Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________
FORM 10-Q
_____________________
ý
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 25, 2012
OR
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________to _____________.
Commission File Number 333-148297
___________________________________
Pinnacle Foods Finance LLC
(Exact name of registrant as specified in its charter)
___________________________________
Delaware
 
20-8720036
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)
 
 
 
399 Jefferson Road
Parsippany, New Jersey
 
07054
(Address of Principal Executive Offices)
 
(Zip Code)
Registrant’s telephone number, including area code: (973) 541-6620
___________________________________
Securities registered pursuant to Section 12(b) of the Act: None

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.  Yes   ¨      No   ý
(The Registrant believes it is a voluntary filer and it has filed all reports under Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months.)
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).     Yes   ý     No   ¨

Table of Contents

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (Check One):
Large accelerated filer
¨
Accelerated filer
¨
 
 
 
 
Non-accelerated filer
ý
Smaller Reporting Company
¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)
Yes   ¨     No   ý
As of May 9, 2012 , 100% of the registrant's outstanding limited liability company interests were held by Peak Finance Holdings LLC, its sole member.


Table of Contents

 
TABLE OF CONTENTS
FORM 10-Q
Page
No.
ITEM 1:
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
ITEM 2:
ITEM 3:
ITEM 4:
ITEM 1:
ITEM 1A:
ITEM 2:
ITEM 3:
ITEM 4:
ITEM 5:
ITEM 6:
 

Table of Contents


PART I - FINANCIAL INFORMATION
ITEM 1.      FINANCIAL STATEMENTS

Unaudited consolidated financial statements begin on the following page

 
PINNACLE FOODS FINANCE LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
(thousands of dollars)
 
   

Three months ended
   

March 25,
2012

March 27,
2011
Net sales

$
616,925


$
606,311

Cost of products sold

481,248


452,916

Gross profit

135,677


153,395

Operating expenses




Marketing and selling expenses

44,000


41,831

Administrative expenses

20,614


20,996

Research and development expenses

2,207


1,994

Other expense (income), net

3,686


3,811

Total operating expenses

70,507


68,632

Earnings before interest and taxes

65,170


84,763

Interest expense

49,612


51,327

Interest income

58


79

Earnings before income taxes

15,616


33,515

Provision for income taxes

6,077


13,263

Net earnings

$
9,539


$
20,252

See accompanying Notes to Unaudited Consolidated Financial Statements

PINNACLE FOODS FINANCE LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS (unaudited)
(thousands of dollars)

 
Three months ended
March 25, 2012
 
March 27, 2011
Net earnings
$
9,539

 
$
20,252

Other comprehensive earnings
 
 
 
Swaps mark to market adjustments
(263
)
 
1,108

Amortization of deferred mark-to-market adjustment on terminated swaps
413

 
705

Foreign currency translation
265

 
489

Loss on pension actuarial assumptions
(97
)
 
—

Tax provision on other comprehensive earnings
(254
)
 
(1,131
)
Total other comprehensive earnings - net of tax
64

 
1,171

Total comprehensive earnings
$
9,603

 
$
21,423

See accompanying Notes to Unaudited Consolidated Financial Statements


PINNACLE FOODS FINANCE LLC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (unaudited)
(thousands of dollars)
 
March 25,
2012
 
December 25,
2011
Current assets:
 
 
 
Cash and cash equivalents
$
167,212

 
$
151,031

Accounts receivable, net of allowances of $6,964 and $5,440, respectively
184,262

 
159,981

Inventories
317,961

 
335,812

Other current assets
7,316

 
7,549

Deferred tax assets
71,046

 
71,109

Total current assets
747,797

 
725,482

Plant assets, net of accumulated depreciation of $218,090 and $205,281, respectively
497,727

 
501,283

Tradenames
1,604,512

 
1,604,512

Other assets, net
170,838

 
178,849

Goodwill
1,441,495

 
1,441,495

Total assets
$
4,462,369

 
$
4,451,621

 
 
 
 
Current liabilities:
 
 
 
Short-term borrowings
$
1,585


$
1,708

Current portion of long-term obligations
15,477

 
15,661

Accounts payable
136,793

 
152,869

Accrued trade marketing expense
41,573

 
35,125

Accrued liabilities
138,561

 
128,785

Total current liabilities
333,989

 
334,148

Long-term debt (includes $121,763 and $121,992 owed to related parties, respectively)
2,735,218

 
2,738,650

Pension and other postretirement benefits
91,231

 
93,406

Other long-term liabilities
23,676

 
22,099

Deferred tax liabilities
423,350

 
417,966

Total liabilities
3,607,464

 
3,606,269

Commitments and contingencies (Note 11)
—

 
—

Member’s equity:
 
 
 
Limited liability company interests
—

 
—

Additional paid-in-capital
697,302

 
697,352

Retained earnings
209,975

 
200,436

Accumulated other comprehensive loss
(52,372
)
 
(52,436
)
Total member’s equity
854,905

 
845,352

Total liabilities and member’s equity
$
4,462,369

 
$
4,451,621


See accompanying Notes to Unaudited Consolidated Financial Statements

PINNACLE FOODS FINANCE LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
(thousands of dollars)
  
Three months ended
  
March 25,
2012
 
March 27,
2011
Cash flows from operating activities
 
 
 
Net earnings
$
9,539

 
$
20,252

Non-cash charges (credits) to net earnings
 
 
 
Depreciation and amortization
20,490

 
20,410

Amortization of discount on term loan
301

 
301

Amortization of debt acquisition costs
2,559

 
2,587

Amortization of deferred mark-to-market adjustment on terminated swaps
413

 
705

Change in value of financial instruments
(2,425
)
 
(1,561
)
Equity-based compensation charge
300

 
300

Pension expense, net of contributions
(2,272
)
 
(1,047
)
Other long-term liabilities
32

 
(711
)
Other long-term assets
234

 
182

Deferred income taxes
5,183

 
12,951

Changes in working capital
 
 
 
Accounts receivable
(24,119
)
 
(24,603
)
Inventories
18,069

 
11,185

Accrued trade marketing expense
6,385

 
(229
)
Accounts payable
(15,856
)
 
17,659

Accrued liabilities
14,622

 
18,084

Other current assets
402

 
1,609

Net cash provided by operating activities
33,857

 
78,074

Cash flows from investing activities
 
 
 
Capital expenditures
(13,505
)
 
(15,815
)
Net cash used in investing activities
(13,505
)
 
(15,815
)
Cash flows from financing activities
 
 
 
Repayments of long-term obligations
(3,125
)
 
—

Proceeds from short-term borrowings
815

 
484

Repayments of short-term borrowings
(937
)
 
(799
)
Repayment of capital lease obligations
(792
)
 
(435
)
Repurchases of equity
(350
)
 
—

Debt acquisition costs
—

 
(67
)
Net cash used in financing activities
(4,389
)
 
(817
)
Effect of exchange rate changes on cash
218

 
90

Net change in cash and cash equivalents
16,181

 
61,532

Cash and cash equivalents - beginning of period
151,031

 
115,286

Cash and cash equivalents - end of period
$
167,212

 
$
176,818

 
 
 
 
Supplemental disclosures of cash flow information:
 
 
 
Interest paid
$
35,673

 
$
36,604

Interest received
58

 
79

Income taxes (refunded) paid
96

 
(5,332
)
Non-cash investing and financing activities:
 
 
 
New capital leases
—

 
55

See accompanying Notes to Unaudited Consolidated Financial Statements
PINNACLE FOODS FINANCE LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF MEMBER’S EQUITY (unaudited)
(thousands of dollars, except share amounts)
 
 
Additional
Paid In
Capital
 
Retained
earnings
 
Accumulated
Other
Comprehensive
Loss
 
Total
Member’s
Equity
 
 
Balance, December 26, 2010
$
697,267

 
$
247,350

 
$
(49,532
)
 
$
895,085

 
Equity related compensation
300

 
 
 
 
 
300

 
Comprehensive earnings
 
 
20,252

 
1,171

 
21,423

 
Balance, March 27, 2011
$
697,567

 
$
267,602

 
$
(48,361
)
 
$
916,808

 
 
 
 
 
 
 
 
 
 
Balance, December 25, 2011
$
697,352

 
$
200,436

 
$
(52,436
)
 
$
845,352

 
Repurchases of equity
(350
)
 
 
 
 
 
(350
)
 
Equity related compensation
300

 
 
 
 
 
300

 
Comprehensive earnings
 
 
9,539

 
64

 
9,603

 
Balance, March 25, 2012
$
697,302

 
$
209,975

 
$
(52,372
)
 
$
854,905

 
 
 
 
 
 
 
 
 
See accompanying Notes to Unaudited Consolidated Financial Statements

1
Table of Contents
PINNACLE FOODS FINANCE LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(thousands of dollars, except share amounts and where noted in millions)



1. Summary of Business Activities
Business Overview
Pinnacle Foods Finance LLC (hereafter referred to as the “Company” or “PFF”) is a leading manufacturer, marketer and distributor of high quality, branded convenience food products in North America, the products and operations of which are managed and reported in three operating segments: (i) Birds Eye Frozen, (ii) Duncan Hines Grocery and (iii) Specialty Foods. The Company's United States retail frozen vegetables ( Birds Eye ), frozen complete bagged meals ( Birds Eye Voila! ), frozen seafood ( Van de Kamp's and Mrs. Paul's ), full-calorie single-serve frozen dinners and entrées ( Hungry-Man ), frozen breakfast ( Aunt Jemima ), frozen and refrigerated bagels ( Lender's ), and frozen pizza for one ( Celeste ) are reported in the Birds Eye Frozen Division. The Company's baking mixes and frostings ( Duncan Hines ), shelf-stable pickles ( Vlasic ), table syrups ( Mrs. Butterworth's and Log Cabin ), canned meat ( Armour, Nalley, Brooks ), pie and pastry fillings ( Comstock, Wilderness ), barbecue sauces ( Open Pit ), salad dressing ( Bernstein's ) and all Canadian operations are reported in the Duncan Hines Grocery Division. The Specialty Foods Division consists of snack products ( Tim's Cascade and Snyder of Berlin ) and the Company's food service and private label businesses.
History and Current Ownership
Since 2001, the Company and its predecessors have been involved in several business combinations to acquire certain assets and liabilities related to the brands discussed above.
Effective April 2, 2007, PFF became a direct wholly-owned subsidiary of Peak Finance Holdings LLC (“Peak”). Peak is a direct wholly-owned subsidiary of Crunch Holding Corp. (“Crunch”) and Crunch is 100% owned by Peak Holdings LLC (“Peak Holdings”) and certain members of the Company’s senior management. Peak Holdings is an entity controlled by affiliates of The Blackstone Group L.P. (“Blackstone”), a global private investment and advisory firm.
On December 23, 2009, the Company’s subsidiary, Pinnacle Foods Group LLC (“PFG”), purchased all of the common stock of Birds Eye Foods, Inc. (the “Birds Eye Foods Acquisition”).

2. Interim Financial Statements

In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments (consisting primarily of normal recurring adjustments) necessary for a fair statement of the Company’s financial position as of March 25, 2012 , the results of operations for the three months ended March 25, 2012 and March 27, 2011 , and the cash flows for the three months ended March 25, 2012 and March 27, 2011 . The results of operations are not necessarily indicative of the results to be expected for the full fiscal year. The accompanying unaudited consolidated financial statements and notes thereto should be read in conjunction with the audited consolidated financial statements and notes thereto for the fiscal year ended December 25, 2011.
3. Fair Value Measurements
The authoritative guidance for financial assets and liabilities discusses valuation techniques, such as the market approach (comparable market prices), the income approach (present value of future income or cash flow), and the cost approach (cost to replace the service capacity of an asset or replacement cost). The guidance utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels:
Level 1:
Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2:
Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.
Level 3:
Unobservable inputs that reflect the Company’s assumptions.
The Company’s financial assets and liabilities subject to recurring fair value measurements and the required disclosures are as follows:
 
 
Fair Value
as of
March 25, 2012
 
Fair Value Measurements
Using Fair Value Hierarchy
 
 
Fair Value
as of
December 25, 2011
 
Fair Value Measurements
Using Fair Value Hierarchy
 
Level 1
 
Level 2
 
Level 3
Level 1
 
Level 2
 
Level 3
Assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate derivatives
$
—

 
$
—

 
$
—

 
$
—

 
 
$
1,335

 
$
—

 
$
1,335

 
$
—

Foreign currency derivatives
1

 
—

 
1

 
—

 
 
931

 
—

 
931

 
—

Corn derivatives
—

 
—

 
—

 
—

 
 
142

 
—

 
142

 
—

Diesel fuel derivatives
1,235

 
—

 
1,235

 
—

 
 
—

 
—

 
—

 
—

Total assets at fair value
$
1,236

 
$
—

 
$
1,236

 
$
—

 
 
$
2,408

 
$
—

 
$
2,408


$
—

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate derivatives
$
5,722

 
$
—

 
$
5,722

 
$
—

 
 
$
7,836

 
$
—

 
$
7,836

 
$
—

Foreign currency derivatives
43

 
—

 
43

 
—

 
 
—

 
—

 
—

 
—

Natural gas derivatives
267

 
—

 
267

 
—

 
 
—

 
—

 
—

 
—

Diesel fuel derivatives
—

 
—

 
—

 
—

 
 
31

 
—

 
31

 
—

Wheat derivatives
—

 
—

 
—

 
—

 
 
1,584

 
—

 
1,584

 
—

Total liabilities at fair value
$
6,032

 
$
—

 
$
6,032

 
$
—

 
 
$
9,451

 
$
—

 
$
9,451

 
$
—


The Company manages economic risks, including interest rate, liquidity and credit risk, primarily by managing the amount, sources and duration of its debt funding and the use of derivative financial instruments. The primary risks managed by using derivative instruments are interest rate risk, foreign currency exchange risk and commodity price risk.

The valuations of these instruments are determined using widely accepted valuation techniques, including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate, commodity, and foreign exchange forward curves. The fair values of interest rate swaps are determined using the market standard methodology of netting the discounted future fixed cash payments (or receipts) and the discounted expected variable cash receipts (or payments). The variable cash receipts (or payments) are based on an expectation of future interest rates (forward curves) derived from observable market interest rate curves. To comply with the provisions of the authoritative guidance for fair value disclosure, the Company incorporates credit valuation adjustments to appropriately reflect both its own non-performance risk and the respective counterparty’s non-performance risk in the fair value measurements. In adjusting the fair value of its derivative contracts for the effect of non-performance risk, the Company has considered the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts, and guarantees. The Company had no fair value measurements based upon significant unobservable inputs (Level 3) as of March 25, 2012 or December 25, 2011 .

In addition to the instruments named above, the Company also makes fair value measurements in connection with its annual goodwill and trade name impairment testing. These measurements would fall into Level 3 of the fair value hierarchy.

In December 2011, the Company adopted the provisions of the Financial Accounting Standards Board's (“FASB”) Accounting Standards Update No. 2011-04, “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements," (“ASU 2011-04”). For purposes of calculating fair value of financial instruments, we manage the portfolio of financial assets and financial liabilities on the basis of the Company's net exposure to credit risk. The Company has elected to apply the portfolio exception in ASU 2011-04 with respect to measuring counterparty credit risk for all of its derivative transactions subject to master netting arrangements on a net basis by counterparty portfolio.
.

4. Other Expense (Income), net
 
 
Three months ended
 
March 25,
2012

March 27,
2011
Other expense (income), net consists of:



Amortization of intangibles/other assets
$
3,882


$
4,039

Royalty income and other
(196
)

(228
)
Total other expense (income), net
$
3,686


$
3,811



5. 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 quarterly. 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:

 
March 25, 2012
 
December 25, 2011
Customers
$
183,294

 
$
154,949

Allowances for cash discounts, bad debts and returns
(6,964
)
 
(5,440
)
Subtotal
176,330

 
149,509

Other receivables
7,932

 
10,472

Total
$
184,262

 
$
159,981


Inventories. Inventories are as follows:
 
 
March 25,
2012
 
December 25,
2011
Raw materials, containers and supplies
$
81,654

 
$
66,247

Finished product
236,307

 
269,565

Total
$
317,961

 
$
335,812


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:
 
March 25, 2012
 
December 25, 2011
Prepaid expenses
$
6,455

 
$
6,540

Prepaid income taxes
861

 
1,009

 
$
7,316

 
$
7,549


Plant Assets. Plant assets are as follows:
 
March 25, 2012
 
December 25, 2011
Land
$
18,002

 
$
18,001

Buildings
177,035

 
163,397

Machinery and equipment
490,177

 
474,556

Projects in progress
30,603

 
50,610

Subtotal
715,817

 
706,564

Accumulated depreciation
(218,090
)
 
(205,281
)
Total
$
497,727

 
$
501,283


Depreciation was $16,606 and $16,371 during the three months ended March 25, 2012 and March 27, 2011 , respectively. As of March 25, 2012 and December 25, 2011 , Plant Assets included assets under capital lease with a book value of $22,842 and $14,332 (net of accumulated depreciation of $6,040 and $3,361), respectively.
Accrued Liabilities. Accrued liabilities are as follows:
 
March 25,
2012

December 25,
2011
Employee compensation and benefits
$
55,278

 
$
50,891

Interest payable
47,800

 
36,840

Consumer coupons
5,706

 
3,170

Accrued restructuring charges (see note 7)
2,462

 
4,076

Accrued financial instrument contracts (see note 10)
4,485

 
9,451

Other
22,830

 
24,357

Total
$
138,561

 
$
128,785

Other Long-Term Liabilities. Other long-term liabilities are as follows:
 
March 25,
2012
 
December 25,
2011
 Employee compensation and benefits
$
9,380

 
$
9,589

 Long-term rent liability and deferred rent allowances
7,045

 
6,594

 Liability for uncertain tax positions
1,931

 
1,788

 Accrued financial instrument contracts (see note 10)
1,546

 
—

 Other
3,774

 
4,128

Total
$
23,676

 
$
22,099


6. Goodwill, Tradenames and Other Assets
Goodwill
Goodwill by segment is as follows:
 
 
Birds Eye
Frozen
 
Duncan
Hines
Grocery
 
Specialty
Foods
 
Total
Balance, December 25, 2011
$
527,069

 
$
740,465

 
$
173,961

 
$
1,441,495

 
 
 
 
 
 
 
 
Balance, March 25, 2012
$
527,069


$
740,465


$
173,961


$
1,441,495

 
 
 
 
 
 
 
 

The authoritative guidance for business combinations requires that all business combinations be accounted for at fair value under the acquisition method of accounting. The authoritative guidance for goodwill provides that goodwill will not be amortized, but will be tested for impairment on an annual basis or more often when events indicate. The Company completed its annual testing as of December 25, 2011. As a result of the testing, the Company recognized goodwill impairments of $122.9 million in its Frozen Breakfast, Private label, and Food Service reporting units during the year ended December 25, 2011.

Tradenames

Tradenames by segment are as follows:

 
 Birds Eye
 
 Duncan Hines
 
 Specialty
 
 
 
 Frozen
 
 Grocery
 
 Foods
 
 Total
Balance, December 25, 2011
$
796,680

 
$
771,832

 
$
36,000

 
$
1,604,512

 
 
 
—

 
 
 

Balance, March 25, 2012
$
796,680

 
$
771,832

 
$
36,000

 
$
1,604,512

 
 
 
 
 
 
 
 


The authoritative guidance for indefinite-lived assets provides that indefinite-lived assets will not be amortized, but will be tested for impairment on an annual basis or more often when events indicate. As a result of its annual testing of indefinite-lived assets in December 2011, the Company recorded impairment charges totaling $25.3 million in its Aunt Jemima , Lender's and Bernstein's tradenames during the year ended December 25, 2011.
Other Assets
 
 
March 25, 2012
 
Weighted
Avg Life
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Net
Amortizable intangibles
 
 
 
 
 
 
 
Recipes
10

 
$
52,810

 
$
(26,380
)
 
$
26,430

Customer relationships - Distributors
36

 
125,746

 
(24,380
)
 
101,366

Customer relationships - Food Service
7

 
36,143

 
(29,308
)
 
6,835

Customer relationships - Private Label
7

 
9,214

 
(8,123
)
 
1,091

License
7

 
4,875

 
(1,684
)
 
3,191

Total amortizable intangibles
 
 
$
228,788

 
$
(89,875
)
 
$
138,913

Deferred financing costs
 
 
77,112

 
(48,787
)
 
28,325

Other (1)
 
 
3,600

 
—

 
3,600

Total other assets, net
 
 
 
 
 
 
$
170,838

 
Amortizable intangibles by segment
 
 
 
Birds Eye Frozen
 
 
 
$
74,467

 
Duncan Hines Grocery
 
 
 
52,686

 
Specialty Foods
 
 
 
11,760

 
 
 
 
 
 
 
$
138,913

 
 
December 25, 2011
 
Weighted
Avg Life
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Net
Amortizable intangibles
 
 
 
 
 
 
 
Recipes
10

 
$
52,810

 
$
(25,084
)
 
$
27,726

Customer relationships - Distributors
36

 
125,746

 
(22,947
)
 
102,799

Customer relationships - Food Service
7

 
36,143

 
(28,472
)
 
7,671

Customer relationships - Private Label
7

 
9,214

 
(7,989
)
 
1,225

License
7

 
4,875

 
(1,500
)
 
3,375

Total amortizable intangibles
 
 
$
228,788

 
$
(85,992
)
 
$
142,796

Deferred financing costs
 
 
77,112

 
(46,228
)
 
30,884

Financial instruments (see note 10)
 
 
1,335

 
—

 
1,335

Other (1)
 
 
3,834

 
—

 
3,834

Total other assets, net
 
 
 
 
 
 
$
178,849

 
Amortizable intangibles by segment
 
 
 
Birds Eye Frozen
 
 
 
$
76,054

 
Duncan Hines Grocery
 
 
 
53,948

 
Specialty Foods
 
 
 
12,794

 
 
 
 
 
 
 
$
142,796


(1) As of March 25, 2012 and December 25, 2011 , Other consists of security deposits.
Amortization of intangible assets was $3,882 for the three months ended March 25, 2012 and $4,039 for the three months ended March 27, 2011 . Estimated amortization expense for each of the next five years and thereafter is as follows: remainder of 2012 - $11,945; 2013 - $15,489; 2014 - $12,205; 2015 - $10,916; 2016 - $10,259 and thereafter - $78,099.

Deferred Financing Costs
All deferred financing costs, which relate to the Senior Secured Credit Facility, Senior Notes and Senior Subordinated Notes are amortized into interest expense over the life of the related debt facility using the effective interest method. Amortization of the deferred financing costs was $ 2,559 and $ 2,587 during the three months ended March 25, 2012 and March 27, 2011 , respectively.
The following summarizes deferred financing cost activity:
 
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Net
Balance, December 25, 2011
$
77,112

 
$
(46,228
)
 
$
30,884

2012 - Additions
—

 
—

 
—

         - Amortization
—

 
(2,559
)
 
(2,559
)
Balance, March 25, 2012
$
77,112

 
$
(48,787
)
 
$
28,325

7. Restructuring Charges

Rochester, NY Office
The Rochester, NY office was the former headquarters of Birds Eye Foods, Inc., which was acquired by the Company on December 23, 2009. In connection with the consolidation of activities into the Company’s New Jersey offices, the Rochester office was closed in December 2010. Notification letters under the Worker Adjustment and Retraining Notification Act of 1988 were issued in the first quarter of 2010. Activities related to the closure of the Rochester office began in the second quarter of 2010 and resulted in the elimination of approximately 200 positions. In addition, the Company recognized lease termination costs in 2010 due to the discontinuation of use of the Birds Eye Foods’ corporate headquarters.

The total cost of this restructuring project through March 25, 2012 was $12,462 and all costs were recorded in 2010. The Company expects all severance payments to be completed by the third quarter of 2012.

Tacoma, WA Plant
On December 3, 2010, in an effort to improve our supply chain operations, the Company announced the closure of the Tacoma, WA plant and the consolidation of production into our Fort Madison, IA plant. In connection with this project, we significantly expanded our Fort Madison plant and hired approximately 65 new employees at that location. The Tacoma plant ceased production in June 2011 and the closure resulted in the termination of approximately 160 employees. The Company recorded accelerated depreciation costs of $307 and $2,791in the three months ended March 25, 2012 and March 27, 2011 , respectively. The total cost of this restructuring project through March 25, 2012 was $8,461. All restructuring charges related to the closure of the Tacoma, WA plant are recorded in the Duncan Hines Grocery segment and in the Cost of products sold line on the Consolidated Statements of Operations. The Company expects all severance payments to be completed by the second quarter of 2012.
Fulton, NY Plant
On April 15, 2011, the Company announced plans to consolidate the Birds Eye Frozen Segments' Fulton, NY plant operations into the Darien, WI and Waseca, MN facilities in order to locate vegetable processing closer to the crop growing region and thus reduce the related freight costs. In connection with this project, we made significant capital investments in our Darien, WI and Waseca, MN plants and hired approximately 150 new employees at these facilities. The Fulton facility closed at the end of December, 2011 and resulted in the termination of approximately 270 employees. The Company recorded accelerated depreciation costs of $1,845 in the three months ended March 25, 2012 . The total cost of this restructuring project through March 25, 2012 was $12,820. All restructuring charges related to the closure of the Fulton, NY plant are recorded in the Birds Eye Frozen segment and in the Cost of products sold line on the Consolidated Statements of Operations. The Company expects most of these severance payments to be completed by the third quarter of 2012.
 
The following table summarizes restructuring charges accrued as of March 25, 2012 .

Description
Balance, December 25, 2011
 
Expense
 
Payments
 
Balance, March 25, 2012
Facility shutdowns
$
1,201

 
$
—

 
$
—

 
$
1,201

Employee severance
2,875

 
—

 
(1,614
)
 
1,261

Total
$
4,076

 
$
—

 
$
(1,614
)
 
$
2,462


Accrued restructuring charges are $2,462 as of March 25, 2012 and are recorded on the Consolidated Balance Sheet in Accrued liabilities.

8. Debt and Interest Expense
 

March 25,
2012
 
December 25,
2011
Short-term borrowings

 

- Notes payable
$
1,585

 
$
1,708

Total short-term borrowings
$
1,585

 
$
1,708

Long-term debt
 
 
 
- Senior Secured Credit Facility - Tranche B Term Loans due 2014
$
1,193,750

 
$
1,196,875

- Senior Secured Credit Facility - Tranche D Term Loans due 2014
313,194

 
313,194

- 9.25% Senior Notes due 2015
625,000

 
625,000

- 8.25% Senior Notes due 2017
400,000

 
400,000

- 10.625% Senior Subordinated Notes due 2017
199,000

 
199,000

- Unamortized discount on long term debt
(2,410
)
 
(2,712
)
- Capital lease obligations
22,161

 
22,954


2,750,695

 
2,754,311

Less: current portion of long-term obligations
15,477

 
15,661

Total long-term debt
$
2,735,218

 
$
2,738,650


 
Interest expense
Three months ended
 
March 25,
2012
 
March 27,
2011
Third party interest expense
$
41,230

 
$
42,437

Related party interest expense
1,331

 
608

Amortization of debt acquisition costs (Note 6)
2,559

 
2,587

Amortization of deferred mark-to-market adjustment on terminated swaps (Note 10)
413

 
705

Interest rate swap losses (Note 10)
4,079

 
4,990

Total interest expense
$
49,612

 
$
51,327


Senior Secured Credit Facility

The Senior Secured Credit Agreement (the “Senior Secured Credit Facility”) consists of (i) term loans in an initial aggregate amount of $1,250.0 million (the “Tranche B Term Loans”); (ii) term loans issued on August 17, 2010 in an initial aggregate principal amount of $442.3 million (the “Tranche D Term Loans”) and (iii) revolving credit commitments in the aggregate amount of $150.0 million (the “Revolving Credit Facility”). The Tranche B and Tranche D Term Loans mature April 2, 2014. The Revolving Credit Facility matures April 2, 2013. The Senior Secured Credit Facility, as well as the indentures covering our various notes referenced below, subject the company to various financial and non-financial covenants.
There were no borrowings outstanding under the Revolving Credit Facility as of March 25, 2012 and December 25, 2011 . There were no borrowings under the revolver during 2011 or 2012.
The total combined amount of the Tranche B Term Loans and Tranche D Term Loans that were owed to affiliates of The Blackstone Group L.P. as of March 25, 2012 and December 25, 2011 , was $ 121,763 and $121,992 , respectively.
 
The Company’s borrowings under the Senior Secured Credit Facility, as amended, bear interest at a floating rate and are maintained as base rate loans or as Eurocurrency rate loans. Base rate loans bear interest at the base rate plus the applicable base rate margin, as defined in the Senior Secured Credit Facility. The 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%. Eurocurrency rate loans bear interest at the adjusted Eurocurrency rate, as described in the Senior Secured Credit Facility, plus the applicable Eurocurrency rate margin. Solely with respect to Tranche D Term Loans, the Eurocurrency rate shall be no less than 1.75% per annum. Solely with respect to Tranche D Term Loans, the base rate shall be no less than 2.75% per annum.
The applicable margins with respect to the Company’s Senior Secured Credit Facility vary from time to time in accordance with the terms thereof and agreed upon pricing grids based on the Company’s leverage ratio as defined in the credit agreement. The applicable margins with respect to the Senior Secured Credit Facility as of March 25, 2012 were:
Applicable Margin (per annum)
 
Revolving Credit Facility and Letters of Credit
 
Tranche B Term Loans
 
Tranche D Term Loans
Eurocurrency Rate for
Revolving Loans and
Letter of Credit Fees
 
Base Rate for
Revolving Loans
 
Commitment Fees
Rate
 
Eurocurrency Rate for
Term Loans
 
Base Rate for
Term Loans
 
Eurocurrency Rate for
Term Loan D
 
Base Rate for
Term Loan D
2.50%
 
1.50%
 
0.50%
 
2.50%
 
1.50%
 
4.25%
 
3.25%
The obligations under the Senior Secured Credit Facility are unconditionally and irrevocably guaranteed by each of the Company’s direct or indirect domestic subsidiaries (collectively, the “Guarantors”). In addition, the Senior Secured Credit Facility is 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 subsidiaries of the Company, or any of its domestic subsidiaries and (ii) certain tangible and intangible assets of the Company and those of the Guarantors (subject to certain exceptions and qualifications).
A commitment fee of 0.50% per annum is applied to the unused portion of the Revolving Credit Facility. As of March 25, 2012 and December 25, 2011 , the interest rate on the revolving credit facility was 2.49% and 2.79% , respectively, however, no borrowings were made during 2011 or 2012. For the three months ended March 25, 2012 and March 27, 2011 , the weighted average interest rate on the term loan components of the Senior Credit Facility was 3.50% and 3.52% , respectively. As of March 25, 2012 and December 25, 2011 the Eurocurrency interest rate on the term loan facility was 3.49% and 3.46% , respectively.
The Company pays a fee for all outstanding letters of credit drawn against the Revolving Credit Facility at an annual rate equivalent to the Applicable Margin then in effect with respect to Eurodollar loans under the Revolving Credit Facility, less the fronting fee payable in respect of the applicable letter of credit. The fronting fee is equal to 0.125% per annum of the daily maximum amount then available to be drawn under such letter of credit. The fronting fees are computed on a quarterly basis in arrears. Total letters of credit issued under the Revolving Credit Facility cannot exceed $ 50,000 . As of March 25, 2012 and December 25, 2011 , the Company had utilized $ 33,224 and $ 33,568 , respectively of the Revolving Credit Facility for letters of credit. As of March 25, 2012 and December 25, 2011 , there were no borrowings under the Revolving Credit Facility. As of March 25, 2012 and December 25, 2011 , respectively, there was $ 116,776 and $ 116,432 of borrowing capacity under the Revolving Credit Facility, of which $ 16,776 and $ 16,432 was available to be used for letters of credit.
Under the terms of the Senior Secured Credit Facility, the Company is required to use 50% of its “Excess Cash Flow” to prepay the Tranche B Term Loans and the Tranche D Term Loans. Excess Cash Flow is defined as consolidated net income (as defined), as adjusted for certain items, including (1) all non cash charges and credits included in arriving at consolidated net income, (2) changes in working capital, (3) capital expenditures (to the extent they were not financed with debt), (4) the aggregate amount of principal payments of indebtedness and (5) certain other items defined in the Senior Secured Credit Facility. In December 2011 and 2010, the Company made voluntary prepayments on its Tranche D terms loans of $55.0 million and $73.0 million, respectively. As a result of these prepayments, no payment was due under the Excess Cash Flow requirements of Senior Secured Credit Facility for the 2010 and 2011 reporting years.
 
The Tranche B Term Loans mature in quarterly 0.25% installments from September 2007 to December 2013 with the remaining balance due in April 2014. The aggregate maturities of the Tranche B Term Loan outstanding as of March 25, 2012 are $9.4 million in the remainder of 2012, $12.5 million in 2013 and $1,171.9 million in 2014. The aggregate maturities of the Tranche D Term Loans outstanding as of March 25, 2012 are no payments due in 2012 and 2013, with a lump sum payment of $313.2 million due in 2014.

Pursuant to the terms of the Senior Secured Credit Facility, if at any time there are borrowings outstanding under the revolving credit facility in an aggregate amount greater than $10.0 million, the Company is required to maintain a ratio of consolidated total senior secured debt to EBITDA (as defined in the Senior Secured Credit Facility) for the most recently concluded four consecutive fiscal quarters (the “Senior Secured Leverage Ratio”) of less than 4.00 to 1.00. Consolidated total senior secured debt is defined under the Senior Secured Credit Facility as aggregate consolidated secured indebtedness of the Company less the aggregate amount of all unrestricted cash and cash equivalents. In addition, under the Senior Secured Credit Facility and the indentures governing the Senior Notes and Senior Subordinated Notes, our ability to engage in activities such as incurring additional indebtedness, making investments and paying dividends is tied to the Senior Secured Leverage Ratio, in the case of the Senior Secured Credit Facility, or to the ratio of EBITDA to fixed charges for the most recently concluded four consecutive fiscal quarters, in the case of the Senior Notes and the Senior Subordinated Notes. The Senior Secured Credit Facility also permits restricted payments up to an aggregate amount of (together with certain other amounts) the greater of $50 million and 2% of our consolidated total assets, so long as no default has occurred and is continuing and our pro forma Senior Secured Leverage Ratio would be no greater than 4.25 to 1.00. As of March 25, 2012 the Company is in compliance with all covenants and other obligations under the Senior Secured Credit Facility, the Senior Notes and the Senior Subordinated Notes.
Senior Notes and Senior Subordinated Notes
On April 2, 2007, the Company issued $325.0 million of 9.25% Senior Notes (the “Senior Notes”) due 2015, and $250.0 million of 10.625% Senior Subordinated Notes (the “Senior Subordinated Notes”) due 2017. On December 23, 2009, as part of the Birds Eye Foods Acquisition, the Company issued an additional $300 million of 9.25% Senior Notes due in 2015 (the “Additional Senior Notes”). The Senior Notes and the Additional Senior Notes are collectively referred to herein as the 9.25% Senior Notes. On August 17, 2010, the Company issued $400.0 million of 8.25% Senior Notes due 2017 (the “8.25% Senior Notes”) and utilized the proceeds to repay the Tranche C Term Loans.
The 9.25% Senior Notes and the 8.25% Senior Notes are general unsecured obligations of the Company, effectively subordinated in right of payment to all existing and future senior secured indebtedness of the Company and guaranteed on a full, unconditional, joint and several basis by the Company’s wholly-owned domestic subsidiaries that guarantee other indebtedness of the Company. The Senior Subordinated 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 that guarantee other indebtedness of the Company. See Note 16 to the Consolidated Financial Statements for Guarantor and Nonguarantor Financial Statements.
The Company may redeem some or all of the 8.25% Senior Notes at any time prior to September 1, 2013, and some or all of the Senior Subordinated Notes at any time prior to April 1, 2012, in each case at a price equal to 100% of the principal amount of notes redeemed plus the Applicable Premium as of, and accrued and unpaid interest to, the redemption date, subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date. The “Applicable Premium” is defined as the greater of (1) 1.0% of the principal amount of such note and (2) the excess, if any, of (a) the present value at such redemption date of (i) the redemption price of such 8.25% Senior Note at September 1, 2013 or such Senior Subordinated Note at April 1, 2012, plus (ii) all required interest payments due on such 8.25% Senior Note through September 1, 2013 or such Senior Subordinated Note through April 1, 2012 (excluding accrued but unpaid interest to the redemption date), computed using a discount rate equal to the treasury rate plus 50 basis points over (b) the principal amount of such note.
The Company currently may redeem the 9.25% Senior Notes, and in the future may redeem the 8.25% Senior Notes or the Senior Subordinated Notes, at the redemption prices listed below, if redeemed during the twelve-month period beginning on April 1 st (for the 9.25% Senior Notes and Senior Subordinated Notes) or September 1 st (for the 8.25% Senior Notes) of each of the years indicated below:
 
9.25% Senior Notes
 
8.25% Senior Notes
Year
Percentage
 
Year
Percentage
2012
102.313%
 
2013
106.188%
2013 and thereafter
100.000%
 
2014
104.125%
 
 
 
2015
102.063%
 
 
 
2016 and thereafter
100.000%
 
 
 
Senior Subordinated Notes
 
Year
Percentage
2012
105.313
%
2013
103.542
%
2014
101.771
%
2015 and thereafter
100.000
%

In addition, until September 1, 2013, the Company may redeem up to 35% of the aggregate principal amount of the 8.25% Senior Notes at a redemption price equal to 108.25% of the aggregate principal amount thereof, plus accrued and unpaid interest, if any, to the redemption date, subject to the right of holders of the 8.25% Senior Notes of record on the relevant record date to receive interest due on the relevant interest payment date, with the net cash proceeds received by the Company from one or more equity offerings; provided that (i) at least 50% of the aggregate principal amount of the 8.25% Senior Notes originally issued under the indenture remains outstanding immediately after the occurrence of each such redemption and (ii) each such redemption occurs within 90 days of the date of closing of each such equity offering.
As market conditions warrant, the Company and its subsidiaries, affiliates or significant equity holders (including The Blackstone Group L.P. and its affiliates) may from time to time, in their sole discretion, purchase, repay, redeem or retire any of the Company’s outstanding debt or equity securities (including any publicly issued debt or equity securities), in privately negotiated or open market transactions, by tender offer or otherwise.
The estimated fair value of the Company’s long-term debt, including the current portion, as of March 25, 2012 , is as follows:
 
 
 
March 25, 2012
Issue
 
Face Value
 
Fair Value
Senior Secured Credit Facility - Tranche B Term Loans
 
$
1,193,750

 
$
1,186,289

Senior Secured Credit Facility - Tranche D Term Loans
 
313,194

 
312,411

9.25% Senior Notes
 
625,000

 
643,750

8.25% Senior Notes
 
400,000

 
436,000

10.625% Senior Subordinated Notes
 
199,000

 
210,940

 
 
$
2,730,944

 
$
2,789,390





The estimated fair value of the Company’s long-term debt, including the current portion, as of December 25, 2011 , is as follows:

 
 
December 25, 2011
Issue
 
Face Value
 
Fair Value
Senior Secured Credit Facility - Tranche B Term Loans
 
$
1,196,875

 
$
1,169,945

Senior Secured Credit Facility - Tranche D Term Loans
 
313,194

 
313,977

9.25% Senior Notes
 
625,000

 
642,188

8.25% Senior Notes
 
400,000

 
416,000

10.625% Senior Subordinated Notes
 
199,000

 
209,448

 
 
$
2,734,069

 
$
2,751,558


The estimated fair values of our long-term debt are classified as Level 2 in the fair value hierarchy. The fair value is based on the quoted market price for such notes and borrowing rates currently available to the Company for loans with similar terms and maturities.

The 2012 Refinancing
On April 17, 2012 the Company entered into an amendment and restatement of the Senior Secured Credit Facility. As part of this amendment and restatement $641.1 million of the Tranche B Term Loans were extended, as outlined below, and $550 million of the Tranche B Term Loans retained their original terms. The Senior Secured Credit Facilities provide for, among other things: (i) an extension of the maturity date of a portion ($641.1 million) of the existing term loan B facility (the “Extended Initial Term Loans”), (ii) the issuance of a new $400 million term loan E facility (the “Tranche E Term Loans”), (iii) the replacement of the existing revolving credit facility with a new $150 million revolving credit facility (the “Replacement Revolving Credit Facility”), (iv) an amendment to the restricted payments and prepayment of indebtedness covenants to permit the redemption of the Company's 10.625% Senior Subordinated Notes due 2017, (v) the replacement of the senior secured leverage ratio which was previously applicable only to revolving credit facility borrowings of $10 million or more with a net first lien senior secured leverage ratio of 5.25 to 1.00 which is applicable to all outstanding term loans and revolving credit facility borrowings, (vi) future extensions of the maturity dates of all or a portion of the term loans, revolving credit commitments or revolving credit loans with the consent solely of any lender agreeing to such extension, (vii) term loans to be permitted to be refinanced or replaced with senior unsecured, senior secured, senior subordinated or subordinated debt ranking equal to or junior to the term loans and (viii) revolving credit commitments and revolving credit loans to be permitted to be refinanced or replaced with new revolving credit loans.
The stated maturity dates are: October 2, 2016 for the Extended Initial Term Loans, October 17, 2018 for the Tranche E Term Loans, and April 17, 2017 for the Replacement Revolving Credit Facility.

However, the maturity dates would be accelerated as follows:

•
if more than $150.0 million of the Tranche B Term Loans are outstanding on January 1, 2014, the Replacement Revolving Credit Facility would expire January 1, 2014;

•
if more than $150.0 million of the 9.25% Senior Notes are outstanding on December 31, 2014, then the maturity/ expiration dates of the Extended Initial Term Loans, the Tranche E Term Loans and the Replacement Revolving Credit Facility would be December 31, 2014;

•
if more than $150.0 million of the Extended Initial Term Loans are outstanding on July 3, 2016, the Replacement Revolving Credit Facility would expire July 3, 2016; or

•
if more than $150.0 million of the 8.25% Senior Notes are outstanding on June 2, 2017, then the maturity/expiration dates of the Tranche E Term Loans and the Replacement Revolving Credit Facility would be June 2, 2017.

We are required to repay installments on the term loans in quarterly installments in aggregate annual amounts equal to 1.00% of their aggregate initial funded total principal amount, with the remaining amount payable on the applicable maturity date with respect to such term loans.

Borrowings for the Extended Initial Term Loans bear interest, at our option, at a rate equal to a margin over either (a) a base rate or (b) a LIBOR rate. The margin for the Extended Initial Term Loans is 2.50% for base rate loans, and 3.50% for LIBOR rate loans; subject to a step-down of 0.25% in certain circumstances.

Borrowings for the Tranche E Term Loans bear interest, at our option, at a rate equal to a margin over either (a) a base rate or (b) a LIBOR rate; provided that the base rate is subject to a floor of 2.25%, and the LIBOR rate is subject to a floor of 1.25%. The margin for the Tranche E Term Loans is 2.50% for base rate loans, and 3.50% for LIBOR rate loans; subject to a stepdown of 0.25% in certain circumstances.

Borrowings under the Replacement Revolving Credit Facility bear interest, at our option, at a rate equal to a margin over either (a) a base rate or (b) a LIBOR rate. The margin is based on a total leverage based grid and is currently 2.50% for base rate loans and 3.50% for LIBOR rate loans.

In addition to paying interest on outstanding principal under the Senior Secured Credit Facilities, we are required to pay a commitment fee under the Replacement Revolving Credit Facility for the commitments not utilized at the same rate provided for
in our existing revolving credit facility. We are also required to pay customary letter of credit fees.

In connection with the refinancing, the Company incurred approximately $15 million of bank arrangement, rating agency, administrative consent, and other fees as well as $4.0 million of original issue discount on our new tranche E term loan. These costs will be recorded during the second quarter.

On April 19, 2012, the Company redeemed all $199.0 million of its outstanding 10.625% Senior Subordinated Notes at a redemption price equal to 105.313% of the aggregate principal amount plus accrued and unpaid interest to the redemption date. The total redemption price was approximately $210.6 million, including accrued interest of $1.0 million. The make whole premium of $10.6 million will be recorded in Other expense (income) during the second quarter. The redemption was effected in accordance with the indenture governing the Senior Subordinated Notes pursuant to a notice dated March 20, 2012.

The Company funded the redemption price for the Senior Subordinated Notes with the net proceeds of $82.8 million from the Tranche E Term Loans along with $127.8 million of available cash.

9. Pension and Retirement Plans
The Company accounts for pension and retirement plans in accordance with the authoritative guidance for retirement benefit compensation . This guidance requires recognition of the funded status of a benefit plan in the statement of financial position. The guidance also requires recognition in accumulated other comprehensive earnings of certain gains and losses that arise during the period but are deferred under pension accounting rules.
The Company uses a measurement date for the pension benefit plans that coincides with its year end.
The Company has two defined benefit plans (Pinnacle Foods Pension Plan and the Birds Eye Foods Pension Plan), two qualified 401(k) plans, a non-qualified 40l(k) plan and participates in a multi-employer defined benefit plan.
Pinnacle Foods Pension Plan
The Company maintains a non-contributory defined benefit pension plan (the “Pinnacle Foods Pension Plan”) that covers eligible union employees and provides benefits generally based on years of service and employees’ compensation. The Pinnacle Foods Pension Plan is funded in conformity with the funding requirements of applicable government regulations. Plan assets consist principally of cash equivalents, equity and fixed income common collective trusts. Plan assets do not include any of the Company’s own equity or debt securities.
The following represents the components of net periodic benefit cost:
 
Pension Benefits
Pinnacle Foods Pension Plan
 
Three months ended
 
March 25,
2012
 
March 27,
2011
Service cost
$
277

 
$
223

Interest cost
1,028

 
1,066

Expected return on assets
(1,089
)
 
(1,061
)
Amortization of:



prior service cost
10

 
11

actuarial loss
447


181

Net periodic cost
$
673

 
$
420


Cash Flows
Contributions. In fiscal 2012 , the Company expects to make contributions of $4.7 million to the Pinnacle Foods Pension Plan, of which $0.9 million was made in the three months ended March 25, 2012 . The Company made contributions to the pension plan totaling $6.8 million in fiscal 2011 , of which $0.8 million was made in three months ending March 27, 2011 .
Birds Eye Foods Pension Plan
The Company’s Birds Eye Foods Pension Plan (the “Birds Eye Foods Pension Plan”) consists of hourly and salaried employees and has primarily non-contributory defined-benefit schedules. Benefits for the salaried employees have been frozen since the plan was acquired.
The Company acquired an Excess Benefit Retirement Plan from Birds Eye Foods, which serves to provide employees with the same retirement benefit they would have received from Birds Eye’s retirement plan under the career average base pay formula. Benefits for this plan are frozen.
The Company maintains a non-qualified Supplemental Executive Retirement Plan (“SERP”) which provides additional retirement benefits to two prior executives of Birds Eye Foods who retired prior to November 4, 1994. Expenses and liabilities for the SERP plan are grouped with those of the Birds Eye Pension Plan in all disclosures listed herein.
The benefits for these plans are based primarily on years of service and employees’ pay near retirement. The Company’s funding policy is consistent with the funding requirements of Federal laws and regulations. Plan assets consist principally of common stocks, corporate bonds and U.S. government obligations. Plan assets do not include any of the Company’s own equity or debt securities.
The following represents the components of net periodic benefit cost:
 
Pension Benefits
Birds Eye Foods Pension Plan
 
Three months ended
 
March 25,
2012
 
March 27,
2011
Service cost
$
52

 
$
234

Interest cost
1,928

 
2,036

Expected return on assets
(2,086
)
 
(1,910
)
Amortization of:
 
 
 
actuarial loss
87

 
—

Net periodic cost
$
(19
)
 
$
360



Cash Flows
Contributions. In fiscal 2012 , the Company expects to make contributions of $8.8 million to the Birds Eye Foods Pension Plan, of which $1.8 million was made in the three months ended March 25, 2012 . The Company made contributions to the pension plan totaling $9.1 million in fiscal 2011 , of which $0.9 million was made in three months ending March 27, 2011 .
Multi-employer Plans
 
Pinnacle contributes to the United Food and Commercial Workers International Union Industry Pension Fund (EIN 51-6055922) (the "UFCW Plan") under the terms of the collective-bargaining agreement with our Fort Madison employees. The collective bargaining agreement expires during September 2012. For the three months ended March 25, 2012 and March 27, 2011 , contributions to the UFCW Plan were $184 and $153, respectively. Our contributions to this plan are paid monthly based upon the number of employees. They represent less than 5% of the total contributions received by this plan during the most recent plan year.

The risks of participating in multi-employer plans are different from single-employer plans in the following aspects: (a) assets contributed to a multi-employer plan by one employer may be used to provide benefits to employees of other participating employers, (b) if a participating employer stops contributing to the multi-employer plan, the unfunded obligations of the plan may be borne by the remaining participating employers and (c) if the Company chooses to stop participating in the plan, the Company may be required to pay a withdraw liability based on the underfunded status of the plan.
 
The UFCW Plan received a Pension Protection Act “green” zone status for plan year beginning July 1, 2011. The zone status is based on information the Company received from the plan and is certified by the plan's actuary. Among other factors, plans in the green zone are at least 80 percent funded. The UFCW Plan did not utilize any extended amortization provisions that effect its placement in the "green" zone. The UFCW Plan has never been required to implement a funding improvement plan nor is one pending at this time.

10. Financial Instruments
Risk Management Objective of Using Derivatives
The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate, liquidity, and credit risk primarily by managing the amount, sources, and duration of its debt funding and the use of derivative financial instruments. The primary risks managed by using derivative instruments are interest rate risk, foreign currency exchange risk and commodity price risk. Specifically, the Company enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates, foreign exchange rates or commodity prices.
The Company manages interest rate risk based on the varying circumstances of anticipated borrowings and existing variable and fixed rate debt, including the Company’s revolving credit facility. Examples of interest rate management strategies include capping interest rates using targeted interest cost benchmarks, hedging portions of the total amount of debt, or hedging a period of months and not always hedging to maturity, and at other times locking in rates to fix interests costs.
Certain parts of the Company’s foreign operations in Canada expose the Company to fluctuations in foreign exchange rates. The Company’s goal is to reduce its exposure to such foreign exchange risks on its foreign currency cash flows and fair value fluctuations on recognized foreign currency denominated assets, liabilities and unrecognized firm commitments to acceptable levels primarily through the use of foreign exchange-related derivative financial instruments. The Company enters into derivative financial instruments to protect the value or fix the amount of certain obligations in terms of its functional currency. The Company does not enter into these transactions for non-hedging purposes.
The Company purchases raw materials in quantities expected to be used in a reasonable period of time in the normal course of business. The Company generally enters into agreements for either spot market delivery or forward delivery. The prices paid in the forward delivery contracts are generally fixed, but may also be variable within a capped or collared price range. Forward derivative contracts on certain commodities are entered into to manage the price risk associated with forecasted purchases of materials used in the Company’s manufacturing process.
Cash Flow Hedges of Interest Rate Risk
The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish this objective, the Company primarily uses interest rate swaps. Interest rate swaps designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. During the three months ended March 25, 2012 and March 27, 2011 such derivatives were used to hedge the variable cash flows associated with existing variable-rate debt.
As of March 25, 2012 , the Company had the following interest rate swaps that were designated as cash flow hedges of interest rate risk:
 
Product
 
Number of
Instruments
 
Notional
Amount
 
Fixed Rate Range
 
Index
 
Trade Dates
 
Maturity
Dates
Interest Rate Swaps
 
6
 
$
657,371

 
 0.58% - 3.33%
 
 USD-LIBOR-BBA
 
Feb 2009 - Aug 2011
 
Jul 2012 - Apr 2014

The effective portion of changes in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in Accumulated other comprehensive (loss) earnings (“AOCE”) on the Consolidated Balance Sheets and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. The ineffective portion of the change in fair value of the derivatives is recognized directly in earnings. Amounts reported in AOCE related to derivatives will be reclassified to Interest expense as interest payments are made on the Company’s variable-rate debt. During the next twelve months, the Company estimates that an additional $5,555 will be reclassified as an increase to Interest expense.
Due to the counterparty bank declaring bankruptcy in October 2008, the Company discontinued prospectively the hedge accounting on its interest rate derivatives with Lehman Brothers Specialty Financing on the bankruptcy date as those hedging relationships no longer met the definition of effective hedge under authoritative guidance for derivative and hedge accounting. The Company terminated these positions during the fourth quarter of 2008. The Company continues to report the net gain or loss related to the discontinued cash flow hedge in AOCE which is expected to be reclassified into earnings during the original contractual terms of the derivative agreements as the hedged interest payments are expected to occur as forecasted.
Cash Flow Hedges of Foreign Exchange Risk
The Company’s operations in Canada expose the Company to changes in the U.S. Dollar – Canadian Dollar ("USD-CAD") foreign exchange rate. From time to time, the Company’s Canadian subsidiary purchases inventory denominated in U.S. Dollars ("USD"), a currency other than its functional currency. The subsidiary sells that inventory in Canadian dollars. The subsidiary uses currency forward and collar agreements to manage its exposure to fluctuations in the USD-CAD exchange rate. Currency forward agreements involve fixing the USD-CAD exchange rate for delivery of a specified amount of foreign currency on a specified date. Currency collar agreements involve the sale of Canadian Dollar ("CAD") currency in exchange for receiving U.S. dollars if exchange rates rise above an agreed upon rate and sale of USD currency in exchange for receiving CAD dollars if exchange rates fall below an agreed upon rate at specified dates.
As of March 25, 2012 , the Company had the following foreign currency exchange contracts (in aggregate) that were designated as cash flow hedges of foreign exchange risk:
 
Product
 
Number of
Instruments
 
Notional Sold in
Aggregate in ("CAD")
 
Notional
Purchased in
Aggregate in ("USD")
 
USD to CAD
Exchange
Rates
 
Trade Date
 
Maturity
Dates
CAD Forward
 
9
 
$
38,000

 
$
37,874

 
0.999-1.007
 
Feb 2011
 
Apr 2012 - Dec 2012

The effective portion of changes in the fair value of derivatives designated that qualify as cash flow hedges of foreign exchange risk is recorded in AOCE on the Consolidated Balance Sheets and subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. The ineffective portions of the change in fair value of the derivative, as well as amounts excluded from the assessment of hedge effectiveness, are recognized directly in Cost of products sold in the Consolidated Statements of Operations.
Non-designated Hedges of Commodity Risk
Derivatives not designated as hedges are not speculative and are used to manage the Company’s exposure to commodity price risk but do not meet the authoritative guidance for derivative and hedge accounting. From time to time, the Company enters into commodity forward contracts to fix the price of natural gas, diesel fuel, corn, wheat and soybean oil purchases and other commodities at a future delivery date. Changes in the fair value of derivatives not designated in hedging relationships are recorded directly in Cost of products sold in the Consolidated Statements of Operations.

As of March 25, 2012 , the Company had the following derivative instruments that were not designated in qualifying hedging relationships:


Product
 
Number of
Instruments
 
Notional Amount
 
Price/Index
 
Trade Dates
 
Maturity
Dates
Diesel Fuel Contracts
 
2
 
 8,477,350 Gallons
 
 $3.75 - $3.88 per Gallon
 
Aug 2011 - Sep 2011
 
Mar 2012 - Dec 2012
Natural Gas Contracts
 
4
 
 460,000 MMBTU’s
 
 $2.68 - $3.00 per MMBTU
 
Jan 2012 -
Feb 2012
 
Apr 2012-
Sep 2012

The table below presents the fair value of the Company’s derivative financial instruments as well as their classification on the Consolidated Balance Sheets as of March 25, 2012 and December 25, 2011 .
 
 
Tabular Disclosure of Fair Values of Derivative Instruments
 
 
Asset Derivatives
 
Liability Derivatives
 
 
Balance Sheet Location
 
Fair Value
as of
March 25, 2012
 
Balance Sheet Location
 
Fair Value
as of
March 25, 2012
Derivatives designated as hedging instruments
 
 
 
 
 
 
 
 
Interest Rate Contracts
 
 
 
$
—

 
Accrued liabilities
 
$
4,176

 
 
 
 
 
 
Other long-term liabilities
 
1,546

Foreign Exchange Contracts
 
Other current assets
 
$
1

 
Accrued liabilities
 
43

Total derivatives designated as hedging instruments
 
 
 
$
1

 
 
 
$
5,765

Derivatives not designated as hedging instruments
 
 
 
 
 
 
 
 
Diesel Fuel Contracts
 
Other current assets
 
1,235

 
 
 
—

Natural Gas Contracts
 
 
 
—

 
Accrued liabilities
 
267

Total derivatives not designated as hedging instruments
 
 
 
$
1,235

 
 
 
$
267

 
 
 
 
 
 
 
 
 
 
 
Balance Sheet Location
 
Fair Value
as of
December 25, 2011
 
Balance Sheet Location
 
Fair Value
as of
December 25, 2011
Derivatives designated as hedging instruments
 
 
 
 
 
 
 
 
Interest Rate Contracts
 
Other assets, net
 
$
1,335

 
Accrued liabilities
 
$
7,836

Foreign Exchange Contracts
 
Other current assets
 
931

 
 
 
—

Total derivatives designated as hedging instruments
 
 
 
$
2,266

 
 
 
$
7,836

Derivatives not designated as hedging instruments
 
 
 
 
 
 
 
 
Corn Contracts
 
Other current assets
 
$
142

 
 
 
$
—

Diesel Fuel Contracts
 
 
 
—

 
Accrued liabilities
 
31

Wheat Contracts
 
 
 
—

 
Accrued liabilities
 
1,584

Total derivatives not designated as hedging instruments
 
 
 
$
142

 
 
 
$
1,615

The table below presents the effect of the Company’s derivative financial instruments on the Consolidated Statements of Operations and Accumulated other comprehensive (loss) earnings for the three months ended March 25, 2012 and March 27, 2011 .

Tabular Disclosure of the Effect of Derivative Instruments
Gain/(Loss)
 
 
 
 
 
 
 
 
 
 
Derivatives in Cash Flow Hedging
Relationships
 
Recognized in
AOCE on
Derivative
(Effective
Portion)
 
Effective portion
reclassified from AOCE to:
 
Reclassified
from AOCE
into Earnings
(Effective
Portion)
 
Ineffective portion
recognized in Earnings in:
 
Recognized in
Earnings on
Derivative
(Ineffective
Portion)
 
 
 
 
 
 
 
 
 
 
 
Interest Rate Contracts
 
$
(3,383
)
 
Interest expense
 
$
(4,490
)
 
Interest expense
 
$
(1
)
Foreign Exchange Contracts
 
(926
)
 
Cost of products sold
 
32

 
Cost of products sold
 
(15
)
Three months ended March 25, 2012
 
$
(4,309
)
 
 
 
$
(4,458
)
 
 
 
$
(16
)
 
 
 
 
 
 
 
 
 
 
 
Interest Rate Contracts
 
$
(2,420
)
 
Interest expense
 
$
(5,733
)
 
Interest expense
 
$
38

Foreign Exchange Contracts
 
(1,882
)
 
Cost of products sold
 
(506
)
 
Cost of products sold
 
86

Three months ended March 27, 2011
 
$
(4,302
)
 
 
 
$
(6,239
)
 
 
 
$
124

 
 
 
 
 
 
 
 
 
 
 
Derivatives Not Designated as Hedging Instruments
 
Recognized in Earnings in:
 
Recognized in
Earnings on
Derivative
 
 
 
 
Natural Gas Contracts
 
 
 
Cost of products sold
 
$
(327
)
 
 
 
 
Diesel Contracts
 
 
 
Cost of products sold
 
1,260

 
 
 
 
Corn Contracts
 
 
 
Cost of products sold
 
11

 
 
 
 
Wheat Contracts
 
 
 
Cost of products sold
 
(201
)
 
 
 
 
Three months ended March 25, 2012
 
 
 
$
743

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Natural Gas Contracts
 
 
 
Cost of products sold
 
$
5

 
 
 
 
Soybean Oil Contracts
 
 
 
Cost of products sold
 
(57
)
 
 
 
 
Diesel Contracts
 
 
 
Cost of products sold
 
1,668

 
 
 
 
Three months ended March 27, 2011
 
 
 
$
1,616

 
 
 
 
Credit risk-related Contingent Features
The Company has agreements with certain counterparties that contain a provision whereby the Company could be declared in default on its derivative obligations if repayment of the underlying indebtedness is accelerated by the lender due to the Company’s default on the indebtedness. As of March 25, 2012 , the Company has not posted any collateral related to these agreements. If the Company had breached this provision at March 25, 2012 , it could have been required to settle its obligations under the agreements at their termination value, which differs from the recorded fair value. The table below summarizes the aggregate fair values of those derivatives that contain credit risk-related contingent features as of March 25, 2012 and December 25, 2011 .
March 25, 2012
 
Asset/(Liability)
 
 
 
 
 
 
 
 
 
 
Counterparty
 
Contract
Type
 
Termination
Value
 
Performance
Risk
Adjustment
 
Accrued
Interest
 
Fair Value
(excluding
interest)
Barclays
 
Interest Rate Contracts
 
$
(5,279
)
 
$
51

 
$
(914
)
 
$
(4,314
)
 
 
Foreign Exchange Contracts
 
(47
)
 
5

 
—

 
(42
)
 
 
Diesel Fuel Contracts
 
1,235

 
—

 
—

 
1,235

 
 
Natural Gas Contracts
 
(267
)
 
—

 
—

 
(267
)
Credit Suisse
 
Interest Rate Contracts
 
(1,954
)
 
41

 
(506
)
 
(1,407
)
Total
 
 
 
$
(6,312
)
 
$
97

 
$
(1,420
)
 
$
(4,795
)

December 25, 2011
 
Asset/(Liability)
 
 
 
 
 
 
 
 
 
 
Counterparty
 
Contract
Type
 
Termination
Value
 
Performance
Risk
Adjustment
 
Accrued
Interest
 
Fair Value
(excluding
interest)
Barclays
 
Interest Rate Contracts
 
$
(7,766
)
 
$
65

 
$
(1,600
)
 
$
(6,101
)
 
 
Foreign Exchange Contracts
 
754

 
1

 
—

 
755

 
 
Diesel Fuel Contracts
 
(31
)
 
—

 
—

 
(31
)
 
 
Corn Contracts
 
142

 
—

 
—

 
142

 
 
Wheat Contracts
 
(1,584
)
 
—

 
—

 
(1,584
)
Credit Suisse
 
Interest Rate Contracts
 
(784
)
 
38

 
(346
)
 
(400
)
 
 
Foreign Exchange Contracts
 
176

 
—

 
—

 
176

Total
 
 
 
$
(9,093
)
 
$
104

 
$
(1,946
)
 
$
(7,043
)
 

11. 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 Company’s general counsel and management are of the opinion that the final outcome of these matters will not have a material effect on the Company’s financial condition, results of operations or cash flows.
Commitment of $6.2 Million Capital Expenditure
In working to resolve an environmental wastewater investigation by the State of Michigan Department of Natural Resources and Environment (“MDNRE”) at the Company's Birds Eye Foods Fennville, Michigan production facility, on July 20, 2010, the Company and the MDNRE reached an agreement (“Administrative Consent Order” or “ACO”). Under the terms of the ACO, the Company agreed to construct a new wastewater treatment system at the facility currently estimated at $6.2 million which was substantially completed as of December 25, 2011 and contribute the funds required to extend the City's water supply to the affected residents, which was also substantially completed as of December 25, 2011. The Company currently estimates the expenses related to this agreement to be $0.5 million, of which $0.3 million was recorded in 2011.
Lehman Brothers Special Financing
On June 4, 2010, Lehman Brothers Special Financing (LBSF) initiated a claim against the Company in LBSF’s bankruptcy proceeding for an additional payment from the Company of $19.7 million, related to certain derivative contracts which the Company had earlier terminated due to LBSF’s default as a result of its bankruptcy filing in 2008. On May 31, 2011, the Company and LBSF agreed to a settlement of LBSF’s June 4, 2010 claim. Under the terms of the settlement, the Company made payment of $8.5 million during the third quarter of 2011 in return for LBSF’s full release of its claim.
Aunt Jemima Breakfast Recall

On January 27, 2012, we issued a voluntary recall for certain Aunt Jemima frozen pancakes due to potential cross contamination with soy protein which may cause allergic reaction for people who have a soy allergy. The cost impact of this recall was $4.4 million, of which $1.1 million was recorded as an inventory write down in Cost of products sold on the Consolidated Statements of Operations in 2011. The remaining $3.3 million was recorded in in the first quarter of 2012, of which $2.3 million was recorded as an offset to Net Sales, $0.2 million was recorded to Cost of products sold, $0.6 million was recorded to Marketing and selling expenses and $0.1 million was recorded to Research and development expenses on the Consolidated Statements of Operations. The charges are reported in the Birds Eye Frozen segment. As of March 25, 2012, the accruals related to the recall remaining on our Consolidated Balance Sheets are $0.9 million in Accrued liabilities, $0.8 million in Accounts receivable reserves. We do not expect this recall to have a lasting impact on the Aunt Jemima breakfast brand.

 
12. Related Party Transactions

At the closing of our acquisition by The Blackstone Group L.P., the Company entered into an advisory agreement with an affiliate of The Blackstone Group L.P. pursuant to which such entity or its affiliates provide certain strategic and structuring advice and assistance to us. In addition, under this agreement, affiliates of The Blackstone Group L.P. provides certain monitoring, advisory and consulting services to the Company for an aggregate annual management fee equal to the greater of $2,500 or 1.0% of Covenant Compliance EBITDA (as defined in the credit agreement governing the Company’s Senior Secured Credit Facility). Affiliates of Blackstone also receive reimbursement for out-of-pocket expenses. Expenses relating to the management fee were $ 1,188 and $1,150 in the three months ended March 25, 2012 and March 27, 2011 , respectively, and were recorded in administrative expenses on the Consolidated Statements of Operations. The Company reimbursed Blackstone out-of-pocket expenses totaling $123 in the three months ended March 25, 2012 . There were no out-of-pocket expenses reimbursed to Blackstone in the three months ended March 27, 2011 . As of March 25, 2012 accrued expenses for related party management fees were $1,188 and were recorded in the Accrued liabilities line on the Consolidated Balance Sheets.
Supplier Costs
Graham Packaging, which was formerly controlled by affiliates of The Blackstone Group L.P, supplies packaging for some of the Company’s products. Purchases from Graham Packaging were $1,798 in the three months ended March 27, 2011 . On September 8, 2011, Graham Packaging announced the completion of its acquisition by Reynolds Group Holdings Limited, and thus ceased to be a related party.
Customer Purchases
Performance Food Group Company, which is controlled by affiliates of The Blackstone Group L.P, is a food service supplier that purchases products from the Company. Sales to Performance Food Group Company were $ 1,246 and $1,200 in the three months ended March 25, 2012 and March 27, 2011 , respectively. As of March 25, 2012 and December 25, 2011 amounts due from Performance Food Group Company were $116 and $113, respectively and were recorded on the Accounts receivable, net of allowances line on the Consolidated Balance Sheets.
Interest Expense
For the three months ended March 25, 2012 and March 27, 2011 , fees and interest expense recognized in the Consolidated Statements of Operations for debt to affiliates of Blackstone Advisors L.P. totaled $1,331 and $608 , respectively.
13. Segments

The Company is a leading producer, marketer and distributor of high quality, branded food products in North America. The Company manages the business in three operating segments: Birds Eye Frozen, Duncan Hines Grocery and Specialty Foods.
The Birds Eye Frozen Division manages our Leadership brands in the United States retail frozen vegetables ( Birds Eye ), frozen complete bagged meals ( Birds Eye Voila! ), and frozen seafood ( Van de Kamp's and Mrs. Paul's ) categories , as well as our Foundation brands in the frozen and refrigerated bagels ( Lender's ), frozen pizza for one ( Celeste ), full-calorie single-serve frozen dinners and entrées ( Hungry-Man ), and frozen breakfast ( Aunt Jemima ) categories.
The Duncan Hines Grocery division manages our Leadership brands in the baking mixes and frostings ( Duncan Hines ), shelf-stable pickles ( Vlasic ), and table syrups ( Mrs. Butterworth's and Log Cabin ) categories, and our Foundation brands in the canned meat ( Armour, Nalley, Brooks ), pie and pastry fillings ( Comstock, Wilderness ), barbecue sauces ( Open Pit ), salad dressing ( Bernstein's ) categories as well as all Canadian operations. We refer to the sum of the Birds Eye Frozen segment and the Duncan Hines Grocery segment as the North American retail businesses.
The Specialty Foods Division consists of snack products ( Tim's Cascade and Snyder of Berlin ) and the food service and private label businesses.
Segment performance is evaluated by the Company’s Chief Operating Decision Maker and is 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. Corporate assets consist of prepaid and deferred tax assets. Unallocated corporate expenses consist of corporate overhead such as executive management and finance and legal functions.
 
Three months ended
SEGMENT INFORMATION
March 25,
2012
 
March 27,
2011
Net sales
 
 
 
Birds Eye Frozen
$
290,540

 
$
294,246

Duncan Hines Grocery
222,001

 
214,147

Specialty Foods
104,384

 
97,918

Total
$
616,925

 
$
606,311

Earnings before interest and taxes
 
 
 
Birds Eye Frozen
$
37,230

 
$
45,442

Duncan Hines Grocery
26,294

 
36,393

Specialty Foods
6,876

 
8,349

Unallocated corporate expenses
(5,230
)
 
(5,421
)
Total
$
65,170

 
$
84,763

Depreciation and amortization
 
 
 
Birds Eye Frozen
$
10,167

 
$
7,983

Duncan Hines Grocery
6,324

 
8,430

Specialty Foods
3,999

 
3,997

Total
$
20,490

 
$
20,410

Capital expenditures*
 
 
 
Birds Eye Frozen
$
7,774

 
$
9,701

Duncan Hines Grocery
3,895

 
4,428

Specialty Foods
1,836

 
1,741

Total
$
13,505

 
$
15,870

GEOGRAPHIC INFORMATION
 
 
 
Net sales
 
 
 
United States
$
612,279

 
$
600,564

Canada
18,463

 
18,855

Intercompany
(13,817
)
 
(13,108
)
Total
$
616,925

 
$
606,311


 * Includes new capital leases.

SEGMENT INFORMATION
March 25,
2012
 
December 25,
2011
Total assets
 
 
 
Birds Eye Frozen
$
2,031,783

 
$
2,028,104

Duncan Hines Grocery
1,986,647

 
1,978,813

Specialty Foods
372,875

 
372,786

Corporate
71,064

 
71,918

Total
$
4,462,369

 
$
4,451,621

GEOGRAPHIC INFORMATION
 
 
 
Long-lived assets
 
 
 
United States
$
497,692

 
$
501,245

Canada
35

 
38

Total
$
497,727

 
$
501,283


14. Taxes on Earnings

The provision (benefit) for income taxes and related effective tax rates for the three months ended March 25, 2012 and March 27, 2011 were as follows:
 
Three months ended
Provision for Income Taxes
March 25,
2012
 
March 27,
2011
Current
$
894

 
$
312

Deferred
5,183

 
12,951

Total
$
6,077

 
$
13,263

 
 
 
 
Effective tax rate
38.9
%
 
39.6.%


Income taxes are accounted for in accordance with the authoritative guidance for accounting for income taxes under which deferred tax assets and liabilities are determined based on the difference between the financial statement basis and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. 
During the three months ended March 25, 2012, there were no material events which impacted the effective tax rate. During the three months ended March 27, 2011, various jurisdictions enacted tax rate changes which affected the amounts at which our deferred tax assets and liabilities will reverse. Such rate changes resulted in net charge of $459 to the tax provision and a corresponding increase of $459 to our net deferred tax liabilities for the three months ended March 27, 2011.
The Company regularly evaluates its deferred tax assets for future realization.  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.
As of March 25, 2012 and March 27, 2011, we maintained a valuation allowance for certain state net operating loss (“NOL”) carryovers, state tax credit carryovers and foreign loss carryovers. For the three months ended March 25, 2012, there was no additional recognition or release of any valuation allowance. For the three months ended March 27, 2011, a benefit of $124 was recognized to the income tax provision related to the release of a valuation allowance on certain state credit carryovers which, due to the aforementioned tax law changes, became more likely than not realizable.
The Company's liability for unrecognized tax benefits (“UTB”) as of March 25, 2012 was $9,998. The amount, if recognized, that would impact the effective tax rate as of March 25, 2012 was $2,615. From time to time, various taxing authorities may audit the Company's tax returns. It is reasonably possible that a decrease in the UTB of up to $2,784 may occur within the next twelve months due to the lapse of certain statute of limitations or resolution of uncertainties.
15.      Recently Issued Accounting Pronouncements

In June 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2011-05, “Comprehensive Income (Topic 220): Presentation of Comprehensive Income," (“ASU 2011-05”). ASU 2011-05 eliminates the option to report other comprehensive earnings and its components in the statement of changes in equity. ASU 2011-05 requires that all non-owner changes in stockholders’ equity be presented in either a single continuous statement of comprehensive earnings or in two separate but consecutive statements. This new guidance is to be applied retrospectively and became effective in the first quarter of 2012. The Company adopted this standard in the first quarter and it resulted in a separate Statement of Comprehensive Earnings.

16. Guarantor and Nonguarantor Statements
The 9.25% Senior Notes and the 8.25% Senior Notes are general senior unsecured obligations of the Company, effectively subordinated in right of payment to all existing and future senior secured indebtedness of the Company and guaranteed on a full, unconditional, joint and several basis by the Company’s 100% owned domestic subsidiaries that guarantee other indebtedness of the Company.
The 10.625% Senior Subordinated 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 that guarantee other indebtedness of the Company.
The following condensed consolidating financial information presents:
(1)
(a) Condensed consolidating balance sheets as of March 25, 2012 and December 25, 2011 .
(b) The related condensed consolidating statements of operations and comprehensive earnings for the Company, all guarantor subsidiaries and the non-guarantor subsidiaries for the following:
i. Three months ended March 25, 2012 ; and
ii. Three months ended March 27, 2011 .
(c) The related condensed consolidating statements of cash flows for the Company, all guarantor subsidiaries and the non-guarantor subsidiaries for the following:
i. Three months ended March 25, 2012 ; and
ii. Three months ended March 27, 2011 .

(2)
Elimination entries necessary to consolidate the Company with its guarantor subsidiaries and non-guarantor subsidiaries.
Investments in subsidiaries are accounted for by the parent using the equity method of accounting. The guarantor subsidiaries are presented on a combined basis. The principal elimination entries eliminate investments in subsidiaries and intercompany balances and transactions and include a reclassification entry of net non-current deferred tax assets to non-current deferred tax liabilities.

Pinnacle Foods Finance LLC
Condensed Consolidating Balance Sheet
March 25, 2012

  
Pinnacle
Foods
Finance LLC
 
Guarantor
Subsidiaries
 
Nonguarantor
Subsidiaries
 
Eliminations
and
Reclassifications
 
Consolidated
Total
Current assets:
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
—

 
$
166,863

 
$
349

 
$
—

 
$
167,212

Accounts receivable, net
—

 
172,977

 
11,285

 
—

 
184,262

Intercompany accounts receivable
103,592

 
—

 
—

 
(103,592
)
 
—

Inventories, net
—

 
313,012

 
4,949

 
—

 
317,961

Other current assets
1,236

 
5,090

 
990

 
—

 
7,316

Deferred tax assets
1,129

 
69,693

 
224

 
—

 
71,046

Total current assets
105,957

 
727,635

 
17,797

 
(103,592
)
 
747,797

Plant assets, net
—

 
497,692

 
35

 
—

 
497,727

Investment in subsidiaries
1,752,420

 
9,113

 
—

 
(1,761,533
)
 
—

Intercompany note receivable
1,550,197

 
7,270

 
9,800

 
(1,567,267
)
 
—

Tradenames
—

 
1,604,512

 
—

 
—

 
1,604,512

Other assets, net
27,733

 
142,924

 
181

 
—

 
170,838

Deferred tax assets
201,795

 
—

 
—

 
(201,795
)
 
—

Goodwill
—

 
1,441,495

 
—

 
—

 
1,441,495

Total assets
$
3,638,102

 
$
4,430,641

 
$
27,813

 
$
(3,634,187
)
 
$
4,462,369

Current liabilities:
 
 
 
 
 
 
 
 
 
Short-term borrowings
$
—

 
$
1,585

 
$
—

 
$
—

 
$
1,585

Current portion of long-term obligations
12,500

 
2,977

 
—

 
—

 
15,477

Accounts payable
123

 
135,520

 
1,150

 
—

 
136,793

Intercompany accounts payable
—

 
102,261

 
1,331

 
(103,592
)
 
—

Accrued trade marketing expense
—

 
36,598

 
4,975

 
—

 
41,573

Accrued liabilities
52,994

 
84,699

 
868

 
—

 
138,561

Total current liabilities
65,617

 
363,640

 
8,324

 
(103,592
)
 
333,989

Long-term debt
2,716,034

 
19,184

 
—

 
—

 
2,735,218

Intercompany note payable
—

 
1,559,831

 
7,436

 
(1,567,267
)
 
—

Pension and other postretirement benefits
—

 
91,231

 
—

 
—

 
91,231

Other long-term liabilities
1,546

 
19,400

 
2,730

 
—

 
23,676

Deferred tax liabilities
—

 
624,935

 
210

 
(201,795
)
 
423,350

Total liabilities
2,783,197

 
2,678,221

 
18,700

 
(1,872,654
)
 
3,607,464

Commitments and contingencies (Note 11)
 
 
 
 
 
 
 
 
 
Member’s equity:
 
 
 
 
 
 
 
 
 
Limited liability company interests and other equity
$
—

 
$
—

 
$
—

 
$
—

 
—

Additional paid-in-capital
697,302

 
1,284,155

 
2,324

 
(1,286,479
)
 
697,302

Retained earnings
209,975

 
509,590

 
7,238

 
(516,828
)
 
209,975

Accumulated other comprehensive (loss) earnings
(52,372
)
 
(41,325
)
 
(449
)
 
41,774

 
(52,372
)
Total member’s equity
854,905

 
1,752,420

 
9,113

 
(1,761,533
)
 
854,905

Total liabilities and member’s equity
$
3,638,102

 
$
4,430,641

 
$
27,813

 
$
(3,634,187
)
 
$
4,462,369

Pinnacle Foods Finance LLC
Condensed Consolidating Balance Sheet
December 25, 2011

  
Pinnacle
Foods
Finance LLC
 
Guarantor
Subsidiaries
 
Nonguarantor
Subsidiaries
 
Eliminations
and
Reclassifications
 
Consolidated
Total
Current assets:
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
—

 
$
150,493

 
$
538

 
$
—

 
$
151,031

Accounts receivable, net
—

 
152,041

 
7,940

 
—

 
159,981

Intercompany accounts receivable
129,142

 
—

 
947

 
(130,089
)
 
—

Inventories, net
—

 
330,136

 
5,676

 
—

 
335,812

Other current assets
1,072

 
6,189

 
288

 
—

 
7,549

Deferred tax assets
1,563

 
69,575

 
(29
)
 
—

 
71,109

Total current assets
131,777

 
708,434

 
15,360

 
(130,089
)
 
725,482

Plant assets, net
—

 
501,245

 
38

 
—

 
501,283

Investment in subsidiaries
1,726,711

 
10,438

 
—

 
(1,737,149
)
 
—

Intercompany note receivable
1,541,341

 
7,270

 
9,800

 
(1,558,411
)
 
—

Tradenames
—

 
1,604,512

 
—

 
—

 
1,604,512

Other assets, net
31,604

 
147,057

 
188

 
—

 
178,849

Deferred tax assets
191,289

 
—

 
—

 
(191,289
)
 
—

Goodwill
—

 
1,441,495

 
—

 
—

 
1,441,495

Total assets
$
3,622,722

 
$
4,420,451

 
$
25,386

 
$
(3,616,938
)
 
$
4,451,621

Current liabilities:
 
 
 
 
 
 
 
 
 
Short-term borrowings
$
—

 
$
1,708

 
$
—

 
$
—

 
$
1,708

Current portion of long-term obligations
12,500

 
3,161

 
—

 
—

 
15,661

Accounts payable
—

 
151,693

 
1,176

 
—

 
152,869

Intercompany accounts payable
—

 
130,089

 
—

 
(130,089
)
 
—

Accrued trade marketing expense
—

 
32,020

 
3,105

 
—

 
35,125

Accrued liabilities
46,012

 
82,312

 
461

 
—

 
128,785

Total current liabilities
58,512

 
400,983

 
4,742

 
(130,089
)
 
334,148

Long-term debt
2,718,858

 
19,792

 
—

 
—

 
2,738,650

Intercompany note payable
—

 
1,551,141

 
7,270

 
(1,558,411
)
 
—

Pension and other postretirement benefits
—

 
93,406

 
—

 
—

 
93,406

Other long-term liabilities
—

 
19,369

 
2,730

 
—

 
22,099

Deferred tax liabilities
—

 
609,049

 
206

 
(191,289
)
 
417,966

Total liabilities
2,777,370

 
2,693,740

 
14,948

 
(1,879,789
)
 
3,606,269

Commitments and contingencies (Note 11)
 
 
 
 
 
 
 
 
 
Member’s equity:
 
 
 
 
 
 
 
 
 
Limited liability company interests and other equity
$
—

 
$
—

 
$
—

 
$
—

 
—

Additional paid-in-capital
697,352

 
1,284,155

 
2,324

 
(1,286,479
)
 
697,352

Retained earnings
200,436

 
483,821

 
8,011

 
(491,832
)
 
200,436

Accumulated other comprehensive (loss) earnings
(52,436
)
 
(41,265
)
 
103

 
41,162

 
(52,436
)
Total member’s equity
845,352

 
1,726,711

 
10,438

 
(1,737,149
)
 
845,352

Total liabilities and member’s equity
$
3,622,722

 
$
4,420,451

 
$
25,386

 
$
(3,616,938
)
 
$
4,451,621



Pinnacle Foods Finance LLC
Condensed Consolidating Statement of Operations and Comprehensive Income
For the three months ended March 25, 2012

   
Pinnacle
Foods
Finance LLC
 
Guarantor
Subsidiaries
 
Nonguarantor
Subsidiaries
 
Eliminations
 
Consolidated
Total
Net sales
$
—

 
$
612,279

 
$
18,463

 
$
(13,817
)
 
$
616,925

Cost of products sold
54

 
477,300

 
17,483

 
(13,589
)
 
481,248

Gross profit
(54
)
 
134,979

 
980

 
(228
)
 
135,677

Operating expenses
 
 
 
 
 
 
 
 
 
Marketing and selling expenses
121

 
42,924

 
955

 
—

 
44,000

Administrative expenses
1,019

 
18,804

 
791

 
—

 
20,614

Research and development expenses
9

 
2,198

 
—

 
—

 
2,207

Intercompany royalties
—

 
—

 
13

 
(13
)
 
—

Intercompany technical service fees
—

 
—

 
215

 
(215
)
 
—

Other expense (income), net
—

 
3,686

 
—

 
—

 
3,686

Equity in (earnings) loss of investees
(25,769
)
 
773

 
—

 
24,996

 
—

Total operating expenses
(24,620
)
 
68,385

 
1,974

 
24,768

 
70,507

Earnings (loss) before interest and taxes
24,566

 
66,594

 
(994
)
 
(24,996
)
 
65,170

Intercompany interest (income) expense
(23,423
)
 
23,393

 
30

 
—

 
—

Interest expense
48,956

 
649

 
7

 
—

 
49,612

Interest income
—

 
58

 
—

 
—

 
58

Earnings (loss) before income taxes
(967
)
 
42,610

 
(1,031
)
 
(24,996
)
 
15,616

Provision (benefit) for income taxes
(10,506
)
 
16,841

 
(258
)
 
—

 
6,077

Net earnings (loss)
$
9,539

 
$
25,769

 
$
(773
)
 
$
(24,996
)
 
$
9,539

 
 
 
 
 
 
 
 
 
 
Total comprehensive earnings
$
9,603

 
$
25,160

 
$
(1,322
)
 
$
(23,838
)
 
$
9,603

 
Pinnacle Foods Finance LLC
Condensed Consolidating Statement of Operations and Comprehensive Income
For the three months ended March 27, 2011

   
Pinnacle
Foods
Finance LLC
 
Guarantor
Subsidiaries
 
Nonguarantor
Subsidiaries
 
Eliminations
 
Consolidated
Total
Net sales
$
—

 
$
600,564

 
$
18,855

 
$
(13,108
)
 
$
606,311

Cost of products sold
(73
)
 
448,124

 
17,775

 
(12,910
)
 
452,916

Gross profit
73

 
152,440

 
1,080

 
(198
)
 
153,395

Operating expenses
 
 
 
 
 
 
 
 
 
Marketing and selling expenses
121

 
40,113

 
1,597

 
—

 
41,831

Administrative expenses
1,336

 
18,808

 
852

 
—

 
20,996

Research and development expenses
9

 
1,985

 
—

 
—

 
1,994

Intercompany royalties
—

 
—

 
12

 
(12
)
 
—

Intercompany technical service fees
—

 
—

 
186

 
(186
)
 
—

Other expense (income), net
—

 
3,811

 
—

 
—

 
3,811

Equity in (earnings) loss of investees
(33,919
)
 
1,081

 
—

 
32,838

 
—

Total operating expenses
(32,453
)
 
65,798

 
2,647

 
32,640

 
68,632

Earnings (loss) before interest and taxes
32,526

 
86,642

 
(1,567
)
 
(32,838
)
 
84,763

Intercompany interest (income) expense
(29,640
)
 
29,640

 
—

 
—

 
—

Interest expense
50,845

 
482

 
—

 
—

 
51,327

Interest income
—

 
78

 
1

 
—

 
79

Earnings (loss) before income taxes
11,321

 
56,598

 
(1,566
)
 
(32,838
)
 
33,515

Provision (benefit) for income taxes
(8,931
)
 
22,679

 
(485
)
 
—

 
13,263

Net earnings (loss)
$
20,252

 
$
33,919

 
$
(1,081
)
 
$
(32,838
)
 
$
20,252

 
 
 
 
 
 
 
 
 
 
Total comprehensive earnings
$
21,423

 
$
33,102

 
$
(1,847
)
 
$
(31,255
)
 
$
21,423


Pinnacle Foods Finance LLC
Condensed Consolidating Statement of Cash Flows
For the three months ended March 25, 2012  
  
Pinnacle
Foods
Finance LLC
 
Guarantor
Subsidiaries
 
Nonguarantor
Subsidiaries
 
Eliminations
and
Reclassifications
 
Consolidated
Total
Cash flows from operating activities
 
 
 
 
 
 
 
 
 
Net cash provided by (used in) operating activities
$
(12,966
)
 
$
47,230

 
$
(407
)
 
$
—

 
$
33,857

Cash flows from investing activities
 
 
 
 
 
 
 
 
 
Intercompany accounts receivable/payable
1,873

 
—

 
—

 
(1,873
)
 
—

Repayments of intercompany loans
14,568

 
—

 
 
 
(14,568
)
 
—

Capital expenditures
—

 
(13,505
)
 
—

 
—

 
(13,505
)
Net cash (used in) provided by investing activities
16,441

 
(13,505
)
 
—

 
(16,441
)
 
(13,505
)
Cash flows from financing activities
 
 
 
 
 
 
 
 
 
Repayments of long-term obligations
(3,125
)
 
—

 
—

 
—

 
(3,125
)
Proceeds from short-term borrowing
—

 
815

 
—

 
—

 
815

Repayments of short-term borrowing
—

 
(937
)
 
—

 
—

 
(937
)
Intercompany accounts receivable/payable
—

 
(1,873
)
 
 
 
1,873

 
—

Repayments of intercompany loans
—

 
(14,568
)
 
—

 
14,568

 
—

Repayment of capital lease obligations
—

 
(792
)
 
—

 
—

 
(792
)
Repurchases of equity
(350
)
 
—

 
—

 
—

 
(350
)
Net cash (used in) provided by financing activities
(3,475
)
 
(17,355
)
 
—

 
16,441

 
(4,389
)
Effect of exchange rate changes on cash
—

 
—

 
218

 
—

 
218

Net change in cash and cash equivalents
—

 
16,370

 
(189
)
 
—

 
16,181

Cash and cash equivalents - beginning of period
—

 
150,493

 
538

 
—

 
151,031

Cash and cash equivalents - end of period
$
—

 
$
166,863

 
$
349

 
$
—

 
$
167,212

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Supplemental disclosures of cash flow information:
 
 
 
 
 
 
 
 
 
Interest paid
$
35,040

 
$
633

 
$
—

 
$
—

 
$
35,673

Interest received
—

 
58

 
—

 
—

 
58

Income taxes paid (refunded)
—

 
(29
)
 
125

 
—

 
96


Pinnacle Foods Finance LLC
Condensed Consolidating Statement of Cash Flows
For the three months ended March 27, 2011

  
Pinnacle
Foods
Finance LLC
 
Guarantor
Subsidiaries
 
Nonguarantor
Subsidiaries
 
Eliminations
and
Reclassifications
 
Consolidated
Total
Cash flows from operating activities
 
 
 
 
 
 
 
 
 
Net cash provided by (used in) operating activities
$
(8,169
)
 
$
88,232

 
$
(1,989
)
 
$
—

 
$
78,074

Cash flows from investing activities
 
 
 
 
 
 
 
 
 
Intercompany accounts receivable/payable
(111,467
)
 
—

 
—

 
111,467

 
—

Repayments of intercompany loans
119,703

 
—

 
—

 
(119,703
)
 
—

Capital expenditures
—

 
(15,815
)
 
—

 
—

 
(15,815
)
Net cash (used in) provided by investing activities
8,236

 
(15,815
)
 
—

 
(8,236
)
 
(15,815
)
Cash flows from financing activities
 
 
 
 
 
 
 
 
 
Proceeds from short-term borrowing
—

 
484

 
—

 
—

 
484

Repayments of short-term borrowing
—

 
(799
)
 
—

 
—

 
(799
)
Intercompany accounts receivable/payable
—

 
111,467

 
—

 
(111,467
)
 
—

Repayments of intercompany loans
—

 
(119,703
)
 
—

 
119,703

 
—

Repayment of capital lease obligations
—

 
(435
)
 
—

 
—

 
(435
)
Debt acquisition costs
(67
)
 
—

 
—

 
—

 
(67
)
Net cash (used in) provided by financing activities
(67
)
 
(8,986
)
 
—

 
8,236

 
(817
)
Effect of exchange rate changes on cash
—

 
—

 
90

 
—

 
90

Net change in cash and cash equivalents
—

 
63,431

 
(1,899
)
 
—

 
61,532

Cash and cash equivalents - beginning of period
—

 
109,324

 
5,962

 
—

 
115,286

Cash and cash equivalents - end of period
$
—

 
$
172,755

 
$
4,063

 
$
—

 
$
176,818

 
 
 
 
 
 
 
 
 
 
Supplemental disclosures of cash flow information:
 
 
 
 
 
 
 
 
 
Interest paid
$
36,123

 
$
481

 
$
—

 
$
—

 
$
36,604

Interest received
—

 
78

 
1

 
—

 
79

Income taxes paid
—

 
(5,615
)
 
283

 
—

 
(5,332
)
Non-cash investing and financing activities:
 
 
 
 
 
 
 
 
 
New capital leases
—

 
55

 
—

 
—

 
55



2
Table of Contents

ITEM 2:
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(dollars in millions, except where noted)

You should read the following discussion of our results of operations and financial condition together with the “Selected Financial Data” and the audited consolidated financial statements appearing in our annual report on Form 10-K for the year ended December 25, 2011 and the unaudited Consolidated Financial Statements included in this quarterly report. This discussion contains forward-looking statements and involves numerous risks and uncertainties, including, but not limited to, those described in the “Item 1A: Risk Factors” section of this Form 10-Q. Actual results may differ materially from those contained in any forward-looking statements.

Overview
We are a leading producer, marketer and distributor of high quality, branded food products in North America. We manage the business in three operating segments: Birds Eye Frozen, Duncan Hines Grocery and Specialty Foods.
Our Birds Eye Frozen Division manages our Leadership brands in the United States retail frozen vegetables ( Birds Eye ), frozen complete bagged meals ( Birds Eye Voila! ), and frozen seafood ( Van de Kamp's and Mrs. Paul's ) categories , as well as our Foundation brands in the frozen and refrigerated bagels ( Lender's ), frozen pizza for one ( Celeste ), full-calorie single-serve frozen dinners and entrées ( Hungry-Man ), and frozen breakfast ( Aunt Jemima ) categories.
Our Duncan Hines Grocery division manages our Leadership brands in the baking mixes and frostings ( Duncan Hines ), shelf-stable pickles ( Vlasic ), and table syrups ( Mrs. Butterworth's and Log Cabin ) categories, and our Foundation brands in the canned meat ( Armour, Nalley, Brooks ), pie and pastry fillings ( Comstock, Wilderness ), barbecue sauces ( Open Pit ), salad dressing ( Bernstein's ) categories as well as all Canadian operations. We refer to the sum of our Birds Eye Frozen segment and our Duncan Hines Grocery segment as our North American retail businesses.
Our Specialty Foods Division consists of snack products ( Tim's Cascade and Snyder of Berlin ) and our food service and private label businesses.
Segment performance is evaluated by the Company’s Chief Operating Decision Maker and is 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. Corporate assets consist of prepaid and deferred tax assets. Unallocated corporate expenses consist of corporate overhead such as executive management and finance and legal functions. Product contribution is defined as gross profit less direct to consumer advertising and marketing expenses, selling commission and direct brand marketing overhead expenses.



3
Table of Contents

Business Drivers and Measures
In operating our business and monitoring its performance, we pay attention to trends in the food manufacturing industry and a number of performance measures and operational factors. An overall trend that has been prevalent in the industry over the past few years has been the volatility in overall commodity inflation. To date the industry has managed this commodity inflation by increasing retail prices, which has affected consumer buying patterns and led to lower volumes. Going forward, competitive pressures may limit the ability to pass through these increased commodity prices to the end consumer. This discussion includes forward-looking statements that are based on our current expectations.
Industry Trends
Growth in our industry is driven primarily by population growth, changes in product selling prices and changes in consumption between out-of-home and in-home eating. With the slow economic recovery since the recession in 2008 and 2009, consumers are looking for value alternatives, which has caused an increase in the percentage of products sold on promotion and a shift from traditional retail grocery to mass merchandisers, club stores and the dollar store channel. We are well positioned in grocery and alternative channels, maintaining strong customer relationships across key retailers in each segment.
Over the long term, the share of food at restaurants and in other food service venues had been increasing, with the share of food consumed at home in decline. During the 2008-09 recession, this trend reversed, with consumers eating more at home. In 2010-11, consumers increased their consumption away from home, but food away from home is still below its 2007 peak. We believe sustained higher levels of at home eating are the “new normal”,  driven by increased popularity of cooking as a leisure activity, elevated focus on time with family in the home, and consumers' sustained focus on prudent management of their finances.

In order to maintain and grow our business, we must successfully react to, and offer products that respond to, evolving consumer trends, such as changing health trends and focus on convenience and products tailored for busy lifestyles. Incremental growth in the industry is principally driven by product, packaging and process innovation.
Revenue Factors
Our net sales are driven principally by the following factors:
•
Gross sales , which change as a function of changes in volume and list price; and

•
the costs that we deduct from gross sales to reach net sales, which consist of:
◦
Cash discounts, returns and other allowances .
◦
Trade marketing expenses , which include the cost of temporary price reductions (“on sale” prices), promotional displays and advertising space in store circulars.
◦
New product distribution (slotting) expenses , which are the costs of having certain retailers stock a new product, including amounts retailers charge for updating their warehousing systems, allocating shelf space and in-store systems set-up, among other things.
◦
Consumer coupon redemption expenses , which are costs from the redemption of coupons we circulate as part of our marketing efforts.

Cost Factors

•
Costs recorded in cost of products sold in the consolidated statement of operations include:

◦
Raw materials , such as sugar, cucumbers, broccoli, corn, peas, green beans, carrots, flour (wheat), poultry, seafood, vegetable oils, shortening, meat and corn syrup, among others, are available from numerous independent suppliers but are subject to price fluctuations due to a number of factors, including changes in crop size, federal and state agricultural programs, export demand, weather conditions and insects, among others.
◦
Packaging costs . Our broad array of products entails significant costs for packaging and is subject to fluctuations in the price of aluminum, glass jars, plastic trays, corrugated fiberboard, and plastic packaging materials.
◦
Conversion costs , which include all costs necessary to convert raw materials into finished product. Key components of this cost include direct labor, and plant overhead such as rent, utilities and depreciation.

4
Table of Contents


◦
Freight and distribution . We use a combination of common carriers and inter-modal rail to transport our products from our manufacturing facilities to distribution centers and to deliver products to our customers from both those centers and directly from our manufacturing plants. Our freight and distribution costs are influenced by fuel costs as well as capacity within the industry.

•
Costs recorded in marketing and selling expenses in the consolidated statement of operations include:

◦
Advertising and other marketing expenses . These expenses represent advertising and other consumer and trade-oriented marketing programs. A key marketing strategy is to continue to invest in marketing that builds brand affinity for our Leadership Brands.

Working Capital
Our working capital is primarily driven by accounts receivable and inventories, which fluctuate throughout the year due to seasonality in both sales and production. See “Seasonality.” We will continue to focus on reducing our working capital requirements while simultaneously maintaining our customer service levels and fulfilling our production requirements. We have historically relied on internally generated cash flows and temporary borrowings under our Revolving Credit Facility to satisfy our working capital requirements.
Other Factors
Other factors that have influenced our results of operations and may do so in the future include:
•
Interest Expense . As a result of our acquisition by The Blackstone Group L.P and the Birds Eye Foods Acquisition, we have significant indebtedness. Although we expect to reduce our leverage over time, we expect interest expense to continue to be a significant component of our expenses. See “Liquidity and Capital Resources” below.

•
Cash Taxes . We have significant tax-deductible intangible asset amortization and federal and state NOLs, which resulted in minimal federal and state cash taxes in recent years. We expect to continue to realize significant reductions in federal and state cash taxes in the future attributable to amortization of intangible assets and realization of NOLs.

•
Acquisitions and Consolidations . We believe we have the expertise to identify and integrate value-enhancing acquisitions to further grow our business. We have successfully integrated acquisitions in the past. We have, however, incurred significant costs in connection with integrating these businesses and streamlining our operations.

•
Impairment of Goodwill, Tradenames and Long-Lived Assets . We test our goodwill and intangible assets annually or more frequently (if necessary) for impairment and have recorded impairment charges in recent years. The value of goodwill and intangibles from the allocation of purchase price from the Blackstone Transaction and the Birds Eye Acquisition is derived from our business operating plans at that time and is therefore susceptible to an adverse change that could require an impairment charge. We have incurred impairment charges in each of the fiscal years ended on December 25, 2011, December 26, 2010 and December 27, 2009, the amounts of which are discussed in greater detail in Note 8 to our consolidated financial statements included in our 10-K that was filed for the fiscal year ending December 25, 2011.

Seasonality
Our sales and cash flows are affected by seasonal cyclicality. Sales of frozen foods, including frozen vegetables and frozen complete bagged meals tend to be marginally higher during the winter months. Seafood sales peak during Lent, in advance of the Easter holiday. Sales of pickles, relishes, barbecue sauces, potato chips and salad dressings tend to be higher in the spring and summer months, and demand for Duncan Hines products, Birds Eye vegetables and our pie and pastry fillings tend to be higher around the Easter, Thanksgiving, and Christmas holidays. Since many of the raw materials we process under the Birds Eye and Vlasic brands are agricultural crops, production of these products is predominantly seasonal, occurring during and immediately following the purchase of such crops. We also increase our Duncan Hines inventories in advance of the peak fall selling season. As a result, our inventory levels tend to be higher during August, September, and October, and thus we require more working capital during these months. We are a seasonal net user of cash in the third quarter of the calendar year.

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Table of Contents


Restructuring Charges

From time to time, we voluntarily undertake consolidation and restructuring activities in order to optimize our manufacturing footprint and reduce our supply chain costs and ongoing costs of products sold. We believe that the combined impact of the closure of the Tacoma, Washington plant and Fulton, New York facility discussed below will reduce our ongoing annual cost of products sold by approximately $20 million beginning in 2012.

Tacoma, WA Plant
On December 3, 2010, in an effort to improve our supply chain operations, we announced the closure of the Tacoma, WA plant and the consolidation of production into our Ft. Madison, IA plant and recorded employee termination benefits of $1.5 million in the three months ended March 27, 2011 . In connection with this project, we significantly expanded our Fort Madison plant and hired approximately 65 new employees at that location. The Tacoma plant ceased production in June 2011 and the closure resulted in the termination of approximately 160 employees. We recorded accelerated depreciation costs of $307 and $2,791 in the three months ended March 25, 2012 and March 27, 2011 , respectively. All restructuring charges related to the closure of the Tacoma, WA plant are recorded in the Duncan Hines Grocery Division and in the Cost of products sold line on the Consolidated Statements of Operations. We expect all severance payments to be completed by the second quarter of 2012.
Fulton, NY Plant
On April 15, 2011, we announced plans to consolidate the Birds Eye brand’s Fulton, NY plant operations into our Darien, WI and Waseca, MN facilities in order to locate vegetable processing closer to the crop growing region and thus reduce the related freight costs. In connection with this project, we made significant capital investments in our Darien and Waseca plants and hired approximately 150 new employees at these facilities. The Fulton facility closed at the end of December, 2011 and resulted in the termination of approximately 270 employees. We recorded accelerated depreciation costs of $1,845 in the three months ended March 25, 2012 . All restructuring charges related to the closure of the Fulton, NY plant are recorded in the Birds Eye Frozen Division and in the Cost of products sold line on the Consolidated Statements of Operations. We expect most of these severance payments to be completed by the third quarter of 2012.

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Results of Operations:
Consolidated Statements of Operations
The following tables set forth our statement of operations data expressed in dollars and as a percentage of net sales.
 
 
Three months ended
 
March 25,
2012
 
March 27,
2011
Net sales
$
616.9

 
100.0
%
 
$
606.3

 
100.0
%
Cost of products sold
481.2

 
78.0
%
 
452.9

 
74.7
%
Gross profit
135.7

 
22.0
%
 
153.4

 
25.3
%
Operating expenses:
 
 
 
 
 
 
 
Marketing and selling expenses
$
44.0

 
7.1
%
 
$
41.8

 
6.9
%
Administrative expenses
20.6

 
3.3
%
 
21.0

 
3.5
%
Research and development expenses
2.2

 
0.4
%
 
2.0

 
0.3
%
Other expense (income), net
3.7

 
0.6
%
 
3.8

 
0.6
%
Total operating expenses
$
70.5

 
11.4
%
 
$
68.6

 
11.3
%
Earnings before interest and taxes
$
65.2

 
10.6
%
 
$
84.8

 
14.0
%
 
 
Three months ended
 
March 25,
2012
 
March 27,
2011
Net sales
 
 
 
Birds Eye Frozen
$
290.5

 
$
294.3

Duncan Hines Grocery
222.0

 
214.1

Specialty Foods
104.4

 
97.9

Total
$
616.9

 
$
606.3

 
 
 
 
Earnings before interest and taxes
 
 
 
Birds Eye Frozen
$
37.2

 
$
45.4

Duncan Hines Grocery
26.3

 
36.4

Specialty Foods
6.9

 
8.4

Unallocated corporate expenses
(5.2
)
 
(5.4
)
Total
$
65.2

 
$
84.8

 
 
 
 
Depreciation and amortization
 
 
 
Birds Eye Frozen
$
10.2

 
$
8.0

Duncan Hines Grocery
6.3

 
8.4

Specialty Foods
4.0

 
4.0

Total
$
20.5


$
20.4



7
Table of Contents

Three months ended March 25, 2012 compared to three months ended March 27, 2011
Net sales
Net sales were $616.9 million for the three months ended March 25, 2012 compared to $606.3 million in the comparable prior year period, a 1.8% increase. Net sales in our North American retail businesses were up 0.9%. We introduced successful new products during the quarter, including Duncan Hines Frosting Creations and Parchment Bake seafood items, which had a positive impact of approximately 2% on our sales volume. First quarter sales also benefited from an earlier Easter holiday compared to 2011. We increased published selling prices across our portfolio during 2011 and are continuing to realize the benefit from those actions during 2012. Net pricing actions increased net sales by 3.0% in the period , while lower volumes and product mix reduced sales by approximately 0.8% and the impact of our Aunt Jemima product recall reduced net sales by 0.4%. During the period, we grew or held market share in brands representing approximately half of our product contribution.
Birds Eye Frozen Division:
Net sales in the three months ended March 25, 2012 were $290.5 million , a decrease of $3.7 million , or 1.3% , from the prior year. The decrease was driven primarily by product returns and reduced sales of our Aunt Jemima breakfast products caused by our product recall issued during January 2012 and lower sales in our Celeste brand driven by the timing of customer shipments within the period. Positive contributors to growth in the quarter included higher sales of our Birds Eye Steamfresh Vegetable products, which increased approximately 11% compared to the prior year period. Birds Eye Voila! sales also increased 1% during the period as the brand increased its market share by 4.2 points compared to the prior year. Sales for the period were also impacted by the launch of various new products, including our Parchment Bake seafood products, which had a positive impact of approximately 2% on sales volume. Net pricing actions increased net sales for the division by 2.5%, while volume and product mix decreased net sales by approximately 2.9% and the Aunt Jemima product recall decreased net sales by approximately 0.8%.
Duncan Hines Grocery Division:
Net sales in the three months ended March 25, 2012 were $222.0 million , an increase of $7.9 million , or 3.7% , from the prior year. The increase was driven by our Duncan Hines brand, where our new Frosting Creations launch and an earlier Easter Holiday drove higher sales. Our new product introductions had a positive impact of approximately 3% on sales volume. Sales of our Armour brand also increased substantially from the prior year, driven by new distribution within the dollar store channel. These increases were partially offset by lower sales in our syrup brands as a result of aggressive competitive activity in that segment. Net pricing actions increased net sales for the division by 3.5% and volume and product mix increased sales by approximately 0.2%,
Specialty Foods Division:
Net sales in the three months ended March 25, 2012 were $104.4 million , an increase of $6.5 million , or 6.6% , from the prior year. The increase was primarily attributable to higher sales in our food service business driven by promotional programs at a key customer. Volume and product mix increased net sales for the division by approximately 4.0% and net pricing increased net sales by approximately 2.3%.
Gross profit .
Gross profit for the three months ended March 25, 2012 was $135.7 million or 22.0% of net sales, compared to $153.4 million , or 25.3% , of net sales during the comparable prior year period. The decrease in gross profit as a percentage of net sales was driven by substantially higher commodity costs and unfavorable product mix during the period. One time charges of $3.2 million related our Aunt Jemima product recall and $2.9 million related to our Fulton, New York plant closure also contributed to the decrease . These decreases were partially offset by increases in our published selling prices across the portfolio during 2011 and that continued to benefit us during the first quarter of 2012. For the period, higher commodity costs reduced the gross profit percentage by 5.0 percentage points, charges related to the product recall and our Fulton, New York plant closing reduced the gross profit percentage by 1.0 percentage point and unfavorable product mix reduced the gross profit percentage by 0.6 percentage points, while higher selling prices increased the gross profit percentage by 3.3 percentage points.

Marketing and selling expenses
Marketing and selling expenses were $44.0 million , or 7.1% of net sales for the three months ended March 25, 2012 , compared to $41.8 million , or 6.9% , of sales during the comparable prior year period. During the first quarter, we launched a new television campaign for our Vlasic brand and also incurred costs to create effective in store displays for our Frosting Creations product launch.

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Table of Contents

Administrative expenses
Administrative expenses were $20.6 million or 3.3% of net sales for the three months ended March 25, 2012 , compared to $21.0 million or 3.5% of net sales during the comparable prior year period, reflecting our strategic objective of keeping administrative costs flat.
Other expense (income), net
 
Three months ended
 
March 25,
2012

March 27,
2011
Amortization of intangibles/other assets
3.9


4.0

Royalty income and other
$
(0.2
)

$
(0.2
)
Total other expense (income), net
3.7


3.8



Earnings before interest and taxes
Earnings before interest and taxes were $65.2 million for the three months ended March 25, 2012 , a decrease of $19.6 million , or 23.1% , from the comparable prior year period. The primary drivers of the decrease were lower gross profit, driven by higher commodity costs and unfavorable product mix, partially offset by increased selling prices. Expenses of $3.2 million related to the product recall and $2.9 million of costs related to the closure of the Fulton, New York plant also negatively impacted earnings before interest and taxes during the period.
Birds Eye Frozen Division:
Earnings before interest and taxes were $37.2 million for the three months ended March 25, 2012 , a decrease of $8.2 million or 18.1% from the comparable prior year period. The primary drivers of the decrease were $3.2 million of costs related to the Aunt Jemima product recall and $2.9 million of costs related to the closure of the Fulton, New York plant. The remainder of the decrease was driven by higher commodity costs, partially offset by increased net selling prices.

Duncan Hines Grocery Division:
Earnings before interest and taxes were $26.3 million for the three months ended March 25, 2012 , a decrease of $10.1 million or 27.7% from the comparable prior year period. The primary drivers of the decrease were higher commodity costs and unfavorable product mix. These decreases were partially offset by increased net selling prices.
Specialty Foods Division:
Earnings before interest and taxes were $6.9 million for the three months ended March 25, 2012 , a decrease of $1.5 million or 17.6% from the comparable prior year period. The primary drivers of the decrease were higher commodity costs partially offset by increased net selling prices and to a lesser extent, unfavorable product mix.

Interest Expense, net
Interest expense, net was $49.6 million in the three months ended March 25, 2012 , compared to $51.2 million in the three months ended March 27, 2011 .
Included in interest expense, net, was $0.4 million and $0.7 million for the three months ended March 25, 2012 and the three months ended March 27, 2011 , respectively, for the amortization of the cumulative mark-to-market adjustment for an interest rate swap that was de-designated for swap accounting in the fourth quarter of 2008 and subsequently terminated. The counterparty to the interest rate swap was Lehman Brothers Special Financing (“LBSF”), a subsidiary of Lehman Brothers, and the hedge was de-designated for swap accounting at the time of LBSF’s bankruptcy filing. At that time of de-designation, the cumulative mark to market adjustment was $11.5 million. As of March 25, 2012 , the balance was fully amortized.
Excluding the impact of the items in the previous paragraph, the net decrease in interest expense was $1.3 million, of which $0.9 million was due to lower payments on interest rate swap agreements and $0.6 million was due to lower term loan debt levels due to payments made in 2011. These decreases to interest expense were partially offset by a $0.2 increase in interest on capital leases.

9
Table of Contents

Included in the interest expense, net, amount was $4.1 million and $5.0 million for the three months ended March 25, 2012 and the three months ended March 27, 2011 , respectively, recorded from losses on interest rate swap agreements, a net change of $0.9 million. 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, excluding the Accumulated other comprehensive (loss) earnings (“AOCE”) portion, are recorded as an adjustment to interest expense.
Provision (benefit) for income taxes
The effective tax rate was 38.9% for the three months ended March 25, 2012, compared to 39.6% for the three months ended March 27, 2011.  The effective rate difference was due to the charge created by the changes in our effective state tax rate due to legislative changes during the three months ended March 27, 2011 as well as a change in our assessment of unrecognized tax benefits during the same period. For the three months ended March 25, 2012 and March 27, 2011, we maintained a valuation allowance against certain state NOL carryovers, state tax credits carryovers and foreign loss carryovers. See Note 14 to the Consolidated Financial Statements.
Under Section 382 of the Code, the Company is a loss corporation. Section 382 of the Code places limitations on our ability to use certain NOLs to offset income. The annual NOL limitation is approximately $14 to $18 million, subject to other rules and restrictions. Our NOLs and certain other tax attributes generated prior to December 23, 2009 may not be utilized to offset Birds Eye income from recognized built in gains through December 2014 pursuant to Section 384 of the Code.



10
Table of Contents

Liquidity and Capital Resourcess

Historical
Our cash flows are very seasonal. Typically we are a net user of cash in the third quarter of the calendar year (i.e., the quarter ending in September) and a net generator of cash over the balance of the year.
Our principal liquidity requirements have been, and we expect will be, for working capital and general corporate purposes, including capital expenditures and debt service. Capital expenditures are expected to be approximately $90-$100 million in 2012, which consists of normal capital expenditures and approximately $3-$5 million related to our Fulton, New York plant restructuring project. We have historically satisfied our liquidity requirements with internally generated cash flows and availability under our Revolving Credit Facility (as defined in note 8 to the consolidated financial statements). The Company expects that its ability to generate cash from its operations and ability to borrow from its credit facilities should be sufficient to support working capital needs, planned growth and capital expenditures for the next 12 months and for the foreseeable future. We keep a minimal amount of cash in foreign accounts, primarily related to the operations of our Canadian business. Tax liabilities related to bringing these funds back into the United States. would not be significant and have been accrued.
Statements of cash flows for the three months ended March 25, 2012 compared to the three months ended March 27, 2011
Net cash provided by operating activities was $33.9 million for the three months ended March 25, 2012 and was the result of net earnings, excluding non-cash charges and credits, of $34.4 million and an increase in working capital of $0.5 million . The increase in working capital was primarily the result of a $24.1 million increase in accounts receivable driven by the timing of sales and a $15.9 million decrease in accounts payable driven by our inventory purchases . Partially offsetting the increases to working capital were an increase of $14.6 million in accrued liabilities driven by higher interest accruals, a seasonal decrease of $18.1 million in inventories and a $6.4 million increase in accrued trade marketing expense driven by the timing of marketing around the Easter holiday. The aging profile of accounts receivable has not changed significantly from December 2011. All other working capital accounts decreased by $0.4 million.

Net cash provided by operating activities was $78.1 million for the three months ended March 27, 2011 and was the result of net earnings, excluding non-cash charges and credits, of $54.4 million and a decrease in working capital of $23.7 million. The decrease in working capital was primarily the result of a $11.2 million decrease in inventories that was due to the sell-down of the seasonal inventory build from December 2010 and seasonal increases of $17.7 million and $18.1 million, respectively, in accounts payable and accrued liabilities. The decrease in inventories and increase in accounts payable and accruals were offset by a $24.6 million increase in accounts receivable that related to the timing of sales within March. All other working capital accounts generated a net $1.8 million in cash.

Net cash used in investing activities was $13.5 million for the three months ended March 25, 2012 and was entirely related to capital expenditures. Capital expenditures during the first quarter of 2012 included approximately $1.7 million of costs related to our plant consolidation projects in Tacoma and Fulton. Net cash used in investing activities was $15.8 million for the three months ended March 27, 2011 and was related exclusively to capital expenditures.
Net cash used by financing activities for the three months ended March 25, 2012 was $4.4 million and consisted of $3.1 million of term loan repayments, $1.7 million of payments on capital leases and notes payable, and $0.4 million of equity repurchases. These outflows were partially offset by proceeds from new note payable issuances of $0.8 million. Net cash used by financing activities for the three months ended March 27, 2011 was $0.8 million and related primarily to capital lease and note payable activity.
The net of all activities resulted in an increase in cash of $16.2 million for the three months ended March 25, 2012 , compared to an increase in cash of $61.5 million for the three months ended March 27, 2011 .



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Table of Contents

Debt
As of March 25, 2012 and December 25, 2011 , our long term debt consisted of the following:


March 25,
2012
 
December 25,
2011
Long-term debt
 
 
 
- Senior Secured Credit Facility - Tranche B Term Loans due 2014
$
1,193.8

 
$
1,196.9

- Senior Secured Credit Facility - Tranche D Term Loans due 2014
313.2

 
313.2

- 9.25% Senior Notes due 2015
625.0

 
625.0

- 8.25% Senior Notes due 2017
400.0

 
400.0

- 10.625% Senior Subordinated Notes due 2017
199.0

 
199.0

- Unamortized discount on long term debt
(2.4
)
 
(2.7
)
- Capital lease obligations
22.2

 
23.0


2,750.7

 
2,754.3

Less: current portion of long-term obligations
15.5

 
15.7

Total long-term debt
$
2,735.2

 
$
2,738.7


We meet the service requirements on our debt utilizing cash flow generated from operations. During 2011, we made a voluntary prepayment of $55.0 million on our term loans. In addition to the above facilities, we have a $150.0 million revolving credit facility, which can be used to fund our working capital needs and can also be used to issue up to $50.0 million of letters of credit. There were no cash borrowings against the revolving credit facility at any time during 2012 or 2011. As of March 25, 2012 and December 25, 2011 , we had issued $33.2 million and $33.6 million , respectively, of letters of credit under this facility, leaving $116.8 million and $116.4 million , respectively, of unused capacity under this facility.

The Term Loans mature in quarterly 0.25% installments through December 2013 with the remaining balance due in April 2014. The aggregate maturities of the Tranche B Term Loans outstanding as of March 25, 2012 are $9.4 million in the remainder of 2012, $12.5 million in 2013 and $1,171.9 million in 2014. As a result of our voluntary prepayments of the Tranche D Term Loan, no quarterly installments are due for the remainder of the term. A lump sum payment of $313.2 million is due in 2014 for the Tranche D Term Loan.
Under the terms of the Senior Secured Credit Facility, we are required to use 50% of our “Excess Cash Flow” to prepay the Tranche B Term Loans and the Tranche D Term Loans. Excess Cash Flow is defined as consolidated net income (as defined), as adjusted for certain items, including (1) all non cash charges and credits included in arriving at consolidated net income, (2) changes in working capital, (3) capital expenditures (to the extent they were not financed with debt), (4) the aggregate amount of principal payments of indebtedness and (5) certain other items defined in the Senior Secured Credit Facility. In December 2011 we made a voluntary prepayment on our Tranche D terms loans of $55.0 million. As a result of this prepayment, no payment was due under the Excess Cash Flow requirements of the Senior Secured Credit Facility for the 2011 reporting year.

As market conditions warrant, we and our subsidiaries, affiliates or significant equity holders (including The Blackstone Group L.P. and its affiliates) may from time to time, in our or their sole discretion, purchase, repay, redeem or retire any of our outstanding debt or equity securities (including any publicly issued debt or equity securities), in privately negotiated or open market transactions, by tender offer or otherwise.

For additional details regarding our debt instruments and our April 2012 refinancing, please refer to Note 8 of the Consolidated Financial Statements, "Debt and Interest Expense".


12
Table of Contents

Covenant Compliance

The following is a discussion of the financial covenants contained in our debt agreements.
Senior Secured Credit Facility
Our Senior Secured Credit Facility contains a number of covenants that, among other things, restrict, subject to certain exceptions, our ability to:
•
incur additional indebtedness and make guarantees;
•
create liens on assets;
•
engage in mergers or consolidations;
•
sell assets;
•
pay dividends and distributions or repurchase our capital stock;
•
make investments, loans and advances, including acquisitions;
•
repay the Senior Subordinated Notes or enter into certain amendments thereof; and
•
engage in certain transactions with affiliates.
The Senior Secured Credit Facility also contains certain customary affirmative covenants and events of default.
On April 17, 2012 we entered into an amendment to the Senior Secured Credit Facility as part of an initiative to refinance our debt, pay off a portion of our high interest bonds and extend the maturity dates for a portion of our Senior Secured Credit Facility. This is discussed further in Note 8 of the Consolidated Financial Statements "Debt and Interest Expense".
8.25% Senior Notes, 9.25% Senior Notes and Senior Subordinated Notes
Additionally, on April 2, 2007, we issued the 9.25% Senior Notes and the 10.625% Senior Subordinated Notes. On December 23, 2009, we issued additional 9.25% Senior Notes. On August 17, 2010, we issued the 8.25% Senior Notes. The Senior Notes are general senior unsecured obligations, effectively subordinated in right of payment to all of our existing and future senior secured indebtedness, and guaranteed on a full, unconditional, joint and several basis by our wholly-owned domestic subsidiaries that guarantee our other indebtedness. The Senior Subordinated Notes are general unsecured obligations, subordinated in right of payment to all of our existing and future senior indebtedness, and guaranteed on a full, unconditional, joint and several basis by our wholly-owned domestic subsidiaries that guarantee our other indebtedness.
The indentures governing the 8.25% Senior Notes, 9.25% Senior Notes and Senior Subordinated Notes limit our (and most or all of our subsidiaries’) ability to, subject to certain exceptions:
•
incur additional debt or issue certain preferred shares;
•
pay dividends on or make other distributions in respect of our capital stock or make other restricted payments;
•
make certain investments;
•
sell certain assets;
•
create liens on certain assets to secure debt;
•
consolidate, merge, sell or otherwise dispose of all or substantially all of our assets;
•
enter into certain transactions with our affiliates; and
•
designate our subsidiaries as unrestricted subsidiaries.
Subject to certain exceptions, the indentures governing the notes permit us and our restricted subsidiaries to incur additional indebtedness, including secured indebtedness.

Adjusted EBITDA

The Company's metric of Adjusted EBITDA, which is used in creating targets for the bonus and equity portions of our compensation plans, is equivalent to Covenant Compliance EBITDA under our debt agreements.

13
Table of Contents

Pursuant to the terms of the Senior Secured Credit Facility, if at any time there are borrowings outstanding under the revolving credit facility in an aggregate amount greater than $10.0 million, we are required to maintain a ratio of consolidated total senior secured debt to Adjusted EBITDA (defined below) for the most recently concluded four consecutive fiscal quarters (the “Senior Secured Leverage Ratio”) of less than 4.00 to 1.00. Consolidated total senior secured debt is defined under the Senior Secured Credit Facility as aggregate consolidated secured indebtedness of the Company less the aggregate amount of all unrestricted cash and cash equivalents. In addition, under the Senior Secured Credit Facility and the indentures governing the Senior Notes and Senior Subordinated Notes, our ability to engage in activities such as incurring additional indebtedness, making investments and paying dividends is tied to the Senior Secured Leverage Ratio, in the case of the Senior Secured Credit Facility, or to the ratio of Adjusted EBITDA to fixed charges for the most recently concluded four consecutive fiscal quarters in the case of the Senior Notes and the Senior Subordinated Notes. As of March 25, 2012 , we were in compliance with all covenants and other obligations under the Senior Secured Credit Facility, and the indentures governing the Senior Notes and the Senior Subordinated Notes.

Adjusted EBITDA is defined as earnings (loss) before interest expense, taxes, depreciation and amortization (“EBITDA”), further adjusted to exclude non-cash items, extraordinary unusual or non-recurring items and other adjustment items permitted in calculating Adjusted EBITDA under the Senior Secured Credit Facility and the indentures governing the Senior Notes and Senior Subordinated Notes. We believe that the inclusion of supplementary adjustments to EBITDA applied in presenting Adjusted EBITDA is appropriate to provide additional information to investors to demonstrate compliance with our financial covenants.
EBITDA and Adjusted EBITDA do not represent net earnings or loss or cash flow from operations as those terms are defined by U.S. Generally Accepted Accounting Principles (“GAAP”) and do not necessarily indicate whether cash flows will be sufficient to fund cash needs. In particular, the definitions of Adjusted EBITDA in the Senior Secured Credit Facility and the indentures allow us to add back certain non-cash, extraordinary, unusual or non-recurring charges that are deducted in calculating net earnings or loss. However, these are expenses that vary greatly and are difficult to predict. While EBITDA and Adjusted EBITDA and similar measures are frequently used as measures of operations and the ability to meet debt service requirements, they are not necessarily comparable to other similarly titled captions of other companies due to the potential inconsistencies in the method of calculation.
Our ability to meet the covenants specified above in future periods will depend on events beyond our control, and we cannot assure you that we will meet those ratios. A breach of any of these covenants in the future could result in a default under, or an inability to undertake certain activities in compliance with, the Senior Secured Credit Facility and the indentures governing the Senior Notes and Senior Subordinated Notes, at which time the lenders could elect to declare all amounts outstanding under the Senior Secured Credit Facility to be immediately due and payable. Any such acceleration would also result in a default under the indentures governing the Senior Notes and Senior Subordinated Notes.


14
Table of Contents

The following table provides a reconciliation from our net earnings (loss) to EBITDA, Covenant Compliance EBITDA and Adjusted EBITDA for the three months ended March 25, 2012 and March 27, 2011 , and the fiscal year ended December 25, 2011 . The terms and related calculations are defined in the Senior Secured Credit Facility and the indentures governing the 8.25% Senior Notes, 9.25% Senior Notes and Senior Subordinated Notes.
(thousands of dollars)
Three months ended
 
Fiscal Year Ended
 
March 25, 2012
 
March 27, 2011
 
December 25, 2011
Net earnings (loss)
$
9,539

 
$
20,252

 
$
(46,914
)
Interest expense, net
49,554

 
51,248

 
208,078

Income tax expense (benefit)
6,077

 
13,263

 
22,103

Depreciation and amortization expense
20,490

 
20,410

 
88,476

EBITDA
$
85,660

 
$
105,173

 
$
271,743

Non-cash items (a)
(2,128
)
 
(1,222
)
 
152,245

Non-recurring items (as defined) (b)
1,806

 
1,669

 
20,264

Other adjustment items (c)
4,535

 
1,238

 
5,440

Adjusted EBITDA
89,873

 
106,858

 
449,692

Last twelve months Adjusted EBITDA
$
432,707

 
 
 
 

(a)
Non-cash items are comprised of the following:
(thousands of dollars)
Three months ended
 
Fiscal Year Ended
 
March 25, 2012
 
March 27, 2011
 
December 25, 2011
Non-cash compensation charges (1)
$
300

 
$
300

 
$
1,151

Unrealized losses resulting from hedging activities (2)
(2,428
)
 
(1,522
)
 
1,608

Goodwill impairment charges (3)
—

 
—

 
122,900

Other impairment charges (4)
—

 
—

 
26,586

Total non-cash items
$
(2,128
)
 
$
(1,222
)
 
$
152,245

 _________________
(1)
For the three months ended March 25, 2012 and March 27, 2011 , and the fiscal year ended December 25, 2011 , represents non-cash compensation charges related to the granting of equity awards.
(2)
For the three months ended March 25, 2012 and March 27, 2011 , and the fiscal year ended December 25, 2011 , represents non-cash gains and losses resulting from mark-to-market adjustments of obligations under foreign exchange and commodity derivative contracts.
(3)
For the fiscal year ended December 25, 2011 , represents goodwill impairments on the Breakfast ($51,700), Private Label ($49,700) and Food Service ($21,500) reporting Units.
(4)
For the fiscal year ended December 25, 2011 , represents tradename impairments on Aunt Jemima ($23,700), Lenders ($1,200) and Bernstein's ($400), as well as a plant asset impairment on the previously announced closure of the Tacoma, WA facility ($1,286).


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(b)
Non-recurring items as defined in our Senior Secured Credit Facility are comprised of the following:
(thousands of dollars)
Three months ended
 
Fiscal Year Ended
 
March 25, 2012
 
March 27, 2011
 
December 25, 2011
Expenses in connection with an acquisition or other non-recurring merger costs (1)
$
316


$
250

 
$
8,771

Restructuring charges, integration costs and other business optimization expenses (2)
1,385


1,365

 
9,485

Employee severance (3)
105


54

 
2,008

Total other adjustments
$
1,806

 
$
1,669

 
$
20,264

_________________
(1)
For the three months ended March 25, 2012 and March 27, 2011 , primarily represents costs related to due diligence investigations. For the fiscal year ended December 25, 2011 , represents other expenses related to financing of the Blackstone Transaction, and includes an $8.5 million legal settlement related to the Lehman Brothers Special Financing claim.
(2)
For the three months ended March 25, 2012 and March 27, 2011 , and the fiscal year ended December 25, 2011 , primarily represents restructuring charges, consulting and business optimization expenses related to the closings of the Tacoma, WA and Fulton, NY facilities.
(3)
For the three months ended March 25, 2012 and March 27, 2011 , and the fiscal year ended December 25, 2011 , represents severance costs paid, or to be paid, to terminated employees.
(c)
Other adjustment items are comprised of the following:
(thousands of dollars)
Three months ended
 
Fiscal Year Ended
 
March 25, 2012
 
March 27, 2011
 
December 25, 2011
Management, monitoring, consulting and advisory fees (1)
$
1,311

 
$
1,188

 
$
4,572

Other (2)
3,224

 
50

 
868

Total other adjustments
$
4,535

 
$
1,238

 
$
5,440

_________________
(1)
For the three months ended March 25, 2012 and March 27, 2011 , and the fiscal year ended December 25, 2011 , represents management/advisory fees and expenses paid to an affiliate of The Blackstone Group L.P.
(2)
For the three months ended March 25, 2012 and the fiscal year ended December 25, 2011 , primarily represents the recall of Aunt Jemima product. For the the fiscal year ended December 25, 2011 , this also includes a gain on the sale of the Watsonville, CA property. For three months ended March 27, 2011 , represents miscellaneous other costs.



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Our covenant requirements and actual ratios for the twelve months ended March 25, 2012 are as follows:
 
   
Covenant
Requirement
Actual Ratio
Senior Secured Credit Facility
 
 
Senior Secured Leverage Ratio (1)
4.00 to 1.00
3.10

Total Leverage Ratio (2)
Not applicable
5.98

Senior Notes and Senior Subordinated Notes (3)
 
 
Minimum Adjusted EBITDA to fixed charges ratio required to incur additional debt pursuant to ratio provisions (4)
2.00 to 1.00
2.23

 _________________
(1)
Pursuant to the terms of the Senior Secured Credit Facility, if at any time there are borrowings outstanding under the Revolving Credit Facility in an aggregate amount greater than $10.0 million, we are required to maintain a consolidated total senior secured debt to Adjusted EBITDA ratio for the most recently concluded four consecutive fiscal quarters (the “Senior Secured Leverage Ratio”) of less than of 4.00:1. Consolidated total senior secured debt is defined as our aggregate consolidated secured indebtedness less the aggregate amount of all unrestricted cash and cash equivalents.
(2)
The Total Leverage Ratio is not a financial covenant but is used to determine the applicable rate under the Senior Secured Credit Facility. The Total Leverage Ratio is calculated by dividing consolidated total debt less the aggregate amount of all unrestricted cash and cash equivalents by Adjusted EBITDA.
(3)
Our ability to incur additional debt and make certain restricted payments under the indentures governing the Senior Notes and Senior Subordinated Notes, subject to specified exceptions, is tied to a Adjusted EBITDA to fixed charges ratio of at least 2.0:1.
(4)
Fixed charges is defined in the indentures governing the Senior Notes and Senior Subordinated Notes as (i) consolidated interest expense (excluding specified items) plus consolidated capitalized interest less consolidated interest income, plus (ii) cash dividends and distributions paid on preferred stock or disqualified stock.

I NFLATION
Prior to 2007, inflation did not have a significant effect on us as we had been successful in mitigating the effects of inflation with cost reduction and productivity programs, as well as increasing selling prices during periods of higher inflation. Beginning in late 2007 and continuing into 2008, we experienced higher energy and commodity costs in production and higher fuel surcharges for product delivery. Inflation was less pronounced in 2009 and in 2010, but has been more pronounced in 2011 and 2012, particularly in ingredient costs such as vegetables, flours, shortening/oils, beef, dairy, cocoa, corn sweeteners and energy. To the extent possible, we offset inflation with productivity programs. However, we spend approximately $1.1 billion each year on ingredients, therefore each 1% change in our weighted average ingredient costs would impact earnings by approximately $11 million. If we experience significant inflation, price increases may be necessary in order to preserve our margins and returns. Although we have no such expectation, severe increases in inflation could have an adverse impact on our business, financial condition and results of operations.

Contractual Commitments

Our contractual commitments consist mainly of payments related to long-term debt and related interest, operating and capital lease payments, certain take-or-pay arrangements entered into as part of the normal course of business and pension obligations. Refer to the “Contractual Commitments” section of the Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year December 25, 2011 for details on our contractual obligations and commitments.

Subsequent to the end of the first quarter of fiscal 2012, there was a significant change in our contractual obligations and commitments related to long-term debt and related interest as a result of the amendment and restatement of our Senior Secured Credit Facility. See Note 8 - Debt and Interest Expense for further details.

Off-Balance Sheet Arrangements

As of March 25, 2012 , we did not have any off-balance sheet obligations.


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Accounting Policies and Pronouncements

Critical Accounting Policies and Estimates

We have disclosed in "Item 7 - Management Discussion and Analysis of Financial Condition and Results of Operations" included in our annual report for the fiscal year ended December 25, 2011 on Form 10-K, those accounting policies that we consider to be significant in determining our results of operations and financial condition. There have been no material changes to those policies that we consider to be significant since the filing of our annual report for the fiscal year ended December 25, 2011 on Form 10-K. We believe that the accounting principles utilized in preparing our unaudited consolidated financial statements conform in all material respects to GAAP.

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ITEM 3:     QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
F INANCIAL INSTRUMENTS
Risk Management Strategy
We are exposed to certain risks arising from both our business operations and economic conditions. We principally manage our exposures to a wide variety of business and operational risks through management of our core business activities. We manage economic risks, including interest rate, liquidity, and credit risk primarily by managing the amount, sources, and duration of our debt funding and the use of derivative financial instruments. The primary risks managed by using derivative instruments are interest rate risk, foreign currency exchange risk and commodity price risk. Specifically, we enter into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates, foreign exchange rates or commodity prices. Please refer to Note 10 of the Consolidated Financial Statements "Financial Instruments" for additional details regarding our derivatives and refer to Note 8 of the Consolidated Financial Statements "Debt and Interest Expense" for additional details regarding our debt instruments. There were no significant changes in our exposures to market risk since December 25, 2011 .

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ITEM 4.      CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed by us in our reports that we file or submit under the Exchange Act (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) 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, with the participation of 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 March 25, 2012 . Based upon that evaluation our Chief Executive Officer and Chief Financial Officer concluded that the design and operation of our disclosure controls and procedures are effective at a level of reasonable assurance.

Changes in Internal Control Over Financial Reporting

There was no change in our internal control over financial reporting (as defined in Rule 15d-15(f) of the Exchange Act) that occurred during the fiscal quarter ended March 25, 2012 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.


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PART II
 
ITEM 1:      LEGAL PROCEEDINGS
Commitment of $6.2 Million Capital Expenditure
In working to resolve an environmental wastewater investigation by the State of Michigan Department of Natural Resources and Environment (“MDNRE”) at the Company's Birds Eye Foods Fennville, Michigan production facility, on July 20, 2010, the Company and the MDNRE reached an agreement (“Administrative Consent Order” or “ACO”). Under the terms of the ACO, the Company agreed to construct a new wastewater treatment system at the facility currently estimated at $6.2 million which was substantially completed as of December 25, 2011 and contribute the funds required to extend the City's water supply to the affected residents, which was also substantially completed as of December 25, 2011. The Company currently estimates the expenses related to this agreement to be $0.5 million, of which $0.3 million was recorded in 2011. This was previously discussed in our in our Annual Report on Form 10-K for the fiscal year December 25, 2011 .

ITEM 1A:      RISK FACTORS

The risk factors listed below have been amended and restated and replace in their entirety, the risk factors listed under Item 1A disclosed in our Annual Report on Form 10-K for the year ended December 25, 2011 .

Risks Related to Our Business
We face significant competition in our industry, which could cause us to lose market share, lower prices, or increase advertising and promotional expenditures. Our success also depends on our ability to predict, identify and interpret changes in consumer preferences and develop and offer new products rapidly enough to meet those changes.
The food products business is highly competitive. Numerous brands and products compete for shelf space and sales, with competition based primarily on product quality, brand recognition and loyalty, price, trade promotion, consumer promotion, customer service, 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 larger companies. Many of these competitors have multiple product lines, substantially greater financial and other resources available to them, and may be substantially less leveraged than we are. In addition, private label is a significant competitor in the frozen vegetables, shelf-stable pickles, peppers, and relish, and table syrup categories. We cannot guarantee that we will be able to compete successfully with these companies and private label. Competitive pressures or other factors could cause us to lose market share, which may require us to lower prices, increase marketing and advertising expenditures, or increase the use of discounting or promotional campaigns, each of which would materially adversely affect our margins and could result in a decrease in our operating results and profitability.
Our success depends on our ability to predict, identify, and interpret the tastes and dietary habits of consumers and to offer products that appeal to those preferences. There are inherent marketplace risks associated with new product or packaging introductions, including uncertainties about trade and consumer acceptance. If we do not succeed in offering products that consumers want to buy, our sales and market share will decrease, resulting in reduced profitability. If we are unable to accurately predict which shifts in consumer preferences will be long-lasting, or are unable to introduce new and improved products to satisfy those preferences, our sales will decline. In addition, given the variety of backgrounds and identities of consumers in our consumer base, we must offer a sufficient array of products to satisfy the broad spectrum of consumer preferences. As such, we must be successful in developing innovative products across a multitude of product categories. Finally, if we fail to rapidly develop products in faster-growing and more profitable categories, we could experience reduced demand for our products.
If we lose one or more of our major customers, or if any of our major customers experience significant business interruption, our results of operations could be adversely affected.
We have several large customers that account for a significant portion of our sales. Wal-Mart Stores, Inc. (“Wal-Mart”) and its affiliates are our largest customers and represented approximately 25% of our net sales in each of the fiscal years 2011, 2010 and 2009, respectively. Cumulatively, including Wal-Mart, our top ten customers accounted for approximately 60% of our net sales in fiscal year 2011, 61% of our net sales in fiscal year 2010 and 58% of our net sales in fiscal year 2009.
We do not have long-term supply contracts with any of our major customers. The loss of one or more major customers, a material reduction in sales to these customers as a result of competition from other food manufacturers, or the occurrence of a significant business interruption of our customers' operations would result in a decrease in our revenues, operating results, and earnings.

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In addition, as the retail grocery trade continues to consolidate and our retail customers grow larger and become more sophisticated, our retail customers may demand lower pricing and increased promotional programs. If we fail to use our sales and marketing expertise to maintain our category leadership positions to respond to these trends, or if we lower our prices or increase promotional support of our products and are unable to increase the volume of our products sold, our profitability and financial condition may be adversely affected.
For the manufacturing, co-packing and distribution of many of our products, we primarily rely on single source providers where a significant disruption in a facility or loss of arrangements could affect our business, financial condition, and results of operations.
With the exception of our pickles, peppers, and relish products that are produced in two facilities (Imlay City, MI and Millsboro, DE) and Birds Eye's frozen vegetable products which are produced in two facilities (Waseca, MN and Darien, WI), none of our products are produced in significant amounts at multiple manufacturing facilities or co-packers. Significant unscheduled downtime at any of our facilities or co-packers due to equipment breakdowns, power failures, natural disasters, or any other cause could materially adversely affect our ability to provide products to our customers, which would have a material adverse effect on our business, financial condition and results of operations.
We rely upon co-packers for our Duncan Hines cake mixes, brownie mixes, specialty mixes, frosting products and a limited portion of our other manufacturing needs. We believe that there are a limited number of competent, high-quality co-packers in the industry, and if we were required to obtain additional or alternative co-packing agreements or arrangements in the future, while we believe we would be able to do so, we cannot be certain that we will be able to do so on satisfactory terms or in a timely manner.
We sell a majority of our products in the United States through one national broker with whom we have a long-term working relationship. In Canada, we use one national broker to distribute the majority of our products. Our business could suffer disruption if either of these brokers were to default in the performance of their obligations to perform brokerage services or fail to effectively represent us to the retail grocery trade.
We are vulnerable to fluctuations in the price and supply of food ingredients, packaging materials, and freight.
The prices of the food ingredients, packaging materials and freight are subject to fluctuations in price attributable to, among other things, changes in supply and demand of crops or other commodities, fuel prices and government-sponsored agricultural and livestock programs. The sales prices to our customers are a delivered price. Therefore, changes in our input costs could impact our gross margins. Our ability to pass along higher costs through price increases to our customers is dependent upon competitive conditions and pricing methodologies employed in the various markets in which we compete. To the extent competitors do not also increase their prices, customers and consumers may choose to purchase competing products or may shift purchases to lower-priced private label or other value offerings which may adversely affect our results of operations.
We use significant quantities of sugar, cucumbers, broccoli, corn, peas, green beans, flour (wheat), poultry, seafood, vegetable oils, shortening, meat, corn syrup and other agricultural products as well as aluminum, glass jars, plastic trays, corrugated fiberboard and plastic packaging materials provided by third-party suppliers. We buy from a variety of producers and manufacturers, and alternate sources of supply are generally available. However, the supply and price are subject to market conditions and are influenced by other factors beyond our control, such as general economic conditions, unanticipated demand, problems in production or distribution, natural disasters, weather conditions during the growing and harvesting seasons, insects, plant diseases, and fungi. Adverse weather conditions may occur more frequently as a result of climate change and other factors. Adverse weather conditions and natural disasters can reduce crop size and crop quality, which in turn could reduce our supplies of raw materials, lower recoveries of usable raw materials, increase the prices of our raw materials, increase our cost of storing raw materials if harvests are accelerated and processing capacity is unavailable, or interrupt or delay our production schedules if harvests are delayed.
Many of our packaging materials are purchased on the open market or from multiple suppliers; however, packaging used for Birds Eye Steamfresh vegetables is purchased pursuant to an exclusive U.S. license and supply agreement that expires in 2013. The loss of this supplier or any significant interruption in the supply of packaging used for Birds Eye Steamfresh vegetables, such as manufacturing problems or shipping delays, could have a material adverse effect on our business.
We do not have long-term contracts with many of our suppliers, and, as a result, they could increase prices or fail to deliver. The occurrence of any of the foregoing could increase our costs and disrupt our operations.

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If our assessments and assumptions about commodity prices, as well as ingredient and other prices and currency exchange rates, prove to be incorrect in connection with our hedging or forward-buy efforts or planning cycles, our costs may be greater than anticipated and our financial results could be adversely affected. Volatility in commodity prices will impact our results of operations.
From time to time, we enter into commodity forward contracts to fix the price of natural gas, diesel fuel, corn, soybean oil and other commodity purchases at a future delivery date. Although we may utilize forward purchase contracts and other instruments to mitigate the risks related to commodity price fluctuation, such strategies do not fully mitigate commodity price risk. Adverse movements in commodity prices over the terms of the contracts or instruments could decrease the economic benefits we derive from these strategies. Additionally, changes in the value of our commodities derivatives accounted for as economic hedges are recorded directly as other income or expense. As of December 25, 2011 , all of our commodity hedges were accounted for as economic hedges and we currently expect to continue such practice. Accordingly, volatility in commodities could result in volatility in our results of operations. As of December 25, 2011 , the potential change in fair value of commodity derivative instruments, assuming a 10% adverse movement in the underlying commodity prices, would have resulted in an unrealized net loss of $3.4 million.
In addition, certain parts of our foreign operations in Canada expose us to fluctuations in foreign exchange rates. Net sales in Canada accounted for 3.4% of Consolidated Net Sales for fiscal 2011. We seek to reduce our exposure to such foreign exchange risks primarily through the use of foreign exchange-related derivative financial instruments. We enter into derivative financial instruments to protect the value or fix the amount of certain obligations in terms of our functional currency. As of December 25, 2011 , a 10% decline in the U.S. dollar relative to the Canadian dollar would have decreased the fair value of our foreign exchange forward contracts by $5.1 million.
We may cease any of our current programs or use other hedging or derivative programs in the future. The extent of our hedges at any given time depends on our assessment of the markets for these commodities, natural gas and diesel fuel, including our assumptions about future prices and currency exchange rates. For example, if we believe market prices for the commodities we use are unusually high, we may choose to hedge less, or even none, of our upcoming requirements. If we fail to hedge and prices or currency exchange rates subsequently increase, or if we institute a hedge and prices or currency exchange rates subsequently decrease, our costs may be greater than anticipated or greater than our competitors' costs and our financial results could be adversely affected. See “Management's Discussion and Analysis of Financial Condition and Results of Operations-Quantitative and Qualitative Disclosures about Market Risk” in our Annual Report on Form 10-K for the fiscal year ended December 25, 2011 for a discussion of our current hedging and derivatives programs.
We may not be able to successfully identify, evaluate and integrate businesses we may acquire in the future and we may not be able to realize anticipated cost savings, revenue enhancements, or other synergies from such acquisitions.
Our ability to successfully implement our business plan and achieve targeted financial results is dependent on our ability to successfully identify, evaluate and integrate acquired businesses. We may not be able to identify and complete acquisitions in the future, and our failure to identify and complete acquisitions could limit our ability to grow our business beyond our existing brands.
Our strategy of evaluating targeted acquisition opportunities involves a number of risks, including the following:
•
we may not be able to find suitable businesses to acquire at affordable valuations or on other acceptable terms;
•
our acquisition of suitable businesses could be prohibited by U.S. or foreign antitrust laws; and
•
we may have to obtain additional equity financing or incur additional debt to finance future acquisitions, and no assurance can be given as to whether, and on what terms, such financing will be available.

The process of integrating an acquired business, involves risks. These risks include, but are not limited to:
•
demands on management related to the significant increase in the size of our business;
•
diversion of management's attention from the management of daily operations;
•
difficulties in the assimilation of different corporate cultures and business practices;
•
difficulties in conforming the acquired company's accounting policies to ours;
•
retaining the loyalty and business of the customers of acquired businesses;
•
retaining employees that may be vital to the integration of acquired businesses or to the future prospects of the combined businesses;

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•
difficulties and unanticipated expenses related to the integration of departments, information technology systems, including accounting systems, technologies, books and records, and procedures, and maintaining uniform standards, such as internal accounting controls, procedures, and policies;
•
costs and expenses associated with any undisclosed or potential liabilities;
•
the use of more cash or other financial resources on integration and implementation activities than we expect;
•
our ability to avoid labor disruptions in connection with any integration, particularly in connection with any headcount reduction; and
•
the incurrence of additional debt and related interest expense, contingent liabilities and amortization expenses related to intangible assets.

Failure to successfully integrate acquired businesses may result in reduced levels of revenue, earnings or operating efficiency than might have been achieved if we had not acquired such businesses.
Our substantial leverage could adversely affect our ability to raise additional capital to fund our operations, limit our ability to react to changes in the economy or our industry, expose us to interest rate risk to the extent of our variable rate debt, and prevent us from meeting our obligations under our indebtedness.
We are highly leveraged. As of March 25, 2012 , our total indebtedness was $2.8 billion . Our high degree of leverage could have important consequences, including:
•
requiring a substantial portion of cash flow from operations to be dedicated to the payment of principal and interest on our indebtedness, thereby reducing our ability to use our cash flow to fund our operations, capital expenditures, and future business opportunities;
•
exposing us to the risk of increased interest rates because certain of our borrowings, including certain borrowings under our senior secured credit facilities, are at variable rates;
•
making it more difficult for us to make payments on our indebtedness;
•
increasing our vulnerability to general economic and industry conditions;
•
restricting us from making strategic acquisitions or causing us to make non-strategic divestitures;
•
subjecting us to restrictive covenants that may limit our flexibility in operating our business;
•
limiting our ability to obtain additional financing for working capital, capital expenditures, product development, debt service requirements, acquisitions, and general corporate or other purposes; and
•
placing us at a competitive disadvantage compared to our competitors who are less highly leveraged.

Despite our significant leverage, we may be able to incur significant additional amounts of debt, which could further exacerbate the risks associated with our significant leverage.
Litigation or claims regarding our trademarks and any other proprietary rights or termination of our material licenses may have a significant, negative impact on our business.
We attempt to protect our intellectual property rights through a combination of trademark, patent, copyright and trade secret laws. We consider our trademarks to be of significant importance to our business. Although we devote resources to the establishment and protection of our trademarks and other intellectual property rights, we cannot assure you that our trademark or other intellectual property applications will be approved. Third parties may also oppose our intellectual property applications, or otherwise challenge our use of our trademark or other intellectual property. We also cannot assure you that the actions we have taken or will take in the future will be adequate to prevent violation of our trademark or other proprietary rights by others or prevent others from seeking to block sales of our products as an alleged violation of their trademark or other proprietary rights. We cannot assure you that future claims or litigation by or against us will not be necessary to enforce our trademark or other proprietary rights or to defend ourselves against claimed infringement of the trademark or other proprietary rights of others. Any future claims or litigation of this type, even without merit, could result in a material adverse effect on our business, financial condition or results of operations. Any such future claims or litigation may: (a) be expensive and time consuming to defend; (b) cause us to cease making, licensing or using products that incorporate the challenged intellectual property; (c) require us to rebrand our products or redesign our packaging, if feasible; (d) divert management's attention and resources; or (e) require us to enter into royalty or licensing agreements in order to obtain the right to use a third party's intellectual property, which, if required, may not be available to us on acceptable terms or at all. Any inability to use our trademarks or other proprietary rights could harm our business and sales through reduced demand for our products and reduced revenues.
We manufacture our Aunt Jemima , Armour and Voila! brands under license agreements from various third parties. The loss of these licenses could have a material adverse effect on our business.

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We may be unable to drive revenue growth in our key product categories or add products that are in faster growing and more profitable categories.
The food and beverage industry's overall growth is linked to population growth. Our future results will depend on our ability to drive revenue growth in our key product categories. Because our operations are concentrated in North America, where growth in the food and beverage industry has been moderate, our success also depends in part on our ability to enhance our portfolio by adding innovative new products in faster growing and more profitable categories. Our failure to drive revenue growth in our key product categories or develop innovative products for new and existing categories could materially and adversely affect our profitability, financial condition and results of operations.
We may be subject to product liability claims should the consumption of any of our products cause injury, illness, or death.
We sell food products for human consumption, which involves risks such as product contamination or spoilage, misbranding, product tampering, and other adulteration of food products. Consumption of a misbranded, adulterated, contaminated, or spoiled product may result in personal illness or injury. We could be subject to claims or lawsuits relating to an actual or alleged illness or injury, and we could incur liabilities that are not insured or exceed our insurance coverage. Even if product liability claims against us are not successful or fully pursued, these claims could be costly and time consuming and may require our management to spend time defending the claims rather than operating our business.
A product that has been actually or allegedly misbranded or becomes adulterated could result in product withdrawals or recalls, destruction of product inventory, negative publicity, temporary plant closings, and substantial costs of compliance or remediation. Any of these events, including a significant product liability judgment against us, could result in a loss of demand for our food products, which could have a material adverse effect on our financial condition, results of operations or cash flows.
Due to the seasonality of the business, our revenue and operating results may vary from quarter to quarter.
Our sales and cash flows are affected by seasonal cyclicality. Sales of frozen foods, including frozen vegetables and frozen complete bagged meals, tend to be marginally higher during the winter months. Seafood sales peak during Lent, in advance of the Easter holiday. Sales of pickles, relishes, barbecue sauces, potato chips and salad dressings tend to be higher in the spring and summer months, and demand for Duncan Hines products, Birds Eye vegetables and our pie and pastry fillings tend to be higher around the Easter, Thanksgiving, and Christmas holidays. Since many of the raw materials we process under the Birds Eye and Vlasic brands are agricultural crops, production of these products is predominantly seasonal, occurring during and immediately following the purchase of such crops. We also increase our Duncan Hines inventories in advance of the peak fall selling season. As a result, our inventory levels tend to be higher during August, September, and October, and thus we require more working capital during these months. We are a seasonal net user of cash in the third quarter of the calendar year.
For these reasons, sequential quarterly comparisons are not a good indication of our performance or how we may perform in the future. If we are unable to obtain access to working capital or if seasonal fluctuations are greater than anticipated, there could be a material adverse effect on our financial condition, results of operations or cash flows.
We face risks associated with certain pension obligations.
We hold investments in equity and debt securities in our qualified defined benefit pension plans. Deterioration in the value of plan assets, resulting from a general financial downturn or otherwise, could cause an increase in the underfunded status of our defined benefit pension plans, thereby increasing our obligation to make contributions to the plans. The underfunding in our pension plans totaled $90.2 million as of December 25, 2011. The single largest contributor of the underfunding has been the lower discount rates which have declined from approximately 6% in 2008 to approximately 4.5% in 2011. We have contributed cash significantly in excess of expense for the last two years to improve the funded status of the plans and intend to continue to do so.
Our obligation to make contributions to the pension plans could reduce the cash available for working capital and other corporate uses and may have a material adverse impact on our operations, financial condition and liquidity.

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Our financial well-being could be jeopardized by unforeseen changes in our employees' collective bargaining agreements or shifts in union policy.
We employed approximately 4,100 people as of December 25, 2011 with approximately 56% of our hourly employees unionized. Due to the seasonality of our pickle and vegetable businesses our employment fluctuates throughout the year, and thus our average number of employees was approximately 4,600 throughout 2011. In September 2012, the collective bargaining agreement expires for approximately 450 of our union employees in Ft. Madison, Iowa. The collective bargaining agreement for approximately 420 of our employees at our Fayetteville, Arkansas plant expired during October 2011, but has been extended indefinitely as negotiations continue for a new collective bargaining agreement, subject to either party being able to cancel the extension on 72 hours written notice. We are also in the process of negotiating an initial collective bargaining agreement for approximately 220 of our employees in Mattoon, Illinois.
Although we consider our employee relations to generally be good, failure to extend or renew our collective bargaining agreements or a prolonged work stoppage or strike at any facility with union employees could have a material adverse effect on our business, financial condition, or results of operations. In addition, we cannot assure you that upon the expiration of our existing collective bargaining agreements, new agreements will be reached without any union action, if at all, or that any such new agreements will be on terms satisfactory to us. Furthermore, labor organizing activities could result in additional employees becoming unionized.
We and our third-party co-packers and suppliers are subject to laws and regulations relating to protection of the environment, worker health, and workplace safety. Costs to comply with these laws and regulations, or claims with respect to environmental, health and safety matters, could have a significant negative impact on our business.
Our operations are subject to various federal, state and local laws and regulations relating to the protection of the environment, including those governing the discharge of pollutants into the air and water, the management and disposal of solid and hazardous materials and wastes, employee exposure to hazards in the workplace and the cleanup of contaminated sites. We are required to obtain and comply with environmental permits for many of our operations, and sometimes we are required to install pollution control equipment or to implement operational changes to limit air emissions or wastewater discharges and/or decrease the likelihood of accidental releases of hazardous materials. We could incur substantial costs, including cleanup costs, civil or criminal fines or penalties, and third-party claims for property damage or personal injury as a result of any violations of environmental laws and regulations, noncompliance with environmental permit conditions or contamination for which we may be responsible that is identified or that may occur in the future. Such costs may be material.
Under federal and state environmental laws, we may be liable for the costs of investigation, removal or remediation of certain hazardous or toxic substances, as well as related costs of investigation and damage to natural resources, at various properties, including our current and former properties and the former properties of our predecessors, as well as offsite waste handling or disposal sites that we or our predecessors have used. Liability may be imposed upon us without regard to whether we knew of or caused the presence of such hazardous or toxic substances. We cannot assure you that any such locations, or locations that we may acquire in the future, will not result in liability to us under such laws or expose us to third party actions such as tort suits based on alleged conduct or environmental conditions. In addition, we may be liable if hazardous or toxic substances migrate from properties for which we may be responsible to other properties.
In addition to regulations applicable to our operations, failure by any of our co-packers or other suppliers to comply with regulations, or allegations of compliance failure, may disrupt their operations and could result in potential liability. Even if we were able to obtain insurance coverage or compensation for any losses or damages resulting from the non-compliance of a co-packer or supplier with applicable regulations, our brands and reputation may be adversely affected by negative perceptions of our brands stemming from such compliance failures.
We cannot predict what environmental or health and safety legislation or regulations will be enacted in the future or how existing or future laws or regulations will be enforced, administered or interpreted. We also cannot predict the amount of future expenditures that may be required in order to comply with such environmental or health and safety laws or regulations or to respond to environmental claims.

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Our operations are subject to regulation by the U.S. Food and Drug Administration ("FDA"), U.S. Department of Agriculture (“USDA”), Federal Trade Commission (“FTC”) and other governmental entities, and we cannot assure you that we will be in compliance with all regulations.
Our operations are subject to extensive regulation by the FDA, the USDA and other national, state, and local authorities. For example, we are subject to the Food, Drug and Cosmetic Act and regulations promulgated thereunder by the FDA. This comprehensive regulatory program governs, among other things, the manufacturing, composition and ingredients, packaging, and safety of food. Under this program, the FDA regulates manufacturing practices for foods through, among other things, its current “good manufacturing practices” regulations, or cGMPs, and specifies the recipes for certain foods. Our processing facilities and products are subject to periodic inspection by federal, state, and local authorities. In addition, we must comply with similar laws in Canada. In January 2011, the FDA's Food Safety Modernization Act was signed into law. The law will increase the number of inspections at food facilities in the U.S. in an effort to enhance the detection of food borne illness outbreaks and order recalls of tainted food products. The FTC and other authorities regulate how we market and advertise our products, and we could be the target of claims relating to alleged false or deceptive advertising under federal, state, and foreign laws and regulations. Changes in these laws or regulations or the introduction of new laws or regulations could increase the costs of doing business for us or our customers or suppliers or restrict our actions, causing our results of operations to be adversely affected.
We seek to comply with applicable regulations through a combination of employing internal personnel to ensure quality-assurance compliance (for example, assuring that food packages contain only ingredients as specified on the package labeling) and contracting with third-party laboratories that conduct analysis of products for the nutritional-labeling requirements. Failure to comply with applicable laws and regulations or maintain permits and licenses relating to our operations could subject us to civil remedies, including fines, injunctions, recalls or seizures, as well as potential criminal sanctions, which could result in increased operating costs resulting in a material adverse effect on our operating results and business. For example, on January 27, 2012, we issued a voluntary recall for certain Aunt Jemima frozen pancakes due to potential cross contamination with soy protein which may cause allergic reactions for people who have a soy allergy. The estimated cost of this recall is $4.4 million.
Our business operations could be disrupted if our information technology systems fail to perform adequately.
The efficient operation of our business depends on our information technology systems, some of which are managed by third-party service providers. We rely on our information technology systems to effectively manage our business data, communications, supply chain, order entry and fulfillment, and other business processes. The failure of our information technology systems to perform as we anticipate could disrupt our business and could result in transaction errors, processing inefficiencies, and the loss of sales and customers, causing our business and results of operations to suffer. In addition, our information technology systems may be vulnerable to damage or interruption from circumstances beyond our control, including fire, natural disasters, power outages, systems failures, security breaches, cyber attacks and viruses. Any such damage or interruption could have a material adverse effect on our business.
We have a significant amount of goodwill and intangible assets on our Consolidated Balance Sheets that are subject to impairment based upon future adverse changes in our business and the overall economic environment.
At March 25, 2012 , the carrying value of goodwill and tradenames was $1,441.5 million and $1,604.5 million, respectively. We evaluate the carrying amount of goodwill and indefinite-lived intangible assets for impairment on an annual basis, in December, or more frequently if an event occurs or circumstances change that would more likely than not reduce the fair value below its carrying amount. We have recorded impairment charges in recent years, including $148.2 million of goodwill and tradename impairments in 2011. The value of goodwill and intangible assets will be derived from our business operating plans and is susceptible to an adverse change in demand, input costs, general changes in the business, or changes in the overall economic environment and could require an impairment charge in the future.
If we are unable to retain our key management personnel, our future performance may be impaired and our financial condition could suffer as a result.
Our success depends to a significant degree upon the continued contributions of senior management, certain of whom would be difficult to replace. Departure by certain of our executive officers could have a material adverse effect on our business, financial condition, or results of operations. We do not maintain key-man life insurance on any of our executive officers. We cannot assure you that the services of such personnel will continue to be available to us.

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We may not be able to utilize all of our net operating loss carryforwards.
If there is an unfavorable adjustment from an United States Internal Revenue Service (“IRS”) examination (whether as a result of a change in law or IRS policy or otherwise) that reduces any of our net operating loss carryforwards (“NOLs”), cash taxes may increase and impact our ability to make interest payments on our indebtedness. As of December 25, 2011, we had NOLs for U.S. federal income tax purposes of $1.1 billion. In general, under Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”), a corporation that undergoes an “ownership change” is subject to annual limitations on its ability to utilize its pre-change NOLs to offset future taxable income. Certain of our existing NOLs are subject to annual limitations under Section 382 of the Code. In addition, if we undergo an ownership change in the future, our ability to utilize NOLs could be further limited by Section 382 of the Code. These limitations and/or our failure to generate sufficient taxable income may result in the expiration of the NOLs before they are utilized.
Affiliates of Blackstone control us and their interests may conflict with ours in the future.
Investment funds associated with or designated by Blackstone control Pinnacle. Blackstone has control over our decisions to enter into any corporate transaction and has the ability to prevent any transaction that requires the approval of unit holders regardless of whether other stakeholders believe that any such transactions are in their interests. For example, Blackstone could collectively cause us to make acquisitions that increase our amount of indebtedness, including secured indebtedness, or to sell assets, which may impair our ability to make payments under the notes.

Additionally, Blackstone is in the business of making investments in companies and may from time to time acquire and hold interests in businesses that compete directly or indirectly with us. Blackstone may also pursue acquisition opportunities that may be complementary to our business and, as a result, those acquisition opportunities may not be available to us. So long as investment funds associated with or designated by Blackstone collectively continue to control Pinnacle, even if such amount is less than 50%, Blackstone will continue to be able to influence or effectively control our decision.
ITEM 2:      UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None

ITEM 3:      DEFAULTS UPON SENIOR SECURITIES
None

ITEM 4:      MINE SAFETY DISCLOSURES
None

ITEM 5:      OTHER INFORMATION
None


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ITEM 6:     EXHIBITS, FINANCIAL STATEMENTS AND SCHEDULES

Exhibit
Number
 
Description of exhibit
 
 
 
4.1*
 
Supplemental Indenture, dated as of December 23, 2009, among Pinnacle Foods Group LLC, Pinnacle Foods International Corp. and Wilmington Trust Company.

 
 
 
10.1*
 
Trademark License Agreement, dated August 19, 2002, by and between Voila Bakeries, Inc. and Agrilink Foods, Inc.

 
 
 
31.1*
 
Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer.
 
 
 
31.2*
 
Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer.
 
 
 
32.1*
 
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)
 
 
 
101.1*
 
The following materials are formatted in XBRL (eXtensible Business Reporting Language): (i) the Consolidated Statements of Operations, (ii) the Consolidated Balance Sheets, (iii) the Consolidated Statements of Cash Flows, (iv) the Consolidated Statements of Member’s Equity, (v) Notes to Consolidated Financial Statements, tagged as blocks of text, and (vi) document and entity information. (B)
*    Identifies exhibits that are filed as attachments to this document.

(A)
Pursuant to Commission Release No. 33-8212, this certification will be treated as “accompanying” this Form 10-Q and not “filed” as part of such report for purposes of Section 18 of Exchange Act, or otherwise subject to the liability of Section 18 of the Exchange Act and this certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference.
(B)
Pursuant to Rule 406T of Regulation S-T, the Interactive Data files on Exhibit 101.1 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 133, as amended, are deemed not file for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.


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SIGNATURES
 
Pursuant to the requirements of Section 13 or 15(d) 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 FINANCE LLC

By:
/s/ Craig Steeneck
Name:
Craig Steeneck
Title:
Executive Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)
Date:
May 9, 2012



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Exhibit 4.1
Supplemental Indenture (this “ Supplemental Indenture ”), dated as of December 23, 2009, among Pinnacle Foods Group LLC, a Delaware limited liability company and Pinnacle Foods International Corp., a Delaware corporation, (each a “ Guaranteeing Subsidiary ” and together, the “ Guaranteeing Subsidiaries ), subsidiaries of Pinnacle Foods Finance LLC, a Delaware limited liability company (together with Pinnacle Foods Finance Corp., a Delaware corporation, the “ Issuers ”), and Wilmington Trust Company, as trustee (the “ Trustee ”).

W I T N E S S E T H
WHEREAS, each Issuer and the Guarantors (as defined in the Indenture referred to below) has heretofore executed and delivered to the Trustee an indenture (the “Indenture”), dated as of April 2, 2007, providing for the issuance of $325.0 million aggregate principal amount of Senior Notes due 2015 (the “Notes”);
WHEREAS, the Issuers consummated a reorganization of its subsidiaries whereby Pinnacle Foods International Corp. was formed on September 26, 2007, Pinnacle Foods Management Corporation and Pinnacle Foods Corporation merged with and into Pinnacle Foods Group Inc. on September 30, 2007, and Pinnacle Foods Group Inc. was converted from a Delaware corporation into a Delaware limited liability company on October 1, 2007 under the name Pinnacle Foods Group LLC;
WHEREAS, the Indenture provides that under certain circumstances the Guaranteeing Subsidiaries shall execute and deliver to the Trustee a supplemental indenture pursuant to which the Guaranteeing Subsidiaries shall unconditionally guarantee all of the Issuers' Obligations under the Notes and the Indenture on the terms and conditions set forth herein and under the Indenture (the “ Guarantee ”); and
WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee is authorized to execute and deliver this Supplemental Indenture.
NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the parties mutually covenant and agree for the equal and ratable benefit of the Holders of the Notes as follows:
(1)      Capitalized Terms . Capitalized terms used herein without definition shall have the meanings assigned to them in the Indenture.
(2)      Agreement to Guarantee . Each Guaranteeing Subsidiary hereby agrees as follows:
(a)      Along with all Guarantors named in the Indenture, to jointly and severally, irrevocable and unconditionally guarantee to each Holder of a Note authenticated and delivered by the Trustee and to the Trustee and its successors and assigns, irrespective of the validity and enforceability of the Indenture, the Notes or the obligations of the Issuers hereunder or thereunder, that:
(i)      the principal of and interest, premium and Additional Interest, if any, on the Notes will be promptly paid in full when due, whether at maturity, by acceleration, redemption or otherwise, and interest on the overdue principal of and interest on the Notes, if any, if lawful, and all other Obligations of the Issuers to the Holders or the Trustee hereunder or thereunder will be promptly paid in full or performed, all in accordance with the terms hereof and thereof; and
(ii)      in case of any extension of time of payment or renewal of any Notes or any of such other obligations, that same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise. Failing payment when due of any amount so guaranteed or any performance so guaranteed for whatever reason, the Guarantors and the Guaranteeing Subsidiary shall be jointly and severally obligated to




pay the same immediately. This is a guarantee of payment and not a guarantee of collection.
(b)      The obligations hereunder shall be unconditional, irrespective of the validity, regularity or enforceability of the Notes or the Indenture, the absence of any action to enforce the same, any waiver or consent by any Holder of the Notes with respect to any provisions hereof or thereof, the recovery of any judgment against either Issuer, any action to enforce the same or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a guarantor.
(c)      The following is hereby waived: diligence, presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of either Issuer, any right to require a proceeding first against the Issuers, protest, notice and all demands whatsoever.
(d)      This Guarantee shall not be discharged except by complete performance of the obligations contained in the Notes, the Indenture and this Supplemental Indenture, and the Guaranteeing Subsidiary accepts all obligations of a Guarantor under the Indenture.
(e)      If any Holder or the Trustee is required by any court or otherwise to return to the Issuers, the Guarantors (including the Guaranteeing Subsidiary), or any custodian, trustee, liquidator or other similar official acting in relation to either the Issuers or the Guarantors, any amount paid either to the Trustee or such Holder, this Guarantee, to the extent theretofore discharged, shall be reinstated in full force and effect.
(f)      The Guaranteeing Subsidiary shall not be entitled to any right of subrogation in relation to the Holders in respect of any obligations guaranteed hereby until payment in full of all obligations guaranteed hereby.
(g)      As between the Guaranteeing Subsidiary, on the one hand, and the Holders and the Trustee, on the other hand, (x) the maturity of the obligations guaranteed hereby may be accelerated as provided in Article 6 of the Indenture for the purposes of this Guarantee, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the obligations guaranteed hereby, and (y) in the event of any declaration of acceleration of such obligations as provided in Article 6 of the Indenture, such obligations (whether or not due and payable) shall forthwith become due and payable by the Guaranteeing Subsidiary for the purpose of this Guarantee.
(h)      The Guaranteeing Subsidiary shall have the right to seek contribution from any non-paying Guarantor so long as the exercise of such right does not impair the rights of the Holders under this Guarantee.
(i)      Pursuant to Section 10.02 of the Indenture, after giving effect to all other contingent and fixed liabilities that are relevant under any applicable Bankruptcy Law or fraudulent conveyance laws, and after giving effect to any collections from, rights to receive contribution from or payments made by or on behalf of any other Guarantor in respect of the obligations of such other Guarantor under Article 10 of the Indenture, this new Guarantee shall be limited to the maximum amount permissible such that the obligations of such Guaranteeing Subsidiary under this Guarantee will not constitute a fraudulent transfer or conveyance.
(j)      This Guarantee shall remain in full force and effect and continue to be effective should any petition be filed by or against either Issuer for liquidation, reorganization, should either Issuer become insolvent or make an assignment for the benefit of creditors or should a receiver or trustee be appointed for all or any significant part of either Issuer's assets, and shall, to the fullest extent permitted by law, continue to be effective or be reinstated, as the case may be, if at any time payment and performance of the Notes are, pursuant to applicable law, rescinded or reduced in amount, or must otherwise be restored or returned by any obligee on the Notes and Guarantee, whether as a “voidable preference,” “fraudulent transfer” or otherwise, all as though such payment or performance had not been made. In the event that any payment or




any part thereof, is rescinded, reduced, restored or returned, the Notes shall, to the fullest extent permitted by law, be reinstated and deemed reduced only by such amount paid and not so rescinded, reduced, restored or returned.
(k)      In case any provision of this Guarantee shall be invalid, illegal or unenforceable, the validity, legality, and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.
(l)      This Guarantee shall be a general unsecured senior obligation of such Guaranteeing Subsidiary, ranking pari passu with any other future Senior Indebtedness of the Guaranteeing Subsidiary, if any.
(m)      Each payment to be made by the Guaranteeing Subsidiary in respect of this Guarantee shall be made without set-off, counterclaim, reduction or diminution of any kind or nature.
(3)      Execution and Delivery . Each Guaranteeing Subsidiary agrees that the Guarantee shall remain in full force and effect notwithstanding the absence of the endorsement of any notation of such Guarantee on the Notes.
(4)      Merger, Consolidation or Sale of All or Substantially All Assets .
(a)      Except as otherwise provided in Section 5.01(c) of the Indenture, a Guaranteeing Subsidiary may not consolidate or merge with or into or wind up into (whether or not the Guaranteeing Subsidiary is the surviving Person), or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its properties or assets, in one or more related transactions, to any Person unless:
(i)      (A) such Guaranteeing Subsidiary is the surviving entity or the Person formed by or surviving any such consolidation or merger (if other than such Guaranteeing Subsidiary) or to which such sale, assignment, transfer, lease, conveyance or other disposition will have been made is a Person organized or existing under the laws of the jurisdiction of organization of such Guaranteeing Subsidiary, as the case may be, or the laws of the United States, any state thereof, the District of Columbia, or any territory thereof (such Guaranteeing Subsidiary or such Person, as the case may be, being herein called the “ Successor Person ”);
(B)      the Successor Person, if other than such Guaranteeing Subsidiary, expressly assumes all the obligations of such Guaranteeing Subsidiary under the Indenture and such Guaranteeing Subsidiary's related Guarantee pursuant to supplemental indentures or other documents or instruments;
(C)      immediately after such transaction, no Default exists; and
(D)      the Issuers shall have delivered to the Trustee an Officer's Certificate and an Opinion of Counsel, each stating that such consolidation, merger or transfer and such supplemental indentures, if any, comply with the Indenture; or
(ii)      the transaction is made in compliance with Section 4.10 of the Indenture;
(b)      Subject to certain limitations described in the Indenture, the Successor Person will succeed to, and be substituted for, such Guaranteeing Subsidiary under the Indenture and such Guaranteeing Subsidiary's Guarantee. Notwithstanding the foregoing, such Guaranteeing Subsidiary may (i) merge into or transfer all or part of its properties and assets to another Guarantor or either Issuer, (ii) merge with an Affiliate of the Company solely for the purpose of reincorporating such Guaranteeing Subsidiary in the United States, any state thereof, the District of Columbia or any territory thereof or (iii) convert into a corporation, partnership, limited partnership, limited liability corporation or trust organized or existing under the laws of the jurisdiction of organization of such Guaranteeing Subsidiary.




(5)      Releases .
The Guarantee of a Guaranteeing Subsidiary shall be automatically and unconditionally released and discharged, and no further action by such Guaranteeing Subsidiary, the Issuers or the Trustee is required for the release of such Guaranteeing Subsidiary's Guarantee, upon:
(1)      (A) any sale, exchange or transfer (by merger or otherwise) of (i) the Capital Stock of such Guaranteeing Subsidiary (including any sale, exchange or transfer), after which such Guaranteeing Subsidiary is no longer a Restricted Subsidiary or (ii) all or substantially all the assets of such Guaranteeing Subsidiary, in each case made in compliance with the applicable provisions of the Indenture;
(B)      the release or discharge of the guarantee by such Guaranteeing Subsidiary of Indebtedness under the Senior Credit Facilities or the guarantee which resulted in the creation of the Guarantee, except a discharge or release by or as a result of payment under such guarantee;
(C)      the designation of such Guaranteeing Subsidiary as an Unrestricted Subsidiary; or
(D)      the exercise by the Issuers of their Legal Defeasance option or Covenant Defeasance option in accordance with Article 8 of the Indenture or the discharge of the Issuers' obligations under the Indenture in accordance with the terms of the Indenture; and
(2)      such Guaranteeing Subsidiary delivering to the Trustee an Officer's Certificate and an Opinion of Counsel, each stating that all conditions precedent provided for in the Indenture relating to such transaction have been complied with.
(6)      No Recourse Against Others . No director, officer, employee, incorporator or stockholder of a Guaranteeing Subsidiary or any of its parent companies (other than the Issuers and the Guarantors) shall have any liability for any obligations of the Issuers or the Guarantors (including such Guaranteeing Subsidiary) under the Notes, any Guarantees, the Indenture or this Supplemental Indenture or for any claim based on, in respect of, or by reason of such obligations or their creation. Each Holder by accepting Notes waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes.
(7)      Governing Law . THIS SUPPLEMENTAL INDENTURE WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
(8)      Counterparts . The parties may sign any number of copies of this Supplemental Indenture. Each signed copy shall be an original, but all of them together represent the same agreement.
(9)      Effect of Headings . The Section headings herein are for convenience only and shall not affect the construction hereof.
(10)      The Trustee . The Trustee shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Supplemental Indenture or for or in respect of the recitals contained herein, all of which recitals are made solely by the Guaranteeing Subsidiaries.
(11)      Subrogation . The Guaranteeing Subsidiaries shall be subrogated to all rights of Holders of Notes against the Issuers in respect of any amounts paid by the Guaranteeing Subsidiaries pursuant to the provisions of Section 2 hereof and Section 10.01 of the Indenture; provided that, if an Event of Default has occurred and is continuing, the Guaranteeing Subsidiaries shall not be entitled to enforce or receive any payments arising out of, or based upon, such right of subrogation until all amounts then due and payable by the Issuers under the Indenture or the Notes shall have been paid in full.
(12)      Benefits Acknowledged . The Guaranteeing Subsidiaries' Guarantee is subject to the terms and conditions set forth in the Indenture. Each Guaranteeing Subsidiary acknowledges that it will receive direct and




indirect benefits from the financing arrangements contemplated by the Indenture and this Supplemental Indenture and that the guarantee and waivers made by it pursuant to this Guarantee are knowingly made in contemplation of such benefits.
(13)      Successors . All agreements of the Guaranteeing Subsidiaries in this Supplemental Indenture shall bind their Successors, except as otherwise provided in Section 2(k) hereof or elsewhere in this Supplemental Indenture. All agreements of the Trustee in this Supplemental Indenture shall bind its successors.
[Signature page to Supplemental Indenture re: Existing Guarantors]
        
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed, all as of the date first above written.


PINNACLE FOODS GROUP LLC



By:      /s/ Kelley Maggs             
Name:      Kelley Maggs
Title: SVP

PINNACLE FOODS INTERNATIONAL CORP.



By:      /s/ Kelley Maggs             
Name:      Kelley Maggs
Title: SVP



Wilmington trust company, as Trustee



By:      /s/ Michael G. Oller, Jr.         
Name:      Michael G. Oller, Jr.
Title: Assistant Vice President




Exhibit 10.16


TRADEMARK LICENSE AGREEMENT

This Agreement made this 19 day of August, 2002, by and between Voila Bakeries, Inc., a New York corporation, having offices and a place of business at 65 Porter Avenue, Brooklyn, New York 11237 (hereinafter “Bakeries”) and Agrilink Foods, Inc., a New York corporation, having offices and a place of business at 90 Linden Place, Rochester, New York 14625 (Hereinafter “Agrilink”).

WITNESSETH

WHEREAS, Bakeries is the owner of the common law trademark of VOILA! For bakery products and the U.S. Trademark Registration No 1,281,798 for VOILA BAKERIES, INC., registered June 12, 1984, (hereinafter the “Trademark Registration”); and

WHEREAS, Agrilink has used and desires to use the trademark of VOILA! in connection with certain specific food products other than bakery products.

NOW, THEREFORE, in consideration of: (1) $50,000 fee, (2) reimbursement of Bakeries’ legal expenses related to this matter in an amount not greater than $6,000, (3) the premises and covenants herein contained and (4) other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

1. Definitions

a) “Bakery Products’’ means all traditional bakery products, including bakery products that contain vegetables and or meat.

b) “Trademark” means VOILA! and any other words or devices confusingly similar thereto.

c) “Agrilink Application” means U.S. Trademark Application, Serial No. 75/401,271, filed December 8, 1997.

d) “Agrilink Products” means all products containing both meat and vegetable items sold together as a meal under one UPC code.

2. Grant of Rights

a) “Agrilink” shall have the perpetual, paid-up exclusive right to use the Trademark on all retail Agrilink Products other than Bakery Products.

b) “Bakeries” shall continue to have the exclusive right to use the trademarks for all products other than Agrilink Products.

    



3.     The scope of this Agreement is the United States, its territories and possessions.

4.     All rights granted under this Agreement are irrevocable and fully paid and shall be in effect for as long as both parties continue to use the Trademark. In the event that either party abandons the Trademark as such term is defined in the Trademark Act, then all of that party’s rights as recognized hereunder shall vest in the other party and the abandoning party agrees to execute such documents as may be requested by the other party to accomplish such vesting.

5.     Agrilink agrees to maintain the quality of products it sells under the Trademark at or above the level of similar products presently sold by Agrilink under the Trademark. Agrilink will provide Bakeries with samples of products sold under the Trademark or packaging therefore upon request. Agrilink further agrees to only use the Trademark in accordance with good trademark practice and will not take actions that would diminish the value of the Trademark.

6.     Agrilink may assign its rights and obligations under this Agreement to an affiliated company or as part of the sale of the portion of the business of Agrilink to which the Trademark pertains, so long as the purchaser is willing to agree to be bound by the terms of this Agreement.

7.     At such time as the trademark is registered for products sold by Agrilink, Agrilink may use the registration symbol in association with the mark. Agrilink shall not be required to identify Bakeries in connection with any use of the Trademark.

8.     Agrilink will amend the Agrilink Application to allege use of the mark in commerce and at such time that the amendment is accepted, Agrilink will assign the Agrilink Application and Agrilink’s goodwill associated with the Trademark to Bakeries. Agrilink shall prosecute the Agrilink Application to registration at its discretion and at its expense.

9.     Agrilink shall have the right to sue for infringement of the Trademark on Agrilink Products in its own name. Agrilink may settle any action or claim made with regard to specific infringement on its rights under this license, at its sole discretion and shall retain all proceeds including damages and royalties past and future. Bakeries agrees to cooperate with Agrilink in any such suit, including allowing itself to be named as a party and providing such assistance to Agrilink as Agrilink may request. Bakeries’ cooperation is conditioned upon Agrilink agreeing to advance or reimburse Bakeries for all expenses in connection with rendering such assistance including, but not limited to, legal expense. In the event that Agrilink becomes aware of any infringement as to which it does not have the right to sue in its own name, it shall advise Bakeries of the infringement and Bakeries shall have thirty (30) days to agree with Agrilink as to the prosecution of the infringement, whether by civil action or otherwise, and if Bakeries and Agrilink are unable to agree then Agrilink shall have the right to sue for infringement in its own name as set forth previously in this paragraph.

2


10.     Agrilink shall not challenge or contest Bakeries’ right to the Trademark in any form, except upon abandonment as described above. Agrilink shall not challenge or contest any application for registration of the Trademark by Bakeries with respect to products other than the Agrilink Products.

11.     If Agrilink breaches any of its material obligations under this Agreement, then Bakeries may terminate this Agreement upon sixty (60) days prior written notice, provided that Agrilink shall not have remedied its breach within such sixty (60) day period.

12.     This Agreement is made and entered into by the parties in the State of New York. This Agreement shall be interpreted according to the laws of the State of New York, except as to those portions that are governed solely by federal law, in which case such laws shall govern.

13.     Agrilink acknowledges that the Trademark and all rights therein and goodwill pertaining thereto belong to Bakeries, that all rights resulting from Agrilink’s use of the Trademark shall inure to the benefit of Bakeries. Bakeries warrants that it is the owner of the Trademark and that to the best of Bakeries knowledge this Agreement and the rights granted herein do not violate any other parties’ rights or interests.

14.     This Agreement contains the entire Agreement between the parties relating to the subject matter hereof, and all prior    proposals, discussions or writings are superseded hereby. This Agreement may not be modified, except in a writing signed by the parties.

15.     This Agreement creates no agency relationship between the parties hereto and nothing contained herein shall be construed as to place the parties in the relationship of partners or joint venturers. Neither party shall have the power to obligate or bind the other party in any manner whatsoever. However, Agrilink shall be considered a related company for the sole purpose of establishing Trademark rights in Bakeries based on Agrilink’s use thereof.

16.     Upon termination of this Agreement for any reason, or transfer of rights in the Trademark hereunder to Bakeries or to Agrilink, the party no longer using the mark may dispose of any products covered by this Agreement which are on hand or in process at the time of termination and for three months thereafter.

17.     All notices and statements to be given hereunder shall be given or made at the respective addresses of the parties as set forth below, unless notification of a change of address is given in writing.

To: Voila Bakeries Inc.                     To: Agrilink Foods, Inc.
65 Porter Avenue                      90 Linden Place
Brooklyn, NY 11237                      Rochester, NY 14625
Attn: William Solomon                  Attn: Ben Frega

3


18.     Agrilink may assign its rights and obligations hereunder to its wholly owned subsidiaries or affiliates including, but not limited to, Linden Oaks Corporation, a Delaware corporation.

19.     Each of the parties hereby agrees to indemnify the other party and undertakes to defend the other party against and hold the other party harmless from any claims, suits, loss or damage sustained by the other party on account of any action of the party under this Agreement.

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their duly authorized representatives as follows:
                                    
AGRILINK FOODS, INC
 
By : /s/ Ben Frega
       Ben Frega, V.P.
 
 
VOILA! BAKERIES, INC.

By : /s/ William J. Solomon
William J. Solomon, President
 
By : /s/ William J. Solomon
       William J. Solomon, President



4


Exhibit 31.1
CERTIFICATION
I, Robert J. Gamgort, certify that:

1.
I have reviewed this quarterly report on Form 10-Q of Pinnacle Foods Finance LLC (the “Registrant”);
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;
4.
The Registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)
Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)
Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s fiscal quarter ended March 25, 2012 that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and
5.
The Registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and
(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.
 
Date:
 
May 9, 2012
 
 
 
 
 
/s/ ROBERT J. GAMGORT
 
 
 
 
 
Robert J. Gamgort
 
 
Chief Executive Officer






Exhibit 31.2
CERTIFICATION
I, Craig Steeneck, certify that:
1.
I have reviewed this quarterly report on Form 10-Q of Pinnacle Foods Finance LLC (the “Registrant”);
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;
4.
The Registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)
Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)
Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s fiscal quarter ended March 25, 2012 that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and
5.
The Registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and
(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

Date:
 
May 9, 2012
 
 
 
 
 
/s/ CRAIG STEENECK
 
 
 
 
 
Craig Steeneck
 
 
Executive Vice President and Chief Financial Officer






Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Pinnacle Foods Finance LLC (the “Registrant”) on Form 10-Q for the fiscal quarter ended March 25, 2012 , as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Robert J. Gamgort, Chief Executive Officer of the Registrant, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1.
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.
Date:
 
May 9, 2012
 
 
 
 
 
/s/ ROBERT J. GAMGORT
 
 
 
 
 
Robert J. Gamgort
 
 
Chief Executive Officer






Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Pinnacle Foods Finance LLC (the “Registrant”) on Form 10-Q for the fiscal quarter ended March 25, 2012 , as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Craig Steeneck, Chief Financial Officer of the Registrant, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1.
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

Date:
 
May 9, 2012
 
 
 
 
 
/s/ CRAIG STEENECK
 
 
 
 
 
Craig Steeneck
 
 
Executive Vice President and Chief Financial Officer