**UNITED STATESSECURITIES 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 June 30, 2007** |
| ** **                                        |       | ** **                                                                                              |
| **OR**                                            |
| ** **                                        |       | ** **                                                                                              |
| **o**                                             | ** ** | **TRANSITION REPORT PURSUANT TO SECTION 13 OR  15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |

 

**For thetransition period from             to             **

**CommissionFile Number:  333-114105**

**Merisant Company**

(Exact Name ofRegistrant as Specified in its Charter)

| **Delaware**                                  |   | **52-2218321**                           |
|-----------------------------------------------|--------|------------------------------------------|
| (State or Other  Jurisdiction of              |   | (I.R.S. Employer  Identification Number) |
| Incorporation or  Organization)               |   |                                     |
|                                          |   |                                     |
| **10  South Riverside Plaza, Suite 850** |   | ** **                               |
| **Chicago,  Illinois**                        |   | **60606**                                |
| (Address of  Principal Executive Offices)     |   | (Zip Code)                               |

 

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

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

**Notapplicable.**

Indicate by check markwhether the registrant (1) has filed all reports required to be filed bySection 13 or 15(d) of the Securities Exchange Act of 1934 during thepreceding 12 months (or for such shorter period that the registrant wasrequired to file such reports), and (2) has been subject to such filing requirementsfor the past 90 days.   Yes  o   No  x

Indicateby check mark whether the registrant is a large accelerated filer, anaccelerated filer, or a non-accelerated filer. See definition of “acceleratedfiler and large accelerated filer” in Rule 12b-2 of the ExchangeAct.

| Large accelerated  filer  o |   | Accelerated  filer  o |   | Non-accelerated  filer  x |
|---------------------------------------|--------|---------------------------------|--------|-------------------------------------|

 

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

Indicate thenumber of shares outstanding of each of the issuer’s classes of common stock,as of the latest practicable date.

As of August 10,2007, the registrant had 100 shares of common stock, par value $0.01 per share,outstanding, all of which were owned by Merisant Worldwide, Inc.

This report is beingfiled pursuant to a requirement contained in the indenture governing MerisantCompany’s 91⁄2% Senior Subordinated Notes due 2013.

 

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**MERISANT COMPANY**

**INDEX TOREPORT**

**FOR THEQUARTER ENDED JUNE 30, 2007**
| **PART I—FINANCIAL  INFORMATION** |       |
|---------------------------------------------|------------|
|                                        |       |   |   |
| Item 1.                                     |       | Financial  Statements of Merisant Company |   |
|                                        |       |   |   |
|                                        |       | Unaudited  Consolidated Balance Sheets at December 31, 2006 and June 30, 2007 |   |
|                                        |       |   |   |
|                                        |       | Unaudited  Consolidated Statements of Operations and Comprehensive Income (Loss) for the  Three and Six Months Ended June 30, 2006 and 2007 |   |
|                                        |       |   |   |
|                                        |       | Unaudited  Consolidated Statement of Stockholder’s Deficit for the Six Months Ended June  30, 2007 |   |
|                                        |       |   |   |
|                                        |       | Unaudited  Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2006  and 2007 |   |
|                                        |       |   |   |
|                                        |       | Notes to  Unaudited Consolidated Financial Statements |   |
|                                        |       |   |   |
| Item 2.                                     |       | Management’s  Discussion and Analysis of Financial Condition and Results of Operations |   |
|                                        |       |   |   |
| Item 3.                                     |       | Quantitative  and Qualitative Disclosures About Market Risk |   |
|                                        |       |   |   |
| Item 4.                                     |       | Controls and  Procedures |   |
|                                        |       |   |   |
| **PART II—OTHER  INFORMATION**    | ** ** |
|                                        |       |   |   |
| Item 1.                                     |       | Legal Proceedings |   |
|                                        |       |   |   |
| Item 1A.                                    |       | Risk Factors |   |
|                                        |       |   |   |
| Item 4.                                     |       | Submission of  Matters to a Vote of Security Holders |   |
|                                        |       |   |   |
| Item  6.                                    |       | Exhibits |   |

 

2

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**PART I**—**FINANCIAL INFORMATION**

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

**MERISANT COMPANYUnaudited Consolidated Balance Sheets(Dollars In Thousands, Except Per Share Amounts)**
| ** **                                                                                                                    | ** ** | **At December 31,  2006** | ** ** | **At June 30,  2007** | ** ** |
|-------------------------------------------------------------------------------------------------------------------------------|------------|-------------------------------------|------------|---------------------------------|------------|
| **ASSETS**                                                                                                                    | ** ** | ** **                          | ** ** | ** **                      | ** ** |
| Cash and cash equivalents                                                                                                     |       | $                                   | 23,730     |                            | $          | 50,909 |   |
| Trade accounts  receivable, net of allowances of $534 and $585, respectively                                             |       | 68,006                              |       | 63,055                          |       |
| Other receivables                                                                                                             |       | 5,689                               |       | 8,203                           |       |
| Inventories                                                                                                                   |       | 13,792                              |       | 14,956                          |       |
| Prepaid expenses and  other assets                                                                                            |       | 5,365                               |       | 5,544                           |       |
| Current portion of note  receivable from director                                                                             |       | 970                                 |       | 970                             |       |
| Deferred income tax  assets                                                                                                   |       | 1,534                               |       | 1,371                           |       |
| Total current  assets                                                                                                         |       | 119,086                             |       | 145,008                         |       |
| Property and equipment,  net                                                                                                  |       | 23,341                              |       | 20,664                          |       |
| Trademarks and other  intangible assets, less accumulated amortization and impairment of $159,340  and $170,794, respectively |       | 182,679                             |       | 171,225                         |       |
| Goodwill                                                                                                                      |       | 107,209                             |       | 107,209                         |       |
| Deferred financing  costs, less accumulated amortization of $7,570 and $8,376, respectively                                   |       | 13,621                              |       | 11,232                          |       |
| Non-current portion of  note receivable from director                                                                         |       | 2,651                               |       | 1,736                           |       |
| Investment in equity  affiliate                                                                                               |       | 269                                 |       | 357                             |       |
| Other non-current  assets                                                                                                     |       | 967                                 |       | 1,139                           |       |
| Total assets                                                                                                                  |       | $                                   | 449,823    |                            | $          | 458,570 |   |
| **LIABILITIES AND STOCKHOLDER’S  DEFICIT**                                                                               | ** ** | ** **                          | ** ** | ** **                      | ** ** |
| Accounts payable                                                                                                              |       | $                                   | 16,234     |                            | $          | 24,188 |   |
| Income taxes payable                                                                                                          |       | 1,578                               |       | 716                             |       |
| Accrued interest  expense                                                                                                     |       | 11,793                              |       | 12,756                          |       |
| Accrued trademarketing  and consumer promotions                                                                               |       | 12,200                              |       | 13,998                          |       |
| Accrued incentives                                                                                                            |       | 8,017                               |       | 2,978                           |       |
| Accrued expenses and  other liabilities                                                                                       |       | 11,757                              |       | 10,186                          |       |
| Current maturities of  long-term obligations                                                                                  |       | 8,468                               |       | 9,407                           |       |
| Total current  liabilities                                                                                                    |       | 70,047                              |       | 74,229                          |       |
| Long-term obligations,  net of current maturities                                                                             |       | 427,813                             |       | 423,006                         |       |
| Deferred income tax  liabilities                                                                                              |       | 19,439                              |       | 21,585                          |       |
| Other liabilities                                                                                                             |       | 11,452                              |       | 6,457                           |       |
| Total  liabilities                                                                                                            |       | 528,751                             |       | 525,277                         |       |
| 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.                                                                  |       | (707                                | )          | (258                            | )          |
| Retained deficit                                                                                                              |       | (72,595                             | )          | (61,534                         | )          |
| Accumulated other  comprehensive loss                                                                                         |       | (5,626                              | )          | (4,915                          | )          |
| Total  stockholder’s deficit                                                                                             |       | (78,928                             | )          | (66,707                         | )          |
| Total liabilities and  stockholder’s deficit                                                                             |       | $                                   | 449,823    |                            | $          | 458,570 |   |

 

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

3

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**MERISANT COMPANY****Unaudited Consolidated Statementsof Operations and****Comprehensive Income (Loss)****(Dollars In Thousands)**
| ** **                         | ** ** | **Three Months Ended  June 30,** | ** ** | **Six Months Ended  June 30,** | ** ** |
|------------------------------------|------------|-------------------------------------------------|------------|-----------------------------------------------|------------|
| ** **                         | ** ** | **2006**                                        | ** ** | **2007**                                      | ** ** | **2006** | ** ** | **2007** | ** ** |
| Net sales                          |       | $                                               | 78,629     |                                          | $          | 71,090 |   | $ | 148,296 |   | $ | 140,403 |   |
| Cost of sales                      |       | 32,604                                          |       | 31,860                                        |       | 61,619 |   | 62,602 |   |
| Gross profit                       |       | 46,025                                          |       | 39,230                                        |       | 86,677 |   | 77,801 |   |
| Operating  expenses:               |       |                                            |       |                                          |       |   |   |   |   |
| Marketing and selling expenses     |       | 22,201                                          |       | 17,034                                        |       | 39,109 |   | 32,281 |   |
| Administration expenses            |       | 10,782                                          |       | 13,419                                        |       | 22,481 |   | 25,294 |   |
| Amortization of intangible assets  |       | 5,554                                           |       | 5,727                                         |       | 11,108 |   | 11,454 |   |
| Transaction fees                   |       | 3,300                                           |       | —                                        |       | 3,300 |   | — |   |
| Restructuring expenses             |       | 1,305                                           |       | 314                                           |       | 3,596 |   | 874 |   |
| Total operating expenses           |       | 43,142                                          |       | 36,494                                        |       | 79,594 |   | 69,903 |   |
| Income from  operations            |       | 2,883                                           |       | 2,736                                         |       | 7,083 |   | 7,898 |   |
| Other expense  (income):           |       |                                            |       |                                          |       |   |   |   |   |
| Interest income                    |       | (216                                            | )          | (160                                          | )          | (364 | ) | (365 | ) |
| Interest expense                   |       | 11,351                                          |       | 11,448                                        |       | 22,263 |   | 23,447 |   |
| Costs of refinancing               |       | 2,478                                           |       | 5,791                                         |       | 2,478 |   | 5,791 |   |
| Other expense (income), net        |       | 1,329                                           |       | (30,218                                       | )          | 1,538 |   | (30,079 | ) |
| Total other expense (income)       |       | 14,942                                          |       | (13,139                                       | )          | 25,915 |   | (1,206 | ) |
| Income (loss)  before income taxes |       | (12,059                                         | )          | 15,875                                        |       | (18,832 | ) | 9,104 |   |
| Provision for  income taxes        |       | 2,688                                           |       | 1,854                                         |       | 2,941 |   | 3,700 |   |
| Net income  (loss)                 |       | $                                               | (14,747    | )                                             | $          | 14,021 |   | $ | (21,773 | ) | $ | 5,404 |   |
|                               |       |                                            |       |                                          |       |   |   |   |   |
| Net income  (loss) from above      |       | $                                               | (14,747    | )                                             | $          | 14,021 |   | $ | (21,773 | ) | $ | 5,404 |   |
| Other  comprehensive income        |       | 662                                             |       | 408                                           |       | 860 |   | 711 |   |
| Total comprehensive  income (loss) |       | $                                               | (14,085    | )                                             | $          | 14,429 |   | $ | (20,913 | ) | $ | 6,115 |   |

 

Theaccompanying notes are an integral part of these unaudited consolidatedfinancial statements.

4

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**MERISANT COMPANY****Unaudited Consolidated Statementof Stockholder’s Deficit****(Dollars In Thousands)**
| ** **                                                              | ** ** | **Common  Stock** | ** ** | **Due for Purchase  of Shares in  Merisant  Worldwide, Inc.** | ** ** | **Retained  Deficit** | ** ** | **Accumulated  Other  Comprehensive  Loss** | ** ** | **Total** | ** ** |
|-------------------------------------------------------------------------|------------|-------------------|------------|----------------------------------------------------------------------------------------|------------|-----------------------|------------|---------------------------------------------|------------|-----------|------------|
| Balance at  December 31, 2006                                      |       | $                 | —     |                                                                                   | $          | (707                  | )          | $                                           | (72,595    | )         | $          | (5,626 | ) | $ | (78,928 | ) |
| Foreign currency  translation adjustment                                |       | —            |       | —                                                                                 |       | —                |       | 711                                         |       | 711       |       |
| Dividend to  Merisant Worldwide, Inc.                                   |       | —            |       | —                                                                                 |       | (100                  | )          | —                                      |       | (100      | )          |
| Settlement of  loans for purchase of shares in Merisant Worldwide, Inc. |       | —            |       | 449                                                                                    |       | —                |       | —                                      |       | 449       |       |
| Cumulative  effect of FIN 48 implementation                             |       | —            |       | —                                                                                 |       | 5,757                 |       | —                                      |       | 5,757     |       |
| Net income                                                              |       | —            |       | —                                                                                 |       | 5,404                 |       | —                                      |       | 5,404     |       |
| Balance at June 30,  2007                                               |       | $                 | —     |                                                                                   | $          | (258                  | )          | $                                           | (61,534    | )         | $          | (4,915 | ) | $ | (66,707 | ) |

 

Theaccompanying notes are an integral part of these unaudited consolidatedfinancial statements.

5

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**MERISANT COMPANYUnaudited Consolidated Statements of Cash Flows(Dollars In Thousands)**
| ** **                                                                                | ** ** | **Six Months Ended  June 30,** | ** ** |
|-------------------------------------------------------------------------------------------|------------|-----------------------------------------------|------------|
| ** **                                                                                | ** ** | **2006**                                      | ** ** | **2007** | ** ** |
| **Operating  Activities**                                                                 |       |                                          |       |   |   |
| Net income (loss)                                                                         |       | $                                             | (21,773    | ) | $ | 5,404 |   |
| Adjustments to reconcile net income (loss) to net  cash provided by operating activities: |       |                                          |       |   |   |
| Depreciation                                                                              |       | 4,400                                         |       | 3,329 |   |
| Amortization of intangible assets                                                         |       | 11,108                                        |       | 11,454 |   |
| Amortization of deferred financing costs                                                  |       | 1,461                                         |       | 1,686 |   |
| Write off of deferred financing costs                                                     |       | 2,478                                         |       | 3,241 |   |
| Euro-denominated loan foreign exchange loss                                               |       | 1,928                                         |       | 503 |   |
| Net realized gains on derivative instruments                                              |       | (694                                          | )          | — |   |
| Equity in income of affiliate                                                             |       | (21                                           | )          | (88 | ) |
| Deferred income tax provision                                                             |       | 2,569                                         |       | 2,318 |   |
| Changes in operating assets and liabilities:                                              |       |                                          |       |   |   |
| Trade accounts receivable                                                                 |       | 5,433                                         |       | 5,454 |   |
| Other receivables                                                                         |       | 5,761                                         |       | (1,575 | ) |
| Inventories                                                                               |       | 7,500                                         |       | (996 | ) |
| Prepaid expenses and other assets                                                         |       | 555                                           |       | (332 | ) |
| Accounts payable                                                                          |       | (181                                          | )          | 7,945 |   |
| Accrued expenses and other                                                                |       | (9,533                                        | )          | (4,397 | ) |
| Net cash provided by operating activities                                                 |       | 10,991                                        |       | 33,946 |   |
| **Investing  Activities**                                                                 |       |                                          |       |   |   |
| Proceeds from sale of property and equipment                                              |       | 26                                            |       | 183 |   |
| Purchases of property and equipment                                                       |       | (1,330                                        | )          | (859 | ) |
| Net cash used in investing activities                                                     |       | (1,304                                        | )          | (676 | ) |
| **Financing  Activities**                                                                 |       |                                          |       |   |   |
| Net payments under revolving credit facility                                              |       | (16,000                                       | )          | — |   |
| Borrowings under long-term obligations                                                    |       | 85,095                                        |       | 85,000 |   |
| Principal payments on long-term obligations, excluding  revolving credit facility         |       | (71,480                                       | )          | (89,284 | ) |
| Payment of deferred financing costs                                                       |       | (5,429                                        | )          | (2,539 | ) |
| Distributions to stockholder                                                              |       | (500                                          | )          | (100 | ) |
| Settlement of loans for purchase of shares in  Merisant Worldwide, Inc.                   |       | —                                        |       | 449 |   |
| Net cash used in financing activities                                                     |       | (8,314                                        | )          | (6,474 | ) |
| Effect of  exchange rate on cash and cash equivalents                                     |       | 68                                            |       | 383 |   |
| Net increase in  cash and cash equivalents                                                |       | 1,441                                         |       | 27,179 |   |
| Cash and cash  equivalents at beginning of period                                         |       | 18,064                                        |       | 23,730 |   |
| Cash and cash equivalents  at end of period                                               |       | $                                             | 19,505     |   | $ | 50,909 |   |

 

Theaccompanying notes are an integral part of these unaudited consolidatedfinancial statements.

6

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**MERISANTCOMPANY****Notes to Unaudited ConsolidatedFinancial Statements****(Dollars In Thousands)**

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

The consolidated financial statements and notes do notcontain certain information included in the annual consolidated financial statementsand notes of Merisant Company and subsidiaries. Unless otherwise indicated or unless the context otherwise requires, allreferences to the “Company” mean Merisant Company and its consolidatedsubsidiaries.  The consolidated balancesheet at December 31, 2006 was derived from the Company’s auditedconsolidated financial statements, but does not include all disclosuresrequired by generally accepted accounting principles in the United States ofAmerica (“GAAP”). The remaining consolidated financial statements areunaudited. In the opinion of management, all normal, recurring adjustmentsnecessary for a fair presentation of such unaudited financial statements havebeen included therein. For interim reporting purposes, certain marketing andadvertising expenses are charged to results of operations as a percentage ofsales. Interim results may not be indicative of results for a full year. Theseunaudited consolidated financial statements and notes should be read inconjunction with the Company’s annual consolidated financial statements.

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

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

The Company manufactures and markets primarily low-calorietabletop sweeteners globally. Therefore, the Company’s reportable segmentsare 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, costs related to thetransition to a new exclusive distributor in the United States, certain litigationcosts and certain other non-cash items or excludable gains or losses. Otherexpense (income), net, as reported in the unaudited consolidated financialstatements, is included in Operating EBITDA of the respective reportablesegments, except for the portion of other expense (income), net that relates tothe foreign currency transaction gains or losses associated with the Company’seuro-denominated debt (see Note 5) and unrealized gains or losses on derivativeinstruments. Corporate expenses include corporate staff and related amounts.Corporate expenses, interest and other expenses and the provision for incometaxes are centrally managed and, accordingly, such items are not presented bysegment since they are excluded from the measure of segment performancereviewed by management. The Company launched a new product line in NorthAmerica in the first quarter of 2006 which management evaluates and managesseparately from its other North American operations. As such, this item is alsoexcluded from the measure of segment performance reviewed by management. TheCompany’s definition of Operating EBITDA is largely driven by similardefinitions of Bank EBITDA under its primary credit facilities.  The definition of Bank EBITDA was amended inthe May 2007 amendment of those credit facilities, and that change is reflectedin the Company’s computation of Operating EBITDA for the 2007 periods.  The Company’s assets, which are principallyin the United States and Europe, are also managed geographically. A summary ofthe Company’s results of operations by reportable segment for the three and sixmonths ended June 30, 2006 and 2007 is as follows:

7

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**For the Three Months Ended June30, 2006**
| ** **                                                | ** ** | **North  America** | ** ** | **EAME** | ** ** | **Latin  America** | ** ** | **Asia/  Pacific** | ** ** | **Consolidated** | ** ** |
|-----------------------------------------------------------|------------|--------------------|------------|----------|------------|--------------------|------------|--------------------|------------|------------------|------------|
| Total net sales  for reportable segments                  |       | $                  | 33,025     |     | $          | 31,945             |       | $                  | 8,291      |             | $          | 5,360 |   | $ | 78,621 |   |
| Plus: Net sales  related to new product launch            |       |               |       |     |       |               |       |               |       | 8                |       |
| Total  consolidated net sales                             |       |               |       |     |       |               |       |               |       | $                | 78,629     |   |
|                                                      |       |               |       |     |       |               |       |               |       |             |       |
| Operating EBITDA                                          |       | $                  | 12,263     |     | $          | 6,354              |       | $                  | 2,502      |             | $          | 1,836 |   | $ | 22,955 |   |
| Less (plus):                                              |       |               |       |     |       |               |       |               |       |             |       |
| Corporate  expenses                                       |       |               |       |     |       |               |       |               |       | 6,691            |       |
| Restructuring  expense                                    |       |               |       |     |       |               |       |               |       | 1,305            |       |
| Depreciation  expense                                     |       |               |       |     |       |               |       |               |       | 2,171            |       |
| Amortization  expense                                     |       |               |       |     |       |               |       |               |       | 5,554            |       |
| Currency loss on  euro debt                               |       |               |       |     |       |               |       |               |       | 1,345            |       |
| Loss related to  new product launch                       |       |               |       |     |       |               |       |               |       | 947              |       |
| Transition costs  to new distributor in the United States |       |               |       |     |       |               |       |               |       | 81               |       |
| Transaction fees                                          |       |               |       |     |       |               |       |               |       | 3,300            |       |
| Other non-cash  expense                                   |       |               |       |     |       |               |       |               |       | 7                |       |
| Other expense,  net                                       |       |               |       |     |       |               |       |               |       | (1,329           | )          |
| Income from  operations                                   |       |               |       |     |       |               |       |               |       | 2,883            |       |
| Interest  expense, net                                    |       |               |       |     |       |               |       |               |       | 11,135           |       |
| Costs of  refinancing                                     |       |               |       |     |       |               |       |               |       | 2,478            |       |
| Other expense,  net                                       |       |               |       |     |       |               |       |               |       | 1,329            |       |
| Loss before income  taxes                                 |       |               |       |     |       |               |       |               |       | $                | (12,059    | ) |

 

**For the Three Months EndedJune 30, 2007**
| ** **                                                                      | ** ** | **North  America** | ** ** | **EAME** | ** ** | **Latin  America** | ** ** | **Asia/  Pacific** | ** ** | **Consolidated** | ** ** |
|---------------------------------------------------------------------------------|------------|--------------------|------------|----------|------------|--------------------|------------|--------------------|------------|------------------|------------|
| Total net sales  for reportable segments                                        |       | $                  | 27,591     |     | $          | 30,081             |       | $                  | 8,050      |             | $          | 5,375 |   | $ | 71,097 |   |
| Plus: Net sales  related to new product launch                                  |       |               |       |     |       |               |       |               |       | (7               | )          |
| Total  consolidated net sales                                                   |       |               |       |     |       |               |       |               |       | $                | 71,090     |   |
|                                                                            |       |               |       |     |       |               |       |               |       |             |       |
| Operating EBITDA                                                                |       | $                  | 10,123     |     | $          | 8,730              |       | $                  | 1,906      |             | $          | 1,366 |   | $ | 22,125 |   |
| Less (plus):                                                                    |       |               |       |     |       |               |       |               |       |             |       |
| Corporate  expenses                                                             |       |               |       |     |       |               |       |               |       | 7,593            |       |
| Restructuring  expense                                                          |       |               |       |     |       |               |       |               |       | 314              |       |
| Depreciation  expense                                                           |       |               |       |     |       |               |       |               |       | 1,771            |       |
| Amortization  expense                                                           |       |               |       |     |       |               |       |               |       | 5,727            |       |
| Currency loss on  euro debt                                                     |       |               |       |     |       |               |       |               |       | 202              |       |
| Loss related to  new product launch                                             |       |               |       |     |       |               |       |               |       | 995              |       |
| Litigation costs  and lease termination charge excludable from Operating EBITDA |       |               |       |     |       |               |       |               |       | 2,542            |       |
| Gain from  receipt of one-time payment excludable from Operating EBITDA         |       |               |       |     |       |               |       |               |       | (30,000          | )          |
| Other non-cash  expense                                                         |       |               |       |     |       |               |       |               |       | 27               |       |
| Other income,  net                                                              |       |               |       |     |       |               |       |               |       | 30,218           |       |
| Income from  operations                                                         |       |               |       |     |       |               |       |               |       | 2,736            |       |
| Interest  expense, net                                                          |       |               |       |     |       |               |       |               |       | 11,288           |       |
| Costs of  refinancing                                                           |       |               |       |     |       |               |       |               |       | 5,791            |       |
| Other income,  net                                                              |       |               |       |     |       |               |       |               |       | (30,218          | )          |
| Income before income  taxes                                                     |       |               |       |     |       |               |       |               |       | $                | 15,875     |   |

 

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**For the Six Months Ended June 30,2006**
| ** **                                                | ** ** | **North  America** | ** ** | **EAME** | ** ** | **Latin  America** | ** ** | **Asia/  Pacific** | ** ** | **Consolidated** | ** ** |
|-----------------------------------------------------------|------------|--------------------|------------|----------|------------|--------------------|------------|--------------------|------------|------------------|------------|
| Total net sales  for reportable segments                  |       | $                  | 62,917     |     | $          | 60,742             |       | $                  | 14,706     |             | $          | 9,905 |   | $ | 148,270 |   |
| Plus: Net sales  related to new product launch            |       |               |       |     |       |               |       |               |       | 26               |       |
| Total consolidated  net sales                             |       |               |       |     |       |               |       |               |       | $                | 148,296    |   |
|                                                      |       |               |       |     |       |               |       |               |       |             |       |
| Operating EBITDA                                          |       | $                  | 22,848     |     | $          | 15,719             |       | $                  | 3,626      |             | $          | 3,362 |   | $ | 45,555 |   |
| Less (plus):                                              |       |               |       |     |       |               |       |               |       |             |       |
| Corporate  expenses                                       |       |               |       |     |       |               |       |               |       | 14,082           |       |
| Restructuring  expense                                    |       |               |       |     |       |               |       |               |       | 3,596            |       |
| Depreciation  expense                                     |       |               |       |     |       |               |       |               |       | 4,375            |       |
| Amortization  expense                                     |       |               |       |     |       |               |       |               |       | 11,108           |       |
| Currency loss on  euro debt                               |       |               |       |     |       |               |       |               |       | 1,928            |       |
| Realized gain on  derivative instruments                  |       |               |       |     |       |               |       |               |       | (694             | )          |
| Loss on  liquidation or sale of subsidiary                |       |               |       |     |       |               |       |               |       | 144              |       |
| Loss related to  new product launch                       |       |               |       |     |       |               |       |               |       | 1,487            |       |
| Transition costs  to new distributor in the United States |       |               |       |     |       |               |       |               |       | 673              |       |
| Transaction fees                                          |       |               |       |     |       |               |       |               |       | 3,300            |       |
| Other non-cash  expense                                   |       |               |       |     |       |               |       |               |       | 11               |       |
| Other expense,  net                                       |       |               |       |     |       |               |       |               |       | (1,538           | )          |
| Income from  operations                                   |       |               |       |     |       |               |       |               |       | 7,083            |       |
| Interest  expense, net                                    |       |               |       |     |       |               |       |               |       | 21,899           |       |
| Cost of  refinancing                                      |       |               |       |     |       |               |       |               |       | 2,478            |       |
| Other expense,  net                                       |       |               |       |     |       |               |       |               |       | 1,538            |       |
| Loss before income  taxes                                 |       |               |       |     |       |               |       |               |       | $                | (18,832    | ) |

 

**For the Six Months EndedJune 30, 2007**
| ** **                                                              | ** ** | **North  America** | ** ** | **EAME** | ** ** | **Latin  America** | ** ** | **Asia/  Pacific** | ** ** | **Consolidated** | ** ** |
|-------------------------------------------------------------------------|------------|--------------------|------------|----------|------------|--------------------|------------|--------------------|------------|------------------|------------|
| Total net sales  for reportable segments                                |       | $                  | 56,528     |     | $          | 56,657             |       | $                  | 13,347     |             | $          | 13,903 |   | $ | 140,435 |   |
| Plus: Net sales  related to new product launch                          |       |               |       |     |       |               |       |               |       | (32              | )          |
| Total  consolidated net sales                                           |       |               |       |     |       |               |       |               |       | $                | 140,403    |   |
|                                                                    |       |               |       |     |       |               |       |               |       |             |       |
| Operating EBITDA                                                        |       | $                  | 20,405     |     | $          | 15,707             |       | $                  | 3,000      |             | $          | 5,457 |   | $ | 44,569 |   |
| Less (plus):                                                            |       |               |       |     |       |               |       |               |       |             |       |
| Corporate  expenses                                                     |       |               |       |     |       |               |       |               |       | 13,974           |       |
| Restructuring  expense                                                  |       |               |       |     |       |               |       |               |       | 874              |       |
| Depreciation  expense                                                   |       |               |       |     |       |               |       |               |       | 3,329            |       |
| Amortization  expense                                                   |       |               |       |     |       |               |       |               |       | 11,454           |       |
| Currency loss on  euro debt                                             |       |               |       |     |       |               |       |               |       | 503              |       |
| Loss related to  new product launch                                     |       |               |       |     |       |               |       |               |       | 1,538            |       |
| 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                                                 |       |               |       |     |       |               |       |               |       | 51               |       |
| Other income,  net                                                      |       |               |       |     |       |               |       |               |       | 30,079           |       |
| Income from  operations                                                 |       |               |       |     |       |               |       |               |       | 7,898            |       |
| Interest  expense, net                                                  |       |               |       |     |       |               |       |               |       | 23,082           |       |
| Costs of  refinancing                                                   |       |               |       |     |       |               |       |               |       | 5,791            |       |
| Other income,  net                                                      |       |               |       |     |       |               |       |               |       | (30,079          | )          |
| Income before income  taxes                                             |       |               |       |     |       |               |       |               |       | $                | 9,104      |   |

 

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

Duringthe six months ended June 30, 2007, 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 $1,305 and $314 were recorded for the three monthsended June 30, 2006 and June 30, 2007, respectively, and $3,596 and $874 wererecorded for the six months ended June 30, 2006 and June 30, 2007,respectively. The 2007 charges principally related to planned termination costsfor employees, including charges related to 15 additional personnel that werenotified of their termination during the six months ended June 30, 2007.  Severance payments and benefits are scheduledto be made over the next six months.

Reconciliation of the restructuring liability at June 30,2007 is as follows: 
| Restructuring liability at  December 31, 2006             |   | $      | 444    |   |
|----------------------------------------------------------------|--------|--------|--------|--------|
| Restructuring  expenses for the six months ended June 30, 2007 |   | 874    |   |
| Cash payments  for the six months ended June 30, 2007          |   | (1,112 | )      |
| Restructuring liability  at June 30, 2007                      |   | $      | 206    |   |

 

Therestructuring liability at December 31, 2006 and June 30, 2007 is includedin the line item “Accrued expenses and other liabilities” in the accompanyingconsolidated balance sheets.

Thefollowing table represents restructuring expenses included in each segment andcorporate expenses for the three and six months ended June 30, 2006 and 2007:
|               | ** ** | **Three Months Ended  June 30,** | ** ** | **Six Months Ended  June 30,** | ** ** |
|---------------|------------|-------------------------------------------------|------------|-----------------------------------------------|------------|
| ** **    | ** ** | **2006**                                        | ** ** | **2007**                                      | ** ** | **2006** | ** ** | **2007** | ** ** |
| North America |       | $                                               | 38         |                                          | $          | — |   | $ | 103 |   | $ | — |   |
| EAME          |       | 634                                             |       | 180                                           |       | 1,867 |   | 298 |   |
| Latin America |       | 451                                             |       | 22                                            |       | 1,039 |   | 86 |   |
| Asia/Pacific  |       | 53                                              |       | 112                                           |       | 505 |   | 330 |   |
| Corporate     |       | 129                                             |       | —                                        |       | 82 |   | 160 |   |
| Total         |       | $                                               | 1,305      |                                          | $          | 314 |   | $ | 3,596 |   | $ | 874 |   |

 

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

Inventories consisted of the following at December 31,2006 and June 30, 2007:
|                                  | ** ** | **December 31, 2006** | ** ** | **June 30, 2007** | ** ** |
|----------------------------------|------------|---------------------------------|------------|-----------------------------|------------|
| Raw materials and  supplies      |       | $                               | 7,309      |                        | $          | 6,439 |   |
| Work in process                  |       | 592                             |       | 379                         |       |
| Finished goods                   |       | 6,869                           |       | 8,949                       |       |
| Inventory obsolescence  reserves |       | (978                            | )          | (811                        | )          |
| Total                            |       | $                               | 13,792     |                        | $          | 14,956 |   |

 

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

The Company and its parent, Merisant Worldwide, Inc. (“MerisantWorldwide”), are highly leveraged. At June 30, 2007, Merisant Worldwide and itssubsidiaries, including the Company, had $548,809 of long-term debtoutstanding, consisting of $116,474 aggregate principal amount of MerisantWorldwide’s 12 1⁄4% senior subordinated discount notes due 2014, $225,000aggregate principal amount of the Company’s 9 1⁄2% senior subordinated notes due2013 (the “Notes”) and $207,335 aggregate principal amount outstanding underthe Company’s amended and restated senior secured credit agreement (the “Amendedand Restated Credit Agreement”), excluding capital lease obligations of $78 andunused commitments on the revolving portion of the Amended and Restated CreditAgreement of $30,640.

At June 30, 2007, borrowings under the Amended and Restated CreditAgreement included $16,789 (“Term A”) aggregate principal amount of term loansbearing annual interest of 7.51% and $190,546 (“Term B”) aggregate 

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principal amount of term loans bearing annual interest of 8.86%. TheTerm A loans are euro-denominated and are translated into U.S. dollars at thespot rate as of June 30, 2007.

On June 23, 2006, theCompany entered into an $85,000 senior secured term loan agreement (the “SecondLien Credit Agreement”), the borrowings under which were secured by a secondlien on all the assets that secured loans outstanding under the then existingsenior secured credit facility (the “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 andcertain of the Company’s subsidiaries entered into the Amended and RestatedCredit Agreement, which, among other things, increased by $85,000 the principalamount of Term B loans that may be borrowed by the Company under the SeniorCredit Agreement.  The Company paid$2,505 in fees and expenses related to this amendment and restatement which itdeferred and is amortizing over the term of the related debt. Upon closing, theCompany borrowed the full $85,000 of additional Term B loans available underthe Amended and Restated Credit Agreement and used the proceeds plus cash onhand to prepay the principal of all loans outstanding under the Second LienCredit Agreement totaling $85,000, plus all outstanding interest of $1,438 anda premium 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 ofthe related amendment, the interest rate on all term loans and revolving loansoutstanding under the Amended and Restated Credit Agreement increased fromeuro-LIBOR and LIBOR plus 325 basis points per annum to euro-LIBOR and LIBOR plus350 basis points per annum.  As a resultof the termination of the Second Lien Credit Facility, the Company’s effectiveinterest rate on variable interest rate debt decreased from 10.63% per annumprior to the closing of this transaction to 8.73% per annum subsequent to thistransaction.

TheCompany paid interest on borrowings under the Senior Credit Agreement, theSecond Lien Credit Agreement and on the Notes totaling $21,369 and $20,618 forthe six months ended June 30, 2006 and 2007, respectively.

The Amended and Restated Credit Agreement preservesprior amendments, amends future financial covenant ratios and levels andcontains a number of additional amendments, including to the definition of BankEBITDA, that give the Company more flexibility to operate its business andde-leverage its balance sheet.

The Amended and Restated Credit Agreement containscovenants, including financial covenants that must be met on a quarterly basis.“Bank EBITDA” is the measure by which the financial covenants contained in theAmended and Restated Credit Agreement are measured. However, Bank EBITDA is nota measure of liquidity under GAAP. Accordingly, while providing usefulinformation with respect to an assessment of liquidity as measured inaccordance with the covenants in the Company’s primary debt obligations, thismeasure should not be considered in isolation from, or as a substitute for,consolidated statement of cash flow data prepared in accordance with GAAP as anindication of liquidity. In addition, the Bank EBITDA measure presented maydiffer from, and may not be comparable to, similarly titled measures used byother companies.

The Company was in compliance with its covenants underthe Amended and Restated Credit Agreement as of June 30, 2007.

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

The Company has adeferred compensation payable to Arnold Donald, its former Chairman and acurrent director, and a note receivable in the same amount fromMr. Donald. The Company recorded $55 and $43 of interest income on thenote receivable for the three months ended June 30, 2006 and 2007,respectively, and $111 and $86 of interest income on the note receivable forthe six months ended June 30, 2006 and 2007, respectively, and an equal amountof interest expense in the respective periods.

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The Company is party toan agreement with Brand Architecture International (“Brand Architecture”)pursuant to which Brand Architecture has agreed to provide consulting servicesrelating to the development of brand architecture for the Company’s brands. Ascompensation, the Company paid approximately $165 and $224 to BrandArchitecture for the three months ended June 30, 2006 and 2007, respectively,and approximately $572 and $300 for the six months ended June 30, 2006 and2007, respectively, including the reimbursement to Brand Architecture forexpenses 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.

Duringthe six months ended June 30, 2006 and 2007, the Company made distributions of$500 and $100, respectively, to its sole stockholder, Merisant Worldwide.

**7.        Commitments and Contingencies**

The Company has aninvestment in an affiliate located in the Philippines that is accounted forusing the equity method. The affiliate, a 50/50 joint venture, distributessugar substitute sweeteners for the international consumer food markets,primarily under the *Equal®* brand.In addition to its investment in the joint venture, the Company is committed toa 50% share in any new borrowings of the joint venture. As of December 31,2006 and June 30, 2007, there were no additional joint venture borrowings.

Merisant Europe B.V.B.A., the Company’s Belgium subsidiary, enteredinto a co-branding agreement with Galleria Srl, a company through which theItalian designer Elio Fiorucci operates. Under this co-branding arrangement,Merisant Europe produced a line of *Canderel*®tablet dispensers that featured designs and trademarks from Mr. Fiorucci’s“Love Therapy by Elio Fiorucci” collection. The co-branding arrangementcontains a representation and warranty that Galleria owns all rights in thename “Love Therapy by Elio Fiorucci” and associated designs and furtherprovides that Galleria will indemnify and hold Merisant Europe and itsaffiliates harmless against damages resulting from or related to their use ofthe name and designs pursuant to the agreement. Beginning in 2005, MerisantEurope sold tablet dispensers with the “Love Therapy by Elio Fiorucci” designsin Italy. Edwin & Co. Ltd. has claimed that it owns all rights inMr. Fiorucci’s name and in the designs used by the Company and has filedsuit against Merisant Europe in Milan, Italy. On or about March 17, 2006,the court in Milan enjoined Merisant Europe from producing or selling thetablet dispensers after the date of the court order. The Company no longerproduces the dispensers and stopped selling dispensers to its distributor inItaly. Merisant Europe has filed an appeal and will vigorously oppose the court’sorder. Merisant Europe will also enforce its indemnification rights under itsco-branding arrangement with Galleria Srl.

On November 26, 2004, the Company filed a federal andstate false advertising complaint against McNeil in the United States DistrictCourt for the Eastern District of Pennsylvania. That lawsuit sought to haveMcNeil’s *Splenda*® advertising campaign stoppedand significant damages recovered.  Thetrial commenced on April 9, 2007 before a Philadelphia jury and the partiesentered into a confidential settlement agreement on May 11, 2007.

InApril 2007, the Company entered into a new operating lease for office space inChicago and terminated its current lease, providing the required one yearnotice period.  The Company plans to moveits corporate operations to the new space in early 2008.  The new landlord paid the lease terminationfee of $869 on the Company’s behalf and the related expense was recorded inAdministration expenses in the second quarter of 2007.  The new lease terminates on April 30,2024.  Current leasehold improvements andother non-transferable assets will be fully depreciated between April 2007 andthe estimated date the Company will move into the new facility and moving costswill be expensed as they are incurred.

The Company is subject to variousother claims, pending and possible legal actions for product liability andother damages, and other matters arising out of the conduct of the Company’sbusiness, including tax uncertainties arising from doing business in variousEuropean jurisdictions. The Company believes, based on current knowledge andconsultation with counsel, that the outcome of such claims and actions will nothave a material adverse effect on the Company’s consolidated financial positionor results of operations.

**8.        Income Taxes**

In June 2006, the Financial Accounting Standards Board (“FASB”)issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes - aninterpretation of FASB Statement No. 109 (“FIN 48”), that clarifies theaccounting 

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and recognition for income tax positions taken or expected tobe taken 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 January 1,2007 and June 30, 2007, the total liability for uncertain tax positionsrecorded in the Company’s balance sheet in non-current Other liabilities was$2,145 and $2,849, respectively. 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 June 30, 2007 liability over the next twelve months.

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

**Interest and penalties related to taxpositions taken in the Company’s tax returns are recorded in income tax expensein the consolidated statements of operations. At January 1, 2007 and June 30,2007, the combined amount of accrued interest and penalties related to taxpositions taken on the Company’s tax returns and recorded in non-current Otherliabilities was $429 and $689, respectively.**

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

The following tables set forth the consolidatingstatements of operations for the three months and six months ended June 30,2006 and June 30, 2007, the consolidating balance sheets at December 31, 2006and June 30, 2007 and the statements of cash flow for the six months ended June30, 2006 and 2007. The following information is included herein as a result ofthe guarantee 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.

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**Unaudited Consolidating Statement of OperationsFor the Three Months Ended June 30, 2006**
| ** **                                                                 | ** ** | **Merisant  Company** | ** ** | **Guarantor  Companies** | ** ** | **Non-  Guarantor  Companies** | ** ** | **Consolidating  Eliminations** | ** ** | **Consolidated** | ** ** |
|----------------------------------------------------------------------------|------------|-----------------------|------------|--------------------------|------------|--------------------------------|------------|---------------------------------|------------|------------------|------------|
|                                                                       |       |                  |       |                     |       |                           |       |                            |       |             |       |
| Net sales                                                                  |       | $                     | —     |                     | $          | 34,873                         |       | $                               | 44,654     |             | $          | (898 | ) | $ | 78,629 |   |
| Cost of sales                                                              |       | —                |       | 14,695                   |       | 18,807                         |       | (898                            | )          | 32,604           |       |
| Gross profit                                                               |       | —                |       | 20,178                   |       | 25,847                         |       | —                          |       | 46,025           |       |
| Operating expenses:                                                        |       |                  |       |                     |       |                           |       |                            |       |             |       |
| Marketing and  selling expenses                                            |       | —                |       | 9,071                    |       | 13,130                         |       | —                          |       | 22,201           |       |
| Administration  expenses                                                   |       | 115                   |       | 7,534                    |       | 3,133                          |       | —                          |       | 10,782           |       |
| Amortization of  intangible assets                                         |       | 2,164                 |       | —                   |       | 3,390                          |       | —                          |       | 5,554            |       |
| Transaction fees                                                           |       | 3,300                 |       | —                   |       | —                         |       | —                          |       | 3,300            |       |
| Restructuring  expenses                                                    |       | —                |       | 167                      |       | 1,138                          |       | —                          |       | 1,305            |       |
| Total operating  expenses                                                  |       | 5,579                 |       | 16,772                   |       | 20,791                         |       | —                          |       | 43,142           |       |
| Income (loss) from  operations                                             |       | (5,579                | )          | 3,406                    |       | 5,056                          |       | —                          |       | 2,883            |       |
| Other expense (income):                                                    |       |                  |       |                     |       |                           |       |                            |       |             |       |
| Interest income                                                            |       | (66                   | )          | (32                      | )          | (359                           | )          | 241                             |       | (216             | )          |
| Interest expense                                                           |       | 11,589                |       | —                   |       | 3                              |       | (241                            | )          | 11,351           |       |
| Costs of  refinancing                                                      |       | 2,478                 |       | —                   |       | —                         |       | —                          |       | 2,478            |       |
| Other expense  (income), net                                               |       | 1,342                 |       | (32                      | )          | 19                             |       | —                          |       | 1,329            |       |
| Total other  expense (income                                               |       | 15,343                |       | (64                      | )          | (337                           | )          | —                          |       | 14,942           |       |
| Income (loss) before  income taxes and equity in consolidated subsidiaries |       | (20,922               | )          | 3,470                    |       | 5,393                          |       | —                          |       | (12,059          | )          |
| Provision for income  taxes                                                |       | 1,344                 |       | 868                      |       | 476                            |       | —                          |       | 2,688            |       |
| Equity in consolidated  subsidiaries                                       |       | 7,519                 |       | 4,917                    |       | —                         |       | (12,436                         | )          | —           |       |
| Net income (loss)                                                          |       | $                     | (14,747    | )                        | $          | 7,519                          |       | $                               | 4,917      |             | $          | (12,436 | ) | $ | (14,747 | ) |

 

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**Unaudited Consolidating Statement of OperationsFor the Three Months Ended June 30, 2007**
| ** **                                                                 | ** ** | **Merisant  Company** | ** ** | **Guarantor  Companies** | ** ** | **Non-  Guarantor  Companies** | ** ** | **Consolidating  Eliminations** | ** ** | **Consolidated** | ** ** |
|----------------------------------------------------------------------------|------------|-----------------------|------------|--------------------------|------------|--------------------------------|------------|---------------------------------|------------|------------------|------------|
|                                                                       |       |                  |       |                     |       |                           |       |                            |       |             |       |
| Net sales                                                                  |       | $                     | —     |                     | $          | 29,796                         |       | $                               | 42,570     |             | $          | (1,276 | ) | $ | 71,090 |   |
| Cost of sales                                                              |       | —                |       | 14,504                   |       | 18,632                         |       | (1,276                          | )          | 31,860           |       |
| Gross profit                                                               |       | —                |       | 15,292                   |       | 23,938                         |       | —                          |       | 39,230           |       |
| Operating expenses:                                                        |       |                  |       |                     |       |                           |       |                            |       |             |       |
| Marketing and  selling expenses                                            |       | —                |       | 6,837                    |       | 10,197                         |       | —                          |       | 17,034           |       |
| Administration  expenses                                                   |       | 137                   |       | 10,564                   |       | 2,718                          |       | —                          |       | 13,419           |       |
| Amortization of  intangible assets                                         |       | 2,428                 |       | —                   |       | 3,299                          |       | —                          |       | 5,727            |       |
| Restructuring  expenses                                                    |       | —                |       | —                   |       | 314                            |       | —                          |       | 314              |       |
| Total operating  expenses                                                  |       | 2,565                 |       | 17,401                   |       | 16,528                         |       | —                          |       | 36,494           |       |
| Income (loss) from  operations                                             |       | (2,565                | )          | (2,109                   | )          | 7,410                          |       | —                          |       | 2,736            |       |
| Other expense (income):                                                    |       |                  |       |                     |       |                           |       |                            |       |             |       |
| Interest income                                                            |       | (48                   | )          | —                   |       | (856                           | )          | 744                             |       | (160             | )          |
| Interest expense                                                           |       | 12,143                |       | —                   |       | 49                             |       | (744                            | )          | 11,448           |       |
| Costs of  refinancing                                                      |       | 5,791                 |       | —                   |       | —                         |       | —                          |       | 5,791            |       |
| Other expense  (income), net                                               |       | (29,799               | )          | (95                      | )          | (324                           | )          | —                          |       | (30,218          | )          |
| Total other  expense (income)                                              |       | (11,913               | )          | (95                      | )          | (1,131                         | )          | —                          |       | (13,139          | )          |
| Income (loss) before  income taxes and equity in consolidated subsidiaries |       | 9,348                 |       | (2,014                   | )          | 8,541                          |       | —                          |       | 15,875           |       |
| Provision for income  taxes                                                |       | 304                   |       | 771                      |       | 779                            |       | —                          |       | 1,854            |       |
| Equity in consolidated  subsidiaries                                       |       | 4,977                 |       | 7,762                    |       | —                         |       | (12,739                         | )          | —           |       |
| Net income (loss)                                                          |       | $                     | 14,021     |                     | $          | 4,977                          |       | $                               | 7,762      |             | $          | (12,739 | ) | $ | 14,021 |   |

 

15

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**Unaudited Consolidating Statement of OperationsFor the Six Months Ended June 30, 2006**
| ** **                                                                 | ** ** | **Merisant  Company** | ** ** | **Guarantor  Companies** | ** ** | **Non-  Guarantor  Companies** | ** ** | **Consolidating  Eliminations** | ** ** | **Consolidated** | ** ** |
|----------------------------------------------------------------------------|------------|-----------------------|------------|--------------------------|------------|--------------------------------|------------|---------------------------------|------------|------------------|------------|
|                                                                       |       |                  |       |                     |       |                           |       |                            |       |             |       |
| Net sales                                                                  |       | $                     | —     |                     | $          | 66,517                         |       | $                               | 83,657     |             | $          | (1,878 | ) | $ | 148,296 |   |
| Cost of sales                                                              |       | —                |       | 28,820                   |       | 34,677                         |       | (1,878                          | )          | 61,619           |       |
| Gross profit                                                               |       | —                |       | 37,697                   |       | 48,980                         |       | —                          |       | 86,677           |       |
| Operating expenses:                                                        |       |                  |       |                     |       |                           |       |                            |       |             |       |
| Marketing and  selling expenses                                            |       | —                |       | 16,937                   |       | 22,172                         |       | —                          |       | 39,109           |       |
| Administration  expenses                                                   |       | 135                   |       | 15,896                   |       | 6,450                          |       | —                          |       | 22,481           |       |
| Amortization of  intangible assets                                         |       | 4,328                 |       | —                   |       | 6,780                          |       | —                          |       | 11,108           |       |
| Transaction fees                                                           |       | 3,300                 |       | —                   |       | —                         |       | —                          |       | 3,300            |       |
| Restructuring  expenses                                                    |       | —                |       | 185                      |       | 3,411                          |       | —                          |       | 3,596            |       |
| Total operating  expenses                                                  |       | 7,763                 |       | 33,018                   |       | 38,813                         |       | —                          |       | 79,594           |       |
| Income (loss) from  operations                                             |       | (7,763                | )          | 4,679                    |       | 10,167                         |       | —                          |       | 7,083            |       |
| Other expense (income):                                                    |       |                  |       |                     |       |                           |       |                            |       |             |       |
| Interest income                                                            |       | (132                  | )          | (47                      | )          | (426                           | )          | 241                             |       | (364             | )          |
| Interest expense                                                           |       | 22,499                |       | (2                       | )          | 7                              |       | (241                            | )          | 22,263           |       |
| Costs of  refinancing                                                      |       | 2,478                 |       | —                   |       | —                         |       | —                          |       | 2,478            |       |
| Other expense  (income), net                                               |       | 1,250                 |       | 372                      |       | (84                            | )          | —                          |       | 1,538            |       |
| Total other  expense (income)                                              |       | 26,095                |       | 323                      |       | (503                           | )          | —                          |       | 25,915           |       |
| Income (loss) before  income taxes and equity in consolidated subsidiaries |       | (33,858               | )          | 4,356                    |       | 10,670                         |       | —                          |       | (18,832          | )          |
| Provision for income  taxes                                                |       | 1,344                 |       | 907                      |       | 690                            |       | —                          |       | 2,941            |       |
| Equity in consolidated  subsidiaries                                       |       | 13,429                |       | 9,980                    |       | —                         |       | (23,409                         | )          | —           |       |
| Net income (loss)                                                          |       | $                     | (21,773    | )                        | $          | 13,429                         |       | $                               | 9,980      |             | $          | (23,409 | ) | $ | (21,773 | ) |

 

16

----

**Unaudited Consolidating Statement of OperationsFor the Six Months Ended June 30, 2007**
| ** **                                                                 | ** ** | **Merisant  Company** | ** ** | **Guarantor  Companies** | ** ** | **Non-  Guarantor  Companies** | ** ** | **Consolidating  Eliminations** | ** ** | **Consolidated** | ** ** |
|----------------------------------------------------------------------------|------------|-----------------------|------------|--------------------------|------------|--------------------------------|------------|---------------------------------|------------|------------------|------------|
|                                                                       |       |                  |       |                     |       |                           |       |                            |       |             |       |
| Net sales                                                                  |       | $                     | —     |                     | $          | 60,801                         |       | $                               | 81,927     |             | $          | (2,325 | ) | $ | 140,403 |   |
| Cost of sales                                                              |       | —                |       | 29,469                   |       | 35,458                         |       | (2,325                          | )          | 62,602           |       |
| Gross profit                                                               |       | —                |       | 31,332                   |       | 46,469                         |       | —                          |       | 77,801           |       |
| Operating  expenses:                                                       |       |                  |       |                     |       |                           |       |                            |       |             |       |
| Marketing and selling expenses                                             |       | —                |       | 13,270                   |       | 19,011                         |       | —                          |       | 32,281           |       |
| Administration expenses                                                    |       | 239                   |       | 19,620                   |       | 5,435                          |       | —                          |       | 25,294           |       |
| Amortization of intangible assets                                          |       | 4,856                 |       | —                   |       | 6,598                          |       | —                          |       | 11,454           |       |
| Restructuring expenses                                                     |       | —                |       | 160                      |       | 714                            |       | —                          |       | 874              |       |
| Total operating expenses                                                   |       | 5,095                 |       | 33,050                   |       | 31,758                         |       | —                          |       | 69,903           |       |
| Income (loss)  from operations                                             |       | (5,095                | )          | (1,718                   | )          | 14,711                         |       | —                          |       | 7,898            |       |
| Other expense  (income):                                                   |       |                  |       |                     |       |                           |       |                            |       |             |       |
| Interest income                                                            |       | (99                   | )          | (4                       | )          | (1,558                         | )          | 1,296                           |       | (365             | )          |
| Interest expense                                                           |       | 24,692                |       | —                   |       | 51                             |       | (1,296                          | )          | 23,447           |       |
| Costs of refinancing                                                       |       | 5,791                 |       | —                   |       | —                         |       | —                          |       | 5,791            |       |
| Other expense (income), net                                                |       | (29,493               | )          | (90                      | )          | (496                           | )          | —                          |       | (30,079          | )          |
| Total other expense (income)                                               |       | 891                   |       | (94                      | )          | (2,003                         | )          | —                          |       | (1,206           | )          |
| Income (loss)  before income taxes and equity in consolidated subsidiaries |       | (5,986                | )          | (1,624                   | )          | 16,714                         |       | —                          |       | 9,104            |       |
| Provision for  income taxes                                                |       | 682                   |       | 1,505                    |       | 1,513                          |       | —                          |       | 3,700            |       |
| Equity in  consolidated subsidiaries                                       |       | 12,072                |       | 15,201                   |       | —                         |       | (27,273                         | )          | —           |       |
| Net income (loss)                                                          |       | $                     | 5,404      |                     | $          | 12,072                         |       | $                               | 15,201     |             | $          | (27,273 | ) | $ | 5,404 |   |

 

17

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**Unaudited Condensed Consolidating Balance Sheetat December 31, 2006**
| ** **                                                         | ** ** | **Merisant  Company** | ** ** | **Guarantor  Companies** | ** ** | **Non-  Guarantor  Companies** | ** ** | **Consolidating  Eliminations** | ** ** | **Consolidated** | ** ** |
|--------------------------------------------------------------------|------------|-----------------------|------------|--------------------------|------------|--------------------------------|------------|---------------------------------|------------|------------------|------------|
| **Assets**                                                         |       |                  |       |                     |       |                           |       |                            |       |             |       |
| Cash and cash equivalents                                          |       | $                     | 782        |                     | $          | 3,088                          |       | $                               | 19,860     |             | $          | — |   | $ | 23,730 |   |
| Trade accounts receivable, net of allowance for  doubtful accounts |       | —                |       | 16,185                   |       | 51,821                         |       | —                          |       | 68,006           |       |
| Other receivables and intercompany receivables                     |       | 138                   |       | 5,209                    |       | 5,434                          |       | (5,092                          | )          | 5,689            |       |
| Inventories                                                        |       | —                |       | 7,777                    |       | 6,015                          |       | —                          |       | 13,792           |       |
| Other current assets                                               |       | 1,171                 |       | 4,214                    |       | 2,484                          |       | —                          |       | 7,869            |       |
| Total current assets                                               |       | 2,091                 |       | 36,473                   |       | 85,614                         |       | (5,092                          | )          | 119,086          |       |
| Property and equipment, net                                        |       | —                |       | 17,053                   |       | 6,288                          |       | —                          |       | 23,341           |       |
| Trademarks and other intangible assets, net                        |       | 67,138                |       | —                   |       | 115,541                        |       | —                          |       | 182,679          |       |
| Goodwill                                                           |       | —                |       | 107,209                  |       | —                         |       | —                          |       | 107,209          |       |
| Deferred financing costs, net                                      |       | 13,621                |       | —                   |       | —                         |       | —                          |       | 13,621           |       |
| Other non-current assets                                           |       | 2,651                 |       | 527                      |       | 440                            |       | —                          |       | 3,618            |       |
| Investment in subsidiary and intercompany debt                     |       | 327,361               |       | 225,307                  |       | 269                            |       | (552,668                        | )          | 269              |       |
| Total assets                                                       |       | $                     | 412,862    |                     | $          | 386,569                        |       | $                               | 208,152    |             | $          | (557,760 | ) | $ | 449,823 |   |
| **Liabilities**                                                    |       |                  |       |                     |       |                           |       |                            |       |             |       |
| Accounts payable and intercompany payables                         |       | $                     | 39,445     |                     | $          | 11,108                         |       | $                               | 8,120      |             | $          | (42,439 | ) | $ | 16,234 |   |
| Income taxes payable                                               |       | —                |       | —                   |       | 1,578                          |       | —                          |       | 1,578            |       |
| Accrued expenses and other liabilities                             |       | 11,826                |       | 13,754                   |       | 18,187                         |       | —                          |       | 43,767           |       |
| Current maturities of long-term obligations                        |       | 8,428                 |       | 40                       |       | —                         |       | —                          |       | 8,468            |       |
| Total current liabilities                                          |       | 59,699                |       | 24,902                   |       | 27,885                         |       | (42,439                         | )          | 70,047           |       |
| Long-term obligations and intercompany debt                        |       | 427,755               |       | 172,066                  |       | —                         |       | (172,008                        | )          | 427,813          |       |
| Other liabilities                                                  |       | 4,336                 |       | 25,780                   |       | 775                            |       | —                          |       | 30,891           |       |
| Total liabilities                                                  |       | 491,790               |       | 222,748                  |       | 28,660                         |       | (214,447                        | )          | 528,751          |       |
| **Stockholder’s  Equity (Deficit)**                           |       |                  |       |                     |       |                           |       |                            |       |             |       |
| Total stockholder’s equity (deficit)                          |       | (78,928               | )          | 163,821                  |       | 179,492                        |       | (343,313                        | )          | (78,928          | )          |
| Total  liabilities and stockholder’s equity (deficit)         |       | $                     | 412,862    |                     | $          | 386,569                        |       | $                               | 208,152    |             | $          | (557,760 | ) | $ | 449,823 |   |

 

18

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**Unaudited Condensed Consolidating Balance Sheetat June 30, 2007**
| ** **                                                 | ** ** | **Merisant  Company** | ** ** | **Guarantor  Companies** | ** ** | **Non-  Guarantor  Companies** | ** ** | **Consolidating  Eliminations** | ** ** | **Consolidated** | ** ** |
|------------------------------------------------------------|------------|-----------------------|------------|--------------------------|------------|--------------------------------|------------|---------------------------------|------------|------------------|------------|
| **Assets**                                                 |       |                  |       |                     |       |                           |       |                            |       |             |       |
| Cash and cash equivalents                                  |       | $                     | 27,262     |                     | $          | 2,303                          |       | $                               | 21,344     |             | $          | — |   | $ | 50,909 |   |
| Trade accounts receivable, net of allowances               |       | —                |       | 12,445                   |       | 50,610                         |       | —                          |       | 63,055           |       |
| Other receivables and intercompany receivables             |       | 80                    |       | 5,748                    |       | 7,677                          |       | (5,302                          | )          | 8,203            |       |
| Inventories                                                |       | —                |       | 8,472                    |       | 6,484                          |       | —                          |       | 14,956           |       |
| Other current assets                                       |       | 1,141                 |       | 4,088                    |       | 2,656                          |       | —                          |       | 7,885            |       |
| Total current assets                                       |       | 28,483                |       | 33,056                   |       | 88,771                         |       | (5,302                          | )          | 145,008          |       |
| Property and equipment, net                                |       | —                |       | 15,207                   |       | 5,457                          |       | —                          |       | 20,664           |       |
| Trademarks and other intangible assets, net                |       | 62,282                |       | —                   |       | 108,943                        |       | —                          |       | 171,225          |       |
| Goodwill                                                   |       | —                |       | 107,209                  |       | —                         |       | —                          |       | 107,209          |       |
| Deferred financing costs, net                              |       | 11,232                |       | —                   |       | —                         |       | —                          |       | 11,232           |       |
| Other non-current assets                                   |       | 1,736                 |       | 576                      |       | 563                            |       | —                          |       | 2,875            |       |
| Investment in subsidiary and intercompany debt             |       | 340,243               |       | 241,219                  |       | 357                            |       | (581,462                        | )          | 357              |       |
| Total assets                                               |       | $                     | 443,976    |                     | $          | 397,267                        |       | $                               | 204,091    |             | $          | (586,764 | ) | $ | 458,570 |   |
| **Liabilities**                                            |       |                  |       |                     |       |                           |       |                            |       |             |       |
| Accounts payable and intercompany payable                  |       | $                     | 61,437     |                     | $          | 17,105                         |       | $                               | 9,648      |             | $          | (64,002 | ) | $ | 24,188 |   |
| Income taxes payable                                       |       | —                |       | —                   |       | 716                            |       | —                          |       | 716              |       |
| Accrued expenses and other liabilities                     |       | 12,808                |       | 8,644                    |       | 18,466                         |       | —                          |       | 39,918           |       |
| Current maturities of long-term obligations                |       | 9,367                 |       | 40                       |       | —                         |       | —                          |       | 9,407            |       |
| Total current liabilities                                  |       | 83,612                |       | 25,789                   |       | 28,830                         |       | (64,002                         | )          | 74,229           |       |
| Long-term obligations and intercompany debt                |       | 422,967               |       | 166,186                  |       | —                         |       | (166,147                        | )          | 423,006          |       |
| Other liabilities                                          |       | 4,104                 |       | 20,588                   |       | 3,350                          |       | —                          |       | 28,042           |       |
| Total liabilities                                          |       | 510,683               |       | 212,563                  |       | 32,180                         |       | (230,149                        | )          | 525,277          |       |
| **Stockholder’s  Equity (Deficit)**                   |       |                  |       |                     |       |                           |       |                            |       |             |       |
| Total stockholder’s equity (deficit)                  |       | (66,707               | )          | 184,704                  |       | 171,911                        |       | (356,615                        | )          | (66,707          | )          |
| Total  liabilities and stockholder’s equity (deficit) |       | $                     | 443,976    |                     | $          | 397,267                        |       | $                               | 204,091    |             | $          | (586,764 | ) | $ | 458,570 |   |

 

19

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**Unaudited Consolidating Statement of Cash Flows For Six Months Ended June 30, 2006**
| ** **                                                                       | ** ** | **Merisant  Company** | ** ** | **Guarantor  Companies** | ** ** | **Non-  Guarantor  Companies** | ** ** | **Consolidating  Eliminations** | ** ** | **Consolidated** | ** ** |
|----------------------------------------------------------------------------------|------------|-----------------------|------------|--------------------------|------------|--------------------------------|------------|---------------------------------|------------|------------------|------------|
| **Operating  activities**                                                        |       |                  |       |                     |       |                           |       |                            |       |             |       |
| Net cash provided by (used in) operating activities                              |       | $                     | (24,882    | )                        | $          | 13,985                         |       | $                               | 45,297     |             | $          | (23,409 | ) | $ | 10,991 |   |
| **Investing  activities**                                                        |       |                  |       |                     |       |                           |       |                            |       |             |       |
| Proceeds from sale of property and equipment                                     |       | —                |       | —                   |       | 26                             |       | —                          |       | 26               |       |
| Purchases from sale of property and equipment                                    |       | —                |       | (1,163                   | )          | (167                           | )          | —                          |       | (1,330           | )          |
| Net cash used in investing activities                                            |       | —                |       | (1,163                   | )          | (141                           | )          | —                          |       | (1,304           | )          |
| **Financing  activities**                                                        |       |                  |       |                     |       |                           |       |                            |       |             |       |
| Net payments under revolving credit agreement                                    |       | (16,000               | )          | —                   |       | —                         |       | —                          |       | (16,000          | )          |
| Borrowings under long-term obligations                                           |       | 85,000                |       | 95                       |       | —                         |       | —                          |       | 85,095           |       |
| Principal payments on long-term obligations,  excluding revolving credit facilty |       | (71,388               | )          | (92                      | )          | —                         |       | —                          |       | (71,480          | )          |
| Payment of deferred financing costs                                              |       | (5,429                | )          | —                   |       | —                         |       | —                          |       | (5,429           | )          |
| Receivable/payable, parent company                                               |       | 33,291                |       | (4,194                   | )          | (52,506                        | )          | 23,409                          |       | —           |       |
| Distribution to stockholder                                                      |       | (500                  | )          | —                   |       | —                         |       | —                          |       | (500             | )          |
| Net cash provided by (used in) financing activities                              |       | 24,974                |       | (4,191                   | )          | (52,506                        | )          | 23,409                          |       | (8,314           | )          |
|                                                                             |       |                  |       |                     |       |                           |       |                            |       |             |       |
| Effect of exchange rate on cash                                                  |       | —                |       | —                   |       | 68                             |       | —                          |       | 68               |       |
| Net increase in  cash and cash equivalents                                       |       | 92                    |       | 8,631                    |       | (7,282                         | )          | —                          |       | 1,441            |       |
| Cash and cash  equivalents at beginning of period                                |       | 98                    |       | 924                      |       | 17,042                         |       | —                          |       | 18,064           |       |
| Cash and cash  equivalents at end of period                                      |       | $                     | 190        |                     | $          | 9,555                          |       | $                               | 9,760      |             | $          | — |   | $ | 19,505 |   |

 

20

----

**UnauditedConsolidating Statement of Cash Flows For the Six Months Ended June 30, 2007**
| ** **                                                                       | ** ** | **Merisant  Company** | ** ** | **Guarantor  Companies** | ** ** | **Non-  Guarantor  Companies** | ** ** | **Consolidating  Eliminations** | ** ** | **Consolidated** | ** ** |
|----------------------------------------------------------------------------------|------------|-----------------------|------------|--------------------------|------------|--------------------------------|------------|---------------------------------|------------|------------------|------------|
| **Operating activities**                                                         |       |                  |       |                     |       |                           |       |                            |       |             |       |
| Net cash  provided by (used in) operating activities                             |       | $                     | 5,282      |                     | $          | 6,188                          |       | $                               | 49,749     |             | $          | (27,273 | ) | $ | 33,946 |   |
| **Investing activities**                                                         |       |                  |       |                     |       |                           |       |                            |       |             |       |
| Proceeds from  sale of property and equipment                                    |       | —                |       | —                   |       | 183                            |       | —                          |       | 183              |       |
| Purchases from  sale of property and equipment                                   |       | —                |       | (654                     | )          | (205                           | )          | —                          |       | (859             | )          |
| Net cash used in  investing activities                                           |       | —                |       | (654                     | )          | (22                            | )          | —                          |       | (676             | )          |
| **Financing activities**                                                         |       |                  |       |                     |       |                           |       |                            |       |             |       |
| Borrowings under  long-term obligations                                          |       | 85,000                |       | —                   |       | —                         |       | —                          |       | 85,000           |       |
| Principal  payments on long-term obligations, excluding revolving credit facilty |       | (89,264               | )          | (20                      | )          | —                         |       | —                          |       | (89,284          | )          |
| Payment of  deferred financing costs                                             |       | (2,539                | )          | —                   |       | —                         |       | —                          |       | (2,539           | )          |
| Settlement of  loans for purchase of shares in Merisant Worldwide, Inc.          |       | 249                   |       | 200                      |       | —                         |       | —                          |       | 449              |       |
| Receivable/payable,  parent company                                              |       | 27,852                |       | (6,499                   | )          | (48,626                        | )          | 27,273                          |       | —           |       |
| Distribution to  stockholder                                                     |       | (100                  | )          | —                   |       | —                         |       | —                          |       | (100             | )          |
| Net cash  provided by (used in) financing activities                             |       | 21,198                |       | (6,319                   | )          | (48,626                        | )          | 27,273                          |       | (6,474           | )          |
|                                                                             |       |                  |       |                     |       |                           |       |                            |       |             |       |
| Effect of  exchange rate on cash                                                 |       | —                |       | —                   |       | 383                            |       | —                          |       | 383              |       |
| Net increase in cash  and cash equivalents                                       |       | 26,480                |       | (785                     | )          | 1,484                          |       | —                          |       | 27,179           |       |
| Cash and cash  equivalents at beginning of period                                |       | 782                   |       | 3,088                    |       | 19,860                         |       | —                          |       | 23,730           |       |
| Cash and cash equivalents at end of period                                       |       | $                     | 27,262     |                     | $          | 2,303                          |       | $                               | 21,344     |             | $          | — |   | $ | 50,909 |   |

 

21

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

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

**Overview**

Our company is a worldwide leader in themarketing of low-calorie tabletop sweeteners, with an estimated 23% dollarshare as of December 31, 2006 of a stable global retail market, which weestimate at $1.5 billion.  We believethat our company has the leading dollar market share as of December 31, 2006 inapproximately half of what we estimate as the top twenty markets forlow-calorie tabletop sweetener sales. Our premium-priced brands, *Equal*®and *Canderel*®, are among the mostrecognized low-calorie tabletop sweetener products in the world, with aidedbrand awareness estimated at between 85% and 95% in our four top markets.  In addition to *Equal*® and *Canderel*®,we market our products under eighteen other regional brands that enjoysignificant brand recognition in their target markets.  We sell our brands in over ninety 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 launched *Equal*® in the United States.  Monsanto entered the sweetener market in 1985through its acquisition of Searle. Our company is a Delaware corporation thatwas formed in 2000 by an investor group led by an affiliate of Pegasus CapitalAdvisors, L.P. to acquire Monsanto Company’s tabletop sweetener business.

Our worldwide headquarters is located inChicago, Illinois, and we have principal regional offices in Mexico City,Mexico, Neuchâtel, Switzerland, Paris, France and Singapore.  We own and operate manufacturing facilitiesin Manteno, Illinois and Zarate, Argentina and own processing lines that areoperated exclusively for us at plants located in Bergisch and Stendal,Germany.  As of August 10, 2007, we hadtwenty-two direct and indirect subsidiaries, including three subsidiaries inthe United States, eight subsidiaries in Europe, six subsidiaries in Mexico,Central America and South America, and five 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 87% of our net sales in 2006.   The majority of our eighteen other regionalbrands around the world are also sweetened with aspartame.

***Sales Trends and Strategy***

Ourcompany’s premium-priced brands had enjoyed a dominant market position amonglow-calorie sweeteners in many of our key markets.  In recent years, however, we have facedsignificant competition from McNeil Nutritionals LLC, a subsidiary of Johnson& Johnson (“McNeil”), which markets and distributes the artificialsweetener*Splenda*®.  *Splenda*®is sweetened with sucralose, which is produced by Tate & Lyle PLC through acomplex chemical process that converts sucrose molecules into a syntheticcompound. From December 2002 to December 2006, *Splenda*®’sdollar share of the United States retail grocery market has grown fromapproximately 15% to 62% 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 42% of our net sales in 2003 and 2006, respectively.  As a result of declining net sales, we haveexperienced significant declines in our Bank EBITDA from $110.2 million in 2003to $67.2 million in 2006.  For a descriptionof Bank EBITDA and a reconciliation of Bank EBITDA to cash flow from operatingactivities, see “Management’s Discussion and Analysis of Financial Conditionand Results of Operations—Liquidity and Capital Resources”.

We believe that there areopportunities for future growth in the low-calorie tabletop sweetener andsweetened food category and that our company is positioned to pursue theseopportunities.  Despite recent declinesin net sales, our premium 

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brands *Equal*®and *Canderel*® are among the mostrecognized low-calorie tabletop sweetener products in the world, with aided brandawareness estimated between 85% and 95% in our top four markets.

Paul Block was appointedChief Executive Officer in November 2004 and has led an initiative tostrengthen our company’s core brands, improve the efficiency of our operations,reduce costs 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 tostabilize and then grow revenues through the following five strategic initiatives:

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

·                  Pursueproduct innovation to bring new aspartame sweetened products and brandextensions to the market.  We launchedseveral new products in 2006 and have additional products in the developmentpipeline.

·                  Developand test products that have the potential to transform our company’s brandportfolio. We have developed an all-natural, zero-calorie sweetener that isbeing marketed under the *Sweet Simplicity*®brand for our subsidiary, Whole Earth Sweetener Company LLC. Currently, thisinnovative product has achieved national distribution at 137 Wild Oats oraffiliated stores, approximately 127 Whole Foods stores (of their 192 stores intotal) and has also been sold into over 250 independent organic retail outletsacross the United States.

·                  Dedicatesignificant resources to improving the efficiency of operations by, among otherthings, implementing supply chain-based programs to streamline manufacturingcapabilities and improving 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.

·                  Offerprivate label low-calorie sweeteners to retail and food service customers andleverage supply chain expertise globally.

Webelieve that the development and introduction of new products under our *Equal*® and *Canderel*®brands may help to stabilize our core business while innovative, all-naturalsweeteners and sweetened food products under our *SweetSimplicity®* brand for Whole Earth Sweetener Company present growthopportunities for us. However, we may be constrained in our ability to realizefully 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$432.3 million of long-term debt outstanding at June 30, 2007, excludingcapital lease obligations, and paid $44.3 million in interest costs for theyear ended December 31, 2006, $22.0 million of which represented interestpayments on our 9 1⁄2% senior subordinated notes due 2013 (the “Notes”). If wecannot generate cash flows from operations significantly in excess of ourshort-term debt obligations, we may not have the resources required to fullyrealize the value of our strategic initiatives. We may engage in discussions from time to time with our lenders andnoteholders on ways to optimize our capital structure.

**Results of Operations**

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

***Three Months Ended June 30, 2007 Compared to Three Months Ended June30, 2006***

The following table sets forth certain of our company’sfinancial data for the three month periods ended June 30, 2006 and 2007 (totalsmay not foot due to rounding).

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| ** **                         | ** ** | **Three Months Ended** | ** ** | **Three Months Ended  June 30,** | ** ** |
|------------------------------------|------------|----------------------------------|------------|-------------------------------------------------|------------|
| ** **                         | ** ** | **June 30,**                | ** ** | ** **                                      | ** ** | ** ** | ** ** | **Better/(Worse)** | ** ** |
| ** **                         | ** ** | **2006**                         | ** ** | **2007**                                        | ** ** | **2006** | ** ** | **2007** | ** ** | **than Prior Year** | ** ** |
| ** **                         | ** ** | **(in millions)**           | ** ** | **As% of Net Sales**             | ** ** | **Dollars** | ** ** | **%** | ** ** |
| Net sales                          |       | $                                | 78.6       |                                            | $          | 71.1 |   | 100 | % | 100 | % | $ | (7.5 | ) | (10 | )% |
| Cost of sales                      |       | 32.6                             |       | 31.9                                            |       | 41 | % | 45 | % | 0.7 |   | 2 | % |
| Gross profit                       |       | 46.0                             |       | 39.2                                            |       | 59 | % | 55 | % | (6.8 | ) | (15 | )% |
| Operating  expenses:               |       |                             |       |                                            |       |   |   |   |   |   |   |   |   |
| Marketing and selling expenses     |       | 22.2                             |       | 17.0                                            |       | 28 | % | 24 | % | 5.2 |   | 23 | % |
| Administration expenses            |       | 10.4                             |       | 13.1                                            |       | 13 | % | 18 | % | (2.6 | ) | (25 | )% |
| Research and development expenses  |       | 0.3                              |       | 0.4                                             |       | 0 | % | 1 | % | (0.0 | ) | (4 | )% |
| Amortization of intangible assets  |       | 5.6                              |       | 5.7                                             |       | 7 | % | 8 | % | (0.2 | ) | (3 | )% |
| Transaction fees                   |       | 3.3                              |       | —                                          |       | 4 | % | — | % | 3.3 |   | 100 | % |
| Restructuring expenses             |       | 1.3                              |       | 0.3                                             |       | 2 | % | 0 | % | 1.0 |   | 76 | % |
| Total operating expenses           |       | 43.1                             |       | 36.5                                            |       | 55 | % | 51 | % | 6.6 |   | 15 | % |
| Income from  operations            |       | 2.9                              |       | 2.7                                             |       | 4 | % | 4 | % | (0.1 | ) | (5 | )% |
| Other expenses  (income):          |       |                             |       |                                            |       |   |   |   |   |   |   |   |   |
| Interest income                    |       | (0.2                             | )          | (0.2                                            | )          | (0 | )% | (0 | )% | (0.1 | ) | (26 | )% |
| Interest expense                   |       | 11.4                             |       | 11.4                                            |       | 14 | % | 16 | % | (0.1 | ) | (1 | )% |
| Costs of refinancing               |       | 2.5                              |       | 5.8                                             |       | 3 | % | 8 | % | (3.3 | ) | (134 | )% |
| Other expense (income), net        |       | 1.3                              |       | (30.2                                           | )          | 2 | % | (43 | )% | 31.5 |   | 2374 | % |
| Total other expense (income)       |       | 14.9                             |       | (13.1                                           | )          | 19 | % | (18 | )% | 28.1 |   | 188 | % |
| Income (loss)  before income taxes |       | (12.1                            | )          | 15.9                                            |       | (15 | )% | 22 | % | 27.9 |   | 232 | % |
| Provision for  income taxes        |       | 2.7                              |       | 1.9                                             |       | 3 | % | 3 | % | 0.8 |   | 31 | % |
| Net income (loss)                  |       | $                                | (14.8      | )                                               | $          | 14.0 |   | (19 | )% | 20 | % | $ | 28.8 |   | 195 | % |

 

***Consolidated Results***

*Net sales.*Overall,net sales declined in the second quarter of 2007 compared to the second quarterof 2006.  The decline was related tolower sales in the North America and EAME regions and, to a lesser extent, inLatin America.  In North America, sales declineddue primarily to lower consumer demand and higher trade marketing expense inthe grocery, drug and  food servicechannels as well as lower consumer demand in the club and mass channels.  In EAME, we experienced our greatest salesdeclines in the UK mainly as a result of weaker consumer demand, the lingeringimpact of diversion of product into the retail channel and discontinuedsales to certain distributors in an effort to stop the diversion.  Lower sales in France, Belgium and Hungaryalso contributed to the decline in the EAME region.   In LatinAmerica, the sales decrease primarily related to a  delay in shipping under our new businessmodel in Mexico.  These sales declineswere partly offset by approximately $2.3 million in favorable currency translationgains, improved sales in the North America discount channel, increased sales inother EAME countries, mainly the Middle East, improved sales in Argentina,Venezuela, Colombia and Brazil and increased raw material sales and contractmanufacturing activity.

*Cost of sales.*Cost of sales decreased due to the reduction in overall sales volumes, however,this decrease was partly offset by unfavorable currency translation, rawmaterial prices and the impact of purchasing product in Euro for sales incountries with weaker currencies. Overall, gross profit as a percentage of net sales declined from 59% forthe three months ended June 30, 2006 to 55% for the three months ended June 30,2007 due to the increases in costs discussed above as well as increased salesof lower margin products such as contract manufacturing and raw materials, anddiscounted pricing in countries converted to distributor models.

*Operating expenses.*Marketingand selling expenses decreased due to lower brand support in North America andEAME, lower variable selling costs due to reduced sales and lower overall marketingand selling administration costs due to savings from restructuring actions.These favorable impacts were partly offset by higher brand support in the AsiaPacific region and unfavorable currency impacts.  Administration expenses increased mainly dueto higher consulting costs and the expense related to the termination of ourChicago office lease, partly offset by lower performance based incentives.

On June 23, 2006, we entered into an $85.0 millionsenior secured 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 secured creditfacility (the “Senior Credit Agreement”). Transactionfees decreased due to $3.3 million in expenses incurred in conjunction with theSecond Lien Credit Agreement in the second quarter of 2006 that did not repeatin the second quarter of 2007.

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During the second quarter of 2007, we continued ourrestructuring initiatives to improve both financial results and the long-termvalue of the business. As a result of these actions, we recorded restructuringcharges for workforce reductions of $0.3 million in the second quarter of 2007as compared to $1.3 million in the second quarter of 2006. The restructuringcharges incurred in the second quarter of 2007 relate primarily to new employeetermination costs and are expected to be substantially paid by December 31,2007. 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.*Our interest expense increased slightly asa net result of higher interest bearing loans under our Second Lien Credit Agreementthat were in place for a portion of the quarter prior to the refinancing ofthese higher interest bearing loans with lower interest bearing loans on May 9,2007.

*Costs ofrefinancing. *Costs ofrefinancing in the second quarter of 2007 related to the extinguishment of debtunder 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 relating to theextinguished debt was written off.  Costsof refinancing in the second quarter of 2006 related to the consummation of theSecond Lien Credit Agreement and related extinguishment of debt under thepreviously established credit agreement, which resulted in a write-off ofexisting deferred financing fees of $2.5 million.

 *Otherincome/expense, net*. In thesecond quarter of 2007, we experienced an unusually high level of other incomeas compared to the more typical other expense realized in the second quarter of2006.  The other income in the secondquarter of 2007 was primarily the result of a one-time cash paymentreceived pursuant to an agreement with a third party.   Also inthe second quarter of 2007, a $0.2 million currency loss on theeuro-denominated debt was more than offset by favorable balance sheetremeasurement impacts.  In the secondquarter of 2006, we recorded a loss on the euro-denominated debt of $1.3million.

*Taxes.*For thethree months ended June 30, 2007, we recorded a $1.9 million tax provision onincome before income taxes of $15.9 million and for the three months ended June30, 2006, we recorded a $2.7 million tax provision on a loss before incometaxes of $12.1 million. The unusual relationship of our tax provisions to ourpre-tax losses (excluding the impact of the one-time cash payment describedabove in the second quarter of 2007) relates to a combination of factors. Thesefactors include increased tax loss carryforwards, primarily generated in theUnited States, 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 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 decreased our total valuation allowanceby $3.9 million in the second quarter of 2007 to a total of $67.5 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.

**Segment Results**

Thefollowing table presents net sales and Operating EBITDA expressedin millions of dollars for each reportable segment (totals may not footdue to rounding):
| ** **               | ** ** | **Net Sales**                          | ** ** | **Operating EBITDA (1)**            | ** ** |
|--------------------------|------------|---------------------------------------------|------------|-----------------------------------------------|------------|
| ** **               | ** ** | **Three Months  Ended  June 30,** | ** ** | **Better/(Worse)  than Prior Year** | ** ** | **Three Months  Ended  June 30,** | ** ** | **Better/(Worse)  than Prior Year** | ** ** |
| ** **               | ** ** | **2006**                                    | ** ** | **2007**                                      | ** ** | **$** | ** ** | **%** | ** ** | **2006** | ** ** | **2007** | ** ** | **$** | ** ** | **%** | ** ** |
| ** **               | ** ** | **(in millions)**                      | ** ** | **(in millions)**                        | ** ** |
| ** **               | ** ** | ** **                                  | ** ** | ** **                                    | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| North America  (2)       |       | $                                           | 33.0       |                                          | $          | 27.6 |   | $ | (5.4 | ) | (16 | )% | $ | 12.3 |   | $ | 10.1 |   | $ | (2.1 | ) | (17 | )% |
| Operating EBITDA  Margin |       |                                        |       |                                          |       |   |   |   |   | 37 | % | 37 | % | (0 | )% |   |   |
| EAME                     |       | 31.9                                        |       | 30.1                                          |       | (1.9 | ) | (6 | )% | 6.4 |   | 8.7 |   | 2.4 |   | 37 | % |
| Operating EBITDA  Margin |       |                                        |       |                                          |       |   |   |   |   | 20 | % | 29 | % | 9 | % |   |   |
| Latin America            |       | 8.3                                         |       | 8.1                                           |       | (0.2 | ) | (3 | )% | 2.5 |   | 1.9 |   | (0.6 | ) | (24 | )% |
| Operating EBITDA  Margin |       |                                        |       |                                          |       |   |   |   |   | 30 | % | 24 | % | (7 | )% |   |   |
| Asia/Pacific             |       | 5.4                                         |       | 5.4                                           |       | 0.0 |   | 0 | % | 1.8 |   | 1.4 |   | (0.5 | ) | (26 | )% |
| Operating EBITDA Margin  |       |                                        |       |                                          |       |   |   |   |   | 34 | % | 25 | % | (9 | )% |   |   |
|                          |            |                                             |            |                                               |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

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(1)             “OperatingEBITDA” as used with respect to our operating segments is a measure upon whichwe assess the financial performance of these segments. Operating EBITDAexcludes interest expense, income tax expense and depreciation andamortization, as well as items such as restructuring expenses, certainsignificant charges related to new product

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development and launchcosts, certain litigation costs, cost related to the transition to a newexclusive distributor in the United States and certain other non-cash items orexcludable gains or losses. Our definition of Operating EBITDA is largelydriven by similar definitions of Bank EBITDA under our primary creditfacilities.  That definition changed inthe May 2007 amendment of those credit facilities, and that change is reflectedin our computation of Operating EBITDA for the 2007 period. See Note 2 to theunaudited consolidated financial statements for a description of OperatingEBITDA and a reconciliation of Operating EBITDA to income or loss before incometaxes. Operating EBITDA margin represents Operating EBITDA as a percentage ofnet sales.

(2)             NorthAmerica segment results exclude immaterial sales and $0.9 million and $1.0million of negative Operating EBITDA related to a new product launch whichmanagement evaluates separately from this geographical segment for the threemonth period ended June 30, 2006 and 2007, respectively.

***North America***

*Net sales.*  In NorthAmerica, net sales declined due primarily to lower consumer demand and highertrade marketing expense in the grocery, drug and food service channels as wellas lower consumer demand in the club and mass channels.  In the club channel, higher consumer demand inthe first quarter as a result of increased promotional activity contributed tosofter consumer demand in the second quarter. In the retail channel, the transition from our previous mid-priced brandto its replacement brand also contributed to the decline in sales.   These sales declines were partly offset byincreased distribution and sales in the discount channel, increases in contractmanufacturing activity and lower commissions.

*Operating EBITDA.*The decrease in Operating EBITDA was primarilyrelated to the adverse margin impact of lower net sales and unfavorable salesmix.  These unfavorable impacts werepartly offset by lower overall brand support and variable selling costs andlower marketing and general administration costs due to savings from restructuringactions.  Operating EBITDA margin wasslightly improved as a result of lower marketing costs as a percentage ofsales.

***EAME***

*Net sales.*In the EAME region, the decline in net sales wasdriven primarily by the UK, France, Belgium and Hungary.  We experienced our greatest sales declines inthe UK mainly as a result of weaker consumer demand, the lingering impact of diversionof product into the retail channel and discontinued sales to certaindistributors in an effort to stop the diversion.  Continued softness in consumer demand andincreased trade marketing costs reduced sales in France.  In Belgium, weakness in consumer demand andreduced pricing due to the change in business model negatively impacted sales,however overall profitability improved as compared to the second quarter of2006.  In Hungary, lower net sales were due mainly to the shift to adistributor model after the sale of the entity in July 2006 to improveinfrastructure costs and discontinued sales of low margin products.  These unfavorable impacts were partly offsetby favorable currency translation of approximately $1.5 million and improvedsales in several other countries, mainly the Middle East.  In the Middle East, a shift in timing ofshipments from the first quarter of 2007 to the second quarter of 2007positively impacted sales in the second quarter of 2007.

*Operating EBITDA.* OperatingEBITDA increased mainly due to lower brand support primarily in France and theUK and reduced marketing, selling and general administrative costs due mainlyto savings from restructuring actions and changes in business models in severalmarkets.  These positive impacts werepartly offset by the adverse margin impact of decreased sales.  The increase in Operating EBITDA margin wasprimarily due to a decrease in marketing, selling and administrative expensesas a percentage of sales.

***Latin America***

*Net sales.* The sales decrease primarily relates to thetransition to a new business model in Mexico, including  additional accruals for sales deductions andsales returns from our previous distributor, and a delay in shipping under thatnew model as well as increased competition in the club channel.  These declines were offset by improvedexecution and promotional activity in Argentina, higher sales in Venezuelarelating to a sugar shortage, new distribution in Brazil and improved sales inColombia.

*Operating EBITDA.*Operating EBITDA declined due mainly to theadverse margin impact of lower sales volumes and increased salesdeductions.  Operating EBITDA margindecreased primarily due to lower gross profit as a percentage of sales.

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***Asia/Pacific***

*Net sales.*Net sales in the Asia/Pacific region were flat asfavorable currency translation impacts and improved sales in Indonesia wereoffset by lower pricing in Australia/New Zealand as a result of the shift to adistributor model.

*Operating EBITDA.*Operating EBITDA and Operating EBITDA margindecreased primarily due to reduced gross margin and higher brand support.

**Corporate Expenses**

Corporate expenses increased from $6.7 million in thesecond quarter of 2006 to $7.6 million in the second quarter of 2007, primarilydue to higher litigation, consulting and employee related costs partly offsetby lower performance based incentives.

***Six Months Ended June 30, 2007 Compared to Six Months Ended June 30,2006***

The following table sets forth certain of our company’sfinancial data for the six month periods ended June 30, 2006 and 2007 (totalsmay not foot due to rounding).
| ** **                         | ** ** | **Six Months Ended** | ** ** | **Six Months Ended  June 30,** | ** ** |
|------------------------------------|------------|--------------------------------|------------|-----------------------------------------------|------------|
| ** **                         | ** ** | **June 30,**              | ** ** | ** **                                    | ** ** | ** ** | ** ** | **Better/(Worse)** | ** ** |
| ** **                         | ** ** | **2006**                       | ** ** | **2007**                                      | ** ** | **2006** | ** ** | **2007** | ** ** | **than Prior Year** | ** ** |
| ** **                         | ** ** | **(in millions)**         | ** ** | **As% of Net Sales**           | ** ** | **Dollars** | ** ** | **%** | ** ** |
| Net sales                          |       | $                              | 148.3      |                                          | $          | 140.4 |   | 100 | % | 100 | % | $ | (7.9 | ) | (5 | )% |
| Cost of sales                      |       | 61.6                           |       | 62.6                                          |       | 42 | % | 45 | % | (1.0 | ) | (2 | )% |
| Gross  profit                      |       | 86.7                           |       | 77.8                                          |       | 58 | % | 55 | % | (8.9 | ) | (10 | )% |
| Operating expenses:                |       |                           |       |                                          |       |   |   |   |   |   |   |   |   |
| Marketing  and selling expenses    |       | 39.1                           |       | 32.3                                          |       | 26 | % | 23 | % | 6.8 |   | 17 | % |
| Administration  expenses           |       | 21.5                           |       | 24.6                                          |       | 15 | % | 18 | % | (3.0 | ) | (14 | )% |
| Research  and development expenses |       | 1.0                            |       | 0.7                                           |       | 1 | % | 1 | % | 0.2 |   | 24 | % |
| Amortization  of intangible assets |       | 11.1                           |       | 11.5                                          |       | 7 | % | 8 | % | (0.3 | ) | (3 | )% |
| Transaction  fees                  |       | 3.3                            |       | —                                        |       | 2 | % | — | % | 3.3 |   | 100 | % |
| Restructuring  expenses            |       | 3.6                            |       | 0.9                                           |       | 2 | % | 1 | % | 2.7 |   | 76 | % |
| Total  operating expenses          |       | 79.6                           |       | 69.9                                          |       | 54 | % | 50 | % | 9.7 |   | 12 | % |
| Income from operations             |       | 7.1                            |       | 7.9                                           |       | 5 | % | 6 | % | 0.8 |   | 12 | % |
| Other expenses  (income):          |       |                           |       |                                          |       |   |   |   |   |   |   |   |   |
| Interest  income                   |       | (0.4                           | )          | (0.4                                          | )          | (0 | )% | (0 | )% | 0.0 |   | 0 | % |
| Interest  expense                  |       | 22.3                           |       | 23.4                                          |       | 15 | % | 17 | % | (1.2 | ) | (5 | )% |
| Costs  of refinancing              |       | 2.5                            |       | 5.8                                           |       | 2 | % | 4 | % | (3.3 | ) | (134 | )% |
| Other  expense (income), net       |       | 1.5                            |       | (30.1                                         | )          | 1 | % | (21 | )% | 31.6 |   | 2056 | % |
| Total  other expense (income)      |       | 25.9                           |       | (1.2                                          | )          | 17 | % | (1 | )% | 27.1 |   | 105 | % |
| Income (loss) before  income taxes |       | (18.8                          | )          | 9.1                                           |       | (13 | )% | 6 | % | 27.9 |   | 148 | % |
| Provision for income  taxes        |       | 2.9                            |       | 3.7                                           |       | 2 | % | 3 | % | (0.8 | ) | (26 | )% |
| Net income (loss)                  |       | $                              | (21.8      | )                                             | $          | 5.4 |   | (15 | )% | 4 | % | $ | 27.2 |   | 125 | % |

 

***Consolidated Results***

*Net sales.*Overall,net sales declined in the six months ended June 30, 2007 compared to the sixmonths ended June 30, 2006.  The declinewas related to lower sales in North America, EAME and Latin America.  In North America, the sales decline primarilyrelated to lower sales volume and higher trade marketing spending in thegrocery, drug and food service channels, as well as increased promotionalspending in the club channel.  Thedecline in grocery, drug and food service was exacerbated by a shift in therecognition of revenue from January 2007 to December 2006 relating to thescheduling of our annual physical inventory in early January.   In EAME, we experienced our greatest salesdeclines in the UK as a result of weaker consumer demand, the impact of diversionof product into the retail channel and discontinued sales to certaindistributors in an effort to stop the diversion.  Lower sales in France, Belgium and Hungaryalso contributed to the decline in the EAME region.   In LatinAmerica, the sales decrease primarily related to a sales return from ourprevious distributor in Mexico and a delay in shipping under our new businessmodel in Mexico.  These sales declineswere partly offset by improved sales in Asia Pacific due to shipments to newdistributors in Australia and India to establish beginning inventory levels,approximately $4.3 million in 

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favorable currency translation gains, improved consumer demand in theNorth America club channel, increased sales in other EAME countries, mainlyPortugal and Ireland, and increased contract manufacturing activity and salesof raw materials.

*Cost of sales.*Cost of sales increased, despite the decline in sales, due to sales increasesin lower margin products, such as contract manufacturing and raw materials, theimpact of purchasing product in Euro for sales in countries with weakercurrencies and unfavorable raw material purchase prices.  Overall, gross profit as a percentage of netsales declined from 58% for the six months ended June 30, 2006 to 55% for thesix months ended June 30, 2007 due to the increases in costs discussed above aswell as discounted pricing in the UK, increased trade marketing in NorthAmerica and France and decreased pricing in countries converted to distributormodels.

*Operating expenses.*Marketingand selling expenses decreased due to lower brand support in North America andEAME, termination costs recorded in the six months ended June 30, 2006 relatedto the transition to a new distributor in the United States that did not repeatin the same period in 2007 and lower overall marketing and sellingadministration costs due to savings from restructuring actions. These favorableimpacts were partly offset by higher brand support in the Asia Pacific regionand unfavorable currency impacts. Administration expenses increased mainly due to higher litigation,consulting and employment termination costs and the expense related to thetermination of our Chicago office lease partly offset by lower performancebased incentives. Transaction fees decreased due to $3.3 million in expensesincurred in conjunction with the Second Lien Credit Agreement in the secondquarter of 2006 that did not repeat in the second quarter of 2007.

During the six months ended June 30, 2007, we continuedour restructuring initiatives to improve both financial results and thelong-term value of the business. As a result of these actions, we recordedrestructuring charges for workforce reductions of $0.9 million in the sixmonths ended June 30, 2007 as compared to $3.6 million in the six months endedJune 30, 2006. The restructuring charges incurred in the six months ended June30, 2007 relate primarily to new employee termination costs and are expected tobe substantially paid by December 31, 2007. Additional information regardingrestructuring charges and the related liability can be found in Note 3 to theunaudited consolidated financial statements located elsewhere in this document.

*Interest.*Our interest expense increased as a netresult of higher interest bearing loans under our Second Lien Credit Agreementand the use of proceeds from the Second Lien Credit Agreement to prepay lowerinterest bearing loans under our Senior Credit Agreement, as well as overallincreases in interest rates on variable interest debt instruments. Loansoutstanding under the Senior Credit Agreement had a weighted average interestrate of approximately 9.0% per annum prior to the June 2006 closing of theSecond 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. In May 2007, we refinanced and therefore terminated the Second LienCredit Agreement as described below, which results in a reduction of cashinterest expense prospectively from the date of the refinancing.

*Costs ofrefinancing. *Costs ofrefinancing in the second quarter of 2007 related to the extinguishment of debtunder 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.  Costs of refinancing in the second quarter of2006 related to the consummation of the Second Lien Credit Agreement andrelated extinguishment of debt under the previously established creditagreement, which resulted in a write-off of existing deferred financing fees of$2.5 million

*Other income/expense, net*. In the second quarter of 2007, we experienced an unusually high levelof other income as compared to the more typical other expense realized in theprevious periods.  The other income inthe second quarter of 2007 was primarily the result of a one-time cashpayment received pursuant to an agreement with a third party.  Also inthe first half of 2007, a $0.5 million currency loss on the euro-denominateddebt was offset by favorable balance sheet remeasurement impacts.  In the first half of 2006, we recorded a losson the euro-denominated debt of $1.9 million, which was partly offset by a $0.7million realized gain on interest rate derivatives that expired in March 2006.

*Taxes.*For the sixmonths ended June 30, 2007, we recorded a $3.7 million tax provision on incomebefore income taxes of $9.1 million and in the six months ended June 30, 2006,we recorded a $2.9 million tax provision on a loss before income taxes of $18.8million.  The unusual relationship of ourtax provisions to our pre-tax losses (excluding the impact of the one-time cashpayment described above in the six months ended June 30, 2007) relates to acombination of factors. These factors include increased tax loss carryforwards,primarily generated in the United States, for which we have not recorded a taxbenefit, as well as **provisions for future tax costs which may beincurred upon the potential repatriation of certain foreign earnings thatare 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.  There was no significant change in ourvaluation allowance in the six months ended June 30, 2007 and it remains at$67.5 million. We will continue to assess the valuation allowances, and, to theextent we determine that such allowances are no longer required, these deferredincome tax assets will be 

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recognized in the future.

**Segment Results**

Thefollowing table presents net sales and Operating EBITDA expressed in millionsof dollars for each reportable segment (totals may not foot due to rounding):
| ** **              | ** ** | **Net Sales**                        | ** ** | **Operating EBITDA (1)**            | ** ** |
|-------------------------|------------|-------------------------------------------|------------|-----------------------------------------------|------------|
| ** **              | ** ** | **Six Months  Ended  June 30,** | ** ** | **Better/(Worse)  than Prior Year** | ** ** | **Six Months  Ended  June 30,** | ** ** | **Better/(Worse)  than Prior Year** | ** ** |
| ** **              | ** ** | **2006**                                  | ** ** | **2007**                                      | ** ** | **$** | ** ** | **%** | ** ** | **2006** | ** ** | **2007** | ** ** | **$** | ** ** | **%** | ** ** |
| ** **              | ** ** | ** **                                | ** ** | **(in millions)**                        | ** ** | ** ** | ** ** | ** ** | ** ** | **(in millions)** | ** ** | ** ** | ** ** |
| ** **              | ** ** | ** **                                | ** ** | ** **                                    | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| North America (2)       |       | $                                         | 62.9       |                                          | $          | 56.5 |   | $ | (6.4 | ) | (10 | )% | $ | 22.8 |   | $ | 20.4 |   | $ | (2.4 | ) | (11 | )% |
| Operating EBITDA Margin |       |                                      |       |                                          |       |   |   |   |   | 36 | % | 36 | % | (0 | )% |   |   |
| EAME                    |       | 60.7                                      |       | 56.7                                          |       | (4.1 | ) | (7 | )% | 15.7 |   | 15.7 |   | (0.0 | ) | (0 | )% |
| Operating EBITDA Margin |       |                                      |       |                                          |       |   |   |   |   | 26 | % | 28 | % | 2 | % |   |   |
| Latin America           |       | 14.7                                      |       | 13.3                                          |       | (1.4 | ) | (9 | )% | 3.6 |   | 3.0 |   | (0.6 | ) | (17 | )% |
| Operating EBITDA Margin |       |                                      |       |                                          |       |   |   |   |   | 25 | % | 22 | % | (2 | )% |   |   |
| Asia/Pacific            |       | 9.9                                       |       | 13.9                                          |       | 4.0 |   | 40 | % | 3.4 |   | 5.5 |   | 2.1 |   | 62 | % |
| Operating EBITDA Margin |       |                                      |       |                                          |       |   |   |   |   | 34 | % | 39 | % | 5 | % |   |   |
|                         |            |                                           |            |                                               |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

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(1)             “Operating EBITDA” asused with respect to our operating segments is a measure upon which we assessthe financial performance of these segments. Operating EBITDA excludes interestexpense, income tax expense and depreciation and amortization, as well as itemssuch as restructuring expenses, certain significant charges related to newproduct development and launch costs, certain litigation costs, cost related tothe transition to a new exclusive distributor in the United States and certainother non-cash items or excludable gains or losses. Our definition of OperatingEBITDA is largely driven by similar definitions of Bank EBITDA under ourprimary credit facilities.  Thatdefinition changed  in the May 2007 amendmentof those credit facilities, and that change is reflected in our computation ofOperating 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 or loss before income taxes. Operating EBITDAmargin represents Operating EBITDA as a percentage of net sales.

(2)             North America segmentresults exclude immaterial sales and $1.5 million of negative Operating EBITDArelated to a new product launch which management evaluates separately from thisgeographical segment for both of the six month periods ended June 30, 2006 and2007, respectively.

***North America***

*Net sales.*  In NorthAmerica, the sales decline was primarily related to lower sales volume andhigher trade marketing spending in the grocery, drug and food service channels,as well as increased promotional spending in the club channel.  The decline in grocery, drug and food servicewas exacerbated by a shift in the recognition of revenue from January 2007 toDecember 2006 relating to the scheduling of our annual physical inventory inearly January.  In the retail channel,the transition from our previous mid-priced brand to its replacement brand alsocontributed to the decline in sales. These sales declines were partly offset by improved consumer demand inthe club channel in response to promotional activities, improved sales incertain areas of the food service channel due to distribution gains and newproduct offerings, lower commissions, increased contract manufacturing activityand increased volumes and distribution in the discount channel.

*Operating EBITDA.*The decrease in Operating EBITDA was primarilyrelated to the adverse margin impact of lower net sales and unfavorable salesmix.  These unfavorable impacts werepartly offset by lower overall brand support, termination costs recorded in thesix months ended June 30, 2006 related to the transition to a new distributorin the US that did not repeat in the same period in 2007 and lower selling,marketing and general administrative costs due to savings from restructuringactions.  Operating EBITDA marginimproved slightly as reduced selling, marketing and general administrativecosts as a percentage of sales was partly offset by lower gross margin as apercentage of sales relating to changes in sales mix and increased trademarketing costs.

***EAME***

*Net sales.*In the EAME region, the decline in net sales wasdriven primarily by the UK, France, Belgium and Hungary.  We experienced our greatest sales declines inthe UK as a result of weaker consumer demand, the impact of diversion of

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productinto the retail channel and discontinued sales to certain distributors in aneffort to stop the diversion.  Continuedsoftness in consumer demand and increased trade marketing costs reduced salesin France.  In Belgium, weakness inconsumer demand, reduced pricing due to the change in business model and higherinventories than expected at December 31, 2006 negatively impacted sales,however overall profitability improved as compared to the first half of2006.  In Hungary, lower net sales were due mainly to the shift to adistributor model after the sale of the entity in July 2006 to improveinfrastructure costs and discontinued sales of low margin products.  These unfavorable impacts were partly offsetby favorable currency translation of approximately $3.4 million and improvedsales in several other countries, mainly Portugal and Ireland.  In Portugal, unusually high inventories atDecember 31, 2005 negatively impacted the first quarter of 2006, resulting inan improvement in the year over year comparison in the first half of 2007.

*Operating EBITDA.* OperatingEBITDA decreased mainly due to the margin impact of lower net sales,unfavorable raw material purchase prices and the impact of purchasing productin Euro for sales in countries with weaker currencies.  These declines were significantly offset bylower brand support mainly in France, the UK and Belgium and reduced marketing,selling and general administrative costs due to savings from restructuringactions and changes in business models in several markets.  The increase in Operating EBITDA margin wasprimarily due to reduced selling, marketing and general administrative costs asa percentage of sales partly offset by lower gross margin as a percentage ofsales resulting from changes in sales mix, discounted pricing in the UK andother countries converted to a distributor model and increased pricing for rawmaterials.

***Latin America***

*Net sales.* The sales decrease primarily relates to thetransition to a new business model in Mexico, including  additional accruals for sales deductions andsales returns from our previous distributor, and a delay in shipping under thenew business model.  This decrease in saleswas partly offset by improved sales in Venezuela mainly due to a shortage ofsugar.

*Operating EBITDA.*Operating EBITDA declined due to the adversemargin impact of lower net sales partly offset by  reductions in brand support and reducedgeneral administrative costs due to savings from restructuring actions.  Operating EBITDA margin declined primarilydue to lower gross profit as a percentage of sales partly offset by loweradministrative expenses as a percentage of sales.

***Asia/Pacific***

*Net sales.*Net sales in the Asia/Pacific region increasedprimarily due to shipments to new distributors in Australia and India toestablish beginning inventory levels and favorable currency translation.  Sales also improved in Indonesia, Malaysiaand Thailand.

 *Operating EBITDA.*OperatingEBITDA increased primarily due to the margin impact of increased net sales andlower sales and general administrative costs related to business model changes,partly offset by higher brand support. Operating EBITDA margin improved as higher gross margin as a percentageof sales and lower marketing and general administrative costs as a percentageof sales outweighed the increase in brand support as a percentage of sales.

**Corporate Expenses**

Corporate expenses decreased from$14.1 million in the six months ending June 30, 2006 to $14.0 million in thesix months ending June 30, 2007 as higher consulting and employee related costswere more than offset by lower performance based incentives.

**Liquidity and Capital Resources**

Ourliquidity needs are primarily met through internally generated cash flow. Asneeded, we also borrow money under the revolving credit facility of the Amendedand Restated Credit Agreement. Our primary uses of cash are cost of sales,operating expenses, debt service, capital expenditures and distributions to ourstockholder. Foreign subsidiaries generatedapproximately 61% of consolidated net sales for the six month period ended June30, 2007, and we have relied upon the repatriation of cash from our foreignsubsidiaries to satisfy many of our domestic cash requirements. Historically,we had received a vast majority of funds from foreign subsidiaries through ourSwiss subsidiary in the form of payments pursuant to a promissory note. Thispromissory 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 balance 

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relating to this revolving note as of June 30, 2007 was $57.9 million,consisting of $55.6 million in outstanding borrowings and $2.3 million ofaccrued interest.

We had$50.9 million of cash and cash equivalents as of June 30, 2007. Our cashbalance at June 30, 2007 increased 128% over the cash balance at March 31, 2007due primarily to a one-time cash payment received pursuant to an agreement witha third party. Accounts receivable levels, time to payment and inventory levelsimpact the amount of internally generated cash flow. The following table showsinformation with respect to accounts receivable and inventory as of December31, 2006 and June 30, 2007.  Accounts receivable decreased in the six monthsended June 30, 2007 primarily due to higher sales in the fourth quarter of 2006compared to the second quarter of 2007. Inventory levels increased as the levels at December 31, 2006 were belowideal quantities on hand for certain products.
|                                   | ** ** | **December 31, 2006** | ** ** | **June 30, 2007** | ** ** |
|-----------------------------------|------------|---------------------------------|------------|-----------------------------|------------|
|                              |       |                            |       |                        |       |
| Accounts receivable (in millions) |       | $                               | 68.0       |                        | $          | 63.1 |   |
| Days sales outstanding            |       | 83                              |       | 79                          |       |
| Inventory (in millions)           |       | $                               | 13.8       |                        | $          | 15.0 |   |
| Days sales in inventory           |       | 40                              |       | 42                          |       |

 

***Six Months Ended June 30,2007 Compared to Six Months Ended June 30, 2006***

For the six months ended June 30, 2007, net cash providedby operating activities was $33.9 million compared to $11.0 million for the sixmonths ended June 30, 2006. Operating cash flows increased $22.9 million versusthe six months ended June 30, 2006, due to increased net income after adjustingfor non-cash items of $26.4 million primarily due to the gain related to aone-time payment received pursuant to an agreement with a third party net of adecrease in the contribution from working capital of $3.5 million.

Net cash used in investing activities totaled $0.7million for the six months ended June 30, 2007 compared to $1.3 million for thesix months ended June 30, 2006 due to reduced spending on capital expenditures.

For the six months ended June 30,2007, financing activities used $6.4 million in cash as compared to $8.3million in cash for the six months ended June 30, 2006.  For the six months ended June 30, 2007, cashwas provided from $85.0 million in borrowings under the Amended and RestatedCredit Agreement and we used cash to pay our scheduled principal payments underthe Senior Credit Agreement, to pay all outstanding borrowings, interest andpremium under the Second Lien Credit Agreement and to pay costs associated withthe Amended and Restated Credit Agreement.  In the six months ended June 30, 2006, cash was provided from borrowingsof $85.0 million under the Second Lien Credit Agreement and we used cash mainlyto repay borrowings of $16.0 million under the revolving loan facility of theSenior Credit Agreement, to pay principal payments on the term loans of theSenior Credit Agreement and to pay fees related to amendments to the SeniorCredit Agreement.  In addition, distributionsof $0.5 million and $0.1 million were made to our sole stockholder in the firsthalf of 2006 and the first half of 2007, respectively, for the purpose ofpaying financing fees and other administrative expenses.  In the six months ended June 30, 2007, wereceived $0.4 million in payments to repay the outstanding principal of andinterest on loans previously made to employees to purchase shares of commonstock of our parent company.  Borrowingsunder our revolving loan facility were $0 at both December 31, 2006 and June30, 2007.

***Capital Expenditures***

Capital expenditures in 2007 are expected to be in therange of $3.0 million to $5.0 million. We believe that cash on handand internally generated cash flow, together with borrowing available under theAmended and Restated Credit Agreement, will be sufficient to fund capitalexpenditures over the next 12 months.

***CorporateHeadquarters’ Lease***

In April 2007, we enteredinto a new operating lease for office space in Chicago and terminated ourcurrent lease and provided the required one year notice period.  We plan to move our corporate operations tothe new space in early 2008.  The newlandlord paid the lease termination fee of $0.9 million on our behalf and werecorded the related expense in the second quarter of 2007.  The new lease terminates on April 30,2024.  Current leasehold improvements andother non-transferable assets will be fully depreciated between April 2007 andthe estimated date we move into the new facility and moving costs will be expensedas they are incurred.

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***Financing***

On July 11, 2003, weissued $225.0 million principal amount of the Notes and refinanced our creditfacility with the Senior Credit Agreement. A portion of the proceeds of the Notes and the Senior Credit Agreementwere used to pay a dividend to our sole stockholder. The Notes are unsecuredobligations and are subordinated in right of payment to all existing and futuresenior indebtedness of our company. The Notes mature on July 15, 2013. Thestated rate of interest for the Notes is 91¤2% per annum.Interest is payable semiannually in arrears on January 15th andJuly 15th, commencing on January 15, 2004.

The Senior Credit Agreement provided for aggregate commitments of up to$310.0 million, consisting of a revolving loan facility of $35.0 million, ofwhich a portion is available at our option in euro or dollars or in the form ofletters of credit denominated in dollars or euro, as well as term loanfacilities of $275.0 million, consisting of a Euro Term Loan A of $50.0 million,and a Term Loan B of $225.0 million, denominated in dollars. The Euro Term LoanA and the revolving loan facility have a maturity of five and one-half yearswhile the Term Loan B has a maturity of six and one-half years. The SeniorCredit Agreement is guaranteed by our sole stockholder and each of our domesticsubsidiaries. The Senior Credit Agreement and the guarantees of the guarantors weresecured by a first-priority security interest in substantially all of ourassets and the assets of the guarantors.

On June 23, 2006, we entered into the Second LienCredit Agreement, the borrowings under which were substantially used to paydown amounts outstanding under the Senior Credit Agreement.  The Second Lien Credit Agreement increasedthe aggregate principal amount of our indebtedness by $7.2 million andincreased our interest expense.  Ourloans outstanding under the Senior Credit Agreement had a weighted averageinterest rate of approximately 9.0% per annum prior to the closing of theSecond 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 May9, 2007, we amended and restated our Senior Credit Agreement (the “Amended andRestated Credit Agreement”), which, among other things, increased by $85.0million the principal amount of Tranche B Term Loans that could be borrowed byus under the facility.  We paid $2.5million in fees and expenses related to this amendment and restatement which weredeferred and are being amortized over the term of the related debt. Uponclosing, we borrowed the full $85.0 million of additional Tranche B Term Loansand used the proceeds plus cash on hand to prepay the principal of all loansoutstanding under the Second Lien Credit Agreement totaling $85.0 million, plusall outstanding interest of $1.4 million and a premium of $2.6 million, or$89.0 million.  The Second Lien CreditAgreement has been terminated as a result of the transaction and there was noincrease in our long term debt.  Inaddition to the incurrence of fees, this transaction resulted in a write-off ofexisting deferred financing fees relating to the extinguishment of previouslyoutstanding debt in the amount of $3.2 million.

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

As ofJune 30, 2007, unamortized deferred financing cost related to entering into theSenior Credit Agreement, the issuance of the Notes in July 2003, the 2005registered exchange offer with respect to the Notes, the execution of anysubsequent amendments to the Senior Credit Agreement and the execution of theAmended and Restated Credit Agreement was approximately $11.2 million and isbeing amortized in accordance with the terms of the respective debtinstruments.

**Restrictive Covenants and Bank EBITDA**.  The indenture governing the Notes and theAmended and Restated Credit Agreement contain certain covenants that limit orrestrict the incurrence of liens, investments (including acquisitions), salesof assets, indebtedness, restricted payments (including dividends) and mergersand consolidations, subject to certain exceptions.

The Amended and Restated Credit Agreement also requiresus to maintain compliance with a consolidated first-lien leverage ratiocovenant, a consolidated leverage ratio covenant and a consolidated interestcoverage ratio covenant. These ratios are measured on the basis of Bank EBITDAfor the four fiscal quarters ending at least 45 days prior to the paymentdate.  Bank EBITDA is discussed herebecause it is the measure upon which the covenants contained in the Amended andRestated Credit Agreement are measured. However, Bank EBITDA is not a measure of liquidity under 

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GAAP.Accordingly, while providing useful information with respect to assessingcompliance with covenants under our primary debt obligations, this measureshould not be considered in isolation from, or as a substitute for,consolidated statement of cash flow data prepared in accordance with GAAP as anindication of liquidity. In addition, the Bank EBITDA measure presented maydiffer from, and may not be comparable to, similarly titled measures used byother companies.

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

·                                          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;

·                                          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) ifsuch period begins on or after January 1, 2006, (x) $11,000,000 with respect toany such non-recurring cash losses or expenses arising from the implementationof 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 waiver of adefault or event of default and any amendment to the Senior Credit Agreementincluding the fees and expenses of any attorneys and financial advisersretained by the administrative agent pursuant thereto with respect to any suchwaiver or amendment and (ii) the negotiation, execution and closing of theSecond Lien Credit Agreement and any waiver of a default or event of defaultand any amendment to the Second Lien Credit Agreement including the fees andexpenses of any attorneys and financial advisers retained by the administrativeagent with respect to any such waiver or amendment;

·                                          expensesincurred by us or any subsidiary prior to January 1, 2007 in connection withthe 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 toJanuary 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 connection with ourlitigation against McNeil and McNeil-PPC, Inc. in an amount not to exceed$4,000,000.

Bank EBITDA for the six monthsended June 30, 2007 under the Amended and Restated Credit Agreement was $30.6million as compared to $34.4 million for the six months ended June 30, 2006,adjusted to reflect litigation costs on a comparable basis with the currentdefinition of Bank EBITDA.  We were incompliance with the covenants under the Amended and Restated Credit Agreementat June 30, 2007.

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

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|                                                                           | ** ** | **Six Months  Ended  June 30, 2007** | ** ** |
|---------------------------------------------------------------------------|------------|-----------------------------------------------------|------------|
| ** **                                                                | ** ** | **(in millions)**                              | ** ** |
| Net cash provided by operating activities                                 |       | $                                                   | 33.9       |   |
| Provision for income taxes, net of deferred income  tax provision         |       | 1.4                                                 |       |
| Interest expense, net of non-cash interest  expense                       |       | 21.4                                                |       |
| Restructuring expenses (a)                                                |       | 0.9                                                 |       |
| Cash costs of refinancing                                                 |       | 2.6                                                 |       |
| Other non-cash items and gains or losses excludable  from Bank EBITDA (b) |       | (23.6                                               | )          |
| Equity in (income) loss of affiliates                                     |       | 0.1                                                 |       |
| Net change in operating assets and liabilities                            |       | (6.1                                                | )          |
| Bank EBITDA                                                               |       | $                                                   | 30.6       |   |

 

(a)          The charges principally relate to planned employeetermination costs that have been announced in the period presented.  The restructuring liability as of the end ofeach period is included in Accrued expenses and other liabilities in theconsolidated balance sheets.

(b)         Includes the non-cashcharge related to the termination of the Chicago lease, expenses related to ourlitigation against McNeil and costs related to the development andcommercialization of our all-natural low-calorie sweetener, which combined weremore than offset by a one-time cash payment received pursuant to an agreementwith a third party.

***ForwardLooking Statements***

Certain informationincluded or incorporated in this report may be deemed to be “forward-lookingstatements” within the meaning of Section 27A of the Securities Act andSection 21E of the Exchange Act. All statements, other than statements ofhistorical facts, included or incorporated in this report, are forward-lookingstatements. 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 and the sufficiency of capital to meetworking capital, capital expenditures requirements and strategies are forward-lookingstatements. When used in this document, the words “anticipate,” “estimate,” “project”and similar expressions are intended to identify forward-looking statements.

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

**Item 3.  Quantitative and Qualitative DisclosuresAbout Market Risk**

***Foreign Operations***

Withapproximately 59% and 61% of consolidated total net sales generated bysubsidiaries outside of the United States in the six months ended June 30, 2006and June 30, 2007, respectively, our ability to obtain funds necessary to meetour domestic obligations is subject to applicable laws, foreign taxes andintercompany pricing laws, including those relating to the flow of fundsbetween our foreign affiliates pursuant to, for example, purchase agreements, licensingagreements or other arrangements. Historically, we received a vast majority of funds from foreignaffiliates through our Swiss subsidiary in the form of payments pursuant to apromissory note.  The note was repaid infull in January 2006. On March 30, 2006, we issued a revolver note to ourSwiss subsidiary, which will mature in 2011. We 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 

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revolver note,which total $57.9 million, including $2.3 million of interest, as of June 30,2007. Regulators in the United States and other foreign countries where weoperate may closely monitor our corporate structure and how it effects intercompanyfund transfers.

In addition, as of June 30,2007, foreign affiliates comprised approximately 44% of our consolidated totalassets.  Accordingly, we have experiencedand will continue to be exposed to foreign exchange risk.

***Foreign Currency 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 is denominated 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 create an offset to 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 creates an offset to the increase inthe euro denominated debt obligations (i.e., foreign currency transaction loss)and interest expense that results from such an exchange rate increase.

A significant portion of ourdebt bears interest at a fixed rate. Interest rate exposure results from our floating rate borrowings. Forthe six months ended June 30, 2007, a 1.0% per annum increase or decrease ininterest rates would have resulted in an increase or decrease in cash interestcosts for our variable rate term loans of approximately $0.9 million.

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 June 30, 2007.

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***Inflation Risk***

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

**Item 4.  Controls and Procedures**

# *Evaluationof Disclosure Controls and Procedures*

We conducted anevaluation, under the supervision of the Chief Executive Officer and InterimChief Financial Officer, of the effectiveness as of December 31, 2006 ofour disclosure controls and procedures (as defined in Exchange ActRule 15d-15(e)). Based on this evaluation, the Chief Executive Officer andInterim Chief Financial Officer had concluded that, as of December 31,2006, our disclosure controls and procedures needed improvement and were noteffective to provide reasonable assurance that information required to bedisclosed by us in reports that we file with the SEC or submit under theExchange Act is recorded, processed, summarized and reported within the timeperiods specified in the SEC’s rules and forms. In making this conclusion,the Chief Executive Officer and Interim Chief Financial Officer considered thepreviously disclosed material weaknesses in our internal controls overfinancial reporting and the status of the corrective actions to remedy thosematerial weaknesses. Although the Chief Executive Officer and the Interim ChiefFinancial Officer noted certain incremental improvements during the year endedDecember 31, 2006, we had not formally documented and tested all of ourpotentially remediated controls to affirmatively conclude that such controlswere operating effectively. In our reevaluation of our disclosure controls andprocedures as of June 30, 2007, the Chief Executive Officer and the ChiefFinancial Officer noted that our company had formally documented and tested allof our potentially remediated controls and affirmatively concluded that suchcontrols are operating effectively.

The certifications of theChief Executive Officer and Interim Chief Financial Officer required inaccordance with Section 302 of the Sarbanes-Oxley Act of 2002 appear asexhibits to this report. The disclosures set forth in this Item 4 containinformation concerning the evaluation of our disclosure controls andprocedures, and changes in internal controls over financial reporting, referredto in paragraphs 4(b) and (c) of the certifications. Thecertifications should be read in conjunction with this Item 4 for a morecomplete understanding of the topics presented.

***Changes in Internal Control Over Financial Reporting***

Therehave been no changes in our internal control over financial reporting duringthe most recently completed fiscal quarter that have materially affected, orare reasonably likely to materially affect, our internal control over financialreporting.  As disclosed in our Annual Report on Form 10-K for the yearended December 31, 2006, we have taken numerous corrective actions over thelast three fiscal years with respect to certain matters that our former auditorconsidered to be material weaknesses in connection with its audits of ourfinancial statements for the years ended December 31, 2003 and 2004.  Inthe second quarter of 2007, we completed an internal audit which concluded thatthose material weaknesses no longer exist.

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**PART II**—**OTHER INFORMATION**

**Item 1.Legal Proceedings**

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

OnNovember 26, 2004, we filed a federal and state false advertising complaintagainst McNeil in the United States District Court for the Eastern District ofPennsylvania. That lawsuit sought to have McNeil’s *Splenda*®advertising campaign stopped and significant damages recovered.  The trial commenced on April 9, 2007 before aPhiladelphia jury and the parties entered into a confidential settlementagreement on May 11, 2007.

On October 23, 2006,Merisant France SAS, our French subsidiary, commenced legal actions in theCommercial Court of Paris against McNeil and McNeil Nutritionals Ltd., McNeil’sFrench and UK subsidiaries respectively, related to McNeil’s advertisingcampaign for *Splenda*® inFrance.  Specifically, we were seekinginjunctive relief and unspecified monetary damages for what we believe to bemisleading advertising and violations of food labeling laws.  The Commercial Court heard oral arguments onthe merits of the case on March 22, 2007, and it rendered its decision on May10, 2007.  The Court ruled that McNeilhad violated French consumer protection laws and ordered McNeil to avoidwording that refers to both the sugar origin of the artificial sweetenersucralose and the sweet taste of *Splenda®* aswell as wording that may mislead consumers into believing that *Splenda®* belongs to an intermediate category between anatural food and a synthetic product.  Inaddition, the Court specifically ruled that McNeil must cease using theadvertising slogan “because it comes from sugar, sucralose tastes like sugar (*parce qu’il provient du sucre, le sucralose a un goût de sucre*)”and the slogan used on packaging “with sucralose: comes from sugar and tasteslike sugar (*au sucralose: provient du sucre et a un goût desucre*)”. McNeil must institute these changes within 30 days from theformal issuance of judgment and may not distribute products bearing thepackaging slogan after four months from the formal issuance of judgment.  The Court ordered McNeil to pay MerisantFrance one euro in damages and 40,000 euro to reimburse Merisant France forlegal expenses.  McNeil has indicatedthat it does not intend to appeal this decision.

Our company is subject tovarious other claims, pending and possible legal actions for product liabilityand other damages, and other matters arising out of the conduct of ourbusiness, including tax uncertainties arising from doing business in variousEuropean jurisdictions. We believe, based on current knowledge and consultation with counsel, that the outcomeof such claims and actions will not have a material adverse effect on ourconsolidated financial position or results of operations.

**Item 1A.  RisksRelated to Our Business**

The most significant riskfactors applicable to our company are described in Part I, Item 1A “RiskFactors” of our Annual Report on Form 10-K for the year ended December 31,2006. There have been no material changes from the risk factors previouslydisclosed in our report on Form 10-K.

**Item 4. Submission of Matters to a Vote of Security Holders**

Theannual meeting of the stockholders of Merisant Worldwide was held on May 8,2007 at which the stockholders elected directors and ratified the appointmentof BDO Seidman, LLP as independent registered public accountant for our companyand Merisant Worldwide.  The stockholders elected Paul Block, RobertAlbus, Arnold Donald, David House, Alec Machiels and Adam Stagliano as directorsof Merisant Worldwide for an additional one-year term by a vote of 8,114,894 shares in favor and 0 shares opposed.  All stockholders votingon the issue of the appointment of BDO Seidman, LLP as independent registeredpublic accountant voted in favor of that resolution.

On May8, 2007, Merisant Worldwide, in its capacity as the sole stockholder ofMerisant, elected Mr. Block, Mr. Albus, Mr. Donald, Mr. House, Mr.Machiels and Mr. Stagliano as the directors of our company for an additionalone-year term.

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**Item 6.    Exhibits**
| Exhibit   No. | ** ** | **Description**                                                                                           |
|---------------|------------|-----------------------------------------------------------------------------------------------------------|
| 10.1          |       | Employment Agreement dated as of April 5, 2007  between Merisant Company and Diana S. Ferguson            |
|          |       |                                                                                                      |
| 31.1          |       | Certificate of Paul Block pursuant to Rule 15d-14  under the Securities Exchange Act of 1934.        |
|          |       |                                                                                                      |
| 31.2          |       | Certificate of Diana S. Ferguson 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 Diana S. Ferguson pursuant to 18  U.S.C. Section 1350.                                |

 

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SIGNATURES

Pursuantto the requirements of the Securities Exchange Act of 1934, the registranthas duly caused this report to be signed on its behalf by the undersignedthereunto duly authorized.
|                       | MERISANT COMPANY                           |                  |
|-----------------------|--------------------------------------------|-----------------------|
|                  |                                       |
|                  |                                       |
| Date: August 10, 2007 | By:                                        | /s/ Diana S. Ferguson |   |
|                  | Diana S. Ferguson                          |
|                  | Chief Financial  Officer                   |
|                  | (on behalf of the  Company and in capacity |
|                  | of principal financial  officer)           |
|                       |                                            |                       |  |  |

 

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