** **

**UNITED STATES****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 April 2, 2005**                                  |
|                                                                                    |
| **or**                                                                                  |
|                                                                                    |
| **o****TRANSITION REPORT PURSUANT TO SECTION 13 OR  15(d) OF THE SECURITIES** |
| **EXCHANGE ACT OF 1934**                                                                |

 

**For thetransition period from  January 1, 2005 to April 2, 2005**

 

**CommissionFile Number: 333-119336**

 

**The Wornick Company**

(Exact name of registrant asspecified in its charter)

 
| **Delaware**                                                    | ** ** | **30-0225741**                        |
|-----------------------------------------------------------------|------------|---------------------------------------|
| (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 telephonenumber, including area code)

 

**N/A**

(Former name, former addressand former fiscal year, if changed since last report)

 

Indicate by check mark whether the registrant (1) hasfiled all reports required to be filed by Section 13 or 15(d) of theSecurities Exchange Act of 1934 during the preceding 12 months (or for suchshorter period that the registrant was required to file such reports), and (2) hasbeen subject to such filing requirements for the past 90 days.  o  Yes    ý  No

 

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

 

On May 11, 2005, one share of Registrant’scommon stock was outstanding.

 

 

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**The Wornick Company**

 

**Table of Contents**

 
| **PART I -  FINANCIAL INFORMATION**                                                            | ** **                                                                                                                        |
|-----------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                |                                                                                                                              |   |
| Item 1. Financial Statements (unaudited)                                                            |                                                                                                                              |
|                                                                                                | Unaudited Condensed  Consolidated Balance Sheet at December 31, 2004 and April 2, 2005                                  | 1 |
|                                                                                                |                                                                                                                              |   |
|                                                                                                | Unaudited  Condensed Consolidated Statement of Income for the thirteen weeks Ended  April 3, 2004 and April 2, 2005     | 2 |
|                                                                                                |                                                                                                                              |   |
|                                                                                                | Unaudited  Condensed Consolidated Statement of Cash Flows for the thirteen weeks Ended  April 3, 2004 and April 2, 2005 | 3 |
|                                                                                                |                                                                                                                              |   |
|                                                                                                | Notes  to Unaudited Condensed Consolidated Financial Statements                                                                   | 4-15 |
|                                                                                                |                                                                                                                              |   |
| Item 2. Management’s  Discussion and Analysis of Financial Condition and Results of Operations | 16-21                                                                                                                             |
|                                                                                                |                                                                                                                              |   |
| Item  3. Quantitative and Qualitative Disclousres About Market Risk                                 | 22                                                                                                                                |
|                                                                                                |                                                                                                                              |   |
| Item 4.  Controls and Procedures                                                                    | 22                                                                                                                                |
|                                                                                                |                                                                                                                              |   |
| Forward-Looking Statements                                                                          | 23                                                                                                                                |
|                                                                                                |                                                                                                                              |   |
| **PART II - OTHER  INFORMATION**                                                               | ** **                                                                                                                        |
|                                                                                                |                                                                                                                              |   |
| Item 1. Legal Proceedings                                                                           | 24                                                                                                                                |
|                                                                                                |                                                                                                                              |   |
| Item 2. Unregistered Sales of Equity Securities  and Use of Proceeds                                | 24                                                                                                                                |
|                                                                                                |                                                                                                                              |   |
| Item 3. Defaults Upon Senior Securities                                                             | 24                                                                                                                                |
|                                                                                                |                                                                                                                              |   |
| Item 4. Submissions of Matters to a Vote of  Security Holders                                       | 24                                                                                                                                |
|                                                                                                |                                                                                                                              |   |
| Item 5. Other Information                                                                           | 24                                                                                                                                |
|                                                                                                |                                                                                                                              |   |
| Item 6. Exhibits                                                                                    | 24                                                                                                                                |
|                                                                                                     |                                                                                                                                   |  |  |

 

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**Part 1 – Financial Information**
| **Item 1.** | ** ** | **Financial Statements** |   |   |
|-------------|------------|--------------------------|--------|--------|

**The Wornick Company**

**Consolidated Balance Sheet**

**(Unaudited)**

** **
| ** **                                                                                  | ** ** | **December 31,  2004** | ** **  | ** ** | **April 2,  2005** | ** ** |
|---------------------------------------------------------------------------------------------|------------|-----------------------------|-------------|------------|-------------------------|------------|
| ** **                                                                                  | ** ** | ** **                  | ** **  | ** ** | ** **              | ** ** |
| **Assets**                                                                                  |       |                        |        |       |                    |       |
| Current assets                                                                              |       |                        |        |       |                    |       |
| Cash and cash equivalents                                                                   |       | $                           | 3,289,030   |       |                    | $          | — |   |
| Trade accounts receivable, net                                                              |       | 13,856,294                  |        |       | 12,541,445              |       |
| Inventories                                                                                 |       | 24,132,116                  |        |       | 23,009,337              |       |
| Prepaid expenses and other current assets                                                   |       | 531,106                     |        |       | 1,139,775               |       |
| Deferred income taxes                                                                       |       | 269,998                     |        |       | 269,998                 |       |
| Total current assets                                                                        |       | 42,078,544                  |        |       | 36,960,555              |       |
| Property and equipment, net                                                                 |       | 32,794,239                  |        |       | 33,648,132              |       |
| Goodwill                                                                                    |       | 77,573,207                  |        |       | 77,573,207              |       |
| Intangible assets, net                                                                      |       | 21,822,710                  |        |       | 20,649,064              |       |
| Other noncurrent assets                                                                     |       | 5,675,939                   |        |       | 5,526,949               |       |
| Total assets                                                                                |       | $                           | 179,944,639 |       |                    | $          | 174,357,907 |   |
| **Liabilities and Stockholder’s Equity**                                               |       |                        |        |       |                    |       |
| Current liabilities                                                                         |       |                        |        |       |                    |       |
| Bank overdrafts                                                                             |       | $                           | —      |       |                    | $          | 108,550 |   |
| Trade accounts payable                                                                      |       | 6,167,826                   |        |       | 5,882,964               |       |
| Accrued expenses                                                                            |       | 3,122,446                   |        |       | 3,684,047               |       |
| Accrued interest                                                                            |       | 6,796,875                   |        |       | 2,832,031               |       |
| Taxes payable                                                                               |       | 51,950                      |        |       | 52,070                  |       |
| Total current liabilities                                                                   |       | 16,139,097                  |        |       | 12,559,662              |       |
| Deferred income taxes                                                                       |       | 1,182,065                   |        |       | 1,638,065               |       |
| Long-term debt                                                                              |       | 125,000,000                 |        |       | 125,000,000             |       |
| Total liabilities                                                                           |       | 142,321,162                 |        |       | 139,197,727             |       |
| **Commitments and Contingencies**                                                           |       |                        |        |       |                    |       |
| Stockholder’s equity                                                                   |       |                        |        |       |                    |       |
| Common stock $0.01 par value; 10,000,000  shares authorized, 1 share issued and outstanding |       | —                      |        |       | —                  |       |
| Additional paid-in capital                                                                  |       | 37,646,400                  |        |       | 37,602,480              |       |
| Retained earnings                                                                           |       | (22,923                     | )           |       | (2,442,300              | )          |
| Total stockholder’s equity                                                             |       | 37,623,477                  |        |       | 35,160,180              |       |
| Total liabilities and stockholder’s equity                                             |       | $                           | 179,944,639 |       |                    | $          | 174,357,907 |   |

 

The accompanying notes are an integral part of these consolidatedfinancial statements.

 

1

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**The Wornick Company**

**Consolidated Statement of Operations**

**(Unaudited)**

 
| ** **                                    | ** ** | **Thirteen Weeks Ended**                              | ** ** |
|-----------------------------------------------|------------|-------------------------------------------------------|------------|
| ** **                                    | ** ** | **January 1,  2004 through  April 3, 2004** | ** ** | ** ** | **January 1,  2005 through  April 2, 2005** | ** ** |
| ** **                                    | ** ** | **(Predecessor)**                                     | ** ** | ** ** | **(Successor)** | ** ** |
| ** **                                    | ** ** | ** **                                            | ** ** | ** ** | ** ** | ** ** |
| Net sales                                     |       | $                                                     | 36,102,631 |   |   | $ | 58,832,215 |   |
| Cost of sales                                 |       | 29,752,876                                            |       |   | 52,383,525 |   |
| Gross profit                                  |       | 6,349,755                                             |       |   | 6,448,690 |   |
| Selling, general and administrative  expenses |       | 5,321,128                                             |       |   | 4,852,250 |   |
| Operating profit                              |       | 1,028,627                                             |       |   | 1,596,440 |   |
| Other (expense) income                        |       |                                                  |       |   |   |   |
| Interest expense                              |       | (49,860                                               | )          |   | (3,573,917 | ) |
| Interest income                               |       | 205,534                                               |       |   | 33,781 |   |
| Other income, net                             |       | 200,112                                               |       |   | 80,439 |   |
| Total other income (expense)                  |       | 355,786                                               |       |   | (3,459,697 | ) |
| Income before income taxes                    |       | 1,384,413                                             |       |   | (1,863,257 | ) |
| Income tax expense                            |       | 27,352                                                |       |   | 556,120 |   |
| Net income/(loss)                             |       | $                                                     | 1,357,061  |   |   | $ | (2,419,377 | )  |
|                                          |       |                                                  |       |   |   |   |
| Pro forma income data (unaudited)             |       |                                                  |       |   |   |   |
| Income before income taxes                    |       | $                                                     | 1,384,413  |   |   |   |   |
| Pro forma income tax expense                  |       | 700,316                                               |       |   |   |   |
| Pro forma net income                          |       | $                                                     | 684,097    |   |   |   |   |

 

The accompanying notes are an integral part of these consolidatedfinancial statements.

 

2

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**The Wornick Company**

**Consolidated Statement of Cash Flows**

**(Unaudited)**

 
| ** **                                                                                   | ** ** | **Thirteen Weeks Ended**                              | ** ** |
|----------------------------------------------------------------------------------------------|------------|-------------------------------------------------------|------------|
| ** **                                                                                   | ** ** | **January 1, 2004  through April 3,  2004** | ** ** | ** ** | **January 1,  2005 through  April 2, 2005** | ** ** |
| ** **                                                                                   | ** ** | **(Predecessor)**                                     | ** ** | ** ** | **(Successor)** | ** ** |
| ** **                                                                                   | ** ** | ** **                                            | ** ** | ** ** | ** ** | ** ** |
| **Cash flows from operating activities**                                                     |       |                                                  |       |   |   |   |
| Net income (loss)                                                                            |       | $                                                     | 1,357,061  |   |   | $ | (2,419,377 | ) |
| Adjustments to reconcile net income to net  cash provided by (used in) operating activities: |       |                                                  |       |   |   |   |
| Depreciation of property and equipment                                                       |       | 680,370                                               |       |   | 947,794 |   |
| Amortization of intangibles                                                                  |       | —                                                |       |   | 1,173,646 |   |
| Amortization of bond issuance cost                                                           |       | —                                                |       |   | 170,700 |   |
| Deferred income tax expense                                                                  |       | —                                                |       |   | 456,000 |   |
| Compensation expense for Employee Stock                                                      |       |                                                  |       |   |   |   |
| Ownership Trust shares released and  committed to be released                                |       | 1,156,435                                             |       |   | — |   |
| Compensation expense for stock options                                                       |       | 713,433                                               |       |   |   |   |
| Other equity based compensation plans                                                        |       | 309,859                                               |       |   | (43,920 | ) |
| Changes in assets and liabilities                                                            |       |                                                  |       |   |   |   |
| Trade accounts receivable                                                                    |       | 6,003,663                                             |       |   | 1,314,849 |   |
| Inventories                                                                                  |       | (1,300,875                                            | )          |   | 1,122,779 |   |
| Prepaid expenses and other current assets                                                    |       | (18,650                                               | )          |   | (608,669 | ) |
| Other noncurrent asset                                                                       |       | (12,799                                               | )          |   | (21,710 | ) |
| Trade accounts payable and accrued expenses                                                  |       | (1,916,728                                            | )          |   | 276,859 |   |
| Accrued bond interest                                                                        |       | —                                                |       |   | (3,964,844 | ) |
| Net cash provided by (used in) operating activities                                          |       | 6,971,769                                             |       |   | (1,595,893 | ) |
| **Cash flows from investing activities**                                                     |       |                                                  |       |   |   |   |
| Payments received on notes receivable                                                        |       | 346,678                                               |       |   | — |   |
| Proceeds from the sale of investments                                                        |       | 7,000,000                                             |       |   | — |   |
| Purchase of investments                                                                      |       | (17,015,154                                           | )          |   | — |   |
| Capital expenditures                                                                         |       | (1,183,888                                            | )          |   | (1,801,687 | ) |
| Net cash (used in) investing activities                                                      |       | (10,852,364                                           | )          |   | (1,801,687 | ) |
| **Cash flows from financing activities**                                                     |       |                                                  |       |   |   |   |
| Change in book overdrafts                                                                    |       | (588,115                                              | )          |   | 108,550 |   |
| Net increase in the line of credit                                                           |       | 1,000,000                                             |       |   | — |   |
| Principal payments on long-term debt                                                         |       | (623,699                                              | )          |   | — |   |
| Net cash (used in) provided by financing activities                                          |       | (211,814                                              | )          |   | 108,550 |   |
| Net (decrease) in cash and cash equivalents                                                  |       | (4,092,409                                            | )          |   | (3,289,030 | ) |
| **Cash and cash equivalents**                                                                |       |                                                  |       |   |   |   |
| Beginning of period                                                                          |       | 5,290,667                                             |       |   | 3,289,030 |   |
| End of period                                                                                |       | $                                                     | 1,198,258  |   |   | $ | — |   |

 

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

 

3

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**The WornickCompany**

**Notes to Unaudited Consolidated Financial Statements**

 

**1.****                                      Organizationand Basis of Presentation**

 

TheWornick Company, a Delaware corporation (the “Company” or “Successor”), anacquisition vehicle formed by The Veritas Capital Fund II, L.P., and itsgeneral partner, Veritas Capital Management II, L.L.C.(collectively “Veritas”),entered into an Assets Purchase and Sale Contract with The Wornick Company, aNevada corporation (the “Predecessor”), and its subsidiaries, The WornickCompany Right Away Division, a Nevada corporation, The Wornick Company RightAway Division, L.P., a Texas limited partnership, and Right Away ManagementCorporation, a Texas corporation, which was consummated on June 30, 2004,and resulted in the purchase by the Successor and its subsidiaries, and thesale 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.

 

TheCompany 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 (“DoD”) and commercial customers,as well as for its own consumer-branded products.

 

**2.****                                      Basisof Presentation**

 

Theaccompanying unaudited interim condensed consolidated financial statements,also referred to as our interim or unaudited "consolidated financial statements,"have been prepared in accordance with accounting principles generally acceptedin the United States of America for interim financial information and theinstructions to Form 10-Q and Article 10 of Regulation S-Xunder the Securities Exchange Act of 1934, as amended.  Accordingly, they do not include all of theinformation and footnotes normally included in financial statements prepared inconformity with accounting principles generally accepted in the United Statesof America. In the opinion of management, the interim consolidated financialstatements reflect all adjustments of a normal recurring nature considerednecessary for a fair presentation of the results for the periodspresented.  Operating results for interimperiods are not necessarily indicative of results that may be expected for thefiscal year as a whole.  The preparationof financial statements in conformity with accounting principles generallyaccepted in the United States of America requires management to make estimatesand assumptions that affect the reported amounts of assets, liabilities,revenues, expenses, and related disclosures at the date of the financialstatements and during the reporting period. Actual amounts could differ from these estimates.  These unaudited interim consolidatedfinancial statements should be read in conjunction with the auditedconsolidated financial statements for the year ended December 31, 2004 andnotes thereto included in the Company’s Annual Report on Form 10-K forthe year ended December 31, 2004 filed with the Securities and ExchangeCommission pursuant to section 13 or 15(D) of the Securities ExchangeAct of 1934.

 

Asdiscussed in Note 1 above, the Assets Purchase and Sale Contract wasconsummated on June 30, 2004.  Assuch, the unaudited financial information presented represents: (i) the CondensedConsolidated Balance Sheet of the Successor at December 31, 2004 and April 2,2005, (ii) the Condensed Consolidated Statements of Operations of thePredecessor for the thirteen week period ended April 3, 2004, (iii) theCondensed Consolidated Statement of Operations of the Successor for the thirteenweek period ended April 2, 2005, (iv) the Condensed Consolidated

 

4

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Statementof Cash Flows of the Predecessor for the thirteen week period ended April 3,2004 and (v) the Condensed Consolidated Statement of Cash Flows of the Successorfor the thirteen week period ended April 2, 2005.

 

Certainitems in the predecessor statement of operations have been reclassified toconform to current year presentations. These reclassifications had no impact on previously reported net incomeor stockholder’s equity.

 

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

 

OnJune 30, 2004 (the “Acquisition Date”), pursuant to the Assets Purchaseand Sale Contract described above in Note 1, the Company acquired all of theoperating assets of the Predecessor.  Theacquisition was financed through a combination of debt and equityissuances.  The purchase price of $165.0million included approximately $10.1 million of transaction costs.  Goodwill of $77.6 million represented theexcess of the acquisition cost over the estimated fair value of theidentifiable assets acquired.  Theidentifiable intangible assets relate to the value of existing long-termcustomer supply contracts in place at the Acquisition Date.  The purchase price has been allocated to theassets 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 |   |

 

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

 

Summaryselected pro forma information of the Predecessor as though the transactionwere completed at the beginning of the respective period presented (and asthough the Company were taxed as a C-Corporation) is as follows:

 
| **(in thousands of dollars)** | ** ** | **Thirteen Weeks  Ended  April 3, 2004** | ** ** |
|-------------------------------|------------|-----------------------------------------------|------------|
| ** **                    | ** ** | ** **                                    | ** ** |
| Net sales                     |       | $                                             | 36,103     |   |
| Net income (loss)             |       | (2,580                                        | )          |
|                               |            |                                               |            |  |

 

5

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**4.****                                     ****Supplemental Balance Sheet Information**

 

**Inventories**

Asummary of inventories is as follows:

 
| ** **      | ** ** | **December 31,  2004** | ** ** | **April 2,  2005** | ** ** |
|-----------------|------------|-----------------------------|------------|-------------------------|------------|
|            |       |                        |       |                    |       |
| Raw materials   |       | $                           | 15,187,856 |                    | $          | 15,766,499 |   |
| Work in process |       | 1,838,828                   |       | 1,464,791               |       |
| Finished goods  |       | 7,105,432                   |       | 5,778,047               |       |
|            |       | $                           | 24,132,116 |                    | $          | 23,009,337 |   |

 

**Property and Equipment, Net**

Asummary of property and equipment, net is as follows:

 
| ** **                                       | ** ** | **December 31,  2004** | ** ** | **April 2,  2005** | ** ** |
|--------------------------------------------------|------------|-----------------------------|------------|-------------------------|------------|
|                                             |       |                        |       |                    |       |
| Leasehold improvements                           |       | $                           | 1,771,322  |                    | $          | 1,771,322 |   |
| Machinery and equipment                          |       | 26,166,475                  |       | 27,668,252              |       |
| Office equipment, fixtures and vehicles          |       | 2,395,476                   |       | 2,430,094               |       |
| Construction in progress                         |       | 4,216,827                   |       | 4,482,119               |       |
|                                             |       | 34,550,100                  |       | 36,351,787              |       |
| Less: Accumulated depreciation and  amortization |       | (1,755,861                  | )          | (2,703,655              | )          |
|                                             |       | $                           | 32,794,239 |                    | $          | 33,648,132 |   |

 

Depreciationexpense for the thirteen week periods ended April 3, 2004 and April 2,2005 was $680,370 and $947,794, respectively.

 

**5.****                                     ****Intangible Assets**

 

Inconnection with the acquisition described in Note 3, a portion of thepurchase price was allocated to identifiable intangible assets related to thevalue of long-term customer supply contracts in place at the AcquisitionDate.  The original value of thesecontracts was $24,170,000 and their useful lives range from three to eightyears.  Aggregate accumulatedamortization of intangibles at December 31, 2004 and April 2, 2005amounted to $2,347,290 and $3,520,936, respectively.  Expense related to amortization of intangibleassets for the thirteen week period ended April 2, 2005, amounted to $1,173,646.

 

Scheduledamortization of these assets is as follows:

 
| April 3, 2005 through  December 31, 2005 |   | $         | 3,520,934  |   |
|----------------------------------------------------|--------|-----------|------------|--------|
| 2006                                               |   | 4,694,580 |       |
| 2007                                               |   | 4,627,918 |       |
| 2008                                               |   | 4,856,248 |       |
| 2009                                               |   | 2,421,226 |       |
| Thereafter                                         |   | 528,158   |       |
|                                               |   | $         | 20,649,064 |   |

 

6

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

 

Asummary of long-term debt at December 31, 2004 and April 2, 2005, isas follows:

 
| ** **                                    | ** ** | **December 31,  2004** | ** **  | **April 2,  2005** | ** ** |
|-----------------------------------------------|------------|-----------------------------|-------------|-------------------------|------------|
|                                          |       |                        |        |                    |       |
| 10-7/8% Senior secured notes; due  2011       |       | $                           | 125,000,000 |                    | $          | 125,000,000 |   |
|                                          |       |                        |        |                    |       |
| Less: Current maturities                      |       | —                      |        | —                  |       |
| Long-term debt, excluding current  maturities |       | $                           | 125,000,000 |                    | $          | 125,000,000 |   |

 

Inconnection with the financing of the acquisition described in Note 3, theCompany issued $125.0 million 10-7/8% Senior Secured Notes due 2011and also secured additional financing through a Revolving Loan Agreement whichprovides the Company $15.0 million of revolving loan financing through June 30,2009, with an additional revolving credit facility of $10.0 millionbecoming available upon certain events. Amounts outstanding under the Revolving Loan Agreements ($0 at December 31,2004 and April 2, 2005) are due June 30, 2009, and amountsoutstanding are subject to limitations as determined by a calculated borrowingbase.

 

Intereston amounts outstanding under the Revolving Loan Agreement will vary at afluctuating rate per annum that is equal to the prime rate (5.25% at December 31,2004 and 5.75% at April 2, 2005) as published daily by The Wall StreetJournal.  Amounts outstanding underthe Revolving Loan Agreement are collateralized by substantially all of theoperating assets of the Company and its subsidiaries.  The lien on such collateral is senior to thelien on the collateral that secures the senior secured notes.  In connection with completing theacquisition, the Company borrowed $3.0 million against the revolving loanfacility to fund the acquisition and initial working capital of theSuccessor.  This amount was subsequentlyrepaid prior to December 31, 2004.  Asof April 2, 2005 we are in compliance with all covenants supporting ourrevolving loan agreement and our $125 million Senior Secured notes.

 

Thesenior secured notes are collateralized by substantially all assets and otherproperty of the Company and its subsidiaries. The lien on such collateral, however, is subordinate to the lien on thecollateral securing the Revolving Loan Agreement.  Interest on the senior secured notes ispayable semi-annually.  Interest expenseon the senior secured notes and revolving loan facility for the thirteen weekperiod ended April 2, 2005 amounted to $3,398,439 and $4,778,respectively.

 

Amountsdue under the senior secured notes and the revolving loan facility are subjectto an intercreditor agreement.  TheCompany is required to meet certain financial covenants related primarily tominimum working capital amounts and minimum working capital ratios as well as minimumprofitability and minimum net worth calculations.  At April 2, 2005 we were in compliancewith all financial covenants.

 

OnFebruary 11, 2005 our parent, TWC Holding LLC (the “Parent Company”) , andits wholly-owned finance subsidiary, TWC Holding Corp., co-issued their  13.875% Senior PIK Notes due 2011, or the “SeniorPIK Notes,” in the aggregate principal amount of $26,000,000.  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

 

7

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TWCHolding Corp.  Neither the Company norany of its subsidiaries guaranteed the Senior PIK notes.  The notes limit the Company’s ability toincur additional indebtedness and pay dividends or make other distributions aswell as to make certain investments and sell certain assets or merge with orinto other companies.  Because our ParentCompany  is a holding company with nooperations and has only its investment in the Company and because TWC HoldingCorp. has no independent operations or assets, future cash flows of the Companythrough 2011 will be required to service the Senior PIK notes.

 

Thepro forma effect of the additional interest expense on our net income assumingthe issuance of the Senior PIK notes took place at the beginning of the yearwould have resulted in interest expense to our direct parent TWC Holding ofapproximately $909,000 for the thirteen week period ended April 2, 2005.

 

**7.****                                     ****Income Taxes**

 

Inconnection with the transactions described in Note 3, the Successor is taxed asa C-Corporation whereas, the Predecessor was a pass-through entity qualifiedunder Subchapter S of the Internal Revenue Code.

 

TheCompany 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 recognized for the tax consequences in futureyears as a result of differences between the tax and financial reporting basesof assets and liabilities and for the expected future tax benefit to be derivedfrom tax credit and loss carry-forwards. Valuation allowances are established when necessary to reduce deferredtax assets to the amounts management believes are more likely than not to berealized in future tax returns.  Tax ratechanges are reflected in the period such changes are enacted.  The Company has recorded a valuationallowance on deferred tax assets due to the indefinite reversal period relatedto goodwill.

 

**8.****                                     ****Successor Company Stock Compensation Plan**

 

Duringthe thirteen week period ended April 2, 2005 certain members of managementterminated their employment with the Company and forfeited their Class Bmembership interests in the Company’s parent (TWC Holding LLC).  As such, previously recognized compensationexpense in 2004 of approximately $78,000 was reversed in the period ended April 2,2005 which resulted in a net compensation credit of approximately $44,000 forthe period ended April 2, 2005 related to vesting provisions of these Class Bmembership interests.

 

Inaddition, on April 11, 2005 TWC Holding LLC issued additional Class Bmembership interests to recently retained senior management of theCompany.  These class B membershipinterests will vest over a five year period.

 

**9.****                                     ****Operating Segment Information**

 

TheCompany has two operating segments: the Right Away Division (“RAD”) and the PreparedFoods Division (“PFD”).  RAD is located in Texas and primarily sells itsproduct to the U.S. Department of Defense.  PFD is located in Ohio andalso sells directly to the U.S. Department of Defense as well as to commercialbranded food companies and

 

8

----

 

inter-segmentsales to RAD.  Management evaluates segment performance based on severalfactors, including operating profit.

 

Consistentwith the Predecessor’s internal management reporting, corporate operations forthe Predecessor 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.  Other significant noncash items include compensation expensefor ESOT shares released and committed to be released as well as compensationexpense related to stock options and other stock-based compensation plans.

 

TheCompany’s sales by product line for the periods indicated are as follows (inthousands):

 
| ** **                                   | ** ** | **Predecessor**                               | ** ** | ** ** | **Successor**                                 | ** ** |
|----------------------------------------------|------------|-----------------------------------------------|------------|------------|-----------------------------------------------|------------|
| **(in thousands of dollars)**                | ** ** | **13 Week  Period Ended  April 3, 2004** | ** ** | ** ** | **13 Week  Period Ended  April 2, 2005** | ** ** |
| DoD Sales                                    |       |                                          |       |       |                                          |       |
| Meals Ready-to-Eat (“MRE”)         |       | $                                             | 20,429     |       |                                          | $          | 33,693 |   |
| Unitized Group Rations-A (“UGR-A”) |       | 7,926                                         |       |       | 14,585                                        |       |
| Tray-Pack                                    |       | 1,062                                         |       |       | 707                                           |       |
| Military Other                               |       | 205                                           |       |       | 541                                           |       |
| Total DoD sales                              |       | 29,622                                        |       |       | 49,526                                        |       |
| Co-manufactured                              |       | 5,030                                         |       |       | 8,204                                         |       |
| Branded                                      |       | 851                                           |       |       | 852                                           |       |
| Other                                        |       | 600                                           |       |       | 250                                           |       |
|                                         |       | $                                             | 36,103     |       |                                          | $          | 58,832 |   |

 

Duringthe thirteen week periods ended April 3, 2004 and April 2, 2005, theCompany had one major customer, which accounted for approximately $29,622,000and $49,526,000, or 82% and 84% of net revenue, respectively.  Approximately $7,124,000, or 82% and $9,369,000,or 75%, of net receivables were attributed to this customer at April 3,2004 and April 2, 2005, respectively.

 

9

----

 

Unauditedreportable operating segment financial information for the thirteen weekperiods ended April 3, 2004 and April 2, 2005, is a follows (inthousands):

 
| ** **                       | ** ** | ** **  | ** ** | ** **        | ** ** | **Operating** | ** ** | ** **        | ** ** | ** **  | ** ** | ** **       | ** ** |
|----------------------------------|------------|-------------|------------|-------------------|------------|---------------|------------|-------------------|------------|-------------|------------|------------------|------------|
| ** **                       | ** ** | **Trade**   | ** ** | **Inter-segment** | ** ** | **Profit**    | ** ** | **Depreciation/** | ** ** | **Total**   | ** ** | **Capital**      | ** ** |
| **Operating Segments**           | ** ** | **Revenue** | ** ** | **Revenue**       | ** ** | **(Loss)**    | ** ** | **Amortization**  | ** ** | **Assets**  | ** ** | **Expenditures** | ** ** |
|                             |       |        |       |              |       |          |       |              |       |        |       |             |       |
| **Right Away Division**          |       |        |       |              |       |          |       |              |       |        |       |             |       |
| April 3, 2004 (Predecessor) |       | 29,007,611  |       | —            |       | 1,224,306     |       | 231,985           |       | 27,232,822  |       | 446,672          |       |
| April 2, 2005 (Successor)   |       | 48,967,837  |       | —            |       | 4,886,899     |       | 325,854           |       | 33,526,344  |       | 155,945          |       |
|                             |       |        |       |              |       |          |       |              |       |        |       |             |       |
| **Prepared Foods**               |       |        |       |              |       |          |       |              |       |        |       |             |       |
| April 3, 2004 (Predecessor) |       | 7,095,020   |       | 11,932,719        |       | 2,747,963     |       | 445,649           |       | 31,932,170  |       | 737,216          |       |
| April 2, 2005 (Successor)   |       | 9,864,378   |       | 12,653,613        |       | (2,236,284    | )          | 621,940           |       | 60,052,135  |       | 1,645,742        |       |
|                             |       |        |       |              |       |          |       |              |       |        |       |             |       |
| **Corporate**                    |       |        |       |              |       |          |       |              |       |        |       |             |       |
| April 3, 2004 (Predecessor) |       | —      |       | —            |       | (2,943,642    | )          | 2,736             |       | 83,510,956  |       | —           |       |
| April 2, 2005 (Successor)   |       | —      |       | —            |       | (1,054,175    | )          | —            |       | 111,521,825 |       | —           |       |
|                             |       |        |       |              |       |          |       |              |       |        |       |             |       |
| **Eliminations**                 |       |        |       |              |       |          |       |              |       |        |       |             |       |
| April 3, 2004 (Predecessor) |       | —      |       | (11,932,719       | )          | —        |       | —            |       | (54,559,005 | )          | —           |       |
| April 2, 2005 (Successor)   |       | —      |       | (12,653,613       | )          | —        |       | —            |       | (30,742,397 | )          | —           |       |
|                             |       |        |       |              |       |          |       |              |       |        |       |             |       |
| **Total Company**                |       |        |       |              |       |          |       |              |       |        |       |             |       |
| April 3, 2004 (Predecessor) |       | 36,102,631  |       | —            |       | 1,028,627     |       | 680,370           |       | 88,116,943  |       | 1,183,888        |       |
| April 2, 2005 (Successor)   |       | 58,832,215  |       | —            |       | 1,596,440     |       | 947,794           |       | 174,357,907 |       | 1,801,687        |       |

 

**10.****                              ****Condensed Consolidating Financial Information**

 

Thefollowing information presents the unaudited condensed consolidating balancesheet of the Successor at April 2, 2005, the unaudited condensedconsolidating statement of operations and statement of cash flows of thePredecessor for thirteen week period ended April 3, 2004 and the unauditedcondensed consolidating statement of operations and statement of cash flows ofthe Successor for thirteen week period ended April 2, 2005.

 

10

----

 

Condensed consolidated balance sheet as of December 31,2004 (unaudited):

 
| ** **                                       | ** ** | **Successor** | ** **  |
|--------------------------------------------------|------------|---------------|-------------|
| ** **                                       | ** ** | ** **    | ** **  | **Subsidiary** | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                                       | ** ** | **Parent**    | ** **  | **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                       |       | 4,822,266     |        | — |   | (4,822,266 | ) | — |   |
| Prepaid  expenses and other current assets       |       | 246,316       |        | 284,790 |   | — |   | 531,106 |   |
| Inventories                                      |       | 10,491,680    |        | 13,640,436 |   | — |   | 24,132,116 |   |
| Deferred  income taxes                           |       | 269,998       |        | — |   | — |   | 269,998 |   |
| Total  current assets                            |       | 21,329,163    |        | 25,571,647 |   | (4,822,266 | ) | 42,078,544 |   |
| Investments  in subsidiary guarantors            |       | 28,579,956    |        | — |   | (28,579,956 | ) | — |   |
| 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                                     |       | $             | 177,293,501 |   | $ | 36,053,360 |   | $ | (33,402,222 | ) | $ | 179,944,639 |   |
| **Liabilities  and Stockholder’s Equity**   |       |          |        |   |   |   |   |   |   |
| Current  liabilities                             |       |          |        |   |   |   |   |   |   |
| Trade  accounts payable                          |       | $             | 4,556,681   |   | $ | 1,611,145 |   | $ | — |   | $ | 6,167,826 |   |
| Interdivision  payables                          |       | 101,605       |        | 4,720,661 |   | (4,822,266 | ) | — |   |
| 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                       |       | 13,487,959    |        | 7,473,404 |   | (4,822,266 | ) | 16,139,097 |   |
|                                             |       |          |        |   |   |   |   |   |   |
| Deferred tax  liabilities                        |       | $             | 1,182,065   |   | — |   | — |   | $ | 1,182,065 |   |
| Long-term  debt, excluding current maturities    |       | 125,000,000   |        | — |   | — |   | 125,000,000 |   |
| Total  liabilities                               |       | 139,670,024   |        | 7,473,404 |   | (4,822,266 | ) | 142,321,162 |   |
| Stockholder’s  equity                       |       |          |        |   |   |   |   |   |   |
| Common stock                                     |       | —        |        | — |   | — |   | — |   |
| Additional  paid-in capital                      |       | 37,646,400    |        | 26,624,729 |   | (26,624,729 | ) | 37,646,400 |   |
| Retained  earnings                               |       | (22,923       | )           | 1,955,227 |   | (1,955,227 | ) | (22,923 | ) |
| Total  stockholder’s equity (deficit)       |       | 37,623,477    |        | 28,579,956 |   | (28,579,956 | ) | 37,623,477 |   |
| Total  liabilities and stockholder’s equity |       | $             | 177,293,501 |   | $ | 36,053,360 |   | $ | (33,402,222 | ) | $ | 179,944,639 |   |

 

11

----

 

Condensed consolidated balance sheet as of April 2,2005 (unaudited):

 
| ** **                                       | ** ** | **Successor** | ** **  |
|--------------------------------------------------|------------|---------------|-------------|
| ** **                                       | ** ** | ** **    | ** **  | **Subsidiary** | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                                       | ** ** | **Parent**    | ** **  | **Guarantors** | ** ** | **Eliminations** | ** ** | **Total** | ** ** |
|                                             |       |          |        |   |   |   |   |   |   |
| **Assets**                                       |       |          |        |   |   |   |   |   |   |
| Current  assets                                  |       |          |        |   |   |   |   |   |   |
| Trade  accounts receivable                       |       | $             | 3,492,226   |   | $ | 9,049,219 |   | $ | — |   | $ | 12,541,445 |   |
| Interdivision  receivables                       |       | 1,191,291     |        | — |   | (1,191,291 | ) | — |   |
| Inventories                                      |       | 9,253,651     |        | 13,755,686 |   | — |   | 23,009,337 |   |
| Prepaid  expenses and other current assets       |       | 536,373       |        | 603,402 |   | — |   | 1,139,775 |   |
| Deferred  income taxes                           |       | 269,998       |        | — |   | — |   | 269,998 |   |
| Total  current assets                            |       | 14,743,539    |        | 23,408,307 |   | (1,191,291 | ) | 36,960,555 |   |
| Investments  in subsidiary guarantors            |       | 29,551,106    |        | — |   | (29,551,106 | ) | — |   |
| Property and  equipment, net                     |       | 26,869,420    |        | 6,778,712 |   | — |   | 33,648,132 |   |
| Goodwill                                         |       | 77,573,207    |        | — |   | — |   | 77,573,207 |   |
| Intangible  assets, net                          |       | 17,466,563    |        | 3,182,501 |   |   |   | 20,649,064 |   |
| Other  noncurrent assets                         |       | 5,370,125     |        | 156,824 |   | — |   | 5,526,949 |   |
| Total assets                                     |       | $             | 171,573,960 |   | $ | 33,526,344 |   | $ | (30,742,397 | ) | $ | 174,357,907 |   |
| **Liabilities  and Stockholder’s Equity**   |       |          |        |   |   |   |   |   |   |
| Current  liabilities                             |       |          |        |   |   |   |   |   |   |
| Bank  overdrafts                                 |       | $             | 1,158,175   |   | $ | (1,049,625 | ) | $ | — |   | $ | 108,550 |   |
| Trade  accounts payable                          |       | 3,016,643     |        | 2,866,321 |   | — |   | 5,882,964 |   |
| Interdivision  payables                          |       | 78,923        |        | 1,112,368 |   | (1,191,291 | ) | — |   |
| Accrued  expenses                                |       | 2,637,873     |        | 1,046,174 |   | — |   | 3,684,047 |   |
| Accrued  interest                                |       | 2,832,031     |        | — |   | — |   | 2,832,031 |   |
| Taxes  payable                                   |       | 52,070        |        | — |   | — |   | 52,070 |   |
| Total current  liabilities                       |       | 9,775,715     |        | 3,975,238 |   | (1,191,291 | ) | 12,559,662 |   |
|                                             |       |          |        |   |   |   |   |   |   |
| Deferred tax  liabilities                        |       | 1,638,065     |        | — |   | — |   | 1,638,065 |   |
| Long-term  debt, excluding current maturities    |       | 125,000,000   |        | — |   | — |   | 125,000,000 |   |
| Total  liabilities                               |       | 136,413,780   |        | 3,975,238 |   | (1,191,291 | ) | 139,197,727 |   |
| Stockholder’s  equity                       |       |          |        |   |   |   |   |   |   |
| Common stock                                     |       | —        |        | — |   | — |   | — |   |
| Additional  paid-in capital                      |       | 37,602,480    |        | 26,624,729 |   | (26,624,729 | ) | 37,602,480 |   |
| Retained  earnings                               |       | (2,442,300    | )           | 2,926,377 |   | (2,926,377 | ) | (2,442,300 | ) |
| Total  stockholder’s equity (deficit)       |       | 35,160,180    |        | 29,551,106 |   | (29,551,106 | ) | 35,160,180 |   |
| Total  liabilities and stockholder’s equity |       | $             | 171,573,960 |   | $ | 33,526,344 |   | $ | (30,742,397 | ) | $ | 174,357,907 |   |

 

12

----

 

Condensed consolidated statement of operations for thethirteen week period from January 1, 2004 through April 3, 2004(unaudited):

 
| ** **                                    | ** ** | **Predecessor** | ** ** |
|-----------------------------------------------|------------|-----------------|------------|
| ** **                                    | ** ** | ** **      | ** ** | **Subsidiary** | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                                    | ** ** | **Parent**      | ** ** | **Guarantors** | ** ** | **Eliminations** | ** ** | **Total** | ** ** |
|                                          |       |            |       |   |   |   |   |   |   |
| Net sales                                     |       | $               | 19,027,739 |   | $ | 29,007,611 |   | $ | (11,932,719 | ) | $ | 36,102,631 |   |
| Cost of  sales                                |       | 15,189,132      |       | 26,496,463 |   | (11,932,719 | ) | 29,752,876 |   |
| Gross profit                                  |       | 3,838,607       |       | 2,511,148 |   | — |   | 6,349,755 |   |
| Selling,  general and administrative expenses |       | 4,034,286       |       | 1,286,842 |   | — |   | 5,321,128 |   |
| Operating  (loss) profit                      |       | (195,679        | )          | 1,224,306 |   | — |   | 1,028,627 |   |
| Other income  (expense)                       |       |            |       |   |   |   |   |   |   |
| Interest  expense                             |       | (49,860         | )          | — |   | — |   | (49,860 | ) |
| Interest  income                              |       | 197,415         |       | 8,119 |   | — |   | 205,534 |   |
| Executive/administration  income (expense)    |       | (241,500        | )          | 241,500 |   | — |   | — |   |
| Other  income, net                            |       | —          |       | 200,112 |   | — |   | 200,112 |   |
| Equity in  earnings of subsidiary guarantors  |       | 1,674,037       |       | — |   | (1,674,037 | ) | — |   |
| Total other  income (expense)                 |       | 1,580,092       |       | 449,731 |   | (1,674,037 | ) | 355,786 |   |
| Income  before income taxes                   |       | 1,384,413       |       | 1,674,037 |   | (1,674,037 | ) | 1,384,413 |   |
| Income tax  expense                           |       | 27,352          |       | — |   | — |   | 27,352 |   |
| Net income                                    |       | $               | 1,357,061  |   | $ | 1,674,037 |   | $ | (1,674,037 | ) | $ | 1,357,061 |   |

 

Condensed consolidated statement ofoperations for the thirteen week period from January 1, 2005 through April 2,2005 (unaudited):

 
| ** **                                    | ** ** | **Successor** | ** ** |
|-----------------------------------------------|------------|---------------|------------|
| ** **                                    | ** ** | ** **    | ** ** | **Subsidiary** | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                                    | ** ** | **Parent**    | ** ** | **Guarantors** | ** ** | **Eliminations** | ** ** | **Total** | ** ** |
|                                          |       |          |       |   |   |   |   |   |   |
| Net sales                                     |       | $             | 22,517,991 |   | $ | 48,967,837 |   | $ | (12,653,613 | ) | $ | 58,832,215 |   |
| Cost of  sales                                |       | 22,430,223    |       | 42,606,915 |   | (12,653,613 | ) | 52,383,525 |   |
| Gross profit                                  |       | 87,768        |       | 6,360,922 |   | — |   | 6,448,690 |   |
| Selling,  general and administrative expenses |       | 3,378,227     |       | 1,474,023 |   | — |   | 4,852,250 |   |
| Operating  profit                             |       | (3,290,459    | )          | 4,886,899 |   | — |   | 1,596,440 |   |
| Other income  (expense)                       |       |          |       |   |   |   |   |   |   |
| Interest  expense                             |       | (3,573,823    | )          | (94 | ) | — |   | (3,573,917 | ) |
| Interest  income                              |       | 6,415         |       | 27,366 |   | — |   | 33,781 |   |
| Executive/administration  income (expense)    |       | 4,094,152     |       | (4,094,152 | ) | — |   | — |   |
| Other  (expense) income, net                  |       | (70,692       | )          | 151,131 |   | — |   | 80,439 |   |
| Equity in  earnings of subsidiary guarantors  |       | 971,150       |       | — |   | (971,150 | ) | — |   |
| Total other  income (expense)                 |       | 1,427,202     |       | (3,915,749 | ) | (971,150 | ) | (3,459,697 | ) |
| Income  before income taxes                   |       | (1,863,257    | )          | 971,150 |   | (971,150 | ) | (1,863,257 | ) |
| Income tax  expense                           |       | 556,120       |       | — |   | — |   | 556,120 |   |
| Net income                                    |       | $             | (2,419,377 | ) | $ | 971,150 |   | $ | (971,150 | ) | $ | (2,419,377 | ) |

 

13

----

 

Condensed consolidated statement of cash flows for thethirteen week period from January 1, 2004 through April 3, 2004 (unaudited):

 
| ** **                                                                                             | ** ** | **Predecessor** | ** ** |
|--------------------------------------------------------------------------------------------------------|------------|-----------------|------------|
| ** **                                                                                             | ** ** | ** **      | ** ** | **Subsidiary** | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                                                                                             | ** ** | **Parent**      | ** ** | **Guarantors** | ** ** | **Eliminations** | ** ** | **Total** | ** ** |
| **Cash  flows from operating activities**                                                              |       |            |       |   |   |   |   |   |   |
| Net income                                                                                             |       | $               | 1,357,061  |   | $ | 1,674,037 |   | $ | (1,674,037 | ) | $ | 1,357,061 |   |
| Adjustments  to reconcile net income to net cash provided by (used in) operating  activities:          |       |            |       |   |   |   |   |   |   |
| Depreciation  of property and equipment                                                                |       | 448,385         |       | 231,985 |   | — |   | 680,370 |   |
| Equity in  earnings of subsidiary guarantors                                                           |       | (1,674,037      | )          | — |   | 1,674,037 |   | — |   |
| Compensation  expense for Employee Stock Ownership Trust shares released and committed to  be released |       | 1,156,435       |       | — |   | — |   | 1,156,435 |   |
| Compensation  expense for stock options                                                                |       | 713,433         |       | — |   | — |   | 713,433 |   |
| Stock  compensation plans                                                                              |       | 309,859         |       | — |   | — |   | 309,859 |   |
| Changes in  assets and liabilities                                                                     |       |            |       |   |   |   |   |   |   |
| Trade  accounts receivable                                                                             |       | 345,888         |       | 5,657,775 |   | — |   | 6,003,663 |   |
| Interdivisional  receivables/payables, net                                                             |       | 7,578,257       |       | (7,578,257 | ) | — |   | — |   |
| Inventories                                                                                            |       | 1,020,378       |       | (2,321,253 | ) | — |   | (1,300,875 | ) |
| Prepaid  expenses and other current assets                                                             |       | 88,560          |       | (107,210 | ) | — |   | (18,650 | ) |
| Other  noncurrent asset                                                                                |       | —          |       | (12,799 | ) | — |   | (12,799 | ) |
| Trade  accounts payable and accrued expenses                                                           |       | (919,643        | )          | (997,085 | ) | — |   | (1,916,728 | ) |
| Net cash  provided by (used in) operating activities                                                   |       | 10,424,576      |       | (3,452,807 | ) | — |   | 6,971,769 |   |
| **Cash  flows from investing activities**                                                              |       |            |       |   |   |   |   |   |   |
| Payments  received on notes receivable                                                                 |       | 346,678         |       | — |   | — |   | 346,678 |   |
| Proceeds  from the sale of investments                                                                 |       | 7,000,000       |       | — |   | — |   | 7,000,000 |   |
| Purchases of  investments                                                                              |       | (17,015,154     | )          | — |   | — |   | (17,015,154 | ) |
| Capital  expenditures                                                                                  |       | (737,216        | )          | (446,672 | ) | — |   | (1,183,888 | ) |
| Net cash  (used in) investing activities                                                               |       | (10,405,692     | )          | (446,672 | ) | — |   | (10,852,364 | ) |
| **Cash  flows from financing activities**                                                              |       |            |       |   |   |   |   |   |   |
| Change in  book overdraft                                                                              |       | —          |       | (588,115 | ) | — |   | (588,115 | ) |
| Net increase  in the line of credit                                                                    |       | —          |       | 1,000,000 |   | — |   | 1,000,000 |   |
| Principal  payments on long-term debt                                                                  |       | (618,094        | )          | (5,605 | ) | — |   | (623,699 | ) |
| Net cash  (used in) provided by financing activities                                                   |       | (618,094        | )          | 406,280 |   | — |   | (211,814 | ) |
| Net (decrease)  in cash and cash equivalents                                                           |       | (599,210        | )          | (3,493,199 | ) | — |   | (4,092,409 | ) |
| **Cash and  cash equivalents**                                                                         |       |            |       |   |   |   |   |   |   |
| Beginning of  period                                                                                   |       | 1,652,570       |       | 3,638,097 |   | — |   | 5,290,667 |   |
| End of  period                                                                                         |       | $               | 1,053,360  |   | $ | 144,898 |   | $ | — |   | $ | 1,198,258 |   |

 

14

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Condensed consolidated statement of cash flows for thethirteen week period from January 1, 2005 through April 2, 2005(unaudited):

 
| ** **                                                                       | ** ** | **Successor** | ** ** |
|----------------------------------------------------------------------------------|------------|---------------|------------|
| ** **                                                                       | ** ** | ** **    | ** ** | **Subsidiary** | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                                                                       | ** ** | **Parent**    | ** ** | **Guarantors** | ** ** | **Eliminations** | ** ** | **Total** | ** ** |
| **Cash flows  from operating activities**                                        |       |          |       |   |   |   |   |   |   |
| Net income                                                                       |       | $             | (2,419,377 | ) | $ | 971,150 |   | $ | (971,150 | ) | $ | (2,419,377 | ) |
| Adjustments  to reconcile net income to net cash (used-in) operating activities: |       |          |       |   |   |   |   |   |   |
| Depreciation  of property and equipment                                          |       | 621,940       |       | 325,854 |   | — |   | 947,794 |   |
| Amortization  of intangibles                                                     |       | 967,812       |       | 205,834 |   | — |   | 1,173,646 |   |
| Amortization  of bond issuance cost                                              |       | 170,700       |       | — |   | — |   | 170,700 |   |
| Equity in  earnings of subsidiary guarantors                                     |       | (971,150      | )          | — |   | 971,150 |   | — |   |
| Deferred tax  liability                                                          |       | 456,000       |       |   |   |   |   | 456,000 |   |
| Other equity  based compensation plans                                           |       | (43,920       | )          |   |   |   |   | (43,920 | ) |
| Changes in  assets and liabilities                                               |       |          |       |   |   |   |   |   |   |
| Trade  accounts receivable                                                       |       | 921,203       |       | 393,646 |   | — |   | 1,314,849 |   |
| Interdivisional  receivables/payables, net                                       |       | 3,608,293     |       | (3,608,293 | ) | — |   | — |   |
| Inventories                                                                      |       | 1,238,029     |       | (115,250 | ) | — |   | 1,122,779 |   |
| Prepaid  expenses and other current assets                                       |       | (290,057      | )          | (318,612 | ) | — |   | (608,669 | ) |
| Other  noncurrent asset                                                          |       | (9,642        | )          | (12,068 | ) | — |   | (21,710 | ) |
| Trade  accounts payable and accrued expenses                                     |       | (882,894      | )          | 1,159,753 |   | — |   | 276,859 |   |
| Accrued  interest                                                                |       | (3,964,844    | )          | — |   | — |   | (3,964,844 | ) |
| Net cash  (used in) operating activities                                         |       | (597,907      | )          | (997,986 | ) | — |   | (1,595,893 | ) |
| **Cash  flows from investing activities**                                        |       |          |       |   |   |   |   |   |   |
| Capital  expenditures                                                            |       | (1,645,742    | )          | (155,945 | ) | — |   | (1,801,687 | ) |
| Net cash  (used in) investing activities                                         |       | (1,645,742    | )          | (155,945 | ) | — |   | (1,801,687 | ) |
| **Cash  flows from financing activities**                                        |       |          |       |   |   |   |   |   |   |
| Change in  book overdraft                                                        |       | 1,158,175     |       | (1,049,625 | ) |   |   | 108,550 |   |
| Net cash  provided by (used in) financing activities                             |       | 1,158,175     |       | (1,049,625 | ) | — |   | 108,550 |   |
| Net  (decrease) in cash and cash equivalents                                     |       | (1,085,474    | )          | (2,203,556 | ) | — |   | (3,289,030 | ) |
| **Cash and  cash equivalents**                                                   |       |          |       |   |   |   |   |   |   |
| Beginning of  period                                                             |       | 1,085,474     |       | 2,203,556 |   | — |   | 3,289,030 |   |
| End of  period                                                                   |       | $             | —     |   | $ | — |   | $ | — |   | $ | — |   |

 

15

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

 

As a result of the acquisition transaction discussedbelow and in Note 3 to our unaudited Consolidated Financial Statements, thefollowing discussion relates to the financial condition and results ofoperations of our Company, or the “Successor” as of and for the period ended April 2,2005.  Included in our discussions arethe results of operations of our predecessor company, or the “Predecessor” forthe thirteen week period ended April 3, 2004.  This section should be read inconjunction with our unaudited Consolidated Financial Statements and consideredwith “—Quantitative and Qualitative Disclosures About Market Risk” and“Cautionary Statements Regarding Forward Looking Statement,” included elsewherein our filing.

 

As a result of the acquisition transaction in which weacquired our business and related financings, the historical consolidatedfinancial data of the Predecessor may not be comparable to the Successor’sconsolidated financial data.  Mostnotably, the liquidity position of the Successor is substantially differentthan that of the Predecessor, including the overall level of debt and resultingamount of interest expense in fiscal periods subsequent to June 30, 2004.

 

**Our Company**

 

We are the leading supplier ofindividual and group military field rations to the Department of Defense (the“DoD”). We specialize 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 customers alsoinclude Kraft Foods, Inc., Gerber Products Company, Quaker Oats Company,the Canadian Ministry of Defense, retail and grocery stores including WalgreenCompany, 7-Eleven, Inc., The Kroger Company, Publix Super Markets andMeijer.

 

**The Transaction**

 

On December 3, 2003, theSuccessor and Veritas Capital Management II, L.L.C. entered into an AssetsPurchase and Sale Contract with the Predecessor and its subsidiaries, The WornickCompany Right Away Division, a Nevada corporation, The Wornick Company RightAway Division, L.P., a Texas limited partnership, and Right Away ManagementCorporation, a Texas corporation.  The gross purchase price of thebusiness was $155 million, of which $150 million was paid to the sellers at theclosing and the remaining $5 million was paid to an escrow agent as escrow forthe sellers’ obligations under the Assets Purchase and Sale Contract.  Theacquisition transaction closed on June 30, 2004.

 

The Successor funded the purchaseprice and the related fees and expenses with the proceeds of its offering ofthe original notes and the equity investments in TWC Holding LLC, the parent ofthe Successor, as follows:

 

•                  the purchaseby the equity investors of Class A interests in TWC Holding LLC for$37.5 million in cash; and

 

16

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•                  the contribution byTWC Holding LLC to the capital of the Successor of all cash received by it fromthe equity investors; and

 

•                  net proceeds to theSuccessor of approximately $121.0 million from the issuance and sale ofthe original $125.0 million of senior notes; and

 

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

 

The closing of the offering of theoriginal notes occurred simultaneously with the closing of the Acquisition, ournew working capital facility (described below) and the other financingtransactions described above.

 

We entered into a new senior securedrevolving working capital credit facility of up to $25 million concurrentlywith the closing of the Acquisition and the offering. We make monthly interestpayments on amounts borrowed under the facility at an annual adjustableinterest rate calculated in accordance with the terms of the applicablepromissory note.

 

**Results of Operations**

 

**Comparison of the thirteen weeksended April 2, 2005 to the thirteen weeks ended April 3, 2004**

 

*Net Sales*.  Our net sales for the thirteen weeks ended April 2,2005 were $58.8 million, representing an increase of $22.7 million, or63.0%, compared to net sales of $36.1 million for the thirteen weeks endedApril 3, 2004. The increase in net sales resulted primarily fromapproximately $19.9 million increase in sales to the DoD ($6.7 million increasein sales of Unitized Group Rations-A (UGR-A’s) and $13.3 million increase inMRE’s). Co-manufacturing sales increased approximately $3.2 million dueprimarily to increased sales to Kraft ($650,000), Gerber ($380,000) and Quaker($1,710,000).

 

*Gross Profit.*  Ourgross profit for the thirteen weeks ended April 2, 2005 was $6.5 million,representing an increase of approximately $99,000, or 1.6%, compared togross profit of $6.4 million for the thirteen weeks ended April 3, 2004.As a percentage of net sales, our gross profit was 11.0% and 17.6% for thethirteen weeks ended April 2, 2005 and the thirteen weeks ended April 3,2004, respectively.  Gross profit on sales to the DoD decreased as apercentage of sales by 2.5% (approximately$5.7 million and $5.6 million, for the thirteen week periods ended April 2,2005 and April 3, 2004, respectively) due to productmix, and competitive pricing pressure on OCONUS (Outside Continental UnitedStated) shipments and lower sales prices for MRE surge volume sales as comparedto base and add-on volume sales for the thirteen weeks ended April 3,2004.  Gross profit on Branded sales decreased by approximately $395,000primarily due to lower than expected sales volumes.

 

*Selling, Generaland Administrative Expenses.*  Our selling, general and administrativeexpenses for the thirteen weeks ended April 2, 2005 were $4.9 million,representing a decrease of approximately $469,000, or 8.8%, compared toselling, general and administrative expenses of $5.3 million for the thirteenweeks ended April 3, 2004.  Selling,general and administrative expenses were 8.3% of net sales for the thirteenweeks ended April 2, 2005 as compared to 14.7% for the thirteen weeksended April 3, 2004.  The decreasewas largely due to charges recorded by the Predecessor relating to

 

17

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the value of shares committed to be released to theESOT and other compensatory stock plans maintained by the Predecessor, whichdid not recur in the first thirteen weeks of 2005 and which were partiallyoffset by charges related to increased depreciation and amortization related tothe acquisition that was completed on June 30, 2004 and resulted in acharge to income from operations of approximately $1.2 million for amortizationof intangible assets.

 

*Operating Profit.*  Ourprofit from operations was approximately $1.6 million for the thirteen weeksended April 2, 2005, representing an increase of approximately $568,000,or 55.2%, compared to a profit of approximately $1,000,000 for the thirteen weeksended April 3, 2004. This increase in profit from operations resulted fromdecreased cost associated with the various Predecessor stock compensation plansdescribed above and increased sales volumes for the thirteen weeks ended April 2,2005 as compared to thirteen weeks ended April 3, 2004.

 

*Interest Expense.*  Ourinterest expense for the thirteen weeks ended April 2, 2005 wasapproximately $3.6 million, representing an increase of approximately $3.5million compared to interest expense of approximately $50,000 for the thirteenweeks ended April 3, 2004. The increase in interest expense resulted fromthe issuance of the $125 million principal amount of our long-term debt, whichaccounts for approximately $3.4 million of interest expense, approximately $171,000in bond issue cost amortization and $5,000 in interest expense related toborrowings under our line of credit.

 

*Interest Income.*  Ourinterest income for the thirteen weeks ended April 2, 2005 wasapproximately $34,000, representing an decrease of approximately $172,000compared to interest income of approximately $205,000 for the thirteen weeksended April 3, 2004. The decrease in interest income resulted frominterest earned on investments held by the Predecessor which were not purchasedin the acquisition transaction.

 

*Other Income(Expense), Net.*  Our other income (expense),net for the thirteen weeks ended April 2, 2005 was approximately $80,000,representing a decrease of approximately $120,000 compared to other income(expense), net of approximately $200,000 for the thirteen weeks ended April 3,2004.  The decrease in other income was partially the result of thereduction of $46,000 of U.S. government payments from the Value EngineeringChange program (the “VE program”).  The VE program provides incentives forU.S. Government contractors to make cost savings proposals to the DefenseSupply Center Philadelphia (“DSCP”). Once the DSCP accepts a contractor’s VEproposal, the contractor is awarded 50% of the resulting industry-wide savingsfor a period of three years following the issuance by the DSCP, which isresponsible for the procurement of military field rations for the DoD, of acontract modification requiring implementation of the proposed change asoutlined in the accepted VE proposal. Other expense was also increased by$75,000 relating to management fees paid to Veritas.

 

*Income Tax Expense.* Expenses related to federal, state and local taxes for the thirteen weeks endedApril 2, 2005 was approximately $556,000 compared to approximately $27,000for the thirteen weeks ended April 3, 2004.  As described further in note 7 to ourfinancial statements, the Predecessor Company was qualified under Subchapter-Sof the Internal Revenue Code, and therefore not subject to Federal Tax whereasthe Successor Company is taxed as a C-Corporation.  During the thirteen weeks ended April 2,2005, we recorded approximately $456,000 of additional valuation

 

18

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allowance on net deferred tax assets associated withthe indefinite reversal period related to Goodwill and approximately $100,000for Ohio Franchise taxes in the current year.

 

*Net Income (Loss).*  As aresult of the foregoing, we incurred a net loss of approximately $2.4 millionfor the thirteen weeks ended April 2, 2005, representing a decrease in netincome of $3.8 million compared to net income of $1.4 million in the thirteenweeks ended April 3, 2004.

 

**Operating SegmentResults**

 

**Comparison of thethirteen weeks ended April 2, 2005 to the thirteen weeks ended April 3,2004**

 

*Net Sales.*  Netsales for our Right Away Division (“RAD”) segment increased by approximately$20.0 million primarily due to an increase in sales to the DoD (MRE $13.3million and URG-A $6.7 million).  Net sales for our Prepared Foods Division (“PFD”) increasedapproximately $2.8 million (excluding inter-segment sales of approximately$12.7 million for the thirteen weeks ended April 2, 2005 and $11.9 millionfor the thirteen weeks ended April 3, 2004).  The increase in PFD sales is primarily due toincreased Co-manufacturing sales of approximately $3.2 million offset by lowertray-pack sales to the DoD of approximately $355,000.  Sales of our Branded products remainedconsistent between periods.

 

*Operating Profit.* Profit from operations increased by approximately $3.7 million for the RADsegment.  Included in operating profit for the RAD segments is anestimated $2.2 million of gross profit that would have been previouslyrecognized by our PFD segment.  Increasedvolume of MRE and UGR-A shipments in the first thirteen weeks 2005 contributedto the remaining increase in operating profit which were off-set by charges foramortization of intangibles acquired in the purchase of approximately $205,000,pricing pressure on UGR-A sales outside of the continental United States andchanges in the mix between sales of surge and add-on MRE cases.  Profit from operations decreased byapproximately $5.0 million for the PFD segment. This decrease was primarily attributable to a reduction in operatingprofits from DoD sales of approximately $3.1 million ($2.2 million of grossprofit included in our RAD segment and approximately $900,000 related to thechange in mix of surge and add-on MRE case sales) and additional charges toselling, general and administrative expense of approximately $1.2 millionrelating to amortization of intangibles of approximately $968,000 andapproximately $250,000 for employee recruiting and training and marketing.  The remaining decrease in operating profitfor the PFD segment is attributable to decreased gross profits on our brandedproduct sales of approximately $395,000 attributable to lower than expectedsales volumes.

 

**Liquidity andCapital Resources**

 

The following table summarizes ournet cash provided by or (used in) our operating activities, investingactivities and financing activities and our capital

 

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expenditures for thirteen weeks ended April 2,2005 and the predecessor for the thirteen weeks ended April 3, 2004:

 
| ** **                       | ** ** | **Predecessor**        | ** ** | ** ** | **Successor**          | ** ** |
|----------------------------------|------------|------------------------|------------|------------|------------------------|------------|
| ** **                       | ** ** | **13 Week**            | ** ** | ** ** | **13 Week**            | ** ** |
| ** **                       | ** ** | **Period Ended**       | ** ** | ** ** | **Period Ended**       | ** ** |
| ** **                       | ** ** | **April 3, 2004** | ** ** | ** ** | **April 2, 2005** | ** ** |
| Net cash  provided by (used-in): |       |                   |       |       |                   |       |
| Operating  activities            |       | $                      | 6,971,769  |       |                   | $          | (1,595,893 | ) |
| Investing  activities            |       | (10,852,364            | )          |       | (1,801,687             | )          |
| Financing  activities            |       | (211,814               | )          |       | 108,550                |       |
| Capital  expenditures            |       | (1,183,888             | )          |       | (1,801,687             | )          |
|                                  |            |                        |            |            |                        |            |  |  |

 

*OperatingActivities.*Net cash provided by (used in) operating activitieswas approximately $(1.6) million and $7.0 million for the Successor thirteenweek period ended April 2, 2005, and the Predecessor thirteen week periodended April 3, 2004, respectively.  Cash generated from operationsdecreased during the first thirteen weeks of 2005 compared to the Predecessorthirteen week period ended April 3, 2004 due mostly to payments forinterest on our $125 million senior secured bond of approximately $3.4 millionand decreased margins on higher military sales volumes for the thirteen weekperiod ended April 3, 2004 associated with surge production to support thewar in Iraq.

 

*InvestingActivities.*Net cash (used in) investing activities was $(1.8)million and $(10.9) million for the Successor thirteen week period ended April 2,2005 and the Predecessor thirteen week period ended April 3, 2004,respectively. The change in the Successor thirteen week period ended April 2,2005 was primarily the result of reduced net investment activity of thePredecessor of approximately $(10.0) million and principle payments received bythe Predecessor on notes receivable of approximately $347,000.  Capitalexpenditures were $1.8 million and $1.2 million for the periods ended April 2,2005 and April 3, 2004, respectively.

 

*FinancingActivities*. Net cash provided by (used in) financing activitieswas approximately $109,000 and $(212,000) for the Successor thirteen weekperiod ended April 2, 2005 and the Predecessor thirteen week period ended April 3,2004, respectively.  Activity of the Predecessor for the thirteen weekperiod ended April 3, 2004 was primarily associated with principle paymentson it’s long-term debt arrangements and net activity associated with thePredecessor’s line of credit.  Whereas,activity for the thirteen week period ended April 2, 2005 is primarilyrelated to timing differences between funding inventory and collection ofreceivables related to UGR-A orders shipped at the end of the first thirteenweeks of 2005.

 

*Long-Term DebtExpenditures*

 

In connection with the closing of theacquisition transactions on June 30, 2004, the Predecessor’s long-termdebt was repaid, and we issued $125 million in Senior Secured Notes and enteredinto our new working capital facility. As a result, we will continue to incursignificant debt service payments including interest in future years. Totalcash interest payments related to the Senior Secured Notes will beapproximately $13.6 million on an annual basis.  We incurredapproximately $3.6 million of interest expense (including approximately$171,000 of bond amortization cost) relating to the Senior Secured Notes andour working capital facilities in the thirteen week period ended

 

20

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April 2, 2005. To the extent we have borrowingsoutstanding under our new working capital facility, we will have additionalcash interest payments.

 

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, our parentTWC Holding LLC (the “Parent Company”), and its wholly-owned financesubsidiary, TWC Holding Corp., co-issued their 13.875% Senior PIK Notes due2011, or the “Senior PIK Notes,” in the aggregate principal amount of$26,000,000.  The Senior PIK Notes earninterest at the rate of 13.875% per annum, mature on August 15, 2011 andare unsecured obligations of TWC Holding LLC and TWC Holding Corp.  Neither the Company nor any of itssubsidiaries guaranteed the Senior PIK Notes. The notes limit the Company’s ability to incur additional indebtednessand pay dividends or make other distributions as well as to make certaininvestments and sell certain assets or merge with or into other companies.  Because our Parent Company is a holdingcompany with no operations and has only its investment in the Company andbecause TWC Holding Corp. has no independent operations or assets, future cashflows of the Company through 2011 will be required to service the Senior PIKnotes.

 

We expect our capital expenditures in2005 to be approximately $6.4 million, primarily to support plant renewal,efficiency improvements and expansion of our co-manufacturing business.

 

Our principal sources of liquidityare cash flow generated from operations and borrowings under our new workingcapital facility.  As of April 2, 2005, we had no borrowings underthe working capital facility.  We have incurred approximately $5,000 ininterest expense on the working capital facility since December 31,2004.  In addition to fluctuations in business volume, cash flows fromoperations are affected by contract terms for billing and collection. Ourliquidity will also continue to be dependent on a number of other factors,including the timing of collection on our contract receivables, processing ofweekly and bi-weekly payroll and associated taxes and payment to our suppliers.Our principal uses of cash will be utilized to meet debt service requirements,finance our capital expenditures and provide working capital. Based on ourcurrent level of operations, our revolving line of credit facility and ouranticipated growth, we believe that the cash flows generated by operations andour revolving line of credit will be sufficient to fund our operations for thenext 12 months and for our currently anticipated needs beyond that period.Our future operating performance and ability to extend or refinance ourindebtedness will be dependent on future economic conditions and financial,business and other factors that are beyond our control.

 

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**Item 3.****                                                          ****Quantitative****and Qualitative Disclosures about Market Risk**

 

We are exposed to market risk,primarily from the impact of interest rate changes on our use of variable ratedebt. Our exposure to market risks from foreign currency and commodity pricefluctuations is limited since most of our purchases and sales are denominatedin U.S. dollars and raw commodities do not comprise a significant percentage ofour costs. Our sales to the Canadian military comprised approximately 1% of oursales in 2004, on a pro forma basis, and we anticipate entering into, from timeto time,  foreign currency forwardcontracts and other hedges to manage our exposure to fluctuations in foreigncurrency exchange rates for the Canadian dollar, the impact of which is notsignificant.  Other than with respect toour sales to the Canadian military, we generally do not have exposure toforeign currency risk.  In addition,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.  Otherthan with respect to our sales to the Canadian military, we do not hedge ourexposure to foreign currency or commodity 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 bank debtbears interest at variable interest rates tied to the prime interest rate. Theuse of variable rate debt to finance our operations and capital improvementsexposes us to variability in interest payments due to changes in interestrates.

 

We had no exposure to variable ratesat April 2, 2005.  We believe that ahypothetical 1% increase in interest rates on our variable rate debt for aone-year period would have had no significant impact on our net income.

 

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

 

Based on a recent evaluation, as ofthe end of the period covered by the Quarterly Report on Form 10-Q, theCompany’s Chief Executive Officer and Chief Financial Officer have concludedthat the Company’s disclosure controls and procedures as defined in the ExchangeAct Rules 13a-15(e) and 15d-15(e) are effective in timelyalerting them to material information relating to the Company required to beincluded in periodic reports filed or submitted under the Securities andExchange Act of 1934, as amended.

 

There were no changes in the Company’sinternal control over financial reporting that occurred during the thirteenweek period ended April 2, 2005, constituting the Company’s latest fiscalquarter, that have materially affected, or are reasonably likely to materiallyaffect, the Company’s internal control over financial reporting.

 

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**FORWARD-LOOKINGSTATEMENTS**

 

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 similarmeaning. They may relate to, among other things:

 

•                  ourliquidity and capital resources;

 

•                  ourcontracts with the U.S. Government;

 

•                  the U.S. Departmentof Defense budget in general and U.S. military activity in particular;

 

•                  ourco-manufacturing plans;

 

•                  competitivepressures and trends in our industry;

 

•                  prevailing interestrates;

 

•                  legal proceedingsand regulatory matters;

 

•                  other risks relatedto our Senior Secured Notes (including the value of the collateral);

 

•                  statements withrespect to the Transactions (as defined herein);

 

•                  general economicconditions; and

 

•                  our development andexpansion plans and expectations for the future.

 

These forward-looking statementsreflect our current views with respect to future events and are based onassumptions and subject to risks and uncertainties, including, but not limitedto, economic, competitive and governmental factors outside of our control, thatmay cause actual results to differ materially from trends, plans orexpectations 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.

 

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**PART II****– OTHER INFORMATION**

 

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

 

We are a defendant in various legalactions arising in the normal course of business, the outcomes of which, in theopinion of management, neither individually nor in the aggregate are likely toresult in a material adverse effect on our business, results of operations,financial position or cash flows.

 

**Item 2.****                                                          ****Unregistered Sales of Equity Securities and Use of Proceeds.**

 

None.

 

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

 

None.

 

**Item 4.****                                                          ****Submission of Matters to a Vote of Securities Holders.**

 

None.

 

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

 

None.

 

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

 
| **No.** | ** ** | **Description**                                                                                                                                                            |
|---------|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 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)               |

 

24

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**Signatures**

 

Pursuant to the requirements of the Securities andExchange Act of 1934, the Registrant has duly caused this report to be signedon its behalf by the undersigned thereunto duly authorized.

 

 
|                               | THE WORNICK COMPANY |
|------------------------------------|---------------------|
|                               | (Registrant)        |
|                               |                |   |
| Date:  May 11, 2005 | By:                 | /s/ MICHAEL M. THOMPSON |   |
|                               |                | Michael M. Thompson |
|                               |                | President and Chief Executive Officer |
|                               |                | (Principal Executive Officer) |
|                               |                |   |
|                               |                |   |
| Date:  May 11, 2005 | By:                 | /s/ JOHN F. MCQUAY |   |
|                               |                | John F. McQuay |
|                               |                | Chief Financial Officer and Treasurer |
|                               |                | (Principal Financial Officer and |
|                               |                | Principal Accounting Officer) |

 

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