<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 1, 2000
-------------
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 Identification No.)
Jurisdiction of Incorporation)
9441 LBJ Freeway
Suite 214
Dallas, Texas 75243
(Address of Principal Executive Offices)
(972) 690-7675
(Registrant's Telephone Number, Including Area Code)
Indicate by check X 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 ______
-----
The number of shares of the registrant's Common Stock outstanding at May 16,
2000 was 1,000. There is no public trading market for shares of the registrant's
Common Stock.
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<PAGE>
Part I - Financial Information Item
Item 1. - Financial Statements
--------------------
GORGES/QUIK-TO-FIX FOODS, INC.
BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
October 2, April 1,
1999 2000
--------------------- --------------------
Assets (Audited) (Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 582 $ 876
Accounts receivable, net 13,937 12,956
Inventory 17,365 16,987
Prepaid expenses and other 589 750
--------------------- --------------------
Total current assets 32,473 31,569
Property, plant and equipment:
Land 1,371 1,371
Buildings and leasehold improvements 35,171 35,265
Machinery and equipment 39,798 40,274
Land improvements and other 794 1,576
--------------------- --------------------
77,134 78,486
Accumulated depreciation (20,524) (24,404)
--------------------- --------------------
Net property, plant and equipment 56,610 54,082
Other assets:
Intangible assets 60,854 59,734
Organizational and deferred debt issuance costs 5,313 3,101
Other 555 77
--------------------- --------------------
Total assets $155,805 $148,563
===================== ====================
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued expenses $ 16,161 $ 15,702
Current portion of long-term debt 4,260 4,260
Convertible debt with shareholders 3,000
--------------------- --------------------
Total current liabilities 23,421 19,962
Long-term debt, less current portion 90,945 90,678
Stockholders' equity:
Common stock, $.01 par value; 2,000 shares authorized,
1,000 shares issued and outstanding - -
Additional paid-in capital 62,492 65,777
Accumulated deficit (21,053) (27,854)
--------------------- --------------------
Total stockholders' equity 41,439 37,923
--------------------- --------------------
Total liabilities and stockholders' equity $155,805 $148,563
===================== ====================
</TABLE>
See accompanying notes to financial statements
-2-
<PAGE>
GORGES/QUIK-TO-FIX FOODS, INC.
STATEMENTS OF OPERATIONS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Three Six Six
months months months months
ended ended ended ended
April 3, April 1, April 3, April 1,
1999 2000 1999 2000
<S> <C> <C> <C> <C>
Sales $36,991 $34,157 $83,820 $68,559
Costs of goods sold 30,353 27,357 69,947 55,241
Gross profit 6,638 6,800 13,873 13,318
Operating expenses:
Selling, general and administrative 5,721 5,830 11,591 11,406
Amortization 815 560 1,627 1,121
Total operating expenses 6,536 6,390 13,218 12,527
Operating income 102 410 655 791
Interest expense 2,737 2,744 6,557 5,575
Other (income) expense (56) (63) 142 (63)
(Loss) before taxes on income (2,579) (2,271) (6,044) (4,721)
Income tax expense 9 36 9 36
Net (loss) before cumulative
effect for change in accounting
principle and extraordinary item (2,588) (2,307) (6,053) (4,757)
Cumulative effect for change in
accounting principle net of tax - - - (2,043)
Net (loss) before extraordinary item (2,588) (2,307) (6,053) (6,800)
Extraordinary item net of tax - - 27,937 -
Net income (loss) $(2,588) $(2,307) $21,884 $(6,800)
</TABLE>
See accompanying notes to financial statements
-3-
<PAGE>
GORGES/QUIK-TO-FIX FOODS, INC.
STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six months Six months
ended Ended
April 3, April 1,
1999 2000
---------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 21,884 $ (6,800)
Adjustments to reconcile net income (loss) to net
Cash provided by (used in) operating activities:
Depreciation 4,536 3,880
Amortization 1,627 1,121
Cumulative effect for change in accounting principle - 2,043
Amortization of deferred debt 232 344
Allowance for bad debt 175 (385)
Gain on asset sale/restructuring (352)
Write off of deferred debt 2,783
Extraordinary gain on early retirement of debt (31,093)
Changes in assets and liabilities:
Decrease in accounts receivable 5,302 1,366
Decrease in inventory 1,732 377
Increase in prepaid expenses and other (127) 317
Decrease in accounts payable and accrued expenses (2,788) (175)
---------------- -------------
Net cash provided by operating activities 3,911 2,088
Cash flows from investing activities:
Purchases of plant and equipment (1,487) (1,350)
Proceeds from sale of facility 4,000
Other (3)
---------------- -------------
Net cash provided by (used in) investing activities 2,510 (1,350)
Cash flows from financing activities:
Proceeds from revolving line of credit 18,910 69,794
Payments on revolving line of credit (28,278) (68,288)
Proceeds from long term debt 33,052
Payments on long term debt (47,164) (1,775)
Capital contributions 16,907
Debt issuance and organizational costs (1,519) (175)
---------------- -------------
Net cash provided by (used in) financing activities (8,092) (444)
---------------- -------------
Net increase in cash and cash equivalents (1,671) 294
Cash and cash equivalents at beginning of period 1,671 582
---------------- -------------
Cash and cash equivalents at end of period $ - $ 876
================ =============
</TABLE>
See accompanying notes to financial statements
-4-
<PAGE>
GORGES/QUIK-TO-FIX FOODS, INC.
NOTES TO FINANCIAL STATEMENTS
April 1, 2000
1. Organization and Basis of Presentation
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. Currently the Company produces value added products
which 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. 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 condensed financial statements of Gorges/Quik-to-Fix
Foods, Inc. have been prepared in accordance with the instructions for Form 10-Q
and therefore, do not include all information on footnotes that generally
accepted accounting principles require for complete financial statements. The
unaudited condensed financial statements should be read in conjunction with the
audited financial statements and related notes included in the Company's Annual
Report on Form 10-K for the year ended October 2, 1999. In the opinion of
management, the unaudited condensed financial statements contain all necessary
adjustments (which include only normal, recurring adjustments) for a fair
presentation of the Interim period presented. Operating results for the three
and six month periods ending April 1, 2000, are not necessarily indicative of
operating results for the entire fiscal year ending September 30, 2000.
GORGES/QUIK-TO-FIX FOODS, INC.
NOTES TO FINANCIAL STATEMENTS- (Continued)
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.
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):
October 2, April 1,
1999 2000
------------------- -------------------
Finished products $10,901 $11,865
Supplies 6,464 5,122
------------------- -------------------
Total $17,365 $16,987
=================== ===================
-5-
<PAGE>
Property, Plant and Equipment
Property, plant and equipment are 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.
GORGES/QUIK-TO-FIX FOODS, INC.
NOTES TO FINANCIAL STATEMENTS- (Continued)
2. Summary of Significant Accounting Policies - Continued
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. 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.
Organizational costs were amortized on a straight-line basis over five
years, until the Company adopted the Statement of Position (SOP) 98-5 in the
first quarter of fiscal 2000. As the result of adopting SOP 98-5 was the Company
expensed the remaining unamortized organizational costs of $2.0 million as a
cumulative effect for a change in accounting principle in the first quarter of
fiscal 2000, compared to amortization expense of $0.5 million at April 3,1999.
Deferred debt issuance costs are amortized over the life of the debt instrument
to which it relates. At October 2, 1999 and April 1, 2000, the accumulated
amortization was $0.9 million and $1.2 million, respectively.
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.
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,
respectively, were $3.2 million and $6.4 million for the three month and six
month periods ending April 3, 1999, compared to $2.6 million and $5.2 million
for the comparable periods ending April 1, 2000. Research and Development
expenses were $0.2 million and $0.4 million for the three month and six month
periods ended April 3, 1999, compared to $0.3 million and $0.5 million for the
comparable periods ending April 1, 2000.
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.
-6-
<PAGE>
Extraordinary Item
Included in the extraordinary item of $27.0 million is $31.1 million in
income from the repurchase of the Notes, $1.6 million in income from interest
forgiven on the repurchase of Notes, $3.1 million of expenses related to the
repurchase of the Notes, $2.6 million of expenses related to the write off of
deferred debt fees (partially related to the repurchased Notes and partially
related to the restructuring of the Senior Credit Facility).
-7-
<PAGE>
GORGES/QUIK-TO-FIX FOODS, INC.
NOTES TO FINANCIAL STATEMENTS- (Continued)
2. Summary of Significant Accounting Policies - Continued
Collective Bargaining Agreements
Currently the Company has approximately 112 employees of a total of 181
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 employees are covered under a new three year collective
bargaining agreement that covers the periods April 2, 2000-March 29, 2003.
3. Long Term Debt
Senior Debt
On March 5, 1999, the Company repaid all amounts outstanding under its then
existing credit facility (NationsBank) and entered into a new credit facility
with The CIT Group/Business Credit, Inc. ("CIT") as agent for a syndicate of
banks and financial institutions (the "New Credit Facility") which provides the
Company with a revolving credit facility (the "Revolver") and a $29.0 million
term loan facility (the "Term Loan"). The Revolver includes covenants under
which the Company can borrow funds based on the levels of its accounts
receivable and inventory in an aggregate amount of not more than $25.0 million.
The Revolver includes a sub-facility of $3.0 million for commercial and standby
letters of credit. The Revolver has a term of five years and all amounts
outstanding under the Revolver will become due and payable on April 1, 2004.
The Term Loan has a five year term and is subject to principal payments in an
annual amount $4.3 million in each of fiscal 2000, 2001, 2002 and 2003 with the
remainder due in fiscal 2004.
Outstanding borrowings under the New Credit Facility bear interest at
floating rates per annum equal to the prime rate plus 1.625% for borrowings
under the Revolver and the prime rate plus 2.125% for borrowings under the Term
Loan. At April 1, 2000, the interest rate for the Company based on this formula
was 10.625% for borrowings under the Revolver and 11.125% for borrowings under
the Term Loan. The Company pays a commitment fee of 0.5% for unused amounts
under the Revolver.
The interest rates under the New Credit Facility vary based on changes in
the prime rate or the London Interbank Offered Rate. Additionally, the interest
rates under the New Credit Facility may vary based on the Company's future
financial performance. 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 Surplus Cash (as
defined in the New Credit Facility). 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 April 1, 2000, the Company's outstanding borrowings
under the New Credit Facility were $42.9 million, $18.2 million under the
Revolver and $24.7 million under the Term Loan. Also, at April 1, 2000, the
Company had $0.2 million in outstanding letters of credit. At April 1, 2000,
the Company had $0.6 million of additional available borrowings under the
Revolver
Under the New Credit Facility, 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 New Credit Facility also
provides 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 to secure indebtedness outstanding. As of April 1, 2000, the Company was
not in compliance with all technical and financial covenants under the New
Credit Facility. On April 27, 2000, the Company and "CIT" entered into an
amendment and a written waiver to the New Credit Facility, which waived the non-
compliance for the second quarter and established new financial covenants going
forward.
On May 5, 2000, the Company entered into an agreement with CIT
providing for a credit facility (the "Secondary Credit Facility") in the amount
of $7,000,000 and separate from the New Credit Facility. The Secondary Credit
Facility is generally governed under the same terms as the New Credit Facility
and bears interest
-8-
<PAGE>
at the same rate. The Secondary Credit Facility is secured by a second priority
security interest in the Company's inventory and accounts receivable. An
affiliate of the Company purchased a 100% participation in the Secondary Credit
Facility and also entered into an agreement to subordinate the amounts owed
under Secondary Credit Facility to the Company's other senior debt.
3. Long Term Debt - Continued
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. In December 1998, the Company retired $48.0 million aggregate principal
amount of Notes, through a combination of open market purchases and a cash
tender offer. The Company's outstanding indebtedness under these Notes was $52
million at January 2, 1999. (See Note 10).
The Notes were issued pursuant to an indenture that 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) therein, 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 April 1,
2000.
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. 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 $2.7 and $6.6 million for the three month and
six month periods ended April 3, 1999, compared to $2.7 million and $5.6 million
for the comparable periods ended April 1, 2000.
On December 15, 1999, the Bridge Loan and interest associated with the
Bridge Loan was converted to equity of the Company. The conversion of the
Bridge loan to equity resulted in the issuance of 822,188 shares of common
stock and an increase to shareholders equity of $3.2 million.
On December 30, 1999 the Company and CIT entered into an amendment of the
New Credit Facility which waived the Company's non-compliance with certain
financial covenants at fiscal year ended October 2, 1999, and January 1, 2000
The amendment to the New Credit Facility established new financial covenants for
future periods.
4. Commitments
The Company leases certain properties and equipment for which the total
rentals thereon approximated $100,000 and $201,000 for the three month and six
month periods ended April 3, 1999, compared to approximately $94,000 and
$188,000 for the comparable periods ended April 1, 2000.
5. Benefit Plans
The Company has defined contribution retirement and incentive benefit
programs for all employees who meet requirements concerning time employed.
Incentive benefit programs are of a profit sharing nature, and are discretionary
as to amount and timing. To date, no incentive contributions have been made by
the Company.
-9-
<PAGE>
Contributions to the defined contribution plans totaled $141,394 and $275,386
for the three month and six month periods ended April 3, 1999, compared to
$90,442 and $184,886 for the same periods ended April 1, 2000.
GORGES/QUIK-TO-FIX FOODS, INC.
NOTES TO FINANCIAL STATEMENTS- (Continued)
6. Income Taxes
The Company has not recorded an income tax benefit related to the net
deferred tax asset for the period ended April 1, 2000, because in the opinion of
management it is uncertain when the Company will be able to realize this
deferred tax asset.
7. Significant Customers
Certain of the Company's products are sold to major foodservice
distributors for distribution to foodservice outlets. As a result, the
Company's top two customers accounted for approximately 25.7% of sales for the
six month period ended April 1, 2000.
8. Transactions with Affiliates
The Company has entered into a consulting agreement with an affiliate of
GHC's majority shareholder, CGW Southeast Partners III, L.P. ("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 of the
Company by GHC, 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 the purchase of the Company from Tyson Foods,
Inc.
9. Restructuring or Subsequent Events
On April 12, 2000, Management approved a plan to close the Company's Sioux
Center manufacturing facility ("Sioux Center") in an effort to improve overall
Company operations. The Company's plans include relocating and upgrading four
automated production lines to its remaining manufacturing locations in order to
increase manufacturing capacity at these facilities. All Sioux Center production
will be consolidated into these manufacturing facilities. As a result of this
decision management formally notified Sioux Center employees on April 12, 2000
of their impending severance. Management expects to record a charge in the third
quarter related to employee severance of $500,000. Before the move, the net book
value of Sioux Center was $13,400,000. Management is still determining which
equipment will be moved and what will be the ultimate disposition or utilization
of Sioux Center including an assessment of the carrying value of the remaining
fixed assets and evaluation of any impairment.
-10-
<PAGE>
GORGES/QUIK-TO-FIX FOODS, INC.
NOTES TO FINANCIAL STATEMENTS- (Continued)
Part 1 - Financial Information
Item 2
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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.
Item 2 Management's Discussion and Analysis of Financial condition and Results
of Operations
Results of Operations
Overview
<TABLE>
<CAPTION>
Three months ended Six months ended
April 3, 1999 April 1, 2000 April 3, 1999 April 1, 2000
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sales Dollars:
Value Added $36,991 $34,154 $83,820 $68,559
----------------------------------------------------------------------------------
Pounds:
Value Added 24,276 21,063 59,652 42,620
----------------------------------------------------------------------------------
Dollars/Pound
Value Added $ 1.52 $ 1.62 $ 1.41 $ 1.61
----------------------------------------------------------------------------------
</TABLE>
Sales. Total sales decreased $2.8 million, or 7.7%, from $37.0 million in
the three month period ended April 3, 1999 to $34.2 million in the three month
period ended April 1, 2000. This decrease was primarily due to decreases in the
sales of ground beef as a result of exiting the ground beef business in
February, 1999, and decreased sales to national account customers of value added
products.
Total sales decreased $15.3 million, or 18.2%, from $83.8 in the six month
period ended April 3, 1999 to $68.6 million in the six month period ended April
1, 2000. This decrease was primarily due to decreases in the sales of ground
beef and sales to national account customers of value added products, partially
offset by increased sales to retail customers.
-11-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
Gross Profit. Gross profit increased $0.2 million, or 2.4%, from $6.6
million in the three month period ended April 3, 1999, compared to $6.8 million
in the three month period ended April 1, 2000. As a percentage of sales, gross
profit increased from 17.9% in the three month period ended April 3, 1999 to
19.9% in the three month period ended April 1, 2000. This increase in gross
profit dollars and gross profit as a percent of sales reflect reduced costs
related to the Company's decision to exit the ground beef business.
Gross profit decreased $0.6 million, or 4.0%, from $13.9 million in the six
month period ended April 3, 1999, to $13.3 million in the six month period ended
April 1, 2000. As a percentage of sales, gross profit increased from 16.6% in
the six month period ended April 3, 1999 to 19.4% in the six month period ended
April 1, 2000. The decrease in gross profit dollars and increase in gross profit
as a percent of sales reflects the exit of ground beef, and the decrease in
sales of some lower margin value added products.
Operating Expenses. Operating expenses decreased $0.1 million, or 2.2%,
from $6.5 million in the three month period ended April 3, 1999, compared to
$6.4 in the three month period ended April 1, 2000. The decrease is the result
of a change in accounting principle, whereby organizational costs were written
off resulting in decreased amortization expense of $0.3 million and an increase
of $0.2 million in general and administrative expenses.
Operating expenses decreased $0.7 million, or 5.2%, from $13.2 million in
the six month period ended April 3, 1999 to $12.5 million in the six month
period ended April 1, 2000. This decrease is primarily the result of an
accounting principle change of $0.5 million and a decrease in selling expenses
of $0.2 million.
Operating Income. Operating income increased $0.3 million, or 302.0%, from
$0.1 million in the three month period ended April 3, 1999, to $0.4 million in
the three month period ended April 1, 2000. This increase is primarily the
result of the changes described above relating to gross profit and operating
expense.
Operating income increased $0.1 million, or 20.8%, from $0.7 million in the
six month period ended April 3, 1999 to $0.8 million in the six month period
ended April 1, 2000. This increase is primarily the result of the changes
described above relating to operating expenses and gross profit.
Interest Expense. Interest expenses were $2.7 million in both the three
month periods ended April 3, 1999 and April 1, 2000.
Interest expense decreased $1.0 million, or 15.0%, from $6.6 million in the
six month period ended April 3, 1999 to $5.6 million in the six month period
ended April 1, 2000. This decrease reflects the overall lower debt level due to
the repurchase and retirement of $48.0 million aggregate principal amount of
Notes.
Other (Income) Expense. Other income and expense, which was minimal in the
three month period ended April 3, 1999, remained minimal in the three month
period ended April 1, 2000.
Other income and expense, was minimal in the six month periods ended April
3, 1999, and April 1, 2000. The $0.1 million of expense in the six month period
ended April 3, 1999 related to restructuring expenses, and the income in the
period ending April 1, 2000 relates to interest income.
Cumulative effect of change in accounting principle. The cumulative effect
of change for adopting Statement of Position (SOP) 98-5 resulted in the Company
expensing the remaining unamortized organizational costs of $2.0 million in
fiscal 2000.
Extraordinary Item. Included in the extraordinary item of $27.9 million
for the six month period ended April 3, 1999, is $31.1 million in income from
the repurchase and early retirement of $48.0 million aggregate principal amount
of Notes, $1.6 million in income from interest forgiven on the repurchase of the
Notes, $2.2
-12-
<PAGE>
million of expenses related to the repurchase of the Notes, $2.6 million of
expense related to the write off of deferred debt fees (partially related to the
repurchasing of the Notes and partially related to the restructuring of the Old
Credit Facility).
Net Income (loss). Net (loss) decreased $0.3 million, or 10.9%, from
($2.6) million in the three month period ended April 3, 1999 to $(2.3) million
in the three month period ended April 1, 2000.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
Net income (loss) decreased ($28.7) million, or 131.1%, from $21.9 million
in the six month period ended April 3, 1999 to ($6.8) million in the six month
period ended April 1, 2000.
Liquidity and Capital Resources
As a result of the Acquisition, the Company has significant annual
principal and interest obligations. Borrowings under the Credit Facility, which
totaled $42.9 million at April 1, 2000 ($24.7 million under the Term Loan and
$18.2 million under the Revolver), accrued interest at an average rate of 10.28%
in the quarter ended April 1, 2000. Borrowings under the Notes totaled $52.0
million at January 1, 2000, and accrue interest at 11.5%.
As of April 1, 2000, the Company was not in compliance with all financial
covenants under its credit agreement with the bank which provides the Company
with the Revolver and the Term Loan. On April 27, 2000, the Company and CIT
entered into an amendment and a written waiver to the New Credit Facility
which waived the non-compliance for the second quarter and established new
financial covenants going forward.
. 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 the shareholders in GHC
totaling $16,900,000.
. Bridge Loan. On December 21, 1998, the Company obtained from some of
its shareholders 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%. $1.0
million was paid back on the bridge loan on March 5, 1999, as part of the
new credit agreement with CIT leaving an amount due of $3.0 million and
interest at 9%. On December 15, 1999, the Company had not obtained a
Replacement Credit Facility, the Bridge Loan and the interest was
automatically convert to equity in GHC.
In addition to its debt service obligations, the Company will need
liquidity for working capital and capital expenditures. For the six months ended
April 1, 2000, the Company spent $1.4 million on capital projects, primarily for
the capital maintenance of the Company's facilities.
The Company's primary sources of liquidity are the availability of cash
under the revolving credit facility and expected cash flows from operations. In
the quarter ended January 1, 2000 the Company used $0.4 million of operating
cash flow, the majority of which was used to fund interest payments. The Company
used another $0.3 million in investing activities for capital asset purchases.
In financing activities, the Company received $1.1 million from the credit
facility. The Company anticipates that its working capital requirements,
capital expenditures, and scheduled repayments for fiscal 2000 will be satisfied
through a combination of cash flows generated from operations together with
funds available under the Revolving Credit Facility.
-13-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
Recent Accounting Pronouncements
In June 1998, FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 requires all derivatives to
be measured at fair value and recognized as either assets or liabilities on the
balance sheet. Changes in such fair value are required to be recognized
immediately in net income (loss) to the extent the derivatives are not effective
as hedges. SFAS No. 133 is effective for fiscal years beginning after June 15,
2000 and is effective for interim periods in the initial year of adoption. At
the present time, we do not feel the adoption of SFAS No. 133 will have a
material effect on our results of operation or cash flows.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
There have been no significant changes to the quantitative and qualitative
disclosures about market risk as discussed in the Company's Form 10-K for the
year ended October 2, 1999.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 Second Amendment to Financing Agreement dated April 27, 2000
between the Company and CIT
10.2 Term Note dated May 5, 2000 from the Company to CIT
27 Financial Data Schedule
(b) Reports on Form 8-K
None
-14-
<PAGE>
SIGNATURE
Pursuant to the requirements 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.
Dated: May 16, 2000 GORGES/QUIK-TO-FIX FOODS, INC.
By: /s/ Michael Nittolo
--------------------------------------
Michael Nittolo
Chief Financial Officer/V.P. Finance
(Principal Financial Officer)
-15-
<PAGE>
Exhibit Index
10.1 Second Amendment to Financing Agreement dated April 27, 2000
between the Company and CIT
10.2 Term Note dated May 5, 2000 from the Company to CIT
27 Financial Data Schedule
<PAGE>
EXHIBIT 10.1
SECOND AMENDMENT TO FINANCING AGREEMENT
THIS SECOND AMENDMENT TO FINANCING AGREEMENT (this "Second Amendment") is
dated as of the 27th day of April, 2000 among GORGES/QUIK-TO-FIX FOODS, INC.
(the "Borrower"), THE CIT GROUP/BUSINESS CREDIT, INC. (the "Agent") and the
Lenders parties hereto;
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the Borrower and The CIT Group/Business Credit, Inc., as the Agent
and as a Lender, executed and delivered that certain Financing Agreement, dated
as of the 5th day of March, 1999, as amended by that certain Waiver and First
Amendment to Financing Agreement dated as of December 30, 2000 ( as so amended,
the "Financing Agreement"); and
WHEREAS, the Borrower has requested that the Agent and the Lenders amend
the Financing Agreement to include certain cash collateral deposited with the
Agent for the benefit of the Lenders in the calculation of "Availability" as
such term is defined in the Financing Agreement, to amend certain financial
covenants, and make certain other amendments;
NOW, THEREFORE, for and in consideration of the above premises and other
good and valuable consideration, the receipt and sufficiency of which hereby is
acknowledged by the parties hereto, the Borrower, the Agent and the Required
Lenders hereby covenant and agree as follows:
1. Definitions. Unless otherwise specifically defined herein, each term
-----------
used herein which is defined in the Financing Agreement shall have the meaning
assigned to such term in the Financing Agreement. Each reference to "hereof",
"hereunder", "herein" and "hereby" and each other similar reference and each
reference to "this Agreement" and each other similar reference contained in the
Financing Agreement shall from and after the date hereof refer to the Financing
Agreement as amended hereby.
2. Amendment to Section 1.1. Section 1.1 of the Financing Agreement
------------------------
hereby is amended by deleting the definitions of "Availability", "Permitted
Encumbrances", and "Permitted Indebtedness", and adding the following
definitions of "Availability", "Permitted Encumbrances", "Permitted
Indebtedness", and "Cash Collateral":
Availability shall mean at any time the excess of the sum of (i)
------------
the advance rate amount with respect to Eligible Accounts Receivable
as such amount is calculated pursuant to clause (i) of Section 3.1 of
this Financing Agreement, (ii) the advance rate amount with respect to
Eligible Finished Goods, Eligible Raw Meat Inventory, and Eligible
Supply Inventory as such amounts are calculated pursuant to clause
(ii) of Section 3.1 of this Financing Agreement, and (iii) the
<PAGE>
Cash Collateral, over the sum of (x) the outstanding aggregate amount
of all Obligations (other than the Term Loans) and (y) the
Availability Reserve.
Cash Collateral shall mean at any time the sum of all monies
---------------
deposited by or for the benefit of the Company with the Agent and in
which the Agent holds a security interest for the ratably benefit of
the Lenders to secure the prompt payment in full of all loans and
advances made to the Company from time to time by the Lenders, as well
as to secure the payment in full of the other Obligations.
Permitted Encumbrances shall mean: (i) liens expressly permitted,
----------------------
or consented to, by the Agent in writing; (ii) Purchase Money Liens;
(iii) Customarily Permitted Liens; (iv) liens granted the Agent for
the ratable benefit of the Lenders by the Company; (v) liens of
judgment creditors provided such liens do not exceed, in the
aggregate, at any time, $200,000 (other than liens bonded or insured
to the reasonable satisfaction of the Agent; (vi) liens for taxes not
yet due and payable or which are being diligently contested in good
faith by the Company by appropriate proceedings and which liens are
not (x) senior to the liens of the Agent or (y) for taxes due the
United States of America; and (vii) liens subordinate in priority to
the liens of the Agent that have been approved by the Required
Lenders.
Permitted Indebtedness shall mean: (i) current indebtedness
----------------------
maturing in less than one year and incurred in the ordinary course of
business for raw materials, supplies, equipment, services, taxes or
labor; (ii) the indebtedness secured by the Purchase Money Liens;
(iii) indebtedness under Capital Leases permitted by Section 7.11,
(iv) Subordinated Debt; (v) indebtedness arising under the Letters of
Credit and this Financing Agreement; (vi) deferred taxes and other
expenses incurred in the ordinary course of business; (vii) other
indebtedness existing on the date of execution of this Financing
Agreement and listed on Exhibit E hereto and made a part hereof; and
(viii) indebtedness, the terms and conditions of which have been
approved by the Required Lenders.
3. Amendment to Section 3.1. Section 3.1 of the Financing Agreement
------------------------
hereby is amended by deleting it in its entirety and substituting the following
therefor:
Section 3.1 Loans and Advances. Each of the Lenders agrees, subject
-------------------------------
to the terms and conditions of this Financing Agreement from time to time, and
within (x) the Availability and (y) the Line of Credit, to make loans and
advances to the Company on a revolving basis (i.e. subject to the limitations
set forth herein the Company may borrow, repay and re-borrow Revolving Loans and
refinance existing LIBOR Loans with Refunding Loans). Such Loans and advances
shall be in amounts up to: (i) eighty five percent (85%) of the outstanding
Eligible Accounts Receivable of the Company, and (ii) the lesser of (x)
$10,000,000 or (y) the aggregate value (without duplication) of (A) 65% Eligible
Finished Goods and Eligible Raw Meat Inventory and (B) the lesser of $1,000,000
or 40% of Eligible Supply Inventory, each as determined at the lower of cost or
market on a first-in first-out basis. Should the Lenders for any reason honor
requests for advances in excess of the limitations set forth herein, such
advances shall be considered "overadvances" and shall be made only with the
written consent of
2
<PAGE>
each of the Lenders. No single advance or overadvance hereunder may be
outstanding more than thirty-six (36) months from the date of such advance. The
Company promises to pay to the order of each Lender all of the outstanding
Revolving Loans, with interest thereon, as provided herein, and if not sooner,
on the Termination Date along with all other Obligations as the same become due
from time to time. Revolving Loans may be advanced as Base Rate Loans and/or
LIBOR Loans. At the direction of the Agent, the Lenders shall automatically and
without request of the Company make Revolving Loan advances to pay principal and
interest payments on the Term Loans, as and when they become due, and such
advances shall be made as Base Rate Loans.
4. Amendment to Section 7.9. Section 7.9 of the Financing Agreement
------------------------
hereby is amended by deleting it in its entirety and substituting the following
therefor:
Section 7.9 Net Worth. The Company shall maintain at the end of each
---------------------
of the periods below, a Net Worth of not less than:
<TABLE>
<CAPTION>
Period Net Worth
------ ---------
<S> <C>
Fiscal quarter ending on or about December 31, 1999 40,000,000
Fiscal quarter ending on or about March 31, 2000 37,500,000
The fiscal quarters ending on or about June 30, 2000 34,000,000
and September 30, 2000
</TABLE>
Each fiscal quarter thereafter, the sum of the Net Worth required
for the proceeding fiscal quarter, plus $500,000
5. Amendment to Section 7.12. Section 7.12 of the Financing Agreement
-------------------------
hereby is amended by deleting it in its entirety and substituting the
following thereof:
Section 7.12 Fixed Charge Coverage Ratio. The company shall maintain
----------------------------------------
at the end of each fiscal period, an Fixed Charge Coverage Ratio of at least:
Fiscal Period Ratio
------------- -----
Fiscal quarters ending on or about on December 31, 0.60 to 1.0
1999
Fiscal quarter ending on or about on March 31,
2000, and the immediately preceeding fiscal quarter 0.60 to 1.0
Fiscal quarter ending on or about June 30,
2000, and the two immediately preceeding fiscal quarters 0.40 to 1.0
3
<PAGE>
Fiscal quarter ending on or about on September 30,
2000, and the three immediately preceeding fiscal quarters 0.65 to 1.0
Fiscal quarter ending on or about on December 31,
2000, and the four immediately preceeding fiscal quarters 0.90 to 1.0
Each fiscal quarter thereafter, and the four immediately
preceeding fiscal quarters 1.10 to 1.0
6. Amendment to Section 7.13. Section 7.13 of the Financing Agreement
-------------------------
hereby is amended by deleting it in its entirety and substituting the following
therefor:
Section 7.13 Leverage Ratio. The Company shall maintain at the end of
---------------------------
each fiscal quarter ending on or about the dates set forth below a Leverage
Ratio of not more than:
Period Ratio
------ -----
Fiscal quarter ended on or about December 31, 2.75 to 1.0
1999
Fiscal quarter ended on or about
March 31, 2000 3.00 to 1.0
Fiscal quarter ended on or about
June 30, 2000 3.40 to 1.0
Fiscal quarter ended on or about
September 30, 2000
3.80 to 1.0
Fiscal quarters ended on or about
December 31, 2000 and March 31, 2001 3.50 to 1.0
Fiscal quarter ended on or about
June 30, 2001 3.00 to 1.0
Fiscal quarters ended on or about
September 30, 2001 and December 31, 2001 2.75 to 1.0
Each fiscal quarter thereafter 2.50 to 1.0
7. Amendment to Section 7.16. Section 7.16 of the Financing Agreement
---------------------------
is hereby is amended by deleting it in its entirety and substituting the
following therefor:
Section 7.16 Subordinated Debt. The Company shall not make any
-------------------------------
election to have Section 8.02 (pertaining to legal defeasance) or 8.03
(pertaining to covenant defeasance) of the Subordinated Notes Indenture
applicable to any of the Senior Notes, or make any payments to the defeasance
trust pursuant to Section 8.04 of the Subordinated Notes Indenture. The
4
<PAGE>
Company shall not make any payment (principal or interest) with respect to or in
connection with (i) the Senior Notes, in contravention of the subordination
provisions contained herein and (ii) with respect to other Subordinated Debt
(including the Bridge Note), unless no Default or Event of Default is in
existence and both (a) the Company would have $1,000,000 of Availability after
the making of any such payment due on June 1, 2000, and $2,500,000 of
Availability after the making of any such payment due on any date thereafter,
and (b) for any such payment due on or after June 1, 2001, the Company's Fixed
Charge Coverage Ratio for the two fiscal quarters immediately preceeding such
payment exceeds 1.25 to 1.0.
8. Amendment to Section 7.18. Section 7.18 of the Financing Agreement
--------------------------
is hereby is amended by deleting it in its entirety and substituting the
following therefor:
Section 7.18 Minimum Availability. The Company shall maintain at the
-----------------------------------
end of each fiscal quarter ending after March 31, 2000, Availability of not less
than $1,000,000.
9. New Section 7.19. The Financing Agreement is hereby amended by adding
----------------
thereto a new Section 7.19 as follows:
Section 7.19 Minimum Monthly EBITDA. The Company shall have, as of the
-----------------------------------
end of each month ending on or after April 30, 2000, EBITDA for such month
and the two immediately preceeding months not less than that set forth
below:
Three Month Period Ending Minimum EBITDA
------------------------- --------------
April 30, 2000 $ 740,000
May 31, 2000 600,000
June 30, 2000 600,000
July 31, 2000 875,000
August 31, 2000 1,500,000
The last day of each month thereafter 1,500,000
10. Effect of Amendment. Except as set forth expressly hereinabove, all
-------------------
terms of the Financing Agreement and the other Loan Documents shall be and
remain in full force and effect, and shall constitute the legal, valid, binding
and enforceable obligations of the Company. The amendments contained herein
shall be deemed to have prospective application only, unless otherwise
specifically stated herein.
11. Reaffirmation; No Novation or Mutual Departure. The Company expressly
----------------------------------------------
acknowledges and agrees that: (i) there has not been, and this Second Amendment
does not constitute or establish, a novation with respect to the Financing
Agreement or any of the Loan Documents, or a mutual departure from the strict
terms, provisions and conditions thereof, other than the amendments and
modifications expressly set forth in Section 1 hereof ; and (ii) nothing in this
Second Amendment shall affect or limit the Agent's and the Lenders' right to
demand
5
<PAGE>
payment of liabilities owing from the Company to the Agent and the Lenders
under, or to demand strict performance of the terms, provisions and conditions
of, the Financing Agreement and the other Loan Documents, to exercise any and
all rights, powers and remedies under the Financing Agreement or the other Loan
Documents or at law or in equity, or to do any and all of the foregoing,
immediately at any time after the occurrence of a Default or an Event of Default
which is not an Existing Default, pursuant to the Financing Agreement or the
other Loan Documents.
12. Ratification. The Company hereby restates, ratifies and reaffirms
------------
each and every term, covenant and condition set forth in the Financing Agreement
and the other Loan Documents effective as of the date hereof.
13. Counterparts. This Second Amendment may be executed in any number of
------------
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed to be an original and all
of which counterparts, taken together, shall constitute but one and the same
instrument.
14. Section References. Section titles and references used in this Second
------------------
Amendment shall be without substantive meaning or content of any kind whatsoever
and are not a part of the agreements among the parties hereto evidenced hereby.
15. No Right of Offset, etc.. To induce the Agent and the Required
------------------------
Lenders to enter into this Second Amendment and to continue to make advances
pursuant to the Financing Agreement, the Company hereby acknowledges and agrees
that, as of the date hereof, and after giving effect to the terms hereof, there
exists no right of offset, defense, counterclaim, claim or objection in favor of
the Company arising out of or with respect to any of the Loans or other
obligations of the Company owed to the Agent and the Lenders under the Financing
Agreement.
16. Further Assurances. The Company agrees to take such further actions
------------------
as the Agent shall reasonably request in connection herewith to evidence the
amendments herein contained to the Company.
17. Governing Law. This Second Amendment shall be governed by and
-------------
construed and interpreted in accordance with, the laws of the State of Georgia.
18. Conditions Precedent. This Second Amendment shall become effective
--------------------
only upon execution and delivery (i) of this Second Amendment by the Company,
the Agent and the Required Lenders, and (ii) of the Consent and Reaffirmation of
Guarantor at the end hereof by the Parent.
6
<PAGE>
IN WITNESS WHEREOF, the Company, the Agent and the Required Lenders
have caused this Second Amendment to be duly executed, under seal, by its duly
authorized officer as of the day and year first above written.
GORGES/QUIK-TO-FIX FOODS, INC., as the
Company (SEAL)
_______________________________________
By: ___________________________________
Title:
THE CIT GROUP/BUSINESS CREDIT, INC.,
as Agent and as a Lender (SEAL)
By: ___________________________________
Title:
CAPITAL BUSINESS CREDIT, INC., A
DIVISION OF CAPITAL FACTORS, INC.,
as a Lender (SEAL)
By:
____________________________________
Title:
CONSECO FINANCE SERVICING
CORPORATION, f/k/a/ Green Tree Financial
Servicing Corporation, as a Lender (SEAL)
By:
____________________________________
Title:
IBJ WHITEHALL BUSINESS CREDIT
CORPORATION, as a Lender (SEAL)
By: ________________________________
Title:
7
<PAGE>
CONSENT AND REAFFIRMATION OF GUARANTOR
The undersigned (i) acknowledges receipt of the foregoing Second Amendment
to Financing Agreement (the "Second Amendment"), (ii) consents to the execution
and delivery of the Second Amendment by the parties thereto and (iii) reaffirms
all of its obligations and covenants under the Guaranty dated as of March 5,
1999 executed by it, and agrees that none of such obligations and covenants
shall be affected by the execution and delivery of the Second Amendment.
GORGES HOLDING CORPORATION, as the
Parent (SEAL)
By: _____________________________
Title:
8
<PAGE>
EXHIBIT 10.2
TERM NOTE
$7,000,000.00 May 5, 2000
FOR VALUE RECEIVED, the undersigned, GORGES/QUIK-TO-FIX FOODS, INC. a
Delaware corporation (the "Borrower"), hereby promises to pay to the order of
THE CIT GROUP/BUSINESS CREDIT, INC. (the "Lender"), SEVEN MILLION AND NO/100
U.S. DOLLARS (U.S. $7,000,000.00), or so much thereof as may have been advanced
and is outstanding, on December 31, 2003.
The Borrower promises to pay interest on the unpaid principal amount of the
Term Loan at a per annum interest rate equal to LIBOR plus 2.50%, with such rate
computed on a daily basis. Accrued interest shall be payable in arrears on the
last day of each month.
"LIBOR" shall mean the rate per annum determined on the basis of the
offered rate for deposits in U.S. dollars of amounts equal or comparable to the
principal amount of the Term Loan offered for one month, which rates appear on
the Reuters Screen LIBO Page effective as of 11:00 A.M., London time, provided
that (i) if more than one such offered rate appears on the Reuters Screen LIBO
Page, LIBOR will be the offered rate which is used in a majority of such
quotations, if there is a majority, otherwise the arithmetic average (rounded
upward, if necessary, to the next higher 1/100th of 1%) of such offered rates;
(ii) if no such offered rates appear on such page, LIBOR will be the arithmetic
average (rounded upward, if necessary, to the next higher 1/100th of 1%) of
rates quoted by the Chase Manhattan Bank at approximately 10:00 A.M., New York
City time for deposits in U.S. dollars offered by leading European banks for one
month in an amount comparable to the principal amount of the Term Loan.
This Term Note may be secured by certain collateral of the Borrower, and
the documents evidencing such security interests shall be referred to as the
"Other Agreements".
Upon (a) the failure to make any payment of principal or interest hereunder
when due, (b) any acceleration of the maturity of the indebtedness evidenced by
that certain Financing Agreement dated as of March 5, 1999, as amended, restated
or otherwise modified from time to time (the "Financing Agreement") by and among
the Lenders thereto, CIT/Business Credit, Inc., as Agent, and the Borrower, or
(c) payment in full of the indebtedness and other obligations owing under the
Financing Agreement, an Event of Default shall exist under this Note, and the
indebtedness evidenced by this Note shall become due and payable in full without
any notice to the Borrower.
Time is of the essence under this Note.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS
OF THE STATE OF GEORGIA.
<PAGE>
IN WITNESS WHEREOF, the Borrower has caused this Note to be duly executed
under seal as of the date first above written.
GORGES/QUIK-TO-FIX FOODS, INC.
By:_______________________________
Title:
ATTEST:
By:__________________________
Title: Secretary
(CORPORATE SEAL)
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-2000
<PERIOD-START> OCT-03-1999
<PERIOD-END> APR-01-2000
<CASH> 876
<SECURITIES> 0
<RECEIVABLES> 12,956
<ALLOWANCES> 114
<INVENTORY> 16,987
<CURRENT-ASSETS> 31,569
<PP&E> 78,486
<DEPRECIATION> (24,404)
<TOTAL-ASSETS> 148,563
<CURRENT-LIABILITIES> 19,962
<BONDS> 90,678
0
0
<COMMON> 0
<OTHER-SE> 65,777
<TOTAL-LIABILITY-AND-EQUITY> 148,563
<SALES> 68,559
<TOTAL-REVENUES> 68,559
<CGS> 55,241
<TOTAL-COSTS> 12,527
<OTHER-EXPENSES> (63)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,575
<INCOME-PRETAX> (4,721)
<INCOME-TAX> 36
<INCOME-CONTINUING> (4,757)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> (2,043)
<NET-INCOME> (6,800)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
