**EXHIBIT 99.1**
**RISK FACTORS**
**Substantial Leverage; Insufficient Cash Flow From Operations**
     At March 1, 2003 the Company had approximately $136.3 million ofindebtedness, representing 93.8% of its total capitalization. The ability ofthe Company to satisfy its debt obligations depends largely on the Company’soperating performance, which is affected by prevailing economic conditions andfinancial, business and other factors, many of which are beyond the Company’scontrol.
     The degree to which the Company is leveraged has important consequences tothe Company, including the following: (i) the Company’s ability to obtainadditional financing is limited; (ii) substantial portions of the Company’scash flows from operations must be dedicated to the debt service, therebyreducing the funds available to the Company for its operations; (iii) theCompany’s debt instruments contain financial and other restrictive covenants,including covenants restricting the incurrence and restructuring of debt, thecreation of liens, the payment of dividends and sales of assets; (iv) theCompany’s borrowings under its revolving credit facility are at variable ratesof interest, resulting in adverse effects on the Company’s financial conditionand results of operations when the relevant market interest rates increase; (v)the debt outstanding under the revolving credit facility is secured bysubstantially all of the Company’s assets; (vi) the Company is more leveragedthan many of its competitors, placing the Company at a relative competitivedisadvantage; and (vii) the Company’s high degree of indebtedness makes it morevulnerable in the event of a downturn in its business. As a result of theCompany’s level of indebtedness, its financial capacity to respond to marketconditions, extraordinary capital needs and other factors is limited.
     Fiscal 2003 operating cash flows and borrowings under the Company’s $50million credit facility were sufficient to provide necessary working capitaland to service existing debt, and the Company anticipates that its fiscal 2004cash requirements for working capital and debt service will be met through acombination of funds provided by operations and additional borrowings under itsnew credit facility (See further information on the Company’s new creditfacility below). Significant assumptions underlie this belief, including,among other things, that the Company will succeed in implementing its businessstrategy, there will be no material adverse developments in the business,liquidity or significant capital requirements of the Company, and the Company’slenders will continue to advance funds to the Company under the new creditfacility.
     Subsequent to Fiscal 2003 year end, effective August 13, 2003, the Companyterminated its five-year variable-rate $50 million revolving credit facility,which included a $16 million term loan subline, a $10 million capitalexpenditures subline and a $7 million letter of credit subfacility. Alsoeffective August 13, 2003, the Company obtained a three year variable rate $40million revolving credit facility from a new lender, which includes a $5million real estate term loan subline, a $5 million equipment term loan sublineand a $7.5 million letter of credit subfacility. Funds available under thisnew facility are available for working capital requirements, permittedinvestments and general corporate purposes. Borrowings under the new facilitybear interest at floating rates based upon the interest rate option selectedfrom time to time by the Company and are secured by a first-priority securityinterest in substantially all of the Company’s assets. The interest rate forborrowings under the new facility at August 13, 2003 was 5% (prime plus 1%).Borrowings under the new facility are due the earlier of ninety days prior tothe redemption of the Senior Notes or August 13, 2006. Repayment is alsorequired in the amount of the proceeds from the sale of any collateral. Inaddition, the Company is required to satisfy certain financial covenantsregarding cash flow and capital expenditures.
     The Company has budgeted approximately $15.9 million for capitalexpenditures for fiscal 2004. These expenditures are primarily devoted to aplant expansion, in addition to routine food processing capital improvementprojects and other miscellaneous expenditures. The Company believes that fundsfrom operations and funds from its new $40 million credit facility, as well asthe Company’s ability to enter into capital or operating leases, will beadequate to finance these routine capital expenditures. If the Companycontinues its historical revenue growth trend as expected, it will be requiredto raise and invest additional capital for other various plant expansionprojects to provide operating capacity to satisfy increased demand. TheCompany believes that future cash requirements for these plant expansionprojects would need to be met through other long-term financing sources, suchas the issuance of industrial revenue
 

 

bonds or equity investment. The incurrence of additional debt is governedand restricted by the Company’s existing debt instruments. Furthermore, therecan be no assurance that additional long-term financing will be available onadvantageous terms (or any terms) when needed by the Company.
     The Company anticipates continued sales growth in key market areas. Asnoted above, however, this growth will require other capital expansion projectsto increase existing plant capacity to satisfy increased demand. Sales growth,improved operating performance and expanded plant capacity — none of which isassured — will be necessary for the Company to continue to service existingdebt. If the Company is unable to continue servicing its debt, then it willneed to adopt alternative strategies, which may include actions such asreducing or delaying capital expenditures, selling assets, restructuring orrefinancing its indebtedness or seeking additional equity capital. There canbe no assurance that any of these strategies could be affected on satisfactoryterms or that the chosen strategy would enable the Company to avoid defaultsunder its existing debt instruments.
**Restrictions Imposed by the Company’s Debt Instruments**
     The Company’s debt instruments include covenants that, among other things,limit or restrict the ability of the Company to dispose of assets, incuradditional indebtedness, repay other indebtedness, pay dividends, enter intocertain investments or acquisitions, engage in mergers or consolidations orengage in certain transactions with subsidiaries and affiliates and otherwiserestrict corporate activities. There can be no assurance that such limitationsand restrictions will not adversely affect the Company’s ability to finance itsfuture operations or capital needs or engage in other business activities thatmay be in the interest of the Company. The Company’s $40 million creditfacility also requires the Company to comply with certain financial covenants.The ability of the Company to comply with such financial covenants may beaffected by events beyond the Company’s control. A breach of any of thesecovenants or the inability of the Company to comply with the required financialcovenants could result in a default under the credit facility. In the event ofany such default, the lender could elect to declare all borrowings outstanding,together with accrued interest and other fees, due and payable. If the Companywere unable to repay any such borrowings when due, then the lender couldproceed against its collateral, with material adverse effects on the Company’sbusiness, financial condition and results of operations.
**Competition**
     The food production business is highly competitive and is often affectedby changes in tastes and eating habits of the public, economic conditionsaffecting spending habits and other demographic factors. In sales of meatproducts, the Company faces strong price competition from a variety of largemeat processing concerns and from smaller local and regional operations. Insales of biscuit and yeast roll products, the Company competes with a number oflarge bakeries in various parts of the country. The sandwich industry isextremely fragmented, with few large direct competitors but low barriers toentry and indirect competition in the form of numerous other products.
**Government Regulation**
     The food production industry is subject to extensive federal, state andlocal government regulation.
     The Company’s food processing facilities and food products are subject tofrequent inspection by the United States Department of Agriculture (the“USDA”), the Food and Drug Administration (the “FDA”) and other governmentauthorities. In July 1996, the USDA issued strict new policies againstcontamination by food-borne pathogens such as E. coli and Salmonella andestablished the Hazard Analysis and Critical Control Points (“HACCP”) system.The HACCP standards require the implementation of a seven step system forpreventing hazards that could cause food-borne illnesses and became effectiveon January 25, 2000 for all food manufacturers with over ten employees and $25million in sales. The Company is in full compliance with all FDA and USDAregulations, including HACCP standards, but there can be no assurance that theCompany will be able to remain in compliance. The Company’s failure to complywith applicable laws and regulations could subject it to civil remedies,including fines, injunctions, recalls and seizures, or even criminal sanctions,any of which could have material adverse effects on the Company.
     The Company’s operations are also governed by laws and regulationsrelating to workplace safety and worker health that, among other things,establish noise standards and regulate the use of hazardous chemicals in theworkplace.
 

 

The Company is also subject to numerous federal, state and local environmentallaws. Under applicable environmental laws, the Company may be responsible forremediation of environmental conditions and may be subject to associatedliabilities relating to its facilities and the land on which its facilities areor had been situated, regardless of whether the Company leases or owns thefacilities or land in question and regardless of whether such environmentalconditions were created by the Company or by a prior owner or tenant. There canbe no assurance that any failure to comply, or compliance in the future, withenvironmental laws, or that liabilities arising thereunder, will have nomaterial adverse effect on the Company’s business, financial condition orresults of operations.
**General Risks of the Food Industry**
     The food processing industry is generally subject to various risks,including adverse changes in general economic conditions, evolving consumerpreferences, nutritional and health-related concerns, federal, state and localfood inspection and processing controls and litigation-oriented risks in thenature of consumer product liability claims, product tampering problems and theavailability and expense of liability insurance. There has recently beenincreasing scrutiny due to the association of meat products with recentoutbreaks of illness, and even death, caused by pathogens which can be found inraw and improperly cooked meat. Incidents of contamination experienced by otherfood processors have materially and adversely affected their businesses andcould adversely affect the Company’s business. Product recalls are sometimesrequired in the meat industry to withdraw contaminated or mislabeled productsfrom the market.
**Adverse Changes in Food Costs; Availability of Supplies**
     The profitability of the Company is dependent on its ability to anticipateand react to changes in food prices in general and to changes in meat prices inparticular. While the Company has historically been able to anticipate andreact to changing prices through purchasing practices and price adjustments soas to avoid any material adverse effect on profitability, there can be noassurance that the Company will be able to do so in the future. In particular,no assurance can be given that the Company will be able to pass any costincreases on to its customers. The Company does not engage in hedgingtransactions with respect to raw material purchases. Failure to engage in suchtransactions may result in increased price volatility, with resulting adverseeffects on results of operations. In addition, the Company’s dependency uponregular deliveries of supplies from particular suppliers means thatinterruptions or stoppages in such deliveries could adversely affect theCompany until arrangements with alternate suppliers could be made.
**Dependence on Key Personnel**
     The Company believes that its continued success will largely depend uponthe abilities and experience of its senior management team such that loss ofthe services of one or more senior managers could adversely affect theCompany’s results of operations. The Company has entered into three-yearEmployment Agreements with its Chairman and Vice-Chairman of the Board, ChiefFinancial Officer and Senior Vice President of Sales, which specify termsrelating to salary, bonus and benefits to be paid. The Company has enteredinto an Incentive Agreement with its President and Chief Executive Officer,which sets forth compensation to be paid, but does not provide for a specifiedemployment term for the President.
**Potential Labor Disruption**
     None of the Company’s employees is covered by a collective bargainingagreement. To the extent the Company experiences a labor disruption in thefuture, there could be material adverse effects on the Company’s business,financial condition and results of operations.