67494--6/2/2006--PIERRE_FOODS

related topics

{cost, regulation, environmental}

{cost, operation, labor}

{debt, indebtedness, cash}

{gas, price, oil}

{competitive, industry, competition}

{customer, product, revenue}

{product, liability, claim}

{system, service, information}

{regulation, government, change}

{property, intellectual, protect}

{personnel, key, retain}

{stock, price, operating}

{loss, insurance, financial}

{product, market, service}

Increases in the price of raw materials, particularly beef, chicken, pork, and cheese could reduce our operating margins. If the Company s products become contaminated or are mislabeled, the Company may be subject to product liability claims, product recalls, and increased scrutiny by regulators, any of which could adversely affect the Company s business. The Company s insurance and indemnification agreements may be inadequate to cover all the liabilities the Company may incur. A decline in meat consumption, or in the consumption of processed food products, would have a material adverse effect on the Company s business, financial condition, and operating results. Outbreaks of disease among cattle, chicken or pigs could significantly reduce demand for the Company s products and restrict its ability to produce meat and sandwich products, adversely affecting its sales volume. The categories of the food industry in which the Company operates are highly competitive, and the Company s inability to compete successfully could adversely affect its business, results of operations, and financial condition. The Company s top ten customers have historically accounted for a significant portion of its net revenues and its largest customer accounted for approximately 21% of net revenues for successor fiscal 2006. The consolidation of and market strength among the Company s retail and foodservice customers may put pressure on its operating margins. The Company manufactures many of its products using proprietary formulations and markets its products under a variety of brand names. The termination of, or failure to renew a license agreement under which the Company sells branded products, the reduction in value of an underlying license or its inability to protect ownership of proprietary formulations, could negatively impact the Company s ability to produce and sell its products. The Company is subject to extensive governmental regulations, which require significant compliance expenditures. Any material changes to, cutbacks in or termination of the USDA s Commodity Reprocessing Program could have a material adverse effect on the Company s sales to schools. Compliance with environmental regulations may result in significant costs and the Company s failure to comply with environmental regulations may result in civil as well as criminal penalties, liability for damages and negative publicity Labor disruptions or increased labor costs could adversely affect the Company s business. The Company sells a large percentage of its products to schools, which subjects its sales volumes and, thus, its operating results, to seasonal variations. The Company processes meat at its Cincinnati, Ohio facility, and the Company produces bread and assembles sandwiches at its Claremont, North Carolina facility. A material disruption at either of these plants or an increase in demand causing inability to meet customer demands could seriously harm the Company s financial condition and operating results. The Company depends upon the continued services of certain members of its senior management team, without whom its business operations would be significantly disrupted. Significant increases in the cost of distribution would have an adverse effect on the Company s financial condition and operating results. The Company s ability to service its debt and meet its cash requirements depends on many factors, some of which are beyond its control. These factors could have a material adverse affect on the Company s business, financial position and results of operations. Restrictive covenants in the Company s debt instruments restrict or prohibit the Company s ability to engage in or enter into a variety of transactions, which could adversely affect the Company. If the Company is unable to maintain or upgrade its information systems and software programs or if the Company is unable to convert to alternate systems in an efficient and timely manner, the Company s operations may be disrupted or become less efficient.

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67494--6/2/2006--PIERRE_FOODS_INC