Table of Contents

 

**As filed with the Securities andExchange Commission on July 28, 2009**

** **

 

**** ****

****UNITED STATES****

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

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

 

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

 

**(Markone)**

 

**x**      **Quarterly Report Pursuant to Section 13 or 15(d) of the SecuritiesExchange Act of 1934**

 

**For the quarterly period ended July 4, 2009**

 

**or**

 

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

 

**For the transition period from                  to                  .**

 

**Commission file number****001-32316**

 

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

(Exact name of Registrant as specified in its charter)

 

| **Delaware**

(State or other jurisdiction of

incorporation or organization)                           | ** ** | **13-3918742**

(I.R.S. Employer Identification No.) |
|---------------------------------------------------------------------------------------------------------|------------|------------------------------------------------------|
| ** **                                                                                              | ** ** | ** **                                           |
| **4 Gatehall Drive, Suite 110, Parsippany, New  Jersey**

(Address of principal executive offices) | ** ** | **07054**

(Zip Code)                                |

 

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

 

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

 

Indicateby check mark whether the registrant has submitted electronically and posted onits corporate Web site, if any, every Interactive Data File required to besubmitted and posted pursuant to Rule 405 of Regulation S-T during thepreceding 12 months (or for such shorter period that the registrant wasrequired to submit and post such files). Yes o No o

 

Indicateby check mark whether the registrant is a large accelerated filer, an acceleratedfiler, a non-accelerated filer or a smaller reporting company.  See the definitions of “large acceleratedfiler,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2of the Exchange Act. 

 

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

 

Indicate by check mark whether the registrant is ashell company (as defined in Rule 12b-2 of the Exchange Act).  Yes o Nox

 

As of July 4, 2009, the registrant had 35,867,292shares of Class A common stock, par value $0.01 per share, issued andoutstanding, 18,199,058 of which were held in the form of Enhanced IncomeSecurities (EISs) and 17,668,234 of which were held separate from EISs.  Each EIS represents one share of Class Acommon stock and $7.15 principal amount of 12% senior subordinated notes due2016.  As of July 4, 2009, theregistrant had no shares of Class B common stock, par value $0.01 pershare, issued or outstanding.

 

 

 

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Table ofContents

 

B&G Foods, Inc. and Subsidiaries

Index

 
| ** **                         | **Page No.** |
|------------------------------------|-------------------|
|                               |              |
| PART I  FINANCIAL INFORMATION | 1                 |
|                               |              |
|                               | Item 1.           | Financial Statements  (Unaudited) | 1 |
|                               |              |   |   |
|                               |              | Consolidated  Balance Sheets | 1 |
|                               |              |   |   |
|                               |              | Consolidated  Statements of Operations | 2 |
|                               |              |   |   |
|                               |              | Consolidated  Statements of Cash Flows | 3 |
|                               |              |   |   |
|                               |              | Notes to Consolidated Financial Statements | 4 |
|                               |              |   |   |
|                               | Item 2.           | Management’s  Discussion and Analysis of Financial Condition and Results of Operations | 17 |
|                               |              |   |   |
|                               | Item 3.           | Quantitative  and Qualitative Disclosures About Market Risk | 32 |
|                               |              |   |   |
|                               | Item 4.           | Controls and  Procedures | 33 |
|                               |              |   |   |
| PART II OTHER  INFORMATION    | 35                |
|                               |              |   |   |
|                               | Item 1.           | Legal Proceedings | 35 |
|                               |              |   |   |
|                               | Item 1A.          | Risk Factors | 35 |
|                               |              |   |   |
|                               | Item 2.           | Unregistered  Sales of Equity Securities and Use of Proceeds | 35 |
|                               |              |   |   |
|                               | Item 3.           | Defaults Upon  Senior Securities | 35 |
|                               |              |   |   |
|                               | 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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**Table of Contents**

** **

**PART IFINANCIAL INFORMATION**

** **

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

** **

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

**Consolidated Balance Sheets**

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

**(Unaudited)**

** **
| ** **                                                                                                                                                                                       | ** ** | **July 4, 2009** | ** ** | **January 3, 2009** | ** ** |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------|------------|--------------------------|------------|
| **Assets**                                                                                                                                                                                       |       |                  |       |                     |       |
|                                                                                                                                                                                             |       |                  |       |                     |       |
| Current  assets:                                                                                                                                                                                 |       |                  |       |                     |       |
| Cash  and cash equivalents                                                                                                                                                                       |       | $                     | 29,594     |                     | $          | 32,559 |   |
| Trade  accounts receivable, less allowance for doubtful accounts and discounts of  $590 in 2009 and $745 in 2008                                                                                 |       | 29,735                |       | 36,578                   |       |
| Inventories                                                                                                                                                                                      |       | 111,008               |       | 88,899                   |       |
| Prepaid  expenses                                                                                                                                                                                |       | 2,965                 |       | 2,475                    |       |
| Income  tax receivable                                                                                                                                                                           |       | 1,707                 |       | 2,221                    |       |
| Deferred  income taxes                                                                                                                                                                           |       | 1,110                 |       | 1,110                    |       |
| Total  current assets                                                                                                                                                                            |       | 176,119               |       | 163,842                  |       |
|                                                                                                                                                                                             |       |                  |       |                     |       |
| Property,  plant and equipment, net of accumulated depreciation of $67,794 and $64,510                                                                                                           |       | 52,712                |       | 51,059                   |       |
| Goodwill                                                                                                                                                                                         |       | 253,353               |       | 253,353                  |       |
| Trademarks                                                                                                                                                                                       |       | 227,220               |       | 227,220                  |       |
| Customer  relationship intangibles, net                                                                                                                                                          |       | 113,093               |       | 116,318                  |       |
| Net  deferred debt issuance costs and other assets                                                                                                                                               |       | 11,905                |       | 13,298                   |       |
| Total  assets                                                                                                                                                                                    |       | $                     | 834,402    |                     | $          | 825,090 |   |
|                                                                                                                                                                                             |       |                  |       |                     |       |
| **Liabilities and Stockholders’  Equity**                                                                                                                                                   |       |                  |       |                     |       |
|                                                                                                                                                                                             |       |                  |       |                     |       |
| Current  liabilities:                                                                                                                                                                            |       |                  |       |                     |       |
| Trade  accounts payable                                                                                                                                                                          |       | $                     | 30,893     |                     | $          | 27,286 |   |
| Accrued  expenses                                                                                                                                                                                |       | 16,920                |       | 16,023                   |       |
| Dividends  payable                                                                                                                                                                               |       | 6,097                 |       | 6,162                    |       |
| Total  current liabilities                                                                                                                                                                       |       | 53,910                |       | 49,471                   |       |
|                                                                                                                                                                                             |       |                  |       |                     |       |
| Long-term  debt                                                                                                                                                                                  |       | 535,800               |       | 535,800                  |       |
| Other  liabilities                                                                                                                                                                               |       | 22,285                |       | 23,671                   |       |
| Deferred  income taxes                                                                                                                                                                           |       | 77,903                |       | 71,500                   |       |
| Total  liabilities                                                                                                                                                                               |       | 689,898               |       | 680,442                  |       |
|                                                                                                                                                                                             |       |                  |       |                     |       |
| Stockholders’  equity:                                                                                                                                                                      |       |                  |       |                     |       |
| Preferred  stock, $0.01 par value per share. Authorized 1,000,000 shares; no shares  issued or outstanding                                                                                       |       | —                |       | —                   |       |
| Class A  common stock, $0.01 par value per share. Authorized 100,000,000 shares;  35,867,292 and 36,246,657 shares issued and outstanding as of July 4,  2009 and January 3, 2009 |       | 359                   |       | 362                      |       |
| Class B  common stock, $0.01 par value per share. Authorized 25,000,000 shares; no  shares issued or outstanding                                                                            |       | —                |       | —                   |       |
| Additional  paid-in capital                                                                                                                                                                      |       | 158,371               |       | 171,123                  |       |
| Accumulated  other comprehensive loss                                                                                                                                                            |       | (11,689               | )          | (12,358                  | )          |
| Accumulated  deficit                                                                                                                                                                             |       | (2,537                | )          | (14,479                  | )          |
| Total  stockholders’ equity                                                                                                                                                                 |       | 144,504               |       | 144,648                  |       |
| Total  liabilities and stockholders’ equity                                                                                                                                                 |       | $                     | 834,402    |                     | $          | 825,090 |   |

 

See Notes to ConsolidatedFinancial Statements.

 

1

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Table ofContents

 

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

**Consolidated Statements of Operations**

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

**(Unaudited)**

** **
| ** **                                                      | ** ** | **Thirteen Weeks Ended** | ** ** | **Twenty-six Weeks Ended** | ** ** |
|-----------------------------------------------------------------|------------|--------------------------|------------|----------------------------|------------|
| ** **                                                      | ** ** | **July 4, 2009**    | ** ** | **June 28, 2008**     | ** ** | **July 4, 2009** | ** ** | **June 28, 2008** | ** ** |
|                                                            |       |                     |       |                       |       |   |   |   |   |
| Net  sales                                                      |       | $                        | 122,899    |                       | $          | 119,184 |   | $ | 241,537 |   | $ | 235,526 |   |
| Cost  of goods sold                                             |       | 86,033                   |       | 85,626                     |       | 165,922 |   | 167,038 |   |
| Gross  profit                                                   |       | 36,866                   |       | 33,558                     |       | 75,615 |   | 68,488 |   |
|                                                            |       |                     |       |                       |       |   |   |   |   |
| Operating  expenses:                                            |       |                     |       |                       |       |   |   |   |   |
| Sales,  marketing and distribution expenses                     |       | 10,929                   |       | 11,461                     |       | 21,916 |   | 23,750 |   |
| General  and administrative expenses                            |       | 2,478                    |       | 1,882                      |       | 4,817 |   | 3,240 |   |
| Amortization  expense—customer relationships               |       | 1,612                    |       | 1,612                      |       | 3,225 |   | 3,225 |   |
| Operating  income                                               |       | 21,847                   |       | 18,603                     |       | 45,657 |   | 38,273 |   |
|                                                            |       |                     |       |                       |       |   |   |   |   |
| Other  expenses:                                                |       |                     |       |                       |       |   |   |   |   |
| Interest expense, net                                           |       | 12,137                   |       | 12,908                     |       | 26,426 |   | 25,479 |   |
| Income  before income tax expense                               |       | 9,710                    |       | 5,695                      |       | 19,231 |   | 12,794 |   |
| Income tax expense                                              |       | 3,681                    |       | 2,165                      |       | 7,289 |   | 4,855 |   |
| Net  income                                                     |       | $                        | 6,029      |                       | $          | 3,530 |   | 11,942 |   | 7,939 |   |
|                                                            |       |                     |       |                       |       |   |   |   |   |
| Basic  and diluted weighted average shares outstanding:         |       |                     |       |                       |       |   |   |   |   |
| Class A  common stock                                      |       | 35,945                   |       | 36,784                     |       | 36,071 |   | 36,782 |   |
|                                                            |       |                     |       |                       |       |   |   |   |   |
| Basic  and diluted earnings per share:                          |       |                     |       |                       |       |   |   |   |   |
| Class A  common stock                                      |       | $                        | 0.17       |                       | $          | 0.10 |   | $ | 0.33 |   | $ | 0.22 |   |
|                                                            |       |                     |       |                       |       |   |   |   |   |
| Cash  dividends declared per share of Class A common stock |       | $                        | 0.17       |                       | $          | 0.21 |   | $ | 0.34 |   | $ | 0.42 |   |

 

See Notes to ConsolidatedFinancial Statements.

 

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

**ConsolidatedStatements of Cash Flows**

**(In thousands)**

**(Unaudited)**

 
| ** **                                                                         | ** ** | **Twenty-six Weeks Ended** | ** ** |
|------------------------------------------------------------------------------------|------------|----------------------------|------------|
| ** **                                                                         | ** ** | **July 4, 2009**      | ** ** | **June 28, 2008** | ** ** |
| ** **                                                                         |       |                       | ** ** | ** ** | ** ** |
| **Cash flows from operating  activities:**                                         |       |                       |       |   |   |
| Net income                                                                         |       | $                          | 11,942     |   | $ | 7,939 |   |
| Adjustments to reconcile net income to net cash  provided by operating activities: |       |                       |       |   |   |
| Depreciation and amortization                                                      |       | 7,170                      |       | 7,533 |   |
| Amortization of deferred debt issuance costs                                       |       | 1,612                      |       | 1,584 |   |
| Deferred income taxes                                                              |       | 5,947                      |       | 4,045 |   |
| Unrealized gain on interest rate swap                                              |       | (739                       | )          | — |   |
| Reclassification to interest expense, net for  interest rate swap                  |       | 846                        |       | — |   |
| Share-based compensation expense                                                   |       | 1,802                      |       | 358 |   |
| Changes in assets and liabilities:                                                 |       |                       |       |   |   |
| Trade accounts receivable                                                          |       | 6,843                      |       | 4,793 |   |
| Inventories                                                                        |       | (22,109                    | )          | (6,102 | ) |
| Prepaid expenses                                                                   |       | (490                       | )          | 662 |   |
| Income tax receivable                                                              |       | 514                        |       | 268 |   |
| Other assets                                                                       |       | (219                       | )          | 415 |   |
| Trade accounts payable                                                             |       | 3,607                      |       | (4,309 | ) |
| Accrued expenses                                                                   |       | 897                        |       | (5,516 | ) |
| Other liabilities                                                                  |       | (291                       | )          | 423 |   |
| Net cash provided by operating activities                                          |       | 17,332                     |       | 12,093 |   |
|                                                                               |       |                       |       |   |   |
| **Cash flows from investing  activities:**                                         |       |                       |       |   |   |
| Capital expenditures                                                               |       | (5,568                     | )          | (9,034 | ) |
| Net cash used in investing activities                                              |       | (5,568                     | )          | (9,034 | ) |
|                                                                               |       |                       |       |   |   |
| **Cash flows from financing  activities:**                                         |       |                       |       |   |   |
| Dividends paid                                                                     |       | (12,288                    | )          | (15,594 | ) |
| Payments for repurchase of Class A common  stock                              |       | (2,334                     | )          | — |   |
| Net cash used in financing activities                                              |       | (14,622                    | )          | (15,594 | ) |
|                                                                               |       |                       |       |   |   |
| Effect of exchange rate fluctuations on cash and  cash equivalents                 |       | (107                       | )          | 15 |   |
| Net decrease in cash and cash equivalents                                          |       | (2,965                     | )          | (12,520 | ) |
|                                                                               |       |                       |       |   |   |
| Cash and cash equivalents at beginning of period                                   |       | 32,559                     |       | 36,606 |   |
| Cash and cash equivalents at end of period                                         |       | $                          | 29,594     |   | $ | 24,086 |   |
| ** **                                                                         |       |                       |       |   |   |
| **Supplemental disclosures of cash  flow information:**                            |       |                       |       |   |   |
| Cash interest payments                                                             |       | $                          | 25,124     |   | $ | 23,928 |   |
| Cash income tax payments                                                           |       | $                          | 852        |   | $ | 606 |   |
| Cash income tax refunds                                                            |       | $                          | (24        | ) | $ | (60 | ) |
| Non-cash transactions:                                                             |       |                       |       |   |   |
| Dividends declared and not yet paid                                                |       | $                          | 6,097      |   | $ | 7,801 |   |

 

SeeNotes to Consolidated FinancialStatements.

 

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

**Notesto Consolidated Financial Statements**

**(Unaudited)**

 

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

 

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

 

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

** **

***Fiscal Year***

 

Our financial statements are presented on aconsolidated basis.  Typically, ourfiscal quarters and fiscal year consist of 13 and 52 weeks, respectively, endingon the Saturday closest to December 31 in the case of our fiscal year andfourth fiscal quarter, and on the Saturday closest to the end of thecorresponding calendar quarter in the case of our fiscal quarters.  As a result, a 53rd week is added to our fiscalyear every five or six years.  In a53-week fiscal year our fourth fiscal quarter contains 14 weeks.  Our fiscal year ending January 2, 2010(fiscal 2009) contains 52 weeks and our fiscal year ended January 3, 2009(fiscal 2008) contained 53 weeks.  Eachquarter of fiscal 2009 and 2008 contains 13 weeks, except the fourth quarter of2008 which contained 14 weeks.

 

***Basis ofPresentation***

 

The accompanying consolidated interim financialstatements for the thirteen and twenty-six week periods ended July 4, 2009(second quarter of 2009 and first two quarters of 2009) and June 28, 2008(second quarter of 2008 and first two quarters of 2008) have been prepared byour company in accordance with accounting principles generally accepted in theUnited States of America without audit, pursuant to the rules andregulations of the Securities and Exchange Commission (SEC), and include theaccounts of B&G Foods, Inc. and its subsidiaries.  Certain information and footnote disclosuresnormally included in annual financial statements prepared in accordance withgenerally accepted accounting principles have been omitted pursuant to suchrules and regulations.  However, ourmanagement believes, to the best of their knowledge, that the disclosuresherein are adequate to make the information presented not misleading.  All intercompany balances and transactionshave been eliminated.  The accompanyingunaudited consolidated interim financial statements contain all adjustments(consisting only of normal and recurring adjustments) that are, in the opinionof management, necessary to present fairly our consolidated financial positionas of July 4, 2009, the results of our operations for the second quarterand first two quarters of 2009 and 2008, and cash flows for the first two quartersof 2009 and 2008.  Our results ofoperations for the second quarter and first two quarters of 2009 are notnecessarily indicative of the results to be expected for the full year.  We have evaluated subsequentevents for disclosure through July 28, 2009, the date of issuance of theaccompanying consolidated interim financial statements. The accompanying unaudited consolidated interim financial statementsshould be read in conjunction with the audited consolidated financialstatements and notes for fiscal 2008 included in our Annual Report onForm 10-K for fiscal 2008 filed with the SEC on March 5, 2009.

 

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

**Notes toConsolidated Financial Statements (Continued)**

**(Unaudited)**

 

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

 

***Use of Estimates***

 

The preparation of financial statements in accordancewith U.S. generally accepted accounting principles requires our management tomake a number of estimates and assumptions relating to the reporting of assetsand liabilities and the disclosure of contingent assets and liabilities at thedate of the consolidated financial statements and the reported amounts ofrevenues and expenses during the reporting period.  Some of the more significant estimates andassumptions made by management involve trade and consumer promotion expenses;allowances for excess, obsolete and unsaleable inventories; pension benefits;purchase accounting allocations; the recoverability of goodwill, trademarks,customer relationship intangibles, property, plant and equipment and deferredtax assets; the accounting for our enhanced income securities (EISs); and the accountingfor share-based compensation expense. Actual results could differ significantly from these estimates andassumptions.

 

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

 

***Enhanced IncomeSecurities***

 

Each of our EISs represents one share of ourClass A common stock and $7.15 principal amount of our senior subordinatednotes.  The holders of our EISs may separateeach EIS into one share of Class A common stock and $7.15 principal amountof senior subordinated notes at any time. Upon the occurrence of certain events (including redemption of thesenior subordinated notes or upon maturity of the senior subordinated notes),EISs will automatically separate. Conversely, subject to limitations, a holder of separate shares ofClass A common stock and senior subordinated notes can combine suchsecurities to form EISs.  Separation andcombination of EISs will automatically result in increases and decreases,respectively, in the number of shares of Class A common stock not held inthe form of EISs.  As of July 4,2009, we had 35,867,292 shares of Class A common stock issued andoutstanding, 18,199,058 of which were held in the form of EISs and 17,668,234of which were held separate from EISs. As of June 28, 2008 we had 36,796,988 shares of Class A commonstock issued and outstanding, 16,764,277 of which were held in the form of EISsand 20,032,711 of which were held separate from EISs.

 

***Recently IssuedAccounting Standards***

 

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

 

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

**Notes toConsolidated Financial Statements (Continued)**

**(Unaudited)**

 

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

 

In December 2007, the FASB issued SFASNo. 141 (revised 2007), “*BusinessCombinations*” (SFAS No. 141R) and SFAS No. 160, “*Noncontrolling Interests in Consolidated FinancialStatements*” (SFAS No. 160). SFAS No. 141R requires an acquirer to measure the identifiableassets acquired, the liabilities assumed and any noncontrolling interest in theacquiree at their fair values on the acquisition date, with goodwill being theexcess value over the net identifiable assets acquired.  SFAS No. 160 clarifies that anoncontrolling interest in a subsidiary is an ownership interest in theconsolidated entity that should be reported as equity in the consolidatedfinancial statements.  SFAS No. 141Rand SFAS No. 160 are effective as of the beginning of our fiscal2009.  SFAS No. 141R will be appliedprospectively.  The effects of SFASNo. 141R will depend on future acquisitions.  SFAS No. 160 requires retroactiveadoption.  We currently do not have anynoncontrolling interests in subsidiaries.

 

In March 2008, the FASB issued SFAS No. 161,“*Disclosures about Derivative Instrumentsand Hedging Activities, an amendment of FASB Statement No. 133 (SFASNo. 161)*.”  SFASNo. 161 requires enhanced disclosures about (a) how and why an entityuses derivative instruments, (b) how derivative instruments and relatedhedged items are accounted for under SFAS No. 133 and its relatedinterpretations, and (c) how derivative instruments and related hedgeditems affect an entity’s financial position, financial performance, and cashflows.  SFAS No. 161 is effective asof the beginning of our fiscal 2009. Since SFAS No. 161 requires enhanced disclosures, without a changeto existing standards relative to measurement and recognition, our adoption ofSFAS No. 161 did not have any effect on our results of operations orfinancial position.  See notes 5 and 7for the required disclosures about our derivative instruments and hedgingactivities.

 

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

 

In December 2008, the FASB issued FASB StaffPosition No. FAS 132(R)-1, “*Employer’sDisclosures about Postretirement Benefit Plan Assets*” (FSP132(R)-1).  FSP 132(R)-1 requiresadditional disclosures about plan assets for defined benefit pension and otherpostretirement benefit plans.  FSP132(R)-1 will be effective as of the end of our fiscal 2009.  Since FSP 132(R)-1 requires enhanceddisclosures, without a change to existing standards relative to measurement andrecognition, our adoption of FSP 132(R)-1 will not have a material impact onour results of operations or financial position.

 

In May 2009, the FASB issued StatementNo. 165, “*Subsequent Events*”(SFAS No. 165), which establishes general standards of accounting for, andrequires disclosure of, events that occur after the balance sheet date butbefore financial statements are issued or are available to be issued.  SFAS No. 165 is effective for our secondquarter of fiscal 2009.  The adoption ofSFAS No. 165 did not have a material effect on our results of operationsor financial position.

 

In June 2009, the FASB issued SFAS No. 168 “*The FASB Accounting Standards Codification and theHierarchy of Generally Accepted Accounting Principles - A Replacement of FASBStatement No. 162*” (SFAS No. 168).  SFAS No. 168 establishes the FASBAccounting Standards CodificationTM (Codification) as the single source ofauthoritative GAAP recognized by the FASB to be applied by nongovernmentalentities. Rules and interpretive releases of the SEC under authority offederal securities laws are also sources of authoritative U.S. GAAP for SECregistrants.  SFAS No. 168 and theCodification are effective for financial statements

 

6

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Table of Contents

 

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

**Notes toConsolidated Financial Statements (Continued)**

**(Unaudited)**

 

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

 

issued for interim and annual periods ending afterSeptember 15, 2009.  When effective,the Codification will supersede all existing non-SEC accounting and reportingstandards.  All other nongrandfatherednon-SEC accounting literature not included in the Codification will becomenonauthoritative.  SFAS No. 168 iseffective for our third quarter of fiscal 2009. All references to U.S. GAAP will be updated to conform to thecodification.  The adoption ofSFAS No. 168 will not have a material impact on our results of operationsor financial position.

 

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

** **

Inventories consist of the following, as of the datesindicated (dollars in thousands):

 
| ** **                   | ** ** | **July 4,  2009** | ** ** | **January 3,  2009** | ** ** |
|------------------------------|------------|------------------------|------------|---------------------------|------------|
| Raw materials and  packaging |       | $                      | 36,878     |                      | $          | 19,402 |   |
| Work in process              |       | 1,013                  |       | 2,658                     |       |
| Finished goods               |       | 73,117                 |       | 66,839                    |       |
|                         |       |                   |       |                      |       |
| Total                        |       | $                      | 111,008    |                      | $          | 88,899 |   |

 

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

** **

There has been no change in the carrying amount ofgoodwill for the period from January 3, 2009 to July 4, 2009.

 

There has been no change in the carrying amount oftrademarks (indefinite-lived intangibles) for the period from January 3,2009 to July 4, 2009.

 

The following table reconciles the changes in thecarrying amount of customer relationship intangibles for the period fromJanuary 3, 2009 to July 4, 2009 (dollars in thousands):

 
| ** **                       | ** ** | **Customer  Relationship  Intangibles** | ** ** | **Less:  Accumulated  Amortization** | ** ** | **Total** | ** ** |
|----------------------------------|------------|-----------------------------------------|------------|--------------------------------------|------------|-----------|------------|
| Balance at January 3,  2009 |       | $                                       | 129,000    |                                 | $          | (12,682   | )          | $ | 116,318 |   |
| Amortization expense             |       | —                                  |       | (3,225                               | )          | (3,225    | )          |
| Balance at July 4,  2009    |       | $                                       | 129,000    |                                 | $          | (15,907   | )          | $ | 113,093 |   |

 

Customer relationship intangibles are presented atcost, net of accumulated amortization, and are amortized on a straight-linebasis over their estimated useful lives of 20 years.  Amortization expense associated with customerrelationship intangibles for each of the second quarter and first two quartersof 2009 and 2008 was $1.6 million and $3.2 million, respectively, and isrecorded in operating expenses.  Weexpect to recognize an additional $3.3 million of amortization expenseassociated with our current customer relationship intangibles during theremainder of fiscal 2009, and thereafter $6.5 million per year for each of thenext four succeeding fiscal years.

 

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Table of Contents

 

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

**Notes toConsolidated Financial Statements (Continued)**

**(Unaudited)**

 

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

** **

Long-term debt consists of the following, as of thedates indicated (dollars in thousands):

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

 

As of July 4, 2009, the aggregate maturities oflong-term debt are as follows (dollars in thousands):

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

 

*Senior Secured Credit Facility*. Our $25.0 million revolving credit facility matures on January 10,2011 and our $130.0 million of term loan borrowings matures onFebruary 26, 2013, provided, however, that if we do not repay, redeem orrefinance our senior notes prior to April 1, 2011, the outstanding termloan borrowings will become immediately due and payable on April 1, 2011.

 

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

 

Our obligations under the credit facility are jointlyand severally and fully and unconditionally guaranteed on a senior basis by allof our existing and certain future domestic subsidiaries.  The credit facility is secured by substantiallyall of our and our domestic subsidiaries’ assets except our and our domesticsubsidiaries’ real property.  The creditfacility provides for mandatory prepayment upon certain asset dispositions andissuances 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 containscertain financial maintenance covenants, which, among other things, specify maximumcapital expenditure limits, a minimum interest coverage ratio and a maximumsenior and total leverage ratio, each ratio as defined.  As of July 4, 2009, we were incompliance with all of the covenants in the credit facility.  Proceeds of the revolving credit facility arerestricted to funding our working capital requirements, capital expendituresand acquisitions of companies in the same line of business as our company,subject to specified

 

8

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Table of Contents

 

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

**Notes toConsolidated Financial Statements (Continued)**

**(Unaudited)**

 

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

** **

criteria.  Themaximum letter of credit capacity under the revolving credit facility is $10.0million, with a fronting fee of 3.0% per annum for all outstanding letters ofcredit.

 

On September 15, 2008, Lehman Brothers HoldingsInc. (Lehman) filed for protection under Chapter 11 of the U.S. BankruptcyCode.  Lehman Commercial Paper Inc.(Lehman CPI), a Lehman subsidiary, is the administrative agent under our creditfacility.  Lehman CPI filed forprotection under Chapter 11 of the U.S. Bankruptcy Code on October 3,2008.  None of our $130.0 million ofoutstanding term loans is currently with Lehman, Lehman CPI or any othersubsidiary of Lehman.  Lehman CPI is oneof the lenders participating in our $25.0 million revolving creditfacility.  However, Lehman CPI has only$3.1 million of the $25.0 million commitment. We do not believe that Lehman CPI would honor its funding commitmentunder the revolving credit facility if we were to make a funding request.  As a result, the effective availableborrowing capacity under our revolving credit facility, net of outstandingletters of credit of $0.5 million, was $21.4 million at July 4, 2009.  We have not drawn upon the revolving creditfacility since its inception in October 2004 and, based upon our cash onhand and working capital requirements, we have no plans to do so for theforeseeable future.

 

Effective as of February 26, 2007, we enteredinto a six year interest rate swap agreement in order to effectively fix at7.0925% the interest rate payable for $130.0 million of term loan borrowingsthrough the life of the term loan, ending on February 26, 2013.  The counterparty to the swap is LehmanSpecial Financing Inc. (Lehman SFI). Lehman SFI filed for protection under Chapter 11 of the U.S. BankruptcyCode on October 3, 2008.

 

We initially designated the swap as a cash flow hedgeunder the guidelines of SFAS No. 133, “*Accountingfor Derivative Instruments and Hedging Activities*,” as amended bySFAS No. 138, “*Accounting for CertainDerivative Instruments and Certain Hedging Activities*” and SFAS No. 149, “*Amendment of Statement No. 133 on DerivativeInstruments and Hedging Activities*” (collectively referred to asSFAS No. 133).  Prior to Lehman’sbankruptcy filing, we recorded changes in the fair value of the swap in othercomprehensive income (loss), net of tax in our consolidated balance sheet.  However, as a result of the Lehman bankruptcyfiling, we determined in September 2008 that the interest rate swap was nolonger an effective hedge as defined by SFAS No. 133 and, accordingly,subsequent changes in the swap’s fair value are being recorded in currentearnings in net interest expense in the consolidated statements ofoperations.  We obtain third-partyverification of fair value at the end of each reporting period.  As of July 4, 2009, the fair value ofour interest rate swap was $12.4 million and is recorded in other liabilitieson our consolidated balance sheet.  Theamount recorded in accumulated other comprehensive income (loss) will bereclassified to net interest expense over the remaining life of the term loanborrowings as we make interest payments. Net interest expense in the second quarter and first two quarters of2009 includes a benefit of $1.5 million and $0.7 million, respectively,relating to the unrealized gain on our interest rate swap and areclassification of $0.4 million and $0.8 million, respectively, of the amountrecorded in accumulated other comprehensive income (loss) related to theswap.  During the remainder of fiscal2009, we expect to reclassify to net interest expense $0.9 million of theamount recorded in accumulated other comprehensive income (loss).

 

See note 15 for information regarding a proposedamendment to the senior credit facility.

 

*Subsidiary Guarantees*. We have no assets or operations independent of our direct and indirectsubsidiaries.  All of our presentdomestic subsidiaries jointly and severally and fully and unconditionallyguarantee our senior subordinated notes and our senior notes, and managementhas determined that our Canadian subsidiary, which is our only subsidiary thatis not a guarantor of our senior subordinated notes and senior notes, is a“minor subsidiary” as that term is used in Rule 3-10 of Regulation S-Xpromulgated by the SEC.  There are nosignificant restrictions on our ability and the ability of our subsidiaries toobtain funds from our respective subsidiaries by dividend or loan.  Consequently, separate financial statementshave not been

 

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Table of Contents

 

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

**Notes toConsolidated Financial Statements (Continued)**

**(Unaudited)**

 

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

 

presented for our subsidiaries because management hasdetermined that they would not be material to investors.

 

*Deferred Debt Issuance Costs*. In connection with the issuance of our senior subordinated notes and oursenior notes in October, 2004, we capitalized approximately $23.1 million ofdebt issuance costs, which will be amortized over their respective terms.  In connection with the issuance of term loanborrowings of $25.0 million in January 2006, we capitalized approximately$0.4 million of additional debt issuance costs, which will be amortized overthe term of the loan.  In connection withthe issuance of additional term loan borrowings of $205.0 million inFebruary 2007 we capitalized approximately $4.0 million of additional debtissuance costs, which will be amortized over the term of the loan.  During the second quarter of 2007 wewrote-off and expensed $1.8 million of deferred debt issuance costs inconnection with our May 2007 prepayment of $100.0 million of term loanborrowings.  As of July 4, 2009 andJanuary 3, 2009 we had net deferred debt issuance costs of $11.6 millionand $13.2 million, respectively.

 

At July 4, 2009 and January 3, 2009 accruedinterest of $9.0 million and $9.4 million, respectively, is included in accruedexpenses in the accompanying consolidated balance sheets.

 

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

 

We adopted SFAS No. 157 on December 30,2007, the first day of our fiscal 2008. SFAS No. 157 defines fair value as the price that would be receivedto sell an asset or paid to transfer a liability in an orderly transactionbetween market participants at the measurement date (an exit price). Thestandard outlines a valuation framework and creates a fair value hierarchy inorder to increase the consistency and comparability of fair value measurementsand the related disclosures. Under generally accepted accounting principles,certain assets and liabilities must be measured at fair value, and SFASNo. 157 details the disclosures that are required for items measured atfair value.

 

Financial assets and liabilities are measured usinginputs from the three levels of the SFAS No. 157 fair value hierarchy. Thethree levels are as follows:

 

Level 1—Inputs are unadjusted quoted prices in activemarkets for identical assets or liabilities.

 

Level 2—Inputs include quoted prices for similarassets and liabilities in active markets, quoted prices for identical orsimilar assets or liabilities in markets that are not active, inputs other thanquoted prices that are observable for the asset or liability (i.e., interestrates, yield curves, etc.), and inputs that are derived principally from orcorroborated by observable market data by correlation or other means (marketcorroborated inputs).

 

Level 3—Unobservable inputs that reflect ourassumptions about the assumptions that market participants would use in pricingthe asset or liability.

 

In accordance with the fair value hierarchy describedabove, the following table shows the fair value of our interest rate swap as ofJuly 4, 2009 and January 3, 2009, which is included in otherliabilities in our consolidated balance sheet (dollars in thousands):

 

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Table of Contents

 

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

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

**(Unaudited)**

 

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

 
| ** **           | ** ** | ** **         | ** ** | **Fair  Value Measurements** | ** ** |
|----------------------|------------|--------------------|------------|------------------------------|------------|
| ** **           | ** ** | **Description**    | ** ** | **Level 1**                  | ** ** | **Level 2** | ** ** | **Level 3** | ** ** |
| July 4, 2009    |       | Interest rate swap |       | $                            | —     |   | $ | 12,378 |   | $ | — |   |
| January 3, 2009 |       | Interest rate swap |       | $                            | —     |   | $ | 13,117 |   | $ | — |   |

 

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

 

The carrying values and fair values of our term loanborrowings, senior notes and senior subordinated notes as of July 4, 2009and January 3, 2009 are as follows (dollars in thousands):

 
| ** **                                               | ** **                 | **July 4, 2009** | ** ** | **January 3, 2009** | ** ** |
|----------------------------------------------------------|----------------------------|-----------------------|------------|--------------------------|------------|
| ** **                                               | ** **                 | **Carrying Value**    | ** ** | **Fair Value(1)(2)**     | ** ** | **Carrying Value** | ** ** | **Fair Value(1)(3)** | ** ** |
| Senior Secured Term Loan due February 26, 2013      |                       | $                     | 130,000    |                     | $          | 126,100 |   | $ | 130,000 |   | $ | 107,900 |   |
|                                                     |                       |                  |       |                     |       |   |   |   |   |
| 8% Senior Notes due October 1, 2011                 |                       | 240,000               |       | 232,200                  |       | 240,000 |   | 207,600 |   |
|                                                     |                       |                  |       |                     |       |   |   |   |   |
| 12% Senior Subordinated Notes due October 30, 2016: |                       |                  |       |                     |       |   |   |   |   |
|                                                     |                       |                  |       |                     |       |   |   |   |   |
|                                                     | — represented by EISs |                  | 130,123    |                     | 113,562    |   | 124,793 |   | 90,235 |   |
|                                                     |                       |                  |       |                     |       |   |   |   |   |   |
|                                                     | — held separately     |                  | 35,677     |                     | 31,136     |   | 41,007 |   | 29,651 |   |
|                                                          |                            |                       |            |                          |            |  |  |  |  |  |  |  |  |  |

 

----

| (1)    | Fair  values are estimated based on quoted market prices, except as otherwise noted  in footnotes (2) and (3) below.                                                                                                                                                                                                                                                                                                                                                                                                            |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| (2)    | Solely  for purposes of this presentation, we have assumed that the fair value of  each senior subordinated note at July 4, 2009 was $6.24, based upon the  $7.96 per share closing price of our separately traded Class A common  stock and the $14.20 per EIS closing price of our EISs on the New York Stock  Exchange on July 2, 2009 (the last business day of the second quarter of  2009). Each EIS represents one share of Class A common stock and $7.15  principal amount of our senior subordinated notes. |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| (3)    | Solely  for purposes of this presentation, we have assumed that the fair value of  each senior subordinated note at January 3, 2009 was $5.17, based upon  the $5.49 per share closing price of our separately traded Class A  common stock and the $10.66 per EIS closing price of our EISs on the New York  Stock Exchange on January 2, 2009 (the last business day of fiscal  2008).                                                                                                                                   |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   |   Our term loan borrowings are subject to an  interest rate swap discussed in Note 5.                                                                                                                                                                                                                                                                                                                                                                                                                                                |

 

**(7)****                                ****Disclosures aboutDerivative Instruments and Hedging Activities**

** **

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

 

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Tableof Contents

 

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

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

**(Unaudited)**

 

**(7)**                                 Disclosuresabout Derivative Instruments and Hedging Activities (Continued)

** **

The followingtable presents the fair value and the location within our consolidated balancesheet of all assets and liabilities associated with derivative instruments notdesignated as hedging instruments (dollars in thousands):

 
| **Derivatives  not  designated as hedging**    | ** ** | ** **                 | ** ** | **Asset  Derivatives**              | ** ** | **Liability  Derivatives**           | ** ** |
|------------------------------------------------|------------|----------------------------|------------|-------------------------------------|------------|--------------------------------------|------------|
| **instruments  under  SFAS No. 133** | ** ** | **Balance Sheet Location** | ** ** | **Fair Value at July 4, 2009** | ** ** | **Fair Value at  July 4, 2009** | ** ** |
|                                           |       |                       |       |                                |       |                                 |       |
| Interest rate swap                             |       | Other liabilities          |       | —                              |       | $                                    | 12,378     |   |
|                                                |            |                            |            |                                     |            |                                      |            |  |

 

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

 

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

 
| **Derivatives not**                                                  | ** ** | **Amount of (Gain)  Loss Recognized in  Income on Derivatives** | ** ** | **Amount of (Gain) Loss  Recognized in Income on Derivatives** | ** ** | **Location of  (Gain) Loss**              | ** ** |
|----------------------------------------------------------------------|------------|-----------------------------------------------------------------|------------|----------------------------------------------------------------|------------|-------------------------------------------|------------|
| **designated as hedging  instruments under  SFAS No. 133** | ** ** | **Thirteen Weeks  Ended****July 4,  2009**                 | ** ** | **Twenty-six Weeks  Ended****July 4,  2009**              | ** ** | **Recognized in  Income on  Derivatives** | ** ** |
| ** **                                                           | ** ** | ** **                                                      | ** ** | ** **                                                     | ** ** | ** **                                | ** ** |
| Interest rate swap                                                   | ** ** | $                                                               | (1,058     | )*                                                             | $          | 107                                       | *          | Interest  expense, net | ** ** |
|                                                                      |            |                                                                 |            |                                                                |            |                                           |            |  |  |

 

----

| * | The amount included in net  interest expense for the second quarter and first two quarters of 2009  consists of $1,482 and $739 unrealized gain on our interest rate swap, and  $424 and $846 (pre-tax) reclassified to net interest expense from accumulated  other comprehensive income, respectively. |
|---|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

**(8)****                                 ComprehensiveIncome**

** **

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

 

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

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

**(Unaudited)**

 

**(8)**                                 Comprehensive Income (Continued)

 

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

 
| ** **                                                                         | ** ** | **Thirteen Weeks Ended** | ** ** | **Twenty-six Weeks Ended** | ** ** |
|------------------------------------------------------------------------------------|------------|--------------------------|------------|----------------------------|------------|
| ** **                                                                         | ** ** | **July 4, 2009**    | ** ** | **June 28, 2008**     | ** ** | **July 4, 2009** | ** ** | **June 28, 2008** | ** ** |
|                                                                               |       |                     |       |                       |       |   |   |   |   |
| Net income                                                                         |       | $                        | 6,029      |                       | $          | 3,530 |   | $ | 11,942 |   | $ | 7,939 |   |
| Other  comprehensive income:                                                       |       |                     |       |                       |       |   |   |   |   |
| Foreign  currency translation adjustments                                          |       | 37                       |       | 52                         |       | (77 | ) | 15 |   |
| Amortization  of unrecognized prior service cost and pension deferrals, net of tax |       | 110                      |       | 5                          |       | 221 |   | 10 |   |
| Cash  flow hedge transaction, net of tax                                           |       | —                   |       | 3,734                      |       | — |   | 317 |   |
| Reclassification  to interest expense, net for interest rate swap and net of tax   |       | 263                      |       | —                     |       | 525 |   | — |   |
| Comprehensive  income                                                              |       | $                        | 6,439      |                       | $          | 7,321 |   | $ | 12,611 |   | $ | 8,281 |   |

 

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

** **

Net periodic costsfor the second quarter and first two quarters of 2009 and 2008 include thefollowing components (dollars in thousands):

 
| ** **                                          | ** ** | **Thirteen Weeks Ended** | ** ** | **Twenty-six Weeks Ended** | ** ** |
|-----------------------------------------------------|------------|--------------------------|------------|----------------------------|------------|
| ** **                                          | ** ** | **July 4, 2009**    | ** ** | **June 28, 2008**     | ** ** | **July 4, 2009** | ** ** | **June 28, 2008** | ** ** |
|                                                |       |                     |       |                       |       |   |   |   |   |
| Service cost—benefits earned during the period |       | $                        | 419        |                       | $          | 330 |   | $ | 838 |   | $ | 660 |   |
| Interest  cost on projected benefit obligation      |       | 431                      |       | 360                        |       | 862 |   | 720 |   |
| Expected  return on plan assets                     |       | (376                     | )          | (453                       | )          | (752 | ) | (906 | ) |
| Amortization  of unrecognized prior service cost    |       | 11                       |       | 11                         |       | 22 |   | 22 |   |
| Amortization  of loss                               |       | 167                      |       | (3                         | )          | 334 |   | (6 | ) |
| Net  pension cost                                   |       | $                        | 652        |                       | $          | 245 |   | $ | 1,304 |   | $ | 490 |   |

 

Duringthe first two quarters of 2009, we made approximately $2.1 million incontributions to our defined benefit pension plans, all of which were madeduring the second quarter.  We anticipateelecting to make contributions of approximately $0.5 million to our definedbenefit pension plans during the remainder of fiscal 2009.

 

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

** **

*Environmental. *We are subject to environmental laws and regulationsin the normal course of business.  We didnot make any material expenditures during the second quarter and first twoquarters of 2009 or in fiscal 2008 in order to comply with environmental lawsand regulations.  Based on our experienceto date, management believes that the future cost of compliance with existingenvironmental laws and regulations (and liability for any known environmentalconditions) will not have a material adverse effect on our consolidatedfinancial position, results of operations or liquidity.  However, we cannot predict what environmentalor health and safety legislation or regulations will be enacted in the futureor how existing or future laws or regulations will be enforced, administered orinterpreted, nor can we predict the amount of future expenditures that may berequired in order to comply with such environmental or health and safety lawsor regulations or to respond to such environmental claims.

 

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

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

**(Unaudited)**

 

**(10)**                          Commitmentsand Contingencies (Continued)

** **

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

 

*Collective Bargaining Agreements*. Approximately 355 of our 732 employees, or 48.5%, as of July 4,2009, were covered by collective bargaining agreements.  None of our collective bargaining agreementsis scheduled to expire within one year.

 

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

 

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

** **

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

 

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

** **

Ourexposure to credit loss in the event of non-payment of accounts receivable bycustomers is estimated in the amount of the allowance for doubtfulaccounts.  We perform ongoing creditevaluations of our customers’ financial conditions.  Our top ten customers accounted forapproximately 49.6%****and 46.1% of consolidated net salesfor the first two quarters of 2009 and 2008, respectively.  Our top ten customers accounted forapproximately 53.0% and 56.1% of our receivables as of July 4, 2009 and January 3,2009, respectively.  Other than Wal-Mart,which accounted for 16.4% and 13.3% of our consolidated net sales for the firsttwo quarters of 2009 and 2008, respectively, no single customer accounted formore than 10.0% of our consolidated net sales for the first two quarters of2009 or 2008.  Other than C&SWholesale Grocery and Wal-Mart, which accounted for 11.4% and 13.0% of ourconsolidated receivables, respectively, as of July 4, 2009, no singlecustomer accounted for more than 10.0% of our consolidated receivables as ofthe end of the first two quarters of 2009. Other than C&S Wholesale Grocery and Wal-Mart, which accounted for17.7% and 13.2% of our consolidated receivables, respectively, as of January 3,2009, no single customer accounted for more than 10.0% of our consolidatedreceivables as of the end of fiscal 2008.

 

During the second quarterand first two quarters of 2009 and 2008, our sales to foreign countriesrepresented less than 1.0% of net sales. Our foreign sales are primarily to customers in Canada.****

 

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

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

**(Unaudited)**

 

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

** **

Therecognition of compensation expense for our performance share long-termincentive awards (LTIAs) is initially based on the probable outcome of theapplicable performance condition based on the fair value of the award on thedate of grant and the anticipated number of shares to be awarded on a straight-linebasis over the applicable performance period. Our company’s performance against the performance goal defined in theaward agreements will be re-evaluated on a quarterly basis throughout theapplicable performance period and the recognition of compensation expense willbe adjusted for subsequent changes in the estimated or actual outcome.  The cumulative effect on current and priorperiods of a change in the estimated number of performance share awards isrecognized as an adjustment to earnings in the period of the revision.

 

Duringthe second quarter and first two quarters of 2009, we recognized $0.9 millionand $1.6 million, respectively, of compensation expense related to performanceshare LTIAs for the 2008 to 2009, 2008 to 2010 and 2009 to 2011 performanceperiods, which is reflected in general and administrative and sales, marketingand distribution expenses in our consolidated statements of operations.  As of July 4, 2009, there was $3.6million of unrecognized compensation expense related to performance shareLTIAs, which is expected to be recognized over the next 30 months.

 

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

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

 

----

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

 

*Non-Employee Director StockGrants. *Each of our non-employeedirectors receives an annual equity grant of approximately $35,000 of Class ACommon Stock as part of his or her non-employee director compensation.  These shares fully vest when issued.  On June 1, 2009, 24,135 shares of Class Acommon stock in theaggregate were issued to the non-employee directors based upon the closing priceof our Class A common stock on May 29, 2009 (the business dayimmediately prior to the date of grant) of $7.25 per share.  Share-based compensation expense of $0.2million relating to the non-employee director grants is reflected in generaland administrative expenses in our consolidated statements of operations.

 

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

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

**(Unaudited)**

 

**(14)****                         ****Stock and DebtRepurchase Plan**

** **

*Stock andDebt Repurchase Plan. *On October 27, 2008, our board ofdirectors authorized a stock and debt repurchase program for the repurchase ofup to $10.0 million of our Class A common stock and/or senior notes overthe next twelve months.  On May 5,2009, the board of directors authorized an increase in the authorization to$25.0 million and extended the authorization through May 4, 2010.  Under the authorization, we may purchaseshares of Class A common stock and/or senior notes from time to time inthe open market or in privately negotiated transactions in compliance with theapplicable rules and regulations of the SEC.

 

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

 

During the first two quarters of 2009 werepurchased and retired 403,500 shares of Class A common stock at anaverage cost per share (excluding fees and commissions) of $5.76, or $2.3million in the aggregate.  As of July 4,2009, we had $20.1 million available for any future repurchases of Class Acommon stock and/or senior notes under the stock and debt repurchase plan.

 

**(15)****                         ****Subsequent Events**

 

InJuly 2009, B&G Foods has proposed to our lenders an amendment to our seniorcredit facility.  The purpose of theproposed amendment is to:

 
| · | appoint  Credit Suisse as administrative agent under the credit facility to replace  Lehman CPI;                                                                                                                                                                          |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                      |
| · | permit  us to do one or more of the following:                                                                                                                                                                                                                            |
|   |                                                                                                                                                                                                                                                                      |
|   | —                                                                                                                                                                                                                                                                    | make  or offer to make any optional or voluntary payment, prepayment, repurchase or  redemption of the senior subordinated notes for cash, subject to the  restricted payments test set forth in our senior notes indenture; |
|   |                                                                                                                                                                                                                                                                      |   |
|   | —                                                                                                                                                                                                                                                                    | make  or offer to make any optional or voluntary payment, prepayment, repurchase or  redemption of the senior subordinated notes in exchange for Class A common  stock; and |
|   |                                                                                                                                                                                                                                                                      |   |
|   | —                                                                                                                                                                                                                                                                    | refinance  the senior subordinated notes with senior unsecured indebtedness provided  that our consolidated leverage ratio is less than or equal to 4.5 to 1.0  after giving effect to the refinancing; and |
|   |                                                                                                                                                                                                                                                                      |
| · | extend the maturity date  for the existing undrawn $25.0 million revolving credit facility from  January 10, 2011 to February 26, 2013 so that it will have the same  maturity date as the existing $130.0 million of borrowings under the term  loan facility. |

 

Theproposed amendment requires the consent of a majority of the lenders under thecredit facility and, with respect to the extension of the revolving creditfacility, all of the revolving credit lenders. No assurance can be given that the proposed amendment will beconsummated on the terms contemplated or at all.

 

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** **

**Item 2.  Management’sDiscussion and Analysis of Financial Condition and Results of Operations**

** **

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

 

**General**

** **

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

 

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

 

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

 

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

 

Wepurchase maple syrup primarily from Canada and Vermont.  In 2008, maple syrup production in Canada,which represents the great majority of global production, was significantlybelow industry needs due to growing global demand and one of the worst cropyields in nearly 40 years.  As a result,the price we paid for maple syrup increased significantly and we were facedwith a shortfall in supply as compared to our needs, which had a negativeimpact on our sales volume of maple syrup products during fiscal 2008 thatcontinued through the first two quarters of 2009.  The 2009 maple syrup crop yield is moreconsistent with historic levels.  Thistogether with the granting of additional production quotas by the Federation ofQuébec Maple Syrup Producers, has brought global supply more in line withglobal demand and is expected to reduce the price we will pay for maple syrupduring the remainder of 2009 as compared to 2008.  In addition, unlike 2008, we expect to be ableto purchase sufficient maple syrup in 2009 to meet our needs.

 

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

 

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manage these risks by entering into short-term supplycontracts and advance commodities purchase agreements from time to time,implementing cost saving measures and by raising sales prices.  To date, our cost saving measures and salesprice increases have offset increases to our raw material, ingredient andpackaging costs, although in certain cases on a lagging basis.  To the extent we are unable to offset presentand future cost increases, our operating results will be negatively impacted.

 

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

 

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

 

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

 

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

 

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

 

**Critical Accounting Policies; Use of Estimates**

** **

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

 

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

 

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** **

**Results of Operations**

** **

Thefollowing table sets forth the percentages of net sales represented by selecteditems for the second quarter of 2009 and 2008 and first two quarters of 2009and 2008 reflected in our consolidated statements of operations.  The comparisons of financial results are notnecessarily indicative of future results:

 
| ** **                                        | ** ** | **Thirteen Weeks Ended** | ** ** | **Twenty-six Weeks Ended** | ** ** |
|---------------------------------------------------|------------|--------------------------|------------|----------------------------|------------|
| ** **                                        | ** ** | **July 4, 2009**    | ** ** | **June 28, 2008**     | ** ** | **July 4, 2009** | ** ** | **June 28, 2008** | ** ** |
| **Statement  of Operations:**                     |       |                     |       |                       |       |   |   |   |   |
| Net sales                                         |       | 100.0                    | %          | 100.0                      | %          | 100.0 | % | 100.0 | % |
| Cost of goods sold                                |       | 70.0                     | %          | 71.8                       | %          | 68.7 | % | 70.9 | % |
| Gross profit                                      |       | 30.0                     | %          | 28.2                       | %          | 31.3 | % | 29.1 | % |
|                                              |       |                     |       |                       |       |   |   |   |   |
| Sales, marketing  and distribution expenses       |       | 8.9                      | %          | 9.6                        | %          | 9.1 | % | 10.1 | % |
| General and  administrative expenses              |       | 2.0                      | %          | 1.6                        | %          | 2.0 | % | 1.4 | % |
| Amortization  expense—customer relationships |       | 1.3                      | %          | 1.4                        | %          | 1.3 | % | 1.4 | % |
| Operating income                                  |       | 17.8                     | %          | 15.6                       | %          | 18.9 | % | 16.2 | % |
|                                              |       |                     |       |                       |       |   |   |   |   |
| Interest  expense, net                            |       | 9.9                      | %          | 10.8                       | %          | 11.0 | % | 10.8 | % |
| Income before  income tax expense                 |       | 7.9                      | %          | 4.8                        | %          | 7.9 | % | 5.4 | % |
|                                              |       |                     |       |                       |       |   |   |   |   |
| Income tax  expense                               |       | 3.0                      | %          | 1.8                        | %          | 3.0 | % | 2.1 | % |
| Net income                                        |       | 4.9                      | %          | 3.0                        | %          | 4.9 | % | 3.4 | % |

 

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

 

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

 

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

 

*Sales, Marketing and Distribution Expenses.* Our sales, marketing and distribution expenses include costs formarketing personnel, consumer advertising programs, internal sales forces,brokerage costs and warehouse facilities.

 

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

 

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

 

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

 

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***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.

 

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

 

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

 

Areconciliation of EBITDA to net income and to net cash provided by operatingactivities for the second quarter and first two quarters of 2009 and 2008 alongwith the components of EBITDA follows:

 

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| ** **                                                                 | ** ** | **Thirteen  Weeks Ended**   | ** ** | **Twenty-six  Weeks Ended** | ** ** |
|----------------------------------------------------------------------------|------------|-----------------------------|------------|-----------------------------|------------|
| ** **                                                                 | ** ** | **July 4,  2009**      | ** ** | **June 28,  2008**     | ** ** | **July 4,  2009** | ** ** | **June 28,  2008** | ** ** |
| ** **                                                                 | ** ** | **(Dollars  in thousands)** | ** ** |
| Net income                                                                 |       | $                           | 6,029      |                        | $          | 3,530 |   | $ | 11,942 |   | $ | 7,939 |   |
| Income tax expense                                                         |       | 3,681                       |       | 2,165                       |       | 7,289 |   | 4,855 |   |
| Interest expense, net                                                      |       | 12,137                      |       | 12,908                      |       | 26,426 |   | 25,479 |   |
| Depreciation and amortization                                              |       | 3,610                       |       | 3,844                       |       | 7,170 |   | 7,533 |   |
| EBITDA                                                                     |       | 25,457                      |       | 22,447                      |       | 52,827 |   | 45,806 |   |
| Income tax expense                                                         |       | (3,681                      | )          | (2,165                      | )          | (7,289 | ) | (4,855 | ) |
| Interest expense, net                                                      |       | (12,137                     | )          | (12,908                     | )          | (26,426 | ) | (25,479 | ) |
| Deferred income taxes                                                      |       | 3,113                       |       | 1,868                       |       | 5,947 |   | 4,045 |   |
| Amortization of deferred financing costs                                   |       | 820                         |       | 792                         |       | 1,612 |   | 1,584 |   |
| Unrealized gain on interest rate swap                                      |       | (1,482                      | )          | —                      |       | (739 | ) | — |   |
| Reclassification to interest expense, net for interest rate swap           |       | 424                         |       | —                      |       | 846 |   | — |   |
| Share-based compensation expense                                           |       | 1,055                       |       | 358                         |       | 1,802 |   | 358 |   |
| Changes in assets and liabilities, net of effects of business  combination |       | (6,863                      | )          | (9,273                      | )          | (11,248 | ) | (9,366 | ) |
| Net cash provided by operating activities                                  |       | $                           | 6,706      |                        | $          | 1,119 |   | $ | 17,332 |   | $ | 12,093 |   |

 

***Second quarter of 2009 compared to the second quarter of2008.***

** **

*Net Sales. *Net sales increased $3.7 million or 3.1%to $122.9 million for the second quarter of 2009 from $119.2 million for thesecond quarter of 2008.  Net sales forthe second quarter of 2009 were negatively impacted by the poor maple syrupcrop in Canada in 2008 that led to a global shortfall of pure maple syrup.  Net sales of our *Maple GroveFarms*pure maple syrup products decreased by $0.6 million,consisting of a unit volume decline of $1.4 million, partially offset by salesprice increases of $0.8 million. Excluding net sales of our pure maple syrup products, net sales for thesecond quarter of 2009 increased $4.3 million or 4.0%.  The $4.3 million increase was attributable tosales price increases of $8.5 million partially offset by a decrease in unitvolume of $4.2 million.

 

Netsales of our lines of *Ortega, B&M,Accent*and *Joan of Arc*products increased**in the amounts of $3.4 million, $0.5million, $0.4 million and $0.4 million or 13.1%, 4.5%, 10.5% and 26.4%,respectively.  These increases wereoffset by a reduction in net sales of our private label pickles and peppers of $0.3million or 23.8%.  In the aggregate, netsales for all other brands decreased $0.1 million, or 0.1%.

 

*Gross Profit. *Gross profit increased $3.3 million or9.9% to $36.9 million for the second quarter of 2009 from $33.6 million for thesecond quarter of 2008.  Gross profitexpressed as a percentage of net sales increased 1.8 percentage points to 30.0%in the second quarter of 2009 from 28.2% in the second quarter of 2008.  This increase in gross profit expressed as apercentage of net sales was primarily attributable to increased sales prices of$9.3 million partially offset by increased costs for beans and packaging and anincreased accrual for performance-based compensation.

 

*Sales, Marketing and Distribution Expenses. *Sales, marketing and distribution expenses decreased$0.6 million or 4.6% to $10.9 million for the second quarter of 2009 from $11.5million for the second quarter of 2008. This decrease is primarily due to a decrease in consumer marketing andtrade spending of $1.2 million and selling expense of $0.1 million offset by anincrease in warehousing expense of $0.4 million and an increased accrual forperformance-based compensation of $0.4 million. Expressed as a percentage of net sales, our sales, marketing anddistribution expenses decreased to 8.9% for the second quarter of 2009 from9.6% for the second quarter of 2008.

 

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*General and Administrative Expenses. *General and administrative expenses increased $0.6million or 31.7% to $2.5 million for the second quarter of 2009 from $1.9million in the second quarter of 2008. The increase in general and administrative expenses primarily resultedfrom an increased accrual for performance-based compensation of $0.8 million,partially offset by decreases in other expenses.

 

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

 

*Operating Income. *As a result of the foregoing, operatingincome increased $3.2 million or 17.4% to $21.8 million for the second quarterof 2009 from $18.6 million for the second quarter of 2008.  Operating income expressed as a percentage ofnet sales increased to 17.8% in the second quarter of 2009 from 15.6% in thesecond quarter of 2008.

 

*Net Interest Expense. *Netinterest expense decreased $0.8 million or 6.0% to $12.1 million for the secondquarter of 2009 from $12.9 million in the second quarter of 2008.  Net interest expense in the second quarter of2009 included a $1.5 million benefit relating to an unrealized gain on ourinterest rate swap, partially offset by a reclassification of $0.4 million ofthe amount recorded in accumulated other comprehensive income (loss) related tothe swap.  Net interest expense in thesecond quarter of 2009 also includes a reduction in interest income primarily dueto lower interest rates.  See “—Liquidityand Capital Resources—Debt” below.

 

*Income Tax Expense. *Income tax expense increased $1.5 millionto $3.7 million for the second quarter of 2009 from $2.2 million for the secondquarter of 2008.  Our effective tax ratewas 37.9% for the second quarter of 2009 and 2008.

 

***First two quarters of 2009 compared to first two quarters of2008.***

** **

*Net Sales. *Net sales increased $6.0 million or 2.6%to $241.5 million for the first two quarters of 2009 from $235.5 million forthe first two quarters of 2008.  Net salesfor the first two quarters of 2009 were negatively impacted by the poor maplesyrup crop in Canada in 2008 that led to a global shortfall of pure maplesyrup.  Net sales of our *Maple Grove Farms*pure maple syrup products decreased by$2.8 million, consisting of a unit volume decline of $4.7 million, partiallyoffset by sales price increases of $1.9 million.  Excluding net sales of our pure maple syrupproducts, net sales for the first two quarters of 2009 increased $8.8 millionor 4.1%.  The $8.8 million increase wasattributable to sales price increases of $15.1 million partially offset by adecrease in unit volume of $6.3 million.

 

Netsales of our lines of *Ortega, B&M, LasPalmas, Joan of Arc, Emeril,*and*Accent*products increased**in the amounts of $6.9 million, $1.6million, $1.0 million, $0.8 million, $0.7 million and $0.6 million or 13.4%,11.1%, 7.6%, 18.1%, 7.8% and 7.1%, respectively.  These increases were offset by a reduction innet sales of our *Cream of Wheat,*private labelpickles and peppers and *Bloch &Guggenheimer*products of $1.8 million, $0.7 million and $0.7 millionor 6.4%, 29.8% and 3.7%.  In theaggregate, net sales for all other brands increased $0.4 million, or 0.6%.

 

*Gross Profit. *Gross profit increased $7.1 million or10.4% to $75.6 million for the first two quarters of 2009 from $68.5 millionfor the first two quarters of 2008. Gross profit expressed as a percentage of net sales increased 2.2percentage points to 31.3% in the first two quarters of 2009 from 29.1% in thefirst two quarters of 2008.  The increasein gross profit expressed as percentage of net sales was primarily attributableto pricing of $17.0 million offset by increased costs for beans and packagingand an increased accrual for performance-based compensation.

 

*Sales, Marketing and Distribution Expenses. *Sales, marketing and distribution expenses decreased$1.9 million or 7.7% to $21.9 million for the first two quarters of 2009 from$23.8 million for the first two quarters of 2008.  The decrease is primarily due to a decreasein consumer marketing and trade spending of $2.2 million and selling expense of$0.2 million, offset by an increased accrual for performance-based 

 

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compensation of $0.6 million.  Expressed as a percentage of net sales, oursales, marketing and distribution expenses decreased to 9.1% for the first twoquarters of 2009 from 10.1% for the first two quarters of 2008.

 

*General and Administrative Expenses. *General and administrative expenses increased $1.6million or 48.7% to $4.8 million for the first two quarters of 2009 from $3.2million in the first two quarters of 2008. The increase in general and administrative expenses primarily resultedfrom an increased accrual for performance-based compensation of $1.6 million.

 

*Amortization Expense—Customer Relationships.* Amortization expense—customer relationships remained consistent at $3.2million for the first two quarters of 2009 as compared to the first twoquarters of 2008.

 

*Operating Income. *As a result of the foregoing, operatingincome increased $7.4 million or 19.3% to $45.7 million for the first twoquarters of 2009 from $38.3 million for the first two quarters of 2008.  Operating income expressed as a percentage ofnet sales increased to 18.9% in the first two quarters of 2009 from 16.2% inthe first two quarters of 2008.

 

*Net Interest Expense. *Netinterest expense increased $0.9 million or 3.7% to $26.4 million for the firsttwo quarters of 2009 from $25.5 million in the first two quarters of 2008.  Net interest expense in the first twoquarters of 2009 included a $0.7 million benefit relating to an unrealized gainon our interest rate swap, partially offset by a reclassification of $0.8million of the amount recorded in accumulated other comprehensive income (loss)related to the swap.  Net interestexpense in the first two quarters of 2009 also includes a reduction in interestincome primarily due to lower interest rates. See “—Liquidity and Capital Resources—Debt” below.

 

*Income Tax Expense. *Income tax expense increased $2.4 millionto $7.3 million for the first two quarters of 2009 from $4.9 million for thefirst two quarters of 2008.  Our effectivetax rate was 37.9% for the first two quarters of 2009 and 2008.

 

**Liquidityand Capital Resources**

 

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

 

*Cash Flows*.  Cash providedby operating activities increased $5.2 million to $17.3 million for the firsttwo quarters of 2009 from $12.1 million for the first two quarters of2008.  Net income, excluding non-cashitems such as depreciation and amortization, amortization of deferred debtissuance costs, deferred income taxes, unrealized gain on our interest rateswap, a reclassification to net interest expense and share-based compensationincreased by $7.1 million.  This increasewas offset by an increase in net changes in assets and liabilities of $1.9million due in large part to an increase in working capital primarilyattributable to an increase in inventory offset by an increase in accountspayable.

 

Netcash used in investing activities for the first two quarters of 2009 decreased$3.4 million to $5.6 million from $9.0 million for the first two quarters of2008.  Net cash used in investingactivities for the first two quarters of 2009 and 2008 consisted entirely ofcapital spending.  Capital expendituresin the first two quarters of 2009 and 2008 included expenditures for buildingimprovements, purchases of manufacturing and computer equipment and capitalizedinterest.  Capital expenditures for thefirst two quarters of 2008 also included expenditures for the expansion of ourStoughton, Wisconsin facility and the transfer of a portion of the *Cream of Wheat*production to that facility.  That project was completed during fiscal 2008and is the primary reason that capital spending decreased in the first twoquarters of 2009 as compared to the first two quarters of 2008.

 

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Netcash used in financing activities for the first two quarters of 2009 was $14.6million as compared to $15.6 million for the first two quarters of 2008.  Net cash used in financing activities for thefirst two quarters of 2009 consisted of the payment of dividends and therepurchase of Class A common stock. Net cash used in financing activities for the first two quarters of 2008was entirely for the payment of dividends to holders of our Class A commonstock.

 

Based on a number offactors, including our trademark, goodwill and customer relationshipintangibles amortization for tax purposes from our prior acquisitions, werealized a significant reduction in cash taxes in fiscal 2008 and 2007 ascompared to our tax expense for financial reporting purposes.  While we expect our cash taxes to continue toincrease in fiscal 2009 as compared to the prior two years, we believe that wewill realize a benefit to our cash taxes payable from amortization of ourtrademarks, goodwill and customer relationship intangibles for the taxableyears 2009 through 2022.

 

***DividendPolicy***

 

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

 

Dividendpayments, however, are not mandatory or guaranteed and holders of our commonstock do not have any legal right to receive, or require us to pay,dividends.  Furthermore, our board ofdirectors may, in its sole discretion, amend or repeal this dividendpolicy.  Our board of directors maydecrease the level of dividends below the intended dividend rate or discontinueentirely the payment of dividends.  Futuredividends with respect to shares of our common stock depend on, among other things,our results of operations, cash requirements, financial condition, contractualrestrictions, business opportunities, acquisition opportunities, the conditionof the debt and equity financing markets, provisions of applicable law andother factors that our board of directors may deem relevant.  Our board of directors is free to depart fromor change our dividend policy at any time and could do so, for example, if itwas to determine that we have insufficient cash to take advantage of growthopportunities.  In addition, over time,our EBITDA and capital expenditure, working capital and other cash needs willbe subject to uncertainties, which could impact the level of dividends, if any,we pay in the future.  Our seniorsubordinated notes indenture, the terms of our revolving credit facility andour senior notes indenture contain significant restrictions on our ability tomake dividend payments.  In addition,certain provisions of the Delaware General Corporation Law may limit ourability to pay dividends.

 

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

 

Forthe first two quarters of 2009 and 2008, we had cash flows provided byoperating activities of $17.3 million and $12.1 million, and distributed $12.3million and $15.6 million, respectively, as dividends. If our cash flows fromoperating activities for future periods were to fall below our minimumexpectations (or if our assumptions as to capital expenditures or interestexpense were too low or our assumptions as to the sufficiency of our revolvingcredit facility to finance our working capital needs were to prove incorrect),we would need either to further reduce or eliminate dividends or, to the extentpermitted under our senior notes 

 

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indenture, our senior subordinated notes indenture andthe terms of our credit facility, fund a portion of our dividends withborrowings or from other sources.  If wewere to use working capital or permanent borrowings to fund dividends, we wouldhave less cash and/or borrowing capacity available for future dividends andother purposes, which could negatively impact our financial position, ourresults of operations, our liquidity and our ability to maintain or expand ourbusiness.

 

***Acquisitions***

 

Ourliquidity and capital resources have been significantly impacted byacquisitions and may be impacted in the foreseeable future by additionalacquisitions.  We have historicallyfinanced acquisitions with borrowings and cash flows from operatingactivities.  Historically, our interestexpense has increased as a result of additional indebtedness we have incurredin connection with acquisitions, and will increase with any additionalindebtedness we may incur to finance future acquisitions, if any.  To the extent future acquisitions arefinanced by additional indebtedness, the resulting increase in debt andinterest expense could have a negative impact on liquidity.

 

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

 

Wehave not made any material expenditures during the first two quarters of 2009in order to comply with environmental laws or regulations.  Based on our experience to date, we believethat the future cost of compliance with existing environmental laws andregulations (and liability for known environmental conditions) will not have amaterial adverse effect on our consolidated financial condition, results ofoperations or liquidity.  However, wecannot 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***

 

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

 

Interest under the revolvingcredit facility, including any outstanding letters of credit, is determinedbased on alternative rates that we may choose in accordance with the revolvingcredit facility, including the base lending rate per annum plus an applicablemargin, and LIBOR plus an applicable margin. We pay a commitment fee of 0.50% per annum on the unused portion of therevolving credit facility.  Interestunder the term loan facility is determined based on alternative rates that wemay choose in accordance with the credit facility, including the base lendingrate per annum plus an applicable margin of 1.00%, and LIBOR plus an applicablemargin of 2.00%.

 

Our obligations under thecredit facility are jointly and severally and fully and unconditionallyguaranteed on a senior basis by all of our existing and certain future domesticsubsidiaries.  The credit facility issecured by substantially all of our and our domestic subsidiaries’ assetsexcept our and our domestic subsidiaries’ real property.  The credit facility provides for mandatoryprepayment based on asset dispositions and certain issuances of securities, asdefined.  The credit facility containscovenants that restrict, among other things, our ability to incur additionalindebtedness, pay dividends and create certain liens.  The credit facility also contains certainfinancial maintenance covenants, which, among other things, specify maximumcapital expenditure limits, a minimum interest coverage ratio and a maximumsenior and total leverage ratio, each ratio as defined.  As of July 4, 2009, we were in compliancewith all of the covenants in the credit facility.  Proceeds of the revolving credit facility arerestricted to funding our working capital requirements, capital expendituresand acquisitions of companies in the same line of business as our company, subjectto specified 

 

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criteria.  The maximum letter of credit capacity underthe revolving credit facility is $10.0 million, with a fronting fee of 3.0% perannum for all outstanding letters of credit.

 

On September 15, 2008,Lehman Brothers Holdings Inc. (Lehman) filed for protection under Chapter 11 ofthe U.S. Bankruptcy Code.  LehmanCommercial Paper Inc. (Lehman CPI), a Lehman subsidiary, is the administrativeagent under our credit facility.  LehmanCPI filed for protection under Chapter 11 of the U.S. Bankruptcy Code on October 3,2008.  None of our $130.0 million ofoutstanding term loans is currently held by Lehman, Lehman CPI or any othersubsidiary of Lehman.  Lehman CPI is oneof the lenders participating in our $25.0 million revolving creditfacility.  However, Lehman CPI has only$3.1 million of the $25.0 million commitment. We do not believe that Lehman CPI would honor its funding commitmentunder the revolving credit facility if we were to make a funding request.  As a result, the effective availableborrowing capacity under our revolving credit facility, net of outstandingletters of credit of $0.5 million, was $21.4 million at July 4, 2009.  We have not drawn upon the revolving creditfacility since its inception in October 2004 and, based upon our cash onhand and working capital requirements, we have no plans to do so for theforeseeable future.

 

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

 

We initially designated theswap as a cash flow hedge under the guidelines of SFAS No. 133 “*Accounting for Derivative Instruments and Hedging Activities,”*asamended (SFAS No. 133).  Prior toLehman’s bankruptcy filing, we recorded changes in the fair value of the swapin other comprehensive income (loss), net of tax in our consolidated balancesheet.  However, as a result of theLehman bankruptcy filing, we determined in September 2008 that theinterest rate swap was no longer an effective hedge as defined by SFAS No. 133and, accordingly, subsequent changes in the swap’s fair value are beingrecorded in current earnings in net interest expense in the consolidatedstatements of operations.  We obtainthird-party verification of fair value at the end of each reporting period.  As of July 4, 2009, the fair value ofour interest rate swap was $12.4 million and is recorded in other liabilitieson our consolidated balance sheet.  Theamount recorded in accumulated other comprehensive income (loss) will bereclassified to net interest expense over the remaining life of the term loanborrowings as we make interest payments. Net interest expense in the second quarter and first two quarters of2009 includes a benefit of $1.5 million and $0.7 million, respectively,relating to unrealized gain on our interest rate swap and a reclassification of$0.4 million and $0.8 million, respectively, of the amount recorded inaccumulated other comprehensive income (loss) related to the swap.  During the remainder of fiscal 2009, weexpect to reclassify to net interest expense $0.9 million of the amount recordedin accumulated other comprehensive income (loss).

 

*12%Senior Subordinated Notes due 2016*.  In October 2004,we issued $165.8 million aggregate principal amount of 12% senior subordinatednotes due 2016, $143.0 million of which in the form of EISs and $22.8 millionseparate from EISs.  As of July 4,2009, $130.1 million aggregate principal amount of senior subordinated noteswas held in the form of EISs and $35.7 million aggregate principal amount ofsenior subordinated notes was held separate from EISs.

 

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

 

Upon the occurrence of achange of control (as defined in the indenture), unless we have retired thesenior subordinated notes or exercised our right to redeem all seniorsubordinated notes as described below, each holder of the senior subordinatednotes 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

 

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repurchased,plus any accrued and unpaid interest 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.

 

Wemay not redeem the senior subordinated notes prior to October 30,2009.  However, we may, from time totime, before or after October 30, 2009, seek to retire 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 orexchanges, if any, would first require an amendment to or a waiver under ourcredit agreement and, in any event, will depend on prevailing marketconditions, our liquidity requirements, contractual restrictions and otherfactors. The amounts involved may be material. As discussed in note 15 to ourconsolidated financial statements, we have recently proposed an amendment tothe lenders under our senior credit facility that would permit us to make suchrepurchases or exchanges.  Noassurance can be given that the proposed amendment will be consummated on theterms contemplated or at all.

 

Onand after October 30, 2009, we may redeem for cash all or part of thesenior subordinated notes at a redemption price of 106.0% beginning October 30,2009 and thereafter at prices declining annually to 100% on or after October 30,2012.  If we redeem senior subordinatednotes represented by EISs, the senior subordinated notes and Class Acommon stock represented by those EISs 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.

 

Ourobligations under the senior subordinated notes are jointly and severally andfully and unconditionally guaranteed by all of our existing domesticsubsidiaries and certain future domestic subsidiaries on an unsecured andsubordinated basis on the terms set forth in our senior subordinated notesindenture.  The senior subordinated noteguarantees are subordinated in right of payment to all existing and future seniorindebtedness of the guarantors, including the indebtedness under our creditfacility and the senior notes.  Ourforeign subsidiary is not a guarantor, and any future foreign or partiallyowned domestic subsidiaries will not be guarantors, of our senior subordinatednotes.

 

Oursenior subordinated notes indenture contains covenants with respect to us andthe guarantors 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.  Each of the covenantsis subject to a number of important exceptions and qualifications.  As of July 4, 2009, we were incompliance with all of the covenants in the senior subordinated notesindenture.

 

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

 

Wemay redeem some or all of the senior notes at a redemption price of 104.0%beginning October 1, 2008 and thereafter at prices declining annually to100.0% on or after October 1, 2010. If we or any of the guarantors sell certain assets or experiencespecific kinds of changes in control, we must offer to purchase the seniornotes at the prices as described in our senior notes indenture plus accrued andunpaid interest to the date of redemption.

 

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Wemay also, from time to time, seek to retire senior notes through cashrepurchases of senior notes and/or exchanges of senior notes for equitysecurities, in open market purchases, privately negotiated transactions orotherwise.  Such repurchases orexchanges, if any, will depend on prevailing market conditions, our liquidityrequirements, contractual restrictions and other factors. The amounts involvedmay be material.

 

Ourobligations under the senior notes are jointly and severally and fully andunconditionally guaranteed on a senior basis by all of our existing and certainfuture domestic subsidiaries.  The seniornotes 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 foreign subsidiary is not a guarantor,and any future foreign or partially owned domestic subsidiaries will not beguarantors, of our senior notes.

 

Oursenior notes indenture contains covenants with respect to us and the guarantorsand restricts the incurrence of additional indebtedness and the issuance ofcapital stock; the payment of dividends or distributions on, and redemption of,capital stock; a number of other restricted payments, including certain investments;specified creation of liens, sale-leaseback transactions and sales of assets;fundamental changes, including consolidation, mergers and transfers of all orsubstantially all of our assets; and specified transactions with affiliates.  Each of the covenants is subject to a numberof important exceptions and qualifications. As of July 4, 2009, we were in compliance with all of the covenantsin the senior notes indenture.

 

***Stock and DebtRepurchase Plan***

 

On October 27, 2008, our board of directors authorizeda stock and debt repurchase program for the repurchase of up to $10.0 millionof our Class A common stock and/or senior notes over the next twelvemonths.  On May 5, 2009, the boardof directors authorized an increase in the authorization to $25.0 million andextended the authorization through May 4, 2010.  Under the authorization, we may purchaseshares of Class A common stock and/or senior notes from time to time inthe open market or in privately negotiated transactions in compliance with the applicablerules and regulations of the SEC.

 

The timing and amount of such repurchases, if any,will be at the discretion of management, and will depend on market conditionsand other considerations.  Therefore,there can be no assurance as to the number or aggregate dollar amount of sharesthat will be repurchased under the stock and debt repurchase program.  Likewise, there can be no assurance as to theprincipal amount of senior notes, if any, that will be repurchased.  We may discontinue the program at anytime.  Any shares repurchased pursuant tothe stock repurchase program will be retired. Likewise, any senior notes repurchased will be cancelled.

 

Duringthe first two quarters of 2009, we repurchased and retired 403,500 shares of Class Acommon stock at an average cost per share (excluding fees and commissions) of$5.76, or $2.3 million in the aggregate. As of July 4, 2009, we had $20.1 million available for any futurerepurchases of Class A common stock and/or senior notes under the stockand debt repurchase plan.

 

***Future CapitalNeeds***

 

We are highlyleveraged.  On July 4, 2009, ourtotal long-term debt and stockholders’ equity was $535.8 million and $144.5million, respectively.

 

Our ability to generatesufficient cash to fund our operations depends generally on our results ofoperations and the availability of financing. Our management believes that our cash on hand, cash flow from operatingactivities and available borrowing capacity under our revolving credit facilitywill be sufficient for 

 

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the foreseeable future tofund operations, meet debt service requirements, fund capital expenditures, andpay our anticipated dividends on our Class A common stock.  We expect to make capital expenditures ofapproximately $11.0 million in the aggregate during fiscal 2009, $5.6 millionof which have already been made during the first two quarters.

 

***Seasonality***

 

Sales of a number of ourproducts tend to be seasonal.  In theaggregate, however, our sales are not heavily weighted to any particularquarter due to the diversity of our product and brand portfolio.  Sales during the first quarter of the fiscalyear are generallybelow those of the following three quarters.

 

We purchase most of the produce used to make ourshelf-stable pickles, relishes, peppers and other related specialty itemsduring the months of July through October, and we purchase substantiallyall of our maple syrup requirements during the months of April throughJuly.  Consequently, our liquidity needsare greatest during these periods.

 

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

 

During fiscal the past several years, we have beenfaced with increasing prices in certain commodities and packagingmaterials.  We manage this risk byentering into short-term supply contracts and advance commodities purchaseagreements from time to time, and if necessary, by raising prices.  We believe that through sales price increasesand our cost saving efforts we have to a large degree been able to offset theimpact of recent raw material, packaging and transportation cost increases,although in certain cases on a lagging basis. There can be no assurance, however, that we will be able to offset anypresent or future increases in the cost of raw materials, packaging andtransportation, with additional sales price increases or cost reductions.

 

**RecentAccounting Pronouncements**

** **

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

 

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

 

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InMarch 2008, the FASB issued SFAS No. 161, “*Disclosures aboutDerivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133(SFAS No. 161)*.”  SFAS No. 161requires enhanced disclosures about (a) how and why an entity usesderivative instruments, (b) how derivative instruments and related hedgeditems are accounted for under SFAS No. 133 and its relatedinterpretations, and (c) how derivative instruments and related hedgeditems affect an entity’s financial position, financial performance, and cashflows.  SFAS No. 161 is effective asof the beginning of our fiscal 2009. Since SFAS No. 161 requires enhanced disclosures, without a changeto existing standards relative to measurement and recognition, our adoption ofSFAS No. 161 did not have any effect on our results of operations orfinancial position.

 

InApril 2008, the FASB issued FASB Staff Position No. FAS 142-3, “*Determination of the Useful Life of Intangible Assets”* (FSP142-3).  FSP 142-3 requires companiesestimating the useful life of a recognized intangible asset to consider theirhistorical experience in renewing or extending similar arrangements or, in theabsence of historical experience, to consider assumptions that marketparticipants would use about renewal or extension as adjusted forentity-specific factors.  FSP 142-3 is effectiveas of the beginning of our fiscal 2009. We adopted FSP 142-3 effective at the beginning of our fiscal 2009,which did not have a material impact on our results of operations or financialposition.

 

InDecember 2008, the FASB issued FASB Staff Position No. FAS 132(R)-1, “*Employer’s Disclosures about Postretirement Benefit Plan Assets*”(FSP 132(R)-1).  FSP 132(R)-1 requiresadditional disclosures about plan assets for defined benefit pension and otherpostretirement benefit plans.  FSP132(R)-1 will be effective as of the end of our fiscal 2009.  Since FSP 132(R)-1 requires enhanceddisclosures, without a change to existing standards relative to measurement andrecognition, our adoption of FSP 132(R)-1 will not have a material impact onour results of operations or financial position.

 

InMay 2009, the FASB issued Statement No. 165, “*SubsequentEvents*” (SFAS No. 165), which establishes general standards ofaccounting for, and requires disclosure of, events that occur after the balancesheet date but before financial statements are issued or are available to beissued.  SFAS No. 165 is effectivefor our second quarter of fiscal 2009. The adoption of SFAS No. 165 did not have a material effect on our resultsof operations or financial position.

 

InJune 2009, the FASB issued SFAS No. 168 “*The FASBAccounting Standards Codification and the Hierarchy of Generally AcceptedAccounting Principles - A Replacement of FASB Statement No. 162*”(SFAS No. 168).  SFAS No. 168establishes the FASB Accounting Standards CodificationTM (Codification) as the singlesource of authoritative GAAP recognized by the FASB to be applied bynongovernmental entities. Rules and interpretive releases of the SEC underauthority of federal securities laws are also sources of authoritative U.S.GAAP for SEC registrants.  SFAS No. 168and the Codification are effective for financial statements issued for interimand annual periods ending after September 15, 2009.  When effective, the Codification willsupersede all existing non-SEC accounting and reporting standards.  All other nongrandfathered non-SEC accountingliterature not included in the Codification will become nonauthoritative.  SFAS No. 168 is effective for our thirdquarter of fiscal 2009.  All referencesto U.S. GAAP will be updated toconform to the codification. The adoption of SFAS No. 168 will not havea material impact on our results of operations or financial position.

 

**Off-balance Sheet Arrangements**

 

As of July 4, 2009, we did not have anyoff-balance sheet arrangements as defined in Item 303(a)(4)(ii) ofRegulation S-K.

 

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** **

**Commitmentsand Contractual Obligations**

** **

Ourcontractual obligations and commitments principally include obligationsassociated with our outstanding indebtedness, future minimum operating leaseobligations and future pension obligations. During the first two quarters of 2009, there were no material changesoutside the ordinary course of business in the specified contractualobligations set forth in our 2008 Annual Report on Form 10-K, except thatduring the first quarter of 2009 we entered into a new warehouse lease thatwill require us to make additional rent payments of approximately $11.5 millionin the aggregate over the course of the lease, which expires in 2016.  These additional rent payments are expectedto be partially offset by a reduction in rent payments relating to certainexpiring warehouse leases that will no longer be needed.  In addition, our expected contributions toour defined benefit pension plans for fiscal 2009 have increased from $1.2million to $2.6 million because, although not obligated to do so, we made $2.1million of voluntary contributions to our defined benefit plans during thefirst two quarters of 2009 and we expect to make $0.5 million of additionalvoluntary contributions during the remainder of fiscal 2009.

 

***Forward-LookingStatements***

** **

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

 
| · |   | our substantial leverage;                                                                                                                                                                                                                                                                                                                               |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                    |
| · |   | the effects of rising costs for our raw materials, packaging and  ingredients;                                                                                                                                                                                                                                                                          |
|   |   |                                                                                                                                                                                                                                                                                                                                                    |
| · |   | crude oil prices and their impact on distribution, packaging and  energy costs;                                                                                                                                                                                                                                                                         |
|   |   |                                                                                                                                                                                                                                                                                                                                                    |
| · |   | our ability to successfully implement sales price increases and cost  saving measures to offset any cost increases;                                                                                                                                                                                                                                     |
|   |   |                                                                                                                                                                                                                                                                                                                                                    |
| · |   | intense competition, changes in consumer preferences, demand for our  products and local economic and market conditions;                                                                                                                                                                                                                                |
|   |   |                                                                                                                                                                                                                                                                                                                                                    |
| · |   | our continued ability to promote brand equity successfully, to  anticipate and respond to new consumer trends, to develop new products and  markets, to broaden brand portfolios in order to compete effectively with  lower priced products and in markets that are consolidating at the retail and  manufacturing levels and to improve productivity; |
|   |   |                                                                                                                                                                                                                                                                                                                                                    |
| · |   | the risks associated with the expansion of our business;                                                                                                                                                                                                                                                                                                |
|   |   |                                                                                                                                                                                                                                                                                                                                                    |
| · |   | our possible inability to integrate any businesses we acquire;                                                                                                                                                                                                                                                                                          |
|   |   |                                                                                                                                                                                                                                                                                                                                                    |
| · |   | our ability to access the credit markets and our borrowing costs and  credit ratings, which may be influenced by credit markets generally and the  credit ratings of our competitors;                                                                                                                                                                   |
|   |   |                                                                                                                                                                                                                                                                                                                                                    |
| · |   | the effects of currency movements of the Canadian dollar as compared  to the U.S. dollar;                                                                                                                                                                                                                                                               |
|   |   |                                                                                                                                                                                                                                                                                                                                                    |
| · |   | other factors that affect the food industry generally, including:                                                                                                                                                                                                                                                                                       |
|   |   |                                                                                                                                                                                                                                                                                                                                                    |
|   |   | —                                                                                                                                                                                                                                                                                                                                                  | recalls if products become adulterated or misbranded, liability if  product consumption causes injury, ingredient disclosure and labeling laws  and regulations and the possibility that consumers could lose confidence in  the safety and quality of certain food products, as well as recent publicity  concerning the health implications of obesity and trans fatty acids; |

 

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|   |   | — | competitors’ pricing practices and promotional spending levels;                                                                                                                                                                                                                                       |
|--------|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   |                                                                                                                                                                                                                                                                                                       |
|   |   | — | the risks associated with third-party suppliers and co-packers,  including the risk that any failure by one or more of our third-party  suppliers or co-packers to comply with food safety or other laws and  regulations may disrupt our supply of raw materials or certain finished goods  products; and |
|   |   |   |                                                                                                                                                                                                                                                                                                       |
|   |   | — | fluctuations in the level  of our customers’ inventories and credit and other business risks related to  our customers operating in a challenging economic and competitive  environment; and                                                                                                          |

 

otherfactors discussed elsewhere in this report and in our other public filings withthe SEC, including under Item 1A, “Risk Factors” in our 2008 Annual Report on Form 10-K.

 

Developments in any of these areas could cause ourresults to differ materially from results that have been or may be projected byor on our behalf.

 

All forward-looking statements included in this reportare based on information available to us on the date of this report. Weundertake no obligation to publicly update or revise any forward-lookingstatement, whether as a result of new information, future events or otherwise.All subsequent written and oral forward-looking statements attributable to usor persons acting on our behalf are expressly qualified in their entirety bythe cautionary statements contained in this report.

 

We caution that the foregoing list of importantfactors is not exclusive.  We urgeinvestors not to unduly rely on forward-looking statements contained in thisreport.

 

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

** **

In the normal course of operations, we are exposed tomarket risks arising from adverse 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.

 

Interestunder our $25.0 million revolving credit facility, including any outstandingletters of credit, is determined based on alternative rates that we may choosein accordance with the revolving credit facility, including the base lendingrate per annum plus an applicable margin, and LIBOR plus an applicablemargin.  Interest under our term loanfacility is determined based on alternative rates that we may choose inaccordance with the credit facility, including the base lending rate per annumplus an applicable margin of 1.00%, and LIBOR plus an applicable margin of2.00%.  The revolving credit facility wasundrawn at July 4, 2009, and we currently have no plans to draw upon thefacility for the foreseeable future.  Ifwe were to make a funding request, we do not believe that Lehman CPI wouldhonor its $3.1 million funding commitment under the revolving credit facility.  As a result, the effective availableborrowing capacity under our revolving credit facility, net of outstandingletters of credit of $0.5 million, was $21.4 million at July 4, 2009.

 

Wehave outstanding $130.0 million of term loan borrowings at July 4, 2009and January 3, 2009.  The term loanborrowings are fixed at 7.0925% based upon a six year interest rate swapagreement that we entered into on February 26, 2007 with an affiliate ofLehman.  See the discussion of theinterest rate swap and the Lehman bankruptcy filing above under the heading “Liquidityand Capital Resources-Debt-Senior Secured Credit Facility” in Item 2, “Management’sDiscussion and Analysis of Financial Condition and Results of Operations” foradditional information.

 

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.

 

Thecarrying values and fair values of our term loan borrowings, senior notes andsenior subordinated notes as of July 4, 2009 and January 3, 2009 areas follows (dollars in thousands):

 

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| ** **                                                | ** ** | **July 4,  2009** | ** ** | **January 3,  2009** | ** ** |
|-----------------------------------------------------------|------------|------------------------|------------|---------------------------|------------|
| ** **                                                | ** ** | **Carrying  Value**    | ** ** | **Fair  Value(1)(2)**     | ** ** | **Carrying  Value** | ** ** | **Fair  Value(1)(3)** | ** ** |
| Senior Secured Term Loan  due February 26, 2013      |       | $                      | 130,000    |                      | $          | 126,100 |   | $ | 130,000 |   | $ | 107,900 |   |
|                                                      |       |                   |       |                      |       |   |   |   |   |
| 8% Senior Notes due  October 1, 2011                 |       | 240,000                |       | 232,200                   |       | 240,000 |   | 207,600 |   |
|                                                      |       |                   |       |                      |       |   |   |   |   |
| 12% Senior Subordinated  Notes due October 30, 2016: |       |                   |       |                      |       |   |   |   |   |
|                                                      |       |                   |       |                      |       |   |   |   |   |
| — represented by EISs                                |       | 130,123                |       | 113,562                   |       | 124,793 |   | 90,235 |   |
|                                                      |       |                   |       |                      |       |   |   |   |   |
| — held separately                                    |       | 35,677                 |       | 31,136                    |       | 41,007 |   | 29,651 |   |
|                                                           |            |                        |            |                           |            |  |  |  |  |  |  |  |  |

 

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| (1)    |   | Fair values are estimated based on quoted market prices, except as  otherwise noted in footnotes (2) and (3) below.                                                                                                                                                                                                                                                                                                                                                                                                            |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| (2)    |   | Solely for purposes of this presentation, we have assumed that the  fair value of each senior subordinated note at July 4, 2009 was $6.24,  based upon the $7.96 per share closing price of our separately traded  Class A common stock and the $14.20 per EIS closing price of our EISs on  the New York Stock Exchange on July 2, 2009 (the last business day of  the second quarter of 2009). Each EIS represents one share of Class A  common stock and $7.15 principal amount of our senior subordinated notes. |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| (3)    |   | Solely  for purposes of this presentation, we have assumed that the fair value of  each senior subordinated note at January 3, 2009 was $5.17, based upon  the $5.49 per share closing price of our separately traded Class A  common stock and the $10.66 per EIS closing price of our EISs on the New York  Stock Exchange on January 2, 2009 (the last business day of fiscal  2008).                                                                                                                                  |

 

The recent volatility in the global financial marketscould negatively impact the fair value of our debt obligations.

 

The information under the heading “Inflation” in Item2, “Management’s Discussion and Analysis of Financial Condition and Results ofOperations” is incorporated herein by reference.

 

**Item 4.  Controlsand Procedures**

** **

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

 

Based on that evaluation, our chief executive officerand our chief financial officer concluded that our disclosure controls andprocedures were effective as of the end of the period covered by this report.

 

*Changes in Internal Control OverFinancial Reporting*.  As required by Rule 13a-15(d) underthe Exchange Act, our management, including our chief executive officer and ourchief financial officer, also conducted an evaluation of our internal controlover financial reporting to determine whether any change occurred during thequarter covered by this report that has materially affected, or is reasonablylikely to materially affect, our internal control over financialreporting.  Based on that evaluation, ourchief executive officer and our chief financial officer concluded that therehas been no change during the period covered by this report that has materiallyaffected, or is reasonably likely to materially affect, our internal controlover financial reporting.

 

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*Inherent Limitations on Effectiveness of Controls.* Our company’s management, including the chief executive officer andchief financial officer, does not expect that our disclosure controls or ourinternal control over financial reporting will prevent or detect all errors andall fraud.  A control system, no matterhow well designed and operated, can provide only reasonable, not absolute, assurancethat the control system’s objectives will be met.  The design of a control system must reflectthe fact that there are resource constraints, and the benefits of controls mustbe considered relative to their costs. 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 inherent limitations include therealities that judgments in decision-making can be faulty and that breakdownscan occur because of simple error or mistake. Controls can also be circumvented by the individual acts of somepersons, by collusion of two or more people, or by management override of thecontrols.  The design of any system ofcontrols is based in part on certain assumptions about the likelihood of futureevents, and there can be no assurance that any design will succeed in achievingits stated goals under all potential future conditions.  Projections of any evaluation of controlseffectiveness to future periods are subject to risks.  Over time, controls may become inadequatebecause of changes in conditions or deterioration in the degree of compliancewith policies or procedures.

 

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** **

**PART IIOTHER INFORMATION**

** **

**Item 1.  LegalProceedings**

** **

We are from time to time involved in various claimsand legal actions arising in the ordinary course of business, includingproceedings involving product liability claims, worker’s compensation and otheremployee claims, and tort and other general liability claims, as well as trademark,copyright, patent infringement and related claims and legal actions.  In the opinion of our management, theultimate disposition of any currently pending claims or actions will not have amaterial adverse effect on our consolidated financial position, results ofoperations or liquidity.

 

**Item 1A.  Risk Factors**

** **

We do not believe there have been any material changesin our risk factors as previously disclosed in our 2008 Annual Report on Form 10-K.

 

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

** **

**Issuer Purchases of Equity Securities**

** **

The following table sets forth information withrespect to shares of our Class A common stock that we purchased during thesecond quarter of 2009:

 
| **Period**                              | ** ** | **Total Number  of Shares  Purchased** | ** ** | **Average Price  Paid per Share** | ** ** | **Total Number  of Shares  Purchased as  Part of Publicly  Announced  Plans or  Programs** | ** ** | **Approximate  Dollar Value of  Shares that  May Yet be  Purchased  Under the  Plans or  Programs(a)** | ** ** |
|-----------------------------------------|------------|----------------------------------------|------------|-----------------------------------|------------|-------------------------------------------------------------------------------------------------|------------|-------------------------------------------------------------------------------------------------------------|------------|
| April 5, 2009 to  May 2, 2009 |       | —                                 |       | —                            |       | —                                                                                          |       | $                                                                                                           | 6,497,552  |   |
| May 3, 2009 to  May 30, 2009  |       | 171,200                                |       | $                                 | 7.10       |                                                                                            | 171,200    |                                                                                                        | $          | 20,282,261 |   |
| May 31, 2009 to  July 4, 2009 |       | 18,700                                 |       | $                                 | 7.43       |                                                                                            | 18,700     |                                                                                                        | $          | 20,143,280 |   |
| Total                                   |       | 189,900                                |       | $                                 | 7.13       |                                                                                            | 189,900    |                                                                                                        | $          | 20,143,280 |   |

 

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| (a) |   | On  October 27, 2008, our board of directors authorized a stock and debt  repurchase program for the repurchase of up to $10.0 million of our  Class A common stock and/or senior notes over the next twelve months. On  May 5, 2009, the board of directors authorized an increase in the  authorization to $25.0 million and extended the authorization through  May 4, 2010. Under the authorization, we may purchase shares of  Class A common stock and/or senior notes from time to time in the open  market or in privately negotiated transactions in compliance with the  applicable rules and regulations of the SEC. |
|-----|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

**Item 3.  DefaultsUpon Senior Securities**

** **

Not applicable.

 

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** **

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

** **

Our annual meeting of stockholders was held on May 5,2009.  At the annual meeting, ourstockholders considered and voted upon the election of seven directors to serveuntil the next annual meeting of stockholders and until their successors havebeen elected and qualified.  All seven ofthe nominees for the board of directors were elected by the following vote:

 
| **Class A Director Nominee** | ** ** | **For**    | ** ** | **Withheld** | ** ** |
|-----------------------------------|------------|------------|------------|--------------|------------|
| Robert C. Cantwell                |       | 32,422,079 |       | 974,726      |       |
| James R. Chambers                 |       | 32,561,307 |       | 835,498      |       |
| Cynthia T. Jamison                |       | 32,518,722 |       | 878,083      |       |
| Dennis Mullen                     |       | 32,557,148 |       | 839,657      |       |
| Alfred Poe                        |       | 32,507,395 |       | 889,410      |       |
| Steven C. Sherrill                |       | 32,533,043 |       | 863,762      |       |
| David L. Wenner                   |       | 32,552,389 |       | 844,416      |       |

** **

Our stockholders ratified the appointment of KPMG LLPas our independent registered public accounting firm for the fiscal year endingJanuary 2, 2010, by the following vote:

 
| **For**    | ** ** | **Against** | ** ** | **Abstain** | ** ** |
|------------|------------|-------------|------------|-------------|------------|
| 32,843,802 |       | 444,330     |       | 108,674     |       |

 

**Item 5.  OtherInformation**

** **

Not applicable.

 

**Item 6.  Exhibits**

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

 

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**SIGNATURE**

 

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

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

 

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