##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
 For the Quarterly Period Ended
June 26, 2005
    
    Commission File Number
333-118390
 Pinnacle Foods Group Inc.
 Delaware
State of Incorporation
    
    94-3303521
I.R.S. Employer Identification No.
 6 Executive Campus, Suite 100
Cherry Hill, New Jersey 08002
Principal Executive Offices
 Telephone Number: (856) 969-7100
 Indicate by check mark whether the registrant: (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
 Yes þ No o.
 Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b
- 2 of the Securities Exchange Act of 1934).
 Yes o No þ.
 As of August 9, 2005, there were outstanding 100 shares of common stock, par value $0.01 per
share, of the Registrant.
   1




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TABLE OF CONTENTS
FORM 10-Q
 PageNo.PART I  FINANCIAL INFORMATION
    
    
    3ITEM 1: CONSOLIDATED FINANCIAL INFORMATION
    
    
    3Consolidated Statements of Operations
    
    
    4Consolidated Balance Sheets
    
    
    5Consolidated Statements of Cash Flows
    
    
    6Consolidated Statements of Shareholders Equity
    
    
    7Notes to Consolidated Financial Statements
    
    
    81. Summary of Business Activities
    
    
    82. Interim Financial Statements
    
    
    83. Acquisitions
    
    
    84. Restructuring and Impairment Charges
    
    
    115. Stock Options
    
    
    146. Other Expense (Income), net
    
    
    147. Inventories
    
    
    158. Goodwill and Other Assets
    
    
    159. Debt and Interest Expense
    
    
    1610. Pension and Retirement Plans
    
    
    1911. Financial Instruments
    
    
    2012. Commitments and Contingencies
    
    
    2213. Related Party Transactions
    
    
    2514. Segments
    
    
    2615. Recently Issued Accounting Pronouncements
    
    
    2716. Guarantor and Nonguarantor Statements
    
    
    28ITEM 2: MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
    
    
    37Overview
    
    
    37Results of operations
    
    
    41Liquidity and capital resources
    
    
    46Inflation
    
    
    50Recently Issued Accounting Pronouncements
    
    
    50ITEM 3:QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
    
    
    51ITEM 4:CONTROLS AND PROCEDURES
    
    
    53PART II  OTHER INFORMATION
    
    
    54ITEM 1:LEGAL PROCEEDINGS
    
    
    54ITEM 2:CHANGES IN SECURITIES AND USE OF PROCEEDS
    
    
    57ITEM 3:DEFAULTS UPON SENIOR SECURITIES
    
    
    57ITEM 4:SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
    
    
    57ITEM 5:OTHER INFORMATION
    
    
    57ITEM 6:EXHIBITS AND REPORTS ON FORM 8-K
    
    
    57EX-31.1: CERTIFICATIONEX-31.2: CERTIFICATIONEX-32.1: CERTIFICATIONEX-32.2: CERTIFICATION
  
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PART I  FINANCIAL INFORMATION
 
 ITEM 1: CONSOLIDATED FINANCIAL INFORMATION
 Consolidated financial statements begin on the following page
 3




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PINNACLE FOODS GROUP INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
 SuccessorThree months ended
    
    
    Six months endedJune 26,
    
    
    June 27,
    
    
    June 26,
    
    
    June 27,2005
    
    
    2004
    
    
    2005
    
    
    2004Net sales
    
    $
    306,614
    
    
    $
    284,240
    
    
    $
    614,451
    
    
    $
    433,712Costs and expensesCost of products sold
    
    
    246,220
    
    
    
    238,977
    
    
    
    507,987
    
    
    
    376,699Marketing and selling expenses
    
    
    22,011
    
    
    
    23,505
    
    
    
    52,962
    
    
    
    41,691Administrative expenses
    
    
    10,097
    
    
    
    14,056
    
    
    
    22,466
    
    
    
    24,516Research and development expenses
    
    
    926
    
    
    
    1,067
    
    
    
    1,966
    
    
    
    1,780Other expense (income), net
    
    
    1,498
    
    
    
    986
    
    
    
    4,924
    
    
    
    19,922Total costs and expenses
    
    
    280,752
    
    
    
    278,591
    
    
    
    590,305
    
    
    
    464,608Income (loss) before interest and taxes
    
    
    25,862
    
    
    
    5,649
    
    
    
    24,146
    
    
    
    (30,896
    )Interest expense
    
    
    20,882
    
    
    
    8,306
    
    
    
    35,135
    
    
    
    17,898Interest income
    
    
    167
    
    
    
    123
    
    
    
    223
    
    
    
    176Income (loss) before income taxes
    
    
    5,147
    
    
    
    (2,534
    )
    
    
    (10,766
    )
    
    
    (48,618
    )Provision for income taxes
    
    
    7,321
    
    
    
    6,173
    
    
    
    13,836
    
    
    
    108Net loss
    
    $
    (2,174
    )
    
    $
    (8,707
    )
    
    $
    (24,602
    )
    
    $
    (48,726
    )
 See accompanying Notes to Unaudited Consolidated Financial Statements
 4




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PINNACLE FOODS GROUP INC. AND SUBSIDIARIES
 
 CONSOLIDATED BALANCE SHEETS (unaudited)
 SuccessorJune 26,
    
    
    December 26,2005
    
    
    2004Current assets:Cash and cash equivalents
    
    $
    13,225
    
    
    $
    2,235Accounts receivable, net
    
    
    75,802
    
    
    
    74,365Inventories, net
    
    
    166,365
    
    
    
    205,510Other current assets
    
    
    7,478
    
    
    
    3,991Deferred income taxes
    
    
    22
    
    
    
    22Total current assets
    
    
    262,892
    
    
    
    286,123Plant assets, net
    
    
    215,664
    
    
    
    223,740Tradenames
    
    
    780,544
    
    
    
    780,544Other assets, net
    
    
    49,597
    
    
    
    57,670Goodwill
    
    
    415,112
    
    
    
    416,863Total assets
    
    $
    1,723,809
    
    
    $
    1,764,940Current liabilities:Current portion of long-term obligations
    
    $
    5,578
    
    
    $
    5,574Notes payable
    
    
    1,449
    
    
    
    Accounts payable
    
    
    61,736
    
    
    
    87,921Accrued trade marketing expense
    
    
    36,754
    
    
    
    46,014Accrued liabilities
    
    
    84,918
    
    
    
    77,735Accrued income taxes
    
    
    2,310
    
    
    
    1,477Total current liabilities
    
    
    192,745
    
    
    
    218,721Long-term debt (includes $10,816 owed to a related party)
    
    
    934,458
    
    
    
    937,506Postretirement benefits
    
    
    2,816
    
    
    
    2,940Deferred income taxes
    
    
    224,863
    
    
    
    212,406Total liabilities
    
    
    1,354,882
    
    
    
    1,371,573Commitments and contingencies (Note 12)Shareholders equity:Pinnacle Common stock: Par value $.01 per share,
100 shares authorized, issued 100
    
    
    
    
    
    
    Additional paid-in-capital
    
    
    519,433
    
    
    
    519,433Accumulated other comprehensive income
    
    
    53
    
    
    
    48Carryover of Predecessor basis of net assets
    
    
    (17,338
    )
    
    
    (17,495
    )Accumulated deficit
    
    
    (133,221
    )
    
    
    (108,619
    )Total shareholders equity
    
    
    368,927
    
    
    
    393,367Total liabilities and shareholders equity
    
    $
    1,723,809
    
    
    $
    1,764,940
 See accompanying Notes to Unaudited Consolidated Financial Statements
 5




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PINNACLE FOODS GROUP INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
 SuccessorSix months endedJune 26,
    
    
    June 27,2005
    
    
    2004Cash flows from operating activitiesNet loss from operations
    
    $
    (24,602
    )
    
    $
    (48,726
    )Non-cash charges (credits) to net earningsDepreciation and amortization
    
    
    21,329
    
    
    
    18,392Restructuring and impairment charge
    
    
    1,502
    
    
    
    10,025Amortization of debt acquisition costs
    
    
    2,614
    
    
    
    1,907Amortization of bond premium
    
    
    (257
    )
    
    
    (276
    )Change in value of financial instruments
    
    
    (1,261
    )
    
    
    (3,290
    )Equity related compensation charge
    
    
    
    
    
    
    7,400Postretirement healthcare benefits
    
    
    (124
    )
    
    
    (261
    )Pension expense
    
    
    298
    
    
    
    597Deferred income taxes
    
    
    12,457
    
    
    
    (278
    )Changes in working capitalAccounts receivable
    
    
    (1,437
    )
    
    
    9,244Inventories
    
    
    39,145
    
    
    
    26,069Accrued trade marketing expense
    
    
    (9,260
    )
    
    
    737Accounts payable
    
    
    (25,847
    )
    
    
    18,994Other current assets and liabilities
    
    
    8,226
    
    
    
    (16,690
    )Net cash provided by operating activities
    
    
    22,783
    
    
    
    23,844Cash flows from investing activitiesCapital expenditures
    
    
    (12,269
    )
    
    
    (7,375
    )Pinnacle merger consideration
    
    
    1,595
    
    
    
    (738
    )Aurora merger consideration
    
    
    
    
    
    
    (663,759
    )Aurora merger costs
    
    
    
    
    
    
    (13,174
    )Sale of plant assets
    
    
    561
    
    
    
    Net cash used in investing activities
    
    
    (10,113
    )
    
    
    (685,046
    )Cash flows from financing activitiesChange in bank overdrafts
    
    
    (308
    )
    
    
    12,683Repayment of capital lease obligations
    
    
    (62
    )
    
    
    (16
    )Equity contribution to Successor
    
    
    
    
    
    
    95,276Successors debt acquisition costs
    
    
    (34
    )
    
    
    (16,691
    )Proceeds from Successors bond offerings
    
    
    
    
    
    
    200,976Proceeds from Successors bank term loan
    
    
    
    
    
    
    425,000Proceeds from Successors notes payable borrowings
    
    
    31,626
    
    
    
    Repayments of Successors notes payable
    
    
    (30,177
    )
    
    
    (14,000
    )Repayments of Successors long term obligations
    
    
    (2,725
    )
    
    
    Net cash (used in) provided by financing activities
    
    
    (1,680
    )
    
    
    703,228Effect of exchange rate changes on cash
    
    
    
    
    
    
    Net change in cash and cash equivalents
    
    
    10,990
    
    
    
    42,026Cash and cash equivalents  beginning of period
    
    
    2,235
    
    
    
    5,254Cash and cash equivalents  end of period
    
    $
    13,225
    
    
    $
    47,280Supplemental disclosures of cash flow information:Interest paid
    
    $
    30,184
    
    
    $
    22,233Interest received
    
    
    223
    
    
    
    176Income taxes refunded (paid)
    
    
    438
    
    
    
    (22
    )
 See accompanying Notes to Unaudited Consolidated Financial Statements
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PINNACLE FOODS GROUP INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY (unaudited)
 Carryover ofAdditional
    
    
    
    
    
    
    Predecessor
    
    
    Other
    
    
    TotalCommon Stock
    
    
    Paid In
    
    
    Accumulated
    
    
    Basis of
    
    
    Comprehensive
    
    
    Shareholder'sShares
    
    
    Amount
    
    
    Capital
    
    
    Deficit
    
    
    Net Assets
    
    
    Income
    
    
    EquitySuccessorBalance at December 28, 2003
    
    
    100
    
    
    $
    
    
    
    $
    191,637
    
    
    $
    (16,299
    )
    
    $
    (17,495
    )
    
    $
    
    
    
    $
    157,843Equity contributions:Cash
    
    
    
    
    
    
    
    
    
    
    95,276
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    95,276Noncash
    
    
    
    
    
    
    
    
    
    
    225,120
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    225,120Equity related compensation
    
    
    
    
    
    
    
    
    
    
    7,400
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,400Comprehensive income:Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (48,726
    )
    
    
    
    
    
    
    
    
    
    
    (48,726
    )Foreign currency translation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (27
    )
    
    
    (27
    )Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (48,753
    )Balance at June 27, 2004
    
    
    100
    
    
    $
    
    
    
    $
    519,433
    
    
    $
    (65,025
    )
    
    $
    (17,495
    )
    
    $
    (27
    )
    
    $
    436,886SuccessorBalance at December 26, 2004
    
    
    100
    
    
    $
    
    
    
    $
    519,433
    
    
    $
    (108,619
    )
    
    $
    (17,495
    )
    
    $
    48
    
    
    $
    393,367Impact of additional purchase
accounting adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    157
    
    
    
    
    
    
    
    157Comprehensive income:Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (24,602
    )
    
    
    
    
    
    
    
    
    
    
    (24,602
    )Foreign currency translation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5
    
    
    
    5Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (24,597
    )Balance at June 26, 2005
    
    
    100
    
    
    $
    
    
    
    $
    519,433
    
    
    $
    (133,221
    )
    
    $
    (17,338
    )
    
    $
    53
    
    
    $
    368,927
 See accompanying Notes to Unaudited Consolidated Financial Statements
 7




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PINNACLE FOODS GROUP INC. AND SUBSIDIARIES
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
 
 1. Summary of Business Activities
 Business Overview
    
 2. Interim Financial Statements
  
 3. Acquisitions
 Aurora Transaction
  8




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PINNACLE FOODS GROUP INC. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
       Total paid to Auroras creditors
    
    $
    709,327Less: Amount paid with Aurora cash
    
    
    (20,764
    )Subtotal
    
    
    688,563Fair value of equity interests in LLC exchanged for Aurora
senior subordinated notes
    
    
    225,120Acquisition costs
    
    
    21,608Total cost of acquisition
    
    $
    935,291
 9




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PINNACLE FOODS GROUP INC. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
  Assets recorded:Plant assets
    
    $
    107,528Inventories
    
    
    68,116Accounts receivable
    
    
    52,730Cash
    
    
    24,804Other current assets
    
    
    4,428Goodwill
    
    
    278,240Recipes and formulas
    
    
    20,600Tradenames
    
    
    675,700Other assets
    
    
    690Fair value of
assets acquired
    
    
    1,232,836Liabilities assumed
    
    
    114,053Deferred income taxes
    
    
    183,492Purchase price
    
    $
    935,291
   Pro forma Information
   Six months endedJune 26,
    
    
    June 27,2005
    
    
    2004(Actual)
    
    
    (Pro Forma)Net sales
    
    $
    614,451
    
    
    $
    591,176Earnings before interest and taxes
    
    $
    24,146
    
    
    $
    175,128Net (loss) earnings
    
    $
    (24,602
    )
    
    $
    139,190
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PINNACLE FOODS GROUP INC. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
   Six MonthsEndedPinnacle Historical Financial Statements
    
    June 27, 2004Flow through of fair value of inventories over
manufactured cost as of November 25, 2003
    
    $
    18,126Flow through of fair value of inventories over
manufactured cost as of March 19, 2004
    
    
    12,966Aurora acquisitions costs
    
    
    3,808Pinnacle acquisition costs
    
    
    1,420Equity related compensation
    
    
    7,400Impact on earnings (loss) before interest and taxes
    
    $
    43,720
 Six MonthsEndedAurora Historical Financial Statements
    
    June 27, 2004Write off of obsolete inventory
    
    $
    725Administrative restructuring and retention costs
    
    
    548Financial restructuring and divestiture costs
    
    
    5,023Reorganization (primarily consists of debt forgiveness)
    
    
    (187,971
    )Miscellaneous non-cash charges
    
    
    207Impact on earnings (loss) before interest and taxes
    
    $
    (181,468
    )
 
 4. Restructuring and Impairment Charges
 Frozen Food Segment
 Erie, Pennsylvania Production Facility
  Estimated
    
    
    Incurred
    
    
    EstimatedTotal
    
    
    Through
    
    
    RemainingDescription
    
    Charges
    
    
    June 26, 2005
    
    
    ChargesEmployee severance
    
    $
    590
    
    
    $
    590
    
    
    $
    Other costs
    
    
    3,650
    
    
    
    85
    
    
    
    3,565Total
    
    $
    4,240
    
    
    $
    675
    
    
    $
    3,565
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PINNACLE FOODS GROUP INC. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
     Mattoon, Illinois Production Facility
  Omaha, Nebraska Production Facility
  IncurredOriginal
    
    
    Change in
    
    
    
    
    
    
    Through
    
    
    Six Months
    
    
    EstimatedEstimated
    
    
    Estimated
    
    
    
    
    
    
    December 26,
    
    
    Ended
    
    
    RemainingDescription
    
    Charges
    
    
    Charges
    
    
    Transfers
    
    
    2004
    
    
    June 26, 2005
    
    
    ChargesAsset impairment charges
    
    $
    7,400
    
    
    $
    2,649
    
    
    
    
    
    
    $
    10,049
    
    
    $
    
    
    
    $
    Employee severance
    
    
    2,506
    
    
    
    
    
    
    
    59
    
    
    
    2,506
    
    
    
    59
    
    
    
    Other costs
    
    
    4,984
    
    
    
    (809
    )
    
    
    (59
    )
    
    
    3,078
    
    
    
    1,008
    
    
    
    30Total
    
    $
    14,890
    
    
    $
    1,840
    
    
    $
    
    
    
    $
    15,633
    
    
    $
    1,067
    
    
    $
    30
  12




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PINNACLE FOODS GROUP INC. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
      Balance at
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Balance atDecember 26,
    
    
    
    
    
    
    Noncash
    
    
    Cash
    
    
    
    
    
    
    June 26,Description
    
    2004
    
    
    Additions
    
    
    Reductions
    
    
    Reductions
    
    
    Transfers
    
    
    2005Other asset
impairment charges
    
    $
    
    
    
    $
    862
    
    
    $
    (862
    )
    
    $
    
    
    
    
    
    
    
    $
    Employee severance
    
    
    3,695
    
    
    
    590
    
    
    
    
    
    
    
    (2,274
    )
    
    
    59
    
    
    
    2,070Other costs
    
    
    305
    
    
    
    1,152
    
    
    
    
    
    
    
    (1,124
    )
    
    
    (59
    )
    
    
    274Total
    
    $
    4,000
    
    
    $
    2,604
    
    
    $
    (862
    )
    
    $
    (3,398
    )
    
    $
    
    
    
    $
    2,344
 13




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PINNACLE FOODS GROUP INC. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
 
 5. Stock Options
   Three Months Ended
    
    
    Six Months EndedJune 26,
    
    
    June 27,
    
    
    June 26,
    
    
    June 27,2005
    
    
    2004
    
    
    2005
    
    
    2004Net loss, as reported
    
    $
    (2,174
    )
    
    $
    (11,441
    )
    
    $
    (24,602
    )
    
    $
    (51,460
    )Deduct: Total stock-based employee compensation
expense determined under fair value method
for all stock option awards, net of related
tax effects
    
    
    (293
    )
    
    
    (158
    )
    
    
    (569
    )
    
    
    (316
    )Pro forma net loss
    
    $
    (2,467
    )
    
    $
    (11,599
    )
    
    $
    (25,171
    )
    
    $
    (51,776
    )
 
 6. Other Expense (Income), net
 Three Months Ended
    
    
    Six Months EndedJune 26,
    
    
    June 27,
    
    
    June 26,
    
    
    June 27,2005
    
    
    2004
    
    
    2005
    
    
    2004Other expense (income) consists of:Restructuring and impairment charges
    
    $
    363
    
    
    $
    
    
    
    $
    2,604
    
    
    $
    10,025Merger related costs
    
    
    (101
    )
    
    
    
    
    
    
    (101
    )
    
    
    8,820Amortization of intangibles/other assets
    
    
    1,204
    
    
    
    1,036
    
    
    
    2,407
    
    
    
    1,148Royalty expense (income), net
    
    
    21
    
    
    
    (87
    )
    
    
    45
    
    
    
    (114
    )Other
    
    
    11
    
    
    
    37
    
    
    
    (31
    )
    
    
    43Total other expense
    
    $
    1,498
    
    
    $
    986
    
    
    $
    4,924
    
    
    $
    19,922
 Restructuring charges.
 Merger related costs.
   14




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PINNACLE FOODS GROUP INC. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
 
 7. Inventories
 June 26,
    
    
    December 26,2005
    
    
    2004Raw materials, containers and supplies
    
    $
    39,795
    
    
    $
    34,489Finished product
    
    
    137,317
    
    
    
    187,645177,112
    
    
    
    222,134Reserves
    
    
    (10,747
    )
    
    
    (16,624
    )Total
    
    $
    166,365
    
    
    $
    205,510
   
 8. Goodwill and Other Assets
 Goodwill
 PurchaseDecember 26,
    
    
    Price
    
    
    June 26,2004
    
    
    Adjustment
    
    
    2005Frozen Foods
    
    $
    122,858
    
    
    $
    
    
    
    $
    122,858Dry Foods
    
    
    294,005
    
    
    
    (1,751
    )
    
    
    292,254Total
    
    $
    416,863
    
    
    $
    (1,751
    )
    
    $
    415,112
   Other Assets
 June 26,
    
    
    December 26,2005
    
    
    2004Amortizable intangibles, net of accumulated
amortization of $5,861 and $3,454, respectively
    
    $
    15,170
    
    
    $
    17,577Deferred financing costs, net of accumulated
amortization of $7,261 and $4,647, respectively
    
    
    33,360
    
    
    
    35,940Interest rate swap fair value (Note 11)
    
    
    473
    
    
    
    3,533Other
    
    
    594
    
    
    
    620Total
    
    $
    49,597
    
    
    $
    57,670
 15




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PINNACLE FOODS GROUP INC. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
   
 9. Debt and Interest Expense
 June 26,
    
    
    December 26,2005
    
    
    2004Long-term debtSuccessor- Senior secured credit facility  term loan
    
    $
    539,550
    
    
    $
    542,275- 8 1/4% Senior subordinated notes
    
    
    394,000
    
    
    
    394,000- Plus: unamortized premium on senior subordinated notes
    
    
    6,195
    
    
    
    6,452- Capital lease obligations
    
    
    291
    
    
    
    353Total Debt
    
    
    940,036
    
    
    
    943,080Less: current portion of long-term obligations
    
    
    5,578
    
    
    
    5,574Total long-term debt
    
    $
    934,458
    
    
    $
    937,506
 Interest expense
    
    Three months ended
    
    
    Six months endedJune 26, 2005
    
    
    June 27, 2004
    
    
    June 26, 2005
    
    
    June 27, 2004Third party interest expense
    
    $
    18,272
    
    
    $
    15,036
    
    
    $
    36,422
    
    
    $
    24,628Related party interest expense
    
    
    65
    
    
    
    76
    
    
    
    153
    
    
    
    76Interest rate swap (gains) / losses (Note 11)
    
    
    2,545
    
    
    
    (6,806
    )
    
    
    (1,440
    )
    
    
    (6,806
    )$
    20,882
    
    
    $
    8,306
    
    
    $
    35,135
    
    
    $
    17,898
   16




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PINNACLE FOODS GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
   
    
    In the case of base rate loans: 1.75% for the term loan and 1.75% for the revolving credit facility.
    
    In the case of Eurodollar loans: 2.75% for the term loan and 2.75% for the revolving credit facility.
  
    
    In the case of base rate loans: 1.25% to 1.75%.
    
    In the case of Eurodollar loans: 2.25% to 2.75%.
     17




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PINNACLE FOODS GROUP INC. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
 1 4 1 4
  Year
    
    Percentage2008
    
    
    104.125
    %2009
    
    
    102.750
    %2010
    
    
    101.375
    %2011 and thereafter
    
    
    100.000
    %
     18




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PINNACLE FOODS GROUP INC. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
 Senior Credit Agreement Amendment
   
    
    delivery of July 31, 2004 fiscal year end financial statements on or prior to the effective date of the amendment;
    
    a 50 basis point increase to the applicable rate, as defined, with respect to borrowings under the credit agreement;
    
    a change in the definition of consolidated cash interest expense to exclude non-cash
gains or losses arising from marking interest rate swap agreements to market;
    
    the addition of a Senior Covenant Leverage Ratio, as defined, which ranges from a ratio
of 3.75 to 1.00 to a ratio of 5.75 to 1.00 through December 2005;
    
    amendment of the interest expense coverage ratio (ranging from a ratio of 1.50 to 1.00
to a ratio of 2.10 to 1.00 through December 2005) and suspends the maximum total leverage
ratio until March 2006;
    
    elimination of limitation on revolving credit exposures;
    
    and the following limitations, restrictions and additional reporting requirements during
the amendment period which ends on the second business day following the date on which the
Company delivers to the Administrative Agent financial statements for the fiscal quarter
ending March 2006:
 
    
    prohibit incremental extensions of credit, as defined;
    
    additional limitations on indebtedness;
    
    limitations on acquisitions and investments;
    
    additional limitations on restricted payments;
    
    suspension of payments for management fees;
    
    continuation of the anti-cash hoarding provision;
    
    monthly financial reporting requirements, and;
    
    a Company election to early terminate the amendment period.
   
 10. Pension and Retirement Plans
   19




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PINNACLE FOODS GROUP INC. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
   Pension Benefits
    
    
    Other Postretirement BenefitsThree months ended
    
    
    Three months endedJune 26,
    
    
    June 27,
    
    
    June 26,
    
    
    June 27,2005
    
    
    2004
    
    
    2005
    
    
    2004Service cost
    
    $
    372
    
    
    $
    536
    
    
    $
    3
    
    
    $
    13Interest cost
    
    
    829
    
    
    
    826
    
    
    
    17
    
    
    
    20Expected return on assets
    
    
    (1,052
    )
    
    
    (1,047
    )
    
    
    
    
    
    
    Recognized net actuarial loss/(gain)
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    29Amortization of:Unrecognized prior service cost (credit)
    
    
    
    
    
    
    
    
    
    
    (84
    )
    
    
    (114
    )Total amount recognized
    
    $
    149
    
    
    $
    315
    
    
    $
    (62
    )
    
    $
    (52
    )
 Pension Benefits
    
    
    Other Postretirement BenefitsSix months ended
    
    
    Six months endedJune 26,
    
    
    June 27,
    
    
    June 26,
    
    
    June 27,2005
    
    
    2004
    
    
    2005
    
    
    2004Service cost
    
    $
    744
    
    
    $
    1,015
    
    
    $
    6
    
    
    $
    68Interest cost
    
    
    1,658
    
    
    
    1,563
    
    
    
    34
    
    
    
    103Expected return on assets
    
    
    (2,104
    )
    
    
    (1,981
    )
    
    
    
    
    
    
    Recognized net actuarial loss/(gain)
    
    
    
    
    
    
    
    
    
    
    4
    
    
    
    149Amortization of:Unrecognized prior service cost (credit)
    
    
    
    
    
    
    
    
    
    
    (168
    )
    
    
    (581
    )Net periodic benefit cost (benefit)
    
    
    298
    
    
    
    597
    
    
    
    (124
    )
    
    
    (261
    )Liability assumed in business acquisition
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    806Total amount recognized
    
    $
    298
    
    
    $
    597
    
    
    $
    (124
    )
    
    $
    545
  
 11. Financial Instruments
  20




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PINNACLE FOODS GROUP INC. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
       21




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PINNACLE FOODS GROUP INC. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
     
 12. Commitments and Contingencies
 General
  Litigation
 Pinnacles Fleming Bankruptcy Claim
  22




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PINNACLE FOODS GROUP INC. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
 Auroras Fleming Bankruptcy Claim
  Employee Litigation  Indemnification of US Cold Storage
   R2 Appeal in Aurora Bankruptcy
  State of Illinois v. City of St. Elmo and Aurora Foods Inc.
  23




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PINNACLE FOODS GROUP INC. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
   Underweight Products
  American Cold Storage  North America, L/P. v. P.F. Distribution, LLC and Pinnacle Foods Group Inc.
  Other Matters
 Bankruptcy filing of Winn-Dixie
  24




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PINNACLE FOODS GROUP INC. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
 
 13. Related Party Transactions
 Management fees
 1 2
 1 2
 Leases and Aircraft
   Debt and Interest Expense
  Financial Instruments
  25




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PINNACLE FOODS GROUP INC. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
 Loan to Member of Management
  
 14. Segments
  Three months ended
    
    
    Six months endedJune 26,
    
    
    June 27,
    
    
    June 26,
    
    
    June 27,SEGMENT INFORMATION
    
    2005
    
    
    2004
    
    
    2005
    
    
    2004Net salesFrozen foods
    
    $
    155,109
    
    
    $
    142,916
    
    
    $
    336,448
    
    
    $
    239,225Dry foods
    
    
    151,505
    
    
    
    141,324
    
    
    
    278,003
    
    
    
    194,487Total
    
    $
    306,614
    
    
    $
    284,240
    
    
    $
    614,451
    
    
    $
    433,712Earnings (loss) before interest and taxesFrozen foods
    
    $
    5,229
    
    
    $
    (4,702
    )
    
    $
    645
    
    
    $
    (19,517
    )Dry foods
    
    
    24,412
    
    
    
    14,491
    
    
    
    32,197
    
    
    
    4,700Unallocated corporate expenses
    
    
    (3,779
    )
    
    
    (4,140
    )
    
    
    (8,696
    )
    
    
    (16,079
    )Total
    
    $
    25,862
    
    
    $
    5,649
    
    
    $
    24,146
    
    
    $
    (30,896
    )Depreciation and amortizationFrozen foods
    
    $
    9,381
    
    
    $
    8,875
    
    
    $
    14,521
    
    
    $
    12,038Dry foods
    
    
    3,317
    
    
    
    4,750
    
    
    
    6,808
    
    
    
    6,354Total
    
    $
    12,698
    
    
    $
    13,625
    
    
    $
    21,329
    
    
    $
    18,392Capital expendituresFrozen foods
    
    $
    7,684
    
    
    $
    3,657
    
    
    $
    10,161
    
    
    $
    4,495Dry foods
    
    
    1,358
    
    
    
    1,867
    
    
    
    2,108
    
    
    
    2,880Total
    
    $
    9,042
    
    
    $
    5,524
    
    
    $
    12,269
    
    
    $
    7,375
 GEOGRAPHIC INFORMATIONNet salesUnited States
    
    $
    293,090
    
    
    $
    276,260
    
    
    $
    589,799
    
    
    $
    417,043Canada
    
    
    13,524
    
    
    
    7,980
    
    
    
    24,652
    
    
    
    16,669Total
    
    $
    306,614
    
    
    $
    284,240
    
    
    $
    614,451
    
    
    $
    433,712
 26




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PINNACLE FOODS GROUP INC. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
 June 26,
    
    
    December 26,SEGMENT INFORMATION:
    
    2005
    
    
    2004Total AssetsFrozen foods
    
    $
    657,048
    
    
    $
    671,860Dry foods
    
    
    1,066,715
    
    
    
    1,092,196Corporate
    
    
    46
    
    
    
    884Total
    
    $
    1,723,809
    
    
    $
    1,764,940
 GEOGRAPHIC INFORMATIONLong-lived assetsUnited States
    
    $
    215,637
    
    
    $
    223,719Canada
    
    
    27
    
    
    
    21Total
    
    $
    215,664
    
    
    $
    223,740
 
 15. Recently Issued Accounting Pronouncements
     27




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PINNACLE FOODS GROUP INC. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
 
 16. Guarantor and Nonguarantor Statements
 1 4
  (1)
    
    Consolidating (a) balance sheets as of June 26, 2005 and December 26, 2004 and
(b) the related statements of operations and cash flows for the three and six months
ended June 26, 2005 and June 27, 2004.(2)
    
    Elimination entries necessary to consolidate the Successor, with its guarantor
subsidiaries and nonguarantor subsidiary.
  28




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PINNACLE FOODS GROUP INC. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
 Pinnacle Foods Group Inc.
Consolidated Balance Sheet  Successor
June 26, 2005
 PinnacleFoods
    
    
    Guarantor
    
    
    Nonguarantor
    
    
    
    
    
    
    ConsolidatedGroup Inc.
    
    
    Subsidiaries
    
    
    Subsidiary
    
    
    Eliminations
    
    
    TotalCurrent assets:Cash and cash equivalents
    
    $
    34
    
    
    $
    11,992
    
    
    $
    1,199
    
    
    $
    
    
    
    $
    13,225Accounts receivable, net
    
    
    42,122
    
    
    
    29,937
    
    
    
    3,743
    
    
    
    
    
    
    
    75,802Intercompany accounts receivable
    
    
    
    
    
    
    27,580
    
    
    
    
    
    
    
    (27,580
    )
    
    
    Inventories, net
    
    
    55,410
    
    
    
    108,038
    
    
    
    2,917
    
    
    
    
    
    
    
    166,365Other current assets
    
    
    4,271
    
    
    
    3,173
    
    
    
    34
    
    
    
    
    
    
    
    7,478Deferred income taxes
    
    
    
    
    
    
    
    
    
    
    22
    
    
    
    
    
    
    
    22Total current assets
    
    
    101,837
    
    
    
    180,720
    
    
    
    7,915
    
    
    
    (27,580
    )
    
    
    262,892Plant assets, net
    
    
    97,561
    
    
    
    118,076
    
    
    
    27
    
    
    
    
    
    
    
    215,664Investment in subsidiaries
    
    
    268,566
    
    
    
    3,089
    
    
    
    
    
    
    
    (271,655
    )
    
    
    Intercompany note receivable
    
    
    185,233
    
    
    
    
    
    
    
    
    
    
    
    (185,233
    )
    
    
    Tradenames
    
    
    674,388
    
    
    
    106,156
    
    
    
    
    
    
    
    
    
    
    
    780,544Other assets, net
    
    
    49,342
    
    
    
    255
    
    
    
    
    
    
    
    
    
    
    
    49,597Goodwill
    
    
    272,618
    
    
    
    142,494
    
    
    
    
    
    
    
    
    
    
    
    415,112Total assets
    
    $
    1,649,545
    
    
    $
    550,790
    
    
    $
    7,942
    
    
    $
    (484,468
    )
    
    $
    1,723,809Current liabilities:Current portion of long-term obligations
    
    $
    5,460
    
    
    $
    118
    
    
    $
    
    
    
    $
    
    
    
    $
    5,578Notes payable
    
    
    
    
    
    
    1,449
    
    
    
    
    
    
    
    
    
    
    
    1,449Accounts payable
    
    
    24,115
    
    
    
    35,707
    
    
    
    1,914
    
    
    
    
    
    
    
    61,736Intercompany accounts payable
    
    
    26,753
    
    
    
    
    
    
    
    827
    
    
    
    (27,580
    )
    
    
    Accrued trade marketing expense
    
    
    19,733
    
    
    
    16,265
    
    
    
    756
    
    
    
    
    
    
    
    36,754Accrued liabilities
    
    
    60,005
    
    
    
    24,648
    
    
    
    265
    
    
    
    
    
    
    
    84,918Accrued income taxes
    
    
    58
    
    
    
    1,162
    
    
    
    1,090
    
    
    
    
    
    
    
    2,310Total current liabilities
    
    
    136,124
    
    
    
    79,349
    
    
    
    4,852
    
    
    
    (27,580
    )
    
    
    192,745Long-term debt
    
    
    934,312
    
    
    
    146
    
    
    
    
    
    
    
    
    
    
    
    934,458Intercompany note payable
    
    
    
    
    
    
    185,233
    
    
    
    
    
    
    
    (185,233
    )
    
    
    Postretirement benefits
    
    
    838
    
    
    
    1,978
    
    
    
    
    
    
    
    
    
    
    
    2,816Deferred income taxes
    
    
    209,344
    
    
    
    15,518
    
    
    
    1
    
    
    
    
    
    
    
    224,863Total liabilities
    
    
    1,280,618
    
    
    
    282,224
    
    
    
    4,853
    
    
    
    (212,813
    )
    
    
    1,354,882Commitments and contingencies
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Shareholders equity:Pinnacle Common Stock, $.01 par value
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Additional paid-in-capital
    
    
    519,433
    
    
    
    287,710
    
    
    
    935
    
    
    
    (288,645
    )
    
    
    519,433Accumulated other comprehensive income (loss)
    
    
    53
    
    
    
    53
    
    
    
    53
    
    
    
    (106
    )
    
    
    53Carryover of Predecessor basis of net assets
    
    
    (17,338
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (17,338
    )Retained earnings (accumulated deficit)
    
    
    (133,221
    )
    
    
    (19,197
    )
    
    
    2,101
    
    
    
    17,096
    
    
    
    (133,221
    )Total shareholders equity
    
    
    368,927
    
    
    
    268,566
    
    
    
    3,089
    
    
    
    (271,655
    )
    
    
    368,927Total liabilities and shareholders equity
    
    $
    1,649,545
    
    
    $
    550,790
    
    
    $
    7,942
    
    
    $
    (484,468
    )
    
    $
    1,723,809
 29




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PINNACLE FOODS GROUP INC. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
 Pinnacle Foods Group Inc.
Consolidated Balance Sheet  Successor
December 26, 2004
 PinnacleFoods
    
    
    Guarantor
    
    
    Nonguarantor
    
    
    
    
    
    
    ConsolidatedGroup Inc.
    
    
    Subsidiaries
    
    
    Subsidiary
    
    
    Eliminations
    
    
    TotalCurrent assets:Cash and cash equivalents
    
    $
    490
    
    
    $
    1,745
    
    
    
    
    
    
    $
    
    
    
    $
    2,235Accounts receivable, net
    
    
    40,488
    
    
    
    29,308
    
    
    
    4,569
    
    
    
    
    
    
    
    74,365Intercompany accounts receivable
    
    
    4,439
    
    
    
    
    
    
    
    
    
    
    
    (4,439
    )
    
    
    Inventories, net
    
    
    70,443
    
    
    
    131,788
    
    
    
    3,279
    
    
    
    
    
    
    
    205,510Other current assets
    
    
    940
    
    
    
    2,968
    
    
    
    83
    
    
    
    
    
    
    
    3,991Deferred income taxes
    
    
    
    
    
    
    
    
    
    
    22
    
    
    
    
    
    
    
    22Total current assets
    
    
    116,800
    
    
    
    165,809
    
    
    
    7,953
    
    
    
    (4,439
    )
    
    
    286,123Plant assets, net
    
    
    101,774
    
    
    
    121,945
    
    
    
    21
    
    
    
    
    
    
    
    223,740Investment in subsidiaries
    
    
    263,384
    
    
    
    1,183
    
    
    
    
    
    
    
    (264,567
    )
    
    
    Intercompany note receivable
    
    
    182,054
    
    
    
    543
    
    
    
    
    
    
    
    (182,597
    )
    
    
    Tradenames
    
    
    674,388
    
    
    
    106,156
    
    
    
    
    
    
    
    
    
    
    
    780,544Other assets, net
    
    
    57,493
    
    
    
    177
    
    
    
    
    
    
    
    
    
    
    
    57,670Goodwill
    
    
    272,618
    
    
    
    144,245
    
    
    
    
    
    
    
    
    
    
    
    416,863Total assets
    
    $
    1,668,511
    
    
    $
    540,058
    
    
    $
    7,974
    
    
    $
    (451,603
    )
    
    $
    1,764,940Current liabilities:Current portion of long-term obligations
    
    $
    5,460
    
    
    $
    114
    
    
    $
    
    
    
    $
    
    
    
    $
    5,574Accounts payable
    
    
    51,815
    
    
    
    33,894
    
    
    
    2,212
    
    
    
    
    
    
    
    87,921Intercompany accounts payable
    
    
    
    
    
    
    3,001
    
    
    
    1,438
    
    
    
    (4,439
    )
    
    
    Accrued trade marketing expense
    
    
    30,864
    
    
    
    12,813
    
    
    
    2,337
    
    
    
    
    
    
    
    46,014Accrued liabilities
    
    
    50,796
    
    
    
    26,817
    
    
    
    122
    
    
    
    
    
    
    
    77,735Accrued income taxes
    
    
    99
    
    
    
    1,240
    
    
    
    138
    
    
    
    
    
    
    
    1,477Total current liabilities
    
    
    139,034
    
    
    
    77,879
    
    
    
    6,247
    
    
    
    (4,439
    )
    
    
    218,721Long-term debt
    
    
    937,300
    
    
    
    206
    
    
    
    
    
    
    
    
    
    
    
    937,506Intercompany note payable
    
    
    
    
    
    
    182,054
    
    
    
    543
    
    
    
    (182,597
    )
    
    
    Postretirement benefits
    
    
    825
    
    
    
    2,115
    
    
    
    
    
    
    
    
    
    
    
    2,940Deferred income taxes
    
    
    197,985
    
    
    
    14,420
    
    
    
    1
    
    
    
    
    
    
    
    212,406Total liabilities
    
    
    1,275,144
    
    
    
    276,674
    
    
    
    6,791
    
    
    
    (187,036
    )
    
    
    1,371,573Commitments and contingencies
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Shareholders equity:Pinnacle Common Stock, $.01 par value
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Additional paid-in-capital
    
    
    519,433
    
    
    
    287,710
    
    
    
    935
    
    
    
    (288,645
    )
    
    
    519,433Accumulated other comprehensive income (loss)
    
    
    48
    
    
    
    48
    
    
    
    48
    
    
    
    (96
    )
    
    
    48Carryover of Predecessor basis of net assets
    
    
    (17,495
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (17,495
    )Retained earnings (accumulated deficit)
    
    
    (108,619
    )
    
    
    (24,374
    )
    
    
    200
    
    
    
    24,174
    
    
    
    (108,619
    )Total shareholders equity
    
    
    393,367
    
    
    
    263,384
    
    
    
    1,183
    
    
    
    (264,567
    )
    
    
    393,367Total liabilities and shareholders equity
    
    $
    1,668,511
    
    
    $
    540,058
    
    
    $
    7,974
    
    
    $
    (451,603
    )
    
    $
    1,764,940
 30




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##### Table of Contents



PINNACLE FOODS GROUP INC. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
 Pinnacle Foods Group Inc.
Consolidated Statement of Operations  Successor
For the three months ended June 26, 2005
 PinnacleFoods
    
    
    Guarantor
    
    
    Nonguarantor
    
    
    
    
    
    
    ConsolidatedGroup Inc.
    
    
    Subsidiaries
    
    
    Subsidiary
    
    
    Eliminations
    
    
    TotalNet sales
    
    $
    147,783
    
    
    $
    150,666
    
    
    $
    13,524
    
    
    $
    (5,359
    )
    
    $
    306,614Costs and expensesCost of products sold
    
    
    124,227
    
    
    
    117,906
    
    
    
    9,254
    
    
    
    (5,167
    )
    
    
    246,220Marketing and selling expenses
    
    
    11,570
    
    
    
    9,245
    
    
    
    1,196
    
    
    
    
    
    
    
    22,011Administrative expenses
    
    
    5,201
    
    
    
    4,629
    
    
    
    267
    
    
    
    
    
    
    
    10,097Research and development expenses
    
    
    483
    
    
    
    443
    
    
    
    
    
    
    
    
    
    
    
    926Intercompany royalties
    
    
    
    
    
    
    
    
    
    
    71
    
    
    
    (71
    )
    
    
    Intercompany technical service fees
    
    
    
    
    
    
    
    
    
    
    121
    
    
    
    (121
    )
    
    
    Other expense (income), net
    
    
    1,239
    
    
    
    259
    
    
    
    
    
    
    
    
    
    
    
    1,498Equity in loss (earnings) of investees
    
    
    (16,048
    )
    
    
    (1,663
    )
    
    
    
    
    
    
    17,711
    
    
    
    Total costs and expenses
    
    
    126,672
    
    
    
    130,819
    
    
    
    10,909
    
    
    
    12,352
    
    
    
    280,752Income (loss) before interest and taxes
    
    
    21,111
    
    
    
    19,847
    
    
    
    2,615
    
    
    
    (17,711
    )
    
    
    25,862Intercompany interest (income) expense
    
    
    (3,263
    )
    
    
    3,263
    
    
    
    
    
    
    
    
    
    
    
    Interest expense
    
    
    20,870
    
    
    
    12
    
    
    
    
    
    
    
    
    
    
    
    20,882Interest income
    
    
    
    
    
    
    162
    
    
    
    5
    
    
    
    
    
    
    
    167Income (loss) before income taxes
    
    
    3,504
    
    
    
    16,734
    
    
    
    2,620
    
    
    
    (17,711
    )
    
    
    5,147Provision for income taxes
    
    
    5,678
    
    
    
    686
    
    
    
    957
    
    
    
    
    
    
    
    7,321Net (loss) earnings
    
    $
    (2,174
    )
    
    $
    16,048
    
    
    $
    1,663
    
    
    $
    (17,711
    )
    
    $
    (2,174
    )
 31




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##### Table of Contents



PINNACLE FOODS GROUP INC. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
 Pinnacle Foods Group Inc.
Consolidated Statement of Operations  Successor
For the three months ended June 27, 2004
 PinnacleFoods
    
    
    Guarantor
    
    
    Nonguarantor
    
    
    
    
    
    
    ConsolidatedGroup Inc.
    
    
    Subsidiaries
    
    
    Subsidiary
    
    
    Eliminations
    
    
    TotalNet sales
    
    $
    127,331
    
    
    $
    153,046
    
    
    $
    7,980
    
    
    $
    (4,117
    )
    
    $
    284,240Costs and expensesCost of products sold
    
    
    108,649
    
    
    
    127,533
    
    
    
    6,665
    
    
    
    (3,870
    )
    
    
    238,977Marketing and selling expenses
    
    
    11,813
    
    
    
    11,166
    
    
    
    526
    
    
    
    
    
    
    
    23,505Administrative expenses
    
    
    6,671
    
    
    
    7,103
    
    
    
    282
    
    
    
    
    
    
    
    14,056Research and development expenses
    
    
    523
    
    
    
    544
    
    
    
    
    
    
    
    
    
    
    
    1,067Intercompany royalties
    
    
    
    
    
    
    
    
    
    
    75
    
    
    
    (75
    )
    
    
    Intercompany technical service fees
    
    
    
    
    
    
    
    
    
    
    172
    
    
    
    (172
    )
    
    
    Other expense (income), net
    
    
    967
    
    
    
    19
    
    
    
    
    
    
    
    
    
    
    
    986Equity in loss (earnings) of investees
    
    
    (4,608
    )
    
    
    (166
    )
    
    
    
    
    
    
    4,774
    
    
    
    Total costs and expenses
    
    
    124,015
    
    
    
    146,199
    
    
    
    7,720
    
    
    
    657
    
    
    
    278,591(Loss) earnings before interest and taxes
    
    
    3,316
    
    
    
    6,847
    
    
    
    260
    
    
    
    (4,774
    )
    
    
    5,649Intercompany interest (income) expense
    
    
    (2,297
    )
    
    
    2,290
    
    
    
    7
    
    
    
    
    
    
    
    Interest expense
    
    
    8,910
    
    
    
    (604
    )
    
    
    
    
    
    
    
    
    
    
    8,306Interest income
    
    
    56
    
    
    
    63
    
    
    
    4
    
    
    
    
    
    
    
    123(Loss) earnings before income taxes
    
    
    (3,241
    )
    
    
    5,224
    
    
    
    257
    
    
    
    (4,774
    )
    
    
    (2,534
    )Provision (benefit) for income taxes
    
    
    5,466
    
    
    
    616
    
    
    
    91
    
    
    
    
    
    
    
    6,173Net (loss) earnings
    
    $
    (8,707
    )
    
    $
    4,608
    
    
    $
    166
    
    
    $
    (4,774
    )
    
    $
    (8,707
    )
 32




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##### Table of Contents



PINNACLE FOODS GROUP INC. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
 Pinnacle Foods Group Inc.
Consolidated Statement of Operations  Successor
For the six months ended June 26, 2005
 PinnacleFoods
    
    
    Guarantor
    
    
    Nonguarantor
    
    
    
    
    
    
    ConsolidatedGroup Inc.
    
    
    Subsidiaries
    
    
    Subsidiary
    
    
    Eliminations
    
    
    TotalNet sales
    
    $
    328,054
    
    
    $
    273,576
    
    
    $
    24,652
    
    
    $
    (11,831
    )
    
    $
    614,451Costs and expensesCost of products sold
    
    
    267,408
    
    
    
    233,244
    
    
    
    18,732
    
    
    
    (11,397
    )
    
    
    507,987Marketing and selling expenses
    
    
    32,594
    
    
    
    18,439
    
    
    
    1,929
    
    
    
    
    
    
    
    52,962Administrative expenses
    
    
    12,458
    
    
    
    9,452
    
    
    
    556
    
    
    
    
    
    
    
    22,466Research and development expenses
    
    
    1,110
    
    
    
    856
    
    
    
    
    
    
    
    
    
    
    
    1,966Intercompany royalties
    
    
    
    
    
    
    
    
    
    
    145
    
    
    
    (145
    )
    
    
    Intercompany technical service fees
    
    
    
    
    
    
    
    
    
    
    289
    
    
    
    (289
    )
    
    
    Other expense (income), net
    
    
    3,934
    
    
    
    990
    
    
    
    
    
    
    
    
    
    
    
    4,924Equity in loss (earnings) of investees
    
    
    (5,177
    )
    
    
    (1,901
    )
    
    
    
    
    
    
    7,078
    
    
    
    Total costs and expenses
    
    
    312,327
    
    
    
    261,080
    
    
    
    21,651
    
    
    
    (4,753
    )
    
    
    590,305Income (loss) before interest and taxes
    
    
    15,727
    
    
    
    12,496
    
    
    
    3,001
    
    
    
    (7,078
    )
    
    
    24,146Intercompany interest (income) expense
    
    
    (6,207
    )
    
    
    6,205
    
    
    
    2
    
    
    
    
    
    
    
    Interest expense
    
    
    35,118
    
    
    
    17
    
    
    
    
    
    
    
    
    
    
    
    35,135Interest income
    
    
    
    
    
    
    213
    
    
    
    10
    
    
    
    
    
    
    
    223Income (loss) before income taxes
    
    
    (13,184
    )
    
    
    6,487
    
    
    
    3,009
    
    
    
    (7,078
    )
    
    
    (10,766
    )Provision for income taxes
    
    
    11,418
    
    
    
    1,310
    
    
    
    1,108
    
    
    
    
    
    
    
    13,836Net (loss) earnings
    
    $
    (24,602
    )
    
    $
    5,177
    
    
    $
    1,901
    
    
    $
    (7,078
    )
    
    $
    (24,602
    )
 33




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##### Table of Contents



PINNACLE FOODS GROUP INC. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
 Pinnacle Foods Group Inc.
Consolidated Statement of Operations  Successor
For the six months ended June 27, 2004
 PinnacleFoods
    
    
    Guarantor
    
    
    Nonguarantor
    
    
    
    
    
    
    ConsolidatedGroup Inc.
    
    
    Subsidiaries
    
    
    Subsidiary
    
    
    Eliminations
    
    
    TotalNet sales
    
    $
    138,396
    
    
    $
    286,008
    
    
    $
    16,669
    
    
    $
    (7,361
    )
    
    $
    433,712Costs and expensesCost of products sold
    
    
    123,818
    
    
    
    246,592
    
    
    
    13,144
    
    
    
    (6,855
    )
    
    
    376,699Marketing and selling expenses
    
    
    14,352
    
    
    
    25,471
    
    
    
    1,868
    
    
    
    
    
    
    
    41,691Administrative expenses
    
    
    7,389
    
    
    
    16,531
    
    
    
    596
    
    
    
    
    
    
    
    24,516Research and development expenses
    
    
    523
    
    
    
    1,257
    
    
    
    
    
    
    
    
    
    
    
    1,780Intercompany royalties
    
    
    
    
    
    
    
    
    
    
    157
    
    
    
    (157
    )
    
    
    Intercompany technical service fees
    
    
    
    
    
    
    
    
    
    
    349
    
    
    
    (349
    )
    
    
    Other expense (income), net
    
    
    8,463
    
    
    
    11,459
    
    
    
    
    
    
    
    
    
    
    
    19,922Equity in loss (earnings) of investees
    
    
    14,075
    
    
    
    (354
    )
    
    
    
    
    
    
    (13,721
    )
    
    
    Total costs and expenses
    
    
    168,620
    
    
    
    300,956
    
    
    
    16,114
    
    
    
    (21,082
    )
    
    
    464,608(Loss) earnings before interest and taxes
    
    
    (30,224
    )
    
    
    (14,948
    )
    
    
    555
    
    
    
    13,721
    
    
    
    (30,896
    )Intercompany interest (income) expense
    
    
    (3,749
    )
    
    
    3,736
    
    
    
    13
    
    
    
    
    
    
    
    Interest expense
    
    
    18,503
    
    
    
    (605
    )
    
    
    
    
    
    
    
    
    
    
    17,898Interest income
    
    
    88
    
    
    
    80
    
    
    
    8
    
    
    
    
    
    
    
    176(Loss) earnings before income taxes
    
    
    (44,890
    )
    
    
    (17,999
    )
    
    
    550
    
    
    
    13,721
    
    
    
    (48,618
    )Provision (benefit) for income taxes
    
    
    3,836
    
    
    
    (3,924
    )
    
    
    196
    
    
    
    
    
    
    
    108Net (loss) earnings
    
    $
    (48,726
    )
    
    $
    (14,075
    )
    
    $
    354
    
    
    $
    13,721
    
    
    $
    (48,726
    )
 34




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##### Table of Contents



PINNACLE FOODS GROUP INC. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
 Pinnacle Foods Group Inc.
Consolidated Statement of Cash Flows  Successor
For the six months ended June 26, 2005
 PinnacleFoods
    
    
    Guarantor
    
    
    Nonguarantor
    
    
    
    
    
    
    ConsolidatedGroup Inc.
    
    
    Subsidiaries
    
    
    Subsidiary
    
    
    Eliminations
    
    
    TotalCash flows from operating activitiesNet (loss) earnings from operations
    
    $
    (24,602
    )
    
    $
    5,177
    
    
    $
    1,901
    
    
    $
    (7,078
    )
    
    $
    (24,602
    )Non-cash charges (credits) to net earningsDepreciation and amortization
    
    
    12,541
    
    
    
    8,785
    
    
    
    3
    
    
    
    
    
    
    
    21,329Restructuring and impairment charge
    
    
    1,502
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,502Amortization of debt acquisition costs
    
    
    2,614
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,614Amortization of bond premium
    
    
    (257
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (257
    )Change in value of financial instruments
    
    
    (1,261
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,261
    )Equity in loss (earnings) of investees
    
    
    (5,177
    )
    
    
    (1,901
    )
    
    
    
    
    
    
    7,078
    
    
    
    Postretirement healthcare benefits
    
    
    13
    
    
    
    (137
    )
    
    
    
    
    
    
    
    
    
    
    (124
    )Pension expense
    
    
    
    
    
    
    298
    
    
    
    
    
    
    
    
    
    
    
    298Deferred income taxes
    
    
    11,359
    
    
    
    1,098
    
    
    
    
    
    
    
    
    
    
    
    12,457Changes in working capitalAccounts receivable
    
    
    (1,634
    )
    
    
    (629
    )
    
    
    826
    
    
    
    
    
    
    
    (1,437
    )Intercompany accounts receivable/payable
    
    
    29,090
    
    
    
    (28,479
    )
    
    
    (611
    )
    
    
    
    
    
    
    Inventories
    
    
    15,033
    
    
    
    23,750
    
    
    
    362
    
    
    
    
    
    
    
    39,145Accrued trade marketing expense
    
    
    (11,131
    )
    
    
    3,452
    
    
    
    (1,581
    )
    
    
    
    
    
    
    (9,260
    )Accounts payable
    
    
    (27,702
    )
    
    
    2,153
    
    
    
    (298
    )
    
    
    
    
    
    
    (25,847
    )Other current assets and liabilities
    
    
    5,672
    
    
    
    1,948
    
    
    
    606
    
    
    
    
    
    
    
    8,226Net cash provided by (used in) operating activities
    
    
    6,060
    
    
    
    15,515
    
    
    
    1,208
    
    
    
    
    
    
    
    22,783Cash flows from investing activitiesCapital expenditures
    
    
    (6,796
    )
    
    
    (5,464
    )
    
    
    (9
    )
    
    
    
    
    
    
    (12,269
    )Pinnacle merger consideration
    
    
    1,595
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,595Sale of plant assets
    
    
    
    
    
    
    561
    
    
    
    
    
    
    
    
    
    
    
    561Net cash used in investing activities
    
    
    (5,201
    )
    
    
    (4,903
    )
    
    
    (9
    )
    
    
    
    
    
    
    (10,113
    )Cash flows from financing activitiesChange in bank overdrafts
    
    
    
    
    
    
    (308
    )
    
    
    
    
    
    
    
    
    
    
    (308
    )Repayment of capital lease obligations
    
    
    (5
    )
    
    
    (57
    )
    
    
    
    
    
    
    
    
    
    
    (62
    )Successors debt acquisition costs
    
    
    (34
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (34
    )Proceeds from Successors notes payable borrowings
    
    
    31,626
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    31,626Repayments of Successors notes payable
    
    
    (30,177
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (30,177
    )Repayments of Successors long term obligations
    
    
    (2,725
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,725
    )Net cash (used in) provided by financing activities
    
    
    (1,315
    )
    
    
    (365
    )
    
    
    
    
    
    
    
    
    
    
    (1,680
    )Effect of exchange rate changes on cash
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net change in cash and cash equivalents
    
    
    (456
    )
    
    
    10,247
    
    
    
    1,199
    
    
    
    
    
    
    
    10,990Cash and cash equivalents  beginning of period
    
    
    490
    
    
    
    1,745
    
    
    
    
    
    
    
    
    
    
    
    2,235Cash and cash equivalents  end of period
    
    $
    34
    
    
    $
    11,992
    
    
    $
    1,199
    
    
    $
    
    
    
    $
    13,225Supplemental disclosures of cash flow information:Interest paid
    
    $
    30,184
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    30,184Interest received
    
    
    
    
    
    
    213
    
    
    
    10
    
    
    
    
    
    
    
    223Income taxes refunded (paid)
    
    
    
    
    
    
    622
    
    
    
    (184
    )
    
    
    
    
    
    
    438
 35




---



##### Table of Contents



PINNACLE FOODS GROUP INC. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
 Pinnacle Foods Group Inc.
Consolidated Statement of Cash Flows  Successor
For the six months ended June 27, 2004
 PinnacleFoods
    
    
    Guarantor
    
    
    Nonguarantor
    
    
    
    
    
    
    ConsolidatedGroup Inc.
    
    
    Subsidiaries
    
    
    Subsidiary
    
    
    Eliminations
    
    
    TotalCash flows from operating activitiesNet (loss) earnings from operations
    
    $
    (48,726
    )
    
    $
    (14,075
    )
    
    $
    354
    
    
    $
    13,721
    
    
    $
    (48,726
    )Non-cash charges (credits) to net earningsDepreciation and amortization
    
    
    5,538
    
    
    
    12,851
    
    
    
    3
    
    
    
    
    
    
    
    18,392Restructuring and impairment charge
    
    
    
    
    
    
    10,025
    
    
    
    
    
    
    
    
    
    
    
    10,025Amortization of debt acquisition costs
    
    
    1,907
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,907Amortization of bond premium
    
    
    (276
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (276
    )Change in value of financial instruments
    
    
    (3,290
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,290
    )Equity in loss (earnings) of investees
    
    
    14,075
    
    
    
    (354
    )
    
    
    
    
    
    
    (13,721
    )
    
    
    Equity related compensation charge
    
    
    7,400
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,400Postretirement healthcare benefits
    
    
    6
    
    
    
    (267
    )
    
    
    
    
    
    
    
    
    
    
    (261
    )Pension expense
    
    
    
    
    
    
    597
    
    
    
    
    
    
    
    
    
    
    
    597Deferred income taxes
    
    
    3,836
    
    
    
    (4,114
    )
    
    
    
    
    
    
    
    
    
    
    (278
    )Changes in working capitalAccounts receivable
    
    
    (46,768
    )
    
    
    56,007
    
    
    
    5
    
    
    
    
    
    
    
    9,244Intercompany accounts receivable/payable
    
    
    (7,861
    )
    
    
    8,693
    
    
    
    (832
    )
    
    
    
    
    
    
    Inventories
    
    
    (64,120
    )
    
    
    90,273
    
    
    
    (84
    )
    
    
    
    
    
    
    26,069Accrued trade marketing expense
    
    
    24,533
    
    
    
    (23,961
    )
    
    
    165
    
    
    
    
    
    
    
    737Accounts payable
    
    
    33,367
    
    
    
    (14,364
    )
    
    
    (9
    )
    
    
    
    
    
    
    18,994Other current assets and liabilities
    
    
    70,333
    
    
    
    (87,822
    )
    
    
    799
    
    
    
    
    
    
    
    (16,690
    )Net cash provided by (used in) operating activities
    
    
    (10,046
    )
    
    
    33,489
    
    
    
    401
    
    
    
    
    
    
    
    23,844Cash flows from investing activitiesCapital expenditures
    
    
    (2,652
    )
    
    
    (4,721
    )
    
    
    (2
    )
    
    
    
    
    
    
    (7,375
    )Pinnacle merger consideration
    
    
    (738
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (738
    )Aurora merger consideration
    
    
    (663,759
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (663,759
    )Aurora merger costs
    
    
    (13,174
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (13,174
    )Net cash used in investing activities
    
    
    (680,323
    )
    
    
    (4,721
    )
    
    
    (2
    )
    
    
    
    
    
    
    (685,046
    )Cash flows from financing activitiesChange in bank overdrafts
    
    
    
    
    
    
    12,683
    
    
    
    
    
    
    
    
    
    
    
    12,683Repayment of capital lease obligations
    
    
    (16
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (16
    )Equity contribution to Successor
    
    
    95,276
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    95,276Successors debt acquisition costs
    
    
    (16,691
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (16,691
    )Proceeds from Successors bond offerings
    
    
    200,976
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    200,976Proceeds from Successors bank term loan
    
    
    425,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    425,000Repayments of Successors notes payable
    
    
    (14,000
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (14,000
    )Net cash (used in) provided by financing activities
    
    
    690,545
    
    
    
    12,683
    
    
    
    
    
    
    
    
    
    
    
    703,228Effect of exchange rate changes on cash
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net change in cash and cash equivalents
    
    
    176
    
    
    
    41,451
    
    
    
    399
    
    
    
    
    
    
    
    42,026Cash and cash equivalents  beginning of period
    
    
    
    
    
    
    4,751
    
    
    
    503
    
    
    
    
    
    
    
    5,254Cash and cash equivalents  end of period
    
    $
    176
    
    
    $
    46,202
    
    
    $
    902
    
    
    $
    
    
    
    $
    47,280Supplemental disclosures of cash flow information:Interest paid
    
    $
    22,233
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    22,233Interest received
    
    
    88
    
    
    
    78
    
    
    
    10
    
    
    
    
    
    
    
    176Income taxes refunded (paid)
    
    
    
    
    
    
    (22
    )
    
    
    
    
    
    
    
    
    
    
    (22
    )
 
 36




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##### Table of Contents



ITEM 2: MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
   
 Overview
    1 4
  37




---



##### Table of Contents




    
    capitalize on our diversified product portfolio;
    
    leverage our brand names for share leadership;
    
    expand the foodservice and private label businesses;
    
    expand the Vlasic and Duncan Hines brands in Canada;
    
    continue to achieve significant productivity improvements; and
    
    complete the integration and execute on our synergy opportunities.
  38




---



##### Table of Contents



Consolidated
    
    
    Frozen Foods
    
    
    Dry FoodsJune 26,
    
    
    June 27,
    
    
    June 26,
    
    
    June 27,
    
    
    June 26,
    
    
    June 27,2005
    
    
    2004
    
    
    2005
    
    
    2004
    
    
    2005
    
    
    2004Shipments
    
    $
    430.4
    
    
    $
    390.5
    
    
    $
    213.7
    
    
    $
    194.2
    
    
    $
    216.7
    
    
    $
    196.3Less: Aggregate trade marketing and
consumer coupon redemption expenses
    
    
    120.4
    
    
    
    102.3
    
    
    
    58.3
    
    
    
    49.7
    
    
    
    62.1
    
    
    
    52.6Less: Slotting expense
    
    
    3.4
    
    
    
    4.0
    
    
    
    0.3
    
    
    
    1.6
    
    
    
    3.1
    
    
    
    2.4Net sales
    
    $
    306.6
    
    
    $
    284.2
    
    
    $
    155.1
    
    
    $
    142.9
    
    
    $
    151.5
    
    
    $
    141.3
  Consolidated
    
    
    Frozen Foods
    
    
    Dry FoodsJune 26,
    
    
    June 27,
    
    
    June 26,
    
    
    June 27,
    
    
    June 26,
    
    
    June 27,2005
    
    
    2004
    
    
    2005
    
    
    2004
    
    
    2005
    
    
    2004Shipments
    
    $
    894.5
    
    
    $
    594.3
    
    
    $
    485.3
    
    
    $
    324.8
    
    
    $
    409.2
    
    
    $
    269.5Less: Aggregate trade marketing and
consumer coupon redemption expenses
    
    
    244.5
    
    
    
    153.7
    
    
    
    133.9
    
    
    
    81.7
    
    
    
    110.6
    
    
    
    72.0Less: Slotting expense
    
    
    35.5
    
    
    
    6.9
    
    
    
    14.9
    
    
    
    3.9
    
    
    
    20.6
    
    
    
    3.0Net sales
    
    $
    614.5
    
    
    $
    433.7
    
    
    $
    336.5
    
    
    $
    239.2
    
    
    $
    278.0
    
    
    $
    194.5
 Plant Consolidations
 Omaha, Nebraska Production Facility
   39




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##### Table of Contents



Erie, Pennsylvania Production Facility
     40




---



##### Table of Contents



Mattoon, Illinois Production Facility
   
 Results of operations
 Consolidated statements of operations
  Three months ended
    
    
    Six months endedJune 26,
    
    
    June 27,
    
    
    June 26,
    
    
    June 27,2005
    
    
    2004
    
    
    2005
    
    
    2004Net sales
    
    $
    306.6
    
    
    
    100.0
    %
    
    $
    284.2
    
    
    
    100.0
    %
    
    $
    614.5
    
    
    
    100.0
    %
    
    $
    433.7
    
    
    
    100.0
    %Costs and expensesCost of products sold
    
    
    246.2
    
    
    
    80.3
    %
    
    
    238.9
    
    
    
    84.1
    %
    
    
    508.0
    
    
    
    82.7
    %
    
    
    376.7
    
    
    
    86.9
    %Marketing and selling expenses
    
    
    22.0
    
    
    
    7.2
    %
    
    
    23.5
    
    
    
    8.3
    %
    
    
    53.0
    
    
    
    8.6
    %
    
    
    41.7
    
    
    
    9.6
    %Administrative expenses
    
    
    10.1
    
    
    
    3.3
    %
    
    
    14.1
    
    
    
    5.0
    %
    
    
    22.5
    
    
    
    3.7
    %
    
    
    24.5
    
    
    
    5.6
    %Research and development expenses
    
    
    0.9
    
    
    
    0.3
    %
    
    
    1.1
    
    
    
    0.4
    %
    
    
    2.0
    
    
    
    0.3
    %
    
    
    1.8
    
    
    
    0.4
    %Other expense (income), net
    
    
    1.5
    
    
    
    0.5
    %
    
    
    1.0
    
    
    
    0.4
    %
    
    
    4.9
    
    
    
    0.8
    %
    
    
    19.9
    
    
    
    4.6
    %Total costs and expenses
    
    
    280.7
    
    
    
    91.6
    %
    
    
    278.6
    
    
    
    98.0
    %
    
    
    590.4
    
    
    
    96.1
    %
    
    
    464.6
    
    
    
    107.1
    %Earnings (loss) before interest and taxes
    
    $
    25.9
    
    
    
    8.4
    %
    
    $
    5.6
    
    
    
    2.0
    %
    
    $
    24.1
    
    
    
    3.9
    %
    
    $
    (30.9
    )
    
    
    -7.1
    %
 41




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##### Table of Contents



Three months ended
    
    
    Six months endedJune 26,
    
    
    June 27,
    
    
    June 26,
    
    
    June 27,2005
    
    
    2004
    
    
    2005
    
    
    2004Net salesFrozen foods
    
    $
    155.1
    
    
    $
    142.9
    
    
    $
    336.5
    
    
    $
    239.2Dry foods
    
    
    151.5
    
    
    
    141.3
    
    
    
    278.0
    
    
    
    194.5Total
    
    $
    306.6
    
    
    $
    284.2
    
    
    $
    614.5
    
    
    $
    433.7Earnings (loss) before interest and taxesFrozen foods
    
    $
    5.3
    
    
    $
    (4.7
    )
    
    $
    0.6
    
    
    $
    (19.5
    )Dry foods
    
    
    24.4
    
    
    
    14.4
    
    
    
    32.2
    
    
    
    4.7Unallocated corporate expenses
    
    
    (3.8
    )
    
    
    (4.1
    )
    
    
    (8.7
    )
    
    
    (16.1
    )Total
    
    $
    25.9
    
    
    $
    5.6
    
    
    $
    24.1
    
    
    $
    (30.9
    )Depreciation and amortizationFrozen foods
    
    $
    9.4
    
    
    $
    8.9
    
    
    $
    14.5
    
    
    $
    12.0Dry foods
    
    
    3.3
    
    
    
    4.7
    
    
    
    6.8
    
    
    
    6.4Total
    
    $
    12.7
    
    
    $
    13.6
    
    
    $
    21.3
    
    
    $
    18.4
 Three months ended June 26, 2005 compared to three months ended June 27, 2004
 Net sales
 Frozen foods:Shipments in the three months ended June 26, 2005 were $213.7 million, an
increase of $19.5 million, compared to shipments in the three months ended June 27, 2004 of
$194.2 million. The change was driven by a $10.5 million increase in our Swanson product
line sales, a $6.0 million increase in our Aunt Jemima product line sales, and a $5.6
million increase in our frozen seafood product line sales. Partially offsetting these
increases was a $3.8 million decline in our Chef Choice product line sales. Aggregate trade
and consumer coupon redemption expenses increased $7.3 million on the three months ended
June 26, 2005. As a result, frozen foods net sales increased $12.2 million in the three
months ended June 26, 2005. The net sales change was driven by a $7.5 million increase in
our Swanson product line, a $5.6 million increase in our Aunt Jemima product line, and a
$4.4 million increase in our seafood product lines. Partially offsetting these increases
was a $4.0 million decline in our Celeste product line and a $3.4 million decline in our
Chef Choice product line.Dry foods:Shipments in the three months ended June 26, 2005 were $216.7 million, an
increase of $20.4 million, compared to shipments in the three months ended June 27, 2004 of
$196.3 million. The change was driven by a $15.4 million increase in our Duncan Hines
product lines sales, a $2.4 million increase in our syrup product line sales, and a $1.0
million increase in our pickle product line sales. Aggregate trade and consumer coupon
redemption expenses increased $10.2 million. As a result, dry foods net sales increased
$10.2 million in the three months ended June 26, 2005. The net sales change was driven by a
$5.6 million increase in our Duncan Hines product lines sales, a $1.7 million increase in
our syrup product line sales, and a $1.4 million increase in our Open Pit product line
sales.
 Cost of products sold
 42




---



##### Table of Contents



Marketing and selling expenses
 Administrative expenses
 Research and development expenses
 Other expense (income), net
 Earnings (loss) before interest and taxes
 Frozen foods:Frozen foods EBIT increased by $10.0 million in the three months ended June
26, 2005. This increase was net of $4.2 million of accelerated depreciation expense related
to the closure of the Erie, Pennsylvania frozen food facility in the second quarter of 2005
and a charge of $0.4 million related to the plant consolidation expense from the closure of
the Omaha, Nebraska and Erie, Pennsylvania frozen foods facilities in the second quarter of
2005. The results for the three months ended June 27, 2004 include additional costs of
products sold of $4.5 million related to post-acquisition sales of inventories written up to
fair value at the date of the Aurora Transaction, and $3.3 million of accelerated
depreciation expense related to the closure of the Omaha, Nebraska frozen food facility.
Additionally, the corporate overhead expense allocated to frozen foods was $1.5 million
higher for the three months ended June 27, 2004, related to the continued operation of the
Aurora headquarters office in St. Louis, which was closed in May 2004. The balance of our
frozen foods EBIT increased $5.3 million, primarily due to a 10% increase in cases sold in
the frozen foods segment. The increase in sales volume was partially offset by increased
cost of products sold expense related to the reorganization of our warehousing network, and
increased trade and coupon promotion expenses.Dry foods:Dry foods EBIT increased $10.0 million in the three months ended June 26, 2005.
The three months ended June 27, 2004 include additional costs of $4.0 million and $5.4
million related to post-Merger sales of inventories written up to fair value at the date of
the Pinnacle Merger and the Aurora Transaction, respectively. Additionally, the corporate
overhead expense allocated to dry foods was $1.4 million higher for the three months ended
June 27, 2004, related to the continued operation of the Aurora headquarters office in St.
Louis, which was closed in May 2004. The balance of the Dry foods EBIT decreased $0.8
million, primarily due to increased trade promotion and advertising expenses and increased
cost of products sold expense related to the reorganization of our warehousing network and
increased slotting and trade promotion expenses. Partially offsetting these costs were
increased sales volume, resulting from additional case volume in our Duncan Hines product
line.
 Interest expense, net
 43




---



##### Table of Contents



Provision for income taxes.
  Six months ended June 26, 2005 compared to six months ended June 27, 2004
 Net sales
 Frozen foods:Shipments in the six months ended June 26, 2005 were $485.3 million, an
increase of $160.5 million. $137.0 million of the increase was related to products acquired
in the Aurora Transaction. The balance of the change was driven by increases in our
Swanson, Aunt Jemima, and seafood product line sales. Aggregate trade and consumer coupon
redemption expenses increased $63.2 million, of which $47.1 million of the increase related
to the products acquired in the Aurora Transaction. As a result, frozen foods net sales
increased $97.3 million, with $90.0 million related to the products acquired in the Aurora
Transaction. The balance of the change was driven by increases in our Aunt Jemima, seafood,
and Swanson product line sales.Dry foods:Shipments in the six months ended June 26, 2005 were $409.2 million, an increase
of $139.7 million. $113.6 million of the increase was related to products acquired in the
Aurora Transaction. The balance of the change was driven by increases in our Duncan Hines,
pickle, and syrup product line sales. Aggregate trade and consumer coupon redemption
expenses increased $56.2 million, of which $38.9 million related to products acquired in the
Aurora Transaction. As a result, dry foods net sales increased $83.5 million, of which
$74.7 million was related to products acquired in the Aurora Transaction. The balance of the
change was driven by increases in our Duncan Hines and syrup product line sales.
 Cost of products sold
 Marketing and selling expenses
 Administrative expenses
 Research and development expenses
 44




---



##### Table of Contents



Other expense (income), net
 Earnings (loss) before interest and taxes
 Frozen foods:Frozen foods EBIT increased by $20.1 million in the six months ended June 26,
2005 and includes $5.2 million related to the business acquired in the Aurora Transaction.
In the first six months of 2005 we recorded $4.2 million of accelerated depreciation expense
related to the closure of the Erie, Pennsylvania frozen food facility and a charge of $1.7
million related to the plant consolidation expense from the closure of the Omaha, Nebraska
($1.0 million) and Erie, Pennsylvania ($0.7 million) frozen foods facilities. Additionally,
a $0.9 million asset impairment write down for the shutdown of a production line at our
Mattoon, Illinois facility was recorded in the first six months of 2005. The six months
ended June 27, 2004 include additional costs of $1.2 million related to post-Merger sales of
inventories written up to fair value at the date of the Pinnacle Merger. The increase in
EBIT also includes the impact of the $5.8 million charge recorded in the six months ended
June 27, 2004 related to post-acquisition sales of inventories written up to fair value at
the date of the Aurora Transaction, which includes $1.3 million in the first quarter and
$4.5 million in the second quarter. Additionally, the results for the six months ended June
27, 2004 included a charge of $10.0 million related to the closure of the Omaha, Nebraska
frozen foods facility as well as $3.3 million of accelerated depreciation expense related to
the closure of the Omaha facility. Additionally, the corporate overhead expense allocated to
frozen foods was $1.5 million higher for the six months ended June 27, 2004, related to the
continued operation of the Aurora headquarters office in St. Louis, which was closed in May
2004. The balance of our frozen foods EBIT decreased $0.1 million, resulting from an
increase in sales volume offset by increased cost of products sold expense related to the
reorganization of our warehousing network, and increased slotting and trade promotion
expenses.Dry foods:Dry foods EBIT increased $27.5 million in the six months ended June 26, 2005 and
includes $9.9 million related to the business acquired in the Aurora Transaction. The
increase in EBIT also includes the impact of the $7.2 million charge recorded in the six
months ended June 27, 2004 related to post-acquisition sales of inventories written up to
fair value at the date of the Aurora Transaction, which includes $1.8 million in the first
quarter and $5.4 million in the second quarter. The six months ended June 27, 2004 also
includes additional cost of products sold of $17.0 million related to post-Merger sales of
inventories written up to fair value at the date of the Pinnacle Merger. Additionally, the
corporate overhead expense allocated to dry foods was $1.4 million higher for the six months
ended June 27, 2004, related to the continued operation of the Aurora headquarters office in
St. Louis, which was closed in May 2004. The balance of the Dry foods EBIT decreased $8.0
million, primarily due to increased cost of products sold expense related to the
reorganization of our warehousing network and increased slotting and trade promotion
expenses. Partially offsetting these costs were increased sales volume, resulting from
additional case volume in our Duncan Hines and pickles product lines.
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Interest expense, net
 Provision for income taxes.
 Seasonality
  
 Liquidity and capital resources
 Historical
   Statements of cash flows for the six months ended June 26, 2005
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Debt
     
    
    In the case of base rate loans: 1.75% for the term loan and 1.75% for the revolving credit facility.
    
    In the case of Eurodollar loans: 2.75% for the term loan and 2.75% for the revolving credit facility.
  
    
    In the case of base rate loans: 1.25% to 1.75%.
    
    In the case of Eurodollar loans: 2.25% to 2.75%.
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1 4 1 4
  Year
    
    Percentage2008
    
    
    104.125
    %2009
    
    
    102.750
    %2010
    
    
    101.375
    %2011 and thereafter
    
    
    100.000
    %
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Senior Credit Agreement Amendment
   
    
    delivery of July 31, 2004 fiscal year end financial statements on or prior to the
effective date of the amendment;
    
    a 50 basis point increase to the applicable rate, as defined, with respect to
borrowings under the credit agreement;
    
    a change in the definition of consolidated cash interest expense to exclude non-cash
gains or losses arising from marking interest rate swap agreements to market;
    
    the addition of a senior covenant leverage ratio, as defined, which ranges from a
ratio of 3.75 to 1.00 to a ratio of 5.75 to 1.00 through December 2005;
    
    amendment of the interest expense coverage ratio (ranging from a ratio of 1.50 to
1.00 to a ratio of 2.10 to 1.00 through December 2005) and suspends the maximum total
leverage ratio until March 2006;
    
    elimination of limitation on revolving credit exposures;
    
    and the following limitations, restrictions and additional reporting requirements
during the amendment period which ends on the second business day following the date on
which the Company delivers to the Administrative Agent financial statements for the
fiscal quarter ending March 2006:
 
    
    prohibit incremental extensions of credit, as defined;
    
    additional limitations on indebtedness;
    
    limitations on acquisitions and investments;
    
    additional limitations on restricted payments;
    
    suspension of payments for management fees;
    
    continuation of the anti-cash hoarding provision;
    
    monthly financial reporting requirements, and;
    
    a Company election to early terminate the amendment period.
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Inflation
  
 Recently Issued Accounting Pronouncements
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ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
 Financial Instruments
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Raw materials, ingredients, packaging and production costs
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ITEM 4: CONTROLS AND PROCEDURES
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PART II  OTHER INFORMATION
 
 ITEM 1: LEGAL PROCEEDINGS
 PFGIs Fleming bankruptcy claim
  Auroras Fleming bankruptcy claim
  Employee litigationindemnification of US Cold Storage
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R2 appeal in Aurora bankruptcy
  State of Illinois v. City of St. Elmo and Aurora Foods Inc.
    Underweight Products
 
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American Cold Storage  North America, L/P. v. P.F. Distribution, LLC and Pinnacle Foods Group Inc.
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ITEM 2: CHANGES IN SECURITIES AND USE OF PROCEEDS
  
 ITEM 3: DEFAULTS UPON SENIOR SECURITIES
  
 ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  
 ITEM 5: OTHER INFORMATION
  
 ITEM 6: EXHIBITS
 a)
    
    Exhibits
 Exhibit Number
    
    Description of exhibit31.1
    
    
    Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer31.2
    
    
    Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer32.1
    
    
    Certification of Chief Executive Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 (A)32.2
    
    
    Certification of Chief Financial Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 (A)
 (A)
    
    Pursuant to Commission Release No. 33-8212, this certification will be treated
as accompanying this Form 10-Q and not filed as part of such report for purposes of
Section 18 of Exchange Act, or otherwise subject to the liability of Section 18 of the
Exchange Act and this certification will not be deemed to be incorporated by reference
into any filing under the Securities Act of 1933, as amended, or the Exchange Act,
except to the extent that the registrant specifically incorporates it by reference.
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SIGNATURES
  Pinnacle Foods Group Inc.By:
    
    /s/ N. MICHAEL DIONName:
    
    N. Michael DionTitle:
    
    Executive Vice President and Chief Financial Officer,(acting in both his capacity as authorized signatory on behalf of the registrant and as principal financial officer)Date:
    
    August 9, 2005
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