MREInfo.com

This might explain part of the reason for Wornick's exit of the civilian MRE business.

From: http://www.bizjournals.com/cincinnati/s ... ily54.html

Wornick files Chapter 11 bankruptcy, reorganization plan

Business Courier of Cincinnati
Friday, February 15, 2008

The Wornick Co. on Friday announced a plan to reorganize via a Chapter 11 bankruptcy filing. It filed the bankruptcy petition Thursday in the U.S. Bankruptcy Court for the Southern District of Ohio in Cincinnati.

The Blue Ash-based company, which makes prepared meals for the military and commercial markets, said high debt levels forced the reorganization.

"Wornick has been operating with a highly leveraged balance sheet since July of 2004," said CEO Jon Geisler, adding that the closing in 2006 of its McAllen, Texas, facility and consolidation in Blue Ash added to its expenses.

"The factors put a strain on our liquidity and we simply cannot continue to operate effectively with our high debt level," Geisler said in a news release posted on the company's Web site.

Day-to-day operations will continue as usual and all suppliers will be paid in full, Geisler added.

Under the terms of the reorganization, DDJ Capital Management LLC, a Waltham, Mass.-based investment firm, will provide up to $35 million in debtor-in-possession financing, as well as exit financing. In addition, a bondholders group will form a new entity to purchase the equity of the reorganized company, according to the release.

The reorganization plan is subject to approval by creditors and the Bankruptcy Court. The company said it plans to emerge from Chapter 11 by July.

Warnick is a major supplier of Meals-Ready-Eat (MREs) to U.S. and international military services. The company is currently owned by New York-based Veritas Capital Fund II LP, which bought it in 2003 for about $155 million.

and
From: http://news.enquirer.com/apps/pbcs.dll/ ... 50407/1076

Wornick Co. files for Chapter 11
By MIKE BOYER

Blue Ash-based Wornick Co., the leading maker of military and "shelf-stable" meals for Kraft Foods Inc. and others, filed for Chapter 11 bankruptcy reorganization Thursday.

The privately held company said it expects to restructure its more than $100 million in debt and emerge from court protection by July.

"This process will allow us to restructure our debt to address the financial obstacles that inhibit our ability to grow while we continue to operate our business," said Jon Geisler, Wornick CEO.

Wornick, which employs 683 at two plants in Blue Ash, said it has worked out a restructuring plan with a majority of its senior note holders.

The plan, which envisions a sale of the restructured company, must be approved by creditors and U.S. Bankruptcy Court.

Wornick said it has $35 million in post-petition and exit financing from Waltham, Mass.-based DDJ Capital Management LLC. Wornick said it expects trade creditors and suppliers to be paid in full.

New York City-based Veritas Capital Fund II LP acquired Wornick in 2004 for $155 million, but in a court filing Geisler said the company's high-level of debt "has been an obstacle to achieving profitability.''

Last year, the company had sales of $191 million, about 44 percent of which were "Meals, Ready to Eat" (MREs) for the Department of Defense.

During 2006, Geisler said the company experienced losses from the shutdown of its McAllen, Texas, plant and relocation of its corporate office to Blue Ash, as well as from the launch and cancellation of a new product line called Eversafe.

Wornick also makes food for Gerber Products Co., Quaker Oats Co. and NutriSystem Inc.

if 44% of your business is gov mre's secured by contract, how do you go bankrupt?

it's not like we haven't had a long run of war to keep these guys in awash in our tax $.

could it be severe mismanagement of the co by sr mgt?

depending on the type of RFP issued by the gov - it's possible that wornick was actually losing money on every mre sold with the hopes of recouping the loss with civilian versions of their product.

at any rate - something smells fishy here...

"B-b-but how? George Clooney says the war is just a massive industrial subsidy for Bush's business cronies!"

Dekard wrote:it's possible that wornick was actually losing money on every mre sold with the hopes of recouping the loss with civilian versions of their product.

I have a hard time believing Wornick was ever serious about the civilian MRE business. Sure, they might have given it a run for a year or two here or there, but just look at their history:

1. Produced Mil-Spec MREs...then exited the market after a couple of years

2. After Katrina (big opportunity missed already because they weren't prepared), produced "Eversafe". Incredible job done with branding and packaging - but dropped the ball on product. First pouched-based, then pouch and bowls, then bowls, then they exit the market.

Wornick should easily be #2 next to Sopakco in the civilian MRE market but instead they aren't even in the game. Oh well...that just means more market opportunity for MREStar and the Menu Cs.

What I'm really saying is if Wornick's failed forays into the civilian market are any reflection of the way they ran the rest of the company, it shouldn't be surprising that they had to declare bankruptcy. The government *handed* them an MRE franchise - easy money - just produce MREs - and with their spare time, they can make even more money with a civilian MRE business. And they screwed up both of those opportunities.

I don't think the civilian MRE market produces that much revenue for any of the MRE contractors, it's more of a niche market in the overall scheme of things, but obviously if it didn't provide some business potential, none of the companies would be producing products for the retail marketplace.

Actually, Wornick was right on top of things for the aftermath of Katrina. They were indeed able to provide one of the more common food relief components to the Louisana Federal Property Assistance agency, the Family Relief Meal Kit, that was assembled from familiar commercial shelf stable components.

Family Relief Meal Kit 6-0294-01
Meal kit for family of 4, one day: breakfast, lunch, dinner & 2 midday snacks.
Includes: 4 Orange Juice containers (4oz), 1 pop tart box (14.6oz , 8 per box), 4 energy bars OR trail mix OR yogurt snacks, 4 Hormel quick meals (10oz) (Spaghetti OR Teriyaki chicken, OR other entrees), 1 box of saltines (16oz), 4 bags of M&Ms OR cookies OR other snacks, 4 cans of pork & beans OR beans and franks (8oz), 8 dining packets (spoon, fork, knife, napkin, salt & pepper)

I'd be more inclined to think that they were unable to manage their operating costs to keep them in line with their revenue income from their government contracts, commercial contracts, and their own retail products.

kman wrote: 1. Produced Mil-Spec MREs...then exited the market after a couple of years

2. After Katrina (big opportunity missed already because they weren't prepared), produced "Eversafe". Incredible job done with branding and packaging - but dropped the ball on product. First pouched-based, then pouch and bowls, then bowls, then they exit the market.

curiosity got the better of me - -

basics on wornick's financials from hoovers.com
Fiscal Year-End
2007 Sales (mil.): $105.1
Employees At This Location: 300
Employees Total: 768

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CEO salary from last 8k filing
http://www.secinfo.com/d11MXs.uu65.htm
On April 18, 2007, The Wornick Company (“the Company”) entered into a retention and severance agreement with Jon P. Geisler, President and Chief Executive Officer of the Company. Under the agreement, Mr. Geisler’s annual base salary will be $325,000. Mr. Geisler will be entitled to a retention payment in the amount of $243,750. Mr. Geisler will also be entitled to bonus payments of $121,875 payable on August 1, 2007 and February 1, 2008 provided that certain conditions are met. If Mr. Geisler is terminated by the Company for any reason other than for cause, or if Mr. Geisler’s employment is terminated by reason of his death or disability, Mr. Geisler, or his estate or beneficiaries in the case of his death, will be entitled to receive continued health insurance coverage for a period of six months, any accrued benefits and a lump sum payment equal to 50% of his base salary. A copy of the agreement is attached hereto as Exhibit 10.1.

On April 18, 2007, the Company also entered into retention and severance agreements with certain employees of the Company. Under these agreements, employees will be entitled to retention payments totaling $396,000. The total bonus payments under these agreements will be $173,625, payable on August 1, 2007 and February 1, 2008, provided that certain conditions are met.

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table of executive salaries...
http://sec.edgar-online.com/2005/05/27/ ... tion30.asp

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sounds like cost control did them in - exec salaries weren't too out of line compared to earnings.

negotiated bids, where you go thru rounds of bidding with specs changng each round to get to a "best and final" may have been their undoing with food prices rising during a contract run and their bid price being fixed for the length of the contract.

here's link to a recent RFP for MRE's
https://www.fbo.gov/index?s=opportunity ... =1&au=&ck=
didn't feel like registering to see the actual rfp.


looks like gov cost per mre is about $6
http://209.85.207.104/search?q=cache:D2 ... =firefox-a

Thanks for the links, Dekard. I'm still digging through them but that Google cached link has me scratching my head. They say:

The government estimate was $375,829.50, which represented a per-meal cost of $13.25 per day for meals served in the dining facility and $6 per day for MREs (meals ready to eat) served in the field.

Does this mean 3 meals in a dining facility cost $13 and three MREs cost $6? Or does it mean 2 dining facility meals for $13 and one MRE for $6?

I see later in the article, they say "$6 per MRE" but I think that's a shortened version of the text I quoted above.

The thing I really don't get about these solicitations is that they're always for "indefinite quantities" but at a fixed price. So how do they really arrive at a specific cost per MRE? Do they just tell Sopakco, "Here's $50 million, give us an indefinite number of MREs."?

kman wrote: The company is currently owned by New York-based Veritas Capital Fund II LP, which bought it in 2003 for about $155 million.

Whoa...

Could it be this is a result of typical hedge-funds / private equity company behaviour? "Buy it, strip it, flip it"

Major_Tom