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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 November 29, 2003

     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   Outstanding at January 15, 2004
 
Class A Common Stock   100,000

 

 

PIERRE FOODS, INC.

INDEX

             
        Page No.
       
Part I. Financial Information:
        
Item 1. Financial Statements
        
 
Consolidated Balance Sheets - November 29, 2003 and March 1, 2003
     3 - 4  
 
Consolidated Statements of Operations and Retained Earnings (Deficit)- Thirteen Weeks Ended November 29, 2003 and Thirteen Weeks Ended November 30, 2002
     5 – 6  
 
Consolidated Statements of Operations and Retained Earnings (Deficit) - Thirty-Nine Weeks Ended November 29, 2003 and Thirty-Nine Weeks Ended November 30, 2002
     7 – 8  
 
Consolidated Statements of Cash Flows - Thirty-Nine Weeks Ended November 29, 2003 and Thirty-Nine Weeks Ended November 30, 2002
     9 - 10  
 
Notes to Consolidated Financial Statements
     11 - 13  
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
     14 - 18  
Item 3. Quantitative and Qualitative Disclosures About Market Risk
     19  
Item 4. Controls and Procedures
    20  
Part II. Other Information:
        
Item 5. Other Information
     21 - 23  
Item 6. Exhibits and Reports on Form 8-K
     24  
 
Signatures
     25  
 
Index to Exhibits
     26 - 27  

2

 

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

PIERRE FOODS, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

                     
        (Unaudited)        
        November 29, 2003   March 1, 2003
       
 
ASSETS
                
CURRENT ASSETS:
                
 
Cash and cash equivalents
   $ 1,442,679     $ 274,329  
 
Certificates of deposit of special purpose entity
     1,240,000       1,240,000  
 
Accounts receivable, net
     24,080,332       23,654,358  
 
Inventories
     37,974,435       32,584,777  
 
Refundable income taxes
     —       165,829  
 
Deferred income taxes
     2,642,526       2,642,526  
 
Prepaid expenses and other current assets (includes prepayments to related parties of $375,000 at March 1, 2003)
     2,062,013       3,264,746  
 
    
     
 
   
Total current assets
     69,441,985       63,826,565  
 
    
     
 
PROPERTY, PLANT AND EQUIPMENT, NET
     60,581,651       55,549,083  
 
    
     
 
OTHER ASSETS:
                
 
Trade name, net
     38,808,636       38,808,636  
 
Note receivable – related party
     993,247       993,247  
 
Deferred income taxes
     6,283,871       6,283,871  
 
Deferred loan origination fees, net
     1,785,056       2,950,109  
 
Other
     315,925       369,500  
 
    
     
 
   
Total other assets
     48,186,735       49,405,363  
 
    
     
 
   
Total Assets
   $ 178,210,371     $ 168,781,011  
 
    
     
 

See accompanying notes to unaudited consolidated financial statements.

3

 

PIERRE FOODS, INC. AND SUBSIDIARIES

                     
        (Unaudited)        
        November 29, 2003   March 1, 2003
       
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
                
CURRENT LIABILITIES:
                
 
Current installments of long-term debt
   $ 1,581,983     $ 369,467  
 
Trade accounts payable
     5,203,991       9,422,256  
 
Accrued interest
     6,113,695       3,056,662  
 
Accrued payroll and payroll taxes
     5,635,883       5,929,464  
 
Accrued promotions
     2,878,712       2,280,788  
 
Income taxes payable
     136,931       —  
 
Accrued taxes (other than income and payroll)
     517,823       561,642  
 
Other accrued liabilities (includes related party liabilities of $6,214,873 and $425,330 at November 29, 2003 and March 1, 2003, respectively)
     7,435,281       1,490,086  
 
    
     
 
   
Total current liabilities
     29,504,299       23,110,365  
 
    
     
 
LONG-TERM DEBT, less current installments
     133,945,291       130,387,174  
 
    
     
 
OBLIGATION OF SPECIAL PURPOSE ENTITY
     5,363,554       5,591,813  
 
    
     
 
OTHER LONG-TERM LIABILITIES
     421,870       693,750  
 
    
     
 
SHAREHOLDERS’ EQUITY:
                
 
Common stock – Class A, 100,000 shares authorized, issued and outstanding at November 29, 2003 and March 1, 2003
     29,438,172       29,438,172  
 
Retained earnings (deficit)
     (15,462,815 )     (15,440,263 )
 
Note receivable – related party
     (5,000,000 )     (5,000,000 )
 
    
     
 
   
Total shareholders’ equity
     8,975,357       8,997,909  
 
    
     
 
   
Total Liabilities and Shareholders’ Equity
   $ 178,210,371     $ 168,781,011  
 
    
     
 

See accompanying notes to unaudited consolidated financial statements.

4

 

PIERRE FOODS, INC. AND SUBSIDIARIES

Consolidated Statements of Operations and Retained Earnings (Deficit)

(Unaudited)

                       
          Thirteen Weeks Ended
         
          November 29, 2003   November 30, 2002
         
 
REVENUES
   $ 93,824,930     $ 79,032,831  
 
    
     
 
COSTS AND EXPENSES:
                
 
Cost of goods sold (includes related party transactions totaling $1,383,924 and $1,203,822 in fiscal 2004 and fiscal 2003, respectively)
     66,502,119       52,655,502  
 
Selling, general and administrative expenses (includes related party transactions totaling $7,814,502 and $5,126,569 in fiscal 2004 and fiscal 2003, respectively)
     19,739,796       18,423,691  
 
(Gain) loss on disposition of property, plant and equipment, net
     22,253       (5,492 )
 
Depreciation
     1,165,673       1,003,958  
 
    
     
 
   
Total costs and expenses
     87,429,841       72,077,659  
 
    
     
 
OPERATING INCOME
     6,395,089       6,955,172  
 
    
     
 
OTHER INCOME (EXPENSE):
                
 
Interest expense
     (3,670,889 )     (3,587,361 )
 
Other income, net - (including interest) (includes related party income of $1,061 in fiscal 2003)
     —       16,117  
 
    
     
 
   
Other expense, net
     (3,670,889 )     (3,571,244 )
 
    
     
 
INCOME BEFORE INCOME TAX PROVISION
     2,724,200       3,383,928  
INCOME TAX PROVISION
     (955,872 )     (1,223,048 )
 
    
     
 
NET INCOME
   $ 1,768,328     $ 2,160,880  
 
    
     
 

See accompanying notes to unaudited consolidated financial statements.

5

 

                   
      Thirteen Weeks Ended
     
      November 29, 2003   November 30, 2002
     
 
RETAINED EARNINGS (DEFICIT):
                
 
Balance at beginning of period
   $ (17,231,143 )   $ (17,629,625 )
 
Net income
     1,768,328       2,160,880  
 
Distributions of special purpose leasing entity
     —       226,894  
 
    
     
 
 
Balance at end of period
   $ (15,462,815 )   $ (15,241,851 )
 
    
     
 
NET INCOME PER COMMON SHARE – BASIC AND DILUTED
   $ 17.68     $ 21.61  
 
    
     
 
WEIGHTED AVERAGE SHARES OUTSTANDING – BASIC AND DILUTED
     100,000       100,000  

See accompanying notes to unaudited consolidated financial statements.

6

 

PIERRE FOODS, INC. AND SUBSIDIARIES

Consolidated Statements of Operations and Retained Earnings (Deficit)

(Unaudited)

                       
          Thirty-Nine Weeks Ended
         
          November 29, 2003   November 30, 2002
         
 
REVENUES
   $ 256,552,851     $ 202,754,362  
 
    
     
 
COSTS AND EXPENSES:
                
 
Cost of goods sold (includes related party transactions totaling $3,913,364 and $3,403,979 in fiscal 2004 and fiscal 2003, respectively)
     180,931,201       133,887,435  
 
Selling, general and administrative expenses (includes related party transactions totaling $23,222,709 and $17,874,692 in fiscal 2004 and fiscal 2003, respectively)
     58,801,353       53,309,754  
 
Loss on disposition of property, plant and equipment, net
     22,885       4,916  
 
Depreciation
     3,480,652       2,971,318  
 
    
     
 
   
Total costs and expenses
     243,236,091       190,173,423  
 
    
     
 
OPERATING INCOME
     13,316,760       12,580,939  
 
    
     
 
OTHER INCOME (EXPENSE):
                
 
Interest expense
     (13,001,529 )     (10,620,612 )
 
Other income, net - (including interest) (includes related party income of $388,545 in fiscal 2003)
     —       442,675  
 
    
     
 
   
Other expense, net
     (13,001,529 )     (10,177,937 )
 
    
     
 
INCOME BEFORE INCOME TAX PROVISION AND CUMMULATIVE EFFECT OF ACCOUNTING CHANGE
     315,231       2,403,002  
INCOME TAX PROVISION
     (104,783 )     (1,026,862 )
 
    
     
 
INCOME BEFORE CUMMULATIVE EFFECT OF ACCOUNTING CHANGE
     210,448       1,376,140  
CUMMULATIVE EFFECT OF ACCOUNTING CHANGE (net of income tax benefit of $10,415,037 in fiscal 2003)
     —       (18,604,534 )
 
    
     
 
NET INCOME/(LOSS)
   $ 210,448     $ (17,228,394 )
 
    
     
 

See accompanying notes to unaudited consolidated financial statements.

7

 

                   
      Thirty-Nine Weeks Ended
     
      November 29, 2003   November 30, 2002
     
 
RETAINED EARNINGS (DEFICIT):
                
 
Balance at beginning of period
   $ (15,440,263 )   $ 2,768,845  
 
Net income/(loss)
     210,448       (17,228,394 )
 
Distributions of special purpose leasing entity
     (233,000 )     (782,302 )
 
    
     
 
 
Balance at end of period
   $ (15,462,815 )   $ (15,241,851 )
 
    
     
 
NET INCOME/(LOSS) PER COMMON SHARE – BASIC AND DILUTED
                
 
Income/(loss) before cumulative effect of accounting change
   $ 2.10     $ 13.76  
 
Cumulative effect of accounting change
     —       (186.05 )
 
    
     
 
 
Net income/(loss)
   $ 2.10     $ (172.29 )
 
    
     
 
WEIGHTED AVERAGE SHARES OUTSTANDING – BASIC AND DILUTED
     100,000       100,000  

See accompanying notes to unaudited consolidated financial statements.

8

 

PIERRE FOODS, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(Unaudited)

                         
            Thirty-Nine Weeks Ended
           
            November 29, 2003   November 30, 2002
           
 
CASH FLOWS FROM OPERATING ACTIVITIES
                
 
Net income/(loss)
   $ 210,448     $ (17,228,394 )
 
    
     
 
 
Adjustments to reconcile net income/(loss) to net cash provided by operating activities:
                
     
Cumulative effect of accounting change
     —       18,604,534  
     
Depreciation
     3,480,652       2,971,318  
     
Amortization of deferred loan origination fees
     594,879       542,841  
     
Write-off of deferred loan origination fees
     1,233,530       —  
     
Loss on disposition of property, plant and equipment, net
     22,885       4,916  
     
Decrease in other assets
     53,574       53,650  
     
Decrease in other long-term liabilities
     (271,880 )     (251,699 )
     
Changes in operating assets and liabilities:
                
       
Receivables
     (425,974 )     (3,611,700 )
       
Inventories
     (5,389,658 )     (3,662,574 )
       
Refundable income taxes, prepaid expenses and other current assets
     1,368,562       (1,171,596 )
       
Trade accounts payable and other accrued liabilities
     5,181,418       8,160,176  
 
    
     
 
       
    Total adjustments
     5,847,988       21,639,866  
 
    
     
 
       
    Net cash provided by operating activities
     6,058,436       4,411,472  
 
    
     
 
CASH FLOWS FROM INVESTING ACTIVITIES
                
 
Proceeds from sales of property, plant and equipment
     77,400       83,000  
 
Capital expenditures
     (8,613,505 )     (12,659,840 )
 
    
     
 
       
    Net cash used in investing activities
     (8,536,105 )     (12,576,840 )
 
    
     
 

See accompanying notes to unaudited consolidated financial statements.

9

 

                             
        Thirty-Nine Weeks Ended        
       
       
        November 29, 2003   November 30, 2002        
       
 
       
CASH FLOWS FROM FINANCING ACTIVITIES
                        
 
Repayment of revolving credit agreement with former lender
   $ (15,085,146 )   $ —    
 
Net borrowings under new revolving credit agreement
     9,986,655       6,559,134          
 
Borrowings under equipment term loan subline
     5,000,000       —          
 
Borrowings under real estate term loan subline
     5,000,000       —          
 
Principal payments on long-term debt
     (359,134 )     (192,391 )        
 
Loan origination fees
     (663,356 )     (1,583,467 )        
 
Distributions by special purpose leasing entity
     (233,000 )     (782,302 )        
 
    
     
         
   
Net cash provided by financing activities
     3,646,019       4,000,974          
 
    
     
         
NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS
     1,168,350       (4,164,394 )        
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
     274,329       4,577,982          
 
    
     
         
CASH AND CASH EQUIVALENTS, END OF PERIOD
   $ 1,442,679     $ 413,588          
 
    
     
         

See accompanying notes to unaudited consolidated financial statements.

10

 

PIERRE FOODS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements
(Unaudited)

1. Basis of Presentation

     The financial information as of March 1, 2003, 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 November 29, 2003 and March 1, 2003, the results of operations for the thirteen weeks and thirty-nine weeks ended November 29, 2003 and November 30, 2002, and the cash flows of the Company for the thirty-nine weeks ended November 29, 2003 and November 30, 2002. The thirteen week period ended November 29, 2003 is referred to as “third quarter 20