UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

FORM 10-Q

        For the quarterly period ended June 5, 2004

        OR

        For the transaction period from                     to                    

Commission File Number: 0-7277

PIERRE FOODS, INC.

North Carolina
(State or other jurisdiction of incorporation or organization)

56-0945643
(I.R.S. Employer Identification No.)

9990 Princeton Road
Cincinnati, Ohio 45246
(Address of principal executive offices) (zip code)

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 126-2 of the Exchange Act).

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

PIERRE FOODS, INC.

INDEX

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

PIERRE FOODS, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

See accompanying notes to unaudited consolidated financial statements.

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PIERRE FOODS, INC. AND SUBSIDIARIES

See accompanying notes to unaudited consolidated financial statements.

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PIERRE FOODS, INC. AND SUBSIDIARIES

Consolidated Statements of Operations and Retained Earnings (Deficit)

(Unaudited)

See accompanying notes to unaudited consolidated financial statements.

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See accompanying notes to unaudited consolidated financial statements.

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PIERRE FOODS, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(Unaudited)

See accompanying notes to unaudited consolidated financial statements.

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See accompanying notes to unaudited consolidated financial statements.

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PIERRE FOODS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

1. Basis of Presentation

     The financial information as of March 6, 2004, included in these financial statements has been derived from the audited consolidated financial statements included in that report. In the opinion of the Company, the accompanying unaudited consolidated financial statements contain all adjustments necessary to present fairly the financial position of the Company as of June 5, 2004 and March 6, 2004, the results of operations for the thirteen weeks ended June 5, 2004 and May 31, 2003, and the cash flows of the Company for the thirteen weeks ended June 5, 2004 and May 31, 2003. The thirteen week period ended June 5, 2004 is referred to as “first quarter 2005” and the thirteen week period ended May 31, 2003 is referred to as “first quarter 2004.” Financial statement presentation used for the first quarter 2004 has been reclasified, where applicable, to conform to financial statement presentation used for first quarter 2005.

     The Company reports the results of its operations using a 52-53 week basis. In line with this, each quarter of the fiscal year will contain 13 weeks except for the infrequent fiscal years with 53 weeks.

     The results of interim operations for first quarter 2005 are not necessarily indicative of the results to be expected for the full fiscal year. These interim unaudited consolidated financial statements should be read in conjunction with the Company’s March 6, 2004 audited consolidated financial statements and notes thereto.

2. Inventories

     A summary of inventories, by major classifications, follows:

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3. Long-Term Debt

Long term debt is comprised of the following:

     As of June 5, 2004, the Company had outstanding borrowings under its revolving credit facility of $19.4 million and borrowing availability of approximately $6.8 million.

     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 senior notes due 2006 (the “Notes”), representing 97.74% of the outstanding 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 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 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 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 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 (see Note 7, “Related Party Transactions”); provided for the assumption by the Company of approximately $15.3 million of subordinated debt of PF Management, Inc., the sole shareholder of the Company; 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 did permit for bonus payments to those executives above the compensation limitations. The bonus payments would be based on the profitability of the Company and cash payments made on the Notes.

     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 million of debt from PF Management; cancelled the $1.0 million related party note receivable against the debt assumed from PF Management; 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. Minimum lease payments on

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the former PF Distribution operating leases will be $3.0 million during fiscal year 2005, $2.9 million during fiscal year 2006 and $0.5 million during fiscal year 2007.

     Subsequent to the end of the first quarter 2005, on June 30, 2004, the shareholders of PF Management closed the sale of their shares of stock of PF Management to an affiliate of Madison Dearborn Partners, LLC (“MDP”) (See Note 8, “Subsequent Events”). In conjunction with the sale, 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 in the amount of $0.4 million were paid to the former lender and were 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, and a five-year variable rate $40 million revolving credit facility with 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 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 June 30, 2004 was 5.75% (prime plus 1.5%). Repayment of borrowings under the term loan will be $375,000 per quarter beginning on September 4, 2004, with a balloon payment of $141.4 million due on June 5, 2010. 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.

     Also in conjunction with the sale, 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 (see Note 8, “Subsequent Events”) and borrowings under our new senior credit facility, were used to finance the acquisition of the Company and to repay outstanding indebtedness, including paying off debt of PF Management assumed by the Company under the Fourth Supplemental Indenture (except capital leases), paying for the Notes tendered in connection with the tender offer described in Note 8 and redeeming the Notes not tendered.

4. Comprehensive Income

     Total comprehensive income (loss) is comprised solely of net income (loss) in first quarter 2005 and first quarter 2004. Comprehensive income (loss) was ($120,781) and $376,235 for the first quarter 2005 and the first quarter 2004, respectively.

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5. Supplemental Cash Flow Disclosures — Cash Paid During the Period and Non-Cash Transactions

6. Recently Issued Accounting Guidance.

     In December of 2003, the FASB issued FIN 46R, “Consolidation of Variable Interest Entities” (“FIN 46R”), which replaces the same titled FIN 46 that was issued in January 2003. FIN 46R addresses how to identify variable interest entities and the criteria that requires a company to consolidate such entities in its financial statements. FIN 46R is effective for the first reporting period that ends after March 15, 2004. This statement did not have an impact on the Company’s financial statements.

7. Related Party Transactions

     As described in Note 3, “Long-Term Debt”, on March 8, 2004, following a consent solicitation in which a majority of the holders of the Company’s outstanding Notes consented to a Fourth Supplemental Indenture between the Company and the Trustee, the Company entered into the Fourth Supplemental Indenture with the Trustee. Among other things, the Fourth Supplemental Indenture limited future related party transactions and required the termination of all related party transactions, except for certain specifically-permitted transactions.

     The following related party transactions were specifically permitted under the terms of the Fourth Supplemental Indenture:

•		Columbia Hill Land Company, LLC, owned 50% by each of James C. Richardson and David R. Clark, our Chairman and Vice-Chairman, respectively, 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 $29,000 during both first quarter 2005 and first quarter 2004.
•		On March 8, 2004 the Company took title to an aircraft that was transferred from Columbia Hill Aviation, LLC (“CHA”), owned 100% by PF Management, subject to existing purchase money debt. The aircraft was originally leased by the Company from CHA beginning in the fourth quarter of fiscal 2002. Effective March 1, 2002, the original lease was cancelled and replaced with a non-exclusive 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.

     All other related party transactions that were in effect at March 6, 2004 were 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 has performed its purchasing and distribution services internally.

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     The following transactions were entered into on March 8, 2004 as required by the Fourth Supplemental Indenture:

     The $339,639 charge represents the removal of members’ equity of CHA.

8. Subsequent Events

     On May 11, 2004, the shareholders of PF Management, the sole shareholder of the Company, agreed to sell their shares of stock in PF Management to an affiliate of MDP. The sale closed on June 30, 2004.

     In connection with the sale, the following occurred:

•		The Company merged with Pierre Merger Corp., an affiliate of MDP, with the Company being the surviving corporation following the merger.
•		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 3, “Long-Term Debt.”
•		The Company terminated its few remaining related party transactions (described in Note 7, “Related Party Transactions”), transferred miscellaneous assets to Messrs. Richardson and Clark, and sold its airplane to Mr. Richardson.
•		Pierre Merger Corp. closed a cash tender offer and consent solicitation for the Company’s Notes. Holders of approximately $110 million, or approximately 96%, of aggregate principal amount of the Company’s outstanding Notes tendered their Notes. The Company, as the surviving corporation of the merger with Pierre Merger Corp., accepted and paid for all Notes tendered pursuant to the tender offer. In connection with the tender, the Noteholders agreed to the terms of a Fifth Supplemental Indenture, which eliminated substantially all of the restrictive covenants contained in the indenture governing the Notes, including the covenants contained in the Fourth Supplemental Indenture. A redemption notice for the Notes not tendered was issued on June 30, 2004 and these Notes will be redeemed as of July 20, 2004.
•		The Company issued 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 our new senior credit facility, were used to finance the acquisition of the Company and to repay outstanding indebtedness, including paying off debt of PF Management assumed by the company under the Fourth Supplemental Indenture (except capital leases), paying for the Notes tendered in connection with the tender offer described above and redeeming the Notes not tendered.

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•

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 sale. The stated term of employment for each executive is one year, but each agreement will renew automatically and continuously year-to-year unless terminated. In addition, Messrs. Woodhams and Naylor made equity investments of $3.1 million and $2.3 million, respectively, in the Company under its new owner.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Results of Operations

First Quarter 2005 Compared to First Quarter 2004

     Revenues, net. Net revenues increased by $10.5 million, or 12.9%. The increase in net revenues was primarily due to the substantial development of national business with an existing customer.

     Cost of goods sold. Cost of goods sold increased by $10.8 million, or 19.3%. As a percentage of revenues, cost of goods sold increased from 69.0% to 72.9%. This increase was primarily due to increased raw material prices, a change in product mix to lower margin product and start-up costs related to the development of high-volume, low margin national business associated with a significant new customer. In first quarter 2005, beef, pork and chicken prices increased approximately 4%, 47% and 76%, respectively, compared to first quarter 2004. These increases were partially offset by the elimination of commissions as a result of the termination of the Company’s purchasing agreement with PF Purchasing. This affiliate relationship was terminated in conjunction with the restructuring of the Company’s Notes, which was completed on March 8, 2004. Other offsets to the increase in cost of goods sold included increased efficiencies due to improvements in the manufacturing process and labor decreases due to less overtime days worked.

     Selling, general and administrative. Selling, general and administrative expenses decreased by $1.3 million, or 6.3%. This decrease was primarily due to the elimination of fees paid to PF Distribution for shipping, warehousing and storage services. Fees totaling $3.2 million were incurred in the first quarter 2004; no fees were incurred in the first quarter 2005. This affiliate relationship was terminated in conjunction with the restructuring of the Company’s Notes, which was completed on March 8, 2004. This decrease was partially offset by increased costs related to an increase in sales volume, in addition to costs incurred in conjunction with the execution of the Fourth Supplemental Indenture totaling $1.9 million. As a percentage of revenues, selling, general and administrative expenses decreased from 24.7% to 20.5%.

     Depreciation. Depreciation expense remained consistent at $1.2 million.

     Interest Expense. Interest expense consists primarily of interest on fixed and variable rate long-term debt. Interest expense increased by $1.3 million or 38.8% in first quarter 2005 primarily due to the increase in the annual interest rate on the Senior Notes and interest expense on the debt assumed, both as a result of the Company entering into the Fourth Supplemental Indenture on March 8, 2004 and increased borrowings under the revolving credit facility.

     Income taxes. The effective tax rate for first quarter 2005 was 32.8% compared to 33.3% for first quarter 2004.

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Critical Accounting Policies and Estimates

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

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

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

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

     Economic Useful Life of Intangible Assets. The Company reviews the economic useful life of its intangible assets annually. The determination of the economic useful life of an intangible asset requires a significant amount of judgment and entails significant subjectivity and uncertainty.

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

     Concentration of Credit Risk and Significant Customers. Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash equivalents and trade receivables. The Company places its cash equivalents with high credit quality financial institutions. The Company performs periodic credit evaluations of its customer’s financial condition and generally does not require collateral. The Company encounters a certain amount of credit risk as a result of a concentration of receivables among a few significant customers. Sales to the Company’s largest customer were approximately 28.3% of revenues for the three month period ended June 5, 2004. Accounts receivable at June 5, 2004 included receivables from the Company’s largest customer totaling $3.5 million.

     New Accounting Pronouncements. In December of 2003, the FASB issued FIN 46R, “Consolidation of Variable Interest Entities” (“FIN 46R”), which replaces the same titled FIN 46 that was issued in January 2003. FIN 46R addresses how to identify variable interest entities and the criteria that requires a company to consolidate such entities in its financial statements. FIN 46R is effective for the first reporting period that ends after March 15, 2004. This statement did not have an impact on the Company’s financial statements.

Liquidity and Capital Resources

     Net cash provided by (used in) operating activities was ($0.2) million and $5.6 million for first quarter 2005 and first quarter 2004, respectively. The primary components of the net cash used in operating activities for first quarter 2005 were: (1) a decrease in trade accounts payable and other accrued liabilities of $2.4 million; and (2) an increase in inventories of $3.2 million; offset by (3) a decrease in accounts receivables $3.4 million.

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     Net cash used in investing activities was $1.5 million for first quarter 2005, compared to $4.7 million for first quarter 2004. The decrease is primarily due to significant capital expenditures for a plant expansion in first quarter 2004 that did not occur in first quarter 2005.

     Net cash provided by (used in) financing activities was $1.6 million for first quarter 2005, compared to ($0.6) million for first quarter 2004. The increase in cash provided by financing activities was due primarily to: (1) increased net borrowings under the revolving credit agreement of $6.1 million; offset by (2) loan origination fees incurred in the amount of $3.4 million and (3) principal payments on long-term debt totaling $1.1 million.

     The interest rate for borrowings under the Company’s $40 million revolving credit facility at June 5, 2004 was 5% (prime plus 1%). At June 5, 2004 the interest rate for the Company’s real estate term loan subline and the equipment term loan subline is 5.25% (prime plus 1.25%).

     As of June 5, 2004, the Company had $0.1 million in cash and cash equivalents on hand, outstanding borrowings under its revolving credit facility of $19.4 million and borrowing availability of approximately $6.8 million. Also as of June 5, 2004, the Company had borrowings under the real estate subline and the equipment subline of $4.6 million and $4.4 million, respectively.

     The Company has budgeted approximately $4.4 million for capital expenditures for the remainder of fiscal 2005. These expenditures are primarily for the routine food processing capital improvement projects and other miscellaneous expenditures. The Company believes that funds from operations and funds from the $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.

     If the Company continues its historical revenue growth trend as expected, then the Company may 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 may need to be met through other long-term 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.

     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 senior notes due 2006 (the “Notes”), representing 97.74% of the outstanding 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. See Item 5, “Other Information—Sale of Company”. 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; cancelled the $1.0 million related party note receivable from its principal shareholders; 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 and $0.5 million owed to PF Distribution; and assumed the operating leases of PF Distribution in connection with the Fourth Supplemental Indenture. Minimum lease payments on the former PF Distribution operating leases will be $3.0 million during fiscal year 2005, $2.9 million during fiscal year 2006 and $0.5 million during fiscal year 2007. The Company assumed $15.3 million of subordinated debt of PF Management, Inc., the sole shareholder of the Company, in connection with the execution of the Fourth Supplemental Indenture and cancelled the $1.0 million related party note receivable against the debt assumed from PF Management.

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     Subsequent to the end of the first quarter 2005, on June 30, 2004, the shareholders of PF Management closed the sale of their shares of stock of PF Management to an affiliate of Madison Dearborn Partners, LLC (“MDP”), see Item 5, “Other Information—Sale of Company.” 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 in the amount of $0.4 million were paid to the former lender and were 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 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 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 June 30, 2004 was 5.75% (prime plus 1.5%). Repayment of borrowings under the term loan is $375,000 per quarter beginning on September 4, 2004, with a balloon payment of $141.4 million due on June 5, 2010. 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.

     Also in connection with the sale of the Company, 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 (see Item 5, “Other Information – Sale of Company”) and borrowings under our new senior credit facility, were used to finance the acquisition of the Company and to repay outstanding indebtedness, including paying off debt of PF Management assumed by the Company under the Fourth Supplemental Indenture, paying for the Notes tendered in connection with the tender offer described in Item 5, “Other Information—Sale of Company” and redeeming the Notes not tendered. The indenture governing the New Notes contains restrictive covenants, including, among others, restrictions on the ability of the Company to make dividends, enter into affiliate transactions, incur indebtedness and make investments.

Seasonality

     Except for sales to school districts, which represent approximately 19% of the Company’s total sales and which decline significantly during summer, late November and December, there is no seasonal variation in the Company’s sales.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     As discussed in its annual report for the fiscal year ended March 6, 2004, the Company is exposed to market risks stemming from changes in interest rates, foreign exchange rates and commodity prices. Changes in these factors could cause fluctuations in the Company’s financial condition, results of operations and cash flows. The Company owned no derivative financial instruments or nonderivative financial instruments held for trading purposes at June 5, 2004 or March 6, 2004. Certain of the Company’s outstanding nonderivative financial instruments at June 5, 2004 are subject to interest rate risk, but not subject to foreign currency or commodity price risk. In first quarter 2005, beef, pork and chicken prices increased approximately 9%, 39% and 44%, respectively, compared to the prices at the fiscal year ended March 6, 2004. The Company manages commodity price risk through purchase orders, non-cancelable contracts and by passing on such cost increases to customers.

     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 June 5, 2004 have not changed materially since March 6, 2004. Of the long-term debt outstanding at June 5, 2004, the $115.0 million of Notes, the $4.4 million equipment term loan subline and the $4.6 million real estate term loan subline accrued interest at a fixed rate, while the $19.4 million of outstanding borrowings under the revolving credit facility, the $13.5 million of subordinated debt of PF Management assumed by the Company in connection with the Fourth Supplemental Indenture and the $5.5 million aircraft debt accrued interest at variable rates. 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 first quarter 2005 would have decreased net income for that period by approximately $20,177.

Cautionary Statement As To Forward Looking Information

     Certain statements made in this document are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve risks and uncertainties that may cause actual results to differ materially from expected results. These risks and uncertainties include: adverse changes in food costs and availability of supplies; our significant level of indebtedness; restrictions imposed by the Company’s debt instruments; competition in the food industry; government regulation; dependence on significant customers; consolidation of our customers; general risks of 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; dependence on key personnel; potential labor disruptions and other factors, risks and uncertainties identified in Exhibit 99.1 to our Annual Report on Form 10-K filed with the SEC on March 9, 2004 and in our other filings with the SEC. This list of risks and uncertainties is not exhaustive. Also, new risk factors emerge over time. Investors should not place undue reliance on the predictive value of forward-looking statements.

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ITEM 4. CONTROLS AND PROCEDURES

     Evaluation of Disclosure Controls and Procedures. The Company’s President and Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of Company’s disclosure controls and procedures (as such term is defined in Exchange Act Rules 13a-14(c) and 15d-14(c)) as of the end of the period covered by this report. Based upon that evaluation, the Company’s President and Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures are effective in alerting them on a timely basis to material information relating to the Company (including its consolidated subsidiaries) required to be included in the Company’s reports filed or submitted under the Exchange Act. During the last fiscal quarter, there have been no significant changes in the Company’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II. OTHER INFORMATION

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

     A special meeting of the shareholders of the Company was held on April 19, 2004. The board of directors of PF Management, acting on behalf of PF Management as the sole shareholder of the Company, reviewed the qualifications of the nominee for independent director proposed by holders of the Company’s Notes in accordance with the Fourth Supplemental Indenture (see Item 5, “Other Information – Restructuring of Senior Notes”) and determined not to appoint the noteholders’ nominee to the Company’s board.

ITEM 5. OTHER INFORMATION

Restructuring of Senior Notes.

     In November 2002, the Company received a notice alleging that the Company was in violation of certain non-financial covenants under the Indenture covering the Senior Notes. The Company disagreed that it had violated any Indenture covenants.

     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, representing 97.74% of the outstanding Notes, consented to a Fourth Supplemental Indenture between the Company and 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 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 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 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 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; 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 did permit for bonus payments to those executives above the compensation limitations. The bonus payments would be based on the profitability of the Company and cash payments made on the Notes.

     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 million of debt from PF Management; cancelled the $1.0 million related party note receivable against the debt assumed from PF Management; 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. Minimum lease payments on the former PF Distribution operating leases will be $3.0 million during fiscal year 2005, $2.9 million during fiscal year 2006 and $0.5 million during fiscal year 2007.

Sale of Company

     On May 11, 2004, the shareholders of PF Management, the sole shareholder of the Company, agreed to sell their shares of stock in PF Management to an affiliate of MDP. The sale closed on June 30, 2004.

     In connection with the sale, the following occurred:

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•		The Company merged with Pierre Merger Corp., an affiliate of MDP, with the Company being the surviving corporation following the merger.
•		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 Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources.”
•		The Company terminated its few remaining related party transactions, transferred miscellaneous assets to Messrs. Richardson and Clark, and sold its airplane to Mr. Richardson.
•		Pierre Merger Corp. closed a cash tender offer and consent solicitation for the Company’s Notes. Holders of approximately $110 million, or approximately 96%, of aggregate principal amount of the Company’s outstanding Notes tendered their Notes. The Company, as the surviving corporation of the merger with Pierre Merger Corp., accepted and paid for all Notes tendered pursuant to the tender offer. In connection with the tender, the Noteholders agreed to the terms of a Fifth Supplemental Indenture, which eliminated substantially all of the restrictive covenants contained in the indenture governing the Notes, including the covenants contained in the Fourth Supplemental Indenture. A redemption notice for the Notes not tendered was issued on June 30, 2004 and these Notes will be redeemed as of July 20, 2004.
•		The Company issued 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 our new senior credit facility, were used to finance the acquisition of the Company and to repay outstanding indebtedness, including paying off debt of PF Management assumed by the Company under the Fourth Supplemental Indenture (except capital leases), paying for the Notes tendered in connection with the tender offer described above and redeeming the Notes not tendered.
•		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 sale. The stated term of employment for each executive is one year, but each agreement will renew automatically and continuously year-to-year unless terminated. In addition, Messrs. Woodhams and Naylor made equity investments of $3.1 million and $2.3 million, respectively, in the Company under its new owner.

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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a)		Exhibits
		See the Index to Exhibits provided elsewhere in this report.
(b)		Reports on Form 8-K

     The Company announced on May 17, 2004 the execution of an agreement whereby the shareholders of the Company’s parent, PF Management, agreed to sell their shares of stock of PF Management to an affiliate of Madison Dearborn Partners, LLC.

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SIGNATURES

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

PIERRE FOODS, INC.

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INDEX TO EXHIBITS

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

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