Asfiled with the Securities and Exchange Commission on October 25, 2007

 

 

****UNITED STATES****

****SECURITIES AND EXCHANGECOMMISSION****

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

 

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

**** ****
| **(Mark one)**

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

 

**For the quarterly periodended September 29, 2007**

 

**or**

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

 

**For the transition periodfrom           to          .**

 

**Commission file number001-32316**

 

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

(Exact name of Registrant asspecified in its charter)

 

| **Delaware**                                                     | ** ** | **13-3918742**                        |
|------------------------------------------------------------------|------------|---------------------------------------|
| (State or other  jurisdiction of  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 telephonenumber, including area code:  ****(973) 401-6500****

 

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

 

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

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

 

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

 

As ofSeptember 30, 2007, the registrant had 36,778,988 shares of Class A commonstock, par value $0.01 per share issued and outstanding, 17,115,567 of whichwere held in the form of Enhanced Income Securities (EISs) and 19,663,421 ofwhich were held separate from EISs. Each EIS represents one share of Class Acommon stock and $7.15 principal amount of 12% senior subordinated notes due2016. As of September 30, 2007, the registrant had no shares of Class B commonstock, par value $0.01 per share, issued or 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 |                                       | 17           |
|                                                                                                |                                       |         |   |
| Item 3. Quantitative and Qualitative Disclosures About  Market Risk                                 |                                       | 34           |
|                                                                                                |                                       |         |   |
| Item 4. Controls and Procedures                                                                     |                                       | 35           |
|                                                                                                |                                       |         |   |
| PART  II OTHER INFORMATION                                                                          |                                       | 36           |
|                                                                                                |                                       |         |   |
| Item  1. Legal Proceedings                                                                          |                                       | 36           |
|                                                                                                |                                       |         |   |
| Item 1A. Risk Factors                                                                               |                                       | 36           |
|                                                                                                |                                       |         |   |
| Item 2. Unregistered Sales of Equity Securities and  Use of Proceeds                                |                                       | 36           |
|                                                                                                |                                       |         |   |
| Item 3. Defaults Upon Senior Securities                                                             |                                       | 36           |
|                                                                                                |                                       |         |
| Item 4. Submission of Matters to a Vote of Security  Holders                                        |                                       | 36           |
|                                                                                                |                                       |         |   |
| Item  5. Other Information                                                                          |                                       | 36           |
|                                                                                                |                                       |         |   |
| Item 6. Exhibits                                                                                    |                                       | 36           |
|                                                                                                |                                       |         |   |
| SIGNATURE                                                                                           |                                       |         | 37 |
|                                                                                                     |                                            |              |  |  |

 

i

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** **

**PART IFINANCIAL INFORMATION**

** **

**Item 1. FinancialStatements (Unaudited)**

** **

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

**Consolidated Balance Sheets**

**(Dollars inthousands, except per share data)**

**(Unaudited)**

 
| ** **                                                                                                                                                                                                                    | ** ** | **September 29, 2007** | ** ** | **December 30, 2006** | ** ** |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|----------------------------------|------------|---------------------------------|------------|
| **Assets**                                                                                                                                                                                                                    |       |                             |       |                            |       |
| Current  assets:                                                                                                                                                                                                              |       |                             |       |                            |       |
| Cash and  cash equivalents                                                                                                                                                                                                    |       | $                                | 34,624     |                            | $          | 29,626 |   |
| Trade  accounts receivable, net                                                                                                                                                                                               |       | 37,749                           |       | 31,090                          |       |
| Inventories                                                                                                                                                                                                                   |       | 95,418                           |       | 78,269                          |       |
| Prepaid  expenses                                                                                                                                                                                                             |       | 3,263                            |       | 3,246                           |       |
| Income tax  receivable                                                                                                                                                                                                        |       | 1,170                            |       | 516                             |       |
| Deferred  income taxes                                                                                                                                                                                                        |       | 2,574                            |       | 2,574                           |       |
| Total  current assets                                                                                                                                                                                                         |       | 174,798                          |       | 145,321                         |       |
|                                                                                                                                                                                                                          |       |                             |       |                            |       |
| Property,  plant and equipment, net of accumulated depreciation of $53,685 and $47,720                                                                                                                                        |       | 48,305                           |       | 40,269                          |       |
| Goodwill                                                                                                                                                                                                                      |       | 253,677                          |       | 198,076                         |       |
| Trademarks                                                                                                                                                                                                                    |       | 227,220                          |       | 200,220                         |       |
| Customer  relationship intangibles, net                                                                                                                                                                                       |       | 124,381                          |       | 14,369                          |       |
| Net deferred  financing costs and other assets                                                                                                                                                                                |       | 17,797                           |       | 17,950                          |       |
| Total assets                                                                                                                                                                                                                  |       | $                                | 846,178    |                            | $          | 616,205 |   |
|                                                                                                                                                                                                                          |       |                             |       |                            |       |
| **Liabilities  and Stockholders’ Equity**                                                                                                                                                                                |       |                             |       |                            |       |
|                                                                                                                                                                                                                          |       |                             |       |                            |       |
| Current  liabilities:                                                                                                                                                                                                         |       |                             |       |                            |       |
| Trade  accounts payable                                                                                                                                                                                                       |       | $                                | 25,147     |                            | $          | 21,520 |   |
| Accrued  expenses                                                                                                                                                                                                             |       | 24,481                           |       | 16,520                          |       |
| Dividends  payable                                                                                                                                                                                                            |       | 7,797                            |       | 4,240                           |       |
| Total  current liabilities                                                                                                                                                                                                    |       | 57,425                           |       | 42,280                          |       |
|                                                                                                                                                                                                                          |       |                             |       |                            |       |
| Long-term  debt                                                                                                                                                                                                               |       | 535,800                          |       | 430,800                         |       |
| Other  liabilities                                                                                                                                                                                                            |       | 5,865                            |       | 4,972                           |       |
| Deferred  income taxes                                                                                                                                                                                                        |       | 68,977                           |       | 62,666                          |       |
| Total  liabilities                                                                                                                                                                                                            |       | 668,067                          |       | 540,718                         |       |
|                                                                                                                                                                                                                          |       |                             |       |                            |       |
| Stockholders’  equity:                                                                                                                                                                                                   |       |                             |       |                            |       |
| Preferred  stock, $0.01 par value per share. Authorized 1,000,000 shares; no shares  issued or outstanding                                                                                                                    |       | —                           |       | —                          |       |
| Class A  common stock, $0.01 par value per share. Authorized 100,000,000 shares;  36,778,988 and 20,000,000 shares issued and outstanding as of September 29,  2007 and December 30, 2006, respectively        |       | 368                              |       | 200                             |       |
| Class B  common stock, $0.01 par value per share. Authorized 25,000,000 shares; no  shares issued or outstanding as of September 29, 2007 and 7,556,443  shares issued and outstanding as of December 30, 2006 |       | —                           |       | 76                              |       |
| Additional  paid-in capital                                                                                                                                                                                                   |       | 210,024                          |       | 119,152                         |       |
| Accumulated  other comprehensive loss                                                                                                                                                                                         |       | (2,901                           | )          | (1,904                          | )          |
| Accumulated  deficit                                                                                                                                                                                                          |       | (29,380                          | )          | (42,037                         | )          |
| Total  stockholders’ equity                                                                                                                                                                                              |       | 178,111                          |       | 75,487                          |       |
| Total  liabilities and stockholders’ equity                                                                                                                                                                              |       | $                                | 846,178    |                            | $          | 616,205 |   |

 

See Notes to Consolidated Financial Statements.

 

1

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

**Consolidated Statements of Operations**

**(Dollars inthousands, except per share data)**

**(Unaudited)**

 
| ** **                                         | ** ** | **Thirteen Weeks Ended** | ** ** | **Thirty-nine Weeks Ended** | ** ** |
|----------------------------------------------------|------------|------------------------------------|------------|---------------------------------------|------------|
| ** **                                         | ** ** | **September 29,  2007**       | ** ** | **September 30,  2006**          | ** ** | **September 29,  2007** | ** ** | **September 30,  2006** | ** ** |
|                                               |       |                               |       |                                  |       |   |   |   |   |
| Net sales                                          |       | $                                  | 117,003    |                                  | $          | 101,854 |   | $ | 338,952 |   | $ | 300,099 |   |
| Cost of  goods sold                                |       | 78,725                             |       | 72,501                                |       | 230,668 |   | 214,477 |   |
| Gross profit                                       |       | 38,278                             |       | 29,353                                |       | 108,284 |   | 85,622 |   |
|                                               |       |                               |       |                                  |       |   |   |   |   |
| Operating  expenses:                               |       |                               |       |                                  |       |   |   |   |   |
| Sales,  marketing and distribution expenses        |       | 13,114                             |       | 11,462                                |       | 37,184 |   | 33,531 |   |
| General and  administrative expenses               |       | 3,374                              |       | 1,593                                 |       | 6,802 |   | 5,056 |   |
| Gain on sale  of property, plant and equipment     |       | —                             |       | (525                                  | )          | — |   | (525 | ) |
| Amortization  expense—customer relationships  |       | 1,612                              |       | 188                                   |       | 3,888 |   | 542 |   |
| Operating  income                                  |       | 20,178                             |       | 16,635                                |       | 60,410 |   | 47,018 |   |
|                                               |       |                               |       |                                  |       |   |   |   |   |
| Other  expenses:                                   |       |                               |       |                                  |       |   |   |   |   |
| Interest  expense, net                             |       | 12,374                             |       | 11,009                                |       | 40,028 |   | 32,796 |   |
| Income  before income tax expense                  |       | 7,804                              |       | 5,626                                 |       | 20,382 |   | 14,222 |   |
| Income tax  expense                                |       | 2,958                              |       | 2,183                                 |       | 7,725 |   | 5,518 |   |
| Net income                                         |       | $                                  | 4,846      |                                  | $          | 3,443 |   | 12,657 |   | 8,704 |   |
|                                               |       |                               |       |                                  |       |   |   |   |   |
| Earnings per  share calculations:                  |       |                               |       |                                  |       |   |   |   |   |
| Basic and  diluted distributed earnings per share: |       |                               |       |                                  |       |   |   |   |   |
| Class A  common stock                         |       | $                                  | 0.21       |                                  | $          | 0.21 |   | $ | 0.72 |   | $ | 0.64 |   |
| Basic and  diluted earnings (loss) per share:      |       |                               |       |                                  |       |   |   |   |   |
| Class A  common stock                         |       | $                                  | 0.13       |                                  | $          | 0.18 |   | $ | 0.49 |   | $ | 0.49 |   |
| Class B  common stock                         |       | $                                  | —     |                                  | $          | (0.03 | ) | $ | (0.23 | ) | $ | (0.15 | ) |

 

See Notes to Consolidated Financial Statements.

 

2

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

**ConsolidatedStatements of Cash Flows**

**(Dollarsin thousands)**

**(Unaudited)**

 
| ** **                                                                         | ** ** | **Thirty-nine Weeks Ended** | ** ** |
|------------------------------------------------------------------------------------|------------|---------------------------------------|------------|
| ** **                                                                         | ** ** | **September 29,  2007**          | ** ** | **September 30,  2006** | ** ** |
| ** **                                                                         | ** ** | ** **                            | ** ** | ** ** | ** ** |
| **Cash  flows from operating activities:**                                         |       |                                  |       |   |   |
| Net income                                                                         |       | $                                     | 12,657     |   | $ | 8,704 |   |
| Adjustments  to reconcile net income to net cash provided by operating activities: |       |                                  |       |   |   |
| Depreciation  and amortization                                                     |       | 9,706                                 |       | 5,863 |   |
| Amortization  of deferred debt issuance costs                                      |       | 2,397                                 |       | 2,122 |   |
| Deferred  income taxes                                                             |       | 6,944                                 |       | 4,910 |   |
| Gain on sale  of property, plant and equipment                                     |       | —                                |       | (525 | ) |
| Write off of  deferred debt issuance costs                                         |       | 1,769                                 |       | — |   |
| Changes in  assets and liabilities, net of effects of business acquired:           |       |                                  |       |   |   |
| Trade  accounts receivable                                                         |       | (6,659                                | )          | 2,242 |   |
| Inventories                                                                        |       | (15,660                               | )          | (8,400 | ) |
| Prepaid  expenses                                                                  |       | (17                                   | )          | (49 | ) |
| Income tax  receivable                                                             |       | (654                                  | )          | 618 |   |
| Other assets                                                                       |       | (12                                   | )          | (4 | ) |
| Trade  accounts payable                                                            |       | 3,627                                 |       | (2,589 | ) |
| Accrued  expenses                                                                  |       | 7,881                                 |       | 5,339 |   |
| Other  liabilities                                                                 |       | (779                                  | )          | (55 | ) |
| Net cash  provided by operating activities                                         |       | 21,200                                |       | 18,176 |   |
|                                                                               |       |                                  |       |   |   |
| **Cash  flows from investing activities:**                                         |       |                                  |       |   |   |
| Capital  expenditures                                                              |       | (10,914                               | )          | (5,788 | ) |
| Payments for  acquisition of businesses                                            |       | (200,850                              | )          | (30,102 | ) |
| Net proceeds  from sale of property                                                |       | —                                |       | 1,275 |   |
| Net cash  used in investing activities                                             |       | (211,764                              | )          | (34,615 | ) |
|                                                                               |       |                                  |       |   |   |
| **Cash  flows from financing activities:**                                         |       |                                  |       |   |   |
| Payments of  long-term debt                                                        |       | (100,000                              | )          | — |   |
| Proceeds  from issuance of long-term debt                                          |       | 205,000                               |       | 25,000 |   |
| Payments for  repurchase of Class B common stock                              |       | (82,417                               | )          | — |   |
| Proceeds  from issuance of Class A common stock, net                          |       | 193,215                               |       | — |   |
| Dividends  paid                                                                    |       | (16,277                               | )          | (12,720 | ) |
| Payment of  debt issuance costs                                                    |       | (4,001                                | )          | (419 | ) |
| Net cash  provided by financing activities                                         |       | 195,520                               |       | 11,861 |   |
|                                                                               |       |                                  |       |   |   |
| Effect of  exchange rate fluctuations on cash and cash equivalents                 |       | 42                                    |       | 50 |   |
| Net increase  (decrease) in cash and cash equivalents                              |       | 4,998                                 |       | (4,528 | ) |
|                                                                               |       |                                  |       |   |   |
| Cash and  cash equivalents at beginning of period                                  |       | 29,626                                |       | 25,429 |   |
| Cash and  cash equivalents at end of period                                        |       | $                                     | 34,624     |   | $ | 20,901 |   |
|                                                                               |       |                                  |       |   |   |
| **Supplemental  disclosures of cash flow information:**                            |       |                                  |       |   |   |
| Cash  interest payments                                                            |       | $                                     | 30,665     |   | $ | 25,439 |   |
| Cash income  tax payments                                                          |       | $                                     | 947        |   | $ | 500 |   |
| Cash income  tax refunds                                                           |       | $                                     | (91        | ) | $ | (800 | ) |
| Non-cash  transactions:                                                            |       |                                  |       |   |   |
| Dividends  declared and not yet paid                                               |       | $                                     | 7,797      |   | $ | 4,240 |   |

 

See Notes toConsolidated Financial Statements. 

 

3

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

**Notes to Consolidated Financial Statements**

**(Unaudited)**

 

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

 

B&G Foods, Inc. is a holding company, theprincipal assets of which are the capital stock of its subsidiaries. Unless thecontext requires otherwise, references in this report to “B&G Foods,” “ourcompany,” “we,” “us” and “our” refer to B&G Foods, Inc. and itssubsidiaries. We operate in one industry segment and manufacture, sell anddistribute a diversified portfolio of high-quality shelf-stable foods acrossthe United States, Canada and Puerto Rico. Our products include fruit spreads,canned meats and beans, spices, seasonings, marinades, hot sauces, winevinegar, hot cereals, molasses, maple syrup, salad dressings, Mexican-stylesauces, taco shells and kits, salsas, pickles, peppers and other specialty foodproducts. We compete in the retail grocery, food service, specialty, privatelabel, club and mass merchandiser channels of distribution. We distribute theseproducts to retailers in the greater New York metropolitan area through adirect-store-delivery sales and distribution system and elsewhere in the UnitedStates through a nationwide network of independent brokers and distributors.

 

***Recent Acquisitions***

 

On January 10, 2006, we acquired the *Grandma’s*molasses business for approximately $30.1 millionin cash, including transaction costs, from Mott’s LLP, a Cadbury SchweppesAmericas Beverages company. Effective February 25, 2007, we completed theacquisition of the *Cream of Wheat*and*Cream of Rice*business for approximately$200.9 million in cash, including transaction costs, from Kraft Foods Global, Inc.We refer to the *Cream of Wheat*and *Cream of Rice*acquisition as the “*Cream ofWheat*acquisition” and the *Cream of Wheat*and*Cream of Rice*businesses collectively asthe “*Cream of Wheat* business.”

 

The acquisitions described above were accounted forusing the purchase method of accounting and, accordingly, the assets acquiredand results of operations are included in our consolidated financial statementsfrom the respective dates of the acquisitions. The excess of the purchase priceover the fair value of identifiable net assets acquired represents goodwill. Trademarksare deemed to have an indefinite useful life and are not amortized. Customerrelationship intangibles are amortized over 20 years. Goodwill, customerrelationship intangibles and trademarks are deductible for income tax purposes.

 

The following table sets forth the preliminaryallocation of the *Cream of Wheat*purchase price tothe estimated fair value of the net assets acquired at the date of acquisitionbased upon currently available information. Inventory has been recorded atestimated selling price less costs of disposal and a reasonable profit. Equipmenthas been recorded at estimated fair value as determined by a third-partyvaluation. We have also obtained a third-party valuation of the intangibleassets acquired (including trademarks and customer relationship intangibles). Managementdoes not expect any adjustments to the preliminary allocation to be material.

 
| **Acquisition of the *Cream of Wheat* business (dollars in thousands):** | ** ** | ** ** | ** ** |
|-----------------------------------------------------------------------------------------------------------------------|------------|------------|------------|
| Inventory                                                                                                             |       | $          | 1,489      |   |
| Equipment                                                                                                             |       | 2,860      |       |
| Goodwill                                                                                                              |       | 55,601     |       |
| Trademarks—indefinite  life intangible assets                                                                    |       | 27,000     |       |
| Customer  relationship intangibles—amortizable intangible assets                                                 |       | 113,900    |       |
| Total                                                                                                                 |       | $          | 200,850    |   |

 

During the second quarter of fiscal 2006, we obtaineda third-party valuation of certain acquired assets, including intangibleassets, and finalized our internal assessments of the purchase price allocationfor the *Grandma’s* molasses acquisition. Thefollowing table sets forth the purchase price allocation:

 

4

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

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

**(Unaudited)**

 

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

 
| **Acquisition of the *Grandma’s*  molasses business (dollars in thousands):** | ** ** | ** ** | ** ** |
|------------------------------------------------------------------------------------|------------|------------|------------|
| Equipment                                                                          |       | $          | 25         |   |
| Goodwill                                                                           |       | 9,877      |       |
| Trademarks—indefinite  life intangible assets                                 |       | 5,100      |       |
| Customer  relationship intangibles—amortizable intangible assets              |       | 15,100     |       |
| Total                                                                              |       | 30,102     |       |
|                                                                                    |            |            |            |  |

 

***Pro Forma Summary of Operations***

 

The following pro forma summary of operations for thefirst three quarters of 2007 and the third quarter and first three quarters of2006 presents our operations as if the *Creamof Wheat* acquisition had occurred as of the beginning of each periodpresented. In addition to including the results of operations of the *Cream of Wheat*business, the pro formainformation gives effect to interest on additional borrowings and changes indepreciation of property, plant and equipment and amortization of customerrelationship intangibles. No pro forma financial information has been presentedfor the *Grandma’s*molasses acquisition becausesuch pro forma financial information is not material to our consolidatedstatements of operations for the periods presented.

 
| ** **                                                             | ** ** | **Thirteen weeks ended**   | ** ** | **Thirty-nine weeks ended** | ** ** |
|------------------------------------------------------------------------|------------|--------------------------------------|------------|---------------------------------------|------------|
| ** **                                                             | ** ** | **September 29,  2007**         | ** ** | **September 30,  2006**          | ** ** | **September 29,  2007** | ** ** | **September 30,  2006** | ** ** |
| ** **                                                             | ** ** | **(Actual)**                         | ** ** | **(Pro forma)**                  | ** ** | **(Pro forma)** | ** ** | **(Pro forma)** | ** ** |
| ** **                                                             | ** ** | **(dollars in thousands)** | ** ** |
| Net sales                                                              |       | $                                    | 117,003    |                                  | $          | 116,362 |   | $ | 350,385 |   | $ | 344,401 |   |
| Net income                                                             |       | 4,846                                |       | 5,244                                 |       | 14,665 |   | 14,551 |   |
| Basic and  diluted earnings per share Class A common stock        |       | $                                    | 0.13       |                                  | $          | 0.25 |   | $ | 0.56 |   | $ | 0.71 |   |
| Basic and  diluted earnings (loss) per share Class B common stock |       | —                               |       | $                                     | 0.04       |   | $ | (0.16 | ) | $ | 0.07 |   |

 

The pro forma information presented above does notpurport to be indicative of the results that actually would have been attainedif the *Cream of Wheat* acquisitionhad occurred as of the beginning of each period presented and is not intendedto be a projection of future results.

 

***Class A Common StockOffering***

 

On May 29, 2007, we completed a public offeringof 15,985,000 shares of our Class A common stock as a separately tradedsecurity, which includes 2,085,000 shares issued pursuant to the fully exercisedunderwriters’ option to purchase additional shares, at $13.00 per share. Theshares of our separately traded Class A common stock trade on the New YorkStock Exchange under the trading symbol “BGS” and trade separately from ourEnhanced Income Securities (EISs), which trade on the New York Stock Exchangeunder the trading symbol “BGF.”  Each EISrepresents one share of our Class A common stock and $7.15 principalamount of our senior subordinated notes.

 

The proceeds of the Class A common stock offeringwere $193.2 million, after deducting underwriting discounts and commissions andother expenses. In connection with the offering, we repurchased 

 

5

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

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

**(Unaudited)**

 

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

 

6,762,455 outstanding shares of our Class Bcommon stock for $82.4 million, and the remaining 793,988 shares of ouroutstanding Class B common stock were exchanged for an equal number ofshares of Class A common stock. See note 9, “Related-Party Transactions.”  We also prepaid $100.0 million of our termloan borrowings under our senior secured credit facility. The remaining fundsare being used for general corporate purposes.

 

The holders of our EISs may separate each EIS into oneshare of Class A common stock and $7.15 principal amount of seniorsubordinated notes at any time. Upon the occurrence of certain events EISs willautomatically separate. Conversely, subject to limitations, a holder ofseparate shares of Class A common stock and senior subordinated notes cancombine such securities to form EISs. Separation and combination of EISs willautomatically result in increases and decreases, respectively, in the number ofshares of Class A common stock not in the form of EISs. As of September 29,2007, we had 36,778,988 shares of Class A common stock issued andoutstanding, 17,115,567 of which were held in the form of EISs and 19,663,421of which were held separate from EISs. As of December 30, 2006, we had20,000,000 shares of Class A common stock issued and outstanding, all ofwhich were held in the form of EISs.

 

**(2)****                                ****Summary of Significant Accounting Policies**

 

***Fiscal Year***

 

Our financial statements are presented on a consolidatedbasis. Typically, our fiscal quarters and fiscal year consist of 13 and 52weeks, respectively, ending on the Saturday closest to December 31 in thecase of our fiscal year and fourth fiscal quarter, and on the Saturday closestto the end of the corresponding calendar quarter in the case of our fiscalquarters. As a result, a 53rd week is added to our fiscal year every five orsix years. In a 53-week fiscal year our fourth fiscal quarter contains 14 weeks.The fiscal years ending December 29, 2007 (fiscal 2007) and December 30,2006 (fiscal 2006) each contain 52 weeks. Each quarter of fiscal 2007 andfiscal 2006 contains 13 weeks.

 

***Basis ofPresentation***

 

Theaccompanying consolidated interim financial statements for the thirteen andthirty-nine week periods ended September 29, 2007 (third quarter of 2007and first three quarters of 2007) and September 30, 2006 (third quarter of2006 and first three quarters of 2006) have been prepared by our company inaccordance with accounting principles generally accepted in the United Statesof America without audit, pursuant to the rules and regulations of theSecurities and Exchange Commission (SEC), and include the accounts ofB&G Foods, Inc. and its subsidiaries. Certain information and footnote disclosuresnormally included in annual financial statements prepared in accordance withgenerally accepted accounting principles have been omitted pursuant to such rules andregulations. However, our management believes, to the best of their knowledge,that the disclosures herein are adequate to make the information presented notmisleading. All intercompany balances and transactions have beeneliminated. The accompanying unaudited consolidated interim financialstatements contain all adjustments (consisting only of normal and recurringadjustments) that are, in the opinion of management, necessary to presentfairly our consolidated financial position as of September 29, 2007, theresults of our operations for the third quarter and first three quarters of2007 and 2006, and cash flows for the first three quarters of 2007 and 2006. Ourresults of operations for the third quarter and first three quarters of 2007are not necessarily indicative of the results to be expected for the full year.The accompanying unaudited consolidated interim financial statements should beread in conjunction with the audited consolidated financial statements andnotes for fiscal 2006 included in our Annual Report on Form 10-K/A forfiscal 2006 filed with the SEC on March 9, 2007.

 

6

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

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

**(Unaudited)**

 

**(2)****                                ****Summary of Significant Accounting Policies (Continued)**

 

***Use of Estimates***

 

Thepreparation of financial statements in accordance with U.S. generally acceptedaccounting principles requires our management to make a number of estimates andassumptions relating to the reporting of assets and liabilities and thedisclosure of contingent assets and liabilities at the date of the consolidatedfinancial statements and the reported amounts of revenues and expenses duringthe reporting period. Some of the more significant estimates and assumptionsmade by management involve trade and consumer promotion expenses; allowancesfor excess, obsolete and unsaleable inventories; pension benefits; purchaseaccounting allocations; the recoverability of goodwill, trademarks, customerrelationship intangibles, property, plant and equipment and deferred taxassets; the accounting for our enhanced income securities (EISs), includingtheir treatment in computing our income tax expense; and the accounting forearnings per share. Actual results could differ from those estimates andassumptions.

 

***Adoption of NewAccounting Standards***

 

In July 2006, the FASB issued FASB InterpretationNo. 48, “*Accounting for Uncertainty in Income Taxes*”(FIN 48). FIN 48 prescribes a comprehensive model for how a company shouldrecognize, measure, present, and disclose in its financial statements uncertaintax positions that the company has taken or expects to take on a tax return. FIN48 states that a tax benefit from an uncertain tax position may be recognizedonly if it is “more likely than not” that the position is sustainable, based onits technical merits. The tax benefit of a qualifying position is the largestamount of tax benefit that is greater than 50% likely of being realized uponsettlement with a taxing authority having full knowledge of all relevantinformation. A tax benefit from an uncertain position was previously recognizedif it was probable of being sustained. Under FIN 48, the liability forunrecognized tax benefits is classified as non-current unless the liability isexpected to be settled in cash within 12 months of the reporting date. FIN 48is effective as of the beginning of the first fiscal year beginning after December 15,2006. We adopted the provisions of FIN 48 at the beginning of fiscal 2007. On May 2,2007, the FASB issued FASB Staff Position No. 48-1, “*Definitionof Settlement in FASB Interpretation 48*” (FIN 48-1). FIN 48-1 amendsFIN 48 to provide guidance on how an enterprise should determine whether a taxposition is effectively settled for the purpose of recognizing previouslyunrecognized tax benefits. The guidance in FIN 48-1 is to be applied upon theinitial adoption of FIN 48. Accordingly, we have applied the provisions of FIN48-1 at the beginning of fiscal 2007. As a result of the adoption of FIN 48, asamended by FIN 48-1, we reclassified $0.2 million to other non-currentliabilities.

 

We operate in multiple taxing jurisdictions within theUnited States and Canada and from time to time face audits from various taxauthorities regarding the deductibility of certain expenses, state income taxnexus, intercompany transactions, transfer pricing and other matters. At thebeginning of fiscal 2007, our liability for unrecognized tax benefits wasapproximately $0.2 million (of which the entire amount would impact oureffective tax rate if recognized) plus approximately $0.1 million of accrued interestand penalties. This liability for unrecognized tax benefits all related tostate income taxes and Canadian income taxes. During the third quarter of 2007,we paid the Canadian income tax liability in full. There was no material changein the net amount of unrecognized tax benefits during the first three quartersof 2007.

 

Although we do not believe that we are currently underexamination in any of our major tax jurisdictions, we remain subject toexamination in all of our tax jurisdictions until the applicable statutes oflimitations expire. As of September 29, 2007, a summary of the tax yearsthat remain subject to examination in our major tax jurisdictions are:

 

7

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

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

**(Unaudited)**

 

**(2)****                                ****Summary of Significant Accounting Policies (Continued)**

 
| United States—Federal |   | 2003 and forward |
|----------------------------|--------|------------------|
| United States—States  |   | 2002 and forward |
| Canada                     |   | 2006 and forward |

 

Based upon the expiration of statutes of limitationsand the conclusion of tax examinations in several jurisdictions, we believe itis reasonably possible that the total amount of previously unrecognized taxbenefits may decrease by $0.1 million within twelve months of the reportingdate.

 

Our policy is to classify interest and penaltiesrelated to income tax uncertainties as income tax expense.

 

***Recently IssuedAccounting Standards***

 

In September 2006, the FASB issued SFAS No. 157,“*Fair Value Measurements*” (SFAS No. 157),which defines fair value, establishes a framework for measuring fair value andexpands disclosures about fair value measurements. The provisions of SFAS No. 157are effective as of the beginning of our 2008 fiscal year. We are currentlyevaluating the impact, if any, of adopting SFAS No. 157 on ourconsolidated financial statements.

 

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

 

Inventories consist of the following, as ofthe dates indicated (dollars in thousands):

 
| ** **                   | ** ** | **September 29, 2007** | ** ** | **December 30, 2006** | ** ** |
|------------------------------|------------|----------------------------------|------------|---------------------------------|------------|
| Raw  materials and packaging |       | $                                | 17,588     |                            | $          | 11,461 |   |
| Work in  process             |       | 3,107                            |       | 2,587                           |       |
| Finished  goods              |       | 74,723                           |       | 64,221                          |       |
|                         |       |                             |       |                            |       |
| Total                        |       | $                                | 95,418     |                            | $          | 78,269 |   |

 

**(4)****                                 Goodwill,Trademarks and Customer Relationship Intangibles**

 

Thefollowing table reconciles the changes in the carrying amount of goodwill forthe period from December 30, 2006 to September 29, 2007 (dollars inthousands):

 
| Balance at December 30,  2006  |   | $      | 198,076 |   |
|-------------------------------------|--------|--------|---------|--------|
| *Cream of  Wheat acquisition*       |   | 55,601 |    |
| Balance at September 29,  2007 |   | $      | 253,677 |   |

 

Thefollowing table reconciles the changes in the carrying amount of trademarks forthe period from December 30, 2006 to September 29, 2007 (dollars inthousands):

 

8

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

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

**(Unaudited)**

 

**(4)****                                 Goodwill,Trademarks and Customer Relationship Intangibles (Continued)**

 
| Balance at December 30,  2006  |   | $      | 200,220 |   |
|-------------------------------------|--------|--------|---------|--------|
| *Cream of  Wheat*acquisition        |   | 27,000 |    |
| Balance at September 29,  2007 |   | $      | 227,220 |   |

 

Customerrelationship intangibles are presented at cost, net of accumulatedamortization, and are amortized on a straight-line basis over their estimateduseful lives of 20 years.

 
| ** **                          | ** ** | **Customer  Relationship  Intangibles** | ** ** | **Less:  Accumulated  Amortization** | ** ** | **Total** | ** ** |
|-------------------------------------|------------|-----------------------------------------|------------|--------------------------------------|------------|-----------|------------|
| ** **                          | ** ** | **(dollars in thousands)**    | ** ** |
| Balance at December 30,  2006  |       | $                                       | 15,100     |                                 | $          | (731      | )          | $ | 14,369 |   |
| *Cream of  Wheat*acquisition        |       | 113,900                                 |       | —                               |       | 113,900   |       |
| Amortization  expense               |       | —                                  |       | (3,888                               | )          | (3,888    | )          |
| Balance at September 29,  2007 |       | $                                       | 129,000    |                                 | $          | (4,619    | )          | $ | 124,381 |   |

 

Amortization expense associated with customer relationship intangiblesfor the third quarter and first three quarters of 2007 was $1.6 million and$3.9 million, respectively, and $0.2 and $0.5 million for the third quarter andfirst three quarters of 2006, respectively, and is recorded in operatingexpenses. We expect to recognize an additional $1.6 million of amortizationexpense associated with customer relationship intangibles during the remainderof fiscal 2007. As of September 29, 2007, amortization of intangibleassets is expected to be $6.5 million for each of the next five succeedingfiscal years.

 

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

 

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

 
| ** **                                                 | ** ** | **September 29, 2007** | ** ** | **December 30, 2006** | ** ** |
|------------------------------------------------------------|------------|----------------------------------|------------|---------------------------------|------------|
| Revolving  credit facility                                 |       | $                                | —     |                            | $          | — |   |
| Term loan                                                  |       | 130,000                          |       | 25,000                          |       |
| Total senior  secured credit facility                      |       | 130,000                          |       | 25,000                          |       |
|                                                       |       |                             |       |                            |       |
| 12.0% Senior  Subordinated Notes due October 30, 2016 |       | 165,800                          |       | 165,800                         |       |
| 8.0% Senior  Notes due October 1, 2011                |       | 240,000                          |       | 240,000                         |       |
| Total  long-term debt                                      |       | $                                | 535,800    |                            | $          | 430,800 |   |

 

9

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

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

**(Unaudited)**

 

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

 

As of September 29,2007, the aggregate maturities of long-term debt are as follows (dollars inthousands):

 
| **Years ending December:** | ** ** | ** ** | ** ** |
|--------------------------------------|------------|------------|------------|
| 2007                                 |       | $          | —     |   |
| 2008                                 |       | —     |       |
| 2009                                 |       | —     |       |
| 2010                                 |       | —     |       |
| 2011                                 |       | 240,000    |       |
| Thereafter                           |       | 295,800    |       |
| Total                                |       | $          | 535,800    |   |

 

*Senior Secured CreditFacility*. In October 2004,we entered into a $30.0 million senior secured revolving credit facility. Inorder to finance the *Grandma’s*molasses acquisition, we amended the credit facility in January 2006 toprovide for, among other things, a new $25.0 million term loan and a reductionin the revolving credit facility commitments from $30.0 million to $25.0million. In order to finance the *Cream of Wheat*acquisition, our credit facility was amended and restated in February 2007to provide for, among other things, an additional $205.0 million of term loanborrowings. On May 29, 2007, we prepaid $100.0 million of term loanborrowings. Our $25.0 million revolving credit facility matures on January 10,2011 and the remaining $130.0 million of term loan borrowings matures on February 26,2013.

 

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

 

Effective as of February 26,2007, we entered into a six-year interest rate swap agreement in order toeffectively fix at 7.0925% the interest rate payable for $130.0 million of termloan borrowings. The interest rate for the remaining $100.0 million of termloan borrowings, which we subsequently prepaid, was 7.36% as of the prepaymentdate (based upon a three-month LIBOR rate contract that expired on May 25,2007). The swap is designated as a cash flow hedge under the guidelines of SFASNo. 133. The swap is in place through the life of the term loan, ending onFebruary 26, 2013. Changes in fair value of the swap are recorded inaccumulated other comprehensive income (loss), net of tax on our consolidatedbalance sheet.

 

Our obligations under thecredit facility are jointly and severally and fully and unconditionallyguaranteed on a senior basis by all of our existing and certain future domesticsubsidiaries. The credit facility is secured by substantially all of our andour subsidiaries’ assets except our and our subsidiaries’ real property. Thecredit facility provides for mandatory prepayment based on asset dispositionsand certain issuances of securities, as defined. The credit facility containscovenants that restrict, among other things, our ability to incur additionalindebtedness, pay dividends and create certain liens. The credit facility alsocontains certain financial maintenance covenants, which, among other things,specify maximum capital expenditure limits, a minimum interest coverage ratioand a maximum senior and total leverage ratio, each ratio as defined. Proceedsof the revolving credit facility are restricted to funding our working capitalrequirements, capital expenditures and acquisitions of companies in the sameline of business as our company, subject to specified criteria. The revolvingcredit facility remained undrawn through September 29, 2007. The available

 

10

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

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

**(Unaudited)**

 

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

 

borrowingcapacity under our revolving credit facility, net of outstanding letters ofcredit of $2.6 million, was $22.4 million at September 29, 2007. Themaximum letter of credit capacity under the revolving credit facility is $10.0million, with a fronting fee of 3.0% per annum for all outstanding letters ofcredit.

 

*Subsidiary Guarantees*. We have noassets or operations independent of our direct and indirect subsidiaries. Allof our present domestic subsidiaries jointly and severally and fully andunconditionally guarantee our senior subordinated notes and our senior notes,and management has determined that our subsidiaries that are not guarantors ofour senior subordinated notes and senior notes are, individually and in theaggregate, “minor subsidiaries” as that term is used in Rule 3-10 ofRegulation S-X promulgated by the SEC. There are no significant restrictions onour ability and the ability of our subsidiaries to obtain funds from ourrespective subsidiaries by dividend or loan. Consequently, separate financialstatements have not been presented for our subsidiaries because management hasdetermined that they would not be material to investors.

 

*Deferred Financing Costs*. Inconnection with the issuance of our 12.0% senior subordinated notes due 2016and our 8.0% senior notes due 2011, we capitalized approximately $23.1 millionof financing costs, which will be amortized over their respective terms. Inconnection with the issuance of our term loan in January 2006, wecapitalized approximately $0.4 million of additional financing costs, whichwill be amortized over the term of the loan. In connection with the issuance ofadditional term loan borrowings of $205.0 million in February 2007 wecapitalized approximately $4.0 million of additional financing costs. Duringthe second quarter of 2007 we wrote-off and expensed $1.8 million relating toour May 2007 prepayment of $100.0 million of term loan borrowings. As of September 29,2007 and December 30, 2006 we had net deferred financing costs of $17.1million and $17.3 million, respectively.

 

At September 29, 2007 and December 30, 2006accrued interest of $13.7 million and $8.5 million, respectively, is includedin accrued expenses in the accompanying consolidated balance sheets.

 

**(6)****                                 FairValue of Financial Instruments**

 

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

 

We have outstanding$240.0 million principal amount of 8.0% senior notes due 2011. The fair valueof the senior notes at September 29, 2007 and December 30, 2006,based on quoted market prices, was $238.8 million and $244.8 million, respectively.

 

We also have outstanding$165.8 million principal amount of 12.0% senior subordinated notes due 2016. Ofsuch outstanding principal amount, $122.4 million principal amount wasrepresented by 17,115,567 EISs as of September 29, 2007, and $143.0 millionprincipal amount was represented by 20,000,000 EISs as of December 30,2006. Each EIS represents one share of our Class A common stock and $7.15principal amount of our senior subordinated notes. As of September 29,2007, the fair value of the EISs, based on the per EIS closing price on the NewYork Stock Exchange, was $355.1 million. As of December 30, 2006, the fairvalue of the EISs, based on the per EIS closing price on the American StockExchange, was $400.4 million. It is not practicable to estimate the fair valueof the principal amount of senior subordinated notes represented by EISs.

 

Of the $165.8 millionaggregate principal amount of senior subordinated notes outstanding, $43.4million and $22.8 million principal amount as of September 29, 2007 and December 30,2006, respectively, was not represented by EISs and traded separately. The fairvalue of the separate senior subordinated notes at

 

11

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

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

**(Unaudited)**

 

**(6)****                                 FairValue of Financial Instruments****(Continued)**

 

September 29, 2007 and December 30, 2006,based on quoted market prices, was $47.1 million and $25.5 million.

 

The carrying value of our term loan borrowingsapproximates fair value because interest rates under the term loan borrowingsare variable, based on prevailing market rates. Our term loan borrowings are subject to the interest rate swap discussedbelow.

 

We use an interest rate swap to manage variableinterest rate exposure on our $130.0 million of term loan borrowings. Ourobjective for holding this derivative is to decrease the volatility of futurecash flows associated with interest payments on our variable rate debt. Derivativeinstruments are recognized in other assets or liabilities on our consolidatedbalance sheet at fair value. We record gains and losses on derivativesqualifying as a cash flow hedge in comprehensive income (loss), to the extentthat the hedge is effective and until we recognize the underlying transactionsin net income, at which time these gains and losses are reflected in theconsolidated statement of operations. Other comprehensive income for the thirdquarter and for the first three quarters of 2007 includes net unrealized aftertax losses of $2.3 million ($3.7 million pre-tax) and $1.1 million ($1.7million pre-tax), respectively. The unrealized amounts in comprehensive income(loss) will fluctuate based on changes in the fair value of open contractsduring each reporting period. We did not have any derivatives during the firstthree quarters of 2006.

 

**(7)****                                 ComprehensiveIncome Recognition**

 

Comprehensiveincome includes net income, foreign currency translation adjustments relatingto assets and liabilities located in our foreign subsidiaries, amortization ofunrecognized prior service cost and pension deferrals and cash flow hedges, netof tax. The components of comprehensive income are as follows (dollars inthousands):

 
| ** **                                                                         | ** ** | **Thirteen Weeks Ended** | ** ** | **Thirty-nine Weeks Ended** | ** ** |
|------------------------------------------------------------------------------------|------------|------------------------------------|------------|---------------------------------------|------------|
| ** **                                                                         | ** ** | **September 29,  2007**       | ** ** | **September 30,  2006**          | ** ** | **September 29,  2007** | ** ** | **September 30,  2006** | ** ** |
|                                                                               |       |                               |       |                                  |       |   |   |   |   |
| Net income                                                                         |       | $                                  | 4,846      |                                  | $          | 3,443 |   | $ | 12,657 |   | $ | 8,704 |   |
| Other  comprehensive income:                                                       |       |                               |       |                                  |       |   |   |   |   |
| Foreign  currency translation adjustments                                          |       | (32                                | )          | (13                                   | )          | 42 |   | 50 |   |
| Amortization  of unrecognized prior service cost and pension deferrals, net of tax |       | 5                                  |       | —                                |       | 21 |   | — |   |
| Mark to  market adjustment of cash flow hedge transaction, net of tax              |       | (2,311                             | )          | —                                |       | (1,060 | ) | — |   |
| Comprehensive  income                                                              |       | $                                  | 2,508      |                                  | $          | 3,430 |   | $ | 11,660 |   | $ | 8,754 |   |

 

12

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** **

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

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

**(Unaudited)**

 

**(8)****                                 PensionBenefits**

 

Net periodic costs for the third quarter and firstthree quarters of 2007 and 2006 include the following components (dollars inthousands): 

 
| ** **                                           | ** ** | **Thirteen Weeks Ended** | ** ** | **Thirty-nine Weeks Ended** | ** ** |
|------------------------------------------------------|------------|------------------------------------|------------|---------------------------------------|------------|
| ** **                                           | ** ** | **September 29,  2007**       | ** ** | **September 30,   2006**    | ** ** | **September 29,   2007** | ** ** | **September 30,   2006** | ** ** |
|                                                 |       |                               |       |                                  |       |   |   |   |   |
| Service  cost—benefits earned during the period |       | $                                  | 332        |                                  | $          | 367 |   | $ | 1,060 |   | $ | 1,152 |   |
| Interest cost  on projected benefit obligation       |       | 322                                |       | 303                                   |       | 982 |   | 909 |   |
| Expected  return on plan assets                      |       | (371                               | )          | (286                                  | )          | (1,113 | ) | (869 | ) |
| Amortization  of unrecognized prior service cost     |       | 11                                 |       | 16                                    |       | 33 |   | 18 |   |
| Net  amortization and deferral                       |       | (4                                 | )          | 41                                    |       | — |   | 146 |   |
| Net pension  cost                                    |       | $                                  | 290        |                                  | $          | 441 |   | $ | 962 |   | $ | 1,356 |   |

 

As of September 29, 2007, we have contributed$2.1 million to our defined benefit pension plans in fiscal 2007. As of September 29,2007, we anticipate electing to make additional payments of approximately $1.6 millionfor a total contribution of $3.7 million for fiscal 2007 to fund our definedbenefit pension plan obligations.

 

**(9)****                                 Related-PartyTransactions**

 

*Transaction Services Agreement.*Wewere party to a transaction services agreement pursuant to which Bruckmann,Rosser, Sherrill & Co., Inc. (BRS & Co.), the manager ofBruckmann, Rosser, Sherrill & Co., L.P. (BRS), would be paid atransaction fee for management, financial and other corporate advisory servicesrendered by BRS & Co. in connection with acquisitions, divestitures,financings and other transactions by our company, which fee would not exceed1.0% of the total transaction value. BRS was our majority owner prior to ourEIS offering in October 2004 and remained a majority owner of our Class Bcommon stock prior to our Class A common stock offering in May 2007. StephenC. Sherrill, the chairman of our board of directors, is a managing director ofBRS & Co. The transaction services agreement provided that transactionfees would be payable as described above unless a majority of disinteresteddirectors determined otherwise. Upon the consummation of the Class Acommon stock offering, the transaction services agreement was terminated. Notransaction fees were paid under the transaction services agreement duringfiscal 2007 prior to its termination or during fiscal 2006.

 

*Roseland Lease.*We lease amanufacturing and warehouse facility from a former chairman of our board ofdirectors under an operating lease, which expires in April 2009. Totalrent expense associated with this lease was $0.6 million for the first threequarters of 2007 and 2006.

 

*Acquisition of Grandma’s Molasses*.On January 10, 2006, through a wholly-owned subsidiary, we acquired the *Grandma’s*molasses business from Mott’s LLP, a CadburySchweppes Americas Beverages company, for $30.0 million in cash. James R.Chambers, a member of our board of directors has been the President, CadburySchweppes Americas Confectionary since July 2005. Mr. Chambers didnot participate in the negotiation of the transaction nor did he participate inthe board’s deliberations or decisions regarding the transaction. Mr. Chambersdid not personally have any direct or indirect pecuniary or other interest inthe transaction as a result of his position at Cadbury.

 

*Repurchase and Exchange of Class B CommonStock*. We used a portion of the proceeds of the Class Acommon stock offering to repurchase 6,762,455 shares of our Class B commonstock, which were held by, among others, BRS, Mr. Sherrill and certain ofour current and former executive officers, at a per share repurchase priceequal to the offering price of our Class A common stock, or $13.00 pershare, less discounts 

 

13

----

 

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

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

**(Unaudited)**

 

**(9)****                                 Related-PartyTransactions****(Continued)**

 

and commissions. We also exchanged the remaining793,988 shares of our Class B common stock, which were held by certain ofour current and former executive officers, for an equal numbers of shares ofour Class A common stock in order to eliminate all of our outstanding Class Bcommon stock. Our board of directors established a special committee comprisedsolely of our independent directors to recommend to our board of directors therepurchase price and exchange ratio for our Class B common stock, tonegotiate with the holders of the Class B common stock, and to recommendto our board of directors if the transaction was in our best interests and fairto the holders of our Class A common stock. The special committee retaineda financial advisor to provide information, advice and analysis to assist thespecial committee in its review of the proposed transaction. The specialcommittee also engaged its own legal counsel to advise the special committee onits duties and responsibilities. The financial advisor delivered to the specialcommittee an opinion that the proposed consideration to be paid by us to theholders of the Class B common stock was fair to us and the holders of the Class Acommon stock from a financial point of view. After considering all of theinformation it had gathered, the special committee recommended to our board ofdirectors that from a valuation standpoint, the purchase price for the Class Bcommon stock to be repurchased should be the offering price of the Class Acommon stock in the offering, net of underwriting discounts and commissions,and that each share of our Class B common stock to be exchanged should beexchanged for one share of our Class A common stock. The special committeealso recommended to our board of directors that based on the repurchase priceand Class A and Class B exchange ratio and other material terms ofthe transaction, the transaction was advisable and in our best interests andfair to the holders of our Class A common stock.

 

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

 

We are subject to environmental laws and regulationsin the normal course of business. Based on our experience to date, managementbelieves that the future cost of compliance with existing environmental lawsand regulations (and liability for known environmental conditions) will nothave a material adverse effect on our consolidated financial position, resultsof operations or liquidity. However, we cannot predict what environmental orhealth and safety legislation or regulations will be enacted in the future orhow existing or future laws or regulations will be enforced, administered orinterpreted, nor can we predict the amount of future expenditures that may berequired in order to comply with such environmental or health and safety lawsor regulations or to respond to such environmental claims.

 

We are involved in various claims and legal actionsarising in the ordinary course of business, including proceedings involvingproduct liability claims, worker’s compensation and other employee claims, andtort and other general liability claims, for which we carry insurance, as wellas trademark, copyright, patent infringement and related claims and legalactions. In the opinion of our management, the ultimate disposition of thesematters will not have a material adverse effect on our consolidated financialposition, results of operations or liquidity.

 

We have employmentagreements with our executive officers. The agreements generally continue untilterminated by the executive or by us, and provide for severance payments undercertain circumstances. As of September 29, 2007, if all of our executiveofficers were to be terminated by us without cause (as defined) or as a resultof the employees’ disability, our severance liability, including salarycontinuation, continuation of health care and insurance benefits, present valueof additional pension credits, and accelerated vesting under compensationplans, would have been approximately $3.2 million. As of September 29,2007, if all of our executive officers were to be terminated or deemedterminated by us upon a change of control (as defined), our severanceliability, including salary continuation, continuation of health care andinsurance benefits, present value of additional pension credits, acceleratedvesting under compensation plans, and potential excise tax liability and grossup payments, would have been approximately $5.0 million.

 

14

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

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

**(Unaudited)**

 

**(11)****                          Earningsper Share**

 

We currently have one class of common stock issued andoutstanding, designated as Class A common stock. Prior to May 29,2007, we had two classes of common stock issued and outstanding, designated as Class Acommon stock and Class B common stock. For periods in which we had sharesof both Class A and Class B common stock issued and outstanding, wepresent earnings per share using the two-class method. The two-class method isan earnings allocation formula that determines earnings per share for eachclass of common stock according to dividends declared and participation rightsin undistributed earnings or losses. Net income is allocated between the twoclasses of common stock based upon the two-class method. Basic and dilutedearnings per share for the Class A common stock and Class B commonstock is calculated by dividing allocated net income by the weighted average numberof shares of Class A common stock and Class B common stockoutstanding.

 
| ** **                                                      | ** ** | **Thirteen  Weeks Ended**       | ** ** | **Thirty-nine  Weeks Ended**  | ** ** |
|-----------------------------------------------------------------|------------|--------------------------------------|------------|------------------------------------|------------|
| ** **                                                      | ** ** | **September 29,   2007**   | ** ** | **September 30,   2006** | ** ** | **September 29,   2007** | ** ** | **September 30,   2006** | ** ** |
| ** **                                                      | ** ** | **(dollars in thousands)** | ** ** |
| Net income                                                      |       | $                                    | 4,846      |                               | $          | 3,443 |   | $ | 12,657 |   | $ | 8,704 |   |
| Less: Class A  common stock dividends declared             |       | 7,797                                |       | 4,240                              |       | 19,834 |   | 12,720 |   |
| Undistributed  (loss) earnings available to common stockholders |       | $                                    | (2,951     | )                                  | $          | (797 | ) | $ | (7,177 | ) | $ | (4,016 | ) |
|                                                            |       |                                 |       |                               |       |   |   |   |   |
| Basic and Diluted  weighted average common shares outstanding:  |       |                                 |       |                               |       |   |   |   |   |
| Class A  common stock                                      |       | 36,778,988                           |       | 20,000,000                         |       | 27,621,225 |   | 20,000,000 |   |
| Class B  common stock                                      |       | —                               |       | 7,556,443                          |       | 4,124,212 |   | 7,556,443 |   |
|                                                            |       |                                 |       |                               |       |   |   |   |   |
| Basic and  diluted allocation of undistributed (loss) earnings: |       |                                 |       |                               |       |   |   |   |   |
| Class A  common stock                                      |       | $                                    | (2,951     | )                                  | $          | (578 | ) | $ | (6,245 | ) | $ | (2,915 | ) |
| Class B  common stock                                      |       | —                               |       | (219                               | )          | (932 | ) | (1,101 | ) |
| Total                                                           |       | $                                    | (2,951     | )                                  | $          | (797 | ) | $ | (7,177 | ) | $ | (4,016 | ) |
|                                                            |       |                                 |       |                               |       |   |   |   |   |
| Basic and  diluted earnings per share:                          |       |                                 |       |                               |       |   |   |   |   |
| Undistributed  (loss) earnings per share:                       |       |                                 |       |                               |       |   |   |   |   |
| Class A  common stock                                      |       | $                                    | (0.08      | )                                  | $          | (0.03 | ) | $ | (0.23 | ) | $ | (0.15 | ) |
| Class B  common stock                                      |       | $                                    | —     |                               | $          | (0.03 | ) | $ | (0.23 | ) | $ | (0.15 | ) |
| Distributed  earnings:                                          |       |                                 |       |                               |       |   |   |   |   |
| Class A  common stock                                      |       | $                                    | 0.21       |                               | $          | 0.21 |   | $ | 0.72 | (1) | $ | 0.64 |   |
| Earnings  (loss) per share:                                     |       |                                 |       |                               |       |   |   |   |   |
| Class A  common stock                                      |       | $                                    | 0.13       |                               | $          | 0.18 |   | $ | 0.49 |   | $ | 0.49 |   |
| Class B  common stock                                      |       | $                                    | —     |                               | $          | (0.03 | ) | $ | (0.23 | ) | $ | (0.15 | ) |

 

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(1)          “Distributed earnings” differs from actual per share amounts paid asdividends as the earnings per share computation under GAAP requires the use ofthe weighted average, rather than the actual number of shares outstanding.

 

Since May 29, 2007, we no longer have any sharesof Class B common stock outstanding. In addition, no dividends on our Class Bcommon stock were ever declared prior to such date. Therefore, for purposes ofthe earnings per share calculation, all distributed earnings are included in Class Acommon stock earnings per share.

 

15

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

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

**(Unaudited)**

 

**(12)****                          Businessand Credit Concentrations and Geographic Information**

 

Our exposure to credit loss in the event ofnon-payment of accounts receivable by customers is estimated in the amount ofthe allowance for doubtful accounts. We perform ongoing credit evaluations ofour customers’ financial conditions. As of September 29, 2007, we do notbelieve we have any significant concentration of credit risk with respect toour trade accounts receivable. Our top ten customers accounted forapproximately 44.8%****and 43.5% ofconsolidated net sales for the first three quarters of 2007 and the first threequarters of 2006, respectively. Other than Wal-Mart, which accounted for 11.7%and 10.5% of our consolidated net sales for the first three quarters of 2007and the first three quarters of 2006, respectively, no single customeraccounted for 10.0% or more of our consolidated net sales for the first threequarters of 2007 or the first three quarters of 2006.

 

During the third quarter of 2007 and 2006 and thefirst three quarters of 2007 and 2006, respectively, our sales to foreigncountries represented less than 1.0% of net sales. Our foreign sales areprimarily to customers in Canada.

 

**(13)****                          InsuranceRecovery**

 

During the fourth quarter of fiscal 2006, we learnedof an alleged theft of approximately $0.8 million over several years at ourRoseland, New Jersey manufacturing facility resulting from overpaymentsallegedly authorized by a former supervisor to direct-store-deliveryindependent contractor truck drivers. While the cumulative amount of thealleged theft may have been substantial, the related losses were reported ineach respective period and discovery of this alleged theft has not resulted inchanges to any previously reported results. During the second quarter of 2007,we received insurance proceeds for the entire amount of the loss, which isrecorded as an offset to general and administrative expenses.

 

**(14)****                          Gain onSale of Property, Plant and Equipment**

 

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. During the thirteen weeks ended December 31,2005, we began negotiations for the sale of the land and building andclassified the land and building, with a carrying value of $0.8 million, asassets held for sale at such time and ceased depreciation. The sale of our NewIberia facility closed on July 9, 2006. We received net proceeds of $1.3million and recorded a gain on the sale of $0.5 million.

** **

**16**

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** **

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

** **

The following Management’s Discussion and Analysis ofFinancial Condition and Results of Operations contains forward-lookingstatements that involve risks and uncertainties. Our actual results coulddiffer materially from those anticipated in these forward-looking statements asa result of certain factors, including those set forth under the heading “Forward-LookingStatements” below and elsewhere in this report. The following discussion shouldbe read in conjunction with the unaudited consolidated interim financialstatements and related notes for the thirteen and thirty-nine weeks ended September 29,2007 (third quarter of 2007 and first three quarters of 2007) includedelsewhere in this report and the audited consolidated financial statements andrelated notes for the fiscal year ended December 30, 2006 (fiscal 2006)included in our Annual Report on Form 10-K/A filed with the Securities andExchange Commission (SEC) on March 9, 2007.

 

**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 cash available to pay dividends by enhancing ourexisting portfolio of branded shelf-stable products and by capitalizing on ourcompetitive strengths. We intend to implement our strategy through thefollowing initiatives: profitably growing our established brands, leveragingour unique multiple-channel sales and distribution system, introducing newproducts, capitalizing on the higher growth Mexican segment of the foodindustry, designing new products and modifying existing products to addressconsumer health and wellness concerns such as diabetes and natural/organicfoods, and expanding our brand portfolio through acquisitions.

 

Since 1996, we havesuccessfully acquired and integrated 18 separate brands into our operations. Webelieve that successful future acquisitions, if any, will enhance our portfolioof existing businesses, further leveraging our existing infrastructure.

 

We completed the acquisitionof the *Grandma’s* molassesbusiness from Motts LLP, a Cadbury Schweppes Americas Beverages Company, on January 10,2006. We completed the acquisition of the *Cream of Wheat*and*Cream of Rice*business from Kraft FoodsGlobal, Inc. effective February 25, 2007. We refer to the *Cream of Wheat*and *Cream of Rice*acquisitionas the “*Cream of Wheat*acquisition” and the *Cream of Wheat*and *Cream of Rice*businessescollectively as the “*Cream of Wheat*business.”  Both the *Grandma’s* molasses acquisition and *Cream of Wheat*acquisition have been accounted for using thepurchase method of accounting and, accordingly, the assets acquired and resultsof operations of the acquired businesses are included in our consolidatedfinancial statements from the respective dates of acquisition. Theseacquisitions and the application of the purchase method of accounting for theseacquisitions affect comparability between periods.

 

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,” include:

 

*Fluctuations in Commodity Prices and Production andDistribution Costs*. We purchase raw materials, includingagricultural products, meat, poultry, other raw materials, ingredients andpackaging materials from growers, commodity processors, other food companiesand packaging manufacturers. Raw materials, ingredients and packaging materialsare subject to fluctuations in price attributable to a number of factors. Fluctuationsin commodity prices can lead to retail price volatility and intensive pricecompetition, and can influence consumer and trade buying patterns. In the thirdquarter and first three quarters of 2007, our commodity prices for maple syrupand corn sweeteners were higher than those incurred during the thirteen andthirty-nine weeks ended September 30, 2006 (third quarter of 2006 andfirst three quarters of 2006). In addition, the cost of labor, manufacturing,energy, fuel, packaging materials and other costs related to the 

 

17

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production and distribution of our food products haverisen significantly in recent years and at an increasing rate in recent months.We expect that many of these costs will continue to rise for the foreseeablefuture. We manage these risks by entering into short-term supply contracts andadvance commodities purchase agreements from time to time, implementing costsaving measures and, if necessary, by raising sales prices. We cannot assureyou that any cost saving measures or sales price increases by us will offsetincreases to our raw material, ingredient, packaging and distribution costs. Tothe extent we are unable to offset these cost increases, our operating resultswill be significantly impacted during the remainder of fiscal 2007 and fiscal2008.

 

*Consolidation in the Retail Trade and ConsequentInventory Reductions*. As the retail grocery trade continuesto 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.

 

*Consumer Concern Regarding Food Safety, Quality andHealth*. The food industry is subject to consumer concernsregarding the safety and quality of certain food products, including the healthimplications of genetically modified organisms and obesity.

 

*Changing Valuations of the Canadian Dollar inRelation to the U.S. Dollar*. We purchase the majority of ourmaple syrup requirements from manufacturers located in Quebec, Canada. Over thepast several years the U.S. dollar has weakened against the Canadian dollar,which has in turn increased our costs relating to the production of our maplesyrup products.

 

To confront these challenges, we continue to takesteps to build the value of our brands, to improve our existing portfolio ofproducts with new product and marketing initiatives, to reduce costs throughimproved productivity and to address consumer concerns about food safety,quality and health.

 

**Critical Accounting Policies; Use of Estimates**

** **

The preparation of financial statements in accordancewith U.S. generally accepted accounting principles requires our management tomake a number of estimates and assumptions relating to the reporting of assetsand liabilities and the disclosure of contingent assets and liabilities at thedate of the consolidated financial statements and the reported amounts ofrevenues and expenses during the reporting period. Some of the more significantestimates and assumptions made by management involve trade and consumerpromotion expenses, allowances for excess, obsolete and unsaleable inventories,pension benefits; purchase accounting allocations; the recoverability ofgoodwill, trademarks, customer relationship intangibles, property, plant andequipment, and deferred tax assets; the accounting for our EISs, includingtheir treatment in computing our income tax expense; and the accounting forearnings per share. Actual results could differ from these estimates andassumptions.

 

Summaries of our significant accounting policies aredescribed more fully in note 2 to our consolidated financial statementsincluded in our 2006 Annual Report on Form 10-K/A. We believe thefollowing critical accounting policies involve the most significant judgmentsand estimates used in the preparation of our consolidated financial statements.

 

***Trade and Consumer PromotionExpenses***

 

We offer various sales incentive programs to customersand consumers, such as price discounts, in-store display incentives, slottingfees and coupons. The recognition of expense for these programs involves theuse of judgment related to performance and redemption estimates. Estimates aremade based on historical 

 

18

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experience and other factors. Actual expenses maydiffer if the level of redemption rates and performance vary from estimates.

 

***Inventories***

 

Inventories are stated at the lower of cost or market.Cost is determined using the first-in, first-out and average cost methods. Inventorieshave been reduced by an allowance for excess, obsolete and unsaleableinventories. The allowance is an estimate based on our management’s review ofinventories on hand compared to estimated future usage and sales.

 

***Long-Lived Assets***

 

Long-lived assets, such as property, plant andequipment, and intangibles with estimated useful lives are depreciated oramortized over their respective estimated useful lives to their estimatedresidual values, and reviewed for impairment whenever events or changes incircumstances indicate that the carrying amount of an asset may not berecoverable. 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. Recoverability of assets held for sale is measured bya comparison of the carrying amount of an asset or asset group to their fairvalue less estimated cost to sell. Calculating fair value of assets requiressignificant estimates and assumptions by management.

 

***Goodwill andTrademarks***

 

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 life intangiblesmight be impaired.

 

We perform the annual impairment tests as of the lastday of each fiscal year. The annual goodwill impairment test involves atwo-step process. The first step of the impairment test involves comparing thefair value of our company with our company’s carrying value, including goodwill.If the carrying value of our company exceeds our fair value, we perform thesecond step of the impairment test to determine the amount of the impairmentloss. The second step of the goodwill impairment test involves comparing theimplied fair value of goodwill with the carrying value of that goodwill andrecognizing a loss for the difference. Calculating our fair value requiressignificant estimates and assumptions by management. We estimate our fair valueby applying third party market value indicators to our earnings beforeinterest, taxes, depreciation and amortization (EBITDA). We test indefinitelife intangible assets for impairment by comparing their carrying value totheir fair value that is determined using a cash flow method and recognize aloss to the extent the carrying value is greater.

 

We completed our annual impairment tests for fiscal2006 with no adjustments to the carrying values of goodwill and indefinite lifeintangibles. We did not note any events or circumstances during the first threequarters of 2007 that would indicate that goodwill or indefinite lifeintangibles might be impaired.

 

***Cash Flow Hedge***

 

We use an interest rate swap to manage variableinterest rate exposure on $130.0 million of term loan borrowings. Our objectivefor holding this derivative is to decrease the volatility of future cash flowsassociated with interest payments on our variable rate debt. This derivative isrecognized in other assets or liabilities on our consolidated balance sheet atfair value. We record gains and losses on derivatives qualifying as a cash flowhedge in comprehensive income (loss), to the extent that the hedge is effectiveand 

 

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until we recognize the underlying transactions in netincome, at which time we recognize these gains and losses in our consolidatedstatement of operations.

 

The unrealized amounts in comprehensive income (loss)will fluctuate based on changes in the fair value of open contracts during eachreporting period. Our interest rate swap, which is described below under “Liquidityand Capital Resources—*Debt*” and innote 5 and note 6 to our consolidated financial statements was an effectivehedge for the third quarter and first three quarters of 2007, meaning that itqualified for hedge accounting treatment.

 

***Accounting Treatment for EISs***

 

Our EISs include Class A common stock and seniorsubordinated notes. Upon completion of our 2004 EIS offering (including theexercise 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 2004 EIS offering was equivalent to thecombined fair value of the Class A common stock and the seniorsubordinated notes, and the price paid in the offering for the seniorsubordinated notes sold separately (not in the form of EISs) was equivalent totheir initial stated principal amount. Therefore, we have allocated the entireproceeds of the 2004 EIS offering to the Class A common stock and thesenior subordinated notes, and the allocation of the EIS proceeds to the seniorsubordinated notes did not result in a premium or discount.

 

The Class A common stock portion of each EIS isincluded in stockholders’ equity, net of the related portion of the EIStransaction costs allocated to Class A common stock. Dividends paid on theClass A common stock portion of each EIS are recorded as a decrease toadditional paid-in capital when declared by us. The senior subordinated noteportion of each EIS is included in long-term debt, and the related portion ofthe 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 interest expense as accrued by us and deductedfor income tax purposes.

 

***Income Tax Expense Estimates andPolicies***

 

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 such chargein our tax provision, or reduce our tax benefits in our consolidated statementof operations. We use our judgment to determine our provision or benefit forincome taxes, deferred tax assets and liabilities and any valuation allowancerecorded against our net deferred tax assets.

 

There are various factors that may cause these 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 recognize the benefit of an uncertain tax positionthat we have taken or expect to take on the income tax returns we file if it is“more likely than not” that such tax position will be sustained based on itstechnical merits.

 

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***Earnings Per Share***

 

We currently have one class of common stock issued andoutstanding, designated as Class A common stock. Prior to May 29,2007, we had two classes of common stock issued and outstanding, designated as Class Acommon stock and Class B common stock. For periods in which we had sharesof both Class A and Class B common stock issued and outstanding, wepresent earnings per share using the two-class method. The two-class method isan earnings allocation formula that determines earnings per share for eachclass of common stock according to dividends declared and participation rightsin undistributed earnings or losses.

 

Net income is allocated between the two classes ofcommon stock based upon the two-class method. Basic and diluted earnings pershare for the Class A common stock and Class B common stock iscalculated by dividing allocated net income by the weighted average number ofshares of Class A common stock and Class B common stock outstanding.

 

***Pension Expense***

*** ***

We have defined benefitpension plans covering substantially all of our employees. Our funding policyis to contribute annually the amount recommended by our actuaries. The fundedstatus of our pension plans is dependent upon many factors, including returnson invested assets and the level of certain market interest rates. We reviewpension assumptions regularly and we may from time to time make voluntarycontributions to our pension plans, which exceed the amounts required bystatute. During the third quarter and first three quarters of 2007, we madecontributions of $0.8 million and $2.1 million, respectively, to our pensionplans. During the third quarter and first three quarters of 2006, we madecontributions of $0.6 million and $1.1 million, respectively, to our pensionplans. Changes in interest rates and the market value of the securities held bythe plans could materially change, positively or negatively, the underfundedstatus of the plans and affect the level of pension expense and requiredcontributions during the remainder of fiscal 2007 and beyond.

 

Our discount rate assumptionincreased from 5.65% at December 31, 2005 to 5.90% at December 30,2006 for our pension plans. We presently anticipate that assumption changes,coupled with the amortization of deferred gains and losses will result in adecrease in fiscal 2007 pre-tax pension expense of approximately $0.3 million. Inaddition, as a sensitivity measure, a 0.25% decline or increase in our discountrate would increase or decrease our pension expense by approximately $0.1million. Similarly, a 0.25% decrease or increase in the expected return onpension plan assets would increase or decrease our pension expense byapproximately $0.1 million.

 

In August 2006, thePension Protection Act of 2006 was signed into law. The major provisions of thestatute will take effect January 1, 2008. Among other things, the statuteis designed to ensure timely and adequate funding of qualified pension plans byshortening the time period within which employers must fully fund pensionbenefits. We are currently evaluating the effect, if any, that the PensionProtection Act of 2006 will have on future pension funding requirements.

 

The adoption of SFAS No. 158as of December 30, 2006 required us to record an incremental after-taxcharge of $1.6 million in accumulated other comprehensive loss related to theunrecognized net actuarial losses and unrecognized prior service costs.

 

***Acquisition Accounting***

*** ***

We account for acquiredbusinesses using the purchase method of accounting, which requires that theassets acquired and liabilities assumed be recorded at the date of acquisitionat their respective fair values. Our consolidated financial statements andresults of operations reflect an acquired business after the completion of theacquisition. The cost to acquire a business, including transaction costs, isallocated to the underlying net assets of the acquired business in proportionto their respective fair values. Any excess of the purchase price over theestimated fair values of the net assets acquired is recorded as goodwill.

 

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The judgments made in determiningthe estimated fair value assigned to each class of assets acquired andliabilities assumed, as well as asset lives, can materially impact our resultsof operations. Accordingly, for significant items, we typically obtainassistance from third party valuation specialists.

 

Determining the useful lifeof an intangible asset also requires judgment as different types of intangibleassets will have different useful lives and certain assets may even beconsidered to have indefinite useful lives.

 

All of these judgments andestimates can materially impact our results of operations.

 

**Resultsof Operations**

** **

The following table sets forth the percentages of netsales represented by selected items for the third quarter of 2007 and 2006 andthe first three quarters of 2007 and 2006 reflected in our consolidatedstatements of operations. The comparisons of financial results are notnecessarily indicative of future results:

 
| ** **                                        | ** ** | **Thirteen Weeks Ended** | ** ** | **Thirty-nine Weeks Ended** | ** ** |
|---------------------------------------------------|------------|------------------------------------|------------|---------------------------------------|------------|
| ** **                                        | ** ** | **September 29,   2007** | ** ** | **September 30,   2006**    | ** ** | **September 29,   2007** | ** ** | **September 30,   2006** | ** ** |
| **Statement  of Operations:**                     |       |                               |       |                                  |       |   |   |   |   |
| Net sales                                         |       | 100.0                              | %          | 100.0                                 | %          | 100.0 | % | 100.0 | % |
| Cost of  goods sold                               |       | 67.3                               | %          | 71.2                                  | %          | 68.1 | % | 71.5 | % |
| Gross profit                                      |       | 32.7                               | %          | 28.8                                  | %          | 31.9 | % | 28.5 | % |
|                                              |       |                               |       |                                  |       |   |   |   |   |
| Sales,  marketing and distribution expenses       |       | 11.2                               | %          | 11.3                                  | %          | 11.0 | % | 11.2 | % |
| General and  administrative expenses              |       | 2.9                                | %          | 1.6                                   | %          | 2.0 | % | 1.7 | % |
| Gain on sale  of property, plant and equipment    |       | —                             |       | (0.5                                  | )%         | — |   | (0.2 | )% |
| Amortization  expense—customer relationships |       | 1.4                                | %          | 0.2                                   | %          | 1.1 | % | 0.2 | % |
| Operating  income                                 |       | 17.2                               | %          | 16.3                                  | %          | 17.8 | % | 15.7 | % |
|                                              |       |                               |       |                                  |       |   |   |   |   |
| Interest  expense, net                            |       | 10.6                               | %          | 10.8                                  | %          | 11.8 | % | 10.9 | % |
| Income  before income tax expense                 |       | 6.7                                | %          | 5.5                                   | %          | 6.0 | % | 4.7 | % |
|                                              |       |                               |       |                                  |       |   |   |   |   |
| Income tax  expense                               |       | 2.5                                | %          | 2.1                                   | %          | 2.3 | % | 1.8 | % |
| Net income                                        |       | 4.1                                | %          | 3.4                                   | %          | 3.7 | % | 2.9 | % |

 

As used in this section the terms listed belowhave the following meanings:

 

*Net Sales.*Our netsales represents gross sales of products shipped to customers plus amountscharged customers for shipping and handling, less cash discounts, couponredemptions, slotting fees and trade promotional spending.

 

*Gross Profit.*Ourgross profit is equal to our net sales less cost of goods sold. The primarycomponents of our cost of goods sold are cost of internally manufacturedproducts, purchases of finished goods from co-packers plus freight costs to ourdistribution centers and to our customers.

 

*Sales, Marketing and DistributionExpenses.*Our sales, marketing and distribution expensesinclude costs for marketing personnel, consumer advertising programs, internalsales forces, brokerage costs and warehouse facilities.

 

*General and Administrative Expenses.*Our general and administrative expenses includeadministrative employee compensation and benefit costs, as well as informationtechnology infrastructure and communication costs, office rent and supplies,professional services, and other general corporate expenses. 

 

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For the first three quarters of 2007, general andadministrative expenses is net of $0.8 million of insurance proceeds relatingto a previously reported employee theft.

 

*Gain on Sale of Property, Plant andEquipment.*Gain on sale of property, plant and equipmentincludes any gain or loss on the sale of property, plant and equipment.

 

*Amortization Expenses—CustomerRelationships.* Amortization expense—customer relationshipsincludes the amortization expense associated with customer relationshipintangibles and are amortized over their useful lives of 20 years.

 

*Net Interest Expense.*Netinterest expense includes interest relating to our outstanding indebtedness andamortization of deferred debt issuance costs, net of interest income.

 

***Non-GAAP Financial Measures***

 

Certain disclosures in this report include “non-GAAP(Generally Accepted Accounting Principles) financial measures.”  A non-GAAP financial measure is defined as anumerical measure of our financial performance that excludes or includesamounts so as to be different than the most directly comparable measurecalculated and presented in accordance with GAAP in our consolidated balancesheets and related consolidated statements of operations, changes instockholders’ equity and comprehensive income, and cash flows.

 

EBITDA is a measure used by management to measureoperating performance. EBITDA is defined as net income before net interestexpense, income taxes, depreciation, and amortization. Management believes thatit is useful to eliminate net interest expense, income taxes, depreciation andamortization because it allows management to focus on what it deems to be amore reliable indicator of ongoing operating performance and our ability togenerate cash flow from operations. We use EBITDA in our business operations,among other things, to evaluate our operating performance, develop budgets andmeasure our performance against those budgets, determine employee bonuses andevaluate our cash flows in terms of cash needs. We also present EBITDA becausewe believe it is a useful indicator of our historical debt capacity and abilityto service debt and because covenants in our credit facility and the indenturesgoverning the senior notes and the senior subordinated notes contain ratiosbased on these measures. As a result, internal management reports used duringmonthly operating reviews feature the EBITDA metric. However, management usesthis metric in conjunction with traditional GAAP operating performance andliquidity measures as part of its overall assessment of company performance andliquidity and therefore does not place undue reliance on this measure as itsonly measure of operating performance and liquidity.

 

EBITDA is not a recognized term under GAAP and doesnot purport to be an alternative to operating income or net income as anindicator of operating performance or any other GAAP measure. EBITDA is not acomplete net cash flow measure because EBITDA is a measure of liquidity thatdoes not include reductions for cash payments for an entity’s obligation toservice its debt, fund its working capital, capital expenditures andacquisitions, if any, and pay its income taxes and dividends, if any. Rather,EBITDA is a potential indicator of an entity’s ability to fund these cashrequirements. EBITDA also is not a complete measure of an entity’sprofitability because it does not include costs and expenses for depreciationand amortization, interest and related expenses and income taxes. Because notall companies use identical calculations, this presentation of EBITDA may notbe comparable to other similarly titled measures of other companies. However,EBITDA can still be useful in evaluating our performance against our peercompanies because management believes this measure provides users with valuableinsight into key components of GAAP amounts.

 

A reconciliation of EBITDA to net income and to netcash provided by operating activities for the third quarter and first threequarters of 2007 and 2006 along with the components of EBITDA follows:

 

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| ** **                                                                 | ** ** | **Thirteen Weeks Ended**   | ** ** | **Thirty-nine Weeks Ended** | ** ** |
|----------------------------------------------------------------------------|------------|--------------------------------------|------------|---------------------------------------|------------|
| ** **                                                                 | ** ** | **September 29,   2007**   | ** ** | **September 30,   2006**    | ** ** | **September 29,   2007** | ** ** | **September 30,   2006** | ** ** |
| ** **                                                                 | ** ** | **(Dollars in thousands)** | ** ** |
| Net income                                                                 |       | $                                    | 4,846      |                                  | $          | 3,443 |   | $ | 12,657 |   | $ | 8,704 |   |
| Income tax  expense                                                        |       | 2,958                                |       | 2,183                                 |       | 7,725 |   | 5,518 |   |
| Interest  expense, net                                                     |       | 12,374                               |       | 11,009                                |       | 40,028 |   | 32,796 |   |
| Depreciation  and amortization                                             |       | 3,843                                |       | 1,959                                 |       | 9,706 |   | 5,863 |   |
| EBITDA                                                                     |       | 24,021                               |       | 18,594                                |       | 70,116 |   | 52,881 |   |
| Income tax  expense                                                        |       | (2,958                               | )          | (2,183                                | )          | (7,725 | ) | (5,518 | ) |
| Interest  expense, net                                                     |       | (12,374                              | )          | (11,009                               | )          | (40,028 | ) | (32,796 | ) |
| Deferred  income taxes                                                     |       | 3,102                                |       | 2,116                                 |       | 6,944 |   | 4,910 |   |
| Amortization  of deferred financing costs                                  |       | 792                                  |       | 710                                   |       | 2,397 |   | 2,122 |   |
| Gain on sale  of property, plant and equipment                             |       | —                               |       | (525                                  | )          | — |   | (525 | ) |
| Write off of  deferred debt issuance costs                                 |       | —                               |       | —                                |       | 1,769 |   | — |   |
| Changes in  assets and liabilities, net of effects of business combination |       | (3,213                               | )          | (3,571                                | )          | (12,273 | ) | (2,898 | ) |
| Net cash  provided by operating activities                                 |       | $                                    | 9,370      |                                  | $          | 4,132 |   | $ | 21,200 |   | $ | 18,176 |   |

 

***Third quarter of 2007 compared to third quarter of2006.***

** **

*Net Sales.*Netsales increased $15.1 million or 14.9% to $117.0 million for the third quarterof 2007 from $101.9 million for the third quarter of 2006. The *Cream of Wheat* acquisition accounted for $15.4 million ofthe net sales increase offset by a decrease in net sales of $1.1 millionrelating to the termination of a temporary co-packing arrangement. Theremaining $0.8 million net sales increase related to increases in sales priceand unit volume. Net sales of our lines of*Maple Grove Farms*, *B&M*and *Ortega*products increased**in the amounts of $2.1 million, $0.5 million and $0.4million or 13.6%, 9.2% and 1.8%, respectively. These increases were offset by areduction in net sales of *Underwood*,*B&G*and *Sa-són* products of $1.2 million, $0.6 million and$0.3 million or 17.7%, 5.7% and 25.3%, respectively. In the aggregate, netsales for all other brands decreased $0.1 million or 0.3%.

 

*Gross Profit.*Grossprofit increased $8.9 million or 30.4% to $38.3 million for the third quarterof 2007 from $29.4 million for the third quarter of 2006. Gross profitexpressed as a percentage of net sales increased 3.9% to 32.7% in the thirdquarter of 2007 from 28.8% in the third quarter of 2006. The increase in grossprofit expressed as a percentage of net sales was primarily due to the positiveeffect of the *Cream of Wheat*acquisition, whichimproved our overall gross profit expressed as a percentage of net sales by5.4%. Our gross profit expressed as a percentage of net sales for all otherbrands in the aggregate decreased by 1.5% primarily due to the mix of productssold and the higher costs for packaging, corn sweeteners and maple syruppartially offset by sales price increases.

 

*Sales, Marketing and DistributionExpenses.*Sales, marketing and distribution expenses increased$1.6 million or 14.4% to $13.1 million for the third quarter of 2007 from $11.5million for the third quarter of 2006. This increase is primarily due to anincrease in brokerage and salesmen compensation of $1.1 million (relating toincreased sales volume from the *Cream of Wheat*acquisitionand internal sales growth) and an increase in consumer marketing of $0.5million. Expressed as a percentage of net sales, our sales, marketing anddistribution expenses decreased to 11.2% for the third quarter of 2007 from11.3% for the third quarter of 2006.

 

*General and Administrative Expenses.*General and administrative expenses increased $1.8 million or111.8% to $3.4 million for the third quarter of 2007 from $1.6 million for thethird quarter of 2006. The increase primarily resulted from a $1.4 millionaccrual relating to special bonus awards to be paid in March 2008 tocertain executive officers and members of our senior management in recognitionof their 

 

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contributions to the successful completion of the *Cream of Wheat* acquisition and the Class A common stockoffering. In addition, general and administrative expenses increased by $0.4million as a result of an increased incentive compensation accrual relating toour 2007 annual bonus plan. During the fourth quarter of 2007, we expect toaccrue an additional expense of $0.5 million relating to the special bonusawards.

 

*Gain on Sale of Property, Plant andEquipment.*Gain onsale of property, plant and equipment for the third quarter of 2006 related to the gain on the sale ofour New Iberia facility of $0.5 million. There were no gains or losses on thesale of property, plant and equipment for the third quarter of 2007.

 

*Amortization Expense*—*Customer Relationships.*Amortization expense—customer relationships, all of which relatesto the amortization of customer relationship intangibles acquired in the*Grandma’s*molasses and *Cream of Wheat*acquisitions, increased$1.4 million to $1.6 for the third quarter of 2007 from $0.2 million for the third quarter of 2006.

 

*Operating Income.*Asa result of the foregoing, operating income increased $3.6 million or 21.3% to$20.2 million for the third quarter of 2007 from $16.6 million for the thirdquarter of 2006. Operating income expressed as a percentage of net salesincreased to 17.2% in the third quarter of 2007 from 16.3% in the third quarterof 2006.

 

*Net Interest Expense.*Netinterest expense increased $1.4 million or 12.4% to $12.4 million for the thirdquarter of 2007 from $11.0 million in the third quarter of 2006. Our averagedebt outstanding was approximately $105.0 million higher for the third quarterof 2007 as compared to the third quarter of 2006. See “—Liquidity and CapitalResources—Debt” below.

 

*Income Tax Expense.*Incometax expense increased $0.8 million to $3.0 for the third quarter of 2007 from$2.2 million for the third quarter of 2006. Our effective tax rate was 37.9%for the third quarter of 2007 and 38.8% for the third quarter of 2006.

 

***First three quarters of 2007 compared to first threequarters of 2006.***

** **

*Net Sales.*Netsales increased $38.9 million or 13.0% to $339.0 million for the first three quarters of 2007 from $300.1million for the first threequarters of 2006. The net sales increase for the first three quarters of 2007included $34.2 million from the *Cream of Wheat*acquisitionoffset by a decrease in net sales of $2.4 million relating to the terminationof a temporary co-packing arrangement. The remaining $7.1 million net salesincrease related to increases in sales price and unit volume. Net sales of ourlines of***Maple GroveFarms, Grandma’s*, *Ortega, Polaner, LasPalmas, B&M*and *Joanof Arc*products increased**inthe amounts of $7.1 million, $1.4 million, $0.8 million, $0.6 million, $0.5million, $0.4 million and $0.3 million or 17.1%, 28.7%, 1.2%, 2.2%, 2.7%, 1.9%and 5.0%, respectively. These increases were offset by a reduction in net salesof *Emeril’s,**B&G,Regina*and *Underwood*products of $1.9 million, $1.0million, $0.7 million and $0.7 million or 12.2%, 2.9%, 8.0% and 4.2%,respectively. In the aggregate, net sales for all other brands increased $0.3million or 0.7%.

 

*Gross Profit.*Grossprofit increased $22.7 million or 26.5% to $108.3 million for the first threequarters of 2007 from $85.6 million for the first three quarters of 2006. Grossprofit expressed as a percentage of net sales increased 3.4% to 31.9% in thefirst three quarters of 2007 from 28.5% in the first three quarters of 2006. Theincrease in gross profit expressed as a percentage of net sales was primarilydue to the positive effect of the *Cream of Wheat*acquisition,which improved our overall gross profit expressed as a percentage of net salesby 3.8%. Our gross profit expressed as a percentage of net sales for all otherbrands in the aggregate decreased by 0.4% primarily due to the mix of productssold and the higher costs for packaging, corn sweeteners and maple syruppartially offset by sales price increases.

 

*Sales, Marketing and DistributionExpenses.*Sales, marketing and distribution expensesincreased $3.7 million or 10.9% to $37.2 million for the first three quartersof 2007 from $33.5 million for the first three

 

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quarters of 2006. The increase is primarily due to anincrease in brokerage and salesmen compensation of $2.3 million (relating toincreased sales volume from the *Cream of Wheat*acquisitionand internal sales growth), an increase in consumer marketing of $1.1 millionand an increase in distribution costs of $0.3 million. Expressed as apercentage of net sales, our sales, marketing and distribution expensesdecreased to 11.0% for the first three quarters of 2007 from 11.2% for thefirst three quarters of 2006.

 

*General and Administrative Expenses.*General and administrative expenses increased $1.7 million or34.5% to $6.8 million for the first three quarters of 2007 from $5.1 million inthe first three quarters of 2006. The increase in general and administrativeexpenses primarily resulted from an accrual of $1.4 million for special bonusawards, an increased incentive compensation accrual of $0.7 million relating toour 2007 annual bonus plan and an increase in other miscellaneous expenses of$0.4 million, offset by an insurance reimbursement of $0.8 million relating toa previously reported employee theft. During the fourth quarter of 2007, weexpect to accrue an additional expense of $0.5 million relating to the specialbonus awards.

 

*Gain on Sale of Property, Plant andEquipment.*Gain onsale of property, plant and equipment for the first three quarters of2006 related to the gain on thesale of our New Iberia facility of $0.5 million. There were no gains or losseson the sale of property, plant and equipment for the first three quarters of2007.

 

*Amortization Expense—CustomerRelationships.*Amortization expense—customer relationships,all of which relates to the amortization of customer relationship intangiblesacquired in the *Grandma’s* molasses and *Cream of Wheat*acquisitions, increased $3.4 million to $3.9million for the first three quarters of 2007 from $0.5 million for the firstthree quarters of 2006.

 

*Operating Income.*Asa result of the foregoing, operating income increased $13.4 million or 28.5% to$60.4 million for the first three quarters of 2007 from $47.0 million for thefirst three quarters of 2006. Operating income expressed as a percentage of netsales increased to 17.8% in the first three quarters of 2007 from 15.7% in thefirst three quarters of 2006.

 

*Net Interest Expense.*Netinterest expense increased $7.2 million or 22.1% to $40.0 million for the firstthree quarters of 2007 from $32.8 million in the first three quarters of 2006. Interestexpense for the first three quarters of 2007 included a write-off of deferredfinancing costs of $1.8 million relating to our prepayment of $100.0 million ofterm loan borrowings with a portion of the proceeds of our public offering of Class Acommon stock in May 2007. Our average debt outstanding was approximately$115.0 million higher for the first three quarters of 2007 as compared to thefirst three quarters of 2006. See “—Liquidity and Capital Resources—Debt”below.

 

*Income Tax Expense.*Incometax expense increased $2.2 million or 40.0% to $7.7 million for the first threequarters of 2007 from $5.5 million for the first three quarters of 2006. Oureffective tax rate was 37.9% for the first three quarters of 2007 and 38.8% forthe first three quarters of 2006.

 

**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 requirements, as well as financing for acquisitions and dividendpayments, if any, primarily through cash generated from operations and to theextent necessary, through borrowings under our credit facility.

 

*Cash Flows*. Cashprovided by operating activities increased $3.0 million to $21.2 million forthe first three quarters of 2007 from $18.2 million for the first threequarters of 2006. The increase was due to changes relating to an increase innet income, trade accounts payable and accrued expenses offset by an increasein accounts receivable and inventory. Working capital at September 29,2007 was $117.4 million, an increase of $14.4 million over working capital at December 30,2006 of $103.0 million.

 

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Net cash used in investing activities for the firstthree quarters of 2007 was $211.8 million as compared to $34.6 million for thefirst three quarters of 2006. Capital expenditures during the first threequarters of 2007 were $10.9 million and included expenditures relating to theexpansion of our Stoughton, Wisconsin facility and the pending transfer of aportion of the *Cream of Wheat*production to thatfacility as well as the routine purchase of manufacturing and computerequipment. Capital expenditures during the first three quarters of 2007 were$5.1 million greater than our capital expenditures of $5.8 million during thefirst three quarters of 2006. Investment expenditures for the first threequarters of 2007 included $200.9 million for the *Cream ofWheat*acquisition. Investment expenditures for the first threequarters of 2006 included $30.1 million for the *Grandma’s*molasses acquisition. We received net proceeds from the sale of property of$1.3 million during the first three quarters of 2006.

 

Net cash provided by financing activities for thefirst three quarters of 2007 was $195.5 million as compared to $11.9 millionfor the first three quarters of 2006. Net cash provided by financing activitiesfor the first three quarters of 2007 consists of $205.0 million from additionalterm loan borrowings and $193.2 million from the issuance of Class Acommon stock, net of underwriting discounts and commissions and other expenses,offset by $100.0 million for the prepayment of term loan borrowings, $82.4million for the repurchase of Class B common stock, $16.3 million for thepayment of dividends to holders of our Class A common stock and $4.0million in debt issuance costs. Net cash provided by financing activities forthe first three quarters of 2006 consisted of $25.0 million from term loanborrowings, offset by $12.7 million in dividends paid to holders of our Class Acommon stock and $0.4 million in debt issuance costs.

 

Based on a number offactors, including our trademark and goodwill amortization for tax purposesfrom our prior acquisitions, we realized a significant reduction in cash taxesin 2006 and 2005 as compared to our tax expense for financial reportingpurposes. While we expect cash taxes to increase beginning in 2007 as comparedto the prior two years, we believe that we will realize a benefit to our cashtaxes payable from amortization of our trademarks, goodwill and customerrelationship intangibles for the taxable years 2007 through 2022 that will notbe reflected in our income tax expense for financial statement purposes.

 

***Dividend Policy***

 

Our dividend policy reflects a basic judgment that ourstockholders would be better served if we distributed a substantial portion ofour cash available to pay dividends to them instead of retaining it in ourbusiness. Under this policy, a substantial portion of the cash generated by ourcompany in excess of operating needs, interest and principal payments onindebtedness, capital expenditures sufficient to maintain our properties andother assets is in general distributed as regular quarterly cash dividends (upto the intended dividend rate as determined by our board of directors) to theholders of our common stock and not retained by us. The current intendeddividend rate for our Class A common stock is $0.848 per share per annum.

 

Dividend payments, however, are not mandatory orguaranteed and holders of our common stock do not have any legal right toreceive, or require us to pay, dividends. Furthermore, our board of directorsmay, in its sole discretion, amend or repeal this dividend policy. Our board ofdirectors may decrease the level of dividends below the intended dividend rateor discontinue entirely the payment of dividends. Future dividends with respectto shares of our common stock, if any, depend on, among other things, ourresults of operations, cash requirements, financial condition, contractualrestrictions, business opportunities, provisions of applicable law and otherfactors that our board of directors may deem relevant. Over time, our EBITDAand capital expenditure, working capital and other cash needs will be subjectto uncertainties, which could impact the level of dividends, if any, we pay inthe future. The indenture governing our senior subordinated notes, the terms ofour revolving credit facility and the indenture governing the senior notescontain significant restrictions on our ability to make dividend payments. Inaddition, certain provisions of the Delaware General Corporation Law may limitour 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 

 

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business downturn. We may have to forego growthopportunities or capital expenditures that would otherwise be necessary ordesirable if we do not find alternative sources of financing. If we do not havesufficient cash for these purposes, our financial condition and our businesswill suffer.

 

For the first three quarters of 2007 and 2006, we hadcash flows provided by operating activities of $21.2 million and $18.2 million,and distributed $16.3 million and $12.7 million as dividends, respectively. Ifour cash flows from operating activities for future periods were to fall belowour minimum expectations (or if our assumptions as to capital expenditures orinterest expense were too low or our assumptions as to the sufficiency of ourrevolving credit facility to finance our working capital needs were to proveincorrect), we would need either to reduce or eliminate dividends or, to theextent permitted under the indenture governing our senior notes, the indenturegoverning our senior subordinated notes and the terms of our credit facility,fund a portion of our dividends with borrowings or from other sources. If wewere to use working capital or permanent borrowings to fund dividends, we wouldhave less cash and/or borrowing capacity available for future dividends andother purposes, which could negatively impact our financial position, ourresults of operations, our liquidity and our ability to maintain or expand ourbusiness.

 

***Acquisitions***

 

Our liquidity and capital resources have beensignificantly impacted by acquisitions and may be impacted in the foreseeablefuture by additional acquisitions. We have historically financed acquisitionswith borrowings and cash flows from operating activities. Our interest expensehas increased significantly as a result of additional indebtedness we haveincurred as a result of the *Grandma’s*molassesacquisition in January 2006 and the *Cream of Wheat*acquisition in February 2007, and will increase with any additionalindebtedness we may incur to finance potential future acquisitions, if any. Tothe extent future acquisitions, if any, are financed by additionalindebtedness, the resulting increase in debt and interest expense could have anegative impact on liquidity.

 

***Environmental and Health andSafety Costs***

 

We have not made any material expenditures during thefirst three quarters of 2007 in order to comply with environmental laws or regulations.Based on our experience to date, we believe that the future cost of compliancewith existing environmental laws and regulations (and liability for knownenvironmental conditions) will not have a material adverse effect on ourconsolidated financial condition, results of operations or liquidity. However,we cannot predict what environmental or health and safety legislation orregulations will be enacted in the future or how existing or future laws orregulations will be enforced, administered or interpreted, nor can we predictthe amount of future expenditures that may be required in order to comply withsuch environmental or health and safety laws or regulations or to respond tosuch environmental claims.

 

***Debt***

 

*Senior Secured Credit Facility*. In October 2004, we entered into a $30.0million senior secured revolving credit facility. In order to finance the *Grandma’s*molasses acquisition, we amended the creditfacility in January 2006 to provide for, among other things, a new $25.0million term loan and a reduction in the revolving credit facility commitmentsfrom $30.0 million to $25.0 million. In order to finance the *Cream of Wheat*acquisition, our credit facility was amendedand restated in February 2007 to provide for, among other things, an additional$205.0 million of term loan borrowings. On May 29, 2007 we prepaid $100.0million of term loan borrowings. Our $25.0 million revolving credit facilitymatures on January 10, 2011 and the remaining $130.0 million of term loanborrowings matures on February 26, 2013.

 

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

 

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termloan facility is determined based on alternative rates that we may choose inaccordance with the credit facility, including the base lending rate per annumplus an applicable margin of 1.00%, and LIBOR plus an applicable margin of2.00%.

 

Effective as of February 26,2007, we entered into a six year interest rate swap agreement in order toeffectively fix at 7.0925% the interest rate payable for $130.0 million of termloan borrowings. The interest rate for the remaining $100.0 of term loanborrowings, which we subsequently prepaid, was 7.36% as of the prepayment date(based upon a three-month LIBOR rate contract that expired on May 25,2007). The swap is designated as a cash flow hedge under the guidelines of SFASNo. 133. The swap is in place through the life of the term loan, ending onFebruary 26, 2013. Changes in fair value of the swap are recorded inaccumulated other comprehensive income (loss), net of tax on our consolidatedbalance sheet.

 

Our obligations under thecredit facility are jointly and severally and fully and unconditionallyguaranteed on a senior basis by all of our existing and certain future domesticsubsidiaries. The credit facility is secured by substantially all of our andour subsidiaries’ assets except our and our subsidiaries’ real property. Thecredit facility provides for mandatory prepayment based on asset dispositionsand certain issuances of securities, as defined. The credit facility containscovenants that restrict, among other things, our ability to incur additionalindebtedness, pay dividends and create certain liens. The credit facility alsocontains certain financial maintenance covenants, which, among other things,specify maximum capital expenditure limits, a minimum interest coverage ratioand a maximum senior and total leverage ratio, each ratio as defined. Proceedsof the revolving credit facility are restricted to funding our working capitalrequirements, capital expenditures and acquisitions of companies in the sameline of business as our company, subject to specified criteria. The revolvingcredit facility was undrawn on the date of consummation of our 2004 EISoffering and concurrent offerings and remained undrawn through September 29,2007. The available borrowing capacity under our revolving credit facility, netof outstanding letters of credit of $2.6 million, was $22.4 million at September 29,2007. The maximum letter of credit capacity under the revolving credit facilityis $10.0 million, with a fronting fee of 3.0% per annum for all outstandingletters of credit.

 

*12.0% Senior Subordinated Notes due 2016*.In October 2004, we issued $165.8 million aggregate principal amount of12.0% senior subordinated notes due 2016, $143.0 million of which in the formof EISs and $22.8 million separate from EISs. As of September 29, 2007,$122.4 million aggregate principal amount of senior subordinated notes was heldin the form of EISs and $43.4 million aggregate principal amount of seniorsubordinated notes was held separate from EISs.

 

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

 

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

 

We may not redeem the notesprior to October 30, 2009. However, we may, from time to time, seek toretire the senior subordinated notes through cash repurchases of EISs orseparate senior subordinated notes and/or exchanges of EISs or separate seniorsubordinated notes for equity securities, in open market purchases, privatelynegotiated transactions or otherwise. Such repurchases or exchanges, if any,will depend on prevailing market conditions, our liquidity requirements,contractual restrictions and other factors. We expect that any repurchase ofEISs or senior subordinated notes would be funded with our existing cashbalances and cash from operations. The amounts involved may be material.

 

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In addition, on and after October 30,2009, we may redeem for cash all or part of the senior subordinated notes at aredemption price of 106.0% beginning October 30, 2009 and thereafter atprices declining annually to 100% on or after October 30, 2012. If weredeem any senior subordinated notes, the senior subordinated notes and Class Acommon stock represented by each EIS will be automatically separated.

 

The senior subordinatednotes are unsecured obligations and are subordinated in right of payment to allof our existing and future senior secured and senior unsecured indebtedness,including the indebtedness under our credit facility and our senior notes. Thesenior subordinated notes rank pari passu in right of payment with any of ourother subordinated indebtedness.

 

The senior subordinatednotes are jointly and severally and fully and unconditionally guaranteed by allof our existing domestic subsidiaries and certain future domestic subsidiarieson an unsecured and subordinated basis on the terms set forth in the indenturegoverning the senior subordinated notes. The senior subordinated noteguarantees are subordinated in right of payment to all existing and futuresenior indebtedness of the guarantors, including the indebtedness under ourcredit facility and the senior notes. Our present foreign subsidiaries are notguarantors, and any future foreign or partially owned domestic subsidiarieswill not be guarantors, of our senior subordinated notes.

 

The indenture governing thesenior subordinated notes contains covenants with respect to us and restrictsthe incurrence of additional indebtedness and the issuance of capital stock;the payment of dividends or distributions on, and redemption of, capital stock;a number of other restricted payments, including certain investments; specifiedcreation of liens, sale-leaseback transactions and sales of assets; fundamentalchanges, including consolidation, mergers and transfers of all or substantiallyall of our assets; and specified transactions with affiliates. Each of thecovenants is subject to a number of important exceptions and qualifications.

 

*8.0% Senior Notes due 2011*. In October 2004, we issued $240.0million aggregate principal amount of 8.0% senior notes due 2011. Interest onthe senior notes is payable on April 1 and October 1 of each year. Thesenior notes will mature on October 1, 2011, unless earlier retired orredeemed at our option as described below.

 

We may not redeem the notesprior to October 1, 2008. However, we may, from time to time, seek to retirethe senior notes through cash repurchases of senior subordinated notes and/orexchanges of senior notes for equity securities, in open market purchases,privately negotiated transactions or otherwise. Such repurchases or exchanges,if any, will depend on prevailing market conditions, our liquidityrequirements, contractual restrictions and other factors.

 

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.

 

Our obligations under thesenior notes are jointly and severally and fully and unconditionally guaranteedon a senior basis by all of our existing and certain future domesticsubsidiaries. The senior notes and the subsidiary guarantees are our and theguarantors’ general unsecured obligations and are effectively junior in rightof payment to all of our and the guarantors’ secured indebtedness and to theindebtedness and other liabilities of our non-guarantor subsidiaries; are paripassu in right of payment to all of our and the guarantors’ existing and futureunsecured senior debt; and are senior in right of payment to all of our and theguarantors’ future subordinated debt, including the senior subordinated notes. Ourpresent foreign subsidiaries 

 

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arenot guarantors, and any future foreign or partially owned domestic subsidiarieswill not be guarantors, of our senior notes.

 

The indenture governing thesenior notes contains covenants with respect to us and the guarantors andrestricts the incurrence of additional indebtedness and the issuance of capitalstock; the payment of dividends or distributions on, and redemption of, capitalstock; a number of other restricted payments, including certain investments;specified creation of liens, sale-leaseback transactions and sales of assets;fundamental changes, including consolidation, mergers and transfers of all orsubstantially all of our assets; and specified transactions with affiliates. Eachof the covenants is subject to a number of important exceptions andqualifications.

 

***Future CapitalNeeds***

 

We are highly leveraged. On September 29,2007, our total long-term debt and stockholders’ equity was $535.8 million and$178.1 million, respectively.

 

Our ability to generatesufficient cash to fund our operations depends generally on our results ofoperations and the availability of financing. Our management believes that ourcash on hand, cash flow from operating activities and available borrowingcapacity under our revolving credit facility, will be sufficient for theforeseeable future to fund operations, meet debt service requirements, fundcapital expenditures, make future acquisitions within our line of business, ifany, and pay our anticipated dividends on our Class A common stock. Weexpect to make capital expenditures of approximately $13.0 million in theaggregate during fiscal 2007.

 

***Seasonality***

 

Sales of a number of ourproducts tend to be seasonal. In the aggregate, however, our sales are notheavily weighted to any particular quarter due to the diversity of our productand brand portfolio. Sales during the first quarter of the fiscal year aregenerally below those of the following three quarters.

 

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

 

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

 

During fiscal 2006 and thefirst three quarters of 2007, we were faced with increasing prices in certain commoditiesand packaging materials and we expect this trend may continue. We manage thisrisk by entering into short-term supply contracts and advance commoditiespurchase agreements from time to time, and if necessary, by raising prices. Ourcost increases in fiscal 2006 and the first three quarters of 2007 werepartially attributable to the spike in oil and natural gas prices, which havehad a substantial impact on our raw material, packaging and transportationcosts. We believe that through sales price increases and our cost savingefforts we have to some degree been able to offset the impact of recent rawmaterial, packaging and transportation cost increases. There can be noassurance, however, that any future sales price increases or cost saving effortsby us will offset the increased cost of raw material, packaging andtransportation costs, or that we will be able to raise prices or reduce costsat all.

 

**RecentAccounting Pronouncements**

** **

In July 2006, the FASB issued FASB InterpretationNo. 48, “*Accounting for Uncertainty in Income Taxes*”(FIN 48). FIN 48 prescribes a comprehensive model for how a company shouldrecognize, measure, present, and disclose in its financial statements uncertaintax positions that the company has taken or expects to 

 

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take on a tax return. FIN 48 states that a tax benefitfrom an uncertain tax position may be recognized only if it is “more likelythan not” that the position is sustainable, based on its technical merits. The taxbenefit of a qualifying position is the largest amount of tax benefit that isgreater than 50% likely of being realized upon settlement with a taxingauthority having full knowledge of all relevant information. A tax benefit froman uncertain position was previously recognized if it was probable of beingsustained. Under FIN 48, the liability for unrecognized tax benefits isclassified as non-current unless the liability is expected to be settled incash within 12 months of the reporting date. FIN 48 is effective as of thebeginning of the first fiscal year beginning after December 15, 2006. Weadopted the provisions of FIN 48 at the beginning of fiscal 2007. On May 2,2007, the FASB issued FASB Staff Position No. 48-1, “*Definitionof Settlement in FASB Interpretation 48*” (FIN 48-1). FIN 48-1 amendsFIN 48 to provide guidance on how an enterprise should determine whether a taxposition is effectively settled for the purpose of recognizing previouslyunrecognized tax benefits. The guidance in FIN 48-1 is to be applied upon theinitial adoption of FIN 48. Accordingly, we have applied the provisions of FIN48-1 at the beginning of fiscal 2007. As a result of the adoption of FIN 48, asamended by FIN 48-1, we reclassified $0.2 million to other non-current liabilities.

 

We operate in multiple taxing jurisdictions within theUnited States and Canada and from time to time face audits from various taxauthorities regarding the deductibility of certain expenses, state income taxnexus, intercompany transactions, transfer pricing and other matters. At thebeginning of fiscal 2007, our liability for unrecognized tax benefits wasapproximately $0.2 million (of which the entire amount would impact oureffective tax rate if recognized) plus approximately $0.1 million of accruedinterest and penalties. This liability for unrecognized tax benefits allrelated to state income taxes and Canadian income taxes. During the thirdquarter of 2007, we paid the Canadian income tax liability in full. There wasno material change in the net amount of unrecognized tax benefits during thefirst three quarters of 2007.

 

Although we do not believe that we are currently underexamination in any of our major tax jurisdictions, we remain subject toexamination in all of our tax jurisdictions until the applicable statutes oflimitations expire. As of September 29, 2007, a summary of the tax yearsthat remain subject to examination in our major tax jurisdictions are:

 
| United States—Federal |   | 2003 and forward |
|----------------------------|--------|------------------|
| United States—States  |   | 2002 and forward |
| Canada                     |   | 2006 and forward |

 

Based upon the expiration of statutes of limitationsand the conclusion of tax examinations in several jurisdictions, we believe itis reasonably possible that the total amount of previously unrecognized taxbenefits may decrease by $0.1 million within twelve months of the reportingdate.

 

Our policy is to classify interest and penaltiesrelated to income tax uncertainties as income tax expense.

 

In September 2006, the FASB issued SFAS No. 157,“*Fair Value Measurements*” (SFAS No. 157),which defines fair value, establishes a framework for measuring fair value andexpands disclosures about fair value measurements. The provisions of SFAS No. 157are effective as of the beginning of our 2008 fiscal year. We are currentlyevaluating the impact, if any, of adopting SFAS No. 157 on ourconsolidated financial statements.

 

**Off-balance Sheet Arrangements**

 

As of September 29, 2007, we did not have anyoff-balance sheet arrangements as defined in Item 303(a)(4)(ii) ofRegulation S-K.

 

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**Commitmentsand Contractual Obligations**

** **

Our contractual obligationsand commitments principally include obligations associated with our outstandingindebtedness, future minimum operating lease obligations and future pensionobligations. During the first three quarters of 2007, there were no materialchanges outside the ordinary course of business in the specified contractualobligations, except that in February 2007 we incurred additional long-termdebt of $205.0 million in the form of additional term loan borrowings under ourcredit facility, $100.0 million of which we prepaid in May 2007. Asamended, our $25.0 million revolving credit facility matures on January 10,2011 and $130.0 million of our term loan borrowings matures on February 26,2013. See “Debt—Senior Secured Credit Facility” above. In addition, during thefirst three quarters of 2007, we made contributions to our defined benefitpension plans of $2.1 million and currently anticipate electing to makeadditional payments of approximately $1.6 million during the remainder offiscal 2007.

 

***Forward-LookingStatements***

** **

This report includes forward-looking statements,including without limitation the statements under “Management’s Discussion andAnalysis of Financial Condition and Results of Operations.”  The words “believes,” “anticipates,” “plans,”“expects,” “intends,” “estimates,” “projects” and similar expressions areintended to identify forward-looking statements. These forward lookingstatements involve known and unknown risks, uncertainties and other factorsthat may cause our actual results, performance and achievements, or industryresults, to be materially different from any future results, performance, orachievements expressed or implied by any forward-looking statements. We believeimportant factors that could cause actual results to differ materially from ourexpectations include the following:

 

•                  our substantial leverage;

 

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

 

•                  crude oil prices and their impact ontransportation, packaging and energy costs;

 

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

 

•                  intense competition, changes in consumer preferences,demand for our products and local economic and market conditions;

 

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

 

•                  the risks associated with the expansion ofour business;

 

•                  our possible inability to integrate anybusinesses we acquire;

 

•                  our ability to maintain access to creditmarkets and our borrowing costs and credit ratings, which may be influenced bycredit markets generally and the credit ratings of our competitors;

 

•                  the effects of currency movements in Canada;and

 

•                  other factors that affect the food industrygenerally, 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;

 

•                  competitors’pricing practices and promotional spending levels; and

 

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•                  fluctuationsin the level of our customers’ inventories and credit and other business risksrelated to our customers operating in a challenging economic and competitiveenvironment; and

 

•                  other factors discussed elsewhere in thisreport and in our other public filings with the SEC, including under Item 1A, “RiskFactors” in our Annual Report on Form 10-K/A for fiscal 2006.

 

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

 

All forward-looking statements included in this reportare based on information available to us on the date of this report. Weundertake no obligation to publicly update or revise any forward-lookingstatement, whether as a result of new information, future events or otherwise.All subsequent written and oral forward-looking statements attributable to usor persons acting on our behalf are expressly qualified in their entirety bythe cautionary statements contained in this report. We caution that theforegoing list of important factors is not exclusive. We urge investors not tounduly rely on forward-looking statements contained in this report.

 

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

 

Interest under our $25.0million revolving credit facility, including any outstanding letters of credit,is determined based on alternative rates that we may choose in accordance withthe revolving credit facility, including the base lending rate per annum plusan applicable margin, and LIBOR plus an applicable margin. Interest under ourterm loan facility is determined based on alternative rates that we may choosein accordance with the credit facility, including the base lending rate perannum plus an applicable margin of 1.00%, and LIBOR plus an applicable marginof 2.00%. The interest rate payable for our $130.0 million of term loanborrowings is effectively fixed at 7.0925% based upon a six year interest rateswap agreement that we entered into on February 26, 2007.

 

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 September 29, 2007 and December 30, 2006, basedon quoted market prices, was $238.8 million and $244.8 million, respectively.

 

We also have outstanding $165.8 million principalamount of 12.0% senior subordinated notes due 2016. Of such outstandingprincipal amount, $122.4 million principal amount was represented by 17,115,567EISs as of September 29, 2007, and $143.0 million principal amount wasrepresented by 20,000,000 EISs as of December 30, 2006. Each EISrepresents one share of our Class A common stock and $7.15 principalamount of our senior subordinated notes. As of September 29, 2007, thefair value of the EISs, based on the per EIS closing price on the New YorkStock Exchange was $355.1 million. As of December 30, 2006, the fair valueof the EISs, based on the per EIS closing price on the American Stock Exchangewas $400.4 million. It is not practicable to estimate the fair value of theprincipal amount of senior subordinated notes represented by EISs.

 

Of the $165.8 million aggregate principal amount ofsenior subordinated notes outstanding, $43.4 million and $22.8 millionprincipal amount as of September 29, 2007 and December 31, 2006,respectively, was not represented by EISs and traded separately. The fair valueof the separate senior subordinated notes at September 29, 2007 and December 30,2006, based on quoted market prices, was $47.1 million and $25.5 million,respectively.

 

The information under the heading “Inflation” underItem 2, “Management’s Discussion and Analysis of Financial Condition andResults of Operations” is incorporated herein by reference.

 

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**Item 4.**           Controls and 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 Rules 13a-15(e) and 15d-15(e) under the Exchange Act,disclosure controls and procedures are controls and other procedures that weuse that are designed to ensure that information required to be disclosed by usin the reports we file or submit under the Exchange Act is recorded, processed,summarized and reported, within the time periods specified in the SEC’s rules andforms. Disclosure controls and procedures include, without limitation, controlsand procedures designed to ensure that information required to be disclosed byus in the reports we file or submit under the Exchange Act is accumulated andcommunicated to our management, including our chief executive officer and ourchief financial officer, as appropriate, to allow timely decisions regardingrequired disclosure.

 

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

 

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

 

*Inherent Limitations on Effectiveness of Controls.*Ourcompany’s management, including the chief executive officer and chief financialofficer, does not expect that our disclosure controls or our internal controlover financial reporting will prevent or detect all errors and all fraud. Acontrol system, no matter how well designed and operated, can provide onlyreasonable, not absolute, assurance that the control system’s objectives willbe met. The design of a control system must reflect the fact that there areresource constraints, and the benefits of controls must be considered relativeto their costs. Further, because of the inherent limitations in all controlsystems, no evaluation of controls can provide absolute assurance thatmisstatements due to error or fraud will not occur or that all control issuesand instances of fraud, if any, within our company have been detected. Theseinherent limitations include the realities that judgments in decision-makingcan be faulty and that breakdowns can occur because of simple error or mistake.Controls can also be circumvented by the individual acts of some persons, bycollusion of two or more people, or by management override of the controls. Thedesign of any system of controls is based in part on certain assumptions aboutthe likelihood of future events, and there can be no assurance that any designwill succeed in achieving its stated goals under all potential futureconditions. Projections of any evaluation of controls effectiveness to futureperiods are subject to risks. Over time, controls may become inadequate becauseof changes in conditions or deterioration in the degree of compliance withpolicies or procedures.

 

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**PART IIOTHER INFORMATION**

** **

**Item 1.**           Legal Proceedings

** **

We are involved in various claims and legal actionsarising in the ordinary course of business, including proceedings involvingproduct liability claims, worker’s compensation and other employee claims, andtort and other general liability claims, for which we carry insurance, as wellas trademark, copyright, patent infringement and related claims and legalactions. In the opinion of our management, the ultimate disposition of thesematters will not have a material adverse effect on our consolidated financialposition, results of operations or liquidity.

 

**Item 1A. Risk Factors**

** **

Except for the additional risk factor set forth inItem 1A to Part II of our Quarterly Report on Form 10-Q for thequarterly period ended June 30, 2007 filed with the SEC on July 30,2007, we do not believe there have been any material changes in our riskfactors as previously disclosed in our Annual Report on Form 10-K/A forthe year ended December 30, 2006 filed with the SEC on March 9, 2007.

 

**Item 2.**           Unregistered Sales of Equity Securitiesand Use of Proceeds

** **

Not applicable.

 

**Item 3.**           Defaults Upon Senior Securities

** **

Not applicable.

 

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

** **

Not applicable.

 

**Item 5.**           Other Information

** **

Not applicable.

 

**Item 6.**           Exhibits

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

 

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**SIGNATURE**

 

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

 
| Dated:  October 25, 2007 | 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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