<PAGE>
 
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                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C.  20549
                            -----------------------
                                        
                                   FORM 10-K
                            -----------------------
(MARK ONE)
         [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934
                   FOR THE FISCAL YEAR ENDED OCTOBER 3, 1998
 
                                      OR
 
         [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934
                    For the transition period from       to
 
                       COMMISSION FILE NUMBER 333-20155

                        GORGES/QUIK-TO-FIX FOODS, INC. 
            (Exact name of registrant as specified in its charter)


          Delaware                                      58-2263508
       (State or other                               (I.R.S. Employer
jurisdiction of incorporation)                      Identification No.)

                               9441 LBJ FREEWAY
                                   SUITE 214
                             DALLAS, TEXAS 75243  

                   (Address of principal executive offices)
                                (972) 690-7675
                        (Registrant's telephone number)

          SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

                                     NONE
                                        
          SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

                                     NONE

                               (Title of class)
                                        
     Indicate by check mark whether the registrant:  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.  Yes  X     No
                                              -----     -----

     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.  [X]

     The number of shares of the registrant's Common Stock outstanding at
December 21, 1998 was 1,000.  There is no public trading market for shares of
the registrant's Common Stock.

                      DOCUMENTS INCORPORATED BY REFERENCE
                                        
     Certain exhibits to this Form 10-K are incorporated by reference in Part
IV.

================================================================================
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<TABLE>
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                                    GORGES/QUIK-TO-FIX FOODS, INC.

                                          TABLE OF CONTENTS

                                                                                                 Page
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<S>                                                                                              <C>
PART I

         Item 1.  Business   . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  1

         Item 2.  Properties   .  .  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

         Item 3.  Legal  Proceedings     . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

         Item 4.  Submission of Matters to a Vote of Security Holders    . . . . . . . . . . . . . 10

PART II

         Item 5.  Market for Registrant's Common Stock and Related Stockholder Matters    . . . .  11

         Item 6.  Selected  Financial  Data   .  .  .  . . . . . . . . . . . . . . . . . . . . . . 12

         Item 7.  Management's Discussion and Analysis of Financial Condition and Results of
                  Operations  .  .  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  12

         Item 8.  Financial Statements and Supplementary Data   . . . . . . . . . . . . . . . . .  23

         Item 9.  Changes in and Disagreements with Accountants on Accounting and Financial
                  Disclosure  .  .  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  23

PART III

         Item 10. Directors and Executive Officers of the Registrant . . . . . . . . . . . . . . . 23

         Item 11. Executive  Compensation .  .  .  . . . . . . . . . . . . . . . . . . . . . . . . 24

         Item 12. Security Ownership of Certain Beneficial Owners and Management . . . . . . . . . 25

         Item 13. Certain Relationships and Related Transactions . . . . . . . . . . . . . . . . . 25

PART IV

         Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K  . . . . . . . . 28

SIGNATURES  .  .  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  29

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS  . . . . . . . . . . . . . . . . . . . . . . . . . . .  F-1

</TABLE>
<PAGE>
 
                         GORGES/QUIK-TO-FIX-FOODS, INC.
                                        
                        1998 ANNUAL REPORT ON FORM 10-K

                                     PART I

ITEM 1.  BUSINESS

GENERAL

     Gorges/Quik-to-Fix Foods, Inc., (the "Company"), or its representatives,
may make forward looking statements, oral or written, including statements in
this report's Management's Discussion and Analysis of Financial Condition and
Results of Operations, press releases and filings with the Securities and
Exchange Commission (the "Commission"), regarding estimated future operating
results, planned capital expenditures (including the amount and nature thereof)
and the Company's financing plans, if any, related thereto, changes in the
Company's financial position and other plans and objectives for future
operations.  Certain of the matters discussed may involve known and unknown
risks, uncertainties and other factors which may cause the actual results,
performance or achievements of the Company to be materially different from
future results, performance or achievements expressed or implied by such
forward-looking statements. Important factors that could cause the actual
results, performance or achievements of the Company to differ materially from
the Company's expectations are set forth among the factors set forth in the
"Factors Affecting Future Performance" section in Item 7 of this report or in
the description of the Company's business in Item 1 of this report, as well as
factors contained in the Company's other filings with the Commission.

     All subsequent oral and written forward looking statements attributable to
the Company or persons acting on its behalf are expressly qualified in their
entirety by these factors.  The Company assumes no obligation to update any of
these statements.  The Company's fiscal year ends on the Saturday closest to
September 30.  References in this report to "fiscal 1999," "fiscal 1998,"
"fiscal 1997," "fiscal 1996," and "fiscal 1995" refer to the twelve month
periods ended October 2, 1999, October 3, 1998, September 27, 1997, September
28, 1996, and September 30, 1995, respectively.

     The Company is a leading producer of value added processed beef products
for the foodservice industry and is one of the few companies in this segment of
the industry that markets and distributes nationally. The Company's products are
marketed under the nationally recognized Quik-to-Fix and Gorges brand names, as
well as the private labels of leading national foodservice distributors. The
Company believes that its products are well positioned to take advantage of what
it believes is a trend within the foodservice industry toward greater
outsourcing of the food preparation process. Outsourcing provides many benefits
to foodservice operators including consistent product quality, reduced
preparation costs and increased food safety.

     The Company purchases fresh and frozen beef and, to a lesser extent, pork
and poultry, which it processes into a broad range of fully cooked and ready to
cook products. The Company's two product categories are value added products and
ground beef. Value added product offerings include: (i) breaded beef items, such
as country fried steak and beef fingers; (ii) charbroiled beef, such as fully
cooked hamburger patties, fajita strips, meatballs, meatloaf and taco meat; and
(iii) other specialty products, such as fully cooked and ready to cook pork
sausage, breaded pork and turkey, cubed steaks and Philly steak slices. Ground
beef product offerings consist primarily of ready to cook individually quick
frozen ("IQF") hamburger patties. The Company operates four manufacturing
facilities, three of which are dedicated to value added products and one of
which produces primarily ground beef products. The Company's products are sold
primarily to the foodservice industry, which encompasses all aspects of away-
from-home food preparation, including commercial establishments such as fast
food restaurants and family dining restaurants and non-commercial establishments
such as healthcare providers, schools and corporations. The Company sells its
products principally through broadline and specialty foodservice distributors.
<PAGE>
 
     The Company was formed in 1996 in connection with the acquisition of the
processed beef operations (the "Business") of Tyson Foods, Inc. ("Tyson" and the
"Acquisition," respectively). Prior to the Acquisition, the Business operated as
part of Tyson, the world's largest vertically integrated poultry processor.
Tyson acquired a portion of the Business in 1989 through its acquisition of
Holly Farms. In doing so, Tyson acquired two separate beef processing companies,
Harker's, Inc. ("Harker's") and Quik-to-Fix Foods, Inc. ("Quik-to-Fix, Inc."),
each of which had been acquired by Holly Farms in 1986. In 1990, Tyson sold the
Harker's brand name and route sales division to Harker's Distribution, Inc., a
company formed by former members of Harker's management. In January 1994, Tyson
expanded its beef processing operations further by acquiring Gorges Foodservice,
Inc., ("Gorges, Inc."), a leading producer of charbroiled beef products. In
April 1996, Tyson announced its intention to sell the Business in order to
concentrate on its core poultry business. The Acquisition was consummated on
November 25, 1996.

     The Company is incorporated under the laws of the state of Delaware.  The
Company's principal executive offices are located at 9441 LBJ Freeway, Suite
214, Dallas, Texas, 75243, and its telephone number is 972/690-7675.  The
Company is a wholly owned subsidiary of Gorges Holding Corporation ("GHC"),
which, in turn, is substantially owned by CGW Southeast Partners III, L.P.
("CGW").  GHC has no business other than holding the stock of the Company, which
is the sole source of GHC's financial resources.  GHC is controlled by CGW,
which beneficially owns shares representing 54.8% of the voting interest in GHC,
(46.3% on a fully diluted basis) and has the right to designate all of the
directors of GHC.  Accordingly, CGW, through its control of GHC, controls the
Company and has the power to elect all of its directors, appoint new management,
and approve any action requiring the approval of the holders of the Company's
common stock.

RECENT DEVELOPMENTS

     Operational Restructuring Plan.  Historically, the Company has produced two
principal product lines, value added products and ground beef products.  Since
January 1998, the Company's results have been adversely affected by a number of
factors including: (i) a significant decrease in sales volume resulting from the
loss of certain national account customers; and (ii) the adverse effects on
profitability of lower margin products, especially ground beef. The Company
recently completed, with the assistance of outside consultants, a detailed
review of its operations and has begun to implement an operational restructuring
plan.  The Company has implemented or intends to implement the following
restructuring measures designed to improve operating efficiencies and better
position it to focus its efforts on its core value added products business (the
"Restructuring"):

     .  Termination of the Low Margin Ground Beef Business. On October 7, 1998,
     the Company announced its intent to exit the ground beef business to
     concentrate on its core value added products. The Company's decision to
     exit the ground beef business was based on the ground beef business being a
     low margin, commodity business. Additionally, as a middle tier producer of
     ground beef products, the Company's operating costs have been higher than
     many of its larger competitors and have been adversely affected by
     increased regulation of ground beef production and continued consolidation
     of the ground beef industry. During fiscal 1998, ground beef represented
     approximately 26.1% of the Company's total net sales.

     .  Disposition of Ground Beef Manufacturing Facility. The Company has
     offered to sell its Orange City, Iowa manufacturing facility (the "Ground
     Beef Facility"). Historically, the Ground Beef Facility has produced almost
     exclusively ground beef product offerings, representing 100% of the
     Company's total ground beef production based on weight. In December 1998,
     the Company entered into a non-binding letter of intent to sell the Ground
     Beef Facility by not later than February 1, 1999. This letter of intent is
     subject to a number of contingencies, many of which are not within the
     Company's control, including but not limited to the completion of due
     diligence by the buyer, the negotiation and execution of a definitive sale
     agreement and the approval of the buyer's board of directors. There can be
     no assurance that these contingencies will be satisfied on or before
     February 1, 1999, if at all.
<PAGE>
 
          In the event the Company is unable to consummate the proposed sale of
     the Ground Beef Facility, it intends to close this facility as soon as
     practicable to facilitate its exit from the ground beef business and to
     reduce costs.  Should the Company close the Ground Beef Facility, it will
     continue to explore opportunities to sell this facility.  Any proceeds from
     the sale of the Ground Beef Facility are required to be used to reduce the
     Company's borrowings under the Credit Facility (as defined herein).  The
     Company incurred significant charges relating to the writedown in value or
     loss on sale of the Ground Beef Facility in the fiscal year ended October
     3, 1998 and expects to incur additional charges in the first quarter of
     fiscal year 1999.  See "Management's Discussion and Analysis of Financial
     Condition and Results of Operations."

     .  Elimination of Lower Margin Value Added Product Offerings. The Company
     has identified a number of value added product offerings whose contribution
     margins are not sufficient to justify their continued production. The
     Company intends to eliminate these product offerings in order to focus on
     its higher margin value added product offerings. The Company believes that
     elimination of less profitable product lines will allow it to produce more
     efficiently its remaining value added product offerings.

     .  Reduction of Working Capital Requirements and Corporate Overhead. The
     Company intends to reduce inventory levels in connection with its exit from
     the ground beef business and the elimination of lower margin value added
     product offerings. The Company also has identified various other areas in
     which it believes it can reduce its overhead expenses. Additionally, the
     Restructuring contemplates a reduction in selling, general and
     administrative costs, as well as other corporate overhead costs.

     .  Strengthening of Management Team. In connection with the Restructuring,
     the Company has strengthened its management team by eliminating the
     position of President, hiring a new Vice President of Operations and
     creating the new position of Senior Vice President of Sales and Marketing.
     The Company believes this will allow it to more efficiently implement the
     Restructuring and operate its business following the Restructuring. See
     "Directors and Executive Officers of the Registrant."

     Financial Restructuring. As of October 3, 1998, the Company was not in
compliance with certain technical or financial and limit ratio covenants under
its credit agreement (the "Credit Agreement") with NationsBank, N.A. (the
"Bank") as agent for a syndicate of banks and financial institutions which
provides the Company with a $30 million revolving credit facility (the
"Revolver") and a $40 million term loan facility (the "Term Loan" and, together
with the Revolver, the "Credit Facility"). As a result of its noncompliance
under the Credit Facility, the Company was prohibited by the Bank from borrowing
additional amounts under the Revolver or making the December 1, 1998 interest
payment (the "Interest Payment") on its Senior Subordinated Notes Due 2006,
Series B (the "Notes"). In order to address the company's non-compliance under
the Credit Facility and to facilitate the Interest Payment, the Company has
implemented or intends to implement the following measures designed to address
the Company's short-term and long-term financing needs (the "Financial
Restructuring"):

     .  Amendment to Credit Facility. On October 29, 1998, the Company entered
     into an amendment to the Credit Facility (the "Amendment") that replaces
     the existing covenants with a new set of covenants under which the Company
     can borrow funds based on the levels of its accounts receivable and
     inventory. The implementation of new covenants under the Credit Facility
     may have the effect of reducing the amount available under the Revolver
     depending on the levels of accounts receivable and inventory at any given
     time. The Amendment also shortens the maturity of the Credit Facility from
     November 2001 to November 2000. The change in maturity of the Credit
     Facility does not affect the repayment schedule under the Credit Facility,
     except that all payments that previously were due between November 2000 and
     November 2001 (an aggregate of $11.4 million) will be due on November 30,
     2000. Additionally, the Amendment provides that on March 31, 1999, the
     Company must pay a fee under the Credit Facility equal to 0.25% of the
     amounts outstanding under the Credit Facility and, thereafter, every three
     months,
<PAGE>
 
     the Company must pay a fee under the Credit Facility in cash equal to 0.50%
     of the amounts outstanding under the Credit Facility until such time as the
     Company has secured a replacement facility (the "Replacement Credit
     Facility") from another lender. The Amendment became effective on December
     21, 1998, at which time the Company was in compliance with all terms and
     conditions of the Credit Facility.

      .  Repurchase and Retirement of Notes.  On October 29, 1998, the Company
     announced a tender offer pursuant to which it offered to purchase not less
     than $36,000,000 (the "Minimum Tender Condition") and up to $46,000,000
     aggregate principal amount of its Notes (the "Offer").  On December 2,
     1998, the Company elected to waive all conditions to the consummation of
     the Offer, including the Minimum Tender Condition, and consummated the
     Offer with respect to $29,970,000 aggregate principal amount of Notes (the
     "Tendered Notes").  Additionally, on December 21, 1998, the Company's
     controlling stockholder, CGW, contributed to the Company $18,030,000
     aggregate principal amount of Notes (the "CGW Notes") acquired by CGW
     through open market purchases.  The Tendered Notes and the CGW Notes were
     retired on December 21, 1998.  The repurchase and retirement of the
     Tendered Notes and the CGW Notes were financed through an equity investment
     by CGW in GHC totaling $16,900,000.

     .  Bridge Loan. On December 21, 1998 the Company obtained from CGW a
     $4,000,000 subordinated bridge loan (the "Bridge Loan"), the proceeds of
     which were used to fund the Interest Payment. The terms of the Bridge Loan
     provide for a one year loan to the Company at an interest rate of 9%. On
     December 15, 1999, if the Company has not obtained a Replacement Credit
     Facility, the Bridge Loan will automatically convert to equity in GHC.

     .  The Replacement Senior Facility. As a result of the increased fees
     payable under the Credit Facility pursuant to the Amendment, the Company is
     seeking a commitment from several alternative lenders with respect to the
     Replacement Credit Facility. There can be no assurance that the Company
     will successfully implement the Replacement Credit Facility, or that if
     obtained, such facility will have terms and conditions satisfactory to the
     Company or that are more favorable than the Credit Facility.

     As a result of the effectiveness of the Amendment, the retirement of the
Tendered Notes and the CGW Notes and the obtaining of the Bridge Loan, as of
December 21, 1998, the Company was in compliance with all terms and conditions
under the Credit Agreement and the indenture pursuant to which the Notes were
issued.  The Company believes that the Financial Restructuring will address its
short and long-term financing needs and will allow management to concentrate on
the completion of the Restructuring.  There can be no assurance, however, that
the Restructuring or the Financial Restructuring will be successful in improving
the Company's financial condition and results of operations.  Factors that may
affect the success of the Restructuring or the Financial Restructuring include,
among other things, the sale or closure of the Ground Beef Facility, the
implementation of the Replacement Credit Facility and the matters set forth in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Factors Affecting Future Performance."


INDUSTRY OVERVIEW

     The Foodservice Industry. Purchases of food prepared away from home have
grown consistently for over forty years and currently represent approximately
50% of total food purchases. Demand has risen due to various demographic
changes, including increases in personal disposable income, the increasing
number of single-parent households and the rising number of dual income
families. The Company believes it has strengthened its relationships with
broadline and specialty foodservice distributors over the last decade, a period
of industry consolidation. Furthermore, management believes that the Company is
well positioned to continue to identify and capitalize on certain segments of
the foodservice industry that are growing at a faster rate than the foodservice
industry overall.
<PAGE>
 
     The Company believes restaurants and other foodservice providers are 
seeking to outsource more of the ''back-of-the-house'' food preparation process
in order to reduce preparation costs and to ensure product safety, quality and
consistency. Management believes the growth in the foodservice industry,
combined with the trend of outsourcing food preparation, will enhance the growth
of value added food processors.

     The Beef Industry.  Beef is the most consumed protein in the United States 
on the basis of boneless, per capita consumption. Although per capita beef
consumption in the United States declined through the late 1980s as consumers
became more concerned about the level of fat in their diet, the beef industry
has taken steps to maintain beef as the nation's number one protein. Beef is now
leaner than ever, with the average cut of beef 27% leaner than in 1985, due to
closer trimming of fat, new leaner cuts of beef and the use of leaner cattle.

     According to the Beef Industry Council, within the foodservice industry,
beef consumption increased from 6.22 billion beef servings in commercial
restaurants in 1991 to 6.68 billion servings in 1994, a 7.4% increase.
Furthermore, according to NPD/CREST, ground beef represents 79% of all beef
served away from home. Fueled by high value ''combo'' meals in the fast food
segment, ground beef volume sales in the restaurant industry grew by 2.5% in
1996.

     A number of national associations conduct research on consumer preferences
for beef, run programs to promote the consumption of beef and conduct research
on improvement of the beef product. These associations, which provide valuable
category promotion, include The National Cattlemen's Association, The Beef
Industry Council and the National Livestock and Meat Board.

     Value Added Beef Processors.  Value added beef processors such as the
Company purchase fresh and frozen beef and process it into a broad range of
fully cooked and ready to cook products sold primarily to the foodservice
industry, including fast food and family dining restaurants, wholesale clubs,
healthcare providers, schools and corporations. The Company believes that
foodservice operators' priorities are quality, product consistency, food safety,
ease of preparation and price and that its products satisfy these priorities.

PRODUCT CATEGORIES

     The Company manufactures and markets an extensive variety of IQF, fully
cooked and ready to cook beef, pork and poultry products. The Company's products
are marketed under the nationally recognized Quik-to-Fix and Gorges brand names
as well as the private labels of leading national foodservice distributors.

     Value Added Products.  The Company's breaded beef products are sold 
primarily under the Quik-to-Fix brand. The flagship product of the Quik-to-Fix
brand is country fried steak. The primary customers for breaded beef products
are commercial foodservice operators, including Shoney's, Cracker Barrel,
Chili's, Steak and Ale and Marriott Corporation.

     Charbroiled beef products are the flagship items of the Gorges brand. Under
the Gorges brand, the Company offers an extensive variety of fully cooked
charbroiled beef products, including charbroiled steak burgers, meatballs,
meatloaf, taco meat and chili. Customers for charbroiled beef products include a
wide variety of commercial users such as Ryan's, Golden Corral and Marriott
Corporation, along with non-commercial users such as hospitals, schools and
corporations. Growth in charbroiled beef products has been driven by customers'
desire to minimize preparation time and concerns about the food safety issues
surrounding the handling of raw beef products. The USDA Commodity Reprocessing
Program for schools has also played an important role in the growth of these
products, as it allows the Company to couple the 
<PAGE>
 
processing of federally donated commodity products with the sale of other value
added products, thereby increasing penetration in the important school
foodservice program segment.

     Other value added products include a wide variety of fully cooked and 
ready to cook items such as charbroiled beef strips, pork sausage, beef luncheon
steaks, cubed steaks, pre-cooked rib patties, meatloaf, stew beef and breaded
turkey products. In March 1996, Quik-to-Fix Beef Steak Slices were introduced
for use in Philly steak sandwiches, stir-fry and other sliced steak dishes.
Customers for these specialty items include Tyson, Stouffer's, Steak and Ale,
McLane, and Subway.

     Value added products accounted for $149.0 million (73.9%), $147.3 million
(71.9%) and $149.6 million (64.3%) of sales (excluding frozen portion steak
sales) in fiscal 1998, fiscal 1997, and fiscal 1996, respectively.

     Ground Beef.  The Company currently serves the ground beef market
principally through the sale of IQF patties. The ground beef market is very
competitive and is served by a large number of national and regional suppliers.
Ground beef customers include Sonic, Harker's, and Sysco.

     Ground beef accounted for $56.3 million (26.7%), $57.4 million (28.1%) and
$74.7 million (32.1%) of sales (excluding frozen portion steak sales) in fiscal
1998, fiscal 1997, and fiscal 1996 respectively.  As part of the Restructuring,
the Company intends to exit the ground beef business.  Accordingly, the Company
expects that sales of ground beef products will decline significantly in fiscal
1999 and will not continue after the second quarter of fiscal 1999.

GROWTH STRATEGY

     The Company's business was acquired from Tyson on November 25, 1996. Prior
to the Acquisition, Tyson's management modified its strategy of providing a full
range of center of the plate meat proteins in addition to chicken. Accordingly
Tyson returned its focus to its core poultry business, as evidenced by its
adoption of the ''We're Chicken'' campaign in early 1996.

     The Company's principal business objective is to build its higher margin
value added business. Value added products address many of the concerns within
the foodservice industry, including cost reduction, food safety and product
quality and consistency. Management believes that by focusing on its core value
added product offerings, the Company will be better able to capitalize on its
strengths and industry trends, including the following.

     . Favorable Trends in the Foodservice Industry. Purchases of food prepared
     away from home have grown consistently for over forty years and currently
     represent approximately 50% of total food purchases. Demand has risen due
     to various demographic changes, including increases in personal disposable
     income, the increasing number of single-parent households and the rising
     number of dual income families.

     The Company believes that there is also an increasing trend within the
     foodservice industry toward outsourcing more of the food preparation
     process to reduce preparation costs and to ensure product safety, quality
     and consistency. The Company addresses these outsourcing needs by producing
     products that are precooked or ready to cook (e.g. breaded, portioned and
     seasoned) and require little "back-of-the-house" preparation.

     .  Strong Brand Names. The Gorges and Quik-to-Fix brands have been
     established for over 50 and 30 years, respectively. The Company believes
     its charbroiled beef and country fried steak customers associate the Gorges
     and Quik-to-Fix brand names with products that are high quality, safe and
     reasonably priced. The Company intends to capitalize on this brand
     recognition to increase the market penetration of its breaded beef and
     charbroiled beef products and to promote additional products under the
     Gorges and Quik-to-Fix brand names.
<PAGE>
 
     .  Focused Sales and Marketing Team. The Company's sales and marketing team
     consists of 14 experienced professionals, most of whom worked with Gorges,
     Inc., Harker's or Quik-to-Fix, Inc. prior to their acquisition by Tyson.
     Until May 1996, these sales professionals marketed substantially all of the
     Tyson product line. With volume based incentives, sales were dominated by
     high volume chicken products. The Company's sales force, now selling only
     the Company's product line, continues to be compensated based on sales
     volume and growth based incentive programs, all of which are tied to sales
     of the Company's predominantly beef based product lines.

     .  Extensive Foodservice Broker Network. Management believes that the
     Company's extensive independent foodservice broker network, consisting of
     64 brokers covering 49 states, is one of its most valuable assets. The
     brokers act as extensions of the Company's in-house sales force, providing
     sales and marketing support and an intensive sales effort focused on the
     major foodservice distributors in each of their respective regions.

     .  Strong and Diverse Customer Base. The Company has a strong and diverse
     customer base, anchored by 48 of the 50 largest broadline foodservice
     distributors. The Company's products are purchased by several the 50
     largest multi-unit restaurant chains in the United States, including
     Shoney's, Metromedia (Steak and Ale, Bennigan's and Ponderosa) and
     Advantica (Denny's, Coco's and Carrow's) as well as by institutional
     customers such as Marriott Corporation and Aramark.  The Company also
     services school districts through the USDA Commodity Reprocessing Program.

     .  Modern Facilities with Excess Capacity. As part of the Restructuring,
     the Company intends to sell or close the Ground Beef Facility to aid its
     exit from the ground beef business. The Company's three remaining modern
     facilities use state-of-the-art equipment with capacity that will allow
     significant volume increases without major additional capital expenditures.

     .  Experienced and Focused Management Team.  Prior to the Acquisition, the
     Company's four plants operated primarily as independent facilities rather
     than as an integrated unit. Furthermore, strategic decisions were made by
     corporate level managers whose principal focus was on Tyson's core poultry
     business. As part of the Restructuring, the Company has strengthened its
     management team by eliminating the position of President, hiring a new Vice
     President of Operations and creating the new position of Senior Vice
     President of Sales and Marketing.  The Company believes this will allow it
     to more efficiently implement the Restructuring and operate its business
     following the Restructuring.


SALES AND MARKETING

     Sales and Marketing Team

     The Company's sales and marketing team consists of 16 experienced
professionals, most of whom worked with Gorges, Inc., Harker's or Quik-to-Fix,
Inc. prior to their respective acquisitions by Tyson. Until May 1996, these
sales professionals marketed substantially all of the Tyson product line. With
volume based incentives, sales were dominated by high volume chicken products.
The Company's sales force, now selling only the Company's product lines,
continues to be compensated based on sales volume and growth based incentive
programs, all of which are tied to sales of the Company's predominantly beef
based product lines.


     Foodservice Broker Network

     Management believes that the Company's extensive independent foodservice
broker network consisting of 64 brokers covering 49 states, is one of its most
valuable assets. The brokers act as extensions of the Company's in-house sales
force, providing sales and marketing support and an intensive sales effort
focused on the major foodservice distributors in each of their respective
regions. Most brokers sell a wide 
<PAGE>
 
variety of products produced by other manufacturers. However, the brokers
generally do not carry products that compete directly with those produced by the
Company. The brokers are compensated on a commission basis and do not take title
to the Company's products.

     The brokers perform the following functions: (i) sell the Company's 
products to foodservice distributors; (ii) provide administrative support for
the Company and its foodservice distributors; and (iii) sell the Company's
products to foodservice operators through product presentations, participation
in broadline foodservice distributor food shows, training seminars for key
foodservice operators, training seminars for distributor sales representatives
and introduction and execution of new product rollout and promotional
activities.

CUSTOMERS AND END USERS

  Overview

     Commercial and non-commercial foodservice operators are the primary end 
users of the Company's products. Commercial foodservice operators include fast
food and family dining restaurants, multi-unit national chain accounts, regional
chain accounts and wholesale clubs. Non-commercial foodservice operators include
hospitals, corporations and schools (including through the USDA Commodity
Reprocessing Program). The Company's sales force, in conjunction with the
Company's independent foodservice brokers, markets the Company's products to
broadline and specialty distributors, multi-unit chains and wholesale clubs. The
majority of sales to foodservice distributors are effected through the Company's
independent broker network. Foodservice distributors are the principal suppliers
of the Company's products to the end users.

     During fiscal 1998, Sysco and Harker's accounted for 16.6% and 10.7% of
gross sales, respectively. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations-Factors Affecting Future
Performance."

     Foodservice Distributors

     Broadline foodservice distributors distribute a full line of dry,
refrigerated and frozen food products to commercial and non-commercial
foodservice operators. A majority of the Company's sales are made to broadline
and specialty foodservice distributors which resell the Company's products to
end users under the Gorges and Quik-to-Fix brand names or under the
distributor's private label using items produced and packaged for the
distributor. The Company has established strong relationships with 48, if
necessary] of the top 50 broadline foodservice distributors in the United
States, including Sysco, US Food Service (formerly JP Foodservice, US
Foodservice and Rykoff-Sexton), Alliant Foodservice, Inc. and PYA/Monarch, Inc.

     End Users.  The four primary end users of the Company's products are: (i)
independent commercial foodservice operators, including fast food, family dining
and fine dining restaurants, snack bars and caterers, most of which purchase
their products through broadline foodservice distributors; (ii) national
accounts, concentrated in the rapidly growing fast food and family dining
category, which generally have centralized buying organizations served by either
broadline or specialty foodservice distributors; (iii) wholesale clubs such as
Price/Cost Co.; and (iv) non-commercial foodservice operators, including
corporate cafeterias and health care and educational institutions, most of which
purchase their products primarily through broadline foodservice distributors.

     USDA Commodity Reprocessing.  The Company participates in the USDA
Commodity Reprocessing Program. Under this federal program, the Company takes
USDA-donated commodity beef and further processes it for schools. The Company
charges a fee for processing the beef into value-added further processed
products such as charbroiled beef patties and fully cooked breaded beef patties.
The program has complex administrative requirements with which the Company has
significant experience. These complex administrative requirements make it
difficult for competitors to enter the business on a
<PAGE>
 
casual basis. The majority of demand for a product under the program arises each
springs and fall; however, the frozen nature of the product allows production to
be scheduled throughout the year to keep plant utilization high. Despite this
segments continued growth as a percent of the Company's sales, the Company has
historically derived less than 10% of its revenues from the USDA Commodity
Reprocessing Program.


DISTRIBUTION

     The Company is one of the few value added beef processors that distributes
its products nationally. Prior to the Acquisition, all of the Company's products
were shipped frozen to customers, to public warehouses for distribution or to a
Tyson warehouse for distribution with other Tyson products. Historically, two
thirds of the Company's shipping requirements have been met by independent
shippers and trucking lines with the remainder being shipped in Tyson-owned
trucks with charges to the Company at market rates. Between 1994 and the
consummation of the Acquisition, Tyson required the Business to stock inventory
at four separate warehouses to accommodate Tyson's poultry shipping needs,
thereby resulting in higher inventory levels. Beginning June 1, 1997, the
Company established a distribution network using its own warehouses and two
primary public warehouses. Substantially all of the Company's products are
shipped by common and contract carriers. Management believes that this network
will allow the Company to maintain its national distribution capability.

SUPPLIERS

     The three major components of the Company's products are: (i) meat
proteins; (ii) batter, breading, spices and other ingredients; and (iii)
packaging material.

     The Company has long standing relationships with numerous major beef
suppliers and operates a centralized procurement group that is responsible for
sourcing beef for all of its facilities. Approximately 50% of the Company's beef
needs are obtained from two major suppliers: IBP and Montfort (ConAgra). The
Company's pork and poultry needs also are sourced primarily from these major
suppliers, as well as Tyson Foods, and John Morrell. Although the supply of meat
proteins is concentrated, it is a commodity market and supplies at USDA
standards are readily available from a variety of sources. The Company typically
purchases raw materials from its suppliers using short-term purchase orders. The
Company does not speculate in the markets for its raw materials and generally
does not enter into long-term contractual arrangements with its suppliers. As a
matter of policy, the Company performs its own quality assurance testing of its
raw materials; however, the Company does require pre-testing by its suppliers of
raw materials to be used in its IQF raw ground beef products.

     Batters, breading, spices and other ingredients, once specified, are 
purchased at the plant level, typically from regional suppliers.

     Virtually all packaging material requirements for the Company's products,
which consist of corrugated boxes, plastic bags and labels, are acquired on a
local basis for each of the plants.

RESEARCH AND DEVELOPMENT

     Over the past three years, the Company has introduced a variety of new
products or product extensions, including the Super and Ultra Crispy Country
Fried Steaks, Pub Burger, Beef TastyRib, charbroiled meatballs, cooked taco
meat, philly beef steak slices, breaded turkey and cooked babyback ribs. The
Company currently employs nine research and development professionals dedicated
to product development, headed by a team leader with a BS in Biochemistry and
Food Science and Masters degrees in Biochemistry and Business Administration.
The Company's research and development team works closely with the sales force
to respond to changing customer needs.
<PAGE>
 
ENVIRONMENTAL MATTERS

     The operations of the Company and the ownership of real property by the
Company are subject to extensive and changing federal, state and local
environmental laws and regulations. The Company believes it is currently in
material compliance with all known material and applicable environmental
regulations and currently does not expect to make material capital expenditures
with respect to environmental control facilities during fiscal 1999. However, in
the future the Company may be involved from time to time in administrative and
judicial proceedings and inquiries relating to environmental matters and may be
required to make capital expenditures to comply with environmental laws.

     Prior to the Acquisition, Tyson incurred monthly surcharges of 
approximately $40,000 to the city of Garland, Texas as a result of effluent
wastewater discharges from the Garland, Texas facility. Tyson elected to pay the
monthly surcharges and not modify the facility to allow for reduction or
elimination of the surcharges. Since the Acquisition, the Company has continued
to incur the monthly surcharges although slightly reduced in amount due to
certain modifications of the facility. The Company currently does not intend to
further modify the facility to allow its operation without incurring any
surcharge due to the prohibitive nature of the amount of needed investment;
however, this will not preclude other minor modifications as needed or deemed
necessary over time to help further reduce these charges. The amount of the
surcharge is calculated based on the amount of effluent discharge and the total
amount of water used by the Garland, Texas plant. Management does not believe
that the incurrence of the aforementioned surcharges will have a material
adverse effect on the Company's business, results of operations and debt service
capabilities. There can be no assurance, however, that such surcharges will not
be increased or that the Company will not be required to modify its operations,
which may result in significant expenses or material capital expenditures.

GOVERNMENTAL REGULATION

     The Company is subject to federal, state and local health laws and 
regulations that establish standards for the manufacture, storage, labeling and
transport of foodstuffs. The USDA is the regulatory body, which is primarily
responsible for oversight of the Company's operations. Beef, pork and poultry
inspection is mandatory, under the jurisdiction of the Food Safety and
Inspection Service (a division of the USDA), for meat that is transported across
state lines or is otherwise placed in interstate commerce. Tyson has made, and
the Company may be required to make, capital expenditures in response to
changing compliance standards and production, storage, and transportation
technology.

     Recently, several of the Company's competitors allegedly have been 
responsible for the distribution and sale of beef products contaminated with the
e-coli virus. Although the Company has taken measures to ensure that its
products are not contaminated with such virus, there can be no assurance that
such contamination will not occur or that, in the absence of such contamination,
the Company's results of operations, financial condition and debt service
capabilities will not be adversely affected by negative publicity about the
Company's industry. In addition, such publicity or other factors may result in
increased government regulation of the Company's business and there can be no
assurance that such regulation will not adversely affect the Company's results
of operations, financial condition, and debt service capabilities.

     The Company operates an USDA-approved Total Quality Control program at each
facility. The Company's programs assure that the Company's products are
manufactured under conditions that meet or exceed all applicable government
standards. Such programs are monitored by federal inspectors and include: (i)
inspection of meat at various stages of processing; (ii) temperature monitoring
for both fresh and cooked meat; (iii) review of packaging and labels used for
fresh and processed meat; and (iv) controlling and monitoring the use of
additives.

     As a participant in the USDA Commodity Reprocessing Program for schools, 
the Company must adhere to certain rules, regulations and guidelines. Such
rules, regulations and guidelines include financial surety bonding in the state
of operation, product inspection and grading and certain reporting requirements.
<PAGE>
 
Should the Company fail to remain in compliance with such rules, regulations and
guidelines, it could be excluded from the USDA Commodity Reprocessing Program,
which could have a material adverse effect on the Company's business, results of
operations and debt service capabilities.

     The operations and the products of the Company are also subject to state
and local regulation through such measures as licensing of plants, enforcement
of health standards and inspection of the facilities. Enforcement actions for
violations of federal, state and local regulations may include seizure and
condemnation of products, cease and desist orders, injunctions and/or monetary
penalties. Management believes that the Company's facilities and practices are
sufficient to maintain compliance with applicable government regulations,
although there can be no assurances in this regard.

PATENTS AND TRADEMARKS

     The Company utilizes a number of U.S. trademarks, the most important of 
which are Gorges/(R)/ and Quik-to-Fix/(R)/. Certain of the Company's products
are marketed under additional trademarks, such as Crispntender/(R)/,
Tenderbroil/(R)/ and TastyRib/(R)/. Although the Company's management considers
all such intellectual property to be valuable assets, management believes that
the loss or expiration of any patents or trademarks, other than the Gorges or
Quik-to-Fix trademarks, would not have a material adverse effect on the
Company's business, results of operations and debt service capabilities.

     The above referenced trademarks, service marks and trade names used by the
Company are the property of the Company. In addition, the Company uses other
trademarks under co-pack arrangements for various customers. Various
trademarks, service marks and trade names used under such co-pack arrangements
or to which reference is made in this report are the property of owners other
than the Company. Such owners have all applicable rights with respect to their
respective trademarks, service marks and trade names.

COMPETITION

     The value-added beef processing industry is highly competitive, with a 
large number of competitors offering similar products. The Company's most
significant competitors in its primary markets are Advance Meats, King's
Command, Penthouse Meats, Pierre/Fresh Foods, Travis Meats and Zartic. In
addition, certain of the Company's suppliers, such as Cargill, IBP and ConAgra,
produce ground beef products that compete directly with certain of the Company's
products. The Company seeks to successfully compete with these suppliers by
providing a diversity of product offerings and custom order packaging to meet
its customers' needs. However, there can be no assurance that such suppliers
will not expand their presence in the value-added beef processing industry in
the future. These suppliers and Hudson Specialty Foods are larger and have
greater resources than the Company. The Company also faces significant price
competition from its competitors and may encounter competition from new market
entrants.

EMPLOYEES

     The Company employs approximately 1,000 people. However, in connection with
the Restructuring and the sale or closure of the Ground Beef Facility, the
Company expects to reduce its total number of employees by approximately 250.
Currently, approximately 200 employees of a total of 253 union-eligible
employees at the Garland, Texas facility are represented by the United Food &
Commercial Workers International Union, AFL-CIO, CLC, Local 540 (the "Union").
The Garland, Texas facility is being operated pursuant to the terms and
conditions specified by the Company at the time of the consummation of the
Acquisition. The Company was not obligated to enter into the collective
bargaining agreement agreed upon by Tyson and the Union or to continue to
operate the Garland, Texas facility pursuant to the terms of such agreement.
Management is currently negotiating a replacement collective bargaining
agreement with the Union, although there can be no assurance that it will be
successful in doing so. [Has the Union contract been finalized?]
<PAGE>
 
ITEM 2.  PROPERTIES.

     The Company's properties consist of the following manufacturing facilities:

<TABLE>
<CAPTION>
     ----------------------------------------------------------------------
              LOCATION               PRODUCT CATEGORY       SQUARE FOOTAGE
     ---------------------------  -----------------------  ----------------
     ----------------------------------------------------------------------
<S>                               <C>                      <C>
     Garland, Texas                Value added products             122,166
     ----------------------------------------------------------------------
     Harlingen, Texas              Value added products             111,412
     ----------------------------------------------------------------------
     Orange City, Iowa             Ground beef and value            135,600
                                      added products
     ----------------------------------------------------------------------
     Sioux Center, Iowa            Value added products              72,211
     ----------------------------------------------------------------------
</TABLE>

     The Company owns all of the manufacturing facilities. The Company has 
offered to sell its Orange City, Iowa manufacturing facility and has entered
into a non-binding letter of intent to sell this facility by February 1, 1999.
In the event the Company is unable to consummate the proposed sale of the Ground
Beef Facility, it intends to close this facility as soon as practicable to
facilitate its exit from the ground beef business and to reduce costs. Should
the Company close the Ground Beef Facility, it will continue to explore
opportunities to sell this facility. The Company's principal executive offices
are located at 9441 LBJ Freeway, Suite 214, Dallas, Texas 75243.

ITEM 3.  LEGAL PROCEEDINGS.

     At the present, the Company is not a party to nor are any of its properties
subject to any lawsuit or proceeding which, in the opinion of management of the
Company, is likely, individually or in the aggregate, to have a material adverse
effect on the Company. However, the Company is likely to be subject to claims
arising from time to time in the ordinary course of its business. In certain of
such actions, plaintiffs may request punitive or other damages that may not be
covered by insurance and, accordingly, no assurance can be given with respect to
the ultimate outcome of any such possible future claims or litigation or their
effect on the Company.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

     The Company did not submit any matters to a vote of security holders during
the year covered by this report.
<PAGE>
 
                                    PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS.

     The Company's common stock is not publicly traded.  The Company is a wholly
owned subsidiary of GHC, which, in turn, is substantially owned by CGW.  GHC has
no business other than holding the stock of the Company, which is the sole
source of GHC's financial resources.  GHC is controlled by CGW, which
beneficially owns shares representing 54.8% of the voting interest in GHC,
(46.3% on a fully diluted basis) and has the right to designate all of the
directors of GHC.  Accordingly, CGW, through its control of GHC, controls the
Company and has the power to elect all of its directors, appoint new management
and approve any action requiring the approval of the holders of the Company's
common stock.

     On November 25, 1996, CGW, NationsBanc Investment Corp. ("NBIC"), Mellon 
Bank, N.A., as trustee of First Plaza Group Trust, a General Motors pension plan
("FPGT") and Messrs. Culwell, Mitchell, Powers, Collins and Aviles (each a
"Senior Manager" and, collectively, the "Senior Managers" and, together with
NBIC and FPGT, the "Stockholders") entered into a Securities Purchase and
Stockholders Agreement (the "Securities Purchase and Stockholders Agreement")
with regard to GHC. Subsequent to the Acquisition Closing, Mr. Letier became a
party to the Securities Purchase and Stockholders' Agreement (Mr. Letier shall
hereinafter be included in the definitions of Stockholder and Senior Manager).
All future purchasers of GHC common stock will be required to enter into the
Securities Purchase and Stockholders Agreement. The Securities Purchase and
Stockholders Agreement contains provisions concerning the governance of GHC and
the Company, restrictions on the transferability of the securities of GHC and
the Company and registration rights for the securities of GHC held by the
Stockholders.

     The governance provisions of the Securities Purchase and Stockholders
Agreement provide that the Board of Directors of GHC will consist of up to five
members all of whom shall be designated by CGW, and that the Board of Directors
of the Company shall be comprised of the directors of GHC. The Securities
Purchase and Stockholders Agreement requires holders of voting securities of GHC
to vote their shares in favor of such designees of CGW for election as directors
of GHC. The Securities Purchase and Stockholders Agreement also grants to each
of NBIC and FPGT the right, except in certain circumstances, to have a
representative in attendance at all meetings of the Board of Directors of GHC or
the Company.

     The Securities Purchase and Stockholders Agreement grants to the 
stockholder parties thereto pre-emptive rights, exercisable pro rata in
accordance with their respective ownership of common stock of GHC, to purchase
shares of common stock or other equity securities of GHC (other than shares of
common stock issued upon exercise of options, rights, awards or grants pursuant
to the Plan and common stock issued in exchange for common stock of another
class), and further provides for certain co-sale rights and obligations in the
event CGW elects to sell all or a portion of its shares of GHC's common stock.
Additionally, GHC has a right of first refusal in connection with any proposed
sale by NBIC, FPGT or any Senior Manager of its or his investment in GHC.

     In connection with the Financial Restructuring, in December 1998 CGW 
acquired additional equity securities of GHC. In order to provide NBIC, FPGT and
the Senior Managers with the benefit of the pre-emptive rights under the
Securities Purchase and Stockholders Agreement, CGW has agreed to offer to each
of NBIC, FPGT and the Senior Managers the opportunity to acquire its pro rata
share of such equity securities at the same price as such equity securities were
acquired by CGW. Assuming each of NBIC, FPGT and the Senior Managers accept this
offer, CGW will continue to beneficially own shares representing 54.8% of the
voting interest in GHC. Should any or all of NBIC, FPGT or the Senior Managers
decline this offer, CGW's beneficial ownership of GHC will increase
proportionately.

     The Securities Purchase and Stockholders Agreement provides that if a 
Senior Manager's employment is terminated for any reason other than for cause,
GHC will have the right to repurchase any shares owned by such Senior Manager at
the greater of cost or fair value. If a Senior Manager's employment is
terminated for cause, GHC will have the right to repurchase any shares owned by
such Senior Manager at the lesser of fair value or cost. Such right is
exercisable within 180 days following such
<PAGE>
 
termination of employment of the Senior Manager. Fair value of the repurchased
shares shall be determined by agreement between GHC and the Senior Manager whose
shares are being repurchased or, failing such agreement, by an independent
investment banking firm.

         If GHC is unable to exercise either its right of first refusal or right
to repurchase shares of common stock from a Senior Manager whose employment is
terminated, it may assign such right to the other Stockholders who are parties
to the Securities Purchase and Stockholders Agreement (other than the
Stockholder whose shares are subject to such rights), who may exercise such
rights in accordance with their respective ownership of common stock.


ITEM 6.  SELECTED FINANCIAL DATA.

         The following table presents (i) selected historical financial
information of the Company and the Business, as of the dates and for the periods
indicated, and (ii) summary pro forma financial information of the Company, as
of the date and for the period indicated, adjusted for the completion of the
Acquisition. The historical financial information for the year ended October 3,
1998 and the three hundred six days ended September 27, 1997 have been derived
from the Company's financial statements, which have been audited by Ernst &
Young LLP. The historical information for the three years in the period ended
September 28, 1996 and the fifty-eight days ended November 25, 1996 has been
derived from the Business' financial statements, which have been audited by
Ernst & Young LLP. The summary pro forma information does not purport to
represent what the Company's results of operations would have been if such
events had occurred at the dates indicated, nor does such information purport to
project the results of the Company for any future period. The summary financial
information should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the Financial
Statements and the Notes thereto included elsewhere in this annual report.

<TABLE>
<CAPTION>

                                                        Business                               Company
                             ---------------------------------------------------------------------------------------------
                              Year Ended   Year Ended    Year Ended   September     November    September    Year Ended
                              October 1,    September    September     29, 1996     26, 1996     29, 1996    October 3,
                                 1994       30, 1995      28, 1996        to           to           to          1998
                                                                       November    September    September
                                                                       25, 1996     27, 1997     27, 1997
                                                                      (58 days)    (306 days)      (Pro
                                                                    (In thousands)                forma)(2)
<S>                          <C>           <C>           <C>        <C>            <C>         <C>           <C>
Statement of
operations data:
Revenues                        $331,969     $304,474      $232,761     $31,966     $172,738     $204,704      $201,581
Costs and expenses,                                                     
 excluding amortization          312,480      283,337       215,973      30,070      158,794      189,649       199,627
 and restructuring                                                      
Amortization                       1,528        1,624         1,624         250        2,706        3,057         3,294
Restructuring expense                  -            -             -           -            -            -        13,900
Operating income (loss)           17,961       19,513        15,164       1,646       11,238       12,098      (15,240)
Interest expense                       -            -             -           -       13,709       16,398        17,243
Other expenses (income)                4          678           796           -           11           11          (10)
Income tax                         7,508        7,931         6,205         731            -            -            58
Net income (loss)                $10,449      $10,904        $8,163        $915      ($2,482)     ($4,311)     ($32,531)
                                                                        
Balance sheet data (at                                                  
 period end):                                                           
Total assets                                                                        $211,261     $211,261      $171,803
Total debt                                                                           149,500      149,500       147,850
Total equity                                                                          43,103       43,103        10,572
                                                                        
Other data:                                                             
EBITDA (1)                        28,579       29,877        24,080       2,238       21,291       24,768        11,487
Cash provided by (used for)                                                                                             
 operating activities             16,724       21,107        15,895         962        3,117          N/A         6,785 
Cash provided by (used for)                                                                                              
 investing activities            (39,773        2,510          (609)       (141)    (187,944)         N/A        (3,208) 
Cash provided by (used for)                                                                                              
 financing activities             23,075      (23,637)      (15,286)       (821)     184,827          N/A        (1,906) 
Capital expenditures               6,580        2,792           735         141        3,691        3,832         3,112
</TABLE>

(1) Excludes one time charge of $13,900 for the year ended October 3, 1998
relating to the Restructuring. 
(2) The pro forma results reflect the information
assuming the Acquisition occurred at September 29, 1996.

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND 
         RESULTS OF OPERATIONS.

GENERAL
<PAGE>
 
     In the Acquisition, the Company acquired the Business from Tyson. Prior to
the Acquisition, (i) Gorges/Quik-to-Fix Foods, Inc. had no significant assets or
liabilities and had not conducted any business, other than in connection with
the Acquisition and the related financings (the "Transactions"), and (ii) the
Business was not operated by Tyson as a distinct legal entity.

     The following discussion should be read in conjunction with the Audited
Financial Statements and the Notes thereto, and the Unaudited Pro Forma
Financial Statements and the Notes thereto of the Company included elsewhere in
this report.

RESULTS OF OPERATIONS

     The Company's fiscal year ends on the Saturday closest to September 30.
References in this report to "fiscal 1998," "fiscal 1997" and  "fiscal 1996"
refer to the twelve month periods ended October 3, 1998, September 27, 1997, and
September 28, 1996, respectively.  Discussion of the results of operations for
the Company as they relate to fiscal 1997 are made in reference to the pro forma
Statement of Income, which represents an adjusted combination of the two stub
periods, one of the Business prior to the consummation of the Acquisition, and
one of the Company following the consummation of the Acquisition, which together
completes coverage of the time of the 52 week period ended September 27, 1997.


     The following tables set forth, for the fiscal periods indicated: (i) sales
and categories of expenses in dollars and as a percentage of sales; and (ii)
production volumes.

<TABLE> 
<CAPTION>  
                                                        FISCAL YEAR ENDED
                          ---------------------------------------------------------------------------
                               SEPTEMBER 28,               SEPTEMBER 27,               OCTOBER 3,
                                  1996                        1997                        1998
                                HISTORICAL                  PRO FORMA                   COMPANY   
                          ---------------------------------------------------------------------------
                                                (DOLLARS AND POUNDS IN THOUSANDS)
<S>                       <C>             <C>           <C>          <C>           <C>          <C> 
SALES                        $232,761     100.0%        $204,704     100.0%        $201,581     100.0%
COST OF GOODS SOLD            189,559      81.4          166,696      81.4          171,746      85.2
                          ---------------------------------------------------------------------------
GROSS PROFIT                   43,202      18.6           38,008      18.6           29,835      14.8
OPERATING EXPENSES             28,038      12.1           25,910      12.7           45,075      22.4
                          ---------------------------------------------------------------------------
OPERATING INCOME (LOSS)        15,164       6.5           12,098       5.9          (15,240)     -7.6
OTHER EXPENSES                    796       0.3           16,409       8.0           17,233       8.5
                          ---------------------------------------------------------------------------
EARNINGS BEFORE TAXES                                                                           
ON INCOME (LOSS)               14,368       6.2           (4,311)     -2.1          (32,473)    -16.1
                                                                                                
PROVISION FOR INCOME                                                                            
TAXES                           6,205       2.7                -       0.0               58       0.0
                          ---------------------------------------------------------------------------
NET INCOME (LOSS)            $  8,163       3.5%        $ (4,311)     -2.1%        $(32,531)    -16.1
                          ===========================================================================
VOLUME (IN POUNDS)            173,821                    154,628                    156,192
</TABLE>
                                        
<TABLE>
<CAPTION>
                                                           FISCAL YEAR ENDED
                                               -----------------------------------------
                                 SEPTEMBER 28, 1996        SEPTEMBER 27, 1997          OCTOBER 3, 1998
                                 ------------------        ------------------          ---------------
                                     HISTORICAL                PRO FORMA                   COMPANY
                                     ----------                ---------                   -------
                                      (DOLLARS AND POUNDS IN THOUSANDS, EXCEPT PER POUND AMOUNTS)
<S>                             <C>                        <C>                         <C>
DOLLARS
Value added products............      $149,564                  $147,260                  $149,051
Ground beef.....................        74,670                    57,444                    52,530
Frozen portion steaks...........         8,527                         -                         -
                                      --------                  --------                  --------
                                      $232,761                  $204,704                  $201,581
                                      ========                  ========                  ========
VOLUMES (IN POUNDS)
Value added products............        93,631                    92,065                    92,494
Ground beef.....................        77,604                    62,563                    63,698
</TABLE> 
<PAGE>
 
<TABLE> 
<S>                             <C>                        <C>                         <C>
Frozen portion steaks...........         2,586                         -                         -
                                      --------                  --------                  --------
                                       173,821                   154,628                   156,192
                                      ========                  ========                  ========
SALES PER POUND
Value added products............      $   1.60                  $   1.60                  $   1.61
Ground beef.....................          0.96                       .92                      0.82
Frozen portion steaks...........          3.30                         -                         -
                                      --------                  --------                  --------
Overall average.................      $   1.34                  $   1.32                  $   1.29
                                      ========                  ========                  ========
</TABLE>
                                                                                
FISCAL YEAR ENDED OCTOBER 3, 1998 COMPARED TO FISCAL YEAR ENDED SEPTEMBER 27,
1997

     Sales.  Total sales decreased $3.1 million, or 1.5%, from $204.7 million in
fiscal 1997 to $201.6 million in fiscal 1998.  This decrease was primarily due
to decreased sales of ground beef, partially offset by increased sales of value
added products.

     Sales of value added products increased $1.8 million, or 1.2%, from $147.3
million in fiscal 1997 to $149.0 million in fiscal 1998. This increase reflects
increased sales in the first quarter of fiscal 1998, partially offset by
decreases in sales to national accounts in the second and third quarters of
fiscal 1998.  This increase is also partially attributable to the inclusion of
an additional week in fiscal 1998 compared to fiscal 1997 and increases in
average selling prices, partially offset by the discontinuation of sales of
certain less profitable value added products. Value added product sales
increased 0.4 million pounds, or 0.5%, from 92.1 million pounds in fiscal 1997
to 92.5 million pounds in fiscal 1998.

     Sales of ground beef products decreased $4.9 million, or 8.6%, from $57.4
million in fiscal 1997 to $52.5 million in fiscal 1998. This decrease was
primarily due to decreased sales volumes resulting from the completion of a
contract with a national club store and, to a lesser extent, decreases in
average selling prices. The decrease in average selling prices is primarily due
to lower prices for raw materials, which the Company passed on, in part, to its
customers. The Company's ground beef contracts with its customers are generally
formula based, changing periodically (weekly, monthly or quarterly) as the
market price of the raw materials change; therefore, changes in the costs of raw
materials are quickly passed along to customers.  Ground beef product sales
increased 1.1 million pounds, or 1.8%, from 62.6 million pounds in fiscal 1997
to 63.7 million pounds in fiscal 1998.

     Gross Profit.  Gross profit decreased $8.2 million, or 21.5%, from $38.0
million in fiscal 1997 to $29.8 million in fiscal 1998. As a percentage of
sales, gross profit decreased from 18.6% in fiscal 1997 to 14.8% in fiscal 1998.
This decrease reflects operating ineffeciencies resulting from lower production
levels, discounted sales of older or overstocked products in connection with the
Company's inventory reduction initiative and increased sales of lower margin
ground beef products.  This decrease also reflects reduced sales of higher
margin value added products and increased expenses relating to sales and
promotional activities.

     Operating Expenses.  Operating expenses increased $19.2 million, or 74.0%,
from $25.9 million in fiscal 1997 to $45.1 million in fiscal 1998.  Operating
expenses for fiscal 1998 include a one time charge of $13.9 million relating to
the Restructuring.  Excluding this one time charge, operating expenses increased
$5.3 million, or 20.3%, from $25.9 million in fiscal 1997 to $31.2 million in
fiscal 1998.  This increase is primarily the result of the complete organization
and staffing of the Company's corporate headquarters following the Acquisition,
increased sales and promotional activity in fiscal 1998, full staffing of the
Company's research and development group, a significantly higher level of
product development activity and, to a lesser extent, increased amortization of
goodwill relating to the Acquisition.

     Operating Income (loss).  Operating income (loss) decreased $27.4 million,
or 226%, from $12.1 million in fiscal 1997 to ($15.3) million in fiscal 1998.
Operating income (loss) for fiscal 1998 includes a one time charge of $13.9
million relating to the Restructuring. Excluding this one time charge, operating
income (loss) decreased $13.4 million, or 112%, from $12.1 million in fiscal
1997 to ($1.3) million in fiscal 1998. This decrease is primarily the result of
decreases in gross profit due to increased sales of ground beef and decreased
sales of higher margin value added products, discounted sales of older or
<PAGE>
 
overstocked products in connection with the Company's inventory reduction
initiative and increased operating expenses.

     Interest Expense.  Interest expense increased $0.8 million, or 5.2%, from
$16.4 million in fiscal 1997 to $17.2 million in fiscal 1998.  This increase
reflects increased borrowings under the Revolver and, to a lesser extent,
increased interest rates.

     Income Tax.  Income tax increased from $0 in fiscal 1997 to $0.06 million
in fiscal 1998. The Company's effective income tax rate was approximately 0% and
0% for fiscal 1997 and fiscal 1998, respectively.

     Net Income (loss).  Net income (loss) decreased $28.2 million, or 656%,
from ($4.3) million in fiscal 1997 to ($32.5) million in fiscal 1998. Net income
(loss) for fiscal 1998 includes a one time charge of $13.9 million relating to
the Restructuring. Excluding this one time charge, net income (loss) decreased
$14.3 million, or 333%, from ($4.3) million in fiscal 1997 to ($18.6) million in
fiscal 1998.


FISCAL YEAR ENDED SEPTEMBER 27, 1997 COMPARED TO FISCAL YEAR ENDED SEPTEMBER 28,
1996

     Sales.  Total sales decreased $28.1 million, or 12.1%, from $232.8 million
in fiscal 1996 to $204.7 million in fiscal 1997. This decrease was primarily due
reduced sales volumes and, to a lesser extent, decreases in average selling
prices, partially offset by increased sales through the USDA Commodity
Reprocessing Program. The decrease in average selling prices is primarily due to
lower prices for two key raw materials, 90% lean beef trimmings and rib lifter
meat, which the Company passed on, in part, to its customers. This decrease also
reflects the conclusion of a temporary contract with a national fast food chain
and the discontinuation of sales of frozen portion steaks during fiscal 1996.

     Sales of value added products decreased $2.3 million, or 1.5%, from $149.6
million in fiscal 1996 to $147.3 million in fiscal 1997. This decrease reflects
slight decreases in sales volumes and selling prices.  Sales volumes decreased
due to the loss of some business with national account customers and the
elimination of certain less profitable products, partially offset by the
introduction of new products.  Value added product sales decreased 1.5 million
pounds, or 1.6%, from 93.6 million pounds in fiscal 1996 to 92.1 million pounds
in fiscal 1997.

     Sales of ground beef products decreased $17.2 million, or 23.1%, from $74.6
million in fiscal 1996 to $57.4 million in fiscal 1997.  A major reason for this
decrease was the completion of a contract with a national club store and, to a
lesser extent, decreases in average selling prices.  Ground beef product sales
decreased 15.0 million pounds, or 19.4%, from 77.6 million pounds in fiscal 1996
to 62.6 million pounds in fiscal 1997.  Sales of frozen portion steaks decreased
$8.5 million, or 100%, from $8.5 million in fiscal 1996 to $0 in fiscal 1997,
reflecting the Company's decision to discontinue sales of frozen portion steaks.
Frozen portion steak sales decreased 2.6 million pounds, or 100%, from 2.6
million pounds in fiscal 1996 to 0 pounds in fiscal 1997.

     Gross Profit.  Gross profit decreased $5.2 million, or 12.1%, from $43.2
million in fiscal 1996 to $38.0 million in fiscal 1997. As a percentage of
sales, gross profit remained unchanged at 18.6% in fiscal 1996 and fiscal 1997.
The decline in gross profit is primarily attributable to reduced sales volumes.
As a percentage of sales, gross profit remained unchanged due to declines in raw
material costs and changes in product mix due to declining sales of lower margin
ground beef and frozen portion steaks, partially offset by inefficiencies and
costs related to the reconfiguration of the Company's Garland, Texas
manufacturing facility (the "Reconfiguration") and losses incurred in disposing
of frozen portion steak inventory.

     Operating Expenses.  Operating expenses decreased $2.1 million, or 7.6%,
from $28.0 million in fiscal 1996 to $25.9 million in fiscal 1997. This decrease
is primarily the result of decreased sales of ground beef products, partially
offset by the incurrence of costs related to the Reconfiguration in fiscal 1996.
Additionally, in fiscal 1996, the Company incurred additional freight and
freezer expenses due to increased usage of third party outside freezer space
during the Reconfiguration, higher inventory levels 
<PAGE>
 
resulting from lower sales volumes and opportunistic purchases of raw materials
and the added costs of servicing a national account customer.

     Operating Income.  Operating income decreased $3.1 million, or 20.2%, from
$15.2 million in fiscal 1996 to $12.1 million in fiscal 1997. This decrease is
primarily the result of decreases in sales of ground beef and value added
products, partially offset by decreases in operating expenses.

     Interest Expense.  Interest expense increased $16.4 million, or 100%, from
$0 million in fiscal 1996 to $16.4 million in fiscal 1997. This increase
reflects increased borrowings incurred under the Revolver, the Term Loan and the
Notes in connection with the Acquisition.

     Income Tax.  Income tax decreased $0.7 million, or 100%, from $0.7 in
fiscal 1996 to $0 in fiscal 1997, reflecting the incurrence of net losses in
fiscal 1997. Prior to the Acquisition, the Company's results of operations had
been included in Tyson's consolidated federal income tax return. However, the
provision for income taxes for fiscal year 1996 has been computed as though the
Company had operated on a stand-alone basis. The Company's effective income tax
rate was approximately 43% and 0% for fiscal 1996 and fiscal 1997, respectively.

     Net Income (loss).  Net income (loss) decreased $12.5 million, or 152%,
from $8.2 million in fiscal 1996 to ($4.3) million in fiscal 1997.

 


LIQUIDITY AND CAPITAL RESOURCES

     As a result of the Transactions, the Company has significant annual
principal and interest obligations. Borrowings under the Credit Facility, which
totaled $47.8 million at October 3, 1998 ($28.8 million under the Term Loan and
$19.0 million under the Revolver), accrued interest at an average rate of 8.55%
in the year ended October 3, 1998. Borrowings under the Notes totaled $100.0
million at October 3, 1998, and accrued interest at 11.5%.

     As of October 3, 1998, the Company was not in compliance with certain
technical or financial and limit ratio covenants under its credit agreement with
the Bank which provides the Company with the Revolver and the Term Loan.  As a
result of its noncompliance under the Credit Facility, the Company was
prohibited by the Bank from borrowing additional amounts under the Revolver or
making the December 1, 1998 interest payment on its Senior Subordinated Notes
Due 2006, Series B.  In order to address the company's non-compliance under the
Credit Facility and to facilitate the Interest Payment, the Company has
implemented or intends to implement the following measures designed to address
the Company's short-term and long-term financing needs:

     .    Amendment to Credit Facility.  On October 29, 1998, the Company
     entered into an amendment to the Credit Facility that replaces the existing
     covenants with a new set of covenants under which the Company can borrow
     funds based on the levels of its accounts receivable and inventory. The
     implementation of new covenants under the Credit Facility may have the
     effect of reducing the amount available under the Revolver depending on the
     levels of accounts receivable and inventory at any given time. The
     Amendment also shortens the maturity of the Credit Facility from November
     2001 to November 2000. The change in maturity of the Credit Facility does
     not affect the repayment schedule under the Credit Facility, except that
     all payments that previously were due between November 2000 and November
     2001 (an aggregate of $11.4 million) will be due on November 30, 2000.
     Additionally, the Amendment provides that on March 31, 1999, the Company
     must pay a fee under the Credit Facility equal to 0.25% of the amounts
     outstanding under the Credit Facility and, thereafter, every three months,
     the Company must pay a fee under the Credit Facility in cash equal to 0.50%
     of the amounts outstanding under the Credit Facility until such time as the
     Company has secured a replacement facility from another lender. The
<PAGE>
 
     Amendment became effective on December 21, 1998, at which time the Company
     was in compliance with all terms and conditions of the Credit Facility.

     .    Repurchase and Retirement of Notes.  On October 29, 1998, the Company
     announced a tender offer pursuant to which it offered to purchase not less
     than $36,000,000 and up to $46,000,000 aggregate principal amount of its
     Notes.  On December 2, 1998, the Company elected to waive all conditions to
     the consummation of the Offer, including the Minimum Tender Condition, and
     consummated the Offer with respect to $29,970,000 aggregate principal
     amount of Notes.  Additionally, on December 21, 1998, the Company's
     controlling stockholder, CGW, contributed to the Company $18,030,000
     aggregate principal amount of Notes acquired by CGW through open market
     purchases.  The Tendered Notes and the CGW Notes were retired on December
     21, 1998.  The repurchase and retirement of the Tendered Notes and the CGW
     Notes were financed through an equity investment by CGW in GHC totaling
     $16,900,000.

     .    Bridge Loan.  On December 21, 1998 the Company obtained from CGW a
     $4,000,000 subordinated bridge loan, the proceeds of which were used to
     fund the Interest Payment. The terms of the Bridge Loan provide for a one
     year loan to the Company at an interest rate of 9%. On December 15, 1999,
     if the Company has not obtained a Replacement Credit Facility, the Bridge
     Loan will automatically convert to equity in GHC.

     .    The Replacement Senior Facility.  As a result of the increased fees
     payable under the Credit Facility pursuant to the Amendment, the Company is
     seeking a commitment from several alternative lenders with respect to the
     Replacement Credit Facility. There can be no assurance that the Company
     will successfully implement the Replacement Credit Facility, or that if
     obtained, such facility will have terms and conditions satisfactory to the
     Company or that are more favorable than the Credit Facility.

     As a result of the effectiveness of the Amendment, the retirement of the
Tendered Notes and the CGW Notes and the obtaining of the Bridge Loan, as of
December 21, 1998, the Company was in compliance with all terms and conditions
under the Credit Agreement and the indenture pursuant to which the Notes were
issued.  The Company believes that the Financial Restructuring will address its
short and long-term financing needs and will allow management to concentrate on
the completion of the Restructuring.  There can be no assurance, however, that
the Restructuring or the Financial Restructuring will be successful in improving
the Company's financial condition and results of operations.  Factors that may
affect the success of the Restructuring or the Financial Restructuring include,
among other things, the sale or closure of the Ground Beef Facility, the
implementation of the Replacement Credit Facility and the matters set forth in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Factors Affecting Future Performance."

     In addition to its debt service obligations, the Company will need
liquidity for working capital and capital expenditures. For the fiscal year
ended September 28, 1996 the Company spent $0.7 million on capital projects. For
the year ended October 3, 1998 and the three hundred six days ended September
27, 1997, the Company spent $3.1 million and $3.7 million, respectively, on
capital projects, primarily for the establishment of a corporate administrative
function, principally for computer software and hardware, as well as office
furniture, fixtures and equipment. The remaining capital expenditures are
primarily for the capital maintenance of the Company's facilities as well as the
establishment of a research and development facility. In connection with the
effort to establish an administrative structure the Company has hired additional
personnel into its Dallas corporate office.

     The Company's primary sources of liquidity are cash flows from operations.
In the year ended October 3, 1998, net cash provided by operations of $6.8
million, was used by financing activities of $1.9 million, primarily in
connection with reduced term loan balances. In addition, net cash provided by
operations was used by investing activities for capital asset purchases. In the
three hundred six-day period ended September 27, 1997, net cash provided by
financing activities of $184.8 million was used by investing activities of
$187.9 million in connection with the Acquisition and normal capital
expenditures. Also, the Company had cash provided by operating activities of
$3.1 million, primarily in connection with
<PAGE>
 
the increase of working capital assets. In the fifty-eight day period ending
November 25, 1996, net cash provided by operating activities of $1.0 million was
used by investing activities of $0.1 million and financing activities of $0.8
million. At October 3, 1998, the Company had $1.7 million in cash and cash
equivalents. The Company anticipates that its working capital requirements,
capital expenditures, and scheduled repayments for fiscal 1999 will be satisfied
through a combination of cash flows generated from operations together with
funds available under the Revolving Credit Facility.


EFFECTS OF INFLATION

     Inflation has not had a significant effect on the Company's operations.
However, in the event of increases in inflation or commodity prices from recent
levels, the Company could experience sudden and significant increases in beef
costs. Over periods of 90 days or less, the Company may be unable to completely
pass these price increases on to its customers. Management currently believes
that over longer periods of time, it generally will be able to pass on price
increases to its customers.

EFFECTS OF YEAR 2000 PROBLEMS

     While the Company is not aware of any material expenses or losses of
revenue that it will incur as a result of so-called "Year 2000 problems" it is
impossible to anticipate all of the ways in which such problems could arise and
affect the Company's financial condition and results of operations. In addition
to hardware and software problems that could arise within the Company's own
computer systems, computer systems with which the Company's systems interface or
other machinery, the Company could be affected by the Year 2000 problems of its
suppliers, partners or customers, or of other parties upon whom the Company
depends, as well. At this time the Company is unable to quantify the possible
effect of Year 2000 problems on its financial condition or results of
operations. The majority of the Company's hardware and software was purchased
and implemented in the past two years and has been represented to the Company as
Year 2000 compliant by the respective vendors.

     Major risks to the Company from Year 2000 issues would primarily be in the
areas of performance by either vendors or customers.  The Company could be
significantly impacted if the Company's vendors are unable to deliver goods and
services needed, or the Company's customers were unable to carry out their
respective businesses, or were unable to place an order with the Company due to
system failures. The Company's remaining plans related to Year 2000 issues
involve a continued effort to poll and monitor vendors and customers through
questionnaires and profiles to be gathered in the purchasing and sales
processes.


RECENT ACCOUNTING PRONOUNCEMENTS

     In addition, the financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130 Reporting Comprehensive Income and
Statement of Financial Accounting Standards No. 131 Disclosures About Segments
of an Enterprise and Related Information which are effective for financial
statement periods beginning after December 15, 1997.  As these statements
require only additional disclosures, they will have no effect on the Company's
financial position, results of operations or cash flows.   Statement of Position
98-1, Accounting for the Costs of Computer Software Developed for Internal Use
and SOP 98-5, Reporting on the Costs of Start Up Activities are effective for
years beginning after December 15, 1998.  The Company does not anticipate that
SOP 98-1 will have a significant effect on the Company's financial position,
results of operations or cash flows.  With the adoption of SOP 98-5 the Company
will have to write off existing organizational costs.  As of October 3, 1998,
organizational costs are approximately $3.0 million.


FACTORS AFFECTING FUTURE PERFORMANCE
<PAGE>
 
     Significant Leverage and Debt Service.  Upon consummation of the
Transactions, the Company became highly leveraged. At October 3, 1998, the
Company had total outstanding debt of $147.8 million. In addition, subject to
the restrictions in the Indenture, the Company may incur additional indebtedness
(including additional Senior Indebtedness) from time to time to finance
acquisitions or capital expenditures or for other purposes. At October 3, 1998,
the Company had outstanding borrowings of approximately $19.0 million and no
unused capacity under the Revolver to finance working capital needs.

     The level of the Company's indebtedness could have important consequences
to holders of the Notes, including: (i) a substantial portion of the Company's
cash flow from operations must be dedicated to debt service and will not be
available for other purposes; (ii) the Company's ability to obtain additional
debt financing in the future for working capital, capital expenditures, research
and development, acquisitions or other corporate purposes may be limited; (iii)
the borrowings of the Company under the Credit Facility accrue interest at
variable rates, which could cause the Company to be vulnerable to increased
interest expense in the event of higher interest rates; and (iv) the Company's
level of indebtedness could limit its flexibility in reacting to changes in its
industry or economic conditions generally.

     The Company's ability to pay interest on the Notes and to satisfy its other
debt obligations will depend upon its future operating performance, which will
be affected by prevailing economic conditions and financial, business and other
factors, certain of which are beyond its control, as well as the availability of
borrowings under the Revolver or successor facilities. The Company anticipates
that its operating cash flow and borrowings under the Revolver or successor
facilities will be sufficient to meet its operating expenses and to service its
debt requirements as they become due. However, if the Company is unable to
service its indebtedness, it will be forced to take actions such as reducing or
delaying capital expenditures, selling assets, restructuring or refinancing its
indebtedness or seeking additional equity capital. There can be no assurance
that any of these remedies can be effected on satisfactory terms, if at all. In
addition, the Company's ability to repay the principal amount of the Notes at
maturity may depend on its ability to refinance the Notes. There can be no
assurance that the Company will be able to refinance the Notes at maturity, if
necessary, on satisfactory terms, if at all.

     Subordination of Notes.  The Notes are general unsecured obligations of the
Company subordinated in right of payment to all existing and future Senior
Indebtedness of the Company, including borrowings under the Credit Facility. In
the event of bankruptcy, liquidation or reorganization of the Company, the
assets of the Company will be available to pay obligations on the Notes only
after all Senior Indebtedness has been paid in full, and there may not be
sufficient assets remaining to pay amounts due on any or all of the Notes then
outstanding. In addition, under certain circumstances the Company will not be
able to make payment of its obligations under the Notes in the event of a
default under certain Senior Indebtedness. At October 3, 1998, the aggregate
principle amount of Senior Indebtedness was $47.8 million, including outstanding
borrowings of approximately $19.0 million under the Revolver.

     Decreases in Net Sales.  The Company has experienced an overall decrease in
net sales during fiscal 1996, fiscal 1997 and fiscal 1998. The decreases are due
to decreases in average selling prices, and to a lesser extent a change in sales
mix.  The decreases in average selling prices are primarily due to lower prices
for two key raw materials, 90% lean beef trimmings and rib lifter meat, which
the Company has passed on, in part, to customers. Also responsible for sales
declines are the reduced sales of ground beef, primarily related to the
completion of a temporary contract with a national fast food chain, and lower
volumes for frozen portion steaks, a line of the business which the Company
discontinued in fiscal 1996. Sales volumes for the Company's value added
products have generally increased during the past three years due to overall
market growth for these products and the introduction of new products. These
increases in sales volumes for value added products were partially offset by the
loss of some business with several national accounts.  As set forth under
"Business--Recent Developments," the Company intends to discontinue the
production of ground beef products, which will result in further decreases in
net sales.  Management intends to pursue the strategies set forth under
"Business--Recent Developments" and "--Growth Strategy." However, there can be
no assurance that these strategies will be successful. Continued decreases in
net sales could have a material adverse effect on the Company's business,
results of operations and debt service capabilities. See "Business--Growth
Strategy."
<PAGE>
 
     Restrictions Imposed by Terms of the Company's Indebtedness.  The Indenture
restricts, among other things, the ability of the Company to incur additional
indebtedness, pay dividends or make certain other restricted payments, incur
liens to secure pari passu or subordinated indebtedness, engage in any sale and
leaseback transactions, sell stock of subsidiaries, apply net proceeds from
certain asset sales, merge or consolidate with any other person, sell, assign,
transfer, lease, convey or otherwise dispose of substantially all of the assets
of the Company, enter into certain transactions with affiliates, or incur
indebtedness that is subordinate in right of payment to any Senior Indebtedness
and senior in right of payment to the Notes. In addition, the Credit Facility
contains other and more restrictive covenants and prohibits the Company from
prepaying other indebtedness (including the Notes). As a result of these
covenants, the ability of the Company to respond to changing business and
economic conditions and to secure additional financing, if needed, may be
significantly restricted, and the Company may be prevented from engaging in
transactions that might otherwise be considered beneficial to the Company.

     The Credit Facility also requires the Company to maintain specified
financial ratios and satisfy certain financial condition tests. The Company's
ability to meet those financial ratios and tests can be affected by events
beyond its control, and there can be no assurance that the Company will meet
those tests. A breach of any of these covenants could result in a default under
the Credit Facility. Upon the occurrence of an event of default under the Credit
Facility, the lenders could elect to declare all amounts outstanding under the
Credit Facility, together with any accrued interest, to be immediately due and
payable. If the Company were unable to repay those amounts, the lenders could
proceed against the collateral granted to them to secure that indebtedness. If
the Credit Facility was to be accelerated, there can be no assurance that the
assets of the Company would be sufficient to repay in full that indebtedness and
the other indebtedness of the Company, including the Notes. Substantially all
the assets of the Company are pledged as security under the Credit Facility.
Such assets may also be pledged in the future to secure other Indebtedness.

     Raw Materials.  The Company uses large quantities of meat proteins,
including beef, pork and poultry. Approximately 70% of the Company's beef needs
are sourced from three major suppliers: IBP; Monfort (ConAgra); and Excel
(Cargill). The Company's pork and poultry needs also are sourced from these
major suppliers. Historically, market prices for meat proteins have fluctuated
in response to a number of factors, including changes in United States
government farm support programs, changes in international agricultural and
trading policies, weather and other conditions during the growing and harvesting
seasons. While the Company historically has been able to pass through changes in
the price of meat proteins to end users, there can be no assurance that the
Company will be able to pass the effects of future changes to end users.
Furthermore, large, abrupt changes in the price of meat proteins could adversely
affect the Company's operating margins, although such adverse effects
historically have been only temporary. There is no assurance that significant
changes in meat protein prices would not have a material adverse effect on the
Company's business, results of operations and debt service capabilities.

     Dependence on Key Personnel.  The Company's operations are dependent, to a
significant extent, on the continued efforts of J. David Culwell and Randall H.
Collins with whom it has entered into employment agreements containing non-
compete provisions. If any of these people become unable to continue in his
present role, or if the Company is unable to attract and retain other skilled
employees, the Company's business could be adversely affected.

     Competition.  The value-added beef processing industry is highly
competitive with a large number of competitors offering similar products.
Certain of the Company's suppliers, such as Cargill, IBP and ConAgra, produce
products that compete directly with certain of the Company's products. The
Company seeks to successfully compete with these suppliers by providing a
diversity of product offerings and custom order packaging to meet its customers
needs. However, there can be no assurance that such suppliers will not further
expand their presence in the value added beef processing industry in the future
or that any such expansion will not have a material adverse effect on the
Company's business, results of operations and debt service capabilities. These
suppliers and one of the Company's significant competitors are larger and have
greater resources than the Company. The Company also faces significant price
competition from its competitors and may encounter competition from new market
entrants.
<PAGE>
 
     Governmental Regulation.  The Company's production facilities and products
are subject to numerous federal, state and local laws and regulations
concerning, among other things, health and safety matters, food manufacture,
product labeling, advertising and the environment. Compliance with existing
federal, state and local laws and regulations is not expected to have a material
adverse effect on the Company's business, results of operations or debt service
capabilities. However, the Company cannot predict the effect, if any, of laws
and regulations that may be enacted in the future, or of changes in the
enforcement of existing laws and regulations that are subject to extensive
regulatory discretion. There can be no assurance that the Company will not incur
expenses or liabilities for compliance with such laws and regulations in the
future, including those resulting from changes in health laws and regulations,
that may have a material adverse effect on the Company's business, results of
operations and debt service capabilities.

     As a participant in the USDA Commodity Reprocessing Program for schools,
the Company must adhere to certain rules, regulations and guidelines. Such
rules, regulations and guidelines include financial surety bonding in the state
of operation, product inspection and grading and certain reporting requirements.
Should the Company fail to remain in compliance with such rules, regulations and
guidelines, it could be excluded from the USDA Commodity Reprocessing Program,
which could have a material adverse effect on the Company's business, results of
operations and debt service capabilities.

     Recently, several of the Company's competitors allegedly have been
responsible for the distribution and sale of beef products contaminated with the
e-coli virus. Although the Company has taken measures to ensure that its
products are not contaminated with such virus, there can be no assurance that
such contamination will not occur or that, in the absence of such contamination,
the Company's results of operations, financial condition, and debt service
capabilities will not be adversely affected by negative publicity about the
Company's industry. In addition, such publicity or other factors may result in
increased government regulation of the Company's business and there can be no
assurance that such regulation will not adversely affect the Company's results
of operations, financial condition, and debt service capabilities.

     Compliance with Environmental Regulations.  The Company's operations and
the ownership and operation of real property by the Company are subject to
extensive and changing federal, state and local environmental laws and
regulations. As a result, the Company may be involved from time to time in
administrative and judicial proceedings and inquiries relating to environmental
matters. The Company cannot predict what environmental legislation or
regulations will be enacted in the future, how existing or future laws or
regulations will be administered or interpreted or what environmental conditions
may be found to exist. Compliance with more stringent laws or regulations,
stricter interpretation of existing laws or discovery of unknown conditions may
require additional expenditures by the Company, some of which may be material.
The Company believes it is currently in material compliance with all known
material and applicable environmental regulations.

     The Company incurs monthly surcharges of approximately $40,000 to the city
of Garland, Texas as a result of effluent wastewater discharges from the
Garland, Texas facility. The Company has elected to incur the monthly surcharges
and currently does not intend to modify the facility to allow its operation
without incurring such surcharges. Management does not believe that the
incurrence of the aforementioned surcharges will have a material adverse effect
on the Company's business, results of operation and debt service capabilities.
There can be no assurance, however, that such surcharges will not be increased
or that the Company will not be required to modify its operations, which may
result in significant expenses or material capital expenditures.

     Seasonality.  Certain of the end uses for some of the Company's products
are seasonal. Demand in many markets is generally higher in the period from July
to September due to higher demand for beef products during the summer months and
increased purchasing by schools in anticipation of the commencement of the
school year. As a result, Company sales and profits are generally higher in the
Company's fourth quarter than in any other quarter during its fiscal year. In
addition, demand in many markets is generally lowest in the period from January
to March, resulting in lower sales and profits in the Company's second quarter.
<PAGE>
 
     Importance of Key Customers.  Historically, one of the Company's largest
customers has been Sam's Club ("Sam's'"), a subsidiary of Wal-Mart Stores, Inc.
The Company supplied Sam's with ground beef patties pursuant to two contracts
(the "Sam's Contracts") which became effective in November 1995. Pursuant to the
Sam's Contracts, the Company agreed to sell and Sam's agreed to purchase an
aggregate of 28.0 million pounds of ground beef. As of September 27, 1997, the
Company had delivered substantially all of the ground beef under the Sam's
Contracts.  During fiscal 1996, fiscal 1997, and fiscal 1998 the Sam's Contracts
accounted for 13.2%, 5.9%, and 1.5% of the Company's sales.

     The Company's largest customer is a group of affiliates of Sysco Corp.
("Sysco"). Each local Sysco affiliate is responsible for its own purchasing
decisions. Management believes that the loss of an individual Sysco affiliate as
a customer would not have a material adverse effect on the Company's business,
results of operations or debt service capabilities. However, there can be no
assurance that Sysco will not elect to employ a system whereby purchasing
decisions are centralized. Should Sysco elect to employ a centralized system,
there can be no assurance that Sysco will continue to purchase the Company's
products at historical volumes, if at all. The loss of all or a significant
portion of the Company's sales to Sysco, regardless of the cause of such loss,
would have a material adverse effect on the Company's business, results of
operations and debt service capabilities. During fiscal 1996, fiscal 1997, and
fiscal 1998 total sales to Sysco affiliates accounted for 17.8%, 16.6%, and
16.6% of sales, respectively.

     The Company's second largest customer is Harker's. The Company supplies
Harker's with ground beef pursuant to a supply agreement that will remain in
effect until 1999 (the "Harker's Agreement"). The Harker's Agreement requires
Harker's to purchase minimum amounts of the Company's products. The Harker's
Agreement provides that amounts charged by the Company thereunder may be
adjusted in response to fluctuations in the Company's costs. During fiscal 1996,
fiscal 1997, and fiscal 1998 the Harker's Agreement accounted for 12.6%, 12.8%
and 10.7% of sales, respectively. At the consummation of the Acquisition, Tyson
assigned to the Company its rights and obligations related to the supply of
ground beef and value added products pursuant to the Harker's Agreement. Tyson
will continue to supply poultry products to Harker's pursuant to the Harker's
Agreement.

     Sam's, Harker's and affiliates of Sysco collectively accounted for
approximately 43.6%, 35.3%, and 27.3% of sales during fiscal 1996, fiscal 1997,
and fiscal 1998, respectively. The loss of the Harker's Agreement or reduced
sales to affiliates of Sysco without offsetting sales to other customers could
have a material adverse effect on the Company's business, results of operations
and debt service capabilities.
 
     Risks Related to Unionized Employees.  The Company's business is labor
intensive. The Company's ability to operate profitably is dependent on its
ability to recruit and retain employees while controlling labor costs.
Currently, certain of the Company's employees at the Garland, Texas facility are
represented by the United Food & Commercial Workers International Union, AFL-
CIO, CLC, Local 540 (the ''Union''). The Garland, Texas facility is being
operated pursuant to the terms and conditions specified by the Company at the
time of the consummation of the Acquisition. The Company was not obligated to
enter into the collective bargaining agreement agreed upon by Tyson and the
Union or to continue to operate the Garland, Texas facility pursuant to the
terms of such agreement.  Management is currently negotiating a replacement
collective bargaining agreement with the Union, although there can be no
assurance that it will be successful in doing so.  Except for employees at the
Garland, Texas facility, none of the Company's employees are represented by a
union. If unionized employees were to engage in a strike or other work stoppage
or if additional employees were to become unionized, the Company could
experience a significant disruption of operations and higher labor costs, either
of which could have a material adverse effect on the Company's business, results
of operations and debt service capabilities.

     General Risks of Food Industry.  The industry in which the Company competes
is subject to various risks, including: adverse changes in general economic
conditions; adverse changes in local markets; evolving consumer preferences;
nutritional and health-related concerns; federal, state and local food
processing controls; consumer product liability claims; risks of product
tampering; limited shelf life of food products; and the availability and expense
of liability insurance.
 
ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
<PAGE>
 
     The consolidated financial statements and financial statement schedule in
Part IV, Item 14(a) 1 and 2 of this report are incorporated by reference into
this Item 8.

ITEM 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.

None.
<PAGE>
 
                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

     Set forth below are the names and positions of the directors, officers and
significant employees of the Company.

          Name             Age               Position                          
          ----             ---               --------                          
   J. David Culwell.......  47   Chief Executive Officer and Director          
   John C. Douthett.......  49   Executive Vice President of Sales and Marketing
   A. Scott Letier........  37   Chief Financial Officer                       
   Randall H. Collins.....  50   Vice President--Sales and Marketing           
   Hernando Aviles........  42   Vice President--Human Resources               
   Richard L. Cravey......  53   Director                                      
   William A. Davies......  52   Director                                      
   James A. O'Donnell.....  45   Director                                       

     J. DAVID CULWELL became Chief Executive Officer and a Director of the
Company at the time of the Acquisition Closing. Mr. Culwell has been an
independent food industry consultant since January 1991. Prior to being a
consultant, Mr. Culwell held positions with Tyson and Holly Farms, wherein he
was responsible for the operations of one of the Company's predecessors, 
Quik-to-Fix, Foods.

     JOHN C. DOUTHETT has been Executive Vice President of Sales and Marketing
since joining the Company on November 10, 1998.  Prior to joining the Company,
Mr. Douthett was employed by Tyson Foods, Inc., for one year as Vice President
of Distribution Sales, where he was responsible for a sales and marketing staff
that was responsible for over $1 billion in sales.  Prior to this position, Mr.
Douthett worked for 25 years, and held a number of positions at Campbell Soup
Company, including Vice President of Sales, Vice President of Sales for
Campbell's Foodservice division, and other divisional, regional and district
sales positions at Campbell's.

     A. SCOTT LETIER has been Vice President and Chief Financial Officer since
joining the Company on December 10, 1996. Prior to joining the Company Mr.
Letier served as the Senior Vice President and Chief Financial Officer of CS
Wireless Systems, Inc. from July 1996 until December 1996. Mr. Letier also
served as the Vice President of Finance and Chief Financial Officer of AmeriServ
Food Company from July 1993 until June 1996. Mr. Letier served as the Vice
President and Corporate Controller of AmeriServ Food Company from February 1992
until July 1993. Mr. Letier is a certified public accountant.

     RANDALL H. COLLINS was employed by Tyson as Vice President of Sales and
Marketing for the Business since April 1996, where he was responsible for a 16
member sales and marketing staff. Prior to holding this position, Mr. Collins
held a number of positions at Tyson, including Division Manager for Tyson
Foodservice, Division Sales Manager for Tyson Beef and Pork, and Division
Manager for Beef Sales. Prior to joining Tyson in 1989 as a result of Tyson's
acquisition of Holly Farms, he held a number of general management and sales
positions at Harker's/Holly Farms and Kraft/General Foods.  Mr. Collins became
Vice President--Sales and Marketing at the time of the Acquisition Closing.

     HERNANDO AVILES was employed by Tyson as Vice President--Human Resources,
Beef and Pork Division since February 1994, where he was responsible for
overseeing six personnel location directors, with responsibility over all human
resources practices and policies. Mr. Aviles joined Tyson in 1989 as the Complex
Personnel Manager for the New Holland, Pennsylvania complex of Tyson. Prior to
1989, Mr. Aviles held various positions at Holly Farms. Mr. Aviles became Vice
President--Human Resources at the time of the Acquisition Closing.

     RICHARD L. CRAVEY has been a director of the Company since October 1996.
Mr. Cravey is a member of CGW Southeast III L.L.C., the general partner of CGW,
(the "General Partner"), and is jointly 
<PAGE>
 
responsible for all major decisions of the General Partner. Mr. Cravey is also a
member of CGW Southwest Management III, L.L.C. (the "Management Company"), an
affiliate of CGW. In addition, Mr. Cravey is a member of Le Select III, L.L.C.
(the "Limited Partner"), a limited partner of CGW. Mr. Cravey has been a
member of the General Partner, the Management Company or affiliated entities for
more than five years. He is a director of AMRESCO, Inc. and Cameron Ashley
Building Products, Inc.

     WILLIAM A. DAVIES has been a director of the Company since October 1996.
Mr. Davies is a member of each of the General Partner and the Limited Partner,
and is responsible for sourcing, structuring and negotiating transactions,
participating in strategic planning with portfolio company management to
maximize value and managing exit strategies. In addition, Mr. Davies is involved
in managing the administrative functions of the General Partner. Mr. Davies has
been a member of the General Partner or an employee of affiliates of the General
Partner for more than five years.

     JAMES A. O'DONNELL has been a director of the Company since October 1996.
Mr. O'Donnell has been a member of the General Partner since 1995, and is
responsible for sourcing, structuring and negotiating transactions,
participating in strategic planning with portfolio company management to
maximize value and managing exit strategies. Mr. O'Donnell is also a member of
the Limited Partner. Mr. O'Donnell has been a general partner of Sherry Lane
Partners, a private equity investment firm based in Dallas, Texas, since 1992.
Also, Mr. O'Donnell has been a general partner of O'Donnell & Masur, a private
equity investment firm based in Dallas, Texas, since 1989. He is a director of
Bestway Rental, Inc.


ITEM 11.  EXECUTIVE COMPENSATION.

     The following table sets forth certain summary information concerning the
compensation paid or awarded to the Company's Chief Executive Officer and the
other executive officers receiving compensation in excess of $100,000 for the
period September 28, 1997 through October 3, 1998 (the "Named Executive
Officers").

                          SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
Name and Principal          Salary           Bonus          Other Annual         Securities          All Other
Position                                                  Compensation (1)       Underlying        Compensation
                                                                                  Options/
                                                                                  SARs(#)
---------------------------------------------------------------------------------------------------------------
<S>                       <C>               <C>           <C>                    <C>               <C>
J. David Culwell            175,000            0               6,000                  0                  0
Richard E. Mitchell (2)     159,000            0               6,000                  0                  0
Randall H. Collins          142,500            0               4,165                  0                  0
A. Scott Letier             130,000            0               3,800                  0                  0
Robert M. Powers (2)        115,000            0               4,500                  0                  0
---------------------------------------------------------------------------------------------------------------
</TABLE>

(1)  Consists of 401K contribution match.
(2)  No longer employed by the Company

EMPLOYMENT AGREEMENTS

     The Company entered into employment agreements (the "Employment
Agreements") with Messrs. Culwell, Mitchell, Collins, Powers, Letier, and
Aviles for terms expiring on the fifth anniversary of the Acquisition Closing,
subject to automatic one-year renewals unless either party gives 60 days notice
not to renew. The Company has the right to terminate the Employment Agreements
at any time prior to expiration. However, if a Senior Manager is terminated
other than for cause, death or disability, such Senior Manager will receive, in
addition to earned salary and bonus, a severance payment equal to 12 months base
salary. If a Senior Manager is terminated for cause, death or disability, such
Senior Manager will receive only earned salary and bonus due as of the date of
termination. The Employment Agreements will also contain non-competition, non-
solicitation and confidentiality provisions.
<PAGE>
 
     Mr. Culwell's Employment Agreement provides for a base salary of $175,000,
and Mr. Culwell is eligible to receive a bonus of up to 50% of his base salary
at the discretion of the Company's Board of Directors. Mr. Mitchell's Employment
Agreement provides for a base salary of $159,000, and Mr. Mitchell eligible to
receive a bonus of up to 50% of his base salary at the discretion of the
Company's Board of Directors. Mr. Collins' Employment Agreement provides for a
base salary of $142,500, and Mr. Collins is eligible to receive a bonus of up to
50% of his base salary at the discretion of the Company's Board of Directors.
Mr. Powers' Employment Agreement provides for a base salary of $115,000, and Mr.
Powers will be eligible to receive a bonus of up to 40% of his base salary at
the discretion of the Company's Board of Directors. Mr. Letier's Employment
Agreement provides for a base salary of $130,000, and Mr. Letier is eligible to
receive a bonus of up to 40% of his base salary at the discretion of the
Company's Board of Directors. Subsequent to year end, the Company and Mr.
Mitchell and Mr. Powers agreed to cancel their respective Employment Agreements
in accordance with the terms of these agreements.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     GHC owns 100% of the issued and outstanding capital stock of the Company.
As of October 3, 1998, GHC was owned 54.8% by CGW, 19.7% by NBIC, 24.1% by FPGT
and 1.4%, in the aggregate, by the Senior Managers, none of whom individually
owns more than 1%. As of October 3, 1998, on a fully-diluted basis, GHC was
owned 46.3% by CGW, 16.7% by NBIC, 20.4% by FPGT and 16.6% in the aggregate, by
the Senior Managers and other employees of the Company who hold options to
purchase GHC common stock, none of whom individually owns more than 1% on a
fully diluted basis. In December 1998, in connection with the repurchase and
retirement of the Tendered Notes and the CGW Notes, CGW invested $16,900,000 in
equity securities of GHC. Pursuant to the terms and conditions of the Securities
Purchase and Stockholders Agreement, CGW has agreed to offer to each of NBIC,
FPGT and the Senior Managers the opportunity to acquire its pro rata share of
such equity securities at the same price as such equity securities were acquired
by CGW. Assuming each of NBIC, FPGT and the Senior Managers accept this offer,
CGW will continue to beneficially own shares representing 54.8% of the voting
interest in GHC. Should any or all of NBIC, FPGT or the Senior Managers decline
this offer, CGW's beneficial ownership of GHC will increase proportionately.
Affiliated entities of each of : (i) Richard L. Cravey, William A. Davies and
James A. O'Donnell; (ii) NBIC; and (iii) FPGT are limited partners of CGW.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

SECURITIES PURCHASE AND STOCKHOLDERS AGREEMENT

     See "Market for Registrant's Common Stock and Related Stockholder Matters."
 


TRANSACTIONS WITH CGW AND ITS AFFILIATES

     On December 21, 1998 the Company obtained from CGW a $4,000,000
subordinated bridge loan, the proceeds of which were used to fund the Interest
Payment.  The terms of the Bridge Loan provide for a one year loan to the
Company at an interest rate of 9%.  On December 15, 1999, if the Company has not
obtained a Replacement Credit Facility, the Bridge Loan will automatically
convert to equity in GHC.

     On November 25, 1996, the General Partner entered into the Consulting
Agreement with the Company whereby the Company will pay the General Partner a
monthly retainer fee of $30,000 for financial and management consulting
services. The Company paid $360,000 to the General Partner for the year ended
October 3, 1998 for such services.  The General Partner may also receive
additional compensation (not to exceed an aggregate of $500,000 annually) if
approved by the Board of Directors of the Company at the end of the Company's
fiscal year, based upon the overall performance of the Company. The Consulting
Agreement expires five years from November 25, 1996The General Partner has
delegated its rights and obligations under the Consulting Agreement to the
Management Company, an affiliate of CGW.
<PAGE>
 
     The Company believes that the terms and conditions of the Consulting
Agreement, the fees paid to the General Partner thereunder and the fees paid to
the Management Company are consistent with arms-length transactions with
unaffiliated parties. In addition, the terms and conditions of the Credit
Agreement and the Indenture restrict the Company's ability to enter into certain
transactions with Affiliates.


TRANSACTIONS WITH NBIC AND ITS AFFILIATES

     The Company paid, in the normal course of business, interest and fees to
Nationsbank of Texas, N.A. ("Nationsbank"), an affiliate of NBIC, of $5.1
million.  A portion of these amounts are paid to Nationsbank as agent for the
other lends participating in the Company's Senior Credit Facility.
Approximately $1.0 million of these amounts was to Nationsbank for their portion
of the Facility and for other services rendered.

 


INDEMNIFICATION OF OFFICERS AND DIRECTORS

     The Certificates of Incorporation of the Company and GHC contain provisions
eliminating the liability of directors for monetary damages for breaches of
their duty of care to the Company or GHC, as applicable, except in certain
prescribed circumstances. The Certificates of Incorporation and Bylaws of the
Company and GHC also provide that directors and officers of the Company and GHC
will be indemnified by the Company and GHC, respectively, to the fullest extent
authorized by Delaware law, as it now exists or may in the future be amended,
against all expenses and liabilities reasonably incurred in connection with
service for or on behalf of the Company or GHC, as appropriate. The Certificate
of Incorporation and Bylaws of the Company and GHC provide that the right of
directors and officers to indemnification is not exclusive of any other right
now possessed or hereinafter acquired under any statute, agreement or otherwise.
<PAGE>
 
                                    PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.

     (a)  THE FOLLOWING DOCUMENTS ARE FILED AS A PART OF THIS ANNUAL REPORT ON
          FORM 10-K.
 
     1.   CONSOLIDATED FINANCIAL STATEMENTS AT ITEM 8.

     2.   CONSOLIDATED FINANCIAL STATEMENT SCHEDULES:

                 All other Financial Statement Schedules have been omitted
          because (i) the required information is not present in amounts
          sufficient to require submission of the schedule, (ii) the information
          required is included in the Consolidated Financial Statements or the
          Notes thereto, or (iii) the information required in the Schedules is
          not applicable to the Company.

     3.   Exhibits:

          The following exhibits either (i) are filed herewith; or (ii) have
          previously been filed with the Securities and Exchange Commission and
          are incorporated herein by reference to such prior filings.

          10.1   Fourth Amendment and Waiver, dated October 29, 1998, by and
          among Gorges Holding Corporation, the Company, the lending
          institutions party to the Credit Agreement and NationsBank, N.A.,
          successor by merger to NationsBank of Texas, N.A. (incorporated by
          reference to the Company's Current Report on Form 8-K, dated October
          29, 1998 (Commission File No. 333-20155)).

          10.2   Letter Agreement, dated December 21, 1998, by and among Gorges
          Holding Corporation, the Company, the lending institutions party to
          the Credit Agreement and NationsBank, N.A.,  successor by merger to
          NationsBank of Texas, N.A.

          10.3   Subordinated Promissory Note, dated December 21, 1998, between
          the Company and Gorges Holding Corporation.

          23.    Consent of Ernst & Young

          27.    Financial Data Schedule.


     (b)  REPORTS ON FORM 8-K

                 The Company did not file any Current Reports on Form 8-K during
          the fiscal quarter ended October 3, 1998.

     (c)  EXHIBITS

                 See Item 14(a)3.

     (d)  FINANCIAL STATEMENT SCHEDULES

                 See Item 14(a)2.
<PAGE>
 
                                  SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized on December 30, 1998.

                                       GORGES/QUIK-TO-FIX FOODS, INC.


                                       By: /s/   J. David Culwell
                                           -----------------------
                                           J. David Culwell
                                           Chief Executive Officer

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, this report has been signed below by the following persons on
behalf of the registrant and in the capacities indicated on December ___, 1998.

           SIGNATURE                              Title
           ---------                              -----
                                        
      /s/ J. David Culwell              Chief Executive Officer and Director
--------------------------------        
        J. David Culwell                
                                        
                                        
     /s/ Richard L. Cravey              Director
--------------------------------        
       Richard L. Cravey                
                                        
     /s/ William A. Davies              Director
--------------------------------        
       William A. Davies                
                                        
     /s/ James A. O'Donnell             Director
--------------------------------
       James A. O'Donnell

      /s/ A. Scott Letier               Chief Financial Officer
--------------------------------
        A. Scott Letier
<PAGE>
 
                        GORGES/QUIK-TO-FIX FOODS, INC.

                  Index to Consolidated Financial Statements

<TABLE>
 
<S>                                             <C> 
Report of Independent Auditors                  F-2
Balance Sheets                                  F-3
Statements of Operations                        F-4
Statements of Cash Flows                        F-5
Statement of Changes in Stockholder's Equity    F-6
Notes to Financial Statements                   F-7
</TABLE>

                                      F-1
<PAGE>
 
               Report of Ernst & Young LLP, Independent Auditors



The Board of Directors and Stockholder
Gorges/Quick-to-Fix Foods, Inc.


We have audited the accompanying balance sheets of Gorges/Quik-to-Fix Foods,
Inc. as of October 3, 1998 and September 27, 1997, and the related statements of
operations, stockholder's equity, and cash flows for the year ended October 3,
1998 and the three hundred and six day period ended September 27, 1997 and the
statements of operations and cash flows of Gorges/Quik-to-Fix Foods operations
of Tyson Foods, Inc. for the fifty-eight day period ended November 25, 1996 and
the year ended September 28, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Gorges/Quik-to-Fix Foods, Inc.
at October 3,1998 and September 27, 1997 and the results of operations and cash
flows for the year ended October 3, 1998 and the three hundred six day period
ended September 27, 1997 of Gorges/Quik-to-Fix Foods, Inc. and fifty-eight days
ended November 25, 1996 and the year ended September 28, 1996 of Gorges/Quik-to-
Fix Foods, operations of Tyson Foods, Inc., in conformity with generally
accepted accounting principles.


                                    /s/   Ernst & Young LLP
                                    -----------------------

Dallas, Texas
November 19, 1998,
except for Note 3 and Note 11, as to which the date is December 21, 1998

                                      F-2
<PAGE>
 
                        GORGES/QUIK-TO-FIX FOODS, INC.
                                BALANCE SHEETS
                       (In thousands, except share data)

<TABLE>
<CAPTION>
                                                                             COMPANY
                                                            SEPTEMBER 27,                 OCTOBER 3,
                                                                 1997                        1998
                                                       ------------------------  ---------------------
<S>                                                    <C>                         <C>
   ASSETS                                                                       
Current assets:                                                                 
   Cash                                                             $      -                  $  1,671
   Accounts receivable, net of allowance for doubtful                           
          accounts of $795 and $207                                   21,960                    16,970
   Inventory                                                          28,645                    15,880
   Prepaid expenses and other                                             78                       448
                                                       ------------------------  ---------------------
     Total current assets                                             50,683                    34,969
                                                                                
Property, plant and equipment:                                                     
   Land                                                                1,499                     1,499
   Buildings and leasehold improvements                               44,531                    38,174
   Machinery and equipment                                            44,517                    38,826
   Construction in process and other                                   3,144                     1,002
                                                       ------------------------  ---------------------
                                                                      93,691                    79,501
   Accumulated depreciation                                           (7,358)                  (13,067)
                                                       ------------------------  ---------------------
     Net property, plant and equipment                                86,333                    66,434
                                                                                
Other assets:                                                                   
   Intangible assets                                                  65,389                    63,090
   Organizational and deferred debt issuance costs                     8,767                     7,282
   Other                                                                  89                        28
                                                       ------------------------  ---------------------
     Total assets                                                   $211,261                  $171,803
                                                       ========================  =====================
                                                                                
     LIABILITIES AND STOCKHOLDER'S EQUITY                                       
Current liabilities:                                                            
   Accounts payable and accrued expenses                            $ 18,658                  $ 13,381
   Current portion of long-term debt                                   8,450                     8,500
                                                       ------------------------  ---------------------
      Total current liabilities                                       27,108                    21,881
                                                                                
Long-term debt, less current portion                                 141,050                   139,350
                                                                                
Stockholder's equity:                                                              
   Common stock, $.01 par value; 2,000 shares                                   
         authorized, 1,000 shares issued and                                       
         outstanding                                                       -                         -
   Additional paid-in capital                                         45,585                    45,585
   Accumulated deficit                                                (2,482)                  (35,013)
                                                       ------------------------  ---------------------
     Total stockholder's equity                                       43,103                    10,572
                                                       ------------------------  ---------------------
     Total liabilities and stockholder's equity                     $211,261                  $171,803
                                                       ========================  =====================
</TABLE>



See accompanying notes to financial statements

                                      F-3
<PAGE>
 
                         GORGES/QUIK-TO-FIX FOODS, INC.
                            STATEMENTS OF OPERATIONS
                                 (In thousands)

<TABLE>
<CAPTION>
                                     PREDECESSOR                                   COMPANY
                           ------------------------------------------------------------------------------------------------------
                                YEAR        FIFTY-EIGHT      |          THREE              PRO FORMA         YEAR
                                ENDED          DAYS          |         HUNDRED               YEAR            ENDED
                                               ENDED         |         SIX DAYS              ENDED  
                                                             |          ENDED    
                              SEPTEMBER       NOVEMBER       |      SEPTEMBER 27,         SEPTEMBER 27,     OCTOBER 
                               28, 1996       25, 1996       |          1997                  1997           3,1998 
                              (AUDITED)      (AUDITED)       |        (AUDITED)            (UNAUDITED)     (AUDITED)
                           ----------------------------------|--------------------------------------------------------
<S>                          <C>             <C>             |      <C>                   <C>              <C> 
Sales                         $  232,761        $31,966      |           $172,738             $204,704      $201,581
Costs of goods sold              189,559         25,917      |            140,149              166,696       171,746
                              ----------     ----------      |      -------------       ---------------------------- 
   Gross profit                   43,202          6,049      |             32,589               38,008        29,835
                                                             |      
Operating expenses:                                          |      
   Selling, general and                                      |      
      administrative              26,414          4,153      |             18,645               22,853        27,881
   Amortization                    1,624            250      |              2,706                3,057         3,294
   Restructuring expense               -              -      |                  -                    -        13,900
                              ----------     ----------      |      -------------       ---------------------------- 
     Total operating              28,038          4,403      |             21,351               25,910        45,075
      Expenses                                               |      
                              ----------     ----------      |      -------------       ----------------------------
                                                             |
Operating income (loss)           15,164          1,646      |             11,238               12,098       (15,240)
                                                             |      
Interest expense                       -              -      |             13,709               16,398        17,243
Other expense (income)               796              -      |                 11                   11           (10)
                              ----------     ----------      |      -------------       ---------------------------- 
                                                             |      
                                                             |      
Income (loss) before              14,368          1,646      |             (2,482)              (4,311)      (32,473)
    income taxes                                             |      
Income tax expense                 6,205            731      |                  -                    -            58
                              ----------     ----------      |      -------------       ---------------------------- 
                                                             |      
     Net income (loss)          $  8,163        $   915      |           $ (2,482)            $ (4,311)     $(32,531)
                              ==========     ==========      |      =============       ============================
</TABLE>



See accompanying notes to financial statements

                                      F-4
<PAGE>
 
                         GORGES/QUIK-TO-FIX FOODS, INC.
                            STATEMENTS OF CASH FLOWS
                                 (In thousands)

<TABLE>
<CAPTION>
                                                                   PREDECESSOR                         COMPANY
                                                    -----------------------------------------------------------------------
                                                                                         |         THREE               
                                                                         FIFTY-EIGHT     |        HUNDRED                 
                                                          YEAR              DAYS         |        SIX DAYS       YEAR
                                                          ENDED            ENDED         |         ENDED         ENDED
                                                        SEPTEMBER         NOVEMBER       |       SEPTEMBER       OCTOBER
                                                        28, 1996          25, 1996       |        27, 1997       3, 1998
                                                     ------------------------------------|----------------------------------
<S>                                                  <C>                 <C>             |     <C>               <C> 
Cash flows from operating activities:                                                    |  
   Net income (loss)                                      $  8,163             $ 915     |     $  (2,482)           $(32,531)
   Adjustments to reconcile net income (loss) to                                         |                      
    net cash provided by operating                                                       |                      
    activities:                                                                          |                      
      Depreciation                                           7,292               342     |         7,358               9,523
      Amortization                                           1,624               250     |         2,706               3,294
      Amortization of deferred debt costs                        -                 -     |           595                 831
      Deferred income taxes                                 (1,285)               26     |             -                   -
      Non-cash restructuring expenses                          792                 -     |             -              13,500
      Provision for losses on doubtful accounts                  -                 -     |           795                 370
Changes in assets and liabilities:                                                       |                      
        (Increase) decrease in accounts                          -                 -     |       (22,755)              4,620
        receivable                                                                       |                      
        (Increase) decrease in inventory                      (691)             (571)    |          (645)             12,765
        Increase (decrease) in prepaid expenses and                                      |
            other                                                -                 -     |          (167)               (310)
         Increase (decrease) in accounts payable and             -                 -     |        17,712              (5,277)
           accrued expenses                                                              |                      
                                                     ------------------------------------|----------------------------------
                                                                                         |                      
     Net cash provided by operating activities              15,895               962     |         3,117               6,785
                                                                                         |                      
Cash flows from investing activities:                                                    |                      
   Purchases of plant and equipment                           (735)             (141)    |        (3,691)             (3,112)
   Acquisition, net of cash received                             -                 -     |      (184,349)                  -
   Proceeds from sale of equipment                             126                 -     |            45                   -
   Other                                                         -                 -     |            51                 (96)
                                                     ------------------------------------|----------------------------------
                                                                                         |                      
     Net cash used in investing                               (609)             (141)    |      (187,944)             (3,208)
          activities                                                                     |                      
                                                                                         |                      
Cash flows from financing activities:                                                    |                      
   Proceeds from note offering                                   -                 -     |       100,000                   -
   Capital contributions                                         -                 -     |        45,585                   -
   Proceeds from revolving line of credit                        -                 -     |        19,000              24,000
   Payments on revolving line of credit                          -                 -     |        (7,000)            (17,000)
   Proceeds from term loan                                       -                 -     |        40,000                   -
   Payments on term loan                                         -                 -     |        (2,500)             (8,650)
   Debt issuance and organizational costs                        -                 -     |       (10,258)               (256)
   Decrease in Investment and advances by                                                |                      
     Tyson                                                 (15,286)             (821)    |             -                   -
                                                                                         |                      
                                                                                         |                      
                                                     ------------------------------------|----------------------------------
Net cash (used in) provided by financing                                                 |                      
      activities                                           (15,286)             (821)    |       184,827              (1,906)
                                                     ------------------------------------|----------------------------------
                                                                                         |                      
Net increase in cash                                             -                 -     |             -               1,671
Cash at beginning of period                                      9                 9     |             -                   -
                                                     ------------------------------------|----------------------------------
Cash at end of period                                     $      9             $   9     |     $       -            $  1,671
                                                     ====================================|==================================
</TABLE>

See accompanying notes to financial statements

                                      F-5
<PAGE>
 
                        GORGES/QUIK-TO-FIX FOODS, INC.
                 STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY
                       (In thousands, except share data)



<TABLE>
<CAPTION>
                                    COMMON                         ADDITIONAL          
                                    STOCK           COMMON          PAID IN            ACCUMULATED
                                    SHARES          STOCK           CAPITAL              DEFICIT            TOTAL
                              --------------------------------------------------------------------------------------
<S>                           <C>                <C>              <C>                  <C>              <C> 
November 25, 1996                        -       $      -            $     -             $      -          $     -
Initial sale                       
 (issuance of common stock)          1,000                            45,585                    -           45,585
Net loss                                 -              -                  -               (2,482)          (2,482)
                              -------------------------------------------------------------------------------------- 
September 27, 1997                   1,000              -             45,585               (2,482)          43,103
                              -------------------------------------------------------------------------------------- 
                                   
Net loss                                                                                  (32,531)         (32,531)
                              -------------------------------------------------------------------------------------- 
                                   
October 3, 1998                      1,000       $      -            $45,585             $(35,013)         $10,572
                              ======================================================================================
</TABLE>

                                      F-6
<PAGE>
 
GORGES/QUIK-TO-FIX FOODS, INC.
NOTES TO FINANCIAL STATEMENTS
October 3, 1998
(In thousands except share data)

1.  ORGANIZATION AND BASIS OF PRESENTATION

     On November 25, 1996 Gorges/Quik-to-Fix Foods, Inc. (the "Company")
acquired certain assets and liabilities of the beef processing division (the
"Predecessor") of Tyson Foods, Inc., ("Tyson"), in exchange for a cash payment
of approximately $184.0 million (the "Acquisition").  The cash used to
consummate the Acquisition was obtained through the issuance of $45.0 million in
common stock, and the proceeds from borrowings. The Company assumed no
liabilities or obligations of Tyson or the Predecessor with the exception of
those defined in the purchase agreement: future obligations of normal course of
business executory contracts, agreements to purchase inventory or supply
products, accrued vacation pay, and certain property tax obligations. Tyson
agreed to indemnify the Company from any and all liabilities and obligations
relating to the Predecessor, other than the aforementioned liabilities assumed
by the Company. The Company and Tyson also entered into a non-competition
agreement which expires two years from the date of closing, in which the parties
have agreed, subject to certain exceptions and limitations, to not compete with
each other in the production or sale of beef and pork items, in the case of
Tyson, and poultry items, in the case of the Company. As a result of the
acquisition, financial information for periods through November 25, 1996 are
presented on a different cost basis and, therefore, such information may not be
comparable.

     The Company, a wholly owned subsidiary of Gorges Holding Company ("GHC"),
is a leading producer, marketer and distributor of value added processed beef
products for the foodservice industry and is one of the few companies in this
segment of the industry that markets and distributes nationally.  The Company
purchases fresh and frozen beef and, to a lesser extent, pork and poultry, which
it processes into a broad range of fully cooked and ready to cook products. The
Company's two product categories are value added products and ground beef.
Value added product offerings include:  (i) breaded beef items such as country
fried steak and beef fingers;  (ii) charbroiled beef items such as fully cooked
hamburger patties, fajita strips, meatballs,  meatloaf and taco meat; and (iii)
other specialty products, such as fully cooked and ready to cook pork sausage,
breaded pork and turkey, cubed steaks, and Philly steak slices.  Ground beef
products consist primarily of individually quick frozen hamburger patties.  The
Company's products are sold primarily to the foodservice industry, which
encompasses all aspects of away-from-home food preparation, including commercial
establishments such as fast food restaurants and family dining restaurants and
non-commercial establishments such as healthcare providers, schools and
corporations.  The Company sells its products primarily through broadline and
specialty foodservice distributors.

     The accompanying audited and unaudited financial statements include
financial information of the Company, and its Predecessor, which represents the
Company prior to its acquisition from Tyson.  The Predecessor represents the
beef processing assets and operations of Tyson, which was operated and accounted
for as a consolidated operating division of Tyson. Prior to the Acquisition,
Tyson's accounting system produced separate income statements for the
Predecessor while certain balance sheet accounts, including the majority of
cash, receivables, prepaids, payables and accruals were maintained only on a
consolidated basis at the corporate level, and are in effect reflected in
Investment and advances by Tyson.  The Predecessor participated in Tyson's
overall corporate cash management program whereby operating funds

                                      F-7
<PAGE>
 
GORGES/QUIK-TO-FIX FOODS, INC.
NOTES TO FINANCIAL STATEMENTS-(Continued)

1.  ORGANIZATION AND BASIS OF PRESENTATION - CONTINUED

were provided by Tyson with the corresponding charge or credit reflected in the
Investment and advances by Tyson account.  As a result, the Predecessor
maintained only nominal cash accounts.  A portion of Tyson's accounting and
administrative costs related to thesefunctions were allocated to the Predecessor
as discussed in Note 2.  Additionally the allocable portion of the expenses
associated with certain other assets and other liabilities recorded at Tyson's
corporate level for which the Predecessor received benefit was reported in the
Predecessor's operations.

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 Fiscal Year

     The Company utilizes a 52 or 53 week accounting period, ending on the
Saturday closest to September 30.  Fiscal year 1998, which ended on October 3,
1998, is a 53 week year.

 Accounts Receivable

     The Company periodically evaluates the credit worthiness of its customers
as accounts receivable balances are not collateralized.  The Company has not
experienced significant credit losses.

 Inventories

     Inventories, valued at the lower of cost (first-in, first-out) or market
(replacement or net realizable value), consist of the following (in thousands):

<TABLE>
<CAPTION>
                                       September 27,  |    October 3,
                                           1997       |       1998
                                   -------------------|------------------
<S>                                <C>                |   <C>
   Finished goods                          $17,655    |       $10,306
   Supplies and ingredients                 10,990    |         5,574
                                   -------------------|------------------
      Total                                $28,645    |       $15,880
                                   ======================================
</TABLE>

 Property, Plant and Equipment

     Property, plant and equipment is stated at cost.  Depreciation is
calculated primarily by the straight-line method over the estimated useful lives
of the assets, which range from 3 to 20 years.

     Capital expenditures for equipment and capital improvements are generally
capitalized while maintenance is expensed.

 Intangible assets and Organizational and Deferred Debt Issuance Costs

     Intangible assets, consisting of goodwill and trademarks, are stated at
cost and are amortized on a straight-line basis over 30 years (40 years by the
Predecessor).  Recoverability of the carrying value of intangible assets is
evaluated on a recurring basis with consideration toward recovery through future
operating results on an undiscounted basis.

                                      F-8
<PAGE>
 
GORGES/QUIK-TO-FIX FOODS, INC.
NOTES TO FINANCIAL STATEMENTS-(Continued)

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

     Organizational costs are amortized on a straight-line basis over five
years, and deferred debt issuance costs are amortized over the life of the debt
instrument to which it relates.  At September 27, 1997 and October 3, 1998, the
accumulated amortization was $3.3 million and $7.3 million, respectively.
Subsequent to year end, the Company amended its credit agreement (the "Credit
Agreement") with NationsBank, N.A. (the "Bank") as agent for a syndicate of
banks and financial institutions, and as a result wrote-off approximately $1.4
million of deferred debt issuance costs, see Notes 3 and 11.

Income Taxes

     The Company follows the liability method of accounting for deferred income
taxes. The liability method provides that deferred tax liabilities are recorded
at currently enacted tax rates based on the difference between the tax basis of
assets and liabilities and their carrying amounts for financial reporting
purposes, referred to as temporary differences.

 Selling Expenses

     Selling expenses include product line expenses such as shipping and
storage, external handling, external freezer charges, product and package
design, brokerage expense, and other direct selling expenses such as certain
salaries, travel and research and development.  Selling expenses for the
Predecessor also include an allocable share of other common Tyson selling
expenses as discussed below.

 Allocation of Corporate Expenses

     Prior to the Acquisition from Tyson certain indirect administrative and
selling expenses incurred by Tyson which were not actually incurred for programs
specific to the Predecessor have been allocated to the Predecessor based on net
sales.  Allocated administrative expenses include costs incurred for all
corporate support functions.  Allocated selling expenses consisted of costs
incurred by Tyson's corporate sales and marketing department.  Because these
charges were incurred by Tyson, actual charges, if the Predecessor had been a
separate entity at the time, might have differed.  Certain expenses incurred at
Tyson corporate directly related to the Predecessor such as production
scheduling, research and development and the corporate aviation department were
allocated based on usage.

     Selling, administrative and corporate expenses allocated to the Predecessor
and charged to operations for the year ended September 28, 1996 and the fifty-
eight days ended November 25, 1996 were $13.9 million and $1.4 million,
respectively.

Advertising, Promotion and Research and Development Expenses

     Advertising, promotion and research and development expenses are charged to
operations in the period incurred.  Advertising and promotion expenses were $9.4
million for the period ending October 3, 1998, compared to $6.6 million for the
pro-forma period ending September 27, 1997 and $5.7 million for fiscal 1996.
Research and Development expenses were $0.7 million for the year ended October
3, 1998 compared to $0.4 million for the year ended September 27, 1997.

                                      F-9
<PAGE>
 
GORGES/QUIK-TO-FIX FOODS, INC.
NOTES TO FINANCIAL STATEMENTS-(Continued)

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

Restructuring Expenses

     On October 7, 1998, the Company announced its intent to exit the ground
beef business to concentrate on its core value added products.  Certain expenses
were recorded in fiscal 1998 in conjunction with this decision.  The $13.9
million charge recorded in fiscal 1998 is comprised of: (i) a $13.5 million
charge to write down the value of certain assets used in the ground beef
business to the estimated net realizable value of these asset, and (ii) a $0.4
million charge for severance and other expenses related to the exit from the
ground beef business and restructuring of the Company's value added business.
The Company expects to incur additional costs related to the exit from the
ground beef business and restructuring of the value added business in fiscal
1999; however, currently, the amount of these costs cannot be accurately
estimated. See Note 11

Use of Estimates

     The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes.  Actual results could differ from those estimates.

Collective Bargaining Agreements

     Currently the Company has approximately 200 employees of its total
workforce of approximately 1,000 employees covered under a collective bargaining
agreement.  The collective bargaining agreement has expired and the Company is
negotiating a new agreement.

3.  LONG TERM DEBT

Senior Debt

     As of October 3, 1998, the Company was not in compliance with certain
technical or financial and limit ratio covenants under the Credit Agreement,
which provides the Company with a $30.0 million revolving credit facility (the
"Revolver") and a $40.0 million term loan facility (the "Term Loan"). The
Revolver includes a subfacility of $7.0 million for commercial and standby
letters of credit. The Revolver has a term of five years, and all amounts
outstanding will become due and payable on November 30, 2000. The Term Loan also
has a five year term and is subject to quarterly principal payments in an
aggregate amount of $8.5 million in fiscal 1999, $9.0 million in fiscal 2000,
and $11.4 million in fiscal 2001.

     As a result of its noncompliance under the Credit Agreement, the Company
was prohibited by the Bank from borrowing additional amounts under the Revolver
or making the December 1, 1998 interest payment (the "Interest Payment") on its
Senior Subordinated Notes Due 2006, Series B (the "Notes"). On October 29, 1998,
the Company entered into an amendment to the Credit Facility (the "Amendment")
that replaces the existing covenants with a new set of covenants under which the
Company can borrow funds based on the levels of its accounts receivable and
inventory.  The implementation of new covenants under the Credit Facility may
have the effect of reducing the amount available under the Revolver depending on

                                      F-10
<PAGE>
 
GORGES/QUIK-TO-FIX FOODS, INC.
NOTES TO FINANCIAL STATEMENTS-(Continued)

3.  LONG TERM DEBT - CONTINUED

     the levels of accounts receivable and inventory at any given time. The
Amendment became effective on December 21, 1998, at which time the Company was
in compliance with all terms and conditions of the Credit Facility.  See Note
11.

     Outstanding borrowings under the Credit Agreement bear interest at floating
rates per annum equal to, the Base Rate plus 1.50%. At October 3, 1998 the
interest rate for the Company based on this formula was 10.00%. The Company may
be required to make mandatory prepayments against both facilities, comprised of
principal payments totaling: (i) 100% of cash received in asset sales wherein
the proceeds are not used to purchase replacement assets, and (ii) 50% of the
Company's Excess Cash Flow as defined in the Credit Agreement. These payments
are to be applied first to the Term Loan and, upon the Term Loan's retirement,
to the Revolver as a permanent reduction. At October 3, 1998, the Company's
outstanding borrowings under the Credit Agreement were $47.9 million, $19.0
million on the Revolver, and $28.9 million on the Term Loan. Also, at October 3,
1998, the Company had $0.8 million in outstanding letters of credit.

     Under the Credit Agreement, the Company is subject to customary financial
and other covenants including certain financial limit and ratio covenants as
well as limitations on further indebtedness, guaranties, liens, dividends and
other restricted payments (including transactions with affiliates), prepayments
and redemption of debt, mergers, acquisitions, asset sales, consolidations, and
other investments.  The Credit Agreement also provides that indebtedness
outstanding is secured by a first-priority security interest in, and lien upon,
substantially all of the Company's present and future tangible and intangible
assets and capital stock.  The Company is also required under the Credit
Agreement to pay the Bank a quarterly fee equal to 0.25% of the outstanding
finance commitment beginning with the quarter ended April 2, 1999, and
increasing to 0.5% of the financing commitment in the next quarter and for each
subsequent quarter.

Subordinated Debt

     On November 25, 1996, the Company consummated a private placement of $100.0
million aggregate principal amount Notes.  The Notes will mature on December 1,
2006, unless previously redeemed.  Interest on the notes is payable semiannually
in arrears, commencing June 1, 1997, and is payable on June 1 and December 1 of
each year at a rate of 11.5% per annum.  The issuance of the Notes resulted in
net proceeds to the Company of approximately $95.0 million after underwriting
discounts and other debt issuance costs aggregating approximately $5.0 million.
On April 30, 1997, the Company consummated an exchange offer where by the
private placement Notes were replaced with similar Notes that are publicly
traded.  The Company's outstanding indebtedness under these Notes was $100
million at October 3, 1998.  Subsequent to year end, the Company retired $48.0
million aggregate principal amount of Notes, through a combination of open
market purchases and a cash tender offer. (See Note 11).

     The Notes were issued pursuant to an indenture which contains certain
restrictive covenants and limitations.  Among other things, the Indenture limits
the incurrence of additional indebtedness, limits the making of restricted
payments (as defined) including the declaration and/or payment of dividends,
places limitations on dividends and other payments by the Company, and places
limitations on liens, certain asset dispositions and merger/sale of assets
activity.  The Company was in compliance with these covenants at October 3,
1998.

                                      F-11
<PAGE>
 
GORGES/QUIK-TO-FIX FOODS, INC.
NOTES TO FINANCIAL STATEMENTS-(Continued)

3.  LONG TERM DEBT - CONTINUED

     The Notes are unsecured subordinated general obligations of the Company.
The Notes become redeemable at the Company's option on December 1, 2001, at
which time the Notes are redeemable in whole or part, subject to a redemption
premium which begins at 105.75 % of the face value in 2001 and reduces at a
scheduled rate annually until 2004 at which time the redemption is 100% of face
value. Notwithstanding the foregoing, at any time prior to December 1, 1999, the
Company, at its option, may redeem the Notes, in part, with the net proceeds of
a public equity offering or of a capital contribution made to the common equity
of the Company. Any such redemption is also subject to a redemption premium,
which begins at 110.75% in 1997 and 110.00% in 1998 and 1999. No mandatory
redemption or sinking fund payments are required with respect to the Notes;
however, at each Note holder's option, the Company may be required to repurchase
the Notes at a redemption premium of 101% in the event the Company incurs a
change of control as defined by the indenture.

     The Company paid interest of $16.4 million for the year ended October 3,
1998 compared to $13.7 million for the three hundred and six day period ended
September 27, 1997 and none in 1996.

4.   INCOME TAXES

     The Predecessor was included in the consolidated income tax returns of
Tyson and computed its tax provision as if it filed a separate return.

     Detail of the provision for income taxes consists of:

<TABLE>
<CAPTION>
                                                   Predecessor                                    Company
                                   ----------------------------------------      ---------------------------------------
                                                                                       Three                             
                                                              Fifty-eight           hundred six                        
                                        Year ended            days ended             days ended            Year ended  
                                         September             November               September             October 3,
                                         28, 1996              25, 1996               27, 1997                 1998
------------------------------------------------------------------------------------------------------------------------
<S>                                  <C>                    <C>                    <C>                   <C>
Federal                                      $ 5,270             $   621                  $   -               $     -    
State                                            935                 110                      -                    58    
                                      --------------         -----------                  -----               -------    
                                                6205                 731                      -                    58    
Current                                         7490                 990                      -                    58    
Deferred                                      (1,285)               (259)                     -                     -    
                                      --------------         -----------                  -----               -------    
                                             $  6205             $   731                  $   -               $    58    
                                      ==============         ===========                  =====               =======
</TABLE>

                                      F-12
<PAGE>
 
GORGES/QUIK-TO-FIX FOODS, INC.
NOTES TO FINANCIAL STATEMENTS-(Continued)

4.   INCOME TAXES - CONTINUED

     The reasons for the difference between the effective income tax rate and
the statutory U.S. federal income tax rate are as follows:
<TABLE>
<CAPTION>
                                                   Predecessor                                Company
                                    --------------------------------------      ----------------------------------
                                       Year ended           Fifty-eight              Three           Year ended
                                       September            days ended            hundred six         October 3, 
                                       28, 1996             November               days ended           1998 
                                                            25, 1996               September
                                                                                    27, 1997  
                                    ------------------------------------------------------------------------------
<S>                                 <C>                   <C>                   <C>                  <C>
U. S. federal income tax rate                   35.0%                 35.0%                 35.0%              35%
State income taxes                               4.2                   4.2                   4.2              4.2
Amortization of excess of                        4.0                   5.2                     -                -
 investments over net assets
 acquired
Valuation allowance                                -                     -                 (39.2)           (39.2)
                                    -----------------     -----------------     ---------------------------------- 
                                                43.2%                 44.4%                  -  %             -  %
                                    =================     =================     ================================== 
</TABLE>

     Deferred incomes taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for incomes tax purposes. The significant
components of the Company's deferred tax assets and liabilities are as follows
(in thousands):

<TABLE>
<CAPTION>
                                                                     Three hundred                       
                                                                     and seven days                     
                                                                         ended             Year ended   
                                                                      September 27,         October 3,  
                                                                          1997                1998      
                                                                   ------------------  ------------------
<S>                                                                <C>                 <C>               
Deferred tax liabilities:                                                                               
     Tax-over-book amortization                                           $ (758)             $ (3,032)  
     Tax over book depreciation                                                -                (1,586)  
                                                                          ------              --------   
  Total deferred tax liabilities                                          $ (758)             $ (4,618)  
                                                                   ===================================   
Deferred tax assets:                                                                                    
    Accounts receivable reserves                                             310                    81   
    Inventory reserves                                                       229                   328   
    Inventory capitalization                                                 201                    80   
    Book-over-tax depreciation                                               192                     -   
    Restructuring Reserve                                                      -                 5,265   
    Severance                                                                  -                   156   
    Contribution carryforward                                                  -                     3   
    Net operating loss carryforward                                          766                12,295   
                                                                          ------              --------   
  Total deferred tax assets                                               $1,698              $ 18,208   
                                                                   ===================================   
                                                                                                        
    Total net deferred tax assets                                         $  940              $ 13,590   
   Valuation allowance                                                      (940)              (13,590)  
                                                                          ------              --------   
Total net                                                                      -                     -   
                                                                   ===================================   
</TABLE>

                                      F-13
<PAGE>
 
GORGES/QUIK-TO-FIX FOODS, INC.
NOTES TO FINANCIAL
STATEMENTS-(Continued)

     The Company has $2.7 million of net operating loss carryforwards that
expire in fiscal 2012 and $29.4 million of net operating loss carryforwards that
expire in fiscal 2018. The Company has not recorded an income tax benefit
related to its net deferred tax assets because in the opinion of management it
is uncertain whether the Company will be able to realize such deferred tax
asset.

5.  COMMITMENTS

     Tyson (for the Predecessor), and the Company leased certain properties and
equipment for which the total rentals thereon approximated $388,000 for the year
ended October 3, 1998, approximately $134,000 for the three hundred six day
period ended September 27, 1997, approximately $11,000 for the fifty-eight day
period ended November 25, 1996, and approximately $44,000 for the year ended
September 28, 1996.  Future minimum lease payments for all noncancelable
operating leases for the Company at October 3, 1998 consist of $394,000,
$377,000, $373,000, $151,000, and $31,000 for fiscal 1999 through 2003.

6.  BENEFIT PLANS

     The Company has defined contribution retirement and incentive benefit
programs for all employees after meeting requirements concerning time employed.
Incentive benefit programs are of a profit sharing nature, and are discretionary
as to amount and timing. No incentive contributions were made by Predecessor or
the Company. Contributions to the defined contribution plans totaled $575,000
for the year ended October 3, 1998, compared to $453,000 for the three hundred
six day period ending September 27, 1997.

7.  SIGNIFICANT CUSTOMERS

     Certain of the Predecessor's and the Company's products are sold to major
foodservice distributors for distribution to foodservice outlets. As a result,
customers with purchases greater than 10% of total sales accounted for
approximately 27.3% of sales for the year ended October 3, 1998, and 35.3% for
the fifty-two week pro forma period ended September 27, 1997.

8.  TRANSACTIONS WITH AFFILIATES

     The Company has entered into a consulting agreement with an affiliate of
majority shareholder CGW, under which CGW will receive a monthly fee of $30,000
for financial and management consulting services.  In addition to the monthly
fee to CGW, the Board of Directors may approve an additional fee not to exceed
$500,000 annually, based upon overall Company operations.  At the closing of the
acquisition, CGW received a fee of $2.65 million, included as part of the
Company's organizational costs, for its services in assisting the Company with
the structuring and negotiating of this transaction.  The Company paid CGW
$360,000 for the year ended October 3, 1998 compared to $300,000 for the three
hundred and six day period ended September 27, 1997.  See Note 11.

                                      F-14
<PAGE>
 
GORGES/QUIK-TO-FIX FOODS, INC.
NOTES TO FINANCIAL STATEMENTS-(Continued)

8.  TRANSACTIONS WITH AFFILIATES - CONTINUED

     NationsBank of Texas, NA, an affiliate of NationsBanc Investment Corp.
("NBIC") a minority shareholder and a limited partner of CGW, is a lender to the
Company and in that capacity has received fees for underwriting, structuring,
syndicating and administering the Facilities under the Credit Agreement.
NationsBanc Capital Markets, Inc., another affiliate of NBIC, was the initial
purchaser of the Company's Senior Subordinated Notes, and in that capacity
received fees and commissions in connection with that transaction.

9.  PRO FORMA INFORMATION

     The pro forma income statement included herein for the fifty-two week
period ended September 27, 1997 combines the final fifty-eight day period
September 28, 1996 through November 25, 1996 when the Predecessor was owned by
Tyson, with the three hundred six day period November 26, 1996 through September
27, 1997, providing a full fifty-two week period to compare with previous
periods.

10. STOCK OPTIONS

     In 1997, GHC adopted a stock option plan (the "Stock Option Plan") which
provides for the granting of up to 112,250 incentive stock options to employees
to purchase shares of GHC's common stock.  All options granted under the Stock
Option Plan have a five year vesting period and a term of up to ten years.  GHC
has no assets or liabilities, other than their direct investment in the Company.
Stock option activity is as follows:

<TABLE>
<CAPTION>
                                                                           Weighted Average 
                                              Number of Shares         and Option Price per 
                                                                                     Share
                                             ---------------------------------------------
<S>                                          <C>                       <C>
Options granted                                           84,968                   $100.00
Options exercised                                              -                         -
Options cancelled                                              -                         -
                                             ---------------------------------------------
Options outstanding September 27, 1997                    84,968                   $100.00
Options granted                                             8543                   $100.00
Options exercised                                              -                         -
Options cancelled                                         15,843                   $100.00
                                             ---------------------------------------------
Options outstanding October 3, 1998                       77,668                   $100.00
</TABLE>

     The weighted-average remaining contractual life of options outstanding at
October 3, 1998 and September 27, 1997 is 8.1 years and 9.0 years.

     At October 3, 1998 there are 35,396 shares issuable upon exercise or
conversion of outstanding options under the Stock Option Plan.

     Under APB 25, because exercise price of the Company's employee stock
options exceeds the market price of the underlying stock on the date of grant,
no compensation expense is recognized.

                                      F-15
<PAGE>
 
GORGES/QUIK-TO-FIX FOODS, INC.
NOTES TO FINANCIAL STATEMENTS-(Continued)

10. STOCK OPTIONS - CONTINUED

     Pro forma information regarding net income and earnings per share is
required by SFAS 123, and has been determined as if the Company had accounted
for its stock options under fair value method of that statement.  The fair value
for these options was estimated at the date of grant using a minimum value
pricing model with the following weighted-average assumptions for 1998, risk-
free interest rate of 5.57% to 6.15% in 1998 and 6.0% in 1997, dividend yield of
0%, a weighted-average expected life of the option of 8 years and near zero
volatility for both 1998 and 1997.

     Option valuation models are used in estimating the fair value of traded
options that have no vesting restrictions and are fully transferable.  In
addition, option valuation models require the input of highly subjective
assumptions.  Because the Company's stock options have characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its stock options.

     For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense on a straight-line basis over the options'
vesting period. The Company's pro-forma net loss for the three hundred and six
days ended September 27, 1997 is $3.0 million. The Company's net pro forma loss
for the year ended October 3, 1998 is $33.1 million.

11. SUBSEQUENT EVENTS

     Prior to October 3, 1998, the Company began a restructuring process that
encompassed two main actions: 1.) exiting of the its raw ground beef business,
and the related closing or sale of the Orange City, IA, plant principally
responsible for this business line's production; and 2.) restructuring of its
balance sheet primarily through a debt restructuring plan and equity offering.

     On October 7, 1998, the Company announced its intent to exit the ground
beef business to concentrate on its core value added products.  Certain expenses
were recorded in fiscal 1998 in conjunction with this decision.  The $13.9
million charge recorded in fiscal 1998 is comprised of: (i) a $13.5 million
charge to write down the value of certain assets used in the ground beef
business to the estimated net realizable value of these asset, and (ii) a $0.4
million charge for severance and other expenses related to the exit from the
ground beef business and restructuring of the Company's value added business.
The Company expects to incur additional costs related to the exit from the
ground beef business and restructuring of the value added business in fiscal
1999; however, currently, the amount of these costs cannot be accurately
estimated.

     The Company has offered to sell its Orange City, Iowa manufacturing
facility (the "Ground Beef Facility").  Historically, the Ground Beef Facility
has produced almost exclusively ground beef product offerings, representing 100%
of the Company's total ground beef production based on weight. In December 1998,
the Company entered into a non-binding letter of intent to sell the Ground Beef
Facility by not later than February 1, 1999.  This letter of intent is subject
to a number of contingencies, many of which are not within the Company's
control, including but not limited to the completion of due diligence by the
buyer, the negotiation and execution of a

                                      F-16
<PAGE>
 
GORGES/QUIK-TO-FIX FOODS, INC.
NOTES TO FINANCIAL STATEMENTS-(Continued)

11. SUBSEQUENT EVENTS - CONTINUED

definitive sale agreement and the approval of the buyer's board of directors.
There can be no assurance that these contingencies will be satisfied on or
before February 1, 1999, if at all.

     In the event the Company is unable to consummate the proposed sale of the
Ground Beef Facility, it intends to close this facility as soon as practicable
to facilitate its exit from the ground beef business and to reduce costs.
Should the Company close the Ground Beef Facility, it will continue to explore
opportunities to sell this facility.  Any proceeds from the sale of the Ground
Beef Facility are required to be used to reduce the Company's borrowings under
the Credit Agreement.

     On October 29, 1998, the Company entered into the Amendment to the Credit
Agreement that replaces the existing covenants with a new set of covenants under
which the Company can borrow funds based on the levels of its accounts
receivable and inventory.  The implementation of new covenants under the Credit
Agreement may have the effect of reducing the amount available under the
Revolver depending on the levels of accounts receivable and inventory at any
given time.  The Amendment also shortens the maturity of the Credit Facility
from November 2001 to November 2000.  The change in maturity of the Credit
Facility does not affect the repayment schedule under the Credit Agreement,
except that all payments that previously were due between November 2000 and
November 2001 (an aggregate of $11.4 million) will be due on November 30, 2000.
Additionally, the Amendment provides that on March 31, 1999, the Company must
pay a fee under the Credit Facility equal to 0.25% of the amounts outstanding
under the Credit Facility and, thereafter, every three months, the Company must
pay a fee under the Credit Facility in cash equal to 0.50% of the amounts
outstanding under the Credit Facility until such time as the Company has secured
a replacement facility (the "Replacement Credit Facility") from another lender.
The Amendment became effective on December 21, 1998, at which time the Company
was in compliance with all terms and conditions of the Credit Facility.

     On October 29, 1998, the Company announced a tender offer pursuant to which
it offered to purchase not less than $36.0 million (the "Minimum Tender
Condition") and up to $46.0 million aggregate principal amount of its Notes (the
"Offer").  On December 2, 1998, the Company elected to waive all conditions to
the consummation of the Offer, including the Minimum Tender Condition, and
consummated the Offer with respect to $30.0 million aggregate principal amount
of Notes (the "Tendered Notes").  Additionally, on December 21, 1998,  CGW
contributed to the Company $18.0 million aggregate principal amount of Notes
(the "CGW Notes") acquired by CGW through open market purchases.  The Tendered
Notes and the CGW Notes were retired on December 21, 1998.  The repurchase and
retirement of the Tendered Notes and the CGW Notes were financed through an
equity investment by CGW in GHC totaling $16.9 million.

     On December 21, 1998 the Company, through GHC, obtained from CGW a $4.0
million subordinated bridge loan (the "Bridge Loan"), the proceeds of which were
used to fund the December 1, 1998 interest payment on the Notes.  The terms of
the Bridge Loan provide for a one year loan to the Company at an interest rate
of 9%.  On December 15, 1999, if the Company has not obtained the Replacement
Credit Facility, the Bridge Loan will automatically convert to equity in GHC.

                                      F-17