**As filed with the Securities and Exchange Commission on July 27, 2005**

** **

** **

**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

**Washington,D.C. 20549**

**FORM 10-Q**

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

 

**Forthe quarterly period ended July 2, 2005**

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

 

**Forthe transition period from                     to                     .**

**Commissionfile number 001-32316**

**B&G FOODS, INC.**

(Exact name of Registrantas specified in its charter)

| Delaware                                                                     | **13-3918742**                        |
|------------------------------------------------------------------------------|---------------------------------------|
| (State or other jurisdiction of  incorporation or organization)              | (I.R.S. Employer  Identification No.) |
| **4  Gatehall Drive, Suite 110, Parsippany, New Jersey**                | **07054**                             |
| (Address of principal executive offices)                                     | (Zip Code)                            |
| Registrant’s telephone  number, including area code: **(973) 401-6500** |

 

Indicate by check markwhether the registrant: (1) has filed all reports required to be filed by Section 13or 15(d) of the Securities Exchange Act of 1934 during the preceding 12months (or for such shorter period that the registrant was required to filesuch reports) and (2) has been subject to such filing requirements for thepast 90 days. Yes x No o

Indicate by check markwhether the registrant is an accelerated filer (as defined in Rule 12b-2of the Exchange Act). Yes o No x

Asof July 27, 2005, the registrant had 20,000,000 shares of Class Acommon stock, par value $0.01 per share, and 7,556,443 shares of Class Bcommon stock, par value $0.01 per share, outstanding.

 

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**B&GFoods, Inc. and SubsidiariesIndex**
|                                    | ** ** | **Page No.**                                                                           | ** ** |
|------------------------------------|------------|---------------------------------------------------------------------------------------------|------------|
| PART I  FINANCIAL INFORMATION |       |                                                                                        | 1          |   |   |
|                               | Item 1.    | Financial  Statements (Unaudited)                                                           |       |   | 1 |   |   |
|                               |       | Consolidated  Balance Sheets                                                                |       |   | 1 |   |   |
|                               |       | Consolidated  Statements of Operations                                                      |       |   | 2 |   |   |
|                               |       | Consolidated  Statements of Cash Flows                                                      |       |   | 3 |   |   |
|                               |       | Notes  to Consolidated Financial Statements                                                 |       |   | 4 |   |   |
|                               | Item 2.    | Management’s  Discussion and Analysis of Financial Condition and Results of Operations |       |   | 24 |   |   |
|                               | Item 3.    | Quantitative  and Qualitative Disclosures About Market Risk                                 |       |   | 55 |   |   |
|                               | Item 4.    | Controls  and Procedures                                                                    |       |   | 56 |   |   |
| PART II OTHER  INFORMATION    |       |                                                                                        | 57         |   |   |
|                               | Item 1.    | Legal Proceedings                                                                           |       |   | 57 |   |   |
|                               | Item 2.    | Unregistered  Sales of Equity Securities and Use of Proceeds                                |       |   | 57 |   |   |
|                               | Item 3.    | Defaults  Upon Senior Securities                                                            |       |   | 57 |   |   |
|                               | Item 4.    | Submission  of Matters to a Vote of Security Holders                                        |       |   | 57 |   |   |
|                               | Item 5.    | Other  Information                                                                          |       |   | 57 |   |   |
|                               | Item 6.    | Exhibits                                                                                    |       |   | 58 |   |   |
| SIGNATURE                          |       |                                                                                        | 59         |   |   |
|                                    |            |                                                                                             |            |  |  |  |  |  |

 

i

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**PART IFINANCIAL INFORMATION**

**Item 1.        FinancialStatements (Unaudited)**

**B&G Foods, Inc. and SubsidiariesConsolidated Balance Sheets(Dollars in thousands, except per share data)(Unaudited)**
| ** **                                                                                                                      | ** ** | ** July 2, 2005 ** | ** ** | **January 1, 2005** | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------|------------|----------------------------------------|------------|-------------------------------|------------|
| **Assets**                                                                                                                      |       |                                   |       |                          |       |   |   |   |   |
| Current assets:                                                                                                                 |       |                                   |       |                          |       |   |   |   |   |
| Cash and cash equivalents                                                                                                       |       |                                   | $          | 22,397                        |       |   |   | $ | 28,525 |   |   |
| Trade accounts receivable, net                                                                                                  |       |                                   | 25,478     |                          |       |   | 28,227 |   |   |
| Inventories                                                                                                                     |       |                                   | 88,519     |                          |       |   | 79,109 |   |   |
| Prepaid expenses                                                                                                                |       |                                   | 3,679      |                          |       |   | 2,806 |   |   |
| Deferred income taxes                                                                                                           |       |                                   | 1,782      |                          |       |   | 1,782 |   |   |
| Income tax receivable                                                                                                           |       |                                   | 7,311      |                          |       |   | 7,006 |   |   |
| Total current assets                                                                                                            |       |                                   | 149,166    |                          |       |   | 147,455 |   |   |
| Property, plant and equipment, net                                                                                              |       |                                   | 41,180     |                          |       |   | 43,774 |   |   |
| Goodwill                                                                                                                        |       |                                   | 188,629    |                          |       |   | 188,629 |   |   |
| Trademarks                                                                                                                      |       |                                   | 193,481    |                          |       |   | 193,481 |   |   |
| Other assets                                                                                                                    |       |                                   | 21,217     |                          |       |   | 22,613 |   |   |
| Total assets                                                                                                                    |       |                                   | $          | 593,673                       |       |   |   | $ | 595,952 |   |   |
| **Liabilities and Stockholders’  Equity**                                                                                  |       |                                   |       |                          |       |   |   |   |   |
| Current liabilities:                                                                                                            |       |                                   |       |                          |       |   |   |   |   |
| Trade accounts payable                                                                                                          |       |                                   | $          | 25,341                        |       |   |   | $ | 25,861 |   |   |
| Accrued expenses                                                                                                                |       |                                   | 16,794     |                          |       |   | 16,082 |   |   |
| Dividends payable                                                                                                               |       |                                   | 4,240      |                          |       |   | 3,728 |   |   |
| Total current liabilities                                                                                                       |       |                                   | 46,375     |                          |       |   | 45,671 |   |   |
| Long-term debt                                                                                                                  |       |                                   | 405,800    |                          |       |   | 405,800 |   |   |
| Other liabilities                                                                                                               |       |                                   | 281        |                          |       |   | 317 |   |   |
| Deferred income  taxes                                                                                                          |       |                                   | 54,187     |                          |       |   | 51,903 |   |   |
| Total liabilities                                                                                                               |       |                                   | 506,643    |                          |       |   | 503,691 |   |   |
| Stockholders’ equity:                                                                                                      |       |                                   |       |                          |       |   |   |   |   |
| Class A common stock, $0.01 par value per  share. Authorized  100,000,000 shares; issued and outstanding 20,000,000 shares |       |                                   | 200        |                          |       |   | 200 |   |   |
| Class B common stock, $0.01 par value per  share. Authorized 25,000,000 shares; issued and outstanding 7,556,443 shares    |       |                                   | 76         |                          |       |   | 76 |   |   |
| Additional  paid-in capital                                                                                                     |       |                                   | 156,800    |                          |       |   | 156,800 |   |   |
| Accumulated other  comprehensive loss                                                                                           |       |                                   | (70        | )                             |       |   | (25 | ) |   |
| Accumulated  deficit                                                                                                            |       |                                   | (69,976    | )                             |       |   | (64,790 | ) |   |
| Total stockholders’ equity                                                                                                 |       |                                   | 87,030     |                          |       |   | 92,261 |   |   |
| Total liabilities  and stockholders’ equity                                                                                |       |                                   | $          | 593,673                       |       |   |   | $ | 595,952 |   |   |

 

See Notes to Consolidated Financial Statements.

1

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**B&G Foods, Inc. and SubsidiariesConsolidated Statementsof Operations(Dollars in thousands, except per share data)(Unaudited)**
| ** **                                                       | ** ** | **Thirteen Weeks Ended** | ** ** | **Twenty-six Weeks Ended** | ** ** |
|------------------------------------------------------------------|------------|------------------------------------|------------|--------------------------------------|------------|
| ** **                                                       | ** ** | **July 2, 2005**         | ** ** | **July 3, 2004**           | ** ** | ** July 2, 2005 ** | ** ** | ** July 3, 2004 ** | ** ** |
| Net sales                                                        |       |                               | $          | 94,116                               |       |   |   | $ | 93,735 |   |   |   | $ | 184,227 |   |   |   | $ | 184,412 |   |   |
| Cost of goods  sold                                              |       |                               | 67,242     |                                 |       |   | 64,269 |   |   |   | 130,525 |   |   |   | 125,960 |   |   |
| Cost of goods  sold—restructuring  charge                   |       |                               | 3,128      |                                 |       |   | — |   |   |   | 3,244 |   |   |   | — |   |   |
| Gross profit                                                     |       |                               | 23,746     |                                 |       |   | 29,466 |   |   |   | 50,458 |   |   |   | 58,452 |   |   |
| Operating  expenses:                                             |       |                               |       |                                 |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Sales, marketing  and distribution expenses                      |       |                               | 10,801     |                                 |       |   | 11,362 |   |   |   | 20,860 |   |   |   | 22,220 |   |   |
| General and  administrative expenses                             |       |                               | 1,958      |                                 |       |   | 820 |   |   |   | 3,327 |   |   |   | 2,355 |   |   |
| Management fees-related  party                                   |       |                               | —     |                                 |       |   | 125 |   |   |   | — |   |   |   | 250 |   |   |
| Operating income                                                 |       |                               | 10,987     |                                 |       |   | 17,159 |   |   |   | 26,271 |   |   |   | 33,627 |   |   |
| Interest expense, net                                            |       |                               | 10,428     |                                 |       |   | 7,794 |   |   |   | 20,862 |   |   |   | 15,606 |   |   |
| Income before tax expense                                        |       |                               | 559        |                                 |       |   | 9,365 |   |   |   | 5,409 |   |   |   | 18,021 |   |   |
| Provision for  income taxes                                      |       |                               | 223        |                                 |       |   | 3,614 |   |   |   | 2,115 |   |   |   | 6,956 |   |   |
| Net income                                                       |       |                               | 336        |                                 |       |   | 5,751 |   |   |   | 3,294 |   |   |   | 11,065 |   |   |
| Less: preferred  stock dividends accumulated and related charges |       |                               | —     |                                 |       |   | 3,782 |   |   |   | — |   |   |   | 7,690 |   |   |
| Net income  available to common stockholders                     |       |                               | $          | 336                                  |       |   |   | $ | 1,969 |   |   |   | $ | 3,294 |   |   |   | $ | 3,375 |   |   |
| Earnings per  share calculations:                                |       |                               |       |                                 |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Net income  available to common stockholders per common share:   |       |                               |       |                                 |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic and diluted  distributed earnings:                         |       |                               |       |                                 |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Class A common stock                                        |       |                               | $          | 0.21                                 |       |   |   | $ | — |   |   |   | $ | 0.42 |   |   |   | $ | — |   |   |
| Earnings (loss) per share:                                       |       |                               |       |                                 |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic and diluted Class A common stock                      |       |                               | $          | 0.07                                 |       |   |   | $ | — |   |   |   | $ | 0.23 |   |   |   | $ | — |   |   |
| Basic Class B common stock                                  |       |                               | $          | (0.14                                | )          |   |   | $ | 0.17 |   |   |   | $ | (0.19 | ) |   |   | $ | 0.29 |   |   |
| Diluted  Class B common stock                               |       |                               | $          | (0.14                                | )          |   |   | $ | 0.13 |   |   |   | $ | (0.19 | ) |   |   | $ | 0.22 |   |   |

 

See Notes to Consolidated Financial Statements.

2

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**B&G Foods, Inc. and SubsidiariesConsolidated Statementsof Cash Flows(Dollars in thousands)(Unaudited)**
| ** **                                                                         | ** ** | **Twenty-six Weeks Ended** | ** ** |
|------------------------------------------------------------------------------------|------------|--------------------------------------|------------|
| ** **                                                                         | ** ** | **July 2, 2005**           | ** ** | **July 3, 2004** | ** ** |
| **Cash flows from operating  activities:**                                         |       |                                 |       |   |   |   |   |   |   |
| Net income                                                                         |       |                                 | $          | 3,294 |   |   |   | $ | 11,065 |   |   |
| Adjustments to  reconcile net income to net cash provided by operating activities: |       |                                 |       |   |   |   |   |   |   |
| Depreciation                                                                       |       |                                 | 3,360      |   |   |   | 3,237 |   |   |
| Amortization of deferred debt issuance costs and  bond discount                    |       |                                 | 1,396      |   |   |   | 1,284 |   |   |
| Deferred income taxes                                                              |       |                                 | 2,284      |   |   |   | 3,138 |   |   |
| Restructuring charge, non-cash portion                                             |       |                                 | 2,813      |   |   |   | — |   |   |
| Changes in assets  and liabilities:                                                |       |                                 |       |   |   |   |   |   |   |
| Trade accounts receivable                                                          |       |                                 | 2,749      |   |   |   | (3,497 | ) |   |
| Inventories                                                                        |       |                                 | (9,628     | ) |   |   | (3,658 | ) |   |
| Prepaid expenses                                                                   |       |                                 | (873       | ) |   |   | (2,864 | ) |   |
| Tax receivable                                                                     |       |                                 | (305       | ) |   |   | — |   |   |
| Trade accounts payable                                                             |       |                                 | (520       | ) |   |   | 3,989 |   |   |
| Accrued expenses                                                                   |       |                                 | 722        |   |   |   | (2,763 | ) |   |
| Other liabilities                                                                  |       |                                 | (36        | ) |   |   | 1 |   |   |
| Net cash provided by operating activities                                          |       |                                 | 5,256      |   |   |   | 9,932 |   |   |
| **Cash  flows from investing activities:**                                         |       |                                 |       |   |   |   |   |   |   |
| Capital expenditures                                                               |       |                                 | (3,371     | ) |   |   | (3,394 | ) |   |
| Net cash used in investing activities                                              |       |                                 | (3,371     | ) |   |   | (3,394 | ) |   |
| **Cash  flows from financing activities:**                                         |       |                                 |       |   |   |   |   |   |   |
| Payments of long-term debt                                                         |       |                                 | —     |   |   |   | (750 | ) |   |
| Dividends paid                                                                     |       |                                 | (7,968     | ) |   |   | — |   |   |
| Net cash used in financing activities                                              |       |                                 | (7,968     | ) |   |   | (750 | ) |   |
| Effect of exchange rate fluctuations on cash and  cash equivalents                 |       |                                 | (45        | ) |   |   | 46 |   |   |
| Net (decrease) increase in cash and cash equivalents                               |       |                                 | (6,128     | ) |   |   | 5,834 |   |   |
| Cash and cash equivalents at beginning of period                                   |       |                                 | 28,525     |   |   |   | 8,092 |   |   |
| Cash and cash equivalents at end of period                                         |       |                                 | $          | 22,397 |   |   |   | $ | 13,926 |   |   |
| **Supplemental disclosures of  cash flow information:**                            |       |                                 |       |   |   |   |   |   |   |
| Cash interest                                                                      |       |                                 | $          | 19,714 |   |   |   | $ | 15,262 |   |   |
| Cash income taxes                                                                  |       |                                 | $          | 99 |   |   |   | $ | 1,666 |   |   |
| Non-cash  transactions:                                                            |       |                                 |       |   |   |   |   |   |   |
| Accretion of Series C senior preferred stock  warrants                        |       |                                 | $          | — |   |   |   | $ | 8 |   |   |
| Accretion of Series C senior preferred stock  dividends                       |       |                                 | $          | — |   |   |   | $ | 3,102 |   |   |
| Dividends  declared and unpaid                                                     |       |                                 | $          | 4,240 |   |   |   | $ | — |   |   |

 

See Notes to Consolidated Financial Statements

3

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**B&G Foods, Inc. and Subsidiaries Notes to Consolidated Financial Statements (Dollars in thousands, except per share data) (Unaudited)**

**(1)**   Natureof Operations

***Organization***

Prior to the consummation of our initial publicoffering on October 14, 2004, we were known as B&G Foods HoldingsCorp. and were majority owned by Bruckmann, Rosser, Sherrill & Co.,L.P. (BRS), a private equity investment firm, and minority owned by management,directors and certain other investors. Our only asset and operations consistedof our ownership of B&G Foods, Inc. and its subsidiaries.

On October 7, 2004, our Registration Statement onForm S-1 in respect of a proposed initial public offering of 17,391,305Enhanced Income Securities (EISs), an offering of $22,800 of 12.0% seniorsubordinated notes due 2016 separate from the EISs and an offering of $240,000of 8.0% senior notes due 2011 was declared effective by the Securities andExchange Commission. Each EIS represents one share of a then new class ofcommon stock, our Class A common stock, and $7.15 principal amount of12.0% senior subordinated notes due 2016. The proceeds were allocated to theunderlying Class A common stock and senior subordinated notes based uponthe relative fair values of each. Trading of the EISs began on the AmericanStock Exchange on October 8, 2004. On October 14, 2004, the initialpublic offering, separate senior subordinated notes and senior notestransactions closed and we simultaneously entered into a new senior securedrevolving credit facility (see Note 4). From the initial public offeringand concurrent offerings, we raised net proceeds (after deducting transactionfees and expenses of $35,313) of approximately $490,704 on October 14,2004 and $36,783 on October 22, 2004 in connection with the exercise ofthe underwriters’ over-allotment option for an additional 2,608,695 EISs. Weused the proceeds of the initial public offering, the concurrent offerings andcash on hand to repay all outstanding borrowings under, and terminate, our thenexisting senior secured credit facility, to repay $194,165 of our$220,000 95¤8%senior subordinated notes due 2007, to repurchase all of our outstandingpreferred stock from the existing stockholders, and to repurchase shares of ourexisting outstanding Class B common stock, options and warrants from theexisting stockholders. Also on such date, $25,835 in proceeds from the initialpublic offering was set aside to redeem the remaining 95¤8% seniorsubordinated notes on November 15, 2004 at a redemption price equal to101.604%. In connection with the initial public offering and the concurrentofferings, for the fifty-two week period ended January 1, 2005 we recordedcharges that total approximately $23,766. These costs include: (i) $13,907of costs relating to the early extinguishment of debt included in interestexpense (including: the write-off of existing deferred financing fees of$8,361, the write-off of existing bond discount of $655 and bond tender costsof $4,891), and (ii) transaction related compensation expense for thepayment of transaction bonuses of $5,948 and the repurchase of employee stockoptions of $3,911.

Simultaneously with the completion of our initialpublic offering and the concurrent offerings, on October 14, 2004, B&GFoods, Inc., our wholly owned subsidiary, was merged with and into us andwe were renamed B&G Foods, Inc. In addition, on such date andsimultaneously with the offerings, our existing common stock was reclassifiedand converted into 109.8901 shares of Class B common stock. Share, pershare, option and warrant amounts for all periods presented give effect to thisreclassification and conversion unless otherwise stated.

4

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**B&G Foods, Inc. and Subsidiaries Notes to Consolidated Financial Statements (Continued) (Dollars in thousands, except per share data) (Unaudited)**

Unless the contextrequires otherwise, references in this report to “B&G Foods,” “the company,”“we,” “us” and “our” refer to B&G Foods, Inc. and its subsidiaries.

***Nature of Operations***

We operate in one industry segment and manufacture,sell and distribute a diverse portfolio of high quality branded, shelf-stablefood products. Our products include pickles, peppers, jams and jellies, cannedmeats and beans, spices, syrups, hot sauces, maple syrup, salad dressings, tacoshells, seasonings, dinner kits, taco sauces, refried beans, salsa and otherspecialty food products which are sold to retailers and food serviceestablishments. We distribute these products to retailers in the greater NewYork metropolitan area through a direct-store-organization sales anddistribution system and elsewhere in the United States through a nationwidenetwork of independent brokers and distributors.

Sales of a number of our products tend to be seasonal;however, in the aggregate, our sales are not heavily weighted to any particularquarter. Sales during the first quarter of the fiscal year are generally belowthat of the following three quarters.

We purchase most of theproduce used to make our shelf-stable pickles, relishes, peppers and otherrelated specialty items during the months of July through October, and wepurchase all of our maple syrup requirements during the months of April throughJuly. Consequently, our liquidity needs are greatest during these periods.

***Business and Credit Concentrations***

Our exposure to credit lossin the event of non-payment of accounts receivable by customers is estimated inthe amount of the allowance for doubtful accounts. We perform ongoing creditevaluations of our customers’ financial conditions. As of July 2, 2005, wedo not believe we have any significant concentration of credit risk withrespect to our trade accounts receivable. Our top ten customers accounted forapproximately 41.8% and 39.6% of consolidated net sales for the twenty-sixweeks ended July 2, 2005 and July 3, 2004, respectively. No singlecustomer accounted for more than 9.1% and 7.4% of consolidated net sales forthe twenty-six weeks ended July 2, 2005 and July 3, 2004,respectively.

**(2)**   Summary of Significant AccountingPolicies

***Basis of Presentation***

Our unaudited consolidated interim financialstatements contain all adjustments (consisting only of normal and recurringadjustments) necessary to present fairly our consolidated financial position asof July 2, 2005 and the results of our operations and cash flows for thethirteen and twenty-six week periods ended July 2, 2005 and July 3,2004.

Our results of operationsfor the thirteen and twenty-six week periods ended July 2, 2005 are not necessarilyindicative of the results to be expected for the full year. The accompanyingunaudited consolidated interim financial statements should be read inconjunction with the audited consolidated financial statements and notes forthe fiscal year ended January 1, 2005 included in our Annual Report on 

5

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**B&G Foods, Inc. and Subsidiaries Notes to Consolidated Financial Statements (Continued) (Dollars in thousands, except per share data) (Unaudited)**

Form 10-Kfor the fiscal year ended January 1, 2005 filed with the Securities andExchange Commission (SEC) on March 2, 2005.

***Use of Estimates***

The preparation offinancial statements in accordance with U.S. generally accepted accountingprinciples requires our management to make a number of estimates andassumptions relating to the reporting of assets and liabilities and thedisclosure of contingent assets and liabilities at the date of the consolidatedfinancial statements and the reported amounts of revenues and expenses duringthe reporting period. Some of the more significant estimates and assumptionsmade by management involve trade and consumer promotion expenses, allowancesfor excess, obsolete and unsaleable inventories, and the recoverability ofgoodwill, trademarks, property, plant and equipment, and deferred tax assetsand the accounting for our EISs, including their treatment in computing ourincome tax expense. Actual results could differ from those estimates andassumptions.

***Cash and Cash Equivalents***

For purposes of theconsolidated statements of cash flows, all highly liquid debt instruments withmaturities of three months or less when acquired are considered to be cash andcash equivalents.

***Inventories***

Inventories are stated atthe lower of cost or market. Cost is determined using the first-in, first-outand average cost methods. Inventories have been reduced by an allowance forexcess, obsolete and unsaleable inventories. The allowance is an estimate basedon our management’s review of inventories on hand compared to estimated futureusage and sales.

***Property, Plant and Equipment***

Property, plant andequipment are stated at cost. Plant and equipment under capital leases arestated at the present value of the minimum lease payments. Depreciation onplant and equipment is calculated using the straight-line method over theestimated useful lives of the assets, 12 to 20 years for buildings andimprovements, 5 to 10 years for machinery and equipment, and 3 to 5 years foroffice furniture and vehicles. Plant and equipment held under capital leasesand leasehold improvements are amortized on a straight-line basis over theshorter of the lease term or estimated useful life of the asset. Expendituresfor maintenance, repairs and minor replacements are charged to currentoperations. Expenditures for major replacements and betterments arecapitalized.

***Goodwill and Trademarks***

Goodwill and intangible assets with indefinite usefullives (trademarks) are tested for impairment at least annually and wheneverevents or circumstances occur indicating that goodwill or indefinite lifeintangibles might be impaired.

We perform the annual impairment tests on the last dayof each fiscal year. The annual goodwill impairment test involves a two-stepprocess. The first step of the impairment test involves comparing the 

6

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**B&G Foods, Inc. and Subsidiaries Notes to Consolidated Financial Statements (Continued) (Dollars in thousands, except per share data) (Unaudited)**

fair value of our companywith our company’s carrying value, including goodwill. If the carrying value ofour company exceeds our fair value, we perform the second step of theimpairment test to determine the amount of the impairment loss. The second stepof the goodwill impairment test involves comparing the implied fair value ofgoodwill with the carrying value of that goodwill and recognizing a loss forthe difference. Calculating our fair value requires significant estimates andassumptions by management. We estimate our fair value by applying third partymarket value indicators to our earnings before interest, taxes, depreciationand amortization (EBITDA). We test indefinite life intangible assets forimpairment by comparing their carrying value to their fair value that isdetermined using a cash flow method and recognize a loss to the extent thecarrying value is greater.

We completed our annualimpairment tests for the year ended January 1, 2005 with no adjustments tothe carrying values of goodwill and indefinite life intangibles.

***Long-Lived Assets***

Long-lived assets, such asproperty, plant and equipment, and intangibles with estimated useful lives aredepreciated or amortized over their respective estimated useful lives to theirestimated residual values, and reviewed for impairment whenever events orchanges in circumstances indicate that the carrying amount of an asset may notbe recoverable. Recoverability of assets to be held and used is measured by acomparison of the carrying amount of an asset to estimated undiscounted futurecash flows expected to be generated by the asset. If the carrying amount of anasset exceeds its estimated future cash flows, an impairment charge isrecognized by the amount by which the carrying amount of the asset exceeds thefair value of the asset.

***Accounting Treatment for EISs***

Our EISs include Class A common stock and seniorsubordinated notes. Upon completion of our initial public offering (includingthe exercise of the over-allotment option), we allocated the proceeds from theissuance of the EISs, based upon relative fair value at the issuance date, tothe Class A common stock and the senior subordinated notes. We have assumedthat the price paid in the EIS offering was equivalent to the combined fairvalue of the Class A common stock and the senior subordinated notes, andthe price paid in the offering for the senior subordinated notes soldseparately (not in the form of EISs) was equivalent to their initial statedprincipal amount. We have concluded there are no embedded derivative featuresrelated to the EIS that require bifurcation under Financial AccountingStandards Board (FASB) Statement No. 133, “Accounting for DerivativeInstruments and Hedging Activities,” as amended (SFAS No. 133). Wehave determined the fair value of the Class A common stock and the seniorsubordinated notes with reference to a number of factors, including the sale ofthe senior subordinated notes sold separately from the EISs that have the sameterms as the senior subordinated notes included in the EISs. Therefore, we haveallocated the entire proceeds of the EIS offering to the Class A commonstock and the senior subordinated notes, and the allocation of the EIS proceedsto the senior subordinated notes did not result in a premium or discount.

We have concluded that the call option and the changein control put option in the senior subordinated notes do not warrant separateaccounting under SFAS No. 133 because they are clearly and closely relatedto the economic characteristics of the host debt instrument. Therefore, we haveallocated 

7

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**B&G Foods, Inc. and Subsidiaries Notes to Consolidated Financial Statements (Continued) (Dollars in thousands, except per share data) (Unaudited)**

the entire proceeds of theoffering to the Class A common stock and the senior subordinated notes. Uponsubsequent issuances, if any, of senior subordinated notes, we will evaluatewhether the call option and the change in control put option in the seniorsubordinated notes require separate accounting under SFAS No. 133. Weexpect that if there is a substantial discount or premium upon a subsequentissuance of senior subordinated notes, we may need to separately account forthe call option and the change in control put option features as embeddedderivatives for such subsequent issuance. If we determine that the embeddedderivatives, if any, require separate accounting from the debt host contractunder SFAS No. 133, the call option and the change in control putoption associated with the senior subordinated notes will be recorded asderivative liabilities at fair value, with changes in fair value recorded asother non-operating income or expense. Any discount on the senior subordinatednotes resulting from the allocation of proceeds to an embedded derivative willbe amortized to interest expense over the remaining life of the seniorsubordinated notes.

The Class A commonstock portion of each EIS is included in stockholders’ equity, net of therelated portion of the EIS transaction costs allocated to Class A commonstock. Dividends paid on the Class A common stock are recorded as areduction to retained earnings when declared by us. The senior subordinatednote portion of each EIS is included in long-term debt, and the related portionof the EIS transaction costs allocated to the senior subordinated noteswas capitalized as deferred financing costs and is being amortized to interestexpense using the effective interest method. Interest on the seniorsubordinated notes is charged to expense as accrued by us.

***Other Comprehensive (Loss) Income Recognition***

Other comprehensive (loss) income includes the effectof exchange rate fluctuations on cash and cash equivalents. Other comprehensiveloss was $10 and $45 for the thirteen and twenty-six weeks endedJuly 2, 2005, respectively. Other comprehensive income was $42 and $46 forthe thirteen and twenty-six weeks ended July 3, 2004, respectively.

***Revenue Recognition***

Revenues are recognizedwhen products are shipped. We report all amounts billed to a customer in a saletransaction as revenue, including those amounts related to shipping andhandling. Shipping and handling costs are included in cost of goods sold. Considerationfrom a vendor to a retailer is presumed to be a reduction to the selling pricesof the vendor’s products and, therefore, should be characterized as a reductionof sales when recognized in the vendor’s income statement. As a result, certaincoupons and promotional expenses are recorded as a reduction of net sales.

***Trade and Consumer Promotion Expenses***

We offer various salesincentive programs to customers and consumers, such as price discounts, in-storedisplay incentives, slotting fees and coupons. The recognition of expense forthese programs involves the use of judgment related to performance and redemptionestimates. Estimates are made based on historical experience and other factors.Actual expenses may differ if the level of redemption rates and performancevary from estimates.

8

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**B&G Foods, Inc. and Subsidiaries Notes to Consolidated Financial Statements (Continued) (Dollars in thousands, except per share data) (Unaudited)**

***Pension Plans***

We have defined benefitpension plans covering substantially all of our employees. Our funding policyis to contribute annually the amount recommended by our actuaries.

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

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

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

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

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

Wedo not provide for U.S. federal income taxes or tax benefits on the unremittedearnings or losses of our foreign subsidiary as such earnings are intended tobe indefinitely reinvested.

We have accounted for ourissuance of EISs as an issuance of the separate securities evidenced by suchEISs and have allocated the proceeds received for each EIS between the Class Acommon stock and senior subordinated note represented thereby in the amounts oftheir respective fair values at the time of issuance. Accordingly, we haveaccounted for the senior subordinated notes represented by the EISs aslong-term debt bearing a stated interest rate and maturing on October 30,2016. In connection with the issuance and initial public offering of the EISs,we received an opinion from counsel that the senior subordinated notes shouldbe treated as debt for United States federal income tax purposes. In accordance

9

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**B&G Foods, Inc. and Subsidiaries Notes to Consolidated Financial Statements (Continued) (Dollars in thousands, except per share data) (Unaudited)**

with the opinion we received, we continue to be of theview that the senior subordinated notes should be treated as debt for UnitedStates federal income tax purposes (although we have not sought a ruling fromthe IRS on this issue), and we intend to deduct annually interest expense ofapproximately $19,896 on the senior subordinated notes from taxable income for UnitedStates federal and state income tax purposes. There can be no assurance thatthe classification of senior subordinated notes as debt (or the amount ofinterest expense deducted) will not be challenged by the IRS or other taxjurisdictions or will be sustained by a court of law if challenged.

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

Afactor in the ongoing determination that our consolidated financial statementsshould reflect deductions for income tax purposes of the interest on the seniorsubordinated notes is the veracity, at the time of the initial public offering,of the representations delivered by the purchasers of senior subordinated notessold separately (not in the form of EISs). We may conduct procedures in the futureto confirm the veracity, at the time of the offering, of the purchaserrepresentations. In addition, other factors indicating the existence, at thetime of the initial public offering, of any plan or pre-arrangement may also berelevant to this ongoing determination. It is possible that we will at somepoint in the future, as a result of the findings of the procedures noted above,or IRS interpretations or other changes in circumstances, conclude that weshould establish a reserve for tax liabilities associated with a disallowanceof all or part of the interest deductions on the senior subordinated notes,although our present view is that no such reserve is necessary or appropriate. Ifwe decide to maintain such a reserve, our income tax provision, and relatedincome tax payable, would be materially impacted. As a result, our ability topay dividends on the shares of our common stock could be materially impairedand the market price and/or liquidity for the EISs or our common stock could beadversely affected.

10

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**B&G Foods, Inc. and Subsidiaries Notes to Consolidated Financial Statements (Continued) (Dollars in thousands, except per share data) (Unaudited)**

***Dividends***

Cash dividends, if any, are accrued as a liability onour consolidated balance sheet when declared.

***EarningsPer Share***

Forthe periods prior to our initial public offering, basic earnings per share iscalculated by dividing net income available to common shares (net income lessdividends accumulating during the period for our 13% Series A and Series Bcumulative preferred stock and Series C senior preferred stock and othercharges) by the weighted average common shares outstanding during the period.Diluted earnings per share is calculated similarly, except that it includes thedilutive effect of the assumed exercise of outstanding options and warrants.

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

Net income available to our common stockholders isallocated between our two classes of common stock based upon the two-classmethod. Basic and diluted earnings per share for our Class A and Class B commonstock is calculated by dividing net income available to common stockholders bythe weighted average number of shares of Class A and Class B common stockoutstanding.

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**B&G Foods, Inc. and Subsidiaries Notes to Consolidated Financial Statements (Continued) (Dollars in thousands, except per share data) (Unaudited)**

 
| ** **                                                                               | ** ** | **Thirteen Weeks Ended** | ** ** | **Twenty-six Weeks Ended** | ** ** |
|------------------------------------------------------------------------------------------|------------|------------------------------------|------------|--------------------------------------|------------|
| ** **                                                                               | ** ** | **July 2,   2005**       | ** ** | **July 3,  2004**               | ** ** | **July 2,  2005** | ** ** | **July 3,  2004** | ** ** |
| Net income                                                                               |       | $                                  | 336        |                                 | $          | 5,751 |   | $ | 3,294 |   | $ | 11,065 |   |
| Preferred stock  dividends accumulated and related charges                               |       | —                             |       | 3,782                                |       | — |   | 7,690 |   |
| Net income available to  common stockholders                                             |       | 336                                |       | 1,969                                |       | 3,294 |   | 3,375 |   |
| Less: Class A common  stock dividends declared                                           |       | 4,240                              |       | —                               |       | 8,480 |   | — |   |
| Undistributed (loss)  earnings available to Class A and Class B common stockholders |       | $                                  | (3,904     | )                                    | $          | 1,969 |   | $ | (5,816 | ) | $ | 3,375 |   |
| *Weighted average common shares outstanding:*                                            |       |                               |       |                                 |       |   |   |   |   |
| Basic and Diluted Class  A common shares outstanding                                     |       | 20,000,000                         |       | —                               |       | 20,000,000 |   | — |   |
| Basic Class B common  shares outstanding                                                 |       | 7,556,443                          |       | 11,593,394                           |       | 7,556,443 |   | 11,593,394 |   |
| Diluted Class B common  shares outstanding                                               |       | 7,556,443                          |       | 15,492,115                           |       | 7,556,443 |   | 15,492,115 |   |
| *Basic and diluted allocation of undistributed  (loss) earnings:*                        |       |                               |       |                                 |       |   |   |   |   |
| Class A common stock                                                                     |       | $                                  | (2,833     | )                                    | $          | — |   | $ | (3,764 | ) | $ | — |   |
| Class B common stock                                                                     |       | (1,071                             | )          | 1,969                                |       | (1,422 | ) | 3,375 |   |
| Total                                                                                    |       | $                                  | (3,904     | )                                    | $          | 1,969 |   | $ | (5,186 | ) | $ | 3,375 |   |
| *Basic earnings per share:*                                                              |       |                               |       |                                 |       |   |   |   |   |
| Undistributed (losses) earnings:                                                         |       |                               |       |                                 |       |   |   |   |   |
| Class A common stock                                                                     |       | $                                  | (0.14      | )                                    | $          | — |   | $ | (0.19 | ) | $ | — |   |
| Class B common stock                                                                     |       | $                                  | (0.14      | )                                    | $          | 0.17 |   | $ | (0.19 | ) | $ | 0.29 |   |
| Distributed earnings:                                                                    |       |                               |       |                                 |       |   |   |   |   |
| Class A common stock                                                                     |       | $                                  | 0.21       |                                 | $          | — |   | $ | 0.42 |   | $ | — |   |
| Basic earnings (losses) per share:                                                       |       |                               |       |                                 |       |   |   |   |   |
| Class A common stock                                                                     |       | $                                  | 0.07       |                                 | $          | — |   | $ | 0.23 |   | $ | — |   |
| Class B common stock                                                                     |       | $                                  | (0.14      | )                                    | $          | 0.17 |   | $ | (0.19 | ) | $ | 0.29 |   |
| *Diluted (losses) earnings per share:*                                                   |       |                               |       |                                 |       |   |   |   |   |
| Undistributed (losses) earnings:                                                         |       |                               |       |                                 |       |   |   |   |   |
| Class A common stock                                                                     |       | $                                  | (0.14      | )                                    | $          | — |   | $ | (0.19 | ) | $ | — |   |
| Class B common stock                                                                     |       | $                                  | (0.14      | )                                    | $          | 0.13 |   | $ | (0.19 | ) | $ | 0.22 |   |
| Distributed earnings:                                                                    |       |                               |       |                                 |       |   |   |   |   |
| Class A common stock                                                                     |       | $                                  | 0.21       |                                 | $          | — |   | $ | 0.42 |   | $ | — |   |
| Diluted earnings (losses) per share:                                                     |       |                               |       |                                 |       |   |   |   |   |
| Class A common stock                                                                     |       | $                                  | 0.07       |                                 | $          | — |   | $ | 0.23 |   | $ | — |   |
| Class B common stock                                                                     |       | $                                  | (0.14      | )                                    | $          | 0.13 |   | $ | (0.19 | ) | $ | 0.22 |   |

 

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**B&G Foods, Inc. and Subsidiaries Notes to Consolidated Financial Statements (Continued) (Dollars in thousands, except per share data) (Unaudited)**

***FairValue of Financial Instruments***

Cashand cash equivalents, trade accounts receivable, income tax receivable, tradeaccounts payable, accrued expenses, dividends payable and due to related partyare reflected in the consolidated balance sheets at carrying value, whichapproximates fair value due to the short-term nature of these instruments.

Wehave outstanding $240,000 principal amount of 8.0% senior notes due 2011. Thefair value of the senior notes at July 2, 2005, based on quoted market prices,was $250,800

We also have outstanding $165,800 principal amount of12.0% senior subordinated notes due 2016. Of such outstanding principal amount,$143,000 principal amount is represented by 20.0 million EISs. Each EISrepresents one share of our Class A common stock and $7.15 principal amount ofour senior subordinated notes. As of July 2, 2005, the fair value of the EISs,based on the per EIS closing price on the American Stock Exchange on July 1,2005, was $14.68 per EIS. It is not practicable to estimate the fair value ofthe $143,000 principal amount of senior subordinated notes represented by theEISs. Of the $165,800 aggregate principal amount of senior subordinated notesoutstanding, $22,800 principal amount is not represented by EISs and tradesseparately. The fair value of the separate senior subordinated notes at July 2,2005, based on quoted market prices, was $25,287.

***Adoptionof New Accounting Standards***

Inresponse to the enactment of the American Job Creation Act of 2004 (the “JobsAct”) on October 22, 2004, the FASB issued FASB Staff Position (FSP) No.109-1, “*Application of FASB Statement No. 109, Accountingfor Income Taxes, for the Tax Deduction Provided to U.S. Based Manufacturers*”(FSP 109-1), and FSP No.109-2, “*Accounting and DisclosureGuidance for the Foreign Earnings Repatriation Provisions within the AmericanJobs Creation Act of 2004*” (FSP 109-2).

FSPNo. 109-1 clarifies how to apply SFAS No. 109 to the new law’s tax deductionfor income attributable to “domestic production activities.” The fullyphased-in tax deduction is up to nine percent of the lesser of taxable incomeor “qualified production activities income,” as defined by the Jobs Act. Thestaff position requires that the deduction be accounted for as a specialdeduction in the period earned, not as a tax-rate reduction. As a result, wewill recognize a reduction in our income tax expense for the domesticproduction activities in the quarterly period(s) in which we are eligible forthe deduction. 

InNovember 2004, the FASB issued SFAS No. 151, *“InventoryCosts—An Amendment of ARB No. 43, Chapter 4”* (SFAS No. 151). SFASNo. 151 amends the guidance in ARB No. 43, Chapter 4, “Inventory Pricing,” toclarify the accounting for abnormal amounts of idle facility expense, freight,handling costs, and wasted material (spoilage). Among other provisions, the newrule requires that items such as idle facility expense, excessive spoilage,double freight, and rehandling costs be recognized as current-period chargesregardless of whether they meet the criterion of “so abnormal” as stated in ARBNo. 43. Additionally, SFAS No. 151 requires that the allocation of fixedproduction overheads to the costs of conversion be based on the normal capacityof the production facilities. SFAS No. 151 is effective for fiscal yearsbeginning after June 15, 2005 and is required to be adopted by us in the firstquarter of fiscal 2006, beginning on January 1, 2006. We are currentlyevaluating the effect that the adoption of SFAS No. 151 will have on ourconsolidated results of operations and financial condition but do not expectSFAS No. 151 to have a material impact. 

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**B&G Foods, Inc. and Subsidiaries Notes to Consolidated Financial Statements (Continued) (Dollars in thousands, except per share data) (Unaudited)**

In December 2004, the FASBissued SFAS No. 123 (revised 2004), “Share-Based Payment” (SFAS No. 123R),which replaces SFAS No. 123 and supercedes APB Opinion No. 25. SFAS No. 123Raddresses the accounting for transactions in which an enterprise receivesemployee services in exchange for (a) equity instruments of the enterprise or(b) liabilities that are based on the fair value of the enterprise’s equityinstruments or that may be settled by the issuance of such equity instruments.SFAS No. 123R requires all share-based payments to employees, including grantsof employee stock options and restrictive stock grants and units, to berecognized as a compensation cost based on their fair values. The pro formadisclosures previously permitted under SFAS No. 123 no longer will be analternative to financial statement recognition. Based on a recent announcementby the Securities and Exchange Commission, we are required to adopt SFAS No.123R no later than January 1, 2006. Under SFAS No. 123R, we must determine theappropriate fair value model to be used for valuing share-based payments, theamortization method for compensation cost and the transition method to be usedat the date of adoption. The transition methods include prospective andretroactive adoption options. Under the retroactive option, prior periods maybe restated either as of the beginning of the year of adoption or for allperiods presented. The prospective method requires that compensation expense berecorded for all unvested stock options and restricted stock at the beginningof the first quarter of adoption of SFAS No. 123R, while the retroactivemethods would record compensation expense for all unvested stock options andrestricted stock beginning with the first period restated. We are evaluatingthe requirements of SFAS No. 123R and expect that the adoption of SFAS No. 123Rwill not have a material impact on our consolidated results of operations andearnings per share, since there are currently no share-based payments. 

**(3)   Inventories**

Inventories consist of thefollowing:
| ** **                   | ** ** | **July 2, 2005** | ** ** | **January 1, 2005** | ** ** |
|------------------------------|------------|----------------------------|------------|-------------------------------|------------|
| Raw materials and  packaging |       |                       | $          | 24,011                        |       |   |   | $ | 12,204 |   |   |
| Work in process              |       |                       | 1,301      |                          |       |   | 1,870 |   |   |
| Finished goods               |       |                       | 63,207     |                          |       |   | 65,035 |   |   |
| Total                        |       |                       | $          | 88,519                        |       |   |   | $ | 79,109 |   |   |

 

**(4)   Long-termDebt**

*PriorSenior Secured Credit Facility*.   On August 21, 2003, weentered into a newly amended and restated $200,000 senior secured creditfacility, which was further amended and restated as of September 9, 2003,comprised of a $50,000 five-year revolving credit facility and a $150,000six-year term loan facility. The proceeds of the term loan and of certaindrawings under the revolving credit facility were used (i) to fund ouracquisition of certain assets of The Ortega Brand of Business from NestlePrepared Foods Company on August 21, 2003, and to pay related transaction feesand expenses and (ii) to fully pay off our remaining obligations under termloan B of our then-existing term loan agreement dated as of March 15, 1999. Inconnection therewith, we capitalized approximately $5,300 of new deferred debtissuance costs related to the senior secured credit facility and, in accordancewith the applicable guidance of the FASB’s Emerging Issues Task Force, wroteoff $1,831 of deferred financing costs related to our then-existing term loanB. Under the senior secured credit facility, interest was determined based onseveral alternative rates, 

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**B&G Foods, Inc. and Subsidiaries Notes to Consolidated Financial Statements (Continued) (Dollars in thousands, except per share data) (Unaudited)**

includingthe base lending rate per annum plus an applicable margin, or LIBOR plus anapplicable margin. The senior secured credit facility was secured bysubstantially all of our assets.

OnOctober 14, 2004, we used a portion of the net proceeds of our initial publicoffering, offering of senior subordinated notes separate from the EISs andoffering of senior notes as described in Note 1 and cash on hand to repay alloutstanding borrowings under, and terminate our senior secured credit facility.In connection with our termination of the senior secured credit facility, wewrote-off all of our previously incurred deferred financing costs, which isincluded in interest expense in fiscal 2004.

*SeniorSecured Credit Facility*.   Concurrently with our initialpublic offering and concurrent offerings, we entered into a $30,000 seniorsecured revolving credit facility. Interest is determined based on severalalternative rates as stipulated in the revolving credit facility, including thebase lending rate per annum plus an applicable margin, or LIBOR plus anapplicable margin. The revolving credit facility is secured by substantiallyall of our assets except our real property. The revolving credit facilityprovides for mandatory prepayment based on asset dispositions and certainissuances of securities, as defined. The revolving credit facility containscovenants that restrict, among other things, our ability to incur additionalindebtedness, pay dividends and create certain liens. The revolving creditfacility also contains certain financial maintenance covenants, which, amongother things, specify maximum capital expenditure limits, a minimum interestcoverage ratio and a maximum senior and total leverage ratio, each ratio asdefined. Proceeds of the revolving credit facility are restricted to fundingour working capital requirements, capital expenditures and acquisitions of companiesin the same line of business as our company, subject to specified criteria. Therevolving credit facility was undrawn on the date of consummation of ourinitial public offering and concurrent offerings and remained undrawn at July2, 2005. The available borrowing capacity under our revolving credit facility,net of outstanding letters of credit of $72, was $29,928 at July 2, 2005. Themaximum letter of credit capacity under the revolving credit facility is$10,000, with a fee of 3.0% for all outstanding letters of credit.

*9**5**¤**8% Senior Subordinated Notes due 2007*.   Immediatelyprior to our initial public offering, we had outstanding $220,000 of 95¤8%senior subordinated notes due August 1, 2007 with interest payable semiannuallyon February 1 and August 1 of each year, of which we issued $120,000 principalamount in August 1997 and $100,000 principal amount in March 2002. The proceedsfrom the issuance of the senior subordinated notes issued in March 2002 wereused to pay off, in its entirety, the then outstanding balance under ourthen-existing term loan A, and to reduce the amount outstanding under the ourthen-existing term loan B, and pay related deferred debt issuance costs.

OnOctober 14, 2004, $194,165 aggregate principal amount of the 95¤8%senior subordinated notes was repaid with the proceeds of the initial publicoffering, the concurrent offerings and cash on hand at the redemption price of102.043% (which redemption price included a consent payment of 0.03%). Also onsuch date, $26,968 in proceeds from the initial public offering, the concurrentofferings and cash on hand were set aside to redeem the remaining $25,835aggregate principal amount of the 95¤8%senior subordinated notes on November 15, 2004 at a redemption price equal to101.604% of the remaining aggregate principal amount plus accrued interest. Thedifference between the carrying value, including remaining bond discount of$655, and the redemption value of approximately $4,891 has been recognized asinterest expense in our fiscal 2004 consolidated statement of operations. Inconnection with the extinguishment of these notes, we wrote-off all of ourpreviously incurred deferred financing costs, which is also included ininterest expense in fiscal 2004.

15

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**B&G Foods, Inc. and Subsidiaries Notes to Consolidated Financial Statements (Continued) (Dollars in thousands, except per share data) (Unaudited)**

*12.0%Senior Subordinated Notes due 2016*.   In connection withour initial public offering, we issued on October 14, 2004, $124,348 aggregateprincipal amount of 12.0% senior subordinated notes due 2016 in the form ofEISs and an additional $22,800 aggregate principal amount of 12.0% seniorsubordinated notes due 2016 (not in the form of EISs). In connection with theexercise of the underwriters’ over-allotment option, on October 22, 2004 weissued an additional $18,652 aggregate principal amount of 12.0% seniorsubordinated notes in the form of EISs. Each EIS represents one share of ourClass A common stock and $7.15 principal amount of our 12.0% seniorsubordinated notes. As of July 2, 2005, $165,800 million aggregate principalamount of senior subordinated notes was outstanding.

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

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

Wemay not redeem the notes prior to October 30, 2009**.**However, we may, from time to time, seek to retire thesenior subordinated notes through cash repurchases of EISs or separate seniorsubordinated notes and/or exchanges of EISs or separate senior subordinatednotes for equity securities, in open market purchases, privately negotiatedtransactions or otherwise. Such repurchases or exchanges, if any, will dependon prevailing market conditions, our liquidity requirements, contractualrestrictions and other factors.

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

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

Thesenior subordinated notes are jointly and severally and fully andunconditionally guaranteed by all of our existing domestic subsidiaries andcertain future domestic subsidiaries on an unsecured and subordinated basis onthe terms set forth in the indenture governing the senior subordinated notes. Thesenior subordinated note guarantees are subordinated in right of payment to allexisting and future senior indebtedness of the guarantors, including theindebtedness under our revolving credit facility and the senior notes. Ourpresent foreign subsidiary, Les Produits Alimentaires Jacques et Fils Inc., isnot a guarantor, and any future foreign or partially owned domesticsubsidiaries will not be guarantors, of our senior subordinated notes.

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**B&G Foods, Inc. and Subsidiaries Notes to Consolidated Financial Statements (Continued) (Dollars in thousands, except per share data) (Unaudited)**

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

*8.0% SeniorNotes due 2011*.   Concurrently with our initial publicoffering and offering of separate senior subordinated notes, we issued $240,000aggregate principal amount of 8.0% senior notes due 2011. Interest on thesenior notes is payable on April 1 and October 1 of each year, commencing onApril 1, 2005. Our obligations under the senior notes are fully andunconditionally guaranteed on a senior basis by all of our existing and futuredomestic subsidiaries. The senior notes and the subsidiary guarantees are ourand the guarantors’ general unsecured obligations and are effectively junior inright of payment to all of our and the guarantors’ secured indebtedness and tothe indebtedness and other liabilities of our non-guarantor subsidiaries; arepari passu in right of payment to all of our and the guarantors’ existing andfuture unsecured senior debt; and are senior in right of payment to all of ourand the guarantors’ future subordinated debt, including the senior subordinatednotes. Our present foreign subsidiary, Les Produits Alimentaires Jacques etFils Inc., is not a guarantor, and any future foreign or partially owneddomestic subsidiaries will not be guarantors, of our senior notes. 

Onor after October 1, 2008, we may redeem some or all of the senior notes at aredemption price of 104.0% beginning October 1, 2008 and thereafter at pricesdeclining annually to 100% on or after October 1, 2010. Prior to October1, 2007, we may redeem up to 35% of the aggregate principal amount of thesenior notes issued in the senior note offering with the net proceeds of one ormore equity offerings at the redemption price as described in the indenturegoverning the senior notes. If we or any of the guarantors sell certain assetsor experience specific kinds of changes in control, we must offer to purchasethe senior notes at the prices as described in the indenture governing thesenior notes plus accrued and unpaid interest to the date of redemption. Theindenture governing the senior notes limits our ability and the ability of theguarantors to incur additional indebtedness and issue preferred stock; makerestricted payments, including dividend payments on our common stock; allowrestrictions on the ability of certain subsidiaries to make distributions; sellall or substantially all of our assets or consolidate or merge with or intoother companies; enter into certain transactions with affiliates; or createliens and enter into sale and leaseback transactions. Each of the covenants issubject to a number of important exceptions and qualifications.

*SubsidiaryGuarantees*.   We have no assets or operations independentof our direct and indirect subsidiaries. All of our domestic subsidiariesjointly and severally, and fully and unconditionally, guarantee our seniorsubordinated notes and our senior notes, and management has determined that ouronly subsidiary that is not a guarantor of our senior subordinated notes andsenior notes is a “minor” subsidiary as that term is used in Rule 3-10 ofRegulation S-X promulgated by the Securities and Exchange Commission. There areno significant restrictions on our ability and the ability of our subsidiariesto obtain funds from our respective subsidiaries by dividend or loan.Consequently, separate financial statements have not been presented for oursubsidiaries because management has determined that they would not be materialto investors. 

*DeferredFinancing Costs*.   In connection with the issuance of the12.0% senior subordinated notes due 2016 and the 8.0% senior notes due 2011, wecapitalized approximately $23,123 of financing costs, 

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**B&G Foods, Inc. and Subsidiaries Notes to Consolidated Financial Statements (Continued) (Dollars in thousands, except per share data) (Unaudited)**

whichwill be amortized over their respective terms. As of July 2, 2005 we had netdeferred financing costs of $21,120. During the fourth quarter of fiscal 2004we wrote-off and expensed $8,361 relating to our then existing senior securedcredit facility and our 95¤8% seniorsubordinated notes.

At July 2, 2005 andJanuary 1, 2005 accrued interest of $8,117 and $8,365, respectively, isincluded in accrued expenses in the accompanying consolidated balance sheets.

**(5)   RedeemablePreferred Stock**

OurAmended and Restated Certificate of Incorporation provides that we may issue100,000 shares of Preferred Stock, $0.01 par value per share. Prior to ourinitial public offering, 22,000 shares of which were designated as the 13%Series A Cumulative Preferred Stock, 35,000 shares of which were designated asthe 13% Series B Cumulative Preferred Stock and 25,000 of which were designatedas the Series C Senior Preferred Stock (See Note 6).

Withrespect to dividend rights and rights on liquidation, winding up anddissolution of our company, the Series C Senior Preferred Stock ranked seniorto the 13% Series B Cumulative Preferred Stock and each ranked senior to the13% Series A Cumulative Preferred Stock. The Series C Senior Preferred Stock,the 13% Series B Cumulative Preferred Stock and the 13% Series A CumulativePreferred Stock each ranked senior to our common stock. 

*13%Series A Cumulative Preferred Stock.  *Each holder of 13%Series A Cumulative Preferred Stock was entitled to receive, when, as and ifdeclared by the our board of directors, out of funds legally availabletherefor, cash dividends on each share of 13% Series A Cumulative PreferredStock at a rate per annum equal to 13%, which dividends were cumulative withoutinterest, whether or not earned or declared, on a daily basis, and were payableannually in arrears. These dividends amounted to $29,267 as of July 3, 2004.

*13% Series B Cumulative Preferred Stock.*Eachholder of 13% Series B Cumulative Preferred Stock was entitled to receive,when, as and if declared by the our board of directors, out of funds legallyavailable therefor, cash dividends on each share of 13% Series B CumulativePreferred Stock at a rate per annum equal to 13%, which dividends werecumulative without interest, whether or not earned or declared, on a dailybasis, and were payable annually in arrears. These dividends amounted to$11,345 as of July 3, 2004.

On October 14,2004, we used a portion of the proceeds from our initial public offering and theconcurrent offerings, and cash on hand, to repurchase all of our outstanding Series ACumulative Preferred Stock and Series B Cumulative Preferred Stock for anaggregate purchase price of $32,736 and $24,481, respectively, which wasrecorded against stockholders’ equity.

*Warrants*.   The holders of the Series BCumulative Preferred Stock received warrants exercisable to purchase anaggregate of 1,289,621 shares of our common stock, with an exercise price of$0.01 per share and an expiration date of December 22, 2009. All of thesewarrants remained outstanding at July 3, 2004. In October 2004, weused a portion of the proceeds from our initial public offering (including fromthe exercise of the over-allotment option) and the concurrent offerings, andcash on hand to repurchase all of the outstanding warrants granted to theholders of our Series B Cumulative Preferred Stock for an aggregatepurchase price of $6,733, which was recorded against stockholders’ equity.

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**B&G Foods, Inc. and Subsidiaries Notes to Consolidated Financial Statements (Continued) (Dollars in thousands, except per share data) (Unaudited)**

**(6)**   Mandatorily Redeemable Preferred Stock

*Series CSenior Preferred Stock.  *When and as declared by ourboard of directors and to the extent permitted under the General CorporationLaw of the State of Delaware, we paid preferential dividends to the holders ofour Series C Senior Preferred Stock. Dividends on each share of Series CSenior Preferred Stock accrued at a rate of 14% per annum. Such dividendsaccrued whether or not they were declared and whether or not we had profits,surplus or other funds legally available for the payment of dividends. To theextent that all accrued dividends were not paid on each June 30 and December 31of each year beginning June 30, 2000 (which we refer to as the “dividendreference dates”), all dividends which had accrued on each share of Series CSenior Preferred Stock outstanding during the six-month period (or other periodin the case of the initial dividend reference date) ending upon each suchdividend reference date was accumulated and added to the liquidation value ofsuch share. These dividends amounted to $21,224 as of July 3, 2004. Suchdividends are charged to net income available to common stockholders.

On October 14,2004, we used a portion of the proceeds from our initial public offering andthe concurrent offerings, and cash on hand to repurchase all of our outstandingSeries C Senior Preferred Stock for an aggregate purchase price of$48,433, which was recorded against stockholders’ equity.

*Warrants*.   Theholders of our Series C Senior Preferred Stock received warrantsexercisable to purchase an aggregate of 1,805,477 shares of our common stock,with an exercise price of $0.01 per share and an expiration date of December 22,2009. All of these warrants remained outstanding at July 3, 2004. In October 2004,we used a portion of the proceeds from our initial public offering (includingfrom the exercise of the over-allotment option) and the concurrent offerings,and cash on hand to repurchase a portion of the outstanding warrants granted tothe holders of our Series C Senior Preferred Stock for an aggregatepurchase price of $2,173, which was recorded against stockholders’ equity. Theremaining 728,393 warrants that had been granted to the holders of our Series CSenior Preferred Stock were exercised for an equivalent number of shares of ourClass B common stock as of October 22, 2004.

**(7)**   Capital Stock and Option Plan

*VotingRights*.   The holders of our common stock are entitled toone vote per share with respect to each matter on which the holders of ourcommon stock are entitled to vote. Shares of our Class A common stock andshares of our Class B common stock are entitled to the same voting rightsper share and vote together as a single class on all matters with respect towhich holders are entitled to vote, except that so long as our former sponsorinvestor, BRS, together with its affiliates, beneficially owns more than 10% ofthe outstanding shares of Class A and Class B common stock in theaggregate on a fully-diluted basis, the holders of our Class B commonstock will have the exclusive right to elect two directors to the board ofdirectors. In accordance with the restated stockholders agreement, so long asthe holders of Class B common stock have the right to elect two directors,the holders of our Class B common stock have agreed to vote for twodirector nominees nominated by our former sponsor investor. The holders of ourcommon stock are not entitled to cumulate their votes in the election of ourdirectors.

*Dividends*.   Theholders of our common stock are entitled to receive dividends, if any, as theymay be lawfully declared from time to time by the board of directors of ourcompany, subject to any preferential rights of holders of any outstandingshares of preferred stock. In the event of any liquidation, dissolution orwinding up of our company, Class A and Class B common stockholdersare entitled to share ratably in our assets available for distribution to thestockholders, subject to the prior rights of holders of any outstandingpreferred stock. With respect to rights to dividends and on liquidation,dissolution or winding up, there is 

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**B&G Foods, Inc. and Subsidiaries Notes to Consolidated Financial Statements (Continued) (Dollars in thousands, except per share data) (Unaudited)**

nodifference between our Class A and Class B common stock, except that:(i) for periods ending on or before January 2, 2010, Class Bdividends, if any, will be paid on an annual basis and will be equal, in theaggregate, to Class B Available Cash (as defined below) (subject to thesubordination provision described below); and (ii) for each annualdividend payment period, after December 30, 2006 and through the dividendpayment period ending on January 2, 2010, if we declare and pay dividendson our Class A common stock, the holders of Class B common stock willhave the right to dividend payments (subject to the subordination provisions describedbelow) equal to Class B Available Cash (up to 1.1 times the amount ofdividends paid to the holders of our Class A common stock). For quarterlyperiods subsequent to January 2, 2010, if we declare and pay dividends onour Class A common stock, the holders of our Class B common stockwill be entitled to dividend payments of 1.1 times the amount paid per share tothe holders of our Class A common stock.

“*Class B Available Cash*” means the lesser of: (i) “excesscash” (as defined in the indenture governing our senior subordinated notes) forthe last four fiscal quarters, including the most recently completed fiscalquarter, minus the sum of the aggregate amount of the prior four Class Adividends, and minus dividend restricted cash of $6.0 million or (ii) theaggregate per share amount of dividends declared or to be declared on our Class Acommon stock (or 1.1 times such amount for dividends with respect to periodscommencing after December 31, 2006) with respect to the annual period forwhich the dividends on our Class B common stock are to be paid multipliedby the number of shares of our Class B common stock issued and outstandingon the last day of such period.

Underour organizational documents, through the dividend payment dates with respectto the quarterly and annual dividend payment periods ending January 2,2010, dividends on our Class B common stock will be subordinated to thepayment of dividends on our Class A common stock. Specifically: (i) anannual dividend on our Class B common stock may only be declared if wehave declared and paid dividends on our Class A common stock at no lessthan the quarterly rate of $0.212 per share for each of the four fiscalquarters corresponding to such annual dividend payment period of the Class Bcommon stock and (ii) no dividends on our Class B common stock may bedeclared with respect to any annual period unless the “Class B ThresholdAmount” (as defined below) as of the last day of such period is at least $10.0million.

Thesubordination of dividends on our Class B common stock will be suspendedupon the occurrence of any default or event of default under the indenturesgoverning the senior notes and the senior subordinated notes and will becomeapplicable again upon the cure of any default or event of default. Dividends onour Class B common stock will not be subordinated to dividends on our Class Acommon stock for any period subsequent to January 2, 2010. If for anydividend payment date after the February 20, 2010 dividend payment datethe amount of cash to be distributed is insufficient to pay dividends at thelevels intended by our dividend policy, any shortfall will reduce the dividendson the Class A and Class B common stock pro rata.

“*Class B Threshold Amount*” as of any date means theamount of cash on our consolidated balance sheet as of such date calculated ona pro forma basis giving effect to the payment of any previously declared butunpaid dividends on any class of our capital stock and the payment of anydividends to be declared with respect to any class of our capital stock withrespect to the period for which the Class B Threshold Amount is beingcalculated less any actual or funded borrowings under our new revolving creditfacility (or any successor or additional revolving credit facility) as of suchdate.

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**B&G Foods, Inc. and Subsidiaries Notes to Consolidated Financial Statements (Continued) (Dollars in thousands, except per share data) (Unaudited)**

On December 27,2004, our board of directors declared a cash dividend of $0.1864 per share forour 20 million shares of Class A common stock for the partial quarterlydividend period commencing on October 14, 2004, the date of completion ofour initial public offering, and ending on January 1, 2005. We made thisdividend payment on January 31, 2005 to holders of record as of December 31,2005. On March 8, 2005, our board of directors declared a cash dividend of$0.2120 per share for our 20 million shares of Class A common stock forthe quarterly dividend period ending on April 2, 2005. We made thisdividend payment on May 2, 2005 to holders of record as of March 31,2005. On May 17, 2005, our board of directors declared a cash dividend of$0.2120 per share for our 20 million shares of Class A common stock forthe quarterly dividend period ending on July 2, 2005. We are scheduled tomake this dividend payment on August 1, 2005 to holders of record as of June 30,2005. No dividends were declared for our Class B common stock in the firsthalf of fiscal 2005 or in fiscal 2004.

*Additional Issuance of Our Authorized Common Stock*.   Additional shares of our authorizedcommon stock may be issued, as determined by the board of directors of ourcompany from time to time, without approval of holders of our common stock,except as may be required by applicable law or the rules of any stockexchange or automated quotation system on which our securities may be listed ortraded. However, according to our bylaws we may not issue any shares of Class Acommon stock unless: (i) they are issued as part of an EIS, the issuanceof which has been registered with the SEC, (ii) any EIS that may resultfrom the combination of the shares of Class A common stock and our seniorsubordinated notes have been issued in a transaction registered with the SEC or(iii) no EISs are currently outstanding.

*1997Incentive Stock Option Plan*.   In 1997, we adopted the1997 Incentive Stock Option Plan for our and our subsidiaries’ key employees. Theoption plan authorized for grant to key employees and officers options for upto 736,263 shares of our common stock. The option plan authorized us to granteither (i) options intended to constitute incentive stock options underthe Internal Revenue Code of 1986 or (ii) non-qualified stock options. Theoption plan provided that it may be administered by our board of directors or acommittee designated by our board of directors. Options granted under theoption plan were exercisable in accordance with the terms established by theboard of directors. Under the option plan, our board of directors determinedthe exercise price of each option granted, which in the case of incentive stockoptions, could not be less than fair value. All option grants were made at fairvalue as determined by a third party valuation. Options expired on the datedetermined by the board of directors, which expiration date was not permittedto be later than the tenth anniversary of the date of grant. The options vestedratably over 5 years. No options were granted during fiscal 2004, 2003 or 2002.Prior to our initial public offering, options to purchase 728,020 shares of ourcommon stock, all of which were incentive stock options, had been granted sincethe inception of the option plan, and 8,243 additional shares were availablefor grant under the plan. Upon the consummation of our initial public offeringand following the option repurchases described below, we terminated the optionplan.

*OtherStock Options*.   Pursuant to the terms of a licenseagreement with Emeril’s Food of Love Productions, LLC (EFLP) dated June 2000,we granted EFLP and William Morris Agency, Inc. 68,021 and 7,582 stockoptions, respectively. Prior to our initial public offering, all such optionswere exercisable at a price of $0.09 per share of common stock, were fullyvested and had an expiration date of June 9, 2010. We recorded the optionsat fair value and expensed such options in 2000.

*Option Repurchases*.   On October 14,2004, we used a portion of the proceeds from our initial public offering andthe concurrent offerings to repurchase all options outstanding under the optionplan for an aggregate purchase price of $3,911, and terminated the option plan.The repurchase of stock options was 

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**B&G Foods, Inc. and Subsidiaries Notes to Consolidated Financial Statements (Continued) (Dollars in thousands, except per share data) (Unaudited)**

charged to operations. Inaddition, we used a portion of the proceeds from our initial public offeringand the concurrent offerings and cash on hand to repurchase all options that wehad granted to EFLP and William Morris Agency for an aggregate purchase priceof $406. The repurchase of non-employee stock options was charged to ourstockholders’ equity up to the fair value of the stock options on the date ofrepurchase.

**(8)   PensionBenefits**

Net periodic costs for thethirteen and twenty-six week periods ended July 2, 2005 and July 3,2004 include the following components:
| ** **                                           | ** ** | **Thirteen Weeks Ended**                                           | ** ** | **Twenty-six Weeks Ended**                                         | ** ** |
|------------------------------------------------------|------------|------------------------------------------------------------------------------|------------|------------------------------------------------------------------------------|------------|
| ** **                                           | ** ** | **July 2,      2005     ** | ** ** | **July 3,      2004     ** | ** ** | **July 2,       2005     ** | ** ** | **July 3,       2004     ** | ** ** |
| Service cost—benefits  earned during the period |       |                                                                         | $          | 377                                                                          |       |   |   | $ | 337 |   |   |   | $ | 754 |   |   |   | $ | 676 |   |   |
| Interest cost on  projected benefit obligation       |       |                                                                         | 276        |                                                                         |       |   | 257 |   |   |   | 553 |   |   |   | 517 |   |   |
| Expected return on plan  assets                      |       |                                                                         | (262       | )                                                                            |       |   | (204 | ) |   |   | (524 | ) |   |   | (413 | ) |   |
| Amortization of  unrecognized prior service cost     |       |                                                                         | 1          |                                                                         |       |   | 0 |   |   |   | 2 |   |   |   | 0 |   |   |
| Amortization of  unrecognized loss                   |       |                                                                         | 48         |                                                                         |       |   | 46 |   |   |   | 96 |   |   |   | 93 |   |   |
| Net pension benefit cost                             |       |                                                                         | $          | 440                                                                          |       |   |   | $ | 436 |   |   |   | $ | 881 |   |   |   | $ | 873 |   |   |

 

We previously disclosed in our Annual Report on Form 10-Kfor the fiscal year ended January 1, 2005 that we expected to contribute$1,860 to our pension plans in 2005. As of July 2, 2005, $370 incontributions have been made. As of July 2, 2005, we anticipate our totalcontribution to be $1,000 for the plan year ended December 31, 2005 tofund our pension plan obligations.

**(9)   Related-Party Transactions**

Prior to the consummation of our initial publicoffering, we were party to a management agreement with BRS & Co., themanager of BRS, pursuant to which BRS & Co. was paid an annual fee of$500 per year for certain management, business and organizational strategy, andmerchant and investment banking services. BRS owned the majority of our capitalstock prior to the completion of our initial public offering. The managementagreement was terminated as of October 14, 2004.

We are party to a transaction services agreementpursuant to which BRS & Co. will be paid a transaction fee formanagement, financial and other corporate advisory services rendered by BRS &Co. in connection with acquisitions by our company, which fee will not exceed1.0% of the total transaction value. No such fees were paid during thetwenty-six weeks ended July 2, 2005 and July 3, 2004.

In connection with our initial public offering and theconcurrent offerings, the transaction services agreement was amended to providethat transaction fees will be payable as described above unless a majority ofour disinterested directors determines otherwise. BRS & Co. did notreceive any transaction fees in connection with the initial public offering andthe concurrent offerings.

We lease a manufacturing and warehouse facility fromthe chairman of our board of directors under an operating lease, which expiresin April 2009. Total rent expense associated with this lease was $384 forthe twenty-six weeks ended July 2, 2005 and July 3, 2004.

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**B&G Foods, Inc. and Subsidiaries Notes to Consolidated Financial Statements (Continued) (Dollars in thousands, except per share data) (Unaudited)**

**(10)   Commitments and Contingencies**

We did not make any material expenditures during thetwenty-six week periods ended July 2, 2005 and July 3, 2004 in orderto comply with environmental laws or regulations. Based on our experience todate, we believe that the future cost of compliance with existing environmentallaws and regulations (and liability for known environmental conditions) willnot have a material adverse effect on our consolidated financial condition,results of operations or liquidity. However, we cannot predict whatenvironmental or health and safety legislation or regulations will be enactedin the future or how existing or future laws or regulations will be enforced,administered or interpreted, nor can we predict the amount of future expendituresthat may be required in order to comply with such environmental or health andsafety laws or regulations or to respond to such environmental claims.

We are involved in various claims and legal actionsarising in the ordinary course of business. In the opinion of our management,the ultimate disposition of these other matters will not have a materialadverse effect on our consolidated financial position, results of operations orliquidity.

We are subject to environmental regulations in thenormal course of business. Management believes that the cost of compliance withsuch regulations will not have a material adverse effect on our consolidatedfinancial position, results of operations or liquidity.

We have employment agreements with our executiveofficers. The agreements generally continue until terminated by the executiveor by us, and provide for severance payments under certain circumstances. As ofJuly 2, 2005, if all of our executives were to be terminated by us withoutcause (as defined) or as a result of the employees’ disability, our severanceliability would be approximately $1,965.

**(11)   Long-term Incentive Plan**

In connection with our initial public offering, weadopted a long-term incentive plan (LTIP). Our executive officers and othersenior employees to be identified by the compensation committee of our board ofdirectors will be eligible to participate in the LTIP. The purpose of the LTIPis to strengthen the mutuality of interests between the LTIP participants andholders of our EISs. The LTIP is administered by our compensation committee,which has the power to, among other things, determine those individuals whowill participate in the LTIP; the level of participation of each participant inan incentive pool; the conditions that must be satisfied in order for theparticipants to vest in their allocated incentive pool amounts (includingestablishing specified performance targets that must be achieved in order for apool to be created and amounts to be allocated to the participants); and otherconditions that the participants must satisfy in order to receive payment oftheir allocated amounts. Under the LTIP, the maximum amount that any oneparticipant can receive in respect of a one-year performance period is $1,000. TheLTIP is an unfunded plan. No amounts have been earned to date by participantsunder the LTIP and there was no expense related to the LTIP in the twenty-sixweek period ending July 2, 2005.

**(12)   Restructuring Charge**

On July 1, 2005, we closed our New Iberia,Louisiana, manufacturing facility as part of our ongoing efforts to improve ourproduction capacity utilization, productivity and operating efficiencies, andlower our overall costs. In the twenty-six weeks ended July 2, 2005, werecorded a charge in connection with the plant closing of $3,244, of which $3,128was recorded during the thirteen weeks ended July 2, 2005 and $116 wasrecorded during the thirteen weeks ended April 2, 2005. The chargeincluded a cash charge for employee compensation and other costs ofapproximately $431 and a non-cash write-down of inventory, land, building andequipment of approximately $2,813.

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**Item2.**                        Management’sDiscussion and Analysis of Financial Condition and Results of Operations

The following Management’sDiscussion and Analysis of Financial Condition and Results of Operationscontains forward-looking statements that involve risks and uncertainties. Ouractual results could differ materially from those anticipated in theseforward-looking statements as a result of certain factors, including those setforth under the heading “Forward-Looking Statements” and elsewhere in thisreport. The following discussion should be read in conjunction with theunaudited consolidated interim financial statements and related notes for thetwenty-six weeks ended July 2, 2005 included elsewhere in this report andthe audited consolidated financial statements and related notes for the fiscalyear ended January 1, 2005 (fiscal 2004) included in our Annual Report on Form 10-Kfiled with the Securities and Exchange Commission (SEC) on March 2, 2005.

**General**

We manufacture, sell and distribute a diversifiedportfolio of high quality, shelf-stable, branded food products, many of whichhave leading regional or national retail market shares. In general, we positionour branded products to appeal to the consumer desiring a high quality andreasonably priced branded product.

Our business strategy is to continue to increasesales, profitability and free cash flow by enhancing our existing portfolio ofbranded shelf-stable products and by capitalizing on our competitive strengths.We intend to implement our strategy through the following initiatives:profitably growing our established brands, leveraging our uniquemultiple-channel sales and distribution system, introducing new products,capitalizing on the higher growth Mexican segment of the food industry, andexpanding our brand portfolio with new licensing arrangements.

Since 1996, we have successfully acquired andintegrated 16 separate brands into our operations. We believe that successfulfuture acquisitions, if any, will enhance our portfolio of existing businesses,further leveraging our existing platform.

We are subject to a number of challenges that mayadversely affect our businesses. These challenges, which are discussed belowand under the heading “Forward-Looking Statements” and “Certain Factors That May AffectFuture Results” in this report include:

*Fluctuations in Commodity Prices*.   Wepurchase raw materials, including agricultural products, meat and poultry fromgrowers, commodity processors, other food companies and packaging manufacturers.Raw materials are subject to fluctuations in price attributable to a number offactors. We have seen increasing prices in certain of these commodities, and weexpect this trend may continue. In the twenty-six weeks ended July 2,2005, our commodity prices for maple syrup, meat, beans and cans were higherthan those incurred during the twenty-six weeks ended July 3, 2004. Fluctuationsin commodity prices can lead to retail price volatility and intensive pricecompetition, and can influence consumer and trade buying patterns. We managethis risk by entering into short-term supply contracts and advance commoditiespurchase agreements from time to time, and if necessary, by raising prices. Therecan be no assurance, however, that any price increases by us will offset theincreased cost of these raw material commodities, or that we will be able toraise prices at all.

*Consolidation in the Retail Trade and ConsequentInventory Reductions*.   As the retail grocery tradecontinues to consolidate and our retail customers grow larger and become moresophisticated, our retail customers may demand lower pricing and increasedpromotional programs. These customers are also reducing their inventories andincreasing their emphasis on private label products.

*Changing Customer Preferences*.   Consumersin the market categories in which we compete frequently change their tastepreferences, dietary habits and product packaging preferences.

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*Consumer Concern Regarding Food Safety, Quality andHealth*.   The food industry is subject to consumerconcerns regarding the safety and quality of certain food products, includingthe health implications of genetically modified organisms, obesity and transfatty acids.

*Changing Valuations of the Canadian Dollar inRelation to the U.S. Dollar*.   We purchase most of ourmaple syrup requirements from manufacturers located in Quebec, Canada. Over thepast year the U.S. dollar has weakened against the Canadian dollar, which hasin turn increased our costs relating to the production of our maple syrupproducts.

To confront thesechallenges, we continue to take steps to build the value of our brands, toimprove our existing portfolio of products with new product and marketinginitiatives, to reduce costs through improved productivity and to addressconsumer concerns about food safety, quality and health.

**CriticalAccounting Policies; Use of Estimates**

The preparation offinancial statements in accordance with U.S. generally accepted accountingprinciples requires our management to make a number of estimates andassumptions relating to the reporting of assets and liabilities and thedisclosure of contingent assets and liabilities at the date of the consolidatedfinancial statements and the reported amounts of revenues and expenses duringthe reporting period. Some of the more significant estimates and assumptionsmade by management involve trade and consumer promotion expenses, allowancesfor excess, obsolete and unsaleable inventories, and the recoverability ofgoodwill, trademarks, property, plant and equipment, and deferred tax assets,and the accounting for our EISs, including their treatment in computing of ourincome tax expense and the accounting for earnings per share. Actual results coulddiffer from those estimates and assumptions.

***Trade and Consumer Promotion Expenses***

We offer various salesincentive programs to customers and consumers, such as price discounts,in-store display incentives, slotting fees and coupons. The recognition ofexpense for these programs involves the use of judgment related to performanceand redemption estimates. Estimates are made based on historical experience andother factors. Actual expenses may differ if the level of redemption rates andperformance vary from estimates.

***Inventories***

Inventories are stated atthe lower of cost or market. Cost is determined using the first-in, first-outand average cost methods. Inventories have been reduced by an allowance forexcess, obsolete and unsaleable inventories. The allowance is an estimate basedon our management’s review of inventories on hand compared to estimated futureusage and sales.

***Long-Lived Assets***

Long-lived assets, such asproperty, plant and equipment, and intangibles with estimated useful lives aredepreciated or amortized over their respective estimated useful lives to theirestimated residual values, and reviewed for impairment whenever events orchanges in circumstances indicate that the carrying amount of an asset may notbe recoverable. Recoverability of assets to be held and used is measured by acomparison of the carrying amount of an asset to estimated undiscounted futurecash flows expected to be generated by the asset. If the carrying amount of anasset exceeds its estimated future cash flows, an impairment charge isrecognized by the amount by which the carrying amount of the asset exceeds thefair value of the asset.

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***Goodwill and Trademarks***

Goodwill and intangible assets with indefinite usefullives (trademarks) are tested for impairment at least annually and wheneverevents or circumstances occur indicating that goodwill or indefinite lifeintangibles might be impaired.

We perform the annual impairment tests on the last dayof each fiscal year. The annual goodwill impairment test involves a two-stepprocess. The first step of the impairment test involves comparing the fairvalue of our company with our company’s carrying value, including goodwill. Ifthe carrying value of our company exceeds our fair value, we perform the secondstep of the impairment test to determine the amount of the impairment loss. Thesecond step of the goodwill impairment test involves comparing the implied fairvalue of goodwill with the carrying value of that goodwill and recognizing aloss for the difference. Calculating our fair value requires significantestimates and assumptions by management. We estimate our fair value by applyingthird party market value indicators to our earnings before interest, taxes,depreciation and amortization (EBITDA). We test indefinite life intangibleassets for impairment by comparing their carrying value to their fair valuethat is determined using a cash flow method and recognize a loss to the extentthe carrying value is greater.

We completed our annualimpairment tests for the year ended January 1, 2005 with no adjustments tothe carrying values of goodwill and indefinite life intangibles. We did notnote any events or circumstances during the twenty-six week period ended July 2,2005 that would indicate that goodwill or indefinite life intangibles might beimpaired.

***Accounting Treatment for EISs.***

Our EISs include Class A common stock and seniorsubordinated notes. Upon completion of our initial public offering (includingthe exercise of the over-allotment option), we allocated the proceeds from theissuance of the EISs, based upon relative fair value at the issuance date, tothe Class A common stock and the senior subordinated notes. We haveassumed that the price paid in the EIS offering was equivalent to the combinedfair value of the Class A common stock and the senior subordinated notes,and the price paid in the offering for the senior subordinated notes soldseparately (not in the form of EISs) was equivalent to their initial statedprincipal amount. We have concluded there are no embedded derivative featuresrelated to the EIS that require bifurcation under Financial AccountingStandards Board (FASB) Statement No. 133, “Accounting for DerivativeInstruments and Hedging Activities,” as amended (SFAS No. 133). We havedetermined the fair value of the Class A common stock and the seniorsubordinated notes with reference to a number of factors, including the sale ofthe senior subordinated notes sold separately from the EISs that have the sameterms as the senior subordinated notes included in the EISs. Therefore, we haveallocated the entire proceeds of the EIS offering to the Class A commonstock and the senior subordinated notes, and the allocation of the EIS proceedsto the senior subordinated notes did not result in a premium or discount.

We have concluded that the call option and the changein control put option in the senior subordinated notes do not warrant separateaccounting under SFAS No. 133 because they are clearly and closely relatedto the economic characteristics of the host debt instrument. Therefore, we haveallocated the entire proceeds of the offering to the Class A common stockand the senior subordinated notes. Upon subsequent issuances, if any, of seniorsubordinated notes, we will evaluate whether the call option and the change incontrol put option in the senior subordinated notes require separate accountingunder SFAS No. 133. We expect that if there is a substantial discount orpremium upon a subsequent issuance of senior subordinated notes, we may need toseparately account for the call option and the change in control put optionfeatures as embedded derivatives for such subsequent issuance. If we determinethat the embedded derivatives, if any, require separate accounting from thedebt host contract under SFAS No. 133, the call option and the change incontrol put option associated with the senior subordinated notes will berecorded 

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as derivative liabilitiesat fair value, with changes in fair value recorded as other non-operatingincome or expense. Any discount on the senior subordinated notes resulting fromthe allocation of proceeds to an embedded derivative will be amortized tointerest expense over the remaining life of the senior subordinated notes.

The Class A commonstock portion of each EIS is included in stockholders’ equity, net of therelated portion of the EIS transaction costs allocated to Class A commonstock. Dividends paid on the Class A common stock are recorded as areduction to retained earnings when declared by us. The senior subordinatednote portion of each EIS is included in long-term debt, and the related portionof the EIS transaction costs allocated to the senior subordinated notes wascapitalized as deferred financing costs and is being amortized to interestexpense using the effective interest method. Interest on the seniorsubordinated notes is charged to expense as accrued by us.

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

Income taxes are accounted for under the asset andliability method. Deferred tax assets and liabilities of our company arerecognized for the future tax consequences attributable to differences betweenthe financial statement carrying amounts of existing assets and liabilities andtheir respective tax bases and operating loss and tax credit carryforwards. Deferredtax assets and liabilities are measured using enacted tax rates expected toapply to taxable income in the years in which those temporary differences areexpected to be recovered or settled. A valuation allowance is provided when itis more likely than not that all or some portion of the deferred tax asset willnot be realized. The effect on deferred tax assets and liabilities of a changein tax rates is recognized in operations in the period that includes theenactment date.

As part of the income tax provision process ofpreparing our consolidated financial statements, we are required to estimateour income taxes. This process involves estimating our current tax expensestogether with assessing temporary differences resulting from differingtreatment of items for tax and accounting purposes. These differences result indeferred tax assets and liabilities. We then assess the likelihood that ourdeferred tax assets will be recovered from future taxable income and to theextent we believe the recovery is not likely, we establish a valuationallowance. Further, to the extent that we establish a valuation allowance orincrease this allowance in a financial accounting period, we include suchcharge in our tax provision, or reduce our tax benefits in our consolidatedstatement of operations. We use our judgment to determine our provision orbenefit for income taxes, deferred tax assets and liabilities and any valuationallowance recorded against our net deferred tax assets.

We have recorded deferred tax assets, a portion ofwhich represents net operating loss carryforwards. A valuation allowance hasbeen recorded for certain state net operating loss carryforwards.

There are various factors that may cause those taxassumptions to change in the near term, and we may have to record a valuationallowance against our deferred tax assets. We cannot predict whether futureU.S. federal and state income tax laws and regulations might be passed thatcould have a material effect on our results of operations. We assess the impactof significant changes to the U.S. federal and state income tax laws andregulations on a regular basis and update the assumptions and estimates used toprepare our consolidated financial statements when new regulations andlegislation are enacted.

We do not provide for U.S. federal income taxes or taxbenefits on the unremitted earnings or losses of our foreign subsidiary as suchearnings are intended to be indefinitely reinvested.

We have accounted for our issuance of EISs as anissuance of the separate securities evidenced by such EISs and have allocatedthe proceeds received for each EIS between the Class A common stock andsenior subordinated note represented thereby in the amounts of their respectivefair values at the time of issuance. Accordingly, we have accounted for thesenior subordinated notes represented by the EISs as 

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long-term debt bearing astated interest rate and maturing on October 30, 2016. In connection withthe issuance and initial public offering of the EISs, we received an opinionfrom counsel that the senior subordinated notes should be treated as debt forUnited States federal income tax purposes. In accordance with the opinion wereceived, we continue to be of the view that the senior subordinated notesshould be treated as debt for United States federal income tax purposes(although we have not sought a ruling from the IRS on this issue), and weintend to deduct annually interest expense of approximately $19.9 million onthe senior subordinated notes from taxable income for United States federal andstate income tax purposes. There can be no assurance that the classification ofsenior subordinated notes as debt (or the amount of interest expense deducted)will not be challenged by the IRS or other tax jurisdictions or will besustained by a court of law if challenged.

If our treatment of the senior subordinated notes asdebt is put at risk in the future as a result of a future ruling by the IRS orother tax jurisdiction or by a court of law, including an adverse ruling forEISs (or other similar securities) issued by other companies or as a result ofa proposed adjustment by the IRS or other tax jurisdiction in an examination ofour company or for any other reason, we will need to consider the effect ofsuch developments on the determination of our future tax provisions andobligations. In the event the senior subordinated notes are required to betreated as equity for income tax purposes, then the cumulative interest expenseassociated with the senior subordinated notes for prior tax periods that areopen to assessment and for future tax periods would not be deductible fromtaxable income and we would be required to recognize additional tax expense andestablish a related income tax liability for prior period treatment. Theadditional tax due to the federal and state authorities would be based on ourtaxable income or loss for each of the years that we claimed the interestexpense deduction and would materially and adversely affect our financialposition, cash flow, and liquidity, and could affect our ongoing ability tomake interest payments on the senior subordinated notes and dividend paymentson the shares of common stock represented by the EISs and our ability tocontinue as a going concern. In addition, non-U.S. holders of our EISscould be subject to withholding taxes on the payment of interest treated asdividends on equity, which could subject us to additional liability for thewithholding taxes that we do not collect on such payments. However, because inaccordance with the opinion of counsel we received on the date of our initialpublic offering we continue to be of the view that the senior subordinatednotes should be treated as debt for United States federal income tax purposes,we do not record a liability for a potential disallowance of this interestexpense deduction or for the potential imposition of these withholding taxes.

A factor in the ongoingdetermination that our consolidated financial statements should reflectdeductions for income tax purposes of the interest on the senior subordinatednotes is the veracity, at the time of the initial public offering, of therepresentations delivered by the purchasers of senior subordinated notes soldseparately (not in the form of EISs). We may conduct procedures in the futureto confirm the veracity, at the time of the offering, of the purchaserrepresentations. In addition, other factors indicating the existence, at thetime of the initial public offering, of any plan or pre-arrangement may also berelevant to this ongoing determination. It is possible that we will at somepoint in the future, as a result of the findings of the procedures noted above,or IRS interpretations or other changes in circumstances, conclude that weshould establish a reserve for tax liabilities associated with a disallowanceof all or part of the interest deductions on the senior subordinated notes,although our present view is that no such reserve is necessary or appropriate. Ifwe decide to maintain such a reserve, our income tax provision, and relatedincome tax payable, would be materially impacted. As a result, our ability topay dividends on the shares of our common stock could be materially impairedand the market price and/or liquidity for the EISs or our common stock could beadversely affected.

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***Earnings Per Share***

For the periods prior to our initial public offering,basic earnings per share is calculated by dividing net income (loss) availableto common shares (net income less dividends accumulating during the period forour 13% Series A and Series B cumulative preferred stock and Series Csenior preferred stock and other charges) by the weighted average common sharesoutstanding during the period. Diluted earning per share is calculatedsimilarly, except that it includes the dilutive effect of the assumed exerciseof outstanding options and warrants.

Following the consummation of our initial publicoffering, we have two classes of common stock, designated as Class Acommon stock and Class B common stock, and we present basic and dilutedearnings per share using the two-class method. The two-class method is anearnings allocation formula that determines earnings per share for each classof common stock according to dividends declared and participation rights inundistributed earnings.

Net income available toour common stockholders is allocated between our two classes of common stockbased upon the two-class method. Basic and diluted earnings per share for our Class Aand Class B common stock is calculated by dividing net income available tocommon stockholders by the weighted average number of shares of Class Aand Class B common stock outstanding.

**Results of Operations**

Thefollowing table sets forth the percentages of net sales represented by selecteditems for the thirteen and twenty-six week periods ended July 2, 2005 and July 3,2004 reflected in our consolidated statements of operations. The comparisons offinancial results are not necessarily indicative of future results:
| ** **                                                    | ** ** | **Thirteen Weeks Ended** | ** ** | **Twenty-six Weeks Ended** | ** ** |
|---------------------------------------------------------------|------------|------------------------------------|------------|--------------------------------------|------------|
| ** **                                                    | ** ** | **July 2, 2005**         | ** ** | **July 3, 2004**           | ** ** | **July 2, 2005** | ** ** | **July 3, 2004** | ** ** |
| **Common Size Income Statement:**                             |       |                               |       |                                 |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Net sales                                                     |       |                               | 100.0      | %                                    |       |   | 100.0 | % |   |   | 100.0 | % |   |   | 100.0 | % |   |
| Cost of goods sold                                            |       |                               | 71.4       | %                                    |       |   | 68.6 | % |   |   | 70.9 | % |   |   | 68.3 | % |   |
| Costs of goods sold—restructuring  charge                |       |                               | 3.3        | %                                    |       |   | 0.0 | % |   |   | 1.8 | % |   |   | 0.0 | % |   |
| Gross profit                                                  |       |                               | 25.2       | %                                    |       |   | 31.4 | % |   |   | 27.4 | % |   |   | 31.7 | % |   |
| Sales, marketing and  distribution expenses                   |       |                               | 11.5       | %                                    |       |   | 12.1 | % |   |   | 11.3 | % |   |   | 12.0 | % |   |
| General and  administrative expenses                          |       |                               | 2.1        | %                                    |       |   | 0.9 | % |   |   | 1.8 | % |   |   | 1.3 | % |   |
| Management fees-related  party                                |       |                               | 0.0        | %                                    |       |   | 0.1 | % |   |   | 0.0 | % |   |   | 0.1 | % |   |
| Operating income                                              |       |                               | 11.7       | %                                    |       |   | 18.3 | % |   |   | 14.3 | % |   |   | 18.2 | % |   |
| Interest expense, net                                         |       |                               | 11.1       | %                                    |       |   | 8.3 | % |   |   | 11.3 | % |   |   | 8.5 | % |   |
| Income before income  taxes                                   |       |                               | 0.6        | %                                    |       |   | 10.0 | % |   |   | 2.9 | % |   |   | 9.8 | % |   |
| Provision for income  taxes                                   |       |                               | 0.2        | %                                    |       |   | 3.9 | % |   |   | 1.1 | % |   |   | 3.8 | % |   |
| Net income                                                    |       |                               | 0.4        | %                                    |       |   | 6.1 | % |   |   | 1.8 | % |   |   | 6.0 | % |   |
| Preferred stock dividend  accumulated and related charges     |       |                               | 0.0        | %                                    |       |   | 4.0 | % |   |   | 0.0 | % |   |   | 4.2 | % |   |
| Net income available to common stockholders per  common share |       |                               | 0.4        | %                                    |       |   | 2.1 | % |   |   | 1.8 | % |   |   | 1.8 | % |   |

 

As used in this section the terms listed below havethe following meanings:

*NetSales.  *Our net sales represents gross sales of productsshipped to customers plus amounts charged customers for shipping and handling,less cash discount, coupon redemption, slotting fees and trade promotionalspending.

*GrossProfit.  *Our gross profit is equal to our net sales lesscost of goods sold. The primary components of our cost of goods sold are costof internally manufactured products, purchases of finished goods fromco-packers plus freight costs to our distribution centers and to our customers.

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*Sales,Marketing and Distribution Expenses.  *Our sales,marketing and distribution expenses include costs for marketing personnel,consumer programs, internal sales forces, brokerage costs and warehousefacilities.

*Generaland Administrative Expenses.  *Our general andadministrative expenses include administrative employee compensation andbenefit costs, as well as information technology infrastructure andcommunication costs, office rent and supplies, professional services,management fees and other general corporate expenses.

*Net Interest Expense.  *Netinterest expense includes interest relating to our outstanding indebtedness netof interest income.

***Thirteen-weekperiod ended July 2, 2005 compared to thirteen-week period ended July 3,2004.***

*NetSales.  *Net sales increased $0.4 million or 0.4% to$94.1 million for the thirteen-week period ended July 2, 2005 from $93.7million for the thirteen-week period ended July 3, 2004. Sales increased$0.5 million relating to price increases and product mix improvements,which was offset by a decrease in unit volume of $0.1 million. Sales of ourlines of*Ortega*, *Polaner, Sason*, and*Emeril* products increased**in the amounts of $1.5 million, $0.5million, $0.5 million and $0.4 million or 8.8%, 6.6%, 67.2% and 5.0%,respectively. These increases were offset by a reduction of sales in *B&M Baked Beans, Underwood, Maple Grove Farms*and *Joan of Arc*products $1.1million, $0.5 million, $0.4 million and $0.3 million or 12.2%, 9.5%, 2.9% and22.1%, respectively. All other brands decreased, in the aggregate by, $0.2million or 0.6%.

*Gross Profit.**  *Excludingthe restructuring charge described below, pro forma gross profitdecreased $2.6 million or 8.8% to $26.9 million for the thirteen-week periodended July 2, 2005 from $29.5 million for the thirteen-week period ended July 3,2004. Pro forma gross profit expressed as a percentage of net sales decreased2.8% to 28.6% in the thirteen-week period ended July 2, 2005 from 31.4% inthe thirteen-week period ended July 3, 2004. Higher transportation costs,primarily relating to fuel surcharges, decreased pro forma gross profit marginby 1.0%, higher costs of meat decreased pro forma gross profit margin by 0.5%,an increase in slotting costs decreased pro forma gross profit margin by 0.5%and higher costs of beans, maple syrup and cans, partially offset by a shift inthe mix of products sold, decreased pro forma gross profit margin by 0.8%. 

On July 1, 2005, we closed our New Iberia,Louisiana, manufacturing facility as part of our ongoing efforts to improve ourproduction capacity utilization, productivity, and operating efficiencies andlower our overall costs. We recorded in cost of goods sold a restructuringcharge associated with the plant closing relating to employee compensation andother costs of approximately $0.4 million and a non-cash write-down ofinventory, land, building and equipment of approximately $2.8 million. Inthe thirteen-weeks ended July 2, 2005, we expensed $3.1 million ofthis charge. We had previously expensed $0.1 million of the $0.4 millionemployee compensation and other costs during the thirteen weeks ended April 2,2005. No restructuring charges were recorded or expensed during the thirteenweeks ended July 3, 2004.

*Sales, Marketing and DistributionExpenses.**  *Sales,marketing and distribution expenses decreased $0.6 million or 4.9% to $10.8million for the thirteen-week period ended July 2, 2005 from $11.4 millionfor the thirteen-week period ended July 3, 2004. These expenses as apercentage of net sales decreased to 11.5% for the thirteen-week period ended July 2,2005 from 12.1% for the thirteen-week period ended July 3, 2004. Thisreduction is primarily due to a reduction in media advertising of $1.1 millionoffset by an increase in brokerage and salesmen commissions of $0.4 million. Allother expenses increased $0.1 million.

*General and Administrative Expenses.**  *General and administrative expenses andmanagement fees increased $1.1 million or 107.2% to $2.0 million for thethirteen-week period ended July 2, 2005 from $0.9 million in thethirteen-week period ended July 3, 2004. The increase was primarily due toincremental costs associated with Sarbanes-Oxley of $0.3 million and additionalpublic company costs of $0.3.

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*Operating Income.  *Asa result of the foregoing, operating income decreased $6.2 million or 36.0% to$11.0 million for the thirteen-week period ended July 2, 2005 from $17.2million for the thirteen-week period ended July 3, 2004. Operating incomeexpressed as a percentage of net sales decreased to 11.7% in the thirteen-weekperiod ended July 2, 2005 from 18.3% in the thirteen-week period ended July 3,2004.

*Interest Expense.  *Netinterest expense increased $2.6 million or 33.8% to $10.4 million for thethirteen-week period ended July 2, 2005 from $7.8 million in thethirteen-week period ended July 3, 2004. The average debt outstandingincreased approximately $37.8 million in the thirteen-week period ended July 2,2005 as compared to the thirteen-week period ended July 3, 2004. Inaddition, the effective interest rate for our outstanding debt during thethirteen-week period ended July 2, 2005 under our post-initial publicoffering capital structure was higher than the effective interest rate for ouroutstanding debt during the thirteen-week period ended July 3, 2004. See “—Liquidityand Capital Resources—Debt” below.

*Income Tax Expense.  *Incometax expense decreased $3.4 million or 93.8% to $0.2 million for thethirteen-week period ended July 2, 2005 from $3.6 million in thethirteen-week period ended July 3, 2004. Our effective tax rate was 39.9%for the thirteen-week period ended July 2, 2005 and 38.6% for thethirteen-week period ended July 3, 2004.

*PreferredStock Dividends Accumulated and Related Charges*.   Preferredstock dividends accumulated and related charges for the thirteen-week periodended July 3, 2004 was $3.8 million. All of our then outstanding preferredstock was repurchased on October 14, 2004 with the proceeds from ourinitial public offering and the concurrent offerings. Accordingly, no preferredstock dividends were accumulated for the thirteen-week period ended July 2,2005.

***Twenty-six week period ended July 2, 2005compared to twenty-six week period ended July 3, 2004.***

*Net Sales.  *Netsales decreased $0.2 million or 0.1% to $184.2 million for the twenty-six weekperiod ended July 2, 2005 from $184.4 million for the twenty-six weekperiod ended July 3, 2004. Sales decreased $2.5 million relating to unitvolume, which was offset by price increases and product mix improvements of$2.3 million. Sales of our lines of *MapleGrove Farms*, *Polaner*and *Las Palmas* products increased$2.4 million, $1.4 million, and $1.0 million or 10.5%, 8.2%, and 10.7%,respectively. These increases were offset by a reduction of sales in *Ortega*, *Underwood,B&M Baked Beans, Emeril, Sason, Vermont Maid*, and*B&G*pickles and peppers products**inthe amounts of $1.4 million, $1.2 million, $0.5 million, $0.5 million, $0.5million, $0.4 million and $0.3 million or 3.4%, 11.0%, 3.8%, 3.5%, 21.9%, 31.0%and 1.2%, respectively. All other brands decreased, in the aggregate by, $0.2million or 1.2%.

*Gross Profit.  *Excluding the restructuring charge describedbelow, pro forma gross profit decreased $4.8 million or 8.1% to $53.7million for the twenty-six week period ended July 2, 2005 from $58.5million for the twenty-six week period ended July 3, 2004. Pro forma grossprofit expressed as a percentage of net sales decreased 2.6% to 29.1% in thetwenty-six week period ended July 2, 2005 from 31.7% in the twenty-sixweek period ended July 3, 2004. The shift in the mix of products soldduring the twenty-six week period July 2, 2005 accounted for a decline in proforma gross profit margin of 0.4% for such period, higher transportation costs,primarily relating to fuel surcharges, accounted for a decline in pro forma grossprofit margin of 0.3%, higher costs of meat accounted for a 0.5% decline in proforma gross profit margin and higher costs of beans, maple syrup and cansaccounted for an additional 1.4% decline in pro forma gross profit margin. 

On July 1, 2005, we closed our New Iberia,Louisiana, manufacturing facility as part of our ongoing efforts to improve ourproduction capacity utilization, productivity, and operating efficiencies andlower our overall costs. We recorded in cost of goods sold a restructuring chargeassociated with the plant closing relating to employee compensation and othercosts of approximately $0.4 million and a non-cash write-down ofinventory, land, building and equipment of approximately $2.8 million. Inthe twenty-six weeks 

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ended July 2, 2005,we expensed all $3.2 million of this charge. No restructuring charges wererecorded or expensed during the twenty-six weeks ended July 3, 2004.

*Sales, Marketing and DistributionExpenses.  *Sales, marketing and distribution expensesdecreased $1.3 million or 6.1% to $20.9 million for the twenty-six week periodended July 2, 2005 from $22.2 million for the twenty-six week period endedJuly 3, 2004. These expenses as a percentage of net sales decreased to11.3% for the twenty-six week period ended July 2, 2005 from 12.0% for thetwenty-six week period ended July 3, 2004. This reduction is primarily dueto a reduction in media advertising of $1.2 million and brokerage and salesmencommissions of $0.2 million. All other expenses increased $0.1 million.

*General and Administrative Expenses.  *Generaland administrative expenses and management fees increased $0.7 million or 27.7%to $3.3 million for the twenty-six week period ended July 2, 2005 from$2.6 million in the twenty-six week period ended July 3, 2004. Theincrease was primarily due to incremental costs associated with Sarbanes-Oxleyof $0.3 million and additional public company costs of $0.6 million, which werepartially offset by the elimination of the management fees previously paid toBRS.

*Operating Income.  *Asa result of the foregoing, operating income decreased $7.3 million or 21.9% to$26.3 million for the twenty-six week period ended July 2, 2005 from $33.6million for the twenty-six week period ended July 3, 2004. Operatingincome expressed as a percentage of net sales decreased to 14.3% in thetwenty-six week period ended July 2, 2005 from 18.2% in the twenty-six weekperiod ended July 3, 2004.

*Interest Expense.  *Netinterest expense increased $5.3 million or 33.7% to $20.9 million for thetwenty-six week period ended July 2, 2005 from $15.6 million in thetwenty-six week period ended July 3, 2004. The average debt outstandingincreased approximately $37.3 million in the twenty-six week period ended July 2,2005 as compared to the twenty-six week period ended July 3, 2004. Inaddition, the effective interest rate for our outstanding debt during thetwenty-six week period ended July 2, 2005 under our post-initial publicoffering capital structure was higher than the effective interest rate for ouroutstanding debt during the twenty-six week period ended July 3, 2004. See“—Liquidity and Capital Resources—Debt” below.

*Income Tax Expense.  *Incometax expense decreased $4.9 million or 69.6% to $2.1 million for the twenty-sixweek period ended July 2, 2005 from $7.0 million in the twenty-six weekperiod ended July 3, 2004. Our effective tax rate was 39.1% for thetwenty-six week period ended July 2, 2005 and 38.6% for the twenty-sixweek period ended July 3, 2004.

*PreferredStock Dividends Accumulated and Related Charges*.   Preferredstock dividends accumulated and related charges for the twenty-six week periodended July 3, 2004 was $7.7 million. All of our then outstanding preferredstock was repurchased on October 14, 2004 with the proceeds from ourinitial public offering and the concurrent offerings. Accordingly, no preferredstock dividends were accumulated for the twenty-six week period ended July 2,2005.

**Liquidity and Capital Resources**

Our primary liquidity requirements include debtservice, capital expenditures and working capital needs. See also, “DividendPolicy” and “Commitments and Contractual Obligations” below. We fund ourliquidity needs primarily through cash generated from operations and to theextent necessary, through borrowings under our revolving credit facility.

*Cash Flows*.   Cashprovided by operating activities decreased $4.6 million to $5.3 million for thetwenty-six week period ended July 2, 2005 from $9.9 million in thetwenty-six week period ended July 3, 2004. The decrease was due to anincrease in inventory, a decrease in accounts payable, a decrease in net incomeoffset by an increase in accrued expenses and a decrease in accounts receivable.Working capital at 

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July 2, 2005 was$102.8 million, an increase of $1.0 million over working capital at January 1,2005 of $101.8 million.

Net cash used in investing activities for thetwenty-six week period ended July 2, 2005 was $3.4 million as compared tonet cash used in investing activities of $3.4 million for the twenty-six weekperiod ended July 3, 2004. Capital expenditures during the twenty-six weekperiod ended July 2, 2005 of $3.4 million included purchases ofmanufacturing and computer equipment and were consistent with the $3.4 millionin similar capital expenditures for the twenty-six week period ended July 3,2004.

Net cash used in financing activities for thetwenty-six week period ended July 2, 2005 was $8.0 million as compared to$0.8 million for the twenty-six week period ended July 3, 2004. In December 2004,our board of directors declared $3.7 million, or $0.185 per share, in dividendspayable to holders of our Class A common stock, and in April 2005 ourboard of directors declared $4.2 million, or $0.212, in dividends payable toholders of our Class A common stock, which dividends were paid on January 31,2005 and May 2, 2005, respectively. The net cash used in financingactivities for the twenty-six week period ended July 3, 2004, included ourrequired $0.8 million year-to-date payment under our then existing term loan.

We believe that based on anumber of factors, including our trademark and goodwill amortization for taxpurposes from our prior acquisitions, and the income tax effects of our initialpublic offering, the concurrent offerings and related transactions, includingour call premium on our outstanding senior subordinated notes, other write-offsof existing deferred financing costs and the compensation expense associatedwith our repurchase of certain management stock options, we realized asignificant reduction in cash taxes in 2004 and we expect to realizesignificant reductions in 2005 as compared to our tax expense for financialstatement purposes, and further, we will realize a benefit to our cash taxespayable from amortization of our trademarks and goodwill for the taxable years2005 through 2018.

***Non-GAAP Financial Measures***

Certain disclosures in this report include “non-GAAP(Generally Accepted Accounting Principles) financial measures.” A non-GAAPfinancial measure is defined as a numerical measure of our financialperformance that excludes or includes amounts so as to be different than themost directly comparable measure calculated and presented in accordance withGAAP in our consolidated balance sheets and related consolidated statements ofoperations, changes in stockholders’ equity and comprehensive income (loss),and cash flows. We present EBITDA (net income before net interest expense,income taxes, depreciation and amortization) and adjusted EBITDA (EBITDA asadjusted for transaction related compensation expenses incurred in fiscal 2004in connection with our initial public offering, the concurrent offerings andthe related transactions and restructuring charges incurred in fiscal 2005)because we believe they are useful indicators of our historical debt capacityand ability to service debt. We also present this discussion of EBITDA andadjusted EBITDA because covenants in the indenture governing our senior notes,our revolving credit facility and the indenture governing our seniorsubordinated notes contain ratios based on these measures.

A reconciliation of EBITDAand adjusted EBITDA with the most directly comparable GAAP measure is includedbelow for the thirteen and twenty-six weeks ended July 2, 2005 and July 3,2004 along with the components of EBITDA and adjusted EBITDA.

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*Reconciliationof EBITDA and Adjusted EBITDA to Net Cash Provided by Operating Activities(dollars in thousands).*
| ** **                                            | ** ** | **Thirteen Weeks Ended** | ** ** | **Twenty-six Weeks Ended** | ** ** |
|-------------------------------------------------------|------------|------------------------------------|------------|--------------------------------------|------------|
| ** **                                            | ** ** | **July 2,  2005**             | ** ** | **July 3,  2004**               | ** ** | **July 2,  2005** | ** ** | **July 3,  2004** | ** ** |
| Net income                                            |       | $                                  | 336        |                                 | $          | 5,751 |   | $ | 3,294 |   | $ | 11,065 |   |
| Depreciation                                          |       | 1,693                              |       | 1,632                                |       | 3,360 |   | 3,237 |   |
| Income tax  expense                                   |       | 223                                |       | 3,614                                |       | 2,115 |   | 6,956 |   |
| Interest expense,  net                                |       | 10,428                             |       | 7,794                                |       | 20,862 |   | 15,606 |   |
| EBITDA(1)                                             |       | 12,680                             |       | 18,791                               |       | 29,631 |   | 36,864 |   |
| Adjustments to  EBITDA(1)(2)                          |       | 3,128                              |       | —                               |       | 3,244 |   | — |   |
| Adjusted EBITDA(1)                                    |       | 15,808                             |       | 18,791                               |       | 32,875 |   | 36,864 |   |
| Income tax  expense                                   |       | (223                               | )          | (3,614                               | )          | (2,115 | ) | (6,956 | ) |
| Interest expense,  net                                |       | (10,428                            | )          | (7,794                               | )          | (20,862 | ) | (15,606 | ) |
| Deferred income  taxes                                |       | 485                                |       | 1,663                                |       | 2,284 |   | 3,138 |   |
| Amortization of  deferred financing and bond discount |       | 698                                |       | 642                                  |       | 1,396 |   | 1,284 |   |
| Changes in assets  and liabilities                    |       | (507                               | )          | 3,067                                |       | (7,891 | ) | (8,792 | ) |
| Restructuring  charge, cash portion                   |       | (315                               | )          | —                               |       | (431 | ) | — |   |
| Net cash provided by  operating activities            |       | $                                  | 5,518      |                                 | $          | 12,755 |   | $ | 5,256 |   | $ | 9,932 |   |

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(1)          Wedefine EBITDA as net income before net interest expense, income taxes,depreciation and amortization. We define adjusted EBITDA as EBITDA as adjustedfor the transaction related compensation expenses incurred in fiscal 2004connection with our initial public offering, the concurrent offerings andrelated transactions and restructuring charges incurred in fiscal 2005 . Webelieve that the most directly comparable GAAP financial measure to EBITDA andadjusted EBITDA is net cash provided by operating activities. We present EBITDAand adjusted EBITDA because we believe they are useful indicators of ourhistorical debt capacity and ability to service debt. We also present thisdiscussion of EBITDA and adjusted EBITDA because covenants in our revolvingcredit facility and the indentures governing the senior notes and the seniorsubordinated notes contain ratios based on these measures. EBITDA and adjustedEBITDA are not substitutes for operating income or net income, as determined inaccordance with generally accepted accounting principles. EBITDA and adjustedEBITDA are not complete net cash flow measures because EBITDA and adjustedEBITDA are measures of liquidity that do 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, if any, and in the case of adjusted EBITDA, cash used topay transaction related bonuses and repurchase of employee stock options andthe cost to restructure our operations. Rather, EBITDA and adjusted EBITDA aretwo potential indicators of an entity’s ability to fund these cash requirements.EBITDA and adjusted EBITDA also are not complete measures of an entity’sprofitability because they do not include costs and expenses for depreciationand amortization, interest and related expenses and income taxes and in thecase of adjusted EBITDA, the cost of transaction related bonuses and repurchaseof employee stock options and the cost to restructure our operations. EBITDAand adjusted EBITDA, as we define them, may differ from similarly namedmeasures used by other entities.

(2)          OnJuly 1, 2005, we closed our New Iberia, Louisiana, manufacturing facilityas part of our ongoing efforts to improve our production capacity utilization,productivity, and operating efficiencies and lower our overall costs. In thetwenty-six weeks ended July 2, 2005, we recorded a charge of $3.2 million,of which $3.1 million was recorded during the thirteen weeks ended July 2,2005 and $0.1 million was recorded during the thirteen weeks ended April 2,2005. The charge associated with the plant closing included a cash charge foremployee compensation and other costs of approximately 

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$0.4 million and anon-cash write-down of inventory, land, building and equipment of approximately$2.8 million.

***Dividend Policy.***

Prior to the completion of our initial publicoffering, our board of directors adopted a dividend policy that reflects abasic judgment that our stockholders would be better served if we distributedour cash available to pay dividends to them instead of retaining it in ourbusiness. Under this policy, cash generated by our company in excess ofoperating needs, interest and principal payments on indebtedness, capital expendituressufficient to maintain our properties and other assets and $6.0 million ofdividend restricted cash (that can be used for the payment of dividends on Class Acommon stock or for any other purpose other than the payment of dividends onthe Class B common stock) would in general be distributed as regularquarterly cash dividends (up to the intended dividend rate as determined by ourboard of directors) to the holders of our Class A common stock and asregular annual cash dividends (up to the dividend rate permitted under our debtagreements and our organizational documents) to the holders of our Class Bcommon stock and not be retained by us as cash on our consolidated balancesheet.

Dividend payments are not mandatory or guaranteed andholders of our common stock do not have any legal right to receive, or requireus to pay, dividends. Furthermore, our board of directors may, in its solediscretion, amend or repeal this dividend policy with respect to the Class Aand Class B common stock at any time. Our board of directors may decreasethe level of dividends for the Class A and Class B common stock belowthe intended dividend rates or discontinue entirely the payment of dividends. Futuredividends with respect to shares of our capital stock, if any, depend on, amongother things, our results of operations, cash requirements, financialcondition, contractual restrictions, business opportunities, provisions ofapplicable law and other factors that our board of directors may deem relevant.The indenture governing our senior subordinated notes, the terms of ourrevolving credit facility and the indenture governing the senior notes containsignificant restrictions on our ability to make dividend payments.   In addition, certain provisions of theDelaware General Corporation Law may limit our ability to pay dividends.

As a result of our dividend policy, we may not retaina sufficient amount of cash to finance growth opportunities or unanticipatedcapital expenditure needs or to fund our operations in the event of asignificant 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 forthese purposes, our financial condition and our business will suffer.

For the twenty-six weeks ended July 2, 2005, wehad cash flows provided by operations of $5.3 million. If our cash flows fromoperations for future periods were to fall below our minimum expectations (orif our assumptions as to capital expenditures or interest expense were too lowor our assumptions as to the sufficiency of our revolving credit facility tofinance our working capital needs were to prove incorrect), we would need eitherto reduce or eliminate dividends or, to the extent permitted under theindenture governing our senior notes, the indenture governing our seniorsubordinated notes and the terms of our revolving credit facility, fund aportion of our dividends with borrowings or from other sources. If we were touse working capital or permanent borrowings to fund dividends, we would haveless cash and/or borrowing capacity available for future dividends and otherpurposes, which could negatively impact our financial condition, our results ofoperations, our liquidity and our ability to maintain or expand our business.

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Thetable below illustrates for the fiscal year ended January 1, 2005 and thelatest twelve months ended July 2, 2005, respectively, the amount of cashthat we had available for distribution to our stockholders.
| ** **                                                           | ** ** | **Fiscal Year  Ended** | ** ** | **Less:  Twenty-six  Weeks Ended** | ** ** | **Plus:  Twenty-six  Weeks Ended** | ** ** | **Latest Twelve  Months  Ended** | ** ** |
|----------------------------------------------------------------------|------------|-----------------------------|------------|-----------------------------------------|------------|-----------------------------------------|------------|---------------------------------------|------------|
| **Cash Available to Pay Dividends**              | ** ** | ** **                  | ** ** | **January 1, 2005**           | ** ** | **July 3, 2004**              | ** ** | **July 2, 2005**            | ** ** | **July 2, 2005**(a) | ** ** |
| ** **                                                           | ** ** | **(unaudited)**             | ** ** | **(unaudited)**                         | ** ** | **(unaudited)**                         | ** ** | **(unaudited)**                       | ** ** |
| ** **                                                           | ** ** | **(Dollars in thousands)**  | ** ** |
| Net cash provided by  operating activities(b)                        |       |                        | $          | 19,302                                  |       |                                    |       | $                                     | 9,932      |   |   |   | $ | 5,256 |   |   |   | $ | 14,626 |   |   |
| Interest expense, net(c)                                             |       |                        | 48,148     |                                    |       |                                    | 15,606     |                                  |       |   | 20,862 |   |   |   | 53,404 |   |   |
| Income taxes                                                         |       |                        | 2,126      |                                    |       |                                    | 6,956      |                                  |       |   | 2,115 |   |   |   | (2,715 | ) |   |
| Amortization of deferred  debt issuance costs and bond discount |       |                        | (2,532     | )                                       |       |                                    | (1,284     | )                                     |       |   | (1,396 | ) |   |   | (2,644 | ) |   |
| Costs relating to the  early extinguishment of debt(c)               |       |                        | (13,906    | )                                       |       |                                    | —     |                                  |       |   | — |   |   |   | (13,906 | ) |   |
| Deferred income taxes                                                |       |                        | (7,462     | )                                       |       |                                    | (3,138     | )                                     |       |   | (2,284 | ) |   |   | (6,608 | ) |   |
| Restructuring charge, non-cash  portion(d)                           |       |                        | —     |                                    |       |                                    | —     |                                  |       |   | (2,813 | ) |   |   | (2,813 | ) |   |
| Changes in assets and  liabilities(b)                                |       |                        | 14,616     |                                    |       |                                    | 8,792      |                                  |       |   | 7,891 |   |   |   | 13,715 |   |   |
| EBITDA                                                               |       |                        | 60,292     |                                    |       |                                    | 36,864     |                                  |       |   | 29,631 |   |   |   | 53,059 |   |   |
| Restructuring charge(d)                                              |       |                        | —     |                                    |       |                                    | —     |                                  |       |   | 3,244 |   |   |   | 3,244 |   |   |
| Transaction related  compensation expenses(e)                        |       |                        | 9,859      |                                    |       |                                    | —     |                                  |       |   | — |   |   |   | 9,859 |   |   |
| Adjusted EBITDA                                                      |       |                        | 70,151     |                                    |       |                                    | 36,864     |                                  |       |   | 32,875 |   |   |   | 66,162 |   |   |
| Reduction for cash  income tax expense                               |       |                        | —     |                                    |       |                                    | —     |                                  |       |   | (99 | ) |   |   | (99 | ) |   |
| Pro forma cash interest  expense(f)                                  |       |                        | (39,096    | )                                       |       |                                    | (19,548    | )                                     |       |   | (19,466 | ) |   |   | (39,014 | ) |   |
| Capital expenditures                                                 |       |                        | (6,598     | )                                       |       |                                    | (3,394     | )                                     |       |   | (3,371 | ) |   |   | (6,575 | ) |   |
| Restructuring charge,  cash portion(d)                               |       |                        | —     |                                    |       |                                    | —     |                                  |       |   | (431 | ) |   |   | (431 | ) |   |
| Cash available to pay dividends                                      |       |                        | $          | 24,457                                  |       |                                    |       | $                                     | 13,922     |   |   |   | $ | 9,508 |   |   |   | $ | 20,043 |   |   |
|                                                                      |            |                             |            |                                         |            |                                         |            |                                       |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

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(a)           Ourunaudited consolidated statements of operations and cash flow data for thelatest twelve months ended July 2, 2005 was derived from our auditedconsolidated statements of operations and cash flow data for the fiscal yearended January 1, 2005 and (i) subtracting from it our unauditedconsolidated statements of operations and cash flow data for the twenty-sixweeks ended July 3, 2004 and (ii) adding to it our unauditedconsolidated statements of operations and cash flow data for the twenty-sixweeks ended July 2, 2005.

(b)   Dividendsdeclared and unpaid during the fiscal year ended January 1, 2005 of $3.7 million,which had previously been reported as part of “net cash provided by operatingactivities” in our consolidated statements of cash flows in our Annual Reporton Form 10-K filed with the SEC on March 2, 2005 has beenreclassified as a non-cash financing activity.

(c)           Netinterest expense for the fiscal year ended January 1, 2005 includes $13.9million of costs relating to the early extinguishment of debt incurred inconnection with our initial public offering, the concurrent offerings and therelated transactions. Included in these costs are: $8.4 million for thewrite-off of deferred financing costs, $4.9 million for bond tender costs and$0.6 million for the payment of bond discount.

(d)          On July 1, 2005, weclosed our New Iberia, Louisiana manufacturing facility as part of our ongoingefforts to improve our production capacity utilization, productivity, andoperating efficiencies and lower our overall costs. In the twenty-six weeksended July 2, 2005, we recorded a charge of $3.2 million. The chargeassociated with the plant closing included a cash charge for employeecompensation and other costs of approximately $0.4 million and a non-cashwrite-down of inventory, land, building and equipment of approximately $2.8million.

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(e)           Transaction relatedcompensation expenses, which were incurred in connection with our initialpublic offering, the concurrent offerings and the related transactions,include: $6.0 million for transaction bonuses and $3.9 million for ourrepurchase of employee stock options.

(f)             The fiscal year endedJanuary 1, 2005 pro forma cash interest expense under our post-initial publicoffering capital structure assuming the initial public offering, concurrentofferings and related transactions occurred on January 4, 2004. Accordingly,the cash interest expense includes, respectively, 12.0% interest on $165.8million of senior subordinated notes and 8.0% interest on $240.0 million ofsenior notes. Pro forma cash interest expense for the twenty-six weeks ended July 3,2004 is an amount equal to one quarter of the pro forma cash interest expensefor the fiscal year ended January 1, 2005. Pro forma cash interest expensefor the twenty-six weeks ended July 2, 2005 is our actual interestexpense, for such period less the non-cash amortization of deferred debtissuance costs, which is included in net interest expense for such period.

There can be no assurancethat we will continue to pay dividends at historical levels, or at all. Dividendpayments are not mandatory or guaranteed, are within the absolute discretion ofour board of directors and will be dependent upon many factors and future developmentsthat could differ materially from our current expectations. Over time, ourEBITDA, adjusted EBITDA and capital expenditure, working capital and other cashneeds will be subject to uncertainties, which could impact the level of anydividends, if any, we pay in the future.

***Acquisitions.***

Our liquidity and capitalresources have been significantly impacted by acquisitions and may be impactedin the foreseeable future by additional acquisitions. We have historicallyfinanced acquisitions with borrowings and cash flows from operations. Ourinterest expense will increase with any additional indebtedness we may incur tofinance potential future acquisitions, if any. To the extent futureacquisitions, if any, are financed by additional indebtedness, the resultingincrease in debt and interest expense could have a negative impact onliquidity.

***Environmental Clean-Up Costs.***

We have not made anymaterial expenditures during the twenty-six week period ended July 2, 2005in order to comply with environmental laws or regulations. Based on ourexperience to date, we believe that the future cost of compliance with existingenvironmental laws and regulations (and liability for known environmentalconditions) will not have a material adverse effect on our consolidatedfinancial condition, results of operations or liquidity. However, we cannotpredict what environmental or health and safety legislation or regulations willbe enacted in the future or how existing or future laws or regulations will beenforced, administered or interpreted, nor can we predict the amount of futureexpenditures that may be required in order to comply with such environmental orhealth and safety laws or regulations or to respond to such environmentalclaims.

***Debt.***

*Prior Senior Secured Credit Facility*.   OnAugust 21, 2003, we entered into a newly amended and restated $200.0million senior secured credit facility, which was further amended and restatedas of September 9, 2003, comprised of a $50.0 million five-year revolvingcredit facility and a $150.0 million six-year term loan facility. Theproceeds of the term loan and of certain drawings under the revolving creditfacility were used (i) to fund our acquisition of certain assets of TheOrtega Brand of Business from Nestle Prepared Foods Company on August 21,2003, and to pay related transaction fees and expenses and (ii) to fullypay off our remaining obligations under term loan B of our then-existing termloan agreement dated as of March 15, 1999. In connection therewith, wecapitalized approximately $5.3 million of new 

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deferred debt issuancecosts related to the senior secured credit facility and, in accordance with theapplicable guidance of the FASB’s Emerging Issues Task Force, wrote off $1.8million of deferred financing costs related to our then-existing term loan B. Underthe senior secured credit facility, interest was determined based on severalalternative rates, including the base lending rate per annum plus an applicablemargin, or LIBOR plus an applicable margin. The senior secured credit facilitywas secured by substantially all of our assets.

On October 14, 2004, we used a portion of the netproceeds of our initial public offering, offering of senior subordinated notesseparate from the EISs and offering of senior notes and cash on hand to repayall outstanding borrowings under, and terminate our senior secured creditfacility. In connection with our termination of the senior secured creditfacility, we wrote-off all of our previously incurred deferred financing costs,which is included in interest expense in fiscal 2004.

*Senior Secured Credit Facility*.   Concurrentlywith our initial public offering and concurrent offerings, we entered into a$30.0 million senior secured revolving credit facility. Interest is determinedbased on several alternative rates as stipulated in the revolving creditfacility, including the base lending rate per annum plus an applicable margin,or LIBOR plus an applicable margin. The revolving credit facility is secured bysubstantially all of our assets except our real property. The revolving creditfacility provides for mandatory prepayment based on asset dispositions andcertain issuances of securities, as defined. The revolving credit facilitycontains covenants that restrict, among other things, our ability to incuradditional indebtedness, pay dividends and create certain liens. The revolvingcredit facility also contains certain financial maintenance covenants, which,among other things, specify maximum capital expenditure limits, a minimuminterest coverage ratio and a maximum senior and total leverage ratio, eachratio as defined. Proceeds of the revolving credit facility are restricted tofunding our working capital requirements, capital expenditures and acquisitionsof companies in the same line of business as our company, subject to specifiedcriteria. The revolving credit facility was undrawn on the date of consummationof our initial public offering and concurrent offerings and remained undrawn atJuly 2, 2005. The available borrowing capacity under our revolving creditfacility, net of outstanding letters of credit of $0.1 million, was $29.9 millionat July 2, 2005. The maximum letter of credit capacity under the revolvingcredit facility is $10 million, with a fee of 3% for all outstandingletters of credit.

*9**5**¤**8%Senior Subordinated Notes due 2007*.   Immediately prior to our initialpublic offering, we had outstanding $220.0 million of 95¤8% seniorsubordinated notes due August 1, 2007 with interest payable semiannuallyon February 1 and August 1 of each year, of which we issued $120.0million principal amount in August 1997 and $100.0 million principalamount in March 2002. The proceeds from the issuance of the seniorsubordinated notes issued in March 2002 were used to pay off, in itsentirety, the then outstanding balance under our then-existing term loan A, andto reduce the amount outstanding under the our then-existing term loan B,and pay related deferred debt issuance costs.

On October 14, 2004, $194.2 million aggregateprincipal amount of the 95¤8% seniorsubordinated notes was repaid with the proceeds of the initial public offering,the concurrent offerings and cash on hand at the redemption price of 102.043%(which redemption price included a consent payment of 0.03%. Also on such date,$27.0 million in proceeds from the initial public offering, the concurrentofferings and cash on hand were set aside to redeem the remaining $25.8 millionaggregate principal amount of the 95¤8%senior subordinated notes on November 15, 2004 at a redemption price equalto 101.604% of the remaining aggregate principal amount plus accrued interest. Thedifference between the carrying value, including remaining bond discount of$0.7 million, and the redemption value of approximately $4.9 million has beenrecognized as interest expense in our fiscal 2004 consolidated statement ofoperations. In connection with the extinguishment of these notes, we wrote-offall of our previously incurred deferred financing costs, which is also includedin interest expense in fiscal 2004.

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*12.0% Senior Subordinated Notes due 2016*.   Inconnection with our initial public offering, we issued on October 14,2004, $124.3 million aggregate principal amount of 12.0% senior subordinatednotes due 2016 in the form of EISs and an additional $22.8 million aggregateprincipal amount of 12.0% senior subordinated notes due 2016 (not in the formof EISs). In connection with the exercise of the underwriters’ over-allotmentoption, on October 22, 2004 we issued an additional $18.7 millionaggregate principal amount of 12.0% senior subordinated notes in the form ofEISs. Each EIS represents one share of our Class A common stock and $7.15principal amount of our 12.0% senior subordinated notes. As of July 2,2005, $165.8 million aggregate principal amount of senior subordinated noteswas outstanding.

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

Upon the occurrence of a change of control (as definedin the indenture), unless we have retired the senior subordinated notes orexercised our right to redeem all senior subordinated notes as described below,each holder of the senior subordinated notes has the right to require us torepurchase that holder’s senior subordinated notes at a price equal to 101.0%of the principal amount of the senior subordinated notes being repurchased,plus any accrued and unpaid interest to the date of repurchase. In order toexercise this right, a holder must separate the senior subordinated notes and Class Acommon stock represented by such holder’s EISs.

We may not redeem the notes prior to October 30,2009. However, we may, from time to time, seek to retire the seniorsubordinated notes through cash repurchases of EISs or separate seniorsubordinated notes and/or exchanges of EISs or separate senior subordinatednotes for equity securities, in open market purchases, privately negotiatedtransactions or otherwise. Such repurchases or exchanges, if any, will dependon prevailing market conditions, our liquidity requirements, contractualrestrictions and other factors. We expect that any repurchase of EISs or seniorsubordinated notes would be funded with our existing cash balances and cashfrom operations. The amounts involved may be material.

In addition, on and after October 30, 2009, wemay redeem for cash all or part of the senior subordinated notes upon not lessthan 30 or more than 60 days’ notice by mail to the owners of seniorsubordinated 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 any senior subordinated notes, the senior subordinated notesand Class A common stock represented by each EIS will be automaticallyseparated.

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

The senior subordinated notes are jointly andseverally and fully and unconditionally guaranteed by all of our existingdomestic subsidiaries and certain future domestic subsidiaries on an unsecuredand subordinated basis on the terms set forth in the indenture governing thesenior subordinated notes. The senior subordinated note guarantees aresubordinated in right of payment to all existing and future senior indebtednessof the guarantors, including the indebtedness under our revolving creditfacility and the senior notes. Our present foreign subsidiary, Les ProduitsAlimentaires Jacques et Fils Inc., is not a guarantor, and any future foreignor partially owned domestic subsidiaries will not be guarantors, of our seniorsubordinated notes.

The indenture governing the senior subordinated notescontains covenants with respect to us and restricts the incurrence ofadditional indebtedness and the issuance of capital stock; the payment ofdividends or distributions on, and redemption of, capital stock; a number ofother restricted payments, 

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including certaininvestments; specified creation of liens, sale-leaseback transactions and salesof assets; fundamental changes, including consolidation, mergers and transfersof all or substantially all of our assets; and specified transactions withaffiliates.

Although we believe that the senior subordinated notesshould be treated as debt for U.S. federal income tax purposes in accordancewith the opinion of our tax counsel issued on the date of our initial publicoffering, this conclusion cannot be assured. If all or a portion of the seniorsubordinated notes were treated as equity rather than debt for U.S. federalincome tax purposes, then a corresponding portion of the interest on the seniorsubordinated notes would not be deductible by us for U.S. federal income taxpurposes. In addition, we would be subject to liability for U.S. withholdingtaxes on interest payments to non-U.S. holders if such payments were determinedto be dividends. Our inability to deduct interest on the senior subordinatednotes could materially increase our taxable income and, thus, our U.S. federaland applicable state income tax liability. Our liability for income taxes (andwithholding taxes) if the senior subordinated notes were determined to beequity for income tax purposes would materially reduce our after-tax cash flowand would materially and adversely impact our ability to make interest and/ordividend payments and could impact our ability to continue as a going concern. See“Critical Accounting Policies; Use of Estimates—Income Tax Expense Estimatesand Policies” for further discussion of income tax matters relating to oursenior subordinated notes.

*8.0% Senior Notes due 2011*.   Concurrentlywith our initial public offering and offering of separate senior subordinatednotes, we issued $240.0 million aggregate principal amount of 8.0% senior notesdue 2011. Interest on the senior notes is payable on April 1 and October 1of each year, commencing on April 1, 2005. Our obligations under the seniornotes are fully and unconditionally guaranteed on a senior basis by all of ourexisting and future domestic subsidiaries. The senior notes and the subsidiaryguarantees are our and the guarantors’ general unsecured obligations and areeffectively junior in right of payment to all of our and the guarantors’secured indebtedness and to the indebtedness and other liabilities of ournon-guarantor subsidiaries; are pari passu in right of payment to all of ourand the guarantors’ existing and future unsecured senior debt; and are seniorin right of payment to all of our and the guarantors’ future subordinated debt,including the senior subordinated notes. Our present foreign subsidiary, LesProduits Alimentaires Jacques et Fils Inc., is not a guarantor, and any futureforeign or partially owned domestic subsidiaries will not be guarantors, of oursenior notes.

On or after October 1,2008, we may redeem some or all of the senior notes at a redemption price of104.0% beginning October 1, 2008 and thereafter at prices decliningannually to 100% on or after October 1, 2010. Prior to October 1,2007, we may redeem up to 35% of the aggregate principal amount of the seniornotes issued in the senior note offering with the net proceeds of one or moreequity offerings at the redemption price as described in the indenturegoverning the senior notes. If we or any of the guarantors sell certain assetsor experience specific kinds of changes in control, we must offer to purchasethe senior notes at the prices as described in the indenture governing thesenior notes plus accrued and unpaid interest to the date of redemption. Theindenture governing the senior notes limits our ability and the ability of theguarantors to incur additional indebtedness and issue preferred stock; makerestricted payments, including dividend payments on our common stock; allowrestrictions on the ability of certain subsidiaries to make distributions; sellall or substantially all of our assets or consolidate or merge with or intoother companies; enter into certain transactions with affiliates; or createliens and enter into sale and leaseback transactions. Each of the covenants issubject to a number of important exceptions and qualifications.

***Future Capital Needs***

We are highly leveraged. On July 2, 2005, ourtotal long-term debt and stockholders’ equity was $405.8 million and $87.0million, respectively.

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Our ability to generatesufficient cash to fund our operations depends generally on our results ofoperations and the availability of financing. Our management believes that thecash on our consolidated balance sheet and our cash flow from operations inconjunction with the available borrowing capacity under our revolving creditfacility, net of outstanding letters of credit, of approximately $29.9 millionat July 2, 2005, will be sufficient for the foreseeable future to fundoperations, meet debt service requirements, fund capital expenditures, makefuture acquisitions within our line of business, if any, and pay ouranticipated dividends. We expect to make capital expenditures of between $6.5million and $7.0 million for fiscal 2005.

***Seasonality***

Sales of a number of our products tend to be seasonal.In the aggregate, however, our sales are not heavily weighted to any particularquarter due to the diversity of our product and brand portfolio. Sales duringthe first quarter of the fiscal year are generally below those of the followingthree quarters.

We purchase most of theproduce used to make our shelf-stable pickles, relishes, peppers and other relatedspecialty items during the months of July through October, and we purchaseall of our maple syrup requirements during the months of April throughJuly. Consequently, our liquidity needs are greatest during these periods.

***Recent Accounting Pronouncements***

In response to the enactment of the American JobCreation Act of 2004 (the “Jobs Act”) on October 22, 2004, the FASB issuedFASB Staff Position (FSP) No. 109-1, “*Applicationof FASB Statement No. 109, Accounting for Income Taxes, for the TaxDeduction Provided to U.S. Based Manufacturers” (FSP 109-1), and FSPNo.109-2, “Accounting and Disclosure Guidance for the Foreign EarningsRepatriation Provisions within the American Jobs Creation Act of 2004”*(FSP 109-2).

FSP No. 109-1 clarifies how to apply SFAS No. 109to the new law’s tax deduction for income attributable to “domestic productionactivities.” The fully phased-in tax deduction is up to nine percent of thelesser of taxable income or “qualified production activities income,” asdefined by the Jobs Act. The staff position requires that the deduction beaccounted for as a special deduction in the period earned, not as a tax-ratereduction. As a result, we will recognize a reduction in our income tax expensefor the domestic production activities in the quarterly period(s) in whichwe are eligible for the deduction.

In November 2004, the FASB issued SFAS No. 151,*“Inventory Costs—An Amendment of ARB No. 43,Chapter 4”* (SFAS No. 151). SFAS No. 151 amends theguidance in ARB No. 43, Chapter 4, “Inventory Pricing,” to clarify theaccounting for abnormal amounts of idle facility expense, freight, handlingcosts, and wasted material (spoilage). Among other provisions, the new rule requiresthat items such as idle facility expense, excessive spoilage, double freight,and rehandling costs be recognized as current-period charges regardless ofwhether they meet the criterion of “so abnormal” as stated in ARB No. 43. Additionally,SFAS No. 151 requires that the allocation of fixed production overheads tothe costs of conversion be based on the normal capacity of the productionfacilities. SFAS No. 151 is effective for fiscal years beginning after June 15,2005 and is required to be adopted by us in the first quarter of fiscal 2006,beginning on January 1, 2006. We are currently evaluating the effect thatthe adoption of SFAS No. 151 will have on our consolidated results ofoperations and financial condition but do not expect SFAS No. 151 to havea material impact.

In December 2004, theFASB issued SFAS No. 123 (revised 2004), “Share-Based Payment” (SFAS No. 123R),which replaces SFAS No. 123 and supercedes APB Opinion No. 25. SFAS No. 123Raddresses the accounting for transactions in which an enterprise receivesemployee services in exchange for (a) equity instruments of the enterpriseor (b) liabilities that are based on the fair value of the enterprise’sequity instruments or that may be settled by the issuance of such equityinstruments. SFAS No. 123R 

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requiresall share-based payments to employees, including grants of employee stockoptions and restrictive stock grants and units, to be recognized as acompensation cost based on their fair values. The pro forma disclosurespreviously permitted under SFAS No. 123 no longer will be an alternativeto financial statement recognition. Based on a recent announcement by theSecurities and Exchange Commission, we are required to adopt SFAS No. 123Rno later than January 1, 2006. Under SFAS No. 123R, we must determinethe appropriate fair value model to be used for valuing share-based payments,the amortization method for compensation cost and the transition method to beused at the date of adoption. The transition methods include prospective andretroactive adoption options. Under the retroactive option, prior periods maybe restated either as of the beginning of the year of adoption or for allperiods presented. The prospective method requires that compensation expense berecorded for all unvested stock options and restricted stock at the beginningof the first quarter of adoption of SFAS No. 123R, while the retroactivemethods would record compensation expense for all unvested stock options andrestricted stock beginning with the first period restated. We are evaluatingthe requirements of SFAS No. 123R and expect that the adoption of SFAS No. 123Rwill not have a material impact on our consolidated results of operations andearnings per share, since there are currently no share-based payments.

***Related-PartyTransactions***

Prior to the consummation of our initial publicoffering on October 14, 2004, we were party to a management agreement withBRS & Co., the manager of Bruckmann, Rosser, Sherrill & Co.,L.P. (BRS), pursuant to which BRS & Co. was paid an annual fee of$500,000 per year for certain management, business and organizational strategy,and merchant and investment banking services. BRS owned the majority of ourcapital stock prior to the consummation of our initial public offering. Themanagement agreement was terminated as of October 14, 2004.

We are also party to a transaction services agreementpursuant to which BRS & Co. will be paid a transaction fee formanagement, financial and other corporate advisory services rendered by BRS &Co. in connection with acquisitions by our company, which fee will not exceed1.0% of the total transaction value. No such fees were paid during thetwenty-six weeks ended July 2, 2005 and July 3, 2004.

In connection with our initial public offering and theconcurrent offerings, the transaction services agreement was amended to providethat transaction fees will be payable as described above unless a majority ofour disinterested directors determines otherwise. BRS & Co. did notreceive any transaction fees in connection with the initial public offering andthe concurrent offerings.

We are a party to a leasefor our Roseland manufacturing and warehouse facility with 426 Eagle RockAvenue Associates, a real estate partnership of which Leonard S. Polaner, ourChairman, is the general partner. Total rent expense associated with this leasewas approximately $384,000 for the twenty-six week periods ended July 2,2005 and July 3, 2004. The lease expires in April 2009.

***Off-balance Sheet Arrangements***

As of July 2, 2005,we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) ofRegulation S-K.

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***Commitments and Contractual Obligations***

Ourcontractual obligations and commitments principally include obligationsassociated with our outstanding indebtedness and future minimum operating leaseobligations as set forth in the following table as of January 1, 2005.
| ** **                        | ** ** | **Payments Due by Period** | ** ** |
|-----------------------------------|------------|-------------------------------------------|------------|
| **Contractual Obligations:** | ** ** | ** **                                | ** ** | **Total** | ** ** | **2005** | ** ** | **2006** | ** ** | **2007** | ** ** | **2008** | ** ** | **2009 and  Thereafter** | ** ** |
| ** **                        | ** ** | **(Dollars in thousands)**      | ** ** |
| Long-term debt(1)                 |       | $                                         | 772,436    |   | $ | 39,096 |   | $ | 39,096 |   | $ | 39,096 |   | $ | 39,096 |   | $ | 616,052 |   |
| Operating leases                  |       | 9,567                                     |       | 3,804 |   | 2,203 |   | 1,506 |   | 1,432 |   | 622 |   |
| Other long-term  obligations(2)   |       | 1,860                                     |       | 1,860 |   | — |   | — |   | — |   | — |   |
| Total                             |       | $                                         | 783,863    |   | $ | 44,760 |   | $ | 41,299 |   | $ | 40,602 |   | $ | 40,528 |   | $ | 616,674 |   |
|                                   |            |                                           |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

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(1)          Includes interestobligations on our senior notes at an interest rate of 8.0% per annum throughmaturity on October 1, 2011 and on our senior subordinated notes of 12.0%per annum through maturity on October 30, 2016.

(2)          Represents expectedcontributions under our defined benefit pension plans (see below). The expectedcontributions beyond 2005 are not currently determinable.

During the twenty-six weekperiod ended July 2, 2005, there were no material changes outside theordinary course of business in the specified contractual obligations set forthin the table above, except that our expected contributions under our definedbenefit pension plans decreased from $1.9 million to $1.0 million.

***Forward-Looking Statements***

This reportincludes forward-looking statements, including without limitation thestatements under “Management’s Discussion and Analysis of Financial Conditionand Results of Operations.” The words “believes,” “anticipates,” “plans,” “expects,”“intends,” “estimates,” “projects” and similar expressions are intended toidentify 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 importantfactors that could cause actual results to differ materially from ourexpectations include the following:

·       oursubstantial leverage;

·       intensecompetition, changes in consumer preferences, demand for our products, theeffects of changing prices for our raw materials and local economic and marketconditions;

·       ourcontinued ability to promote brand equity successfully, to anticipate andrespond to new consumer trends, to develop new products and markets, to broadenbrand portfolios in order to compete effectively with lower priced products andin markets that are consolidating at the retail and manufacturing levels, toimprove productivity and to maintain access to credit markets;

·       therisks associated with the expansion of our business;

·       ourpossible inability to integrate any businesses we acquire;

·       ourborrowing costs and credit ratings, which may be influenced by the creditratings of our competitors;

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·       factors that affect thefood industry generally, including:

·        recallsif products become adulterated or misbranded, liability if product consumptioncauses injury, ingredient disclosure and labeling laws and regulations and thepossibility that consumers could lose confidence in the safety and quality ofcertain food products, as well as recent publicity concerning the healthimplications of obesity and trans fatty acids; and

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

·       therisk that our senior subordinated notes may be treated as equity for U.S.federal income tax purposes; and

·       otherfactors discussed elsewhere in this report, under the section captioned “CertainFactors That May Affect Future Results” and in our public filings with theSEC.

Developments in any ofthese areas could cause our results to differ materially from results that havebeen or may be projected by or on our behalf.

All forward-lookingstatements included in this report are based on information available to us onthe date of this report. We undertake no obligation to publicly update orrevise any forward-looking statement, whether as a result of new information,future events or otherwise. All subsequent written and oral forward-lookingstatements attributable to us or persons acting on our behalf are expresslyqualified in their entirety by the cautionary statements contained in thisreport.

We caution that theforegoing list of important factors is not exclusive. We urge investors not tounduly rely on forward-looking statements contained in this report.

**CertainFactors That May Affect Future Results**

Any investment in ourcompany will be subject to risks inherent to our business. Before making aninvestment decision, investors should carefully consider the risks describedbelow together with all of the other information included in this report. Therisks and uncertainties described below are not the only ones facing ourcompany. Additional risks and uncertainties that we are not aware of or focusedon or that we currently deem immaterial may also impair our business operations.This report is qualified in its entirety by these risk factors.

Any of the following riskscould materially and adversely affect our business, consolidated financialcondition, results of operations or liquidity. In that case, holders of oursecurities may lose all or part of their investment.

**RisksSpecific to Our Company**

***The packaged foodindustry is highly competitive.***

The packaged food industryis highly competitive. Numerous brands and products, including private labelproducts, compete for shelf space and sales, with competition based primarilyon product quality, convenience, price, trade promotion, consumer promotion,brand recognition and loyalty, customer service, effective advertising andpromotional activities and the ability to identify and satisfy emergingconsumer preferences. We compete with a significant number of companies ofvarying sizes, including divisions or subsidiaries of larger companies. Many ofthese competitors have multiple product lines, substantially greater financialand other resources available to them and may have lower fixed costs and/or aresubstantially less leveraged than our company. If we are unable to continue tocompete successfully with these companies or if competitive pressures or otherfactors cause our products to lose market share or result in significant priceerosion, our business, consolidated financial condition, results of operationsor liquidity could be materially and adversely affected.

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***We may be unable to maintain our profitability in theface of a consolidating retail environment.***

Our largest customer,Wal-Mart Stores, Inc., accounted for 9.1% of our net sales during thetwenty-six week period ended July 2, 2005 compared to 7.4% of our netsales during the twenty-six week period ended July 3, 2004. Our tenlargest customers together accounted for approximately 41.8% of our net salesduring the twenty-six week period ended July 2, 2005 compared to 39.6% ofour net sales during the twenty-six week period ended July 3, 2004. As theretail grocery trade continues to consolidate and our retail customers growlarger and become more sophisticated, our retail customers may demand lowerpricing and increased promotional programs. Further, these customers arereducing their inventories and increasing their emphasis on private labelproducts. If we fail to use our marketing expertise and unique products andcategory leadership positions to respond to these trends, or if we lower ourprices or increase promotional support of our products and are unable toincrease the volume of our products sold, our profitability may be adverselyaffected.

***If we are unable toretain our key management personnel, our growth and future success may beimpaired and our financial condition could suffer as a result.***

Our success depends to asignificant degree upon the continued contributions of senior management,certain of whom would be difficult to replace. In addition, we do not maintainkey-man life insurance on any of our executive officers. As a result, departureby our executive officers could have a material adverse effect on our business,consolidated financial condition, results of operations or liquidity.

***Most of our foodproduct categories are mature and certain categories have experienced decliningconsumption rates from time to time. We may be unable to offset any reductionin, or increase, net sales through an increase in trade spending for thesecategories or an increase in net sales in other categories.***

If consumption rates andsales in our mature food product categories continue to decline, our revenueand operating income may be adversely affected, and we may not be able tooffset this decrease in business with increased trade spending or an increasein sales or profitability of other products and product categories.

***We may have difficulties integrating any futureacquisitions or identifying new licensing arrangements.***

We may pursue additionalacquisitions of food product lines and businesses. However, we may be unable toidentify additional acquisitions or may be unable to integrate and manage anyacquired product lines or businesses successfully or achieve a substantialportion of any anticipated cost savings from these acquisitions or otheranticipated benefits in the timeframe we anticipate, or at all. In addition,any acquired product lines or businesses may require a greater amount of tradeand promotional spending than we anticipate. Historically, we have grown netsales for some but not all of the brands we have acquired. Acquisitions involvenumerous risks, including difficulties in the assimilation of the operations,technologies, services and products of the acquired companies, personnelturnover and the diversion of management’s attention from other businessconcerns. Any inability by us to integrate and manage any acquired productlines or businesses in a timely and efficient manner, any inability to achievea substantial portion of any anticipated cost savings or other anticipatedbenefits from these acquisitions in the time frame we anticipate or anyunanticipated required increases in trade or promotional spending couldadversely affect our business, consolidated financial condition, results ofoperations or liquidity. Moreover, future acquisitions by us could result inour incurring substantial additional indebtedness, being exposed to contingentliabilities or incurring the impairment of goodwill and other intangibleassets, all of which could adversely affect our financial condition and resultsof operations. In addition, we intend to pursue licensing arrangements withthird parties to expand our brand and product offerings. However, we may beunable to identify additional licensing arrangements or achieve benefitsanticipated from these arrangements.

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***We are vulnerableto fluctuations in the supply and price of raw materials and labor, manufacturingand other costs, and we may not be able to offset increasing costs byincreasing prices to our customers.***

We purchase agriculturalproducts, meat and poultry, other raw materials and packaging supplies fromgrowers, commodity processors, other food companies and packaging manufacturers.While all such materials are available from numerous independent suppliers, rawmaterials and packaging supplies are subject to fluctuations in priceattributable to a number of factors, including changes in crop size, federaland state agricultural programs, export demand, energy and fuel costs, weatherconditions during the growing and harvesting seasons, insects, plant diseasesand fungi. Although we enter into advance commodities purchase agreements fromtime to time, these contracts do not protect us from all increases in rawmaterial costs. In addition, the cost of labor, manufacturing, energy, fuel,packaging materials and pork and chicken and other costs related to theproduction and distribution of our food products have risen in recent years,and we believe that they may continue to rise in the foreseeable future. Overthe past several years, due primarily to an increase in price competition, weand other manufacturers throughout the packaged food industry have been unableto offset increased costs by raising prices to our customers. If the cost oflabor, raw materials or manufacturing or other costs of production anddistribution of our food products continue to increase, and we are unable tooffset these increases by raising prices or other measures, our profitabilityand financial condition could be negatively impacted.

***We rely onco-packers for a significant portion of our manufacturing needs, and theinability to enter into additional or future co-packing agreements may resultin our failure to meet customer demand.***

We rely upon co-packersfor a significant portion of our manufacturing needs. The success of ourbusiness depends, in part, on maintaining a strong sourcing and manufacturingplatform. We believe that there are a limited number of competent, high-qualityco-packers in the industry, and if we were required to obtain additional oralternative co-packing agreements or arrangements in the future, we can provideno assurance that we would be able to do so on satisfactory terms or in atimely manner. Our inability to enter into satisfactory co-packing agreementscould limit our ability to implement our business plan or meet customer demand.

***The loss of ourexclusive license with Emeril’s Food of Love Productions, L.L.C. or events orrumors relating to the Emeril’s brand could adversely impact our operatingresults.***

The value of our exclusivelicense agreement with Emeril’s Food of Love Productions, L.L.C. (EFLP) dependsin part on the reputation and integrity of Emeril Lagasse, under whose name the*Emeril’s*products are marketed.Mr. Lagasse is a widely recognized chef who currently enjoys celebritystatus for his ability to prepare gourmet foods. Consumer and customerrecognition of Mr. Lagasse and the *Emeril’s* brandand the association of this brand with safe and high quality food products forman integral part of our *Emeril’s*products.Should Mr. Lagasse’s popularity decline, or should our exclusive licensewith EFLP be lost or compromised for any reason, our operating results could beadversely impacted. In addition, EFLP may terminate the license agreement atany point if we fail to meet our obligations under the agreement.

***We rely on theperformance of major retailers, wholesalers, specialty distributors and massmerchants for the success of our business, and should they perform poorly orgive higher priority to other brands or products, our business could beadversely affected.***

We sell our productsprincipally to retail outlets and wholesale distributors including, traditionalsupermarkets, food service outlets, mass merchants, warehouse clubs, non-foodoutlets and specialty food distributors. The replacement by or poor performanceof our major wholesalers, retailers or chains or our inability to collectaccounts receivable from our customers could materially and adversely affectour results of operations and financial condition. In addition, our customersoffer branded and private label products 

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thatcompete directly with our products for retail shelf space and consumerpurchases. Accordingly, there is a risk that our customers may give higherpriority to the products of our competitors. In the future, our customers maynot continue to purchase our products or provide our products with adequatelevels of promotional support.

***We may be unable toanticipate changes in consumer preferences, which may result in decreaseddemand for our products.***

Our success depends inpart on our ability to anticipate and offer products that appeal to thechanging tastes, dietary habits and product packaging preferences of consumersin the market categories in which we compete. If we are not able to anticipate,identify or develop and market products that respond to these changes inconsumer preferences, demand for our products may decline and our operatingresults maybe adversely affected. In addition, we may incur significant costsrelated to developing and marketing new products or expanding our existingproduct lines in reaction to what we perceive to be increased consumerpreference or demand. Such development or marketing may not result in thevolume of sales or profitability anticipated.

***Severe weather conditions and natural disasters canaffect crop supplies and reduce our operating results.***

Severe weather conditionsand natural disasters, such as floods, droughts, frosts, earthquakes orpestilence, may affect the supply of the raw materials that we use for ourproducts. Our maple syrup products, for instance, are particularly susceptibleto severe freezing conditions in Quebec, Canada and Vermont during the seasonin which the syrup is produced. Competing manufacturers can be affecteddifferently by weather conditions and natural disasters depending on thelocation of their supplies. If our supplies of raw materials are reduced, wemay not be able to find enough supplemental supply sources on favorable terms,which could adversely affect our business and operating results.

***We are subject toenvironmental laws and regulations relating to hazardous materials, substancesand waste used in or resulting from our operations. Liabilities or claims withrespect to environmental matters could have a significant negative impact onour business.***

As with other companiesengaged in similar businesses, the nature of our operations expose us to therisk of liabilities and claims with respect to environmental matters, includingthose relating to the disposal and release of hazardous substances. Furthermore,our operations are governed by laws and regulations relating to workplacesafety and worker health which, among other things, regulate employee exposureto hazardous chemicals in the workplace. Any material costs incurred inconnection with such liabilities or claims could have a material adverse effecton our business, consolidated financial condition, results of operations orliquidity. Any environmental or health and safety legislation or regulationsenacted in the future, or any changes in how existing or future laws orregulations will be enforced, administered or interpreted may lead to anincrease in compliance costs or expose us to additional risk of liabilities andclaims, which could have a material adverse effect on our business,consolidated financial condition, results of operations or liquidity.

***Our operations aresubject to numerous laws and governmental regulations, exposing us to potentialclaims and compliance costs that could adversely affect our business.***

Our operations are subjectto extensive regulation by the United States Food and Drug Administration(FDA), the United States Department of Agriculture (USDA) and other national,state and local authorities. For example, we are subject to the Food, Drug andCosmetic Act and regulations promulgated thereunder by the FDA. Thiscomprehensive regulatory program governs, among other things, themanufacturing, composition and ingredients, packaging and safety of foods. Underthis program the FDA regulates manufacturing practices for foods through itscurrent “good manufacturing practices” 

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regulationsand specifies the recipes for certain foods. Furthermore, our processingfacilities and products are subject to periodic inspection by federal, stateand local authorities. Any changes in these laws and regulations could increasethe cost of developing and distributing our products and otherwise increase thecost of conducting our business, which would adversely affect our financialcondition. In addition, failure by us to comply with applicable laws andregulations, including future laws and regulations, could subject us to civil remedies,including fines, injunctions, recalls or seizures, as well as potentialcriminal sanctions, which could have a material adverse effect on our business,consolidated financial condition, results of operations or liquidity.

***We may be subjectto significant liability should the consumption of any of our products causeinjury, illness or death.***

The sale of food products for human consumptioninvolves the risk of injury to consumers. Such injuries may result fromtampering by unauthorized third parties or product contamination or spoilage,including the presence of foreign objects, substances, chemicals, other agentsor residues introduced during the growing, storage, handling or transportationphases of production. We have from time to time been involved in productliability lawsuits, none of which have been material to our business. While weare subject to governmental inspection and regulations and believe ourfacilities comply in all material respects with all applicable laws andregulations, if the consumption of any of our products causes, or is alleged tohave caused, a health-related illness in the future we may become subject toclaims or lawsuits relating to such matters. Even if a product liability claimis unsuccessful or is not fully pursued, the negative publicity surrounding anyassertion that our products caused injury, illness or death could adverselyaffect our reputation with existing and potential customers and our corporateand brand image. Moreover, claims or liabilities of this sort might not becovered by our insurance or by any rights of indemnity or contribution that wemay have against others. We maintain product liability insurance in an amountthat we believe to be adequate. However, we cannot be sure that we will notincur claims or liabilities for which we are not insured or that exceed theamount of our insurance coverage.

Furthermore, our productscould potentially suffer from product tampering, contamination or spoilage orbe mislabeled or otherwise damaged. Under certain circumstances, we may berequired to recall products, leading to a material adverse effect on ourbusiness. Even if a situation does not necessitate a recall, product liabilityclaims might be asserted against us. A product liability judgment against us ora product recall could have a material adverse effect on our business,consolidated financial condition, results of operations or liquidity.

***Consumer concernregarding the safety and quality of food products or health concerns couldadversely affect sales of certain of our products.***

If consumers in ourprincipal markets lose confidence in the safety and quality of certain foodproducts, our business could be adversely affected. The food industry is alsosubject to recent publicity concerning the health implications of obesity andtrans fatty acids. Developments in any of these areas could cause our resultsto differ materially from results that have been or may be projected. Forexample, negative publicity about genetically modified organisms, whether ornot valid, may discourage consumers from buying certain of our products orresult in production and delivery disruptions.

***Litigationregarding our trademarks and any other proprietary rights may have asignificant negative impact on our business.***

We own 105 trademarkswhich are registered in the United States, 23 trademarks which are registeredwith certain U.S. states and Puerto Rico, and 224 trademarks which areregistered in foreign countries. In addition, we have ten trademarkapplications pending in the United States and foreign countries. We considerour trademarks to be of significant importance in our business. If the actionswe take to establish 

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andprotect our trademarks and other proprietary rights are not adequate to preventimitation of our products by others or to prevent others from seeking to blocksales of our products as an alleged violation of their trademarks andproprietary rights, it may be necessary for us to initiate or enter intolitigation in the future to enforce our trademark right or to defend ourselvesagainst claimed infringement of the rights of others. Any legal proceedingscould result in an adverse determination that could have a material adverseeffect on our business, consolidated financial condition, results of operationsor liquidity.

***Our financialwell-being could be jeopardized by unforeseen changes in our employees’collective bargaining agreements or shifts in union policy.***

As of July 2, 2005,approximately 279 of our 716 employees were covered by collective bargainingagreements. Approximately 53 of our employees at our Roseland, New Jerseyfacility were represented by a collective bargaining agreement with theInternational Brotherhood of Teamsters, Chauffeurs, Warehousemen &Helpers of America (Local No. 863). Approximately 139 of our employees atour Portland and Biddeford, Maine facilities were represented by a collectivebargaining agreement with the Bakery, Confectionery, Tobacco Workers and GrainMillers International Union (AFL-CIO, Local No. 334). Approximately 87 ofour employees at our Stoughton, Wisconsin facility were represented by acollective bargaining agreement with the Drivers, Salesmen, Warehousemen, MilkProcessors, Cannery, Dairy Employees and Helpers Union (Local No. 695). Althoughwe consider our employee relations to be generally good, a prolonged work stoppage orstrike at any facility with union employees could have a material adverseeffect on our business, consolidated financial condition, results of operationsor liquidity. In addition, if upon the expiration of existing collectivebargaining agreements we are unable to reach new agreements without unionaction or any such new agreements are not on terms satisfactory to us, ourbusiness, consolidated financial condition, results of operations or liquiditycould be materially and adversely affected.

***Future labor disruptions in the food industry couldsignificantly impact our sales and profitability.***

The grocer’s strike inCalifornia, which began in October 2003 and ended March 2004, inresponse to proposed healthcare cuts by several large retail grocers, affectedover 70,000 grocery workers in California, and had a negative impact on our netsales. Should a similar strike or other labor disruption occur in California orelsewhere in the future, it may have a significant impact on our sales revenueand operating profits.

**Risks Relating to our Securities**

***Holders of ourEISs, Class A common stock and Class B common stock, may not receivethe level of dividends provided for in the dividend policy our board ofdirectors adopted in connection with our initial public offering, or anydividends at all.***

Dividend payments are notmandatory or guaranteed and holders of our common stock do not have any legalright to receive, or require us to pay, dividends. Furthermore, our board ofdirectors may, in its sole discretion, amend or repeal the dividend policy itadopted in connection with our initial public offering. Our board of directorsmay decrease the level of dividends provided for in this dividend policy or entirelydiscontinue the payment of dividends. Future dividends with respect to sharesof our capital stock, if any, depend on, among other things, our results ofoperations, cash requirements, financial condition, contractual restrictions,business opportunities, provisions of applicable law and other factors that ourboard of directors may deem relevant. The indenture governing our seniorsubordinated notes, the terms of our revolving credit facility and theindenture governing the senior notes contain significant restrictions on ourability to make dividend payments. In addition, certain provisions of theDelaware General Corporation Law may limit our ability to pay dividends.

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***Our dividend policymay negatively impact our ability to finance our working capital requirements,capital expenditures or operations.***

In connection with ourinitial public offering, our board of directors has adopted a dividend policyunder which cash generated by our business in excess of operating needs,interest and principal payments on indebtedness, capital expendituressufficient to maintain our properties and assets and $6.0 million of dividendrestricted cash (that can be used for the payment of dividends on the Class Acommon stock or for any other purpose other than the payment of dividends onthe Class B common stock), would in general be distributed as regularquarterly cash dividends (up to the intended dividend rates as determined byour board of directors) to the holders of our Class A common stock and asregular annual cash dividends (up to the dividend rate permitted under our debtagreements and our organizational documents) to the holders of our Class Bcommon stock and not be retained by us as cash on our consolidated balancesheet. As a result, we may not retain a sufficient amount of cash to financegrowth opportunities or unanticipated capital expenditure needs or to fund ouroperations in the event of a significant business downturn. We may have toforego growth opportunities or capital expenditures that would otherwise benecessary or desirable if we do not find alternative sources of financing. Ifwe do not have sufficient cash for these purposes, our financial condition andour business will suffer.

***If we haveinsufficient cash flow to cover the intended dividend payments under thedividend policy adopted by our board of directors we would need to reduce oreliminate dividends or, to the extent permitted under our debt agreements, funda portion of our dividends with additional borrowings.***

For the latest twelvemonths ended July 2, 2005, we had cash provided by operating activities of$14.6 million. If our cash flows from operations for future periods wereto fall below our minimum expectations (or if our assumptions as to capitalexpenditures or interest expense were too low or our assumptions as to thesufficiency of our revolving credit facility to finance our working capitalneeds were to prove incorrect), we would need either to reduce or eliminatedividends or, to the extent permitted under the indenture governing our seniornotes, the indenture governing our senior subordinated notes and the terms ofour revolving credit facility, fund a portion of our dividends with borrowings orfrom other sources. If we were to use working capital or permanent borrowingsto fund dividends, we would have less cash and/or borrowing capacity availablefor future dividends and other purposes, which could negatively impact ourfinancial condition, our results of operations, our liquidity and our abilityto maintain or expand our business.

***Our certificate ofincorporation authorizes us to issue without stockholder approval preferredstock that may be senior to our common stock in right of dividend payment.***

Our certificate ofincorporation authorizes the issuance of preferred stock without stockholderapproval and upon such terms as the board of directors may determine. Therights of the holders of shares of our common stock will be subject to, and maybe adversely affected by, the rights of holders of any class or series ofpreferred stock that may be issued in the future. The right of the holders ofour common stock to receive dividends as they may be lawfully declared fromtime to time by our board of directors is subject to any preferential rightsthat we may grant to the holders of preferred stock that we may issue. Theterms of any preferred stock we issue may place restrictions on the payment ofdividends to the holders of our common stock. If we issue preferred stock thatis senior to our common stock in right of dividend payment, and our cash flowsfrom operations or surplus are insufficient to support dividend payments to theholders of preferred stock and to the holders of EISs and Class A and Class Bcommon stock, we may be forced to reduce or eliminate dividends to the holdersof EISs and Class A and Class B common stock.

***We have substantialindebtedness, which could:***

·       ***restrict our ability to pay interest on our seniorsubordinated notes and our senior notes;***

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·       ***restrict our ability to pay dividends with respectto shares of our Class A and Class B common stock; and***

·       ***impact our financing options and liquidityposition.***

At July 2, 2005, we had $240.0 million of seniorindebtedness, and $165.8 million of senior subordinated indebtedness.

Our ability to paydividends is subject to applicable law and contractual restrictions containedin the instruments governing any indebtedness of ours and our subsidiaries,including our revolving credit facility, which is secured on a senior basis bysubstantially all of our and our subsidiaries’ assets except our real property,and our senior notes. The degree to which we are leveraged on a consolidatedbasis could have important consequences to the holders of our securities,including:

·       ourability in the future to obtain additional financing for working capital,capital expenditures or acquisitions may be limited;

·       wemay not be able to refinance our indebtedness on terms acceptable to us or atall;

·       asignificant portion of our cash flow is likely to be dedicated to the paymentof interest on our indebtedness, thereby reducing funds available for futureoperations, capital expenditures and/or dividends on our Class A and Class Bcommon stock; and

·       we may be more vulnerableto economic downturns and be limited in our ability to withstand competitivepressures.

***Despite currentindebtedness levels, we and our subsidiaries may still be able to incursubstantially more debt. This could further exacerbate risks associated withour substantial indebtedness.***

While our revolving creditfacility contains total leverage, senior leverage and cash interest coveragemaintenance covenants and the indentures governing the senior notes and seniorsubordinated notes contain incurrence covenants that restrict our ability toincur debt, as long as we meet these financial covenant tests we will beallowed to incur additional indebtedness. In addition, the indenture governingthe senior subordinated notes allows us to issue additional senior subordinatednotes with terms identical (other than issuance date) to our existing seniorsubordinated notes under certain circumstances.

***To service ourindebtedness, we require a significant amount of cash. Our ability to generatecash depends on many factors beyond our control. We may not be able to repay orrefinance the senior subordinated notes, the revolving credit facility or oursenior notes upon terms acceptable to us if at all.***

Our ability to make payments on and to refinance ourindebtedness, including the senior subordinated notes, and to fund plannedcapital expenditures depends on our ability to generate cash flow fromoperations in the future. This ability, to a certain extent, is subject togeneral economic, financial, competitive, legislative, regulatory and otherfactors that are beyond our control.

A significant portion of our cash flow from operationsis dedicated to servicing our debt requirements. In addition, we currentlyintend to distribute a significant portion of any remaining cash flow to ourstockholders in the form of dividends. Moreover, prior to the maturity of oursenior notes, we are not required to make any payments of principal on oursenior subordinated notes.

Our ability tocontinue to expand our business is, to a certain extent, dependent upon ourability to borrow funds under our revolving credit facility and to obtain otherthird-party financing, including through the sale of EISs or other securities. Therevolving credit facility is subject to periodic renewal or must otherwise berefinanced. Likewise, we expect that we will refinance our senior notes at orprior to maturity, which will be substantially prior to the maturity date ofthe senior subordinated notes. If we are 

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unableto refinance our indebtedness, including our revolving credit facility or oursenior notes, on commercially reasonable terms or at all, we would be forced toseek other alternatives, including:

·       salesof assets;

·       salesof equity; and

·       negotiationswith our lenders or noteholders to restructure the applicable debt.

In addition, if we are unable to refinance the seniorsubordinated notes or the senior notes, our failure to repay all amounts due onthe applicable maturity date would cause a default under the applicableindentures.

If we are forced to pursueany of the above options, our business and/or the value of an investment in oursecurities could be adversely affected.

***Credit ratings mayaffect our ability to obtain financing and the cost of such financing.***

Our ability to obtain externalfinancing and, in particular, debt financing is affected by our debt ratings,which are periodically reviewed by the major credit rating agencies. Moody’sand S&P have provided ratings to the senior subordinated notes of Caa1 andCCC+ respectively. In determining our credit ratings, the rating agenciesgenerally consider a number of both quantitative and qualitative factors. Thesefactors include earnings, fixed charges such as interest, cash flows, totaldebt outstanding, off-balance sheet obligations and other commitments, totalcapitalization and various ratios calculated from these factors. The ratingsprovided to us by Moody’s and S&P for the senior subordinated notesindicate that these rating agencies have determined that our seniorsubordinated notes have a currently identifiable vulnerability to default andthat we are dependent upon favorable business, financial, and economicconditions to meet timely payment of interest and repayment of principal on thesenior subordinated notes.

***We are a holdingcompany and we rely on dividends, interest and other payments, advances andtransfers of funds from our subsidiaries to meet our debt service and otherobligations.***

We are a holding companyand all of our assets are held by our direct and indirect subsidiaries and werely on dividends and other payments or distributions from our subsidiaries tomeet our debt service obligations and to enable us to pay dividends. Theability of our subsidiaries to pay dividends or make other payments ordistributions to us depends on their respective operating results and may berestricted by, among other things, the laws of their jurisdiction oforganization (which may limit the amount of funds available for the payment ofdividends), agreements of those subsidiaries, the revolving credit facility,the terms of the indenture governing the senior notes and the covenants of anyfuture outstanding indebtedness we or our subsidiaries incur.

***We may amend ourrevolving credit facility, the indenture governing the senior notes or theindenture governing the senior subordinated notes, or we may enter into newagreements that govern senior indebtedness. The amended or new terms maysignificantly affect our ability to pay interest and dividends to holders ofour securities, as applicable.***

Our revolving creditfacility and the indenture governing the senior notes contain significantrestrictions on our ability to pay interest on the senior subordinated notesand dividends on the shares of Class A and Class B common stock basedon meeting specified financial ratios, and compliance with other conditions. Asa result of general economic conditions, conditions in the lending markets, theresults of our business or for any other reason, we may elect or be required toamend or refinance our revolving credit facility or our senior notes, at orprior to maturity, or enter into additional agreements for senior indebtedness.Regardless of any protection holders of our securities have in the indenturegoverning the 

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seniorsubordinated notes, any such amendment, refinancing or additional agreement maycontain covenants which could limit in a significant manner our ability to payinterest payments and dividends to holders of the EISs, our Class A and Class Bcommon stock and our senior subordinated notes.

***We are subject torestrictive debt covenants and other requirements related to our debt thatlimit our business flexibility by imposing operating and financial restrictionson our operations.***

The agreementsgoverning our indebtedness impose significant operating and financialrestrictions on us. These restrictions prohibit or limit, among other things:

·       theincurrence of additional indebtedness and the issuance of certain preferredstock or redeemable capital stock;

·       thepayment of dividends on, and purchase or redemption of, capital stock;

·       anumber of other restricted payments, including investments;

·       specifiedsales of assets;

·       specifiedtransactions with affiliates;

·       thecreation of a number of liens; and

·       consolidations,mergers and transfers of all or substantially all of our assets.

Our revolving credit facility and the indenturegoverning the senior notes include other and more restrictive covenants andprohibit us from prepaying our other indebtedness, including the seniorsubordinated notes, while senior indebtedness is outstanding. The revolvingcredit facility requires us to maintain specified financial ratios and satisfyfinancial condition tests, including, without limitation, the following: amaximum leverage ratio, a minimum interest coverage ratio and a maximum seniorleverage ratio.

Our ability to comply withthe ratios or tests may be affected by events beyond our control, includingprevailing economic, financial and industry conditions. A breach of any ofthese covenants, or failure to meet or maintain ratios or tests could result ina default under the revolving credit facility, the terms of the indenturegoverning the senior notes and/or the indenture governing the seniorsubordinated notes. Certain events of default under the revolving creditfacility and the terms of the indenture governing the senior notes wouldprohibit us from making payments on the senior subordinated notes, includingpayment of interest when due. In addition, upon the occurrence of an event ofdefault under the revolving credit facility or the terms of the indenturegoverning the senior notes, the lenders could elect to declare all amountsoutstanding under the revolving credit facility and the senior notes, togetherwith accrued interest, to be immediately due and payable. If we were unable torepay those amounts, the lenders could proceed against the security granted tothem to secure that indebtedness. If the lenders accelerate the payment of theindebtedness, our assets may not be sufficient to repay in full thisindebtedness and our other indebtedness, including the senior subordinatednotes.

***Interest on thesenior subordinated notes may not be deductible by us for U.S. federal incometax purposes, which could significantly reduce our future cash flow and impactour ability to make interest and dividend payments.***

If all or a portion of the senior subordinated noteswere treated as equity rather than debt for U.S. federal income tax purposes,then a corresponding portion of the interest on the senior subordinated noteswould not be deductible by us for U.S. federal income tax purposes. Inaddition, we would be subject to liability for U.S. withholding taxes oninterest payments to non-U.S. holders if such payments were determined to bedividends. Our inability to deduct interest on the senior subordinated notescould materially increase our taxable income and, thus, our U.S. federal andapplicable state income tax liability. 

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Our liability for incometaxes (and withholding taxes) if the senior subordinated notes were determinedto be equity for income tax purposes would materially reduce our after-tax cashflow and would materially and adversely impact our ability to make interestand/or dividend payments and could impact our ability to continue as a going concern.In the case of foreign holders, treatment of the senior subordinated notes asequity for U.S. federal income tax purposes would subject such holders inrespect of the senior subordinated notes to withholding or estate taxes in thesame manner as with regard to common stock and could subject us to liabilityfor withholding taxes that were not collected on payments of interest. Therefore,foreign holders would receive any such payments net of the tax withheld.

Even if the IRS does not challenge the tax treatmentof the senior subordinated notes, it is possible that we will at some point inthe future, as a result of changes in circumstances or facts that come to lightin the future, conclude that we should establish a reserve for contingent taxliabilities associated with a disallowance of all or part of the interestdeductions on the senior subordinated notes, although our present view is thatno such reserve is necessary or appropriate. If we decide to maintain such areserve, our ability to pay dividends on the shares of our common stock couldbe materially impaired and the market price and/or liquidity for the ElSs orour common stock could be adversely affected.

For discussion of thesetax related risks, see “Critical Accounting Policies; Use of Estimates—IncomeTax Expense Estimates and Policies” above.

***Future changes thatincrease cash taxes payable by us could significantly decrease our future cashflow available to make interest and dividend payments with respect to oursecurities.***

We are able to amortizegoodwill and certain intangible assets within the meaning of Section 197of the Internal Revenue Code of 1986. This enables us to amortize for taxpurposes approximately $16.0 million annually through 2011, approximately$14.4 million for fiscal 2012, approximately $12.9 million for fiscal 2013and 2014, and approximately $7.1 million for fiscal 2015 through 2018. If thereis a change in U.S. federal tax policy that reduces any of these availabledeductions or results in an increase in our corporate tax rate, our cash taxespayable may increase, which could significantly reduce our future cash andimpact our ability to make interest and dividend payments. As of January 1,2005, we had net operating loss, or NOL, carryforwards for U.S. federal incometax purposes of approximately $2.9 million which are available to offset futureU.S. federal taxable income, if any, through 2020 subject to certainlimitations under Section 382 of the Internal Revenue Code of 1986. Therealizable amount of these NOLs could be reduced in the near term if estimatesof future taxable income during future periods are reduced.

***If interest ratesrise, the trading value of our ElSs and senior subordinated notes may decline.***

Should interest rates riseor should the threat of rising interest rates develop, debt markets may beadversely affected. As a result, the trading value of our EISs and seniorsubordinated notes may decline.

***Future sales or thepossibility of future sales of a substantial amount of EISs, shares of our Class Acommon stock, our senior subordinated notes or other securities may depress theprice of our securities.***

Future sales or the availability for sale ofsubstantial amounts of EISs, shares of our Class A common stock, asignificant principal amount of our senior subordinated notes or othersecurities in the public market could adversely affect the prevailing marketprice of our securities and could impair our ability to raise capital throughfuture sales of our securities.

We may issue shares of our Class A common stockand senior subordinated notes, which may be in the form of EISs, or othersecurities from time to time in future financings or as consideration forfuture acquisitions and investments. In the event any such future financing,acquisition or investment is significant, the number of shares of our Class Acommon stock and the aggregate principal amount of senior subordinated notes,which may be in the form of EISs, or the number or aggregate principal 

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amount, as the case maybe, of other securities that we may issue may in turn be significant. Inaddition, we may also grant registration rights covering those EISs, shares ofour Class A common stock, senior subordinated notes or other securities inconnection with any such future financing, acquisitions and investments.

In addition, following thefifth anniversary of the closing of our initial public offering or earlierunder certain circumstances, holders of Class B common stock may demandregistration of their Class B common stock.

***Our certificate ofincorporation and bylaws and several other factors could limit another party’sability to acquire us and deprive our investors of the opportunity to obtain atakeover premium for their securities.***

Our certificate ofincorporation and bylaws contain certain provisions that may make it difficultfor another company to acquire us and for holders of our securities to receiveany related takeover premium for their securities. For example, our certificateof incorporation authorizes the issuance of preferred stock without stockholderapproval and upon such terms as the board of directors may determine. Therights of the holders of shares of our common stock will be subject to, and maybe adversely affected by, the rights of holders of any class or series of preferredstock that may be issued in the future.

**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 isdefined for these purposes as the potential change in the fair value of afinancial asset or liability resulting from an adverse movement in interestrates. As of July 2, 2005, our revolving credit facility entered intoconcurrently with our initial public offering and the concurrent offerings wasundrawn, and we have no outstanding variable rate borrowings. Interest underour revolving credit facility is determined based on several alternative ratesas stipulated in the revolving credit facility, including the base lending rateper annum plus an applicable margin, or LIBOR plus an applicable margin.

We also have outstanding $240.0 million principalamount of 8.0% senior notes due October 1, 2011, with interest payablesemiannually on April 1 and October 1 of each year. The fair value ofthe senior notes at July 2, 2005, based on quoted market prices, was$250.8 million.

We also have outstanding $165.8 million principalamount of 12.0% senior subordinated notes due October 30, 2016, withinterest payable semiannually on April 30 and October 30 of each year.Of such outstanding principal amount, $143.0 million principal amount is representedby approximately 20.0 million EISs. Each EIS represents one share of our Class Acommon stock and $7.15 principal amount of our senior subordinated notes. As ofJuly 2, 2005, the fair value of the EISs, based on the per EIS closingprice on the AMEX on July 1, 2005, was $14.68 per EIS. It is notpracticable to estimate the fair value of the $143.0 million principal amountof senior subordinated notes represented by the EISs. Of the $165.8 aggregateprincipal amount of senior subordinated notes outstanding, $22.8 millionprincipal amount is not represented by EISs and trades separately. The fairvalue of the separate senior subordinated notes at July 2, 2005, based onquoted market prices, was $25.3 million.

We purchase raw materials,including agricultural products, meat and poultry from growers, commodityprocessors, other food companies and packaging manufacturers. Raw materials aresubject to fluctuations in price attributable to a number of factors. We arefaced with increasing prices in certain of these commodities, particularly inpackaging materials, pork and chicken and we expect this trend may continue. Wemanage this risk by entering into short-term supply contracts and advancecommodities purchase agreements from time to time, and if necessary, by raisingprices. There can be no assurance, however, that any price increases by us willoffset the increased cost of these raw material commodities, or that we will beable to raise prices at all.

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**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. Asdefined in Rule 13a-15(e) and 15d-15(e) under theExchange Act, disclosure controls and procedures are controls and otherprocedures that we use that are designed to ensure that information required tobe disclosed by us in the reports we file or submit under the Exchange Act isrecorded, processed, summarized and reported, within the time periods specifiedin 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. Itshould be noted that any system of controls, however well designed andoperated, is based in part upon certain assumptions and can provide onlyreasonable, and not absolute, assurance that the objectives of the system aremet.

*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 financial reporting. Basedon that evaluation, our chief executive officer and our chief financial officerconcluded that there has been no change during the quarter covered by thisreport that has materially affected, or is reasonably likely to materiallyaffect, our internal control over financial reporting.

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**PART IIOTHER INFORMATION**

**Item 1.**                        LegalProceedings

We are involved in variousclaims and legal actions arising in the ordinary course of business. In theopinion of our management, the ultimate disposition of these other matters willnot have a material adverse effect on our consolidated financial position,results of operations or liquidity.

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

Not applicable. 

**Item 3.**                        DefaultsUpon Senior Securities

Not applicable.

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

Our annual meeting ofstockholders was held on May 12, 2005. At the annual meeting, ourstockholders considered and voted upon the election of six Class Adirectors and one Class B director to serve until the next annual meetingof stockholders and until their successors have been elected and qualified. Allseven of the nominees for the board of directors were elected by the followingvote:
| **Class A Director Nominee** | ** ** | ** ** | ** ** | **For** | ** ** | ** Withheld ** | ** ** |
|---------------------------------------------|------------|------------|------------|---------|------------|--------------------------|------------|
| David L. Wenner                             |       | 19,162,479 |       |    | 16,825     |                     |       |
| Leonard S. Polaner                          |       | 19,160,979 |       |    | 18,325     |                     |       |
| Nicholas B. Dunphy                          |       | 19,160,179 |       |    | 19,125     |                     |       |
| James R. Chambers                           |       | 19,159,779 |       |    | 19,525     |                     |       |
| Cynthia T. Jamison                          |       | 19,159,379 |       |    | 19,925     |                     |       |
| Alfred Poe                                  |       | 19,158,179 |       |    | 21,125     |                     |       |

 
| **Class B Director Nominee** | ** ** | ** ** | ** ** | **For** | ** ** | ** Withheld ** | ** ** |
|---------------------------------------------|------------|------------|------------|---------|------------|--------------------------|------------|
| Steven C.  Sherrill                         |       | 6,097,687  |       |    | —     |                     |       |
|                                             |            |            |            |         |            |                          |            |  |  |

 

**Item 5.**                        OtherInformation

Not applicable.

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**Item 6.**                        Exhibits
| EXHIBIT NO. | ** ** | **DESCRIPTION**                                                                                                                                                     |
|-------------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 31.1        |       | Certification pursuant to  Rule 13a-14(a) or Rule 15d-14(a) of the Securities  Exchange Act of 1934 of the Chief Executive Officer.             |
| 31.2        |       | Certification pursuant to  Rule 13a-14(a) or Rule 15d-14(a) of the Securities  Exchange Act of 1934 of the Chief Financial Officer.             |
| 32.1        |       | Certification pursuant to 18 U.S.C.  Section 1350, as adopted pursuant to Section 906 of the  Sarbanes-Oxley Act of 2002, of the Chief Executive Officer. |
| 32.2        |       | Certification pursuant to 18 U.S.C.  Section 1350, as adopted pursuant to Section 906 of the  Sarbanes-Oxley Act of 2002, of the Chief Financial Officer. |

 

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**SIGNATURE**

Pursuantto the requirements of the Securities Exchange Act of 1934, the registrant hasduly caused this report to be signed on its behalf by the undersigned thereuntoduly authorized.
| Dated:   July 27, 2005 | 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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**INDEX TO EXHIBITS**
| EXHIBIT NO. | ** ** | **DESCRIPTION**                                                                                                                                                     | ** ** |
|-------------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|
| 31.1        |       | Certification pursuant  to Rule 13a-14(a) or Rule 15d-14(a) of the Securities  Exchange Act of 1934 of the Chief Executive Officer.             |       |
| 31.2        |       | Certification pursuant  to Rule 13a-14(a) or Rule 15d-14(a) of the Securities  Exchange Act of 1934 of the Chief Financial Officer.             |       |
| 32.1        |       | Certification pursuant  to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of  the Sarbanes-Oxley Act of 2002, of the Chief Executive Officer. |       |
| 32.2        |       | Certification pursuant  to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of  the Sarbanes-Oxley Act of 2002, of the Chief Financial Officer. |       |

 

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