**UNITED STATES****SECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON, DC 20549**

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**FORM 10-Q**

| **x**                                                                                                            |   | **QUARTERLY REPORT PURSUANT TO SECTION 13 OR  15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**  |
|------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------|
| ** **                                                                                                       |   | ** **                                                                                              |
| **For the  quarterly period ended June 30, 2007**                                                                |
| ** **                                                                                                       |   | ** **                                                                                              |
| ** **                                                                                                       |   | **OR**                                                                                                  |
| ** **                                                                                                       |   | ** **                                                                                              |
| **o**                                                                                                            |   | **TRANSITION REPORT PURSUANT TO SECTION 13 OR  15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |
| ** **                                                                                                       |   | ** **                                                                                              |
| **For the  transition period from               to** |

 

**CommissionFile Number:  333-114102**

**Merisant Worldwide, Inc.**

(Exact Name ofRegistrant as Specified in its Charter)

| **Delaware**                                                     |   | **52-2219000**                           |
|------------------------------------------------------------------|--------|------------------------------------------|
| (State or Other  Jurisdiction of  Incorporation or Organization) |   | (I.R.S. Employer  Identification Number) |
|                                                             |   |                                     |
| **10  South Riverside Plaza, Suite 850  Chicago, Illinois** |   | **60606**                                |
| (Address of  Principal Executive Offices)                        |   | (Zip Code)                               |

 

Registrant’s telephone number, including area code: **(312) 840-6000**

Former name, formeraddress and former fiscal year, if changed since last report:

**Notapplicable.**

Indicate by check markwhether the registrant (1) has filed all reports required to be filed bySection 13 or 15(d) of the Securities Exchange Act of 1934 during thepreceding 12 months (or for such shorter period that the registrant wasrequired to file such reports), and (2) has been subject to such filingrequirements for the past 90 days.   Yes  o   No  x

Indicateby check mark whether the registrant is a large accelerated filer, anaccelerated filer, or a non-accelerated filer. See definition of “acceleratedfiler and large accelerated filer” in Rule 12b-2 of the Exchange Act.
| Large accelerated  filer  o |   | Accelerated  filer  o |   | Non-accelerated  filer  x |
|---------------------------------------|--------|---------------------------------|--------|-------------------------------------|

 

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

Indicate thenumber of shares outstanding of each of the issuer’s classes of common stock,as of the latest practicable date.

As of August 10,2007, the registrant had outstanding 9,089,380 shares of common stock, parvalue $0.01 per share.

This report is being filedpursuant to a requirement contained in the indenture governing MerisantWorldwide, Inc.’s 121⁄4% Senior Subordinated Discount Notes due 2014.

 

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**MERISANT WORLDWIDE, INC.**

**INDEX TOREPORT**

**FOR THEQUARTER ENDED JUNE 30, 2007**
| **PART I—FINANCIAL  INFORMATION** |   |
|---------------------------------------------|--------|
|                                        |   |   |
| Item 1.                                     |   | Financial  Statements of Merisant Worldwide, Inc. |   |
|                                        |   |   |   |
|                                        |   | Unaudited  Consolidated Balance Sheets at December 31, 2006 and June 30, 2007 |   |
|                                        |   |   |   |
|                                        |   | Unaudited  Consolidated Statements of Operations and Comprehensive Income (Loss) for the  Three and Six Months Ended June 30, 2006 and 2007 |   |
|                                        |   |   |   |
|                                        |   | Unaudited  Consolidated Statement of Stockholders’ Deficit for the Six Months Ended June  30, 2007 |   |
|                                        |   |   |   |
|                                        |   | Unaudited  Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2006  and 2007 |   |
|                                        |   |   |   |
|                                        |   | Notes to  Unaudited Consolidated Financial Statements |   |
|                                        |   |   |   |
| Item 2.                                     |   | Management’s  Discussion and Analysis of Financial Condition and Results of Operations |   |
|                                        |   |   |   |
| Item 3.                                     |   | Quantitative  and Qualitative Disclosures About Market Risk |   |
|                                        |   |   |   |
| Item 4.                                     |   | Controls and  Procedures |   |
|                                        |   |   |   |
| **PART II—OTHER INFORMATION**     |   |
|                                        |   |
| Item 1.                                     |   | Legal Proceedings |   |
|                                        |   |   |   |
| Item 1A.                                    |   | Risk Factors |   |
|                                        |   |   |   |
| Item 4.                                     |   | Submission  of Matters to a Vote of Security Holders |   |
|                                        |   |   |   |
| Item  6.                                    |   | Exhibits |   |

 

2

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**PART I**—**FINANCIAL INFORMATION**

**Item1. Financial Statements of Merisant Worldwide, Inc.**

**MERISANT WORLDWIDE, INC.Unaudited Consolidated Balance Sheets(Dollars In Thousands, Except Per Share Amounts)**
| ** **                                                                                                                    | ** ** | **At December 31,  2006** | ** ** | **At June 30,  2007** | ** ** |
|-------------------------------------------------------------------------------------------------------------------------------|------------|-------------------------------------|------------|---------------------------------|------------|
| **ASSETS**                                                                                                                    | ** ** | ** **                          | ** ** | ** **                      | ** ** |
| Cash and cash  equivalents                                                                                                    |       | $                                   | 23,753     |                            | $          | 50,994 |   |
| Trade accounts  receivable, net of allowances of $534 and $585, respectively                                             |       | 68,006                              |       | 63,055                          |       |
| Other receivables                                                                                                             |       | 5,676                               |       | 8,203                           |       |
| Inventories                                                                                                                   |       | 13,792                              |       | 14,956                          |       |
| Prepaid expenses and  other assets                                                                                            |       | 5,477                               |       | 5,596                           |       |
| Current portion of note  receivable from director                                                                             |       | 970                                 |       | 970                             |       |
| Deferred income tax  assets                                                                                                   |       | 1,534                               |       | 1,371                           |       |
| Total current  assets                                                                                                         |       | 119,208                             |       | 145,145                         |       |
| Property and equipment,  net                                                                                                  |       | 23,341                              |       | 20,664                          |       |
| Trademarks and other  intangible assets, less accumulated amortization and impairment of $159,340  and $170,794, respectively |       | 182,679                             |       | 171,225                         |       |
| Goodwill                                                                                                                      |       | 107,209                             |       | 107,209                         |       |
| Deferred financing  costs, less accumulated amortization of $7,570 and $8,376, respectively                                   |       | 15,793                              |       | 13,257                          |       |
| Non-current portion of  note receivable from director                                                                         |       | 2,651                               |       | 1,736                           |       |
| Investment in equity  affiliate                                                                                               |       | 269                                 |       | 357                             |       |
| Other non-current  assets                                                                                                     |       | 967                                 |       | 1,139                           |       |
| Total assets                                                                                                                  |       | $                                   | 452,117    |                            | $          | 460,732 |   |
| **LIABILITIES AND STOCKHOLDERS’  DEFICIT**                                                                               | ** ** | ** **                          | ** ** | ** **                      | ** ** |
| Accounts payable                                                                                                              |       | $                                   | 16,234     |                            | $          | 24,188 |   |
| Income taxes payable                                                                                                          |       | 1,578                               |       | 716                             |       |
| Accrued interest  expense                                                                                                     |       | 11,793                              |       | 12,756                          |       |
| Accrued trademarketing  and consumer promotions                                                                               |       | 12,200                              |       | 13,998                          |       |
| Accrued incentives                                                                                                            |       | 8,017                               |       | 2,978                           |       |
| Accrued expenses and  other liabilities                                                                                       |       | 11,757                              |       | 10,193                          |       |
| Current maturities of  long-term obligations                                                                                  |       | 8,468                               |       | 9,407                           |       |
| Total current  liabilities                                                                                                    |       | 70,047                              |       | 74,236                          |       |
| Long-term obligations,  net of current maturities                                                                             |       | 537,565                             |       | 539,480                         |       |
| Deferred income tax  liabilities                                                                                              |       | 19,439                              |       | 21,585                          |       |
| Other liabilities                                                                                                             |       | 11,452                              |       | 6,457                           |       |
| Total  liabilities                                                                                                            |       | 638,503                             |       | 641,758                         |       |
| Commitments and  contingencies (Note 7)                                                                                       |       |                                |       |                            |       |
| Stockholders’ deficit:                                                                                                   |       |                                |       |                            |       |
| Common stock, $0.01 par  value, 10,000,000 shares authorized, 9,169,552 shares issued and 9,089,380  shares outstanding       |       | 91                                  |       | 91                              |       |
| Due for purchase of  shares                                                                                                   |       | (707                                | )          | (258                            | )          |
| Retained deficit                                                                                                              |       | (178,423                            | )          | (174,223                        | )          |
| Accumulated other  comprehensive loss                                                                                         |       | (5,626                              | )          | (4,915                          | )          |
|                                                                                                                          |       | (184,665                            | )          | (179,305                        | )          |
| Less cost of treasury  stock (80,172 shares)                                                                                  |       | (1,721                              | )          | (1,721                          | )          |
| Total  stockholders’ deficit                                                                                             |       | (186,386                            | )          | (181,026                        | )          |
| Total liabilities and  stockholders’ deficit                                                                             |       | $                                   | 452,117    |                            | $          | 460,732 |   |

 

The accompanying notes are an integral part ofthese unaudited consolidated financial statements.

3

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**MERISANT WORLDWIDE, INC.****Unaudited Consolidated Statementsof Operations and****Comprehensive Income (Loss)****(Dollars In Thousands)**
| ** **                         | ** ** | **Three Months Ended  June 30,** | ** ** | **Six Months Ended  June 30,** | ** ** |
|------------------------------------|------------|-------------------------------------------------|------------|-----------------------------------------------|------------|
| ** **                         | ** ** | **2006**                                        | ** ** | **2007**                                      | ** ** | **2006** | ** ** | **2007** | ** ** |
| Net sales                          |       | $                                               | 78,629     |                                          | $          | 71,090 |   | $ | 148,296 |   | $ | 140,403 |   |
| Cost of sales                      |       | 32,604                                          |       | 31,860                                        |       | 61,619 |   | 62,602 |   |
| Gross profit                       |       | 46,025                                          |       | 39,230                                        |       | 86,677 |   | 77,801 |   |
| Operating expenses:                |       |                                            |       |                                          |       |   |   |   |   |
| Marketing and  selling expenses    |       | 22,201                                          |       | 17,034                                        |       | 39,109 |   | 32,281 |   |
| Administration  expenses           |       | 10,814                                          |       | 13,429                                        |       | 22,573 |   | 25,365 |   |
| Amortization of  intangible assets |       | 5,554                                           |       | 5,727                                         |       | 11,108 |   | 11,454 |   |
| Transaction fees                   |       | 3,300                                           |       | —                                        |       | 3,300 |   | — |   |
| Restructuring expenses             |       | 1,305                                           |       | 314                                           |       | 3,596 |   | 874 |   |
| Total operating  expenses          |       | 43,174                                          |       | 36,504                                        |       | 79,686 |   | 69,974 |   |
| Income from operations             |       | 2,851                                           |       | 2,726                                         |       | 6,991 |   | 7,827 |   |
| Other expense (income):            |       |                                            |       |                                          |       |   |   |   |   |
| Interest income                    |       | (216                                            | )          | (160                                          | )          | (364 | ) | (365 | ) |
| Interest expense                   |       | 14,464                                          |       | 14,944                                        |       | 28,398 |   | 30,337 |   |
| Costs of  refinancing              |       | 2,478                                           |       | 5,791                                         |       | 2,478 |   | 5,791 |   |
| Other expense  (income), net       |       | 1,329                                           |       | (30,218                                       | )          | 1,538 |   | (30,079 | ) |
| Total other  expense (income)      |       | 18,055                                          |       | (9,643                                        | )          | 32,050 |   | 5,684 |   |
| Income (loss) before  income taxes |       | (15,204                                         | )          | 12,369                                        |       | (25,059 | ) | 2,143 |   |
| Provision for income  taxes        |       | 2,688                                           |       | 1,854                                         |       | 2,941 |   | 3,700 |   |
| Net income (loss)                  |       | $                                               | (17,892    | )                                             | $          | 10,515 |   | $ | (28,000 | ) | $ | (1,557 | ) |
|                               |       |                                            |       |                                          |       |   |   |   |   |
| Net income (loss) from  above      |       | $                                               | (17,892    | )                                             | $          | 10,515 |   | $ | (28,000 | ) | $ | (1,557 | ) |
| Other comprehensive  income        |       | 662                                             |       | 408                                           |       | 860 |   | 711 |   |
| Total comprehensive  income (loss) |       | $                                               | (17,230    | )                                             | $          | 10,923 |   | $ | (27,140 | ) | $ | (846 | ) |

 

The accompanying notes are anintegral part of these unaudited consolidated financial statements.

4

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**MERISANT WORLDWIDE, INC.****Unaudited Consolidated Statementof Stockholders’ Deficit****(Dollars In Thousands)**
| ** **                                  | ** ** | **Common  Stock** | ** ** | **Due for   Purchase  of Shares** | ** ** | **Retained  Deficit** | ** ** | **Accumulated  Other  Comprehensive  Loss** | ** ** | **Treasury   Stock, at  Cost** | ** ** | **Total** | ** ** |
|---------------------------------------------|------------|-------------------|------------|--------------------------------------------------|------------|-----------------------|------------|---------------------------------------------|------------|------------------------------------------|------------|-----------|------------|
| Balance at  December 31, 2006          |       | $                 | 91         |                                             | $          | (707                  | )          | $                                           | (178,423   | )                                        | $          | (5,626    | )          | $ | (1,721 | ) | $ | (186,386 | ) |
| Foreign currency  translation adjustment    |       | —            |       | —                                           |       | —                |       | 711                                         |       | —                                   |       | 711       |       |
| Settlement of  loans for purchase of shares |       | —            |       | 449                                              |       | —                |       | —                                      |       | —                                   |       | 449       |       |
| Cumulative  effect of FIN 48 implementation |       | —            |       | —                                           |       | 5,757                 |       | —                                      |       | —                                   |       | 5,757     |       |
| Net loss                                    |       | —            |       | —                                           |       | (1,557                | )          | —                                      |       | —                                   |       | (1,557    | )          |
| Balance at June 30,  2007                   |       | $                 | 91         |                                             | $          | (258                  | )          | $                                           | (174,223   | )                                        | $          | (4,915    | )          | $ | (1,721 | ) | $ | (181,026 | ) |

 

The accompanying notes are anintegral part of these unaudited consolidated financial statements.

5

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**MERISANT WORLDWIDE, INC.Unaudited Consolidated Statements of Cash Flows(Dollars In Thousands)**
| ** **                                                                        | ** ** | **Six Months Ended  June 30,** | ** ** |
|-----------------------------------------------------------------------------------|------------|-----------------------------------------------|------------|
| ** **                                                                        | ** ** | **2006**                                      | ** ** | **2007** | ** ** |
| **Operating  Activities**                                                         |       |                                          |       |   |   |
| Net loss                                                                          |       | $                                             | (28,000    | ) | $ | (1,557 | ) |
| Adjustments to reconcile net loss to net cash  provided by operating activities:  |       |                                          |       |   |   |
| Depreciation                                                                      |       | 4,400                                         |       | 3,329 |   |
| Amortization of intangible assets                                                 |       | 11,108                                        |       | 11,454 |   |
| Amortization of deferred financing costs                                          |       | 1,609                                         |       | 1,834 |   |
| Interest accretion on senior subordinated discount  notes                         |       | 5,969                                         |       | 6,722 |   |
| Write off of deferred financing costs                                             |       | 2,478                                         |       | 3,241 |   |
| Euro-denominated loan foreign exchange loss                                       |       | 1,928                                         |       | 503 |   |
| Net realized gains on derivative instruments                                      |       | (694                                          | )          | — |   |
| Equity in income of affiliate                                                     |       | (21                                           | )          | (88 | ) |
| Deferred income tax provision                                                     |       | 2,569                                         |       | 2,318 |   |
| Changes in operating assets and liabilities:                                      |       |                                          |       |   |   |
| Trade accounts receivable                                                         |       | 5,433                                         |       | 5,454 |   |
| Other receivables                                                                 |       | 5,761                                         |       | (1,575 | ) |
| Inventories                                                                       |       | 7,500                                         |       | (996 | ) |
| Prepaid expenses and other assets                                                 |       | 574                                           |       | (272 | ) |
| Accounts payable                                                                  |       | (181                                          | )          | 7,945 |   |
| Accrued expenses and other                                                        |       | (9,882                                        | )          | (4,404 | ) |
| Net cash provided by operating activities                                         |       | 10,551                                        |       | 33,908 |   |
| **Investing  Activities**                                                         |       |                                          |       |   |   |
| Proceeds from sale of property and equipment                                      |       | 26                                            |       | 183 |   |
| Purchases of property and equipment                                               |       | (1,330                                        | )          | (859 | ) |
| Net cash used in investing activities                                             |       | (1,304                                        | )          | (676 | ) |
| **Financing  Activities**                                                         |       |                                          |       |   |   |
| Net payments under revolving credit facility                                      |       | (16,000                                       | )          | — |   |
| Borrowings under long-term obligations                                            |       | 85,095                                        |       | 85,000 |   |
| Principal payments on long-term obligations,  excluding revolving credit facility |       | (71,480                                       | )          | (89,284 | ) |
| Payment of deferred financing costs                                               |       | (5,429                                        | )          | (2,539 | ) |
| Settlement of loans for purchase of shares                                        |       | —                                        |       | 449 |   |
| Net cash used in financing activities                                             |       | (7,814                                        | )          | (6,374 | ) |
| Effect of  exchange rate on cash and cash equivalents                             |       | 68                                            |       | 383 |   |
| Net increase in  cash and cash equivalents                                        |       | 1,501                                         |       | 27,241 |   |
| Cash and cash  equivalents at beginning of period                                 |       | 18,074                                        |       | 23,753 |   |
| Cash and cash  equivalents at end of period                                       |       | $                                             | 19,575     |   | $ | 50,994 |   |

 

The accompanying notes are anintegral part of these unaudited consolidated financial statements.

6

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**MERISANT WORLDWIDE, INC.****Notes to Unaudited ConsolidatedFinancial Statements****(Dollars In Thousands)**

**1.****                       ****Principles of Consolidation**

Theconsolidated financial statements and notes do not contain certain informationincluded in the annual consolidated financial statements and notes of MerisantWorldwide, Inc. and subsidiaries.  Unlessotherwise indicated or unless the context otherwise requires, all references tothe “Company” mean Merisant Worldwide, Inc. and its consolidatedsubsidiaries.  The consolidated balancesheet at December 31, 2006 was derived from the Company’s auditedconsolidated financial statements, but does not include all disclosuresrequired by generally accepted accounting principles in the United States ofAmerica (“GAAP”). The remaining consolidated financial statements are unaudited.In the opinion of management, all normal, recurring adjustments necessary for afair presentation of such unaudited financial statements have been includedtherein. For interim reporting purposes, certain marketing and advertisingexpenses are charged to results of operations as a percentage of sales. Interimresults may not be indicative of results for a full year. These unauditedconsolidated financial statements and notes should be read in conjunction withthe Company’s annual consolidated financial statements.

The preparation of consolidatedfinancial statements in conformity with generally accepted accountingprinciples requires management to make estimates and assumptions that affectthe reported amounts of assets and liabilities, disclosure of contingent assetsand liabilities at the date of the consolidated financial statements and thereported amounts of revenues and expenses during the reporting period. Actualresults could differ from those estimates.

**2.****                       ****Segment Information**

TheCompany manufactures and markets primarily low-calorie tabletop sweetenersglobally. Therefore, the Company’s reportable segments are organized andmanaged principally by geographic region: North America; Europe/Africa/Middle East, referred to as EAME; LatinAmerica; and Asia/Pacific. The Company’s management reviews Operating EBITDA toevaluate segment performance and allocate resources. Operating EBITDA consistsof segment earnings before interest expense, income tax expense, depreciationand amortization as well as items such as expenses related to restructuringcharges, certain significant charges related to new product development andlaunch costs, costs related to the transition to a new exclusive distributor inthe United States, certain litigation costs and certain other non-cash items orexcludable gains or losses. Other expense (income), net, as reported in theunaudited consolidated financial statements, is included in Operating EBITDA ofthe respective reportable segments, except for the portion of other expense(income), net that relates to the foreign currency transaction gains or lossesassociated with the Company’s euro-denominated debt (see Note 5) and unrealizedgains or losses on derivative instruments. Corporate expenses include corporatestaff and related amounts. Corporate expenses, interest and other expenses andthe provision for income taxes are centrally managed and, accordingly, suchitems are not presented by segment since they are excluded from the measure ofsegment performance reviewed by management. The Company launched a new productline in North America in the first quarter of 2006 which management evaluatesand manages separately from its other North American operations. As such, thisitem is also excluded from the measure of segment performance reviewed bymanagement. The Company’s definition of Operating EBITDA is largely driven bysimilar definitions of Bank EBITDA under its primary credit facilities.  The definition of Bank EBITDA was amended inthe May 2007 amendment of those credit facilities, and that change is reflectedin the Company’s computation of Operating EBITDA for the 2007 periods.  The Company’s assets, which are principallyin the United States and Europe, are also managed geographically. A summary ofthe Company’s results of operations by reportable segment for the three and sixmonths ended June 30, 2006 and 2007 is as follows:

7

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**For theThree Months Ended June 30, 2006**
| ** **                                                | ** ** | **North  America** | ** ** | **EAME** | ** ** | **Latin  America** | ** ** | **Asia/  Pacific** | ** ** | **Consolidated** | ** ** |
|-----------------------------------------------------------|------------|--------------------|------------|----------|------------|--------------------|------------|--------------------|------------|------------------|------------|
| Total net sales  for reportable segments                  |       | $                  | 33,025     |     | $          | 31,945             |       | $                  | 8,291      |             | $          | 5,360 |   | $ | 78,621 |   |
| Plus: Net sales  related to new product launch            |       |               |       |     |       |               |       |               |       | 8                |       |
| Total  consolidated net sales                             |       |               |       |     |       |               |       |               |       | $                | 78,629     |   |
|                                                      |       |               |       |     |       |               |       |               |       |             |       |
| Operating EBITDA                                          |       | $                  | 12,263     |     | $          | 6,354              |       | $                  | 2,502      |             | $          | 1,836 |   | $ | 22,955 |   |
| Less (plus):                                              |       |               |       |     |       |               |       |               |       |             |       |
| Corporate  expenses                                       |       |               |       |     |       |               |       |               |       | 6,723            |       |
| Restructuring  expense                                    |       |               |       |     |       |               |       |               |       | 1,305            |       |
| Depreciation  expense                                     |       |               |       |     |       |               |       |               |       | 2,171            |       |
| Amortization  expense                                     |       |               |       |     |       |               |       |               |       | 5,554            |       |
| Currency loss on  euro debt                               |       |               |       |     |       |               |       |               |       | 1,345            |       |
| Loss related to  new product launch                       |       |               |       |     |       |               |       |               |       | 947              |       |
| Transition costs  to new distributor in the United States |       |               |       |     |       |               |       |               |       | 81               |       |
| Transaction fees                                          |       |               |       |     |       |               |       |               |       | 3,300            |       |
| Other non-cash  expense                                   |       |               |       |     |       |               |       |               |       | 7                |       |
| Other expense,  net                                       |       |               |       |     |       |               |       |               |       | (1,329           | )          |
| Income from  operations                                   |       |               |       |     |       |               |       |               |       | 2,851            |       |
| Interest  expense, net                                    |       |               |       |     |       |               |       |               |       | 14,248           |       |
| Costs of  refinancing                                     |       |               |       |     |       |               |       |               |       | 2,478            |       |
| Other expense,  net                                       |       |               |       |     |       |               |       |               |       | 1,329            |       |
| Loss before income  taxes                                 |       |               |       |     |       |               |       |               |       | $                | (15,204    | ) |

 

**For the Three Months EndedJune 30, 2007**
| ** **                                                                      | ** ** | **North  America** | ** ** | **EAME** | ** ** | **Latin  America** | ** ** | **Asia/  Pacific** | ** ** | **Consolidated** | ** ** |
|---------------------------------------------------------------------------------|------------|--------------------|------------|----------|------------|--------------------|------------|--------------------|------------|------------------|------------|
| Total net sales  for reportable segments                                        |       | $                  | 27,591     |     | $          | 30,081             |       | $                  | 8,050      |             | $          | 5,375 |   | $ | 71,097 |   |
| Plus: Net sales  related to new product launch                                  |       |               |       |     |       |               |       |               |       | (7               | )          |
| Total  consolidated net sales                                                   |       |               |       |     |       |               |       |               |       | $                | 71,090     |   |
|                                                                            |       |               |       |     |       |               |       |               |       |             |       |
| Operating EBITDA                                                                |       | $                  | 10,123     |     | $          | 8,730              |       | $                  | 1,906      |             | $          | 1,366 |   | $ | 22,125 |   |
| Less (plus):                                                                    |       |               |       |     |       |               |       |               |       |             |       |
| Corporate  expenses                                                             |       |               |       |     |       |               |       |               |       | 7,603            |       |
| Restructuring  expense                                                          |       |               |       |     |       |               |       |               |       | 314              |       |
| Depreciation  expense                                                           |       |               |       |     |       |               |       |               |       | 1,771            |       |
| Amortization  expense                                                           |       |               |       |     |       |               |       |               |       | 5,727            |       |
| Currency loss on  euro debt                                                     |       |               |       |     |       |               |       |               |       | 202              |       |
| Loss related to  new product launch                                             |       |               |       |     |       |               |       |               |       | 995              |       |
| Litigation costs  and lease termination charge excludable from Operating EBITDA |       |               |       |     |       |               |       |               |       | 2,542            |       |
| Gain from  receipt of one-time payment excludable from Operating EBITDA         |       |               |       |     |       |               |       |               |       | (30,000          | )          |
| Other non-cash  expense                                                         |       |               |       |     |       |               |       |               |       | 27               |       |
| Other income,  net                                                              |       |               |       |     |       |               |       |               |       | 30,218           |       |
| Income from  operations                                                         |       |               |       |     |       |               |       |               |       | 2,726            |       |
| Interest  expense, net                                                          |       |               |       |     |       |               |       |               |       | 14,784           |       |
| Costs of  refinancing                                                           |       |               |       |     |       |               |       |               |       | 5,791            |       |
| Other income,  net                                                              |       |               |       |     |       |               |       |               |       | (30,218          | )          |
| Income before income  taxes                                                     |       |               |       |     |       |               |       |               |       | $                | 12,369     |   |

 

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**For the Six Months Ended June 30,2006**
| ** **                                                | ** ** | **North  America** | ** ** | **EAME** | ** ** | **Latin  America** | ** ** | **Asia/  Pacific** | ** ** | **Consolidated** | ** ** |
|-----------------------------------------------------------|------------|--------------------|------------|----------|------------|--------------------|------------|--------------------|------------|------------------|------------|
| Total net sales  for reportable segments                  |       | $                  | 62,917     |     | $          | 60,742             |       | $                  | 14,706     |             | $          | 9,905 |   | $ | 148,270 |   |
| Plus: Net sales  related to new product launch            |       |               |       |     |       |               |       |               |       | 26               |       |
| Total  consolidated net sales                             |       |               |       |     |       |               |       |               |       | $                | 148,296    |   |
|                                                      |       |               |       |     |       |               |       |               |       |             |       |
| Operating EBITDA                                          |       | $                  | 22,848     |     | $          | 15,719             |       | $                  | 3,626      |             | $          | 3,362 |   | $ | 45,555 |   |
| Less (plus):                                              |       |               |       |     |       |               |       |               |       |             |       |
| Corporate  expenses                                       |       |               |       |     |       |               |       |               |       | 14,174           |       |
| Restructuring  expense                                    |       |               |       |     |       |               |       |               |       | 3,596            |       |
| Depreciation  expense                                     |       |               |       |     |       |               |       |               |       | 4,375            |       |
| Amortization  expense                                     |       |               |       |     |       |               |       |               |       | 11,108           |       |
| Currency loss on  euro debt                               |       |               |       |     |       |               |       |               |       | 1,928            |       |
| Realized gain on  derivative instruments                  |       |               |       |     |       |               |       |               |       | (694             | )          |
| Loss on  liquidation or sale of subsidiary                |       |               |       |     |       |               |       |               |       | 144              |       |
| Loss related to  new product launch                       |       |               |       |     |       |               |       |               |       | 1,487            |       |
| Transition costs  to new distributor in the United States |       |               |       |     |       |               |       |               |       | 673              |       |
| Transaction fees                                          |       |               |       |     |       |               |       |               |       | 3,300            |       |
| Other non-cash  expense                                   |       |               |       |     |       |               |       |               |       | 11               |       |
| Other expense,  net                                       |       |               |       |     |       |               |       |               |       | (1,538           | )          |
| Income from  operations                                   |       |               |       |     |       |               |       |               |       | 6,991            |       |
| Interest  expense, net                                    |       |               |       |     |       |               |       |               |       | 28,034           |       |
| Cost of  refinancing                                      |       |               |       |     |       |               |       |               |       | 2,478            |       |
| Other expense,  net                                       |       |               |       |     |       |               |       |               |       | 1,538            |       |
| Loss before income  taxes                                 |       |               |       |     |       |               |       |               |       | $                | (25,059    | ) |

 

**For the Six Months EndedJune 30, 2007**
| ** **                                                              | ** ** | **North  America** | ** ** | **EAME** | ** ** | **Latin  America** | ** ** | **Asia/  Pacific** | ** ** | **Consolidated** | ** ** |
|-------------------------------------------------------------------------|------------|--------------------|------------|----------|------------|--------------------|------------|--------------------|------------|------------------|------------|
| Total net sales  for reportable segments                                |       | $                  | 56,528     |     | $          | 56,657             |       | $                  | 13,347     |             | $          | 13,903 |   | $ | 140,435 |   |
| Plus: Net sales  related to new product launch                          |       |               |       |     |       |               |       |               |       | (32              | )          |
| Total  consolidated net sales                                           |       |               |       |     |       |               |       |               |       | $                | 140,403    |   |
|                                                                    |       |               |       |     |       |               |       |               |       |             |       |
| Operating EBITDA                                                        |       | $                  | 20,405     |     | $          | 15,707             |       | $                  | 3,000      |             | $          | 5,457 |   | $ | 44,569 |   |
| Less (plus):                                                            |       |               |       |     |       |               |       |               |       |             |       |
| Corporate  expenses                                                     |       |               |       |     |       |               |       |               |       | 14,045           |       |
| Restructuring  expense                                                  |       |               |       |     |       |               |       |               |       | 874              |       |
| Depreciation  expense                                                   |       |               |       |     |       |               |       |               |       | 3,329            |       |
| Amortization  expense                                                   |       |               |       |     |       |               |       |               |       | 11,454           |       |
| Currency loss on  euro debt                                             |       |               |       |     |       |               |       |               |       | 503              |       |
| Loss related to  new product launch                                     |       |               |       |     |       |               |       |               |       | 1,538            |       |
| Other non-cash  charge and net gain excludable from Operating EBITDA    |       |               |       |     |       |               |       |               |       | 4,869            |       |
| Gain from  receipt of one-time payment excludable from Operating EBITDA |       |               |       |     |       |               |       |               |       | (30,000          | )          |
| Other non-cash  expense                                                 |       |               |       |     |       |               |       |               |       | 51               |       |
| Other income,  net                                                      |       |               |       |     |       |               |       |               |       | 30,079           |       |
| Income from  operations                                                 |       |               |       |     |       |               |       |               |       | 7,827            |       |
| Interest  expense, net                                                  |       |               |       |     |       |               |       |               |       | 29,972           |       |
| Costs of  refinancing                                                   |       |               |       |     |       |               |       |               |       | 5,791            |       |
| Other income,  net                                                      |       |               |       |     |       |               |       |               |       | (30,079          | )          |
| Income before income  taxes                                             |       |               |       |     |       |               |       |               |       | $                | 2,143      |   |

 

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**3.****                       ****Restructuring Expenses**

During the sixmonths ended June 30, 2007, the Company continued to evaluate opportunities toincrease efficiency and reduce costs. This review resulted in the continuationof workforce reductions and planned changes in the Company’s global businessmodel. These actions are designed to improve both financial results and thelong-term value of the business. Restructuring expenses for workforcereductions of $1,305 and $314 were recorded for the three months ended June 30,2006 and June 30, 2007, respectively, and $3,596 and $874 were recorded for thesix months ended June 30, 2006 and June 30, 2007, respectively. The 2007charges principally related to planned termination costs for employees,including charges related to 15 additional personnel that were notified oftheir termination during the six months ended June 30, 2007.  Severance payments and benefits are scheduledto be made over the next six months.

Reconciliationof the restructuring liability at June 30, 2007 is as follows: 
| Restructuring liability at  December 31, 2006             |   | $      | 444    |   |
|----------------------------------------------------------------|--------|--------|--------|--------|
| Restructuring expenses  for the six months ended June 30, 2007 |   | 874    |   |
| Cash payments for the  six months ended June 30, 2007          |   | (1,112 | )      |
| Restructuring liability at June 30, 2007                       |   | $      | 206    |   |

 

The restructuring liability atDecember 31, 2006 and June 30, 2007 is included in the line item “Accruedexpenses and other liabilities” in the accompanying consolidated balancesheets.

The following table representsrestructuring expenses included in each segment and corporate expenses for thethree and six months ended June 30, 2006 and 2007:
|               | ** ** | **Three Months Ended  June 30,** | ** ** | **Six Months Ended  June 30,** | ** ** |
|---------------|------------|-------------------------------------------------|------------|-----------------------------------------------|------------|
| ** **    | ** ** | **2006**                                        | ** ** | **2007**                                      | ** ** | **2006** | ** ** | **2007** | ** ** |
| North America |       | $                                               | 38         |                                          | $          | — |   | $ | 103 |   | $ | — |   |
| EAME          |       | 634                                             |       | 180                                           |       | 1,867 |   | 298 |   |
| Latin America |       | 451                                             |       | 22                                            |       | 1,039 |   | 86 |   |
| Asia/Pacific  |       | 53                                              |       | 112                                           |       | 505 |   | 330 |   |
| Corporate     |       | 129                                             |       | —                                        |       | 82 |   | 160 |   |
| Total         |       | $                                               | 1,305      |                                          | $          | 314 |   | $ | 3,596 |   | $ | 874 |   |

 

**4.****                       ****Inventories**

Inventoriesconsisted of the following at December 31, 2006 and June 30, 2007:
|                                  | ** ** | **December 31, 2006** | ** ** | **June 30, 2007** | ** ** |
|----------------------------------|------------|---------------------------------|------------|-----------------------------|------------|
| Raw materials and  supplies      |       | $                               | 7,309      |                        | $          | 6,439 |   |
| Work in process                  |       | 592                             |       | 379                         |       |
| Finished goods                   |       | 6,869                           |       | 8,949                       |       |
| Inventory obsolescence  reserves |       | (978                            | )          | (811                        | )          |
| Total                            |       | $                               | 13,792     |                        | $          | 14,956 |   |

 

**5.****                       ****Debt**

The Company is highly leveraged. At June 30, 2007, the Company and itssubsidiaries, including Merisant Company (“Merisant”), had $548,809 oflong-term debt outstanding, consisting of $116,474 aggregate principal amountof the Company’s 121⁄4% senior subordinated discount notes due 2014, $225,000aggregate principal amount of Merisant’s 91⁄2% senior subordinated notes due 2013(the “Notes”) and $207,335 aggregate principal amount outstanding underMerisant’s amended and restated senior secured credit agreement (the “Amendedand Restated Credit Agreement”), excluding capital lease obligations of $78 andunused commitments on the revolving portion of the Amended and Restated CreditAgreement of $30,640.

At June 30, 2007, borrowings under the Amended and Restated CreditAgreement included $16,789 (“Term A”) aggregate principal amount of term loansbearing annual interest of 7.51% and $190,546 (“Term B”) aggregate 

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principal amount of term loans bearing annual interest of 8.86%. TheTerm A loans are euro-denominated and are translated into U.S. dollars at thespot rate as of June 30, 2007.

On June 23, 2006,Merisant entered into an $85,000 senior secured term loan agreement (the “SecondLien Credit Agreement”), the borrowings under which were secured by a secondlien on all the assets that secured loans outstanding under the then existingsenior secured credit facility (the “Senior Credit Agreement”).  The Second Lien Credit Agreement consisted ofan aggregate of $85,000 principal amount of term loans, the net proceeds ofwhich were used to prepay $9,540 of euro-denominated Term A loans, prepay$53,320 of Term B loans and to repay $15,000 of revolving loans, in each case,outstanding under the Senior Credit Agreement.

On May 9, 2007, the Company, Merisant and certain of Merisant’ssubsidiaries entered into the Amended and Restated Credit Agreement, which,among other things, increased by $85,000 the principal amount of Term B loansthat may be borrowed by Merisant under the Senior Credit Agreement. Merisant paid$2,505 in fees and expenses related to this amendment and restatement which itdeferred and is amortizing over the term of the related debt. Upon closing,Merisant borrowed the full $85,000 of additional Term B loans available underthe Amended and Restated Credit Agreement and used the proceeds plus cash onhand to prepay the principal of all loans outstanding under the Second LienCredit Agreement totaling $85,000, plus all outstanding interest of $1,438 anda premium of $2,550, or $88,988.  TheSecond Lien Credit Agreement was terminated as a result of the transaction andthere was no increase in Merisant’s long term debt as a result of thistransaction.  In addition to theincurrence of fees, this transaction also resulted in a write-off of existingdeferred financing fees relating to the extinguishment of previouslyoutstanding debt under the Second Lien Credit Agreement of $3,241.

Upon closing of the above transaction and execution of the relatedamendment, the interest rate on all term loans and revolving loans outstandingunder the Amended and Restated Credit Agreement increased from euro-LIBOR andLIBOR plus 325 basis points per annum to euro-LIBOR and LIBOR plus 350 basispoints per annum.  As a result of thetermination of the Second Lien Credit Facility, Merisant’s effective interestrate on variable interest rate debt decreased from 10.63% per annum prior tothe closing of this transaction to 8.73% per annum subsequent to thistransaction.

Merisant paid interest on borrowingsunder the Senior Credit Agreement, the Second Lien Credit Agreement and on theNotes totaling $21,369 and $20,618 for the six months ended June 30, 2006 and2007, respectively.

The Amended and Restated Credit Agreement preserves prior amendments,amends future financial covenant ratios and levels and contains a number ofadditional amendments, including to the definition of Bank EBITDA, that givethe Company more flexibility to operate its business and de-leverage itsbalance sheet.

The Amended and Restated Credit Agreement contains covenants, includingfinancial covenants that must be met on a quarterly basis. “Bank EBITDA” is themeasure by which the financial covenants contained in the Amended and RestatedCredit Agreement are measured. However, Bank EBITDA is not a measure ofliquidity under GAAP. Accordingly, while providing useful information withrespect to an assessment of liquidity as measured in accordance with thecovenants in the Company’s primary debt obligations, this measure should not beconsidered in isolation from, or as a substitute for, consolidated statement ofcash flow data prepared in accordance with GAAP as an indication of liquidity.In addition, the Bank EBITDA measure presented may differ from, and may not becomparable to, similarly titled measures used by other companies.

Merisant was in compliance with its covenants under the Amended andRestated Credit Agreement as of June 30, 2007.

**6.****                       ****Transactions with Related Parties**

Merisant has a deferredcompensation payable to Arnold Donald, its former Chairman and a currentdirector, and a note receivable in the same amount from Mr. Donald.Merisant recorded $55 and $43 of interest income on the note receivable for thethree months ended June 30, 2006 and 2007, respectively, and $111 and $86 ofinterest income on the note receivable for the six months ended June 30, 2006and 2007, respectively, and an equal amount of interest expense in therespective periods.

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Merisant is party to an agreementwith Brand Architecture International (“Brand Architecture”) pursuant to which BrandArchitecture has agreed to provide consulting services relating to thedevelopment of brand architecture for Merisant’s brands. As compensation,Merisant paid approximately $165 and $224 to Brand Architecture for the threemonths ended June 30, 2006 and 2007, respectively, and approximately $572 and$300 for the six months ended June 30, 2006 and 2007, respectively, includingthe reimbursement to Brand Architecture for expenses relating to its work.Adam Stagliano, a member of the Company’s board of directors, is afounding director and the President and Chief Strategic Officer of BrandArchitecture.

**7.**                        Commitmentsand Contingencies

The Company has aninvestment in an affiliate located in the Philippines that is accounted forusing the equity method. The affiliate, a 50/50 joint venture, distributessugar substitute sweeteners for the international consumer food markets,primarily under the *Equal®* brand.In addition to its investment in the joint venture, the Company is committed toa 50% share in any new borrowings of the joint venture. As of December 31,2006 and June 30, 2007, there were no additional joint venture borrowings.

Merisant Europe B.V.B.A., the Company’s Belgium subsidiary, enteredinto a co-branding agreement with Galleria Srl, a company through which theItalian designer Elio Fiorucci operates. Under this co-branding arrangement,Merisant Europe produced a line of *Canderel*®tablet dispensers that featured designs and trademarks from Mr. Fiorucci’s“Love Therapy by Elio Fiorucci” collection. The co-branding arrangementcontains a representation and warranty that Galleria owns all rights in thename “Love Therapy by Elio Fiorucci” and associated designs and furtherprovides that Galleria will indemnify and hold Merisant Europe and its affiliatesharmless against damages resulting from or related to their use of the name anddesigns pursuant to the agreement. Beginning in 2005, Merisant Europe soldtablet dispensers with the “Love Therapy by Elio Fiorucci” designs in Italy.Edwin & Co. Ltd. has claimed that it owns all rights inMr. Fiorucci’s name and in the designs used by the Company and has filedsuit against Merisant Europe in Milan, Italy. On or about March 17, 2006,the court in Milan enjoined Merisant Europe from producing or selling thetablet dispensers after the date of the court order. The Company no longerproduces the dispensers and stopped selling dispensers to its distributor inItaly. Merisant Europe has filed an appeal and will vigorously oppose the court’sorder. Merisant Europe will also enforce its indemnification rights under itsco-branding arrangement with Galleria Srl.

On November 26, 2004, Merisant filed a federal and state falseadvertising complaint against McNeil in the United States District Court forthe Eastern District of Pennsylvania. That lawsuit sought to have McNeil’s *Splenda*® advertising campaign stopped and significantdamages recovered.  The trial commencedon April 9, 2007 before a Philadelphia jury and the parties entered into aconfidential settlement agreement on May 11, 2007.

In April 2007, theCompany entered into a new operating lease for office space in Chicago andterminated its current lease, providing the required one year noticeperiod.  The Company plans to move itscorporate operations to the new space in early 2008.  The new landlord paid the lease terminationfee of $869 on the Company’s behalf and the related expense was recorded inAdministration expenses in the second quarter of 2007.  The new lease terminates on April 30,2024.  Current leasehold improvements andother non-transferable assets will be fully depreciated between April 2007 andthe estimated date the Company will move into the new facility and moving costswill be expensed as they are incurred.

The Company is subject to various other claims,pending and possible legal actions for product liability and other damages, andother matters arising out of the conduct of the Company’s business, includingtax uncertainties arising from doing business in various Europeanjurisdictions. The Company believes, based on current knowledge andconsultation with counsel, that the outcome of such claims and actions will nothave a material adverse effect on the Company’s consolidated financial positionor results of operations.

**8.**                        Income Taxes

In June2006, the Financial Accounting Standards Board (“FASB”) issued InterpretationNo. 48, Accounting for Uncertainty in Income Taxes — an interpretation of FASBStatement No. 109 (“FIN 48”), that clarifies the accounting and recognition forincome tax positions taken or expected to be taken in the Company’s taxreturns. The Company adopted FIN 48 on January 1, 2007, and recorded thecumulative effect of a change in accounting principle by recording a decreasein the liability for uncertain tax positions of $5,757, that was accounted foras a credit to opening 

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retainedearnings. At January 1, 2007 and June 30, 2007, the total liability foruncertain tax positions recorded in the Company’s balance sheet in non-currentOther liabilities was $2,145 and $2,849, respectively. The entire amount ofthis consolidated worldwide liability for uncertain tax positions would affectthe Company’s effective tax rate upon favorable resolution of the uncertain taxpositions.  Absent new experience indefending these uncertain tax positions in the various jurisdictions to whichthey relate, the Company cannot currently estimate a range of possible changeof the June 30, 2007 liability over the next twelve months.

TheCompany files a consolidated U.S. income tax return and tax returns in variousstate and local jurisdictions. The Company’s subsidiaries also file tax returnsin various foreign jurisdictions. In addition to the U.S., the Company’s majortaxing jurisdictions include Switzerland, France, the United Kingdom, Belgium,Australia, Argentina and Mexico. In the U.S., all tax years from inception in2000 through the present are open.  TheCompany’s Switzerland subsidiary operates under a tax holiday, resulting in nouncertain tax positions for that entity for any tax year.  Local audits of the tax returns for theCompany’s France subsidiary have been completed through 2004.  In the United Kingdom, the Company assumesthat tax years through 2004 are closed due to local practice.  In Belgium and Australia, tax years through 2003and 2001, respectively, are closed due to the local statute oflimitations.  In Argentina and Mexico,only the year of inception, 2000, is considered a closed tax year due to thelocal statute of limitations.

Interest and penalties related to tax positions taken in the Company’stax returns are recorded in income tax expense in the consolidated statementsof operations. At January 1, 2007 and June 30, 2007, the combined amount ofaccrued interest and penalties related to tax positions taken on the Company’stax returns and recorded in non-current Other liabilities was $429 and $689,respectively.

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**Item 2.  Management’s Discussion andAnalysis of Financial Condition and Results of Operations**

*The following discussion should be read in conjunction with our unauditedconsolidated financial statements and accompanying notes included elsewhere inthis document. Our discussion of results by reportable segment should be readin conjunction with Note 2 to the unaudited consolidated financial statements included elsewhere in thisdocument, which illustrates the reconciliation of Operating EBITDA to income orloss before income taxes. Unless otherwise indicated or unless the contextrequires otherwise, all references in this discussion to “us”, “our” or “ourcompany” mean Merisant Worldwide, Inc. and its consolidated subsidiaries andall references to “Merisant” mean Merisant Company.*

**Overview**

Our company is a worldwide leader in themarketing of low-calorie tabletop sweeteners, with an estimated 23% dollarshare as of December 31, 2006 of a stable global retail market, which weestimate at $1.5 billion.  We believethat our company has the leading dollar market share as of December 31, 2006 inapproximately half of what we estimate as the top twenty markets for low-calorietabletop sweetener sales.  Ourpremium-priced brands, *Equal*® and*Canderel*®, are among the mostrecognized low-calorie tabletop sweetener products in the world, with aidedbrand awareness estimated at between 85% and 95% in our four top markets.  In addition to *Equal*® and *Canderel*®,we market our products under eighteen other regional brands that enjoysignificant brand recognition in their target markets.  We sell our brands in over ninety countries.

Our business is the result of over 25years of history in the low-calorie tabletop sweetener industry, first as adivision of G.D. Searle & Co. (“Searle”) and later Monsanto Company (“Monsanto”).  Searle invented the key sweetening ingredientin many of our products, aspartame, in 1965. Aspartame was first approved for consumer use in France in 1979, whereSearle marketed the product under the *Canderel*®brand.  By the early 1980s, *Canderel*® was being marketed in much ofEurope.  In 1981, the U.S. Food and DrugAdministration approved the tabletop use of aspartame.  The following year, Searle launched *Equal*® in the United States.  Monsanto entered the sweetener market in 1985through its acquisition of Searle. Our company is a Delaware corporation thatwas formed in 2000 by an investor group led by an affiliate of Pegasus CapitalAdvisors, L.P. to acquire Monsanto Company’s tabletop sweetener business.

Our worldwide headquarters is located inChicago, Illinois, and we have principal regional offices in Mexico City,Mexico, Neuchâtel, Switzerland, Paris, France and Singapore.  We own and operate manufacturing facilitiesin Manteno, Illinois and Zarate, Argentina and own processing lines that areoperated exclusively for us at plants located in Bergisch and Stendal, Germany.  As of August 10, 2007, we had twenty-twodirect and indirect subsidiaries, including three subsidiaries in the UnitedStates, eight subsidiaries in Europe, six subsidiaries in Mexico, CentralAmerica and South America, and five subsidiaries in the Asia Pacific region,including Australia and India.  Inaddition, our Swiss subsidiary holds a 50% interest in a joint venture in thePhilippines.

Our core business continues to be productssweetened with aspartame, and the *Equal*®and *Canderel*® tabletop sweetenerproducts accounted for approximately 87% of our net sales in 2006.   The majority of our eighteen other regionalbrands around the world are also sweetened with aspartame.

***Sales Trends and Strategy***

Ourcompany’s premium-priced brands had enjoyed a dominant market position amonglow-calorie sweeteners in many of our key markets.  In recent years, however, we have facedsignificant competition from McNeil Nutritionals LLC, a subsidiary of Johnson& Johnson (“McNeil”), which markets and distributes the artificialsweetener*Splenda*®.  *Splenda*®is sweetened with sucralose, which is produced by Tate & Lyle PLC through acomplex chemical process that converts sucrose molecules into a syntheticcompound. From December 2002 to December 2006, *Splenda*®’sdollar share of the United States retail grocery market has grown fromapproximately 15% to 62% and has surpassed that of *Equal*® to become the number one premium low-caloriesweetener in the United States.  While webelieve that the introduction of *Splenda*®has increased the size of the market for low-calorie sweeteners in general, ournet sales have declined during this period, particularly in North America whichhad accounted for 46% and 42% of our net sales in 2003 and 2006,respectively.  As a result of decliningnet sales, we have experienced significant declines in our Bank EBITDA from$110.2 million in 2003 to $67.2 million in 2006.  For a description of Bank EBITDA and areconciliation of Bank EBITDA to cash flow from operating activities, see “Management’sDiscussion and Analysis of Financial Condition and Results ofOperations—Liquidity and Capital Resources”.

We believe that there areopportunities for future growth in the low-calorie tabletop sweetener andsweetened food category and that our company is positioned to pursue theseopportunities.  Despite recent declinesin net sales, our premium 

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brands *Equal*®and *Canderel*® are among the mostrecognized low-calorie tabletop sweetener products in the world, with aidedbrand awareness estimated between 85% and 95% in our top four markets.

Paul Block was appointedChief Executive Officer in November 2004 and has led an initiative tostrengthen our company’s core brands, improve the efficiency of our operations,reduce costs and transform our company into a sweetener and sweetened foodcompany.  Mr. Block has recruitedindividuals from outside our company and promoted individuals from within theorganization to form a new senior management team with the goal of developing aculture of innovation with a focus on the development and launch of new productsdesigned to revitalize the existing customer base and attract new consumers.

Our company seeks tostabilize and then grow revenues through the following five strategicinitiatives:

·                  Promotenew usage among existing consumers and expand the *Equal*®and *Canderel*® brand positioning to attractnew consumers through invasive marketing campaigns and improved salesexecution.

·                  Pursueproduct innovation to bring new aspartame sweetened products and brandextensions to the market.  We launchedseveral new products in 2006 and have additional products in the developmentpipeline.

·                  Developand test products that have the potential to transform our company’s brandportfolio. We have developed an all-natural, zero-calorie sweetener that isbeing marketed under the *Sweet Simplicity*®brand for our subsidiary, Whole Earth Sweetener Company LLC. Currently, thisinnovative product has achieved national distribution at 137 Wild Oats oraffiliated stores, approximately 127 Whole Foods stores (of their 192 stores intotal) and has also been sold into over 250 independent organic retail outletsacross the United States.

·                  Dedicatesignificant resources to improving the efficiency of operations by, among otherthings, implementing supply chain-based programs to streamline manufacturingcapabilities and improving the efficiency of certain support services.   We have successfully reduced costs and madeour business more efficient, which has significantly contributed to the currentstabilization of Bank EBITDA over the past two years.

·                  Offerprivate label low-calorie sweeteners to retail and food service customers andleverage supply chain expertise globally.

Webelieve that the development and introduction of new products under our *Equal*® and *Canderel*®brands may help to stabilize our core business while innovative, all-naturalsweeteners and sweetened food products under our *SweetSimplicity®* brand for Whole Earth Sweetener Company present growthopportunities for us. However, we may be constrained in our ability to realizefully the value of these new products as a result of our current capitalstructure. The successful launch of new products and marketing of our corebrands requires capital, and we must use a significant portion of our cashflows from operations to service our outstanding debt. We had an aggregate of$548.8 million of long-term debt outstanding at June 30, 2007, excludingcapital lease obligations, and paid $44.3 million in interest costs for theyear ended December 31, 2006, $22.0 million of which represented interestpayments on Merisant’s 91⁄2% senior subordinated notes due 2013 (the “Notes”). Ifwe cannot generate cash flows from operations significantly in excess of ourshort-term debt obligations, we may not have the resources required to fullyrealize the value of our strategic initiatives. We may engage in discussions from time to time with our lenders andnoteholders on ways to optimize our capital structure.

**Results of Operations**

For each of the periodsdiscussed below, the information set forth under the caption “ConsolidatedResults” represents an overview of our company’s results of operations on aconsolidated basis. Additional detail regarding the results of operations canbe found under the caption “Segment Results” for each period discussed below.

***Three Months Ended June 30, 2007 Compared to Three Months Ended June30, 2006***

The following table sets forth certain of our company’sfinancial data for the three month periods ended June 30, 2006 and 2007 (totalsmay not foot due to rounding).

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| ** **                         | ** ** | **Three Months Ended  June 30,** | ** ** | **Three Months Ended  June 30,** | ** ** |
|------------------------------------|------------|-------------------------------------------------|------------|-------------------------------------------------|------------|
| ** **                         | ** ** | **2006**                                        | ** ** | **2007**                                        | ** ** | **2006** | ** ** | **2007** | ** ** | **Better/(Worse)  than Prior Year** | ** ** |
| ** **                         | ** ** | **(in millions)**                          | ** ** | **As % of Net Sales**       | ** ** | **Dollars** | ** ** | **%** | ** ** |
| Net sales                          |       | $                                               | 78.6       |                                            | $          | 71.1 |   | 100 | % | 100 | % | $ | (7.5 | ) | (10 | )% |
| Cost of sales                      |       | 32.6                                            |       | 31.9                                            |       | 41 | % | 45 | % | 0.7 |   | 2 | % |
| Gross profit                       |       | 46.0                                            |       | 39.2                                            |       | 59 | % | 55 | % | (6.8 | ) | (15 | )% |
| Operating expenses:                |       |                                            |       |                                            |       |   |   |   |   |   |   |   |   |
| Marketing and  selling expenses    |       | 22.2                                            |       | 17.0                                            |       | 28 | % | 24 | % | 5.2 |   | 23 | % |
| Administration  expenses           |       | 10.5                                            |       | 13.1                                            |       | 13 | % | 18 | % | (2.6 | ) | (25 | )% |
| Research and  development expenses |       | 0.3                                             |       | 0.4                                             |       | 0 | % | 1 | % | (0.0 | ) | (4 | )% |
| Amortization of  intangible assets |       | 5.6                                             |       | 5.7                                             |       | 7 | % | 8 | % | (0.2 | ) | (3 | )% |
| Transaction fees                   |       | 3.3                                             |       | —                                          |       | 4 | % | — | % | 3.3 |   | 100 | % |
| Restructuring  expenses            |       | 1.3                                             |       | 0.3                                             |       | 2 | % | 0 | % | 1.0 |   | 76 | % |
| Total operating  expenses          |       | 43.2                                            |       | 36.5                                            |       | 55 | % | 51 | % | 6.7 |   | 15 | % |
| Income from operations             |       | 2.9                                             |       | 2.7                                             |       | 4 | % | 4 | % | (0.1 | ) | (4 | )% |
| Other expenses  (income):          |       |                                            |       |                                            |       |   |   |   |   |   |   |   |   |
| Interest income                    |       | (0.2                                            | )          | (0.2                                            | )          | (0 | )% | (0 | )% | (0.1 | ) | (26 | )% |
| Interest expense                   |       | 14.5                                            |       | 14.9                                            |       | 18 | % | 21 | % | (0.5 | ) | (3 | )% |
| Costs of  refinancing              |       | 2.5                                             |       | 5.8                                             |       | 3 | % | 8 | % | (3.3 | ) | (134 | )% |
| Other expense  (income), net       |       | 1.3                                             |       | (30.2                                           | )          | 2 | % | (43 | )% | 31.5 |   | 2374 | % |
| Total other  expense (income)      |       | 18.1                                            |       | (9.6                                            | )          | 23 | % | (14 | )% | 27.7 |   | 153 | % |
| Income (loss) before  income taxes |       | (15.2                                           | )          | 12.4                                            |       | (19 | )% | 17 | % | 27.6 |   | 181 | % |
| Provision for income  taxes        |       | 2.7                                             |       | 1.9                                             |       | 3 | % | 3 | % | 0.8 |   | 31 | % |
| Net income (loss)                  |       | $                                               | (17.9      | )                                               | $          | 10.5 |   | (23 | )% | 15 | % | $ | 28.4 |   | 159 | % |

 

***Consolidated Results***

*Net sales.*Overall,net sales declined in the second quarter of 2007 compared to the second quarterof 2006.  The decline was related tolower sales in the North America and EAME regions and, to a lesser extent, inLatin America.  In North America, salesdeclined due primarily to lower consumer demand and higher trade marketingexpense in the grocery, drug and  foodservice channels as well as lower consumer demand in the club and masschannels.  In EAME, we experienced ourgreatest sales declines in the UK mainly as a result of weaker consumer demand,the lingering impact of diversion of product into the retail channel anddiscontinued sales to certain distributors in an effort to stop thediversion.  Lower sales in France,Belgium and Hungary also contributed to the decline in the EAME region.  In LatinAmerica, the sales decrease primarily related to a  delay in shipping under our new businessmodel in Mexico.  These sales declineswere partly offset by approximately $2.3 million in favorable currencytranslation gains, improved sales in the North America discount channel,increased sales in other EAME countries, mainly the Middle East, improved salesin Argentina, Venezuela, Colombia and Brazil and increased raw material salesand contract manufacturing activity.

*Cost of sales.*Cost of sales decreased due to the reduction in overall sales volumes, however,this decrease was partly offset by unfavorable currency translation, rawmaterial prices and the impact of purchasing product in Euro for sales incountries with weaker currencies. Overall, gross profit as a percentage of net sales declined from 59% forthe three months ended June 30, 2006 to 55% for the three months ended June 30,2007 due to the increases in costs discussed above as well as increased salesof lower margin products such as contract manufacturing and raw materials, anddiscounted pricing in countries converted to distributor models.

*Operating expenses.*Marketingand selling expenses decreased due to lower brand support in North America andEAME, lower variable selling costs due to reduced sales and lower overallmarketing and selling administration costs due to savings from restructuringactions. These favorable impacts were partly offset by higher brand support inthe Asia Pacific region and unfavorable currency impacts.  Administration expenses increased mainly dueto higher consulting costs and the expense related to the termination of our Chicagooffice lease, partly offset by lower performance based incentives.

On June 23, 2006, Merisant entered into an $85.0million senior secured term loan agreement (the “Second Lien Credit Agreement”),the borrowings under which were secured by a second lien on all the assets thatsecured loans outstanding under the then existing senior secured creditfacility (the “Senior Credit Agreement”). Transactionfees decreased due to $3.3 million in expenses incurred in conjunction with theSecond Lien Credit Agreement in the second quarter of 2006 that did not repeatin the second quarter of 2007.

16

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During the second quarter of 2007, we continued ourrestructuring initiatives to improve both financial results and the long-termvalue of the business. As a result of these actions, we recorded restructuringcharges for workforce reductions of $0.3 million in the second quarter of 2007as compared to $1.3 million in the second quarter of 2006. The restructuringcharges incurred in the second quarter of 2007 relate primarily to new employeetermination costs and are expected to be substantially paid by December 31,2007. Additional information regarding restructuring charges and the relatedliability can be found in Note 3 to the unaudited consolidated financialstatements located elsewhere in this document.

*Interest.*Our interest expense increased as a resultof interest calculated on a higher accreted balance on our 121⁄4% seniorsubordinated discount notes due 2014 (the “Discount Notes”) and the net resultof higher interest bearing loans under Merisant’s Second Lien Credit Agreementthat were in place for a portion of the quarter prior to the refinancing ofthese higher interest bearing loans with lower interest bearing loans on May 9,2007.

*Costs ofrefinancing. *Costs ofrefinancing in the second quarter of 2007 related to the extinguishment of debtunder the Second Lien Credit Agreement. As a result of this transaction, a premium of $2.6 million was incurredto pay all debt and interest outstanding under the Second Lien Credit Agreementand $3.2 million of existing deferred financing fees relating to theextinguished debt was written off.  Costsof refinancing in the second quarter of 2006 related to the consummation of theSecond Lien Credit Agreement and related extinguishment of debt under thepreviously established credit agreement, which resulted in a write-off ofexisting deferred financing fees of $2.5 million.

 *Otherincome/expense, net*. In thesecond quarter of 2007, we experienced an unusually high level of other incomeas compared to the more typical other expense realized in the second quarter of2006.  The other income in the secondquarter of 2007 was primarily the result of a one-time cash paymentreceived pursuant to an agreement with a third party.   Also inthe second quarter of 2007, a $0.2 million currency loss on theeuro-denominated debt was more than offset by favorable balance sheetremeasurement impacts.  In the secondquarter of 2006, we recorded a loss on the euro-denominated debt of $1.3million.

*Taxes.*For thethree months ended June 30, 2007, we recorded a $1.9 million tax provision onincome before income taxes of $12.4 million and for the three months ended June30, 2006, we recorded a $2.7 million tax provision on a loss before incometaxes of $15.2 million. The unusual relationship of our tax provisions to ourpre-tax losses (excluding the impact of the one-time cash payment describedabove in the second quarter of 2007) relates to a combination of factors. Thesefactors include increased tax loss carryforwards, primarily generated in theUnited States, for which we have not recorded a tax benefit, as well as **provisionsfor future tax costs which may be incurred upon the potential repatriation ofcertain foreign earnings that are not deemed to be permanentlyreinvested. **With regard to the deferred income taxassets on the tax loss carryforwards, we determined that we have not satisfiedthe “more likely than not” test and we decreased our total valuation allowanceby $2.7 million in the second quarter of 2007 to a total of $82.5 million. Wewill continue to assess the valuation allowances, and, to the extent wedetermine that such allowances are no longer required, these deferred incometax assets will be recognized in the future.

**Segment Results**

Thefollowing table presents net sales and Operating EBITDA expressedin millions of dollars for each reportable segment (totals may not footdue to rounding):
| ** **              | ** ** | **Net Sales**                          | ** ** | **Operating EBITDA (1)**            | ** ** |
|-------------------------|------------|---------------------------------------------|------------|-----------------------------------------------|------------|
| ** **              | ** ** | **Three Months  Ended  June 30,** | ** ** | **Better/(Worse)  than Prior Year** | ** ** | **Three Months  Ended  June 30,** | ** ** | **Better/(Worse)  than Prior Year** | ** ** |
| ** **              | ** ** | **2006**                                    | ** ** | **2007**                                      | ** ** | **$** | ** ** | **%** | ** ** | **2006** | ** ** | **2007** | ** ** | **$** | ** ** | **%** | ** ** |
| ** **              | ** ** | **(in millions)**                      | ** ** | **(in millions)**                        | ** ** |
| ** **              | ** ** | ** **                                  | ** ** | ** **                                    | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| North America (2)       |       | $                                           | 33.0       |                                          | $          | 27.6 |   | $ | (5.4 | ) | (16 | )% | $ | 12.3 |   | $ | 10.1 |   | $ | (2.1 | ) | (17 | )% |
| Operating EBITDA Margin |       |                                        |       |                                          |       |   |   |   |   | 37 | % | 37 | % | (0 | )% |   |   |
| EAME                    |       | 31.9                                        |       | 30.1                                          |       | (1.9 | ) | (6 | )% | 6.4 |   | 8.7 |   | 2.4 |   | 37 | % |
| Operating EBITDA Margin |       |                                        |       |                                          |       |   |   |   |   | 20 | % | 29 | % | 9 | % |   |   |
| Latin America           |       | 8.3                                         |       | 8.1                                           |       | (0.2 | ) | (3 | )% | 2.5 |   | 1.9 |   | (0.6 | ) | (24 | )% |
| Operating EBITDA Margin |       |                                        |       |                                          |       |   |   |   |   | 30 | % | 24 | % | (7 | )% |   |   |
| Asia/Pacific            |       | 5.4                                         |       | 5.4                                           |       | 0.0 |   | 0 | % | 1.8 |   | 1.4 |   | (0.5 | ) | (26 | )% |
| Operating EBITDA Margin |       |                                        |       |                                          |       |   |   |   |   | 34 | % | 25 | % | (9 | )% |   |   |
|                         |            |                                             |            |                                               |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

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(1)             “Operating EBITDA” asused with respect to our operating segments is a measure upon which we assessthe financial performance of these segments. Operating EBITDA excludes interestexpense, income tax expense and depreciation and 

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amortization, aswell as items such as restructuring expenses, certain significant chargesrelated to new product development and launch costs, certain litigation costs,cost related to the transition to a new exclusive distributor in the UnitedStates and certain other non-cash items or excludable gains or losses. Ourdefinition of Operating EBITDA is largely driven by similar definitions of BankEBITDA under our primary credit facilities. That definition changed in the May 2007 amendment of those creditfacilities, and that change is reflected in our computation of Operating EBITDAfor the 2007 period. See Note 2 to the unaudited consolidated financialstatements for a description of Operating EBITDA and a reconciliation ofOperating EBITDA to income or loss before income taxes. Operating EBITDA marginrepresents Operating EBITDA as a percentage of net sales.

(2)             NorthAmerica segment results exclude immaterial sales and $0.9 million and $1.0million of negative Operating EBITDA related to a new product launch whichmanagement evaluates separately from this geographical segment for the threemonth period ended June 30, 2006 and 2007, respectively.

***North America***

*Net sales.*  In NorthAmerica, net sales declined due primarily to lower consumer demand and highertrade marketing expense in the grocery, drug and food service channels as wellas lower consumer demand in the club and mass channels.  In the club channel, higher consumer demandin the first quarter as a result of increased promotional activity contributedto softer consumer demand in the second quarter.  In the retail channel, the transition fromour previous mid-priced brand to its replacement brand also contributed to thedecline in sales.   These sales declineswere partly offset by increased distribution and sales in the discount channel,increases in contract manufacturing activity and lower commissions.

*Operating EBITDA.*The decrease in Operating EBITDA was primarilyrelated to the adverse margin impact of lower net sales and unfavorable salesmix.  These unfavorable impacts werepartly offset by lower overall brand support and variable selling costs andlower marketing and general administration costs due to savings fromrestructuring actions.  Operating EBITDAmargin was slightly improved as a result of lower marketing costs as apercentage of sales.

***EAME***

*Net sales.*In the EAME region, the decline in net sales wasdriven primarily by the UK, France, Belgium and Hungary.  We experienced our greatest sales declines inthe UK mainly as a result of weaker consumer demand, the lingering impact of diversionof product into the retail channel and discontinued sales to certaindistributors in an effort to stop the diversion.  Continued softness in consumer demand andincreased trade marketing costs reduced sales in France.  In Belgium, weakness in consumer demand andreduced pricing due to the change in business model negatively impacted sales,however overall profitability improved as compared to the second quarter of2006.  In Hungary, lower net sales were due mainly to the shift to adistributor model after the sale of the entity in July 2006 to improveinfrastructure costs and discontinued sales of low margin products.  These unfavorable impacts were partly offsetby favorable currency translation of approximately $1.5 million and improvedsales in several other countries, mainly the Middle East.  In the Middle East, a shift in timing ofshipments from the first quarter of 2007 to the second quarter of 2007positively impacted sales in the second quarter of 2007.

*Operating EBITDA.* OperatingEBITDA increased mainly due to lower brand support primarily in France and theUK and reduced marketing, selling and general administrative costs due mainlyto savings from restructuring actions and changes in business models in severalmarkets.  These positive impacts werepartly offset by the adverse margin impact of decreased sales.  The increase in Operating EBITDA margin wasprimarily due to a decrease in marketing, selling and administrative expensesas a percentage of sales.

***Latin America***

*Net sales.* The sales decrease primarily relates to thetransition to a new business model in Mexico, including  additional accruals for sales deductions andsales returns from our previous distributor, and a delay in shipping under thatnew model as well as increased competition in the club channel.  These declines were offset by improvedexecution and promotional activity in Argentina, higher sales in Venezuelarelating to a sugar shortage, new distribution in Brazil and improved sales inColombia.

*Operating EBITDA.*Operating EBITDA declined due mainly to theadverse margin impact of lower sales volumes and increased salesdeductions.  Operating EBITDA margindecreased primarily due to lower gross profit as a percentage of sales.

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***Asia/Pacific***

*Net sales.*Net sales in the Asia/Pacific region were flat asfavorable currency translation impacts and improved sales in Indonesia wereoffset by lower pricing in Australia/New Zealand as a result of the shift to adistributor model.

*Operating EBITDA.*Operating EBITDA and Operating EBITDA margindecreased primarily due to reduced gross margin and higher brand support.

**Corporate Expenses**

Corporate expenses increased from $6.7 million in thesecond quarter of 2006 to $7.6 million in the second quarter of 2007, primarilydue to higher litigation, consulting and employee related costs partly offsetby lower performance based incentives.

***Six Months Ended June 30, 2007 Compared to Six Months Ended June 30,2006***

The following table sets forth certain of our company’sfinancial data for the six month periods ended June 30, 2006 and 2007 (totalsmay not foot due to rounding).
| ** **                         | ** ** | **Six Months Ended  June 30,** | ** ** | **Six Months Ended  June 30,** | ** ** |
|------------------------------------|------------|-----------------------------------------------|------------|-----------------------------------------------|------------|
| ** **                         | ** ** | **2006**                                      | ** ** | **2007**                                      | ** ** | **2006** | ** ** | **2007** | ** ** | **Better/(Worse)  than Prior Year** | ** ** |
| ** **                         | ** ** | **(in millions)**                        | ** ** | **As % of Net Sales**     | ** ** | **Dollars** | ** ** | **%** | ** ** |
| Net sales                          |       | $                                             | 148.3      |                                          | $          | 140.4 |   | 100 | % | 100 | % | $ | (7.9 | ) | (5 | )% |
| Cost of sales                      |       | 61.6                                          |       | 62.6                                          |       | 42 | % | 45 | % | (1.0 | ) | (2 | )% |
| Gross profit                       |       | 86.7                                          |       | 77.8                                          |       | 58 | % | 55 | % | (8.9 | ) | (10 | )% |
| Operating  expenses:               |       |                                          |       |                                          |       |   |   |   |   |   |   |   |   |
| Marketing and selling expenses     |       | 39.1                                          |       | 32.3                                          |       | 26 | % | 23 | % | 6.8 |   | 17 | % |
| Administration expenses            |       | 21.6                                          |       | 24.6                                          |       | 15 | % | 18 | % | (3.0 | ) | (14 | )% |
| Research and development expenses  |       | 1.0                                           |       | 0.7                                           |       | 1 | % | 1 | % | 0.2 |   | 24 | % |
| Amortization of intangible assets  |       | 11.1                                          |       | 11.5                                          |       | 7 | % | 8 | % | (0.3 | ) | (3 | )% |
| Transaction fees                   |       | 3.3                                           |       | —                                        |       | 2 | % | — | % | 3.3 |   | 100 | % |
| Restructuring expenses             |       | 3.6                                           |       | 0.9                                           |       | 2 | % | 1 | % | 2.7 |   | 76 | % |
| Total operating expenses           |       | 79.7                                          |       | 70.0                                          |       | 54 | % | 50 | % | 9.7 |   | 12 | % |
| Income from  operations            |       | 7.0                                           |       | 7.8                                           |       | 5 | % | 6 | % | 0.8 |   | 12 | % |
| Other expenses  (income):          |       |                                          |       |                                          |       |   |   |   |   |   |   |   |   |
| Interest income                    |       | (0.4                                          | )          | (0.4                                          | )          | (0 | )% | (0 | )% | 0.0 |   | 0 | % |
| Interest expense                   |       | 28.4                                          |       | 30.3                                          |       | 19 | % | 22 | % | (1.9 | ) | (7 | )% |
| Costs of refinancing               |       | 2.5                                           |       | 5.8                                           |       | 2 | % | 4 | % | (3.3 | ) | (134 | )% |
| Other expense (income), net        |       | 1.5                                           |       | (30.1                                         | )          | 1 | % | (21 | )% | 31.6 |   | 2056 | % |
| Total other expense                |       | 32.1                                          |       | 5.7                                           |       | 22 | % | 4 | % | 26.4 |   | 82 | % |
| Income (loss)  before income taxes |       | (25.1                                         | )          | 2.1                                           |       | (17 | )% | 2 | % | 27.2 |   | 109 | % |
| Provision for  income taxes        |       | 2.9                                           |       | 3.7                                           |       | 2 | % | 3 | % | (0.8 | ) | (26 | )% |
| Net loss                           |       | $                                             | (28.0      | )                                             | $          | (1.6 | ) | (19 | )% | (1 | )% | $ | 26.4 |   | 94 | % |

 

***Consolidated Results***

*Net sales.*Overall,net sales declined in the six months ended June 30, 2007 compared to the sixmonths ended June 30, 2006.  The declinewas related to lower sales in North America, EAME and Latin America.  In North America, the sales decline primarilyrelated to lower sales volume and higher trade marketing spending in thegrocery, drug and food service channels, as well as increased promotionalspending in the club channel.  Thedecline in grocery, drug and food service was exacerbated by a shift in therecognition of revenue from January 2007 to December 2006 relating to thescheduling of our annual physical inventory in early January.   In EAME, we experienced our greatest salesdeclines in the UK as a result of weaker consumer demand, the impact of diversionof product into the retail channel and discontinued sales to certaindistributors in an effort to stop the diversion.  Lower sales in France, Belgium and Hungaryalso contributed to the decline in the EAME region.   In LatinAmerica, the sales decrease primarily related to a sales return from ourprevious distributor in Mexico and a delay in shipping under our new businessmodel in Mexico.  These sales declineswere partly offset by improved sales in Asia Pacific due to shipments to newdistributors in Australia and India to establish beginning inventory levels,approximately $4.3 million in 

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favorablecurrency translation gains, improved consumer demand in the North America clubchannel, increased sales in other EAME countries, mainly Portugal and Ireland,and increased contract manufacturing activity and sales of raw materials.

*Cost of sales.*Cost of sales increased, despite the decline in sales, due to sales increasesin lower margin products, such as contract manufacturing and raw materials, theimpact of purchasing product in Euro for sales in countries with weakercurrencies and unfavorable raw material purchase prices.  Overall, gross profit as a percentage of netsales declined from 58% for the six months ended June 30, 2006 to 55% for thesix months ended June 30, 2007 due to the increases in costs discussed above aswell as discounted pricing in the UK, increased trade marketing in NorthAmerica and France and decreased pricing in countries converted to distributormodels.

*Operating expenses.*Marketingand selling expenses decreased due to lower brand support in North America andEAME, termination costs recorded in the six months ended June 30, 2006 relatedto the transition to a new distributor in the United States that did not repeatin the same period in 2007 and lower overall marketing and sellingadministration costs due to savings from restructuring actions. These favorableimpacts were partly offset by higher brand support in the Asia Pacific regionand unfavorable currency impacts. Administration expenses increased mainly due to higher litigation,consulting and employment termination costs and the expense related to thetermination of our Chicago office lease partly offset by lower performancebased incentives. Transaction fees decreased due to $3.3 million in expensesincurred in conjunction with the Second Lien Credit Agreement in the secondquarter of 2006 that did not repeat in the second quarter of 2007.

During the six months ended June 30, 2007, we continuedour restructuring initiatives to improve both financial results and thelong-term value of the business. As a result of these actions, we recordedrestructuring charges for workforce reductions of $0.9 million in the sixmonths ended June 30, 2007 as compared to $3.6 million in the six months endedJune 30, 2006. The restructuring charges incurred in the six months ended June30, 2007 relate primarily to new employee termination costs and are expected tobe substantially paid by December 31, 2007. Additional information regardingrestructuring charges and the related liability can be found in Note 3 to theunaudited consolidated financial statements located elsewhere in this document.

*Interest.*Our interest expense increased as a resultof interest calculated on a higher accreted balance on our Discount Notes andthe net result of higher interest bearing loans under Merisant’s Second LienCredit Agreement and the use of proceeds from the Second Lien Credit Agreementto prepay lower interest bearing loans under Merisant’s Senior CreditAgreement, as well as overall increases in interest rates on variable interestdebt instruments. Loans outstanding under the Senior Credit Agreement had aweighted average interest rate of approximately 9.0% per annum prior to theJune 2006 closing of the Second Lien Credit Agreement.  Merisant’s borrowings under the Senior CreditAgreement and Second Lien Credit Agreement had a weighted average interest rateof approximately 10.3% per annum upon the closing of the Second Lien CreditAgreement.  In May 2007, Merisantrefinanced and therefore terminated the Second Lien Credit Agreement asdescribed below, which results in a reduction of cash interest expenseprospectively from the date of the refinancing.

*Costs ofrefinancing. *Costs ofrefinancing in the second quarter of 2007 related to the extinguishment of debtunder the Second Lien Credit Agreement. As a result of this transaction, a premium of $2.6 million was incurredto pay all debt and interest outstanding under the Second Lien Credit Agreementand $3.2 million of existing deferred financing fees was written off.  Costs of refinancing in the second quarter of2006 related to the consummation of the Second Lien Credit Agreement andrelated extinguishment of debt under the previously established creditagreement, which resulted in a write-off of existing deferred financing fees of$2.5 million

*Other income/expense, net*. In the second quarter of 2007, we experienced an unusually high levelof other income as compared to the more typical other expense realized in theprevious periods.  The other income inthe second quarter of 2007 was primarily the result of a one-time cashpayment received pursuant to an agreement with a third party.  Also inthe first  half of 2007, a $0.5 millioncurrency loss on the euro-denominated debt was offset by favorable balancesheet remeasurement impacts.  In thefirst half of 2006, we recorded a loss on the euro-denominated debt of $1.9 million,which was partly offset by a $0.7 million realized gain on interest ratederivatives that expired in March 2006.

*Taxes.*For the sixmonths ended June 30, 2007, we recorded a $3.7 million tax provision on incomebefore income taxes of $2.1 million and in the six months ended June 30, 2006,we recorded a $2.9 million tax provision on a loss before income taxes of $18.8million.  The unusual relationship of ourtax provisions to our pre-tax losses (excluding the impact of the one-time cashpayment described above in the six months ended June 30, 2007) relates to acombination of factors. These factors include increased tax loss carryforwards,primarily generated in the United States, for which we have not recorded a taxbenefit, as well as **provisions for future tax costs which may beincurred upon the potential repatriation of certain foreign earnings thatare not deemed to be permanently reinvested. **Withregard to the deferred income tax assets on the tax loss carryforwards, wedetermined that we have not satisfied the “more likely than not” test and weincreased our total valuation allowance by $2.2 million in the second half of2007 to a total of $82.5 million. We will continue to assess the valuationallowances, and, to the 

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extent we determine that such allowances are no longer required, thesedeferred income tax assets will be recognized in the future.

**Segment Results**

Thefollowing table presents net sales and Operating EBITDA expressedin millions of dollars for each reportable segment (totals may not footdue to rounding):
| ** **               | ** ** | **Net Sales**                        | ** ** | **Operating EBITDA (1)**            | ** ** |
|--------------------------|------------|-------------------------------------------|------------|-----------------------------------------------|------------|
| ** **               | ** ** | **Six Months  Ended  June 30,** | ** ** | **Better/(Worse)  than Prior Year** | ** ** | **Six Months  Ended  June 30,** | ** ** | **Better/(Worse)  than Prior Year** | ** ** |
| ** **               | ** ** | **2006**                                  | ** ** | **2007**                                      | ** ** | **$** | ** ** | **%** | ** ** | **2006** | ** ** | **2007** | ** ** | **$** | ** ** | **%** | ** ** |
| ** **               | ** ** | **(in millions)**                    | ** ** | **(in millions)**                        | ** ** |
| ** **               | ** ** | ** **                                | ** ** | ** **                                    | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| North America  (2)       |       | $                                         | 62.9       |                                          | $          | 56.5 |   | $ | (6.4 | ) | (10 | )% | $ | 22.8 |   | $ | 20.4 |   | $ | (2.4 | ) | (11 | )% |
| Operating EBITDA  Margin |       |                                      |       |                                          |       |   |   |   |   | 36 | % | 36 | % | (0 | )% |   |   |
| EAME                     |       | 60.7                                      |       | 56.7                                          |       | (4.1 | ) | (7 | )% | 15.7 |   | 15.7 |   | (0.0 | ) | (0 | )% |
| Operating EBITDA  Margin |       |                                      |       |                                          |       |   |   |   |   | 26 | % | 28 | % | 2 | % |   |   |
| Latin America            |       | 14.7                                      |       | 13.3                                          |       | (1.4 | ) | (9 | )% | 3.6 |   | 3.0 |   | (0.6 | ) | (17 | )% |
| Operating EBITDA  Margin |       |                                      |       |                                          |       |   |   |   |   | 25 | % | 22 | % | (2 | )% |   |   |
| Asia/Pacific             |       | 9.9                                       |       | 13.9                                          |       | 4.0 |   | 40 | % | 3.4 |   | 5.5 |   | 2.1 |   | 62 | % |
| Operating EBITDA Margin  |       |                                      |       |                                          |       |   |   |   |   | 34 | % | 39 | % | 5 | % |   |   |
|                          |            |                                           |            |                                               |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

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(1)             “OperatingEBITDA” as used with respect to our operating segments is a measure upon whichwe assess the financial performance of these segments. Operating EBITDAexcludes interest expense, income tax expense and depreciation andamortization, as well as items such as restructuring expenses, certainsignificant charges related to new product development and launch costs,certain litigation costs, cost related to the transition to a new exclusivedistributor in the United States and certain other non-cash items or excludablegains or losses. Our definition of Operating EBITDA is largely driven bysimilar definitions of Bank EBITDA under our primary credit facilities.  That definition changed  in the May 2007 amendment of those creditfacilities, and that change is reflected in our computation of Operating EBITDAfor the 2007 period. See Note 2 to the unaudited consolidated financialstatements for a description of Operating EBITDA and a reconciliation ofOperating EBITDA to income or loss before income taxes. Operating EBITDA marginrepresents Operating EBITDA as a percentage of net sales.

(2))            NorthAmerica segment results exclude immaterial sales and $1.5 million of negativeOperating EBITDA related to a new product launch which management evaluatesseparately from this geographical segment for both of the six month periodsended June 30, 2006 and 2007, respectively.

***North America***

*Net sales.*  In NorthAmerica, the sales decline was primarily related to lower sales volume andhigher trade marketing spending in the grocery, drug and food service channels,as well as increased promotional spending in the club channel.  The decline in grocery, drug and food servicewas exacerbated by a shift in the recognition of revenue from January 2007 toDecember 2006 relating to the scheduling of our annual physical inventory inearly January.  In the retail channel,the transition from our previous mid-priced brand to its replacement brand alsocontributed to the decline in sales. These sales declines were partly offset by improved consumer demand inthe club channel in response to promotional activities, improved sales incertain areas of the food service channel due to distribution gains and newproduct offerings, lower commissions, increased contract manufacturing activityand increased volumes and distribution in the discount channel.

*Operating EBITDA.*The decrease in Operating EBITDA was primarilyrelated to the adverse margin impact of lower net sales and unfavorable salesmix.  These unfavorable impacts werepartly offset by lower overall brand support, termination costs recorded in thesix months ended June 30, 2006 related to the transition to a new distributorin the US that did not repeat in the same period in 2007 and lower selling,marketing and general administrative costs due to savings from restructuringactions.  Operating EBITDA marginimproved slightly as reduced selling, marketing and general administrativecosts as a percentage of sales was partly offset by lower gross margin as apercentage of sales relating to changes in sales mix and increased trademarketing costs.

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***EAME***

*Net sales.*In the EAME region, the decline in net sales wasdriven primarily by the UK, France, Belgium and Hungary.  We experienced our greatest sales declines inthe UK as a result of weaker consumer demand, the impact of diversion ofproduct into the retail channel and discontinued sales to certain distributorsin an effort to stop the diversion. Continued softness in consumer demand and increased trade marketingcosts reduced sales in France.  InBelgium, weakness in consumer demand, reduced pricing due to the change inbusiness model and higher inventories than expected at December 31, 2006negatively impacted sales, however overall profitability improved as comparedto the first half of 2006.  In Hungary, lower net sales were due mainly to the shift to adistributor model after the sale of the entity in July 2006 to improveinfrastructure costs and discontinued sales of low margin products.  These unfavorable impacts were partly offsetby favorable currency translation of approximately $3.4 million and improvedsales in several other countries, mainly Portugal and Ireland.  In Portugal, unusually high inventories atDecember 31, 2005 negatively impacted the first quarter of 2006, resulting inan improvement in the year over year comparison in the first half of 2007.

*Operating EBITDA.* OperatingEBITDA decreased mainly due to the margin impact of lower net sales,unfavorable raw material purchase prices and the impact of purchasing productin Euro for sales in countries with weaker currencies.  These declines were significantly offset bylower brand support mainly in France, the UK and Belgium and reduced marketing,selling and general administrative costs due to savings from restructuringactions and changes in business models in several markets.  The increase in Operating EBITDA margin wasprimarily due to reduced selling, marketing and general administrative costs asa percentage of sales partly offset by lower gross margin as a percentage ofsales resulting from changes in sales mix, discounted pricing in the UK andother countries converted to a distributor model and increased pricing for rawmaterials.

***Latin America***

*Net sales.* The sales decrease primarily relates to thetransition to a new business model in Mexico, including  additional accruals for sales deductions andsales returns from our previous distributor, and a delay in shipping under thenew business model.  This decrease insales was partly offset by improved sales in Venezuela mainly due to a shortageof sugar.

*Operating EBITDA.*Operating EBITDA declined due to the adversemargin impact of lower net sales partly offset by  reductions in brand support and reducedgeneral administrative costs due to savings from restructuring actions.  Operating EBITDA margin declined primarilydue to lower gross profit as a percentage of sales partly offset by loweradministrative expenses as a percentage of sales.

***Asia/Pacific***

*Net sales.*Net sales in the Asia/Pacific region increasedprimarily due to shipments to new distributors in Australia and India toestablish beginning inventory levels and favorable currency translation.  Sales also improved in Indonesia, Malaysiaand Thailand.

*Operating EBITDA.*Operating EBITDA increased primarily due to themargin impact of increased net sales and lower sales and general administrativecosts related to business model changes, partly offset by higher brandsupport.  Operating EBITDA marginimproved as higher gross margin as a percentage of sales and lower marketingand general administrative costs as a percentage of sales outweighed theincrease in brand support as a percentage of sales.

**Corporate Expenses**

Corporate expenses decreased from$14.2 million in the six months ending June 30, 2006 to $14.0 million in thesix months ending June 30, 2007 as higher consulting and employee related costswere more than offset by lower performance based incentives.

**Liquidity and Capital Resources**

Our liquidityneeds are primarily met through internally generated cash flow. As needed,Merisant also borrows  under therevolving credit facility of its Amended and Restated Credit Agreement. Ourprimary uses of cash are cost of sales, operating expenses, debt service andcapital expenditures. Foreign subsidiariesgenerated approximately 61% of consolidated net sales for the six month periodended June 30, 2007, and we have relied upon the repatriation of cash from ourforeign subsidiaries to satisfy many of our domestic cash requirements.Historically, we had received a vast majority of funds from foreignsubsidiaries through our Swiss subsidiary in the form of payments pursuant to apromissory note. This promissory note was repaid in full in January 2006.On March 30, 2006, Merisant issued a revolver note to our Swisssubsidiary, which will 

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maturein 2011. Merisant may borrow up to $200 million from its Swiss subsidiaryduring the term of the revolver note, and we expect to repatriate cash to theUnited States through borrowings under this revolver note. The balance relatingto this revolving note as of June 30, 2007 was $57.9 million, consisting of$55.6 million in outstanding borrowings and $2.3 million of accrued interest.

We had $51.0million of cash and cash equivalents as of June 30, 2007. Our cash balance atJune 30, 2007 increased 129% over the cash balance at March 31, 2007 dueprimarily to a one-time cash payment received pursuant to an agreement with athird party. Accounts receivable levels, time to payment and inventory levelsimpact the amount of internally generated cash flow. The following table showsinformation with respect to accounts receivable and inventory as of December31, 2006 and June 30, 2007.  Accounts receivable decreased in the six monthsended June 30, 2007 primarily due to higher sales in the fourth quarter of 2006compared to the second quarter of 2007. Inventory levels increased as the levels at December 31, 2006 were belowideal quantities on hand for certain products.
|                                    | ** ** | **December 31, 2006** | ** ** | **June 30, 2007** | ** ** |
|------------------------------------|------------|---------------------------------|------------|-----------------------------|------------|
|                               |       |                            |       |                        |       |
| Accounts  receivable (in millions) |       | $                               | 68.0       |                        | $          | 63.1 |   |
| Days sales  outstanding            |       | 83                              |       | 79                          |       |
| Inventory (in  millions)           |       | $                               | 13.8       |                        | $          | 15.0 |   |
| Days sales in inventory            |       | 40                              |       | 42                          |       |

 

***Six Months Ended June 30, 2007 Compared to SixMonths Ended June 30, 2006***

For the six months ended June 30, 2007, net cash provided by operatingactivities was $33.9 million compared to $10.6 million for the six months endedJune 30, 2006. Operating cash flows increased $23.4 million versus the sixmonths ended June 30, 2006, due to increased net income after adjusting fornon-cash items of $26.4 million primarily due to the gain related to a one-timepayment received pursuant to an agreement with a third party net of a decreasein the contribution from working capital of $3.0 million.

Net cash used in investing activities totaled $0.7 million for the sixmonths ended June 30, 2007 compared to $1.3 million for the six months endedJune 30, 2006 due to reduced spending on capital expenditures.

Forthe six months ended June 30, 2007, financing activities used $6.4 million incash as compared to $7.8 million in cash for the six months ended June 30,2006.  For the six months ended June 30,2007, cash was provided from $85.0 million in borrowings under the Amended andRestated Credit Agreement and Merisant used cash to pay its scheduled principalpayments under the Senior Credit Agreement, to pay all outstanding borrowings,interest and premium under the Second Lien Credit Agreement and to pay costsassociated with the Amended and Restated Credit Agreement.   In the six months ended June 30, 2006, cashwas provided from borrowings of $85.0 million under the Second Lien CreditAgreement and Merisant used cash mainly to repay borrowings of $16.0 millionunder the revolving loan facility of the Senior Credit Agreement, to payprincipal payments on the term loans of the Senior Credit Agreement and to payfees related to amendments to the Senior Credit Agreement.  In the six months ended June 30, 2007, wereceived $0.4 million in payments to repay the outstanding principal of andinterest on loans previously made to employees to purchase shares of our commonstock.  Borrowings under Merisant’srevolving loan facility were $0 at both December 31, 2006 and June 30, 2007.

***Capital Expenditures***

Capital expenditures in 2007 are expected to be in the range of$3.0 million to $5.0 million. We believe that cash on hand andinternally generated cash flow, together with borrowing available underMerisant’s Amended and Restated Credit Agreement, will be sufficient to fundcapital expenditures over the next 12 months.

***CorporateHeadquarters’ Lease***

In April 2007, we entered into a new operating leasefor office space in Chicago and terminated our current lease and provided therequired one year notice period.  We planto move our corporate operations to the new space in early 2008.  The new landlord paid the lease terminationfee of $0.9 million on our behalf and we recorded the related expense in thesecond quarter of 2007.  The new leaseterminates on April 30, 2024. Current leasehold improvements and other non-transferable assets will befully depreciated between April 2007 and the estimated date we move into thenew facility and moving costs will be expensed as they are incurred.

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***Financing***

On November 12, 2003, we issued $136.0 million statedaggregate principal amount at maturity of our Discount Notes and on July 11,2003, Merisant issued $225.0 million principal amount of its Notes andrefinanced its credit facility with the Senior Credit Agreement.  A portion of the proceeds of the DiscountNotes, the Notes and the Senior Credit Agreement were used to pay a dividend toour stockholders. 

The Discount Notes are unsecured obligations and aresubordinated in right of payment to all of our existing and future seniorindebtedness. The Discount Notes had an initial accreted value of principal of$.551 per $1 fully accreted stated principal amount at maturity.  The accreted value of principal of eachDiscount Note increases from the date of issuance until November 15, 2008 atthe rate equal to the interest rate in effect. The Discount Notes mature on May 15, 2014.  The stated rate of interest for the DiscountNotes is 121⁄4% per annum and interest is payable semiannually in arrears on May15th and November 15th, commencing May 15, 2009.

The Notes are unsecured obligations and are subordinatedin right of payment to all existing and future senior indebtedness of Merisant.The Notes mature on July 15, 2013. The stated rate of interest for theNotes is 91/2% per annum and interest is payablesemiannually in arrears on January 15th and July 15th, commencing onJanuary 15, 2004.

The Senior Credit Agreement provided for aggregate commitments of up to$310.0 million, consisting of a revolving loan facility of $35.0 million, ofwhich a portion is available at Merisant’s option in euro or dollars or in theform of letters of credit denominated in dollars or euro, as well as term loanfacilities of $275.0 million, consisting of a Euro Term Loan A of $50.0million, and a Term Loan B of $225.0 million, denominated in dollars. The EuroTerm Loan A and the revolving loan facility have a maturity of five andone-half years while the Term Loan B has a maturity of six and one-half years.The Senior Credit Agreement is guaranteed by our company and each of Merisant’sdomestic subsidiaries. The Senior Credit Agreement and the guarantees of theguarantors were secured by a first-priority security interest insubstantially all of Merisant’s assets and the assets of the guarantors.

On June 23, 2006, Merisant entered into the SecondLien Credit Agreement, the borrowings under which were substantially used topay down amounts outstanding under the Senior Credit Agreement.  The Second Lien Credit Agreement increasedthe aggregate principal amount of our indebtedness by $7.2 million and increasedour interest expense.  Merisant’s loansoutstanding under the Senior Credit Agreement had a weighted average interestrate of approximately 9.0% per annum prior to the closing of the Second LienCredit Agreement.  Merisant’s borrowingsunder the Senior Credit Agreement and Second Lien Credit Agreement had aweighted average interest rate of approximately 10.3% per annum upon theclosing of the Second Lien Credit Agreement.

On May 9, 2007,Merisant amended and restated its Senior Credit Agreement (the “Amended andRestated Credit Agreement”), which, among other things, increased by $85.0million the principal amount of Tranche B Term Loans that could be borrowed byMerisant under the facility.  Merisantpaid $2.5 million in fees and expenses related to this amendment andrestatement which were deferred and are being amortized over the term of therelated debt. Upon closing, Merisant borrowed the full $85.0 million ofadditional Tranche B Term Loans and used the proceeds plus cash on hand toprepay the principal of all loans outstanding under the Second Lien CreditAgreement totaling $85.0 million, plus all outstanding interest of $1.4 millionand a premium of $2.6 million, or $89.0 million.  The Second Lien Credit Agreement has beenterminated as a result of the transaction and there was no increase in Merisant’slong term debt.  In addition to theincurrence of fees, this transaction resulted in a write-off of existingdeferred financing fees relating to the extinguishment of previouslyoutstanding debt in the amount of $3.2 million.

Upon closing ofthe above transaction and execution of the related amendment, the interest rateon all term loans and revolving loans outstanding under the Amended andRestated Credit Agreement increased from euro-LIBOR and LIBOR plus 325 basispoints per annum to euro-LIBOR and LIBOR plus 350 basis points per annum.  As a result of the termination of the SecondLien Credit Facility, Merisant’s effective interest rate on variable interestrate debt decreased from 10.63% per annum prior to the closing of thistransaction to 8.73% per annum subsequent to this transaction.

As of June 30,2007, unamortized deferred financing cost related to entering into the SeniorCredit Agreement, the issuance of the Notes in July 2003, the issuance ofthe Discount Notes in November 2003, the 2005 registered exchange offer withrespect to the Notes and the Discount Notes, the execution of any subsequentamendments to the Senior Credit Agreement and the execution of the Amended andRestated Credit Agreement was approximately $13.3 million and is beingamortized in accordance with the terms of the respective debt instruments.

**Restrictive Covenants and Bank EBITDA**.  The indentures governing the Discount Notesand the Notes and the Amended and Restated Credit Agreement contain certaincovenants that limit or restrict the incurrence of liens, investments(including acquisitions), sales of assets, indebtedness, restricted payments(including dividends) and mergers and consolidations, subject to certainexceptions.

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The Amended and Restated Credit Agreement alsorequires Merisant to maintain compliance with a consolidated first-lienleverage ratio covenant, a consolidated leverage ratio covenant and aconsolidated interest coverage ratio covenant. These ratios are measured on thebasis of Bank EBITDA for the four fiscal quarters ending at least 45 days priorto the payment date.  Bank EBITDA isdiscussed here because it is the measure upon which the covenants contained inthe Amended and Restated Credit Agreement are measured.  However, Bank EBITDA is not a measure ofliquidity under GAAP. Accordingly, while providing useful information withrespect to assessing compliance with covenants under our primary debtobligations, this measure should not be considered in isolation from, or as asubstitute for, consolidated statement of cash flow data prepared in accordancewith GAAP as an indication of liquidity. In addition, the Bank EBITDA measurepresented may differ from, and may not be comparable to, similarly titledmeasures used by other companies.

Bank EBITDA as defined under the Amended and RestatedCredit Agreement excludes interest expense, income tax and gross receipts taxexpense, depreciation and amortization as well as certain other expenses andnon-cash items, including:

·                                          anyextraordinary, unusual or non-recurring non-cash expenses or losses (includingnon-cash losses on sales of assets outside of the ordinary course of business);

·                                          non-cashcontributions and other non-cash compensation expense;

·                                          non-cashlosses attributable to equity in non-consolidated subsidiaries;

·                                          transactioncosts associated with the 2003 recapitalization transaction which are expensedand not amortized;

·                                          anynon-cash foreign currency translation adjustments;

·                                          anyextraordinary or non-recurring cash losses or expenses arising fromrestructuring not to exceed in the aggregate (A) if such period ends prior to January 1, 2006, $14,600,000, or (B) ifsuch period begins on or after January 1, 2006, (x) $11,000,000 with respect toany such non-recurring cash losses or expenses arising from the implementationof Merisant’s plan known as “Project Arrow” and related restructuring, (y)$4,000,000 with respect to any such non-recurring cash losses or expensesarising from the transition from Heinz to ACH as Merisant’s exclusive distributorin the United States; and (z) any cash expenses incurred in connection with (i)any waiver of a default or event of default and any amendment to the SeniorCredit Agreement including the fees and expenses of any attorneys and financialadvisers retained by the administrative agent pursuant thereto with respect toany such waiver or amendment and (ii) the negotiation, execution and closing ofthe Second Lien Credit Agreement and any waiver of a default or event ofdefault and any amendment to the Second Lien Credit Agreement including thefees and expenses of any attorneys and financial advisers retained by theadministrative agent with respect to any such waiver or amendment;

·                                          expensesincurred by Merisant or any subsidiary prior to January 1, 2007 in connectionwith the development and commercialization of the all-natural, zero-caloriesweetener to be marketed under the *Sweet Simplicity®*trademark in an amount not to exceed in the aggregate $3,000,000 and prior toJanuary 1, 2009 in an amount not to exceed in the aggregate $15,000,000; and

·                                          expensesincurred between January 1, 2007 and December 31, 2007 in connection with ourlitigation against McNeil and McNeil-PPC, Inc. in an amount not to exceed$4,000,000.

Bank EBITDA for the six monthsended June 30, 2007 under the Amended and Restated Credit Agreement was $30.6million as compared to $34.4 million for the six months ended June 30, 2006,adjusted to reflect litigation costs on a comparable basis with the currentdefinition of Bank EBITDA.  Merisant wasin compliance with the covenants under the Amended and Restated CreditAgreement at June 30, 2007.

The following table illustratesthe reconciliation of Bank EBITDA to cash flow from operating activities, whichmanagement believes is the most nearly equivalent GAAP measure:

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|                                                                           | ** ** | **Six Months  Ended  June 30, 2007** | ** ** |
|---------------------------------------------------------------------------|------------|-----------------------------------------------------|------------|
| ** **                                                                | ** ** | **(in millions)**                              | ** ** |
| Net cash  provided by operating activities                                |       | $                                                   | 33.9       |   |
| Provision for  income taxes, net of deferred income tax provision         |       | 1.4                                                 |       |
| Interest  expense, net of non-cash interest expense                       |       | 21.4                                                |       |
| Restructuring  expenses (a)                                               |       | 0.9                                                 |       |
| Cash costs of  refinancing                                                |       | 2.6                                                 |       |
| Other non-cash  items and gains or losses excludable from Bank EBITDA (b) |       | (23.5                                               | )          |
| Equity in  (income) loss of affiliates                                    |       | 0.1                                                 |       |
| Net change in  operating assets and liabilities                           |       | (6.2                                                | )          |
| Bank EBITDA                                                               |       | $                                                   | 30.6       |   |

 

(a)          The charges principally relate to planned employeetermination costs that have been announced in the period presented.  The restructuring liability as of the end ofeach period is included in Accrued expenses and other liabilities in theconsolidated balance sheets.

(b)         Includes the non-cashcharge related to the termination of the Chicago lease, expenses related to ourlitigation against McNeil and costs related to the development andcommercialization of our all-natural low-calorie sweetener, which combined weremore than offset by a one-time cash payment received pursuant to an agreementwith a third party.

***Forward Looking Statements***

Certain information included or incorporated in thisreport may be deemed to be “forward-looking statements” within the meaning ofSection 27A of the Securities Act and Section 21E of the ExchangeAct. All statements, other than statements of historical facts, included orincorporated in this report, are forward-looking statements. In particular,statements made under the heading “Management’s Discussion and Analysis ofFinancial Condition and Results of Operations,” relating to overall volumetrends, pricing trends and industry forces, anticipated results, expectations forfunding capital expenditures and operations and increased market share and thesufficiency of capital to meet working capital, capital expendituresrequirements and strategies are forward-looking statements. When used in thisdocument, the words “anticipate,” “estimate,” “project” and similar expressionsare intended to identify forward-looking statements.

These statementsare based on assumptions and assessments made by management in light of theirexperience and their perception of historical trends, current conditions,expected future developments and other factors they believe to be appropriate.Any forward-looking statements are not guarantees of future performance and aresubject to risks and uncertainties that could cause actual results, developmentsand business decisions to differ materially from those contemplated by suchforward-looking statements. We disclaim any duty to update any forward-lookingstatements. Some of the factors that may cause actual results, developments andbusiness decisions to differ materially from those contemplated by suchforward-looking statements include the following:  changes in consumer preferences andnutritional and health-related concerns; increased competition; changes in theterms on which we may obtain aspartame; damaged consumer confidence in ourproducts as a result of health-related allegations; product liability claims;fluctuations in exchange rates and other currency risks; disruptions in ourbusiness as a result of strikes or work stoppages; changes in our relationshipwith our largest distributor; and changes in economic and political conditionsin the countries in which we market and produce our products.

**Item 3.  Quantitative andQualitative Disclosures About Market Risk**

***Foreign Operations***

With approximately59% and 61% of consolidated total net sales generated by subsidiaries outsideof the United States in the six months ended June 30, 2006 and June 30, 2007,respectively, our ability to obtain funds necessary to meet our domesticobligations is subject to applicable laws, foreign taxes and intercompanypricing laws, including those relating to the flow of funds between our foreignaffiliates pursuant to, for example, purchase agreements, licensing agreementsor other arrangements.  Historically,Merisant received a vast majority of funds from foreign affiliates through itsSwiss subsidiary in the form of payments pursuant to a promissory note.  The note was repaid in full in January 2006.On March 30, 2006, Merisant issued a revolver note to its Swiss subsidiary,which will mature in 2011. Merisant may borrow up to $200 million from itsSwiss subsidiary during the term of the revolver note. Merisant is repatriatingcash to the United States through 

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borrowings under thisrevolver note, which total $57.9 million, including $2.3 million of interest,as of June 30, 2007. Regulators in the United States and other foreigncountries where we operate may closely monitor our corporate structure and howit effects intercompany fund transfers.

In addition, as of June 30,2007, foreign affiliates comprised approximately 44% of our consolidated totalassets.  Accordingly, we have experiencedand will continue to be exposed to foreign exchange risk.

***Foreign Currency and Interest Rate Risks***

Inherent in our operations arecertain risks related to changes in foreign currency exchange rates andinterest rates. We bear foreign exchange risk because a majority of ourfinancing was obtained in U.S. dollars although a significant portion ofrevenues are earned in the various currencies of our foreign subsidiaries’operations.  Under the Amended andRestated Credit Agreement, a portion of our financing is denominated ineuro.  This euro-denominated loandecreases our transactional exposure to euro exchange fluctuations until theeuro principal and interest are repaid. Decreases in sales and earnings from euro denominated countries thatresult from the euro weakening against the U.S. dollar create an offset to thedecrease in the euro denominated debt obligations (i.e., foreign currencytransaction gain) and interest expense that also results from such a decreasein exchange rate.  Likewise, any increasein sales and earnings from the euro denominated countries that results from astrengthening euro against the U.S. dollar creates an offset to the increase inthe euro denominated debt obligations (i.e., foreign currency transaction loss)and interest expense that results from such an exchange rate increase.

A significant portion of ourdebt bears interest at a fixed rate. Interest rate exposure results from our floating rate borrowings. Forthe six months ended June 30, 2007, a 1.0% per annum increase or decrease ininterest rates would have resulted in an increase or decrease in cash interestcosts for our variable rate term loans of approximately $0.9 million.

In the normal course of business, we identifyrisks relating to foreign currency exchange rates and interest rates andmitigate their financial impact through corporate policies and, at times,through the use of derivative financial instruments.  We use derivatives only where there is anunderlying exposure and do not use them for trading or speculative purposes.The counter parties to the hedging activities would be highly rated financialinstitutions. We did not have any foreign currency forward exchange contractsor interest rate derivatives outstanding at June 30, 2007.

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***Inflation Risk***

Inflation is not expected tohave a material impact on our business, financial condition or results ofoperations.  In markets outside theUnited States in countries with higher inflation, we generally have been ableto offset the impact of inflation through a combination of cost-cuttingmeasures and price increases.

**Item 4.  Controls and Procedures**

# *Evaluationof Disclosure Controls and Procedures*

Weconducted an evaluation, under the supervision of the Chief Executive Officerand Interim Chief Financial Officer, of the effectiveness as ofDecember 31, 2006 of our disclosure controls and procedures (as defined inExchange Act Rule 15d-15(e)). Based on this evaluation, the ChiefExecutive Officer and Interim Chief Financial Officer had concluded that, as ofDecember 31, 2006, our disclosure controls and procedures neededimprovement and were not effective to provide reasonable assurance that informationrequired to be disclosed by us in reports that we file with the SEC or submitunder the Exchange Act is recorded, processed, summarized and reported withinthe time periods specified in the SEC’s rules and forms. In making thisconclusion, the Chief Executive Officer and Interim Chief Financial Officerconsidered the previously disclosed material weaknesses in our internalcontrols over financial reporting and the status of the corrective actions toremedy those material weaknesses. Although the Chief Executive Officer and theInterim Chief Financial Officer noted certain incremental improvements duringthe year ended December 31, 2006, we had not formally documented and tested allof our potentially remediated controls to affirmatively conclude that suchcontrols were operating effectively. In our reevaluation of our disclosurecontrols and procedures as of June 30, 2007, the Chief Executive Officer andthe Chief Financial Officer noted that our company had formally documented andtested all of our potentially remediated controls and affirmatively concludedthat such controls are operating effectively.

Thecertifications of the Chief Executive Officer and Interim Chief FinancialOfficer required in accordance with Section 302 of the Sarbanes-Oxley Actof 2002 appear as exhibits to this report. The disclosures set forth in thisItem 4 contain information concerning the evaluation of our disclosure controlsand procedures, and changes in internal controls over financial reporting,referred to in paragraphs 4(b) and (c) of the certifications. Thecertifications should be read in conjunction with this Item 4 for a morecomplete understanding of the topics presented.

***Changes in Internal Control Over Financial Reporting***

There have been no changes in our internal controlover financial reporting during the most recently completed fiscal quarter thathave materially affected, or are reasonably likely to materially affect, ourinternal control over financial reporting.  As disclosed in our AnnualReport on Form 10-K for the year ended December 31, 2006, we have takennumerous corrective actions over the last three fiscal years with respect tocertain matters that our former auditor considered to be material weaknesses inconnection with its audits of our financial statements for the years endedDecember 31, 2003 and 2004.  In the second quarter of 2007, we completedan internal audit which concluded that those material weaknesses no longerexist.

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**PART II**—**OTHER INFORMATION**

**Item1.  Legal Proceedings**

From time to time, our company is involved inlitigation concerning its business operations.

On November 26,2004, Merisant Companyfiled a federal and state false advertising complaintagainst McNeil in the United States District Court for the Eastern District ofPennsylvania. That lawsuit sought to have McNeil’s *Splenda*®advertising campaign stopped and significant damages recovered.  The trial commenced on April 9, 2007 before aPhiladelphia jury and the parties entered into a confidential settlementagreement on May 11, 2007.

On October 23, 2006, Merisant France SAS, our Frenchsubsidiary, commenced legal actions in the Commercial Court of Paris againstMcNeil and McNeil Nutritionals Ltd., McNeil’s French and UK subsidiariesrespectively, related to McNeil’s advertising campaign for *Splenda*® in France.  Specifically, we were seeking injunctiverelief and unspecified monetary damages for what we believe to be misleadingadvertising and violations of food labeling laws.  The Commercial Court heard oral arguments onthe merits of the case on March 22, 2007, and it rendered its decision on May10, 2007.  The Court ruled that McNeilhad violated French consumer protection laws and ordered McNeil to avoidwording that refers to both the sugar origin of the artificial sweetenersucralose and the sweet taste of *Splenda®* aswell as wording that may mislead consumers into believing that *Splenda®* belongs to an intermediate category between anatural food and a synthetic product.  Inaddition, the Court specifically ruled that McNeil must cease using theadvertising slogan “because it comes from sugar, sucralose tastes like sugar (*parce qu’il provient du sucre, le sucralose a un goût de sucre*)”and the slogan used on packaging “with sucralose: comes from sugar and tasteslike sugar (*au sucralose: provient du sucre et a un goût desucre*)”. McNeil must institute these changes within 30 days from theformal issuance of judgment and may not distribute products bearing thepackaging slogan after four months from the formal issuance of judgment.  The Court ordered McNeil to pay MerisantFrance one euro in damages and 40,000 euro to reimburse Merisant France forlegal expenses.  McNeil has indicatedthat it does not intend to appeal this decision.

Our company is subject tovarious other claims, pending and possible legal actions for product liabilityand other damages, and other matters arising out of the conduct of ourbusiness, including tax uncertainties arising from doing business in variousEuropean jurisdictions. We believe, based on current knowledge and consultation with counsel, that the outcomeof such claims and actions will not have a material adverse effect on ourconsolidated financial position or results of operations.

**Item 1A. Risks Related to Our Business**

The most significant risk factors applicable to ourcompany are described in Part I, Item 1A “Risk Factors” of our AnnualReport on Form 10-K for the year ended December 31, 2006. There have beenno material changes from the risk factors previously disclosed in our report onForm 10-K.

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

The annual meetingof the stockholders of Merisant Worldwide was held on May 8, 2007 at which thestockholders elected directors and ratified the appointment of BDO Seidman, LLPas independent registered public accountant for our company and Merisant. The stockholders elected Paul Block, Robert Albus, Arnold Donald, David House,Alec Machiels and Adam Stagliano as directors of Merisant Worldwide for anadditional one-year term by a vote of  8,114,894 shares in favor and 0shares opposed.  All stockholders voting on the issue of the appointmentof BDO Seidman, LLP as independent registered public accountant voted in favorof that resolution.

On May 8, 2007,Merisant Worldwide, in its capacity as the sole stockholder of Merisant,elected Mr. Block, Mr. Albus, Mr. Donald, Mr. House, Mr. Machiels and Mr.Stagliano as the directors of Merisant for an additional one-year term.

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**Item 6.  Exhibits**
| Exhibit   No. | ** ** | **Description**                                                                                           |
|---------------|------------|-----------------------------------------------------------------------------------------------------------|
| 10.1          |       | Employment Agreement dated as of April 5, 2007  between Merisant Company and Diana S. Ferguson            |
|          |       |                                                                                                      |
| 31.1          |       | Certificate of Paul Block pursuant to Rule 15d-14  under the Securities Exchange Act of 1934.        |
|          |       |                                                                                                      |
| 31.2          |       | Certificate of Diana S. Ferguson pursuant to  Rule 15d-14 under the Securities Exchange Act of 1934. |
|          |       |                                                                                                      |
| 32.1          |       | Certificate of Paul Block pursuant to 18 U.S.C.  Section 1350.                                       |
|          |       |                                                                                                      |
| 32.2          |       | Certificate of Diana S. Ferguson pursuant to 18  U.S.C. Section 1350.                                |

 

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SIGNATURES

Pursuant to therequirements of the Securities Exchange Act of 1934, the registranthas duly caused this report to be signed on its behalf by the undersignedthereunto duly authorized.
|                       | MERISANT WORLDWIDE,  INC. |
|-----------------------|---------------------------|
|                  |                      |   |
|                  |                      |   |
| Date: August 10, 2007 | By:                       | /s/ Diana S. Ferguson |
|                  |                      | Diana S. Ferguson |
|                  |                      | Chief Financial  Officer |
|                  |                      | (on behalf of the  Company and in capacity |
|                  |                      | of principal financial  officer) |

 

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