Table of Contents

 

**As filed with the Securities and ExchangeCommission on April 28, 2009**

 

 

****UNITED STATES****

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

****Washington,D.C.  20549****

 

****FORM 10-Q****

 
| **(Mark  one)****x**                                   | **Quarterly  Report Pursuant to Section 13 or 15(d)****of the Securities Exchange Act of 1934** |   |
|--------------------------------------------------------|------------------------------------------------------------------------------------------------------|--------|
|                                                   |                                                                                                 |   |
| **For the  quarterly period ended April 4, 2009** |
|                                                   |                                                                                                 |   |
| **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 001-32316**

 

****B&G FOODS,INC.****

(Exact name ofRegistrant as specified in its charter)

 
| **Delaware**(State or other  jurisdiction ofincorporation or  organization)                            | **13-3918742**(I.R.S. Employer  Identification No.) |
|--------------------------------------------------------------------------------------------------------|-----------------------------------------------------|
| ** **                                                                                             | ** **                                          |
| **4  Gatehall Drive, Suite 110, Parsippany, New Jersey**(Address of  principal executive offices) | **07054**(Zip Code)                                 |

 

Registrant’stelephone number, including area code:  ****(973) 401-6500****

 

Indicate by check mark whether the registrant:  (1) has filed all reports required to befiled by Section 13 or 15(d) of the Securities Exchange Act of 1934during the preceding 12 months (or for such shorter period that the registrantwas required to file such reports) and (2) has been subject to such filingrequirements for the past 90 days.  Yes x No o

 

Indicate by check mark whether the registrant hassubmitted electronically and posted on its corporate Web site, if any, everyInteractive Data File required to be submitted and posted pursuant to Rule 405of Regulation S-T during the preceding 12 months (or for such shorter periodthat the registrant was required to submit and post such files).  Yes o Noo

 

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

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

 

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

 

As of April 4, 2009, the registrant had 36,033,057 shares of Class Acommon stock, par value $0.01 per share, issued and outstanding, 17,858,539 ofwhich were held in the form of Enhanced Income Securities (EISs) and 18,174,518of which were held separate from EISs. Each EIS represents one share of Class A common stock and $7.15principal amount of 12% senior subordinated notes due 2016.  As of April 4, 2009, the registrant hadno shares of Class B common stock, par value $0.01 per share, issued oroutstanding.

 

 

 

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Table of Contents

 

B&G Foods, Inc. and SubsidiariesIndex

 
|                                                                                                | **Page No.**                          |
|-----------------------------------------------------------------------------------------------------|--------------------------------------------|
|                                                                                                | ** **                                 |
| PART I  FINANCIAL INFORMATION                                                                  | 1                                          |
|                                                                                                |                                       |
| Item 1. Financial Statements (Unaudited)                                                            | 1                                          |
|                                                                                                |                                       |
|                                                                                                | Consolidated  Balance Sheets               | 1 |
|                                                                                                |                                       |   |
|                                                                                                | Consolidated Statements of Operations      | 2 |
|                                                                                                |                                       |   |
|                                                                                                | Consolidated Statements of Cash Flows      | 3 |
|                                                                                                |                                       |   |
|                                                                                                | Notes to Consolidated Financial Statements | 4 |
|                                                                                                |                                       |
| Item 2. Management’s Discussion and Analysis of  Financial Condition and Results of Operations | 16                                         |
|                                                                                                |                                       |
| Item 3. Quantitative and Qualitative Disclosures About  Market Risk                                 | 29                                         |
|                                                                                                |                                       |
| Item 4. Controls and Procedures                                                                     | 31                                         |
|                                                                                                |                                       |
| PART II OTHER INFORMATION                                                                      | 32                                         |
|                                                                                                |                                       |
| Item  1.Legal Proceedings                                                                           | 32                                         |
|                                                                                                |                                       |
| Item 1A. Risk Factors                                                                               | 32                                         |
|                                                                                                |                                       |
| Item 2. Unregistered Sales of Equity Securities and  Use of Proceeds                                | 32                                         |
|                                                                                                |                                       |
| Item 3. Defaults Upon Senior Securities                                                             | 32                                         |
|                                                                                                |                                       |
| Item 4. Submission of Matters to a Vote of Security  Holders                                        | 32                                         |
|                                                                                                |                                       |
| Item  5. Other Information                                                                          | 33                                         |
|                                                                                                |                                       |
| Item 6. Exhibits                                                                                    | 33                                         |
|                                                                                                |                                       |
| SIGNATURE                                                                                           | 34                                         |

 

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**PART IFINANCIAL INFORMATION**

** **

**Item 1. Financial Statements (Unaudited)**

** **

**B&G Foods, Inc. and Subsidiaries**

**Consolidated Balance Sheets**

**(In thousands, except share and per share data)**

**(Unaudited)**

** **
| ** **                                                                                                                                                                                       | ** ** | **April 4, 2009** | ** ** | **January 3, 2009** | ** ** |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------------------|------------|--------------------------|------------|
| **Assets**                                                                                                                                                                                       |       |                   |       |                     |       |
| Current assets:                                                                                                                                                                                  |       |                   |       |                     |       |
| Cash and cash equivalents                                                                                                                                                                        |       | $                      | 33,498     |                     | $          | 32,559 |   |
| Trade accounts receivable, less allowance for doubtful accounts and  discounts of $596 in 2009 and $637 in 2008                                                                                  |       | 31,994                 |       | 36,578                   |       |
| Inventories                                                                                                                                                                                      |       | 93,883                 |       | 88,899                   |       |
| Prepaid expenses                                                                                                                                                                                 |       | 2,323                  |       | 2,475                    |       |
| Income tax receivable                                                                                                                                                                            |       | 1,438                  |       | 2,221                    |       |
| Deferred income taxes                                                                                                                                                                            |       | 1,110                  |       | 1,110                    |       |
| Total current assets                                                                                                                                                                             |       | 164,246                |       | 163,842                  |       |
|                                                                                                                                                                                             |       |                   |       |                     |       |
| Property, plant and equipment, net of accumulated depreciation of  $66,442 and $64,510                                                                                                           |       | 51,548                 |       | 51,059                   |       |
| Goodwill                                                                                                                                                                                         |       | 253,353                |       | 253,353                  |       |
| Trademarks                                                                                                                                                                                       |       | 227,220                |       | 227,220                  |       |
| Customer relationship intangibles, net                                                                                                                                                           |       | 114,705                |       | 116,318                  |       |
| Net deferred debt issuance costs and other assets                                                                                                                                                |       | 12,725                 |       | 13,298                   |       |
| Total assets                                                                                                                                                                                     |       | $                      | 823,797    |                     | $          | 825,090 |   |
|                                                                                                                                                                                             |       |                   |       |                     |       |
| **Liabilities and Stockholders’ Equity**                                                                                                                                                    | ** ** | ** **             | ** ** | ** **               | ** ** |
|                                                                                                                                                                                             |       |                   |       |                     |       |
| Current liabilities:                                                                                                                                                                             |       |                   |       |                     |       |
| Trade accounts payable                                                                                                                                                                           |       | $                      | 25,774     |                     | $          | 27,286 |   |
| Accrued expenses                                                                                                                                                                                 |       | 12,263                 |       | 16,023                   |       |
| Dividends payable                                                                                                                                                                                |       | 6,126                  |       | 6,162                    |       |
| Total current liabilities                                                                                                                                                                        |       | 44,163                 |       | 49,471                   |       |
|                                                                                                                                                                                             |       |                   |       |                     |       |
| Long-term debt                                                                                                                                                                                   |       | 535,800                |       | 535,800                  |       |
| Other liabilities                                                                                                                                                                                |       | 24,807                 |       | 23,671                   |       |
| Deferred income taxes                                                                                                                                                                            |       | 74,561                 |       | 71,500                   |       |
| Total liabilities                                                                                                                                                                                |       | 679,331                |       | 680,442                  |       |
|                                                                                                                                                                                             |       |                   |       |                     |       |
| Stockholders’ equity:                                                                                                                                                                       |       |                   |       |                     |       |
| Preferred stock, $0.01 par value per share. Authorized 1,000,000  shares; no shares issued or outstanding                                                                                        |       | —                 |       | —                   |       |
| Class A common stock, $0.01 par value per share. Authorized  100,000,000 shares; 36,033,057 and 36,246,657 shares issued and outstanding  as of April 4, 2009 and January 3, 2009 |       | 360                    |       | 362                      |       |
| Class B common stock, $0.01 par value per share. Authorized  25,000,000 shares; no shares issued or outstanding                                                                             |       | —                 |       | —                   |       |
| Additional paid-in capital                                                                                                                                                                       |       | 164,771                |       | 171,123                  |       |
| Accumulated other comprehensive loss                                                                                                                                                             |       | (12,099                | )          | (12,358                  | )          |
| Accumulated deficit                                                                                                                                                                              |       | (8,566                 | )          | (14,479                  | )          |
| Total stockholders’ equity                                                                                                                                                                  |       | 144,466                |       | 144,648                  |       |
| Total liabilities and stockholders’ equity                                                                                                                                                  |       | $                      | 823,797    |                     | $          | 825,090 |   |

 

See Notes to ConsolidatedFinancial Statements.

 

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**B&G Foods, Inc. and Subsidiaries**

**Consolidated Statements of Operations**

**(In thousands, except per share data)**

**(Unaudited)**

** **
| ** **                                                     | ** ** | **Thirteen Weeks Ended** | ** ** |
|----------------------------------------------------------------|------------|--------------------------|------------|
|                                                           |       | **April 4,  2009**  | ** ** | **March 29,  2008** | ** ** |
| Net sales                                                      |       | $                        | 118,638    |   | $ | 116,342 |   |
| Cost of goods sold                                             |       | 79,889                   |       | 81,412 |   |
| Gross profit                                                   |       | 38,749                   |       | 34,930 |   |
|                                                           |       |                     |       |   |   |
| Operating expenses:                                            |       |                     |       |   |   |
| Sales, marketing and distribution expenses                     |       | 10,987                   |       | 12,289 |   |
| General and administrative expenses                            |       | 2,339                    |       | 1,358 |   |
| Amortization expense—customer relationships               |       | 1,613                    |       | 1,613 |   |
| Operating income                                               |       | 23,810                   |       | 19,670 |   |
|                                                           |       |                     |       |   |   |
| Other expenses:                                                |       |                     |       |   |   |
| Interest expense, net                                          |       | 14,289                   |       | 12,571 |   |
| Income before income tax expense                               |       | 9,521                    |       | 7,099 |   |
| Income tax expense                                             |       | 3,608                    |       | 2,690 |   |
| Net income                                                     |       | $                        | 5,913      |   | $ | 4,409 |   |
|                                                           |       |                     |       |   |   |
| Basic and diluted weighted average shares outstanding:         |       |                     |       |   |   |
| Class A common stock                                      |       | 36,197                   |       | 36,779 |   |
|                                                           |       |                     |       |   |   |
| Basic and diluted earnings per share:                          |       |                     |       |   |   |
| Class A common stock                                      |       | $                        | 0.16       |   | $ | 0.12 |   |
|                                                           |       |                     |       |   |   |
| Cash dividends declared per share of Class A common stock |       | $                        | 0.17       |   | $ | 0.21 |   |

 

See Notes to ConsolidatedFinancial Statements.

 

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**B&GFoods, Inc. and Subsidiaries**

**ConsolidatedStatements of Cash Flows**

**(In thousands)**

**(Unaudited)**

 
| ** **                                                                         | ** ** | **Thirteen Weeks Ended** | ** ** |
|------------------------------------------------------------------------------------|------------|--------------------------|------------|
| ** **                                                                         | ** ** | **April 4, 2009**   | ** ** | **March 29, 2008** | ** ** |
| ** **                                                                         | ** ** | ** **               | ** ** | ** ** | ** ** |
| **Cash flows from operating activities:**                                          | ** ** | ** **               | ** ** | ** ** | ** ** |
| Net income                                                                         |       | $                        | 5,913      |   | $ | 4,409 |   |
| Adjustments to reconcile net income to net cash provided by operating  activities: |       |                     |       |   |   |
| Depreciation and amortization                                                      |       | 3,560                    |       | 3,689 |   |
| Amortization of deferred debt issuance costs                                       |       | 792                      |       | 792 |   |
| Deferred income taxes                                                              |       | 2,834                    |       | 2,177 |   |
| Unrealized loss on interest rate swap                                              |       | 743                      |       | — |   |
| Reclassification to interest expense, net from interest rate swap                  |       | 422                      |       | — |   |
| Share-based compensation expense                                                   |       | 747                      |       | — |   |
| Changes in assets and liabilities:                                                 |       |                     |       |   |   |
| Trade accounts receivable                                                          |       | 4,584                    |       | 7,201 |   |
| Inventories                                                                        |       | (4,984                   | )          | (1,956 | ) |
| Prepaid expenses                                                                   |       | 152                      |       | 1,005 |   |
| Income tax receivable                                                              |       | 783                      |       | 513 |   |
| Other assets                                                                       |       | (219                     | )          | 256 |   |
| Trade accounts payable                                                             |       | (1,512                   | )          | (6,420 | ) |
| Accrued expenses                                                                   |       | (3,760                   | )          | (1,134 | ) |
| Other liabilities                                                                  |       | 571                      |       | 442 |   |
| Net cash provided by operating activities                                          |       | 10,626                   |       | 10,974 |   |
|                                                                               |       |                     |       |   |   |
| **Cash flows from investing activities:**                                          | ** ** | ** **               | ** ** | ** ** | ** ** |
| Capital expenditures                                                               |       | (2,443                   | )          | (6,420 | ) |
| Net cash used in investing activities                                              |       | (2,443                   | )          | (6,420 | ) |
|                                                                               |       |                     |       |   |   |
| **Cash flows from financing activities:**                                          | ** ** | ** **               | ** ** | ** ** | ** ** |
| Dividends paid                                                                     |       | (6,162                   | )          | (7,797 | ) |
| Payments for repurchase of Class A common stock                               |       | (975                     | )          | — |   |
| Net cash used in financing activities                                              |       | (7,137                   | )          | (7,797 | ) |
|                                                                               |       |                     |       |   |   |
| Effect of exchange rate fluctuations on cash and cash equivalents                  |       | (107                     | )          | (37 | ) |
| Net increase (decrease) in cash and cash equivalents                               |       | 939                      |       | (3,280 | ) |
|                                                                               |       |                     |       |   |   |
| Cash and cash equivalents at beginning of period                                   |       | 32,559                   |       | 36,606 |   |
| Cash and cash equivalents at end of period                                         |       | $                        | 33,498     |   | $ | 33,326 |   |
| ** **                                                                         | ** ** | ** **               | ** ** | ** ** | ** ** |
| **Supplemental disclosures of cash flow  information:**                            | ** ** | ** **               | ** ** | ** ** | ** ** |
| Cash interest payments                                                             |       | $                        | 17,130     |   | $ | 7,012 |   |
| Cash income tax payments                                                           |       | $                        | 17         |   | $ | 10 |   |
| Cash income tax refunds                                                            |       | $                        | (24        | ) | $ | (40 | ) |
| Non-cash transactions:                                                             |       |                     |       |   |   |
| Dividends declared and not yet paid                                                |       | $                        | 6,126      |   | $ | 7,797 |   |

 

See Notes to Consolidated Financial Statements.

 

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**B&GFoods, Inc. and Subsidiaries**

**Notes toConsolidated Financial Statements**

**(Unaudited)**

 

**(1)**                                 **Nature of Operations**

** **

B&GFoods, Inc. is a holding company, the principal assets of which are thecapital stock of its subsidiaries. Unless the context requires otherwise, references in this report to “B&GFoods,” “our company,” “we,” “us” and “our” refer to B&G Foods, Inc.and its subsidiaries.  We operate in oneindustry segment and manufacture, sell and distribute a diverse portfolio ofhigh-quality shelf-stable foods across the United States, Canada and PuertoRico.  Our products include hot cereals,fruit spreads, canned meats and beans, spices, seasonings, marinades, hotsauces, wine vinegar, maple syrup, molasses, salad dressings, Mexican-stylesauces, taco shells and kits, salsas, pickles, peppers and other specialty foodproducts.  We compete in the retailgrocery, food service, specialty, private label, club and mass merchandiserchannels of distribution.  We distributeour products throughout the United States via a nationwide network ofindependent brokers and distributors to supermarket chains, food serviceoutlets, mass merchants, warehouse clubs, non-food outlets and specialty fooddistributors.

 

**(2)****                                ****Summary of SignificantAccounting Policies**

** **

***Fiscal Year***

 

Our financialstatements are presented on a consolidated basis.  Typically, our fiscal quarters and fiscalyear consist of 13 and 52 weeks, respectively, ending on the Saturday closestto December 31 in the case of our fiscal year and fourth fiscal quarter,and on the Saturday closest to the end of the corresponding calendar quarter inthe case of our fiscal quarters.  As aresult, a 53rd week is added to our fiscal year every five or six years.  In a 53-week fiscal year our fourth fiscalquarter contains 14 weeks.  Our fiscalyear ending January 2, 2010 (fiscal 2009) contains 52 weeks and our fiscalyear ended January 3, 2009 (fiscal 2008) contained 53 weeks.  Each quarter of fiscal 2009 and 2008 contains13 weeks, except the fourth quarter of 2008 which contained 14 weeks.

 

***Basis of Presentation***

 

The accompanyingconsolidated interim financial statements for the thirteen week periods ended April 4,2009 (first quarter of 2009) and March 29, 2008 (first quarter of 2008)have been prepared by our company in accordance with accounting principlesgenerally accepted in the United States of America without audit, pursuant tothe rules and regulations of the Securities and Exchange Commission (SEC),and include theaccounts of B&G Foods, Inc. and its subsidiaries.  Certain information and footnote disclosuresnormally included in annual financial statements prepared in accordance withgenerally accepted accounting principles have been omitted pursuant to such rules andregulations.  However, our managementbelieves, to the best of their knowledge, that the disclosures herein areadequate to make the information presented not misleading.  All intercompany balances and transactionshave been eliminated.  The accompanyingunaudited consolidated interim financial statements contain all adjustments(consisting only of normal and recurring adjustments) that are, in the opinionof management, necessary to present fairly our consolidated financial positionas of April 4, 2009, the results of our operations and cash flows for thefirst quarter of 2009 and 2008.  Ourresults of operations for the first quarter of 2009 are not necessarilyindicative of the results to be expected for the full year.  The accompanying unaudited consolidatedinterim financial statements should be read in conjunction with the auditedconsolidated financial statements and notes for fiscal 2008 included in ourAnnual Report on Form 10-K for fiscal 2008 filed with the SEC on March 5,2009.

 

***Use of Estimates***

 

The preparation offinancial statements in accordance with U.S. generally accepted accountingprinciples requires our management to make a number of estimates andassumptions relating to the reporting of assets and liabilities and thedisclosure of contingent assets and liabilities at the date of the consolidatedfinancial statements and the reported amounts of revenues and expenses duringthe reporting period.  Some of

 

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**B&GFoods, Inc. and Subsidiaries**

**Notes to Consolidated Financial Statements (Continued)**

**(Unaudited)**

 

**(2)**                                 Summaryof Significant Accounting Policies (Continued)

** **

themore significant estimates and assumptions made by management involve trade andconsumer promotion expenses; allowances for excess, obsolete and unsaleableinventories; pension benefits; purchase accounting allocations; the recoverabilityof goodwill, trademarks, customer relationship intangibles, property, plant andequipment and deferred tax assets; the accounting for our enhanced income securities (EISs); and theaccounting for share-based compensation expense.  Actual results could differ significantlyfrom these estimates and assumptions.

 

Management evaluates its estimates andassumptions on an ongoing basis using historical experience and other factors,including the current economic environment, that management believe to be reasonableunder the circumstances.  We adjust suchestimates and assumptions when facts and circumstances dictate.  Recent volatility in the credit, equity andforeign currency markets has increased the uncertainty inherent in suchestimates and assumptions.

 

***Enhanced Income Securities***

 

Each of our EISs represents one share of our Class Acommon stock and $7.15 principal amount of our senior subordinated notes.  The holders of our EISs may separate each EIS into oneshare of Class A common stock and $7.15 principal amount of seniorsubordinated notes at any time.  Upon theoccurrence of certain events (including redemption of the senior subordinatednotes or upon maturity of the senior subordinated notes), EISs will automaticallyseparate.  Conversely, subject tolimitations, a holder of separate shares of Class A common stock andsenior subordinated notes can combine such securities to form EISs.  Separation and combination of EISs willautomatically result in increases and decreases, respectively, in the number ofshares of Class A common stock not held in the form of EISs.  As of April 4, 2009, we had 36,033,057shares of Class A common stock issued and outstanding, 17,858,539 of whichwere held in the form of EISs and 18,174,518 of which were held separate fromEISs.  As of March 29, 2008 we had36,778,988 shares of Class A common stock issued and outstanding,16,680,877 of which were held in the form of EISs and 20,098,111 of which wereheld separate from EISs.

 

***Recently Issued Accounting Standards***

 

In September 2006, the FASB issuedStatement of Financial Accounting Standards (SFAS) No. 157, “*Fair Value Measurements*” (SFAS No. 157), which definesfair value, establishes a framework for measuring fair value and expandsdisclosures about fair value measurements. The provisions of SFAS No. 157 were effective as of the beginningof our fiscal 2008, with the exception of certain provisions deferred until thebeginning of our fiscal 2009.  In February 2008,the FASB issued FASB Staff Position SFAS No. 157-2, “*Effective Date of FASB Statement No. 157,*”which delayed the effective date of SFAS No. 157 for all non-financialassets and liabilities, except those that are recognized or disclosed at fairvalue in the financial statements on a recurring basis, until the beginning ofour fiscal 2009.  We adopted SFAS No. 157effective at the beginning of our fiscal 2008 for financial assets andfinancial liabilities, which did not have a material impact on our results ofoperations or financial position.  Weadopted SFAS No. 157 effective at the beginning of our fiscal 2009 fornon-financial assets and non-financial liabilities, which did not have amaterial impact on our results of operations or financial position.

 

In December 2007, the FASB issued SFAS No. 141(revised 2007), “*Business Combinations*” (SFAS No. 141R)and SFAS No. 160, “*Noncontrolling Interests in Consolidated FinancialStatements*” (SFAS No. 160).  SFAS No. 141R requires an acquirer tomeasure the identifiable assets acquired, the liabilities assumed and any noncontrollinginterest in the acquiree at their fair values on the acquisition date, withgoodwill being the excess value over the net identifiable assets acquired.  SFAS No. 160 clarifies that anoncontrolling interest in a subsidiary is an ownership interest in theconsolidated entity that should be reported as equity in the

 

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**B&GFoods, Inc. and Subsidiaries**

**Notes to Consolidated Financial Statements (Continued)**

**(Unaudited)**

 

**(2)****                                ****Summary of Significant AccountingPolicies (Continued)**

 

consolidated financialstatements.  SFAS No. 141R and SFAS No. 160are effective as of the beginning of our fiscal 2009.  SFAS No. 141R will be appliedprospectively.  The effects of SFAS No. 141Rwill depend on future acquisitions.  SFASNo. 160 requires retroactive adoption. We currently do not have any noncontrolling interests in subsidiaries.

 

In March 2008, the FASB issued SFAS No. 161,“*Disclosures about Derivative Instruments andHedging Activities, an amendment of FASB Statement No. 133 (SFAS No. 161)*.”  SFAS No. 161 requires enhanceddisclosures about (a) how and why an entity uses derivative instruments, (b) howderivative instruments and related hedged items are accounted for under SFAS No. 133and its related interpretations, and (c) how derivative instruments andrelated hedged items affect an entity’s financial position, financialperformance, and cash flows.  SFAS No. 161is effective as of the beginning of our fiscal 2009.  Since SFAS No. 161 requires enhanceddisclosures, without a change to existing standards relative to measurement andrecognition, our adoption of SFAS No. 161 did not have any effect on ourresults of operations or financial position. See notes 5 and 7 for the required disclosures about our derivativeinstruments and hedging activities.

 

In April 2008, the FASB issued FASBStaff Position No. FAS 142-3, “*Determination of theUseful Life of Intangible Assets”* (FSP 142-3).  FSP 142-3 requires companies estimating theuseful life of a recognized intangible asset to consider their historicalexperience in renewing or extending similar arrangements or, in the absence ofhistorical experience, to consider assumptions that market participants woulduse about renewal or extension as adjusted for entity-specific factors.  FSP 142-3 is effective as of the beginning ofour fiscal 2009.  We adopted FSP 142-3effective at the beginning of our fiscal 2009, which did not have a materialimpact on our results of operations or financial position.

 

In December 2008, the FASB issued FASB Staff Position No. FAS132(R)-1, “*Employer’s Disclosures about Postretirement BenefitPlan Assets*” (FSP 132(R)-1). FSP 132(R)-1 requires additional disclosures about plan assets fordefined benefit pension and other postretirement benefit plans.  FSP 132(R)-1 will be effective as of the endof our fiscal 2009.  Since FSP 132(R)-1requires enhanced disclosures, without a change to existing standards relativeto measurement and recognition, our adoption of FSP 132(R)-1 will not have amaterial impact on our results of operations or financial position.

 

**(3)****                                ****Inventories**

** **

Inventoriesconsist of the following, as of the dates indicated (dollars in thousands):

 
| ** **                  | ** ** | **April 4, 2009** | ** ** | **January 3, 2009** | ** ** |
|-----------------------------|------------|------------------------|------------|--------------------------|------------|
| Raw materials and packaging |       | $                      | 18,672     |                     | $          | 19,402 |   |
| Work in process             |       | 1,538                  |       | 2,658                    |       |
| Finished goods              |       | 73,673                 |       | 66,839                   |       |
|                        |       |                   |       |                     |       |
| Total                       |       | $                      | 93,883     |                     | $          | 88,899 |   |

 

**(4)****                                ****Goodwill, Trademarks andCustomer Relationship Intangibles**

** **

There has been no change in the carryingamount of goodwill for the period from January 3, 2009 to April 4,2009.

 

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** **

**B&GFoods, Inc. and Subsidiaries**

**Notes to Consolidated Financial Statements (Continued)**

**(Unaudited)**

 

**(4)**                                 Goodwill, Trademarks and CustomerRelationship Intangibles (Continued)

 

There has been no changein the carrying amount of trademarks (indefinite-lived intangibles) for theperiod from January 3, 2009 to April 4, 2009.

 

The following tablereconciles the changes in the carrying amount of customer relationshipintangibles for the period from January 3, 2009 to April 4, 2009(dollars in thousands):

 
| ** **                       | ** ** | **Customer   Relationship  Intangibles** | ** ** | **Less:  Accumulated   Amortization** | ** ** | **Total** | ** ** |
|----------------------------------|------------|------------------------------------------|------------|---------------------------------------|------------|-----------|------------|
| Balance at  January 3, 2009 |       | $                                        | 129,000    |                                  | $          | (12,682   | )          | $ | 116,318 |   |
| Amortization expense             |       | —                                   |       | (1,613                                | )          | (1,613    | )          |
| Balance at April 4, 2009    |       | $                                        | 129,000    |                                  | $          | (14,295   | )          | $ | 114,705 |   |

 

Customer relationshipintangibles are presented at cost, net of accumulated amortization, and areamortized on a straight-line basis over their estimated useful lives of 20years.  Amortization expense associatedwith customer relationship intangibles for each of the first quarter of 2009and 2008 was $1.6 million, and is recorded in operating expenses.  We expect to recognize an additional $4.9million of amortization expense associated with our current customer relationshipintangibles during the remainder of fiscal 2009, and thereafter $6.5 millionper year for each of the next four succeeding fiscal years.

 

**(5)****                                ****Long-termDebt**

** **

Long-termdebt consists of the following, as of the dates indicated (dollars inthousands):

 
| ** **                                              | ** ** | **April 4, 2009** | ** ** | **January 3, 2009** | ** ** |
|---------------------------------------------------------|------------|------------------------|------------|--------------------------|------------|
| Senior secured credit facility:                         |       |                   |       |                     |       |
| Revolving credit facility                               |       | $                      | —     |                     | $          | — |   |
| Term loan                                               |       | 130,000                |       | 130,000                  |       |
|                                                    |       |                   |       |                     |       |
| 12% Senior Subordinated Notes due October 30, 2016 |       | 165,800                |       | 165,800                  |       |
| 8% Senior Notes due October 1, 2011                |       | 240,000                |       | 240,000                  |       |
| Total long-term debt                                    |       | $                      | 535,800    |                     | $          | 535,800 |   |

 

As of April 4, 2009, the aggregate maturitiesof long-term debt are as follows (dollars in thousands):

 
| **Years  ending December:** | ** ** | ** ** | ** ** |
|-----------------------------|------------|------------|------------|
| 2009                        |       | $          | —     |   |
| 2010                        |       | —     |       |
| 2011                        |       | 240,000    |       |
| 2012                        |       | —     |       |
| 2013                        |       | 130,000    |       |
| Thereafter                  |       | 165,800    |       |
| Total                       |       | $          | 535,800    |   |

 

7

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Tableof Contents

 

**B&GFoods, Inc. and Subsidiaries**

**Notes to Consolidated Financial Statements (Continued)**

**(Unaudited)**

 

**(5)**                                 Long-term Debt (Continued)

** **

*Senior Secured Credit Facility*.  Our$25.0 million revolving credit facility matures on January 10, 2011 andour $130.0 million of term loan borrowings matures on February 26, 2013,provided, however, that if we do not repay, redeem or refinance our seniornotes prior to April 1, 2011, the outstanding term loan borrowings willbecome immediately due and payable on April 1, 2011.

 

Interest under the revolving credit facility,including any outstanding letters of credit, is determined based on alternativerates that we may choose in accordance with the revolving credit facility,including the base lending rate per annum plus an applicable margin, and LIBORplus an applicable margin.  We pay a commitmentfee of 0.50% per annum on the unused portion of the revolving creditfacility.  Interest under the term loanfacility is determined based on alternative rates that we may choose inaccordance with the credit facility, including the base lending rate per annumplus an applicable margin of 1.00%, and LIBOR plus an applicable margin of2.00%.

 

Our obligations under the credit facility arejointly and severally and fully and unconditionally guaranteed on a seniorbasis by all of our existing and certain future domestic subsidiaries.  The credit facility is secured bysubstantially all of our and our domestic subsidiaries’ assets except our andour domestic subsidiaries’ real property. The credit facility provides for mandatory prepayment upon certain assetdispositions and issuances of securities, as defined.  The credit facility contains covenants thatrestrict, among other things, our ability to incur additional indebtedness, paydividends and create certain liens.  Thecredit facility also contains certain financial maintenance covenants, which,among other things, specify maximum capital expenditure limits, a minimuminterest coverage ratio and a maximum senior and total leverage ratio, eachratio as defined.  As of April 4,2009, we were in compliance with all of the covenants in the creditfacility.  Proceeds of the revolvingcredit facility are restricted to funding our working capital requirements,capital expenditures and acquisitions of companies in the same line of businessas our company, subject to specified criteria. The maximum letter of credit capacity under the revolving creditfacility is $10.0 million, with a fronting fee of 3.0% per annum for alloutstanding letters of credit.

 

On September 15, 2008, Lehman BrothersHoldings Inc. (Lehman) filed for protection under Chapter 11 of the U.S.Bankruptcy Code.  Lehman Commercial PaperInc. (Lehman CPI), a Lehman subsidiary, is the administrative agent under ourcredit facility.  Lehman CPI filed forprotection under Chapter 11 of the U.S. Bankruptcy Code on October 3,2008.  None of our $130.0 million ofoutstanding term loans is currently with Lehman, Lehman CPI or any othersubsidiary of Lehman.  Lehman CPI is oneof the lenders participating in our $25.0 million revolving credit facility.  However, Lehman CPI has only $3.1 million ofthe $25.0 million commitment.  The otherlenders under the revolving credit facility and their respective commitmentsare as follows:  Bank of America, N.A.,$9.4 million; Citibank, N.A., $9.4 million; and Royal Bank of Canada, $3.1million.  We do not believe that LehmanCPI would honor its funding commitment under the revolving credit facility ifwe were to make a funding request.  As aresult, the effective available borrowing capacity under our revolving creditfacility, net of outstanding letters of credit of $0.5 million, was $21.4million at April 4, 2009.  We havenot drawn upon the revolving credit facility since its inception in October 2004and, based upon our cash on hand and working capital requirements, we have noplans to do so for the foreseeable future.

 

Effective as of February 26, 2007, weentered into a six year interest rate swap agreement in order to effectivelyfix at 7.0925% the interest rate payable for $130.0 million of term loanborrowings through the life of the term loan, ending on February 26,2013.  The counterparty to the swap isLehman Special Financing Inc. (Lehman SFI). Lehman SFI filed for protection under Chapter 11 of the U.S. BankruptcyCode on October 3, 2008.

 

We initially designated the swap as a cashflow hedge under the guidelines of SFAS No. 133, “*Accounting for Derivative Instruments and HedgingActivities*,” as amended by SFAS No. 138, “*Accounting*

 

8

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Tableof Contents

 

**B&GFoods, Inc. and Subsidiaries**

**Notes to Consolidated Financial Statements (Continued)**

**(Unaudited)**

 

**(5)****                                ****Long-term Debt****(Continued)**

 

*forCertain Derivative Instruments and Certain Hedging Activities*” and SFAS No. 149, “*Amendment of Statement No. 133 on Derivative Instruments andHedging Activities*” (collectively referred to as SFAS No. 133).  Prior to Lehman’s bankruptcy filing, werecorded changes in the fair value of the swap in other comprehensive income(loss), net of tax in our consolidated balance sheet.  However, as a result of the Lehman bankruptcyfiling, we determined in September 2008 that the interest rate swap was nolonger an effective hedge as defined by SFAS No. 133 and, accordingly,subsequent changes in the swap’s fair value are being recorded in currentearnings in net interest expense in the consolidated statements ofoperations.  We obtain third-partyverification of fair value at the end of each reporting period.  As of April 4, 2009, the fair value ofour interest rate swap was $13.9 million and is recorded in other liabilitieson our consolidated balance sheet.  Theamount recorded in accumulated other comprehensive income (loss) will bereclassified to net interest expense over the remaining life of the term loanborrowings as we make interest payments. Net interest expense in the first quarter of 2009 includes a $0.7million charge relating to the unrealized loss on our interest rate swap and areclassification of $0.4 million of the amount recorded in accumulated othercomprehensive income (loss) related to the swap.  During fiscal 2009, we expect to reclassifyto net interest expense $1.1 million of the amount recorded in accumulatedother comprehensive income (loss).

 

*SubsidiaryGuarantees*.  We have no assets or operations independentof our direct and indirect subsidiaries. All of our present domestic subsidiaries jointly and severally and fullyand unconditionally guarantee our senior subordinated notes and our seniornotes, and management has determined that our Canadian subsidiary, which is ouronly subsidiary that is not a guarantor of our senior subordinated notes andsenior notes, is a “minor subsidiary” as that term is used in Rule 3-10 ofRegulation S-X promulgated by the SEC. There are no significant restrictions on our ability and the ability ofour subsidiaries to obtain funds from our respective subsidiaries by dividendor loan.  Consequently, separatefinancial statements have not been presented for our subsidiaries becausemanagement has determined that they would not be material to investors.

 

*DeferredDebt Issuance Costs*.  In connection with the issuance of our seniorsubordinated notes and our senior notes in October, 2004, we capitalizedapproximately $23.1 million of debt issuance costs, which will be amortizedover their respective terms.  Inconnection with the issuance of term loan borrowings of $25.0 million in January 2006,we capitalized approximately $0.4 million of additional debt issuance costs,which will be amortized over the term of the loan.  In connection with the issuance of additionalterm loan borrowings of $205.0 million in February 2007 we capitalizedapproximately $4.0 million of additional debt issuance costs, which will beamortized over the term of the loan. During the second quarter of 2007 we wrote-off and expensed $1.8 millionof deferred debt issuance costs in connection with our May 2007 prepaymentof $100.0 million of term loan borrowings. As of April 4, 2009 and January 3, 2009 we had net deferreddebt issuance costs of $12.4 million and $13.2 million, respectively.

 

At April 4,2009 and January 3, 2009 accrued interest of $4.6 million and $9.4million, respectively, is included in accrued expenses in the accompanyingconsolidated balance sheets.

 

**(6)****                                ****Fair Value Measurements**

** **

We adopted SFAS No. 157on December 30, 2007, the first day of our fiscal 2008.  SFAS No. 157 defines fair value as theprice that would be received to sell an asset or paid to transfer a liabilityin an orderly transaction between market participants at the measurement date(an exit price). The standard outlines a valuation framework and creates a fairvalue hierarchy in order to increase the consistency and comparability of fairvalue measurements and the related disclosures. Under generally acceptedaccounting principles, certain assets and liabilities must be measured at fairvalue, and SFAS No. 157 details the disclosures that are required foritems measured at fair value.

 

9

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Table ofContents

 

**B&GFoods, Inc. and Subsidiaries**

**Notes to Consolidated Financial Statements (Continued)**

**(Unaudited)**

 

**(6)**           Fair Value Measurements(Continued)

** **

Financial assets and liabilitiesare measured using inputs from the three levels of the SFAS No. 157 fairvalue hierarchy. The three levels are as follows:

 

Level 1—Inputs are unadjustedquoted prices in active markets for identical assets or liabilities.

 

Level 2—Inputs include quotedprices for similar assets and liabilities in active markets, quoted prices foridentical or similar assets or liabilities in markets that are not active,inputs other than quoted prices that are observable for the asset or liability(i.e., interest rates, yield curves, etc.), and inputs that are derivedprincipally from or corroborated by observable market data by correlation orother means (market corroborated inputs).

 

Level 3—Unobservable inputs thatreflect our assumptions about the assumptions that market participants woulduse in pricing the asset or liability.

 

In accordance with the fair valuehierarchy described above, the following table shows the fair value of ourinterest rate swap as of April 4, 2009 and January 3, 2009, which isincluded in other liabilities in our consolidated balance sheet (dollars inthousands):

 
| ** **           | ** ** | ** **         | ** ** | **Fair Value Measurements** | ** ** |
|----------------------|------------|--------------------|------------|-----------------------------|------------|
| ** **           | ** ** | **Description**    | ** ** | **Level 1**                 | ** ** | **Level 2** | ** ** | **Level 3** | ** ** |
| April 4, 2009   |       | Interest rate swap |       | $                           | —     |   | $ | 13,860 |   | $ | — |   |
| January 3, 2009 |       | Interest rate swap |       | $                           | —     |   | $ | 13,117 |   | $ | — |   |

 

Cashand cash equivalents, trade accounts receivable, income tax receivable, tradeaccounts payable, accrued expenses and dividends payable are reflected in theconsolidated balance sheets at carrying value, which approximates fair value dueto the short-term nature of these instruments.

 

The carrying values and fairvalues of our term loan borrowings, senior notes and senior subordinated notesas of April 4, 2009 and January 3, 2009 are as follows (dollars inthousands):

 
| ** **                                               | ** ** | **April 4, 2009** | ** ** | **January 3, 2009** | ** ** |
|----------------------------------------------------------|------------|-----------------------------|------------|-------------------------------|------------|
| ** **                                               | ** ** | **Carrying Value**     | ** ** | **Fair Value(1)(2)**     | ** ** | **Carrying Value** | ** ** | **Fair Value(1)(3)** | ** ** |
| Senior Secured Term Loan due February 26, 2013      |       | $                           | 130,000    |                          | $          | 119,600 |   | $ | 130,000 |   | $ | 107,900 |   |
| 8% Senior Notes due October 1, 2011                 |       | 240,000                     |       | 220,800                       |       | 240,000 |   | 207,600 |   |
| 12% Senior Subordinated Notes due October 30, 2016: |       |                        |       |                          |       |   |   |   |   |
| — represented by EISs                               |       | 127,689                     |       | 101,972                       |       | 124,793 |   | 90,235 |   |
| — held separately                                   |       | 38,111                      |       | 30,436                        |       | 41,007 |   | 29,651 |   |
|                                                          |            |                             |            |                               |            |  |  |  |  |  |  |  |  |

 

----

| (1) | Fair values are estimated  based on quoted market prices, except as otherwise noted in footnotes  (2) and (3) below.                                                                                                                                                                                                                                                                                                                                                                                                             |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2) | Solely for purposes of this  presentation, we have assumed that the fair value of each senior subordinated  note at April 4, 2009 was $5.71, based upon the $5.09 per share closing  price of our separately traded Class A common stock and the $10.80 per  EIS closing price of our EISs on the New York Stock Exchange on April 3,  2009 (the last business day of the first quarter of 2009). Each EIS  represents one share of Class A common stock and $7.15 principal amount  of our senior subordinated notes. |
| (3) | Solely for purposes of this  presentation, we have assumed that the fair value of each senior subordinated  note at January 3, 2009 was $5.17, based upon the $5.49 per share  closing price of our separately traded Class A common stock and the                                                                                                                                                                                                                                                                               |

 

10

 

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Tableof Contents

 

**B&GFoods, Inc. and Subsidiaries**

**Notes to Consolidated Financial Statements (Continued)**

**(Unaudited)**

 

**(6)****          ****FairValue Measurements (Continued)**

** **

$10.66 per EIS closing price of our EISs onthe New York Stock Exchange on January 2, 2009 (the last business day offiscal 2008).

 

Ourterm loan borrowings are subject to an interest rate swap discussed in Note 5.

 

**(7)****          ****Disclosures about Derivative Instruments and HedgingActivities**

** **

Weaccount for our derivative and hedging transactions in accordance with SFAS No. 133.  SFAS No. 133 establishes accounting andreporting standards for derivative instruments and for hedging activities andrequires an entity to recognize all derivative instruments either as an assetor a liability in the balance sheet and to measure such instruments at fairvalue.  We do not engage in derivativeinstruments for trading purposes.

 

Thefollowing table presents the fair value and the location within ourconsolidated balance sheet of all assets and liabilities associated withderivative instruments not designated as hedging instruments (dollars inthousands):

 
| **Derivatives not  designated as hedging** | ** ** | ** **                       | ** ** | **Asset  Derivatives**                               | ** ** | **Liability  Derivatives**                           | ** ** |
|-----------------------------------------------------------|------------|----------------------------------|------------|------------------------------------------------------|------------|------------------------------------------------------|------------|
| **instruments under  SFAS No. 133**        | ** ** | **Balance Sheet  Location** | ** ** | **Fair Value at  April 4, 2009** | ** ** | **Fair Value at  April 4, 2009** | ** ** |
| ** **                                                | ** ** | ** **                       | ** ** | ** **                                           | ** ** | ** **                                           | ** ** |
| Interest rate swap                                        |       | Other liabilities                |       | —                                               |       | $                                                    | 13,860     |   |
|                                                           |            |                                  |            |                                                      |            |                                                      |            |  |

 

See notes 5 and 6 for additionalinformation regarding our interest rate swap. We do not currently have any derivatives designated as hedginginstruments under SFAS No. 133.

 

Thefollowing tables present the impact of derivative instruments and theirlocation within our consolidated statement of operations (dollars inthousands):

 
| **Derivatives not  designated as hedging**    | ** ** | **Amount of (Gain) Loss  Recognized in Income  on Derivatives** | ** ** | **Location of (Gain)  Loss Recognized in** | ** **            |
|-----------------------------------------------|------------|-----------------------------------------------------------------------------------------------|------------|----------------------------------------------------------------|-----------------------|
| **instruments under  SFAS No. 133** | ** ** | **Thirteen Weeks Ended  April 4, 2009**                                   | ** ** | **Income on  Derivatives**                                | ** **            |
| ** **                                    |       |                                                                                          |       |                                                           |                  |
| Interest rate swap                            |       | $                                                                                             | 1,165      | *                                                              | Interest expense, net |   |
|                                               |            |                                                                                               |            |                                                                |                       |  |

 

----

|   | * | The amount included in net  interest expense consists of $743 unrealized loss on our interest rate swap,  and $422 (pre-tax) reclassified to net interest expense from accumulated  other comprehensive income. |
|--------|---|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

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Tableof Contents

 

**B&GFoods, Inc. and Subsidiaries**

**Notes to Consolidated Financial Statements (Continued)**

**(Unaudited)**

 

**(8)****          ****Comprehensive Income Recognition**

 

Comprehensive incomeincludes net income, foreign currency translation adjustments relating toassets and liabilities located in our Canadian subsidiary, changes in ourpension benefits, net of tax and the change in the fair value of an interestrate swap during the period it was designated as an effective cash flow hedge,net of tax.  The amount recorded inaccumulated other comprehensive income (loss) related to the swap will bereclassified to net interest expense over the remaining life of the term loanas we make interest payments.

 

The components ofcomprehensive income are as follows (dollars in thousands):

 

 
| ** **                                                                         | ** ** | **Thirteen Weeks Ended** | ** ** |
|------------------------------------------------------------------------------------|------------|------------------------------------|------------|
| ** **                                                                         | ** ** | **April 4, 2009**        | ** ** | **March 29, 2008** | ** ** |
|                                                                               |       |                               |       |   |   |
| Net income                                                                         |       | $                                  | 5,913      |   | $ | 4,409 |   |
| Other comprehensive income:                                                        |       |                               |       |   |   |
| Foreign currency translation adjustments                                           |       | (114                               | )          | (37 | ) |
| Amortization of unrecognized prior service cost and pension  deferrals, net of tax |       | 111                                |       | 5 |   |
| Cash flow hedge transaction, net of tax                                            |       | —                             |       | (3,417 | ) |
| Reclassification to interest expense, net from interest rate swap                  |       | 262                                |       | — |   |
| Comprehensive income                                                               |       | $                                  | 6,172      |   | $ | 960 |   |

 

**(9)****          ****Pension Benefits**

** **

Net periodic costsfor the first quarter of 2009 and 2008 include the following components(dollars in thousands):

 
| ** **                                          | ** ** | **Thirteen Weeks Ended** | ** ** |
|-----------------------------------------------------|------------|------------------------------------|------------|
| ** **                                          | ** ** | **April 4, 2009**        | ** ** | **March 29, 2008** | ** ** |
|                                                |       |                               |       |   |   |
| Service cost—benefits earned during the period |       | $                                  | 419        |   | $ | 330 |   |
| Interest cost on projected benefit obligation       |       | 431                                |       | 360 |   |
| Expected return on plan assets                      |       | (376                               | )          | (453 | ) |
| Amortization of unrecognized prior service cost     |       | 11                                 |       | 11 |   |
| Amortization of loss (gain)                         |       | 167                                |       | (3 | ) |
| Net pension cost                                    |       | $                                  | 652        |   | $ | 245 |   |

 

Duringthe first quarter of 2009, we made no contributions to our defined benefitpension plans.  We anticipate electing tomake contributions of approximately $2.1 million to our defined benefit pensionplans during the remainder of fiscal 2009.

 

**(10)****        ****Commitments and Contingencies**

* *

*Environmental. *We are subject to environmental laws and regulationsin the normal course of business.  We didnot make any material expenditures during the first quarter of 2009 or infiscal 2008 in order to comply with environmental laws and regulations.  Based on our experience to date, managementbelieves that the future cost of compliance with existing environmental lawsand regulations (and liability for any known environmental conditions) will nothave a material adverse effect on our consolidated financial position, resultsof operations or liquidity.  However, wecannot predict what environmental or health and

 

12

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Tableof Contents

 

**B&GFoods, Inc. and Subsidiaries**

**Notes to Consolidated Financial Statements (Continued)**

**(Unaudited)**

 

**(10)**         Commitments andContingencies (Continued)

** **

safetylegislation or regulations will be enacted in the future or how existing orfuture laws or regulations will be enforced, administered or interpreted, norcan we predict the amount of future expenditures that may be required in orderto comply with such environmental or health and safety laws or regulations orto respond to such environmental claims.

 

*LegalProceedings. *We are from time to time involved invarious claims and legal actions arising in the ordinary course of business,including proceedings involving product liability claims, worker’s compensationand other employee claims, and tort and other general liability claims, as wellas trademark, copyright, patent infringement and related claims and legalactions.  In the opinion of ourmanagement, the ultimate disposition of any currently pending claims or actionswill not have a material adverse effect on our consolidated financial position,results of operations or liquidity.

 

*Collective Bargaining Agreements*. Approximately 354 of our 734 employees, or 48.2%, as of April 4,2009, were covered by collective bargaining agreements.  None of our collective bargaining agreementsis scheduled to expire within one year. During the first quarter of 2009, we reached an agreement with theInternational Brotherhood of Teamsters, Chauffeurs, Warehousemen &Helpers of America (Local No. 863) to renew the collective bargainingagreement covering our Roseland, New Jersey facility for the period April 1,2009 through March 31, 2014.

 

*Severance and Change of Control Agreements. *We have employmentagreements with each of our five executive officers.  The agreements generally continue untilterminated by the executive or by us, and provide for severance payments undercertain circumstances, including termination by us without cause (as defined)or as a result of the employees’ disability, or termination by us or a deemedtermination upon a change of control (as defined).  Severance benefits include payments forsalary continuation, continuation of health care and insurance benefits,present value of additional pension credits and, in the case of a change ofcontrol, accelerated vesting under compensation plans and potential excise taxliability and gross up payments.

 

**(11)****        ****Earnings per Share**

** **

Wecurrently have only one class of common stock issued and outstanding,designated as Class A common stock. During the periods presented there were no shares of Class B commonstock issued or outstanding.  Basicearnings per share for the Class A common stock is calculated by dividingnet income by the weighted average number of shares of Class A commonstock outstanding.  Diluted earnings pershare for each of the periods presented are equal to basic earnings per sharebecause no potentially dilutive securities were outstanding during eitherperiod.

 

**(12)****        ****Business and Credit Concentrations and GeographicInformation**

** **

Ourexposure to credit loss in the event of non-payment of accounts receivable bycustomers is estimated in the amount of the allowance for doubtfulaccounts.  We perform ongoing creditevaluations of our customers’ financial conditions.  Our top ten customers accounted forapproximately 49.4%****and 46.7% of consolidated net salesfor the first quarter of 2009 and 2008, respectively.  Our top ten customers accounted forapproximately 52.2% and 56.1% of our receivables as of April 4, 2009 and January 3,2009, respectively.  Other than Wal-Mart,which accounted for 17.3% and 12.9% of our consolidated net sales for the firstquarter of 2009 and 2008, respectively, no single customer accounted for morethan 10.0% of our consolidated net sales for the first quarter of 2009 or2008.  Other than C&S WholesaleGrocery and Wal-Mart, which accounted for 13.6% and 12.3% of our consolidatedreceivables, respectively, as of April 4, 2009, no single customeraccounted for more than 10.0% of our consolidated receivables as of the end ofthe first quarter of 2009.  Other thanC&S Wholesale Grocery and Wal-Mart, which accounted for 17.7% and 13.2% ofour

 

13

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Tableof Contents

 

**B&GFoods, Inc. and Subsidiaries**

**Notes to Consolidated Financial Statements (Continued)**

**(Unaudited)**

 

**(12)**         Business and CreditConcentrations and Geographic Information (Continued)

** **

consolidatedreceivables, respectively, as of January 3, 2009, no single customeraccounted for more than 10.0% of our consolidated receivables as of the end offiscal 2008.

 

During the firstquarter of 2009 and 2008, our sales to foreign countries represented less than1.0% of net sales.  Our foreign sales areprimarily to customers in Canada.

** **

**(13)****        ****Share-Based Compensation**

** **

Therecognition of compensation expense for our performance share long-termincentive awards (LTIAs) is initially based on the probable outcome of theapplicable performance condition based on the fair value of the award on thedate of grant and the anticipated number of shares to be awarded on astraight-line basis over the applicable performance period.  Our company’s performance against theperformance goal defined in the award agreements will be re-evaluated on aquarterly basis throughout the applicable performance period and therecognition of compensation expense will be adjusted for subsequent changes inthe estimated or actual outcome.  Thecumulative effect on current and prior periods of a change in the estimatednumber of performance share awards is recognized as an adjustment to earningsin the period of the revision.

 

Duringthe first quarter of 2009, we recognized $0.7 million of compensation expenserelated to performance share LTIAs for the 2008 to 2009, 2008 to 2010 and 2009to 2011 performance periods, which is reflected in general and administrativeand sales, marketing and distribution expenses in our consolidated statementsof operations.  As of April 4, 2009,there was $3.5 million of unrecognized compensation expense related toperformance share LTIAs, which is expected to be recognized over the next 33months.

 

Thefollowing table details the activity in our performance share LTIAs for thefirst quarter of 2009:

 
| ** **                | ** ** | **Number of  Performance Shares (1)** | ** ** | **Weighted Average  Grant Date Fair  Value (per share)(2)** | ** ** |
|---------------------------|------------|------------------------------------------------------|------------|--------------------------------------------------------------------------------------|------------|
|                      |       |                                                 |       |                                                                                 |       |
| Beginning of year(3)      |       | 273,814                                              |       | $                                                                                    | 7.25       |   |
| Granted(4)                |       | 392,824                                              |       | $                                                                                    | 1.88       |   |
| Vested                    |       | —                                               |       | —                                                                               |       |
| Forfeited                 |       | —                                               |       | —                                                                               |       |
| End of first quarter 2009 |       | 666,638                                              |       | $                                                                                    | 4.09       |   |

 

----

| (1) | The  number of unvested performance shares is based on the participants earning  their target number of performance shares at 100%. The ultimate award, which  we determine at the end of the applicable performance period, can range from  zero to 300% of the target number of performance shares.                                         |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2) | The  fair value of the awards was determined based upon the closing price of our  Class A common stock on the applicable measurement dates reduced by the  present value of expected dividends using the risk-free interest-rate as the  award holders are not entitled to dividends or dividend equivalents during  the vesting period. |
| (3) | Represents  unvested 2008 to 2009 and 2008 to 2010 performance share LTIAs granted in  fiscal 2008.                                                                                                                                                                                                                                           |
| (4) | Represents  unvested 2009 to 2011 performance share LTIAs granted in the first quarter of  2009.                                                                                                                                                                                                                                              |

 

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Table of Contents

 

**B&GFoods, Inc. and Subsidiaries**

**Notes to Consolidated Financial Statements (Continued)**

**(Unaudited)**

 

**(14)****        ****Stock and Debt Repurchase Plan**

** **

*Stock andDebt Repurchase Plan. *On October 27, 2008, our board ofdirectors authorized a stock and debt repurchase program for the repurchase ofup to $10.0 million of our Class A common stock and/or senior notes overthe next twelve months.  Under theauthorization, we may purchase shares of Class A common stock and/orsenior notes from time to time in the open market or in privately negotiatedtransactions in compliance with the applicable rules and regulations ofthe SEC.

 

Thetiming and amount of such repurchases, if any, will be at the discretion ofmanagement, and will depend on market conditions and other considerations.  Therefore, there can be no assurance as tothe number or aggregate dollar amount of shares that will be repurchased underthe stock and debt repurchase program. Likewise, there can be no assurance as to the principal amount of seniornotes, if any, that will be repurchased. We may discontinue the program at any time.  Any shares repurchased pursuant to the stockrepurchase program will be retired. Likewise, any senior notes repurchased will be cancelled.  In general, our credit agreement prohibits usfrom repurchasing our senior subordinated notes.

 

During the first quarter of 2009 werepurchased and retired 213,600 shares of Class A common stock at anaverage cost per share (excluding fees and commissions) of $4.53, or $1.0million in the aggregate.  As of April 4,2009, we had $6.5 million available for any future repurchases of Class Acommon stock and/or senior notes under the stock and debt repurchase plan.

 

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**Table of Contents**

** **

**Item 2.**    Management’s Discussion and Analysis ofFinancial Condition and Results of Operations

** **

Thefollowing Management’s Discussion and Analysis of Financial Condition andResults of Operations contains forward-looking statements that involve risksand uncertainties.  Our actual resultscould differ materially from those anticipated in these forward-lookingstatements as a result of certain factors, including those set forth under theheading “Forward-Looking Statements” below and elsewhere in this report.  The following discussion should be read in conjunctionwith the unaudited consolidated interim financial statements and related notesfor the thirteen weeks ended April 4, 2009 (first quarter of 2009)included elsewhere in this report and the audited consolidated financialstatements and related notes for the fiscal year ended January 3, 2009(fiscal 2008) included in our Annual Report on Form 10-K filed with theSecurities and Exchange Commission (SEC) on March 5, 2009 (which we referto as our 2008 Annual Report on Form 10-K).

 

**General**

** **

Wemanufacture, sell and distribute a diverse portfolio of branded, high quality,shelf-stable food products, many of which have leading regional or nationalmarket shares.  In general, we positionour branded products to appeal to the consumer desiring a high quality andreasonably priced product.  We complementour branded product retail sales with institutional and food service sales andlimited private label sales.

 

Ourgoal is to continue to increase sales, profitability and cash flows byenhancing our existing portfolio of branded shelf stable products and bycapitalizing on our competitive strengths. We intend to implement our growth strategy through the followinginitiatives: expanding our brand portfolio with acquisitions of complementarybranded businesses, continuing to develop innovative new products anddelivering them to market quickly, leveraging our unique multiple channel salesand distribution system and continuing to focus on higher growth customers anddistribution channels.  Since 1996, wehave successfully acquired and integrated 18 separate brands into ouroperations.

 

We aresubject to a number of challenges that may adversely affect ourbusinesses.  These challenges, which arediscussed below and under the heading “Forward-Looking Statements,” include:

 

*Fluctuationsin Commodity Prices and Production and Distribution Costs:* We purchase raw materials, including agricultural products, meat,poultry, other raw materials, ingredients and packaging materials from growers,commodity processors, other food companies and packaging manufacturers.  Raw materials, ingredients and packagingmaterials are subject to fluctuations in price attributable to a number offactors.  Fluctuations in commodityprices can lead to retail price volatility and intensive price competition, andcan influence consumer and trade buying patterns.  Although our commodity prices for wheat werelower in the first quarter of 2009 than those incurred during the thirteenweeks ended March 29, 2008 (the first quarter of 2008), our commodityprices for maple syrup, beans and packaging were higher than those incurredduring the first quarter of 2008.

 

Wepurchase maple syrup primarily from Canada and Vermont.  In 2008, maple syrup production in Canada,which represents the great majority of global production, was significantlybelow industry needs due to growing global demand and one of the worst cropyields in nearly 40 years.  As a result,the price we paid for maple syrup increased significantly and we were facedwith a shortfall in supply as compared to our needs, which had a negativeimpact on our sales volume of maple syrup products during fiscal 2008 thatcontinued through the first quarter of 2009. Early indications suggest that the 2009 maple syrup crop yield isexpected to be more consistent with historic levels.  This together with the granting of additionalproduction quotas by the Federation of Québec Maple Syrup Producers, isexpected to bring global supply more in line with global demand and reduce theprice we pay for maple syrup during the remainder of 2009.

 

Thecost of labor, manufacturing, energy, fuel, packaging materials and other costsrelated to the production and distribution of our food products have also risensignificantly in recent years.  Weattempt to 

 

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managethese risks by entering into short-term supply contracts and advancecommodities purchase agreements from time to time, implementing cost savingmeasures and by raising sales prices.  Todate, our cost saving measures and sales price increases have offset increasesto our raw material, ingredient and packaging costs, although in certain caseson a lagging basis.  To the extent we areunable to offset present and future cost increases, our operating results willbe negatively impacted.

 

*Consolidationin the Retail Trade and Consequent Inventory Reductions:* As the retail grocery trade continues to consolidate and our retailcustomers grow larger and become more sophisticated, our retail customers maydemand lower pricing and increased promotional programs.  These customers are also reducing theirinventories and increasing their emphasis on private label products.

 

*ChangingCustomer Preferences:*  Consumers in the marketcategories in which we compete frequently change their taste preferences,dietary habits and product packaging preferences.

 

*ConsumerConcern Regarding Food Safety, Quality and Health:* The food industry is subject to consumer concerns regarding the safetyand quality of certain food products.

 

*Fluctuationsin Currency Exchange Rates:*  We purchasethe majority of our maple syrup requirements from suppliers located in Québec,Canada.  Any weakening of the U.S. dollaragainst the Canadian dollar, could significantly increase our costs relating tothe production of our maple syrup products to the extent that we have notpurchased Canadian dollars in advance of any such weakening of the U.S. dollar.

 

Toconfront these challenges, we continue to take steps to build the value of ourbrands, to improve our existing portfolio of products with new product andmarketing initiatives, to reduce costs through improved productivity and toaddress consumer concerns about food safety, quality and health and tofavorably manage currency fluctuations.

 

**Critical Accounting Policies; Use of Estimates**

** **

Thepreparation of financial statements in accordance with U.S. generally acceptedaccounting principles requires our management to make a number of estimates andassumptions relating to the reporting of assets and liabilities and thedisclosure of contingent assets and liabilities at the date of the consolidatedfinancial statements and the reported amounts of revenues and expenses duringthe reporting period.  Some of the moresignificant estimates and assumptions made by management involve trade andconsumer promotion expenses; allowances for excess, obsolete and unsaleableinventories; pension benefits; purchase accounting allocations; therecoverability of goodwill, trademarks, customer relationship intangibles,property, plant and equipment, and deferred tax assets; the accounting for ourEISs; and the accounting for share-based compensation expense.  Actual results could differ significantlyfrom these estimates and assumptions.

 

In our2008 Annual Report on Form 10-K, we identified the critical accountingpolicies which affect our more significant estimates and assumptions used inpreparing our consolidated financial statements. There have been no significantchanges to these policies since January 3, 2009.

 

**Results of Operations**

** **

Thefollowing table sets forth the percentages of net sales represented by selecteditems for the first quarter of 2009 and 2008 reflected in our consolidatedstatements of operations.  Thecomparisons of financial results are not necessarily indicative of futureresults:

 

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| ** **                                       | ** ** | **Thirteen Weeks Ended** | ** ** |
|--------------------------------------------------|------------|------------------------------------|------------|
| ** **                                       | ** ** | **April 4, 2009**        | ** ** | **March 29, 2008** | ** ** |
| **Statement of Operations:**                     |       |                               |       |   |   |
| Net sales                                        |       | 100.0                              | %          | 100.0 | % |
| Cost of goods sold                               |       | 67.3                               | %          | 70.0 | % |
| Gross profit                                     |       | 32.7                               | %          | 30.0 | % |
|                                             |       |                               |       |   |   |
| Sales, marketing and distribution expenses       |       | 9.3                                | %          | 10.6 | % |
| General and administrative expenses              |       | 2.0                                | %          | 1.1 | % |
| Amortization expense—customer relationships |       | 1.3                                | %          | 1.4 | % |
| Operating income                                 |       | 20.1                               | %          | 16.9 | % |
|                                             |       |                               |       |   |   |
| Interest expense, net                            |       | 12.1                               | %          | 10.8 | % |
| Income before income tax expense                 |       | 8.0                                | %          | 6.1 | % |
|                                             |       |                               |       |   |   |
| Income tax expense                               |       | 3.0                                | %          | 2.3 | % |
| Net income                                       |       | 5.0                                | %          | 3.8 | % |

 

Asused in this section the terms listed below have the following meanings:

 

*Net Sales.*  Our net salesrepresents gross sales of products shipped to customers plus amounts charged tocustomers for shipping and handling, less cash discounts, coupon redemptions,slotting fees and trade promotional spending.

 

*Gross Profit.*  Our grossprofit is equal to our net sales less cost of goods sold.  The primary components of our cost of goodssold are cost of internally manufactured products, purchases of finished goodsfrom co-packers plus freight costs to our distribution centers and to ourcustomers.

 

*Sales, Marketing and Distribution Expenses.* Our sales, marketing and distribution expenses include costs for marketingpersonnel, consumer advertising programs, internal sales forces, brokeragecosts and warehouse facilities.

 

*General and Administrative Expenses.* Our general and administrative expenses include administrative employeecompensation and benefit costs, as well as information technologyinfrastructure and communication costs, office rent and supplies, professionalservices and other general corporate expenses.

 

*Amortization Expense—Customer Relationships.* Amortization expense—customerrelationships includes the amortization expense associated with customerrelationship intangibles, which are amortized over their useful lives of 20years.

 

*Net Interest Expense.*  Net interestexpense includes interest relating to our outstanding indebtedness andamortization of deferred debt issuance costs, net of interest income andsubsequent to our determination in September 2008, that our interest rateswap is no longer an effective hedge as defined by SFAS No.133, unrealizedlosses on the interest rate swap and the reclassification of amounts recordedin accumulated other comprehensive income (loss) related to the swap.

 

***Non-GAAP Financial Measures***

 

Certaindisclosures in this report include “non-GAAP (generally accepted accountingprinciples) financial measures.”  A non-GAAPfinancial measure is defined as a numerical measure of our financialperformance that excludes or includes amounts so as to be different than themost directly comparable measure calculated and presented in accordance withGAAP in our consolidated balance sheets and related consolidated statements ofoperations, changes in stockholders’ equity and comprehensive income, and cashflows.

 

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EBITDAis a measure used by management to measure operating performance.  EBITDA is defined as net income before netinterest expense, income taxes, depreciation, and amortization. Managementbelieves that it is useful to eliminate net interest expense, income taxes,depreciation and amortization because it allows management to focus on what itdeems to be a more reliable indicator of ongoing operating performance and ourability to generate cash flow from operations. We use EBITDA in our businessoperations, among other things, to evaluate our operating performance, developbudgets and measure our performance against those budgets, determine employeebonuses and evaluate our cash flows in terms of cash needs. We also presentEBITDA because we believe it is a useful indicator of our historical debtcapacity and ability to service debt and because covenants in our creditfacility, our senior notes indenture and our senior subordinated notesindenture contain ratios based on this measure. As a result, internal management reports used during monthly operatingreviews feature the EBITDA metric. However, management uses this metric inconjunction with traditional GAAP operating performance and liquidity measuresas part of its overall assessment of company performance and liquidity andtherefore does not place undue reliance on this measure as its only measure ofoperating performance and liquidity.

 

EBITDAis not a recognized term under GAAP and does not purport to be an alternativeto operating income or net income as an indicator of operating performance orany other GAAP measure. EBITDA is not a complete net cash flow measure becauseEBITDA is a measure of liquidity that does not include reductions for cashpayments for an entity’s obligation to service its debt, fund its workingcapital, capital expenditures and acquisitions, if any, and pay its incometaxes and dividends. Rather, EBITDA is a potential indicator of an entity’sability to fund these cash requirements. EBITDA is not a complete measure of anentity’s profitability because it does not include costs and expenses fordepreciation and amortization, interest and related expenses and income taxes.Because not all companies use identical calculations, this presentation ofEBITDA may not be comparable to other similarly titled measures of othercompanies. However, EBITDA can still be useful in evaluating our performanceagainst our peer companies because management believes this measure providesusers with valuable insight into key components of GAAP amounts.

 

Areconciliation of EBITDA to net income and to net cash provided by operatingactivities for the first quarter of 2009 and 2008 along with the components ofEBITDA follows:

 
| ** **                                                                 | ** ** | **Thirteen Weeks Ended**   | ** ** |
|----------------------------------------------------------------------------|------------|--------------------------------------|------------|
| ** **                                                                 | ** ** | **April 4, 2009**          | ** ** | **March 29, 2008** | ** ** |
| ** **                                                                 | ** ** | **(dollars in thousands)** | ** ** |
| Net income                                                                 |       | $                                    | 5,913      |   | $ | 4,409 |   |
| Income tax expense                                                         |       | 3,608                                |       | 2,690 |   |
| Interest expense, net                                                      |       | 14,289                               |       | 12,571 |   |
| Depreciation and amortization                                              |       | 3,560                                |       | 3,689 |   |
| EBITDA                                                                     |       | 27,370                               |       | 23,359 |   |
| Income tax expense                                                         |       | (3,608                               | )          | (2,690 | ) |
| Interest expense, net                                                      |       | (14,289                              | )          | (12,571 | ) |
| Deferred income taxes                                                      |       | 2,834                                |       | 2,177 |   |
| Amortization of deferred financing costs                                   |       | 792                                  |       | 792 |   |
| Unrealized loss on interest rate swap                                      |       | 743                                  |       | — |   |
| Reclassification to interest expense, net from interest rate swap          |       | 422                                  |       | — |   |
| Share-based compensation expense                                           |       | 747                                  |       | — |   |
| Changes in assets and liabilities, net of effects of business  combination |       | (4,385                               | )          | (93 | ) |
| Net cash provided by operating activities                                  |       | $                                    | 10,626     |   | $ | 10,974 |   |

 

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***First quarter of 2009 compared to the first quarter of 2008***

 

*NetSales. *Net sales increased $2.3 million or 2.0% to$118.6 million for the first quarter of 2009 from $116.3 million for the firstquarter of 2008.  Net sales werenegatively impacted by the poor maple syrup crop in Canada in 2008 that led toa global shortfall of pure maple syrup. Net sales of our *Maple Grove Farms*puremaple syrup products decreased by $1.9 million, consisting of a unit volumedecline of $3.3 million, partially offset by sales price increases of $1.4million.  Excluding net sales of our puremaple syrup products, net sales for the first quarter of 2009 increased $4.2million or 3.8%.  The $4.2 millionincrease was attributable to sales price increases of $6.4 million, partiallyoffset by a decrease in unit volume of $2.2 million.

 

Net sales of our lines of *Ortega,B&M, Las Palmas, Emeril’s,Regina*and*Joan of Arc*products increasedby $3.5 million, $1.1 million, $1.0 million, $0.8 million, $0.4 million and$0.4 million or 13.7%, 27.1%, 15.9%, 21.3%, 17.2% and 13.9%, respectively.  These increases were offset by a reduction innet sales of *Cream of Wheat*and *B&G*productsof $1.9 million and $0.7 million or 10.6% and 8.7%, respectively, and areduction in net sales of our private label pickles and peppers of $0.4 millionor 37.5%.  In the aggregate, net salesfor all other brands remained constant.

 

*Gross Profit. *Gross profit increased $3.8million or 10.9% to $38.7 million for the first quarter of 2009 from $34.9million for the first quarter of 2008. Gross profit expressed as a percentage of net sales increased 2.7percentage points to 32.7% in the first quarter of 2009 from 30.0% in the first quarter of 2008.  This increase in gross profit expressed as apercentage of net sales was primarily attributable to increased sales pricesand decreased costs for trade spending, slotting, wheat and transportation,partially offset by increased costs for maple syrup, beans and packaging.

 

*Sales, Marketing and Distribution Expenses. *Sales, marketing and distribution expenses decreased$1.3 million or 10.6% to $11.0 million for the first quarter of 2009 from $12.3million for the first quarter of 2008. This decrease is primarily due to a decrease in consumer and trademarketing of $0.8 million, a reduction in compensation expense and warehousespending of $0.3 million and a decrease in other expenses of $0.2 million.  Expressed as a percentage of net sales, oursales, marketing and distribution expenses decreased to 9.3% for the firstquarter of 2009 from 10.6% for the first quarter of 2008.

 

*General and Administrative Expenses. *General and administrative expenses increased $0.9million or 72.2% to $2.3 million for the first quarter of 2009 from $1.4million in the first quarter of 2008. The increase in general and administrative expenses primarily resultedfrom an increased accrual for performance-based equity compensation.

 

*Amortization Expense*—*CustomerRelationships. *Amortization expense—customer relationships remained consistentat $1.6 million for the first quarter of 2009 as compared to the first quarterof 2008.

 

*Operating Income. *As a result of the foregoing, operatingincome increased $4.1 million or 21.1% to $23.8 million for the first quarterof 2009 from $19.7 million for the first quarter of 2008.  Operating income expressed as a percentage ofnet sales increased to 20.1% in the first quarter of 2009 from 16.9% in thefirst quarter of 2008.

 

*Net Interest Expense. *Netinterest expense increased $1.7 million or 13.7% to $14.3 million for the firstquarter of 2009 from $12.6 million in the first quarter of 2008.  Net interest expense in the first quarter of2009 included a $0.7 million charge relating to the unrealized loss on ourinterest rate swap resulting from our determination in September 2008following the Lehman bankruptcy filing that the swap was no longer an effectivehedge under the guidelines of SFAS No. 133, and a reclassification of $0.4million of the amount recorded in accumulated other comprehensive income (loss)related to the swap.  Net interestexpense in the first quarter of 2009 also includes a reduction in interestincome primarily due to lower interest rates. See “—Liquidity and Capital Resources—Debt” below.

 

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*Income Tax Expense. *Income tax expense increased $0.9 millionto $3.6 million for the first quarter of 2009 from $2.7 million for the firstquarter of 2008.  Our effective tax ratewas 37.9% for the first quarter of 2009 and 2008.

 

**Liquidityand Capital Resources**

 

Ourprimary liquidity requirements include debt service, capital expenditures andworking capital needs.  See also, “DividendPolicy” and “Commitments and Contractual Obligations” below.  We fund our liquidity requirements, as wellas our dividend payments and financing for acquisitions, primarily through cashgenerated from operations and to the extent necessary, through borrowings underour credit facility.

 

*Cash Flows*.  Cash providedby operating activities decreased $0.4 million to $10.6 million for the firstquarter of 2009 from $11.0 million for the first quarter of 2008.  Net income, excluding non-cash items such asdepreciation and amortization, amortization of deferred debt issuance costs,deferred income taxes, unrealized loss on our interest rate swap, areclassification to net interest expense and share-based compensation increasedby $3.9 million.  This increase wasoffset by a increase in net changes in assets and liabilities of $4.3 milliondue in large part to an increase in working capital primarily attributable to adecrease in accrued expenses relating primarily to the timing of the payment ofour semi-annual interest payment on our senior notes partially offset by adecrease in trade accounts receivable. Our $9.6 million semi-annual interest payment on our senior notes is dueon April 1 of each year.  During2009, April 1 was part of our first quarter and during fiscal 2008, April 1was part of our second quarter.

 

Netcash used in investing activities for the first quarter of 2009 decreased $4.0million to $2.4 million from $6.4 million for the first quarter of 2008.  Net cash used in investing activities for thefirst quarter of 2009 and 2008 consisted entirely of capital spending.  Capital expenditures in the first quarter of2009 and 2008 included expenditures for building improvements, purchases ofmanufacturing and computer equipment and capitalized interest.  Capital expenditures for the first quarter of2008 also included expenditures for the expansion of our Stoughton, Wisconsinfacility and the transfer of a portion of the *Cream ofWheat*production to that facility. That project was completed during fiscal 2008 and is the primary reasonthat capital spending decreased in the first quarter of 2009 as compared to thefirst quarter of 2008.

 

Netcash used in financing activities for the first quarter of 2009 was $7.1million as compared to $7.8 million for the first quarter of 2008.  Net cash used in financing activities for thefirst quarter of 2009 consisted of the payment of dividends and the repurchaseof Class A common stock.  Net cashused in financing activities for the first quarter of 2008 was entirely for thepayment of dividends to holders of our Class A common stock.

 

Based on a number of factors, including ourtrademark, goodwill and customer relationship intangibles amortization for taxpurposes from our prior acquisitions, we realized a significant reduction incash taxes in fiscal 2008 and 2007 as compared to our tax expense for financialreporting purposes.  While we expect ourcash taxes to continue to increase in fiscal 2009 as compared to the prior twoyears, we believe that we will realize a benefit to our cash taxes payable fromamortization of our trademarks, goodwill and customer relationship intangiblesfor the taxable years 2009 through 2022.

 

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***DividendPolicy***

 

Our dividendpolicy reflects a basic judgment that our stockholders would be better servedif we distributed a substantial portion of our cash available to pay dividendsto them instead of retaining it in our business.  Under this policy, a substantial portion ofthe cash generated by our company in excess of operating needs, interest andprincipal payments on indebtedness, capital expenditures sufficient to maintainour properties and other assets is in general distributed as regular quarterlycash dividends (up to the intended dividend rate as determined by our board ofdirectors) to the holders of our common stock and not retained by us.  From the date of our initial public offeringof EISs in October 2004 through the dividend payment we made on October 30,2008, the dividend rate for our Class A common stock was $0.848 per shareper annum.  Beginning with the dividendpayment we made on January 30, 2009, the current intended dividend ratefor our Class A common stock is $0.68 per share per annum.

 

Dividendpayments, however, are not mandatory or guaranteed and holders of our commonstock do not have any legal right to receive, or require us to pay,dividends.  Furthermore, our board ofdirectors may, in its sole discretion, amend or repeal this dividendpolicy.  Our board of directors maydecrease the level of dividends below the intended dividend rate or discontinueentirely the payment of dividends. Future dividends with respect to shares of our common stock depend on,among other things, our results of operations, cash requirements, financialcondition, contractual restrictions, business opportunities, acquisitionopportunities, the condition of the debt and equity financing markets,provisions of applicable law and other factors that our board of directors maydeem relevant.  Our board of directors isfree to depart from or change our dividend policy at any time and could do so,for example, if it was to determine that we have insufficient cash to takeadvantage of growth opportunities.  Inaddition, over time, our EBITDA and capital expenditure, working capital andother cash needs will be subject to uncertainties, which could impact the levelof dividends, if any, we pay in the future. Our senior subordinated notes indenture, the terms of our revolvingcredit facility and our senior notes indenture contain significant restrictionson our ability to make dividend payments. In addition, certain provisions of the Delaware General Corporation Lawmay limit our ability to pay dividends.

 

As aresult of our dividend policy, we may not retain a sufficient amount of cash tofinance growth opportunities or unanticipated capital expenditure needs or tofund our operations in the event of a significant business downturn.  We may have to forego growth opportunities orcapital expenditures that would otherwise be necessary or desirable if we donot find alternative sources of financing. If we do not have sufficient cash for these purposes, our financialcondition and our business will suffer.

 

Forthe first quarter of 2009 and 2008, we had cash flows provided by operatingactivities of $10.6 million and $11.0 million, and distributed $6.2 million and$7.8 million, respectively, as dividends. If our cash flows from operatingactivities for future periods were to fall below our minimum expectations (orif our assumptions as to capital expenditures or interest expense were too lowor our assumptions as to the sufficiency of our revolving credit facility tofinance our working capital needs were to prove incorrect), we would needeither to further reduce or eliminate dividends or, to the extent permittedunder our senior notes indenture, our senior subordinated notes indenture andthe terms of our credit facility, fund a portion of our dividends withborrowings or from other sources.  If wewere to use working capital or permanent borrowings to fund dividends, we wouldhave less cash and/or borrowing capacity available for future dividends andother purposes, which could negatively impact our financial position, ourresults of operations, our liquidity and our ability to maintain or expand ourbusiness.

 

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***Acquisitions***

 

Our liquidity andcapital resources have been significantly impacted by acquisitions and may beimpacted in the foreseeable future by additional acquisitions.  We have historically financed acquisitionswith borrowings and cash flows from operating activities.  Historically, our interest expense has increasedas a result of additional indebtedness we have incurred in connection withacquisitions, and will increase with any additional indebtedness we may incurto finance future acquisitions, if any. To the extent future acquisitions are financed by additionalindebtedness, the resulting increase in debt and interest expense could have anegative impact on liquidity.

 

***Environmentaland Health and Safety Costs***

 

We have not madeany material expenditures during the first quarter of 2009 in order to comply withenvironmental laws or regulations.  Basedon our experience to date, we believe that the future cost of compliance withexisting environmental laws and regulations (and liability for knownenvironmental conditions) will not have a material adverse effect on ourconsolidated financial condition, results of operations or liquidity.  However, we cannot predict what environmentalor health and safety legislation or regulations will be enacted in the futureor how existing or future laws or regulations will be enforced, administered orinterpreted, nor can we predict the amount of future expenditures that may berequired in order to comply with such environmental or health and safety lawsor regulations or to respond to such environmental claims.

 

***Debt***

 

*Senior Secured Credit Facility*.  Our$25.0 million revolving credit facility matures on January 10, 2011 andour $130.0 million of term loan borrowings matures on February 26, 2013,provided, however, that if we do not repay, redeem or refinance our senior notesprior to April 1, 2011, the outstanding term loan borrowings will becomeimmediately due and payable on April 1, 2011.

 

Interest under the revolving credit facility,including any outstanding letters of credit, is determined based on alternativerates that we may choose in accordance with the revolving credit facility,including the base lending rate per annum plus an applicable margin, and LIBORplus an applicable margin.  We pay acommitment fee of 0.50% per annum on the unused portion of the revolving creditfacility.  Interest under the term loanfacility is determined based on alternative rates that we may choose inaccordance with the credit facility, including the base lending rate per annumplus an applicable margin of 1.00%, and LIBOR plus an applicable margin of2.00%.

 

Our obligations under the credit facility arejointly and severally and fully and unconditionally guaranteed on a seniorbasis by all of our existing and certain future domestic subsidiaries.  The credit facility is secured by substantiallyall of our and our domestic subsidiaries’ assets except our and our domesticsubsidiaries’ real property.  The creditfacility provides for mandatory prepayment based on asset dispositions andcertain issuances of securities, as defined. The credit facility contains covenants that restrict, among otherthings, our ability to incur additional indebtedness, pay dividends and createcertain liens.  The credit facility alsocontains certain financial maintenance covenants, which, among other things,specify maximum capital expenditure limits, a minimum interest coverage ratioand a maximum senior and total leverage ratio, each ratio as defined.  As of April 4, 2009, we were incompliance with all of the covenants in the credit facility.  Proceeds of the revolving credit facility arerestricted to funding our working capital requirements, capital expendituresand acquisitions of companies in the same line of business as our company,subject to specified criteria.  Themaximum letter of credit capacity under the revolving credit facility is $10.0million, with a fronting fee of 3.0% per annum for all outstanding letters ofcredit.

 

On September 15, 2008, Lehman BrothersHoldings Inc. (Lehman) filed for protection under Chapter 11 of the U.S.Bankruptcy Code.  Lehman Commercial PaperInc. (Lehman CPI), a Lehman subsidiary, is the administrative agent under ourcredit facility.  Lehman CPI filed forprotection under Chapter 11 of the U.S. 

 

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Bankruptcy Code on October 3, 2008.  None of our $130.0 million of outstandingterm loans is currently held by Lehman, Lehman CPI or any other subsidiary ofLehman.  Lehman CPI is one of the lendersparticipating in our $25.0 million revolving credit facility.  However, Lehman CPI has only $3.1 million ofthe $25.0 million commitment.  The otherlenders under the revolving credit facility and their respective commitmentsare as follows:  Bank of America, N.A.,$9.4 million; Citibank, N.A., $9.4 million; and Royal Bank of Canada, $3.1million.  We do not believe that LehmanCPI would honor its funding commitment under the revolving credit facility ifwe were to make a funding request.  As aresult, the effective available borrowing capacity under our revolving creditfacility, net of outstanding letters of credit of $0.5 million, was $21.4million at April 4, 2009.  We havenot drawn upon the revolving credit facility since its inception in October 2004and, based upon our cash on hand and working capital requirements, we have noplans to do so for the foreseeable future.

 

Effective as of February 26, 2007, weentered into a six year interest rate swap agreement in order to effectivelyfix at 7.0925% the interest rate payable for $130.0 million of term loanborrowings through the life of the term loan, ending on February 26,2013.  The counterparty to the swap isLehman Special Financing Inc (Lehman SFI). Lehman SFI filed for protection under Chapter 11 of the U.S. BankruptcyCode on October 3, 2008.

 

We initially designated the swap as a cashflow hedge under the guidelines of SFAS No. 133 “*Accountingfor Derivative Instruments and Hedging Activities,”*as amended (SFASNo. 133).  Prior to Lehman’sbankruptcy filing, we recorded changes in the fair value of the swap in othercomprehensive income (loss), net of tax in our consolidated balance sheet.  However, as a result of the Lehman bankruptcyfiling, we determined in September 2008 that the interest rate swap was nolonger an effective hedge as defined by SFAS No. 133 and, accordingly,subsequent changes in the swap’s fair value are being recorded in currentearnings in net interest expense in the consolidated statements of operations.  We obtain third-party verification of fairvalue at the end of each reporting period. As of April 4, 2009, the fair value of our interest rate swap was$13.9 million and is recorded in other liabilities on our consolidated balancesheet.  The amount recorded inaccumulated other comprehensive income (loss) will be reclassified to netinterest expense over the remaining life of the term loan borrowings as we makeinterest payments.  Net interest expensein the first quarter of 2009 includes a $0.7 million charge relating to theunrealized loss on our interest rate swap and a reclassification of $0.4million of the amount recorded in accumulated other comprehensive income (loss)related to the swap.  During fiscal 2009,we expect to reclassify to net interest expense $1.1 million of the amountrecorded in accumulated other comprehensive income (loss).

 

*12%Senior Subordinated Notes due 2016*.  In October 2004,we issued $165.8 million aggregate principal amount of 12% senior subordinatednotes due 2016, $143.0 million of which in the form of EISs and $22.8 millionseparate from EISs.  As of April 4,2009, $127.7 million aggregate principal amount of senior subordinated noteswas held in the form of EISs and $38.1 million aggregate principal amount ofsenior subordinated notes was held separate from EISs.

 

Interest on the senior subordinated notes ispayable quarterly in arrears on each January 30, April 30, July 30and October 30 through the maturity date. The senior subordinated notes will mature on October 30, 2016,unless earlier retired or redeemed as described below.

 

Upon the occurrence of a change of control(as defined in the indenture), unless we have retired the senior subordinatednotes or exercised our right to redeem all senior subordinated notes asdescribed below, each holder of the senior subordinated notes has the right torequire us to repurchase that holder’s senior subordinated notes at a priceequal to 101.0% of the principal amount of the senior subordinated notes beingrepurchased, plus any accrued and unpaid interest to the date ofrepurchase.  In order to exercise thisright, a holder must separate the senior subordinated notes and Class Acommon stock represented by such holder’s EISs.

 

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We may not redeem the senior subordinatednotes prior to October 30, 2009. However, we may, from time to time, seek to retire the seniorsubordinated notes through cash repurchases of EISs or separate seniorsubordinated notes and/or exchanges of EISs or separate senior subordinatednotes for equity securities, in open market purchases, privately negotiatedtransactions or otherwise.  Suchrepurchases or exchanges, if any, would first require an amendment to or awaiver under our credit agreement and, in any event, will depend on prevailingmarket conditions, our liquidity requirements, contractual restrictions andother factors.  On and after October 30,2009, we may redeem for cash all or part of the senior subordinated notes at aredemption price of 106.0% beginning October 30, 2009 and thereafter atprices declining annually to 100% on or after October 30, 2012.  If we redeem any senior subordinated notes,the senior subordinated notes and Class A common stock represented by eachEIS will be automatically separated.

 

The senior subordinated notes are unsecuredobligations and are subordinated in right of payment to all of our existing andfuture senior secured and senior unsecured indebtedness, including theindebtedness under our credit facility and our senior notes. The seniorsubordinated notes rank pari passu in right of payment with any of our othersubordinated indebtedness.

 

Our obligations under the senior subordinatednotes are jointly and severally and fully and unconditionally guaranteed by allof our existing domestic subsidiaries and certain future domestic subsidiarieson an unsecured and subordinated basis on the terms set forth in our seniorsubordinated notes indenture.  The seniorsubordinated note guarantees are subordinated in right of payment to allexisting and future senior indebtedness of the guarantors, including theindebtedness under our credit facility and the senior notes.  Our foreign subsidiary is not a guarantor,and any future foreign or partially owned domestic subsidiaries will not beguarantors, of our senior subordinated notes.

 

Our senior subordinated notes indenturecontains covenants with respect to us and the guarantors and restricts theincurrence of additional indebtedness and the issuance of capital stock; thepayment of dividends or distributions on, and redemption of, capital stock; anumber of other restricted payments, including certain investments; specifiedcreation of liens, sale-leaseback transactions and sales of assets; fundamentalchanges, including consolidation, mergers and transfers of all or substantiallyall of our assets; and specified transactions with affiliates.  Each of the covenants is subject to a numberof important exceptions and qualifications. As of April 4, 2009, we were in compliance with all of thecovenants in the senior subordinated notes indenture.

 

*8% Senior Notes due 2011*.  In October 2004,we issued $240.0 million aggregate principal amount of 8% senior notes due2011.  Interest on the senior notes ispayable on April 1 and October 1 of each year.  The senior notes will mature on October 1,2011, unless earlier retired or redeemed as described below.

 

We may redeem some or all of the senior notesat a redemption price of 104.0% beginning October 1, 2008 and thereafterat prices declining annually to 100.0% on or after October 1, 2010.  If we or any of the guarantors sell certainassets or experience specific kinds of changes in control, we must offer topurchase the senior notes at the prices as described in our senior notesindenture plus accrued and unpaid interest to the date of redemption.

 

We may also, from time to time, seek toretire senior notes through cash repurchases of senior notes and/or exchangesof senior notes for equity securities, in open market purchases, privatelynegotiated transactions or otherwise. Such repurchases or exchanges, if any, will depend on prevailing marketconditions, our liquidity requirements, contractual restrictions and otherfactors.

 

Our obligations under the senior notes arejointly and severally and fully and unconditionally guaranteed on a seniorbasis by all of our existing and certain future domestic subsidiaries.  The senior notes and the subsidiaryguarantees are our and the guarantors’ general unsecured obligations and areeffectively junior in right of payment to all of our and the guarantors’secured indebtedness and to the indebtedness and other liabilities of ournon-guarantor subsidiaries; are pari passu in right of payment to all of ourand the 

 

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guarantors’ existing and future unsecuredsenior debt; and are senior in right of payment to all of our and theguarantors’ future subordinated debt, including the senior subordinatednotes.  Our foreign subsidiary is not aguarantor, and any future foreign or partially owned domestic subsidiaries willnot be guarantors, of our senior notes.

 

Our senior notes indenture contains covenantswith respect to us and the guarantors and restricts the incurrence ofadditional indebtedness and the issuance of capital stock; the payment ofdividends or distributions on, and redemption of, capital stock; a number ofother restricted payments, including certain investments; specified creation ofliens, sale-leaseback transactions and sales of assets; fundamental changes,including consolidation, mergers and transfers of all or substantially all ofour assets; and specified transactions with affiliates.  Each of the covenants is subject to a numberof important exceptions and qualifications. As of April 4, 2009, we were in compliance with all of thecovenants in the senior notes indenture.

 

***Stock and DebtRepurchase Plan***

 

On October 27,2008, our board of directors authorized a stock and debt repurchase program forthe repurchase of up to $10.0 million of our Class A common stock and/orsenior notes over the next twelve months. Under the authorization, we may purchase shares of Class A commonstock and/or senior notes from time to time in the open market or in privatelynegotiated transactions in compliance with the applicable rules andregulations of the SEC.

 

Thetiming and amount of such repurchases, if any, will be at the discretion ofmanagement, and will depend on market conditions and other considerations.  Therefore, there can be no assurance as tothe number or aggregate dollar amount of shares that will be repurchased underthe stock and debt repurchase program. Likewise, there can be no assurance as to the principal amount of seniornotes, if any, that will be repurchased. We may discontinue the program at any time.  Any shares repurchased pursuant to the stockrepurchase program will be retired. Likewise, any senior notes repurchased will be cancelled.  In general, our credit agreement prohibits usfrom repurchasing our senior subordinated notes.

 

During the first quarter of 2009, werepurchased and retired 213,600 shares of Class A common stock at anaverage cost per share (excluding fees and commissions) of $4.53, or $1.0million in the aggregate.  As of April 4,2009, we had $6.5 million available for any future repurchases of Class Acommon stock and/or senior notes under the stock and debt repurchase plan.

 

***Future CapitalNeeds***

 

We are highly leveraged.  On April 4, 2009, our total long-termdebt and stockholders’ equity was $535.8 million and $144.5 million,respectively.

 

Our ability to generate sufficient cash to fund ouroperations depends generally on our results of operations and the availabilityof financing.  Our management believesthat our cash on hand, cash flow from operating activities and availableborrowing capacity under our revolving credit facility will be sufficient forthe foreseeable future to fund operations, meet debt service requirements, fundcapital expenditures, and pay our anticipated dividends on our Class Acommon stock.  We expect to make capital expenditures ofapproximately $11.0 million in the aggregate during fiscal 2009, $2.4 millionof which have already been made during the first quarter.

 

***Seasonality***

 

Sales of a number of our products tend to beseasonal.  In the aggregate, however, oursales are not heavily weighted to any particular quarter due to the diversityof our product and brand portfolio. Sales during the first quarter of the fiscal year are generally below those of the followingthree quarters.

 

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Wepurchase most of the produce used to make our shelf-stable pickles, relishes,peppers and other related specialty items during the months of July throughOctober, and we purchase substantially all of our maple syrup requirementsduring the months of April through July. Consequently, our liquidity needs are greatest during these periods.

 

***Inflat******ion***

 

Duringfiscal the past several years, we have been faced with increasing prices incertain commodities and packaging materials. We manage this risk by entering into short-term supply contracts andadvance commodities purchase agreements from time to time, and if necessary, byraising prices.  We believe that throughsales price increases and our cost saving efforts we have to a large degreebeen able to offset the impact of recent raw material, packaging andtransportation cost increases, although in certain cases on a laggingbasis.  There can be no assurance,however, that we will be able to offset any present or future increases in thecost of raw materials, packaging and transportation, with additional salesprice increases or cost reductions.

 

**Recent AccountingPronouncements**

** **

In September 2006, the FASB issued SFAS No. 157,“*Fair Value Measurements*” (SFAS No. 157),which defines fair value, establishes a framework for measuring fair value andexpands disclosures about fair value measurements.  The provisions of SFAS No. 157 wereeffective as of the beginning of our fiscal 2008, with the exception of certainprovisions deferred until the beginning of our fiscal 2009.  In February 2008, the FASB issued FASBStaff Position SFAS No. 157-2, “*EffectiveDate of FASB Statement No. 157,*” which delayed the effectivedate of SFAS No. 157 for all non-financial assets and liabilities, exceptthose that are recognized or disclosed at fair value in the financialstatements on a recurring basis, until the beginning of our fiscal 2009.  We adopted SFAS No. 157 effective at thebeginning of our fiscal 2008 for financial assets and financial liabilities,which did not have a material impact on our results of operations or financialposition.  We adopted SFAS No. 157effective at the beginning of our fiscal 2009 for non-financial assets andnon-financial liabilities, which did not have a material impact on our resultsof operations or financial position.

 

In December 2007, the FASB issued SFAS No. 141(revised 2007), “*Business Combinations*” (SFAS No. 141R)and SFAS No. 160, “*Noncontrolling Interests in Consolidated FinancialStatements*” (SFAS No. 160).  SFAS No. 141R requires an acquirer tomeasure the identifiable assets acquired, the liabilities assumed and anynoncontrolling interest in the acquiree at their fair values on the acquisitiondate, with goodwill being the excess value over the net identifiable assetsacquired.  SFAS No. 160 clarifiesthat a noncontrolling interest in a subsidiary is an ownership interest in theconsolidated entity that should be reported as equity in the consolidatedfinancial statements.  SFAS No. 141Rand SFAS No. 160 are effective as of the beginning of our fiscal2009.  SFAS No. 141R will be appliedprospectively.  The effects of SFAS No. 141Rwill depend on future acquisitions.  SFASNo. 160 requires retroactive adoption. We currently do not have any noncontrolling interests in subsidiaries.

 

In March 2008, the FASB issued SFAS No. 161,“*Disclosures about Derivative Instruments andHedging Activities, an amendment of FASB Statement No. 133 (SFAS No. 161)*.”  SFAS No. 161 requires enhanceddisclosures about (a) how and why an entity uses derivative instruments, (b) howderivative instruments and related hedged items are accounted for under SFAS No. 133and its related interpretations, and (c) how derivative instruments and relatedhedged items affect an entity’s financial position, financial performance, andcash flows.  SFAS No. 161 iseffective as of the beginning of our fiscal 2009.  Since SFAS No. 161 requires enhanceddisclosures, without a change to existing standards relative to measurement andrecognition, our adoption of SFAS No. 161 did not have any effect on ourresults of operations or financial position.

 

In April 2008, the FASB issued FASBStaff Position No. FAS 142-3, “*Determination of theUseful Life of Intangible Assets”* (FSP 142-3).  FSP 142-3 requires companies estimating theuseful life of a 

 

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recognized intangible asset to consider theirhistorical experience in renewing or extending similar arrangements or, in theabsence of historical experience, to consider assumptions that marketparticipants would use about renewal or extension as adjusted forentity-specific factors.  FSP 142-3 iseffective as of the beginning of our fiscal 2009.  We adopted FSP 142-3 effective at thebeginning of our fiscal 2009, which did not have a material impact on ourresults of operations or financial position.

 

In December 2008, the FASB issued FASBStaff Position No. FAS 132(R)-1, “*Employer’s Disclosuresabout Postretirement Benefit Plan Assets*” (FSP 132(R)-1).  FSP 132(R)-1 requires additional disclosuresabout plan assets for defined benefit pension and other postretirement benefitplans.  FSP 132(R)-1 will be effective asof the end of our fiscal 2009.  Since FSP132(R)-1 requires enhanced disclosures, without a change to existing standardsrelative to measurement and recognition, our adoption of FSP 132(R)-1 will nothave a material impact on our results of operations or financial position.

 

**Off-balance Sheet Arrangements**

 

As of April 4,2009, we did not have any off-balance sheet arrangements as defined in Item303(a)(4)(ii) of Regulation S-K.

 

**Commitments and ContractualObligations**

** **

Our contractual obligations and commitmentsprincipally include obligations associated with our outstanding indebtedness,future minimum operating lease obligations and future pension obligations.  During the first quarter of 2009, there wereno material changes outside the ordinary course of business in the specifiedcontractual obligations set forth in our 2008 Annual Report on Form 10-K,except that we entered into a new warehouse lease that will require us to makeadditional rent payments of approximately $11.5 million in the aggregate overthe course of the lease, which expires in 2016. These additional rent payments are expected to be partially offset by areduction in rent payments relating to certain expiring warehouse leases thatwill no longer be needed.  In addition,our expected contributions to our defined benefit pension plans for fiscal 2009have increased from $1.2 million to $2.1 million because, although notobligated to do so, we expect to make $0.9 million of voluntary contributionsto our defined benefit pension plans during the remainder of fiscal 2009.

 

***Forward-LookingStatements***

** **

Thisreport includes forward-looking statements, including without limitation thestatements under “Management’s Discussion and Analysis of Financial Conditionand Results of Operations.”  The words “believes,”“anticipates,” “plans,” “expects,” “intends,” “estimates,” “projects” andsimilar expressions are intended to identify forward-looking statements.  These forward looking statements involveknown and unknown risks, uncertainties and other factors that may cause ouractual results, performance and achievements, or industry results, to bematerially different from any future results, performance, or achievementsexpressed or implied by any forward-looking statements.  We believe important factors that could causeactual results to differ materially from our expectations include thefollowing:

 

·                  our substantial leverage;

 

·                  the effects of rising costs for our rawmaterials, packaging and ingredients;

 

·                  crude oil prices and their impact ondistribution, packaging and energy costs;

 

·                  our ability to successfully implement salesprice increases and cost saving measures to offset any cost increases;

 

·                  intense competition, changes in consumerpreferences, demand for our products and local economic and market conditions;

 

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·                  our continued ability to promote brand equitysuccessfully, to anticipate and respond to new consumer trends, to develop newproducts and markets, to broaden brand portfolios in order to competeeffectively with lower priced products and in markets that are consolidating atthe retail and manufacturing levels and to improve productivity;

 

·                  the risks associated with the expansion ofour business;

 

·                  our possible inability to integrate anybusinesses we acquire;

 

·                  our ability to access the credit markets andour borrowing costs and credit ratings, which may be influenced by creditmarkets generally and the credit ratings of our competitors;

 

·                  the effects of currency movements of theCanadian dollar as compared to the U.S. dollar;

 

·                  other factors that affect the food industrygenerally, including:

 

·                  recalls if products become adulterated ormisbranded, liability if product consumption causes injury, ingredient disclosureand labeling laws and regulations and the possibility that consumers could loseconfidence in the safety and quality of certain food products, as well asrecent publicity concerning the health implications of obesity and trans fattyacids;

 

·                  competitors’ pricing practices andpromotional spending levels;

 

·                  the risks associated with third-partysuppliers and co-packers, including the risk that any failure by one or more ofour third-party suppliers or co-packers to comply with food safety or otherlaws and regulations may disrupt our supply of raw materials or certainfinished goods products; and

 

·                  fluctuations in the level of our customers’inventories and credit and other business risks related to our customersoperating in a challenging economic and competitive environment; and

 

·                  other factors discussed elsewhere in thisreport and in our other public filings with the SEC, including under Item 1A, “RiskFactors” in our 2008 Annual Report on Form 10-K.

 

Developmentsin any of these areas could cause our results to differ materially from resultsthat have been or may be projected by or on our behalf.

 

Allforward-looking statements included in this report are based on informationavailable to us on the date of this report. We undertake no obligation topublicly update or revise any forward-looking statement, whether as a result ofnew information, future events or otherwise. All subsequent written and oralforward-looking statements attributable to us or persons acting on our behalfare expressly qualified in their entirety by the cautionary statementscontained in this report.

 

Wecaution that the foregoing list of important factors is not exclusive.  We urge investors not to unduly rely onforward-looking statements contained in this report.

 

**Item 3.  Quantitativeand Qualitative Disclosures About Market Risk**

** **

In thenormal course of operations, we are exposed to market risks arising fromadverse changes in interest rates. Market risk is defined for these purposes as the potential change in thefair value of a financial asset or liability resulting from an adverse movementin interest rates.

 

Interest under our $25.0 million revolvingcredit facility, including any outstanding letters of credit, is determinedbased on alternative rates that we may choose in accordance with the revolvingcredit facility, including the base lending rate per annum plus an applicablemargin, and LIBOR plus an applicable margin. Interest under our term loan facility is determined based on alternativerates that we may choose in accordance with the credit facility, including thebase lending rate per annum plus an applicable margin of 1.00%, and LIBOR plusan applicable margin of 2.00%.  Therevolving credit facility was undrawn at April 4, 2009, and we currentlyhave no plans to draw upon the facility for the foreseeable future.  If we were to make a funding 

 

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request, we do not believe that Lehman CPIwould honor its $3.1 million funding commitment under the revolving creditfacility.  As a result, the effectiveavailable borrowing capacity under our revolving credit facility, net of outstandingletters of credit of $0.5 million, was $21.4 million at April 4, 2009.

 

We have outstanding $130.0 million of termloan borrowings at April 4, 2009 and January 3, 2009.  The term loan borrowings are fixed at 7.0925%based upon a six year interest rate swap agreement that we entered into on February 26,2007 with an affiliate of Lehman.  Seethe discussion of the interest rate swap and the Lehman bankruptcy filing aboveunder the heading “Liquidity and Capital Resources-Debt-Senior Secured CreditFacility” in Item 2, “Management’s Discussion and Analysis of FinancialCondition and Results of Operations” for additional information.

 

Cash and cash equivalents, trade accountsreceivable, income tax receivable, trade accounts payable, accrued expenses anddividends payable are reflected in the consolidated balance sheets at carryingvalue, which approximates fair value due to the short-term nature of theseinstruments.

 

The carrying values and fairvalues of our term loan borrowings, senior notes and senior subordinated notesas of April 4, 2009 and January 3, 2009 are as follows (dollars inthousands):

 
| ** **                                               | ** ** | **April 4, 2009** | ** ** | **January 3, 2009** | ** ** |
|----------------------------------------------------------|------------|-----------------------------|------------|-------------------------------|------------|
| ** **                                               | ** ** | **Carrying Value**     | ** ** | **Fair Value(1)(2)**     | ** ** | **Carrying Value** | ** ** | **Fair Value(1)(3)** | ** ** |
| Senior Secured Term Loan due February 26, 2013      |       | $                           | 130,000    |                          | $          | 119,600 |   | $ | 130,000 |   | $ | 107,900 |   |
| 8% Senior Notes due October 1, 2011                 |       | 240,000                     |       | 220,800                       |       | 240,000 |   | 207,600 |   |
| 12% Senior Subordinated Notes due October 30, 2016: |       |                        |       |                          |       |   |   |   |   |
| — represented by EISs                               |       | 127,689                     |       | 101,972                       |       | 124,793 |   | 90,235 |   |
| — held separately                                   |       | 38,111                      |       | 30,436                        |       | 41,007 |   | 29,651 |   |
|                                                          |            |                             |            |                               |            |  |  |  |  |  |  |  |  |

 

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(1)          Fair values are estimated based on quoted market prices, except asotherwise noted in footnotes (2) and (3) below.

(2)          Solely for purposes of this presentation, we have assumed that the fairvalue of each senior subordinated note at April 4, 2009 was $5.71, basedupon the $5.09 per share closing price of our separately traded Class Acommon stock and the $10.80 per EIS closing price of our EISs on the New YorkStock Exchange on April 3, 2009 (the last business day of the first quarterof 2009).  Each EIS represents one shareof Class A common stock and $7.15 principal amount of our seniorsubordinated notes.

(3)          Solely for purposes of this presentation, we have assumed that the fairvalue of each senior subordinated note at January 3, 2009 was $5.17, basedupon the $5.49 per share closing price of our separately traded Class Acommon stock and the $10.66 per EIS closing price of our EISs on the New YorkStock Exchange on January 2, 2009 (the last business day of fiscal 2008).

 

Therecent volatility in the global financial markets could negatively impact thefair value of our debt obligations.

 

Theinformation under the heading “Inflation” in Item 2, “Management’s Discussionand Analysis of Financial Condition and Results of Operations” is incorporatedherein by reference.

 

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** **

**Item 4**.  Controls and Procedures

** **

*Evaluationof Disclosure Controls and Procedures. *As required by Rule 13a-15(b) underthe Securities Exchange Act of 1934, as amended, our management, including ourchief executive officer and our chief financial officer, conducted anevaluation of the effectiveness of the design and operation of our disclosurecontrols and procedures as of the end of the period covered by thisreport.  As defined in Rules 13a-15(e) and15d-15(e) under the Exchange Act, disclosure controls and procedures arecontrols and other procedures that we use that are designed to ensure thatinformation required to be disclosed by us in the reports we file or submitunder the Exchange Act is recorded, processed, summarized and reported, withinthe time periods specified in the SEC’s rules and forms.  Disclosure controls and procedures include,without limitation, controls and procedures designed to ensure that informationrequired to be disclosed by us in the reports we file or submit under theExchange Act is accumulated and communicated to our management, including our chiefexecutive officer and our chief financial officer, as appropriate, to allowtimely decisions regarding required disclosure.

 

Basedon that evaluation, our chief executive officer and our chief financial officerconcluded that our disclosure controls and procedures were effective as of theend of the period covered by this report.

 

*Changes in Internal Control Over Financial Reporting*. As required by Rule 13a-15(d) under the Exchange Act, ourmanagement, including our chief executive officer and our chief financialofficer, also conducted an evaluation of our internal control over financialreporting to determine whether any change occurred during the quarter coveredby this report that has materially affected, or is reasonably likely tomaterially affect, our internal control over financial reporting.  Based on that evaluation, our chief executiveofficer and our chief financial officer concluded that there has been no changeduring the period covered by this report that has materially affected, or is reasonablylikely to materially affect, our internal control over financial reporting.

 

*InherentLimitations on Effectiveness of Controls.*  Our company’smanagement, including the chief executive officer and chief financial officer,does not expect that our disclosure controls or our internal control overfinancial reporting will prevent or detect all errors and all fraud.  A control system, no matter how well designedand operated, can provide only reasonable, not absolute, assurance that thecontrol system’s objectives will be met. The design of a control system must reflect the fact that there areresource constraints, and the benefits of controls must be considered relativeto their costs.  Further, because of theinherent limitations in all control systems, no evaluation of controls canprovide absolute assurance that misstatements due to error or fraud will notoccur or that all control issues and instances of fraud, if any, within ourcompany have been detected.  Theseinherent limitations include the realities that judgments in decision-makingcan be faulty and that breakdowns can occur because of simple error ormistake.  Controls can also becircumvented by the individual acts of some persons, by collusion of two ormore people, or by management override of the controls.  The design of any system of controls is basedin part on certain assumptions about the likelihood of future events, and therecan be no assurance that any design will succeed in achieving its stated goalsunder all potential future conditions. Projections of any evaluation of controls effectiveness to futureperiods are subject to risks.  Over time,controls may become inadequate because of changes in conditions ordeterioration in the degree of compliance with policies or procedures.

 

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** **

**PART II**

**OTHER INFORMATION**

** **

**Item 1.  LegalProceedings**

** **

We arefrom time to time involved in various claims and legal actions arising in theordinary course of business, including proceedings involving product liabilityclaims, worker’s compensation and other employee claims, and tort and othergeneral liability claims, as well as trademark, copyright, patent infringementand related claims and legal actions.  Inthe opinion of our management, the ultimate disposition of any currentlypending claims or actions will not have a material adverse effect on ourconsolidated financial position, results of operations or liquidity.

 

**Item 1A.  RiskFactors**

** **

We do not believethere have been any material changes in our risk factors as previouslydisclosed in our 2008 Annual Report on Form 10-K.

 

**Item 2.  UnregisteredSales of Equity Securities and Use of Proceeds**

** **

**Issuer Purchases of EquitySecurities**

** **

Thefollowing table sets forth information with respect to shares of our Class Acommon stock that we purchased during the first quarter of 2009:

 
| **Period**                                      | ** ** | **Total Number  of Shares  Purchased** | ** ** | **Average Price  Paid per Share** | ** ** | **Total Number  of Shares  Purchased as  Part of Publicly  Announced  Plans or  Programs** | ** ** | **Approximate  Dollar Value of  Shares that  May Yet be  Purchased  Under the  Plans or  Programs(a)** | ** ** |
|-------------------------------------------------|------------|--------------------------------------------------|------------|--------------------------------------------------|------------|--------------------------------------------------------------------------------------------------------------------------|------------|-------------------------------------------------------------------------------------------------------------------------------------------|------------|
| ** **                                      | ** ** | ** **                                       | ** ** | ** **                                       | ** ** | ** **                                                                                                               | ** ** | ** **                                                                                                                                | ** ** |
| January 4, 2009 to January 26, 2009   |       | —                                           |       | —                                           |       | —                                                                                                                   |       | —                                                                                                                                    |       |
|                                            |       |                                             |       |                                             |       |                                                                                                                     |       |                                                                                                                                      |       |
| January 27, 2009 to February 23, 2009 |       | —                                           |       | —                                           |       | —                                                                                                                   |       | —                                                                                                                                    |       |
|                                            |       |                                             |       |                                             |       |                                                                                                                     |       |                                                                                                                                      |       |
| February 24, 2009 to April 4, 2009    |       | 213,600                                          |       | $                                                | 4.53       |                                                                                                                     | 213,600    |                                                                                                                                      | $          | 6,497,552 |   |
|                                            |       |                                             |       |                                             |       |                                                                                                                     |       |                                                                                                                                      |       |
| Total                                           |       | 213,600                                          |       | $                                                | 4.53       |                                                                                                                     | 213,600    |                                                                                                                                      | $          | 6,497,552 |   |

 

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(a)       On October 27, 2008, our board ofdirectors authorized a stock and debt repurchase program for the repurchase ofup to $10.0 million of our Class A common stock and/or senior notes overthe next twelve months.  Under theauthorization, we may purchase shares of Class A common stock and/orsenior notes from time to time in the open market or in privately negotiatedtransactions in compliance with the applicable rules and regulations ofthe SEC.

 

**Item 3.  DefaultsUpon Senior Securities**

** **

Notapplicable.

 

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

** **

Notapplicable.

 

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** **

**Item 5.  OtherInformation**

** **

Notapplicable.

 

**Item 6.  Exhibits**

 
| **EXHIBIT  NO.** | ** ** | **DESCRIPTION**                                                                                                                                                                                  |
|------------------|------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|             |       |                                                                                                                                                                                             |
| 31.1             |       | Certification pursuant to  Rule 13a-14(a) or Rule 15d-14(a) of the Securities  Exchange Act of 1934 of the Chief Executive Officer.                                          |
| 31.2             |       | Certification pursuant to  Rule 13a-14(a) or Rule 15d-14(a) of the Securities  Exchange Act of 1934 of the Chief Financial Officer.                                          |
| 32.1             |       | Certification pursuant to  18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the  Sarbanes-Oxley Act of 2002, of the Chief Executive Officer and Chief  Financial Officer. |

 

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**SIGNATURE**

 

Pursuantto the requirements of the Securities Exchange Act of 1934, the registrant hasduly caused this report to be signed on its behalf by the undersigned thereuntoduly authorized.

 
| Dated:  April 28, 2009 | B&G  FOODS, INC. |
|-----------------------------|----------------------|
|                        |                 |
|                        |                 |
|                        | By:                  |  /s/ Robert C. Cantwell |
|                        |                 | Robert  C. Cantwell |
|                        |                 | Executive  Vice President and Chief Financial Officer (Principal Financial and  Accounting Officer and Authorized Officer) |

 

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