Cagle's-Keystone Foods LLC

Financial Statements

for the 52-Week Periods Ended

December 27, 2003 and December 28, 2002

and Independent Auditors' Report

INDEPENDENT AUDITORS' REPORT

Steering Committee of Cagle's-Keystone Foods LLC:

We have audited the accompanying balance sheets of Cagle's-Keystone Foods LLC

(the "Company"), which is owned 70% by Executive Holdings L.P. and 30% by

Cagle's Inc., as of December 27, 2003 and December 28, 2002 and the related

statements of operations, members' equity, and cash flows for the 52-week

periods then ended. These financial statements are the responsibility of the

Company's management. Our responsibility is to express an opinion on these

financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally

accepted in the United States of America. Those standards require that we

plan and perform the audit to obtain reasonable assurance about whether the

financial statements are free of material misstatement. An audit includes

examining, on a test basis, evidence supporting the amounts and disclosures

in the financial statements. An audit also includes assessing the accounting

principles used and significant estimates made by management, as well as

evaluating the overall financial statement presentation. We believe that our

audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in

all material respects, the financial position of the Company at December 27,

2003 and December 28, 2002 and the results of its operations and its cash

flows for the 52-week periods then ended in conformity with accounting

principles generally accepted in the United States of America.

/s/ Deloitte & Touche LLP

April 9, 2004

CAGLE'S-KEYSTONE FOODS LLC

BALANCE SHEETS

(Dollars in thousands)

December 27, 2003 December 28, 2002

ASSETS

CURRENT ASSETS:

Cash $ 3,397 $ 951

Accounts receivable 8,423 5,971

Receivables-related party 4,677 13,302

Inventory 17,956 11,971

Notes receivable-related party 523

Prepaid and other current assets 212 248

----------------- -----------------

Total current assets 34,665 32,966

INVESTMENTS IN AND ADVANCES

TO AFFILIATED ENTITIES 464 254

PROPERTY, PLANT, AND EQUIPMENT:

Land 2,199 2,206

Buildings and improvements 57,397 53,224

Machinery and equipment 27,211 25,258

Furniture and fixtures 1,005 865

Construction in progress 289 4,424

----------------- -----------------

88,101 85,977

Less accumulated depreciation (28,375)

(20,238)

----------------- -----------------

Property, plant, and

equipment-net 59,726 65,739

OTHER ASSETS 3,107 2,191

----------------- -----------------

TOTAL $ 97,962 $ 101,150

See notes to financial statements.

LIABILITIES AND MEMBERS' EQUITY

CURRENT LIABILITIES:

Current portion of long term debt $ 7,500 $ 7,500

Debt-related party 16,976 4,000

Accounts payable 7,881 11,481

Accounts payable-related party 244 530

Accrued expenses 4,726 3,137

----------------- ------------------

Total current liabilities 37,327 26,648

LONG-TERM DEBT 47,063 67,880

OTHER LONG-TERM LIABILITIES 2,549 0

----------------- ------------------

Total liabilities 86,939 94,528

MEMBERS' EQUITY 11,023 6,622

----------------- ------------------

TOTAL $ 97,962 $ 101,150

See notes to financial statements.

CAGLE'S-KEYSTONE FOODS LLC

STATEMENTS OF OPERATIONS

(Dollars in thousands)

52-Week Periods Ended

December 27, December 28,

2003 2002

------------ ------------

NET SALES $ 215,443 $ 175,104

TOTAL COST OF PRODUCT SOLD 186,529 146,854

SELLING, GENERAL, AND ADMINISTRATIVE 7,338 6,208

DEPRECIATION AND AMORTIZATION 9,154 9,077

------------ ------------

OPERATING INCOME 12,422 12,965

OTHER INCOME (EXPENSES):

Interest-net of interest income (2,198) (4,145)

Interest-related party (377) (56)

Other-net (61) (94)

Equity in income of affiliates 269 306

------------ ------------

NET INCOME $ 10,055 $ 8,976

See notes to financial statements.

CAGLE'S-KEYSTONE FOODS LLC

STATEMENTS OF MEMBERS' EQUITY

(Dollars in thousands)

Executive Cagle's,

Holdings L.P. Inc. Total

BALANCE-December 29, 2001 (deficit) $ (405) $ (174) $ (579)

Net income 6,283 2,693 8,976

Other comprehensive income:

Net change in fair value of:

Interest rate hedge of company-

GA/KY Fundco LLC 1,192 510 1,702

Interest rate hedge of Cagle Foods

Credit, L.L.C.- equity method

investment (91) (39) (130)

Total comprehensive income 7,384 3,164 10,548

Distributions to members (2,343) (1,004) (3,347)

BALANCE-December 28, 2002 4,636 1,986 6,622

Net income 7,039 3,016 10,055

Other comprehensive income:

Net change in fair value of:

Interest rate hedge of company-

GA/KY Fundco LLC 5 3 8

Interest rate hedge of Cagle Foods

Credit, L.L.C.- equity method

investment 41 18 59

Total comprehensive income 7,085 3,037 10,122

Distributions to members (4,005) (1,716) (5,721)

BALANCE-December 27, 2003 $ 7,716 $ 3,307 $11,023

See notes to financial statements.

CAGLE'S-KEYSTONE FOODS LLC

STATEMENTS OF CASH FLOWS

(Dollars in thousands)

52-Week Periods Ended

December 27, December 28,

2003 2002

OPERATING ACTIVITIES:

Net income $ 10,055 $ 8,976

Adjustments to reconcile net income to net cash

provided by operating activities:

Depreciation and amortization 9,154 9,077

Loss on sale of equipment 39 67

Equity in income of affiliates (269) (306)

Dividends received from affiliates 118 155

Changes in operating assets and liabilities:

Accounts receivable-net 6,173 (8,982)

Inventories (5,985) (2,201)

Accounts payable and accrued liabilities (2,289) 8,658

Other 2,585 496

Net cash provided by operating activities 19,581 15,940

INVESTING ACTIVITIES:

Investments in and advances to affiliates 523 47

Purchases of property, plant, and equipment (2,464) (5,536)

Proceeds from sale of property, plant, and equipment 83 5

Other assets and liabilities (4) (202)

Net cash used in investing activities (1,862) (5,686)

FINANCING ACTIVITIES:

Net payments under revolving lines of credit (12,000) (3,000)

Principal payments on long-term debt (8,817) (56,507)

Proceeds from the issuance of long-term debt 67,880

Loan fees (245) (2,207)

Debt-related party 11,510 (13,193)

Distributions to members (5,721) (3,347)

Net cash used in financing activities (15,273) (10,374)

NET INCREASE (DECREASE) IN CASH 2,446 (120)

CASH-Beginning of period 951 1,071

CASH-End of period $ 3,397 $ 951

See notes to financial statements.

CAGLE'S-KEYSTONE FOODS LLC

NOTES TO FINANCIAL STATEMENTS

FOR THE 52-WEEK PERIODS ENDED DECEMBER 27, 2003 AND

DECEMBER 28, 2002

(Dollars in thousands)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of Business-Cagle's-Keystone Foods LLC (the "Company") was

established as a limited liability company on October 31, 1997 and is a joint

venture between Cagle's, Inc. (30%) and Executive Holdings L.P. (70%). The

Company's operations are located in Albany and Franklin, Kentucky. The latest

date at which the limited liability company is to dissolve is December 31,

2022. The Company is engaged in the production and sale of processed chicken.

A significant portion of all of the Company's sales are made to the joint

venture partners (see Note 3).

Revenue Recognition-The Company recognizes revenue when the product is

shipped to customers, an exchange has taken place, and the applicable

provisions of Statement of Financial Accounting Standards ("SFAS") No. 48,

Revenue Recognition When Right of Return Exists, have been made.

Inventories-Live field inventories are stated at the lower of cost or

market and breeders are stated at cost, less accumulated amortization.

Breeder costs are accumulated up to the production stage. Such costs are

amortized into hatching egg costs over the estimated production lives

based on monthly egg production. Finished products, feed, medication, and

supplies are stated at the lower of cost or market determined by the

first-in, first-out method.

Inventories at December 27, 2003 and December 28, 2002 consist of the

following:

2003 2002

Finished products $ 3,954 $ 1,320

Field inventory, breeders, and eggs 10,145 7,869

Feed, ingredients, and medication 1,529 1,200

Supply inventory 2,328 1,582

-------- --------

$ 17,956 $ 11,971

Property, Plant, and Equipment-Property, plant, and equipment are stated at

cost. Depreciation is computed principally by the straight-line method for

financial reporting purposes over the following periods:

Buildings and improvements 3-30 years

Machinery, furniture, and equipment 3-17 years

Land improvements 7 years

On January 1, 2002, the Company adopted SFAS No. 144, Accounting for the

Impairment or Disposal of Long-Lived Assets, which superceded SFAS No. 121,

Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to

be Disposed Of. SFAS No. 144 establishes a single accounting model for

long-lived assets to be disposed of by sale and resolves several

implementation issues arising from SFAS No. 121. The effect of adopting

SFAS No. 144 was not material to the results of operations or financial

condition of the Company.

The Company evaluates the estimated useful lives and the carrying value of

assets on a periodic basis to determine whether events or circumstances

warrant revised estimated useful lives or whether any impairment exists.

Management believes that no impairment existed at December 27, 2003.

Investment in Unconsolidated Affiliates-The equity method of accounting

is used to account for the Company's investment in unconsolidated

affiliates because of the Company's ability to exercise significant

influence.

Fair Value of Financial Instruments-The carrying amounts of cash,

accounts receivable, and accounts payable reflected in the financial

statements approximate fair values because of the short-term nature of

these instruments. Based on the borrowing rates currently available to

the Company for bank loans with similar terms and maturities, the Company

estimates that the carrying value of its long-term debt approximates fair

value. The fair value of the interest rate swaps (see Note 2) is the

amount the Company would receive or pay to terminate the swap agreements.

Use of Estimates-The preparation of financial statements in conformity

with accounting principles generally accepted in the United States of

America requires management to make estimates and assumptions that affect

reported amounts of assets and liabilities and disclosure of contingent

assets and liabilities at the date of the financial statements and the

reported amounts of revenues and expenses during the reporting period.

Actual results could differ from those estimates.

Reporting Period-The Company's tax reporting year ends on the Saturday

closest to December 31, which for the current year was January 3, 2004.

For purposes of these financial statements, the Company has elected to

use the 52-week periods ended December 27, 2003 and December 28, 2002.

Income Taxes-The Company is a limited liability company and has received

a ruling from the Internal Revenue Service, which allows the Company to be

treated as a partnership for income tax purposes. As a partnership, it is

not subject to income taxes and the partners report their proportionate

share of the income on their tax returns.

Accumulated Other Comprehensive Loss-Included in members' equity is

accumulated other comprehensive loss related to interest rate swaps

(see Note 2) of $149 and $216 as of December 27, 2003 and December 28,

2002, respectively.

Derivative Instruments and Hedging Activities-On December 31, 2000, the

Company adopted SFAS No. 133, Accounting for Derivative Instruments and

Hedging Activities, and SFAS No. 138, Accounting for Certain Derivative

Instruments and Certain Hedging Activities, which amended SFAS No. 133.

These standards require companies to record derivatives on the balance

sheet as assets or liabilities, measured at fair value. Gains or losses

resulting from changes in the values of those derivatives would be

accounted for depending on the use of the derivative and whether it

qualifies for hedge accounting.

Interest Rate Swap Agreements-These agreements involve the receipt of a

floating rate of interest on long-term debt in exchange for a fixed-rate

of interest over the life of the agreements without an exchange of the

underlying debt principal amount. These swap agreements have been

designated as cash flow hedges and their fair values are recognized as

an asset or liability in the financial statements with a corresponding

gain or lose recognized, in accumulated other comprehensive (loss) income

in members' equity.

Interest Rate Collar Agreements-These agreements involve the receipt of

a floating rate of interest above a certain cap or below a certain floor

on long-term debt in exchange for the cap or the floor over the life of

the agreements without an exchange of the underlying debt principal amount.

These agreements did not qualify as hedges under SFAS No. 133. The fair

values of the collars are recognized as an asset or liability in the

financial statements with a corresponding gain or loss recognized as

income or expense.

New Accounting Pronouncements-In November 2002, the Financial Accounting

Standards Board ("FASB") issued Interpretation No. ("FIN") 45,

Guarantor's Accounting and Disclosure Requirements for Guarantees,

Including Indirect Guarantees of Indebtedness of Others, an Interpretation

of FASB Statement Nos. 5, 57, and 107 and Rescission of FASB Interpretation

No. 34. The interpretation requires that upon issuance of a guarantee, the

entity must recognize a liability for the fair value of the obligation it

assumes under that obligation. This interpretation is intended to improve

the comparability of financial reporting by requiring identical accounting

for guarantees issued with separately identified consideration and

guarantees issued without separately identified consideration. The

disclosure provisions of FIN 45 are effective for the Company as of

December 28, 2002. The initial recognition and measurement provisions of

FIN 45 are applicable to guarantees issued or modified after December 28,

2002. Adoption of the accounting recognition provisions of FIN 45 did not

have a significant impact on the Company's financial statements.

In January 2003, the FASB issued FIN No. 46, Consolidation of Variable

Interest Entities-an Interpretation of Accounting Research Bulletin No.

51. FIN 46 addresses consolidation by business enterprises where equity

investors do not bear the residual economic risks and rewards. The

underlying principle behind FIN 46 is that if a business enterprise has

the majority financial interest in an entity, which is defined in FIN 46

as a variable interest entity, the assets, liabilities and results of the

activities of the variable interest entity should be included in

consolidated financial statements with those of the business enterprise.

In December 2003, the FASB issued Revised FIN 46 ("FIN 46R") to clarify

certain aspects of FIN 46 including the determination of who is the

primary beneficiary of a variable interest entity. FIN 46R postponed the

effective date as to when companies are required to apply the provisions

of FIN 46 prospectively for all variable interest entities in existence

prior to January 31, 2003 until the first financial reporting period that

ends after March 15, 2004. However, for entities that are considered to

be special purpose entities, the effective date of FIN 46 is financial

reporting periods after December 15, 2003. The Company is evaluating the

impact of FIN 46 to determine the effect, if any, the pronouncement will

have on its financial position or results of operations.

In April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133

on Derivative Instruments and Hedging Activities. SFAS No. 149 amends

and clarifies accounting for derivative instruments, including certain

derivative instruments embedded in other contracts, and for hedging

activities under SFAS No. 133. In particular, this statement clarifies

under what circumstances a contract with an initial net investment meets

the characteristic of a derivative and when a derivative contains a

financing component that warrants special reporting in the statement of

cash flows. This statement is effective for contracts entered into or

modified after June 30, 2003. Adoption of the pronouncement did not have

a significant impact on the Company's financial statements.

In May 2003, the FASB issued SFAS No. 150, Accounting for Certain

Financial Instruments With Characteristics of Both Liabilities and

Equity. SFAS No. 150 establishes how an issuer classifies and measures

certain financial instruments with characteristics of both liabilities

and equity. This statement is effective for instruments entered into or

modified after May 31, 2003 and otherwise is effective at the beginning

of the first interim period beginning after June 15, 2003. As a result

of concerns over implementation and measurement issues, the FASB

unanimously decided on October 29, 2003 to defer the application of SFAS

No. 150 to certain noncontrolling interests of limited-life entities that

are consolidated in the financial statements. Adoption of the

pronouncement did not have a significant impact on the Company's

financial statements.

On January 12, 2004, the FASB issued FASB Staff Position No. FAS 106-1,

Accounting and Disclosure Requirements Related to the Medicare

Prescription Drug, Improvement and Modernization Act of 2003 ("FSP 106-1").

FSP 106-1 permits employers that sponsor postretirement benefit plans that

provide prescription drug benefits to retirees to make a one-time election

to defer accounting impact, if any, of the Medicare Prescription Drug,

Improvement, and Modernization Act of 2003 (the "Act"), which was enacted

into law on December 8, 2003. The Company has elected to defer recognition

of the provisions of the Act as permitted by FSP 106-1 due to uncertainties

regarding some of the new Medicare provisions and a lack of authoritative

accounting guidance regarding certain matters. Changes to previously

reported information may be required depending on the transition guidance

issued in future authoritative guidance.

Reclassifications-Certain reclassifications have been made to prior year

amounts to conform to the current year presentation.

2. LONG-TERM DEBT

Long-term debt at December 27, 2003 and December 28, 2002 consists of the

following:

2003 2002

Notes payable to GA/KY Fundco LLC under a term loan

agreement, variable interest rate (2.92% at December

27, 2003 and 3.69% at December 28, 2002) commencing

April 30, 2002, maturing on April 19, 2007. $ 54,563 $ 63,380

Note payable to GA/KY Fundco LLC under a revolving

Credit agreement, variable interest rate (2.92% at

December 27, 2003 and 3.36% at December 28, 2002)

commencing April 30, 2002, maturing on April 30, 2007 0 12,000

Note payable to Equity Group-Georgia Division LLC, a

related party, variable interest rate (2.89% at

December 27, 2003 and 3.36% at December 28, 2002),

due on demand. 15,500 4,000

Note payable to Cagle Foods Credit, L.L.C., a

related party, 6.5% fixed interest rate, due

on demand. 875 0

Note payable to Cagle Foods Credit, L.L.C., a

related party, 9.25 % fixed interest rate, due

on demand. 601 0

-------- --------

Total 71,539 79,380

Current portion of long-term debt

Related party debt-due on demand 7,500 7,500

16,976 4,000

-------- --------

Total long-term debt $ 47,063 $ 67,880

On April 30, 2002, GA/KY Fundco LLC ("Fundco") (a 50%-owned subsidiary)

executed a loan agreement for a $105 million term loan facility and a $30

million revolving loan facility at variable interest rates on behalf of the

Company and Equity Group-Georgia Division LLC ("Equity GA"), formerly Cagle

Foods JV, L.L.C., a related party. This loan is guaranteed by the Company

and Equity GA. The proceeds were used to repay the Company's and Equity

GA's existing term loan of $53.7 million and revolving loans of $17 million

and purchase all of the Cagle's, Inc. joint venture interests in Equity GA.

Fundco was established in 1997 as a 50%-owned subsidiary of both the Company

and Equity GA. Fundco is a special purpose entity set up for borrowing of

funds from a group of banks to fund the capital needs of the Company and

Equity GA. All borrowing terms entered into by Fundco are the same borrowing

terms passed down to the Company and Equity GA. Fundco has no other

operations. At December 27, 2003, Equity GA had $22.9 million outstanding

for the term loan facility and none for the revolving loan facility. The

debt is secured by substantially all of the Company's' assets.

Aggregate maturities of long-term debt during the years subsequent to

December 27, 2003 are as follows:

For the fiscal year

2004 $ 24,476

2005 8,000

2006 8,000

2007 31,063

--------

$ 71,539

The Company incurred approximately $2,207 in loan origination costs

related to the term loan and revolver, which is being amortized on a

straight-line basis over the term of the loan, five years. Amortization

expense related to the loan origination costs was $462 in 2003.

In 2003 and 2002, the Company paid approximately $2,750 and $4,324 in

interest expense, respectively.

On December 31, 1997, Fundco, on behalf of the Company and Equity GA,

entered into two interest rate swap agreements, which matured December 31,

2002. The swaps effectively fixed the rate on original notional amounts of

$58.5 million at rates of 5.98% and 6%, plus a spread based on the

Company's debt-to-cash-flow ratio. These notional amounts changed based

on amounts outstanding under the Company's term and revolving loan

agreements. Under the terms of the agreements, the Company made payments

at fixed rates and receives payments at variable rates based on the three-

month London InterBank Offered Rate ("LIBOR"). Approximately $12 in

unrealized losses exist on these agreements at December 28, 2002, the

Company's share of which is $8 and Equity GA's share is $4.

On January 15, 2003, Fundco entered two new interest rate collars on

behalf of the Company and Equity GA. The collars allow Fundco to incur a

floating rate of interest on the outstanding notional amount between a

specified range. The collar swaps floating three-month LIBOR for fixed

rates whenever the floating rate exceeds the cap rate (4%) or falls below

the floor rate (1.5%). Each contract originated with a notional amount of

$28,350. The notional amounts amortize over a three-year term in

proportion to the underlying Fundco term loan. The collars differ in that

one has a conventional cap which may trigger payments on a period-by-period

basis, while the other has a cumulative cap which will only trigger payments

when the sum of all floating rate payments exceed interest at the cap rate

over the life of the contract. As of the date of this report it is highly

probable that the underlying loan for which these derivative contracts were

entered will be terminated in the near term. For this reason, the collars

are not given hedge accounting and changes in their market values are

reflected in other income and expenses of the Company in the amount of $97.

At December 27, 2003 Fundco had an unused standby letter of credit

available to the Company amounting to $4,760.

3. RELATED PARTY TRANSACTIONS

Sales to the Company's owners (Executive Holdings L.P. through its common

ownership affiliate Keystone Foods LLC and Cagle's, Inc.) represented 80%

and 89% of net sales during 2003 and 2002, respectively. The Company

currently sells deboned chicken at cost plus $.03 per eviscerated pound.

Executive Holdings L.P. and Cagle's Inc. both charge the Company

administrative fees based on the Company's volume of production. These

fees totaled $2,430 and $2,264 in 2003 and 2002, respectively.

Sales, expenses, and balances with related parties for 2003 and 2002 are

summarized as follows:

Executive

Holdings Franklin Cagle's,

L.P. Equipment Equity GA Credit Inc.

2003

Net sales $ 172,580 $ - $ 561 $ - $ 21

Purchases 5,973

Interest income (expense) 14 (300) (91)

Balance at year-end:

Net A/R, (A/P) 4,547 (58) (56)

Notes receivable

Notes payable 15,500 1,476

Executive

Holdings Franklin Cagle's,

L.P. Equipment Equity GA Credit Inc.

2002

Net sales $ 153,866 $ - $ 1,388 $ - $ -

Purchases 494

Interest income (expense) 37 (93)

Balance at year-end:

Net A/R, (A/P) 13,353 2 (54) (522) (7)

Notes receivable 523

Notes payable 4,000

The Company entered into a loan agreement with Franklin Poultry Equipment

LLC ("Franklin Equipment") to advance $1.6 million in funds to finance

operations. Franklin Equipment is a joint venture between Cagle's, Inc.

and Executive Holdings L.P., whose primary purpose is to supply independent

farmers equipment necessary for production of chickens owned by the Company.

This loan bears interest at a rate of 7% per annum. The balance at December

28, 2002 was $523 and the loan was repaid in February and October 2003.

In 2003, Cagle Foods Credit, L.L.C. ("Credit"), a related party,

transferred two foreclosed consumer loans and the related real estate that

collateralized the loans to the Company. The Company acquired this real

estate from Credit for the book value and issued notes payable as

consideration for this acquisition. The real estate collateral is recorded

in other assets at the loan values which approximate fair market value and

are held for resale. The balance of the notes payable at December 27, 2003

were $875 (6.5% fixed rate interest) and $601 (9.25% fixed rate interest).

4. COMMITMENTS

In 2003, the Company entered into a five year industrial power agreement

with South Kentucky Rural Electric Cooperative Corporation (the "Co-op").

Under the terms of this agreement, the Co-op has agreed to provide the

substation and other facilities costing approximately $518 to supply the

Company with its power requirements. The cost of these facilities will be

recovered through rates over the life of the contract.

Additionally in 2003, the Company entered into a five year emergency backup

service agreement with the Co-op. Under the terms of this agreement, the

Co-op has agreed to provide the backup generators and associated equipment

and facilities costing approximately $608 to provide backup electric to the

Company in the event of a power interruption. The Company has agreed to pay

an annual facilities charge of $114 for the availability of this service.

The Company leases machinery and equipment under operating leases. Rent

expense was $2,649 and $1,635 in 2003 and 2002, respectively.

Future minimum payments under noncancelable operating leases with initial

terms of one year or more consisted of the following at December 27, 2003:

For the fiscal year

2004 $ 2,855

2005 2,855

2006 2,733

2007 1,720

2008 843

Thereafter 318

--------

$ 11,324

5. INVESTMENT IN UNCONSOLIDATED AFFILIATE

Effective December 1995, Cagle's, Inc., Executive Holdings L.P., and Equity

GA formed Credit. Each Company made capital contributions of $3. Effective

July 1, 1998, the Company became a member of Credit, at which time the

Company made a capital contribution of $14. Currently, the Company owns 25%

of Credit along with Equity GA (25%) and Executive Holdings L.P. (50%).

Credit was formed for the purpose of financing the facilities of the

Company's and Equity GA's contract growers. The investment is being

accounted for under the equity method. The undistributed income from this

affiliate allocated to the Company was $269 and $306 in 2003 and 2002,

respectively. The Company received distributions of $118 and $155 in 2003

and 2002, respectively.

On April 30, 2002, Credit executed a loan agreement for a $25.3 million

revolving loan facility at variable interest rates. The Company and Equity

GA have guaranteed the borrowings under the loan agreement. Credit has

received advances of approximately $21.7 million on the revolving loan

facilities as of December 27, 2003. The revolving loan facility is due

in monthly installments. Credit is required to make a final balloon

payment in April 2007.

Credit has consumer loans receivable of approximately $20.8 million and

$25.1 million at December 27, 2003 and December 28, 2002, respectively.

Credit has total assets of approximately $24.4 million and $26.0 million

and total liabilities of approximately $22.6 million and $25.0 million as

of December 27, 2003 and December 28, 2002, respectively, and net income

of approximately $1,076 and $1,225 for 2003 and 2002, respectively.

6. BENEFIT PLANS

The Company contributes to a 401(k) retirement plan for employees who meet

the eligibility requirements. Under the plan, the Company contributes up

to 2% of participating employees' salaries. Amounts contributed by the

Company to the 401(k) plan totaled $95 in 2003 and $89 in 2002. During

2003, the Company introduced a defined contribution plan for certain

employees not covered by collective bargaining agreements. Contributions

are made on the basis of a percentage of each employee's salary and

pension expense for 2003 was $227.

In November 2002, the Company revised its benefits program to provide

certain health care benefits for retired employees. Substantially, all of

the Companies' domestic employees may become eligible for varying levels of

benefits if they reach normal retirement age while working for the Company.

The Companies' accumulated postretirement benefit obligation, which is

unfunded, is $328 and $212 at December 27, 2003 and December 28, 2002,

respectively. The accrued postretirement benefit cost recognized in the

accompanying balance sheets is $113 and $20 at December 27, 2003 and

December 28, 2002, respectively. No retiree benefit payments were paid,

2003 or 2002.

Actuarial assumptions used to determine the liability for postretirement

plans other than pensions included a discount rate of 6.25% at December

27, 2003 and 6.75% at December 28, 2002.

For measurement purposes, an average 5.5% annual increase in the per capita

cost of covered health care benefits was assumed for 2003.

The net periodic postretirement benefit costs were $93 and $20 for 2003

and 2002, respectively.

7. CONTINGENCIES

The Company is a party to various lawsuits in the ordinary course of doing

business. The Company intends to defend these matters vigorously. The

outcome of such lawsuits cannot presently be determined, but in the opinion

of management, the aggregate liability, if any, arising from such

litigation will not have a material adverse effect on the accompanying

financial statements.

8. SUBSEQUENT EVENT

As described in Note 1, the Company is owned 70% by Executive Holdings

L.P., which is affiliated with Keystone Foods LLC and various other

entities through common ownership. On April 2, 2004, the Company became

subject to an agreement under which the Company and various other entities

affiliated by common ownership with Keystone Food LLC would be merged into

one entity and an unrelated third party would obtain a controlling equity

interest in that entity. The agreement is subject to regulatory approval

and satisfaction of the conditions agreed to by the parties. Following

that merger, it is likely that borrowing agreements outstanding at December

27, 2003 would be replaced by new agreements entered into by the postmerger

entity. The accompanying financial statements do not reflect any adjustments

that might result from the merger or repayment of debt.