SecProbe.io

CORRESP
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filename1.htm

November 1, 2005

United States Securities and Exchange
Commission

Division of Corporation Finance

100 F Street, NE

Washington, D.C.  20549-7010

Attn:  Jill S. Davis, Branch
Chief

  Re:

  Pierre Foods, Inc.

  Form 10-K for Fiscal Year Ended
  March 5, 2005

  Filed June 3, 2005

  Form 10-Q for Fiscal Quarter Ended
  June 4, 2005

  Filed July 19, 2005

  File No. 0-07277

Ladies and Gentlemen:

We submit this letter in response to comments
from the Staff of the Securities and Exchange Commission (the “Staff”) received
by letter dated September 15, 2005 relating to the Pierre Foods, Inc.
(the “Company”) Form 10-K for the fiscal year ended March 5, 2005
(“Fiscal 2005”) filed on June 3, 2005 and Form 10-Q for the fiscal quarter
ended June 4, 2005 filed July 19, 2005.

Set forth below are the Staff’s comments
followed by our responses, which are numbered to correspond with the numbers
set forth in the Staff’s comment letter.
This letter has been filed with the Staff as correspondence through
EDGAR.

Form 10-K for the Fiscal Year Ended March 5,
2005

Management’s Discussion and Analysis of
Financial Condition and Results of Operation, page 9

1.                                       Comment— Please refer to the guidance provided in PRC 501.03.b
which indicates that your discussion and analysis of cash flows should not be a
mere recitation of changes and other information evident to readers from the
financial statements.  Please review and
revise your disclosure, as appropriate.

Response—The Company
has reviewed the guidance referenced above and agrees that additional
disclosure would be useful to readers of the financial statements.  In response to this comment, the Company, in
its most recent Quarterly Report on Form 10-Q for the quarter ended September 3,
2005, filed on October 18, 2005 (see page 24), expanded its
discussion and analysis of cash flows to include disclosure of the factors and
trends that are driving changes in cash flows.
While the Company, as indicated below, intends to file a Form 10-K/A
for the Company’s Fiscal 2005 year in response to the Staff’s comments, it
believes, given the nature of the disclosures, the Company has appropriately
applied this comment on a prospective basis and further revisions to the Form 10-K
are not necessary.

Controls and Procedures, page 20

2.                                       Comment—We note your conclusion as to the effectiveness of
your disclosure controls and procedures is incomplete as it does not indicate
whether your controls are effective or ineffective.  Please review

your disclosure and revise accordingly.  We note that you have revised the disclosure
in your Form 10-Q for the fiscal quarter ended June 4, 2005.

Response—Included in
the Company’s response to Comment #9 below, is a detailed explanation of the
basis for the principal executive and principal accounting officers’ conclusion
that the Company’s disclosure controls and procedures were effective as of end
of the Company’s Fiscal 2005.  The
Company stated in its Form 10-Q report for its first quarter ended June 4,
2005 and its second quarter ended September 3, 2005 that as of end of the
period covered by the report, “the Company’s management, including the chief
executive officer and principal accounting officer, concluded that the Company’s
disclosure controls and procedures were effective.”  The Company acknowledges that the disclosure
in its Form 10-K inadvertently lacks the use of the word “effective” when
concluding on its disclosure controls and procedures.  In response to the comment, the Company
intends to file a Form 10-K/A for the Company’s Fiscal 2005 upon resolution
of all open comments with the Staff that amends “Item 9a—Controls and
Procedures” to include the quoted language that appears in the second sentence
of this paragraph.

Certain Relationships and Related Party
Transactions, page 26

Predecessor Pierre, page 27

3.                                       Comment—We note the allocation of the transaction entered
into on March 8, 2004, as permitted by the Fourth Supplemental Indenture,
was to Retained Earnings of $11,900,276 and Common Stock of $339,639.  Please explain to us the basis for the
adjustment to Common Stock and how you determined the amount of the adjustment.

Response–Columbia
Hill Aviation (“CHA”) was a related party entity with which the Company had an
aircraft leasing arrangement.  Beginning
with the Company’s Annual Report on Form 10-K for the year ended March 1,
2003, CHA was consolidated with the Company
under EITF 90-15 and D-14, and FIN 46(R) because the Company considered CHA to
be a non-independent special purpose leasing entity.  In connection with the Restructuring, the
Company’s aircraft leasing arrangement with CHA was eliminated.    Upon elimination of the aircraft leasing
agreement, consolidation of CHA with the Company was no longer required under
EITF 90-15 and D-14, and FIN 46(R).  The
adjustment to common stock of $339,639 represents the deconsolidation of CHA’s
members’ equity as shown in its historical financial statements on the date of
the Restructuring.

Financial Statements

Consolidated Statements of Shareholder’s
Equity, page F-5

4.                                       Comment—We note that you have recorded your acquisition (“Acquisition”)
of 100% of the shares of your parent, PFMI, on June 30, 2004 and the
simultaneous merger with Pierre Merger Corp., an affiliate of Madison Dearborn
Partners, LLC (“MDP”), under the purchase method of accounting whereby you
emerged as the surviving corporation.
Based on the disclosures provided in your filing regarding the
Acquisition, please contact us at your earliest convenience so that we may
better understand the accounting methodology and guidance you followed to
record the applicable transactions.
Prior to your call, you may wish to provide us with a comprehensive
analysis of the transactions that resulted in the presentation of the following
line items, “Purchase Accounting Adjustment,” “Successor Pierre Purchase
Allocation,” “Contribution from parent” and “Expenses paid on behalf of parent.”  Without limitation, please identify the
accounting and legal acquirer of the Acquisition and how you determined the
amounts presented in your financial statements.
See below for further comments regarding the disclosures surrounding the
Acquisition located within Note 1.

Response –Please see
Summary of Acquisition Memorandum (Exhibit I):

Consolidated Statements of Cash Flows, page F-6

5.                                       Comment—Please provide an analysis and description of the
amounts presented under cash flows from financing activities under the captions
“Return of capital to parent” and “Contribution from parent.”

Response –Please see
Summary of Acquisition Memorandum (Exhibit I).

6.                                       Comment—Please revise your column headings to be consistent
with those reported in your Consolidated Statements of Operations on page F-4.

Response—The Company
agrees that the headings referenced above should be consistent.  The Company will revise the column headings in
its Form 10-K/A for the Company’s Fiscal 2005 to be filed upon resolution
of all open comments with the Staff.

Note 1.
Basis of Presentation and Acquisition, page F-7

7.                                       Comment—Please expand your disclosure to comply with
paragraphs 51 (a) and (b) of SFAS 141.

Response –The Company acknowledges your
request for expanded disclosure but the Company respectfully submits that under
the facts and circumstances of the Acquisition we have met the applicable
disclosure requirements.  Specifically,
the Company believes that the disclosure requirement of paragraph 51 (a) has
been met by the disclosure on page F-8 that “On June 30, 2004, Pierre
Holding Corp. (“Holding”) acquired 100% of the shares of the Company’s parent,
PF Management, Inc. (“PFMI”).”  The
Company believes that the disclosure requirement of paragraph 51 (b) has
been met by the disclosure on page F-10 that “In conjunction with the
Acquisition, the Company engaged an independent party to perform valuations for
financial reporting purposes of the Company’s goodwill and other
intangibles.  Assets identified through
this valuation process included goodwill, formulas, customer relationships,
licensing agreements and certain trade names and trademarks.”

8.                                       Comment—We note that certain “management investors” have
invested $4.9 million in a deferred compensation plan, which is funded through
a rabbi trust that owns preferred stock of Holding.  Please tell us how you have considered the
guidance in EITF 97-14.  In addition,
please reconcile the amount disclosed as aggregate liquidation value under this
heading of $4.9 million with that disclosed on page 24 of $5.2 million.

Response —We have
considered the guidance within EITF 97-14.
We believe the deferred compensation plan is consistent with the “Plan B”
scenario identified in EITF 97-14 whereby the plan does not permit
diversification and may be settled by the delivery of cash or shares.  The deferred compensation plan is a plan of
Holding and is therefore recorded on Holding’s financial statements.  However, as the deferred compensation plan is
for the benefit of certain members of management of the Company, any
compensation costs related to the deferred compensation plan are pushed down to
the Company and reflected in the income statement of the Company. The
difference between the aggregate liquidation value of $4.9 million disclosed on
page F-7 and that disclosed on page 24 of $5.2 million represents the
increase in the aggregate liquidation value from the date of the Acquisition (June 30,
2004) to our fiscal year-end (March 5, 2005).  The increase in the aggregate liquidation
value of $0.3 million was recorded as compensation expense in the income
statement of the Company.

Note 17.
Restated Quarterly Financial Information (Unaudited), page F-28

9.                                       Comment—We note that you have restated quarterly financial
information to reflect misstatements in four areas, including (i) the tax
basis of assets assumed in connection with the Restructuring, (ii) the tax
basis of assets and liabilities following the Acquisition, (iii) the
classification of professional fees incurred in connection with the Acquisition
and related debt transactions and (iv) the calculation of depreciation
expense following the Acquisition.
Please tell us how you have considered the effect these misstatements
may have had on the effectiveness or ineffectiveness of your disclosure
controls and procedures.

Response—The Company’s management, including its principal
executive officer and principal accounting officer, evaluated the effectiveness
of the Company’s “disclosure controls and procedures,” as such phrase is
defined in Rule 13a-15(e) under the 1934 Act.  Based upon their evaluation, the principal
executive officer and principal accounting officer concluded that as of the end
of the Company’s fiscal year ended March 5, 2005 (“Fiscal 2005”), the
Company’s disclosure controls and procedures were effective for the purpose of
ensuring that the information required to be disclosed in the reports that the
Company files or submits under the 1934 Act with the SEC (i) is recorded,
processed, summarized and reported within the time periods specified in the SEC’s
rules and forms, and (ii) is accumulated and communicated to the
Company’s management, including its principal executive and principal
accounting officers, as appropriate to allow timely decisions regarding
disclosure.

During the
Company’s Fiscal 2005 financial closing and reporting process, the Company
became aware of certain items that resulted in a restatement of previously
reported interim financial information, as outlined in Note 17, “Restated
Quarterly Financial Information (unaudited),” to the Consolidated Financial
Statements in the Company’s Fiscal 2005 Form 10-K.  The restated interim financial information
was restated as a result of errors that occurred in connection with the
Restructuring and the purchase accounting for the Acquisition, both of which
are non-recurring and complex transactions.
The following summarizes each area of the restatement:

(i) Tax basis of assets assumed in connection with the Restructuring:
On March 8, 2004, in connection with the Restructuring discussed in
Note 16, “Transactions with Related Parties,” to the Consolidated Financial
Statements in the Company’s Fiscal 2005 Form 10-K, CHA, a related party to
the Company at that time, transferred an airplane to the Company.  The airplane was properly transferred at book
value in connection with the Restructuring; however, a deferred tax liability
of approximately $1.6 million associated with the airplane was not transferred
to the Company.  The airplane, when
recorded as an asset of the Company on March 8, 2004, should have retained
the same tax basis that it had prior to the transfer because the transfer was
between two related party subsidiaries of PFMI.
In conjunction with the Acquisition, the airplane was transferred to a
former shareholder of PFMI.  Successor
Pierre’s opening balance sheet was adjusted to eliminate the $1.6 million deferred
tax liability associated with the airplane; however, since the $1.6 million
deferred tax liability had not been recorded, the elimination of $1.6 million
in deferred tax liability resulted in a $1.6 million understatement of deferred
tax liabilities.  This adjustment
impacted the balance sheet, but had no impact on operating results or cash flow
in any of the restated periods.

(ii) Tax basis of assets and liabilities following the Acquisition:
The Company’s opening balance sheet at July 1, 2004 (immediately
following the Acquisition) included a deferred tax asset of approximately $7.0
million related to goodwill that had been written off for book purposes but was
still being amortized for tax purposes.
Under FAS 109 this asset should have been eliminated in establishing the
Company’s opening balance sheet.  This
resulted in an approximately $7.0 million understatement of deferred tax
liabilities.

(iii) Classification of professional fees incurred in connection
with the Acquisition and related debt transactions:
The Company identified $585,000 of legal fees that at June 30, 2004
were classified as

being related
to the Acquisition when, in fact, they related to debt offerings associated
with the Acquisition.  The $585,000 in
fees has been removed from goodwill and reclassified as deferred loan origination
fees.

(iv) Calculation of depreciation expense following the Acquisition:
 The Acquisition was recorded under the
purchase method of accounting. The purchase price paid for the Company and the
assumed liabilities were allocated to assets acquired and liabilities assumed
based on estimated fair market value at the date of the Acquisition.  As a result of the appraisal of the Company’s
plant, property and equipment, a one-time adjustment was made to fixed asset
costs and accumulated depreciation and useful lives were reset for accounting purposes
as of the opening balance sheet date.

In order to
reset our depreciation calculation system, we contracted with an outside
software vendor.  The vendor was
instructed to divide Fiscal 2005 into two periods (predecessor Pierre - March 7,
2004 through June 30, 2004; and successor Pierre – July 1, 2004
through March 5, 2005). The vendor uploaded all the adjusted fixed asset
information as instructed by the Company, but during the programming/resetting,
the vendor erroneously set the successor Pierre Fiscal 2005 to depreciate
assets for six periods rather than the eight periods that it should have been
set up to depreciate.  As a result of the
error, the Company’s depreciation expense was understated at Fiscal 2005 year
end.

In reaching
the conclus