Asfiled with the Securities and Exchange Commission on April 27, 2006

 

****UNITED STATES**********SECURITIESAND EXCHANGE COMMISSION******

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

 

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

**** ****
| (Mark one) |       |                                                                                            |       |       |
|------------|------------|-------------------------------------------------------------------------------------------------|------------|------------|
| ý     | ** ** | **Quarterly  Report Pursuant to Section 13 or 15(d)****of the Securities Exchange Act of 1934** | ** ** | ** ** |

 

**For the quarterly periodended April 1, 2006**

 

**or**

 
| o | ** ** | **Transition  Report Pursuant to Section 13 or 15(d)  of the Securities Exchange Act of 1934** | ** ** | ** ** |
|---|------------|------------------------------------------------------------------------------------------------|------------|------------|

 

**For the transition periodfrom                        to                      .**

 

**Commission file number001-32316**

 

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

(Exact name of Registrant asspecified in its charter)

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

 

Registrant’s telephonenumber, including area code:  ****(973) 401-6500****

 

Indicateby check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) ofthe Securities Exchange Act of 1934 during the preceding 12 months (or for suchshorter period that the registrant was required to file such reports) and (2)has been subject to such filing requirements for the past 90 days. Yes ý No o

 

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

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

 

Indicateby check mark whether the registrant is a shell company (as defined in Rule12b-2 of the Exchange Act). Yes  o  No  ý

 

As ofApril 27, 2006, the registrant had 20,000,000 shares of Class A common stock,par value $0.01 per share, and 7,556,443 shares of Class B common stock, parvalue $0.01 per share, outstanding.

 

 

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B&GFoods, Inc. and SubsidiariesIndex

 
| PART I FINANCIAL INFORMATION | **Page No.**                                                                                |
|------------------------------|---------------------------------------------------------------------------------------------|
|                         |                                                                                        |   |
| 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 | 18 |
|                         |                                                                                        |   |
| Item 3.                      | Quantitative  and Qualitative Disclosures About Market Risk                                 | 34 |
|                         |                                                                                        |   |
| Item 4.                      | Controls and  Procedures                                                                    | 35 |
|                         |                                                                                        |   |
| PART II OTHER  INFORMATION   | 36                                                                                          |
|                         |                                                                                        |   |
| Item 1.                      | Legal Proceedings                                                                           | 36 |
|                         |                                                                                        |   |
| Item  1A.                    | Risk Factors                                                                                | 36 |
|                         |                                                                                        |   |
| Item 2.                      | Unregistered  Sales of Equity Securities and Use of Proceeds                                | 36 |
|                         |                                                                                        |   |
| Item 3.                      | Defaults  Upon Senior Securities                                                            | 36 |
|                         |                                                                                        |   |
| Item 4.                      | Submission of Matters to a Vote of Security  Holders                                        | 36 |
|                         |                                                                                        |   |
| Item 5.                      | Other Information                                                                           | 36 |
|                         |                                                                                        |   |
| Item  6.                     | Exhibits                                                                                    | 36 |
|                         |                                                                                        |   |
| SIGNATURE                    | 37                                                                                          |

 

i

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**PART IFINANCIAL INFORMATION**

** **

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

** **

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

**Consolidated Balance Sheets**

**(Dollars in thousands, except per share data)**

**(Unaudited)**

 
| ** **                                                                                                                | ** ** | **April 1, 2006** | ** ** | **December 31, 2005** | ** ** |
|---------------------------------------------------------------------------------------------------------------------------|------------|-----------------------------|------------|---------------------------------|------------|
| **Assets**                                                                                                                |       |                        |       |                            |       |
| Current assets:                                                                                                           |       |                        |       |                            |       |
| Cash and cash equivalents                                                                                                 |       | $                           | 22,713     |                            | $          | 25,429 |   |
| Trade accounts receivable, net                                                                                            |       | 26,934                      |       | 31,869                          |       |
| Inventories                                                                                                               |       | 92,431                      |       | 85,530                          |       |
| Prepaid expenses                                                                                                          |       | 2,830                       |       | 3,249                           |       |
| Assets held for sale                                                                                                      |       | 750                         |       | 750                             |       |
| Deferred income taxes                                                                                                     |       | 3,381                       |       | 3,381                           |       |
| Income tax receivable                                                                                                     |       | 725                         |       | 618                             |       |
| Total current assets                                                                                                      |       | 149,764                     |       | 150,826                         |       |
|                                                                                                                      |       |                        |       |                            |       |
| Property, plant and equipment, net                                                                                        |       | 40,051                      |       | 40,190                          |       |
| Goodwill                                                                                                                  |       | 214,814                     |       | 189,028                         |       |
| Trademarks                                                                                                                |       | 198,564                     |       | 194,264                         |       |
| Net deferred financing costs and other assets                                                                             |       | 19,563                      |       | 19,867                          |       |
| Total assets                                                                                                              |       | $                           | 622,756    |                            | $          | 594,175 |   |
|                                                                                                                      |       |                        |       |                            |       |
| **Liabilities and Stockholders’  Equity**                                                                            |       |                        |       |                            |       |
|                                                                                                                      |       |                        |       |                            |       |
| Current liabilities:                                                                                                      |       |                        |       |                            |       |
| Trade accounts payable                                                                                                    |       | $                           | 24,264     |                            | $          | 26,337 |   |
| Accrued expenses                                                                                                          |       | 21,800                      |       | 16,413                          |       |
| Dividends payable                                                                                                         |       | 4,240                       |       | 4,240                           |       |
| Total current liabilities                                                                                                 |       | 50,304                      |       | 46,990                          |       |
|                                                                                                                      |       |                        |       |                            |       |
| Long-term debt                                                                                                            |       | 430,800                     |       | 405,800                         |       |
| Other liabilities                                                                                                         |       | 227                         |       | 245                             |       |
| Deferred income taxes                                                                                                     |       | 59,482                      |       | 57,866                          |       |
| Total liabilities                                                                                                         |       | 540,813                     |       | 510,901                         |       |
|                                                                                                                      |       |                        |       |                            |       |
| 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; issued and outstanding 20,000,000 shares |       | 200                         |       | 200                             |       |
| Class B common stock, $0.01 par value per share. Authorized  25,000,000 shares; issued and outstanding 7,556,443 shares   |       | 76                          |       | 76                              |       |
| Additional paid-in capital                                                                                                |       | 131,872                     |       | 136,112                         |       |
| Accumulated other comprehensive loss                                                                                      |       | (100                        | )          | (57                             | )          |
| Accumulated deficit                                                                                                       |       | (50,105                     | )          | (53,057                         | )          |
| Total stockholders’ equity                                                                                           |       | 81,943                      |       | 83,274                          |       |
| Total liabilities and stockholders’ equity                                                                           |       | $                           | 622,756    |                            | $          | 594,175 |   |

 

See Notes toConsolidated Financial Statements.

 

1

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

**Consolidated Statements of Operations**

**(Dollars in thousands, except per share data)**

**(Unaudited)**

 
| ** **                                                              | ** ** | **Thirteen Weeks Ended** | ** ** |
|-------------------------------------------------------------------------|------------|------------------------------------|------------|
| ** **                                                              | ** ** | **April 1, 2006**        | ** ** | **April 2, 2005** | ** ** |
|                                                                    |       |                               |       |   |   |
| Net sales                                                               |       | $                                  | 92,980     |   | $ | 90,111 |   |
| Cost of goods sold                                                      |       | 65,114                             |       | 63,283 |   |
| Cost of goods sold—restructuring charge                            |       | —                             |       | 116 |   |
| Gross profit                                                            |       | 27,866                             |       | 26,712 |   |
|                                                                    |       |                               |       |   |   |
| Operating expenses:                                                     |       |                               |       |   |   |
| Sales, marketing and distribution expenses                              |       | 10,481                             |       | 10,059 |   |
| General and administrative expenses                                     |       | 1,688                              |       | 1,369 |   |
| Operating income                                                        |       | 15,697                             |       | 15,284 |   |
|                                                                    |       |                               |       |   |   |
| Other expenses:                                                         |       |                               |       |   |   |
| Interest expense, net                                                   |       | 10,858                             |       | 10,434 |   |
| Income before income tax expense                                        |       | 4,839                              |       | 4,850 |   |
| Income tax expense                                                      |       | 1,887                              |       | 1,892 |   |
| Net income                                                              |       | $                                  | 2,952      |   | $ | 2,958 |   |
|                                                                    |       |                               |       |   |   |
| Earnings per share calculations:                                        |       |                               |       |   |   |
| Net income available to common stockholders per share of common  stock: |       |                               |       |   |   |
| Basic and diluted distributed earnings:                                 |       |                               |       |   |   |
| Class A common stock                                                    |       | $                                  | 0.21       |   | $ | 0.21 |   |
| Earnings (loss) per share:                                              |       |                               |       |   |   |
| Basic and diluted Class A common stock                                  |       | $                                  | 0.16       |   | $ | 0.16 |   |
| Basic and diluted Class B common stock                                  |       | $                                  | (0.05      | ) | $ | (0.05 | ) |

 

See Notes toConsolidated Financial Statements.

 

2

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

**ConsolidatedStatements of Cash Flows**

**(Dollars in thousands)**

**(Unaudited)**

 
| ** **                                                                                   | ** ** | **Thirteen Weeks Ended** | ** ** |
|----------------------------------------------------------------------------------------------|------------|------------------------------------|------------|
| ** **                                                                                   | ** ** | **April 1, 2006**        | ** ** | **April 2, 2005** | ** ** |
| ** **                                                                                   | ** ** | ** **                         | ** ** | ** ** | ** ** |
| **Cash flows from operating activities:**                                                    |       |                               |       |   |   |
| Net income                                                                                   |       | $                                  | 2,952      |   | $ | 2,958 |   |
| Adjustments to reconcile net income to net cash provided by (used in)  operating activities: |       |                               |       |   |   |
| Depreciation                                                                                 |       | 1,771                              |       | 1,667 |   |
| Amortization of deferred debt issuance costs                                                 |       | 708                                |       | 698 |   |
| Deferred income taxes                                                                        |       | 1,616                              |       | 1,799 |   |
| Changes in assets and liabilities:                                                           |       |                               |       |   |   |
| Trade accounts receivable                                                                    |       | 4,935                              |       | (79 | ) |
| Inventories                                                                                  |       | (6,927                             | )          | 2,276 |   |
| Prepaid expenses                                                                             |       | 419                                |       | (477 | ) |
| Income tax receivable                                                                        |       | (107                               | )          | 16 |   |
| Trade accounts payable                                                                       |       | (2,073                             | )          | (3,794 | ) |
| Accrued expenses                                                                             |       | 5,372                              |       | (5,308 | ) |
| Other liabilities                                                                            |       | (18                                | )          | (18 | ) |
| Net cash provided by (used in) operating activities                                          |       | 8,648                              |       | (262 | ) |
|                                                                                         |       |                               |       |   |   |
| **Cash flows from investing activities:**                                                    |       |                               |       |   |   |
| Capital expenditures                                                                         |       | (1,592                             | )          | (1,499 | ) |
| Payments for acquisition of businesses                                                       |       | (30,085                            | )          | — |   |
| Net cash used in investing activities                                                        |       | (31,677                            | )          | (1,499 | ) |
|                                                                                         |       |                               |       |   |   |
| **Cash flows from financing activities:**                                                    |       |                               |       |   |   |
| Proceeds from issuance of long-term debt                                                     |       | 25,000                             |       | — |   |
| Dividends paid                                                                               |       | (4,240                             | )          | (3,728 | ) |
| Payment of debt issuance costs                                                               |       | (404                               | )          | — |   |
| Net cash provided by (used in) financing activities                                          |       | 20,356                             |       | (3,728 | ) |
|                                                                                         |       |                               |       |   |   |
| Effect of exchange rate fluctuations on cash and cash equivalents                            |       | (43                                | )          | (35 | ) |
| Net decrease in cash and cash equivalents                                                    |       | (2,716                             | )          | (5,524 | ) |
|                                                                                         |       |                               |       |   |   |
| Cash and cash equivalents at beginning of period                                             |       | 25,429                             |       | 28,525 |   |
| Cash and cash equivalents at end of period                                                   |       | $                                  | 22,713     |   | $ | 23,001 |   |
|                                                                                         |       |                               |       |   |   |
| **Supplemental disclosures of cash flow  information:**                                      |       |                               |       |   |   |
| Cash interest payments                                                                       |       | $                                  | 4,965      |   | $ | 14,809 |   |
| Cash income tax payments                                                                     |       | $                                  | 379        |   | $ | 40 |   |
| Non-cash transactions:                                                                       |       |                               |       |   |   |
| Dividends declared and unpaid                                                                |       | $                                  | 4,240      |   | $ | 4,240 |   |

 

SeeNotes to Consolidated Financial Statements.

 

3

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**B&G Foods, Inc. andSubsidiaries**

**Notes to Consolidated FinancialStatements**

**(Dollars in thousands, except per share data)**

**(Unaudited)**

 

**(1)**           **Nature ofOperations and Recent Acquisitions**

 

B&G Foods, Inc. is aholding company, the principal assets of which are the capital stock of itssubsidiaries. Unless the context requires otherwise, references in this reportto “B&G Foods,” “the company,” “we,” “us” and “our” refer to B&G Foods,Inc. and its subsidiaries. We operate in one industry segment and manufacture,sell and distribute a diversified portfolio of high-quality shelf-stable foodsacross the United States, Canada and Puerto Rico. Our products include pickles,peppers, jams, jellies and fruit spreads, canned meats and beans, spices,seasonings, marinades, hot sauces, wine vinegar, molasses, maple syrup, saladdressings, Mexican-style sauces, taco shells and kits, salsas and otherspecialty food products. We compete in the retail grocery, food service,specialty store, private label, club and mass merchandiser channels ofdistribution. We distribute these products to retailers in the greater New Yorkmetropolitan area through a direct-store-delivery sales and distribution systemand elsewhere in the United States through a nationwide network of independentbrokers and distributors.

 

OnDecember 1, 2005, we acquired the Ortega food service dispensing pouch anddipping cup business for approximately $2,509 in cash, including transactioncosts, from Nestlé USA, Inc. On January 10, 2006, we acquired the *Grandma’s*molasses business for approximately $30,089 incash, including transaction costs, from Mott’s LLP, a Cadbury SchweppesAmericas Beverages company. In connection with this transaction, we enteredinto an amendment to our senior secured credit facility to provide for, amongother things, a new $25,000 term loan and a reduction in the revolving creditfacility commitments from $30,000 to $25,000. The proceeds of the term loantogether with cash on hand were used to fund the *Grandma’s*molassesacquisition and pay related transaction costs.

 

Theacquisitions described above were accounted for using the purchase method ofaccounting and, accordingly, the assets acquired, liabilities assumed, andresults of operations are included in our consolidated financial statementsfrom the respective dates of the acquisitions. The excess of the purchase priceover the fair value of identifiable net assets acquired represents goodwill.Trademarks are deemed to have an indefinite useful life and are not amortized.Goodwill and trademarks are deductible for income tax purposes.

 

Thefollowing tables sets forth the preliminary allocation of the purchase pricefor the Ortega food service dispensing pouch and dipping cup businessacquisition and the *Grandma’s*molasses acquisition. As of April 1, 2006, we are in the process of obtainingvaluations of the intangible assets acquired (including trademarks andcustomer-related intangibles), assessing certain assumed contracts andcompleting other purchase price allocation procedures; thus, the preliminaryallocation of the purchase price for each acquisition may change, and suchchange could be significant. We anticipate completing the purchase priceallocation for each acquisition in the second quarter of fiscal 2006.

 
| Acquisition of the Ortega food service dispensing pouch and dipping cup business |   |   |   |   |
|-----------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|
| Inventory                                                                                                                               |   | $      | 873    |   |
| Goodwill                                                                                                                                |   | 853    |   |
| Indefinite-life intangible assets—trademarks                                                                                       |   | 783    |   |
| Total                                                                                                                                   |   | $      | 2,509  |   |

 
| Acquisition of the *Grandma’s* molasses business | ** ** | ** ** | ** ** |
|-------------------------------------------------------|------------|------------|------------|
| Equipment                                             |       | $          | 25         |   |
| Goodwill                                              |       | 25,764     |       |
| Indefinite-life intangible assets—trademarks     |       | 4,300      |       |
| Total                                                 |       | $          | 30,089     |   |

 

4

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**B&G Foods, Inc. andSubsidiaries**

**Notes to Consolidated FinancialStatements****(Continued)**

**(Dollars in thousands, except per share data)**

**(Unaudited)**

 

**(1)           Nature of Operations and RecentAcquisitions (Continued)**

 

***Unaudited Pro FormaSummary of Operations***

*** ***

Theacquisitions of the Ortega food service dispensing pouch and dipping cupbusiness and the *Grandma’s*molasses business did not meet any of the significance tests pursuant to Rule11-01(b)(1) of Regulation S-X. As such, no pro forma information has beenpresented.

 

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

 

***FiscalYear***

 

Ourfinancial statements are presented on a consolidated basis. We utilize a 52 to53 week fiscal year ending on the Saturday closest to December 31. The fiscalyear ending December 30, 2006 (fiscal 2006) and the fiscal year ended December31, 2005 (fiscal 2005) each contain 52 weeks.

 

***Basis of Presentation***

 

The accompanyingconsolidated interim financial statements for the thirteen week periods endedApril 1, 2006 and April 2, 2005 have been prepared by our company in accordancewith accounting principles generally accepted in the United States of Americawithout audit, pursuant to the rules and regulations of the Securities andExchange Commission (SEC), and include the accounts of B&G Foods, Inc. and itssubsidiaries. Certaininformation and footnote disclosures normally included in annual financialstatements prepared in accordance with generally accepted accounting principleshave been omitted pursuant to such rules and regulations. However, ourmanagement believes, to the best of their knowledge, that the disclosuresherein are adequate to make the information presented not misleading. Allintercompany balances and transactions have 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 1, 2006 and the results of our operations and cash flows for thethirteen week periods ended April 1, 2006 and April 2, 2005. Our results ofoperations for the thirteen week period ended April 1, 2006 are not necessarilyindicative of the results to be expected for the full year. The accompanyingunaudited consolidated interim financial statements should be read inconjunction with the audited consolidated financial statements and notes forthe fiscal year ended December 31, 2005 included in our Annual Report on Form10-K for the fiscal year ended December 31, 2005 filed with the SEC on March 7,2006.

 

***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 the more significant estimates and assumptionsmade by management involve trade and consumer promotion expenses, allowancesfor excess, obsolete and unsaleable inventories, and the recoverability ofgoodwill, trademarks, property, plant and equipment, and deferred tax assetsand the accounting for our enhanced income securities (EISs), including theirtreatment in computing our income tax expense. Actual results could differ fromthose estimates and assumptions.

 

5

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**B&G Foods, Inc. andSubsidiaries**

**Notes to Consolidated FinancialStatements****(Continued)**

**(Dollars in thousands, except per share data)**

**(Unaudited)**

** **

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

 

***Cash and Cash Equivalents***

 

Forpurposes of the consolidated statements of cash flows, all highly liquid debtinstruments with maturities of three months or less when acquired areconsidered to be cash and cash equivalents.

 

***Inventories***

 

Inventoriesare stated at the lower of cost or market. Cost is determined using thefirst-in, first-out and average cost methods. Inventories have been reduced byan allowance for excess, obsolete and unsaleable inventories. The allowance isan estimate based on our management’s review of inventories on hand compared toestimated future usage and sales.

 

***Property, Plant and Equipment***

 

Property,plant and equipment are stated at cost. Depreciation on plant and equipment iscalculated using the straight-line method over the estimated useful lives ofthe assets, 12 to 20 years for buildings and improvements, 5 to 10 years formachinery and equipment, and 3 to 5 years for office furniture and vehicles.Expenditures for maintenance, repairs and minor replacements are charged tocurrent operations. Expenditures for major replacements and betterments arecapitalized.

 

***Goodwill and Trademarks***

 

Goodwilland intangible assets with indefinite useful lives (trademarks) are tested forimpairment at least annually and whenever events or circumstances occurindicating that goodwill or indefinite life intangibles might be impaired.

 

Weperform the annual impairment tests as of the last day of each fiscal year. Theannual goodwill impairment test involves a two-step process. The first step ofthe impairment test involves comparing the fair value of our company with ourcompany’s carrying value, including goodwill. If the carrying value of ourcompany exceeds our fair value, we perform the second step of the impairmenttest to determine the amount of the impairment loss. The second step of thegoodwill impairment test involves comparing the implied fair value of goodwillwith the carrying value of that goodwill and recognizing a loss for thedifference. Calculating our fair value requires significant estimates andassumptions by management. We estimate our fair value by applying third partymarket value indicators to our net income before net interest expense, incometaxes, depreciation and amortization (EBITDA). We test indefinite lifeintangible assets for impairment by comparing their carrying value to theirfair value that is determined using a cash flow method and recognize a loss tothe extent the carrying value is greater.

 

Wecompleted our annual impairment tests for the year ended December 31, 2005 withno adjustments to the carrying values of goodwill and indefinite lifeintangibles.

 

6

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**B&G Foods, Inc. andSubsidiaries**

**Notes to Consolidated FinancialStatements****(Continued)**

**(Dollars in thousands, except per share data)**

**(Unaudited)**

** **

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

*** ***

***Deferred Debt Issuance Costs***

 

Debt issuance costs arecapitalized and amortized over the term of the related debt agreements and areclassified as other non-current assets.

 

***Long-Lived Assets***

 

Long-livedassets, such as property, plant and equipment, and intangibles with estimateduseful lives are depreciated or amortized over their respective estimateduseful lives to their estimated residual values, and reviewed for impairmentwhenever events or changes in circumstances indicate that the carrying amountof an asset may not be recoverable. Recoverability of assets to be held andused is measured by a comparison of the carrying amount of an asset toestimated undiscounted future cash flows expected to be generated by the asset.If the carrying amount of an asset exceeds its estimated future cash flows, animpairment charge is recognized by the amount by which the carrying amount ofthe asset exceeds the fair value of the asset. Assets to be disposed of areseparately presented in our consolidated balance sheets and reported at thelower of the carrying value amount or fair value, less costs to sell, and areno longer depreciated.

 

***Accounting Treatment for EISs***

 

Eachof our EISs represents one share of our Class A common stock and $7.15principal amount of our 12% senior subordinated notes due 2016. Upon completionof our initial public offering (including the exercise of the over-allotmentoption), we allocated the proceeds from the issuance of the EISs, based uponrelative fair value at the issuance date, to the Class A common stock and thesenior subordinated notes. We have assumed that the price paid in the EISoffering was equivalent to the combined fair value of the Class A common stockand the senior subordinated notes, and the price paid in the offering for thesenior subordinated notes sold separately (not in the form of EISs) wasequivalent to their initial stated principal amount. We have concluded thereare no embedded derivative features related to the EIS that require bifurcationunder Financial Accounting Standards Board (FASB) Statement No. 133, “Accountingfor Derivative Instruments and Hedging Activities,” as amended (SFAS No. 133).We have determined the fair value of the Class A common stock and the seniorsubordinated notes with reference to a number of factors, including the sale ofthe senior subordinated notes sold separately from the EISs that have the sameterms as the senior subordinated notes included in the EISs. Therefore, we haveallocated the entire proceeds of the EIS offering to the Class A common stockand the senior subordinated notes, and the allocation of the EIS proceeds tothe senior subordinated notes did not result in a premium or discount.

 

Wehave concluded that the call option and the change in control put option in thesenior subordinated notes do not warrant separate accounting under SFAS No. 133because they are clearly and closely related to the economic characteristics ofthe host debt instrument. Therefore, we have allocated the entire proceeds ofthe offering to the Class A common stock and the senior subordinated notes.Upon subsequent issuances, if any, of senior subordinated notes, we willevaluate whether the call option and the change in control put option in thesenior subordinated notes require separate accounting under SFAS No. 133. Weexpect that if there is a substantial discount or premium upon a subsequentissuance of senior subordinated notes, we may need to separately account forthe call option and the change in control put option features as embeddedderivatives for such subsequent issuance. If we determine that the embeddedderivatives, if any, require separate accounting from the debt host contractunder SFAS No. 133, the call option and the change in control put optionassociated with the senior subordinated notes will be recorded as derivativeliabilities at fair value, with changes in fair value recorded as othernon-operating income or expense. Any discount on the senior

 

7

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**B&G Foods, Inc. andSubsidiaries**

**Notes to Consolidated FinancialStatements****(Continued)**

**(Dollars in thousands, except per share data)**

**(Unaudited)**

** **

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

 

subordinatednotes resulting from the allocation of proceeds to an embedded derivative willbe amortized to interest expense over the remaining life of the seniorsubordinated notes.

 

TheClass A common stock portion of each EIS is included in stockholders’ equity,net of the related portion of the EIS transaction costs allocated to Class Acommon stock. Dividends paid on the Class A common stock are recorded as areduction to additional paid-in capital when declared by us. The seniorsubordinated note portion of each EIS is included in long-term debt, and therelated portion of the EIS transaction costs allocated to the seniorsubordinated notes was capitalized as deferred financing costs and is beingamortized to interest expense using the effective interest method. Interest onthe senior subordinated notes is charged to expense as accrued by us.

 

***Comprehensive Income Recognition***

 

Comprehensiveincome includes the effect of exchange rate fluctuations on cash and cashequivalents relating to our Canadian subsidiary. Comprehensive income was$2,909 for the thirteen weeks ended April 1, 2006. Comprehensive income was $2,923for the thirteen weeks ended April 2, 2005.

 

***Revenue Recognition***

 

Revenuesare recognized when products are shipped. We report all amounts billed to acustomer in a sale transaction as revenue, including those amounts related toshipping and handling. Shipping and handling costs are included in cost ofgoods sold. Consideration from a vendor to a retailer is presumed to be areduction to the selling prices of the vendor’s products and, therefore, shouldbe characterized as a reduction of sales when recognized in the vendor’s incomestatement. As a result, certain coupons and promotional expenses are recordedas a reduction of net sales.

 

***Trade and Consumer Promotion Expenses***

 

Weoffer various sales incentive programs to customers and consumers, such asprice discounts, in-store display incentives, slotting fees and coupons. Therecognition of expense for these programs involves the use of judgment relatedto performance and redemption estimates. Estimates are made based on historicalexperience and other factors. Actual expenses may differ if the level ofredemption rates and performance vary from estimates.

 

***Pension Plans***

 

Wehave defined benefit pension plans covering substantially all of our employees.Our funding policy is to contribute annually the amount recommended by ouractuaries.

 

***Income Tax Expense Estimates and Policies***

 

Incometaxes are accounted for under the asset and liability method. Deferred taxassets and liabilities of our company are recognized for the future taxconsequences attributable to differences between the financial statementcarrying amounts of existing assets and liabilities and their respective taxbases and operating loss and tax credit carryforwards. Deferred tax assets andliabilities are measured using enacted tax rates expected to apply to taxableincome in the years in which those temporary differences are expected to berecovered or settled. A valuation allowance is provided when it is more likelythan not that all or some portion of the deferred tax asset will not berealized. The effect on deferred tax assets and liabilities of a change in taxrates is recognized in operations in the period that includes the enactmentdate.

 

8

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**B&G Foods, Inc. andSubsidiaries**

**Notes to Consolidated FinancialStatements****(Continued)**

**(Dollars in thousands, except per share data)**

**(Unaudited)**

** **

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

 

Aspart of the income tax provision process of preparing our consolidatedfinancial statements, we are required to estimate our income taxes. Thisprocess involves estimating our current tax expenses together with assessingtemporary differences resulting from differing treatment of items for tax andaccounting purposes. These differences result in deferred tax assets andliabilities. We then assess the likelihood that our deferred tax assets will berecovered from future taxable income and to the extent we believe the recoveryis not likely, we establish a valuation allowance. Further, to the extent thatwe establish a valuation allowance or increase this allowance in a financialaccounting period, we include such charge in our tax provision, or reduce ourtax benefits, in our consolidated statement of operations. We use our judgmentto determine our provision or benefit for income taxes, deferred tax assets andliabilities and any valuation allowance recorded against our net deferred taxassets.

 

Wehave recorded deferred tax assets, a portion of which represents net operatingloss carryforwards. A valuation allowance has been recorded for certain statenet operating loss carryforwards.

 

Thereare various factors that may cause those tax assumptions to change in the nearterm, and we may have to record a valuation allowance against our deferred taxassets. We cannot predict whether future U.S. federal and state income tax lawsand regulations might be passed that could have a material effect on ourresults of operations. We assess the impact of significant changes to the U.S.federal and state income tax laws and regulations on a regular basis and updatethe assumptions and estimates used to prepare our consolidated financialstatements when new regulations and legislation are enacted.

 

We donot provide for U.S. federal income taxes or tax benefits on the unremittedearnings or losses of our foreign subsidiary as such earnings are intended tobe indefinitely reinvested.

 

Wehave accounted for our issuance of EISs as an issuance of the separatesecurities evidenced by such EISs and have allocated the proceeds received foreach EIS between the Class A common stock and senior subordinated noterepresented thereby in the amounts of their respective fair values at the timeof issuance. Accordingly, we have accounted for the senior subordinated notesrepresented by the EISs as long-term debt bearing a stated interest rate andmaturing on October 30, 2016. In connection with the issuance and initialpublic offering of the EISs, we received an opinion from counsel that thesenior subordinated notes should be treated as debt for United States federal incometax purposes. We continue to be of the view that the senior subordinated notesshould be treated as debt for United States federal income tax purposes(although we have not sought a ruling from the IRS on this issue), and weintend to deduct annually interest expense of approximately $19,896 on thesenior subordinated notes from taxable income for United States federal andstate income tax purposes. There can be no assurance that the classification ofsenior subordinated notes as debt (or the amount of interest expense deducted)will not be challenged by the IRS or other tax jurisdictions or will besustained by a court of law if challenged.

 

If ourtreatment of the senior subordinated notes as debt is put at risk in the futureas a result of a future ruling by the IRS or other tax jurisdiction or by acourt of law, including an adverse ruling for EISs (or other similarsecurities) issued by other companies or as a result of a proposed adjustmentby the IRS or other tax jurisdiction in an examination of our company or forany other reason, we will need to consider the effect of such developments onthe determination of our future tax provisions and obligations. In the eventthe senior subordinated notes are required to be treated as equity for incometax purposes, then the cumulative interest expense associated with the seniorsubordinated notes for prior tax periods that are open to assessment and forfuture tax periods would not be deductible from taxable income and we would berequired to recognize additional tax expense and establish a related income taxliability for the prior period treatment. The additional tax due to the federaland state authorities would be based on our taxable income or loss for each ofthe years

 

9

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

**Notes to Consolidated FinancialStatements****(Continued)**

**(Dollars in thousands, except per share data)**

**(Unaudited)**

** **

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

 

that weclaimed the interest expense deduction and would materially and adverselyaffect our financial position, results of operations, cash flow, and liquidity,and could affect our ongoing ability to make interest payments on the seniorsubordinated notes and dividend payments on the shares of common stockrepresented by the EISs and our ability to continue as a going concern. Inaddition, non-U.S. holders of our EISs could be subject to withholding taxes onthe payment of interest treated as dividends on equity, which could subject usto additional liability for the withholding taxes that we do not collect onsuch payments. However, in accordance with the opinion of counsel we receivedon the date of our initial public offering we continue to be of the view thatthe senior subordinated notes should be treated as debt for United Statesfederal income tax purposes. As a result, we do not record a liability for apotential disallowance of this interest expense deduction or for the potentialimposition of these withholding taxes.

 

Afactor in the ongoing determination that no liability should be recorded in ourconsolidated financial statements with respect to the deductibility for incometax purposes of the interest on the senior subordinated notes is the veracity,at the time of the initial public offering, of the representations delivered bythe purchasers of senior subordinated notes sold separately (not in the form ofEISs). In addition, other factors indicating the existence, at the time of theinitial public offering, of any plan or pre-arrangement may also be relevant tothis ongoing determination. It is possible that we will at some point in thefuture, as a result of IRS interpretations or other changes in circumstances,conclude that we should establish a reserve for tax liabilities associated witha disallowance of all or part of the interest deductions on the seniorsubordinated notes, although our present view is that no such reserve isnecessary or appropriate. If we decide to maintain such a reserve, our incometax provision, and related income tax payable, would be materially impacted. Asa result, our ability to pay dividends on the shares of our common stock couldbe materially impaired and the market price and/or liquidity for the EISs orour common stock could be adversely affected.

 

***Dividends***

 

Cashdividends, if any, are accrued as a liability on our consolidated balance sheetwhen declared.

 

***Earnings Per Shar******e***

 

Followingthe consummation of our initial public offering, we have two classes of commonstock, designated as Class A common stock and Class B common stock, and wepresent basic and diluted earnings per share using the two-class method. Thetwo-class method is an earnings allocation formula that determines earnings pershare for each class of common stock according to dividends declared andparticipation rights in undistributed earnings.

 

Netincome available to our common stockholders is allocated between our twoclasses of common stock based upon the two-class method. Basic and dilutedearnings per share for our Class A and Class B common stock is calculated bydividing allocated net income available to common stockholders by the weightedaverage number of shares of Class A and Class B common stock outstanding.

 

10

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**B&G Foods, Inc. andSubsidiaries**

**Notes to Consolidated FinancialStatements****(Continued)**

**(Dollars in thousands, except per share data)**

**(Unaudited)**

** **

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

** **
| ** **                                                                          | ** ** | **Thirteen  Weeks Ended** | ** ** |
|-------------------------------------------------------------------------------------|------------|--------------------------------|------------|
| ** **                                                                          | ** ** | **April 1, 2006**    | ** ** | **April 2, 2005** | ** ** |
|                                                                                |       |                           |       |   |   |
| Net income                                                                          |       | $                              | 2,952      |   | $ | 2,958 |   |
| Less: Class A common stock dividends declared                                       |       | 4,240                          |       | 4,240 |   |
| Undistributed (loss) earnings available to Class A and Class B common  stockholders |       | $                              | (1,288     | ) | $ | (1,282 | ) |
|                                                                                |       |                           |       |   |   |
| Weighted average common shares outstanding:                                         |       |                           |       |   |   |
| Basic and diluted Class A common shares outstanding                                 |       | 20,000,000                     |       | 20,000,000 |   |
| Basic and diluted Class B common shares outstanding                                 |       | 7,556,443                      |       | 7,556,443 |   |
|                                                                                |       |                           |       |   |   |
| Basic and diluted allocation of undistributed (loss) earnings:                      |       |                           |       |   |   |
| Class A common stock                                                                |       | $                              | (935       | ) | $ | (930 | ) |
| Class B common stock                                                                |       | (353                           | )          | (352 | ) |
| Total                                                                               |       | $                              | (1,288     | ) | $ | (1,282 | ) |
|                                                                                |       |                           |       |   |   |
| Basic and diluted earnings per share:                                               |       |                           |       |   |   |
| Undistributed (loss) earnings:                                                      |       |                           |       |   |   |
| Class A common stock                                                                |       | $                              | (0.05      | ) | $ | (0.05 | ) |
| Class B common stock                                                                |       | $                              | (0.05      | ) | $ | (0.05 | ) |
| Distributed earnings:                                                               |       |                           |       |   |   |
| Class A common stock                                                                |       | $                              | 0.21       |   | $ | 0.21 |   |
| Earnings (loss) per share:                                                          |       |                           |       |   |   |
| Class A common stock                                                                |       | $                              | 0.16       |   | $ | 0.16 |   |
| Class B common stock                                                                |       | $                              | (0.05      | ) | $ | (0.05 | ) |

 

Nodividends were declared on our Class B common stock during the thirteen weeksended April 1, 2006 or April 2, 2005; therefore, for purposes of the earningsper share calculation, all distributed earnings are included in Class A commonstock earnings per share.

 

***Fair Value of Financial Instruments***

 

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 valuedue to the short-term nature of these instruments.

 

We have outstanding $240,000 principal amount of 8.0%senior notes due 2011. The fair value of the senior notes at April 1, 2006,based on quoted market prices, was $247,800.

 

We also have outstanding $165,800 principal amount of12.0% senior subordinated notes due 2016. Of such outstanding principal amount,$143,000 principal amount is represented by 20.0 million EISs. Each EISrepresents one share of our Class A common stock and $7.15 principal amount ofour senior subordinated notes. As of April 1, 2006, the fair value of the EISs,based on the per EIS closing price on the American Stock Exchange on March 31,2006, was $14.42 per EIS. It is not practicable to estimate the fair value ofthe $143,000 principal amount of senior subordinated notes represented by theEISs. Of the $165,800 aggregate principal amount of senior subordinated notesoutstanding, $22,800 principal amount is not represented by

 

11

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**B&G Foods, Inc. andSubsidiaries**

**Notes to Consolidated FinancialStatements****(Continued)**

**(Dollars in thousands, except per share data)**

**(Unaudited)**

** **

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

 

EISsand trades separately. The fair value of the separate senior subordinated notesat April 1, 2006, based on quoted market prices, was $25,510.

 

The carrying value of our other borrowingsapproximates their fair value based on the information currently available tous with respect to similar instruments.

 

***Adoption of New Accounting Standards***

 

InNovember 2004, the FASB issued SFAS No. 151, *“InventoryCosts—An Amendment of ARB No. 43, Chapter 4”* (SFAS No. 151). SFASNo. 151 amends the guidance in ARB No. 43, Chapter 4, “Inventory Pricing,” toclarify the accounting for abnormal amounts of idle facility expense, freight,handling costs, and wasted material (spoilage). Among other provisions, the newrule requires that items such as idle facility expense, excessive spoilage,double freight, and rehandling costs be recognized as current-period chargesregardless of whether they meet the criterion of “so abnormal” as stated in ARBNo. 43. Additionally, SFAS No. 151 requires that the allocation of fixedproduction overheads to the costs of conversion be based on the normal capacityof the production facilities. SFAS No. 151 was adopted by us beginning onJanuary 1, 2006. The adoption of SFAS No. 151 has not had an impact on ourconsolidated results of operations and financial position.

 

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

 

Inventories consist of thefollowing, as of the dates indicated:

 
| ** **                  | ** ** | **April 1, 2006** | ** ** | **December 31, 2005** | ** ** |
|-----------------------------|------------|-----------------------------|------------|---------------------------------|------------|
| Raw materials and packaging |       | $                           | 16,568     |                            | $          | 14,544 |   |
| Work in process             |       | 1,743                       |       | 2,342                           |       |
| Finished goods              |       | 74,120                      |       | 68,644                          |       |
|                        |       |                        |       |                            |       |
| Total                       |       | $                           | 92,431     |                            | $          | 85,530 |   |

 

**(4)****          ****Asset Held for Sale**

 

On July 1, 2005,we closed our New Iberia, Louisiana, manufacturing facility as part of ourongoing efforts to improve our production capacity utilization, productivity,and operating efficiencies and lower our overall costs. During the thirteenweeks ended July 2, 2005 we recorded a non-cash impairment charge of $1,961 towrite down the land and building to its estimated fair value. During thethirteen weeks ended December 31, 2005, we began negotiations for the sale ofthe land and building and classified the land and building, with a carryingvalue of $750, as assets held for sale and ceased depreciation. On February 9,2006, we entered into an agreement to sell the New Iberia facility. The sale,which is subject to the buyer obtaining a mortgage commitment, the buyer’s duediligence and other customary closing conditions, is scheduled to close in orabout June 2006.

 

12

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**B&G Foods, Inc. andSubsidiaries**

**Notes to Consolidated FinancialStatements****(Continued)**

**(Dollars in thousands, except per share data)**

**(Unaudited)**

** **

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

 

Long-termdebt consists of the following, as of the date indicated:

 
| ** **                               | ** ** | **April 1, 2006** | ** ** | **December 31, 2005** | ** ** |
|------------------------------------------|------------|-----------------------------|------------|---------------------------------|------------|
| Revolving credit facility                |       | $                           | —     |                            | $          | — |   |
| Term loan                                |       | 25,000                      |       | —                          |       |
| Total senior secured credit facility     |       | 25,000                      |       | —                          |       |
|                                     |       |                        |       |                            |       |
| 12.0% Senior Subordinated Notes due 2016 |       | 165,800                     |       | 165,800                         |       |
| 8.0% Senior Notes due 2011               |       | 240,000                     |       | 240,000                         |       |
| Total long-term debt                     |       | $                           | 430,800    |                            | $          | 405,800 |   |

 

As of April 1, 2006, the aggregate maturities oflong-term debt are as follows:

 
| **Years ending December:** | ** ** | ** ** | ** ** |
|--------------------------------------|------------|------------|------------|
| 2006                                 |       | $          | —     |   |
| 2007                                 |       | —     |       |
| 2008                                 |       | —     |       |
| 2009                                 |       | —     |       |
| 2010                                 |       | —     |       |
| Thereafter                           |       | 430,800    |       |
| Total                                |       | $          | 430,800    |   |

 

*SeniorSecured Credit Facility*. Concurrent with our initial public offering and concurrent offerings,we entered into a $30,000 senior secured revolving credit facility on October14, 2004. In order to finance our acquisition of the *Grandma’s*molassesbrand, we amended the credit facility in January 2006 to provide for, amongother things, a new $25,000 term loan and a reduction in the revolving creditfacility commitments from $30,000 to $25,000. As amended, all outstandingindebtedness under the credit facility matures on January 10, 2011. Interestunder the revolving credit facility is determined based on several alternativerates as stipulated in the revolving credit facility, including the baselending rate per annum plus an applicable margin, or LIBOR plus an applicablemargin. We pay a commitment fee of 0.50% per annum on the unused portion of therevolving credit facility. Interest under the term loan is determined based onalternative rates as stipulated in the credit facility, including the baselending rate per annum plus an applicable margin of 1.75%, and LIBOR plus anapplicable margin of 2.75%. As of April 1, 2006, the interest rate for the termloan was 7.49% (based upon a six-month LIBOR contract expiring on July 17,2006). The credit facility is secured by substantially all of our assets exceptour real property. The credit facility provides for mandatory prepayment basedon asset dispositions and certain issuances of securities, as defined. Thecredit facility contains covenants that restrict, among other things, ourability to incur additional indebtedness, pay dividends and create certainliens. The credit facility also contains certain financial maintenancecovenants, which, among other things, specify maximum capital expenditure limits,a minimum interest coverage ratio and a maximum senior and total leverageratio, each ratio as defined. 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. The revolving credit facility was undrawn on thedate of consummation of our initial public offering and concurrent offeringsand remained undrawn through April 1, 2006. The available borrowing capacityunder our revolving credit facility, net of outstanding letters of credit of$672, was $24,328 at April 1, 2006. The maximum letter of credit capacity underthe revolving credit facility is $10,000, with a fee of 3.0% for all outstandingletters of credit.

 

13

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

**Notes toConsolidated Financial Statements (Continued)**

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

**(Unaudited)**

 

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

 

*12.0%Senior Subordinated Notes due 2016*. In connection with our initial public offering, weissued on October 14, 2004, $124,348 aggregate principal amount of 12.0% seniorsubordinated notes due 2016 in the form of EISs and an additional $22,800aggregate principal amount of 12.0% senior subordinated notes due 2016 (not inthe form of EISs). In connection with the exercise of the underwriters’over-allotment option, on October 22, 2004 we issued an additional $18,652aggregate principal amount of 12.0% senior subordinated notes in the form of EISs.Each EIS represents one share of our Class A common stock and $7.15 principalamount of our 12.0% senior subordinated notes. As of April 1, 2006, $165,800aggregate principal amount of senior subordinated notes was outstanding.

 

Intereston the senior subordinated notes is payable quarterly in arrears on eachJanuary 30, April 30, July 30 and October 30 through the maturity date. Thesenior subordinated notes will mature on October 30, 2016, unless earlierredeemed at our option as described below.

 

Uponthe occurrence of a change of control (as defined in the indenture), unless wehave retired the senior subordinated notes or exercised our right to redeem allsenior subordinated notes as described below, each holder of the seniorsubordinated notes has the right to require us to repurchase that holder’ssenior subordinated notes at a price equal to 101.0% of the principal amount ofthe senior subordinated notes being repurchased, plus any accrued and unpaidinterest to the date of repurchase. In order to exercise this right, a holdermust separate the senior subordinated notes and Class A common stockrepresented by such holder’s EISs.

 

We maynot redeem the notes prior to October 30, 2009**.**However, we may, from time to time, seek to retire the senior subordinatednotes through cash repurchases of EISs or separate senior subordinated notesand/or exchanges of EISs or separate senior subordinated notes for equitysecurities, in open market purchases, privately negotiated transactions orotherwise. Such repurchases or exchanges, if any, will depend on prevailingmarket conditions, our liquidity requirements, contractual restrictions andother factors.

 

Inaddition, on and after October 30, 2009, we may redeem for cash all or part ofthe senior subordinated notes upon not less than 30 or more than 60 days’notice by mail to the owners of senior subordinated notes, at a redemptionprice of 106.0% beginning October 30, 2009 and thereafter at prices decliningannually to 100% on or after October 30, 2012. If we redeem any seniorsubordinated notes, the senior subordinated notes and Class A common stockrepresented by each EIS will be automatically separated.

 

Thesenior subordinated notes are unsecured obligations and are subordinated inright of payment to all of our existing and future senior secured and seniorunsecured indebtedness, including the indebtedness under our credit facilityand our senior notes. The senior subordinated notes rank pari passu in right ofpayment with any of our other subordinated indebtedness.

 

Thesenior subordinated notes are jointly and severally and fully andunconditionally guaranteed by all of our existing domestic subsidiaries andcertain future domestic subsidiaries on an unsecured and subordinated basis onthe terms set forth in the indenture governing the senior subordinated notes.The senior subordinated note guarantees are subordinated in right of payment toall existing and future senior indebtedness of the guarantors, including theindebtedness under our credit facility and the senior notes. Our presentforeign subsidiary, Les Produits Alimentaires Jacques et Fils Inc., is not aguarantor, and any future foreign or partially owned domestic subsidiaries willnot be guarantors, of our senior subordinated notes.

 

Theindenture governing the senior subordinated notes contains covenants withrespect to us and restricts the incurrence of additional indebtedness and theissuance of capital stock; the payment of dividends

 

14

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

**Notes toConsolidated Financial Statements (Continued)**

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

**(Unaudited)**

 

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

 

ordistributions on, and redemption of, capital stock; a number of otherrestricted 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.

 

*8.0%Senior Notes due 2011*. Concurrent with our initial public offering and offering of separatesenior subordinated notes, we issued $240,000 aggregate principal amount of8.0% senior notes due 2011. Interest on the senior notes is payable on April 1and October 1 of each year. Our obligations under the senior notes are fullyand unconditionally guaranteed on a senior basis by all of our existing andfuture domestic subsidiaries. The senior notes and the subsidiary guaranteesare our and the guarantors’ general unsecured obligations and are effectivelyjunior in right of payment to all of our and the guarantors’ securedindebtedness and to the indebtedness and other liabilities of our non-guarantorsubsidiaries; are pari passu in right of payment to all of our and theguarantors’ existing and future unsecured senior debt; and are senior in rightof payment to all of our and the guarantors’ future subordinated debt,including the senior subordinated notes. Our present foreign subsidiary, LesProduits Alimentaires Jacques et Fils Inc., is not a guarantor, and any futureforeign or partially owned domestic subsidiaries will not be guarantors, of oursenior notes.

 

On orafter October 1, 2008, we may redeem some or all of the senior notes at aredemption price of 104.0% beginning October 1, 2008 and thereafter at pricesdeclining annually to 100% on or after October 1, 2010. Prior to October 1,2007, we may redeem up to 35% of the aggregate principal amount of the seniornotes issued in the senior note offering with the net proceeds of one or moreequity offerings at the redemption price as described in the indenturegoverning the senior notes. If we or any of the guarantors sell certain assetsor experience specific kinds of changes in control, we must offer to purchasethe senior notes at the prices as described in the indenture governing thesenior notes plus accrued and unpaid interest to the date of redemption. Theindenture governing the senior notes limits our ability and the ability of theguarantors to incur additional indebtedness and issue preferred stock; makerestricted payments, including dividend payments on our common stock; allowrestrictions on the ability of certain subsidiaries to make distributions; sellall or substantially all of our assets or consolidate or merge with or intoother companies; enter into certain transactions with affiliates; or createliens and enter into sale and leaseback transactions. Each of the covenants issubject to a number of important exceptions and qualifications.

 

*SubsidiaryGuarantees*. Wehave no assets or operations independent of our direct and indirectsubsidiaries. All of our domestic subsidiaries jointly and severally, and fullyand unconditionally, guarantee our senior subordinated notes and our seniornotes, and management has determined that our only subsidiary that is not aguarantor of our senior subordinated notes and senior notes is a “minor”subsidiary as that term is used in Rule 3-10 of Regulation S-X promulgated bythe Securities and Exchange Commission. There are no significant restrictionson our ability and the ability of our subsidiaries to obtain funds from ourrespective subsidiaries by dividend or loan. Consequently, separate financialstatements have not been presented for our subsidiaries because management hasdetermined that they would not be material to investors.

 

*DeferredFinancing Costs*.In connection with the issuance of the 12.0% senior subordinated notes due 2016and the 8.0% senior notes due 2011, we capitalized approximately $23,123 offinancing costs, which will be amortized over their respective terms. Inconnection with the issuance of our term loan in January 2006, we capitalizedapproximately $404 of additional financing costs, which will be amortized overthe term of the loan. As of April 1, 2006, we had net deferred financing costsof $19,421.

 

AtApril 1, 2006 and December 31, 2005 accrued interest of $13,302 and $8,117,respectively, is included in accrued expenses in the accompanying consolidatedbalance sheets.

 

15

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

**Notes toConsolidated Financial Statements (Continued)**

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

**(Unaudited)**

 

**(6)****          ****Pension Benefits**

 

Netperiodic costs for the thirteen-week periods ended April 1, 2006 and April 2,2005 include the following components:

** **
| ** **                                          | ** ** | **Thirteen Weeks Ended** | ** ** |
|-----------------------------------------------------|------------|------------------------------------|------------|
| ** **                                          | ** ** | **April 1, 2006**        | ** ** | **April 2, 2005** | ** ** |
| Service cost—benefits earned during the period |       | $                                  | 426        |   | $ | 377 |   |
| Interest cost on projected benefit obligation       |       | 313                                |       | 277 |   |
| Expected return on plan assets                      |       | (297                               | )          | (262 | ) |
| Amortization of unrecognized prior service cost     |       | 1                                  |       | 1 |   |
| Net amortization and deferral                       |       | 64                                 |       | 48 |   |
| Net pension cost                                    |       | $                                  | 507        |   | $ | 441 |   |

 

Wepreviously disclosed in our consolidated financial statements for the fiscalyear ended December 31, 2005 that we expected to contribute $1,514 to ourpension plans in fiscal 2006. As of April 1, 2006, we have not made anycontributions to our pension plan during fiscal 2006.

 

Infiscal 2005 an additional minimum pension liability adjustment was required forour pension plan, due to a decline in the discount rate used to estimate ourpension liability. As a result, our accumulated benefit obligation exceeded thefair value of the plan assets. The effect of this adjustment was to increasepension liabilities by $78, increase intangible assets by $45 and increase ourother comprehensive loss by $33.

 

**(7)****          ****Related-Party Transactions**

 

We are party to atransaction services agreement pursuant to which BRS & Co., the manager ofBruckmann, Rosser, Sherrill & Co., L.P. (BRS), will be paid a transactionfee for management, financial and other corporate advisory services rendered byBRS & Co. in connection with acquisitions by our company, which fee willnot exceed 1.0% of the total transaction value. BRS was our majority ownerprior to our initial public offering in October 2004. In connection with ourinitial public offering and the concurrent offerings, the transaction servicesagreement was amended to provide that transaction fees will be payable asdescribed above unless a majority of our disinterested directors determinesotherwise. BRS & Co. did not receive any transaction fees in connectionwith the initial public offering and the concurrent offerings, the Ortega foodservice dispensing pouch and dipping cup acquisition or the *Grandma’s*molasses acquisition.

 

Welease a manufacturing and warehouse facility from a former chairman of ourboard of directors under an operating lease, which expires in April 2009. Totalrent expense associated with this lease was $192 for the thirteen weeks endedApril 1, 2006 and April 2, 2005.

 

OnJanuary 10, 2006, through a wholly-owned subsidiary, we acquired the *Grandma’s Molasses* business from Mott’s LLP, a CadburySchweppes Americas Beverages company, for $30,000 in cash and assumption ofcertain liabilities. James R. Chambers, a member of our board of directors hasbeen the President, Cadbury Schweppes Americas Confectionary since July 2005.Mr. Chambers did not participate in the negotiation of the transaction nor didhe participate in the board’s deliberations or decisions regarding thetransaction. Mr. Chambers did not personally have any direct or indirectpecuniary or other interest in the transaction as a result of his position atCadbury.

 

16

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** **

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

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

**(Dollars in thousands, except per share data)**

**(Unaudited)**

 

**(8)****           Commitmentsand Contingencies**

 

We aresubject to environmental laws and regulations in the normal course of business.We did not make any material expenditures during the thirteen-week periodsended April 1, 2006 and April 2, 2005 in order to comply with environmentallaws or regulations. Based on our experience to date, management believes thatthe future cost of compliance with existing environmental laws and regulations(and liability for known environmental conditions) will not have a materialadverse effect on our consolidated financial position, results of operations orliquidity. However, we cannot predict what environmental or health and 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.

 

We areinvolved in various claims and legal actions arising in the ordinary course ofbusiness, including proceedings involving product liability claims, worker’scompensation and other employee claims, and tort and other general liabilityclaims, for which we carry insurance, as well as trademark, copyright, patentinfringement and related claims and legal actions. In the opinion of ourmanagement, the ultimate disposition of these matters will not have a materialadverse effect on our consolidated financial position, results of operations orliquidity.

 

Wehave employment agreements with our executive officers. The agreementsgenerally continue until terminated by the executive or by us, and provide forseverance payments under certain circumstances. As of April 1, 2006, if all ofour executives were to be terminated by us without cause (as defined) or as aresult of the employees’ disability, our severance liability would beapproximately $2,036.

 

**(9)****           RestructuringCharge**

** **

On July 1, 2005,we closed our New Iberia, Louisiana, manufacturing facility as part of ourongoing efforts to improve our production capacity utilization, productivity,and operating efficiencies and lower our overall costs. In the fiscal yearended December 31, 2005, we recorded a charge of $3,839. The charge associatedwith the plant closing included a cash charge for employee compensation and othercosts of $769 and a non-cash charge for the impairment of property, plant,equipment and inventory of $3,070. In the thirteen weeks ended April 2, 2005,we recorded a charge for employee other compensations in connection with theplant closing of $116.

 

**(10)****         Businessand Credit Concentrations**

** **

Our exposure tocredit loss in the event of non-payment of accounts receivable by customers isestimated in the amount of the allowance for doubtful accounts. We performongoing credit evaluations of our customers’ financial conditions. As of April1, 2006, we do not believe we have any significant concentration of credit riskwith respect to our trade accounts receivable. Our top ten customers accountedfor approximately 42.7%****and 42.0%of consolidated net sales for the thirteen weeks ended April 1, 2006 and April2, 2005, respectively. Other than Wal-Mart, which accounted for 10.0% of ourconsolidated net sales for the thirteen weeks ended April 1, 2006, no singlecustomer accounted for 10.0% or more of our consolidated net sales for thethirteen weeks ended April 1, 2006 or April 2, 2005.

 

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**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 results could differ materially from thoseanticipated in these forward-looking statements as a result of certain factors,including those set forth under the heading “Forward-Looking Statements” belowand elsewhere in this report. The following discussion should be read inconjunction with the unaudited consolidated interim financial statements and relatednotes for the thirteen weeks ended April 1, 2006 included elsewhere in thisreport and the audited consolidated financial statements and related notes forthe fiscal year ended December 31, 2005 (fiscal 2005) included in our AnnualReport on Form 10-K filed with the Securities and Exchange Commission (SEC) onMarch 7, 2006.

 

**General**

** **

Wemanufacture, sell and distribute a diversified portfolio of high quality,shelf-stable, branded food products, many of which have leading regional ornational retail market shares. In general, we position our branded products toappeal to the consumer desiring a high quality and reasonably priced brandedproduct.

 

Ourbusiness strategy is to continue to increase sales, profitability and cashavailable to pay dividends by enhancing our existing portfolio of brandedshelf-stable products and by capitalizing on our competitive strengths. Weintend to implement our strategy through the following initiatives: profitablygrowing our established brands, leveraging our unique multiple-channel salesand distribution system, introducing new products, capitalizing on the highergrowth Mexican segment of the food industry, and expanding our brand portfoliothrough acquisitions.

 

Since 1996, we havesuccessfully acquired and integrated 16 separate brands into our operations. InJanuary 2006, we acquired a seventeenth brand, the *Grandma’s*molassesbrand, which we expect to integrate into our business during the first half offiscal 2006. We believe thatsuccessful future acquisitions, if any, will enhance our portfolio of existingbusinesses, further leveraging our existing infrastructure.

 

We completed the acquisitionof The Ortega Brand of Business from Nestlé Prepared Foods Company on August21, 2003, which we refer to in this report as “Ortega” or the “initial Ortegaacquisition.”  We subsequently completedthe acquisition of the Ortega food service dispensable pouch and dipping cupcheese sauce businesses from Nestlé USA, Inc. on December 1, 2005, which werefer to in this report as the “Ortega food service dispensing pouch anddipping cup acquisition.”  We completedthe acquisition of the *Grandma’s*molasses business from Motts LLP, a Cadbury Schweppes Americas BeveragesCompany, on January 10, 2006. Both *Ortega*acquisitions and the *Grandma’s*molasses acquisition have been accounted for using the purchase method ofaccounting and, accordingly, the assets acquired, liabilities assumed andresults of operations of the acquired businesses are included in ourconsolidated financial statements from the respective dates of acquisition. TheOrtega acquisitions and the *Grandma’s*molasses acquisition and the application of the purchase method of accountingaffect comparability between periods presented in this report.

 

We aresubject to a number of challenges that may adversely affect our businesses. Thesechallenges, which are discussed below and under the heading “Forward-LookingStatements,” include:

 

*Fluctuationsin Commodity Prices*. We purchase raw materials, includingagricultural products, meat, poultry, other raw materials and packagingmaterials from growers, commodity processors, other food companies andpackaging manufacturers. Raw materials are subject to fluctuations in priceattributable to a number of factors. Fluctuations in commodity prices can leadto retail price volatility and intensive price competition, and can influenceconsumer and trade buying patterns. In the thirteen weeks ended April 1, 2006,our commodity prices for maple syrup and meat were higher than those incurred duringthe thirteen weeks ended April 2, 2005. In addition, the cost of labor,manufacturing, energy, fuel, packaging materials and other costs related to theproduction and distribution of our food products have risen in recent years,and we believe

 

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thatthey may continue to rise in the foreseeable future. We manage these risks byentering into short-term supply contracts and advance commodities purchaseagreements from time to time, and if necessary, by raising prices. We cannotassure you that any price increases by us will offset the increased cost of rawmaterial commodities.

 

*Consolidationin the Retail Trade and Consequent Inventory Reductions*. Asthe retail grocery trade continues to consolidate and our retail customers growlarger and become more sophisticated, our retail customers may demand lowerpricing and increased promotional programs. These customers are also reducingtheir inventories and increasing their emphasis on private label products.

 

*ChangingCustomer Preferences*. Consumers in the market categories inwhich we compete frequently change their taste preferences, dietary habits andproduct packaging preferences.

 

*ConsumerConcern Regarding Food Safety, Quality and Health*. The foodindustry is subject to consumer concerns regarding the safety and quality ofcertain food products, including the health implications of geneticallymodified organisms, obesity and trans fatty acids.

 

*ChangingValuations of the Canadian Dollar in Relation to the U.S. Dollar*.We purchase the majority of our maple syrup requirements from manufacturerslocated in Quebec, Canada. Over the past year the U.S. dollar has weakenedagainst the Canadian dollar, which has in turn increased our costs relating tothe production of our maple syrup products.

 

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.

 

**CriticalAccounting 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 more significant estimates and assumptionsmade by management involve trade and consumer promotion expenses, allowancesfor excess, obsolete and unsaleable inventories, the recoverability ofgoodwill, trademarks, property, plant and equipment, and deferred tax assets,and the accounting for our EISs, including their treatment in computing ourincome tax expense and the accounting for earnings per share. Actual resultscould differ from these estimates and assumptions.

 

Oursignificant accounting policies are described in note 2 to our consolidatedfinancial statements included elsewhere in this report. We believe thefollowing critical accounting policies involve the most significant judgmentsand estimates used in the preparation of our consolidated financial statements.

 

***Trade and Consumer PromotionExpenses***

 

Weoffer various sales incentive programs to customers and consumers, such asprice discounts, in-store display incentives, slotting fees and coupons. Therecognition of expense for these programs involves the use of judgment relatedto performance and redemption estimates. Estimates are made based on historicalexperience and other factors. Actual expenses may differ if the level ofredemption rates and performance vary from estimates.

 

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***Inventories***

 

Inventoriesare stated at the lower of cost or market. Cost is determined using thefirst-in, first-out and average cost methods. Inventories have been reduced byan allowance for excess, obsolete and unsaleable inventories. The allowance isan estimate based on our management’s review of inventories on hand compared toestimated future usage and sales.

 

***Long-Lived Assets***

 

Long-livedassets, such as property, plant and equipment, and intangibles with estimateduseful lives are depreciated or amortized over their respective estimateduseful lives to their estimated residual values, and reviewed for impairmentwhenever events or changes in circumstances indicate that the carrying amountof an asset may not be recoverable. Recoverability of assets to be held andused is measured by a comparison of the carrying amount of an asset toestimated undiscounted future cash flows expected to be generated by the asset.If the carrying amount of an asset exceeds its estimated future cash flows, animpairment charge is recognized by the amount by which the carrying amount ofthe asset exceeds the fair value of the asset. Recoverability of assets heldfor sale is measured by a comparison of the carrying amount of an asset orasset group to their fair value less estimated cost to sell. Calculating fairvalue of assets requires significant estimates and assumptions by management.

 

***Goodwill and Trademarks***

 

Goodwilland intangible assets with indefinite useful lives (trademarks) are tested forimpairment at least annually and whenever events or circumstances occurindicating that goodwill or indefinite life intangibles might be impaired.

 

Weperform the annual impairment tests as of the last day of each fiscal year. Theannual goodwill impairment test involves a two-step process. The first step ofthe impairment test involves comparing the fair value of our company with ourcompany’s carrying value, including goodwill. If the carrying value of ourcompany exceeds our fair value, we perform the second step of the impairmenttest to determine the amount of the impairment loss. The second step of thegoodwill impairment test involves comparing the implied fair value of goodwillwith the carrying value of that goodwill and recognizing a loss for thedifference. Calculating our fair value requires significant estimates andassumptions by management. We estimate our fair value by applying third partymarket value indicators to our earnings before interest, taxes, depreciationand amortization (EBITDA). We test indefinite life intangible assets forimpairment by comparing their carrying value to their fair value that isdetermined using a cash flow method and recognize a loss to the extent thecarrying value is greater.

 

Wecompleted our annual impairment tests for the year ended December 31, 2005 withno adjustments to the carrying values of goodwill and indefinite lifeintangibles. We did not note any events or circumstances during the thirteenweek period ended April 1, 2006 that would indicate that goodwill or indefinitelife intangibles might be impaired.

 

***Accounting Treatment for EISs.***

 

OurEISs include Class A common stock and senior subordinated notes. Uponcompletion of our initial public offering (including the exercise of theover-allotment option), we allocated the proceeds from the issuance of theEISs, based upon relative fair value at the issuance date, to the Class Acommon stock and the senior subordinated notes. We have assumed that the pricepaid in the EIS offering was equivalent to the combined fair value of the ClassA common stock and the senior subordinated notes, and the price paid in theoffering for the senior subordinated notes sold separately (not in the form ofEISs) was equivalent to their initial stated principal amount. We haveconcluded there are no embedded derivative features related to the EIS thatrequire bifurcation under Financial Accounting Standards Board (FASB) StatementNo. 133, “Accounting for Derivative Instruments and Hedging Activities,” asamended (SFAS No. 133). We have determined the fair value of the Class A commonstock and the senior subordinated notes with reference to a

 

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numberof factors, including the sale of the senior subordinated notes sold separatelyfrom the EISs that have the same terms as the senior subordinated notesincluded in the EISs. Therefore, we have allocated the entire proceeds of theEIS offering to the Class A common stock and the senior subordinated notes, andthe allocation of the EIS proceeds to the senior subordinated notes did notresult in a premium or discount.

 

Wehave concluded that the call option and the change in control put option in thesenior subordinated notes do not warrant separate accounting under SFAS No. 133because they are clearly and closely related to the economic characteristics ofthe host debt instrument. Therefore, we have allocated the entire proceeds ofthe offering to the Class A common stock and the senior subordinated notes. Uponsubsequent issuances, if any, of senior subordinated notes, we will evaluatewhether the call option and the change in control put option in the seniorsubordinated notes require separate accounting under SFAS No. 133. We expectthat if there is a substantial discount or premium upon a subsequent issuanceof senior subordinated notes, we may need to separately account for the calloption and the change in control put option features as embedded derivativesfor such subsequent issuance. If we determine that the embedded derivatives, ifany, require separate accounting from the debt host contract under SFAS No.133, the call option and the change in control put option associated with thesenior subordinated notes will be recorded as derivative liabilities at fairvalue, with changes in fair value recorded as other non-operating income orexpense. Any discount on the senior subordinated notes resulting from theallocation of proceeds to an embedded derivative will be amortized to interestexpense over the remaining life of the senior subordinated notes.

 

TheClass A common stock portion of each EIS is included in stockholders’ equity,net of the related portion of the EIS transaction costs allocated to Class Acommon stock. Dividends paid on the Class A common stock are recorded as adecrease to additional paid-in capital when declared by us. The seniorsubordinated note portion of each EIS is included in long-term debt, and therelated portion of the EIS transaction costs allocated to the seniorsubordinated notes was capitalized as deferred financing costs and is beingamortized to interest expense using the effective interest method. Interest onthe senior subordinated notes is charged to expense as accrued by us.

 

***Income Tax Expense Estimates and Policies***

 

Aspart of the income tax provision process of preparing our consolidatedfinancial statements, we are required to estimate our income taxes. Thisprocess involves estimating our current tax expenses together with assessingtemporary differences resulting from differing treatment of items for tax andaccounting purposes. These differences result in deferred tax assets andliabilities. We then assess the likelihood that our deferred tax assets will berecovered from future taxable income and to the extent we believe the recoveryis not likely, we establish a valuation allowance. Further, to the extent thatwe establish a valuation allowance or increase this allowance in a financialaccounting period, we include such charge in our tax provision, or reduce ourtax benefits in our consolidated statement of operations. We use our judgmentto determine our provision or benefit for income taxes, deferred tax assets andliabilities and any valuation allowance recorded against our net deferred taxassets.

 

Wehave recorded deferred tax assets, a portion of which represents net operatingloss carryforwards. A valuation allowance has been recorded for certain statenet operating loss carryforwards.

 

Thereare various factors that may cause these tax assumptions to change in the nearterm, and we may have to record a valuation allowance against our deferred taxassets. We cannot predict whether future U.S. federal and state income tax lawsand regulations might be passed that could have a material effect on ourresults of operations. We assess the impact of significant changes to the U.S.federal and state income tax laws and regulations on a regular basis and updatethe assumptions and estimates used to prepare our consolidated financialstatements when new regulations and legislation are enacted.

 

We donot provide for U.S. federal income taxes or tax benefits on the unremittedearnings or losses of our foreign subsidiary as such earnings are intended tobe indefinitely reinvested.

 

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Wehave accounted for our issuance of EISs as an issuance of the separatesecurities evidenced by such EISs and have allocated the proceeds received foreach EIS between the Class A common stock and senior subordinated noterepresented thereby in the amounts of their respective fair values at the timeof issuance. Accordingly, we have accounted for the senior subordinated notesrepresented by the EISs as long-term debt bearing a stated interest rate andmaturing on October 30, 2016. In connection with the issuance and initialpublic offering of the EISs, we received an opinion from counsel that thesenior subordinated notes should be treated as debt for United States federalincome tax purposes. We continue to be of the view that the senior subordinatednotes should be treated as debt for United States federal income tax purposes(although we have not sought a ruling from the IRS on this issue), and weintend to deduct annually interest expense of approximately $19.9 million onthe senior subordinated notes from taxable income for United States federal andstate income tax purposes. There can be no assurance that the classification ofsenior subordinated notes as debt (or the amount of interest expense deducted)will not be challenged by the IRS or other tax jurisdictions or will besustained by a court of law if challenged.

 

If ourtreatment of the senior subordinated notes as debt is put at risk in the futureas a result of a future ruling by the IRS or other tax jurisdiction or by acourt of law, including an adverse ruling for EISs (or other similarsecurities) issued by other companies or as a result of a proposed adjustmentby the IRS or other tax jurisdiction in an examination of our company or forany other reason, we will need to consider the effect of such developments onthe determination of our future tax provisions and obligations. In the eventthe senior subordinated notes are required to be treated as equity for incometax purposes, then the cumulative interest expense associated with the seniorsubordinated notes for prior tax periods that are open to assessment and forfuture tax periods would not be deductible from taxable income and we would berequired to recognize additional tax expense and establish a related income taxliability for prior period treatment. The additional tax due to the federal andstate authorities would be based on our taxable income or loss for each of theyears that we claimed the interest expense deduction and would materially andadversely affect our financial position, cash flow, and liquidity, and couldaffect our ongoing ability to make interest payments on the senior subordinatednotes and dividend payments on the shares of common stock represented by theEISs and our ability to continue as a going concern. In addition, non-U.S.holders of our EISs could be subject to withholding taxes on the payment ofinterest treated as dividends on equity, which could subject us to additionalliability for the withholding taxes that we do not collect on such payments. However,because in accordance with the opinion of counsel we received on the date ofour initial public offering we continue to be of the view that the seniorsubordinated notes should be treated as debt for United States federal incometax purposes, we do not record a liability for a potential disallowance of thisinterest expense deduction or for the potential imposition of these withholdingtaxes.

 

Afactor in the ongoing determination that no liability should be recorded in ourconsolidated financial statements with respect to the deductibility for incometax purposes of the interest on the senior subordinated notes is the veracity,at the time of the initial public offering, of the representations delivered bythe purchasers of senior subordinated notes sold separately (not in the form ofEISs). In addition, other factors indicating the existence, at the time of theinitial public offering, of any plan or pre-arrangement may also be relevant tothis ongoing determination. It is possible that we will at some point in thefuture, as a result of IRS interpretations or other changes in circumstances,conclude that we should establish a reserve for tax liabilities associated witha disallowance of all or part of the interest deductions on the seniorsubordinated notes, although our present view is that no such reserve isnecessary or appropriate. If we decide to maintain such a reserve, our incometax provision, and related income tax payable, would be materially impacted. Asa result, our ability to pay dividends on the shares of our common stock couldbe materially impaired and the market price and/or liquidity for the EISs orour common stock could be adversely affected.

 

***Earnings Per Share***

 

Followingthe consummation of our initial public offering, we have two classes of commonstock, designated as Class A common stock and Class B common stock, and wepresent basic and diluted earnings per share using the two-class method. Thetwo-class method is an earnings allocation formula that determines

 

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earningsper share for each class of common stock according to dividends declared andparticipation rights in undistributed earnings.

 

Netincome available to our common stockholders is allocated between our twoclasses of common stock based upon the two-class method. Basic and dilutedearnings per share for our Class A and Class B common stock is calculated bydividing allocated net income available to common stockholders by the weightedaverage number of shares of Class A and Class B common stock outstanding.

 

**Results of Operations**

** **

Thefollowing table sets forth the percentages of net sales represented by selecteditems for the thirteen week periods ended April 1, 2006 and April 2, 2005reflected in our consolidated statements of operations. The comparisons offinancial results are not necessarily indicative of future results:

 
| ** **                                   | ** ** | **Thirteen Weeks Ended** | ** ** |
|----------------------------------------------|------------|------------------------------------|------------|
| ** **                                   | ** ** | **April 1, 2006**        | ** ** | **April 2, 2005** | ** ** |
| **Statement of Operations:**       | ** ** | ** **                         | ** ** | ** ** | ** ** |
| Net sales                                    |       | 100.0                              | %          | 100.0 | % |
| Cost of goods sold                           |       | 70.0                               | %          | 70.2 | % |
| Cost of goods sold—restructuring charge |       | 0.0                                | %          | 0.1 | % |
| Gross profit                                 |       | 30.0                               | %          | 29.6 | % |
|                                         |       |                               |       |   |   |
| Sales, marketing and distribution expenses   |       | 11.3                               | %          | 11.2 | % |
| General and administrative expenses          |       | 1.8                                | %          | 1.5 | % |
| Operating income                             |       | 16.9                               | %          | 17.0 | % |
|                                         |       |                               |       |   |   |
| Interest expense, net                        |       | 11.7                               | %          | 11.6 | % |
| Income before income tax expense             |       | 5.2                                | %          | 5.4 | % |
|                                         |       |                               |       |   |   |
| Income tax expense                           |       | 2.0                                | %          | 2.1 | % |
| Net income                                   |       | 3.2                                | %          | 3.3 | % |

 

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

 

*Net Sales.*Our net sales represents grosssales of products shipped to customers plus amounts charged customers forshipping and handling, less cash discounts, coupon redemptions, slotting feesand trade promotional spending.

 

*Gross Profit.*Our gross profit is equal toour net sales less cost of goods sold. The primary components of our cost ofgoods sold are cost of internally manufactured products, purchases of finishedgoods from co-packers plus freight costs to our distribution centers and to ourcustomers.

 

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

 

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

 

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*Net Interest Expense.*Net interest expenseincludes interest relating to our outstanding indebtedness and amortization ofdeferred debt issuance costs, net of interest income.

 

***Thirteen-week period ended April 1, 2006 compared tothirteen-week period ended April 2, 2005.***

** **

*Net Sales.*Net sales increased $2.9million or 3.2% to $93.0 million for the thirteen-week period ended April 1,2006 from $90.1 million for the thirteen-week period ended April 2, 2005. The *Ortega* food service dispensing pouch and dipping cupacquisition accounted for $2.9 million and the *Grandma’s*molasses acquisition accounted for $0.9 million of the sales increase. Theremaining $0.9 million reduction in net sales was related to a decrease in unitvolume offset by price increases. Net sales of our lines of*Ortega*(exclusive of food servicedispensing pouch and dipping cup net sales), *B&G*pickles and peppers, *Sason* and *Regina*productsincreased**in the amounts of $1.8million, $0.8 million, $0.3 million and $0.3 million or 9.4%, 8.9%, 59.9% and9.8%, respectively. These increases were offset by a reduction of net sales in *Maple Grove Farms, Las Palmas, Joan of Arc*and *B&M*products of $1.6million, $1.2 million, $0.7 million and $0.7 million or 11.9%, 18.5%, 27.0% and14.6%, respectively. All other brands increased, in the aggregate, by $0.1million or 0.3%.

 

*Gross Profit.*Gross profit increased $1.2million or 4.3% to $27.9 million for the thirteen-week period ended April 1,2006 from $26.7 million for the thirteen-week period ended April 2, 2005. OnJuly 1, 2005, we closed our New Iberia, Louisiana, manufacturing facility aspart of our ongoing efforts to improve our production capacity utilization,productivity, and operating efficiencies and lower our overall costs. Werecorded as cost of goods sold a restructuring charge associated with the plantclosing, which included a cash charge for employee compensation and other costsof $0.8 million and a non-cash charge for the impairment of property, plant,equipment and inventory of $3.0 million. In the thirteen-weeks ended April 2,2005, we expensed $0.1 million of this $3.8 million charge. The balance of the$3.8 million charge was expensed during the remainder of fiscal 2005. Norestructuring charges were recorded or expensed during the thirteen weeks endedApril 1, 2006.

 

Proforma gross profit, which excludes the restructuring charge described above,increased $1.1 million or 3.9% to $27.9 million for the thirteen-week periodended April 1, 2006 from $26.8 million for the thirteen-week period ended April2, 2005. Pro forma gross profit expressed as a percentage of net salesincreased 0.2% to 30.0% in the thirteen-week period ended April 1, 2006 from29.8% in the thirteen-week period ended April 2, 2005. The increase in proforma gross profit was primarily due to price increases, which were partiallyoffset by higher costs for packaging materials, transportation costs and maplesyrup.

 

*Sales, Marketing and Distribution Expenses.*Sales,marketing and distribution expenses increased $0.4 million or 4.2% to $10.5million for the thirteen-week period ended April 1, 2006 from $10.1 million forthe thirteen-week period ended April 2, 2005. These expenses as a percentage ofnet sales increased to 11.3% for the thirteen-week period ended April 1, 2006from 11.2% for the thirteen-week period ended April 2, 2005. This increase isprimarily due to an increase in brokerage and salesmen commissions of $0.4million.

 

*General and Administrative Expenses.*Generaland administrative expenses increased $0.3 million or 23.3% to $1.7 million forthe thirteen-week period ended April 1, 2006 from $1.4 million in thethirteen-week period ended April 2, 2005. The increase was primarily due to anincrease in employee compensation.

 

*Operating Income.*As a result of theforegoing, operating income increased $0.4 million or 2.7% to $15.7 million forthe thirteen-week period ended April 1, 2006 from $15.3 million for thethirteen-week period ended April 2, 2005. Operating income expressed as apercentage of net sales decreased to 16.9% in the thirteen-week period endedApril 1, 2006 from 17.0% in the thirteen-week period ended April 2, 2005.

 

*Interest Expense.*Net interest expenseincreased $0.4 million or 5.0% to $10.8 million for the thirteen-week periodended April 1, 2006 from $10.4 million in the thirteen-week period ended April2, 2005. The average debt outstanding increased approximately $25.0 million inthe thirteen-week period ended April 1,

 

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2006 ascompared to the thirteen-week period ended April 2, 2005. See “—Liquidity andCapital Resources—Debt” below.

 

*Income Tax Expense.*Income tax expenseremained constant at $1.9 million for the thirteen-week periods ended April 1,2006 and April 2, 2005. Our effective tax rate was 39.0% for the thirteen-weekperiods ended April 1, 2006 and April 2, 2005.

 

**Liquidity and Capital Resources**

 

Ourprimary liquidity requirements include debt service, capital expenditures andworking capital needs. See also, “Dividend Policy” and “Commitments andContractual Obligations” below. We fund our liquidity needs primarily throughcash generated from operations and to the extent necessary, through borrowingsunder our revolving credit facility.

 

*Cash Flows*. Cash provided by operatingactivities increased $8.9 million to $8.6 million for the thirteen-week periodended April 1, 2006 from cash used in operating activities of $0.3 million inthe thirteen-week period ended April 2, 2005. The increase was due to changesrelating to a reduction in accounts receivable and an increase in accruedexpenses and accounts payable, offset by increases in inventory. Workingcapital at April 1, 2006 was $99.5 million, a decrease of $4.3 million overworking capital at December 31, 2005 of $103.8 million.

 

Netcash used in investing activities for the thirteen-week period ended April 1,2006 was $31.7 million as compared to $1.5 million for the thirteen week periodended April 2, 2005. Capital expenditures during the thirteen-week period endedApril 1, 2006 were $1.6 million and included purchases of manufacturing andcomputer equipment. This compares to $1.5 million in similar capitalexpenditures for the thirteen-week period ended April 2, 2005. Investmentexpenditures for the thirteen week period ended April 1, 2006 included $30.1million for the *Grandma’s* molasses acquisition.

 

Netcash provided by financing activities for the thirteen-week period ended April1, 2006 was $20.4 million as compared to net cash used in financing activitiesof $3.7 million for the thirteen-week period ended April 2, 2005. Net cashprovided by financing activities for the thirteen-week period ended April 1,2006 consists of $25.0 million in a new term loan, offset by $4.2 million individends paid on our Class A common stock, and $0.4 million in debt issuancecosts. The net cash used in financing activities for the thirteen-week periodended April 2, 2005 consists of $3.7 million in dividends paid on our Class Acommon stock.

 

Basedon a number of factors, including our trademark and goodwill amortization fortax purposes from our prior acquisitions, and the income tax effects of ourinitial public offering, the concurrent offerings and related transactions,including our call premium on our outstanding senior subordinated notes, otherwrite-offs of existing deferred financing costs and the compensation expenseassociated with our repurchase of certain management stock options, we realizeda significant reduction in cash taxes in 2005 as compared to our tax expensefor financial statement purposes, and further, we will realize a benefit to ourcash taxes payable from amortization of our trademarks and goodwill for thetaxable years 2006 through 2020.

 

***Non-GAAP Financial Measures***

 

Certaindisclosures in this report include “non-GAAP (Generally Accepted AccountingPrinciples) financial measures.”  Anon-GAAP financial 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. We present EBITDA (net income before net interest expense, income taxes,depreciation and amortization) and adjusted EBITDA (EBITDA as adjusted forrestructuring charges incurred in fiscal 2005) because we believe they are usefulindicators of our historical debt capacity and ability to service debt. We alsopresent this

 

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discussionof EBITDA and adjusted EBITDA because covenants in the indenture governing oursenior notes, our credit facility and the indenture governing our seniorsubordinated notes contain ratios based on these measures.

 

Areconciliation of EBITDA and adjusted EBITDA with the most directly comparableGAAP measure is included below for the thirteen weeks ended April 1, 2006 andApril 2, 2005 along with the components of EBITDA and adjusted EBITDA.

 

*Reconciliation of EBITDA and Adjusted EBITDAto Net Cash Provided by (Used in) Operating Activities (dollars in thousands)*.

 
| ** **                                                                 | ** ** | **Thirteen Weeks Ended** | ** ** |
|----------------------------------------------------------------------------|------------|------------------------------------|------------|
| ** **                                                                 | ** ** | **April 1, 2006**        | ** ** | **April 2, 2005** | ** ** |
| Net income                                                                 |       | $                                  | 2,952      |   | $ | 2,958 |   |
| Income tax expense                                                         |       | 1,887                              |       | 1,892 |   |
| Interest expense, net                                                      |       | 10,858                             |       | 10,434 |   |
| Depreciation                                                               |       | 1,771                              |       | 1,667 |   |
| EBITDA (1)                                                                 |       | 17,468                             |       | 16,951 |   |
| Adjustments to EBITDA – restructuring  (1)(2)                         |       | —                             |       | 116 |   |
| Adjusted EBITDA (1)                                                        |       | 17,468                             |       | 17,067 |   |
| Income tax expense                                                         |       | (1,887                             | )          | (1,892 | ) |
| Interest expense, net                                                      |       | (10,858                            | )          | (10,434 | ) |
| Deferred income taxes                                                      |       | 1,616                              |       | 1,799 |   |
| Restructuring charge—cash portion                                     |       | —                             |       | (116 | ) |
| Amortization of deferred financing costs                                   |       | 708                                |       | 698 |   |
| Changes in assets and liabilities, net of  effects of business combination |       | 1,601                              |       | (7,384 | ) |
| Net cash provided by (used in) operating  activities                       |       | $                                  | 8,648      |   | $ | (262 | ) |

 

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(1)   We define EBITDA as net income before netinterest expense, income taxes, depreciation and amortization. We defineadjusted EBITDA as EBITDA as adjusted for restructuring charges incurred infiscal 2005. We believe that the most directly comparable GAAP financialmeasure to EBITDA and adjusted EBITDA is net cash provided by (used in) operatingactivities. We present EBITDA and adjusted EBITDA because we believe they areuseful indicators of our historical debt capacity and ability to service debt. Wealso present this discussion of EBITDA and adjusted EBITDA because covenants inour credit facility and the indentures governing the senior notes and thesenior subordinated notes contain ratios based on these measures. EBITDA andadjusted EBITDA are not substitutes for operating income or net income, asdetermined in accordance with generally accepted accounting principles. EBITDAand adjusted EBITDA are not complete net cash flow measures because EBITDA andadjusted EBITDA are measures of liquidity that do not include reductions forcash payments for an entity’s obligation to service its debt, fund its workingcapital, capital expenditures and acquisitions, if any, and pay its incometaxes and dividends, if any, and in the case of adjusted EBITDA, the cost torestructure our operations. Rather, EBITDA and adjusted EBITDA are twopotential indicators of an entity’s ability to fund these cash requirements. EBITDAand adjusted EBITDA also are not complete measures of an entity’s profitabilitybecause they do not include costs and expenses for depreciation andamortization, interest and related expenses and income taxes and in the case ofadjusted EBITDA, the cost of restructuring charges. EBITDA and adjusted EBITDA,as we define them, may differ from similarly named measures used by otherentities.

 

(2)   OnJuly 1, 2005, we closed our New Iberia, Louisiana, manufacturing facility aspart of our ongoing efforts to improve our production capacity utilization,productivity, and operating efficiencies and lower our overall costs. In fiscal2005, we recorded a charge of $3.8 million, of which $0.1 million was recordedduring the thirteen weeks ended April 2, 2005. The charge associated with theplant closing included a

 

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cash chargefor employee compensation and other costs of $0.8 million and a non-cash chargefor the impairment of property, plant, equipment and inventory of $3.0 million.

 

***Dividend Policy.***

 

Priorto the completion of our initial public offering, our board of directorsadopted a dividend policy that reflects a basic judgment that our stockholderswould be better served if we distributed our cash available to pay dividends tothem instead of retaining it in our business. Under this policy, cash generatedby our company in excess of operating needs, interest and principal payments onindebtedness, capital expenditures sufficient to maintain our properties andother assets and $6.0 million of dividend restricted cash (that can be used forthe payment of dividends on Class A common stock or for any other purpose otherthan the payment of dividends on the Class B common stock) would in general bedistributed as regular quarterly cash dividends (up to the intended dividendrate as determined by our board of directors) to the holders of our Class Acommon stock and as regular annual cash dividends (up to the dividend ratepermitted under our debt agreements and our organizational documents) to theholders of our Class B common stock and not be retained by us.

 

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 of directors may, in its sole discretion, amend or repeal thisdividend policy with respect to the Class A and Class B common stock at anytime. Our board of directors may decrease the level of dividends for the ClassA and Class B common stock below the intended dividend rates or discontinueentirely the payment of dividends. Future dividends with respect to shares ofour capital stock, if any, depend on, among other things, our results ofoperations, cash requirements, financial condition, contractual restrictions,business opportunities, provisions of applicable law and other factors that ourboard of directors may deem relevant. The indenture governing our seniorsubordinated notes, the terms of our revolving credit facility and theindenture governing the senior notes contain significant restrictions on ourability to make dividend payments. In addition, certain provisions of theDelaware General Corporation Law may 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 mayhave to forego growth opportunities or capital expenditures that wouldotherwise be necessary or desirable if we do not find alternative sources offinancing. If we do not have sufficient cash for these purposes, our financialcondition and our business will suffer.

 

Forthe thirteen weeks ended April 1, 2006, we had cash flows provided by operatingactivities of $8.6 million. If our cash flows from operating activities forfuture periods were to fall below our minimum expectations (or if ourassumptions as to capital expenditures or interest expense were too low or ourassumptions as to the sufficiency of our revolving credit facility to financeour working capital needs were to prove incorrect), we would need either toreduce or eliminate dividends or, to the extent permitted under the indenturegoverning our senior notes, the indenture governing our senior subordinatednotes and the terms of our credit facility, fund a portion of our dividendswith borrowings or from other sources. If we were to use working capital orpermanent borrowings to fund dividends, we would have less cash and/orborrowing capacity available for future dividends and other purposes, whichcould negatively impact our financial position, our results of operations, ourliquidity and our ability to maintain or expand our business.

 

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Thetable below illustrates for the fiscal year ended December 31, 2005 and thelatest twelve months ended April 1, 2006, respectively, the amount of cash thatwe had available for distribution to our stockholders.

 
| ** **                                                                        | ** ** | **Fiscal Year  Ended**          | ** ** | **Less:  Thirteen  Weeks Ended** | ** ** | **Plus:  Thirteen  Weeks Ended** | ** ** | **Latest Twelve  Months  Ended** | ** ** |
|-----------------------------------------------------------------------------------|------------|--------------------------------------|------------|---------------------------------------|------------|---------------------------------------|------------|---------------------------------------|------------|
| **Cash Available to Pay Dividends**                           | ** ** | **December 31,  2005**          | ** ** | **April 2,  2005**               | ** ** | **April 1,  2006**               | ** ** | **April 1,  2006 ****(a)**  | ** ** |
| ** **                                                                        | ** ** | **(unaudited)**                      | ** ** | **(unaudited)**                       | ** ** | **(unaudited)**                       | ** ** | **(unaudited)**                       | ** ** |
| ** **                                                                        | ** ** | **(Dollars in thousands)** | ** ** |
| Net cash provided by (used in) operating  activities                              |       | $                                    | 22,523     |                                  | $          | (262                                  | )          | $                                     | 8,648      |   | $ | 31,433 |   |
| Interest expense, net                                                             |       | 41,767                               |       | 10,434                                |       | 10,858                                |       | 42,191                                |       |
| Income taxes                                                                      |       | 5,235                                |       | 1,892                                 |       | 1,887                                 |       | 5,230                                 |       |
| Amortization of deferred debt issuance  costs                                     |       | (2,791                               | )          | (698                                  | )          | (708                                  | )          | (2,801                                | )          |
| Deferred income taxes                                                             |       | (4,795                               | )          | (1,799                                | )          | (1,616                                | )          | (4,612                                | )          |
| Restructuring charge—property, plant,  equipment and inventory impairment(b) |       | (3,070                               | )          | —                                |       | —                                |       | (3,070                                | )          |
| Changes in assets and liabilities                                                 |       | 3,050                                |       | 7,384                                 |       | (1,601                                | )          | (5,935                                | )          |
| EBITDA                                                                            |       | 61,919                               |       | 16,951                                |       | 17,468                                |       | 62,436                                |       |
| Restructuring charge (b)                                                          |       | 3,839                                |       | 116                                   |       | —                                |       | 3,723                                 |       |
| Adjusted EBITDA                                                                   |       | 65,758                               |       | 17,067                                |       | 17,468                                |       | 66,159                                |       |
| Reduction for cash income tax expense (c)                                         |       | —                               |       | —                                |       | —                                |       | —                                |       |
| Cash interest expense (d)                                                         |       | (38,976                              | )          | (9,736                                | )          | (10,150                               | )          | (39,390                               | )          |
| Capital expenditures                                                              |       | (6,659                               | )          | (1,499                                | )          | (1,592                                | )          | (6,752                                | )          |
| Restructuring charge—cash portion (b)                                        |       | (769                                 | )          | (116                                  | )          | —                                |       | (653                                  | )          |
| Cash available to pay dividends on Class A  common stock                          |       | 19,354                               |       | 5,716                                 |       | 5,726                                 |       | 19,364                                |       |
|                                                                              |       |                                 |       |                                  |       |                                  |       |                                  |       |
| Less:                                                                             |       |                                 |       |                                  |       |                                  |       |                                  |       |
| Dividends paid on Class A common stock                                            |       | 16,448                               |       | 3,728                                 |       | 4,240                                 |       | 16,960                                |       |
| Dividend restricted cash (e)                                                      |       | 6,000                                |       |                                  |       |                                  |       | 6,000                                 |       |
| Cash available to pay dividends on Class B  common stock                          |       | $                                    | (3,094     | )                                     |       |                                  |       |                                  | $          | (3,596 | ) |
|                                                                                   |            |                                      |            |                                       |            |                                       |            |                                       |            |  |  |  |  |

 

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(a)   Ourunaudited consolidated statements of operations and cash flow data for thelatest twelve months ended April 1, 2006 was derived from our audited consolidatedstatements of operations and cash flow data for the fiscal year ended December31, 2005 and (i) subtracting from it our unaudited consolidated statements ofoperations and cash flow data for the thirteen weeks ended April 2, 2005 and(ii) adding to it our unaudited consolidated statements of operations and cashflow data for the thirteen weeks ended April 1, 2006.

 

(b)   OnJuly 1, 2005, we closed our New Iberia, Louisiana manufacturing facility aspart of our ongoing efforts to improve our production capacity utilization,productivity, and operating efficiencies and lower our overall costs. In fiscal2005, we recorded a charge of $3.8 million, of which $0.1 million was recordedduring the thirteen weeks ended April 2, 2005. The charge associated with theplant closing included a cash charge for employee compensation and other costsof $0.8 million and a non-cash charge for the impairment of property, plant,equipment and inventory of $3.0 million.

 

(c)   Infiscal 2005 we had a net cash tax refund of $5.9 million. For the latest twelvemonths ended April 1, 2006 we had a net cash tax refund of $5.6 million.

 

(d)   Cashinterest expense is interest expense less deferred debt issuance costs.

 

(e)   Underour organizational documents, our EBITDA otherwise available for the payment ofannual dividends, if any, on our Class B common stock for any year is reducedby $6.0 million.

 

There can be no assurance that we will continue to paydividends at historical levels, or at all. Dividend payments are not mandatoryor guaranteed, are within the absolute discretion of our board of directors andwill be dependent upon many factors and future developments that could differmaterially from our current expectations. Over time, our EBITDA, adjustedEBITDA and capital expenditure, working capital and other cash needs will besubject to uncertainties, which could impact the level of dividends, if any, wepay in the future.

 

***Acquisitions.***

 

Ourliquidity and capital resources have been significantly impacted byacquisitions and may be impacted in the foreseeable future by additionalacquisitions. We have historically financed acquisitions with borrowings andcash flows from operating activities. Our interest expense has increasedsignificantly as a

 

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resultof additional indebtedness we have incurred as a result of our acquisition ofOrtega in August 2003 and the *Grandma’s*molassesbusiness in January 2006, and will increase with any additional indebtedness wemay incur to finance potential future acquisitions, if any. To the extentfuture acquisitions, if any, are financed by additional indebtedness, theresulting increase in debt and interest expense could have a negative impact onliquidity.

 

***Environmental and Health and Safety Costs.***

 

Wehave not made any material expenditures during the thirteen-week period endedApril 1, 2006 in order to comply with environmental 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 environmental or health and safety legislation orregulations will be enacted in the future or how existing or future laws orregulations will be enforced, administered or interpreted, nor can we predictthe amount of future expenditures that may be required in order to comply withsuch environmental or health and safety laws or regulations or to respond tosuch environmental claims.

 

***Debt.***

 

*SeniorSecured Credit Facility*. Concurrent with our initial publicoffering and concurrent offerings, we entered into a $30.0 million seniorsecured revolving credit facility on October 14, 2004. In order to finance ouracquisition of the *Grandma’s*molassesbrand, we amended the credit facility in January 2006 to provide for, amongother things, a new $25.0 million term loan and a reduction in the revolvingcredit facility commitments from $30.0 million to $25.0 million. As amended,all outstanding indebtedness under the credit facility matures on January 10,2011. Interest under the revolving credit facility is determined based onseveral alternative rates as stipulated in the revolving credit facility,including the base lending rate per annum plus an applicable margin, or LIBORplus an applicable margin. We pay a commitment fee of 0.50% per annum on theunused portion of the revolving credit facility. Interest under the term loanis determined based on alternative rates as stipulated in the credit facility,including the base lending rate per annum plus an applicable margin of 1.75%,and LIBOR plus an applicable margin of 2.75%. As of April 1, 2006, the interestrate for the term loan was 7.49% (based upon a six-month LIBOR contractexpiring on July 17, 2006). The credit facility is secured by substantially allof our assets except our real property. The credit facility provides formandatory prepayment based on asset dispositions and certain issuances ofsecurities, as defined. The credit facility contains covenants that restrict,among other things, our ability to incur additional indebtedness, pay dividendsand create certain liens. The credit facility also contains certain financialmaintenance covenants, which, among other things, specify maximum capitalexpenditure limits, a minimum interest coverage ratio and a maximum senior andtotal leverage ratio, each ratio as defined. Proceeds of the revolving creditfacility are restricted to funding our working capital requirements, capitalexpenditures and acquisitions of companies in the same line of business as ourcompany, subject to specified criteria. The revolving credit facility was undrawnon the date of consummation of our initial public offering and concurrentofferings and remained undrawn through April 1, 2006. The available borrowingcapacity under our revolving credit facility, net of outstanding letters ofcredit of $0.7 million, was $24.3 million at April 1, 2006. The maximum letterof credit capacity under the revolving credit facility is $10.0 million, with afee of 3% for all outstanding letters of credit.

 

*12.0%Senior Subordinated Notes due 2016*. In connection with ourinitial public offering, we issued on October 14, 2004, $124.3 millionaggregate principal amount of 12.0% senior subordinated notes due 2016 in theform of EISs and an additional $22.8 million aggregate principal amount of12.0% senior subordinated notes due 2016 (not in the form of EISs). Inconnection with the exercise of the underwriters’ over-allotment option, onOctober 22, 2004 we issued an additional $18.7 million aggregate principalamount of 12.0% senior subordinated notes in the form of EISs. Each EIS representsone share of our Class A common stock and $7.15 principal amount of our 12.0%senior subordinated notes.

 

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Intereston the senior subordinated notes is payable quarterly in arrears on each January30, April 30, July 30 and October 30 through the maturity date. The seniorsubordinated notes will mature on October 30, 2016, unless earlier retired orredeemed at our option as described below.

 

Uponthe occurrence of a change of control (as defined in the indenture), unless wehave retired the senior subordinated notes or exercised our right to redeem allsenior subordinated notes as described below, each holder of the seniorsubordinated notes has the right to require us to repurchase that holder’s seniorsubordinated notes at a price equal to 101.0% of the principal amount of thesenior subordinated notes being repurchased, plus any accrued and unpaidinterest to the date of repurchase. In order to exercise this right, a holdermust separate the senior subordinated notes and Class A common stockrepresented by such holder’s EISs.

 

We maynot redeem the notes prior to October 30, 2009. However, we may, from time totime, seek to retire the senior subordinated notes through cash repurchases ofEISs or separate senior subordinated notes and/or exchanges of EISs or separatesenior subordinated notes for equity securities, in open market purchases,privately negotiated transactions or otherwise. Such repurchases or exchanges,if any, will depend on prevailing market conditions, our liquidityrequirements, contractual restrictions and other factors. We expect that anyrepurchase of EISs or senior subordinated notes would be funded with ourexisting cash balances and cash from operations. The amounts involved may bematerial.

 

Inaddition, on and after October 30, 2009, we may redeem for cash all or part ofthe senior subordinated notes upon not less than 30 or more than 60 days’notice by mail to the owners of senior subordinated notes, at a redemptionprice of 106.0% beginning October 30, 2009 and thereafter at prices decliningannually to 100% on or after October 30, 2012. If we redeem any seniorsubordinated notes, the senior subordinated notes and Class A common stockrepresented by each EIS will be automatically separated.

 

Thesenior subordinated notes are unsecured obligations and are subordinated inright of payment to all of our existing and future senior secured and seniorunsecured indebtedness, including the indebtedness under our credit facilityand our senior notes. The senior subordinated notes rank pari passu in right ofpayment with any of our other subordinated indebtedness.

 

Thesenior subordinated notes are jointly and severally and fully andunconditionally guaranteed by all of our existing domestic subsidiaries andcertain future domestic subsidiaries on an unsecured and subordinated basis onthe terms set forth in the indenture governing the senior subordinated notes. Thesenior subordinated 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 presentforeign subsidiary, Les Produits Alimentaires Jacques et Fils Inc., is not aguarantor, and any future foreign or partially owned domestic subsidiaries willnot be guarantors, of our senior subordinated notes.

 

Theindenture governing the senior subordinated notes contains covenants withrespect to us and restricts the incurrence of additional indebtedness and theissuance of capital stock; the payment of dividends or distributions on, andredemption of, capital stock; a number of other restricted payments, includingcertain investments; specified creation of liens, sale-leaseback transactionsand sales of assets; fundamental changes, including consolidation, mergers andtransfers of all or substantially all of our assets; and specified transactionswith affiliates.

 

Althoughwe believe that the senior subordinated notes should be treated as debt forU.S. federal income tax purposes in accordance with the opinion of our taxcounsel issued on the date of our initial public offering, this conclusioncannot be assured. If all or a portion of the senior subordinated notes weretreated as equity rather than debt for U.S. federal income tax purposes, then acorresponding portion of the interest on the senior subordinated notes wouldnot be deductible by us for U.S. federal income tax purposes. In addition, wewould be subject to liability for U.S. withholding taxes on interest paymentsto non-U.S. holders if such payments were determined to be dividends. Ourinability to deduct interest on the senior subordinated notes

 

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couldmaterially increase our taxable income and, thus, our U.S. federal andapplicable state income tax liability. Our liability for income taxes (andwithholding taxes) if the senior subordinated notes were determined to beequity for income tax purposes would materially reduce our after-tax cash flowand would materially and adversely impact our ability to make interest and/ordividend payments and could impact our ability to continue as a going concern. See“Critical Accounting Policies; Use of Estimates—Income Tax Expense Estimatesand Policies” for further discussion of income tax matters relating to oursenior subordinated notes.

 

*8.0%Senior Notes due 2011*. Concurrently with our initial publicoffering and offering of separate senior subordinated notes, we issued $240.0million aggregate principal amount of 8.0% senior notes due 2011. Interest onthe senior notes is payable on April 1 and October 1 of each year. Ourobligations under the senior notes are fully and unconditionally guaranteed ona senior basis by all of our existing and future domestic subsidiaries. Thesenior notes and the subsidiary guarantees are our and the guarantors’ generalunsecured obligations and are effectively junior in right of payment to all ofour and the guarantors’ secured indebtedness and to the indebtedness and otherliabilities of our non-guarantor subsidiaries; are pari passu in right ofpayment to all of our and the guarantors’ existing and future unsecured seniordebt; and are senior in right of payment to all of our and the guarantors’future subordinated debt, including the senior subordinated notes. Our presentforeign subsidiary, Les Produits Alimentaires Jacques et Fils Inc., is not aguarantor, and any future foreign or partially owned domestic subsidiaries willnot be guarantors, of our senior notes.

 

On orafter October 1, 2008, we may redeem some or all of the senior notes at aredemption price of 104.0% beginning October 1, 2008 and thereafter at pricesdeclining annually to 100% on or after October 1, 2010. Prior to October 1,2007, we may redeem up to 35% of the aggregate principal amount of the seniornotes issued in the senior note offering with the net proceeds of one or moreequity offerings at the redemption price as described in the indenturegoverning the senior notes. If we or any of the guarantors sell certain assetsor experience specific kinds of changes in control, we must offer to purchasethe senior notes at the prices as described in the indenture governing thesenior notes plus accrued and unpaid interest to the date of redemption. Theindenture governing the senior notes limits our ability and the ability of theguarantors to incur additional indebtedness and issue preferred stock; makerestricted payments, including dividend payments on our common stock; allowrestrictions on the ability of certain subsidiaries to make distributions; sellall or substantially all of our assets or consolidate or merge with or intoother companies; enter into certain transactions with affiliates; or createliens and enter into sale and leaseback transactions. Each of the covenants issubject to a number of important exceptions and qualifications.

 

***Future Capital Needs***

 

We arehighly leveraged. On April 1, 2006, our total long-term debt and stockholders’equity was $430.8 million and $81.9 million, respectively.

 

Ourability to generate sufficient cash to fund our operations depends generally onour results of operations and the availability of financing. Our managementbelieves that our cash on hand, cash flow from operating activities andavailable borrowing capacity under our revolving credit facility, will besufficient for the foreseeable future to fund operations, meet debt servicerequirements, fund capital expenditures, make future acquisitions within ourline of business, if any, and pay our anticipated dividends on our Class Acommon stock. We expect to make capital expenditures of approximately $7.0million for fiscal 2006.

 

***Seasonality***

 

Salesof a number of our products tend to be seasonal. 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 thefiscal year are generally below those of the following three quarters.

 

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We purchasemost of the produce used to make our shelf-stable pickles, relishes, peppersand other related specialty items during the months of July through October,and we purchase substantially all of our maple syrup requirements during themonths of April through July. Consequently, our liquidity needs are greatestduring these periods.

 

***Inflation***

 

Duringfiscal 2005 and the thirteen weeks ended April 1, 2006, we were faced withincreasing prices in certain commodities, particularly in packaging materials,pork and chicken and we expect this trend may continue. We manage this risk byentering into short-term supply contracts and advance commodities purchaseagreements from time to time, and if necessary, by raising prices. Our costincreases in fiscal 2005 were partially attributable to the spike in oil andnatural gas prices, which have had a substantial impact on our raw material,packaging and transportation costs. During 2005, our transportation costs alsoincreased as a result of a shortage in truck carrier availability followingHurricanes Katrina and Rita. We believe that through price increases and ourcost saving efforts we have to some degree been able to offset the impact ofrecent raw material, packaging and transportation cost increases. There can beno assurance, however, that any future price increases or cost saving effortsby us will offset the increased cost of raw material, packaging andtransportation costs, or that we will be able to raise prices or reduce costsat all.

 

**Recent Accounting Pronouncements**

** **

InNovember 2004, the FASB issued SFAS No. 151, *“InventoryCosts—An Amendment of ARB No. 43, Chapter 4”* (SFAS No. 151). SFASNo. 151 amends the guidance in ARB No. 43, Chapter 4, “Inventory Pricing,” toclarify the accounting for abnormal amounts of idle facility expense, freight,handling costs, and wasted material (spoilage). Among other provisions, the newrule requires that items such as idle facility expense, excessive spoilage,double freight, and rehandling costs be recognized as current-period chargesregardless of whether they meet the criterion of “so abnormal” as stated in ARBNo. 43. Additionally, SFAS No. 151 requires that the allocation of fixedproduction overheads to the costs of conversion be based on the normal capacityof the production facilities. SFAS No. 151 was adopted by us beginning onJanuary 1, 2006. The adoption of SFAS No. 151 has not had an impact on ourconsolidated results of operations and financial position.

 

**Off-balance SheetArrangements**

** **

As ofApril 1, 2006, we did not have any off-balance sheet arrangements as defined inItem 303(a)(4)(ii) of Regulation S-K.

 

**Commitments and ContractualObligations**

** **

Our contractual obligations and commitmentsprincipally include obligations associated with our outstanding indebtednessand future minimum operating lease obligations as set forth in the followingtable as of December 31, 2005.

 

32

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| ** **                        | ** ** | **Payments Due by Period** | ** ** |
|-----------------------------------|------------|-------------------------------------------|------------|
| **Contractual Obligations:** | ** ** | **Total**                                 | ** ** | **2006** | ** ** | **2007** | ** ** | **2008** | ** ** | **2009** | ** ** | **2010 and  Thereafter** | ** ** |
| ** **                        | ** ** | **(Dollars in thousands)**      | ** ** |
| Long-term debt (1)                |       | $                                         | 731,733    |   | $ | 39,096 |   | $ | 39,096 |   | $ | 39,096 |   | $ | 39,096 |   | $ | 575,349 |   |
| Operating leases                  |       | 11,921                                    |       | 4,044 |   | 3,192 |   | 3,119 |   | 1,470 |   | 96 |   |
| Other long-term obligations (2)   |       | 1,514                                     |       | 1,514 |   | — |   | — |   | — |   | — |   |
| Total                             |       | $                                         | 745,168    |   | $ | 44,654 |   | $ | 42,288 |   | $ | 42,215 |   | $ | 40,566 |   | $ | 575,445 |   |

 

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(1)   Includes interest obligations on our seniornotes at an interest rate of 8.0% per annum through maturity on October 1, 2011and on our senior subordinated notes of 12% per annum through maturity onOctober 30, 2016. In January 2006, we incurred additional long-term debt of $25.0million in the form of a new term loan, which is not reflected in the table. See“Debt—*Senior Secured Credit Facility*” above.

 

(2)   Represents expected contributions under ourdefined benefit pension plans in 2006. The expected contributions beyond 2006are not currently determinable.

 

Duringthe thirteen-week period ended April 1, 2006, there were no material changesoutside the ordinary course of business in the specified contractualobligations set forth in the table above, except that in January 2006, weissued additional long-term debt of $25.0 million in the form of a new termloan under our amended senior secured credit facility, which is not reflectedin the table. See “Debt—Senior Secured Credit Facility” above.

 

***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. Theseforward looking statements involve known and unknown risks, uncertainties andother factors that may cause our actual results, performance and achievements,or industry results, to be materially different from any future results,performance, or achievements expressed or implied by any forward-lookingstatements. We believe important factors that could cause actual results todiffer materially from our expectations include the following:

 

•      our substantial leverage;

 

•      intense competition, changesin consumer preferences, demand for our products, the effects of changingprices for our raw materials and local economic and market conditions;

 

•      our continued ability topromote brand equity successfully, to anticipate and respond to new consumertrends, to develop new products and markets, to broaden brand portfolios inorder to compete effectively with lower priced products and in markets that areconsolidating at the retail and manufacturing levels, to improve productivityand to maintain access to credit markets;

 

•      the risks associated withthe expansion of our business;

 

•      our possible inability tointegrate any businesses we acquire;

 

•      our borrowing costs andcredit ratings, which may be influenced by the credit ratings of ourcompetitors;

 

•      factors that affect the foodindustry generally, including:

 

•      recallsif products become adulterated or misbranded, liability if product consumptioncauses injury, ingredient disclosure and labeling laws and regulations and thepossibility that consumers

 

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could lose confidence in the safety and quality of certain foodproducts, as well as recent publicity concerning the health implications ofobesity and trans fatty acids; and

 

•      theeffects of currency movements in Canada and fluctuations in the level of ourcustomers’ inventories and credit and other business risks related to ourcustomers operating in a challenging economic and competitive environment; and

 

•      the risk that our seniorsubordinated notes may be treated as equity for U.S. federal income tax purposes;and

 

•      other factors discussedelsewhere in this report and in our public filings with the SEC, includingunder Item 1A, “Risk Factors” in our Annual Report on Form 10-K for fiscal2005.

 

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 urgeinvestors not to unduly rely on forward-looking statements contained in thisreport.

 

**Item 3.**    Quantitative and Qualitative Disclosures AboutMarket 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 asthe potential change in the fair value of a financial asset or liabilityresulting from an adverse movement in interest rates. As of April 1, 2006, ourrevolving credit facility was undrawn. As a result, our only variable rateborrowing as of April 1, 2006, are under our term loan. Interest under the termloan is determined based on alternative rates as stipulated in the creditfacility, including the base lending rate per annum plus an applicable marginof 1.75%, and LIBOR plus an applicable margin of 2.75%. Interest under ourrevolving credit facility is determined based on several alternative rates asstipulated in the revolving credit facility, including the base lending rateper annum plus an applicable margin, or LIBOR plus an applicable margin. As ofApril 1, 2006, the interest rate for the term loan was 7.49% (based upon asix-month LIBOR contract expiring on July 17, 2006). A 100 basis point increasein interest rates, applied to our variable rate borrowings at April 1, 2006,would result in an annual increase in interest expense and a correspondingreduction in cash flow of $0.3 million.

 

Wealso have outstanding $240.0 million principal amount of 8.0% senior notes dueOctober 1, 2011, with interest payable semiannually on April 1 and October 1 ofeach year. The fair value of the senior notes at April 1, 2006, based on quotedmarket prices, was $247.8 million.

 

Wealso have outstanding $165.8 million principal amount of 12.0% seniorsubordinated notes due October 30, 2016, with interest payable quarterly onJanuary 30, April 30, July 30 and October 30 of each year. Of such outstandingprincipal amount, $143.0 million principal amount is represented by 20.0million EISs. Each EIS represents one share of our Class A common stock and$7.15 principal amount of our senior subordinated notes. As of April 1, 2006,the fair value of the EISs, based on the per EIS closing price on the AMEX onMarch 31, 2006, was $14.42 per EIS. It is not practicable to estimate the fairvalue of the $143.0 million principal amount of senior subordinated notesrepresented by the EISs. Of the $165.8 aggregate principal amount of seniorsubordinated notes outstanding, $22.8 million principal amount is notrepresented by EISs and trades separately. The fair value of the separatesenior subordinated notes at April 1, 2006, based on quoted market prices, was$25.5 million.

 

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Theinformation under the heading “Inflation” under Item 7, “Management’sDiscussion and Analysis of Financial Condition and Results of Operations” isincorporated herein by reference.

 

**Item 4.**    Controls and Procedures

** **

*Evaluation of Disclosure Controls and Procedures.*Asrequired by Rule 13a-15(b) under the Securities Exchange Act of 1934, asamended, our management, including our chief executive officer and our chieffinancial officer, conducted an evaluation of the effectiveness of the designand operation of our disclosure controls and procedures as of the end of theperiod covered by this report. As defined in Rules 13a-15(e) and 15d-15(e)under the Exchange Act, disclosure controls and procedures are controls andother procedures that we use that are designed to ensure that informationrequired to be disclosed by us in the reports we file or submit under theExchange Act is recorded, processed, summarized and reported, within the timeperiods specified in the SEC’s rules and forms. Disclosure controls andprocedures include, without limitation, controls and procedures designed toensure that information required to be disclosed by us in the reports we fileor submit under the Exchange Act is accumulated and communicated to ourmanagement, including our chief executive officer and our chief financialofficer, as appropriate, to allow timely decisions regarding requireddisclosure.

 

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, our management, includingour chief executive officer and our chief financial officer, also conducted anevaluation of our internal control over financial reporting to determinewhether any change occurred during the quarter covered by this report that hasmaterially affected, or is reasonably likely to materially affect, our internalcontrol 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 isreasonably likely to materially affect, our internal control over financialreporting.

 

*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 controlsystem, no matter how well designed and operated, can provide only reasonable,not absolute, assurance that the control system’s objectives will be met. Thedesign of a control system must reflect the fact that there are resourceconstraints, and the benefits of controls must be considered relative to theircosts. Further, because of the inherent limitations in all control systems, noevaluation of controls can provide absolute assurance that misstatements due toerror or fraud will not occur or that all control issues and instances offraud, if any, within our company have been detected. These inherentlimitations include the realities that judgments in decision-making can befaulty and that breakdowns can occur because of simple error or mistake. Controlscan also be circumvented by the individual acts of some persons, by collusionof two or more people, or by management override of the controls. The design ofany system of controls is based in part on certain assumptions about thelikelihood of future events, and there can be no assurance that any design willsucceed in achieving its stated goals under all potential future conditions. Projectionsof any evaluation of controls effectiveness to future periods are subject torisks. Over time, controls may become inadequate because of changes in conditionsor deterioration in the degree of compliance with policies or procedures.

 

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**PART IIOTHER INFORMATION**

** **

**Item 1.**    Legal Proceedings

** **

We areinvolved in various claims and legal actions arising in the ordinary course ofbusiness, including proceedings involving product liability claims, worker’scompensation and other employee claims, and tort and other general liabilityclaims, for which we carry insurance, as well as trademark, copyright, patentinfringement and related claims and legal actions. In the opinion of ourmanagement, the ultimate disposition of these matters will not have a materialadverse effect on our consolidated financial position, results of operations orliquidity.

 

**Item 1A. Risk Factors**

** **

We donot believe there have been any material changes in our risk factors aspreviously disclosed in our Annual Report on Form 10-K for the year endedDecember 31, 2005 filed with the Securities and Exchange Commission on March 7,2006.

 

**Item 2.**    Unregistered Sales of Equity Securities and Useof Proceeds

** **

Notapplicable.

 

**Item 3.**    Defaults Upon Senior Securities

** **

Notapplicable.

 

**Item 4.**    Submission of Matters to a Vote of SecurityHolders

** **

Notapplicable.

 

**Item 5.**    Other Information

** **

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. |
| 32.2             |       | 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 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 27, 2006 | 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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INDEXTO 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. |
| 32.2             |       | 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 Financial Officer. |

 

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