UNITED ~~STATES~~ ~~SECURITIES AND EXCHANGE COMMISSION~~STATES

WASHINGTON, DCSECURITIES 20549AND EXCHANGE COMMISSION

~~FORM~~WASHINGTON, ~~10-K~~DC 20549

(MarkFORM One)10-K

~~ý ANNUAL REPORT PURSUANT TO SECTION 13 OR 15~~(~~d) OF~~Mark ~~THE SECURITIES EXCHANGE ACT OF 1934~~One)

~~For~~ý ANNUAL ~~the~~REPORT ~~fiscal~~PURSUANT ~~year~~TO ~~ended: March~~SECTION 5,13 OR ~~2005~~15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

ORFor the fiscal year ended March 4, 2006

~~o TRANSITION REPORT PURSUANT TO SECTION 13~~ OR ~~15(d) OF THE SECURITIES EXCHANGE ACT OF 1934~~

~~For~~o TRANSITION ~~the~~REPORT ~~transition~~PURSUANT ~~period~~TO ~~from~~ SECTION 13 to OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

~~Commission file~~For ~~number~~the ~~0-7277~~transition period from to

~~PIERRE FOODS,~~Commission ~~INC.~~file number 0-7277

~~(Exact~~PIERRE ~~Name of Registrant as Specified in Its Charter)~~FOODS, INC.

North Carolina		56-0945643
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)
9990 Princeton Road, Cincinnati, Ohio		45246
(Address of Principal Executive Offices)		(Zip Code)

(Exact Name of Registrant as Specified in Its Charter)

Registrant’s telephone number, including area code: (513) 874-8741

North Carolina		56-0945643
(State or Other Jurisdiction		(I.R.S. Employer
of Incorporation or Organization)		Identification No.)

Securities registered pursuant to Section 12(b) of the Act: None.

9990 Princeton Road, Cincinnati, Ohio		45246
(Address of Principal Executive Offices)		(Zip Code)

~~Securities~~Registrant’s ~~registered~~telephone ~~pursuant to~~number, ~~Section 12(g) of~~including ~~the Act~~area code: ~~None.~~(513) 874-8741

~~Indicate~~Securities byregistered ~~check~~pursuant ~~mark whether the registrant: (1) has filed all reports required~~ to ~~be filed by~~ Section ~~13 or 15~~12(db) 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 reports), and (2) has been subject to such filing requirements for the past 90 days~~Act: None. ~~Yes ý No o~~

~~Indicate~~Securities byregistered ~~check mark if disclosure of delinquent filers~~ pursuant to ~~Item~~Section ~~405~~ 12(g) of ~~Regulation 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~~Act: None. ý

Indicate by check mark ~~whether~~if the registrant is ~~an accelerated~~a ~~filer~~well-known (seasoned issuer, as defined in ~~Exchange Act~~ Rule ~~12b-2)~~405 of the Securities Act. Yes o No ý

~~The~~Indicate ~~aggregate~~by ~~market~~check ~~value of the voting and~~mark ~~non-voting~~whether ~~common equity held by non-affiliates as of~~ the ~~last~~registrant ~~business~~is ~~day~~not ~~of the~~required ~~registrant’s~~to ~~most~~file ~~recently~~reports ~~completed~~pursuant ~~second~~to ~~quarter (September~~Section 3,13 ~~2004~~or Section 15(d) of ~~was~~the $0Act.~~00.~~ Yes ý No o

AsIndicate by ofcheck ~~April~~mark whether the registrant: (1) ~~30,~~has ~~2005,~~filed ~~there~~all ~~were~~reports ~~100,000~~required to ~~Class~~be filed by Section ~~A Common~~13 ~~Shares~~or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve months (or for such shorter period that the registrant ~~outstanding~~was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o

~~Documents~~Indicate ~~Incorporated~~by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation 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:~~reference in Part III of this Form 10-K or any amendment to this Form 10-K. ý

~~None~~Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Large accelerated filer o Accelerated filer o Non-accelerated filer ý

~~TABLE~~Indicate by OFcheck mark whether the registrant is a shell company (as defined in Exchange ~~CONTENTS~~Act Rule 12b-2). Yes o No ý

Item Number
PART I
Item 1.	Description of Business
	General Development of Business
	Narrative Description of the Business
Item 2.	Properties
Item 3.	Legal Proceedings
Item 4.	Submission of Matters to a Vote of Security Holders
PART II
Item 5.	Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Item 6.	Selected Financial Data
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations
	Results of Operations
	Critical Accounting Policies and Estimates
	Liquidity and Capital Resources
	Commercial Commitments, Contingencies and Contractual Obligations
	Inflation
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk
Item 8.	Financial Statements and Supplementary Data
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A.	Controls and Procedures
Item 9B.	Other Information
PART III
Item 10.	Directors and Executive Officers of the Registrant
Item 11.	Executive Compensation
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13.	Certain Relationships and Related Party Transactions
Item 14.	Principal Accountant Fees and Services
PART IV
Item 15.	Exhibits and Financial Statement Schedules
Signatures
Index to Exhibits

The aggregate market value of the voting and non-voting common equity held by non-affiliates as of the last business day of the registrant’s most recently completed second quarter (September 3, 2005) was $0.00.

iiAs of June 1, 2006, there were 100,000 Class A Common Shares of the registrant outstanding.

~~Cautionary Statements Regarding~~Documents ~~Forward-Looking~~Incorporated ~~Statements~~by Reference:

This report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including statements about the business, operations, financial results and future prospects of Pierre Foods, IncNone. (the “Company”). Forward-looking statements relate to future events or future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential” or “continue,” the negative of such terms or other comparable terminology. These statements may involve risks and uncertainties related to, among other things:

~~• changes in~~TABLE ~~economic and business conditions in the world;~~OF CONTENTS

• adverse changes in food costs and availability of supplies or costs of distribution;

Item Number

		PART I

Item 1.		Description of Business
		General Development of Business
		Narrative Description of the Business
Item 1A.		Risk Factors
Item 2.		Properties
Item 3.		Legal Proceedings
Item 4.		Submission of Matters to a Vote of Security Holders

		PART II

Item 5.		Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Item 6.		Selected Financial Data
Item 7.		Management’s Discussion and Analysis of Financial Condition and Results of Operations
		Results of Operations
		Liquidity and Capital Resources
		Commercial Commitments, Contingencies, and Contractual Obligations
		Inflation
		Critical Accounting Policies and Estimates
Item 7A.		Quantitative and Qualitative Disclosures About Market Risk
Item 8.		Financial Statements and Supplementary Data
Item 9.		Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A.		Controls and Procedures
Item 9B.		Other Information

		PART III

Item 10.		Directors and Executive Officers of the Registrant
Item 11.		Executive Compensation
Item 12.		Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13.		Certain Relationships and Related Party Transactions
Item 14.		Principal Accountant Fees and Services

		PART IV

Item 15.		Exhibits and Financial Statement Schedules

Signatures
Index to Exhibits

~~• the Company’s level of indebtedness;~~ii

~~• restrictions imposed~~Cautionary byStatement ~~the~~As ~~Company’s~~To ~~debt instruments;~~Forward-Looking Information

~~• increased~~This report includes “forward-looking ~~competitive~~statements” ~~activity;~~within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including statements about the business, operations, financial results, and future prospects of the Company. Forward-looking statements relate to future events or future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential” or “continue,” the negative of such terms or other comparable terminology. These statements may involve risks and uncertainties related to, among other things:

• ~~government~~changes ~~regulation~~in economic and business conditions in the world;

• ~~dependence~~potential impact of hurricanes and other natural disasters on ~~significant~~sales, ~~customers~~raw material costs, fuel costs, insurance costs, and bad debt expense resulting from uncollectible accounts receivables;

• ~~consolidation~~increased ofglobal tensions, market disruption resulting from a terrorist or other attack and any armed conflict involving the ~~Company’s~~United ~~customers~~States;

• ~~general~~adverse ~~risks~~changes ofin ~~the~~ food ~~industry,~~costs ~~including~~and ~~risk~~availability of ~~contamination,~~supplies ~~mislabeling~~or ~~of food~~costs ~~products, a decline in meat consumption and outbreak~~ of ~~disease among cattle, chicken or pigs~~distribution;

• ~~adverse change in~~ the Company’s ~~Cincinnati,~~level ~~Ohio~~of ~~or Claremont, North Carolina facility~~indebtedness;

• ~~dependence~~restrictions onimposed ~~key~~by ~~personnel;~~the ~~and~~Company’s debt instruments;

• ~~potential~~increased ~~labor~~competitive ~~disruptions.~~activity;

~~This list of risks and uncertainties is not~~• government ~~exhaustive. Also,~~regulatory ~~new risk factors emerge over time. It is not possible for the Company to predict all risks and uncertainties~~actions, ~~nor~~including ~~can~~those ~~the~~relating ~~Company assess the extent~~ to ~~which~~federal any factor, or combination of factors, may cause actual results to differ from those contained in forward-looking statements. Any forward-looking statements in this report are based on certain assumptions and ~~analyses~~state ~~made by the Company in light of~~environmental its experience and perception of historical trends, current conditions, expected future developments and other factors it believes are appropriate in the circumstances. Such statements are not a guarantee of future performance and actual results or developments may differ materially from those projected.laws;

~~The Company is not under any duty to update~~• dependence ~~any~~on ~~forward-looking~~significant statements after the date of this report to conform such statements to actual results or to changes in the Company’s expectations. All forward-looking statements contained in this report and any subsequently filed reports are expressly qualified in their entirety by these cautionary statements.customers;

~~iii~~• changes in consumer preferences and diets;

~~PART I~~• consolidation of the Company’s customers;

~~Item 1. Description~~• general risks of ~~Business~~the food industry, including risk of contamination, mislabeling of food products, a decline in meat consumption, and outbreak of disease among cattle, chicken or pigs, or any change in consumer perception of certain protein products;

~~General~~• adverse change ~~Development~~to, or efficient utilization or successful rationalization of, ~~Business~~the Company’s Cincinnati, Ohio or Claremont, North Carolina facilities;

~~Pierre Foods, Inc. (the “Company” or “Pierre”)~~• dependence ~~is a manufacturer and marketer of high-quality, differentiated processed food solutions, focusing~~ on ~~formed,~~key ~~pre-cooked~~personnel; ~~protein products~~ and hand-held convenience sandwiches. The Company’s products include beef, poultry, pork and bakery items. Pierre offers comprehensive food solutions to its customers, including proprietary product development, special ingredients and recipes, as well as custom packaging and marketing programs. Pierre’s pre-cooked proteins include flamebroiled burger patties, homestyle meatloaf, chicken strips and boneless, barbecued pork rib products. Pierre markets its pre-cooked protein products to a broad array of customers that includes restaurant chains, schools and other foodservice providers.

~~The Company’s predecessor was founded as a~~• changes ~~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,~~availability ~~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~~relative ofcosts ~~the business in Caryville, Tennessee (collectively, “Pierre Cincinnati”), conducted by the Pierre Foods Division~~ of ~~Hudson~~labor ~~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~~potential ~~markets. In~~labor ~~September 1998,~~disruptions ~~the~~or ~~Company~~union ~~implemented~~organization ~~a tax-exempt reorganization of its corporate structure~~activities. 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. Subsequent to the disposal of the restaurant segment, Pierre operates solely in the food processing business, its sole segment. 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.”

~~Restructuring. On~~The ~~March 8, 2004, following a consent solicitation in which consents of holders of $112.4 million in aggregate principal amount of the~~ Company’s ~~then~~is ~~outstanding~~not ~~notes~~under ~~(“Old~~any ~~Notes”), representing~~duty ~~97.74% of the outstanding Old Notes, consented~~ to ~~a Fourth~~update ~~Supplemental~~any ~~Indenture~~forward-looking ~~between~~statements ~~the~~after ~~Company and~~ the ~~Trustee~~date thereunder, the Company entered into the Fourth Supplemental Indenture with the Trustee. Among other things, the Fourth Supplemental Indenture increased the annual interest rate on the Old Notes from 10.75% to 12.25% through March 31, 2005 and 13.25% thereafter; required the payment of athis ~~cash~~report ~~consent fee of $3.5 million (3% of the principal amount of Old Notes held by each consenting noteholder); granted~~ to ~~the noteholders liens on the assets of the Company and its subsidiaries,~~ conform such ~~liens being junior to the~~ ~~senior~~statements ~~liens securing the Company’s credit facility, granted~~ to ~~noteholders~~actual ~~a repurchase~~results ~~right~~or ~~allowing all of the noteholders~~ to ~~require~~changes ~~the~~in ~~Company to repurchase their Old Notes at par plus accrued interest on March 31, 2005; provided for~~ the ~~payment of a portion of certain cash flow of the~~ Company ~~(referred to as “excess cash”) to reduce the principal amount of Old Notes outstanding at the end of the Company~~’s ~~fiscal~~expectations. ~~years; added restrictive covenants limiting the~~All ~~compensation~~forward-looking ~~payable~~statements tocontained ~~certain~~in ~~senior~~this ~~executives~~report ~~of the Company~~ and ~~limiting future~~any ~~related~~subsequently ~~party transactions; required the termination of all related~~filed ~~party~~reports ~~transactions,~~are ~~except~~expressly ~~for~~qualified ~~certain~~in ~~specifically-permitted~~their ~~transactions; provided~~entirety ~~for the assumption~~ by ~~the~~these ~~Company of approximately $15.3 million of~~cautionary ~~subordinated debt of PF Management; Inc~~statements., the sole shareholder of the Company (“PFMI”), required the Company to comply with certain corporate governance standards, including appointing an independent director acceptable to the Company and the noteholders to its board and hiring an independent auditor to monitor the Company’s compliance with the Indenture; and waived any and all defaults of the Indenture existing as of March 8, 2004.

The restrictive covenants limiting compensation payable to certain senior executives of the Company permitted for bonus payments to those executives above the compensation limitations. The bonus payments were based on the profitability of the Company and cash payments made on the Old Notes.iii

1PART I

~~Concurrently~~Item with the execution of the Fourth Supplemental Indenture, the Company took title to an aircraft transferred from a related party subject to $5.6 million of existing purchase money debt; assumed $15.3 million of debt from PFMI; cancelled the $1.0 ~~million~~Description related party note receivable against the debt assumed from PFMI; cancelled the balances owed by the Company to certain related parties, as follows: $0.5 million owed to Columbia Hill Aviation; $3.5 million owed to PF Purchasing; $0.5 million owed to PF Distribution; and assumed the operating leases of ~~PF Distribution in connection with the Fourth Supplemental Indenture.~~Business

InGeneral ~~this~~Development ~~document,~~of ~~unless~~Business. ~~the context~~Pierre ~~otherwise requires~~Foods, Inc. (the ~~term~~ “Company” ~~refers~~or to “Pierre”) ~~Foods, Inc.~~is ~~and its~~a ~~current~~manufacturer and ~~former~~marketer ~~subsidiaries. As~~of ahigh-quality, ~~result~~differentiated processed offood ~~the~~solutions, ~~Acquisition~~focusing ~~discussed~~on ~~below~~formed, onpre-cooked ~~June 30,~~protein ~~2004,~~products ~~the~~and hand-held convenience sandwiches. The Company’s ~~fiscal~~ ~~year~~products ~~ended~~include ~~March 5~~beef, ~~2005~~pork, poultry, ischeese, ~~comprised~~and ofbakery ~~two short periods~~items. ~~The~~ ~~periods~~Pierre ofoffers ~~March 7,~~comprehensive ~~2004~~food ~~through June 30,~~solutions ~~2004~~to ~~and~~its ~~July 1~~customers, ~~2004~~including ~~through~~proprietary ~~March 5~~product development, ~~2005~~special ingredients, ~~are~~and ~~referred~~recipes, toas well as ~~“predecessor fiscal~~custom ~~2005”~~packaging and ~~“successor~~marketing ~~fiscal~~programs. ~~2005,”~~Pierre’s pre-cooked ~~respectively. These~~proteins ~~two~~include ~~short~~flamebroiled ~~periods~~burger ~~collectively~~patties, ~~are~~homestyle ~~referred~~meatloaf, tochicken asstrips, ~~“predecessor fiscal 2005~~ and ~~successor~~boneless, ~~fiscal~~barbecued ~~2005~~pork ~~combined~~rib products.~~” The~~ ~~Company’s~~Pierre ~~fiscal~~markets ~~year ended March 6,~~its ~~2004~~pre-cooked isprotein ~~referred~~products to asa ~~“predecessor~~broad ~~fiscal~~array ~~2004”~~of ~~and~~customers ~~its~~that ~~fiscal~~includes restaurant ~~year~~chains, ~~ended March 1~~schools, ~~2003~~ isand ~~referred~~other tofoodservice ~~as “predecessor fiscal 2003~~providers.”

~~Acquisition~~Restructuring. On ~~June~~On March 308, 2004, ~~Pierre~~following ~~Holding~~a ~~Corp~~consent solicitation in which consents of holders of $112.4 million in aggregate principal amount of the Company’s then outstanding notes (“~~Holding~~Old Notes”), ~~acquired~~representing ~~100~~97.74% of the ~~shares~~outstanding Old Notes, consented to a Fourth Supplemental Indenture between the Company and the Trustee thereunder, the Company entered into the Fourth Supplemental Indenture with the Trustee. Among other things, the Fourth Supplemental Indenture increased the annual interest rate on the Old Notes from 10.75% to 12.25% through March 31, 2005 and 13.25% thereafter; required the payment of a cash consent fee of $3.5 million (3% of the principal amount of Old Notes held by each consenting noteholder); granted to the noteholders liens on the assets of the Company and its subsidiaries, such liens being junior to the senior liens securing the Company’s ~~parent~~credit facility, ~~PFMI. Such~~granted ~~acquisition~~to noteholders a repurchase right allowing isall ~~referred~~of the noteholders to ~~herein~~require asthe Company to repurchase their Old Notes at par plus accrued interest on March 31, 2005; provided for the payment of a portion of certain cash flow of the Company (referred to as “~~Acquisition~~excess cash”) to reduce the principal amount of Old Notes outstanding at the end of the Company’s fiscal years; added restrictive covenants limiting the compensation payable to certain senior executives of the Company and limiting future related party transactions; required the termination of all related party transactions, except for certain specifically-permitted transactions; provided for the assumption by the Company of approximately $15.3 million of subordinated debt of PF Management, Inc. (“PFMI”), the sole Inshareholder ~~connection~~of the Company; required the Company to comply with certain corporate governance standards, including appointing an independent director acceptable to the ~~Acquisition~~Company and the noteholders to its board and hiring an independent auditor to monitor the Company’s compliance with the Indenture; and waived any and all defaults of the Indenture existing as of March 8, 2004. The restrictive covenants limiting compensation payable to certain senior executives of the ~~following~~Company ~~occurred:~~permitted for bonus payments to those executives above the compensation limitations. The bonus payments were based on the profitability of the Company and cash payments made on the Old Notes.

~~• The~~Concurrently ~~Company~~with ~~merged~~the ~~with~~execution ~~Pierre~~of ~~Merger~~the ~~Corp.~~Fourth Supplemental Indenture, the Company took title to an aircraft transferred from ~~affiliate~~a related party subject to $5.6 million of ~~Madison~~existing ~~Dearborn~~purchase ~~Partners~~money debt; assumed $15.3 million of debt from PFMI; cancelled the $1.0 million related party note receivable against the debt assumed from PFMI; cancelled the balances owed by the Company to certain related parties, ~~LLC~~as follows: $0.5 million owed to Columbia Hill Aviation (“~~MDP~~CHA”); $3.5 million owed to PF Purchasing, ~~with~~a former affiliate of the Company; ~~being~~$0.5 million owed to PF Distribution, a former affiliate of the Company; and assumed the operating leases of PF Distribution ~~surviving~~in ~~corporation~~connection ~~following~~with the ~~merger~~Fourth Supplemental Indenture.

~~• The~~In ~~Company~~this ~~terminated~~document, ~~its~~unless ~~three-year~~the ~~variable-rate~~context ~~$40~~otherwise ~~million~~requires, ~~revolving~~the ~~credit~~term ~~facility~~“Company” ~~and~~refers ~~obtained~~to aPierre ~~$190~~Foods, Inc. ~~million credit~~and ~~facility~~its ~~from~~current aand ~~new~~former ~~lender~~subsidiaries. ~~which~~The ~~includes~~Company’s afiscal ~~six-~~year ~~variable-rate~~ended ~~$150 million~~March 4, ~~term~~2006 ~~loan~~is ~~and~~referred to as “successor fiscal 2006.” As a ~~five-year~~result ~~variable~~of ~~rate~~the ~~$40~~Acquisition ~~million~~discussed ~~revolving~~below, ~~credit~~on ~~facility~~June 30, 2004, ~~with~~the aCompany’s ~~$10~~fiscal ~~million~~year ~~letter~~ended March 5, 2005 is comprised of ~~credit~~two ~~subfacility~~short periods. ~~See~~ ~~Note~~The periods of March 7, 2004 through June 30, 2004 and July 1, 2004 through March 5, 2005 are referred to as “~~Financing~~predecessor ~~Arrangements~~fiscal 2005” and “successor fiscal 2005,” respectively. These two short periods collectively are referred to ~~the~~as “predecessor fiscal 2005 and successor fiscal 2005 combined.” The Company’s ~~Consolidated~~fiscal ~~Financial~~year ~~Statements~~ended March 6, 2004 is referred to as “predecessor fiscal 2004.”

~~• The~~Acquisition. ~~Company~~On June 30, ~~terminated~~2004, ~~its~~the ~~few~~shareholders ~~remaining~~of ~~related party~~PFMI ~~transactions~~sold ~~(described~~their inshares ~~Note~~of ~~16,~~stock ~~“Transactions~~(the ~~with Related Parties,~~“Acquisition”) to ~~the~~Pierre ~~Consolidated~~Holding ~~Financial~~Corp. ~~Statements~~(“Holding”), ~~transferred~~an ~~miscellaneous~~affiliate ~~assets~~of toMadison ~~Messrs. Richardson and~~Dearborn ~~Clark~~Partners, LLC ~~the~~(“MDP”). ~~Company’s~~The ~~former~~following ~~Chairman~~occurred ~~and~~in ~~Vice~~conjunction ~~Chairman,~~with ~~respectively, including~~ the ~~Company’s airplane, which was distributed to Mr. Richardson.~~Acquisition:

• Pierre Merger Corp. closed a cash tender offer and consent solicitation for the Company’s Old Notes. Holders of approximately $106.3 million, or approximately 92%, of aggregate principal amount of the Company’s outstanding Old Notes tendered their Old Notes. The Company, asmerged ~~the surviving corporation of the merger~~ with Pierre Merger Corp., ~~accepted and paid~~an ~~for~~affiliate ~~all~~of ~~Old~~MDP, ~~Notes~~with ~~tendered pursuant to~~ the ~~tender~~Company ~~offer. A~~being ~~redemption notice for~~ the ~~Old~~surviving ~~Notes~~corporation ~~not~~following ~~tendered~~the ~~(approximately $8~~merger.~~7 million) was issued on June 30, 2004 and these Old Notes were redeemed on July 20, 2004.~~

• The Company issued $125.0 million of 9-7/8% Senior Subordinated Notes due 2012 (the “New Notes”). The proceeds of the New Notes, together with the equity contributions from MDP and certain members of management (as described below) and borrowings under the Company’s new senior credit facility, were used to finance the Acquisition and to repay outstanding indebtedness.1

• The Company’s ~~President~~terminated ~~and~~its ~~Chief~~three-year ~~Executive Officer,~~variable-rate ~~Norbert~~$40 E.million ~~Woodhams,~~revolving ~~and~~credit ~~its~~facility ~~Senior~~and ~~Vice~~obtained ~~President~~a of$190 ~~Sales,~~million ~~Marketing and New~~credit ~~Product~~facility ~~Development,~~from ~~Robert~~a C.new ~~Naylor,~~lender ~~signed~~which ~~employment~~includes ~~agreements~~a ~~committing them~~six-year tovariable-rate ~~continue~~$150 ~~working~~million term ~~for~~loan ~~the~~and ~~Company~~a ~~after~~five-year ~~the~~variable-rate ~~Acquisition.~~$40 ~~The~~million ~~stated~~revolving ~~term~~credit facility ofwith ~~employment~~a ~~for~~$10 ~~each~~million ~~executive~~letter isof ~~one~~credit ~~year,~~subfacility. ~~but~~See ~~each~~Note ~~agreement~~7 ~~will~~— ~~renew~~“Financing ~~automatically~~Arrangements,” ~~and~~to ~~continuously~~the ~~year-to-year~~Company’s ~~unless~~Consolidated ~~terminated~~Financial Statements.

• The ~~management investors, the~~ Company’s ~~President and~~terminated ~~Chief Executive Officer, Norbert E. Woodhams, and~~ its ~~Senior~~few ~~Vice~~remaining ~~President~~related ofparty ~~Sales,~~transactions ~~Marketing~~as ~~and~~described ~~New~~in ~~Product~~Note ~~Development,~~16 ~~Robert~~—“Transactions C.with ~~Naylor,~~Related ~~invested~~Parties,” ~~approximately~~to ~~$4.9~~the ~~million~~Consolidated inFinancial aStatements, ~~deferred~~transferred ~~compensation~~miscellaneous ~~plan. This~~assets ~~deferred~~to ~~compensation plan is funded~~Messrs. Richardson ~~through~~and aClark, ~~rabbi~~the ~~trust~~Company’s ~~that~~former ~~owns~~Chairman ~~preferred~~and ~~stock~~Vice ofChairman, ~~Holding~~respectively, including ~~with~~the anCompany’s ~~aggregate liquidation~~airplane, ~~value~~which ofwas ~~approximately~~distributed ~~$4.9~~to ~~million~~Mr. Richardson.

2• Pierre Merger Corp. closed a cash tender offer and consent solicitation for the Company’s Old Notes. Holders of approximately $106.3 million, or approximately 92%, of aggregate principal amount of the Company’s outstanding Old Notes tendered their Old Notes. The Company, as the surviving corporation of the merger with Pierre Merger Corp., accepted and paid for all Old Notes tendered pursuant to the tender offer. A redemption notice for the Old Notes not tendered (approximately $8.7 million) was issued on June 30, 2004 and these Old Notes were redeemed on July 20, 2004.

• InThe ~~addition~~Company toissued ~~the base purchase price, the stock purchase agreement entitled the selling shareholders to earn-out cash payments, which included an additional aggregate amount of~~ $13125.0 million inof ~~the~~9-7/8% ~~event~~Senior ~~that,~~Subordinated atNotes ~~the~~due ~~end~~2012 of(the ~~any~~“New ~~fiscal~~Notes”). ~~quarter~~The ~~during~~proceeds of the ~~fiscal~~New ~~year ended March 5~~Notes, ~~2005,~~together ~~the~~with ~~Company achieved EBITDA (as defined in~~ the ~~stock~~equity ~~purchase~~contributions ~~agreement) for~~from ~~the~~MDP ~~prior~~and ~~four~~certain ~~fiscal~~members ~~quarters then ended~~ of management ~~$56.0~~(as ~~million~~described orbelow) ~~more. No~~and ~~portion~~borrowings ofunder the ~~additional~~Company’s ~~amount~~new ~~is payable~~senior ascredit ~~of March 5~~facility, ~~2005,~~were asused ~~this~~to ~~EBITDA~~finance ~~target~~the ~~was~~Acquisition ~~not~~and ~~met~~to repay outstanding indebtedness.

• The ~~Acquisition~~Company’s ~~was~~President ~~recorded~~and ~~under~~Chief ~~the~~Executive Officer, ~~purchase~~Norbert ~~method~~E. ofWoodhams, ~~accounting.~~and ~~The~~its ~~purchase~~Senior ~~price~~Vice ~~has~~President ~~been~~of ~~allocated~~Sales, toMarketing ~~assets~~and New ~~acquired~~Product ~~and~~Development, ~~liabilities~~Robert ~~assumed~~C. ~~based~~Naylor, onsigned ~~the~~employment ~~estimated~~agreements ~~fair~~committing them ~~market~~to ~~value~~continue atworking for the ~~date~~ ofCompany after the Acquisition. The ~~allocation~~stated term of ~~the~~employment ~~purchase~~for ~~price~~each executive is asone ~~follows:~~year, but each agreement renews year-to-year unless terminated.

Current assets	$	75,727,665
Plant, property and equipment	57,857,942
Non-current assets	4,283,121
Goodwill	186,535,050
Other intangibles	175,900,000
Debt and other liabilities assumed	(239,899,080		)
Net assets acquired	$	260,404,698

• The management investors, the Company’s President and Chief Executive Officer, Norbert E. Woodhams, and its Senior Vice President of Sales, Marketing and New Product Development, Robert C. Naylor, invested approximately $4.9 million in a deferred compensation plan. This deferred compensation plan is funded through a rabbi trust that owns preferred stock of Holding with an aggregate liquidation value of approximately $5.7 million as of March 4, 2006.

~~The~~• In ~~Company~~addition ~~has~~to ~~obtained~~the ~~outside~~base ~~appraisals~~purchase price, the stock ofpurchase ~~acquired~~agreement ~~assets~~entitled ~~and~~the ~~liabilities~~selling inshareholders ~~successor~~to ~~fiscal~~earn-out ~~2005~~cash payments, which included an additional aggregate amount of $13.0 ~~Deferred~~million ~~tax~~in the event ~~liabilities~~that, ~~have~~at ~~been~~the ~~finalized~~end ~~based~~of onany fiscal quarter during the ~~final~~fiscal ~~allocation~~year ofended March 5, 2005, the Company achieved EBITDA (as defined in the stock purchase agreement) ~~price~~for ~~and~~ the ~~determination~~prior four fiscal quarters then ended of ~~the~~$56.0 ~~tax~~million ~~basis~~or more. No portion of the ~~assets~~additional ~~and~~amount ~~liabilities acquired~~was payable, as this EBITDA target was not met.

~~Narrative~~The ~~Description~~Acquisition was recorded under the purchase method of accounting. The purchase price was allocated to assets acquired and liabilities assumed based on the ~~Business~~estimated fair market value at the date of Acquisition. The allocation of the purchase price was as follows:

The Company manufactures and markets a wide variety of high-quality, differentiated processed food solutions, focusing on formed, pre-cooked protein products and hand-held convenience sandwiches. Products primarily consist of specialty beef, poultry, pork and bakery items. Pierre offers comprehensive food solutions to its customers, including proprietary product development, special ingredients and recipes, as well as custom packaging and marketing programs. Pierre’s pre-cooked proteins include flamebroiled burger patties, homestyle meatloaf, chicken strips and boneless, barbecued pork rib products. The Company markets its pre-cooked protein products to a broad array of customers that includes restaurant chains, schools and other foodservice providers.

Current assets	$	75,727,665
Property, plant, and equipment	57,857,942
Non-current assets	4,283,121
Goodwill	186,535,050
Other intangibles	175,900,000
Debt and other liabilities assumed	(239,899,080		)
Net assets acquired	$	260,404,698

The Company’s product line consists of over 800 stock keeping units (“SKUs”). Pierre manufactures its pre-cooked proteins, hand-held convenience sandwiches and bakery items in its two manufacturing facilities located in Ohio and North Carolina. Pierre forms, portions, seasons, cooks and freezes beef, poultry and pork in its facility located in Cincinnati, Ohio. These frozen products are either shipped to customers or sent to the Company’s sandwich assembly facility in Claremont, North Carolina. Pierre’s Claremont, North Carolina plant houses high-speed baking and sandwich assembly lines.2

The ~~following table sets forth the~~ Company’s ~~net~~obtained ~~revenue~~outside ~~and~~appraisals ~~percent~~ of acquired ~~revenue~~assets ~~contributed during~~and ~~the~~liabilities ~~past~~in ~~three~~successor fiscal ~~years~~2005. byDeferred ~~its~~tax liabilities ~~various~~were ~~product~~finalized ~~channels~~based ~~and classes. Note~~on ~~that~~the asfinal aallocation ~~result~~ of the ~~Acquisition,~~ ~~the~~purchase ~~results for predecessor fiscal 2005~~ price and ~~successor~~the ~~fiscal~~determination ~~2005 are~~of ~~combined in~~ the ~~table~~tax ~~below~~basis inof ~~order~~the toassets ~~provide~~and aliabilities ~~more meaningful period-to-period comparison~~acquired.

3Narrative Description of the Business. The Company manufactures and markets a wide variety of high-quality, differentiated processed food solutions, focusing on formed, pre-cooked protein products and hand-held convenience sandwiches. Products primarily consist of specialty beef, poultry, pork, and bakery items. Pierre offers comprehensive food solutions to its customers, including proprietary product development, special ingredients and recipes, as well as custom packaging and marketing programs. Pierre’s pre-cooked proteins include flamebroiled burger patties, homestyle meatloaf, chicken strips, and boneless, barbecued pork rib products. The Company markets its pre-cooked protein products to a broad array of customers that includes restaurant chains, schools, and other foodservice providers.

	Net Revenues by Source
	Predecessor Fiscal 2005 And Successor Fiscal 2005 Combined			Predecessor Fiscal 2004			Predecessor Fiscal 2003
	(in millions)		%	(in millions)		%	(in millions)		%
Food Processing:
Fully-Cooked Protein Products	$	255.3	62.2	$	214.7	59.9	$	149.3	54.0
Microwaveable Sandwiches	147.3		35.9	136.4		38.0	119.1		43.1
Bakery and Other Products	7.8		1.9	7.5		2.1	7.9		2.9
Total Food Processing:	$	410.4	100.0	$	358.6	100.0	$	276.3	100.0

The Company’s product line consists of over 1,100 stock keeping units (“SKUs”). Pierre manufactures its pre-cooked proteins, hand-held convenience sandwiches, and bakery items in its two manufacturing facilities located in Ohio and North Carolina. Pierre forms, portions, seasons, cooks, and freezes beef, poultry, and pork in its facility located in Cincinnati, Ohio. These frozen products are either shipped to customers or sent to the Company’s sandwich assembly facility in Claremont, North Carolina. Pierre’s Claremont, North Carolina plant houses high-speed baking and sandwich assembly lines.

~~Significant~~The ~~Customer. Sales~~following totable ~~CKE Restaurants, Inc.~~sets ~~(“CKE”)~~forth ~~accounted~~the ~~for~~Company’s net ~~approximately~~revenue ~~25%, 24%~~ and ~~11%~~percent of ~~the~~ ~~Company’s~~ net ~~sales~~revenue incontributed ~~predecessor~~during ~~fiscal~~the ~~2005~~past ~~and~~three ~~successor~~ fiscal ~~2005~~ ~~combined,~~years ~~predecessor~~by ~~fiscal~~its ~~2004~~various ~~and~~product ~~predecessor~~channels ~~fiscal~~and ~~2003, respectively~~classes. No ~~other~~Note ~~customer accounted~~that ~~for~~as ~~10%~~a orresult ~~more~~ of ~~net~~the ~~sales~~Acquisition, ~~during~~the ~~predecessor~~results for predecessor fiscal 2005 and successor fiscal 2005 are combined, ~~predecessor~~in ~~fiscal~~the ~~2004~~table ~~and~~below ~~predecessor~~in ~~fiscal~~order ~~2003~~to provide a more meaningful period-to-period comparison.

Sales, Marketing and New Product Development. The Company’s team of sales and marketing professionals has significant experience in the Company’s markets for fully-cooked protein products, packaged sandwiches and bakery products. 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 122 independent food brokers, all of whom are compensated primarily by payment of sales commissions.

	Net Revenues by Source (in millions)
				Predecessor Fiscal 2005
	Successor			and Successor Fiscal 2005			Predecessor
	Fiscal 2006			Combined			Fiscal 2004
			%			%			%
Food processing:
Fully-cooked protein products	$	254.8	59.0	$	255.3	62.2	$	214.7	59.9
Microwaveable sandwiches	168.4		39.0	147.3		35.9	136.4		38.0
Bakery and other products	8.4		2.0	7.8		1.9	7.5		2.1

Total food processing:	$	431.6	100.0	$	410.4	100.0	$	358.6	100.0

~~The~~Significant ~~Company’s~~Customer. ~~marketing~~Sales to ~~strategy~~CKE ~~includes distributor~~Restaurants, Inc. ~~and~~(“CKE”) ~~consumer~~accounted ~~promotions,~~for ~~trade~~approximately ~~promotions~~21%, ~~advertising~~25%, and ~~participation~~24% inof ~~trade~~the ~~shows~~Company’s ~~and~~net ~~exhibitions. The~~sales ~~Company~~in ~~participates~~successor infiscal ~~numerous~~2006, ~~conferences~~predecessor fiscal 2005 and issuccessor afiscal ~~member~~2005 ofcombined, ~~more than~~and 15predecessor ~~industry~~fiscal ~~organizations~~2004, respectively. ~~Certain~~ No ~~members~~other ofcustomer ~~the~~accounted ~~Company’s~~for ~~management~~10% ~~serve~~or onmore ~~the boards~~ of anet ~~number~~sales ofduring ~~industry~~successor fiscal ~~organizations~~2006, ~~including~~predecessor ~~the~~fiscal ~~American~~2005 ~~Meat~~and ~~Institute,~~successor ~~the~~fiscal ~~American~~2005 ~~School Food Service Association~~combined, ~~the American Commodity Distribution Association~~ and ~~the~~predecessor ~~National~~fiscal ~~Association of Convenience Stores~~2004.

~~The~~Sales, ~~Company~~Marketing isand ~~actively~~New Product ~~involved~~Development. inThe ~~all aspects~~Company’s team of ~~developing~~sales and ~~food~~marketing ~~solutions~~professionals ~~systems~~has tosignificant ~~meet~~experience ~~customers’~~in ~~needs. The~~the Company’s ~~sales~~markets for ~~force~~fully-cooked ~~works~~protein ~~directly~~products, ~~with customers~~packaged tosandwiches, ~~define~~and ~~product~~bakery ~~and~~products. ~~menu~~The sales, ~~needs~~marketing, ~~assess~~and ~~market~~new ~~opportunities~~product ~~and create~~development ~~and~~functions ~~implement~~are ~~packaging,~~organized predominantly ~~merchandising~~by ~~and~~distribution ~~marketing strategies~~channel. ~~The~~ ~~Company’s~~In ~~ability~~addition to ~~develop~~its ~~and~~direct sales force, ~~implement~~the ~~innovative~~Company utilizes a nationwide network of over 105 independent food ~~solutions~~brokers, all isof anwhom ~~important~~are ~~aspect~~compensated primarily by payment of ~~the~~sales ~~Company’s success~~commissions.

The Company’s ~~employs~~marketing ~~seven~~strategy ~~food technologists~~includes distributor and aconsumer ~~Ph.D.~~promotions, ~~corporate~~trade ~~chef~~promotions, inadvertising, ~~the product~~ and ~~process development~~ ~~department. Ongoing~~participation ~~food~~in ~~production research~~trade shows and ~~development~~exhibitions. ~~activities~~The ~~include~~Company ~~development~~participates ~~of new products,~~in ~~improvement~~numerous ofconferences ~~existing products~~ and ~~refinement~~is ofa ~~food~~member ~~production processes. These activities resulted in the launch~~ of ~~approximately~~more ~~239~~than ~~new~~15 ~~SKUs~~industry inorganizations. ~~predecessor fiscal 2005 and~~Certain ~~successor~~members ~~fiscal 2005 combined. Approximately 23.5%~~ of the Company’s ~~predecessor~~management ~~fiscal~~serve ~~2005~~on ~~and successor~~the ~~fiscal~~boards ~~2005~~of ~~combined~~a ~~net~~number ~~revenues~~of ~~were derived from product SKUs~~industry ~~developed~~organizations, ~~during~~including the ~~last~~American ~~two~~Meat ~~fiscal~~Institute, ~~years. In~~the ~~predecessor~~American ~~fiscal~~School ~~2005 and successor fiscal 2005 combined,~~Food ~~predecessor~~Service ~~fiscal 2004 and predecessor fiscal 2003~~Association, the ~~Company~~American ~~spent approximately~~Commodity ~~$1,650,000,~~Distribution $1Association,~~286,000~~ and ~~$1,030,000,~~the National ~~respectively,~~Association onof ~~product development~~Convenience ~~programs~~Stores.

~~Raw Materials.~~ The ~~primary materials used in the~~ Company~~’s food~~ ~~processing~~is ~~operations~~actively ~~include~~involved ~~boneless~~in ~~beef, chicken, pork, flour, yeast,~~all ~~seasonings,~~aspects ~~cheese, breading, soy proteins and packaging supplies. Meat proteins are generally purchased under seven day payment terms, with the exception~~ of adeveloping ~~few~~food ~~that~~solutions ~~require~~systems ~~payment~~to ~~at the~~meet ~~time~~customers’ ~~the product is shipped~~needs. ~~Historically,~~ ~~the Company has not hedged in the futures markets, and~~The ~~over time, the~~ Company’s ~~raw~~sales ~~material~~force ~~costs~~works ~~have~~directly ~~fluctuated~~ with ~~movement~~customers into ~~the relevant~~define ~~commodity~~product ~~markets. Prices~~and ~~for~~menu ~~beef~~needs, ~~chicken~~assess ~~and~~market ~~pork~~opportunities, ~~the~~and ~~Company’s~~create ~~principal~~and ~~protein~~implement ~~raw materials~~packaging, ~~reached~~ ~~historical~~merchandising, ~~highs during predecessor fiscal 2005~~ and ~~successor~~marketing ~~fiscal 2005~~strategies. The Company’s ~~manages~~ability ~~such~~to ~~fluctuations~~develop ~~through purchase orders, non-cancelable~~and ~~contracts~~implement ~~and~~innovative byfood ~~passing~~solutions onis ~~such~~an ~~cost~~important ~~increases~~aspect toof ~~customers~~the Company’s success.

The Company ~~purchases~~employs ~~all~~seven offood ~~its~~technologists ~~raw~~in the ~~materials~~product ~~from outside~~and ~~sources~~process development department. ~~The~~ ~~Company~~Ongoing ~~does~~food ~~not~~production ~~depend~~research onand adevelopment ~~single~~activities ~~source~~include ~~for~~development ~~any~~of ~~significant~~new ~~item~~products, improvement ~~except~~of ~~for~~existing products, asand ~~requested~~refinement byof food production processes. These aactivities ~~customer,~~resulted in the ~~utilization~~launch of aapproximately ~~single~~300 ~~source~~new ~~raw~~SKUs ~~material~~in ~~supplier for~~successor ~~production~~fiscal ~~specific~~2006. toApproximately ~~that customer~~25. ~~The~~8% ~~single~~of ~~source~~the ~~supplier~~Company’s ~~allows~~successor ~~for~~fiscal ~~consistent~~2006 ~~supply~~net revenues ~~and~~were ~~competitive pricing~~derived ~~for~~from ~~the~~product ~~Company. The~~SKUs ~~Company believes~~developed ~~that~~during ~~its~~the ~~sources~~last oftwo ~~supply~~fiscal years. ~~for~~In ~~raw~~successor ~~materials~~fiscal ~~are~~2006, ~~adequate~~predecessor ~~for~~fiscal ~~its~~2005 and successor fiscal ~~present~~2005 ~~needs~~combined, and ~~does~~predecessor ~~not~~fiscal ~~anticipate~~2004, ~~any~~the ~~difficulty~~Company inspent ~~acquiring~~approximately ~~such~~$1,936,000, ~~materials~~$1,650,000, inand ~~the~~$1,286,000, ~~future~~respectively, on product development programs.

~~Trademarks and~~Raw ~~Licensing~~Materials. The primary raw materials used in the Company’s ~~markets~~ food ~~products~~processing ~~under~~operations aare ~~variety~~boneless ofbeef, ~~brand~~chicken ~~names,~~and ~~including~~pork, ~~Pierre™~~flour, ~~Fast~~yeast, ~~Choice®~~seasonings, ~~Rib-B-Q®~~cheese, ~~Hot~~breading, ~~‘n’~~soy ~~Ready®~~proteins, and ~~Big AZ®~~packaging supplies. ~~The~~ ~~Company~~Meat ~~regards~~proteins ~~its~~are ~~trademarks~~generally ~~and~~purchased under seven day payment ~~service~~terms, ~~marks~~with asthe ~~having~~exception ~~significant~~of ~~value~~a infew ~~marketing~~that ~~its~~require ~~food~~payment ~~products~~at the time the product is shipped. ~~The~~ ~~Company~~Historically, ~~also~~the Company has ~~proprietary~~not ~~rights~~hedged in the futures markets, and ~~including~~over time, the Company’s raw material costs have fluctuated with movement ~~trade~~in ~~secret~~the relevant commodity markets. Prices for beef, chicken, and ~~other~~pork, ~~intellectual~~the Company’s ~~property~~principal ~~protection~~protein raw materials, inreached ~~formulations~~historical ~~and~~highs during ~~processes~~predecessor ~~used~~fiscal to2005 ~~make~~and ~~its~~successor ~~products. In~~fiscal ~~addition~~2005 combined. However, during successor fiscal 2006, the ~~Company~~weighted ~~has~~average prices ~~licenses~~paid tofor ~~produce~~raw ~~and~~materials ~~sell~~(excluding ~~packaged~~cost-plus ~~sandwiches~~contracts) decreased from ~~under~~the ~~brands~~historical ~~such~~highs asexperienced ~~Checkers®,~~in ~~Krystal®,~~predecessor ~~Tony~~fiscal ~~Roma’s®~~2005 and successcr fiscal 2005 combined, ~~NASCAR®~~with the exception of beef, ~~NASCAR~~which increased ~~CAFE®~~by approximately 7.7% compared to the weighted average prices the Company paid during predecessor fiscal 2005 and ~~Nathan’s~~successor ~~Famous®~~fiscal 2005 combined. The ~~term~~Company manages ofraw ~~each such~~material ~~license~~fluctuations isthrough ~~subject~~purchase toorders, ~~renewal~~cost-plus contracts, and ~~satisfaction~~by ofpassing ~~sales~~on ~~volume requirements~~such cost increases to customers.

~~Seasonality.~~ The Company ~~experiences~~purchases ~~seasonal~~all ~~fluctuations~~of its raw materials from inoutside ~~sales~~sources. ~~and~~The ~~operating~~Company ~~results~~does not depend on a single source for any significant item except for, as requested by a ~~result~~customer, the utilization of ~~sales~~a single source raw material supplier for production specific to ~~school~~that ~~districts,~~customer. ~~which~~The ~~represent~~single ~~approximately~~source ~~18%~~supplier ofallows for consistent supply and competitive pricing for the Company’s. ~~total~~The ~~sales. Sales~~Company tobelieves ~~school~~that ~~districts~~its ~~decline~~sources of supply for raw materials ~~significantly~~are ~~during~~adequate ~~summer,~~for ~~late~~its ~~November~~ present needs and ~~December~~does not anticipate any difficulty in acquiring such materials in the future.

~~Competition~~Trademarks and Licensing. The ~~food~~Company ~~production~~markets ~~business~~its issandwiches ~~highly competitive~~under ~~and~~a isnumber ~~often~~of brand ~~affected~~names, bysuch ~~changes~~as inPierre™, ~~tastes~~Fast ~~and~~Choice®, ~~eating~~Rib-B-Q®, ~~habits~~Blue ofStone ~~the public~~Grill™, ~~economic~~Hot ~~conditions affecting the public~~‘n’s Ready®, ~~spending habits~~ and ~~other demographic~~Big ~~factors~~AZ®. The Company ~~competes~~ ~~with~~regards ~~manufacturers~~its trademarks and ~~distributors~~service ofmarks ~~value-added meat products and~~as ~~packaged~~having ~~sandwich~~significant ~~suppliers. In~~value ~~sales~~in of marketing its ~~protein~~food products,. ~~the~~The Company ~~faces~~also ~~competition from a variety of meat~~has ~~processing~~proprietary ~~companies~~rights, including ~~Advance~~trade ~~Food~~secret ~~Company,~~and ~~Zartic, Inc.,~~other ~~Tyson,~~intellectual property ~~Gorges/Quick~~protection, Toin ~~Fix~~formulations and ~~from~~processes ~~smaller~~used ~~local~~to ~~and~~make ~~regional~~its ~~operations~~products. ~~The~~ ~~sandwich industry, however, is extremely~~In ~~fragmented~~addition, ~~with~~the ~~few~~Company ~~large~~has ~~direct~~licenses ~~competitors~~to ~~but~~sell ~~indirect~~sandwiches ~~competition~~using inwell-known ~~the~~brands, ~~form~~such ofas ~~numerous~~Checkers®, ~~other~~Rally’s®, ~~products. Our competitors~~Krystal®, inTony ~~the~~Roma’s®, ~~sandwich industry include Sara Lee/Jimmy Dean Foods~~NASCAR®, ~~Bridgford~~ ~~Foods~~NASCAR ~~Corp.~~CAFE®, ~~Deli Express~~ and Nathan’s ~~Landshire~~Famous®. In ~~sales~~The term of ~~biscuit~~each ~~and~~such ~~yeast~~license ~~roll~~is ~~products, we~~subject ~~compete~~to ~~with~~renewal aand satisfaction ~~number~~ of ~~large~~sales ~~bakeries~~volume ~~in various parts of the country~~requirements.

~~Government Regulation~~Seasonality. The ~~food~~Company ~~production~~experiences ~~industry~~seasonal isfluctuations ~~subject~~in tosales ~~extensive federal, state~~ and ~~local~~operating results ~~regulations.~~as ~~The~~a ~~Company’s~~result ~~food~~of ~~processing~~sales ~~facilities~~to ~~and~~school ~~food~~districts. ~~products~~Sales ~~are subject~~ to ~~frequent~~school ~~inspection~~districts decline bysignificantly ~~the~~during ~~United~~summer, ~~States~~late ~~Department of Agriculture (“USDA”)~~November, ~~the Food~~ and ~~Drug Administration (“FDA”) and various state and local health and agricultural agencies~~December. ~~Applicable~~During successor ~~statutes~~fiscal ~~and regulations governing food products include rules for identifying the content of specific types of foods~~2006, ~~the~~predecessor ~~nutritional~~fiscal ~~value~~2005 ~~of that food~~ and ~~its~~successor ~~serving~~fiscal ~~size~~2005 combined, ~~as well as rules that protect against contamination of products by food-borne pathogens~~ and ~~sanitation~~predecessor ~~requirements.~~fiscal ~~Many~~2004, ~~jurisdictions~~sales ~~also require that food manufacturers adhere~~ to ~~good~~schools ~~manufacturing~~represented approximately ~~practices~~20%, ~~(the definition of which may vary by jurisdiction) with respect to production processes. Recently~~18%, ~~the food safety practices~~ and ~~procedures in the meat processing industry have been subject to more intense scrutiny and oversight by the USDA and future outbreaks of diseases among cattle~~19%, ~~poultry or pigs could lead to further governmental regulation. In July 1996~~respectively, ~~the~~of ~~USDA issued strict new policies against contamination by food-borne pathogens and established~~ the ~~Hazard Analysis and Critical Control Points (“HACCP”) system. The~~ Company’s isnet ~~in compliance with all applicable FDA and USDA regulations, including HACCP standards~~revenues.

5Competition. The food production business is highly competitive and is often affected by changes in tastes and eating habits of the public, economic conditions affecting the public’s spending habits, and other demographic factors. The Company competes with manufacturers and distributors of value-added meat products and packaged sandwich suppliers. In sales of its protein products, the Company faces competition from a variety of meat processing companies, including Advance Food Company, Zartic, Inc., Tyson, Gorges/Quick To Fix, and from smaller local and regional operations. The sandwich industry, however, is extremely fragmented, with few large direct competitors, but indirect competition in the form of numerous other products. Pierre’s competitors in the sandwich industry include Sara Lee/Jimmy Dean Foods, Bridgford Foods Corp., Deli Express, and Landshire. In sales of biscuit and yeast roll products, the Company competes with a number of large bakeries in various parts of the country.

In addition, the Company’s operations are governed by laws and regulations relating to workplace health and safety that, among other things, establish noise standards and regulate fire codes and the use of hazardous chemicals in the workplace. The Company is also 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 substantial material effect upon the capital expenditures, earnings or competitive position of the Company.4

Government Regulation. The food production industry is subject to extensive federal, state, and local regulations. The Company’s ~~operations~~food processing facilities and food products are subject to ~~licensing~~frequent ~~and~~inspection ~~regulation~~ by the aUnited ~~number~~States Department of Agriculture (“USDA”), the Food and Drug Administration (“FDA”), and various state and local ~~governmental~~health and agricultural ~~authorities,~~agencies. ~~which~~Applicable statutes and regulations governing food products include ~~health,~~rules for identifying ~~safety,~~the ~~sanitation~~content of specific types of foods, ~~building~~the nutritional value of that food and ~~fire~~its serving size, as well as rules that protect against ~~agencies~~contamination of products by food-borne pathogens and sanitation requirements. ~~Operating~~ Many ~~costs~~jurisdictions ~~are~~also ~~affected~~require that food manufacturers adhere to good bymanufacturing ~~increases~~practices in(the ~~costs~~definition of ~~providing~~which ~~health~~may vary ~~care~~by ~~benefits~~jurisdiction) with respect to production processes. Recently, the ~~minimum~~food ~~hourly~~safety practices and ~~wage~~procedures in the meat processing industry have been subject to more intense scrutiny and oversight by the USDA and future outbreaks of diseases among cattle, ~~unemployment~~poultry ~~tax~~or ~~rates~~pigs could lead to further governmental regulation. In July 1996, the ~~sales~~USDA ~~taxes~~issued ~~and~~strict ~~other~~new ~~similar~~policies ~~matters~~against ~~over~~contamination ~~which~~by food-borne pathogens and established the ~~Company~~Hazard ~~may~~Analysis ~~have~~and noCritical ~~control~~Control Points (“HACCP”) system. The Company believes that it is ~~subject~~in tosubstantial compliance with such applicable laws ~~governing~~and ~~relationships~~regulations ~~with~~and ~~employees,~~the ~~including minimum~~Company ~~wage~~is ~~requirements,~~not ~~overtime,~~aware ~~working~~of ~~conditions~~any pending changes in such laws and ~~citizenship~~regulations that are likely to have a material impact on the ~~requirements~~Company’s operations.

~~Employees.~~In Asaddition, ofthe ~~March~~Company’s 5operations are governed by laws and regulations relating to workplace health and safety that, ~~2005~~among other things, establish noise standards and regulate fire codes and the ~~Company~~use ~~employed~~of hazardous ~~approximately~~chemicals ~~1,700~~in ~~persons~~the workplace. The Company’s ~~employees~~is ~~are~~also ~~non-unionized~~subject to numerous federal, state, and local environmental laws. ~~The~~Under applicable environmental laws, the Company ~~has~~may be ~~experienced~~responsible nofor ~~work~~remediation ~~stoppage~~of ~~attributable~~environmental conditions and may be subject to ~~labor~~associated ~~disputes~~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 ~~considers~~regardless ~~employee~~of ~~relations~~whether tosuch beenvironmental ~~good~~conditions were created by the Company or by a prior owner or tenant.

~~Item~~ As described in Note 17 — “Legal Proceedings,” to the Consolidated Financial Statements, if the Hamilton County Department of Environmental Services (“HCDOES”) determines that the Company is non-compliant with emissions requirements, the Company likely will be required to install additional control equipment. The Company is estimating the cost of such upgrades to existing equipment to be $2. ~~Properties~~5 million. Should such capital expenditures be required, the Company would likely adjust its capital budget for its successor fiscal 2007 or delay previously budgeted capital expenditures. The Company does not believe that any other issues related to compliance with environmental laws will have a material effect upon the capital expenditures, earnings or competitive position of the Company.

~~Principal Offices.~~ The Company’s ~~main~~operations are ~~office~~subject isto ~~located~~licensing inand aregulation ~~facility~~by ita ~~owns~~number inof ~~Cincinnati,~~state ~~Ohio. The~~and ~~Company~~local ~~also~~governmental authorities, ~~owns~~which ~~and~~include ~~uses~~health, asafety, 23sanitation,~~000 square~~ ~~foot~~ building, inand ~~Claremont,~~fire agencies. ~~North~~Operating ~~Carolina~~costs ~~for~~are ~~additional~~affected ~~office~~by ~~space. Prior~~increases toin ~~the~~costs ~~Acquisition~~of onproviding health ~~June 30~~care benefits, ~~2004,~~ the ~~Company~~minimum ~~also~~hourly ~~leased 6~~wage,~~000~~ ~~square~~unemployment ~~feet~~tax ofrates, ~~executive office space in~~sales ~~Hickory~~taxes, ~~North~~and ~~Carolina~~other ~~from~~similar anmatters ~~affiliated~~over ~~party~~which ~~for~~the ~~$116,000~~Company ~~per~~may have ~~year at terms~~ no control. ~~less~~The ~~favorable~~Company ~~than~~is ~~those~~subject ~~which~~to ~~could~~laws begoverning ~~obtained~~relationships ~~from~~with ~~an unaffiliated third~~employees, ~~party. This~~including ~~lease~~minimum ~~was~~wage ~~terminated~~requirements, ~~in conjunction~~overtime, ~~with~~working ~~the~~conditions, ~~Acquisition~~and citizenship requirements.

~~Food Processing Plants~~Employees. ~~The Company produces~~ ~~its~~As ~~fully-cooked~~of ~~meat~~March 4, ~~products~~2006, ~~packaged~~the ~~sandwiches~~Company ~~and specialty bread~~employed ~~products~~approximately ~~at facilities it owns in Cincinnati~~1,850 ~~Ohio and Claremont, North Carolina~~persons. The ~~Cincinnati~~Company’s ~~facility~~employees ~~occupies~~are ~~buildings~~non-unionized. ~~totaling approximately~~The ~~225,000~~Company ~~square~~has ~~feet,~~experienced ~~following~~no awork ~~25,000~~stoppage attributable ~~square~~to ~~foot~~labor ~~building expansion during~~disputes, ~~predecessor~~and ~~fiscal~~considers ~~2003. The~~employee ~~Claremont facility~~relations ~~occupies~~to ~~buildings~~be ~~totaling approximately 150,000 square feet~~good.

~~The~~Item ~~Company is highly committed to the quality of its products and the safety of its operations~~1A. ~~The~~ ~~Company’s~~Risk modern equipment allows for a fully automated contaminant removal procedure. As a result of this procedure, in addition to the continuous raw material inspections that the Company performs, the Company has received the total quality control designation from the USDA since 1987.Factors

Increases in the price of raw materials, particularly beef, chicken, pork, and cheese could reduce our operating margins. The ~~Company~~primary ~~believes~~raw ~~that~~materials ~~its~~used ~~facilities~~in the Company’s food processing operations are boneless beef, chicken, pork, and cheese, breading, soy proteins, and packaging supplies. Meat proteins are generally purchased under seven day payment terms, with the exception of a few that require payment at the time the product is shipped. Historically, the Company has not hedged in the ~~good~~futures ~~condition~~markets, and ~~that~~over ~~they~~time, ~~are~~the ~~suitable~~Company’s ~~for~~raw ~~their~~material ~~current~~costs have ~~uses~~fluctuated with movement in the relevant commodity markets. ~~The~~ Prices for beef, chicken, and pork, the Company’s ~~nevertheless~~principal ~~engages~~protein raw materials, reached ~~periodically~~historical highs during predecessor fiscal 2005 and successor fiscal 2005 combined. However, during successor fiscal 2006, the weighted average prices paid for raw materials (excluding cost-plus contracts) decreased from the historical highs experienced in ~~construction~~predecessor fiscal 2005 and ~~other~~successor ~~capital~~fiscal ~~improvement~~2005 ~~projects~~combined, ~~that~~with the ~~Company~~exception ~~believes~~of ~~are~~beef, ~~necessary~~which increased by approximately 7.7% compared to ~~expand~~the weighted ~~and~~average ~~improve~~prices the ~~efficiency~~Company ofpaid ~~its~~during predecessor fiscal 2005 and ~~facilities~~successor fiscal 2005 combined. During

~~Item 3. Legal Proceedings~~5

~~Pierre~~successor fiscal is2006, athe ~~party~~weighted inaverage ~~various~~prices the Company paid for beef, chicken, ~~lawsuits~~pork, ~~arising~~and incheese decreased by approximately 4.4%, 3.6%, 29.1% and 7.7%, respectively, over the ~~ordinary~~weighted ~~course~~average prices the Company paid for these raw materials during the fourth quarter of ~~business~~successor fiscal 2005. ~~Although~~ ~~management~~While historically ~~cannot~~the ~~predict~~Company has managed such fluctuations through purchase orders, cost-plus contracts, and by passing on such cost increases to customers, the Company may be unable to protect ~~outcome~~itself from future increases in the prices of ~~these~~raw ~~lawsuits~~materials on a timely basis, or ~~management~~at ~~believes~~all. ~~the~~In ~~disposition~~addition, some of the Company’s customers purchase products based on bid contracts with set prices, which would prevent the Company from recovering any raw materials price increases from these ~~matters~~customers during the life ~~will~~of ~~not~~those ~~have~~contracts. If prices for beef, chicken, pork, and cheese were to increase significantly without a ~~material~~commensurate ~~adverse~~increase ~~effect~~in onthe price for processed protein food products, the Company’s financial condition~~, results~~ ofand ~~operations~~operating orresults ~~cash~~could be ~~flows~~adversely affected.

~~Item 4~~If the Company’s products become contaminated or are mislabeled, the Company may be subject to product liability claims, product recalls, and increased scrutiny by regulators, any of which could adversely affect the Company’s business. ~~Submission~~ Beef, chicken, and pork products are vulnerable to contamination by organisms producing food-borne illnesses. These organisms are generally found in the environment, and, as a result, there is a risk that as a result of ~~Matters~~food processing, they could be found in the Company’s products. For example, E. coli is one of many food-borne pathogens commonly associated with beef products. If contaminated products are shipped for distribution, illness and death could result if the pathogens are not eliminated by processing at the foodservice or consumer level. The risk can be controlled, but not eliminated, by use of good manufacturing practices and finished product testing. Also, products purchased from others for re-packing or distribution may contain contaminants that the Company is unable to identify. The Company may also encounter the same risks if a third party tampers with its products or if its products are ~~Vote~~inadvertently mislabeled. Shipment of ~~Security~~adulterated ~~Holders~~products, even if inadvertent, is a violation of law and may lead to product liability claims, product recalls and increased scrutiny by federal and state regulatory agencies, any of which could have a material adverse effect on the Company’s reputation, business, prospects, results of operations, and financial condition.

OnThe ~~January~~Company’s insurance and indemnification agreements may ~~11,~~be ~~2005,~~inadequate ~~PFMI,~~to cover all the ~~sole~~liabilities ~~shareholder of~~the ~~Pierre,~~Company ~~elected~~may incur. ~~Scott~~The ~~Meader~~Company tofaces the ~~Board~~risk of ~~Directors~~exposure to product liability claims and adverse public relations in the event that its control procedures fail and the consumption of ~~Pierre~~its products causes injury or illness. ~~Mr. Meader~~ ~~was~~If ~~elected~~a asproduct liability claim is successful, the ~~fifth~~Company’s insurance may not ~~director~~be ofadequate to cover all liabilities it may incur, including harm to its reputation, and the Company~~. Messrs.~~ may ~~Alexos~~not be able to continue to maintain such insurance, or obtain comparable insurance at a reasonable cost, if at all. The ~~Peinado~~Company generally seeks contractual indemnification and insurance coverage from its suppliers, ~~Selati~~but this indemnification or insurance coverage is limited by the creditworthiness of the indemnifying party and ~~Woodhams~~their ~~also~~insurance ~~continued~~carriers, if any, as ~~directors~~well ~~following~~as Mrthe insured limits of any insurance provided by those suppliers. ~~Meader’s~~ ~~election~~If the Company does not have adequate insurance or contractual indemnification available, product liability claims relating to defective products could have a material adverse effect on its financial condition and operating results.

6A decline in meat consumption, or in the consumption of processed food products, would have a material adverse effect on the Company’s business, financial condition, and operating results. Adverse publicity relating to health concerns and the nutritional value of meat and meat products could adversely affect meat consumption and, consequently, demand for the Company’s beef, chicken, and pork products. In addition, as all of the Company’s operations consist of the production and distribution of processed food products, a change in consumer preferences relating to processed food products or in consumer perceptions regarding the nutritional value of processed food products could significantly reduce the Company’s sales volume. A reduction in demand for the Company’s products caused by these factors could have a material adverse effect on the Company’s business, financial condition, and operating results.

~~PART II~~The food industry in general is subject to changing consumer trends, demands, and preferences. The Company’s processed protein and bakery products compete with other processed convenience foods, as well as other foods. The Company’s failure to anticipate, identify or react to changes in consumer preferences could lead to, among other things, reduced demand and reduced margins for its products, and could have a material adverse effect on its business, financial condition, and operating results.

~~Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and IssuerPurchases of Equity Securities~~6

~~Since~~Outbreaks ~~the~~of disease ~~Company’s~~among ~~going-private transaction on July 26~~cattle, ~~2002,~~ ~~the~~chicken ~~Company~~or ~~has~~pigs ~~been~~could asignificantly ~~wholly-owned~~reduce ~~subsidiary~~demand ~~of PFMI; accordingly, there is no public trading market~~ for the Company’s ~~common~~products ~~stock. The~~and ~~Company~~restrict ~~did~~its ~~not~~ability ~~declare~~to aproduce ~~cash~~meat ~~dividend during~~and ~~predecessor~~sandwich ~~fiscal~~products, adversely ~~2005~~affecting ~~and~~its ~~successor~~sales ~~fiscal~~volume. ~~2005~~An ~~combined~~outbreak ~~or predecessor~~of ~~fiscal~~disease ~~2004. The~~affecting ~~Company’s~~livestock, ~~debt~~such ~~instruments~~as ~~restrict~~bovine ~~its~~spongiform encephalopathy ~~ability~~(commonly referred to ~~pay~~as ~~dividends. See~~ “~~Management’s~~mad ~~Discussion and Analysis of~~cow ~~Financial~~disease” ~~Condition~~or ~~and~~BSE), ~~Results of Operations—Liquidity~~ foot-and-mouth ~~Capital~~disease ~~Resources” and~~or ~~Note~~Asian 7,bird ~~“Financing~~flu ~~Arrangements,”~~could toresult ~~the~~in reductions ~~Company’s~~in ~~Consolidated~~demand ~~Financial Statements. Regardless~~and ofrestrictions ~~the~~on ~~scope~~sales of ~~such~~ ~~restrictions,~~products to the Company’s customers ~~policy~~or ispurchases toof ~~reinvest~~meat ~~any~~and ~~earnings~~poultry ~~rather~~products ~~than pay~~from ~~dividends~~its suppliers. ~~The~~ ~~Company has no~~Health ~~compensation~~concerns ~~plans~~about orBSE ~~individual~~in ~~arrangements~~particular ~~under~~have ~~which~~had ~~equity~~an ~~securities~~adverse ~~of the~~impact ~~Company~~on ~~are authorized for issuance; however, Holding,~~ the ~~sole stockholder~~livestock ofindustry ~~PFMI,~~and ~~implemented~~on asales ~~stock~~of ~~option~~beef ~~plan~~products ~~pursuant~~in toEurope, ~~which~~South ~~options~~America toand ~~purchase~~Japan in ~~shares~~past ofyears. ~~common~~The ~~stock~~North ofAmerican ~~Holding~~Governmental ~~may~~Food beAgencies ~~issued~~have toput ~~officers, employees and~~preventative ~~consultants~~measures ofin ~~the~~place ~~Company. See Note 11, “Stock-Based Compensation,”~~ to ~~the~~lessen ~~Consolidated~~these ~~Financial Statements~~risks.

NoThe ~~equity~~categories ~~securities~~of the food industry in which the Company operates are highly competitive, and the Company’s inability to compete successfully could adversely affect its business, results of operations, and financial condition. Competition in each of the categories of the food industry in which the Company ~~were~~operates ~~sold~~is intense. Increased competition byfor any of the Company’s ~~during~~products ~~predecessor~~could ~~fiscal~~result ~~2005~~in price reductions, reduced margins or loss of market share, any of which would negatively affect the Company’s business, results of operations, and ~~successor~~financial ~~fiscal~~condition. ~~2005~~The Company’s ~~combined~~formed, pre-cooked protein products compete with the products of several meat processors, including Advance Food Company, Zartic, Inc., Tyson, Gorges/Quick To Fix, and smaller local and regional producers. The market for hand-held convenience sandwiches has low barriers to entry and is extremely fragmented, with several direct competitors, including Sara Lee/Jimmy Dean Foods, Bridgford Foods Corp., Deli Express, and Landshire, and indirect competition from a variety of substitute products. Many of the Company’s competitors in each of these categories have substantially greater financial resources, name recognition, research and development, marketing, and human resources. In addition, any of the Company’s competitors may develop new or enhanced products that are superior to the Company’s products, or market and sell their products more successfully than the Company does, the Company may be unable to compete successfully with any or all of these companies.

7The Company’s top ten customers have historically accounted for a significant portion of its net revenues and its largest customer accounted for approximately 21% of net revenues for successor fiscal 2006. The Company’s top ten customers accounted for approximately 55% and 59% of its net revenues in successor fiscal 2006 and predecessor fiscal 2005 and successor fiscal 2005 combined, respectively. In particular, the Company’s largest customer accounted for approximately 21% and 25% of net revenues in successor fiscal 2006 and predecessor fiscal 2005 and successor fiscal 2005 combined, respectively. If, for any reason, one of the Company’s key customers were to purchase significantly less of the Company’s products in the future or were to terminate purchases from the Company, or if for any reason the Company was unable to renew an existing contract with a key customer on favorable terms, or at all, and the Company was not able to sell its products to new customers at comparable or greater levels, its business, financial condition, and operating results would suffer.

~~Item~~The consolidation 6of and market strength among the Company’s retail and foodservice customers may put pressure on its operating margins. ~~Selected~~ In recent years, the trend among the Company’s ~~Financial~~retail ~~Data~~and foodservice customers, such as warehouse clubs and foodservice distributors, has been toward consolidation. In addition, the Company’s customers include two of the five largest quick-service hamburger restaurant chains in the United States. These factors have resulted in increased negotiating strength among many of the Company’s customers, which has and may continue to allow them to exert pressure on the Company with respect to pricing terms, product quality, and the introduction of new products. To the extent the Company’s customer base continues to consolidate, competition for the business of fewer customers may intensify. If the Company cannot continue to negotiate favorable contracts, whether upon renewal or otherwise, with these customers, implement appropriate pricing and introduce new product offerings acceptable to its customers, or if the Company loses its existing large customers, its profitability could decrease.

The ~~following~~Company manufactures ~~selected~~many ~~historical~~of ~~financial~~its products using proprietary formulations and markets ~~information~~its ~~has~~products ~~been~~under ~~derived~~a ~~from~~variety ~~audited~~of ~~consolidated~~brand ~~financial~~names. ~~statements~~The termination of, or failure to renew a license agreement under which the Company~~. Such~~ ~~financial~~sells ~~information should~~branded beproducts, ~~read~~the reduction in ~~conjunction~~value ~~with~~of ~~the~~an ~~consolidated~~underlying ~~financial~~license ~~statements~~or its inability to protect ownership of proprietary formulations, could negatively impact the Company’s ability to produce and sell its products. The market for the Company,’s products depends to a significant extent upon the ~~notes~~proprietary ~~thereto~~formulations used in manufacturing its products and the ~~other~~goodwill ~~financial~~associated ~~information~~with ~~contained~~the brand names under which its ~~elsewhere~~products ~~herein~~are sold. ~~See~~ ~~“Management’s Discussion~~The ~~and~~Company ~~Analysis~~relies ofon ~~Financial~~patent, ~~Condition~~trademark and ~~Results~~trade ofsecret ~~Operations”~~law to establish and protect its intellectual property rights, including its ~~the~~proprietary formulations. The Company’s ~~Consolidated~~may be ~~Financial~~required ~~Statements~~from ~~and~~time ~~supplementary~~to ~~data~~time to bring lawsuits against third parties to protect its intellectual property.

	Successor			Predecessor
	Fiscal 2005			Fiscal 2005			Fiscal 2004			Fiscal 2003			Fiscal 2002			Fiscal 2001
				(dollars in thousands, except per share data)
STATEMENT OF OPERATIONS DATA:
Revenues, net	$	294,867		$	115,549		$	358,549		$	276,339		$	243,278		$	203,475
Cost of goods sold	217,323			87,025			254,235			184,092			160,781			133,385
Selling, general and administrative	39,826			26,447			79,982			71,352			62,399			55,752
Net loss on disposition of property, plant and equipment	5			340			11			89			84			27
Depreciation and amortization	23,170			1,545			4,605			4,125			6,438			6,238
Operating income	14,543			192			19,716			16,681			13,576			8,073
Interest expense	(19,493		)	(6,538		)	(16,979		)	(14,228		)	(13,206		)	(13,334		)
Other income, net	24			2			—			447			364			281
Income tax benefit (provision)	597			2,080			(1,303		)	(1,122		)	(733		)	767
Income (loss) from continuing operations	(4,329		)	(4,264		)	1,434			1,778			1			(4,213		)
Extraordinary item (1)	—			—			—			—			—			(455		)
Cumulative effect of accounting change (2)	—			—			—			(18,605		)	—			—
Net income (loss)	$	(4,329	)	$	(4,264	)	$	1,434		$	(16,827	)	$	1		$	(4,668	)
NET INCOME (LOSS) PER SHARE - BASIC AND DILUTED:
Income (loss) from continuing operations	$	(43.29	)	$	(42.64	)	$	14.34		$	17.78		$	0.01		$	(42.13	)
Extraordinary item	—			—			—			—			—			(4.55		)
Cumulative effect of accounting change	—			—			—			(186.05		)	—			—
Net income (loss)	$	(43.29	)	$	(42.64	)	$	14.34		$	(168.27	)	$	0.01		$	(46.68	)
OTHER DATA:
Capital expenditures	$	3,677		$	2,084		$	10,041		$	16,216		$	5,994		$	2,764
BALANCE SHEET DATA:
Working capital	$	62,662		n/a			$	46,110		$	40,716		$	37,061		$	35,890
Total assets	496,588			n/a			175,771			168,781			169,821			160,308
Total debt	263,580			n/a			143,694			136,348			121,231			115,165
Shareholders’ equity	146,023			n/a			6,621			8,998			27,207			26,867

~~(1) Reflects~~Similarly, anfrom ~~extraordinary~~time ~~loss~~to ~~from~~time ~~early~~the ~~extinguishment~~Company ofmay be ~~debt~~party to proceedings in which third parties challenge its rights, including those to the ~~amount~~Company’s ofproduct formulations. ~~$455~~Any lawsuits or other actions the Company brings to enforce its rights may not be successful, and the Company may in ~~predecessor~~fact ~~fiscal~~be ~~2001~~found to infringe on the intellectual property rights of others, in either of which case the Company may not be able to prevent others from using such intellectual property and/or may be prevented from using such intellectual property, including proprietary formulations.

~~(2) Reflects~~In addition to its own brand names, the Company has alicenses ~~loss~~with ~~due~~third toparties ~~cumulative~~that ~~effect~~own certain trademarks or trade names used in the marketing of ~~accounting~~some ~~change~~of the Company’s products. In the event that any such license is terminated, the Company may lose the right to use or have reduced rights to use the intellectual property covered by such agreement. In such event, the Company may not be able to secure licenses to use alternative trademarks or trade names in the ~~amount~~marketing of ~~$18~~its products,~~605~~ and its products may not be as attractive to customers. In addition, certain events, including events beyond the Company’s control, could make certain of its brand names, or the brand names it licenses, less attractive to its customers, making its products less desirable as a result. Any loss in ~~predecessor~~the ~~fiscal~~value ~~2003~~of a brand name or loss of a license for a brand name could adversely affect the Company’s sales volume for affected products.

~~See~~The ~~Note~~Company 2is subject to extensive governmental regulations, ~~“Summary~~which require significant compliance expenditures. The Company is subject to extensive federal, state and local regulations. Its food processing facilities and food products are subject to frequent inspection by the USDA, FDA, and various state and local health and agricultural agencies. Applicable statutes and regulations governing food products include rules for identifying the content of ~~Significant~~specific types of ~~Accounting~~foods, ~~Policies~~the nutritional value of that food and its serving size,” as well as rules that protect against contamination of products by food-borne pathogens. Many jurisdictions also provide that food manufacturers adhere to good manufacturing practices (the ~~Consolidated~~definition ~~Financial~~of ~~Statements~~which may vary by jurisdiction) with respect to production processes. Recently, the food safety practices and procedures in the meat processing industry have been subject to more intense scrutiny and oversight by the USDA and future outbreaks of diseases among cattle, poultry or pigs could lead to further governmental regulation. In addition, the Company’s production and distribution facilities are subject to various federal, state and local laws and regulations relating to workplace safety and workplace health. Failure to comply with all applicable laws and regulations could subject the Company to civil remedies, including fines, injunctions, product recalls or seizures and criminal sanctions, any of which could have a material adverse effect on the Company’s business, financial condition and results of operations. Furthermore, compliance with current or future laws or regulations could require the Company to make material expenditures or otherwise adversely affect the way the Company operates its business, financial condition and operating results.

8Any material changes to, cutbacks in or termination of the USDA’s Commodity Reprocessing Program could have a material adverse effect on the Company’s sales to schools. A substantial portion of the products that the Company sells to schools use meat provided to the schools through the USDA’s Commodity Reprocessing Program. If this program were terminated or significantly curtailed due to budgetary constraints, or if the program were changed in a way that neutralizes what the Company believes is its competitive advantage in complying with program guidelines, the Company may be unable to continue to sell these products to schools at current volumes. These programs provide food and nutrition assistance to certain eligible institutions. The programs are designed to assist farmers, commodity producers and processors to maintain stable commodity prices and to provide nutritious foods to children. The Company produces many of its pre-cooked proteins using meat provided by customers through this program, which it re-sells to these customers.

~~Item 7~~Compliance with environmental regulations may result in significant costs and the Company’s failure to comply with environmental regulations may result in civil as well as criminal penalties, liability for damages and negative publicity. ~~Management~~ The Company’s ~~Discussion~~operations are subject to extensive and ~~Analysis~~increasingly stringent regulations pertaining to the discharge of materials ~~Financial~~into ~~Condition~~the environment and ~~Results~~the handling and disposition of ~~Operations~~wastes. Failure to comply with these regulations can have serious consequences for the Company, including criminal as well as civil and administrative penalties and negative publicity. The Company has incurred and will continue to incur significant capital and operating expenditures to avoid violations of these laws and regulations. Additional environmental requirements imposed in the future could require currently unanticipated investigations, assessments or expenditures, and may require the Company to incur significant additional costs.

~~The following discussion relates to the~~Labor ~~financial~~disruptions ~~condition~~or ~~and~~increased ~~results~~labor ofcosts ~~operations~~could ~~for~~adversely ~~successor~~affect ~~fiscal~~the ~~2005,~~Company’s ~~predecessor fiscal 2005, predecessor fiscal 2004 and predecessor fiscal 2003~~business. ~~Successor~~ ~~fiscal~~As ~~2005~~of ~~and predecessor fiscal 2005 collectively are referred to as “predecessor fiscal 2005 and successor fiscal 2005 combined.” This section~~March ~~should be read in~~4, ~~conjunction~~2006, ~~with~~ the Company’s ~~Consolidated~~had ~~Financial~~approximately ~~Statements and considered with “Risk Factors” discussed in Item 7A below~~1,850 ~~“Quantitative~~employees. ~~and~~The ~~Qualitative Disclosures~~Company ~~About~~considers ~~Market Risk” and “Cautionary Statements Regarding Forward~~its ~~Looking~~relations ~~Statements,”~~with ~~which~~its ~~precedes~~employees ~~Part I,~~to ~~Item~~be ~~1 above~~good.

Pierre operates on a 52-week or 53-week fiscal year ending on the first Saturday in March or if the last day of February is a Saturday, the last day of February. Each quarter of the fiscal year contains 13 weeks except for the infrequent fiscal years with 53 weeks. The results for predecessor fiscal 2005 and successor fiscal 2005 combined contain 52 weeks. The results for predecessor fiscal 2004 contain 53 weeks. The results for predecessor fiscal 2003 contain 52 weeks.8

~~Results~~However, the Company could experience a material labor disruption or significantly increased labor costs at one or more of its facilities in the future, which would have a ~~Operations~~material adverse effect on its business, financial condition and operating results.

~~Results~~The ~~for~~Company ~~successor~~sells a ~~fiscal~~large ~~2005~~percentage of its products to schools, which subjects its sales volumes and, thus, its operating results, to seasonal variations. The Company’s quarterly operating results are affected by the seasonal fluctuations of its sales and operating profits. The Company derived approximately 20% and 21% of its net revenues in successor fiscal 2006 and predecessor fiscal 2005 and successor fiscal 2005 combined, respectively, ~~predecessor~~from sales to schools. Since schools comprise a significant portion of the Company’s customer base, sales of its products tend to be lower during the summer months. These lower sales volumes negatively impact its operating profits during the second quarter of each fiscal ~~2004~~year. As a result of these fluctuations, the Company believes that comparisons of its sales and operating ~~predecessor~~results among different quarters within a single fiscal ~~2003~~ year are ~~shown~~not necessarily ~~below:~~meaningful and that they cannot be relied upon as indicators of the Company’s future performance.

	Successor			Predecessor
	Fiscal 2005			Fiscal 2005			Fiscal 2004			Fiscal 2003
	(in millions)			(in millions)			(in millions)			(in millions)
Revenues, net	$	294.9		$	115.5		$	358.6		$	276.3
Cost of goods sold	217.3			87.0			254.2			184.1
Selling, general and administrative	39.8			26.4			80.0			71.3
Net loss on disposition of property, plant and Equipment	—			0.4			0.1			0.1
Depreciation and amortization	23.2			1.5			4.6			4.1
Operating income	14.6			0.2			19.7			16.7
Interest and other expense, net	(19.5		)	(6.5		)	(17.0		)	(13.8		)
Income (loss) before income tax, and cumulative effect of accounting change	(4.9		)	(6.3		)	2.7			2.9
Income tax benefit (provision)	0.6			2.0			(1.3		)	(1.1		)
Income (loss) before cumulative effect of accounting change	(4.3		)	(4.3		)	1.4			1.8
Cumulative effect of accounting change	—			—			—			(18.6		)
Net income (loss)	$	(4.3	)	$	(4.3	)	$	1.4		$	(16.8	)

The Company processes meat at its Cincinnati, Ohio facility, and the Company produces bread and assembles sandwiches at its Claremont, North Carolina facility. A material disruption at either of these plants or an increase in demand causing inability to meet customer demands could seriously harm the Company’s financial condition and operating results. The Company manufactures protein products, including the meat used in its packaged sandwich operations, at its Cincinnati, Ohio facility. In addition, the Company produces bread and assembles sandwiches at its Claremont, North Carolina facility. Since the Company does not have operations elsewhere, a material disruption at either location would seriously limit its ability to deliver products to its customers. Such disruption could be caused by a number of different events, including:

~~Predecessor~~• ~~Fiscal~~maintenance ~~2005 and Successor Fiscal 2005 Combined Compared to Predecessor Fiscal 2004~~outages;

As• aprolonged ~~result~~power of the Acquisition as described in Note 1, “Basis of Presentation and Acquisition,” to the Consolidated Financial Statements and elsewhere in this report, the following results of operations comparisons demonstrate a significant difference between compared periods. The Acquisition on June 30, 2004 was accounted for under the purchase method of accounting resulting in an increase in the basis of our assets. Due to the change in basis, our results of operations and those of our predecessor are not considered comparable. Our results of operations include amortization related to the identifiable intangible assets and interest expense related to the borrowings incurred in connection with the Acquisition. For the purpose of comparing comparable time periods the results for predecessor fiscal 2005 and successor fiscal 2005 are combined in the discussion below in order to provide a more meaningful period-to-period comparison.failures;

9• equipment failure;

~~Revenues~~• ~~net. Net~~chemical ~~revenues~~spill ~~increased by $51.9 million,~~ or 14.5%. The increase in net revenues was the result of increases in sales across most of the Company’s end-market segments, including the substantial development of national business with existing customers and the advent of business with a new customer, in addition to net revenue of approximately $6.4 million due to net price increases to customers, offset by additional revenues of $7.9 million in the prior year due to predecessor fiscal 2004 being a 53 week year, compared to the 52 week period in predecessor fiscal 2005 and successor fiscal 2005 combined. Included in predecessor fiscal 2005 and successor fiscal 2005 combined and predecessor fiscal 2004 are non-recurring revenues of $8,604 and $104,127, respectively, related to Compass Outfitters, LLC. These revenues will not be present in future periods due to Compass Outfitters, LLC being retained by the selling shareholders following the Acquisition.release;

~~Cost~~• ofwidespread ~~goods~~contamination ~~sold. Cost~~ of ~~goods~~our sold increased by $50.1 million in predecessor fiscal 2005 and successor fiscal 2005 combined compared to predecessor fiscal 2004, or 19.7%. As a percentage of revenues, cost of goods sold increased from 70.9% to 74.2%. This increase was primarily due to increased raw material prices ($13.9 million), the impact of a $2.0 million purchase accounting adjustment on beginning inventory (as a result of the Acquisition) and start-up costs of $3.1 million related to the development of new lower margin, high volume national accounts business. In predecessor fiscal 2005 and successor fiscal 2005 combined, beef, pork, chicken and cheese prices increased approximately 7.3%, 49.4%, 22.5% and 25.0%, respectively, compared to predecessor fiscal 2004. These increases were partially offset by price increases passed on to customers, as noted above, and the elimination of commissions as a result of the termination of the Company’s purchasing agreement with PF Purchasing. Commissions paid to PF Purchasing totaled $5.3 million during predecessor fiscal 2004. This affiliate relationship was terminated in conjunction with the Restructuring.equipment;

~~Selling,~~• ~~general and administrative. Selling~~fires, ~~general and administrative expenses decreased by $13.7 million~~floods, earthquakes or ~~17.1%.~~other Asnatural adisasters; percentage of revenues, selling, general and administrative expenses decreased from 22.3% to 16.1%. This decrease was primarily due to the elimination of PF Distribution fees of $11.6 million and a decrease in former affiliate expenses offset, in part, by expenses associated with the Acquisition that are not expected to repeat in future periods. Expenses associated with the previous shareholders in predecessor fiscal 2005 and successor fiscal 2005 combined and predecessor fiscal 2004 that are not expected to be incurred in the future include the following: or

	Predecessor Fiscal 2005 and Successor Fiscal 2005 Combined		Predecessor Fiscal 2004
	(dollars in millions)
Distribution expenses (a)	$	—	$	11.6
House lease(b)	—		0.1
Compensation expense (c)	1.2		2.8
Travel and entertainment (d)	1.0		2.0
Office expense(e)	0.2		0.6
Aircraft expense (f)	0.8		1.5
Compass Outfitters (g)	0.1		0.7
Professional fees (h)	2.6		2.4
Previous shareholders’ other expenses (i)	0.7		1.1
Previous shareholders’ transaction fees (j)	1.0		—
Consulting services (k)	0.8		—
Endorsement termination (l)	0.3		—
Other (m)	0.1		—
Total	$	8.8	$	22.8

• other operational problems.

10Any material malfunction or prolonged disruption in the operations of either of its facilities could prevent the Company from fulfilling orders to existing customers, and would limit its ability to sell products to new customers. Any material malfunction or prolonged disruption in its Cincinnati, Ohio meat processing facility would be particularly harmful to the Company, as nearly all of its products are manufactured, at least in part, at that facility. In addition, the Company may not be able to meet manufacturing requirements in its current facilities if there is a significant increase in customer demands. Any of these events would adversely affect the Company’s business, financial condition and operating results.

~~Distribution~~The ~~expenses (a) incurred under~~Company ~~related~~depends ~~party~~upon ~~agreements~~the ~~that~~continued ~~were~~services ~~terminated~~of incertain ~~March 2004~~members ~~as part~~ of ~~the Restructuring. The~~its ~~house~~senior ~~lease (b) relates~~management ~~to rent expense~~team, ~~maintenance~~without ~~and~~whom ~~other~~its ~~occupancy~~business ~~costs~~operations ~~paid~~would tobe ~~related~~significantly ~~parties pursuant~~disrupted. toThe aCompany’s ~~lease~~success ~~that~~depends, ~~was terminated~~ in ~~connection~~part, ~~with~~on the ~~Restructuring.~~ ~~Compensation~~continued ~~expense~~contributions ~~(c) relates~~of toits ~~personnel~~executive ~~who~~officers ~~were terminated in connection with the Acquisition~~ and ~~will~~other ~~not~~key ~~be replaced~~employees. ~~Travel and~~The ~~entertainment~~Company’s ~~(d) relates~~management toteam ~~expenses~~has ~~incurred~~significant byindustry ~~personnel~~experience ~~who were terminated~~ and ~~will~~would ~~not~~ be ~~replaced as a result of the Acquisition. Office~~ ~~expense~~difficult ~~(e) relates~~ to ~~rent~~replace. ~~expense,~~If ~~maintenance~~the ~~and~~Company ~~other~~loses ~~occupancy~~or ~~costs associated~~suffers ~~with the lease of~~ an ~~office~~extended ~~building from a related party that was~~interruption ~~terminated~~ in ~~connection with~~ the ~~Acquisition.~~service ~~Aircraft~~of ~~expense~~one ~~(f) relates to~~or ~~the~~more ~~leasing~~ of anits ~~aircraft~~senior ~~owned by Columbia Hill Aviation~~officers, ~~LLC~~its ~~which~~financial ~~was~~condition ~~formerly~~and aoperating ~~subsidiary~~results ~~of PFMI, which was retained by the selling shareholders. Compass Outfitters (g)~~may ~~relates~~be toadversely ~~expenses incurred in connection with an asset that was retained by the selling shareholders~~affected. ~~The~~Moreover, ~~professional fees (h) primarily are related to~~ the ~~Restructuring~~market ~~and to the Acquisition. The previous~~for ~~shareholders’~~qualified ~~other~~individuals ~~expenses (i)~~may ~~relate~~be tohighly ~~outside~~competitive ~~board of director fees, community relations,~~ and ~~contributions made to~~ the ~~former~~Company ~~owners alma mater. The previous shareholders’ transaction fees (j)~~may ~~include legal, accounting,~~not ~~and~~be ~~tax~~able ~~consulting fees related~~ to ~~the~~attract ~~Acquisition.~~and ~~The~~retain ~~consulting~~qualified ~~services (k) consist~~personnel ~~of the fee paid~~ to ~~the~~replace ~~selling~~or ~~shareholders’~~succeed ~~adviser for his~~members ~~role in the Acquisition. The endorsement termination (l) relates to the termination~~ of ~~the~~its ~~contract~~senior ~~between~~management ~~the~~or ~~Company~~other ~~and~~key ~~Crawford Race Cars~~employees, ~~LLC. Other~~should ~~(m) includes employee travel and other expenses incurred as a result of~~ the ~~debt~~need ~~placement for the Acquisition~~arise.

~~Operational~~Significant ~~selling,~~increases ~~general,~~in ~~and administrative~~the ~~expenses~~cost inof ~~total~~distribution ~~remained~~would ~~constant~~have ~~for~~an adverse effect on the ~~two~~Company’s ~~year-to-date~~financial condition and operating results. The Company’s distribution costs include fuel ~~periods~~for ~~due~~transportation toand ~~the~~electricity ~~increase~~for cold storage. Significant increases in these distribution costs ofwould ~~$2.4~~adversely ~~million~~affect ~~being~~the ~~offset~~Company’s financial condition byand aoperating ~~decrease~~results. inThe ~~bonus~~Company ~~payments~~uses a core group of ~~$2.1~~contract ~~million~~carriers ~~and~~that have ~~efficiencies~~established ~~related~~rates based on mileage to ~~increased~~ ~~national~~regions ~~account~~or ~~business~~destination states. A ~~Included~~fuel insurcharge ~~successor~~addendum ~~fiscal 2005~~ is a ~~non-cash~~component ~~compensation~~of ~~charge~~all ofrates ~~$0.3~~to offset the fluctuating ~~million~~price ~~related~~of diesel fuel, primarily to limit the ~~Holding~~contract ~~deferred~~carrier’s ~~compensation~~exposure. ~~arrangement~~These fuel ~~for~~surcharges ~~management following~~have risen over the ~~Acquisition.~~past year and remain at a historic

Depreciation and Amortization. Depreciation and amortization expense increased by $20.1 million. The increase is due primarily to amortization of intangible assets and additional depreciation expense related to a step-up in the value of fixed assets due to purchase accounting, both occurring in successor fiscal 2005 as a result of the Acquisition.9

~~Loss~~high. If onthese ~~Disposal~~surcharges ~~of Assets. Loss~~continue onto ~~disposal~~rise, ~~of assets~~or ~~increased~~if bythe ~~$0.3 million.~~ Company is unable to pass ~~The~~increased ~~increase~~distribution iscosts ~~due~~on to ~~the~~its ~~recording~~customers ofin ~~losses~~the ~~related~~form of tohigher ~~affiliate~~prices ~~companies~~for asour aproducts, ~~consequence~~its offinancial ~~the~~condition ~~Restructuring~~and operating results would suffer.

~~Other~~The ~~Expense. Other~~Company ~~expense~~uses ~~consists primarily of interest~~commercial oncold ~~fixed~~storage ~~and~~vendors ~~variable~~to ~~rate~~store ~~long-term~~finished ~~debt~~goods. ~~and~~A ~~interest~~major oncomponent aof ~~revolving~~cold ~~loan, both~~storage ofoperations ~~which~~expense ~~exist~~is aselectricity acost. ~~result~~Although of the ~~Acquisition.~~Company ~~Other~~tries ~~expense~~to ~~increased by~~minimize ~~$9.0 million~~storage costs, orany ~~53.2%. This~~ significant increase ~~was~~in ~~primarily~~electricity ~~due~~rates tofor ~~expenses as a result of~~ the ~~Acquisition,~~vendor are ~~including~~passed ~~$4.3~~along ~~million~~in ~~for~~ the ~~write-off~~ form of ~~deferred~~higher ~~loan~~storage ~~origination fees, $0~~rates.~~6 million~~ ~~for~~If the ~~repayment~~Company’s ofstorage rates ~~the~~increase ~~Old~~significantly, ~~Notes~~it ~~and~~may be ~~$0.5~~unable ~~million~~to ~~for~~pass ~~the~~these ~~repayment of~~costs ~~our~~on ~~former~~to its ~~revolving~~customers, ~~credit~~which ~~facility~~would ~~combined~~have ~~with~~an ~~the~~adverse ~~increased~~effect ~~debt~~on ~~and borrowings~~its ~~under~~financial ~~our new revolving credit facility. See “Liquidity~~ condition and ~~Capital~~operating ~~Resources” below~~results.

~~Income taxes.~~ The ~~effective~~Company’s ~~tax~~ability ~~rate~~to ~~for~~service ~~predecessor~~its ~~fiscal 2005~~debt and ~~successor~~meet ~~fiscal~~its cash ~~2005~~requirements ~~combined~~depends ~~was~~on ~~23.8%~~many factors, ~~compared~~some toof 47which are beyond its control.6% These ~~for~~factors could have a material adverse affect on the Company’s business, ~~predecessor~~financial ~~fiscal~~position ~~2004~~and results of operations. The Company’s ~~decrease~~ability into satisfy its obligations, including its Notes and its credit facility will depend on the ~~effective~~Company’s ~~tax~~future ~~rate~~operating performance and financial results, which will be subject, in part, to factors beyond the Company’s control, including interest rates and general economic, financial and business conditions. If the Company is ~~primarily~~unable ~~due~~to general sufficient cash flow, it may be required to refinance all or a ~~change~~portion of its debt, including the Notes and its credit facility, obtain additional financing in the ~~tax~~future ~~rated~~for acquisitions, ~~used~~working capital, capital expenditures and general corporate or other purposes, redirect a substantial portion of its cash flow to debt ~~provide~~service, which as a result, might not be available for ~~deferred~~its ~~taxes~~operations or other purposes, sell some of its assets or operations, reduce or delay capital expenditures, or revise or delay its operations or strategic plans. If the Company is required to take any of these actions, it could have a material adverse effect on its business, financial condition or results of operations. In addition, the Company cannot assure you that it would be able to take any of these actions, that these actions would enable it to continue to satisfy its capital requirements or that these actions would be permitted under the terms of its Notes or credit facility.

~~Predecessor~~Restrictive ~~Fiscal~~covenants ~~2004~~in ~~Compared~~the Company’s debt instruments restrict or prohibit the Company’s ability to engage in or enter ~~Predecessor~~into ~~Fiscal~~a ~~2003~~variety of transactions, which could adversely affect the Company. The indenture governing the Company’s Notes and its credit facility contain various restrictive covenants that limit the Company’s discretion in operating its business. In particular, those agreements limit the Company’s ability to, among other things:

~~Revenues, net. Net revenues increased by $82.2 million, or~~• incur ~~29.7%. The~~additional increase in net revenues was primarily due to the substantial development of national business with an existing customer, increased retail business with an existing customer, short term co-packing operations and an increase in sales of existing product lines. Among our six end markets, our national accounts had the greatest increase in demand. Revenues in predecessor fiscal 2004 included $0.1 million of revenues from Compass Outfitters, which was retained by the selling shareholders following the Acquisition.indebtedness;

~~Cost of goods sold. Cost of goods sold~~• make ~~increased~~certain byinvestments ~~$70.1 million,~~ or 38.1%. As a percentage of net revenues, cost of goods sold increased from 66.6% to 70.9%. This increase primarily was due to a change in product mix to lower margin products and increased raw material prices (particularly beef prices), offset by allocating fixed costs over increased production as a result of the Cincinnati plant expansion. In predecessor fiscal 2004, beef, chicken and pork prices increased by approximately 13%, 2% and 32%, respectively, compared to predecessor fiscal 2003. Cost of goods sold included $5.3 million and $4.1 million of commissions paid to PF Purchasing in predecessor fiscal 2004 and predecessor fiscal 2003, respectively. The payment of these commissions was terminated in the Restructuring.acquisitions;

11• create liens on its assets to secure additional debt;

~~Selling,~~• engage ~~general and administrative expenses. Selling, general and administrative expenses increased by $8.6 million, or 12.1%, primarily due to an increase~~ in ~~distribution~~ ~~expense~~certain ontransactions higher product volumes and increased marketing costs. As a percentage of net revenues, selling, general and administrative expenses decreased from 25.8% to 22.3%. Selling, general and administrative expenses included $22.8 million and $15.6 million in predecessor fiscal 2004 and predecessor fiscal 2003, respectively, of expenses that will not be paid following the Acquisition, including (1) distribution expenses paid to PF Distribution in excess of the cost of such services of $11.6 million and $2.9 million, respectively, (2) rent expense, maintenance and other occupancy costs under a lease that was terminated of $144,000 and $48,000, respectively, (3) compensation expense paid to personnel terminated in connection with the Acquisition of $2.8 million and $6.1 million, respectively, (4) travel and entertainment expenses incurred by personnel terminated in connection with the Acquisition of $2.0 million and $1.6 million, respectively, (5) expenses of leasing of an aircraft retained by the selling shareholders following the Acquisition of $1.5 million and $1.0 million, respectively, (6) expenses of $0.6 million and $0.4 million, respectively, associated with the lease of an office building from a related party that was terminated in connection with the Acquisition, and (7) losses of Compass Outfitters, which was retained by the selling shareholders following the Acquisition.affiliates;

~~Depreciation and amortization. Depreciation and~~• merge, ~~amortization~~consolidate ~~increased by $0.5 million,~~ or ~~11.6%,~~transfer ~~primarily~~substantially ~~due~~all ~~to the full-year impact in predecessor fiscal 2004~~ of ~~the~~its ~~Cincinnati~~assets; ~~plant expansion in predecessor fiscal 2003. As a percentage of net revenues, depreciation~~ and ~~amortization decreased from 1.5% to 1.3%.~~

~~Interest expense and other income, net. The primary component of~~• transfer ~~interest expense~~ and ~~other~~sell ~~income, net for predecessor fiscal 2004 and predecessor fiscal 2003 was interest expense~~assets. Interest expense consists primarily of interest on fixed and variable rate long-term debt, in addition to expense incurred due to the early extinguishment of our $50.0 million revolving credit loan in predecessor fiscal 2004. Interest expense and other income, net increased by $3.2 million or 23.2% in predecessor fiscal 2004 due to increased borrowings under our revolving credit facility and due to the write-off of loan commitment fees and a prepayment penalty associated with the change in credit facilities and early extinguishment of that credit facility, both of which were charged to interest expense. See “Liquidity and Capital Resources” below.

~~Income~~These ~~tax~~covenants ~~provision. The~~could ~~effective~~have ~~tax~~a ~~rate~~material ~~for~~adverse effect ~~predecessor~~on ~~fiscal~~the ~~2004~~Company’s ~~was~~business ~~47.6%~~by ~~compared~~limiting toits ~~38.7%~~ability ~~for~~to ~~predecessor~~take ~~fiscal~~advantage of ~~2003. The~~financing, ~~increase~~merger inand ~~the~~acquisition ~~effective~~or ~~tax rate~~other iscorporate ~~primarily~~opportunities ~~due~~ to anfund ~~increase~~its operations. inAny ~~state~~future ~~tax~~debt ~~expense~~could ofalso ~~3.4%~~contain financial and aother covenants ~~decrease~~more inrestrictive than those imposed under the ~~benefit~~indenture ~~realized~~governing ~~from~~the ~~Columbia~~Company’s Notes ~~Hill~~and ~~Aviation~~its credit facility.

~~Critical~~If ~~Accounting~~the ~~Policies~~Company is unable to maintain or upgrade its information systems and ~~Estimates~~software programs or if the Company is unable to convert to alternate systems in an efficient and timely manner, the Company’s operations may be disrupted or become less efficient. The Company depends on a variety of information systems for the efficient functioning of its business. The Company relies on certain software vendors to maintain and periodically upgrade many of these systems so that they can continue to support the Company’s business. The software programs supporting many of the Company’s systems were licensed to the Company by independent software developers. Costs and potential interruptions associated with the implementation of new or upgraded systems and technology or with maintenance or adequate support of existing systems could disrupt or reduce the efficiency of the Company’s business.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires the appropriate application of certain accounting policies, many of which require the Company to make estimates and assumptions about future events and their impact on amounts reported in the financial statements and related notes. Since future events and the impact of those events cannot be determined with certainty, the actual results will inevitably differ from the Company’s estimates. Such differences could be material to the financial statements.10

~~The~~Item ~~Company believes its application of accounting policies, and the estimates inherently required therein, are reasonable~~2. ~~These~~ accounting policies and estimates are constantly reevaluated, and adjustments are made when facts and circumstances dictate a change. Historically, the Company’s application of accounting policies has been appropriate, and actual results have not differed materially from those determined using necessary estimates.Properties

Principal Offices. The Company’s ~~following~~main ~~critical~~office ~~accounting~~is ~~policies affect~~located ~~the~~in ~~Company’s~~a ~~more~~facility ~~significant~~it ~~judgments~~owns in Cincinnati, Ohio. The Company also owns and ~~estimates~~uses ~~used~~a 23,000 square foot building in ~~the~~Claremont, North ~~preparation~~Carolina offor ~~its~~additional ~~financial~~office ~~statements~~space.

~~Revenue~~Food ~~Recognition~~Processing Plants. ~~Revenue~~ ~~from sales of food processing~~The ~~products~~Company isproduces ~~recorded~~its atfully-cooked ~~the~~meat ~~time~~products, ~~title~~packaged ~~transfers. Standard~~sandwiches, ~~shipping~~and ~~terms are FOB destination,~~specialty ~~therefore,~~bread ~~title~~products ~~passes~~ at ~~the~~facilities ~~time~~it ~~the~~owns ~~product~~in isCincinnati, ~~delivered~~Ohio toand ~~the~~Claremont, ~~customer~~North Carolina. ~~Revenue~~ isThe ~~recognized~~Cincinnati asfacility ~~the~~occupies ~~net~~buildings ~~amount~~totaling ~~to be~~approximately ~~received after deductions for estimated discounts~~225,000 ~~product~~square ~~returns~~feet. ~~and~~The ~~other allowances. These~~Claremont ~~estimates~~facility ~~are~~occupies ~~based~~buildings ontotaling ~~historical~~approximately ~~trends~~150,000 ~~and~~square ~~expected future payments (see also Promotions below)~~feet.

12The Company is highly committed to the quality of its products and the safety of its operations. The Company’s modern equipment allows for a fully automated contaminant removal procedure. As a result of this procedure, in addition to the continuous raw material inspections that the Company performs, the Company has received the total quality control designation from the USDA since 1987.

~~Goodwill and~~The ~~Other~~Company ~~Intangible~~believes ~~Assets. In June 2001,~~that ~~the~~its ~~Financial~~facilities ~~Accounting Standards Board (“FASB”) issued~~are ~~Financial~~generally ~~Accounting~~in ~~Standard~~good ~~No. (“SFAS”)~~condition ~~142, “Goodwill~~ and ~~Other Intangible~~that ~~Assets,”~~they ~~which~~are ~~was~~suitable ~~effective~~ for ~~the~~their ~~beginning~~current ~~of predecessor fiscal 2003~~uses. As ~~prescribed under SFAS 142, the Company tested goodwill for impairment during predecessor fiscal 2003 using a two-step process.~~ The ~~first step of the goodwill~~ ~~impairment~~Company ~~test~~nevertheless isengages ~~used~~periodically toin ~~identify~~construction potential impairment by comparing the fair value of the entity with its net asset value (or carrying amount), including goodwill. If the fair value of the entity exceeds its net asset value, goodwill of the entity is considered not impaired and ~~the~~other ~~second step of the goodwill impairment test is not~~capital ~~needed. If~~improvement ~~the~~projects net asset value of the entity exceeds the fair market value, the second step of the goodwill impairment test is performed to measure the amount of impairment loss, if any. The second step of the goodwill impairment test compares the implied fair value of the entity’s goodwill with the carrying amount of that ~~goodwill. If~~ the ~~carrying~~Company ~~amount~~believes ofare ~~the~~necessary ~~entity’s goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal~~ to ~~that excess. Subsequent~~expand ~~to recognizing an impairment~~and ~~loss,~~improve the ~~adjusted~~efficiency ~~carrying amount~~ of ~~the intangible asset shall be~~ its ~~new accounting basis~~facilities. ~~Reversal of a previously recognized impairment loss is prohibited.~~

~~During~~Item predecessor fiscal 2003, upon adoption of SFAS 142, the Company utilized a valuation technique based on market values of publicly-traded equity, as adjusted, plus publicly-owned subordinated notes, which were determined in conjunction with the management buyout in predecessor fiscal 20033. ~~See~~ ~~Note~~Legal 1, “Basis of Presentation and Acquisition,” to the Consolidated Financial Statements. The Company’s analysis showed that the carrying value of the goodwill exceeded its fair value, requiring the Company to determine the implied fair value of its goodwill. Upon completion of that analysis, management determined that the entire net carrying value of its goodwill was impaired. The carrying amount, $29.0 million, net of the related effect on income taxes, $10.4 million, was written-off by the Company and reported as the Cumulative Effect of an Accounting Change, net of income taxes in the statement of operations. See Note 2, “Summary of Significant Accounting Policies,” to the Consolidated Financial Statements for further discussion.Proceedings

InOn ~~conjunction~~August 19, ~~with~~2003, ~~the~~as ~~Acquisition~~a result of complaints from neighboring businesses, the Company ~~engaged~~received ana ~~independent~~Notice ~~party~~of toViolation ~~perform~~(“NOV”) from ~~valuations~~the ~~for~~Hamilton ~~financial reporting~~County ~~purposes~~Department of Environmental Services (“HCDOES”) relating to operations at its Cincinnati, Ohio plant facility. The NOV alleged that the Company’s ~~goodwill~~violated ~~and~~its ~~other~~permits ~~intangibles.~~by ~~Assets~~exceeding the visual emission (“VE”) ~~identified~~specification ~~through~~of ~~this~~20% ~~valuation~~opacity. ~~process~~The ~~included~~Company ~~goodwill~~received additional NOV’s for opacity violations on October 22, ~~formulas~~2003 and November 26, ~~customer relationships~~2003, ~~licensing~~all ~~agreements~~of ~~and~~which were ~~certain~~the ~~trade~~result ~~names~~of ~~and~~complaints ~~trademarks~~from neighboring businesses.

InSubsequent ~~accordance~~to ~~with~~the ~~SFAS~~original ~~142—Goodwill~~NOV ~~and Other~~received ~~Intangible~~in ~~Assets~~August of 2003, the Company ~~tests~~began ~~recorded~~investigating ~~goodwill~~ and ~~intangibles with~~testing ~~indefinite~~various ~~lives~~emission ~~for impairment at least annually. All other intangible assets with finite lives~~reduction ~~are amortized over their estimated economic or estimated useful lives~~technologies. In ~~addition,~~The ~~all~~Company ~~other~~found ~~intangible~~a ~~assets~~solution ~~are reviewed~~that ~~for~~enabled ~~impairment~~operations into ~~accordance~~ continue with ~~SFAS~~less ~~144,~~smoke ~~“Accounting~~output ~~for~~and completed the ~~Impairment~~ orupgrade ~~Disposal~~during ofearly ~~Long-Lived Assets”~~2004. As ~~of March 5, 2005, the Company~~HCDOES ~~performed~~inspected the ~~annual~~upgrade ~~impairment~~in ~~review~~ April of ~~goodwill~~2004 and ~~indefinite-lived intangible~~determined ~~assets~~that ~~and also assessed whether~~ the ~~indefinite-lived~~Company ~~intangible~~had ~~assets~~returned ~~continue~~ to ~~have~~compliance ~~indefinite~~with ~~lives. The~~the ~~Company~~opacity ~~engaged~~limit. anIn ~~independent~~connection ~~party~~with tothe ~~perform valuations to assist~~upgrade, in the ~~impairment~~Company ~~review. There~~was ~~were~~required ~~not any~~to ~~impairment~~submit ~~charges as~~ a ~~result~~revised ofPermit ~~this~~to ~~review~~Install (“PTI”) application.

~~The~~In August, 2005, pursuant to its regulatory authority, HCDOES requested a Method 5 Stack Test be performed to assess the Company’s compliance ~~amortizable~~with ~~intangible~~its ~~assets~~emissions limits. The Company contacted HCDOES, requesting ~~are~~the ~~amortized~~scheduled ~~using~~stack ~~accelerated~~emission ~~amortization~~compliance ~~methods~~test ~~that~~be ~~match~~postponed while the ~~expected~~Company’s ~~benefit~~independent ~~derived~~consulting ~~from~~firm ~~the~~conducted ~~assets. The~~an emissions audit program consisting of ~~accelerated~~a ~~amortization~~series of ~~methods~~engineering ~~allocate~~stack ~~amortization~~tests ~~expense~~that were performed at both controlled and uncontrolled emission test points in ~~proportion~~order to evaluate the magnitude of the ~~each~~emissions ~~year’s~~based ~~expected~~on ~~revenues~~current production data and to estimate new emissions factors by product line. HCDOES agreed to this approach and granted permission to delay the ~~total~~standard ~~expected~~Method ~~revenues~~5 ~~over~~Stack Test originally requested while the ~~estimated~~Company ~~useful~~conducted ~~lives~~its ofemissions ~~the~~audit ~~assets~~program.

~~Promotions. Promotional~~The ~~expenses~~Company ~~associated~~contracted with ~~rebates,~~an ~~marketing~~independent ~~promotions~~environmental ~~and~~consulting ~~special~~firm ~~pricing~~to ~~arrangements~~perform the ~~are~~audit ~~recorded~~and asevaluation. aAs ~~reduction~~ part of ~~revenues~~the oroverall ~~selling~~audit, ~~expense~~this atfirm ~~the~~performed ~~time~~preliminary ~~the~~testing ~~sale~~in isearly ~~recorded. Certain~~September 2005, which indicated that violations of ~~these~~emission ~~expenses~~levels ~~are~~may have ~~estimated~~occurred, ~~based~~and onretested ~~historical~~September 28, ~~trends~~2005 through September 30, ~~expected~~2005. ~~future~~The ~~payments~~firm conducted toadditional betests ~~made~~during ~~under~~October 27, ~~these~~2005 ~~programs~~through November 8, ~~and~~2005. ~~expected~~The ~~future~~Company ~~customer~~received ~~deductions~~the toresults beof ~~taken~~the ~~under~~audit ~~these~~in ~~programs~~January, 2006. The results allowed the Company ~~believes~~to evaluate the ~~estimates~~facility’s ~~recorded~~current and historical inpotential ~~the~~and ~~financial~~actual ~~statements~~emissions. ~~are~~The ~~reasonable~~testing ~~estimates~~revealed ofthat assumptions made by the Company’s ~~liability~~former outside engineering firm concerning particulate emissions ~~under~~and throughput were incorrect. This miscalculation caused the ~~programs~~Company to receive permit limits that are lower than actual emissions for certain cook lines. The Company met with the local air permitting authority in February, 2006, to discuss the results of the emissions audit program.

1311

~~Concentration~~Based ~~of Credit~~on ~~Risk~~the ~~and~~results ~~Significant~~of ~~Customers. Financial~~the ~~instruments~~audit ~~that potentially~~program, ~~subject~~ the Company toreceived ~~concentrations~~a ofNOV ~~credit~~from ~~risk~~HCDOES ~~consist~~on ~~primarily~~March 20, of2006 ~~trade receivables. The~~for ~~Company performs periodic~~particulate ~~credit~~emissions ~~evaluations~~in excess of ~~its~~the ~~customers’~~allowable ~~financial~~limits ~~condition~~of ~~and~~certain ~~generally~~of ~~does~~its ~~not require~~air ~~collateral. The~~permits ~~Company~~and ~~encounters~~for asubmitting certain ~~amount~~permit ofapplications ~~credit~~with ~~risk~~incorrect asinformation. aThe Company ~~result~~is ofin athe ~~concentration~~process of ~~receivables~~ ~~among~~assessing acontrol ~~few~~technology ~~significant~~options ~~customers.~~ and vendors ~~Sales~~for to the ~~Company’s~~installation ~~largest~~of ~~customer~~new ~~were~~control ~~approximately~~technology ~~25%,~~to ~~24%~~substantially ~~and~~reduce ~~11%~~particulate ofemissions. ~~revenues~~This ~~for~~process, ~~predecessor~~including ~~fiscal~~the ~~2005~~installation ~~and~~of ~~successor~~additional control ~~fiscal 2005 combined~~technology, ~~predecessor~~ ~~fiscal~~will ~~2004~~likely ~~and~~last ~~predecessor~~through ~~fiscal~~the ~~2003,~~remainder ~~respectively. Accounts~~of ~~receivable~~calendar atyear ~~March 5, 2005 and~~2006 ~~March 6,~~and ~~2004~~could ~~included~~take ~~receivables~~until ~~from~~early ~~the~~2007 ~~Company’s~~to ~~largest customer totaling $3~~complete.~~7 million and $2.8 million, respectively.~~

~~Stock-Based Compensation.~~ The Company ~~treats~~is ~~the~~cooperating ~~options~~with ~~to purchase shares of common stock of Holding issued to employees of~~ the ~~Company (“Options”)~~ asauthorities ~~stock-based~~in ~~compensation~~all ~~for~~aspects ~~employees~~ of ~~the~~these ~~Company~~matters. As ~~permitted~~In ~~under GAAP~~addition, the Company ~~accounts~~consulted ~~for~~with ~~the~~its ~~Options~~outside ~~under~~legal ~~the~~counsel ~~recognition~~to ~~and~~assist ~~measurement~~them ~~principles~~in ofresolving ~~Accounting Principles~~these ~~Board~~matters ~~Opinion No. 25, “Accounting for Stock Issued to Employees”~~and ~~(“APB~~estimate ~~25”), and related Interpretations using~~ the ~~intrinsic~~potential ~~value~~fines ~~method. Accordingly,~~and nopenalties ~~compensation~~that ~~expense~~may be ~~has~~assessed ~~been recognized for the stock option plan~~ in the ~~Company’s consolidated statements~~ ~~of operations~~future.

~~New~~The ~~Accounting~~Company ~~Pronouncements. In~~continuously ~~December of~~evaluates contingencies based ~~2003,~~upon the ~~FASB~~best ~~issued~~available ~~FIN~~information. ~~46R,~~The ~~“Consolidation~~Company ofbelieves ~~Variable~~it ~~Interest~~has ~~Entities” (“FIN~~recorded ~~46R”),~~appropriate ~~which~~liabilities ~~replaces~~to the ~~same~~extent ~~titled~~necessary ~~FIN~~in 46cases ~~that~~where ~~was~~the ~~issued~~outcome ~~in January 2003.~~of ~~FIN~~such ~~46R~~liabilities ~~addresses~~is ~~how~~considered toprobable ~~identify~~and ~~variable~~reasonably ~~interest~~estimable, ~~entities~~ and ~~the criteria~~ that ~~requires a company to consolidate such entities in~~ its ~~financial~~ ~~statements.~~assessment ~~FIN~~of ~~46R~~contingencies is ~~effective~~reasonable. ~~for~~To the ~~first~~extent ~~reporting period~~ that ~~ends~~resolution ~~after~~of ~~March 15,~~contingencies ~~2004.~~results ~~This~~in ~~statement~~amounts ~~did~~that ~~not~~vary ~~have~~from anmanagement’s ~~impact~~estimates, onfuture earnings ~~the~~will ~~Company’s financial~~be ~~statements~~charged or credited accordingly.

InAs ~~November~~part ~~2004,~~of ~~FASB~~its ~~issued~~ongoing ~~SFAS 151,~~operations ~~“Inventory~~in the food ~~Costs—an~~manufacturing ~~amendment~~industry, ofthe ~~ARB~~Company ~~No. 43,~~is ~~Chapter 4”~~subject ~~(“SFAS 151”). SFAS 151~~to ~~amends~~extensive ~~ARB 43~~federal, ~~Chapter 4~~state, toand local ~~clarify~~regulations ~~that~~and ~~abnormal amounts~~its offood ~~idle~~processing ~~facility~~facilities ~~expense~~and food products are subject to frequent inspection, ~~freight~~audits, ~~handling~~and ~~costs~~inquiries ~~and~~by ~~wasted~~the ~~materials~~USDA, the FDA, and ~~(spoilage)~~various ~~should~~local behealth ~~recognized~~and asagricultural ~~current-period~~agencies ~~charges.~~and Inby ~~addition~~federal, state and local ~~SFAS 151~~agencies ~~requires~~responsible ~~that~~for ~~allocation~~the enforcement of ~~fixed~~environmental ~~production~~laws ~~overheads~~and toregulations. The Company is also involved in various legal actions arising in the normal ~~costs~~course of ~~conversion~~business. beThese ~~based~~matters onare ~~the~~continuously ~~normal~~being ~~capacity~~evaluated ofand, ~~the~~in ~~production~~some ~~facilities.~~cases, ~~The~~are ~~Company~~being ~~will~~contested ~~adopt~~by the ~~provisions~~Company ofand ~~SFAS~~the ~~151,~~outcome ~~effective~~is ~~March 5,~~not predictable. ~~2006~~Consequently, ~~for~~an ~~its~~estimate ~~fiscal~~of ~~2007~~the ~~consolidated~~possible ~~financial~~loss ~~statements~~or range of loss associated with these actions cannot be made. ~~Management~~Although occasional adverse outcomes (or ~~currently~~settlements) ~~believes~~may occur ~~that~~and ~~adoption~~could possibly have an adverse effect on the results of operations in any one accounting period, the ~~provisions~~Company believes that the final disposition of ~~SFAS~~such ~~151~~matters will not have a material ~~impact~~adverse affect on the Company’s ~~Consolidated~~consolidated ~~Financial~~financial ~~Statements~~position.

~~Liquidity~~Item ~~and~~4. ~~Capital~~Submission ~~Resources~~of Matters to a Vote of Security Holders

~~Net~~No ~~Cash~~matters ~~Provided~~were bysubmitted ~~Operating~~to ~~Activities. Net~~a ~~cash~~vote ~~provided~~of bythe ~~operating activities was~~Company’s ~~$12.9~~shareholder ~~million,~~during ~~$0.4~~the ~~million,~~quarter ~~$3.3~~ended ~~million and $0.04 million for successor fiscal 2005~~March 4, ~~predecessor fiscal 2005, predecessor fiscal 2004 and predecessor fiscal 2003, respectively~~2006.

~~The primary components of net cash provided by operating activities for successor fiscal 2005 were: (1)~~PART depreciation and amortization, including amortization of deferred loan origination fees totaling, $24.2 million; (2) an increase in deferred income taxes of $0.4 million; (3) the write-off of deferred loan origination fees of $4.3 million; (4) an increase in trade accounts payable and other accrued liabilities of $0.9 million and (5) a decrease in inventory of $0.5 million; offset by (6) an increase in accounts receivable of $9.6 million and (7) an increase in refundable income taxes, prepaid expenses and other current assets of $3.6 million.II

~~The~~Since ~~primary~~the ~~components~~Company’s going-private transaction on July 26, 2002, the Company has been a wholly-owned subsidiary of ~~net~~PFMI; accordingly, there is no public trading market for the Company’s common stock. The Company did not declare a cash ~~provided~~dividend during successor fiscal 2006, predecessor fiscal by2005 ~~operating~~and ~~activities~~successor ~~for~~fiscal 2005 combined or predecessor fiscal 2004. ~~were:~~The ~~(1) depreciation~~Company’s debt instruments restrict its ability to pay dividends. See “Management’s Discussion and ~~amortization~~Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources” and Note 7 — “Financing Arrangements,” ~~including~~to ~~amortization~~the Company’s Consolidated Financial Statements. Regardless of ~~deferred~~the ~~loan~~scope ~~origination~~of ~~fees~~such restrictions, ~~totaling~~the Company’s policy is to reinvest $5any earnings rather than pay dividends.4 ~~million;~~The ~~(2) a~~Company ~~decrease~~has inno ~~deferred~~compensation ~~income~~plans or ~~taxes~~individual arrangements under which equity securities of ~~$1.3~~the ~~million~~Company are authorized for issuance; ~~(3) an~~however, Holding, the sole stockholder of PFMI, ~~increase~~implemented a stock option plan in ~~trade~~successor ~~accounts~~fiscal ~~payable~~2005 ~~and~~pursuant ~~other~~to ~~accrued~~which options ~~liabilities~~to purchase shares of ~~$2.4~~common stock of Holding may be issued to ~~million~~officers, employees and ~~(4)~~ consultants of the ~~write-off~~Company. ofIn ~~deferred~~addition, ~~loan~~on ~~origination~~July 12, 2005, ~~fees~~Holding ofissued ~~$1.~~2,000 shares of restricted common stock that vest over ~~million;~~time ~~offset~~to byScott ~~(5) an~~W. ~~increase~~Meader, ina ~~inventories~~director of $6the Company.4 ~~million~~The ~~and~~shares ~~(6) an increase~~were inpurchased ~~receivables~~by ofMr. Meader for $210.000 ~~million~~per share. See Note 11 —“Stock-Based Compensation,” to the Consolidated Financial Statements.

14No equity securities of the Company were sold by the Company during successor fiscal 2006 and predecessor fiscal 2005 and successor fiscal 2005 combined.

The primary components of net cash provided by operating activities for predecessor fiscal 2003 were: (1) depreciation and amortization totaling $4.9 million; (2) an increase in inventories of $8.7 million; offset by (3) an increase in trade accounts payable and other accrued liabilities of $4.9 million; (4) an increase in accounts receivable of $2.2 million and (5) an increase in refundable income taxes, prepaid expenses and other assets of $1.7 million.12

~~Net~~Item ~~Cash Used in Investing Activities~~6. ~~Net~~ ~~cash~~Selected ~~used~~Financial in investing activities for successor fiscal 2005, predecessor fiscal 2005, predecessor fiscal 2004 and predecessor fiscal 2003 was $3.7 million, $2.1 million, $9.8 million and $16.1 million, respectively. The primary components for both successor fiscal 2005 and predecessor fiscal 2005 were routine capital expenditures. The primary components for predecessor fiscal 2004 were routine capital expenditures and a significant plant expansion totaling $10.0 million. The primary components for predecessor fiscal 2003 were routine capital expenditures and a significant plant expansion totaling $16.2 million.Data

~~Net~~The ~~Cash~~following ~~Provided~~selected byhistorical ~~(Used in) Financing~~financial ~~Activities. Net cash~~information ~~used~~has inbeen ~~financing~~derived ~~activities~~from ~~was~~audited ~~$11.3~~consolidated ~~million~~financial ~~for~~statements ~~successor fiscal~~of ~~2005. The primary components were: (1)~~ the ~~payoff of the Old Notes of $115~~Company.0 ~~million;~~Such ~~(2) a~~financial ~~return~~information ofshould ~~capital~~be toread ~~parent of $100.1 million; (3) the repayment of debt~~ in conjunction with the consolidated ~~Acquisition~~financial ofstatements ~~$29.0 million; (4) net repayment~~ of the ~~revolving~~Company, ~~credit~~the ~~agreement~~notes ofthereto ~~$17.7 million;~~and ~~(5) principal~~the ~~payments~~other onfinancial ~~long-term~~information ~~debt~~contained ofelsewhere ~~$16~~herein.2 ~~million~~See ~~and (6) loan origination fees~~“Management’s ofDiscussion ~~$10.0~~and ~~million;~~Analysis ~~offset by (7) borrowings under the new term loan~~ of ~~$150.0 million;~~ ~~(8) issuance~~Financial ofCondition ~~New~~and ~~Notes~~Results of ~~$125.0 million;~~Operations” ~~(9) the~~and ~~termination~~the ofCompany’s aConsolidated ~~certificate~~Financial ofStatements ~~deposit for $1.3 million~~ and ~~(10) a contribution~~supplementary ~~from parent totaling $0~~data.~~4 million.~~

Net cash provided by financing activities for predecessor fiscal 2005, predecessor fiscal 2004 and predecessor fiscal 2003 was $3.7 million, $6.4 million and $11.8 million, respectively. The primary components for predecessor fiscal 2005 were: (1) net borrowings under the revolving credit agreement with former lender of $7.7 million; offset by (2) loan origination fees incurred in the amount of $3.4 million and (3) principal payments on long-term debt in the amount of $0.7 million. The primary components for predecessor fiscal 2004 were: (1) borrowings under the equipment term loan subline and the real estate term loan subline of $5.0 million each, offset by (2) the net repayment of revolving credit agreement of $1.8 million; (3) principal payments on long-term debt of $0.8 million and (4) loan origination fees of $0.7 million. The primary components for predecessor fiscal 2003 were: (1) borrowing under the revolving credit facility of $15.1 million; offset by (2) loan origination fees of $1.6 million; (3) special purpose entity distributions of $1.4 and (4) principal payments on long-term debt of $0.3 million.

	Successor						Predecessor
	Fiscal 2006			Fiscal 2005			Fiscal 2005			Fiscal 2004			Fiscal 2003			Fiscal 2002
	(dollars in thousands, except per share data)

STATEMENT OF OPERATIONS DATA:
Revenues, net	$	431,633		$	294,867		$	115,549		$	358,549		$	276,339		$	243,278
Cost of goods sold	309,273			217,323			87,025			254,235			184,092			160,781
Selling, general, and administrative	67,839			39,826			26,447			79,982			71,352			62,399
Net loss on disposition of property, plant and equipment	6			5			340			11			89			84
Depreciation and amortization	30,638			23,170			1,545			4,605			4,125			6,438
Operating income	23,877			14,543			192			19,716			16,681			13,576
Interest expense	(22,331		)	(19,493		)	(6,538		)	(16,979		)	(14,228		)	(13,206		)
Other income, net	151			24			2			—			447			364
Income tax benefit (provision)	465			597			2,080			(1,303		)	(1,122		)	(733		)
Income (loss) from continuing operations	2,162			(4,329		)	(4,264		)	1,434			1,778			1
Cumulative effect of accounting change (1)	—			—			—			—			(18,605		)	—
Net income (loss)	$	2,162		$	(4,329	)	$	(4,264	)	$	1,434		$	(16,827	)	$	1

NET INCOME (LOSS) PER SHARE - BASIC AND DILUTED:
Income (loss) from continuing operations	$	21.62		$	(43.29	)	$	(42.64	)	$	14.34		$	17.78		$	0.01
Cumulative effect of accounting change	—			—			—			—			(186.05		)	—
Net income (loss)	$	21.62		$	(43.29	)	$	(42.64	)	$	14.34		$	(168.27	)	$	0.01

OTHER DATA:
Capital expenditures	$	7,150		$	3,677		$	2,084		$	10,041		$	16,216		$	5,994

BALANCE SHEET DATA:
Working capital	$	61,997		$	62,145		n/a			$	46,110		$	40,716		$	37,061
Total assets	472,425			496,588			n/a			175,771			168,781			169,821
Total debt	244,994			263,580			n/a			143,694			136,348			121,231
Shareholder’s equity	148,058			146,023			n/a			6,621			8,998			27,207

On(1) Reflects ~~March 8, 2004, following~~ a ~~consent~~loss ~~solicitation~~due into ~~which~~cumulative ~~consents~~effect of ~~holders~~accounting ofchange ~~$112.4 million~~ in ~~aggregate~~the ~~principal~~ amount of ~~the Company’s Old Notes~~$18,605 ~~representing~~in ~~97.74%~~predecessor offiscal ~~the outstanding Old Notes, consented to a Fourth Supplemental Indenture between the Company and U~~2003.S. ~~Bank~~The ~~National~~loss ~~Association, as~~represents ~~trustee (~~the ~~“Trustee”), the Company entered into the Fourth Supplemental~~ ~~Indenture~~write-off ~~with the Trustee. See Note 1, “Basis~~ of ~~Presentation~~goodwill ~~and~~upon ~~Acquisition,” to~~adoption ~~the Consolidated Financial Statements. Concurrently with the execution~~ of ~~the~~ ~~Fourth~~Statement ~~Supplemental Indenture, the Company took title to an aircraft transferred from a related party subject to $5.6 million~~ of ~~existing purchase~~Financial ~~money debt; cancelled the $1.0 million related party note~~Accounting ~~receivable~~Standards ~~from its former principal shareholders; cancelled the balances owed by the Company to certain related parties, as follows: $0~~No.~~5 million owed to Columbia Hill Aviation; $3.5~~ million owed to PF Purchasing and $0.5 million owed to PF Distribution; and assumed the operating leases of PF Distribution in connection with the Fourth Supplemental Indenture. The Company assumed $15.3 million of subordinated debt of PFMI142, ~~the~~“Goodwill ~~sole shareholder of the Company, in connection with the execution of the Fourth Supplemental Indenture~~ and ~~cancelled~~Other ~~the~~Intangible $1Assets.~~0 million related party note receivable against the debt assumed from PFMI.~~”

1513

OnItem ~~June 30, 2004, the shareholders of PFMI closed the Acquisition (see Note 1, “Basis of Presentation and Acquisition,” to the Consolidated Financial Statements)~~7. ~~Effective~~ ~~June 30, 2004, the Company terminated its three-year variable-rate $40 million revolving credit facility. Existing debt issuance costs related to the Company~~Management’s ~~former~~Discussion ~~$40 million facility in the amount of $0.5 million~~ and aAnalysis ~~prepayment penalty paid to the former lender in the amount~~ of ~~$0.4 million~~Financial ~~were~~Condition charged to interest expense. Also effective June 30, 2004, the Company obtained a $190 million credit facility from a new lender which includes a six-year variable-rate $150 million term loan, a five-year variable rate $40 million revolving credit facility and aResults ~~$10 million letter~~ of credit subfacility. Funds available under this new facility are available for working capital requirements, permitted investments and general corporate purposes. Borrowings under the new 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 Company’s assets. The interest rate for borrowings under the new revolving credit facility at March 5, 2005 was 7.5% (prime plus 1.75%). Repayment of borrowings under the term loan is $375,000 per quarter, which began on September 4, 2004, with a balloon payment of $141.4 million due on June 5, 2010. In addition to the scheduled quarterly payment, prepayments on the term loan totaling $12.4 million were made during successor fiscal 2005. The maturity date of the $40 million revolving credit facility is June 30, 2009. In addition, the Company is required to satisfy certain financial covenants regarding cash flow and capital expenditures.Operations

~~Also~~The infollowing ~~conjunction~~discussion ~~with~~relates ~~the~~to ~~Acquisition,~~ the ~~Company~~financial ~~issued~~condition ~~the~~and ~~New~~results ~~Notes.~~of ~~The~~operations ~~proceeds~~for ofsuccessor ~~the~~fiscal ~~New Notes~~2006, successor ~~together~~fiscal ~~with~~2005, ~~the equity~~predecessor ~~contributions~~fiscal ~~from~~2005, ~~MDP~~ and ~~certain~~predecessor ~~members~~fiscal of2004. ~~management and borrowings~~Successor ~~under~~fiscal ~~the~~2005 ~~Company’s~~and ~~new~~predecessor ~~senior~~fiscal ~~credit~~2005 ~~facility,~~collectively ~~were~~are ~~used~~referred to ~~finance~~as ~~the~~“predecessor ~~Acquisition~~fiscal of2005 ~~the Company~~ and tosuccessor ~~repay~~fiscal ~~outstanding~~2005 ~~indebtedness,~~combined.” This ~~including paying~~section should ~~off~~be ~~debt~~read ofin conjunction ~~PFMI~~with ~~assumed by~~ the Company’s ~~under~~Consolidated ~~the~~Financial ~~Fourth~~Statements ~~Supplemental~~and considered ~~Indenture~~with ~~(except~~“Risk ~~capital~~Factors” ~~leases),~~discussed ~~paying~~in ~~for~~Item ~~the~~1A ~~Old~~above, ~~Notes~~Item ~~tendered~~7A in—“Quantitative ~~connection~~and ~~with~~Qualitative ~~the~~Disclosures ~~tender~~About ~~offer~~Market ~~described~~Risk” ~~in Note 1~~below, ~~“Basis~~and ~~of Presentation~~“Cautionary ~~and~~Statements ~~Acquisition,”~~Regarding toForward ~~the~~Looking ~~Consolidated Financial~~ Statements,” ~~and~~which ~~redeeming~~precedes ~~the~~Part I, ~~Old~~Item ~~Notes~~1 ~~not tendered~~above.

AsPierre ofoperates ~~March 5,~~on ~~2005,~~a ~~the~~52-week ~~Company~~or ~~had no~~53-week ~~cash~~fiscal ~~and~~year ~~cash~~ending ~~equivalents~~ on ~~hand,~~the ~~outstanding~~first ~~borrowings~~Saturday ~~under~~in ~~its~~March or ~~revolving credit~~if ~~facility~~the oflast ~~$0.8~~day ~~million and borrowing availability~~ of ~~approximately $34.7~~February ~~million. Also~~is a ~~as of March 5~~Saturday, ~~2005,~~ the ~~Company~~last ~~had~~day ~~borrowings under its term loan~~ of ~~$136~~February.5 ~~million~~Each ~~and $125.0~~quarter ~~million~~ of the ~~New~~fiscal ~~Notes~~year ~~outstanding.~~ contains ~~As of March~~13 6,weeks ~~2004,~~except for the ~~Company~~infrequent ~~had~~fiscal ~~$0.2~~years ~~million~~with in53 weeks. ~~cash and cash~~The ~~equivalents~~results onfor ~~hand,~~successor ~~had~~fiscal ~~outstanding~~2006 ~~borrowings under its former revolving credit facility of $13.3 million~~ and ~~borrowing~~the ~~availability~~results offor ~~approximately $12.9~~predecessor ~~million. Also,~~fiscal ~~as of March 6,~~2005 ~~2004,~~and ~~the~~successor ~~Company~~fiscal ~~had~~2005 ~~borrowings~~combined ~~under~~both ~~the~~contain ~~former~~52 ~~real~~weeks. ~~estate~~The ~~subline~~results ~~and~~for ~~the~~predecessor ~~former~~fiscal ~~equipment~~2004 ~~subline~~contain of53 $4weeks.~~7 million and $4.6 million, respectively.~~

~~The~~Results ~~Company~~of has budgeted approximately $14.5 million for capital expenditures in fiscal 2006. These expenditures include a provision for capacity expansion, system upgrades and routine food processing capital improvement projects and other miscellaneous expenditures within the Company’s existing facilities. The Company believes that funds from operations and funds from its new $40 million revolving credit facility, as well as the Company’s ability to enter into capital or operating leases, will be adequate to finance these capital expenditures.Operations

IfResults ~~the~~for ~~Company~~successor ~~continues~~fiscal ~~its historical revenue growth trend as expected~~2006, ~~then~~successor ~~the Company will be required to raise~~fiscal ~~and~~2005, ~~invest~~predecessor ~~additional~~fiscal ~~capital~~2005, for additional plant expansion projects to provide operating capacity to satisfy increased demand. Management believes that future cash requirements for these plant expansion projects would need to be met through other long-term financing sources. The incurrence of additional long-term debt is governed and ~~restricted~~predecessor byfiscal ~~the Company’s~~2004 ~~existing~~are ~~debt~~shown ~~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.~~below:

Significant assumptions underlie the belief that the Company anticipates that its fiscal 2006 cash requirements for working capital and debt service will be met through a combination of funds provided by operations and borrowings under its new $40 million revolving credit facility, including, among other things, that there will be no material adverse developments in the business, liquidity or significant capital requirements of the Company.

	Successor						Predecessor
	Fiscal 2006			Fiscal 2005			Fiscal 2005			Fiscal 2004
	(in millions)
Revenues, net	$	431.6		$	294.9		$	115.5		$	358.6
Cost of goods sold	309.3			217.3			87.0			254.2
Selling, general, and administrative	67.8			39.8			26.4			80.0
Net loss on disposition of property, plant, and Equipment	—			—			0.4			0.1
Depreciation and amortization	30.6			23.2			1.5			4.6
Operating income	23.9			14.6			0.2			19.7
Interest expense and other income, net	(22.2		)	(19.5		)	(6.5		)	(17.0		)
Income (loss) before income tax	1.7			(4.9		)	(6.3		)	2.7
Income tax benefit (provision)	0.5			0.6			2.0			(1.3		)
Net income (loss)	$	2.2		$	(4.3	)	$	(4.3	)	$	1.4

16As a result of the Acquisition as described in Note 1 — “Basis of Presentation and Acquisition,” to the Consolidated Financial Statements and elsewhere in this report, the following results of operations comparisons demonstrate a significant difference between compared periods. The Acquisition was accounted for under the purchase method of accounting, resulting in an increase in the basis of the Company’s assets. Due to the change in basis, the Company’s results of operations and those of its predecessor are not considered comparable. The Company’s results of operations include amortization related to the identifiable intangible assets and interest expense related to the borrowings incurred in connection with the Acquisition. For the purpose of comparing comparable time periods, the results for predecessor fiscal 2005 and successor fiscal 2005 are combined in the discussion below in order to provide a more meaningful period-to-period comparison.

~~Commercial~~Successor Fiscal 2006 Compared to Predecessor ~~Commitments,~~Fiscal ~~Contingencies~~2005 and ~~Contractual~~Successor ~~Obligations~~Fiscal 2005 Combined

~~The~~Revenue, ~~Company~~net. ~~provided~~Net arevenues ~~letter~~increased ofby ~~credit in the amount of~~ $421.5 2 million, or ~~$3.~~5 ~~million and $1~~.52%. ~~million~~This inincrease ~~predecessor~~was ~~fiscal 2005~~primarily ~~and~~due ~~successor~~to ~~fiscal~~sales ~~2005~~volume ~~combined,~~growth ~~predecessor~~in ~~fiscal~~most ~~2004~~of ~~and predecessor fiscal 2003, respectively, to its insurance carrier for~~ the ~~underwriting~~Company’s ofend-market ~~certain~~segments ~~performance bonds~~($30. ~~The~~1 ~~current~~million), ~~letter~~net ofprice ~~credit~~increases ~~expires~~to incustomers, and ~~fiscal~~higher ~~2006. The~~margin ~~Company~~product ~~also~~sales; ~~provides~~offset ~~secured~~by ~~letters~~decreased ~~of credit~~sales volume to ~~its~~two ~~insurance carriers for outstanding and potential workers’~~large ~~compensation~~National ~~and~~Accounts ~~general~~customers ~~liability~~($18.2 ~~claims~~million). ~~Letters~~ ofSales ~~credit~~to ~~for~~ these ~~claims~~National ~~totaled $110,000 in predecessor~~Accounts ~~fiscal~~customers ~~2005~~were ~~and successor fiscal 2005 combined and $75~~impacted,~~000~~ in ~~both~~part, ~~predecessor fiscal~~by ~~2004~~their ~~and~~promotional ~~predecessor~~activity ~~fiscal 2003.~~ toward Insandwiches ~~addition,~~that ~~the~~do ~~Company~~not ~~provides~~include ~~secured~~Pierre’s ~~letters~~products ofand ~~credit~~ to a ~~limited number~~lesser ofextent, ~~suppliers. The Company had no~~higher ~~letters~~gasoline ofprices, ~~credit~~which ~~for~~impacted ~~suppliers~~the instore ~~predecessor~~traffic ~~fiscal 2005 and successor fiscal 2005 combined. Letters~~ of ~~credit~~these ~~for suppliers~~National ~~totaled $250,000 in both predecessor fiscal 2004 and predecessor~~Accounts ~~fiscal 2003~~customers.

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.14

~~The~~Net ~~following~~price ~~tables~~increases ~~summarize~~to ~~our~~customers ~~contractual~~in successor fiscal ~~obligations~~2006 consisted of $4.0 million attributable to cost-plus contracts with two large National Accounts customers, which enable the Company to limit its exposure to raw material price fluctuations, and ~~commitments~~$3.3 asmillion related to the impact of ~~March 5,~~price ~~2005~~increases implemented during the prior year in response to higher raw material prices.

	Commitments by Fiscal Year
	Total		Less than 1 Year			1 – 3 Years			3-5 Years			More than 5 Years
Letters of credit	$	4,560,000	$		4,560,000	$	—		$	—		$	—
Purchase commitments for capital projects	1,612,500		1,612,500			—			—			—
Purchase commitments for electricity	2,474,640		2,474,640			—			—			—
Purchase commitments for raw materials	1,187,277		1,187,277			—			—			—
Purchase commitments for natural gas	605,473		605,473			—			—			—
Total	$	10,439,890	$	10,439,890		$		—	$		—	$		—

Cost of goods sold. Cost of goods sold increased by $4.9 million in successor fiscal 2006 compared to predecessor fiscal 2005 and successor fiscal 2005 combined, or 1.6%. This increase was primarily due to (1) an increase in costs as a result of increased net revenues due to volume growth; (2) an increase in raw material protein costs of $3.8 million attributable to cost-plus contracts with two large National Accounts customers, which enable the Company to limit its exposure to raw material price fluctuations; (3) an increase in utility costs of $1.0 million primarily due to natural gas and electric cost increases offset by increased efficiencies related to water usage; offset by (4) start-up costs of $3.1 million incurred in predecessor fiscal 2005 and successor fiscal 2005 combined associated with a National Accounts customer that were not incurred during successor fiscal 2006; (5) a favorable impact as a result of a $2.0 million purchase accounting adjustment on beginning inventory in the prior year comparable period made in connection with the Acquisition; and (6) the net impact of decreases in prices paid for raw material proteins and formulation mix excluding raw material protein purchases attributable to cost-plus contracts with two large National Accounts customers.

	Contractual Obligations by Fiscal Year
	Total		Less than 1 Year		1 – 3 Years		3-5 Years		More than 5 Years
Long-term debt	$	262,290,000	$	—	$	—	$	790,000	$	261,500,000
Capital lease obligations	1,290,371		421,713		419,464		343,028		106,166
Operating lease obligations	7,198,427		3,454,557		3,654,647		69,783		19,440
Total	$	270,778,798	$	3,876,270	$	4,074,111	$	1,202,811	$	261,625,606

As a percentage of revenues, cost of goods sold decreased from 74.2% to 71.7%, a decrease of 2.5%. This decrease was primarily due to (1) a decrease in costs as a result of an change in mix to lower cost, higher margin products (approximately 1.3%); (2) start-up costs incurred in predecessor fiscal 2005 and successor fiscal 2005 combined associated with a National Accounts customer that were not incurred during successor fiscal 2006 (approximately 0.7%); (3) a favorable impact as a result of a purchase accounting adjustment on beginning inventory in the prior year comparable period made in connection with the Acquisition (approximately 0.5%); and (4) the net impact of decreases in prices paid for raw material proteins and formulation mix; offset by (5) an increase in costs as a result of manufacturing efficiencies related to changes in sales mix.

InThe ~~conjunction~~primary ~~with~~materials ~~the~~used ~~Acquisition,~~in the Company ~~and the~~’s ~~selling~~food ~~shareholders~~processing ~~entered~~operations ~~into~~include aboneless ~~tax~~beef, ~~sharing~~pork, ~~and~~chicken, ~~indemnification~~flour, ~~agreement~~yeast, ~~which~~seasonings, ~~contains~~cheese, ~~certain~~breading, ~~representations~~soy proteins, and ~~warranties~~packaging ofsupplies. ~~the selling~~Meat ~~shareholders~~proteins ~~with~~are ~~respect~~generally topurchased ~~taxes. The agreement~~under ~~provides~~7-day ~~that~~payment ~~any~~terms. ~~net~~Historically, ~~operating loss carryforward (“NOL”) with~~the ~~respect~~Company tohas ~~periods~~not ~~before~~hedged in the ~~Acquisition~~futures markets, and ~~attributable~~over ~~to expenses relating to the Acquisition~~time, ~~will be for~~ the ~~benefit~~Company’s ~~of the selling~~raw ~~shareholders. Accordingly,~~material ~~the~~costs ~~Company will~~have ~~pay~~fluctuated towith ~~the~~movement ~~selling~~in ~~shareholders~~ the ~~amount~~relevant ofcommodity ~~any tax benefit attributable~~markets. ~~to such NOL~~Additionally, ~~except that~~ the ~~first~~Company $4has ~~million~~contracts ofwith ~~such~~formulaic ~~tax~~pricing ~~benefits shall be paid into an escrow account~~ that ~~will~~require ~~secure~~ the ~~selling shareholders~~ ~~indemnification~~Company ~~obligations~~to ~~under~~immediately ~~the~~pass ~~tax~~along ~~sharing~~commodity ~~agreement~~price variances. ~~The~~ ~~Company~~During ~~has~~successor fiscal ~~recorded~~2006, a net ~~long-term liability~~raw tomaterial ~~the~~protein ~~former~~prices ~~shareholders~~increased ~~totaling~~approximately $~~10,190,051 as of March 5,~~2.7 ~~2005~~million ~~for~~including ~~the~~a ~~estimated~~$4.7 ~~obligations~~million ~~under~~increase ~~the~~related ~~tax~~to ~~sharing~~these ~~agreement. This~~formulaic ~~amount~~contracts offset isby ~~excluded~~raw ~~from~~material ~~the~~protein ~~table~~price ~~above due~~decreases ~~to the uncertainty~~ of ~~when~~approximately ~~such~~$2.0 ~~utilization~~million related ofto ~~the~~other ~~NOL~~non-contracted ~~will occur~~sales.

~~See~~Approximately 42.0% of total sales for ~~Note~~successor 14fiscal 2006 were protected from commodity exposure, ~~“Commitments~~of ~~and~~which ~~Contingencies~~35.8% were attributable to cost-plus contracts,” while the other 6.2% were related to the USDA Commodity Reprocessing Program, which also insulates the ~~Consolidated~~Company ~~Financial~~from ~~Statements~~raw ~~for~~material ~~further~~price ~~discussion~~fluctuations. For predecessor fiscal 2005 and successor fiscal 2005 combined, approximately 44.9% of total sales were protected from commodity exposure, of which 38.7% were attributable to cost-plus contracts, while the other 6.2% were related to the USDA Commodity Reprocessing Program.

17The following table represents the (increases)/decreases in the weighted average prices the Company paid for beef, pork, chicken, and cheese excluding unfavorable formulation mix and contracts with formulaic pricing during successor fiscal 2006 compared to predecessor fiscal 2005 and successor fiscal 2005 combined:

Inflation

	(Increase)/Decrease
	Successor Fiscal 2006 Compared to
	Predecessor Fiscal 2005 and
	Successor Fiscal 2005 Combined
Beef	(7.7	)%
Pork	14.2	%
Chicken	39.0	%
Cheese	6.1	%
Aggregate	7.8	%

The Company believes that inflation has not had a material impact on its results of operations for predecessor fiscal 2005 and successor fiscal 2005 combined, predecessor fiscal 2004 or predecessor fiscal 2003. In addition, the Company does not expect inflation to have a material impact on its results of operations for successor fiscal 2006. However, the Company experienced significant raw material price increases in predecessor fiscal 2005 and successor fiscal 2005 combined and predecessor fiscal 2004; see Item 7A. – “Quantitative and Qualitative Disclosures About Market Risk.”15

Selling, general and administrative. Selling, general and administrative expenses increased by $1.6 ~~Item 7A~~million, or 2. ~~Quantitative~~4%. This increase was primarily due to (1) an increase in sales volume and ~~Qualitative~~an increase ~~Disclosures~~in ~~About~~sales ~~Market~~mix ~~Risk~~to lower cost, higher margin end-markets with greater selling burden rates; (2) an increase in storage expense ($1.8 million) as a result of increased inventories built to maintain customer service levels for customer requirements and product line expansion, in addition to increased storage rates paid by the Company; (3) an increase in freight ($2.1 million) due to higher fuel prices and higher fuel surcharges; (4) an increase in selling expenses ($1.6 million) primarily due to selling expenses incurred to establish the Company’s new Military selling channel, product line expansion, and an increase in demonstration expense related to growth in the Waarehouse Club selling channel; and (5) an increase in administrative costs; offset by (6) the elimination of expenses related to the selling shareholders and non-recurring transaction fees as a result of the Acquisition ($8.8 million). As a percentage of revenues, selling, general, and administrative expenses decreased from 16.1% to 15.7%.

~~The~~Expenses ~~Company~~associated iswith ~~exposed~~the ~~to market risk~~selling ~~stemming~~shareholders ~~from changes~~ in ~~interest~~predecessor ~~rates,~~fiscal ~~foreign~~2005 ~~exchange rates~~ and ~~commodity prices. Changes~~successor infiscal ~~these~~2005 ~~factors~~combined ~~could~~that ~~cause~~are ~~fluctuations~~not present in ~~the~~successor ~~Company’s~~fiscal ~~financial~~2006 ~~condition, results of operations~~ and cash flows. The Company owned no derivative financial instruments or nonderivative financial instruments held for trading purposes at March 5, 2005, March 6, 2004 or March 1, 2003. Certain of the Company’s outstanding nonderivative financial instruments at March 5, 2005 are ~~subject~~ ~~to interest rate risk, but~~ not ~~subject~~expected to ~~foreign~~be ~~currency~~incurred ~~or commodity price risk. There was no significant change~~ in ~~market risk from predecessor fiscal 2004 to predecessor fiscal 2005~~ ~~and~~the ~~successor~~future ~~fiscal~~include ~~2005~~the ~~combined.~~following:

Interest Rate Risk. The Company’s major market risk exposure is potential loss arising from changing interest rates and its impact on long-term debt. The Company’s policy is to manage interest rate risk by maintaining a combination of fixed and variable rate financial instruments in amounts and with maturities that management considers appropriate. The risks associated with long-term debt at March 5, 2005 have not changed materially since March 6, 2004. Of the long-term debt outstanding at March 5, 2005, the $125.0 million of New Notes and the $1.3 million of capital leases accrue interest at fixed interest rates, while the $136.5 million outstanding borrowings under the Term B Loan facility and the revolving credit facility accrue interest at a variable interest rate. At March 5, 2005, the Company had outstanding borrowings under the revolving credit facility of $0.8 million. A rise in prevailing interest rates could have adverse effects on the Company’s financial condition and results of operations. A 25 basis point increase in the reference rates for the Company’s average variable rate debt outstanding during predecessor fiscal 2005 and successor fiscal 2005 combined would have increased net loss for that period by approximately $269,000.

	Predecessor Fiscal 2005 and Successor Fiscal 2005 Combined
	(in millions)
Compensation expense (a)	$	1.2
Travel and entertainment (b)	1.0
Office expense (c)	0.2
Aircraft expense (d)	0.8
Compass Outfitters (e)	0.1
Professional fees (f)	2.6
Selling shareholders’ other expenses (g)	0.7
Selling shareholders’ transaction fees (h)	1.0
Consulting services (i)	0.8
Endorsement termination (j)	0.3
Other (k)	0.1
Total	$	8.8

~~The~~Compensation ~~following~~expense ~~table~~(a) relates ~~summarizes~~to personnel who were terminated in connection with the ~~Company’s~~Acquisition and will not ~~market~~be ~~risks~~replaced. Travel and entertainment (b) relates to expenses incurred by personnel who were terminated and will not be replaced as a result of the Acquisition. Office expense (c) relates to rent expense, maintenance and other occupancy costs associated with ~~long-term~~the ~~debt~~lease ~~outstanding~~of atan ~~March~~office building from a related party that was terminated in connection with the Acquisition. Aircraft expense (d) 5relates to the leasing of an aircraft owned by Columbia Hill Aviation, LLC, which was ~~2005~~formerly a subsidiary of PFMI, which was retained by the selling shareholders. Compass Outfitters (e) relates to expenses incurred in connection with an asset that was retained by the selling shareholders. The ~~table~~professional ~~presents~~fees ~~principal~~(f) primarily relate ~~cash~~to the Restructuring and to the Acquisition. The selling shareholders’ ~~outflows~~other expenses (g) relate to outside board of director fees, community relations, and contributions made to the former owners alma mater. The selling shareholders’ transaction fees (h) include legal, accounting, and tax consulting fees related ~~interest~~to ~~rates~~the byAcquisition. ~~maturity~~The ~~date~~consulting services (i) consist of the fee paid to the selling shareholders’ adviser for his role in the Acquisition. The endorsement termination (j) relates to the termination of the contract between the Company and Crawford Race Cars, LLC. Other (k) includes employee travel and other expenses incurred as a result of the debt placement for the Acquisition.

	March 5, 2005 Expected Maturities in Fiscal Years Long-Term Debt
	Variable Rate Long-Term Debt		Fixed Rate Long-Term Debt		Weighted Average Interest Rate
2006	$	—	$	421,713	8.02	%
2007	—		229,171		8.28	%
2008	—		190,293		8.37	%
2009	—		167,576		8.41	%
Thereafter	137,290,000		125,281,618		8.41	%
Total	$	137,290,000	$	126,290,371	7.67	%
Fair Value	$	137,290,000	$	133,165,371	7.67	%

Depreciation and amortization. Depreciation and amortization expense increased by $5.9 million. This is due to an increase in amortization of $5.7 million, primarily related to the allocation of the Acquisition purchase price to other intangible assets that was present for the entire successor fiscal 2006 period. For the prior year comparable period, such amortization of intangible assets only occurred subsequent to the Acquisition during successor fiscal 2005. In addition, depreciation expense increased by $0.2 million, primarily as a result of the allocation of the Acquisition purchase price and re-valuation of property, plant, and equipment as a result of purchase accounting due to the Acquisition.

Foreign Exchange Rate Risk. The Company bills customers in foreign countries in US dollars, with the exception of sales to Canada. The Company does not believe the foreign exchange rate risk on Canadian sales is material. 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 5, 2005 and March 6, 2004, all trade receivables were denominated in US dollars.16

18Loss on disposal of assets. The loss on disposal of assets decreased by $0.3 million. The decrease is due to the recording of losses in the prior year related to affiliated companies as a consequence of the Restructuring.

~~Commodity~~Interest ~~Price~~expense ~~Risk~~and ~~Certain~~other ~~raw~~income, ~~materials~~net. ~~used~~Interest expense inand ~~food~~other ~~processing~~income, ~~operations~~net ~~are~~consists ~~susceptible~~primarily toof ~~commodity~~interest ~~price~~on ~~changes.~~fixed ~~Increases~~and variable-rate inlong-term ~~the~~debt ~~prices~~and ofinterest ~~certain~~on ~~commodity~~the ~~products~~revolving ~~could~~loan, ~~result~~both inof ~~higher~~which were ~~overall~~entered ~~production~~into ~~costs.~~in ~~The~~connection ~~primary~~with ~~raw materials used in~~ the ~~Company’s~~Acquisition. ~~food~~Interest ~~processing~~expense ~~operations are boneless beef, chicken~~ and other ~~pork~~income, ~~flour,~~net ~~yeast,~~decreased ~~seasonings,~~by ~~cheese~~$3.8 million, ~~breading,~~or ~~soy proteins and packaging supplies~~14.7%. ~~Prices~~This ~~for~~decrease ~~many~~is primarily ofdue ~~these~~to ~~raw~~expenses ~~materials~~incurred ~~are~~during ~~at historical highs. During~~ predecessor fiscal 2005 and successor fiscal 2005 combined, ~~the~~as ~~weighted~~a ~~average~~result ~~prices~~of the ~~Company paid for beef~~Acquisition, ~~chicken,~~including: ~~pork~~(1) $4.3 million ~~and~~for ~~cheese~~the ~~increased~~write-off byof ~~approximately~~deferred ~~15.5%,~~loan ~~11.7%,~~origination ~~53.1%~~fees; ~~and 18~~(2) $0.~~9%,~~6 million ~~respectively,~~for ~~over~~ the ~~weighted~~repayment ~~average~~of ~~prices~~ the ~~Company~~Old ~~paid~~Notes; ~~for~~and ~~these~~(3) $0.5 ~~raw~~million ~~materials~~for ~~during~~ the repayment ~~fourth quarter~~ of ~~predecessor~~the ~~fiscal 2004. The~~ Company’s ~~manages~~former ~~commodity~~revolving ~~pricing~~credit ~~risks~~facility. ~~through~~This ~~purchase~~decrease ~~orders,~~was offset ~~non-cancelable contracts and, to the extent they can,~~ by ~~passing~~increased ondebt ~~such~~and ~~cost~~related ~~increases~~interest toexpense ~~customers.~~as Ata ~~March~~result 5,of ~~2005~~the Acquisition, ~~the~~in ~~Company~~addition ~~evaluated~~to ~~commodity~~an ~~pricing~~increase ~~risks~~in ~~and~~floating ~~determined~~interest itrates ~~was~~related ~~not currently beneficial~~ to ~~use derivative financial instruments to hedge~~ the Company’s ~~current~~term ~~positions with respect to such pricing exposures~~loan.

~~Fair~~Income ~~Value of Financial Instruments~~taxes. The ~~Company’s~~effective ~~nonderivative~~tax ~~financial~~rate ~~instruments~~for successor ~~consist~~fiscal ~~primarily~~2006 ofwas ~~cash~~27.4% ~~and~~compared ~~cash~~to ~~equivalents,~~23.8% ~~trade~~for ~~and~~predecessor ~~note~~fiscal ~~receivables,~~2005 and ~~trade~~successor ~~payables~~fiscal ~~and~~2005 ~~long-term debt~~combined. The ~~estimated~~change ~~fair~~in ~~values of~~ the ~~financial~~effective ~~instruments~~tax ~~have~~rate ~~been~~is primarily ~~determined~~due byto the ~~Company~~impact ~~using~~of ~~available~~new ~~market~~Ohio ~~information~~tax ~~and~~laws ~~appropriate~~enacted ~~valuation~~in ~~techniques~~H.B. ~~Considerable~~66 ~~judgment~~on ~~is required~~June 30, 2005. ~~however,~~H.B. to66 ~~interpret~~includes ~~market~~the ~~data~~phase-out toof ~~develop~~Ohio franchise tax and Ohio personal property tax and the ~~estimates~~phase-in of ~~fair~~a ~~value.~~gross ~~Accordingly,~~receipts tax referred to as the Commercial ~~estimates~~Activity ~~presented~~Tax ~~are~~(“CAT”). ~~not~~As ~~necessarily~~a ~~indicative~~result of the ~~amounts~~enactment, ~~that~~ the Company reduced ~~could~~its ~~realize~~deferred intax aliability ~~current~~based ~~market~~on ~~exchange.~~the ~~The~~phase-out ~~use~~ of ~~different~~franchise ~~market~~tax ~~assumptions~~ and~~/or~~ recorded ~~estimation~~an ~~methodologies~~additional ~~may~~valuation ~~have~~allowance abased ~~material~~on ~~effect~~Ohio oninvestment ~~the~~tax ~~estimated~~credits that ~~fair~~are ~~value~~expected ~~amounts~~to expire prior to utilization. ~~See~~Excluding ~~further~~the ~~discussion~~one-time inimpact of ~~Note~~this 12enactment, ~~“Disclosures~~the ~~About~~effective ~~Fair~~tax ~~Values~~rate offor ~~Financial~~successor ~~Instruments,”~~fiscal to2006 ~~the~~would ~~Consolidated~~have been ~~Financial Statements~~38.3%.

~~Item 8. Financial~~Predecessor ~~Statements~~Fiscal 2005 and Successor Fiscal ~~Supplementary~~2005 ~~Data~~Combined Compared to Predecessor Fiscal 2004.

Revenues, net. Net revenues increased by $51.9 million, or 14.5%. The increase in net revenues was the result of increases in sales across most of the Company’s end-market ~~Consolidated~~segments, ~~Financial~~including the substantial development of national business ~~Statements~~with ~~required~~existing customers and the advent of business with a new customer, in addition to net revenue of approximately $6.4 million due to net price increases to customers, offset by ~~this~~additional ~~Item~~revenues ~~are~~of on$7.9 ~~pages F-1~~million ~~through~~in Fthe prior year due to predecessor fiscal 2004 being a 53 week year, compared to the 52 week period in predecessor fiscal 2005 and successor fiscal 2005 combined. Included in predecessor fiscal 2005 and successor fiscal 2005 combined and predecessor fiscal 2004 are non-31recurring revenues of ~~this~~$8,604 and $104,127, respectively, ~~Report~~related to Compass Outfitters, LLC. These revenues are not present in future periods due to Compass Outfitters, LLC being retained by the selling shareholders following the Acquisition.

Cost of goods sold. Cost of goods sold increased by $50.1 million in predecessor fiscal 2005 and successor fiscal 2005 combined compared to predecessor fiscal 2004, or 19.7%. As a percentage of revenues, cost of goods sold increased from 70.9% to 74.2%. This increase was primarily due to increased raw material prices ($13.9 million), the impact of a $2.0 million purchase accounting adjustment on beginning inventory (as a result of the Acquisition) and start-up costs of $3.1 million related to the development of new lower margin, high volume national accounts business. In predecessor fiscal 2005 and successor fiscal 2005 combined, beef, pork, chicken and cheese prices increased approximately 7.3%, 49.4%, 22.5% and 25.0%, respectively, compared to predecessor fiscal 2004. These increases were partially offset by price increases passed on to customers, as noted above, and the elimination of commissions as a result of the termination of the Company’s purchasing agreement with PF Purchasing. Commissions paid to PF Purchasing totaled $5.3 million during predecessor fiscal 2004. This affiliate relationship was terminated in conjunction with the Restructuring.

~~Item 9~~Selling, general and administrative. ~~Changes~~ inSelling, general and administrative expenses decreased by $13.7 million, or 17.1%. ~~Disagreements~~As a percentage of revenues, selling, general and administrative expenses decreased from 22.3% to 16.1%. This decrease was primarily due to the elimination of PF Distribution fees of $11.6 million and a decrease in former affiliate expenses offset, in part, by expenses associated with ~~Accountants~~the Acquisition onthat ~~Accounting~~are not expected to repeat in future periods. Expenses associated with the selling shareholders in predecessor fiscal 2005 and successor ~~Financial~~fiscal ~~Disclosure~~2005 combined and predecessor fiscal 2004 that are not expected to be incurred in the future include the following:

~~None.~~17

Item 9A. Controls and Procedures

	Predecessor Fiscal 2005 and Successor Fiscal 2005 Combined		Predecessor Fiscal 2004
	(in millions)
Distribution expenses (a)	$	—	$	11.6
House lease (b)	—		0.1
Compensation expense (c)	1.2		2.8
Travel and entertainment (d)	1.0		2.0
Office expense (e)	0.2		0.6
Aircraft expense (f)	0.8		1.5
Compass Outfitters (g)	0.1		0.7
Professional fees (h)	2.6		2.4
Selling shareholders’ other expenses (i)	0.7		1.1
Selling shareholders’ transaction fees (j)	1.0		—
Consulting services (k)	0.8		—
Endorsement termination (l)	0.3		—
Other (m)	0.1		—
Total	$	8.8	$	22.8

~~Evaluation~~Distribution ofexpenses ~~Disclosure~~(a) incurred under ~~Controls~~related ~~and~~party ~~Procedures~~agreements that were terminated in March 2004 as part of the Restructuring. The ~~Company’s~~house ~~President~~lease ~~and Chief~~(b) relates ~~Executive~~to ~~Officer~~rent expense, maintenance and ~~Principal~~other ~~Financial~~occupancy ~~Officer~~costs ~~have~~paid ~~evaluated~~to ~~the~~related parties pursuant to a ~~effectiveness~~lease ofthat ~~the~~was ~~Company’s~~terminated ~~disclosure~~in ~~controls~~connection ~~and~~with ~~procedures~~the Restructuring. Compensation expense (asc) relates ~~such~~to ~~term is~~personnel ~~defined~~who were terminated in ~~Exchange~~connection ~~Act~~with the ~~Rules 13a-15~~Acquisition and will not be replaced. Travel and entertainment (ed) relates to expenses incurred by personnel who were terminated and ~~15d-15(e))~~will not be replaced as a result of the Acquisition. Office expense (e) relates to rent ~~end~~expense, ofmaintenance and other occupancy costs associated with the ~~period~~lease ~~covered~~of byan office ~~this~~building ~~report.~~from ~~Based~~a ~~upon~~related party that ~~evaluation,~~was terminated in connection with the ~~Company’s~~Acquisition. ~~President~~Aircraft ~~and~~expense ~~Chief~~(f) relates ~~Executive~~to ~~Officer~~the ~~and~~leasing ~~Principal~~of ~~Financial~~an ~~Officer~~aircraft ~~have~~owned ~~concluded~~by ~~that~~Columbia Hill Aviation, asLLC ofwhich ~~the~~was ~~end~~formerly a subsidiary of ~~the~~PFMI, which ~~period~~was ~~covered~~retained by ~~this~~the ~~report,~~selling shareholders. Compass Outfitters (g) relates to expenses incurred in connection with an asset that was retained by the ~~Company’s~~selling ~~disclosure~~shareholders. ~~controls~~The ~~and~~professional ~~procedures~~fees (h) primarily are ~~designed~~related to ~~ensure that~~ ~~information~~the ~~relating~~Restructuring and to the ~~Company~~Acquisition. ~~(including~~The ~~its~~selling ~~consolidated~~shareholders’ ~~subsidiaries~~other expenses (i) relate to outside board of director fees, community ~~that~~relations, isand ~~required~~contributions made to bethe ~~included~~former inowners ~~the~~alma ~~Company~~mater. The selling shareholders’s ~~reports~~transaction ~~filed~~fees or(j) include ~~submitted~~legal, accounting, and tax ~~under~~consulting fees related to the ~~Exchange~~Acquisition. ~~Act~~The isconsulting ~~accumulated~~services (k) consist ~~and~~of ~~communicated~~the fee paid to the ~~Company~~selling shareholders’s adviser for his ~~management~~role asin ~~appropriate~~the Acquisition. The endorsement termination (l) relates to ~~allow~~the termination ~~timely~~of ~~decisions~~the ~~regarding~~contract ~~required~~between the Company and Crawford Race Cars, LLC. ~~disclosure~~Other (m) includes employee travel and other expenses incurred as a result of the debt placement for the Acquisition.

~~Changes~~Depreciation and ~~in Internal Controls~~amortization. ~~There~~ Depreciation ~~have~~and ~~been~~amortization noexpense ~~changes~~increased inby ~~the~~$20.1 million. ~~Company’s~~The ~~internal~~increase ~~controls~~is ~~over~~due primarily ~~financial~~to ~~reporting~~amortization ~~during~~of ~~the~~intangible ~~Company’s~~assets ~~fiscal~~and ~~fourth~~additional ~~quarter~~depreciation ~~ended~~expense ~~March 5,~~related ~~2005~~to ~~that~~a ~~have~~step-up ~~materially~~in ~~affected,~~the orvalue ~~are~~of ~~reasonably likely~~fixed toassets ~~materially~~due ~~affect~~to purchase accounting, ~~the~~both ~~Company’s~~occurring ~~internal~~in ~~control~~successor ~~over~~fiscal ~~financial~~2005 as a result of the ~~reporting~~Acquisition.

~~Item 9B~~Loss on disposal of assets. ~~Other~~ ~~Information~~Loss on disposal of assets increased by $0.3 million. The increase is due to the recording of losses related to affiliate companies as a consequence of the Restructuring.

~~None~~Interest expense and other income, net. Interest expense and other income, net consists primarily of interest on fixed and variable rate long-term debt and interest on a revolving loan, both of which exist as a result of the Acquisition. Other expense increased by $9.0 million, or 53.2%. This increase was primarily due to expenses as a result of the Acquisition, including $4.3 million for the write-off of deferred loan origination fees, $0.6 million for the repayment of the Old Notes and $0.5 million for the repayment of the Company’s former revolving credit facility combined with the increased debt and borrowings under the Company’s new revolving credit facility. See “Liquidity and Capital Resources” below.

2018

~~PART III~~Income taxes. The effective tax rate for predecessor fiscal 2005 and successor fiscal 2005 combined was 23.8%, compared to 47.6% for predecessor fiscal 2004. The decrease in the effective tax rate is primarily due to a change in the tax rate used to provide for deferred taxes.

~~Item~~Liquidity ~~10. Directors~~ and ~~Executive~~Capital ~~Officers of the Registrant~~Resources

~~Directors~~Net cash provided by operating activities. Net cash provided by operating activities was $28.5 million, $12.9 million, $0.4 million, and ~~Executive~~$3.3 ~~Officers~~million for successor fiscal 2006, successor fiscal 2005, predecessor fiscal 2005, and predecessor fiscal 2004, respectively. The increase in net cash provided by operating activities for successor fiscal 2006 compared to net cash provided by operating activities for predecessor fiscal 2005 and successor fiscal 2005 combined was primarily due to the Company’s increased profitability during successor fiscal 2006, in addition to (1) an increase in accounts receivable during successor fiscal 2006 that was substantially less than the increase during the prior year comparable period; (2) a decrease in refundable income taxes, prepaid expense, and other current assets during successor fiscal 2006 compared to the increase in the prior year comparable period; and (3) an increase in inventories during successor fiscal 2006 that was substantially less than the increase in the prior year comparable period; offset by (4) an increase in payments on long-term debt during successor fiscal 2006 compared to the prior year comparable period and (5) an increase in accounts payable and other accrued liabilities during successor fiscal 2006 that was significantly less than the increase in the prior year comparable period.

~~ROBIN~~The P.primary components of the net cash ~~SELATI,~~provided ~~DIRECTOR,~~by ~~age~~operating ~~39,~~activities ~~became~~for asuccessor ~~director~~fiscal in2006 ~~June~~were (1) ~~2004~~depreciation and ~~upon~~amortization ~~completion~~ of ~~the~~intangible ~~Acquisition~~assets of $30. ~~Prior~~6 tomillion, ~~co-founding~~of which $7.2 million ~~MDP~~relates into ~~1993,~~depreciation Mrof fixed assets and $23. ~~Selati~~4 ~~was~~million ~~with~~relates ~~Alex,~~to amortization ~~Brown~~of intangible assets; (2) &a ~~Sons~~decrease in refundable income ~~Incorporated~~taxes, prepaid expenses, and other current assets of $2. ~~Mr. Selati~~2 ~~currently~~million, primarily ~~serves~~due onto the ~~Board~~tax ofprovision ~~Directors~~recorded as a result of ~~Beverages &~~the ~~More~~income in successor fiscal 2006, reducing previously recorded tax benefits; (3) ~~Inc.,~~an increase in trade ~~Carrols~~accounts ~~Holdings~~payable ~~Corporation,~~and ~~Cinemark,~~other accrued liabilities of $0.8 million; and (4) ~~Inc~~amortization of deferred loan fees totaling $1.,7 ~~Family~~million; ~~Christian~~offset ~~Stores,~~by (5) ~~Inc~~a decrease in other long-term liabilities of $4.,3 million primarily as a result of the ~~NWL~~payment ~~Holdings~~to the selling shareholders as required by the tax sharing agreement, partially offset by an increase in liability for deferred compensation; (6) ~~Inc~~a decrease in deferred income taxes of $2.,3 ~~Peter~~million; ~~Piper,~~and (7) ~~Inc.,~~an ~~Ruth’s~~increase ~~Chris~~in inventories ~~Steak~~of ~~House, Inc~~$1.9 million due to an inventory build to satisfy existing customer needs, new customers needs, and ~~Tuesday~~new ~~Morning~~product ~~Corporation~~lines.

~~NICHOLAS~~The W.primary ~~ALEXOS,~~components ~~DIRECTOR,~~of ~~age~~net ~~41,~~cash ~~became~~provided aby ~~director~~operating inactivities ~~June~~for successor fiscal 2005 were: (1) ~~2004~~depreciation and ~~upon~~amortization, ~~completion~~including amortization of ~~the~~deferred ~~Acquisition~~loan origination fees, totaling $24. ~~Prior~~2 tomillion; ~~co-founding~~(2) an ~~MDP~~increase in ~~1993,~~deferred Mrincome taxes of $0. ~~Alexos~~4 ~~was~~million; ~~with~~(3) the ~~First~~write-off ~~Chicago~~of ~~Venture~~deferred ~~Capital~~loan ~~for~~origination ~~four~~fees ~~years~~of $4. ~~Mr.~~3 million; (4) ~~Alexos~~an ~~serves~~increase onin ~~the~~trade ~~Board~~accounts ofpayable and other accrued ~~Directors~~liabilities of ~~Milnot~~$0.9 million; ~~Holding~~and ~~Company,~~(5) a ~~National~~decrease ~~Mentor,~~in inventory of $0.5 million; offset by (6) ~~Inc~~an increase in accounts receivable of $9.6 million and ~~Team~~(7) an ~~Health Holdings~~increase in refundable income taxes, ~~LLC~~prepaid expenses and other current assets of $3.6 million.

~~GEORGE~~The A.primary ~~PEINADO,~~components ~~DIRECTOR,~~of ~~age~~net ~~35,~~cash ~~became~~provided by operating activities for predecessor fiscal 2005 were: (1) a ~~director~~ decrease in ~~June~~accounts receivable of $5.7 million; (2) ~~2004~~depreciation ~~upon~~and ~~completion~~amortization, including amortization of ~~the~~deferred ~~Acquisition. Mr. Peinado~~loan ~~currently~~origination ~~serves~~fees, astotaling a$2.3 ~~Director~~million; of(3) an ~~MDP~~increase in trade accounts payable and ~~has~~other ~~been~~accrued liabilities ~~employed~~of $2.2 million; offset by ~~the~~(4) an ~~firm~~increase ~~since~~in ~~January 2004~~inventory of $4. ~~Prior~~9 tomillion; ~~that,~~(5) an ~~beginning~~increase in ~~1997~~refundable income taxes, ~~Mr. Peinado~~prepaid ~~was~~expenses ~~with~~and ~~Donaldson,~~other ~~Lufkin &~~current ~~Jenrette~~assets of $0.2 million; and ~~DLJ~~(6) an ~~Merchant~~decrease in ~~Banking~~deferred ~~Partners~~income taxes of $2.1 million.

~~SCOTT~~The W.primary ~~MEADER,~~components ~~DIRECTOR,~~of ~~age~~net ~~43,~~cash ~~became a~~provided ~~director~~by inoperating ~~October 2004. Mr. Meader is~~activities ~~currently~~for ~~the~~predecessor ~~President~~fiscal 2004 were: (1) depreciation and ~~Chief~~amortization, ~~Executive~~including ~~Officer~~amortization of ~~Milnot~~deferred ~~Holding~~loan ~~Corp.~~origination fees, ~~having~~totaling ~~served~~$5.4 million; (2) a decrease in ~~that~~deferred ~~position~~income ~~since~~taxes ~~1997~~of $1. 3 ~~Prior~~million; to(3) an ~~Milnot~~increase ~~Holding~~in ~~Corp.,~~trade Mraccounts payable and other accrued liabilities of $2.4 million; and (4) ~~Meader~~the ~~held~~write-off ~~various~~of ~~positions~~deferred loan ~~with~~origination ~~Burns~~fees ~~Philps~~of ~~Foods~~$1.2 ~~PLC,~~million; ~~Pet~~offset ~~Incorporated,~~by A(5) an increase in inventories of $6.T.4 ~~Kearney~~million and ~~Quaker~~(6) an ~~Oats~~increase Coin receivables of $2.0 million.

NORBERT E. WOODHAMS, PRESIDENT, CHIEF EXECUTIVE OFFICER, DIRECTOR AND CHAIRMAN OF THE BOARD, age 59, became the Company’s President and Chief Executive Officer in December 1999 and became a director in June 2004 upon completion of the Acquisition. He was elected as Chairman of the Board of the Company effective January 11, 2005. Immediately prior to his election to those offices, Mr. Woodhams was President of Pierre Foods, LLC, the Company’s former 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 Foods, Inc. Upon the acquisition of Hudson by Tyson Foods in January 1998, Mr. Woodhams became President of Pierre. Mr. Woodhams served as a director from 1998 to September 2002.19

~~ROBERT~~Net C.cash ~~NAYLOR,~~used ~~SENIOR~~in ~~VICE~~investing activities. ~~PRESIDENT~~Net ~~OF SALES,~~cash ~~MARKETING~~used ~~AND~~in ~~NEW~~investing ~~PRODUCT~~activities for ~~DEVELOPMENT,~~successor ~~age~~fiscal 532006, ~~became~~successor ~~the~~fiscal ~~Company’s Senior~~2005, ~~Vice~~predecessor ~~President~~fiscal ~~of Sales~~2005, ~~Marketing~~ and predecessor ~~New~~fiscal ~~Product~~2004 ~~Development~~was in$7.2 ~~December 1999~~million, $3. ~~Immediately~~7 ~~prior~~million, he$2.1 ~~was~~million, ~~Senior~~and ~~Vice~~$9.8 ~~President~~million, ofrespectively. ~~Sales~~The ofprimary ~~Pierre~~components ~~Foods,~~for ~~LLC,~~successor ~~the~~fiscal ~~Company’s fomer operating subsidiary~~2006, ~~having~~successor ~~served~~fiscal in2005, ~~that~~and ~~position~~predecessor ~~since~~fiscal ~~the~~2005 ~~Company’s~~were ~~acquisition~~plant ofimprovements ~~Pierre~~and ~~Cincinnati~~routine incapital ~~June 1998~~expenditures. ~~From~~ ~~1978 to~~The ~~1998,~~primary hecomponents ~~served~~for inpredecessor ~~various~~fiscal 2004 ~~sales~~were ~~positions~~plant ~~for~~improvements, ~~Pierre~~routine ~~Cincinnati~~capital expenditures, ~~including~~and a significant ~~Vice~~plant ~~President~~expansion oftotaling ~~Sales~~$10.0 million.

~~JOSEPH~~Net W.cash ~~MEYERS,~~provided ~~VICE~~by ~~PRESIDENT,~~(used ~~FINANCE,~~in) ~~age~~financing ~~38,~~activities. ~~has~~Net ~~served~~cash asused ~~the~~in ~~Company’s Vice President, Finance since February 2003~~financing ~~and~~activities ~~has~~was ~~held~~$18.8 ~~various~~million ~~accounting~~for ~~and~~successor ~~finance~~fiscal ~~positions~~2006. ~~with~~The ~~the~~primary ~~Company since~~components ~~1996.~~were: ~~Prior~~(1) principal topre-payments ~~this, Mr. Meyers~~on ~~held~~long-term ~~the~~debt ~~position~~ of ~~General~~$17.8 ~~Accounting~~million; ~~Manager~~(2) net atrepayments ~~OhSe~~under ~~Foods,~~the ~~Lunch Meat~~revolving ~~Division~~credit agreement of ~~Hudson~~$0.8 ~~Foods~~million; in(3) a ~~Topeka,~~return ~~Kansas~~of ~~from~~capital ~~1991~~to ~~through~~parent ~~1996. In 1996, OhSe Foods divested into Hudson~~of ~~Foods~~$0. ~~Prior~~1 tomillion; ~~joining~~and ~~Hudson Foods, Mr.~~(4) ~~Meyers held~~loan ~~the~~origination ~~position~~fees asof ~~staff accountant at PGT Trucking Inc~~$0.1 ~~in Monaca, Pennsylvania~~million.

~~Audit~~Net ~~Committee~~cash ~~Financial~~used ~~Expert~~in financing activities was $11.3 million for successor fiscal 2005. The primary components were: (1) the payoff of the Old Notes of $115.0 million; (2) a return of capital to parent of $100.1 million; (3) the repayment of debt in conjunction with the Acquisition of $29.0 million; (4) net repayment of the revolving credit agreement of $17.7 million; (5) principal payments on long-term debt of $16.2 million; and (6) loan origination fees of $10.0 million; offset by (7) borrowings under the new term loan of $150.0 million; (8) issuance of New Notes of $125.0 million; (9) the termination of a certificate of deposit for $1.3 million; and (10) a contribution from parent totaling $0.4 million.

~~The~~Net ~~Board~~cash ofprovided ~~Directors~~by offinancing ~~the~~activities ~~Company has~~was ~~determined that Nicholas W~~$3.7 ~~Alexos~~million isfor anpredecessor ~~“audit~~fiscal ~~committee~~2005. ~~financial~~The ~~expert”~~primary ~~as defined~~components inwere: ~~Item 401~~(b1) ofnet borrowings ~~Regulation~~under ~~S-K promulgated by~~ the ~~Securities~~revolving ~~and Exchange~~credit ~~Commission~~agreement ~~(“SEC”);~~with ~~however~~former ~~Mr. Alexos~~lender isof ~~not considered “independent”~~$7.7 asmillion; ~~that~~offset ~~term~~by ~~is defined under the applicable SEC rules. Mr.~~(2) ~~Alexos~~loan isorigination afees ~~Managing~~incurred ~~Director~~in ~~of Madison Dearborn Partners, LLC,~~ the ~~general~~amount ~~partner~~ of ~~Madison Dearborn~~ ~~Partners IV, L~~$3.~~P.,~~4 ~~which~~million isand ~~the~~(3) principal ~~general~~payments ~~partner~~on oflong-term ~~Madison~~debt ~~Dearborn~~in ~~Capital Partners IV, L.P., which holds approximately 96% of~~ the ~~issued~~amount ~~and outstanding~~of ~~capital~~$0.7 ~~stock of Holding~~million.

21Net cash provided by financing activities was $6.4 million for predecessor fiscal 2004. The primary components were: (1) borrowings under the equipment term loan subline and the real estate term loan subline of $5.0 million each, offset by (2) the net repayment of revolving credit agreement of $1.8 million; (3) principal payments on long-term debt of $0.8 million; and (4) loan origination fees of $0.7 million.

~~Code~~On March 8, 2004, following a consent solicitation in which consents of ~~Ethics~~holders of $112.4 million in aggregate principal amount of the Company’s then outstanding Old Notes, representing 97.74% of the outstanding Old Notes, consented to a Fourth Supplemental Indenture between the Company and U.S. Bank National Association, as trustee (the “Trustee”). The Company entered into the Fourth Supplemental Indenture with the Trustee. Among other things, the Fourth Supplemental Indenture increased the annual interest rate on the Old Notes from 10.75% to 12.25% through March 31, 2005 and 13.25% thereafter, and required the payment of a cash consent fee of $3.5 million (3% of the principal amount of Old Notes held by each consenting noteholder); required the termination of all related party transactions, except for certain specifically-permitted transactions as described in Note 16 — “Transactions With Related Parties” to the Consolidated Financial Statements); provided for the assumption by the Company of approximately $15.3 million of subordinated debt of PFMI and waived any and all defaults of the Indenture existing as of March 8, 2004.

~~The~~Concurrently ~~Board~~with the execution of ~~Directors~~the ~~has~~Fourth Supplemental ~~not~~Indenture, ~~yet~~the ~~adopted~~Company took title to an aircraft transferred from a related party subject to $5.6 million of existing purchase money debt; ~~Code~~assumed $15.3 million of ~~Ethics~~debt from PFMI; cancelled the $1.0 million related ~~The~~party ~~Company~~note isreceivable inagainst the ~~process~~debt ofassumed ~~developing~~from anPFMI; ~~appropriate~~cancelled ~~Code~~the ofbalances ~~Ethics~~owed ~~and~~by ~~when~~the ~~this~~Company ~~process~~to iscertain ~~complete~~related parties, ~~will~~as ~~made~~follows: $0.5 million owed to CHA; $3.5 million owed to PF Purchasing, a former ~~copy~~affiliate of the ~~Code~~Company; $0.5 million owed to PF Distribution, a ~~available~~former affiliate of the Company; and assumed the operating leases of PF Distribution in connection with the Fourth Supplemental Indenture. We refer to these transactions as the ~~public~~“Restructuring”.

~~Item 11~~On June 30, 2004, the shareholders of PFMI closed the sale of their shares of stock of PFMI to Holding (see Note 1 — “Basis of Presentation and Acquisition,” to the Consolidated Financial Statements). ~~Executive~~ ~~Compensation~~Effective June 30, 2004, the Company terminated its three-year variable-rate $40 million revolving credit facility. Existing debt issuance costs related to the Company’s former $40 million facility in the amount of $0.5 million and a prepayment penalty paid to the former lender in the amount of $0.4 million were charged to interest expense.

~~Summary Compensation Table~~20

~~The~~Also ~~following~~effective ~~information~~June 30, ~~presents~~2004, the ~~compensation~~Company ~~information~~obtained ~~for~~a ~~services~~$190 million tocredit ~~the~~facility ~~Company~~from a new lender which includes a six-year variable-rate $150 million term loan, a five-year variable-rate $40 million revolving credit facility and a $10 million letter of credit subfacility. Funds available under this new facility are available for working capital requirements, permitted investments, and general corporate purposes. Borrowings under the ~~fiscal~~new ~~years~~facility bear interest at floating ~~indicated,~~rates ~~for~~based ~~its~~upon ~~Chief~~the ~~Executive~~interest ~~Officer~~rate option selected from time to time by the Company and are secured by a first-priority security interest in substantially all of the Company’s ~~other~~assets. ~~most~~The ~~highly~~interest rates for base rate borrowings under ~~compensated~~the ~~Executive~~new ~~Officer~~revolving credit facility and ~~two~~the ~~former~~new ~~Executive~~term ~~Officers~~loan at March 4, 2006 were 9.25% (prime of 7.50% plus 1.75%) and 9.00% (prime of 7.50% plus 1.50%), respectively. Actual interest rates are lowered by the ~~Company~~use of LIBOR tranches as ~~(collectively~~appropriate. Repayment of borrowings under the term loan was initially $375,000 per quarter, which began on September 4, 2004, with a balloon payment of $141.4 million due on June 5, 2010. However, in addition to paying all scheduled quarterly payments totaling $8.6 million for the ~~“Named~~term ~~Executive~~of ~~Officers”)~~the loan, the Company made prepayments on the term loan totaling $4.9 million during successor fiscal 2005. Prepayments totaling $17.4 million were made during successor fiscal 2006. The remaining outstanding balance of $119.1 million as of March 4, 2006 is due on June 5, 2010.

						Long-Term Compensation Awards
Name and Principal Position	Fiscal Year	Salary		Bonus		Number of Shares Underlying Options		All Other Compensation
Norbert E. Woodhams	2005	$	367,019	$	78,591	53,228	(2)	$	75,207	(3)
President and Chief	2004	356,731		518,213		—		9,200		(6)
Executive Officer	2003	350,000		678,563		—		3,200		(6)
Robert C. Naylor	2005	$	240,423	$	41,971	32,756	(2)	$	76,347	(4)
Senior Vice President of	2004	224,231		314,592		—		8,000		(6)
Sales, Marketing and New Product Development	2003	220,000		427,140		—		1,040		(6)
James C. Richardson, Jr. (1)	2005	$	319,486			—		—
	2004	1,020,046		—		—		$	188,652	(5)
	2003	1,000,800		$	1,615,000	—		276,947		(5)
David R. Clark (1)	2005	$	319,486	—		—		$	1,683	(6)
	2004	1,020,046		—		—		5,500		(6)
	2003	1,000,800		$	1,750,000	—		3,200		(6)

As of March 4, 2006, the Company had cash and cash equivalents on hand of $2.5 million, no outstanding borrowings under its revolving credit facility and borrowing availability of approximately $34.4 million. Also as of March 4, 2006, the Company had borrowings under its term loan of $119.1 million and $125.0 million of the New Notes outstanding. As of March 5, 2005, the Company had no cash and cash equivalents on hand, outstanding borrowings under its revolving credit facility of $0.8 million, and borrowing availability of approximately $34.7 million. Also as of March 5, 2005, the Company had borrowings under its term loan of $136.5 million and $125.0 million of the New Notes outstanding. The maturity date of the $40 million revolving credit facility is June 30, 2009. In addition, the Company is required to satisfy certain financial covenants regarding cash flow and capital expenditures. As of March 4, 2006, the Company is in compliance with all financial covenants.

~~(1) Following~~In conjunction with the Acquisition, ~~Messrs~~the Company issued the New Notes. ~~Richardson~~ ~~and~~The ~~Clark~~proceeds of the New Notes, together with the equity ~~former~~contributions ~~Chairman~~from MDP and ~~Vice~~certain ~~Chairman~~members of management and borrowings under the Company’s new senior credit facility, ~~respectively~~were used to finance the Acquisition and to repay outstanding indebtedness, ~~are~~including nopaying off debt of ~~longer~~PFMI ~~employed~~assumed by the Company under the Fourth Supplemental Indenture (except capital leases), paying for the Old Notes tendered in connection with the tender offer described in Note 1 — “Basis of Presentation and Acquisition” to the Consolidated Financial Statements and redeeming the Old Notes not tendered.

Also in conjunction with the Acquisition, the Company and the selling shareholders entered into a tax sharing and indemnification agreement containing certain representations and warranties of the selling shareholders with respect to taxes. The agreement provides that any net operating loss carryforwards attributable to expenses relating to the sale of the Company (2“Deal Related NOLs”) ~~Represents~~ ~~shares~~and certain other deal related expenses, will be for the benefit of ~~Holding~~the ~~awarded~~selling ~~under~~shareholders. As of the ~~2004~~date ~~Stock~~of the Acquisition, these Deal ~~Option~~Related ~~Plan~~NOLs and other deal related expenses totaled approximately $24. ~~See~~2 million ~~“Stock-Based~~and $6.6 million, respectively. Accordingly, the Company is required pay ~~Compensation”~~to ~~below~~the selling shareholders the amount of any tax benefit attributable to such Deal Related NOLs and other deal related expenses, except that the first $4.0 million of such tax benefits shall be paid into an escrow account that will secure the selling shareholders indemnification obligations under the tax sharing and indemnification agreement. The Company is required to make payments to the selling shareholders or the escrow account for tax benefits derived from such utilization 20 days after the filing of the tax return that utilizes such Deal Related NOLs or other deal related expenses.

~~(3) Represents~~Initially, the Company recorded a net long-term liability to the selling shareholders totaling $10.3 million for the estimated obligations under the tax sharing and indemnification agreement. As of March 4,~~878~~ 2006, based on the federal income tax return filed November 15, 2005 (for the tax year ended February 26, 2005), the Company has utilized $8.6 million of the Deal Related NOLs and $1.7 million in ~~contributions~~other ~~made~~deal byrelated expenses. During the fiscal year ended March 4, 2006, the Company tosubmitted payments based on the tax benefits received, net of other tax assessments due to the Company’s ~~401(k)~~from ~~plan~~the selling shareholders, to an escrow account for a total of $3.6 million and directly to the selling shareholders for a total of $711.4 million. As of March 4,~~329~~ in2006, ~~life~~the ~~insurance~~Company has ~~premiums~~a net long-term liability to the selling shareholders totaling $5.3 million.

~~(4) Represents~~For the $5tax year ended February 26,~~018~~ 2005, the Company utilized approximately $3.3 million of non-deal related NOLs in ~~contributions~~its ~~made~~tax byreturn filed November 15, 2005. The non-deal related NOLs enabled the Company to ~~the~~defer cash tax payments ~~Company’s~~required ~~401(k)~~by ~~plan~~the tax sharing and indemnification agreement of approximately $~~71,329~~1.2 million inattributable ~~life~~to ~~insurance~~this ~~premiums~~tax period.

~~(5) Represents the value of life insurance premiums.~~21

~~(6) Represents~~For the ~~matching~~tax ~~contributions~~year ~~made~~ending byFebruary 25, 2006, as a result of the current year taxable income for successor fiscal 2006, the Company was able to ~~the~~defer cash tax payments of approximately $4.2 million. The Company’s ~~401(k)~~expects ~~plan~~a portion of such deferred amounts to be paid out pursuant to the tax sharing and indemnification agreement subsequent to the filing of its tax return in November 2007.

22The Company has budgeted approximately $13.4 million for capital expenditures for successor fiscal 2007. These expenditures include a provision for capacity expansion, system upgrades, and routine food processing capital improvement projects and other miscellaneous expenditures within the Company’s existing facilities. The Company believes that funds from operations and funds from its $40 million revolving credit facility, as well as the Company’s ability to enter into capital or operating leases, will be adequate to finance these capital expenditures. As described in Note 17 — “Legal Proceedings,” to the Consolidated Financial Statements, if the HCDOES determines that the Company is non-compliant with emissions requirements, the Company likely will be required to install additional control equipment. The Company is estimating the cost of such upgrades to existing equipment to be $2.5 million. Should such capital expenditures be required, the Company would likely adjust its capital budget for its successor fiscal 2007 or delay previously budgeted capital expenditures.

~~Stock~~If the Company continues its historical revenue growth trend as expected, then the Company will be required to raise and invest additional capital for additional plant expansion projects to provide operating capacity to satisfy increased demand. Management believes that future cash requirements for these plant expansion projects would need to be met through other long-~~Based~~term ~~Compensation~~financing sources. 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.

~~Following~~Significant ~~the~~assumptions ~~consummation~~underlie of the ~~Acquisition, Holding’s~~belief ~~board~~that ~~of directors and stockholders adopted~~ the ~~2004 Stock Option~~ ~~Plan~~Company ~~(the~~anticipates ~~“Option~~that ~~Plan”),~~its ~~pursuant~~fiscal to2007 ~~which~~cash arequirements ~~pool of approximately 10% of Holding’s common stock, or 163,778 shares, are reserved~~ for ~~issuance~~working tocapital ~~management, employees~~ and ~~consultants~~debt ofservice ~~the~~will ~~Company in order to provide incentives to such persons. In the event that any participant in the Option Plan ceases to~~ be ~~employed~~met bythrough ~~Holding~~a orcombination ~~its subsidiaries, Holding may repurchase such participant’s option shares at fair market value (whether held by the participant or one or more~~ of ~~his~~funds ~~transferees). If~~provided ~~for any reason, Holding does not elect to~~by ~~purchase~~operations ~~all of such option shares, MDP~~ and ~~certain~~borrowings ofunder its ~~affiliates~~$40 ~~will~~million ~~be entitled~~revolving tocredit ~~do so. In addition~~facility, ~~subject~~ ~~to certain exceptions~~including, ~~any~~among ~~shares~~other ~~issued~~things, ~~pursuant~~that tothere ~~the Option Plan~~ will be ~~subject~~ tono ~~the~~material ~~stockholders agreement, which grants Holding certain rights of~~adverse ~~first~~developments ~~refusal~~ in ~~connection~~the ~~with certain transfers of such shares. Upon a sale of Holding to an independent third party~~business, ~~Holding’s~~liquidity ~~board~~or ofsignificant ~~directors,~~unbudgeted ~~in its sole discretion, may permit~~capital ~~the~~requirements ~~acceleration~~ of the ~~vesting of the options of participants in the Option Plan~~Company. Should any participant’s employment with Holding or its subsidiaries terminate prior to the vesting of options issued to such participant, any unvested options expire and are forfeited by the participant.

~~The following~~Commercial ~~table sets forth certain information regarding options granted in~~Commitments, ~~successor~~Contingencies, ~~fiscal~~and ~~2005~~Contractual ~~under the Option Plan to named executive officers who participated therein.~~Obligations

Individual Grants(a)							Potential Realizable Value at Assumed Annual Rates of Stock Price Appreciation for Option Term
Name	No. of Securities Underlying Options Granted	% of Total Options Granted to Employees in Fiscal 2005		Exercise Price Per Share		Expiration Date	5%		10%
Norbert E. Woodhams	53,228	41.8	%	$	10.00	6/30/14	$	293,458	$	848,317
Robert C. Naylor	32,756	25.7	%	$	10.00	6/30/14	$	275,810	$	522,046

The Company provided a letter of credit in the amount of $5.5 million, $4.5 million and $3.5 million in successor fiscal 2006, predecessor fiscal 2005 and successor fiscal 2005 combined, and predecessor fiscal 2004, respectively, to its insurance carrier for the underwriting of certain performance bonds. The current letter of credit expires in fiscal 2007. The Company also provides secured letters of credit to its insurance carriers for outstanding and potential workers’ compensation and general liability claims. Letters of credit for these claims totaled $110,000 in both successor fiscal 2006 and in predecessor fiscal 2005 and successor fiscal 2005 combined, and $75,000 in predecessor fiscal 2004. In addition, the Company provides secured letters of credit to a limited number of suppliers. The Company had no letters of credit for suppliers in successor fiscal 2006 or predecessor fiscal 2005 and successor fiscal 2005 combined. Letters of credit for suppliers totaled $250,000 in predecessor fiscal 2004.

~~(a) In~~The ~~general~~Company is involved in various legal proceedings. Management believes, ~~40%~~based ofon the ~~option~~advice ~~vests~~of ~~daily~~legal ~~over~~counsel, ~~five~~that ~~years from~~ the ~~date~~outcome of ~~grant~~such ~~and~~proceedings ~~60%~~will ~~vests~~not ~~over~~have ~~seven~~a ~~years~~materially adverse ~~from~~effect on the ~~date~~ Company’s financial position or future results of operations ~~grant,~~and ~~subject~~cash toflows. ~~accelerated~~See ~~vesting~~Item ~~based~~3 on— “Legal Proceedings” and Note 17 – “Legal Proceedings,” to the ~~achievement~~Consolidated ofFinancial Statements for further discussion ~~certain~~of ~~performance~~proceedings ~~measures~~as of March 4, 2006.

~~Aggregated~~The ~~Option~~following ~~Exercises~~tables Insummarize ~~Last~~our ~~Fiscal~~contractual ~~Year~~obligations and ~~Year-End~~commitments ~~Values~~as of March 4, 2006:

The following table sets forth, for each of the Named Executive Officers, aggregated information concerning options to purchase shares of common stock of Holding granted to each and the value of outstanding options to purchase shares of common stock of Holding at March 5, 2005. No stock appreciation rights were outstanding at March 5, 2005. No options were exercised by Named Executive Officers in fiscal 2005.

	Commitments by Fiscal Year
	Total		Less than 1 Year		1 – 3 Years		3 - 5 Years		More than 5 Years
Letters of credit	$	5,610,000	$	5,610,000	$	—	$	—	$	—
Purchase commitments for capital projects	1,941,735		1,941,735		—		—		—
Purchase commitments for raw materials	852,576		852,576		—		—		—
Purchase commitments for natural gas	3,130,722		3,130,722		—		—		—
Other miscellaneous services	90,000		90,000		—		—		—
Total	$	11,625,033	$	11,625,033	$	—	$	—	$	—

	Number of Securities Underlying Unexercised Options At March 5, 2005		Value of Unexercised In-the-Money Options At March 5, 2005 (a)
Name	Exercisable	Unexercisable	Exercisable		Unexercisable
Norbert E. Woodhams	2,890	50,338	$	28,900	$	503,380
Robert C. Naylor	1,778	30,978	$	17,780	$	309,780

	Contractual Obligations by Fiscal Year
	Total		Less than 1 Year		1 – 3 Years		3-5 Years		More than 5 Years

Long-term debt	$	244,125,000	$	—	$	—	$	119,125,000	$	125,000,000
Capital lease obligations*	868,659		229,172		357,870		281,617		—
Operating lease obligations	4,963,704		3,644,904		1,104,483		198,117		16,200
Interest on fixed-rate debt**	68,842,870		12,719,106		25,246,422		24,705,467		6,171,875
Interest on variable-rate debt**	31,322,662		8,949,332		17,898,664		4,474,666		—
Total	$	350,122,895	$	25,542,514	$	44,607,439	$	148,784,867	$	131,188,075

~~(a) There is no market for the shares and the values at March 5, 2005~~*Capital ~~are~~lease ~~based~~obligations oninclude ~~the~~interest ~~last~~component ~~valuation~~related ~~available~~ to ~~the Company~~leases.

~~Deferred~~**Estimated payments ~~Compensation~~for ~~Plan~~interest are based on actual interest rates for fixed and variable-rate debt outstanding as of March 4, 2006 assuming that the outstanding balances remain unchanged until maturity.

In ~~connection~~ conjunction with the Acquisition, Mrthe Company recorded a net long-term liability to the selling shareholders totaling $10. ~~Woodhams~~3 million for the estimated obligations under the tax sharing and Mrindemnification agreement. As of March ~~Naylor~~4, 2006, based on the federal income tax return ~~invested~~filed ~~approximately~~November 15, 2005 (for the tax year ended February 26, 2005), the Company has utilized $48.9 6 million of the Deal Related NOLs and $1.7 million in aother ~~deferred~~deal ~~compensation~~related ~~plan~~expenses. ~~This~~ ~~deferred~~During ~~compensation~~the ~~plan~~fiscal isyear ~~funded~~ended March 4, ~~through~~2006, athe ~~rabbi~~Company ~~trust~~submitted ~~that~~payments ~~owns~~based ~~preferred~~on ~~stock~~the tax benefits received, net of other ~~Holding~~tax ~~with~~assessments andue ~~aggregate~~to the Company from the selling shareholders, to an ~~liquidation~~escrow ~~value~~account for a total of ~~approximately~~$3.6 million and directly to the selling shareholders for a total of $51.2 4 million. atAs of March 54, 2006, the Company ~~2005~~has a net long-term liability to the selling shareholders totaling $5. ~~See~~3 ~~“Certain~~million. This ~~Relationships~~amount ~~and~~is excluded from the table above due to the uncertainty of when such utilization of the Deal Related ~~Transactions~~NOLs will occur.”

~~Compensation~~See Note of14 ~~Directors~~— “Commitments, Contingencies and, Contractual Obligations,” to the Consolidated Financial Statements for further discussion.

During predecessor fiscal 2005, directors were paid $5,000 per board meeting attended, except that directors who were employees of the Company received no payment for services as directors. Following the Acquisition in successor fiscal 2005, directors that are employees or affiliates of MDP did not receive fees for services as directors. The director who is neither the Company’s employee nor an affiliate of MDP receives $35,000 annually plus related travel expenses. All of the Company’s directors are reimbursed for out-of-pocket expenses incurred in connection with attending all board and other committee meetings.Inflation

~~Employment~~The ~~Contracts~~Company believes that inflation has not had a material impact on its results of operations for successor fiscal 2006, predecessor fiscal 2005 and ~~Change~~successor fiscal 2005 combined or predecessor fiscal 2004. In addition, the Company does not expect inflation to have a material impact on its results of operations for successor fiscal 2007. However, the Company experienced significant increases in ~~Control~~fuel ~~Agreements~~prices in successor fiscal 2006, in addition to raw material price increases in predecessor fiscal 2005 and successor fiscal 2005 combined and predecessor fiscal 2004; see Item 7A. – “Quantitative and Qualitative Disclosures About Market Risk.”

~~Norbert~~Critical E.Accounting ~~Woodhams. In~~Policies ~~connection with the Acquisition, Norbert E. Woodhams entered into an Employment Agreement with Holding, which provides for the employment of Mr. Woodhams as President~~ and Chief Executive Officer of Pierre and Holding through June 29, 2005. The term of the Employment Agreement automatically renews for successive one-year terms unless either party gives the other party written notice of its intent not to renew at least 60 days prior to the expiration of the then-current term. Pursuant to the Employment Agreement, Mr. Woodhams’ base salary is $375,000 per year subject to annual adjustments for inflation. In addition, Mr. Woodhams is entitled to (i) participate in the annual bonus plan for senior executives of Pierre, (ii) participate in employee benefit programs in which senior executives of Pierre are generally eligible to participate, (iii) use a company car, and (iv) obtain reimbursement of all reasonable out-of-pocket expenses. If Mr. Woodhams is terminated without cause, dies or becomes disabled, or he resigns for good reason (each as defined in the Employment Agreement), he will be entitled to receive his base salary for one year and to continue to participate in employee welfare benefit plans. The Employment Agreement contains customary nondisclosure of confidential information provisions and a covenant not to compete with Pierre for a period of one year after termination of employment. The Employment Agreement supercedes the Incentive Agreement dated August 18, 1999, as amended, between Mr. Woodhams and Pierre.Estimates

~~Robert C. Naylor. Also in connection with the Acquisition,~~The ~~Robert~~preparation C.of ~~Naylor~~financial ~~entered~~statements ~~into~~in anconformity ~~Employment Agreement~~ with ~~Holding,~~accounting ~~which provides~~principles ~~for~~generally ~~the~~accepted ~~employment~~in ~~of Mr. Naylor as Senior Vice President of~~the ~~Sales~~United ~~and~~States ~~Marketing and New Product Development~~ of ~~Pierre~~America ~~and~~(“GAAP”) ~~Holding~~requires ~~through June 29, 2005. The Employment Agreement automatically renews for successive one-year terms unless either party gives~~ the ~~other~~appropriate ~~party~~application ~~written notice~~ of ~~its~~certain ~~intent not to renew at least 60 days~~accounting ~~prior~~policies, tomany ~~the expiration~~ of ~~the~~which ~~then-current~~require ~~term. Pursuant to~~ the ~~Agreement,~~Company ~~Mr. Naylor’s base salary is $250,000 per year subject~~ to ~~annual~~make ~~adjustments~~estimates ~~for~~and ~~inflation. In addition, Mr. Naylor is entitled to (i) participate~~assumptions inabout ~~the~~future ~~annual~~events ~~bonus~~and ~~plan~~their ~~for~~impact ~~senior~~on ~~executives~~amounts ofreported ~~Pierre, (ii) participate~~ in ~~employee~~the ~~benefit programs in which senior executives of Pierre are generally~~financial ~~eligible~~statements toand ~~participate,~~related ~~(iii) use~~notes. aSince ~~company~~future ~~car,~~events and ~~(iv) obtain reimbursement~~the ofimpact ~~all reasonable out-~~of~~-pocket~~ ~~expenses. If Mr. Naylor is terminated without~~those ~~cause,~~events ~~dies~~cannot orbe ~~becomes~~determined ~~disabled~~with certainty, ~~or he resigned for good reason (each as defined in~~ the ~~Agreement),~~actual heresults will ~~be entitled to receive his base salary for~~inevitably ~~one~~differ ~~year~~from ~~and~~the toCompany’s ~~continue to participate in employee welfare benefit plans~~estimates. ~~The~~ ~~Employment~~Such ~~Agreement~~differences ~~contains~~could ~~customary nondisclosure~~be ofmaterial ~~confidential information provisions and a covenant not~~ to ~~compete with Pierre for a period of one year after termination of employment. The Employment Agreement supercedes~~ the ~~Employment~~financial ~~Agreement dated December 31, 2001 between Mr~~statements. ~~Naylor and Pierre.~~

~~James~~The C.Company ~~Richardson~~believes its application of accounting policies, ~~Jr.~~ and ~~David~~the R.estimates ~~Clark. Each~~inherently ofrequired ~~James~~therein, Care reasonable. ~~Richardson, Jr.,~~These ~~the~~accounting ~~Company’s~~policies ~~former~~and ~~Chairman~~estimates are constantly reevaluated, and ~~David~~adjustments Rare made when facts and circumstances dictate a change. ~~Clark~~Historically, the Company’s ~~former~~application ~~Vice~~of ~~Chairman,~~accounting ~~were~~policies ~~parties~~has tobeen anappropriate, and ~~Employment~~actual ~~Agreement~~results ~~with~~have ~~the~~not ~~Company~~differed ~~that~~materially ~~was~~from ~~terminated~~those indetermined ~~connection with~~using ~~the~~necessary ~~Acquisition~~estimates.

24The following critical accounting policies affect the Company’s more significant judgments and estimates used in the preparation of its financial statements.

~~Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters~~23

~~Securities~~Revenue ~~Authorized~~Recognition. The Company records revenues from its sales of food processing products at the time title transfers. Standard shipping terms are FOB destination. Based on these terms, title passes at the time the product is delivered to the customer. Revenue is recognized as the net amount to be received by the Company after deductions for ~~Issuance~~estimated ~~Under~~discounts, product ~~Equity~~returns, ~~Compensation~~and ~~Plans~~other allowances. These estimates are based on historical trends and expected future payments (see also Promotions below).

~~The~~Goodwill ~~following~~and ~~table~~Other ~~sets~~Intangible Assets. In ~~forth~~conjunction with the ~~number~~Acquisition, ofthe ~~shares~~Company engaged an ofindependent ~~common~~party ~~stock~~to perform valuations for financial reporting purposes of ~~Holding~~the ~~subject~~Company’s togoodwill ~~options~~and ~~granted~~other ~~pursuant~~intangible toassets. ~~the~~Assets ~~Option~~identified ~~Plan,~~through ~~which~~this isvaluation ~~the~~process ~~only~~included ~~outstanding~~goodwill, ~~equity~~formulas, ~~compensation~~customer relationships, ~~plan~~licensing ~~relating~~agreements, toand ~~the Company~~certain trade names and trademarks.

Plan Category	Number of Securities to be Issued Upon Exercise of Outstanding Options (a)	Weighted-Average Exercise Price of Outstanding Options (b)			Number of Securities Remaining Available for Future Issuance under Equity Compensation Plans (excluding Securities Reflected in Column (a)) (c)
Equity Compensation Plans Approved by Security-Holders	127,397	$	10.00	(1)	36,381
Equity Compensation Plans Not Approved by Security Holders	-0-	N/A			-0-
TOTAL	127,397	$	10.00	(1)	36,381

In accordance with Financial Accounting Standard No. 142 (“SFAS 142”) —“Goodwill and Other Intangible Assets,” the Company tests recorded goodwill and intangibles with indefinite lives for impairment at least annually. Intangible assets with finite lives are amortized over their estimated economic or estimated useful lives. In addition, all other intangible assets are reviewed for impairment in accordance with SFAS 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” As of March 4, 2006, the Company performed the annual impairment review of goodwill and indefinite-lived intangible assets and also assessed whether the indefinite-lived intangible assets continue to have indefinite lives. The Company engaged an independent party to perform valuations to assist in the impairment review. There were no impairment charges as a result of this review.

~~(1)~~ The Company’s amortizable intangible assets ~~All~~are ~~outstanding~~amortized ~~options~~using ~~have~~accelerated anamortization ~~exercise~~methods ~~price~~that ofmatch ~~$10~~the expected benefit derived from the assets.00 ~~per~~The ~~share~~accelerated amortization methods allocate amortization expense in proportion to each year’s expected revenues to the total expected revenues over the estimated useful lives of the assets.

~~Security~~Promotions. ~~Ownership~~Promotional expenses associated with rebates, marketing promotions, and special pricing arrangements are recorded as a reduction of ~~Principal~~revenues ~~Shareholders~~or as selling expense at the time the sale is recorded. Certain of these expenses are estimated based on historical trends, expected future payments to be made under these programs, and ~~Management~~expected future customer deductions to be taken under these programs. The Company believes the estimates recorded in the financial statements are reasonable estimates of the Company’s liability under these programs.

~~All~~Concentration of Credit Risk and Significant Customers. Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of trade receivables. The Company performs periodic credit evaluations of its customers’s ~~capital~~financial condition ~~stock~~and isgenerally ~~owned~~does bynot ~~PFMI,~~require collateral. The Company encounters a ~~which~~certain isamount of credit risk as a ~~wholly-owned~~result ~~subsidiary~~of a concentration of ~~Holding~~receivables among a few significant customers. Sales to the Company’s largest customer were approximately 21%, 25%, and 24% of net revenues for successor fiscal 2006, predecessor fiscal 2005 and successor fiscal 2005 combined, and predecessor fiscal 2004, respectively. Accounts receivable at March 4, 2006 and March 5, 2005 included receivables from the Company’s largest customer totaling $2.7 million and $4.4 million, respectively.

Stock-Based Compensation. The ~~following~~Company ~~table~~treats ~~sets~~the ~~forth~~options ~~certain information with respect~~ to ~~the~~purchase ~~beneficial~~shares ~~ownership~~ of ~~the~~ common stock of Holding asissued ofto ~~March 5, 2005,~~employees byof ~~(1) each person known by~~ the Company to(“Options”) ~~own~~as ~~beneficially more~~stock-based ~~than~~compensation ~~five~~for ~~percent~~employees of the ~~outstanding~~Company. ~~shares~~As ofpermitted ~~common~~under ~~stock~~GAAP, ofthe ~~Holding; (2) each~~Company ofaccounts for the ~~directors~~Options ~~and~~under ~~executive~~the ~~officers~~recognition ~~of Holding;~~ and ~~(3) all~~measurement ofprinciples ~~the~~of ~~directors~~Accounting ~~and~~Principles ~~executive~~Board ~~officers~~Opinion ~~of Holding as a group~~No. ~~Unless otherwise stated~~ 25, ~~each~~“Accounting offor ~~the~~Stock ~~persons~~Issued into ~~the~~Employees” ~~table~~(“APB ~~has~~25”), ~~sole voting~~ and ~~investment~~related ~~power~~Interpretations ~~with~~using ~~respect to~~ the ~~securities~~ ~~beneficially~~intrinsic ~~owned.~~ value ~~Percentage~~method. ~~ownership~~Accordingly, isno ~~based~~compensation onexpense ~~1,477,500~~has ~~shares~~been ofrecognized ~~common~~for ~~stock~~the ofstock ~~Holding~~option ~~outstanding~~plan asin ofthe ~~March 5,~~Company’s ~~2005~~consolidated statements of operations.

Name And Address of Beneficial Owner	Number of Shares of Common Stock Beneficially Owned		Percent of Outstanding Common Stock
Madison Dearborn Capital Partners IV, L.P.	1,420,000	(1)	96.1	%
Norbert E. Woodhams	29,589	(2)	2.0	%
Robert C. Naylor	25,209	(3)	1.7	%
Nicholas W. Alexos	1,420,000	(4)	96.1	%
Robin P. Selati	1,420,000	(4)	96.1	%
All directors and executive officers as a group (4 persons)	1,475,160		99.4	%

New Accounting Pronouncements. In November 2004, the Financial Accounting Standards Board (the “FASB”) issued SFAS No. 151, “Inventory Costs—an amendment of ARB No. 43, Chapter 4” (“SFAS No. 151”). SFAS No. 151 amends ARB 43, Chapter 4, to clarify that abnormal amounts of idle facility expense, freight, handling costs and wasted materials (spoilage) should be recognized as current-period charges. In addition, SFAS No. 151 requires that allocation of fixed production overheads to the costs of conversion be based on the normal capacity of the production facilities. The Company will adopt the provisions of SFAS No. 151, effective March 5, 2006 for its fiscal 2007 consolidated financial statements. Management currently believes that adoption of the provisions of SFAS No. 151 will not have a material impact on the Company’s consolidated financial statements.

2524

~~(1)~~In December ~~The~~of ~~listed~~2004, ~~shares~~the ~~are~~FASB ~~directly~~issued Statement ~~owned~~of byFinancial ~~Madison~~Accounting ~~Dearborn~~Standards ~~Capital~~No. 123 ~~Partners~~(Revision IV2004), “Share-Based ~~L.P.~~Payment” (“~~MDCP~~SFAS IV123R”)~~. Madison~~, ~~Dearborn~~which is effective for the first annual reporting ~~Partners~~period IVbeginning after December 15, ~~L.P.~~2005 for non-public companies (~~“MDP~~as defined ~~IV”~~in SFAS 123R). isThe ~~the~~new ~~general~~statement ~~partner~~requires ofcompensation ~~MDCP~~expense associated IVwith ~~and~~share-based ~~Madison Dearborn~~payments ~~Partners,~~to ~~LLC~~employees ~~(“MDP~~to ~~LLC”)~~be isrecognized in the financial ~~general~~statements ~~partner~~based ofon ~~MDP~~their IVfair values. ~~MDP~~ IVUpon ~~and~~the ~~MDP~~adoption ~~LLC~~of ~~may~~SFAS 123R, ~~therefore~~the Company will be ~~deemed~~required to apply the provisions of the statement ~~have~~prospectively ~~shared~~for ~~voting~~any ~~and~~newly ~~dispositive~~issued, ~~power~~modified ~~with~~or ~~respect~~settled toaward ~~all~~after the date of initial adoption, as well as to the ~~shares~~unvested portion of awards granted prior to ~~owned~~adoption byof ~~MDCP~~the IVstandard. ~~The~~ ~~address~~As ~~for~~the ~~MDCP~~Company currently uses the intrinsic value ~~IV,~~method ~~MDP~~to IVvalue the Options, ~~and~~the ~~MDP~~fair ~~LLC~~value isassigned ~~Three~~to ~~First~~any ~~National~~newly ~~Plaza~~issued, ~~Suite 3800,~~modified ~~Chicago,~~or ~~Illinois~~settled ~~60602~~awards after the adoption of SFAS 123R is expected to be significantly greater due to the differences in valuation methods.

~~(2)~~In May ~~Includes~~2005, 3FASB issued SFAS 154,~~589~~ ~~shares~~“Accounting ~~subject~~Changes and Error Corrections.” This statement requires retroactive application of a voluntary change in accounting principle to ~~options~~prior ~~exercisable~~period financial ~~within~~statements 60unless ~~days~~it is impracticable. SFAS 154 also requires that a change in method of depreciation, amortization, or depletion for long-lived, non-financial assets be accounted for as a change in accounting estimate that is affected by Mra change in accounting principle. SFAS 154 replaces APB Opinion 20, “Accounting Changes”, and SFAS 3, “Reporting Accounting Changes in Interim Financial Statements”. The Company will adopt the provisions of SFAS 154, effective March ~~Woodhams~~5, 2006 for its fiscal 2007 Consolidated Financial Statements. Management currently believes that adoption of the provisions of SFAS 154 will not have a material impact on the Company’s Consolidated Financial Statements.

~~(3) Includes~~Item ~~2,209~~7A. ~~shares~~Quantitative ~~subject~~and toQualitative ~~options~~Disclosures ~~exercisable~~About ~~within~~Market ~~60 days by Mr. Naylor.~~Risk

~~(4) Messrs. Selati~~The ~~and~~Company ~~Alexos~~is ~~are~~exposed ~~Managing~~to ~~Directors~~market ofrisk stemming ~~MDP~~from ~~LLC~~changes in interest rates, ~~the~~foreign ~~general partner~~exchange ofrates ~~MDP~~and ~~IV,~~commodity prices. ~~which~~Changes in ~~turn~~these isfactors could cause fluctuations in the ~~general~~Company’s financial ~~partner~~condition, results of ~~MDCP~~operations IVand cash flows. ~~Messrs.~~ The Company owned no derivative financial instruments or nonderivative financial instruments held for trading purposes at March ~~Selati~~4, ~~and~~2006, ~~Alexos~~March 5, ~~disclaim~~2005, or March 6, ~~beneficial~~2004. ~~ownership~~Certain of ~~those~~the ~~shares~~Company’s outstanding nonderivative financial instruments at March 4, ~~except~~2006 are subject to ~~the~~interest ~~extent~~rate ofrisk, ~~any~~but ~~pecuniary~~not subject to ~~interest~~foreign ~~therein~~currency or commodity price risk. There was no significant change in market risk from predecessor fiscal 2005 and successor fiscal 2005 combined compared to successor fiscal 2006.

Item 13Interest Rate Risk. Certain RelationshipsThe Company’s major market risk exposure is potential loss arising from changing interest rates and Related Partyits Transactionsimpact on long-term debt. The Company’s policy is to manage interest rate risk by maintaining a combination of fixed and variable-rate financial instruments in amounts and with maturities that management considers appropriate. The risks associated with long-term debt at March 4, 2006 have not changed materially since March 5, 2005. Of the long-term debt outstanding at March 4, 2006, the $125.0 million of New Notes and the $0.9 million of capital leases accrue interest at fixed interest rates, while the $119.1 million outstanding borrowings under the Term B Loan facility and the revolving credit facility accrue interest at a variable interest rate. At March 4, 2006, the Company had no outstanding borrowings under the revolving credit facility. A rise in prevailing interest rates could have adverse effects on the Company’s financial condition and results of operations. A 25 basis point increase in the reference rates for the Company’s average variable-rate debt outstanding during successor fiscal 2006 would have decreased net income for that period by approximately $324,000.

~~Successor Pierre~~25

InThe ~~conjunction~~following table summarizes the Company’s market risks associated with orlong-term ~~subsequent~~debt tooutstanding ~~the~~at ~~Acquisition~~March 4, ~~the~~2006. ~~following~~The table ~~relationships~~presents principal cash outflows and related ~~transactions~~ ~~existed:~~interest rates by maturity date.

• In conjunction with the Acquisition, John Grigg, one of the Company’s former directors, was paid a fee at the closing, pursuant to his letter agreement with the Company dated as of January 29, 2004, for professional services performed on behalf of the Company and PFMI. The fee was approximately $781,000 and was paid from the proceeds to the selling shareholders.

	March 4, 2006 Expected Maturities in Fiscal Years Long-Term Debt
	Variable-Rate Long-Term Debt		Fixed-Rate Long-Term Debt		Weighted Average Interest Rate
2007	$	—	$	229,172	6.52	%
2008	—		190,293		6.63	%
2009	—		167,577		6.86	%
2010	—		175,453		7.83	%
Thereafter	119,125,000		125,106,164		8.86	%
Total	$	119,125,000	$	125,868,659	8.85	%

Fair Value	$	119,125,000	$	135,737,000	8.85	%

~~• Madison Dearborn~~Foreign ~~Partners~~Exchange ~~IV,~~Rate LRisk.P. ~~received~~The aCompany ~~fee~~bills ofcustomers ~~$5.0~~in ~~million~~foreign atcountries in US dollars, with the ~~closing~~exception of ~~the~~sales to Canada. The Company does not ~~Acquisition~~believe the foreign exchange rate risk on Canadian sales is material. However, a ~~plus~~significant ~~out-~~decline in the value of~~-pocket~~ ~~expenses~~currencies ~~incurred~~used in ~~connection~~certain ~~with~~regions of the ~~Acquisition. MDP~~world ~~may~~as becompared ~~paid~~to ~~additional fees~~the ~~from~~US ~~time~~dollar tocould ~~time~~adversely affect product sales in those regions because the ~~future~~Company’s ~~for~~products ~~providing~~may be ~~management,~~more ~~consulting~~expensive orfor ~~advisory~~those ~~services~~customers ~~and~~to ~~will~~pay befor ~~reimbursed~~in ~~for~~their ~~all~~local ~~future~~currency. ~~expenses~~At ~~incurred~~March 4, in2006 and March 5, ~~connection~~2005, ~~with~~all ~~its~~trade ~~investment~~receivables were denominated in ~~Holding~~US dollars.

• InCommodity connectionPrice Risk. Certain raw materials used in food processing operations are susceptible to commodity price changes. Increases in the prices of certain commodity products could result in higher overall production costs. The primary raw materials used in the Company’s food processing operations are boneless beef, chicken and pork, flour, yeast, seasonings, cheese, breading, soy proteins, and packaging supplies. Prices for beef, chicken, and pork, the Company’s principal protein raw materials, reached historical highs during predecessor fiscal 2005 and successor fiscal 2005 combined. However, during successor fiscal 2006, the weighted average prices paid for raw materials (excluding cost-plus contracts) decreased from the historical highs experienced during predecessor fiscal 2005 and successor fiscal 2005 combined, with the Acquisitionexception of beef, Mrwhich increased by approximately 7. Woodhams 7% compared to the weighted average prices the Company paid during predecessor fiscal 2005 and Mrsuccessor fiscal 2005 combined. Naylor During successor fiscal 2006, investedthe weighted average prices the Company paid for beef, chicken, pork, and cheese decreased by approximately $4.9 million4%, in3.6%, a29.1%, deferred compensationand plan7. This7%, deferred compensationrespectively, planover isthe fundedweighted throughaverage aprices rabbithe trustCompany thatpaid ownsfor preferredthese stockraw materials during the fourth quarter of Holding withsuccessor anfiscal aggregate2005. liquidationThe valueCompany ofmanages approximatelysuch $5fluctuations through purchase orders, cost-plus contracts and by passing on such cost increases to customers.2 million as ofAt March 5 4, 20052006, 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.

• In conjunctionFair withValue theof Acquisition,Financial theInstruments. The Company’s andnonderivative thefinancial sellinginstruments shareholders enteredconsist intoprimarily aof taxcash sharing and indemnificationcash agreementequivalents, whichtrade containsreceivables, certain representationstrade payables and warrantieslong-term ofdebt. theThe sellingestimated shareholdersfair withvalues respectof to taxes. Thethe agreementfinancial providesinstruments thathave any netbeen operatingdetermined lossby carryforwardthe (“NOL”)Company withusing respectavailable tomarket periodsinformation beforeand the Acquisition,appropriate andvaluation attributabletechniques. toConsiderable expensesjudgment relatingis required, however, to theinterpret Acquisition,market willdata be forto develop the benefitestimates of thefair selling shareholdersvalue. Accordingly, the Companyestimates willpresented payare tonot thenecessarily sellingindicative shareholdersof the amount ofamounts anythat taxthe benefitCompany attributablecould torealize suchin NOL,a exceptcurrent thatmarket theexchange. firstThe $4use million of suchdifferent taxmarket benefitsassumptions shalland/or beestimation paidmethodologies intomay anhave escrowa accountmaterial thateffect willon secure the selling shareholdersestimated indemnificationfair obligationsvalue under the tax sharing agreementamounts. The CompanySee hasfurther recordeddiscussion a netin long-termNote liability12 to—“Disclosures theAbout formerFair shareholdersValues totaling $10,190,051 as of March 5Financial Instruments, 2005” forto the estimatedConsolidated obligationsFinancial under the tax sharing agreementStatements.

• Norbert J. Woodhams, one of the Company's Vice Presidents, is the son of Norbert E. Woodhams. Norbert E. Woodhams is the Company's President, Chief Executive Officer, Director and Chairman of the Board. In predecessor fiscal 2005 and successor fiscal 2005 combined, Norbert J. Woodhams received a base salary of ninety-two thousand and seven hundred dollars and earned a bonus of forty-seven thousand and eight hundred dollars under the Company's bonus plan. The base salary and bonus earned by Norbert J. Woodhams is consistent with the earnings of other Company employees with similar responsibilities.26

26Item 8. Financial Statements and Supplementary Data

~~Predecessor~~The ~~Pierre~~Company’s Consolidated Financial Statements required by this Item are on pages F-1 through F-31 of this Report.

AsItem ~~described~~9. Changes in ~~Note~~and 1Disagreements towith ~~the~~Accountants ~~Consolidated Financial Statements,~~ on ~~March 8,~~Accounting ~~2004 the Company~~ and ~~the~~Financial Trustee under the Company’s Indenture executed a Fourth Supplemental Indenture and, pursuant to the terms of the Fourth Supplemental Indenture, the Company terminated substantially all of its related party transactions. The following related party transactions were specifically permitted under the terms of the Fourth Supplemental Indenture:Disclosure

~~• Columbia Hill Land Company, LLC, owned 50% by each of Messrs~~None. 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 $58,000 and $116,000 in predecessor fiscal 2005 and predecessor fiscal 2004, respectively.

~~• On~~Item ~~August 13, 2003, the Company obtained a three year variable rate $40 million revolving credit facility from Fleet Capital Corporation~~9A. ~~Messrs. Richardson and~~ ~~Clark~~Controls ~~provided guarantees of value~~ and ~~validity of the collateral securing this credit facility; they did not, however, guarantee payment of the facility, nor did they receive guarantee fees.~~Procedures

~~• On~~Evaluation ~~March 8, 2004 the Company~~of ~~took~~Disclosure ~~title~~Controls toand ~~an aircraft that was transferred from Columbia Hill Aviation, LLC (“CHA”), owned 100% by PFMI, subject to existing purchase money debt~~Procedures. ~~The~~ ~~aircraft~~As ~~was~~of ~~originally leased by~~ the ~~Company~~ ~~from~~end ~~CHA beginning in the fourth quarter~~ of ~~predecessor fiscal~~ ~~2002. Effective March 1, 2002,~~ the ~~original~~ ~~lease~~period ~~was~~covered ~~cancelled~~by ~~and replaced with a non-exclusive lease agreement. Pursuant to~~ this ~~new lease~~report, the Company ~~was~~performed ~~obligated~~an ~~to make 16 quarterly lease payments of $471~~evaluation,~~500~~ ~~each~~under ~~for~~ the ~~right~~supervision toand ~~use~~with the ~~aircraft~~participation ~~for~~of upits tomanagement ~~115~~including ~~flight hours per quarter, based~~the onPresident ~~availability. Under~~and ~~this~~Chief ~~lease agreement,~~Executive ~~CHA~~Officer ~~was~~and ~~responsible~~Principal ~~for~~Financial ~~all~~Officer ~~expenses~~of ~~incurred in~~ the ~~operation of~~ ~~the~~effectiveness ~~use~~ of the ~~aircraft, except that the~~ Company’s ~~provided~~disclosure ~~its~~controls ~~own~~and ~~flight crew. During~~procedures ~~predecessor~~(as ~~fiscal~~such ~~2004,~~term ~~the~~is ~~Company~~defined ~~paid~~in ~~CHA~~Exchange ~~approximately~~Act ~~$2.6~~Rules 13a-15(e) and ~~million in lease payments~~15d-15(e)). ~~CHA~~ ~~was~~Based ~~not a subsidiary of the Company;~~upon ~~however~~this evaluation, the Company’s ~~considered~~President ~~CHA~~and aChief ~~non-independent~~Executive ~~special~~Officer ~~purpose leasing~~and ~~entity. Accordingly,~~Principal ~~CHA’s~~Financial ~~financial condition,~~Officer ~~results~~have ofconcluded ~~operations~~that ~~and~~as ~~cash~~of ~~flows~~March 4, ~~have~~2006, ~~been included in~~ the Company’s ~~Consolidated~~disclosure ~~Financial~~controls ~~Statements~~and ~~included~~procedures ~~herein. Under~~were ~~the~~effective ~~terms~~for of the ~~operating~~purposes ~~lease with~~of ~~CHA,~~ensuring ~~and~~that ~~the~~information required ~~financing~~to ~~agreements~~be ~~between~~disclosed ~~CHA~~in ~~and~~reports ~~its~~that ~~creditor,~~ the Company ~~did not~~files ~~maintain~~or ~~the~~submits ~~legal~~under ~~rights~~the 1934 ofAct ~~ownership~~has tobeen ~~the~~recorded, ~~aircraft~~processed, ~~nor~~summarized ~~did~~and ~~CHA’s creditor~~reported ~~maintain~~in ~~any~~accordance with ~~legal recourse to~~ the ~~Company. Subsequently,~~rules and asforms ~~a result~~ of the ~~Acquisition, the~~Securities ~~aircraft~~and ~~was~~Exchange ~~distributed~~Commission to(the ~~a former shareholder~~“SEC”).

~~Any~~Changes ~~related~~in Internal ~~party~~Controls. ~~transactions~~There have ~~described~~been ~~below~~no ~~that were~~changes in ~~effect~~the atCompany’s ~~March 6,~~internal ~~2004~~controls ~~were~~over ~~subsequently~~financial reporting ~~terminated~~during asthe ofquarter ended March 84, ~~2004~~ ~~pursuant~~2006 tothat ~~the~~have ~~terms of the Fourth Supplemental Indenture. As a result of the termination of these~~materially ~~related~~affected, ~~party~~or ~~transactions,~~are ~~subsequent~~reasonably likely to ~~March 8,~~materially ~~2004~~affect, the Company ~~performs~~’s ~~the purchasing and distribution services internally. Other related party services are outsourced~~internal ascontrol ~~necessary~~over atfinancial ~~comparable cost~~reporting.

~~• Columbia~~Item ~~Hill Management, Inc~~9B. ~~(“Columbia Hill”),~~Other owned 50% by each of Messrs. Richardson and Clark, provided accounting, tax and administrative services to Pierre, as well as professional services for the management of special projects. Fees paid for these services were approximately $203,000 in predecessor fiscal 2004.Information

~~• During predecessor fiscal 2004, PFMI owed the Company as much as $993,247 pursuant to a promissory note payable on demand and bearing interest at the prime rate~~None. Prior to the Acquisition, PFMI was owned in part by Messrs. Richardson and Clark, who have unconditionally guaranteed repayment of the note. As of March 8, 2004, this note was forgiven in connection with the Fourth Supplemental Indenture.

• Effective February 21, 2003, Messrs. Richardson and Clark sold their net assets in Compass Outfitters, LLC, a company that provided team-building opportunities for customers and employees of the Company, to the Company for a total of $270,983. In exchange for the net assets, the Company issued notes in the amount of $135,491 to each of Messrs. Richardson and Clark. The notes were five-year notes, bearing interest at 6% per annum, with interest and principal due at maturity. As of March 8, 2004, in connection with the Fourth Supplemental Indenture, these notes were cancelled.27

• PF Purchasing, LLC (“PFP”), previously owned 100% by PFMI, served as the exclusive purchasing agent for the Company, pursuant to a three-year agreement that commenced SeptemberPART 3, 2001. Under the agreement, PFP made an incentive payment of $100,000 per quarter to the Company in consideration of the opportunity to act as exclusive purchasing agent, and in exchange was entitled to receive all rebates or discounts receivable by Pierre from suppliers and vendors for orders negotiated and placed by PFP. In predecessor fiscal 2004, net fees paid to PFP were approximately $2,122,000.III

27Item 10. Directors and Executive Officers of the Registrant

~~• Effective~~Directors March 3, 2002, the Company entered into a logistics agreement with PF Distribution, LLC (“PFD”), owned 100% by PFMI. Under the agreement, PFD served as the exclusive logistics agent for the Company, and ~~provided~~Executive all warehousing, fulfillment and transportation services to the Company. The cost of PFD’s services was based on flat rates per pound, which were calculated based on weight and volume characteristics of products, inventory pounds maintained and inventory pounds shipped. Rates were determined based on historical costs and industry standards. In predecessor fiscal 2004, distribution expense recorded in selling, general and administrative expense was approximately $31,126,000 of which approximately $30,999,000 million had been paid to PFD as of March 6, 2004.Officers

~~• Atlantic~~ROBIN ~~Cold~~P. ~~Storage of Mocksville~~SELATI, ~~LLC (“ACS”)~~DIRECTOR, ~~owned~~age ~~one-third each by Messrs. Richardson and Clark~~40, ~~planned~~became ~~to construct and finance~~ a ~~public~~director ~~cold~~in ~~storage~~June 2004 ~~warehouse~~upon ~~which~~completion ~~would~~of ~~lease~~the ~~space~~Acquisition. Prior to ~~the Company~~co-founding asMDP ~~well~~in as1993, ~~to others~~Mr. ~~The proposed~~ Selati ~~agreement~~was with ~~the~~Alex, ~~Company~~Brown & Sons ~~was~~Incorporated. ~~for~~Mr. Selati 10also ~~years~~serves ~~and~~on athe ~~minimum~~Board of ~~4,000 pallet~~Directors ~~positions to be leased as~~ of Beverages & ~~the first date the facility became operational~~More, Inc. ~~During~~, ~~predecessor~~Carrols ~~fiscal~~Holdings ~~2001~~Corporation, ~~the Company~~Cinemark, Inc., ~~paid~~Family ~~$250~~Christian Stores,~~000~~ Inc., toNWL ~~ACS for specialized construction costs~~Holdings, Inc. As, ofPeter ~~March~~Piper, 8Inc., Ruth’s ~~2004,~~Chris inSteak ~~connection~~House, Inc., ~~with the~~Tuesday ~~Fourth~~Morning ~~Supplemental Indenture~~Corporation, ~~these~~and ~~costs~~Wm. Bolthouse ~~were written-off~~Farms, Inc.

~~• The~~NICHOLAS ~~following~~W. ~~transactions~~ALEXOS, ~~were~~DIRECTOR, ~~entered~~age ~~into~~42, onbecame a ~~March~~director in June 82004 upon completion of the Acquisition. Prior to co-founding MDP in 1993, Mr. Alexos was with First Chicago Venture Capital ~~2004~~for asfour ~~permitted~~years. byMr. Alexos also serves on the ~~Fourth~~Board ~~Supplemental~~of ~~Indenture:~~Directors of National Mentor, Inc. and Sirona Holdings Luxco S.C.A.

Assumption of PFMI debt	$	(14,274,050	)
Accrued liabilities to PFP cancelled	3,479,007
Assumption of deferred tax liability for aircraft	(1,576,000		)
Note receivable cancelled	(993,247		)
Accrued liabilities to PFD cancelled	535,251
Cash received	763,998
Other	(174,874		)
Total	$	(12,239,915	)
Allocated to the following accounts:
Retained Earnings	$	11,900,276
Common Stock	339,639
Total	$	12,239,915

GEORGE A. PEINADO, DIRECTOR, age 36, became a director in June 2004 upon completion of the Acquisition. Mr. Peinado currently serves as a director of MDP and has been employed by the firm since January 2004. Mr. Peinado also serves as a board member of Wm. Bolthouse, Inc. Prior to that, beginning in 1997, Mr. Peinado was with Donaldson, Lufkin & Jenrette and DLJ Merchant Banking Partners.

~~The~~SCOTT ~~$339~~W. MEADER,~~639~~ ~~charge~~DIRECTOR, ~~represents~~age 44, became a director in October 2004. Mr. Meader was formerly the President and Chief ~~removal~~Executive Officer of ~~members’~~Milnot ~~equity~~Holding ofCorp., ~~CHA~~having served in that position from 1997 until 2006. Prior to Milnot Holding Corp., Mr. Meader held various positions with Burns Philps Foods PLC, Pet Incorporated, A.T. Kearney and Quaker Oats Co.

~~All~~NORBERT ~~material~~E. ~~transactions~~WOODHAMS, ~~with~~PRESIDENT, ~~affiliates~~CHIEF ofEXECUTIVE OFFICER, DIRECTOR AND CHAIRMAN OF THE BOARD, age 60, became the Company’s President ~~were~~and ~~reviewed~~Chief byExecutive Officer in December 1999 and became a director in June 2004 upon completion of the ~~entire~~Acquisition. He was elected as Chairman of the Board of ~~Directors,~~the ~~where~~Company ~~they~~effective ~~were~~January 11, 2005. Immediately ~~approved~~prior byto ahis ~~majority~~election to those offices, Mr. Woodhams was President of Pierre Foods, LLC, the ~~independent~~Company’s ~~directors. The~~former ~~directors~~operating ~~obtained~~subsidiary, ~~and~~having ~~relied~~served ~~upon~~in ~~investment~~that ~~banking~~position ~~“fairness”~~since ~~opinions~~the ~~when~~Company’s ~~considering~~acquisition ~~these~~of ~~transactions~~Pierre Cincinnati in June 1998. From 1994 to 1998, he served as President of Hudson Specialty Foods, a food processing division of Hudson Foods, Inc. Upon the ~~extent~~acquisition ~~required~~of Hudson by ~~the~~Tyson ~~indenture~~Foods ~~governing~~in ~~the~~January 1998, ~~Old~~Mr. Woodhams ~~Notes~~became President of Pierre. Mr. Woodhams served as a director from 1998 to September 2002.

OnROBERT ~~June 30,~~C. ~~2004~~NAYLOR, inSENIOR ~~conjunction~~VICE ~~with~~PRESIDENT OF SALES, ~~the~~MARKETING ~~Acquisition~~AND NEW PRODUCT DEVELOPMENT, ~~all~~age ~~previously~~54, ~~existing~~became ~~related~~the ~~party~~Company’s ~~transactions~~Senior ~~were~~Vice ~~terminated~~President asof ~~described~~Sales, Marketing and New Product Development in ~~Note~~December 1999. Immediately 1prior, ~~“Basis~~he was Senior Vice President of ~~Presentation~~Sales ~~and~~of ~~Acquisition~~Pierre Foods,” toLLC, the ~~Consolidated~~Company’s ~~Financial~~former ~~Statements~~operating subsidiary, having served in that position since the Company’s acquisition of Pierre Cincinnati in June 1998. From 1978 to 1998, he served in various sales positions for Pierre Cincinnati, including Vice President of Sales.

28JOSEPH W. MEYERS, VICE PRESIDENT, FINANCE, age 39, has served as the Company’s Vice President, Finance since February 2003 and has held various accounting and finance positions with the Company since 1996. Prior to this, Mr. Meyers held the position of General Accounting Manager at OhSe Foods, Lunch Meat Division of Hudson Foods in Topeka, Kansas from 1991 through 1996. In 1996, OhSe Foods divested into Hudson Foods.

~~Item 14. Principal Accountant Fees and Services~~28

~~The~~Audit ~~following~~Committee ~~table~~Financial presents fees billed for professional audit services rendered by Deloitte & Touche LLP for the audit of our annual financial statements for predecessor fiscal 2005 and successor fiscal 2005 combined and predecessor fiscal 2004, and for other services rendered by Deloitte & Touche LLP during those periods:Expert

	Predecessor Fiscal 2005 And Successor Fiscal 2005 Combined		Predecessor Fiscal 2004
Audit Fees (1)	$	326,900	$	281,000
Audit Related Fees (2)	564,100		—
Tax Fees (3)	137,600		80,700
All Other Fees	—		—
Total	$	1,028,600	$	361,700

The Board of Directors of the Company has determined that Nicholas W. Alexos is an “audit committee financial expert” as defined in Item 401(h) of Regulation S-K promulgated by the SEC; however Mr. Alexos is not considered “independent” as that term is defined under the applicable SEC rules. Mr. Alexos is a Managing Partner of Madison Dearborn Partners, LLC, the general partner of Madison Dearborn Partners IV, L.P., which is the general partner of Madison Dearborn Capital Partners IV, L.P., which holds approximately 96% of the issued and outstanding capital stock of Holding.

~~(1) Audit~~Code ~~fees consisted~~ of ~~fees for services performed in the audit of the financial statements, as well as work generally only the independent auditor can reasonably be expected to provide, such as statutory audits.~~Ethics

~~(2)~~The Board of Directors adopted a Code of Ethics effective January ~~Audit~~10, ~~related~~2006, ~~fees~~which ~~during~~is ~~predecessor~~applicable ~~2005~~to all officers, directors, and ~~successor~~employees ~~2005~~of ~~combined~~the ~~include~~Company. ~~payment~~The ~~for~~portion ~~services~~of insuch ~~connection~~Code ~~with~~of ~~the~~Ethics ~~Acquisition,~~that ~~including~~constitutes ~~but~~a ~~not~~“Code ~~limited~~of toEthics” ~~the~~as ~~tender~~defined ~~offer,~~in ~~the~~Item ~~filing~~406 of ~~the~~Regulation S-K under the Exchange Act is filed as Exhibit 14 to the Company’s ~~registration~~Quarterly Report ~~statement~~on ~~and~~Form 10-Q ~~audits~~filed ~~in connection~~ with the ~~Acquisition~~SEC on January 17, 2006 and is incorporated herein by reference.

~~(3) Tax~~Item ~~fees~~11. ~~include~~Executive ~~all tax services relating to tax compliance, tax planning and reporting.~~Compensation

~~The~~Summary ~~Board~~Compensation ~~of Directors of the Company considered the impact on auditor’s independence in connection with non-audit services and concluded there is no adverse effect on their independence.~~Table

~~Policy~~The onfollowing ~~Board~~information ofpresents ~~Directors~~compensation information ~~Pre-Approval~~for ofservices ~~Audit~~to the Company, for the fiscal years indicated, for its President and ~~Permissible~~Chief Executive Officer and the Company’s other most highly compensated ~~Non-audit~~executive ~~Services~~officer of(collectively, ~~Independent~~the ~~Auditors~~“Named Executive Officers”).

Consistent with SEC policies regarding auditor independence, the Audit Committee of the Board of Directors of the Company has responsibility for appointing, setting compensation and overseeing the work of the independent auditor. In recognition of this responsibility, the Audit Committee of the Board of Directors has established a policy to pre-approve all audit and permissible non-audit services provided by the independent auditor.

Name and Principal Position	Fiscal Year	Salary		Bonus		Long-Term Compensation Awards Number of Shares Underlying Options		All Other Compensation

Norbert E. Woodhams	2006	$	381,865	$	89,751	—		$	157,425	(5)
President and Chief	2005	367,019		78,591		53,228	(1)	75,207		(2)
Executive Officer	2004	356,731		518,213		—		9,200		(3)

Robert C. Naylor	2006	$	251,077	$	59,834	—		$	144,492	(6)
Senior Vice President of	2005	240,423		41,971		32,756	(1)	76,347		(4)
Sales, Marketing and New	2004	224,231		314,592		—		8,000		(3)
Product Development

29(1) Represents options to purchase shares of Holding awarded under the 2004 Stock Option Plan. See “Stock-Based Compensation” below.

~~PART IV~~(2) Represents $3,878 in matching contributions made by the Company to the Company’s 401(k) plan and $71,329 in life insurance premiums.

~~Item~~(3) ~~15. Exhibits~~Represents ~~and~~matching ~~Financial~~contributions made by the Company to the ~~Statement~~Company’s ~~Schedules~~401(k) plan.

(a4) ~~1. Financial~~ Represents $5,018 in matching contributions made by the ~~Statements~~Company to the Company’s 401(k) plan and $71,329 in life insurance premiums.

~~The~~(5) Represents ~~Financial~~$109,091 ~~Statements~~in ~~listed~~life insurance premiums, $14,387 in disability premiums, $7,040 in matching contributions made by the Company to ~~accompanying~~the ~~Index~~Company’s on401(k) ~~page F-1~~plan, ~~are~~and ~~filed~~$26,907 asprimarily arelating ~~part~~to the use of ~~this~~a Company-leased ~~Report~~automobile.

~~2. Financial~~(6) Represents $109,091 in life insurance premiums, $10,333 in ~~Statement~~disability ~~Schedules~~premiums, $7,114 in matching contributions made by the Company to the Company’s 401(k) plan, and $17,954 primarily relating to the use of a Company-leased automobile.

Financial statement schedules have been omitted because they are not applicable or not required, or because the required information is provided in the Company’s Consolidated Financial Statements or notes thereto.29

~~3. Exhibits~~Stock-Based Compensation

~~See~~Following ~~Index~~the consummation of the Acquisition, Holding’s board of directors and stockholders adopted the 2004 Stock Option Plan (the “Option Plan”), pursuant to ~~Exhibits~~which ~~below~~a pool of approximately 10% of Holding’s common stock, or 163,778 shares, were reserved for issuance to management, employees and consultants of the Company in order to provide incentives to such persons. In the event that any participant in the Option Plan ceases to be employed by Holding or its subsidiaries, Holding may repurchase such participant’s option shares at fair market value (whether held by the participant or one or more of his transferees). If for any reason, Holding does not elect to purchase all of such option shares, MDP and certain of its affiliates will be entitled to do so. In addition, subject to certain exceptions, any shares issued pursuant to the Option Plan will be subject to the stockholders agreement, which grants Holding certain rights of first refusal in connection with certain transfers of such shares. Upon a sale of Holding to an independent third party, Holding’s board of directors, in its sole discretion, may permit the acceleration of the vesting of the options of participants in the Option Plan. Should any participant’s employment with Holding or its subsidiaries terminate prior to the vesting of options issued to such participant, any unvested options expire and are forfeited by the participant. No options were granted to any Named Executive Officer in successor fiscal 2006.

30Aggregated Option Exercises In Last Fiscal Year and Year-End Values

~~SIGNATURES~~The following table sets forth, for each of the Named Executive Officers, aggregated information concerning options to purchase shares of common stock of Holding granted to each and the value of outstanding options to purchase shares of common stock of Holding at March 4, 2006. No stock appreciation rights were outstanding at March 4, 2006. No options were exercised by Named Executive Officers in successor fiscal 2006.

Pursuant to the requirements of Section 13 or 15(d) 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.

	Number of Securities Underlying Unexercised Options At March 4, 2006		Value of Unexercised In-the-Money Options At March 4, 2006 (a)
Name	Exercisable	Unexercisable	Exercisable		Unexercisable

Norbert E. Woodhams	7,132	46,096	$	71,320	$	460,960

Robert C. Naylor	4,389	28,367	$	43,890	$	283,670

~~PIERRE~~(a) There ~~FOODS,~~is ~~INC.~~no ~~By:~~market ~~/S/~~for the ~~JOSEPH~~shares W.and ~~MEYERS~~the ~~Joseph~~values W.at ~~Meyers~~March 4, ~~Vice~~2006 ~~President,~~are ~~Finance~~based on the last valuation available to the Company.

~~Dated:~~Deferred ~~June 3,~~Compensation ~~2005~~Plan

~~Pursuant~~In connection towith the ~~requirements~~Acquisition, ofMr. Woodhams ~~the~~and Mr. Naylor, ~~Securities~~invested ~~Exchange~~approximately ~~Act~~$4.9 million ofin ~~1934,~~a ~~this~~deferred ~~report~~compensation ~~has~~plan. ~~been~~This deferred ~~signed~~compensation ~~below~~plan byis ~~the~~funded through a rabbi trust that owns preferred ~~following~~stock ~~persons~~of onHolding ~~behalf~~with an aggregate liquidation value of ~~Pierre~~approximately ~~Foods, Inc~~$5.7 million at March 4, in2006. ~~the~~See ~~capacities~~Item 13 —“Certain Relationships and on ~~the~~Related ~~dates~~Party ~~indicated~~Transactions” for further discussion.

Signature	Title	Date
/S/ NORBERT E. WOODHAMS	Chief Executive Officer and	June 3, 2005
Norbert E. Woodhams	President (Principal Executive
	Officer), Director and Chairman
	of the Board
/S/ JOSEPH W. MEYERS	Vice President, Finance	June 3, 2005
Joseph W. Meyers	(Principal Financial Officer and
	Principal Accounting Officer)
/S/ NICHOLAS W. ALEXOS	Director	June 3, 2005
Nicholas W. Alexos
/S/ SCOTT W. MEADER	Director	June 3, 2005
Scott W. Meader
/S/ GEORGE A. PEINADO	Director	June 3, 2005
George A. Peinado
/S/ ROBIN P. SELATI	Director	June 3, 2005
Robin P. Selati

Compensation of Directors

31During predecessor fiscal 2005, directors were paid $5,000 per board meeting attended, except that directors who were employees of the Company received no payment for services as directors. Following the Acquisition in successor fiscal 2006 and successor fiscal 2005, directors that are employees or affiliates of MDP did not receive fees for services as directors. Scott W. Meader, a director who is neither the Company’s employee nor an affiliate of MDP, receives $35,000 annually plus related travel expenses. In addition, Holding entered into a restricted stock agreement with Mr. Meader pursuant to which Mr. Meader purchased 2,000 shares of common stock of Holding for $10.00 per share. The shares vest over 4 ½ years provided that Mr. Meader continues to be a director of the Company and Holding. In the event that he ceases to be a director of the Company or Holding, Holding has an option to repurchase the vested shares at the greater of the fair market value or $10.00 per share and the unvested shares at $10.00 per share. If Holding does not exercise such option, MDP then has the option to purchase the shares on the same terms. The shares are also subject to restrictions, including restrictions on transfer, set forth in the Stockholder’s Agreement dated June 30, 2004 among certain stockholders of Holding. All of the Company’s directors are reimbursed for out-of-pocket expenses incurred in connection with attending all board and other committee meetings.

~~INDEX TO EXHIBITS~~30

	Description		Located at Manually Numbered Page
(2)	PLAN OF ACQUISITION, REORGANIZATION, ARRANGEMENT, LIQUIDATION OR SUCCESSION
	2.1	Stock Purchase Agreement, dated as of May 11, 2004, among PF Management, Inc., the PF Management, Inc. Shareholders, David R. Clark, as Shareholders Agent, and Pierre Holding Corp. (filed as Exhibit 10.12 to the Company’s Annual Report on Form 10-K, filed with the Securities and Exchange Commission On May 17, 2004)	**
(3)(i)	ARTICLES OF INCORPORATION
	3(i).1	Articles of Restatement of Pierre Foods, Inc., dated July 30, 2002 incorporating Restated Articles of Incorporation (filed as Exhibit 3.3 to the Company’s Quarterly Report on Form 10-Q, filed with the Securities and Exchange Commission on October 15, 2002)	**
	3(i).2	Articles of Merger of Pierre Foods, Inc. and Pierre Merger Corp., dated June 30, 2004 (filed as Exhibit 3.2 to the Company’s Registration Statement on Form S-4, filed with the Securities and Exchange Commission on September 27, 2004)	**
	3(i).3	Articles of Organization of Fresh Foods Properties, LLC, dated December 10, 1997 (filed as Exhibit 3.4 to the Company’s Registration Statement on Form S-4, filed with the Securities and Exchange Commission on September 27, 2004)	**
(3)(ii)	BYLAWS
	3(ii).1	Amended and Restated Bylaws of Pierre Foods, Inc., dated September 18, 2002 (filed as Exhibit 3.3 to the Amendment No. 2 to the Company’s Registration Statement on Form S-4, filed with the Securities and Exchange Commission on February 3, 2005)	**
	3(ii).2	Operating Agreement of Fresh Foods Properties, LLC (filed as Exhibit 3.5 to the Company’s Registration Statement on Form S-4, filed with the Securities and Exchange Commission on September 27, 2004)	**
(4)	INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS, INCLUDING INDENTURES
	4.1	Indenture, dated as of June 30, 2004, between Pierre Merger Corp. and U.S. Bank National Association, Trustee (filed as Exhibit 4.1- to the Company’s Registration Statement on Form S-4, filed with the Securities and Exchange Commission on September 27, 2004)	**
	4.2	First Supplemental Indenture, dated as of June 30, 2004, among Pierre Foods, Inc., Fresh Foods Properties, LLC and U.S. Bank National Association, Trustee (filed as Exhibit 4.2 to the Company’s Registration Statement on Form S-4, filed with the Securities and Exchange Commission on September 27, 2004)	**

Employment Contracts and Change in Control Agreements

32Norbert E. Woodhams. In connection with the Acquisition, Norbert E. Woodhams entered into an Employment Agreement with Holding, which provided for the employment of Mr. Woodhams as President and Chief Executive Officer of Pierre and Holding through June 29, 2005. The term of the Employment Agreement automatically renewed after a one-year term, and will continue to renew for successive one-year terms unless either party gives the other party written notice of its intent not to renew at least 60 days prior to the expiration of the then-current term. Pursuant to the Employment Agreement, Mr. Woodhams’ base salary is $375,000 per year subject to annual adjustments for inflation. In addition, Mr. Woodhams is entitled to (i) participate in the annual bonus plan for senior executives of Pierre, (ii) participate in employee benefit programs in which senior executives of Pierre are generally eligible to participate, (iii) use a company car, and (iv) obtain reimbursement of all reasonable out-of-pocket expenses. If Mr. Woodhams is terminated without cause, dies or becomes disabled, or he resigns for good reason (each as defined in the Employment Agreement), he will be entitled to receive his base salary for one year and to continue to participate in employee welfare benefit plans. The Employment Agreement contains customary nondisclosure of confidential information provisions and a covenant not to compete with Pierre for a period of one year after termination of employment. The Employment Agreement supercedes the Incentive Agreement dated August 18, 1999, as amended, between Mr. Woodhams and Pierre.

	4.3	Registration Rights Agreement, dated June 30, 2004, among Pierre Foods, Inc. and Banc of America LLC and Wachovia Capital Markets, LLC (filed as Exhibit 4.3 to the Company’s Registration Statement on Form S-4, filed with the Securities and Exchange Commission on September 27, 2004)	**
(10)	MATERIAL CONTRACTS
	Management Contracts and Compensatory Plans or Arrangements
	10.1	Third Amendment to Incentive Agreement, dated as of May 11, 2004, between the Company and Norbert E. Woodhams (filed as Exhibit 10.13 to the Company’s Annual Report on Form 10-K, filed with the Securities and Exchange Commission on May 17, 2004)	**
	10.2	Amendment to Employment Agreement, dated as of May 11, 2004, between the Company and Robert C. Naylor (filed as Exhibit 10.15 to the Company’s Annual Report on Form 10-K, filed with the Securities and Exchange Commission on May 17, 2004)	**
	10.3	Pierre Foods, Inc. Fiscal 2006 Executive Incentive Compensation Plan (filed as Exhibit 10.1 to the Company Current Report on Form 8-K, filed with the Securities and Exchange Commission on March 15, 2005)	**
	10.4	Employment Agreement dated as of May 11, 2004 between Pierre Holding Corp. and Norbert E. Woodhams (filed as Exhibit 10.15 to the Company’s Registration Statement on Form S-4, filed with the Securities and Exchange Commission on September 27, 2004)	**
	10.5	Employment Agreement dated as of May 11, 2004 between Pierre Holding Corp. and Robert C. Naylor (filed as Exhibit 10.16 to the Company’s Registration Statement on Form S-4, filed with the Securities and Exchange Commission on September 27, 2004)	**
	10.6	Deferred Compensation Plan (filed as Exhibit 10.17 to the Company’s Registration Statement on Form S-4, filed with the Securities and Exchange Commission on September 27, 2004)	**
	10.7	Pierre Holding Corp. 2004 Stock Option Plan (filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q, filed with the Securities and Exchange Commission on January 18, 2005)	**
	10.8	Form of Option Agreement (filed as Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q, filed with the Securities and Exchange Commission on January 18, 2005)	**
	Other Material Contracts
	10.9	Assignment and Assumption and Subordination Agreement dated as of March 8, 2004, between Pierre Foods, Inc. and PF Management, Inc. (filed as Exhibit 10.20 to the Company’s Annual Report on Form 10-K, filed with the Securities and Exchange Commission on March 9, 2004)	**
	10.10	Termination Agreement, dated as of March 8, 2004, between Columbia Hill Aviation, LLC and Pierre Foods, Inc. (filed as Exhibit 10.21 to the Company’s Annual Report on Form 10-K, filed with the Securities and Exchange Commission March 9, 2004)	**

Robert C. Naylor. Also in connection with the Acquisition, Robert C. Naylor entered into an Employment Agreement with Holding, which provides for the employment of Mr. Naylor as Senior Vice President of Sales and Marketing and New Product Development of Pierre and Holding through June 29, 2005. The term of the Employment Agreement automatically renewed after a one-year term, and will continue to renew for successive one-year terms unless either party gives the other party written notice of its intent not to renew at least 60 days prior to the expiration of the then-current term. Pursuant to the Agreement, Mr. Naylor’s base salary is $250,000 per year subject to annual adjustments for inflation. In addition, Mr. Naylor is entitled to (i) participate in the annual bonus plan for senior executives of Pierre, (ii) participate in employee benefit programs in which senior executives of Pierre are generally eligible to participate, (iii) use a company car, and (iv) obtain reimbursement of all reasonable out-of-pocket expenses. If Mr. Naylor is terminated without cause, dies or becomes disabled, or he resigned for good reason (each as defined in the Agreement), he will be entitled to receive his base salary for one year and to continue to participate in employee welfare benefit plans. The Employment Agreement contains customary nondisclosure of confidential information provisions and a covenant not to compete with Pierre for a period of one year after termination of employment. The Employment Agreement supercedes the Employment Agreement dated December 31, 2001 between Mr. Naylor and Pierre.

33Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

10.11	Termination Agreement, dated as of March 8, 2004, between PF Purchasing, LLC and Pierre Foods, Inc. (filed as Exhibit 10.22 to the Company’s Annual Report on Form 10-K, filed with the Securities and Exchange Commission March 9, 2004)	**
10.12	Termination Agreement, dated as of March 8, 2004, between PF Distribution, LLC and Pierre Foods, Inc. (filed as Exhibit 10.23 to the Company’s Annual Report on Form 10-K, filed with the Securities and Exchange Commission March 9, 2004)	**
10.13	Amended and Restated Agreement, dated as of May 21, 2004, between the Company and Carl Karcher Enterprises, Inc. (filed as Exhibit 10.8 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on January 7, 2005)	**C
10.14	Amended and Restated Formula Development Agreement, dated as of May 21, 2004, between the Company and Carl Karcher Enterprises, Inc. (filed as Exhibit 10.9 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on January 7, 2005)	**C
10.16	First Amendment Agreement, dated as of June 27, 2004, between the Company and Carl Karcher Enterprises, Inc. (filed as Exhibit 10.10 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on December 2, 2004)	**C
10.17	Amended and Restated Agreement, dated as of May 21, 2004, between the Company and Hardee’s Food Systems, Inc. (filed as Exhibit 10.11 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on January 7, 2005)	**C
10.18	Amended and Restated Formula Development Agreement, dated as of May 21, 2004, between the Company and Hardee’s Food Systems, Inc. (filed as Exhibit 10.12 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on January 7, 2005)	**C
10.19	First Amendment Agreement, dated as of June 27, 2004, between the Company and Hardee’s Food Systems, Inc. (filed as Exhibit 10.13 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on December 2, 2004)	**C
10.22	Second Amendment Agreement, dated as of September 30, 2004, between the Company and Carl Karcher Enterprises, Inc. (filed as Exhibit 10.14 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on December 2, 2004)	**C
10.23	Second Amendment Agreement, dated as of September 30, 2004, between the Company and Hardee’s Food Systems, Inc. (filed as Exhibit 10.15 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on December 2, 2004)	**C

Securities Authorized for Issuance Under Equity Compensation Plans

34The following table sets forth the number of shares of common stock of Holding subject to options granted pursuant to the Option Plan, which is the only outstanding equity compensation plan relating to the Company.

	10.20	Credit Agreement, dated as of June 30, 2004, among Pierre Merger Corp., Wachovia Bank, National Association, as administrative and collateral agent, Wachovia Capital Markets, LLC and Banc of America Securities LLC, as joint lead arrangers and book-running managers, and a syndicate of banks, financial institutions and other institutional lenders party thereto (filed as Exhibit 10.14 to the Registration Statement on Form S-4, filed with the Securities and Exchange Commission on September 27, 2004)		**
Plan Category	Number of Securities to be Issued Upon Exercise of Outstanding Options (a)		Weighted-Average Exercise Price of Outstanding Options (b)			Number of Securities Remaining Available for Future Issuance under Equity Compensation Plans (excluding Securities Reflected in Column (a)) (c)
	10.21	Tax Sharing and Indemnification Agreement, dated as of May 11, 2004, among PF Management, Inc., the PF Management, Inc. Shareholders, David R. Clark as Shareholders Agent and Pierre Holding Corp. (filed as Exhibit 10.18 to the Registration Statement on Form S-4, filed with the Securities and Exchange Commission on September 27, 2004)		**
Equity Compensation Plans Approved by Security-Holders	126,219		$	10.00	(1)	37,559
(12)	CALCULATION OF RATIO OF EARNINGS TO FIXED CHARGES
Equity Compensation Plans Not Approved by Security-Holders	—		N/A			—
(21)	SUBSDIARIES OF THE REGISTRANT
TOTAL	126,219		$	10.00	(1)	37,559
	21	Subsidiaries of Pierre Foods, Inc.
(31)	RULE 13a - 14(a)/15(d)-14(a) CERTIFICATIONS
	31.1	Rule 13a-14(a) Certification of Chief Executive Officer of the Company in accordance with Section 302 of the Sarbanes-Oxley Act of 2002
	31.2	Rule 13a-14(a) Certification of Principal Financial Officer of the Company in accordance with Section 302 of the Sarbanes-Oxley Act of 2002
(32)	SECTION 1350 CERTIFICATIONS
	32	Section 1350 Certification of Chief Executive Officer and Principal Financial Officer of the Company in accordance with Section 906 of the Sarbanes-Oxley Act of 2002

** Indicates that Exhibit is incorporated by reference in this Report from a previous filing with the Commission.31

~~“C”~~(1) ~~Confidential~~All ~~treatment~~outstanding ~~requested~~options ~~as to certain portions, which~~ have ~~been~~an ~~filed~~exercise ~~separately~~price ~~with~~of ~~the~~$10.00 ~~Commission~~per share.

35Security Ownership of Principal Shareholders and Management

~~INDEX~~All TOof the Company’s capital stock is owned by PFMI, ~~FINANCIAL~~which ~~STATEMENTS~~is a wholly-owned subsidiary of Holding.

~~PIERRE~~The following table sets forth certain information ~~FOODS~~with respect to the beneficial ownership of the common stock of Holding as of March 4, 2006, ~~INC~~by (1) each person known by the Company to own beneficially more than five percent of the outstanding shares of common stock of Holding; (2) each of the directors and executive officers of Holding; and (3) all of the directors and executive officers of Holding as a group. Unless otherwise stated, each of the persons in the table has sole voting and investment power with respect to the securities beneficially owned. Percentage ownership is based on 1,479,500 shares of common stock of Holding outstanding as of March 4, 2006.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM CONSOLIDATED FINANCIAL STATEMENTS: Consolidated Balance Sheets - March 5, 2005 and March 6, 2004 Consolidated Statements of Operations - for the periods from March 7, 2004 through June 30, 2004 and July 1, 2004 through March 5, 2005 and for the years ended March 6, 2004 and March 1, 2003 Consolidated Statements of Shareholder’s Equity - for the periods from March 7, 2004 through June 30, 2004 and July 1, 2004 throughMarch 5, 2005 and for the years ended March 6, 2004 and March 1, 2003 Consolidated Statements of Cash Flows - for the periods from March 7, 2004 through June 30, 2004 and July 1, 2004 through March 5, 2005 and for the years ended March 6, 2004 and March 1, 2003 Notes to Consolidated Financial Statements

Name And Address of Beneficial Owner	Number of Shares of Common Stock Beneficially Owned		Percent of Outstanding Common Stock

Madison Dearborn Capital Partners IV, L.P.	1,420,000	(1)	96.0	%

Norbert E. Woodhams	33,835	(2)	2.3	%

Robert C. Naylor	27,821	(3)	1.9	%

Nicholas W. Alexos	1,420,000	(4)	96.0	%

Scott W. Meader	510	(5)	(6	)*

Robin P. Selati	1,420,000	(4)	96.0	%

George A. Peinado	—		—

All directors and executive officers as a group (6 persons)	1,482,166	(2)(3)(5)	99.3	%

F-(1) The listed shares are directly owned by Madison Dearborn Capital Partners IV, L.P. (“MDCP IV”). Madison Dearborn Partners IV , L.P. (“MDP IV”) is the general partner of MDCP IV and Madison Dearborn Partners, LLC (“MDP LLC”) is the general partner of MDP IV. MDP IV and MDP LLC may therefore be deemed to have shared voting and dispositive power with respect to all of the shares owned by MDCP IV. The address for MDCP IV, MDP IV, and MDP LLC is Three First National Plaza, Suite 3800, Chicago, Illinois 60602.

~~REPORT~~(2) Includes OF7,835 ~~INDEPENDENT~~shares ~~REGISTERED~~subject ~~PUBLIC ACCOUNTING~~to ~~FIRM~~options exercisable within 60 days by Mr. Woodhams.

To(3) ~~the~~Includes ~~Board~~4,821 ofshares ~~Directors~~subject ~~and~~to ~~Shareholder~~options ofexercisable within 60 days by Mr. Naylor.

~~Pierre~~(4) ~~Foods~~Messrs. Selati and Alexos are Managing Directors of MDP LLC, ~~Inc~~the general partner of MDP IV, which in turn is the general partner of MDCP IV. Messrs. Selati and Alexos disclaim beneficial ownership of those shares, except to the extent of any pecuniary interest therein.

~~Cincinnati,~~(5) Represents vested shares of Restricted Stock sold to Mr. Meader on ~~Ohio~~July 12, 2005.

~~We have audited the accompanying consolidated balance sheets of Pierre Foods, Inc. and subsidiaries~~ (~~the “Company”~~6) Less asthan of1% ~~March 5, 2005 and March 6, 2004, and the related consolidated statements~~ of ~~operations, shareholder’s equity, and cash flows for~~ the ~~periods~~total ~~from~~issued ~~July 1, 2004 through March 5, 2005~~ and ~~March 7,~~outstanding ~~2004~~shares ~~through June 30, 2004 and the years ended March 6, 2004 and March 1, 2003. These financial statements are the responsibility~~ of ~~the Company’s management. Our responsibility is to express an opinion~~common ~~on these financial statements based on our audits~~stock.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, 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.32

~~DELOITTE~~Successor ~~& TOUCHE LLP~~Pierre

~~Cincinnati~~In conjunction with or subsequent to the Acquisition, ~~Ohio~~the following relationships and related transactions existed:

~~June~~• In conjunction with the Acquisition, John Grigg, one of the Company’s former directors, was paid a fee at the closing, pursuant to his letter agreement with the Company dated as of January 229, 2004, for professional services performed on behalf of the Company and PFMI. The fee of approximately $780,952 was paid from the proceeds to the selling shareholders and expensed during predecessor fiscal 2005.

F• Madison Dearborn Partners IV, L.P. received a fee of $5.0 million at the closing of the Acquisition, plus out-2of-pocket expenses incurred in connection with the Acquisition. MDP may be paid additional fees from time to time in the future for providing management, consulting or advisory services and will be reimbursed for all future expenses incurred in connection with its investment in Holding.

~~PIERRE~~• In ~~FOODS~~connection with the Acquisition, ~~INC~~Mr. Woodhams and Mr. Naylor, invested approximately $4.9 million in a deferred compensation plan. This deferred compensation plan is funded through a rabbi trust that owns preferred stock of Holding with an aggregate liquidation value of approximately $5.7 million as of March 4, 2006.

~~CONSOLIDATED~~• In ~~BALANCE~~conjunction ~~SHEETS~~with the Acquisition, the Company and the selling shareholders entered into a tax sharing and indemnification agreement which contains certain representations and warranties of the selling shareholders with respect to taxes. The agreement provides that any net operating loss carryforward (“NOL”) with respect to periods before the Acquisition, and attributable to expenses relating to the Acquisition, will be for the benefit of the selling shareholders. Accordingly, the Company will pay to the selling shareholders the amount of any tax benefit attributable to such NOL, except that the first $4 million of such tax benefits shall be paid into an escrow account that will secure the selling shareholders indemnification obligations under the tax sharing agreement. The Company has made payments to the selling shareholders totaling $5.0 million, of which $3.6 million was paid into this escrow account during successor fiscal 2006. The Company has recorded a net long-term liability to the former shareholders totaling $5.3 million and $10.3 million as of March 4, 2006 and March 5, 2005, respectively, for the estimated obligations under the tax sharing agreement.

	Successor			Predecessor
	March 5,			March 6,
	2005			2004
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	—		$	204,865
Certificate of deposit	—			1,240,000
Accounts receivable, net	29,547,340			25,641,608
Inventories	45,448,224			38,974,018
Refundable income taxes	2,906,502			—
Deferred income taxes	5,764,233			3,569,766
Prepaid expenses and other current assets (includes related party amounts of $24,000 at March 6, 2004)	2,954,942			3,236,867
Total current assets	86,621,241			72,867,124
PROPERTY, PLANT AND EQUIPMENT, NET	56,284,482			60,695,455
OTHER ASSETS:
Other intangibles, net	158,223,072			38,808,636
Goodwill	186,535,050			—
Note receivable-related party	—			993,247
Deferred income taxes	—			482,215
Deferred loan origination fees, net	8,923,688			1,627,601
Other	—			296,694
Total other assets	353,681,810			42,208,393
Total Assets	$	496,587,533		$	175,770,972
LIABILITIES AND SHAREHOLDER’S EQUITY
CURRENT LIABILITIES:
Current installments of long-term debt	$	421,713		$	1,628,276
Trade accounts payable	11,172,350			7,170,004
Accrued payroll and payroll taxes	4,663,372			5,745,950
Accrued interest	1,832,374			3,242,623
Accrued promotions	3,499,230			3,064,769
Income taxes payable	—			39,248
Accrued taxes (other than income and payroll)	949,572			901,693
Other accrued liabilities (includes related party amounts of $4,503,219 in fiscal 2004)	1,420,979			4,964,703
Total current liabilities	23,959,590			26,757,266
LONG-TERM DEBT, less current installments	263,158,658			136,772,418
OBLIGATION OF SPECIAL PURPOSE ENTITY	—			5,293,342
DEFERRED INCOME TAXES	52,929,534			—
OTHER LONG-TERM LIABILITIES	10,517,166			327,411
COMMITMENTS AND CONTINGENCIES	—			—
Total liabilities	350,564,948			169,150,437
SHAREHOLDER’S EQUITY:
Common stock - Class A, 100,000 shares authorized, issued and outstanding at March 5, 2005 and March 6, 2004	150,351,972			29,438,172
Accumulated Deficit	(4,329,387		)	(17,817,637		)
Note receivable-related party	—			(5,000,000		)
Total shareholder’s equity	146,022,585			6,620,535
Total Liabilities and Shareholder’s Equity	$	496,587,533		$	175,770,972

• Norbert J. Woodhams, one of the Company’s Vice Presidents, is the son of Norbert E. Woodhams. Norbert E. Woodhams is the Company’s President, Chief Executive Officer, Director and Chairman of the Board. In successor fiscal 2006, Norbert J. Woodhams received a base salary of one hundred and one thousand dollars and earned a bonus of thirty-three thousand and three hundred dollars under the Company’s bonus plan. In predecessor fiscal 2005 and successor fiscal 2005 combined, Norbert J. Woodhams received a base salary of ninety-two thousand and seven hundred dollars and earned a bonus of forty-seven thousand and eight hundred dollars under the Company’s bonus plan. The base salary and bonus earned by Norbert J. Woodhams is consistent with the earnings of other Company employees with similar responsibilities.

~~See accompanying~~Predecessor ~~notes to consolidated financial statements.~~Pierre

~~F-3~~As described in Note 1 to the Consolidated Financial Statements, on March 8, 2004 the Company and the Trustee under the Company’s Indenture executed a Fourth Supplemental Indenture and, pursuant to the terms of the Fourth Supplemental Indenture, the Company terminated substantially all of its related party transactions. The following related party transactions were specifically permitted under the terms of the Fourth Supplemental Indenture:

~~PIERRE~~• Columbia ~~FOODS~~Hill Land Company, ~~INC~~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 $58,000 and $116,000 in predecessor fiscal 2005 and predecessor fiscal 2004, respectively.

~~CONSOLIDATED~~• On ~~STATEMENTS~~August 13, OF2003, ~~OPERATIONS~~the Company obtained a three year variable rate $40 million revolving credit facility from Fleet Capital Corporation. Messrs. Richardson and Clark provided guarantees of value and validity of the collateral securing this credit facility; they did not, however, guarantee payment of the facility, nor did they receive guarantee fees.

	Successor			Predecessor
	Fiscal 2005			Fiscal 2005
	For the Period			For the Period			Fiscal 2004			Fiscal 2003
	July 1, 2004			March 7, 2004			For the Year			For the Year
	Through			Through			Ended			Ended
	March 5, 2005			June 30,2004			March 6, 2004			March 1, 2003
REVENUES, NET:	$	294,867,222		$	115,548,564		$	358,549,316		$	276,338,823
COSTS AND EXPENSES:
Cost of goods sold (includes net related party transactions totaling $5,295,036,and $4,283,025 in fiscal 2004 and 2003, respectively)	217,322,673			87,025,521			254,235,016			184,091,572
Selling, general and administrative expenses (includes related party transactions totaling $32,487,545 and $23,155,405 in fiscal 2004 and 2003, respectively)	39,827,160			26,446,857			79,982,134			71,351,817
Net loss on disposition of property, plant and equipment	5,372			339,921			11,042			88,937
Depreciation and amortization	23,169,814			1,544,903			4,604,954			4,124,641
Total costs and expenses	280,325,019			115,357,202			338,833,146			259,656,967
OPERATING INCOME	14,542,203			191,362			19,716,170			16,681,856
OTHER INCOME (EXPENSE):
Interest expense	(19,493,148		)	(6,537,519		)	(16,979,028		)	(14,228,220		)
Other income, net (includes related party income totaling $371,610 in fiscal 2003)	24,334			1,784			—			446,825
Other expense, net	(19,468,814		)	(6,535,735		)	(16,979,028		)	(13,781,395		)
INCOME (LOSS) BEFORE INCOME TAX AND CUMMULATIVE EFFECT OF ACCOUNTING CHANGE	(4,926,611		)	(6,344,373		)	2,737,142			2,900,461
INCOME TAX (PROVISION) BENEFIT	597,224			2,080,338			(1,303,347		)	(1,122,478		)
INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE	(4,329,387		)	(4,264,035		)	1,433,795			1,777,983
CUMULATIVE EFFECT OF ACCOUNTING CHANGE (net of income income tax benefit of $10,415,037)	—			—			—			(18,604,534		)
NET INCOME (LOSS)	$	(4,329,387	)	$	(4,264,035	)	$	1,433,795		$	(16,826,551	)
NET INCOME (LOSS) PER COMMON SHARE - BASIC AND DILUTED
Income (loss) before cumulative effect of accounting change	$	(43.29	)	$	(42.64	)	$	14.34		$	17.78
Cumulative effect of accounting change	—			—			—			(186.05		)
Net income (loss) per common share - basic and diluted	$	(43.29	)	$	(42.64	)	$	14.34		$	(168.27	)
WEIGHTED AVERAGE SHARES OUTSTANDING - BASIC AND DILUTED	100,000			100,000			100,000			100,000

~~See~~• The ~~accompanying~~Company ~~notes~~had tomutual leasing agreements ~~consolidated~~with ~~financial~~certain ~~statements~~related individuals and with certain companies in which the selling shareholders had substantial ownership interests. Total payments under such leasing agreements were approximately $260,000 in predecessor fiscal 2004.

F• On March 8, 2004 the Company took title to an aircraft that was transferred from Columbia Hill Aviation, LLC (“CHA”), owned 100% by PFMI, subject to existing purchase money debt. The aircraft was originally leased by the Company from CHA beginning in the fourth quarter of predecessor fiscal 2002. Effective March 1, 2002, the original lease was cancelled and replaced with a non-4exclusive lease agreement. Pursuant to this new lease, the Company was obligated to make 16 quarterly lease payments of $471,500 each for the right to use the aircraft for up to 115 flight hours per quarter, based on availability. Under this lease agreement, CHA was responsible for all expenses incurred in the operation of the use of the aircraft, except that the Company provided its own flight crew. During predecessor fiscal 2004, the Company paid CHA approximately $2.6 million in lease payments. CHA was not a subsidiary of the Company; however, the Company considered CHA a non-independent special purpose leasing entity. Accordingly, CHA’s financial condition, results of operations and cash flows have been included in the Company’s Consolidated Financial Statements included herein. Under the terms of the operating lease with CHA, and the financing agreements between CHA and its creditor, the Company did not maintain the legal rights of ownership to the aircraft, nor did CHA’s creditor maintain any legal recourse to the Company. Subsequently, as a result of the Acquisition, the aircraft was distributed to a former shareholder.

~~PIERRE~~Any ~~FOODS~~related party transactions described below that were in effect at March 6, ~~INC~~2004 were subsequently terminated as of March 8, 2004 pursuant to the terms of the Fourth Supplemental Indenture. As a result of the termination of these related party transactions, subsequent to March 8, 2004, the Company performs the purchasing and distribution services internally. Other related party services are outsourced as necessary at comparable cost.

~~CONSOLIDATED~~• Columbia Hill ~~STATEMENTS~~Management, Inc. OF(“Columbia ~~SHAREHOLDER’S~~Hill”), ~~EQUITY~~owned 50% by each of Messrs. Richardson and Clark, provided accounting, tax and administrative services to Pierre, as well as professional services for the management of special projects. Fees paid for these services were approximately $203,000 in predecessor fiscal 2004.

	Common			Additional			Retained			Receivable			Total
	Stock			Paid in			Earnings			From			Shareholder’s
	Class A			Capital			(Deficit)			Shareholder			Equity
PREDECESSOR PIERRE BALANCE AT MARCH 2, 2002	$	—		$	23,656,692		$	2,768,845		$	(5,000,000	)	$	27,207,017
Recapitalization	29,438,172			(23,656,692		)	—			—			—
Net loss	—			—			(16,826,551		)	—			(16,826,551		)
Distributions of special purpose entity	—			—			(1,382,557		)	—			(1,382,557		)
PREDECESSOR PIERRE BALANCE AT MARCH 1, 2003	29,438,172			—			(15,440,263		)	(5,000,000		)	8,997,909
Net income	—			—			1,433,795			—			1,433,795
Distribution to parent - tax benefit	—			—			(3,578,169		)	—			(3,578,169		)
Distributions of special purpose entity	—			—			(233,000		)	—			(233,000		)
PREDECESSOR PIERRE BALANCE AT MARCH 6, 2004	29,438,172			—			(17,817,637		)	(5,000,000		)	6,620,535
Net loss	—			—			(4,264,035		)	—			(4,264,035		)
Transaction with common shareholder	(339,639		)	—			(11,900,276		)	—			(12,239,915		)
PREDECESSOR PIERRE BALANCE AT JUNE 30, 2004	29,098,533			—			(33,981,948		)	(5,000,000		)	(9,883,415		)
PURCHASE ACCOUNTING ADJUSTMENT	(29,098,533		)	—			33,981,948			5,000,000			9,883,415
SUCCESSOR PIERRE PURCHASE ALLOCATION	150,023,000			—			—			—			150,023,000
Net loss	—			—			(4,329,387		)	—			(4,329,387		)
Contribution from parent	350,000												350,000
Expenses paid on behalf of parent	(21,028		)	—			—			—			(21,028		)
SUCCESSOR PIERRE BALANCE AT MARCH 5, 2005	$	150,351,972		$	—		$	(4,329,387	)	$	—		$	146,022,585

• During predecessor fiscal 2004, PFMI owed the Company as much as $993,247 pursuant to a promissory note payable on demand and bearing interest at the prime rate. Prior to the Acquisition, PFMI was owned in part by Messrs. Richardson and Clark, who have unconditionally guaranteed repayment of the note. As of March 8, 2004, this note was forgiven in connection with the Fourth Supplemental Indenture.

~~See~~• Effective February 21, 2003, Messrs. Richardson ~~accompanying~~and Clark sold their net assets in Compass Outfitters, LLC, a company that provided team-building opportunities for customers and employees of the Company, to the Company for a total of $270,983. In exchange for the net assets, the Company issued notes in the amount of $135,491 to ~~consolidated~~each ~~financial~~of ~~statements~~Messrs. Richardson and Clark. The notes were five-year notes, bearing interest at 6% per annum, with interest and principal due at maturity. As of March 8, 2004, in connection with the Fourth Supplemental Indenture, these notes were cancelled.

F• PF Purchasing, LLC (“PFP”), previously owned 100% by PFMI, served as the exclusive purchasing agent for the Company, pursuant to a three-5year agreement that commenced September 3, 2001. Under the agreement, PFP made an incentive payment of $100,000 per quarter to the Company in consideration of the opportunity to act as exclusive purchasing agent, and in exchange was entitled to receive all rebates or discounts receivable by Pierre from suppliers and vendors for orders negotiated and placed by PFP. In predecessor fiscal 2004, net fees paid to PFP were approximately $2,122,000.

~~PIERRE~~• Effective ~~FOODS~~March 3, ~~INC~~2002, the Company entered into a logistics agreement with PF Distribution, LLC (“PFD”), owned 100% by PFMI. Under the agreement, PFD served as the exclusive logistics agent for the Company, and provided all warehousing, fulfillment and transportation services to the Company. The cost of PFD’s services was based on flat rates per pound, which were calculated based on weight and volume characteristics of products, inventory pounds maintained and inventory pounds shipped. Rates were determined based on historical costs and industry standards. In predecessor fiscal 2004, distribution expense recorded in selling, general and administrative expense was approximately $31,126,000 of which approximately $30,999,000 had been paid to PFD as of March 6, 2004.

~~CONSOLIDATED STATEMENTS OF CASH FLOWS~~34

	Successor			Predecessor
	Fiscal			Fiscal			Fiscal			Fiscal
	2005			2005			2004			2003
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	$	(4,329,387	)	$	(4,264,035	)	$	1,433,795		$	(16,826,551	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Cumulative effect of accounting change	—			—			—			18,604,534
Depreciation and amortization	23,169,814			1,544,903			4,604,954			4,124,641
Amortization of deferred loan origination fees	1,029,109			716,478			769,587			746,262
Deferred income taxes	370,083			(2,080,338		)	1,296,247			1,286,191
Write-off of deferred loan origination fees	4,283,122			—			1,233,530			—
Net loss on disposition of assets (net of writedowns)	5,372			339,921			11,042			88,937
Decrease in other assets	—			296,694			72,806			79,831
Increase (decrease) in other long-term liabilities	199,565			(94,477		)	(366,339		)	(338,946		)
Changes in operating assets and liabilities providing (using) cash:
Receivables	(9,566,451		)	5,660,719			(1,987,250		)	(2,170,878		)
Inventories	458,272			(4,911,529		)	(6,389,241		)	(8,731,922		)
Refundable income taxes, prepaid expenses and other assets	(3,636,860		)	949,584			193,708			(1,726,478		)
Trade accounts payable and other accrued liabilities	867,917			2,227,855			2,388,092			4,906,862
Total adjustments	17,179,943			4,649,810			1,827,136			16,869,034
Net cash provided by operating activities	12,850,556			385,775			3,260,931			42,483
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales of assets to others	—			—			278,400			83,000
Capital expenditures	(3,677,259		)	(2,084,160		)	(10,040,768		)	(16,216,292		)
Net cash used in investing activities	(3,677,259		)	(2,084,160		)	(9,762,368		)	(16,133,292		)
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings (repayments) of revolving credit agreement	(17,702,886		)	7,712,901			(1,805,161		)	15,085,147
Borrowings under equipment term loan subline	—			—			5,000,000			—
Borrowings under real estate term loan subline	—			—			5,000,000			—
Principal payments on long-term debt	(16,169,945		)	(673,526		)	(849,257		)	(311,967		)
Loan origination fees	(9,952,798		)	(3,371,999		)	(680,609		)	(1,603,467		)
Payoff of Old Notes	(115,000,000		)	—			—			—
Issuance of New Notes	125,000,000			—			—			—
Borrowings under new term loan	150,000,000			—			—			—
Repayment of debt in conjunction with the Acquisition	(29,048,031		)	—			—			—
Termination of certificate of deposit	1,262,245			—			—			—
Return of capital to parent	(100,085,738		)	—			—			—
Distribution of special purpose leasing entity	—						(233,000		)	(1,382,557		)
Contribution from parent	350,000			—			—			—
Net cash provided by (used in) financing activities	(11,347,153		)	3,667,376			6,431,973			11,787,156
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	(2,173,856		)	1,968,991			(69,464		)	(4,303,653		)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR	2,173,856			204,865			274,329			4,577,982
CASH AND CASH EQUIVALENTS, END OF YEAR	$	—		$	2,173,856		$	204,865		$	274,329

• Atlantic Cold Storage of Mocksville, LLC (“ACS”), owned one-third each by Messrs. Richardson and Clark, planned 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 was for 10 years and a minimum of 4,000 pallet positions to be leased as of the first date the facility became operational. During predecessor fiscal 2001, the Company paid $250,000 to ACS for specialized construction costs. As of March 8, 2004, in connection with the Fourth Supplemental Indenture, these costs were written-off.

~~See~~• The ~~accompanying~~following ~~notes~~transactions towere entered into on March 8, ~~consolidated~~2004 ~~financial~~as ~~statements.~~permitted by the Fourth Supplemental Indenture:

F-6

Assumption of PFMI debt	$	(14,274,050	)
Accrued liabilities to PFP cancelled	3,479,007
Assumption of deferred tax liability for aircraft	(1,576,000		)
Note receivable cancelled	(993,247		)
Accrued liabilities to PFD cancelled	535,251
Cash received	763,998
Other	(174,874		)
Total	$	(12,239,915	)

Allocated to the following accounts:
Retained Earnings	$	11,900,276
Common Stock	339,639
Total	$	12,239,915

~~PIERRE FOODS~~The $339,639 ~~INC~~charge represents the removal of members’ equity of CHA.

~~NOTES~~All TOmaterial ~~CONSOLIDATED~~transactions ~~FINANCIAL~~with ~~STATEMENTS~~affiliates of the Company were reviewed by the entire Board of Directors, where they were approved by a majority of the independent directors. The directors obtained and relied upon investment banking “fairness” opinions when considering these transactions to the extent required by the indenture governing the Old Notes.

On June 30, 2004, in conjunction with the Acquisition, all previously existing related party transactions were terminated as described in Note 1~~. BASIS~~ — “Basis of Presentation OFand ~~PRESENTATION~~Acquisition,” ~~AND~~to ~~ACQUISITION~~the Consolidated Financial Statements.

~~Description of~~Item ~~Business~~14. ~~Pierre~~ ~~Foods,~~Principal ~~Inc.~~Accountant ~~(the~~Fees ~~“Company” or “Pierre”) is a manufacturer~~ and marketer of high-quality, differentiated processed food solutions, focusing on formed, pre-cooked protein products and hand-held convenience sandwiches. The Company’s products include beef, poultry, pork and bakery items. Pierre offers comprehensive food solutions to its customers, including proprietary product development, special ingredients and recipes, as well as custom packaging and marketing programs. Pierre’s pre-cooked proteins include flamebroiled burger patties, homestyle meatloaf, chicken strips and boneless, barbecued pork rib products. Pierre markets its pre-cooked protein products to a broad array of customers that includes restaurant chains, schools and other foodservice providers under a variety of brand names, including Pierre™, Fast Choice®, Rib-B-Q®, Hot ‘n’ Ready® and Big AZ®.Services

The ~~Company’s~~following ~~predecessor~~table ~~was~~presents ~~founded~~fees asbilled afor ~~North~~professional ~~Carolina~~audit ~~corporation~~services inrendered ~~1966~~by 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 JuneDeloitte ~~1998,~~& ~~the~~Touche ~~Company~~LLP ~~consummated~~for the ~~purchase of~~ ~~substantially~~audit ~~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~~’s aannual ~~tax-exempt~~financial ~~reorganization~~statements offor ~~its~~successor ~~corporate~~fiscal ~~structure. The reorganization established Fresh Foods~~2006, ~~Inc. as a holding company, consolidated~~predecessor 32fiscal ~~subsidiaries~~2005 ~~into 12 subsidiaries~~ and ~~separated~~successor ~~the~~fiscal ~~Company’s~~2005 ~~food processing and restaurant businesses. In July 1999~~combined, ~~the Company sold its ham curing business,~~ and infor ~~October 1999, the~~other ~~Company~~services ~~disposed of its restaurant segment.~~ rendered ~~Subsequent~~by ~~to the disposal of the restaurant segment, Pierre operates solely in the food processing business, its sole segment. In December~~Deloitte ~~1999, the~~& ~~Company~~Touche ~~implemented~~LLP ~~another~~during ~~tax-exempt~~those 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.”periods:

Management Buyout. On July 26, 2002, management completed a going private transaction in which the Company’s shareholders approved the Amended and Restated Agreement and Plan of Share Exchange dated as of December 20, 2001, and amended as of June 20, 2002. This going-private transaction resulted in the Company becoming a wholly-owned subsidiary of PF Management, Inc. (“PFMI”); accordingly, there is no public market for the Company’s common stock. The Company had 5,781,480 shares issued and outstanding immediately before the closing and 2,500,000 shares of preferred stock authorized, none of which were outstanding. After the closing, the Company amended and restated its Articles of Incorporation to authorize the issuance of up to 100,000 shares of Class A common stock as the only authorized class of capital stock of the Company. All 100,000 shares of authorized common stock have been issued to PFMI. All per share amounts have been retroactively restated in the accompanying Consolidated Financial Statements and Notes to Consolidated Financial Statements for all periods presented to reflect the transaction.

			Predecessor Fiscal 2005 and
			Successor Fiscal 2005
	Successor Fiscal 2006		Combined

Audit Fees (1)	$	254,000	$	326,900
Audit Related Fees (2)	24,925		564,100
Tax Fees (3)	—		137,600
All Other Fees	—		—

Total	$	278,925	$	1,028,600

~~Restructuring. On March 8, 2004, following a consent solicitation in which consents of holders of $112.4 million in aggregate principal amount of the Company’s outstanding Notes~~ (~~“Old Notes”~~1), Audit ~~representing 97.74%~~fees ofduring ~~the~~both ~~outstanding~~successor ~~Notes, consented to a Fourth Supplemental Indenture~~fiscal ~~between~~2006 ~~the Company~~ and ~~the~~predecessor ~~Trustee~~fiscal thereunder, the Company entered into the Fourth Supplemental Indenture with the Trustee. Among other things, the Fourth Supplemental Indenture increased the annual interest rate on the Old Notes from 10.75% to 12.25% through March 31, 2005 and ~~13.25%~~successor ~~thereafter;~~fiscal required the payment of a cash consent fee of $3.5 million (3% of the principal amount of Old Notes held by each consenting noteholder); granted to the noteholders liens on the assets of the Company and its subsidiaries, such liens being junior to the senior liens securing the Company’s credit facility, granted to noteholders a repurchase right allowing all of the noteholders to require the Company to repurchase their Old Notes at par plus accrued interest on March 31, 2005; ~~provided~~combined ~~for~~consisted ~~the payment~~ of a ~~portion~~fees of certain cash flow of the Company (referred to as “excess cash”) to reduce the principal amount of Old Notes outstanding at the end of the Company’s fiscal years; added restrictive covenants limiting the compensation payable to certain senior executives of the Company and limiting future related party transactions; required the termination of all related party transactions, except for ~~certain~~services ~~specifically-permitted~~performed ~~transactions;~~in ~~provided for~~ the ~~assumption~~ byaudits ~~the Company~~ of ~~approximately $15.3 million of subordinated debt of PFMI,~~ the ~~sole~~financial ~~shareholder of the Company~~statements, ~~required~~as ~~the Company to comply~~well ~~with~~as ~~certain~~work ~~corporate~~generally ~~governance~~only ~~standards, including appointing an independent director acceptable to~~ the ~~Company and the noteholders to its board and hiring an~~ independent auditor tocan ~~monitor~~reasonably ~~the~~be ~~Company’s~~expected ~~compliance with the~~to ~~Indenture;~~provide, ~~and~~such ~~waived any and all defaults of the Indenture existing~~ as ofstatutory ~~March 8, 2004~~audits.

F(2) Audit related fees during successor fiscal 2006 include payment for services in connection with a comment letter issued to the Company by the SEC dated September 15, 2005 related to the Company’s Form 10-7K for the fiscal year ended March 5, 2005. Audit related fees during predecessor fiscal 2005 and successor fiscal 2005 combined include payment for services in connection with the Acquisition, including but not limited to the tender offer, the filing of the Company’s registration statement and audits in connection with the Acquisition.

Concurrently with the execution of the Fourth Supplemental Indenture, the Company took title to an aircraft transferred from a related party subject to $5.6 million of existing purchase money debt; assumed $15.(3) Tax ~~million~~fees ofinclude ~~debt~~all ~~from~~tax ~~PFMI;~~services ~~cancelled the $1.0 million related~~relating ~~party note receivable against the debt assumed from PFMI; cancelled the balances owed by the Company~~ to ~~certain~~tax ~~related parties~~compliance, astax ~~follows:~~planning ~~$0.5 million owed to Columbia Hill Aviation; $3.5 million owed to PF Purchasing; $0.5 million owed to PF Distribution;~~ and ~~assumed the operating leases of PF Distribution in connection with the Fourth Supplemental Indenture~~reporting.

InThe ~~this~~Board ~~document,~~of ~~unless~~Directors ~~the~~of ~~context otherwise requires,~~ the ~~term “~~Company” ~~refers~~considered ~~to Pierre Foods, Inc. and its~~the ~~current~~impact ~~and former subsidiaries. As a result of the Acquisition discussed below,~~ on ~~June 30, 2004, the Company~~auditor’s ~~fiscal~~ ~~year~~independence ~~ended~~in ~~March 5,~~connection ~~2005~~with isnon-audit ~~comprised~~services ~~of two short periods. The periods of March 7, 2004 through June 30, 2004~~ and ~~July 1, 2004 through March 5, 2005 are referred to “predecessor~~ ~~fiscal~~concluded ~~2005”~~there and “successor fiscal 2005,” respectively. These two short periods collectively are referred to as “predecessor fiscal 2005 and successor fiscal 2005 combined.” The Company’s fiscal year ended March 6, 2004 is ~~referred~~no toadverse aseffect ~~“predecessor~~on ~~fiscal~~their ~~2004” and its fiscal year ended March 1, 2003 is referred to as “predecessor fiscal 2003~~independence.”

~~Acquisition. On~~Policy ~~June 30,~~on ~~2004,~~Board ~~Pierre Holding Corp. (“Holding”) acquired 100%~~ of ~~the~~Directors ~~shares~~Pre-Approval of ~~the~~Audit ~~Company’s~~and ~~parent, PF Management, Inc. (“PFMI”). Such acquisition is referred to herein as the~~Permissible ~~“Acquisition”. In~~Non-audit ~~connection~~Services ~~with~~of ~~the Acquisition,~~Independent ~~the following occurred:~~Accountants

~~• The~~Consistent with SEC policies regarding auditor independence, the Audit Committee of the Board of Directors of the Company ~~merged~~has responsibility ~~with~~for ~~Pierre~~appointing, ~~Merger~~setting ~~Corp~~compensation and overseeing the work of the independent auditor. In recognition of this responsibility, anthe Audit Committee ~~affiliate~~of the Board of ~~Madison~~Directors ~~Dearborn~~has ~~Partners,~~established ~~LLC~~a ~~(“MDP”),~~policy ~~with~~to ~~the~~pre-approve ~~Company~~all ~~being~~audit ~~the~~and ~~surviving~~permissible ~~corporation~~non-audit ~~following~~services provided by the ~~merger~~independent auditor.

• The Company terminated its three-year variable-rate $40 million revolving credit facility and obtained a $190 million credit facility from a new lender which includes a six-year variable-rate $150 million term loan and a five-year variable rate $40 million revolving credit facility with a $10 million letter of credit subfacility. See Note 7, “Financing Arrangements,” to the Consolidated Financial Statements.36

• The Company terminated its few remaining related party transactions (described in Note 16, “Transactions with Related Parties,” to the Consolidated Financial Statements), transferred miscellaneous assets to Messrs. Richardson and Clark, the Company’s former Chairman and Vice Chairman, respectively, including the Company’s airplane, which was distributed to Mr. Richardson.PART IV

~~• Pierre~~Item ~~Merger Corp~~15. ~~closed~~Exhibits ~~a cash tender offer~~ and ~~consent~~ ~~solicitation~~Financial ~~for~~Statement the Company’s Old Notes. Holders of approximately $106.3 million, or approximately 92%, of aggregate principal amount of the Company’s outstanding Old Notes tendered their Old Notes. The Company, as the surviving corporation of the merger with Pierre Merger Corp., accepted and paid for all Old Notes tendered pursuant to the tender offer. A redemption notice for the Old Notes not tendered (approximately $8.7 million) was issued on June 30, 2004 and these Old Notes were redeemed on July 20, 2004.Schedules

(a)	1.	Financial Statements

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

	2.	Financial Statement Schedules

		Financial statement schedules have been omitted because they are not applicable or not required, or because the required information is provided in the Company’s Consolidated Financial Statements or notes thereto.

	3.	Exhibits

		See Index to Exhibits below.

• The Company’s President and Chief Executive Officer, Norbert E. Woodhams, and its Senior Vice President of Sales, Marketing and New Product Development, Robert C. Naylor, signed employment agreements committing them to continue working for the Company after the Acquisition. The stated term of employment for each executive is one year, but each agreement will renew automatically and continuously year-to-year unless terminated.37

~~• In~~Pursuant ~~addition~~ to the ~~base~~requirements ~~purchase~~of ~~price, the stock~~Section 13 ~~purchase~~or ~~agreement~~15(d) of ~~entitled~~ the ~~selling~~Securities ~~shareholders~~Exchange toAct ~~earn-out cash payments, which included an additional aggregate amount~~ of ~~$13.0 million in the event that~~1934, atPierre ~~the end of any fiscal quarter during the fiscal year ended March 5~~Foods, Inc. ~~2005,~~has ~~the~~duly ~~Company~~caused ~~achieved~~this ~~EBITDA~~report ~~(as~~to ~~defined~~be insigned ~~the~~on ~~stock~~its ~~purchase~~behalf ~~agreement) for~~by the ~~prior four fiscal quarters then ended of $56.0 million or more. No portion of the additional amount is~~undersigned, ~~payable~~thereunto asduly ~~of March 5, 2005, as this EBITDA target was not met~~authorized.

~~F-8~~PIERRE FOODS, INC. By: /s/ JOSEPH W. MEYERS Joseph W. Meyers Vice President, Finance

~~The~~Dated: ~~following table presents unaudited pro forma information for predecessor fiscal 2004, and for predecessor fiscal 2005 and successor fiscal 2005 combined, as if the Acquisition had occurred on March~~ June 2, ~~2003 and March 7, 2004, as applicable.~~2006

	Predecessor Fiscal 2004						Predecessor and Successor Fiscal 2005 Combined
	Actual			Pro Forma			Actual			Pro Forma
Revenues	$		358,549,316	$	358,445,189		$	410,415,786		$	410,407,182
Net income (loss)	$	1,433,795		$	(3,668,629	)	$	(8,593,422	)	$	(11,800,203	)

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

These unaudited pro forma results, based on assumptions deemed appropriate by the Company’s management, have been prepared for informational purposes only and are not necessarily indicative of the amounts that would have resulted if the Company had been acquired by MDP on March 2, 2003 or March 7, 2004, as applicable. Purchase related adjustments to the results of operations include the effects on depreciation and amortization, interest expense, cost of goods sold and income taxes.

Signature	Title	Date

/s/ NORBERT E. WOODHAMS	Chief Executive Officer and	June 2, 2006
Norbert E. Woodhams	President (Principal Executive
	Officer), Director and Chairman
	of the Board

/s/ JOSEPH W. MEYERS	Vice President, Finance	June 2, 2006
Joseph W. Meyers	(Principal Financial Officer and
	Principal Accounting Officer)

/s/ NICHOLAS W. ALEXOS	Director	June 2, 2006
Nicholas W. Alexos

/s/ SCOTT W. MEADER	Director	June 2, 2006
Scott W. Meader

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