Table of Contents

 

 

 

**UNITEDSTATESSECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON, DC 20549**

 

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**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 September 30, 2008** |
| ** **                                                  | ** **                                                                                               |
| **OR**                                                      |
| ** **                                                  | ** **                                                                                               |
| **o**                                                       | **TRANSITION REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF  1934** |

 

**For the transition period from             to             **

 

**Commission File Number:  333-114105**

 

**MerisantCompany**

(Exact Name of Registrant as Specified in itsCharter)

 

| **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’s telephone number, including areacode: **(312) 840-6000**

 

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

**Not applicable.**

 

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,” “acceleratedfiler,” and “smaller reporting company” in Rule 12b-2 of the Exchange 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 mark whether the registrant is a shell company (asdefined in Rule 12b-2 of the Exchange Act). Yes  o   No  x

 

Indicate the number of shares outstanding of each of the issuer’sclasses of common stock, as of the latest practicable date.

 

As of November 13, 2008, the registrant had 100 shares of commonstock, par value $0.01 per share, outstanding, all of which were owned byMerisant 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.

 

 

 

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Tableof Contents

 

**MERISANT COMPANY**

 

**INDEX TO REPORT**

 

**FOR THE QUARTER ENDED SEPTEMBER 30, 2008**

 
|                                            | ** **                                                                                                                                             | ** ** | **Page** |
|--------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------|------------|----------|
| **PART I—FINANCIAL INFORMATION** |                                                                                                                                                   | 3          |
|                                       |                                                                                                                                                   |       |     |
| Item 1.                                    | Financial  Statements of Merisant Company                                                                                                              |       | 3        |
|                                       |                                                                                                                                                   |       |     |
|                                       | Unaudited Consolidated Balance Sheets at  December 31, 2007 and September 30, 2008                                                           |       | 3        |
|                                       |                                                                                                                                                   |       |     |
|                                       | Unaudited Consolidated Statements of Operations and  Comprehensive Income (Loss) for the Three and Nine Months Ended September 30,  2007 and 2008 |       | 4        |
|                                       |                                                                                                                                                   |       |     |
|                                       | Unaudited Consolidated Statement of Stockholder’s  Deficit for the Nine Months Ended September 30, 2008                                      |       | 5        |
|                                       |                                                                                                                                                   |       |     |
|                                       | Unaudited Consolidated Statements of Cash Flows for  the Nine Months Ended September 30, 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                                                            |       | 20       |
|                                       |                                                                                                                                                   |       |     |
| Item 3.                                    | Quantitative  and Qualitative Disclosures About Market Risk                                                                                            |       | 36       |
|                                       |                                                                                                                                                   |       |     |
| Item 4T.                                   | Controls and  Procedures                                                                                                                               |       | 37       |
|                                       |                                                                                                                                                   |       |     |
| PART II—OTHER  INFORMATION       |                                                                                                                                                   | 37         |
|                                       |                                                                                                                                                   |       |     |
| Item 1.                                    | Legal Proceedings                                                                                                                                      |       | 37       |
|                                       |                                                                                                                                                   |       |     |
| Item 1A.                                   | Risk  Factors                                                                                                                                          |       | 38       |
|                                       |                                                                                                                                                   |       |     |
| Item 6.                                    | Exhibits                                                                                                                                               |       | 38       |

 

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Tableof Contents

 

**PART I**—**FINANCIAL INFORMATION**

 

**Item 1. Financial Statements of Merisant Company**

 

**MERISANTCOMPANY**

**UnauditedConsolidated Balance Sheets**

**(DollarsIn Thousands, Except Per Share Amount)**

 
| ** **                                                                                                                    | ** ** | **At December 31,   2007** | ** ** | **At September 30,   2008** | ** ** |
|-------------------------------------------------------------------------------------------------------------------------------|------------|-------------------------------------------|------------|--------------------------------------------|------------|
| **ASSETS**                                                                                                                    | ** ** | ** **                                | ** ** | ** **                                 | ** ** |
| Cash and cash equivalents                                                                                                     |       | $                                         | 51,040     |                                       | $          | 11,713 |   |
| Trade accounts receivable, net of  allowances of $854 and $1,108, respectively                                           |       | 74,410                                    |       | 62,441                                     |       |
| Other receivables                                                                                                             |       | 9,128                                     |       | 13,063                                     |       |
| Inventories                                                                                                                   |       | 13,540                                    |       | 25,368                                     |       |
| Prepaid expenses and other assets                                                                                             |       | 6,206                                     |       | 4,131                                      |       |
| Current portion of note receivable from  director                                                                             |       | 970                                       |       | 970                                        |       |
| Deferred income tax assets                                                                                                    |       | 1,620                                     |       | 1,783                                      |       |
| Total current assets                                                                                                          |       | 156,914                                   |       | 119,469                                    |       |
| Property and equipment, net                                                                                                   |       | 23,509                                    |       | 29,779                                     |       |
| Trademarks and other intangible assets,  less accumulated amortization and impairment of $164,022 and $179,809,  respectively |       | 160,697                                   |       | 147,941                                    |       |
| Goodwill                                                                                                                      |       | 107,209                                   |       | 107,209                                    |       |
| Deferred financing costs, less accumulated  amortization of $10,052 and $12,564 respectively                                  |       | 9,586                                     |       | 7,367                                      |       |
| Non-current portion of note receivable from  director                                                                         |       | 1,822                                     |       | 910                                        |       |
| Investment in equity affiliate                                                                                                |       | 264                                       |       | 403                                        |       |
| Other non-current assets                                                                                                      |       | 880                                       |       | 1,193                                      |       |
| Total assets                                                                                                                  |       | $                                         | 460,881    |                                       | $          | 414,271 |   |
| **LIABILITIES AND STOCKHOLDER’S DEFICIT**                                                                                | ** ** | ** **                                | ** ** | ** **                                 | ** ** |
| Accounts payable                                                                                                              |       | $                                         | 22,618     |                                       | $          | 18,331 |   |
| Income taxes payable                                                                                                          |       | 1,031                                     |       | 644                                        |       |
| Accrued interest expense                                                                                                      |       | 12,727                                    |       | 6,452                                      |       |
| Accrued trade marketing and consumer  promotions                                                                              |       | 14,353                                    |       | 15,123                                     |       |
| Accrued incentives                                                                                                            |       | 8,024                                     |       | 696                                        |       |
| Accrued expenses and other liabilities                                                                                        |       | 11,056                                    |       | 11,996                                     |       |
| Current maturities of long-term obligations                                                                                   |       | 12,178                                    |       | 21,218                                     |       |
| Total current liabilities                                                                                                     |       | 81,987                                    |       | 74,460                                     |       |
| Long-term obligations, net of current  maturities                                                                             |       | 416,838                                   |       | 397,290                                    |       |
| Deferred income tax liabilities                                                                                               |       | 23,701                                    |       | 26,597                                     |       |
| Other liabilities                                                                                                             |       | 6,954                                     |       | 7,742                                      |       |
| Total liabilities                                                                                                             |       | 529,480                                   |       | 506,089                                    |       |
| 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                                      | )          | (64                                        | )          |
| Retained deficit                                                                                                              |       | (65,454                                   | )          | (88,413                                    | )          |
| Accumulated other comprehensive loss                                                                                          |       | (3,038                                    | )          | (3,341                                     | )          |
| Total stockholder’s deficit                                                                                              |       | (68,599                                   | )          | (91,818                                    | )          |
| Total liabilities and stockholder’s deficit                                                                              |       | $                                         | 460,881    |                                       | $          | 414,271 |   |

 

The accompanying notes are an integral partof these unaudited consolidated financial statements.

 

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**MERISANTCOMPANY**

**UnauditedConsolidated Statements of Operations and**

**ComprehensiveIncome (Loss)**

**(DollarsIn Thousands)**

 
| ** **                        | ** ** | **Three Months Ended  September 30,** | ** ** | **Nine Months Ended  September 30,** | ** ** |
|-----------------------------------|------------|------------------------------------------------------|------------|-----------------------------------------------------|------------|
| ** **                        | ** ** | **2007**                                             | ** ** | **2008**                                            | ** ** | **2007** | ** ** | **2008** | ** ** |
| Net sales                         |       | $                                                    | 72,837     |                                                | $          | 64,520 |   | $ | 213,240 |   | $ | 200,486 |   |
| Cost of sales                     |       | 31,518                                               |       | 31,632                                              |       | 94,120 |   | 97,461 |   |
| Gross profit                      |       | 41,319                                               |       | 32,888                                              |       | 119,120 |   | 103,025 |   |
| Operating expenses:               |       |                                                 |       |                                                |       |   |   |   |   |
| Marketing and selling expenses    |       | 15,921                                               |       | 14,492                                              |       | 48,202 |   | 48,308 |   |
| Administration expenses           |       | 8,162                                                |       | 6,282                                               |       | 33,456 |   | 25,025 |   |
| Amortization of intangible assets |       | 5,264                                                |       | 5,264                                               |       | 16,718 |   | 15,792 |   |
| Restructuring expenses            |       | 211                                                  |       | 296                                                 |       | 1,085 |   | 1,404 |   |
| Total operating expenses          |       | 29,558                                               |       | 26,334                                              |       | 99,461 |   | 90,529 |   |
| Income from operations            |       | 11,761                                               |       | 6,554                                               |       | 19,659 |   | 12,496 |   |
| Other expense (income):           |       |                                                 |       |                                                |       |   |   |   |   |
| Interest income                   |       | (246                                                 | )          | (70                                                 | )          | (611 | ) | (528 | ) |
| Interest expense                  |       | 10,946                                               |       | 9,578                                               |       | 34,393 |   | 29,193 |   |
| Costs of refinancing              |       | —                                               |       | —                                              |       | 5,791 |   | — |   |
| Other expense (income), net       |       | 117                                                  |       | 1,871                                               |       | (29,962 | ) | 2,505 |   |
| Total other expense (income)      |       | 10,817                                               |       | 11,379                                              |       | 9,611 |   | 31,170 |   |
| Income (loss) before income taxes |       | 944                                                  |       | (4,825                                              | )          | 10,048 |   | (18,674 | ) |
| Provision for income taxes        |       | 1,336                                                |       | 496                                                 |       | 5,036 |   | 3,578 |   |
| Net income (loss)                 |       | $                                                    | (392       | )                                                   | $          | (5,321 | ) | $ | 5,012 |   | $ | (22,252 | ) |
|                              |       |                                                 |       |                                                |       |   |   |   |   |
| Net income (loss) from above      |       | $                                                    | (392       | )                                                   | $          | (5,321 | ) | $ | 5,012 |   | $ | (22,252 | ) |
| Other comprehensive income (loss) |       | 960                                                  |       | (2,959                                              | )          | 1,671 |   | 303 |   |
| Total comprehensive income (loss) |       | $                                                    | 568        |                                                | $          | (8,280 | ) | $ | 6,683 |   | $ | (21,949 | ) |

 

The accompanying notes are an integral partof these unaudited consolidated financial statements.

 

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**MERISANTCOMPANY**

**UnauditedConsolidated Statement of Stockholder’s Deficit**

**(DollarsIn 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                                      |       | —            |       | —                                                                                 |       | —                |       | (303                                        | )          | (303      | )          |
| Distribution to Merisant  Worldwide, Inc.                               |       | —            |       | —                                                                                 |       | (707                  | )          | —                                      |       | (707      | )          |
| Settlement of loans for purchase of shares  in Merisant Worldwide, Inc. |       | —            |       | 43                                                                                     |       | —                |       | —                                      |       | 43        |       |
| Net loss                                                                     |       | —            |       | —                                                                                 |       | (22,252               | )          | —                                      |       | (22,252   | )          |
| Balance at September 30, 2008                                           |       | $                 | —     |                                                                                   | $          | (64                   | )          | $                                           | (88,413    | )         | $          | (3,341 | ) | $ | (91,818 | ) |

 

The accompanying notes are an integral partof these unaudited consolidated financial statements.

 

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**MERISANTCOMPANY**

**UnauditedConsolidated Statements of Cash Flows**

**(DollarsIn Thousands)**

 
| ** **                                                                                          | ** ** | **Nine Months Ended  September 30,** | ** ** |
|-----------------------------------------------------------------------------------------------------|------------|-----------------------------------------------------|------------|
| ** **                                                                                          | ** ** | **2007**                                            | ** ** | **2008** | ** ** |
| **Operating Activities**                                                                            |       |                                                |       |   |   |
| Net income (loss)                                                                                   |       | $                                                   | 5,012      |   | $ | (22,252 | ) |
| Adjustments to reconcile net income (loss) to  net cash provided by (used in) operating activities: |       |                                                |       |   |   |
| Depreciation                                                                                        |       | 4,919                                               |       | 3,657 |   |
| Gain on liquidation of subsidiary                                                                   |       | (284                                                | )          | — |   |
| Amortization of intangible assets                                                                   |       | 16,718                                              |       | 15,792 |   |
| Amortization of deferred financing costs                                                            |       | 2,520                                               |       | 2,513 |   |
| Write off of deferred financing costs                                                               |       | 3,241                                               |       | — |   |
| Euro-denominated loan foreign exchange loss                                                         |       | 1,382                                               |       | 341 |   |
| Equity in income of affiliate                                                                       |       | (127                                                | )          | (139 | ) |
| Deferred income tax provision                                                                       |       | 3,141                                               |       | 2,704 |   |
| Changes in operating assets and  liabilities, (net of business acquisition):                        |       |                                                |       |   |   |
| Trade accounts receivable                                                                           |       | (929                                                | )          | 11,446 |   |
| Other receivables                                                                                   |       | (971                                                | )          | (3,171 | ) |
| Inventories                                                                                         |       | 1,005                                               |       | (12,384 | ) |
| Prepaid expenses and other assets                                                                   |       | (1,992                                              | )          | 1,784 |   |
| Accounts payable                                                                                    |       | (1,112                                              | )          | (4,508 | ) |
| Accrued expenses and other                                                                          |       | (5,770                                              | )          | (11,292 | ) |
| Net cash provided by (used in) operating  activities                                                |       | 26,753                                              |       | (15,509 | ) |
| **Investing Activities**                                                                            |       |                                                |       |   |   |
| Proceeds from sale of property and  equipment                                                       |       | 216                                                 |       | 40 |   |
| Purchase of business                                                                                |       | —                                              |       | (3,400 | ) |
| Purchases of property and equipment                                                                 |       | (2,188                                              | )          | (8,787 | ) |
| Net cash used in investing activities                                                               |       | (1,972                                              | )          | (12,147 | ) |
| **Financing Activities**                                                                            |       |                                                |       |   |   |
| Net borrowings under revolving credit  facility                                                     |       | —                                              |       | 12,000 |   |
| Borrowings under long-term obligations                                                              |       | 85,088                                              |       | 11 |   |
| Principal payments on long-term obligations                                                         |       | (91,649                                             | )          | (22,838 | ) |
| Payment of deferred financing costs                                                                 |       | (2,537                                              | )          | (294 | ) |
| Distributions to stockholder                                                                        |       | (100                                                | )          | (707 | ) |
| Settlement of loans for purchase of shares  in Merisant Worldwide, Inc.                        |       | 518                                                 |       | 43 |   |
| Net cash used in financing activities                                                               |       | (8,680                                              | )          | (11,785 | ) |
| Effect of exchange rate on cash and cash  equivalents                                               |       | 656                                                 |       | 114 |   |
| Net increase (decrease) in cash and cash  equivalents                                               |       | 16,757                                              |       | (39,327 | ) |
| Cash and cash equivalents at beginning of  period                                                   |       | 23,730                                              |       | 51,040 |   |
| Cash and cash equivalents at end of period                                                          |       | $                                                   | 40,487     |   | $ | 11,713 |   |

 

The accompanying notes are an integral partof these unaudited consolidated financial statements.

 

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**MERISANTCOMPANY**

**Notes toUnaudited Consolidated Financial Statements**

**(DollarsIn Thousands)**

 

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

 

The consolidated financial statements and notes do notcontain certain information included in the annual consolidated financialstatements and notes of Merisant Company and subsidiaries.  Unless otherwise indicated or unless thecontext otherwise requires, all references to the “Company” mean MerisantCompany and its consolidated subsidiaries. The consolidated balance sheet at December 31, 2007 was derivedfrom the Company’s audited consolidated financial statements, but does notinclude all disclosures required by generally accepted accounting principles inthe United States of America (“GAAP”). The remaining consolidated financialstatements are unaudited. In the opinion of management, all normal, recurringadjustments necessary for a fair presentation of such unaudited financialstatements have been included therein. For interim reporting purposes, certainmarketing and advertising expenses are charged to results of operations as apercentage of sales. Interim results may not be indicative of results for afull year. These unaudited consolidated financial statements and notes shouldbe read in conjunction with the Company’s annual consolidated financialstatements.

 

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 primarily manufactures and marketslow-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, except forthe portion of other expense (income), net that relates to the foreign currencytransaction gains or losses associated with the Company’s euro-denominated debt(see Note 5) and unrealized gains or losses on derivative instruments.Corporate expenses include corporate staff and related amounts. Corporateexpenses, interest and other expenses and the provision for income taxes arecentrally managed and, accordingly, such items are not presented by segmentsince they are excluded from the measure of segment performance reviewed bymanagement. The Company launched a new product line in North America in thefirst quarter of 2006 which management evaluates and manages separately fromits other North American operations. As such, this item is also excluded from themeasure of segment performance reviewed by management. The Company’s definitionof Operating EBITDA is largely driven by similar definitions of Bank EBITDAunder its primary credit facilities.  Thedefinition of Bank EBITDA was adjusted in the May 2007 amendment of thosefacilities and that change is reflected prospectively in the Company’scomputation of Operating EBITDA.  TheCompany’s assets, which are principally in the United States and Europe, arealso managed geographically. A summary of the Company’s results of operationsby reportable segment for the three and nine months ended September 30,2007 and 2008 is as follows:

 

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**For the Three Months Ended September 30,2007**

 
| ** **                                                | ** ** | **North  America** | ** ** | **EAME** | ** ** | **Latin  America** | ** ** | **Asia/  Pacific** | ** ** | **Consolidated** | ** ** |
|-----------------------------------------------------------|------------|--------------------|------------|----------|------------|--------------------|------------|--------------------|------------|------------------|------------|
| Total net sales for reportable segments                   |       | $                  | 29,127     |     | $          | 27,920             |       | $                  | 9,508      |             | $          | 6,254 |   | $ | 72,809 |   |
| Net sales related to new product launch                   |       |               |       |     |       |               |       |               |       | 28               |       |
| Total consolidated net sales                              |       |               |       |     |       |               |       |               |       | $                | 72,837     |   |
|                                                      |       |               |       |     |       |               |       |               |       |             |       |
| Operating EBITDA                                          |       | $                  | 11,298     |     | $          | 9,874              |       | $                  | 2,913      |             | $          | 1,971 |   | $ | 26,056 |   |
| Less (plus):                                              |       |               |       |     |       |               |       |               |       |             |       |
| Corporate expenses                                        |       |               |       |     |       |               |       |               |       | 5,216            |       |
| Restructuring and specified project  implementation costs |       |               |       |     |       |               |       |               |       | 414              |       |
| Depreciation expense                                      |       |               |       |     |       |               |       |               |       | 1,590            |       |
| Amortization expense                                      |       |               |       |     |       |               |       |               |       | 5,264            |       |
| Currency loss on euro debt                                |       |               |       |     |       |               |       |               |       | 879              |       |
| Gain on liquidation or sale of subsidiary                 |       |               |       |     |       |               |       |               |       | (284             | )          |
| Loss related to new product launch                        |       |               |       |     |       |               |       |               |       | 1,314            |       |
| Other non-cash expense                                    |       |               |       |     |       |               |       |               |       | 19               |       |
| Other expense, net                                        |       |               |       |     |       |               |       |               |       | (117             | )          |
| Income from operations                                    |       |               |       |     |       |               |       |               |       | 11,761           |       |
| Interest expense, net                                     |       |               |       |     |       |               |       |               |       | 10,700           |       |
| Other expense, net                                        |       |               |       |     |       |               |       |               |       | 117              |       |
| Income before income taxes                                |       |               |       |     |       |               |       |               |       | $                | 944        |   |

 

**For the Three Months Ended September 30,2008**

 
| ** **                                                | ** ** | **North  America** | ** ** | **EAME** | ** ** | **Latin  America** | ** ** | **Asia/  Pacific** | ** ** | **Consolidated** | ** ** |
|-----------------------------------------------------------|------------|--------------------|------------|----------|------------|--------------------|------------|--------------------|------------|------------------|------------|
| Total net sales for reportable segments                   |       | $                  | 22,100     |     | $          | 27,976             |       | $                  | 10,529     |             | $          | 3,878 |   | $ | 64,483 |   |
| Net sales related to new product launch                   |       |               |       |     |       |               |       |               |       | 37               |       |
| Total consolidated net sales                              |       |               |       |     |       |               |       |               |       | $                | 64,520     |   |
|                                                      |       |               |       |     |       |               |       |               |       |             |       |
| Operating EBITDA                                          |       | $                  | 6,230      |     | $          | 5,603              |       | $                  | 3,512      |             | $          | 847 |   | $ | 16,192 |   |
| Less (plus):                                              |       |               |       |     |       |               |       |               |       |             |       |
| Corporate expenses                                        |       |               |       |     |       |               |       |               |       | 2,700            |       |
| Restructuring and specified project  implementation costs |       |               |       |     |       |               |       |               |       | 325              |       |
| Depreciation expense                                      |       |               |       |     |       |               |       |               |       | 1,382            |       |
| Amortization expense                                      |       |               |       |     |       |               |       |               |       | 5,264            |       |
| Currency gain on euro debt                                |       |               |       |     |       |               |       |               |       | (651             | )          |
| Loss related to new product launch                        |       |               |       |     |       |               |       |               |       | 2,486            |       |
| Other non-cash expense                                    |       |               |       |     |       |               |       |               |       | 3                |       |
| Other expense, net                                        |       |               |       |     |       |               |       |               |       | (1,871           | )          |
| Income from operations                                    |       |               |       |     |       |               |       |               |       | 6,554            |       |
| Interest expense, net                                     |       |               |       |     |       |               |       |               |       | 9,508            |       |
| Other expense, net                                        |       |               |       |     |       |               |       |               |       | 1,871            |       |
| Loss before income taxes                                  |       |               |       |     |       |               |       |               |       | $                | (4,825     | ) |

 

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**For the Nine Months Ended September 30,2007**

 
| ** **                                                              | ** ** | **North  America** | ** ** | **EAME** | ** ** | **Latin  America** | ** ** | **Asia/  Pacific** | ** ** | **Consolidated** | ** ** |
|-------------------------------------------------------------------------|------------|--------------------|------------|----------|------------|--------------------|------------|--------------------|------------|------------------|------------|
| Total net sales for reportable segments                                 |       | $                  | 85,655     |     | $          | 84,577             |       | $                  | 22,855     |             | $          | 20,157 |   | $ | 213,244 |   |
| Net sales related to new product launch                                 |       |               |       |     |       |               |       |               |       | (4               | )          |
| Total consolidated net sales                                            |       |               |       |     |       |               |       |               |       | $                | 213,240    |   |
|                                                                    |       |               |       |     |       |               |       |               |       |             |       |
| Operating EBITDA                                                        |       | $                  | 31,703     |     | $          | 25,581             |       | $                  | 5,913      |             | $          | 7,428 |   | $ | 70,625 |   |
| Less (plus):                                                            |       |               |       |     |       |               |       |               |       |             |       |
| Corporate expenses                                                      |       |               |       |     |       |               |       |               |       | 19,190           |       |
| Restructuring and specified project  implementation costs               |       |               |       |     |       |               |       |               |       | 1,288            |       |
| Depreciation expense                                                    |       |               |       |     |       |               |       |               |       | 4,919            |       |
| Amortization expense                                                    |       |               |       |     |       |               |       |               |       | 16,718           |       |
| Currency loss on euro debt                                              |       |               |       |     |       |               |       |               |       | 1,382            |       |
| Gain on liquidation or sale of subsidiary                               |       |               |       |     |       |               |       |               |       | (284             | )          |
| Loss related to new product launch                                      |       |               |       |     |       |               |       |               |       | 2,852            |       |
| Other non-cash charge and net gain  excludable from Operating EBITDA    |       |               |       |     |       |               |       |               |       | 4,869            |       |
| Gain from receipt of one-time payment  excludable from Operating EBITDA |       |               |       |     |       |               |       |               |       | (30,000          | )          |
| Other non-cash expense                                                  |       |               |       |     |       |               |       |               |       | 70               |       |
| Other income, net                                                       |       |               |       |     |       |               |       |               |       | 29,962           |       |
| Income from operations                                                  |       |               |       |     |       |               |       |               |       | 19,659           |       |
| Interest expense, net                                                   |       |               |       |     |       |               |       |               |       | 33,782           |       |
| Cost of refinancing                                                     |       |               |       |     |       |               |       |               |       | 5,791            |       |
| Other income, net                                                       |       |               |       |     |       |               |       |               |       | (29,962          | )          |
| Income before income taxes                                              |       |               |       |     |       |               |       |               |       | $                | 10,048     |   |

 

**For the Nine Months Ended September 30,2008**

 
| ** **                                                   | ** ** | **North  America** | ** ** | **EAME** | ** ** | **Latin  America** | ** ** | **Asia/  Pacific** | ** ** | **Consolidated** | ** ** |
|--------------------------------------------------------------|------------|--------------------|------------|----------|------------|--------------------|------------|--------------------|------------|------------------|------------|
| Total net sales for reportable segments                      |       | $                  | 69,102     |     | $          | 90,454             |       | $                  | 27,232     |             | $          | 13,674 |   | $ | 200,462 |   |
| Net sales related to new product launch                      |       |               |       |     |       |               |       |               |       | 24               |       |
| Total consolidated net sales                                 |       |               |       |     |       |               |       |               |       | $                | 200,486    |   |
|                                                         |       |               |       |     |       |               |       |               |       |             |       |
| Operating EBITDA                                             |       | $                  | 21,167     |     | $          | 22,145             |       | $                  | 6,694      |             | $          | 3,225 |   | $ | 53,231 |   |
| Less (plus):                                                 |       |               |       |     |       |               |       |               |       |             |       |
| Corporate expenses                                           |       |               |       |     |       |               |       |               |       | 14,229           |       |
| Restructuring and specified project  implementation costs    |       |               |       |     |       |               |       |               |       | 3,204            |       |
| Depreciation expense                                         |       |               |       |     |       |               |       |               |       | 3,657            |       |
| Amortization expense                                         |       |               |       |     |       |               |       |               |       | 15,792           |       |
| Currency loss on euro debt                                   |       |               |       |     |       |               |       |               |       | 341              |       |
| Loss related to new product launch                           |       |               |       |     |       |               |       |               |       | 5,514            |       |
| Expenses related to credit agreement  amendments and waivers |       |               |       |     |       |               |       |               |       | 435              |       |
| Other non-cash expense                                       |       |               |       |     |       |               |       |               |       | 68               |       |
| Other expense, net                                           |       |               |       |     |       |               |       |               |       | (2,505           | )          |
| Income from operations                                       |       |               |       |     |       |               |       |               |       | 12,496           |       |
| Interest expense, net                                        |       |               |       |     |       |               |       |               |       | 28,665           |       |
| Other expense, net                                           |       |               |       |     |       |               |       |               |       | 2,505            |       |
| Loss before income taxes                                     |       |               |       |     |       |               |       |               |       | $                | (18,674    | ) |

 

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

 

During thenine months ended September 30, 2008, the Company continued to evaluateopportunities to increase efficiency and reduce costs. This review resulted inthe continuation of workforce reductions and planned changes in the Company’sglobal business model. These actions are designed to improve both financialresults and the long-term value of the business. Restructuring expenses forworkforce reductions of $211 and $296 were recorded for the three months ended September 30,2007 and September 30, 2008, respectively, and $1,085 and $1,404 wererecorded for the nine months ended September 30, 2007 and 2008,respectively.  The 2008 chargesprincipally related to planned termination costs for employees includingcharges related to 10 additional personnel that were notified of theirtermination during the nine months ended September 30, 2008.  Severance payments and benefits are scheduledto be made over the next nine months.

 

Reconciliation of the restructuring liability at September 30,2008 is as follows:

 
| Restructuring liability at  December 31, 2007                        |   | $      | 182    |   |
|---------------------------------------------------------------------------|--------|--------|--------|--------|
| Restructuring expenses for the nine months  ended September 30, 2008 |   | 1,404  |   |
| Cash payments for the nine months ended  September 30, 2008          |   | (1,255 | )      |
| Restructuring liability at  September 30, 2008                       |   | $      | 331    |   |

 

The restructuring liability at December 31, 2007and September 30, 2008 is included in the line item “Accrued expenses andother liabilities” in the accompanying consolidated balance sheets.

 

The following table presents restructuring expensesincluded in each segment and corporate expenses for the three and nine monthsended September 30, 2007 and 2008:

 
| ** **    | ** ** | **Three Months Ended****September ****30,** | ** ** | **Nine Months Ended****September ****30,** | ** ** |
|---------------|------------|------------------------------------------------------------|------------|-----------------------------------------------------------|------------|
| ** **    | ** ** | **2007**                                                   | ** ** | **2008**                                                  | ** ** | **2007** | ** ** | **2008** | ** ** |
| North America |       | $                                                          | —     |                                                      | $          | 327 |   | $ | — |   | $ | 327 |   |
| EAME          |       | 204                                                        |       | (26                                                       | )          | 502 |   | 796 |   |
| Latin America |       | 5                                                          |       | (1                                                        | )          | 91 |   | 7 |   |
| Asia/Pacific  |       | 2                                                          |       | (4                                                        | )          | 332 |   | 127 |   |
| Corporate     |       | —                                                     |       | —                                                    |       | 160 |   | 147 |   |
| Total         |       | $                                                          | 211        |                                                      | $          | 296 |   | $ | 1,085 |   | $ | 1,404 |   |

 

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

 

Inventories consisted of the following at December 31,2007 and September 30, 2008:

 
| ** **                      | ** ** | **December 31, 2007** | ** ** | **September 30, 2008** | ** ** |
|---------------------------------|------------|---------------------------------|------------|----------------------------------|------------|
| Raw materials and supplies      |       | $                               | 5,767      |                             | $          | 8,598 |   |
| Work in process                 |       | 383                             |       | 1,381                            |       |
| Finished goods                  |       | 7,924                           |       | 16,168                           |       |
| Inventory obsolescence reserves |       | (534                            | )          | (779                             | )          |
| Total                           |       | $                               | 13,540     |                             | $          | 25,368 |   |

 

The increase infinished goods is due to planned build up of stock related to recent changes inour foreign manufacturing operations as described further in Note 7.

 

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

 

The Company and itsparent, Merisant Worldwide, Inc. (“Merisant Worldwide”), are highlyleveraged. At September 30, 2008, Merisant Worldwide and its subsidiaries,including the Company, had $553,557 of long-term debt outstanding, consistingof $135,136 aggregate principal amount of Merisant Worldwide’s 12 1⁄4% seniorsubordinated discount notes due 2014 (the “Discount Notes”), $225,000 aggregateprincipal amount of the Company’s 9 1⁄2% senior subordinated notes due 2013 (the “Notes”),and $193,421 aggregate principal amount outstanding under the Company’s seniorcredit agreement (the “Senior Credit Agreement” or as amended and restated, the“Amended and Restated Credit Agreement”), excluding capital lease obligationsof $89 and unused commitments on the revolving portion of the Senior CreditAgreement of $21,000.

 

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At September 30,2008, borrowings under the Senior Credit Agreement included $7,416 (“Term A”)aggregate principal amount of term loans bearing annual interest of 8.35%,$174,005 (“Term B”) aggregate principal amount of term loans bearing annualinterest of 6.40% and $12,000 aggregate principal amount in revolvercommitments, bearing annual interest of 5.97%. The Term A loans areeuro-denominated and are translated into U.S. dollars at the spot rate as of September 30,2008.

 

The Term A loans and the revolver commitment are scheduled to terminatein January 2009 and all amounts thereunder are scheduled to berepaid.  Most of the Term B loans($171,803) are due at its final maturity in January 2010. Additionally,interest on the Discount Notes will become payable in cash commencing on May 15,2009.  Semiannual interest payments of$8.6 million are required.  The indenturegoverning the Notes limits the Company’s ability to pay dividends or loan cashto Merisant Worldwide, which has no operations of its own.

 

As of November 13, 2008, borrowings under the Company’s revolvingcredit facility were $28,000. In aggregate, during the twelve months endingSeptember 30, 2009, the Company and Merisant Worldwide are scheduled to pay$78,300 of principal and interest under the Company and Merisant Worldwide’sprimary debt obligations.  Given thedisruptions in the credit and financial markets in recent months, uncertaintyexists as to whether we will be able to generate results from operations orconsummate transactions sufficient to enable us to make all of these payments.The disruptions in the credit and financial markets have also limited access tocapital and credit for many companies. We rely on a number of financial institutionsand the credit and financial markets to meet our financial commitments andshort-term liquidity needs if internal funds are not available. Continuinginstability or disruptions of these markets could prohibit or make it moredifficult for us to access new capital, significantly increase the cost ofcapital or limit our ability to refinance, replace or amend our existingindebtedness.  We are engaged indiscussions with certain of our secured lenders and debt security holders aswell as potential financing sources with regard to refinancing or restructuringall or a portion of our debt obligations. However, there can be no assurancethat we will be able to refinance, replace or amend our outstanding debtobligations on terms favorable to us, or at all, particularly given currentfinancial market conditions.

 

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

 

On May 9, 2007, the Company, Merisant Worldwide and certain of theCompany’s subsidiaries entered into the Amended and Restated Credit Agreement,which, among other things, increased by $85,000 the principal amount of Term Bloans that could be borrowed by the Company under the Senior CreditAgreement.  The Company paid $2,505 infees and expenses related to this amendment and restatement which it deferredand is amortizing over the term of the related debt. Upon closing, the Companyborrowed the full $85,000 of additional Term B loans available under theAmended and Restated Credit Agreement and used the proceeds plus cash on handto prepay the principal of all loans outstanding under the Second Lien CreditAgreement totaling $85,000, plus all outstanding interest of $1,438 and apremium of $2,550, or $88,988.  TheSecond Lien Credit Agreement was terminated as a result of the transaction andthere was no increase in the Company’s long-term debt as a result of thistransaction.  In addition to theincurrence of fees, this transaction also resulted in a write-off of existingdeferred financing fees relating to the extinguishment of previouslyoutstanding debt under the Second Lien Credit Agreement of $3,241.

 

Upon closing of the above transaction and execution of the relatedamendment, the interest rate on all term loans and revolving loans outstandingunder the Amended and Restated Credit Agreement increased from euro-LIBOR andLIBOR plus 325 basis points per annum to euro-LIBOR and LIBOR plus 350 basispoints per annum.  As a result of thetermination of the Second Lien Credit Agreement, the Company’s effective interestrate on variable interest rate debt decreased from 10.63% per annum prior tothe closing of this transaction to 8.73% per annum subsequent to thistransaction.

 

The Company paid interest on borrowings under the SeniorCredit Agreement, the Second Lien Credit Agreement, and on the Notes totaling$35,933 and $32,703 for the nine months ended September 30, 2007 and 2008,respectively.

 

The Amended and Restated Credit Agreement preserves prior amendments,amends future financial covenant ratios and levels and contains a number ofadditional amendments, including to the definition of Bank EBITDA, that givethe Company more flexibility to operate its business and de-leverage itsbalance sheet.

 

The Amended and Restated Credit Agreement contains covenants, includingfinancial covenants that must be met on a quarterly basis. “Bank EBITDA” is themeasure by which the financial covenants contained in the Amended and RestatedCredit Agreement are measured. However, Bank EBITDA is not a measure ofliquidity under GAAP. Accordingly, while providing useful information withrespect to an assessment of liquidity as measured in accordance with thecovenants in the Company’s primary debt obligations, this measure should not beconsidered in isolation from, or as a substitute for, consolidated statement ofcash flow data prepared in accordance with GAAP as an indication of liquidity.In addition, the Bank EBITDA measure presented may differ from, and may not becomparable to, similarly titled measures used by other companies.

 

The Company was in compliance with its covenants under the Amended andRestated Credit Agreement as of September 30, 2008.

 

The Company was required to prepay $15,226 of the principal amount ofterm loans outstanding under the Amended and Restated Credit Agreement fivebusiness days after filing the annual financial statements with excess cash asrequired and calculated under the terms of the Amended and Restated CreditAgreement.  The prepayment was completedon April 4, 2008.

 

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

 

The Company has a deferred compensation payable to Arnold Donald, itsformer Chairman and a current director, and a note receivable in the sameamount from Mr. Donald. The Company recorded $43 and $30 of interestincome on the note receivable for the three months ended September 30,2007 and 2008, respectively, and $129 and $89 of interest income on the notereceivable for the nine months ended September 30, 2007 and 2008,respectively, and an equal amount of interest expense in the respectiveperiods.

 

The Company is party to an agreement with Brand ArchitectureInternational (“Brand Architecture”) pursuant to which Brand Architecture hasagreed to provide consulting services relating to the development of brandarchitecture for the Company’s brands. The Company paid approximately $15 and$371 to Brand Architecture for the three months ended September 30,2007 and 2008, respectively, and approximately $315 and $569 for the ninemonths ended September 30,2007 and 2008, respectively, including the reimbursement to Brand Architecturefor expenses relating to its work. Adam Stagliano, a member of the Company’sboard of directors, is a founding director and the President and ChiefStrategic Officer of Brand Architecture.

 

During the nine months ended September 30, 2007 and 2008, theCompany made distributions of $100 and $707, respectively, to its sole stockholder,Merisant Worldwide.

 

**7.**        Commitmentsand Contingencies

** **

The Company has an investment in an affiliate located in thePhilippines that is accounted for using the equity method. The affiliate, a50/50 joint venture, distributes sugar substitute sweeteners for theinternational consumer food markets, primarily under the *Equal®* brand. In addition to itsinvestment in the joint venture, the Company is committed to a 50% share in anynew borrowings of the joint venture. As of December 31, 2007 and September 30,2008, there were no additional joint venture borrowings.

 

In July 2008, the Company started handling order processing,warehousing and trade marketing internally and through a third-party broker andlogistics provider for retail grocery and drug customers in the United Statesrather than through its primary domestic distributors.  The Company anticipates that this operationalchange will reduce its operating costs, improve the efficiency of its inventorymanagement and distribution capabilities, and provide more transparency incustomer relations.  In July 2008,the Company paid the distributor $300 to facilitate this and other changes inthe distribution agreement.

 

The Company has initiated a multi-site manufacturing strategy forEAME.  In connection with this strategy,the Company formed CzechPak Manufacturing s.r.o. to operate a new manufacturingfacility located in the Czech Republic. The Company will shift a portion of its current production and equipmentto this new facility from Krüger GmbH & Co. KG, its current contractmanufacturer located in Germany.  Inconnection with this transition, the Company and Krüger amended the parties’manufacturing agreement.  Under the termsof the amended agreement, certain products will no longer be manufactured byKrüger and the Company will be able to move the equipment currently used byKrüger to manufacture and package these products to its CzechPak facility.  The parties extended the expiration of themanufacturing agreement from 2010 to 2012 and the Company agreed to meetcertain minimum purchase commitments for each of Krüger’s facilities.  Commencing January 2009 the aggregateamount of such commitments is €29.2 million. In addition, the Company agreed to acquire any raw materials, packagingand work in progress for the discontinued products and to increase conversionfees per unit for the products that Krüger will continue to produce.  The Company also agreed to provide creditenhancements in the event that Krüger is unable to obtain a certain level of creditinsurance for its production commitments. The Company built up additional inventory of finished products to meetanticipated market demand during the transition period.

 

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.

 

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**8.**        Income Taxes

** **

In June 2006, the Financial Accounting Standards Board (“FASB”)issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes -an interpretation of FASB Statement No. 109 (“FIN 48”), that clarifies theaccounting and recognition for income tax positions taken or expected to betaken in the Company’s tax returns. The Company adopted FIN 48 on January 1,2007, and recorded the cumulative effect of a change in accounting principle byrecording a decrease in the liability for uncertain tax positions of $5,757,that was accounted for as a credit to opening retained earnings. At December 31,2007 and September 30, 2008, the total liability, including interest andpenalties of $715 and $771, respectively, for uncertain tax positions recordedin the Company’s balance sheet in non-current Other liabilities was $2,815 and$2,805, respectively. No uncertain tax position reserves were reversed or settledduring the nine months ended September 30, 2008.  The entire amount of this consolidatedworldwide liability for uncertain tax positions would affect the Company’seffective 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 September 30, 2008 liability over the next twelve months.

 

The Company files a consolidated U.S. income tax return and tax returnsin various state and local jurisdictions. The Company’s subsidiaries also filetax returns in various foreign jurisdictions. In addition to the U.S., theCompany’s major taxing jurisdictions include Switzerland, France, the UnitedKingdom, Belgium, Australia, Argentina and Mexico. In the U.S., all tax yearsfrom inception in 2000 through the present are open.  The Company’s Switzerland subsidiary operatesunder a tax holiday, resulting in no uncertain tax positions for that entityfor any tax year.  Local audits of thetax returns for the Company’s France subsidiary have been completed through2004.  In the United Kingdom, the Companyassumes that tax years through 2005 are closed due to local practice.  In Belgium and Australia, tax years through2003 and 2001, respectively, are closed due to the local statute oflimitations.  In Argentina and Mexicoonly 2000 and 2001 are considered closed tax years due to the local statute oflimitations.

 

Interest and penalties related to tax positions takenin the Company’s tax returns are recorded in income tax expense in theconsolidated statements of operations.

 

**9.**        Expansion ofOperations

** **

On April 9, 2008, Nativia Guarani, S.A., theCompany’s indirect, wholly-owned subsidiary (“Nativia Guarani”), purchased astevia processing facility and business located in Paraguay and relatedtangible and intangible assets from Imperio Guarani, S.A. (“Imperio Guarani”)in an asset purchase transaction. The purchase price was $5.0 million, $0.6million of which was paid in 2007 and $3.4 million of which was paid upon theclosing of the acquisition on April 9, 2008. The remaining $1.0 million ofthe purchase price may be paid to Imperio Guarani over the next 27 months ifImperio Guarani continues to perform under related long-term contracts duringthat period.  This remaining purchaseprice liability is classified as current payables and other noncurrentliabilities as appropriate.  Inconjunction with the transaction, the Company paid $0.5 million in reimbursablevalue added tax which is classified as other non-current assets.  The Company is currently analyzing therecovery period.  None of the working capitalof the business was acquired, so the total cost of the acquisition was allocatedto long-lived fixed and intangible assets acquired based on their respectivefair values (as decreased due to resulting “negative goodwill”) in accordancewith FASB No. 141- Business Combinations. The allocation resulted in $2.1 million of fixed assets (predominatelymachinery and equipment), $2.2 million of internally-developed technology and$0.7 million of tradenames and customer relationships.  Depreciation andamortization of these allocated balances will be deductible for income tax purposesover expected lives of two to ten years. These assets will be tested for impairment as required under FASB No. 144,Accounting for the Impairment or Disposal of Long-Lived Assets.  The preliminary values assigned to theintangible assets were based upon future discounted cash flows related to theexisting products revenue streams.

 

The acquisition was accounted for by the purchasemethod and the results of operations of the acquired business have beenincluded in our Consolidated Statement of Operations since the date ofacquisition and are not yet material. Pro forma financial information is not presented as the effect of thisacquisition is not material to the Company’s results of operations andfinancial position.

 

Upon the consummation of the acquisition, Whole EarthSweetener Company LLC, a wholly owned subsidiary of the Company (“Whole Earth”),and Nativia Guarani entered into long-term contracts with Imperio Guarani and aconsulting agreement with Sergio Chase, the principal owner of Imperio Guarani.  Imperio Guarani will exclusively supply driedstevia leaves to Nativia Guarani and collaborate on research and developmentprojects. Management believes that the Nativia Guarani business and agreementswith Imperio Guarani and Mr. Chase will assist the 

 

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Company in several ways.  A number of larger and better capitalizedcompanies will be competing for stevia leaves and extracts, and verticalintegration provides Whole Earth with more control over its supply of thisnatural ingredient although the Company will continue to source high purity RebA from other suppliers.  In addition, theCompany believes that Nativia Guarani and our strategic relationship withImperio Guarani will permit Whole Earth to promote sustainable farmingpractices and develop improved agricultural and processing methods andtechnologies that may offer competitive advantages.

 

**10.     Consolidating Guarantor and Non-GuarantorFinancial Information**

** **

The following tables set forth the consolidating statements ofoperations for the three and nine months ended September 30, 2007 and September 30,2008, the consolidating balance sheets at December 31, 2007 and September 30,2008 and the statements of cash flow for the nine months ended September 30,2007 and 2008. The following information is included herein as a result of theguarantee by certain of the Company’s wholly owned U.S. subsidiaries (“GuarantorCompanies”) of the Notes. None of the Company’s other subsidiaries guaranteethe Notes. Each of the guarantees is joint and several and full andunconditional.

 

**Unaudited Consolidating Statement ofOperationsFor the Three Months Ended September 30, 2007**

** **
| ** **                                                                 | ** ** | **Merisant  Company** | ** ** | **Guarantor  Companies** | ** ** | **Non-  Guarantor  Companies** | ** ** | **Consolidating  Eliminations** | ** ** | **Consolidated** | ** ** |
|----------------------------------------------------------------------------|------------|-----------------------|------------|--------------------------|------------|--------------------------------|------------|---------------------------------|------------|------------------|------------|
|                                                                       |       |                  |       |                     |       |                           |       |                            |       |             |       |
| Net sales                                                                  |       | $                     | —     |                     | $          | 31,104                         |       | $                               | 42,899     |             | $          | (1,166 | ) | $ | 72,837 |   |
| Cost of sales                                                              |       | —                |       | 14,573                   |       | 18,111                         |       | (1,166                          | )          | 31,518           |       |
| Gross profit                                                               |       | —                |       | 16,531                   |       | 24,788                         |       | —                          |       | 41,319           |       |
| Operating expenses:                                                        |       |                  |       |                     |       |                           |       |                            |       |             |       |
| Marketing and selling expenses                                             |       | —                |       | 7,004                    |       | 8,917                          |       | —                          |       | 15,921           |       |
| Administration expenses                                                    |       | 51                    |       | 5,616                    |       | 2,495                          |       | —                          |       | 8,162            |       |
| Amortization of intangible assets                                          |       | 2,020                 |       | —                   |       | 3,244                          |       | —                          |       | 5,264            |       |
| Restructuring expenses                                                     |       | —                |       | —                   |       | 211                            |       | —                          |       | 211              |       |
| Total operating expenses                                                   |       | 2,071                 |       | 12,620                   |       | 14,867                         |       | —                          |       | 29,558           |       |
| Income (loss) from operations                                              |       | (2,071                | )          | 3,911                    |       | 9,921                          |       | —                          |       | 11,761           |       |
| Other expense (income):                                                    |       |                  |       |                     |       |                           |       |                            |       |             |       |
| Interest income                                                            |       | (110                  | )          | —                   |       | (1,009                         | )          | 873                             |       | (246             | )          |
| Interest expense                                                           |       | 11,815                |       | —                   |       | 4                              |       | (873                            | )          | 10,946           |       |
| Other expense (income), net                                                |       | 881                   |       | (78                      | )          | (686                           | )          | —                          |       | 117              |       |
| Total other expense (income)                                               |       | 12,586                |       | (78                      | )          | (1,691                         | )          | —                          |       | 10,817           |       |
| Income (loss) before income taxes and  equity in consolidated subsidiaries |       | (14,657               | )          | 3,989                    |       | 11,612                         |       | —                          |       | 944              |       |
| Provision for income taxes                                                 |       | 527                   |       | 726                      |       | 83                             |       | —                          |       | 1,336            |       |
| Equity in consolidated subsidiaries                                        |       | 14,792                |       | 11,529                   |       | —                         |       | (26,321                         | )          | —           |       |
| Net income (loss)                                                          |       | $                     | (392       | )                        | $          | 14,792                         |       | $                               | 11,529     |             | $          | (26,321 | ) | $ | (392 | ) |

 

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**Unaudited Consolidating Statement ofOperationsFor the Three Months Ended September 30, 2008**

 
| ** **                                                                 | ** ** | **Merisant  Company** | ** ** | **Guarantor  Companies** | ** ** | **Non-  Guarantor  Companies** | ** ** | **Consolidating  Eliminations** | ** ** | **Consolidated** | ** ** |
|----------------------------------------------------------------------------|------------|-----------------------|------------|--------------------------|------------|--------------------------------|------------|---------------------------------|------------|------------------|------------|
|                                                                       |       |                  |       |                     |       |                           |       |                            |       |             |       |
| Net sales                                                                  |       | $                     | —     |                     | $          | 24,824                         |       | $                               | 41,646     |             | $          | (1,410 | ) | $ | 64,520 |   |
| Cost of sales                                                              |       | —                |       | 13,364                   |       | 19,678                         |       | (1,410                          | )          | 31,632           |       |
| Gross profit                                                               |       | —                |       | 10,920                   |       | 21,968                         |       | —                          |       | 32,888           |       |
| Operating expenses:                                                        |       |                  |       |                     |       |                           |       |                            |       |             |       |
| Marketing and selling expenses                                             |       | —                |       | 6,065                    |       | 8,427                          |       | —                          |       | 14,492           |       |
| Administration expenses                                                    |       | (90                   | )          | 3,904                    |       | 2,468                          |       | —                          |       | 6,282            |       |
| Amortization of intangible assets                                          |       | 2,020                 |       | —                   |       | 3,244                          |       | —                          |       | 5,264            |       |
| Restructuring expenses                                                     |       | —                |       | 327                      |       | (31                            | )          | —                          |       | 296              |       |
| Total operating expenses                                                   |       | 1,930                 |       | 10,296                   |       | 14,108                         |       | —                          |       | 26,334           |       |
| Income (loss) from operations                                              |       | (1,930                | )          | 624                      |       | 7,860                          |       | —                          |       | 6,554            |       |
| Other expense (income):                                                    |       |                  |       |                     |       |                           |       |                            |       |             |       |
| Interest income                                                            |       | (31                   | )          | —                   |       | (799                           | )          | 760                             |       | (70              | )          |
| Interest expense                                                           |       | 10,334                |       | —                   |       | 4                              |       | (760                            | )          | 9,578            |       |
| Other expense (income), net                                                |       | (398                  | )          | 58                       |       | 2,211                          |       | —                          |       | 1,871            |       |
| Total other expense (income)                                               |       | 9,905                 |       | 58                       |       | 1,416                          |       | —                          |       | 11,379           |       |
| Income (loss) before income taxes and  equity in consolidated subsidiaries |       | (11,835               | )          | 566                      |       | 6,444                          |       | —                          |       | (4,825           | )          |
| Provision for income taxes                                                 |       | (55                   | )          | 729                      |       | (178                           | )          | —                          |       | 496              |       |
| Equity in consolidated subsidiaries                                        |       | 6,459                 |       | 6,622                    |       | —                         |       | (13,081                         | )          | —           |       |
| Net income (loss)                                                          |       | $                     | (5,321     | )                        | $          | 6,459                          |       | $                               | 6,622      |             | $          | (13,081 | ) | $ | (5,321 | ) |

 

**Unaudited Consolidating Statement ofOperationsFor the Nine Months Ended September 30, 2007**

 
| ** **                                                                 | ** ** | **Merisant  Company** | ** ** | **Guarantor  Companies** | ** ** | **Non-  Guarantor  Companies** | ** ** | **Consolidating  Eliminations** | ** ** | **Consolidated** | ** ** |
|----------------------------------------------------------------------------|------------|-----------------------|------------|--------------------------|------------|--------------------------------|------------|---------------------------------|------------|------------------|------------|
|                                                                       |       |                  |       |                     |       |                           |       |                            |       |             |       |
| Net sales                                                                  |       | $                     | —     |                     | $          | 91,905                         |       | $                               | 124,826    |             | $          | (3,491 | ) | $ | 213,240 |   |
| Cost of sales                                                              |       | —                |       | 44,042                   |       | 53,569                         |       | (3,491                          | )          | 94,120           |       |
| Gross profit                                                               |       | —                |       | 47,863                   |       | 71,257                         |       | —                          |       | 119,120          |       |
| Operating expenses:                                                        |       |                  |       |                     |       |                           |       |                            |       |             |       |
| Marketing and selling expenses                                             |       | —                |       | 20,274                   |       | 27,928                         |       | —                          |       | 48,202           |       |
| Administration expenses                                                    |       | 290                   |       | 25,236                   |       | 7,930                          |       | —                          |       | 33,456           |       |
| Amortization of intangible assets                                          |       | 6,876                 |       | —                   |       | 9,842                          |       | —                          |       | 16,718           |       |
| Restructuring expenses                                                     |       | —                |       | 160                      |       | 925                            |       | —                          |       | 1,085            |       |
| Total operating expenses                                                   |       | 7,166                 |       | 45,670                   |       | 46,625                         |       | —                          |       | 99,461           |       |
| Income (loss) from operations                                              |       | (7,166                | )          | 2,193                    |       | 24,632                         |       | —                          |       | 19,659           |       |
| Other expense (income):                                                    |       |                  |       |                     |       |                           |       |                            |       |             |       |
| Interest income                                                            |       | (209                  | )          | (4                       | )          | (2,567                         | )          | 2,169                           |       | (611             | )          |
| Interest expense                                                           |       | 36,507                |       | —                   |       | 55                             |       | (2,169                          | )          | 34,393           |       |
| Cost of refinancing                                                        |       | 5,791                 |       | —                   |       | —                         |       | —                          |       | 5,791            |       |
| Other expense (income), net                                                |       | (28,612               | )          | (168                     | )          | (1,182                         | )          | —                          |       | (29,962          | )          |
| Total other expense (income)                                               |       | 13,477                |       | (172                     | )          | (3,694                         | )          | —                          |       | 9,611            |       |
| Income (loss) before income taxes and  equity in consolidated subsidiaries |       | (20,643               | )          | 2,365                    |       | 28,326                         |       | —                          |       | 10,048           |       |
| Provision for income taxes                                                 |       | 1,209                 |       | 2,231                    |       | 1,596                          |       | —                          |       | 5,036            |       |
| Equity in consolidated subsidiaries                                        |       | 26,864                |       | 26,730                   |       | —                         |       | (53,594                         | )          | —           |       |
| Net income (loss)                                                          |       | $                     | 5,012      |                     | $          | 26,864                         |       | $                               | 26,730     |             | $          | (53,594 | ) | $ | 5,012 |   |

 

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**Unaudited Consolidating Statement ofOperationsFor the Nine Months Ended September 30, 2008**

 
| ** **                                                                 | ** ** | **Merisant  Company** | ** ** | **Guarantor  Companies** | ** ** | **Non-  Guarantor  Companies** | ** ** | **Consolidating  Eliminations** | ** ** | **Consolidated** | ** ** |
|----------------------------------------------------------------------------|------------|-----------------------|------------|--------------------------|------------|--------------------------------|------------|---------------------------------|------------|------------------|------------|
|                                                                       |       |                  |       |                     |       |                           |       |                            |       |             |       |
| Net sales                                                                  |       | $                     | —     |                     | $          | 75,234                         |       | $                               | 129,109    |             | $          | (3,857 | ) | $ | 200,486 |   |
| Cost of sales                                                              |       | —                |       | 39,691                   |       | 61,627                         |       | (3,857                          | )          | 97,461           |       |
| Gross profit                                                               |       | —                |       | 35,543                   |       | 67,482                         |       | —                          |       | 103,025          |       |
| Operating expenses:                                                        |       |                  |       |                     |       |                           |       |                            |       |             |       |
| Marketing and selling expenses                                             |       | —                |       | 18,352                   |       | 29,956                         |       | —                          |       | 48,308           |       |
| Administration expenses                                                    |       | 843                   |       | 16,171                   |       | 8,011                          |       | —                          |       | 25,025           |       |
| Amortization of intangible assets                                          |       | 6,060                 |       | —                   |       | 9,732                          |       | —                          |       | 15,792           |       |
| Restructuring expenses                                                     |       | —                |       | 474                      |       | 930                            |       | —                          |       | 1,404            |       |
| Total operating expenses                                                   |       | 6,903                 |       | 34,997                   |       | 48,629                         |       | —                          |       | 90,529           |       |
| Income (loss) from operations                                              |       | (6,903                | )          | 546                      |       | 18,853                         |       | —                          |       | 12,496           |       |
| Other expense (income):                                                    |       |                  |       |                     |       |                           |       |                            |       |             |       |
| Interest income                                                            |       | (117                  | )          | —                   |       | (2,471                         | )          | 2,060                           |       | (528             | )          |
| Interest expense                                                           |       | 31,242                |       | —                   |       | 11                             |       | (2,060                          | )          | 29,193           |       |
| Other expense (income), net                                                |       | 595                   |       | 186                      |       | 1,724                          |       | —                          |       | 2,505            |       |
| Total other expense (income)                                               |       | 31,720                |       | 186                      |       | (736                           | )          | —                          |       | 31,170           |       |
| Income (loss) before income taxes and  equity in consolidated subsidiaries |       | (38,623               | )          | 360                      |       | 19,589                         |       | —                          |       | (18,674          | )          |
| Provision for income taxes                                                 |       | 948                   |       | 2,209                    |       | 421                            |       | —                          |       | 3,578            |       |
| Equity in consolidated subsidiaries                                        |       | 17,319                |       | 19,168                   |       | —                         |       | (36,487                         | )          | —           |       |
| Net income (loss)                                                          |       | $                     | (22,252    | )                        | $          | 17,319                         |       | $                               | 19,168     |             | $          | (36,487 | ) | $ | (22,252 | ) |

 

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**Unaudited Condensed Consolidating BalanceSheet**

**AtDecember 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 |   |

 

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**Unaudited Condensed Consolidating BalanceSheetat September 30, 2008**

 
| ** **                                                 | ** ** | **Merisant  Company** | ** ** | **Guarantor  Companies** | ** ** | **Non-  Guarantor  Companies** | ** ** | **Consolidating  Eliminations** | ** ** | **Consolidated** | ** ** |
|------------------------------------------------------------|------------|-----------------------|------------|--------------------------|------------|--------------------------------|------------|---------------------------------|------------|------------------|------------|
| **Assets**                                                 | ** ** | ** **            | ** ** | ** **               | ** ** | ** **                     | ** ** | ** **                      | ** ** | ** **       | ** ** |
| Cash and cash equivalents                                  |       | $                     | 952        |                     | $          | 1,486                          |       | $                               | 9,275      |             | $          | — |   | $ | 11,713 |   |
| Trade accounts receivable, net of  allowances              |       | —                |       | 11,471                   |       | 50,970                         |       | —                          |       | 62,441           |       |
| Other receivables and intercompany  receivables            |       | 1,925                 |       | 5,209                    |       | 12,651                         |       | (6,722                          | )          | 13,063           |       |
| Inventories                                                |       | —                |       | 8,431                    |       | 16,937                         |       | —                          |       | 25,368           |       |
| Other current assets                                       |       | 1,369                 |       | 3,312                    |       | 2,203                          |       | —                          |       | 6,884            |       |
| Total current assets                                       |       | 4,246                 |       | 29,909                   |       | 92,036                         |       | (6,722                          | )          | 119,469          |       |
| Property and equipment, net                                |       | —                |       | 16,830                   |       | 12,949                         |       | —                          |       | 29,779           |       |
| Trademarks and other intangible assets, net                |       | 52,182                |       | —                   |       | 95,759                         |       | —                          |       | 147,941          |       |
| Goodwill                                                   |       | —                |       | 107,209                  |       | —                         |       | —                          |       | 107,209          |       |
| Deferred financing costs, net                              |       | 7,367                 |       | —                   |       | —                         |       | —                          |       | 7,367            |       |
| Other non-current assets                                   |       | 910                   |       | 445                      |       | 748                            |       | —                          |       | 2,103            |       |
| Investment in subsidiary and intercompany  debt            |       | 387,137               |       | 292,253                  |       | 403                            |       | (679,390                        | )          | 403              |       |
| Total assets                                               |       | $                     | 451,842    |                     | $          | 446,646                        |       | $                               | 201,895    |             | $          | (686,112 | ) | $ | 414,271 |   |
| **Liabilities**                                            | ** ** | ** **            | ** ** | ** **               | ** ** | ** **                     | ** ** | ** **                      | ** ** | ** **       | ** ** |
| Accounts payable and intercompany payable                  |       | $                     | 112,420    |                     | $          | 10,531                         |       | $                               | 10,250     |             | $          | (114,870 | ) | $ | 18,331 |   |
| Income taxes payable                                       |       |                  |       | —                   |       | 644                            |       | —                          |       | 644              |       |
| Accrued expenses and other liabilities                     |       | 6,811                 |       | 8,098                    |       | 19,358                         |       | —                          |       | 34,267           |       |
| Current maturities of long-term obligations                |       | 21,177                |       | 41                       |       | —                         |       | —                          |       | 21,218           |       |
| Total current liabilities                                  |       | 140,408               |       | 18,670                   |       | 30,252                         |       | (114,870                        | )          | 74,460           |       |
| Long-term obligations and intercompany debt                |       | 397,243               |       | 163,476                  |       | —                         |       | (163,429                        | )          | 397,290          |       |
| Other liabilities                                          |       | 6,009                 |       | 25,683                   |       | 2,647                          |       | —                          |       | 34,339           |       |
| Total liabilities                                          |       | 543,660               |       | 207,829                  |       | 32,899                         |       | (278,299                        | )          | 506,089          |       |
| **Stockholder’s Equity (Deficit)**                    | ** ** | ** **            | ** ** | ** **               | ** ** | ** **                     | ** ** | ** **                      | ** ** | ** **       | ** ** |
| Total stockholder’s equity (deficit)                  |       | (91,818               | )          | 238,817                  |       | 168,996                        |       | (407,813                        | )          | (91,818          | )          |
| Total liabilities and stockholder’s equity  (deficit) |       | $                     | 451,842    |                     | $          | 446,646                        |       | $                               | 201,895    |             | $          | (686,112 | ) | $ | 414,271 |   |

 

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**Unaudited Consolidating Statement of CashFlows For the Nine Months Ended September 30, 2007**

 
| ** **                                                                        | ** ** | **Merisant  Company** | ** ** | **Guarantor  Companies** | ** ** | **Non-  Guarantor  Companies** | ** ** | **Consolidating  Eliminations** | ** ** | **Consolidated** | ** ** |
|-----------------------------------------------------------------------------------|------------|-----------------------|------------|--------------------------|------------|--------------------------------|------------|---------------------------------|------------|------------------|------------|
| **Operating activities**                                                          |       |                  |       |                     |       |                           |       |                            |       |             |       |
| Net cash provided by (used in) operating  activities                              |       | $                     | (11,013    | )                        | $          | 2,873                          |       | $                               | 88,487     |             | $          | (53,594 | ) | $ | 26,753 |   |
| **Investing activities**                                                          |       |                  |       |                     |       |                           |       |                            |       |             |       |
| Proceeds from sale of property and  equipment                                     |       | —                |       | 26                       |       | 190                            |       | —                          |       | 216              |       |
| Purchases from sale of property and  equipment                                    |       | —                |       | (1,362                   | )          | (826                           | )          | —                          |       | (2,188           | )          |
| Net cash used in investing activities                                             |       | —                |       | (1,336                   | )          | (636                           | )          | —                          |       | (1,972           | )          |
| **Financing activities**                                                          |       |                  |       |                     |       |                           |       |                            |       |             |       |
| Borrowings under long-term obligations                                            |       | 85,000                |       | 88                       |       | —                         |       | —                          |       | 85,088           |       |
| Principal payments on long-term  obligations, excluding revolving credit facility |       | (91,605               | )          | (44                      | )          | —                         |       | —                          |       | (91,649          | )          |
| Payment of deferred financing costs                                               |       | (2,537                | )          | —                   |       | —                         |       | —                          |       | (2,537           | )          |
| Settlement of loans for purchase of shares  in Merisant Worldwide, Inc.      |       | 318                   |       | 200                      |       | —                         |       | —                          |       | 518              |       |
| Receivable/payable, parent company                                                |       | 32,254                |       | 758                      |       | (86,606                        | )          | 53,594                          |       | —           |       |
| Distribution to stockholder                                                       |       | (100                  | )          | —                   |       | —                         |       | —                          |       | (100             | )          |
| Net cash provided by (used in) financing  activities                              |       | 23,330                |       | 1,002                    |       | (86,606                        | )          | 53,594                          |       | (8,680           | )          |
|                                                                              |       |                  |       |                     |       |                           |       |                            |       |             |       |
| Effect of exchange rate on cash                                                   |       | —                |       | —                   |       | 656                            |       | —                          |       | 656              |       |
| Net increase in cash and cash equivalents                                         |       | 12,317                |       | 2,539                    |       | 1,901                          |       | —                          |       | 16,757           |       |
| Cash and cash equivalents at beginning of  period                                 |       | 782                   |       | 3,088                    |       | 19,860                         |       | —                          |       | 23,730           |       |
| Cash and cash equivalents at end of period                                        |       | $                     | 13,099     |                     | $          | 5,627                          |       | $                               | 21,761     |             | $          | — |   | $ | 40,487 |   |

 

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**Unaudited Consolidating Statement of CashFlows For the Nine Months Ended September 30, 2008**

 
| ** **                                                                        | ** ** | **Merisant  Company** | ** ** | **Guarantor  Companies** | ** ** | **Non-  Guarantor  Companies** | ** ** | **Consolidating  Eliminations** | ** ** | **Consolidated** | ** ** |
|-----------------------------------------------------------------------------------|------------|-----------------------|------------|--------------------------|------------|--------------------------------|------------|---------------------------------|------------|------------------|------------|
|                                                                              |       |                  |       |                     |       |                           |       |                            |       |             |       |
| **Operating activities**                                                          | ** ** | ** **            | ** ** | ** **               | ** ** | ** **                     | ** ** | ** **                      | ** ** | ** **       | ** ** |
| Net cash provided by (used in) operating  activities                              |       | $                     | (35,698    | )                        | $          | 2,798                          |       | $                               | 53,878     |             | $          | (36,487 | ) | $ | (15,509 | ) |
| **Investing activities**                                                          | ** ** | ** **            | ** ** | ** **               | ** ** | ** **                     | ** ** | ** **                      | ** ** | ** **       | ** ** |
| Proceeds from sale of property and  equipment                                     |       | —                |       | —                   |       | 40                             |       | —                          |       | 40               |       |
| Purchase of business                                                              |       | —                |       | —                   |       | (3,400                         | )          | —                          |       | (3,400           | )          |
| Purchases of property and equipment                                               |       | —                |       | (2,350                   | )          | (6,437                         | )          | —                          |       | (8,787           | )          |
| Net cash used in investing activities                                             |       | —                |       | (2,350                   | )          | (9,797                         | )          | —                          |       | (12,147          | )          |
| **Financing activities**                                                          | ** ** | ** **            | ** ** | ** **               | ** ** | ** **                     | ** ** | ** **                      | ** ** | ** **       | ** ** |
| Borrowings under revolving credit facility                                        |       | 12,000                |       | —                   |       | —                         |       | —                          |       | 12,000           |       |
| Borrowings under long term obligations                                            |       | —                |       | 11                       |       | —                         |       | —                          |       | 11               |       |
| Principal payments on long-term  obligations, excluding revolving credit facility |       | (22,792               | )          | (46                      | )          | —                         |       | —                          |       | (22,838          | )          |
| Payment of deferred financing costs                                               |       | (294                  | )          | —                   |       | —                         |       | —                          |       | (294             | )          |
| Receivable/payable, parent company                                                |       | 36,049                |       | (2,232                   | )          | (70,304                        | )          | 36,487                          |       | —           |       |
| Distribution to shareholder                                                       |       | (707                  | )          | —                   |       | —                         |       | —                          |       | (707             | )          |
| Settlement of loans for purchase of shares  in Merisant Worldwide, Inc.      |       | 43                    |       | —                   |       | —                         |       | —                          |       | 43               |       |
| Net cash provided by (used in) financing  activities                              |       | 24,299                |       | (2,267                   | )          | (70,304                        | )          | 36,487                          |       | (11,785          | )          |
| Effect of exchange rate on cash                                                   |       | —                |       | —                   |       | 114                            |       | —                          |       | 114              |       |
| Net decrease in cash and cash equivalents                                         |       | (11,399               | )          | (1,819                   | )          | (26,108                        | )          | —                          |       | (39,327          | )          |
| Cash and cash equivalents at beginning of  period                                 |       | 12,351                |       | 3,305                    |       | 35,384                         |       | —                          |       | 51,040           |       |
| Cash and cash equivalents at end of period                                        |       | $                     | 952        |                     | $          | 1,486                          |       | $                               | 9,275      |             | $          | — |   | $ | 11,713 |   |

 

**Item 2. Management’s Discussion and Analysisof Financial Condition and Results of Operations**

 

*The following discussion should be read inconjunction with our unaudited consolidated financial statements andaccompanying notes included elsewhere in this document. Our discussion ofresults by reportable segment should be read in conjunction with Note 2 tothe unaudited consolidated financial statements included elsewhere in thisdocument, which illustrates the reconciliation of Operating EBITDA to income(loss) before income taxes. Unless otherwise indicated or unless the contextrequires otherwise, all references in this discussion to “Merisant”, “us”, “we”,“our” or “our company” mean Merisant Company and its consolidated subsidiaries.*

 

**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 geographic marketsfor low-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 19 other regional brands that enjoy significantbrand recognition in their target markets. We sell our brands in over 100 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 ingredientin many of our products, aspartame, in 1965. Aspartame was first approved for consumer use in France in 1979, whereSearle 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 

 

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launched *Equal*®in the United States.  Monsanto enteredthe sweetener market in 1985 through its acquisition of Searle. Our company isa Delaware corporation that was formed in 2000 by an investor group led by anaffiliate of Pegasus Capital Advisors, L.P. to acquire Monsanto’s tabletopsweetener business.

 

Ourworldwide headquarters is located in Chicago, Illinois, and we have principalregional offices in Mexico City, Mexico, Neuchâtel, Switzerland, and Paris,France.  We own and operate manufacturingfacilities in Manteno, Illinois, Zarate, Argentina and Teplice, Czech Republicand own processing lines that are operated exclusively for us at plants locatedin Bergisch and Stendal, Germany and Bankrason, Thailand.  We have formed a new wholly-ownedsubsidiary, CzechPak Manufacturing s.r.o., to manufacture products at afacility located in the Czech Republic, which commenced production in August 2008.  The CzechPak facility initially will produce *Canderel*® branded products for EAME region.  As of November 13, 2008, we had 20direct and indirect active subsidiaries, including four subsidiaries in theUnited States, seven subsidiaries in Europe, six subsidiaries in Mexico,Central America and South America, and three subsidiaries in the Asia Pacificregion, including Australia and India. In addition, our Swiss subsidiary holds a 50% interest in a jointventure 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 19 other regional brandsaround the world are also sweetened with aspartame.

 

***Market Trends and Strategy***

** **

Our company’s premium-priced brands hadenjoyed a strong market position among low-calorie sweeteners in many of ourkey markets.  In recent years, however,we have faced significant competition from McNeil Nutritionals LLC, asubsidiary of Johnson & Johnson (“McNeil”), which markets anddistributes the artificial sweetener*Splenda*®.  *Splenda*®is sweetened with sucralose, which is produced through a complex chemicalprocess that converts sucrose molecules into a synthetic compound. From December 2002to 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-caloriesweetener in the United States.  While webelieve that 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 declining net sales, we haveexperienced significant declines in our Bank EBITDA from $110.2 million in 2003to a low of $67.2 million in 2006, before increasing to $69.9 million in2007.  For a description of Bank EBITDAand a reconciliation of Bank EBITDA to cash flow from operating activities, see“Management’s Discussion and Analysis of Financial Condition and Results ofOperations—Liquidity and Capital Resources”.

 

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 newproducts designed to revitalize the existing customer base and attract newconsumers.

 

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

 

·                  Promote newusage among existing consumers and expand the *Equal*®and *Canderel*® brand positioning to attractnew consumers through invasive marketing campaigns and improved salesexecution.

 

·                  Increase thepace of product innovation to bring new products and brand extensions to themarket, including products sweetened with high intensity sweeteners other thanaspartame.

 

·                  Develop and testproducts that have the potential to transform our company’s brand portfolio,including by building a platform for all natural, low-calorie sweeteners andsweetened foods.

 

·                  Dedicatesignificant resources to improving the efficiency of operations by, among otherthings, implementing programs to streamline manufacturing capabilities andimproving the efficiency of certain support services.  We have successfully reduced costs and madeour business more efficient, which has significantly contributed to the currentstabilization of Bank EBITDA over the past two years.

 

·                  Offer privatelabel low-calorie sweeteners to retail and food service customers and leveragesupply chain expertise globally.

 

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We believe that these strategies taken together have positioned ourcompany to pursue opportunities for future growth in the low-calorie tabletopsweetener and sweetened food category. Many of our major markets are increasingly competitive as more brandedand private label tabletop sweeteners compete for limited space on retailgrocery shelves and in restaurant caddies. Although our premium brands *Equal*® and *Canderel*® are among the most recognized brands in the world,our company must offer more than these quality products in order to remainrelevant to our customers and to consumers. Our strategies allow us to offer our retail grocery and food servicecustomers a suite of branded and private label low-calorie tabletop sweetenersthat contain a range of synthetic and natural sweeteners.  We seek to offer our retail grocery and foodservice customers a range of quality products and the benefits of ourmanufacturing capabilities.

 

***Recent Developments***

 

*Launch of PureViaTM Brand and RelatedAgreements*

 

On July 31, 2008, Whole Earth Sweetener Company LLC, awholly-owned subsidiary of Merisant Company (“Whole Earth”), announced thatPepsiCo, Inc. (“PepsiCo”) and Whole Earth had formed an unprecedentedpartnership to jointly own the *PureVia*TMtrademark and market the *PureVia*TM brandglobally.  Whole Earth owns the *PureVia* trademark for tabletop sweeteners, and PepsiCo ownsthe trademark for beverages and certain other food categories.  Whole Earth anticipates that it will launch a*PureVia*TM all-natural, zero calorietabletop sweetener in the United States in the fall of 2008.

 

*PureVia*TM brandedproducts will be sweetened with high purity Reb A, an all-natural, purifiedextract of the stevia plant that is approximately 200 times sweeter thansugar.  PepsiCo and Whole Earth haveentered into an ingredient branding agreement with PureCircle Limited, asupplier of high purity Reb A (“PureCircle”). Among other things, the parties will collaborate on marketing high purityReb A under the *PureVia*TM brand.  PureCircle will be permitted to license thetrademark on an exclusive and royalty-free basis from either PepsiCo or WholeEarth in order to identify the branded ingredient in product categories to beagreed to by the parties.  PureCirclewill be permitted to sublicense the trademark to customers approved by PepsiCoand Whole Earth for the purpose of identifying the ingredient in the agreedupon product categories.

 

Whole Earth has entered into a non-exclusive supply agreement withPureCircle pursuant to which PureCircle will supply high purity Reb A to WholeEarth.  The supply agreement has aninitial term of five years.

 

The active sweetening ingredient in *PureVia*TMtabletop sweetener is high purity Reb A. This ingredient differs from most stevia products sold as dietarysupplements in the United States because it is a highly pure form of only oneof several steviol glycosides found in the stevia plant and because of itspurity the ingredient contains little or no residual plant material.

 

Whole Earth believes that it has demonstrated that high purity Reb A isgenerally recognized as safe (referred to as “GRAS”) and that the ingredientmay therefore be sold as a food in the United States.  In general, the Food, Drug, and Cosmetic Actprovides that any substance that is added to food must be pre-approved by U.S.Food and Drug Administration, unless the substance is generally recognized,among qualified experts, as having been adequately shown to be safe under theconditions of its intended use. Management believes that Whole Earth has demonstrated the GRAS status ofhigh purity Reb A through scientific procedures in accordance with FDAregulations.  These procedures requirethe same quantity and quality of scientific evidence as is required to obtainapproval of the substance as a food additive and ordinarily is based uponpublished studies.  Companies may electto use GRAS ingredients on a self-affirmed basis or they may submit anotification and supporting documentation to the FDA for review.  In May 2008, Whole Earth submitted anotification and supporting scientific data to the FDA that high purity Reb Ais GRAS for use in beverages, foods and tabletop sweeteners.  The FDA could ask questions and seekadditional information from Whole Earth or it may provide a letter indicatingthat it has no objections.  It isanticipated that the FDA could deliver a no objection letter in the fall of2008.

 

*Vertical Integration of Stevia Supply*

 

On April 9, 2008, Whole Earth acquired the stevia processingbusiness and related assets in Paraguay through its indirect, wholly-ownedsubsidiary, Nativia Guarani, S.A.  Inconnection with this acquisition, Whole Earth and Nativia Guarani entered intolong-term agricultural supply, research and development, purchase option andconsulting agreements with its local partner Imperio Guarani, S.A. and SergioChase, the principal owner of Imperio Guarani. Imperio Guarani has developed a network of small, independent farmersfrom whom the company acquires stevia leaves, and Imperio Guarani will selldried stevia leaves exclusively to Nativia Guarani.  Among other things, Imperio Guarani and WholeEarth will 

 

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collaborate on further extending this network of farmers, improvingstevia varieties as well as developing improved stevia growing, harvesting andprocessing technologies.  Imperio Guaranihas granted Whole Earth an exclusive option to acquire its business and theland currently leased by Nativia Guarani from affiliates of Imperio Guarani.

 

The Nativia Guarani facility currently mills dried stevia leaves andproduces a stevia extract that has not yet been purified into high purity RebA.  Pending the results of its currentresearch and development efforts and the commercialization of thosetechnologies, Whole Earth may use this stevia extract for its own productswhere steviol glycosides may be used, offer the extract for sale as aningredient or further purify the extract into high purity Reb A.

 

Management believes that the Nativia Guarani business and agreementswith Imperio Guarani and Mr. Chase will assist the company in severalways.  A number of larger and bettercapitalized companies will be competing for stevia leaves and extracts, andvertical integration provides Whole Earth with more control over its supply ofthis natural ingredient, although Whole Earth will continue to source highpurity Reb A from PureCircle and other suppliers.  In addition, management believes that theformation of Nativia Guarani and our company’s strategic relationship withImperio Guarani will permit Whole Earth to promote sustainable farmingpractices and develop improved agricultural and processing methods andtechnologies that may offer competitive advantages.

 

*CzechPak Manufacturing Facility*

 

We have built a new manufacturing facility in the Czech Republic whichis operated by our newly formed subsidiary CzechPak Manufacturing s.r.o.  The CzechPak facility initially will employapproximately 80 people and produce *Canderel*®branded products for EAME region.  The facility commenced production in August 2008.  We anticipate that the CzechPak facility willreduce our manufacturing costs, allow us to introduce new products morerapidly, test new products on a limited basis and improve both operationalefficiency and working capital by reducing lead times and the amount of inventoryheld by our distributors.  We will shifta portion of our current production and equipment to this new facility fromKrüger GmbH & Co. KG, our current contract manufacturer located inGermany.  In connection with thistransition, Merisant and Krüger amended the parties’ manufacturingagreement.  Under the terms of theamended agreement, certain products will no longer be manufactured by Krügerand we will be able to move the equipment currently used by Krüger tomanufacture and package these products to our CzechPak facility.  The parties extended the expiration of themanufacturing agreement from 2010 to 2012 and we agreed to meet certain minimumpurchase commitments for each of Krueger’s facilities.  Commencing January 2009 the aggregateamount of such commitments is €29.2 million. In addition, we agreed to acquire any raw materials, packaging and workin progress for the discontinued products and to increase conversion fees perunit for the products that Krüger will continue to produce.  We also agreed to provide credit enhancementsin the event that Krüger is unable to obtain a certain level of creditinsurance for its production commitments.

 

**CapitalConstraints and Need to Refinance or Restructure**

 

We believe that the development andintroduction of new products under our *Equal*® and *Canderel*® brands may help to stabilize our core businesswhile*PureVia*TM and other innovative,all-natural sweeteners and sweetened food products from Whole Earth presentgrowth opportunities for us. However, we may be constrained in our ability torealize fully the value of these new products as a result of our current capitalstructure. The successful launch of new products and marketing of our corebrands requires capital, and we must use a significant portion of our cashflows from operations to service our outstanding debt. We had an aggregate of$418.5 million of short and long-term debt outstanding at September 30,2008, including capital lease obligations and borrowings from our revolvingcredit facility.  We paid $32.7 millionin interest costs for the nine months ended September 30, 2008, $21.4million of which represented interest payments on our 9 1⁄2% senior subordinatednotes due 2013 (the “Notes”). If we cannot generate cash flows from operationssignificantly in excess of our debt obligations, we may not have the resourcesrequired to fully realize the value of our strategic initiatives.

 

In order to maximize value, management isfocused on refinancing or restructuring all or part of our debtobligations.  By January 11, 2009,approximately $7.4 million principal amount of the Term A loans and $28.0million of revolving loans currently outstanding under our senior creditfacility as of November 13, 2008 will become due and payable, and we willno longer be able to draw revolving loans or issue letters of credit under oursenior credit facility.  We have a totalof $45.9 million in interest and principal payments that become due and payablein January 2009.  In addition,interest on the 12 1⁄4% senior subordinated discount notes due 2014 (the “DiscountNotes”) of Merisant Worldwide, Inc. (“Merisant Worldwide”), our parentcompany, will become payable 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.

 

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As of November 13, 2008, borrowingsunder our revolving credit facility were $28.0 million. In aggregate, duringthe twelve months ending September 30, 2009, we and Merisant Worldwide arescheduled to pay $78.3 million of principal and interest under our andMerisant Worldwide’s primary debt obligations. Given the disruptions in the credit and financial markets in recentmonths, uncertainty exists as to whether we will be able to generate resultsfrom operations or consummate transactions sufficient to enable us to make allof these payments. The disruptions in the credit and financial markets havealso limited access to capital and credit for many companies. We rely on anumber of financial institutions and the credit and financial markets to meetour financial commitments and short-term liquidity needs if internal funds arenot available. Continuing instability or disruptions of these markets couldprohibit or make it more difficult for us to access new capital, significantlyincrease the cost of capital or limit our ability to refinance, replace oramend our existing indebtedness.  We areengaged in discussions with certain of our secured lenders and debt securityholders as well as potential financing sources with regard to refinancing orrestructuring all or a portion of our debt obligations. However, there can beno assurance that we will be able to refinance, replace or amend ouroutstanding debt obligations on terms favorable to us, or at all, particularlygiven current financial market conditions.

 

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** **

**Results of Operations**

 

For each of the periods discussed below, the information set forthunder the caption “Consolidated Results” represents an overview of our company’sresults of operations on a consolidated basis. Additional detail regarding theresults of operations can be found under the caption “Segment Results” for eachperiod discussed below.

 

***Three Months Ended September 30, 2008 Compared to Three Months EndedSeptember 30, 2007***

 

The following table sets forth certain of ourcompany’s financial data for the three month periods ended September 30,2007 and 2008 (totals may not foot due to rounding).

 
| ** **                        | ** ** | **Three Months Ended  September 30,** | ** ** | **Three Months Ended  September 30,** | ** ** |
|-----------------------------------|------------|------------------------------------------------------|------------|------------------------------------------------------|------------|
| ** **                        | ** ** | **2007**                                             | ** ** | **2008**                                             | ** ** | **2007** | ** ** | **2008** | ** ** | **Better/(Worse)  than Prior Year** | ** ** |
| ** **                        | ** ** | **(in millions)**                               | ** ** | **As % of Net Sales**            | ** ** | **Dollars** | ** ** | **%** | ** ** |
| Net sales                         |       | $                                                    | 72.8       |                                                 | $          | 64.5 |   | 100 | % | 100 | % | $ | (8.3 | ) | (11 | )% |
| Cost of sales                     |       | 31.5                                                 |       | 31.6                                                 |       | 43 | % | 49 | % | (0.1 | ) | (0 | )% |
| Gross profit                      |       | 41.3                                                 |       | 32.9                                                 |       | 57 | % | 51 | % | (8.4 | ) | (20 | )% |
| Operating expenses:               |       |                                                 |       |                                                 |       |   |   |   |   |   |   |   |   |
| Marketing and selling expenses    |       | 15.9                                                 |       | 14.5                                                 |       | 22 | % | 22 | % | 1.4 |   | 9 | % |
| Administration expenses           |       | 7.8                                                  |       | 5.5                                                  |       | 11 | % | 8 | % | 2.3 |   | 29 | % |
| Research and development costs    |       | 0.4                                                  |       | 0.8                                                  |       | 0 | % | 1 | % | (0.4 | ) | (118 | )% |
| Amortization of intangible assets |       | 5.3                                                  |       | 5.3                                                  |       | 7 | % | 8 | % | 0.0 |   | 0 | % |
| Restructuring expenses            |       | 0.2                                                  |       | 0.3                                                  |       | 0 | % | 0 | % | (0.1 | ) | (40 | )% |
| Total operating expenses          |       | 29.6                                                 |       | 26.3                                                 |       | 41 | % | 41 | % | 3.2 |   | 11 | % |
| Income from operations            |       | 11.7                                                 |       | 6.6                                                  |       | 16 | % | 10 | % | (5.2 | ) | (44 | )% |
| Other expenses (income):          |       |                                                 |       |                                                 |       |   |   |   |   |   |   |   |   |
| Interest income                   |       | (0.2                                                 | )          | (0.1                                                 | )          | (0 | )% | (0 | )% | (0.2 | ) | (72 | )% |
| Interest expense                  |       | 10.9                                                 |       | 9.6                                                  |       | 15 | % | 15 | % | 1.4 |   | 12 | % |
| Other expense (income), net       |       | 0.1                                                  |       | 1.9                                                  |       | (0 | )% | 3 | % | (1.8 | ) | (1,500 | )% |
| Total other expenses              |       | 10.8                                                 |       | 11.4                                                 |       | 15 | % | 18 | % | (0.6 | ) | (5 | )% |
| Income (loss) before income taxes |       | 0.9                                                  |       | (4.8                                                 | )          | 1 | % | (7 | )% | (5.8 | ) | (611 | )% |
| Provision for income taxes        |       | 1.3                                                  |       | 0.5                                                  |       | 2 | % | 1 | % | 0.8 |   | 63 | % |
| Net loss                          |       | $                                                    | (0.4       | )                                                    | $          | (5.3 | ) | (1 | )% | (8 | )% | $ | (4.9 | ) | (1,258 | )% |

 

**Consolidated Results**

 

*Net sales.*Overall,net sales declined in the third quarter of 2008 compared to the third quarterof 2007.  The decline was related tolower sales in North America and Asia/Pacific partially offset by higher salesin Latin America.  Overall net 

 

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sales in EAME during the third quarter of 2008 were stable compared tothe same period last year.  In NorthAmerica, net sales declined as a result of our transition from a distributionsales model for our retail business to a direct sales model along with adecline in consumer consumption.  Thesenegative impacts on net sales were slightly offset by decreased trade marketingspending.  In Asia/Pacific, we areimplementing a change in our supply chain that decreased shipments to ourdistributor in Australia.  Offsettingthese declines slightly was improved performance in the Latin America regionalong with the consolidated sales impact of the devaluation of the U.S. dollarcompared to the third quarter of 2007 and the resulting currency translationwhich accounted for approximately $1.6 million of incremental net sales in thethird quarter of 2008.  In the EAMEregion, UK sales increased in conjunction with a price increase.   In Latin America, Argentina also implementeda price increase which positively impacted the net sales compared to the samequarter in 2007.  In Mexico, we continueto maintain high brand awareness, though our competitor, *Splenda*®, has invested heavily inadvertising over the past 21 months. This has resulted in a decrease in consumer demand for our productsalong with pricing pressure particularly in the club channel.

 

*Cost of sales.* Costof sales increased, despite the decline in sales, due to one-time start upcosts related to our manufacturing plant in the Czech Republic, sales increasesin lower margin products, 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 57% for the three months ended September 30,2007 to 51% for the three months ended September 30, 2008 due to theincreases in costs discussed above as well as increased trade marketing inFrance.

 

*Operating expenses.*Marketingand selling expenses decreased due to lower performance-based incentives in allregions along with lower brand support in North America.  This was partially offset by higher brand supportin Latin America related to our *Canderel*®anniversary promotion, unfavorable currency impacts in the EAME region andincreased costs related to our new product launch.  Administration expenses decreased mainly dueto lower litigation and performance-based incentives.

 

During the third quarter of 2008, wecontinued our restructuring initiatives to improve both financial results andthe long-term value of the business. As a result of these actions, we recordedrestructuring charges for workforce reductions of $0.3 million in the thirdquarter of 2008 as compared to $0.2 million in the third quarter of 2007. Therestructuring charges incurred in the third quarter of 2008 relate primarily tonew employee termination costs and are expected to be substantially paidby May 31, 2009. Additional information regarding restructuring chargesand the related liability can be found in Note 3 to the unaudited consolidatedfinancial statements located elsewhere in this document.

 

*Interest.*Ourinterest expense decreased as a net result of overall decreases in interestrates on variable interest debt instruments and lower principal balances forthe third quarter of 2008 compared to the third quarter of 2007.

 

*Other expense, net*.   Inthe third quarter of 2008, a $0.7 million currency gain on the euro-denominateddebt was more than offset by unfavorable balance sheet remeasurementimpacts.  In the third quarter of 2007,we recorded a loss on the euro-denominated debt of $0.9 million which was morethan offset by favorable balance sheet remeasurement impacts.

 

*Taxes. *For the three months ended September 30,2008, we recorded a $0.5 million tax provision on a loss before income taxes of$4.8 million. The unusual relationship of our tax provision to the pre-tax lossin the third 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 $5.5 million in the third quarter of 2008 to a total of $79.9 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. The similar unusual relationship in 2007 is due to the same factors.

 

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**Segment Results**

 

The following table presents net sales andOperating EBITDA expressed in millions of dollars for each reportablesegment (totals may not foot due to rounding):

 
| ** **              | ** ** | **Net Sales**                               | ** ** | **Operating EBITDA (1)**            | ** ** |
|-------------------------|------------|--------------------------------------------------|------------|-----------------------------------------------|------------|
| ** **              | ** ** | **Three Months  Ended  September 30,** | ** ** | **Better/(Worse)  than Prior Year** | ** ** | **Three Months  Ended  September 30,** | ** ** | **Better/(Worse)  than Prior Year** | ** ** |
| ** **              | ** ** | **2007**                                         | ** ** | **2008**                                      | ** ** | **$** | ** ** | **%** | ** ** | **2007** | ** ** | **2008** | ** ** | **$** | ** ** | **%** | ** ** |
| ** **              | ** ** | ** **                                       | ** ** | **(in millions)**                        | ** ** | ** ** | ** ** | ** ** | ** ** | **(in millions)** | ** ** | ** ** | ** ** |
| ** **              | ** ** | ** **                                       | ** ** | ** **                                    | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| North America (2)       |       | $                                                | 29.1       |                                          | $          | 22.1 |   | $ | (7.0 | ) | (24 | )% | $ | 11.3 |   | $ | 6.2 |   | (5.1 | ) | (45 | )% |
| Operating EBITDA Margin |       |                                             |       |                                          |       |   |   |   |   | 39 | % | 28 | % | (11 | )% |   |   |
| EAME                    |       | 27.9                                             |       | 28.0                                          |       | 0.1 |   | 0 | % | 9.9 |   | 5.6 |   | (4.3 | ) | (43 | )% |
| Operating EBITDA Margin |       |                                             |       |                                          |       |   |   |   |   | 35 | % | 20 | % | (15 | )% |   |   |
| Latin America           |       | 9.5                                              |       | 10.5                                          |       | 1.0 |   | 11 | % | 2.9 |   | 3.5 |   | 0.6 |   | 21 | % |
| Operating EBITDA Margin |       |                                             |       |                                          |       |   |   |   |   | 31 | % | 33 | % | 3 | % |   |   |
| Asia/Pacific            |       | 6.3                                              |       | 3.9                                           |       | (2.4 | ) | (38 | )% | 2.0 |   | 0.8 |   | (1.1 | ) | (57 | )% |
| Operating EBITDA Margin |       |                                             |       |                                          |       |   |   |   |   | 32 | % | 22 | % | (10 | )% |   |   |
|                         |            |                                                  |            |                                               |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

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(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, costs 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 EBITDA marginrepresents Operating EBITDA as a percentage of net sales.

 

(2)         NorthAmerica segment results exclude immaterial sales and $2.5 million of negativeOperating EBITDA related to a new product launch which management evaluatesseparately from this geographical segment for the three month period ended September 30,2008.

 

***North America***

 

*Net sales.*  In North America, the net sales decline wasdriven by the planned impact of our transition from our distributor model to adirect sales distribution model. Shipments to our distributor were significantly reduced during the monthof July as the distributor continued to ship product to the trade andconsume the remaining product on hand. Also contributing to the decline was decreased sales volume in the club,food service, and ingredient channels along with a decrease in consumerconsumption in the retail, club and food service channels.   These negative variances were partiallyoffset by decreased trade spending in the food service and retail channels.

 

*Operating EBITDA.*Thedecrease in Operating EBITDA and Operating EBITDA margin was primarily relatedto the margin impact of lower net sales. These unfavorable impacts were partially offset by lower overall brandsupport and lower sales and marketing administration costs.

 

***EAME***

 

*Net sales.*In theEAME region, net sales were stable during the third quarter of 2008 compared tothe same period of 2007 as net sales in the Middle East and the UK along withthe positive currency translation impact were offset by weak performance inFrance. Strong net sales performance in the Middle East was related to ourintentional increases in distributor inventory levels in preparation for ourchange in manufacturing locations.  Inthe first quarter of 2007, as a result of diversion 

 

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of product into the retail channel, we discontinued sales to certain UKdistributors in an effort to stop the diversion.  In the third quarter of 2008, sales in the UKcontinued to perform at levels realized in the second half of 2007 afterstopping the diversion of product.  Inaddition, we implemented a price increase in the UK.  Continued softness in consumer demand as wellas increased trade spending reduced sales in France.  The devaluation of the U.S. dollar and theresulting currency translation effect on our financial statements accounted forapproximately $1.2 million of the net sales increase in the EAME region.

 

*Operating EBITDA.* Operating EBITDA and Operating EBITDA margindecreases are mainly due to unfavorable currency impacts related to cost ofgoods sold, one-time start up costs related to our new manufacturing operationsin the Czech Republic, and unfavorable impacts of the remeasurement of theSwiss entity’s balance sheet.  Thesenegative impacts were slightly offset by reduced general administrative costsdue mainly to savings from lower performance-based incentives, restructuringactions and facility related changes in France.

 

Our CzechPak facility commenced production in August 2008 and willmanufacture *Canderel*® products for the EAMEregion.  We anticipate that the CzechPakfacility will reduce our manufacturing costs, allow us to introduce newproducts more rapidly, test new products on a more limited basis and improveboth operational efficiency and working capital by reducing lead times and theamount of inventory held by our distributors in the region.

 

Until the start-up of the CzechPak facility, most of our *Canderel*® products for the EAME region had been manufacturedby Krüger GmbH & Co. KG under a long-term contract manufacturingagreement.  We intend to shift a portionof the production currently handled by Krüger to the CzechPak facility.  On October 8, 2008, we entered into anagreement with Krüger that amends the terms of the manufacturingagreement.  Under the terms of theamended agreement, certain products will no longer be manufactured byKrüger  and we will be able to move theequipment currently used by Krüger to manufacture and package these products toour CzechPak facility.  The partiesextended the expiration of the manufacturing agreement from 2010 to 2012 and weagreed to meet certain minimum purchase commitments for each of Krueger’sfacilities. Commencing January 2009 the aggregate amount of suchcommitments is €29.2 million.  Inaddition, we agreed to acquire any raw materials, packaging and work inprogress for the discontinued products and to increase conversion fees per unitfor the products that Krüger will continue to produce.  We also agreed to provide credit enhancementsin the event that Krüger is unable to obtain a certain level of creditinsurance for its production commitments.

 

***Latin America***

 

*Net sales.* Improved sales in the third quarter of 2008relates primarily to a price increase implemented in Argentina.  In addition, Peru sales volume increased dueto strong performance from a new distributor and its effective execution ofpromotions.   Venezuela sales performancealso improved as a result of strong promotional activity.  These positive results were partially offsetby declines in Mexico sales volume.

 

*Operating EBITDA.*OperatingEBITDA and Operating EBITDA margin increased due to the increase in net salesdespite higher raw material costs across the region and increased brand supportin Mexico.

 

***Asia/Pacific***

 

*Net sales.*Net salesin the Asia/Pacific region decreased due to lower shipments to our distributorin Australia related to a change in manufacturing locations.   In preparation for the transition, wedecreased inventory levels at our distributor. We have commenced manufacturing operations at a local facility late inthe third quarter.  Overall, markettrends in this region have remained stable.

 

*Operating EBITDA.*OperatingEBITDA and Operating EBITDA margin decreased primarily due to the decreasedsales coupled with higher cost of goods sold related to unfavorable currencyvariances.

 

**Corporate Expenses**

 

Corporate expenses decreased from $5.2million in the third quarter of 2007 to $2.7 million in the third quarter of2008, primarily due to lower performance-based incentives, lower consultingfees and lower legal costs.

 

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***Nine Months Ended September 30, 2008 Comparedto Nine Months Ended September 30, 2007***

 

Thefollowing table sets forth certain of our company’s financial data for the ninemonth periods ended September 30, 2007 and 2008 (totals may not foot dueto rounding).

 
| ** **                        | ** ** | **Nine Months Ended  September 30,** | ** ** | **Nine Months Ended  September 30,** | ** ** |
|-----------------------------------|------------|-----------------------------------------------------|------------|-----------------------------------------------------|------------|
| ** **                        | ** ** | ** **                                          | ** ** | ** **                                          | ** ** | ** ** | ** ** | ** ** | ** ** | **Better/(Worse)** | ** ** |
| ** **                        | ** ** | **2007**                                            | ** ** | **2008**                                            | ** ** | **2007** | ** ** | **2008** | ** ** | **than Prior Year** | ** ** |
| ** **                        | ** ** | **(in millions)**                              | ** ** | **As% of Net Sales**                 | ** ** | **Dollars** | ** ** | **%** | ** ** |
| Net sales                         |       | $                                                   | 213.2      |                                                | $          | 200.5 |   | 100 | % | 100 | % | $ | (12.8 | ) | (6 | )% |
| Cost of sales                     |       | 94.1                                                |       | 97.5                                                |       | 44 | % | 49 | % | (3.3 | ) | (4 | )% |
| Gross profit                      |       | 119.1                                               |       | 103.0                                               |       | 56 | % | 51 | % | (16.1 | ) | (14 | )% |
| Operating expenses:               |       |                                                |       |                                                |       |   |   |   |   |   |   |   |   |
| Marketing and selling expenses    |       | 48.2                                                |       | 48.3                                                |       | 23 | % | 24 | % | (0.1 | ) | (0 | )% |
| Administration expenses           |       | 32.4                                                |       | 22.9                                                |       | 15 | % | 11 | % | 9.4 |   | 29 | % |
| Research and development expenses |       | 1.1                                                 |       | 2.1                                                 |       | 1 | % | 1 | % | (1.0 | ) | (94 | )% |
| Amortization of intangible assets |       | 16.7                                                |       | 15.8                                                |       | 8 | % | 8 | % | 0.9 |   | 6 | % |
| Restructuring expenses            |       | 1.1                                                 |       | 1.4                                                 |       | 1 | % | 1 | % | (0.3 | ) | (29 | )% |
| Total operating expenses          |       | 99.5                                                |       | 90.5                                                |       | 47 | % | 45 | % | 8.9 |   | 9 | % |
| Income from operations            |       | 19.7                                                |       | 12.5                                                |       | 9 | % | 6 | % | (7.1 | ) | (36 | )% |
| Other expenses (income):          |       |                                                |       |                                                |       |   |   |   |   |   |   |   |   |
| Interest income                   |       | (0.6                                                | )          | (0.5                                                | )          | (0 | )% | (0 | )% | (0.1 | ) | (14 | )% |
| Interest expense                  |       | 34.4                                                |       | 29.2                                                |       | 16 | % | 15 | % | 5.2 |   | 15 | % |
| Costs of refinancing              |       | 5.8                                                 |       | —                                              |       | 3 | % | — | % | 5.8 |   | 100 | % |
| Other expense (income), net       |       | (30.0                                               | )          | 2.5                                                 |       | (14 | )% | 1 | % | (32.5 | ) | (108 | )% |
| Total other expense (income)      |       | (9.6                                                | )          | 31.2                                                |       | (5 | )% | 16 | % | (21.6 | ) | (224 | )% |
| Income (loss) before income taxes |       | 10.0                                                |       | (18.6                                               | )          | 5 | % | (9 | )% | (28.7 | ) | (286 | )% |
| Provision for income taxes        |       | 5.0                                                 |       | 3.6                                                 |       | 2 | % | 2 | % | 1.4 |   | 28 | % |
| Net income (loss)                 |       | $                                                   | 5.0        |                                                | $          | (22.3 | ) | 2 | % | (11 | )% | $ | (27.3 | ) | (544 | )% |

 

**Consolidated Results**

 

*Net sales.*Overall,net sales declined in the nine months ended September 30, 2008 compared tothe nine months ended September 30, 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.  In the retail channel, the planned transitionfrom a distributor model to a direct sales model negatively impacted sales asdistributor inventory levels were significantly reduced and we commenced directshipments to our customers.  Thesenegative impacts on net sales were slightly offset by decreased trade marketingspending.  In Asia/Pacific, we had highnet sales in the first quarter of 2007 related to shipments to new distributorsto establish beginning inventory levels which did not repeat in 2008.  This impact was exasperated during 2008 as wetransitioned to a local manufacturer and reduced distributor inventory levelsfurther in the region to shorten lead times. Offsetting these declines were improved performance in the EAME andLatin America regions along with the consolidated sales impact of thedevaluation of the U.S. dollar and the resulting currency translation impactwhich accounted for approximately $8.3 million of incremental net sales.  In the EAME region,  UK sales continued the momentum achieved inthe second half of 2007 as the impact of the late 2006 diversion hassubsided.  Additionally, strong markettrends and a third quarter price increase have contributed to the positiveperformance in the UK.   In LatinAmerica, we implemented a price increase in Argentina to offset rising costsand a new distributor in Peru has maintained strong performance.

 

*Cost of sales.* Costof sales increased, despite the slight decline in sales, due to sales increasesin lower margin products, such as contract manufacturing, one time costsrelated to the start up of new manufacturing operations, the impact ofpurchasing product in euro for sales in countries with weaker currencies andunfavorable raw material purchase prices. 

 

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Overall, gross profit as a percentage of net sales declined from 56%for the nine months ended September 30, 2007 to 51% for the nine monthsended September 30, 2008 due to the increases in costs discussed above,and to a lesser extent, increased trade marketing in France.

 

*Operating expenses.*Marketingand selling expenses increased slightly due to higher brand support in LatinAmerica, unfavorable currency impacts, and increased costs related to our newproduct launch. These unfavorable impacts were partially offset by lower brandsupport and commissions in North America, lower brand support in Asia/Pacific,as well as lower performance-based incentives in all regions.  Administration expenses decreased mainly dueto lower litigation costs and lower performance-based incentives.

 

During the nine months ended September 30,2008, we continued our restructuring initiatives to improve both financialresults and the long-term value of the business. As a result of these actions,we recorded restructuring charges for workforce reductions of $1.4 million inthe first nine months of 2008 as compared to $1.1 million in the first ninemonths of 2007. The restructuring charges incurred in 2008 relate primarily tonew employee termination costs and are expected to be substantially paid by May 31,2009. 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 in 2007, as well asoverall decreases 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.

 

*Costs of refinancing. *Costs of refinancingfor the nine months ended September 30, 2007 related to the extinguishmentof debt under the Second Lien Credit Agreement. As a result of this transaction, a premium of $2.6 million was incurredto pay all debt and interest outstanding under the Second Lien Credit Agreementand $3.2 million of existing deferred financing fees was written off.

 

*Other expense, net*.In the second quarter of 2007, we experienced an unusually high level of otherincome as compared to the more typical other expenses realized in 2008.  The other income in the second quarter of2007 was primarily the result of a one-time cash payment received pursuant toan agreement with a third party. In the first nine months of 2008, we recorded a $0.3 million currency loss on theeuro-denominated debt as well as an unfavorable balance sheet remeasurementimpact.  In the first nine months of2007, we recorded a  loss of $1.4 millionon the euro-denominated debt which was partially offset by a favorable balancesheet remeasurement impact.

 

*Taxes.*For the ninemonths ended September 30, 2008, we recorded a $3.6 million tax provisionon a loss before income taxes of $18.6 million. The unusual relationship of ourtax provision to the pre-tax loss in the nine months ended September 30, 2008relates to a combination of factors. These factors include increased tax losscarryforwards, primarily generated in the United States, for which we have notrecorded a tax benefit, as well as **provisions for future tax costs which may beincurred upon the potential repatriation of certain 2008 foreign earningsthat are not deemed to be permanently reinvested. **Withregard to the deferred income tax assets on the tax loss carryforwards, wedetermined that we have not satisfied the “more likely than not” test and weincreased our total valuation allowance by $10.4 million in the nine monthsended September 30, 2008 to a total of $79.9 million. We will continue toassess the valuation allowances, and, to the extent we determine that suchallowances are no longer required, these deferred income tax assets will berecognized in the future.  The similarunusual relationship in 2007 is due to the same factors.

 

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**Segment Results**

 

The following table presents net sales andOperating EBITDA expressed in millions of dollars for each reportablesegment (totals may not foot due to rounding):

 
| ** **              | ** ** | **Net Sales**                              | ** ** | **Operating EBITDA (1)**            | ** ** |
|-------------------------|------------|-------------------------------------------------|------------|-----------------------------------------------|------------|
| ** **              | ** ** | **Nine Months  Ended  September 30,** | ** ** | **Better/(Worse)  than Prior Year** | ** ** | **Nine Months  Ended  September 30,** | ** ** | **Better/(Worse)  than Prior Year** | ** ** |
| ** **              | ** ** | **2007**                                        | ** ** | **2008**                                      | ** ** | **$** | ** ** | **%** | ** ** | **2007** | ** ** | **2008** | ** ** | **$** | ** ** | **%** | ** ** |
| ** **              | ** ** | ** **                                      | ** ** | **(in millions)**                        | ** ** | ** ** | ** ** | ** ** | ** ** | **(in millions)** | ** ** | ** ** | ** ** |
| ** **              | ** ** | ** **                                      | ** ** | ** **                                    | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| North America (2)       |       | $                                               | 85.7       |                                          | $          | 69.1 |   | (16.6 | ) | (19 | )% | $ | 31.6 |   | $ | 21.2 |   | (10.5 | ) | (33 | )% |
| Operating EBITDA Margin |       |                                            |       |                                          |       |   |   |   |   | 37 | % | 31 | % | (6 | )% |   |   |
| EAME                    |       | 84.6                                            |       | 90.5                                          |       | 5.9 |   | 7 | % | 25.6 |   | 22.1 |   | (3.4 | ) | (13 | )% |
| Operating EBITDA Margin |       |                                            |       |                                          |       |   |   |   |   | 30 | % | 25 | % | (6 | )% |   |   |
| Latin America           |       | 22.9                                            |       | 27.2                                          |       | 4.3 |   | 19 | % | 5.9 |   | 6.7 |   | 0.8 |   | 13 | % |
| Operating EBITDA Margin |       |                                            |       |                                          |       |   |   |   |   | 26 | % | 25 | % | (1 | )% |   |   |
| Asia/Pacific            |       | 20.2                                            |       | 13.7                                          |       | (6.5 | ) | (32 | )% | 7.4 |   | 3.2 |   | (4.2 | ) | (57 | )% |
| Operating EBITDA Margin |       |                                            |       |                                          |       |   |   |   |   | 37 | % | 24 | % | (13 | )% |   |   |
|                         |            |                                                 |            |                                               |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

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| (1)    |   | “Operating  EBITDA” as used with respect to our operating segments is a measure upon  which we assess the financial performance of these segments. Operating EBITDA  excludes interest expense, income tax expense and depreciation and  amortization, as well as items such as restructuring expenses, certain  significant charges related to new product development and launch costs,  certain litigation costs, costs related to the transition to a new exclusive  distributor in the United States and certain other non-cash items. Our  definition of Operating EBITDA largely mirrors the definition of Bank EBITDA  under our Senior Credit Facility. That definition changed in the  May 2007 amendment of those credit facilities, and that change is  reflected prospectively in our computation of Operating EBITDA for the 2007  period. See Note 2 to the unaudited consolidated financial statements for a  description of Operating EBITDA and a reconciliation of Operating EBITDA to  income (loss) before income taxes. Operating EBITDA margin represents  Operating EBITDA as a percentage of net sales. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| (2)    |   | North America segment  results exclude immaterial sales and $5.5 million of negative Operating  EBITDA related to a new product launch which management evaluates separately  from this geographical segment for the nine month period ended  September 30, 2008.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |

 

***North America***

 

*Net sales.*  In North America, the net sales decline wasdriven by the planned impact of our transition from our distributor to a directsales model for the retail channel.  Inaddition, our distributor inventory levels were higher than usual at December 31,2007 in the food service channel which resulted in a decrease in shipmentsduring the first nine months of 2008 compared to the first nine months of2007.  We also experienced decreasedconsumer consumption in the food service and retail channels slightly offset bydecreased trade marketing spending.   Inthe club channel, though the timing and extent of our promotional activitiesvaried when comparing the first nine months of 2007 to the first nine months of2008, we have experienced decreases in consumption and sales volume.

 

On January 29, 2008, we delivered noticeto ACH Food Companies, Inc. (“ACH”) that the distribution agreementbetween Merisant US, Inc. and ACH would terminate on July 27, 2008with respect only to the retail grocery channel.  We have partially terminated the distributionagreement so that we can pursue a direct distribution model for retailcustomers in the United States.  We willhandle order processing, warehousing and trade marketing internally and througha third-party broker and logistics providers for retail grocery and drugcustomers in the United States which we anticipate will reduce our operatingcosts, improve the efficiency of our inventory management and distributioncapabilities, and provide more transparency in customer relations.  In July 2008, we paid the distributor$0.3 million to facilitate this and other changes in the distribution agreement.  This expense is included in operatingexpenses for the nine months ended September 30, 2008.

 

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*Operating EBITDA.*Thedecrease in Operating EBITDA and Operating EBITDA margin were primarily relatedto the margin impact of lower net sales. This unfavorable impact was partially offset by lower overall brandsupport and  commissions.

 

***EAME***

 

*Net sales.*In theEAME region, the increase in net sales was driven primarily by the UK, theMiddle East and Belgium along with the positive currency translation impact. Inthe first quarter of 2007, as a result of diversion of product into the retailchannel, we discontinued sales to certain UK distributors in an effort to stopthe diversion.  In the first half of2008, sales in the UK continued to perform at levels realized in the secondhalf of 2007 after stopping the diversion of product and we have experienced astrong market demand.  Strong net salesperformance in the Middle East was related to our intentional increases indistributor inventory levels in preparation for our change in manufacturinglocations.  In Belgium, our distributorcarried higher inventories than expected at December 31, 2006, negativelyimpacting sales in the first quarter of 2007 and thus reflecting a favorableperiod to period comparison.   Continuedsoftness in consumer demand as well as increased trade spending reduced net salesin France. The devaluation of the U.S. dollar compared to the same period in2007 and the resulting currency translation effect on our financial statementsaccounted for approximately $6.8 million of the net sales increase in the EAMEregion.

 

*Operating EBITDA.* Operating EBITDA and Operating EBITDA margindecreased despite the increase in net sales due to unfavorable currency impactson the cost of goods sold, unfavorable balance sheet remeasurements andone-time costs related to the start up of new manufacturing operations in theCzech Republic that are not excluded from Bank EBITDA.

 

***Latin America***

 

*Net sales.* Net sales improvement relates primarily to aprice increase implemented in Argentina along with continued strong performancefrom our distributor in Peru which distributes both locally and throughout theregion.  In addition, net sales in Mexicofor the nine months ended September 30, 2008 improved compared to the sameperiod in 2007.  However, unusually lowsales were reported in Mexico in the first half of 2007 as we converted to adirect distribution model for the grocery channel.  Overall, trends in Mexico indicate a decreasein consumer demand for our product as our competitor, *Splenda*®, experiences positive resultsfrom its heavy consumer and trade promotion spending.

 

*Operating EBITDA.*OperatingEBITDA and Operating EBITDA margin increased due to the increase in net salesdespite higher brand support in Mexico and the overall impact of increased costof goods sold.

 

***Asia/Pacific***

 

*Net sales.*Net salesin the Asia/Pacific region decreased primarily due to unusually high sales inthe first quarter of 2007 related to shipments to new distributors in Australiaand India to establish beginning inventory levels which did not repeat in 2008.  Net sales were also impacted by a decrease ininventory levels at our Asia/Pacific distributors in 2008 related to thestart-up of our local production as we shorten lead times.

 

*Operating EBITDA.*OperatingEBITDA and Operating EBITDA margin decreased primarily due to the decreasedsales coupled with higher cost of goods sold and lower brand support againstsignificantly lower sales.

 

**Corporate Expenses**

 

Corporate expenses decreased from $19.2million in the nine months ended September 30, 2007 to $14.2 million inthe nine months ended September 30, 2008, primarily due to lowerlitigation costs relating to our lawsuit against McNeil incurred in 2007 andlower performance-based incentives.

 

**Liquidity and Capital Resources**

 

Our liquidity needs are primarily met through internally generated cashflow supplemented in 2007 by a one-time payment received pursuant to an agreement with a third party. As needed,we also borrow money under the revolving credit facility of the Amended andRestated Credit Agreement.  Our primaryuses of cash are cost of sales, operating expenses, debt service, capitalexpenditures and distributions to our stockholder and, in 2008, the acquisitionof Nativia Guarani. Foreign subsidiaries generated approximately 59% ofconsolidated net sales during the year ended December 31, 2007, and ourU.S. operations have relied upon the repatriation of cash from our foreignsubsidiaries to satisfy many of our domestic cash requirements. Historically,our U.S. operations had received a vast majority of funds from foreignsubsidiaries through our 

 

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Swiss subsidiary in the form of payments pursuant 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 in2011. We may borrow up to $200 million from our Swiss subsidiary during theterm of the revolver note, and we expect to repatriate cash to the UnitedStates through borrowings under this revolver note. The principal balancerelating to this revolving note as of September 30, 2008 was $102 million.

 

We had $11.7million of cash and cash equivalents as of September 30, 2008 compared to $51.0million of cash and cash equivalents at December 31, 2007.  The decrease is related to debt and interestpayments along with 2008 operating cash expenditures that included the purchaseof Nativia Guarani and higher than usual capital expenditures.  We were also required to prepay $15.2 millionof the principal amount of term loans outstanding under our Amended andRestated Credit Agreement five business days after filing our 2007 AnnualReport with excess cash as required and calculated under the terms of ourAmended and Restated Credit Agreement. This prepayment was made on April 4, 2008 and decreased our cashbalance accordingly.  The decrease wasoffset with $12.0 million in borrowings from our revolving creditfacility.  Our net cash outflows in thefourth quarter  of 2008 are expected tobe less than the average run rate of the first three quarters of  2008 as several one-time outflows are notexpected to repeat.  These items includea three to six month inventory build in the EAME, the purchase of the NativiaGuarani business, and the prepayment of debt principal.

 

Accounts receivable levels, time to payment and inventory levels impactthe amount of internally generated cash flow. The following table showsinformation with respect to accounts receivable and inventory as of December 31,2007 and September 30, 2008. Accounts receivable decreased in the nine months ended September 30,2008 primarily due to higher sales in the fourth quarter of 2007 compared tothe third quarter of 2008.  Inventory levelsincreased in the nine months ended September 30, 2008 as compared to December 31,2007, primarily due to planned increases in finished goods quantities on handin our foreign subsidiaries related to supply chain synchronization efforts todecrease lead times and to prepare for the commencement of operations at ourmanufacturing plant in the Czech Republic.

 
| ** **                        | ** ** | **December 31, 2007** | ** ** | **September 30, 2008** | ** ** |
|-----------------------------------|------------|---------------------------------|------------|----------------------------------|------------|
|                              |       |                            |       |                             |       |
| Accounts receivable (in millions) |       | $                               | 74.4       |                             | $          | 62.4 |   |
| Days sales outstanding            |       | 92                              |       | 82                               |       |
| Inventory (in millions)           |       | $                               | 13.5       |                             | $          | 25.4 |   |
| Days sales in inventory           |       | 38                              |       | 66                               |       |

 

***Nine Months Ended September 30, 2008Compared to Nine Months Ended September 30, 2007***

 

For the nine months ended September 30, 2008, net cash used byoperating activities was $15.5 million compared to cash provided of $26.8million for the nine months ended September 30, 2007. Operating cash flowsdecreased $42.3 million versus the nine months ended September 30, 2007,due to a decrease in the contribution from working capital of $8.4 million anddecreased net income after adjusting for non-cash items of $33.9 millionprimarily due to the gain related to a one-time payment received in 2007pursuant to an agreement with a third party.

 

Net cash used in investing activities totaled $12.1 million for thenine months ended September 30, 2008 compared to $2.0 million for the ninemonths ended September 30, 2007 due to increased spending on capitalexpenditures, primarily related to our new manufacturing operations in theCzech Republic and a business acquisition in 2008.

 

For the ninemonths ended September 30, 2008, financing activities used $11.8 millionin cash as compared to using $8.7 million in cash for the nine months ended September 30,2007.  For the nine months ended September 30,2008, we used cash to pay our scheduled and additional required principalpayments under the Amended and Restated Credit Agreement and borrowed $12.0million under our revolving credit facility.   For the nine months ended September 30,2007, cash was provided from $85.0 million in borrowings under the Amended andRestated Credit Agreement and we used cash to pay our scheduled principalpayments under the Senior Credit Agreement, to pay all outstanding borrowings,interest and premium under the Second Lien Credit Agreement and to pay costsassociated with the Amended and Restated Credit Agreement. In addition,distributions of $0.1 million and $0.7 million were made to our solestockholder in the first nine months of 2007 and the first nine months of 2008,respectively, for the purpose of paying administrative expenses.  Borrowings under our revolving creditfacility were $0 at December 31, 2007, $12.0 million at September 30,2008 and $28.0 million at November 13, 2008.

 

***Capital Expenditures***

 

Capital expenditures in 2008 are expected to be in the range of$15 million to $17 million. The majority of the 2008 capital expenditures related to theestablishment of our new manufacturing operations in the Czech Republic.  We believe

 

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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 are seeking to refinanceour existing Amended and Restated Credit Agreement prior to the scheduledmaturity of our revolving credit facility in January 2009.

 

***Financing***

 

On July 11, 2003, we issued $225.0 million principalamount of the Notes and refinanced our credit facility with the Senior CreditAgreement.  A portion of the proceeds ofthe Notes and the Senior Credit Agreement were used to pay a dividend to oursole stockholder. The Notes are unsecured obligations and are subordinated inright of payment to all existing and future senior indebtedness of our company.The Notes mature on July 15, 2013. The stated rate of interest for theNotes is 91⁄2% per annum. Interest is payable semi-annually in arrears on January 15thand July 15th.

 

The Senior Credit Agreement, as of September 30,2008, provides for aggregate commitments of up to $310.0 million, consisting ofa revolving loan facility of $35.0 million, of which a portion is available atour option in euro or dollars or in the form of letters of credit denominatedin dollars or euro, as well as term loan facilities of $275.0 million,consisting of a euro Term A loan of an original amount of $50.0 million, and aTerm B loan of an original amount of $225.0 million, denominated in dollars.The euro Term A loan and the revolving loan facility mature in January 2009while the Term B loan 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 are secured by afirst-priority security interest in substantially all of our assets and theassets 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 restatedour Senior Credit Agreement (the “Amended and Restated Credit Agreement”),which, among other things, increased by $85.0 million the principal amount ofTranche B Term Loans that could be borrowed by us under the facility.  We paid $2.5 million in fees and expensesrelated to this amendment and restatement which were deferred and are being amortizedover the term of the related debt. Upon closing, we borrowed the full $85.0million of additional Tranche B Term Loans and used the proceeds plus cash onhand to prepay the principal of all loans outstanding under the Second LienCredit Agreement totaling $85.0 million, plus all outstanding interest of $1.4million and a premium of $2.6 million, or $89.0 million.  The Second Lien Credit Agreement has beenterminated as a result of the transaction and there was no increase in our longterm debt.  In addition to the incurrenceof fees, this transaction resulted in a write-off of existing deferredfinancing fees relating to the extinguishment of previously outstanding debt inthe amount of $3.2 million.

 

Upon closingof the above transaction and execution of the related amendment, the interestrate on all term loans and revolving loans outstanding under the Amended andRestated Credit Agreement increased from euro-LIBOR and LIBOR plus 325 basispoints per annum to euro-LIBOR and LIBOR plus 350 basis points per annum.  As a result of the termination of the SecondLien Credit Agreement, our effective interest rate on variable interest ratedebt decreased from 10.63% per annum prior to the closing of this transactionto 8.73% per annum subsequent to this transaction.  As of September 30, 2008, we had $193.4million in borrowings outstanding under the Amended and Restated CreditAgreement and $12.0 million in borrowings under our revolving credit line witheffective interest rates of 7.43% and 5.97%, respectively.  As a result of the $15.2 million prepaymentof term loans under the Amended and Restated Credit Agreement and a reductionof the LIBOR, we anticipate that our cash interest expense will decrease byapproximately $4.0 million for the year ending December 31, 2008 comparedto the year ended December 31, 2007. The effective interest rate under the Amended and Restated CreditAgreement is significantly below current market conditions for companies withcomparable credit risk.  As such, if werefinance or restructure our credit facility in the current credit environment,we expect to be subject to substantially higher interest rates.

 

**BankEBITDA**.  TheAmended and 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 

 

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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.

 

We are engaged in discussions with certain ofour secured lenders and debt security holders as well as potential financingsources with regard to refinancing or restructuring all or a portion of ourdebt obligations. However, there can be no assurance that we will be able torefinance, replace or amend our outstanding debt obligations on terms favorableto us, or at all, particularly given current financial market conditions.

 

Bank EBITDA asdefined under the Amended and Restated Credit Agreement excludes interestexpense, income tax and gross receipts tax expense, depreciation andamortization as well as certain other expenses and non-cash items, including:

 

·                                          anyextraordinary, unusual or non-recurring non-cash expenses or losses (includingnon-cash losses on sales of assets outside of the ordinary course of business);

 

·                                          non-cashcontributions and other non-cash compensation expense;

 

·                                          non-cashlosses attributable to equity in non-consolidated subsidiaries;

 

·                                          transactioncosts associated with the 2003 recapitalization transaction which are expensedand not amortized;

 

·                                          anycash expenses incurred in connection with any waiver of a Default or Event ofDefault and any amendment to the Amended and Restated Credit Agreement;

 

·                                          anynon-cash foreign currency translation adjustments;

 

·                                          anyextraordinary or non-recurring cash losses or expenses arising fromrestructuring not to exceed in the aggregate (A) if such period ends prior to January 1, 2006, $14,600,000,or (B) if such period begins on or after January 1, 2006, (x) $11,000,000with respect to any such non-recurring cash losses or expenses arising from theimplementation of our plan known as “Project Arrow” and related restructuring, (y) $4,000,000with respect 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;

 

·                                          expensesincurred by us or any subsidiary prior to January 1, 2007 in connectionwith the development and commercialization of our all-natural, zero-caloriesweetener to be marketed under the *Sweet Simplicity®*trademark in an amount not to exceed in the aggregate $3,000,000 and prior to January 1,2009 in an amount not to exceed in the aggregate $15,000,000; and

 

·                                          expensesincurred between January 1, 2007 and December 31, 2007 in connectionwith our litigation against McNeil and McNeil-PPC, Inc. in an amount notto exceed $4,000,000.

 

Bank EBITDAfor the nine months ended September 30, 2008 under the Amended andRestated Credit Agreement was $39.0 million as compared to $51.4 million forthe nine months ended September 30, 2007, adjusted to reflect litigationcosts and *Sweet Simplicity®* product launch costson a comparable basis with the current definition of Bank EBITDA.  We were in compliance with the covenantsunder the Amended and Restricted Credit Agreement at September 30, 2008.

 

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The following table illustrates thereconciliation of Bank EBITDA to cash flow from operating activities, whichmanagement believes is the most nearly equivalent GAAP measure:

 
| ** **                                                                   | ** ** | **Nine Months  Ended  September 30, 2008** | ** ** |
|------------------------------------------------------------------------------|------------|-----------------------------------------------------------|------------|
| ** **                                                                   | ** ** | **(in millions)**                                    | ** ** |
| Net cash used by operating activities                                        |       | $                                                         | (15.5      | ) |
| Provision for income taxes, net of deferred  income tax provision            |       | 0.9                                                       |       |
| Interest expense, net of non-cash interest  expense                          |       | 26.2                                                      |       |
| Restructuring expenses (a)                                                   |       | 3.2                                                       |       |
| Other non-cash items                                                         |       | 6.0                                                       |       |
| Equity in (income) loss of affiliates                                        |       | 0.1                                                       |       |
| Net change in operating assets and  liabilities, net of business acquisition |       | 18.1                                                      |       |
| Bank EBITDA                                                                  |       | $                                                         | 39.0       |   |

 

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(a)                                  Thecharges principally relate to planned employee termination costs that have been announced in the periodpresented and specified project implementation costs.

 

***Forward Looking Statements***

 

Certain information included or incorporatedin this report may be deemed to be “forward-looking statements” within themeaning of Section 27A of the Securities Act of 1933 and Section 21Eof the Securities Exchange Act of 1934. All statements, other than statementsof historical facts, included or incorporated in this report areforward-looking statements. In particular, statements made under the heading “Management’sDiscussion and Analysis of Financial Condition and Results of Operations,”relating to overall volume trends, pricing trends and industry forces,anticipated results, expectations for funding capital expenditures andoperations and increased market share, refinancing efforts and the availabilityof financing  and the sufficiency ofcapital to meet working capital, capital expenditures requirements andstrategies are forward-looking statements. When used in this document, thewords “anticipate,” “estimate,” “project” and similar expressions are intendedto identify forward-looking statements.

 

These statements are based on assumptions and assessments made bymanagement in light of their experience and their perception of historicaltrends, current conditions, expected future developments and other factors theybelieve to be appropriate. Any forward-looking statements are not guarantees offuture performance and are subject to risks and uncertainties that could causeactual results, developments and business decisions to differ materially fromthose contemplated by such forward-looking statements. We disclaim any duty toupdate any forward-looking statements, except as required by law. Some of thefactors that may cause actual results, developments and business decisions todiffer materially from those contemplated by such forward-looking statementsinclude the following:  the availabilityof financing; changes in consumer preferences and nutritional andhealth-related concerns; increased competition; changes in the terms on whichwe may obtain aspartame; damaged consumer confidence in our products as aresult of health-related allegations; product liability claims; fluctuations inexchange rates and other currency risks; disruptions in our business as aresult of strikes or work stoppages; changes in our relationship with ourlargest distributor; and changes in economic and political conditions in thecountries in which we market and produce our products.

 

**Item3.  Quantitative and QualitativeDisclosures About Market Risk**

 

***ForeignOperations***

 

With approximately 60% and 66% of consolidated total net salesgenerated by subsidiaries outside of the United States in the nine months endedSeptember 30, 2007 and September 30, 2008, respectively, our abilityto obtain funds necessary to meet our domestic obligations is subject toapplicable laws, foreign taxes and intercompany pricing laws, including thoserelating to the flow of funds between our foreign affiliates pursuant to, forexample, purchase agreements, licensing agreements or other arrangements.  Historically, our U.S. operations havereceived 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. Our U.S. operations may borrow up to $200 millionfrom our Swiss subsidiary during the term of the revolver note.  We are repatriating cash to the United Statesthrough borrowings under this revolver note, which total $102 million as of September 30,2008. Regulators in the United States and other foreign countries where weoperate may closely monitor our corporate structure and how it affectsintercompany fund transfers.

 

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In addition, as of September 30,2008, foreign affiliates comprised approximately 49% of our consolidated totalassets. 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) andinterest expense that results from such an exchange rate increase.  Upon maturity of our euro-denominated debt inJanuary 2009, our exposure to fluctuations in currency exchange rates willincrease.

 

A significant portion of ourdebt bears interest at a fixed rate. Interest rate exposure results from our floating rate borrowings. Forthe nine months ended September 30, 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 $2.0million.  The interest rates that ourdebt is subject to are significantly below current market interest rates forcompanies with comparable credit risk. As such, if we refinance or restructure our debt under current marketconditions we expect to be subject to significantly higher interest rates.

 

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 September 30, 2008.

 

***InflationRisk***

 

We anticipate that inflationwill increase our costs and inflation may also reduce consumption as moreconsumers reduce their discretionary spending. In prior periods, we generally have been able to offset the impact ofinflation through a combination of cost-cutting measures and price increases,but as the global economy weakens it will likely become increasingly difficultto mitigate the impact of rising costs.

 

**Item 4T.  Controls and Procedures**

 

# *Evaluationof Disclosure Controls and Procedures*

#  

We conducted an evaluation, under the supervision of the ChiefExecutive Officer and Vice President, Finance, Controller (Principal FinancialOfficer), of the effectiveness as of September 30, 2008 of our disclosurecontrols and procedures (as defined in Exchange Act Rule 15d-15(e)). Basedon this evaluation, the Chief Executive Officer and Principal Financial Officerconcluded that, as of September 30, 2008, our disclosure controls andprocedures were effective.

 

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

 

There have been no changes in our internalcontrol over financial reporting during the most recently completed fiscalquarter that have materially affected, or are reasonably likely to materiallyaffect, our internal control over financial reporting.

 

**PART II**—**OTHER INFORMATION**

 

**Item 1. Legal Proceedings**

 

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

 

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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 counsel, that the outcome of such claims and actions will nothave a material adverse effect on our consolidated financial position orresults of operations.

 

**Item1A.  Risk Factors**

 

The most significant risk factors applicableto our company are described in Part I, Item 1A “Risk Factors” of ourAnnual Report on Form 10-K for the year ended December 31, 2007.

 

***We face risksrelated to the current credit crisis and global economic slowdown.***

 

Weuse our operating cash flows and our revolving credit facility to service ourdebt obligations and operating activities.  Current uncertainty in global economic conditions resulting from therecent disruption in worldwide credit markets pose a risk to the overall globaleconomy that could adversely impact consumer and customer demand for ourproducts, as well as our ability to manage normal commercial relationships withour customers, suppliers and creditors. Recent trends indicate the continuation and possible acceleration of consumerspurchasing store branded products rather than branded, premium products.  If these trends continue, our revenue andoperating cash flows and, in turn, our ability to operate our business andservice our debt obligations could be adversely affected.

 

Moreover, overthe past several months, significant deterioration in the financial conditionof many financial institutions has resulted in severe loss of liquidity, highershort-term borrowing costs, lower borrowing availability in global creditmarkets and more stringent borrowing terms. The global economic slowdown has caused further tightening of the creditmarkets, more stringent lending standards and terms and higher volatility ininterest rates.  These factors couldadversely affect the ability of our customers and suppliers to do business withus.  We are engaged in discussions with certainof our secured lenders and debt security holders as well as potential financingsources with regard to refinancing or restructuring all or a portion of ourdebt obligations.  However, there can beno assurance that we will be able to refinance, replace or amend ouroutstanding debt obligations on terms favorable to us, or at all, particularlygiven current financial market conditions.

 

**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.                                 |

 

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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934,the registrant has duly caused this report to be signedon its behalf by the undersigned thereunto duly authorized.

 
|                         | MERISANT COMPANY |
|------------------------------|------------------|
|                         |             |   |
|                         |             |   |
| Date: November 13, 2008 | By:              | /s/ Julie Wool |
|                         |             | Julie Wool |
|                         |             | Vice President, Finance, Controller |
|                         |             | (on behalf of the Company and in capacity |
|                         |             | of principal financial officer) |

 

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