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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
    
    Commission File NumberMarch 27, 2005
    
    333-118390
 Pinnacle Foods Group Inc. Delaware
    
    94-3303521State of Incorporation
    
    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 or15(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 May 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
    
    
    113.Acquisitions
    
    
    114.Restructuring and Impairment Charges
    
    
    145.Stock Options
    
    
    176.Other Expense (Income), net
    
    
    177.Inventories
    
    
    188.Goodwill and Other Assets
    
    
    189.Debt and Interest Expense
    
    
    1910.Pension and Retirement Plans
    
    
    2211.Financial Instruments
    
    
    2312.Commitments and Contingencies
    
    
    2513.Related Party Transactions
    
    
    2714.Segments
    
    
    2815.Recently Issued Accounting Pronouncements
    
    
    3016.Guarantor and Nonguarantor Statements
    
    
    30ITEM 2: MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
    
    
    37Overview
    
    
    37Results of operations
    
    
    42Liquidity and capital resources
    
    
    45Inflation
    
    
    49Recently Issued Accounting Pronouncements
    
    
    49ITEM 3:QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
    
    
    50ITEM 4:CONTROLS AND PROCEDURES
    
    
    52PART II  OTHER INFORMATION
    
    
    53ITEM 1:LEGAL PROCEEDINGS
    
    
    53ITEM 2:CHANGES IN SECURITIES AND USE OF PROCEEDS
    
    
    55ITEM 3:DEFAULTS UPON SENIOR SECURITIES
    
    
    55ITEM 4:SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
    
    
    55ITEM 5:OTHER INFORMATION
    
    
    55ITEM 6:EXHIBITS AND REPORTS ON FORM 8-K
    
    
    55Exhibit 31.1
    
    
    57Exhibit 31.2
    
    
    58Exhibit 32.1
    
    
    59Exhibit 32.2
    
    
    60EX-31.1: CERTIFICATIONEX-31.2: CERTIFICATIONEX-32.1: CERTIFICATIONEX-32.2: CERTIFICATION
    2




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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 endedMarch 27,
    
    
    March 28,2005
    
    
    2004Net sales
    
    $
    307,837
    
    
    $
    149,472Costs and expensesCost of products sold
    
    
    261,767
    
    
    
    137,722Marketing and selling expenses
    
    
    30,950
    
    
    
    18,186Administrative expenses
    
    
    12,368
    
    
    
    10,460Research and development expenses
    
    
    1,041
    
    
    
    713Other expense (income), net
    
    
    3,426
    
    
    
    18,936Total costs and expenses
    
    
    309,552
    
    
    
    186,017Loss before interest and taxes
    
    
    (1,715
    )
    
    
    (36,545
    )Interest expense
    
    
    14,254
    
    
    
    9,592Interest income
    
    
    56
    
    
    
    53Loss before income taxes
    
    
    (15,913
    )
    
    
    (46,084
    )Provision (benefit) for income taxes
    
    
    6,515
    
    
    
    (6,065
    )Net loss
    
    $
    (22,428
    )
    
    $
    (40,019
    )
 See accompanying Notes to
Unaudited Consolidated Financial Statements. 4




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PINNACLE FOODS GROUP INC. AND SUBSIDIARIES 
 CONSOLIDATED BALANCE SHEETS (unaudited)
 SuccessorMarch 27,
    
    
    December 26,2005
    
    
    2004Current assets:Cash and cash equivalents
    
    $
    23,387
    
    
    $
    2,235Accounts receivable, net
    
    
    92,758
    
    
    
    74,365Inventories, net
    
    
    167,912
    
    
    
    205,510Other current assets
    
    
    6,703
    
    
    
    3,991Deferred income taxes
    
    
    22
    
    
    
    22Total current assets
    
    
    290,782
    
    
    
    286,123Plant assets, net
    
    
    218,678
    
    
    
    223,740Tradenames
    
    
    780,544
    
    
    
    780,544Other assets, net
    
    
    54,240
    
    
    
    57,670Goodwill
    
    
    415,318
    
    
    
    416,863Total assets
    
    $
    1,759,562
    
    
    $
    1,764,940Current liabilities:Current portion of long-term obligations
    
    $
    5,576
    
    
    $
    5,574Accounts payable
    
    
    74,710
    
    
    
    87,921Accrued trade marketing expense
    
    
    52,634
    
    
    
    46,014Accrued liabilities
    
    
    96,399
    
    
    
    77,735Accrued income taxes
    
    
    1,632
    
    
    
    1,477Total current liabilities
    
    
    230,951
    
    
    
    218,721Long-term debt
    
    
    935,984
    
    
    
    937,506Postretirement benefits
    
    
    2,878
    
    
    
    2,940Deferred income taxes
    
    
    218,639
    
    
    
    212,406Total liabilities
    
    
    1,388,452
    
    
    
    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
    
    
    62
    
    
    
    48Carryover of Predecessor basis of net assets
    
    
    (17,338
    )
    
    
    (17,495
    )Accumulated deficit
    
    
    (131,047
    )
    
    
    (108,619
    )Total shareholders equity
    
    
    371,110
    
    
    
    393,367Total liabilities and shareholders equity
    
    $
    1,759,562
    
    
    $
    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)
 SuccessorThree months endedMarch 27,
    
    
    March 28,2005
    
    
    2004Cash flows from operating activitiesNet loss from operations
    
    $
    (22,428
    )
    
    $
    (40,019
    )Non-cash charges (credits) to net earningsDepreciation and amortization
    
    
    8,631
    
    
    
    4,767Restructuring and impairment charge
    
    
    1,502
    
    
    
    10,025Amortization of debt acquisition costs
    
    
    1,307
    
    
    
    749Amortization of bond premium
    
    
    (128
    )
    
    
    (95
    )Change in value of financial instruments
    
    
    (4,368
    )
    
    
    Equity related compensation charge
    
    
    
    
    
    
    7,400Postretirement healthcare benefits
    
    
    (62
    )
    
    
    (209
    )Pension expense
    
    
    149
    
    
    
    282Deferred income taxes
    
    
    6,233
    
    
    
    (6,270
    )Changes in working capitalAccounts receivable
    
    
    (18,336
    )
    
    
    2,886Inventories
    
    
    37,639
    
    
    
    29,033Accrued trade marketing expense
    
    
    6,591
    
    
    
    3,609Accounts payable
    
    
    (12,932
    )
    
    
    3,239Other current assets and liabilities
    
    
    20,720
    
    
    
    1,354Net cash provided by operating activities
    
    
    24,518
    
    
    
    16,751Cash flows from investing activitiesCapital expenditures
    
    
    (3,227
    )
    
    
    (1,851
    )Pinnacle merger consideration
    
    
    1,595
    
    
    
    Pinnacle merger costs
    
    
    
    
    
    
    (290
    )Aurora merger consideration
    
    
    
    
    
    
    (663,759
    )Aurora merger costs
    
    
    
    
    
    
    (11,981
    )Net cash used in investing activities
    
    
    (1,632
    )
    
    
    (677,881
    )Cash flows from financing activitiesChange in bank overdrafts
    
    
    (308
    )
    
    
    11,366Repayment of capital lease obligations
    
    
    (30
    )
    
    
    (1
    )Equity contribution to Successor
    
    
    
    
    
    
    95,276Successors debt acquisition costs
    
    
    (34
    )
    
    
    (16,671
    )Proceeds from Successors bond offerings
    
    
    
    
    
    
    200,976Proceeds from Successors bank term loan
    
    
    
    
    
    
    425,000Proceeds from Successors notes payable borrowing
    
    
    30,000
    
    
    
    Repayments of Successors notes payable
    
    
    (30,000
    )
    
    
    (14,000
    )Repayments of Successors long term obligations
    
    
    (1,362
    )
    
    
    Net cash (used in) provided by financing activities
    
    
    (1,734
    )
    
    
    701,946Effect of exchange rate changes on cash
    
    
    
    
    
    
    Net change in cash and cash equivalents
    
    
    21,152
    
    
    
    40,816Cash and cash equivalents - beginning of period
    
    
    2,235
    
    
    
    5,254Cash and cash equivalents - end of period
    
    $
    23,387
    
    
    $
    46,070Supplemental disclosures of cash flow information:Interest paid
    
    $
    5,311
    
    
    $
    3,171Interest received
    
    
    56
    
    
    
    53Income taxes refunded (paid)
    
    
    659
    
    
    
    (12
    )Non-cash investing activity:Aurora merger consideration
    
    
    
    
    
    
    (225,120
    )Non-cash financing activityAurora merger equity contribution
    
    
    
    
    
    
    225,120
 See accompanying Notes to Unaudited Consolidated Financial Statements 6




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PINNACLE FOODS GROUP INC. AND SUBSIDIARIES 
 CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY (unaudited)
 Carryover of
    
    
    AccumulatedAdditional
    
    
    
    
    
    
    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
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (40,019
    )
    
    
    
    
    
    
    
    
    
    
    (40,019
    )Foreign currency translation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3
    )
    
    
    (3
    )Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (40,022
    )Balance at March 28, 2004
    
    
    100
    
    
    $
    
    
    
    $
    519,433
    
    
    $
    (56,318
    )
    
    $
    (17,495
    )
    
    $
    (3
    )
    
    $
    445,617SuccessorBalance at December 26, 2004
    
    
    100
    
    
    $
    
    
    
    $
    519,433
    
    
    $
    (108,619
    )
    
    $
    (17,495
    )
    
    $
    48
    
    
    $
    393,367Impact of additional purchase accounting adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    157
    
    
    
    
    
    
    
    157Comprehensive income:Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (22,428
    )
    
    
    
    
    
    
    
    
    
    
    (22,428
    )Foreign currency translation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14
    
    
    
    14Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (22,414
    )Balance at March 27, 2005
    
    
    100
    
    
    $
    
    
    
    $
    519,433
    
    
    $
    (131,047
    )
    
    $
    (17,338
    )
    
    $
    62
    
    
    $
    371,110
 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 As described in detail below, Pinnacle Foods Holding Corporation (PFHC), a leading producer,
marketer and distributor of high quality, branded food products, and certain newly-formed investor
companies consummated a merger (the Pinnacle Merger or Merger) effective November 24, 2003.
The ultimate parent of these investor companies is Crunch Equity Holding, LLC (LLC). Each share
of PFHCs issued and outstanding stock immediately prior to the closing of the Pinnacle Merger was
converted into the right to receive the per share merger consideration in cash. Therefore, PFHC
was effectively acquired by LLC on November 25, 2003. On November 25, 2003, LLC entered into a definitive agreement with Aurora Foods Inc. (Aurora)
that provided for a comprehensive restructuring transaction in which PFHC was merged with and into
Aurora, with Aurora surviving this merger. The combination of Aurora and PFHC is treated as a
purchase, with LLC as the accounting acquirer, in accordance with Statement of Financial Accounting
Standards (SFAS) No. 141, Business Combinations. This restructuring transaction and the
related merger was completed on March 19, 2004 and the surviving company was renamed Pinnacle Foods
Group Inc. (hereafter referred to as the Company or PFGI). For purposes of identification and description, the Company is referred to as the Predecessor for
the period prior to the Pinnacle Merger occurring on November 24, 2003, and the Successor for the
period subsequent to the Pinnacle Merger. In December 2004, the Companys board of directors approved a change in PFGIs fiscal year end from
July 31 to the last Sunday in December. Accordingly, the Company is presenting unaudited
consolidated financial statements for the three months ended March 27, 2005 (also referred to as
the first quarter of 2005) and for the three months ended March 28, 2004. Additionally, references
to the transition year refer to the 21 weeks ended December 26, 2004. The Company is a leading producer, marketer and distributor of high quality, branded convenience
food products, the products and operations of which are managed and reported in two operating
segments: (i) frozen foods and (ii) dry foods. The Companys frozen foods segment consists
primarily of Swanson and Hungry Man frozen foods products, Van de Kamps and Mrs. Pauls frozen
seafood, Aunt Jemima frozen breakfasts, Lenders bagels and other frozen foods under the Celeste
and Chefs Choice names, as well as food service and private label products. The Companys dry
foods segment consists primarily of Vlasic pickles, peppers and relish products, Duncan Hines
baking mixes and frostings, Mrs. Butterworths and Log Cabin syrups and pancake mixes, and Open Pit
barbecue sauce as well as food service and private label products. Pinnacle Merger and Change of Control On August 8, 2003, Pinnacle Foods Holding Corporation (PFHC, or Pinnacle), Crunch Holding Corp.
(CHC) and Crunch Acquisition Corp. (CAC) entered into an agreement and plan of merger. CHC is
a newly formed Delaware corporation and a wholly-owned subsidiary of LLC, and CAC is a newly formed
Delaware corporation and a wholly-owned subsidiary of CHC. J.P. Morgan Partners, LLC (JPMP),
J.W. Childs Associates, L.P. (or its affiliates, as appropriate, JWC) and CDM Investor Group LLC
(CDM and together with JPMP and JWC, the Sponsors), together with certain of their affiliates,
as of the closing of this Pinnacle Merger, own 100% of the outstanding voting units of LLC on a
fully diluted basis. Prior to the Pinnacle Merger, JPMP owned approximately 9.2% of PFHCs common
stock. The closing of the Pinnacle Merger occurred on November 25, 2003. Each share of PFHCs issued and outstanding stock immediately prior to closing was converted into
the right to receive the per share Merger consideration (approximately $2.14 per share) in cash.
The aggregate purchase price was approximately $485 million, including the repayment of outstanding
debt under the Predecessors Senior Secured Credit Facilities. The estimated working capital
adjustment at the time of the closing was approximately $10 million. During the first quarter of
2005, the working capital adjustment was settled at $8.4 million and resulted in a reduction of
purchase price and goodwill of approximately $1.5 million. 8




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PINNACLE FOODS GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(in thousands, except where noted in millions)  In June 2001, the FASB issued SFAS No. 141, Business Combinations, and SFAS No. 142,
Goodwill and Other Intangible Assets, which establishes accounting and reporting for business
combinations. SFAS No. 141 requires all business combinations be accounted for using the purchase
method of accounting. SFAS No. 142 provides that goodwill and other intangible assets with
indefinite lives will not be amortized, but will be tested for impairment on an annual basis. The
Successor has accounted for the Pinnacle Merger in accordance with these standards. The Merger of
PFHC with CAC is being treated as a purchase with LLC (whose sole asset is its indirect investment
in the common stock of PFHC) as the accounting acquiror in accordance with SFAS No. 141, and is
accounted for in accordance with Emerging Issues Task Force (EITF) Issue No. 88-16, Basis in
Leveraged Buyout Transactions. Following the guidance in EITF Issue No. 88-16, the net assets associated with the 9.2% of the
outstanding PFHC common stock owned by JPMP and certain members of CDM before the Pinnacle Merger
were carried over at the Predecessor basis and the net assets related to the 90.8% of the
outstanding PFHC common stock before the Merger not owned by JPMP and certain members of CDM have
been recorded at fair value. The excess of the purchase price over Predecessor basis of net assets
of the PFHC common stock owned by JPMP and certain members of CDM prior to the Pinnacle Merger was
$17,338, after adjusting for the final working capital adjustment, and is recorded as carry-over
basis in shareholders equity. The total cost of the Pinnacle Merger, after adjusting for the final working capital adjustment,
consists of: Stated purchase price
    
    $
    485,000Working capital adjustments
    
    
    8,414Acquisition costs
    
    
    7,154Total cost of acquisition
    
    $
    500,568
 Of the total consideration paid to the Predecessors shareholders outlined above, $10 million was
deposited into an escrow account pending finalization of the working capital adjustment. In April
2004, a partial distribution of approximately $7 million was disbursed from the working capital
escrow account. During the first quarter of 2005, the working capital adjustment was settled at
$8.4 million and the final distribution from the escrow was made. This resulted in a reduction of
purchase price and goodwill of approximately $1.5 million. Of the total consideration paid to the Predecessors shareholders outlined above, $17 million was
deposited into a second escrow account pending finalization of indemnification adjustments, which
related to the Predecessors indemnifications of CHC as stipulated in the merger agreement and
included, but were not limited to, breaches of representations or warranties, certain tax matters,
and certain environmental items. During the first quarter of 2005, as there were no claims
pending, the full indemnification escrow was distributed to the sellers. 9




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PINNACLE FOODS GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(in thousands, except where noted in millions)  The following table summarizes the final allocation of the total cost of the Pinnacle
acquisition to the assets acquired and liabilities assumed: Assets recorded:Plant assets
    
    $
    147,490Inventories
    
    
    134,730Accounts receivable
    
    
    42,739Cash
    
    
    4,772Other current assets
    
    
    4,205Goodwill
    
    
    142,567Tradenames
    
    
    106,156Other assets
    
    
    177Fair value of assets acquired
    
    
    582,836Liabilities assumed
    
    
    76,946Deferred income taxes
    
    
    22,660Carryover of Predecessor basis of net assets
    
    
    (17,338
    )Purchase price
    
    $
    500,568
 The total intangible assets amounted to $248,723, of which $106,156 was assigned to tradenames
that are not subject to amortization. Goodwill, which is not subject to amortization, amounted to
$142,567, of which $140,800 was allocated to the dry foods segment and $1,767 was allocated to the
frozen foods segment. No new tax-deductible goodwill was created as a result of the Pinnacle
Merger, but historical tax-deductible goodwill in the amount of $1,661 does exist. In accordance with the requirements of purchase method accounting for acquisitions, inventories as
of November 24, 2003 were valued at fair value (net realizable value, which is defined as estimated
selling prices less the sum of (a) costs of disposal and (b) a reasonable profit allowance for the
selling effort of the acquiring entity) which in the case of finished products was $26,304 higher
than the Predecessors historical manufacturing cost. The Successors cost of products sold during
the three months ended March 28, 2004 includes a pre-tax charge of $14,142. The Pinnacle Merger was financed through borrowings of a $120 million Term Loan and a $21.5 million
Revolver drawing under the Successors Senior Secured Credit Facilities, $200 million of Senior
Subordinated Notes issued November 2003 and $181 million equity contribution from the Sponsors. As a result of the Pinnacle Merger, our initial capitalization at the Merger date consisted of: Borrowings under new revolving credit facility
    
    $
    21,500Borrowings of new term loan
    
    
    120,000Issuance of new senior subordinated notes
    
    
    200,000Additional paid-in capital
    
    
    180,637Total capitalization
    
    $
    522,137
 Other Pinnacle Merger Related Matters Immediately prior to closing, pursuant to their original terms, all of the Predecessors
outstanding stock options vested and the Predecessor exercised its purchase option to purchase at
fair value all of the shares of common stock to be acquired by exercise of options held by
employees pursuant to the Stock Option Plan. As a result, compensation expense of approximately
$4.9 million was recorded in the Consolidated Statement of Operations immediately before the
Pinnacle Merger for the difference between the aggregate fair value of the shares of common stock
and the aggregate exercise price of the stock options. 10




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PINNACLE FOODS GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(in thousands, except where noted in millions)  From and after the consummation of the Pinnacle Merger, each outstanding warrant will
thereafter entitle the holder thereof to receive, in consideration for the cancellation of such
warrant, an amount in cash equal to the excess, if any, of the final per share Pinnacle Merger
consideration over the exercise price of such warrant and no more. Because the warrants strike
price is $3.00 per share and as the Pinnacle Merger consideration was approximately $2.14 per
share, no payment to warrant holders was made and thus, no value was assigned to the warrants. The closing of the transaction represented a change in control under the Predecessors employment
agreements with certain executives. As a result, the Predecessor was required to pay $1.7 million
pursuant to these agreements and recorded a charge for such amount in the Consolidated Statement of
Operations immediately before the Pinnacle Merger. In addition, retention benefits to certain key
employees of approximately $2.2 million were accrued as a compensation charge over the three-month
retention period from the date of closing to the payment date in February 2004. In connection with the formation of LLC, certain ownership units of LLC were issued to CDM, which
is controlled by certain members of PFGIs management. Certain of these units provide a profits
interest consisting of an interest in distributions to the extent in excess of capital contributed
by members of LLC. The interests vest immediately. The fair value of the interests at the date of
grant is $11 million and has been included in the Successors Consolidated Balance Sheet as an
increase in Successors paid-in-capital and in the Consolidated Statement of Operations for the 36
weeks ended July 31, 2004 as an expense reflecting the charge for the fair value immediately after
consummation of the Pinnacle Merger. Additional units were issued in connection with the Aurora
transaction and are discussed in Note 3 to the Consolidated Financial Statements. The Advisory and Oversight Agreement between the Predecessor and an affiliate of the majority
selling shareowners, and the stockholders agreement between PFHC and Predecessors current
shareholders, was terminated at closing. Also, at closing, all members of the board of directors
of PFHC resigned. Subsequent to the Pinnacle Merger, directors of Crunch Acquisition Corp. became
directors of the surviving corporation, Pinnacle Foods Holding Corporation. 
 2. Interim Financial Statements In the opinion of management, the accompanying unaudited consolidated financial statements contain
all adjustments (consisting only of normal recurring adjustments) necessary for a fair statement of
PFGIs financial position as of March 27, 2005, and the results of operations and cash flows for
the three months ended March 27, 2005 and March 28, 2004. The results of operations are not
necessarily indicative of the results to be expected for the full year. The accompanying unaudited
consolidated financial statements should be read in conjunction with the audited consolidated
financial statements and notes thereto for the transition year ended December 26, 2004. 
 3. Acquisitions Aurora Transaction On November 25, 2003, Aurora Foods Inc. (Aurora) entered into a definitive agreement with LLC,
the indirect owner of PFHC. The definitive agreement provides for a comprehensive restructuring
transaction in which PFHC was merged with and into Aurora, with Aurora surviving the Merger,
following the filing and confirmation of a pre-negotiated bankruptcy reorganization case with
respect to Aurora under Chapter 11 of the U.S. Bankruptcy Code. On December 8, 2003, Aurora filed
its petition for reorganization with the Bankruptcy Court. On February 20, 2004, the First Amended
Joint Reorganization Plan of Aurora Foods Inc. and Sea Coast Foods, Inc., as modified, dated
February 17, 2004, was confirmed by order of the Bankruptcy Court. We collectively refer to the
restructuring, the financing therefore and the other related transactions as the Aurora
Transaction. This restructuring transaction was completed on March 19, 2004 and the surviving
company was renamed Pinnacle Foods Group Inc. (hereafter referred to as the Company or PFGI). 11




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PINNACLE FOODS GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(in thousands, except where noted in millions)  Pursuant to the terms of the definitive agreement, (i) the senior secured lenders under Auroras
existing credit facility were paid in full in cash in respect of principal and interest, and
received $15 million in cash in respect of certain leverage and asset sales fees owing under that
facility, (ii) the holders of Auroras 12% senior unsecured notes due 2005 were paid in full in
cash in respect of principal and interest but did not receive $1.9 million of original issue
discount, (iii) the holders of Auroras outstanding 8.75% and 9.875% senior subordinated notes due
2008 and 2007, respectively, received approximately 50% of the face value of the senior
subordinated notes plus accrued interest in cash or, at the election of each bondholder, 52% of the
face value of the senior subordinated notes plus accrued interest in equity interests in LLC (held
indirectly through a bondholders trust), (iv) the existing common and preferred stockholders did
not receive any distributions and their shares have been cancelled, (v) Auroras existing accounts
receivable securitization facility was terminated in December 2003, (vi) all of Auroras trade
creditors were paid in full and (vii) all other claims against Aurora were unimpaired, except for
the rejection of Auroras St. Louis headquarters leases. The definitive agreement also provides
that total acquisition consideration is subject to a post-closing adjustment based on Auroras
adjusted net debt as of the closing date. At this point, we can not estimate when the post-closing
adjustment will be finalized. Upon the settlement of the post-closing adjustment, the merger
consideration will either increase or decrease with a corresponding increase or decrease to
goodwill. In connection with the Aurora Transaction, certain ownership units of LLC were issued to CDM, which
is controlled by certain members of PFGIs management. Certain of these units provide a profits
interest consisting of an interest in distributions to the extent in excess of capital contributed
by members of the LLC. The interests vest immediately. The fair value of the interests at the date
of grant is $7.4 million and has been included in the Successors Consolidated Balance Sheet as an
increase in Successors paid-in-capital and in the Consolidated Statement of Operations for the
three months ended March 28, 2004 as an expense reflecting the charge for the fair value
immediately after consummation of the Aurora Transaction. Additional units were issued in
connection with the Pinnacle Merger and are discussed in Note 1 under the section entitled Other
Pinnacle Merger Related Matters. After the consummation of the Aurora Transaction, JPMP and JWC collectively own approximately 48%
of LLC, the holders of Auroras senior subordinated notes own approximately 43% of LLC and CDM owns
approximately 9% of LLC, in each case subject to dilution by up to 16% in management equity
incentives and in each case without giving effect to any net debt adjustment to the Aurora equity
value. Prior to its bankruptcy filing, Aurora entered into an agreement with its prepetition lending group
compromising the amount of certain fees (i.e., excess leverage fees) due under its senior bank
facilities (the October Amendment). One of the members of the bank group (R2 Top Hat, Ltd.)
challenged the enforceability of the October Amendment during Auroras bankruptcy by filing an
adversary proceeding and by objecting to confirmation. The bankruptcy court rejected the lenders
argument and confirmed Auroras plan of reorganization. The lender then appealed from those orders
of the bankruptcy court. The appeals are pending. It is too early to predict the outcome of the
appeals. The Company assumed a liability of $20 million through the Aurora Transaction with
respect to its total exposure relating to these fees, which is included in Accrued Liabilities on
the Consolidated Balance Sheet. The Aurora Transaction was financed through borrowings of a $425.0 million Term Loan drawn under
the Companys Senior Secured Credit Facilities, $201.0 million gross proceeds from the February
2004 issuance of the 8.25% Senior Subordinated Notes due 2013, existing cash on the Aurora balance
sheet and cash equity contributions of $84.4 million and $10.9 million by the Sponsors and from the
Aurora bondholders, respectively. The total cost of the Aurora Transaction, subject to the post-closing adjustment discussed above,
consists of: 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
 12




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PINNACLE FOODS GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(in thousands, except where noted in millions)  The following table summarizes the allocation of the total cost of acquisition to the assets
acquired and liabilities assumed: 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
 The total intangible assets amounted to $974,540, of which $20,600 was assigned to recipes and
formulas, which are amortized over an estimated useful life of five years, and $675,700 was
assigned to tradenames that are not subject to amortization. Goodwill, which is not subject to
amortization, amounted to $278,240, of which $150,872 was allocated to the dry foods segment and
$127,368 was allocated to the frozen foods segment. No new tax-deductible goodwill was created as
a result of the Aurora Transaction, but historical tax-deductible goodwill in the amount of
$386,386 does exist. In accordance with the requirements of purchase method accounting for acquisitions, inventories as
of March 19, 2004 were valued at fair value (net realizable value, which is defined as estimated
selling prices less the sum of (a) costs of disposal and (b) a reasonable profit allowance for the
selling effort of the acquiring entity) which in the case of finished products was $13,185 higher
than the Auroras historical manufacturing cost. Cost of products sold in the three months ended
March 28, 2004 includes a pre-tax charge of $3,130 representing the write-up of the inventory to
fair value at March 19, 2004 of inventories. Pro forma Information The following schedule includes statements of operation data for the unaudited actual results for
the three months ended March 27, 2005 and unaudited pro forma information for the three months
ended March 28, 2004 as if the Aurora Transaction had occurred as of December 29, 2003. The pro
forma information includes the actual results with pro forma adjustments for the change in interest
expense related to the changes in capital structure resulting from the financings discussed above,
purchase accounting adjustments resulting in changes to depreciation and amortization expenses, and
the reduction in rent expense resulting from an office closure. The unaudited pro forma information is provided for illustrative purposes only. It does not
purport to represent what the results of operations would have been had the Aurora Transaction
occurred on the dates indicated above, nor does it purport to project the results of operations for
any future period or as of any future date. Three months endedMarch 27,
    
    
    March 28,2005
    
    
    2004(Actual)
    
    
    (Pro Forma)Net sales
    
    $
    307,837
    
    
    $
    306,936Earnings (loss) before interest and taxes
    
    $
    (1,715
    )
    
    $
    169,479Net earnings (loss)
    
    $
    (22,428
    )
    
    $
    148,094
 13




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PINNACLE FOODS GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(in thousands, except where noted in millions)  Pro forma depreciation and amortization expense included above was $8,187 for the three months
ended March 28, 2004. Included in earnings (loss) before interest and taxes in the pro forma information above for the
three months ended March 28, 2004 are the following material charges (credits): Three MonthsEndedPinnacle Historical Financial Statements
    
    March 28, 2004Flow through of fair value of inventories over
manufactured cost as of November 25, 2003
    
    $
    14,142Flow through of fair value of inventories over
manufactured cost as of March 19, 2004
    
    
    3,130Aurora acquisitions costs
    
    
    510Pinnacle acquisition costs
    
    
    1,420Equity related compensation
    
    
    7,400Impact on earnings (loss) before interest and taxes
    
    $
    26,602
 Three MonthsEndedAurora Historical Financial Statements
    
    March 28, 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 On April 29, 2005, the Companys board of directors approved a plan to permanently close its Erie,
Pennsylvania production facility, as part of the Companys plan of consolidating and streamlining
production activities after the Aurora merger. Production from the Erie plant, which manufactures
Mrs. Pauls and Van de Kamp frozen seafood products and Aunt Jemima frozen breakfast products, will be relocated to the Companys Jackson, Tennessee production facility. Activities
related to the closure of the plant are expected to be completed by the fourth quarter of 2005 and
will result in the elimination of approximately 290 positions. Employee termination activities
will commence in July 2005 and are expected to be completed in the third quarter of 2005. In
accordance with SFAS 112, Employers Accounting for Postemployment Benefits, the Company has
accrued severance costs related to the employees to be terminated. In addition, the following
table contains detailed information about the charges incurred related to the Erie restructuring
plan, recorded in accordance with SFAS No. 146, Accounting for Costs Associated with Exit or
Disposal Activities: Estimated
    
    
    Incurred
    
    
    EstimatedTotal
    
    
    Through
    
    
    RemainingDescription
    
    Charges
    
    
    March 27, 2005
    
    
    ChargesEmployee severance
    
    $
    590
    
    
    $
    590
    
    
    $
    Other costs
    
    
    3,650
    
    
    
    50
    
    
    
    3,600Total
    
    $
    4,240
    
    
    $
    640
    
    
    $
    3,600
 14




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PINNACLE FOODS GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(in thousands, except where noted in millions)  The charges incurred have been included in Other expense (income), net line in the
Consolidated Statement of Operations for three months ended March 27, 2005. All such charges are
reported under the frozen foods business segment. The Company plans to transfer equipment with a net book value of approximately $4 million to other
production locations, primarily in Jackson, Tennessee. The remaining property, plant and equipment
have been evaluated as to recoverability. Based on an estimate of future cash flows over the
remaining useful life of the assets, depreciation expense will be accelerated on the remaining
asset value and will result in additional depreciation expense of
approximately $4,400 through July
2005. Employees terminated as a result of this closure are eligible to receive severance pay and other
benefits totaling $590, which was accrued at March 27, 2005. However, none of such amounts have
been expended. Other closing costs of approximately $3,650 relate to facility operating costs
during the shutdown period and other shutdown costs and expenses associated with dismantling,
transferring and reassembling certain equipment to Jackson, Tennessee. As of March 27, 2005, $50
has been accrued and none has been spent. In connection with the plant closure, facility operating and shutdown costs as well as costs to
dismantle, transfer and reassemble equipment and other plant shut down costs will be incurred and
expect to result in expense as incurred in the Companys Statements of Operations of approximately
$50, $3,330 and $220 in the second, third, and fourth quarters, respectively, of 2005. Also, the
Company expects to make capital expenditures of approximately $7,100 through October 2005 in
connection with this plant consolidation project. Mattoon, Illinois Production Facility On April 21, 2005, the Company made and announced its decision effective May 9, 2005 to shutdown a
bagel production line at its Mattoon, IL facility, which produces the Companys Lenders® Bagels.
In connection with the shutdown of the production line, the Company will be terminating 28
full-time and 7 part-time employees. A portion of the assets that were used in the bagel line will
be utilized in other production areas within the Company. In accordance with SFAS No. 144,
Accounting for the Impairment and Disposal of Long-Lived Assets, the Company incurred a non-cash
charge of $862 related to the asset impairment of the bagel line, which has been recorded as a
component of Other expense (income), net in the Consolidated Statement of Operations for the three
months ended March 27, 2005. The Company expects that any costs associated with the removal of the
assets would be offset from the proceeds received from the sale of those assets. Omaha, Nebraska Production Facility On April 7, 2004, the Company made and announced its decision to permanently close its Omaha,
Nebraska production facility, as part of the Companys plan of consolidating and streamlining
production activities after the Aurora merger. Production from the Omaha plant, which manufactured
Swanson frozen entree retail products and frozen foodservice products and ceased in December 2004,
has been relocated to the Companys Fayetteville, Arkansas and Jackson, Tennessee production

facilities. Activities related to the closure of the plant were completed in the first quarter of
2005 and resulted in the elimination of 411 positions. The following table contains detailed
information about the charges incurred to date related to the Omaha restructuring plan, recorded in
accordance with SFAS No. 112, Employers Accounting for Postemployment Benefits, SFAS No. 144,
Accounting for the Impairment and Disposal of Long-Lived Assets and SFAS No. 146, Accounting for
Costs Associated with Exit or Disposal Activities: IncurredOriginal
    
    
    Change in
    
    
    Through
    
    
    Three Months
    
    
    EstimatedEstimated
    
    
    Estimated
    
    
    December 26,
    
    
    Ended
    
    
    RemainingDescription
    
    Charges
    
    
    Charges
    
    
    2004
    
    
    March 27, 2005
    
    
    ChargesAsset impairment charges

    
    $
    7,400
    
    
    $
    2,649
    
    
    $
    10,049
    
    
    $
    
    
    
    $
    Employee severance
    
    
    2,506
    
    
    
    
    
    
    
    2,506
    
    
    
    
    
    
    
    Other costs
    
    
    4,984
    
    
    
    (860
    )
    
    
    3,078
    
    
    
    739
    
    
    
    307Total
    
    $
    14,890
    
    
    $
    1,789
    
    
    $
    15,633
    
    
    $
    739
    
    
    $
    307
 The charges incurred have been included in other expense (income), net in the Consolidated
Statement of Operations. 15




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PINNACLE FOODS GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(in thousands, except where noted in millions)  The Company had planned to transfer equipment with a net book value of approximately $9,700 to
other production locations, primarily in Fayetteville, Arkansas and Jackson, Tennessee. Due to the
delay in closing the Omaha plant and the need to have production up and running in the Fayetteville
plant, the Company was unable to transfer certain equipment with a net book value of $6,196 and
instead incurred capital expenditures to purchase, build and modify the necessary equipment in
Fayetteville. In addition to the impairment charge initially recorded in the first quarter of
2004, the Company evaluated the remaining property, plant and equipment as well as existing offers
to sell the plant and equipment, and recorded an additional impairment charge of $2,649 in December
2004. Employees terminated as a result of this closure are eligible to receive severance pay and benefits
totaling $2,506, of which $2,260 has been expended as of March 27, 2005. Other closing costs of
approximately $4,124 relate to other shutdown costs. As of March 27, 2005, $3,534 has been
expended and $283 has been incurred and accrued. The employee terminations resulted in a curtailment gain under the Companys pension plan of $2,067
and postretirement benefit plan of approximately $1,142, as a portion of the unrecognized prior
service credit will be immediately recognized when the employees terminate. In accordance with
SFAS No. 88, the curtailment gain attributable to the pension plan was offset by an unrecognized
loss. The gain of $1,142 attributable to the postretirement benefit plan has been recognized as a
component of cost of products sold in the Consolidated Statements of Operations during the 21 weeks
ended December 26, 2004. In connection with the plant closure, costs to dismantle, transfer and reassemble equipment and
other plant shut down costs will be incurred and expect to result in expense as incurred in the
Companys Statements of Operations of approximately $307 in the quarter ending June 26, 2005.
Also, the Company is making capital expenditures totaling approximately $7,700 through the second
quarter ending June 2005 in connection with this plant consolidation project. Impairment of Goodwill and Other Long-lived Assets As discussed in our Annual Report on Form 10-K for the transition year ended December 26, 2004, the
Company changed its method of accounting for goodwill and intangible assets by changing the time of
year the annual impairment test is performed from July 31st (the last day of our old
fiscal year) to the last Sunday of December (the last day of our new fiscal year). The annual
evaluation performed as of December 26, 2004 resulted in a $4,308 non-cash impairment charge
related to the goodwill in the Companys bagels reporting unit ($2,675) and dinners reporting unit
($1,633). This impairment charge adjusted the carrying value of the segments goodwill to its
implied fair value. During the transition year, the Company experienced higher costs in its bagels
and dinners business units and expects these higher costs to continue into the future. In
addition, as a result of the impairment charges, the Company assessed whether there had been an
impairment of the Companys trade names in accordance with SFAS 142. The Company concluded that
the book value of the Lenders trade name asset was higher than its fair value and that an
impairment had occurred. Accordingly, the Company has recorded a non-cash charge in the transition
year related to the write down to fair value of the trade name of $12, which is recorded in Other
expense (income), net, on the Consolidated Statement of Operations. The following table summarizes impairment and restructuring charges during the three months ended
March 27, 2005. It also includes severance liabilities assumed or established in purchase
accounting. These amounts are recorded in accrued liabilities. Balance at
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Balance atDecember 26,
    
    
    
    
    
    
    Noncash
    
    
    Cash
    
    
    March 27,Description
    
    2004
    
    
    Additions
    
    
    Reductions
    
    
    Reductions
    
    
    2005Other asset impairment charges
    
    $
    
    
    
    $
    862
    
    
    $
    (862
    )
    
    $
    
    
    
    $
    Employee severance
    
    
    3,695
    
    
    
    590
    
    
    
    
    
    
    
    (1,694
    )
    
    
    2,591Other costs
    
    
    305
    
    
    
    789
    
    
    
    
    
    
    
    (761
    )
    
    
    333Total
    
    $
    4,000
    
    
    $
    2,241
    
    
    $
    (862
    )
    
    $
    (2,455
    )
    
    $
    2,924
 16




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PINNACLE FOODS GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(in thousands, except where noted in millions)  
 5. Stock Options As permitted by SFAS No. 123 Accounting for Stock-Based Compensation as amended by SFAS No. 148
Accounting for Stock-Based Compensation  Transition and Disclosure, the Company uses the
intrinsic value-based method of accounting prescribed by Accounting Principles Board Opinion
(APB) No. 25, Accounting for Stock Issued to Employees, and related interpretations to account
for its employee stock-based compensation. No compensation expense for employee stock options is
reflected in net earnings as all options granted under those plans had an exercise price equal to
the market value of the common stock on the date of the grant. The following table illustrates the effect on net earnings if the Company had applied the fair
value recognition provisions of SFAS No. 123 to stock-based employee compensation for the periods
ended March 27, 2005 and March 28, 2004. Three Months EndedMarch 27,
    
    
    March 28,2005
    
    
    2004Net loss, as reported
    
    $
    (22,428
    )
    
    $
    (40,019
    )Deduct: Total stock-based employee compensation
expense determined under fair value method
for all stock option awards, net of related tax effects
    
    
    (276
    )
    
    
    (158
    )Pro forma net loss
    
    $
    (22,704
    )
    
    $
    (40,177
    )
 
 6. Other Expense (Income), net Three Months EndedMarch 27,
    
    
    March 28,2005
    
    
    2004Other expense (income) consists of:Restructuring and impairment charges
    
    $
    2,241
    
    
    $
    10,025Merger related costs
    
    
    
    
    
    
    8,820Amortization of intangibles/other assets
    
    
    1,203
    
    
    
    112Royalty expense (income), net
    
    
    24
    
    
    
    (27
    )Other
    
    
    (42
    )
    
    
    6Total other expense
    
    $
    3,426
    
    
    $
    18,936
 Restructuringcharges.As described in Note 4, the Company incurred costs
in connection with the planned shutdown of the Omaha, Nebraska and Erie, Pennsylvania facilities as
well as the shut down of a production line in Mattoon, Illinois. Mergerrelatedcosts.The Company incurred the following costs in the
first quarter of 2004 in connection with the Pinnacle Merger discussed in Note 1 and the Aurora
Transaction discussed in Note 3: Equity related compensation. In connection with the formation of LLC and the Aurora Transaction,
certain ownership units of LLC were issued to CDM, which is controlled by certain members of PFGIs
management. Certain of these units provide a profits interest consisting of an interest in
distributions to the extent in excess of capital contributed by members of the LLC. The interests
vest immediately. The estimated fair value of the interests issued in the Aurora Transaction at
the date of the respective grant was $7,400, and has been included in the Consolidated Balance
Sheet as an increase in the Companys paid-in-capital and in the Consolidated Statement of
Operations as an expense reflecting the charge for the fair value immediately after consummation of
such transactions. Retention benefits. In connection with the Pinnacle Merger, retention benefits to certain key
employees accrued during the three months ended March 28, 2004 totaled $1,420. 17




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PINNACLE FOODS GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(in thousands, except where noted in millions)  
 7. Inventories March 27,
    
    
    December 26,2005
    
    
    2004Raw materials, containers and supplies
    
    $
    45,987
    
    
    $
    34,489Finished product
    
    
    136,029
    
    
    
    187,645182,016
    
    
    
    222,134Reserves
    
    
    (14,104
    )
    
    
    (16,624
    )Total
    
    $
    167,912
    
    
    $
    205,510
 Reserves represent amounts necessary to adjust the carrying value of inventory to the lower of
cost or net realizable value, including any costs to sell or dispose. The Company has various purchase commitments for raw materials, containers, supplies and certain
finished products incident to the ordinary course of business. Such commitments are not at prices
in excess of current market. 
 8. Goodwill and Other Assets Goodwill PurchaseDecember 26,
    
    
    Price
    
    
    March 27,2004
    
    
    Adjustment
    
    
    2005Frozen Foods
    
    $
    122,858
    
    
    $
    
    
    
    $
    122,858Dry Foods
    
    
    294,005
    
    
    
    (1,545
    )
    
    
    292,460Total
    
    $
    416,863
    
    
    $
    (1,545
    )
    
    $
    415,318
 As discussed in Note 1, the total consideration paid to the Predecessors shareholders
included $10 million deposited into an escrow accounting pending finalization of the working
capital adjustment. During the first quarter of 2005, the working capital adjustment was settled
at $8.4 million. The settlement of the working capital adjustment resulted in a net reduction to
goodwill of $1,545. Other Assets March 27,
    
    
    December 26,2005
    
    
    2004Amortizable intangibles, net of accumulated
amortization of $4,657 and $3,454, respectively
    
    $
    16,374
    
    
    $
    17,577Deferred financing costs, net of accumulated
amortization of $5,954 and $4,647, respectively
    
    
    34,667
    
    
    
    35,940Interest rate swap fair value (Note 11)
    
    
    2,606
    
    
    
    3,533Other
    
    
    593
    
    
    
    620Total
    
    $
    54,240
    
    
    $
    57,670
 Amortizable intangible assets relate primarily to recipes and formulas acquired in the Aurora
Transaction and have been assigned a five year estimated useful life for amortization purposes.
Additionally, during the 21 weeks ended December 26, 2004, the Company reacquired an exclusive
license to distribute Duncan Hines product in Canada. The license that was reacquired runs through
June 30, 2006 at which time the Company will have exclusive right to distribution of the Duncan
Hines product in Canada. Amortization expense during the three months ended March 27, 2005 and
March 28, 2004 was $1,203 and $112, respectively. Estimated amortization expense for each of the
next five years is as follows: remainder of 2005 - $3,611, 2006 - $4,299, 2007 - $3,785, 2008 -
$3,785, 2009 - $869, thereafter - $25. 18




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PINNACLE FOODS GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(in thousands, except where noted in millions)  Deferred financing costs relate to the Successors senior secured credit facilities and senior
subordinated notes. Amortization was $1,307 and $749 for the three months ended March 27, 2005 and
March 28, 2004, respectively. 
 9. Debt and Interest Expense March 27,
    
    
    December 26,2005
    
    
    2004Long-term debtSuccessor- Senior secured credit facility - term loan
    
    $
    540,913
    
    
    $
    542,275- 8 1/4% Senior subordinated notes
    
    
    394,000
    
    
    
    394,000- Plus: unamortized premium on senior
subordinated notes
    
    
    6,324
    
    
    
    6,452- Capital lease obligations
    
    
    323
    
    
    
    353Total Debt
    
    
    941,560
    
    
    
    943,080Less: current portion of long-term obligations
    
    
    5,576
    
    
    
    5,574Total long-term debt
    
    $
    935,984
    
    
    $
    937,506
 Three months endedMarch 27, 2005
    
    
    March 28, 2004Interest expenseThird party interest expense
    
    $
    18,151
    
    
    $
    9,592Related party interest expense
    
    
    88
    
    
    
    Interest rate swap (gains) / losses (Note 11)
    
    
    (3,985
    )
    
    
    $
    14,254
    
    
    $
    9,592
 In November 2003, the Company entered into a $675.0 million Credit Agreement (senior secured
credit facilities) with JPMorgan Chase Bank (a related party of JPMP) and other financial
institutions as lenders, which provides for a $545.0 million seven-year term loan B facility, of
which $120.0 million was made available on November 25, 2003 and $425.0 million was made available
as a delayed draw term loan on the closing date of the Aurora Transaction. The term loan matures
November 25, 2010. The senior secured credit facility also provides for a six-year $130.0 million
revolving credit facility, of which up to $65.0 million was made available on November 25, 2003,
and the remaining $65.0 million was made available on the closing date of the Aurora Transaction.
The revolving credit facility expires November 25, 2009. There were no borrowings outstanding
under the revolver as of March 27, 2005 and December 26, 2004. There was no related party debt as of March 27, 2005 and December 26, 2004. Subject to the Senior Credit Agreement Amendment, which is discussed below, our borrowings under
the senior secured credit facilities bear interest at a floating rate and are maintained as base
rate loans or as Eurodollar loans. Base rate loans bear interest at the base rate plus the
applicable base rate margin, as defined in the senior secured credit facilities. Base rate is
defined as the higher of (i) the prime rate and (ii) the Federal Reserve reported overnight funds
rate plus 1/2 of 1%. Eurodollar loans bear interest at the adjusted Eurodollar rate, as described
in the senior secured credit facilities, plus the applicable Eurodollar rate margin. The applicable margins with respect to our term loan facility and our revolving credit facility
will vary from time to time in accordance with the terms thereof and agreed upon pricing grids
based on our leverage ratio as defined in our senior secured credit facilities. The initial
applicable margin with respect to the term loan facility and the revolving credit facility is:  
    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. 19




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##### Table of Contents



PINNACLE FOODS GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(in thousands, except where noted in millions)  The range of margins for the revolving credit facility is:  
    In the case of base rate loans: 1.25% to 1.75%.
    In the case of Eurodollar loans: 2.25% to 2.75%. A commitment fee of 0.50% per annum applies to the unused portion of the revolving loan facility
and 1.25% per annum applied to the delayed-draw term loan until it became available for the Aurora
Transaction. For the three months ended March 27, 2005, the weighted average interest rate on the
term loan was 5.7193% and on the revolving credit facility was 6.2530%. As of March 27, 2005, the
Eurodollar interest rate on the term loan facility was 5.8201% and the commitment fee on the
undrawn revolving credit facility was 0.50%. For the three months ended March 28, 2004, the
weighted average interest rate on the term loan was 4.0642% and on the revolving credit facility
was 3.8886%. As of March 28, 2004, the Eurodollar interest rate on the term loan facility was
3.84% and the commitment fee on the undrawn revolving credit facility was 0.50%. The term loan facility matures in quarterly 0.25% installments from June 30, 2004 through December
31, 2009, with the remaining balance due in 2010 and the revolving credit facility terminates on
November 25, 2009. The aggregate maturities of the term loan outstanding as of March 27, 2005 are:
$4,088 in the remainder of 2005, $5,450 in 2006, $5,450 in 2007, $5,450 in 2008, $5,450 in 2009 and
$515,025 thereafter. The obligations under the senior secured credit facilities are unconditionally and irrevocably
guaranteed by each of our direct or indirect domestic subsidiaries (collectively, the
Guarantors). In addition, the senior secured credit facilities are collateralized by first
priority or equivalent security interests in (i) all the capital stock of, or other equity
interests in, each direct or indirect domestic subsidiary of the Company and 65% of the capital
stock of, or other equity interests in, each direct foreign subsidiary of the Company, or any of
its domestic subsidiaries and (ii) certain tangible and intangible assets of the Company and the
Guarantors (subject to certain exceptions and qualifications). We pay a commission on the face amount of all outstanding letters of credit drawn under the senior
secured credit facilities at a per annum rate equal to the Applicable Margin then in effect with
respect to Eurodollar loans under the revolving credit loan facility minus the fronting fee (as
defined). A fronting fee equal to 1/4% per annum on the face amount of each letter of credit is
payable quarterly in arrears to the issuing lender for its own account. We also pay a per annum
fee equal to 1/2% on the undrawn portion of the commitments in respect of the revolving credit
facility. Total letters of credit issuable under the facilities cannot exceed $40,000. As of March
27, 2005 and December 26, 2004, there were no outstanding borrowings under the revolving credit
facility and we had utilized $10,893 and $15,741, respectively, for letters of credit. Of the
$130,000 revolving credit facility available, as of March 27, 2005 and December 26, 2004, we had an
unused balance of $119,107 and $114,259, respectively, available for future borrowings and letters
of credit, of which a maximum of $29,107 and $24,259, respectively, may be used for letters of
credit. In November 2003, the Successor issued $200.0 million 81/4% senior subordinated notes, which are due
December 1, 2013. On February 20, 2004, the Successor issued an additional $194.0 million of 81/4%
senior subordinated notes due December 1, 2013, which resulted in gross proceeds of $201.0 million,
including premium. The terms of the February 2004 notes are the same as the November 2003 notes
and are issued under the same indenture. The Notes are general unsecured obligations of the
Company, subordinated in right of payment to all existing and future senior indebtedness of the
Company, and guaranteed on a full, unconditional, joint and several basis by the Companys
wholly-owned domestic subsidiaries. See Note 16 for Guarantor and Nonguarantor Financial
Statements. 20




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PINNACLE FOODS GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(in thousands, except where noted in millions)  We may redeem all or a portion of the notes prior to December 1, 2008, at a price equal to 100% of
the principal amount of the notes plus a make-whole premium (the greater of: (1) 1% of the then
outstanding principal amount of the note; and (2) the excess of: (a) the present value at such
redemption date of (i) the redemption price of the note at December 1, 2008 plus (ii) all required
interest payments due on the note through December 1, 2008, computed using a discount rate equal to
the Treasury Rate as of such redemption date plus 50 basis points; over (b) the then outstanding
principal amount of the note, if greater). On or after December 1, 2008, we may redeem some or all
of the notes at the redemption prices listed below, if redeemed during the twelve-month period
beginning on December 1 of the years indicated below: Year
    
    Percentage2008
    
    
    104.125
    %2009
    
    
    102.750
    %2010
    
    
    101.375
    %2011 and thereafter
    
    
    100.000
    %
 At any time prior to December 1, 2006, we may redeem up to 35% of the original aggregate
principal amount of the notes with the net cash proceeds of certain equity offerings at a
redemption price equal to 108.250% of the principal amount thereof, plus accrued and unpaid
interest, so long as (a) at least 65% of the original aggregate amount of the notes remains
outstanding after each such redemption and (b) any such redemption by us is made within 90 days of
such equity offering. If a change of control occurs (as defined in the indenture pursuant to which the notes were
issued), and unless we have exercised our right to redeem all of the notes as described above, the
note holders will have the right to require the Successor to repurchase all or a portion of the
notes at a purchase price in cash equal to 101% of the principal amount thereof, plus accrued and
unpaid interest to the date of repurchase. The notes include a provision that the Company would file with the SEC on or prior to August 21,
2004 a registration statement relating to an offer to exchange the notes for an issue of
SEC-registered notes with terms identical to the notes and use its reasonable best effort to cause
such registration statement to become effective on or prior to October 20, 2004. Since the
exchange offer was not completed before November 19, 2004, the annual interest rate borne by the
notes increased by 1.0% per annum until the exchange offer was completed, which occurred on
February 1, 2005. As of this date, the Company was no longer paying the additional interest. Our senior secured credit facilities and the notes contain a number of covenants that, among other
things, limit, subject to certain exceptions, our ability to incur additional liens and
indebtedness, make capital expenditures, engage in certain transactions with affiliates, repay
other indebtedness (including the notes), make certain distributions, make acquisitions and
investments, loans or advances, engage in mergers or consolidations, liquidations and dissolutions
and joint ventures, sell assets, make dividends, amend certain material agreements governing our
indebtedness, enter into guarantees and other contingent obligations and other matters customarily
restricted in similar agreements. In addition to scheduled periodic repayments, we are also
required to make mandatory repayments of the loans under the senior secured credit facilities with
a portion of excess cash flow, as defined. In addition, our senior secured credit facilities
contain, among others, the following financial covenants: a maximum total leverage ratio, a minimum
interest coverage ratio and a maximum capital expenditure limitation. See the discussion below
regarding the amendment to the senior credit agreement where these covenants have been adjusted. Senior Credit Agreement Amendment On September 14, 2004, the Company was first in default under its senior credit agreement. On
November 4, 2004 the Company received required lender approval to temporarily waive defaults under
the Companys senior credit agreement arising due to (i) failure to furnish on a timely basis the
Companys audited financial statements for the fiscal year ended July 31, 2004, the Companys
annual budget for fiscal year 2005 and other related deliverables and (ii) failure to comply with
the maximum total leverage ratio for the period ended October 31, 2004. Conditions of the waiver
limited the Companys access to the revolving credit facility through the addition of an anti-cash
hoarding provision which required that at the time of a borrowing request, cash, as defined, could
not exceed $10 million and limited total outstanding borrowings under the facility to $65 million.
The amendment and waiver expired November 24, 2004. 21




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PINNACLE FOODS GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(in thousands, except where noted in millions)  On November 19, 2004 the Company received required lender approval to permanently waive the
defaults mentioned above and amend the financial covenants for future reporting periods. The terms
of the permanent amendment and waiver include:  
    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. As of March 27, 2005, the Company was in compliance with the amended and added covenants as listed
above. 
 10. Pension and Retirement Plans In December 2003, the Financial Accounting Standards Board issued SFAS No. 132, Employers
Disclosures about Pensions and Other Postretirement Benefits (revised 2003) (SFAS 132R). SFAS
132R requires additional annual and interim disclosures about pension plans and other
postretirement benefit plans. As of March 27, 2005, the Company maintains a noncontributory defined benefit pension plan that
covers substantially all eligible union employees and provides benefits generally based on years of
service and employees compensation. The Companys pension plan is funded in conformity with the
funding requirements of applicable government regulations. As disclosed in the Companys
Consolidated Financial Statements for the transition year ended December 26, 2004, the Company does
not expect to make a contribution during the current fiscal year. The Company maintains a postretirement benefits plan that provides health care and life insurance
benefits to eligible retirees, covers most U.S. employees and their dependents and is self-funded.
Employees who have 10 years of service after the age of 45 and retire are eligible to participate
in the postretirement benefit plan. Effective March 19, 2004 and in connection with the
acquisition of Aurora Foods, liabilities were assumed related to eight retired employees (Aurora
Retirees). Upon amendments that became effective on May 23, 2004, the Companys net out-of-pocket
costs for postretirement health care benefits was substantially reduced as retired employees,
excluding the Aurora Retirees, are now required to pay 100% of the monthly premium cost, as
calculated by our insurance administrator. 22




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PINNACLE FOODS GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(in thousands, except where noted in millions)  The components of net periodic benefit cost included in the Consolidated Statements of Operations
are as follows: Pension Benefits
    
    
    Other Postretirement BenefitsThree months ended
    
    
    Three months endedMarch 27,
    
    
    March 28,
    
    
    March 27,
    
    
    March 28,2005
    
    
    2004
    
    
    2005
    
    
    2004Service cost
    
    $
    372
    
    
    $
    479
    
    
    $
    3
    
    
    $
    55Interest cost
    
    
    829
    
    
    
    737
    
    
    
    17
    
    
    
    83Expected return on assets
    
    
    (1,052
    )
    
    
    (934
    )
    
    
    
    
    
    
    Recognized net actuarial loss/(gain)
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    120Amortization of:Unrecognized prior service cost (credit)
    
    
    
    
    
    
    
    
    
    
    (84
    )
    
    
    (467
    )Net periodic benefit cost (benefit)
    
    
    149
    
    
    
    282
    
    
    
    (62
    )
    
    
    (209
    )Liability assumed in business acquisition
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    806Total amount recognized
    
    $
    149
    
    
    $
    282
    
    
    $
    (62
    )
    
    $
    597
 On December 8, 2003, the Medicare Prescription Drug, Improvement and Modernization Act of 2003
(the Act) was signed into law. The Act expanded Medicare to include, for the first time,
coverage for prescription drugs and a federal subsidy to sponsors of certain retiree medical plans.
The Company sponsors medical programs for certain of its U.S. retirees and expects that this
legislation may eventually reduce the costs for some of these programs. However, due to the
relative small number of participants, the Company does not expect the impact of this legislation
to have a material impact on its consolidated financial statements. 
 11. Financial Instruments We may utilize derivative financial instruments to enhance our ability to manage risks, including,
but not limited to, interest rate and foreign currency, which exist as part of ongoing business
operations. We do not enter into contracts for speculative purposes, nor are we a party to any
leveraged derivative instrument. We monitor the use of derivative financial instruments through
regular communication with senior management and the utilization of written guidelines. We rely primarily on bank borrowings to meet our funding requirements. We utilize interest rate
swap agreements or other derivative instruments to reduce the potential exposure to interest rate
movements and to achieve a desired proportion of variable versus fixed rate debt. We recognize the
amounts that we pay or receive on hedges related to debt as an adjustment to interest expense. The Company is party to four interest rate swap agreements with counterparties, including JP Morgan
Chase Bank (a related party), that effectively changes the floating rate payments on its Senior
Secured Credit Facility into fixed rate payments. The first swap agreement became effective April
26, 2004, terminated December 31, 2004 and had a notional amount of $545.0 million; the second swap
agreement commenced January 4, 2005, terminates on January 3, 2006 and has a notional amount of
$450.0 million; the third swap agreement commences January 3, 2006, terminates on January 2, 2007
and has a notional amount of $100.0 million, and the fourth swap agreement commences on January 3,
2006, terminates on January 2, 2007 and has a notional amount of $250.0 million. Interest payments
determined under each swap agreement are based on these notional amounts, which match or are
expected to match the Companys outstanding borrowings under the Senior Secured Credit Facility
during the periods that each interest rate swap is outstanding. Floating interest rate payments to
be received under each swap are based on U.S. Dollar LIBOR, which is the same basis for determining
the floating rate payments on the Senior Secured Credit Facility. The fixed interest rate payments
that the Company will pay under the swap agreements are determined using the following approximate
fixed interest rates: 1.39% for the swap terminated on December 31, 2004; 2.25% for the swap
terminating January 1, 2006; and 3.75% for two swaps terminating January 2, 2007. 23




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PINNACLE FOODS GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(in thousands, except where noted in millions)  These swaps were not designated as hedges pursuant to SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities. As of March 27, 2005 and December 26, 2004, the fair value of
the interest rate swaps was a gain of $7,518 and $3,757, respectively. At March 27, 2005, $4,912
was recorded in Other current assets and $2,606 was recorded in Other assets, net in the
Consolidated Balance Sheet. Of the amount at December 26, 2004, $224 is recorded in Other current
assets and was realized in cash when the swap was settled at its maturity date. The balance of the
fair value at December 26, 2004, $3,533, was recorded in Other assets, net in the Consolidated
Balance Sheet. The increase in the fair value of $3,985 during the three months ended March 27,
2005 was recognized in interest expense, net in the Consolidated Statement of Operations. In August and September 2004, the Company entered into natural gas swap transactions with JP Morgan
Chase Bank (a related party) to lower the Companys exposure to the price of natural gas. The
agreements became effective beginning on August 1, 2004, terminate between February 2005 and
December 2005, and have various notional quantities of MMBTUs per month. The Company will pay a
fixed price per MMBTU, which range from $5.93 to $6.99 per MMBTU, depending on the month, with
settlements monthly. This swap was not designed as a hedge pursuant to SFAS No. 133, Accounting
for Derivative Instruments and Hedging Activities. For the three months ended March 27, 2005, the Company realized a loss of $79, which is recorded as
an increase to cost of products sold. Additionally, as of March 27, 2005 and December 26, 2004,
the fair value of the remaining natural gas swaps was a gain of $383 and $95, respectively, which
is recorded in Other current assets. The related offset is recorded as a gain of $288 and was
recognized as a reduction to cost of products sold during the three months ended March 27, 2005. On March 10, 2005, the Company entered into foreign currency exchange transactions with JP Morgan
Chase Bank (a related party) to lower the Companys exposure to the exchange rates between the U.S.
and Canadian dollar. Each agreement is based upon a notional amount in Canadian dollars, which is
expected to approximate the amount of our Canadian subsidiarys U.S. dollar denominated purchases
for the month, and the agreements run through December 2005. The Company will pay a fixed exchange
rate of 1.2062 Canadian dollars per U.S. dollar, with settlements monthly. This swap was not
designed as a hedge pursuant to SFAS No. 133, Accounting for Derivative Instruments and Hedging
Activities. For the three months ended March 27, 2005, the Company realized a gain of $8, which is recorded as
a reduction to cost of products sold. Additionally, as of March 27, 2005, the fair value of the
remaining foreign exchange swaps was a gain of $95, which is recorded in Other current assets. The
related offset is recorded as a gain of $95 and was recognized as a reduction to cost of products
sold during the three months ended March 27, 2005. We utilize irrevocable standby letters of credit with one-year renewable terms to satisfy workers
compensation self-insurance security deposit requirements. The contract value of the outstanding
standby letter of credit as of March 27, 2005 was $10,579, which approximates fair value. As of
March 27, 2005, we also utilized letters of credit in connection with the purchase of raw materials
in the amount of $314, which approximates fair value. We are exposed to credit loss in the event of non-performance by the other parties to derivative
financial instruments. All counterparties are at least A rated by Moodys and Standard & Poors.
Accordingly, we do not anticipate non-performance by the counterparties. The carrying values of cash and cash equivalents, accounts receivable and accounts payable
approximate fair value. The estimated fair value of the Senior Secured Credit Facilities bank debt
that is classified as long term debt on the Consolidated Balance Sheet at March 27, 2005, was
approximately its carrying value. 24




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PINNACLE FOODS GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(in thousands, except where noted in millions)  
 12. Commitments and Contingencies General From time to time, the Company and its operations are parties to, or targets of, lawsuits, claims,
investigations, and proceedings, which are being handled and defended in the ordinary course of
business. Although the outcome of such items cannot be determined with certainty, the corporations
general counsel and management are of the opinion that the final outcome of these matters should
not have a material effect on the Companys financial condition, results of operations or cash
flows. Litigation PinnaclesFlemingBankruptcyClaim The Company, on or about April 1, 2003, filed a reclamation claim against Fleming, a customer, in
Flemings bankruptcy proceeding pending in the United States Bankruptcy Court for the District of
Delaware in the amount of $964. Fleming has claimed that the products in controversy had been
commingled with other products and that the value of Pinnacles claim is $0. Additionally, on or
about January 31, 2004 Fleming identified alleged preferential transfers to Pinnacle of up to
$6,493, of which Fleming has alleged $5,014 are, or may be, eligible for protection as new
value. Fleming additionally alleged that some, if not all, of the alleged Pinnacle preferential
transfers may qualify as ordinary course of business transactions. Fleming has also made claims
regarding payments it describes as overpayment, unjust enrichment due to allegedly excess wire
transfers and payments and debts arising out of military sales. The Company has been advised that
similar allegations have been made by Fleming in many, if not all, of the other pending reclamation
claims filed against Fleming. The Company is currently in the process of analyzing the claims.
The Companys attorneys have been in contact with counsel for Aurora and counsel for Fleming and
all parties have expressed agreement that the most expedient manner to resolve the Aurora and
Fleming claims would be to do so in the Fleming bankruptcy case under the terms of Flemings
confirmed plan. Stipulations to this effect have been signed by all parties. The Company believes
that resolution of such matters will not result in a material impact on the Companys financial
condition, results of operations or cash flows. AurorasFlemingBankruptcyClaim The Company (Aurora), on or about March 31, 2003, filed a reclamation claim against Fleming, a
customer, in Flemings bankruptcy proceeding pending in the United States Bankruptcy Court for the
District of Delaware in the amount of $595. Fleming has claimed that the products in controversy
had been commingled with other products and that the value of Auroras claim is $299.
Additionally, on or about February 2, 2004, Fleming identified alleged preferential transfers to
Aurora of up to $5,942, of which Fleming has alleged $3,293 are, or may be, eligible for
protection as new value. Fleming additionally alleged that some, if not all, of the alleged
Aurora preferential transfers may qualify as ordinary course of business transactions. Fleming
has also made claims regarding payments it describes as overpayment, unjust enrichment due to
allegedly excess wire transfers and payments and debts arising out of military sales. The Company
has been advised that similar allegations have been made by Fleming in many, if not all, of the
other pending reclamation claims filed against Fleming. The Company is currently in the process of
analyzing the claims. The Companys attorneys have been in contact with counsel for Aurora and
counsel for Fleming and all parties have expressed agreement that the most expedient manner to
resolve the Aurora and Fleming claims would be to do so in the Fleming bankruptcy case under the
terms of Flemings confirmed plan. Stipulations to this effect have been signed by all parties.
The Company believes that resolution of such matters will not result in a material impact on the
Companys financial condition, results of operations or cash flows. EmployeeLitigation-IndemnificationofUSColdStorage On March 21, 2002, an employee at the Omaha, NE facility, died as the result of an accident while
operating a forklift at a Company-leased warehouse facility. OSHA conducted a full investigation
and determined that the death was the result of an accident and found no violations against the
Company. On March 18, 2004, the Estate of the deceased filed suit in District Court of Sarpy
County, Nebraska, Case No: CI 04-391, against the Company, the owner of the forklift and the leased
warehouse, the manufacturer of the forklift and the distributor of the forklift. The Company,
having been the deceaseds employer, was named as a defendant for workers compensation subrogation
purposes only. 25




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PINNACLE FOODS GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(in thousands, except where noted in millions)  On May 18, 2004, the Company received notice from defendant, US Cold Storage, requesting the
Company to accept the tender of defense for US Cold Storage in this case in accordance with the
Indemnification provision of the warehouse lease. The request has been submitted to the Companys
insurance carrier for evaluation and the Company has been advised that the indemnification
provision is not applicable in this matter and that Company should have no liability under that
provision. Therefore, the Company believes that resolution of such matters will not result in a
material impact on the Companys financial condition, results of operations or cash flows. R2AppealinAuroraBankruptcy Prior to its bankruptcy filing, Aurora entered into an agreement with its prepetition lending group
compromising the amount of certain fees due under its senior bank facilities (the October
Amendment). One of the members of the bank group (R2 Top Hat, Ltd.) challenged the enforceability
of the October Amendment during Auroras bankruptcy by filing an adversary proceeding and by
objecting to confirmation. The bankruptcy court rejected the lenders argument and confirmed
Auroras plan of reorganization. The lender then appealed from those orders of the bankruptcy
court. The appeals are pending. It is too early to predict the outcome of the appeals. Included
in the Companys accrued liabilities is $20 million, which was assumed in the Aurora Transaction. StateofIllinoisv.CityofSt.
ElmoandAuroraFoodsInc. The Company is a defendant in an action filed by the State of Illinois regarding the Companys St.
Elmo facility. The Illinois Attorney General filed a complaint seeking a restraining order
prohibiting further discharges by the City of St. Elmo from its publicly owned wastewater treatment
facility in violation of Illinois law and enjoining the Company from discharging its industrial
waste into the Citys treatment facility. The complaint also asked for fines and penalties
associated with the Citys discharge from its treatment facility and the Companys alleged
operation of its production facility without obtaining a state environmental operating permit.
Management believes the remedial actions it has taken to date and is continuing to implement will
minimize any fines and penalties associated with this matter. Subsequent to the Companys settlement with the State of Illinois, the City also entered into a
settlement agreement with the State of Illinois. At this time, the City is on restricted status
with the State of Illinois Environmental Protection Agency (ILEPA). Restricted status for the
City may be lifted after it establishes a consistent record of compliance with its effluent
discharge parameters. In August 2004, the latest Consent Order was signed by the parties and by the Judge allowing
the Company to continue discharging to the City of St. Elmo. In September 2004, the Company met
with representatives from the State of Illinois Environmental Protection Agency and the State
Attorney Generals Office and separately with the City of St. Elmo to inform them that the Company
has begun engineering work and the permit application process to install a pre-treatment system at

its St. Elmo facility during the fourth quarter of calendar year 2004. The construction work will
continue through the fourth quarter of calendar year 2005. The Company intends to vigorously defend
any future claim for fines or penalties. The Company believes that resolution of such matters,
including the associated fines and penalties, will not result in a material impact on the Companys
financial condition, results of operations or cash flows. We continue to discharge our effluent to the City. We would vigorously defend any future
effort to prevent us from discharging our industrial wastewater to the City. Although we believe we
will be able to resolve this matter favorably, an adverse resolution may have a material impact on
our financial position, results of operation, or cash flows. 26




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PINNACLE FOODS GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(in thousands, except where noted in millions)  UnderweightProducts In July 2004, it came to our attention that certain products produced in one of the former Aurora
plants have not met some state weight requirements. While we are in the process of investigating
the scope of this issue, we have revised the operating procedures of the plant such that products
produced there will comply with state product weight requirements. As a result of these weight
issues, we voluntarily initiated return procedures for the product in the locations involved and
also disposed of certain inventory held by the Company. Pinnacle has recorded a charge related to
the returns and inventory of $3.4 million and $1.2 million in the fiscal year ended July 31, 2004
and the transition year ended December 26, 2004, respectively. As a result of these underweight
products, the Company has recently received a letter from the State of California, County of Santa
Barbara, requesting that the Company meet with it to discuss this issue and the remedial actions
taken by the Company. A meeting was held with the involved California officials on December 8,
2004 at which time the issues and corrective steps taken by the Company were presented and
discussed. While the Company believes it has taken appropriate remedial steps, it is probable that
fines and penalties will be imposed. The State has recently responded with its acknowledgment of
the Companys cooperation with the investigation and prompt reaction to and correction of the
issue, and proposed a settlement amount which the Company is negotiating with the State. As of
March 27, 2005, the Company has reserved $695 based upon the State of Californias latest
settlement proposal. The Company will continue to vigorously defend its actions to date since
taking control of Aurora Foods Inc.. The Company believes that resolution of such matters will not
result in a material impact on the Companys financial condition, results of operations or cash
flows. Other Matters BankruptcyfilingofWinn-Dixie On February 21, 2005, Winn-Dixie Stores, Inc., a customer that accounts for approximately 2% of the
Company annual net sales, filed for Chapter 11 reorganization in U.S. Bankruptcy Court for the
Southern District of New York. The amount due from Winn-Dixie at the time of the bankruptcy filing
was $764, which was adequately reserved. 
 13. Related Party Transactions Management fees On November 25, 2003, the Successor entered into a Management Agreement with JPMorgan Partners, LLC
(JPMP) and J.W. Childs Associates, L.P. (JWC) where JPMP and JWC provide management, advisory
and other services. The agreement calls for quarterly payments of $125 to each JPMP and JWC for
management fees. Management fees to JPMP and JWC in total included in the Consolidated Statement
of Operations for the three months ended March 27, 2005 and the three months ended March 28, 2004
were $0 and $348, respectively. In accordance with our Senior Credit Agreement Amendment (see Note
9), the payment of the management fees was suspended during the amendment period. In addition, the
Company reimbursed JWC for out-of-pocket expenses totaling $5 and $1 during the three months ended
March 27, 2005 and March 28, 2004, respectively. In connection with the Pinnacle Merger, the
Company paid a transaction fee of $2,425 to each JPMP and JWC, in addition to $441 in fees and
expenses. In connection with the Aurora Transaction, transaction fees were paid to JPMP and JWC of
$1 million to each, plus $119 in fees and expenses. In connection with any subsequent acquisition
transaction, there will be a transaction fee of 1/2% of the aggregate purchase price to each of JPMP
and JWC, plus fees and expenses. These transaction fees are included in Acquisition costs in Notes
1 and 3. Also on November 25, 2003, the Successor entered into an agreement with CDM Capital LLC, an
affiliate of CDM Investor Group LLC, where CDM Capital LLC will receive a transaction fee of 1/2% of
the aggregate purchase price of future acquisitions (other than the Pinnacle Merger or the Aurora
Transaction), plus fees and expenses. 27




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PINNACLE FOODS GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(in thousands, except where noted in millions)  Leases and Aircraft The Company leases office space owned by a party related to the Chairman. One office was leased
through January 15, 2004. A new office was leased beginning January 15, 2004. The new lease
provides for the Company to make leasehold improvements approximating $318. The base rent for the
new office is $87 annually compared to $245 annually scheduled in the old office. Rent expense
during the three months ended March 27, 2005 and March 28, 2004 was $25 and $28, respectively. Beginning November 25, 2003, the Company began using an aircraft owned by a company indirectly
owned by the Chairman. In connection with the usage of the aircraft, the Company paid net
operating expenses of $688 during the three months ended March 27, 2005 and $313 during the three
months ended March 28, 2004. Debt and Interest Expense For the three months ended March 27, 2005, fees and interest expense recognized in the Consolidated
Statement of Operations for the debt to the related party, JPMorgan Chase Bank, amounted to $88.
See Note 9. Financial Instruments The Company has entered into transactions for derivative financial instruments with JPMorgan Chase
Bank to lower its exposure to interest rates, foreign currency, and natural gas prices. During the
three months ended March 27, 2005, the Company received cash for the settlement of interest rate
swap and foreign exchange transactions totaling $224 and $8, respectively. The Company also paid
$79 for the settlement of natural gas swap transactions. See Note 11. Loan to Member of Management In February 2005, the Company loaned Mr. Daniel Parker, Senior Vice President, Supply Chain, $41.
The interest rate on the loan is 8%. The current outstanding balance is $27 and it is expected to
be paid in full by the end of 2005. 
 14. Segments The Companys products and operations are managed and reported in two operating segments. The
Frozen Foods segment consists of the following: dinners and entrees (Swanson, Hungry Man),
prepared seafood (Van de Kamps, Mrs. Pauls), breakfast (Aunt Jemima), bagels (Lenders), and other
frozen products (Celeste, Chefs Choice). The Dry Foods segment consists of the following product
lines: pickles, peppers, and relish (Vlasic), baking mixes and frostings (Duncan Hines), syrups
and pancake mixes (Mrs. Butterworths and Log Cabin), and other grocery products (Open Pit).
Segment performance is evaluated based on earnings before interest and taxes. Transfers between
segments and geographic areas are recorded at cost plus markup or at market. Identifiable assets
are those assets, including goodwill, which are identified with the operations in each segment or
geographic region. Cost of products sold for the three months ended March 28, 2004 includes
$17,272 ($2,499 frozen foods and $14,773 dry foods), representing the write-up of inventories to
fair value (net realizable value, which is defined as estimated selling prices less the sum of (a)
costs of disposal and (b) a reasonable profit allowance for the selling effort of the acquiring
entity) at the dates of the acquisitions of inventories, which were sold subsequent to the
acquisition dates. Corporate assets consist of deferred and prepaid income tax assets.
Unallocated corporate expenses consist of corporate overhead such as executive management, finance
and legal functions, and Pinnacle and Aurora merger related costs discussed in Note 6. 28




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PINNACLE FOODS GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(in thousands, except where noted in millions)  Three months endedMarch 27,
    
    
    March 28,2005
    
    
    2004SEGMENT
INFORMATIONNet salesFrozen foods
    
    $
    181,339
    
    
    $
    96,309Dry foods
    
    
    126,498
    
    
    
    53,163Total
    
    $
    307,837
    
    
    $
    149,472Earnings (loss) before interest and taxesFrozen foods
    
    $
    (4,584
    )
    
    $
    (14,815
    )Dry foods
    
    
    7,786
    
    
    
    (9,791
    )Unallocated corporate expenses
    
    
    (4,917
    )
    
    
    (11,939
    )Total
    
    $
    (1,715
    )
    
    $
    (36,545
    )Depreciation and amortizationFrozen foods
    
    $
    5,140
    
    
    $
    3,164Dry foods
    
    
    3,491
    
    
    
    1,603Total
    
    $
    8,631
    
    
    $
    4,767Capital expendituresFrozen foods
    
    $
    2,478
    
    
    $
    838Dry foods
    
    
    749
    
    
    
    1,013Total
    
    $
    3,227
    
    
    $
    1,851GEOGRAPHIC
INFORMATIONNet salesUnited States
    
    $
    296,709
    
    
    $
    140,783Canada
    
    
    11,128
    
    
    
    8,689Total
    
    $
    307,837
    
    
    $
    149,472
 March 27,
    
    
    December 26,2005
    
    
    2004SEGMENT
INFORMATION:Total AssetsFrozen foods
    
    $
    677,492
    
    
    $
    671,860Dry foods
    
    
    1,082,024
    
    
    
    1,092,196Corporate
    
    
    46
    
    
    
    884Total
    
    $
    1,759,562
    
    
    $
    1,764,940GEOGRAPHIC
INFORMATIONLong-lived assetsUnited States
    
    $
    218,659
    
    
    $
    223,719Canada
    
    
    19
    
    
    
    21Total
    
    $
    218,678
    
    
    $
    223,740
 29




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PINNACLE FOODS GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(in thousands, except where noted in millions)  15. Recently Issued
Accounting Pronouncements On December 27, 2004 the
Company implemented FASB interpretation (FIN) 46R,
Consolidation of Variable Interest Entitiesan
Interpretation of ARB No. 51 (revised). Implementation of
this accounting standard has had no significant impact on the
Companys financial position, results of operations, or cash
flows. FIN 46R provides guidance on the identification of
entities for which control is achieved through means other than
through voting rights (variable-interest entity) and how
to determine when an entity is the primary beneficiary and required
to consolidate a variable interest entity. In December 2004, the FASB
issued SFAS No. 123R, Share-Based Payment (Revised
2004). This statement addresses the accounting for share-based
payment transactions in which a company receives employee services in
exchange for the companys equity instruments or liabilities
that are based on the fair value of the companys equity
securities or may be settled by the issuance of these securities.
SFAS 123R eliminates the ability to account for share-based
compensation using APB 25 and generally requires that such
transactions be accounted for using a fair value method. The
provisions of this statement are effective for financial statements
issued for fiscal periods beginning after December 15, 2005 and
will become effective for the Company beginning in 2006. Alternative
transition methods are allowed under Statement No. 123R. While
the Company has not yet determined the transition method to use,
adequate disclosure of all comparative periods covered by the
financial statements will comply with the requirements of
FASB 123R. In November 2004, the FASB
issued SFAS No. 151, Inventory Costsan Amendment
of ARB No. 43, Chapter 4. This statement clarifies
the accounting for abnormal amounts of idle facility expense,
freight, handling costs and spoilage, requiring these items be
recognized as current-period charges. In addition, this statement
requires that allocation of fixed production overheads to the costs
of conversion be based on the normal capacity of the production
facilities. The provisions of this statement are effective for
inventory costs incurred during fiscal years beginning after
June 15, 2005 and will become effective for the Company
beginning in 2006. The Company is assessing what impact, if any,
adoption of this statement would have on its financial statements. In December 2004, the FASB
issued SFAS No. 153, Exchanges of Nonmonetary Assetsan amendment to APB Opinion No. 29. This statement
amends APB 29 to eliminate the exception for nonmonetary
exchanges of similar productive assets and replaces it with a general
exception for exchanges of nonmonetary assets that do not have
commercial substance. A nonmonetary exchange has commercial substance
if the future cash flows of the entity are expected to change
significantly as a result of the exchange. The provisions of this
statement are effective for nonmonetary asset exchanges occurring in
fiscal periods beginning after June 15, 2005. The Company is
assessing what impact, if any, adoption of this statement would have
on its financial statements. 
 16. Guarantor and Nonguarantor Statements In connection with the Merger and Aurora Transaction described in Note 1 and as a part of the
related financings, the Company issued $394 million of 81/4% senior subordinated notes ($200 million
in November 2003 and $194 million in February 2004, collectively referred to as the Notes) in
private placements pursuant to Rule 144A and Regulation S. The Notes are general unsecured
obligations of the Company, subordinated in right of payment to all existing and future senior
indebtedness of the Company, and guaranteed on a full, unconditional, joint and several basis by
the Companys wholly-owned domestic subsidiaries. The following consolidating financial information presents:  (1)
    Consolidating (a) balance sheets as of March 27, 2005 and December 26, 2004 and
(b) the related statements of operations and cash flows for the three months ended
March 27, 2005 and March 28, 2004.(2)
    Elimination entries necessary to consolidate the Successor, with its guarantor
subsidiaries and nonguarantor subsidiary. Investments in subsidiaries are accounted for by the parent using the equity method of accounting.
The guarantor subsidiaries are presented on a combined basis. The principal elimination entries
eliminate investments in subsidiaries and intercompany balances and transactions. 30




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PINNACLE FOODS GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(in thousands, except where noted in millions)  Pinnacle Foods Group Inc.
Consolidated Balance Sheet - Successor
March 27, 2005 PINNACLEFOODS
    
    
    GUARANTOR
    
    
    NONGUARANTOR
    
    
    
    
    
    
    CONSOLIDATEDGROUP INC.
    
    
    SUBSIDIARIES
    
    
    SUBSIDIARY
    
    
    ELIMINATIONS
    
    
    TOTALCurrent assets:Cash and cash equivalents
    
    $
    657
    
    
    $
    20,860
    
    
    $
    1,870
    
    
    
    
    
    
    $
    23,387Accounts receivable, net
    
    
    46,863
    
    
    
    41,136
    
    
    
    4,759
    
    
    
    
    
    
    
    92,758Intercompany accounts receivable
    
    
    24,530
    
    
    
    3,849
    
    
    
    
    
    
    
    (28,379
    )Inventories, net
    
    
    57,615
    
    
    
    106,639
    
    
    
    3,658
    
    
    
    
    
    
    
    167,912Other current assets
    
    
    5,263
    
    
    
    1,403
    
    
    
    37
    
    
    
    
    
    
    
    6,703Deferred income taxes
    
    
    
    
    
    
    
    
    
    
    22
    
    
    
    
    
    
    
    22Total current assets
    
    
    134,928
    
    
    
    173,887
    
    
    
    10,346
    
    
    
    (28,379
    )
    
    
    290,782Plant assets, net
    
    
    99,037
    
    
    
    119,622
    
    
    
    19
    
    
    
    
    
    
    
    218,678Investment in subsidiaries
    
    
    252,527
    
    
    
    1,435
    
    
    
    
    
    
    
    (253,962
    )Intercompany note receivable
    
    
    185,191
    
    
    
    
    
    
    
    
    
    
    
    (185,191
    )Tradenames
    
    
    674,388
    
    
    
    106,156
    
    
    
    
    
    
    
    
    
    
    
    780,544Other assets, net
    
    
    54,096
    
    
    
    144
    
    
    
    
    
    
    
    
    
    
    
    54,240Goodwill
    
    
    272,618
    
    
    
    142,700
    
    
    
    
    
    
    
    
    
    
    
    415,318Total assets
    
    $
    1,672,785
    
    
    $
    543,944
    
    
    $
    10,365
    
    
    $
    (467,532
    )
    
    $
    1,759,562Current liabilities:Current portion of long-term obligations
    
    $
    5,460
    
    
    $
    116
    
    
    
    
    
    
    
    
    
    
    $
    5,576Accounts payable
    
    
    53,811
    
    
    
    19,022
    
    
    
    1,877
    
    
    
    
    
    
    
    74,710Intercompany accounts payable
    
    
    
    
    
    
    24,530
    
    
    
    3,849
    
    
    
    (28,379
    )Accrued trade marketing expense
    
    
    30,873
    
    
    
    19,093
    
    
    
    2,668
    
    
    
    
    
    
    
    52,634Accrued liabilities
    
    
    71,158
    
    
    
    24,925
    
    
    
    316
    
    
    
    
    
    
    
    96,399Accrued income taxes
    
    
    70
    
    
    
    1,343
    
    
    
    219
    
    
    
    
    
    
    
    1,632Total current liabilities
    
    
    161,372
    
    
    
    89,029
    
    
    
    8,929
    
    
    
    (28,379
    )
    
    
    230,951Long-term debt
    
    
    935,807
    
    
    
    177
    
    
    
    
    
    
    
    
    
    
    
    935,984Intercompany note payable
    
    
    
    
    
    
    185,191
    
    
    
    
    
    
    
    (185,191
    )Postretirement benefits
    
    
    832
    
    
    
    2,046
    
    
    
    
    
    
    
    
    
    
    
    2,878Deferred income taxes
    
    
    203,664
    
    
    
    14,974
    
    
    
    1
    
    
    
    
    
    
    
    218,639Total liabilities
    
    
    1,301,675
    
    
    
    291,417
    
    
    
    8,930
    
    
    
    (213,570
    )
    
    
    1,388,452Commitments 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)
    
    
    62
    
    
    
    62
    
    
    
    62
    
    
    
    (124
    )
    
    
    62Carryover of Predecessor basis of net assets
    
    
    (17,338
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (17,338
    )Retained earnings (accumulated deficit)
    
    
    (131,047
    )
    
    
    (35,245
    )
    
    
    438
    
    
    
    34,807
    
    
    
    (131,047
    )Total shareholders equity
    
    
    371,110
    
    
    
    252,527
    
    
    
    1,435
    
    
    
    (253,962
    )
    
    
    371,110Total liabilities and shareholders equity
    
    $
    1,672,785
    
    
    $
    543,944
    
    
    $
    10,365
    
    
    $
    (467,532
    )
    
    $
    1,759,562
 31




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PINNACLE FOODS GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(in thousands, except where noted in millions)  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
 32




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##### Table of Contents



PINNACLE FOODS GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(in thousands, except where noted in millions)  Pinnacle Foods Group Inc.
Consolidated Statement of Operations - Successor
For the three months ended March 27, 2005 PINNACLEFOODS
    
    
    GUARANTOR
    
    
    NONGUARANTOR
    
    
    
    
    
    
    CONSOLIDATEDGROUP INC.
    
    
    SUBSIDIARIES
    
    
    SUBSIDIARY
    
    
    ELIMINATIONS
    
    
    TOTALNet sales
    
    $
    180,271
    
    
    $
    122,909
    
    
    $
    11,128
    
    
    $
    (6,471
    )
    
    $
    307,837Costs and expensesCost of products sold
    
    
    143,181
    
    
    
    115,337
    
    
    
    9,478
    
    
    
    (6,229
    )
    
    
    261,767Marketing and selling expenses
    
    
    21,023
    
    
    
    9,194
    
    
    
    733
    
    
    
    
    
    
    
    30,950Administrative expenses
    
    
    7,257
    
    
    
    4,822
    
    
    
    289
    
    
    
    
    
    
    
    12,368Research and development expenses
    
    
    627
    
    
    
    414
    
    
    
    
    
    
    
    
    
    
    
    1,041Intercompany royalties
    
    
    
    
    
    
    
    
    
    
    74
    
    
    
    (74
    )Intercompany technical service fees
    
    
    
    
    
    
    
    
    
    
    168
    
    
    
    (168
    )Other expense (income), net
    
    
    2,695
    
    
    
    731
    
    
    
    
    
    
    
    
    
    
    
    3,426Equity in loss (earnings) of investees
    
    
    10,871
    
    
    
    (238
    )
    
    
    
    
    
    
    (10,633
    )Total costs and expenses
    
    
    185,654
    
    
    
    130,260
    
    
    
    10,742
    
    
    
    (17,104
    )
    
    
    309,552(Loss) earnings before interest and taxes
    
    
    (5,383
    )
    
    
    (7,351
    )
    
    
    386
    
    
    
    10,633
    
    
    
    (1,715
    )Intercompany interest (income) expense
    
    
    (2,944
    )
    
    
    2,942
    
    
    
    2Interest expense
    
    
    14,249
    
    
    
    5
    
    
    
    
    
    
    
    
    
    
    
    14,254Interest income
    
    
    
    
    
    
    51
    
    
    
    5
    
    
    
    
    
    
    
    56(Loss) earnings before income taxes
    
    
    (16,688
    )
    
    
    (10,247
    )
    
    
    389
    
    
    
    10,633
    
    
    
    (15,913
    )Provision (benefit) for income taxes
    
    
    5,740
    
    
    
    624
    
    
    
    151
    
    
    
    
    
    
    
    6,515Net (loss) earnings
    
    $
    (22,428
    )
    
    $
    (10,871
    )
    
    $
    238
    
    
    $
    10,633
    
    
    $
    (22,428
    )
 33




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##### Table of Contents



PINNACLE FOODS GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(in thousands, except where noted in millions)  Pinnacle Foods Group Inc.
Consolidated Statement of Operations - Successor
For the three months ended March 28, 2004 PINNACLEFOODS
    
    
    GUARANTOR
    
    
    NONGUARANTOR
    
    
    
    
    
    
    CONSOLIDATEDGROUP INC.
    
    
    SUBSIDIARIES
    
    
    SUBSIDIARY
    
    
    ELIMINATIONS
    
    
    TOTALNet sales
    
    $
    11,065
    
    
    $
    132,963
    
    
    $
    8,689
    
    
    $
    (3,245
    )
    
    $
    149,472Costs and expensesCost of products sold
    
    
    15,168
    
    
    
    119,061
    
    
    
    6,479
    
    
    
    (2,986
    )
    
    
    137,722Marketing and selling expenses
    
    
    2,539
    
    
    
    14,305
    
    
    
    1,342
    
    
    
    
    
    
    
    18,186Administrative expenses
    
    
    718
    
    
    
    9,428
    
    
    
    314
    
    
    
    
    
    
    
    10,460Research and development expenses
    
    
    
    
    
    
    713
    
    
    
    
    
    
    
    
    
    
    
    713Intercompany royalties
    
    
    Intercompany technical service fees
    
    
    
    
    
    
    
    
    
    
    82
    
    
    
    (82
    )Goodwill impairment charge
    
    
    
    
    
    
    
    
    
    
    177
    
    
    
    (177
    )Other expense (income), net
    
    
    7,496
    
    
    
    11,440
    
    
    
    
    
    
    
    
    
    
    
    18,936Equity in loss (earnings) of investees
    
    
    18,687
    
    
    
    (187
    )
    
    
    
    
    
    
    (18,500
    )Total costs and expenses
    
    
    44,608
    
    
    
    154,760
    
    
    
    8,394
    
    
    
    (21,745
    )
    
    
    186,017(Loss) earnings before interest and taxes
    
    
    (33,543
    )
    
    
    (21,797
    )
    
    
    295
    
    
    
    18,500
    
    
    
    (36,545
    )Intercompany interest (income) expense
    
    
    (1,454
    )
    
    
    1,447
    
    
    
    7Interest expense
    
    
    9,592
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,592Interest income
    
    
    32
    
    
    
    17
    
    
    
    4
    
    
    
    
    
    
    
    53(Loss) earnings before income taxes
    
    
    (41,649
    )
    
    
    (23,227
    )
    
    
    292
    
    
    
    18,500
    
    
    
    (46,084
    )Provision (benefit) for income taxes
    
    
    (1,630
    )
    
    
    (4,540
    )
    
    
    105
    
    
    
    
    
    
    
    (6,065
    )Net (loss) earnings
    
    $
    (40,019
    )
    
    $
    (18,687
    )
    
    $
    187
    
    
    $
    18,500
    
    
    $
    (40,019
    )
 34




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##### Table of Contents



PINNACLE FOODS GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(in thousands, except where noted in millions)  Pinnacle Foods Group Inc.
Consolidated Statement of Cash Flows - Successor
For the three months ended March 27, 2005 PINNACLEFOODS
    
    
    GUARANTOR
    
    
    NONGUARANTOR
    
    
    
    
    
    
    CONSOLIDATEDGROUP INC.
    
    
    SUBSIDIARIES
    
    
    SUBSIDIARY
    
    
    ELIMINATIONS
    
    
    TOTALCash flows from operating activitiesNet (loss) earnings from operations
    
    $
    (22,428
    )
    
    $
    (10,871
    )
    
    $
    238
    
    
    $
    10,633
    
    
    $
    (22,428
    )Non-cash charges (credits) to net earningsDepreciation and amortization
    
    
    4,751
    
    
    
    3,878
    
    
    
    2
    
    
    
    
    
    
    
    8,631Restructuring and impairment charge
    
    
    1,502
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,502Amortization of debt acquisition costs
    
    
    1,307
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,307Amortization of bond premium
    
    
    (128
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (128
    )Change in value of financial instruments
    
    
    (4,368
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,368
    )Equity in loss (earnings) of investees
    
    
    10,871
    
    
    
    (238
    )
    
    
    
    
    
    
    (10,633
    )Postretirement healthcare benefits
    
    
    7
    
    
    
    (69
    )
    
    
    
    
    
    
    
    
    
    
    (62
    )Pension expense
    
    
    
    
    
    
    149
    
    
    
    
    
    
    
    
    
    
    
    149Deferred income taxes
    
    
    5,679
    
    
    
    554
    
    
    
    
    
    
    
    
    
    
    
    6,233Changes in working capitalAccounts receivable
    
    
    (6,375
    )
    
    
    (11,827
    )
    
    
    (134
    )
    
    
    
    
    
    
    (18,336
    )Intercompany accounts receivable/payable
    
    
    (20,035
    )
    
    
    17,642
    
    
    
    2,393Inventories
    
    
    12,828
    
    
    
    25,150
    
    
    
    (339
    )
    
    
    
    
    
    
    37,639Accrued trade marketing expense
    
    
    9
    
    
    
    6,280
    
    
    
    302
    
    
    
    
    
    
    
    6,591Accounts payable
    
    
    1,996
    
    
    
    (14,566
    )
    
    
    (362
    )
    
    
    
    
    
    
    (12,932
    )Other current assets and liabilities
    
    
    16,010
    
    
    
    4,940
    
    
    
    (230
    )
    
    
    
    
    
    
    20,720Net cash provided by (used in) operating activities
    
    
    1,626
    
    
    
    21,022
    
    
    
    1,870
    
    
    
    
    
    
    
    24,518Cash flows from investing activitiesCapital expenditures
    
    
    (1,657
    )
    
    
    (1,570
    )
    
    
    
    
    
    
    
    
    
    
    (3,227
    )Pinnacle merger consideration
    
    
    1,595
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,595Net cash used in investing activities
    
    
    (62
    )
    
    
    (1,570
    )
    
    
    
    
    
    
    
    
    
    
    (1,632
    )Cash flows from financing activitiesChange in bank overdrafts
    
    
    
    
    
    
    (308
    )
    
    
    
    
    
    
    
    
    
    
    (308
    )Repayment of capital lease obligations
    
    
    (1
    )
    
    
    (29
    )
    
    
    
    
    
    
    
    
    
    
    (30
    )Successors debt acquisition costs
    
    
    (34
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (34
    )Proceeds from Successors notes payable borrowings
    
    
    30,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    30,000Repayments of Successors notes payable
    
    
    (30,000
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (30,000
    )Repayments of Successors long term obligations
    
    
    (1,362
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,362
    )Net cash (used in) provided by financing activities
    
    
    (1,397
    )
    
    
    (337
    )
    
    
    
    
    
    
    
    
    
    
    (1,734
    )Effect of exchange rate changes on cash
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net change in cash and cash equivalents
    
    
    167
    
    
    
    19,115
    
    
    
    1,870
    
    
    
    
    
    
    
    21,152Cash and cash equivalents  beginning of period
    
    
    490
    
    
    
    1,745
    
    
    
    
    
    
    
    
    
    
    
    2,235Cash and cash equivalents  end of period
    
    $
    657
    
    
    $
    20,860
    
    
    $
    1,870
    
    
    $
    
    
    
    $
    23,387Supplemental disclosures of cash flow information:Interest paid
    
    $
    5,311
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    5,311Interest received
    
    
    
    
    
    
    51
    
    
    
    5
    
    
    
    
    
    
    
    56Income taxes refunded (paid)
    
    
    
    
    
    
    748
    
    
    
    (89
    )
    
    
    
    
    
    
    659
 35




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##### Table of Contents



PINNACLE FOODS GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(in thousands, except where noted in millions)  Pinnacle Foods Group Inc.
Consolidated Statement of Cash Flows - Successor
For the three months ended March 28, 2004 PINNACLEFOODS
    
    
    GUARANTOR
    
    
    NONGUARANTOR
    
    
    
    
    
    
    CONSOLIDATEDGROUP INC.
    
    
    SUBSIDIARIES
    
    
    SUBSIDIARY
    
    
    ELIMINATIONS
    
    
    TOTALCash flows from operating activitiesNet (loss) earnings from operations
    
    $
    (40,019
    )
    
    $
    (18,687
    )
    
    $
    187
    
    
    $
    18,500
    
    
    $
    (40,019
    )Non-cash charges (credits) to net earningsDepreciation and amortization
    
    
    650
    
    
    
    4,115
    
    
    
    2
    
    
    
    
    
    
    
    4,767Restructuring and impairment charge
    
    
    
    
    
    
    10,025
    
    
    
    
    
    
    
    
    
    
    
    10,025Amortization of debt acquisition costs
    
    
    749
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    749Amortization of bond premium
    
    
    (95
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (95
    )Equity related compensation expense
    
    
    7,400
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,400Equity in loss (earnings) of investees
    
    
    18,687
    
    
    
    (187
    )
    
    
    
    
    
    
    (18,500
    )
    
    
    Postretirement healthcare benefits
    
    
    
    
    
    
    (209
    )
    
    
    
    
    
    
    
    
    
    
    (209
    )Pension expense
    
    
    
    
    
    
    282
    
    
    
    
    
    
    
    
    
    
    
    282Deferred income taxes
    
    
    (1,630
    )
    
    
    (4,640
    )
    
    
    
    
    
    
    
    
    
    
    (6,270
    )Changes in working capitalAccounts receivable
    
    
    5,093
    
    
    
    (1,761
    )
    
    
    (446
    )
    
    
    
    
    
    
    2,886Intercompany accounts receivable/payable
    
    
    (19,548
    )
    
    
    20,878
    
    
    
    (1,330
    )
    
    
    
    
    
    
    Inventories
    
    
    10,384
    
    
    
    18,141
    
    
    
    508
    
    
    
    
    
    
    
    29,033Accrued trade marketing expense
    
    
    882
    
    
    
    2,770
    
    
    
    (43
    )
    
    
    
    
    
    
    3,609Accounts payable
    
    
    (1,324
    )
    
    
    3,426
    
    
    
    1,137
    
    
    
    
    
    
    
    3,239Other current assets and liabilities
    
    
    9,628
    
    
    
    (8,435
    )
    
    
    161
    
    
    
    
    
    
    
    1,354Net cash provided by (used in) operating activities
    
    
    (9,143
    )
    
    
    25,718
    
    
    
    176
    
    
    
    
    
    
    
    16,751Cash flows from investing activitiesCapital expenditures
    
    
    (64
    )
    
    
    (1,787
    )
    
    
    
    
    
    
    
    
    
    
    (1,851
    )Pinnacle merger costs
    
    
    (290
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (290
    )Aurora merger consideration
    
    
    (663,759
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (663,759
    )Aurora merger costs
    
    
    (11,981
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (11,981
    )Net cash used in investing activities
    
    
    (676,094
    )
    
    
    (1,787
    )
    
    
    
    
    
    
    
    
    
    
    (677,881
    )Cash flows from financing activitiesChange in bank overdrafts
    
    
    
    
    
    
    11,366
    
    
    
    
    
    
    

    
    
    
    
    11,366Repayment of capital lease obligations
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1
    )Equity contribution to Successor
    
    
    95,276
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    95,276Successors debt acquisition costs
    
    
    (16,671
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (16,671

    )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
    
    
    690,580
    
    
    
    11,366
    
    
    
    
    
    
    
    
    
    
    
    701,946Effect of exchange rate changes on cash
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net change in cash and cash equivalents
    
    
    5,343
    
    
    
    35,297
    
    
    
    176
    
    
    
    
    
    
    
    40,816Cash and cash equivalents  beginning of period
    
    
    
    
    
    
    4,751
    
    
    
    503
    
    
    
    
    
    
    
    5,254Cash and cash equivalents  end of period
    
    $
    5,343
    
    
    $
    40,048
    
    
    $
    679
    
    
    $
    
    
    
    $
    46,070Supplemental disclosures of cash flow information:Interest paid
    
    $
    3,171
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    3,171Interest received
    
    
    32
    
    
    
    15
    
    
    
    6
    
    
    
    
    
    
    
    53Income taxes refunded (paid)
    
    
    
    
    
    
    (12
    )
    
    
    
    
    
    
    
    
    
    
    (12
    )Non-cash investing activity:Aurora merger consideration
    
    
    (225,120
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (225,120
    )Non-cash financing activity:Aurora merger equity contribution
    
    
    225,120
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    225,120
 36




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##### Table of Contents



ITEM 2: MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (in millions, except where noted) The purpose of this section is to discuss and analyze our consolidated financial condition,
liquidity and capital resources and results of operations. You should read this analysis in
conjunction with the consolidated financial statements and accompanying footnotes. This section
contains certain forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. Forward-looking statements are based on managements beliefs,
assumptions and expectations of our future economic performance, taking into account the
information currently available to management. These statements are not statements of historical
fact. Forward-looking statements involve risks and uncertainties that may cause our actual results,
performance or financial condition to differ materially from the expectations of future results,
performance or financial condition we express or imply in any forward-looking statements. Factors
that could contribute to these differences include, but are not limited to: changes in demand for
our products, changes in distribution channels or competitive conditions in the markets where we
operate, loss of our intellectual property rights, fluctuations in the price or supply of raw
materials, seasonality, our reliance on co-packers to meet our manufacturing needs, competition and
industry trends. The words believe, may, will, should, anticipate, estimate, expect,
intend, objective, seek, strive, or similar words, or the negative of these words, identify
forward-looking statements entirely by these cautionary factors. 
 Overview We are a leading producer, marketer and distributor of high quality, branded food products, the
results of which are managed and reported in two operating segments: frozen foods and dry foods.
The frozen foods segment consists of the following: dinners and entrees (Swanson, Hungry-Man),
prepared seafood (Van de Kamps, Mrs. Pauls) breakfast (Aunt Jemima), bagels (Lenders), and other
frozen products (Celeste, Chefs Choice). The dry foods segment consists of the following product
lines: pickles, peppers, and relish (Vlasic), baking mixes and frostings (Duncan Hines), syrups
and pancake mixes (Mrs. Butterworths and Log Cabin), and other grocery products (Open Pit). As described in Note 1 to the Consolidated Financial Statements, there was a merger (the Pinnacle
Merger) and change of control on November 25, 2003. For purposes of identification and
description, the Company is referred to as the Predecessor for the period prior to the Pinnacle
Merger, and the Successor for the period subsequent to the Pinnacle Merger. Also, as described
in Note 3 to the consolidated financial statements, on March 19, 2004, in connection with the
comprehensive restructuring of Aurora Foods Inc., the Aurora Transaction resulted in the merger
of Pinnacle and Aurora, with Pinnacle as the accounting acquiror. The consolidated financial
statements include the results of operations of the Aurora businesses beginning March 19, 2004.
Also, see Note 3 for pro forma financial information. In November 2003, we entered into a $675.0 million credit agreement (senior secured credit
facilities) with JPMorgan Chase Bank (a related party) and other financial institutions as
lenders, which provides for a $545.0 million seven-year term loan B facility, of which $120.0
million was made available in connection with the Pinnacle Merger and $425.0 million was made
available as a delayed draw term loan on the closing date of the Aurora Transaction. The senior
secured credit facilities also provide for a six-year $130.0 million revolving credit facility, of
which up to $65.0 million was made available on November 25, 2003, and the remaining $65.0 million
was made available on the closing date of the Aurora Transaction. The revolving credit facility
expires November 25, 2009. There were no borrowings outstanding under the revolving credit
facility as of March 27, 2005 and December 26, 2004. Additionally, in November 2003 and February 2004, we issued $200 million and $194 million,
respectively, 81/4% senior subordinated notes. The terms of the November 2003 and February 2004
notes are the same and are issued under the same indenture. During the thirty-six weeks ended July 31, 2004, our earnings (loss) before interest and taxes were
negatively impacted by certain non-cash items. These items included $18.4 million of non-cash
equity compensation for certain ownership units of Crunch Equity Holding, LLC (LLC) issued to CDM
Investor Group LLC, which is controlled by certain members of PFGIs management. Additionally,
$39.5 million related to the increase in the fair market value of inventory acquired in the
Pinnacle Merger and Aurora Transaction and was charged against earnings. The increase in fair
market value represents a non-cash charge. 37




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In December 2004, our board of directors approved a change in our fiscal year end from July 31 to
the last Sunday in December. Accordingly, we are presenting unaudited consolidated financial
statements for the three months ended March 27, 2005 (also referred to as the first quarter of
2005) and for the three months ended March 28, 2004. During the three months ended March 27, 2005, the twenty-one weeks ended December 26, 2004 (the
transition year) and the thirty-six weeks ended July 31, 2004, we recorded restructuring charges
totaling $0.7 million, $3.9 million and $11.8 million, respectively, pertaining to our decision to
permanently close the Omaha, Nebraska production facility. The closure was part of our plan of
consolidating and streamlining production activities after the Aurora Merger. In October 2004, we decided to discontinue producing products under the Chefs Choice trade name,
which is reported under our frozen foods segment. In connection with this decision, we recorded in
fiscal 2004 non-cash impairment charges totaling $4.8 million related to goodwill ($1.8 million),
amortizable intangibles ($1.7 million), and fixed assets ($1.3 million). Additionally, in fiscal
2004, we recorded a non-cash impairment charge of $1.3 million for the write down of the Avalon Bay
trade name due to lower than expected future sales. During the transition year, we recorded non-cash impairment charges to goodwill and trade names
totaling $4.3 million and less than $0.1 million, respectively. The write downs were the result of
higher than expected costs in the bagels and frozen dinners business units. All of the charges
were recorded in the frozen foods segment. On November 4, 2004, our lenders agreed to temporarily waive certain defaults under the senior
secured credit facilities arising due to (i) failure to furnish on a timely basis our audited
financial statements for the fiscal year ended July 31, 2004, our annual budget for fiscal year
2005 and other related deliverables and (ii) failure to comply with certain financial covenants for
the October 31, 2004 reporting period. On November 19, 2004 subject to certain conditions, we received required lender approval to
permanently waive the defaults discussed above and modify the financial covenants for future
reporting periods. The terms of the permanent amendment and waiver are discussed later in this
section. We are currently in compliance with the covenants under the senior secured credit
facilities. During the first quarter of 2005, our earnings (loss) before interest and taxes were negatively
impacted by certain items. In April 2005, we announced plans to shutdown a production line in our
Mattoon, Illinois production facility and incurred a non-cash charge for an impairment write down
of fixed assets totaling $0.9 million. In April 2005, we announced plans to permanently close the
Erie, Pennsylvania production facility and incurred charges totaling $0.6 million pertaining to
employee severance and related costs. This charge was included in the results of
operations for the three months ended March 27, 2005 and is recorded in other expense (income), net
in the Consolidated Statement of Operations. Additionally, in the continuing effort to revitalize our brands, we introduced several new products
during the first quarter of 2005 and incurred a substantially higher level of slotting expenses and
a higher level of coupon expenses. We do not expect these levels of expense to continue throughout
the remainder of the year. Both slotting and coupon expenses are deducted from shipments (as
discussed below) in arriving at net sales in our Consolidated Statement of Operations. We have substantially completed the acquisition integration and achieved cost savings through the
Aurora Transaction. Through the Aurora Transaction, we have enhanced our existing product
offerings and developed dozens of new offerings which we are in the process of launching. Despite
the difficulties that necessitated us amending the financial covenants under our senior secured
credit facilities, our focused strategy remains the same. This includes:  
    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. The discussion below for each of the comparative periods is based upon net sales. We determine net
sales in accordance with generally accepted accounting principles. We calculate our net sales by
deducting trade marketing, slotting and consumer coupon redemption expenses from shipments.
Shipments means gross sales less cash discounts, returns and non-marketing allowances. We
calculate gross sales by multiplying the published list price of each product by the number of
units of that product sold. 38




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Shipments is a non-GAAP financial measure. We include it in our managements discussion and
analysis because we believe that it is a relevant financial performance indicator for our company
as it measures the increase or decrease in our revenues caused by shipping more or less physical
case volume multiplied by our published list prices. It is also a measure used by our management
to evaluate our revenue performance. This measure is not recognized in accordance with GAAP and
should not be viewed as an alternative to GAAP measures of performance. The following table reconciles shipments to net sales for the consolidated company, the frozen
foods segment and the dry foods segment for three months ended March 27, 2005 and March 28, 2004 For the three months ended, Consolidated
    
    
    Frozen Foods
    
    
    Dry FoodsMarch 27,
    
    
    March 28,
    
    
    March 27,
    
    
    March 28,
    
    
    March 27,
    
    
    March 28,2005
    
    
    2004
    
    
    2005
    
    
    2004
    
    
    2005
    
    
    2004Shipments
    
    $
    464.0
    
    
    $
    203.8
    
    
    $
    271.5
    
    
    $
    130.6
    
    
    $
    192.5
    
    
    $
    73.2Less: Aggregate trade marketing and
consumer coupon redemption expenses
    
    
    124.1
    
    
    
    51.4
    
    
    
    75.6
    
    
    
    32.0
    
    
    
    48.5
    
    
    
    19.4Less: Slotting expense
    
    
    32.1
    
    
    
    2.9
    
    
    
    14.6
    
    
    
    2.3
    
    
    
    17.5
    
    
    
    0.6Net sales
    
    $
    307.8
    
    
    $
    149.5
    
    
    $
    181.3
    
    
    $
    96.3
    
    
    $
    126.5
    
    
    $
    53.2
 Plant Consolidations Omaha, Nebraska Production Facility During the three months ended March 27, 2005, we recorded restructuring charges totaling $0.7
pertaining to our decision to permanently close the Omaha, Nebraska production facility. In
addition, during the transition year ended December 26, 2004 and fiscal 2004 ended July 31, 2004,
we recorded restructuring charges totaling $3.9 million and $11.8 million, respectively. These
charges are recorded as a component of Other expense (income), net in the Consolidated Statement of
Operations. The closure was part of our plan of consolidating and streamlining production
activities after the Aurora merger. These charges were recorded in accordance with SFAS No. 112,
Employers Accounting for Postemployment Benefits, SFAS No. 144, Accounting for the Impairment
and Disposal of Long-Lived Assets and SFAS No. 146, Accounting for Costs Associated with Exit or
Disposal Activities. In determining such charges, we made certain estimates and judgments
surrounding the amounts ultimately to be paid and received for the actions we have taken. Production from the Omaha plant, which manufactured Swanson frozen entree retail products and
frozen foodservice products, has been relocated to our Fayetteville, Arkansas and Jackson,
Tennessee production facilities. Activities related to the final closure of the plant were
completed in the first quarter of 2005 and resulted in the elimination of 411 positions. In order to estimate the costs related to our restructuring efforts, management made its best
estimates of the most likely expected outcomes of the significant activities to accomplish the
restructuring. These estimates principally related to charges for asset impairment for the owned
facility in Omaha, employee severance costs to be paid, and other plant shutdown and relocation
costs. The most significant of these estimated costs related to the asset impairment of the Omaha
facility, which was based upon the net book value of the assets that were not being transferred,
less the cash flows from production until shutdown and a reasonable salvage value for the land,
building and equipment to be sold. We initially recorded a charge of $7.4 million during fiscal
2004 for the impairment of these assets, which was our best estimate of the impairment charge at
the time. We had planned to transfer equipment with a net book value of approximately $9.7 million
to other production locations, primarily in Fayetteville, Arkansas and Jackson, Tennessee. Due to
the delay in closing the Omaha plant and the need to have production up and running in the
Fayetteville plant, we were unable to transfer certain equipment with a net book value of $6.2
million and instead incurred capital expenditures to purchase, build and modify the necessary
equipment in Fayetteville. In addition to the impairment charge initially recorded in fiscal 2004,
we evaluated the remaining property, plant and equipment as well as existing offers to sell the
plant and equipment, and recorded an additional impairment charge of $2.6 million in the 21 weeks
ended December 26, 2004. The severance costs, which include continuation of employee benefits for salaried employees, total
$2.5 million and was expensed in the first quarter of 2004. As of March 27, 2005, $2.3 million has
been paid. 39




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The estimated costs associated with transferring certain assets to the Fayetteville and Jackson
facilities along with estimates of the costs necessary to shut down the Omaha facility are included
in other restructuring costs as they are incurred. Through March 27, 2005, these costs have
totaled $3.8 million. We anticipate that additional costs through completion of the program, which
will be recorded in future periods, will approximate $0.3 million. These estimates, together with
other estimates made by us in connection with the restructuring actions, may vary significantly
from the actual results, depending in part on factors beyond our control. For example, proceeds
received from the sale of the land and equipment will depend on our success in negotiating with
buyers and the current real estate market in Omaha. We will review the status of our restructuring
activities on a quarterly basis and, if appropriate, record changes in estimates to our
restructuring obligations in our consolidated financial statements for such quarter based on
managements then-current estimates. Erie, Pennsylvania Production Facility During the three months ended March 27, 2005, we recorded restructuring charges totaling $0.6
million pertaining to our decision to permanently close the Erie, Pennsylvania production facility,
which we anticipate will close by July 2005. The charges are recorded as a component of Other
expense (income), net in the Consolidated Statement of Operations. The closure was part of the
Companys continuing plan of streamlining production activities. These charges were recorded in
accordance with SFAS No. 112, Employers Accounting for Postemployment Benefits and SFAS No. 146,
Accounting for Costs Associated with Exit or Disposal Activities. In determining such charges,
we made certain estimate and judgments surrounding the amounts ultimately to be paid and received
for the actions we have taken. Production from the Erie plant, which manufactures Mrs. Pauls and Van de Kamp frozen seafood
products and Aunt Jemima frozen breakfast products, will be relocated to the
Companys Jackson, Tennessee production facility. Activities related to the closure of the plant
are expected to be completed by the fourth quarter of 2005 and will result in the elimination of
approximately 290 positions. Employee termination activities will commence in July 2005 and are
expected to be completed in the third quarter of 2005. In order to estimate the costs related to our restructuring efforts, management made its best
estimates of the most likely expected outcomes of the significant activities to accomplish the
restructuring. These estimates principally related to charges for employee severance and related
costs to be paid and other plant shutdown and relocation costs. The employee related costs, which
include severance and other benefits, total $0.6 million. None of these costs have been paid as of March 27, 2005. The estimated costs associated with transferring certain assets to the Jackson facility along with
estimates of the costs necessary to shut down the Erie facility are included in other restructuring
costs as they are incurred. We anticipate that costs through completion of the program, which will
be recorded in future periods, will approximate $3.6 million. These estimates, together with other
estimates made by us in connection with the restructuring actions, may vary significantly from the
actual results, depending in part on factors beyond our control. For example, proceeds received
from the sale of the land and equipment will depend on our success in negotiating with buyers and
the current real estate market in Erie. We will review the status of our restructuring activities
on a quarterly basis and, if appropriate, record changes in estimates to our restructuring
obligations in our consolidated financial statements for such quarter based on managements
then-current estimates. Mattoon, Illinois Production Facility On April 21, 2005, the Company made and announced its decision effective May 9, 2005 to shutdown a
bagel production line at its Mattoon, IL facility, which produces the Companys Lenders® Bagels.
In connection with the shutdown of the production line, the Company will be terminating 28
full-time and 7 part-time employees. A portion of the assets that was used in the bagel line will
be utilized in other production areas within the Company. In accordance with SFAS No. 144,
Accounting for the Impairment and Disposal of Long-Lived Assets, the Company incurred a non-cash
charge of $0.9 million related to the asset impairment of the bagel line, which has been recorded
as a component of Other expense (income), net in the Consolidated Statement of Operations for the
three months ended March 27, 2005. We expect that any costs associated with the removal of the
assets would be offset from the proceeds received from the sale of those assets. As of March 27, 2005, we had an accrued restructuring liability of $2.9 million, of which $0.5
million related to the Omaha plant shutdown, $0.6 million related to the Erie plant shutdown and
the balance related to severance costs from the Aurora Transaction. We expect all of these costs
to be paid during the next twelve months. 40




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Impairment of Goodwill and Other Long-lived Assets In October 2004, we decided to discontinue producing products under the Chefs Choice trade name.
In accordance with the provisions of SFAS No. 142, we prepared a discounted cash flow analysis
which indicated that the book value of the assets related to the Chefs Choice business unit
exceeded its estimated fair value and that a goodwill impairment had occurred. In addition, as a
result of the goodwill analysis, we assessed whether there had been an impairment of our long-lived
assets in accordance with SFAS No. 144. We concluded that the book value of the assets related to
the Chefs Choice products were higher than their expected undiscounted future cash flows and that
an impairment had occurred. Accordingly, we recorded a non-cash impairment charge of $4.8 million
in fiscal 2004 ended July 31, 2004. The charges included $1.8 million of goodwill impairment, $1.7
million of amortizable intangibles (recipes) and $1.3 million of fixed asset write downs. Additionally, in connection with our annual impairment test in accordance with SFAS No. 142, it was
determined that due to lower than expected future sales, the carrying value of the trade name for
the Avalon Bay product was impaired. We recorded a non-cash impairment charge of $1.3 million in
fiscal 2004 related to the write down of the trade name value. During the transition year ended December 26, 2004, we changed our method of accounting for
goodwill and intangible assets by changing the time of year the annual impairment test is performed
from July 31st (the last day of our old fiscal year) to the last Sunday of December (the
last day of our new fiscal year). The annual evaluation performed as of December 26, 2004 resulted
in a $4.3 million non-cash impairment charge related to the goodwill in our bagels reporting unit
($2.7 million) and dinners reporting unit ($1.6 million), both of which are in the frozen foods
segment. The impairment charges adjusted the carrying value of the segments goodwill to its
implied fair value. During the transition year, we experienced higher costs in our bagels and
frozen dinners business units and expect these higher costs to continue into the future. In
addition, as a result of the impairment charges, we assessed whether there had been an impairment
of our trade names in accordance with SFAS 142. We concluded that the book value of the Lenders
trade name asset was higher than its fair value and that an impairment had occurred. Accordingly,
we recorded a non-cash charge in the frozen foods segment during the transition year related to the
write down to fair value of the trade name of less than $0.1 million, which is recorded in the
other expense (income), net line item of the Consolidated Statement of Operations. Further, we
assessed whether there had been an impairment of our long-lived assets in the bagels and frozen
dinners reporting units and determined that the undiscounted cash flows were sufficient to recover
the carrying value of such long-lived assets. 41




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Results of operations Consolidated statements of operations The following tables set forth statement of operations data expressed in dollars and as a
percentage of net sales. In accordance with Generally Accepted Accounting Principles in the United
States (GAAP), the results for the three months ended March 28, 2004 only include the results of
operations of the Aurora businesses from the date of acquisition, March 19, 2004, through the end
of the period. Thrree months endedMarch 27,
    
    
    March 28,2005
    
    
    2004Net sales
    
    $
    307.8
    
    
    
    100.0
    %
    
    $
    149.5
    
    
    
    100.0
    %Costs and expensesCost of products sold
    
    
    261.8
    
    
    
    85.1
    %
    
    
    137.7
    
    
    
    92.1
    %Marketing and selling expenses
    
    
    30.9
    
    
    
    10.0
    %
    
    
    18.2
    
    
    
    12.2
    %Administrative expenses
    
    
    12.4
    
    
    
    4.0
    %
    
    
    10.5
    
    
    
    7.0
    %Research and development expenses
    
    
    1.0
    
    
    
    0.3
    %
    
    
    0.7
    
    
    
    0.5
    %Other expense (income), net
    
    
    3.4
    
    
    
    1.1
    %
    
    
    18.9
    
    
    
    12.6
    %Total costs and expenses
    
    $
    309.5
    
    
    
    100.6
    %
    
    $
    186.0
    
    
    
    124.4
    %Earnings (loss) before interest and taxes
    
    $
    (1.7
    )
    
    
    -0.6
    %
    
    $
    (36.5
    )
    
    
    -24.4
    %
 Three months endedMarch 27,
    
    
    March 28,2005
    
    
    2004Net salesFrozen foods
    
    $
    181.3
    
    
    $
    96.3Dry foods
    
    
    126.5
    
    
    
    53.2Total
    
    $
    307.8
    
    
    $
    149.5Earnings (loss) before interest and taxesFrozen foods
    
    $
    (4.6
    )
    
    $
    (14.8
    )Dry foods
    
    
    7.8
    
    
    
    (9.8
    )Unallocated corporate expenses
    
    
    (4.9
    )
    
    
    (11.9
    )Total
    
    $
    (1.7
    )
    
    $
    (36.5
    )Depreciation and amortizationFrozen foods
    
    $
    5.1
    
    
    $
    3.2Dry foods
    
    
    3.5
    
    
    
    1.6Total
    
    $
    8.6
    
    
    $
    4.8
 Three months ended March 27, 2005 compared to three months ended March 28, 2004 Net sales. Shipments in the three months ended March 27, 2005 were $464.0 million, an increase of
$260.2 million, compared to shipments in the three months ended March 28, 2004 of $203.8 million.
$255.4 million of the increase was related to the shipments of products acquired in the Aurora
Transaction. Net sales in the three months ended March 27, 2005 were $307.8 million, an increase
of $158.3 million, compared to net sales in the three months ended March 28, 2004 of $149.5
million, $167.2 million of the increase was related to the products acquired in the Aurora
Transaction, whose brands required a higher level of trade spending than the historical Pinnacle
brands. Net sales were impacted by significant new product launch activity and the relating
slotting expense, which increased by $29.2 million. 42




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Frozen foods:Shipments in the three months ended March 27, 2005 were $271.5 million, an
increase of $140.9 million. $137.0 million of the increase was related to products
acquired in the Aurora Transaction. The balance of the change was driven by a $4.6 million
increase in our Swanson product line sales and a $0.7 million decline in our Kings Hawaiian
product line. Aggregate trade and consumer coupon redemption expenses increased $55.9
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 $85.0 million, with
$90.0 million related to the products acquired in the Aurora Transaction while net sales of
the existing Swanson and Kings Hawaiian businesses decreased $5.0 million, or 5.4%, in the
three months ended March 27, 2005. Dry foods:Shipments in the three months ended March 27, 2005 were $192.5 million, an
increase of $119.3 million. $113.6 million of the increase was related to products
acquired in the Aurora Transaction. The balance of the increase was due to a $6.5 million
increase in our pickle product line sales and a $0.8 million decline in our Open Pit
product line. Aggregate trade and consumer coupon redemption expenses increased $46.0
million, of which $38.9 million related to products acquired in the Aurora Transaction. As
a result, dry foods net sales increased $73.3 million, of which $74.7 million was related
to products acquired in the Aurora Transaction and net sales of the existing Vlasic and
Open Pit businesses decreased $1.4 million, or 2.7%, for the three months ended March 27,
2005. Cost of products sold. Our cost of products sold was $261.8 million, or 85.1% of net sales in the
three months ended March 27, 2005, versus cost of products sold of $137.7 million, or 92.1% of net
sales in the three months ended March 28, 2004. The products acquired in the Aurora Transaction
resulted in an additional $127.8 million of cost of products sold in the three months ended March
27, 2005. Cost of products sold during the three months ended March 28, 2004 include additional
costs of $14.1 million and $3.1 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. Cost of
products sold during the three months ended March 27, 2005 were impacted by the additional costs
resulting from the reorganization of our warehousing network and the related movement of product to
the new warehousing network. In addition to these costs, this percentage is also affected by
changes in our aggregate trade (including the slotting mentioned above) and consumer coupon
redemption expenses that are classified as reductions to net sales. Marketing and selling expenses. Marketing and selling expenses were $30.9 million, or 10.0% of
net sales, in the three months ended March 27, 2005 compared to $18.2 million, or 12.2% of net
sales, in the three months ended March 28, 2004. The Aurora Transaction contributed $20.8 million
of the increase for the three months ended March 27, 2005. The balance of the change was due to
lower advertising expense of $4.6 million, primarily on our Swanson business, and decreased selling
overhead expense. Administrative expenses. Administrative expenses were $12.4 million in the three months ended
March 27, 2005 compared to $10.5 million in the three months ended March 28, 2004. The principal
driver of the $1.9 million increase was higher overhead expense related to the merger of the Aurora
businesses. However, as a percentage of net sales, administrative expenses declined from 7.0% for
the three months ended March 28, 2004 to 4.0% for the three months ended March 27, 2005 due to the
relative size of additional administrative expenses incurred as a result of the Aurora business
compared to the additional net sales from the Aurora business. Research and development expenses. Research and development expenses were $1.0 million, or 0.3%
of net sales, in the three months ended March 27, 2005 compared with $0.7 million, or 0.5% of net
sales, in the three months ended March 28, 2004. Other expense (income), net. Other expense was $3.4 million in the three months ended March 27,
2005 as compared to $18.9 million in the three months ended March 28, 2004. Included in other
expense (income), net for the three months ended March 28, 2004 was $8.8 million of Pinnacle Merger
related expenses, consisting primarily of $7.4 million of non-cash equity related compensation
expense and $1.4 million of retention benefits payments as well as $10.0 million related to the
closure of our Omaha, Nebraska frozen food facility. For the three months ended March 27, 2005,
restructuring and impairment charges totaled $2.2 million and consisted of $0.6 million of costs
related to the closure of our Erie, Pennsylvania frozen food facility, a $0.9 million asset impairment for the shutdown of a production line at our
Mattoon, Illinois facility, and $0.7 million of plant
consolidation expense related to the closure of our Omaha, Nebraska
frozen food facility, all of which are  discussed
above under Plant Consolidation. In addition, $1.2 million of amortization expense was incurred
in the three months ended March 27, 2005 compared to $0.1 in the three months ended March 28, 2004.
The increased amortization was primarily related to the amortizable intangible assets acquired in
the Aurora Transaction. 43




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Earnings (loss) before interest and taxes. Earnings (loss) before interest and taxes (EBIT)
increased $34.8 million to a loss of $1.7 million in the three months ended March 27, 2005 from a
loss of $36.5 million in EBIT in the three months ended March 28, 2004. This increase resulted
from a $10.2 million increase in frozen foods EBIT, a $17.6 million increase in dry foods EBIT, and
a $7.0 million decrease in unallocated corporate expenses. The decrease in the unallocated
corporate expenses was principally related to $8.8 million of Pinnacle Merger related expenses in
the three months ended March 28, 2004, consisting primarily of $7.4 million of non-cash equity
related compensation expense and $1.4 million of retention benefit payments. For the three months
ended March 27, 2005 there was a $1.8 million increase in overhead expense related to the merger of
the Aurora businesses. Frozen foods:Frozen foods EBIT increased by $10.2 million in the three months ended March
27, 2005. The increase is partially related to the business acquired in the Aurora
Transaction, which contributed an additional $5.0 million of EBIT. This increase was net
of a $0.6 million restructuring charge related to the closure of the Erie, Pennsylvania
frozen food facility in the first quarter of 2005, a $0.9 million asset impairment write
down for the shutdown of a production line at our Mattoon, Illinois facility in the first
quarter of 2005, and a charge of $1.3 million related to post-acquisition sales of
inventories written up to fair value at the date of the Aurora Transaction included in the
first quarter of 2004. Additionally, the results for the three months ended March 28,
2004 included a charge of $10.0 million related to the closure of the Omaha, Nebraska
frozen foods facility as well as additional costs of products sold of $1.2 million related
to post-Merger sales of inventories written up to fair value at the date of the Pinnacle
Merger.. EBIT for the three months ended March 27, 2005 was also impacted by a $0.7
million charge related to the plant consolidation expense from the closure of our Omaha,
Nebraska frozen food facility. The balance of our frozen foods EBIT decreased $5.3 million
due to increased cost of products sold expense related to the reorganization of our
warehousing network, increased slotting and trade promotion expenses, partially offset by
lower advertising, coupon, and consumer promotion expenses. Dry foods:Dry foods EBIT increased $17.6 million in the three months ended March 27, 2005
and consisted of $11.7 million related to the business acquired in the Aurora Transaction.
The increase in EBIT includes the impact of the $1.8 million charge recorded in the three
months ended March 28, 2004 related to post-acquisition sales of inventories written up to
fair value at the date of the Aurora Transaction. The three months ended March 28, 2004
also includes additional cost of products sold of $13.0 million related to post-Merger
sales of inventories written up to fair
value at the date of the Pinnacle Merger. The balance of the Dry foods EBIT decreased $7.1
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 core Vlasic product line. Interest expense, net. Interest expense, net was $14.2 million in the three months ended March
27, 2005, compared to $9.5 million in the three months ended March 28, 2004. Comparison of
interest expense is not meaningful due to the change in capital structure after the Pinnacle Merger
and the Aurora Transaction. Included in the interest expense, net, amount for the three months
ended March 27, 2005 was $4.0 million recorded from gains on interest rate swap agreements. We
utilize interest rate swap agreements to reduce the potential exposure to interest rate movements
and to achieve a desired proportion of variable versus fixed rate debt. Any gains or losses
realized on the interest rate swap agreements are recorded as an adjustment to interest expense. Provision for income taxes.The effective tax rate was -40.9% in the three months ended March 27,
2005, compared to 13.2% in the three months ended March 28, 2004. We maintain a full valuation
allowance against net deferred tax assets excluding indefinite lived intangible assets, and the
effective rate difference is primarily due to the change in the valuation allowance for the three
month period. Deferred tax liabilities are recognized for the differences between the book and tax
bases of certain goodwill and indefinite lived intangible assets. A deferred tax charge was
recorded this three month period for amortization recognized for tax purposes related to indefinite
lived intangibles. Under Internal Revenue Code Section 382, Aurora is a loss corporation. Section 382 of the Code
places limitations on our ability to use Auroras net operating loss carry forward to offset our
income. The annual net operating loss limitation is approximately $13-15 million subject to other
rules and restrictions. 44




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Seasonality We experience seasonality in our sales and cash flows. Sales of frozen foods, including seafood,
tend to be marginally higher during the winter months, whereas sales of pickles, relishes and
barbecue sauces tend to be higher in the spring and summer months and demand for Duncan Hines
products tend to be higher around the Easter, Thanksgiving and Christmas holidays. We pack the
majority of our pickles during a season extending from May through September and also increase our
seafood and Duncan Hines inventories at that time in advance of the selling season. As a result,
our inventory levels are higher during August, September and October, and thus we require more
working capital during those months. We are a seasonal net user of cash in the third quarter of
the calendar year, which may require us to draw on the revolving credit commitments under our
senior credit facilities. 
 Liquidity and capital resources Historical Our cash flows are very seasonal. Typically we are a net user of cash in the third quarter of the
calendar year (i.e., the quarter ending in September) and a net generator of cash over the balance
of the year. Our principal liquidity requirements have been, and we expect will be, for working capital and
general corporate purposes, including capital expenditures and debt service. Capital expenditures
are expected to be approximately $27 million in 2005. We have historically satisfied our liquidity
requirements with internally generated cash flows and availability under our revolving credit
facilities. Statements of cash flows for the three months ended March 27, 2005 Net cash provided by operating activities was $24.5 million and $16.8 million for the three months
ended March 27, 2005 and March 28, 2004, respectively. Net cash provided by operating activities
during the three months ended March 27, 2005 was principally the result of a decrease in working
capital, which included a $37.6 million decrease in inventory that was a result of the sell down of
the seasonal build from December 2004 as well as an $18.4 million increase in accrued liabilities.
The increase in accrued liabilities primarily relates to higher accrued interest on our senior
subordinated notes as interest is payable on December 1st and June 1st. The
cash provided by the reduction in inventory levels and increase in accrued liabilities were offset
by a $18.3 million increase in accounts receivable, representing higher sales levels, and a $12.9
million decrease in accounts payable. In the three months ended March 28, 2004, net cash provided
by operations was driven by a $40.3 million decrease in working capital, principally related to the
seasonal decrease in inventories and higher accrued trade marketing costs. Net cash used in investing
activities was $1.6 million and $677.9 million for the three months
ended March 27, 2005 and March 28, 2004, respectively. Net cash used in investing activities
during the three months ended March 27, 2005 includes $3.2 million for capital expenditures less
$1.6 million received from the settlement of the working capital adjustment from the Pinnacle
Merger. Net cash used in investing activities during the three months ended March 28, 2004
includes activities related to the Aurora Transaction, mainly consideration paid of $663.8 million
and transaction costs of $12.0 million. Additionally, $1.9 million for capital expenditures was
included in the three months ended March 28, 2004. Net cash used by financing activities was $1.7 million for the three months ended March 27, 2005.
The usage was driven by the scheduled quarterly payments of our senior term loan credit facility of
$1.4 million and a $0.3 million decline in bank overdrafts. Net cash provided by financing
activities was $701.9 million during the three months ended March 28, 2004, which was primarily
related to the Aurora Transaction and included $425.0 million in proceeds from the senior credit
facility, $201.0 million in senior subordinated note proceeds, and $95.3 million in equity
contributions. The proceeds were offset by $16.7 million in debt acquisition costs and $14.0
million repayments of borrowings under our revolving credit facility. The net of all activities resulted in an increase in cash of $21.2 million and $40.8 million during
the three months ended March 27, 2005 and March 28, 2004, respectively. 45




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Debt In November 2003, we entered into a $675.0 million credit agreement with JPMorgan Chase Bank (a
related party of JPMP) and other financial institutions as lenders, which provides for a $545.0
million seven-year term loan B facility, of which $120.0 million was made available on November 25,
2003 and $425.0 million was made available as a delayed draw term loan on the closing date of the
Aurora Transaction. The term loan matures November 25, 2010. The senior secured credit facility
also provides for a six-year $130.0 million revolving credit facility, of which up to $65.0 million
was made available on November 25, 2003, and the remaining $65.0 million was made available on the
closing date of the Aurora Transaction. The revolving credit facility expires November 25, 2009.
There were no borrowings outstanding under the revolver as of March 27, 2005 and December 26, 2004. Subject to the Senior Credit Agreement Amendment, which is discussed below, our borrowings under
the senior secured credit facilities bear interest at a floating rate and are maintained as base
rate loans or as Eurodollar loans. Base rate loans bear interest at the base rate plus the
applicable base rate margin, as defined in the senior secured credit facilities. Base rate is
defined as the higher of (i) the prime rate and (ii) the Federal Reserve reported overnight funds
rate plus 1/2 of 1%. Eurodollar loans bear interest at the adjusted Eurodollar rate, as described
in the senior secured credit facilities, plus the applicable Eurodollar rate margin. The applicable margins with respect to our term loan facility and our revolving credit facility
will vary from time to time in accordance with the terms thereof and agreed upon pricing grids
based on our leverage ratio as defined in our senior secured credit facilities. The initial
applicable margin with respect to the term loan facility and the revolving credit facility is:  
    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. The range of margins for the revolving credit facility is:  
    In the case of base rate loans: 1.25% to 1.75%.
    In the case of Eurodollar loans: 2.25% to 2.75%. A commitment fee of 0.50% per annum applies to the unused portion of the revolving loan facility
and 1.25% per annum applied to the delayed-draw term loan until it became available for the Aurora
Transaction. For the three months ended March 27, 2005, the weighted average interest rate on the
term loan was 5.7193% and on the revolving credit facility was 6.2530%. As of March 27, 2005, the
Eurodollar interest rate on the term loan facility was 5.8201% and the commitment fee on the
undrawn revolving credit facility was 0.50%. The term loan facility matures in quarterly 0.25% installments from June 30, 2004 through December
31, 2009, with the remaining balance due in 2010 and the revolving credit facility terminates on
November 25, 2009. The aggregate maturities of the term loan outstanding as of March 27, 2005 are:
$4.1 million in the remainder of 2005, $5.5 million in 2006, $5.5 million in 2007, $5.5 million in
2008, $5.5 million in 2009 and $515.0 million thereafter. The obligations under the senior secured credit facilities are unconditionally and irrevocably
guaranteed by each of our direct or indirect domestic subsidiaries (collectively, the
Guarantors). In addition, the senior secured credit facilities are collateralized by first
priority or equivalent security interests in (i) all the capital stock of, or other equity
interests in, each of our direct or indirect domestic subsidiaries and 65% of the capital stock of,
or other equity interests in, each of our direct foreign subsidiaries, or any of our domestic
subsidiaries and (ii) certain tangible and intangible assets of the Company and the Guarantors
(subject to certain exceptions and qualifications). 46




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We pay a commission on the face amount of all outstanding letters of credit drawn under the senior
secured credit facilities at a per annum rate equal to the Applicable Margin then in effect with
respect to Eurodollar loans under the revolving credit loan facility minus the fronting fee (as
defined). A fronting fee equal to 1/4% per annum on the face amount of each letter of credit is
payable quarterly in arrears to the issuing lender for its own account. We also pay a per annum
fee equal to 1/2% on the undrawn portion of the commitments in respect of the revolving credit
facility. Total letters of credit issuable under the facilities cannot exceed $40 million. As of
March 27, 2005 and December 26, 2004, there were no outstanding borrowings under the revolving
credit facility and we had utilized $10.9 million and $15.7 million, respectively, for letters of
credit. Of the $130 million revolving credit facility available, as of March 27, 2005 and December
26, 2004, we had an unused balance of $119.1 million and $114.3 million, respectively, available
for future borrowings and letters of credit, of which a maximum of $29.1 million and $24.3 million,
respectively, may be used for letters of credit. In November 2003, the Successor issued $200.0 million 81/4% senior subordinated notes. On February
20, 2004, the Successor issued an additional $194.0 million of 81/4% senior subordinated notes, which
resulted in gross proceeds of $201.0 million, including premium. The terms of the February 2004
notes are the same as the November 2003 notes and are issued under the same indenture. The Notes
are general unsecured obligations of the Company, subordinated in right of payment to all existing
and future senior indebtedness of the Company, and guaranteed on a full, unconditional, joint and
several basis by the Companys wholly-owned domestic
subsidiaries. See Note 16 for Guarantor and
Nonguarantor Financial Statements. We may redeem all or a portion of the notes prior to December 1, 2008, at a price equal to 100% of
the principal amount of the notes plus a make-whole premium (the greater of: (1) 1% of the then
outstanding principal amount of the note; and (2) the excess of: (a) the present value at such
redemption date of (i) the redemption price of the note at December 1, 2008 plus (ii) plus all
required interest payments due on the note through December 1, 2008, computed using a discount rate
equal to the Treasury Rate as of such redemption date plus 50 basis points; over (b) the then
outstanding principal amount of the note, if greater). On or after December 1, 2008, we may redeem
some or all of the notes at the redemption prices listed below, if redeemed during the twelve-month
period beginning on December 1 of the years indicated below: Year
    
    Percentage2008
    
    
    104.125
    %2009
    
    
    102.750
    %2010
    
    
    101.375
    %2011 and thereafter
    
    
    100.000
    %
 At any time prior to December 1, 2006, we may redeem up to 35% of the original aggregate
principal amount of the notes with the net cash proceeds of certain equity offerings at a
redemption price equal to 108.250% of the principal amount thereof, plus accrued and unpaid
interest, so long as (a) at least 65% of the original aggregate amount of the notes remains
outstanding after each such redemption and (b) any such redemption by us is made within 90 days of
such equity offering. If a change of control occurs (as defined in the indenture pursuant to which the notes were
issued), and unless we have exercised our right to redeem all of the notes as described above, the
note holders will have the right to require the Successor to repurchase all or a portion of the
notes at a purchase price in cash equal to 101% of the principal amount thereof, plus accrued and
unpaid interest to the date of repurchase. The notes include a provision that the Company would file with the SEC on or prior to August 21,
2004 a registration statement relating to an offer to exchange the notes for an issue of
SEC-registered notes with terms identical to the notes and use its reasonable best effort to cause
such registration statement to become effective on or prior to October 20, 2004. Since the
exchange offer was not completed before November 19, 2004, the annual interest rate borne by the
notes increased by 1.0% per annum until the exchange offer was completed, which occurred on
February 1, 2005. As of this date, the Company was no longer paying the additional interest. 47




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Our senior secured credit facilities and the notes contain a number of covenants that, among other
things, limit, subject to certain exceptions, our ability to incur additional liens and
indebtedness, make capital expenditures, engage in certain transactions with affiliates, repay
other indebtedness (including the notes), make certain distributions, make acquisitions and
investments, loans or advances, engage in mergers or consolidations, liquidations and dissolutions
and joint ventures, sell assets, make dividends, amend certain material agreements governing our
indebtedness, enter into guarantees and other contingent obligations and other matters customarily
restricted in similar agreements. In addition to scheduled periodic repayments, we are also
required to make mandatory repayments of the loans under the senior secured credit facilities with
a portion of excess cash flow, as defined. In addition, our senior secured credit facilities
contain, among others, the following financial covenants: a maximum total leverage ratio, a minimum
interest coverage ratio and a maximum capital expenditure limitation. See the discussion below
regarding the amendment to the senior credit agreement where these covenants have been adjusted. Senior Credit Agreement Amendment On September 14, 2004, the Company was first in default under its senior secured credit facilities.
On November 4, 2004 the Company received required lender approval to temporarily waive defaults
under the Companys senior secured credit facility arising due to (i) failure to furnish on a
timely basis the Companys audited financial statements for the fiscal year ended July 31, 2004,
the Companys annual budget for fiscal year 2005 and other related deliverables and (ii) failure to
comply with the maximum total leverage ratio for the period ended October 31, 2004. Conditions of
the waiver limited the Companys access to the revolving credit facility through the addition of an
anti-cash hoarding provision which required that at the time of a borrowing request, cash, as
defined, could not exceed $10 million and limited total outstanding borrowings under the facility
to $65 million. The amendment and waiver expired November 24, 2004. On November 19, 2004 the Company received required lender approval to permanently waive the
defaults mentioned above and amend the financial covenants for future reporting periods. The terms
of the permanent amendment and waiver include:  
    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. None of the above terms are expected to impact the Companys ability to meet the financial targets
set forth in the bank amendment. As of March 27, 2005, the Company was in compliance with the amended and added covenants as listed
above. Based on current estimates, we believe that the Company will meet the financial targets set forth
in the bank amendment and, as such, will maintain compliance with debt covenant requirements for at
least the next 12 months. 48




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Inflation Inflation has not had a significant effect on us. We have been successful in mitigating the
effects of inflation with aggressive cost reduction and productivity programs. Although we have no
such expectation, severe increases in inflation, however, could affect the North American economies
and could have an adverse impact on our business, financial condition and results of operations. Recently
Issued Accounting Pronouncements On
December 27, 2004 the Company implemented FASB interpretation
(FIN) 46R, Consolidation of Variable Interest
Entitiesan Interpretation of ARB No. 151 (revised).
Implementation of this accounting standard has had no significant
impact on the Companys financial position, results of
operations, or cash flows. FIN 46R provides guidance on the
identification of entities for which control is achieved through
means other than through voting rights (variable-interest
entity) and how to determine when an entity is the primary
beneficiary and required to consolidate a variable interest entity. In
December 2004, the FASB issued SFAS No. 123R, Share-Based
Payment (Revised 2004). This statement addresses the accounting
for share-based payment transactions in which a company receives
employee services in exchange for the companys equity
instruments or liabilities that are based on the fair value of the
companys equity securities or may be settled by the issuance of
these securities. SFAS 123R eliminates the ability to account
for shares-based compensations using APB 25 and generally
requires that such transactions be accounted for using a fair value
method. The provisions of this statement are effective for financial
statements issued for fiscal periods beginning after
December 15, 2005 and will become effective for the Company
beginning on 2006. Alternative transition methods are allowed under
Statement No. 123R. While the Company has not yet
determined the transition method to use, adequate disclosure of all
comparative periods covered by the financial statements will comply
with the requirements of FASB 123R. In
November 2004, the FASB issued SFAS No. 151,
Inventory Costsan Amendment of ARB No. 43,
Chapter 4. This statement clarifies the accounting for abnormal
amounts of idle facility expense, freight, handling costs and
spoilage, requiring these items be recognized as current-period
charges. In addition, this statement requires that allocation of
fixed production overheads to the costs of conversion be based on
the normal capacity of the production facilities. The provisions of
this statement are effective for inventory costs incurred during
fiscal years beginning after June 15, 2005 and will become
effective for the Company beginning in 2006. The Company is assessing
what impact, if any, adoption of this statement would have on its
financial statements. In
December 2004, the FASB issued SFAS No. 153,
Exchanges of Nonmonetary Assetsan amendment to APB
Opinion No. 29. This statement amends APB 29 to
eliminate the exception for nonmonetary exchanges of similar
productive assets and replaces it with a general exception for
exchanges of nonmonetary assets that do not have commercial
substance. A nonmonetary exchange has commercial substance if the
future cash flows of the entity are expected to change significantly
as a result of the exchange. The provisions of this statement are
effective for nonmonetary asset exchanges occurring in fiscal
periods beginning after June 15, 2005. The Company is assessing
what impact, if any, adoption of this statement would have on its
financial statements. 49




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ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK Financial Instruments We may utilize derivative financial instruments to enhance our ability to manage risks, including,
but not limited to, interest rate and foreign currency, which exist as part of ongoing business
operations. We do not enter into contracts for speculative purposes, nor are we a party to any
leveraged derivative instrument. We monitor the use of derivative financial instruments through
regular communication with senior management and the utilization of written guidelines. We rely primarily on bank borrowings to meet our funding requirements. We utilize interest rate
swap agreements or other derivative instruments to reduce the potential exposure to interest rate
movements and to achieve a desired proportion of variable versus fixed rate debt. We recognize the
amounts that we pay or receive on hedges related to debt as an adjustment to interest expense. We are party to four interest rate swap agreements with counterparties, including JP Morgan Chase
Bank (a related party) that effectively changes the floating rate payments on our Senior Secured
Credit Facility into fixed rate payments. The first swap agreement became effective April 26,
2004, terminated December 31, 2004 and had a notional amount of $545.0 million; the second swap
agreement commenced January 4, 2005, terminates on January 3, 2006 and has a notional amount of
$450.0 million; the third swap agreement commences January 3, 2006, terminates on January 2, 2007
and has a notional amount of $100.0 million, and the fourth swap agreement commences on January 3,
2006, terminates on January 2, 2007 and has a notional amount of $250.0 million. Interest payments
determined under each swap agreement are based on these notional amounts, which match or are
expected to match the Companys outstanding borrowings under the Senior Secured Credit Facility
during the periods that each interest rate swap is outstanding. Floating interest rate payments to
be received under each swap are based on U.S. Dollar LIBOR, which is the same basis for determining
the floating rate payments on the Senior Secured Credit Facility. The fixed interest rate payments
that the Company will pay under the swap agreements are determined using the following approximate
fixed interest rates: 1.39% for the swap terminated on December 31, 2004; 2.25% for the swap
terminating January 1, 2006; and 3.75% for two swaps terminating January 2, 2007. These swaps were not designated as hedges pursuant to SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities. As of March 27, 2005 and December 26, 2004, the fair value of
the interest rate swaps was a gain of $7.5 million and $3.8 million, respectively. At March 27,
2005, $4.9 million was recorded in Other current assets and $2.6 million was recorded in Other
assets, net in the Consolidated Balance Sheet. Of the amount at December 26, 2004, $0.2 million is
recorded in Other current assets and was realized in cash when the swap was settled at its maturity
date. The balance of the fair value at December 26, 2004, $3.5 million, was recorded in Other
assets, net in the Consolidated Balance Sheet. The increase in the fair value of $4.0 million
during the three months ended March 27, 2005 was recognized in interest expense, net in the
Consolidated Statement of Operations. In August and September 2004, we entered into natural gas swap transactions with JP Morgan Chase

Bank (a related party) to lower our exposure to the price of natural gas. The agreements became
effective beginning on August 1, 2004, terminate between February 2005 and December 2005, and have
various notional quantities of MMBTUs per month. We will pay a fixed price per MMBTU, which range
from $5.93 to $6.99 per MMBTU, depending on the month, with settlements monthly. This swap was not
designed as a hedge pursuant to SFAS No. 133, Accounting for Derivative Instruments and Hedging
Activities. For the three months ended March 27, 2005, we realized a loss of $0.1 million, which is recorded as
an increase to cost of products sold. Additionally, as of March 27, 2005 and December 26, 2004,
the fair value of the remaining natural gas swaps was a gain of $0.4 million and $0.1 million,
respectively, which is recorded in Other current assets. The related offset is recorded as a gain
of $0.3 million and was recognized as a reduction to cost of products sold during the three months
ended March 27, 2005. On March 10, 2005, we entered into foreign currency exchange transactions with JP Morgan Chase Bank
(a related party) to lower our exposure to the exchange rates between the U.S. and Canadian dollar.
Each agreement is based upon a notional amount in Canadian dollars, which is expected to
approximate the amount of our Canadian subsidiarys U.S. denominated purchases for the month, and
the agreements run through December 2005. We will pay a fixed exchange rate of 1.2062 Canadian
dollars per U.S. dollar, with settlements monthly. This swap was not designed as a hedge pursuant
to SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities. 50




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For the three months ended March 27, 2005, we realized a gain of less than $0.1 million, which is
recorded as a reduction to cost of products sold. Additionally, as of March 27, 2005, the fair
value of the remaining foreign currency swaps was a gain of $0.1 million, which is recorded in
Other current assets. The related offset is recorded as a gain of $0.1 million and was recognized
as a reduction to cost of products sold during the three months ended March 27, 2005. We utilize irrevocable standby letters of credit with one-year renewable terms to satisfy workers
compensation self-insurance security deposit requirements. The contract value of the outstanding
standby letter of credit as of March 27, 2005 was $10.6 million, which approximates fair value. As
of March 27, 2005, we also utilized letters of credit in connection with the purchase of raw
materials in the amount of $0.3 million, which approximates fair value. We are exposed to credit loss in the event of non-performance by the other parties to derivative
financial instruments. All counterparties are at least A rated by Moodys and Standard & Poors.
Accordingly, we do not anticipate non-performance by the counterparties. The carrying values of cash and cash equivalents, accounts receivable and accounts payable
approximate fair value. The estimated fair value of the Senior Secured Credit Facilities bank debt
that is classified as long term debt on the Consolidated Balance Sheet at March 27, 2005, was
approximately its carrying value. Raw materials, ingredients, packaging and production costs We purchase agricultural products, meat, poultry, other raw materials and packaging supplies from
growers, commodity processors, other food companies and packaging manufacturers using a combination
of purchase orders and various short- and long-term supply arrangements. In August and September 2004, we entered into natural gas swap transactions with a counterparty to
lower our exposure to the price of natural gas. The agreements became effective beginning on
August 1, 2004, terminate between February 2005 and December 2005, and have various notional
quantities of MMBTUs per month. We will pay a fixed price per MMBTU, which range from $5.93 to
$6.99 per MMBTU, depending on the month, with settlements monthly. This swap was not designed as a
hedge pursuant to SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities. For the three months ended March 27, 2005, we realized a loss of $0.1 million, which is recorded as
an increase to cost of products sold. Additionally, as of March 27, 2005 and December 26, 2004,
the fair value of the remaining natural gas swaps was a gain of $0.4 million and $0.1 million,
respectively, which is recorded in Other current assets. The related offset is recorded as a gain
of $0.3 million and was recognized as a reduction to cost of products sold during the three months
ended March 27, 2005. While all of our materials are available from numerous independent suppliers, raw materials are
subject to fluctuations in price attributable to a number of factors, including changes in crop
size, federal and state agricultural programs, export demand, weather conditions during the growing
and harvesting seasons, insects, plant diseases and fungi. Although we enter into advance
commodities purchase agreements from time to time, increases in raw material costs could have a
material adverse effect on our business, financial condition or results of operations. We do not
engage in speculative transactions nor hold or issue financial instruments for trading purposes. 51




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ITEM 4: CONTROLS AND PROCEDURES We maintain disclosure controls and procedures that are designed to ensure that information
required to be disclosed in our reports under the Securities Exchange Act of 1934 is recorded,
processed, summarized and reported within the time periods specified in the SECs rules and forms,
and that such information is accumulated and communicated to our management, including our Chief
Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding
required disclosures. Any controls and procedures, no matter how well designed and operated, can
provide only reasonable assurance of achieving the desired control objectives. Our management,
under the supervision and with the participation of our Chief Executive Officer and Chief Financial
Officer, has evaluated the effectiveness of the design and operation of our disclosure controls and
procedures pursuant to Rule 15d-14 of the Securities Exchange Act of 1934 as of March 27, 2005.
Based upon our evaluation, our Chief Executive Officer and Chief Financial Officer concluded that
the design and operation of our disclosure controls and procedures are effective to accomplish
their objectives. In addition, there was no change in our internal control over financial reporting or in other
factors that occurred during the quarter ended March 27, 2005 that has materially affected, or is
reasonably likely to materially affect, our internal control over financial reporting. 52




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PART II  OTHER INFORMATION 
 ITEM 1: LEGAL PROCEEDINGS PFGIs Fleming bankruptcy claim PFGI, on or about April 1, 2003, filed a reclamation claim against Fleming, a customer, in
Flemings bankruptcy proceeding pending in the United States Bankruptcy Court for the District of
Delaware in the amount of $964,000. Fleming has claimed that the products in controversy had been
commingled with other products and that the value of PFGIs claim is $0. Additionally, on or about
January 31, 2004, Fleming identified alleged preferential transfers to PFGI of up to $6,493,000, of
which Fleming has alleged $5,014,000 are, or may be, eligible for protection as new value.
Fleming additionally alleged that some, if not all, of the alleged PFGI preferential transfers may
qualify as ordinary course of business transactions. Fleming has also made claims regarding
payments it describes as overpayment, unjust enrichment due to allegedly excess wire transfers and
payments and debts arising out of military sales. We have been advised that similar allegations
have been made by Fleming in many, if not all, of the other pending reclamation claims filed
against Fleming. We are currently in the process of analyzing the claims. Our attorneys have been
in contact with counsel for Aurora and counsel for Fleming and all parties have expressed agreement
that the most expedient manner to resolve the Aurora and Fleming claims would be to do so in the
Fleming bankruptcy case under the terms of Flemings confirmed plan. Stipulations to this effect
have been signed by all parties. We believe that resolution of such matters will not result in a
material impact on our financial condition, results of operations or cash flows. Auroras Fleming bankruptcy claim Aurora, on or about March 31, 2003, filed a reclamation claim against Fleming, a customer, in
Flemings bankruptcy proceeding pending in the United States Bankruptcy Court for the District of
Delaware in the amount of $595,000. Fleming has claimed that the products in controversy had been
commingled with other products and that the value of Auroras claim is $299,000. Additionally, on
or about February 2, 2004, Fleming identified alleged preferential transfers to Aurora of up to
$5,942,000, of which Fleming has alleged $3,293,000 are, or may be, eligible for protection as new
value. Fleming additionally alleged that some, if not all, of the alleged Aurora preferential
transfers may qualify as ordinary course of business transactions. Fleming has also made claims
regarding payments it describes as overpayment, unjust enrichment due to allegedly excess wire
transfers and payments and debts arising out of military sales. We have been advised that similar
allegations have been made by Fleming in many, if not all, of the other pending reclamation claims
filed against Fleming. We are currently in the process of analyzing the claims. Our attorneys
have been in contact with counsel for Aurora and counsel for Fleming and all parties have expressed
agreement that the most expedient manner to resolve the Aurora and Fleming claims would be to do so
in the Fleming bankruptcy case under the terms of Flemings confirmed plan. Stipulations to this
effect have been signed by all parties. We believe that resolution of such matters will not result
in a material impact on our financial condition, results of operations or cash flows. Employee litigationindemnification of US Cold Storage On March 21, 2002, an employee at the Omaha, Nebraska facility died as the result of an accident
while operating a forklift at a warehouse facility that we leased. OSHA conducted a full
investigation and determined that the death was the result of an accident and found no violations
against us. On March 18, 2004, the Estate of the deceased filed suit in District Court of Sarpy
County, Nebraska, Case No: CI 04-391, against us, the owner of the forklift and the leased
warehouse, the manufacturer of the forklift and the distributor of the forklift. We, having been
the deceaseds employer, were named as a defendant for workers compensation subrogation purposes
only. On May 18, 2004, we received notice from defendant, US Cold Storage, requesting that we accept the
tender of defense for US Cold Storage in this case in accordance with the indemnification provision
of the warehouse lease. The request has been submitted to our insurance carrier for evaluation and
we have been advised that the indemnification provision is not applicable in this matter and that
we should have no liability under that provision. Therefore, we believe that resolution of such
matters will not result in a material impact on our financial condition, results of operations or
cash flows. 53




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R2 appeal in Aurora bankruptcy Prior to its bankruptcy filing, Aurora entered into an agreement with its prepetition lending group
compromising the amount of certain fees due under its senior bank facilities (the October
Amendment). One of the members of the bank group (R2 Top Hat, Ltd.) challenged the
enforceability of the October Amendment during Auroras bankruptcy by filing an adversary
proceeding and by objecting to confirmation. The bankruptcy court rejected the lenders argument
and confirmed Auroras plan of reorganization. The lender then appealed from those orders of the
bankruptcy court. It is too early to predict the outcome of the appeals. Included in our recorded
accrued liabilities is $20 million, which was assumed in the Aurora Transaction. State of Illinois v. City of St. Elmo and Aurora Foods Inc. We are a defendant in an action filed by the State of Illinois regarding our St. Elmo facility. The
Illinois Attorney General filed a complaint seeking a restraining order prohibiting further
discharges by the City of St. Elmo from its publicly owned wastewater treatment facility in
violation of Illinois law and enjoining us from discharging our industrial waste into the Citys
treatment facility. The complaint also asked for fines and penalties associated with the Citys
discharge from its treatment facility and our alleged operation of a production facility without
obtaining a state environmental operating permit. On June 19, 2003, we and the Illinois Attorney
General executed an Agreed Injunction Order settling all allegations in the complaint against us,
other than any potential monetary fines or penalty. We intend to vigorously defend any future claim
for fines or penalties. After analyzing these claims, we believe that resolution of such matters
will not result in a material impact on our financial condition, results of operations or cash
flows. Subsequent to our settlement with the State of Illinois, the City also entered into a
settlement agreement with the State of Illinois. At this time, the City is on restricted status
with the State of Illinois Environmental Protection Agency (ILEPA). Restricted status for the
City may be lifted after it establishes a consistent record of compliance with its effluent
discharge parameters. In August 2004, the latest Consent Order was signed by the parties and by the Judge allowing
us to continue discharging to the City of St. Elmo. In September 2004, we met with representatives
from the ILEPA and the State Attorney Generals Office and separately with the City of St. Elmo to
inform them that we have begun engineering work and the permit application process to install a
pre-treatment system at our St. Elmo facility during the fourth quarter of calendar year 2004. On
January 19, 2005 the ILEPA issued to us our construction and operating permit for the newly
installed pretreatment system. The construction work will continue through the fourth quarter of
calendar year 2005. We intend to vigorously defend any future claim for fines or penalties. We
believe that resolution of such matters, including the associated fines and penalties, will not
result in a material impact on our financial condition, results of operations or cash flows. We continue to discharge our effluent to the City. We would vigorously defend any future
effort to prevent us from discharging our industrial wastewater to the City. Although we believe we
will be able to resolve this matter favorably, an adverse resolution may have a material impact on
our financial position, results of operation, or cash flows. Underweight Products In July 2004, it came to our attention that certain products produced in one of the former Aurora
plants have not met some state weight requirements. While we are in the process of investigating
the scope of this issue, we have revised the operating procedures of the plant such that products
produced there will comply with state product weight requirements. As a result of these weight
issues, we voluntarily initiated return procedures for the product in the locations involved and
also disposed of certain inventory held by us. We have recorded a charge related to the returns and
inventory of $3.4 million and $1.2 million in the fiscal year ended July 31, 2004 and the
transition year ended December 26, 2004, respectively. As a result of these underweight products,
we have recently received a letter from the State of California, County of Santa Barbara,
requesting that we meet with it to discuss this issue and the remedial actions taken by us. A
meeting was held with the involved California officials on December 8, 2004 at which time the
issues and corrective steps taken by us were presented and discussed. While we believe we have
taken appropriate remedial steps, it is probable that fines and penalties will be imposed. The
State of California has recently responded with its acknowledgment of our cooperation with the
investigation and prompt reaction to and correction of the issue, and proposed a settlement amount
which we are negotiating with the State of California. As of March 27, 2005, we have reserved
$695,000 based upon the State of Californias latest settlement proposal. We will continue to
vigorously defend our actions to date since taking control of the Aurora. We believe that
resolution of such matters will not result in a material impact on our financial condition, results
of operations or cash flows. 54




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ITEM 2: CHANGES IN SECURITIES AND USE OF PROCEEDS None 
 ITEM 3: DEFAULTS UPON SENIOR SECURITIES None 
 ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None 
 ITEM 5: OTHER INFORMATION None 
 ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K ExhibitNumber
    
    
    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. 55




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SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned, thereunto duly authorized. 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:
    
    May 9, 2005
 56