10-Q

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

FORM 10-Q

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

        For the quarterly period ended August 31, 2002

        OR

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

        For the transaction period from ___________________ to ___________________

Commission File Number: 0-7277

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

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

(Former name or former address, if changed since last report)

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.

Yes [X]                     No [  ]

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

Class
Class A Common Stock Outstanding at October 15, 2002
100,000

PIERRE FOODS, INC.

INDEX

			Page No.
Part I. Financial Information:
Item 1. Financial Statements
	Consolidated Balance Sheets - August 31, 2002 and March 2, 2002			3 - 4
	Consolidated Statements of Operations and Retained Earnings - Thirteen Weeks Ended August 31, 2002 and Thirteen Weeks Ended September 1, 2001			5 - 6
	Consolidated Statements of Operations and Retained Earnings - Twenty-six Weeks Ended August 31, 2002 and Twenty-six Weeks Ended September 1, 2001			7 - 8
	Consolidated Statements of Cash Flows - Twenty-six Weeks Ended August 31, 2002 and Twenty-six Weeks Ended September 1, 2001			9 - 10
	Notes to Consolidated Financial Statements			11 - 14
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations				15 - 18
Item 3. Quantitative and Qualitative Disclosures About Market Risk				19
Item 4. Controls and Procedures				19
Part II. Other Information:
Item 6. Exhibits and Reports on Form 8-K				20
		Signatures		21
		Certifications		22 - 23
		Index to Exhibits		24

2

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

PIERRE FOODS, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

			(Unaudited)
			August 31, 2002		March 2, 2002
ASSETS
CURRENT ASSETS:
	Cash and cash equivalents		$	85,769	$	4,577,982
	Certificates of deposit of special purpose entity			1,240,000		1,240,000
	Accounts receivable, net (includes related party receivables of $106,000 and employee receivables of $3,365,000 in fiscal 2003)			23,345,585		21,469,035
	Inventories			33,704,949		23,852,855
	Refundable income taxes			198,908		70,622
	Deferred income taxes			2,349,617		2,349,617
	Prepaid expenses and other current assets			3,434,587		1,624,161
		Total current assets		64,359,415		55,184,272
PROPERTY, PLANT AND EQUIPMENT, NET				50,089,280		43,281,303
OTHER ASSETS:
	Trade name, net			38,808,636		38,808,636
	Goodwill, net			29,019,571		29,019,571
	Note receivable — related party			993,247		993,247
	Deferred loan origination fees, net			3,336,951		2,092,904
	Other			405,214		440,931
		Total other assets		72,563,619		71,355,289
		Total Assets	$	187,012,314	$	169,820,864

See accompanying notes to unaudited consolidated financial statements.

3

PIERRE FOODS, INC. AND SUBSIDIARIES

			(Unaudited)
			August 31, 2002			March 2, 2002
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
	Current installments of long-term debt		$	333,907		$	325,071
	Trade accounts payable			7,505,459			4,972,870
	Accrued interest			3,073,736			3,090,624
	Accrued payroll and payroll taxes			5,215,125			6,077,062
	Accrued promotions			1,916,284			1,473,954
	Accrued taxes (other than income and payroll)			791,428			566,677
	Other accrued liabilities (includes related party liabilities of $370,017 and employee payables of $1,125,000 at August 31, 2002)			2,291,591			1,617,083
		Total current liabilities		21,127,530			18,123,341
LONG-TERM DEBT, less current installments				131,270,512			115,047,605
OBLIGATION OF SPECIAL PURPOSE ENTITY				5,782,862			5,858,139
OTHER LONG-TERM LIABILITIES				866,263			1,032,696
DEFERRED INCOME TAXES				2,552,066			2,552,066
SHAREHOLDERS’ EQUITY:
	Preferred stock — none at August 31, 2002 and par value $.10, authorized 2,500,000 shares; no shares issued at March 2, 2002			—			—
	Common stock — no par value, 100,000 shares authorized, issued and outstanding at August 31, 2002 and no par value, authorized 100,000,000 shares; issued and outstanding at March 2, 2002 - 5,781,480 shares			5,781,480			5,781,480
	Additional paid in capital			23,656,692			23,656,692
	Retained earnings			974,909			2,768,845
	Note receivable — related party			(5,000,000	)		(5,000,000	)
		Total shareholders’ equity		25,413,081			27,207,017
		Total Liabilities and Shareholders’ Equity	$	187,012,314		$	169,820,864

See accompanying notes to unaudited consolidated financial statements.

4

PIERRE FOODS, INC. AND SUBSIDIARIES

Consolidated Statements of Operations and Retained Earnings

(Unaudited)

				Thirteen Weeks Ended
				August 31, 2002			September 1, 2001
REVENUES				$	61,533,655		$	57,839,217
COSTS AND EXPENSES:
	Cost of goods sold (includes related party transactions totaling $1,013,356 in fiscal 2003)				40,979,098			38,454,858
	Selling, general and administrative expenses (includes related party transactions totaling $6,449,381 and $686,978 in fiscal 2003 and fiscal 2002, respectively)				17,000,115			15,043,653
	(Gain) loss on disposition of property, plant and equipment, net				(13,000	)		13,557
	Depreciation and amortization				978,693			1,553,815
		Total costs and expenses			58,944,906			55,065,883
OPERATING INCOME					2,588,749			2,773,334
OTHER INCOME (EXPENSE):
	Interest expense				(3,615,736	)		(3,292,574	)
	Other income, net — (including interest) (includes related party income of $192,484 and $14,551 in fiscal 2003 and 2002, respectively)				213,616			16,898
			Other expense, net		(3,402,120	)		(3,275,676	)
LOSS BEFORE INCOME TAX BENEFIT					(813,371	)		(502,342	)
INCOME TAX BENEFIT					142,233			251,171
NET LOSS				$	(671,138	)	$	(251,171	)

See accompanying notes to unaudited consolidated financial statements.

5

RETAINED EARNINGS:
	Balance at beginning of period	$	2,655,243		$	2,007,630
	Net loss		(671,138	)		(251,171	)
	Distributions by special purpose leasing entity		(1,009,196	)		—
	Balance at end of period	$	974,909		$	1,756,459
NET LOSS PER COMMON SHARE — BASIC AND DILUTED		$	(6.71	)	$	(.04	)
WEIGHTED AVERAGE SHARES OUTSTANDING — BASIC AND DILUTED			100,000			5,781,480

See accompanying notes to unaudited consolidated financial statements.

6

PIERRE FOODS, INC. AND SUBSIDIARIES

Consolidated Statements of Operations and Retained Earnings

(Unaudited)

				Twenty-Six Weeks Ended
				August 31, 2002			September 1, 2001
REVENUES				$	123,294,454		$	108,665,141
COSTS AND EXPENSES:
	Cost of goods sold (includes related party transactions totaling $2,200,157 in fiscal 2003)				81,231,933			71,710,923
	Selling, general and administrative expenses (includes related party transactions totaling $12,748,123 and $2,125,041 in fiscal 2003 and fiscal 2002, respectively)				34,458,986			29,354,614
	Loss on disposition of property, plant and equipment, net				10,408			13,557
	Depreciation and amortization				1,967,360			3,135,435
		Total costs and expenses			117,668,687			104,214,529
OPERATING INCOME					5,625,767			4,450,612
OTHER INCOME (EXPENSE):
	Interest expense				(7,033,251	)		(6,567,931	)
	Other income, net — (including interest) (includes related party income of $387,484 and $29,102 in fiscal 2003 and fiscal 2002, respectively)				426,558			93,707
			Other expense, net		(6,606,693	)		(6,474,224	)
LOSS BEFORE INCOME TAX BENEFIT					(980,926	)		(2,023,612	)
INCOME TAX BENEFIT					196,186			1,011,806
NET LOSS				$	(784,740	)	$	(1,011,806	)

See accompanying notes to unaudited consolidated financial statements.

7

RETAINED EARNINGS:
	Balance at beginning of period	$	2,768,845		$	2,768,265
	Net loss		(784,740	)		(1,011,806	)
	Distributions by special purpose leasing entity		(1,009,196	)		—
	Balance at end of period	$	974,909		$	1,756,459
NET LOSS PER COMMON SHARE — BASIC AND DILUTED		$	(7.85	)	$	(.17	)
WEIGHTED AVERAGE SHARES OUTSTANDING — BASIC AND DILUTED			100,000			5,781,480

See accompanying notes to unaudited consolidated financial statements.

8

PIERRE FOODS, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(Unaudited)

					Twenty-Six Weeks Ended
					August 31, 2002			September 1, 2001
CASH FLOWS FROM OPERATING ACTIVITIES
	Net loss				$	(784,740	)	$	(1,011,806	)
	Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
			Depreciation and amortization			1,967,360			3,135,435
			Amortization of deferred loan origination fees			339,420			263,810
			Loss on disposition of property, plant and equipment, net			10,408			13,557
			(Increase) decrease in other assets			35,717			(482,142	)
			Decrease in other long-term liabilities			(166,433	)		(154,289	)
			Changes in operating assets and liabilities:
				Receivables		(1,876,550	)		(2,034,218	)
				Inventories		(9,852,094	)		(3,916,016	)
				Refundable income taxes, prepaid expenses and other current assets		(1,938,712	)		(1,153,443	)
				Trade accounts payable and other accrued liabilities		2,995,353			1,280,551
				Total adjustments		(8,485,531	)		(3,046,755	)
				Net cash used in operating activities		(9,270,271	)		(4,058,561	)
CASH FLOWS FROM INVESTING ACTIVITIES
		Proceeds from sales of property, plant and equipment				43,000			1,000
		Capital expenditures				(8,828,745	)		(2,579,082	)
				Net cash used in investing activities		(8,785,745	)		(2,578,082	)

See accompanying notes to unaudited consolidated financial statements.

9

CASH FLOWS FROM FINANCING ACTIVITIES
	Net borrowings under revolving credit agreement			16,249,527			4,867,915
	Principal payments on long-term debt			(93,061	)		(44,457	)
	Loan origination fees			(1,583,467	)		—
	Distributions by special purpose leasing entity			(1,009,196	)		—
		Net cash provided by financing activities		13,563,803			4,823,458
NET DECREASE IN CASH AND CASH EQUIVALENTS				(4,492,213	)		(1,813,185	)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD				4,577,982			1,813,185
CASH AND CASH EQUIVALENTS, END OF PERIOD			$	85,769		$	—

See accompanying notes to unaudited consolidated financial statements.

10

PIERRE FOODS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements
(Unaudited)

1.     Basis of Presentation

     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 August 31, 2002 and March 2, 2002, the results of operations for the thirteen weeks and twenty-six weeks ended August 31, 2002 and September 1, 2001, and the cash flows of the Company for the twenty-six weeks ended August 31, 2002 and September 1, 2001. Financial statements for the year-to-date period ended September 1, 2001 (“fiscal 2002”) have been reclassified, where applicable, to conform to financial statement presentation used for the year-to-date period ended August 31, 2002 (“fiscal 2003”). The thirteen week period ended August 31, 2002 is referred to as “second quarter 2003” and the thirteen week period ended September 1, 2001 is referred to as “second quarter 2002.”

     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 fiscal 2003 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 2, 2002 audited consolidated financial statements and notes thereto.

2.      Inventories

     A summary of inventories, by major classifications, follows:

		August 31, 2002		March 2, 2002
Manufacturing supplies		$	1,269,607	$	1,199,647
Raw materials			4,957,506		4,975,188
Finished goods			27,477,836		17,678,020
	Total	$	33,704,949	$	23,852,855

3.      Intangible Assets

     The Company adopted FASB Statement of Financial Accounting Standards No. 142 (“SFAS 142”), “Goodwill and Other Intangible Assets,” effective March 3, 2002. SFAS 142 requires, among other things, the discontinuance of goodwill amortization. In addition, the standard includes provisions for the reclassification of certain existing recognized intangibles as goodwill, reassessment of the useful lives of existing recognized intangibles, reclassification of certain intangibles out of previously reported goodwill and the identification of reporting units for purposes of assessing potential future impairments of goodwill. As a result, during first quarter 2002, the assembled work force with an amortized balance of $2,171,067 was reclassified as goodwill. In addition, the intangible asset established for trade name is deemed to have an indefinite life because the trade name is expected to generate cashflows indefinitely. Accordingly, amortization of both goodwill and tradename has been discontinued.

     As required by FAS 142, during second quarter 2002, the Company completed its first step transitional goodwill impairment test. The results of the first step transitional impairment test indicate that the revised goodwill amount of $29,019,571 may be impaired. Since the first step transitional test indicates that goodwill may be impaired, a second step transitional test is required to be completed by March 1, 2003. Any impairment loss resulting from the second step

11

transitional impairment test would be recorded as a cumulative effect of a change in accounting principle effective March 3, 2002. Accordingly, the financial statements for interim quarters of fiscal 2003 would be restated for any such impairment loss. The reason for the potential impairment loss is the result of the change (effective March 3, 2002) in the evaluation criteria for goodwill from an undiscounted cash flow approach, which was previously utilized under the guidance in Accounting Principles Board Opinion No. 17, to the fair value approach which is stipulated in SFAS 142.

     As of August 31, 2002, the Company had the following acquired intangible assets recorded:

			August 31, 2002		August 31, 2002			August 31, 2002
			Gross Carrying		Accumulated			Net Carrying
			Amount		Amortization			Amount
Goodwill			$	33,571,687	$	(4,552,116	)	$	29,019,571
Intangible assets with indefinite lives:
		Trade name	$	44,340,000	$	(5,531,364	)	$	38,808,636
	Total		$	77,911,687	$	(10,083,480	)	$	67,282,207

     As required by SFAS 142, the results for first and second quarters 2002 have not been restated. The table below presents the effect on net loss and loss per share as if SFAS 142 had been in effect for first and second quarters 2002:

		Twenty-Six			Twenty-Six
		Weeks Ended			Weeks Ended
		August 31, 2002			September 1, 2001
Reported net loss		$	(784,740	)	$	(1,011,806	)
	Add back:
Goodwill and tradename amortization (net of tax)			—			673,376
Adjusted net loss		$	(784,740	)	$	(338,430	)
Basic and diluted net loss per share:
	Reported net loss	$	(7.85	)	$	(.17	)
	Adjusted net loss	$	(7.85	)	$	(.06	)

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4.      Long-Term Debt

     Effective May 29, 2002, the Company terminated its $25 million credit facility, and obtained a new five-year variable rate secured credit facility in an aggregate amount up to $50 million. The new facility includes a $16 million term loan subline, a $10 million capital expenditures subline and a $7 million letter of credit subfacility. The collateral for the facility includes substantially all of the Company’s assets. As of August 31, 2002, the Company had borrowings under this new facility of $16.2 million and borrowing availability of approximately $3.6 million. As of September 1, 2001, the Company had borrowings under its former $25 million credit facility of $4.9 million and borrowing availability of approximately $18.1 million. In addition, at August 31, 2002 and September 1, 2001, the Company was in compliance with the financial covenants under each facility.

     The Company’s Chairman and Vice Chairman agreed to guarantee payment of the new $50 million facility in exchange for guarantee fees to be paid annually in advance, equal to 1.5% each of the amount committed for lending under the facility. During the fiscal quarter ended August 31, 2002, $750,000 was paid to each of the Company’s Chairman and Vice Chairman, and as of August 31, 2002, $187,500 each had been amortized.

5.      Common Stock

     On July 26, 2002, PF Management, Inc. closed its management buyout of the Company. This going-private transaction resulted in the exchange of each share of common stock owned by a person other than PF Management for the right to receive $2.50 in cash. There were 5,781,480 shares issued and outstanding immediately before the closing. Of that amount, 2,151,268 shares were owned by persons other than PF Management. 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 PF Management.

6.     Comprehensive Income

     Total comprehensive loss is comprised solely of the net loss in fiscal 2003 and fiscal 2002. Comprehensive loss was $671,138 and $251,171 for the second quarter 2003 and the second quarter 2002, respectively; and $784,740 and $1,011,806 for fiscal 2003 and fiscal 2002, respectively.

7.      Supplemental cash flow disclosures — cash paid (received) during the period

		Twenty-Six			Twenty-Six
		Weeks Ended			Weeks Ended
		August 31, 2002			September 1, 2001
Interest		$	6,710,719		$	6,333,191
Income taxes net of		$			$
	refunds received		(152,616	)		(356,802	)

8.      Recently Issued Accounting Guidance.

     In June 2001, the FASB issued Statement of Financial Accounting Standards No. 142 (“SFAS 142”), Goodwill and Other Intangible Assets.” See Note 3 for discussion of the Company’s adoption of SFAS 142.

     In June 2001, the FASB issued Statement of Financial Accounting Standards No. 143 (“SFAS 143”), “Accounting for Asset Retirement Obligations,” which is effective for the Company beginning March 3, 2002. SFAS 143 addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the

13

associated asset retirement cost. The adoption of SFAS 143 did not have a material impact on the Company’s financial position and results of operations.

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

9.      Related Party Transactions

     Effective March 3, 2002, the Company entered into a one-year logistics agreement with PF Distribution, LLC (“PF Distribution”), owned 50% each by the Company’s Chairman and Vice Chairman. Under the agreement, PF Distribution will serve as an exclusive logistics agent for the Company, and will provide all warehousing, fulfillment and transportation services to the Company. In the second quarter 2003, distribution expense recorded in selling, general and administrative expense was approximately $6.1 million. In fiscal 2003, distribution expense recorded in selling, general and administrative expense was approximately $12.0 million, of which approximately $11.7 million had been paid to PF Distribution as of August 31, 2002.

     All other related party transactions are consistent with those described at March 2, 2002.

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

Results of Operations

Second Quarter 2003 Compared to Second Quarter 2002

     Revenues, net. Net revenues increased by $3.7 million, or 6.4%. The increase in net revenues was primarily due to a significant new customer, to the introduction of new products and to an increase in demand in all core customer channels. Sales to the new customer significantly increased the Company’s microwavable sandwich sales. The significant new product line introduced was the Chop House burger line, marketed primarily to restaurants. This new line added significant volume to the lower margin customer channel.

     Cost of goods sold. Cost of goods sold increased by $2.5 million, or 6.6%. As a percentage of revenues, cost of goods sold increased from 66.5% to 66.6%. This increase primarily was due to a change in product mix to lower margin products, offset by a decrease in beef and pork raw material prices and improved production efficiencies. Production efficiencies, including favorable material usage, were realized through process improvements combined with an increase in production volume spread over a stable fixed overhead base.

     Selling, general and administrative. Selling, general and administrative expenses increased by $2.0 million, or 13.0%, primarily due to an increase in overhead costs to support the increase in sales volume. As a percentage of revenues, selling, general and administrative expenses increased from 26.0% to 27.6%.

     Depreciation and amortization. Depreciation and amortization expense decreased by $.6 million, or 37.0%, due primarily to the adoption of SFAS 142 in fiscal 2003 which discontinued amortization of goodwill and intangibles with indefinite lives.

     Other expense, net. The primary component of net other expense for second quarter 2003 and second quarter 2002 is interest expense. Interest expense consists primarily of interest on fixed rate long-term debt (see — “Liquidity and Capital Resources” below). Net other expense increased by $.1 million or 3.9% in fiscal year 2003.

     Income tax benefit. The effective tax rate for second quarter 2003 was 17.5% compared to 50% for second quarter 2002. The decrease in the effective tax rate is due primarily to the effects of permanent timing differences and compensation deduction limitations in fiscal 2002.

15

Fiscal 2003 Compared to Fiscal 2002

     Revenues, net. Net revenues increased by $14.6 million, or 13.5%. The increase in net revenues was primarily due to a significant new customer, to the introduction of new products and to an increase in demand in all core customer channels. Sales to the new customer significantly increased the Company’s microwavable sandwich sales. The significant new product line introduced was the Chop House burger line, marketed primarily to restaurants. This new line added significant volume to the lower margin customer channel.

     Cost of goods sold. Cost of goods sold increased by $9.5 million, or 13.3%. As a percentage of revenues, cost of goods sold decreased from 66.0% to 65.9%. This decrease primarily was due to a decrease in beef raw material prices and improved production efficiencies, offset by an increase in pork and chicken raw material prices and a by change in product mix to lower margin products. Production efficiencies, including favorable material usage, were realized through process improvements combined with an increase in production volume spread over a stable fixed overhead base.

     Selling, general and administrative. Selling, general and administrative expenses increased by $5.1 million, or 17.4%, primarily due to an increase in overhead costs to support the increase in sales volume. As a percentage of revenues, selling, general and administrative expenses increased from 27.0% to 27.9%.

     Depreciation and amortization. Depreciation and amortization expense decreased by $1.2 million, or 37.3%, due primarily to the adoption of SFAS 142 in fiscal 2003 which discontinued amortization of goodwill and intangibles with indefinite lives.

     Other expense, net. The primary component of net other expense for fiscal 2003 and fiscal 2002 is interest expense. Interest expense consists primarily of interest on fixed rate long-term debt (see -— “Liquidity and Capital Resources” below). Net other expense increased by $.1 million or 2%.

     Income tax benefit. The effective tax rate for fiscal 2003 was 20.0% compared to 50% for fiscal 2002. The decrease in the effective tax rate is due primarily to the effects of permanent timing differences and compensation deduction limitations in fiscal 2002.

16

     Liquidity and Capital Resources

     Net cash used in operating activities was $9.3 million for fiscal 2003, as compared to $4.1 million for fiscal 2002. The primary components of the change in net cash used in operating activities were 1) an increase in inventory of $9.9 million due to the seasonal building of inventories which normally occurs during the late spring and early summer to service market channels that require heavy shipments in late summer and early fall; 2) an increase in accounts payable and other accrued liabilities of $3.0 million; offset by 3) a decrease in amortization expense of $1.3 million due to the discontinuance of amortization of goodwill under FAS 142.

     Net cash used in investing activities was $8.8 million for fiscal 2003, compared to $2.6 million for fiscal 2002, due to an increase in capital expenditures for plant improvements and a plant expansion.

     Net cash provided by financing activities was $13.6 million for fiscal 2003, compared to net cash provided by financing activities of $4.8 million for fiscal 2002. The increase in cash provided by financing activities was due primarily to an increase in borrowings under the revolving credit facility of $11.4 million for fiscal 2003 compared to fiscal 2002, offset by loan origination fees of $1.6 million incurred in fiscal 2003 that did not occur in fiscal 2002 and special purpose entity member distributions of $1.0 million incurred in fiscal 2003 that did not occur in fiscal 2002.

     Effective May 29, 2002, the Company terminated its $25 million credit facility. Also, effective May 29, 2002, the Company obtained a five-year variable-rate $50 million revolving credit facility from a new lender, which includes a $16 million term loan subline, a $10 million capital expenditures subline and a $7 million letter of credit subfacility. Funds available under this facility are available for working capital requirements, permitted investments and general corporate purposes. Borrowings under the facility bear interest at floating rates based upon the interest rate option selected from time to time by the Company and are secured by a first-priority security interest in substantially all of the Company’s assets. In addition, the Company is required to satisfy certain financial covenants regarding cash flow and capital expenditures.

     As of August 31, 2002, the Company had borrowings under this new facility of $16.2 million and borrowing availability of approximately $3.6 million. As of September 1, 2001, the Company had borrowings under its former $25 million credit facility of approximately $4.9 million and borrowing availability of approximately $18.1 million. In addition, at August 31, 2002 and September 1, 2001, the Company was in compliance with the financial covenants under each of the facilities.

     The Company has budgeted approximately $4.3 million for capital expenditures for the remainder of fiscal 2003. These expenditures are primarily devoted to a plant expansion in order to maintain the current revenue growth trend. Additional expenditures are designated for routine food processing capital improvement projects and other miscellaneous expenditures. The Company believes that funds from operations and funds from the $50 million 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 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-term financing sources, such as an increase in borrowing availability under the $50 million credit facility, the issuance of industrial revenue bonds or equity investment. The incurrence of additional long-term debt is governed and restricted by the Company’s existing debt instruments. Furthermore, there can be no assurance that additional long-term financing will be available on advantageous terms (or any terms) when needed by the Company.

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

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Logistics Agreement

     Effective March 3, 2002, the Company entered into a one-year logistics agreement with PF Distribution, LLC (“PF Distribution”), owned 50% each by the Company’s Chairman and Vice Chairman. Under the agreement, PF Distribution will serve as an exclusive logistics agent for the Company, and will provide all warehousing, fulfillment and transportation services to the Company. The cost of PF Distribution’s services is based on flat rates per pound, which are 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 the second quarter 2003, distribution expense recorded in selling, general and administrative expense was approximately $6.1 million. In fiscal 2003, distribution expense recorded in selling, general and administrative expense was approximately $12.0 million, of which approximately $11.7 million had been paid to PF Distribution as of August 31, 2002.

Seasonality

     Except for sales to school districts, which represent approximately 26% of total sales and which decline during the early spring and summer and early January, there is no significant seasonal variation in sales.

Management Buyout

     On July 26, 2002, 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 and the management buyout of the Company was completed on July 26, 2002. The Company is now a wholly-owned subsidiary of PF Management, Inc.

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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 2, 2002, 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 August 31, 2002 or March 2, 2002. Certain of the Company’s outstanding nonderivative financial instruments at August 31, 2002 are subject to interest rate risk, but not subject to foreign currency or commodity price 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 August 31, 2002 have not changed materially since March 2, 2002. All long-term debt outstanding at August 31, 2002, comprised of $115.0 million of Senior Notes, $16.2 million of outstanding borrowings under the revolving credit facility and $5.8 million of obligation of special purpose entity, was accruing interest at fixed rates. In the future, should the Company borrow funds under its existing credit facility or other long-term financing sources, a rise in prevailing interest rates could have adverse effects on the Company’s financial condition and results of operations.

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: substantial leverage and insufficient cash flow from operations; restrictions imposed by the Company’s debt instruments; management control; restriction of payment of dividends; competitive considerations; government regulation; general risks of the food industry; adverse changes in food costs and availability of supplies; dependence on key personnel and potential labor disruptions. Shareholder approval of the management buyout is not assured. The Company’s failure to close that transaction for any reason could have material adverse effects on the Company and the markets for its securities. 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.

ITEM 4. CONTROLS AND PROCEDURES

     Within the 90 days prior to the date of this report, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s President and Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures, as defined in Exchange Act Rule 15d-14(c). Based upon that evaluation, the Company’s President and Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective in enabling the Company to record, process, summarize and report information required to be included in the Company’s periodic SEC filings within the required time period. There have been no significant changes in the Company’s internal controls or in other factors that could significantly affect internal controls subsequent to the date the Company carried out its evaluation.

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PART II. OTHER INFORMATION

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 July 26, 2002 the completion of a share exchange with PF Management, Inc. resulting in a management buyout of Pierre Foods, Inc.
(c)	Other Filings
	None.

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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.
Date: October 15, 2002	By:	/s/ Norbert E. Woodhams Norbert E. Woodhams President and Chief Executive Officer (Principal Executive Officer)
Date: October 15, 2002	By:	/s/ Pamela M. Witters Pamela M. Witters Chief Financial Officer (Principal Financial Officer)

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CERTIFICATIONS

I, Norbert E. Woodhams, certify that:

     1.     I have reviewed this quarterly report on Form 10-Q of Pierre Foods, Inc.;

     2.     Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

     3.     Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this quarterly report;

     4.     The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the Company and we have:

a.	designed such disclosure controls and procedures to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
b.	evaluated the effectiveness of the Company’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and
c.	presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

     5.     The Company’s other certifying officer and I have disclosed, based on our most recent evaluation, to the Company’s auditors and the Company’s board of directors:

a.	all significant deficiencies in the design or operation of internal controls which could adversely affect the Company’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and
b.	any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal controls; and

     6.     The Company’s other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: October 15, 2002
	/s/ Norbert E. Woodhams Norbert E. Woodhams President and Chief Executive Officer (Principal Executive Officer)

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I, Pamela M. Witters, certify that:

     1.     I have reviewed this quarterly report on Form 10-Q of Pierre Foods, Inc.;

     2.     Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

     3.     Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this quarterly report;

     4.     The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the Company and we have:

a.	designed such disclosure controls and procedures to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
b.	evaluated the effectiveness of the Company’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and
c.	presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

     5.     The Company’s other certifying officer and I have disclosed, based on our most recent evaluation, to the Company’s auditors and the Company’s board of directors:

a.	all significant deficiencies in the design or operation of internal controls which could adversely affect the Company’s ability to record, process, summarize and report financial data and have identified for the Company’s auditors any material weaknesses in internal controls; and
b.	any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal controls; and

     6.     The Company’s other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: October 15, 2002
	/s/ Pamela M. Witters Pamela M. Witters Chief Financial Officer (Principal Financial Officer)

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INDEX TO EXHIBITS

Exhibit No.	Description
3.1	Restated Articles of Incorporation of the Company (incorporated by reference to Exhibit 3.1 to the Company’s Registration Statement on Form S-4 (No. 333-58711))
3.2	Bylaws of the Company (incorporated by reference to Exhibit 3.4 to the Company’s Annual Report on Form 10-K for its fiscal year ended February 27, 1998)
3.3	Articles of Restatement of Pierre Foods, Inc., dated July 30, 2002
4.1	Note Purchase Agreement, dated June 4, 1998, among the Company, the Guarantors and the Initial Purchasers (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed with the SEC on June 24, 1998)
4.2	Indenture, dated as of June 9, 1998, among the Company, certain Guarantors and State Street Bank and Trust Company, Trustee (incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K filed with the SEC on June 24, 1998)
4.3	Registration Rights Agreement, dated June 9, 1998, among the Company, certain Guarantors and certain Initial Purchasers (incorporated by reference to Exhibit 4.3 to the Company’s Current Report on Form 8-K filed with the SEC on June 24, 1998)
4.4	Form of Initial Global Note (included as Exhibit A to Exhibit 4.2 to the Company’s Current Report on Form 8-K filed with the SEC on June 24, 1998 and incorporated herein by reference)
4.5	Form of Initial Certificated Note (included as Exhibit B to Exhibit 4.2 to the Company’s Current Report on Form 8-K filed with the SEC on June 24, 1998 and incorporated herein by reference)
4.6	Form of Exchange Global Note (included as Exhibit C to Exhibit 4.2 to the Company’s Current Report on Form 8-K filed with the SEC on June 24, 1998 and incorporated herein by reference)
4.7	Form of Exchange Certificated Note (included as Exhibit D to Exhibit 4.2 to the Company’s Current Report on Form 8-K filed with the SEC on June 24, 1998 and incorporated herein by reference)
4.8	First Supplemental Indenture, dated as of September 5, 1998, among the Company, State Street Bank and Trust Company, Trustee, and Pierre Leasing, LLC (incorporated by reference to Exhibit 4.8 to Pre-Effective amendment No. 1 to the Company’s Registration Statement on Form S-4 (No. 333-58711))
4.9	Second Supplemental Indenture dated as of February 26, 1999 among the Company, State Street Bank and Trust Company, Trustee, and Fresh Foods Restaurant Group, LLC (incorporated by reference to Exhibit 4.9 to the Company’s Quarterly Report on Form 10-Q for its fiscal quarter ended December 4, 1999)
4.10	Third Supplemental Indenture dated as of October 8, 1999 between the Company and State Street Bank and Trust Company, Trustee (incorporated by reference to Exhibit 4.10 to the Company’s Quarterly Report on Form 10-Q for its fiscal quarter ended December 4, 1999)
10.1	Guarantee Fee Agreement between the Company and James C. Richardson, dated as of May 23, 2002 (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for its fiscal quarter ended June 1, 2002)

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10.2	Guarantee Fee Agreement between the Company and David R. Clark, dated as of May 23, 2002 (incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for its fiscal quarter ended June 1, 2002)
10.3	Loan and Security Agreement by and among the Company and Foothill Capital Corporation, as Lender, dated as of May 29, 2002 (schedules omitted) (incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for its fiscal quarter ended June 1, 2002)
10.4	Amendment No. 1 to Amended and Restated Agreement and Plan of Share Exchange between the Company, PF Management, Inc., James C. Richardson, Jr. and David R. Clark, dated as of June 20, 2002 (incorporated by reference to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for its fiscal quarter ended June 1, 2002)
10.5	Articles of Share Exchange Between PF Management, Inc. and Pierre Foods, Inc. dated July 26, 2002
10.6	Amended and Restated Bylaws of Pierre Foods, Inc., dated September 18, 2002
99.1	Risk Factors
99.2	Written Statement of Chief Executive Officer
99.3	Written Statement of Chief Financial Officer

     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.

25 EX-3.3 3 g78669exv3w3.txt ARTICLES OF RESTATEMENT OF PIERRE FOODS, INC. EXHIBIT 3.3 ARTICLES OF RESTATEMENT OF PIERRE FOODS, INC. The undersigned corporation, pursuant to Section 55-10-07 of the North Carolina Business Corporation Act, as amended, hereby submits these Articles of Restatement for the purpose of integrating into one document its original Articles of Incorporation and all amendments thereto and also for the purpose of amending its Articles of Incorporation: 1. Name. The name of the corporation is Pierre Foods, Inc. (the "Corporation"). 2. Restated Articles. Attached hereto as Exhibit A are the Restated Articles of Incorporation of the Corporation, which contain an amendment to the Articles of Incorporation of the Corporation requiring shareholder approval. 3. Approval. The Amended and Restated Articles of Incorporation of the Corporation were adopted and approved by the shareholders of the Corporation on the 30th day of July 2002, in the manner prescribed by law. This the 30th day of July, 2002. PIERRE FOODS, INC. By: /s/ David R. Clark -------------------------------- David R. Clark, Vice-Chairman EXHIBIT A RESTATED ARTICLES OF INCORPORATION OF PIERRE FOODS, INC. The undersigned hereby submits these Restated Articles of Incorporation pursuant to N.C.G.S. 55-10-07 of the North Carolina Business Corporation Act. 1. Name. The name of the corporation is Pierre Foods, Inc. 2. Capital. The number of shares the corporation is authorized to issue is one hundred thousand (100,000) of Class A common without par or stated value. 3. Registered Agent/Office. The address of the registered office of the corporation in the State of North Carolina is 361 Second Street, Hickory, Catawba County, North Carolina 28601 with a mailing address of Post Office Box 3967, Hickory, Catawba County, North Carolina 28603; and the name of its registered agent at such address is David R. Clark. 4. Indemnification. To the fullest extent permitted by the North Carolina Business Corporation Act as it exists or may hereafter be amended, no person who is serving or who has served as a director of the corporation shall be personally liable to the corporation or any of its shareholders for monetary damages for breach of duty as a director. No amendment or repeal of this article, nor the adoption of any provision to these Articles of Incorporation inconsistent with this article, shall eliminate or reduce the protection granted herein with respect to any matter that occurred prior to such amendment, repeal, or adoption. 5. Pre-emptive Rights. The shareholders of the Corporation shall have no pre-emptive rights to acquire additional or treasury shares of the Corporation. 6. Cumulative Voting. The shareholders are not entitled to cumulate their votes for the election of directors. EX-10.5 4 g78669exv10w5.txt ARTICLES OF SHARE EXCHANGE EXHIBIT 10.5 ARTICLES OF SHARE EXCHANGE BETWEEN PF MANAGEMENT, INC. AND PIERRE FOODS, INC. Pursuant to Section 55-11-05 of the General Statutes of North Carolina, PF Management, Inc., a corporation organized under the laws of the State of North Carolina, hereby submits these Articles of Share Exchange for the purpose of acquiring all of the outstanding shares of common stock, no par value, of Pierre Foods, Inc., a corporation organized under the law of the State of North Carolina . I. The Plan of Share Exchange that was duly adopted by the board of directors of each of the corporations participating in the exchange and that was approved by the shareholders of Pierre Foods, Inc. in the manner prescribed by Chapter 55 of the General Statutes of North Carolina is as follows: Plan of Share Exchange A. Corporations Participating in Share Exchange. PF Management, Inc. (the "Acquiror") will acquire all of the outstanding shares of Pierre Foods, Inc. (the "Company") pursuant to the terms and conditions of this Plan. B. Exchange of Shares. At the effective time of the share exchange (the "Effective Time"), the shares of the corporations participating in the share exchange shall be exchanged as follows: 1. Acquiror. The outstanding shares of the Acquiror will not be exchanged or altered in any manner as a result of the share exchange and will remain outstanding as shares of the Acquiror. 2. The Company. Each outstanding share of the Company, except those already owned by the Acquiror, will be exchanged for and become the right to receive from the Acquiror $2.50 in cash per share and each such share shall be cancelled. 3. Surrender of Share Certificates. Each holder of a certificate representing shares of the Company to be exchanged under this Plan will be entitled, upon presentation and surrender to the Acquiror of such certificate, to receive in exchange therefor the consideration described in paragraph 2 of this Plan. Until so surrendered, each outstanding certificate that prior to the Effective Time represented shares of the Company will be deemed for all purposes to evidence ownership of the consideration to be issued for such shares. C. Abandonment. After the approval of this Plan by the shareholders of the Company, and at any time prior to the exchange becoming effective, the board of directors of the Acquiror may, in its discretion, abandon the share exchange. II. Approval by the shareholders of the undersigned Acquiror was not required. III. The share exchange will become effective upon filing by the Secretary of State of North Carolina. This the 26th day of July, 2002. PF MANAGEMENT, INC. By: /s/ David R. Clark ------------------------------- David R. Clark President EX-10.6 5 g78669exv10w6.txt AMENDED AND RESTATED BYLAWS OF PIERRE FOODS, INC. EXHIBIT 10.6 ARTICLES OF AMENDMENT OF PIERRE FOODS, INC. Pursuant to N.C.G.S. Section 55-10-06 of the General Statutes of North Carolina, the undersigned Corporation hereby submits the following Articles of Amendment for the purpose of amending its Articles of Incorporation. 1. Name. The name of the Corporation is Pierre Foods, Inc. 2. Amendment. The following amendment to the Articles of the corporation was adopted by its directors and shareholders on the 18th day of September, 2002, in the manner prescribed by law: RESOLVED, that the Restated Articles of Incorporation of Pierre Foods, Inc. filed with the Secretary of State on August 5, 2002 be amended by the addition of the following new Article. 6. Action Without Meeting. To the full extent then permitted by the North Carolina Business Corporation Act as it may be amended from time to time, any action required or permitted to be taken at a meeting may be taken without a meeting and without prior notice by shareholders having not less than the minimum number of votes that would be necessary to take the action at a meeting at which all shareholders entitled to vote were present and voted. 4. Date of Adoption. The date of adoption of the amendment was September 18, 2002. 5. Shareholder Approval. The amendment was approved by shareholder action as required in accordance with Chapter 55 of the North Carolina General Statutes. 6. Effective Date. These articles will be effective upon filing. This the 18th day of September, 2002. PIERRE FOODS, INC. By: /s/ David R. Clark ----------------------------- David R. Clark, Vice-Chairman EX-99.1 6 g78669exv99w1.txt RISK FACTORS EXHIBIT 99.1 RISK FACTORS SUBSTANTIAL LEVERAGE; INSUFFICIENT CASH FLOW FROM OPERATIONS At August 31, 2002 the Company had approximately $131.6 million of indebtedness, representing 70.4% of its total capitalization. The ability of the Company to satisfy its debt obligations depends largely on the Company's operating performance, which is affected by prevailing economic conditions and financial, business and other factors, many of which are beyond the Company's control. The degree to which the Company is leveraged has important consequences to the Company, including the following: (i) the Company's ability to obtain additional financing is limited; (ii) substantial portions of the Company's cash flows from operations must be dedicated to the debt service, thereby reducing the funds available to the Company for its operations; (iii) the Company's debt instruments contain financial and other restrictive covenants, including covenants restricting the incurrence and restructuring of debt, the creation of liens, the payment of dividends and sales of assets; (iv) the Company's borrowings under its revolving credit facility are at variable rates of interest, resulting in adverse effects on the Company's financial condition and results of operations when the relevant market interest rates increase; (v) the debt outstanding under the revolving credit facility is secured by substantially all of the Company's assets; (vi) the Company is more leveraged than many of its competitors, placing the Company at a relative competitive disadvantage; and (vii) the Company's high degree of indebtedness makes it more vulnerable in the event of a downturn in its business. As a result of the Company's level of indebtedness, its financial capacity to respond to market conditions, extraordinary capital needs and other factors is limited. Fiscal 2003 operating cash flows and borrowings under the Company's $50 million credit facility were sufficient to provide necessary working capital and to service existing debt, and the Company anticipates that the remainder of its fiscal 2003 cash requirements for working capital and debt service will be met through a combination of funds provided by operations and additional borrowings under its credit facility. Significant assumptions underlie this belief, including, among other things, that the Company will succeed in implementing its business strategy and that there will be no material adverse developments in the business, liquidity or significant capital requirements of the Company. The Company has budgeted approximately $4.3 million for capital expenditures for the remainder of fiscal 2003. These expenditures primarily are devoted to a plant expansion in order to maintain the current revenue growth trends. Additional expenditures are devoted to routine food processing capital improvement projects and other miscellaneous expenditures. The Company believes that funds from operations and funds from its $50 million credit facility, as well as the Company's ability to enter into capital or operating leases, will be adequate to finance these routine capital expenditures. If the Company continues its historical revenue growth trend as expected, it will be required to raise and invest additional capital for other various plant expansion projects to provide operating capacity to satisfy increased demand. The Company believes that future cash requirements for these plant expansion projects would need to be met through other long-term financing sources, such as the issuance of industrial revenue bonds or equity investment. The incurrence of additional debt is governed and restricted by the Company's existing debt instruments. Furthermore, there can be no assurance that additional long-term financing will be available on advantageous terms (or any terms) when needed by the Company. The Company anticipates continued sales growth in key market areas. As noted above, however, this growth will require other capital expansion projects to increase existing plant capacity to satisfy increased demand. Sales growth, improved operating performance and expanded plant capacity -- none of which is assured -- will be necessary for the Company to continue to service existing debt. If the Company is unable to continue servicing its debt, then it will need to adopt alternative strategies, which may include actions such as reducing or delaying capital expenditures, selling assets, restructuring or refinancing its indebtedness or seeking additional equity capital. There can be no assurance that any of these strategies could be affected on satisfactory terms or that the chosen strategy would enable the Company to avoid defaults under its existing debt instruments. RESTRICTIONS IMPOSED BY THE COMPANY'S DEBT INSTRUMENTS The Company's debt instruments include covenants that, among other things, limit or restrict the ability of the Company to dispose of assets, incur additional indebtedness, repay other indebtedness, pay dividends, enter into certain investments or acquisitions, engage in mergers or consolidations or engage in certain transactions with subsidiaries and affiliates and otherwise restrict corporate activities. There can be no assurance that such limitations and restrictions will not adversely affect the Company's ability to finance its future operations or capital needs or engage in other business activities that may be in the interest of the Company. The Company's $50 million credit facility also requires the Company to comply with certain financial covenants. The ability of the Company to comply with such financial covenants may be affected by events beyond the Company's control. A breach of any of these covenants or the inability of the Company to comply with the required financial covenants could result in a default under the credit facility. In the event of any such default, the lender could elect to declare all borrowings outstanding, together with accrued interest and other fees, due and payable. If the Company were unable to repay any such borrowings when due, then the lender could proceed against its collateral, with material adverse effects on the Company's business, financial condition and results of operations. COMPETITION The food production business is highly competitive and is often affected by changes in tastes and eating habits of the public, economic conditions affecting spending habits and other demographic factors. In sales of meat products, the Company faces strong price competition from a variety of large meat processing concerns and from smaller local and regional operations. In sales of biscuit and yeast roll products, the Company competes with a number of large bakeries in various parts of the country. The sandwich industry is extremely fragmented, with few large direct competitors but low barriers to entry and indirect competition in the form of numerous other products. GOVERNMENT REGULATION The food production industry is subject to extensive federal, state and local government regulation. The Company's food processing facilities and food products are subject to frequent inspection by the United States Department of Agriculture (the "USDA"), the Food and Drug Administration (the "FDA") and other government authorities. In July 1996, the USDA issued strict new policies against contamination by food-borne pathogens such as E. coli and Salmonella and established the Hazard Analysis and Critical Control Points ("HACCP") system. The HACCP standards require the implementation of a seven step system for preventing hazards that could cause food-borne illnesses and became effective on January 25, 2000 for all food manufacturers with over ten employees and $25 million in sales. The Company is in full compliance with all FDA and USDA regulations, including HACCP standards, but there can be no assurance that the Company will be able to remain in compliance. The Company's failure to comply with applicable laws and regulations could subject it to civil remedies, including fines, injunctions, recalls and seizures, or even criminal sanctions, any of which could have material adverse effects on the Company. The Company's operations are also governed by laws and regulations relating to workplace safety and worker health that, among other things, establish noise standards and regulate the use of hazardous chemicals in the workplace. The Company 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. There can be no assurance that any failure to comply, or compliance in the future, with environmental laws, or that liabilities arising thereunder, will have no material adverse effect on the Company's business, financial condition or results of operations. GENERAL RISKS OF THE FOOD INDUSTRY The food processing industry is generally subject to various risks, including adverse changes in general economic conditions, evolving consumer preferences, nutritional and health-related concerns, federal, state and local food inspection and processing controls and litigation-oriented risks in the nature of consumer product liability claims, product tampering problems and the availability and expense of liability insurance. There has recently been increasing scrutiny due to the association of meat products with recent outbreaks of illness, and even death, caused by pathogens which can be found in raw and improperly cooked meat. Incidents of contamination experienced by other food processors have materially and adversely affected their businesses and could adversely affect the Company's business. Product recalls are sometimes required in the meat industry to withdraw contaminated or mislabeled products from the market. ADVERSE CHANGES IN FOOD COSTS; AVAILABILITY OF SUPPLIES The profitability of the Company is dependent on its ability to anticipate and react to changes in food prices in general and to changes in meat prices in particular. While the Company has historically been able to anticipate and react to changing prices through purchasing practices and price adjustments so as to avoid any material adverse effect on profitability, there can be no assurance that the Company will be able to do so in the future. In particular, no assurance can be given that the Company will be able to pass any cost increases on to its customers. The Company does not engage in hedging transactions with respect to raw material purchases. Failure to engage in such transactions may result in increased price volatility, with resulting adverse effects on results of operations. In addition, the Company's dependency upon regular deliveries of supplies from particular suppliers means that interruptions or stoppages in such deliveries could adversely affect the Company until arrangements with alternate suppliers could be made. DEPENDENCE ON KEY PERSONNEL The Company believes that its continued success will largely depend upon the abilities and experience of its senior management team such that loss of the services of one or more senior managers could adversely affect the Company's results of operations. The Company has entered into three-year Employment Agreements with its Chairman and Vice-Chairman of the Board, Chief Financial Officer and Senior Vice President of Sales, which specify terms relating to salary, bonus and benefits to be paid. The Company has entered into an Incentive Agreement with its President and Chief Executive Officer, which sets forth compensation to be paid, but does not provide for a specified employment term for the President. POTENTIAL LABOR DISRUPTION None of the Company's employees is covered by a collective bargaining agreement. To the extent the Company experiences a labor disruption in the future, there could be material adverse effects on the Company's business, financial condition and results of operations. EX-99.2 7 g78669exv99w2.txt WRITTEN STATEMENT OF CHIEF EXECUTIVE OFFICER EXHIBIT 99.2 WRITTEN STATEMENT OF THE CHIEF EXECUTIVE OFFICER Pursuant to 18 U.S.C. Section 1350 Solely for the purposes of complying with 18 U.S.C. "1350, I, the undersigned President and Chief Executive Officer of Pierre Foods, Inc. (the "Company"), hereby certify, based on my knowledge, that the Quarterly Report on Form 10-Q of the Company for the quarter ended August 31, 2002 (the "Report") fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 and that information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Norbert E. Woodhams October 15, 2002 EX-99.3 8 g78669exv99w3.txt WRITTEN STATEMENT OF CHIEF FINANCIAL OFFICER EXHIBIT 99.3 WRITTEN STATEMENT OF THE CHIEF FINANCIAL OFFICER Pursuant to 18 U.S.C. Section 1350 Solely for the purposes of complying with 18 U.S.C. "1350, I, the undersigned Chief Financial Officer of Pierre Foods, Inc. (the "Company"), hereby certify, based on my knowledge, that the Quarterly Report on Form 10-Q of the Company for the quarter ended August 31, 2002 (the "Report") fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 and that information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Pamela M. Witters October 15, 2002 -----END PRIVACY-ENHANCED MESSAGE-----

EX-3.3

                                                                     EXHIBIT 3.3


                             ARTICLES OF RESTATEMENT
                                       OF
                               PIERRE FOODS, INC.


         The undersigned corporation, pursuant to Section 55-10-07 of the North
Carolina Business Corporation Act, as amended, hereby submits these Articles of
Restatement for the purpose of integrating into one document its original
Articles of Incorporation and all amendments thereto and also for the purpose of
amending its Articles of Incorporation:

         1. Name. The name of the corporation is Pierre Foods, Inc. (the
"Corporation").

         2. Restated Articles. Attached hereto as Exhibit A are the Restated
Articles of Incorporation of the Corporation, which contain an amendment to the
Articles of Incorporation of the Corporation requiring shareholder approval.

         3. Approval. The Amended and Restated Articles of Incorporation of the
Corporation were adopted and approved by the shareholders of the Corporation on
the 30th day of July 2002, in the manner prescribed by law.

         This the 30th day of July, 2002.


                                            PIERRE FOODS, INC.

                                            By: /s/ David R. Clark
                                                --------------------------------
                                                David R. Clark, Vice-Chairman





                                    EXHIBIT A


                       RESTATED ARTICLES OF INCORPORATION
                                       OF
                               PIERRE FOODS, INC.


         The undersigned hereby submits these Restated Articles of Incorporation
pursuant to N.C.G.S. 55-10-07 of the North Carolina Business Corporation Act.

         1. Name. The name of the corporation is Pierre Foods, Inc.

         2. Capital. The number of shares the corporation is authorized to issue
is one hundred thousand (100,000) of Class A common without par or stated value.

         3. Registered Agent/Office. The address of the registered office of the
corporation in the State of North Carolina is 361 Second Street, Hickory,
Catawba County, North Carolina 28601 with a mailing address of Post Office Box
3967, Hickory, Catawba County, North Carolina 28603; and the name of its
registered agent at such address is David R. Clark.

         4. Indemnification. To the fullest extent permitted by the North
Carolina Business Corporation Act as it exists or may hereafter be amended, no
person who is serving or who has served as a director of the corporation shall
be personally liable to the corporation or any of its shareholders for monetary
damages for breach of duty as a director. No amendment or repeal of this
article, nor the adoption of any provision to these Articles of Incorporation
inconsistent with this article, shall eliminate or reduce the protection granted
herein with respect to any matter that occurred prior to such amendment, repeal,
or adoption.

         5. Pre-emptive Rights. The shareholders of the Corporation shall have
no pre-emptive rights to acquire additional or treasury shares of the
Corporation.

         6. Cumulative Voting. The shareholders are not entitled to cumulate
their votes for the election of directors.

EX-10.5

                                                                    EXHIBIT 10.5


                           ARTICLES OF SHARE EXCHANGE

                                     BETWEEN

                               PF MANAGEMENT, INC.

                                       AND

                               PIERRE FOODS, INC.


         Pursuant to Section 55-11-05 of the General Statutes of North Carolina,
PF Management, Inc., a corporation organized under the laws of the State of
North Carolina, hereby submits these Articles of Share Exchange for the purpose
of acquiring all of the outstanding shares of common stock, no par value, of
Pierre Foods, Inc., a corporation organized under the law of the State of North
Carolina .

         I. The Plan of Share Exchange that was duly adopted by the board of
directors of each of the corporations participating in the exchange and that was
approved by the shareholders of Pierre Foods, Inc. in the manner prescribed by
Chapter 55 of the General Statutes of North Carolina is as follows:

                             Plan of Share Exchange

            A. Corporations Participating in Share Exchange.

                  PF Management, Inc. (the "Acquiror") will acquire all of the
         outstanding shares of Pierre Foods, Inc. (the "Company") pursuant to
         the terms and conditions of this Plan.

            B. Exchange of Shares.

                  At the effective time of the share exchange (the "Effective
         Time"), the shares of the corporations participating in the share
         exchange shall be exchanged as follows:

                           1. Acquiror. The outstanding shares of the Acquiror
                  will not be exchanged or altered in any manner as a result of
                  the share exchange and will remain outstanding as shares of
                  the Acquiror.

                           2. The Company. Each outstanding share of the
                  Company, except those already owned by the Acquiror, will be
                  exchanged for and become the right to receive from the
                  Acquiror $2.50 in cash per share and each such share shall be
                  cancelled.




                           3. Surrender of Share Certificates. Each holder of a
                  certificate representing shares of the Company to be exchanged
                  under this Plan will be entitled, upon presentation and
                  surrender to the Acquiror of such certificate, to receive in
                  exchange therefor the consideration described in paragraph 2
                  of this Plan. Until so surrendered, each outstanding
                  certificate that prior to the Effective Time represented
                  shares of the Company will be deemed for all purposes to
                  evidence ownership of the consideration to be issued for such
                  shares.

            C. Abandonment.

                  After the approval of this Plan by the shareholders of the
         Company, and at any time prior to the exchange becoming effective, the
         board of directors of the Acquiror may, in its discretion, abandon the
         share exchange.

         II. Approval by the shareholders of the undersigned Acquiror was not
required.

         III. The share exchange will become effective upon filing by the
Secretary of State of North Carolina.

         This the 26th day of July, 2002.


                                             PF MANAGEMENT, INC.


                                             By: /s/ David R. Clark
                                                 -------------------------------
                                                 David R. Clark
                                                 President

EX-10.6

                                                                    EXHIBIT 10.6


                              ARTICLES OF AMENDMENT

                                       OF

                               PIERRE FOODS, INC.

         Pursuant to N.C.G.S. Section 55-10-06 of the General Statutes of North
Carolina, the undersigned Corporation hereby submits the following Articles of
Amendment for the purpose of amending its Articles of Incorporation.

         1. Name. The name of the Corporation is Pierre Foods, Inc.

         2. Amendment. The following amendment to the Articles of the
corporation was adopted by its directors and shareholders on the 18th day of
September, 2002, in the manner prescribed by law:

                  RESOLVED, that the Restated Articles of Incorporation of
                  Pierre Foods, Inc. filed with the Secretary of State on August
                  5, 2002 be amended by the addition of the following new
                  Article.

                  6. Action Without Meeting. To the full extent then permitted
                  by the North Carolina Business Corporation Act as it may be
                  amended from time to time, any action required or permitted to
                  be taken at a meeting may be taken without a meeting and
                  without prior notice by shareholders having not less than the
                  minimum number of votes that would be necessary to take the
                  action at a meeting at which all shareholders entitled to vote
                  were present and voted.

         4. Date of Adoption. The date of adoption of the amendment was
September 18, 2002.

         5. Shareholder Approval. The amendment was approved by shareholder
action as required in accordance with Chapter 55 of the North Carolina General
Statutes.

         6. Effective Date. These articles will be effective upon filing.

         This the 18th day of September, 2002.

                                               PIERRE FOODS, INC.

                                               By: /s/ David R. Clark
                                                   -----------------------------
                                                   David R. Clark, Vice-Chairman

EX-99.1

                                                                    EXHIBIT 99.1


                                  RISK FACTORS

SUBSTANTIAL LEVERAGE; INSUFFICIENT CASH FLOW FROM OPERATIONS

         At August 31, 2002 the Company had approximately $131.6 million of
indebtedness, representing 70.4% of its total capitalization. The ability of the
Company to satisfy its debt obligations depends largely on the Company's
operating performance, which is affected by prevailing economic conditions and
financial, business and other factors, many of which are beyond the Company's
control.

         The degree to which the Company is leveraged has important consequences
to the Company, including the following: (i) the Company's ability to obtain
additional financing is limited; (ii) substantial portions of the Company's cash
flows from operations must be dedicated to the debt service, thereby reducing
the funds available to the Company for its operations; (iii) the Company's debt
instruments contain financial and other restrictive covenants, including
covenants restricting the incurrence and restructuring of debt, the creation of
liens, the payment of dividends and sales of assets; (iv) the Company's
borrowings under its revolving credit facility are at variable rates of
interest, resulting in adverse effects on the Company's financial condition and
results of operations when the relevant market interest rates increase; (v) the
debt outstanding under the revolving credit facility is secured by substantially
all of the Company's assets; (vi) the Company is more leveraged than many of its
competitors, placing the Company at a relative competitive disadvantage; and
(vii) the Company's high degree of indebtedness makes it more vulnerable in the
event of a downturn in its business. As a result of the Company's level of
indebtedness, its financial capacity to respond to market conditions,
extraordinary capital needs and other factors is limited.

         Fiscal 2003 operating cash flows and borrowings under the Company's $50
million credit facility were sufficient to provide necessary working capital and
to service existing debt, and the Company anticipates that the remainder of its
fiscal 2003 cash requirements for working capital and debt service will be met
through a combination of funds provided by operations and additional borrowings
under its credit facility. Significant assumptions underlie this belief,
including, among other things, that the Company will succeed in implementing its
business strategy and that there will be no material adverse developments in the
business, liquidity or significant capital requirements of the Company.

         The Company has budgeted approximately $4.3 million for capital
expenditures for the remainder of fiscal 2003. These expenditures primarily are
devoted to a plant expansion in order to maintain the current revenue growth
trends. Additional expenditures are devoted to routine food processing capital
improvement projects and other miscellaneous expenditures. The Company believes
that funds from operations and funds from its $50 million credit facility, as
well as the Company's ability to enter into capital or operating leases, will be
adequate to finance these routine capital expenditures. If the Company continues
its historical revenue growth trend as expected, it will be required to raise
and invest additional capital for other various plant expansion projects to
provide operating capacity to satisfy increased demand. The Company believes
that future cash requirements for these plant expansion projects would need to
be met through other long-term financing sources, such as the issuance of
industrial revenue bonds or equity investment. The incurrence of additional debt
is governed and restricted by the Company's existing debt instruments.
Furthermore, there can be no assurance that additional long-term financing will
be available on advantageous terms (or any terms) when needed by the Company.

         The Company anticipates continued sales growth in key market areas. As
noted above, however, this growth will require other capital expansion projects
to increase existing plant capacity to satisfy increased demand. Sales growth,
improved operating performance and expanded plant capacity -- none of which is
assured -- will be necessary for the Company to continue to service existing
debt. If the Company is unable to continue servicing its debt, then it will need
to adopt alternative strategies, which may include actions such as reducing or
delaying capital expenditures, selling assets, restructuring or refinancing its
indebtedness or seeking additional equity capital. There can be no assurance
that any of these strategies could be affected on satisfactory terms or that the
chosen strategy would enable the Company to avoid defaults under its existing
debt instruments.




RESTRICTIONS IMPOSED BY THE COMPANY'S DEBT INSTRUMENTS

         The Company's debt instruments include covenants that, among other
things, limit or restrict the ability of the Company to dispose of assets, incur
additional indebtedness, repay other indebtedness, pay dividends, enter into
certain investments or acquisitions, engage in mergers or consolidations or
engage in certain transactions with subsidiaries and affiliates and otherwise
restrict corporate activities. There can be no assurance that such limitations
and restrictions will not adversely affect the Company's ability to finance its
future operations or capital needs or engage in other business activities that
may be in the interest of the Company. The Company's $50 million credit facility
also requires the Company to comply with certain financial covenants. The
ability of the Company to comply with such financial covenants may be affected
by events beyond the Company's control. A breach of any of these covenants or
the inability of the Company to comply with the required financial covenants
could result in a default under the credit facility. In the event of any such
default, the lender could elect to declare all borrowings outstanding, together
with accrued interest and other fees, due and payable. If the Company were
unable to repay any such borrowings when due, then the lender could proceed
against its collateral, with material adverse effects on the Company's business,
financial condition and results of operations.

COMPETITION

         The food production business is highly competitive and is often
affected by changes in tastes and eating habits of the public, economic
conditions affecting spending habits and other demographic factors. In sales of
meat products, the Company faces strong price competition from a variety of
large meat processing concerns and from smaller local and regional operations.
In sales of biscuit and yeast roll products, the Company competes with a number
of large bakeries in various parts of the country. The sandwich industry is
extremely fragmented, with few large direct competitors but low barriers to
entry and indirect competition in the form of numerous other products.

GOVERNMENT REGULATION

         The food production industry is subject to extensive federal, state and
local government regulation.

         The Company's food processing facilities and food products are subject
to frequent inspection by the United States Department of Agriculture (the
"USDA"), the Food and Drug Administration (the "FDA") and other government
authorities. In July 1996, the USDA issued strict new policies against
contamination by food-borne pathogens such as E. coli and Salmonella and
established the Hazard Analysis and Critical Control Points ("HACCP") system.
The HACCP standards require the implementation of a seven step system for
preventing hazards that could cause food-borne illnesses and became effective on
January 25, 2000 for all food manufacturers with over ten employees and $25
million in sales. The Company is in full compliance with all FDA and USDA
regulations, including HACCP standards, but there can be no assurance that the
Company will be able to remain in compliance. The Company's failure to comply
with applicable laws and regulations could subject it to civil remedies,
including fines, injunctions, recalls and seizures, or even criminal sanctions,
any of which could have material adverse effects on the Company.

         The Company's operations are also governed by laws and regulations
relating to workplace safety and worker health that, among other things,
establish noise standards and regulate the use of hazardous chemicals in the
workplace. The Company 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. There can be no assurance that any failure to comply, or compliance in
the future, with environmental laws, or that liabilities arising thereunder,
will have no material adverse effect on the Company's business, financial
condition or results of operations.

GENERAL RISKS OF THE FOOD INDUSTRY

         The food processing industry is generally subject to various risks,
including adverse changes in general economic conditions, evolving consumer
preferences, nutritional and health-related concerns, federal, state and local
food inspection and processing controls and litigation-oriented risks in the
nature of consumer product liability claims, product tampering problems




and the availability and expense of liability insurance. There has recently been
increasing scrutiny due to the association of meat products with recent
outbreaks of illness, and even death, caused by pathogens which can be found in
raw and improperly cooked meat. Incidents of contamination experienced by other
food processors have materially and adversely affected their businesses and
could adversely affect the Company's business. Product recalls are sometimes
required in the meat industry to withdraw contaminated or mislabeled products
from the market.

ADVERSE CHANGES IN FOOD COSTS; AVAILABILITY OF SUPPLIES

         The profitability of the Company is dependent on its ability to
anticipate and react to changes in food prices in general and to changes in meat
prices in particular. While the Company has historically been able to anticipate
and react to changing prices through purchasing practices and price adjustments
so as to avoid any material adverse effect on profitability, there can be no
assurance that the Company will be able to do so in the future. In particular,
no assurance can be given that the Company will be able to pass any cost
increases on to its customers. The Company does not engage in hedging
transactions with respect to raw material purchases. Failure to engage in such
transactions may result in increased price volatility, with resulting adverse
effects on results of operations. In addition, the Company's dependency upon
regular deliveries of supplies from particular suppliers means that
interruptions or stoppages in such deliveries could adversely affect the Company
until arrangements with alternate suppliers could be made.

DEPENDENCE ON KEY PERSONNEL

         The Company believes that its continued success will largely depend
upon the abilities and experience of its senior management team such that loss
of the services of one or more senior managers could adversely affect the
Company's results of operations. The Company has entered into three-year
Employment Agreements with its Chairman and Vice-Chairman of the Board, Chief
Financial Officer and Senior Vice President of Sales, which specify terms
relating to salary, bonus and benefits to be paid. The Company has entered into
an Incentive Agreement with its President and Chief Executive Officer, which
sets forth compensation to be paid, but does not provide for a specified
employment term for the President.

POTENTIAL LABOR DISRUPTION

         None of the Company's employees is covered by a collective bargaining
agreement. To the extent the Company experiences a labor disruption in the
future, there could be material adverse effects on the Company's business,
financial condition and results of operations.

EX-99.2

                                                                    EXHIBIT 99.2


                WRITTEN STATEMENT OF THE CHIEF EXECUTIVE OFFICER
                       Pursuant to 18 U.S.C. Section 1350

         Solely for the purposes of complying with 18 U.S.C. "1350, I, the
undersigned President and Chief Executive Officer of Pierre Foods, Inc. (the
"Company"), hereby certify, based on my knowledge, that the Quarterly Report on
Form 10-Q of the Company for the quarter ended August 31, 2002 (the "Report")
fully complies with the requirements of Section 13(a) of the Securities Exchange
Act of 1934 and that information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of the
Company.




Norbert E. Woodhams
October 15, 2002

EX-99.3

                                                                    EXHIBIT 99.3


                WRITTEN STATEMENT OF THE CHIEF FINANCIAL OFFICER
                       Pursuant to 18 U.S.C. Section 1350

         Solely for the purposes of complying with 18 U.S.C. "1350, I, the
undersigned Chief Financial Officer of Pierre Foods, Inc. (the "Company"),
hereby certify, based on my knowledge, that the Quarterly Report on Form 10-Q of
the Company for the quarter ended August 31, 2002 (the "Report") fully
complies with the requirements of Section 13(a) of the Securities Exchange Act
of 1934 and that information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of the
Company.




Pamela M. Witters
October 15, 2002