UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

MICHAEL FOODS, INC.

(Exact name of registrant as specified in its charter)

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.      ý     Yes       o      No

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

PART I - FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

MICHAEL FOODS, INC.

(A WHOLLY-OWNED SUBSIDIARY OF M-FOODS HOLDINGS, INC.wholly-owned subsidiary of M-Foods Holdings, Inc.)

CONDENSED CONSOLIDATED BALANCE SHEETSCondensed Consolidated Balance Sheets

(Unaudited)(Unaudited, dollars in thousands)

SeeThe accompanying notes toare an integral part of the unaudited condensed consolidated financial statements.

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MICHAEL FOODS, INC.

(A WHOLLY-OWNED SUBSIDIARY OF M-FOODS HOLDINGS, INC.wholly-owned subsidiary of M-Foods Holdings, Inc.)

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGSCondensed Consolidated Statements of Earnings

Three Months Ended Septembermonths ended June 30,

(Unaudited)(Unaudited, dollars in thousands)

SeeThe accompanying notes toare an integral part of the unaudited condensed consolidated financial statements.

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MICHAEL FOODS, INC.

(A WHOLLY-OWNED SUBSIDIARY OF M-FOODS HOLDINGS, INC.wholly-owned subsidiary of M-Foods Holdings, Inc.)

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGSCondensed Consolidated Statements of Earnings

Six months ended June 30,

(Unaudited, dollars in thousands)

(Unaudited)

SeeThe accompanying notes toare an integral part of the unaudited condensed consolidated financial statements.

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MICHAEL FOODS, INC.

(A WHOLLY-OWNED SUBSIDIARY OF M-FOODS HOLDINGS, INC.wholly-owned subsidiary of M-Foods Holdings, Inc.)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWSCondensed Consolidated Statements of Cash Flows

(Unaudited)Six months ended June 30,

(Unaudited, dollars in thousands)

SeeThe accompanying notes toare an integral part of the unaudited condensed consolidated financial statements.

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MICHAEL FOODS, INC.

(A WHOLLY-OWNED SUBSIDIARY OF M-FOODS HOLDINGS, INC.wholly-owned subsidiary of M-Foods Holdings, Inc.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Notes to Condensed Consolidated Financial Statements

(Unaudited)

NOTE A -–  2001 MERGER AGREEMENT

On April 10, 2001, Michael Foods, Inc. and its subsidiaries (“Michael Foods”, “Company”, “we”, “us”, “our”) was acquired in a transaction (the “Merger”) led by an investor group comprised of a management group led by Michael Foods’ Chairman, President and Chief Executive Officer, Gregg Ostrander,Ostrander; affiliates of Jeffrey Michael, a member of the Predecessor’s Boardboard of Directors,directors; and affiliates of two private equity investment firms, Vestar Capital Partners and Goldner Hawn Johnson & Morrison Incorporated, (collectively, “M-Foods Investors, LLC”). Michael Foods, Inc. is a wholly-owned subsidiary of M-Foods Holdings, Inc., which is a wholly-owned subsidiary of M-Foods Investors, LLC. Under the terms of the Merger agreement, all outstanding shares of Michael Foods common stock were converted into the right to receive $30.10 per share in cash, or value equal thereto, and all outstanding stock options were converted into the right to receive, in cash, $30.10 per share reduced by the exercise price per share for all shares subject to such stock options. The purchase of the outstanding shares was financed through new equity financing of approximately $175,000,000, a senior secured credit facility of up to $470,000,000 at market-based variable interest rates, (effective rate of approximately 6.8% as of September 30, 2002), and $200,000,000 of senior subordinated notes at an 11.75% annual interest rate. As a result of the Merger, the stock of pre-merger Michael Foods (“Predecessor”) is no longer publicly traded and, therefore, earnings per share calculations are no longer included for financial statement presentation.

Immediately after the close of the Merger, we contributed the assets of our Dairy divisionProducts Division into two limited liability corporations,companies, M-Foods Dairy, LLC and M-Foods Dairy TXCT, LLC (collectively, the “Dairy LLCs”) and in exchange received voting preferred and voting common units from these entities equal to the fair value of the net assets contributed, which collectively werewas approximately $35,800,000. The preferred units issued to us by the Dairy LLCs have an annual 10% preferred return guarantee and represent 100% of the preferred units issued and outstanding. In addition, we received 5% of the common units issued by the Dairy LLCs, with the common units held by the Company representing 100% of the voting common units issued and outstanding. These common units have a stated value of $25,000. The remaining 95% of the common units, which are non-voting, are owned by M-Foods Dairy Holdings, LLC, another entity which is owned by the same owners or affiliates of such owners, in the same proportion, as the unit holders of M-Foods Investors, LLC. The common unit interests owned by M-Foods Dairy Holdings, LLC were issued in exchange for $475,000 and are reflected as non-controlling interest in the accompanying consolidated balance sheet.  See also Note D.

The 2001 Merger was accounted for as a purchase in accordance with Accounting Principles Board Opinion 16, Business Combinations and EITFEmerging Issues Task Force Issue No. 88-16, Basis in Leveraged Buyout Transactions. 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 were 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 continuing affiliate investors of the Michael family, and the new interests acquired by the new investors. The amount of carryover basis was reflected as a deemed dividend of $66,631,000.

For ease of presentation, the Merger was accounted for as if it had occurred on April 1, 2001. Management determined that results of operations were not significant and no material transactions occurred during the period from April 1 through April 9, 2001. Our consolidated financial statements have been presented on a comparative basis with the Predecessor’s historical consolidated financial statements prior to the date of Merger. Different bases of accounting have been used to prepare the Company and Predecessor consolidated financial statements. The primary differences relate to additional interest expense for new debt and depreciation and amortization of fixed assets and other intangible assets recorded at fair value at the date of Merger.

For accounting purposes, the Merger was considered a leveraged buyout. The total purchase price of approximately $562,881,000 was allocated to the acquired assets and assumed liabilities based on their fair values at April 1, 2001, net of the deemed dividend of $66,631,000. These allocations were based on a valuation by a third party appraisal firm. The allocation of the purchase price was as follows:

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In connection with the Merger, the Predecessor incurred transaction expenses of approximately $26,600,000 associated with the Merger and change-in-control provisions of various compensation, debt and other agreements, which have been reflected in the Predecessor financial statements. These transaction expenses include the extraordinary item related to the early extinguishment of debt resulting from the change-in-control. In addition, we incurred other merger related and debt issuance costs of approximately $40,000,000, which have been capitalized as direct costs of the Merger and deferred financing costs in our consolidated balance sheet.

The following unaudited pro forma net sales and net earnings for the nine months ended September 30, 2001 are derived from the application of pro forma adjustments to the Predecessor’s historical statement of earnings, and assumes the Merger had occurred on January 1, 2001.  The pro forma net earnings for the nine months ended September 30, 2001 are also adjusted for goodwill amortization determined in accordance with the provisions of SFAS 142 (see Note D).  The net sales and net earnings for the nine months ended September 30, 2002 represent actual results for the period.

NOTE B – ASSET PURCHASE

On August 26, 2002, we acquired the egg products assets of Canadian Inovatech Inc. for approximately $18,000,000.  We also entered into long-term leases for two plants operated by the seller.  This entity’s results of operations have been included in our operating results since the date of the asset purchase.  Also, as a result of this asset purchase, we now own 67%, rather than 33%, of a Canadian egg product’s joint venture — Trilogy Egg Products, Inc.  Hence, Trilogy became a consolidated entity under our financial reporting as of the date of the asset purchase.

The following unaudited pro forma statement of earnings information has been prepared assuming the asset purchase and the merger transaction described in Note A had occurred on January 1, 2002 and 2001:

This unaudited pro forma information is not necessarily indicative of the combined results of operations that would have occurred had the asset purchase occurred on the noted dates, nor is it indicative of the results which may occur in the future.

NOTE C – BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with Regulation S-X pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote 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 and the Predecessor utilized, a fiscal year consisting of either 52 or 53 weeks, ending on the Saturday nearest to December 31 each year. The quarters ended SeptemberJune 30, 20022003 and 20012002 each included thirteen13 weeks of operations. For clarity of presentation, the Company and Predecessor havehas described both periods presented as if the quarters ended on SeptemberJune 30^th.

The accompanying unaudited financial statements and footnote information as of and for the three month period ended March 31, 2001 were prepared in accordance with Regulation S-X pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) using the historical books and records of the Predecessor and reflect the historical cost basis of assets and liabilities of the Predecessor. The accompanying unaudited financial statements and footnote information of the Company as of and for the six month period ended September 30, 2001 and the three and nine month periods ended September 30, 2002 have been

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prepared in accordance with Regulation S-X pursuant to the rules and regulations of the SEC using the new basis of assets and liabilities of the Company. 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. The historical financial results of operations and cash flows of the Company and Predecessorfor the period ended June 30, 2003 are not necessarily indicative of theirthe results expected for athe full year.

These unaudited interim consolidated financial statements should be read in conjunction with our consolidated financial statements and notes thereto, contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2001.2002.

Use of Estimates6

Preparation of the Company’s consolidated financial statements requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and related revenues and expenses. Actual results could differ from the estimates used by management.

NOTE D – ADOPTION OF NEW ACCOUNTING POLICIES

Goodwill and Intangible Assets

In July 2001, the Financial Accounting Standards Board (“FASB”)(FASB) issued Statement of Financial Accounting Standards (“SFAS”) 141, Business Combinations, and(SFAS) No. 143, “Accounting for Asset Retirement Obligations” which provides accounting requirements for retirement obligations associated with tangible long-lived assets.  SFAS 142, Goodwill and Other Intangible Assets.  SFAS 141 is effective for all business combinations completed after June 30, 2001.  SFAS 142No. 143 is effective for fiscal years beginning after DecemberJune 15, 2001; however, certain provisions of this Statement apply to goodwill and other intangible assets acquired between July 1, 2001 and the effective date of SFAS 142.  We adopted the provisions of SFAS 142 as of January 1, 2002 and had no acquisitions between July 1, 2001 and January 1, 2002.

As a result of adopting SFAS No. 141 and SFAS No. 142, our accounting policies for goodwill and intangible assets changedwas adopted by the Company effective January 1, 2002 as described below:

Goodwill and Intangible Assets with Indefinite Lives

We recognize the excess cost of an acquired entity over the net amount assigned to assets acquired, including intangible assets with indefinite lives, and liabilities assumed, as goodwill.  Goodwill and intangible assets with indefinite lives will be tested for impairment on an annual basis and between annual tests whenever there is an impairment indicated.  Impairment losses will be recognized whenever the implied fair value is less than the carrying value of the related asset.  Prior to January 1, 2002, goodwill and intangible assets with indefinite lives were amortized over 40 years.  Beginning January 1, 2002, goodwill and intangible assets with indefinite lives are no longer amortized.

Other Intangibles

We recognize an acquired intangible apart from goodwill whenever the asset arises from contractual or other legal rights, or whenever it is capable of being separated or divided from the acquired entity and sold, transferred, licensed, rented, or exchanged, either individually or in combination with a related contract, asset, or liability.  An intangible other than goodwill is amortized over its estimated useful life unless that life is determined to be indefinite.  Impairment losses are recognized if the carrying amount of an intangible subject to amortization is not recoverable from expected future cash flows and its carrying amount exceeds its fair value.

During the first half of 2002, we completed the transitional impairment tests of goodwill and intangibles with no impairment indicated at January 1, 2002.

Our carrying amounts, net of accumulated amortization, for goodwill as of September 30, 2002 was $345,746,000 and at December 31, 2001 was $341,021,000.  Each segment’s share of this goodwill at these dates was as follows:

The carrying amounts, net of accumulated amortization, for other indefinite-lived intangible assets (trademarks) as of September 30, 2002, and December 31, 2001 were $13,406,000. The Predecessor had no indefinite-lived intangible assets.

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The following table presents a reconciliation of net earnings (loss), as reported in the financial statements, to those amounts adjusted for goodwill and intangible amortization determined in accordance with the provisions of SFAS 142.

Our acquired intangible assets that have been determined to have a definite life and continue to be amortized as of September 30, 2002, are as follows:

The aggregate amortization expense for the nine months ended September 30, 2002 was approximately $540,000 and $310,000 for the six months ended September 30, 2001.  The Predecessor had amortization expense of approximately $500,000 during the three months ended March 31, 2001.  The estimated amortization expense for the years ended December 31, 2002 through December 31, 2006 is as follows:

Other New Pronouncements:

On January 1, 2002, we adopted SFAS 144, Accounting for the Impairment or Disposal of Long-Lived Assets.2003.  The adoption of SFAS 144No. 143 did not have a material effect on our consolidated financial statements.

In addition, we adoptedJune 2002, the FASB issued SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities.”  SFAS No. 146 requires that a liability for a cost associated with an exit or disposal activity be recognized and measured initially at fair value only when the liability is incurred.  Prior to the adoption of this standard, a liability for an exit cost, as defined by Emerging Issues Task Force (EITF) Issue No. 00-25, Vendor Income Statement Characterization94-3, Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring), was recognized at the date of Considerationan entity’s commitment to a Reselleran exit plan. SFAS No. 146 was effective for the Company for exit plans or disposal activities initiated after December 31, 2002.  Effective January 1, 2003, we adopted the provisions of SFAS 146, which had no impact on our financial statements.

In November 2002, the FASB issued FASB Interpretation No. 45, “Guarantors Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others.” This interpretation elaborates on the Vendors Products,disclosure requirements in the financial statements concerning obligations under certain guarantees. It also clarifies the requirements related to the recognition of liabilities by a guarantor at the inception of certain guarantees. The disclosure requirements of this interpretation were effective January 1,for us on December 31, 2002.  The adoption of EITF Issue 00-25this standard did not impact our financial statements.

In January 2003, the FASB issued FASB Interpretation No. 46, “Consolidation of Variable Interest Entities” (FIN 46).  This interpretation of Accounting Research Bulletin No. 51, Consolidated Financial Statements, addresses consolidation by business enterprises of variable interest entities that possess certain characteristics. FIN 46 requires that if a business enterprise has a controlling financial interest in a variable interest entity, the assets, liabilities, and results of the activities of the variable interest entity must be included in the consolidated financial statements with those of the business enterprise. FIN 46 applies immediately to variable interest entities created after January 31, 2003 and to variable interest entities in which an enterprise obtains an interest after that date. We do not have ownership in any variable interest entities and will apply the consolidation requirements of FIN 46 in future periods should an interest in a variable interest entity be acquired.

In May 2003, the FASB issued SFAS No. 149, “Amendment of Statement 133 on Derivative Instruments and Hedging Activities.”  This Statement amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts (collectively referred to as derivatives) and for hedging activities under FASB Statement No. 133, “Accounting for Derivative Instruments and Hedging Activities.”  SFAS No. 149 is effective for contracts entered into or modified after June 30, 2003, and for hedging relationships designated after June 30, 2003.  We do not believe that the adoption of SFAS No. 149 will have a material impact on our financial position or results of operations.

In May 2003, the FASB issued SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity.”  The statement requires that an issuer classify financial instruments that are within its scope as a liability.  Many of those instruments were classified as equity under previous guidance.  SFAS No. 150 is effective for all financial instruments entered into or modified after May 31, 2003.  Otherwise, it is effective on July 1, 2003.  We do not believe that the adoption of SFAS No. 150 will have a material effect on our consolidated financial statements. In addition,position or results of operations.

NOTE C – ASSET PURCHASE

On August 26, 2002, we adopted EITF Issue No. 01-09, Accountingacquired the egg products assets of Canadian Inovatech Inc. for Consideration givenapproximately $18.0 million.  The total purchase price was allocated to the acquired assets and liabilities based on their fair values at the acquisition date as determined by a Vendor to a Customer (including a Resellerthird party appraisal firm.  The allocation of the Vendor's Products)purchase price resulted in goodwill of $4.8 million.  We also entered into long-term leases for two plants operated by the seller.  This entity’s results of operations have been included in our operating results since the date of the asset purchase.  Also, as a result of this asset purchase, we now own 67%, effective rather than 33%, of a Canadian egg products joint venture, Trilogy Egg Products, Inc.  Hence, Trilogy became a consolidated entity under our financial reporting as of the date of the asset purchase.

The following unaudited pro forma statement of earnings information has been prepared assuming the asset purchase had occurred on January 1, 2002.    The adoptionnet sales and earnings before income taxes for the six months ended June 30, 2003 represent actual results for the period (dollars in thousands):

In May 2003, we signed a letter of intent for the sale of our dairy products division operating segment to Dean Foods Company.  The dairy products division is substantially made up of the assets of M-Foods Dairy, LLC and M-Foods Dairy TXCT, LLC.  The dairy products division processes and sells ice milk and ice cream mixes, creamers, milk and specialty dairy products.  The transaction is expected to close during the third quarter of 2003.  Completion of the transaction is dependent upon several items, including completion of due diligence, execution of a securities purchase agreement, approval by both companies’ Boards of Directors, and regulatory approval.  As a part of the transaction, we may be compensated for certain transition services expected to be provided to the buyer for a period currently anticipated to be 12 to 18 months after the close of the transaction.  These transition services will include services such as information technology, sales, customer service and procurement.  By providing these transition services, we will be deemed to have “significant continuing involvement” in the dairy products division operating segment.  Therefore, we have determined that the sale, as currently contemplated, would not meet the accounting criteria for “discontinued operations”, but does meet the accounting criteria for classification as “held for sale.”  Accordingly, the related assets and liabilities of the dairy products division operating segment have a material effect on our consolidated financial statements.been classified as current assets and liabilities held for sale at June 30, 2003.  The operations of the dairy products division operating segment continue to be included in the earnings statement of the Company.

External net sales and earnings from the dairy products division operating segment held for sale as of June 30, 2003 were as follows:

Assets and liabilities of the dairy products division operating segment classified as held for sale in the Consolidated Balance Sheet as of June 30, 2003 are as follows:

NOTE E – 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 life of generally one to two years, assuming no salvage value.

Inventories consisted of the following:following (dollars in thousands):

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NOTE F – COMMITMENTS AND CONTINGENCIES

Potato Procurement Contract

We have a contract to purchase potatoes which expires in 2004 and which will supply approximately 45% and 40% of the Potato Products Division’s raw material needs in 2003 and 2004, respectively, at an approximate cost of $5.3 million each year.

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 55%50% of our egg requirements.  TheseMost of these contracts vary in length from 18 to 72 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 that our purchases from our top five long-term contracted egg suppliers will approximate $141 million in 2003, $138 million in 2004, $82 million in 2005, $20 million in 2006, and $16 million in 2007, and that the 2003 amount will account for approximately 60% of our contracted egg purchases this year.

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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.  We may applyoffset 50% of our costs of defending the patents against royalty payments due to future royalty payments.

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

In 2000, the Predecessorlitigation was settled litigation with one party related to the infringement of these patents and issued a sub-license was issued to the infringing party granting them the right to manufacture and distribute extended shelf-life liquid whole egg product subject to royaltiesa royalty payable to us and the patent holder on all future product sold. In connection with this settlement, the patent holder received a lump sum payment for the past production and sale of the product and other matters related to the infringement. We are continuing to pursue litigation related to other parties who we believe are infringing the product and process patents, including Sunny Fresh Foods, Inc., a subsidiary of Cargill, Inc.  The patent infringement trial with Sunny Fresh Foods, Inc. commenced with a jury on June 30, 2003 and is expected to continue into the third quarter of 2003.

Other Litigation

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

Other Matter

As of June 30, 2003, we have an approximate $4 million investment recorded for Belovo S.A. (Belovo), a Belgium egg products company, which represents our approximate 36% interest accounted for under the equity method.  Belovo recently notified the Belgium government of a potential finished products inventory matter and is currently working with the Belgium government to address the situation. The potential loss, if any, related to this matter has not yet been determined.

NOTE G – COMPREHENSIVE INCOME (LOSS)

The components and changes in accumulated other comprehensive loss (AOCL), net of taxes, during the ninesix months ended SeptemberJune 30, 20022003 were as follows:follows (dollars in thousands):

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Comprehensive income (loss), net of taxes, for the nine months ended September 30, 2002 and for the six months ended SeptemberJune 30, 20012003 and for the predecessor’s three months ended March 31, 20012002 was as follows:follows (dollars in thousands):

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NOTE H – BUSINESS SEGMENTS

We operate in four reportable segments – Egg Products, Refrigerated Distribution, Dairy Products and Potato Products.  The Merger, as more fully described inSee Note A, did not have an impact on our segment classification orD regarding the interaction betweensale of the segments.Dairy Products division operating segment.  Certain financial information on our operating segments and the Predecessor’s, is as follows (unaudited, dollars in thousands):

NOTE I – SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION

Our revolving line of credit, A and B term loans and senior subordinated notes have been guaranteed, on a joint and several basis, by us and our domestic subsidiaries. The revolving line of credit and A and B term loans are also guaranteed by our parent, M-Foods Holdings, Inc.

The following condensed consolidating financial information presents our consolidated balance sheet as of SeptemberJune 30, 20022003 and December 31, 2001,2002 and the statements of earnings for the three monthsand six month periods ended SeptemberJune 30, 2003 and 2002 and 2001 and for the nine months ended September 30, 2002 and the six months ended September 30, 2001, and the statements of cash flows for the nine monthssix month periods ended SeptemberJune 30, 20022003 and the six months ended September 30, 2001; and the Predecessor’s consolidated statements of earnings and cash flows for the three months ended March 31, 2001.2002.  These financial statements reflect Michael Foods, Inc. (the parent)Parent), the wholly owned guarantor subsidiaries (on a combined basis), the non-wholly owned guarantor subsidiaries, and elimination entries necessary to combine such entities on a consolidated basis. Included elsewhere in this Form 10-Q are the unaudited financial statements of the non-wholly owned guarantor subsidiaries.  The assets and liabilities of the Dairy Products segment are presented in current assets held for sale and liabilities related to business to be sold (see Note D).

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Condensed Consolidating Balance Sheets

June 30, 2003

(Unaudited, dollars in thousands)