UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549

 

FORM 10-Q

 

ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended April 2, 2005

or

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

 

For the transition period from  January 1, 2005 to April 2, 2005

 

Commission File Number: 333-119336

 

The Wornick Company

(Exact name of registrant as specified in its charter)

 

Delaware		30-0225741
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
10825 Kenwood Road, Cincinnati, Ohio		42542
(Address of principal executive offices)		(Zip Code)

 

(513) 794-9800

(Registrant’s telephone number, including area code)

 

N/A

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

 

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.  o  Yes    ý  No

 

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

 

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

 

 

The Wornick Company

 

Table of Contents

 

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

 

 

Part 1 – Financial Information

Item 1.

Financial Statements

The Wornick Company

Consolidated Balance Sheet

(Unaudited)

 

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

 

The accompanying notes are an integral part of these consolidated financial statements.

 

1

 

The Wornick Company

Consolidated Statement of Operations

(Unaudited)

 

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

 

The accompanying notes are an integral part of these consolidated financial statements.

 

2

 

The Wornick Company

Consolidated Statement of Cash Flows

(Unaudited)

 

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

 

The accompanying notes are an integral part of these consolidated financial statements.

 

3

 

The Wornick Company

Notes to Unaudited Consolidated Financial Statements

 

1.                                      Organization and Basis of Presentation

 

The Wornick Company, a Delaware corporation (the “Company” or “Successor”), an acquisition vehicle formed by The Veritas Capital Fund II, L.P., and its general partner, Veritas Capital Management II, L.L.C.(collectively “Veritas”), entered into an Assets Purchase and Sale Contract with The Wornick Company, a Nevada corporation (the “Predecessor”), and its subsidiaries, The Wornick Company Right Away Division, a Nevada corporation, The Wornick Company Right Away Division, L.P., a Texas limited partnership, and Right Away Management Corporation, a Texas corporation, which was consummated on June 30, 2004, and resulted in the purchase by the Successor and its subsidiaries, and the sale by the Predecessor and its subsidiaries, of the business of the Predecessor and its subsidiaries as a going concern, including substantially all of the operating assets of the Predecessor and its subsidiaries.

 

The Company produces, packages and distributes extended shelf-life foods, both shelf stable and frozen, in flexible pouches and semi-rigid containers, primarily for the U.S. Department of Defense (“DoD”) and commercial customers, as well as for its own consumer-branded products.

 

2.                                      Basis of Presentation

 

The accompanying unaudited interim condensed consolidated financial statements, also referred to as our interim or unaudited "consolidated financial statements," have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X under the Securities Exchange Act of 1934, as amended.  Accordingly, they do not include all of the information and footnotes normally included in financial statements prepared in conformity with accounting principles generally accepted in the United States of America. In the opinion of management, the interim consolidated financial statements reflect all adjustments of a normal recurring nature considered necessary for a fair presentation of the results for the periods presented.  Operating results for interim periods are not necessarily indicative of results that may be expected for the fiscal year as a whole.  The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses, and related disclosures at the date of the financial statements and during the reporting period.  Actual amounts could differ from these estimates.  These unaudited interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2004 and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2004 filed with the Securities and Exchange Commission pursuant to section 13 or 15(D) of the Securities Exchange Act of 1934.

 

As discussed in Note 1 above, the Assets Purchase and Sale Contract was consummated on June 30, 2004.  As such, the unaudited financial information presented represents: (i) the Condensed Consolidated Balance Sheet of the Successor at December 31, 2004 and April 2, 2005, (ii) the Condensed Consolidated Statements of Operations of the Predecessor for the thirteen week period ended April 3, 2004, (iii) the Condensed Consolidated Statement of Operations of the Successor for the thirteen week period ended April 2, 2005, (iv) the Condensed Consolidated

 

4

 

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

 

Certain items in the predecessor statement of operations have been reclassified to conform to current year presentations.  These reclassifications had no impact on previously reported net income or stockholder’s equity.

 

3.                                      Acquisition

 

On June 30, 2004 (the “Acquisition Date”), pursuant to the Assets Purchase and Sale Contract described above in Note 1, the Company acquired all of the operating assets of the Predecessor.  The acquisition was financed through a combination of debt and equity issuances.  The purchase price of $165.0 million included approximately $10.1 million of transaction costs.  Goodwill of $77.6 million represented the excess of the acquisition cost over the estimated fair value of the identifiable assets acquired.  The identifiable intangible assets relate to the value of existing long-term customer supply contracts in place at the Acquisition Date.  The purchase price has been allocated to the assets acquired in accordance with the purchase method of accounting as follows:

 

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

 

In financing the acquisition, the Company received $165.5 million in proceeds from debt and equity financing, including a $3.0 million advance on a working capital facility.

 

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

 

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

 

5

 

4.                                      Supplemental Balance Sheet Information

 

Inventories

A summary of inventories is as follows:

 

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

 

Property and Equipment, Net

A summary of property and equipment, net is as follows:

 

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

 

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

 

5.                                      Intangible Assets

 

In connection with the acquisition described in Note 3, a portion of the purchase price was allocated to identifiable intangible assets related to the value of long-term customer supply contracts in place at the Acquisition Date.  The original value of these contracts was $24,170,000 and their useful lives range from three to eight years.  Aggregate accumulated amortization of intangibles at December 31, 2004 and April 2, 2005 amounted to $2,347,290 and $3,520,936, respectively.  Expense related to amortization of intangible assets for the thirteen week period ended April 2, 2005, amounted to $1,173,646.

 

Scheduled amortization of these assets is as follows:

 

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

 

6

 

6.                                      Notes Payable and Long-Term Debt

 

A summary of long-term debt at December 31, 2004 and April 2, 2005, is as follows:

 

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

 

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

 

Interest on amounts outstanding under the Revolving Loan Agreement will vary at a fluctuating rate per annum that is equal to the prime rate (5.25% at December 31, 2004 and 5.75% at April 2, 2005) as published daily by The Wall Street Journal.  Amounts outstanding under the Revolving Loan Agreement are collateralized by substantially all of the operating assets of the Company and its subsidiaries.  The lien on such collateral is senior to the lien on the collateral that secures the senior secured notes.  In connection with completing the acquisition, the Company borrowed $3.0 million against the revolving loan facility to fund the acquisition and initial working capital of the Successor.  This amount was subsequently repaid prior to December 31, 2004.  As of April 2, 2005 we are in compliance with all covenants supporting our revolving loan agreement and our $125 million Senior Secured notes.

 

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

 

Amounts due under the senior secured notes and the revolving loan facility are subject to an intercreditor agreement.  The Company is required to meet certain financial covenants related primarily to minimum working capital amounts and minimum working capital ratios as well as minimum profitability and minimum net worth calculations.  At April 2, 2005 we were in compliance with all financial covenants.

 

On February 11, 2005 our parent, TWC Holding LLC (the “Parent Company”) , and its wholly-owned finance subsidiary, TWC Holding Corp., co-issued their  13.875% Senior PIK Notes due 2011, or the “Senior PIK Notes,” in the aggregate principal amount of $26,000,000.  The Senior PIK Notes earn interest at the rate of 13.875% per annum, mature on August 15, 2011 and are unsecured obligations of TWC Holding LLC and

 

7

 

TWC Holding Corp.  Neither the Company nor any of its subsidiaries guaranteed the Senior PIK notes.  The notes limit the Company’s ability to incur additional indebtedness and pay dividends or make other distributions as well as to make certain investments and sell certain assets or merge with or into other companies.  Because our Parent Company  is a holding company with no operations and has only its investment in the Company and because TWC Holding Corp. has no independent operations or assets, future cash flows of the Company through 2011 will be required to service the Senior PIK notes.

 

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

 

7.                                      Income Taxes

 

In connection with the transactions described in Note 3, the Successor is taxed as a C-Corporation whereas, the Predecessor was a pass-through entity qualified under Subchapter S of the Internal Revenue Code.

 

The Company provides for income taxes utilizing the asset liability method, current income tax expense or benefit represents income taxes expected to be payable or refundable for the current period.  Deferred income taxes are recognized for the tax consequences in future years as a result of differences between the tax and financial reporting bases of assets and liabilities and for the expected future tax benefit to be derived from tax credit and loss carry-forwards.  Valuation allowances are established when necessary to reduce deferred tax assets to the amounts management believes are more likely than not to be realized in future tax returns.  Tax rate changes are reflected in the period such changes are enacted.  The Company has recorded a valuation allowance on deferred tax assets due to the indefinite reversal period related to goodwill.

 

8.                                      Successor Company Stock Compensation Plan

 

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

 

In addition, on April 11, 2005 TWC Holding LLC issued additional Class B membership interests to recently retained senior management of the Company.  These class B membership interests will vest over a five year period.

 

9.                                      Operating Segment Information

 

The Company has two operating segments: the Right Away Division (“RAD”) and the Prepared Foods Division (“PFD”).  RAD is located in Texas and primarily sells its product to the U.S. Department of Defense.  PFD is located in Ohio and also sells directly to the U.S. Department of Defense as well as to commercial branded food companies and

 

8

 

inter-segment sales to RAD.  Management evaluates segment performance based on several factors, including operating profit.

 

Consistent with the Predecessor’s internal management reporting, corporate operations for the Predecessor include investment and interest income, compensation expense for The Wornick Company (Predecessor) Employee Stock Ownership Trust (“ESOT”), stock options and other stock-based compensation expense and overhead costs.  Corporate assets primarily include investments in subsidiary guarantors (which are eliminated in consolidation), other investments and goodwill.  Other significant noncash items include compensation expense for ESOT shares released and committed to be released as well as compensation expense related to stock options and other stock-based compensation plans.

 

The Company’s sales by product line for the periods indicated are as follows (in thousands):

 

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

 

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

 

9

 

Unaudited reportable operating segment financial information for the thirteen week periods ended April 3, 2004 and April 2, 2005, is a follows (in thousands):

 

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

 

10.                               Condensed Consolidating Financial Information

 

The following information presents the unaudited condensed consolidating balance sheet of the Successor at April 2, 2005, the unaudited condensed consolidating statement of operations and statement of cash flows of the Predecessor for thirteen week period ended April 3, 2004 and the unaudited condensed consolidating statement of operations and statement of cash flows of the Successor for thirteen week period ended April 2, 2005.

 

10

 

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

 

		Successor
					Subsidiary
		Parent			Guarantors			Eliminations			Total
Assets
Current assets
Cash and cash equivalents		$	1,085,474		$	2,203,556		$	—		$	3,289,030
Trade accounts receivable		4,413,429			9,442,865			—			13,856,294
Interdivision receivables		4,822,266			—			(4,822,266		)	—
Prepaid expenses and other current assets		246,316			284,790			—			531,106
Inventories		10,491,680			13,640,436			—			24,132,116
Deferred income taxes		269,998			—			—			269,998
Total current assets		21,329,163			25,571,647			(4,822,266		)	42,078,544
Investments in subsidiary guarantors		28,579,956			—			(28,579,956		)	—
Property and equipment, net		25,845,617			6,948,622			—			32,794,239
Goodwill		77,573,207			—			—			77,573,207
Intangible assets, net		18,434,375			3,388,335						21,822,710
Other noncurrent assets		5,531,183			144,756			—			5,675,939
Total assets		$	177,293,501		$	36,053,360		$	(33,402,222	)	$	179,944,639
Liabilities and Stockholder’s Equity
Current liabilities
Trade accounts payable		$	4,556,681		$	1,611,145		$	—		$	6,167,826
Interdivision payables		101,605			4,720,661			(4,822,266		)	—
Accrued expenses		1,980,848			1,141,598			—			3,122,446
Accrued interest		6,796,875			—			—			6,796,875
Taxes payable		51,950			—			—			51,950
Total current liabilities		13,487,959			7,473,404			(4,822,266		)	16,139,097
Deferred tax liabilities		$	1,182,065		—			—			$	1,182,065
Long-term debt, excluding current maturities		125,000,000			—			—			125,000,000
Total liabilities		139,670,024			7,473,404			(4,822,266		)	142,321,162
Stockholder’s equity
Common stock		—			—			—			—
Additional paid-in capital		37,646,400			26,624,729			(26,624,729		)	37,646,400
Retained earnings		(22,923		)	1,955,227			(1,955,227		)	(22,923		)
Total stockholder’s equity (deficit)		37,623,477			28,579,956			(28,579,956		)	37,623,477
Total liabilities and stockholder’s equity		$	177,293,501		$	36,053,360		$	(33,402,222	)	$	179,944,639

 

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

 

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

 

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

 

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

 

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

 

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

 

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