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**UNITED STATESSECURITIES 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  September 30, 2008** |
| ** **                                                  | ** ** | ** **                                                                                               |
| **OR**                                                      |
| ** **                                                  | ** ** | ** **                                                                                               |
| **o**                                                       | ** ** | **TRANSITION  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE  ACT OF 1934** |

 

**For thetransition period from             to             **

 

**CommissionFile Number:  333-114102**

 

**Merisant Worldwide, Inc.**

(Exact Name of Registrant asSpecified in its Charter)

 

| **Delaware**                                                    | ** ** | **52-2219000**                           |
|-----------------------------------------------------------------|------------|------------------------------------------|
| (State  or Other Jurisdiction of Incorporation or Organization) |       | (I.R.S.  Employer Identification Number) |
|                                                            |       |                                     |
| **33 North Dearborn  Chicago, Illinois**                        | ** ** | **60602**                                |
| (Address  of Principal Executive Offices)                       |       | (Zip  Code)                              |

 

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

 

Former name, former address andformer fiscal year, if changed since last report:

**Notapplicable.**

 

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

 

Indicate by check markwhether the registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer, or a smaller reporting company. See definitions of “largeaccelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2of the Exchange Act. (Check one):

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

 

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

 

Indicate the number of shares outstanding ofeach of the issuer’s classes of common stock, as of the latest practicabledate.

 

As of November 13, 2008, the registranthad 9,086,495 shares of common stock, par value $0.01 per share, outstanding.

 

This Quarterly Report is being filed pursuant to arequirement contained in the indenture governing Merisant Worldwide Inc.’s 121/4% SeniorSubordinated Discount Notes due 2014.

 

 

 

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**MERISANTWORLDWIDE, INC.**

 

**INDEX TOREPORT**

 

**FOR THEQUARTER ENDED SEPTEMBER 30, 2008**

 

 
|                                            | ** ** | ** **                                                                                                                                             | **Page** |
|--------------------------------------------|------------|--------------------------------------------------------------------------------------------------------------------------------------------------------|----------|
| **PART I—FINANCIAL INFORMATION** | 3          |
|                                       |       |                                                                                                                                                   |     |
| Item 1.                                    |       | Financial Statements of  Merisant Worldwide, Inc.                                                                                                 | 3        |
|                                       |       |                                                                                                                                                   |     |
|                                       |       | Unaudited  Consolidated Balance Sheets at December 31, 2007 and September 30,  2008                                                          | 3        |
|                                       |       |                                                                                                                                                   |     |
|                                       |       | Unaudited  Consolidated Statements of Operations and Comprehensive Income (Loss) for the  Three and Nine Months Ended September 30, 2007 and 2008 | 4        |
|                                       |       |                                                                                                                                                   |     |
|                                       |       | Unaudited Consolidated  Statement of Stockholders’ Deficit for the Nine Months Ended  September 30, 2008                                     | 5        |
|                                       |       |                                                                                                                                                   |     |
|                                       |       | Unaudited Consolidated Statements of Cash Flows for  the Nine Months Ended September 30, 2007 and 2008                                            | 6        |
|                                       |       |                                                                                                                                                   |     |
|                                       |       | Notes to Unaudited Consolidated Financial Statements                                                                                                   | 7        |
|                                       |       |                                                                                                                                                   |     |
| Item 2.                                    |       | Management’s Discussion  and Analysis of Financial Condition and Results of Operations                                                            | 14       |
|                                       |       |                                                                                                                                                   |     |
| Item 3.                                    |       | Quantitative  and Qualitative Disclosures About Market Risk                                                                                            | 30       |
|                                       |       |                                                                                                                                                   |     |
| Item 4T.                                   |       | Controls and  Procedures                                                                                                                               | 31       |
|                                       |       |                                                                                                                                                   |     |
| PART II—OTHER  INFORMATION       | 31         |
|                                       |       |                                                                                                                                                   |     |
| Item 1.                                    |       | Legal Proceedings                                                                                                                                      | 31       |
|                                       |       |                                                                                                                                                   |     |
| Item 1A.                                   |       | Risk Factors                                                                                                                                           | 32       |
|                                       |       |                                                                                                                                                   |     |
| Item 6.                                    |       | Exhibits                                                                                                                                               | 32       |

 

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**PART I**—**FINANCIAL INFORMATION**

 

**Item 1. Financial Statements of Merisant Worldwide, Inc.**

 

**MERISANTWORLDWIDE, INC.Unaudited Consolidated Balance Sheets**

**(DollarsIn Thousands, Except Per Share Amount)**

 
| ** **                                                                                                                    | ** ** | **At December 31,  2007** | ** ** | **At September 30,  2008** | ** ** |
|-------------------------------------------------------------------------------------------------------------------------------|------------|-------------------------------------|------------|--------------------------------------|------------|
| **ASSETS**                                                                                                                    | ** ** | ** **                          | ** ** | ** **                           | ** ** |
| Cash and cash equivalents                                                                                                     |       | $                                   | 51,050     |                                 | $          | 11,798 |   |
| Trade accounts receivable, net of  allowances of $854 and $1,108, respectively                                           |       | 74,410                              |       | 62,441                               |       |
| Other receivables                                                                                                             |       | 9,128                               |       | 13,063                               |       |
| Inventories                                                                                                                   |       | 13,540                              |       | 25,368                               |       |
| Prepaid expenses and other assets                                                                                             |       | 6,270                               |       | 4,150                                |       |
| Current portion of note receivable from  director                                                                             |       | 970                                 |       | 970                                  |       |
| Deferred income tax assets                                                                                                    |       | 1,620                               |       | 1,783                                |       |
| Total current assets                                                                                                          |       | 156,988                             |       | 119,573                              |       |
| Property and equipment, net                                                                                                   |       | 23,509                              |       | 29,779                               |       |
| Trademarks and other intangible assets,  less accumulated amortization and impairment of $164,022 and $179,809,  respectively |       | 160,697                             |       | 147,941                              |       |
| Goodwill                                                                                                                      |       | 107,209                             |       | 107,209                              |       |
| Deferred financing costs, less accumulated  amortization of $11,186 and $13,919 respectively                                  |       | 11,464                              |       | 9,606                                |       |
| Non-current portion of note receivable from  director                                                                         |       | 1,822                               |       | 910                                  |       |
| Investment in equity affiliate                                                                                                |       | 264                                 |       | 403                                  |       |
| Other non-current assets                                                                                                      |       | 880                                 |       | 1,193                                |       |
| Total assets                                                                                                                  |       | $                                   | 462,832    |                                 | $          | 414,614 |   |
| **LIABILITIES AND STOCKHOLDERS’ DEFICIT**                                                                                | ** ** | ** **                          | ** ** | ** **                           | ** ** |
| Accounts payable                                                                                                              |       | $                                   | 22,618     |                                 | $          | 18,331 |   |
| Income taxes payable                                                                                                          |       | 1,031                               |       | 644                                  |       |
| Accrued interest expense                                                                                                      |       | 12,727                              |       | 6,452                                |       |
| Accrued trade marketing and consumer  promotions                                                                              |       | 14,353                              |       | 15,123                               |       |
| Accrued incentives                                                                                                            |       | 8,024                               |       | 696                                  |       |
| Accrued expenses and other liabilities                                                                                        |       | 11,039                              |       | 12,006                               |       |
| Current maturities of long-term obligations                                                                                   |       | 12,178                              |       | 29,616                               |       |
| Total current liabilities                                                                                                     |       | 82,000                              |       | 82,868                               |       |
| Long-term obligations, net of current  maturities                                                                             |       | 540,446                             |       | 524,028                              |       |
| Deferred income tax liabilities                                                                                               |       | 23,701                              |       | 26,597                               |       |
| Other liabilities                                                                                                             |       | 6,954                               |       | 7,742                                |       |
| Total liabilities                                                                                                             |       | 653,101                             |       | 641,235                              |       |
| Commitments and contingencies (Note 7)                                                                                        |       |                                |       |                                 |       |
| Stockholders’ Deficit:                                                                                                   |       |                                |       |                                 |       |
| Common stock, $0.01 par value, 10,000,000  shares authorized, 9,169,552 shares issued and 9,086,495 shares outstanding        |       | 91                                  |       | 91                                   |       |
| Due for purchase of shares in Merisant  Worldwide, Inc.                                                                  |       | (107                                | )          | (64                                  | )          |
| Retained deficit                                                                                                              |       | (185,434                            | )          | (219,526                             | )          |
| Accumulated other comprehensive loss                                                                                          |       | (3,038                              | )          | (3,341                               | )          |
|                                                                                                                          |       | (188,488                            | )          | (222,840                             | )          |
| Less cost of treasury stock (83,057 shares)                                                                                   |       | (1,781                              | )          | (1,781                               | )          |
| Total stockholders’ deficit                                                                                              |       | (190,269                            | )          | (224,621                             | )          |
| Total liabilities and stockholders’ deficit                                                                              |       | $                                   | 462,832    |                                 | $          | 416,614 |   |

 

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

 

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**MERISANTWORLDWIDE, INC.****Unaudited Consolidated Statements of Operationsand**

**ComprehensiveIncome (Loss)**

**(DollarsIn Thousands)**

 
| ** **                        | ** ** | **Three Months Ended  September 30,** | ** ** | **Nine Months Ended  September 30,** | ** ** |
|-----------------------------------|------------|------------------------------------------------------|------------|-----------------------------------------------------|------------|
| ** **                        | ** ** | **2007**                                             | ** ** | **2008**                                            | ** ** | **2007** | ** ** | **2008** | ** ** |
| Net sales                         |       | $                                                    | 72,837     |                                                | $          | 64,520 |   | $ | 213,240 |   | $ | 200,486 |   |
| Cost of sales                     |       | 31,518                                               |       | 31,632                                              |       | 94,120 |   | 97,461 |   |
| Gross profit                      |       | 41,319                                               |       | 32,888                                              |       | 119,120 |   | 103,025 |   |
| Operating expenses:               |       |                                                 |       |                                                |       |   |   |   |   |
| Marketing and selling expenses    |       | 15,921                                               |       | 14,492                                              |       | 48,202 |   | 48,308 |   |
| Administration expenses           |       | 8,183                                                |       | 6,276                                               |       | 33,548 |   | 25,082 |   |
| Amortization of intangible assets |       | 5,264                                                |       | 5,264                                               |       | 16,718 |   | 15,792 |   |
| Restructuring expenses            |       | 211                                                  |       | 296                                                 |       | 1,085 |   | 1,404 |   |
| Total operating expenses          |       | 29,579                                               |       | 26,328                                              |       | 99,553 |   | 90,586 |   |
| Income from operations            |       | 11,740                                               |       | 6,560                                               |       | 19,567 |   | 12,439 |   |
| Other expense (income):           |       |                                                 |       |                                                |       |   |   |   |   |
| Interest income                   |       | (246                                                 | )          | (70                                                 | )          | (611 | ) | (528 | ) |
| Interest expense                  |       | 14,543                                               |       | 13,620                                              |       | 44,880 |   | 40,976 |   |
| Costs of refinancing              |       | —                                               |       | —                                              |       | 5,791 |   | — |   |
| Other expense (income), net       |       | 117                                                  |       | 1,871                                               |       | (29,962 | ) | 2,505 |   |
| Total other expense (income)      |       | 14,414                                               |       | 15,421                                              |       | 20.098 |   | 42,953 |   |
| Income (loss) before income taxes |       | (2,674                                               | )          | (8,861                                              | )          | (531 | ) | (30,514 | ) |
| Provision for income taxes        |       | 1,336                                                |       | 496                                                 |       | 5,036 |   | 3,578 |   |
| Net income (loss)                 |       | $                                                    | (4,010     | )                                                   | $          | (9,357 | ) | $ | (5,567 | ) | $ | (34,092 | ) |
|                              |       |                                                 |       |                                                |       |   |   |   |   |
| Net income (loss) from above      |       | $                                                    | (4,010     | )                                                   | $          | (9,357 | ) | $ | (5,567 | ) | $ | (34,092 | ) |
| Other comprehensive income (loss) |       | 960                                                  |       | (2,959                                              | )          | 1,671 |   | 303 |   |
| Total comprehensive income (loss) |       | $                                                    | (3,050     | )                                                   | $          | (12,316 | ) | $ | (3,896 | ) | $ | (33,789 | ) |

 

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

 

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**MERISANTWORLDWIDE, INC.****Unaudited Consolidated Statement of Stockholders’Deficit**

**(DollarsIn Thousands)**

 
| ** **                                | ** ** | **Common  Stock** | ** ** | **Due for  Purchase of  Shares in  Merisant  Worldwide,  Inc.** | ** ** | **Retained  Deficit** | ** ** | **Accumulated  Other  Comprehensive  Loss** | ** ** | **Treasury  Stock at  cost** | ** ** | **Total** | ** ** |
|-------------------------------------------|------------|-------------------|------------|--------------------------------------------------------------------------------|------------|-----------------------|------------|---------------------------------------------|------------|-----------------------------------|------------|-----------|------------|
| Balance at December 31, 2007         |       | $                 | 91         |                                                                           | $          | (107                  | )          | $                                           | (185,434   | )                                 | $          | (3,038    | )          | $ | (1,781 | ) | $ | (190,269 | ) |
| Foreign currency translation adjustment   |       | —            |       | —                                                                         |       | —                |       | (303                                        | )          | —                            |       | (303      | )          |
| Settlement of loan for purchase of shares |       | —            |       | 43                                                                             |       | —                |       | —                                      |       | —                            |       | 43        |       |
| Net loss                                  |       | —            |       | —                                                                         |       | (34,092               | )          | —                                      |       | —                            |       | (34,092   | )          |
| Balance at September 30, 2008        |       | $                 | 91         |                                                                           | $          | (64                   | )          | $                                           | (219,526   | )                                 | $          | (3,341    | )          | (1,781 | ) | $ | (224,621 | ) |
|                                           |            |                   |            |                                                                                |            |                       |            |                                             |            |                                   |            |           |            |  |  |  |  |  |  |

 

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

 

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**MERISANT WORLDWIDE, INC.Unaudited Consolidated Statements of Cash Flows**

**(Dollars In Thousands)**

 
| ** **                                                                                 | ** ** | **Nine Months Ended  September 30,** | ** ** |
|--------------------------------------------------------------------------------------------|------------|-----------------------------------------------------|------------|
| ** **                                                                                 | ** ** | **2007**                                            | ** ** | **2008** | ** ** |
| **Operating Activities**                                                                   |       |                                                |       |   |   |
| Net Loss                                                                                   |       | $                                                   | (5,567     | ) | $ | (34,092 | ) |
| Adjustments to reconcile net Loss to net  cash provided by (used in) operating activities: |       |                                                |       |   |   |
| Depreciation                                                                               |       | 4,919                                               |       | 3,657 |   |
| Gain on liquidation of subsidiary                                                          |       | (284                                                | )          | — |   |
| Amortization of intangible assets                                                          |       | 16,718                                              |       | 15,792 |   |
| Amortization of deferred financing costs                                                   |       | 2,740                                               |       | 2,734 |   |
| Interest accretion on senior subordinated  discount notes                                  |       | 10,235                                              |       | 11,528 |   |
| Write off of deferred financing costs                                                      |       | 3,241                                               |       | — |   |
| Euro-denominated loan foreign exchange loss                                                |       | 1,382                                               |       | 341 |   |
| Equity in income of affiliate                                                              |       | (127                                                | )          | (139 | ) |
| Deferred income tax provision                                                              |       | 3,141                                               |       | 2,704 |   |
| Changes in operating assets and  liabilities, (net of business acquisition):               |       |                                                |       |   |   |
| Trade accounts receivable                                                                  |       | (929                                                | )          | 11,446 |   |
| Other receivables                                                                          |       | (994                                                | )          | (3,171 | ) |
| Inventories                                                                                |       | 1,005                                               |       | (12,384 | ) |
| Prepaid expenses and other assets                                                          |       | (1,917                                              | )          | 1,829 |   |
| Accounts payable                                                                           |       | (1,112                                              | )          | (4,715 | ) |
| Accrued expenses and other                                                                 |       | (5,749                                              | )          | (11,089 | ) |
| Net cash provided by (used in) operating  activities                                       |       | 26,702                                              |       | (15,559 | ) |
| **Investing Activities**                                                                   |       |                                                |       |   |   |
| Proceeds from sale of property and  equipment                                              |       | 216                                                 |       | 40 |   |
| Purchase of business                                                                       |       | —                                              |       | (3,400 | ) |
| Purchases of property and equipment                                                        |       | (2,188                                              | )          | (8,787 | ) |
| Net cash used in investing activities                                                      |       | (1,972                                              | )          | (12,147 | ) |
| **Financing Activities**                                                                   |       |                                                |       |   |   |
| Net borrowings under revolving credit  facility                                            |       | —                                              |       | 12,000 |   |
| Borrowings under long-term obligations                                                     |       | 85,088                                              |       | 11 |   |
| Principal payments on long-term obligations                                                |       | (91,649                                             | )          | (22,838 | ) |
| Payment of deferred financing costs                                                        |       | (2,537                                              | )          | (876 | ) |
| Settlement of loans for purchase of shares                                                 |       | 518                                                 |       | 43 |   |
| Net cash used in financing activities                                                      |       | (8,580                                              | )          | (11,660 | ) |
| Effect of exchange rate on cash and cash  equivalents                                      |       | 656                                                 |       | 114 |   |
| Net increase (decrease) in cash and cash  equivalents                                      |       | 16,807                                              |       | (39,252 | ) |
| Cash and cash equivalents at beginning of  period                                          |       | 23,753                                              |       | 51,050 |   |
| Cash and cash equivalents at end of period                                                 |       | $                                                   | 40,559     |   | $ | 11,798 |   |

 

The accompanying notes are an integral part of these unauditedconsolidated financial statements.

 

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**MERISANT WORLDWIDE, INC.****Notes to Unaudited Consolidated FinancialStatements**

**(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. Unless otherwise indicated or unless the context otherwise requires, allreferences to the “Company” mean Merisant Worldwide, Inc. and itsconsolidated subsidiaries.  Theconsolidated balance sheet at December 31, 2007 was derived from theCompany’s audited consolidated financial statements, but does not include alldisclosures required by generally accepted accounting principles in the UnitedStates of America (“GAAP”). The remaining consolidated financial statements areunaudited. In the opinion of management, all normal, recurring adjustmentsnecessary for a fair presentation of such unaudited financial statements havebeen included therein. For interim reporting purposes, certain marketing andadvertising expenses are charged to results of operations as a percentage ofsales. Interim results may not be indicative of results for a full year. Theseunaudited consolidated financial statements and notes should be read inconjunction with the Company’s annual consolidated financial statements.

 

The preparation of consolidated financial statements in conformity withgenerally accepted accounting principles requires management to make estimatesand assumptions that affect the reported amounts of assets and liabilities,disclosure of contingent assets and liabilities at the date of the consolidatedfinancial statements and the reported amounts of revenues and expenses duringthe reporting period. Actual results could differ from those estimates.

 

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

 

TheCompany primarily manufactures and markets 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, certain litigation costs and certain other non-cash or excludablecharges or losses. Other expense (income), net, as reported in the unauditedconsolidated financial statements, is included in Operating EBITDA of therespective 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 adjusted inthe May 2007 amendment of those facilities and that change is reflectedprospectively in the Company’s computation of Operating EBITDA.  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 andnine months ended September 30, 2007 and 2008 is as follows:

 

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**For the Three Months Ended September 30, 2007**

 
| ** **                                                | ** ** | **North  America** | ** ** | **EAME** | ** ** | **Latin  America** | ** ** | **Asia/  Pacific** | ** ** | **Consolidated** | ** ** |
|-----------------------------------------------------------|------------|--------------------|------------|----------|------------|--------------------|------------|--------------------|------------|------------------|------------|
| Total net sales for reportable segments                   |       | $                  | 29,127     |     | $          | 27,920             |       | $                  | 9,508      |             | $          | 6,254 |   | $ | 72,809 |   |
| Net sales related to new product launch                   |       |               |       |     |       |               |       |               |       | 28               |       |
| Total consolidated net sales                              |       |               |       |     |       |               |       |               |       | $                | 72,837     |   |
|                                                      |       |               |       |     |       |               |       |               |       |             |       |
| Operating EBITDA                                          |       | $                  | 11,298     |     | $          | 9,874              |       | $                  | 2,913      |             | $          | 1,971 |   | $ | 26,056 |   |
| Less (plus):                                              |       |               |       |     |       |               |       |               |       |             |       |
| Corporate expenses                                        |       |               |       |     |       |               |       |               |       | 5,237            |       |
| Restructuring and specified project  implementation costs |       |               |       |     |       |               |       |               |       | 414              |       |
| Depreciation expense                                      |       |               |       |     |       |               |       |               |       | 1,590            |       |
| Amortization expense                                      |       |               |       |     |       |               |       |               |       | 5,264            |       |
| Currency loss on euro debt                                |       |               |       |     |       |               |       |               |       | 879              |       |
| Gain on liquidation or sale of subsidiary                 |       |               |       |     |       |               |       |               |       | (284             | )          |
| Loss related to new product launch                        |       |               |       |     |       |               |       |               |       | 1,314            |       |
| Other non-cash expense                                    |       |               |       |     |       |               |       |               |       | 19               |       |
| Other expense, net                                        |       |               |       |     |       |               |       |               |       | (117             | )          |
| Income from operations                                    |       |               |       |     |       |               |       |               |       | 11,740           |       |
| Interest expense, net                                     |       |               |       |     |       |               |       |               |       | 14,297           |       |
| Other expense, net                                        |       |               |       |     |       |               |       |               |       | 117              |       |
| Loss before income taxes                                  |       |               |       |     |       |               |       |               |       | $                | (2,674     | ) |

 

**For the Three Months Ended September 30, 2008**

 
| ** **                                                     | ** ** | **North  America** | ** ** | **EAME** | ** ** | **Latin  America** | ** ** | **Asia/  Pacific** | ** ** | **Consolidated** | ** ** |
|----------------------------------------------------------------|------------|--------------------|------------|----------|------------|--------------------|------------|--------------------|------------|------------------|------------|
| Total net sales for reportable segments                        |       | $                  | 22,100     |     | $          | 27,976             |       | $                  | 10,529     |             | $          | 3,878 |   | $ | 64,483 |   |
| Net sales related to new product launch                        |       |               |       |     |       |               |       |               |       | 37               |       |
| Total consolidated net sales                                   |       |               |       |     |       |               |       |               |       | $                | 64,520     |   |
|                                                           |       |               |       |     |       |               |       |               |       |             |       |
| Operating EBITDA                                               |       | $                  | 6,230      |     | $          | 5,603              |       | $                  | 3,512      |             | $          | 847 |   | $ | 16,192 |   |
| Less (plus):                                                   |       |               |       |     |       |               |       |               |       |             |       |
| Corporate expenses                                             |       |               |       |     |       |               |       |               |       | 2,694            |       |
| Restructuring and specified project  implementation costs |       |               |       |     |       |               |       |               |       | 325              |       |
| Depreciation expense                                           |       |               |       |     |       |               |       |               |       | 1,382            |       |
| Amortization expense                                           |       |               |       |     |       |               |       |               |       | 5,264            |       |
| Currency gain on euro debt                                     |       |               |       |     |       |               |       |               |       | (651             | )          |
| Loss related to new product launch                             |       |               |       |     |       |               |       |               |       | 2,486            |       |
| Other non-cash expense                                         |       |               |       |     |       |               |       |               |       | 3                |       |
| Other expense, net                                             |       |               |       |     |       |               |       |               |       | (1,871           | )          |
| Income from operations                                         |       |               |       |     |       |               |       |               |       | 6,560            |       |
| Interest expense, net                                          |       |               |       |     |       |               |       |               |       | 13,550           |       |
| Other expense, net                                             |       |               |       |     |       |               |       |               |       | 1,871            |       |
| Loss before income taxes                                       |       |               |       |     |       |               |       |               |       | $                | (8,861     | ) |

 

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**For the Nine Months Ended September 30, 2007**

 
| ** **                                                              | ** ** | **North  America** | ** ** | **EAME** | ** ** | **Latin  America** | ** ** | **Asia/  Pacific** | ** ** | **Consolidated** | ** ** |
|-------------------------------------------------------------------------|------------|--------------------|------------|----------|------------|--------------------|------------|--------------------|------------|------------------|------------|
| Total net sales for reportable segments                                 |       | $                  | 85,655     |     | $          | 84,577             |       | $                  | 22,855     |             | $          | 20,157 |   | $ | 213,244 |   |
| Net sales related to new product launch                                 |       |               |       |     |       |               |       |               |       | (4               | )          |
| Total consolidated net sales                                            |       |               |       |     |       |               |       |               |       | $                | 213,240    |   |
|                                                                    |       |               |       |     |       |               |       |               |       |             |       |
| Operating EBITDA                                                        |       | $                  | 31,703     |     | $          | 25,581             |       | $                  | 5,913      |             | $          | 7,428 |   | $ | 70,625 |   |
| Less (plus):                                                            |       |               |       |     |       |               |       |               |       |             |       |
| Corporate expenses                                                      |       |               |       |     |       |               |       |               |       | 19,282           |       |
| Restructuring and specified project  implementation costs               |       |               |       |     |       |               |       |               |       | 1,288            |       |
| Depreciation expense                                                    |       |               |       |     |       |               |       |               |       | 4,919            |       |
| Amortization expense                                                    |       |               |       |     |       |               |       |               |       | 16,718           |       |
| Currency loss on euro debt                                              |       |               |       |     |       |               |       |               |       | 1,382            |       |
| Gain on liquidation or sale of subsidiary                               |       |               |       |     |       |               |       |               |       | (284             | )          |
| Loss related to new product launch                                      |       |               |       |     |       |               |       |               |       | 2,852            |       |
| 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                                                  |       |               |       |     |       |               |       |               |       | 70               |       |
| Other income, net                                                       |       |               |       |     |       |               |       |               |       | 29,962           |       |
| Income from operations                                                  |       |               |       |     |       |               |       |               |       | 19,567           |       |
| Interest expense, net                                                   |       |               |       |     |       |               |       |               |       | 44,269           |       |
| Cost of refinancing                                                     |       |               |       |     |       |               |       |               |       | 5,791            |       |
| Other income, net                                                       |       |               |       |     |       |               |       |               |       | (29,962          | )          |
| Income before income taxes                                              |       |               |       |     |       |               |       |               |       | $                | (531       | ) |

 

**For the Nine Months Ended September 30, 2008**

 
| ** **                                                    | ** ** | **North  America** | ** ** | **EAME** | ** ** | **Latin  America** | ** ** | **Asia/  Pacific** | ** ** | **Consolidated** | ** ** |
|---------------------------------------------------------------|------------|--------------------|------------|----------|------------|--------------------|------------|--------------------|------------|------------------|------------|
| Total net sales for reportable segments                       |       | $                  | 69,102     |     | $          | 90,454             |       | $                  | 27,232     |             | $          | 13,674 |   | $ | 200,462 |   |
| Net sales related to new product launch                       |       |               |       |     |       |               |       |               |       | 24               |       |
| Total consolidated net sales                                  |       |               |       |     |       |               |       |               |       | $                | 200,486    |   |
|                                                          |       |               |       |     |       |               |       |               |       |             |       |
| Operating EBITDA                                              |       | $                  | 21,167     |     | $          | 22,145             |       | $                  | 6,694      |             | $          | 3,225 |   | $ | 53,231 |   |
| Less (plus):                                                  |       |               |       |     |       |               |       |               |       |             |       |
| Corporate expenses                                            |       |               |       |     |       |               |       |               |       | 14,283           |       |
| Restructuring and specified project implementation costs |       |               |       |     |       |               |       |               |       | 3,204            |       |
| Depreciation expense                                          |       |               |       |     |       |               |       |               |       | 3,657            |       |
| Amortization expense                                          |       |               |       |     |       |               |       |               |       | 15,792           |       |
| Currency loss on euro debt                                    |       |               |       |     |       |               |       |               |       | 341              |       |
| Loss related to new product launch                            |       |               |       |     |       |               |       |               |       | 5,514            |       |
| Expenses related to credit agreement  amendments and waivers  |       |               |       |     |       |               |       |               |       | 435              |       |
| Other non-cash expense                                        |       |               |       |     |       |               |       |               |       | 68               |       |
| Other expense, net                                            |       |               |       |     |       |               |       |               |       | (2,505           | )          |
| Income from operations                                        |       |               |       |     |       |               |       |               |       | 12,439           |       |
| Interest expense, net                                         |       |               |       |     |       |               |       |               |       | 40,448           |       |
| Other expense, net                                            |       |               |       |     |       |               |       |               |       | 2,505            |       |
| Loss before income taxes                                      |       |               |       |     |       |               |       |               |       | $                | (30,514    | ) |

 

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

 

During thenine months ended September 30, 2008, the Company continued to evaluateopportunities to increase efficiency and reduce costs. This review resulted inthe continuation of workforce reductions and planned changes in the Company’sglobal business model. These actions are designed to improve both financialresults and the long-term value of the business. Restructuring expenses forworkforce reductions of $211 and $296 were recorded for the three months ended September 30,2007 and September 30, 2008, respectively, and $1,085 and $1,404 wererecorded for the nine months ended September 30, 2007 and 2008,respectively.  The 2008 chargesprincipally related to planned termination costs for employees includingcharges related to 10 additional personnel that were notified of their terminationduring the nine months ended September 30, 2008.  Severance payments and benefits are scheduledto be made over the next nine months.

 

Reconciliationof the restructuring liability at September 30, 2008 is as follows:

 

| Restructuring liability at  December 31, 2007                        |   | $      | 182    |   |
|---------------------------------------------------------------------------|--------|--------|--------|--------|
| Restructuring expenses for the nine months  ended September 30, 2008 |   | 1,404  |   |
| Cash payments for the nine months ended  September 30, 2008          |   | (1,255 | )      |
| Restructuring liability at  September 30, 2008                       |   | $      | 331    |   |

 

Therestructuring liability at December 31, 2007 and September 30, 2008is included in the line item “Accrued expenses and other liabilities” in theaccompanying consolidated balance sheets.

 

Thefollowing table presents restructuring expenses included in each segment andcorporate expenses for the three and nine months ended September 30, 2007and 2008:

 
| ** **    | ** ** | **Three Months Ended****September ****30,** | ** ** | **Nine Months Ended****September ****30,** | ** ** |
|---------------|------------|------------------------------------------------------------|------------|-----------------------------------------------------------|------------|
| ** **    | ** ** | **2007**                                                   | ** ** | **2008**                                                  | ** ** | **2007** | ** ** | **2008** | ** ** |
| North America |       | $                                                          | —     |                                                      | $          | 327 |   | $ | — |   | $ | 327 |   |
| EAME          |       | 204                                                        |       | (26                                                       | )          | 502 |   | 796 |   |
| Latin America |       | 5                                                          |       | (1                                                        | )          | 91 |   | 7 |   |
| Asia/Pacific  |       | 2                                                          |       | (4                                                        | )          | 332 |   | 127 |   |
| Corporate     |       | —                                                     |       | —                                                    |       | 160 |   | 147 |   |
| Total         |       | $                                                          | 211        |                                                      | $          | 296 |   | $ | 1,085 |   | $ | 1,404 |   |

 

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

 

Inventoriesconsisted of the following at December 31, 2007 and September 30,2008:

 
| ** **                      | ** ** | **December 31, 2007** | ** ** | **September 30, 2008** | ** ** |
|---------------------------------|------------|---------------------------------|------------|----------------------------------|------------|
| Raw materials and supplies      |       | $                               | 5,767      |                             | $          | 8,598 |   |
| Work in process                 |       | 383                             |       | 1,381                            |       |
| Finished goods                  |       | 7,924                           |       | 16,168                           |       |
| Inventory obsolescence reserves |       | (534                            | )          | (779                             | )          |
| Total                           |       | $                               | 13,540     |                             | $          | 25,368 |   |

 

The increase in finishedgoods is due to planned build up of stock related to recent changes in ourforeign manufacturing operations as described further in Note 7.

 

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

 

The Company ishighly leveraged. At September 30, 2008, the Company and its subsidiaries,including Merisant Company (“Merisant”), had $553,557 of long-term debtoutstanding, consisting of $135,136 aggregate principal amount of the Company’s121/4%senior subordinated discount notes due 2014 (the “Discount Notes”), $225,000aggregate principal amount of Merisant’s 91/2% senior subordinated notes due 2013 (the “Notes”),and $193,421 aggregate principal amount outstanding under Merisant’s seniorcredit agreement (the “Senior Credit Agreement” or as amended and restated, the“Amended and Restated Credit Agreement”), excluding capital lease obligationsof $89 and unused commitments on the revolving portion of the Senior CreditAgreement of $21,000.

 

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At September 30,2008, borrowings under the Senior Credit Agreement included $7,416 (“Term A”)aggregate principal amount of term loans bearing annual interest of 8.35%,$174,005 (“Term B”) aggregate principal amount of term loans bearing annualinterest of 6.40% and $12,000 aggregate principal amount in revolvercommitments, bearing annual interest of 5.97%. The Term A loans areeuro-denominated and are translated into U.S. dollars at the spot rate as of September 30,2008.

 

The Term A loans and the revolver commitment are scheduled to terminatein January 2009 and all amounts thereunder are scheduled to berepaid.  Most of the Term B loans($171,803) are due at its final maturity in January 2010. Additionally,interest on the Discount Notes will become payable in cash commencing on May 15,2009.  Semiannual interest payments of$8.6 million are required.  The indenturegoverning the Notes limits Merisant’s ability to pay dividends or loan cash tothe Company, which has no operations of its own.

 

Asof November 13, 2008, borrowings under Merisant’s revolving creditfacility were $28,000. In aggregate, during the twelve months ending September30, 2009, the Company and Merisant are scheduled to pay $78,300 of principaland interest under the Company and Merisant’s primary debt obligations.  Given the disruptions in the credit andfinancial markets in recent months, uncertainty exists as to whether we will beable to generate results from operations or consummate transactions sufficientto enable us to make all of these payments. The disruptions in the credit andfinancial markets have also limited access to capital and credit for manycompanies. We rely on a number of financial institutions and the credit andfinancial markets to meet our financial commitments and short-term liquidityneeds if internal funds are not available. Continuing instability ordisruptions of these markets could prohibit or make it more difficult for us toaccess new capital, significantly increase the cost of capital or limit ourability to refinance, replace or amend our existing indebtedness.  We are engaged in discussions with certain ofour secured lenders and debt security holders as well as potential financingsources with regard to refinancing or restructuring all or a portion of ourdebt obligations. However, there can be no assurance that we will be able torefinance, replace or amend our outstanding debt obligations on terms favorableto us, or at all, particularly given current financial conditions.

 

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 Credit Agreement.  The Second LienCredit Agreement consisted of an aggregate of $85,000 principal amount of termloans, the net proceeds of which were used to prepay $9,540 of euro-denominatedTerm A loans, prepay $53,320 of Term B loans and to repay $15,000 of revolvingloans, in each case, outstanding under the Senior Credit Agreement.

 

On May 9,2007, the Company, Merisant and certain of Merisant’s subsidiaries entered intothe Amended and Restated Credit Agreement, which, among other things, increasedby $85,000 the principal amount of Term B loans that could be borrowed byMerisant under the Senior Credit Agreement. Merisant paid $2,505 in fees and expenses related to this amendment andrestatement which it deferred and is amortizing over the term of the relateddebt. Upon closing, Merisant borrowed the full $85,000 of additional Term Bloans available under the Amended and Restated Credit Agreement and used theproceeds plus cash on hand to prepay the principal of all loans outstandingunder the Second Lien Credit Agreement totaling $85,000, plus all outstandinginterest of $1,438 and a premium of $2,550, or $88,988.  The Second Lien Credit Agreement wasterminated as a result of the transaction and there was no increase in Merisant’slong-term debt as a result of this transaction. In addition to the incurrence of fees, this transaction also resulted ina write-off of existing deferred financing fees relating to the extinguishmentof previously outstanding debt under the Second Lien Credit Agreement of$3,241.

 

Upon closingof the above transaction and execution of the related amendment, the interestrate on 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 Agreement, 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.

 

Merisantpaid interest on borrowings under the Senior Credit Agreement, the Second LienCredit Agreement, and on the Notes totaling $35,933 and $32,703 for the ninemonths ended September 30, 2007 and 2008, respectively.

 

The Amendedand Restated Credit Agreement preserves prior amendments, amends futurefinancial covenant ratios and levels and contains a number of additionalamendments, including to the definition of Bank EBITDA, that give Merisant moreflexibility to operate its business and de-leverage its balance sheet.

 

The Amendedand Restated Credit Agreement contains covenants, including financial covenantsthat must be met on a quarterly basis. “Bank EBITDA” is the measure by whichthe financial covenants contained in the Amended and Restated Credit Agreementare measured. However, Bank EBITDA is not a measure of liquidity under GAAP.Accordingly, while providing useful information with respect to an assessmentof liquidity as measured in accordance with the covenants in Merisant’s primarydebt obligations, this measure should not be considered in isolation from, oras a substitute for, consolidated statement of cash flow data prepared inaccordance with GAAP as an indication of liquidity. In addition, the BankEBITDA measure presented may differ from, and may not be comparable to,similarly titled measures used by other companies.

 

Merisant wasin compliance with its covenants under the Amended and Restated CreditAgreement as of September 30, 2008.

 

Merisant wasrequired to prepay $15,226 of the principal amount of term loans outstandingunder the Amended and Restated Credit Agreement five business days after filingthe annual financial statements with excess cash as required and calculatedunder the terms of the Amended and Restated Credit Agreement.  The prepayment was completed on April 4,2008.

 

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

 

Merisant has a deferred compensation payable to Arnold Donald, itsformer Chairman and a current director, and a note receivable in the sameamount from Mr. Donald. Merisant recorded $43 and $30 of interest incomeon the note receivable for the three months ended September 30, 2007 and2008, respectively, and $129 and $89 of interest income on the note receivablefor the nine months ended September 30, 2007 and 2008, respectively, andan equal amount of interest expense in the respective periods.

 

Merisant is party to an agreement with Brand Architecture International(“Brand Architecture”) pursuant to which Brand Architecture has agreed toprovide consulting services relating to the development of brand architecturefor the Merisant’s brands. Merisant paid approximately $15 and $371 to BrandArchitecture for the three months ended September 30, 2007and 2008, respectively, and approximately $315 and $569 for the nine monthsended September 30,2007 and 2008, respectively, including the reimbursement to Brand Architecturefor expenses relating to its work. Adam Stagliano, a member of the Company’sboard of directors, is a founding director and the President and ChiefStrategic Officer of Brand Architecture.

 

**7.****                       ****Commitments and Contingencies**

** **

The Companyhas an investment in an affiliate located in the Philippines that is accountedfor using 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 31,2007 and September 30, 2008, there were no additional jointventure borrowings.

 

In July 2008, the Company started handling order processing,warehousing and trade marketing internally and through a third-party broker andlogistics provider for retail grocery and drug customers in the United Statesrather than through its primary domestic distributors.  The Company anticipates that this operationalchange will reduce its operating costs, improve the efficiency of its inventorymanagement and distribution capabilities, and provide more transparency incustomer relations.  In July 2008,the Company paid the distributor $300 to facilitate this and other changes inthe distribution agreement.

 

The Company has initiated a multi-site manufacturing strategy forEAME.  In connection with this strategy,the Company formed CzechPak Manufacturing s.r.o. to operate a new manufacturingfacility located in the Czech Republic. The Company will shift a portion of its current production and equipmentto this new facility from Krüger GmbH & Co. KG, its current contractmanufacturer located in Germany.  Inconnection with this transition, the Company and Krüger amended the parties’manufacturing agreement.  Under the termsof the amended agreement, certain products will no longer be manufactured byKrüger and the Company will be able to move the equipment currently used byKrüger to manufacture and package these products to its CzechPak facility.  The parties extended the expiration of themanufacturing agreement from 2010 to 2012 and the Company agreed to meetcertain minimum purchase commitments for each of Krüger’s facilities.  Commencing January 2009 the aggregateamount of such commitments is €29.2 million. In addition, the Company agreed to acquire any raw materials, packagingand work in progress for the discontinued products and to increase conversionfees per unit for the products that Krüger will continue to produce.  The Company also agreed to provide creditenhancements in the event that Krüger is unable to obtain a certain level ofcredit insurance for its production commitments.  The Company built up additional inventory offinished products to meet anticipated market demand during the transition period.

 

The Company issubject to various other claims, pending and possible legal actions for productliability and other damages, and other matters arising out of the conduct ofthe Company’s business, including tax uncertainties arising from doing businessin various European and Latin American jurisdictions. The Company believes,based on current knowledge and consultation with counsel, that the outcome ofsuch claims and actions will not have a material adverse effect on the Company’sconsolidated financial position or results of operations.

 

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**8.****                       ****Income Taxes**

** **

InJune 2006, the Financial Accounting Standards Board (“FASB”) issuedInterpretation No. 48, Accounting for Uncertainty in Income Taxes - aninterpretation of FASB Statement No. 109 (“FIN 48”), that clarifies theaccounting and recognition for income tax positions taken or expected to betaken in the Company’s tax returns. The Company adopted FIN 48 on January 1,2007, and recorded the cumulative effect of a change in accounting principle byrecording a decrease in the liability for uncertain tax positions of $5,757,that was accounted for as a credit to opening retained earnings. At December 31,2007 and September 30, 2008, the total liability, including interest andpenalties of $715 and $771, respectively, for uncertain tax positions recordedin the Company’s balance sheet in non-current Other liabilities was $2,815 and$2,805, respectively. No uncertain tax position reserves were reversed orsettled during the nine months ended September 30, 2008.  The entire amount of this consolidatedworldwide liability for uncertain tax positions would affect the Company’seffective 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 September 30, 2008 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 2005 are closed due to local practice.  In Belgium and Australia, tax years through2003 and 2001, respectively, are closed due to the local statute oflimitations.  In Argentina and Mexicoonly 2000 and 2001 are considered closed tax years due to the local statute oflimitations.

 

Interestand penalties related to tax positions taken in the Company’s tax returns arerecorded in income tax expense in the consolidated statements of operations.

 

**9.**                        Expansion ofOperations

 

OnApril 9, 2008, Nativia Guarani, S.A., the Company’s indirect, wholly-ownedsubsidiary (“Nativia Guarani”), purchased a stevia processing facility andbusiness located in Paraguay and related tangible and intangible assets fromImperio Guarani, S.A. (“Imperio Guarani”) in an asset purchase transaction. Thepurchase price was $5.0 million, $0.6 million of which was paid in 2007 and$3.4 million of which was paid upon the closing of the acquisition on April 9,2008. The remaining $1.0 million of the purchase price may be paid to ImperioGuarani over the next 27 months if Imperio Guarani continues to perform underrelated long-term contracts during that period. This remaining purchase price liability is classified as currentpayables and other noncurrent liabilities as appropriate.  In conjunction with the transaction, theCompany paid $0.5 million in reimbursable value added tax which is classifiedas other non-current assets.  The Companyis currently analyzing the recovery period. None of the working capital of the business was acquired, so the totalcost of the acquisition was allocated to long-lived fixed and intangible assetsacquired based on their respective fair values (as decreased due to resulting “negativegoodwill”) in accordance with FASB No. 141- Business Combinations.  The allocation resulted in $2.1 million offixed assets (predominately machinery and equipment), $2.2 million ofinternally-developed technology and $0.7 million of tradenames and customerrelationships.  Depreciation and amortization of these allocated balanceswill be deductible for income tax purposes over expected lives of two to tenyears.  These assets will be tested forimpairment as required under FASB No. 144, Accounting for the Impairmentor Disposal of Long-Lived Assets.  Thepreliminary values assigned to the intangible assets were based upon futurediscounted cash flows related to the existing products revenue streams.

 

Theacquisition was accounted for by the purchase method and the results ofoperations of the acquired business have been included in our ConsolidatedStatement of Operations since the date of acquisition and are not yetmaterial.  Pro forma financialinformation is not presented as the effect of this acquisition is not materialto the Company’s results of operations and financial position.

 

Uponthe consummation of the acquisition, Whole Earth Sweetener Company LLC, awholly owned subsidiary of the Company (“Whole Earth”), and Nativia Guaranientered into long-term contracts with Imperio Guarani and a consultingagreement with Sergio Chase, the principal owner of Imperio Guarani.  Imperio Guarani will exclusively supply driedstevia leaves to Nativia Guarani and collaborate on research and developmentprojects. Management believes that the Nativia Guarani business and agreementswith Imperio Guarani and Mr. Chase will assist the 

 

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Companyin several ways.  A number of larger andbetter capitalized companies will be competing for stevia leaves and extracts,and vertical integration provides Whole Earth with more control over its supplyof this natural ingredient although the Company will continue to source highpurity Reb A from other suppliers.  Inaddition, the Company believes that Nativia Guarani and our strategicrelationship with Imperio Guarani will permit Whole Earth to promotesustainable farming practices and develop improved agricultural and processingmethods and technologies that may offer competitive advantages.

 

**Item 2. Management’s Discussion and Analysis of Financial Condition andResults of Operations**

 

*The following discussion should be read in conjunction with ourunaudited consolidated financial statements and accompanying notes includedelsewhere in this document. Our discussion of results by reportable segmentshould be read in conjunction with Note 2 to the unaudited consolidatedfinancial statements included elsewhere in this document, which illustrates thereconciliation of Operating EBITDA to income (loss) before income taxes. Unlessotherwise indicated or unless the context requires otherwise, all references inthis discussion to “us”, “we”, “our” or “our company” mean Merisant Worldwide, Inc.and its consolidated subsidiaries and all references to “Merisant” meanMerisant Company.*

 

**Overview**

 

Our company is a worldwide leader in themarketing of low-calorie tabletop sweeteners, with an estimated 22% dollarshare as of December 31, 2007 of a stable global retail market, which weestimate at $1.6 billion.  We believethat our company has the leading dollar market share as of December 31,2007 in almost half of what we estimate as the top twenty geographic marketsfor low-calorie tabletop sweetener sales. Our premium-priced brands, *Equal*®and *Canderel*®, are among the mostrecognized low-calorie tabletop sweetener products in the world, with aidedbrand awareness estimated at between 90% and 95% in our four top markets.  In addition to *Equal*® and *Canderel*®,we market our products under 19 other regional brands that enjoy significantbrand recognition in their target markets. We sell our brands in over 100 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, where Searlemarketed 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’s tabletop sweetener business.

 

Our worldwide headquartersis located in Chicago, Illinois, and we have principal regional offices inMexico City, Mexico, Neuchâtel, Switzerland, and Paris, France.  We own and operate manufacturing facilitiesin Manteno, Illinois, Zarate, Argentina and Teplice, Czech Republic and ownprocessing lines that are operated exclusively for us at plants located inBergisch and Stendal, Germany and Bankrason, Thailand.  We have formed a new wholly-ownedsubsidiary, CzechPak Manufacturing s.r.o., to manufacture products at afacility located in the Czech Republic, which commenced production in August 2008.  The CzechPak facility initially will produce *Canderel*® branded products for EAME region.  As of November 13, 2008, we had 21direct and indirect active subsidiaries, including five subsidiaries in theUnited States, seven subsidiaries in Europe, six subsidiaries in Mexico,Central America and South America, and three subsidiaries in the Asia Pacificregion, including Australia and India. In addition, our Swiss subsidiary holds a 50% interest in a jointventure in the Philippines.

 

Our core business continues to be productssweetened with aspartame, and the *Equal*®and *Canderel*® tabletop sweetenerproducts accounted for approximately 85% of our net sales in 2007.  The majority of our 19 other regional brandsaround the world are also sweetened with aspartame.

 

***Market Trends and Strategy***

** **

Our company’spremium-priced brands had enjoyed a strong market position among low-caloriesweeteners in many of our key markets. In recent years, however, we have faced significant competition fromMcNeil Nutritionals LLC, a subsidiary of Johnson & Johnson (“McNeil”),which markets and distributes the artificial sweetener*Splenda*®. *Splenda*® is sweetened withsucralose, which is produced through a complex chemical process that convertssucrose molecules into a synthetic compound. From December 2002 to December 2007,*Splenda*®’s dollar share of theUnited States retail grocery 

 

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market has grown fromapproximately 15% to 61% and has surpassed that of *Equal*® to become the number one premium low-calorie sweetenerin the United States.  While we believethat 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 40% of our net sales in 2003 and 2007,respectively.  As a result of decliningnet sales, we have experienced significant declines in our Bank EBITDA from$110.2 million in 2003 to a low of $67.2 million in 2006, before increasing to$69.9 million in 2007.  For a descriptionof Bank EBITDA and a reconciliation of Bank EBITDA to cash flow from operatingactivities, see “Management’s Discussion and Analysis of Financial Conditionand Results of Operations—Liquidity and Capital Resources”.

 

A new management team launched efforts to revitalizeour company’s business.  Paul Block wasappointed Chief Executive Officer in November 2004 and has led aninitiative to strengthen our company’s core brands, improve the efficiency ofour operations, reduce costs and transform our company into a sweetener andsweetened food company.  Mr. Blockhas recruited individuals from outside our company and promoted individualsfrom within the organization to form a new senior management team with the goalof developing a culture of innovation with a focus on the development andlaunch of new products designed to revitalize the existing customer base andattract new consumers.

 

Our company seeks to stabilize and then grow revenuesthrough the following five strategic initiatives:

 

·                  Promote new usage among existingconsumers and expand the *Equal*® and *Canderel*® brand positioning to attract new consumers throughinvasive marketing campaigns and improved sales execution.

 

·                  Increase the pace of productinnovation to bring new products and brand extensions to the market, includingproducts sweetened with high intensity sweeteners other than aspartame.

 

·                  Develop and test products that havethe potential to transform our company’s brand portfolio, including by buildinga platform for all natural, low-calorie sweeteners and sweetened foods.

 

·                  Dedicate significant resources toimproving the efficiency of operations by, among other things, implementingprograms to streamline manufacturing capabilities and improving the efficiencyof certain support services.  We havesuccessfully reduced costs and made our business more efficient, which hassignificantly contributed to the current stabilization of Bank EBITDA over thepast two years.

 

·                  Offer private label low-caloriesweeteners to retail and food service customers and leverage supply chainexpertise globally.

 

We believethat these strategies taken together have positioned our company to pursueopportunities for future growth in the low-calorie tabletop sweetener andsweetened food category.  Many of ourmajor markets are increasingly competitive as more branded and private labeltabletop sweeteners compete for limited space on retail grocery shelves and inrestaurant caddies.  Although our premiumbrands *Equal*® and *Canderel*®are among the most recognized brands in the world, our company must offer morethan these quality products in order to remain relevant to our customers and toconsumers.  Our strategies allow us tooffer our retail grocery and food service customers a suite of branded andprivate label low-calorie tabletop sweeteners that contain a range of syntheticand natural sweeteners.  We seek to offerour retail grocery and food service customers a range of quality products andthe benefits of our manufacturing capabilities.

 

***Recent Developments***

 

*Launch ofPureViaTM Brand and Related Agreements*

 

On July 31,2008, Whole Earth Sweetener Company LLC, a wholly-owned subsidiary of Merisant(“Whole Earth”), announced that PepsiCo, Inc. (“PepsiCo”) and Whole Earthhad formed an unprecedented partnership to jointly own the *PureVia*TMtrademark and market the *PureVia*TM brandglobally.  Whole Earth owns the *PureVia* trademark for tabletop sweeteners, and PepsiCo ownsthe trademark for beverages and certain other food categories.  Whole Earth anticipates that it will launch a*PureVia*TM all-natural, zero calorietabletop sweetener in the United States in the fall of 2008.

 

*PureVia*TMbranded products will be sweetened with high purity Reb A, an all-natural,purified extract of the stevia plant that is approximately 200 times sweeterthan sugar.  PepsiCo and Whole Earth haveentered into an ingredient branding agreement with PureCircle Limited, asupplier of high purity Reb A (“PureCircle”). Among other things, the parties will collaborate on marketing highpurity Reb A under the *PureVia*TMbrand.  PureCircle will be permitted tolicense the trademark on an exclusive and royalty-free basis from eitherPepsiCo or Whole Earth in order to identify the branded 

 

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ingredient in productcategories to be agreed to by the parties. PureCircle will be permitted to sublicense the trademark to customersapproved by PepsiCo and Whole Earth for the purpose of identifying theingredient in the agreed upon product categories.

 

Whole Earthhas entered into a non-exclusive supply agreement with PureCircle pursuant towhich PureCircle will supply high purity Reb A to Whole Earth.  The supply agreement has an initial term offive years.

 

The activesweetening ingredient in *PureVia*TMtabletop sweetener is high purity Reb A. This ingredient differs from most stevia products sold as dietarysupplements in the United States because it is a highly pure form of only oneof several steviol glycosides found in the stevia plant and because of itspurity the ingredient contains little or no residual plant material.

 

Whole Earthbelieves that it has demonstrated that high purity Reb A is generallyrecognized as safe (referred to as “GRAS”) and that the ingredient maytherefore be sold as a food in the United States.  In general, the Food, Drug, and Cosmetic Actprovides that any substance that is added to food must be pre-approved by U.S.Food and Drug Administration, unless the substance is generally recognized,among qualified experts, as having been adequately shown to be safe under theconditions of its intended use. Management believes that Whole Earth has demonstrated the GRAS status ofhigh purity Reb A through scientific procedures in accordance with FDAregulations.  These procedures requirethe same quantity and quality of scientific evidence as is required to obtainapproval of the substance as a food additive and ordinarily is based uponpublished studies.  Companies may electto use GRAS ingredients on a self-affirmed basis or they may submit anotification and supporting documentation to the FDA for review.  In May 2008, Whole Earth submitted anotification and supporting scientific data to the FDA that high purity Reb Ais GRAS for use in beverages, foods and tabletop sweeteners.  The FDA could ask questions and seekadditional information from Whole Earth or it may provide a letter indicatingthat it has no objections.  It isanticipated that the FDA could deliver a no objection letter in the fall of2008.

 

*VerticalIntegration of Stevia Supply*

 

On April 9,2008, Whole Earth acquired the stevia processing business and related assets inParaguay through its indirect, wholly-owned subsidiary, Nativia Guarani,S.A.  In connection with thisacquisition, Whole Earth and Nativia Guarani entered into long-termagricultural supply, research and development, purchase option and consultingagreements with its local partner Imperio Guarani, S.A. and Sergio Chase, theprincipal owner of Imperio Guarani. Imperio Guarani has developed a network of small, independent farmersfrom whom the company acquires stevia leaves, and Imperio Guarani will selldried stevia leaves exclusively to Nativia Guarani.  Among other things, Imperio Guarani and WholeEarth will collaborate on further extending this network of farmers, improvingstevia varieties as well as developing improved stevia growing, harvesting andprocessing technologies.  Imperio Guaranihas granted Whole Earth an exclusive option to acquire its business and theland currently leased by Nativia Guarani from affiliates of Imperio Guarani.

 

The NativiaGuarani facility currently mills dried stevia leaves and produces a steviaextract that has not yet been purified into high purity Reb A.  Pending the results of its current researchand development efforts and the commercialization of those technologies, WholeEarth may use this stevia extract for its own products where steviol glycosidesmay be used, offer the extract for sale as an ingredient or further purify theextract into high purity Reb A.

 

Managementbelieves that the Nativia Guarani business and agreements with Imperio Guaraniand Mr. Chase will assist the company in several ways.  A number of larger and better capitalizedcompanies will be competing for stevia leaves and extracts, and verticalintegration provides Whole Earth with more control over its supply of thisnatural ingredient, although Whole Earth will continue to source high purity RebA from PureCircle and other suppliers. In addition, management believes that the formation of Nativia Guaraniand our company’s strategic relationship with Imperio Guarani will permit WholeEarth to promote sustainable farming practices and develop improvedagricultural and processing methods and technologies that may offer competitiveadvantages.

 

*CzechPakManufacturing Facility*

 

We have builta new manufacturing facility in the Czech Republic which is operated by ournewly formed subsidiary CzechPak Manufacturing s.r.o.  The CzechPak facility initially will employapproximately 80 people and produce *Canderel*®branded products for EAME region.  The facility commenced production in August 2008.  We anticipate that the CzechPak facility willreduce our manufacturing costs, allow us to introduce new products morerapidly, test new products on a limited basis and improve both operationalefficiency and working capital by reducing lead times and the amount of inventoryheld by our distributors.  We will shifta portion of our current production and equipment to this new facility from 

 

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Krüger GmbH & Co. KG,our current contract manufacturer located in Germany.  In connection with this transition, Merisantand Krüger amended the parties’ manufacturing agreement.  Under the terms of the amended agreement,certain products will no longer be manufactured by Krüger and we will be ableto move the equipment currently used by Krüger to manufacture and package theseproducts to our CzechPak facility.  Theparties extended the expiration of the manufacturing agreement from 2010 to2012 and we agreed to meet certain minimum purchase commitments for each ofKrueger’s facilities.  Commencing January 2009the aggregate amount of such commitments is €29.2 million.  In addition, we agreed to acquire any rawmaterials, packaging and work in progress for the discontinued products and to increaseconversion fees per unit for the products that Krüger will continue toproduce.  We also agreed to providecredit enhancements in the event that Krüger is unable to obtain a certainlevel of credit insurance for its production commitments.

 

**Capital Constraints and Need to Refinance orRestructure**

 

We believethat the development and introduction of new products under our *Equal*® and *Canderel*®brands may help to stabilize our core business while*PureVia*TMand other innovative, all-natural sweeteners and sweetened food products fromWhole Earth present growth opportunities for us. However, we may be constrainedin our ability to realize fully the value of these new products as a result ofour current capital structure. The successful launch of new products andmarketing of our core brands requires capital, and we must use a significantportion of our cash flows from operations to service our outstanding debt. Wehad an aggregate of $553.6 million of short and long-term debt outstanding at September 30,2008, including capital lease obligations and borrowings from Merisant’srevolving credit facility.  We paid $32.7million in interest costs for the nine months ended September 30, 2008,$21.4 million of which represented interest payments on Merisant’s 9 1⁄2% seniorsubordinated notes due 2013 (the “Notes”). If we cannot generate cash flowsfrom operations significantly in excess of our debt obligations, we may nothave the resources required to fully realize the value of our strategicinitiatives.

 

In order tomaximize value, management is focused on refinancing or restructuring all orpart of our debt obligations.  By January 11,2009, approximately $7.4 million principal amount of the Term A loans and $28.0million of revolving loans currently outstanding under Merisant’s senior creditfacility as of November 13, 2008 will become due and payable, and we willno longer be able to draw revolving loans or issue letters of credit underMerisant’s senior credit facility.  Wehave a total of $45.9 million in interest and principal payments that becomedue and payable in January 2009.  Inaddition, interest on our 12 1⁄4% senior subordinated discount notes due 2014(the “Discount Notes”), will become payable in cash commencing on May 15,2009.  The indenture governing the Noteslimits Merisant’s ability to pay dividends or loan cash to our company, whichhas no operations of its own.

 

As ofNovember 13, 2008, borrowings under Merisant’s revolving credit facilitywere $28.0 million. In aggregate, during the twelve months ending September 30,2009, we and Merisant are scheduled to pay $78.3 million of principal andinterest under our and Merisant’s primary debt obligations.  Given the disruptions in the credit andfinancial markets in recent months, uncertainty exists as to whether we will beable to generate results from operations or consummate transactions sufficientto enable us to make all of these payments. The disruptions in the credit andfinancial markets have also limited access to capital and credit for many companies.We rely on a number of financial institutions and the credit and financialmarkets to meet our financial commitments and short-term liquidity needs ifinternal funds are not available. Continuing instability or disruptions ofthese markets could prohibit or make it more difficult for us to access newcapital, significantly increase the cost of capital or limit our ability torefinance, replace or amend our existing indebtedness.  We are engaged in discussions with certain ofour secured lenders and debt security holders as well as potential financingsources with regard to refinancing or restructuring all or a portion of ourdebt obligations. However, there can be no assurance that we will be able torefinance, replace or amend our outstanding debt obligations on terms favorableto us, or at all, particularly given current financial market conditions.

 

**Results ofOperations**

 

For each ofthe periods discussed 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 September 30, 2008Compared to Three Months Ended September 30, 2007***

 

The followingtable sets forth certain of our company’s financial data for the three monthperiods ended September 30, 2007 and 2008 (totals may not foot due torounding).

 

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| ** **                        | ** ** | **Three Months Ended  September 30,** | ** ** | **Three Months Ended  September 30,** | ** ** |
|-----------------------------------|------------|------------------------------------------------------|------------|------------------------------------------------------|------------|
| ** **                        | ** ** | **2007**                                             | ** ** | **2008**                                             | ** ** | **2007** | ** ** | **2008** | ** ** | **Better/(Worse)  than Prior Year** | ** ** |
| ** **                        | ** ** | **(in millions)**                               | ** ** | **As % of Net Sales**            | ** ** | **Dollars** | ** ** | **%** | ** ** |
| Net sales                         |       | $                                                    | 72.8       |                                                 | $          | 64.5 |   | 100 | % | 100 | % | $ | (8.3 | ) | (11 | )% |
| Cost of sales                     |       | 31.5                                                 |       | 31.6                                                 |       | 43 | % | 49 | % | (0.1 | ) | (0 | )% |
| Gross profit                      |       | 41.3                                                 |       | 32.9                                                 |       | 57 | % | 51 | % | (8.4 | ) | (20 | )% |
| Operating expenses:               |       |                                                 |       |                                                 |       |   |   |   |   |   |   |   |   |
| Marketing and selling expenses    |       | 15.9                                                 |       | 14.5                                                 |       | 22 | % | 22 | % | 1.4 |   | 9 | % |
| Administration expenses           |       | 7.8                                                  |       | 5.5                                                  |       | 11 | % | 8 | % | 2.3 |   | 29 | % |
| Research and development costs    |       | 0.4                                                  |       | 0.8                                                  |       | 0 | % | 1 | % | (0.4 | ) | (118 | )% |
| Amortization of intangible assets |       | 5.3                                                  |       | 5.3                                                  |       | 7 | % | 8 | % | 0.0 |   | 0 | % |
| Restructuring expenses            |       | 0.2                                                  |       | 0.3                                                  |       | 0 | % | 0 | % | (0.1 | ) | (40 | )% |
| Total operating expenses          |       | 29.6                                                 |       | 26.3                                                 |       | 41 | % | 41 | % | 3.3 |   | 11 | % |
| Income from operations            |       | 11.7                                                 |       | 6.6                                                  |       | 16 | % | 10 | % | (5.2 | ) | (44 | )% |
| Other expenses (income):          |       |                                                 |       |                                                 |       |   |   |   |   |   |   |   |   |
| Interest income                   |       | (0.2                                                 | )          | (0.1                                                 | )          | (0 | )% | (0 | )% | (0.2 | ) | (72 | )% |
| Interest expense                  |       | 14.5                                                 |       | 13.6                                                 |       | 20 | % | 21 | % | 0.9 |   | 6 | % |
| Other expense (income), net       |       | 0.1                                                  |       | 1.9                                                  |       | (0 | )% | 3 | % | (1.8 | ) | (1,500 | )% |
| Total other expenses              |       | 14.4                                                 |       | 15.4                                                 |       | 20 | % | 24 | % | (1.0 | ) | (7 | )% |
| Income (loss) before income taxes |       | (2.7                                                 | )          | (8.9                                                 | )          | (4 | )% | (14 | )% | (6.2 | ) | (231 | )% |
| Provision for income taxes        |       | 1.3                                                  |       | 0.5                                                  |       | 2 | % | 1 | % | 0.8 |   | 63 | % |
| Net loss                          |       | $                                                    | (4.0       | )                                                    | $          | (9.4 | ) | (6 | )% | (15 | )% | $ | (5.3 | ) | (133 | )% |

 

**Consolidated Results**

 

*Net sales.*Overall,net sales declined in the third quarter of 2008 compared to the third quarterof 2007.  The decline was related tolower sales in North America and Asia/Pacific partially offset by higher salesin Latin America.  Overall net sales inEAME during the third quarter of 2008 were stable compared to the same periodlast year.  In North America, net salesdeclined as a result of our transition from a distribution sales model for ourretail business to a direct sales model along with a decline in consumerconsumption.  These negative impacts onnet sales were slightly offset by decreased trade marketing spending.  In Asia/Pacific, we are implementing a changein our supply chain that decreased shipments to our distributor inAustralia.  Offsetting these declinesslightly was improved performance in the Latin America region along with theconsolidated sales impact of the devaluation of the U.S. dollar compared to thethird quarter of 2007 and the resulting currency translation which accountedfor approximately $1.6 million of incremental net sales in the third quarter of2008.  In the EAME region, UK salesincreased in conjunction with a price increase. In Latin America, Argentina also implemented a price increase whichpositively impacted the net sales compared to the same quarter in 2007.  In Mexico, we continue to maintain high brandawareness, though our competitor, *Splenda*®,has invested heavily in advertising over the past 21 months.  This has resulted in a decrease in consumerdemand for our products along with pricing pressure particularly in the clubchannel.

 

*Cost ofsales.* Cost of sales increased, despite the decline insales, due to one-time start up costs related to our manufacturing plant in theCzech Republic, sales increases in lower margin products, the impact ofpurchasing product in euro for sales in countries with weaker currencies andunfavorable raw material purchase prices. Overall, gross profit as a percentage of net sales declined from 57% forthe three months ended September 30, 2007 to 51% for the three monthsended September 30, 2008 due to the increases in costs discussed above aswell as increased trade marketing in France.

 

*Operatingexpenses.*Marketing and selling expenses decreased dueto lower performance-based incentives in all regions along with lower brand supportin North America.  This was partiallyoffset by higher brand support in Latin America related to our *Canderel*® anniversary promotion, unfavorable currencyimpacts in the EAME region and increased costs related to our new productlaunch.  Administration expensesdecreased mainly due to lower litigation and performance-based incentives.

 

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During thethird quarter of 2008, we continued our restructuring initiatives to improveboth financial results and the long-term value of the business. As a result ofthese actions, we recorded restructuring charges for workforce reductions of$0.3 million in the third quarter of 2008 as compared to $0.2 million in thethird quarter of 2007. The restructuring charges incurred in the third quarterof 2008 relate primarily to new employee termination costs andare expected to be substantially paid by May 31, 2009. Additional informationregarding restructuring charges and the related liability can be found in Note3 to the unaudited consolidated financial statements located elsewhere in thisdocument.

 

*Interest.*Ourinterest expense decreased as a net result of overall decreases in interestrates on variable interest debt instruments and lower principal balances forthe third quarter of 2008 compared to the third quarter of 2007.  Offsetting this decrease was interestcalculated on a higher accreted balance on our Discount Notes during the thirdquarter of 2008.

 

*Otherexpense, net*.  In the third quarter of 2008, a $0.7 millioncurrency gain on the euro-denominated debt was more than offset by unfavorablebalance sheet remeasurement impacts.  Inthe third quarter of 2007, we recorded a loss on the euro-denominated debt of$0.9 million which was more than offset by favorable balance sheetremeasurement impacts.

 

*Taxes. *For the three monthsended September 30, 2008, we recorded a $0.5 million tax provision on aloss before income taxes of $8.9 million. The unusual relationship of our taxprovision to the pre-tax loss in the third quarter of 2008 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 2008 foreign earningsthat are 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 $6.9 million in the third quarter of2008 to a total of $101.9 million. We will continue to assess the valuationallowances, and, to the extent we determine that such allowances are no longerrequired, these deferred income tax assets will be recognized in thefuture.  The similar unusual relationshipin 2007 is due to the same factors.

 

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**Segment Results**

 

The following 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  September 30,** | ** ** | **Better/(Worse)  than Prior Year** | ** ** | **Three Months  Ended  September 30,** | ** ** | **Better/(Worse)  than Prior Year** | ** ** |
| ** **              | ** ** | **2007**                                         | ** ** | **2008**                                      | ** ** | **$** | ** ** | **%** | ** ** | **2007** | ** ** | **2008** | ** ** | **$** | ** ** | ** %** | ** ** |
| ** **              | ** ** | **(in millions)**                           | ** ** | **(in millions)**                        | ** ** |
| ** **              | ** ** | ** **                                       | ** ** | ** **                                    | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| North America (2)       |       | $                                                | 29.1       |                                          | $          | 22.1 |   | $ | (7.0 | ) | (24 | )% | $ | 11.3 |   | $ | 6.2 |   | (5.1 | ) | (45 | )% |
| Operating EBITDA Margin |       |                                             |       |                                          |       |   |   |   |   | 39 | % | 28 | % | (11 | )% |   |   |
| EAME                    |       | 27.9                                             |       | 28.0                                          |       | 0.1 |   | 0 | % | 9.9 |   | 5.6 |   | (4.3 | ) | (43 | )% |
| Operating EBITDA Margin |       |                                             |       |                                          |       |   |   |   |   | 35 | % | 20 | % | (15 | )% |   |   |
| Latin America           |       | 9.5                                              |       | 10.5                                          |       | 1.0 |   | 11 | % | 2.9 |   | 3.5 |   | 0.6 |   | 21 | % |
| Operating EBITDA Margin |       |                                             |       |                                          |       |   |   |   |   | 31 | % | 33 | % | 3 | % |   |   |
| Asia/Pacific            |       | 6.3                                              |       | 3.9                                           |       | (2.4 | ) | (38 | )% | 2.0 |   | 0.8 |   | (1.1 | ) | (57 | )% |
| Operating EBITDA Margin |       |                                             |       |                                          |       |   |   |   |   | 32 | % | 22 | % | (10 | )% |   |   |
|                         |            |                                                  |            |                                               |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

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(1)          “Operating EBITDA” as used with respect to ouroperating segments is a measure upon which we assess the financial performanceof these segments. Operating EBITDA excludes interest expense, income taxexpense and depreciation and amortization, as well as items such asrestructuring expenses, certain significant charges related to new productdevelopment and launch costs, certain litigation costs, costs related to thetransition to a new exclusive distributor in the United States and certain othernon-cash items. Our definition of Operating EBITDA largely mirrors thedefinition of Bank EBITDA under our Senior Credit Facility.  That definition changed in the May 2007amendment of those credit facilities, and that change is reflectedprospectively in our computation of Operating EBITDA for the 2007 period.  See Note 2 to the unaudited consolidatedfinancial statements for a description of Operating EBITDA and a reconciliationof Operating EBITDA to income (loss) before income taxes. Operating EBITDAmargin represents Operating EBITDA as a percentage of net sales.

 

(2)          North America segmentresults exclude immaterial sales and $2.5 million of negative Operating EBITDArelated to a new product launch which management evaluates separately from thisgeographical segment for the three month period ended September 30, 2008.

 

***North America***

 

*Net sales.*  In North America, the net sales decline wasdriven by the planned impact of our transition from our distributor model to adirect sales distribution model.  Shipmentsto our distributor were significantly reduced during the month of July asthe distributor continued to ship product to the trade and consume theremaining product on hand.  Alsocontributing to the decline was decreased sales volume in the club, foodservice, and ingredient channels along with a decrease in consumer consumptionin the retail, club and food service channels. These negative variances were partially offset by decreased tradespending in the food service and retail channels.

 

*OperatingEBITDA*. The decrease in Operating EBITDA and OperatingEBITDA margin was primarily related to the margin impact of lower netsales.  These unfavorable impacts werepartially offset by lower overall brand support and lower sales and marketingadministration costs.

 

***EAME***

 

*Net sales*.In the EAME region, net sales were stable during the third quarter of 2008compared to the same period of 2007 as net sales in the Middle East and the UKalong with the positive currency translation impact were offset by weak performancein France. Strong net sales performance in the Middle East was related to ourintentional increases in distributor inventory levels in preparation for ourchange in manufacturing locations.  Inthe first quarter of 2007, as a result of diversion

 

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of product into the retailchannel, we discontinued sales to certain UK distributors in an effort to stopthe diversion.  In the third quarter of2008, sales in the UK continued to perform at levels realized in the secondhalf of 2007 after stopping the diversion of product.  In addition, we implemented a price increasein the UK.  Continued softness in consumerdemand as well as increased trade spending reduced sales in France.  The devaluation of the U.S. dollar and theresulting currency translation effect on our financial statements accounted forapproximately $1.2 million of the net sales increase in the EAME region.

 

*OperatingEBITDA.* Operating EBITDA and Operating EBITDA margindecreases are mainly due to unfavorable currency impacts related to cost ofgoods sold, one-time start up costs related to our new manufacturing operationsin the Czech Republic, and unfavorable impacts of the remeasurement of theSwiss entity’s balance sheet.  Thesenegative impacts were slightly offset by reduced general administrative costsdue mainly to savings from lower performance-based incentives, restructuringactions and facility related changes in France.

 

Our CzechPak facility commenced production in August 2008 and willmanufacture *Canderel*® products for the EAMEregion.  We anticipate that the CzechPakfacility will reduce our manufacturing costs, allow us to introduce newproducts more rapidly, test new products on a more limited basis and improveboth operational efficiency and working capital by reducing lead times and theamount of inventory held by our distributors in the region.

 

Until thestart-up of the CzechPak facility, most of our *Canderel*®products for the EAME region had been manufactured by Krüger GmbH &Co. KG under a long-term contract manufacturing agreement.  We intend to shift a portion of theproduction currently handled by Krüger to the CzechPak facility.  On October 8, 2008, we entered into anagreement with Krüger that amends the terms of the manufacturingagreement.  Under the terms of theamended agreement, certain products will no longer be manufactured by Krüger andwe will be able to move the equipment currently used by Krüger to manufactureand package these products to our CzechPak facility.  The parties extended the expiration of themanufacturing agreement from 2010 to 2012 and we agreed to meet certain minimumpurchase commitments for each of Krueger’s facilities. Commencing January 2009the aggregate amount of such commitments is €29.2 million.  In addition, we agreed to acquire any rawmaterials, packaging and work in progress for the discontinued products and toincrease conversion fees per unit for the products that Krüger will continue toproduce.  We also agreed to providecredit enhancements in the event that Krüger is unable to obtain a certainlevel of credit insurance for its production commitments.

 

***Latin America***

 

*Net sales.* Improved sales in the third quarter of 2008relates primarily to a price increase implemented in Argentina.  In addition, Peru sales volume increased dueto strong performance from a new distributor and its effective execution ofpromotions.  Venezuela sales performancealso improved as a result of strong promotional activity.  These positive results were partially offsetby declines in Mexico sales volume.

 

*OperatingEBITDA.*Operating EBITDA and Operating EBITDA marginincreased due to the increase in net sales despite higher raw material costsacross the region and increased brand support in Mexico.

 

***Asia/Pacific***

 

*Net sales.*Netsales in the Asia/Pacific region decreased due to lower shipments to ourdistributor in Australia related to a change in manufacturing locations.  In preparation for the transition, wedecreased inventory levels at our distributor. We have commenced manufacturing operations at a local facility late inthe third quarter.  Overall, markettrends in this region have remained stable.

 

*OperatingEBITDA.*Operating EBITDA and Operating EBITDA margindecreased primarily due to the decreased sales coupled with higher cost ofgoods sold related to unfavorable currency variances.

 

**Corporate Expenses**

 

Corporate expenses decreased from $5.2 million in the third quarter of2007 to $2.7 million in the third quarter of 2008, primarily due to lowerperformance-based incentives, lower consulting fees and lower legal costs.

 

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***Nine Months Ended September 30,2008 Compared to Nine Months Ended September 30, 2007***

 

The following table setsforth certain of our company’s financial data for the nine month periods ended September 30,2007 and 2008 (totals may not foot due to rounding).

 
| ** **                        | ** ** | **Nine Months Ended  September 30,** | ** ** | **Nine Months Ended  September 30,** | ** ** |
|-----------------------------------|------------|-----------------------------------------------------|------------|-----------------------------------------------------|------------|
| ** **                        | ** ** | ** **                                          | ** ** | ** **                                          | ** ** | ** ** | ** ** | ** ** | ** ** | **Better/(Worse)** | ** ** |
| ** **                        | ** ** | **2007**                                            | ** ** | **2008**                                            | ** ** | **2007** | ** ** | **2008** | ** ** | **than Prior Year** | ** ** |
| ** **                        | ** ** | **(in millions)**                              | ** ** | **As % of Net Sales**           | ** ** | **Dollars** | ** ** | **%** | ** ** |
| Net sales                         |       | $                                                   | 213.2      |                                                | $          | 200.5 |   | 100 | % | 100 | % | $ | (12.8 | ) | (6 | )% |
| Cost of sales                     |       | 94.1                                                |       | 97.5                                                |       | 44 | % | 49 | % | (3.3 | ) | (4 | )% |
| Gross profit                      |       | 119.1                                               |       | 103.0                                               |       | 56 | % | 51 | % | (16.1 | ) | (14 | )% |
| Operating expenses:               |       |                                                |       |                                                |       |   |   |   |   |   |   |   |   |
| Marketing and selling expenses    |       | 48.2                                                |       | 48.3                                                |       | 23 | % | 24 | % | (0.1 | ) | (0 | )% |
| Administration expenses           |       | 32.5                                                |       | 23.0                                                |       | 15 | % | 11 | % | 9.5 |   | 29 | % |
| Research and development expenses |       | 1.1                                                 |       | 2.1                                                 |       | 1 | % | 1 | % | (1.0 | ) | (94 | )% |
| Amortization of intangible assets |       | 16.7                                                |       | 15.8                                                |       | 8 | % | 8 | % | 0.9 |   | 6 | % |
| Restructuring expenses            |       | 1.1                                                 |       | 1.4                                                 |       | 1 | % | 1 | % | (0.3 | ) | (29 | )% |
| Total operating expenses          |       | 99.6                                                |       | 90.6                                                |       | 47 | % | 45 | % | 9.0 |   | 9 | % |
| Income from operations            |       | 19.6                                                |       | 12.4                                                |       | 9 | % | 6 | % | (7.1 | ) | (36 | )% |
| Other expenses (income):          |       |                                                |       |                                                |       |   |   |   |   |   |   |   |   |
| Interest income                   |       | (0.6                                                | )          | (0.5                                                | )          | (0 | )% | (0 | )% | (0.1 | ) | (14 | )% |
| Interest expense                  |       | 44.9                                                |       | 41.0                                                |       | 21 | % | 20 | % | 3.9 |   | 9 | % |
| Costs of refinancing              |       | 5.8                                                 |       | —                                              |       | 3 | % | — | % | 5.8 |   | 100 | % |
| Other expense (income), net       |       | (30.0                                               | )          | 2.5                                                 |       | (14 | )% | 1 | % | (32.5 | ) | (108 | )% |
| Total other expense (income)      |       | (20.1                                               | )          | 43.0                                                |       | 9 | % | 21 | % | (22.9 | ) | (114 | )% |
| Income (loss) before income taxes |       | (0.5                                                | )          | (30.5                                               | )          | 0 | % | (15 | )% | (30.0 | ) | (5,647 | )% |
| Provision for income taxes        |       | 5.0                                                 |       | 3.6                                                 |       | 2 | % | 2 | % | 1.4 |   | 28 | % |
| Net income (loss)                 |       | $                                                   | (5.7       | )                                                   | $          | (34.1 | ) | (3 | )% | (17 | )% | $ | (28.5 | ) | (512 | )% |

 

**Consolidated Results**

 

*Net sales.*Overall,net sales declined in the nine months ended September 30, 2008 compared to thenine months ended September 30, 2007. The decline was related to lower sales in North America and Asia/Pacificoffset by higher sales in EAME and Latin America.  In North America, net sales declined as aresult of a decline in consumer consumption and a decline in inventory levelsmaintained by our distributor in the food service channel.  In the retail channel, the planned transitionfrom a distributor model to a direct sales model negatively impacted sales asdistributor inventory levels were significantly reduced and we commenced directshipments to our customers.  Thesenegative impacts on net sales were slightly offset by decreased trade marketingspending.  In Asia/Pacific, we had highnet sales in the first quarter of 2007 related to shipments to new distributorsto establish beginning inventory levels which did not repeat in 2008.  This impact was exasperated during 2008 as wetransitioned to a local manufacturer and reduced distributor inventory levelsfurther in the region to shorten lead times. Offsetting these declines were improved performance in the EAME andLatin America regions along with the consolidated sales impact of thedevaluation of the U.S. dollar and the resulting currency translation impactwhich accounted for approximately $8.3 million of incremental net sales.  In the EAME region, UK sales continued themomentum achieved in the second half of 2007 as the impact of the late 2006diversion has subsided.  Additionally,strong market trends and a third quarter price increase have contributed to thepositive performance in the UK.  In LatinAmerica, we implemented a price increase in Argentina to offset rising costsand a new distributor in Peru has maintained strong performance.

 

*Cost of sales.* Costof sales increased, despite the slight decline in sales, due to sales increasesin lower margin products, such as contract manufacturing, one time costsrelated to the start up of new manufacturing operations, the impact ofpurchasing product in euro for sales in countries with weaker currencies andunfavorable raw material purchase prices.

 

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Overall, gross profit as a percentage of net sales declined from 56%for the nine months ended September 30, 2007 to 51% for the nine monthsended September 30, 2008 due to the increases in costs discussed above,and to a lesser extent, increased trade marketing in France.

 

*Operating expenses.*Marketingand selling expenses increased slightly due to higher brand support in LatinAmerica, unfavorable currency impacts, and increased costs related to our newproduct launch. These unfavorable impacts were partially offset by lower brandsupport and commissions in North America, lower brand support in Asia/Pacific,as well as lower performance-based incentives in all regions.  Administration expenses decreased mainly dueto lower litigation costs and lower performance-based incentives.

 

During the nine months ended September 30, 2008, 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 $1.4 million in the first nine months of2008 as compared to $1.1 million in the first nine months of 2007. Therestructuring charges incurred in 2008 relate primarily to new employeetermination costs and are expected to be substantially paid by May 31,2009. 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.*Ourinterest expense decreased as a net result of lower interest bearing loansunder our Amended and Restated Credit Agreement compared to the higher interestbearing loans under our Second Lien Credit Agreement in 2007, as well asoverall decreases in interest rates on variable interest debt instruments.  Our 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, werefinanced and therefore terminated the Second Lien Credit Agreement asdescribed below.  Offsetting thisdecrease was interest calculated on a higher accreted balance on our DiscountNotes during the nine months ended September 30, 2008.

 

*Costs of refinancing. *Costs of refinancingfor the nine months ended September 30, 2007 related to the extinguishmentof debt under 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.

 

*Otherexpense, net*. In the second quarter of 2007, weexperienced an unusually high level of other income as compared to the moretypical other expenses realized in 2008. The other income in the second quarter of 2007 was primarily the resultof a one-time cash payment received pursuant to an agreement with a thirdparty. In the first nine months of 2008, we recorded a $0.3 million currency loss on the euro-denominated debt as well as anunfavorable balance sheet remeasurement impact. In the first nine months of 2007, we recorded a loss of $1.4 million onthe euro-denominated debt which was partially offset by a favorable balancesheet remeasurement impact.

 

*Taxes.*For the nine monthsended September 30, 2008, we recorded a $3.6 million tax provision on aloss before income taxes of $30.5 million. The unusual relationship of our taxprovision to the pre-tax loss in the nine months ended September 30, 2008relates to a combination of factors. These factors include increased tax losscarryforwards, primarily generated in the United States, for which we have notrecorded a tax benefit, as well as **provisions for future tax costs which may beincurred upon the potential repatriation of certain 2008 foreign earningsthat are 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 $14.4 million in the nine months endedSeptember 30, 2008 to a total of $101.9 million. We will continue to assess thevaluation allowances, and, to the extent we determine that such allowances areno longer required, these deferred income tax assets will be recognized in thefuture.  The similar unusual relationshipin 2007 is due to the same factors.

 

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**Segment Results**

 

The following 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)**            | ** ** |
|-------------------------|------------|-------------------------------------------------|------------|-----------------------------------------------|------------|
| ** **              | ** ** | **Nine Months  Ended  September 30,** | ** ** | **Better/(Worse)  than Prior Year** | ** ** | **Nine Months  Ended  September 30,** | ** ** | **Better/(Worse)  than Prior Year** | ** ** |
| ** **              | ** ** | **2007**                                        | ** ** | **2008**                                      | ** ** | **$** | ** ** | **%** | ** ** | **2007** | ** ** | **2008** | ** ** | **$** | ** ** | **%** | ** ** |
| ** **              | ** ** | **(in millions)**                          | ** ** | **(in millions)**                        | ** ** |
| ** **              | ** ** | ** **                                      | ** ** | ** **                                    | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| North America (2)       |       | $                                               | 85.7       |                                          | $          | 69.1 |   | (16.6) |   | (19 | )% | $ | 31.6 |   | $ | 21.2 |   | (10.5) |   | (33 | )% |
| Operating EBITDA Margin |       |                                            |       |                                          |       |   |   |   |   | 37 | % | 31 | % | (6 | )% |   |   |
| EAME                    |       | 84.6                                            |       | 90.5                                          |       | 5.9 |   | 7 | % | 25.6 |   | 22.1 |   | (3.4 | ) | (13 | )% |
| Operating EBITDA Margin |       |                                            |       |                                          |       |   |   |   |   | 30 | % | 25 | % | (6 | )% |   |   |
| Latin America           |       | 22.9                                            |       | 27.2                                          |       | 4.3 |   | 19 | % | 5.9 |   | 6.7 |   | 0.8 |   | 13 | % |
| Operating EBITDA Margin |       |                                            |       |                                          |       |   |   |   |   | 26 | % | 25 | % | (1 | )% |   |   |
| Asia/Pacific            |       | 20.2                                            |       | 13.7                                          |       | (6.5 | ) | (32 | )% | 7.4 |   | 3.2 |   | (4.2 | ) | (57 | )% |
| Operating EBITDA Margin |       |                                            |       |                                          |       |   |   |   |   | 37 | % | 24 | % | (13 | )% |   |   |
|                         |            |                                                 |            |                                               |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

----

| (1)    |   | “Operating EBITDA” as  used with respect to our operating segments is a measure upon which we assess  the financial performance of these segments. Operating EBITDA excludes  interest expense, income tax expense and depreciation and amortization, as  well as items such as restructuring expenses, certain significant charges related  to new product development and launch costs, certain litigation costs, costs  related to the transition to a new exclusive distributor in the United States  and certain other non-cash items. Our definition of Operating EBITDA largely  mirrors the definition of Bank EBITDA under our Senior Credit Facility. That  definition changed in the May 2007 amendment of those credit facilities,  and that change is reflected prospectively in our computation of Operating  EBITDA for the 2007 period. See Note 2 to the unaudited consolidated  financial statements for a description of Operating EBITDA and a  reconciliation of Operating EBITDA to income (loss) before income taxes.  Operating EBITDA margin represents Operating EBITDA as a percentage of net  sales. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| (2)    |   | North America segment results exclude immaterial  sales and $5.5 million of negative Operating EBITDA related to a new product  launch which management evaluates separately from this geographical segment  for the nine month period ended September 30, 2008.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |

 

***North America***

 

*Net sales.*  In North America, the net sales decline wasdriven by the planned impact of our transition from our distributor to a directsales model for the retail channel.  Inaddition, our distributor inventory levels were higher than usual at December 31,2007 in the food service channel which resulted in a decrease in shipmentsduring the first nine months of 2008 compared to the first nine months of2007.  We also experienced decreasedconsumer consumption in the food service and retail channels slightly offset bydecreased trade marketing spending.  Inthe club channel, though the timing and extent of our promotional activitiesvaried when comparing the first nine months of 2007 to the first nine months of2008, we have experienced decreases in consumption and sales volume.

 

OnJanuary 29, 2008, we delivered notice to ACH Food Companies, Inc.(“ACH”) that the distribution agreement between Merisant US, Inc. and ACHwould terminate on July 27, 2008 with respect only to the retail grocerychannel.  We have partially terminatedthe distribution agreement so that we can pursue a direct distribution modelfor retail customers in the United States. We will handle order processing, warehousing and trade marketinginternally and through a third-party broker and logistics providers for retailgrocery and drug customers in the United States which we anticipate will reduceour operating costs, improve the efficiency of our inventory management anddistribution capabilities, and provide more transparency in customer relations.  In July 2008, we paid the distributor$0.3 million to facilitate this and other changes in the distributionagreement.  This expense is included inoperating expenses for the nine months ended September 30, 2008.

 

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*OperatingEBITDA.*The decrease in Operating EBITDA and OperatingEBITDA margin were primarily related to the margin impact of lower netsales.  This unfavorable impact waspartially offset by lower overall brand support and commissions.

 

***EAME***

 

*Net sales.*Inthe EAME region, the increase in net sales was driven primarily by the UK, theMiddle East and Belgium along with the positive currency translation impact. Inthe first quarter of 2007, as a result of diversion of product into the retailchannel, we discontinued sales to certain UK distributors in an effort to stopthe diversion.  In the first half of2008, sales in the UK continued to perform at levels realized in the secondhalf of 2007 after stopping the diversion of product and we have experienced astrong market demand.  Strong net salesperformance in the Middle East was related to our intentional increases indistributor inventory levels in preparation for our change in manufacturinglocations.  In Belgium, our distributorcarried higher inventories than expected at December 31, 2006, negativelyimpacting sales in the first quarter of 2007 and thus reflecting a favorableperiod to period comparison.  Continuedsoftness in consumer demand as well as increased trade spending reduced netsales in France. The devaluation of the U.S. dollar compared to the same periodin 2007 and the resulting currency translation effect on our financialstatements accounted for approximately $6.8 million of the net sales increasein the EAME region.

 

*OperatingEBITDA.* Operating EBITDA and Operating EBITDA margindecreased despite the increase in net sales due to unfavorable currency impactson the cost of goods sold, unfavorable balance sheet remeasurements andone-time costs related to the start up of new manufacturing operations in theCzech Republic that are not excluded from Bank EBITDA.

 

***Latin America***

 

*Net sales.* Net sales improvement relates primarily to aprice increase implemented in Argentina along with continued strong performancefrom our distributor in Peru which distributes both locally and throughout theregion.  In addition, net sales in Mexicofor the nine months ended September 30, 2008 improved compared to the sameperiod in 2007.  However, unusually lowsales were reported in Mexico in the first half of 2007 as we converted to adirect distribution model for the grocery channel.  Overall, trends in Mexico indicate a decreasein consumer demand for our product as our competitor, *Splenda*®, experiences positive resultsfrom its heavy consumer and trade promotion spending.

 

*OperatingEBITDA.*Operating EBITDA and Operating EBITDA marginincreased due to the increase in net sales despite higher brand support inMexico and the overall impact of increased cost of goods sold.

 

***Asia/Pacific***

 

*Net sales.*Netsales in the Asia/Pacific region decreased primarily due to unusually highsales in the first quarter of 2007 related to shipments to new distributors inAustralia and India to establish beginning inventory levels which did notrepeat in 2008.  Net sales were alsoimpacted by a decrease in inventory levels at our Asia/Pacific distributors in2008 related to the start-up of our local production as we shorten lead times.

 

*OperatingEBITDA.*Operating EBITDA and Operating EBITDA margindecreased primarily due to the decreased sales coupled with higher cost ofgoods sold and lower brand support against significantly lower sales.

 

**Corporate Expenses**

 

Corporateexpenses decreased from $19.3 million in the nine months ended September 30,2007 to $14.3 million in the nine months ended September 30, 2008,primarily due to lower litigation costs relating to our lawsuit against McNeilincurred in 2007 and lower performance-based incentives.

 

**Liquidity and Capital Resources**

 

Our liquidityneeds are primarily met through internally generated cash flow supplemented in2007 by a one-time payment received pursuant to an agreement with a thirdparty. As needed, Merisant also borrows money under the revolving creditfacility of the Amended and Restated Credit Agreement.  Our primary uses of cash are cost of sales,operating expenses, debt service, and capital expenditures and, in 2008, theacquisition of Nativia Guarani. Foreign subsidiaries generated approximately59% of consolidated net sales during the year ended December 31, 2007, andour U.S. operations have relied upon the repatriation of cash from our foreignsubsidiaries to satisfy many of our domestic cash requirements. Historically,our U.S. operations had received a vast majority of funds from foreignsubsidiaries through our Swiss subsidiary 

 

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in the form of paymentspursuant to a promissory 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 mature in 2011. Merisant may borrow up to $200 millionfrom our Swiss subsidiary during the term of the revolver note, and we expectto repatriate cash to the United States through borrowings under this revolvernote. The principal balance relating to this revolving note as of September 30,2008 was $102 million.

 

We had $11.8 million of cash and cash equivalents as of September 30,2008 compared to $51.1 million of cash and cash equivalents at December 31,2007.  The decrease is related to debtand interest payments along with 2008 operating cash expenditures that includedthe purchase of Nativia Guarani and higher than usual capitalexpenditures.  Merisant was were alsorequired to prepay $15.2 million of the principal amount of term loansoutstanding under its Amended and Restated Credit Agreement five business daysafter filing its 2007 Annual Report with excess cash as required and calculatedunder the terms of our Amended and Restated Credit Agreement.  This prepayment was made on April 4,2008 and decreased our cash balance accordingly.  The decrease was offset with $12.0 million inborrowings from our revolving credit facility. Our net cash outflows in the fourth quarter of 2008 are expected to beless than the average run rate of the first three quarters of 2008 as severalone-time outflows are not expected to repeat. These items include a three to six month inventory build in the EAME,the purchase of the Nativia Guarani business, and the prepayment of debtprincipal.

 

Accountsreceivable levels, time to payment and inventory levels impact the amount ofinternally generated cash flow. The following table shows information withrespect to accounts receivable and inventory as of December 31, 2007 and September 30,2008.  Accounts receivable decreased inthe nine months ended September 30, 2008 primarily due to higher sales inthe fourth quarter of 2007 compared to the third quarter of 2008.  Inventory levels increased in the nine monthsended September 30, 2008 as compared to December 31, 2007, primarilydue to planned increases in finished goods quantities on hand in our foreignsubsidiaries related to supply chain synchronization efforts to decrease leadtimes and to prepare for the commencement of operations at our manufacturingplant in the Czech Republic.

 
| ** **                        | ** ** | **December 31, 2007** | ** ** | **September 30, 2008** | ** ** |
|-----------------------------------|------------|---------------------------------|------------|----------------------------------|------------|
|                              |       |                            |       |                             |       |
| Accounts receivable (in millions) |       | $                               | 74.4       |                             | $          | 62.4 |   |
| Days sales outstanding            |       | 92                              |       | 82                               |       |
| Inventory (in millions)           |       | $                               | 13.5       |                             | $          | 25.4 |   |
| Days sales in inventory           |       | 38                              |       | 66                               |       |

 

***Nine Months Ended September 30, 2008Compared to Nine Months Ended September 30, 2007***

 

For the ninemonths ended September 30, 2008, net cash used by operating activities was$15.6 million compared to cash provided of $26.7 million for the nine monthsended September 30, 2007. Operating cash flows decreased $42.3 millionversus the nine months ended September 30, 2007, due to a decrease in thecontribution from working capital of $8.4 million and decreased net incomeafter adjusting for non-cash items of $33.9 million primarily due to the gainrelated to a one-time payment received in 2007 pursuant to an agreement with athird party.

 

Net cash usedin investing activities totaled $12.1 million for the nine months ended September 30,2008 compared to $2.0 million for the nine months ended September 30, 2007due to increased spending on capital expenditures, primarily related to our newmanufacturing operations in the Czech Republic and a business acquisition in2008.

 

For the ninemonths ended September 30, 2008, financing activities used $11.7 millionin cash as compared to using $8.6 million in cash for the nine months ended September 30,2007.  For the nine months ended September 30,2008, Merisant used cash to pay its scheduled and additional required principalpayments under the Amended and Restated Credit Agreement and borrowed $12.0million under our revolving credit facility.  For the nine months ended September 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.  Borrowings under Merisant’s revolving creditfacility were $0 at December 31, 2007, $12.0 million at September 30,2008 and $28.0 million at November 13, 2008.

 

***Capital Expenditures***

 

Capitalexpenditures in 2008 are expected to be in the range of $15 million to$17 million.  The majority of the2008 capital expenditures related to the establishment of our new manufacturingoperations in the Czech Republic.  Webelieve that internally generated cash flow, together with borrowing availableunder Merisant’s Amended and Restated Credit 

 

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Agreement, will be sufficientto fund capital expenditures during the remainder of 2008. Merisant is seekingto refinance its existing Amended and Restated Credit Agreement prior to thescheduled maturity of its revolving credit facility in January 2009.

 

***Financing***

 

On November 12,2003, we issued $136.0 million stated aggregate principal amount at maturity ofour Discount Notes and on July 11, 2003, Merisant issued $225.0 millionprincipal amount of the Notes and refinanced our credit facility with theSenior Credit Agreement. A portion of the proceeds of the Discount Notes, theNotes and the Senior Credit Agreement were used to pay a dividend to ourstockholders.

 

TheDiscount Notes are unsecured obligations and are subordinated in right ofpayment to all of our existing and future senior indebtedness. The DiscountNotes had an initial accreted value of principal of $0.551 per $1 fully accretedstated principal amount at maturity. The accreted value of principal of eachDiscount Note increases from the date of issuance until November 15, 2008at the rate equal to the interest rate then in effect. The stated rate ofinterest for the Discount Notes is 12.25% per annum. Interest is payablesemiannually in arrears on May 15th and November 15th, commencing on May 15,2009.

 

TheNotes are unsecured obligations and are subordinated in right of payment to allexisting and future senior indebtedness of Merisant. The Notes mature on July 15,2013. The stated rate of interest for the Notes is 91/2% per annum. Interest is payable semi-annually inarrears on January 15th and July 15th.

 

The Senior Credit Agreement, as of September 30, 2008, provides foraggregate commitments of up to $310.0 million, consisting of a revolving loanfacility of $35.0 million, of which a portion is available at Merisant’s optionin euro or dollars or in the form of letters of credit denominated in dollarsor euro, as well as term loan facilities of $275.0 million, consisting of aeuro Term A loan of an original amount of $50.0 million, and a Term B loan ofan original amount of $225.0 million, denominated in dollars. The euro Term Aloan and the revolving loan facility mature in January 2009 while the TermB loan matures in 2010. The Senior Credit Agreement is guaranteed by ourcompany and each of Merisant’s domestic subsidiaries. The Senior CreditAgreement and the guarantees of the guarantors are secured by a first-prioritysecurity interest in substantially all of Merisant’s assets and the assets ofthe guarantors.

 

On June 23, 2006, Merisant entered into the Second Lien CreditAgreement, the borrowings under which were substantially used to pay downamounts outstanding under the Senior Credit Agreement.  The Second Lien Credit Agreement increasedthe aggregate principal amount of our indebtedness by $7.2 million andincreased our interest expense.  Merisant’sloans outstanding under the Senior Credit Agreement had a weighted averageinterest rate of approximately 9.0% per annum prior to the closing of theSecond Lien Credit Agreement.  Merisant’sborrowings under the Senior Credit Agreement and Second Lien Credit Agreementhad a weighted 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 “Amendedand Restated 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 closingof the above transaction and execution of the related amendment, the interestrate on 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 Agreement, 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 September 30, 2008, Merisant had$193.4 million in borrowings outstanding under the Amended and Restated CreditAgreement and $12.0 million in borrowings under our revolving credit line witheffective interest rates of 7.43% and 5.97%, respectively.  As a result of the $15.2 million prepaymentof term loans under the Amended and Restated Credit Agreement and a reductionof the LIBOR, we anticipate that our cash interest expense will decrease byapproximately $4.0 million for the year ending 

 

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December 31, 2008 comparedto the year ended December 31, 2007. The effective interest rate under the Amended and Restated CreditAgreement is significantly below current market conditions for companies withcomparable credit risk.  As such, if werefinance or restructure our credit facility in the current credit environment,we expect to be subject to substantially higher interest rates.

 

**Bank EBITDA**. The Amended and Restated Credit Agreement requires Merisant to maintaincompliance with a consolidated first-lien leverage ratio covenant, aconsolidated leverage ratio covenant and a consolidated interest coverage ratiocovenant. These ratios are measured on the basis of Bank EBITDA for the fourfiscal quarters ending at least 45 days prior to the payment date.  Bank EBITDA is discussed here because it isthe measure upon which the covenants contained in the Amended and Restated CreditAgreement are measured.  However, BankEBITDA is not a measure of liquidity under GAAP. Accordingly, while providinguseful information with respect to assessing compliance with covenants underour primary debt obligations, this measure should not be considered inisolation from, or as a substitute for, consolidated statement of cash flowdata prepared in accordance with GAAP as an indication of liquidity. Inaddition, the Bank EBITDA measure presented may differ from, and may not becomparable to, similarly titled measures used by other companies.

 

We are engagedin discussions with certain of our secured lenders and debt security holders aswell as potential financing sources with regard to refinancing or restructuringall or a portion of our debt obligations. However, there can be no assurancethat we will be able to refinance, replace or amend our outstanding debtobligations on terms favorable to us, or at all, particularly given currentfinancial market conditions.

 

Bank EBITDA asdefined under the Amended and Restated Credit Agreement excludes interestexpense, income tax and gross receipts tax expense, depreciation andamortization as well as certain other expenses and non-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;

 

·                  anycash expenses incurred in connection with any waiver of a Default or Event ofDefault and any amendment to the Amended and Restated Credit Agreement;

 

·                  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 priorto January 1, 2006, $14,600,000, or (B) if such period begins on orafter January 1, 2006, (x) $11,000,000 with respect to any suchnon-recurring cash losses or expenses arising from the implementation ofMerisant’s plan known as “Project Arrow” and related restructuring, (y) $4,000,000with respect to any such non-recurring cash losses or expenses arising from thetransition from Heinz to ACH as Merisant’s exclusive distributor in the UnitedStates, and (z) any cash expenses incurred in connection with (i) anywaiver of a default or event of default and any amendment to the Senior CreditAgreement 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 andclosing of the Second Lien Credit Agreement and any waiver of a default orevent of default and any amendment to the Second Lien Credit Agreementincluding the fees and expenses of any attorneys and financial advisersretained by the administrative agent with respect to any such waiver oramendment;

 

·                  expensesincurred by Merisant or any subsidiary prior to January 1, 2007 inconnection with the development and commercialization of the all-natural,zero-calorie sweetener to be marketed under the *SweetSimplicity®* trademark in an amount not to exceed in the aggregate$3,000,000 and prior to January 1, 2009 in an amount not to exceed in theaggregate $15,000,000; and

 

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·                  expensesincurred between January 1, 2007 and December 31, 2007 in connectionwith our litigation against McNeil and McNeil-PPC, Inc. in an amount notto exceed $4,000,000.

 

Bank EBITDAfor the nine months ended September 30, 2008 under the Amended and RestatedCredit Agreement was $39.0 million as compared to $51.4 million for the ninemonths ended September 30, 2007, adjusted to reflect litigation costs and *Sweet Simplicity®* product launch costs on a comparable basiswith the current definition of Bank EBITDA. Merisant was in compliance with the covenants under the Amended andRestricted Credit Agreement at September 30, 2008.

 

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The followingtable illustrates the reconciliation of Bank EBITDA to cash flow from operatingactivities, which management believes is the most nearly equivalent GAAPmeasure:

 
| ** **                                                                   | ** ** | **Nine Months  Ended  September 30, 2008** | ** ** |
|------------------------------------------------------------------------------|------------|-----------------------------------------------------------|------------|
| ** **                                                                   | ** ** | **(in millions)**                                    | ** ** |
| Net cash used by operating activities                                        |       | $                                                         | (15.6      | ) |
| Provision for income taxes, net of deferred  income tax provision            |       | 0.9                                                       |       |
| Interest expense, net of non-cash interest  expense                          |       | 26.2                                                      |       |
| Restructuring expenses (a)                                                   |       | 3.2                                                       |       |
| Other non-cash items                                                         |       | 6.1                                                       |       |
| Equity in (income) loss of affiliates                                        |       | 0.1                                                       |       |
| Net change in operating assets and  liabilities, net of business acquisition |       | 18.1                                                      |       |
| Bank EBITDA                                                                  |       | $                                                         | 39.0       |   |

 

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(a)                                  Thecharges principally relate to planned employee termination costs that have been announced in the periodpresented and specified project implementation costs.

 

***Forward Looking Statements***

 

Certaininformation included or incorporated in this report may be deemed to be “forward-lookingstatements” within the meaning of Section 27A of the Securities Act of 1933and Section 21E of the Securities Exchange Act of 1934. All statements,other than statements of historical facts, included or incorporated in thisreport are forward-looking statements. In particular, statements made under theheading “Management’s Discussion and Analysis of Financial Condition andResults of Operations,” relating to overall volume trends, pricing trends andindustry forces, anticipated results, expectations for funding capitalexpenditures and operations and increased market share, refinancing efforts andthe availability of financing;  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.

 

Thesestatements are based on assumptions and assessments made by management in lightof their experience and their perception of historical trends, currentconditions, expected future developments and other factors they believe to beappropriate. Any forward-looking statements are not guarantees of futureperformance and are subject to risks and uncertainties that could cause actualresults, developments and business decisions to differ materially from thosecontemplated by such forward-looking statements. We disclaim any duty to updateany forward-looking statements, except as required by law. Some of the factorsthat may cause actual results, developments and business decisions to differmaterially from those contemplated by such forward-looking statements includethe following:  the availability offinancing, changes in consumer preferences and nutritional and health-relatedconcerns; increased competition; changes in the terms on which we may obtainaspartame; damaged consumer confidence in our products as a result ofhealth-related allegations; product liability claims; fluctuations in exchangerates and other currency risks; disruptions in our business as a result of strikesor work stoppages; changes in our relationship with our largest distributor;and changes in economic and political conditions in the countries in which wemarket and produce our products.

 

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

 

***ForeignOperations***

 

Withapproximately 60% and 66% of consolidated total net sales generated bysubsidiaries outside of the United States in the nine months ended September 30,2007 and September 30, 2008, respectively, our ability to obtain funds necessaryto meet our domestic obligations is subject to applicable laws, foreign taxesand intercompany pricing laws, including those relating to the flow of fundsbetween our foreign affiliates pursuant to, for example, purchase agreements,licensing agreements or other arrangements. Historically, our U.S. operations have received a vast majority of fundsfrom foreign affiliates through our Swiss subsidiary in the form of paymentspursuant to a promissory note.  The notewas repaid in full in January 2006. On March 30, 2006, Merisantissued a revolver note to our Swiss subsidiary, which will mature in 2011.Merisant may borrow up to $200 million from our Swiss subsidiary during theterm of the revolver note.  Merisant isrepatriating cash to the United States through borrowings under this revolvernote, which total $102 million as of September 30, 2008. Regulators in theUnited States and other foreign countries where we operate may closely monitorour corporate structure and how it affects intercompany fund transfers.

 

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Inaddition, as of September 30, 2008, foreign affiliates comprisedapproximately 49% of our consolidated total assets. Accordingly, we haveexperienced and will continue to be exposed to foreign exchange risk.

 

***ForeignCurrency and Interest Rate Risks***

 

Inherentin our operations are certain risks related to changes in foreign currencyexchange rates and interest rates. We bear foreign exchange risk because amajority of our financing was obtained in U.S. dollars although a significantportion of revenues are earned in the various currencies of our foreignsubsidiaries’ operations.  Under theAmended and Restated Credit Agreement, a portion of our financing was obtainedin euro.  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 are offset by 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 offsets the increase in the eurodenominated debt obligations (i.e., foreign currency transaction loss) andinterest expense that results from such an exchange rate increase.  Upon maturity of our euro-denominated debt inJanuary 2009, our exposure to fluctuations in currency exchange rates willincrease.

 

Asignificant portion of Merisant’s debt bears interest at a fixed rate.  Interest rate exposure results from Merisant’sfloating rate borrowings. For the nine months ended September 30, 2008, a1.0% per annum increase or decrease in interest rates would have resulted in anincrease or decrease in cash interest costs for Merisant’s variable rate termloans of approximately $2.0 million.  Theinterest rates that our debt is subject to are significantly below currentmarket interest rates for companies with comparable credit risk.  As such, if we refinance or restructure ourdebt under current market conditions we expect to be subject to significantlyhigher interest rates.

 

In the normal course of business, weidentify risks relating to foreign currency exchange rates and interest ratesand mitigate 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 September 30, 2008.

 

***InflationRisk***

 

Weanticipate that inflation will increase our costs and inflation may also reduceconsumption as more consumers reduce their discretionary spending.  In prior periods, we generally have been ableto offset the impact of inflation through a combination of cost-cuttingmeasures and price increases, but as the global economy weakens it will likelybecome increasingly difficult to mitigate the impact of rising costs.

 

**Item 4T.  Controls and Procedures**

 

# *Evaluation of Disclosure Controls and Procedures*

#  

We conducted anevaluation, under the supervision of the Chief Executive Officer and VicePresident, Finance, Controller (Principal Financial Officer), of theeffectiveness as of September 30, 2008 of our disclosure controls andprocedures (as defined in Exchange Act Rule 15d-15(e)). Based on thisevaluation, the Chief Executive Officer and Principal Financial Officerconcluded that, as of September 30, 2008, our disclosure controls andprocedures were effective.

 

***Changesin Internal Control Over Financial Reporting***

 

There havebeen no changes in our internal control over financial reporting during themost recently completed fiscal quarter that have materially affected, or arereasonably likely to materially affect, our internal control over financialreporting.

 

**PART II**—**OTHER INFORMATION**

 

**Item 1.  Legal Proceedings**

 

From time to time, our company isinvolved in litigation concerning its business operations.

 

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Our company is subject to various otherclaims, pending and possible legal actions for product liability and otherdamages, and other matters arising out of the conduct of our business,including tax uncertainties arising from doing business in various European andLatin American jurisdictions. We believe, based on current knowledge andconsultation with counsel, that the outcome of such claims and actions will nothave a material adverse effect on our consolidated financial position orresults of operations.

 

**Item 1A.  Risk Factors**

 

The mostsignificant risk factors applicable to our company are described in Part I,Item 1A “Risk Factors” of our Annual Report on Form 10-K for the yearended December 31, 2007.

 

***We face risks related to the current creditcrisis and global economic slowdown.***

 

We use our operating cashflows and our revolving credit facility to service our debt obligations andoperating activities.  Currentuncertainty in global economic conditions resulting from the recent disruption inworldwide credit markets pose a risk to the overall global economy that couldadversely impact consumer and customer demand for our products, resulting in areduction in our operating cash flows, as well as our ability to manage normalcommercial relationships with our customers, suppliers and creditors. Recentconsumer trends indicate the continuation and possible acceleration of consumerspurchasing store branded products rather than branded, premium products.  If these trends continue, our revenue andoperating cash flows and, in turn, our ability to operate our business andservice our debt obligations could be adversely affected.

 

Moreover, overthe past several months, significant deterioration in the financial conditionof many financial institutions has resulted in severe loss of liquidity, highershort-term borrowing costs, lower borrowing availability in global creditmarkets and more stringent borrowing terms. The global economic slowdown hascaused further tightening of the credit markets, more stringent lendingstandards and terms and higher volatility in interest rates. These factorscould adversely affect the ability of our customers and suppliers to dobusiness with us. We are engaged in discussions with certain of our securedlenders and debt security holders as well as potential financing sources withregard to refinancing or restructuring all or a portion of our debtobligations. However, there can be no assurance that we will be able torefinance, replace or amend our outstanding debt obligations on terms favorableto us, or at all, particularly given current financial market conditions.

 

**Item 6.  Exhibits**

 
| **Exhibit  No.** | ** ** | **Description**                                                                                     |
|------------------|------------|-----------------------------------------------------------------------------------------------------|
| 31.1             |       | Certificate  of Paul Block pursuant to Rule 15d-14 under the Securities Exchange Act  of 1934. |
|             |       |                                                                                                |
| 31.2             |       | Certificate  of Julie Wool 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 Julie Wool pursuant to 18 U.S.C. Section 1350.                                 |

 

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SIGNATURES

 

Pursuant tothe requirements 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: November 13, 2008 |   | By:                     | /s/ Julie Wool |
|                         |   |                    | Julie Wool |
|                         |   |                    | Vice President, Finance, Controller |
|                         |   |                    | (on behalf of the Company and in capacity |
|                         |   |                    | of principal financial officer) |

 

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