**UNITEDSTATES****SECURITIES AND EXCHANGE COMMISSION****Washington,D.C.  20549**

 

**FORM 10-Q**

 
| **ý****QUARTERLY REPORT  PURSUANT TO SECTION 13 OR 15(d)**         |
|------------------------------------------------------------------------------|
| **OF  THE SECURITIES EXCHANGE ACT OF 1934**                                  |
|                                                                         |
| **For the quarterly period ended October 1, 2005**                           |
|                                                                         |
| **or**                                                                       |
|                                                                         |
| **o****TRANSITION REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE** |
| **SECURITIES  EXCHANGE ACT OF 1934**                                         |

 

**For the transition period from           to           **

 

**Commission File Number: 333-124826**

 

**TheTWC Holding LLC**

(Exact name of registrant as specified in its charter)

 
| **Delaware**                                                    | ** ** | **59-3781176**                       |
|-----------------------------------------------------------------|------------|--------------------------------------|
| (State or other jurisdiction of incorporation or  organization) |       | (I.R.S. Employer Identification No.) |
|                                                            |       |                                 |
| **10825 Kenwood Road, Cincinnati, Ohio**                        | ** ** | **42542**                            |
| (Address of principal executive offices)                        |       | (Zip Code)                           |

 

**(513) 794-9800**

(Registrant’s telephone number, including area code)

 

**N/A**

(Former name, former address and former fiscal year, if changed sincelast report)

 

Indicateby check mark whether the registrant (1) has filed all reports required tobe filed by Section 13 or 15(d) of the Securities Exchange Act of1934 during the preceding 12 months (or for such shorter period that theregistrant was required to file such reports), and (2) has been subject tosuch filing requirements for the past 90 days.  ý  Yes   o  No

 

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

 

Indicateby check mark whether the registrant is a shell company (as defined inRule 12b-2 of the Exchange Act).  o  Yes    ý  No

 

 

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TWC Holding LLC

Table of Contents

 
| PART I - FINANCIAL INFORMATION                                                                                                                                                                                |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                                                                                                          |   |
| Item 1. Financial Statements (unaudited)                                                                                                                                                                      |   |
| Unaudited Condensed Consolidated Balance Sheets at December 31, 2004  and October 1, 2005                                                                                                                     |   |
|                                                                                                                                                                                                          |   |
| Unaudited Condensed Consolidated Statements of Operations of the  Successor for the thirteen week period ended October 2, 2004 and October 1, 2005  and for the thirty-nine week period ended October 1, 2005 |   |
|                                                                                                                                                                                                          |   |
| Unaudited Condensed Statement of Operations  of the Predecessor for the twenty-six week period ended June 30, 2004                                                                                            |   |
|                                                                                                                                                                                                          |   |
| Unaudited Condensed Consolidated Statements of Cash Flows of the  Successor for the thirteen week period ended October 2, 2004 and thirty nine  week period ended October 1, 2005                             |   |
|                                                                                                                                                                                                          |   |
| Unaudited Condensed Consolidated Statement  of Cash Flows of the Predecessor for the twenty-six week period ended June  30, 2004                                                                              |   |
|                                                                                                                                                                                                          |   |
| Notes to Unaudited Condensed Consolidated Financial Statements                                                                                                                                                |   |
|                                                                                                                                                                                                          |   |
| Item 2. Management's Discussion and  Analysis of Financial Condition and Results of Operations                                                                                                                |   |
|                                                                                                                                                                                                          |   |
| Item 3. Quantitative and Qualitative Disclousres  About Market Risk                                                                                                                                           |   |
|                                                                                                                                                                                                          |   |
| Item 4. Controls and Procedures Forward-Looking  Statements                                                                                                                                                   |   |
|                                                                                                                                                                                                          |   |
| Forward-Looking Statements                                                                                                                                                                                    |   |
|                                                                                                                                                                                                          |   |
| PART II - OTHER INFORMATION                                                                                                                                                                                   |   |
|                                                                                                                                                                                                          |   |
| Item 1. Legal Proceedings                                                                                                                                                                                     |   |
|                                                                                                                                                                                                          |   |
| Item 2. Unregistered Sales of Equity  Securities and Use of Proceeds                                                                                                                                          |   |
|                                                                                                                                                                                                          |   |
| Item 3. Defaults Upon Senior Securities                                                                                                                                                                       |   |
|                                                                                                                                                                                                          |   |
| Item 4. Submissions of Matters to a Vote of  Security Holders                                                                                                                                                 |   |
|                                                                                                                                                                                                          |   |
| Item 5. Other Information                                                                                                                                                                                     |   |
|                                                                                                                                                                                                          |   |
| Item 6. Exhibits                                                                                                                                                                                              |   |
|                                                                                                                                                                                                          |   |
| Signatures                                                                                                                                                                                                    |   |

 

----

 

Part I - FINANCIAL INFORMATION

 

Item 1.

 

Financial Statements

TWC Holding LLC

Condensed Consolidated Balance Sheets

(Unaudited)

 
| ** **                                             | ** ** | **December 31,** | ** **  | **October 1,** | ** ** |
|--------------------------------------------------------|------------|------------------|-------------|----------------|------------|
| ** **                                             | ** ** | **2004**         | ** **  | **2005**       | ** ** |
| **Assets**                                             |       |             |        |           |       |
| Current  assets                                        |       |             |        |           |       |
| Cash and cash equivalents                              |       | $                | 3,289,030   |           | $          | 505,939 |   |
| Trade accounts receivable, net                         |       | 13,856,294       |        | 20,355,354     |       |
| Inventories                                            |       | 24,132,116       |        | 25,816,342     |       |
| Prepaid expenses and other current assets              |       | 531,106          |        | 746,066        |       |
| Total current assets                                   |       | 41,808,546       |        | 47,423,701     |       |
|                                                   |       |             |        |           |       |
| Property and equipment, net                            |       | 32,794,239       |        | 40,911,353     |       |
| Goodwill                                               |       | 77,573,207       |        | 77,573,207     |       |
| Intangible assets, net                                 |       | 21,822,710       |        | 18,301,773     |       |
| Other noncurrent assets                                |       | 5,675,939        |        | 7,578,922      |       |
| Total assets                                           |       | $                | 179,674,641 |           | $          | 191,788,956 |   |
| ** **                                             |       |             |        |           |       |
| **Liabilities  and Stockholder’s/Members Equity** |       |             |        |           |       |
| Current  liabilities                                   |       |             |        |           |       |
| Book overdraft                                         |       | $                | —      |           | $          | 1,718,497 |   |
| Trade accounts payable                                 |       | 6,167,826        |        | 14,316,831     |       |
| Accrued expenses                                       |       | 3,122,446        |        | 5,739,812      |       |
| Accrued interest                                       |       | 6,796,875        |        | 2,832,032      |       |
| Taxes payable                                          |       | 51,950           |        | —         |       |
| Total current liabilities                              |       | 16,139,097       |        | 24,607,172     |       |
| Deferred  income taxes                                 |       | 912,067          |        | 2,280,067      |       |
| Long-term  debt                                        |       | 125,000,000      |        | 153,358,945    |       |
| Total liabilities                                      |       | 142,051,164      |        | 180,246,184    |       |
| ** **                                             |       |             |        |           |       |
| **Members  equity**                                    |       |             |        |           |       |
| Class A and Class B Membership Interests               |       | 37,500,000       |        | 14,038,007     |       |
| Additional paid-in capital                             |       | 146,400          |        | 178,815        |       |
| Retained earnings                                      |       | (22,923          | )           | (2,674,050     | )          |
| Total stockholder’s equity                        |       | 37,623,477       |        | 11,542,772     |       |
| Total liabilities and stockholder’s equity        |       | $                | 179,674,641 |           | $          | 191,788,956 |   |

 

The accompanying notes are an integral partof these consolidated financial statements.

 

1

----

 

TWC Holding LLC

Condensed Consolidated Statements of Operations

(Unaudited)

 
| ** **                                    | ** ** | **Thirteen Weeks Ended** | ** ** | **Thirty-Nine Weeks Ended** | ** ** |
|-----------------------------------------------|------------|--------------------------|------------|-----------------------------|------------|
| ** **                                    | ** ** | **July 1, 2004**         | ** ** | **July 2, 2005**            | ** ** | **January 1, 2004** | ** ** | **July 1, 2004** | ** ** | **January 1, 2005** | ** ** |
| ** **                                    | ** ** | **through**              | ** ** | **through October**         | ** ** | **through June 30,** | ** ** | **through** | ** ** | **through** | ** ** |
| ** **                                    | ** ** | **October 2, 2004**      | ** ** | **1, 2005**                 | ** ** | **2004** | ** ** | **October 2, 2004** | ** ** | **October 1, 2005** | ** ** |
| ** **                                    | ** ** | **(Predecessor)**        | ** ** | **(Successor)**             | ** ** | **(Predecessor)** | ** ** | **(Successor)** | ** ** | **(Successor)** | ** ** |
| Net sales                                     |       | $                        | 51,077,176 |                        | $          | 56,731,139 |   | $ | 80,923,839 |   | $ | 51,077,176 |   | $ | 159,956,301 |   |
| Cost of  sales                                |       | 43,422,124               |       | 43,699,206                  |       | 67,668,529 |   | 43,422,124 |   | 132,501,162 |   |
| Gross profit                                  |       | 7,655,052                |       | 13,031,933                  |       | 13,255,310 |   | 7,655,052 |   | 27,455,139 |   |
| Selling, general and administrative  expenses |       | 4,237,990                |       | 5,843,887                   |       | 12,458,600 |   | 4,237,990 |   | 15,398,427 |   |
| Operating profit                              |       | 3,417,062                |       | 7,188,046                   |       | 796,710 |   | 3,417,062 |   | 12,056,712 |   |
| Other  (expense) income                       |       |                     |       |                        |       |   |   |   |   |   |   |
| Interest income                               |       | 32,422                   |       | 26,545                      |       | 506,553 |   | 32,422 |   | 125,479 |   |
| Interest expense                              |       | (3,597,165               | )          | (4,684,228                  | )          | (99,791 | ) | (3,597,165 | ) | (13,387,948 | ) |
| Other income (expense), net                   |       | (13,159                  | )          | (97,354                     | )          | 284,921 |   | (13,159 | ) | (124,579 | ) |
| Total other income (expense)                  |       | (3,577,902               | )          | (4,755,037                  | )          | 691,683 |   | (3,577,902 | ) | (13,387,048 | ) |
| Income  before income taxes                   |       | (160,840                 | )          | 2,433,009                   |       | 1,488,393 |   | (160,840 | ) | (1,330,336 | ) |
| Income tax  expense                           |       | 21,949                   |       | 360,621                     |       | 41,052 |   | 21,949 |   | 1,320,791 |   |
| Net income/(loss)                             |       | $                        | (182,789   | )                           | $          | 2,072,388 |   | $ | 1,447,341 |   | $ | (182,789 | ) | $ | (2,651,127 | ) |
|                                          |       |                     |       |                        |       |   |   |   |   |   |   |
| Pro forma  income data (unaudited)            |       |                     |       |                        |       |   |   |   |   |   |   |
| Income before income taxes                    |       |                     |       |                        |       | $ | 1,488,393 |   |   |   |   |   |
| Pro forma income tax expense                  |       |                     |       |                        |       | 949,825 |   |   |   |   |   |
| Pro forma net income                          |       |                     |       |                        |       | $ | 538,568 |   |   |   |   |   |

 

The accompanying notes arean integral part of these consolidated financial statements.

 

2

----

 

TWC Holding LLC

Condensed Consolidated Statements of Cash Flows

(Unaudited)

 
| ** **                                                                                  | ** ** | **Thirty-Nine Weeks Ended** | ** ** |
|---------------------------------------------------------------------------------------------|------------|-----------------------------|------------|
| ** **                                                                                  | ** ** | **January 1, 2004**         | ** ** | **July 1, 2004** | ** ** | **January 1, 2005** | ** ** |
| ** **                                                                                  | ** ** | **through June**            | ** ** | **through** | ** ** | **through** | ** ** |
| ** **                                                                                  | ** ** | **30, 2004**                | ** ** | **October 2, 2004** | ** ** | **October 1, 2005** | ** ** |
| ** **                                                                                  | ** ** | **(Predecessor)**           | ** ** | **(Successor)** | ** ** | **(Successor)** | ** ** |
| **Cash  flows from operating activities**                                                   |       |                        |       |   |   |   |   |
| Net income  (loss)                                                                          |       | $                           | 1,447,341  |   | $ | (182,789 | ) | $ | (2,651,127 | ) |
| Adjustments to reconcile net income to net  cash provided by (used in) operating activities |       |                        |       |   |   |   |   |
| Depreciation of property and equipment                                                      |       | 1,386,904                   |       | 864,329 |   | 2,907,021 |   |
| Amortization of intangibles                                                                 |       | —                      |       | 1,173,645 |   | 3,520,937 |   |
| Amortization of inventory step-up                                                           |       | —                      |       | 1,767,037 |   | — |   |
| Amortization of bond issuance cost                                                          |       | —                      |       | 150,054 |   | 759,569 |   |
| Interest Expense on Senior PIK Notes                                                        |       |                        |       |   |   | 2,358,842 |   |
| Deferred income tax expense                                                                 |       | —                      |       | — |   | 1,368,000 |   |
| Compensation expense for Employee Stock                                                     |       |                        |       | — |   | 32,415 |   |
| Ownership Trust shares released and  committed to be released                               |       | 2,344,292                   |       | — |   | — |   |
| Compensation expense for stock options                                                      |       | 713,433                     |       | — |   | — |   |
| Other equity based compensation plans                                                       |       | 3,266,814                   |       |   |   | — |   |
| Stock compensation plans                                                                    |       | (4,270,995                  | )          | — |   | — |   |
| Changes in assets and liabilities                                                           |       |                        |       |   |   |   |   |
| Trade accounts receivable                                                                   |       | 1,189,462                   |       | (13,804,595 | ) | (6,499,060 | ) |
| Inventories                                                                                 |       | (4,693,075                  | )          | 3,025,521 |   | (1,684,225 | ) |
| Prepaid expenses and other current assets                                                   |       | 162,149                     |       | (695,251 | ) | (214,960 | ) |
| Other noncurrent asset                                                                      |       | (56,901                     | )          | (18,132 | ) | (71,858 | ) |
| Trade accounts payable and accrued expenses                                                 |       | (1,961,207                  | )          | 7,570,535 |   | 10,766,371 |   |
| Accrued bond interest                                                                       |       | —                      |       | 3,548,493 |   | (3,964,843 | ) |
| Taxes payable                                                                               |       | —                      |       | — |   | (51,950 | ) |
| Net cash (used in) provided by operating activities                                         |       | (471,783                    | )          | 3,398,847 |   | 6,575,132 |   |
| **Cash  flows from investing activities**                                                   |       |                        |       |   |   |   |   |
| Payments  received on notes receivable                                                      |       | 610,100                     |       | — |   | — |   |
| Proceeds  from the sale of investments                                                      |       | 19,988,514                  |       | — |   | — |   |
| Purchase of  investments                                                                    |       | (30,007,514                 | )          | — |   | — |   |
| Business  acquired                                                                          |       | —                      |       | (165,060,252 | ) | — |   |
| Capital  expenditures                                                                       |       | (2,382,720                  | )          | (659,952 | ) | (11,024,135 | ) |
| Net cash (used in) investing activities                                                     |       | (11,791,620                 | )          | (165,720,204 | ) | (11,024,135 | ) |
| **Cash  flows from financing activities**                                                   |       |                        |       |   |   |   |   |
| Change in  book overdrafts                                                                  |       | 243,027                     |       | 206,475 |   | 1,718,496 |   |
| Net increase  in the line of credit                                                         |       | 8,700,000                   |       | — |   | — |   |
| Proceeds  from issuance of long-term debt                                                   |       | —                      |       | 125,000,000 |   | 26,000,000 |   |
| Principal  payments on long-term debt                                                       |       | (629,305                    | )          | — |   | — |   |
| Proceeds  from issuance of common stock                                                     |       | —                      |       | 37,500,000 |   | — |   |
| Capitalized  bond issuance cost                                                             |       | —                      |       | — |   | (2,590,612 | ) |
| Return of  Capital Dividend                                                                 |       | —                      |       | — |   | (23,461,972 | ) |
| Net cash provided by financing activities                                                   |       | 8,313,722                   |       | 162,706,475 |   | 1,665,912 |   |
| Net (decrease) increase in cash and cash equivalents                                        |       | (3,949,681                  | )          | 385,118 |   | (2,783,091 | ) |
| **Cash and  cash equivalents**                                                              |       |                        |       |   |   |   |   |
| Beginning of  period                                                                        |       | 5,290,667                   |       | — |   | 3,289,030 |   |
| End of  period                                                                              |       | $                           | 1,340,986  |   | $ | 385,118 |   | $ | 505,939 |   |

 

The accompanying notes arean integral part of these consolidated financial statements.

 

3

----

 

TWC Holding LLC

Notes to Unaudited Condensed Consolidated Financial Statements

 

**1.****            ****Organization**

 

TWC Holding LLC (the “Company”or “Successor”) and its wholly owned subsidiaries The Wornick Company, aDelaware corporation (“Wornick” or the “Operating Company”) and TWC HoldingCorp were formed by The Veritas Capital Fund II, L.P., and its general partner,Veritas Capital Management II, L.L.C. (collectively “Veritas”). Wornick andVeritas entered into an Asset Purchase and Sale Contract with The WornickCompany, a Nevada corporation (the “Predecessor”), and its subsidiaries, TheWornick Company Right Away Division, a Nevada corporation, The Wornick CompanyRight Away Division, L.P., a Texas limited partnership, and Right AwayManagement Corporation, a Texas corporation, which was consummated on June 30,2004, and resulted in the purchase by the Successor and its subsidiaries, andthe sale by the Predecessor and its subsidiaries, of the business of thePredecessor and its subsidiaries as a going concern, including substantiallyall of the operating assets of the Predecessor and its subsidiaries. TWCHolding Corp. has no operations or assets and de minimus equity and was formedfor the purpose of being a co-issuer of the Senior PIK notes described inNote 6.

 

The Company, throughWornick, produces, packages and distributes extended shelf-life foods, bothshelf stable and frozen, in flexible pouches and semi-rigid containers,primarily for the U.S. Department of Defense and commercial customers, as wellas for its own consumer-branded products.

 

**2.****            ****Basis of Presentation**

 

The accompanying unauditedinterim consolidated financial statements have been prepared in accordance withaccounting principles generally accepted in the United States of America forinterim financial information and the instructions to Form 10-Q andArticle 10 of Regulation S-X under the Securities Exchange Act of1934, as amended. Accordingly, they do not include all of the information andfootnotes normally included in financial statements prepared in conformity withaccounting principles generally accepted in the United States of America. Inthe opinion of management, the interim consolidated financial statementsreflect all adjustments of a normal recurring nature considered necessary for afair presentation of the results for the periods presented. Operating resultsfor interim periods are not necessarily indicative of results that may beexpected for the fiscal year as a whole. The preparation of financialstatements in conformity with accounting principles generally accepted in theUnited States of America requires management to make estimates and assumptionsthat affect the reported amounts of assets, liabilities, revenues, expenses,and related disclosures at the date of the financial statements and during thereporting period. Actual amounts could differ from these estimates. Theseunaudited interim consolidated financial statements should be read inconjunction with the audited consolidated financial statements and notesthereto included in the Company’s Registration Statement on Form S-4 (FileNo. 333-124826) filed with the Securities and Exchange Commission.

 

As discussed in Note 1above, the Assets Purchase and Sale Contract was consummated on June 30,2004.  As such, the unaudited financial information presented represents:(i) the Condensed Consolidated Balance Sheet of the Successor atDecember 31, 2004 and October 1, 2005, (ii) the CondensedConsolidated Statement of Operations of the Predecessor for the twenty-six weekperiod ended June 30, 2004, (iii) the Condensed Consolidated Statements ofOperations of the Successor for the thirteen week period ended October 2, 2004,(iv) the Condensed Consolidated Statement of Operations of the Successorfor the thirteen and thirty-nine week periods ended October 1, 2005,(v) the Condensed Consolidated Statement of Cash Flows of the Predecessorfor the twenty-six week period ended June 30, 2004, (vi) the CondensedConsolidated Statement of Cash Flows of the Successor for the thirteen weekperiod ended October 2, 2004 and (vii) the Condensed ConsolidatedStatement of Cash Flows of the Successor for the thirty-nine week period endedOctober 1, 2005.

 

4

----

 

For the purpose of thesefinancial statements, references to the Predecessor twenty-six week period endedJune 30, 2004, reflect the result of operations for the period fromJanuary 1, 2004 to June 30, 2004.

 

Certain items in thepredecessor statement of operations have been reclassified to conform tocurrent year presentations.  These reclassifications had no impact onpreviously reported net income or stockholder’s equity.

 

**3.****            ****Acquisition**

 

On June 30, 2004 (the “AcquisitionDate”), pursuant to the Assets Purchase and Sale Contract described above inNote 1, the Operating Company acquired all of the operating assets of thePredecessor.  The acquisition was financed through a combination of debtand equity issuances.  The purchase price of $165.0 million includedapproximately $10.1 million of transaction costs.  Goodwill of $77.6million represents the excess of the acquisition cost over the estimated fairvalue of the identifiable assets acquired.  The identifiable intangibleassets relate to the value of existing long-term customer supply contracts inplace at the Acquisition Date.  The purchase price has been allocated tothe assets acquired in accordance with the purchase method of accounting asfollows:

 
| Inventory                    |   | $          | 27,062,776  |   |
|------------------------------|--------|------------|-------------|--------|
| Property and  equipment      |   | 30,320,502 |        |
| Intangible  assets           |   | 24,170,000 |        |
| Goodwill                     |   | 77,573,207 |        |
| Deferred  debt issuance cost |   | 4,458,990  |        |
| Other  noncurrent assets     |   | 1,449,777  |        |
|                         |   | $          | 165,035,252 |   |

 

In financing theacquisition, the Operating Company received $165.5 million in proceeds fromdebt and equity financing, including a $3.0 million advance on a workingcapital facility.

 

Summary selected pro formainformation of the Predecessor as though the transaction were completed at thebeginning of the respective period presented (and as though the Operating Companywere taxed as a C-Corporation) is as follows:

 
| ** **                    | ** ** | **Twenty-Six Weeks** | ** ** |
|-------------------------------|------------|----------------------|------------|
| ** **                    | ** ** | **Ended**            | ** ** |
| **(in thousands of dollars)** | ** ** | **June 30, 2004**    | ** ** |
| ** **                    | ** ** | **(Predecessor)**    | ** ** |
| Net sales                     |       | $                    | 80,924     |   |
| Net income  (loss)            |       | (5,950               | )          |
|                               |            |                      |            |  |

 

5

----

 

**Supplemental Balance SheetInformation**

 

**Inventories**

A summary of inventories isas follows:

 
| ** **       | ** ** | **Successor**    | ** ** |
|------------------|------------|------------------|------------|
| ** **       | ** ** | **December 31,** | ** ** | **October 1,** | ** ** |
| ** **       | ** ** | **2004**         | ** ** | **2005** | ** ** |
|             |       |             |       |   |   |
| Raw  materials   |       | $                | 15,187,856 |   | $ | 14,551,139 |   |
| Work in  process |       | 1,838,828        |       | 1,913,576 |   |
| Finished  goods  |       | 7,105,432        |       | 9,351,628 |   |
|             |       | $                | 24,132,116 |   | $ | 25,816,343 |   |

 

**Property and Equipment, Net**

A summary of property andequipment, net is as follows:

 
| ** **                                       | ** ** | **Successor**    | ** ** |
|--------------------------------------------------|------------|------------------|------------|
| ** **                                       | ** ** | **December 31,** | ** ** | **October 1,** | ** ** |
| ** **                                       | ** ** | **2004**         | ** ** | **2005** | ** ** |
|                                             |       |             |       |   |   |
| Leasehold  improvements                          |       | $                | 1,771,322  |   | $ | 2,684,250 |   |
| Machinery  and equipment                         |       | 26,166,475       |       | 28,556,844 |   |
| Office  equipment, fixtures and vehicles         |       | 2,395,476        |       | 1,881,820 |   |
| Construction  in progress                        |       | 4,216,827        |       | 12,451,321 |   |
|                                             |       | 34,550,100       |       | 45,574,235 |   |
| Less:  Accumulated depreciation and amortization |       | 1,755,861        |       | 4,662,882 |   |
|                                             |       | $                | 32,794,239 |   | $ | 40,911,353 |   |

 

Depreciation expense for thethirteen week periods ended October 2, 2004 and October 1, 2005 wasapproximately $864,000 and $996,000, respectively.  Depreciation expense for the thirty-nine weekperiod ended October 1, 2005 was approximately $2,907,000.

 

**4.****            ****Intangible Assets**

 

In connection with theacquisition described in Note 3, a portion of the purchase price wasallocated to identifiable intangible assets related to the value of long-termcustomer supply contracts in place at the Acquisition Date.  The originalvalue of these contracts was $24,170,000 and their useful lives range fromthree to eight years.  Aggregate accumulated amortization of intangiblesat December 31, 2004 and October 1, 2005 amounted to $2,347,290 and$5,868,227 respectively.  Expense related to amortization of intangibleassets for the thirteen week periods ended October 2, 2004 and October 1, 2005amounted to $1,173,645, respectively.

 

6

----

 

Scheduled amortization ofthese assets is as follows:

 
| October 2, 2005 through December 31, 2005 |   | $         | 1,173,643  |   |
|-------------------------------------------|--------|-----------|------------|--------|
| 2006                                      |   | 4,694,580 |       |
| 2007                                      |   | 4,627,918 |       |
| 2008                                      |   | 4,856,248 |       |
| 2009                                      |   | 2,421,226 |       |
| Thereafter                                |   | 528,158   |       |
|                                      |   | $         | 18,301,773 |   |

 

**5.****            ****Notes Payable and Long-Term Debt**

 

A summary of long-term debtat December 31, 2004 and October 1, 2005, is as follows:

 
| ** **                                    | ** ** | **Successor**    | ** **  |
|-----------------------------------------------|------------|------------------|-------------|
| ** **                                    | ** ** | **December 31,** | ** **  | **October 1,** | ** ** |
| ** **                                    | ** ** | **2004**         | ** **  | **2005** | ** ** |
|                                          |       |             |        |   |   |
| 10-7/8%  Senior secured notes; due 2011       |       | $                | 125,000,000 |   | $ | 125,000,000 |   |
|                                          |       |             |        |   |   |
| 13-7/8%  Senior secured PIK notes; due 2011   |       | —           |        | 28,358,945 |   |
|                                          |       | 125,000,000      |        | 153,358,945 |   |
| Less:  Current maturities                     |       | —           |        | — |   |
| Long-term  debt, excluding current maturities |       | $                | 125,000,000 |   | $ | 153,358,945 |   |

 

In connection with thefinancing of the acquisition described in Note 3, the Company’s whollyowned subsidiary, Wornick, issued $125.0 million 107/8%Senior Secured Notes due 2011 and also secured additional financing through aRevolving Loan Agreement which provides Wornick with $15.0 million ofrevolving loan financing through June 30, 2009, with an additionalrevolving credit facility of $10.0 million becoming available upon certainevents. Amounts outstanding under the Revolving Loan Agreements ($0 atDecember 31, 2004 and October 1, 2005) are due June 30, 2009, andamounts outstanding are subject to limitations as determined by a calculatedborrowing base.

 

Interest on amountsoutstanding under the Revolving Loan Agreement will vary at a fluctuating rateper annum that is equal to the prime rate (5.25% at December 31, 2004 and6.75% at October 1, 2005) as published daily by *The Wall Street Journal*. Amounts outstanding under theRevolving Loan Agreement are collateralized by substantially all of theoperating assets of Wornick. The lien on such collateral is senior to the lienon the collateral that secures the Senior Secured Notes. In connection withcompleting the acquisition, the Operating Company borrowed $3.0 millionagainst the revolving loan facility to fund the acquisition and initial workingcapital of the Operating Company. This amount was subsequently repaid prior toDecember 31, 2004. There are no amounts outstanding under the revolvingloan agreement at October 1, 2005.

 

The Senior Secured Notes arecollateralized by substantially all assets and other property of the OperatingCompany. The lien on such collateral, however, is subordinate to the lien onthe collateral securing the Revolving Loan Agreement. Interest on the SeniorSecured Notes is payable semi-annually. Interest expense on the Senior SecuredNotes and revolving loan facility for the thirty-nine six week period ended October1, 2005 amounted to $10,195,313 and $75,162 respectively.

 

Amounts due under the SeniorSecured Notes and the revolving loan facility are subject to an intercreditoragreement. Wornick is required to meet certain financial covenants related primarily

 

7

----

 

to minimum working capitalamounts and minimum working capital ratios as well as minimum profitability andminimum net worth calculations.  AtOctober 1, 2005 we were in compliance with all financial covenants.

 

On February 11, 2005,the Company and its wholly-owned finance subsidiary, TWC Holding Corp.,co-issued their 13.875% Senior PIK Notes due 2011, or the “Senior PIK Notes,”in the approximate aggregate principal amount of $62,259,000 with a discount ofapproximately $36,259,000.  The Senior PIK Notes earn interest at the rateof 13.875% per annum, mature on August 15, 2011 and are unsecuredobligations of TWC Holding LLC and TWC Holding Corp.  Neither theOperating Company nor any of its subsidiaries guaranteed the Senior PIKnotes.  The notes limit the Company’s ability to incur additionalindebtedness and pay dividends or make other distributions as well as to makecertain investments and sell certain assets or merge with or into other companies. Because the Company is a holding company with no operations and has onlyits investment in the Operating Company and because TWC Holding Corp. has noindependent operations or assets, future cash flows or assets of the OperatingCompany through 2011 may be required to service the $62.3 million Senior PIKnotes, upon their maturity.

 

Assuming the offering of theSenior PIK notes took place at the beginning of the year, the Company wouldhave incurred approximately $415,000 of additional interest expense for thethirty-nine week period ended October 1, 2005.  Actual interest expenseexcluding bond amortization expense was approximately $946,000 and $2,359,000for the thirteen and thirty-nine week periods ended October 1, 2005,respectivley.

 

**6.****            ****Income Taxes**

 

In connection with thetransactions described in Note 3, the Successor’s wholly owned subsidiary “Wornick”is taxed as a C-Corporation whereas, the Predecessor was a pass-through entityqualified under Subchapter S of the Internal Revenue Code.  The OperatingCompany provides for income taxes utilizing the asset liability method, currentincome tax expense or benefit represents income taxes expected to be payable orrefundable for the current period.  Deferred income taxes are recognizedfor the tax consequences in future years as a result of differences between thetax and financial reporting bases of assets and liabilities and for theexpected future tax benefit to be derived from tax credit and losscarry-forwards.  Valuation allowances are established when necessary toreduce deferred tax assets to the amounts management believes are more likelythan not to be realized in future tax returns.  Tax rate changes arereflected in the period such changes are enacted.  The Operating Companyhas recorded deferred tax liabilities of approximately $2,280,000 related tothe indefinite reversal period related to goodwill.

 

**7.****            ****Members Equity**

 

TWC HoldingLLC has two classes of membership interests, Class A interests and Class Binterests. In connection with completing the Acquisition, certain members ofWornick management and outside directors received Class B interests. Pursuantto the terms of the operating agreement governing TWC Holding LLC, the holdersof Class B interests are entitled to receive up to 7.875%, in aggregate, of alldistributions made by TWC Holding LLC after the holders of Class A interestshave received a return of their invested capital provided that the holders ofthe Class A interests have received an 8% per annum internal rate of return ontheir invested capital. The Class B interests are subject to a five-yearvesting schedule with any unvested interest reverting to the holders of Class Ainterests. Because these Class B interests were issued to members of managementand directors of the Operating Company, these awards are considered to becompensatory to the Operating Company over the vesting period. The total fairvalue of these class B interests as of their issuance date was determined to be$1,464,000. During the period ended April 2, 2005, certain members ofmanagement terminated their employment with Wornick and forfeited their Class Binterests.  In addition, subsequent toOctober 1, 2005 certain members of management relinquished their Class Binterests. As such, previously recognized compensation expense of approximately$78,000 was reversed in the thirteen week period ended April 2, 2005 related tothe vesting provisions of these Class B interests.  As it relates to members of management thatrelinquished their Class B interests in November 2005, previously recognizedcompensation expenses of approximately $34,000 was reversed for the thirteenweek period ended October 1, 2005.

 

On April 11,2005 and November 11, 2005, the Company issued additional Class B membershipinterests to recently retained senior management of the Operating Company.  These Class B membership interests will vestover a five year period.  Approximately$145,000 of compensation expense was recognized in the thirty-nine week periodended October 1, 2005 related to all outstanding Class B units, resulting innet compensation expense for Class B membership interests for the thirty-nineweek period ended October 1, 2005 of $32,415.

 

8

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**8.****            ****Operating Segment Information**

 

The Operating Company hastwo operating segments: the Right Away Division (“RAD”) and the Prepared FoodsDivision (“PFD”).  RAD is located in Texas and primarily sells its productto the U.S. Department of Defense.  PFD is located in Ohio and also sellsdirectly to the U.S. Department of Defense as well as to commercial brandedfood companies and inter-segment sales to RAD.  Management evaluatessegment performance based on several factors, including operating profit.

 

Consistent with thePredecessor’s internal management reporting, corporate operations for thePredecessor include investment and interest income, compensation expense forThe Wornick Company (Predecessor) Employee Stock Ownership Trust (“ESOT”),stock options and other stock-based compensation expense and overheadcosts.  Corporate assets primarily include investments in subsidiaryguarantors (which are eliminated in consolidation), other investments andgoodwill.

 

The Company’s sales byproduct line for the periods indicated are as follows:

 
| ** **                    | ** ** | **Thirteen Weeks Ended** | ** ** | **Thirty-nine Weeks Ended** | ** ** |
|-------------------------------|------------|--------------------------|------------|-----------------------------|------------|
| ** **                    | ** ** | ** **               | ** ** | ** **                  | ** ** | **January 1, 2004** | ** ** | **July 1, 2004** | ** ** | **January 1, 2005** | ** ** |
| ** **                    | ** ** | **October 2,**           | ** ** | **October 1,**              | ** ** | **through** | ** ** | **through** | ** ** | **through** | ** ** |
| **(in thousands of dollars)** | ** ** | **2004**                 | ** ** | **2005**                    | ** ** | **June 30, 2004** | ** ** | **October 2, 2004** | ** ** | **October 1, 2005** | ** ** |
| ** **                    | ** ** | **Successor**            | ** ** | **Successor**               | ** ** | **Predecessor** | ** ** | **Successor** | ** ** | **Successor** | ** ** |
| DOD Sales                     |       |                     |       |                        |       |   |   |   |   |   |   |
| Meals Ready-to-Eat            |       | $                        | 27,589     |                        | $          | 25,200 |   | $ | 39,078 |   | $ | 27,589 |   | $ | 83,964 |   |
| Unitized Group Rations        |       | 12,050                   |       | 13,842                      |       | 24,518 |   | 12,050 |   | 36,143 |   |
| Tray-Pack                     |       | 1,847                    |       | 2,446                       |       | 2,410 |   | 1,847 |   | 4,663 |   |
| Military Other                |       | 874                      |       | 1,339                       |       | 793 |   | 874 |   | 2,656 |   |
| Total DOD sales               |       | 42,360                   |       | 42,827                      |       | 66,799 |   | 42,360 |   | 127,426 |   |
| Co-manufactured               |       | 5,533                    |       | 11,741                      |       | 10,329 |   | 5,533 |   | 28,515 |   |
| Branded                       |       | 1,443                    |       | 1,604                       |       | 2,359 |   | 1,443 |   | 2,993 |   |
| Other                         |       | 1,741                    |       | 559                         |       | 1,437 |   | 1,741 |   | 1,022 |   |
|                          |       | $                        | 51,077     |                        | $          | 56,731 |   | $ | 80,924 |   | $ | 51,077 |   | $ | 159,956 |   |

 

During the thirteen weekperiods ended October 2, 2004 and October 1, 2005, the Company had one majorcustomer, (DoD), which accounted for approximately $42,360,000 and $42,827,000or 82.9% and 75.5% of net revenue, respectively.  This customer accounted for approximately$127,426,000 or 79.7% of sales for the thirty-nine week period ended October 1,2005.  Approximately $10,220,000 or 74.0%%and $12,631,000 or 62.1%, of net receivables were attributable to this customerat October 2, 2004 and October 1, 2005, respectively.

 

9

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Unaudited reportableoperating segment financial information for the Successor thirteen week periodsended October 2, 2004 and October 1, 2005, is as follows:

 
| ** **               | ** ** | **Successor** | ** ** |
|--------------------------|------------|---------------|------------|
| ** **               | ** ** | ** **    | ** ** | ** ** | ** ** | **Operating** | ** ** |
| ** **               | ** ** | **Trade**     | ** ** | **Inter-segment** | ** ** | **Profit** | ** ** |
| **Operating Segments**   | ** ** | **Revenue**   | ** ** | **Revenue** | ** ** | **(Loss)** | ** ** |
|                     |       |          |       |   |   |   |   |
| **Right  Away Division** |       |          |       |   |   |   |   |
| October 2, 2004          |       | 40,886,565    |       | — |   | 2,985,485 |   |
| October 1, 2005          |       | 40,020,057    |       | — |   | 8,588,604 |   |
| **Prepared  Foods**      |       |          |       |   |   |   |   |
| October 2, 2004          |       | 10,190,611    |       | 13,504,633 |   | 1,645,425 |   |
| October 1, 2005          |       | 16,711,082    |       | 7,986,602 |   | 3,045,671 |   |
| **Corporate**            |       |          |       |   |   |   |   |
| October 2, 2004          |       | —        |       | — |   | (173,000 | ) |
| October 1, 2005          |       | —        |       | — |   | (4,409,802 | ) |
| **Eliminations**         |       |          |       |   |   |   |   |
| October 2, 2004          |       | —        |       | (13,504,633 | ) | (1,040,848 | ) |
| October 1, 2005          |       | —        |       | (7,986,602 | ) |   |   |
| **TWC  Holding LLC**     |       |          |       |   |   |   |   |
| October 2, 2004          |       | —        |       | — |   | — |   |
| October 1, 2005          |       | —        |       | — |   | (36,427 | ) |
| **Total  Company**       |       |          |       |   |   |   |   |
| October 2, 2004          |       | 51,077,176    |       | — |   | 3,417,062 |   |
| October 1, 2005          |       | 56,731,139    |       | — |   | 7,188,046 |   |

 

10

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Unaudited reportableoperating segment information for the thirty-nine week periods ended October 2,2004 and October 1, 2005, is as follows;

 
| **Operating Segments**                           | ** ** | **Trade  Revenue** | ** ** | **Inter-segment  Revenue** | ** ** | **Operating  Profit  (Loss)** | ** ** | **Depreciation** | ** ** | **Amortization** | ** ** | **Total  Assets** | ** ** | **Capital  Expenditures** | ** ** |
|--------------------------------------------------|------------|--------------------|------------|----------------------------|------------|-------------------------------|------------|------------------|------------|------------------|------------|-------------------|------------|---------------------------|------------|
| **Right Away Division**                          |       |               |       |                       |       |                          |       |             |       |             |       |              |       |                      |       |
| January 1, 2004  to June 30, 2004  (Predecessor) |       | 65,266,652         |       | —                     |       | 4,358,847                     |       | 486,473          |       | —           |       | —            |       | 773,591                   |       |
| July 1, 2004 to  October 2, 2004  (Successor)    |       | 40,886,565         |       | —                     |       | 2,985,485                     |       | 369,329          |       | 652,930          |       | —            |       | 116,557                   |       |
| January 1, 2005  to October 1, 2005  (Successor) |       | 122,615,594        |       | —                     |       | 20,666,404                    |       | 994,741          |       | 617,500          |       | 32,594,130        |       | 427,366                   |       |
| **Prepared Foods**                               |       |               |       |                       |       |                          |       |             |       |             |       |              |       |                      |       |
| January 1, 2004  to June 30, 2004  (Predecessor) |       | 15,657,187         |       | 19,815,600                 |       | 4,413,202                     |       | 891,518          |       | —           |       | —            |       | 1,609,129                 |       |
| July 1, 2004 to  October 2, 2004  (Successor)    |       | 10,190,611         |       | 13,504,633                 |       | 1,645,425                     |       | 495,000          |       | 2,287,752        |       | —            |       | 543,395                   |       |
| January 1, 2005  to October 1, 2005  (Successor) |       | 37,340,707         |       | 28,106,199                 |       | (2,018,861                    | )          | 1,912,280        |       | 2,903,437        |       | 73,898,785        |       | 10,596,769                |       |
| **Corporate**                                    |       |               |       |                       |       |                          |       |             |       |             |       |              |       |                      |       |
| January 1, 2004  to June 30, 2004  (Predecessor) |       | —             |       | —                     |       | (7,975,339                    | )          | 8,913            |       | —           |       | —            |       | —                    |       |
| July 1, 2004 to  October 2, 2004  (Successor)    |       | —             |       | —                     |       | (173,000                      | )          | —           |       | 150,054          |       | —            |       | —                    |       |
| January 1, 2005  to October 1, 2005  (Successor) |       | —             |       | —                     |       | (6,481,498                    | )          | —           |       | 512,100          |       | 106,600,443       |       | —                    |       |
| **Eliminations**                                 |       |               |       |                       |       |                          |       |             |       |             |       |              |       |                      |       |
| January 1, 2004  to June 30, 2004  (Predecessor) |       | —             |       | (19,815,600                | )          | —                        |       | —           |       | —           |       | —            |       | —                    |       |
| July 1, 2004 to  October 2, 2004  (Successor)    |       | —             |       | (13,504,633                | )          | (1,040,848                    | )          | —           |       | —           |       | —            |       |                      |       |
| January 1, 2005  to October 1, 2005  (Successor) |       | —             |       | (28,106,199                | )          | —                        |       | —           |       | —           |       | (61,496,468       | )          | —                    |       |
| **TWC Holding LLC**                              |       |               |       |                       |       |                          |       |             |       |             |       |              |       |                      |       |
| January 1, 2004  to June 30, 2004  (Predecessor) |       | —             |       | —                     |       | —                        |       | —           |       | —           |       | —            |       | —                    |       |
| July 1, 2004 to  October 2, 2004  (Successor)    |       | —             |       | —                     |       | —                        |       | —           |       | —           |       | —            |       | —                    |       |
| January 1, 2005  to October 1, 2005  (Successor) |       | —             |       | —                     |       | (109,333                      | )          | —           |       | 247,469          |       | 40,192,066        |       | —                    |       |
| **Total Company**                                |       |               |       |                       |       |                          |       |             |       |             |       |              |       |                      |       |
| January 1, 2004  to June 30, 2004  (Predecessor) |       | 80,923,839         |       | —                     |       | 796,710                       |       | 1,386,904        |       | —           |       | —            |       | 2,382,720                 |       |
| July 1, 2004 to  October 2, 2004  (Successor)    |       | 51,077,176         |       | —                     |       | 3,417,062                     |       | 864,329          |       | 3,090,736        |       | —            |       | 659,952                   |       |
| January 1, 2005  to October 1, 2005  (Successor) |       | 159,956,301        |       | —                     |       | 12,056,712                    |       | 2,907,021        |       | 4,280,506        |       | 191,788,956       |       | 11,024,135                |       |

 

11

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**9.****            ****Condensed Consolidating FinancialInformation**

 

The following informationpresents the unaudited condensed consolidating balance sheets of the Successorat December 31, 2004 and October 1, 2005, the unaudited condensed consolidatingstatements of operations of the Predecessor for the twenty-six week periodended June 30, 2004, the unaudited condensed consolidating statements ofoperations of the Successor for the thirteen week period ended October 2, 2004,the unaudited condensed consolidating statements of operations of the Successorfor the thirteen and thirty-nine week periods ended October 1, 2005, theunaudited statement of cash flows of the Predecessor for the twenty-six weekperiod ended June 30, 2004, the unaudited statement of cash flows of theSuccessor for the thirteen week period ended October 2, 2004 and the unauditedstatement of cash flows of the successor for the thirty-nine week period endedOctober 1, 2005, respectively.

 

Condensed consolidatedbalance sheet at December 31, 2004 (unaudited);

 
| ** **                                    | ** ** | **Successor**        | ** ** |
|-----------------------------------------------|------------|----------------------|------------|
| ** **                                    | ** ** | **TWC Holding  LLC** | ** ** | **The Wornick  Company  Delaware** | ** ** | **Subsidiary  Guarantors** | ** ** | **Eliminations** | ** ** | **Total** | ** ** |
| **Assets**                                    |       |                 |       |   |   |   |   |   |   |   |   |
| Current assets                                |       |                 |       |   |   |   |   |   |   |   |   |
| Cash and cash equivalents                     |       | $                    | —     |   | $ | 1,085,474 |   | $ | 2,203,556 |   | $ | — |   | $ | 3,289,030 |   |
| Trade accounts receivable                     |       | —               |       | 4,413,429 |   | 9,442,865 |   | — |   | 13,856,294 |   |
| Interdivision receivables (payables)          |       | —               |       | 4,720,661 |   | (4,720,661 | ) | — |   | — |   |
| Inventories                                   |       | —               |       | 10,491,680 |   | 13,640,436 |   | — |   | 24,132,116 |   |
| Prepaid expenses and other current assets     |       | —               |       | 246,316 |   | 284,790 |   | — |   | 531,106 |   |
| Total current assets                          |       | —               |       | 20,957,560 |   | 20,850,986 |   | — |   | 41,808,546 |   |
| Investments in subsidiary guarantors          |       | 37,623,477           |       | 28,579,956 |   | — |   | (66,203,433 | ) | — |   |
| Property and equipment, net                   |       |                 |       | 25,845,617 |   | 6,948,622 |   | — |   | 32,794,239 |   |
| Goodwill                                      |       |                 |       | 77,573,207 |   | — |   | — |   | 77,573,207 |   |
| Intangible assets, net                        |       |                 |       | 18,434,375 |   | 3,388,335 |   |   |   | 21,822,710 |   |
| Other noncurrent assets                       |       |                 |       | 5,531,183 |   | 144,756 |   | — |   | 5,675,939 |   |
| Total assets                                  |       | $                    | 37,623,477 |   | $ | 176,921,898 |   | $ | 31,332,699 |   | $ | (66,203,433 | ) | $ | 179,674,641 |   |
| **Liabilities and Members Equity**            |       |                 |       |   |   |   |   |   |   |   |   |
| Current liabilities                           |       |                 |       |   |   |   |   |   |   |   |   |
| Trade accounts payable                        |       | $                    | —     |   | $ | 4,556,681 |   | $ | 1,611,145 |   | $ | — |   | $ | 6,167,826 |   |
| Accrued expenses                              |       | —               |       | 1,980,848 |   | 1,141,598 |   | — |   | 3,122,446 |   |
| Accrued interest                              |       | —               |       | 6,796,875 |   | — |   | — |   | 6,796,875 |   |
| Taxes payable                                 |       | —               |       | 51,950 |   | — |   | — |   | 51,950 |   |
| Total current liabilities                     |       | —               |       | 13,386,354 |   | 2,752,743 |   | — |   | 16,139,097 |   |
|                                          |       |                 |       |   |   |   |   |   |   |   |   |
| Deferred tax liabilities                      |       | $                    | —     |   | $ | 912,067 |   | — |   | — |   | $ | 912,067 |   |
| Long-term debt, excluding current  maturities |       | —               |       | 125,000,000 |   | — |   | — |   | 125,000,000 |   |
| Total liabilities                             |       | —               |       | 139,298,421 |   | 2,752,743 |   | — |   | 142,051,164 |   |
| **Member’s equity**                      |       |                 |       |   |   |   |   |   |   |   |   |
| Members equity                                |       | 37,500,000           |       | — |   | — |   | — |   | 37,500,000 |   |
| Additional paid-in capital                    |       | 146,400              |       | 37,646,400 |   | 26,624,729 |   | (64,271,129 | ) | 146,400 |   |
| Retained earnings/(deficit)                   |       | (22,923              | )          | (22,923 | ) | 1,955,227 |   | (1,932,304 | ) | (22,923 | ) |
| Total Member’s equity (deficit)          |       | 37,623,477           |       | 37,623,477 |   | 28,579,956 |   | (66,203,433 | ) | 37,623,477 |   |
| Total liabilities and Member’s equity    |       | $                    | 37,623,477 |   | $ | 176,921,898 |   | $ | 31,332,699 |   | $ | (66,203,433 | ) | $ | 179,674,641 |   |

 

12

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Condensed consolidatedbalance sheet at October 1, 2005 (unaudited):

 
| ** **                                    | ** ** | **Successor**        | ** ** |
|-----------------------------------------------|------------|----------------------|------------|
| ** **                                    | ** ** | **TWC Holding  LLC** | ** ** | **The Wornick  Company  Delaware** | ** ** | **Subsidiary  Guarantors** | ** ** | **Eliminations** | ** ** | **Total** | ** ** |
| **Assets**                                    |       |                 |       |   |   |   |   |   |   |   |   |
| Current  assets                               |       |                 |       |   |   |   |   |   |   |   |   |
| Cash and cash equivalents                     |       | $                    | 111,765    |   | $ | — |   | $ | 394,174 |   | $ | — |   | $ | 505,939 |   |
| Trade accounts receivable                     |       | —               |       | 5,882,394 |   | 14,472,960 |   | — |   | 20,355,354 |   |
| Interdivision receivables (payables)          |       | —               |       | 3,074,766 |   | (3,074,766 | ) | — |   | — |   |
| Inventories                                   |       | —               |       | 14,721,469 |   | 11,094,873 |   | — |   | 25,816,342 |   |
| Prepaid expenses and other current assets     |       | 16,667               |       | 336,612 |   | 392,787 |   | — |   | 746,066 |   |
| Total current assets                          |       | 128,432              |       | 24,015,241 |   | 23,280,028 |   | — |   | 47,423,701 |   |
| Investments  in subsidiaries                  |       | 37,720,409           |       | 23,776,059 |   | — |   | (61,496,468 | ) | — |   |
| Property and  equipment, net                  |       | —               |       | 34,530,106 |   | 6,381,247 |   | — |   | 40,911,353 |   |
| Goodwill                                      |       | —               |       | 77,573,207 |   | — |   | — |   | 77,573,207 |   |
| Intangible  assets, net                       |       | —               |       | 15,530,938 |   | 2,770,835 |   | — |   | 18,301,773 |   |
| Other  noncurrent assets                      |       | 2,343,225            |       | 5,073,677 |   | 162,020 |   | — |   | 7,578,922 |   |
| Total assets                                  |       | $                    | 40,192,066 |   | $ | 180,499,228 |   | $ | 32,594,130 |   | $ | (61,496,468 | ) | $ | 191,788,956 |   |
| **Liabilities  and Members Equity**           |       |                 |       |   |   |   |   |   |   |   |   |
| Current  liabilities                          |       |                 |       |   |   |   |   |   |   |   |   |
| Bank overdrafts                               |       | $                    | —     |   | $ | 1,718,497 |   | $ | — |   | $ | — |   | $ | 1,718,497 |   |
| Trade accounts payable                        |       | 290,349              |       | 6,941,317 |   | 7,085,165 |   | — |   | 14,316,831 |   |
| Accrued expenses                              |       | —               |       | 4,006,906 |   | 1,732,906 |   | — |   | 5,739,812 |   |
| Accrued interest                              |       | —               |       | 2,832,032 |   | — |   | — |   | 2,832,032 |   |
| Total current liabilities                     |       | 290,349              |       | 15,498,752 |   | 8,818,071 |   | — |   | 24,607,172 |   |
|                                          |       |                 |       |   |   |   |   |   |   |   |   |
| Deferred tax  liabilities                     |       | —               |       | 2,280,067 |   | — |   | — |   | 2,280,067 |   |
| Long-term debt, excluding current  maturities |       | 28,358,945           |       | 125,000,000 |   | — |   | — |   | 153,358,945 |   |
| Total liabilities                             |       | 28,649,294           |       | 142,778,819 |   | 8,818,071 |   | — |   | 180,246,184 |   |
| **Members  equity**                           |       |                 |       |   |   |   |   |   |   |   |   |
| Members equity                                |       | 14,038,007           |       | — |   | — |   | — |   | 14,038,007 |   |
| Additional paid-in capital                    |       | 178,815              |       | 37,678,815 |   | 26,624,730 |   | (64,303,545 | ) | 178,815 |   |
| Retained earnings                             |       | (2,674,050           | )          | 41,594 |   | (2,848,671 | ) | 2,807,077 |   | (2,674,050 | ) |
| Total members equity (deficit)                |       | 11,542,772           |       | 37,720,409 |   | 23,776,059 |   | (61,496,468 | ) | 11,542,772 |   |
| Total liabilities and members equity          |       | $                    | 40,192,066 |   | $ | 180,499,228 |   | $ | 32,594,130 |   | $ | (61,496,468 | ) | $ | 191,788,956 |   |

 

13

----

 

Condensed consolidatedstatement of operations of the Successor for the thirteen week period from July1, 2004 through October 2, 2004 (unaudited):

 
| ** **                                   | ** ** | **Successor**        | ** ** |
|----------------------------------------------|------------|----------------------|------------|
| ** **                                   | ** ** | **TWC Holding  LLC** | ** ** | **The Wornick  Company  Delaware** | ** ** | **Subsidiary  Guarantors** | ** ** | **Eliminations** | ** ** | **Total** | ** ** |
|                                         |       |                 |       |   |   |   |   |   |   |   |   |
| Net sales                                    |       | $                    | —     |   | $ | 23,695,244 |   | $ | 40,886,565 |   | $ | (13,504,633 | ) | $ | 51,077,176 |   |
| Cost of  sales                               |       | —               |       | 19,369,835 |   | 36,516,074 |   | (12,463,785 | ) | 43,422,124 |   |
| Gross profit                                 |       | —               |       | 4,325,409 |   | 4,370,491 |   | (1,040,848 | ) | 7,655,052 |   |
| Selling, general and administrative expenses |       | —               |       | 2,852,984 |   | 1,385,006 |   | — |   | 4,237,990 |   |
| Operating (loss) profit                      |       | —               |       | 1,472,425 |   | 2,985,485 |   | (1,040,848 | ) | 3,417,062 |   |
| Other income  (expense)                      |       |                 |       |   |   |   |   |   |   |   |   |
| Interest income                              |       | —               |       | — |   | 32,422 |   | — |   | 32,422 |   |
| Interest expense                             |       | —               |       | (3,575,860 | ) | (21,305 | ) | — |   | (3,597,165 | ) |
| Executive/administration income (expense)    |       | —               |       | 2,291,501 |   | (2,291,501 | ) | — |   | — |   |
| Other (expense) income, net                  |       | —               |       | (82,778 | ) | 69,619 |   | — |   | (13,159 | ) |
| Equity in earnings(loss) of subsidiaries     |       | —               |       | 774,720 |   | — |   | (774,720 | ) | — |   |
| Total other income (expense)                 |       | —               |       | (592,417 | ) | (2,210,765 | ) | (774,720 | ) | (3,577,902 | ) |
| Income (loss) before income taxes            |       | —               |       | 880,008 |   | 774,720 |   | (1,815,568 | ) | (160,840 | ) |
| Income tax  expense                          |       | —               |       | 21,949 |   | — |   | — |   | 21,949 |   |
| Net income (loss)                            |       | $                    | —     |   | $ | 858,059 |   | $ | 774,720 |   | $ | (1,815,568 | ) | $ | (182,789 | ) |

 

Condensed consolidatedstatement of operations of the Successor for the thirteen week period from July3, 2005 through October 1, 2005 (unaudited):

 
| ** **                                    | ** ** | **Successor**        | ** ** |
|-----------------------------------------------|------------|----------------------|------------|
| ** **                                    | ** ** | **TWC Holding  LLC** | ** ** | **The Wornick  Company  Delaware** | ** ** | **Subsidiary  Guarantors** | ** ** | **Eliminations** | ** ** | **Total** | ** ** |
|                                          |       |                 |       |   |   |   |   |   |   |   |   |
| Net sales                                     |       | $                    | —     |   | $ | 24,697,684 |   | $ | 40,020,057 |   | $ | (7,986,602 | ) | $ | 56,731,139 |   |
| Cost of  sales                                |       | —               |       | 21,443,261 |   | 30,242,547 |   | (7,986,602 | ) | 43,699,206 |   |
| Gross profit                                  |       | —               |       | 3,254,423 |   | 9,777,510 |   | — |   | 13,031,933 |   |
| Selling, general and administrative  expenses |       | 36,427               |       | 4,618,554 |   | 1,188,906 |   | — |   | 5,843,887 |   |
| Operating (loss) profit                       |       | (36,427              | )          | (1,364,131 | ) | 8,588,604 |   | — |   | 7,188,046 |   |
| Other income  (expense)                       |       |                 |       |   |   |   |   |   |   |   |   |
| Interest income                               |       | —               |       | 4,761 |   | 21,784 |   | — |   | 26,545 |   |
| Interest expense                              |       | (1,045,645           | )          | (3,638,583 | ) | — |   | — |   | (4,684,228 | ) |
| Executive/administration income (expense)     |       | —               |       | 15,842,002 |   | (15,842,002 | ) | — |   | — |   |
| Other (expense) income, net                   |       | —               |       | (101,354 | ) | 4,000 |   | — |   | (97,354 | ) |
| Equity in earnings(loss) of subsidiaries      |       | 3,154,458            |       | (7,227,614 | ) | — |   | 4,073,156 |   | — |   |
| Total other income (expense)                  |       | 2,108,813            |       | 4,879,212 |   | (15,816,218 | ) | 4,073,156 |   | (4,755,037 | ) |
| Income (loss) before income taxes             |       | 2,072,386            |       | 3,515,081 |   | (7,227,614 | ) | 4,073,156 |   | 2,433,009 |   |
| Income tax  expense                           |       | —               |       | 360,621 |   | — |   | — |   | 360,621 |   |
| Net income (loss)                             |       | $                    | 2,072,386  |   | $ | 3,154,460 |   | $ | (7,227,614 | ) | $ | 4,073,156 |   | $ | 2,072,388 |   |

 

14

----

 

Condensed consolidatedstatement of operations of the Predecessor for the twenty six week period fromJanuary 1, 2004 through June 30, 2004 (unaudited):

 
| ** **                                    | ** ** | **Predecessor** | ** ** |
|-----------------------------------------------|------------|-----------------|------------|
| ** **                                    | ** ** | **Parent**      | ** ** | **Subsidiary  Guarantors** | ** ** | **Eliminations** | ** ** | **Total** | ** ** |
|                                          |       |            |       |   |   |   |   |   |   |
| Net sales                                     |       | $               | 35,472,787 |   | $ | 65,266,652 |   | $ | (19,815,600 | ) | $ | 80,923,839 |   |
| Cost of  sales                                |       | 28,838,375      |       | 58,645,754 |   | (19,815,600 | ) | 67,668,529 |   |
| Gross profit                                  |       | 6,634,412       |       | 6,620,898 |   | — |   | 13,255,310 |   |
| Selling, general and administrative  expenses |       | 10,196,549      |       | 2,262,051 |   | — |   | 12,458,600 |   |
| Operating (loss) profit                       |       | (3,562,137      | )          | 4,358,847 |   | — |   | 796,710 |   |
| Other income  (expense)                       |       |            |       |   |   |   |   |   |   |
| Interest income                               |       | 483,029         |       | 23,524 |   | — |   | 506,553 |   |
| Interest expense                              |       | (95,403         | )          | (4,388 | ) | — |   | (99,791 | ) |
| Executive/administration income (expense)     |       | 483,000         |       | (483,000 | ) | — |   | — |   |
| Other income, net                             |       | 92,912          |       | 192,009 |   | — |   | 284,921 |   |
| Equity in earnings of subsidiary guarantors   |       | 4,086,992       |       | — |   | (4,086,992 | ) | — |   |
| Total other income (expense)                  |       | 5,050,530       |       | (271,855 | ) | (4,086,992 | ) | 691,683 |   |
| Income before income taxes                    |       | 1,488,393       |       | 4,086,992 |   | (4,086,992 | ) | 1,488,393 |   |
| Income tax  expense                           |       | 41,052          |       | — |   | — |   | 41,052 |   |
| Net income                                    |       | $               | 1,447,341  |   | $ | 4,086,992 |   | $ | (4,086,992 | ) | $ | 1,447,341 |   |

 

Condensed consolidatedstatement of operations of the Successor for the thirty-nine week period fromJanuary 1, 2005 through October 1, 2005 (unaudited):

 
| ** **                                    | ** ** | **Successor**        | ** ** |
|-----------------------------------------------|------------|----------------------|------------|
| ** **                                    | ** ** | **TWC Holding  LLC** | ** ** | **The Wornick  Company  Delaware** | ** ** | **Subsidiary  Guarantors** | ** ** | **Eliminations** | ** ** | **Total** | ** ** |
|                                          |       |                 |       |   |   |   |   |   |   |   |   |
| Net sales                                     |       | $                    | —     |   | $ | 65,446,906 |   | $ | 122,615,594 |   | $ | (28,106,199 | ) | $ | 159,956,301 |   |
| Cost of  sales                                |       | —               |       | 62,681,340 |   | 97,926,021 |   | (28,106,199 | ) | 132,501,162 |   |
| Gross profit                                  |       | —               |       | 2,765,566 |   | 24,689,573 |   | — |   | 27,455,139 |   |
| Selling, general and administrative  expenses |       | 109,333              |       | 11,265,925 |   | 4,023,169 |   | — |   | 15,398,427 |   |
| Operating (loss) profit                       |       | (109,333             | )          | (8,500,359 | ) | 20,666,404 |   | — |   | 12,056,712 |   |
| Other income  (expense)                       |       |                 |       |   |   |   |   |   |   |   |   |
| Interest income                               |       | —               |       | 15,339 |   | 110,140 |   | — |   | 125,479 |   |
| Interest expense                              |       | (2,606,311           | )          | (10,781,543 | ) | (94 | ) | — |   | (13,387,948 | ) |
| Executive/administration income (expense)     |       | —               |       | 25,723,152 |   | (25,723,152 | ) | — |   | — |   |
| Other (expense) income, net                   |       | —               |       | (267,383 | ) | 142,804 |   | — |   | (124,579 | ) |
| Equity in earnings(loss) of subsidiaries      |       | 64,517               |       | (4,803,898 | ) | — |   | 4,739,381 |   | — |   |
| Total other income (expense)                  |       | (2,541,794           | )          | 9,885,667 |   | (25,470,302 | ) | 4,739,381 |   | (13,387,048 | ) |
| Income (loss) before income taxes             |       | (2,651,127           | )          | 1,385,308 |   | (4,803,898 | ) | 4,739,381 |   | (1,330,336 | ) |
| Income tax  expense                           |       | —               |       | 1,320,791 |   | — |   | — |   | 1,320,791 |   |
| Net income (loss)                             |       | $                    | (2,651,127 | ) | $ | 64,517 |   | $ | (4,803,898 | ) | $ | 4,739,381 |   | $ | (2,651,127 | ) |

 

 

15

----

 

Condensedconsolidated statement of cash flows of the Predecessor for the twenty six weekperiod from January 1, 2004 through June 30, 2004 (unaudited):

 
| ** **                                                                                  | ** ** | **Predecessor** | ** ** |
|---------------------------------------------------------------------------------------------|------------|-----------------|------------|
| ** **                                                                                  | ** ** | **Parent**      | ** ** | **Subsidiary  Guarantors** | ** ** | **Eliminations** | ** ** | **Total** | ** ** |
|                                                                                        |       |            |       |   |   |   |   |   |   |
| **Cash  flows from operating activities**                                                   |       |            |       |   |   |   |   |   |   |
| Net income                                                                                  |       | $               | 1,447,341  |   | $ | 4,086,992 |   | $ | (4,086,992 | ) | $ | 1,447,341 |   |
| Adjustments to reconcile net income to net  cash provided by (used in) operating activities |       |            |       |   |   |   |   |   |   |
| Equity in earnings of subsidiary guarantors                                                 |       | (4,086,992      | )          | — |   | 4,086,992 |   | — |   |
| Depreciation of property and equipment                                                      |       | 900,431         |       | 486,473 |   | — |   | 1,386,904 |   |
| Compensation expense for Employee Stock                                                     |       |            |       |   |   |   |   |   |   |
|   Ownership Trust shares released  and committed to be   released       |       | 2,344,292       |       | — |   | — |   | 2,344,292 |   |
| Compensation expense for stock options                                                      |       | 713,433         |       | — |   | — |   | 713,433 |   |
| Other stock-based compensation expense                                                      |       | 3,266,814       |       | — |   | — |   | 3,266,814 |   |
| Stock compensation plans                                                                    |       | (4,270,995      | )          | — |   | — |   | (4,270,995 | ) |
| Changes in assets and liabilities                                                           |       |            |       |   |   |   |   |   |   |
| Trade accounts receivable                                                                   |       | (1,294,593      | )          | 2,484,055 |   | — |   | 1,189,462 |   |
| Interdivisional receivables/payables, net                                                   |       | 3,768,359       |       | (3,768,359 | ) | — |   | — |   |
| Inventories                                                                                 |       | (1,351,831      | )          | (3,341,244 | ) | — |   | (4,693,075 | ) |
| Prepaid expenses and other current assets                                                   |       | 7,032           |       | 155,117 |   | — |   | 162,149 |   |
| Other noncurrent asset                                                                      |       | (36,950         | )          | (19,951 | ) | — |   | (56,901 | ) |
| Trade accounts payable and accrued expenses                                                 |       | 59,727          |       | (2,020,934 | ) | — |   | (1,961,207 | ) |
| Net cash provided by (used in) operating activities                                         |       | 1,466,068       |       | (1,937,851 | ) | — |   | (471,783 | ) |
| ** **                                                                                  |       |            |       |   |   |   |   |   |   |
| **Cash  flows from investing activities**                                                   |       |            |       |   |   |   |   |   |   |
| Payments  received on notes receivable                                                      |       | 610,100         |       | — |   |   |   | 610,100 |   |
| Proceeds  from the sale of investments                                                      |       | 19,988,514      |       | — |   | — |   | 19,988,514 |   |
| Purchase of  investments                                                                    |       | (30,007,514     | )          | — |   | — |   | (30,007,514 | ) |
| Business  acquired                                                                          |       | —          |       | — |   | — |   | — |   |
| Capital  expenditures                                                                       |       | (1,609,129      | )          | (773,591 | ) | — |   | (2,382,720 | ) |
| Net cash used in investing activities                                                       |       | (11,018,029     | )          | (773,591 | ) | — |   | (11,791,620 | ) |
| ** **                                                                                  |       |            |       |   |   |   |   |   |   |
| **Cash  flows from financing activities**                                                   |       |            |       |   |   |   |   |   |   |
| Net increase  (decrease) in book overdrafts                                                 |       | 990,692         |       | (747,665 | ) |   |   | 243,027 |   |
| Net increase  in the line of credit                                                         |       | 8,700,000       |       | — |   | — |   | 8,700,000 |   |
| Principal  payments on long-term debt                                                       |       | (618,096        | )          | (11,209 | ) | — |   | (629,305 | ) |
| Net cash provided by (used in) financing activities                                         |       | 9,072,596       |       | (758,874 | ) | — |   | 8,313,722 |   |
| Net (decrease) in cash and cash equivalents                                                 |       | (479,365        | )          | (3,470,316 | ) | — |   | (3,949,681 | ) |
| ** **                                                                                  |       |            |       |   |   |   |   |   |   |
| **Cash and  cash equivalents**                                                              |       |            |       |   |   |   |   |   |   |
| Beginning of  period                                                                        |       | 1,652,570       |       | 3,638,097 |   | — |   | 5,290,667 |   |
| End of  period                                                                              |       | $               | 1,173,205  |   | $ | 167,781 |   | $ | — |   | $ | 1,340,986 |   |

 

16

----

 

Condensed consolidatedstatement of cash flows of the Successor for the thirteen week period from July1, 2004 through October 2, 2004 (unaudited):

 
| ** **                                                                                  | ** ** | **Successor**        | ** ** |
|---------------------------------------------------------------------------------------------|------------|----------------------|------------|
| ** **                                                                                  | ** ** | **TWC Holding  LLC** | ** ** | **The Wornick  Company  Delaware** | ** ** | **Subsidiary  Guarantors** | ** ** | **Eliminations** | ** ** | **Total** | ** ** |
|                                                                                        |       |                 |       |   |   |   |   |   |   |   |   |
| **Cash  flows from operating activities**                                                   |       |                 |       |   |   |   |   |   |   |   |   |
| Net income  (loss)                                                                          |       | $                    | —     |   | $ | 858,059 |   | $ | 774,720 |   | $ | (1,815,568 | ) | $ | (182,789 | ) |
| Adjustments to reconcile net income to net  cash provided by (used in) operating activities |       |                 |       |   |   |   |   |   |   |   |   |
| Equity in earnings of subsidiary guarantors                                                 |       | —               |       | (774,720 | ) | — |   | 774,720 |   | — |   |
| Depreciation of property and equipment                                                      |       | —               |       | 495,000 |   | 369,329 |   | — |   | 864,329 |   |
| Amortization of intangibles                                                                 |       | —               |       | 967,812 |   | 205,833 |   | — |   | 1,173,645 |   |
| Amortization of inventory step-up                                                           |       | —               |       | 1,319,940 |   | 447,097 |   | — |   | 1,767,037 |   |
| Amortization of bond issuance cost                                                          |       | —               |       | 150,054 |   | — |   | — |   | 150,054 |   |
| Changes in assets and liabilities                                                           |       |                 |       |   |   |   |   |   |   |   |   |
| Trade accounts receivable                                                                   |       | —               |       | (4,736,658 | ) | (9,067,937 | ) | — |   | (13,804,595 | ) |
| Interdivisional receivables/payables, net                                                   |       | —               |       | (3,645,975 | ) | 3,645,975 |   | — |   | — |   |
| Inventories                                                                                 |       | —               |       | (139,282 | ) | 2,123,955 |   | 1,040,848 |   | 3,025,521 |   |
| Prepaid expenses and other current assets                                                   |       | —               |       | (268,224 | ) | (427,027 | ) | — |   | (695,251 | ) |
| Other noncurrent asset                                                                      |       | —               |       | (15,837 | ) | (2,295 | ) | — |   | (18,132 | ) |
| Trade accounts payable and accrued expenses                                                 |       | —               |       | 5,338,002 |   | 2,232,533 |   | — |   | 7,570,535 |   |
| Accrued bond interest                                                                       |       | —               |       | 3,548,493 |   | — |   | — |   | 3,548,493 |   |
| Net cash provided by operating activities                                                   |       | —               |       | 3,096,664 |   | 302,183 |   | — |   | 3,398,847 |   |
| **Cash  flows from investing activities**                                                   |       |                 |       |   |   |   |   |   |   |   |   |
| Purchase of  subsidiary common stock                                                        |       | (37,500,000          | )          | — |   | — |   | 37,500,000 |   | 0 |   |
| Business  acquired                                                                          |       | —               |       | (165,060,252 | ) | — |   | — |   | (165,060,252 | ) |
| Capital  expenditures                                                                       |       | —               |       | (543,395 | ) | (116,557 | ) | — |   | (659,952 | ) |
| Net cash (used in) investing activities                                                     |       | (37,500,000          | )     | (165,603,647 | ) | (116,557 | ) | 37,500,000 |   | (165,720,204 | ) |
| **Cash  flows from financing activities**                                                   |       |                 |       |   |   |   |   |   |   |   |   |
| Change in  book overdrafts                                                                  |       | —               |       | 206,475 |   | — |   | — |   | 206,475 |   |
| Proceeds  from issuance of long-term debt                                                   |       | —               |       | 125,000,000 |   | — |   | — |   | 125,000,000 |   |
| Proceeds  from Issuance of Class A & B units                                            |       | 37,500,000           |       | — |   | — |   | (37,500,000 | ) | 0 |   |
| Proceeds  from issuance of common stock                                                     |       | —               |       | 37,500,000 |   | — |   | — |   | 37,500,000 |   |
| Net cash provided by financing activities                                                   |       | 37,500,000           |       | 162,706,475 |   | — |   | (37,500,000 | )  | 162,706,475 |   |
| Net increase in cash and cash equivalents                                                   |       | —               |       | 199,492 |   | 185,626 |   | — |   | 385,118 |   |
| **Cash and  cash equivalents**                                                              |       |                 |       |   |   |   |   |   |   |   |   |
| Beginning of  period                                                                        |       | —               |       | — |   | — |   | — |   |   |   |
| End of  period                                                                              |       | $                    | —     |   | $ | 199,492 |   | $ | 185,626 |   | $ | — |   | $ | 385,118 |   |

 

17

----

 

Condensed consolidatedstatement of cash flows of the Successor for the thirty-nine week period fromJanuary 1, 2005 through October 1, 2005 (unaudited):

 
| ** **                                                                        | ** ** | **Successor**        | ** ** |
|-----------------------------------------------------------------------------------|------------|----------------------|------------|
| ** **                                                                        | ** ** | **TWC Holding  LLC** | ** ** | **The Wornick  Company  Delaware** | ** ** | **Subsidiary  Guarantors** | ** ** | **Eliminations** | ** ** | **Total** | ** ** |
| **Cash  flows from operating activities**                                         |       |                 |       |   |   |   |   |   |   |   |   |
| Net income  (loss)                                                                |       | $                    | (2,651,127 | ) | $ | 64,517 |   | $ | (4,803,898 | ) | $ | 4,739,381 |   | $ | (2,651,127 | ) |
| Adjustments to reconcile net income to net cash  provided by operating activities |       |                 |       |   |   |   |   |   |   |   |   |
| Equity in earnings of subsidiary guarantors                                       |       | (64,517              | )          | 4,803,898 |   | — |   | (4,739,381 | ) | — |   |
| Depreciation of property and equipment                                            |       | —               |       | 1,912,280 |   | 994,741 |   | — |   | 2,907,021 |   |
| Amortization of intangibles                                                       |       | —               |       | 2,903,437 |   | 617,500 |   | — |   | 3,520,937 |   |
| Amortization of bond issuance cost                                                |       | 247,469              |       | 512,100 |   | — |   | — |   | 759,569 |   |
| Deferred tax liability                                                            |       | —               |       | 1,368,000 |   | — |   | — |   | 1,368,000 |   |
| Interest Expense on Senior PIK Notes                                              |       | 2,358,842            |       |   |   |   |   |   |   | 2,358,842 |   |
| Compensation expense for stock options                                            |       | —               |       | 32,415 |   | — |   | — |   | 32,415 |   |
| Changes in assets and liabilities                                                 |       | —               |       |   |   |   |   |   |   |   |   |
| Trade accounts receivable                                                         |       | —               |       | (1,468,965 | ) | (5,030,095 | ) | — |   | (6,499,060 | ) |
| Interdivisional receivables/payables, net                                         |       | —               |       | 1,645,895 |   | (1,645,895 | ) | — |   | — |   |
| Inventories                                                                       |       | —               |       | (4,229,789 | ) | 2,545,564 |   | — |   | (1,684,225 | ) |
| Prepaid expenses and other current assets                                         |       | (16,667              | )          | (90,296 | ) | (107,997 | ) | — |   | (214,960 | ) |
| Other noncurrent asset                                                            |       | —               |       | (54,594 | ) | (17,264 | ) | — |   | (71,858 | ) |
| Trade accounts payable and accrued expenses                                       |       | 290,349              |       | 4,410,694 |   | 6,065,328 |   | — |   | 10,766,371 |   |
| Accrued bond cost and LOC interest                                                |       | —               |       | (3,964,843 | ) | — |   | — |   | (3,964,843 | ) |
| Taxes payable                                                                     |       | —               |       | (51,950 | ) | — |   | — |   | (51,950 | ) |
| Net cash provided by (used in) operating activities                               |       | 164,349              |       | 7,792,799 |   | (1,382,016 | ) | — |   | 6,575,132 |   |
| **Cash  flows from investing activities**                                         |       |                 |       |   |   |   |   |   |   |   |   |
| Capital  expenditures                                                             |       | —               |       | (10,596,769 | ) | (427,366 | ) | — |   | (11,024,135 | ) |
| Net cash (used in) investing activities                                           |       | —               |       | (10,596,769 | ) | (427,366 | ) | — |   | (11,024,135 | ) |
| **Cash  flows from financing activities**                                         |       |                 |       |   |   |   |   |   |   |   |   |
| Change in  book overdraft                                                         |       | —               |       | 1,718,496 |   | — |   | — |   | 1,718,496 |   |
| Proceeds  from issuance of common stock                                           |       | 26,000,000           |       | — |   | — |   | — |   | 26,000,000 |   |
| Captialized  bond issuance cost                                                   |       | (2,590,612           | )          | — |   | — |   | — |   | (2,590,612 | ) |
| Return of  capital payments                                                       |       | (23,461,972          | )          | — |   | — |   | — |   | (23,461,972 | ) |
| Net cash (used in) provided by financing activities                               |       | (52,584              | )          | 1,718,496 |   | — |   | — |   | 1,665,912 |   |
| Net Increase (decrease) in cash and cash equivalents                              |       | 111,765              |       | (1,085,474 | ) | (1,809,382 | ) | — |   | (2,783,091 | ) |
| **Cash and  cash equivalents**                                                    |       |                 |       |   |   |   |   |   |   |   |   |
| Beginning of  period                                                              |       | —               |       | 1,085,474 |   | 2,203,556 |   | — |   | 3,289,030 |   |
| End of  period                                                                    |       | $                    | 111,765    |   | $ | — |   | $ | 394,174 |   | $ | — |   | $ | 505,939 |   |

 

18

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**Item 2.  Management’s Discussion and Analysis of FinancialCondition and Results of Operations**

 

As a result of theacquisition transaction discussed below and in Note 3, to our unauditedConsolidated Financial Statements, the following discussion relates to thefinancial condition and results of operation of our Company, or the “Successor”as of and for the periods ended October 1, 2005.  Included in our discussions are the resultsof operations of our predecessor company, or the “Predecessor” for the twenty-sixweek period ended June 30, 2004. This section should be read in conjunction with our unauditedConsolidated Financial Statements and considered with “ – Quantitative andQualitative Disclosures About Market Risk” and “Forward Looking Statements,” includedelsewhere in our filing.

 

As a result of theacquisition transaction in which we acquired our business and relatedfinancings, the historical consolidated financial data of the Predecessor maynot be comparable to the Successor’s consolidated financial data.  Most notably, the liquidity position of theSuccessor is substantially different than that of the Predecessor, includingthe overall level of debt and resulting amount of interest expense in fiscalperiods subsequent to June 30, 2004, as well as the revaluation of theassets and liabilities as a result of applying purchase accounting.

 

In order to provideinvestors with a more meaningful thirty-nine week period-to-period comparison,we have combined the results of the Predecessor for the twenty-six week periodended June 30, 2004 with that of the Successor Company for the thirteenweek period ended October 2, 2004 in our discussion below.

 

Accordingly, the combinedpro forma financial information for the thirty-nine week period ended October 2,2004 combines results of operations under two separate bases of accounting, thePredecessor’s basis and the Successor’s basis. We have combined the financial information for the six months ended June 30,2004 of the Predecessor and the thirteen weeks ended October 2, 2004 ofthe Successor on an unaudited pro forma basis in which we combined therespective financial information as originally presented.  The pro formainformation provided in the table below in “—Results of Operations” does notpurport to represent what our consolidated results of operations would havebeen if the Company had actually been formed on January 1, 2004, nor havewe made any attempt to either include or exclude expenses or income that wouldhave resulted had the acquisition actually occurred on January 1, 2004.

 

Percentage anddollar change calculations may differ due rounding.  Where possible, management has used theinformation as provided in the financial statements or supplemental tableswithin the section in determining its calculations.  Management views any rounding differences tobe inconsequential to our discussion and analysis.

 

**Our Company**

 

Through our wholly ownedsubsidiary, “Wornick”, we are the leading supplier of individual and groupmilitary field rations to the Department of Defense (the “DoD”).  Wespecialize in the production, packaging and distribution of extendedshelf-life, shelf stable and frozen foods in flexible pouches and semi-rigidcontainers. With over 30 years of experience in the food manufacturing and foodprocessing businesses, we believe we have a reputation for superior quality andservice in developing and producing unique meal solutions for the military andfor the consumer and foodservice markets. We are a primary supplier to the DoDof Meals Ready-to-Eat, Unitized Group Rations-A and the polymeric trays used inthe Unitized Group Rations-Heat & Serve program.  Our customersalso include Kraft Foods, Inc., Gerber Products Company, Quaker OatsCompany, the Canadian Ministry of Defense.

 

**The Transaction**

 

On December 3, 2003,our Operating Company and Veritas Capital Management II, L.L.C. (“Veritas”) enteredinto an Assets Purchase and Sale Contract with the Predecessor and itssubsidiaries, The Wornick Company Right Away Division, a Nevada corporation,The Wornick Company Right Away Division, L.P., a Texas limited partnership, andRight Away Management Corporation, a Texas corporation.  The grosspurchase price of the business was $155 million, of which $150 million was paidto the sellers at the closing and the remaining $5 million was paid to anescrow agent as escrow for the sellers’ obligations under the Assets Purchaseand Sale Contract.  The acquisition transaction closed on June 30,2004.

 

19

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The Successor funded thepurchase price and the related fees and expenses with the proceeds of itsoffering of the original notes and the equity investments in TWC Holding LLC,the parent of the Successor, as follows:

 

•      the purchase by the equity investors of Class Ainterests in TWC Holding LLC for $37.5 million in cash; and

 

•      the contribution by TWC Holding LLC to thecapital of the Successor of all cash received by it from the equity investors;and

 

•      net proceeds to the Successor ofapproximately $121.0 million from the issuance and sale of the original$125.0 million of senior notes; and

 

•      advance of $3.0 million under the Successor’sworking capital facility.

 

The closing of the offeringof the original notes occurred simultaneously with the closing of theAcquisition, our new working capital facility (described below) and the otherfinancing transactions described above.

 

We entered into a new seniorsecured revolving working capital credit facility of up to $25 millionconcurrently with the closing of the Acquisition and the offering. We makemonthly interest payments on amounts borrowed under the facility at an annualadjustable interest rate calculated in accordance with the terms of theapplicable promissory note.

 

**Results of Operations**

 

**Comparison of the thirteen weeks ended October 1, 2005 to thethirteen weeks ended October 2, 2004**

 

Net Sales.  Our net sales for the thirteen weeks ended October 1,2005 were $56.7 million, representing an increase of approximately $5.7million, or 11.1%, compared to net sales of $51.1 for the thirteen week periodended October 2, 2004.  The increasein net sales resulted from increased Co-manufacturing sales of approximately$6.2 million ($5.0 million on new business initiatives in fiscal year 2005 andincreased sales to Gerber and Kraft $1.2 million) and higher sales to the DoD$467,000 (Increased sales of UGR-A, Tray Pack and Other Military sales ofapproximately $2.9 million offset by lower sales of MRE’s of approximately $2.4million) and further offset by lower sales of our specialty and other productsof approximately $1.0 million.

 

Gross Profit.  Our gross profit for the thirteen weeks endedOctober 1, 2005 was $13.0 million, representing an increase ofapproximately $5.4 million, or 70.2%, compared to gross profit of $7.7 millionfor the thirteen weeks ended October 2, 2004.  As a percentage of net sales, our grossprofit was 23.0% and 15.0%, respectively for the thirteen week periods ended October 1,2005 and October 2, 2004.  Grossprofit on sales to the DoD increased approximately $4.4 million or 64.5%(approximately $11.1 million and $6.8 million, for the thirteen week periodsended October 1, 2005 and October 2, 2004, respectively) due tohigher prices on the current MRE-25 base contract, which began during thesecond quarter 2005 as compared to add-on pricing under the MRE-24 contract forthe thirteen week period ended October 2, 2004.  Contributing to the increase in DoD grossprofit was additional gross profit earned on UGR-A, Tray Pack and Other Militarysales of approximately $694,000 due primarily to higher prices.  Gross profit on Co-manufacturing sales was16.6% versus 14.3% for the thirteen weeks ended October 1, 2005 and October 2,2004, respectively.  This represents andincrease of approximately $1.2 million largely attributable to new start upinitiatives with Quaker and Delmonte. Gross profit on Specialty and Other products decreased approximately$138,000 due to start up efficiencies of new products and lower sales volumesto the Canadian Department of Defense.

 

20

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Selling, General andAdministrative Expenses.  Our selling,general and administrative expenses for the thirteen weeks ended October 1,2005 were $5.8 million, representing an increase of approximately $1.6 million,or 37.9%, compared to selling, general and administrative expenses of $4.2million for the thirteen weeks ended October 2, 2004.  Selling, general and administrative expenseswere 10.3% of net sales for the thirteen week period ended October 1, 2005as compared to 8.3% of net sales for the thirteen week period ended October 2,2004.  The increase in selling, generaland administrative expenses was largely due to increased employee related costassociated with hiring, consultant and professional fees paid to support newproject initiatives and other expenses associated with the new corporatefacility.

 

Operating Profit.  Our profit from operations was approximately$7.2 million for the thirteen weeks ended October 1, 2005, representing anincrease of approximately $3.7 million, compared to an operating profit ofapproximately $3.4 million for the thirteen weeks ended October 2,2004.  This increase in profit fromoperations resulted from increased gross profit and offset by higher spendingon selling, general and administrative expenses which were described above.

 

Interest Expense.  Our interest expense for the thirteen weeksended October 1, 2005 was approximately $4,684,000, representing anapproximate increase of $1,087,000 compared to interest expense ofapproximately $3,597,000 for the thirteen weeks ended October 2,2004.  The increase in interest expenserelate to the issuance our Senior PIK Note which incurred interest expense ofapproximately $1,046,000 and includes approximately $100,000 for bondamortization cost.  The remaining changeis related to borrowings on the working line of capital and was a function oflonger payback periods and higher interest rates during the thirteen weeksended October 1, 2005 as compared to October 2, 2004.

 

Interest Income.  Our interest income for the thirteen weeksended October 1, 2005 was approximately $27,000, representing a decreaseof approximately $6,000 compared to interest income of approximately $32,000for the thirteen weeks ended October 2, 2004.  The decrease in interest income resulted fromgenerally lower daily cash balances invested at overnight funds rates.

 

Other Income (Expense),Net.  Our other income (expense), net forthe thirteen weeks ended October 1, 2005 was approximately ($97,000),representing an increase of approximately $84,000, compared to other income(expense), net of approximately ($13,000) for the thirteen weeks ended October 2,2004.  The decrease in other income(expense), net was partially the result of the reductions of approximately$66,000 of U.S. government payments from the Value Engineering Change program(the “VE program”).  The VE program provides incentives for U.S.Government contractors to make cost savings proposals to the Defense Supply CenterPhiladelphia (“DSCP”). Once the DSCP accepts a contractor’s VE proposal, thecontractor is awarded 50% of the resulting industry-wide savings for a periodof three years following the issuance by the DSCP, which is responsible for theprocurement of military field rations for the DoD, of a contract modificationrequiring implementation of the proposed change as outlined in the accepted VEproposal.  Other expense was also increased as a result of $22,000 propertyand equipment disposals in the current period and offset by other income ofapproximately $3,000.

 

Income TaxExpense.  Expenses related to federal,state and local taxes for the thirteen weeks ended October 1, 2005 wasapproximately $361,000, compared to approximately $22,000 for the thirteen weeksended October 2, 2004.  As describedfurther in note 7 to our financial statements, the Predecessor Company wasqualified under Subchapter-S of the Internal Revenue Code, and therefore notsubject to Federal Tax whereas the Successor Company is taxed as aC-Corporation.  During the thirteen weeksended October 1, 2005, we recorded approximately $456,000 of deferred taxliabilities associated with the indefinite reversal period related to Goodwilland approximately $95,000 of tax benefits related to reversals of state, localand city taxes at our Prepared Foods Division ($84,000 State Franchise Tax,$11,000 State Property Tax).

 

Net Income (loss).  As a result of the foregoing, we had netincome of approximately $2.1 million for the thirteen weeks ended October 1,2005, representing an increase in net income of approximately $2.3 millioncompared to the net loss of approximately ($183,000) for the thirteen weeksended October 2, 2004.

 

21

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**Comparison of the thirty-nine weeks ended October 1, 2005 to the thirty-nineweeks ended October 2, 2005**

 

As described in theintroduction to this section, we do not have financial information for theSuccessor for the thirty-nine week period ended October 2, 2004.  In order to present Management’s Discussionand Analysis in a way that offers investors a meaningful period-to-periodcomparison, we have combined the prior year Predecessor information for thetwenty-six week period ended June 30, 2004 with the Successor pior yearinformation for the thirteen weeks ended October 2, 2004, as each wereoriginally presented, on an unaudited pro forma combined basis.  The unaudited pro forma combined data andsegment information for the thirty-nine week period ended October 2, 2004do not purport to represent what our consolidated results would have been ifthe Successor Company had actually been formed on January 1, 2004, norhave we made any attempt to either include or exclude expenses or income thatwould have resulted had the acquisition transaction actually occurred on January 1,2004.  The pro forma information wascompiled as follows:

 
| ** **                                    | ** ** | **Unaudited**                                    | ** ** |
|-----------------------------------------------|------------|--------------------------------------------------|------------|
| **(in thousands, 000’s)**                | ** ** | **Twenty Six Week  Period Ended June  30, 2004** | ** ** | **Thirteen Week  Period Ended  October 2, 2004** | ** ** | **Pro Forma Thirty  Nine Week Period  Ended October 2,  2004** | ** ** | **Thirty Nine Week  Period Ended  October 1, 2005** | ** ** |
| ** **                                    | ** ** | **(Predecessor)**                                | ** ** | **(Successor)** | ** ** | **(Successor)** | ** ** | **(Successor)** | ** ** |
| Net sales                                     |       | 80,924                                           |       | 51,077 |   | 132,001 |   | 159,956 |   |
| Gross Profit                                  |       | 13,255                                           |       | 7,655 |   | 20,910 |   | 27,455 |   |
| Selling,  general and administrative expenses |       | (12,459                                          | )          | (4,238 | ) | (16,697 | ) | (15,398 | ) |
| Operating  profit                             |       | 797                                              |       | 3,417 |   | 4,214 |   | 12,057 |   |
| Interest  expense                             |       | (100                                             | )          | (3,597 | ) | (3,697 | ) | (13,388 | ) |
| Interest  income                              |       | 507                                              |       | 32 |   | 539 |   | 125 |   |
| Other income  (expense), net                  |       | 285                                              |       | (13 | ) | 272 |   | (125 | ) |
| Income tax  expense                           |       | (41                                              | )          | (22 | ) | (63 | ) | (1,321 | ) |
| Net income  (loss)                            |       | 1,447                                            |       | (183 | ) | 1,264 |   | (2,651 | ) |

 

Net Sales.  Our net sales for the thirty-nine weeks endedOctober 1, 2005 were $160.0 million, representing an increase ofapproximately $28.0 million, or 21.2%, compared to pro forma net sales ofapproximately $132.0 million for the thirty-nine week period ended October 2,2004. The increase in net sales resulted primarily from increased sales to theDoD of approximately $18.3 million (increased net sales of MRE $17.3 million,increased Military Other sales of approximately $1.0 million).  Co-manufacturing net sales increasedapproximately $12.7 million due primarily to new Co-manufacturing projects ofapproximately $9.2 million (Quaker $3.5 million, Keefe $2.9 million andDelmonte $2.9 million) and increased sales of Co-manufacturing products toexisting customers of approximately $3.4 million (Gerber $2.2 million and Kraft$1.2 million) which were offset by decreased specialty and other sales ofapproximately $3.0.  (decreased net salesof Specialty products approximately $809,000, decreased net sales to theCanadian Department of Defense approximately $945,000 and decreased net salesof Scrap and other miscellaneous sales of approximately $1.2 million).

 

Gross Profit.  Our gross profit for the thirty-nine weeksended October 1, 2005 was $27.5 million, representing an increase ofapproximately $6.6 million, or 31.3%, compared to pro forma gross profit of$20.9 million for the thirty-nine week period ended October 2, 2004.  As a percentage of net sales, our grossprofit was 17.2% and 15.8% for the thirty-nine week period ended October 1,2005 and October 2, 2004, respectively. Gross profit on sales to the DoD increased by approximately $6.7 million,or 36.8% (approximately $24.9 million and $18.2 million, for the thirty-nineweek periods ending October 1, 2005 and October 2, 2004,respectively) due to higher volumes and higher base prices on MRE 25 contractsales

 

22

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as compared to pricing onadd-on and surge pricing under the MRE 24 contract.  Additionally, higher prices on UGR-A salesand higher volume for our Other Military products contributed an additional$1.0 million to our gross profit for the thirty-nine week period ended October 1,2005.  Co-manufacturing gross profitincreased approximately $1.4 million, or 62.6% (approximately $3.6 million and$2.2 million, for the thirty-nine week period ended October 2, 2005 ascompared to the pro forma thirty-nine week period October 2, 2004,respectively) but was offset by decreases in Specialty and Other Products grossprofit of approximately $1.5 million for the thirty-nine week period ended October 1,2005 which was attributable to lower sales.

 

Selling, General andAdministrative Expenses.  Our selling,general and administrative expenses for the thirty-nine week period ending October 1,2005 were $15.4 million representing a decrease of approximately $1.3 million,or 7.6% as compared to $16.7 million for the pro forma thirty-nine week periodended October 2, 2004.  Selling,general and administrative expenses were approximately 9.6% of net sales forthe thirty-nine week period ended October 1, 2005 as compared to 12.7% forthe pro forma thirty-nine week period ended October 2, 2004.  The decrease in selling, general andadministrative expense was largely attributable to equity based compensationcharges recorded by the Predecessor relating to the value of shares committedto be released to the ESOT and other compensatory stock plans maintained by thePredecessor, which did not recur in 2005 and which were partially offset by increaseddepreciation and amortization related to the acquisition, increased employeerelated cost associated with hiring and consultant and professional fees paidto support new project initiatives and other expenses associated with the newcorporate facility for the third quarter 2005.

 

Operating Profit.  Our profit from operations was $12.1 millionfor the thirty-nine week period ended October 1, 2005, representing anincrease of approximately $7.8 million compared to pro forma operating profitof $4.2 million for the thirty-nine weeks ended October 2, 2004.  This increase in operating profit primarilyresulted from higher sales volumes and prices on sales of MRE’s, UGR-A’s andOther Military products to the DoD as noted above and which were offset byincreased cost in depreciation and amortization of intangibles associated withthe acquisition.  Acquisition relatedcost were partially offset by decreases in selling, general and administrativeexpenses associated with the Predecessor relating to the value of sharescommitted to be released to the ESOT and other compensatory stock plans thatdid not recur in 2005.

 

Interest Expense.  Our interest expense for the thirty-nineweeks ended October 1, 2005 was approximately $13.4 million, representingan increase of approximately $9.7 million, compared to pro forma interestexpense of $3.7 million for the thirty-nine weeks ended October 2,2004.  The increase in interest expensewas due to approximately $6.8 million in interest expense resulting for theissuance of the $125 million 10 7/8 Senior Secured Notes, approximately$362,000 in related bond cost amortization. The remaining increase is related to the issuance of the our Senior PIKNote in which we incurred additional interest expense of approximately $2.6million, including charges for bond amortization of approximately$247,000.  The increase in interestexpense was offset by decreased interest expense on other secured borrowing ofthe Predecessor and working line of capital of the Successor of approximately$74,000.

 

Interest Income.  Our interest income for the thirty-nine weekperiod ended October 1, 2005 was approximately $125,000, representing adecrease of approximately $414,000 as compared to pro forma interest income ofapproximately $539,000 for the thirty-nine weeks ended October 2,2004.  The decrease in interest incomeresulted primarily from short-term investments held by the Predecessor thatwere not acquired in the acquisition on June 30, 2004.

 

Other Income(Expense), Net.  Our other income(expense), net for the thirty-nine weeks ended October 1, 2005 wasapproximately ($125,000), representing a decrease of approximately $397,000 ascompared to pro forma other income (expense), net of $272,000 for thethirty-nine week period ended October 2, 2004. This decrease in other income (expense) was the result of finalsettlement on prior period U.S. Government contracts by the Predecessor whichresulted in approximately $176,000 of other income.  Other income (expense) was also adverselyaffected by approximately $150,000 of additional management fees paid toVeritas in 2005 as compared to 2004, approximately $27,000 in loss vs gain ondisposal of property and equipment in 2005 as compared to 2004, decreased V.E.income of approximately $27,000 and other miscellaneous expense items includingapproximately $10,000 in bank fees trustee fees.

 

23

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Income TaxExpense.  Expenses related to federal,state and local taxes for the thirty-nine weeks ended October 1, 2005 wasapproximately $1.3 million compared to pro forma income tax expense ofapproximately $63,000 for the thirty-nine week period ended October 2,2004.  As described further in Note 7 toour financial statements, the Predecessor Company was qualified underSubchapter-S of the Internal Revenue Code, and therefore was not subject to FederalTax whereas the Successor Company is taxed as a C-Corporation.  During the thirty-nine weeks ended October 1,2005, we recorded approximately $1.4 million of additional deferred taxliabilities associated with the indefinite reversal period related to Goodwilland offset by tax benefits during the current year of approximately ofapproximately $95,000 due to state, local and city taxes as described in ourdiscussion related to income tax expense for the thirteen week period endedOctober 1, 2005 above.

 

Net Income.  As a result of the foregoing, we incurred a netloss of approximately $2.7 million for the thirty-nine week period ended October 1,2005, representing an increase of approximately $4.0 million as compared to proforma net income of approximately $1.3 million for the thirty-nine week periodended October 2, 2004.

 

**Operating Segment Results**

 

**Comparison of the thirteen weeks ended October 1, 2005 to thethirteen weeks ended October 2, 2004**

 

NetSales.  Net sales for our Right AwayDivision (“RAD”) segment decreased by approximately $867,000 for the thirteenweeks ended October 1, 2005, primarily due to a decrease in sales to the DoD(decreased MRE sales $2.4 million, increased UGR-A sales $1.8 million,increased Other military sales of approximately $466,000) and further offset byother miscellaneous commercial sales and scrap. Net sales for our Prepared Foods Division (“PFD”) increasedapproximately $6.5 million (excluding inter-segment sales of approximately $8.0million for the thirteen week period ended October 1, 2005 and $13.5 millionfor the thirteen week period ended October 2, 2004).  The increase in PFD sales is attributable toincrease sales to Co-Manufacturing customer of approximately $6.2 million andincreased sales of Specialty and Other products of approximately $161,000.

 

OperatingProfit.  Profit from Operations for ourRAD segment increased $5.6 million of the thirteen week period ended October 1,2005.  Increased operating profit for theRAD segment is due to higher pricing on MRE, UGR-A and other military products forthe thirteen week period ended October 1, 2005. Also included in the operating profit for our RAD segment isapproximately $2.0 million in gross profit that would have been previouslyrecognized by our PFD segment on MRE shipments to the RAD segment (intersegmentsales are now recorded at cost).  Theremaining increase in RAD operating profit is attributable to slightly lowerselling, general and administrative costs incurred by the segment as a resultof transferring personnel to the Corporate headquarters during theconsolidation of shared services which took place during the thirteen weeksended October 1, 2005.  Profit fromoperations for the PFD segment increased approximately $1.4 million for thethirteen week period ended October 1, 2005 and is primarily attributable to$1.2 million in increased gross profit on Co-manufacturing contracts, inventorystep-up amortization cost of approximately $1.3 million in the prior year whichdid not recur in 2005 and approximately $1.2 million in selling, general andadministrative expenses transferred to our corporate office which were offsetby approximately $2.0 million in gross profit on MRE shipments to our RADsegment now included at RAD as discussed above.

 

24

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**Comparison of the thirty-nine weeks ended October 1, 2005 to the thirty-nineweeks ended October 2, 2004**

 
| **(in thousands, 000’s)** | ** ** | **Twenty Six Week  Period Ended  June 30, 2004** | ** ** | **Thirteen Week  Period Ended  October 2, 2004** | ** ** | **Pro Forma Thirty  Nine Week Period  Ended October 2,  2004** | ** ** | **Thirty Nine Week  Period Ended  October 1, 2005** | ** ** |
|--------------------------------|------------|-------------------------------------------------------|------------|-------------------------------------------------------|------------|---------------------------------------------------------------------|------------|----------------------------------------------------------|------------|
| ** **                     | ** ** | **(Predecessor)**                                     | ** ** | **(Successor)**                                       | ** ** | **(Successor)**                                                     | ** ** | **(Successor)**                                          | ** ** |
| Net sales                      |       |                                                  |       |                                                  |       |                                                                |       |                                                     |       |
| Right Away Division            |       | 65,267                                                |       | 40,886                                                |       | 106,153                                                             |       | 122,615                                                  |       |
| Prepared Foods Division        |       | 35,473                                                |       | 23,696                                                |       | 59,169                                                              |       | 65,447                                                   |       |
| Corporate                      |       | —                                                |       | —                                                |       | —                                                              |       |                                                     |       |
| TWC Holding LLC                |       | —                                                |       | —                                                |       | —                                                              |       | 0                                                        |       |
| Eliminations                   |       | (19,816                                               | )          | (13,505                                               | )          | (33,321                                                             | )          | (28,106                                                  | )          |
| Total Company                  |       | 80,924                                                |       | 51,077                                                |       | 132,001                                                             |       | 159,956                                                  |       |
|                           |       |                                                  |       |                                                  |       |                                                                |       |                                                     |       |
| Operating  profit              |       |                                                  |       |                                                  |       |                                                                |       |                                                     |       |
| Right Away Division            |       | 4,359                                                 |       | 2,985                                                 |       | 7,344                                                               |       | 20,666                                                   |       |
| Prepared Foods Division        |       | 4,413                                                 |       | 1,646                                                 |       | 6,059                                                               |       | (2,019                                                   | )          |
| Corporate                      |       | (7,975                                                | )          | (173                                                  | )          | (8,148                                                              | )          | (6,481                                                   | )          |
| TWC Holding LLC                |       | —                                                |       | —                                                |       | —                                                              |       | (109                                                     | )          |
| Eliminations                   |       | —                                                |       | (1,041                                                | )          | (1,041                                                              | )          | —                                                   |       |
| Total Company                  |       | 797                                                   |       | 3,417                                                 |       | 4,214                                                               |       | 12,057                                                   |       |

 

NetSales.  Net sales for the RAD segmentincreased for the thirty-nine week period ended October 1, 2005 byapproximately $16.5 million primarily due to increased sales to the DoD ofapproximately $17.9 million (increased MRE sales $17.3 million, increased othermilitary sales $989,000 offset by decreased URG-A sales of $425,000).  The remaining decrease in net sales for ourRAD segment is due to lower commercial sales and miscellaneous sales of scrapof approximately $1.4 million.  Net salesfor our PFD segment increased approximately $11.5 million (includinginter-segments sales) for the thirty-nine week period ended October 1,2005.  The Increase in PFD segment saleswas largely attributed to $12.7 million in Co-manufacturing (increases due tonew Co-manufacturing contracts;  Quaker$3.5 million, Keefe $2.9 million, DelMonte $2.9, increases in existing baseCo-manufacturing contracts $2.2 million and Kraft $1.2 million) offset bydecreased sales in our Specialty and other products.

 

OperatingProfit.  Profit from operations for ourFAD segment increased by approximately $13.3 million for the thirty-nine weekperiod ended October 1, 2005.  Includedin the operating profit for the RAD segment is an estimated $7.0 million thatwould have been previously recognized by our PFD segment on MRE shipments tothe RED segment (intersegment sales are now recorded at cost).  The remaining increase in operating profitfor our RAD segment is related to volume and pricing on sales to the DoD.(gross profit exclusive of the PFD segment includes increases in MRE ofapproximately $5.7 million, UGR-A $568,000 and other military gross profit of$406,000).  The remaining differences areoffset by modest increases in selling, general and administrative expenses forthe pro forma thirty-nine week period ending October 2, 2004 of approximately$376,000.  Profit from operations for ourPFD segment decreased approximately $8.1 million.  As discussed above, approximately $7.0million in gross profit that would have been previously recognized by our PFDsegment is now included in our operating profit at RAD.  The remaining decrease in operating profit isrelated to cost associated with our exit from the grocery isles of certainspecialty related products which resulted in decreased with our exit from thegrocery isles of certain specialty related products which resulted in decreasedgross profit of approximately $1.5 million offset by lower selling, general andadministrative cost associated with the transferred to our corporate division.

 

**Liquidity and Capital Resources**

 

The following tablesummarizes our net cash provided by or (used in) our operating activities,investing activities and financing activities and our capital expenditures forthe Predecessor twenty-six weeks ended June 30, 2004 and Successor netcash provided by or (used in) our operating activities, investing activitiesand financing activities and our capital expenditures for the thirteen weekperiod ended October 2, 2004 and thirty-nine week period ended October 1,2005:

 

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| ** **                       | ** ** | **Twenty Six Week  Period Ended June  30, 2004** | ** ** | **Thirteen Week  Period Ended  October 2, 2004** | ** ** | **Thirty Nine Week  Period Ended  October 1, 2005** | ** ** |
|----------------------------------|------------|--------------------------------------------------|------------|-------------------------------------------------------|------------|----------------------------------------------------------|------------|
| ** **                       | ** ** | **(Predecessor)**                                | ** ** | **(Successor)**                                       | ** ** | **(Successor)**                                          | ** ** |
| Net cash  provided by (used-in): |       |                                             |       |                                                  |       |                                                     |       |
| Operating activities             |       | (471,783                                         | )          | 3,398,847                                             |       | 6,575,132                                                |       |
| Investing activities             |       | (11,791,620                                      | )          | (165,720,204                                          | )          | (11,024,135                                              | )          |
| Financing activities             |       | 8,313,722                                        |       | 162,706,475                                           |       | 1,665,912                                                |       |
| Capital  expenditures            |       | (2,382,720                                       | )          | (659,952                                              | )          | (11,024,135                                              | )          |

 

OperatingActivities. Net cashprovided by (used in) operating activities was approximately $6.6 million, $3.4million and $(0.5) million for the Successor thirty-nine week period ended October 1,2005, the Successor thirteen week period ended October 2, 2004 and the Predecessorperiod from January 1, 2004 to June 30, 2004, respectively.  Cashgenerated from operations increased during the first thirty-nine weeks offiscal year 2005 due mostly to higher sales volume and pricing on DoD salesassociated with the surge production in the first quarter of 2005 and thestart-up of the MRE 25 base contact which began in the second quarter of 2005.In addition, for the Predecessor six-month period ended June 30, 2004, thePredecessor used additional cash to make payments relating to settlement ofcertain stock options and stock-based compensation plans and to buildinventories as required to meet military contract commitments, which weresubsequently recognized by the Successor in the thirteen week period ended October 2,2004.

 

InvestingActivities.**Net cash (used in) investing activities was$(11.0) million, $(165.7) million and $(11.8) million for the Successor thirty-nineweek period ended October 1, 2005, the Successor thirteen week period endedOctober 2, 2004 and the Predecessor twenty six week period ended June 30,2004, respectively. The decrease in investing activity for the thirty-nine weekperiod ended October 1, 2005 was largely related to the acquisition, whichaccounts for approximately $165.5 million, whereas spending for the thirty-nineweek period ended October 1, 2005 was primarily related to the addition ofproduction capacity and line improvements, the build out of a new consolidatedcorporate headquarters in Cincinnati. Significant investment activity for the Predecessor twenty-six weekperiod ended June 30, 2004 was largely due to increased investments duringthe first and second quarters of 2004 in short-term investments which were notacquired in the acquisition transaction on July 1, 2004.

 

FinancingActivities. Net cashprovided by financing activities was $1.7 million, $162.7 million and $8.3million for the Successor thirty-nine week period ended October 1, 2005,the Successor thirteen week period ended October 2, 2004 and the Predecessorsix months ended June 30, 2004, respectively.  For the thirty-nine week period ended October 1,2005, cash provided by financing activities is attributable to book overdraftsand financing activity associated with the issuance of the Senior PIK Note andsubsequent return of capital dividend payment, whereas the Successor thirteenweek period ended October 2, 2004 was largely related to funding of theacquisition with issuance of the $125.0 million Senior Secured 10 7/8 % Notesand capital contributions of approximately $37.5 million.  The remaining change for the thirteen weekperiod ended October 2, 2004 is attributable to bank overdrafts.  Financing activities related to thePredecessor twenty six week period ended June 30, 2004, related toborrowings against its credit facility of approximately $8.7 million offset byprincipal payments on its long-term debt arrangement of approximately($629,000).  The remaining differencerelates to book overdrafts of approximately $243,000.

 

**Long-Term Debt Expenditures**

 

In connection with theclosing of the acquisition transactions on June 30, 2004, the Predecessor’slong-term debt was repaid, and we issued $125 million in Senior Secured Notesand entered into our new working capital facility. As a result, we willcontinue to incur significant debt service payments including interest infuture years. Total cash interest payments related to the Senior Secured Noteswill be approximately $13.6 million on an annual basis.  We incurredapproximately $10.2 million of interest

 

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expense (includingapproximately $512,000 of bond amortization cost) relating to the SeniorSecured Notes and our working capital facilities in the thirty-nine week periodended October 1, 2005. To the extent we have borrowings outstanding underour working capital facility, we will have additional cash interest payments.Our borrowings against our working capital facility was $0 at October 1,2005.

 

The indenture governing the SeniorSecured Notes, and our new working capital facility, impose significantoperating and financial restrictions on us. These restrictions limit orprohibit, among other things, our ability to incur additional indebtedness,repay indebtedness prior to stated maturities, pay dividends on or redeem orrepurchase our stock, issue capital stock, make investments, create liens, sellcertain assets or merge with or into other companies, enter into certaintransactions with stockholders and affiliates, make capital expenditures, sellstock in our subsidiaries and restrict dividends, distributions or otherpayments from our subsidiaries. In addition, our new working capital facilityrequires us to meet certain financial ratios and financial condition tests.

 

On February 11, 2005,the Company and its wholly-owned finance subsidiary, TWC Holding Corp.,co-issued their 13.875% Senior PIK Notes due 2011, or the “Senior PIK Notes,”in the approximate aggregate principal amount of $62,259,000 net of a discountof approximately $36,259,000.  The Senior PIK Notes earn interest at therate of 13.875% per annum, mature on August 15, 2011 and are unsecuredobligations of TWC Holding LLC and TWC Holding Corp.  Neither the Companynor any of its subsidiaries guaranteed the Senior PIK notes.  The noteslimit the Company’s ability to incur additional indebtedness and pay dividendsor make other distributions as well as to make certain investments and sellcertain assets or merge with or into other companies.  Because theCompany is a holding company with no operations and has only itsinvestment in the Operating Company and because TWC Holding Corp. has noindependent operations or assets, future cash flows or assets of the OperatingCompany through 2011 may be required to service the $62.3 million Senior PIKnotes, upon their maturity. For the thirty-nine week period ended October 1,2005, we incurred approximately $2.6 million in interest expense (includingapproximately $247,000 of bond amortization cost) related to the Senior PIKNotes.

 

We expect our remainingcapital expenditures in 2005 to be approximately $1.5 million, primarilyrelated to scope changes on the Gerber project and to support plant renewal,efficiency improvements and expansion of our co-manufacturing business.

 

Our principal sources ofliquidity are cash flow generated from operations and borrowings under our newworking capital facility.  As of October 1, 2005, we had noborrowings under the working capital facility.  We have incurredapproximately $75,000 in interest expense on the working capital facility sinceDecember 31, 2004.  In addition to fluctuations in business volume,cash flows from operations are affected by contract terms for billing andcollection. Our liquidity will also continue to be dependent on a number ofother factors, including the timing of collection on our contract receivables,processing of weekly and bi-weekly payroll and associated taxes and payment toour suppliers. Our principal uses of cash will be utilized to meet debt servicerequirements, finance our capital expenditures and provide working capital.Based on our current level of operations, our revolving line of credit facilityand our anticipated growth, we believe that the cash flows generated byoperations and our revolving line of credit will be sufficient to fund ouroperations for the next 12 months and for our currently anticipated needsbeyond that period. Our future operating performance and ability to extend orrefinance our indebtedness will be dependent on future economic conditions andfinancial, business and other factors that are beyond our control.

 

**Item 3.  Quantitative and QualitativeDisclosures about Market Risk**

 

We are exposed to marketrisk, primarily from the impact of interest rate changes on our use of variablerate debt. Our exposure to market risks from foreign currency and commodityprice fluctuations is limited since all of our fiscal year 2005 purchases andsales are denominated in U.S. dollars and raw commodities do not comprise asignificant percentage of our costs. Our 2004 sales to the Canadian militarycomprised approximately 1% of our total sales in 2004, on a pro forma basis andwe believe any future risk related to fluctuations in foreign currency exchangerates for the Canadian dollar to not be significant.  Other than withrespect to our sales to the Canadian military, we generally do not haveexposure to foreign

 

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currency risk.  Inaddition, because our customary contract terms pass through increase in cost ofcommodities underlying our products to our customers, we generally do not haveexposure to commodity price risk.  Other than with respect to our sales tothe Canadian military, we do not hedge our exposure to foreign currency orcommodity price risk.  We do not hold any derivatives for trading orspeculative purposes. Changes in the fair value of derivatives are recorded incurrent earnings along with the change in the fair value of the underlyinghedged item.

 

All of our outstanding bankdebt bears interest at variable interest rates tied to the prime interest rate.The use of variable rate debt to finance our operations and capitalimprovements exposes us to variability in interest payments due to changes ininterest rates.  We had no exposure to variablerates at October 1, 2005.  We believe that a hypothetical 1% increasein interest rates on our variable rate debt for a one-year period would havehad no significant impact on our net income.

 

**Item 4.****   ****Controls and Procedures**

 

Based on a recent evaluation,as of the end of the period covered by the Quarterly Report on Form 10-Q,the Company’s Chief Executive Officer and Chief Financial Officer haveconcluded that the Company’s disclosure controls and procedures as defined inthe Exchange Act Rules 13a-15(e) and 15d-15(e) are effective intimely alerting them to material information relating to the Company requiredto be included in periodic reports filed or submitted under the Securities andExchange Act of 1934, as amended.

 

There were no changes in theCompany’s internal control over financial reporting that occurred during thethirteen week period ended October 1, 2005, constituting the Company’slatest fiscal quarter, that have materially affected, or are reasonably likelyto materially affect, the Company’s internal control over financial reporting.

 

**FORWARD-LOOKING STATEMENTS**

 

This report includes “forward-lookingstatements” within the meaning of the Private Securities Litigation Reform Actof 1995. Forward-looking statements are those that do not relate solely tohistorical fact. They include, but are not limited to, any statement that maypredict, forecast, indicate or imply future results, performance, achievementsor events. They may contain words such as “believe,” “anticipate,” “expect,” “estimate,”“intend,” “project,” “plan,” “will,” or words or phrases of similar meaning.They may relate to, among other things:

 

•          our liquidity and capital resources;

 

•          our contracts with the U.S. Government;

 

•          the U.S. Department of Defense budget in generaland U.S. military activity in particular;

 

•          our co-manufacturing plans;

 

•          competitive pressures and trends in ourindustry;

 

•          prevailing interest rates;

 

•          legal proceedings and regulatory matters;

 

•          other risks related to our Senior SecuredNotes (including the value of the collateral);

 

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•          statements with respect to the Transactions(as defined herein);

 

•          general economic conditions; and

 

•          our development and expansion plans andexpectations for the future.

 

These forward-lookingstatements reflect our current views with respect to future events and arebased on assumptions and subject to risks and uncertainties, including, but notlimited to, economic, competitive and governmental factors outside of ourcontrol, that may cause actual results to differ materially from trends, plansor expectations set forth in the forward-looking statements and may adverselyaffect us. It is not possible for us to predict all of these risks, nor can weassess the extent to which any factor, or combination of factors, may causeactual results to differ from those contained in forward-looking statements.  The foregoing list of important factors andother risk detailed from time to time in the Company’s reports filed with theSecurities and Exchange Commission are not exhaustive.

 

**PART II – OTHER INFORMATION**

 

**Item 1.****   ****Legal Proceedings.**

 

We are a defendant invarious legal actions arising in the normal course of business, the outcomes ofwhich, in the opinion of management, neither individually nor in the aggregateare likely to result in a material adverse effect on our business, results ofoperations, financial position or cash flows.

 

**Item 2.****   ****Unregistered Sales of EquitySecurities and Use of Proceeds.**

 

None.

 

**Item 3.****   ****Defaults Upon Senior Notes.**

 

None.

 

**Item 4.****   ****Submission of Matters to aVote of Securities Holders.**

 

None.

 

**Item 5.****   ****Other Information.**

 

On November 11, 2005, the operating agreementgoverning TWC Holding LLC, was amended to reflect the award of 1.0% and 0.25%Class B membership interests to Brian Lutes and Ted Samotis, respectively, andtheir admission as newly admitted members of TWC Holding LLC, the amendmentalso amended the schedules to TWC Holding LLC operating agreement to reflectthe voluntary relinquishment of Humberto Cavazos and Lealan Westfield of theirrespective entire Class B membership interests.

 

**Item 6.****   ****Exhibits.**

 

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| **No.** | ** ** | **Description**                                                                                                                                                            |
|---------|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 3.1     |       | Amendment No. 3 to the Limited Liability Company Operating Agreement  of TWC Holding LLC                                                                                   |
|    |       |                                                                                                                                                                       |
| 31.1    |       | Certification pursuant to Section 302 of the Sarbanes Oxley Act  of 2002 (President and Chief Executive Officer)                                                      |
|    |       |                                                                                                                                                                       |
| 31.2    |       | Certification pursuant to Section 302 of the Sarbanes Oxley Act  of 2002 (Chief Financial Officer)                                                                    |
|    |       |                                                                                                                                                                       |
| 32.1    |       | Certification pursuant to 18 U.S.C. Section 1350, as adopted  pursuant to Section 906 of the Sarbanes Oxley Act of 2002 (President and  Chief Executive Officer) |
|    |       |                                                                                                                                                                       |
| 32.2    |       | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant  to Section 906 of the Sarbanes Oxley Act of 2002 (Chief Financial  Officer)               |

 

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**Signatures**

 

Pursuant to the requirements ofthe Securities and Exchange Act of 1934, the Registrant has duly caused this reportto be signed on its behalf by the undersigned thereunto duly authorized.

 

 
|                     | TWC Holding  LLC |
|--------------------------|------------------|
|                     | (Registrant)     |
|                     |             |   |
| Date:  November 15, 2005 | By:              | /s/ MICHAEL  M. THOMPSON |   |
|                     |             | Michael M.  Thompson |
|                     |             | President  and Chief Executive Officer |
|                     |             | (Principal  Executive Officer) |
|                     |             |   |
|                     |             |   |
| Date:  November 15, 2005 | By:              | /s/ Brian A.  Lutes |   |
|                     |             | Brian A.  Lutes |
|                     |             | Chief  Financial Officer and Treasurer |
|                     |             | (Principal  Financial Officer and  Principal Accounting Officer) |

 

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