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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

For the quarterly period ended March 31, 2004

or

For the transition period from                      to                     

Commission File Number: 333-112714

MICHAEL FOODS, INC.

(Exact name of registrant as specified in its charter)

(952) 258-4000

(Registrant’s telephone number, including area code)

None

(Former name, former address and former fiscal year, 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 (“Exchange Act”) 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    ¨  No (Not applicable—voluntary filer)

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). ¨  Yes    x  No

The number of shares outstanding of the registrant’s Common Stock, $0.01 par value, as of May 5, 2004, was 3,000 shares.

PART I—FINANCIAL INFORMATION

MICHAEL FOODS, INC.

(A wholly owned subsidiary of M-Foods Holdings, Inc.)

CONSOLIDATED BALANCE SHEETS

(Unaudited, in thousands)

The accompanying notes are an integral part of these financial statements.

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MICHAEL FOODS, INC.

(A wholly owned subsidiary of M-Foods Holdings, Inc.)

CONSOLIDATED STATEMENTS OF EARNINGS

Three months ended March 31,

(Unaudited, in thousands)

The accompanying notes are an integral part of these financial statements.

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MICHAEL FOODS, INC.

(A wholly owned subsidiary of M-Foods Holdings, Inc.)

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the three months ended March 31,

(Unaudited, in thousands)

The accompanying notes are an integral part of these financial statements.

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MICHAEL FOODS, INC.

(A wholly owned subsidiary of M-Foods Holdings, Inc.)

(Unaudited)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE A—MERGER

On November 20, 2003, Michael Foods, Inc. and its subsidiaries (“Michael Foods”, “Company,” “we,” “us,” “our”) was acquired by an investor group comprised of a management group led by our Chairman, President and Chief Executive Officer, and affiliates of the private equity investment firm Thomas H. Lee Partners, L.P., collectively Michael Foods Investors, LLC (or “MF Investors, LLC”), through the merger of THL Food Products Holding Co. with and into M-Foods Holdings, Inc. (the “Merger”), with M-Foods Holdings, Inc. being the continuing entity. M-Foods Holdings, Inc. then merged with and into Michael Foods, Inc. (Minn.). M-Foods Holdings, Inc. continued as the surviving corporation and was immediately renamed Michael Foods, Inc. (Del.).

Michael Foods, Inc. is a wholly-owned subsidiary of M-Foods Holdings, Inc. (“Holdings” or “Parent”; f/k/a THL Food Products Holding Co. ). M-Foods Holdings, Inc. is a wholly-owned subsidiary of MF Investors, LLC.

The “Predecessor” refers to Michael Foods, Inc. prior to the Merger. In April 2001, the Company was acquired (the “2001 Merger”) by an investor group comprised of members of senior management, two equity sponsors and affiliates of the Michael family. The “2001 Predecessor” refers to Michael Foods, Inc. prior to the 2001 Merger.

Under the terms of the Merger, all outstanding shares and stock options were purchased for $1.018 billion ($1,055,000,000, less purchase price adjustments of $47,366,000, in accordance with the Merger agreement, plus direct acquisition costs of $10,788,000) and was financed through new equity cash contributions of approximately $290,907,000, a senior secured credit facility of up to $595,000,000 (of which $495,000,000 was drawn at the close of the transactions), a senior unsecured term loan of $135,000,000 and $150,000,000 of 8% senior subordinated notes.

The Merger was accounted for as a purchase in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 141 Business Combinations and EITF 88-16, Basis In Leveraged Buyout Transaction. Accordingly, the acquired assets and liabilities have been recorded at fair value for the interests acquired by new investors and at the carryover basis for continuing investors. As a result, the assets and liabilities are assigned new values, which are part Predecessor cost and part fair value, in the same proportions as the carryover basis of the residual interests retained by the continuing management investors and the new interests acquired by the affiliates of Thomas H. Lee Partners. The amount of the carryover basis was reflected as a deemed dividend of $3,551,000.

The total purchase price of $1,018,421,000, net of cash acquired, was allocated to the acquired assets and liabilities based on their estimated fair values at the acquisition date, net of the deemed dividend. These allocations were determined by internal studies and by a valuation report by an independent third party appraisal firm.

In connection with the Merger, the Predecessor incurred transaction expenses and a loss on the early extinguishment of debt of approximately $76,603,000 associated with the Merger and change-in-control provisions of compensation, debt and other agreements, which have been reflected in the Predecessor financial statements for the period ended November 30, 2003. We incurred other direct costs of the Merger of approximately $10,788,000 and debt issuance costs of approximately $34,206,000, which have been capitalized in our consolidated balance sheet. In addition, we also incurred other expenses associated with the Merger of approximately $7,121,000, which was expensed during the one month period ended December 31, 2003.

The following unaudited pro forma financial information reflects our consolidated results of operations for the three months ended March 31, 2003, as if the Merger had taken place on January 1, 2003. The net sales and net income for the three months ended March 31, 2004 represent actual results for the period.

The most significant of the pro forma adjustments reflected in the above amounts were to record the incremental interest on the additional debt incurred in connection with the Merger, to record additional depreciation and amortization expense resulting from the fair value adjustments made to property, plant and equipment and intangible assets, and to remove the Dairy Products Division, which was sold effective September 30, 2003. The pro forma financial information should be read in conjunction with the related historical information and is not necessarily indicative of the results that would have been obtained had the transaction actually taken place at

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the beginning of the period presented.

NOTE B—SALE OF DAIRY PRODUCTS DIVISION

Effective September 30, 2003, the Predecessor completed the sale of its Dairy Products Division operating segment to Dean Foods Company for approximately $155 million. The Dairy Products Division processed and sold ice milk and ice cream mixes, creamers, milk and specialty dairy products. In accordance with a transition services agreement, we were compensated for certain transition services provided to the buyer through February 2004. These transition services included services such as information technology, sales, customer service and procurement. By providing these transition services, the Predecessor was deemed to have significant continuing involvement in the Dairy Products Division operating segment. Therefore, the Predecessor determined at the time of the sale that the transaction did not meet the accounting criteria for discontinued operations. Accordingly, the operations of the Dairy Products Division operating segment are included in the Predecessor’s statement of earnings for the three months ended March 31, 2003. External net sales and earnings before income taxes from the Dairy Products Division operating segment for the three months ended March 31, 2003 were $40,602,000 and $1,592,000, respectively.

NOTE C—BASIS OF PRESENTATION AND RECENT ACCOUNTING PRONOUNCEMENTS

The accompanying condensed consolidated financial statements have been prepared in accordance with Regulation S-X of the Securities and Exchange Commission. The financial statements for the period ended March 31, 2003 have been taken from the historical books and records of the Predecessor. Certain information and disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations, although management believes that the disclosures are adequate to make the information presented not misleading.

We utilize a fifty-two, fifty-three week fiscal year ending on the Saturday nearest to December 31 each year. The quarters ended March 31, 2004 and 2003 each included 13 weeks of operations. For clarity of presentation, we describe both periods as if the quarters ended on March 31^st.

In the opinion of management, the unaudited financial statements contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly the results of operations for the periods indicated. Our results of operations and cash flows for the period ended March 31, 2004 are not necessarily indicative of the results expected for the full year.

FASB Interpretation No. (“FIN”) 46 as amended by FIN 46 R, Consolidation of Variable Interest Entities—an Interpretation of ARB No. 51, as amended, clarifies the application of Accounting Research Bulletin No. 51, Consolidated Financial Statements, to entities in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. FIN 46 R applies immediately to entities created after December 31, 2003. For variable interest entities created before December 31, 2003, FIN 46 R is effective for the first period beginning after December 15, 2004. The adoption of FIN 46 R did not have any impact on our financial position or results of operations.

NOTE D—OTHER FINANCIAL STATEMENT DATA

Inventories

Inventories, other than flocks, are stated at the lower of cost (determined on a first-in, first-out basis) or market. Flock inventory represents the cost of purchasing and raising flocks to laying maturity, at which time their cost is amortized to operations over their expected useful lives of generally one to two years, assuming no salvage value.

Inventories consisted of the following (in thousands):

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NOTE E—COMMITMENTS AND CONTINGENCIES

Potato Procurement Contracts

We have contracts to purchase approximately $9 million of potatoes in 2004, which will supply approximately 60% of the Potato Products Division’s raw material needs in 2004. We have additional contracts to purchase approximately $8 million of potatoes in 2005, approximately $6 million in 2006, and approximately $4 million in 2007, representing approximately 45%, 30%, and 20%, respectively, of the Division’s estimated needs each year.

Cheese Procurement Contracts

We have forward buy contracts to purchase approximately $22.1 million of cheese in 2004, which will supply approximately 20% of the Refrigerated Distribution Division’s cheese needs in 2004.

Egg Procurement Contracts

We maintain egg procurement contracts with numerous cooperatives and egg producers throughout the Midwestern and Eastern United States and Canada, which supply approximately 60% of our annual egg requirements. Most of these contracts vary in length from 18 to 94 months with prices primarily indexed to grain or Urner Barry market indices. No single egg supplier provides more than 10% of our egg requirements. Based upon the best estimates available to us for grain and egg prices, we project our purchases from our top five long-term contracted egg suppliers will approximate $112 million in 2004, $105 million in 2005, $101 million in 2006, $101 million in 2007, and $82 million in 2008, and that the 2004 amount will account for approximately 40% of our total egg purchases this year.

Patent Litigation

We have an exclusive license agreement for a patented process for the production and sale of extended shelf-life liquid egg products. Under the license agreement, we have the right to defend and prosecute infringement of the underlying patents.

The U.S. Federal Court of Appeals has upheld the validity of the patents on two separate occasions. In 2000, the U.S. Patent and Trademark Office allowed product claims beyond the process claims previously allowed for the extended shelf-life liquid egg product. These patents are scheduled to expire beginning in 2006.

Litigation related to the infringement of these patents has been settled with three parties, one in 2000 and two in early 2004. The 2004 settlements aggregated approximately $2.0 million (see ITEM 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations). A sublicense has been issued to each of the infringing parties, granting them the right to manufacture and distribute extended shelf-life liquid whole egg products subject to a royalty payable to us on all future product sales. In connection with each of these settlements, lump sum payments to the Company were made to cover the past production and sale of such products and other matters related to the infringements. We are appealing a non-infringement decision in our patent litigation against Sunny Fresh Foods, Inc., a subsidiary of Cargill, Inc.

Other Litigation

We are engaged in routine litigation incidental to our business. Management believes the ultimate outcome of this litigation will not have a material effect on our consolidated financial position, liquidity or results of operations.

NOTE F—COMPREHENSIVE INCOME

The components of and changes in accumulated other comprehensive income (AOCI), net of taxes, during the three months ended March 31, 2004 were as follows (in thousands):

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Comprehensive income, net of taxes, for the three months ended March 31, 2004 and 2003 was as follows (in thousands):

NOTE G—BUSINESS SEGMENTS

We operate in three reportable segments—Egg Products, Refrigerated Distribution and Potato Products. See Note B regarding the sale of the Dairy Products Division operating segment effective September 30, 2003. Certain financial information on our operating segments is as follows (unaudited, in thousands):