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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



FORM 10-K



(Mark One)



|x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ------------------------------------------------------------------------------------



For the fiscal year ended July 3, 2004



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 numbers 333-50305 and 333-50305-01



Eagle Family Foods, Inc.

(Exact name
of registrant as specified in its charter)



|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                       |  | 13-3982757                          
|(State or other jurisdiction of incorporation or organization) |  | (IRS Employer Identification Number)



Eagle Family Foods
Holdings, Inc.

(Exact name of registrant as specified in its charter)



|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                       |  | 13-3983598                          
|(State or other jurisdiction of incorporation or organization) |  | (IRS Employer Identification Number)
|                                                               | 
|735 Taylor Road, Suite 200 Gahanna, OH                         |  | 43230                               
|(Address of principal executive offices)                       |  | (Zip Code)                          



Registrants
telephone number, including area code: (614) 501-4200



Securities registered pursuant to Section 12(b) of the Act:



|                    |  |                                          
|------------------- |  | -----------------------------------------
|Title of each class |  | Name of each exchange on which registered
|N/A                 |  | N/A                                      



Securities
registered pursuant to Section 12(g) of the Act: None

Title of class

N/A



Indicate by check mark whether the registrants (1) have 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 registrants
were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days.



Yes x     No ̈



Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrants knowledge, in definitive proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K. x



Indicate by check mark whether the registrants are accelerated filers (as defined in Rule 12b-2 of the Act).



Yes ̈No x



State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common
equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrants most recent completed second fiscal year. None.



As of October 1, 2004, there were 957,235 shares of common stock, par value $.01 per share, of Eagle Family Foods Holdings,
Inc. (Common Stock) and 10,000 shares of common stock, par value $.01 per share, of Eagle Family Foods, Inc. outstanding, respectively.



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TABLE OF CONTENTS



|         |  |                                                                                                              |  |     
|-------- |  | ------------------------------------------------------------------------------------------------------------ |  | ----
|         |  |                                                                                                              |  | Page
|PART I   |  |                                                                                                              |  |     
|Item 1.  |  | Business                                                                                                     |  | 2   
|Item 2.  |  | Properties                                                                                                   |  | 10  
|Item 3.  |  | Legal Proceedings                                                                                            |  | 10  
|Item 4.  |  | Submission of Matters to a Vote of Security Holders                                                          |  | 10  
|         |  |                                                                                                             
|PART II  |  |                                                                                                              |  |     
|Item 5.  |  | Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |  | 11  
|Item 6.  |  | Selected Financial Data                                                                                      |  | 12  
|Item 7.  |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                        |  | 13  
|Item 7A. |  | Quantitative and Qualitative Disclosures About Market Risk                                                   |  | 22  
|Item 8.  |  | Financial Statements and Supplementary Data                                                                  |  | 23  
|Item 9.  |  | Changes in and Disagreements With Accountants on Accounting and Financial Disclosure                         |  | 23  
|Item 9A. |  | Controls and Procedures                                                                                      |  | 23  
|Item 9B. |  | Other Information                                                                                            |  | 24  
|         |  |                                                                                                             
|PART III |  |                                                                                                              |  |     
|Item 10. |  | Directors and Executive Officers of the Registrants                                                          |  | 25  
|Item 11. |  | Executive Compensation                                                                                       |  | 27  
|Item 12. |  | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters               |  | 29  
|Item 13. |  | Certain Relationships and Related Transactions                                                               |  | 31  
|Item 14. |  | Principal Accountant Fees and Services                                                                       |  | 32  
|         |  |                                                                                                             
|PART IV  |  |                                                                                                              |  |     
|Item 15. |  | Exhibits, Financial Statement Schedules                                                                      |  | 33  





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##### Table of Contents

PART I



Eagle Family Foods, Inc. (Eagle) and Eagle Family Foods Holdings, Inc. (Holdings, and together with Eagle, the
Company) are presenting consolidated financial statements of the Company with the Securities and Exchange Commission (SEC) under the guidelines of Regulation S-X Article 3, Rule 3-10(c). Eagle is the issuer of a public
registered debt that is guaranteed by its parent, Holdings. Eagle is 100% owned by Holdings; Holdings fully and unconditionally guarantees this registered debt; Holdings has no independent assets or operations; and Holdings has no other
subsidiaries.



The Company has significant restrictions on the
ability of Holdings or any guarantor to obtain funds from Eagle by dividend or loan as disclosed in Note 7 to the financial statements included elsewhere in this Annual Report on Form 10-K. The Company has provided the disclosures prescribed by Rule
4-08(e)(3) of Regulation S-X with respect to the subsidiary issuers and subsidiary guarantors.



|Item 1: | Business
|------- | --------



Holdings and its wholly-owned subsidiary, Eagle is a manufacturer and marketer of a portfolio of leading dry-grocery food products with widely recognized
and established brands, including Eagle Brandsweetened condensed milk and None Such mincemeat pie filling. The Company began marketing premium dessert kits in the current fiscal year. These kits utilize the Companys Eagle
Brand sweetened condensed milk product in popular sweetened condensed milk recipes. Eagle and Holdings are collectively referred to as the Company, unless the context indicates otherwise. Eagle and Holdings were incorporated in
Delaware in 1997.



Cautionary Statement Regarding Forward-Looking Statements



This Annual Report on Form 10-K may contain
forward-looking statements which include assumptions about future market conditions, operations and financial results. These statements are based on current expectations and are subject to risks and uncertainties. They are made pursuant to safe
harbor provisions of the Private Securities Litigation Reform Act of 1995. The Companys actual results, performance or achievements in the future could differ significantly from the results, performance or achievements discussed or implied in
such forward-looking statements herein and in prior SEC filings by the Company. The Company assumes no obligation to update these forward-looking statements or to advise of changes in the assumption on which they were based.



Factors that could cause or contribute to such differences include, but are
not limited to, the success of new product introductions and promotions, changes in the competitive environment of the Companys products, general economic and business conditions, industry trends, raw material costs, dependence on the
Companys labor force, and changes in, or the failure or inability to comply with, government rules and regulations, including, without limitation, Food and Drug Administration and environmental rules and regulations. Statements concerning
interest rates and other financial instrument fair values and their estimated contribution to the Companys future results of operations are based upon market information as of a specific date. This market information is often a function of
significant judgment and estimation. Further, market interest rates and commodity prices are subject to significant volatility.



Significant Events in Fiscal Year 2004



On December 24, 2003, the Company sold to Dean Specialty Foods Group, LLC (Dean Foods) the Companys business of marketing, distributing
and selling powdered non-dairy creamer sold under the Cremora and Cremora Royalebrand names (Non-Dairy Creamer Business) and related assets, including inventory (Non-Dairy Creamer Sale). The purchase price was
$12.2 million. The Company recognized a loss of $1.0 million on the sale, which included the book values of $3.4 million, $6.3 million, $2.3 million, and $0.2 million for trade names, goodwill, inventory, and other prepaid assets, respectively. The
Company incurred $1.0 million of expenses related to the Non-Dairy Creamer Sale.



On March 23, 2004, the Company entered into a Financing Agreement (the Financing Agreement) by and among Eagle, Holdings, as a guarantor, and certain financial institutions party thereto from time to time
(the Lenders), Fortress Credit Opportunities I LP (Fortress), as collateral agent for the Lenders, and Congress



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Financial Corporation (Central) (Congress), an administrative agent for the Lenders. The Financing Agreement provides for a secured revolving
credit facility that consists of (1) an asset-based revolving credit facility (Revolver A) in an aggregate principal amount not to exceed $27.0 million at any time outstanding, including a subfacility for the issuance of letters of
credit in an aggregate amount not to exceed $5.0 million, and (2) a revolving credit facility (Revolver B, and together with Revolver A, the Revolving Financing Facility) in an aggregate principal amount not to exceed $55.0
million for Revolver B. The maturity date of the Financing Agreement is March 23, 2007, subject to extensions if certain conditions are met.



The proceeds from the Revolving Financing Facility were used, in part, to repay all amounts outstanding under the Companys previous bank facilities
and will be used, in part, to fund working capital of the Company and for other general corporate purposes.



The Company has classified the Revolving Financing Facility as a current liability in accordance with the Financial Accounting Standards Boards
(FASB) Emerging Issues Task Force Issue No. 95-22, Balance Sheet Classification of Borrowings Outstanding under Revolving Credit Agreements that Include Both a Subjective Acceleration Clause and a Lock-Box Arrangement
(EITF 95-22). The Revolving Financing Facility is classified as a current liability in accordance with EITF 95-22 since the Financing Agreement contains a subjective acceleration clause and a lock box arrangement that requires the cash
receipts of the Company to be used to repay amounts outstanding under the Revolving Financing Facility.



Subsequent Event



On September 20, 2004, the Company entered into a First Amendment to Financing Agreement (the First Amendment) by and among Holdings, as guarantor, Eagle, as borrower, certain financial institutions from time to time
party thereto, Fortress, as collateral agent for the Lenders, and Congress, as administrative agent for the Lenders. The First Amendment temporarily increases the principal amount available for borrowing under Revolver A from $27,000,000 to
$30,000,000 through and including November 3, 2004.



Products and
Markets



The Company markets and distributes its products
through the retail grocery channel, including mass-merchant retailers and club stores, foodservice, the U.S. military, and private label businesses. The Companys U.S. food business is complemented by a presence in Canada and other foreign
countries that represented 8.7%, 8.0% and 7.9% of the Companys total net sales for the fifty-three week period ended July 3, 2004 (fiscal year 2004), and the fifty-two week periods ended June 28, 2003 (fiscal year 2003)
and June 29, 2002 (fiscal year 2002), respectively. The Company utilizes a national retail grocery brokerage company with 43 brokerage houses and 13 independent food brokers to sell its products in the U.S. Non-grocery channels and
international markets are serviced through brokers, distributors, or directly, depending on the size and needs of the customers.



The Companys marketing programs consist of various combinations of media advertising, consumer promotions, and trade promotion. Certain products are
also promoted with direct consumer rebate programs. The Companys customers may also be offered pre-season stocking and in-store promotional allowances. Since many of the Companys brands are purchased primarily as ingredients for recipes,
the Company frequently promotes recipes that incorporate its brands. Recipe dissemination is a primary focus during the holiday season for our seasonal brands None Such mincemeat pie filling, Borden eggnog, and Eagle Brandsweetened condensed milk. The following Company-sponsored Internet sites promote the recipes containing the Companys products:



| |  | www.eaglebrand.com
| | - | ------------------



| |  | www.eaglenonesuch.com
| | - | ---------------------



| |  | www.bordeneggnog.com
| | - | --------------------



| |  | www.eaglebrandkits.com
| | - | ----------------------



The Company marketed powdered non-dairy creamer under the Cremoraand Cremora Royalebrand names until the sale of the Non-Dairy Creamer
Business to Dean Foods in December 2003. The Company manufactured and marketed ReaLemon lemon juice from concentrate and ReaLime lime juice from concentrate (collectively, the ReaLemon business) until the sale of the
ReaLemon business to Motts Inc. in September 2001.



The net sales percentages provided within Part I of this Annual Report on Form 10-K exclude the results from the Non-Dairy Creamer Business and the ReaLemonbusiness product lines for the applicable periods provided.



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Sweetened condensed milk. The Company manufactures and marketsEagle Brand and additional
sweetened condensed milk products in the U.S. In Canada, the Company markets Eagle Brand and additional sweetened condensed milk products. In addition to classic Eagle Brand sweetened condensed milk, the Companys other branded
sweetened condensed milk products includeEagle Brand low fat and fat free products, Meadow Gold, and the Hispanic brands,Starand Magnolia. The Companys Eagle Brand products carry theBorden andElsie trademarks. In fiscal year 2004, the Company launched a new product offering, premium dessert kits, to selected markets. These premium dessert kits utilize the Companys Eagle Brand sweetened condensed milk product in popular
sweetened condensed milk recipes. The Company also manufactures sweetened condensed milk under several private labels, which includes an Asian customer who distributes and markets these products to certain ethnic markets. In fiscal year 2004, fiscal
year 2003, and fiscal year 2002, respectively, the Companys sweetened condensed milk products accounted for 91%, 90% and 89% of the Companys net sales.



Retail channels, including grocery and mass-merchant retailers, are the primary outlet for the Companys sweetened
condensed milk products and accounted for approximately 79%, 80% and 81% of the Companys sweetened condensed milk net sales for fiscal year 2004, fiscal year 2003 and fiscal year 2002, respectively. The balance of the Companys sweetened
condensed milk net sales is made through other channels, including foodservice customers, industrial customers, and international markets.



Niche brand products.The Companys niche brand products include eggnog, mincemeat pie filling and instant coffee.



Borden eggnog is manufactured by a third party through a seasonal
purchase order agreement. Bordeneggnog is the only shelf-stable eggnog available in the market and competes with refrigerated eggnog. Borden eggnog is distributed through the retail grocery channel. Eggnog is generally consumed during
the November and December holiday season as a beverage or mixed with liquor as a cocktail.



The Company manufactures and markets two flavors of None Such mincemeat pie filling: Regular and Brandy & Rum. None Suchmincemeat is used in pies, cookies and pastries, and is consumed primarily
during the November and December holiday season.None Such is distributed through the retail grocery channel.



Kavais marketed by the Company and manufactured by a third party independent manufacturer pursuant to a co-packing agreement. Kavais a
unique instant coffee, differentiated as the only coffee that is 90% acid-neutralized. Management believes that Kavas customer loyalty is significantly higher than that of most other instant coffee brands, and is well
positioned to remain high given the brands unique position as an acid-neutralized product.



Competition



The
Company operates in highly competitive markets. Competition for retail sales to consumers and sales to the retailer in the retail grocery channel is based on several factors, including brand name recognition, quality, price and customer service.
Many companies with numerous brands and product offerings compete for retailers shelf-space and sales. The Company competes with a significant number of competitors of varying sizes, including divisions or subsidiaries of larger companies.
Furthermore, the Company is facing increased competition from private label brands and store brands. A number of these branded and private label competitors have broader product lines, as well as substantially greater financial and other resources
available to them compared to the Company.



Industry Overview



The U.S. food industry has historically been relatively
stable with growth driven primarily by modest population increases and new products. Over the last ten years, management believes the industry has experienced consolidation as competitors have shed non-core business lines and made strategic
acquisitions to strengthen category positions, generate economies of scale in distribution, production and raw material sourcing and create leverage relative to the retail grocery trade through better service and broader market presence.



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Grocery retailers have also utilized mergers and acquisitions to consolidate within their industry.
Growth in the mass-merchant retailer channel has outpaced growth in the retail grocery channel, and mass-merchant retailers have consequently increased their share of food sales relative to the retail grocery and drug store channels. Furthermore,
the convenience store channel has maintained a constant presence within the total grocery industry. Management believes that food companies have broadened their distribution channels to include greater focus on mass-merchant retailers and other
alternative distribution channels. Management also believes that another growth opportunity in the U.S. for branded food companies is the foodservice channel, which supplies restaurants, hospitals, schools and other institutions.



Seasonality



The Companys net sales, operating income and cash flows are affected by a seasonal bias toward the second quarter of
the Companys fiscal year due to increased sales during the holiday season. Three of the Companys four major brands (Eagle Brand sweetened condensed milk, Borden eggnog and None Suchmincemeat pie filling) are
consumed primarily during the November and December holiday season. In recent years, approximately 49% of the Companys net sales, excluding the net sales of the Non-Dairy Creamer Business and the ReaLemonBusiness, have occurred in the
second quarter of the Companys fiscal year. Because of this seasonality, the Companys working capital needs have historically increased throughout the year, normally peaking in the August/September period, which will require the Company
to draw additional amounts on its Revolving Financing Facility in that period.



Raw Materials and Suppliers



The primary raw
materials used in the Companys operations include milk, sugar, and packaging materials. The Company purchases many of its raw materials from numerous independent suppliers. Milk is purchased through one cooperative at each of its manufacturing
plants. Kava instant coffee, sweetened condensed milk marketed in Canada, evaporated canned milk, and Borden eggnog are obtained in final product form from third party manufacturers, traditionally referred to as co-packers. The
ingredients in the premium dessert kits are procured by the Company and converted into a finished product by a co-packer.



Trademarks, Copyrights and Patents



The Company owns a number of trademarks, licenses and patents. The Companys principal trademarks includeEagle Brand andNone Such
which the Company has registered in the United States and various foreign countries. The Company holds a perpetual, exclusive and royalty-free license to use theBorden andElsie trademarks on certain products and their extensions.
TheBorden andElsie trademarks are currently used on (1) the entire line ofEagle Brand products, including condensed or evaporated milk and (2) shelf-stable eggnog. TheBorden trademark is also currently used onMagnolia sweetened condensed milk. The Company also holds a perpetual, exclusive and royalty-free license to use the Borden trademark onNone Such mincemeat, Magnolia condensed or evaporated milk, and Kavaacid-neutralized
coffee. In addition, as assignee from Borden Foods Corporation (BFC), the Company holds an exclusive and royalty-free license from Dean Foods Limited (f.k.a. Southern Foods Group, L.P.) to use theMeadow Gold trademark on
sweetened condensed milk in the United States for a five year term, which is renewable automatically for subsequent five year terms and terminable at the option of the Company upon one years notice and, under certain limited circumstances, by
the licensor. Such brand names are considered to be of fundamental importance to the business of the Company due to their brand identification and ability to maintain brand loyalty. The Company also owns various patents and copyrights associated
with the business.



Employees



As of July 3, 2004, the Company employed approximately 163 people, including
109 hourly and 54 salaried employees. The Wellsboro, Pennsylvania and Starkville, Mississippi plants are unionized plants. As of July 3, 2004, union employees represented approximately 55% of the Companys total work force. At Starkville, the
Teamsters Local 984 has a contract expiring on January 31, 2005 and at Wellsboro, the United Food and Commercial Workers Union-Local 174 has a contract expiring on February 5, 2005. Management believes that relations with the Companys
employees and unions are generally good.



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Business History



On January 23, 1998 (the Acquisition Closing), Eagle acquired certain assets of BFC, BFC Investments, L.P. (BFC Investments) and
certain of their affiliates for an aggregate purchase price of $376.8 million (the Acquisition). The assets acquired included, among other things: (1) four manufacturing facilities located in Wellsboro, Pennsylvania; Starkville,
Mississippi; Waterloo, New York; and Chester, South Carolina; (2) all machinery and equipment located at these facilities; (3) the trademarks Eagle Brand; ReaLemon; ReaLime; Cremora; Kava; None Suchand certain other trademarks in North
America and in certain foreign territories; and (4) a non-compete and non-solicitation agreement from BFC and certain of its affiliates.



Financing for the Acquisition and related fees and expenses consisted of (1) $82.5 million of equity contribution from Holdings (which was financed by
Holdings issuance of preferred and common stock in that amount to GE Investment Private Placement Partners II, a Limited Partnership (GEI) and Warburg, Pincus Ventures, L.P. (Warburg and together with GEI, the
Equity Sponsors), and certain members of the Companys management, (the Management Investors), who contributed approximately $1.7 million of such amount (the Equity Contribution); (2) the issuance of $115.0
million of 8.75% senior subordinated notes due 2008 (the Notes); and (3) senior secured credit facilities (the Senior Credit Facilities) in an aggregate principal amount of $245.0 million, consisting of a $175.0 million term
loan facility (the Term Loan Facility) and a $70.0 million revolving credit facility (the Revolving Credit Facility).



Since the Acquisition Closing, the Company nationally launched Cremora Royalepowdered non-dairy creamer, the StarandMagnolia
Hispanic brands of sweetened condensed milk and ReaLemonade lemonade liquid concentrate.



In September 1999, the Equity Sponsors contributed an aggregate of $10.0 million to Holdings in exchange for shares of a new series of Holdings preferred
stock and Holdings common stock. This contribution was made to finance the marketing investment made by the Company in launching CremoraRoyale and ReaLemonade during its fiscal year ended July 3, 1999.



In September 2001, the Company completed the sale to Motts Inc. and
Cadbury Beverages Delaware, Inc. of Eagles business of developing, manufacturing, marketing, distributing and selling shelf-stable juice sold under the ReaLemon and ReaLime brand names (the ReaLemonproduct
lines) and related assets for $128.4 million (the ReaLemon Sale).



In July 2001, the Company began implementing a plan (the Plan) to reorganize the management and operations of the Company because of the then pending ReaLemon Sale, which reduced the sales and
operating base of the Company. The Plan included (1) the resignation of John OC. Nugent as Chief Executive Officer and President of the Company; (2) the appointment of Craig A. Steinke as Chief Executive Officer and President in addition to
serving as the Chief Financial Officer of the Company; (3) the resignations of other executive officers of the Company; and (4) the closure of the corporate office in Tarrytown, New York and the research and development office in Columbus, Ohio.



As part of the Plan, the number of corporate and
administrative employees of the Company was reduced by 64% during the two quarters ended December 29, 2001, with the majority of the reductions occurring in the quarter ended September 29, 2001. In addition, the Companys overall administrative
cost structure was reduced by renegotiation of annual service contracts with third party vendors, elimination of office leases and related costs and reductions in travel, entertainment and other administrative expenses.



Effective December 30, 2002, the Company closed the powdered non-dairy
creamer manufacturing plant in Chester, South Carolina (Non-Dairy Creamer Plant Closure) and outsourced the production of powdered non-dairy creamer product to Dean Specialty Foods Group, LLC (Dean Foods). In connection with
the Non-Dairy Creamer Plant Closure, the Company recorded a charge of $1.2 million in fiscal year 2003. The closure charges included $1.3 million for termination pay and benefits for the 79 displaced employees, $0.4 million for other plant closure
costs and contractual expenditures, offset by the $0.5 million gain on the sale of the South Carolina Property.



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On December 24, 2003, the Company completed the Non-Dairy Creamer Sale to Dean Foods for $12.2 million.
The Company has reclassified the results of the Non-Dairy Creamer Business as discontinued operations.



Certain Legal and Regulatory Matters



Public Health. The Company is subject to the Federal Food, Drug and Cosmetic Act and regulations promulgated thereunder by the Food and Drug Administration. This comprehensive regulatory program governs, among
other things, the manufacturing, composition and ingredients, labeling, packaging and safety of food. In addition, the Nutrition Labeling and Education Act of 1990, as amended, prescribes the format and content of certain information required to
appear on the labels of food products. The operations and the products of the Company are also subject to state and local regulation through such measures as licensing of plants, enforcement by state health agencies of various state standards and
inspection of facilities. Management believes that the Companys facilities and practices are in compliance with applicable government regulations in all material respects. The Company is subject to certain health and safety regulations,
including regulations issued pursuant to the Occupational Safety and Health Act. These regulations require the Company to comply with certain manufacturing, health and safety standards to protect its employees from accidents. See Risk
Factors The Companys operations are subject to comprehensive public health regulations.



Environment.The Company believes that it is substantially in compliance with all applicable laws and regulations for the protection of the
environment. The Companys operations and properties are subject to a wide variety of increasingly complex and stringent federal, state and local environmental regulations governing the storage, handling, generation, treatment, emission, and
disposal of certain substances and wastes, the remediation of contaminated soil and groundwater. As such, the nature of the Companys operations exposes it to the risk of claims with respect to environmental matters. Based upon its experience
to date, the Company believes that the future cost of compliance with existing environmental laws and regulations and liability for known environmental claims will not have a material adverse effect on the Companys business, financial
condition or results of operations. See Risk Factors The Companys operations and properties are subject to a wide variety of increasingly complex and stringent federal, state and local environmental regulations governing the
storage, handling, generation, treatment, emission, and disposal of certain substances and wastes, the remediation of contaminated soil and groundwater.



Risk Factors



In connection with a review of this Annual Report on Form 10-K, the following risk factors should be considered carefully.



The Company has a significant amount of indebtedness. As of July 3,
2004, the outstanding indebtedness was $185.7 million, with maturities of $70.7 million in fiscal year 2007 on the Revolving Financing Facility and $115.0 million in fiscal year 2008 on the Notes. This substantial indebtedness could have important
consequences. For example, it could:



| |  | make it more difficult for the Company to satisfy its obligations to creditors, including holders of its Notes, who could upon default require the Company to accelerate principal
and interest payments;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | limit the Companys ability to borrow additional amounts for working capital, capital expenditures, acquisitions, debt service requirements, the sales growth, research and
development costs, or other general corporate purposes;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | limit the Companys flexibility in planning for, or reacting to, changes in its business and in the industry in which the Company operates;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------



| |  | increase the vulnerability to adverse changes in general economic, industry and competitive conditions, and adverse changes in government regulation;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------



| |  | place the Company at a disadvantage compared to its competitors that have less debt; and
| | - | ----------------------------------------------------------------------------------------



| |  | expose the Company to risks inherent in interest rate fluctuations because some of the indebtedness bears interest at variable rates, which could result in higher interest expense
in the event of increases in interest rates.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Any
of the above listed factors could have a material adverse affect on the Companys business and results of operations and its ability to meet its obligations.



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The Financing Agreement governing the Revolving Financing Facility restricts managements discretion
in operating the Companys business. The Financing Agreement requires the Company to dedicate a substantial portion of its cash flow from operations to payments on its indebtedness and corresponding interest, which will reduce the cash flow
available for working capital, capital expenditures, acquisitions, and other general corporate purposes. In addition, the Financing Agreement requires the Company to maintain specified financial ratios and tests, among other obligations. The
Financing Agreement also restricts the Companys ability to incur additional indebtedness, make acquisitions and make capital expenditures.



The markets in which the Company competes are highly competitive. The Company competes with large and established national and multinational
companies, as well as smaller companies. Some of these competitors have, and new competitors may have, substantially greater resources than the Company has. Consequently, it cannot be assured that the Company will be able to compete effectively in
the future. See Competition.



The Company relies
upon its suppliers and third party manufacturers. The Company purchases many of its raw materials from numerous independent suppliers. Milk is purchased through one cooperative at each of its manufacturing plants. Kava instant coffee,
sweetened condensed milk marketed in Canada, evaporated canned milk, and Borden eggnog are obtained in final product form from third party manufacturers, or co-packers. The ingredients in the premium dessert kits are procured by the Company
and converted into a finished product by a co-packer. Any adverse change in any of the following could have a material adverse effect on the Companys business, financial condition and results of operations:



| |  | relationships with the Companys suppliers or third party manufacturers;
| | - | ------------------------------------------------------------------------



| |  | financial condition of the suppliers or third party manufacturers; or
| | - | ---------------------------------------------------------------------



| |  | the suppliers or third party manufacturers ability to manufacture and deliver outsourced products on a timely basis.
| | - | ----------------------------------------------------------------------------------------------------------------------



There is no assurance that the Company could quickly or effectively replace
any of its suppliers or third party manufacturers if the need arose. The Companys dependence on these suppliers and third party manufacturers could also adversely affect its ability to react quickly and effectively to changes in the market for
its products.



The Company uses milk as a major ingredient
in its sweetened condensed milk product line and is subject to the risk of rising milk prices that increase manufacturing costs and erode profit margins. By purchasing future contracts, the Company tries to establish a known price for future
milk purchases in order to protect against fluctuating milk prices. Milk prices in April 2004 rose dramatically and the forward milk prices from May through December have also increased significantly. Future contracts purchased by the Company
reduced a significant portion of the negative impact these higher milk prices would have had on the Companys operating results. However, if milk prices continue to rise and the Company is not able or does not secure lower priced milk future
contracts, the impact of higher milk prices could adversely affect the Companys business, financial condition, and results of operations.



The Company manufactures all of its U. S. sweetened condensed milk at two facilities and is dependent on such facilities for production.The
Company manufactures sweetened condensed milk for the U.S. markets at the Wellsboro, PA and Starkville, MS facilities. These facilities are subject to the normal hazards that could result in any material damage to any such facility. Damage to the
facilities, or prolonged interruption in the operations of the facilities for repairs or other reasons, would have a material adverse effect on the Companys business, financial condition and results of operations.



The Company cannot be certain of the results of its product innovations
and marketing programs. The Company believes that its future success will depend, in part, upon its ability to develop, manufacture and market new products or line extensions to its existing product lines. The Company is making an investment in
the development, test marketing, and promotion of new premium dessert kits utilizing popular sweetened condensed milk recipes, which were introduced into the market in fiscal year 2004. The Company cannot predict whether it will be successful in the
introduction, marketing and manufacturing of this new product offering or any other new products. Furthermore, there can be no assurance that the Company will be able to develop and introduce new products or improvements to its existing products,
which satisfy customer needs or achieve market acceptance. The



8



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##### Table of Contents

failure to develop products and introduce them successfully in a timely manner could adversely affect the Companys business, financial condition and
results of operations.



The Company is dependent on a
concentrated customer base. The Company does not have long-term sales agreements or other contractual assurances as to future sales with any of its customers. In addition, continued consolidation in the retail industry has resulted in an
increasingly concentrated retail base. If such concentration continues to occur, the Companys net sales and operating income may be increasingly sensitive to deterioration in the financial condition of its customer base, or other adverse
developments involving the Companys relationships with its customers.



The Companys operations are subject to comprehensive public health regulations.The Company is subject to the Federal Food, Drug and Cosmetic Act and regulations promulgated thereunder by the Food and
Drug Administration. This comprehensive regulatory program governs, among other things, the manufacturing, composition and ingredients, labeling, packaging and safety of food. In addition, the Nutrition Labeling and Education Act of 1990, as
amended, prescribes the format and content of certain information required to appear on the labels of food products.



The operations and the products of the Company are also subject to state and local regulation through such measures as licensing of plants, enforcement by
state health agencies of various state standards and inspection of facilities. Enforcement actions for violations of federal, state and local regulations may include seizure and condemnation of volatile products, cease and desist-orders, injunctions
and/or monetary penalties.



The Company is subject to certain
health and safety regulations, including regulations issued pursuant to the Occupational Safety and Health Act. These regulations require the Company to comply with certain manufacturing, health and safety standards to protect its employees from
accidents.



Management believes that the Companys
facilities and practices comply with applicable government regulations in all material respects, but there can be no assurance that the Company will not incur liabilities in the future. In addition, future events, such as changes in existing laws
and regulations or their interpretation, and more vigorous enforcement policies of regulatory agencies, may give rise to additional expenditures or liabilities that could be material.



The Companys operations and properties are subject to a wide variety of increasingly complex and stringent federal,
state and local environmental regulations governing the storage, handling, generation, treatment, emission, and disposal of certain substances and wastes, the remediation of contaminated soil and groundwater.As such, the nature of the
Companys operations exposes it to the risk of claims with respect to environmental matters. The Company believes that it is substantially in compliance with all applicable laws and regulations for the protection of the environment. Based upon
its experience to date, the Company believes that the future cost of compliance with existing environmental laws and regulations and liability for known environmental claims will not have a material adverse effect on the Companys business,
financial condition or results of operations. In connection with the Acquisition, the Company assumed all past and future environmental liabilities related to the acquired business. The Company would have been indemnified by BFC and BFC Investments
with respect to certain pre-Acquisition Closing environmental liabilities identified by January 2003. No liabilities were identified. There can be no assurances that past material environmental liabilities will not be identified or that new material
environmental liabilities will not be incurred. In addition, future events, such as changes in existing laws and regulations or their interpretation, and more vigorous enforcement policies of regulatory agencies, may give rise to additional
expenditures or liabilities that could be material.



Available Information



The Companys Internet address is
www.eaglefamilyfoods.com. The Company does not make available its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 on the Internet, but these reports will be furnished free of charge upon request to the Secretary of the Company at (614) 501-4200.



9



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##### Table of Contents

|Item 2: | Properties
|------- | ----------



The Company produces its U.S. sweetened condensed milk and mincemeat pie filling products in two Company-owned manufacturing facilities, as described in
the following table. Management believes that the Companys manufacturing plants have sufficient capacity to accommodate the Companys needs for the foreseeable future.



|               |  |             |  |                                                
|-------------- |  | ----------- |  | -----------------------------------------------
|Location       |  | Square Feet |  | Products Manufactured                          
|Wellsboro, PA  |  | 119,000     |  | Sweetened condensed milk, mincemeat pie filling
|Starkville, MS |  | 49,000      |  | Sweetened condensed milk                       



In addition to the
owned manufacturing facilities described above, as of July 3, 2004, the Company leased 17,000 square feet of office space in Columbus, Ohio and uses public warehouse space in numerous locations in variable amounts as needed.



|Item 3: | Legal Proceedings
|------- | -----------------



The Company is subject to litigation in the ordinary course of its business. The Company is not a party to any lawsuit or proceeding, which is material,
or in the opinion of management, is likely to have a material adverse effect on the Companys financial condition or results of operations.



|Item 4: | Submission of Matters to a Vote of Security Holders
|------- | ---------------------------------------------------



Not applicable.



10



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##### Table of Contents

PART II



|Item 5: | Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
|------- | ------------------------------------------------------------------------------------------------------------



There is no established public trading market for the common stock of
Holdings or Eagle. As of October 1, 2004, Holdings was the only holder of Eagle common stock. As of October 1, 2004, there were three holders of Holdings Common Stock.



No cash dividends on common stock have been declared by either registrant since their respective incorporations. Holdings
and Eagle are restricted from declaring dividends on their common stock by the Revolving Financing Facility. See Note 7 of the Notes to the Financial Statements of Holdings and Eagle included elsewhere in this Annual Report on Form 10-K.



The following table presents the number of shares of Common Stock
that were repurchased by Holdings from certain current and prior employee stockholders in fiscal year 2004:



|              |  |                                               |  |                                          |      |                                                                                            |   |                                                                                                                      |  
|------------- |  | --------------------------------------------- |  | ---------------------------------------- | ---- | ------------------------------------------------------------------------------------------ | - | -------------------------------------------------------------------------------------------------------------------- | -
|Period        |  | (a) Total Numberof Shares (or Units)Purchased |  | (b) Average PricePaid for Share (orUnit) |      | (c) Total Numberof Shares (or Units)Purchased as Partof PubliclyAnnounced Plansor Programs |   | (d) MaximumNumber (orApproximateDollar Value) of Shares(or Units) that May Yet BePurchased Underthe Plans
orPrograms
|December 2003 |  | 45,047                                        |  | $                                        | 0.00 |                                                                                            |  |                                                                                                                      | 
|Total         |  | 45,047                                        |  | $                                        | 0.00 |                                                                                            |  |                                                                                                                      | 



11



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##### Table of Contents

|Item 6: | Selected Financial Data
|------- | -----------------------



The selected financial data set forth below (dollars in thousands) as of July 3, 2004 and June 28, 2003, and for fiscal year 2004, fiscal year 2003, and
fiscal year 2002 are derived from audited consolidated financial statements included elsewhere herein. The selected financial data set forth below as of July 1, 2000, June 30, 2001, June 29, 2002, and for the fifty-two week periods ended June 30,
2001 (fiscal year 2001) and July 1, 2000 (fiscal year 2000) are derived from the consolidated financial statements not included elsewhere herein. In accordance with the provisions of the Statement of Financial Accounting
Standards (SFAS) No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, the results of operations of the Non-Dairy Creamer Business for all fiscal years presented have been classified as discontinued
operations and prior period results of operations have been reclassified.



|                                                             |  |                                        |         |   |                                         |   |         |                                         |  |   |                                         |      |  |                                          |          |      |  |   |          |  
|------------------------------------------------------------ |  | -------------------------------------- | ------- | - | --------------------------------------- | - | ------- | --------------------------------------- |  | - | --------------------------------------- | ---- |  | ---------------------------------------- | -------- | ---- |  | - | -------- | -
|                                                             |  | Fifty-Two WeekPeriod EndedJuly 1, 2000 |         |   | Fifty-Two WeekPeriod EndedJune 30, 2001 |   |         | Fifty-Two WeekPeriod EndedJune 29, 2002 |  |   | Fifty-Two WeekPeriod EndedJune 28, 2003 |      |  | Fifty-Three WeekPeriod EndedJuly 3, 2004 |         
|Statement of Operations Data:(a)                             |  |                                        |         |   |                                         |   |         |                                         |  |   |                                         |      |  |                                          |          |      |  |   |          |  
|Net sales                                                    |  | $                                      | 155,093 |   |                                         | $ | 156,693 |                                         |  | $ | 116,351                                 |      |  | $                                        | 105,661  |      |  | $ | 115,778  |  
|Cost of goods sold                                           |  |                                        | 87,944  |   |                                         |   | 80,906  |                                         |  |   | 79,557                                  |      |  |                                          | 64,150   |      |  |   | 72,789   |  
|                                                             |  |                                        |         |   |                                         |   |         |                                         |  |   |                                         |      |  |                                          |          |      |  |   |          |  
|Gross profit                                                 |  |                                        | 67,149  |   |                                         |   | 75,787  |                                         |  |   | 36,794                                  |      |  |                                          | 41,511   |      |  |   | 42,989   |  
|Distribution expenses                                        |  |                                        | 11,081  |   |                                         |   | 10,634  |                                         |  |   | 6,986                                   |      |  |                                          | 6,405    |      |  |   | 7,578    |  
|Marketing expense                                            |  |                                        | 24,199  |   |                                         |   | 17,685  |                                         |  |   | 10,002                                  |      |  |                                          | 9,132    |      |  |   | 11,351   |  
|General & administrative expense                             |  |                                        | 13,601  |   |                                         |   | 13,372  |                                         |  |   | 8,794                                   |      |  |                                          | 7,619    |      |  |   | 7,170    |  
|Due diligence and other costs                                |  |                                        |        |   |                                         |   |        |                                         |  |   |                                        |      |  |                                          |         |      |  |   | 1,516    |  
|Amortization of intangible assets                            |  |                                        | 10,504  |   |                                         |   | 10,504  |                                         |  |   | 8,052                                   |      |  |                                          | 1,660    |      |  |   |         |  
|Gain on sale of product lines, net of reorganization charges |  |                                        |        |   |                                         |   |        |                                         |  |   | 18,722                                  |      |  |                                          |         |      |  |   |         |  
|Other operating income                                       |  |                                        | (1,209  | ) |                                         |   |        |                                         |  |   |                                        |      |  |                                          |         |      |  |   |         |  
|                                                             |  |                                        |         |   |                                         |   |         |                                         |  |   |                                         |      |  |                                          |          |      |  |   |          |  
|Operating income                                             |  |                                        | 8,973   |   |                                         |   | 23,592  |                                         |  |   | 21,682                                  |      |  |                                          | 16,695   |      |  |   | 15,374   |  
|Net loss                                                     |  | $                                      | (11,631 | ) |                                         | $ | (5,443  | )                                       |  | $ | (31,679                                 | )(b) |  | $                                        | (54,606  | )(c) |  | $ | (2,403   | )
|Other Financial Data:                                        |  |                                        |         |   |                                         |   |         |                                         |  |   |                                         |      |  |                                          |          |      |  |   |          |  
|Depreciation and amortization(d)                             |  | $                                      | 20,575  |   |                                         | $ | 19,765  |                                         |  | $ | 28,397                                  |      |  | $                                        | 6,772    |      |  | $ | 3,847    |  
|Capital expenditures                                         |  |                                        | 7,564   |   |                                         |   | 3,568   |                                         |  |   | 414                                     |      |  |                                          | 610      |      |  |   | 789      |  
|                                                             |  |                                        |         |   |                                        
|                                                             |  | As ofJuly 1, 2000                      |         |   | As ofJune 30, 2001                      |   |         | As ofJune 29, 2002                      |  |   | As ofJune 28, 2003                      |      |  | As ofJuly 3, 2004                        |         
|Balance Sheet Data:                                          |  |                                        |         |   |                                         |   |         |                                         |  |   |                                         |      |  |                                          |          |      |  |   |          |  
|Inventories                                                  |  | $                                      | 33,780  |   |                                         | $ | 36,929  |                                         |  | $ | 35,491                                  |      |  | $                                        | 32,594   |      |  | $ | 33,298   |  
|Net property and equipment                                   |  |                                        | 33,775  |   |                                         |   | 31,014  |                                         |  |   | 8,670                                   |      |  |                                          | 5,574    |      |  |   | 3,960    |  
|Total assets                                                 |  |                                        | 395,939 |   |                                         |   | 386,784 |                                         |  |   | 223,042                                 |      |  |                                          | 157,112  |      |  |   | 148,374  |  
|Total debt, including current maturities                     |  |                                        | 327,500 |   |                                         |   | 333,500 |                                         |  |   | 203,788                                 |      |  |                                          | 193,252  |      |  |   | 185,688  |  
|Redeemable Preferred Stock                                   |  |                                        | 113,555 |   |                                         |   | 125,163 |                                         |  |   | 137,129                                 |      |  |                                          | 151,145  |      |  |   | 166,905  |  
|Stockholders deficit                                        |  |                                        | (74,314 | ) |                                         |   | (91,362 | )                                       |  |   | (135,802                                | )    |  |                                          | (204,302 | )    |  |   | (222,123 | )

---

|(a) | The adoption of EITF No. 00-14 and No. 00-25, effective first quarter of 2002, resulted in
the following reclassifications to fiscal year 2000 and fiscal year 2001: net sales were reduced by $38.6 million and $35.1 million, respectively; distribution expense was reduced by $1.0 million and $1.0 million, respectively; and marketing expense
was reduced by $37.6 million and $34.1 million, respectively. Under EITF No. 00-14 and No. 00-25, the EITF concluded that certain consumer and trade sales promotion expenses should be classified as a reduction of sales rather than as marketing
expense. These reclassifications had no impact on operating income, net loss and cash flows.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(b) | In fiscal year 2002, the Company recorded a valuation allowance for its deferred tax assets
and net operating loss carryforwards of $33.2 million.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------



|(c) | In fiscal year 2003, the Company recorded an impairment charge of $56.6 million upon the
adoption of SFAS No. 142.
|--- | ------------------------------------------------------------------------------------------------------------------



|(d) | Includes the amortization of debt issuance costs of $1,823, $2,322, $2,878, $1,450, and
$1,449 for fiscal year 2000, fiscal year 2001, fiscal year 2002, fiscal year 2003, and fiscal year 2004, respectively.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

|Item 7: | Managements Discussion and Analysis of Financial Condition and Results of Operations
|------- | -------------------------------------------------------------------------------------



Executive Overview



Set forth below is a discussion of the consolidated financial condition and consolidated results of operations for fiscal
year 2004, fiscal year 2003 and fiscal year 2002 of the Company. The following discussion should be read in conjunction with the consolidated financial statements of the Company and the notes thereto included elsewhere in this Annual Report on Form
10-K.



Eagle and Holdings will file consolidated financial
statements of Holdings and its subsidiary, Eagle with the SEC under the guidelines of Regulation S-X Article 3, Rule 3-10(c). Eagle is the issuer of a public registered debt that is guaranteed by its parent, Eagle Family Foods Holdings, Inc.
(Holdings). Eagle is 100% owned by Holdings; Holdings fully and unconditionally guarantees this registered debt; Holdings has no independent assets or operations; and Holdings has no other subsidiaries.



The Company has significant restrictions on the ability of Holdings or any
guarantor to obtain funds from Eagle by dividend or loan as disclosed in Note 7 to the financial statements included elsewhere in this Annual Report Form 10-K. The Company has provided the disclosures prescribed by Rule 4-08(e)(3) of Regulation S-X
with respect to the subsidiary issuers and subsidiary guarantors



The Company has classified the Revolving Financing Facility as a current liability in accordance with EITF 95-22. The Revolving Financing Facility is classified as a current liability in accordance with EITF 95-22 since the Financing
Agreement contains a subjective acceleration clause and a lock box arrangement that requires the cash receipts of the Company to be used to repay amounts outstanding under the Revolving Financing Facility.



The discussion and analysis of the Companys financial condition and
results of operations relates to the business exclusive of the powdered non-dairy creamer business (Non-Dairy Creamer Business) unless otherwise described. In accordance with the provisions of SFAS No. 144, the results of operations of
the Non-Dairy Creamer Business for fiscal year 2004, fiscal year 2003 and fiscal year 2002 have been classified as discontinued operations and prior period results of operations have been reclassified.



On December 24, 2003, the Company sold to Dean Specialty Foods Group, LLC
(Dean Foods) the Non-Dairy Creamer Business and related assets, including inventory. The purchase price was $12.2 million. The Company recognized a loss of $1.0 million on the sale, which included the book values of $3.4 million, $6.3
million, $2.3 million, and $0.2 million for trade names, goodwill, inventory, and other prepaid assets, respectively. The Company incurred $1.0 million of expenses related to the Non-Dairy Creamer Sale. Effective December 30, 2002, the Company
closed the powdered non-dairy creamer manufacturing plant in Chester, South Carolina (Non-Dairy Creamer Plant Closure) and outsourced the production of powdered non-dairy creamer product to Dean Foods.



In July 2001, the Company implemented the Plan, which reorganized the
management and operations of the Company. This was executed because of the ReaLemonSale that had reduced the sales and operating base of the Company. On September 19, 2001, the Company sold to Motts Inc. and Cadbury Beverages Delaware, Inc.
the Companys business of developing, manufacturing, marketing, distributing and selling shelf-stable juice sold under the ReaLemon and ReaLimebrand names and related assets including inventory and the manufacturing facility in
Waterloo, New York.



13



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##### Table of Contents

The following table sets forth the results of operations as a percentage of net sales for fiscal year
2004, fiscal year 2003 and fiscal year 2002.



|                                                             |  |                                          |   |  |                                         |   |  |                                         |  
|------------------------------------------------------------ |  | ---------------------------------------- | - |  | --------------------------------------- | - |  | --------------------------------------- | -
|                                                             |  | Results of Operations                    |  
|                                                             |  | Fifty-Three WeekPeriod EndedJuly 3, 2004 |   |  | Fifty-Two WeekPeriod EndedJune 28, 2003 |   |  | Fifty-Two WeekPeriod EndedJune 29, 2002 |  
|Net sales                                                    |  | 100.0                                    | % |  | 100.0                                   | % |  | 100.0                                   | %
|Cost of goods sold                                           |  | 62.9                                     |   |  | 60.7                                    |   |  | 58.8                                    |  
|Cost of goods sold, accelerated depreciation                 |  |                                         |   |  |                                        |   |  | 9.6                                     |  
|                                                             |  |                                          |   |  |                                         |   |  |                                         |  
|Total cost of goods sold                                     |  | 62.9                                     |   |  | 60.7                                    |   |  | 68.4                                    |  
|Gross margin                                                 |  | 37.1                                     |   |  | 39.3                                    |   |  | 31.6                                    |  
|Distribution expense                                         |  | 6.5                                      |   |  | 6.1                                     |   |  | 6.0                                     |  
|Marketing expense                                            |  | 9.8                                      |   |  | 8.6                                     |   |  | 8.6                                     |  
|General & administrative expense                             |  | 6.2                                      |   |  | 7.2                                     |   |  | 7.6                                     |  
|Due diligence and other costs                                |  | 1.3                                      |   |  |                                        |   |  |                                        |  
|Amortization of intangible assets                            |  |                                         |   |  | 1.6                                     |   |  | 6.9                                     |  
|Gain on sale of product lines, net of reorganization charges |  |                                         |   |  |                                        |   |  | 16.1                                    |  
|                                                             |  |                                          |   |  |                                         |   |  |                                         |  
|Operating income                                             |  | 13.3                                     | % |  | 15.8                                    | % |  | 18.6                                    | %
|                                                             |  |                                          |   |  |                                         |   |  |                                         |  



Results of Operations



Fifty-Three Week Period Ended July 3, 2004, and the
Fifty-Two week Period Ended June 28, 2003.



Net
Sales. The Companys net sales for fiscal year 2004 were $115.8 million as compared to $105.7 million for fiscal year 2003, an increase of $10.1 million, or 9.6%. The table below sets forth the Companys net sales data for each of the
Companys product lines for fiscal year 2004 and fiscal year 2003 (dollars in millions):



|                         |  |                                                    |  |                          |       |                       |       |   |                          |   |                        |  |       |  
|------------------------ |  | -------------------------------------------------- |  | ------------------------ | ----- | --------------------- | ----- | - | ------------------------ | - | ---------------------- |  | ----- | -
|Product Lines            |  | Companys Principal Brands                         |  | Net SalesFiscal Year2004 |       | Percentageof NetSales |       |   | Net SalesFiscal Year2003 |   | Percentageof Net Sales | 
|Sweetened condensed milk |  | Eagle Brand, Meadow Gold, Magnolia, Star and other |  | $                        | 104.8 |                       | 90.5  | % |                          | $ | 95.1                   |  | 90.0  | %
|Niche brand products     |  | Borden, None Such, and Kava                        |  |                          | 11.0  |                       | 9.5   |   |                          |   | 10.6                   |  | 10.0  |  
|                         |  |                                                    |  |                          |       |                       |       |   |                          |   |                        |  |       |  
|Total                    |  |                                                    |  | $                        | 115.8 |                       | 100.0 | % |                          | $ | 105.7                  |  | 100.0 | %
|                         |  |                                                    |  |                          |       |                       |       |   |                          |   |                        |  |       |  



The increase in
sweetened condensed milk net sales of $9.7 million for fiscal year 2004 as compared to fiscal year 2003 was due to an increase in sales volume to an Asian private label customer, an increase in sales volume of the retail Eagle Brand products
and increased sales of the new product offering, premium dessert kits. The new product offering, the premium dessert kits, utilizes the Companys Eagle Brand sweetened condensed milk product in popular sweetened condensed milk recipes.



Cost of Goods Sold. Cost of goods sold was $72.8
million for fiscal year 2004 as compared to $64.2 million for fiscal year 2003, an increase of $8.6 million, or 13.4%. Expressed as a percentage of net sales, cost of goods sold for fiscal year 2004 increased to 62.9% from 60.7% for fiscal year
2003. The increase in cost of goods sold was primarily due to the change in the sales mix to products with a higher production cost.



Distribution Expense. Distribution expense was $7.6 million for fiscal year 2004 as compared to $6.4 million for fiscal year 2003, an increase of
$1.2 million, or 18.8%. Expressed as a percentage of net sales, distribution expense was 6.5% and 6.1% for fiscal year 2004 and fiscal year 2003, respectively. The increase in distribution expense was due to costs associated with storing and
handling the new premium dessert kits and higher transportation costs.



14



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##### Table of Contents

Marketing Expense. Marketing expense was $11.4 million for fiscal year 2004 as compared to $9.1
million for fiscal year 2003, an increase of $2.3 million, or 25.3%. Expressed as a percentage of net sales, marketing expense was 9.8% and 8.6% for fiscal year 2004 and fiscal year 2003, respectively. The increase was due to the Companys
investment in the development, test marketing and promotion of new premium dessert kits utilizing popular sweetened condensed milk recipes. In addition, the increase was due to marketing efforts to capture incremental opportunities within the
growing Hispanic market.



General & Administrative
(G&A) Expense. G&A expense was $7.2 million for fiscal year 2004 as compared to $7.6 million for fiscal year 2003, a decrease of $0.4 million, or 5.3%. Expressed as a percentage of net sales, G&A expense was 6.2% and 7.2%
for fiscal year 2004 and fiscal year 2003, respectively.



Due Diligence and Other Costs. Due diligence and other costs were $1.5 million for fiscal year 2004. The Company recorded a charge of $0.7 million for due diligence costs related to an unsuccessful acquisition attempt, and a charge
of $0.8 million for an incentive payment to certain management members for successfully completing the sale of the Non-Dairy Creamer Business.



Amortization of Intangible Assets. Amortization of intangible assets was $1.7 million for fiscal year 2003. The Companys only amortizable
intangible asset was a covenant not to compete. This asset was fully amortized in fiscal year 2003.



Operating Income. Operating income was $15.4 million for fiscal year 2004 as compared to $16.7 million for fiscal year 2003, a decrease of $1.3
million, or 7.8%. Expressed as a percentage of net sales, operating income for fiscal year 2004 decreased to 13.3% from 15.8% for fiscal year 2003. The decrease in operating income was due to due diligence and other costs, the change in product
sales mix and the cost of launching the new premium dessert product offering.



Interest Expense. Net interest expense was $16.0 million for fiscal year 2004 as compared to $14.9 million for fiscal year 2003, an increase of $1.1 million, or 7.4%. In accordance with SFAS No. 144, interest
expense totaling $0.3 million and $0.7 million for fiscal year 2004 and fiscal year 2003, respectively, was charged against income from discontinued operations, and represented the interest associated with the Non-Dairy Creamer Business. The
increase in interest expense was due to a higher average interest rate of 9.11% in fiscal year 2004 as compared to an average interest rate of 8.11% in fiscal year 2003. The average debt balance in fiscal year 2004 was $178.9 million as compared
$191.7 million in fiscal year 2003. The Company used the proceeds from the sale of the Non-Dairy Creamer Business to repay indebtedness in fiscal year 2004.



Costs Related to Refinancing. Costs related to refinancing were $1.3 million for fiscal year 2004. The Company recorded a write-off of $1.3 million
for the unamortized financing fees related to the extinguished Term Loan Facility.



Income Taxes. Income tax expense was less than $0.1 million for fiscal year 2004 as compared to an income tax benefit of less than $0.1 million for fiscal year 2003. The expense resulted from estimated state
and local income taxes. The Company is carrying a full valuation allowance for its net deferred tax assets and net operating loss carryforwards until such time that sufficient positive evidence exists to support realization of these tax assets.



Income from Discontinued Operations. Income from
discontinued operations was $0.6 million for fiscal year 2004 as compared to $0.1 million for fiscal year 2003. This represents the results of operations of the Non-Dairy Creamer Business. The Company sold the Non-Dairy Creamer Business on December
24, 2003 to Dean Foods.



Loss on Disposal of Discontinued
Operations. In fiscal year 2004, the Company recorded a loss of $1.0 million for the Non-Dairy Creamer Sale.



15



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##### Table of Contents

Fifty-Two Week Periods Ended June 28, 2003 and June 29, 2002.



Net Sales. The Companys net sales for fiscal year 2003 were
$105.7 million as compared to $116.4 million for fiscal year 2002, a decrease of $10.7 million, or 9.2%. The table below sets forth the Companys net sales data for each of the Companys product lines for fiscal year 2003 and fiscal year
2002 (dollars in millions):



|                         |  |                                                    |  |                          |       |                        |       |   |                          |   |                        |  |       |  
|------------------------ |  | -------------------------------------------------- |  | ------------------------ | ----- | ---------------------- | ----- | - | ------------------------ | - | ---------------------- |  | ----- | -
|Product Lines            |  | Companys Principal Brands                         |  | Net SalesFiscal Year2003 |       | Percentageof Net Sales |       |   | Net SalesFiscal Year2002 |   | Percentageof Net Sales | 
|Sweetened condensed milk |  | Eagle Brand, Meadow Gold, Magnolia, Star and other |  | $                        | 95.1  |                        | 90.0  | % |                          | $ | 93.5                   |  | 80.3  | %
|Niche brand products     |  | Borden, None Such, Kava                            |  |                          | 10.6  |                        | 10.0  |   |                          |   | 11.3                   |  | 9.7   |  
|Lemon and lime juices    |  | ReaLemon and ReaLime                               |  |                          |      |                        |      |   |                          |   | 11.6                   |  | 10.0  |  
|                         |  |                                                    |  |                          |       |                        |       |   |                          |   |                        |  |       |  
|Total                    |  |                                                    |  | $                        | 105.7 |                        | 100.0 | % |                          | $ | 116.4                  |  | 100.0 | %
|                         |  |                                                    |  |                          |       |                        |       |   |                          |   |                        |  |       |  



Net sales of sweetened
condensed milk product increased by $1.6 million for fiscal year 2003 as compared to fiscal year 2002. The Company experienced sales growth for its Hispanic branded products and within the private label sweetened condensed milk business.



This increase in net sales was offset by a decrease in net sales from the
ReaLemon product lines. On September 19, 2001, the Company consummated the ReaLemon Sale.



Cost of Goods Sold. Cost of goods sold was $64.2 million for fiscal year 2003 as compared to $79.6 million for fiscal year 2002, a decrease of
$15.4 million, or 19.3%. The decrease is due to an $11.1 million charge for accelerated depreciation in fiscal year 2002, which related principally to long-lived assets that were taken out of service before the end of their normal service period,
and the $5.2 million reduction in cost of goods sold attributable to the ReaLemon product lines in fiscal year 2002. The decrease was offset by the cost of goods sold associated with the increased sales volume as discussed above under net
sales. Expressed as a percentage of net sales, cost of goods sold for fiscal year 2003 decreased to 60.7% from 68.4% for 2002.



Distribution Expense. Distribution expense was $6.4 million for fiscal year 2003 as compared to $7.0 million for fiscal year 2002, a decrease of
$0.6 million, or 8.6%. The decrease in distribution expense was due to a reduction of $1.1 million for the ReaLemon product lines in fiscal year 2002. This was offset by an increase in distribution expense primarily due to increased sales
volume. Expressed as a percentage of net sales, distribution expense for fiscal year 2003 increased to 6.1% from 6.0% for fiscal year 2002.



Marketing Expense. Marketing expense was $9.1 million for fiscal year 2003 as compared to $10.0 million for fiscal year 2002, a decrease of $0.9
million, or 9.0%. Expressed as a percentage of net sales, marketing expense was 8.6% for fiscal year 2003 and fiscal year 2002. The decrease in marketing expense was primarily due to $0.8 million of marketing expense in fiscal year 2002 related to
the ReaLemon product lines.



G&A Expense.
G&A expense was $7.6 million for fiscal year 2003 as compared to $8.8 million for fiscal year 2002, a decrease of $1.2 million, or 13.6%. Expressed as a percentage of net sales, G&A expense for fiscal year 2003 decreased to 7.2% from 7.6%
for fiscal year 2002. The decrease in G&A expense was primarily due to the execution of the Plan as noted above.



Amortization of Intangible Assets. Amortization of intangible assets was $1.7 million for fiscal year 2003 and $8.1 for fiscal year 2002. The
decrease is due to the write-off of the net book value of certain tradenames and other intangible assets sold pursuant to the ReaLemon Sale.



Gain on sale of product lines, net of reorganization charges. In fiscal year 2002, the Company recognized an $18.7 million gain on the
ReaLemon Sale, inclusive of a reorganization charge of $4.8 million.



Operating Income (Loss). Operating income was $16.7 million for fiscal year 2003 as compared to $21.7 million for fiscal year 2002, a decrease of $5.0 million, or 23.0%. The decrease was due primarily to the
$18.7 million gain on the ReaLemon Sale in fiscal year 2002, the $4.4 million of operating income from the ReaLemon product lines in fiscal year 2002, offset by the $11.1 million charge for accelerated depreciation in fiscal year 2002
and reductions in administrative costs, marketing expense and amortization as discussed above.



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Interest Expense. Net interest expense was $14.9 million for fiscal year 2003 as compared to net
interest expense of $19.9 million for fiscal year 2002, a decrease of $5.0 million, or 25.1%. The decrease in interest expense was due to a lower average interest rate of 8.11% in fiscal year 2003 as compared to an average interest rate of 9.18% in
fiscal year 2002. The average debt balance in fiscal year 2003 was $191.7 million as compared to $225.5 million in fiscal year 2002.



Income Taxes. Income tax benefit was less than $0.1 million for fiscal year 2003 as compared to an income tax expense of $34.1 million for fiscal
year 2002. In fiscal year 2002, the Company established a tax valuation allowance for $33.2 million for the Companys net deferred tax assets and net operating loss carryforwards. The valuation allowance was provided as the Company has
experienced pretax losses over the past several years, excluding the gain in fiscal year 2002 on the ReaLemonSale. Management continues to see lower industry market values in the current economic environment which could affect the tax
planning strategies available to the Company. Therefore, the Company will continue to maintain a full valuation allowance for its net deferred tax assets and net operating loss carryforwards until sufficient positive evidence exists to support
reversal of the reserve. Until such time, except for minor state and local tax provisions, the Company will have no reported tax provision, net of valuation allowance adjustments.



In determining the amount of the deferred tax asset valuation allowance, the Company estimated the current tax deductibility
of certain costs and charges, and evaluated the fair market value of the Company in comparison to the tax value. These estimates are subject to change. Any differences between these current estimates and actual values determined at a future date
will result in a change to the valuation allowance and will be recorded at that date.



Income from Discontinued Operations. Income from discontinued operations was $0.1 million for fiscal year 2003 and $0.7 million for fiscal year 2002. As mentioned above, income from discontinued operations
represent the results of operations of the Non-Dairy Creamer Business.



Liquidity and Capital Resources



On March 23,
2004, the Company entered into the Financing Agreement by and among Eagle, Holdings, as a guarantor, and the Lenders, Fortress, as collateral agent for the Lenders, and Congress, as administrative agent for the Lenders. The Financing Agreement
provides for a secured revolving credit facility that consists of (1) an asset-based revolving credit facility (Revolver A) in an aggregate principal amount not to exceed $27.0 million at any time outstanding, including a subfacility for
the issuance of letters of credit in an aggregate amount not to exceed $5.0 million, and (2) a revolving credit facility (Revolver B, and together with Revolver A, the Revolving Financing Facility) in an aggregate principal
amount not to exceed $55.0 million. As of July 3, 2004, the borrowings were $15.7 million under Revolver A and $55.0 million under Revolver B.



On September 20, 2004, the Company entered into a First Amendment to Financing Agreement (the First Amendment) by and among Holdings, as
guarantor, Eagle, as borrower, certain financial institutions from time to time party thereto, Fortress, as collateral agent for the Lenders, and Congress, as administrative agent for the Lenders. The First Amendment temporarily increases the
principal amount available for borrowing under Revolver A from $27.0 million to $30.0 million through and including November 3, 2004.



The Revolving Financing Facility contains financial covenants, which require the Company to meet certain financial tests including senior debt leverage,
fixed charge coverage, and consolidated earnings before interest, income tax, and depreciation and amortization expenses. The Company is required to reduce the outstanding principal amount of Revolver B to specific amounts by December 31 of each of
the next three years. The principal amount as of December 31, 2004 is to be less than $34.7 million. In addition, the Company is restricted from accumulating or maintaining an aggregate amount of cash in bank accounts, other cash equivalents and
investments in excess of $2.0 million for a period of more than ten consecutive business days, subject to certain exceptions as permitted by the Financing Agreement. The Revolving Financing Facility includes a subjective acceleration clause and a
lockbox arrangement, which provides for all cash receipts to be swept daily to reduce borrowings outstanding under the Revolving Financing Facility.



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The Revolving Financing Facility also contains covenants including limitations on liens, indebtedness,
dispositions, acquisitions, mergers, consolidations, changes in the nature of business, loans, advances, investments, sale and leaseback transactions, capital expenditures, transactions with affiliates, dividends and other payments, issuances of
capital stock and excess cash. The Revolving Financing Facility contains customary events of default, including certain changes in control of the Company. The Company is currently in compliance with the covenants of the Financing Agreement.



The proceeds from the Revolving Financing Facility were used,
in part, to repay all amounts outstanding under the Companys previous senior bank facilities and will be used, in part, to fund working capital of the Company and for other general corporate purposes.



Interest payments on the Companys $115 million of outstanding senior
subordinated notes (Notes) and interest and principal payments under the Revolving Financing Facility represent significant cash requirements for the Company. Borrowings under the Revolving Financing Facility bear interest at floating
rates and require interest payments monthly.



The
Companys remaining liquidity needs are for capital expenditures and increases in working capital. The Company spent $0.8 million on capital projects in fiscal year 2004 to fund expenditures at existing facilities, and expects capital
expenditures to be no more than $1.0 million at the existing facilities in the year ending July 2, 2005 (fiscal year 2005). The Companys primary sources of liquidity are cash flows from operations and available borrowings under the
Revolving Financing Facility.



Net cash used in operating
activities was $0.5 million in fiscal year 2004 and net cash from operating activities was $11.8 million in fiscal year 2003, a decrease of $12.3 million. This decrease is primarily due to the additional costs associated with the Non-Dairy Creamer
Sale and the investment in the new product offering, premium dessert kits, as described above.



Cash from investing activities was $11.4 million in fiscal year 2004 and cash used in investing activities was less than $0.1 million in fiscal year 2003. In fiscal year 2004, the Company received $12.2 million in
proceeds from the Non-Dairy Creamer Sale.



Cash used in
financing activities was $10.5 million and $11.1 million in fiscal year 2004 and fiscal year 2003, respectively, a decrease of $0.6 million. As described above, in fiscal year 2004, the Company received proceeds from the Revolving Financing Facility
which were used to repay the outstanding amount of the then existing senior bank facilities and the financing costs associated with the refinancing. In addition, the Company used the proceeds from the sale of the Non-Dairy Creamer Business received
in December 2003 to pay down its then existing term loan facility.



During the year ended July 3, 2004, the Company had negative cash generated from operating activities. The classification of the Revolving Financing Facility as a current liability caused a working capital deficit. The Revolving Financing
Facility is available to the Company through March 23, 2007. The Company will be required to temporarily reduce the amount outstanding under the Revolver B by $20.3 million. Management has evaluated its estimated cash flows in the next operating
period and believes that cash generated from operations and borrowings under the Revolving Financing Facility will be sufficient to service interest on the Notes and Revolving Financing Facility, satisfy working capital requirements, meet temporary
requirements to reduce the amount of outstanding indebtedness, and make required capital expenditures in fiscal year 2005. However, significant changes in interest rates, the Companys business, customers and cost of raw materials could have a
material adverse effect on the Companys results of operations and the Companys ability to meet its obligations.



As of September 9, 2004, GE Investment Private Placement Partners II, a Limited Partnership and Warburg, Pincus Ventures, L.P., Holdings principal
stockholders, each owned $14.1 million in aggregate principal amount of Notes. These stockholders have guaranteed payment of Revolver B obligations and associated costs to the extent of interest paid to the stockholders on the Notes after March 23,
2004.



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Significant Events in Fiscal Year 2004



On December 24, 2003, the Company sold to Dean Specialty Foods Group, LLC (Dean Foods) the Companys
business of marketing, distributing and selling powdered non-dairy creamer sold under the Cremora and Cremora Royalebrand names (Non-Dairy Creamer Business) and related assets, including inventory (Non-Dairy Creamer
Sale). The purchase price was $12.2 million. The Company recognized a loss of $1.0 million on the sale, which included the book values of $3.4 million, $6.3 million, $2.3 million, and $0.2 million for trade names, goodwill, inventory, and
other prepaid assets, respectively. The Company incurred $1.0 million of expenses related to the Non-Dairy Creamer Sale.



Contractual Obligations



The Company may enter into long-term contracts for the purchase of certain raw materials. At July 3, 2004, the Company did not have any long-term purchase
commitments. The Company intends to utilize the raw materials under its outstanding purchase commitments in production. The Company leases buildings and equipment under various noncancellable lease agreements for periods of one to five years. The
lease agreements generally require the Company to pay taxes, insurance and maintenance expenses related to the leased assets. The Company has entered into employment agreements with certain key executives. Such agreements provide for annual
salaries, bonuses and severances and include non-compete and non-solicitation provisions. The following table lists the Companys contractual obligations at July 3, 2004 (dollars in thousands):



|                                |  |                        |         |                 |   |          |  |          |     |                  |   |         |  |   |   
|------------------------------- |  | ---------------------- | ------- | --------------- | - | -------- |  | -------- | --- | ---------------- | - | ------- |  | - | --
|                                |  | Payments Due by Period
|Contractual Obligations         |  | Total                  |         | Less Than1 Year |   | 1-3Years |  | 3-5Years |     | More Than5 Years
|Long-term debt obligations      |  | $                      | 115,000 |                 | $ |         |  | $        |    |                  | $ | 115,000 |  | $ |  
|Revolving financing obligations |  |                        | 70,688  |                 |   | 70,688   |  |          |    |                  |   |        |  |   |  
|Operating lease obligations     |  |                        | 822     |                 |   | 244      |  |          | 487 |                  |   | 51      |  |   | 40
|Purchase obligations            |  |                        | 7,271   |                 |   | 7,271    |  |          |    |                  |   |        |  |   |  
|                                |  |                        |         |                 |   |          |  |          |     |                  |   |         |  |   |   
|Total                           |  | $                      | 193,781 |                 | $ | 78,203   |  | $        | 487 |                  | $ | 115,051 |  | $ | 40
|                                |  |                        |         |                 |   |          |  |          |     |                  |   |         |  |   |   



The Companys
Revolving Financing Facility includes a lockbox arrangement, which provides for all cash receipts to be swept daily to reduce borrowings outstanding under the Revolving Financing Facility. This arrangement, combined with the existence of a
subjective acceleration clause, causes the Revolving Financing Facility balance to be classified as a current liability on the balance sheet in accordance with EITF 95-22. The acceleration clause allows the Companys lenders to accelerate
payment of the obligation or to terminate the Financing Agreement upon the occurrence of an event or development that would be reasonably likely to result in a material adverse effect on the Companys operations, business, assets, properties or
condition (financial or otherwise). Management believes that no such event or development has occurred. The maturity date of the Revolving Financing Facility is March 23, 2007.



Redeemable Preferred Stock



Redeemable Preferred Stock is subject to mandatory redemption at a price per share equal to the Stated Value for each series of Preferred Stock plus all
dividends accrued and unpaid there upon (1) the closing of a public offering pursuant to an effective registration statement under the Securities Act of 1933, (2) the sale of all or substantially all of the assets of Holdings or the merger or
consolidation of Holdings with or into any other corporation or other entity in which the holders of Holdings outstanding shares before the merger or consolidation do not retain a majority of the voting power of the surviving corporation or
other entity or (3) the acquisition by any person of shares of Common Stock representing a majority of the issued and outstanding shares of Common Stock then outstanding.



Seasonality



The Companys net sales, operating income and cash flows are affected by a seasonal bias toward the second quarter of the Companys fiscal year
due to increased sales during the holiday season. Three of the Companys four major brands (Eagle Brand sweetened condensed milk, Bordeneggnog and None Such mincemeat pie filling) are



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consumed primarily during the November and December holiday season. In recent years, approximately 49% of the Companys net sales, excluding the net
sales of the Non-Dairy Creamer Business and the ReaLemon Business, have occurred in the second quarter of the Companys fiscal year. Because of this seasonality, the Companys working capital needs have historically increased
throughout the year, normally peaking in the August/September period, which will require the Company to draw additional amounts on its Revolving Financing Facility in that period.



Off-Balance Sheet Arrangements



The Company does not have any off-balance sheet arrangements.



Critical Accounting Policies and Estimates



The process of preparing financial statements in conformity with accounting principles generally accepted in the United States of America requires the use
of significant judgment and estimates on the part of the Companys management about the effect of matters that are inherently uncertain. Actual results could differ significantly from the estimates under different assumptions or conditions. The
following discussion addresses the Companys most critical accounting policies.



Revenue Recognition.The Company recognizes revenues when there is persuasive evidence of a sale arrangement, delivery has occurred and title, ownership and risk of loss transfers to the customer, the price is
fixed or determinable, and collection is reasonably assured. Liabilities are established for estimated returns, allowances, consumer and certain trade promotions and discounts when revenues are recognized. The Company utilizes certain consumer and
trade promotions, such as coupons, co-op advertising, featured price discounts and in store display incentives. These expenses are classified as a reduction of sales.



Marketing Costs. The Company offers market development funds, slotting, and other trade spending programs to its
customers to support the customers promotional activities related to the Companys product lines. The Company provides accruals for marketing costs based on historical information and known promotional programs that may deviate from prior
years activity. At interim dates and year end, the Company reviews and revises estimates of costs to the Company, when deemed necessary, for the marketing programs based on actual costs incurred or revised spending level by the customers.
Actual costs may differ significantly if factors, such as the level and success of the customers programs, changes in customer utilization practices, or other conditions, differ from previous expectations.



Inventories. Inventories are stated at the lower of cost or market,
with cost of goods sold principally determined using the first-in, first-out method. The Company reviews the value of the inventory, and based on the physical condition (e.g., age and quality) of the inventories and forecasted sales plans, may
require adjustments, either favorable or unfavorable. These inventory adjustments are estimates and may differ if future economic conditions, customer inventory levels or competitive conditions differ from the Companys expectations.



Property, Plant and Equipment. Property, plant and
equipment are stated at cost and are depreciated on a straight-line method over the estimated useful lives of the assets. Changes in circumstances, such as technological advances or changes to the Companys capital strategy, can result in the
actual lives differing from the Companys estimates. The Company periodically reviews the useful lives of its property, plant and equipment, and where warranted, changes are made that may result in acceleration of depreciation.



Intangible Assets and Goodwill. Intangible assets are stated at fair
value as recorded at acquisition and adjusted for impairment as deemed appropriate. In accordance with SFAS 142, the Company reviews indefinite-lived assets for impairment, at a minimum, annually or whenever events or changes in circumstances
indicate that the carrying value of any such asset may not be recoverable. The Company performs its annual impairment test of intangible assets during its first quarter of the fiscal year. The fair value of the indefinite-lived tradenames are
determined using a royalty savings methodology and discounted cash flows and the fair value of goodwill is determined using estimated future discounted cash flow earnings and market valuations based on these cash flow earnings.



Income taxes. Income taxes are recognized using the liability method.
Under this method, deferred tax assets and liabilities are recognized based on the difference between the financial statement carrying amounts of existing



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assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates in effect in the years in
which those temporary differences are expected to reverse. The Company assesses the recoverability of the deferred tax assets when events or circumstances indicate that it is more likely than not that the assets will not be recovered. The Company
had recorded a valuation allowance for the net deferred tax assets and net operating loss carryforwards as of June 29, 2002. The Company has continued to record a full valuation allowance. The valuation allowance was $54.2 million and $53.3 million
as of July 3, 2004 and June 28, 2003, respectively. The Company intends to maintain a full valuation allowance for the net deferred tax assets and net operating loss carryforwards until sufficient positive evidence exists to support reversal of the
remaining reserve. Until such time, except for minor state and local tax expenses, the Company will have no reported tax provision, net of valuation allowance adjustments. In the event the Company were to determine, based on the existence of
sufficient positive evidence, that it would be able to realize deferred tax assets in the future in excess of the currently realized amount, an adjustment to the valuation allowance would increase income in the period such determination was made.



Recently Adopted Accounting Statements



In December 2003, the FASB issued FASB Interpretation No. 46 (revised
December 2003), Consolidation of Variable Interest Entities (FIN No. 46R). FIN No. 46R varies significantly from FASB Interpretation No. 46, Consolidation of Variable Interest Entities (FIN No. 46),
which it supersedes. FIN No. 46R requires the application of either FIN No. 46 or FIN No. 46R by Public Entities (as defined in paragraph 395 of FASB Statement No. 123, Accounting for Stock-Based Compensation) to all Special
Purpose Entities (SPEs) created prior to February 1, 2003 at the end of the first interim or annual reporting period ending after December 15, 2003. All entities created after January 31, 2003 by Public Entities were already required to
be analyzed under FIN No. 46, and they must continue to do so, unless FIN No. 46R is adopted early. FIN No. 46R is applicable to all non-SPEs created prior to February 1, 2003 by Public Entities at the end of the first interim or annual reporting
period ending after March 15, 2004. The adoption of this standard did not have any effect on the Companys results of operations or financial condition.



In July 2003, the Company adopted SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and
Equity (SFAS No. 150). SFAS No. 150 establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. SFAS No. 150 requires that an issuer classify a
financial instrument that is within its scope as a liability, or as an asset in some circumstances. SFAS No. 150 applies to three types of freestanding financial instruments, other than outstanding shares. One type is mandatory redeemable shares,
which the issuing company is obligated to buy back in exchange for cash or assets; a second type includes put options and forward purchase contracts that require or may require the issuer to buy back some of its shares in exchange for cash or other
assets; the third type is obligations that can be settled with shares, the monetary value of which is fixed, ties solely or predominantly to a variable such as a market index, or varies inversely with the value of the issuers shares. SFAS No.
150 does not apply to features embedded in a financial instrument that is not a derivative in its entirety. The Company considered the classification of its redeemable preferred stock and determined that this stock is contingently redeemable.
Accordingly, these securities are outside the scope of SFAS No. 150 and adoption of this standard did not have any effect on the Companys results of operations or financial condition.



In December 2003, the FASB issued SFAS No. 132 (revised 2003),
Employers Disclosures about Pensions and Other Postretirement Benefits, an amendment of FASB Statements No. 87, 88, and 106, and a revision of FASB Statement No. 132 (SFAS No. 132). SFAS No. 132 revises employers
disclosures about pension plans and other postretirement benefit plans. It does not change the measurement or recognition of those plans required by FASB Statements No. 87, Employers Accounting for Pensions, No. 88,
Employers Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits and No. 106, Employers Accounting for Postretirement Benefits Other Than Pensions. The new rules
require additional disclosures about the assets, obligations, cash flows, and net periodic benefit cost of defined benefit pension plans and other postretirement benefit plans. The required information has been provided separately for pension plans
and for other postretirement benefit plans. This includes expanded disclosure on an interim basis as well. The new disclosures are required for fiscal years ending after December 15, 2003. The disclosures required by this statement have been
included within the Notes to the Financial Statements appearing elsewhere in this Annual Report on Form 10-K.



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Cautionary Statement Regarding Forward-Looking Statements



This section may contain forward-looking statements which include
assumptions about future market conditions, operations and financial results. These statements are based on current expectations and are subject to risks and uncertainties. They are made pursuant to safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. The Companys actual results, performance or achievements in the future could differ significantly from the results, performance or achievements discussed or implied in such forward-looking statements herein and
in prior Securities and Exchange Commission filings by the Company. The Company assumes no obligation to update these forward-looking statements or advise of changes in the assumption on which they were based.



Factors that could cause or contribute to such differences include, but are
not limited to, the success of new product introductions and promotions, changes in the competitive environment of the Companys products, general economic and business conditions, industry trends, raw material costs, dependence on the
Companys labor force, and changes in, or the failure or inability to comply with, government rules and regulations, including, without limitation, Food and Drug Administration and environmental rules and regulations. Statements concerning
interest rates and other financial instrument fair values and their estimated contribution to the Companys future results of operations are based upon market information as of a specific date. This market information is often a function of
significant judgment and estimation. Further, market interest rates and commodity prices are subject to significant volatility.



|Item 7A: | Quantitative and Qualitative Disclosures About Market Risk
|-------- | ----------------------------------------------------------



Interest Rates



The following table presents a description of the financial instruments that were held by the Company at July 3, 2004 and that were sensitive to changes
in interest rates. In the ordinary course of business, the Company enters into derivative financial instrument transactions in order to manage or reduce market risk. The Company does not enter into derivative financial instrument transactions for
speculative purposes. For the liabilities, the table represents principal fiscal year cash flows that exist by maturity date and the related average interest rate. The variable rates are estimated based upon the six-month forward LIBOR rate.



All amounts are reflected in U.S. dollars (in thousands).



|                      |  |      |        |   |      |   |      |  |      |   |  |       |         |   |            |   |         |   |  |   |       
|--------------------- |  | ---- | ------ | - | ---- | - | ---- |  | ---- | - |  | ----- | ------- | - | ---------- | - | ------- | - |  | - | ------
|                      |  | 2005 |        |   | 2006 |   | 2007 |  | 2008 |   |  | Total |         |   | Fair Value
|Liabilities           |  |      |        |   |      |   |      |  |      |   |  |       |         |   |            |   |         |   |  |   |       
|Fixed Rate            |  |      |        |   |      |   |      |  |      |   |  | $     | 115,000 |   |            | $ | 115,000 |   |  | $ | 80,500
|Average Interest Rate |  |      |        |   |      |   |      |  |      |   |  |       | 8.750   | % |            |   | 8.750   | % |  |   |       
|Variable Rate         |  | $    | 70,688 |   |      | $ |     |  | $    |  |  | $     |        |   |            | $ | 70,688  |   |  | $ | 70,688
|Average Interest Rate |  |      | 10.336 | % |      |   |     |  |      |  |  |       |        |   |            |   | 10.336  | % |  |   |       



As the table
incorporates only those exposures that existed as of July 3, 2004, it does not consider exposure to changes in the LIBOR rate that arise after that date. As a result, our ultimate interest expense with respect to interest rate fluctuations will
depend on the interest rates that are applicable during the period. A 1% change in interest rate will cause a variance of approximately $0.7 million in forecasted interest expense. The Companys variable rate liability has a stated maturity
date of March 23, 2007. In accordance with EITF 95-22, the Company has presented the outstanding balance as a current obligation. See additional disclosure in Note 7 of the financial statements of the Company included elsewhere in this Annual Report
on Form 10-K.



Milk Hedging



The Company uses milk as a major ingredient in its sweetened condensed milk
product line and is subject to the risk of rising milk prices that increase manufacturing costs and erode profit margins. By purchasing futures contracts, however, the Company establishes a known price for future milk purchases in order to protect
against fluctuating milk prices. During the fourth quarter of fiscal year 2004, the Company sold 886 contracts for a gain of $2.0 million prior to the contracts settlement dates. The gain will be recognized as the original contracts mature. As



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of July 3, 2004, the Company had purchased 154 milk futures contracts, which will settle during various months through May 2005, at a cost of $4.1 million
and a current market value of $4.0 million, or an aggregate market loss of $0.1 million. The aggregate market value will increase or decrease based on the future milk prices.



Cautionary Statement Regarding Forward-Looking Statements



This section may contain forward-looking statements which include assumptions about future market conditions, operations and
financial results. These statements are based on current expectations and are subject to risks and uncertainties. They are made pursuant to safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The Companys actual
results, performance or achievements in the future could differ significantly from the results, performance or achievements discussed or implied in such forward-looking statements herein and in prior Securities and Exchange Commission filings by the
Company. The Company assumes no obligation to update these forward-looking statements or advise of changes in the assumption on which they were based.



Factors that could cause or contribute to such differences include, but are not limited to, the success of new product introductions and promotions,
changes in the competitive environment of the Companys products, general economic and business conditions, industry trends, raw material costs, dependence on the Companys labor force, and changes in, or the failure or inability to comply
with, government rules and regulations, including, without limitation, Food and Drug Administration and environmental rules and regulations. Statements concerning interest rates and other financial instrument fair values and their estimated
contribution to the Companys future results of operations are based upon market information as of a specific date. This market information is often a function of significant judgment and estimation. Further, market interest rates and commodity
prices are subject to significant volatility.



|Item 8: | Financial Statements and Supplementary Data
|------- | -------------------------------------------



See Item 15: Exhibits, Financial Statement Schedules and Reports on Form 8-K.



|Item 9: | Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
|------- | ------------------------------------------------------------------------------------



Not applicable.



|Item 9A: | Controls and Procedures
|-------- | -----------------------



|(a) | Evaluation of disclosure controls and procedures.
|--- | -------------------------------------------------



The Companys management reviewed the Companys internal controls and procedures and the effectiveness of these controls. As of July 3, 2004,
the registrants carried out an evaluation, under the supervision and with the participation of the registrants management, including the registrants Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design
and operation of the registrants disclosure controls and procedures pursuant to Rule 13a-14(c) and 15d-14(c) of the Securities Exchange Act of 1934. Based upon that evaluation, including the event described below, the Chief Executive Officer
and Chief Financial Officer concluded that the registrants disclosure controls and procedures are not effective for the reason described in Item 9A(b) below. Disclosure controls and procedures include, without limitation, controls and
procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Securities Exchange Act of 1934 is accumulated and communicated to the issuers management, including its
principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.



|(b) | Change in internal controls over financial reporting.
|--- | -----------------------------------------------------



Subsequent to the issuance of the Companys financial statements for the quarterly period ended April 3, 2004, the Company determined that borrowings
under its Revolving Financing Facility should have been classified as short-term on the balance sheet of Eagle and the consolidated balance sheet of Holdings. As a



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##### Table of Contents

result, the balance sheet of Eagle at April 3, 2004 and the consolidated balance sheet of Holdings at April 3, 2004 were restated and a Form 10-Q/A was filed
with the SEC on October 1, 2004 for the quarterly period ended April 3, 2004.



As of the end of the period covered by the Report on Form 10-K, the Company carried out an evaluation, under the supervision and with the participation of the Companys Chief Executive Officer and Chief Financial
Officer, of the effectiveness of the design and operation of the Companys disclosure controls and procedures as described above.



In making this evaluation, the Chief Executive Officer and Chief Financial Officer considered matters relating to this restatement and its impact on the
financial statements taken as a whole, including the processes that were undertaken to ensure that all material adjustments necessary to correct the classification were recorded. This restatement reflected the Companys compliance with an
accounting standard that was brought to light with respect to the new Financing Agreement entered into on March 23, 2004. In light of the facts and circumstances relating to the restatement, the Companys Chief Executive Officer and Chief
Financial Officer concluded that the restatement was reflective of a material weakness (as defined under standards established by the Public Company Accounting Oversight Board) in the Companys disclosure controls.



The material weakness was caused by an inadequate control over the review
process of new material debt agreements. The Company has subsequently implemented a more robust review policy of new material debt agreements using accounting checklists and additional levels of review.



|Item 9B: | Other Information
|-------- | -----------------



Not applicable.



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##### Table of Contents

PART III



|Item 10: | Directors and Executive Officers of the Registrants
|-------- | ---------------------------------------------------



The directors of Holdings and the Company and executive officers of Eagle are as follows:



|                      |  |     |  |                                                                                    
|--------------------- |  | --- |  | -----------------------------------------------------------------------------------
|Name                  |  | Age |  | Position                                                                           
|Craig A. Steinke      |  | 47  |  | Chief Executive Officer, President, Chief Financial Officer,Treasurer and Director*
|Michael P. Conti      |  | 35  |  | Vice President, Finance*                                                           
|Kelly J. Crouse       |  | 41  |  | Vice President, Marketing                                                          
|Ronald E. Hord, Jr.   |  | 42  |  | Vice President, Supply Chain                                                       
|Lori S. Snowden       |  | 44  |  | Secretary* and Financial Controller                                                
|Harold G. M. Strunk   |  | 47  |  | Vice President, Sales                                                              
|David A. Barr         |  | 41  |  | Director                                                                           
|Andreas T. Hildebrand |  | 36  |  | Director                                                                           
|Kewsong Lee           |  | 39  |  | Director                                                                           
|Mark J. Strelecki     |  | 37  |  | Director                                                                           
|Donald W. Torey       |  | 47  |  | Director                                                                           

---

|* | Messrs. Steinke and Conti and Ms. Snowden hold these same positions at Holdings and are the executive officers of Holdings.
|- | ---------------------------------------------------------------------------------------------------------------------------



Craig A. Steinke has served as a Director, Chief Executive Officer and
President of Holdings and Eagle since July 2001. Since January 1998, Mr. Steinke has held the positions of Chief Financial Officer, and Treasurer of Holdings and Eagle. From March 1999 until July 2001, Mr. Steinke also served as Senior Vice
President of Operations of Holdings and Eagle. Prior to joining Eagle, Mr. Steinke was President of Magma Metals, a billion dollar subsidiary of Magma Copper. He was responsible for operations, marketing and sales. Magma Metals was acquired by
Broken Hill Proprietary Co. Ltd., and Mr. Steinke was promoted to Senior Vice President and Group General Manager of BHP Copper, a $3.0 billion subsidiary of Broken Hill Proprietary Co., Ltd. His responsibilities included worldwide sales,
international and national marketing teams and a complex U.S. based manufacturing operation with over 1,000 employees.



Michael P. Contihas served as Vice President, Finance of Holdings and Eagle since August 2001. Mr. Conti joined Eagle in August 1998 and has held
Director of Financial Planning and Analysis and Financial Manager positions. From April 1996 through August 1998, Mr. Conti served as Controller of Hamilton Watch, a division of The Swatch Watch Group.



Kelly J. Crouse has served as Vice President, Marketing of Eagle since
August 2001. From 1998 through August 2001, Mr. Crouse served as Director of Customer Marketing and as Area Vice President of Sales at Eagle. Between 1994 and 1998, Mr. Crouse served as a National Trade Marketing Manager and Midwest Regional Sales
Manager with BFCs, Pasta/Sauce Division.



Ronald E.
Hord, Jr.has served as Vice President, Supply Chain of Eagle since August 2001 as an executive officer. From March 2000 to August 2001, Mr. Hord served in that position in a non-executive officer capacity. Mr. Hord joined Eagle as the Director
of Logistics in January 1998. From March 1994 through January 1998, Mr. Hord held a position in logistics with BFC and Borden, Inc., working on numerous food brands including the six brands that Eagle acquired.



Lori S. Snowdenhas served as Secretary of Holdings and Eagle since
August 2001. Since April 1999, Ms. Snowden has served as Financial Controller for Eagle. Ms. Snowden joined Eagle as Assistant Controller in January 1998. Prior to joining Eagle, Ms. Snowden held various managerial accounting positions with BFC and
Borden, Inc.



Harold G. M. Strunk has served as Vice
President, Sales of Eagle since August 2001. From 1998 through August 2001 Mr. Strunk held positions of Director of Sales Support and Vice President of International Sales of



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##### Table of Contents

Eagle. Between 1996 and 1998, Mr. Strunk held various managerial positions in sales and marketing with BFC and Borden, Inc.



David A. Barrhas served as a Director of Holdings and Eagle since
August 2001. Mr. Barr has served as a Member and Managing Director of E.M. Warburg, Pincus & Co., LLC (EMW LLC) and General Partner of Warburg, Pincus & Co. (WP) since January 1, 2001. Prior to joining EMW LLC, Mr.
Barr was a Managing Director at Butler Capital Corp., a private investment firm focused on middle market management buyouts. His present service as a director includes membership on the boards of TransDigm Holding Company, Polypore Holdings, and
Wellman, Inc.



Andreas T. Hildebrandhas served as a
Director of Holdings and Eagle since their respective dates of formation. Mr. Hildebrand has served as Managing Director of the Private Equity Group of General Electric Asset Management (GEAM) since July 2000 and Vice President of GEAM
since May 1997. Mr. Hildebrand presently serves as a director of several privately held companies.



Kewsong Leehas served as a Director of Holdings and Eagle since their respective dates of formation. Mr. Lee has served as a Member and Managing
Director of EMW LLC and General Partner of WP since January 1, 1997. His present service as a director includes membership on the boards of Knoll, Inc., Arch Capital Group Ltd., TransDigm Holding Company, Polypore Holdings, and several privately
held companies.



Mark J. Streleckihas served as a
Director of Holdings and Eagle since September 2002. Mr. Strelecki has served as an Associate in the Private Equity Group of GEAM since July 2000. From July 1997 through July 2000, Mr. Strelecki served in various Financial Planning and Analysis
positions at GEAM.



Donald W. Torey has served as a
Director of Holdings and Eagle since their respective dates of formation. Mr. Torey has served as Executive Vice President of GEAM and GE Investment Management Incorporated (GEIM and, together with GEAM, GE Investments) with
responsibility for GE Investments Alternative Assets group since January 1997. Mr. Torey currently serves as a Trustee for the General Electric Pension Trust (GEPT).



The Company does not have a separately designated audit committee and therefore the entire board acts as the audit committee
for the Company. The board has determined not to designate an audit committee financial expert.



The Company has adopted a Code of Ethics, which is included as an exhibit to the Annual Report on Form 10-K.



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##### Table of Contents

|Item 11: | Executive Compensation
|-------- | ----------------------



Summary Compensation Table



The following summary compensation table provides information concerning compensation for the Companys chief executive officer, the four other most
highly compensated executive officers of Eagle and other executive officers who are named executive officers within the meaning of Item 402(a)(3) of Regulation S-K under the Securities Act of 1933 (collectively, the Named Executive
Officers) for fiscal year 2004, fiscal year 2003, and fiscal year 2002.



|                                           |  |                     |  |            |         |              |   |                             |  |   |         |      
|------------------------------------------ |  | ------------------- |  | ---------- | ------- | ------------ | - | --------------------------- |  | - | ------- | -----
|                                           |  | Annual Compensation | 
|Name and Principal Position                |  | Fiscal Year         |  | Salary ($) |         | Bonus ($)(1) |   | Other AnnualCompensation($) | 
|Craig A. Steinke                           |  | 2004                |  | $          | 320,970 |              | $ | 300,000                     |  | $ | 680,700 | (2)  
|Chief Executive Officer, President         |  | 2003                |  |            | 312,875 |              |   | 250,000                     |  |   | 13,200  | (3)  
|and Chief Financial Officer                |  | 2002                |  |            | 305,078 |              |   | 182,500                     |  |   | 382,300 | (4)  
|                                           |  |                     |  |           
|Harold G.M. Strunk                         |  | 2004                |  |            | 183,942 |              |   | 93,476                      |  |   | 43,293  | (2)  
|Senior Vice President, Marketing and Sales |  | 2003                |  |            | 179,250 |              |   | 90,668                      |  |   | 12,356  | (3)  
|                                           |  | 2002                |  |            | 173,967 |              |   | 91,470                      |  |   | 12,998  | (5)  
|                                           |  |                     |  |           
|Ronald E. Hord, Jr.                        |  | 2004                |  |            | 172,358 |              |   | 88,560                      |  |   | 42,408  | (2)  
|Vice President, Supply Chain               |  | 2003                |  |            | 167,983 |              |   | 110,923                     |  |   | 11,197  | (3)  
|                                           |  | 2002                |  |            | 163,042 |              |   | 72,450                      |  |   | 10,020  | (5)  
|                                           |  |                     |  |           
|Kelly J. Crouse                            |  | 2004                |  |            | 172,158 |              |   | 88,475                      |  |   | 43,287  | (2)  
|Vice President, Marketing                  |  | 2003                |  |            | 167,783 |              |   | 80,837                      |  |   | 12,696  | (3)  
|                                           |  | 2002                |  |            | 162,842 |              |   | 66,980                      |  |   | 38,337  | (5,6)
|                                           |  |                     |  |           
|Michael P. Conti                           |  | 2004                |  |            | 156,733 |              |   | 96,697                      |  |   | 41,086  | (2)  
|Vice President, Finance                    |  | 2003                |  |            | 152,717 |              |   | 78,793                      |  |   | 16,249  | (3)  
|                                           |  | 2002                |  |            | 138,533 |              |   | 58,570                      |  |   | 58,207  | (6,7)

---

|(1) | The bonus represents the amount earned and paid to the Named Executive Officer for the
Companys fiscal year for which each executive could earn a certain percentage of his base salary if certain performance targets were met.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) | Includes for fiscal year 2004 for Messrs. Steinke, Strunk, Hord, Crouse and Conti,
respectively, the following: (i) special bonus for consummating the Non-Dairy Creamer Sale of $667,000, $30,000, $30,000, $30,000, and $35,000 (ii) matching and profit sharing contributions (Company 401k match) made by the Company on
behalf of each Named Executive Officer pursuant to the Eagle 401k Savings and Retirement Plan of $6,500, $6,093 $5,208, $6,087, and $6,086; and (iii) car allowance of $7,200, $7,200, $7,200, $7,200, and $0.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(3) | Includes for fiscal year 2003 for Messrs. Steinke, Strunk, Hord, Crouse and Conti,
respectively, the following: (i) Company 401k match of $6,000, $5,156, $3,997, $5,496, and $5,433; (ii) car allowance of $7,200, $7,200, $7,200, $7,200, and $0; and (iii) moving expense of $10,816 for Mr. Conti.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(4) | Includes $370,800 special bonus for consummating the ReaLemonSale, $6,000 for
out-of-town car allowance and $5,500 for Company 401k match.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------



|(5) | Includes car allowance of $7,200, $6,000 and $7,200 and Company 401k match of $5,798, $4,020,
and $5,717 for Messrs. Strunk, Hord, and Crouse, respectively.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------



|(6) | Includes $25,420 and $31,778 related to moving expense for Messrs. Crouse and Conti,
respectively.
|--- | --------------------------------------------------------------------------------------------------



|(7) | Includes $20,000 special bonus for consummating the ReaLemonSale.
|--- | -----------------------------------------------------------------



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Retirement Plan



The Company sponsors a defined benefit plan covering all eligible union employees. No executive officer participates in this plan.



Compensation Committee Interlocks and Insider Participation



Matters of compensation are reviewed and acted upon by the full Board of
Directors, consisting of David A. Barr, Andreas T. Hildebrand, Kewsong Lee, Craig A. Steinke, Mark J. Strelecki, and Donald W. Torey. Mr. Steinke is an executive officer and employee of Holdings and Eagle. See Item 13. Certain Relationships
and Related Transactions.



Director Compensation



The Directors of Holdings and Eagle have not received, and are not expected
in the future to receive, compensation for their service as directors. Directors are entitled to reasonable out-of-pocket expenses in connection with their travel to and attendance at meetings of the Boards of Directors or committees thereof, except
that directors who are employees of Holdings, Eagle, or a stockholder of Holdings shall not be entitled to such reimbursement.



Employment Agreements



On January 23, 1998, the Company entered into an employment agreement with Craig A. Steinke, pursuant to which Mr. Steinke served as Vice President, Chief
Financial Officer and Treasurer of the Company. In July 2001, Mr. Steinke was appointed Chief Executive Officer and President of the Company. The Company has not entered into a new agreement with Mr. Steinke since his promotion. Pursuant to his
employment agreement, his annual base salary was $300,000 as of July 1, 2001 and is subject to increases as determined by the Board of Directors. In addition, pursuant to the agreement, Mr. Steinke is entitled to receive a bonus of up to 100% of his
base salary if certain performance targets are met. Bonuses for future periods are to be based on targets to be established by the Board of Directors. The agreement has a term of one year, with automatic annual renewals. In the event the employment
agreement is terminated by the Company without cause (as defined in such employment agreement), Mr. Steinke is entitled to receive severance payments equal to the base salary then in effect for 12 months. The agreement provides for
customary non-competition and non-solicitation provisions.



The
Company has employment arrangements with Messrs. Conti, Crouse, Hord and Strunk relative to base pay and bonuses. In the event employment is terminated by the Company without cause, these executive officers are entitled to receive severance payments
equal to the base salary then in effect for 12 months.



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##### Table of Contents

|Item 12: | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
|-------- | ----------------------------------------------------------------------------------------------



All of the issued and outstanding shares of common stock of Eagle as of
October 1, 2004 are beneficially owned by Holdings. There are three classes of capital stock of Holdings authorized and outstanding: the Common Stock, which has full voting rights, the Series A Preferred Stock and the Series B Preferred Stock, each
of which has limited voting rights. The following table sets forth, as of October 1, 2004, certain information regarding the beneficial ownership of Common Stock, Series A Preferred Stock and Series B Preferred Stock, as determined in accordance
with Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the Exchange Act), with respect to (i) each person known by the Company to be the beneficial owner of more than five percent of any class of Holdings voting
securities, (ii) each of the directors and named executive officers of Holdings and Eagle and (iii) all directors and executive officers of Holdings and Eagle, as a group:



|                                                                                                            |  |                 |  |                          |  |                          |  |            |  |                 |  |           
|----------------------------------------------------------------------------------------------------------- |  | --------------- |  | ------------------------ |  | ------------------------ |  | ---------- |  | --------------- |  | ----------
|                                                                                                            |  | Common Stock    |  | Series A Preferred Stock |  | Series B Preferred Stock
|Name and Address of Beneficial Owner
(1)                                                                    |  | Numberof Shares |  | Percentage               |  | Number ofShares          |  | Percentage |  | Number ofShares |  | Percentage
|GE Investment Private Placement Partners II, a Limited Partnership 3003 Summer Street Stamford, CT 06905(2) |  | 458,200         |  | 47.9                     |  | 402,399                  |  | 49.9       |  | 49.5            |  | 50.0      
|Warburg, Pincus Ventures, L.P. 466 Lexington Avenue New York, NY 10017(3)                                   |  | 458,200         |  | 47.9                     |  | 402,399                  |  | 49.9       |  | 49.5            |  | 50.0      
|Craig A. Steinke(4)                                                                                         |  | 40,835          |  | 4.2                      |  | 990                      |  | *          |  |                |  |          
|David A. Barr(3)                                                                                            |  | 458,200         |  | 47.9                     |  | 402,399                  |  | 49.9       |  |                |  |          
|Andreas T. Hildebrand(2)(5)                                                                                 |  |                |  |                         |  |                         |  |           |  |                |  |          
|Kewsong Lee(3)                                                                                              |  | 458,200         |  | 47.9                     |  | 402,399                  |  | 49.9       |  |                |  |          
|Mark J. Strelecki(2)(5)                                                                                     |  |                |  |                         |  |                         |  |           |  |                |  |          
|Donald W. Torey(2)(5)                                                                                       |  |                |  |                         |  |                         |  |           |  |                |  |          
|Michael P. Conti                                                                                            |  |                |  |                         |  |                         |  |           |  |                |  |          
|Kelly J. Crouse                                                                                             |  |                |  |                         |  |                         |  |           |  |                |  |          
|Ronald E. Hord, Jr.                                                                                         |  |                |  |                         |  |                         |  |           |  |                |  |          
|Harold G.M. Strunk                                                                                          |  |                |  |                         |  |                         |  |           |  |                |  |          
|All directors and executive officers as a Group (11 persons)(6)                                             |  | 499,035         |  | 52.1                     |  | 403,389                  |  | 50.0       |  | 49.5            |  | 50.0      

---

|* | Less than 1%
|- | ------------



|(1) | Pursuant to the rules of the Securities and Exchange Commission, shares are deemed to be beneficially owned by a person if such person directly or
indirectly has or shares (i) the power to vote or dispose of such shares, whether or not such person has any pecuniary interest in such shares, or (ii) the right to acquire the power to vote or dispose of such shares within 60 days, including any
right to acquire through the exercise of any option, warrant or right. Unless otherwise indicated, each persons address is c/o Eagle Family Foods, Inc. 735 Taylor Road, Gahanna, Ohio 43230. Messrs. Barr and Lee have the same address as
Warburg. Messrs. Hildebrand, Strelecki, and Torey have the same address as GEI.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) | Does not include any shares indirectly held by Trustees of GEPT by virtue of GEPTs
limited partnership interest in Warburg. GEPT is also a limited partner in GEI. GEIM is the general partner of GEI and a wholly owned subsidiary of GE. As a result, each of GEIM and GE may be deemed to be the beneficial owner of the shares owned by
GEI.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(3) | The sole general partner of Warburg is WP, a New York general partnership. EMW LLC, a New
York limited liability company, manages Warburg. The members of EMW LLC are substantially the same as the partners of WP. Lionel I. Pincus is the managing partner of WP and the managing member of EMW LLC. WP, as the sole general partner of Warburg,
has a 15% interest in the profits of Warburg. Messrs. Barr and Lee, directors of Holdings, are Managing Directors and members of EMW LLC and general partners of WP. As such, Messrs. Barr and Lee may be deemed to have an indirect pecuniary interest
(within the meaning of Rule 16a-1 under the Exchange Act) in an indeterminate portion of the shares beneficially owned by Warburg and WP.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(4) | Includes 39,835 Restricted Shares, subject to certain vesting and forfeiture requirements,
issued to Mr. Steinke.
|--- | -----------------------------------------------------------------------------------------------------------------



|(5) | Excludes 458,200 shares of Common Stock, 402,399 shares of Series A Preferred Stock and 49.5
shares of Series B Preferred Stock beneficially owned by GEI and GEIM. As an executive officer and director of GEIM, Mr. Torey has shared voting and investment power with respect to the shares held by GEI, and therefore, may be deemed to be the
beneficial owner of such shares. Messrs. Hildebrand, Strelecki, and Torey disclaim beneficial ownership of all such shares owned by GEI and GEIM.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(6) | Includes 458,200 shares of Common Stock, 402,399 shares of Series A Preferred Stock and 49.5
shares of Series B Preferred Stock beneficially owned by Warburg. Excludes 458,200 shares of Common Stock, 402,399 shares of Series A Preferred Stock and 49.5 shares of Series B Preferred Stock beneficially owned by GEI.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

Equity Compensation Plan Information



The following table sets forth information about the Common Stock issuable under the 1998 Stock Incentive Plan (the
Incentive Plan) as of July 3, 2004. Only Restricted Shares had been issued under the Incentive Plan as of July 3, 2004.



|                                                              |  |                                                                                              |  |                                                                             |  |                                                                                                                                              |    
|------------------------------------------------------------- |  | -------------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------- | ---
|Plan category                                                 |  | Number of securities to beissued upon exercise ofoutstanding options,warrants and rights (a) |  | Weighted averageexercise price ofoutstanding options,warrants and rights(b) |  | Number of securitiesremaining availablefor further issuance underequity compensation plans(excluding
securitiesreflected in column (a)). (c) |    
|Equity compensation plans approved by security holders        |  |                                                                                             |  |                                                                            |  |                                                                                                                                             |    
|Equity compensation plans not approved by security holders(1) |  |                                                                                             |  |                                                                            |  | 166,315                                                                                                                                      | (2)
|                                                              |  |                                                                                              |  |                                                                             |  |                                                                                                                                              |    
|Total                                                         |  |                                                                                             |  |                                                                            |  | 166,315                                                                                                                                      |    
|                                                              |  |                                                                                              |  |                                                                             |  |                                                                                                                                              |    

---

|(1) | On January 14, 1998, Holdings Board of Directors adopted the Incentive Plan. The
Incentive Plan provides for the granting of incentive stock options, non-qualified stock options and restricted stock to officers, key employees, directors and consultants of the Company at the discretion of a committee of the Holdings Board
of Directors. Originally, there were 153,650 shares of Common Stock reserved for issuance under the Incentive Plan. As amended on January 5, 2000 by the Holdings Board of Directors, 206,150 shares of Common Stock may be awarded under the
Incentive Plan, subject to certain adjustments reflecting changes in Holdings capitalization.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) | All 166,315 shares of Common Stock remain available for issuance pursuant to the Incentive
Plan. No options have been issued under the Incentive Plan.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------



The Holdings Stockholders Agreement



The
relations among the Equity Sponsors and the Management Investors (collectively, the Investors), and Holdings are governed by a Stockholders Agreement, dated as of the Acquisition Closing and as amended (the Holdings Stockholders
Agreement). The following summary of certain provisions of the Holdings Stockholders Agreement does not purport to be complete and is qualified in its entirety by reference to all the provisions of the Holdings Stockholders Agreement.



Board of Directors.Holdings is managed by a Board of
Directors not to exceed nine members, three members of which may be designated by GEI and three members of which may be designated by Warburg. For so long as GEI beneficially owns at least 20% of the Common Stock outstanding on a fully diluted
basis, GEI has the right to designate three directors to the Board of Directors. For so long as GEI beneficially owns at least 15% of the Common Stock outstanding on a fully diluted basis, GEI has the right to designate two directors to the Board of
Directors. For so long as GEI beneficially owns at least 10% of the Common Stock outstanding on a fully diluted basis, GEI has the right to designate one director to the Board of Directors. For so long as Warburg beneficially owns at least 20% of
the Common Stock outstanding on a fully diluted basis, Warburg has the right to designate three directors to the Board of Directors. For so long as Warburg beneficially owns at least 15% of the Common Stock outstanding on a fully diluted basis,
Warburg has the right to designate two directors to the Board of Directors. For so long as Warburg beneficially owns at least 10% of the Common Stock outstanding on a fully diluted basis, Warburg has the right to designate one director to the Board
of Directors. In addition, as long as the Equity Sponsors in the aggregate beneficially own more than 50% of the Common Stock outstanding on a fully diluted basis, the Equity Sponsors have the right to designate a majority of the directors to the
Board of Directors. The Board of Directors will have at least one director who is not an officer or employee of Holdings, the Company, or the Equity Sponsors, appointed by unanimous approval of the Board of Directors. The Holdings Stockholders
Agreement provides that the Board of Directors of the Company is identical to that of Holdings.



The consent of a majority of the Board of Directors which includes at least one of the directors designated by GEI and one of the directors designated by
Warburg is required for the approval of (i) the Companys or Holdings annual operating budget; (ii) capital expenditures or investments not approved in the annual budget in amounts greater than $500,000; (iii) any merger or consolidation
involving the Company or Holdings; (iv) any acquisition by the Company or Holdings of any assets or stock, other than acquisitions of assets in the ordinary course of business; (v) any divestiture of assets in excess of $500,000 by the Company or
Holdings, other than sales of inventory in the



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##### Table of Contents

ordinary course of business; (vi) any liquidation, dissolution or winding up, or any consent to a bankruptcy or insolvency or related proceeding involving,
the Company or Holdings; (vii) the issuance or sale of any debt or equity securities for cash; (viii) any expansion into new lines of business; (ix) any joint venture or strategic alliance; (x) the repurchase or redemption of any outstanding shares
of capital stock or the declaration or payment of any dividends on any shares of capital stock of the Company or Holdings; (xi) the amendment or modification of the certificate of incorporation or bylaws of the Company or Holdings; (xii) the
amendment, modification or termination of any employment agreement with any executive officer of the Company or Holdings; (xiii) the grant of any stock options or other equity-based compensation; (xiv) the hiring or firing of any executive officer;
(xv) any related party transactions; (xvi) any loans or guarantees by the Company or Holdings outside of the ordinary course of business; (xvii) any agreement having a duration in excess of one year or cumulative obligations in excess of $1 million;
(xviii) the amendment, modification or termination of any agreement with any union; (xix) the approval or adoption, amendment, modification or termination of certain employee benefit plans; and (xx) any agreement to do any of the foregoing.



Restrictions on Transfer of Stock.Securities held by
the Management Investors, including any shares of Common Stock or Redeemable Preferred Stock and any options to acquire shares of Common Stock, may only be sold or otherwise transferred with the consent of the Board of Directors of Holdings.



Tag-Along Rights.The Holdings Stockholders Agreement
provides that in the event any Investor chooses to sell or otherwise transfer more than 20% of its shares of Common Stock or Redeemable Preferred Stock to a proposed transferee, the selling Investor must offer to each of the other Investors the
right to participate in such sale on a pro rata basis based on ownership of the shares being sold.



Subscription Rights.With certain exceptions, the Holdings Stockholders Agreement provides each Investor with subscription rights in connection
with any issuance of equity securities by Holdings for cash whereby each Investor shall have the right to purchase a pro rata portion of such equity securities.



Certain Covenants.The Holdings Stockholders Agreement requires Holdings to (i) provide certain financial and other information to the Investors
concerning Holdings and its subsidiaries (ii) comply with applicable law and (iii) maintain insurance.



Termination.The tag-along rights and subscription rights described above will terminate upon the completion of an initial public offering of
Common Stock.



The Registration Rights Agreement



Holdings and the Investors entered into a Registration Rights Agreement,
dated as of the Acquisition Closing and as amended (the Registration Rights Agreement). Pursuant to the Registration Rights Agreement, each of the Equity Sponsors has two demand registration rights for each of its Redeemable Preferred
Stock and Common Stock. In addition, the Equity Sponsors have unlimited Form S-3 registration rights and unlimited piggyback rights. The Management Investors also have piggyback registration rights. All expenses related to these registrations (other
than underwriting discounts and commissions) will be borne by Holdings. Holdings is required to use its best efforts to affect such registrations, subject to certain conditions and limitations. Holdings has agreed to indemnify the Investors for
certain liabilities arising out of such registrations, including liabilities under the Securities Act.



|Item 13: | Certain Relationships and Related Transactions
|-------- | ----------------------------------------------



On September 27, 1999, pursuant to a subscription agreement, each of Warburg and GEI purchased (i) 50,000 shares of Common Stock and Warrants to purchase
11,006.5 shares of Common Stock for a cash purchase price of $50,000 and (ii) 49.5 shares of Series B Preferred Stock for a cash purchase price of $4,950,000. The Warrants were exercisable (a) for a purchase price of $1 per share of Common Stock
(subject to certain adjustments) and (b) only upon the failure of the Company to achieve certain financial targets for fiscal year 2000. The financial targets for fiscal year 2000 were not met. The Warrants expired on September 27, 2004 without
being exercised.



31



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##### Table of Contents

Matters of compensation are reviewed and acted upon by the full Board of Directors, consisting of David
A. Barr, Andreas T. Hildebrand, Kewsong Lee, Craig A. Steinke, Mark J. Strelecki and Donald W. Torey. Mr. Steinke is an executive officer and employee of Holdings and Eagle.



All future transactions between the Company and its officers, directors, principal stockholders or their respective
affiliates, will be on terms no less favorable to the Company than can be obtained from unaffiliated third parties.



|Item 14: | Principal Accountant Fees and Services
|-------- | --------------------------------------



The following table sets forth the fees billed to the Company by PricewaterhouseCoopers LLP during fiscal year 2004 and 2003 (in thousands):



|                        |  |                 |       |                 |   |      
|----------------------- |  | --------------- | ----- | --------------- | - | -----
|                        |  | Fiscal Year2004 |       | Fiscal Year2003
|Audit Fees              |  | $               | 167.8 |                 | $ | 158.4
|Audit-Related Fees      |  |                 | 190.5 |                 |   | 18.8 
|Tax Fees and Other Fees |  |                 | 74.5  |                 |   | 40.5 
|                        |  |                 |       |                 |   |      
|Total                   |  | $               | 432.8 |                 | $ | 217.7
|                        |  |                 |       |                 |   |      



Audit Fees for fiscal
year 2004 and fiscal year 2003 were for professional services rendered for the audits of the consolidated financial statements of the Company, the issuance of debt compliance letters and assistance with the review of documents filed with the
Securities and Exchange Commission.



Audited-Related Fees for
fiscal year 2004 were for due diligence work pertaining to an acquisition attempt. For fiscal year 2003, fees were for work pertaining to the Companys employee benefit plans.



Tax Fees and Other Fees for fiscal year 2004 and fiscal year 2003 were for services related to tax compliance and
preparation of federal, state and local corporate tax returns and personal property returns and tax planning and tax advice. Fiscal year 2004 also included fees for services related to an acquisition attempt.



The Company does not have an audit committee and therefore the entire board
is consulted before accountants are engaged for any services.



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##### Table of Contents

PART IV



|Item 15: | Exhibits, Financial Statement Schedules
|-------- | ---------------------------------------



(a)(1) Financial Statements of the Company



|                                                                                                                                                                                                                               |  |     
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ----
|                                                                                                                                                                                                                               |  | Page
|                                                                                                                                                                                                                               | 
|Eagle Family Foods Holdings, Inc.                                                                                                                                                                                              |  |     
|                                                                                                                                                                                                                               | 
|Report of Independent Registered Public Accounting Firm                                                                                                                                                                        |  | 37  
|                                                                                                                                                                                                                               | 
|Eagle Family Foods Holdings, Inc. Consolidated Statements of Operations for the Fifty-Three Week Period ended July 3, 2004 and the Fifty-Two Week Periods ended June 28, 2003 and June 29, 2002                                |  | 38  
|                                                                                                                                                                                                                               | 
|Eagle Family Foods Holdings, Inc. Consolidated Balance Sheets as of July 3, 2004 and June 28, 2003                                                                                                                             |  | 39  
|                                                                                                                                                                                                                               | 
|Eagle Family Foods Holdings, Inc. Consolidated Statements of Cash Flows for the Fifty-Three Week Period ended July 3, 2004 and the Fifty-Two Week Periods ended June 28, 2003 and June 29, 2002                                |  | 40  
|                                                                                                                                                                                                                               | 
|Eagle Family Foods Holdings, Inc. Consolidated Statements of Changes in Stockholders Equity (Deficit) for the Fifty-Three Week Period ended July 3, 2004 and the Fifty-Two Week Periods ended June 28, 2003 and June 29,
2002 |  | 41  
|                                                                                                                                                                                                                               | 
|Notes to the Financial Statements                                                                                                                                                                                              |  | 42  
|                                                                                                                                                                                                                               | 
|(a)(2) Financial Statement Schedules                                                                                                                                                                                           |  |     
|                                                                                                                                                                                                                               | 
|Schedule II  Valuation and Qualifying Accounts                                                                                                                                                                                |  | 56  
|                                                                                                                                                                                                                               | 
|All other schedules are omitted because the required information is presented either in the financial statements or notes thereto, or is not applicable, required or material.                                                 |  |     



(a)(3) Exhibits



|    |  |                                                                                                                                                                                                                                                                                                                                             
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2.1 |  | Asset Purchase Agreement, dated as of November 24, 1997, as amended as of December 9, 1997 and January 15, 1998, by and among Borden Foods Corporation, BFC Investments, L.P., and the Company
(Incorporated by reference to Exhibit 2.1 to the Registration Statement on Form S-4 of Eagle and Holdings filed on June 17, 1998 (the S-4))
|    | 
|2.2 |  | Asset Purchase Agreement, dated as of August 13, 2001, among Holdings, Eagle, Motts Inc. and Cadbury Beverages Delaware, Inc. (Incorporated by reference to Exhibit 2.1 of the Report on
Form 8-K filed by Holdings and Eagle on October 3, 2001)                                                                                          
|    | 
|3.1 |  | Restated Certificate of Incorporation of Holdings (Incorporated by reference to Exhibit 3.1 of the S-4)                                                                                                                                                                                                                                     
|    | 
|3.2 |  | Amended Bylaws of Holdings (Incorporated by reference to Exhibit 3.1 of the Report on Form 10-Q, filed by Holdings and Eagle on May 14, 1999)                                                                                                                                                                                               
|    | 
|3.3 |  | Restated Certificate of Incorporation, dated November 19, 1997 (Incorporated by reference to Exhibit 3.3 of the S-4)                                                                                                                                                                                                                        
|    | 
|3.4 |  | Amended Bylaws of Eagle (Incorporated by reference to Exhibit 3.2 of the Report on Form 10-Q, filed by Holdings and Eagle on May 14, 1999)                                                                                                                                                                                                  



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|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|---- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.5  |  | Certificate of Designation, Number, Voting Powers, Preferences and Rights of Series B Non-Voting Preferred Stock of Eagle Family Foods Holdings, Inc. dated September 24, 1999 (Incorporated by
reference to Exhibit 3.1 of the Report on Form 10-Q, filed by Holdings and Eagle on October 27, 1999)                                                                                                                                                                                                     
|     | 
|4.1  |  | Financing Agreement, dated as of March 23, 2004, by and among Eagle Family Foods Holdings, Inc., Eagle Family Foods, Inc., the financial institutions from time to time party there to,
Fortress Credit Opportunities, ILP, as collateral agent for the Lenders, and Congress Financial Corporation (Central), as administrative agent for the Lenders (incorporated by reference to Exhibit 99.1 of the Report on Form 8-K filed by Holdings and
Eagle on March 25, 2004)                                
|     | 
|4.2  |  | First Amendment to Financing Agreement, dated as of September 20, 2004, by and among Eagle Family Foods Holdings, Inc., as guarantor, Eagle Family Foods, Inc., as borrower, the financial
institutions from time to time party thereto, as lenders, Fortress Credit Opportunities I LP, as collateral agent, and Congress Financial Corporation (Central), as administrative agent (incorporated by reference to Exhibit 4.1 of the Report on Form
8-K filed by Holdings and Eagle on September 22, 2004)
|     | 
|4.3  |  | Purchase Agreement, dated January 16, 1998, by and among Holdings, Eagle, Chase Securities Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated (Incorporated by reference to
Exhibit 4.1 of the S-4)                                                                                                                                                                                                                                                                                              
|     | 
|4.4  |  | Indenture, dated January 23, 1998, among Holdings, Eagle and IBJ Schroder Bank & Trust Company (including Specimen Certificates of 83⁄4% Series Senior Subordinated Notes due 2008 and
83⁄4% Series B Senior Subordinated Notes due 2008) (Incorporated by reference to Exhibit 4.2 of the S-4)                                                                                                                                                                                                               
|     | 
|4.5  |  | Registration Rights Agreement, dated January 23, 1998, by and among Holdings, Eagle, Chase Securities Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated (Incorporated by
reference to Exhibit 4.3 of the S-4)                                                                                                                                                                                                                                                                                   
|     | 
|4.6  |  | Stockholders Agreement, dated as of January 23, 1998, by and among Holdings and certain stockholders of Holdings named therein (Incorporated by reference to Exhibit 4.5 of the
S-4)                                                                                                                                                                                                                                                                                                                      
|     | 
|4.7  |  | Exchange and Registration Rights Agreement, dated as of January 23, 1998, by and among Holdings and certain stockholders of Holdings named therein (Incorporated by reference to Exhibit 4.6 of
the S-4)                                                                                                                                                                                                                                                                                                  
|     | 
|4.8  |  | Subscription Rights Agreement, dated as of January 23, 1998, by and among Holdings, GEI and Warburg (Incorporated by reference to Exhibit 4.7 of the S-4)                                                                                                                                                                                                                                                                                                                                                 
|     | 
|4.9  |  | First Amendment to Registration Rights Agreement, dated September 27, 1999, by and among Holdings and certain investors named therein (Incorporated by reference to Exhibit 4.1 of the 10-Q,
filed on October 27, 1999)                                                                                                                                                                                                                                                                                   
|     | 
|4.10 |  | First Amendment to Stockholders Agreement, dated September 27, 1999, by and among Holdings and certain stockholders of Holdings named therein (Incorporated by reference to Exhibit 4.2 of the
Report on Form 10-Q, filed by Holdings and Eagle on October 27, 1999)                                                                                                                                                                                                                                      
|     | 
|4.11 |  | Subscription Agreement, dated September 27, 1999, by and among Holdings, GE Investment Private Placement Partners, II, a Limited Partnership and Warburg, Pincus Ventures, L. P. (Incorporated
by reference to Exhibit 4.3 of the Report on Form 10-Q, filed by Holdings and Eagle on October 27, 1999)                                                                                                                                                                                                   
|     | 
|10.1 |  | License Agreement dated January 23, 1998 by and among BDH Two, Inc., Borden, Inc. and the Company (Incorporated by reference to Exhibit 10.2 of the S-4)                                                                                                                                                                                                                                                                                                                                                  
|     | 
|10.2 |  | Assignment of Trademark License Agreement dated January 23, 1998, by and between BFC and the Company of BFCs License Agreement, dated as of September 4, 1997, by and between BFC and
Southern Foods Group, L.P. (Incorporated by reference to Exhibit 10.3 of the S-4)                                                                                                                                                                                                                                  
|     | 
|10.3 |  | License Agreement, dated January 23, 1998, by and between BFC and the Company (Incorporated by reference to Exhibit 10.4 of the S-4)                                                                                                                                                                                                                                                                                                                                                                      



34



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##### Table of Contents

|     |  |                                                                                                                                                                                                                                  
|---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.4 |  | The 1998 Stock Incentive Plan of Holdings (Incorporated by reference to Exhibit 10.5 of the S-4)                                                                                                                                 
|     | 
|10.5 |  | Employment Agreement, dated January 23, 1998, by and between Craig A. Steinke and the Company (Incorporated by reference to Exhibit 10.8 of the S-4)                                                                             
|     | 
|10.6 |  | Amendment No. 1 to the Eagle Family Foods Holdings, Inc. 1998 Stock Incentive Plan, effective January 5, 2000 (Incorporated by reference to Exhibit 10.1 of the Report on Form 10-Q, filed by
Holdings and Eagle on May 10, 2000)
|     | 
|12.1 |  | Eagle Family Foods Holdings, Inc. Ratio of Earnings to Fixed Charges                                                                                                                                                             
|     | 
|14.1 |  | Code of Ethics for Eagle Family Foods Holdings, Inc. and Eagle Family Foods, Inc.                                                                                                                                                
|     | 
|31.1 |  | Certification, pursuant to 15 U.S.C. Section 7241, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of Eagle Family Foods, Inc.                                                                              
|     | 
|31.2 |  | Certification, pursuant to 15 U.S.C. Section 7241, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of Eagle Family Foods Holdings, Inc.                                                                     



35



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##### Table of Contents

SIGNATURES



Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrants have duly caused this report to be signed
on their behalf by the undersigned, thereunto duly authorized.



EAGLE FAMILY FOODS HOLDINGS, INC.By:

/S/ CRAIG A. STEINKECraig A. SteinkePresident, Chief Executive Officer and Chief Financial OfficerEAGLE FAMILY FOODS, INC.By:

/S/ CRAIG A. STEINKECraig A. SteinkePresident, Chief Executive Officer and Chief Financial Officer




October 1, 2004



Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the registrants and in their capacities indicated.



|                                               |  |                                                                                                                                                                         |  |                
|---------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------
|Name                                           |  | Title                                                                                                                                                                   |  | Date           
|                                               |  |                                                                                                                                                                        
|/S/ CRAIG A. STEINKECraig A. Steinke           |  | Director, President, Chief Executive Officer and Chief Financial Officer (principal executive officer and principal financial officer and principal accounting officer) |  | October 1, 2004
|                                               |  |                                                                                                                                                                        
|/S/ ANDREAS T. HILDEBRANDAndreas T. Hildebrand |  | Director                                                                                                                                                                |  | October 1, 2004
|                                               |  |                                                                                                                                                                        
|/S/ KEWSONG LEEKewsong Lee                     |  | Director                                                                                                                                                                |  | October 1, 2004
|                                               |  |                                                                                                                                                                        
|/S/ DAVID A. BARRDavid A. Barr                 |  | Director                                                                                                                                                                |  | October 1, 2004
|                                               |  |                                                                                                                                                                        
|/S/ DONALD W. TOREYDonald W. Torey             |  | Director                                                                                                                                                                |  | October 1, 2004
|                                               |  |                                                                                                                                                                        
|/S/ MARK J. STRELECKIMark J. Strelecki         |  | Director                                                                                                                                                                |  | October 1, 2004



36



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##### Table of Contents

Report of Independent Registered Public Accounting Firm



To the Board of Directors and Stockholders

of Eagle Family Foods Holdings, Inc.

and its subsidiary:



In our opinion, the consolidated financial statements listed in the index appearing under Item 15(a)(1) present fairly, in all material respects, the financial position of Eagle Family Foods Holdings, Inc. and
its subsidiary at July 3, 2004 and June 28, 2003, and the results of their operations and their cash flows for each of the three years in the period ended July 3, 2004 in conformity with accounting principles generally accepted in the
United States of America. In addition, in our opinion, the financial statement schedule listed in the index appearing under Item 15(a) (2)presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial
statements. These financial statements and financial statement schedule are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our
audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant
estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.



PricewaterhouseCoopers LLP



Columbus, Ohio



September 21, 2004



37



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##### Table of Contents

EAGLE FAMILY FOODS HOLDINGS, INC.

Consolidated Statements of Operations

(Dollars in Thousands)



|                                                                                                      |  |                                           |              |   |                            |              |         |   |  |   |         |  
|----------------------------------------------------------------------------------------------------- |  | ----------------------------------------- | ------------ | - | -------------------------- | ------------ | ------- | - |  | - | ------- | -
|                                                                                                      |  | Fifty-Three WeekPeriod Ended July 3, 2004 |              |   | Fifty-Two Week PeriodEnded |             
|                                                                                                      |  |                                           | June 28,2003 |   |                            | June 29,2002 |        
|Net sales, before marketing allowance                                                                 |  | $                                         | 139,973      |   |                            | $            | 128,661 |   |  | $ | 138,003 |  
|Marketing allowance                                                                                   |  |                                           | 24,195       |   |                            |              | 23,000  |   |  |   | 21,652  |  
|                                                                                                      |  |                                           |              |   |                            |              |         |   |  |   |         |  
|Net sales                                                                                             |  |                                           | 115,778      |   |                            |              | 105,661 |   |  |   | 116,351 |  
|Cost of goods sold                                                                                    |  |                                           | 72,789       |   |                            |              | 64,150  |   |  |   | 68,431  |  
|Cost of goods sold, accelerated depreciation                                                          |  |                                           |             |   |                            |              |        |   |  |   | 11,126  |  
|                                                                                                      |  |                                           |              |   |                            |              |         |   |  |   |         |  
|Cost of goods sold                                                                                    |  |                                           | 72,789       |   |                            |              | 64,150  |   |  |   | 79,557  |  
|                                                                                                      |  |                                           |              |   |                            |              |         |   |  |   |         |  
|Gross margin                                                                                          |  |                                           | 42,989       |   |                            |              | 41,511  |   |  |   | 36,794  |  
|Distribution expense                                                                                  |  |                                           | 7,578        |   |                            |              | 6,405   |   |  |   | 6,986   |  
|Marketing expense                                                                                     |  |                                           | 11,351       |   |                            |              | 9,132   |   |  |   | 10,002  |  
|General and administrative expense                                                                    |  |                                           | 7,170        |   |                            |              | 7,619   |   |  |   | 8,794   |  
|Due diligence and other costs                                                                         |  |                                           | 1,516        |   |                            |              |        |   |  |   |        |  
|Amortization of intangible assets                                                                     |  |                                           |             |   |                            |              | 1,660   |   |  |   | 8,052   |  
|Gain on sale of product lines, net of reorganization charges                                          |  |                                           |             |   |                            |              |        |   |  |   | 18,722  |  
|                                                                                                      |  |                                           |              |   |                            |              |         |   |  |   |         |  
|Operating income (loss)                                                                               |  |                                           | 15,374       |   |                            |              | 16,695  |   |  |   | 21,682  |  
|Interest expense, net                                                                                 |  |                                           | 15,994       |   |                            |              | 14,899  |   |  |   | 19,921  |  
|Costs related to refinancing                                                                          |  |                                           | 1,310        |   |                            |              |        |   |  |   |        |  
|                                                                                                      |  |                                           |              |   |                            |              |         |   |  |   |         |  
|Income (loss) before income taxes, discontinued operations and cumulative effect of accounting change |  |                                           | (1,930       | ) |                            |              | 1,796   |   |  |   | 1,761   |  
|Income tax (expense) benefit                                                                          |  |                                           | (73          | ) |                            |              | 76      |   |  |   | (34,101 | )
|                                                                                                      |  |                                           |              |   |                            |              |         |   |  |   |         |  
|Income (loss) before discontinued operations and cumulative effect of accounting change               |  |                                           | (2,003       | ) |                            |              | 1,872   |   |  |   | (32,340 | )
|                                                                                                      |  |                                           |              |   |                            |              |         |   |  |   |         |  
|Income from discontinued operations                                                                   |  |                                           | 607          |   |                            |              | 136     |   |  |   | 661     |  
|Loss on disposal of discontinued operations                                                           |  |                                           | (1,007       | ) |                            |              |        |   |  |   |        |  
|                                                                                                      |  |                                           |              |   |                            |              |         |   |  |   |         |  
|Income (loss) from discontinued operations                                                            |  |                                           | (400         | ) |                            |              | 136     |   |  |   | 661     |  
|                                                                                                      |  |                                           |              |   |                            |              |         |   |  |   |         |  
|Cumulative effect of accounting change                                                                |  |                                           |             |   |                            |              | 56,614  |   |  |   |        |  
|                                                                                                      |  |                                           |              |   |                            |              |         |   |  |   |         |  
|Net loss                                                                                              |  | $                                         | (2,403       | ) |                            | $            | (54,606 | ) |  | $ | (31,679 | )
|                                                                                                      |  |                                           |              |   |                            |              |         |   |  |   |         |  



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



38



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##### Table of Contents

EAGLE FAMILY FOODS HOLDINGS, INC.

Consolidated Balance Sheets

(Dollars in Thousands Except Share Data)



|                                                                                                       |  |             |          |   |              |   |          |  
|------------------------------------------------------------------------------------------------------ |  | ----------- | -------- | - | ------------ | - | -------- | -
|                                                                                                       |  | July 3,2004 |          |   | June 28,2003 |  
|Assets                                                                                                 |  |             |          |   |              |   |          |  
|Current assets                                                                                         |  |             |          |   |              |   |          |  
|Cash and cash equivalents                                                                              |  | $           | 2,030    |   |              | $ | 1,616    |  
|Accounts receivable, net                                                                               |  |             | 8,075    |   |              |   | 7,261    |  
|Inventories                                                                                            |  |             | 33,298   |   |              |   | 32,594   |  
|Other current assets                                                                                   |  |             | 1,634    |   |              |   | 1,222    |  
|                                                                                                       |  |             |          |   |              |   |          |  
|Total current assets                                                                                   |  |             | 45,037   |   |              |   | 42,693   |  
|Property and equipment, net                                                                            |  |             | 3,960    |   |              |   | 5,574    |  
|Goodwill                                                                                               |  |             | 61,047   |   |              |   | 67,354   |  
|Other intangible assets                                                                                |  |             | 33,783   |   |              |   | 37,217   |  
|Other non-current assets                                                                               |  |             | 4,547    |   |              |   | 4,274    |  
|                                                                                                       |  |             |          |   |              |   |          |  
|Total assets                                                                                           |  | $           | 148,374  |   |              | $ | 157,112  |  
|                                                                                                       |  |             |          |   |              |   |          |  
|Liabilities and Stockholders Deficit                                                                  |  |             |          |   |              |   |          |  
|Current liabilities                                                                                    |  |             |          |   |              |   |          |  
|Current portion of long-term debt                                                                      |  | $           |         |   |              | $ | 8,578    |  
|Revolving financing facility                                                                           |  |             | 70,688   |   |              |   |         |  
|Accounts payable                                                                                       |  |             | 7,093    |   |              |   | 5,504    |  
|Other accrued liabilities                                                                              |  |             | 5,904    |   |              |   | 6,111    |  
|Accrued interest                                                                                       |  |             | 4,907    |   |              |   | 5,402    |  
|                                                                                                       |  |             |          |   |              |   |          |  
|Total current liabilities                                                                              |  |             | 88,592   |   |              |   | 25,595   |  
|                                                                                                       |  |             |          |   |              |   |          |  
|Long-term debt                                                                                         |  |             | 115,000  |   |              |   | 184,674  |  
|                                                                                                       |  |             |          |   |              |   |          |  
|Commitments and contingencies (Note 13)                                                                |  |             |          |   |              |   |          |  
|Redeemable preferred stock, 1,000,000 shares authorized:                                               |  |             |          |   |              |   |          |  
|Series A preferred stock, $100 stated value, 816,750 shares issued and outstanding at redemption value |  |             | 152,518  |   |              |   | 138,247  |  
|Treasury stock, 10,962 shares at cost                                                                  |  |             | (1,382   | ) |              |   | (1,382   | )
|                                                                                                       |  |             |          |   |              |   |          |  
|                                                                                                       |  |             | 151,136  |   |              |   | 136,865  |  
|Series B preferred stock, $100,000 stated value, 99 shares issued and outstanding at redemption value  |  |             | 15,769   |   |              |   | 14,280   |  
|                                                                                                       |  |             |          |   |              |   |          |  
|Total redeemable preferred stock                                                                       |  |             | 166,905  |   |              |   | 151,145  |  
|                                                                                                       |  |             |          |   |              |   |          |  
|Stockholders deficit                                                                                  |  |             |          |   |              |   |          |  
|Common stock $0.01 par value, 1,200,000 shares authorized, 957,235 shares issued and outstanding       |  |             | 10       |   |              |   | 10       |  
|Additional paid-in capital                                                                             |  |             | 958      |   |              |   | 958      |  
|Accumulated deficit                                                                                    |  |             | (223,445 | ) |              |   | (205,282 | )
|Accumulated other comprehensive income                                                                 |  |             | 354      |   |              |   | 12       |  
|                                                                                                       |  |             |          |   |              |   |          |  
|Total stockholders deficit                                                                            |  |             | (222,123 | ) |              |   | (204,302 | )
|                                                                                                       |  |             |          |   |              |   |          |  
|Total liabilities and stockholders deficit                                                            |  | $           | 148,374  |   |              | $ | 157,112  |  
|                                                                                                       |  |             |          |   |              |   |          |  



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



39



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##### Table of Contents

EAGLE FAMILY FOODS HOLDINGS, INC.

Consolidated Statements of Cash Flows

(Dollars in Thousands)



|                                                                                  |  |                                           |              |   |                            |              |         |   |  |   |          |  
|--------------------------------------------------------------------------------- |  | ----------------------------------------- | ------------ | - | -------------------------- | ------------ | ------- | - |  | - | -------- | -
|                                                                                  |  | Fifty-Three WeekPeriod Ended July 3, 2004 |              |   | Fifty-Two Week PeriodEnded |             
|                                                                                  |  |                                           | June 28,2003 |   |                            | June 29,2002 |        
|Cash flows (used in) from operating activities:                                   |  |                                           |              |   |                            |              |         |   |  |   |          |  
|Net loss                                                                          |  | $                                         | (2,403       | ) |                            | $            | (54,606 | ) |  | $ | (31,679  | )
|Adjustments to reconcile net loss to net cash (used in) from operating activities |  |                                           |              |   |                            |              |         |   |  |   |          |  
|Depreciation and amortization                                                     |  |                                           | 2,398        |   |                            |              | 5,322   |   |  |   | 25,519   |  
|Amortization of deferred financing costs                                          |  |                                           | 1,449        |   |                            |              | 1,450   |   |  |   | 2,878    |  
|Cumulative effect of accounting change                                            |  |                                           |             |   |                            |              | 56,614  |   |  |   |         |  
|Write off of deferred financing costs                                             |  |                                           | 1,273        |   |                            |              |        |   |  |   |         |  
|Loss on disposal of discontinued operations                                       |  |                                           | 1,007        |   |                            |              |        |   |  |   |         |  
|Loss (gain) on retirement/sale of fixed assets                                    |  |                                           | 6            |   |                            |              | (549    | ) |  |   | (5       | )
|Deferred taxes                                                                    |  |                                           |             |   |                            |              |        |   |  |   | 33,889   |  
|Gain on sale of product lines, net of reorganization charges                      |  |                                           |             |   |                            |              |        |   |  |   | (18,722  | )
|Net change in assets and liabilities:                                             |  |                                           |              |   |                            |              |         |   |  |   |          |  
|Accounts receivable, net                                                          |  |                                           | (814         | ) |                            |              | 2,118   |   |  |   | 4,955    |  
|Inventories                                                                       |  |                                           | (3,149       | ) |                            |              | 2,897   |   |  |   | (1,542   | )
|Accounts payable                                                                  |  |                                           | 1,589        |   |                            |              | (321    | ) |  |   | (1,196   | )
|Other assets                                                                      |  |                                           | (614         | ) |                            |              | (617    | ) |  |   | 716      |  
|Other liabilities                                                                 |  |                                           | (1,271       | ) |                            |              | (468    | ) |  |   | (11,768  | )
|                                                                                  |  |                                           |              |   |                            |              |         |   |  |   |          |  
|Cash (used in) from operating activities                                          |  |                                           | (529         | ) |                            |              | 11,840  |   |  |   | 3,045    |  
|                                                                                  |  |                                           |              |   |                            |              |         |   |  |   |          |  
|Cash (used in) from investing activities:                                         |  |                                           |              |   |                            |              |         |   |  |   |          |  
|Capital expenditures                                                              |  |                                           | (789         | ) |                            |              | (610    | ) |  |   | (414     | )
|Proceeds from the sale of assets                                                  |  |                                           |             |   |                            |              | 593     |   |  |   | 41       |  
|Proceeds from the sale of business                                                |  |                                           | 12,201       |   |                            |              |        |   |  |   | 128,425  |  
|                                                                                  |  |                                           |              |   |                            |              |         |   |  |   |          |  
|Cash from (used in) investing activities                                          |  |                                           | 11,412       |   |                            |              | (17     | ) |  |   | 128,052  |  
|                                                                                  |  |                                           |              |   |                            |              |         |   |  |   |          |  
|Cash (used in) from financing activities:                                         |  |                                           |              |   |                            |              |         |   |  |   |          |  
|Net proceeds from revolver                                                        |  |                                           | 70,688       |   |                            |              |        |   |  |   |         |  
|Borrowings under revolving credit facility                                        |  |                                           | 32,600       |   |                            |              | 55,000  |   |  |   | 64,100   |  
|Payments under revolving credit facility                                          |  |                                           | (58,600      | ) |                            |              | (64,600 | ) |  |   | (75,500  | )
|Payments under term loan facility                                                 |  |                                           | (52,252      | ) |                            |              | (936    | ) |  |   | (118,312 | )
|Other financing costs                                                             |  |                                           | (2,905       | ) |                            |              | (563    | ) |  |   | (591     | )
|Purchase of Series A Preferred Stock                                              |  |                                           |             |   |                            |              |        |   |  |   | (966     | )
|                                                                                  |  |                                           |              |   |                            |              |         |   |  |   |          |  
|Cash used in financing activities                                                 |  |                                           | (10,469      | ) |                            |              | (11,099 | ) |  |   | (131,269 | )
|                                                                                  |  |                                           |              |   |                            |              |         |   |  |   |          |  
|Increase (decrease) in cash and cash equivalents                                  |  |                                           | 414          |   |                            |              | 724     |   |  |   | (172     | )
|Cash and cash equivalents at beginning of period                                  |  |                                           | 1,616        |   |                            |              | 892     |   |  |   | 1,064    |  
|                                                                                  |  |                                           |              |   |                            |              |         |   |  |   |          |  
|Cash and cash equivalents at end of period                                        |  | $                                         | 2,030        |   |                            | $            | 1,616   |   |  | $ | 892      |  
|                                                                                  |  |                                           |              |   |                            |              |         |   |  |   |          |  
|Supplemental disclosure:                                                          |  |                                           |              |   |                            |              |         |   |  |   |          |  
|Interest paid                                                                     |  | $                                         | 15,532       |   |                            | $            | 14,074  |   |  | $ | 21,528   |  
|                                                                                  |  |                                           |              |   |                            |              |         |   |  |   |          |  
|Non-cash activities, including dividends accrued on redeemable preferred stock    |  | $                                         | 15,760       |   |                            | $            | 14,016  |   |  | $ | 12,593   |  
|                                                                                  |  |                                           |              |   |                            |              |         |   |  |   |          |  



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



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EAGLE FAMILY FOODS HOLDINGS, INC.

Consolidated Statements of Changes in Stockholders Equity (Deficit)

For the Fifty-Three Week Period
Ended July 3, 2004 and

For the Fifty-Two Week Periods Ended

June 28, 2003 and June 29, 2002

(Dollars in Thousands)



|                                                         |  |             |    |   |                          |   |       |                    |  |   |                                     |   |  |       |        |   |       |   |     |   |  |   |          |  
|-------------------------------------------------------- |  | ----------- | -- | - | ------------------------ | - | ----- | ------------------ |  | - | ----------------------------------- | - |  | ----- | ------ | - | ----- | - | --- | - |  | - | -------- | -
|                                                         |  | CommonStock |    |   | AdditionalPaid InCapital |   |       | AccumulatedDeficit |  |   | AccumulatedOtherComprehensiveIncome |   |  | Other |        |   | Total |  
|Balance, June 30, 2001                                   |  | $           | 11 |   |                          | $ | 1,001 |                    |  | $ | (92,388                             | ) |  | $     | 35     |   |       | $ | (21 | ) |  | $ | (91,362  | )
|Net loss                                                 |  |             |   |   |                          |   |      |                    |  |   | (31,679                             | ) |  |       |       |   |       |   |    |   |  |   | (31,679  | )
|Preferred stock dividend                                 |  |             |   |   |                          |   |      |                    |  |   | (12,593                             | ) |  |       |       |   |       |   |    |   |  |   | (12,593  | )
|Subscription receivable:                                 |  |             |    |   |                          |   |       |                    |  |   |                                     |   |  |       |        |   |       |   |     |   |  |   |          |  
|Interest income                                          |  |             |   |   |                          |   |      |                    |  |   |                                    |   |  |       |       |   |       |   | (1  | ) |  |   | (1       | )
|Repayment of subscription receivable                     |  |             |   |   |                          |   |      |                    |  |   |                                    |   |  |       |       |   |       |   | 7   |   |  |   | 7        |  
|Termination of restricted common stock                   |  |             | (1 | ) |                          |   | (43   | )                  |  |   |                                    |   |  |       |       |   |       |   | 1   |   |  |   | (43      | )
|Amortization of unearned compensation                    |  |             |   |   |                          |   |      |                    |  |   |                                    |   |  |       |       |   |       |   | 14  |   |  |   | 14       |  
|Other comprehensive loss:                                |  |             |    |   |                          |   |       |                    |  |   |                                     |   |  |       |        |   |       |   |     |   |  |   |          |  
|Change in fair value of commodity contracts              |  |             |   |   |                          |   |      |                    |  |   |                                    |   |  |       | (41    | ) |       |   |    |   |  |   | (41      | )
|Recognition of interest income                           |  |             |   |   |                          |   |      |                    |  |   |                                    |   |  |       | (211   | ) |       |   |    |   |  |   | (211     | )
|Foreign currency translation adjustment                  |  |             |   |   |                          |   |      |                    |  |   |                                    |   |  |       | 107    |   |       |   |    |   |  |   | 107      |  
|                                                         |  |             |    |   |                          |   |       |                    |  |   |                                     |   |  |       |        |   |       |   |     |   |  |   |          |  
|Balance, June 29, 2002                                   |  |             | 10 |   |                          |   | 958   |                    |  |   | (136,660                            | ) |  |       | (110   | ) |       |   |    |   |  |   | (135,802 | )
|Net loss                                                 |  |             |   |   |                          |   |      |                    |  |   | (54,606                             | ) |  |       |       |   |       |   |    |   |  |   | (54,606  | )
|Preferred stock dividend                                 |  |             |   |   |                          |   |      |                    |  |   | (14,016                             | ) |  |       |       |   |       |   |    |   |  |   | (14,016  | )
|Other comprehensive income:                              |  |             |    |   |                          |   |       |                    |  |   |                                     |   |  |       |        |   |       |   |     |   |  |   |          |  
|Change in fair value of commodity contracts              |  |             |   |   |                          |   |      |                    |  |   |                                    |   |  |       | 37     |   |       |   |    |   |  |   | 37       |  
|Recognition of interest income                           |  |             |   |   |                          |   |      |                    |  |   |                                    |   |  |       | (121   | ) |       |   |    |   |  |   | (121     | )
|Foreign currency translation adjustment                  |  |             |   |   |                          |   |      |                    |  |   |                                    |   |  |       | 206    |   |       |   |    |   |  |   | 206      |  
|                                                         |  |             |    |   |                          |   |       |                    |  |   |                                     |   |  |       |        |   |       |   |     |   |  |   |          |  
|Balance, June 28, 2003                                   |  |             | 10 |   |                          |   | 958   |                    |  |   | (205,282                            | ) |  |       | 12     |   |       |   |    |   |  |   | (204,302 | )
|Net loss                                                 |  |             |   |   |                          |   |      |                    |  |   | (2,403                              | ) |  |       |       |   |       |   |    |   |  |   | (2,403   | )
|Preferred stock dividend                                 |  |             |   |   |                          |   |      |                    |  |   | (15,760                             | ) |  |       |       |   |       |   |    |   |  |   | (15,760  | )
|Other comprehensive income:                              |  |             |    |   |                          |   |       |                    |  |   |                                     |   |  |       |        |   |       |   |     |   |  |   |          |  
|Change in fair value of commodity contracts              |  |             |   |   |                          |   |      |                    |  |   |                                    |   |  |       | 176    |   |       |   |    |   |  |   | 176      |  
|Deferred gain on commodity contracts sold                |  |             |   |   |                          |   |      |                    |  |   |                                    |   |  |       | 1,969  |   |       |   |    |   |  |   | 1,969    |  
|Recognition of deferred gain on Commodity contracts sold |  |             |   |   |                          |   |      |                    |  |   |                                    |   |  |       | (1,638 | ) |       |   |    |   |  |   | (1,638   | )
|Foreign currency translation adjustment                  |  |             |   |   |                          |   |      |                    |  |   |                                    |   |  |       | (165   | ) |       |   |    |   |  |   | (165     | )
|                                                         |  |             |    |   |                          |   |       |                    |  |   |                                     |   |  |       |        |   |       |   |     |   |  |   |          |  
|Balance, July 3, 2004                                    |  | $           | 10 |   |                          | $ | 958   |                    |  | $ | (223,445                            | ) |  | $     | 354    |   |       | $ |    |   |  | $ | (222,123 | )
|                                                         |  |             |    |   |                          |   |       |                    |  |   |                                     |   |  |       |        |   |       |   |     |   |  |   |          |  



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



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EAGLE FAMILY FOODS HOLDINGS, INC.

Notes to the Financial Statements  continued



1. Basis of Presentation:



The accompanying
financial statements as of July 3, 2004 and June 28, 2003 and for fiscal year 2004, fiscal year 2003, and fiscal year 2002 present the consolidated financial position, results of operations and cash flows of Eagle Family Foods Holdings, Inc.
(Holdings) and its wholly owned subsidiary, Eagle Family Foods, Inc. (Eagle) Eagle and Holdings are collectively referred to as the Company, unless the context indicates otherwise. Under the guidelines of
Regulation S-X Article 3, Rule 3-10(c), the Company will only present the consolidated financial statements of Holdings as mentioned above and will exclude separate financial statements of Eagle. Eagle is a 100% wholly owned subsidiary of Holdings;
Holdings fully and unconditionally guarantees the registered debt issued by Eagle; Holdings has no independent assets or operations; and Holdings has no other subsidiaries.



The Company has significant restrictions on the ability of Holdings or any guarantor to obtain funds from Eagle by dividend
or loan as disclosed in Note 8. The Company has provided the disclosures prescribed by Rule 4-08(e)(3) of Regulation S-X with respect to the subsidiary issuers and subsidiary guarantors.



During the year ended July 3, 2004, the Company had negative cash generated from operating activities. The classification of
the Revolving Financing Facility as a current liability caused a working capital deficit. The Revolving Financing Facility is available to the Company through March 23, 2007. The Company will be required to temporarily reduce the amount outstanding
under the Revolver B by $20,270,000. Management has evaluated its estimated cash flows in the next operating period and believes that cash generated from operations and borrowings under the Revolving Financing Facility will be sufficient to service
interest on the Notes and Revolving Financing Facility, satisfy working capital requirements, meet temporary requirements to reduce the amount of outstanding indebtedness, and make required capital expenditures in fiscal year 2005. However,
significant changes in interest rates, the Companys business, customers and cost of raw materials could have a material adverse effect on the Companys results of operations and the Companys ability to meet its obligations.



All significant intercompany balances and transactions have
been eliminated in consolidation. Certain prior year amounts have been reclassified to conform to the current years presentation. Included in these reclassifications is the presentation of the sale of the non-dairy business as discontinued
operations pursuant to the Statement of Financial Accounting Standards (SFAS) No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets (SFAS No. 144). See Note 3 to the financial statements included
in this Annual Report on Form 10-K. The Companys fiscal year end is the Saturday closest to June 30. Fiscal years are designated in the financial statements and notes by the calendar year in which the fiscal year ends.



Holdings was incorporated on December 22, 1997 and Eagle was incorporated on
November 14, 1997. On December 30, 1997, Eagle issued 10,000 shares of common stock, par value $.01 per share, for $1,000 to Holdings. The Company did not realize any income or incur any expenses until commencement of operations on January 23, 1998.
On January 23, 1998, Holdings received $82.5 million from GE Investment Private Placement Partners II, a Limited Partnership (GEI), Warburg, Pincus Ventures, L.P. (Warburg) and certain members of management in exchange for
825,000 shares of common stock and 816,750 shares of Series A preferred stock. On January 23, 1998, Eagle acquired certain assets of Borden Foods Corporation and certain of their affiliates for $376.8 million (the Acquisition). Financing
for the acquisition and related fees consisted of (i) $82.5 million equity contribution from Holdings, (ii) $115.0 million of 8.75% Senior Subordinated Notes (the Notes) and (iii) Senior Credit Facilities in the aggregate principal
amount of $245.0 million, consisting of a $175.0 million Term Loan Facility and a $70.0 million revolving credit facility, under which $16.5 million was drawn at the time of the Acquisition closing.



The Acquisition was reflected in the financial statements using the purchase
method of accounting. The purchase price was allocated to the assets of Eagle based on their fair values. The fair values of assets were determined based on independent appraisals and management estimates.



The Company operates in a single segment that markets a portfolio of leading
dry-grocery food products with widely recognized and established brands in the United States. The Companys portfolio of products includes Eagle Brand sweetened condensed milk, NoneSuch mincemeat pie filling,
Kava acid-neutralized coffee and Borden eggnog, and through December 24, 2003 included Cremora powdered non-dairy creamer, and through September 19, 2001 included ReaLemon and ReaLimelemon and lime juice from
concentrate. The Company began marketing



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EAGLE FAMILY FOODS HOLDINGS, INC.

Notes to the Financial Statements  continued



premium dessert kits in the current fiscal year. These kits utilize the Companys Eagle Brand sweetened condensed milk product in popular
sweetened condensed milk recipes. The Company also markets sweetened condensed milk products in Canada. In the U.S, the Company manufactures sweetened condensed milk and mincemeat pie filling.



2. Summary of Significant Accounting Policies:



Revenue Recognition



Revenues are recognized when there is persuasive evidence of a sale
arrangement, delivery has occurred and title, ownership and risk of loss transfers to the customer, the price is fixed or determinable, and collection is reasonably assured. Liabilities are established for estimated returns, allowances, consumer and
certain trade promotions and discounts when revenues are recognized. The Company utilizes certain consumer and trade promotions, such as coupons, co-op advertising, featured price discounts and in store display incentives. These expenses are
classified as a reduction of sales.



Research and
Development



Research and development costs are expensed as
incurred. Research and development costs amounted to $262,000, $285,000 and $629,000 for fiscal year 2004, fiscal year 2003, and fiscal year 2002, respectively.



Advertising and Promotion



The Company advertises its products through national and regional media, and through cooperative advertising programs with retailers. Certain products are
also promoted with direct consumer rebate programs. The Companys customers may also be offered pre-season stocking and in-store promotional allowances.



Production costs of media advertising and consumer promotion events are deferred until the advertising or promotion first occurs. Advertising and
promotional expenses were $31,469,000, $31,871,000 and $30,830,000 for fiscal year 2004, fiscal year 2003, and fiscal year 2002, respectively.



Cash and Cash Equivalents



The Company considers liquid investments purchased with an initial term to maturity of three months or less when purchased to be cash equivalents.



Allowance for Doubtful Accounts



The Company provides for an allowance for doubtful accounts based on the
aging of the accounts receivable balances, historical write-off experience and an on-going review of our trade customers and those customers ability to make payment.



Inventories



Inventories are stated at the lower of cost or market, with cost of goods sold being determined using the first-in, first-out method.



Slotting Allowance



The costs of obtaining shelf space (slotting) are expensed over a period not
to exceed twelve months. Slotting expense was $138,000, $122,000 and $392,000 for fiscal year 2004, fiscal year 2003, and fiscal year 2002, respectively.



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EAGLE FAMILY FOODS HOLDINGS, INC.

Notes to the Financial Statements  continued



Property and Equipment



Property and equipment are stated at cost. Depreciation of property and equipment is calculated for financial reporting
purposes on a straight-line method using estimated service lives ranging principally from 8-20 years for buildings and improvements and 3-10 years for other property and equipment. When assets are sold, retired or otherwise disposed of, the related
cost and accumulated depreciation are removed from the accounts and any related gain or loss is recorded in the statement of operations. Normal maintenance and repairs are expensed as incurred, while major renewals and betterments that extend
service lives are capitalized.



Capitalized Software
Development Costs



Certain external costs and internal
payroll and payroll related costs incurred during the application development and implementation stages of a software project are capitalized and amortized on a straight-line basis over the useful life of the software. Costs incurred during the
preliminary project and post-implementation stages are expensed as incurred. Capitalized software costs were $9,063,000 at July 3, 2004 and June 28, 2003, and had a net book value of $99,000 and $1,185,000 at July 3, 2004 and June 28, 2003,
respectively.



Goodwill and Other Identifiable Intangible
Assets



Goodwill and other identifiable intangible assets
with indefinite lives, such as trademarks that are not subject to amortization, are tested annually for impairment of value. Impairment occurs when the fair value of the asset is less than its carrying amount. If impaired, the assets carrying
amount is reduced to its fair market value. The Companys annual impairment testing is performed during the first quarter of the fiscal year.



Identifiable intangible assets with definite lives are amortized over their estimated useful lives and tested for impairment whenever events or changes in
circumstances indicate the carrying amount of the asset may be impaired. Impairment occurs when the fair value of the asset is less than its carrying amount. If impaired, the asset is written down to its fair value. (See Note 6 to the Financial
Statements for additional financial disclosure.)



Other
Non-current Assets



Other non-current assets at July 3,
2004 and June 28, 2003 consisted primarily of net deferred financing costs amounting to approximately $4,547,000 and $4,274,000, respectively. Such costs are amortized over the term of the related debt using the interest method.



Income Taxes



The Company accounts for income taxes on the liability method. Under this
method, deferred tax assets and liabilities are recognized based on the difference between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates in effect in the years in which those temporary differences are expected to reverse. The effect on deferred taxes of a change in tax rates is recognized in income in the period that includes the enactment date. The Company
assesses the recoverability of the deferred tax assets and has determined that a valuation allowance for the net deferred tax assets and net operating loss carryforwards was required as of June 29, 2002. The Company has continued to record a full
valuation allowance. As of July 3, 2004 and June 28, 2003, the amount was $54,198,000 and $53,291,000, respectively.



Use of Estimates



The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions
that affect the reported amounts and disclosure of contingent assets, liabilities, revenue and expenses as well as assets and liabilities. Actual results may differ from those estimates.



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EAGLE FAMILY FOODS HOLDINGS, INC.

Notes to the Financial Statements  continued



Foreign Currency Translation



All assets and liabilities of Canadian operations are translated into U.S. dollars using the rate at the end of the fiscal
period. Income and expense items are translated at average exchange rates prevailing during the fiscal period. Foreign currency assets, liabilities, income and expenses were not significant to the Companys financial position, results of
operations and cash flows.



Fair Value of Financial
Instruments



The carrying value of cash equivalents,
accounts receivable and accounts payable as stated on the balance sheets approximate their fair market values because of their short maturities. The fair value of the Companys debt is estimated based on the current rates offered to the Company
for debt of the same remaining maturities. The fair value of the Companys derivatives is estimated based on dealer quotes for those instruments.



Derivative Instruments and Hedging



The Company accounts for derivative instruments and hedging in accordance with SFAS No. 133, Accounting for Derivative Instruments and Hedging
Activities (SFAS 133). SFAS 133 requires that all derivative instruments be recognized as assets and liabilities in the financial statements at fair value. Derivatives that are not hedges must be adjusted to fair value through
income. If the derivative is a hedge, depending on the nature of the hedge (fair value or cash flow), changes in the fair value of the derivative will either be offset against the change in fair value of the hedged assets or liabilities through
earnings, or recognized in other comprehensive income until the hedged item is recognized in earnings. The amount of the hedged item is expected to be recorded to earnings within twelve months. The change in a derivatives fair value related to
the ineffective portion of a hedge, if any, will be immediately recognized in earnings. For fiscal year 2004, there have been no gains or losses recognized in earnings for hedge ineffectiveness. The Companys current financial derivatives are
treated as cash flow hedges.



As of July 3, 2004, the Company
had purchased 154 milk futures contracts, which will settle during various months through May 2005, at a cost of $4,091,000 and a current market value of $4,011,000, or an aggregate market loss of $80,000. The aggregate market value will increase or
decrease based on the future milk prices.



Environmental



The Company, like other companies in similar businesses,
is subject to extensive Federal, state and local environmental laws and regulations. Although the Companys environmental policies and practices are designed to ensure compliance with these laws and regulations, future developments and
increasingly stringent regulations could require the Company to incur additional unforeseen environmental expenditures. Environmental remediation costs are accrued when environmental assessments and/or remedial efforts are probable and the cost
within a reasonable range can be estimated. Environmental expenditures, which improve the condition of the property, are capitalized and amortized over their estimated useful life. The Company has not incurred any significant environmental
liabilities.



Recently Adopted Accounting Statements



In December 2003, the Financial Accounting Standards Board
(the FASB) issued FASB Interpretation No. 46 (revised December 2003), Consolidation of Variable Interest Entities (FIN No. 46R). FIN No. 46R varies significantly from FASB Interpretation No. 46,
Consolidation of Variable Interest Entities (FIN No. 46), which it supersedes. FIN No. 46R requires the application of either FIN No. 46 or FIN No. 46R by Public Entities (as defined in paragraph 395 of FASB
Statement No 123, Accounting for Stock-Based Compensation) to all Special Purpose Entities (SPEs) created prior to February 1, 2003 at the end of the first interim or annual reporting period ending after December 15, 2003.
All entities created after January 31, 2003 by Public Entities were already required to be analyzed under FIN No. 46, and they must continue to do so, unless FIN No. 46R is adopted early. FIN No. 46R is applicable to all non-SPEs created prior to
February 1, 2003 by Public Entities at the end of the first interim



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EAGLE FAMILY FOODS HOLDINGS, INC.

Notes to the Financial Statements  continued



or annual reporting period ending after March 15, 2004. The adoption of this standard did not have any effect on the Companys results of operations or
financial condition.



In July 2003, the Company adopted SFAS
No. 150, Accounting for Certain Financial Instruments With Characteristics of Both Liabilities and Equity (SFAS No. 150). SFAS No. 150 establishes standards for how an issuer classifies and measures certain financial
instruments with characteristics of both liabilities and equity. SFAS No. 150 requires that an issuer classify a financial instrument that is within its scope as a liability, or as an asset in some circumstances. SFAS No. 150 applies to three types
of freestanding financial instruments, other than outstanding shares. One type is mandatory redeemable shares, which the issuing company is obligated to buy back in exchange for cash or assets; a second type includes put options and forward purchase
contracts that require or may require the issuer to buy back some of its shares in exchange for cash or other assets; the third type is obligations that can be settled with shares, the monetary value of which is fixed, ties solely or predominantly
to a variable such as a market index, or varies inversely with the value of the issuers shares. SFAS No. 150 does not apply to features embedded in a financial instrument that is not a derivative in its entirety. The Company considered the
classification of its redeemable preferred stock and determined that this stock is contingently redeemable. Accordingly, these securities are outside the scope of SFAS No. 150 and adoption of this standard did not have any effect on the
Companys results of operations or financial condition.



In December 2003, the FASB issued SFAS No. 132 (revised 2003),Employers Disclosures about Pensions and Other Postretirement Benefits, an amendment of FASB Statements No. 87, 88 and 106, and a revision of FASB Statement No.
132 (SFAS No. 132). SFAS No. 132 revises employers disclosures about pension plans and other postretirement benefit plans. It does not change the measurement or recognition of those plans required by FASB Statements No. 87,
Employers Accounting for Pensions, No. 88, Employers Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits and No. 106, Employers Accounting for
Postretirement Benefits Other Than Pensions. SFAS No. 132 requires additional disclosures about the assets, obligations, cash flows and net periodic benefit cost of defined benefit pension plans and other postretirement benefit plans. The
required information has been provided separately for pension plans and for other postretirement benefit plans. This includes expanded disclosure on an interim basis as well. The new disclosures are required for fiscal years ending after December
15, 2003. The disclosures required by this statement are included within Note 15 of the Financial Statements.



3. Divestiture and restructuring activities:



On December 24, 2003, the Company sold to Dean Specialty Foods Group, LLC the Companys business of marketing, distributing and selling powdered non-dairy creamer sold under the Cremora and Cremora
Royalebrand names (Non-Dairy Creamer Business) and related assets, including inventory (Non-Dairy Creamer Sale). The purchase price was $12,201,000. The Company recognized a loss of $1,007,000 on the sale, which included
the book values of $3,433,000, $6,307,000, $2,260,000 and $201,000 for tradenames, goodwill, inventory and other prepaid assets, respectively. The Company incurred $1,007,000 of expenses related to the Non-Dairy Creamer Sale.



Effective December 30, 2002, the Company closed its powdered non-dairy
creamer manufacturing plant in Chester, South Carolina (Non-Dairy Creamer Plant Closure). In connection with the Non-Dairy Creamer Plant Closure, the Company recorded a charge of $1,190,000 in fiscal year 2003. The closure charges
included $1,321,000 for termination pay and benefits for the 79 displaced employees, $411,000 for other plant closure costs and contractual expenditures, offset by a $542,000 gain on the sale of the South Carolina property.



On September 19, 2001, the Company sold to Motts, Inc. and Cadbury
Beverages Delaware, Inc. the Companys business of developing, manufacturing, marketing, distributing, and selling shelf-stable juice sold under the ReaLemon and ReaLime brand names (the ReaLemon product lines)
and related assets, including inventory and the manufacturing facility in Waterloo, New York for $128,425,000 (the ReaLemon Sale). The Company recognized a gain of $18,722,000 on the ReaLemon Sale, inclusive of
reorganization and transition charges of $4,769,000.



In
connection with the ReaLemon Sale, the Company committed to a plan (the Plan) to reorganize the management and operations of the Company. The Plan included the reduction of approximately 60 employees,



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EAGLE FAMILY FOODS HOLDINGS, INC.

Notes to the Financial Statements  continued



including executives and administrative staff at the offices in Tarrytown, New York; Columbus, Ohio; and Gahanna, Ohio, and the closure of corporate and
research and development offices. Costs expensed related to the Plan in fiscal year 2002 included $3,942,000 severance and related termination costs and $827,000 for contractual lease liabilities and related office closure costs.



In accordance with the provisions of SFAS No. 144, the results of operations
of the Non-Dairy Creamer Business have been classified as discontinued operations and prior period results of operations have been reclassified. Interest expense associated with the term debt to be paid down because of the sale of the businesses has
been allocated to discontinued operations.



The results of
operations of the discontinued businesses are as follows (in thousands):



|                                    |  |                                           |               |                            |               |        |  |   |       
|----------------------------------- |  | ----------------------------------------- | ------------- | -------------------------- | ------------- | ------ |  | - | ------
|                                    |  | Fifty-Three WeekPeriod Ended July 3, 2004 |               | Fifty-Two WeekPeriod Ended
|                                    |  |                                           | June 28, 2003 |                            | June 29, 2002
|Net sales                           |  | $                                         | 7,368         |                            | $             | 23,061 |  | $ | 27,498
|Operating income                    |  |                                           | 920           |                            |               | 795    |  |   | 1,431 
|Interest expense, net               |  |                                           | 313           |                            |               | 659    |  |   | 770   
|                                    |  |                                           |               |                            |               |        |  |   |       
|Income from discontinued operations |  | $                                         | 607           |                            |               | 136    |  | $ | 661   
|                                    |  |                                           |               |                            |               |        |  |   |       



Included within the
operating income for the fifty-two week period ended June 28, 2003 was the charge of $1,190,000 for the Non-Dairy Creamer Plant Closure.



4. Inventories:



Inventories are stated at lower of cost or market and consisted of the following (in thousands):



|                  |  |              |        |               |   |       
|----------------- |  | ------------ | ------ | ------------- | - | ------
|                  |  | July 3, 2004 |        | June 28, 2003
|Finished goods    |  | $            | 31,342 |               | $ | 31,384
|Raw material      |  |              | 1,956  |               |   | 1,210 
|                  |  |              |        |               |   |       
|Total inventories |  | $            | 33,298 |               | $ | 32,594
|                  |  |              |        |               |   |       



5. Property and Equipment:



Property and equipment are recorded at cost and consisted
of the following (in thousands):



|                             |  |              |         |   |               |   |         |  
|---------------------------- |  | ------------ | ------- | - | ------------- | - | ------- | -
|                             |  | July 3, 2004 |         |   | June 28, 2003 |  
|Land                         |  | $            | 355     |   |               | $ | 355     |  
|Buildings and improvements   |  |              | 3,575   |   |               |   | 3,694   |  
|Machinery and equipment      |  |              | 13,147  |   |               |   | 12,732  |  
|Computers                    |  |              | 11,033  |   |               |   | 10,859  |  
|Construction in progress     |  |              | 110     |   |               |   | 442     |  
|                             |  |              |         |   |               |   |         |  
|Total property and equipment |  |              | 28,220  |   |               |   | 28,082  |  
|Accumulated depreciation     |  |              | (24,260 | ) |               |   | (22,508 | )
|                             |  |              |         |   |               |   |         |  
|Net property and equipment   |  | $            | 3,960   |   |               | $ | 5,574   |  
|                             |  |              |         |   |               |   |         |  



The Company
periodically reviews the useful lives of its assets, and when warranted, changes are made that result in an acceleration of depreciation. The Company recorded a charge of $11,126,000 in fiscal year 2002 for accelerated depreciation related to
long-lived assets that may be taken out of service before the end of their normal service period due to expected strategic initiatives.



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EAGLE FAMILY FOODS HOLDINGS, INC.

Notes to the Financial Statements  continued



6. Intangible Assets:



Effective June 30, 2002, the Company adopted SFAS No. 142, Goodwill and Other Intangible Assets (SFAS
142). In accordance with this standard, goodwill and certain other intangible assets have been classified as indefinite-lived assets that are no longer subject to amortization. Indefinite-lived intangible assets are subject to an impairment
test upon adoption and at least annually thereafter. As of June 30, 2002, the value of the indefinite-lived tradenames was determined using a royalty savings methodology and discounted cash flows. As a result, the Company recorded an impairment
charge of $43,736,000 against tradenames. After completing the valuation and impairment of the tradenames, a market valuation of goodwill was assessed based on estimated future discounted cash flow earnings. As a result, the Company recorded an
impairment charge of $12,878,000 against goodwill. The transitional impairment charge was recorded as a cumulative effect of an accounting change. The Company performed its annual impairment test of intangible assets during the period ended
September 27, 2003 and during the quarterly period ending October 2, 2004, and determined there was no impairment. Pursuant to the sale of the Non-Dairy Creamer Business, the Company sold tradenames and goodwill with the book values of $3,433,000
and $6,307,000, respectively.



Intangible assets consisted of
the following (in thousands):



|                                               |  |              |        |               |   |        
|---------------------------------------------- |  | ------------ | ------ | ------------- | - | -------
|                                               |  | July 3, 2004 |        | June 28, 2003
|Intangible assets not subject to amortization: |  |              |        |               |   |        
|Tradenames                                     |  | $            | 33,783 |               | $ | 37,217 
|Goodwill                                       |  |              | 61,047 |               |   | 67,354 
|                                               |  |              |        |               |   |        
|Total unamortized intangible assets            |  | $            | 94,830 |               | $ | 104,571
|                                               |  |              |        |               |   |        



Total amortization of
intangible assets was $1,652,000 and $8,040,000 for fiscal year 2003 and fiscal year 2002, respectively.



In accordance with SFAS No. 142, fiscal year 2002 was not restated to reflect the accounting change. The table below presents a reconciliation of net
income as if SFAS No. 142 had been adopted for fiscal year 2002.



|                                                                      |  |                                           |               |   |                            |   |       |  |   |         |  
|--------------------------------------------------------------------- |  | ----------------------------------------- | ------------- | - | -------------------------- | - | ----- |  | - | ------- | -
|                                                                      |  | Fifty-Three WeekPeriod Ended July 3, 2004 |               |   | Fifty-Two WeekPeriod Ended |  
|                                                                      |  |                                           | June 28, 2003 |   | June 29, 2002              |  
|Net income (loss) before cumulative effect of accounting change       |  | $                                         | (2,403        | ) |                            | $ | 2,008 |  | $ | (31,679 | )
|Amortization of intangible assets, net of tax and valuation allowance |  |                                           |              |   |                            |   |      |  |   | 4,992   |  
|                                                                      |  |                                           |               |   |                            |   |       |  |   |         |  
|Adjusted net income before cumulative effect of accounting change     |  | $                                         | (2,403        | ) |                            | $ | 2,008 |  | $ | (26,687 | )
|                                                                      |  |                                           |               |   |                            |   |       |  |   |         |  



7. Debt:



Debt consisted of the following (in thousands):



|                                                                         |  |              |         |   |               |   |         |  
|------------------------------------------------------------------------ |  | ------------ | ------- | - | ------------- | - | ------- | -
|                                                                         |  | July 3, 2004 |         |   | June 28, 2003 |  
|Senior subordinated notes due January 15, 2008                           |  | $            | 115,000 |   |               | $ | 115,000 |  
|Revolving financing facility due March 23, 2007                          |  |              | 70,688  |   |               |   |        |  
|Term loan facility due December 31, 2005                                 |  |              |        |   |               |   | 52,252  |  
|Revolving credit facility due December 31, 2004                          |  |              |        |   |               |   | 26,000  |  
|                                                                         |  |              |         |   |               |   |         |  
|Total debt                                                               |  |              | 185,688 |   |               |   | 193,252 |  
|Less: current portion of long-term debt and revolving financing facility |  |              | (70,688 | ) |               |   | (8,578  | )
|                                                                         |  |              |         |   |               |   |         |  
|Long-term debt                                                           |  | $            | 115,000 |   |               | $ | 184,674 |  
|                                                                         |  |              |         |   |               |   |         |  



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EAGLE FAMILY FOODS HOLDINGS, INC.

Notes to the Financial Statements  continued



On March 23, 2004, the Company entered into a Financing Agreement (the Financing
Agreement) by and among Eagle, Holdings, as a guarantor, and certain financial institutions party thereto from time to time (the Lenders), Fortress Credit Opportunities I LP (Fortress), as collateral agent for the
Lenders, and Congress Financial Corporation (Central) (Congress), an administrative agent for the Lenders. The Financing Agreement provides for a secured revolving credit facility that consists of (1) an asset-based revolving credit
facility (Revolver A) in an aggregate principal amount not to exceed $27,000,000 at any time outstanding, including a subfacility for the issuance of letters of credit in an aggregate amount not to exceed $5,000,000, and (2) a revolving
credit facility (Revolver B, and together with Revolver A, the Revolving Financing Facility) in an aggregate principal amount not to exceed $55,000,000. The borrowings under Revolver A are subject to a maximum borrowing base
based on the calculation of 65% of the book value of eligible inventory and 85% of the value of the net amount of eligible accounts receivable as defined in the Financing Agreement. The Company must borrow the maximum amount available under Revolver
B before the Company can utilize Revolver A. As of July 3, 2004, the borrowings under Revolver A were $15,688,000, and the borrowings under Revolver B were $55,000,000. The maturity date of the Financing Agreement is March 23, 2007, subject to
extensions if certain conditions are met.



The Companys
Revolving Financing Facility includes a lockbox arrangement, which provides for all cash receipts to be swept daily to reduce borrowings outstanding under the Revolving Financing Facility. This arrangement, combined with the existence of a
subjective acceleration clause, causes the Revolving Financing Facility balance to be classified as a current liability on the balance sheet in accordance with the FASBs Emerging Issues Task Force Issue No. 95-22, Balance Sheet
Classification of Borrowings Outstanding under Revolving Credit Agreements that Include Both a Subjective Acceleration Clause and a Lock-Box Arrangement (EITF 95-22). The acceleration clause allows the Companys lenders to
accelerate payment of the obligation or to terminate the Financing Agreement upon the occurrence of an event or development that would be reasonably likely to result in a material adverse effect on the Companys operations, business, assets,
properties or condition (financial or otherwise). Management believes that no such event or development has occurred.



The proceeds from the Revolving Financing Facility were used, in part, to repay all amounts outstanding under the Companys previous bank facilities
and will be used, in part, to fund working capital of the Company and for other general corporate purposes.



The interest rate on Revolver A is LIBOR plus 3.0% or the reference rate as announced by Wachovia Bank (the Reference Rate) plus 0.5%. The
interest rate on Revolver B is 10.0% plus the greater of 2.0% and LIBOR or 8.0% plus the greater of 4.0% and the Reference Rate. The fair market value of the Revolving Financing Facility at April 3, 2004 was approximately the carrying value.



The Revolving Financing Facility contains financial covenants,
which require the Company to meet certain financial tests including senior debt leverage, fixed charge coverage, and consolidated earnings before interest, income tax, and depreciation and amortization expenses. The Company is required to reduce the
outstanding principal amount of Revolver B to specific amounts by December 31 of each of the next three years. The principal amount as of December 31, 2004 is to be less than $34,730,000. In addition, the Company is restricted from accumulating or
maintaining an aggregate amount of cash in bank accounts, other cash equivalents and investments in excess of $2,000,000 for a period of more than ten consecutive business days, subject to certain exceptions as permitted by the Financing Agreement.



The Revolving Financing Facility also contains covenants
including limitations on liens, indebtedness, dispositions, acquisitions, mergers, consolidations, changes in the nature of business, loans, advances, investments, sale and leaseback transactions, capital expenditures, transactions with affiliates,
dividends and other payments, issuances of capital stock and excess cash. The Revolving Financing Facility contains customary events of default, including certain changes in control of the Company. The Company is currently in compliance with the
covenants of the Financing Agreement.



The Company has pledged
or assigned a security interest in substantially all of its assets to secure payment of its indebtedness and other obligations under the Financing Agreement. The Companys principal stockholders, GE Investment Private Placement Partners II,
L.P. (GEI) and Warburg, Pincus Ventures, L.P. (Warburg, and together with GEI, the Equity Sponsors), have guaranteed the payments of the Revolver B obligations and



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EAGLE FAMILY FOODS HOLDINGS, INC.

Notes to the Financial Statements  continued



associated costs (the Guaranteed Obligations). This guaranty is limited in amount to the lesser of (i) the aggregate amount of all interest paid
to the Equity Sponsors after March 23, 2004 in respect of the Notes (as defined below) held by such Equity Sponsors and their affiliates and (ii) the aggregate amount of the outstanding Guaranteed Obligations.



The Companys ability to meet the covenants in the Financing Agreement
will be dependent upon the Companys future performance, which will be subject to general economic conditions and financial operations. There can be no assurance that the Companys future performance will not be affected negatively by
changes in the above factors to such a degree that it affects the Companys ability to meet covenants in the Financing Agreement.



As of July 3, 2004, the Company had letters of credit outstanding totaling $1,664,000 under the Revolving Financing Facility, as required by certain
insurance policies.



Senior Subordinated Notes



The Companys $115,000,000 of Senior Subordinated
Notes (the Notes) are due January 15, 2008 bearing interest of 8.75% per annum, payable on January 15 and July 15, commencing July 15, 1998. The fair market value of the Notes was approximately $80,500,000 and $78,200,000 at July 3, 2004
and June 28, 2003, respectively.



The Notes are unconditionally
guaranteed by Holdings (the Parent Guarantee) and by each future Domestic Subsidiary of the Company (each, a Domestic Subsidiary Guarantee and, collectively, the Domestic Subsidiary Guarantees). The Company
currently has no domestic subsidiaries and therefore none that guarantee the Notes. The Parent Guarantee and the Domestic Subsidiary Guarantees are joint and several as well as full and unconditional. The Notes are unsecured and subordinated in
right of payment to all existing and future senior indebtedness of the Company. The Notes include certain covenants including limitations on indebtedness, dividends and other payment restrictions affecting subsidiaries, subordinated liens, sale and
leaseback transactions, sale or issuance of capital stock of subsidiaries, merger, consolidation or sale of assets, transactions with affiliates and layering debt. The indenture provides that the Company will not, and will not permit any of its
subsidiaries, directly or indirectly, to declare or pay any dividend or make any distribution on or in respect of its capital stock except dividends or distributions payable solely in its capital stock (other than redeemable stock) and except
dividends or distributions payable solely to the Company or any wholly-owned subsidiary of the Company. Furthermore, Holdings ability to obtain funds from its subsidiaries is restricted by the Notes because (1) Holdings may not hold assets
other than Company capital stock and other minimal assets related to the business of holding such stock and (2) Holdings may not incur any additional liabilities other than in the ordinary course of business.



GEI and Warburg, Holdings principal stockholders, each owned
$14,100,000 in aggregate principal amount of Notes as of September 9, 2004.



8. Income Taxes:



The Company assesses the
recoverability of the deferred tax assets and records a valuation allowance when it is probable that any or all of the deferred tax assets will not be realized. The Company has experienced pretax losses over the past few years, excluding the gain in
fiscal year 2002 on the ReaLemonSale. Because of these factors, the Company had recorded a $54,198,000 valuation allowance for the net deferred tax assets and net operating loss carryforwards as of July 3, 2004. Management continues to see
lower industry market values in the current economic environment, which could affect the tax planning strategies available to the Company. The Company maintains a full valuation allowance for its net deferred tax assets and net operating loss
carryforwards as sufficient positive evidence does not exist to support reversal of the reserve. Until such time, except for minor state and local tax provisions, the Company will have no reported tax provision, net of valuation allowance
adjustments.



In determining the amount of the deferred tax
asset valuation allowance, the Company estimated the current tax deductibility of certain costs and charges, and evaluated the fair market value of the Company in comparison to the tax value. These estimates are subject to change. Any differences
between these current estimates and actual values determined at a future date will result in a change to the valuation allowance and will be recorded at that date.



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EAGLE FAMILY FOODS HOLDINGS, INC.

Notes to the Financial Statements  continued



A comparative analysis of the Companys (expense) benefit for income taxes from earnings before
income taxes and cumulative effect of accounting change consisted of the following (in thousands):



|                    |  |             |     |   |              |   |     |              |  |   |         |  
|------------------- |  | ----------- | --- | - | ------------ | - | --- | ------------ |  | - | ------- | -
|                    |  | July 3,2004 |     |   | June 28,2003 |   |     | June 29,2002 | 
|Federal             |  | $           |    |   |              | $ | 97  |              |  | $ | (824    | )
|State               |  |             | (73 | ) |              |   | (21 | )            |  |   | (110    | )
|Valuation allowance |  |             |    |   |              |   |    |              |  |   | (33,167 | )
|                    |  |             |     |   |              |   |     |              |  |   |         |  
|                    |  | $           | (73 | ) |              | $ | 76  |              |  | $ | (34,101 | )
|                    |  |             |     |   |              |   |     |              |  |   |         |  



At July 3, 2004, the
Company had $133,495,000 of accumulated net operating loss carryforwards for tax reporting purposes. The tax net operating losses expire, if unused, beginning in 2018. The Companys net operating loss carryforwards for foreign purposes are not
material.



Reconciliation of the differences between income
taxes computed at Federal statutory rates and the consolidated (expense) benefit for income taxes on earnings before income taxes and cumulative effect of accounting change are as follows (in thousands):



|                                                                        |  |             |      |   |              |   |         |              |  |   |         |  
|----------------------------------------------------------------------- |  | ----------- | ---- | - | ------------ | - | ------- | ------------ |  | - | ------- | -
|                                                                        |  | July 3,2004 |      |   | June 28,2003 |   |         | June 20,2002 | 
|Income tax (expense) benefit computed at the Federal statutory tax rate |  | $           | 847  |   |              | $ | 19,140  |              |  | $ | (848    | )
|State tax (expense) benefit, net of Federal tax benefits                |  |             | (13  | ) |              |   | 1,060   |              |  |   | (86     | )
|Valuation allowance                                                     |  |             | (907 | ) |              |   | (20,124 | )            |  |   | (33,167 | )
|                                                                        |  |             |      |   |              |   |         |              |  |   |         |  
|                                                                        |  | $           | (73  | ) |              | $ | 76      |              |  | $ | (34,101 | )
|                                                                        |  |             |      |   |              |   |         |              |  |   |         |  



Deferred tax assets
and liabilities consisted of the following (in thousands):



|                                |  |             |         |   |              |   |         |              |  |   |         |  
|------------------------------- |  | ----------- | ------- | - | ------------ | - | ------- | ------------ |  | - | ------- | -
|                                |  | July 3,2004 |         |   | June 28,2003 |   |         | June 29,2002 | 
|Net operating loss carryforward |  | $           | 49,393  |   |              | $ | 36,418  |              |  | $ | 29,470  |  
|Intangible assets               |  |             | 2,265   |   |              |   | 14,890  |              |  |   | (989    | )
|Property, plant and equipment   |  |             | 609     |   |              |   | 386     |              |  |   | 2,052   |  
|All other assets                |  |             | 1,988   |   |              |   | 1,842   |              |  |   | 2,772   |  
|All other liabilities           |  |             | (57     | ) |              |   | (245    | )            |  |   | (138    | )
|Valuation allowance             |  |             | (54,198 | ) |              |   | (53,291 | )            |  |   | (33,167 | )
|                                |  |             |         |   |              |   |         |              |  |   |         |  
|Net deferred tax asset          |  | $           |        |   |              | $ |        |              |  | $ |        |  
|                                |  |             |         |   |              |   |         |              |  |   |         |  



9. Supplemental Information:



Other accrued liabilities consisted of the following (in
thousands):



|                                  |  |             |       |              |   |      
|--------------------------------- |  | ----------- | ----- | ------------ | - | -----
|                                  |  | July 3,2004 |       | June 28,2003
|Other accrued liabilities:        |  |             |       |              |   |      
|Customer allowances               |  | $           | 2,803 |              | $ | 2,741
|Insurance accruals                |  |             | 1,224 |              |   | 945  
|Divestiture reserve               |  |             |      |              |   | 494  
|Coupon accrual                    |  |             | 497   |              |   | 578  
|Broker commissions                |  |             | 326   |              |   | 390  
|Compensation and related accruals |  |             | 999   |              |   | 956  
|Other                             |  |             | 55    |              |   | 7    
|                                  |  |             |       |              |   |      
|Total other accrued liabilities   |  | $           | 5,904 |              | $ | 6,111
|                                  |  |             |       |              |   |      



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EAGLE FAMILY FOODS HOLDINGS, INC.

Notes to the Financial Statements  continued



10. Redeemable Preferred Stock:



On September 24, 1999, 99 shares of Series B Non-Voting Preferred Stock (the Series B Preferred Stock) were
issued by Holdings at a stated value of $100,000 per share (the Series B Stated Value), and on January 23, 1998, 816,750 shares of Series A Non-Voting Preferred Stock (the Series A Preferred Stock and together with the Series
B Preferred Stock, the Preferred Stock) were issued by Holdings at a stated value of $100 per share (the Series A Stated Value, and together with the Series B Stated Value, the Stated Value).



Series A Preferred Stock and Series B Preferred Stock rank on parity as to
dividends and on liquidation. The Preferred Stock provides for preferential cumulative dividends at the rate of 10% per share per annum of the Stated Value for each series of Preferred Stock. Dividends are payable as declared by the Holdings Board
of Directors and shall be paid before any dividends shall be set apart for or paid upon the Common Stock of Holdings, par value $0.01 per share (the Common Stock). In the event of liquidation, dissolution or winding up, the holders of
shares of Preferred Stock are entitled to be paid out of the assets of Holdings available for distribution to its stockholders before any payment is made to the holders of stock junior to the Preferred Stock. Holders of Preferred Stock are not
entitled to vote on any matters presented to the stockholders of Holdings. However, the affirmative vote or written consent of the holders of at least two-thirds of the then outstanding shares of Preferred Stock is required to amend, alter or repeal
the preferences, special rights or other powers of the Preferred Stock. The Preferred Stock is subject to mandatory redemption at a price per share equal to the Stated Value for each series of Preferred Stock plus all dividends accrued and unpaid
there upon (1) the closing of a public offering pursuant to an effective registration statement under the Securities Act of 1933, (2) the sale of all or substantially all of the assets of Holdings or the merger or consolidation of Holdings with or
into any other corporation or other entity in which the holders of Holdings outstanding shares before the merger or consolidation do not retain a majority of the voting power of the surviving corporation or other entity or (3) the acquisition
by any person of shares of Common Stock representing a majority of the issued and outstanding shares of Common Stock then outstanding.



Cumulative accrued dividends totaled $76,712,000 and $60,952,000 at July 3, 2004 and June 28, 2003, respectively. They are classified with Redeemable
Preferred Stock in the consolidated balance sheet of the Company.



11.
Stockholders and Registration Rights Agreements:



The
Stockholders Agreement, dated as of January 23, 1998, by and among Holdings and the stockholders named therein (the Stockholders Agreement) and the Registration Rights Agreement, dated as of January 23, 1998, by and among Holdings and
the investors named therein (the Registration Rights Agreement) were each amended as of September 27, 1999, to reflect a Subscription Agreement with GEI and Warburg (as described in Note 12) for the offer and sale of a total of 99 shares
of Series B Preferred Stock and a total of 100,000 shares of Common Stock with accompanying warrants to purchase a total of 22,013 shares of Common Stock (the Warrants). Because of such amendments, all covenants and agreements set forth
in the initial Stockholders Agreement and Registration Rights Agreement will apply to the newly issued Series B Preferred Stock and Common Stock.



12. Stock Subscription Agreement:



On September 27, 1999, GEI and Warburg subscribed to purchase a total of 99 shares of Series B Preferred Stock at $100,000 per share and a total of
100,000 shares of Common Stock at $1 per share with accompanying Warrants to purchase up to 22,013 additional shares of Common Stock. The Warrants were exercisable for a purchase price of $1 per share of Common Stock (subject to certain adjustments)
and only upon failure of the Company to achieve certain financial targets for the fiscal year 2000. The Warrants would have automatically terminated if the Company had achieved certain financial targets for fiscal year 2000. The Company did not meet
the financial targets for fiscal year 2000. Therefore, pursuant to the terms of the Warrants, the Warrants expired on September 27, 2004 without being exercised. Holdings received $10,000,000 in exchange for these securities. Upon completion of the
issuance of the Warrants, Holdings made a $10,000,000 capital contribution to Eagle.



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EAGLE FAMILY FOODS HOLDINGS, INC.

Notes to the Financial Statements  continued



Upon the separations of certain executive officers during fiscal year 2002 and pursuant to their
employment agreements, the Company purchased into treasury 7,524 shares of Series A Preferred Stock for a value of $966,000.



Secured recourse promissory note, principal and interest, between the Company and one executive was satisfied in fiscal year 2002 by transferring the
executives 2,475 shares of Series A Preferred Stock (included in the 7,524 treasury shares referenced above) to the Company.



13. Commitments and Contingencies:



The Company may enter into long-term contracts for the purchase of certain raw materials. At July 3, 2004, the Company did not have any long-term purchase
commitments. The Company leases buildings and equipment under various non-cancelable lease agreements for periods of one to five years. The lease agreements generally require the Company to pay taxes, insurance and maintenance expenses related to
the leased assets.



The following table lists the
Companys commitments and contingencies at July 3, 2004 (dollars in thousands):



|                                |  |                        |         |                 |   |           |  |           |     |                  |   |         |  |   |   
|------------------------------- |  | ---------------------- | ------- | --------------- | - | --------- |  | --------- | --- | ---------------- | - | ------- |  | - | --
|                                |  | Payments Due by Period
|Contractual Obligations         |  | Total                  |         | Less Than 1Year |   | 1-3 Years |  | 3-5 Years |     | More Than 5Years
|Long-term debt obligations      |  | $                      | 115,000 |                 | $ |          |  | $         |    |                  | $ | 115,000 |  | $ |  
|Revolving financing obligations |  |                        | 70,688  |                 |   | 70,688    |  |           |    |                  |   |        |  |   |  
|Operating lease obligations     |  |                        | 822     |                 |   | 244       |  |           | 487 |                  |   | 51      |  |   | 40
|Purchase obligations            |  |                        | 7,271   |                 |   | 7,271     |  |           |    |                  |   |        |  |   |  
|                                |  |                        |         |                 |   |           |  |           |     |                  |   |         |  |   |   
|Total                           |  | $                      | 193,781 |                 | $ | 78,203    |  | $         | 487 |                  | $ | 115,051 |  | $ | 40
|                                |  |                        |         |                 |   |           |  |           |     |                  |   |         |  |   |   



The maturity date of
the Revolving Financing Facility is March 23, 2007, but in accordance with EITF 95-22, the Company has presented the outstanding balance as a current obligation. See additional disclosure in Note 7 herein.



Employment Agreements.The Company has an employment agreement with
the Chief Executive Officer and has employment arrangements with certain other key executives which provide for annual salaries, bonuses and severances and include non-compete and non-solicitation provisions.



14. Stock Options and Restricted Stock:



On January 14, 1998, Holdings Board of Directors adopted the 1998
Stock Incentive Plan (the Incentive Plan). The Incentive Plan provides for the granting of incentive stock options, non-qualified stock options, and restricted stock to officers, key employees, directors and consultants of the Company at
the discretion of a committee of the Board of Directors. As amended on January 5, 2000, a total of 206,150 shares of common stock may be awarded under the Incentive Plan, subject to certain adjustments reflecting changes in Holdings
capitalization.



Grants of options and the periods during which
such options can be exercised, and grants of restricted stock and the periods during which such grants become unrestricted and vest are at the discretion of a committee. As of July 3, 2004, the committee has not granted any stock options.



The committee has granted and issued shares of restricted
stock to Holdings officers and other key employees. Holders of the restricted stock are not entitled to (1) receive dividends until such shares vest or (2) vote their respective shares during the restricted period. The restricted stock vests
in installments of 20% per year on each of the first five anniversaries of the issue date, provided that the recipient is employed by Holdings as of each such date. Additionally, the sale, transfer, pledge, exchange or disposal of restricted shares
during the restricted period is not permitted except as otherwise allowed by the Holdings Stockholders Agreement.



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EAGLE FAMILY FOODS HOLDINGS, INC.

Notes to the Financial Statements  continued



A summary of restricted stock transactions for the fiscal years 2002, 2003, and 2004 is as follows:



|                             |  |                           |   |  |                                  |         |  
|---------------------------- |  | ------------------------- | - |  | -------------------------------- | ------- | -
|                             |  | Shares ofRestricted Stock |   |  | Fair MarketValue atIssuance Date |        
|Outstanding at June 30, 2001 |  | 191,704                   |   |  | $                                | 87,115  |  
|Cancelled                    |  | (106,522                  | ) |  |                                  | (44,156 | )
|                             |  |                           |   |  |                                  |         |  
|Outstanding at June 29, 2002 |  | 85,182                    |   |  |                                  | 42,959  |  
|Cancelled                    |  | (300                      | ) |  |                                  | (3      | )
|                             |  |                           |   |  |                                  |         |  
|Outstanding at June 28, 2003 |  | 84,882                    |   |  |                                  | 42,956  |  
|Cancelled                    |  | (45,047                   | ) |  |                                  | (37,771 | )
|                             |  |                           |   |  |                                  |         |  
|Outstanding at July 3, 2004  |  | 39,835                    |   |  | $                                | 5,185   |  
|                             |  |                           |   |  |                                  |         |  



Unearned compensation
is charged for the fair value of the restricted shares granted and issued in accordance with the Incentive Plan. The unearned compensation is shown as a reduction of stockholders deficit in the accompanying Consolidated Balance Sheets of
Holdings. Unearned compensation is amortized ratably over the restricted period.



15. Retirement Plan:



The Company sponsors a
defined contribution 401(k) retirement plan. Participation in this plan is available to all employees who have completed certain minimum service requirements. Company contributions to this plan are based on a percentage of employees annual
compensation. The costs of this plan were $222,000, $340,000, and $373,000, for fiscal year 2004, fiscal year 2003, and fiscal year 2002, respectively.



The Company sponsors a defined benefit plan covering all eligible union employees (Benefit Plan) and provides a defined benefit based on years
of service. The following tables present information about benefit obligations, plan assets, annual expense, net periodic benefit costs and other assumptions about the Companys Benefit Plan as of December 31 for each respective year (in
thousands):



|                                               |  |                     |     |   |                  |   |     |  
|---------------------------------------------- |  | ------------------- | --- | - | ---------------- | - | --- | -
|                                               |  | Twelve Months Ended |    
|                                               |  | December 31,2003    |     |   | December 31,2002 |  
|Change in benefit obligation                   |  |                     |     |   |                  |   |     |  
|Benefit obligation at beginning of year        |  | $                   | 321 |   |                  | $ | 237 |  
|Service cost                                   |  |                     | 60  |   |                  |   | 60  |  
|Interest cost                                  |  |                     | 21  |   |                  |   | 15  |  
|Experience losses                              |  |                     | 23  |   |                  |   | 9   |  
|                                               |  |                     |     |   |                  |   |     |  
|Benefit obligation at end of year              |  | $                   | 425 |   |                  | $ | 321 |  
|                                               |  |                     |     |   |                  |   |     |  
|Change in plan assets                          |  |                     |     |   |                  |   |     |  
|Fair value of plan assets at beginning of year |  | $                   | 237 |   |                  | $ | 171 |  
|Employer contribution                          |  |                     | 70  |   |                  |   | 65  |  
|Benefits paid                                  |  |                     | (4  | ) |                  |   | (1  | )
|Interest earned                                |  |                     | 1   |   |                  |   | 2   |  
|                                               |  |                     |     |   |                  |   |     |  
|Fair value of plan assets at end of year       |  | $                   | 304 |   |                  | $ | 237 |  
|                                               |  |                     |     |   |                  |   |     |  
|Weighted average assumptions                   |  |                     |     |   |                  |   |     |  
|Discount rate                                  |  |                     | 6.5 | % |                  |   | 6.5 | %
|Expected rate of return                        |  |                     | 8.0 | % |                  |   | 8.0 | %



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EAGLE FAMILY FOODS HOLDINGS, INC.

Notes to the Financial Statements  continued



|                                        |  |                  |     |   |                  |   |     |                  |  |   |    |  
|--------------------------------------- |  | ---------------- | --- | - | ---------------- | - | --- | ---------------- |  | - | -- | -
|                                        |  | December31, 2003 |     |   | December31, 2002 |   |     | December31, 2001 | 
|Components of net periodic benefit cost |  |                  |     |   |                  |   |     |                  |  |   |    |  
|Service cost                            |  | $                | 60  |   |                  | $ | 60  |                  |  | $ | 53 |  
|Interest cost                           |  |                  | 21  |   |                  |   | 15  |                  |  |   | 11 |  
|Expected return on plan assets          |  |                  | (16 | ) |                  |   | (12 | )                |  |   | (7 | )
|Amortization of net (gain) loss         |  |                  | 6   |   |                  |   | 6   |                  |  |   | 2  |  
|                                        |  |                  |     |   |                  |   |     |                  |  |   |    |  
|Net periodic benefit cost               |  | $                | 71  |   |                  | $ | 69  |                  |  | $ | 59 |  
|                                        |  |                  |     |   |                  |   |     |                  |  |   |    |  



The Company expensed
$39,000 and $37,000 for the six months ended July 3, 2004 and June 28, 2003, respectively. The Company contributed $70,000 during the twelve-month period ended December 31, 2003, including $52,500 paid during the fifty-three week period ended July
3, 2004. The Company anticipates contributing $90,000 to fund its Benefit Plan during the twelve-month period ending December 31, 2004.



16. Comprehensive Income (Loss):



The components of other comprehensive income (loss) for the fifty-three week period ended July 3, 2004 and the fifty-two week periods ended June
28, 2003 and June 29, 2002 consisted of the following (in thousands):



|                                                         |  |             |        |   |              |   |         |              |  |   |         |  
|-------------------------------------------------------- |  | ----------- | ------ | - | ------------ | - | ------- | ------------ |  | - | ------- | -
|                                                         |  | July 3,2004 |        |   | June 28,2003 |   |         | June 29,2002 | 
|Net loss                                                 |  | $           | (2,403 | ) |              | $ | (54,606 | )            |  | $ | (31,679 | )
|Other comprehensive income (loss):                       |  |             |        |   |              |   |         |              |  |   |         |  
|Change in fair value of commodity contracts              |  |             | 176    |   |              |   | 37      |              |  |   | (41     | )
|Recognition of interest expense                          |  |             |       |   |              |   | (121    | )            |  |   | (211    | )
|Deferred gain on commodity contracts sold                |  |             | 1,969  |   |              |   |        |              |  |   |        |  
|Recognition of realized gain on commodity contracts sold |  |             | (1,638 | ) |              |   |        |              |  |   |        |  
|Foreign currency translation adjustment                  |  |             | (165   | ) |              |   | 206     |              |  |   | 107     |  
|                                                         |  |             |        |   |              |   |         |              |  |   |         |  
|Comprehensive loss                                       |  | $           | (2,061 | ) |              | $ | (54,484 | )            |  | $ | (31,824 | )
|                                                         |  |             |        |   |              |   |         |              |  |   |         |  



The Company sold 886
contracts for a gain of $1,969,000 prior to the contracts settlement dates. The gain will be recognized as the original contracts mature.



17. Subsequent Event:



On September 20, 2004, the Company entered into a First Amendment to Financing Agreement (the First Amendment) by and among Holdings, as
guarantor, Eagle, as borrower, certain financial institutions from time to time party thereto, Fortress, as collateral agent for the Lenders, and Congress, as administrative agent for the Lenders. The First Amendment temporarily increases the
principal amount available for borrowing under Revolver A from $27,000,000 to $30,000,000 through and including November 3, 2004.



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##### Table of Contents

Schedule II

Eagle Family Foods Holdings, Inc.

Valuation and Qualifying Accounts

(Dollars in thousands)



|                                        |  |                             |        |                            |        |            |   |                        |   |       
|--------------------------------------- |  | --------------------------- | ------ | -------------------------- | ------ | ---------- | - | ---------------------- | - | ------
|Description                             |  | Balanceatbeginningof period |        | Chargedto costsandexpenses |        | Deductions |   | Balance atend ofperiod
|Deferred income tax valuation allowance |  |                             |        |                            |        |            |   |                        |   |       
|For the year ended July 3, 2004         |  | $                           | 53,291 |                            | 907    |            |  |                        | $ | 54,198
|For the year ended June 28, 2003        |  | $                           | 33,167 |                            | 20,124 |            |  |                        | $ | 53,291
|For the year ended June 29, 2002        |  | $                           |       |                            | 33,167 |            |  |                        | $ | 33,167



56