** **

**UNITEDSTATES****SECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON,DC 20549**

 

----

 

**FORM 10-Q**

 
| **x**                                                   | ** ** | **QUARTERLY REPORT PURSUANT TO SECTION 13 OR  15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**  |
|---------------------------------------------------------|------------|---------------------------------------------------------------------------------------------------------|
| ** **                                              | ** ** | ** **                                                                                              |
| **For the  quarterly period ended March 31, 2008** |
| ** **                                              | ** ** | ** **                                                                                              |
| **OR**                                                  |
| ** **                                              | ** ** | ** **                                                                                              |
| **o**                                                   | ** ** | **TRANSITION REPORT PURSUANT TO SECTION 13 OR  15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |

 

**For thetransition period from             to             **

 

**CommissionFile Number:  333-114105**

 

**MerisantCompany**

(Exact Name ofRegistrant as Specified in its Charter)

 

| **Delaware**                                                    | ** ** | **52-2218321**                           |
|-----------------------------------------------------------------|------------|------------------------------------------|
| (State or Other  Jurisdiction of Incorporation or Organization) |       | (I.R.S. Employer  Identification Number) |
|                                                            |       |                                     |
| **33  North Dearborn  Chicago, Illinois**                       | ** ** | **60602**                                |
| (Address of  Principal Executive Offices)                       |       | (Zip Code)                               |

 

Registrant’stelephone number, including area code: **(312) 840-6000**

 

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

**Notapplicable.**

 

Indicate by check mark whether the registrant (1) hasfiled all reports required to be filed by Section 13 or 15(d) of theSecurities Exchange Act of 1934 during the preceding 12 months (or for suchshorter period that the registrant was required to file such reports), and (2) hasbeen subject to such filing requirements for the past 90days.   Yes  o   No  x

 

Indicate by check mark whether the registrant is alarge accelerated filer, an accelerated filer, a non-accelerated filer, or asmaller reporting company. See definitions of “large accelerated filer,”“accelerated filer,” and “smaller reporting company” in Rule 12b-2 of theExchange Act. (Check one):

 

| Large accelerated filer  o                     |   | Accelerated filer o          |
|------------------------------------------------|--------|-----------------------------------|
|                                           |   |                              |
| Non-accelerated filer x                        |   | Smaller reporting  company o |
| (Do not check if a  smaller reporting company) |   |                              |

 

Indicate by check markwhether the registrant is a shell company (as defined in Rule 12b-2 of theExchange Act). Yes  o   No  x

 

Indicate the number ofshares outstanding of each of the issuer’s classes of common stock, as of thelatest practicable date.

 

As of May 14, 2008,the registrant had 100 shares of common stock, par value $0.01 per share,outstanding, all of which were owned by Merisant Worldwide, Inc.

 

ThisQuarterly Report is being filed pursuant to a requirement contained in theindenture governing Merisant Company’s 91⁄2% Senior Subordinated Notes due 2013.

 

 

----

 

**MERISANTCOMPANY**

 

**INDEX TOREPORT**

 

**FOR THEQUARTER ENDED MARCH 31, 2008**

 
|                                            | ** **                                                                                                                      | ** ** | **Page** |
|--------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------|------------|----------|
| **PART I—FINANCIAL INFORMATION** |                                                                                                                            | 3          |
|                                       |                                                                                                                            |       |     |
| Item 1.                                    | Financial  Statements of Merisant Company                                                                                       |       | 3        |
|                                       |                                                                                                                            |       |     |
|                                       | Unaudited Consolidated Balance Sheets at  December 31, 2007 and March 31, 2008                                        |       | 3        |
|                                       |                                                                                                                            |       |     |
|                                       | Unaudited Consolidated Statements of Operations and  Comprehensive Loss for the Three Months Ended March 31, 2007 and 2008 |       | 4        |
|                                       |                                                                                                                            |       |     |
|                                       | Unaudited Consolidated Statement of Stockholder’s  Deficit for the Three Months Ended March 31, 2008                  |       | 5        |
|                                       |                                                                                                                            |       |     |
|                                       | Unaudited Consolidated Statements of Cash Flows for  the Three Months Ended March 31, 2007 and 2008                        |       | 6        |
|                                       |                                                                                                                            |       |     |
|                                       | Notes to Unaudited Consolidated Financial Statements                                                                            |       | 7        |
|                                       |                                                                                                                            |       |     |
| Item 2.                                    | Management’s  Discussion and Analysis of Financial Condition and Results of Operations                                     |       | 17       |
|                                       |                                                                                                                            |       |     |
| Item 3.                                    | Quantitative  and Qualitative Disclosures About Market Risk                                                                     |       | 27       |
|                                       |                                                                                                                            |       |     |
| Item 4T.                                   | Controls and  Procedures                                                                                                        |       | 28       |
|                                       |                                                                                                                            |       |     |
| PART II—OTHER  INFORMATION       |                                                                                                                            | 28         |
|                                       |                                                                                                                            |       |
| Item 1.                                    | Legal Proceedings                                                                                                               |       | 28       |
|                                       |                                                                                                                            |       |     |
| Item 1A.                                   | Risk Factors                                                                                                                    |       | 29       |
|                                       |                                                                                                                            |       |     |
| Item  6.                                   | Exhibits                                                                                                                        |       | 29       |
|                                            |                                                                                                                                 |            |          |  |

 

----

 

**PART I**—**FINANCIAL INFORMATION**

 

**Item 1. Financial Statements ofMerisant Company**

 

**MERISANT COMPANYUnaudited Consolidated Balance Sheets(Dollars In Thousands, Except Per Share Amount)**

 
| ** **                                                                                                                    | ** ** | **At December 31,  2007** | ** ** | **At March 31,  2008** | ** ** |
|-------------------------------------------------------------------------------------------------------------------------------|------------|-------------------------------------|------------|----------------------------------|------------|
| **ASSETS**                                                                                                                    | ** ** | ** **                          | ** ** | ** **                       | ** ** |
| Cash and cash  equivalents                                                                                                    |       | $                                   | 51,040     |                             | $          | 45,830 |   |
| Trade accounts  receivable, net of allowances of $854 and $742, respectively                                             |       | 74,410                              |       | 71,501                           |       |
| Other  receivables                                                                                                            |       | 9,128                               |       | 9,499                            |       |
| Inventories                                                                                                                   |       | 13,540                              |       | 20,702                           |       |
| Prepaid expenses  and other assets                                                                                            |       | 6,206                               |       | 5,990                            |       |
| Current portion  of note receivable from director                                                                             |       | 970                                 |       | 1,970                            |       |
| Deferred income  tax assets                                                                                                   |       | 1,620                               |       | 1,723                            |       |
| Total current  assets                                                                                                         |       | 156,914                             |       | 157,215                          |       |
| Property and  equipment, net                                                                                                  |       | 23,509                              |       | 25,096                           |       |
| Trademarks and  other intangible assets, less accumulated amortization and impairment of  $164,022 and $169,286, respectively |       | 160,697                             |       | 155,433                          |       |
| Goodwill                                                                                                                      |       | 107,209                             |       | 107,209                          |       |
| Deferred  financing costs, less accumulated amortization of $10,052 and $10,889,  respectively                                |       | 9,586                               |       | 8,749                            |       |
| Non-current  portion of note receivable from director                                                                         |       | 1,822                               |       | 851                              |       |
| Investment in  equity affiliate                                                                                               |       | 264                                 |       | 327                              |       |
| Other  non-current assets                                                                                                     |       | 880                                 |       | 836                              |       |
| Total assets                                                                                                                  |       | $                                   | 460,881    |                             | $          | 455,716 |   |
| **LIABILITIES  AND STOCKHOLDER’S DEFICIT**                                                                               | ** ** | ** **                          | ** ** | ** **                       | ** ** |
| Accounts payable                                                                                                              |       | $                                   | 22,618     |                             | $          | 20,529 |   |
| Income taxes  payable                                                                                                         |       | 1,031                               |       | 1,299                            |       |
| Accrued interest  expense                                                                                                     |       | 12,727                              |       | 6,784                            |       |
| Accrued  trademarketing and consumer promotions                                                                               |       | 14,353                              |       | 17,168                           |       |
| Accrued  incentives                                                                                                           |       | 8,024                               |       | 2,873                            |       |
| Accrued expenses  and other liabilities                                                                                       |       | 11,056                              |       | 12,376                           |       |
| Current maturities  of long-term obligations                                                                                  |       | 12,178                              |       | 37,200                           |       |
| Total current  liabilities                                                                                                    |       | 81,987                              |       | 98,229                           |       |
| Long-term  obligations, net of current maturities                                                                             |       | 416,838                             |       | 398,175                          |       |
| Deferred income  tax liabilities                                                                                              |       | 23,701                              |       | 25,116                           |       |
| Other  liabilities                                                                                                            |       | 6,954                               |       | 7,414                            |       |
| Total  liabilities                                                                                                            |       | 529,480                             |       | 528,934                          |       |
| Commitments and  contingencies (Note 7)                                                                                       |       |                                |       |                             |       |
| Stockholder’s  Deficit:                                                                                                  |       |                                |       |                             |       |
| Common stock,  $0.01 par value, 100 shares authorized, issued and outstanding                                                 |       | —                              |       | —                           |       |
| Due for purchase  of shares in Merisant Worldwide, Inc.                                                                  |       | (107                                | )          | (86                              | )          |
| Retained deficit                                                                                                              |       | (65,454                             | )          | (72,070                          | )          |
| Accumulated  other comprehensive loss                                                                                         |       | (3,038                              | )          | (1,062                           | )          |
| Total  stockholder’s deficit                                                                                             |       | (68,599                             | )          | (73,218                          | )          |
| Total  liabilities and stockholder’s deficit                                                                             |       | $                                   | 460,881    |                             | $          | 455,716 |   |

 

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

 

3

----

 

**MERISANT COMPANY****Unaudited Consolidated Statementsof Operations and**

**Comprehensive Loss****(Dollars In Thousands)**

 
| ** **                         | ** ** | **Three Months Ended  March 31,** | ** ** |
|------------------------------------|------------|--------------------------------------------------|------------|
| ** **                         | ** ** | **2007**                                         | ** ** | **2008** | ** ** |
| Net sales                          |       | $                                                | 69,313     |   | $ | 68,920 |   |
| Cost of sales                      |       | 30,742                                           |       | 32,925 |   |
| Gross profit                       |       | 38,571                                           |       | 35,995 |   |
| Operating  expenses:               |       |                                             |       |   |   |
| Marketing and  selling expenses    |       | 15,247                                           |       | 14,385 |   |
| Administration  expenses           |       | 11,875                                           |       | 10,001 |   |
| Amortization of  intangible assets |       | 5,727                                            |       | 5,264 |   |
| Restructuring  expenses            |       | 560                                              |       | 115 |   |
| Total operating  expenses          |       | 33,409                                           |       | 29,765 |   |
| Income from  operations            |       | 5,162                                            |       | 6,230 |   |
| Other expense  (income):           |       |                                             |       |   |   |
| Interest income                    |       | (205                                             | )          | (304 | ) |
| Interest expense                   |       | 11,999                                           |       | 10,111 |   |
| Other expense,  net                |       | 139                                              |       | 801 |   |
| Total other  expense               |       | 11,933                                           |       | 10,608 |   |
| Loss before  income taxes          |       | (6,771                                           | )          | (4,378 | ) |
| Provision for  income taxes        |       | 1,846                                            |       | 2,088 |   |
| Net loss                           |       | $                                                | (8,617     | ) | $ | (6,466 | ) |
|                               |       |                                             |       |   |   |
| Net loss from  above               |       | $                                                | (8,617     | ) | $ | (6,466 | ) |
| Other  comprehensive income        |       | 303                                              |       | 1,976 |   |
| Total  comprehensive loss          |       | $                                                | (8,314     | ) | $ | (4,490 | ) |

 

The accompanying notes are anintegral part of these unaudited consolidated financial statements.

 

4

----

** **

**MERISANTCOMPANY****Unaudited Consolidated Statementof Stockholder’s Deficit****(Dollars In Thousands)**

 
| ** **                                                                   | ** ** | **Common  Stock** | ** ** | **Due for Purchase  of Shares in  Merisant  Worldwide, Inc.** | ** ** | **Retained  Deficit** | ** ** | **Accumulated  Other  Comprehensive  Loss** | ** ** | **Total** | ** ** |
|------------------------------------------------------------------------------|------------|-------------------|------------|----------------------------------------------------------------------------------------|------------|-----------------------|------------|---------------------------------------------|------------|-----------|------------|
| Balance at December 31,  2007                                           |       | $                 | —     |                                                                                   | $          | (107                  | )          | $                                           | (65,454    | )         | $          | (3,038 | ) | $ | (68,599 | ) |
| Foreign currency  translation adjustment                                     |       | —            |       | —                                                                                 |       | —                |       | 1,976                                       |       | 1,976     |       |
| Dividend to  Merisant Worldwide, Inc.                                   |       | —            |       | —                                                                                 |       | (150                  | )          | —                                      |       | (150      | )          |
| Settlement of  loans for purchase of shares in Merisant Worldwide, Inc. |       | —            |       | 21                                                                                     |       | —                |       | —                                      |       | 21        |       |
| Net loss                                                                     |       | —            |       | —                                                                                 |       | (6,466                | )          | —                                      |       | (6,466    | )          |
| Balance at  March 31, 2008                                              |       | $                 | —     |                                                                                   | $          | (86                   | )          | $                                           | (72,070    | )         | $          | (1,062 | ) | $ | (73,218 | ) |

 

The accompanying notes are anintegral part of these unaudited consolidated financial statements.

 

5

----

 

**MERISANTCOMPANYUnaudited Consolidated Statements of Cash Flows(Dollars In Thousands)**

 
| ** **                                                                       | ** ** | **Three Months Ended  March 31,** | ** ** |
|----------------------------------------------------------------------------------|------------|--------------------------------------------------|------------|
| ** **                                                                       | ** ** | **2007**                                         | ** ** | **2008** | ** ** |
| **Operating  Activities**                                                        |       |                                             |       |   |   |
| Net loss                                                                         |       | $                                                | (8,617     | ) | $ | (6,466 | ) |
| Adjustments to  reconcile net loss to net cash provided by operating activities: |       |                                             |       |   |   |
| Depreciation                                                                     |       | 1,558                                            |       | 1,226 |   |
| Amortization of  intangible assets                                               |       | 5,727                                            |       | 5,264 |   |
| Amortization of  deferred financing costs                                        |       | 863                                              |       | 837 |   |
| Euro-denominated  loan foreign exchange loss                                     |       | 301                                              |       | 961 |   |
| Equity in income  of affiliate                                                   |       | (38                                              | )          | (63 | ) |
| Deferred income  tax provision                                                   |       | 1,288                                            |       | 1,342 |   |
| Changes in  operating assets and liabilities:                                    |       |                                             |       |   |   |
| Trade accounts  receivable                                                       |       | 5,290                                            |       | 4,473 |   |
| Other  receivables                                                               |       | (11                                              | )          | (245 | ) |
| Inventories                                                                      |       | 273                                              |       | (6,071 | ) |
| Prepaid expenses  and other assets                                               |       | 1,015                                            |       | 291 |   |
| Accounts payable                                                                 |       | 1,876                                            |       | (2,076 | ) |
| Accrued expenses  and other                                                      |       | (8,898                                           | )          | (7,383 | ) |
| Net cash  provided by (used in) operating activities                             |       | 627                                              |       | (7,910 | ) |
| **Investing  Activities**                                                        |       |                                             |       |   |   |
| Proceeds from  sale of property and equipment                                    |       | —                                           |       | 22 |   |
| Purchases of  property and equipment                                             |       | (209                                             | )          | (2,822 | ) |
| Net cash used in  investing activities                                           |       | (209                                             | )          | (2,800 | ) |
| **Financing  Activities**                                                        |       |                                             |       |   |   |
| Net borrowings  under revolving credit facility                                  |       | —                                           |       | 8,000 |   |
| Principal  payments on long-term obligations                                     |       | (2,148                                           | )          | (2,585 | ) |
| Distributions to  stockholder                                                    |       | —                                           |       | (150 | ) |
| Settlement of  loans for purchase of shares in Merisant Worldwide, Inc.     |       | 179                                              |       | 21 |   |
| Net cash  provided by (used in) financing activities                             |       | (1,969                                           | )          | 5,286 |   |
| Effect of  exchange rate on cash and cash equivalents                            |       | 118                                              |       | 214 |   |
| Net decrease in  cash and cash equivalents                                       |       | (1,433                                           | )          | (5,210 | ) |
| Cash and cash  equivalents at beginning of period                                |       | 23,730                                           |       | 51,040 |   |
| Cash and cash  equivalents at end of period                                      |       | $                                                | 22,297     |   | $ | 45,830 |   |

 

The accompanying notes are anintegral part of these unaudited consolidated financial statements.

 

6

----

 

**MERISANT COMPANY****Notes to Unaudited ConsolidatedFinancial Statements****(Dollars In Thousands)**

 

**1.****       ****Principles of Consolidation**

 

The consolidated financial statements and notes do notcontain certain information included in the annual consolidated financial statementsand notes of Merisant Company and subsidiaries. Unless otherwise indicated or unless the context otherwise requires, allreferences to the “Company” mean Merisant Company and its consolidatedsubsidiaries.  The consolidated balancesheet at December 31, 2007 was derived from the Company’s auditedconsolidated financial statements, but does not include all disclosuresrequired by generally accepted accounting principles in the United States ofAmerica (“GAAP”). The remaining consolidated financial statements areunaudited. In the opinion of management, all normal, recurring adjustmentsnecessary for a fair presentation of such unaudited financial statements havebeen included therein. For interim reporting purposes, certain marketing andadvertising expenses are charged to results of operations as a percentage ofsales. Interim results may not be indicative of results for a full year. Theseunaudited consolidated financial statements and notes should be read inconjunction with the Company’s annual consolidated financial statements.

 

The preparation of consolidated financial statements in conformity withgenerally accepted accounting principles requires management to make estimatesand assumptions that affect the reported amounts of assets and liabilities,disclosure of contingent assets and liabilities at the date of the consolidatedfinancial statements and the reported amounts of revenues and expenses duringthe reporting period. Actual results could differ from those estimates.

 

**2.****       ****Segment Information**

 

The Company manufactures and markets primarilylow-calorie tabletop sweeteners globally. Therefore, the Company’s reportablesegments are organized and managed principally by geographic region:  North America; Europe/Africa/Middle East,referred to as EAME; Latin America; and Asia/Pacific. The Company’s managementreviews Operating EBITDA to evaluate segment performance and allocateresources. Operating EBITDA consists of segment earnings before interestexpense, income tax expense, depreciation and amortization as well as itemssuch as expenses related to restructuring charges, certain significant chargesrelated to new product development and launch costs, certain litigation costsand certain other non-cash or excludable charges or losses. Other expense(income), net, as reported in the unaudited consolidated financial statements,is included in Operating EBITDA of the respective reportable segments, exceptfor the portion of other expense (income), net that relates to the foreigncurrency transaction gains or losses associated with the Company’seuro-denominated debt (see Note 5) and unrealized gains or losses on derivativeinstruments. Corporate expenses include corporate staff and related amounts.Corporate expenses, interest and other expenses and the provision for incometaxes are centrally managed and, accordingly, such items are not presented bysegment since they are excluded from the measure of segment performancereviewed by management. The Company launched a new product line in North Americain the first quarter of 2006 which management evaluates and manages separatelyfrom its other North American operations. As such, this item is also excludedfrom the measure of segment performance reviewed by management. The Company’sdefinition of Operating EBITDA is largely driven by similar definitions of BankEBITDA under its primary credit facilities. The definition of Bank EBITDA was adjusted in the May 2007amendment of those facilities and that change is reflected prospectively in theCompany’s computation of Operating EBITDA. The Company’s assets, which are principally in the United States andEurope, are also managed geographically. A summary of the Company’s results ofoperations by reportable segment for the three months ended March 31, 2007and 2008 is as follows:

 

7

----

 

**For the Three Months Ended March 31, 2007**

 
| ** **                                     | ** ** | **North  America** | ** ** | **EAME** | ** ** | **Latin  America** | ** ** | **Asia/  Pacific** | ** ** | **Consolidated** | ** ** |
|------------------------------------------------|------------|--------------------|------------|----------|------------|--------------------|------------|--------------------|------------|------------------|------------|
| Total net sales  for reportable segments       |       | $                  | 28,937     |     | $          | 26,576             |       | $                  | 5,297      |             | $          | 8,528 |   | $ | 69,338 |   |
| Plus: Net sales  related to new product launch |       |               |       |     |       |               |       |               |       | (25              | )          |
| Total  consolidated net sales                  |       |               |       |     |       |               |       |               |       | $                | 69,313     |   |
|                                           |       |               |       |     |       |               |       |               |       |             |       |
| Operating EBITDA                               |       | $                  | 10,282     |     | $          | 6,977              |       | $                  | 1,094      |             | $          | 4,091 |   | $ | 22,444 |   |
| Less (plus):                                   |       |               |       |     |       |               |       |               |       |             |       |
| Corporate  expenses                            |       |               |       |     |       |               |       |               |       | 9,251            |       |
| Restructuring  expense                         |       |               |       |     |       |               |       |               |       | 560              |       |
| Depreciation  expense                          |       |               |       |     |       |               |       |               |       | 1,558            |       |
| Amortization  expense                          |       |               |       |     |       |               |       |               |       | 5,727            |       |
| Currency loss on  euro debt                    |       |               |       |     |       |               |       |               |       | 301              |       |
| Other non-cash  expense                        |       |               |       |     |       |               |       |               |       | 24               |       |
| Other expense,  net                            |       |               |       |     |       |               |       |               |       | (139             | )          |
| Income from  operations                        |       |               |       |     |       |               |       |               |       | 5,162            |       |
| Interest  expense, net                         |       |               |       |     |       |               |       |               |       | 11,794           |       |
| Other expense,  net                            |       |               |       |     |       |               |       |               |       | 139              |       |
| Loss before  income taxes                      |       |               |       |     |       |               |       |               |       | $                | (6,771     | ) |

 

**For the Three Months Ended March 31, 2008**

 
| ** **                                                   | ** ** | **North  America** | ** ** | **EAME** | ** ** | **Latin  America** | ** ** | **Asia/  Pacific** | ** ** | **Consolidated** | ** ** |
|--------------------------------------------------------------|------------|--------------------|------------|----------|------------|--------------------|------------|--------------------|------------|------------------|------------|
| Total net sales  for reportable segments                     |       | $                  | 23,194     |     | $          | 32,182             |       | $                  | 7,635      |             | $          | 5,894 |   | $ | 68,905 |   |
| Plus: Net sales  related to new product launch               |       |               |       |     |       |               |       |               |       | 15               |       |
| Total  consolidated net sales                                |       |               |       |     |       |               |       |               |       | $                | 68,920     |   |
|                                                         |       |               |       |     |       |               |       |               |       |             |       |
| Operating EBITDA                                             |       | $                  | 6,215      |     | $          | 10,580             |       | $                  | 2,201      |             | $          | 2,500 |   | $ | 21,496 |   |
| Less (plus):                                                 |       |               |       |     |       |               |       |               |       |             |       |
| Corporate  expenses                                          |       |               |       |     |       |               |       |               |       | 6,203            |       |
| Restructuring  and specified project implementation costs    |       |               |       |     |       |               |       |               |       | 611              |       |
| Depreciation  expense                                        |       |               |       |     |       |               |       |               |       | 1,226            |       |
| Amortization  expense                                        |       |               |       |     |       |               |       |               |       | 5,264            |       |
| Currency loss on  euro debt                                  |       |               |       |     |       |               |       |               |       | 961              |       |
| Loss related to  new product launch                          |       |               |       |     |       |               |       |               |       | 1,306            |       |
| Expenses related  to credit agreement amendments and waivers |       |               |       |     |       |               |       |               |       | 466              |       |
| Other non-cash  expense                                      |       |               |       |     |       |               |       |               |       | 30               |       |
| Other expense,  net                                          |       |               |       |     |       |               |       |               |       | (801             | )          |
| Income from  operations                                      |       |               |       |     |       |               |       |               |       | 6,230            |       |
| Interest  expense, net                                       |       |               |       |     |       |               |       |               |       | 9,807            |       |
| Other expense,  net                                          |       |               |       |     |       |               |       |               |       | 801              |       |
| Loss before  income taxes                                    |       |               |       |     |       |               |       |               |       | $                | (4,378     | ) |

 

8

----

 

**3.****       ****Restructuring Expenses**

 

During the three months ended March 31, 2008, theCompany continued to evaluate opportunities to increase efficiency and reducecosts. This review resulted in the continuation of workforce reductions andplanned changes in the Company’s global business model. These actions aredesigned to improve both financial results and the long-term value of thebusiness. Restructuring expenses for workforce reductions of $560 and $115 wererecorded for the three months ended March 31, 2007 and March 31,2008, respectively. The 2008 charges principally related to continuingprovisions for previously notified employees being recorded over their stayperiods. Severance payments and benefits are scheduled to be made over the nextsix months.

 

Reconciliation of the restructuring liability at March 31,2008 is as follows:

 

| Restructuring  liability at December 31, 2007                     |   | $   | 182    |   |
|------------------------------------------------------------------------|--------|-----|--------|--------|
| Restructuring  expenses for the three months ended March 31, 2008 |   | 115 |   |
| Cash payments  for the three months ended March 31, 2008          |   | (96 | )      |
| Restructuring  liability at March 31, 2008                        |   | $   | 201    |   |

 

Therestructuring liability at December 31, 2007 and March 31, 2008 isincluded in the line item “Accrued expenses and other liabilities” in theaccompanying consolidated balance sheets.

 

Thefollowing table represents restructuring expenses included in each segment andcorporate expenses for the three months ended March 31, 2007 and 2008:

 

| ** **    | ** ** | **Three Months Ended  March 31,** | ** ** |
|---------------|------------|--------------------------------------------------|------------|
| ** **    | ** ** | **2007**                                         | ** ** | **2008** | ** ** |
| North America |       | $                                                | —     |   | $ | — |   |
| EAME          |       | 118                                              |       | — |   |
| Latin America |       | 64                                               |       | — |   |
| Asia/Pacific  |       | 218                                              |       | 115 |   |
| Corporate     |       | 160                                              |       | — |   |
| Total         |       | $                                                | 560        |   | $ | 115 |   |

 

**4.****       ****Inventories**

 

Inventories consisted of the following at December 31,2007 and March 31, 2008:

 

| ** **                       | ** ** | **December 31, 2007** | ** ** | **March 31, 2008** | ** ** |
|----------------------------------|------------|---------------------------------|------------|------------------------------|------------|
| Raw materials  and supplies      |       | $                               | 5,767      |                         | $          | 5,202 |   |
| Work in process                  |       | 383                             |       | 489                          |       |
| Finished goods                   |       | 7,924                           |       | 15,625                       |       |
| Inventory  obsolescence reserves |       | (534                            | )          | (614                         | )          |
| Total                            |       | $                               | 13,540     |                         | $          | 20,702 |   |

 

**5.****       ****Debt**

 

The Company and itsparent, Merisant Worldwide, Inc. (“Merisant Worldwide”), are highlyleveraged. At March 31, 2008, Merisant Worldwide and its subsidiaries,including the Company, had $562,602 of long-term debt outstanding, consistingof $127,337 aggregate principal amount of Merisant Worldwide’s 12 1⁄4% seniorsubordinated discount notes due 2014, $225,000 aggregate principal amount ofthe Company’s 9 1⁄2% senior subordinated notes due 2013 (the “Notes”), $210,266aggregate principal amount outstanding under the Company’s senior creditagreement (the “Senior Credit Agreement”), excluding capital lease obligationsof $109 and unused commitments on the revolving portion of the Senior CreditAgreement of $21,075.

 

At March 31, 2008,borrowings under the Senior Credit Agreement included $13,149 (“Term A”)aggregate principal 

 

9

----

 

amount of term loansbearing annual interest of 7.89%, $189,117 (“Term B”) aggregate principalamount of term loans bearing annual interest of 6.74%, and $8,000 aggregateprincipal amount in revolver commitments. The Term A loans are euro-denominatedand are translated into U.S. dollars at the spot rate as of March 31,2008.  The variable interest ratedecreased to 6.39% effective with the April 30, 2008 payment.

 

On June 23, 2006, the Company entered into an$85,000 senior secured term loan agreement (the “Second Lien Credit Agreement”),the borrowings under which were secured by a second lien on all the assets thatsecured loans outstanding under the then existing senior secured creditfacility (the “Senior Credit Agreement”). The Second Lien Credit Agreement consisted of an aggregate of $85,000principal amount of term loans, the net proceeds of which were used to prepay$9,540 of euro-denominated Term A loans, prepay $53,320 of Term B loans and torepay $15,000 of revolving loans, in each case, outstanding under the SeniorCredit Agreement.

 

On May 9,2007, the Company, Merisant Worldwide and certain of the Company’s subsidiariesentered into the Amended and Restated Credit Agreement, which, among otherthings, increased by $85,000 the principal amount of Term B loans that may beborrowed by the Company under the Senior Credit Agreement.  The Company paid $2,505 in fees and expensesrelated to this amendment and restatement which it deferred and is amortizingover the term of the related debt. Upon closing, the Company borrowed the full$85,000 of additional Term B loans available under the Amended and RestatedCredit Agreement and used the proceeds plus cash on hand to prepay theprincipal of all loans outstanding under the Second Lien Credit Agreementtotaling $85,000, plus all outstanding interest of $1,438 and a premium of$2,550, or $88,988.  The Second LienCredit Agreement was terminated as a result of the transaction and there was noincrease in the Company’s long term debt as a result of this transaction.  In addition to the incurrence of fees, thistransaction also resulted in a write-off of existing deferred financing feesrelating to the extinguishment of previously outstanding debt under the SecondLien Credit Agreement of $3,241.

 

Uponclosing of the above transaction and execution of the related amendment, theinterest rate on all term loans and revolving loans outstanding under theAmended and Restated Credit Agreement increased from euro-LIBOR and LIBOR plus325 basis points per annum to euro-LIBOR and LIBOR plus 350 basis points perannum.  As a result of the termination ofthe Second Lien Credit Facility, the Company’s effective interest rate onvariable interest rate debt decreased from 10.63% per annum prior to theclosing of this transaction to 8.73% per annum subsequent to this transaction.

 

The Company paid interest on borrowings under theSenior Credit Agreement, the Second Lien Credit Agreement, and on the Notestotaling $16,456 and $15,204 for the three months ended March 31, 2007 and2008, respectively.

 

The Amended and RestatedCredit Agreement preserves prior amendments, amends future financialcovenant  ratios and levels and containsa number of additional amendments, including to the definition of Bank EBITDA,that give the Company more flexibility to operate its business and de-leverageits balance sheet.

 

TheAmended and Restated Credit Agreement contains covenants, including financialcovenants that must be met on a quarterly basis. “Bank EBITDA” is the measureby which the financial covenants contained in the Amended and Restated CreditAgreement are measured. However, Bank EBITDA is not a measure of liquidityunder GAAP. Accordingly, while providing useful information with respect to anassessment of liquidity as measured in accordance with the covenants in theCompany’s primary debt obligations, this measure should not be considered inisolation from, or as a substitute for, consolidated statement of cash flowdata prepared in accordance with GAAP as an indication of liquidity. Inaddition, the Bank EBITDA measure presented may differ from, and may not becomparable to, similarly titled measures used by other companies.

 

TheCompany was in compliance with its covenants under the Amended and RestatedCredit Agreement as of March 31, 2008.

 

TheCompany was required to prepay $15,226 of the principal amount of term loansoutstanding under the Amended and Restated Credit Agreement five business daysafter filing the annual financial statements with excess cash as required andcalculated under the terms of the Amended and Restated Credit Agreement.  The prepayment was completed on April 4,2008.

 

10

----

 

**6.****       ****Transactions with Related Parties**

 

The Company has adeferred compensation payable to Arnold Donald, its former Chairman and acurrent director, and a note receivable in the same amount from Mr. Donald.The Company recorded $43 and $30 of interest income on the note receivable forthe three months ended March 31, 2007 and 2008, respectively, and an equalamount of interest expense in the respective periods.

 

The Company isparty to an agreement with Brand Architecture International (“Brand Architecture”)pursuant to which Brand Architecture has agreed to provide consulting servicesrelating to the development of brand architecture for the Company’s brands. Ascompensation, the Company paid approximately $76 and $59 to Brand Architecturefor the three months ended March 31, 2007 and 2008, respectively,including the reimbursement to Brand Architecture for expenses relating to itswork. Adam Stagliano, a member of the Company’s board of directors, is afounding director and the President and Chief Strategic Officer of BrandArchitecture.

 

Duringthe three months ended March 31, 2007 and 2008, the Company madedistributions of $0 and $150, respectively, to its sole stockholder, MerisantWorldwide.

 

**7.**        Commitments and Contingencies

** **

The Company has aninvestment in an affiliate located in the Philippines that is accounted forusing the equity method. The affiliate, a 50/50 joint venture, distributessugar substitute sweeteners for the international consumer food markets,primarily under the *Equal®* brand.In addition to its investment in the joint venture, the Company is committed toa 50% share in any new borrowings of the joint venture. As of December 31,2007 and March 31, 2008, there were no additional joint ventureborrowings.

 

On January 29, 2008,the Company delivered notice to ACH that the distribution agreement betweenMerisant US, Inc. and ACH would terminate on July 27, 2008 withrespect only to the retail grocery channel. The Company  partially terminatedthe distribution agreement so that it can pursue a direct distribution modelfor retail customers in the United States. The Company will handle order processing, warehousing and trademarketing internally and through a third-party broker and logistics providersfor retail grocery and drug customers in the United States which the Companyanticipate will reduce our operating costs, improve the efficiency of its inventory management and distributioncapabilities, and provide more transparency in customer relations.  On March 4, 2008, the Company and ACHagreed that the Company will pay $300  toACH and that commissions will not increase in connection with the partialtermination of the distribution agreement. This expense is included in operating expenses for the three monthsended March 31, 2008.

 

The Company is subject to various other claims, pending and possiblelegal actions for product liability and other damages, and other mattersarising out of the conduct of the Company’s business, including taxuncertainties arising from doing business in various European and LatinAmerican jurisdictions. The Company believes, based on current knowledge andconsultation with counsel, that the outcome of such claims and actions will nothave a material adverse effect on the Company’s consolidated financial positionor results of operations.

 

**8.**        Income Taxes

** **

In June 2006, the Financial Accounting StandardsBoard (“FASB”) issued Interpretation No. 48, Accounting for Uncertainty inIncome Taxes - an interpretation of FASB Statement No. 109 (“FIN 48”),that clarifies the accounting and recognition for income tax positions taken orexpected to be taken in the Company’s tax returns. The Company adopted FIN 48on January 1, 2007, and recorded the cumulative effect of a change inaccounting principle by recording a decrease in the liability for uncertain taxpositions of $5,757, that was accounted for as a credit to opening retainedearnings. At December 31, 2007 and March 31, 2008, the totalliability, including interest and penalties of $715 and $783, respectively foruncertain tax positions recorded in the Company’s balance sheet in non-currentOther liabilities was $2,815 and $3,002, respectively. No uncertain taxposition reserves were reversed or settled during the three months ended March 31,2008.  The entire amount of thisconsolidated worldwide liability for uncertain tax positions would affect theCompany’s effective tax rate upon favorable resolution of the uncertain taxpositions.  Absent new experience indefending these uncertain tax positions in the various jurisdictions to whichthey relate, the Company cannot currently estimate a range of possible changeof the March 31, 2008 liability over the next twelve months.

 

11

----

 

The Company files a consolidated U.S. income taxreturn and tax returns in various state and local jurisdictions. The Company’ssubsidiaries also file tax returns in various foreign jurisdictions. Inaddition to the U.S., the Company’s major taxing jurisdictions includeSwitzerland, France, the United Kingdom, Belgium, Australia, Argentina andMexico. In the U.S., all tax years from inception in 2000 through the presentare open.  The Company’s Switzerlandsubsidiary operates under a tax holiday, resulting in no uncertain taxpositions for that entity for any tax year. Local audits of the tax returns for the Company’s France subsidiary havebeen completed through 2004.  In theUnited Kingdom, the Company assumes that tax years through 2005 are closed dueto local practice.  In Belgium and Australia,tax years through 2003 and 2001, respectively, are closed due to the localstatute of limitations.  In Argentina andMexico only 2000 and 2001 are considered closed tax years due to the localstatute of limitations.

 

**Interest and penalties related totax positions taken in the Company’s tax returns are recorded in income taxexpense in the consolidated statements of operations.**

** **

**9.**        Consolidating Guarantor andNon-Guarantor Financial Information

** **

The following tables setforth the consolidating statements of operations for the three months ended March 31,2007 and March 31, 2008, the consolidating balance sheets at December 31,2007 and March 31, 2008 and the statements of cash flow for the threemonths ended March 31, 2007 and 2008. The following information isincluded herein as a result of the guarantee by certain of the Company’s whollyowned U.S. subsidiaries (“Guarantor Companies”) of the Notes. None of theCompany’s other subsidiaries guarantee the Notes. Each of the guarantees isjoint and several and full and unconditional.

 

**UnauditedConsolidating Statement of OperationsFor the Three Months Ended March 31, 2007**

 
| ** **                                                                 | ** ** | **Merisant  Company** | ** ** | **Guarantor  Companies** | ** ** | **Non-  Guarantor  Companies** | ** ** | **Consolidating  Eliminations** | ** ** | **Consolidated** | ** ** |
|----------------------------------------------------------------------------|------------|-----------------------|------------|--------------------------|------------|--------------------------------|------------|---------------------------------|------------|------------------|------------|
|                                                                       |       |                  |       |                     |       |                           |       |                            |       |             |       |
| Net sales                                                                  |       | $                     | —     |                     | $          | 31,005                         |       | $                               | 39,357     |             | $          | (1,049 | ) | $ | 69,313 |   |
| Cost of sales                                                              |       | —                |       | 14,965                   |       | 16,826                         |       | (1,049                          | )          | 30,742           |       |
| Gross profit                                                               |       | —                |       | 16,040                   |       | 22,531                         |       | —                          |       | 38,571           |       |
| Operating  expenses:                                                       |       |                  |       |                     |       |                           |       |                            |       |             |       |
| Marketing and  selling expenses                                            |       | —                |       | 6,433                    |       | 8,814                          |       | —                          |       | 15,247           |       |
| Administration  expenses                                                   |       | 102                   |       | 9,056                    |       | 2,717                          |       | —                          |       | 11,875           |       |
| Amortization of  intangible assets                                         |       | 2,428                 |       | —                   |       | 3,299                          |       | —                          |       | 5,727            |       |
| Restructuring  expenses                                                    |       | —                |       | 160                      |       | 400                            |       | —                          |       | 560              |       |
| Total operating  expenses                                                  |       | 2,530                 |       | 15,649                   |       | 15,230                         |       | —                          |       | 33,409           |       |
| Income (loss)  from operations                                             |       | (2,530                | )          | 391                      |       | 7,301                          |       | —                          |       | 5,162            |       |
| Other expense  (income):                                                   |       |                  |       |                     |       |                           |       |                            |       |             |       |
| Interest income                                                            |       | (51                   | )          | (4                       | )          | (702                           | )          | 552                             |       | (205             | )          |
| Interest expense                                                           |       | 12,549                |       | —                   |       | 2                              |       | (552                            | )          | 11,999           |       |
| Other expense  (income), net                                               |       | 306                   |       | 5                        |       | (172                           | )          | —                          |       | 139              |       |
| Total other  expense (income)                                              |       | 12,804                |       | 1                        |       | (872                           | )          | —                          |       | 11,933           |       |
| Income (loss)  before income taxes and equity in consolidated subsidiaries |       | (15,334               | )          | 390                      |       | 8,173                          |       | —                          |       | (6,771           | )          |
| Provision for  income taxes                                                |       | 378                   |       | 734                      |       | 734                            |       | —                          |       | 1,846            |       |
| Equity in  consolidated subsidiaries                                       |       | 7,095                 |       | 7,439                    |       | —                         |       | (14,534                         | )          | —           |       |
| Net income  (loss)                                                         |       | $                     | (8,617     | )                        | $          | 7,095                          |       | $                               | 7,439      |             | $          | (14,534 | ) | $ | (8,617 | ) |

 

12

----

 

**UnauditedConsolidating Statement of OperationsFor the Three Months Ended March 31, 2008**

 
| ** **                                                                 | ** ** | **Merisant  Company** | ** ** | **Guarantor  Companies** | ** ** | **Non-  Guarantor  Companies** | ** ** | **Consolidating  Eliminations** | ** ** | **Consolidated** | ** ** |
|----------------------------------------------------------------------------|------------|-----------------------|------------|--------------------------|------------|--------------------------------|------------|---------------------------------|------------|------------------|------------|
|                                                                       |       |                  |       |                     |       |                           |       |                            |       |             |       |
| Net sales                                                                  |       | $                     | —     |                     | $          | 24,976                         |       | $                               | 45,073     |             | $          | (1,129 | ) | $ | 68,920 |   |
| Cost of sales                                                              |       | —                |       | 13,624                   |       | 20,430                         |       | (1,129                          | )          | 32,925           |       |
| Gross profit                                                               |       | —                |       | 11,352                   |       | 24,643                         |       | —                          |       | 35,995           |       |
| Operating  expenses:                                                       |       |                  |       |                     |       |                           |       |                            |       |             |       |
| Marketing and  selling expenses                                            |       | —                |       | 6,283                    |       | 8,102                          |       | —                          |       | 14,385           |       |
| Administration  expenses                                                   |       | 556                   |       | 6,816                    |       | 2,629                          |       | —                          |       | 10,001           |       |
| Amortization of  intangible assets                                         |       | 2,020                 |       | —                   |       | 3,244                          |       | —                          |       | 5,264            |       |
| Restructuring  expenses                                                    |       | —                |       | —                   |       | 115                            |       | —                          |       | 115              |       |
| Total operating  expenses                                                  |       | 2,576                 |       | 13,099                   |       | 14,090                         |       | —                          |       | 29,765           |       |
| Income (loss)  from operations                                             |       | (2,576                | )          | (1,747                   | )          | 10,553                         |       | —                          |       | 6,230            |       |
| Other expense  (income):                                                   |       |                  |       |                     |       |                           |       |                            |       |             |       |
| Interest income                                                            |       | (54                   | )          | —                   |       | (909                           | )          | 659                             |       | (304             | )          |
| Interest expense                                                           |       | 10,770                |       | —                   |       | —                         |       | (659                            | )          | 10,111           |       |
| Other expense  (income), net                                               |       | 963                   |       | 72                       |       | (234                           | )          | —                          |       | 801              |       |
| Total other  expense (income)                                              |       | 11,679                |       | 72                       |       | (1,143                         | )          | —                          |       | 10,608           |       |
| Income (loss) before  income taxes and equity in consolidated subsidiaries |       | (14,255               | )          | (1,819                   | )          | 11,696                         |       | —                          |       | (4,378           | )          |
| Provision for  income taxes                                                |       | 864                   |       | 744                      |       | 480                            |       | —                          |       | 2,088            |       |
| Equity in  consolidated subsidiaries                                       |       | 8,653                 |       | 11,216                   |       | —                         |       | (19,869                         | )          | —           |       |
| Net income  (loss)                                                         |       | $                     | (6,466     | )                        | $          | 8,653                          |       | $                               | 11,216     |             | $          | (19,869 | ) | $ | (6,466 | ) |

 

13

----

 

**UnauditedCondensed Consolidating Balance Sheet**

**At December 31, 2007**

 
| ** **                                                             | ** ** | **Merisant  Company** | ** ** | **Guarantor  Companies** | ** ** | **Non-Guarantor Companies** | ** ** | **Consolidating  Eliminations** | ** ** | **Consolidated** | ** ** |
|------------------------------------------------------------------------|------------|-----------------------|------------|--------------------------|------------|-----------------------------|------------|---------------------------------|------------|------------------|------------|
| **Assets**                                                             | ** ** | ** **            | ** ** | ** **               | ** ** | ** **                  | ** ** | ** **                      | ** ** | ** **       | ** ** |
| Cash and cash  equivalents                                             |       | $                     | 12,351     |                     | $          | 3,305                       |       | $                               | 35,384     |             | $          | — |   | $ | 51,040 |   |
| Trade accounts  receivable, net of allowance for doubtful accounts     |       | —                |       | 18,259                   |       | 56,151                      |       | —                          |       | 74,410           |       |
| Other  receivables and intercompany receivables                        |       | 40                    |       | 5,387                    |       | 9,060                       |       | (5,359                          | )          | 9,128            |       |
| Inventories                                                            |       | —                |       | 6,038                    |       | 7,502                       |       | —                          |       | 13,540           |       |
| Other current  assets                                                  |       | 1,315                 |       | 4,734                    |       | 2,747                       |       | —                          |       | 8,796            |       |
| Total current  assets                                                  |       | 13,706                |       | 37,723                   |       | 110,844                     |       | (5,359                          | )          | 156,914          |       |
| Property and equipment,  net                                           |       | 600                   |       | 16,535                   |       | 6,374                       |       | —                          |       | 23,509           |       |
| Trademarks and  other intangible assets, less accumulated amortization |       | 58,242                |       | —                   |       | 102,455                     |       | —                          |       | 160,697          |       |
| Goodwill, less  accumulated amortization                               |       | —                |       | 107,209                  |       | —                      |       | —                          |       | 107,209          |       |
| Deferred  financing costs, less accumulated amortization               |       | 9,586                 |       | —                   |       | —                      |       | —                          |       | 9,586            |       |
| Other  non-current assets                                              |       | 1,822                 |       | 579                      |       | 301                         |       | —                          |       | 2,702            |       |
| Investment in  subsidiary and intercompany debt                        |       | 368,271               |       | 264,388                  |       | 264                         |       | (632,659                        | )          | 264              |       |
| Total assets                                                           |       | $                     | 452,227    |                     | $          | 426,434                     |       | $                               | 220,238    |             | $          | (638,018 | ) | $ | 460,881 |   |
| **Liabilities**                                                        | ** ** | ** **            | ** ** | ** **               | ** ** | ** **                  | ** ** | ** **                      | ** ** | ** **       | ** ** |
| Accounts payable  and intercompany payables                            |       | $                     | 73,743     |                     | $          | 11,752                      |       | $                               | 13,544     |             | $          | (76,421 | ) | $ | 22,618 |   |
| Income taxes  payable                                                  |       | —                |       | 2                        |       | 1,029                       |       | —                          |       | 1,031            |       |
| Accrued expenses  and other liabilities                                |       | 12,818                |       | 13,474                   |       | 19,868                      |       | —                          |       | 46,160           |       |
| Current  maturities of long-term obligations                           |       | 12,119                |       | 59                       |       | —                      |       | —                          |       | 12,178           |       |
| Total current  liabilities                                             |       | 98,680                |       | 25,287                   |       | 34,441                      |       | (76,421                         | )          | 81,987           |       |
| Long-term  obligations and intercompany debt                           |       | 416,773               |       | 166,144                  |       | —                      |       | (166,079                        | )          | 416,838          |       |
| Other  liabilities                                                     |       | 5,373                 |       | 22,202                   |       | 3,080                       |       | —                          |       | 30,655           |       |
| Total  liabilities                                                     |       | 520,826               |       | 213,633                  |       | 37,521                      |       | (242,500                        | )          | 529,480          |       |
| **Stockholder’s  Equity (Deficit)**                               | ** ** | ** **            | ** ** | ** **               | ** ** | ** **                  | ** ** | ** **                      | ** ** | ** **       | ** ** |
| Total  stockholder’s equity (deficit)                             |       | (68,599               | )          | 212,801                  |       | 182,717                     |       | (395,518                        | )          | (68,599          | )          |
| Total  liabilities and stockholder’s equity (deficit)             |       | $                     | 452,227    |                     | $          | 426,434                     |       | $                               | 220,238    |             | $          | (638,018 | ) | $ | 460,881 |   |

 

14

----

 

**Unaudited Condensed Consolidating Balance Sheetat March 31, 2008**

 
| ** **                                                 | ** ** | **Merisant  Company** | ** ** | **Guarantor  Companies** | ** ** | **Non-  Guarantor  Companies** | ** ** | **Consolidating  Eliminations** | ** ** | **Consolidated** | ** ** |
|------------------------------------------------------------|------------|-----------------------|------------|--------------------------|------------|--------------------------------|------------|---------------------------------|------------|------------------|------------|
| **Assets**                                                 | ** ** | ** **            | ** ** | ** **               | ** ** | ** **                     | ** ** | ** **                      | ** ** | ** **       | ** ** |
| Cash and cash  equivalents                                 |       | $                     | 14,159     |                     | $          | 3,252                          |       | $                               | 28,419     |             | $          | — |   | $ | 45,830 |   |
| Trade accounts  receivable, net of allowances              |       | —                |       | 11,610                   |       | 59,891                         |       | —                          |       | 71,501           |       |
| Other  receivables and intercompany receivables            |       | 42                    |       | 5,162                    |       | 9,408                          |       | (5,113                          | )          | 9,499            |       |
| Inventories                                                |       | 198                   |       | 5,772                    |       | 14,732                         |       | —                          |       | 20,702           |       |
| Other current  assets                                      |       | 2,229                 |       | 4,550                    |       | 2,904                          |       | —                          |       | 9,683            |       |
| Total current  assets                                      |       | 16,628                |       | 30,346                   |       | 115,354                        |       | (5,113                          | )          | 157,215          |       |
| Property and  equipment, net                               |       | 600                   |       | 17,241                   |       | 7,255                          |       | —                          |       | 25,096           |       |
| Trademarks and  other intangible assets, net               |       | 56,222                |       | —                   |       | 99,211                         |       | —                          |       | 155,433          |       |
| Goodwill                                                   |       | —                |       | 107,209                  |       | —                         |       | —                          |       | 107,209          |       |
| Deferred  financing costs, net                             |       | 8,749                 |       | —                   |       | —                         |       | —                          |       | 8,749            |       |
| Other  non-current assets                                  |       | 851                   |       | 522                      |       | 314                            |       | —                          |       | 1,687            |       |
| Investment in  subsidiary and intercompany debt            |       | 378,381               |       | 277,580                  |       | 327                            |       | (655,961                        | )          | 327              |       |
| Total assets                                               |       | $                     | 461,431    |                     | $          | 432,898                        |       | $                               | 222,461    |             | $          | (661,074 | ) | $ | 455,716 |   |
| **Liabilities**                                            | ** ** | ** **            | ** ** | ** **               | ** ** | ** **                     | ** ** | ** **                      | ** ** | ** **       | ** ** |
| Accounts payable  and intercompany payable                 |       | $                     | 86,925     |                     | $          | 9,181                          |       | $                               | 13,003     |             | $          | (88,580 | ) | $ | 20,529 |   |
| Income taxes  payable                                      |       | —                |       | 2                        |       | 1,297                          |       | —                          |       | 1,299            |       |
| Accrued expenses  and other liabilities                    |       | 7,192                 |       | 10,478                   |       | 21,531                         |       | —                          |       | 39,201           |       |
| Current  maturities of long-term obligations               |       | 37,141                |       | 59                       |       | —                         |       | —                          |       | 37,200           |       |
| Total current  liabilities                                 |       | 131,258               |       | 19,720                   |       | 35,831                         |       | (88,580                         | )          | 98,299           |       |
| Long-term  obligations and intercompany debt               |       | 398,124               |       | 165,610                  |       | —                         |       | (165,559                        | )          | 398,175          |       |
| Other  liabilities                                         |       | 5,267                 |       | 24,138                   |       | 3,125                          |       | —                          |       | 32,530           |       |
| Total  liabilities                                         |       | 534,649               |       | 209,468                  |       | 38,956                         |       | (254,139                        | )          | 528,934          |       |
| **Stockholder’s  Equity (Deficit)**                   | ** ** | ** **            | ** ** | ** **               | ** ** | ** **                     | ** ** | ** **                      | ** ** | ** **       | ** ** |
| Total  stockholder’s equity (deficit)                 |       | (73,218               | )          | 223,430                  |       | 183,505                        |       | (406,935                        | )          | (73,218          | )          |
| Total  liabilities and stockholder’s equity (deficit) |       | $                     | 461,431    |                     | $          | 432,898                        |       | $                               | 222,461    |             | $          | (661,074 | ) | $ | 455,716 |   |

 

15

----

 

**UnauditedConsolidating Statement of Cash Flows For the Three months Ended March 31, 2007**

 
| ** **                                                                        | ** ** | **Merisant  Company** | ** ** | **Guarantor  Companies** | ** ** | **Non-  Guarantor  Companies** | ** ** | **Consolidating  Eliminations** | ** ** | **Consolidated** | ** ** |
|-----------------------------------------------------------------------------------|------------|-----------------------|------------|--------------------------|------------|--------------------------------|------------|---------------------------------|------------|------------------|------------|
|                                                                              |       |                  |       |                     |       |                           |       |                            |       |             |       |
| **Operating  activities**                                                         | ** ** | ** **            | ** ** | ** **               | ** ** | ** **                     | ** ** | ** **                      | ** ** | ** **       | ** ** |
| Net cash  provided by (used in) operating activities                              |       | $                     | (17,051    | )                        | $          | 2,662                          |       | $                               | 29,550     |             | $          | (14,534 | ) | $ | 627 |   |
| **Investing  activities**                                                         | ** ** | ** **            | ** ** | ** **               | ** ** | ** **                     | ** ** | ** **                      | ** ** | ** **       | ** ** |
| Purchases of  property and equipment                                              |       | —                |       | (158                     | )          | (51                            | )          | —                          |       | (209             | )          |
| Net cash used in  investing activities                                            |       | —                |       | (158                     | )          | (51                            | )          | —                          |       | (209             | )          |
| **Financing  activities**                                                         | ** ** | ** **            | ** ** | ** **               | ** ** | ** **                     | ** ** | ** **                      | ** ** | ** **       | ** ** |
| Principal  payments on long-term obligations, excluding revolving credit facility |       | (2,138                | )          | (10                      | )          | —                         |       | —                          |       | (2,148           | )          |
| Receivable/payable,  parent company                                               |       | 18,746                |       | (2,529                   | )          | (30,751                        | )          | 14,534                          |       | —           |       |
| Settlement of  loans for purchase of shares in Merisant Worldwide, Inc.      |       | 179                   |       | —                   |       | —                         |       | —                          |       | 179              |       |
| Net cash  provided by (used in) financing activities                              |       | 16,787                |       | (2,539                   | )          | (30,751                        | )          | 14,534                          |       | (1,969           | )          |
| Effect of  exchange rate on cash                                                  |       | —                |       | —                   |       | 118                            |       | —                          |       | 118              |       |
| Net increase  (decrease) in cash and cash equivalents                             |       | (264                  | )          | (35                      | )          | (1,134                         | )          | —                          |       | (1,433           | )          |
| Cash and cash  equivalents at beginning of period                                 |       | 782                   |       | 3,088                    |       | 19,860                         |       | —                          |       | 23,730           |       |
| Cash and cash  equivalents at end of period                                       |       | $                     | 518        |                     | $          | 3,053                          |       | $                               | 18,726     |             | $          | — |   | $ | 22,297 |   |

 

16

----

 

**UnauditedConsolidating Statement of Cash Flows For the Three months Ended March 31, 2008**

 
| ** **                                                                        | ** ** | **Merisant  Company** | ** ** | **Guarantor  Companies** | ** ** | **Non-  Guarantor  Companies** | ** ** | **Consolidating  Eliminations** | ** ** | **Consolidated** | ** ** |
|-----------------------------------------------------------------------------------|------------|-----------------------|------------|--------------------------|------------|--------------------------------|------------|---------------------------------|------------|------------------|------------|
|                                                                              |       |                  |       |                     |       |                           |       |                            |       |             |       |
| **Operating  activities**                                                         | ** ** | ** **            | ** ** | ** **               | ** ** | ** **                     | ** ** | ** **                      | ** ** | ** **       | ** ** |
| Net cash  provided by (used in) operating activities                              |       | $                     | (16,195    | )                        | $          | 1,834                          |       | $                               | 26,320     |             | $          | (19,869 | ) | $ | (7,910 | ) |
| **Investing  activities**                                                         | ** ** | ** **            | ** ** | ** **               | ** ** | ** **                     | ** ** | ** **                      | ** ** | ** **       | ** ** |
| Proceeds from  sale of property and equipment                                     |       | —                |       | —                   |       | 22                             |       | —                          |       | 22               |       |
| Purchases of  property and equipment                                              |       | —                |       | (1,574                   | )          | (1,248                         | )          | —                          |       | (2,822           | )          |
| Net cash used in  investing activities                                            |       | —                |       | (1,574                   | )          | (1,226                         | )          | —                          |       | (2,800           | )          |
| **Financing activities**                                                          | ** ** | ** **            | ** ** | ** **               | ** ** | ** **                     | ** ** | ** **                      | ** ** | ** **       | ** ** |
| Borrowings under  revolving credit facility                                       |       | 8,000                 |       | —                   |       | —                         |       | —                          |       | 8,000            |       |
| Principal  payments on long-term obligations, excluding revolving credit facility |       | (2,570                | )          | (15                      | )          | —                         |       | —                          |       | (2,585           | )          |
| Receivable/payable,  parent company                                               |       | 12,702                |       | (298                     | )          | (32,273                        | )          | 19,869                          |       | —           |       |
| Distribution to  shareholder                                                      |       | (150                  | )          | —                   |       | —                         |       | —                          |       | (150             | )          |
| Settlement of  loans for purchase of shares in Merisant Worldwide, Inc.      |       | 21                    |       | —                   |       | —                         |       | —                          |       | 21               |       |
| Net cash  provided by (used in) financing activities                              |       | 18,003                |       | (313                     | )          | (32,273                        | )          | 19,869                          |       | 5,286            |       |
| Effect of  exchange rate on cash                                                  |       | —                |       | —                   |       | 214                            |       | —                          |       | 214              |       |
| Net increase  (decrease) in cash and cash equivalents                             |       | 1,808                 |       | (53                      | )          | (6,965                         | )          | —                          |       | (5,210           | )          |
| Cash and cash  equivalents at beginning of period                                 |       | 12,351                |       | 3,305                    |       | 35,384                         |       | —                          |       | 51,040           |       |
| Cash and cash  equivalents at end of period                                       |       | $                     | 14,159     |                     | $          | 3,252                          |       | $                               | 28,419     |             | $          | — |   | $ | 45,830 |   |

 

**Item 2.Management’s Discussion and Analysis of Financial Condition and Results ofOperations**

 

*The following discussion should be read in conjunction with ourunaudited consolidated financial statements and accompanying notes includedelsewhere in this document. Our discussion of results by reportable segmentshould be read in conjunction with Note 2 to the  unaudited consolidated financial statementsincluded elsewhere in this document, which illustrates the reconciliation ofOperating EBITDA to loss before income taxes. Unless otherwise indicated orunless the context requires otherwise, all references in this discussion to “Merisant”,“us”, “our” or “our company” mean Merisant Company and its consolidatedsubsidiaries.*

 

**Overview**

 

Our company is a worldwide leader in themarketing of low-calorie tabletop sweeteners, with an estimated 22% dollarshare as of December 31, 2007 of a stable global retail market, which weestimate at $1.6 billion.  We believethat our company has the leading dollar market share as of December 31,2007 in almost half of what we estimate as the top twenty markets forlow-calorie tabletop sweetener sales. Our premium-priced brands, *Equal*®and *Canderel*®, are among the mostrecognized low-calorie tabletop sweetener products in the world, with aidedbrand awareness estimated at between 90% and 95% in our four top markets.  In addition to *Equal*® and *Canderel*®,we market our products under 18 other regional brands that enjoy significantbrand recognition in their target markets. We sell our brands in over 90 countries.

 

Our business is the result of over 25years of history in the low-calorie tabletop sweetener industry, first as adivision of G.D. Searle & Co. (“Searle”) and later Monsanto Company (“Monsanto”).  Searle invented the key sweetening ingredient

 

17

----

 

in many of our products, aspartame, in1965.  Aspartame was first approved forconsumer use in France in 1979, where Searle marketed the product under the *Canderel*® brand.  By the early 1980s, *Canderel*® was being marketed in much ofEurope.  In 1981, the U.S. Food and DrugAdministration approved the tabletop use of aspartame.  The following year, Searle launched *Equal*® in the United States.  Monsanto entered the sweetener market in 1985through its acquisition of Searle. Our company is a Delaware corporation thatwas formed in 2000 by an investor group led by an affiliate of Pegasus CapitalAdvisors, L.P. to acquire Monsanto Company’s tabletop sweetener business.

 

Our worldwide headquarters is located inChicago, Illinois, and we have principal regional offices in Mexico City,Mexico, Neuchâtel, Switzerland, and Paris, France.  We own and operate manufacturing facilitiesin Manteno, Illinois and Zarate, Argentina and own processing lines that areoperated exclusively for us at plants located in Bergisch and Stendal, Germanyand Bankrason, Thailand.  As of May 14,2008, we had 19 direct and indirect active subsidiaries, including foursubsidiaries in the United States, seven subsidiaries in Europe, five subsidiariesin Mexico, Central America and South America, and three subsidiaries in theAsia Pacific region, including Australia and India.  In addition, our Swiss subsidiary holds a 50%interest in a joint venture in the Philippines.

 

Our core business continues to be productssweetened with aspartame, and the *Equal*®and *Canderel*® tabletop sweetenerproducts accounted for approximately 85% of our net sales in 2007.  The majority of our eighteen other regionalbrands around the world are also sweetened with aspartame.

 

***Sales Trends and Strategy***

** **

Ourcompany’s premium-priced brands had enjoyed a dominant market position amonglow-calorie sweeteners in many of our key markets.  In recent years, however, we have facedsignificant competition from McNeil Nutritionals LLC, a subsidiary of Johnson &Johnson (“McNeil”), which markets and distributes the artificial sweetener*Splenda*®. *Splenda*® is sweetened withsucralose, which is produced by Tate & Lyle PLC through a complexchemical process that converts sucrose molecules into a synthetic compound.From December 2002 to December 2007, *Splenda*®’sdollar share of the United States retail grocery market has grown fromapproximately 15% to 61% and has surpassed that of *Equal*® to become the number one premium low-calorie sweetenerin the United States.  While we believethat the introduction of *Splenda*®has increased the size of the market for low-calorie sweeteners in general, ournet sales have declined during this period, particularly in North America whichhad accounted for 46% and 40% of our net sales in 2003 and 2007,respectively.  As a result of decliningnet sales, we have experienced significant declines in our Bank EBITDA from$110.2 million in 2003 to a low of $67.2 million in 2006, before increasing to$69.9 million in 2007.  For a descriptionof Bank EBITDA and a reconciliation of Bank EBITDA to cash flow from operatingactivities, see “Management’s Discussion and Analysis of Financial Conditionand Results of Operations—Liquidity and Capital Resources”.

 

We believe that there are opportunities for future growth in thelow-calorie tabletop sweetener and sweetened food category and that our companyis positioned to pursue these opportunities. Despite recent declines in net sales, our premium brands *Equal*® and *Canderel*® are among the most recognized low-calorie tabletopsweetener products in the world, with aided brand awareness estimated between90% and 95% in our top four markets.

 

A new management team launched efforts to revitalize our company’sbusiness.  Paul Block was appointed ChiefExecutive Officer in November 2004 and has led an initiative to strengthenour company’s core brands, improve the efficiency of our operations, reducecosts and transform our company into a sweetener and sweetened foodcompany.   Mr. Block has recruitedindividuals from outside our company and promoted individuals from within theorganization to form a new senior management team with the goal of developing aculture of innovation with a focus on the development and launch of new productsdesigned to revitalize the existing customer base and attract new consumers.

 

Our company seeks to stabilize and then grow revenues through thefollowing five strategic initiatives:

 

·      Promote new usage among existingconsumers and expand the *Equal*® and *Canderel*® brand positioning to attract new consumers throughinvasive marketing campaigns and improved sales execution.

 

·      Increase the pace of product innovationto bring new products and brand extensions to the market, including productssweetened with high intensity sweeteners other than aspartame.

 

18

----

 

·      Develop and test products that have thepotential to transform our company’s brand portfolio, including by building aplatform for all natural, low-calorie sweeteners and sweetened foods.

 

·      Dedicate significant resources toimproving the efficiency of operations by, among other things, implementingprograms to streamline manufacturing capabilities and improving the efficiencyof certain support services.  We havesuccessfully reduced costs and made our business more efficient, which hassignificantly contributed to the current stabilization of Bank EBITDA over thepast two years.

 

·      Offer private label low-caloriesweeteners to retail and food service customers and leverage supply chainexpertise globally.

 

**CapitalConstraints and Need to Refinance or Restructure**

 

We believe thatthe development and introduction of new products under our *Equal*®and *Canderel*® brands may help to stabilizeour core business while innovative, all-natural sweeteners and sweetened foodproducts under our Whole Earth Sweetener Company present growth opportunitiesfor us. However, we may be constrained in our ability to realize fully thevalue of these new products as a result of our current capital structure. Thesuccessful launch of new products and marketing of our core brands requirescapital, and we must use a significant portion of our cash flows fromoperations to service our outstanding debt. We had an aggregate of $435.4 millionof long-term debt outstanding at March 31, 2008, including capital leaseobligations and borrowings from our revolving credit facility.  We paid $15.2 million in interest costs forthe three months ended March  31, 2008, $10.7 million of which representedinterest payments on our 9 1⁄2% senior subordinated notes due 2013 (the “Notes”).If we cannot generate cash flows from operations significantly in excess of ourdebt obligations, we may not have the resources required to fully realize thevalue of our strategic initiatives.

 

In order tomaximize value, management is focused on refinancing or restructuring all orpart of our debt obligations.  On January 11,2009, approximately $4.1 million principal amount of the Term A loans and anyrevolving loans outstanding under our senior credit facility will become dueand payable, and we will no longer be able to draw revolving loans or issueletters of credit under our senior credit facility.  In addition, interest on the 12 1⁄4% seniorsubordinated discount notes due 2014 (the “Discount Notes”) of MerisantWorldwide, Inc. (“Merisant Worldwide”), our parent company, will becomepayable in cash commencing on May 15, 2009.  The indenture governing the Notes limits ourcompany’s ability to pay dividends or loan cash to Merisant Worldwide, whichhas no operations of its own.

 

On March 17,2008, we launched efforts to arrange a new $245 million senior secured creditfacility, comprised of $210 million of term loans and a $35 million revolvingloan facility (the “New Credit Facility”). Under the terms contemplated, we anticipated that we would have had moreflexibility under its covenants to further stabilize our core business, pursueour growth initiatives and address the challenges of our current capitalstructure.  On April 2, 2008, weceased refinancing efforts due to adverse market conditions that prevented usfrom obtaining favorable terms.  We mayengage in discussions from time to time with our noteholders on ways torestructure all or part of our other debt obligations.

 

**Results ofOperations**

 

For eachof the periods discussed below, the information set forth under the caption “ConsolidatedResults” represents an overview of our company’s results of operations on aconsolidated basis. Additional detail regarding the results of operations canbe found under the caption “Segment Results” for each period discussed below.

 

***Three Months Ended March 31,2008 Compared to Three Months Ended March 31, 2007***

 

The following table sets forth certain of our company’sfinancial data for the three month periods ended March 31, 2007 and 2008(totals may not foot due to rounding).

 

19

----

 
| ** **                         | ** ** | **Three Months Ended  March 31,** | ** ** | **Three Months Ended  March 31,** | ** ** |
|------------------------------------|------------|--------------------------------------------------|------------|--------------------------------------------------|------------|
| ** **                         | ** ** | **2007**                                         | ** ** | **2008**                                         | ** ** | **2007** | ** ** | **2008** | ** ** | **Better/(Worse)  than Prior Year** | ** ** |
| ** **                         | ** ** | **(in millions)**                           | ** ** | **As% of Net Sales**              | ** ** | **Dollars** | ** ** | **%** | ** ** |
| Net sales                          |       | $                                                | 69.3       |                                             | $          | 68.9 |   | 100 | % | 100 | % | $ | (0.4 | ) | (1 | )% |
| Cost of sales                      |       | 30.7                                             |       | 32.9                                             |       | 44 | % | 48 | % | (2.2 | ) | (7 | )% |
| Gross profit                       |       | 38.6                                             |       | 36.0                                             |       | 56 | % | 52 | % | (2.6 | ) | (7 | )% |
| Operating  expenses:               |       |                                             |       |                                             |       |   |   |   |   |   |   |   |   |
| Marketing and  selling expenses    |       | 15.2                                             |       | 14.4                                             |       | 22 | % | 21 | % | 0.9 |   | 6 | % |
| Administration  expenses           |       | 11.9                                             |       | 10.0                                             |       | 17 | % | 15 | % | 1.9 |   | 16 | % |
| Amortization of  intangible assets |       | 5.7                                              |       | 5.3                                              |       | 8 | % | 8 | % | 0.5 |   | 8 | % |
| Restructuring  expenses            |       | 0.6                                              |       | 0.1                                              |       | 1 | % | 0 | % | 0.4 |   | 80 | % |
| Total operating  expenses          |       | 33.4                                             |       | 29.8                                             |       | 48 | % | 43 | % | 3.6 |   | 11 | % |
| Income from  operations            |       | 5.2                                              |       | 6.2                                              |       | 7 | % | 9 | % | 1.0 |   | 21 | % |
| Other expenses  (income):          |       |                                             |       |                                             |       |   |   |   |   |   |   |   |   |
| Interest income                    |       | (0.2                                             | )          | (0.3                                             | )          | (0 | )% | (0 | )% | 0.1 |   | 48 | % |
| Interest expense                   |       | 12.0                                             |       | 10.1                                             |       | 17 | % | 15 | % | 1.9 |   | 16 | % |
| Other expense  (income), net       |       | 0.1                                              |       | 0.8                                              |       | 0 | % | 1 | % | (0.7 | ) | (476 | )% |
| Total other  expenses              |       | 11.9                                             |       | 10.6                                             |       | 17 | % | 15 | % | 1.4 |   | 11 | % |
| Loss before  income taxes          |       | (6.8                                             | )          | (4.4                                             | )          | (10 | )% | (6 | )% | 2.7 |   | (35 | )% |
| Provision for  income taxes        |       | 1.8                                              |       | 2.1                                              |       | 3 | % | 3 | % | (0.2 | ) | (13 | )% |
| Net loss                           |       | $                                                | (8.6       | )                                                | $          | (6.5 | ) | (12 | )% | (9 | )% | $ | 2.1 |   | 25 | % |

 

20

----

** **

**Consolidated Results**

 

*Net sales.*Overall, net sales declined slightly in the first quarterof 2008 compared to the first quarter of 2007. The decline was related to lower sales in North America and Asia Pacificoffset by higher sales in EAME and Latin America.  In North America, net sales declined as aresult of a decline in consumer consumption and a decline in inventory levelsmaintained by our distributor in the food service channel.  These negative impacts on net sales wereslightly offset by decreased trade marketing spending.  In Asia Pacific, we had high net sales in thefirst quarter of 2007 related to shipments to new distributors to establishbeginning inventory levels which did not repeat in 2008.  Offsetting these declines were improvedperformance in the EAME and Latin America regions along with the consolidatedsales impact of the devaluation of the U.S. dollar and the resulting currencytranslation impact which accounted for approximately $3.7 million of netsales.  In the EAME region, the UK salescontinued the momentum achieved in the second half of 2007 as the impact of thelate 2006 diversion has subsided.  Additionally,Belgium sales increased partially as a result of strong consumer market trends. In LatinAmerica, Mexico reported unusually low sales in the first quarter of 2007 as weconverted to a direct distribution model, while in the first quarter of 2008 wecontinued to experience the steady sales trend that was reported in the secondhalf of 2007.

 

*Cost of sales.* Cost of sales increased, despite the slightdecline in sales, due to sales increases in lower margin products, such ascontract manufacturing, the impact of purchasing product in euro for sales incountries with weaker currencies and unfavorable raw material purchaseprices.  Overall, gross profit as apercentage of net sales declined from 56% for the three months ended March 31,2007 to 52% for the three months ended March 31, 2008 due to the increasesin costs discussed above as well as increased trade marketing in France.

 

*Operating expenses.*Marketing and selling expensesdecreased due to lower brand support in EAME and Asia Pacific as well as lowerbrand support, lower commissions and lower performance based incentives inNorth America.  These favorable impactswere partially offset by higher brand support in the Latin American region,unfavorable currency impacts and increased costs related to our new productlaunch.  Administration expensesdecreased mainly due to lower litigation and consulting costs.

 

During the first quarter of 2008, we continued ourrestructuring initiatives to improve both financial results and the long-termvalue of the business. As a result of these actions, we recorded restructuringcharges for workforce reductions of $0.1 million in the first quarter of 2008as compared to $0.6 million in the first quarter of 2007. The restructuringcharges incurred in the first quarter of 2008 relate primarily to continuing provisions for previouslynotified employees being recorded over their stay periods and are expected to be substantially paid by September 30,2008. Additional information regarding restructuring charges and the relatedliability can be found in Note 3 to the unaudited consolidated financialstatements located elsewhere in this document.

 

*Interest.*Ourinterest expense decreased as a net result of lower interest bearing loansunder our Amended and Restated Credit Agreement compared to the higher interestbearing loans under our Second Lien Credit Agreement, as well as overalldecreases in interest rates on variable interest debt instruments.  Our borrowings under the Senior CreditAgreement and Second Lien Credit Agreement had a weighted average interest rateof approximately 10.3% per annum upon the closing of the Second Lien CreditAgreement.  In May 2007, werefinanced and therefore terminated the Second Lien Credit Agreement asdescribed below.

 

*Other expense, net*. The $0.7 million increase inother income/expense, net from the first quarter of 2007 compared to the firstquarter of 2008 is related to the difference in the respective period’scurrency losses on the euro-denominated debt. The loss was $0.3 million in the three months ended March 31, 2007versus $1.0 million in the three months ended March 31, 2008.

 

*Taxes.*For the three months ended March 31, 2008, werecorded a $2.1 million tax provision on a loss before income taxes of $4.4million. The unusual relationship of our tax provision to the pre-tax loss inthe first quarter of 2008 relates to a combination of factors. These factorsinclude increased tax loss carryforwards, primarily generated in the UnitedStates, for which we have not recorded a tax benefit, as well as **provisionsfor future tax costs which may be incurred upon the potential repatriation ofcertain 2008 foreign earnings that are not deemed to be permanentlyreinvested. **With regard to the deferred income taxassets on the tax loss carryforwards, we determined that we have not satisfiedthe “more likely than not” test and we increased our total valuation allowanceby $0.5 million in the first quarter of 2008 to a total of $70.0 million. Wewill continue to assess the valuation allowances, and, to the extent wedetermine that such allowances are no longer required, these deferred incometax assets will be recognized in the future.

 

21

----

 

**Segment Results**

 

Thefollowing table presents net sales and Operating EBITDA expressedin millions of dollars for each reportable segment (totals may not footdue to rounding):

 
| ** **               | ** ** | **Net Sales**                           | ** ** | **Operating EBITDA (1)**            | ** ** |
|--------------------------|------------|----------------------------------------------|------------|-----------------------------------------------|------------|
| ** **               | ** ** | **Three Months  Ended  March 31,** | ** ** | **Better/(Worse)  than Prior Year** | ** ** | **Three Months  Ended  March 31,** | ** ** | **Better/(Worse)  than Prior Year** | ** ** |
| ** **               | ** ** | **2007**                                     | ** ** | **2008**                                      | ** ** | **$** | ** ** | **%** | ** ** | **2007** | ** ** | **2008** | ** ** | **$** | ** ** | **%** | ** ** |
| ** **               | ** ** | **(in millions)**                       | ** ** | **(in millions)**                        | ** ** |
| ** **               | ** ** | ** **                                   | ** ** | ** **                                    | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| North America  (2)       |       | $                                            | 28.9       |                                          | $          | 23.2 |   | $ | (5.8 | ) | (20 | )% | $ | 10.3 |   | $ | 6.2 |   | $ | (4.1 | ) | (40 | )% |
| Operating EBITDA  Margin |       |                                         |       |                                          |       |   |   |   |   | 36 | % | 27 | % | (9 | )% |   |   |
| EAME                     |       | 26.6                                         |       | 32.2                                          |       | 5.6 |   | 21 | % | 7.0 |   | 10.6 |   | 3.6 |   | 52 | % |
| Operating EBITDA  Margin |       |                                         |       |                                          |       |   |   |   |   | 26 | % | 33 | % | 6 | % |   |   |
| Latin America            |       | 5.3                                          |       | 7.6                                           |       | 2.3 |   | 44 | % | 1.1 |   | 2.2 |   | 1.1 |   | 101 | % |
| Operating EBITDA  Margin |       |                                         |       |                                          |       |   |   |   |   | 21 | % | 29 | % | 8 | % |   |   |
| Asia/Pacific             |       | 8.5                                          |       | 5.9                                           |       | (2.6 | ) | (31 | )% | 4.1 |   | 2.5 |   | (1.6 | ) | (39 | )% |
| Operating EBITDA  Margin |       |                                         |       |                                          |       |   |   |   |   | 48 | % | 42 | % | (6 | )% |   |   |
|                          |            |                                              |            |                                               |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

----

(1)   “Operating EBITDA” as used with respectto our operating segments is a measure upon which we assess the financialperformance of these segments. Operating EBITDA excludes interest expense,income tax expense and depreciation and amortization, as well as items such asrestructuring expenses, certain significant charges related to new productdevelopment and launch costs, certain litigation costs, cost related to thetransition to a new exclusive distributor in the United States and certainother non-cash items. Our definition of Operating EBITDA largely mirrors thedefinition of Bank EBITDA under our Senior Credit Facility.  That definition changed in the May 2007amendment of those credit facilities, and that change is reflectedprospectively in our computation of Operating EBITDA for the 2007 period.  See Note 2 to the unaudited consolidatedfinancial statements for a description of Operating EBITDA and a reconciliationof Operating EBITDA to income (loss) before income taxes. Operating EBITDAmargin represents Operating EBITDA as a percentage of net sales.

 

(2)   NorthAmerica segment results exclude immaterial sales and $1.3 million of negativeOperating EBITDA related to a new product launch which management evaluatesseparately from this geographical segment for the three month period ended March 31,2008.

 

***North America***

 

*Net sales.*  In North America,net sales declined due to decreased sales volume and consumer consumption inthe club, foodservice, and retail channels slightly offset by decreased trademarketing spending.   The timing of ourpromotional activities in the club channel varied when compared to 2007 resultingin lower shipments in the three months ended March 31, 2008 compared tothe same period in 2007.  Our distributorinventory levels were higher than usual at December 31, 2007 in thefoodservice channel which resulted in a decrease in shipments during the firstquarter of 2008 compared to the first quarter of 2007.

 

On January 29, 2008, we delivered noticeto ACH that the distribution agreement between Merisant US, Inc. and ACHwould terminate on July 27, 2008 with respect only to the retail grocerychannel.  We have partially terminatedthe distribution agreement so that we can pursue a direct distribution modelfor retail customers in the United States. We will handle order processing, warehousing and trade marketinginternally and through a third-party broker and logistics providers for retailgrocery and drug customers in the United States which we anticipate will reduceour operating costs,  improve theefficiency of our inventory management and distribution capabilities, andprovide more transparency in customer relations.  On March 4, 2008, Merisant and ACHagreed that Merisant will pay $0.3 million to ACH and that commissions will not increase in connection with thepartial termination of the distribution agreement.  This expense is included in operatingexpenses for the three months ended March 31, 2008.

 

22

----

 

*Operating EBITDA.*The decrease in Operating EBITDAand Operating EBITDA margin were primarily related to the margin impact oflower net sales and unfavorable sales mix. These unfavorable impacts were partially offset by lower overall brandsupport, commissions and lower sales and marketing administration costs.

 

***EAME***

 

*Net sales.*In the EAME region, the increase in net sales was drivenprimarily by the UK and Belgium along with the positive currency translationimpact. In the first quarter of 2007, as a result of diversion of product into the retailchannel we discontinued sales to certain distributors in an effort to stop thediversion.  In the first quarter of 2008,sales in the UK continued to perform at levels realized in the second half of2007 after stopping the diversion of product. In Belgium, our distributor carried higher inventories than expected at December 31,2006, negatively impacting sales in the first quarter of 2007 and thusreflecting a favorable quarter to quarter comparison along with recent marketstrengthening.   Continued softness in consumer demand as wellas increased trade spending reduced sales in France.  Thedevaluation of the U.S. dollar and the resulting currency translation effect onour financial statements accounted for approximately $2.9 million of the netsales increase in the EAME region.

 

*Operating EBITDA.* Operating EBITDA increased mainly due tohigher net sales and lower brand support in France and the UK, along withreduced general administrative costs due mainly to savings from restructuringactions and facility related changes in France. The increase in Operating EBITDA margin was primarily due to highersales driven by the UK favorable sales variances and reduced selling andgeneral and administrative costs offset by a slight decrease in gross margin asa percent of sales.

 

***Latin America***

 

*Net sales.* Improved sales inthe first quarter of 2008 relates primarily to our transition in Mexico from adistributor model to a direct model in the first quarter of 2007 which resultedin lower sales, in part because of delayed shipments.  During the first quarter of 2008, our Mexicooperations achieved sales at levels comparable to the level of sales achievedprior to the change in distribution models.  In addition, Argentina sales volume increased due to shipments forupcoming sales promotions.

 

*Operating EBITDA.*Operating EBITDA and OperatingEBITDA margin increased due to the positive impact of higher sales.

 

***Asia/Pacific***

 

*Net sales.*Net sales in the Asia/Pacific region decreased primarilydue to unusually high sales in the first quarter of 2007 related to shipmentsto new distributors in Australia and India to establish beginning inventorylevels which did not repeat in 2008. 

 

*Operating EBITDA.*Operating EBITDA and OperatingEBITDA margin decreased primarily due to the decreased sales coupled with highercost of goods sold and lower brand support against significantly lower sales.

 

**Corporate Expenses**

 

Corporate expenses decreased from $9.3 million in thefirst quarter of 2007 to $6.2 million in the first quarter of 2008, primarilydue to lower litigation costs relating to our lawsuit against McNeil and costsrelating to our *Sweet Simplicity®* line that wereexcluded from corporate expenses in the first quarter of 2008 but included incorporate expenses in the first quarter of 2007 as required by our EBITDAdefinition in effect for the period. These decreases were offset by higher facility related expenses in thefirst quarter of 2008.

 

**Liquidity and Capital Resources**

 

Our liquidity needs areprimarily met through internally generated cash flow supplemented in 2007 by aone-time  payment received pursuant to anagreement with a third party. As needed, we also borrow money under therevolving credit facility of the Amended and Restated Credit Agreement.  Our primary uses of cash are cost of sales,operating expenses, debt service, capital expenditures and distributions to ourstockholder. Foreign subsidiaries generatedapproximately 59% of consolidated net sales during the year ended December 31,2007, and we have relied upon the repatriation of cash from our 

 

23

----

 

foreign subsidiaries to satisfy many of our domesticcash requirements. Historically, we had received a vast majority of funds fromforeign subsidiaries through our Swiss subsidiary in the form of paymentspursuant to a promissory note. This promissory note was repaid in full in January 2006.On March 30, 2006, we issued a revolver note to our Swiss subsidiary,which will mature in 2011. We may borrow up to $200 million from our Swisssubsidiary during the term of the revolver note, and we expect to repatriatecash to the United States through borrowings under this revolver note. Theprincipal balance relating to this revolving note as of March 31, 2008 was$78 million.

 

We had $45.8million of cash and cash equivalents as of March 31, 2008 compared to$51.0 million of cash and cash equivalents at December 31, 2007.  The decrease is related to scheduled debt andinterest payments along with first quarter operating cash expenditures.  The decrease was offset with $8.0 million inborrowings from our revolving credit facility. We were required to prepay $15.2million of the principal amount of term loans outstanding under our Amended andRestated Credit Agreement five business days after filing our Annual Reportwith excess cash as required and calculated under the terms of our Amended andRestated Credit Agreement.  Thisprepayment was made on April 4, 2008 and decreased our cash balanceaccordingly.

 

Accounts receivablelevels, time to payment and inventory levels impact the amount of internallygenerated cash flow. The following table shows information with respect toaccounts receivable and inventory as of December 31, 2007 and March 31,2008.  Accountsreceivable decreased in the three months ended March 31, 2008 primarilydue to higher sales in the fourth quarter of 2007 compared to the first quarterof 2008 and timing of collection from ACH, our largest customer.  Inventory levels increased in the threemonths ended March 31, 2008 as compared to December 31, 2008,primarily due to planned increases in finished goods quantities on hand in ourforeign subsidiaries related to supply chain sychronization efforts to decreaselead times.

 

| ** **                         | ** ** | **December 31, 2007** | ** ** | **March 31, 2008** | ** ** |
|------------------------------------|------------|---------------------------------|------------|------------------------------|------------|
|                               |       |                            |       |                         |       |
| Accounts  receivable (in millions) |       | $                               | 74.4       |                         | $          | 71.5 |   |
| Days sales  outstanding            |       | 92                              |       | 89                           |       |
| Inventory (in  millions)           |       | $                               | 13.5       |                         | $          | 20.7 |   |
| Days sales in  inventory           |       | 38                              |       | 57                           |       |

 

***Three Months Ended March 31, 2008 Compared toThree Months Ended March 31, 2007***

 

Forthe three months ended March 31, 2008, net cash used by operatingactivities was $7.9 million compared to cash provided of $0.6 million for thethree months ended March 31, 2007. Operating cash flows decreased $8.5million versus the three months ended March 31, 2007, due to a decrease inthe contribution from working capital of $11.0 million and increased net incomeafter adjusting for non-cash items of $2.5 million.

 

Netcash used in investing activities totaled $2.8 million for the three monthsended March 31, 2008 compared to $0.2 million for the three months ended March 31,2007 due to increased spending on capital expenditures.

 

For the three months ended March 31,2008, financing activities provided $5.3 million in cash as compared to using$2.0 million in cash for the three months ended March 31, 2007.  For the three months ended March 31,2008, we used cash to pay our scheduled principal payments under the Amendedand Restated Credit Agreement and borrowed $8 million under our revolvingcredit facility.   In the three monthsended March 31, 2007, we used cash to pay our scheduled principal paymentsunder the Amended and Restated Credit Agreement.  In addition, distributions of $0.2 millionwere made to our sole stockholder in the first quarter of 2008 for the purposeof paying administrative expenses. Borrowings under our revolving loan facility were $0 at December 31,2007 and $8 million at March 31, 2008.

 

***Capital Expenditures***

 

Capitalexpenditures in 2008 are expected to be in the range of $21 million to$24 million, relating to forecasted purchases of equipment and capitalimprovements necessary to further optimize our manufacturing operations. Webelieve that internally generated cash flow, together with borrowing availableunder the Amended and Restated Credit Agreement, will be sufficient to fundcapital expenditures during the remainder of 2008. We anticipate that we willseek to refinance our existing Amended and Restated Credit Agreement prior tothe scheduled maturity of our revolver credit facility in January 2009. If weare unable to obtain a new revolver credit facility or extend the maturity ofour current credit facility we may be required to reduce our planned capitalexpenditures for 2009.

 

24

----

 

***Financing***

 

On July 11, 2003, we issued $225.0 millionprincipal amount of the Notes and refinanced our credit facility with theSenior Credit Agreement.  A portion ofthe proceeds of the Notes and the Senior Credit Agreement were used to pay adividend to our sole stockholder. The Notes are unsecured obligations and aresubordinated in right of payment to all existing and future senior indebtednessof our company. The Notes mature on July 15, 2013. The stated rate ofinterest for the Notes is 91¤2%per annum. Interest is payable semi-annually in arrears on January 15thand July 15th.

 

The Senior Credit Agreement, asof March 31, 2008, provides for aggregate commitments of up to $310.0million, consisting of a revolving loan facility of $35.0 million, of which aportion is available at our option in euro or dollars or in the form of lettersof credit denominated in dollars or euro, as well as term loan facilities of$275.0 million, consisting of a euro Term Loan A of an original amount of $50.0million, and a Term Loan B of an original amount of $225.0 million, denominatedin dollars. The euro Term Loan A and the revolving loan facility mature in 2009while the Term Loan B matures in 2010. The Senior Credit Agreement isguaranteed by our sole stockholder and each of our domestic subsidiaries. TheSenior Credit Agreement and the guarantees of the guarantors aresecured by a first-priority security interest in substantially all of ourassets and the assets of the guarantors.

 

On June 23,2006, we entered into the Second Lien Credit Agreement, the borrowings underwhich were substantially used to pay down amounts outstanding under the SeniorCredit Agreement.  The Second Lien CreditAgreement increased the aggregate principal amount of our indebtedness by $7.2million and increased our interest expense. Our loans outstanding under the Senior Credit Agreement had a weightedaverage interest rate of approximately 9.0% per annum prior to the closing ofthe Second Lien Credit Agreement.  Ourborrowings under the Senior Credit Agreement and Second Lien Credit Agreementhad a weighted average interest rate of approximately 10.3% per annum upon theclosing of the Second Lien Credit Agreement.

 

On May 9,2007, we amended and restated our Senior Credit Agreement (the “Amended andRestated Credit Agreement”), which, among other things, increased by $85.0million the principal amount of Tranche B Term Loans that could be borrowed byus under the facility.  We paid $2.5million in fees and expenses related to this amendment and restatement whichwere deferred and are being amortized over the term of the related debt. Uponclosing, we borrowed the full $85.0 million of additional Tranche B Term Loansand used the proceeds plus cash on hand to prepay the principal of all loansoutstanding under the Second Lien Credit Agreement totaling $85.0 million, plusall outstanding interest of $1.4 million and a premium of $2.6 million, or$89.0 million.  The Second Lien CreditAgreement has been terminated as a result of the transaction and there was noincrease in our long term debt.  Inaddition to the incurrence of fees, this transaction resulted in a write-off ofexisting deferred financing fees relating to the extinguishment of previouslyoutstanding debt in the amount of $3.2 million.

 

Upon closing of the above transaction and execution ofthe related amendment, the interest rate on all term loans and revolving loansoutstanding under the Amended and Restated Credit Agreement increased fromeuro-LIBOR and LIBOR plus 325 basis points per annum to euro-LIBOR and LIBORplus 350 basis points per annum.  As aresult of the termination of the Second Lien Credit Facility, our effectiveinterest rate on variable interest rate debt decreased from 10.63% per annumprior to the closing of this transaction to 8.73% per annum subsequent to thistransaction.  As of March 31, 2008,we had $208.8 million in borrowings outstanding under the Amended and RestatedCredit Agreement with an effective interest rate of 7.31%.  As a result of the $15.2 million prepaymentof term loans under the Amended and Restated Credit Agreement and a reduction ofthe LIBOR, we anticipate that our cash interest expense will decrease byapproximately $4 million for the year ending December 31, 2008 compared tothe year ended December 31, 2007.

 

**Bank EBITDA**.  The Amendedand Restated Credit Agreement requires us to maintain compliance with aconsolidated first-lien leverage ratio covenant, a consolidated leverage ratiocovenant and a consolidated interest coverage ratio covenant. These ratios aremeasured on the basis of Bank EBITDA for the four fiscal quarters ending atleast 45 days prior to the payment date. Bank EBITDA is discussed here because it is the measure upon which thecovenants contained in the Amended and Restated Credit Agreement aremeasured.  However, Bank EBITDA is not ameasure of liquidity under GAAP. Accordingly, while providing usefulinformation with respect to assessing compliance with covenants under ourprimary debt obligations, this measure should not be considered in isolationfrom, or as a substitute for, consolidated statement of cash flow data preparedin accordance with GAAP as an indication of liquidity. In addition, the BankEBITDA measure presented may differ from, and may not be comparable to,similarly titled measures used by other companies.

 

Bank EBITDA as defined under the Amended and RestatedCredit Agreement excludes interest expense, income tax and gross receipts taxexpense, depreciation and amortization as well as certain other expenses andnon-cash items, including:

 

25

----

 

·                                          any extraordinary, unusual ornon-recurring non-cash expenses or losses (including non-cash losses on salesof assets outside of the ordinary course of business);

 

·                                          non-cash contributions and other non-cashcompensation expense;

 

·                                          non-cash losses attributable to equity innon-consolidated subsidiaries;

 

·                                          transaction costs associated with the2003 recapitalization transaction which are expensed and not amortized;

 

·                                          any cash expenses incurred in connectionwith any waiver of a Default or Event of Default and any amendment to theAmended and Restated Credit Agreement;

 

·                                          any non-cash foreign currency translationadjustments;

 

·                                          any extraordinary or non-recurring cashlosses or expenses arising from restructuring not to exceed in theaggregate  (A) if such period endsprior to January 1, 2006, $14,600,000, or (B) if such period beginson or after January 1, 2006, (x) $11,000,000 with respect to any suchnon-recurring cash losses or expenses arising from the implementation of ourplan known as “Project Arrow” and related restructuring, (y) $4,000,000 withrespect to any such non-recurring cash losses or expenses arising from thetransition from Heinz to ACH as our exclusive distributor in the United States;and (z) any cash expenses incurred in connection with (i) any waiverof a default or event of default and any amendment to the Senior CreditAgreement including the fees and expenses of any attorneys and financialadvisers retained by the administrative agent pursuant thereto with respect toany such waiver or amendment and (ii) the negotiation, execution andclosing of the Second Lien Credit Agreement and any waiver of a default orevent of default and any amendment to the Second Lien Credit Agreementincluding the fees and expenses of any attorneys and financial advisersretained by the administrative agent with respect to any such waiver oramendment;

 

·                                          expenses incurred by us or any subsidiaryprior to January 1, 2007 in connection with the development andcommercialization of our all-natural, zero-calorie sweetener to be marketedunder the *Sweet Simplicity®* trademark in an amountnot to exceed in the aggregate $3,000,000 and prior to January 1, 2009 inan amount not to exceed in the aggregate $15,000,000; and

 

·                                          expenses incurred between January 1,2007 and December 31, 2007 in connection with our litigation againstMcNeil and McNeil-PPC, Inc. in an amount not to exceed $4,000,000.

 

Bank EBITDA for the three monthsended March 31, 2008 under the Amended and Restated Credit Agreement was$15.3 million as compared to $16.1 million for the three months ended March 31,2007, adjusted to reflect litigation costs and *Sweet Simplicity®*productlaunch costs on a comparable basis with the current definition of Bank EBITDA.  We were in compliance with the covenantsunder the Amended and Restricted Credit Agreement at March 31, 2008.

 

The following table illustrates the reconciliation of Bank EBITDA tocash flow from operating activities, which management believes is the mostnearly equivalent GAAP measure:

 

26

----

 
| ** **                                                        | ** ** | **Three Months  Ended  March 31, 2008** | ** ** |
|-------------------------------------------------------------------|------------|--------------------------------------------------------|------------|
| ** **                                                        | ** ** | **(in millions)**                                 | ** ** |
| Net cash used by  operating activities                            |       | $                                                      | (7.9       | ) |
| Provision for  income taxes, net of deferred income tax provision |       | 0.7                                                    |       |
| Interest  expense, net of non-cash interest expense               |       | 9.0                                                    |       |
| Restructuring  expenses (a)                                       |       | 0.6                                                    |       |
| Other non-cash  items                                             |       | 1.8                                                    |       |
| Equity in  (income) loss of affiliates                            |       | 0.1                                                    |       |
| Net change in  operating assets and liabilities                   |       | 11.0                                                   |       |
| Bank EBITDA                                                       |       | $                                                      | 15.3       |   |

 

----

(a)                                 The charges principally relate to continuingprovisions for previously notified employees and specified projectimplementation costs.

 

***ForwardLooking Statements***

 

Certaininformation included or incorporated in this report may be deemed to be “forward-lookingstatements” within the meaning of Section 27A of the Securities Act and Section 21Eof the Exchange Act. All statements, other than statements of historical facts,included or incorporated in this report, are forward-looking statements. Inparticular, statements made under the heading “Management’s Discussion andAnalysis of Financial Condition and Results of Operations,” relating to overallvolume trends, pricing trends and industry forces, anticipated results,expectations for funding capital expenditures and operations and increasedmarket share and the sufficiency of capital to meet working capital, capitalexpenditures requirements and strategies are forward-looking statements. Whenused in this document, the words “anticipate,” “estimate,” “project” andsimilar expressions are intended to identify forward-looking statements.

 

These statements arebased on assumptions and assessments made by management in light of theirexperience and their perception of historical trends, current conditions,expected future developments and other factors they believe to be appropriate.Any forward-looking statements are not guarantees of future performance and aresubject to risks and uncertainties that could cause actual results,developments and business decisions to differ materially from thosecontemplated by such forward-looking statements. We disclaim any duty to updateany forward-looking statements. Some of the factors that may cause actualresults, developments and business decisions to differ materially from thosecontemplated by such forward-looking statements include the following:  changes in consumer preferences andnutritional and health-related concerns; increased competition; changes in theterms on which we may obtain aspartame; damaged consumer confidence in ourproducts as a result of health-related allegations; product liability claims;fluctuations in exchange rates and other currency risks; disruptions in ourbusiness as a result of strikes or work stoppages; changes in our relationshipwith our largest distributor; and changes in economic and political conditionsin the countries in which we market and produce our products.

 

**Item 3.  Quantitative andQualitative Disclosures About Market Risk**

 

***ForeignOperations***

 

With approximately 57 %and 65% of consolidated total net sales generated by subsidiaries outside ofthe United States in the three months ended March 31, 2007 and March 31,2008, respectively, our ability to obtain funds necessary to meet our domesticobligations is subject to applicable laws, foreign taxes and intercompanypricing laws, including those relating to the flow of funds between our foreignaffiliates pursuant to, for example, purchase agreements, licensing agreementsor other arrangements.  Historically, wereceived a vast majority of funds from foreign affiliates through our Swisssubsidiary in the form of payments pursuant to a promissory note.  The note was repaid in full in January 2006.On March 30, 2006, we issued a revolver note to our Swiss subsidiary,which will mature in 2011. We may borrow up to $200 million from our Swisssubsidiary during the term of the revolver note.  We are repatriating cash to the United Statesthrough borrowings under this revolver note, which total $78 million as of March 31,2008. Regulators in the United States and other foreign countries where weoperate may closely monitor our corporate structure and how it effectsintercompany fund transfers.

 

In addition, as of March 31,2008, foreign affiliates comprised approximately 49% of our consolidated totalassets.  

 

27

----

 

Accordingly, we have experienced and will continue to be exposed toforeign exchange risk.

 

***ForeignCurrency and Interest Rate Risks***

 

Inherent in our operationsare certain risks related to changes in foreign currency exchange rates andinterest rates. We bear foreign exchange risk because a majority of ourfinancing was obtained in U.S. dollars although a significant portion ofrevenues are earned in the various currencies of our foreign subsidiaries’operations.  Under the Amended andRestated Credit Agreement, a portion of our financing was obtained ineuro.  This euro-denominated loandecreases our transactional exposure to euro exchange fluctuations until theeuro principal and interest are repaid. Decreases in sales and earnings from euro denominated countries thatresult from the euro weakening against the U.S. dollar are offset by thedecrease in the euro denominated debt obligations (i.e., foreign currencytransaction gain) and interest expense that also results from such a decreasein exchange rate.  Likewise, any increasein sales and earnings from the euro denominated countries that results from astrengthening euro against the U.S. dollar offsets the increase in the eurodenominated debt obligations (i.e., foreign currency transaction loss) and interestexpense that results from such an exchange rate increase.

 

A significant portion of ourdebt bears interest at a fixed rate. Interest rate exposure results from our floating rate borrowings. Forthe three months ended March 31, 2008, a 1.0% per annum increase ordecrease in interest rates would have resulted in an increase or decrease incash interest costs for our variable rate term loans of approximately $2.1million.

 

In the normal course of business, we identifyrisks relating to foreign currency exchange rates and interest rates andmitigate their financial impact through corporate policies and, at times,through the use of derivative financial instruments.  We use derivatives only where there is anunderlying exposure and do not use them for trading or speculative purposes.The counter parties to the hedging activities would be highly rated financialinstitutions. We did not have any foreign currency forward exchange contractsor interest rate derivatives outstanding at March 31, 2008.

 

***InflationRisk***

 

Inflation is not expected tohave a material impact on our business, financial condition or results ofoperations.  In markets outside theUnited States in countries with higher inflation, we generally have been ableto offset the impact of inflation through a combination of cost-cuttingmeasures and price increases.

 

**Item 4T.  Controls and Procedures**

 

# *Evaluation of Disclosure Controls and Procedures*

#  

We conducted anevaluation, under the supervision of the Chief Executive Officer and VicePresident, Finance, Controller (Principal Financial Officer), of theeffectiveness as of March 31, 2008 of our disclosure controls andprocedures (as defined in Exchange Act Rule 15d-15(e)). Based on thisevaluation, the Chief Executive Officer and Principal Financial Officerconcluded that, as of March 31, 2008, our disclosure controls andprocedures were effective.

 

***Changes inInternal Control Over Financial Reporting***

 

Therehave been no changes in our internal control over financial reporting duringthe most recently completed fiscal quarter that have materially affected, orare reasonably likely to materially affect, our internal control over financialreporting.

 

**PART II**—**OTHER INFORMATION**

 

**Item 1.  Legal Proceedings**

 

From time to time, our company is involved inlitigation concerning its business operations.

 

Our company is subject to various otherclaims, pending and possible legal actions for product liability and otherdamages, and other matters arising out of the conduct of our business,including tax uncertainties arising from doing business in various European andLatin American jurisdictions. We believe, based on current knowledge andconsultation with 

 

28

----

 

counsel, that the outcome of such claims andactions will not have a material adverse effect on our consolidated financialposition or results of operations.

 

**Item 1A. Risks Related to Our Business**

 

Themost significant risk factors applicable to our company are described in Part I,Item 1A “Risk Factors” of our Annual Report on Form 10-K for the yearended December 31, 2007. There have been no material changes from the riskfactors previously disclosed in our report on Form 10-K.

 

**Item 6.  Exhibits**

 
| Exhibit  No. | ** ** | **Description**                                                                                    |
|--------------|------------|----------------------------------------------------------------------------------------------------|
| 31.1         |       | Certificate of Paul Block pursuant to  Rule 15d-14 under the Securities Exchange Act of 1934. |
|         |       |                                                                                               |
| 31.2         |       | Certificate of Julie Wool pursuant to  Rule 15d-14 under the Securities Exchange Act of 1934. |
|         |       |                                                                                               |
| 32.1         |       | Certificate of Paul Block pursuant to 18 U.S.C. Section 1350.                                 |
|         |       |                                                                                               |
| 32.2         |       | Certificate of Julie Wool pursuant to 18 U.S.C.  Section 1350.                                |

 

29

----

 

SIGNATURES

 

Pursuant to therequirements of the Securities Exchange Act of 1934, the registranthas duly caused this report to be signed on its behalf by the undersignedthereunto duly authorized.

 
|                         | MERISANT COMPANY |
|-------------------------|------------------|
|                    |             |   |
|                    |             |   |
| Date: May 14, 2008 | By:              | /s/ Julie Wool |
|                    |             | Julie Wool |
|                    |             | Vice President,  Finance, Controller |
|                    |             | (on behalf of the  Company and in capacity |
|                    |             | of principal financial  officer) |

 

30

----