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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
 FORM 10-K o
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934orþ
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
for the transition period
from August 1, 2004 to December 26, 2004
 Commission file number - 333-118390 Pinnacle Foods Group Inc.  Delaware
State or other jurisdiction of
incorporation or organization
    
    94-3303521
(I.R.S. Employer
Identification No.)
 6 Executive Campus, Suite 100
Cherry Hill, New Jersey 08002
(Address of principal executive offices) (Zip Code) Registrants telephone number, including area code (856) 969-7100 Securities registered pursuant to Section 12(b) of the Act: Title of each class
    
    Name of each exchange on which registeredNone
 Securities registered pursuant to section 12(g) of the Act:None
(Title of class)  Indicate by check mark whether the Registrant (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days. þ Yes o No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation
S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of
Registrants knowledge, in definitive proxy or information statements incorporated by reference in
Part III of this Form 10-K or any amendment to this Form 10-K. þ Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule
12b-2 of the Act). o Yes þ No State the aggregate market value of the voting and non-voting common equity held by
non-affiliates computed by reference to the price at which the common equity was last sold, or the
average bid and asked price of such common equity, as of the last business day of the Registrants
most recently completed second fiscal quarter. Not applicable.




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TABLE OF CONTENTSFORM 10-K
    
    Page No.PART IItem 1
    
    Business
    
    
    4Item 2
    
    Properties
    
    
    12Item 3
    
    Legal Proceedings
    
    
    13Item 4
    
    Submission of Matters to a Vote of Security Holders
    
    
    14PART IIItem 5
    
    Market for Registrants Common Equity and Related Stockholder Matters
    
    
    15Item 6
    
    Selected Financial Data
    
    
    15Item 7
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    18Item 7a
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    
    38Item 8
    
    Financial Statements and Supplementary Data
    
    
    40Item 9
    
    Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure
    
    
    103Item 9a
    
    Controls and Procedures
    
    
    103Item 9b
    
    Other Information
    
    
    103PART IIIItem 10
    
    Directors and Executive Officers of the Registrant
    
    
    104Item 11
    
    Executive Compensation
    
    
    108Item 12
    
    Security Ownership of Certain Beneficial Owners and Management and Related
Shareholder Matters
    
    
    111Item 13
    
    Certain Relationships and Related Transactions
    
    
    114Item 14
    
    Principal Accountant Fees and Services
    
    
    118PART IVItem 15
    
    Exhibits, Financial Statement Schedules, and Reports on Form 8-K
    
    
    119EX-12.1: Computation of Ratios of Earnings to Fixed ChargesEX-18.1: Letter regarding change in accounting principleEX-31.1: CertificationEX-31.2: CertificationEX-32.1: CertificationEX-32.2: Certification
  2




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PART I In December 2004, the Board of Directors approved a change to PFGIs fiscal year end from July 31
to the last Sunday in December. In view of this change, this Form 10-K is a transition report, and
includes financial information for the 21 weeks ended December 26, 2004, which we refer to as the
Transition Year throughout this report, and for the years ended July 31, 2004, 2003, and 2002.
We identify each fiscal year for PFGI in this annual report according to the calendar year in which
such fiscal year ends. For example, we refer to the fiscal year ended July 31, 2004, as fiscal
2004 or 2004. DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS In this annual report, PFGI, the Company, we, us and our refers to Pinnacle Foods Group
Inc., a Delaware corporation, and its subsidiaries on a consolidated basis. PFHC refers to
Pinnacle Foods Holding Corporation, a Delaware corporation, and its subsidiaries on a consolidated
basis prior to the consummation of the Aurora Transaction (as defined) and Pinnacle refers to
Pinnacle Foods Corporation, a Delaware corporation and a wholly-owned subsidiary of PFGI. Aurora
refers to Aurora Foods Inc., a Delaware corporation, and its subsidiary on a consolidated basis
prior to the consummation of the Aurora Transaction (as defined). This annual report includes forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended and Section 21E of the Exchange Act of 1934, as amended.
Forward-looking statements include statements concerning our plans, objectives, goals, strategies,
future events, future revenues or performance, capital expenditures, financing needs, plans or
intentions relating to acquisitions, business trends and other information that is not historical
information and, in particular, appear under the headings Managements discussion and analysis of
financial condition and results of operations and Business. When used in this annual report, the
words estimates, expects, anticipates, projects, plans, intends, believes,
forecasts and variations of such words or similar expressions are intended to identify
forward-looking statements. All forward-looking statements, including, without limitation,
managements examination of historical operating trends, are based upon our current expectations
and various assumptions. Our expectations, beliefs and projections are expressed in good faith and
we believe there is a reasonable basis for them. However, there can be no assurance that
managements expectations, beliefs and projections will result or be achieved. There are a number of risks and uncertainties that could cause our actual results to differ
materially from the forward-looking statements contained in this annual report. Such risks,
uncertainties and other important factors include, among others:  
    general economic and business conditions;
    industry trends;
    changes in our leverage;
    interest rate changes;
    changes in our ownership structure;
    competition;
    the loss of any of our major customers or suppliers;
    changes in demand for our products;
    changes in distribution channels or competitive conditions in the markets where we operate;
    costs of integrating future acquisitions;
    loss of our intellectual property rights;
    fluctuations in price and supply of raw materials;
    seasonality;
    our reliance on co-packers to meet our manufacturing needs;
    availability of qualified personnel; and
    changes in the cost of compliance with laws and regulations, including
environmental laws and regulations. 3




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There may be other factors that may cause our actual results to differ materially from the
forward-looking statements. All forward-looking statements attributable to us or persons acting on our behalf apply only as of
the date of this annual report and are expressly qualified in their entirety by the cautionary
statements included in this annual report. We undertake no obligation to publicly update or revise
any forward-looking statements to reflect subsequent events or circumstances. 
 ITEM 1. BUSINESS General Information We are a leading manufacturer and marketer of high-quality, branded convenience food products. Our
products and operations are managed and reported in two operating segments: frozen foods and dry
foods. The frozen foods segment consists primarily of Swanson and Hungry-Man frozen dinners and
entrees; Van de Kamps and Mrs. Pauls frozen seafood; Aunt Jemima frozen breakfasts and Lenders
bagels. The dry foods segment consists primarily of Vlasic pickles, peppers and relish; Duncan
Hines baking mixes and frostings and Mrs. Butterworths and Log Cabin syrups and pancake mixes. Our
major brands hold leading market positions in their respective retail markets and enjoy high
consumer awareness. Through our managed broker network, our products reach all traditional classes
of trade, including grocery wholesalers and distributors, grocery stores and supermarkets,
convenience stores, mass and drug merchandisers and warehouse clubs. Throughout this Form 10-K, we use a combination of customized (assembled at our request)
Information Resources, Inc. (IRI) data and IRI syndicated databases. Unless we indicate
otherwise, retail sales, market share, category and other industry data used throughout this annual
report for all categories and segments listed below are IRI data for the 52-week period ended
December 26, 2004 and in some cases December 19, 2004. These data include retail sales in
supermarkets with at least $2 million in total annual sales but exclude sales in mass merchandiser,
club, drug, convenience or dollar stores. Retail sales are dollar sales estimated by IRI and
represent the value of units sold through supermarket cash registers for the relevant period. We
view the frozen dinners and entrees category as consisting of single-serve full-calorie dinners and
entrees and single-serve healthy dinners and entrees. We view the baking mixes and frostings
category as consisting of the following segments: layer cakes, brownies, ready-to-serve frostings,
muffins, cookie mix, bars, frosting mix, quick bread, snack kits and special baking mixes. We view
the frozen breakfast category as consisting of breakfast entrees, waffles, pancakes and French
toast. We view the prepared seafood segment as consisting of the prepared fin, prepared non-fin
without shrimp and prepared shrimp sub-segments. References to the bagel category are to scannable
bagels, as consisting of the frozen, refrigerated and shelf-stable segments. We view syrup, frozen
pizza and frozen skillet meals as distinct categories. When we refer to the core market of our Open
Pit brand of barbecue sauce, such core market consists of the major metropolitan areas surveyed by
IRI in Illinois, Michigan, Ohio, western Pennsylvania and Wisconsin. Unless we indicate otherwise,
all references to percent changes reflect the comparison to the same period in the prior year. Although we believe that this information is reliable, we cannot guarantee its accuracy and
completeness, nor have we independently verified it. Where we so indicate, we obtain certain other
market share and industry data from internal company surveys and management estimates based on
these surveys and on our managements knowledge of the industry. While we believe such internal
company surveys and management estimates are reliable, no independent sources have verified such
surveys and estimates. Although we are not aware of any misstatements regarding the industry data
that we present in this annual report, our estimates involve risks and uncertainties and are
subject to change based on various factors, including those discussed under Disclosure regarding
forward-looking statements. 4




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Industry overview The U.S. food manufacturing industry has historically been characterized by relatively stable sales
growth based on modest price and population increases. Over the past several years, consolidation
activity in the food manufacturing industry has been driven primarily by businesses making
strategic acquisitions to complement category positions, maximize economies of scale in raw material sourcing and production and expand retail distribution,
while shedding non-core business lines. In recent years food manufacturers have capitalized on an
increasing desire by households, particularly dual-income, single-family and active-lifestyle
consumers, for convenience and variety by introducing innovative, high-quality food products and
complete meal solutions. Food manufacturers have also taken advantage of the growing trends toward
away-from-home eating by increasing their sales to the foodservice channel, which supplies
restaurants, schools, hospitals and other institutions. We believe that these trends will continue
to represent growth opportunities for food manufacturers. Frozen foods Frozen dinners and entrees.The frozen dinners and entrees category had $3.6 billion in retail
sales, a decline of 4.2%. Through our Hungry-Man and Swanson Dinners brands, we compete in the $2.2
billion single-serve, full-calorie dinners and entrees segment of this category. While the frozen
dinners and entrees category has traditionally exhibited growth, we believe the recent category
declines have been impacted by a shift to mass merchandiser, club, and dollar store chains (which
are not measured by IRI), growth in quick serve restaurants, trends such as low-carb diets and a
shift toward value as noted by lower unit declines of 0.7%. Recent category trends have shown
improvement with dollar sales declining 0.3% and unit sales increasing 2.8% for the 13-week period
ended December 19, 2004. Frozen prepared seafood.The frozen prepared seafood category consists of fin products, such as
pollock and salmon, and non-fin products, primarily shrimp. This category had approximately $558
million in retail sales, as compared to the overall frozen seafood category, which had retail sales
of approximately $1.6 billion. The frozen prepared seafood category declined 3.1%. Our Mrs. Pauls
and Van de Kamps brands compete in the frozen prepared seafood category. The unprepared frozen
seafood category, which grew 6.9%, includes bagged shrimp and accounts for the remainder of the
frozen seafood industry. Frozen breakfast.The frozen breakfast category consists of the frozen waffles, pancakes, French
toast and breakfast entrees segments. This category had $1.1 billion in retail sales, an increase
of 3.4% over the prior year period, driven primarily by an increased focus on new product
innovation and new entrants to the category. Through our Aunt Jemima brand, we compete in all four
segments. Bagels.The scannable bagel category consists of the frozen bagels, refrigerated bagels and fresh
bagels segments, comprising 11.0%, 11.0% and 77.9% of the category, respectively. The scannable
bagel category had retail sales of $553 million, a decline of 1.3%. Our Lenders brand competes in
all three segments. Frozen and refrigerated bagel market sales have declined 19.2% and 16.0%,
respectively, while shelf stable bagel market sales have increased 4.6%. The decline in frozen
bagel sales is driven by consumers replacing frozen bagel purchases with purchases of fresh bagels
and other, more innovative frozen breakfast products. As a result, retailers have reduced shelf
space and distribution for frozen bagels, further contributing to the decline in the frozen bagel
segment. Dry foods Pickles, peppers and relish.The pickles, peppers and relish category is large and stable, with
approximately $1 billion of retail sales in each of the past five years. Shelf-stable pickles is
the largest segment of the category, with $513 million in retail sales, followed by peppers ($268
million), refrigerated pickles ($134 million) and relish ($117 million). Of retail shelf-stable
pickle segment sales, approximately 72% represents sales of branded pickles, and the remaining
28.3% represents sales of private label pickles. Our Vlasic brand competes in all four segments. We
believe that the pickles, peppers and relish category will continue to demonstrate a relatively
stable level of retail sales. Baking mixes and frostings.The baking mixes and frostings category, which has historically
exhibited stable consumption, had approximately $1.3 billion in retail sales, an increase of 1.8%
over the prior year period. The baking mixes and frostings category primarily consists of the
following five key product segments, with the corresponding retail sales volume percentages: cake
mix (26.5%), ready-to-serve frostings (19.2%), brownie mix (16.8%), muffin mix (16.3%) and cookie
mix (4.7%). Our Duncan Hines brand competes in all five of these segments. The remaining 16.5% of
the retail sales volume is in small product segments such as quick breads and specialty mixes. 5




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Syrup.The syrup category had $491 million in retail sales, which represents a decline of
approximately 1.2%. The syrup category consists of four major brandsAunt Jemima, Mrs.
Butterworths, Log Cabin and Eggoas well as numerous private label and regional brands. Market
share is driven largely by pricing, as the syrup consumer is extremely price sensitive. Of retail
syrup category sales, approximately 79.5% represents sales of branded syrup, and the remaining
20.5% represents sales of private label syrup. Our products Our product portfolio consists of a diverse mix of product lines and leading well-recognized
brands. Our major brands hold leading market positions in their respective retail markets and enjoy
high consumer awareness. Through our managed broker network, our products reach all traditional
classes of trade, including grocery wholesalers and distributors, grocery stores and supermarkets,
convenience stores, mass and drug merchandisers and warehouse clubs. Frozen foods Dinners and entrees.Our dinners and entrees product line consists primarily of products sold in
the United States and Canada under the Swanson and Hungry-Man brands. We also distribute these
products through foodservice and private label channels. As a complement to our major brands
(Hungry-Man and Swanson Dinners), our frozen dinner offerings also include Swanson Pot Pies and
Swanson Hearty Bowls sold in Canada. The Swanson brand enjoys a strong heritage, dating back over
50 years to its introduction of The Original TV Dinner in 1953. Our Hungry-Man and Swanson Dinners
brands collectively represent the third-largest brand in the $2.2 billion single-serve,
full-calorie dinners and entrees segment. Hungry-Man consists of dinners, breakfasts and sandwiches targeted toward men who prefer larger,
more satisfying portions. As a result of our unique positioning and new product introductions,
Hungry-Man retail sales have outpaced segment trends (declining 2.5% compared to segment decline of
3.8%). Swanson Dinners consists of a complete line of dinners targeted toward women and is positioned as
the best value among the premium brands in the single-serve, full-calorie dinners and entrees
segment. Prepared seafood.Our frozen prepared seafood product line, marketed primarily under the Van de
Kamps and Mrs. Pauls brands, includes breaded and battered fish sticks and fish fillets,
healthy breaded fish, grilled fish fillets, breaded shrimp, marinated shrimp, shrimp bowls and
specialty seafood items, such as crab cakes and clam strips. We also distribute these products
through foodservice and private label channels. The Van de Kamps and Mrs. Pauls brands hold the
number two (14.1%) and the number three (11.1%) market share positions, respectively, of the $558
million frozen prepared seafood segment of the $1.6 billion frozen seafood category. The Van de
Kamps brand dates back to 1915 and the Mrs. Pauls franchise began in the mid-1940s. Frozen breakfast.Our breakfast product line consists of waffles, pancakes, French toast and
breakfast entrees marketed under the Aunt Jemima brand. We also distribute these products through
foodservice and private label channels. The Aunt Jemima brand was established over a century ago
and, with a 13.9% share, is currently the number three brand in the $1.1 billion frozen breakfast
category. Bagels.Our bagel product line consists primarily of Lenders packaged bagels, which we distribute
among all scannable sections of the grocery store (i.e., the frozen, refrigerated and the fresh
bread aisles). We also distribute these products through foodservice and private label channels.
Founded in 1927, Lenders ranks number two in scannable bagels, with a 17.6% share of the $553
million scannable bagel category. Our Lenders bagels are offered in a variety of styles, including Lenders Original and New York
Style Frozen Bagels, Lenders refrigerated and Lenders fresh bagels. 6




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Other frozen foods.We market frozen pizza under the Celeste brand, which dates back to the 1930s.
Celeste is positioned as a homemade, authentic Italian meal at an affordable price. We also sell
skillet meals, which are complete entrees in a single package that can be cooked in a skillet in
less than fifteen minutes, under the Chefs Choice brand. The Chefs Choice brand, which was sold primarily to one customer, was discontinued
in the fourth quarter of 2004. Dry foods Pickles, peppers and relish.Our pickle, pepper and relish product lines consist primarily of
pickle, pepper and relish products sold nationally under our Vlasic brand (95% of branded sales)
and pickles sold regionally under the Milwaukees and Wiejske Wyroby brands (5% of branded sales).
We also distribute these products through foodservice and private label channels. Our Vlasic brand
was introduced over 60 years ago, and we believe that the Vlasic brand, together with our trademark
Vlasic stork, enjoy strong consumer awareness. Vlasic, with a 30.7% share (nearly twice that of its
nearest branded competitor), is the leading and only national brand in the $513 million
shelf-stable pickle segment of the $1.0 billion pickles, peppers and relish category. Our Vlasic pickle products are offered primarily in dill, sweet and bread-and-butter flavors and in
a wide array of forms, such as whole, baby wholes, spears, chips and slices. We offer over 30
different flavors and cuts of pickles. The Vlasic cut pepper product offering consists of four
types of peppers in varying heat levels to cover the sweet, mild and hot consumer preferences.
Vlasic also offers six other whole pepper varieties, such as jalapeno and pepperoncini. The Vlasic
relish product offering consists of a full line of relish products in a variety of flavors
including Dill, Mild Sweet and Fancy Sweet. Baking mixes and frostings.Our baking mixes and frostings product line consists primarily of
Duncan Hines cake mixes, ready-to-serve frostings, brownie mixes, muffin mixes and cookie mixes.
Duncan Hines is a national premium brand that was introduced in 1956 and, with a 18.2% share, is
the number two brand in the $1.3 billion baking mixes and frostings category. We position Duncan Hines as a national premium brand that appeals to the consumer who wants a
quality, good as homemade baking product. All Duncan Hines products are produced by contract
manufacturers. Syrups and pancake mixes.Our syrup and pancake mixes product line consists primarily of products
marketed under our Log Cabin and Mrs. Butterworths brands. Our syrup line consists of original,
lite and sugar-free varieties. We also distribute these products through foodservice and private
label channels. Log Cabin was introduced in 1888 and is the only national branded syrup that
contains real maple syrup. Mrs. Butterworths was introduced in 1962 and, with its distinctive
grandmother-shaped bottle, appeals to families with children. In the $491 million table-syrup
category, Log Cabin and Mrs. Butterworths hold the number two (10.4%) and number three (8.9%)
market share positions, respectively. We also sell pancake mix under the Mrs. Butterworths brand. Other dry foods.We market a complete line of barbeque sauce products under our Open Pit brand,
which was introduced in 1955. We sell this product line primarily to retail customers in core
Midwest markets where we have the number one position with 22.5% market share. History On May 22, 2001, Pinnacle acquired certain assets and assumed certain liabilities of the North
American business of Vlasic Foods International Inc. (VFI). The North American business consisted
of the Swanson frozen food, Vlasic pickles, relish and peppers and Open Pit barbecue sauce
businesses. PFHC and Pinnacle were each incorporated on March 29, 2001, but had no operations until
the acquisition of the North American business of VFI. The financial data for the ten weeks ended
July 31, 2001, include the results of operations from May 23, 2001 through July 31, 2001. PFGI
derived the summary financial data for the 42 weeks ended May 22, 2001, from the audited statement
of operations of the frozen foods and condiments businesses of VFI, its predecessor. 7




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On August 8, 2003, Crunch Holding Corp., a Delaware corporation indirectly owned by J.P. Morgan
Partners, LLC (or one or more of its affiliates, as appropriate, JPMP), J.W. Childs Associates,
L.P. (or one or more of its affiliates, as appropriate, JWC) and CDM Investor Group LLC (CDM
Investor Group LLC and, together with JPMP and JWC, the Sponsors) entered into a definitive
purchase agreement to acquire PFHC. The Pinnacle Transaction (as defined below) was consummated on November 25, 2003. As of the closing date of the
Pinnacle Transaction, the Sponsors indirectly owned 100% of the issued and outstanding stock of
PFHC. The merger described above, the financing thereof and the other related transactions are
collectively referred to in this annual report for convenience as the Pinnacle Transaction. On November 25, 2003, Aurora entered into a definitive agreement (as amended on January 8, 2004,
the Merger Agreement) with Crunch Equity Holding, LLC that provided that Aurora would undertake a
comprehensive restructuring transaction in which it would be combined with PFHC (the Aurora
Merger). The Aurora Merger was consummated on March 19, 2004. Aurora is the surviving entity in
the merger, and the combined business operates under the name Pinnacle Foods Group Inc. The Aurora
Merger, the financing thereof and the other related transactions are collectively referred to in
this annual report for convenience as the Aurora Transaction. Marketing, sales and distribution Our marketing programs consist of advertising, consumer promotions and trade promotions. Our
advertising consists of television, newspaper and magazine advertising aimed at increasing consumer
awareness and trial of our brands. Consumer promotions include free trial offers, targeted coupons
and on-package offers to generate trial usage and increase purchasing frequency. Our trade
promotions focus on obtaining retail feature and display support, discounting to achieve key price
points and securing retail shelf space. We continue to shift our marketing efforts toward building
long-term brand equity through consumer advertising and trial generation promotions rather than
through trade spending. We sell a majority of our products in the United States through a single national broker with whom
we have a long term working relationship. In Canada, we use two brokers to distribute the majority
of our products. We employ other brokers for the foodservice, military, club and convenience
channels. We manage our brokers through our company employees in regional sales offices located in
Arkansas, Florida, Texas and Ontario, Canada. Through this managed broker network, our products
reach all traditional classes of trade including grocery wholesalers and distributors, grocery
stores and supermarkets, convenience stores, mass and drug merchandisers and warehouse clubs. Due to the different demands of distribution for frozen, refrigerated and shelf-stable products, we
maintain separate distribution systems. Our frozen product warehouse and distribution network
consists of 26 locations. Frozen products are distributed by means of three owned and operated
warehouses at our Fayetteville, Arkansas, Mattoon, Illinois, and Jackson, Tennessee plants. In
addition, we utilize seven distribution centers and eight consignment distribution centers in the
United States and two distribution centers in Canada, all of which are owned and operated by
third-party logistics providers. We currently ship frozen products from two specialty locations
which provide special packaging and from two co-packers of finished goods. We also maintain
inventory in two leased overflow warehouses, which we plan to close early in the second quarter of 2005.
Vlasic refrigerated pickles are distributed directly from cold storage warehouses at our pickle
manufacturing facilities. Dry products are distributed through a system of eight distribution sites
that include two warehouses that are owned and operated by us in Millsboro, Delaware and St. Elmo,
Illinois, and six other locations which are owned and operated by third-party logistics providers.
In each third-party operated location, the provider receives, handles, and stores product. Our
distribution system uses a combination of common carrier trucking and inter-modal rail transport.
We believe that the sales and distribution network is scalable and has the capacity to support
substantial increases in volume. Ingredients and packaging We believe that the ingredients and packaging used to produce our products are readily available
through multiple sources. PFGIs ingredients are expected to account for approximately 44% of our
cost of products sold, and primarily include chicken, beef, turkey, corn syrup, flour, sugar, fish,
shrimp, eggs, cheese, vegetable oils, shortening and cucumbers, PFGIs largest raw material. PFGIs
packaging costs, primarily for glass jars, plastic trays corrugated fiberboard and plastic
packaging materials, are expected to account for approximately 15% of our cost of products sold. 8




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Research and development Our Product Development and Technical Services team currently consists of 28 full-time employees
focused on product-quality improvements, product creation, package development, regulatory
compliance, quality assurance and tracking consumer feedback. For the twenty-one weeks ended
December 26, 2004, and the fiscal years ended July 31, 2004, 2003 and 2002, PFGIs research and
development expenditures totaled $1.5 million, $3.3 million, $3.0 million and, $3.6 million
respectively. Customers Sales of PFGIs products to Wal-Mart and its affiliates approximated 18%, 18%, 17% and 14% of
PFGIs consolidated net sales in the twenty-one weeks ended December 26, 2004, fiscal 2004, 2003
and 2002, respectively. PFGIs top ten customers accounted for approximately 53% and 50% of PFGIs
net sales in the twenty-one weeks ended December 26, 2004 and fiscal 2004, respectively. We believe
that our concentration of business with our largest customers is representative of the food
industry. The loss of our largest customer would have a significant impact on our business. The
specific timing of significant customers merchandising activities for our products can impact
quarterly sales and operating results when making year-to-year comparisons. Competition We face competition in each of our product lines. We compete with producers of similar products on
the basis of, among other things, product quality, convenience, price, brand recognition and
loyalty, customer service, effective advertising and promotional activities and the ability to
identify and satisfy emerging consumer preferences. We compete with a significant number of
companies of varying sizes, including divisions, subdivisions or subsidiaries of much larger
companies with more substantial financial and other resources available to them. Our ability to
grow our business may be impacted by the relative effectiveness of, and competitive response to,
new product efforts, product innovation and new advertising and promotional activities. In
addition, from time to time, we may experience margin pressure in certain markets as a result of
competitors pricing practices or as a result of price increases for the ingredients used in our
products. Although we compete in a highly competitive industry for representation in the retail
food and foodservice channels, we believe that our brand strength in our various markets has
resulted in a strong competitive position. During the twenty-one weeks ended December 26, 2004 and fiscal 2004 our most significant
competitors for our frozen foods products were Nestle, ConAgra and Heinz, and our most significant
branded competitors for our pickles and peppers products were Claussen, B&G Foods, Inc., and Mt.
Olive products. During the twenty-one weeks ended December 26, 2004 and fiscal 2004 our most
significant competitors for our baking products were General Mills and J.M. Smucker Co., for our
syrup products were The Quaker Oats Company and Kelloggs, for our seafood products was Gortons,
for our frozen breakfast products were Kelloggs and General Mills and for our bagels were Weston
and Sara Lee. Trademarks and patents We own a number of registered trademarks in the United States, Canada and other countries,
including All Day Breakfast®, American Recipes®, Avalon Bay®, Candy Factory®, Casa Brava®, Casa
Regina®, Celeste®, Country Kitchen®, Duncan Hines®, Food Thats In Fashion®, Fun Frosters®, Great
Starts®, Grill Classics®, Hearty Bowls®, Hearty Hero®, Hungry-Man®, Hungry-Man Sports Grill®,
Hungry-Man Steakhouse®, Its Good to be Full®, Lenders®, Log Cabin®, Milwaukees®, Mrs.
Butterworths®, Mrs. Pauls®, Only Mrs. Pauls®, Open Pit®, Snackmms®, Stackers®, Steakhouse Mix®,
Syrup Dunkers ®, The Original TV Dinner®, Thats The Best Pickle I Ever Heard ®, Van de Kamps®,
Vlasic®, and Wiejske Wyroby ®. Registration is pending on the following trademarks: Carb-Meter,
Fish N Dips, Ovals, Relishmixers, and Signature Desserts. We protect our trademarks by
obtaining registrations where appropriate and opposing any infringement in key markets. We also own
a design trademark in the United States, Canada and other countries on the Vlasic stork. 9




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We manufacture and market certain of our frozen food products under the Swanson brand pursuant to
two royalty-free, exclusive and perpetual trademark licenses granted by Campbell Soup Company. The
licenses give us the right to use certain Swanson trademarks both inside and outside of the United
States in connection with the manufacture, distribution, marketing, advertising and promotion of frozen foods and beverages of any type except
for frozen soup or broth. The licenses require us to obtain the prior written approval of Campbell
Soup Company for the visual appearance and labeling of all packaging, advertising materials and
promotions bearing the Swanson trademark. The licenses contain standard provisions, including those
dealing with quality control and termination by Campbell Soup Company as well as assignment and
consent. If we were to breach any material term of the licenses and not timely cure such breach,
Campbell Soup Company could terminate the licenses. We manufacture and market certain of our frozen breakfast products under the Aunt Jemima brand
pursuant to a royalty-free, exclusive (as to frozen breakfast products only) and perpetual license
granted by The Quaker Oats Company. The license gives us the right to use certain Aunt Jemima
trademarks both inside and outside the United States in connection with the manufacture and sale of
waffles, pancakes, French toast, pancake batter, biscuits, muffins, strudel, croissants and all
other frozen breakfast products, excluding frozen cereal. The license requires us to obtain the
approval of The Quaker Oats Company for any labels, packaging, advertising and promotional
materials bearing the Aunt Jemima trademark. The Quaker Oats Company can only withhold approval if
such proposed use violates the terms of the license. The license contains standard provisions,
including those dealing with quality control and termination by The Quaker Oats Company as well as
assignment and consent. If we were to breach any material term of the license and not timely cure
such breach, The Quaker Oats Company could terminate the license. The loss of these licenses could have a material adverse effect on our business. Although we own a number of patents covering manufacturing processes, we do not believe that our
business depends on any of these patents to a material extent. Employees As of December 31, 2004, we employed approximately 2,600 people. Approximately 26% of our employees
are unionized. We consider our employee relations to be generally good. Governmental, legal and regulatory matters Food safety and labeling We are subject to the Food, Drug and Cosmetic Act and regulations promulgated thereunder by the
Food and Drug Administration. This comprehensive and evolving regulatory program governs, among
other things, the manufacturing, composition and ingredients, labeling, packaging and safety of
food. In addition, the Nutrition Labeling and Education Act of 1990 prescribes the format and
content of certain information required to appear on the labels of food products. We are subject to
regulation by certain other governmental agencies, including the U.S. Department of Agriculture. Our operations and products are also subject to state and local regulation through such measures as
licensing of plants, enforcement by state health agencies of various state standards and inspection
of facilities. Enforcement actions for violations of federal, state and local regulations may
include seizure and condemnation of products, cease and desist orders, injunctions or monetary
penalties. We believe that our facilities and practices are sufficient to maintain compliance with
applicable government regulations, although there can be no assurances in this regard. Federal Trade Commission We are subject to certain regulations by the Federal Trade Commission. Advertising of our products
is subject to such regulation pursuant to the Federal Trade Commission Act and the regulations
promulgated thereunder. Employee safety regulations We are subject to certain health and safety regulations, including regulations issued pursuant to
the Occupational Safety and Health Act. These regulations require us to comply with certain
manufacturing, health and safety standards to protect our employees from accidents. 10




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Environmental We are subject to a number of federal, state and local laws and other requirements relating to the
protection of the environment and the safety and health of personnel and the public. These
requirements relate to a broad range of our activities, including:  
    the discharge of pollutants into the air and water;
    the identification, generation, storage, handling, transportation, disposal,
record-keeping, labeling, reporting of, and emergency response in connection with,
hazardous materials (including asbestos) associated with our operations;
    noise emissions from our facilities; and
    safety and health standards, practices and procedures that apply to the workplace
and the operation of our facilities. In order to comply with these requirements, we may need to spend substantial amounts of money and
other resources from time to time to (i) construct or acquire new equipment, (ii) acquire or amend
permits to authorize facility operations, (iii) modify, upgrade or replace existing and proposed
equipment and (iv) clean up or decommission waste management facilities. Our capital and operating
budgets include costs and expenses associated with complying with these laws. If we do not comply
with environmental requirements that apply to our operations, regulatory agencies could seek to
impose civil, administrative and/or criminal liabilities, as well as seek to curtail our
operations. Under some circumstances, private parties could also seek to impose civil fines or
penalties for violations of environmental laws or recover monetary damages, including those
relating to property damage or personal injury. The presence of hazardous materials at our facilities may expose us to potential liabilities
associated with the cleanup of contaminated soil and groundwater under federal or state Superfund
statutes. Under the federal Comprehensive Environmental Response, Compensation, and Liability Act
of 1980, as amended (CERCLA), owners and operators of facilities from which there has been a
release or threatened release of hazardous materials, together with those who have transported or
arranged for the transportation or disposal of those materials, are liable for (i) the costs of
responding to and remediating that release and (ii) the restoration of natural resources damaged by
any such release. Under CERCLA and similar state statutes, liability for the entire cost of
cleaning up the contaminated site can be imposed upon any such party, regardless of the lawfulness
of the activities that led to the contamination. During fiscal 2003, there were no material
expenditures made in order to comply with environmental laws or regulations, and we do not
anticipate any such material expenditures for fiscal 2004. We are not aware of any environmental
liabilities that we would expect to have a material adverse effect on our business. Insurance We maintain general liability and product liability, property, workers compensation, director and
officer and other insurance in amounts and on terms that we believe are customary for companies
similarly situated. In addition, we maintain excess insurance where we reasonably believe it is
cost effective. 11




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ITEM 2. PROPERTIES We own and operate the following eight manufacturing facilities:   Facility location
    
    Principal products
    
    Facility sizeFayetteville, Arkansas
    
    Frozen foods
    
    335,000 square feetOmaha, Nebraska
    
    Frozen foods
    
    275,000 square feetImlay City, Michigan
    
    Pickles, peppers, relish
    
    344,000 square feetMillsboro, Delaware
    
    Pickles, peppers, relish
    
    460,000 square feetJackson, Tennessee
    
    Frozen breakfast; Frozen pizza
    
    302,000 square feetMattoon, Illinois
    
    Bagels
    
    215,000 square feetErie, Pennsylvania
    
    Frozen seafood
    
    116,000 square feetSt. Elmo, Illinois
    
    Syrup
    
    250,000 square feet
 On April 7, 2004, we made and announced our decision to permanently close our Omaha, Nebraska
production facility, as part of our plan of consolidating and streamlining production activities
after the Aurora Transaction. The Omaha plant manufactured Swanson frozen entree retail products
and frozen foodservice products. Certain parts of the production line and equipment from Omaha,
which ceased production in December 2004, have been relocated to our 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 in Omaha.
Through December 31, 2004, 388 employees have been terminated,
with the remainder terminated in the
first quarter of 2005. We believe that our manufacturing facilities have sufficient capacity to accommodate our planned
internal growth over the next few years. We have also entered into co-packing (third-party
manufacturing) agreements with several manufacturers for certain of our finished products. The
majority of our co-packed finished products are represented by our Duncan Hines and Aunt Jemima
sandwich product lines. All of our Duncan Hines cake mixes, brownie mixes, specialty mixes and
frosting production equipment, including co-milling, blending and packaging equipment, is located
at the contract manufacturers facilities. The current Duncan Hines agreements will expire in
February 2014 and January 2007. We lease office space in Mountain Lakes, New Jersey; Cherry Hill, New Jersey (our corporate
headquarters); Lewisburg, Pennsylvania; Greenwich, Connecticut; and Mississauga, Ontario, under
operating leases expiring in July 2012, May 2011, November 2005, May 2010 and October 2006,
respectively. 12




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ITEM 3. 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. 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. 13




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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 its 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 ILEPA, Restricted status for the City may be lifted after it establishes a consistent
record of compliance with its effluent discharge parameters. 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 and results of operation. 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 State of Illinois Environmental
Protection Agency (IL EPA) 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
its St. Elmo facility during the fourth quarter of calendar year 2004 and the first quarter of
calendar year 2005. On January 19, 2005 the IL EPA issued to us our construction and operating
permit for the newly installed pretreatment system. 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. Underweight Products In July 2004, it came to our attention that certain products produced in one of the 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 in the period ended July 31, 2004. 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 may 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.
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. 
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None 14




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PART II 
  ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES
 There is no established trading market for our common stock. As of December 31, 2004, one hundred
percent of our stock was held by our parent, Crunch Holding Corp. We did not pay any dividends in
respect to our common stock in 2004. Our senior secured credit facilities and the indenture governing our senior subordinated notes both
contain covenants that limit our ability to pay dividends. 
 ITEM 6. SELECTED FINANCIAL DATA In December 2004, the Board of Directors approved a change to PFGIs fiscal year end from July 31
to the last Sunday in December. Accordingly, data for December 2004 presented in this report
relates to the period from August 1, 2004 to December 26, 2004, otherwise known as the transition
year, and is referred to as the 21 weeks ended December 26, 2004. The following table sets forth selected historical consolidated financial and other operating data
for the following periods: for PFGI and its subsidiaries as of and for the 21 weeks ended December
26, 2004 and as of and for the 36 weeks ended July 31, 2004; for the Predecessor, as of and for the
16 weeks ended November 24, 2003, as of and for the years ended July 31, 2003 and 2002, and as of
and for the ten weeks ended July 31, 2001; and for VFI, as of and for the 42 weeks ended May 22,
2001 and as of and for the 52 weeks ended July 30, 2000. The selected historical financial data for the 21 weeks ended December 26, 2004, the 36 weeks ended
July 31, 2004, the 16 weeks ended November 24, 2003, and for the years ended July 31, 2003 and 2002
have been derived from PFGIs audited consolidated financial statements included elsewhere in this
Form 10-K. The selected financial data for the 10 weeks ended July 31, 2001, include the unaudited results of
operations from May 23, 2001 through July 31, 2001. The selected financial data for the 42 weeks
ended May 22, 2001, have been derived from the audited statement of operations of the frozen foods
and condiments business of VFI. The selected financial data as of July 31, 2000 and for the fiscal
year then ended have been derived from unaudited financial statements of VFI. The selected
financial data presented below should be read in conjunction with our consolidated financial
statements and the notes to those statements and PFGI managements discussion and analysis of
financial condition and results of operations included elsewhere in this prospectus. 15




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PFGI
    
    
    Predecessor21 weeks
    
    
    5 weeks
    
    
    16 weeksended
    
    
    ended
    
    
    endedDecember 26,
    
    
    December 28,
    
    
    November 24,2004
    
    
    2003
    
    
    2003Statement of operations data:Net sales
    
    $
    511,190
    
    
    $
    49,658
    
    
    $
    181,379Cost and expensesCost of products sold
    
    
    420,080
    
    
    
    45,017
    
    
    
    134,233Marketing and selling expenses
    
    
    53,588
    
    
    
    6,499
    
    
    
    24,335Administrative expense
    
    
    15,216
    
    
    
    2,879
    
    
    
    9,454Research and development expenses
    
    
    1,459
    
    
    
    234
    
    
    
    814Goodwill impairment
    
    
    4,308
    
    
    
    
    
    
    
    Other expenses (income), net
    
    
    5,680
    
    
    
    11,870
    
    
    
    7,956Total cost and expenses
    
    
    500,331
    
    
    
    66,499
    
    
    
    176,792Earnings (loss) before interest and taxes
    
    
    10,859
    
    
    
    (16,841
    )
    
    
    4,587Interest expense
    
    
    26,260
    
    
    
    2,824
    
    
    
    9,310Interest income
    
    
    120
    
    
    
    2
    
    
    
    143Earnings (loss) before income taxes
    
    
    (15,281
    )
    
    
    (19,663
    )
    
    
    (4,580
    )Provision (benefit) for income taxes
    
    
    9,425
    
    
    
    (3,364
    )
    
    
    (1,506
    )Net (loss) earnings
    
    $
    (24,706
    )
    
    $
    (16,299
    )
    
    $
    (3,074
    )Other financial data:Net cash provided by (used in) operating activities
    
    $
    (2,488
    )
    
    $
    
    
    
    $
    (23,439
    )Net cash provided by (used in) investing activities
    
    
    (12,455
    )
    
    
    
    
    
    
    (1,511
    )Net cash provided by (used in) financing activities
    
    
    (20,639
    )
    
    
    
    
    
    
    (262
    )Depreciation and amortization
    
    
    17,068
    
    
    
    
    
    
    
    6,136Capital expenditures
    
    
    8,073
    
    
    
    
    
    
    
    1,511Ratio of earnings to fixed charges (1)
    
    
    NM
    
    
    
    
    
    
    
    NMBalance sheet data:Cash and cash equivalents
    
    $
    2,235
    
    
    $
    
    
    
    $
    Working capital (2)
    
    
    72,976
    
    
    
    
    
    
    
    Total assets
    
    
    1,764,940
    
    
    
    
    
    
    
    Total debt (3)
    
    
    943,080
    
    
    
    
    
    
    
    Total liabilities
    
    
    1,371,573
    
    
    
    
    
    
    
    Shareholders equity (deficit)
    
    
    393,367
    
    
    
    
    
    
    
    
 16




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##### Table of Contents



PFGI
    
    
    Predecessor
    
    
    VFI36 weeks
    
    
    16 weeks
    
    
    Year
    
    
    Year
    
    
    10 weeks
    
    
    42 weeks
    
    
    52 weeksended
    
    
    ended
    
    
    ended
    
    
    ended
    
    
    ended
    
    
    ended
    
    
    endedJuly 31,
    
    
    November 24,
    
    
    July 31,
    
    
    July 31,
    
    
    July 31,
    
    
    May 22,
    
    
    July 31,2004
    
    
    2003
    
    
    2003
    
    
    2002
    
    
    2001
    
    
    2001
    
    
    2000Statement of operations data:Net sales
    
    $
    574,352
    
    
    $
    181,379
    
    
    $
    574,482
    
    
    $
    574,456
    
    
    $
    97,343
    
    
    $
    506,794
    
    
    $
    632,099Cost and expensesCost of products sold
    
    
    502,967
    
    
    
    134,233
    
    
    
    447,527
    
    
    
    452,145
    
    
    
    89,890
    
    
    
    420,762
    
    
    
    510,726Marketing and selling expenses
    
    
    57,910
    
    
    
    24,335
    
    
    
    57,915
    
    
    
    51,458
    
    
    
    6,244
    
    
    
    35,680
    
    
    
    60,418Administrative expense
    
    
    32,258
    
    
    
    9,454
    
    
    
    32,878
    
    
    
    32,346
    
    
    
    6,377
    
    
    
    38,075
    
    
    
    43,875Research and development expenses
    
    
    2,436
    
    
    
    814
    
    
    
    3,040
    
    
    
    3,552
    
    
    
    490
    
    
    
    3,993
    
    
    
    6,257Goodwill impairment
    
    
    1,835
    
    
    
    
    
    
    
    1,550
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other expenses (income), net
    
    
    38,096
    
    
    
    7,956
    
    
    
    6,492
    
    
    
    5,137
    
    
    
    (30
    )
    
    
    17,367
    
    
    
    609Total cost and expenses
    
    
    635,502
    
    
    
    176,792
    
    
    
    549,402
    
    
    
    544,638
    
    
    
    102,971
    
    
    
    515,877
    
    
    
    621,885Earnings (loss) before interest and taxes
    
    
    (61,150
    )
    
    
    4,587
    
    
    
    25,080
    
    
    
    29,818
    
    
    
    (5,628
    )
    
    
    (9,083
    )
    
    
    10,214Interest expense
    
    
    26,240
    
    
    
    9,310
    
    
    
    11,592
    
    
    
    14,513
    
    
    
    3,342
    
    
    
    42,163
    
    
    
    52,088Interest income
    
    
    320
    
    
    
    143
    
    
    
    476
    
    
    
    807
    
    
    
    73
    
    
    
    697
    
    
    
    1,213Earnings (loss) before income taxes
    
    
    (87,070
    )
    
    
    (4,580
    )
    
    
    13,964
    
    
    
    16,112
    
    
    
    (8,897
    )
    
    
    (50,549
    )
    
    
    (40,661
    )Provision (benefit) for income taxes
    
    
    (3,157
    )
    
    
    (1,506
    )
    
    
    5,516
    
    
    
    4,190
    
    
    
    (919
    )
    
    
    16,784
    
    
    
    (12,920
    )Net earnings (loss) from continuing operations
    
    
    (83,913
    )
    
    
    (3,074
    )
    
    
    8,448
    
    
    
    11,922
    
    
    
    (7,978
    )
    
    
    (67,333
    )
    
    
    (27,741
    )Discontinued operations:Loss from discontinued operations, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (104,421
    )
    
    
    (7,597
    )Gain (loss) on sale of discontinued operations,
net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,547
    
    
    
    5,276Net (loss) earnings
    
    $
    (83,913
    )
    
    $
    (3,074
    )
    
    $
    8,448
    
    
    $
    11,922
    
    
    $
    (7,978
    )
    
    $
    (170,207
    )
    
    $
    (30,062
    )Other financial data:Net cash provided by (used in) operating activities
    
    $
    31,070
    
    
    $
    (23,439
    )
    
    $
    32,951
    
    
    $
    64,495
    
    
    $
    21,423
    
    
    $
    22,492
    
    
    $
    (4,928
    )Net cash provided by (used in) investing activities
    
    
    (1,058,781
    )
    
    
    (1,511
    )
    
    
    (8,795
    )
    
    
    (26,812
    )
    
    
    (343,519
    )
    
    
    19,169
    
    
    
    25,523Net cash provided by (used in) financing activities
    
    
    1,018,534
    
    
    
    (262
    )
    
    
    (17,016
    )
    
    
    9,885
    
    
    
    339,518
    
    
    
    10,667
    
    
    
    (255
    )Depreciation and amortization
    
    
    24,570
    
    
    
    6,136
    
    
    
    22,948
    
    
    
    21,231
    
    
    
    3,191
    
    
    
    19,808
    
    
    
    24,493Capital expenditures
    
    
    9,826
    
    
    
    1,511
    
    
    
    8,787
    
    
    
    19,452
    
    
    
    1,686
    
    
    
    5,331
    
    
    
    15,192Ratio of earnings to fixed charges (1)
    
    NM
    
    NM
    
    
    2.10
    x
    
    
    2.01
    x
    
    NM
    
    NM
    
    NMBalance sheet data:Cash and cash equivalents
    
    $
    37,781
    
    
    $
    
    
    
    $
    72,128
    
    
    $
    64,971
    
    
    $
    17,422
    
    
    $
    
    
    
    $
    17,445Working capital (2)
    
    
    78,194
    
    
    
    
    
    
    
    125,755
    
    
    
    109,264
    
    
    
    79,857
    
    
    
    
    
    
    
    80,806Total assets
    
    
    1,784,610
    
    
    
    
    
    
    
    466,121
    
    
    
    477,988
    
    
    
    437,138
    
    
    
    
    
    
    
    552,821Total debt (3)
    
    
    944,328
    
    
    
    
    
    
    
    175,000
    
    
    
    190,009
    
    
    
    190,084
    
    
    
    
    
    
    
    482,517Total liabilities
    
    
    1,366,595
    
    
    
    
    
    
    
    287,634
    
    
    
    308,540
    
    
    
    282,191
    
    
    
    
    
    
    
    612,289Shareholders equity (deficit)
    
    
    418,015
    
    
    
    
    
    
    
    178,487
    
    
    
    169,448
    
    
    
    154,947
    
    
    
    
    
    
    
    (59,468
    )
   (1)
    For purposes of computing the ratio of earnings to fixed charges, earnings consist of
earnings (loss) before income taxes and fixed charges. Fixed charges consist of (i) interest
expense, including amortization of debt acquisition costs and (ii) one-third of rent expense,
which management believes to be representative of the interest factor thereon. VFIs earnings
for the 52 weeks ended July 30, 2000 and the 42 weeks ended May 22, 2001, were insufficient to
cover fixed charges by $40.7 million and $50.5 million, respectively. The Predecessors
earnings for the 10 weeks ended July 31, 2001 and the 16 weeks ended November 24, 2003, were
insufficient to cover fixed charges by $8.9 million and $4.6 million, respectively. PFGIs
earnings for the 36 weeks ended July 31, 2004 and the 21 weeks ended December 26, 2004 were
insufficient to cover fixed charges by $87.1 million and $15.3 million, respectively.  (2)
    Working capital excludes notes payable, revolving debt facility and current portion of long
term debt.  (3)
    Total debt includes notes payable, revolving debt facility and current portion of long term
debt 17




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##### Table of Contents



ITEM 7:
    
    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), 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 December 26, 2004 and July 31, 2004. Additionally, in November 2003 and February 2004, we issued $200 million and $194 million,
respectively, 8 1/4% senior subordinated notes. The terms of the November 2003 and February 2004
notes are the same and are issued under the same indenture. 18




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##### Table of Contents



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 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. During the transition year (the 21 weeks ended December 26, 2004) and fiscal 2004, we recorded
restructuring charges totaling $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). 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. 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. In November 2003, we also recorded an additional impairment charge of $1.3
million related to the carrying value of the trade name for the Kings Hawaiian business. 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 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. 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. 19




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##### Table of Contents



The following table reconciles shipments to net sales for the consolidated company, the frozen
foods segment and the dry foods segment for the transition year ended December 26, 2004 and the
corresponding 21 weeks ended December 28, 2003 as well as fiscal years ended July 31, 2002, 2003
and 2004. Consolidated
    
    
    Frozen Foods
    
    
    Dry FoodsDecember 26,
    
    
    December 28,
    
    
    December 26,
    
    
    December 28,
    
    
    December 26,
    
    
    December 28,For the 21 weeks ended,
    
    2004
    
    
    2003
    
    
    2004
    
    
    2003
    
    
    2004
    
    
    2003Shipments
    
    $
    730.7
    
    
    $
    292.2
    
    
    $
    389.9
    
    
    $
    186.0
    
    
    $
    340.8
    
    
    $
    106.2Less: Aggregate trade marketing and
consumer coupon redemption expenses
    
    
    207.4
    
    
    
    57.1
    
    
    
    111.8
    
    
    
    37.0
    
    
    
    95.6
    
    
    
    20.1Less: Slotting expense
    
    
    12.1
    
    
    
    4.1
    
    
    
    6.9
    
    
    
    0.9
    
    
    
    5.2
    
    
    
    3.2Net sales
    
    $
    511.2
    
    
    $
    231.0
    
    
    $
    271.2
    
    
    $
    148.1
    
    
    $
    240.0
    
    
    $
    82.9
 Consolidated
    

    Frozen Foods
    

    Dry FoodsFor the fiscal years ended July 31,
    
    2004
    
    
    2003
    
    
    2002
    
    
    2004
    
    
    2003
    
    
    2002
    
    
    2004
    
    
    2003
    
    
    2002Shipments
    
    $
    1,023.2
    
    
    $
    749.3
    
    
    $
    726.0
    
    
    $
    585.7
    
    
    $
    452.5
    
    
    $
    429.0
    
    
    $
    437.5
    
    
    $
    296.8
    
    
    $
    297.0Less: Aggregate trade marketing and
consumer coupon redemption expenses
    
    
    249.0
    
    
    
    153.2
    
    
    
    142.1
    
    
    
    138.6
    
    
    
    91.3
    
    
    
    80.9
    
    
    
    110.4
    
    
    
    61.9
    
    
    
    61.2Less: Slotting expense
    
    
    18.5
    
    
    
    21.6
    
    
    
    9.4
    
    
    
    8.2
    
    
    
    19.1
    
    
    
    8.5
    
    
    
    10.3
    
    
    
    2.5
    
    
    
    0.9Net sales
    
    $
    755.7
    
    
    $
    574.5
    
    
    $
    574.5
    
    
    $
    438.9
    
    
    $
    342.1
    
    
    $
    339.6
    
    
    $
    316.8
    
    
    $
    232.4
    
    
    $
    234.9
 Restructuring of Omaha, Nebraska Production Facility During the transition year and fiscal 2004, we recorded restructuring charges totaling $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. These charges were recorded in accordance with FASB
No. 144, Accounting for the Impairment and Disposal of Long-Lived Assets and FASB 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 manufactures 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. Employee
termination activities commenced in September 2004 and will be completed in early 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 amounts 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. As of December 26, 2004, $1.2 million has been paid. 20




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##### Table of Contents



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 December 26, 2004, these costs have
totaled $3.1 million. We anticipate that additional costs through completion of the program, which
will be recorded in future periods, will approximate $2.0 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 charges to our restructuring
obligations in our consolidated financial statements for such quarter based on managements
then-current estimates. As of December 26, 2004, we had an accrued restructuring liability of $4.0 million, of which $1.6
million related to the Omaha 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 year. Impairment of Goodwill and Other Long-lived Assets In October 2004, we decided to discontinue producing products under the Chefs Choice trade name.
We will sell primarily all the remaining inventory through the first quarter of 2005. In
accordance with the provisions of FASB 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 FASB 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. 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 FASB 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, 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 FAS
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. 21




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##### Table of Contents



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. The discussion below of the fiscal year 2004 is based on the information for the 52 week period
ended July 31, 2004 and is the combination of the Predecessors consolidated financial statements
for the 16 weeks ended November 24, 2003 and Successors consolidated financial statements for the
36 week period ended July 31, 2004. Additionally, the discussion below for the 21 weeks ended
December 28, 2003 is based on the combination of the Predecessors consolidated financial results
for the 16 week period ended November 24, 2003 and the Successors consolidated financial results
for the 5 weeks ended December 25, 2003. These combinations represent what we believe is the most
meaningful basis for comparison of the transition year and fiscal 2004 with the corresponding
periods of the prior years, although the combination is not in accordance with accounting
principles generally accepted in the United States of America (GAAP). We believe that this is
the most meaningful basis for comparison because the customer base, products, manufacturing
facilities and types of marketing programs were the same under the Predecessor as they are under
the Successor. Also, the results for the transition year and the twelve months ended July 31, 2004
include the results of operations of the Aurora businesses from the date of acquisition, March 19,
2004. As the result of the change in ownership resulting from the Pinnacle Merger and the
inclusion of results from the Aurora businesses since the March 19, 2004 acquisition, these results
are not indicative of what the full 52 week year ended July 31, 2004 would have been had the change
in ownership not occurred. 21 weeks ended
    
    
    Fiscal year endedDecember 26,
    
    
    December 28,
    
    
    July 31,
    
    
    July 31,
    
    July 31,(In thousands)
    
    2004

    
    
    2003(2)
    
    
    2004(1)
    
    2003
    
    2002Net sales
    
    $
    511.2
    
    
    
    100.0
    %
    
    $
    231.0
    
    
    
    100.0
    %
    
    $
    755.7
    
    
    
    100.0
    %
    
    $
    574.5
    
    
    
    100.0
    %
    
    $
    574.5
    
    
    
    100.0
    %Costs and expensesCost of products sold
    
    
    420.0
    
    
    
    82.2
    %
    
    
    179.3
    
    
    
    77.6
    %
    
    
    637.2
    
    
    
    84.3
    %
    
    
    447.5
    
    
    
    77.9
    %
    
    
    452.1
    
    
    
    78.7
    %Marketing and selling expenses
    
    
    53.6
    
    
    
    10.5
    %
    
    
    30.8
    
    
    
    13.3
    %
    
    
    82.2
    
    
    
    10.9
    %
    
    
    57.9
    
    
    
    10.1
    %
    
    
    51.5
    
    
    
    9.0
    %Administrative expenses
    
    
    15.2
    
    
    
    3.0
    %
    
    
    12.3
    
    
    
    5.3
    %
    
    
    41.7
    
    
    
    5.5
    %
    
    
    32.9
    
    
    
    5.7
    %
    
    
    32.3
    
    
    
    5.6
    %Research and development expenses
    
    
    1.5
    
    
    
    0.3
    %
    
    
    1.1
    
    
    
    0.5
    %
    
    
    3.3
    
    
    
    0.4
    %
    
    
    3.0
    
    
    
    0.5
    %
    
    
    3.6
    
    
    
    0.6
    %Goodwill impairment charge
    
    
    4.3
    
    
    
    0.8
    %
    
    
    
    
    
    
    0.0
    %
    
    
    1.8
    
    
    
    0.2
    %
    
    
    1.6
    
    
    
    0.3
    %
    
    
    
    
    
    
    0.0
    %Other expense (income), net
    
    
    5.7
    
    
    
    1.1
    %
    
    
    19.8
    
    
    
    8.6
    %
    
    
    46.1
    
    
    
    6.1
    %
    
    
    6.5
    
    
    
    1.1
    %
    
    
    5.1
    
    
    
    0.9
    %Total costs and expenses
    
    $
    500.3
    
    
    
    97.9
    %
    
    $
    243.3
    
    
    
    105.3
    %
    
    $
    812.3
    
    
    
    107.5
    %
    
    $
    549.4
    
    
    
    95.6
    %
    
    $
    544.7
    
    
    
    94.8
    %Earnings (loss) before interest and taxes
    
    $
    10.9
    
    
    
    2.1
    %
    
    $
    (12.3
    )
    
    
    -5.3
    %
    
    $
    (56.6
    )
    
    
    -7.5
    %
    
    $
    25.1
    
    
    
    4.4
    %
    
    $
    29.8
    
    
    
    5.2
    %
 22




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##### Table of Contents



21 weeks ended
    
    
    Fiscal year endedDecember 26,
    
    
    December 28,
    
    
    July 31,
    
    
    July 31,
    
    
    July 31,2004
    
    
    2003(2)
    
    
    2004(1)
    
    
    2003
    
    
    2002Net sales
Frozen foods
    
    $
    271.2
    
    
    $
    148.1
    
    
    $
    438.9
    
    
    $
    342.1
    
    
    $
    339.6Dry foods
    
    
    240.0
    
    
    
    82.9
    
    
    
    316.8
    
    
    
    232.4
    
    
    
    234.9Total
    
    $
    511.2
    
    
    $
    231.0
    
    
    $
    755.7
    
    
    $
    574.5
    
    
    $
    574.5Earnings (loss) before interest and taxesFrozen foods
    
    $
    (22.6
    )
    
    $
    4.7
    
    
    $
    (31.8
    )
    
    $
    (6.9
    )
    
    $
    8.8Dry foods
    
    
    38.5
    
    
    
    7.4
    
    
    
    16.5
    
    
    
    48.1
    
    
    
    36.5Unallocated corporate expenses
    
    
    (5.0
    )
    
    
    (24.4
    )
    
    
    (41.3
    )
    
    
    (16.1
    )
    
    
    (15.5
    )Total
    
    $
    10.9
    
    
    $
    (12.3
    )
    
    $
    (56.6
    )
    
    $
    25.1
    
    
    $
    29.8Depreciation and amortization
Frozen foods
    
    $
    10.8
    
    
    $
    5.0
    
    
    $
    20.6
    
    
    $
    14.0
    
    
    $
    13.1Dry foods
    
    
    6.3
    
    
    
    2.6
    
    
    
    10.1
    
    
    
    8.9
    
    
    
    8.1Total
    
    $
    17.1
    
    
    $
    7.6
    
    
    $
    30.7
    
    
    $
    22.9
    
    
    $
    21.2
   (1)
    
    Represents the combined 52 weeks ended July 31, 2004(2)
    
    Represents the combined 21 weeks ended December 28, 2003   Transition year ended December 26, 2004 compared to twenty-one weeks ended December 28, 2003 The discussion below of the 21 weeks ended December 28, 2003 is based on the combination of the
Predecessors consolidated financial statements for the 16 weeks ended November 24, 2003 and the
Successors consolidated financial statements for the 5 week period ended December 28, 2003. For
the Pinnacle businesses, we believe that this is the most meaningful basis for comparison, because
the customer base, products, manufacturing facilities and types of marketing programs were the same
under the Predecessor as they are under the Successor. Also, the discussion below for the
transition year ended December 26, 2004 includes the results of operations of the Aurora
businesses. Net sales. Shipments in the 21 weeks ended December 26, 2004 were $730.7 million, an increase of
$438.5 million, compared to shipments in the 21 weeks ended December 28, 2003 of $292.2 million.
$434.3 million of the increase was related to the Aurora Transaction. Net sales in the 21 weeks
ended December 26, 2004 were $511.2 million, an increase of $280.2 million, compared to net sales
in the 21 weeks ended December 28, 2003 of $231.0 million, $286.5 million of the increase was
related to the Aurora Transaction, whose brands required a higher level of spending than the
historical Pinnacle brands. Frozen foods:Shipments in the 21 weeks ended December 26, 2004 were $389.9 million, an
increase of $203.9 million, $206.8 million of the increase was related to the Aurora
Transaction. The balance of the change was driven by a $3.4 million decrease in our Swanson
product line sales. Aggregate trade and consumer coupon redemption expenses increased $80.8
million, $75.1 million of the increase was related to the Aurora Transaction. As a result,
frozen foods net sales increased $123.1 million, of which $131.7 million was related to the
Aurora Transaction and net sales of the existing Swanson and Kings Hawaiian businesses
decreased $8.6 million, or 5.8%, in the 21 weeks ended December 26, 2004. Dry foods:Shipments in the 21 weeks ended December 26, 2004 were $340.8 million, an
increase of $234.6 million, $227.5 million of the increase was related to the Aurora
Transaction. The balance of the increase was due to additional case volume of 5.0% in our
core Vlasic product line. Aggregate trade and consumer coupon redemption expenses increased
$77.5 million, of which $72.4 million was related to the Aurora Transaction. As a result,
dry foods net sales increased $157.1 million, of which $155.0 million was related to the
Aurora Transaction and net sales of the existing Vlasic and Open Pit businesses increased
$2.1 million, or 2.5%, for the 21 weeks ended December 26, 2004. 23




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Cost of products sold.
Our cost of products sold was $420.0 million, or 82.2% of net sales in the
21 weeks ended December 26, 2004, versus cost of products sold of $179.3 million, or 77.6% of net
sales in the 21 weeks ended December 28, 2003. The Aurora
Transaction resulted in $235.3 million
of cost of products sold in the 21 weeks ended December 26, 2004. The balance of cost of products
sold was $184.7 million, or 82.2% of net sales, in the 21 weeks ended December 26, 2004. The main
driver of increased cost of product sold, as a percentage of net sales, is the additional costs
resulting from the reorganization of our warehousing network and the related movement of product to
the new warehousing network as well as higher year over year commodity costs (chicken, beef, and
cheese). In addition to these costs, this percentage is also affected by changes in our aggregate
trade and consumer coupon redemption expenses that are classified as reductions to net sales. The
21 weeks ended December 28, 2003 year includes additional costs of $8.2 million related to
post-Merger sales of inventories written up to fair value at the date of the Pinnacle Merger. Marketing and selling expenses. Marketing and selling expenses were $53.6 million, or 10.5% of
net sales, in the 21 weeks ended December 26, 2004 compared to $30.8 million, or 13.3% of net
sales, in the 21 weeks ended December 28, 2003. The Aurora Transaction contributed $35.8 million
of the increase for the 21 weeks ended December 26, 2004. The balance of the change was due to
lower advertising expense of $10.8 million, primarily on our Swanson and Vlasic businesses, and
decreased selling overhead expense. Administrative expenses. Administrative expenses were $15.2 million, or 3.0% of net sales, in the
21 weeks ended December 26, 2004 compared to $12.3 million, or 5.3% of net sales, in the 21 weeks
ended December 28, 2003. The principal driver of the $2.9 million increase was higher overhead
expense related to the merger of the Aurora businesses. Offsetting the increase in higher overhead
expenses was the reduction of accrued liabilities for the management incentive plan. Research and development expenses. Research and development expenses were $1.5 million, or 0.3%
of net sales, in the 21 weeks ended December 26, 2004 compared with $1.1 million, or 0.5% of net
sales, in the 21 weeks ended December 28, 2003. Goodwill impairment charge.Goodwill impairment charges was $4.3 million in the 21 weeks ended
December 26, 2004. There were no impairment charges in the 21 weeks ended December 28, 2003.
Of the total charge in the 21 weeks ended December 26, 2004, which was recorded in the frozen foods
segment, $1.6 million related to the dinners reporting unit and $2.7 million related to the bagels
reporting unit. Other expense (income). Other expense was $5.7 million in the 21 weeks ended December 26, 2004
as compared to $19.8 million in the 21 weeks ended December 28, 2003. This decrease was related to
$18.4 million of Pinnacle Merger related expenses in the 21 weeks ended December 28, 2003,
consisting primarily of $11.0 million of non-cash equity related compensation expense, $4.9 million
of Predecessor stock option expense, $1.7 million of change in control payments, and $0.8 million
of retention benefit payments. Additionally, a $1.3 million charge related to an impairment of the
Kings Hawaiian trade name was recorded in the 21 weeks ended December 28, 2003. Restructuring and
impairment charges totaled $3.9 million during the 21 weeks ended December 26, 2004 related to (i)
$2.6 million of asset impairment write downs related to the Omaha, Nebraska frozen food facility
discussed above, (ii) $1.2 million of plant consolidation expense related to the announced closure
of our Omaha, Nebraska frozen food facility, and (iii) less than $0.1 million impairment charge
related to the Lenders trade name. In addition, $1.8 million of additional amortization expense
was incurred in the 21 weeks ended December 26, 2004 compared to the 21 weeks ended December 28,
2003 (see Note 6 to the audited Consolidated Financial Statements), primarily related to the
amortizable intangible assets acquired in the Aurora Transaction. Earnings (loss) before interest and taxes. Earnings (loss) before interest and taxes (EBIT)
increased $23.2 million to earnings of $10.9 million in the 21 weeks ended December 26, 2004 from a
loss of $12.3 million in EBIT in the 21 weeks ended December 28, 2003. This increase resulted from
a $27.3 million decrease in frozen foods EBIT, a $31.1 million increase in dry foods EBIT, and a
$19.4 million decrease in unallocated corporate expenses. The decrease in the unallocated
corporate expenses was principally related to $18.4 million of Pinnacle Merger related expenses in
the 21 weeks ended December 28, 2003, consisting primarily of $11.0 million of non-cash equity
related compensation expense, $4.9 million of Predecessor stock option expense, $1.7 million of
change in control payments, and $0.8 million of retention benefit payments. Additionally, based
upon results through December 2004, we have reduced accrued liabilities for the management
incentive plan. 24




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##### Table of Contents



Frozen
foods:Frozen foods EBIT decreased by $27.3 million in the 21 weeks ended December
26, 2004; $16.7 million of the decline was related to the Aurora Transaction, including a
$2.7 million impairment of the bagels goodwill. During the 21 weeks ended December 26,
2004, we recorded a net expense of $4.5 million related to the announced closure of our
Omaha, Nebraska frozen food facility. The net expense was the result of $2.6 million of
asset impairment, $1.4 million of accelerated depreciation, $1.2 million of other plant
consolidation expenses, and $0.7 million curtailment gain related to the postretirement
benefit program. Additionally, a non-cash impairment charge of $1.6 million related to
frozen dinner goodwill and a favorable adjustment of $1.6 million to our medical liability
reserves were recorded in the 21 weeks ended December 26, 2004. In the 21 weeks ended December
28, 2003, a non-cash impairment charge of $1.3 million related to the Kings Hawaiian
intangible assets was recorded. The 21 weeks ended
December 28, 2003 also include additional costs of products sold
of $2.7 million related to post-Merger sales of inventories written up to fair value at the
date of the Pinnacle Merger. The balance of our frozen foods EBIT
decreased $10.1 million due
to increased cost of products sold expense related to the reorganization of our warehousing
network, increased coupon and trade promotion expenses, partially offset by lower
advertising expenses. Dry foods:Dry foods EBIT increased $31.1 million in the 21 weeks ended December 26, 2004;
a $24.9 million increase in EBIT was related to the Aurora Transaction. The 21 weeks ended
December 28, 2003 includes additional cost of products sold of $5.5 million related to
post-Merger sales of inventories written up to fair value at the date of the Pinnacle
Merger. Dry foods EBIT increased $0.6 million due to lower advertising expenses and
increased sales volume, resulting from additional case volume of 5.0% in our core Vlasic
product line. Partially offsetting these increases were increased cost of products sold
expense related to the reorganization of our warehousing network and increased trade
promotion expenses. Interest expense, net. Interest expense, net was $26.1 million in the 21 weeks ended December 26,
2004, compared to $12.0 million in the 21 weeks ended December 28, 2003. 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 21 weeks ended December
26, 2004 was $0.3 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 -61.7% in the weeks ended December 26, 2004,
compared to 20.1% in the 21 weeks ended December 28, 2003. We maintain a full valuation
allowance against net deferred tax assets excluding indefinite lived intangible assets, and the
effective rate difference is due to the change in the valuation allowance for the 21 week 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
21 week 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 carryforward to
offset our income. The annual net operating loss limitation is approximately $13-15
million subject to other rules and restrictions. See Note 11  Taxes on Earnings. Fiscal year ended July 31, 2004 compared to fiscal year ended July 31, 2003 The discussion below of fiscal 2004 is based on the information for the 52 week period ended July
31, 2004 and is the combination of the Predecessors consolidated financial statements for the 16
weeks ended November 24, 2003 and the Successors consolidated financial statements for the 36 week
period ended July 31, 2004. For the Pinnacle businesses, we believe that this is the most
meaningful basis for comparison, because the customer base, products, manufacturing facilities and
types of marketing programs were the same under the Predecessor as they are under the Successor.
Also, the discussion below for fiscal 2004 includes the results of operations of the Aurora
businesses from the date of acquisition, March 19, 2004. As a result of the change in ownership
resulting from the Pinnacle Merger and the inclusion of results from the Aurora businesses since
the March 19, 2004 acquisition, these results are not indicative of what the full 52 week year
ended July 31, 2004 would have been had the change in ownership and Aurora acquisition not
occurred. 25




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##### Table of Contents



Net sales. Shipments in fiscal 2004 were $1,023.2 million, an increase of $273.9 million, or
36.6%, compared to shipments in fiscal 2003 of $749.3 million. $292.6 million of the increase was
related to the Aurora Transaction. Net sales in fiscal 2004 were $755.7 million, an increase of
$181.2 million, or 31.5%, compared to net sales in fiscal 2003 of $574.5 million, $189.0 million of
the increase was related to the Aurora Transaction. Frozen foods:Shipments in fiscal 2004 were $585.7 million, an increase of $133.2 million,
or 29.4%, $149.4 million of the increase was related to the Aurora Transaction. The balance
of the change was driven by a $27.8 million decrease in our Swanson product line sales, and
a $7.0 million decrease in our Kings Hawaiian sales. Partially offsetting these declines
was a $18.6 million increase in our foodservice sales. Aggregate trade and consumer coupon
redemption expenses increased $36.4 million, $51.4 million of the increase was related to
the Aurora Transaction. As a result, frozen foods net sales increased $96.8 million, or
28.3%, of which $98.0 million was related to the Aurora Transaction and net sales of the
existing Swanson and Kings Hawaiian businesses decreased $1.2 million, or 0.3%, in fiscal
2004. Dry foods:Shipments in fiscal 2004 were $437.5 million, an increase of $140.7 million, or
47.4%, $143.1 million of the increase was related to the Aurora Transaction. The balance of
the change was due to decreased case volume of 1.3% in our Vlasic product line. Aggregate
trade and consumer coupon redemption expenses increased $56.2 million, of which $52.1
million was related to the Aurora Transaction. As a result, dry foods net sales increased
$84.4 million, or 36.3%, of which $91.0 million was related to the Aurora Transaction and
net sales of the existing Vlasic and Open Pit businesses decreased $6.6 million, or 2.8%,
for fiscal 2004. Cost of products sold. Our cost of products sold was $637.2 million, or 84.3% of net sales in
fiscal 2004, versus cost of products sold of $447.5 million, or 77.9% of net sales in fiscal 2003.
The Aurora Transaction resulted in $169.2 million of cost of products sold in fiscal 2004, and
includes additional costs of $13.2 million related to post-acquisition sales of inventories written
up to fair value at the date of the Aurora Transaction. The balance of cost of products sold was
$468.0 million, or 82.6% of net sales, in fiscal 2004. The fiscal 2004 year includes additional
costs of $26.3 million related to post-Merger sales of inventories written up to fair value at the
date of the Pinnacle Merger. Marketing and selling expenses. Marketing and selling expenses were $82.2 million, or 10.9% of
net sales, in fiscal 2004 compared to $57.9 million, or 10.1% of net sales, in fiscal 2003. The
Aurora Transaction contributed $16.3 million of the increase for fiscal 2004. The balance of the
increase was due to higher advertising expense of $3.9 million, primarily in support of our Vlasic
business, and increased marketing and selling overhead expense of $2.2 million in support of the
merger of the Aurora businesses. Administrative expenses. Administrative expenses were $41.7 million, or 5.5% of net sales, in
fiscal 2004 compared to $32.9 million, or 5.7% of net sales, in fiscal 2003. The principal driver
of the $8.8 million increase was higher overhead expense related to the merger of the Aurora
businesses. Research and development expenses. Research and development expenses were $3.3 million, or 0.4%
of net sales, in fiscal 2004 compared with $3.0 million, or 0.5% of net sales, in fiscal 2003. Goodwill impairment charge.Goodwill impairment charges was $1.8 million in fiscal 2004 as
compared to $1.6 million in fiscal 2003. The charge in fiscal 2004 related to the impairment of
the Chefs Choice goodwill as a result of our decision to discontinue producing products under the
Chefs Choice trade name. The charge in fiscal 2003 related to the impairment of the Kings
Hawaiian goodwill. 26




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##### Table of Contents



Other expense (income). Other expense was $46.1 million in fiscal 2004 as compared to $6.5
million in fiscal 2003. This increase was related to $27.3 million of Pinnacle Merger related
expenses in fiscal 2004, consisting primarily of $18.4 million of non-cash equity related
compensation expense, $4.9 million of Predecessor stock option expense, $2.2 million of retention
benefit payments, and $1.7 million of change in control payments. Additionally, restructuring and
impairment charges totaled $17.3 million during fiscal 2004, of which $13.0 million related to
non-cash charges. The non-cash charges related to (i) $7.4 million of asset impairment write downs
related to the Omaha, Nebraska frozen food facility discussed above, (ii) $3.0 million impairment
charges related to the Chefs Choice brand including $1.7 million of amortizable intangibles
(recipes) and $1.3 million of fixed asset write downs, (iii) $1.3 million impairment charge related
to the Avalon Bay trade name, (iv) $1.3 million related to an impairment of the Kings Hawaiian
trade name, which was recorded in the 16 weeks ended November 24, 2003. In fiscal 2003 a non-cash
intangibles impairment charge of $3.3 million related to the Kings Hawaiian business was recorded.
Additionally in fiscal 2003, we incurred a cost of $2.0 million in connection with the early
termination of a related party contract with our Chairman, a $0.7 million charge related to
pre-acquisition transaction costs relating to the proposed agreement to acquire the Claussen brand,
and a $0.8 million gain on an insurance claim related to finished product inventories damaged in a
public warehouse. In addition, amortization expense was higher in fiscal 2004 compared to fiscal
2003 (see Note 6 to the audited Consolidated Financial Statements). Earnings (loss) before interest and taxes. Earnings (loss) before interest and taxes (EBIT)
decreased $81.7 million to a loss of $56.6 million in fiscal 2004 from $25.1 million in EBIT in
fiscal 2003. This decrease resulted from a $24.9 million decrease in frozen foods EBIT, a $31.6
million decrease in dry foods EBIT, and a $25.2 million increase in unallocated corporate expenses.
The increase in the unallocated corporate expenses was principally related to $27.3 million of
Pinnacle Merger related expenses in fiscal 2004, consisting primarily of $18.4 million of equity
related compensation expense, $4.9 million of Predecessor stock option expense, $2.2 million of
retention benefit payments, and $1.7 million of change in control payments. In fiscal 2003 the
unallocated corporate segment included a cost of $2.0 million in connection with the early
termination of a related party contract with our Chairman and $0.7 million charge related to
pre-acquisition transaction costs relating to the proposed agreement to acquire the Claussen brand
(see Note 6 to the audited Consolidated Financial Statements). The balance of the increase in
unallocated corporate expenses is due to higher overhead expenses related to the merger of the
Aurora businesses. Frozen foods:Frozen foods EBIT decreased by $24.9 million in fiscal 2004; $14.4 million of
the decline was related to the Aurora Transaction, including additional costs of products
sold of $6.0 million related to post-acquisition sales of inventories written up to fair
value at the date of the Aurora Transaction. Fiscal 2004 includes additional costs of
products sold of $3.9 million related to post-Merger sales of inventories written up to fair
value at the date of the Pinnacle Merger. Additionally, a non-cash impairment charge of $4.8
million related to the Chefs Choice brand and a non-cash impairment charge of $1.3 million
related to the Avalon Bay trade name were recorded fiscal 2004. In fiscal 2004, a non-cash
impairment charge of $1.3 million related to the Kings Hawaiian intangible assets was
recorded in the 16 weeks ended November 24, 2003. An additional restructuring and impairment
charge of $11.8 million was recorded for the announced closure of our Omaha, Nebraska frozen
food facility. In fiscal 2003, a non-cash impairment loss of $4.9 million related to the
Kings Hawaiian goodwill and intangible assets was recorded. The balance of our frozen
foods EBIT increased $12.6 million due to $15.8 million of lower slotting expense, partially
offset by lower case sales on our Swanson business. Dry foods:Dry foods EBIT decreased $31.6 million in fiscal 2004; a $4.8 million increase
in EBIT was related to the Aurora Transaction, including additional cost of products sold of
$7.2 million related to post-acquisition sales of inventories written up fair value at the
date of the Aurora Transaction. Fiscal 2004 also includes additional cost of products sold
of $22.4 million related to post-Merger sales of inventories written up to fair value at the
date of the Pinnacle Merger. Dry foods EBIT decreased $5.1 million due to increased
advertising expense, $3.6 million due to increased trade expense, and $2.3 million due to
increased slotting expense. The balance of the decline was due to a 1.3% decrease in Vlasic
pickle sales volume. Interest expense, net. Interest expense, net was $35.1 million in fiscal 2004, compared to $11.1
million in fiscal 2003. 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 2004 was $7.0 million recorded from gains on interest rate swap
agreements, of which $3.5 million was realized in cash. The Company utilizes 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. 27




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##### Table of Contents



Provision for income taxes.The effective tax rate was 5.1% in fiscal 2004, compared to 39.5% in
fiscal 2003. The principal reason for the difference in effective
rates is due to the fact that the Company incurred a pre-tax loss in 2004 which could not be fully tax affected due to the impact
of deferred tax valuation allowances ($27.7 million) primarily due to the Aurora Transaction. In
addition, the non-deductibility of the equity related compensation expense of $18.4 million
negatively impacts the effective tax rate. See Note 1 and Note 3. The Company records deferred
tax liabilities for the differences between the book and tax bases of certain goodwill and
indefinite lived intangible assets. Fiscal year ended July 31, 2003 compared to fiscal year ended July 31, 2002 Net sales.Shipments in fiscal 2003 were $749.3 million, an increase of $23.3 million, or 3.2%,
compared to shipments in fiscal 2002 of $726.0 million. Net sales in fiscal 2003 were unchanged at
$574.5 million as an increase in net sales of frozen foods of $2.5 million was offset by a
comparable decrease in the net sales of dry foods. Frozen foods.Shipments increased $23.5 million in fiscal 2003, driven primarily by a $20.7
million increase in our Swanson product line, a $8.5 million increase in our foodservice
sales and a $4.2 million increase related to the full-year effect of our acquisition of
Kings Hawaiian in the second quarter of 2002, partially offset by $9.9 million of lower
Campbell Soup Company co-pack sales as a result of the termination of our contract with
Campbell Soup Company in the first quarter of fiscal 2002. This shipment increase of $23.5
million was offset by a $10.6 million increase in slotting expense (principally resulting
from the accelerated slotting discussed above) and a $10.4 million increase in trade
marketing expense resulting primarily from the support of new products. As a result, frozen
foods net sales increased $2.5 million, or 0.7%, to $342.1 million in fiscal 2003. Dry foods.Shipments of dry foods decreased $0.2 million in fiscal 2003 as increases due to
product mix changes to higher priced products were offset by a decrease in case volume of
3.2%. Aggregate trade and consumer marketing expenses increased $2.3 million driven by
increased coupon redemption. As a result, dry foods net sales decreased $2.5 million, or
1.1%, to $232.4 million in fiscal 2003. Cost of products sold. Our cost of products sold was $447.5 million, or 77.9% of net sales, in
fiscal 2003, an improvement of 0.8 percentage points from fiscal 2002, when our cost of products
sold was $452.1 million, or 78.7% of net sales. This improvement was driven by favorable product
mix, reduced ingredient and packaging costs and improved yields and manufacturing plant
efficiencies, including the full year benefit of the reduced manufacturing overhead resulting from
the closure of one of the facilities in Omaha in March 2002 and reduced postretirement healthcare
benefit costs as a result of a plan amendment late in fiscal 2002. This improvement was partially
offset by increases in our aggregate trade and consumer marketing expenses. Marketing and selling expenses.Marketing and selling expenses were $57.9 million, or 10.1% of net
sales, in fiscal 2003 compared to $51.5 million, or 9.0% of net sales, in fiscal 2002. The
principal driver behind the $6.4 million increase was higher Swanson advertising expense of $9.3
million. Lower packaging design costs of $1.6 million as compared to fiscal 2002, when packaging
design costs were higher than normal due to marketing initiatives across the entire Swanson line
and lower other marketing and selling expenses of $1.3 million, offset the increased advertising
expense. Administrative expenses.Administrative expenses were $32.9 million, or 5.7% of net sales, in
fiscal 2003 compared to $32.3 million, or 5.6% of net sales, in fiscal 2002. The $0.6 million
increase in administrative expenses in fiscal 2003 was driven primarily by a $1.3 million provision
related to two large customer bankruptcy filings. Excluding this provision, administrative expenses
would have declined by $0.7 million, or 2.2%. Research and development expenses.Research and development expenses were $3.0 million, or 0.5% of
net sales, in fiscal 2003 compared with $3.6 million, or 0.6% of net sales, in fiscal 2002. The
reduction was due to savings associated with lower headcount. 28




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##### Table of Contents



Other expense (income).Other expense (income) was $6.5 million in fiscal 2003 as compared to $5.1
million in fiscal 2002. This increase was principally related to a fiscal 2003 non-cash intangible
asset impairment loss of $3.3 million related to the Kings Hawaiian frozen entree business
acquired in fiscal 2002 and a one-time cost in fiscal 2003 of $2.0 million in connection with the
early termination of a related party contract with our Chairman. These increases were offset by a
net reduction in fiscal 2003 of $4.0 million in pre-acquisition
transaction costs relating to the proposed agreement to acquire the Claussen brand and a $0.8 million gain in fiscal 2003 on an
insurance claim related to finished product inventories damaged in a public warehouse in fiscal
2002. Earnings (loss) before interest and taxes.EBIT declined $4.7 million to $25.1 million in fiscal
2003 from $29.8 million in fiscal 2002. This decline resulted from a $15.7 million decline in
frozen foods EBIT partially offset by a $11.6 million increase in dry foods EBIT. A $0.6 million
increase in unallocated corporate expenses accounted for remainder of the change. Frozen foods.Frozen foods EBIT declined by $15.7 million in fiscal 2003 principally as a
result of significant long-term investments we made in our Swanson brand, including $8.6
million of accelerated slotting for new products, $9.3 million of increased advertising and
$10.4 million of increased trade marketing. Frozen foods EBIT was also adversely affected by
the $4.9 million non-cash goodwill and intangibles impairment charge discussed above. These
incremental expenses were partially offset by higher shipments of Swanson products,
primarily Hungry-Man shipments and favorable manufacturing costs, both in terms of purchase
prices and manufacturing efficiencies. Dry foods.Dry foods EBIT increased $11.6 million to $48.1 million in fiscal 2003, compared
to $36.5 million in fiscal 2002. The increase in EBIT is primarily a result of reduced cost
of products sold, about half of which was related to improved product mix and the balance of
which was the result of improved produce sourcing, purchasing savings and manufacturing
plant efficiencies. These improvements were partially offset by increased consumer coupon
redemptions in both Vlasic and Open Pit where we increased our emphasis on consumer-focused
marketing efforts and reduced trade marketing expenses. Interest expense, net.Interest expense was $11.6 million in fiscal 2003, compared to $14.5 million
in fiscal 2002, a decline of 20.1%. A decrease in related variable interest rates on borrowings
under our existing credit facility accounted for 90.2% of the decline and the balance was due to
lower average debt balances. Interest income was $0.5 million in fiscal 2003, compared to $0.8
million in fiscal 2002. The decline in interest rates more than offset higher average cash
balances. Provision for income taxes.The effective tax rate was 39.5% in fiscal 2003, compared to 26.0% in
fiscal 2002. The principal reason for the lower effective tax rate in fiscal 2002 was the change in
the deferred tax valuation allowance based upon managements determination that there would be
sufficient income earned in the future to realize the majority of the deferred tax asset. 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 Overview.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 $25 million in 2005. We have historically satisfied our liquidity
requirements with internally generated cash flows and availability under our revolving credit
facilities. 29




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Statements of cash flows for the transition year ended December 26, 2004 The following information regarding cash flows for the 21 week period ended December 28, 2003 is
provided for comparison purposes only and is unaudited. Net cash used in operating activities was $2.5 million and $11.1 million for the 21 weeks ended
December 26, 2004 and December 28, 2003, respectively. Net cash used in operating activities
during the 21 weeks ended December 26, 2004 was principally the result of an increase in working
capital, which included a $23.0 million increase in inventory for the seasonal build and a $7.7
million increase in accounts receivable as well as a $19.0 million increase in accounts payable and
accrued liabilities. The increase in accrued liabilities primarily relate to higher accrued bond
interest, and higher accrued trade and coupon costs. In the 21 weeks ended December 28, 2003, net
cash used in operations was $11.1 million and was driven by a $19.2 million increase in working
capital, principally related to the seasonal increase in inventories and higher accrued trade
costs. Net cash used in investing activities was $12.4 million and $369.9 million for the 21 weeks ended
December 26, 2004 and December 28, 2003, respectively. Net cash used in investing activities
during the 21 weeks ended December 26, 2004 includes $8.1 million for capital expenditures, $1.9
million for the reacquisition of an exclusive license to distribute Duncan Hines product in Canada,
and $2.3 million for the payment of costs associated with the Aurora Transaction, which were
previously accrued as of the date of acquisition. Net cash used in investing activities during the
21 weeks ended December 28, 2003 includes activities related to the Pinnacle Merger, mainly
consideration paid of $368.2 million. Additionally, $1.7 million for capital expenditures was
included in the 21 weeks ended December 28, 2003. Net cash used by financing activities was $20.6 million for the 21 weeks ended December 26, 2004.
The usage was driven by a $16.4 million decline in bank overdrafts, $2.8 million of debt
acquisition costs, as well as the scheduled quarterly payments of our senior term loan credit
facility of $1.4 million. Net cash provided by financing activities was $314.1 million during the
21 weeks ended December 28, 2003. The Predecessor senior credit facility term loan of $175.0
million was paid off, and debt acquisition costs were $21.2 million. Cash inflows consisted of
equity contribution of $180.3 million, long-term bank borrowing of $120.0 million, borrowing under
our bank revolver of $21.5 million, and issuance of senior subordinated notes of $200.0 million.
Additionally, we repaid $7.5 million of the revolver borrowings and there was a $4.1 million
decline in bank overdrafts. The net of all activities resulted in a decrease in cash by $35.5 million and $66.9 million during
the 21 weeks ended December 26, 2004 and December 28, 2003, respectively. Statements of cash flows for the fiscal year ended July 31, 2004 In the Predecessors 16 week period ending November 24, 2003 of fiscal 2004, cash usage as a result
of operations was $23.4 million, in the Successors 36 week period ending July 31, 2004, cash
generated as a result of operations was $31.0 million, for a net cash increase as a result of
operations for the 52 week combined period ended July 31, 2004 of $7.6 million. The cash increase
from operations is due to net earnings excluding non-cash charges/credits and the impact of the
flow through of the write-up of inventories to fair value of $39.5 million and increased working
capital of $18.3 million, principally due to increased inventories partially offset by lower
receivables and increased accounts payable. Capital expenditures were $11.3 million, primarily for process improvement, cost savings and
maintenance capital. In fiscal 2004, bank overdrafts increased by $11.3 million resulting from the timing of checks
clearing the bank. The other significant activities in our cash flow for the first nine months of fiscal 2004 relate
to the Pinnacle Merger and Aurora Transaction. Pinnacle Merger consideration paid was $361.1
million, Pinnacle Merger costs were $7.2 million, the Predecessor senior credit facility term loan
of $175.0 million was paid off, and debt acquisition costs were $21.2 million. Cash inflows
consisted of equity contribution of $179.8 million, long-term bank borrowing of $120.0 million,
borrowing under our bank revolver of $21.5 million, and issuance of senior subordinated notes of
$200.0 million. Since the Pinnacle Merger, we have repaid $21.5 million of the revolver borrowings.
The Aurora 30




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Transaction consideration paid was $888.9 million (including $225.1 million
relating to the exchange of Aurora senior subordinated notes for equity interest in LLC),
transaction costs paid were $17.0 million, and debt acquisition costs were $16.6 million. Cash
inflows consisted of the equity contribution to Successor of $320.4 million (including $225.1
million relating to the exchange of Aurora senior subordinated notes for equity interest in LLC),
term loan borrowings under the senior secured credit facilities of $425.0 million and gross
proceeds from the February 2004 issuance of additional 8.25% Senior Subordinated Notes due 2013. In addition, cash flows from financing activities reflect the regularly scheduled quarterly
repayment of the term loan of $1.4 million. The net of all activities resulted in a decrease in cash by $34.3 million in fiscal 2004. Statements of cash flows for the fiscal year ended July 31, 2003 Cash provided by operations was $33.0 million and was net of a $10.8 million increase in working
capital, principally related to the timing of payment of liabilities and an increase in inventories
of $2.2 million, or 2.8%, to provide improved customer service levels. Capital expenditures were
$8.8 million, primarily for process improvement, cost savings and maintenance capital. Scheduled
payments of $15.0 million were made on the term loan. In fiscal 2003, bank overdrafts decreased by
$2.4 million resulting from the timing of checks clearing the bank. The net of all activities
increased cash by $7.2 million in fiscal 2003. Statements of cash flows for the fiscal year ended July 31, 2002 Cash provided by operations was $64.5 million, including a $21.8 million reduction in working
capital. As a result of re-establishing normal trade terms with vendors following the change in
ownership in May 2001, accounts payable increased by $11.9 million to more normal levels.
Inventories decreased by $8.2 million, principally in pickles, the result of our decision to
procure a lower cost local cucumber crop. This resulted in less production in the fourth quarter
of fiscal 2002 and more in the first quarter of fiscal 2003. This does not impact year-end
comparisons of fiscal 2002 with fiscal 2003. Accrued liabilities increased as the management
incentive bonus was accrued in fiscal 2002 but not paid until early fiscal 2003. There were no
accrued bonuses as of July 31, 2001. Capital expenditures were $19.5 million in fiscal 2002,
including $9.0 million related to the consolidation of productive capacity at other facilities in
connection with the closing of one of our Omaha plants in March 2002. Cash payments for business
acquisitions were $7.4 million in fiscal 2002 and principally related to the Kings Hawaiian frozen
entree acquisition, which we funded from our excess cash balance. During fiscal 2002, we issued
$2.2 million of common stock related to purchases by key employees under our Stock Purchase Plan.
In fiscal 2002, bank overdrafts increased $7.8 million related to a change in the depository for
temporary investments in early fiscal 2002. The net of all activities increased cash by $47.5
million in fiscal 2002. Debt In November 2003, the Successor 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 December 26, 2004
and July 31, 2004. As of July 31, 2004, the amount owed to JP Morgan Chase Bank under the term loan, which is reported
separately in our Consolidated Balance Sheet, was $7.9 million. There was no related party debt as
of December 26, 2004. 31




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Our borrowings under the new 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 new 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 new 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 new 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 21 weeks ended December 26, 2004, the weighted average interest rate on the
term loan was 4.3853% and on the revolving credit facility was 4.8627%. As of December 26, 2004,
the Eurodollar interest rate on the term loan facility was 4.7599% 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 December 26, 2004
are: $5.5 million in 2005, $5.5 million in 2006, $5.5 million in 2007, $5.5 million in 2008, $5.5
million in 2009 and $909.0 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 subsidiary and 65% of the capital
stock of, or other equity interests in, each of our direct foreign
subsidiary, 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). 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
December 26, 2004 and July 31, 2004, we had utilized $15.7 million and $16.7 million, respectively,
of the revolving credit facility for letters of credit. As of December 26, 2004 and July 31, 2004,
there were no outstanding borrowings under the revolving credit facility and had utilized of the
revolving credit facility $15.7 million and $16.7 million for letters of credit, respectively. Of
the $130 million revolving credit facility available, as of December 26, 2004 and July 31, 2004, we
had an unused balance of $114.3 million and $113.3 million, respectively, available for future
borrowings and letters of credit, of which a maximum of $24.3 million and $23.3 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 18 for Guarantor and
Nonguarantor Financial Statements. 32




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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 will 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 its excess cash flow, as defined. In addition, our new 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. 33




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Senior Secured Credit Facilities 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 over the next twelve months;
    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 over the next twelve months) 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 31, 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 December 26, 2004, 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. The Company had also notified the trustee under the indenture governing its 8 1/4% senior
subordinated notes due 2013 of the Companys failure to comply with the covenant requiring it to
furnish to the note holders on a timely basis, its annual report and audited financial statements
for the fiscal year ended July 31, 2004. Delivery of this notice did not create an event of
default under the indenture or acceleration of the notes. The Company did not receive a notice of
default from the trustee and subsequently cured the default through the issuance of its annual
report and audited financial statements with the trustee on November 24, 2004. In May 2001, the Predecessor entered into a $245 million Credit Agreement (Senior Secured Credit
Facilities) with Bankers Trust Co., which provided for a term loan of $190 million and a revolving
credit facility of $55 million. The term was to have matured in 2008 and the revolving credit
facility would have expired in 2006. The Predecessors senior secured credit facility was paid in
full and terminated at the closing of the Pinnacle Merger described in Note 1. 34




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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. Contractual Commitments The table below provides information on our contractual commitments as of December 26, 2004. Less Than
    
    
    
    
    
    
    
    
    
    
    AfterTotal
    
    
    1 Year
    
    
    1 - 3 Years
    
    
    3 - 5 Years
    
    
    5 YearsLong-term debt (1)
    
    $
    936,275
    
    
    $
    5,450
    
    
    $
    10,900
    
    
    $
    10,900
    
    
    $
    909,025Operating lease obligations
    
    
    29,128
    
    
    
    5,227
    
    
    
    9,533
    
    
    
    9,497
    
    
    
    4,871Capital lease obligations
    
    
    384
    
    
    
    143
    
    
    
    241
    
    
    
    
    
    
    
    Purchase obligations (2)
    
    
    359,921
    
    
    
    277,617
    
    
    
    82,304
    
    
    
    
    
    
    
    Other long-term obligations (3)
    
    
    4,000
    
    
    
    4,000
    
    
    
    
    
    
    
    
    
    
    
    $
    1,329,708
    
    
    $
    292,437
    
    
    $
    102,978
    
    
    $
    20,397
    
    
    $
    913,896
   (1)
    
    Long-term debt at face value includes schedule principal repayments and excludes interest payments.(2)
    
    The amounts indicated in this line primarily reflect future contractual payments under various take-or-
pay arrangements entered into as part of the normal course of business. The amounts do not include
obligations related to other contractual purchase obligations that are not take-or-pay arrangements. Such
contractual purchase obligations are primarily purchase orders at fair value that are part of normal
operations and are reflected in historical operating cash flow trends. Purchase obligations also include
trade and consumer promotion and advertising commitments. We do not believe such purchase
obligations will adversely affect our liquidity positions.(3)
    
    Other long-term obligations relate to the Omaha resturturing plan and severance costs related to the Aurora
transaction. Critical accounting policies and estimates The preparation of financial statements in accordance with generally accepted accounting principles
requires the use of judgment, estimates and assumptions. We make such subjective determinations
after careful consideration of our historical performance, managements experience, current
economic trends and events and information from outside sources. Inherent in this process is the
possibility that actual results could differ from these estimates and assumptions for any
particular period. Our significant accounting policies are detailed in Note 2 to the consolidated financial statements
for the transition year ended December 26, 2004. The following areas are the most important and
require the most difficult, subjective judgments. Revenue recognition. Revenue consists of sales of our frozen food and dry food products. We
recognize revenue from product sales upon shipment to our customers, at which point title and risk
of loss are transferred and the selling price is fixed or determinable. Shipment completes the
revenue-earning process, as an arrangement exists, delivery has occurred, the price is fixed and
collectibility is reasonably assured. We estimate and deduct from revenues discounts and product
return allowance is recorded as a reduction of sales in the same period that the revenue is
recognized. 35




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Trade and consumer promotional expenses. We offer various sales incentive programs to retailers
and consumers. We record consumer incentive and trade promotion costs as a reduction of revenues
in the year in which we offer these programs. The recognition of expense for these programs
involves the exercise of judgment related to performance and redemption estimates that we base on historical experience and other factors. Actual expenses may differ if the level of redemption
rates and performance vary from estimates. We also record slotting fees, which refers to payments
to retailers to obtain shelf placement for new and existing product introductions. We reduce
revenues for the amount of slotting estimated to each customer in full at the time of the first
shipment of the new product to that customer. Inventories. We state inventories at the lower of average cost or market. In determining market
value, we provide allowances to adjust the carrying value of its inventory to the lower of cost or
net realizable value, including any costs to sell or dispose. Appropriate consideration is given
to obsolescence, excessive inventory levels, product deterioration and other factors in evaluating
net realizable value. These adjustments are estimates, which could vary significantly from actual
requirements if future economic conditions, customer inventory levels or competitive conditions
differ from expectations. Long-lived and intangible assets. We assess changes in economic conditions and strategic
priorities and make assumptions regarding estimated future cash flows in evaluating the value of
our fixed assets, goodwill and other non-current assets. As these assumptions and estimates may
change over time, it may be necessary for us to record impairment charges. Pensions and retiree medical benefits. We provide pension and post-retirement benefits to
employees and retirees. Determining the costs associated with such benefits depends on various
actuarial assumptions, including discount rates, expected return on plan assets, compensation
increases, turnover rates and health care trend rates. Independent actuaries, in accordance with
generally accepted accounting principles, perform the required calculations to determine expense.
We generally accumulate actual results that differ from the actuarial assumptions and amortize such
results over future periods. Insurance reserves. We are self-insured and retain liabilities under our workers compensation
insurance policy. An independent, third-party actuary estimates the outstanding retained-insurance
liabilities by projecting incurred losses to their ultimate liability and subtracting amounts
paid-to-date to obtain the remaining liabilities. We base actuarial estimates of ultimate
liability on actual incurred losses, estimates of incurred but not yet reported losses  based on
historical information from both us and the industry  and the projected costs to resolve these
losses. Retained-insurance liabilities may differ based on new events or circumstances that might
materially impact the ultimate cost to settle these losses. Income taxes. We record income taxes based on the amounts that are refundable or payable in the
current year, and we include results of any difference between generally accepted accounting
principles and U.S. tax reporting that we record as deferred tax assets or liabilities. The
Company reviews its deferred tax assets for recovery. A valuation allowance is established when
the Company believes that it is more likely than not that some portion of its deferred tax assets
will not be realized. Changes in valuation allowances from period to period are included in the
Companys tax provision in the period of change. Assessment of the appropriate amount and
classification of income taxes is dependent on several factors, including estimates of the timing
and realization of deferred income tax assets and the timing of income tax payments. Actual
collections and payments may differ from these estimates as a result of changes in tax laws as well
as unanticipated future transactions impacting related income tax balances. 36




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Stock options. We have elected to use Accounting Principles Board Opinion No. 25, Accounting for
Stock Issued to Employees. SFAS No. 148, Accounting for Stock-Based CompensationTransition and
Disclosure, an amendment of FASB Statement No. 123, requires us to make pro forma disclosure of
net earnings and earnings per share as if we had applied the fair value method of accounting for
stock options in measuring compensation cost. Sale of Crunch Holding Corp. (CHC), the
successors sole shareholder, and the Predecessor stock was restricted. Except under certain
circumstances, the CHC and the Predecessor had the option to purchase at fair value all or any
portion of the shares of common stock acquired by exercise of options held by employees in the
event of termination or a change in control. At the time an event occurs that allowed CHC or the
Predecessor to exercise its option, they would record compensation expense for the difference
between the aggregate fair value of the shares of common stock and the aggregate exercise price of
the stock options. The Pinnacle Merger was an event that allowed the Predecessor to exercise that
option. At the time of the Pinnacle Merger, all Predecessor options vested were purchased by the
Predecessor at the closing date and compensation expense of $4.9 million was recorded immediately
prior to the Pinnacle Merger. For the options issued by CHC, no compensation expense related to the
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. New accounting pronouncements In January 2003, the FASB issued FASB Interpretation No. 46 (FIN 46), Consolidation of Variable
Interest Entities. FIN 46 clarifies the application of Accounting Research Bulletin No. 51,
Consolidated Financial Statements, to certain entities in which equity investors do not have the
characteristics of a controlling financial interest or do not have sufficient equity at risk for
the entity to finance its activities without additional subordinated financial support from other
parties. In December 2003, the FASB published a revision to FIN 46 (FIN 46R) to clarify some of
the provisions of the interpretation and to defer the effective date of implementation for certain
entities. The Company will be required to apply the provisions of FIN 46R for periods ended after
December 15, 2004. The Company is currently assessing what impact, if any, adoption of this
interpretation would have on its financial statements. 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 relatively small
number of participants, the Company does not expect the impact of this legislation to have a
material impact on its consolidated financial statements. In December 2003, the FASB issued Statement of Financial Accounting Standards No. 132 (revised
2003), Employers Disclosures about Pensions and Other Postretirement Benefits. This Statement
revises employers disclosures about pension plans and other postretirement benefits. However, it
does not change the measurement or recognition of those plans, as previously required by SFAS No.
87, Employers Accounting for Pensions, No. 88, Employers Accounting for Settlements and
Curtailments of Defined Benefit Pension Plans and for Termination Benefits and No. 106,
Employers Accounting for Postretirement Benefits Other Than Pensions. In addition to the
disclosure requirements contained in SFAS No. 132, the revised statement requires additional
disclosures about the assets, obligations, cash flows and net periodic benefit cost of defined
benefit pension plans and other defined postretirement plans. See Note 10, Pension Plans and
Retirement Benefits, for these additional disclosures. In December 2004, the FASB issued Statement of Financial Accounting Standards 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 Statement of Financial Accounting Standards 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. 37




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In December 2004, the FASB issued Statement of Financial Accounting Standards 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. Off Balance Sheet Arrangements As of December 26, 2004, we did not have any off balance sheet obligations. 
 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Financial instruments We may utilize derivative financial instruments to enhance our ability to manage risks, including
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 will
recognize the amounts that we pay or receive on hedges related to debt as an adjustment to interest
expense. The Company has entered into four interest rate swap agreements with a counterparty to effectively
change the floating rate payments on its senior secured credit facilities into fixed rate payments.
The first swap agreement became effective April 26, 2004, terminated on 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 facilities 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 facilities. 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 terminating 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 December 26, 2004 and July 31, 2004, the fair value of
the interest rate swaps was a gain of $3.7 million and $3.5 million, respectively. Of the amount
at December 26, 2004, $0.2 million is recorded in Other current assets and $3.5 million is recorded
in Other assets, net in the Consolidated Balance Sheet. At July 31, 2004, $0.2 million was
recorded in Other current assets and $3.3 million was recorded in Other assets, net in the
Consolidated Balance Sheet. The increase in the fair value of $0.3 million was recognized in
interest expense, net in the Consolidated Statement of Operations for the 21 weeks ended December
26, 2004. In August and September 2004, the Company entered into natural gas swap transactions with a
counterparty 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 $4.695 to $6.93 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. 38




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For the 21 weeks ended December 26, 2004, the Company realized a gain of $0.2 million, which is
recorded as a reduction to cost of products sold. Additionally, as of
December 26, 2004, the fair value of the remaining natural gas 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. As required by the senior secured credit facilities in effect prior to the Merger, in September
2001, we entered into a zero cost collar for a one-year period for the purpose of reducing our
exposure to variable interest rates. This collar required the counterparty to make payments to us
when the 30-day LIBOR interest rate exceeded 7% and required us to make payments to the
counterparty when the 30-day LIBOR interest rate fell below 3.13%. Our payments increase interest
expense and the payments received reduce interest expense. In September 2002, we entered into a
new zero cost collar for a one-year period. The new zero cost collar requires the counterparty to
make payments to us when the 30-day LIBOR interest rate exceeds 5% and requires us to make payments
to the counterparty when the 30 day LIBOR interest rate falls below 1.5%. Additionally, because
these agreements are not designated as hedges pursuant to Statement of Financial Accounting
Standards No. 133, Accounting for Derivative Financial Instruments and Hedging Activities, we
recorded a credit to interest expense of $0.1 million in the first quarter of fiscal 2004 and
additional interest expense of $0.1 million in fiscal 2003. The collar was terminated in September
2003. 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 December 26, 2004 was $11.6 million, which approximates fair value.
As of December 26, 2004, we also utilized letters of credit in connection with the purchase of raw
materials in the amount of $4.2 million, which approximates fair value. We may also utilize foreign currency exchange contracts, including swap and forward contracts, to
hedge existing foreign currency exposures. We recognize foreign exchange gains and losses on
derivative financial instruments, and we offset foreign exchange gains and losses on the underlying
exposures. At December 26, 2004 and July 31, 2004, we had no outstanding foreign exchange
contracts in place. 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. 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, the Company entered into natural gas swap transactions with a
counterparty 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 $4.695 to $6.93 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 21 weeks ended December 26, 2004, the Company realized a gain of $0.2 million, which is
recorded as a reduction to cost of products sold. Additionally, as of December 26, 2004, the fair
value of the remaining natural gas 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. 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. 39




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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Financial statements begin on the following page. 40




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Report of Independent Registered Public Accounting Firm To the Board of Directors and Shareholder of
Pinnacle Foods Group Inc.: In our opinion, the accompanying consolidated balance sheets and the related consolidated
statements of operations, cash flows and shareholders equity present fairly, in all material
respects, the financial position of Pinnacle Foods Group Inc. and its subsidiaries (the Company)
at December 26, 2004 and July 31, 2004, and the results of their operations and their cash flows
for the period from August 1, 2004 to December 26, 2004 and for the period from November 25, 2003
to July 31, 2004 (Successor as defined in Note 1) in conformity with accounting principles
generally accepted in the United States of America. These financial statements are the
responsibility of the Companys management. Our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these statements in
accordance with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion. As discussed in Note 2 to the consolidated financial statements, during the transition period ended
December 26, 2004, the Company changed the period in which it performs its annual goodwill and
indefinite-lived intangibles impairment test from July 31st to the last Sunday in
December. PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
March 28, 2005 41




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Report of Independent Registered Public Accounting Firm To the Board of Directors and Shareholder of
Pinnacle Foods Group Inc.: In our opinion, the accompanying consolidated balance sheet and the related consolidated statements
of operations, cash flows and shareholders equity present fairly, in all material respects, the
financial position of Pinnacle Foods Group Inc. and its subsidiaries (the Company) at July 31,
2003 and the results of their operations and their cash flows for the period from August 1, 2003 to
November 24, 2003 and each of the years in the two-year period ended July 31, 2003 (Predecessor
as defined in Note 1) in conformity with accounting principles generally accepted in the United
States of America. These financial statements are the responsibility of the Companys management.
Our responsibility is to express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
November 24, 2004 42




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PINNACLE FOODS GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands) 
 Successor
    
    
    
    Predecessor21 weeks
    
    
    36 weeks
    
    
    
    16 weeks
    
    
    Fiscal yearended
    
    
    ended
    
    
    
    ended
    
    
    endedDecember 26,
    
    
    July 31,
    
    
    
    November 24,
    
    
    July 31,2004
    
    
    2004
    
    
    
    2003
    
    
    2003
    
    
    2002Net sales
    
    $
    511,190
    
    
    $
    574,352
    
    
    
    $
    181,379
    
    
    $
    574,482
    
    
    $
    574,456Costs and expensesCost of products sold
    
    
    420,080
    
    
    
    502,967
    
    
    
    
    134,233
    
    
    
    447,527
    
    
    
    452,145Marketing and selling expenses
    
    
    53,588
    
    
    
    57,910
    
    
    
    
    24,335
    
    
    
    57,915
    
    
    
    51,458Administrative expenses
    
    
    15,216
    
    
    
    32,258
    
    
    
    
    9,454
    
    
    
    32,878
    
    
    
    32,346Research and development expenses
    
    
    1,459
    
    
    
    2,436
    
    
    
    
    814
    
    
    
    3,040
    
    
    
    3,552Goodwill impairment charge
    
    
    4,308
    
    
    
    1,835
    
    
    
    
    
    
    
    
    1,550
    
    
    
    Other expense (income), net
    
    
    5,680
    
    
    
    38,096
    
    
    
    
    7,956
    
    
    
    6,492
    
    
    
    5,137Total costs and expenses
    
    
    500,331
    
    
    
    635,502
    
    
    
    
    176,792
    
    
    
    549,402
    
    
    
    544,638Earnings (loss) before interest and taxes
    
    
    10,859
    
    
    
    (61,150
    )
    
    
    
    4,587
    
    
    
    25,080
    
    
    
    29,818Interest expense
    
    
    26,260
    
    
    
    26,240
    
    
    
    
    9,310
    
    
    
    11,592
    
    
    
    14,513Interest income
    
    
    120
    
    
    
    320
    
    
    
    
    143
    
    
    
    476
    
    
    
    807(Loss) earnings before income taxes
    
    
    (15,281
    )
    
    
    (87,070
    )
    
    
    
    (4,580
    )
    
    
    13,964
    
    
    
    16,112Provision (benefit) for income taxes
    
    
    9,425
    
    
    
    (3,157
    )
    
    
    
    (1,506
    )
    
    
    5,516
    
    
    
    4,190Net (loss) earnings
    
    $
    (24,706
    )
    
    $
    (83,913
    )
    
    
    $
    (3,074
    )
    
    $
    8,448
    
    
    $
    11,922
 See accompanying Notes to Consolidated Financial Statement 43




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PINNACLE FOODS GROUP INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands) 
 Successor
    
    
    
    PredecessorDecember 26,
    
    
    July 31,
    
    
    
    July 31,2004
    
    
    2004
    
    
    
    2003Current assets:Cash and cash equivalents
    
    $
    2,235
    
    
    $
    37,781
    
    
    
    $
    72,128Accounts receivable, net
    
    
    74,365
    
    
    
    66,437
    
    
    
    
    33,324Inventories, net
    
    
    205,510
    
    
    
    182,338
    
    
    
    
    82,591Other current assets
    
    
    3,991
    
    
    
    6,671
    
    
    
    
    6,790Deferred income taxes
    
    
    22
    
    
    
    26
    
    
    
    
    7,243Total current assets
    
    
    286,123
    
    
    
    293,253
    
    
    
    
    202,076Plant assets, net
    
    
    223,740
    
    
    
    233,124
    
    
    
    
    149,639Tradenames
    
    
    780,544
    
    
    
    780,556
    
    
    
    
    88,000Other assets, net
    
    
    57,670
    
    
    
    56,636
    
    
    
    
    8,424Goodwill
    
    
    416,863
    
    
    
    421,041
    
    
    
    
    17,982Total assets
    
    $
    1,764,940
    
    
    $
    1,784,610
    
    
    
    $
    466,121Current liabilities:Current portion of long-term obligations
    
    $
    5,574
    
    
    $
    5,380
    
    
    
    $
    15,000Current portion of long-term obligations  related party
    
    
    
    
    
    
    80
    
    
    
    
    Accounts payable
    
    
    87,921
    
    
    
    85,519
    
    
    
    
    30,908Accrued trade marketing expense
    
    
    46,014
    
    
    
    42,728
    
    
    
    
    19,567Accrued liabilities
    
    
    77,735
    
    
    
    85,236
    
    
    
    
    25,345Accrued income taxes
    
    
    1,477
    
    
    
    1,576
    
    
    
    
    501Total current liabilities
    
    
    218,721
    
    
    
    220,519
    
    
    
    
    91,321Long-term debt
    
    
    937,506
    
    
    
    930,968
    
    
    
    
    160,000Long-term debt  related party
    
    
    
    
    
    
    7,900
    
    
    
    
    Postretirement benefits
    
    
    2,940
    
    
    
    4,202
    
    
    
    
    33,121Deferred income taxes
    
    
    212,406
    
    
    
    203,006
    
    
    
    
    3,192Total liabilities
    
    
    1,371,573
    
    
    
    1,366,595
    
    
    
    
    287,634Commitments and contingencies
    
    
    
    
    
    
    
    
    
    
    
    Shareholders equity:Pinnacle Common stock: Successor par value $.01 per share,
100 shares authorized, issued 100; Predecessor  par value
$.01 per share, 400,000 shared authorized, issued 162,604
    
    
    
    
    
    
    
    
    
    
    
    1,626Additional paid-in-capital
    
    
    519,433
    
    
    
    519,433
    
    
    
    
    164,322Accumulated other comprehensive income (loss)
    
    
    48
    
    
    
    (10
    )
    
    
    
    147Carryover of Predecessor basis of net assets
    
    
    (17,495
    )
    
    
    (17,495
    )
    
    
    
    Accumulated deficit
    
    
    (108,619
    )
    
    
    (83,913
    )
    
    
    
    12,392Total shareholders equity
    
    
    393,367
    
    
    
    418,015
    
    
    
    
    178,487Total liabilities and shareholders equity
    
    $
    1,764,940
    
    
    $
    1,784,610
    
    
    
    $
    466,121
 See accompanying Notes to Consolidated Financial Statements 44




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PINNACLE FOODS GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands) 
 Successor
    
    
    
    Predecessor21 weeks
    
    
    36 weeks
    
    
    
    16 weeks
    
    
    Fiscal yearended
    
    
    ended
    
    
    
    ended
    
    
    endedDecember 26,
    
    
    July 31,
    
    
    
    November 24,
    
    
    July 31,2004
    
    
    2004
    
    
    
    2003
    
    
    2003
    
    
    2002Cash flows from operating activitiesNet (loss) earnings from operations
    
    $
    (24,706
    )
    
    $
    (83,913
    )
    
    
    $
    (3,074
    )
    
    $
    8,448
    
    
    $
    11,922Non-cash charges (credits) to net earningsDepreciation and amortization
    
    
    17,068
    
    
    
    24,570
    
    
    
    
    6,136
    
    
    
    22,948
    
    
    
    21,231Restructuring and impairment charge
    
    
    6,969
    
    
    
    16,312
    
    
    
    
    1,262
    
    
    
    4,941
    
    
    
    Amortization of debt acquisition costs
    
    
    1,995
    
    
    
    2,652
    
    
    
    
    6,907
    
    
    
    1,630
    
    
    
    1,630Amortization of bond premium
    
    
    (201
    )
    
    
    (323
    )
    
    
    
    
    
    
    
    
    
    
    
    Change in value of financial instruments
    
    
    (360
    )
    
    
    (3,492
    )
    
    
    
    
    
    
    
    
    
    
    
    Equity related compensation charge
    
    
    
    
    
    
    18,400
    
    
    
    
    4,935
    
    
    
    
    
    
    
    Postretirement healthcare benefits
    
    
    (1,262
    )
    
    
    (593
    )
    
    
    
    (527
    )
    
    
    (1,324
    )
    
    
    3,955Pension expense
    
    
    310
    
    
    
    820
    
    
    
    
    342
    
    
    
    1,323
    
    
    
    901Deferred income taxes
    
    
    9,398
    
    
    
    (2,942
    )
    
    
    
    (986
    )
    
    
    5,762
    
    
    
    3,010Changes in working capitalAccounts receivable
    
    
    (7,734
    )
    
    
    29,059
    
    
    
    
    (9,297
    )
    
    
    (812
    )
    
    
    (2,738
    )Inventories
    
    
    (23,010
    )
    
    
    20,483
    
    
    
    
    (25,288
    )
    
    
    (2,217
    )
    
    
    8,236Accrued trade marketing expense
    
    
    3,188
    
    
    
    468
    
    
    
    
    (4,815
    )
    
    
    (1,706
    )
    
    
    (1,244
    )Accounts payable
    
    
    18,682
    
    
    
    24,378
    
    
    
    
    1,279
    
    
    
    (4,685
    )
    
    
    11,940Other current assets and liabilities
    
    
    (2,825
    )
    
    
    (14,809
    )
    
    
    
    (313
    )
    
    
    (1,357
    )
    
    
    5,652Net cash (used in) provided by operating
activities
    
    
    (2,488
    )
    
    
    31,070
    
    
    
    
    (23,439
    )
    
    
    32,951
    
    
    
    64,495Cash flows from investing activitiesPayments for business acquisitions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (56
    )
    
    
    (7,360
    )Capital expenditures
    
    
    (8,073
    )
    
    
    (9,826
    )
    
    
    
    (1,511
    )
    
    
    (8,787
    )
    
    
    (19,452
    )Pinnacle merger consideration
    
    
    (130
    )
    
    
    (361,062
    )
    
    
    
    
    
    
    
    
    
    
    
    Pinnacle merger costs
    
    
    
    
    
    
    (7,154
    )
    
    
    
    
    
    
    
    
    
    
    
    Aurora merger consideration
    
    
    
    
    
    
    (663,759
    )
    
    
    
    
    
    
    
    
    
    
    
    Aurora merger costs
    
    
    (2,333
    )
    
    
    (16,980
    )
    
    
    
    
    
    
    
    
    
    
    
    Sale of plant assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    48
    
    
    
    Acquisition of license
    
    
    (1,919
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net cash (used in) provided by investing
activities
    
    
    (12,455
    )
    
    
    (1,058,781
    )
    
    
    
    (1,511
    )
    
    
    (8,795
    )
    
    
    (26,812
    )Cash flows from financing activitiesChange in bank overdrafts
    
    
    (16,413
    )
    
    
    11,603
    
    
    
    
    (262
    )
    
    
    (2,419
    )
    
    
    7,799Repayment of capital lease obligations
    
    
    (41
    )
    
    
    (4
    )
    
    
    
    
    
    
    
    (9
    )
    
    
    (75
    )Issuance of common stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    412
    
    
    
    2,161Equity contribution to Successor
    
    
    
    
    
    
    275,088
    
    
    
    
    
    
    
    
    
    
    
    
    Successors debt acquisition costs
    
    
    (2,822
    )
    
    
    (37,766
    )
    
    
    
    
    
    
    
    
    
    
    
    Proceeds from Successors bond offerings
    
    
    
    
    
    
    400,976
    
    
    
    
    
    
    
    
    
    
    
    
    Proceeds from Successors bank term loans
    
    
    
    
    
    
    545,000
    
    
    
    
    
    
    
    
    
    
    
    
    Proceeds from Successors notes payable borrowing
    
    
    30,000
    
    
    
    21,500
    
    
    
    
    
    
    
    
    
    
    
    
    Repayments of Successors notes payable
    
    
    (30,000
    )
    
    
    (21,500
    )
    
    
    
    
    
    
    
    
    
    
    
    Repayments of Predecessors long term obligations
    
    
    
    
    
    
    (175,000
    )
    
    
    
    
    
    
    
    (15,000
    )
    
    
    Repayments of Successors long term obligations
    
    
    (1,363
    )
    
    
    (1,363
    )
    
    
    
    
    
    
    
    
    
    
    
    Net cash (used in) provided by financing
activities
    
    
    (20,639
    )
    
    
    1,018,534
    
    
    
    
    (262
    )
    
    
    (17,016
    )
    
    
    9,885Effect of exchange rate changes on cash
    
    
    36
    
    
    
    
    
    
    
    
    42
    
    
    
    17
    
    
    
    (19
    )Net change in cash and cash equivalents
    
    
    (35,546
    )
    
    
    (9,177
    )
    
    
    
    (25,170
    )
    
    
    7,157
    
    
    
    47,549Cash and cash equivalents  beginning of period
    
    
    37,781
    
    
    
    46,958
    
    
    
    
    72,128
    
    
    
    64,971
    
    
    
    17,422Cash and cash equivalents  end of period
    
    $
    2,235
    
    
    $
    37,781
    
    
    
    $
    46,958
    
    
    $
    72,128
    
    
    $
    64,971Supplemental disclosures of cash flow information:Interest paid
    
    $
    23,547
    
    
    $
    28,776
    
    
    
    $
    2,517
    
    
    $
    10,001
    
    
    $
    12,672Interest received
    
    
    120
    
    
    
    320
    
    
    
    
    143
    
    
    
    476
    
    
    
    807Income taxes refunded (paid)
    
    
    627
    
    
    
    37
    
    
    
    
    3,308
    
    
    
    269
    
    
    
    (8,022
    )Non-cash investing activity:Capital leases
    
    
    (357
    )Aurora merger consideration
    
    
    
    
    
    
    (225,120
    )
    
    
    
    
    
    
    
    
    
    
    
    Aurora merger costs
    
    
    
    
    
    
    (4,628
    )
    
    
    
    
    
    
    
    
    
    
    
    Non -cash financing activityAurora merger equity contribution
    
    
    
    
    
    
    225,120
    
    
    
    
    
    
    
    
    
    
    
    
    
 See accompanying Notes to Consolidated Financial Statements 45




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##### Table of Contents



PINNACLE FOODS GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
(in thousands) 
 Carryover of
    
    
    AccumulatedAdditional
    
    
    Retained
    
    
    Predecessor
    
    
    Other
    
    
    TotalCommon Stock
    
    
    Paid In
    
    
    Earnings
    
    
    basis of
    
    
    Comprehensive
    
    
    ShareholdersShares
    
    
    Amount
    
    
    Capital
    
    
    (Deficit)
    
    
    net assets
    
    
    Income (loss)
    
    
    EquityPredecessorBalance at July 31, 2001
    
    
    160,000
    
    
    $
    1,600
    
    
    $
    161,325
    
    
    $
    (7,978
    )
    
    
    
    
    
    $
    
    
    
    $
    154,947Comprehensive income:Net earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,922
    
    
    
    
    
    
    
    
    
    
    
    11,922Foreign currency translation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (32
    )
    
    
    (32
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,890Warrants issued in business acquisition (1)
    
    
    
    
    
    
    
    
    
    450
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    450Stock issued, principally under the 2001 Stock
Purchase Plan, net of expenses
    
    
    2,187
    
    
    
    22
    
    
    
    2,139
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,161Balance at July 31, 2002
    
    
    162,187
    
    
    $
    1,622
    
    
    $
    163,914
    
    
    $
    3,944
    
    
    
    
    
    
    $
    (32
    )
    
    $
    169,448Comprehensive income:Net earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,448
    
    
    
    
    
    
    
    
    
    
    
    8,448Foreign currency translation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    179
    
    
    
    179Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,627Stock issued, principally under the 2001 Stock
Purchase Plan, net of expenses
    
    
    417
    
    
    
    4
    
    
    
    408
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    412Balance at July 31, 2003
    
    
    162,604
    
    
    $
    1,626
    
    
    $
    164,322
    
    
    $
    12,392
    
    
    
    
    
    
    $
    147
    
    
    $
    178,487Stock Compensation
    
    
    
    
    
    
    
    
    
    
    4,935
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,935Comprehensive income:Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,074
    )
    
    
    
    
    
    
    
    
    
    
    (3,074
    )Foreign currency translation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    78
    
    
    
    78Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,996
    )Balance at November 24, 2003
    
    
    162,604
    
    
    $
    1,626
    
    
    $
    169,257
    
    
    $
    9,318
    
    
    $
    
    
    
    $
    225
    
    
    $
    180,426SuccessorBalance at November 25, 2003
    
    
    100
    
    
    $
    
    
    
    $
    180,637
    
    
    $
    
    
    
    $
    (17,495
    )
    
    $
    
    
    
    $
    163,142Equity contributions:Cash
    
    
    
    
    
    
    
    
    
    
    95,276
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    95,276Noncash
    
    
    
    
    
    
    
    
    
    
    225,120
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    225,120Equity related compensation
    
    
    
    
    
    
    
    
    
    
    18,400
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18,400Comprehensive income:Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (83,913
    )
    
    
    
    
    
    
    
    
    
    
    (83,913
    )Foreign currency translation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (10
    )
    
    
    (10
    )Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (83,923
    )Balance at July 31, 2004
    
    
    100
    
    
    $
    
    
    
    $
    519,433
    
    
    $
    (83,913
    )
    
    $
    (17,495
    )
    
    $
    (10
    )
    
    $
    418,015Comprehensive income:Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (24,706
    )
    
    
    
    
    
    
    
    
    
    
    (24,706
    )Foreign currency translation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    58
    
    
    
    58Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (24,648
    )Balance at December 26, 2004
    
    
    100
    
    
    $
    
    
    
    $
    519,433
    
    
    $
    (108,619
    )
    
    $
    (17,495
    )
    
    $
    48
    
    
    $
    393,367
   (1)
    
    Warrants were issued December 12, 2001. See accompanying Notes to Consolidated Financial Statements. 46




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##### Table of Contents



PINNACLE FOODS GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except where noted in millions) 
 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 audited financial
statements for the 21 weeks ended December 26, 2004, the transition period. For comparative
purposes, unaudited condensed results of operations data for the comparable period of the prior
year is presented in Note 4, Change in Fiscal Year End. 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 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 name, 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
(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. The aggregate purchase price
was subject to a final working capital settlement and other adjustments as of the closing date.
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 $1.6 million. 47




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##### Table of Contents



PINNACLE FOODS GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except where noted in millions) 
 In June 2001, the FASB issued Statement of Financial Accounting Standards (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 Investor Group LLC 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 Investor Group LLC 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
Investor Group LLC prior to the Pinnacle Merger was $17,495 and is recorded as carry-over basis in
shareholders equity. The total cost of the Pinnacle Merger, which is subject to the post-closing adjustment as discussed
below, consists of: Stated purchase price
    
    $
    485,000Estimated working capital adjustments
    
    
    10,009Acquisition costs
    
    
    7,154Total cost of acquisition
    
    $
    502,163
 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 and $17
million was deposited into a second escrow account pending finalization of indemnification
adjustments. The $10 million working capital adjustment was preliminary. 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. This will result
in a reduction of purchase price and goodwill of approximately $1.6 million. Indemnification adjustments, if any, relate to the Predecessors indemnifications of CHC, which are
stipulated in the merger agreement and include, but are not limited to, breaches of representations
or warranties, certain tax matters, and certain environmental items. During the first quarter of
2005, with no further claims pending, the indemnification escrow was distributed to the sellers. 48




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##### Table of Contents



PINNACLE FOODS GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except where noted in millions) 
 The following table summarizes the 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
    
    
    4,436Goodwill
    
    
    144,111Tradenames
    
    
    106,156Other assets
    
    
    177Fair value of assets acquired
    
    
    584,611Liabilities assumed
    
    
    77,283Deferred income taxes
    
    
    22,660Carryover of Predecessor basis of net assets
    
    
    (17,495
    )Purchase price
    
    $
    502,163
 The total intangible assets amounted to $250,267, of which $106,156 was assigned to tradenames
that are not subject to amortization. Goodwill, which is not subject to amortization, amounted to
$144,111, of which $142,344 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 for
the 36 weeks ended July 31, 2004 includes a pre-tax charge of $26,304, as all of such finished
product was sold during the period November 25, 2003 to July 31, 2004. 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 49




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##### Table of Contents



PINNACLE FOODS GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(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 is approximately $2.14 per share (subject to adjustment as set forth above), no payment to warrant holders is expected; 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 and paid in February 2004. In connection with the formation of LLC, certain ownership units of LLC were issued to CDM Investor
Group LLC, 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 $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. Summary of Significant Accounting Policies Consolidation. The consolidated financial statements include the accounts of Pinnacle Foods Group
Inc. and its wholly-owned subsidiaries. The results of companies acquired during the year are
included in the consolidated financial statements from the effective date. Intercompany
transactions have been eliminated in consolidation. Foreign Currency Translation.Foreign-currency-denominated assets and liabilities are translated
into U.S. dollars at exchange rates existing at the respective balance sheet dates. Translation
adjustments resulting from fluctuations in exchange rates are recorded as a separate component of
accumulated other comprehensive income (loss) within shareholders equity. The Company translates
the results of operations of its foreign subsidiaries at the average exchange rates during the
respective periods. Gains and losses resulting from foreign currency transactions, the amounts of
which are not material, are included in net earnings (loss). Fiscal Year. As discussed in Note 1, in December 2004, the Company changed its fiscal year end
from July 31 to the last Sunday in December. Cash and Cash Equivalents. The Company considers investments in all highly liquid debt instruments
with an initial maturity of three months or less to be cash equivalents. Inventories. Substantially all inventories are valued at the lower of average cost or market.
Cost is determined by the first-in first-out method. The nature of costs included in inventory
are: ingredients, containers, packaging, other raw materials, direct manufacturing labor and fully
absorbed manufacturing overheads. When necessary, the Company provides allowances to adjust the
carrying value of its inventory to the lower of cost or net realizable value, including any costs
to sell or dispose including consideration for obsolescence, excessive inventory levels, product
deterioration and other factors in evaluating net realizable value. 50




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##### Table of Contents



PINNACLE FOODS GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except where noted in millions) 
 Plant Assets.Plant assets are stated at historical cost, and depreciation is computed using the
straight-line method over the lives of the assets. Buildings and machinery and equipment are
depreciated over periods not exceeding 45 years and 15 years, respectively. The weighted average
estimated remaining useful lives are approximately 10 years for buildings and 7 years for machinery
and equipment. When assets are retired, sold, or otherwise disposed of, their gross carrying value
and related accumulated depreciation are removed from the accounts and included in determining gain or
loss on such disposals. Costs of assets acquired in a business combination are based on the estimated fair
value at the date of acquisition. Goodwill and Intangible Assets. Intangible assets consist principally of goodwill and tradenames.
Intangible assets with definite lives are amortized over those lives. Goodwill and intangible
assets with indefinite lives are not amortized, but are tested annually for impairment or more
frequently if events or changes in circumstances indicate that the carrying value may not be
recoverable. During the transition year, the Company changed its method of accounting for goodwill
and intangible assets by changing the time of year the annual impairment test is performed. Prior
to the change in year end, the impairment test was performed as of July 31st (the last
day of the Companys old fiscal year). Upon the change in year end from July 31 to the last Sunday
in December, management believes it is preferable to continue to test goodwill and impairments as
of the last day of its new fiscal year, which will be the last Sunday in December. This change in
accounting policy will not change the comparability of the Companys financial statements from
period to period and therefore no restatement of prior periods is necessary. Valuation of Long-Lived Assets. The Company adopted SFAS No. 144 Accounting for the Impairment or
Disposal of Long-Lived Assets on August 1, 2002. The carrying value of long-lived assets held and
used, other than goodwill, is evaluated at the reporting unit level when events or changes in
circumstances indicate the carrying value may not be recoverable. The carrying value of a
long-lived asset is considered impaired when the total projected undiscounted cash flows from such
asset are separately identifiable and are less than the carrying value. In that event, a loss is
recognized based on the amount by which the carrying value exceeds the fair market value of the
long-lived asset. Fair market value is determined primarily using the projected cash flows from
the asset discounted at a rate commensurate with the risk involved. Losses on long-lived assets
held for sale, other than goodwill, are determined in a similar manner, except that fair market
values are reduced for disposal costs. Revenue Recognition. Revenue from product sales is recognized upon shipment to the customers as
terms are FOB shipping point, at which point title and risk of loss is transferred and the selling
price is fixed or determinable. This completes the revenue-earning process, specifically that an
arrangement exists, delivery has occurred, the price is fixed and collectibility is reasonably
assured. A provision for payment discounts, uncollectible accounts and product return allowances
is recorded as a reduction of sales in the same period that the revenue is recognized. Trade promotions, consisting primarily of customer pricing allowances, merchandising funds and
consumer coupons, are offered through various programs to customers and consumers. Sales are
recorded net of estimated trade promotion spending, which is recognized as incurred at the time of
sale. Certain retailers require the payment of slotting fees in order to obtain space for the
Companys products on the retailers store shelves. The fees are recognized as reductions of
revenue at the earlier of the date cash is paid or a liability to the retailer is created. These
amounts are included in the determination of net sales. Accruals for expected payouts under these
programs are included as accrued trade marketing expense line in the Consolidated Balance Sheet. Marketing Expenses. Trade marketing expense is comprised of amounts paid to retailers for programs
designed to promote our products. These costs include standard introductory allowances for new
products. They also include the cost of in-store product displays, feature pricing in retailers
advertisements and other temporary price reductions. These programs are offered to our customers
both in fixed and variable (rate per case) amounts. The ultimate cost of these programs depends on
retailer performance and is the subject of significant management estimates. The Company records
as expense the estimated ultimate cost of the program in the period during which the program
occurs. In accordance with EITF No. 01-9 Accounting for Consideration Given by a Vendor to a
Customer, these trade marketing expenses are classified in the Consolidated Statement of
Operations as a reduction of net sales. Also, in accordance with EITF No. 01-9, coupon redemption
costs are also recognized as reductions of net sales when issued. Marketing expenses recorded as a
reduction of net sales of the Successor were $219,534 and $219,452 in the 21 weeks ended December 26, 2004 and in the 36
weeks ended July 31, 2004, respectively. Marketing expenses
of the Predecessor were $48,038 in the 16 weeks ended November 24, 2003, $174,833 in 2003 and
$151,313 in 2002. 51




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PINNACLE FOODS GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except where noted in millions) 
 Advertising. Advertising costs include the cost of working media (advertising on television, radio
or in print), the cost of producing advertising, and the cost of coupon insertion and distribution.
Working media and coupon insertion and distribution costs are expensed in the period the
advertising is run or the coupons are distributed. The cost of producing advertising is expensed
as of the first date the advertisement takes place. Advertising included in the Successors
marketing and selling expenses were $28,428 and $20,620 in the 21 weeks ended December 26, 2004 and
in the 36 weeks ended July 31, 2004, respectively. Advertising included in the Predecessors
marketing and selling expenses were $14,590 in the 16 weeks ended November 24, 2003, $25,402 in
2003 and $16,100 in 2002. Shipping and Handling Costs. In accordance with the EITF No. 00-10 Accounting for Shipping and
Handling Revenues and Costs, costs related to shipping and handling of products shipped to
customers are classified as cost of products sold. Stock Based Compensation. 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-base 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. Net
earnings, as reported, include compensation expense related to ownership units of LLC issued to CDM
Investor Group LLC. See Notes 1 and 3. 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 all periods
presented. Successor
    
    
    Successor
    
    
    
    Predecessor21 weeks ended
    
    
    36 weeks ended
    
    
    
    16 weeks ended
    
    
    Fiscal yearDecember 31,
    
    
    July 31,
    
    
    
    November 24,
    
    
    ended July 31,2004
    
    
    2004
    
    
    
    2003
    
    
    2003
    
    
    2002Net earnings (loss), as reported
    
    $
    (24,706
    )
    
    $
    (83,913
    )
    
    
    $
    (3,074
    )
    
    $
    8,448
    
    
    $
    11,922Add: Stock-based compensation expense included
in reported net income, net of tax
    
    
    
    
    
    
    18,400
    
    
    
    
    3,158
    
    
    
    
    
    
    
    Deduct: Total stock-based employee compensation
expense determined under fair value method
for all stock option awards, net of
related tax effects
    
    
    (504
    )
    
    
    (19,031
    )
    
    
    
    (734
    )
    
    
    (268
    )
    
    
    (275
    )Pro forma net earnings (loss)
    
    $
    (25,210
    )
    
    $
    (84,544
    )
    
    
    $
    (650
    )
    
    $
    8,180
    
    
    $
    11,647
 Insurance reserves. The Company is self-insured under its workers compensation insurance
policy. An independent, third-party actuary estimates the outstanding retained-insurance
liabilities by projecting incurred losses to their ultimate liability and subtracting amounts
paid-to-date to obtain the remaining liabilities. The Company bases actuarial estimates of
ultimate liability on actual incurred losses, estimates of incurred but not yet reported losses and
the projected costs to resolve these losses. Income Taxes. Income taxes are accounted for in accordance with SFAS No. 109, Accounting for
Income Taxes, under which deferred tax assets and liabilities are determined based on the
difference between the financial statement and tax bases of assets and liabilities, using enacted
tax rates in effect for the year in which the differences are expected to reverse. The Company
reviews its deferred tax assets for recovery. A valuation allowance is established when the
Company believes that it is more likely than not that some portion of its deferred tax assets will
not be realized. Changes in valuation allowances from period to period are included in the
Companys tax provision in the period of change. 52




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PINNACLE FOODS GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except where noted in millions) 
 Financial Instruments.The Company uses financial instruments, primarily swap contracts, to manage
its exposure to movements in interest rates and commodity prices. The use of these financial
instruments modifies the exposure of these risks with the intent to reduce the risk or cost to the
Company. The Company does not use derivatives for trading purposes and is not a party to leveraged
derivatives. Use of Estimates. The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make estimates and
assumptions that affect amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates. Reclassifications. Certain prior year amounts have been reclassified to conform to current year
presentation. Recently Issued Accounting Pronouncements In January 2003, the FASB issued FASB Interpretation No. 46 (FIN 46), Consolidation of Variable
Interest Entities. FIN 46 clarifies the application of Accounting Research Bulletin No. 51,
Consolidated Financial Statements, to certain entities in which equity investors do not have the
characteristics of a controlling financial interest or do not have sufficient equity at risk for
the entity to finance its activities without additional subordinated financial support from other
parties. In December 2003, the FASB published a revision to FIN 46 (FIN 46R) to clarify some of
the provisions of the interpretation and to defer the effective date of implementation for certain
entities. The Company will be required to apply the provisions of FIN 46R for periods ended after
December 15, 2004. The Company is currently assessing what impact, if any, adoption of this
interpretation would have on its financial statements. 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. In December 2003, the FASB issued Statement of Financial Accounting Standards No. 132 (revised
2003), Employers Disclosures about Pensions and Other Postretirement Benefits. This Statement
revises employers disclosures about pension plans and other postretirement benefits. However, it
does not change the measurement or recognition of those plans, as previously required by SFAS No.
87, Employers Accounting for Pensions, No. 88, Employers Accounting for Settlements and
Curtailments of Defined Benefit Pension Plans and for Termination Benefits and No. 106,
Employers Accounting for Postretirement Benefits Other Than Pensions. In addition to the
disclosure requirements contained in SFAS No. 132, the revised statement requires additional
disclosures about the assets, obligations, cash flows and net periodic benefit cost of defined
benefit pension plans and other defined postretirement plans. See Note 10, Pension Plans and
Retirement Benefits, for these additional disclosures. In December 2004, the FASB issued Statement of Financial Accounting Standards 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. 53




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PINNACLE FOODS GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except where noted in millions) 
 In November 2004, the FASB issued Statement of Financial Accounting Standards 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 Statement of Financial Accounting Standards 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. 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). 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 will 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
Investor Group LLC, 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 36 weeks ended July 31, 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
Investor Group, LLC 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. 54




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PINNACLE FOODS GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except where noted in millions) 
 Prior to its bankruptcy filing, the Company 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 the Companys bankruptcy by filing an
adversary proceeding and by objecting to confirmation. The bankruptcy court rejected the lenders
argument and confirmed the Company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. 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
    
    
    225,120Transaction costs
    
    
    21,608Total cost of acquisition
    
    $
    935,291
 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. 55




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PINNACLE FOODS GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except where noted in millions) 
 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 36 weeks ended July
31, 2004 includes a pre-tax charge of $13,185 representing the write-up of the inventory to fair
value at March 19, 2004 of inventories, all of which were sold during the period March 19, 2004 to
July 31, 2004. Pro forma Information The following unaudited pro forma statements of operation data present the information for the
fiscal years 2004 and 2003 as if the Pinnacle Merger and Aurora Transaction had occurred as of
August 1, 2002. 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 elimination of the amortization of the net postretirement benefit
unrecognized actuarial gains, the reduction in rent expense resulting from an office closure, and
to conform the accounting policies with respect to slotting expenses. 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 Pinnacle Merger and
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. Fiscal year ended July 31,2004
    
    
    2003Net sales
    
    $
    1,230,402
    
    
    $
    1,319,379Earnings (loss) before interest and taxes
    
    $
    (43,815
    )
    
    $
    40,122Net earnings (loss)
    
    $
    (117,339
    )
    
    $
    (50,303
    )
 Pro forma depreciation and amortization expense included above was $41,602 and $43,802 for the
fiscal years ended July 31, 2004 and 2003, respectively. Included in earnings (loss) before interest and taxes in the pro forma information above are the
following material charges (credits): 56




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PINNACLE FOODS GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except where noted in millions) 
 Fiscal Year Ended July 31,Pinnacle Historical Financial Statements
    
    2004
    
    
    2003Flow through of fair value of inventories over
manufactured cost as of November 25, 2003
    
    $
    26,304
    
    
    $
    Flow through of fair value of inventories over
manufactured cost as of March 19, 2004
    
    
    13,185
    
    
    
    Write off of obsolete inventory
    
    
    4,075
    
    
    
    Aurora acquisitions costs
    
    
    8,560
    
    
    
    Pinnacle acquisition costs
    
    
    8,963
    
    
    
    Omaha restructuring and impairment charge
    
    
    11,757
    
    
    
    Equity related compensation
    
    
    18,400
    
    
    
    Impairment of intangibles and goodwill
    
    
    6,063
    
    
    
    4,941Impairment of fixed assets
    
    
    1,300Unsuccessful Claussen acquisition
    
    
    
    
    
    
    660Contract termination
    
    
    
    
    
    
    2,000Gain on insurance settlement
    
    
    
    
    
    
    (783
    )Impact on earnings (loss) before interest and taxes
    
    $
    98,607
    
    
    $
    6,818
 Fiscal Year Ended July 31,Aurora Historical Financial Statements
    
    2004
    
    
    2003Write off of obsolete inventory
    
    $
    1,855
    
    
    $
    Impairment of goodwill and intangible assets (1)
    
    
    238,812
    
    
    
    67,091Plant closure and asset-impairment charges
    
    
    (363
    )
    
    
    23,325Administrative restructuring and retention costs
    
    
    3,773
    
    
    
    Financial restructuring and divestiture costs
    
    
    16,289
    
    
    
    Reorganization (primarily consists of debt forgiveness)
    
    
    (187,971
    )
    
    
    Miscellaneous non-cash charges
    
    
    3,965Impact on earnings (loss) before interest and taxes
    
    $
    76,360
    
    
    $
    90,416
 Kings Hawaiian Business Acquisition During the second fiscal quarter of fiscal 2002, Pinnacle completed the acquisition of Kings
Hawaiian, a line of frozen entrees, including premium products such as Teriyaki Chicken and Sour
Chicken rice bowls. The total cost of the acquisition of approximately $8,000 was funded from
Pinnacles excess cash balance. The cost of the acquisition was allocated on the basis of the
estimated fair value of the assets acquired, including intangible assets (primarily recipes) of
$6,100, inventories of $300 and goodwill of $1,600. 4. Change in Fiscal Year End As discussed in Note 1  Summary of Business, the Companys fiscal year end has changed from July
31 to the last Sunday in December. Accordingly, the Company is presenting audited financial
statements for the 21 weeks ended December 26, 2004, the transition period, in this Form 10-K. The
following table provides certain unaudited financial information for the same period of the prior
year. 57




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PINNACLE FOODS GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except where noted in millions) 
 Successor
    
    
    
    Predecessor21 weeks
    
    
    5 weeks
    
    
    
    16 weeksended
    
    
    ended
    
    
    
    endedDecember 26,
    
    
    December 28,
    
    
    
    November 24,2004
    
    
    2003
    
    
    
    2003(Unaudited)Net sales
    
    $
    511,190
    
    
    $
    49,658
    
    
    
    $
    181,379Costs and expensesCost of products sold
    
    
    420,080
    
    
    
    45,017
    
    
    
    
    134,233Marketing and selling expenses
    
    
    53,588
    
    
    
    6,499
    
    
    
    
    24,335Administrative expenses
    
    
    15,216
    
    
    
    2,879
    
    
    
    
    9,454Research and development expenses
    
    
    1,459
    
    
    
    234
    
    
    
    
    814Goodwill impairment charge
    
    
    4,308
    
    
    
    
    
    
    
    
    Other expense (income), net
    
    
    5,680
    
    
    
    11,870
    
    
    
    
    7,956Total costs and expenses
    
    
    500,331
    
    
    
    66,499
    
    
    
    
    176,792Earnings before interest and taxes
    
    
    10,859
    
    
    
    (16,841
    )
    
    
    
    4,587Interest expense
    
    
    26,260
    
    
    
    2,824
    
    
    
    
    9,310Interest income
    
    
    120
    
    
    
    2
    
    
    
    
    143Earnings before income taxes
    
    
    (15,281
    )
    
    
    (19,663
    )
    
    
    
    (4,580
    )Provision for income taxes
    
    
    9,425
    
    
    
    (3,364
    )
    
    
    
    (1,506
    )Net (loss) earnings
    
    $
    (24,706
    )
    
    $
    (16,299
    )
    
    
    $
    (3,074
    )
 5. Restructuring and Impairment Charges Successor Frozen Food Segment 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 manufactures
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. Employee termination activities commenced
in September 2004 and will be completed by March 2005. The following table contains detailed
information about the charges incurred to date related to the Omaha restructuring plan, recorded in
accordance with 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: Original
    
    
    Change in
    
    
    Incurred
    
    
    EstimatedEstimated
    
    
    Estimated
    
    
    Through July
    
    
    Current
    
    
    RemainingDescription
    
    Total Charges
    
    
    Charges
    
    
    31, 2004
    
    
    Period
    
    
    ChargesAsset impairment charges
    
    $
    7,400
    
    
    $
    2,649
    
    
    $
    7,400
    
    
    $
    2,649
    
    
    $
    Employee severance
    
    
    2,506
    
    
    
    
    
    
    
    2,506
    
    
    
    
    
    
    
    Other costs
    
    
    4,984
    
    
    
    123
    
    
    
    1,851
    
    
    
    1,227
    
    
    
    2,029Total
    
    $
    14,890
    
    
    $
    2,772
    
    
    $
    11,757
    
    
    $
    3,876
    
    
    $
    2,029
 The charges incurred have been included in other expense (income), net of the Consolidated
Statement of Operations. 58




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PINNACLE FOODS GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(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 loss initially recorded in April 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 $1,204 has been expended as of December 26, 2004. Other closing costs of
approximately $5,107 relate to warehouse restoration obligations and other shutdown costs. As of
December 26, 2004, $2,773 has been expended and $305 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 FAS 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, $1,964 and $65 in the quarters ending March
27, 2005 and June 26, 2005, respectively. Also, the Company is making capital expenditures
totaling approximately $6,400 through the second quarter of 2005 in connection with this plant
consolidation project. In October 2004, the Company decided that it will discontinue producing product under the Chefs
Choice trade name, which is reported under the Frozen Foods segment of the Company. The Company
will sell the majority of the remaining inventory through March 2005. In accordance with the
provisions of FAS 142, the Company prepared a discounted cash flow analysis as of July 31, 2004
which indicated that the book value of related to the Chefs Choice business unit exceeded its
estimated fair value and that a goodwill impairment had occurred. Accordingly, the Company has
recorded a non-cash impairment charge during fiscal 2004 related to goodwill of $1,835. As a result of the impairment charge related to the Chef Choice brand, the Company assessed whether
there had been an impairment of the Companys long-lived assets in accordance with FAS 144. The
Company 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, the Company has recorded a non-cash charge in fiscal 2004 related to the write down to
fair value of the fixed assets of $1,300 and a non-cash impairment charge of $1,666 related to
amortizable intangibles (recipes). In connection with the Companys annual goodwill and indefinite lived impairment test conducted as
of July 31, 2004 and in accordance with FAS 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. The
Company has recorded a non-cash impairment charge of $1,300 in fiscal 2004 related to the write
down of the trade name value. Product sold under the Avalon Bay trade name are reported in the
frozen foods segment. 59




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PINNACLE FOODS GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except where noted in millions) 
 As discussed in Note 2, 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 FAS 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. Predecessor During fiscal 2003, the Company recorded an impairment charge of $4,941 related to the intangible
assets and goodwill of the Kings Hawaiian frozen entrée business. The charge is the result of
cash flows not being sufficient to recover the previously recorded values of the intangible assets
and was calculated in accordance with the policies described in Note 2. During fiscal 2004,
changes in circumstances indicated that the carrying value of the intangible assets related to the
Kings Hawaiian business may not be recoverable. After performing a cash flow analysis, it was
determined that an additional impairment charge of $1,262 was to be recorded during the sixteen
weeks ended November 24, 2003. The following table summarizes impairment and restructuring charges. It also includes severance
liabilities assumed or established in purchase accounting. These amounts are recorded in accrued
liabilities. AssumedLiabilities /Balance at
    
    
    
    
    
    
    Purchase
    
    
    Noncash
    
    
    Cash
    
    
    Balance atDescription
    
    August 1, 2002
    
    
    Additions
    
    
    Accounting
    
    
    Reductions
    
    
    Reductions
    
    
    July 31, 2003Goodwill impairment charges
    
    $
    
    
    
    $
    1,550
    
    
    $
    
    
    
    $
    (1,550
    )
    
    $
    
    
    
    $
    Other asset impairment charges
    
    
    
    
    
    
    3,391
    
    
    
    
    
    
    
    (3,391
    )
    
    
    
    
    
    
    Employee severance
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    
    
    
    $
    4,941
    
    
    $
    
    
    
    $
    (4,941
    )
    
    $
    
    
    
    $
    
 AssumedLiabilities /
    
    
    
    
    
    
    
    
    
    
    Balance atBalance at
    
    
    
    
    
    
    Purchase
    
    
    Noncash
    
    
    Cash
    
    
    November 24,Description
    
    August 1, 2003
    
    
    Additions
    
    
    Accounting
    
    
    Reductions
    
    
    Reductions
    
    
    2003Other asset impairment charges
    
    $
    
    
    
    $
    1,262
    
    
    $
    
    
    
    $
    (1,262
    )
    
    $
    
    
    
    $
    Employee severance
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    
    
    
    $
    1,262
    
    
    $
    
    
    
    $
    (1,262
    )
    
    $
    
    
    
    $
    
 AssumedBalance at
    
    
    
    
    
    
    Liabilities /November 25,
    
    
    
    
    
    
    Purchase
    
    
    Noncash
    
    
    Cash
    
    
    Balance atDescription
    
    2003
    
    
    Additions
    
    
    Accounting
    
    
    Reductions
    
    
    Reductions
    
    
    July 31, 2004Goodwill impairment charges
    
    $
    
    
    
    $
    1,835
    
    
    $
    
    
    
    $
    (1,835
    )
    
    $
    
    
    
    $
    Other asset impairment charges
    
    
    
    
    
    
    11,666
    
    
    
    
    
    
    
    (11,666
    )
    
    
    
    
    
    
    Employee severance
    
    
    
    
    
    
    2,506
    
    
    
    11,406
    
    
    
    
    
    
    
    (6,085
    )
    
    
    7,827Other costs
    
    
    
    
    
    
    1,851
    
    
    
    
    
    
    
    
    
    
    
    (1,546
    )
    
    
    305Total
    
    $
    
    
    
    $
    17,858
    
    
    $
    11,406
    
    
    $
    (13,501
    )
    
    $
    (7,631
    )
    
    $
    8,132
 AssumedLiabilities /
    
    
    
    
    
    
    
    
    
    
    Balance atBalance at
    
    
    
    
    
    
    Purchase
    
    
    Noncash
    
    
    Cash
    
    
    December 26,Description
    
    August 1, 2004
    
    
    Additions
    
    
    Accounting
    
    
    Reductions
    
    
    Reductions
    
    
    2004Goodwill impairment charges
    
    $
    
    
    
    $
    4,308
    
    
    $
    
    
    
    $
    (4,308
    )
    
    $
    
    
    
    $
    Other asset impairment charges
    
    
    
    
    
    
    2,661
    
    
    
    
    
    
    
    (2,661
    )
    
    
    
    
    
    
    Employee severance
    
    
    7,827
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,132
    )
    
    
    3,695Other costs
    
    
    305
    
    
    
    1,227
    
    
    
    
    
    
    
    
    
    
    
    (1,227
    )
    
    
    305Total
    
    $
    8,132
    
    
    $
    8,196
    
    
    $
    
    
    
    $
    (6,969
    )
    
    $
    (5,359
    )
    
    $
    4,000
 60




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PINNACLE FOODS GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except where noted in millions) 
 6. Other Expense (Income), net Successor
    
    
    Successor
    
    
    
    Predecessor21 weeks ended
    
    
    36 weeks ended
    
    
    
    16 weeks ended
    
    
    Fiscal yearDecember 31,
    
    
    July 31,
    
    
    
    November 24,
    
    
    ended July 31,2004
    
    
    2004
    
    
    
    2003
    
    
    2003
    
    
    2002Other expense (income),net consists of:Restructuring and intangible asset
impairment charges
    
    $
    3,888
    
    
    $
    16,023
    
    
    
    $
    1,262
    
    
    $
    3,391
    
    
    $
    Merger related costs
    
    
    
    
    
    
    20,620
    
    
    
    
    6,661
    
    
    
    547
    
    
    
    Contract termination
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,000
    
    
    
    Unsuccessful Claussen acquisition
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    660
    
    
    
    4,626Gain on insurance settlement
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (783
    )
    
    
    Amortization of intangibles/other assets
    
    
    1,905
    
    
    
    1,549
    
    
    
    
    79
    
    
    
    812
    
    
    
    615Royalty income and other
    
    
    (113
    )
    
    
    (96
    )
    
    
    
    (46
    )
    
    
    (135
    )
    
    
    (104
    )Total other expense (income), net
    
    $
    5,680
    
    
    $
    38,096
    
    
    
    $
    7,956
    
    
    $
    6,492
    
    
    $
    5,137
 Restructuring and intangible asset impairment charges.As described in Note 5, the Company
incurred costs in connection with the planned shutdown of the Omaha, Nebraska facility, the
discontinuation of the Chefs Choice branded products, and other asset impairment charges. Merger related costs. The Successor and/or the Predecessor incurred the following costs in
connection with the Merger discussed in Note 1: Successor Equity related compensation. In connection with the formation of LLC and the Pinnacle Merger,
certain ownership units of LLC were issued to CDM Investor Group LLC, 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. Additional units were issued in connection with the Aurora Transaction. The interests vest
immediately. The estimated fair value of the interests issued in the Pinnacle and Aurora
Transactions at the dates of their respective grants were $11,000 and $7,400, respectively, and
each has been included in the Consolidated Balance Sheet as an increase in the Successor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 paid in February
2004 to certain key employees of approximately $2,220 were recognized as expense during the 36 week
period ended July 31, 2004. Predecessor Stock options. 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
$4,935 million was recorded in the Consolidated Statement of Operations immediately before the
Merger for the difference between the aggregate fair value of the shares of common stock and the
aggregate exercise price of the stock options. Upon resolution of the working capital and
indemnity escrows, the ultimate amount of Merger consideration may change and, accordingly, an
adjustment of this compensation expense may be required. Change in control. The closing of the transaction represents a change in control under the
Predecessors employment agreements with certain executives. As a result, the Predecessor was
required to pay $1,688 million pursuant to these agreements and recorded a charge for such amount
in the Consolidated Statement of Operations immediately before the Merger. Other miscellaneous Merger costs were incurred in fiscal 2003, totaling $547. 61




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PINNACLE FOODS GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except where noted in millions) 
 Contract termination. As described in Note 14, the Company used an aircraft owned by a company
indirectly owned by the Chairman. During fiscal 2003, this agreement was terminated early at a
one-time cost to the Company of $2,000. Unsuccessful Claussen acquisition. On May 4, 2002, the Company entered into an agreement to
acquire the Claussen brand and related manufacturing assets from Kraft Foods North America. This
agreement was contingent upon obtaining regulatory approval and other normal closing conditions. On October 22, 2002, the U.S. Federal Trade Commission authorized its staff to seek a preliminary
injunction in federal district court to block the proposed acquisition on grounds that it would
violate federal antitrust laws. The purchase agreement included a provision that would require the Company to pay $2,000 to Kraft
Foods North America upon termination of the agreement for certain reasons. Additionally, the
Company had incurred approximately $2,626 in pre-acquisition transaction costs as of July 31, 2002.
These costs ($2,626) and the agreement termination fee ($2,000) that total $4,626 were expensed
and are included on the Other expense (income), net line of the Consolidated Statement of
Operations for the fiscal year ended July 31, 2002. Subsequent to July 31, 2002, the Company
incurred an additional $660 in pre-acquisition transaction costs. These were expensed in the
fiscal year ended July 31, 2003. Gain on insurance settlement. During fiscal 2003, the Company settled at a gain of $783 an
insurance claim related to finished product inventories damaged in a public warehouse in fiscal
2002. 7. Balance Sheet Information Accounts Receivable.Customer accounts receivable are recorded at the invoiced amount and do not
bear interest. The allowance for cash discounts, returns and bad debts is our best estimate of the
amount of uncollectible amounts in our existing accounts receivable. The Company determines the
allowance based on historical discounts taken and write-off experience. The Company reviews its
allowance for doubtful accounts monthly. Account balances are charged off against the allowance
when the Company concludes it is probable the receivable will not be recovered. The Company does
not have any off-balance sheet credit exposure related to our customers. Accounts receivable are
as follows: Successor
    
    
    
    PredecessorDecember 26,
    
    
    July 31,
    
    
    
    July 31,2004
    
    
    2004
    
    
    
    2003Customers
    
    $
    77,846
    
    
    $
    71,916
    
    
    
    $
    33,624Allowances for cash discounts, bad debts and returns
    
    
    (6,320
    )
    
    
    (7,792
    )
    
    
    
    (1,765
    )71,526
    
    
    
    64,124
    
    
    
    
    31,859Other
    
    
    2,839
    
    
    
    2,313
    
    
    
    
    1,465Total
    
    $
    74,365
    
    
    $
    66,437
    
    
    
    $
    33,324
 Following are the changes in the allowance for cash discounts, bad debts, and returns during the 21
weeks ended December 26, 2004, the 36 weeks ended July 31, 2004, the 16 weeks ended November 24,
2003, and the fiscal years ended July 31, 2003 and 2002: Beginning
    
    
    
    
    
    
    Aurora
    
    
    
    
    
    
    EndingBalance
    
    
    Additions
    
    
    Acquisition
    
    
    Deductions
    
    
    BalanceSuccessor21 weeks ended December 26, 2004
    
    $
    7,792
    
    
    $
    13,743
    
    
    
    
    
    
    $
    (15,215
    )
    
    $
    6,32036 weeks ended July 31, 2004
    
    $
    2,200
    
    
    $
    16,802
    
    
    $
    3,883
    
    
    $
    (15,093
    )
    
    $
    7,792Predecessor16 weeks ended November 24, 2003
    
    $
    1,765
    
    
    $
    4,755
    
    
    
    
    
    
    $
    (4,320
    )
    
    $
    2,200Fiscal year ended July 31, 2003
    
    
    1,568
    
    
    
    16,490
    
    
    
    
    
    
    
    (16,293
    )
    
    
    1,765Fiscal year ended July 31, 2002
    
    
    1,874
    
    
    
    14,546
    
    
    
    
    
    
    
    (14,852
    )
    
    
    1,568
 62




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PINNACLE FOODS GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except where noted in millions) 
 Inventories.Inventories are as follows: Successor
    
    
    
    PredecessorDecember 26,
    
    
    July 31,
    
    
    
    July 31,2004
    
    
    2004
    
    
    
    2003Raw materials, containers and supplies
    
    $
    34,489
    
    
    $
    41,988
    
    
    
    $
    21,059Finished product
    
    
    187,645
    
    
    
    152,774
    
    
    
    
    62,641222,134
    
    
    
    194,762
    
    
    
    
    83,700Reserves
    
    
    (16,624
    )
    
    
    (12,424
    )
    
    
    
    (1,109
    )Total
    
    $
    205,510
    
    
    $
    182,338
    
    
    
    $
    82,591
 Reserves represent amounts necessary to adjust the carrying value of its 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. Other Current Assets.Other current assets are as follows: Successor
    
    
    
    PredecessorDecember 26,
    
    
    July 31,
    
    
    
    July 31,2004
    
    
    2004
    
    
    
    2003Prepaid expenses
    
    $
    3,129
    
    
    $
    4,961
    
    
    
    $
    3,310Prepaid income taxes
    
    
    862
    
    
    
    1,710
    
    
    
    
    3,480Total
    
    $
    3,991
    
    
    $
    6,671
    
    
    
    $
    6,790
 Plant Assets.Plant assets are as follows: Successor
    
    
    
    PredecessorDecember 26,
    
    
    July 31,
    
    
    
    July 31,2004
    
    
    2004
    
    
    
    2003Land
    
    $
    12,533
    
    
    $
    12,533
    
    
    
    $
    9,575Building
    
    
    59,374
    
    
    
    59,423
    
    
    
    
    44,916Machinery and equipment
    
    
    180,421
    
    
    
    177,775
    
    
    
    
    137,073Projects in progress
    
    
    8,529
    
    
    
    5,344
    
    
    
    
    2,151260,857
    
    
    
    255,075
    
    
    
    
    193,715Accumulated depreciation
    
    
    (37,117
    )
    
    
    (21,951
    )
    
    
    
    (44,076
    )Total
    
    $
    223,740
    
    
    $
    233,124
    
    
    
    $
    149,639
 Depreciation of the Predecessor was $6,058 during the 16 weeks ended November 24, 2003, $22,136 in
fiscal 2003 and $20,616 in fiscal 2002. Depreciation of the Successor was $15,163 during the 21
weeks ended December 26, 2004, and $23,020 during the 36 weeks ended July 31, 2004. 63




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PINNACLE FOODS GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except where noted in millions) 
 Accounts Payable.Accounts payable are as follows: Successor
    
    
    
    PredecessorDecember 26,
    
    
    July 31,
    
    
    
    July 31,2004
    
    
    2004
    
    
    
    2003Trade payables
    
    $
    87,613
    
    
    $
    68,798
    
    
    
    $
    25,528Book overdrafts
    
    
    308
    
    
    
    16,721
    
    
    
    
    5,380Total
    
    $
    87,921
    
    
    $
    85,519
    
    
    
    $
    30,908
 Book overdrafts represent outstanding checks in excess of funds on deposit. Accrued Liabilities.Accrued liabilities are as follows: Successor
    
    
    
    PredecessorDecember 26,
    
    
    July 31,
    
    
    
    July 31,2004
    
    
    2004
    
    
    
    2003Employee compensation and benefits
    
    $
    17,239
    
    
    $
    25,096
    
    
    
    $
    14,337Excess leverage fee (see Note 14)
    
    
    20,110
    
    
    
    20,110
    
    
    
    
    Pensions
    
    
    3,641
    
    
    
    3,330
    
    
    
    
    1,253Consumer coupons
    
    
    8,764
    
    
    
    6,011
    
    
    
    
    3,656Interest payable
    
    
    7,095
    
    
    
    5,919
    
    
    
    
    367Accrued restructuring charges
    
    
    4,000
    
    
    
    8,132
    
    
    
    
    Other
    
    
    16,886
    
    
    
    16,638
    
    
    
    
    5,732Total
    
    $
    77,735
    
    
    $
    85,236
    
    
    
    $
    25,345
 64




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PINNACLE FOODS GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except where noted in millions) 
 8. Goodwill, Tradenames and Other Assets Goodwill Frozen
    
    
    DryPredecessor
    
    Foods
    
    
    Foods
    
    
    TotalBalance, July 31, 2002
    
    $
    19,615
    
    
    $
    
    
    
    $
    19,615Impairment charge
    
    
    (1,550
    )
    
    
    
    
    
    
    (1,550
    )Other adjustments
    
    
    (83
    )
    
    
    
    
    
    
    (83
    )Balance, July 31, 2003
    
    
    17,982
    
    
    
    
    
    
    
    17,982Other adjustments
    
    
    1,184
    
    
    
    
    
    
    
    1,184Balance, November 24, 2003
    
    $
    19,166
    
    
    $
    
    
    
    $
    19,166SuccessorPinnacle Merger
    
    $
    1,767
    
    
    $
    142,344
    
    
    $
    144,111Aurora Transaction
    
    
    127,368
    
    
    
    150,872
    
    
    
    278,240Impairment
    
    
    (1,835
    )
    
    
    
    
    
    
    (1,835
    )Other adjustments
    
    
    (136
    )
    
    
    661
    
    
    
    525Balance, July 31, 2004
    
    
    127,164
    
    
    
    293,877
    
    
    
    421,041Impairment
    
    
    (4,308
    )
    
    
    
    
    
    
    (4,308
    )Other adjustments
    
    
    2
    
    
    
    128
    
    
    
    130Balance, December 26, 2004
    
    $
    122,858
    
    
    $
    294,005
    
    
    $
    416,863
 The allocation of the Pinnacle Merger purchase price resulted in goodwill being allocated $142,344
to the dry foods segment and $1,767 to the frozen foods segment by the Successor and is not subject
to amortization. The allocation of the Aurora Transaction purchase price resulted in goodwill
being allocated $150,872 to the dry foods segment and $127,368 to the frozen foods segment and is
not subject to amortization. The Company has not generated any new tax deductible goodwill related
to the Pinnacle Merger and the Aurora Transaction. Goodwill resulting from the Predecessors acquisition of VFIs North American Business was not
subject to amortization. In October 2004, the Company decided that it will discontinue producing product under the Chefs
Choice trade name, which is reported under the Frozen Foods segment of the Company. The Company
will sell the remaining inventory through December 31, 2004. In accordance with the provisions of
FAS 142, the Company prepared a discounted cash flow analysis which indicated that the book value
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, the Company assessed
whether there had been an impairment of the Companys long-lived assets in accordance with FAS 144.
The Company concluded that the book value of the assets related to the Chefs Choice products were
higher than their expected future undiscounted cash flows and that an impairment had occurred.
Accordingly, the Company has reported a non-cash impairment charge of $4,801 in 2004, which is
recorded in other expenses on the Consolidated Statement of Operations. The charges included
$1,835 of goodwill impairment, $1,666 of amortizable intangibles (recipes) and $1,300 of fixed
asset write downs. Additionally, in connection with the Companys annual goodwill and indefinite-lived impairment test
in accordance with FAS 142, it was determined that due to lower than expected future sales, the
carrying value of the trade name for the Avalon Bay product, which is reported under the Frozen
Foods segment of the Company, was impaired. The Company has recorded a non-cash impairment charge
of $1,300 in 2004 related to the write down of the trade name value, which is recorded in the other
expense (income), net line item of the Consolidated Statement of Operations. 65




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PINNACLE FOODS GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except where noted in millions) 
 As discussed in Note 2, 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 business unit ($1,633), both of which are in the frozen foods segment. 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 dinners and bagels
reporting 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 FAS 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 frozen foods segment during the
transition year related to the write down to fair value of the trade name of $12, which is recorded
in the other expense (income), net line item of the Consolidated Statement of Operations. Tradenames The change in the book value of Tradename intangible assets from July 31, 2002 to July 31, 2003 was
not significant. The change from July 31, 2003 to July 31, 2004 is as follows: July 31,
    
    
    November 25, 2003
    
    
    March 19, 2004
    
    
    Impairment
    
    
    July 31,2003
    
    
    Merger
    
    
    Aurora Transaction
    
    
    Charge
    
    
    2004Dry foods
    
    $
    51,000
    
    
    $
    16,340
    
    
    $
    462,400
    
    
    $
    
    
    
    $
    529,740Frozen foods
    
    
    37,000
    
    
    
    1,816
    
    
    
    213,300
    
    
    
    (1,300
    )
    
    
    250,816Total
    
    $
    88,000
    
    
    $
    18,156
    
    
    $
    675,700
    
    
    $
    (1,300
    )
    
    $
    780,556
 July 31,
    
    
    Impairment
    
    
    December 26,2004
    
    
    Charge
    
    
    2004Dry foods
    
    $
    529,740
    
    
    $
    
    
    
    $
    529,740Frozen foods
    
    
    250,816
    
    
    
    (12
    )
    
    
    250,804Total
    
    $
    780,556
    
    
    $
    (12
    )
    
    $
    780,544
 Successor- Tradenames of $106,156 resulting from the Successors acquisition (the Pinnacle
Merger) are not subject to amortization. Pinnacle has a perpetual, royalty-free license to use the
Swanson trademark for certain frozen foods (other than broth, stock and soup), included in
tradenames. Tradenames of $675,700 resulting from the Aurora Transaction are not subject to
amortization. Predecessor- Tradenames of $88,000 resulting from the Predecessors acquisition of VFIs North
American Business are not subject to amortization. Pinnacle has a perpetual, royalty-free license
to use the Swanson trademark for certain frozen foods (other than broth, stock and soup), included
in tradenames. Tradenames and recipes acquired in the Kings Hawaiian acquisition of $6,100 were
being amortized over their estimated useful lives of 3-10 years (weighted average 9.4 years).
These Kings Hawaiian intangible assets were determined to be impaired and were written down by
$3,391 in the fourth quarter of fiscal 2003. During the 16 week Predecessor period ended November
24, 2003, changes in circumstances indicated that the carrying value of these intangible assets may not be recoverable.
Upon performing a cash flow analysis, the Kings Hawaiian intangibles were further written down by
$1,262 and such impairment charge was included in the other expense (income), net line on the
Consolidated Statement of Operations and the earnings (loss) before taxes of the frozen foods
segment for the sixteen weeks ended November 24, 2003. As of November 24, 2003, the Kings
Hawaiian intangibles are fully impaired and have no carrying value. 66




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PINNACLE FOODS GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except where noted in millions) 
 Other Assets Successor
    
    
    
    PredecessorDecember 26,
    
    
    July 31,
    
    
    
    July 31,2004
    
    
    2004
    
    
    
    2003Amortizable intangibles, net of accumulated
amortization of $3,454, $1,549 and $1,378, respectively
    
    $
    17,577
    
    
    $
    17,563
    
    
    
    $
    1,517Deferred financing costs, net of accumulated
amortization of $4,647, $2,652 and $3,560, respectively
    
    
    35,940
    
    
    
    35,113
    
    
    
    
    6,907Interest rate swap fair value (Note 13)
    
    
    3,533
    
    
    
    3,270
    
    
    
    
    Other
    
    
    620
    
    
    
    690
    
    
    
    
    Total
    
    $
    57,670
    
    
    $
    56,636
    
    
    
    $
    8,424
 The change in the book value of the amortizable intangible assets, net is as follows: July 31,
    
    
    
    
    
    
    
    
    
    
    December 26,2004
    
    
    Acquisition
    
    
    Amortization
    
    
    2004Dry foods
    
    $
    6,914
    
    
    $
    1,919
    
    
    $
    (981
    )
    
    $
    7,852Frozen foods
    
    
    10,649
    
    
    
    
    
    
    
    (924
    )
    
    
    9,725Total
    
    $
    17,563
    
    
    $
    1,919
    
    
    $
    (1,905
    )
    
    $
    17,577
 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. Estimated amortization expense for each of the next five years is as follows: 2005  $4,813, 2006
- $4,298, 2007  $3,784, 2008  $3,784, 2009  $867, thereafter  $31. Deferred financing costs relate to the Successors senior secured credit facilities and senior
subordinated notes. Amortization was $1,995 for the 21 weeks ended December 26, 2004. 67




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PINNACLE FOODS GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except where noted in millions) 
 9. Debt and Interest Expense Successor
    
    
    
    PredecessorDecember 26,
    
    
    July 31,
    
    
    
    July 31,2004
    
    
    2004
    
    
    
    2003Long-term debtSuccessor- Senior secured credit facility  term loan
    
    $
    542,275
    
    
    $
    535,658
    
    
    
    $
    - 8 1/4% Senior subordinated notes
    
    
    394,000
    
    
    
    394,000
    
    
    
    
    - Plus: unamortized premium on senior
subordinated notes
    
    
    6,452
    
    
    
    6,653
    
    
    
    
    - Capital lease obligations
    
    
    353
    
    
    
    37
    
    
    
    
    Predecessor- Senior secured credit facility  term loan
    
    
    
    
    
    
    
    
    
    
    
    175,000Total Debt
    
    
    943,080
    
    
    
    936,348
    
    
    
    
    175,000Less: current portion of long-term obligations
    
    
    5,574
    
    
    
    5,380
    
    
    
    
    15,000Total long-term debt
    
    $
    937,506
    
    
    $
    930,968
    
    
    
    $
    160,000
 Successor
    
    
    
    Predecessor21 weeksended
    
    
    36 weeks
    
    
    
    16 weeks ended
    
    
    Fiscal Year
    
    
    Fiscal YearDecember 26,
    
    
    ended July 31,
    
    
    
    November 24,
    
    
    Ended July
    
    
    Ended JulyInterest expense
    
    2004
    
    
    2004
    
    
    
    2003
    
    
    31, 2003
    
    
    31, 2002Third party interest expense
    
    $
    26,377
    
    
    $
    32,885
    
    
    
    $
    9,425
    
    
    
    11,688
    
    
    
    14,302Related party interest expense
    
    
    148
    
    
    
    362
    
    
    
    
    
    
    
    
    
    
    
    
    Third party interest rate swap (gains) / losses
    
    
    (265
    )
    
    
    (7,007
    )
    
    
    
    (115
    )
    
    
    (96
    )
    
    
    211$
    26,260
    
    
    $
    26,240
    
    
    
    $
    9,310
    
    
    $
    11,592
    
    
    $
    14,513
 Successor In November 2003, the Successor 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 December 26, 2004 and July 31, 2004. As of July 31, 2004, the amount owed to JP Morgan Chase Bank under the term loan, which is reported
separately in our Consolidated Balance Sheet, was $7.9 million. There was no related party debt as
of December 26, 2004. Our borrowings under the new 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 new 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 new 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 new senior secured credit facilities. The initial
applicable margin with respect to the term loan facility and the revolving credit facility is: 68




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PINNACLE FOODS GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except where noted in millions) 
  
    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 21 weeks ended December 26, 2004, the weighted average interest rate on the
term loan was 4.3853% and on the revolving credit facility was 4.8627%. As of December 26, 2004,
the Eurodollar interest rate on the term loan facility was 4.7599% 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 December 26, 2004
are: $5.5 million in 2005, $5.5 million in 2006, $5.5 million in 2007, $5.5 million in 2008, $5.5
million in 2009 and $909.0 million thereafter. 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 its excess cash flow, as defined. In addition, our new 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. 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
December 26, 2004 and July 31, 2004, we had utilized $15,741 and $16,692, respectively, of the
revolving credit facility for letters of credit. As of December 26, 2004 and July 31, 2004, there
were no outstanding borrowings under the revolving credit facility and had utilized of the
revolving credit facility $15,741 and $16,692 for letters of credit, respectively. Of the $130,000
revolving credit facility available, as of December 26, 2004 and July 31, 2004, we had an unused
balance of $114,259 and $113,308, respectively, available for future borrowings and letters of
credit, of which a maximum of $24,249 and $23,308, respectively, may be used for letters of credit. 69




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PINNACLE FOODS GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except where noted in millions) 
 In November 2003, the Successor issued $200.0 million 8 1/4% senior subordinated notes. On February
20, 2004, the Successor issued an additional $194.0 million of 8 1/4% 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 18 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 will 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. 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. 70




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PINNACLE FOODS GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(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;
    an 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 over the next twelve months;
    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 over the next twelve months) 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 31, 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 December 26, 2004, the Company was in compliance with the amended and added covenants as
listed above. The Company had also notified the trustee under the indenture governing its 8 1/4% senior
subordinated notes due 2013 (the notes) of the Companys failure to comply with the covenant
requiring it to furnish to the note holders on a timely basis, its annual report and audited
financial statements for the fiscal year ended July 31, 2004. Delivery of this notice did not
create an event of default under the indenture or acceleration of the notes. An event of default
will only occur after the Company receives notice of the default from the trustee and fails to
comply with the covenant 60 days after receipt thereof. The Company did not receive a notice of
default from the trustee and subsequently cured the default through the issuance of its annual
report and audited financial statements with the trustee on November 24, 2004. Predecessor The Predecessors senior secured credit facility was paid in full and terminated at the closing of
the Pinnacle Merger described in Note 1. In May 2001, the Predecessor entered into a $245 million Credit Agreement (Senior Secured Credit
Facilities) with Bankers Trust Co., which provided for a term loan of $190 million and a revolving
credit facility of $55 million. The term was to have matured in 2008 and the revolving credit
facility would have expired in 2006. 10. Pension Plans and Retirement Benefits In December 2003, the Financial Accounting Standards Board issued Statement of Financial Accounting
Standards No. 132, Employers Disclosures about Pensions and Other Postretirement Benefits
(revised 2003) (FAS 132R). FAS 132R requires additional annual disclosures about pension plans
and other postretirement benefit plans. As of December 26, 2004, 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. For the 21 weeks ended December 26,
2004 and the fiscal year ended July 31, 2004, the Company was not required to make contributions to
its pension plan. 71




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PINNACLE FOODS GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except where noted in millions) 
 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 cost sharing for retired
employees, excluding the Aurora Retirees, was increased to 100%. The Company uses a measurement date for the pension and postretirement benefits
plan that coincides with its year end. Pension Benefits Successor
    
    
    
    Predecessor21 weeks ended
    
    
    36 weeks ended
    
    
    
    16 weeks ended
    
    
    Fiscal year endedDecember 26,
    
    
    July 31,
    
    
    
    November 24,
    
    
    July 31, 20032004
    
    
    2004
    
    
    
    2003
    
    
    2003Change in Benefit ObligationNet benefit obligation at beginning of the period
    
    $
    55,163
    
    
    $
    53,102
    
    
    
    $
    48,726
    
    
    $
    43,212Service cost
    
    
    644
    
    
    
    1,392
    
    
    
    
    571
    
    
    
    1,859Interest cost
    
    
    1,351
    
    
    
    2,144
    
    
    
    
    990
    
    
    
    2,936Actuarial loss
    
    
    5,495
    
    
    
    300
    
    
    
    
    3,655
    
    
    
    3,257Gross benefits paid
    
    
    (1,416
    )
    
    
    (1,775
    )
    
    
    
    (840
    )
    
    
    (2,538
    )Curtailments
    
    
    (2,067
    )
    
    
    
    
    
    
    
    
    
    
    
    Net benefit obligation at end of the period
    
    
    59,170
    
    
    
    55,163
    
    
    
    
    53,102
    
    
    
    48,726Change in Plan AssetsFair value of plan assets at beginning of the period
    
    
    50,686
    
    
    
    50,499
    
    
    
    
    48,435
    
    
    
    44,378Actual return on plan assets
    
    
    4,855
    
    
    
    1,962
    
    
    
    
    2,904
    
    
    
    6,595Gross benefits paid
    
    
    (1,416
    )
    
    
    (1,775
    )
    
    
    
    (840
    )
    
    
    (2,538
    )Fair value of plan assets at end of the period
    
    
    54,125
    
    
    
    50,686
    
    
    
    
    50,499
    
    
    
    48,435Funded status at end of the year
    
    
    (5,045
    )
    
    
    (4,477
    )
    
    
    
    (2,603
    )
    
    
    (291
    )Unrecognized net actuarial loss (gain)
    
    
    1,404
    
    
    
    1,147
    
    
    
    
    1,008
    
    
    
    (962
    )Net amount recognized at end of the period
    
    $
    (3,641
    )
    
    $
    (3,330
    )
    
    
    $
    (1,595
    )
    
    $
    (1,253
    )Amounts recognized in the Consolidated Balance SheetAccrued benefit cost  current
    
    $
    (3,641
    )
    
    $
    (3,330
    )
    
    
    $
    (1,595
    )
    
    $
    (1,253
    )Net amount recognized at end of the period
    
    $
    (3,641
    )
    
    $
    (3,330
    )
    
    
    $
    (1,595
    )
    
    $
    (1,253
    )Weighted average assumptionsDiscount rate
    
    
    5.75
    %
    
    
    6.00
    %
    
    
    
    6.00
    %
    
    
    6.50
    %Expected return on plan assets
    
    
    8.00
    %
    
    
    8.00
    %
    
    
    
    8.00
    %
    
    
    8.00
    %Rate of compensation increase
    
    
    3.75
    %
    
    
    3.75
    %
    
    
    
    3.75
    %
    
    
    3.75
    %Projected benefit obligation
    
    $
    59,170
    
    
    $
    55,163
    
    
    
    $
    53,102
    
    
    $
    48,726Accumulated benefit obligation
    
    
    55,498
    
    
    
    51,194
    
    
    
    
    48,238
    
    
    
    43,275Fair value of plan assets
    
    
    54,125
    
    
    
    50,686
    
    
    
    
    50,499
    
    
    
    48,435
 72




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PINNACLE FOODS GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except where noted in millions) 
 Other Postretirement Benefits Successor
    
    
    
    Predecessor21 weeks ended
    
    
    36 weeks ended
    
    
    
    16 weeks ended
    
    
    Fiscal year endedDecember 26,
    
    
    July 31,
    
    
    
    November 24,
    
    
    July 31,2004
    
    
    2004
    
    
    
    2003
    
    
    2003Change in Benefit ObligationNet benefit obligation at beginning of the period
    
    $
    1,228
    
    
    $
    1,102
    
    
    
    $
    12,031
    
    
    $
    10,869Service cost
    
    
    4
    
    
    
    42
    
    
    
    
    411
    
    
    
    1,061Interest cost
    
    
    28
    
    
    
    63
    
    
    
    
    245
    
    
    
    844Plan amendments
    
    
    
    
    
    
    
    
    
    
    
    (12,192
    )
    
    
    Actuarial losses and (gains)
    
    
    36
    
    
    
    (352
    )
    
    
    
    1,057
    
    
    
    131Business combinations  Aurora Foods
    
    
    
    
    
    
    806
    
    
    
    
    
    
    
    
    Gross benefits paid
    
    
    (14
    )
    
    
    (433
    )
    
    
    
    (450
    )
    
    
    (874
    )Curtailment
    
    
    (78
    )Net benefit obligation at end of the period
    
    
    1,204
    
    
    
    1,228
    
    
    
    
    1,102
    
    
    
    12,031Change in Plan AssetsFair value of plan assets at beginning of the period
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Employer contributions
    
    
    14
    
    
    
    433
    
    
    
    
    450
    
    
    
    874Gross benefits paid
    
    
    (14
    )
    
    
    (433
    )
    
    
    
    (450
    )
    
    
    (874
    )Fair value of plan assets at end of the period
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Funded status at end of the year
    
    
    (1,204
    )
    
    
    (1,228
    )
    
    
    
    (1,102
    )
    
    
    (12,031
    )Unamortized prior service credit
    
    
    (1,980
    )
    
    
    (3,262
    )
    
    
    
    (39,469
    )
    
    
    (28,243
    )Unrecognized net actuarial loss
    
    
    244
    
    
    
    288
    
    
    
    
    7,977
    
    
    
    7,153Net amount recognized at end of the period
    
    $
    (2,940
    )
    
    $
    (4,202
    )
    
    
    $
    (32,594
    )
    
    $
    (33,121
    )Amounts recognized in the Consolidated Balance SheetAccrued benefit cost
    
    $
    (2,940
    )
    
    $
    (4,202
    )
    
    
    $
    (32,594
    )
    
    $
    (33,121
    )Net amount recognized at end of the period
    
    $
    (2,940
    )
    
    $
    (4,202
    )
    
    
    $
    (32,594
    )
    
    $
    (33,121
    )Weighted average assumptionsDiscount rate
    
    
    5.75
    %
    
    
    6.00
    %
    
    
    
    6.00
    %
    
    
    6.50
    %
 The assumed health care trend
rates used in determining other post-retirement benefits at
December 26, 2004 and July 31, 2004
are 10% decreasing gradually to 5.0% in 2010, and 8.5% decreasing gradually to 4.0% in 2009 at July 31, 2003. 73




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PINNACLE FOODS GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except where noted in millions) 
 The following represents the components of net periodic benefit costs and the sensitivity of
retiree welfare results: Successor
    
    
    
    Predecessor21 weeks ended
    
    
    36 weeks ended
    
    
    
    16 weeks ended
    
    
    Fiscal year endedDecember 26,
    
    
    July 31,
    
    
    
    November 24,
    
    
    July 31,Pension Benefits
    
    2004
    
    
    2004
    
    
    
    2003
    
    
    2003
    
    
    2002Service cost
    
    $
    644
    
    
    $
    1,392
    
    
    
    $
    571
    
    
    $
    1,859
    
    
    $
    1,914Interest cost
    
    
    1,351
    
    
    
    2,144
    
    
    
    
    990
    
    
    
    2,936
    
    
    
    2,809Expected return on assets
    
    
    (1,685
    )
    
    
    (2,716
    )
    
    
    
    (1,219
    )
    
    
    (3,472
    )
    
    
    (3,822
    )Net periodic benefit cost (benefit)
    
    
    310
    
    
    
    820
    
    
    
    
    342
    
    
    
    1,323
    
    
    
    901Purchase price allocation adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,302Total amount recognized
    
    $
    310
    
    
    $
    820
    
    
    
    $
    342
    
    
    $
    1,323
    
    
    $
    2,203Weighted average assumptions:Discount rate
    
    
    5.75
    %
    
    
    6.00
    %
    
    
    
    6.50
    %
    
    
    7.00
    %
    
    
    7.12
    %Expected return on plan assets
    
    
    8.00
    %
    
    
    8.00
    %
    
    
    
    8.00
    %
    
    
    8.00
    %
    
    
    8.00
    %Rate of compensation increase
    
    
    3.75
    %
    
    
    3.75
    %
    
    
    
    3.75
    %
    
    
    3.75
    %
    
    
    3.75
    %
 Successor
    
    
    
    Predecessor21 weeks ended
    
    
    36 weeks ended
    
    
    
    16 weeks ended
    
    
    Fiscal year endedDecember 26,
    
    
    July 31,
    
    
    
    November 24,
    
    
    July 31,Other postretirement benefits
    
    2004
    
    
    2004
    
    
    
    2003
    
    
    2003
    
    
    2002Service cost
    
    $
    4
    
    
    $
    42
    
    
    
    $
    411
    
    
    $
    1,061
    
    
    $
    3,146Interest cost
    
    
    28
    
    
    
    63
    
    
    
    
    245
    
    
    
    844
    
    
    
    2,046Recognized net actuarial loss/(gain)
    
    
    3
    
    
    
    91
    
    
    
    
    232
    
    
    
    692
    
    
    
    494Amortization of:Unrecognized prior service credit
    
    
    (141
    )
    
    
    (355
    )
    
    
    
    (966
    )
    
    
    (3,047
    )
    
    
    (878
    )Curtailment
    
    
    (1,142
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net periodic benefit cost (benefit)
    
    
    (1,248
    )
    
    
    (159
    )
    
    
    
    (78
    )
    
    
    (450
    )
    
    
    4,808Liability assumed in business acquisition
    
    
    
    
    
    
    806
    
    
    
    
    
    
    
    
    
    
    
    
    Purchase price allocation adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    700Total amount recognized
    
    $
    (1,248
    )
    
    $
    647
    
    
    
    $
    (78
    )
    
    $
    (450
    )
    
    $
    5,508Weighted average assumptions:Discount rate
    
    
    6.00
    %
    
    
    6.00
    %
    
    
    
    6.50
    %
    
    
    7.00
    %
    
    
    7.12
    %Expected return on plan assets
    
    NA
    
    NA
    
    
    NA
    
    NA
    
    NARate of compensation increase
    
    NA
    
    NA
    
    
    NA
    
    NA
    
    NA
   74




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##### Table of Contents



PINNACLE FOODS GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except where noted in millions) 
 Successor
    
    
    
    Predecessor21 weeks ended
    
    
    36 weeks ended
    
    
    
    16 weeks ended
    
    
    Fiscal year endedDecember 26,
    
    
    July 31,
    
    
    
    November 24,
    
    
    July 31,2004
    
    
    2004
    
    
    
    2003
    
    
    2003
    
    
    2002Other post retirement benefitsSensitivity of retiree welfare resultsEffect of a one percentage point increase in assumed
health care cost trendon total service and interest cost
components
    
    $
    6
    
    
    $
    6
    
    
    
    
    (a)
    
    
    $
    267
    
    
    $
    913on postretirement benefit obligation
    
    $
    105
    
    
    $
    100
    
    
    
    
    (a)
    
    
    $
    1,262
    
    
    $
    1,590Effect of a one percentage point decrease in assumed
health care cost trendon total service and interest cost
components
    
    $
    (5
    )
    
    $
    (5
    )
    
    
    
    (a)
    
    
    $
    (77
    )
    
    $
    (719
    )on postretirement benefit obligation
    
    $
    (88
    )
    
    $
    (84
    )
    
    
    
    (a)
    
    
    $
    (381
    )
    
    $
    (1,318
    )
   (a)
    
    Medical cost sharing rates increased to 100% at March 23, 2004 for all eligible
retirees, excluding the Aurora Retirees. Therefore, as of November 24, 2003, the
information regarding sensitivity to a 1% change in trend rates was not applicable. Plan Assets The Companys pension plan weighted-average asset allocations at December 26, 2004, July 31, 2004,
November 24, 2003 and July 31, 2003 by asset category are as follows: Successor
    
    
    Predecessor21 weeks ended
    
    
    36 weeks ended
    
    
    16 weeks ended
    
    
    Fiscal year endedDecember 26,
    
    
    July 31,
    
    
    November 24,
    
    
    July 31,2004
    
    
    2004
    
    
    2003
    
    
    2003Asset categoryEquity securities
    
    
    62
    %

    
    
    61
    %
    
    
    
    61
    %

    
    
    50
    %Debt securities
    
    
    33
    %

    
    
    35
    %
    
    
    
    34
    %

    
    
    35
    %Cash
    
    
    5
    %

    
    
    4
    %
    
    
    
    5
    %

    
    
    15
    %Total
    
    
    100
    %

    
    
    100
    %
    
    
    
    100
    %

    
    
    100
    %
 The Companys investment policy is to invest approximately 60% of plan assets in equity
securities, 35% in fixed income securities, and 5% in cash or cash equivalents. Periodically, the
plan assets are rebalanced to maintain these allocation percentages and the investment policy is
reviewed. Within each investment category, assets are allocated to various investment styles.
Professional managers manage all assets and a consultant is engaged to assist in evaluating these
activities. The expected long-term rate of return on assets was determined by assessing the rates
of return on each targeted asset class, return premiums generated by portfolio management and by
comparison of rates utilized by other companies. 75




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##### Table of Contents



PINNACLE FOODS GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except where noted in millions) 
 Cash Flows Contributions. The Company expects to contribute $0 to its pension plan and $69 to its other
postretirement benefit plan during year ending December 25, 2005. Estimated Future Benefit Payments.The following benefit payments, which reflect expected future
service, as appropriate, are expected to be paid: Pension
    
    
    OtherBenefits
    
    
    Benefits2005
    
    $
    3,063
    
    
    $
    692006
    
    
    2,873
    
    
    
    632007
    
    
    2,685
    
    
    
    592008
    
    
    2,584
    
    
    
    522009
    
    
    2,507
    
    
    
    492010-2014
    
    
    12,296
    
    
    
    269
 Savings Plans. Employees participate in a 401(k) plan. Pinnacle matches 50% of employee
contributions up to five percent of compensation for union employees after one year of continuous
service and six percent of compensation for salaried employees. Employer contributions made by the
Company relating to this plan were $781 for the 21 weeks ended December 26, 2004, $1,024 for the 36
weeks ended July 31, 2004, $291 for 16 weeks ended November 24, 2003, $867 in 2003 and $1,274 in
2002. In June 2002, the matching contribution was eliminated for certain union employees. 76




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##### Table of Contents



PINNACLE FOODS GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except where noted in millions) 
 11. Taxes on Earnings The components of the provision (benefit) for income taxes are as follows: PROVISION FOR INCOME TAXES Successor
    
    
    
    Predecessor21 weeks ended
    
    
    36 weeks ended
    
    
    
    16 weeks ended
    
    
    Fiscal yearDecember 26,
    
    
    July 31,
    
    
    
    November 24,
    
    
    ended July 31,2004
    
    
    2004
    
    
    
    2003
    
    
    2003
    
    
    2002CurrentFederal
    
    $
    56
    
    
    $
    (743
    )
    
    
    $
    (589
    )
    
    $
    (454
    )
    
    $
    744State
    
    
    152
    
    
    
    294
    
    
    
    
    69
    
    
    
    393
    
    
    
    316Non-U.S.
    
    
    (181
    )
    
    
    234
    
    
    
    
    
    
    
    
    (185
    )
    
    
    12027
    
    
    
    (215
    )
    
    
    
    (520
    )
    
    
    (246
    )
    
    
    1,180DeferredFederal
    
    
    8,014
    
    
    
    (2,323
    )
    
    
    
    (946
    )
    
    
    5,168
    
    
    
    3,034State
    
    
    1,384
    
    
    
    (467
    )
    
    
    
    (40
    )
    
    
    545
    
    
    
    (18
    )Non-U.S.
    
    
    
    
    
    
    (152
    )
    
    
    
    
    
    
    
    49
    
    
    
    (6
    )9,398
    
    
    
    (2,942
    )
    
    
    
    (986
    )
    
    
    5,762
    
    
    
    3,010Provision (benefit) for income taxes
    
    $
    9,425
    
    
    $
    (3,157
    )
    
    
    $
    (1,506
    )
    
    $
    5,516
    
    
    $
    4,190Earnings (loss) before income taxesUnited States
    
    
    (15,418
    )
    
    
    (87,014
    )
    
    
    
    (4,411
    )
    
    
    14,428
    
    
    
    15,997Non-U.S.
    
    
    137
    
    
    
    (56
    )
    
    
    
    (169
    )
    
    
    (464
    )
    
    
    115Total
    
    $
    (15,281
    )
    
    $
    (87,070
    )
    
    
    $
    (4,580
    )
    
    $
    13,964
    
    
    $
    16,112
 The effective tax rate differs from the federal statutory income tax rate as explained below: EFFECTIVE INCOME TAX RATE Federal statutory income tax rate
    
    
    35.0
    %
    
    
    35.0
    %
    
    
    
    35.0
    %
    
    
    35.0
    %
    
    
    35.0
    %State income taxes (net of federal benefit)
    
    
    -6.5
    %
    
    
    0.1
    %
    
    
    
    -0.4
    %
    
    
    4.8
    %
    
    
    1.3
    %Tax effect resulting from international activities
    
    
    1.3
    %
    
    
    -0.1
    %
    
    
    
    -0.4
    %
    
    
    -0.2
    %
    
    
    0.9
    %Change in deferred tax valuation allowance
    
    
    -86.4
    %
    
    
    -24.4
    %
    
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    -12.1
    %Non-deductible expenses
    
    
    -5.1
    %
    
    
    -7.0
    %
    
    
    
    -0.2
    %
    
    
    0.6
    %
    
    
    0.9
    %Other
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    
    -1.1
    %
    
    
    -0.7
    %
    
    
    0.0
    %Effective income tax rate
    
    
    -61.7
    %
    
    
    3.6
    %
    
    
    
    32.9
    %
    
    
    39.5
    %
    
    
    26.0
    %
 77




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##### Table of Contents



PINNACLE FOODS GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except where noted in millions) 
 The components of deferred tax assets and liabilities are as follows: DEFERRED TAX ASSETS AND LIABILITIES
    
    Successor
    
    
    Successor
    
    
    
    PredecessorDecember 26, 2004
    
    
    July 31, 2004
    
    
    
    July 31, 2003AssetsPostretirement benefits
    
    $
    1,243
    
    
    $
    1,760
    
    
    
    $
    13,234Accrued liabilities
    
    
    27,523
    
    
    
    29,721
    
    
    
    
    5,283Net operating loss carryforwards
    
    
    271,483
    
    
    
    249,159
    
    
    
    
    1,560Federal & state tax credits
    
    
    3,083
    
    
    
    2,989
    
    
    
    
    Inventories
    
    
    8,763
    
    
    
    7,295
    
    
    
    
    1,354Benefits and compensation
    
    
    2,233
    
    
    
    2,283
    
    
    
    
    1,206Alternative minimum tax
    
    
    2,023
    
    
    
    2,023
    
    
    
    
    2,473Restructuring accruals
    
    
    665
    
    
    
    1,127
    
    
    
    
    Goodwill and other intangible assets
    
    
    37,523
    
    
    
    38,613
    
    
    
    
    Other
    
    
    5,371
    
    
    
    6,188
    
    
    
    
    209359,910
    
    
    
    341,158
    
    
    
    
    25,319LiabilitiesPlant assets
    
    
    (21,527
    )
    
    
    (21,421
    )
    
    
    
    (16,081
    )Intangible assets
    
    
    (212,406
    )
    
    
    (203,006
    )
    
    
    
    (2,936
    )(233,933
    )
    
    
    (224,427
    )
    
    
    
    (19,017
    )125,977
    
    
    
    116,731
    
    
    
    
    6,302Deferred tax asset valuation allowance
    
    
    (338,361
    )
    
    
    (319,711
    )
    
    
    
    (2,251
    )Net deferred tax asset (liability)
    
    $
    (212,384
    )
    
    $
    (202,980
    )
    
    
    $
    4,051AMOUNTS RECOGNIZED IN THE CONSOLIDATED BALANCE SHEETDeferred income taxes  Current asset
    
    $
    22
    
    
    $
    26
    
    
    
    $
    7,243Deferred income taxes  Noncurrent (liability)
    
    
    (212,406
    )
    
    
    (203,006
    )
    
    
    
    (3,192
    )Net deferred tax asset (liability)
    
    $
    (212,384
    )
    
    $
    (202,980
    )
    
    
    $
    4,051
 As described in Note 1, PFHC became a wholly owned subsidiary of Crunch Holding Corp on
November 25, 2003. As described in Note 1 and Note 3, PFHC was merged with and into Aurora on
March 19, 2004 with Aurora surviving the Merger. The surviving company was renamed Pinnacle Foods
Group Inc. (PFGI or the Company). SFAS 109 requires that a valuation allowance be established when it is more likely than not that
all or a portion of deferred tax assets will not be realized. A review of all available positive
and negative evidence needs to be considered, including a companys performance, the market
environment in which the company operates, the utilization of past tax credits, length of carryback
and carryforward periods, existing contracts or sales backlog that will result in future profits. SFAS 109 further states that where there is negative evidence such as cumulative losses in recent
years, concluding that a valuation allowance is not required is problematical. Therefore,
cumulative losses weigh heavily in the overall assessment. As a result of the Aurora transaction,
management determined that it was no longer more likely than not that the Company would be able to
realize the deferred tax assets of both the Predecessor and Aurora. This conclusion was reached due
to cumulative losses recognized by Aurora in preceding years. Management intends to maintain a
valuation allowance until sufficient positive evidence exists to support its reversal. In accordance with SFAS 109 deferred assets and liabilities have been recognized for the
differences between the assigned values and the tax bases of the assets and liabilities recognized
in a purchase business combination. As of the March 19, 2004 business combination date, the Company
established a deferred tax liability of $195.3 million, net of valuation allowance of $292.0 million.
Therefore, in accordance with SFAS No. 109, $292.0 million
would be allocated as a reduction in goodwill upon subsequent recognition of the tax benefits
associated with the deferred tax assets to which the valuation allowance applies. The deferred
tax liability relates to the book and tax basis differences for indefinite lived intangible assets
consisting of primarily tradenames and goodwill. 78




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PINNACLE FOODS GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except where noted in millions) 
 The federal valuation
allowance at December 26, 2004 is $284.5 million, and the state valuation
allowance is $53.9 million. The Company may record a tax benefit to its provision in subsequent
periods for the recognition of tax benefits for which deferred tax valuation reserve had been
recorded subsequent to the aforementioned business combination. Approximately $3.9 million of the
valuation allowance recorded subsequent to the business combination will not provide a future tax
provision benefit but will be recorded as a reduction in goodwill. PFHC, the Predecessor, had a
valuation allowance related to state net operating loss carryforwards and the realization of state
deferred tax assets of $2.3 and $1.8 million as of July 31, 2003 and July 31, 2002 respectively. The Company is a loss corporation as defined in Internal Revenue Code Section 382. As of July 31,
2004 the Company had a federal Net Operating Loss Carryover of $652.3 million of which $560 million
existed as of the business combination date and is subject to the Section 382 limitation. Section
382 places an annual limitation on a Companys ability to utilize loss carryovers to reduce future
taxable income. It is expected that the Companys annual 382 limitation will approximate $13 15
million, which may increase or decrease pending resolution of certain tax matters. This annual
limitation can affect the Companys ability to utilize other tax attributes such as tax credit
carryforwards. The Companys federal net operating losses have expiration periods from 2019 through 2024. The
Company also has state tax net operation loss carryforwards which are also limited and vary in
amount by jurisdiction. State net operating losses are approximately
$530 million with expiration
periods through 2024. 12. Stock-Based Compensation Successor 2004 Stock Option Plan.CHC has adopted a stock option plan (the 2004 Plan) providing for the
issuance of up to 29.6 million shares of CHCs common stock. Pursuant to the option plan, certain
officers, employees, managers, directors and other persons will be eligible to receive grants of
incentive and nonqualified stock options, as permitted by applicable law. Except as otherwise
provided by the plan administrator, two-thirds (2/3) of the shares of common stock subject to each
option shall time vest annually over a three-year period from the effective date of the option
grant. The remaining one-third (1/3) of the shares of common stock subject to each option shall
vest on the seventh anniversary of the effective date of the option grant unless otherwise
determined by the plan administrator. The following table summarizes the stock option transactions under the 2004 Plan: WeightedNumber of
    
    
    AverageShares
    
    
    Exercise PriceGranted
    
    
    17,920
    
    
    $
    1.00Exercised
    
    
    
    
    
    
    Forteitures
    
    
    
    
    
    
    Outstanding  July 31, 2004
    
    
    17,920
    
    
    $
    1.00Granted
    
    
    933
    
    
    $
    1.00Exercised
    
    
    
    
    
    
    Forteitures
    
    
    (1,898
    )
    
    
    1.00Outstanding  December 26, 2004
    
    
    16,955
    
    
    $
    1.00
 79




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PINNACLE FOODS GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except where noted in millions) 
 The following table summarizes information for options currently outstanding under the 2004
Plan at December 26, 2004: Options Outstanding
    
    
    Exercisable OptionsWeighted
    
    
    Weighted
    
    
    
    
    
    
    WeightedAverage
    
    
    Average
    
    
    
    
    
    
    AverageRange of Prices
    
    Shares
    
    
    Remaining Life
    
    
    Exercise Price
    
    
    Shares
    
    
    Exercise Price$1.00
    
    
    16,955
    
    
    
    8.89
    
    
    $
    1.00
    
    
    
    1,959
    
    
    $
    1.00
 The fair value of each option grant was estimated on the date of the grant using the
Bi-nominal Lattice option-pricing model with the following weighted average assumptions used for
grants in fiscal 2004 and during the Transition Year: 2004Risk-free interest rate
    
    
    4.74
    %Expected life of option
    
    4 yearsExpected volatility of Pinnacle stock
    
    
    31.0
    %Expected dividend yield on Pinnacle stock
    
    
    0
    %
 Volatility was based on an average 208 week volatilities of a group of publicly traded food
companies. The weighted-average fair value of options granted during fiscal 2004 and the twenty-one weeks
ended December 26, 2004 21 weeks
    
    
    36 weeksended
    
    
    endedDecember 26,
    
    
    July 31,2004
    
    
    2004Fair value of each option granted
    
    $
    0.28
    
    
    $
    0.31Number of options granted
    
    
    933
    
    
    
    17,920Total fair value of all options granted
    
    $
    261
    
    
    $
    5,555
 In accordance with SFAS 123, the weighted-average fair value of stock options granted is required
to be based on a theoretical statistical model in accordance with assumptions noted above. In
actuality, because employee stock options do not trade on a secondary exchange, employees receive
no benefit and derive no value from holding stock options under these plans without an increase in
the market price of the Companys stock. 2004 Employee Stock Purchase Plan.CHC has adopted an employee stock purchase plan providing for
the issuance of up to 15 million shares of CHCs common stock. Pursuant to the plan, certain
officers, employees, managers, directors and other persons will be eligible to purchase shares at
the fair market value of such shares on the date of determination. As of December 26, 2004, no
shares have been purchased by employees Predecessor 2001 Stock Option Plan.PFHCs 2001 stock option plan (the 2001 Plan), pursuant to which stock
options were granted to certain officers and key employees, was terminated in connection with the
Pinnacle Transaction. All outstanding options vested and the holders of the options granted under
the 2001 plan received $4,321 in the aggregate. PFHCs 2001 stock purchase plan was also
terminated in connection with the Pinnacle Transaction. Under the 2001 Plan, stock options were granted to certain officers and key employees. The Plan
had authorized the issuance of up to 8.4 million shares of Pinnacle common stock pursuant to the
exercise of stock options. Options were granted at a price not less than the fair value of the
shares on the date of grant. 80




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PINNACLE FOODS GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except where noted in millions) 
 The following table summarizes the stock option transactions under the Pinnacle incentive plan: WeightedAverageShares
    
    
    Exercise PriceOutstanding, August 1, 2002
    
    
    4,358
    
    
    $
    1.00Granted
    
    
    902
    
    
    
    1.00Exercised
    
    
    (71
    )
    
    
    1.00Forteitures
    
    
    (848
    )
    
    
    1.00Outstanding, July 31, 2003
    
    
    4,341
    
    
    $
    1.00Granted
    
    
    
    
    
    
    1.00Exercised
    
    
    (4,321
    )
    
    
    1.00Forteitures
    
    
    (20
    )
    
    
    1.00Outstanding, July 31, 2004
    
    
    
    
    
    $
    1.00
 The fair value of each option grant was estimated on the date of the grant using the
Black-Scholes option-pricing model with the following weighted average assumptions used for grants
in 2003: 2003Risk-free interest rate
    
    
    4.37
    %Expected life of option
    
    10 yearsExpected volatility of Pinnacle stock
    
    
    26.5
    %Expected dividend yield on Pinnacle stock
    
    
    0
    %
 Volatility was based on an average 400 week volatilities of a group of publicly traded food
companies. The weighted-average fair value of options granted during 2003 is as follows: 2003Fair value of each option granted
    
    $
    0.48Number of options granted
    
    
    902Total fair value of all options granted
    
    $
    433
 In accordance with SFAS 123, the weighted-average fair value of stock options granted is
required to be based on a theoretical statistical model in accordance with assumptions noted above.
In actuality, because employee stock options do not trade on a secondary exchange, employees
receive no benefit and derive no value from holding stock options under these plans without an
increase in the market price of the Companys stock. Sale of the Companys stock is restricted. Except under certain circumstances, the Company has the
option to purchase at fair value all or any portion of the shares of common stock acquired by
exercise of an option and/or options held by the employee in the event of termination or change in
control. Accordingly, these options are accounted for as variable options. At the time an event
occurs which would allow the Company to exercise its option, compensation expense would be recorded
for the difference between fair value and the exercise price. 13. Financial Instruments We may utilize derivative financial instruments to enhance our ability to manage risks, including
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. 81




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PINNACLE FOODS GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except where noted in millions) 
 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 will
recognize the amounts that we pay or receive on hedges related to debt as an adjustment to interest
expense. The Company has entered into four interest rate swap agreements with a counterparty to effectively
change 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
terminating 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 December 26, 2004 and July 31, 2004, the fair value of
the interest rate swaps was a gain of $3,757 and $3,492, respectively. Of the amount at December
26, 2004, $224 is recorded in Other current assets and $3,533 is recorded in Other assets, net in
the Consolidated Balance Sheet. At July 31, 2004, $222 was recorded in Other current assets and
$3,270 was recorded in Other assets, net in the Consolidated Balance Sheet. The increase in the
fair value of $265 was recognized in interest expense, net in the Consolidated Statement of
Operations for the 21 weeks ended December 26, 2004. In August and September 2004, the Company entered into natural gas swap transactions with a
counterparty 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 $4.695 to $6.93 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 21 weeks ended December 26, 2004, the Company realized a gain of $243, which is recorded as
a reduction to cost of products sold. Additionally, as of December 26, 2004, the fair value of the
remaining natural gas 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. 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 December 26, 2004 was $11,579, which approximates fair value. As of
December 26, 2004, we also utilized letters of credit in connection with the purchase of raw
materials in the amount of $4,163, which approximates fair value. We may also utilize foreign currency exchange contracts, including swap and forward contracts, to
hedge existing foreign currency exposures. We recognize foreign exchange gains and losses on
derivative financial instruments, and we offset foreign exchange gains and losses on the underlying
exposures. At December 26, 2004 and July 31, 2004, we had no outstanding foreign exchange
contracts in place. 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 December 26, 2004, was approximately its carrying
value. 82




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PINNACLE FOODS GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except where noted in millions) 
 14. 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s Fleming Bankruptcy Claim 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s Fleming Bankruptcy Claim 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. Employee Litigation  Indemnification of US Cold Storage 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. 83




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PINNACLE FOODS GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(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. R2 Appeal in Aurora Bankruptcy Prior to its bankruptcy filing, the Company 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 the Companys bankruptcy by filing an adversary proceeding and by
objecting to confirmation. The bankruptcy court rejected the lenders argument and confirmed the
Company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. State of Illinois v. City of St. Elmo and Aurora Foods Inc. 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. 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 and the first 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. Underweight Products In July 2004, it came to our attention that certain products produced in one of the 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 in the period ended July 31, 2004. 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 may 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. The Company will
continue to vigorously defend its actions to date since taking control of the Aurora Foods Inc.
company. While the Company believes it has taken appropriate remedial steps, it is possible that
fines and penalties may be imposed. 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. 84




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PINNACLE FOODS GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except where noted in millions) 
 Other Matters Bankruptcy filing of Winn-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 December 26, 2004 was $1,275 and
was substantially collected prior to Winn-Dixies Chapter 11 filing. At the time of its Chapter 11
filing, amounts due from Winn-Dixie were approximately $750, which relates to sales from 2005. It
is too early to predict what amount, if any, will be uncollectible from Winn-Dixie and the Company
plans to provide an adequate provision in the first quarter of 2005. Operating Leases Certain offices, distribution facilities and equipment are under operating leases expiring on
various dates through 2012. Total rental expense charged to operations of the Predecessor was $952
in the 16 weeks ended November 24, 2003, $3,359 in fiscal 2003 and $4,449 in fiscal 2002. Total
rental expense charged to operations of the Successor was $1,497 in the 21 weeks ended December 26,
2004 and $2,539 in the 36 weeks ended July 31, 2004. The minimum future rental commitments under
non-cancelable leases payable over the remaining lives of these leases approximate $5,227 in 2005,
$4,798 in 2006, $4,735 in 2007, $4,707 in 2008, $4,790 in 2009 and 2010 through 2012, totaling
$4,871. The single largest operating leases are for the corporate offices in Cherry Hill and
Mountain Lakes, New Jersey. Under the terms of this lease agreement, if the lease is terminated
early, Pinnacle would be required to accelerate rental payments of approximately $13.8 million due
during the remainder of the lease. 15. Related Party Transactions Management fees Predecessor- The Predecessor incurred monitoring and oversight fees of $367 in the 16 weeks ended
November 24, 2003, $1,136 in 2003 and $1,090 in 2002, which were paid to an affiliate of HMTF, its
then largest stockholder. The monitoring and oversight agreement with the affiliate of HMTF was
terminated at the time of the Pinnacle Merger. Successor- 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 21 weeks ended December 26, 2004 and the 36 weeks
ended July 31, 2004 were $417 and $681, respectively. In addition, the Company reimbursed JWC for
out-of-pocket expenses totaling $33 during the 36 weeks ended July 31, 2004. In connection with
the Pinnacle Merger, the Successor 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. As part of the amendment to
the Senior Credit facility discussed in Note 9, the payment of the
management fees have been suspended during the amendment period. 85




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PINNACLE FOODS GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(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 for
the Successor included $39 in the 21 weeks ended
December 26, 2004 for the new office and $91 in the 36 weeks ended July 31, 2004 of which $36 was for the old office and
$55 for the new office. Rent expense of the Predecessor was $71, $283, and $228 in the 16 weeks
ended November 24, 2003, fiscal 2003 and fiscal 2002, respectively. The Predecessor also used an aircraft owned by a company indirectly owned by the Chairman. In
connection with the use of this aircraft, the Predecessor paid net operating expenses of $1,180 in
2002 and $376 in the first quarter of fiscal 2003. In the second quarter of 2003, the agreement to
use and pay for the plane was terminated early at a cost to the Predecessor of $2 million, which
was included in the Consolidated Statement of Operations. Beginning November 25, 2003, the
Successor resumed using the aircraft and in connection with the usage paid net operating expenses
of $1,146 in the 21 weeks ended December 26, 2004 and $1,543 in the 36 weeks ended July 31, 2004.
Also, during the November 2003 financing road show, the Company paid an additional $84 for usage
of the aircraft; such amount is included in deferred financing costs in Other Assets in the
Consolidated Balance Sheet as of July 31, 2004. Debt and Interest Expense See Note 9. For the 21 weeks ended December 26, 2004 and the 36 weeks ended July 31, 2004, fees and interest
expense recognized in the Consolidated Statement of Operations for the debt to the related party,
JPMorgan Chase Bank, amounted to $148 and $362, respectively. 16. Segment and Geographic Area Information 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), prepared seafood
(Van de Kamps, Mrs. Pauls, Avalon Bay), 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 thirty-six weeks ended July 31, 2004 includes
$39,489 ($9,879 frozen foods and $29,610 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, Pinnacle and Aurora merger related costs, the costs of unsuccessful business
acquisitions and the contract termination discussed in Note 6. 86




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PINNACLE FOODS GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except where noted in millions) 
 Successor
    
    
    
    Predecessor21 weeks ended
    
    
    36 weeks ended
    
    
    
    16 weeks ended
    
    
    Fiscal yearDecember 26,
    
    
    July 31,
    
    
    
    November 24,
    
    
    ended July 31,2004
    
    
    2004
    
    
    
    2003
    
    
    2003
    
    
    2002SEGMENT INFORMATIONNet salesFrozen foods
    
    $
    271,165
    
    
    $
    319,936
    
    
    
    $
    118,992
    
    
    $
    342,115
    
    
    $
    339,595Dry foods
    
    
    240,025
    
    
    
    254,416
    
    
    
    
    62,387
    
    
    
    232,367
    
    
    
    234,861Total
    
    $
    511,190
    
    
    $
    574,352
    
    
    
    $
    181,379
    
    
    $
    574,482
    
    
    $
    574,456Earnings (loss) before interest and taxesFrozen foods
    
    $
    (22,649
    )
    
    $
    (38,070
    )
    
    
    $
    6,313
    
    
    $
    (6,880
    )
    
    $
    8,784Dry foods
    
    
    38,480
    
    
    
    6,765
    
    
    
    
    9,706
    
    
    
    48,068
    
    
    
    36,518Unallocated corporate expenses
    
    
    (4,972
    )
    
    
    (29,845
    )
    
    
    
    (11,432
    )
    
    
    (16,108
    )
    
    
    (15,484
    )Total
    
    $
    10,859
    
    
    $
    (61,150
    )
    
    
    $
    4,587
    
    
    $
    25,080
    
    
    $
    29,818Depreciation and amortizationFrozen foods
    
    $
    10,743
    
    
    $
    16,414
    
    
    
    $
    4,179
    
    
    $
    14,027
    
    
    $
    13,156Dry foods
    
    
    6,325
    
    
    
    8,156
    
    
    
    
    1,957
    
    
    
    8,921
    
    
    
    8,075Total
    
    $
    17,068
    
    
    $
    24,570
    
    
    
    $
    6,136
    
    
    $
    22,948
    
    
    $
    21,231Capital expendituresFrozen foods
    
    $
    5,340
    
    
    $
    6,533
    
    
    
    $
    913
    
    
    $
    4,456
    
    
    $
    13,729Dry foods
    
    
    3,090
    
    
    
    3,293
    
    
    
    
    598
    
    
    
    4,331
    
    
    
    5,723Total
    
    $
    8,430
    
    
    $
    9,826
    
    
    
    $
    1,511
    
    
    $
    8,787
    
    
    $
    19,452GEOGRAPHIC INFORMATIONNet salesUnited States
    
    $
    492,888
    
    
    $
    552,655
    
    
    
    $
    171,915
    
    
    $
    548,951
    
    
    $
    552,676Canada
    
    
    18,302
    
    
    
    21,697
    
    
    
    
    9,464
    
    
    
    25,531
    
    
    
    21,780Total
    
    $
    511,190
    
    
    $
    574,352
    
    
    
    $
    181,379
    
    
    $
    574,482
    
    
    $
    574,456
 Successor
    
    
    
    PredecessorDecember 26,
    
    
    July 31,
    
    
    
    July 31,2004
    
    
    2004
    
    
    
    2003SEGMENT INFORMATION:Total AssetsFrozen foods
    
    $
    671,860
    
    
    $
    692,710
    
    
    
    $
    239,270Dry foods
    
    
    1,092,196
    
    
    
    1,090,190
    
    
    
    
    216,128Corporate
    
    
    884
    
    
    
    1,710
    
    
    
    
    10,723Total
    
    $
    1,764,940
    
    
    $
    1,784,610
    
    
    
    $
    466,121GEOGRAPHIC INFORMATIONLong-lived assetsUnited States
    
    $
    223,719
    
    
    $
    233,103
    
    
    
    $
    149,615Canada
    
    
    21
    
    
    
    21
    
    
    
    
    24Total
    
    $
    223,740
    
    
    $
    233,124
    
    
    
    $
    149,639
 Net sales to Wal-Mart Stores, Inc. were 18% in the 21 weeks ended December 26, 2004, 18% in fiscal
2004, 17% in fiscal 2003 and 14% in fiscal 2002 of consolidated net sales. No other single
customer represents over 10% of consolidated net sales in any year. 87




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PINNACLE FOODS GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except where noted in millions) 
 17. Quarterly Results (unaudited) Summarized quarterly financial data is presented below. The second quarter of 2004 includes
predecessor operations through November 24, 2003 and successor operations for November 25, 2003
through January 31, 2004. Due to the change in fiscal end year to the last Sunday in December, only the results for the
quarter ended October 31, 2004 were reported in the transition period. Quarter EndedOct-04Net sales
    
    $
    328,834Cost of products sold
    
    
    262,991Net earnings
    
    
    (5,250
    )
 Quarter EndedOct-03
    
    
    Jan-04
    
    
    Apr-04
    
    
    Jul-04
    
    
    Fiscal 2004Net sales
    
    $
    139,137
    
    
    $
    143,176
    
    
    $
    210,626
    
    
    $
    262,792
    
    
    $
    755,731Cost of products sold
    
    
    103,909
    
    
    
    121,697
    
    
    
    185,838
    
    
    
    225,756
    
    
    
    637,200Net earnings
    
    
    3,531
    
    
    
    (27,517
    )
    
    
    (36,101
    )
    
    
    (26,900
    )
    
    
    (86,987
    )
 Quarter EndedOct-02
    
    
    Jan-03
    
    
    Apr-03
    
    
    Jul-03
    
    
    Fiscal 2003Net sales
    
    $
    130,240
    
    
    $
    145,315
    
    
    $
    145,684
    
    
    $
    153,243
    
    
    $
    574,482Cost of products sold
    
    
    104,553
    
    
    
    111,095
    
    
    
    111,083
    
    
    
    120,796
    
    
    
    447,527Net earnings
    
    
    1,065
    
    
    
    730
    
    
    
    6,001
    
    
    
    652
    
    
    
    8,448
 Net earnings in fiscal 2004 and 2003 included the following items included in the Other
expense (income) line on the Consolidated Statements of Operations, which are discussed in Note 6. Cost of products sold  discussed in Note 1 and 3.  
    The second quarter of fiscal 2004 includes charges related to the
write-up of inventory to fair value at the time of the Pinnacle
Merger. These charges were $14,314.
    The third quarter of fiscal 2004 includes charges related to the
write-up of inventory to fair value at the time of the Pinnacle
Merger and the Aurora Transaction. These charges were $11,990 and
$11,290, respectively.
    The fourth quarter of fiscal 2004 includes charges related to the
write up of inventory to fair value at the time of the Aurora
Transaction. These charges were $1,895. Other expense (income), net  discussed in Note 6.  
    The first quarter of fiscal 2003 includes pre-tax expenses related to the unsuccessful Claussen acquisition of $660.
    The second quarter of fiscal 2003 includes pre-tax expenses related to the contract termination of $2,000 and pre-tax
credits related to the gain on insurance settlement of $518. These items net to a pre-tax expense of $1,482.
    The third quarter of fiscal 2003 includes pre-tax credits related to the gain on insurance settlement of $259. 88




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PINNACLE FOODS GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except where noted in millions) 
  
    The fourth quarter of fiscal 2003 includes pre-tax expenses related to the impairment of intangibles of $4,941 and
merger costs of $547, and pre-tax credits related to the gain on insurance settlement of $6. These items net to a
pre-tax expense of $5,482.
    The second quarter of fiscal 2004 includes $19,223 of merger related expenses. This merger related expenses were made
up of $11,000 for equity related compensation expense, $4,935 for predecessor stock option expense, $1,600 for
retention expense, and $1,688 for change of control/waiver expense. In addition, a non-cash impairment loss of $1,292
related to the Kings Hawaiian intangibles was recorded during the quarter.
    The third quarter of fiscal 2004 includes $8,020 of merger related expenses, consisting of $7,400 of non-cash equity
related compensation expense and $620 of retention expense. In addition, a restructuring and impairment charge of
$10,025 related to the announced closure of our Omaha frozen food facility was recorded in the third quarter.
    The fourth quarter of fiscal 2004 includes $1,732 related to the announced closure of our Omaha frozen food facility.
In addition, $4,801 of non-cash impairment charges were recorded related to the Chefs Choice product, which included
$1,835 in goodwill, $1,666 in recipes, and $1,300 in fixed assets. An additional $1,300 was recorded as a non-cash
impairment charge related to the Avalon Bay trade name. 18. Guarantor and Nonguarantor Financial 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 8 1/4% 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 December 26, 2004 and July 31, 2004 for
the Successor and July 31, 2003 for the Predecessor and (b) the related statements of
operations and cash flows for the 21 weeks ended December 26, 2004 and the 36 weeks
ended July 31, 2004 for the Successor and the sixteen weeks ended November 24, 2003 and
the fiscal years ended July 31, 2003 and 2002 for the Predecessor.(2)
    Elimination entries necessary to consolidate the Predecessor and Successor,
with their respective guarantor subsidiaries and nonguarantor subsidiary. Investments in subsidiaries are accounted for by the parent using the equity method of accounting.
The guarantor subsidiaries and nonguarantor subsidiary are presented on a combined basis. The
principal elimination entries eliminate investments in subsidiaries and intercompany balances and
transactions. 89




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PINNACLE FOODS GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(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
    )
    
    
    Trade names
    
    
    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
 90




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PINNACLE FOODS GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except where noted in millions) 
 Pinnacle Foods Group Inc.
Consolidated Balance Sheet  Successor
July 31, 2004 PINNACLEFOODS
    
    
    GUARANTOR
    
    
    NONGUARANTOR
    
    
    
    
    
    
    CONSOLIDATEDGROUP INC.
    
    
    SUBSIDIARIES
    
    
    SUBSIDIARY
    
    
    ELIMINATIONS
    
    
    TOTALCurrent assets:Cash and cash equivalents
    
    $
    510
    
    
    $
    36,816
    
    
    $
    455
    
    
    $
    
    
    
    $
    37,781Accounts receivable, net
    
    
    39,365
    
    
    
    24,651
    
    
    
    2,421
    
    
    
    
    
    
    
    66,437Intercompany accounts receivable
    
    
    
    
    
    
    4,165
    
    
    
    
    
    
    
    (4,165
    )
    
    
    Inventories, net
    
    
    69,223
    
    
    
    111,077
    
    
    
    2,038
    
    
    
    
    
    
    
    182,338Other current assets
    
    
    1,399
    
    
    
    5,233
    
    
    
    39
    
    
    
    
    
    
    
    6,671Deferred income taxes
    
    
    
    
    
    
    
    
    
    
    26
    
    
    
    
    
    
    
    26Total current assets
    
    
    110,497
    
    
    
    181,942
    
    
    
    4,979
    
    
    
    (4,165
    )
    
    
    293,253Plant assets, net
    
    
    102,989
    
    
    
    130,114
    
    
    
    21
    
    
    
    
    
    
    
    233,124Investment in subsidiaries
    
    
    266,603
    
    
    
    787
    
    
    
    
    
    
    
    (267,390
    )
    
    
    Intercompany note receivable
    
    
    185,042
    
    
    
    
    
    
    
    
    
    
    
    (185,042
    )
    
    
    Trade names
    
    
    672,860
    
    
    
    107,696
    
    
    
    
    
    
    
    
    
    
    
    780,556Other assets, net
    
    
    56,468
    
    
    
    168
    
    
    
    
    
    
    
    
    
    
    
    56,636Goodwill
    
    
    276,930
    
    
    
    144,111
    
    
    
    
    
    
    
    
    
    
    
    421,041Total assets
    
    $
    1,671,389
    
    
    $
    564,818
    
    
    $
    5,000
    
    
    $
    (456,597
    )
    
    $
    1,784,610Current liabilities:Current portion of long-term obligations
    
    $
    5,380
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    5,380Current portion of long-term obligations  related party
    
    
    80
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    80Accounts payable
    
    
    38,317
    
    
    
    45,942
    
    
    
    1,260
    
    
    
    
    
    
    
    85,519Intercompany accounts payable
    
    
    3,423
    
    
    
    
    
    
    
    742
    
    
    
    (4,165
    )
    
    
    Accrued trade marketing expense
    
    
    28,134
    
    
    
    13,370
    
    
    
    1,224
    
    
    
    
    
    
    
    42,728Accrued liabilities
    
    
    49,453
    
    
    
    35,572
    
    
    
    211
    
    
    
    
    
    
    
    85,236Accrued income taxes
    
    
    
    
    
    
    1,345
    
    
    
    231
    
    
    
    
    
    
    
    1,576Total current liabilities
    
    
    124,787
    
    
    
    96,229
    
    
    
    3,668
    
    
    
    (4,165
    )
    
    
    220,519Long-term debt
    
    
    930,968
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    930,968Long-term debt  related party
    
    
    7,900
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,900Intercompany note payable
    
    
    
    
    
    
    184,497
    
    
    
    545
    
    
    
    (185,042
    )
    
    
    Postretirement benefits
    
    
    815
    
    
    
    3,387
    
    
    
    
    
    
    
    
    
    
    
    4,202Deferred income taxes
    
    
    188,904
    
    
    
    14,102
    
    
    
    
    
    
    
    
    
    
    
    203,006Total liabilities
    
    
    1,253,374
    
    
    
    298,215
    
    
    
    4,213
    
    
    
    (189,207
    )
    
    
    1,366,595Commitments 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)
    
    
    (10
    )
    
    
    (10
    )
    
    
    (10
    )
    
    
    20
    
    
    
    (10
    )Carryover of Predecessor basis of net assets
    
    
    (17,495
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (17,495
    )Retained earnings (accumulated deficit)
    
    
    (83,913
    )
    
    
    (21,097
    )
    
    
    (138
    )
    
    
    21,235
    
    
    
    (83,913
    )Total shareholders equity
    
    
    418,015
    
    
    
    266,603
    
    
    
    787
    
    
    
    (267,390
    )
    
    
    418,015Total liabilities and shareholders equity
    
    $
    1,671,389
    
    
    $
    564,818
    
    
    $
    5,000
    
    
    $
    (456,597
    )
    
    $
    1,784,610
 91




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PINNACLE FOODS GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except where noted in millions) 
 Pinnacle Foods Holding Corporation
Consolidated Balance Sheet  Predecessor
July 31, 2003 PINNACLE FOODSHOLDING
    
    
    GUARANTOR
    
    
    NONGUARANTOR
    
    
    
    
    
    
    CONSOLIDATEDCORPORATION
    
    
    SUBSIDIARIES
    
    
    SUBSIDIARY
    
    
    ELIMINATIONS
    
    
    TOTALCurrent assets:Cash and cash equivalents
    
    $
    
    
    
    $
    71,535
    
    
    $
    593
    
    
    
    
    
    
    $
    72,128Accounts receivable, net
    
    
    
    
    
    
    31,651
    
    
    
    1,673
    
    
    
    
    
    
    
    33,324Intercompany accounts receivable
    
    
    
    
    
    
    1,685
    
    
    
    
    
    
    
    (1,685
    )
    
    
    Inventories, net
    
    
    
    
    
    
    81,516
    
    
    
    1,075
    
    
    
    
    
    
    
    82,591Other current assets
    
    
    
    
    
    
    6,037
    
    
    
    753
    
    
    
    
    
    
    
    6,790Deferred income taxes
    
    
    
    
    
    
    7,243
    
    
    
    
    
    
    
    
    
    
    
    7,243Total current assets
    
    
    
    
    
    
    199,667
    
    
    
    4,094
    
    
    
    (1,685
    )
    
    
    202,076Plant assets, net
    
    
    
    
    
    
    149,615
    
    
    
    24
    
    
    
    
    
    
    
    149,639Investment in subsidiaries
    
    
    178,487
    
    
    
    1,056
    
    
    
    
    
    
    
    (179,543
    )
    
    
    Intercompany note receivable
    
    
    
    
    
    
    545
    
    
    
    
    
    
    
    (545
    )
    
    
    Trade names
    
    
    
    
    
    
    88,000
    
    
    
    
    
    
    
    
    
    
    
    88,000Other assets, net
    
    
    
    
    
    
    8,424
    
    
    
    
    
    
    
    
    
    
    
    8,424Goodwill
    
    
    
    
    
    
    17,647
    
    
    
    335
    
    
    
    
    
    
    
    17,982Total assets
    
    $
    178,487
    
    
    $
    464,954
    
    
    $
    4,453
    
    
    $
    (181,773
    )
    
    $
    466,121Current liabilitiesCurrent portion of long-term obligations
    
    $
    
    
    
    $
    15,000
    
    
    
    
    
    
    
    
    
    
    $
    15,000Accounts payable
    
    
    
    
    
    
    30,504
    
    
    
    404
    
    
    
    
    
    
    
    30,908Intercompany accounts payable
    
    
    
    
    
    
    
    
    
    
    1,685
    
    
    
    (1,685
    )
    
    
    Accrued trade marketing expense
    
    
    
    
    
    
    19,147
    
    
    
    420
    
    
    
    
    
    
    
    19,567Accrued liabilities
    
    
    
    
    
    
    25,149
    
    
    
    196
    
    
    
    
    
    
    
    25,345Accrued income taxes
    
    
    
    
    
    
    501
    
    
    
    
    
    
    
    
    
    
    
    501Total current liabilities
    
    
    
    
    
    
    90,301
    
    
    
    2,705
    
    
    
    (1,685
    )
    
    
    91,321Long-term debt
    
    
    
    
    
    
    160,000
    
    
    
    
    
    
    
    
    
    
    
    160,000Intercompany note payable
    
    
    
    
    
    
    
    
    
    
    545
    
    
    
    (545
    )
    
    
    Postretirement benefits
    
    
    
    
    
    
    33,121
    
    
    
    
    
    
    
    
    
    
    
    33,121Deferred income taxes
    
    
    
    
    
    
    3,192
    
    
    
    
    
    
    
    
    
    
    
    3,192Total liabilities
    
    
    
    
    
    
    286,614
    
    
    
    3,250
    
    
    
    (2,230
    )
    
    
    287,634Commitments and contingenciesShareholders equityPinnacle Common Stock, $.01 par value;
    
    
    1,626
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,626Additional paid-in-capital
    
    
    164,322
    
    
    
    165,948
    
    
    
    1,465
    
    
    
    (167,413
    )
    
    
    164,322Accumulated other comprehensive income
    
    
    147
    
    
    
    
    
    
    
    147
    
    
    
    (147
    )
    
    
    147Retained earnings (accumulated deficit)
    
    
    12,392
    
    
    
    12,392
    
    
    
    (409
    )
    
    
    (11,983
    )
    
    
    12,392Total shareholders equity
    
    
    178,487
    
    
    
    178,340
    
    
    
    1,203
    
    
    
    (179,543
    )
    
    
    178,487Total liabilities and shareholders equity
    
    $
    178,487
    
    
    $
    464,954
    
    
    $
    4,453
    
    
    $
    (181,773
    )
    
    $
    466,121
 92




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##### Table of Contents



PINNACLE FOODS GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except where noted in millions) 
 Pinnacle Foods Group Inc.
Consolidated Statement of Operations  Successor
For the 21 weeks ended December 26, 2004 PINNACLEFOODS
    
    
    GUARANTOR
    
    
    NONGUARANTOR
    
    
    
    
    
    
    CONSOLIDATEDGROUP INC.
    
    
    SUBSIDIARIES
    
    
    SUBSIDIARY
    
    
    ELIMINATIONS
    
    
    TOTALNet sales
    
    $
    278,815
    
    
    $
    223,801
    
    
    $
    18,297
    
    
    $
    (9,723
    )
    
    $
    511,190Costs and expensesCost of products sold
    
    
    222,588
    
    
    
    191,928
    
    
    
    14,832
    
    
    
    (9,268
    )
    
    
    420,080Marketing and selling expenses
    
    
    33,643
    
    
    
    17,569
    
    
    
    2,376
    
    
    
    
    
    
    
    53,588Administrative expenses
    
    
    8,897
    
    
    
    5,826
    
    
    
    493
    
    
    
    
    
    
    
    15,216Research and development expenses
    
    
    866
    
    
    
    593
    
    
    
    
    
    
    
    
    
    
    
    1,459Intercompany royalties
    
    
    
    
    
    
    
    
    
    
    144
    
    
    
    (144
    )Intercompany technical service fees
    
    
    
    
    
    
    
    
    
    
    311
    
    
    
    (311
    )Goodwill impairment charge
    
    
    2,675
    
    
    
    1,633
    
    
    
    
    
    
    
    
    
    
    
    4,308Other expense (income), net
    
    
    1,840
    
    
    
    3,840
    
    
    
    
    
    
    
    
    
    
    
    5,680Equity in loss (earnings) of investees
    
    
    3,277
    
    
    
    (338
    )
    
    
    
    
    
    
    (2,939
    )Total costs and expenses
    
    
    273,786
    
    
    
    221,051
    
    
    
    18,156
    
    
    
    (12,662
    )
    
    
    500,331(Loss) earnings before interest and taxes
    
    
    5,029
    
    
    
    2,750
    
    
    
    141
    
    
    
    2,939
    
    
    
    10,859Intercompany interest (income) expense
    
    
    (5,064
    )
    
    
    5,054
    
    
    
    10Interest expense
    
    
    26,250
    
    
    
    10
    
    
    
    
    
    
    
    
    
    
    
    26,260Interest income
    
    
    
    
    
    
    114
    
    
    
    6
    
    
    
    
    
    
    
    120(Loss) earnings before income taxes
    
    
    (16,157
    )
    
    
    (2,200
    )
    
    
    137
    
    
    
    2,939
    
    
    
    (15,281
    )Provision (benefit) for income taxes
    
    
    8,549
    
    
    
    1,077
    
    
    
    (201
    )
    
    
    
    
    
    
    9,425Net (loss) earnings
    
    $
    (24,706
    )
    
    $
    (3,277
    )
    
    $
    338
    
    
    $
    2,939
    
    
    $
    (24,706
    )
 93




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##### Table of Contents



PINNACLE FOODS GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except where noted in millions) 
 Pinnacle Foods Group Inc.
Consolidated Statement of Operations  Successor
For the 36 weeks ended July 31, 2004 PINNACLEFOODS
    
    
    GUARANTOR
    
    
    NONGUARANTOR
    
    
    
    
    
    
    CONSOLIDATEDGROUP INC.
    
    
    SUBSIDIARIES
    
    
    SUBSIDIARY
    
    
    ELIMINATIONS
    
    
    TOTALNet sales
    
    $
    183,099
    
    
    $
    379,223
    
    
    $
    21,697
    
    
    $
    (9,667
    )
    
    $
    574,352Costs and expensesCost of products sold
    
    
    166,237
    
    
    
    328,175
    
    
    
    17,664
    
    
    
    (9,109
    )
    
    
    502,967Marketing and selling expenses
    
    
    16,450
    
    
    
    38,680
    
    
    
    2,780
    
    
    
    
    
    
    
    57,910Administrative expenses
    
    
    8,347
    
    
    
    23,168
    
    
    
    743
    
    
    
    
    
    
    
    32,258Research and development expenses
    
    
    552
    
    
    
    1,884
    
    
    
    
    
    
    
    
    
    
    
    2,436Intercompany royalties
    
    
    
    
    
    
    
    
    
    
    207
    
    
    
    (207
    )
    
    
    Intercompany technical service fees
    
    
    
    
    
    
    
    
    
    
    351
    
    
    
    (351
    )
    
    
    Goodwill impairment charge
    
    
    1,835
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,835Other expense (income), net
    
    
    24,910
    
    
    
    13,186
    
    
    
    
    
    
    
    
    
    
    
    38,096Equity in (earnings) loss of investees
    
    
    21,097
    
    
    
    138
    
    
    
    
    
    
    
    (21,235
    )
    
    
    Total costs and expenses
    
    
    239,428
    
    
    
    405,231
    
    
    
    21,745
    
    
    
    (30,902
    )
    
    
    635,502Earnings (loss) before interest and taxes
    
    
    (56,329
    )
    
    
    (26,008
    )
    
    
    (48
    )
    
    
    21,235
    
    
    
    (61,150
    )Intercompany interest (income) expense
    
    
    (5,329
    )
    
    
    5,311
    
    
    
    18
    
    
    
    
    
    
    
    Interest expense
    
    
    26,240
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    26,240Interest income
    
    
    88
    
    
    
    222
    
    
    
    10
    
    
    
    
    
    
    
    320Earnings (loss) before income taxes
    
    
    (77,152
    )
    
    
    (31,097
    )
    
    
    (56
    )
    
    
    21,235
    
    
    
    (87,070
    )Provision (benefit) for income taxes
    
    
    6,761
    
    
    
    (10,000
    )
    
    
    82
    
    
    
    
    
    
    
    (3,157
    )Net earnings (loss)
    
    $
    (83,913
    )
    
    $
    (21,097
    )
    
    $
    (138
    )
    
    $
    21,235
    
    
    $
    (83,913
    )
 94




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##### Table of Contents



PINNACLE FOODS GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except where noted in millions) 
 Pinnacle Foods Group Inc.
Consolidated Statement of Operations  Predecessor
For the 16 weeks ended November 24, 2003 PINNACLEFOODS
    
    
    GUARANTOR
    
    
    NONGUARANTOR
    
    
    
    
    
    
    CONSOLIDATEDGROUP INC.
    
    
    SUBSIDIARIES
    
    
    SUBSIDIARY
    
    
    ELIMINATIONS
    
    
    TOTALNet Sales
    
    $
    
    
    
    $
    176,819
    
    
    $
    9,464
    
    
    $
    (4,904
    )
    
    $
    181,379Costs and expensesCost of products sold
    
    
    
    
    
    
    130,954
    
    
    
    7,862
    
    
    
    (4,583
    )
    
    
    134,233Marketing and selling expenses
    
    
    
    
    
    
    23,283
    
    
    
    1,052
    
    
    
    
    
    
    
    24,335Administrative expenses
    
    
    
    
    
    
    9,176
    
    
    
    278
    
    
    
    
    
    
    
    9,454Research and development expenses
    
    
    
    
    
    
    814
    
    
    
    
    
    
    
    
    
    
    
    814Intercompany royalties
    
    
    
    
    
    
    
    
    
    
    97
    
    
    
    (97
    )
    
    
    Intercompany technical service fees
    
    
    
    
    
    
    
    
    
    
    224
    
    
    
    (224
    )
    
    
    Other expense (income), net
    
    
    
    
    
    
    7,838
    
    
    
    118
    
    
    
    
    
    
    
    7,956Equity in (earnings) loss of investees
    
    
    3,074
    
    
    
    160
    
    
    
    
    
    
    
    (3,234
    )
    
    
    Total costs and expenses
    
    
    3,074
    
    
    
    172,225
    
    
    
    9,631
    
    
    
    (8,138
    )
    
    
    176,792Earnings (loss) before interest and taxes
    
    
    (3,074
    )
    
    
    4,594
    
    
    
    (167
    )
    
    
    3,234
    
    
    
    4,587Intercompany interest (income) expense
    
    
    
    
    
    
    (8
    )
    
    
    8
    
    
    
    
    
    
    
    Interest expense
    
    
    
    
    
    
    9,310
    
    
    
    
    
    
    
    
    
    
    
    9,310Interest income
    
    
    
    
    
    
    137
    
    
    
    6
    
    
    
    
    
    
    
    143Earnings (loss) before income taxes
    
    
    (3,074
    )
    
    
    (4,571
    )
    
    
    (169
    )
    
    
    3,234
    
    
    
    (4,580
    )Provision (benefit) for income taxes
    
    
    
    
    
    
    (1,497
    )
    
    
    (9
    )
    
    
    
    
    
    
    (1,506
    )Net earnings (loss)
    
    $
    (3,074
    )
    
    $
    (3,074
    )
    
    $
    (160
    )
    
    $
    3,234
    
    
    $
    (3,074
    )
 95




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##### Table of Contents



PINNACLE FOODS GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except where noted in millions) 
 Pinnacle Foods Holding Corporation
Consolidated Statement of Operations  Predecessor
For the year ended July 31, 2003 PINNACLE FOODSHOLDING
    
    
    GUARANTOR
    
    
    NONGUARANTOR
    
    
    
    
    
    
    CONSOLIDATEDCORPORATION
    
    
    SUBSIDIARIES
    
    
    SUBSIDIARY
    
    
    ELIMINATIONS
    
    
    TOTALNet Sales
    
    $
    
    
    
    $
    561,386
    
    
    $
    25,531
    
    
    $
    (12,435
    )
    
    $
    574,482Costs and expensesCost of products sold
    
    
    
    
    
    
    436,843
    
    
    
    22,170
    
    
    
    (11,486
    )
    
    
    447,527Marketing and selling expenses
    
    
    
    
    
    
    55,936
    
    
    
    1,979
    
    
    
    
    
    
    
    57,915Administrative expenses
    
    
    
    
    
    
    31,993
    
    
    
    885
    
    
    
    
    
    
    
    32,878Research and development expenses
    
    
    
    
    
    
    3,040
    
    
    
    
    
    
    
    
    
    
    
    3,040Intercompany royalties
    
    
    
    
    
    
    
    
    
    
    255
    
    
    
    (255
    )
    
    
    Intercompany technical service fees
    
    
    
    
    
    
    
    
    
    
    694
    
    
    
    (694
    )
    
    
    Goodwill impairment charge
    
    
    
    
    
    
    1,550
    
    
    
    
    
    
    
    
    
    
    
    1,550Other expense (income), net
    
    
    
    
    
    
    6,492
    
    
    
    
    
    
    
    
    
    
    
    6,492Equity in (earnings) loss of investees
    
    
    (8,448
    )
    
    
    304
    
    
    
    
    
    
    
    8,144
    
    
    
    Total costs and expenses
    
    
    (8,448
    )
    
    
    536,158
    
    
    
    25,983
    
    
    
    (4,291
    )
    
    
    549,402Earnings (loss) before interest and taxes
    
    
    8,448
    
    
    
    25,228
    
    
    
    (452
    )
    
    
    (8,144
    )
    
    
    25,080Intercompany interest (income) expense
    
    
    
    
    
    
    (30
    )
    
    
    30
    
    
    
    
    
    
    
    Interest expense
    
    
    
    
    
    
    11,592
    
    
    
    
    
    
    
    
    
    
    
    11,592Interest income
    
    
    
    
    
    
    459
    
    
    
    17
    
    
    
    
    
    
    
    476Earnings (loss) before income taxes
    
    
    8,448
    
    
    
    14,125
    
    
    
    (465
    )
    
    
    (8,144
    )
    
    
    13,964Provision (benefit) for income taxes
    
    
    
    
    
    
    5,677
    
    
    
    (161
    )
    
    
    
    
    
    
    5,516Net earnings (loss)
    
    $
    8,448
    
    
    $
    8,448
    
    
    $
    (304
    )
    
    $
    (8,144
    )
    
    $
    8,448
 96




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##### Table of Contents



PINNACLE FOODS GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except where noted in millions) 
 Pinnacle Foods Holding Corporation
Consolidated Statement of Operations  Predecessor
For the year ended July 31, 2002 PINNACLE FOODSHOLDING
    
    
    GUARANTOR
    
    
    NONGUARANTOR
    
    
    
    
    
    
    CONSOLIDATEDCORPORATION
    
    
    SUBSIDIARIES
    
    
    SUBSIDIARY
    
    
    ELIMINATIONS
    
    
    TOTALNet Sales
    
    $
    
    
    
    $
    561,882
    
    
    $
    21,780
    
    
    $
    (9,206
    )
    
    $
    574,456Costs and expensesCost of products sold
    
    
    
    
    
    
    442,727
    
    
    
    17,834
    
    
    
    (8,416
    )
    
    
    452,145Marketing and selling expenses
    
    
    
    
    
    
    49,095
    
    
    
    2,363
    
    
    
    
    
    
    
    51,458Administrative expenses
    
    
    
    
    
    
    31,725
    
    
    
    621
    
    
    
    
    
    
    
    32,346Research and development expenses
    
    
    
    
    
    
    3,552
    
    
    
    
    
    
    
    
    
    
    
    3,552Intercompany royalties
    
    
    
    
    
    
    
    
    
    
    287
    
    
    
    (287
    )
    
    
    Intercompany technical service fees
    
    
    
    
    
    
    
    
    
    
    503
    
    
    
    (503
    )
    
    
    Other expense (income), net
    
    
    
    
    
    
    5,137
    
    
    
    
    
    
    
    
    
    
    
    5,137Equity in (earnings) loss of investees
    
    
    (11,922
    )
    
    
    
    
    
    
    
    
    
    
    11,922
    
    
    
    Total costs and expenses
    
    
    (11,922
    )
    
    
    532,236
    
    
    
    21,608
    
    
    
    2,716
    
    
    
    544,638Earnings (loss) before interest and taxes
    
    
    11,922
    
    
    
    29,646
    
    
    
    172
    
    
    
    (11,922
    )
    
    
    29,818Intercompany interest (income) expense
    
    
    
    
    
    
    (73
    )
    
    
    73
    
    
    
    
    
    
    
    Interest expense
    
    
    
    
    
    
    14,508
    
    
    
    5
    
    
    
    
    
    
    
    14,513Interest income
    
    
    
    
    
    
    786
    
    
    
    21
    
    
    
    
    
    
    
    807Earnings (loss) before income taxes
    
    
    11,922
    
    
    
    15,997
    
    
    
    115
    
    
    
    (11,922
    )
    
    
    16,112Provision for income taxes
    
    
    
    
    
    
    4,075
    
    
    
    115
    
    
    
    
    
    
    
    4,190Net earnings (loss)
    
    $
    11,922
    
    
    $
    11,922
    
    
    $
    
    
    
    $
    (11,922
    )
    
    $
    11,922
 97




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##### Table of Contents



PINNACLE FOODS GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except where noted in millions) 
 Pinnacle Foods Group Inc.
Consolidated Statement of Cash Flows  Successor
For the 21 weeks ended December 26, 2004 PINNACLEFOODS
    
    
    GUARANTOR
    
    
    NONGUARANTOR
    
    
    
    
    
    
    CONSOLIDATEDGROUP INC.
    
    
    SUBSIDIARIES
    
    
    SUBSIDIARY
    
    
    ELIMINATIONS
    
    
    TOTALCash flows from operating activitiesNet (loss) earnings from operations
    
    $
    (24,706
    )
    
    $
    (3,277
    )
    
    $
    338
    
    
    $
    2,939
    
    
    $
    (24,706
    )Non-cash charges (credits) to net earningsDepreciation and amortization
    
    
    7,413
    
    
    
    9,652
    
    
    
    3
    
    
    
    
    
    
    
    17,068Restructuring and impairment charge
    
    
    2,687
    
    
    
    4,282
    
    
    
    
    
    
    
    
    
    
    
    6,969Amortization of debt acquisition costs
    
    
    1,995
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,995Amortization of bond premium
    
    
    (201
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (201
    )Change in value of financial instruments
    
    
    (360
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (360
    )Equity in loss (earnings) of investees
    
    
    3,277
    
    
    
    (338
    )
    
    
    
    
    
    
    (2,939
    )Postretirement healthcare benefits
    
    
    11
    
    
    
    (1,273
    )
    
    
    
    
    
    
    
    
    
    
    (1,262
    )Pension expense
    
    
    
    
    
    
    310
    
    
    
    
    
    
    
    
    
    
    
    310Deferred income taxes
    
    
    8,450
    
    
    
    948
    
    
    
    
    
    
    
    
    
    
    
    9,398Changes in working capitalAccounts receivable
    
    
    (1,123
    )
    
    
    (4,657
    )
    
    
    (1,954
    )
    
    
    
    
    
    
    (7,734
    )Intercompany accounts receivable
    
    
    (590
    )
    
    
    (50
    )
    
    
    640Inventories
    
    
    (1,220
    )
    
    
    (20,712
    )
    
    
    (1,078
    )
    
    
    
    
    
    
    (23,010
    )Accrued trade marketing expense
    
    
    2,730
    
    
    
    (557
    )
    
    
    1,015
    
    
    
    
    
    
    
    3,188Accounts payable
    
    
    13,498
    
    
    
    4,641
    
    
    
    543
    
    
    
    
    
    
    
    18,682Other current assets and liabilities
    
    
    (682
    )
    
    
    (1,837
    )
    
    
    (306
    )
    
    
    
    
    
    
    (2,825
    )Net cash provided by (used in) operating activities
    
    
    11,179
    
    
    
    (12,868
    )
    
    
    (799
    )
    
    
    
    
    
    
    (2,488
    )Cash flows from investing activitiesCapital expenditures
    
    
    (2,758
    )
    
    
    (5,315
    )
    
    
    
    
    
    
    
    
    
    
    (8,073
    )Pinnacle merger consideration
    
    
    
    
    
    
    (130
    )
    
    
    
    
    
    
    
    
    
    
    (130
    )Aurora merger costs
    
    
    (2,333
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,333
    )Acquisition of license
    
    
    (1,919
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,919
    )Net cash used in investing activities
    
    
    (7,010
    )
    
    
    (5,445
    )
    
    
    
    
    
    
    
    
    
    
    (12,455
    )Cash flows from financing activitiesChange in bank overdrafts
    
    
    
    
    
    
    (16,721
    )
    
    
    308
    
    
    
    
    
    
    
    (16,413
    )Repayment of capital lease obligations
    
    
    (4
    )
    
    
    (37
    )
    
    
    
    
    
    
    
    
    
    
    (41
    )Successors debt acquisition costs
    
    
    (2,822
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,822
    )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
    
    
    (1,363
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,363
    )Net cash (used in) provided by financing activities
    
    
    (4,189
    )
    
    
    (16,758
    )
    
    
    308
    
    
    
    
    
    
    
    (20,639
    )Effect of exchange rate changes on cash
    
    
    
    
    
    
    
    
    
    
    36
    
    
    
    
    
    
    
    36Net change in cash and cash equivalents
    
    
    (20
    )
    
    
    (35,071
    )
    
    
    (455
    )
    
    
    
    
    
    
    (35,546
    )Cash and cash equivalents  beginning of period
    
    
    510
    
    
    
    36,816
    
    
    
    455
    
    
    
    
    
    
    
    37,781Cash and cash equivalents  end of period
    
    $
    490
    
    
    $
    1,745
    
    
    $
    
    
    
    $
    
    
    
    $
    2,235Supplemental disclosures of cash flow information:Interest paid
    
    $
    23,547
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    23,547Interest received
    
    
    
    
    
    
    114
    
    
    
    6
    
    
    
    
    
    
    
    120Income taxes refunded (paid)
    
    
    
    
    
    
    627
    
    
    
    
    
    
    
    
    
    
    
    627Non-cash investing activity:Capital leases
    
    
    
    
    
    
    (357
    )
    
    
    
    
    
    
    
    
    
    
    (357
    )
 98




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##### Table of Contents



PINNACLE FOODS GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except where noted in millions) 
 Pinnacle Foods Group Inc.
Consolidated Statement of Cash Flows  Successor
For the 36 weeks ended July 31, 2004 PINNACLEFOODS
    
    
    GUARANTOR
    
    
    NONGUARANTOR
    
    
    
    
    
    
    CONSOLIDATEDGROUP INC.
    
    
    SUBSIDIARIES
    
    
    SUBSIDIARY
    
    
    ELIMINATIONS
    
    
    TOTALCash flows from operating activitiesNet earnings (loss) from operations
    
    $
    (83,913
    )
    
    $
    (21,097
    )
    
    $
    (138
    )
    
    $
    21,235
    
    
    $
    (83,913
    )Non-cash charges (credits) to net earningsDepreciation and amortization
    
    
    6,471
    
    
    
    18,094
    
    
    
    5
    
    
    
    
    
    
    
    24,570Restructuring and impairment charge
    
    
    6,101
    
    
    
    10,211
    
    
    
    
    
    
    
    
    
    
    
    16,312Amortization of debt acquisition costs
    
    
    2,652
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,652Amortization of bond premium
    
    
    (323
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (323
    )Change in value of financial instruments
    
    
    (3,492
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,492
    )Equity related compensation charge
    
    
    18,400
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18,400Equity in (earnings) loss of investees
    
    
    21,097
    
    
    
    138
    
    
    
    
    
    
    
    (21,235
    )
    
    
    Postretirement healthcare benefits
    
    
    9
    
    
    
    (602
    )
    
    
    
    
    
    
    
    
    
    
    (593
    )Pension expense
    
    
    
    
    
    
    820
    
    
    
    
    
    
    
    
    
    
    
    820Deferred income taxes
    
    
    6,761
    
    
    
    (9,551
    )
    
    
    (152
    )
    
    
    
    
    
    
    (2,942
    )Changes in working capitalAccounts receivable
    
    
    10,958
    
    
    
    17,978
    
    
    
    123
    
    
    
    
    
    
    
    29,059Intercompany accounts receivable
    
    
    51,860
    
    
    
    (51,617
    )
    
    
    (243
    )
    
    
    
    
    
    
    Inventories
    
    
    (5,635
    )
    
    
    26,303
    
    
    
    (185
    )
    
    
    
    
    
    
    20,483Accrued trade marketing expense
    
    
    641
    
    
    
    (271
    )
    
    
    98
    
    
    
    
    
    
    
    468Accounts payable
    
    
    22,508
    
    
    
    1,791
    
    
    
    79
    
    
    
    
    
    
    
    24,378Other current assets and liabilities
    
    
    (26,023
    )
    
    
    10,344
    
    
    
    870
    
    
    
    
    
    
    
    (14,809
    )Net cash provided by (used in) operating activities
    
    
    28,072
    
    
    
    2,541
    
    
    
    457
    
    
    
    
    
    
    
    31,070Cash flows from investing activitiesCapital expenditures
    
    
    (2,668
    )
    
    
    (7,156
    )
    
    
    (2
    )
    
    
    
    
    
    
    (9,826
    )Pinnacle merger consideration
    
    
    (361,062
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (361,062
    )Pinnacle merger costs
    
    
    (7,154
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,154
    )Aurora merger consideration
    
    
    (663,759
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (663,759
    )Aurora merger costs
    
    
    (16,980
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (16,980
    )Net cash used in investing activities
    
    
    (1,051,623
    )
    
    
    (7,156
    )
    
    
    (2
    )
    
    
    
    
    
    
    (1,058,781
    )Cash flows from financing activitiesChange in bank overdrafts
    
    
    
    
    
    
    11,603
    
    
    
    
    
    
    
    
    
    
    
    11,603Repayment of capital lease obligations
    
    
    (4
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4
    )Equity contribution to Successor
    
    
    275,088
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    275,088Successors debt acquisition costs
    
    
    (37,766
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (37,766
    )Proceeds from Successors bond offerings
    
    
    400,976
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    400,976Proceeds from Successors bank term loans
    
    
    545,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    545,000Proceeds from Successors notes payable borrowings
    
    
    21,500
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21,500Repayments of Successors notes payable
    
    
    (21,500
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (21,500
    )Repayments of Predecessors long term obligations
    
    
    
    
    
    
    (175,000
    )
    
    
    
    
    
    
    
    
    
    
    (175,000
    )Repayments of Successors long term obligations
    
    
    (1,363
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,363
    )Intercompany loans
    
    
    (175,370
    )
    
    
    175,370
    
    
    
    
    
    
    
    
    
    
    
    Repayments of intercompany loans
    
    
    17,500
    
    
    
    (17,500
    )
    
    
    
    
    
    
    
    
    
    
    Net cash provided by (used in) financing activities
    
    
    1,024,061
    
    
    
    (5,527
    )
    
    
    
    
    
    
    
    
    
    
    1,018,534Effect of exchange rate changes on cash
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net change in cash and cash equivalents
    
    
    510
    
    
    
    (10,142
    )
    
    
    455
    
    
    
    
    
    
    
    (9,177
    )Cash and cash equivalents  beginning of period
    
    
    
    
    
    
    46,958
    
    
    
    
    
    
    
    
    
    
    
    46,958Cash and cash equivalents  end of period
    
    $
    510
    
    
    $
    36,816
    
    
    $
    455
    
    
    $
    
    
    
    $
    37,781Supplemental disclosures of cash flow information:Interest paid
    
    $
    28,776
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    28,776Interest received
    
    
    89
    
    
    
    221
    
    
    
    10
    
    
    
    
    
    
    
    320Income taxes paid
    
    
    
    
    
    
    37
    
    
    
    
    
    
    
    
    
    
    
    37Non-cash investing activity:Aurora merger consideration
    
    
    (225,120
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (225,120
    )Aurora merger costs
    
    
    (4,628
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,628
    )Non-cash financing activity:Aurora merger equity contribution
    
    
    225,120
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    225,120
 99




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##### Table of Contents



PINNACLE FOODS GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except where noted in millions) 
 Pinnacle Foods Group Inc.Consolidated Statement of Cash Flows  Predecessor For the 16 weeks ended November 24, 2003
 PINNACLEFOODS
    
    
    GUARANTOR
    
    
    NONGUARANTOR
    
    
    
    
    
    
    CONSOLIDATEDGROUP INC.
    
    
    SUBSIDIARIES
    
    
    SUBSIDIARY
    
    
    ELIMINATIONS
    
    
    TOTALCash flows from operating activitiesNet earnings (loss) from operations
    
    $
    (3,074
    )
    
    $
    (3,074
    )
    
    $
    (160
    )
    
    $
    3,234
    
    
    $
    (3,074
    )Non-cash charges (credits) to net earnings
    
    
    
    
    
    
    
    
    
    
    Depreciation and amortization
    
    
    
    
    
    
    6,131
    
    
    
    5
    
    
    
    
    
    
    
    6,136Restructuring and impairment charge
    
    
    
    
    
    
    1,262
    
    
    
    
    
    
    
    
    
    
    
    1,262Amortization of debt acquisition costs
    
    
    
    
    
    
    6,907
    
    
    
    
    
    
    
    
    
    
    
    6,907Equity related compensation charge
    
    
    
    
    
    
    4,935
    
    
    
    
    
    
    
    
    
    
    
    4,935Equity in (earnings) loss of investees
    
    
    3,074
    
    
    
    160
    
    
    
    
    
    
    
    (3,234
    )
    
    
    Postretirement healthcare benefits
    
    
    
    
    
    
    (527
    )
    
    
    
    
    
    
    
    
    
    
    (527
    )Pension expense
    
    
    
    
    
    
    342
    
    
    
    
    
    
    
    
    
    
    
    342Deferred income taxes
    
    
    
    
    
    
    (986
    )
    
    
    
    
    
    
    
    
    
    
    (986
    )Changes in working capitalAccounts receivable
    
    
    
    
    
    
    (8,513
    )
    
    
    (784
    )
    
    
    
    
    
    
    (9,297
    )Intercompany accounts receivable
    
    
    
    
    
    
    848
    
    
    
    (848
    )
    
    
    
    
    
    
    Inventories
    
    
    
    
    
    
    (24,561
    )
    
    
    (727
    )
    
    
    
    
    
    
    (25,288
    )Accrued trade marketing expense
    
    
    
    
    
    
    (5,506
    )
    
    
    691
    
    
    
    
    
    
    
    (4,815
    )Accounts payable
    
    
    
    
    
    
    514
    
    
    
    765
    
    
    
    
    
    
    
    1,279Other current assets and liabilities
    
    
    
    
    
    
    (736
    )
    
    
    423
    
    
    
    
    
    
    
    (313
    )Net cash used in operating activities
    
    
    
    
    
    
    (22,804
    )
    
    
    (635
    )
    
    
    
    
    
    
    (23,439
    )Cash flows from investing activitiesCapital expenditures
    
    
    
    
    
    
    (1,511
    )
    
    
    
    
    
    
    
    
    
    
    (1,511
    )Net cash used in investing activities
    
    
    
    
    
    
    (1,511
    )
    
    
    
    
    
    
    
    
    
    
    (1,511
    )Cash flows from financing activitiesChange in bank overdrafts
    
    
    
    
    
    
    (262
    )
    
    
    
    
    
    
    
    
    
    
    (262
    )Intercompany advance
    
    
    42,186
    
    
    
    (42,186
    )
    
    
    
    
    
    
    
    
    
    
    Net cash used in financing activities
    
    
    42,186
    
    
    
    (42,448
    )
    
    
    
    
    
    
    
    
    
    
    (262
    )Effect of exchange rate changes on cash
    
    
    
    
    
    
    
    
    
    
    42
    
    
    
    
    
    
    
    42Net change in cash and cash
equivalents
    
    
    42,186
    
    
    
    (66,763
    )
    
    
    (593
    )
    
    
    
    
    
    
    (25,170
    )Cash and cash equivalents  beginning of period
    
    
    
    
    
    
    71,535
    
    
    
    593
    
    
    
    
    
    
    
    72,128Cash and cash equivalents  end of period
    
    $
    42,186
    
    
    $
    4,772
    
    
    $
    
    
    
    $
    
    
    
    $
    46,958Supplemental disclosures of cash flow
information:Interest paid
    
    $
    
    
    
    $
    2,518
    
    
    $
    
    
    
    $
    
    
    
    $
    2,518Interest received
    
    
    
    
    
    
    143
    
    
    
    
    
    
    
    
    
    
    
    143Income taxes paid/(refunded)
    
    
    
    
    
    
    (2,856
    )
    
    
    (452
    )
    
    
    
    
    
    
    (3,308
    )
 100




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PINNACLE FOODS GROUP INC. AND SUBSIDIARIES NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except where noted in millions) 
 Pinnacle Foods Holding Corporation Consolidated Statement of Cash Flows  Predecessor
 For the year ended July 31, 2003
 PINNACLE FOODSHOLDING
    
    
    GUARANTOR
    
    
    NONGUARANTOR
    
    
    
    
    
    
    CONSOLIDATEDCORPORATION
    
    
    SUBSIDIARIES
    
    
    SUBSIDIARY
    
    
    ELIMINATIONS
    
    
    TOTALCash flows from operating activitiesNet earnings (loss) from operations
    
    $
    8,448
    
    
    $
    8,448
    
    
    $
    (304
    )
    
    $
    (8,144
    )
    
    $
    8,448Non-cash charges (credits) to net earningsDepreciation and amortization
    
    
    
    
    
    
    22,942
    
    
    
    6
    
    
    
    
    
    
    
    22,948Amortization of debt acquisition costs
    
    
    
    
    
    
    1,630
    
    
    
    
    
    
    
    
    
    
    
    1,630Impairment of intangibles and goodwill
    
    
    
    
    
    
    4,941
    
    
    
    
    
    
    
    
    
    
    
    4,941Equity in (earnings) loss of investees
    
    
    (8,448
    )
    
    
    304
    
    
    
    
    
    
    
    8,144
    
    
    
    Postretirement healthcare benefits
    
    
    
    
    
    
    (1,324
    )
    
    
    
    
    
    
    
    
    
    
    (1,324
    )Pension expense
    
    
    
    
    
    
    1,323
    
    
    
    
    
    
    
    
    
    
    
    1,323Deferred income taxes
    
    
    
    
    
    
    5,712
    
    
    
    50
    
    
    
    
    
    
    
    5,762Changes in working capital
    
    
    Accounts receivable
    
    
    
    
    
    
    (784
    )
    
    
    (28
    )
    
    
    
    
    
    
    (812
    )Intercompany accounts receivable
    
    
    
    
    
    
    392
    
    
    
    (392
    )
    
    
    
    
    
    
    Inventories
    
    
    
    
    
    
    (3,181
    )
    
    
    964
    
    
    
    
    
    
    
    (2,217
    )Accrued trade marketing expense
    
    
    
    
    
    
    (1,780
    )
    
    
    74
    
    
    
    
    
    
    
    (1,706
    )Accounts payable
    
    
    
    
    
    
    (4,796
    )
    
    
    111
    
    
    
    
    
    
    
    (4,685
    )Other current assets and liabilities
    
    
    
    
    
    
    (1,345
    )
    
    
    (12
    )
    
    
    
    
    
    
    (1,357
    )Net cash provided by operating
activities
    
    
    
    
    
    
    32,482
    
    
    
    469
    
    
    
    
    
    
    
    32,951Cash flows from investing activitiesPayments for business acquisitions
    
    
    
    
    
    
    (56
    )
    
    
    
    
    
    
    
    
    
    
    (56
    )Capital expenditures
    
    
    
    
    
    
    (8,763
    )
    
    
    (24
    )
    
    
    
    
    
    
    (8,787
    )Sale of plant assets
    
    
    
    
    
    
    48
    
    
    
    
    
    
    
    
    
    
    
    48Net cash used in investing activities
    
    
    
    
    
    
    (8,771
    )
    
    
    (24
    )
    
    
    
    
    
    
    (8,795
    )Cash flows from financing activitiesChange in bank overdrafts
    
    
    
    
    
    
    (2,419
    )
    
    
    
    
    
    
    
    
    
    
    (2,419
    )Repayment of capital lease obligations
    
    
    
    
    
    
    (9
    )
    
    
    
    
    
    
    
    
    
    
    (9
    )Repayments of long term obligations
    
    
    
    
    
    
    (15,000
    )
    
    
    
    
    
    
    
    
    
    
    (15,000
    )Issuance of common stock
    
    
    412
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    412Capital contributions to subsidiaries
    
    
    (412
    )
    
    
    412
    
    
    
    
    
    
    
    
    
    
    
    Net cash used in financing activities
    
    
    
    
    
    
    (17,016
    )
    
    
    
    
    
    
    
    
    
    
    (17,016
    )Effect of exchange rate changes on cash
    
    
    
    
    
    
    
    
    
    
    17
    
    
    
    
    
    
    
    17Net change in cash and cash equivalents
    
    
    
    
    
    
    6,695
    
    
    
    462
    
    
    
    
    
    
    
    7,157Cash and cash equivalents  beginning of
period
    
    
    
    
    
    
    64,840
    
    
    
    131
    
    
    
    
    
    
    
    64,971Cash and cash equivalents  end of period
    
    $
    
    
    
    $
    71,535
    
    
    $
    593
    
    
    $
    
    
    
    $
    72,128Supplemental disclosures of cash flow
information:Interest paid
    
    $
    
    
    
    $
    10,001
    
    
    $
    26
    
    
    $
    (26
    )
    
    $
    10,001Interest received
    
    
    
    
    
    
    485
    
    
    
    17
    
    
    
    (26
    )
    
    
    476Income taxes paid (refunded)
    
    
    
    
    
    
    (108
    )
    
    
    (161
    )
    
    
    
    
    
    
    (269
    )
 101




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PINNACLE FOODS GROUP INC. AND SUBSIDIARIES NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except where noted in millions) 
 Pinnacle Foods Holding Corporation Consolidated Statement of Cash Flows  Predecessor For the year ended July 31, 2002 PINNACLE FOODSHOLDING
    
    
    GUARANTOR
    
    
    NONGUARANTOR
    
    
    
    
    
    
    CONSOLIDATEDCORPORATION
    
    
    SUBSIDIARIES
    
    
    SUBSIDIARY
    
    
    ELIMINATIONS
    
    
    TOTALCash flows from operating activitiesNet earnings (loss) from operations
    
    $
    11,922
    
    
    $
    11,922
    
    
    $
    
    
    
    $
    (11,922
    )
    
    $
    11,922Non-cash charges (credits) to net earningsDepreciation and amortization
    
    
    
    
    
    
    21,228
    
    
    
    3
    
    
    
    
    
    
    
    21,231Amortization of debt acquisition costs
    
    
    
    
    
    
    1,630
    
    
    
    
    
    
    
    
    
    
    
    1,630Equity in (earnings) loss of investees
    
    
    (11,922
    )
    
    
    
    
    
    
    
    
    
    
    11,922
    
    
    
    Postretirement healthcare benefits
    
    
    
    
    
    
    3,955
    
    
    
    
    
    
    
    
    
    
    
    3,955Pension expense
    
    
    
    
    
    
    901
    
    
    
    
    
    
    
    
    
    
    
    901Deferred income taxes
    
    
    
    
    
    
    3,016
    
    
    
    (6
    )
    
    
    
    
    
    
    3,010Changes in working capitalAccounts receivable
    
    
    
    
    
    
    (2,621
    )
    
    
    (117
    )
    
    
    
    
    
    
    (2,738
    )Intercompany accounts receivable
    
    
    
    
    
    
    5
    
    
    
    (5
    )Inventories
    
    
    
    
    
    
    6,398
    
    
    
    1,838
    
    
    
    
    
    
    
    8,236Accrued trade marketing expense
    
    
    
    
    
    
    (1,180
    )
    
    
    (64
    )
    
    
    
    
    
    
    (1,244
    )Accounts payable
    
    
    
    
    
    
    12,156
    
    
    
    (216
    )
    
    
    
    
    
    
    11,940Other current assets and liabilities
    
    
    
    
    
    
    6,279
    
    
    
    (627
    )
    
    
    
    
    
    
    5,652Net cash provided by operating
activities
    
    
    
    
    
    
    63,689
    
    
    
    806
    
    
    
    
    
    
    
    64,495Cash flows from investing activitiesPayments for business acquisitions
    
    
    
    
    
    
    (7,354
    )
    
    
    (6
    )
    
    
    
    
    
    
    (7,360
    )Capital expenditures
    
    
    
    
    
    
    (19,452
    )
    
    
    
    
    
    
    
    
    
    
    (19,452
    )Net cash used in investing activities
    
    
    
    
    
    
    (26,806
    )
    
    
    (6
    )
    
    
    
    
    
    
    (26,812
    )Cash flows from financing activitiesChange in bank overdrafts
    
    
    
    
    
    
    7,799
    
    
    
    
    
    
    
    
    
    
    
    7,799Repayment of intercompany notes payable
    
    
    
    
    
    
    1,275
    
    
    
    (1,275
    )
    
    
    
    
    
    
    Repayment of capital lease obligations
    
    
    
    
    
    
    (75
    )
    
    
    
    
    
    
    
    
    
    
    (75
    )Issuance on common stock
    
    
    2,161
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,161Capital contributions to subsidiaries
    
    
    (2,161
    )
    
    
    2,161
    
    
    
    
    
    
    
    
    
    
    
    Net cash provided by (used in) financing
activities
    
    
    
    
    
    
    11,160
    
    
    
    (1,275
    )
    
    
    
    
    
    
    9,885Effect of exchange rate changes on cash
    
    
    
    
    
    
    
    
    
    
    (19
    )
    
    
    
    
    
    
    (19
    )Net change in cash and cash
equivalents
    
    
    
    
    
    
    48,043
    
    
    
    (494
    )
    
    
    
    
    
    
    47,549Cash and cash equivalents  beginning of period
    
    
    
    
    
    
    16,797
    
    
    
    625
    
    
    
    
    
    
    
    17,422Cash and cash equivalents  end of period
    
    $
    
    
    
    $
    64,840
    
    
    $
    131
    
    
    $
    
    
    
    $
    64,971Supplemental disclosures of cash flow
information:Interest paid
    
    $
    
    
    
    $
    12,667
    
    
    $
    5
    
    
    $
    
    
    
    $
    12,672Interest received
    
    
    
    
    
    
    786
    
    
    
    21
    
    
    
    
    
    
    
    807Income taxes paid
    
    
    
    
    
    
    7,140
    
    
    
    882
    
    
    
    
    
    
    
    8,022
 102




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ITEM 9.
    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE None. 
  ITEM 9A.
    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, 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 as of December
26, 2004. Based upon that evaluation and subject to the foregoing, our Chief Executive Officer and
Chief Financial Officer concluded that the design and operation of our disclosure controls and
procedures are effective. In addition, there was no change in our internal control over financial reporting that occurred
during the 21 weeks ended December 26, 2004 that has materially affected, or is reasonably likely
to materially affect, our internal control over financial reporting. 
  ITEM 9B.
    OTHER INFORMATION None. 103




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##### Table of Contents



PART III 
  ITEM 10.
    DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The following table sets forth certain information with respect to our executive officers, key
employees and directors. Name
    
    Age
    
    PositionC. Dean Metropoulos
    
    
    58
    
    
    Chairman of the Board, Chief Executive Officer and DirectorN. Michael Dion
    
    
    47
    
    
    Executive Vice President and Chief Financial OfficerMichael J. Cramer
    
    
    52
    
    
    Executive Vice President and Chief Administrative OfficerEvan Metropoulos
    
    
    51
    
    
    Executive Vice President, Operations and Technical ServicesLouis Pellicano
    
    
    58
    
    
    Executive Vice President, Business Development and
Acquisitions and Assistant SecretaryDavid Roe
    
    
    41
    
    
    Executive Vice President, MarketingWilliam Toler
    
    
    45
    
    
    Executive Vice President, SalesM. Kelley Maggs
    
    
    53
    
    
    Senior Vice President, General Counsel and SecretaryLynne M. Misericordia
    
    
    41
    
    
    Vice President, Treasurer and Assistant SecretaryJohn F. Kroeger
    
    
    49
    
    
    Vice President, Human Resources; Assistant General Counsel
and Assistant SecretaryStephen P. Murray
    
    
    42
    
    
    DirectorTerry Peets
    
    
    60
    
    
    DirectorKevin G. OBrien
    
    
    39
    
    
    DirectorJohn W. Childs
    
    
    63
    
    
    DirectorAdam L. Suttin
    
    
    37
    
    
    DirectorRaymond B. Rudy
    
    
    73
    
    
    DirectorDavid R. Jessick
    
    
    51
    
    
    DirectorBrett G. Wyard
    
    
    35
    
    
    Director
 C. Dean Metropouloshas served as our Chairman and Chief Executive Officer since March 19,
2004. Prior thereto, Mr. Metropoulos held the same position with Pinnacle since its inception in
2001. Mr. Metropoulos is also Chairman and Chief Executive Officer of CDM Investor Group LLC, a
merchant banking and management firm. Some of the recent transactions for which affiliates of CDM
Investor Group LLC have provided senior management include Hillsdown Holdings, PLC (Premier
International Foods, Burtons Biscuits and Christie Tyler Furniture), Mumm and Perrier Jouet
Champagnes, International Home Foods, Ghirardelli Chocolates, The Morningstar Group and Stella
Foods, Inc. Mr. Metropoulos also sits on the board of National Waterworks, Inc. and a number of
privately held companies in both the United States and Europe. Mr. Metropoulos began his career
with GTE International, where his last position before leaving to establish his merchant banking
and management firm was Senior Vice President. N. Michael Dionhas been our Executive Vice President and Chief Financial Officer since March 19,
2004. Prior thereto, Mr. Dion held the same position with Pinnacle since its inception in 2001. Mr.
Dion has been affiliated with affiliates of CDM Investor Group LLC and each of the business
platforms that Mr. Metropoulos and his team have managed since 1990. Mr. Dion served as Senior Vice
President and Chief Financial Officer of International Home Foods from November 1996 to November
1999. Mr. Dion is also a Certified Public Accountant. Michael J. Cramerhas been our Executive Vice President and Chief Administrative Officer since
March 19, 2004. From 1998 to 2004, Mr. Cramer served as President and COO of Southwest Sports
Group, LLC, and Southwest Sports Realty, LP and as part of those duties, he served at various times
as President of the Texas Rangers Baseball Club and Dallas Stars Hockey Team. Prior to joining
Southwest Sports Group in 1998, Mr. Cramer was affiliated with each of the platforms C. Dean
Metropoulos managed since 1987. In that capacity he served as Executive Vice President and as a
member of the Board of Directors of International Home Foods; Executive Vice President and 104




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General Counsel of The Morningstar Group Inc. and Executive Vice President of Administration and
General Counsel of Stella Foods, Inc. Prior to that time, he was engaged in the private practice of
law for several years in Wisconsin. Evan Metropouloshas been our Executive Vice President, Operations and Technical Services since
March 19, 2004. Prior thereto, Evan Metropoulos held the same position with Pinnacle since its
inception in 2001. Evan Metropoulos is also a founding partner of affiliates of CDM Investor Group
LLC, and has overseen the manufacturing operations for affiliates of CDM Investor Group LLC
portfolio platforms in the United States and Europe. Evan Metropoulos is the brother of C. Dean
Metropoulos. Louis Pellicanohas been our Executive Vice President, Business Development and Acquisitions and
Assistant Secretary since March 19, 2004. Prior thereto, Mr. Pellicano held the same position with
Pinnacle since its inception in 2001. Mr. Pellicano is also a founding partner of CDM Investor
Group LLC. During the past twelve years at affiliates of CDM Investor Group LLC, Mr. Pellicano has
played a significant role in the acquisition, monitoring and successful exit of all affiliates of
CDM Investor Group LLC portfolio food platforms. Previously, Mr. Pellicano was Senior Vice
President at International Home Foods until it was sold in 2000. Before affiliates of CDM Investor
Group LLC, Mr. Pellicano spent twelve years at and was a co-founder of the Mergers & Acquisitions
office in New York for Banque Nationale de Paris and Credit Lyonnais. He began his career with Ford
Motor Company and Mobil Oil Corporation in various management positions. David Roeis the Executive Vice President, Marketing. Prior thereto, Mr. Roe was the Executive Vice
President and General Manager of our Dry Grocery division (Cake Mix, Pancake Syrups & Condiments).
Mr. Roe joined Pinnacle in January 2004 following three years with Cendant Corporation as Executive
Vice President and General Manager of Resorts Condominium International. Mr. Roe was previously the
Senior Vice President & General Manager of International Home Foods Chef Boyardee Division prior
to the sale of International Home Foods to ConAgra Foods in 2000. Before joining International Home
Foods, Mr. Roe spent three years with the Pillsbury Company, where he was responsible for brand
management for the Progresso and Green Giant brands. Mr. Roe began his career in 1985 with Reckitt
& Colman (now Reckitt Benckiser), where he spent ten years in the United Kingdom and United States
managing brands such as Colmans Cooking Sauces, Frenchs Mustard, Black Flag Insecticides &
Airwick Air Fresheners. William Tolerhas been our Executive Vice President, Sales since March 19, 2004. Mr. Toler
previously provided consulting services to Aurora and oversaw its sales department from June 2003
to March 2004. Mr. Toler was previously President of North America for ICG Commerce, a procurement
services company. Before ICG Commerce, Mr. Toler was President of Campbell Sales Company from 1995
to 2000. At Campbell Sales Company, he was responsible for $4 billion in sales, including Campbell
Soup Companys flagship soup brands Condensed, Chunky and Select; V-8 beverages; and Prego and Pace
sauces. He joined Campbell Sales Company from Nabisco, where he was Vice President, Sales and
Integrated Logistics from 1992 to 1995. Prior to Nabisco, he was Vice President/National Sales
Manager for Reckitt & Colman from 1989 to 1992. Mr. Toler began his career at Procter & Gamble,
where he worked from 1981 to 1989; his last responsibility at Procter & Gamble was Eastern division
manager of Health and Beauty Care. M. Kelley Maggshas been our Senior Vice President, General Counsel and Secretary since March 19,
2004. Prior thereto, Mr. Maggs held the same position with Pinnacle since its inception in 2001. He
has also been associated with affiliates of CDM Investor Group LLC for the past twelve years. Prior
to his involvement with Pinnacle, Mr. Maggs held the same position with International Home Foods
from November 1996 to December 2000. From 1993 to 1996, Mr. Maggs was employed with Stella Foods,
Inc. as Vice President and General Counsel. Lynne M. Misericordiahas been our Vice President and Treasurer since March 19, 2004. Prior
thereto, Ms. Misericordia held the same position with Pinnacle since its inception in 2001. Ms.
Misericordia previously held the position of Treasurer with International Home Foods from November
1996 to December 2000. Before that, Ms. Misericordia was employed by Wyeth from August 1985 to
November 1996 and held various financial positions. 105




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##### Table of Contents



John F. Kroegerwas named Vice President, Human Resources in July 2004 and has been our Vice
President and Assistant General Counsel since March 19, 2004. Prior thereto, Mr. Kroeger held the
position of Vice President and Assistant General Counsel with Pinnacle since November 2001. From
January 2001 to October 2001, Mr. Kroeger was the Vice President and General Counsel of Anadigics, Inc., a NASDAQ Company. From August 1998
until December 2000, Mr. Kroeger was Vice President and Assistant General Counsel at International
Home Foods, Inc. Mr. Kroeger has also held general management and legal positions with leading
companies in the chemical, pharmaceutical and petroleum-refining industries. Mr. Kroeger is a
Director of Fiber-Tec Inc., a privately held medical supply company. Stephen P. Murraybecame our director upon consummation of the Aurora Transaction on March 19,
2004. Mr. Murray is a Partner of JPMP. Prior to joining JPMP in 1984, Mr. Murray was a Vice
President with the Middle-Market Lending Division of Manufacturers Hanover Trust Company.
Currently, he serves as a director of La Petite Academy, Zoots, Warner Chilcott, AMC, National
Waterworks, Inc. and Strongwood Insurance. Terry Peetsbecame our director upon consummation of the Aurora Transaction on March 19, 2004. Mr.
Peets is an advisor to JPMP in its consideration of consumer segment investment opportunities. Over
the past 25 years, Mr. Peets has served as Chairman of Brunos Supermarkets, Inc., Executive Vice
President of Vons Grocery Company, Executive Vice President of Ralphs Grocery Company, and
President and CEO of PIA Merchandising, Inc. Mr. Peets is the Chairman of the Board and Director of
World Kitchens, Inc., Vice Chairman and Director of City of Hope, PSC Scanning Inc., Ruiz Foods
Inc., Berry Plastics, Inc., Doane Pet Care, Inc. and Childrens Museum of Orange County. Mr. Peets
holds an M.B.A. with honors from Pepperdine University. Kevin G. OBrienbecame our director upon consummation of the Aurora Transaction on March 19, 2004.
Mr. OBrien is a Principal of JPMP. Prior to joining JPMP in 2000, Mr. OBrien was a Vice President
in the High Yield Capital Markets and High Yield Corporate Finance Groups at Chemical Securities
Inc. and Chase Securities Inc. since 1994. Previously, he was a commissioned officer in the U.S.
Navy. Currently, he serves as a director of La Petite Academy and National Waterworks, Inc. John W. Childsbecame our director upon consummation of the Aurora Transaction on March 19, 2004.
Mr. Childs has been President of JWC since July 1995. Prior to that time, he was an executive at
Thomas H. Lee Company from May 1987, most recently holding the position of Senior Managing
Director. Prior to that, Mr. Childs was with the Prudential Insurance Company of America where he
held various executive positions in the investment area ultimately serving as Senior Managing
Director in charge of the Capital Markets Group. He is a director of Pan Am International Flight
Academy, Inc., American Safety Razor Company, Sunny Delight Beverages Company, Sheridan Healthcare
Inc. and Esselte AB. Adam L. Suttinbecame our director upon consummation of the Aurora Transaction on March 19, 2004.
Mr. Suttin has been a Partner of JWC since January 1998 and has been with JWC since July 1995.
Prior to that time, Mr. Suttin was an executive at Thomas H. Lee Company from August 1989, most
recently holding the position of Associate. Mr. Suttin is a director of American Safety Razor
Company, The NutraSweet Company, Sunny Delight Beverages Company and Esselte AB. Raymond B. Rudybecame our director upon consummation of the Aurora Transaction on March 19, 2004.
Mr. Rudy has been an Operating Partner of JWC since July 1995. Prior to that time, he was Deputy
Chairman and Director of Snapple Beverage Corporation from 1992 until the company was sold in 1994.
From 1987 to 1989, Mr. Rudy was President of Best Foods Subsidiaries of CPC International. From
1984 to 1986, Mr. Rudy was Chairman, President and CEO of Arnold Foods Company, Inc. He is the
Chairman of American Safety Razor Company and Sunny Delight Beverages Company. David R. Jessickbecame our director upon consummation of the Aurora Transaction on March 19, 2004.
From December 1999 to July 2002, Mr. Jessick was
Senior Executive Vice President and Chief
Administrative Officer of Rite Aid Corporation. Prior to joining Rite Aid Corporation in 1999, Mr.
Jessick spent three years at Fred Meyer, Inc., with his last position being Executive Vice
President, Finance and Investor Relations. Prior to joining Fred Meyer, Inc., Mr. Jessick spent 17
years with Thrifty PayLess Holdings, Inc., with his last position being Executive Vice President
and Chief Financial Officer. Prior thereto, Mr. Jessick worked as an auditor with KPMG. Mr. Jessick
received a B.B.A. degree in accounting from Boise State University. He currently serves as a
director and audit committee chair at World Kitchen, Inc. and Dollar Financial Corp. and as a director and audit committee
member of Source Interlink. 106




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Brett G. Wyardbecame our director upon consummation of the Aurora Transaction on March 19, 2004.
Mr. Wyard is a Managing Director of Oaktree Capital Management LLC where he is part of Oaktree
distressed opportunities group. Before joining Oaktree in 1999, Mr. Wyard served as a Vice
President in Merrill Lynchs global distressed situations group where he focused on proprietary
debt investments in distressed and bankrupt situations. Prior to joining Merrill Lynch in 1997, Mr.
Wyard spent three years as a senior associate in Houlihan, Lokey, Howard & Zukin, Inc.s financial
restructuring group providing financial advisory services to both distressed corporations and their
creditor constituencies. Prior thereto, Mr. Wyard worked at Voyageur Asset Management in
investment-grade bond management and Miller & Schroeder Financial in investment banking. Mr. Wyard
received a B.A. degree in Economics from Boston College. Committees of the board of directors The board of directors of PFGI has an audit committee and a compensation committee. The audit
committee recommends the annual appointment of auditors with whom the audit committee reviews the
scope of audit and non-audit assignments and related fees and accounting principles we will use in
financial reporting. The members of the audit committee are currently Messrs. OBrien (who is a
financial expert), Suttin and Peets. The compensation committee reviews and approves the
compensation and benefits for our employees, directors and consultants, administer our employee
benefit plans, authorize and ratify stock option grants and other incentive arrangement and
authorize employment and related agreements. The members of the compensation committee are
currently Messrs. C.D. Metropoulos, Murray and Childs. Compensation
committee interlocks and insider participation Mr. C.D. Metropoulos, our Chairman and Chief Executive Officer, is the only member of the
compensation committee who is also one of our employees or officers. However, Mr. C.D. Metropoulos
does not participate in decisions affecting his own compensation. For information regarding certain
transactions between us and Mr. C.D. Metropoulos, see Certain relationships and related
transactions. Compensation of directors Our directors who are also our employees or employees of our principal stockholders will receive no
additional compensation for their services as director. Those directors who are not employees of us
or our principal stockholders will be paid (1) an annual retainer of $25,000 to be paid quarterly
in arrears and (2) an annual option grant valued at $10,000 with a one year vesting period. We also
intend to promptly reimburse our non-employee directors for reasonable expenses incurred to attend
meetings of our board of directors or its committees. Code of Ethics Our employee handbook contains certain standards for ethical conduct required of our employees. We
require all employees to meet our ethical standards which include compliance with all laws while
performing their job duties with high integrity and professionalism. We have also adopted a Code of Ethics for our Chief Executive Officer, our Chief Financial Officer
and our Chief Administrative Officer and all other executive officers and other key employees. This
Code of Ethics is intended to promote honest and ethical conduct, full and accurate reporting, and
compliance with all applicable laws and regulations. 107




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ITEM 11.
    EXECUTIVE COMPENSATION The following table sets forth information concerning total compensation earned or paid to PFGIs
Executive Officer and PFGIs four other most highly compensated executive officers who served in
such capacities as of December 26, 2004 (as of the end of the transition year) (collectively, the
named executive officers), for services rendered to PFGI during each of the transition year and
past three fiscal years. In connection with the Pinnacle Transaction, Louis Pellicano, N. Michael Dion and Evan Metropoulos
received payments under certain change of control agreements with Pinnacle of $250,000, $250,000
and $250,000, respectively. In addition certain key other employees received retention benefits in an aggregate amount of
approximately $2.2 million, which was paid in February 2004. Summary compensation table Long-term compensationAnnual
    
    
    Securitiescompensation (1) (2)
    
    
    underlying
    
    
    LTIP
    
    
    All OtherSalary
    
    
    Bonus
    
    
    options/
    
    
    Payments
    
    
    Compensation (3)Name and principal position
    
    Year
    
    
    ($)
    
    
    ($)
    
    
    SARs (#)
    
    
    ($)
    
    
    ($)C. Dean Metropoulos
    
    8/04 to 12/04
    
    $
    846,154
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    79,298
    (4)Chairman of the Board and
    
    Fiscal 2004
    
    
    1,521,233
    
    
    
    520,833
    
    
    
    
    
    
    
    
    
    
    
    298,428Chief Executive Officer
    
    Fiscal 2003
    
    
    1,250,000
    
    
    
    1,250,000
    
    
    
    
    
    
    
    
    
    
    
    181,304Fiscal 2002
    
    
    1,247,756
    
    
    
    1,040,000
    
    
    
    
    
    
    
    
    
    
    
    37,705N. Michael Dion
    
    8/04 to 12/04
    
    
    190,384
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Executive Vice President
    
    Fiscal 2004
    
    
    386,164
    
    
    
    60,000
    
    
    
    
    
    
    
    
    
    
    
    250,000
    (5)and Chief Financial Officer
    
    Fiscal 2003
    
    
    350,000
    
    
    
    205,000
    
    
    
    
    
    
    
    
    
    
    
    Fiscal 2002
    
    
    346,410
    
    
    
    210,000
    
    
    
    
    
    
    
    
    
    
    
    Evan Metropoulos
    
    8/04 to 12/04
    
    
    190,384
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Executive Vice President
    
    Fiscal 2004
    
    
    386,164
    
    
    
    62,500
    
    
    
    
    
    
    
    
    
    
    
    250,000
    (5)Fiscal 2003
    
    
    350,000
    
    
    
    175,000
    
    
    
    
    
    
    
    
    
    
    
    Fiscal 2002
    
    
    214,027
    
    
    
    100,000
    
    
    
    
    
    
    
    
    
    
    
    Michael J. Cramer
    
    8/04 to 12/04
    
    
    169,231
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    28,413
    (6)Executive Vice President
    
    Fiscal 2004
    
    
    162,308
    
    
    
    
    
    
    
    2,500,000
    
    
    
    
    
    
    
    and Chief Administrative
OfficerLouis Pellicano
    
    8/04 to 12/04
    
    
    148,077
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Executive Vice President
    
    Fiscal 2004
    
    
    350,000
    
    
    
    40,000
    
    
    
    
    
    
    
    
    
    
    
    250,000
    (5)and Assistant Secretary
    
    Fiscal 2003
    
    
    350,000
    
    
    
    175,000
    
    
    
    
    
    
    
    
    
    
    
    Fiscal 2002
    
    
    346,410
    
    
    
    150,000
    
    
    
    
    
    
    
    
    
    
    
    Dianne W. Jacobs (7)
    
    8/04 to 12/04
    
    
    106,250
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    50,162
    (8)Executive Vice President
    
    Fiscal 2004
    
    
    287,442
    
    
    
    148,500
    
    
    
    1,650,000
    
    
    
    
    
    
    
    374,060Frozen Division
    
    Fiscal 2003
    
    
    259,877
    
    
    
    129,428
    
    
    
    
    
    
    
    
    
    
    
    Fiscal 2002
    
    
    247,436
    
    
    
    166,496
    
    
    
    
    
    
    
    
    
    
    
    
   (1)
    
    Compensation for fiscal 2004, 2003 and 2002 is reported on the basis of our fiscal year
ending in July. Bonuses are reported for the fiscal year earned and are typically paid to the
executive in the first quarter of the subsequent fiscal year. During 2004, PFGI changed its
bonus program from a July fiscal year basis to a calendar year basis. The 2004 reported bonus
represents bonuses paid in July 2004 for the period August 2003 through December 2003. 108




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(2)
    
    For PFGIs fiscal year ended July 31, 2002, Messrs. C.D. Metropoulos and E. Metropoulos each
performed services for an affiliate of PFGIs principal shareholder. Accordingly, these
individuals base salaries for 2002 are lower than their base salaries per their respective
employment contract with us.(3)
    
    Amounts totaling less than the lesser of $50,000 or 10% of total annual salary and bonus have
been omitted. We provide the named executive officers with certain group life, health,
medical, and other non-cash benefits that are generally available to all salaried employees
and are not included in this column.(4)
    
    For Mr. C.D. Metropoulos, All other compensation includes items provided under his
employment agreement with Pinnacle. For fiscal 2002 All other compensation includes the
following benefits which were provided beginning January 1, 2002: $20,538 for personal use of
company-provided vehicles, $16,413 for club dues and $754 for personal use of an aircraft that
we provided. For fiscal 2003, All other compensation includes the following: $117,057 for
accounting and tax services provided for Mr. C.D. Metropoulos, $36,850 for personal use of
vehicles that we provided and $27,398 for club dues. For fiscal 2004, All other compensation
includes the following: $117,057 for accounting and tax services provided for Mr. C.D.
Metropoulos, $45,849 for personal use of vehicles that we provided and $135,521 for club dues
and assessments. For the period from August to December 2004, All other compensation
includes the following: $48,933 for accounting and tax services provided for Mr. C.D.
Metropoulos, $19,145 for personal use of vehicles that we provided and $11,220 for club dues
and assessments.(5)
    
    For Messrs. Dion, E. Metropoulos and Pellicano All other compensation for 2004 includes
payments received under certain change of control agreements with Pinnacle in connection with
the November 2003 transaction.(6)
    
    For Mr. Cramer, All other compensation for the period for August to December 2004 includes
$28,413 for moving and relocation allowances.(7)
    
    Mrs. Jacobs resigned effective October 29, 2004.(8)
    
    For Mrs. Jacobs, All other compensation for 2004 represents compensation paid with respect
to stock options of Pinnacle that were cashed out in accordance with the Companys stock
option plan. For the period from August to December 2004, All other compensation includes
$50,000 paid in connection with her resignation and $162 paid for compensation in lieu of
medical benefit insurance. Option grants in the Transition Year There were no stock option grants to the named executive offices during the Transition Year. Stock options and stock purchase plans PFHCs 2001 stock option plan, pursuant to which stock options were granted to certain officers and
key employees, was terminated in connection with the Pinnacle Transaction. All outstanding options
thereunder vested and the holders of options granted under the 2001 plan thereof (none of whom are
listed above) received $4,320,500 in the aggregate. PFHCs 2001 stock purchase plan was also
terminated in connection with the Pinnacle Transaction. Crunch Holding Corp. has adopted a stock option plan providing for the issuance of up to 29,250,000
shares of Crunch Holding Corp.s common stock. Pursuant to the option plan, certain officers,
employees, managers, directors and other persons performing certain designated services for Crunch
Holding Corp., or a subsidiary or parent thereof, will be eligible to receive grants of incentive
and nonqualified stock options, as permitted by applicable law. The option plan will be
administered by a committee, sub-committee or officer(s) selected by Crunch Holding Corp.s board
of directors which shall determine the exercise price per share at the time of each option grant.
Except as otherwise provided by the plan administrator, two-thirds (2/3) of the shares of common
stock subject to each option shall time vest annually over a three-year period from the effective
date of the option grant. The remaining one-third (1/3) of the shares of common stock subject to
each option shall vest on the seventh anniversary of the effective date of the option grant unless
otherwise determined by the plan administrator. All options, and shares of common stock received
upon exercise, will be subject to certain call-rights, drag-along rights, co-sale rights and 109




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transfer restrictions. Upon the occurrence of certain events, the vesting of certain the options
granted under the option plan will accelerate. Crunch Holding Corp. has adopted a stock option plan providing for the issuance of up to 350,000
shares of Crunch Holding Corp.s common stock to certain officers, employees, managers, directors
and other persons who are residents of California performing certain designated services for Crunch
Holding Corp., or a subsidiary or parent thereof. The terms of the California stock option plan
will be substantially similar to the terms of the stock option plan described above, other than
certain changes required by California law. Crunch Holding Corp. has adopted an employee stock purchase plan providing for the issuance of up
to 14,500,000 shares of Crunch Holding Corp.s common stock. Pursuant to the stock purchase plan,
certain individuals and employees performing certain designated services for Crunch Holding Corp.,
or a subsidiary or parent thereof, will be eligible to purchase shares of Crunch Holding Corp.s
common stock at the fair market value of such shares on the date of determination. The stock
purchase plan will be administered by a committee, sub-committee or officer(s) selected by Crunch
Holding Corp.s board of directors. All shares of common stock purchased under the stock purchase
plan will be subject to certain call-rights, drag-along rights, co-sale rights and transfer
restrictions. Crunch Holding Corp. has adopted an employee stock purchase plan providing for the issuance of up
to 500,000 shares of Crunch Holding Corp.s common stock to certain individuals and employees who
are residents of California performing certain designated services for Crunch Holding Corp., or a
subsidiary or parent thereof. The terms of the California employee stock purchase plan will be
substantially similar to the terms of the employee stock purchase plan described above, other than
certain changes required by California law. In connection with the adoption of the stock option plan and stock purchase plan, Crunch Holding
Corp. has amended its certificate of incorporation to increase the number of its authorized shares
of common stock. Copies of the stock option plans and stock purchase plans were previously filed as
exhibits to the registration statement of which this prospectus forms a part. Pension plans We do not have any tax-qualified defined benefit pension plans for salaried employees. Employment agreements In connection with the Pinnacle Transaction, PFHC entered into amended employment agreements with
Messrs. C.D. Metropoulos, E. Metropoulos, Dion and Pellicano, each of whom is a member of CDM
Investor Group LLC. These amended employment agreements, which provide for a two-year term and two
successive automatic one-year extensions, were assumed by PFGI as part of the Aurora Transaction. Pursuant to the amended employment agreements, Mr. C. Dean Metropoulos is entitled to an annual
base salary of $1,250,000 and an annual bonus of up to $1,250,000, provided certain performance
targets are met; Mr. E. Metropoulos is entitled to an annual base salary of $350,000 and an annual
bonus of up to $150,000, provided certain performance targets are met; Mr. Dion is entitled to an
annual base salary of $350,000 and an annual bonus of up to $175,000, provided certain performance
targets are met; and Mr. Pellicano is entitled to an annual base salary of $350,000 and an annual
bonus of up to $150,000, provided certain performance targets are met. Pursuant to each of the
amended employment agreements, in light of each executives increased duties and responsibilities
as a result of the Aurora Transaction, effective as of March 22, 2004, Mr. C.D. Metropoulos annual
base salary and annual bonus target were changed to $2,000,000 and $1,000,000 respectively, and
Messrs. E. Metropoulos and Dions annual base salary and annual bonus target were changed to
$450,000 and $200,000, respectively. 110




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Additionally, each of the amended employment agreements provides for certain severance payments to
be made if the executives employment is terminated without cause or due to a resignation for
good reason or a disability (each as defined in the employment agreements). Following any of
these events, (A) Mr. C.D. Metropoulos will be entitled to receive, among other things, (i) an
amount equal to 200% of his then-current annual base compensation and (ii) a pro rata portion of
any bonus earned during the calendar year in which the termination occurs payable concurrently with
the other accrued investments and (B) Messrs. E. Metropoulos, Dion and Pellicano will be entitled
to receive, among other things, (i) an amount equal to 150% of his then-current annual base
compensation and (ii) a pro rata portion of any bonus earned during the calendar year in which the
termination occurs payable concurrently with the other accrued investments. Each of the amended
employment agreements provides for a gross-up for any Code section 4999 excise tax that may be
triggered as a result of any payment made pursuant to the executives employment agreement or
otherwise. Each of the amended employment agreements contains a confidentiality provision pursuant to which
each executive agrees not to use confidential information (as defined in the employment
agreements) for the benefit of any person or entity during the term of the employment agreements.
Each of the amended employment agreements also contains a non-compete provision pursuant to which
each executive agrees, in the event of his termination or his resignation for good reason, other
than for a termination or resignation for good reason due to the occurrence of a change of control,
concurrent with his receipt of his severance payment, not to engage in or promote any business
within the United States that is principally engaged in the business of manufacturing and marketing
food products that directly compete in the same categories as our core products at the time of
termination with PFHC. The non-competition period for Mr. C.D. Metropoulos is two years after the
termination of his employment with PFHC. In the case of Messrs. E. Metropoulos, Dion and Pellicano,
the non-competition period is 18 months after the termination of the executives employment with
PFHC. 
  ITEM 12.
    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Crunch Holding Corp. owns 100% of the capital stock of PFGI. Crunch Equity Holding, LLC owns 100%
of the capital stock of Crunch Holding Corp. The following table sets forth information with respect to the ownership of the membership units of
Crunch Equity Holding, LLC as of December 26, 2004:  
    each person known to own beneficially more than 5% of the membership units,
    each of our directors,
    each of the executive officers named in the summary compensation table above, and
    all of our executive officers and directors as a group. The information set forth below is subject to a post-closing net debt adjustment to the Aurora
equity value. Net debt is calculated as funded debt as of the closing date of the Aurora
Transaction less cash on hand, minus working capital, and will be adjusted for certain payments the
Debtors have made or will make with respect to specific matters referred to in the Merger
Agreement. The Debtors working capital is defined as the sum of (i) net accounts receivable,
(ii) inventory net of reserves and (iii) prepaid expenses minus the sum of (x) accounts payable and
(y) accrued expenses (excluding certain items). Each of net debt and working capital excludes
certain specifically identified expenses. If net debt on the closing date of the Aurora Transaction
is determined to be greater than $609.9 million, the value of the Bondholders Trust Interests will
be decreased correspondingly and the percentage ownership of the Bondholders Trust in the Combined
Company will decrease. If net debt on the closing date of the Aurora Transaction is determined to
be less than $595.9 million, the value of the Bondholders Trust Interests will be increased
correspondingly and the percentage ownership of the Bondholders Trust in the Combined Company will
increase. The ownership of the membership units of Crunch Equity Holding, LLC immediately upon
consummation of the Aurora Transaction was based on an estimate by Aurora of net debt of
$584,504,000. At this point, we can not estimate when the post-closing adjustment will be
finalized. Notwithstanding the beneficial ownership of units presented below, a members agreement governs the
members exercise of their voting rights with respect to election of directors and certain other
material events. The parties to the members agreement have agreed to vote their units to elect the
board of directors as set forth therein. See Certain relationships and related transactions. 111




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The amounts and percentages of units beneficially owned are reported on the basis of SEC
regulations governing the determination of beneficial ownership of securities. Under SEC rules, a
person is deemed to be a beneficial owner of a security if that person has or shares voting power
or investment power, which includes the power to dispose of or to direct the disposition of such
security. A person is also deemed to be a beneficial owner of any securities with


respect to which that person has a right to acquire beneficial ownership within 60 days. Securities
that can be so acquired are deemed to be outstanding for purposes of computing such persons
ownership percentage but not for purposes of computing any other persons percentage. Under these
rules, more than one person may be deemed to be a beneficial owner of the same securities, and a
person may be deemed to be a beneficial owner of securities as to which such person has no economic
interest. Except as otherwise indicated in these footnotes, each of the beneficial owners listed has, to our
knowledge, sole voting and investment power with respect to the indicated units. Number of Class Aand Class B UnitsBeneficially Owned
    
    
    Percent ofName of beneficial owner
    
    (1)
    
    
    Units (1)JPMP Capital Corp.(2)
    
    
    132,370
    
    
    
    24.9
    %J.W. Childs Associates, Inc.(3)
    
    
    132,370
    
    
    
    24.9
    %CDM Investor Group LLC(4)
    
    
    31,200
    
    
    
    5.9
    %Crunch Equity Voting Trust(5)
    
    
    235,906
    
    
    
    44.4
    %Stephen P. Murray(6)
    
    
    132,370
    
    
    
    24.9
    %Terry Peets
    
    
    
    
    
    
    Kevin G. OBrien(7)
    
    
    132,370
    
    
    
    24.9
    %John W. Childs(8)
    
    
    132,370
    
    
    
    24.9
    %Adam L. Suttin(8)
    
    
    132,370
    
    
    
    24.9
    %Raymond B. Rudy(8)
    
    
    132,370
    
    
    
    24.9
    %David R. Jessick
    
    
    
    
    
    
    Brett G. Wyard(9)
    
    
    
    
    
    
    C. Dean Metropoulos(10)
    
    
    31,200
    
    
    
    5.9
    %N. Michael Dion(11)
    
    
    
    
    
    
    Evan Metropoulos(11)
    
    
    
    
    
    
    Louis Pellicano(11)
    
    
    
    
    
    
    All directors and executive officers as a group
    
    
    295,940
    
    
    
    55.6
    %
   (1)
    
    Represents the aggregate ownership of the Class A and Class B Units of Crunch Equity
Holding, LLC. Affiliates of JPMP Capital Corp. and J.W. Childs Equity Investors III, L.P. and
Crunch Equity Voting Trust own only Class A Units. The Class B Units are owned only by CDM
Investor Group LLC and its officers.(2)
    
    Includes 90,082.10 Units, 16,846.69 Units, 2,588.56 Units, 8,457.80 Units, 5,704 Units and
945.85 Units of Class A Units owned by J.P. Morgan Partners (BHCA), L.P., J.P. Morgan Partners
Global Investors, L.P., J.P. Morgan Partners Global Investors A, L.P., J.P. Morgan Partners
Global Investors (Cayman), L.P., J.P. Morgan Partners Global Investors (Selldown), L.P. and
J.P. Morgan Partners Global Investors (Cayman) II, L.P., respectively. JPMP Capital Corp.,
which is an affiliate of JPMorgan Chase & Co., is the direct or indirect general partner of
each of these entities. JPMP Capital Corp. and each of the foregoing entities is an affiliate
of J.P. Morgan Partners, LLC and has an address c/o J.P. Morgan Partners, LLC, 1221 Avenue of
the Americas, 39th Floor, New York, New York 10020. Also includes 7,500 units owned by
Co-Investment Partners, L.P. Pursuant to a proxy agreement, each of J.P. Morgan Partners
(BHCA), L.P., J.P. Morgan Partners Global Investors, L.P., J.P. Morgan Partners Global
Investors A, L.P., J.P. Morgan Partners Global Investors (Cayman), L.P. and J.P. Morgan
Partners Global Investors (Cayman) II, L.P. has the right to vote the units owned by
Co-Investment Partners, L.P.(3)
    
    Includes 128,957.527 Units owned by J.W. Childs Equity Partners III, L.P. and 3,167.473 Units
owned by JWC Fund III Co-Invest, LLC. J.W. Childs Associates, Inc. is the direct or indirect
majority shareholder, general partner or managing member, as applicable, of each of these
entities. 112




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(4)
    
    Includes 250 Class A Units and 30,950 Class B Units owned by CDM Investor Group LLC. CDM
Investor Group LLC also owns 17,071.85 Class C Units, 28,890.61 Class D Units and 30,411.44
Class E Units. C. Dean Metropoulos is the managing member of CDM Investor Group LLC and has
the sole power to direct the voting and disposition of any Units owned by CDM Investor Group LLC. The non-managing members of CDM
Investor Group LLC are currently Messrs. Dion, E. Metropoulos and Pellicano and certain of their
respective affiliates. The address of CDM Investor Group LLC and each of the foregoing persons
is c/o CDM Investor Group LLC, 67 Mason Street, Greenwich, Connecticut 06830.(5)
    
    Crunch Equity Voting Trust (the Voting Trust) was formed prior to the consummation of the
Aurora Transaction to hold approximately 235,906 Crunch Equity Holding, LLC interests on
behalf of the Aurora bondholders and, 244.875 of Crunch Equity Holding, LLC interests of JWC
and 244.876 of Crunch Equity Holding, LLC Units of JPMP. The interests held by JPMP and JWC
may be exchanged for units in Crunch Equity Holding, LLC upon expiration of the indemnity
agreement described herein. Each ownership interest in the Voting Trust represents a
corresponding interest in Crunch Equity Holding, LLC. The Voting Trust has a board of three
voting trustees. As more fully set forth in the trust agreement for the Voting Trust, the
board has the authority, at the boards sole discretion, to exercise certain rights and cause
the Voting Trust to perform certain obligations of the Voting Trust. Certain other actions
taken by the board require the consent or instruction of the holders of ownership interests in
the Voting Trust. The Voting Trust terminates upon the liquidation, dissolution or winding up
of the affairs of Crunch Equity Holding, LLC or at such time (following the deposit of the
first Class A Units into the Voting Trust) as the Voting Trust ceases to hold any Class A
Units.(6)
    
    Reflects the shares directly owned by J.P. Morgan Partners (BHCA), L.P., J.P. Morgan Partners
Global Investors, L.P., J.P. Morgan Partners Global Investors A., L.P., J.P. Morgan Partners
Global Investors (Cayman), L.P., J.P. Morgan Partners Global Investors (Selldown), L.P. and
J.P. Morgan Partners Global Investors (Cayman) II, L.P. (collectively, the JPMP Entities)
due to his status as an executive officer of JPMP Capital Corp., a wholly owned subsidiary of
JPMorgan Chase & Co. and the direct and indirect general partner of each of the JPMP Entities.
Mr. Murray disclaims beneficial ownership except to the extent of his pecuniary interest. The
address of Mr. Murray is c/o J.P. Morgan Partners, LLC, 1221 Avenue of the Americas, New York,
New York 10020.(7)
    
    Mr. OBrien is a Principal of J.P. Morgan Partners, LLC and a limited partner of JPMP Master
Fund Manager, L.P. (JPMP MFM), an entity which has a carried interest in investments of the
JPMP Entities. While Mr. OBrien has no beneficial ownership of these shares held by the JPMP
Entities under Section 13(d) of the Exchange Act because he has no ability to control the
voting or investment power of the JPMP Entities, Mr. OBrien has an indirect pecuniary
interest in the shares of Crunch Equity Holding, LLC held by the JPMP Entities as a result of
his status as a limited partner of JPMP MFM. Mr. OBrien disclaims beneficial ownership of
these shares except to the extent of his pecuniary interest therein. The actual pecuniary
interest which may be attributable to Mr. OBrien is not readily determinable because it is
subject to several variables, including without limitation, the JPMP Entities internal rate
of return and vesting. Mr. OBriens address is c/o J.P. Morgan Partners, LLC, 1221 Avenue of
the Americas, New York, New York 10020.(8)
    
    Each of Messrs. Childs, Suttin and Rudy may be deemed the beneficial owner of the Units owned
by J.W. Childs Associates, Inc., in their capacity as a shareholder, Partner or Operating
Partner of J.W. Childs Associates, Inc. and certain of its affiliates, as applicable. Each of
Messrs. Childs, Suttin and Rudy disclaim beneficial ownership of such Units. The address for
each of them is c/o J.W. Childs Associates, L.P., 111 Huntington Avenue, Suite 2900, Boston,
Massachusetts 02199-7610.(9)
    
    Mr. Wyard is a Managing Director of Oaktree Capital Management, LLC (Oaktree). Oaktree is
the general partner or investment adviser of certain funds and accounts which hold, in the
aggregate, 77,288.297 units of ownership interest in the Voting Trust, and may be deemed to
have beneficial ownership of such units. Mr. Wyard, Oaktree and its members, principals and
officers hereby disclaim beneficial ownership of such units, except to the extent of any
pecuniary interest therein.(10)
    
    Mr. C.D. Metropoulos may be deemed the beneficial owner of the Units owned by CDM Investor
Group LLC set forth in note (4) due to his status as its managing member. Mr. C.D. Metropoulos
disclaims beneficial ownership of any such Units except to the extent of his pecuniary
interest. 113




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(11)
    
    Each of Messrs. Dion, E. Metropoulos and Pellicano is a non-managing member of CDM Investor
Group LLC but has no power to direct the voting or disposition of Units owned by CDM Investor
Group LLC. 
  ITEM 13.
    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Office space lease We currently lease office space owned by Barrington Properties, LLC, which is an affiliate of C.D.
Metropoulos, our Chairman and Chief Executive Officer. In the twenty-one weeks ended December 26,
2004 and fiscal years 2004, 2003 and 2002, total rent paid under this lease was $39,000, $162,000,
$283,000 and $228,000, respectively. The lease required us to make leasehold improvements of
approximately $318,000. The building, which included the office space leased by a subsidiary of
PFGI, was sold by the owner on January 12, 2004. The lease was amended to reflect that the
subsidiary moved to a different building in Greenwich, Connecticut also owned by Barrington
Properties, LLC. The lease amendment runs through May 31, 2010. Airplane We historically used an aircraft owned by a company indirectly owned by our Chairman. In connection
with the use of this aircraft, we paid net operating expenses of $1,180,000 in fiscal 2002 and
$376,000 in the first quarter of fiscal 2003. In the second quarter of fiscal 2003, the agreement
to use and pay for the plane was terminated early at a cost to us of $2 million. Beginning November
25, 2003, we resumed using the aircraft and in connection with the usage, paid net operating
expenses of $1,543,000 in the thirty-six weeks ended July 31, 2004, and $1,146,000 in the
twenty-one weeks ended December 26, 2004. As of March 2004, our subsidiary, Pinnacle Foods Management Corporation, entered into an agreement
with Fairmont Aviation, LLC, an affiliate of C.D. Metropoulos, our Chairman and Chief Executive
Officer, whereby Fairmont Aviation, LLC has agreed to provide us with use of an aircraft for
approximately $230,000 per month. Subject to each parties termination rights, the agreement
terminates in March 2010 and may be renewed on a month-to-month basis thereafter. Members agreement In connection with the Aurora Transaction, the Sponsors and the Bondholders Trust entered into an
amended and restated members agreement of LLC. The members agreement, among other matters:  
    restricts the transfer of units of Crunch Equity Holding, LLC, subject to certain
exceptions, and provides that all transferees must become a party to the members
agreement;
    provides for a board of managers of Crunch Equity Holding, LLC and a board of
directors of Crunch Holding Corp. and PFC consisting of nine directors, of which:  o
    three were nominated by the members affiliated with JPMP (the JPMP
Directors), with one of such JPMP Director being a person identified and approved
by the Bondholders Trust,o
    three were nominated by the members affiliated with JWC (the JWC
Directors), with one of such JWC Director being a person identified and approved
by the Bondholders Trust,o
    one is C. Dean Metropoulos so long as he is our Chief Executive Officer ando
    two were nominated by the Bondholders Trust;  
    requires each member of Crunch Equity Holding, LLC to vote all their shares for the
election of the persons nominated as managers as provided above;
    provides for a compensation committee and an audit committee, each consisting of at
least three managers, of which:  o
    one member of such committee will be a JPMP Director for so long as the
members affiliated with JPMP hold 25% or more of the Class A Units owned by them at
the consummation of the Aurora Transaction,o
    one member of such committee will be a JWC Director for so long as the
members affiliated with JWC hold 25% or more of the Class A Units owned by them at
the consummation of the Aurora Transaction and 114




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o
    C. Dean Metropoulos will have a seat on the compensation committee for
so long as he is a member of Crunch Equity Holding, LLCs board of managers;  
    prohibits Crunch Equity Holding, LLC or any of its subsidiaries from taking the
following actions, subject to carve outs provided in the members agreement, without
the prior approval of the members of the board of managers affiliated with each of JPMP
and JWC so long as in each case the members affiliated with the applicable Sponsor owns
at least 25% of the Class A Units owned by such party at the consummation of the Aurora
Transaction:  o
    decisions in respect of compensation of members of senior management,
including terminating or amending the employment agreements, issuance of options
and granting of bonuses,o
    approval or amendment of the operating budget,o
    incurring indebtedness outside the ordinary course of business that is
not contemplated by the operating budget,o
    acquiring or disposing of assets or stock of another company in excess
of $5 million that is not contemplated by the operating budget,o
    making investments or capital expenditures, in each case in excess of
$3 million in any one fiscal year not included in the operating budget,o
    entering into affiliate transactions,o
    changing the strategic direction of lines of businesses not specified in the annual strategic plan,o
    authorizing, issuing or selling membership interests or capital stock,o
    making distributions, paying dividends or redeeming or repurchasing
membership interests or capital stock, subject to customary carve-outs and except
as otherwise provided in the members agreement,o
    amending the terms of the governance documents,o
    reorganizations, share exchanges, dissolutions, liquidations or similar organic transactions,o
    any change in the accounting year, taxable year, accountants or accounting practices ando
    establishment of committees of the board of managers or board of directors, as the case may be;  
    require the consent of CDM Investor Group LLC to any changes to the terms of the
Class B, C, D or E units or any amendment to Crunch Equity Holding, LLCs governance
documents that would adversely affect CDM Investor Group LLC in a manner different from
any other member;
    require the consent of the Bondholders Trust to amend Crunch Equity Holding, LLCs
governance documents for so long as the Bondholders Trust holds at least 5% of the
issued and outstanding units;
    contain rights of certain unit holders to participate in transfers of Class A and
Class B units by the Sponsors to third parties;
    contain a right of first refusal by Crunch Equity Holding, LLC with respect to
transfers of Class A and Class B units by members other than Bondholders Trust, and if
Crunch Equity Holding, LLC does not exercise such right, grant the non-transferring
members (other than Bondholders Trust) a right of first refusal;
    grants the Sponsors and Crunch Equity Holding, LLC a right of first offer with
respect to transfers of interests by members of Bondholders Trust;
    grant the members certain preemptive rights;
    require the consent of each of the Sponsors to effect a sale of Crunch Equity
Holding, LLC, Aurora or PFC;
    if CDM Investor Group LLC does not consent to (i) a sale of Crunch Equity Holding,
LLC or Aurora or (ii) a liquidation in connection with a required initial public
offering, grant JPMP and JWC, in the case of clause (i), and Bondholders Trust, in the
case of clause (ii), the right to purchase all of CDM Investor Group LLCs units at a
purchase price equal to the product of (x) $10.75 million and (y) a percentage (which
is not greater than 100%) representing the percentage on original investment of the
capital returned to JPMP, JWC and the Bondholders Trust in connection with such
transaction; and 115




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
    if any of C. Dean Metropoulos, N. Michael Dion, Evan Metropoulos or Louis Pellicano
voluntarily resign from Aurora without good reason (as defined in his respective
employment agreement) and other than as a result of disability (as defined in his
employment agreement), grant Crunch Equity Holding, LLC, Pinnacle or Aurora the option
to purchase the portion of CDM Investor Group LLCs units reflecting such individuals
ownership in CDM Investor Group LLC (i) if such resignation is on or before November
25, 2004, at a purchase price equal to $10.75 million multiplied by such individuals
ownership percentage in CDM Investor Group LLC and (ii) if such
resignation is after November 25, 2004 but on or before November 25, 2005, at a purchase price equal to the
greater of (x) $10.75 million multiplied by such individuals ownership percentage in
CDM Investor Group LLC and (y) fair market value (without regard to any minority or
illiquidity discounts. The members agreement will terminate upon the sale, dissolution or liquidation of Crunch Equity
Holding, LLC. Management and fee agreements In connection with the Pinnacle Transaction, PFHC entered into a management agreement with JPMP and
an affiliate of JWC. Under this agreement, each of JPMP and JWC provide us with financial advisory
and other services. We will pay each of JPMP and JWC an annual management fee in the amount of $0.5
million ($1.0 million in the aggregate) commencing November 2003, and one-fourth of this fee will
be paid each calendar quarter in advance. In addition, we will pay each of JPMP and JWC, in
exchange for advisory services in connection with acquisitions, a transaction fee equal to $1
million upon the consummation of the Aurora Transaction and 0.5% of the aggregate purchase price
upon consummation of any other acquisition or disposition by us. We will also reimburse JPMP and
JWC for all expenses incurred by them in connection with the agreement. The management agreement
may be terminated by either JPMP or JWC with respect to that party only, or by mutual consent of
JPMP and JWC, at any time on 30 days notice, and will terminate with respect to either JPMP or JWC
on the date such party owns less than 5% of the units of Crunch Equity Holding, LLC that it
purchased on the closing date of the Pinnacle Transaction. In addition, the management agreement
may be terminated with respect to either JPMP or JWC in connection with an initial public offering
or a change in law, occurrence or event which causes the existence of the management agreement to
render any of the directors designated by JPMP or JWC an interested or not otherwise independent
director or adversely affects such partys right to designate a director or such directors ability
to perform his duties as director. In such event, such party will be entitled to receive a
termination fee equal to the net present value of the fees which would have been paid to such party
for the two-year period commencing on the date of termination. In connection with the Pinnacle Transaction, we paid each of JPMP and JWC a transaction fee in the
amount of $2.425 million ($4.85 million in the aggregate). We also paid all expenses of JPMP, JWC
and each of their controlled affiliates, including the fees and expenses of their respective
counsel and other advisors and consultants, in connection with the Pinnacle Transaction. In addition, in connection with the Pinnacle Transaction, PFHC entered into an agreement with CDM
Capital LLC, an affiliate of CDM Investor Group LLC, pursuant to which CDM Capital LLC will
receive, in exchange for advisory services in connection with acquisitions, a transaction fee equal
to 0.5% of the aggregate purchase price upon consummation of any acquisition (other than the
Pinnacle Transaction or the Aurora Transaction) by us. The payments to CDM Capital LLC under the
fee agreement cease at the time at which CDM Investor Group LLC no longer owns at least 5% of the
Crunch Equity Holding, LLC units issued to it at the closing of the Pinnacle Transaction. These arrangements with the Sponsors also contain standard indemnification provisions by us of the
Sponsors. Upon the closing date of the Aurora Transaction, PFGI assumed all of PFHCs rights and obligations
under the management and fee agreements. As part of the amendment to the Companys senior credit facilities dated November 19, 2004, the
payment of the management fees have been suspended during the amendment period. Tax sharing agreement On November 25, 2003, we entered into a tax sharing agreement with Crunch Holding Corp. which
provides that we will file U.S. federal income tax returns with Crunch Holding Corp. on a
consolidated basis. This agreement further provides that we make distributions to Crunch Holding
Corp., and Crunch Holding Corp. makes contributions to us, such that we incur the expense for taxes
generated by our business on the same basis as if we did not file consolidated tax returns. Aurora
and its wholly owned subsidiary, Sea Coast, became party to the tax sharing agreement on March 19,
2004. 116




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Indemnity agreement In connection with the Aurora Transaction, we entered into an indemnity agreement with the
Bondholders Trust. Pursuant to the indemnity agreement, the Bondholders Trust is required to
reimburse us in respect of losses resulting from liabilities other than those (a) reserved against
on the balance sheet of Aurora delivered to Crunch Equity Holding, LLC pursuant to the Merger
Agreement (or not required under GAAP to be so reserved against), (b) entered into in the ordinary
course of business, and (c) disclosed as of November 25, 2003; and claims by third parties which
would give rise to a breach of any of the representations or warranties of Aurora set forth in the
Merger Agreement. The Bondholders Trust is not required to reimburse us for the first $1 million of such losses
(subject to upward adjustment of up to $14 million depending on the level of Auroras net debt at
closing) and its aggregate reimbursement obligation may not exceed $30 million. Any claims for
indemnification must be made by us prior to the first anniversary of the closing date of the Aurora
Transaction. The Bondholders Trust may satisfy its indemnification obligations by delivering Class
A units (valued at $1,000 per unit) to Crunch Equity Holding, LLC for cancellation or by paying
cash. The indemnity agreement was amended and restated on May 4, 2004 to provide that the $30
million cap will be increased as further provided therein to the extent we are obligated to pay
amounts in excess of $6.85 million to any prepetition lender in connection with the R2 Top Hat,
Ltd. appeal described in The Transactions. Registration rights agreement In connection with the Aurora Transaction, Crunch Holding Corp. entered into a registration rights
agreement with the members of Crunch Equity Holding, LLC. Pursuant to the registration rights
agreement, following consummation of an IPO by Crunch Holding Corp., affiliates of JPMP, affiliates
of JWC, CDM Investor Group LLC and the Bondholders Trust will each receive a demand registration
right with respect to shares of Crunch Holding Corp. received by it upon liquidation of Crunch
Equity Holding, LLC in connection with the initial public offering, as well as unlimited rights to
include its shares of Crunch Holding Corp. in registered offerings by Crunch Holding Corp. and to
request registration on Form S-3 if Crunch Holding Corp. has qualified for the use of Form S-3, in
all cases subject to certain conditions, standard cutbacks and other customary restrictions. Senior secured credit facilities and interim financing commitment JPMorgan Chase & Co. or one of its affiliates is a lender under the senior secured credit
facilities. In addition, JPMorgan Chase & Co. or its affiliates in conjunction with each of the
other initial purchasers or their affiliates agreed to provide us with senior subordinated
financing in an aggregate amount of $150.0 million in the event that the offering of the old notes
was not consummated. J.P. Morgan Securities Inc. was an initial purchaser of the old notes and both
J.P. Morgan Securities Inc. and JPMorgan Chase & Co. are affiliates of JPMP Capital Corp., which
owns approximately 25% of our parents outstanding capital stock (on a fully diluted basis) and has
the right under the members agreement to appoint three of our directors. JPMP Capital Corp. is an
affiliate of J.P. Morgan Partners, LLC. Steven P. Murray, a partner of J.P. Morgan Partners, LLC,
Kevin G. OBrien, a principal of J.P. Morgan Partners, LLC, and Terry Peets, an advisor to J.P.
Morgan Partners LLC, serve as three of our directors. 117




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ITEM 14.
    PRINCIPAL ACCOUNTANT FEES AND SERVICES Independent Auditors Fees Aggregate fees, including out-of-pocket expenses, for professional services rendered for the
Company by PricewaterhouseCoopers LLP for the 21 weeks ended December 26, 2004 and the fiscal years
ended July 31, 2004 and 2003 were: Twenty-one weeksended
    
    
    Fiscal
    
    
    FiscalDecember 26, 2004
    
    
    2004
    
    
    2003(Dollars in thousands)Audit
    
    $
    709
    
    
    $
    1,989
    
    
    $
    473Audit related
    
    
    
    
    
    
    810
    
    
    
    549Tax
    
    
    75
    
    
    
    51
    
    
    
    All other
    
    
    
    
    
    
    70
    
    
    
    70Total
    
    $
    784
    
    
    $
    2,750
    
    
    $
    1,092
 Audit Fees Aggregate fees, including out-of-pocket expenses, paid or to be paid for professional services
rendered by PricewaterhouseCoopers in connection with (i) the audit of the Companys consolidated
financial statements as of and for the transition year ended December 26, 2004, (ii) the reviews of
the Companys unaudited consolidated interim financial statements as of October 31, 2004, (iii)
issuance of comfort letters and consents, and (iv) assistance with review of debt offering
documents and documents filed with the SEC were $709. Aggregate fees, including out-of-pocket expenses, paid or to be paid for professional services
rendered by PricewaterhouseCoopers in connection with (i) the audit of the Companys consolidated
financial statements as of and for the year ended July 31, 2004, (ii) the reviews of the Companys
unaudited consolidated interim financial statements as of October 31, 2003, January 31, 2004, and
April 30, 2004, (iii) issuance of comfort letters and consents, and (iv) assistance with review of
debt offering documents and documents filed with the SEC were $1,989 for fiscal 2004. Aggregate fees for these services for the year ended July 31, 2003 was $473. Audit-Related Fees There were no aggregate fees, including out-of-pocket expenses, for professional services rendered
by PricewaterhouseCoopers for audit-related services for the transition year ended December 26,
2004. Audit-related services include historical audits of acquired companies, due diligence related
to acquisitions and employee benefit plan audits. Aggregate fees for these services for the years ended July 31, 2004 and 2003 were $810 and $549,
respectively. Tax Fees Aggregate fees, including out-of-pocket expenses, for professional services rendered by
PricewaterhouseCoopers in connection with tax compliance for the transition year ended December 26,
2004 were $75. Aggregate fees for these services for the years ended July 31, 2004 and 2003 were $51 and $0,
respectively. 118




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All Other Fees Aggregate fees for these services during the twenty-one weeks ended December 31, 2004 and for the
years ended July 31, 2004 and 2003 were $0, $70 and $70, respectively. 
  ITEM 15.
    EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K  a)
    Documents filed as part of this report  1)
    The Consolidated financial statements, financial statement schedules and accompanying
reports of independent registered public accounting firm are included in Item 8 of this
10-K.2)
    Financial Schedule ScheduleNumber
    
    
    Description of ScheduleSchedule II
    
    
    Valuation of Qualifying Accounts
  3)
    Exhibits Exhibit Number
    
    
    Description of exhibit2.1*
    
    
    Agreement and Plan of Reorganization and Merger, by and between, Aurora
Foods Inc. and Crunch Equity Holding, LLC, dated as of November 25, 20032.2*
    
    
    Amendment No. 1, dated January 8, 2004, to the Agreement and Plan of
Reorganization and Merger, by and between, Aurora Foods Inc. and Crunch
Equity Holding, LLC, dated as of November 25, 20032.3*
    
    
    Agreement and Plan of Merger, dated March 19, 2004, between Aurora Foods
Inc. and Pinnacle Foods Holding Corporation3.1*
    
    
    First Amended and Restated Certificate of Incorporation of Aurora Foods
Inc., dated March 19, 20043.2*
    
    
    Aurora Foods Inc. Amended and Restated Bylaws, as adopted on March 19, 20044.1*
    
    
    Indenture dated November 25, 2003, among Pinnacle Foods Holding Corporation;
Pinnacle Foods Corporation; PF Sales, LLC; PF Distribution, LLC; Pinnacle
Foods Brands Corporation; PF Standards Corporation; Pinnacle Foods
Management Corporation, PF Sales (N. Central Region) Corp. and Wilmington
Trust Company.4.2*
    
    
    Supplemental Indenture dated as of March 19, 2004 among Aurora Foods Inc.,
Sea Coast Foods, Inc., Pinnacle Foods Holding Corporation; Pinnacle Foods
Corporation; PF Sales, LLC; PF Distribution, LLC; Pinnacle Foods Brands
Corporation; PF Standards Corporation; Pinnacle Foods Management
Corporation, PF Sales (N. Central Region) Corp. and Wilmington Trust
Company.4.3*
    
    
    Exchange and Registration Rights Agreement, dated as of November 25, 2003,
between J.P. Morgan Securities Inc.; Deutsche Bank Securities Inc.; Pinnacle
Foods Holding Corporation; Pinnacle Foods Corporation; PF Sales, LLC; PF
Distribution, LLC; Pinnacle Foods Brands Corporation; PF Standards
Corporation; Pinnacle Foods Management Corporation and PF Sales (N. Central
Region) Corp.
 119




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##### Table of Contents



Exhibit Number
    
    
    Description of exhibit4.4*
    
    
    Exchange and Registration Rights Agreement, dated as of February 20, 2004,
between J.P. Morgan Securities Inc.; Citigroup Global Markets Inc., CIBC
World Markets Corp., Deutsche Bank Securities Inc.; Pinnacle Foods Holding
Corporation; Pinnacle Foods Corporation; PF Sales, LLC; PF Distribution,
LLC; Pinnacle Foods Brands Corporation; PF Standards Corporation; Pinnacle
Foods Management Corporation and PF Sales (N. Central Region) Corp.9.1*
    
    
    Voting Trust Agreement, dated as of March 18, 2004, by and among the Voting
Trustees party thereto, Wilmington Trust Company, the signatories to the
Trust Accession Instruments listed on Schedule I thereto, Aurora Foods Inc.
and Crunch Equity Holding, LLC10.1*
    
    
    Credit Agreement, dated as of November 25, 2003 among Crunch Holding Corp.,
Pinnacle Foods Holding Corporation, certain Lenders, Deutsche Bank Trust
Company Americas, General Electric Capital Corporation, JPMorgan Chase Bank,
Citicorp North America, Inc. and Canadian Imperial Bank of Commerce.10.2*
    
    
    Assumption Agreement to the Credit Agreement, dated as of March 19, 200410.3*
    
    
    Guarantee and Collateral Agreement dated as of November 25, 200310.4*
    
    
    Supplement No. 1 to the Collateral Agreement, dated March 19, 2004, between
Aurora Foods Inc. and Deutsche Bank Trust Company Americas.10.5*
    
    
    Supplement No. 2 to the Collateral Agreement, dated March 19, 2004, between
Sea Coast Foods, Inc. and Deutsche Bank Trust Company Americas.10.6*
    
    

    Amended and Restated Members Agreement of Crunch Equity Holding, LLC, dated
March 19, 2004.10.7*
    
    
    Amended and Restated Operating Agreement of Crunch Equity Holding, LLC,
dated March 19, 2004.10.8*
    
    
    Management Agreement, dated as of November 25, 2003, by and among Pinnacle
Foods Holding Corporation, J.P. Morgan Partners, LLC and J.W. Childs
Associates, L.P.10.9*
    
    
    Amended and Restated Indemnity Agreement, dated May 4, 2004, between Crunch
Equity Holding LLC and the Class 6 Claim holders party thereto.10.10*
    
    
    Crunch Holding Corporation Registration Rights Agreement, dated as of March
19, 2004, among Crunch Holding Corp. and certain investors party thereto.10.11*
    
    
    Amended and Restated Employment Agreement dated November 25, 2003 between
PFHC and C. Dean Metropoulos10.12*
    
    
    Amended and Restated Employment Agreement dated November 25, 2003 between
PFHC and Evan Metropoulos10.13*
    
    
    Amended and Restated Employment Agreement dated November 25, 2003 between
PFHC and Michael Dion10.14*
    
    
    Amended and Restated Employment Agreement dated November 25, 2003 between
PFHC and Louis Pellicano10.15*
    
    
    Indemnification Agreement, dated May 22, 2001, between Pinnacle Foods
Holding Corporation and C. Dean Metropoulos10.16*
    
    
    Amendment No. 1, dated November 25, 2003, to the Indemnification Agreement,
dated May 22, 2001, between Pinnacle Foods Holding Corporation and C. Dean
Metropoulos10.17*
    
    
    Crunch Holding Corp. 2004 Stock Option Plan, effective as of March 19, 200410.18*
    
    
    Crunch Holding Corp. 2004 California Stock Option Plan, effective as of
March 19, 2004
 120




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Exhibit Number
    
    
    Description of exhibit10.19*
    
    
    Crunch Holding Corp. 2004 Stock Purchase Plan, effective as of March 19, 200410.20*
    
    
    Crunch Holding Corp. 2004 California Stock Purchase Plan, effective as of
March 19, 200410.21*
    
    
    Fee Agreement, dated as of September 12, 2003, by and between Crunch
Acquisition Corp., J.P. Morgan Partners, LLC and J.W. Childs Associates,
L.P.10.22*
    
    
    Fee Agreement, dated November 25, 2003, by and among Pinnacle Foods Holding
Corporation, CDM Capital LLC and Crunch Holding Corp.10.23*
    
    
    Amendment No. 1, dated December 8, 2003, to the Fee Agreement, dated
November 25, 2003, by and among Pinnacle Foods Holding Corporation, CDM
Capital LLC and Crunch Holding Corp.10.24*
    
    
    Tax Sharing Agreement, dated as of November 25, 2003, by and among Crunch
Holding Corp., Pinnacle Foods Holding Corporation, Pinnacle Foods
Corporation, Pinnacle Foods Management Corporation, Pinnacle Foods Brands
Corporation, PF Sales (N. Central Region) Corp., PF Sales, LLC, PF
Distribution, LLC and PF Standards Corporation10.25*
    
    
    Lease, dated May 23, 2001, between Brandywine Operating Partnership, L.P.
and Pinnacle Foods Corporation (Cherry Hill, New Jersey)10.26*
    
    
    Lease, dated August 10, 2001, between 485 Properties, LLC and Pinnacle Foods
Corporation (Mountain Lakes, New Jersey); Amendment No. 1, dated November
23, 2001; Amendment No. 2, dated October 16, 2003.10.27*
    
    
    Swanson Trademark License Agreement (U.S.) by and between CSC Brands, Inc.
and Vlasic International Brands Inc., dated as of March 24, 199810.28*
    
    
    Swanson Trademark License Agreement (Non-U.S.) by and between Campbell Soup
Company and Vlasic International Brands Inc., dated as of March 26, 199810.29*
    
    
    Technology Sharing Agreement by and between Campbell Soup Company and Vlasic
Foods International Inc., dated as of March 26, 199810.30*
    
    
    Amendment No. 1 and Waiver, dated November 1, 2004, to the Credit Agreement
dated as of November 25, 200310.31*
    
    
    Amendment No. 2 and Waiver, dated November 19, 2004, to the Credit Agreement
dated as of November 25, 200312.1
    
    
    Computation of Ratios of Earnings to Fixed Charges14.1*
    
    
    Code of Ethics18.1
    
    

Letter
regarding change in accounting principle21.1*
    
    
    Subsidiaries of Pinnacle Foods Group Inc.24.1
    
    
    Power of Attorney (included in signature pages)31.1
    
    
    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)
 121




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*
    Incorporated by reference to Exhibits to Registration Statement on Form S-4 of the
Registrant, filed on December 23, 2004(A)
    Pursuant to Commission Release No. 33-8212, this certification will be treated as
accompanying this Form 10-K 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.b)
    Reports on Form 8-KNone 122




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##### Table of Contents



SIGNATURES Pursuant to the requirements of Section 13 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 OfficerDate:

    
    March 28, 2005
 Pursuant to the requirement of the Securities Exchange Act of 1934, this report has been signed
below by the following persons on behalf of the registrant and in the capacities and on the dates
indicated. Name
    
    Title
    
    Date/s/ C. DEAN METROPOULOS
    
    Chairman, Chief Executive Officer and Director
    
    March 28, 2005By: C. Dean Metropoulos/s/ N. MICHAEL DION
    
    Executive Vice President and Chief
Financial Officer
    
    March 28, 2005By: N. Michael Dion/s/ DAVID R. JESSICK
    
    Director
    
    March 28, 2005By: David R. Jessick/s/ STEPHEN P. MURRAY
    
    Director
    
    March 28, 2005By: Stephen P. Murray/s/ KEVIN G. OBRIEN
    
    Director
    
    March 28, 2005By: Kevin G. OBrien/s/ TERRY PEETS
    
    Director
    
    March 28, 2005By: Terry Peets/s/ RAYMOND B. RUDY
    
    Director
    
    March 28, 2005By: Raymond B. Rudy/s/ ADAM L. SUTTIN
    
    Director
    
    March 28, 2005By: Adam L. Suttin/s/ BRETT G. WYARD
    
    Director
    
    March 28, 2005By: Brett G. Wyard
 123




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##### Table of Contents



Report of Independent Registered Public Accounting Firm
on
Financial Statement Schedule To the Board of Directors and Shareholder of
Pinnacle Food Group Inc.: Our audits of the consolidated financial statements referred to in our reports dated November 24,
2004 and March 28, 2005 appearing in this Annual Report on Form 10-K also included an audit of the
financial statement schedule listed in Item 15 of this Form 10-K. In our opinion, this financial
statement schedule presents fairly, in all material respects, the information set forth therein
when read in conjunction with the related consolidated financial statements. PRICEWATERHOUSECOOPERS LLP
Philadelphia, Pennsylvania
March 28, 2005 124




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##### Table of Contents



SCHEDULE II VALUATION ANDQUALIFYING ACCOUNTS (in thousands)
    
    
    
    
    
    AdditionsBalance
    
    
    Charged to
    
    
    
    
    
    
    
    
    
    
    BalanceAugust 1,
    
    
    Cost and
    
    
    Impact of Business
    
    
    
    
    
    
    July 31,2001
    
    
    Expense
    
    
    Acquisitions
    
    
    Deductions
    
    
    2002,Inventory reserve
    
    $
    569
    
    
    $
    1,998
    
    
    $
    
    
    
    $
    (1,102
    )
    
    $
    1,465Deferred tax valuation allowance
    
    
    13,017
    
    
    
    
    
    
    
    (9,011
    )
    
    
    (2,029
    )
    
    
    1,977$
    13,586
    
    
    $
    1,998
    
    
    $
    (9,011
    )
    
    $
    (3,131
    )
    
    $
    3,442
 AdditionsImpact of
    
    
    
    
    
    
    BalanceBalance August 1,
    
    
    Charged to Cost and
    
    
    Business
    
    
    
    
    
    
    July 31,2002
    
    
    Expense
    
    
    Acquisitions
    
    
    Deductions
    
    
    2003Inventory reserve
    
    $
    1,465
    
    
    $
    640
    
    
    $
    
    
    
    $
    (996
    )
    
    $
    1,109Deferred tax valuation allowance
    
    
    1,977
    
    
    
    274
    
    
    
    
    
    
    
    
    
    
    
    2,251$
    3,442
    
    
    $
    914
    
    
    $
    
    
    
    $
    (996
    )
    
    $
    3,360
 Additions
    
    
    
    
    
    
    BalanceBalance August 1,
    
    
    Charged to Cost and
    
    
    Impact of Business
    
    
    
    
    
    
    November 24,2003
    
    
    Expense
    
    
    Acquisitions
    
    
    Deductions
    
    
    2003Inventory reserve
    
    $
    1,109
    
    
    $
    516
    
    
    $
    
    
    
    $
    (225
    )
    
    $
    1,400Deferred tax valuation allowance
    
    
    2,251
    
    
    
    487
    
    
    
    
    
    
    
    
    
    
    
    2,738$
    3,360
    
    
    $
    1,003
    
    
    $
    
    
    
    $
    (225
    )
    
    $
    4,138
 AdditionsBalanceBalance November
    
    
    Charged to Cost and
    
    
    Impact of Business
    
    
    
    
    
    
    July 31,25, 2003
    
    
    Expense
    
    
    Acquisitions
    
    
    Deductions
    
    
    2004Inventory reserve
    
    $
    1,400
    
    
    $
    7,217
    
    
    $
    4,406
    
    
    $
    (599
    )
    
    $
    12,424Deferred tax valuation allowance
    
    
    2,738
    
    
    
    27,703
    
    
    
    289,270
    
    
    
    
    
    
    
    319,711$
    4,138
    
    
    $
    34,920
    
    
    $
    293,676
    
    
    $
    (599
    )
    
    $
    332,135
 AdditionsBalanceBalance August 1,
    
    
    Charged to Cost and

    
    
    Impact of Business
    
    
    
    
    
    
    December 31,2004
    
    
    Expense
    
    
    Acquisitions
    
    
    Deductions
    
    
    2004Inventory reserve
    
    $
    12,424
    
    
    $
    7,766
    
    
    $
    
    
    
    $
    (3,566
    )
    
    $
    16,624Deferred tax valuation allowance
    
    
    319,711
    
    
    
    18,650
    
    
    
    
    
    
    
    
    
    
    
    338,361$
    332,135
    
    
    $
    26,416
    
    
    $
    
    
    
    $
    (3,566
    )
    
    $
    354,985
 125