Pinnacle Foods Inc. (Form: 10-Q, Received: 07/29/2016 06:14:42)

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 June 26, 2016



¨	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 001-35844

___________________________________

Pinnacle Foods Inc.

(Exact name of registrant as specified in its charter)

___________________________________



Delaware		35-2215019
(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

___________________________________

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 ý No ¨

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 ¨

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 definitions of “large accelerated filer," “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (Check One):



Large accelerated filer	ý	Accelerated filer	¨

Non-accelerated filer (Do not check if a smaller reporting company)	¨	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

The Registrant had 117,975,249 shares of common stock, $0.01 par value, outstanding at July 25, 2016 .

Table of Contents



	TABLE OF CONTENTS FORM 10-Q	Page No.
PART I - FINANCIAL INFORMATION		1
ITEM 1:	FINANCIAL STATEMENTS (UNAUDITED)	1
CONSOLIDATED STATEMENTS OF OPERATIONS		1
CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS		2
CONSOLIDATED BALANCE SHEETS		3
CONSOLIDATED STATEMENTS OF CASH FLOWS		4
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY		5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)		6
1.	Summary of Business Activities	6
2.	Interim Financial Statements	6
3.	Acquisition s	7
4.	Fair Value Measurements	9
5.	Other Expense (Income), net	10
6.	Equity-Based Compensation and Earnings Per Share	10
7.	Accumulated Other Comprehensive Income (Loss)	12
8.	Balance Sheet Information	12
9.	Goodwill, Tradenames and Other Assets	14
10.	Debt and Interest Expense	16
11.	Pension and Retirement Plans	19
12.	Financial Instruments	20
13.	Commitments and Contingencies	25
14.	Segments	26
15.	Provision for Income Taxes	28
16.	Recently Issued Accounting Pronouncements	29
17.	Guarantor and Nonguarantor Statements	31
18.	Subsequent Events	40
ITEM 2:	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	41
ITEM 3:	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	63
ITEM 4:	CONTROLS AND PROCEDURES	64
PART II - OTHER INFORMATION		65
ITEM 1:	LEGAL PROCEEDINGS	65
ITEM 1A:	RISK FACTORS	65
ITEM 2:	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	65
ITEM 3:	DEFAULTS UPON SENIOR SECURITIES	65
ITEM 4:	MINE SAFETY DISCLOSURES	65
ITEM 5:	OTHER INFORMATION	65
ITEM 6:	EXHIBITS	67
SIGNATURES		66

Table of Contents

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

PINNACLE FOODS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)

(thousands, except per share amounts)



	Three months ended					Six months ended
	June 26, 2016			June 28, 2015		June 26, 2016		June 28, 2015
Net sales	$	756,381		$	631,746	$	1,510,636	$	1,297,027
Cost of products sold	535,189			462,637		1,090,877		956,201
Gross profit	221,192			169,109		419,759		340,826

Marketing and selling expenses	61,036			45,698		119,934		92,707
Administrative expenses	43,703			27,665		89,591		55,451
Research and development expenses	5,098			3,589		9,283		6,641
Other expense (income), net	3,569			2,342		12,884		7,743
	113,406			79,294		231,692		162,542
Earnings before interest and taxes	107,786			89,815		188,067		178,284
Interest expense	35,488			22,187		67,128		43,815
Interest income	27			12		104		165
Earnings before income taxes	72,325			67,640		121,043		134,634
Provision for income taxes	26,542			23,961		50,423		49,419
Net earnings	45,783			43,679		70,620		85,215
Less: Net loss attributable to non-controlling interest	(1		)	—		—		—
Net earnings attributable to Pinnacle Foods, Inc. and Subsidiaries common stockholders	$	45,784		$	43,679	$	70,620	$	85,215


Net earnings per share attributable to Pinnacle Foods, Inc. and Subsidiaries common stockholders:
Basic	$	0.39		$	0.38	$	0.61	$	0.73
Weighted average shares outstanding - basic	116,657			116,031		116,387		115,968
Diluted	$	0.39		$	0.37	$	0.60	$	0.73
Weighted average shares outstanding - diluted	117,766			117,281		117,689		117,158
Dividends declared	$	0.255		$	0.235	$	0.510	$	0.470

See accompanying Notes to Unaudited Consolidated Financial Statements

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PINNACLE FOODS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS (unaudited)

(thousands)



	Three months ended												Six months ended
	June 26, 2016							June 28, 2015					June 26, 2016							June 28, 2015
	Pre-tax amount		Tax (expense) benefit		After-tax amount			Pre-tax amount	Tax (expense) benefit		After-tax amount		Pre-tax amount		Tax (expense) benefit		After-tax amount			Pre-tax amount		Tax (expense) benefit		After-tax amount
Net earnings					$	45,783					$	43,679					$	70,620						$	85,215
Other comprehensive earnings (loss)
Foreign currency translation:
Foreign currency translation adjustments	123		—		123			623	(238	)	385		5,566		—		5,566			(1,938	)	757		(1,181		)
Cash-flow hedges:
Unrealized gains (losses) arising during the period	(7,996	)	3,116		(4,880		)	2,254	(843	)	1,411		(19,117	)	7,390		(11,727		)	(10,362	)	4,056		(6,306		)
Reclassification adjustment for (gains) losses included in net earnings	2,230		(838	)	1,392			402	(313	)	89		3,616		(1,387	)	2,229			91		(86	)	5
Pension:
Reclassification of net actuarial loss included in net earnings	309		(117	)	192			244	(93	)	151		617		(234	)	383			519		(198	)	321
Other comprehensive earnings (loss)	(5,334	)	2,161		(3,173		)	3,523	(1,487	)	2,036		(9,318	)	5,769		(3,549		)	(11,690	)	4,529		(7,161		)
Total comprehensive earnings					42,610						45,715						67,071							78,054
Less: Comprehensive loss attributable to non-controlling interest					(1		)				—						—							—
Comprehensive earnings attributable to Pinnacle Foods Inc. and Subsidiaries					$	42,611					$	45,715					$	67,071						$	78,054

See accompanying Notes to Unaudited Consolidated Financial Statements

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PINNACLE FOODS INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (unaudited)

(thousands, except share and per share amounts)



	June 26, 2016			December 27, 2015
Current assets:
Cash and cash equivalents	$	129,344		$	180,549
Accounts receivable, net of allowances of $11,359 and $7,902, respectively	270,200			219,736
Inventories	441,240			403,101
Other current assets	17,134			13,677
Deferred tax assets	72,620			40,571
Total current assets	930,538			857,634
Plant assets, net of accumulated depreciation of $450,605 and $408,294, respectively	700,971			631,109
Tradenames	2,540,938			2,001,048
Other assets, net	180,606			120,364
Goodwill	2,169,799			1,714,008
Total assets	$	6,522,852		$	5,324,163

Current liabilities:
Short-term borrowings	$	1,758		$	2,225
Current portion of long-term obligations	21,754			14,847
Accounts payable	218,244			211,039
Accrued trade marketing expense	41,450			46,228
Accrued liabilities	144,156			100,510
Dividends payable	30,998			30,798
Total current liabilities	458,360			405,647
Long-term debt	3,135,016			2,257,012
Pension and other postretirement benefits	62,903			63,454
Other long-term liabilities	64,359			54,506
Deferred tax liabilities	962,459			738,015
Total liabilities	4,683,097			3,518,634
Commitments and contingencies (Note 13)
Shareholders' equity:
Pinnacle preferred stock: $.01 per share, 50,000,000 shares authorized, none issued	—			—
Pinnacle common stock: par value $.01 per share, 500,000,000 shares authorized; issued 118,577,288 and 117,619,695, respectively	1,186			1,176
Additional paid-in-capital	1,404,567			1,378,521
Retained earnings	528,180			517,330
Accumulated other comprehensive loss	(62,937		)	(59,388		)
Capital stock in treasury, at cost, 1,000,000 common shares	(32,110		)	(32,110		)
Total Pinnacle Foods Inc. and Subsidiaries stockholders' equity	1,838,886			1,805,529
Non-controlling interest	869			—
Total Equity	1,839,755			1,805,529
Total liabilities and equity	$	6,522,852		$	5,324,163

See accompanying Notes to Unaudited Consolidated Financial Statements

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PINNACLE FOODS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

(thousands)



	Six months ended
	June 26, 2016			June 28, 2015
Cash flows from operating activities
Net earnings	$	70,620		$	85,215
Non-cash charges (credits) to net earnings
Depreciation and amortization	51,672			43,157
Amortization of debt acquisition costs and discount on term loan	4,657			3,130
Change in value of financial instruments	(7,494		)	(4,566		)
Equity-based compensation charges	5,131			8,062
Pension expense, net of contributions	66			(2,704		)
Other long-term liabilities	1,198			(638		)
Other long-term assets	(1,635		)	—
Foreign exchange (gains) / losses	(1,283		)	1,578
Excess tax benefits on equity-based compensation	(6,369		)	(1,076		)
Deferred income taxes	19,027			33,123
Changes in working capital (net of effects of acquisition)
Accounts receivable	(7,557		)	(4,528		)
Inventories	28,351			(9,652		)
Accrued trade marketing expense	(4,923		)	(4,668		)
Accounts payable	2,128			(15,049		)
Accrued liabilities	3,041			(4,693		)
Other current assets	8,473			(2,257		)
Net cash provided by operating activities	165,103			124,434
Cash flows from investing activities
Business acquisition activity (net of cash acquired)	(985,365		)	1,102
Capital expenditures	(60,187		)	(48,168		)
Net cash used in investing activities	(1,045,552		)	(47,066		)
Cash flows from financing activities
Proceeds from bank term loans	547,250			—
Proceeds from notes offerings	350,000			—
Repayments of long-term obligations	(6,478		)	(4,422		)
Proceeds from short-term borrowings	1,604			1,710
Repayments of short-term borrowings	(2,060		)	(2,312		)
Repayment of capital lease obligations	(1,574		)	(1,871		)
Dividends paid	(59,460		)	(54,747		)
Net proceeds from issuance of common stock	15,642			824
Excess tax benefits on equity-based compensation	6,369			1,076
Taxes paid related to net share settlement of equity awards	(1,087		)	(2,401		)
Debt acquisition costs	(21,262		)	—
Net cash provided by (used in) financing activities	828,944			(62,143		)
Effect of exchange rate changes on cash	300			(346		)
Net change in cash and cash equivalents	(51,205		)	14,879
Cash and cash equivalents - beginning of period	180,549			38,477
Cash and cash equivalents - end of period	$	129,344		$	53,356

Supplemental disclosures of cash flow information:
Interest paid	$	48,083		$	39,453
Interest received	104			165
Income taxes paid	19,145			17,341
Non-cash investing and financing activities:
New capital leases	4,586			—
Dividends payable	30,998			28,059
Accrued additions to plant assets	10,570			17,767

See accompanying Notes to Unaudited Consolidated Financial Statements

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PINNACLE FOODS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (unaudited)

(thousands, except share and per share amounts)



	Common Stock			Treasury Stock					Additional Paid In Capital		Retained Earnings			Accumulated Other Comprehensive Loss			Total Shareholders' Equity			Non-Controlling Interest		Total Equity
	Shares	Amount		Shares		Amount			Additional Paid In Capital		Retained Earnings			Accumulated Other Comprehensive Loss			Total Shareholders' Equity			Non-Controlling Interest		Total Equity
Balance, December 28, 2014	117,293,745	$	1,173	(1,000,000	)	$	(32,110	)	$	1,363,129	$	419,531		$	(37,734	)	$	1,713,989		$	—	$	1,713,989
Equity-based compensation plans	290,689	3							7,560								7,563					7,563
Dividends ($0.47 per share) (a)											(54,955		)				(54,955		)			(54,955		)
Comprehensive earnings											85,215			(7,161		)	78,054					78,054
Balance, June 28, 2015	117,584,434	$	1,176	(1,000,000	)	$	(32,110	)	$	1,370,689	$	449,791		$	(44,895	)	$	1,744,651		$	—	$	1,744,651

Balance, December 27, 2015	117,619,695	$	1,176	(1,000,000	)	$	(32,110	)	$	1,378,521	$	517,330		$	(59,388	)	$	1,805,529		$	—	$	1,805,529
Equity-based compensation plans	957,593	10							26,046								26,056					26,056
Dividends ($0.51 per share) (b)											(59,770		)				(59,770		)			(59,770		)
Non-controlling interest in acquisition																	—			869		869
Comprehensive earnings											70,620			(3,549		)	67,071			—		67,071
Balance, June 26, 2016	118,577,288	$	1,186	(1,000,000	)	$	(32,110	)	$	1,404,567	$	528,180		$	(62,937	)	$	1,838,886		$	869	$	1,839,755

(a) $0.235 per share declared February 2015 and June 2015

(b) $0.255 per share declared February 2016 and June 2016

See accompanying Notes to Unaudited Consolidated Financial Statements

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PINNACLE FOODS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(thousands, except share and per share amounts and where noted in millions)

1. Summary of Business Activities

Business Overview

Pinnacle Foods Inc. (the "Company") is a leading manufacturer, marketer and distributor of high quality, branded convenience food products, the products and operations of which are managed and reported in four operating segments: (i) Birds Eye Frozen, (ii) Duncan Hines Grocery, (iii) Boulder Brands and (iv) 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 ), plant-based protein frozen products ( gardein ), 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 segment. The Company’s baking mixes and frostings ( Duncan Hines ), shelf-stable pickles ( Vlasic ), liquid and dry-mix salad dressings ( Wish-Bone and Western ), table syrups ( Mrs. Butterworth’s and Log Cabin ), canned meat ( Armour , Nalley and Brooks ), pie and pastry fillings ( Duncan Hines Comstock and Wilderness ), barbecue sauces ( Open Pit ) and Canadian operations other than gardein are reported in the Duncan Hines Grocery segment. The Boulder Brands segment is comprised of health and wellness brands including gluten-free products ( Udi's and Glutino) , natural frozen meal offerings ( EVOL) , refrigerated and shelf-stable spreads (Smart Balance), and plant-based refrigerated and shelf-stable spreads ( Earth Balance ). The Specialty Foods segment consists of snack products ( Tim’s Cascade and Snyder of Berlin ) and the Company’s food service and private label businesses, other than Boulder Brands and gardein .

History and Current Ownership

On April 2, 2007, the Company was acquired by, and became a wholly owned subsidiary of Peak Holdings LLC (“Peak Holdings”), an entity controlled by investment funds affiliated with The Blackstone Group L.P. (“Blackstone”). We refer to this merger transaction and related financing transactions as the Blackstone Transaction. As a result of the Blackstone Transaction, Blackstone owned, through Peak Holdings, approximately 98% of the common stock of the Company.

As of the launch of our initial public offering on April 3, 2013 (the “IPO”), we were controlled by Blackstone. Effective September 12, 2014, as a result of Blackstone’s reduced ownership in the Company, we no longer qualified as a “controlled company” under applicable New York Stock Exchange listing standards. On May 8, 2015, Blackstone sold their final 5,000,000 shares in an underwritten public offering. Upon completion of the offering, Blackstone no longer beneficially owned any of the Company's outstanding common stock.

2. Interim Financial Statements

Basis of Presentation

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 June 26, 2016 , the results of operations for the three and six months ended June 26, 2016 and June 28, 2015 , and the cash flows for the six months ended June 26, 2016 and June 28, 2015 . 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 27, 2015 .

Recently Adopted Accounting Pronouncements

In 2016, the Company changed the presentation of debt issuance costs in line with the guidance set forth by Accounting Standards Update ("ASU") No. 2015-03 "Simplifying the Presentation of Debt Issuance Costs". The Company now presents such costs in the balance sheet as a direct deduction from the related debt liability, rather than as an asset. Amortization of the costs continue to be reported as interest expense. The changes in presentation were applied retrospectively to all periods presented. As of December 27, 2015 the cumulative effect of these changes on the balance sheet were decreases of $15.9 million in Long-term debt as well as in Other assets, net.

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PINNACLE FOODS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(thousands, except share and per share amounts and where noted in millions)

3. Acquisitions

The Company accounts for business combinations by using the acquisition method of accounting. The following acquisition has been accounted for in accordance with these standards.

Acquisition of Boulder Brands Inc. (the "Boulder acquisition")

On January 15, 2016, the Company acquired 100% of the capital stock of Boulder Brands Inc. ("Boulder") which manufactures a portfolio of health and wellness brands, including Udi's and Glutino gluten-free products, EVOL natural frozen meal offerings, Smart Balance refrigerated and shelf-stable spreads and Earth Balance plant-based refrigerated and shelf-stable spreads. The Boulder acquisition expands the Company's presence in growing and complementary health and wellness categories and in the natural and organic retail channels.

The Company has preliminarily allocated the purchase price to tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values. The Company is in the process of completing the valuation of various assets and pre-acquisition contingencies and, therefore, the fair values set forth below are subject to adjustment upon finalizing the valuations. The amount of these potential adjustments could be significant.

The cost of the Boulder acquisition was $1,001,419 , which included the repayment of debt. The following table summarizes the preliminary allocation of the total cost of the acquisition to the assets acquired and liabilities assumed:



Assets acquired:
Cash	$	16,054
Accounts receivable	42,088
Inventories	66,893
Other current assets	12,043
Deferred tax asset	24,949
Property and equipment	59,405
Tradenames	539,600
Distributor relationships	40,600
Customer relationships	11,400
Other assets	11,798
Goodwill	450,366
Fair value of assets acquired	1,275,196
Liabilities assumed
Accounts payable	16,022
Accrued liabilities	41,094
Capital lease obligations	7,486
Long term deferred tax liability	204,024
Other long-term liabilities	4,282
Non-controlling interest	869
Total cost of acquisition	$	1,001,419

Based upon the preliminary allocation, the value assigned to intangible assets and goodwill totaled $1,042.0 million . The goodwill was generated primarily as a result of expected synergies to be achieved because of the Boulder acquisition. Distributor relationships and customer relationships are being amortized on an accelerated basis over 30 and 10 years, respectively. These useful lives are based on an attrition rate based on industry experience, which management believes is appropriate in the Company's circumstances. The Company has also assigned $539.6 million to the value of the tradenames acquired, which is not subject to amortization but

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PINNACLE FOODS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(thousands, except share and per share amounts and where noted in millions)

is reviewed annually for impairment. Goodwill, which is also not subject to amortization, totaled $450.4 million (tax deductible goodwill of $21.7 million resulted from the Boulder acquisition). The Boulder acquisition is reported in the Company's newly formed Boulder Brands operating segment.

During the six months ended June 26, 2016 , the Boulder acquisition resulted in an additional $223.5 million of net sales and a net loss of $9.2 million , related to Boulder operations from January 15, 2016 to June 26, 2016 , which included a $10.4 million charge related to the fair value step-up of inventories acquired and sold during the period, $16.7 million of restructuring costs, primarily severance and $6.8 million of acquisition costs described below.

In accordance with the requirements of the acquisition method of accounting for acquisitions, inventories obtained in the Boulder acquisition were required to be valued at fair value (net realizable value, which is defined as estimated selling prices less the sum of (a) costs of disposal and (b) a reasonable profit allowance for the selling effort of the acquiring entity), which is $10.4 million higher than historical manufacturing costs. Cost of products sold for the six months ended June 26, 2016 includes pre-tax charges of $10.4 million related to the inventory acquired, which were subsequently sold.

The Boulder acquisition was financed through borrowings of $550.0 million in incremental term loans (the "Tranche I Term Loans") due 2023, $350.0 million of 5.875% Senior Notes (the "5.875% Senior Notes) due 2024, $118.3 million of cash on hand, prior to transaction costs of $6.8 million and $1.7 million in the three months ended June 26, 2016 and fiscal year ended December 27, 2015, respectively, and debt acquisition costs of $24.0 million and $0.4 million in the three months ended June 26, 2016 and fiscal year ended December 27, 2015, respectively. The debt acquisition costs, which included original issue discount are being amortized over the life of the associated debt using the effective interest method and are recorded in Long-Term debt on the Consolidated Balance Sheet. For more information, see Note 10 to the Consolidated Financial Statements, Debt and Interest Expense. Included in the acquisition costs of $6.8 million for the six months ended June 26, 2016 are $6.1 million of merger, acquisition and advisory fees and $0.7 million of other costs. The $1.7 million of transaction costs incurred in fiscal 2015 primarily relate to legal, accounting and other professional fees. The transaction costs are recorded in Other expense (income), net in the Consolidated Statements of Operations.

Pro forma Information

The following unaudited pro forma summary presents the Company's consolidated results of operations as if Boulder had been acquired on December 29, 2014. These amounts adjusted Boulder's historical results to reflect the additional depreciation and amortization that would have been charged assuming the fair value adjustments to plant assets and intangible assets had been applied from December 29, 2014, together with the consequential tax effects. These adjustments also reflect the additional interest expense incurred on the debt to finance the purchase. The six months ended June 26, 2016 pro forma earnings were adjusted to exclude the acquisition related and restructuring costs incurred and the nonrecurring expense related to the fair value inventory step-up adjustment. The six months ended June 28, 2015 pro forma earnings were adjusted to include these charges. The pro forma financial information presented below is for informational purposes only and is not indicative of the results of operations that would have been achieved if the acquisition and borrowings undertaken to finance the acquisition had taken place at the beginning of 2015.

Amounts in millions:



	Six months ended June 26, 2016 (unaudited)		Six months ended June 28, 2015 (unaudited)
Net sales	$	1,528.2	$	1,543.7
Net earnings	$	96.2	$	52.5

Boulder Brands Restructuring

As a result of the Boulder acquisition, the Company expects to incur approximately $18.0 million of restructuring charges in 2016, primarily related to employee termination and retention benefits. Charges of $6.1 million and $16.7 million were incurred during the three and six months ended June 26, 2016 , respectively and were recorded in Administrative expenses in the Consolidated Statements of Operations.

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PINNACLE FOODS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(thousands, except share and per share amounts and where noted in millions)

The following table summarizes total restructuring charges accrued as of June 26, 2016 . These amounts are recorded in our Consolidated Balance Sheet in Accrued Liabilities.



	Balance							Balance
Description	December 27, 2015		Expense		Payments			June 26, 2016
Accrued restructuring charges	$	—	$	16,686	$	(7,228	)	$	9,458

4. 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 June 26, 2016		Fair Value Measurements Using Fair Value Hierarchy						Fair Value as of December 27, 2015		Fair Value Measurements Using Fair Value Hierarchy
	Fair Value as of June 26, 2016		Level 1		Level 2		Level 3		Fair Value as of December 27, 2015		Level 1		Level 2		Level 3
Assets
Foreign currency derivatives	$	45	$	—	$	45	$	—	$	471	$	—	$	471	$	—
Total assets at fair value	$	45	$	—	$	45	$	—	$	471	$	—	$	471	$	—

Liabilities
Interest rate derivatives	$	33,959	$	—	$	33,959	$	—	$	18,868	$	—	$	18,868	$	—
Commodity derivatives	2,512		—		2,512		—		10,013		—		10,013		—
Total liabilities at fair value	$	36,471	$	—	$	36,471	$	—	$	28,881	$	—	$	28,881	$	—

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,

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PINNACLE FOODS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(thousands, except share and per share amounts and where noted in millions)

mutual puts and guarantees. The Company had no fair value measurements based upon significant unobservable inputs (Level 3) as of June 26, 2016 or December 27, 2015 .

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 fall into Level 3 of the fair value hierarchy.

5. Other Expense (Income), net

Other Expense (Income), net



	Three months ended						Six months ended
	June 26, 2016			June 28, 2015			June 26, 2016			June 28, 2015
Other expense (income), net consists of:
Amortization of intangibles/other assets	$	4,309		$	3,399		$	8,356		$	6,761
Foreign exchange (gains) losses	(499		)	(701		)	(1,283		)	1,578
Boulder acquisition costs (Note 3)	—			—			6,781			—
Royalty income and other	(241		)	(356		)	(970		)	(596		)
Total other expense (income), net	$	3,569		$	2,342		$	12,884		$	7,743

Foreign exchange (gains) losses. These represent foreign exchange (gains) losses from intra-entity loans resulting from the Company's November 2014 Garden Protein acquisition that are anticipated to be settled in the foreseeable future.

6. Equity-Based Compensation Expense and Earnings Per Share

Equity-based Compensation

The Company currently grants equity awards under the Amended and Restated 2013 Omnibus Incentive Plan (the “Incentive Plan”). Equity-based compensation expense recognized during the period is based on the value of the portion of equity-based payment awards that is ultimately expected to vest during the period. As equity-based compensation expense recognized in the Consolidated Statements of Operations is based on awards ultimately expected to vest, it has been reduced for estimated forfeitures. The authoritative guidance for equity-based compensation requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

Expense Information

The following table summarizes equity-based compensation expense which was allocated as follows:



		Three months ended						Six months ended
		June 26, 2016			June 28, 2015			June 26, 2016			June 28, 2015
Cost of products sold		$	211		$	578		$	904		$	1,871
Marketing and selling expenses		1,377			1,480			2,557			1,994
Administrative (income) expenses	(1)	(521		)	2,412			1,413			3,956
Research and development expenses		155			123			257			241
Pre-tax equity-based compensation expense		1,222			4,593			5,131			8,062
Income tax benefit		(416		)	(1,695		)	(1,893		)	(2,967		)
Net equity-based compensation expense		$	806		$	2,898		$	3,238		$	5,095

(1) The departure of the Company's previous Chief Executive Officer ("CEO") in the second quarter of 2016 resulted in income being recognized due to the forfeiture of unvested awards.

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PINNACLE FOODS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(thousands, except share and per share amounts and where noted in millions)

Amended and Restated 2013 Omnibus Incentive Plan

The Incentive Plan provides for the issuance of up to 11,300,000 shares of the Company's common stock under (1) equity awards granted as a result of the conversion of unvested performance interest units ("PIU's") into restricted common stock of the Company, (2) stock options and other equity awards granted in connection with the completion of the IPO, and (3) awards granted by the Company under the Incentive Plan following the completion of the IPO. Awards granted subsequent to the IPO include nonqualified stock options, non-vested shares and restricted stock units ("RSU's"), the majority of which vest in full three years from the date of grant. The Company also granted non-vested performance shares ("PS's") and grants performance share units ("PSU's"), both of which vest based on achievement of relative total shareholder return performance goals over a three -year performance period.

During the second quarter of 2016, as part of our ongoing equity compensation program and in connection with the hiring of our new Chief Executive Officer:


•	We granted 633,709 nonqualified stock options with grant date fair values ranging from $8.97 to $9.44 and exercise prices ranging from $42.08 to $45.28 using the BlackScholes pricing method to value the awards.


•	We granted 223,204 PSU's and PS's with grant date fair values ranging from $44.32 to $53.07 using the Monte Carlo simulation model to value the awards.


•	We granted 313,795 RSU's with grant date fair values ranging from $42.08 to $45.28 , which was the closing price of our stock on the date of grant.

Earnings Per Share

Basic earnings per common share is computed by dividing net earnings or loss for common shareholders by the weighted-average number of common shares outstanding during the period. Diluted earnings per common share are calculated by dividing net earnings by weighted-average common shares outstanding during the period plus dilutive potential common shares, which are determined as follows:



	Three months ended		Six months ended
	June 26, 2016	June 28, 2015	June 26, 2016	June 28, 2015
Weighted-average common shares	116,657,004	116,030,571	116,387,240	115,968,301
Effect of dilutive securities:	1,108,926	1,250,001	1,302,162	1,190,188
Dilutive potential common shares	117,765,930	117,280,572	117,689,402	117,158,489

Dilutive potential common shares are calculated in accordance with the treasury stock method, which assumes that proceeds from the exercise of all warrants and options are used to repurchase common stock at market value. The amount of shares remaining after the proceeds are exhausted represents the potentially dilutive effect of the securities. For the three and six months ended June 26, 2016 , conversion of securities totaling 748,900 and 562,674 , respectively, into common share equivalents were excluded from this calculation as their effect would have been anti-dilutive. For the three and six months ended June 28, 2015 , conversion of securities totaling 526,648 and 265,264 , respectively, into common share equivalents were excluded from this calculation as their effect would have been anti-dilutive.

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PINNACLE FOODS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(thousands, except share and per share amounts and where noted in millions)

7. Accumulated Other Comprehensive Loss

The components of Accumulated other comprehensive loss consist of the following:



	Currency translation adjustments			Gains (Losses) on cash flow hedges			Change in pensions			Total
Balance at December 27, 2015	$	(6,418	)	$	(9,232	)	$	(43,738	)	$	(59,388	)
Other comprehensive loss before reclassification	5,566			(11,727		)	—			(6,161		)
Amounts reclassified from accumulated other comprehensive loss	—			2,229			383			2,612
Net current period other comprehensive (loss) income	5,566			(9,498		)	383			(3,549		)
Balance at June 26, 2016	$	(852	)	$	(18,730	)	$	(43,355	)	$	(62,937	)



	Currency translation adjustments			Gains (Losses) on cash flow hedges			Change in pensions			Total
Balance at December 28, 2014	$	(2,054	)	$	4,124		$	(39,804	)	$	(37,734	)
Other comprehensive loss before reclassification	(1,181		)	(6,306		)	—			(7,487		)
Amounts reclassified from accumulated other comprehensive loss	—			5			321			326
Net current period other comprehensive (loss) income	(1,181		)	(6,301		)	321			(7,161		)
Balance at June 28, 2015	$	(3,235	)	$	(2,177	)	$	(39,483	)	$	(44,895	)

The following table presents amounts reclassified out of Accumulated Other Comprehensive Loss ("AOCL") and into Net earnings for the three and six months ended June 26, 2016 and June 28, 2015 , respectively.



Gain/(Loss)	Amounts Reclassified from AOCL
	Three months ended						Six months ended
Details about Accumulated Other Comprehensive Loss Components	June 26, 2016			June 28, 2015			June 26, 2016			June 28, 2015				Reclassified from AOCL to:
Gains and losses on financial instrument contracts
Interest rate contracts	$	(2,206	)	$	(1,011	)	$	(3,671	)	$	(1,403	)		Interest expense
Foreign exchange contracts	(24		)	609			55			1,312				Cost of products sold
Total pre-tax	(2,230		)	(402		)	(3,616		)	(91		)
Tax benefit (expense)	838			313			1,387			86				Provision for income taxes
Net of tax	(1,392		)	(89		)	(2,229		)	(5		)

Pension actuarial assumption adjustments
Amortization of actuarial loss	(309		)	(244		)	(617		)	(519		)	(a)	Cost of products sold
Tax benefit	117			93			234			198				Provision for income taxes
Net of tax	(192		)	(151		)	(383		)	(321		)
Net reclassifications into net earnings	$	(1,584	)	$	(240	)	$	(2,612	)	$	(326	)

(a) This is included in the computation of net periodic pension cost (see Note 11 for additional details).

8. 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 the Company's best estimate of these amounts. 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

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PINNACLE FOODS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(thousands, except share and per share amounts and where noted in millions)

recovered. The Company does not have any off-balance sheet credit exposure related to its customers. Accounts receivable are as follows:



	June 26, 2016			December 27, 2015
Customers	$	271,950		$	219,352
Allowances for cash discounts, bad debts and returns	(11,359		)	(7,902		)
Subtotal	260,591			211,450
Other receivables	9,609			8,286
Total	$	270,200		$	219,736

Inventories. Inventories are as follows:



	June 26, 2016		December 27, 2015
Raw materials	$	101,990	$	57,145
Work in progress (1)	34,179		61,527
Finished product	305,071		284,429
Total	$	441,240	$	403,101

(1) Included in work in progress is primarily agricultural inventory.

The Company has various purchase commitments for raw materials and certain finished products within the ordinary course of business. Such commitments are not at prices in excess of current market prices.

Other Current Assets. Other Current Assets are as follows:



	June 26, 2016		December 27, 2015
Prepaid expenses and other	$	11,403	$	8,166
Prepaid income taxes	5,731		5,511
Total	$	17,134	$	13,677

Plant Assets. Plant assets are as follows:



	June 26, 2016			December 27, 2015
Land	$	15,771		$	14,948
Buildings	268,415			246,988
Machinery and equipment	784,641			716,314
Projects in progress	82,749			61,153
Subtotal	1,151,576			1,039,403
Accumulated depreciation	(450,605		)	(408,294		)
Total	$	700,971		$	631,109

Depreciation was $ 22,446 and $43,316 during the three and six months ended June 26, 2016 , respectively. Depreciation was $18,891 and $36,396 during the three and six months ended June 28, 2015 , respectively. As of June 26, 2016 and December 27, 2015 , Machinery and equipment included assets under capital lease with a book value of $21,460 and $16,372 (net of accumulated depreciation of $12,093 and $11,018 ), respectively.

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PINNACLE FOODS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(thousands, except share and per share amounts and where noted in millions)

Accrued Liabilities. Accrued liabilities are as follows:



	June 26, 2016		December 27, 2015
Employee compensation and benefits	$	53,009	$	55,416
Interest payable	23,795		12,127
Consumer coupons	5,711		2,035
Accrued restructuring charges (see note 3)	9,458		—
Accrued financial instrument contracts (see note 12)	10,933		5,957
Accrued broker commissions	7,519		4,651
Other	33,731		20,324
Total	$	144,156	$	100,510

Other Long-Term Liabilities. Other long-term liabilities are as follows:



	June 26, 2016		December 27, 2015
Employee compensation and benefits	$	12,674	$	9,806
Long-term rent liability and deferred rent allowances	7,108		7,774
Liability for uncertain tax positions	11,435		7,712
Accrued financial instrument contracts (see note 12)	27,297		22,924
Other	5,845		6,290
Total	$	64,359	$	54,506

9. Goodwill, Tradenames and Other Assets

Goodwill

Goodwill by segment is as follows:



	Birds Eye Frozen		Duncan Hines Grocery		Boulder Brands		Specialty Foods		Total
Balance, December 27, 2015	$	603,432	$	936,615	$	—	$	173,961	$	1,714,008
Boulder acquisition (Note 3)	—		—		450,366		—		450,366
Foreign currency adjustment	1,452		—		3,973		—		5,425
Balance, June 26, 2016	$	604,884	$	936,615	$	454,339	$	173,961	$	2,169,799

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 in the third quarter of 2015, which indicated no impairment.

Tradenames

Tradenames by segment are as follows:



	Birds Eye Frozen		Duncan Hines Grocery		Boulder		Specialty Foods		Total
Balance, December 27, 2015	$	846,336	$	1,118,712	$	—	$	36,000	$	2,001,048
Boulder acquisition (Note 3)	—		—		539,600		—		539,600
Foreign currency adjustment	290		—		—		—		290
Balance, June 26, 2016	$	846,626	$	1,118,712	$	539,600	$	36,000	$	2,540,938

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PINNACLE FOODS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(thousands, except share and per share amounts and where noted in millions)

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. The Company completed its annual testing in the third quarter of 2015, which indicated no impairment.

Other Assets



	June 26, 2016
	Weighted Avg Life	Gross Carrying Amount		Accumulated Amortization			Net
Amortizable intangibles
Recipes	10	$	60,094	$	(50,082	)	$	10,012
Customer relationships - Distributors	34	182,735		(50,493		)	132,242
Customer relationships - Food Service	10	11,400		(1,018		)	10,382
Customer relationships - Private Label	7	1,290		(526		)	764
License	7	6,175		(5,987		)	188
Total amortizable intangibles		$	261,694	$	(108,106	)	$	153,588
Financial instruments (see Note 12)		1,565		—			1,565
Other (1)		30,024		(4,571		)	25,453
Total other assets, net							$	180,606
	Amortizable intangibles by segment
	Birds Eye Frozen						$	57,211
	Duncan Hines Grocery						42,941
	Boulder Brands						49,773
	Specialty Foods						3,663
							$	153,588



	December 27, 2015
	Weighted Avg Life	Gross Carrying Amount		Accumulated Amortization			Net
Amortizable intangibles
Recipes	10	$	60,094	$	(47,077	)	$	13,017
Customer relationships - Distributors	35	142,129		(46,507		)	95,622
Customer relationships - Private Label	7	1,290		(399		)	891
License	7	6,175		(5,800		)	375
Total amortizable intangibles		$	209,688	$	(99,783	)	$	109,905
Other (2)		14,779		(4,320		)	10,459
Total other assets, net							$	120,364
	Amortizable intangibles by segment
	Birds Eye Frozen						$	60,510
	Duncan Hines Grocery						45,503
	Specialty Foods						3,892
							$	109,905

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PINNACLE FOODS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(thousands, except share and per share amounts and where noted in millions)

(1) As of June 26, 2016 , Other primarily consists of cost basis investments in companies in the natural and organic food and beverage industries acquired through the Boulder acquisition as well as security deposits, supplemental savings plan investments and debt acquisition costs associated with the Company's revolver.

(2) As of December 27, 2015 , Other primarily consists of security deposits and supplemental savings plan investments.

Amortization of intangible assets was $4,309 and $8,356 for the three and six months ended June 26, 2016 , respectively. Amortization of intangible assets was $3,399 and $6,761 for the three and six months ended June 28, 2015 , respectively. Estimated amortization expense for each of the next five years and thereafter is as follows: remainder of 2016 - $8,800 ; 2017 - $11,800 ; 2018 - $9,600 ; 2019 - $8,900 ; 2020 - $8,200 and thereafter - $106,400 .

10. Debt and Interest Expense



	June 26, 2016			December 27, 2015
Short-term borrowings
- Notes payable	$	1,758		$	2,225
Total short-term borrowings	$	1,758		$	2,225
Long-term debt
- Amended Credit Agreement - Tranche G Term Loans due 2020	1,409,625			1,409,625
- Amended Credit Agreement - Tranche H Term Loans due 2020	511,875			514,500
- Amended Credit Agreement - Tranche I Term Loans due 2023	548,625			—
- 4.875% Senior Notes due 2021	350,000			350,000
- 5.875% Senior Notes due 2024	350,000			—
- 3.0% Note payable to Gilster Mary Lee Corporation	7,012			8,878
- Unamortized discount on long term debt and deferred financing costs	(45,869		)	(26,267		)
- Capital lease obligations	25,502			15,123
	3,156,770			2,271,859
Less: current portion of long-term obligations	21,754			14,847
Total long-term debt	$	3,135,016		$	2,257,012



Interest expense	Three months ended				Six months ended
	June 26, 2016		June 28, 2015		June 26, 2016		June 28, 2015
Interest expense	$	30,871	$	19,635	$	58,800	$	39,282
Amortization of debt acquisition costs and original issue discounts	2,411		1,541		4,657		3,130
Interest rate swap losses (Note 12)	2,206		1,011		3,671		1,403
Total interest expense	$	35,488	$	22,187	$	67,128	$	43,815

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PINNACLE FOODS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(thousands, except share and per share amounts and where noted in millions)

Amended Credit Agreement

To partially fund the Boulder acquisition, on January 15, 2016 as described in Note 3, Pinnacle Foods Finance LLC ("Pinnacle Foods Finance") entered into an amendment to the Second Amended and Restated Credit Agreement (the “Amended Credit Agreement”) which provided for a seven year incremental term loan of $550.0 million (the “Tranche I Term Loans”). Other than with respect to interest rate, maturity and certain pricing protections, the Tranche I Term Loans have substantially the same terms as Pinnacle Foods Finance's Tranche G and H Term Loans. Refer to Note 10 in our Form 10-K filed with the Securities and Exchange Commission on February 25, 2016 for details. In connection with the Tranche I Term Loans, Pinnacle Foods Finance incurred $2.7 million of original issue discount and deferred financing fees of $10.5 million .

The Tranche I Term Loans 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 described in the Amended Credit Agreement. The base rate is defined as the highest of (i) the administrative agent's prime rate, (ii) the federal funds effective rate plus 1/2 of 1% and (iii) the eurocurrency rate that would be payable on such day for a eurocurrency rate loan with a one-month interest period plus 1% . Eurocurrency rate loans bear interest at the adjusted eurocurrency rate plus the applicable eurocurrency rate margin, as described in the Amended Credit Agreement. The eurocurrency rate is determined by reference to the British Bankers Association "BBA" LIBOR rate for the interest period relevant to such borrowing. With respect to Tranche I Term Loans , the eurocurrency rate shall be no less than 0.75% per annum and the base rate shall be no less than 1.75% per annum. The interest rate margin for Tranche I Term Loans under the Amended Credit Agreement is 2.00% , in the case of the base rate loans and 3.00% , in the case of Eurocurrency rate loans.

As a result of the Boulder acquisition, Pinnacle Foods Finance's total net leverage ratio increased above 4.25 :1.0, which resulted in a 25 basis point interest rate step-up on existing Term Loans G and H, under the Amended Credit Agreement immediately subsequent to the quarterly certification to the Administrative Agent which occurred after filing the first quarter 10-Q report on April 28, 2016. The higher rate will remain in effect as long as the total net leverage ratio remains greater than 4.25 :1.0. As of June 26, 2016 , the total net leverage ratio was 4.64 :1.0.

Senior Notes

To partially fund the Boulder acquisition, on January 15, 2016, as described in Note 3 , Pinnacle Foods Finance issued $350.0 million aggregate principal amount of 5.875% Senior Notes (the "5.875% Senior Notes") due January 15, 2024.

The Company's 4.875% Senior Notes due 2021 (the "4.875% Senior Notes") and 5.875% Senior Notes (together the "Senior Notes") are general senior unsecured obligations of Pinnacle Foods Finance, effectively subordinated to all existing and future senior secured indebtedness of Pinnacle Foods Finance to the extent of the value of the assets securing that indebtedness and guaranteed on a full, unconditional, joint and several basis by Pinnacle Foods Finance’s wholly-owned domestic subsidiaries that guarantee other indebtedness of Pinnacle Foods Finance and by the Company. See Note 17 for Guarantor and Nonguarantor Financial Statements.

Pinnacle Foods Finance may redeem some or all of the 5.875% Senior Notes at any time prior to January 15, 2019 at a price equal to 100% of the principal amount of the 5.875% 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 5.875% Senior Notes and (2) the excess, if any, of (a) the present value at such redemption date of (i) the redemption price of such 5.875% Senior Notes at January 15, 2019, plus (ii) all required interest payments due on such 5.875% Senior Notes through January 15, 2019 (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 5.875% Senior Notes.

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PINNACLE FOODS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(thousands, except share and per share amounts and where noted in millions)

Pinnacle Foods Finance may redeem the 5.875% Senior Notes at the redemption prices listed below, if redeemed during the twelve-month period beginning on January 15th of each of the years indicated below:



Year	Percentage
2019	104.406%
2020	102.938%
2021	101.469%
2022 and thereafter	100.000%

In addition, at any time prior to January 15, 2019, Pinnacle Foods Finance may redeem up to 35% of the aggregate principal amount of the 5.875% Senior Notes at a redemption price equal to 100% of the aggregate principal amount thereof, plus a premium equal to 5.875%, plus accrued and unpaid interest, if any, to the redemption date, subject to the right of holders of the 5.875% 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 Pinnacle Foods Finance from one or more equity offerings; provided that (i) at least 50% of the aggregate principal amount of the 5.875% Senior Notes originally issued under the indenture remains outstanding immediately after the occurrence of each such redemption and (ii) each such redemption occurs within 120 days of the date of closing of each such equity offering.

Debt Acquisition Costs and Original Issue Discounts

As discussed in Note 2 of the Consolidated Financial Statements and in accordance with ASU No. 2015-03, the Company now presents debt acquisition costs in the balance sheet as a direct deduction from the related debt liability, rather than as an asset.

As part of the Boulder acquisition, debt acquisition costs of $21.3 million and $0.4 million were incurred during the three months ended March 27, 2016 and the fiscal year ended December 27, 2015 , respectively, and original issue discounts of $2.7 million were incurred during the three months ended March 27, 2016. There were no debt acquisition costs or original issue discounts incurred subsequent to March 27, 2016.

All debt acquisition costs and original issue discounts are amortized into interest expense over the life of the related debt using the effective interest method. Amortization of these costs were $ 2.3 million and $ 4.4 million during the three and six months ended June 26, 2016 , respectively. Amortization of these costs were $ 1.5 million and $ 2.9 million during the three and six months ended June 28, 2015 , respectively.

The following summarizes debt acquisition cost and original issue discount activity during the six months ended June 26, 2016 :



	Gross Carrying Amount		Accumulated Amortization			Net
Balance, December 27, 2015	$	58,036	$	(31,769	)	$	26,267
2016 - Additions	24,009		—			24,009
2016 - Amortization	—		(4,407		)	(4,407		)
Balance, June 26, 2016	$	82,045	$	(36,176	)	$	45,869

Table of Contents

PINNACLE FOODS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(thousands, except share and per share amounts and where noted in millions)

Estimated fair value

The estimated fair value of the Company’s long-term debt, including the current portion, as of June 26, 2016 , is as follows:



	June 26, 2016
Issue	Face Value		Fair Value
Amended Credit Agreement - Tranche G Term Loans	$	1,409,625	$	1,409,625
Amended Credit Agreement - Tranche H Term Loans	511,875		511,875
Amended Credit Agreement - Tranche I Term Loans	548,625		550,710
3.0% Note payable to Gilster Mary Lee Corporation	7,012		7,012
4.875% Senior Notes	350,000		353,938
5.875% Senior Notes	350,000		364,875
	$	3,177,137	$	3,198,035

The estimated fair value of the Company’s long-term debt, including the current portion, as of December 27, 2015 , is as follows:



	December 27, 2015
Issue	Face Value		Fair Value
Amended Credit Agreement - Tranche G Term Loans	$	1,409,625	$	1,384,957
Amended Credit Agreement - Tranche H Term Loans	514,500		505,496
3.0% Note payable to Gilster Mary Lee Corporation	8,878		8,878
4.875% Senior Notes	350,000		337,750
	$	2,283,003	$	2,237,081

The estimated fair values of the Company's 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 loans and borrowing rates currently available to the Company for notes and loans with similar terms and maturities.

11. 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 maintains a defined benefit plan, the Pinnacle Foods Group LLC Pension Plan (the "Plan"), which is frozen for future benefit accruals. The Company also has three 401(k) plans, three non-qualified supplemental savings plans and the Company participates in a multi-employer defined benefit plan.

Pinnacle Foods Group LLC Pension Plan

The Plan covers eligible employees and provides benefits generally based on years of service and employees’ compensation. The Plan is frozen for future benefits and is funded in conformity with the funding requirements of applicable government regulations. The Plan assets consist principally of cash equivalents, equity and fixed income common collective trusts. The Plan assets do not include any of the Company’s equity or debt securities.

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PINNACLE FOODS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(thousands, except share and per share amounts and where noted in millions)

The following represents the components of net periodic (benefit) cost:



	Three months ended						Six months ended
Pension Benefits	June 26, 2016			June 28, 2015			June 26, 2016			June 28, 2015
Interest cost	$	2,628		$	2,361		$	5,256		5,189
Expected return on assets	(2,838		)	(3,225		)	(5,675		)	(6,616		)
Amortization of:
Actuarial loss	309			206			617			475
Net periodic cost (benefit)	$	99		$	(658	)	$	198		$	(952	)

Cash Flows

Contributions. In fiscal 2016 , the Company does not expect to make any significant contributions to the Plan. The Company made contributions to the Plan totaling $3.1 million in fiscal 2015 , of which $0.0 million and $1.7 million was made in the three and six months ended June 28, 2015 .

Multi-employer Plans

The Company 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 its Fort Madison employees.

For the three and six months ended June 26, 2016 , contributions to the UFCW Plan were $183 and $364 . For the three and six months ended June 28, 2015 , contributions to the UFCW Plan were $191 and $384 , respectively. The contributions to this UFCW Plan are paid monthly based upon the number of employees. They represent less than 5% of the total contributions received by this UFCW Plan using available information 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 withdrawal liability based on the underfunded status of the plan.

The UFCW Plan received a Pension Protection Act “green” zone status for the plan year ending June 30, 2015. The zone status is based on information the Company received from the UFCW Plan and is certified by the UFCW 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 affect 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.

12. 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.

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PINNACLE FOODS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(thousands, except share and per share amounts and where noted in millions)

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 processes.

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 and six months ended June 26, 2016 and June 28, 2015 , such derivatives were used to hedge the variable cash flows associated with existing variable-rate debt.

As of June 26, 2016 , the Company had the following interest rate swaps that were designated as cash flow hedges of interest rate risk:

Product

Number of

Instruments

Current

Notional

Amount

Fixed Rate Range

Index

Trade Dates

Maturity

Dates

Interest Rate Swaps

1,316,300

1.45% - 2.97%

USD-LIBOR-BBA

Apr 2013 - Oct 2013

Nov 2016 - Apr 2020

The effective portion of changes in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in AOCL in 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 AOCL 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 $10,108 will be reclassified as an increase to Interest expense.

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 ("CAD"). 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 CAD currency in exchange for receiving USD if exchange rates rise above an agreed upon rate and purchase of USD currency in exchange for paying CAD currency if exchange rates fall below an agreed upon rate at specified dates.

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PINNACLE FOODS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(thousands, except share and per share amounts and where noted in millions)

As of June 26, 2016 , 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 $ Contracts

15,000

11,595

1.281 - 1.313

Oct 2015 - April 2016

July 2016 - Dec 2016

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 AOCL in 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 hedge accounting. From time to time, the Company enters into commodity forward contracts to fix the price of diesel fuel, heating oil, natural gas 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 June 26, 2016 , the Company had the following derivative instruments that were not designated in qualifying hedging relationships:



Commodity Contracts	Number of Instruments	Notional Purchased in Aggregate	Price/Index	Trade Dates	Maturity Dates
Diesel Fuel Contracts	1	7,025,182 Gallons	$3.68 - $3.80 per Gallon	Nov 2014	Dec 2016
Heating Oil Contracts	5	8,709,974 Gallons	$1.25 - $1.82 per Gallon	Jan 2015 - Feb 2016	Dec 2016 - Dec 2017
Natural Gas Contracts	2	798,000 MMBTU's	2.41 - 2.81 per MMBTU	Oct 2015 - March 2016	Aug 2016 - Dec 2016
Soybean Oil Contracts	3	32,347,655 Pounds	$0.31 - $0.35 per Pound	Dec 2014 - July 2015	July 2016 - Dec 2016

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PINNACLE FOODS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(thousands, except share and per share amounts and where noted in millions)

The table below presents the fair value of the Company’s derivative financial instruments as well as their classification in the Consolidated Balance Sheets as of June 26, 2016 and December 27, 2015 .



	Tabular Disclosure of Fair Values of Derivative Instruments
	Asset Derivatives			Liability Derivatives
	Balance Sheet Location	Fair Value as of June 26, 2016		Balance Sheet Location	Fair Value as of June 26, 2016
Derivatives designated as hedging instruments
Interest Rate Contracts				Accrued liabilities	$	6,662
				Other long-term liabilities	27,297
Foreign Exchange Contracts	Other current assets	$	45
Total derivatives designated as hedging instruments		$	45		$	33,959
Derivatives not designated as hedging instruments
Commodity Contracts	Other current assets	$	194	Accrued liabilities	$	4,271
	Other assets, net	1,565
Total derivatives not designated as hedging instruments		$	1,759		$	4,271

	Balance Sheet Location	Fair Value as of December 27, 2015		Balance Sheet Location	Fair Value as of December 27, 2015
Derivatives designated as hedging instruments
Interest Rate Contracts				Accrued liabilities	$	3,921
				Other long-term liabilities	14,947
Foreign Exchange Contracts	Other current assets	$	471
Total derivatives designated as hedging instruments		$	471		$	18,868
Derivatives not designated as hedging instruments
Commodity Contracts				Accrued liabilities	$	2,036
				Other long-term liabilities	7,977
Total derivatives not designated as hedging instruments		$	—		$	10,013

The Company has elected not to offset the fair values of derivative assets and liabilities executed with the same counterparty that are generally subject to enforceable netting agreements. However, if the Company were to offset and record the asset and liability balances of derivatives on a net basis, the amounts presented in the Consolidated Balance Sheets as of June 26, 2016 and December 27, 2015 would be adjusted as detailed in the following table:



	June 26, 2016						December 27, 2015
Derivative Instrument	Gross Amounts Presented in the Consolidated Balance Sheet		Gross Amounts Not Offset in the Consolidated Balance Sheet Subject to Netting Agreements		Net Amount		Gross Amounts Presented in the Consolidated Balance Sheet		Gross Amounts Not Offset in the Consolidated Balance Sheet Subject to Netting Agreements		Net Amount
Total asset derivatives	$	1,804	(1,804	)	$	—	$	471	(471	)	$	—

Total liability derivatives	$	38,230	(1,804	)	$	36,426	$	28,881	(471	)	$	28,410

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PINNACLE FOODS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(thousands, except share and per share amounts and where noted in millions)

The table below presents the effect of the Company’s derivative financial instruments in the Consolidated Statements of Operations and AOCL for the three and six months ended June 26, 2016 and June 28, 2015 .

Tabular Disclosure of the Effect of Derivative Instruments



Gain/(Loss)
Derivatives in Cash Flow Hedging Relationships	Recognized in AOCL on Derivative (Effective Portion)			Effective portion reclassified from AOCL to:	Reclassified from AOCL into Earnings (Effective Portion)			Ineffective portion recognized in Earnings in:	Recognized in Earnings (Ineffective Portion)
Interest Rate Contracts	$	(8,067	)	Interest expense	$	(2,206	)	Interest expense
Foreign Exchange Contracts	71			Cost of products sold	(24		)	Cost of products sold	—
Three months ended June 26, 2016	$	(7,996	)		$	(2,230	)		$	—

Interest Rate Contracts	$	(18,761	)	Interest expense	$	(3,671	)	Interest expense
Foreign Exchange Contracts	(356		)	Cost of products sold	55			Cost of products sold	(8		)
Six months ended June 26, 2016	$	(19,117	)		$	(3,616	)		$	(8	)

Interest Rate Contracts	$	2,564		Interest expense	$	(1,011	)	Interest expense	$	—
Foreign Exchange Contracts	(310		)	Cost of products sold	609			Cost of products sold	(14		)
Three months ended June 28, 2015	$	2,254			$	(402	)		$	(14	)

Interest Rate Contracts	$	(11,567	)	Interest expense	$	(1,403	)	Interest expense	$	—
Foreign Exchange Contracts	1,205			Cost of products sold	1,312			Cost of products sold	(15		)
Six months ended June 28, 2015	$	(10,362	)		$	(91	)		$	(15	)

Derivatives Not Designated as Hedging Instruments				Recognized in Earnings in:	Recognized in Earnings
Commodity Contracts				Cost of products sold	$	1,165
Three months ended June 26, 2016					$	1,165

Commodity Contracts				Cost of products sold	$	1,848
Six months ended June 26, 2016					$	1,848

Commodity Contracts				Cost of products sold	$	1,934
Three months ended June 28, 2015					$	1,934

Commodity Contracts				Cost of products sold	$	(73	)
Six months ended June 28, 2015					$	(73	)

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PINNACLE FOODS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(thousands, except share and per share amounts and where noted in millions)

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 June 26, 2016 , the Company has not posted any collateral related to these agreements. If the Company had breached this provision at June 26, 2016 , 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 June 26, 2016 and December 27, 2015 .

June 26, 2016



Asset/(Liability)
Counterparty	Contract Type	Termination Value			Performance Risk Adjustment		Accrued Interest			Fair Value (excluding interest)
Barclays	Interest Rate Contracts	$	(17,712	)	$	986	$	(517	)	$	(16,209	)
	Foreign Exchange Contracts	93			—		—			93
	Commodity Contracts	(2,703		)	21		—			(2,682		)
Bank of America	Interest Rate Contracts	(14,665		)	1,116		—			(13,549		)
	Foreign Exchange Contracts	(49		)	1		—			(48		)
	Commodity Contracts	146			1		—			147
Credit Suisse	Interest Rate Contracts	(3,103		)	40		(531		)	(2,533		)
Macquarie	Interest Rate Contracts	(1,976		)	13		(294		)	(1,669		)
	Commodity Contracts	22			2		—			24
Total		$	(39,948	)	$	2,179	$	(1,342	)	$	(36,426	)

December 27, 2015



Asset/(Liability)
Counterparty	Contract Type	Termination Value			Performance Risk Adjustment		Accrued Interest			Fair Value (excluding interest)
Barclays	Interest Rate Contracts	$	(9,616	)	$	773	$	(260	)	$	(8,583	)
	Commodity Contracts	(7,035		)	116		—			(6,919		)
Bank of America	Interest Rate Contracts	(5,879		)	790		—			(5,089		)
	Foreign Exchange Contracts	470			1		—			471
	Commodity Contracts	(1,737		)	29		—			(1,709		)
Credit Suisse	Interest Rate Contracts	(2,627		)	53		(260		)	(2,314		)
Macquarie	Interest Rate Contracts	(3,137		)	47		(209		)	(2,882		)
	Commodity Contracts	(1,408		)	23		—			(1,386		)
Total		$	(30,970	)	$	1,831	$	(728	)	$	(28,410	)

13. Commitments and Contingencies

General

From time to time, the Company and its subsidiaries 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.

No single item individually is, nor are all of them in the aggregate, material.

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PINNACLE FOODS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(thousands, except share and per share amounts and where noted in millions)

14. Segments

The Company is a leading manufacturer, marketer and distributor of high quality, branded food products in North America. Subsequent to the Boulder acquisition, the Company manages the business in four operating segments: Birds Eye Frozen, Duncan Hines Grocery, Boulder Brands and Specialty Foods.

The Birds Eye Frozen segment is comprised of our Leadership Brands in the retail frozen vegetables ( Birds Eye ), frozen complete bagged meals ( Birds Eye Voila! ), plant-based protein frozen products ( gardein ) and frozen prepared seafood ( Van de Kamp’s and Mrs. Paul’s ) categories, as well as our Foundation Brands in the full-calorie single-serve frozen dinners and entrées ( Hungry-Man ), frozen pancakes / waffles / French Toast ( Aunt Jemima ), frozen and refrigerated bagels ( Lender’s ) and frozen pizza for one ( Celeste ) categories.

The Duncan Hines Grocery segment is comprised of our Leadership Brands in the baking mixes and frostings ( Duncan Hines ), shelf-stable pickles ( Vlasic ), liquid and dry-mix salad dressings ( Wish-Bone and Western ), and table syrups ( Mrs. Butterworth’s and Log Cabin ) categories, and our Foundation Brands in the canned meat ( Armour, Nalley and Brooks ), pie and pastry fillings ( Duncan Hines Comstock and Wilderness ), and barbecue sauces ( Open Pit ) categories as well as Canadian operations, excluding Garden Protein.

The Company refers to the sum of the Birds Eye Frozen segment and the Duncan Hines Grocery segment as the North America Retail business.

The Boulder Brands segment is comprised of health and wellness brands including gluten-free products ( Udi's and Glutino) , natural frozen meal offerings ( EVOL) , refrigerated and shelf-stable spreads ( Smart Balance), and plant-based refrigerated and shelf-stable spreads ( Earth Balance ).

The Specialty Foods segment consists of snack products ( Tim's Cascade and Snyder of Berlin ), foodservice and private label business.

As the Company continues to integrate the Boulder Brands segment into its operations and financial reporting systems, the Company’s management expects to reevaluate its internal reporting, which may require reporting of its results in different reportable segments in future periods.

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, finance and legal functions.

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PINNACLE FOODS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(thousands, except share and per share amounts and where noted in millions)



	Three months ended						Six months ended
SEGMENT INFORMATION	June 26, 2016			June 28, 2015			June 26, 2016			June 28, 2015
Net sales
Birds Eye Frozen	$	285,155		$	268,859		$	615,166		$	586,749
Duncan Hines Grocery	270,471			277,994			513,656			539,192
Boulder Brands	122,607			—			223,455			—
Specialty Foods	78,148			84,893			158,359			171,086
Total	$	756,381		$	631,746		$	1,510,636		$	1,297,027
Earnings before interest and taxes
Birds Eye Frozen	$	46,794		$	37,978		$	102,035		$	81,255
Duncan Hines Grocery	52,255			51,041			94,860			94,248
Boulder Brands (1)	7,028			—			(4,198		)	—
Specialty Foods	6,333			7,599			13,253			15,299
Unallocated corporate expenses (2)	(4,624		)	(6,803		)	(17,883		)	(12,518		)
Total	$	107,786		$	89,815		$	188,067		$	178,284
Depreciation and amortization
Birds Eye Frozen	$	10,857		$	10,747		$	22,042		$	21,415
Duncan Hines Grocery	7,781			8,081			15,162			15,081
Boulder Brands	4,688			—			7,692			—
Specialty Foods	3,429			3,461			6,776			6,661
Total	$	26,755		$	22,289		$	51,672		$	43,157
Capital expenditures
Birds Eye Frozen	$	16,811		$	13,212		$	36,443		$	17,752
Duncan Hines Grocery	10,551			6,889			21,820			25,811
Boulder Brands	1,457			—			2,493			—
Specialty Foods	2,023			1,043			4,017			4,605
Total	$	30,842		$	21,144		$	64,773		$	48,168

NET SALES BY PRODUCT TYPE
Net sales
Frozen	$	381,171		$	305,335		$	796,317		$	664,474
Shelf stable meals and meal enhancers	261,933			233,951			500,175			442,925
Desserts	75,980			65,279			144,764			137,133
Snacks	37,297			27,181			69,380			52,495
Total	$	756,381		$	631,746		$	1,510,636		$	1,297,027

GEOGRAPHIC INFORMATION
Net sales
United States	$	741,576		$	626,468		$	1,486,639		$	1,287,635
Canada	41,005			31,067			77,114			60,565
United Kingdom	3,217			—			5,689			—
Intercompany	(29,417		)	(25,789		)	(58,806		)	(51,173		)
Total	$	756,381		$	631,746		$	1,510,636		$	1,297,027

Table of Contents

PINNACLE FOODS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(thousands, except share and per share amounts and where noted in millions)


(1)	Includes $10.4 million of charges related to the fair value step-up of inventories acquired and $16.7 million of restructuring costs in the six months ended June 26, 2016.


(2)	Includes $6.8 million of acquisition costs in the six months ended June 26, 2016.



SEGMENT INFORMATION	June 26, 2016		December 27, 2015
Total assets
Birds Eye Frozen	$	2,204,408	$	2,263,159
Duncan Hines Grocery	2,629,048		2,664,966
Boulder Brands	1,271,670		—
Specialty Foods	340,645		351,499
Corporate	77,081		44,539
Total	$	6,522,852	$	5,324,163
GEOGRAPHIC INFORMATION
Plant assets
United States	$	664,754	$	615,123
Canada	32,322		15,986
United Kingdom	3,895		—
Total	$	700,971	$	631,109

15. Provision for Income Taxes

The provision for income taxes and related effective tax rates for the three and six months ended June 26, 2016 and June 28, 2015 , respectively, were as follows:



	Three months ended						Six months ended
Provision for Income Taxes	June 26, 2016			June 28, 2015			June 26, 2016			June 28, 2015
Current	$	20,066		$	9,337		$	31,396		$	16,296
Deferred	6,476			14,624			19,027			33,123
Total	$	26,542		$	23,961		$	50,423		$	49,419

Effective tax rate	36.7		%	35.4		%	41.7		%	36.7		%

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 their financial statement basis and tax basis, using enacted tax rates in effect for the year in which the differences are expected to reverse.

In connection with our acquisition of Boulder, our effective income tax rate for the six months ended June 26, 2016 was increased by approximately 5.0% due to the tax effect of certain non-deductible acquisition costs and compensation payments, a charge for an increase in our non-current state deferred income tax liability balance and a charge related to the tax effect of foreign operations, principally attributable to a valuation allowance on our foreign tax credit carryforward. Our income tax rate for the six months ended June 26, 2016 and June 28, 2015 also reflects the benefit of the domestic production activities deduction and tax credits. For the six months ended June 28, 2015, it was also reduced by the effect of enacted state tax legislation.

For the three months ended June 26, 2016, our rate was impacted by the effect of certain non-deductible acquisition and compensation expenditures incurred in connection with our acquisition of Boulder. It also reflects the benefit of the domestic production activities deduction and tax credits. For the three months ended June 28, 2015, it was reduced by the effect of the domestic production activities deduction, tax credits and by enacted state tax legislation.

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PINNACLE FOODS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(thousands, except share and per share amounts and where noted in millions)

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 and as noted above, for the six months ended June 26, 2016 , a valuation allowance was recorded on our foreign tax credit carryforward in connection with our acquisition of Boulder Brands. There was no significant movement in our valuation allowances on state attribute carryforwards during the three and six months ended June 26, 2016 and for the three and six months ended June 28, 2015 .

The Company is a loss corporation as defined by Internal Revenue Code (“the Code”) Section 382. Section 382 places an annual limitation on our ability to use our federal net operating loss (“NOL”) carryovers and other attributes to reduce future taxable income. As of June 26, 2016 , we have federal NOL carryovers of $439.4 million subject to an annual limitation of $17.1 million . As a result, $237.2 million of the carryovers exceed the estimated available Section 382 limitation. The Company has reduced its deferred tax assets for this limitation.

On January 15, 2016 we acquired Boulder which is a loss corporation. As of the acquisition date, Boulder had approximately $46.0 million of federal NOL carryovers subject to the Section 382 provisions. The annual limitation is approximately $26.5 million subject to increase for recognized built in gains during the recognition period. Based on our analysis, we anticipate we will be able to utilize the acquired NOL balance in our 2016 tax year without limitation.

In connection with our acquisition of Boulder we also recorded, in purchase accounting, reserves for uncertain positions of approximately $5.4 million for a matter related to their foreign operations.

16. Recently Issued Accounting Pronouncements

In March 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-09, "Improvements to Employee Share-Based Payment Accounting". The areas for simplification in this ASU involve several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The updated guidance will be effective for fiscal years beginning after December 15, 2016, and interim periods within those annual periods. Early application is permitted. The amendments related to the timing of when excess tax benefits are recognized are to be applied using a modified retrospective approach. The amendments related to the presentation of employee taxes paid on the statement of cash flows are to be applied retrospectively. The amendments requiring recognition of excess tax benefits and tax deficiencies in the income statement are to be applied prospectively. The Company is in the process of evaluating this guidance.

In February 2016, the FASB issued ASU No. 2016-02, “Leases”. The FASB is amending the FASB Accounting Standards Codification ("ASC") and creating Topic 842, Leases, which will supersede Topic 840, Leases. The main difference between previous GAAP and Topic 842 is the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases under previous GAAP. Under the new guidance, lessees will be required to recognize the assets and liabilities arising from leases on the balance sheet. The updated guidance will be effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early application is permitted. In transition to the new guidance, entities are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. The Company is in the process of evaluating this guidance.

In November 2015, the FASB issued ASU No. 2015-17, “Balance Sheet Classification of Deferred Taxes”. The new guidance eliminates the requirement to separate deferred income tax liabilities and assets into current and noncurrent amounts. The amendments will require that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. The updated guidance will be effective for fiscal years beginning after December 15, 2016, including interim periods within those annual periods. Early adoption is permitted, and the amendments may be applied either prospectively to all deferred tax liabilities and assets or retrospectively to all periods presented. The Company is in the process of evaluating this guidance.

In September 2015, the FASB issued ASU No. 2015-16, “Simplifying the Accounting for Measurement-Period Adjustments”. The new guidance eliminates the requirement to retrospectively account for adjustments to provisional amounts recognized in a business combination. Under the ASU, the adjustments to the provisional amounts will be recognized in the reporting period in which the

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PINNACLE FOODS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(thousands, except share and per share amounts and where noted in millions)

adjustment amounts are determined. The updated guidance will be effective for fiscal years beginning after December 15, 2015, including interim periods within those fiscal years. Early adoption is permitted, and the ASU should be applied prospectively. The Company has implemented this guidance in 2016 without material effect on the consolidated financial statements.

In July 2015, the FASB issued ASU No. 2015-11, "Simplifying the Measurement of Inventory", which requires entities to measure most inventory “at the lower of cost and net realizable value,” thereby simplifying the current guidance under which an entity must measure inventory at the lower of cost or market. The ASU will not apply to inventories that are measured by using either the last-in, first-out (LIFO) method or the retail inventory method (RIM). The updated guidance will be effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Early adoption is permitted. The Company is in the process of evaluating this guidance.

In April 2015, the FASB issued ASU No. 2015-03, “Simplifying the Presentation of Debt Issuance Costs". The new guidance changes the presentation of debt issuance costs in financial statements. Under the ASU, an entity presents such costs in the balance sheet as a direct deduction from the related debt liability rather than as an asset. Amortization of the costs will continue to be reported as interest expense. The Company implemented this guidance in 2016. Refer to Note 2 for information.

In April 2015, the FASB issued ASU No. 2015-04, “Compensation-Retirement Benefits (Topic 715): Practical Expedient for the Measurement Date of an Employer’s Defined Benefit Obligation and Plan Assets". The new guidance gives an employer whose fiscal year-end does not coincide with a calendar month-end (e.g., an entity that has a 52- or 53-week fiscal year, as the Company does) the ability, as a practical expedient, to measure defined benefit retirement obligations and related plan assets as of the month- end that is closest to its fiscal year-end. The updated guidance will be effective for annual reporting periods beginning after December 31, 2015, including interim periods within that reporting period. Early application is permitted, and the ASU should be applied prospectively. The Company implemented this guidance in 2015 without material effect on the consolidated financial statements.

In May 2014, the FASB issued revised guidance on the recognition of revenue from contracts with customers. The guidance is designed to create greater comparability for financial statement users across industries and jurisdictions. The guidance also requires enhanced disclosures. The guidance was originally effective for fiscal years, and interim periods within those years, beginning after December 15, 2016. In April 2015, the FASB delayed the effective date of the new revenue guidance by one year. The updated guidance will be effective for fiscal years, and interim periods within those years, beginning after December 15, 2017. Entities will be permitted to adopt the new revenue standard early, but not before the original effective date. The guidance permits the use of either a full retrospective or modified retrospective transition method. The Company is currently evaluating the impact that the new guidance will have on the consolidated financial statements, as well as which transition method it will use.

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PINNACLE FOODS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(thousands, except share and per share amounts and where noted in millions)

17. Guarantor and Nonguarantor Statements

The Senior Notes are general senior unsecured obligations of Pinnacle Foods Finance, effectively subordinated in right of payment to all existing and future senior secured indebtedness of Pinnacle Foods Finance and guaranteed on a full, unconditional, joint and several basis by the Company and Pinnacle Foods Finance's 100% owned domestic subsidiaries that guarantee other indebtedness of the Pinnacle Foods Finance. The indenture governing the Senior Notes contains customary exceptions under which a guarantee of a guarantor subsidiary will terminate, including (1) the sale, exchange or transfer (by merger or otherwise) of the capital stock or all or substantially all of the assets of such guarantor subsidiary, (2) the release or discharge of the guarantee by such guarantor subsidiary of the Amended Credit Agreement or other guarantee that resulted in the creation of the guarantee, (3) the designation of such guarantor subsidiary as an “unrestricted subsidiary” in accordance with the indentures governing the Senior Notes and (4) upon the legal defeasance or covenant defeasance or discharge of the indentures governing the Senior Notes.

The following condensed consolidating financial information presents:


(1)	(a) Condensed consolidating balance sheets as of June 26, 2016 and December 27, 2015 .

(b) The related condensed consolidating statements of operations and comprehensive earnings for the Company, Pinnacle Foods Finance, all guarantor subsidiaries and the non-guarantor subsidiaries for the following:

i. Three and six months ended June 26, 2016 ; and

ii. Three and six months ended June 28, 2015 .

(c) The related condensed consolidating statements of cash flows for the Company, Pinnacle Foods Finance, all guarantor subsidiaries and the non-guarantor subsidiaries for the following:

i. Six months ended ended June 26, 2016 ; and

ii. Six months ended ended June 28, 2015 .


(2)	Elimination entries necessary to consolidate the Company, Pinnacle Foods Finance 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.

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PINNACLE FOODS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(thousands, except share and per share amounts and where noted in millions)

Pinnacle Foods Inc. Condensed Consolidating Balance Sheet June 26, 2016

	Pinnacle Foods Inc.			Pinnacle Foods Finance LLC			Guarantor Subsidiaries			Nonguarantor Subsidiaries			Eliminations and Reclassifications			Consolidated Total
Current assets:
Cash and cash equivalents	$	—		$	—		$	122,433		$	6,911		$	—		$	129,344
Accounts receivable, net	—			—			258,122			12,078			—			270,200
Intercompany accounts receivable	92,756			—			791,709			1,610			(886,075		)	—
Inventories, net	—			—			425,019			16,221			—			441,240
Other current assets	—			239			15,838			1,057			—			17,134
Deferred tax assets	—			1,670			69,717			1,233			—			72,620
Total current assets	92,756			1,909			1,682,838			39,110			(886,075		)	930,538
Plant assets, net	—			—			664,754			36,217			—			700,971
Investment in subsidiaries	1,777,372			2,476,347			39,627			—			(4,293,346		)	—
Intercompany note receivable	—			2,996,357			44,914			9,802			(3,051,073		)	—
Tradenames	—			—			2,536,400			4,538			—			2,540,938
Other assets, net	—			2,492			166,423			11,691			—			180,606
Deferred tax assets	—			343,347			—			—			(343,347		)	—
Goodwill	—			—			2,115,319			54,480			—			2,169,799
Total assets	$	1,870,128		$	5,820,452		$	7,250,275		$	155,838		$	(8,573,841	)	$	6,522,852
Current liabilities:
Short-term borrowings	$	—		$	—		$	1,758		$	—		$	—		$	1,758
Current portion of long-term obligations	—			10,750			10,989			15			—			21,754
Accounts payable	—			—			209,180			9,064			—			218,244
Intercompany accounts payable	—			857,303			1,610			27,210			(886,123		)	—
Accrued trade marketing expense	—			—			38,931			2,519			—			41,450
Accrued liabilities	244			34,052			106,370			3,490			—			144,156
Dividends payable	30,998			—			—			—			—			30,998
Total current liabilities	31,242			902,105			368,838			42,298			(886,123		)	458,360
Long-term debt	—			3,113,678			21,029			309			—			3,135,016
Intercompany note payable	—			—			2,986,057			64,968			(3,051,025		)	—
Pension and other postretirement benefits	—			—			62,903			—			—			62,903
Other long-term liabilities	—			27,297			33,687			3,375			—			64,359
Deferred tax liabilities	—			—			1,301,414			4,392			(343,347		)	962,459
Total liabilities	31,242			4,043,080			4,773,928			115,342			(4,280,495		)	4,683,097
Commitments and contingencies (Note 13)
Shareholders' equity:
Pinnacle common stock	1,186			—			—			—			—			1,186
Additional paid-in-capital	1,404,567			1,405,753			1,313,141			33,008			(2,751,902		)	1,404,567
Retained earnings	528,180			434,556			1,199,791			13,242			(1,647,589		)	528,180
Accumulated other comprehensive loss	(62,937		)	(62,937		)	(36,585		)	(6,623		)	106,145			(62,937		)
Capital stock in treasury, at cost	(32,110		)	—			—			—			—			(32,110		)
Total Pinnacle Foods Inc. and Subsidiaries stockholders' equity	1,838,886			1,777,372			2,476,347			39,627			(4,293,346		)	1,838,886
Non-controlling interest	—			—			—			869			—			869
Total Equity	1,838,886			1,777,372			2,476,347			40,496			(4,293,346		)	1,839,755
Total liabilities and equity	$	1,870,128		$	5,820,452		$	7,250,275		$	155,838		$	(8,573,841	)	$	6,522,852

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PINNACLE FOODS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(thousands, except share and per share amounts and where noted in millions)

Pinnacle Foods Inc. Condensed Consolidating Balance Sheet December 27, 2015

	Pinnacle Foods Inc.			Pinnacle Foods Finance LLC			Guarantor Subsidiaries			Nonguarantor Subsidiaries			Eliminations and Reclassifications			Consolidated Total
Current assets:
Cash and cash equivalents	$	—		$	—		$	177,669		$	2,880		$	—		$	180,549
Accounts receivable, net	—			—			214,690			5,046			—			219,736
Intercompany accounts receivable	92,475			—			725,074			—			(817,549		)	—
Inventories, net	—			—			392,404			10,697			—			403,101
Other current assets	—			470			11,860			1,347			—			13,677
Deferred tax assets	—			1,670			38,516			385			—			40,571
Total current assets	92,475			2,140			1,560,213			20,355			(817,549		)	857,634
Plant assets, net	—			—			615,123			15,986			—			631,109
Investment in subsidiaries	1,744,015			2,428,472			26,433			—			(4,198,920		)	—
Intercompany note receivable	—			2,084,130			8,398			9,800			(2,102,328		)	—
Tradenames	—			—			1,996,800			4,248			—			2,001,048
Other assets, net	—			935			118,621			808			—			120,364
Deferred tax assets	—			332,372			—			—			(332,372		)	—
Goodwill	—			—			1,692,715			21,293			—			1,714,008
Total assets	$	1,836,490		$	4,848,049		$	6,018,303		$	72,490		$	(7,451,169	)	$	5,324,163
Current liabilities:
Short-term borrowings	$	—		$	—		$	2,225		$	—		$	—		$	2,225
Current portion of long-term obligations	—			5,250			9,515			82			—			14,847
Accounts payable	—			—			206,082			4,957			—			211,039
Intercompany accounts payable	—			815,100			—			2,449			(817,549		)	—
Accrued trade marketing expense	—			—			44,096			2,132			—			46,228
Accrued liabilities	163			18,152			79,468			2,727			—			100,510
Dividends payable	30,798			—			—			—			—			30,798
Total current liabilities	30,961			838,502			341,386			12,347			(817,549		)	405,647
Long-term debt	—			2,242,608			14,055			349			—			2,257,012
Intercompany note payable	—			—			2,075,113			27,215			(2,102,328		)	—
Pension and other postretirement benefits	—			—			63,454			—			—			63,454
Other long-term liabilities	—			22,924			28,195			3,387			—			54,506
Deferred tax liabilities	—			—			1,067,628			2,759			(332,372		)	738,015
Total liabilities	30,961			3,104,034			3,589,831			46,057			(3,252,249		)	3,518,634
Commitments and contingencies (Note 13)
Shareholders' equity:
Pinnacle common stock	1,176			—			—			—			—			1,176
Additional paid-in-capital	1,378,521			1,379,697			1,301,642			20,476			(2,701,815		)	1,378,521
Retained earnings	517,330			423,706			1,169,032			14,212			(1,606,950		)	517,330
Accumulated other comprehensive loss	(59,388		)	(59,388		)	(42,202		)	(8,255		)	109,845			(59,388		)
Capital stock in treasury, at cost	(32,110		)	—			—			—			—			(32,110		)
Total Shareholders' equity	1,805,529			1,744,015			2,428,472			26,433			(4,198,920		)	1,805,529
Total liabilities and shareholders' equity	$	1,836,490		$	4,848,049		$	6,018,303		$	72,490		$	(7,451,169	)	$	5,324,163

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PINNACLE FOODS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(thousands, except share and per share amounts and where noted in millions)

Pinnacle Foods Inc. Condensed Consolidating Statement of Operations and Comprehensive Earnings For the three months ended June 26, 2016

	Pinnacle Foods Inc.			Pinnacle Foods Finance LLC			Guarantor Subsidiaries			Nonguarantor Subsidiaries			Eliminations			Consolidated Total
Net sales	$	—		$	—		$	741,576		$	44,222		$	(29,417	)	$	756,381
Cost of products sold	—			—			525,536			38,072			(28,419		)	535,189
Gross profit	—			—			216,040			6,150			(998		)	221,192

Marketing and selling expenses	—			—			59,356			1,680			—			61,036
Administrative expenses	—			—			41,281			2,422			—			43,703
Research and development expenses	—			—			4,967			131			—			5,098
Intercompany royalties	—			—			(48		)	155			(107		)	—
Intercompany management fees	—			—			—			643			(643		)	—
Intercompany technical service fees	—			—			—			248			(248		)	—
Other expense (income), net	—			(499		)	3,967			101			—			3,569
Equity in (earnings) loss of investees	(45,784		)	(52,539		)	(683		)	—			99,006			—
	(45,784		)	(53,038		)	108,840			5,380			98,008			113,406
Earnings before interest and taxes	45,784			53,038			107,200			770			(99,006		)	107,786
Intercompany interest (income) expense	—			(23,434		)	23,650			(216		)	—			—
Interest expense	—			34,987			491			10			—			35,488
Interest income	—			—			13			14			—			27
Earnings before income taxes	45,784			41,485			83,072			990			(99,006		)	72,325
Provision (benefit) for income taxes	—			(4,299		)	30,533			308			—			26,542
Net earnings	45,784			45,784			52,539			682			(99,006		)	45,783
Less: Net loss attributable to non-controlling interest	—			—			—			(1		)	—			(1		)
Net earnings attributable to Pinnacle Foods, Inc. and Subsidiaries common stockholders	$	45,784		$	45,784		$	52,539		$	683		$	(99,006	)	$	45,784

Total comprehensive earnings	42,611			42,611			52,952			903			(96,467		)	42,610
Less: Comprehensive loss attributable to non-controlling interest	—			—			—			(1		)	—			(1		)
Comprehensive earnings attributable to Pinnacle Foods, Inc. and Subsidiaries	$	42,611		$	42,611		$	52,952		$	904		$	(96,467	)	$	42,611

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PINNACLE FOODS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(thousands, except share and per share amounts and where noted in millions)

Pinnacle Foods Inc. Condensed Consolidating Statement of Operations and Comprehensive Earnings For the three months ended June 28, 2015

	Pinnacle Foods Inc.			Pinnacle Foods Finance LLC			Guarantor Subsidiaries			Nonguarantor Subsidiaries			Eliminations			Consolidated Total
Net sales	$	—		$	—		$	626,468		$	31,067		$	(25,789	)	$	631,746
Cost of products sold	—			14			461,850			26,304			(25,531		)	462,637
Gross profit	—			(14		)	164,618			4,763			(258		)	169,109

Marketing and selling expenses	—			—			43,320			2,378			—			45,698
Administrative expenses	—			(129		)	26,308			1,486			—			27,665
Research and development expenses	—			—			3,449			140			—			3,589
Intercompany royalties	—			—			—			8			(8		)	—
Intercompany technical service fees	—			—			—			250			(250		)	—
Other expense (income), net	—			(522		)	2,830			34			—			2,342
Equity in (earnings) loss of investees	(43,679		)	(46,246		)	(266		)	—			90,191			—
	(43,679		)	(46,897		)	75,641			4,296			89,933			79,294
Earnings before interest and taxes	43,679			46,883			88,977			467			(90,191		)	89,815
Intercompany interest (income) expense	—			(17,181		)	16,908			273			—			—
Interest expense	—			21,808			367			12			—			22,187
Interest income	—			—			2			10			—			12
Earnings before income taxes	43,679			42,256			71,704			192			(90,191		)	67,640
Provision (benefit) for income taxes	—			(1,423		)	25,458			(74		)	—			23,961
Net earnings	$	43,679		$	43,679		$	46,246		$	266		$	(90,191	)	$	43,679

Total comprehensive earnings (loss)	$	45,715		$	45,715		$	46,100		$	(31	)	$	(91,784	)	$	45,715

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PINNACLE FOODS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(thousands, except share and per share amounts and where noted in millions)

Pinnacle Foods Inc. Condensed Consolidating Statement of Operations and Comprehensive Earnings For the six months ended June 26, 2016

	Pinnacle Foods Inc.			Pinnacle Foods Finance LLC			Guarantor Subsidiaries			Nonguarantor Subsidiaries			Eliminations			Consolidated Total
Net sales	$	—		$	—		$	1,486,639		$	82,803		$	(58,806	)	$	1,510,636
Cost of products sold	—			—			1,073,951			73,981			(57,055		)	1,090,877
Gross profit	—			—			412,688			8,822			(1,751		)	419,759

Marketing and selling expenses	—			—			116,893			3,041			—			119,934
Administrative expenses	—			—			85,073			4,518			—			89,591
Research and development expenses	—			—			8,903			380			—			9,283
Intercompany royalties	—			—			(304		)	483			(179		)	—
Intercompany management fees	—			—			—			1,074			(1,074		)	—
Intercompany technical service fees	—			—			—			498			(498		)	—
Other expense (income), net	—			(1,283		)	14,035			132			—			12,884
Equity in (earnings) loss of investees	(70,620		)	(78,657		)	1,665			—			147,612			—
	(70,620		)	(79,940		)	226,265			10,126			145,861			231,692
Earnings before interest and taxes	70,620			79,940			186,423			(1,304		)	(147,612		)	188,067
Intercompany interest (income) expense	—			(51,692		)	51,582			110			—			—
Interest expense	—			66,127			979			22			—			67,128
Interest income	—			—			71			33			—			104
Earnings (loss) before income taxes	70,620			65,505			133,933			(1,403		)	(147,612		)	121,043
Provision (benefit) for income taxes	—			(5,115		)	55,276			262			—			50,423
Net earnings (loss)	70,620			70,620			78,657			(1,665		)	(147,612		)	70,620
Less: Net earnings attributable to non-controlling interest	—			—			—			—			—			—
Net earnings (loss) attributable to Pinnacle Foods, Inc. and Subsidiaries common stockholders	$	70,620		$	70,620		$	78,657		$	(1,665	)	$	(147,612	)	$	70,620

Total comprehensive earnings	67,071			67,071			84,338			3,634			(155,043		)	67,071
Less: Comprehensive earnings attributable to non-controlling interest	—			—			—			—			—			—
Comprehensive earnings attributable to Pinnacle Foods, Inc. and Subsidiaries	$	67,071		$	67,071		$	84,338		$	3,634		$	(155,043	)	$	67,071

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PINNACLE FOODS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(thousands, except share and per share amounts and where noted in millions)

Pinnacle Foods Inc. Condensed Consolidating Statement of Operations and Comprehensive Earnings For the six months ended June 28, 2015

	Pinnacle Foods Inc.			Pinnacle Foods Finance LLC			Guarantor Subsidiaries			Nonguarantor Subsidiaries			Eliminations			Consolidated Total
Net sales	$	—		$	—		$	1,287,635		$	60,565		$	(51,173	)	$	1,297,027
Cost of products sold	—			16			957,236			49,609			(50,660		)	956,201
Gross profit	—			(16		)	330,399			10,956			(513		)	340,826

Marketing and selling expenses	—			—			86,611			6,096			—			92,707
Administrative expenses	—			3			52,248			3,200			—			55,451
Research and development expenses	—			—			6,390			251			—			6,641
Intercompany royalties	—			—			—			14			(14		)	—
Intercompany technical service fees	—			—			—			499			(499		)	—
Other expense (income), net	—			1,311			6,396			36			—			7,743
Equity in (earnings) loss of investees	(85,215		)	(91,452		)	(337		)	—			177,004			—
	(85,215		)	(90,138		)	151,308			10,096			176,491			162,542
Earnings before interest and taxes	85,215			90,122			179,091			860			(177,004		)	178,284
Intercompany interest (income) expense	—			(34,359		)	33,829			530			—			—
Interest expense	—			42,929			863			23			—			43,815
Interest income	—			—			147			18			—			165
Earnings (loss) before income taxes	85,215			81,552			144,546			325			(177,004		)	134,634
Provision (benefit) for income taxes	—			(3,663		)	53,094			(12		)	—			49,419
Net earnings (loss)	$	85,215		$	85,215		$	91,452		$	337		$	(177,004	)	$	85,215

Total comprehensive earnings (loss)	$	78,054		$	78,054		$	90,511		$	(925	)	$	(167,640	)	$	78,054

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PINNACLE FOODS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(thousands, except share and per share amounts and where noted in millions)



Pinnacle Foods Inc. Condensed Consolidating Statement of Cash Flows For the six months ended June 26, 2016
	Pinnacle Foods Inc.			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	$	(6,369	)	$	11,481		$	139,564		$	20,427		$	—		$	165,103
Cash flows from investing activities
Business acquisition activity	—			—			(985,365		)	—			—			(985,365		)
Intercompany accounts receivable/payable	—			7,832			13,588			—			(21,420		)	—
Intercompany loans	—			(880,122		)	—			—			880,122			—
Investment in Subsidiary	44,905			33,726			—			—			(78,631		)	—
Capital expenditures	—			—			(57,086		)	(3,101		)	—			(60,187		)
Net cash (used in) provided by investing activities	44,905			(838,564		)	(1,028,863		)	(3,101		)	780,071			(1,045,552		)
Cash flows from financing activities
Net proceeds from issuance of common stock	15,642			—			—			—			—			15,642
Excess tax benefits on stock-based compensation	6,369			—			—			—			—			6,369
Taxes paid related to net share settlement of equity awards	(1,087		)	—			—			—			—			(1,087		)
Dividends paid	(59,460		)	—			—			—			—			(59,460		)
Proceeds from notes offering	—			350,000			—			—			—			350,000
Proceeds from bank term loans	—			547,250			—			—			—			547,250
Repayments of long-term obligations	—			(4,000		)	(2,478		)	—			—			(6,478		)
Proceeds from short-term borrowing	—			—			1,604			—			—			1,604
Repayments of short-term borrowing	—			—			(2,060		)	—			—			(2,060		)
Intercompany accounts receivable/payable	—			—			(7,832		)	(13,588		)	21,420			—
Return of capital	—			(44,905		)	(33,726		)	—			78,631			—
Intercompany loans	—			—			880,122			—			(880,122		)	—
Repayment of capital lease obligations	—			—			(1,567		)	(7		)	—			(1,574		)
Debt acquisition costs	—			(21,262		)	—			—			—			(21,262		)
Net cash (used in) provided by financing activities	(38,536		)	827,083			834,063			(13,595		)	(780,071		)	828,944
Effect of exchange rate changes on cash	—			—			—			300			—			300
Net change in cash and cash equivalents	—			—			(55,236		)	4,031			—			(51,205		)
Cash and cash equivalents - beginning of period	—			—			177,669			2,880			—			180,549
Cash and cash equivalents - end of period	$	—		$	—		$	122,433		$	6,911		$	—		$	129,344

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PINNACLE FOODS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(thousands, except share and per share amounts and where noted in millions)

Pinnacle Foods Inc. Condensed Consolidating Statement of Cash Flows For the six months ended June 28, 2015

	Pinnacle Foods Inc.			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	$	—		$	(6,195	)	$	137,365		$	(6,736	)	$	—		$	124,434
Cash flows from investing activities
Payments for business acquisitions	—			—			1,102			—			—			1,102
Intercompany accounts receivable/payable	—			—			(19,131		)	—			19,131			—
Intercompany loans	—			—			(7,209		)	—			7,209			—
Investment in subsidiaries	55,248			—			—			—			(55,248		)	—
Capital expenditures	—			—			(47,057		)	(1,111		)	—			(48,168		)
Net cash (used in) provided by investing activities	55,248			—			(72,295		)	(1,111		)	(28,908		)	(47,066		)
Cash flows from financing activities
Proceeds from the issuance of common stock	824			—			—			—			—			824
Excess tax benefits on stock-based compensation	1,076			—			—			—			—			1,076
Taxes paid related to net share settlement of equity awards	(2,401		)	—			—			—			—			(2,401		)
Dividends paid	(54,747		)	—			—			—			—			(54,747		)
Repayments of long-term obligations	—			(2,626		)	(1,796		)	—			—			(4,422		)
Proceeds from short-term borrowing	—			—			1,710			—			—			1,710
Repayments of short-term borrowing	—			—			(2,312		)	—			—			(2,312		)
Intercompany accounts receivable/payable	—			8,821			—			10,310			(19,131		)	—
Proceeds from Intercompany loans	—			—			—			7,209			(7,209		)	—
Parent investment	—			—			(55,248		)	—			55,248			—
Repayment of capital lease obligations	—			—			(1,871		)	—			—			(1,871		)
Net cash (used in) provided by financing activities	(55,248		)	6,195			(59,517		)	17,519			28,908			(62,143		)
Effect of exchange rate changes on cash	—			—			—			(346		)	—			(346		)
Net change in cash and cash equivalents	—			—			5,553			9,326			—			14,879
Cash and cash equivalents - beginning of period	—			—			32,942			5,535			—			38,477
Cash and cash equivalents - end of period	$	—		$	—		$	38,495		$	14,861		$	—		$	53,356

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PINNACLE FOODS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(thousands, except share and per share amounts and where noted in millions)

18. Subsequent events

On July 26, 2016, Pinnacle Foods Finance entered into amendments to the Amended Credit Agreement for the purpose of reducing the interest rate applicable to the Tranche I Term Loans (the “Repricing”). The eurocurrency rate was amended from a minimum of 0.75% to a minimum of 0.0% and the interest rate margin was amended from 3.00% to 2.75% . All other terms and conditions of the Tranche I Term Loans remained the same. As a result of the Repricing, the Company expects to benefit from approximately $10.0 million of cash interest savings over the remaining life of the loan. In connection with the Repricing, Pinnacle Foods Finance incurred approximately $1.2 million of fees.

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This report contains “forward-looking statements.” These statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. All statements, other than our financial statements, including the Notes thereto, and statements of historical facts included elsewhere in this Report on Form 10-Q, including statements concerning our plans, objectives, goals, strategies, future events, future revenues or performance, financing needs, plans or intentions relating to acquisitions, business trends and other information referred to under “Management's Discussion and Analysis of Financial Condition and Results of Operations” are forward-looking statements. When used in this report, the words “estimates,” “expects,” “contemplates”, “anticipates,” “projects,” “plans,” “intends,” “believes,” “forecasts,” “may,” “should” and variations of such words or similar expressions are intended to identify forward-looking statements. The forward-looking statements are not historical facts, and are based upon our current expectations, beliefs and projections, and various assumptions, many of which, by their nature, are inherently uncertain and beyond our control. Our expectations, beliefs and projections are expressed in good faith and we believe there is a reasonable basis for them. However, there can be no assurance that management's expectations, beliefs and projections will result or be achieved and actual results may vary materially from what is expressed in or indicated by the forward-looking statements.

There are a number of risks, uncertainties and other important factors that could cause our actual results to differ materially from the forward-looking statements contained in this report. Such risks, uncertainties and other important factors include, among others, the risks, uncertainties and factors set forth in our Form 10-K filed with the SEC on February 25, 2016 under the section entitled “Risk Factors,” the section entitled “Management's Discussion and Analysis of Financial Condition and Results of Operations” in this report and the following risks, uncertainties and factors:


•	competition;


•	our ability to predict, identify, interpret and respond to changes in consumer preferences;


•	the loss of any of our major customers;


•	our reliance on a single source provider for the manufacturing, co-packing and distribution of many of our products;


•	fluctuations in the price and supply of food ingredients, packaging materials and freight;


•	volatility in commodity prices and our failure to mitigate the risks related to commodity price fluctuation and foreign exchange risk through the use of derivative instruments;


•	costs and timeliness of integrating future acquisitions or our failure to realize anticipated cost savings, revenue enhancements or other synergies therefrom;


•	litigation or claims regarding our intellectual property rights or termination of our material licenses;


•	our ability to drive revenue growth in our key product categories or to add products that are in faster growing and more profitable categories;


•	potential product liability claims;


•	seasonality;


•	the funding of our defined benefit pension plan;


•	changes in our collective bargaining agreements or shifts in union policy;


•	changes in the cost of compliance with laws and regulations, including environmental, worker health and workplace safety laws and regulations;


•	our failure to comply with U.S Food & Drug Administration, U.S. Department of Agriculture or Federal Trade Commission regulations and the impact of governmental budget cuts;


•	disruptions in our information technology systems;


•	future impairments of our goodwill and intangible assets;


•	difficulty in the hiring or the retention of key management personnel; and


•	changes in tax statutes, tax rates, or case laws which impact tax positions we have taken.

You should evaluate all forward-looking statements made in this report in the context of these risks and uncertainties.

We caution you that the risks, uncertainties and other factors referenced above may not contain all of the risks, uncertainties and other factors that are important to you. In addition, we cannot assure you that we will realize the results, benefits or developments that we expect or anticipate or, even if substantially realized, that they will result in the consequences or affect us or our business in the way expected. All forward-looking statements in this report apply only as of the date made and are expressly qualified in their entirety by the cautionary statements included in this report. We undertake no obligation to publicly update or revise any forward-looking statements to reflect subsequent events or circumstances.

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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 audited consolidated financial statements appearing in our annual report on Form 10-K filed with the Securities and Exchange Commission (the "SEC") on February 25, 2016 and the unaudited Consolidated Financial Statements and the notes thereto 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 “Risk Factors” section of our Form 10-K, and the section entitled “Special Note Regarding Forward-Looking Statements” in this report. Actual results may differ materially from those contained in any forward-looking statements.

Overview

We are a leading manufacturer, marketer and distributor of high quality, branded food products in North America. The business is comprised of four segments: Birds Eye Frozen, Duncan Hines Grocery, Boulder Brands and 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 ), plant-based protein frozen products ( gardein ), 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 segment. The Company’s baking mixes and frostings ( Duncan Hines ), shelf-stable pickles ( Vlasic ), liquid and dry-mix salad dressings ( Wish-Bone and Western ), table syrups ( Mrs. Butterworth’s and Log Cabin ), canned meat ( Armour , Nalley and Brooks ), pie and pastry fillings ( Duncan Hines Comstock and Wilderness ), barbecue sauces ( Open Pit ) and Canadian operations other than gardein are reported in the Duncan Hines Grocery segment. The Boulder Brands segment is comprised of health and wellness brands including gluten-free products ( Udi's and Glutino) , natural frozen meal offerings ( EVOL) , refrigerated and shelf-stable spreads ( Smart Balance), and plant-based refrigerated and shelf-stable spreads ( Earth Balance ). The Specialty Foods segment consists of snack products ( Tim’s Cascade and Snyder of Berlin ) and the Company’s food service and private label businesses, other than Boulder Brands and gardein .

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. The industry experiences volatility in overall commodity prices from time to time, which has historically been managed by increasing retail prices. However, over the past several years, significant macroeconomic weakness and ongoing pressures on the consumer have resulted in shifting consumer buying patterns for grocery products. As a result, industry volumes have come under pressure, hampering the ability of the industry to pass along higher input costs.

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. In the current economic environment, consumers are looking for value alternatives, which have caused an increase in the percentage of products sold on promotion and a shift from traditional retail grocery to mass merchandisers, club stores and dollar store channels. We believe we are well positioned in grocery and non-traditional channels, maintaining strong customer relationships across key retailers in each segment.

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In order to maintain and grow our business, we must successfully react to, and offer products that respond to, evolving consumer needs, such as changing health trends, the focus on convenience and the growth of smaller households. Incremental growth in the industry is principally driven by product and packaging 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 arrive at 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 introductory (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 vegetables and fruits, proteins, grains and oils, sugars, seafood and other agricultural products, 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 steel, aluminum, glass jars, plastic bottles, corrugated fiberboard, and various poly-films.


•	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 salaries, benefits, utilities and depreciation.


•	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.


•	Brokerage commissions and other overhead expenses .


•	Costs recorded in administrative and research and development expenses in the consolidated statement of operations include:

•

Administrative expenses. These expenses consist of personnel and facility charges and also include third party professional and other services. Our lean, nimble structure and efficient internal processes have enabled us to consistently hold our overhead costs (i.e., selling, general and administrative expenses, excluding one-time items affecting comparability) to approximately 9% of net sales on an annual basis.


•	Research and Development. These expenses consist of personnel and facility charges and include expenditures on new products and the improvement and maintenance of existing products and processes.

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” below. 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.

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Other Factors

Other factors that have influenced our results of operations and may do so in the future include:


•	Interest Expense . Our IPO and debt refinancings have improved our debt profile and significantly reduced our leverage. However, as a result of our previous acquisitions and the recent Boulder transaction, we still have significant indebtedness. Although we expect to continue to reduce our leverage over time, we expect interest expense to continue to be a significant component of our expenses.


•	Cash Taxes . We had significant tax-deductible intangible asset amortization and federal and state NOLs, which resulted in minimal federal and state cash taxes through 2015. Continued amortization and utilization of our remaining NOLs will generate modest annual cash savings for 2016 and thereafter.

•

Acquisitions and Consolidations . We believe we have the expertise to identify and integrate value-enhancing acquisitions to grow our business and we have done so successfully in the past. On November 14, 2014, we acquired Garden Protein for $156.5 million, the rapidly growing manufacturer of the plant-based protein brand gardein . On August 20, 2015 we acquired a manufacturing facility in Hagerstown, Maryland for approximately $8.0 million. The site will be used to expand production capabilities for the gardein brand and provide an East coast footprint to supplement the existing Richmond, British Columbia manufacturing location. We expect to invest approximately $30.0 million for the gardein capacity expansion in 2016. We also expect to incur approximately $7.0 million of additional charges to integrate the location in 2016, of which $1.4 million was incurred in the first half of 2016. As previously mentioned, on January 15, 2016, the Company acquired Boulder Brands for a cost of $1,004.4 million (which included $16.1 million of cash acquired), which included the repayment of debt. Total acquisition and financing costs of $32.9 million have been incurred, of which $2.1 million was incurred in the fourth quarter of 2015, with the remainder in the first quarter of 2016. Included in this total is $24.4 million of debt acquisition costs, including original issue discount. During 2016, we expect one-time costs associated with the integration of Boulder to approximate $30.0 million, of which $22.4 million was incurred in the first half of 2016.

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 fruit fillings tend to be higher around the Easter, Thanksgiving, and Christmas holidays. Since many of the raw materials we process under the Birds Eye , Vlasic, Duncan Hines Comstock and Wilderness 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. Typically, we are a seasonal net user of cash in the third quarter of the calendar year.

Inflation

To the extent possible, we strive to offset the effects of inflation with cost reduction and productivity programs.We expect to spend approximately $2.3 billion annually on Cost of products sold, therefore each 1% change in our weighted average cost of inputs would increase our Cost of products sold by approximately $23 million. If we experience significant inflation, price increases may be necessary in order to preserve our margins and returns. However, over the past several years, significant macroeconomic weakness and ongoing pressures on the consumer have resulted in shifting consumer buying patterns for grocery products. As a result, industry volumes have come under pressure, hampering our ability to pass along higher input costs. Severe increases in inflation could have an adverse impact on our business, financial condition and results of operations.

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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								Six months ended
	June 26, 2016				June 28, 2015				June 26, 2016				June 28, 2015
Net sales	$	756.4	100.0	%	$	631.7	100.0	%	$	1,510.6	100.0	%	$	1,297.0	100.0	%
Cost of products sold	535.2		70.8	%	462.6		73.2	%	1,090.9		72.2	%	956.2		73.7	%
Gross profit	221.2		29.2	%	169.1		26.8	%	419.8		27.8	%	340.8		26.3	%

Marketing and selling expenses	$	61.0	8.1	%	$	45.7	7.2	%	$	119.9	7.9	%	$	92.7	7.1	%
Administrative expenses	43.7		5.8	%	27.7		4.4	%	89.6		5.9	%	55.5		4.3	%
Research and development expenses	5.1		0.7	%	3.6		0.6	%	9.3		0.6	%	6.6		0.5	%
Other expense (income), net	3.6		0.5	%	2.3		0.4	%	12.9		0.9	%	7.7		0.6	%
	$	113.4	15.0	%	$	79.3	12.6	%	$	231.7	15.3	%	$	162.5	12.5	%
Earnings before interest and taxes	$	107.8	14.3	%	$	89.8	14.2	%	$	188.1	12.5	%	$	178.3	13.7	%



	Three months ended						Six months ended
	June 26, 2016			June 28, 2015			June 26, 2016			June 28, 2015
Net sales
Birds Eye Frozen	$	285.2		$	268.9		$	615.2		$	586.7
Duncan Hines Grocery	270.5			278.0			513.7			539.2
North America Retail	555.6			546.9			1,128.8			1,125.9

Boulder Brands	122.6			—			223.5			—
Specialty Foods	78.1			84.9			158.4			171.1
Total	$	756.4		$	631.7		$	1,510.6		$	1,297.0

Earnings (loss) before interest and taxes
Birds Eye Frozen	$	46.8		$	38.0		$	102.0		$	81.3
Duncan Hines Grocery	52.3			51.0			94.9			94.2
Boulder Brands	7.0			—			(4.2		)	—
Specialty Foods	6.3			7.6			13.3			15.3
Unallocated corporate expense	(4.6		)	(6.8		)	(17.9		)	(12.5		)
Total	$	107.8		$	89.8		$	188.1		$	178.3

Depreciation and amortization
Birds Eye Frozen	$	10.9		$	10.7		$	22.0		$	21.4
Duncan Hines Grocery	7.8			8.1			15.2			15.1
Boulder Brands	4.7			—			7.7			—
Specialty Foods	3.4			3.5			6.8			6.7
Total	$	26.8		$	22.3		$	51.7		$	43.2

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Adjustments to Earnings before Interest and Taxes used in the calculation of Adjusted EBITDA as described below in the "Covenant Compliance" section, by Segment, are as follows:



	Three months ended						Six months ended
	June 26, 2016			June 28, 2015			June 26, 2016			June 28, 2015
Adjustments to Earnings before interest and taxes
Birds Eye Frozen	$	(1.4	)	$	(1.5	)	$	(3.3	)	$	2.0
Duncan Hines Grocery	(1.6		)	(1.0		)	(3.2		)	2.4
Boulder Brands	10.2			—			33.6			—
Specialty Foods	(0.2		)	(0.3		)	(0.4		)	(0.2		)
Unallocated corporate expense	—			—			6.8			—

Three months ended June 26, 2016 compared to the three months ended June 28, 2015

Net sales

Net sales for the three months ended June 26, 2016 increased $124.6 million , or 19.7% , versus year-ago to $756.4 million , reflecting a 19.4% increase from the benefit of the Boulder acquisition and higher net price realization of 1.3%, partially offset by a 0.9% decrease from volume/mix and unfavorable foreign currency translation of 0.1%.

Net sales in our North America Retail business for the three months ended June 26, 2016 increased $8.8 million , or 1.6% , versus year-ago to $555.6 million , reflecting a 1.4% increase from higher net price realization and a 0.3% increase due to volume/mix, partially offset by unfavorable foreign currency translation of 0.1%. Our North American Retail business continued to outpace the performance of our composite categories, with market share growth of 0.7 percentage points in the quarter.

Birds Eye Frozen Segment:

Net sales in the three months ended June 26, 2016 increased $16.3 million , or 6.1% , versus year-ago to $285.2 million , reflecting a 3.6% increase from volume/mix and higher net price realization of 2.5%, despite higher new product introductory expenses. During the period we realized continued strong sales from the Birds Eye franchise and our gardein plant-based protein products. Recent innovation and strength of existing products continue to fuel the growth of the Birds Eye franchise. Also positively impacting net sales for the period were higher sales of Hungry-Man products.

Duncan Hines Grocery Segment:

Net sales in the three months ended June 26, 2016 were $270.5 million , a decline of $7.5 million , or 2.7% versus year-ago, reflecting a 2.9% decrease from volume/mix and unfavorable foreign currency translation of 0.3%, partially offset by higher net price realization of 0.5%. The period benefited from higher sales of our Armour canned meats. This increase was more than offset by lower net sales of our Wish-Bone products, pressured by ongoing category weakness and new product introductory expenses related to our Wish-Bone EVOO and Wish-Bone Ristorante Italiano product lines. Also impacting the period was a decline in our Canadian business, primarily due to lower volumes and the unfavorable impact from foreign exchange.

Boulder Brands Segment:

Net sales in the three months ended June 26, 2016 were $122.6 million . Retail consumption since the acquisition has advanced for the Glutino , Udi's , Earth Balance and EVOL brands, offset by a moderating decline for Smart Balance .

Specialty Foods Segment:

Net sales in the three months ended June 26, 2016 were $78.1 million , a decline of $6.7 million , or 7.9% versus year-ago, reflecting an 8.2% decrease from volume/mix, offset partially by higher net pricing of 0.3%. This decrease was primarily driven by lower sales of private label canned meat.

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Gross profit

Gross profit for the three months ended June 26, 2016 was $221.2 million , or 29.2% of net sales, compared to $169.1 million , or 26.8% of net sales, in the comparable prior year period. Impacting gross profit in the second quarter of 2016 were lower expenses related to acquisition integrations and lower mark to market gains on financial instruments. Excluding these and other items affecting comparability, Adjusted gross profit advanced 31.4% and Adjusted gross profit percentage increased approximately 260 basis points to 28.9%, primarily reflecting strong productivity, favorable product mix, including the benefit of Boulder, and higher net price realization. Partially offsetting these positive drivers were modest inflation and higher depreciation expense.

The following table outlines the factors resulting in the year on year change in gross profit and gross margin percentage in the three months ended June 26, 2016 .



	$ (in millions)			% Net sales
Productivity	$	17.0		2.1	%
Favorable product mix (including Boulder)	8.7			0.9
Higher net price realization, net of slotting	7.4			0.7
Inflation	(6.0		)	(0.8	)
Higher depreciation expense	(0.6		)	(0.1	)
Lower mark to market gains on financial instruments	(0.9		)	(0.1	)
Other (a)	(3.1		)	(0.2	)
Subtotal	$	22.5		2.5	%
Higher sales volume (including Boulder Brands)	29.6
Total	$	52.1

(a) Consists primarily of higher finished product and packaging obsolescence and the unfavorable impact of currency.

Marketing and selling expenses

Marketing and selling expenses increased 33.6% to $61.0 million , or 8.1% of net sales, for the three months ended June 26, 2016 , compared to $45.7 million , or 7.2% of net sales for the prior year period. The increase primarily reflected a double digit increase in marketing investment on the base business and the inclusion of Boulder.

Administrative expenses

Administrative expenses were $43.7 million , or 5.8% of net sales, for the three months ended June 26, 2016 , compared to $27.7 million , or 4.4% of net sales, for the comparable prior year period. The increase was primarily driven by the addition of Boulder, which included $6.1 million of restructuring costs in the current quarter.

Research and development expenses

Research and development expenses were $5.1 million , or 0.7% of net sales, for the three months ended June 26, 2016 compared to $3.6 million , or 0.6% of net sales, for the prior year period primarily reflecting higher expenses as a result of the Boulder acquisition.

Other income and expense



	Three months ended
	June 26, 2016			June 28, 2015
Other expense (income), net consists of:
Amortization of intangibles/other assets	$	4.3		$	3.4
Foreign exchange gains	(0.5		)	(0.7		)
Royalty income and other	(0.2		)	(0.4		)
Total other expense (income), net	$	3.6		$	2.3

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Foreign exchange gains . Represents foreign exchange gains from intra-entity loans resulting from the November 2014 Garden Protein acquisition that are anticipated to be settled in the foreseeable future.

Earnings before interest and taxes

Earnings before interest and taxes increased $18.0 million , or 20.0% , to $107.8 million . Items affecting comparability in the three months ended June 26, 2016 and June 28, 2015, were $7.0 million of charges and $2.8 million of credits, respectively. The variance in these items primarily resulted from higher restructuring and integration costs resulting from the Boulder acquisition and lower unrealized mark to market gains on financial instruments. Excluding items affecting comparability, Adjusted earnings before interest and taxes increased $27.8 million, or 31.9%, reflecting the growth in gross profit, partially offset by higher marketing and selling driven by a double digit increase in marketing investment, and higher administrative expenses primarily due to the inclusion of Boulder Brands.

Birds Eye Frozen Segment:

Earnings before interest and taxes for the three months ended June 26, 2016 increased 23.2% , or $8.8 million , versus year-ago to $46.8 million for the three months ended June 26, 2016 . Excluding items affecting comparability, Adjusted earnings before interest and taxes advanced 24.5% to $45.4 million, reflecting the benefits of net sales growth and productivity savings, partially offset by very modest input cost inflation and increased investment in consumer marketing.

Duncan Hines Grocery Segment:

Earnings before interest and taxes for the three months ended June 26, 2016 were $52.3 million , an increase of 2.4% , or $1.2 million , as compared to the year-ago period. Excluding items affecting comparability, Adjusted earnings before interest and taxes advanced 1.2% to $50.7 million, reflecting productivity savings partially offset by lower volumes and modest input cost inflation.

Boulder Brands Segment:

Earnings before interest and taxes for the three months ended June 26, 2016 were $7.0 million , reflecting significant restructuring expenses. Excluding items affecting comparability, Adjusted earnings before interest and taxes for the Boulder Brands segment totaled $17.2 million.

Specialty Foods Segment:

Earnings before interest and taxes for the three months ended June 26, 2016 were $6.3 million , a decline of 16.7% , or $1.3 million , as compared to the year-ago period. Excluding items affecting comparability, Adjusted earnings before interest and taxes decreased 15.7%, to $6.1 million, largely reflecting the decline in net sales.

Unallocated corporate expense:

Unallocated corporate expense for the three months ended June 26, 2016 was $4.6 million , a decline of $2.2 million , as compared to the year-ago period. The decline primarily reflected lower equity based compensation expense driven by the change in CEO.

Interest expense, net

Net interest expense increased 59.9% , or $13.3 million , to $35.5 million in the three months ended June 26, 2016 , compared to $22.2 million in the three months ended June 28, 2015 . The increase was largely driven by additional debt issued to finance the Boulder acquisition and, to a lesser extent, the impact of higher interest expense for floating rate debt. Also impacting the comparison were higher interest rate swap losses described below.

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 AOCL portion, are recorded as an adjustment to interest expense. Included in net interest expense was $2.2 million and $1.0 million for the second quarters of 2016 and 2015, respectively, recorded from losses on interest rate swap agreements.

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Provision for income taxes

The effective tax rate was 36.7% for the three months ended June 26, 2016 compared to 35.4% for the three months ended June 28, 2015.

Our effective rate for the three months ended June 26, 2016 increased by 1.4% compared to the three months ended June 28, 2015 due to certain non-deductible acquisition and compensation expenditures incurred in connection with our acquisition of Boulder. This increase was partially offset by an incremental benefit of 0.8% from our domestic production activities deduction as compared to the three months ended June 28, 2015. Our effective rate for the three months ended June 28, 2015 also included a benefit of 0.8% for enacted state law changes.

The Company is a loss corporation as defined by Section 382 of the Code. Section 382 places an annual limitation on our ability to use our NOL carryovers and other attributes to reduce future taxable income. As of June 26, 2016, we have federal NOL carryovers of $439.4 million subject to an annual limitation of $17.1 million. As a result, $237.2 million of the carryovers exceed the estimated available Section 382 limitation. The Company has reduced its deferred tax assets for this limitation.

We have significant tax-deductible intangible asset amortization and federal and state NOLs, which resulted in minimal federal and state cash taxes through 2015. We expect continued amortization and utilization of our NOLs will generate modest annual cash tax savings in 2016 and thereafter.

Six months ended June 26, 2016 compared to the six months ended June 28, 2015

Net sales

Net sales for the six months ended June 26, 2016 increased $213.6 million , or 16.5% , versus year-ago to $1.51 billion , reflecting a 17.2% increase from the benefit of the Boulder acquisition and higher net price realization of 0.8% partially offset by a 1.3% decrease from volume/mix. The period also was impacted by unfavorable foreign currency translation of 0.2%.

Net sales in our North American retail business for the six months ended June 26, 2016 increased 0.3% versus year-ago to $1.13 billion , reflecting higher net price realization of 0.8%, offset by a 0.4% decrease from volume/mix. Also impacting the comparison was unfavorable foreign currency translation of 0.1%. We continued to outpace the performance of our composite categories, with market share growth in the six months of 0.8 percentage points.

Birds Eye Frozen Segment:

Net sales in the six months ended June 26, 2016 increased 4.8% versus year-ago to $615.2 million , reflecting a 3.5% increase from volume/mix and higher net price realization of 1.4%. Also impacting the comparison was unfavorable foreign currency translation of 0.1%. During the period we realized continued strong sales from the Birds Eye franchise, our gardein plant-based protein products and our Hungry-Man frozen entrées. Products launched in 2015 such as Birds Eye Steamfresh Flavor Full, BirdsEye Protein Blends and Birds Eye Disney-themed side dishes for kids, fueled the growth of Birds Eye vegetables, while distribution gains and the expansion of Family Size offerings and premium tier varieties drove the growth of Birds Eye Voila! . Partially offsetting these positive drivers were lower sales of our Seafood business, driven by category weakness, and lower sales of our Aunt-Jemima products.

Duncan Hines Grocery Segment:

Net sales in the six months ended June 26, 2016 were $513.7 million , a decline of 4.7% , reflecting higher net price realization of 0.2% more than offset by a 4.6% decrease from volume/mix and unfavorable foreign currency translation of 0.3%. Impacting the period were lower sales of our Duncan Hines baking products due to category weakness, lower sales of Wish-Bone products, reflecting a highly competitive category environment and new product introductory expenses from the launch of our two new product lines, Wish-Bone EVOO and Wish-Bone Ristorante Italiano dressing. Also impacting the period was lower net sales from our Canadian operations, including the unfavorable impact from foreign exchange.

Boulder Brands Segment:

Net sales in the six months ended June 26, 2016 were $223.5 million , representing the January 15, 2016 to June 26, 2016 time period in which Boulder Brands was consolidated.

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Specialty Foods Segment:

Net sales in the six months ended June 26, 2016 decreased 7.4% versus year-ago to $158.4 million , reflecting a 7.2% decline from volume/mix and lower net pricing of 0.2%. This decline was primarily driven by decreased sales of private label canned meat.

Gross profit

Gross profit for the six months ended June 26, 2016 was $419.8 million , or 27.8% of net sales, compared to $340.8 million , or 26.3% of net sales, in the comparable prior year period. Impacting gross profit in the six months ended June 26, 2016 were expenses related to the write-up to fair market value of inventories acquired as a result of the Boulder acquisition and higher mark to market gains on financial instruments. Excluding these and other items affecting comparability, Adjusted gross profit advanced 24.3% and gross profit percentage increased 180 basis points to 28.1%. The increased margin largely reflected strong productivity, favorable product mix and the benefits of higher net price realization partially offset by the impacts of input cost inflation, higher depreciation and other items.

The following table outlines the factors resulting in the year on year change in gross profit and gross margin percentage in the six months ended June 26, 2016 .



	$ (in millions)			% Net sales
Productivity	$	31.0		2.0	%
Favorable product mix (Including Boulder)	13.7			0.8
Higher net price realization, net of slotting	8.2			0.4
Higher mark-to-market gains on financial instruments	2.9			0.2
Inflation	(14.0		)	(0.9	)
Effects of adjustments related to the application of purchase accounting (a)	(10.4		)	(0.7	)
Higher depreciation expense (b)	(2.2		)	(0.1	)
Other (c)	(3.0		)	(0.2	)
Subtotal	$	26.2		1.5	%
Higher sales volume	52.7
Total	$	78.9

(a) Represents expense related to the write-up to fair market value of inventories acquired as a result of the Boulder acquisition.

(b) The increase primarily relates to the insourcing of the manufacturing of Wish-Bone into our St. Elmo, Illinois location.

Marketing and selling expenses

Marketing and selling expenses were $119.9 million , or 7.9% of net sales, for the six months ended June 26, 2016 , compared to $92.7 million , or 7.1% of net sales, for the comparable prior year period. The increase primarily reflected the impact of the Boulder acquisition and an increase in marketing investment, including new product introductions.

Administrative expenses

Administrative expenses were $89.6 million , or 5.9% of net sales, for the six months ended June 26, 2016 , compared to $55.5 million , or 4.3% of net sales, for the comparable prior year period. The increase was primarily driven by the addition of Boulder, which included $16.7 million of restructuring costs in the current period.

Research and development expenses:

Research and development expenses were $9.3 million , or 0.6% of net sales, for the six months ended June 26, 2016 compared to $6.6 million , or 0.5% of net sales, for the comparable prior year period. The increase primarily reflected higher expenses as a result of the Boulder acquisition and innovation related expenses.

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Other income and expense



	Six months ended
	June 26, 2016			June 28, 2015
Other expense (income), net consists of:
Amortization of intangibles/other assets	$	8.4		$	6.8
Foreign exchange losses	(1.3		)	1.6
Boulder acquisition costs	6.8			—
Royalty income and other	(1.0		)	(0.6		)
Total other expense (income), net	$	12.9		$	7.7

Foreign exchange losses . Represents foreign exchange losses from intra-entity loans resulting from the Garden Protein acquisition that are anticipated to be settled in the foreseeable future.

Earnings before interest and taxes

Earnings before interest and taxes for the six months ended June 26, 2016 increased $9.8 million , or 5.5% , versus year-ago to $188.1 million . Items affecting comparability in the six months ended June 26, 2016 and June 28, 2015 were $33.5 million and $4.2 million of charges, respectively. The variance in these items was largely driven by acquisition related expenses in the current period. Excluding these items, Adjusted earnings before interest and taxes increased $39.1 million, or 21.4%, primarily resulting from increased gross profit, partially offset by higher marketing and selling and administrative expenses due to the consolidation of the Boulder acquisition.

Birds Eye Frozen Segment:

Earnings before interest and taxes for the six months ended June 26, 2016 were $102.0 million , an increase of $20.8 million , or 25.6% , as compared to the year-ago period. Excluding items affecting comparability, Adjusted earnings before interest and taxes increased $15.5 million, or 18.7%, largely reflecting increased gross profit driven by the benefit of net sales growth and productivity savings, partially offset by input cost inflation.

Duncan Hines Grocery Segment:

Earnings before interest and taxes for the six months ended June 26, 2016 were $94.9 million , an increase of $0.6 million , or 0.6% , as compared to the year-ago period. Excluding items affecting comparability, Adjusted earnings before interest and taxes declined $4.9 million, or 5.1%, largely reflecting lower volume, higher new product introductory expenses, higher depreciation expenses and input cost inflation, partially offset by productivity savings.

Boulder Brands Segment:

Loss before interest and taxes was $4.2 million , reflecting significant acquisition related expenses. Excluding items affecting comparability, Adjusted earnings before interest and taxes for the Boulder Brands segment totaled $29.4 million.

Specialty Foods Segment:

Earnings before interest and taxes for the six months ended June 26, 2016 were $13.3 million , a decline of $2.0 million , or 13.4% , versus year-ago. Excluding items affecting comparability, Adjusted earnings before interest and taxes decreased $2.3 million or 15.2%, largely reflecting the decline in net sales and unfavorable product mix.

Unallocated corporate expense:

Unallocated corporate expense for the six months ended June 26, 2016 was $17.9 million , as compared to $12.5 million in the year ago period. The increase primarily reflected the impact of the Boulder acquisition costs and lower equity based compensation expense driven by the change in CEO.

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Interest expense, net

Net interest expense increased 53.5% , or $23.4 million , to $67.0 million in the six months ended June 26, 2016 from $43.7 million in the nine months ended June 28, 2015 . The increase was largely driven by additional debt issued to finance the Boulder acquisition and, to a lesser extent, the impact of higher interest expense for floating rate debt. Also impacting the comparison were higher interest rate swap losses described below.

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 AOCL portion, are recorded as an adjustment to interest expense. Included in net interest expense was $3.7 million and $1.4 million for the first six months of 2016 and 2015, respectively, recorded from losses on interest rate swap agreements.

Provision for income taxes

The effective tax rate was 41.7% for the six months ended June 26, 2016 compared to 36.7% for the six months ended June 28, 2015.

In connection with our acquisition of Boulder Brands, Inc., our effective income tax rate for the six months ended June 26, 2016 was increased by approximately 5.0% due to the tax effect of certain non-deductible acquisition costs and compensation payments, a charge for an increase in our non-current state deferred income tax liability balance and a charge related to the tax effect of foreign operations, principally attributable to a valuation allowance on our foreign tax credit carryforward. Our income tax rate for the six months ended June 26, 2016 and June 28, 2015 also reflects the benefit of the domestic production activities deduction and tax credits. For the six months ended June 28, 2015, it was also reduced by the effect of enacted state tax legislation.

The Company is a loss corporation as defined by Section 382 of the Code. Section 382 places an annual limitation on our ability to use our NOL carryovers and other attributes to reduce future taxable income. As of June 26, 2016, we have NOL carryovers of $439.4 million subject to an annual limitation of $17.1 million. As a result, $237.2 million of the carryovers exceed the estimated available Section 382 limitation. The Company has reduced its deferred tax assets for this limitation.

Liquidity and Capital Resources

Historical

Our cash flows are 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, debt service and our quarterly dividend program. Currently, the quarterly payment is $0.255 per share, or approximately $30 million per quarter. Capital expenditures are expected to be approximately $115 to $125 million in 2016, including Boulder. We have historically satisfied our liquidity requirements with internally generated cash flows and availability under our revolving credit facility. We expect that our ability to generate cash from our operations and ability to borrow from our credit facilities should be sufficient to support working capital needs, planned growth, capital expenditures, debt service and dividends for the next 12 months and for the foreseeable future. We have cash in foreign accounts, primarily related to the operations of our Canadian businesses. 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 six months ended June 26, 2016 compared to the six months ended June 28, 2015

For the six months ended June 26, 2016 , net cash flow decreased $51.2 million compared to an increase in net cash flow of $14.9 million for the six months ended June 28, 2015 .

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Net cash provided by operating activities was $165.1 million for the six months ended June 26, 2016 , and was the result of net earnings, excluding non-cash charges and credits, of $135.6 million and a decrease in working capital of $29.5 million . The decrease in working capital was primarily the result of a $28.4 million decrease in inventories resulting from the sell-down of the seasonal build from December 2015, an $8.5 million decrease in other current assets primarily from lower prepaid tax balances,

a $3.0 million increase in accrued liabilities, primarily attributable to higher interest and restructuring accruals and a $2.1 million increase in accounts payable resulting from seasonality and timing of disbursements. These were partially offset by a $7.6 million increase in accounts receivable primarily due to an increase in days sales outstanding and a $4.9 million decrease in accrued trade marketing driven by the seasonality of our marketing programs.

Net cash provided by operating activities was $124.4 million for the six months ended June 28, 2015, and was the result of net earnings, excluding non-cash charges and credits, of $166.4 million and an increase in working capital of $41.9 million. The increase in working capital was primarily the result of a $5.8 million decrease in accrued liabilities, primarily attributable to payment of the 2014 annual bonus, a $15.0 million decrease in accounts payable resulting from seasonal timing, a $9.7 million increase in inventories resulting from agricultural seasonal build that is expected to normalize by year end, a $4.7 million decrease in accrued trade marketing expense and a $4.5 million increase in accounts receivable driven by the timing of sales. The aging profile of accounts receivable has not changed significantly from December 2014. All other working capital accounts generated a net $2.3 million cash inflow.

Net cash used in investing activities was $1,045.6 million , for the six months ended June 26, 2016 and included $985.4 million for the acquisition of Boulder as well as $60.2 million for capital expenditures.

Net cash used in investing activities was $47.1 million, for the six months ended June 28, 2015 and included $48.2 million capital expenditures as well as $1.1 million of cash inflows from a Garden Protein acquisition post closing working capital adjustment. Capital expenditures during the first six months of 2015 included approximately $8.4 million of costs related to acquisition integration projects.

Net cash provided by financing activities for the six months ended June 26, 2016 was $828.9 million and consisted of $547.3 million of net proceeds from our new Tranche I Term Loans, $350.0 million from our notes offering and $20.9 million of net cash inflows related to our equity based compensation plans which were partially offset by $59.5 million of dividends paid, $21.3 million of debt acquisition costs, $6.5 million of debt repayments, $2.0 million of net cash outflows for capital leases and notes payable activity.

Net cash used by financing activities for the six months ended June 28, 2015 was $62.1 million and consisted of $54.7 million of dividends paid, $6.9 million of debt repayments and $0.5 million of net cash outflows related to our equity based compensation plans.

Debt

For more information on our debt, see Note 10 of the Consolidated Financial Statements "Debt and Interest Expense".

On July 26, Pinnacle Foods Finance completed the Repricing. See Note 18 of the Consolidated Financial Statements “Subsequent Events”.

Covenant Compliance

The following is a discussion of the financial covenants contained in our debt agreements.

Amended Credit Agreement

Our Amended Credit Agreement 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;

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•	make investments, loans and advances, including acquisitions; and


•	engage in certain transactions with affiliates.

The Amended Credit Agreement also contains certain customary affirmative covenants and events of default.

5.875% Senior Notes and 4.875% Senior Notes

In April 2013, we issued the 4.875% Senior Notes. In January 2016, we issued the 5.875% Senior Notes. We refer to the 4.875% Notes and the 5.875% Notes as the "Senior Notes". The Senior Notes are general senior unsecured obligations, effectively subordinated to all of our existing and future secured indebtedness to the extent of the value of the assets securing that indebtedness, and guaranteed on a full, unconditional, joint and several basis by the Company and Pinnacle Foods Finance's wholly-owned domestic subsidiaries that guarantee our other indebtedness.

The indentures governing the Senior Notes limits our (and our restricted 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 indenture governing the Senior Notes permits us and our restricted subsidiaries to incur additional indebtedness, including secured indebtedness.

Non-GAAP Financial Measures

Pinnacle uses the following non-GAAP financial measures as defined by the Securities and Exchange Commission in its financial communications. These non-GAAP financial measures should be considered as supplements to the GAAP reported measures, should not be considered replacements for, or superior to, the GAAP measures and may not be comparable to similarly named measures used by other companies.


•	Adjusted gross profit


•	Adjusted gross profit as a % of sales


•	Adjusted EBITDA


•	Adjusted Earnings before Interest and Taxes (Adjusted EBIT)

Adjusted gross profit

Pinnacle defines Adjusted gross profit as gross profit before accelerated depreciation related to restructuring activities, certain non-cash items, acquisition, merger and other restructuring charges and other adjustments. The Company believes that the presentation of Adjusted gross profit is useful to investors in the evaluation of the operating performance of companies in similar industries. The Company believes this measure is useful to investors because it increases transparency and assists investors in understanding the underlying performance of the Company and in the analysis of ongoing operating trends. In addition, Adjusted gross profit is one of the components used to evaluate the performance of Company’s management. Such targets include, but are not limited to, measurement of sales efficiency, productivity measures and recognition of acquisition synergies.

Adjusted EBITDA

Pinnacle defines Adjusted EBITDA as earnings before interest expense, taxes, depreciation and amortization (“EBITDA”), further adjusted to exclude certain non-cash items, non-recurring items and certain other adjustment items permitted in calculating Covenant Compliance EBITDA under the Senior Secured Credit Facility and the indentures governing the Senior Notes. Adjusted EBITDA does not include adjustments for equity-based compensation and certain other adjustments related to acquisitions, both of which are permitted in calculating Covenant Compliance EBITDA.

Management uses Adjusted EBITDA as a key metric in the evaluation of underlying Company performance, in making financial, operating and planning decisions and, in part, in the determination of cash bonuses for its executive officers and employees. The Company believes this measure is useful to investors because it increases transparency and assists investors in understanding the underlying performance of the Company and in the analysis of ongoing operating trends. Additionally, Pinnacle believes the

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presentation of Adjusted EBITDA provides investors with useful information, as it is an important component in measuring covenant compliance in accordance with the financial covenants and determining our ability to service debt and meet any payment obligations. In addition, Pinnacle believes that Adjusted EBITDA is frequently used by analysts, investors and other interested parties in their evaluation of companies, many of which present an Adjusted EBITDA measure when reporting their results. The Company has historically reported Adjusted EBITDA to analysts and investors and believes that its continued inclusion provides consistency in financial reporting and enables analysts and investors to perform meaningful comparisons of past, present and future operating results.

Adjusted EBITDA should not be considered as an alternative to operating or net earnings (loss), determined in accordance with GAAP, as an indicator of the Company’s operating performance, as an alternative to cash flows from operating activities, determined in accordance with GAAP, as an indicator of cash flows, or as a measure of liquidity.

Adjusted Earnings before Interest and Taxes (Adjusted EBIT)

Adjusted earnings before interest and taxes is provided because Pinnacle believes it is useful information in understanding our EBIT results by improving the comparability of year-to-year results. Additionally, Adjusted EBIT provides transparent and useful information to management, investors, analysts and other parties in evaluating and assessing the Company and its segments, primary operating results from period to period after removing the impact of unusual, non-operational or restructuring-related activities that affect comparability. Adjusted EBIT is one of the measures management uses for planning and budgeting, monitoring and evaluating financial and operating results and in the analysis of ongoing operating trends.

Covenant Compliance EBITDA

Covenant Compliance EBITDA is defined as earnings before interest expense, taxes, depreciation and amortization, further adjusted to exclude non-cash items, extraordinary, unusual or non-recurring items and other adjustment items permitted in calculating Covenant Compliance EBITDA under the Amended Credit Agreement and the indenture governing the Senior Notes. We believe that the inclusion of supplementary adjustments to EBITDA applied in presenting Covenant Compliance EBITDA is appropriate to provide additional information to investors to demonstrate compliance with our financial covenants.

EBITDA, Adjusted EBITDA and Covenant Compliance EBITDA do not represent net earnings or (loss) or cash flow from operations as those terms are defined by 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 Pinnacle 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 may recur, vary greatly and are difficult to predict. While EBITDA, Adjusted EBITDA and Covenant Compliance 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.

Pursuant to the terms of the Amended Credit Agreement, Pinnacle Foods Finance is required to maintain a ratio of Net First Lien Secured Debt to Covenant Compliance EBITDA of no greater than 5.75 to 1.00. Net First Lien Secured Debt is defined as Pinnacle Foods Finance's aggregate consolidated secured indebtedness secured on a first lien basis, less the aggregate amount of all unrestricted cash and cash equivalents.

In addition, under the Amended Credit Agreement and the indenture governing the Senior 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 (which is currently the same as the ratio of Net First Lien Secured Debt to Covenant Compliance EBITDA described above), in the case of the Amended Credit Agreement, or to the ratio of Covenant Compliance EBITDA to fixed charges for the most recently concluded four consecutive fiscal quarters, in the case of the Senior Notes. We believe that these covenants are material terms of these agreements and that information about the covenants is material to an investor's understanding our financial performance. As of June 26, 2016 , we were in compliance with all covenants and other obligations under the Amended Credit Agreement and the indentures governing the Senior Notes.

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 Amended Credit Agreement and the indentures governing the Senior Notes, at which time the lenders could elect to declare all amounts outstanding under the Amended Credit Agreement to be immediately due and payable. Any such acceleration would also result in a default under the indentures governing the Senior Notes.

The following table provides a reconciliation from our net earnings to EBITDA, Adjusted EBITDA and Covenant Compliance EBITDA for the three and six months ended June 26, 2016 and June 28, 2015 , and the fiscal year ended December 27, 2015 .

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The terms and related calculations are defined in the Amended Credit Agreement and the indentures governing the Senior Notes.



(thousands of dollars)	Three months ended						Six months ended					Fiscal Year Ended
	June 26, 2016			June 28, 2015			June 26, 2016		June 28, 2015			December 27, 2015
Net earnings	$	45,783		$	43,679		$	70,620	$	85,215		$	212,508
Interest expense, net	35,461			22,175			67,024		43,650			88,315
Income tax expense	26,542			23,961			50,423		49,419			123,879
Depreciation and amortization expense	26,754			22,290			51,672		43,157			89,660
EBITDA	$	134,540		$	112,105		$	239,739	$	221,441		$	514,362
Non-cash items (a)	(4,100		)	(5,200		)	1,606		(1,465		)	4,315
Acquisition, merger and other restructuring charges (b)	11,108			2,388			31,887		5,657			12,926
Adjusted EBITDA	$	141,548		$	109,293		$	273,232	$	225,633		$	531,603
Wish-Bone, Garden Protein and Boulder acquisition adjustments (1)	(2,168		)	8,859			28,055		17,723			60,533
Non-cash equity-based compensation charges (2)	1,222			4,593			5,131		6,495			13,555
Covenant Compliance EBITDA	$	140,602		$	122,745		$	306,418	$	249,851		$	605,691
Last twelve months Covenant Compliance EBITDA							$	662,258

(1)

For the three and six months ended June 26, 2016 and fiscal 2015, represents proforma additional EBITDA from Boulder for the period prior to the acquisition and net cost savings projected to be realized from acquisition synergies from the Boulder, Garden Protein and Wish-Bone acquisitions, calculated consistent with the definition of Covenant Compliance EBITDA. For the three and six months ended June 28, 2015 , represents the net cost savings projected to be realized from acquisition synergies from both the Garden Protein and Wish-Bone acquisitions, calculated consistent with the definition of Covenant Compliance EBITDA.


(2)	Represents non-cash compensation charges related to the granting of equity awards that occur in the normal course of business. Awards that were issued as a result of the termination of the Hillshire merger agreement are being treated as an adjustment in the determination of Adjusted EBITDA. See Non-cash items below for details.


(a)	Non-cash items are comprised of the following:



(thousands of dollars)	Three months ended						Six months ended						Fiscal Year Ended
	June 26, 2016			June 28, 2015			June 26, 2016			June 28, 2015			December 27, 2015
Unrealized gains resulting from hedging activities (1)	$	(3,601	)	$	(4,500	)	$	(7,493	)	$	(4,610	)	$	(1,983	)
Effects of adjustments related to the application of purchase accounting (2)	—			—			10,382			—			—
Non-cash compensation charges (3)	—			—			—			1,567			1,567
Foreign exchange (gains) losses (4)	(499		)	(700		)	(1,283		)	1,578			4,731
Total non-cash items	$	(4,100	)	$	(5,200	)	$	1,606		$	(1,465	)	$	4,315

_________________


(1)	Represents non-cash gains resulting from mark-to-market adjustments of obligations under derivative contracts.


(2)	For the six months ended June 26, 2016 , represents expense related to the write-up to fair market value of inventories acquired as a result of the Boulder acquisition.


(3)	For the six months ended June 28, 2015 , represents non-cash employee incentives and retention charges resulting from the termination of the Hillshire merger agreement.


(4)	Represents foreign exchange (gains) losses resulting from intra-entity loans that are anticipated to be settled in the foreseeable future.

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(b)	Acquisition, merger and other restructuring charges are comprised of the following:



(thousands of dollars)	Three months ended				Six months ended				Fiscal Year Ended
	June 26, 2016		June 28, 2015		June 26, 2016		June 28, 2015		December 27, 2015
Expenses in connection with an acquisition or other non-recurring merger costs (1)	$	—	$	362	$	6,781	$	1,128	$	2,735
Restructuring charges, integration costs and other business optimization expenses (2)	11,108		2,026		25,106		4,529		9,504
Employee severance (3)	—		—		—		—		687
Total acquisition, merger and other restructuring charges	$	11,108	$	2,388	$	31,887	$	5,657	$	12,926

_________________


(1)	For the six months ended June 26, 2016 , represents Boulder acquisition costs. For the three and six months ended June 28, 2015 , represents expenses related to the secondary offerings of common stock. For fiscal 2015, represents Boulder acquisition costs and expenses related to the secondary offerings of common stock.


(2)	For the three and six months ended June 26, 2016 , primarily represents restructuring charges and integration costs of the Boulder and Garden Protein acquisitions. For the three and six months June 28, 2015 and fiscal 2015, primarily represents integration costs of the Garden Protein and Wish-Bone acquisitions.


(3)	Represents severance costs not related to business acquisitions paid, or to be paid, to terminated employees.

_________________

Our covenant requirements and actual ratios for the twelve months ended June 26, 2016 are as follows:



	Covenant Requirement	Actual Ratio
Amended Credit Agreement
Net First Lien Leverage Ratio (1)	5.75 to 1.00	3.57
Total Leverage Ratio (2)	Not applicable	4.64
Senior Notes (3)
Minimum Covenant Compliance EBITDA to fixed charges ratio required to incur additional debt pursuant to ratio provisions (4)	2.00 to 1.00	6.30

_________________

(1)

Pursuant to the terms of the Amended Credit Agreement, Pinnacle Foods Finance is required to maintain a ratio of Net First Lien Secured Debt to Covenant Compliance EBITDA of no greater than 5.75 to 1.00. Net First Lien Secured Debt is defined as Pinnacle Foods Finance's aggregate consolidated secured indebtedness secured on a first lien priority basis, 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 margin rate under the Amended Credit Agreement. As of June 26, 2016 , our total net leverage ratio was greater than 4.25:1.0, which results in an additional 25 basis point margin on existing term loans under the Amended Credit Agreement. The Total Leverage Ratio is calculated by dividing consolidated total debt less the aggregate amount of all unrestricted cash and cash equivalents by Covenant Compliance EBITDA.


(3)	Our ability to incur additional debt and make certain restricted payments under the indentures governing the Senior Notes, subject to specified exceptions, is tied to a Covenant Compliance EBITDA to fixed charges ratio of at least 2.00 to 1.00.


(4)	Fixed charges is defined in the indenture governing the Senior 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.

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Pinnacle Foods Inc.

Reconciliation of Non-GAAP measures (Unaudited)

Adjusted gross profit and Adjusted gross profit as a % of sales

(thousands)



	Three months ended						Six months ended						Fiscal Year Ended
	June 26, 2016			June 28, 2015			June 26, 2016			June 28, 2015			December 27, 2015
Gross profit	$	221,192		$	169,109		$	419,759		$	340,826		$	740,506
Accelerated depreciation expense (a)	—			—			—			—			1,131
Non-cash items (b)	(3,601		)	(4,500		)	2,889			(3,656		)	(1,029		)
Acquisition, merger and other restructuring charges (c)	972			1,677			1,608			4,294			9,217
Adjusted gross profit	$	218,563		$	166,286		$	424,256		$	341,464		$	749,825

Adjusted gross profit as a % of sales	28.9		%	26.3		%	28.1		%	26.3		%	28.2		%


(a)	Reflects accelerated depreciation related to in-sourcing of Wish-Bone production.


(b)	Non-cash items are comprised of the following:



(thousands of dollars)	Three months ended						Six months ended						Fiscal Year Ended
	June 26, 2016			June 28, 2015			June 26, 2016			June 28, 2015			December 27, 2015
Unrealized gains resulting from hedging activities (1)	$	(3,601	)	$	(4,500	)	$	(7,493	)	$	(4,610	)	$	(1,983	)
Effects of adjustments related to the application of purchase accounting (2)	—			—			10,382			—			—
Non-cash compensation charges (3)	—						—			954			954
Non-cash items	$	(3,601	)	$	(4,500	)	$	2,889		$	(3,656	)	$	(1,029	)

_________________


(1)	Represents non-cash gains and losses resulting from mark-to-market obligations under derivative contracts.


(2)	For the six months ended June 26, 2016 , represents expense related to the write-up to fair market value of inventories acquired as a result of the Boulder acquisition.


(3)	Represents non-cash employee incentives and retention charges resulting from the termination of the Hillshire merger agreement

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(c)	Acquisition, merger and other restructuring charges are comprised of the following:



(thousands of dollars)	Three months ended				Six months ended				Fiscal Year Ended
	June 26, 2016		June 28, 2015		June 26, 2016		June 28, 2015		December 27, 2015
Expenses in connection with an acquisition or other non-recurring merger costs (1)	$	—	$	—	$	—	$	130	$	130
Restructuring charges, integration costs and other business optimization expenses (2)	972		1,677		$	1,608	$	4,164	8,625
Employee severance and recruiting (3)	—		—		—		—		462
Total acquisition, merger and other restructuring charges	$	972	$	1,677	$	1,608	$	4,294	$	9,217

_________________


(1)	For the six months ended June 28, 2015 and for fiscal 2015, represents expenses incurred related to the terminated agreement with Hillshire.


(2)	For the three and six months ended June 26, 2016 , primarily represents integration costs of the Garden Protein acquisition. For the six months ended June 28, 2015 and for fiscal 2015, primarily represents integration costs of the Garden Protein and Wish-Bone acquisitions.


(3)	Represents severance costs paid or accrued to terminated employees.

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Pinnacle Foods Inc. and Subsidiaries

Reconciliation of Non-GAAP measures (Unaudited)

Adjusted EBIT (1)

(thousands)



	Three months ended						Six months ended
	June 26, 2016			June 28, 2015			June 26, 2016			June 28, 2015
Net earnings attributable to Pinnacle Foods Inc. and Subsidiaries common stockholders (as reported)	$	45,784		$	43,679		$	70,620		$	85,215
Interest expense, net	35,461			22,175			67,024			43,650
Provision for income taxes	26,542			23,961			50,423			49,419
Net loss attributable to non-controlling interest	(1		)	—			—			—
Earnings before interest and taxes (as reported)	107,786			89,815			188,067			178,284
Non-cash items
Unrealized (gains)/losses resulting from hedging (2)	(3,601		)	(4,500		)	(7,493		)	(4,610		)
Purchase accounting adjustments (3)	—			—			10,382			—
Non-cash compensation charges (4)	—			—			—			1,567
Foreign exchange (gains)/losses (5)	(499		)	(700		)	(1,283		)	1,578
Acquisition, merger and other restructuring charges
Acquisition or other non recurring expenses (6)	—			362			6,781			1,130
Restructuring and integration costs (7)	11,108			2,026			25,106			4,527
Adjusted EBIT	$	114,794		$	87,003		$	221,560		$	182,476


(1)	Excludes Boulder, Wish-Bone and Gardein anticipated synergies which are included in calculating Covenant compliance.


(2)	Represents non-cash gains and losses resulting from mark-to-market obligations under derivative contracts.


(3)	For the six months ended June 26, 2016, represents expense related to the write-up to fair value of inventories acquired as a result of the Boulder acquisition.


(4)	For the six months ended June 28, 2015, represents non-cash employee incentives and retention charges resulting from the termination of the Hillshire merger agreement.


(5)	Represents foreign exchange (gains) losses resulting from intra-entity loans that are anticipated to be settled in the foreseeable future.


(6)	For the six months ended June 26, 2016, represents Boulder acquisition costs. For the three and six months ended June 28, 2015, represents expenses related to the secondary offerings of common stock.


(7)	For the three and six months ended June 26, 2016, primarily represents restructuring charges and integration costs of the Boulder and Garden Protein acquisitions. For the three and six months June 28, 2015, primarily represents integration costs of the Garden Protein and Wish-Bone acquisitions.

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Pinnacle Foods Inc.

Reconciliation from Reported to Adjusted Segment Amounts (unaudited)

For the three and six months ended June 26, 2016 and June 28, 2015

(thousands)



	Three Months Ended						Six Months Ended
	June 26,			June 28,			June 26,			June 28,
	2016			2015			2016			2015

Earnings before interest & taxes - Reported
Birds Eye Frozen	$	46,794		$	37,978		$	102,035		$	81,255
Duncan Hines Grocery	52,255			51,041			94,860			94,248
Boulder Brands	7,028			—			(4,198		)	—
Specialty Foods	6,333			7,599			13,253			15,299
Unallocated corporate expenses	(4,624		)	(6,803		)	(17,883		)	(12,518		)
Total	$	107,786		$	89,815		$	188,067		$	178,284


Adjustments (Non GAAP - See separate table)
Birds Eye Frozen	$	(1,388	)	$	(1,518	)	$	(3,296	)	$	1,955
Duncan Hines Grocery	(1,584		)	(979		)	(3,166		)	2,390
Boulder Brands	10,171			—			33,617			—
Specialty Foods	(191		)	(315		)	(444		)	(153		)
Unallocated corporate expenses	—			—			6,782			—
Total	$	7,008		$	(2,812	)	$	33,493		$	4,192


Earnings before interest & taxes - Adjusted (Non GAAP - See separate discussion and tables)
Birds Eye Frozen	$	45,406		$	36,460		$	98,739		$	83,210
Duncan Hines Grocery	50,671			50,062			91,694			96,638
Boulder Brands	17,199			—			29,419			—
Specialty Foods	6,142			7,284			12,809			15,146
Unallocated corporate expenses	(4,624		)	(6,803		)	(11,101		)	(12,518		)
Total	$	114,794		$	87,003		$	221,560		$	182,476

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Pinnacle Foods Inc. Reconciliation from Reported to Adjusted Segment Amounts Supplemental Schedule of Adjustments Detail (unaudited) For the three and six months ended June 26, 2016 and June 28, 2015 (millions)

	Adjustments to Earnings Before Interest and Taxes
	Three Months Ended						Six Months Ended
	June 26, 2016			June 28, 2015			June 26, 2016			June 28, 2015
Birds Eye Frozen
Restructuring and acquisition integration charges	$	0.1		$	0.1		$	0.3		$	2.5
Gardein acquisition related charges	—			—			—			0.1
Unrealized mark-to-market (gain)/loss	(1.6		)	(1.8		)	(3.7		)	(1.8		)
Hillshire merger termination-related employee compensation expense	—			—			—			0.8
Other	0.1			0.2			0.1			0.4
Total Birds Eye Frozen	$	(1.4	)	$	(1.5	)	$	(3.3	)	$	2.0

Duncan Hines Grocery
Restructuring and acquisition integration charges	$	—		$	1.2		$	(3.3	)	$	3.6
Unrealized mark-to-market (gain)/loss	(1.7		)	(2.4		)	—			(2.4		)
Hillshire merger termination-related employee compensation expense	—			—			—			0.8
Other	0.1			0.2			0.1			0.4
Total Duncan Hines Grocery	$	(1.6	)	$	(1.0	)	$	(3.2	)	$	2.4

Boulder Brands
Restructuring and acquisition integration charges	$	10.2		$	—		$	23.2		$	—
Expense related to the write-up to fair market value of inventories acquired	—			—			10.4			—
Total Boulder Brands	$	10.2		$	—		$	33.6		$	—

Specialty Foods
Unrealized mark-to-market (gain)/loss	$	(0.2	)	$	(0.3	)	$	(0.4	)	$	(0.3	)
Hillshire merger termination-related employee compensation expense	—			—			—			0.1
Total Specialty Foods	$	(0.2	)	$	(0.3	)	$	(0.4	)	$	(0.2	)

Unallocated Corporate Expenses
Boulder acquisition related charges	$	—		$	—		6.8			—
Total Unallocated Corporate Expenses	$	—		$	—		$	6.8		$	—

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 Form 10-K filed with the SEC on February 25, 2016, as well as the same section in our Form 10-Q filed with the SEC on April 28, 2016, for details on our contractual obligations and commitments.

Off-Balance Sheet Arrangements

As of June 26, 2016 , we did not have any off-balance sheet obligations.

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Critical Accounting Policies and Estimates

We have disclosed in "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in our Form 10-K filed on February 25, 2016, those accounting policies that we consider to be significant in determining our results of operations and financial condition. Other than the below disclosure, there have been no material changes to those policies that we consider to be significant since the filing of the 10-K. We believe that the accounting principles utilized in preparing our unaudited consolidated financial statements conform in all material respects to GAAP.

Revenue recognition

Boulder Brands recognizes revenue upon the receipt and acceptance of product by the customer. The earnings process is complete once the customer order has been placed and approved and the product shipped has been received by the customer. For the base Pinnacle business, revenue from product sales is recognized upon shipment to the customers as terms are free on board ("FOB") shipping point, at which point title and risk of loss is transferred. As the Company continues to integrate Boulder into its operations and financial reporting systems, the Company’s management expects Boulder's revenue recognition policy to align with the base Pinnacle business.

ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES 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 12 of the Consolidated Financial Statements "Financial Instruments" for additional details regarding our derivatives and refer to Note 10 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 27, 2015 .

See “Item 7A. Quantitative and Qualitative Disclosures about Market Risk” included in our Form 10-K filed on February 25, 2016.

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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 June 26, 2016 . 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 June 26, 2016 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

No material legal proceedings are currently pending.

ITEM 1A: RISK FACTORS

Our risk factors are summarized under the “Risk Factors” section of our Form 10-K filed on February 25, 2016. There have been no material changes to our risk factors since the filing of the Form 10-K.

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

Rule 10b5-1 Plans

Our policy governing transactions in our securities by our directors, officers and employees permits such persons to adopt stock trading plans pursuant to Rule 10b5-1 promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended. Certain members of management have and may from time to time establish such stock trading plans. We do not undertake any obligation to disclose, or to update or revise any disclosure regarding, any such plans and specifically do not undertake to disclose the adoption, amendment, termination or explanation of any such plans.

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ITEM 6: EXHIBITS

See the Exhibit Index immediately following the signature page hereto, which Exhibit Index is incorporated by reference as if fully set forth herein.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

PINNACLE FOODS INC.



By:	/s/ Craig Steeneck
Name:	Craig Steeneck
Title:	Executive Vice President and Chief Financial Officer (Principal Financial Officer, Principal Accounting Officer and Authorized Officer)
Date:	July 28, 2016

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PINNACLE FOODS INC.

Exhibit Index



Exhibit Number	Exhibit Description	Filed Herewith	Incorporated by Reference from Form	Exhibit	Filing Date
3.1	Amended and Restated Certificate of Incorporation of Pinnacle Foods Inc.		8-K	3.1	4/3/13
3.2	Second Amended and Restated Bylaws of Pinnacle Foods Inc.		8-K	3.1	2/16/2016
4.1	Form of Stock Certificate for Common Stock		S-1/A	4.1	3/7/2013
10.1	Amended and Restated 2013 Omnibus Incentive Plan		DEF 14A		4/14/2016
10.2	Form of Restricted Stock Unit Agreement (Directors)	X
10.3	Form of Performance Share Unit Agreement under Amended and Restated 2013 Omnibus Incentive Plan	X
10.4	Form of Nonqualified Stock Option Agreement under Amended and Restated 2013 Omnibus Incentive Plan	X
10.5	Restricted Share Agreement (Mark Clouse)	X
10.6	Nonqualified Stock Option Agreement (Mark Clouse)	X
10.7	Performance Restricted Share Agreement (Mark Clouse)	X
10.8	Restricted Stock Unit Agreement (Mark Schiller)	X
10.9	Performance Share Unit Agreement (Mark Schiller)	X
31.1	Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer	X
31.2	Rule 13a-14(a)/15d-14(a) Certification of Executive Vice President and Chief Financial Officer	X
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	X
32.2**	Certification of Executive Vice President and 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)	X
101.1	The following materials are formatted in XBRL (eXtensible Business Reporting Language): (i) the Consolidated Statements of Operations, (ii) the Consolidated Statements of Comprehensive Earnings, (iii) the Consolidated Balance Sheets, (iv) the Consolidated Statements of Cash Flows, (v) the Consolidated Statements of Shareholders' Equity, (vi) Notes to Consolidated Financial Statements, and (vii) document and entity information.	X

**This certification will not be deemed “filed” for purposes of Section 18 of the Exchange Act (15 U.S.C. 78r), or otherwise subject to the liability of that section. Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act or Exchange Act, except to the extent that the Registrant specifically incorporates it by reference.

Exhibit 10.2

PINNACLE FOODS INC.

2013 OMNIBUS INCENTIVE PLAN

RESTRICTED STOCK UNIT AGREEMENT

(Form 0002)

This Restricted Stock Unit Agreement (the “ Agreement ”), effective as of the Date of Grant (as defined below), is between Pinnacle Foods Inc., a Delaware corporation (the “ Company ”), and the participant identified on the Signature Page hereto (the “ Participant ”). Capitalized terms not otherwise defined herein shall have the same meanings as in the Plan.

RECITALS :

WHEREAS, the Company has adopted the Plan (as defined below), the terms of which are hereby incorporated by reference and made a part of this Agreement; and

WHEREAS, the Committee has determined that it would be in the best interests of the Company and its stockholders to grant the RSUs (as defined below) provided for herein to the Participant pursuant to the Plan and the terms set forth herein.

NOW, THEREFORE, in consideration of the mutual covenants hereinafter set forth, the parties agree as follows:

1. Definitions . The following terms shall have the following meanings for purposes of this Agreement:

(a) Covenant Violation : the Participant’s breach of the covenants set forth in Section 7 or any covenant regarding confidentiality or any similar provision applicable to or agreed to by the Participant.

(b) Date of Grant : the Date of Grant set forth on the Signature Page hereto.

(d) Restricted Share Units or RSUs : the number of restricted stock units set forth on the Signature Page hereto.

(e) Service : the term “Service” shall mean the Participant’s services as a non-employee director and member of the Board.

(f) Share : a share of Common Stock of the Company.

(g) Termination Date : the date upon which the Participant’s Service is terminated.

2. Grant of Units . The Company hereby grants, as of the Date of Grant, the RSUs to the Participant, each of which represents the right to receive one Share upon vesting of such RSU, subject to and in accordance with the terms, conditions and restrictions set forth in the Plan and this Agreement.

3. RSU Account . The Company shall cause an account (the “Unit Account”) to be established and maintained on the books of the Company to record the number of RSUs credited to the Participant under the terms of this Agreement. The Participant’s interest in the Unit Account shall be that of a general, unsecured creditor of the Company.

5. Dividend Equivalents . A Participant holding unvested RSUs shall be entitled to be credited with a dividend equivalent payment on each RSU upon the payment by the Company of any cash dividends on Shares equal to the amount of such dividend per Share, which dividend equivalent payment shall be payable in cash (or if elected by the Committee in its sole discretion, in Shares having a Fair Market Value as of the settlement date equal to the amount of such dividends), at the same time as the underlying RSUs are settled following the vesting of RSUs. If any RSU is forfeited, the Participant shall have no right to such dividend equivalent payments in respect of such RSU.

6. Termination of Service .

(a) Except as expressly set forth in Schedule I, in the event that the Participant’s Service with the Company and its Subsidiaries is terminated for any reason, any unvested RSUs shall be forfeited and all of the Participant’s rights hereunder with respect to such unvested RSUs shall cease as of the Termination Date (unless otherwise provided for by the Committee in accordance with the Plan).

(b) Whether (and the circumstances under which) Service has been terminated and the determination of the Termination Date for the purposes of this Agreement shall be determined by the Committee.


7.	Confidentiality .

(a) The Participant will not at any time (whether during or after the Participant’s Service with the Company) (x) retain or use for the benefit, purposes or account of the Participant or any other person; or (y) disclose, divulge, reveal, communicate, share, transfer or provide access to any person outside the Company (other than its professional advisers who are bound by confidentiality obligations), any non-public, proprietary or confidential information –

including without limitation trade secrets, know-how, research and development, software, databases, inventions, processes, formulae, technology, designs and other intellectual property, information concerning finances, investments, profits, pricing, costs, products, services, vendors, customers, clients, partners, investors, personnel, compensation, recruiting, training, advertising, sales, marketing, promotions, government and regulatory activities and approvals – concerning the past, current or future business, activities and operations of the Company, its Subsidiaries or Affiliates and/or any third party that has disclosed or provided any of same to the Company on a confidential basis (“ Confidential Information ”) without the prior written authorization of the Board or the Chief Executive Officer of the Company.

(b) “ Confidential Information ” shall not include any information that is (i) generally known to the industry or the public other than as a result of the Participant’s breach of this covenant or any breach of other confidentiality obligations by third parties; (ii) made legitimately available to the Participant (A) by a third party without breach of any confidentiality obligation, or (B) prior to the Participant’s Service as a result of the Participant’s prior experience related to the business of manufacturing and marketing food products; or (iii) required by law to be disclosed (including via subpoena); provided that the Participant shall give prompt written notice to the Company of such requirement of law, disclose no more information than is so required, and cooperate, at the Company’s cost, with any attempts by the Company to obtain a protective order or similar treatment.

(c) The Participant agrees to disclose to any prospective future employer or service recipient the provisions of this Section 7.

(d) Upon termination of the Participant’s Service with the Company for any reason, the Participant shall (x) cease and not thereafter commence use of any Confidential Information or intellectual property (including without limitation, any patent, invention, copyright, trade secret, trademark, trade name, logo, domain name or other source indicator) owned or used by the Company, its Subsidiaries or Affiliates; (y) immediately destroy, delete, or return to the Company, at the Company’s option, all originals and copies in any form or medium (including memoranda, books, papers, plans, computer files, letters and other data) in the Participant’s possession or control (including any of the foregoing stored or located in the Participant’s office, home, laptop or other computer, whether or not Company property) that contain Confidential Information or otherwise relate to the business of the Company, its Affiliates and Subsidiaries, except that the Participant may retain only those portions of any personal notes, notebooks and diaries that do not contain any Confidential Information and his or her rolodex (or other physical or electronic address book); and (z) fully cooperate with the Company regarding the delivery or destruction of any other Confidential Information not within the Participant’s possession or control of which the Participant is or becomes aware.

(e) Repayment of Proceeds . If the Participant breaches the confidentiality provisions of this Section 7, or if the Company discovers after a Termination Date that grounds for Cause existed at the time thereof, then the Participant shall be required (in addition to any other remedy available (on a non-exclusive basis) to pay to the Company, within ten business days following the first date on which the Participant first breaches such provisions (or in the

case of a discovery of grounds for Cause, upon the Company’s request therefor), an amount equal to the aggregate after-tax proceeds (taking into account all amounts of tax that would be recoverable upon a claim of loss for payment of such proceeds in the year of repayment) the Participant received upon the sale or other disposition of, or distributions or dividends in respect of, the RSUs or any Shares received in settlement of the RSUs.

8. No Right to Continued Service . Neither the Plan nor this Agreement nor the granting of the RSUs evidenced hereby shall be construed as giving the Participant the right to be retained to provide services to, or to be retained as a non-employee director of, the Company or any Affiliate or to continue to engage the Participant’s services as a member of the Board. Further, the Company or any Affiliate may at any time dismiss the Participant or discontinue any service relationship, free from any liability or any claim under the Plan or this Agreement, except as otherwise expressly provided herein.

9. Transferability . The Participant may not assign, alienate, pledge, attach, sell or otherwise transfer or encumber the RSUs or the Participant’s right under the RSUs to receive Shares, except other than by will or by the laws of descent and distribution and any such purported assignment, alienation, pledge, attachment, sale, transfer or encumbrance shall be void and unenforceable against the Company or an Affiliate; provided that the designation of a beneficiary (if permitted by the Committee) shall not constitute an assignment, alienation, pledge, attachment, sale, transfer or encumbrance.

10. No Rights as a Stockholder . The Participant’s interest in the RSUs shall not entitle the Participant to any rights as a stockholder of the Company. The Participant shall not be deemed to be the holder of, or have any of the rights and privileges of a stockholder of the Company in respect of, the Shares unless and until such Shares have been issued to the Participant in accordance with Section 11.

11. Issuance of Shares; Tax Withholding .

(a) Subject to Section 4, upon the vesting of an RSU, the Company shall, as soon as reasonably practicable (and, in any event, within 2.5 months) following the applicable vesting date, issue the Share underlying such vested RSU to the Participant, free and clear of all restrictions. Any fractional Share which would otherwise be delivered shall be cancelled and only a whole number of Shares shall be delivered. The Company shall pay any costs incurred in connection with issuing the Shares. Upon the issuance of the Shares to the Participant, the Participant’s Unit Account shall be eliminated. Notwithstanding anything in this Agreement to the contrary, the Company shall have no obligation to issue or transfer the Shares as contemplated by this Agreement unless and until such issuance or transfer shall comply with all relevant provisions of law and the requirements of any stock exchange on which the Company’s shares are listed for trading.

(b) The Company shall have the right and is hereby authorized to withhold, from any Shares or from any compensation (including from payroll or any other amounts payable to the Participant) the amount (in cash, Shares, or other property) of any required withholding taxes in respect of the RSUs, their grant or vesting or any payment or transfer with respect to the

RSUs, and to take such action as may be necessary in the opinion of the Committee to satisfy all obligations for the payment of such withholding taxes, provided, however, that no amounts shall be withheld in excess of the Company’s statutory minimum withholding liability.

(c) Notwithstanding the foregoing, the Participant acknowledges and agrees that to the extent consistent with applicable law and the Participant’s status as a director and member of the Board, the Company does not intend to withhold any amounts as federal income tax withholdings under any other state or federal laws, and Participant hereby agrees to make adequate provision for any sums required to satisfy all applicable federal, state, local and foreign tax withholding obligations of the Company which may arise in connection with the RSUs.

12. Severability . Should any provision of this Agreement be held by a court of competent jurisdiction to be unenforceable or invalid for any reason, the remaining provisions of this Agreement shall not be affected by such holding and shall continue in full force in accordance with their terms.

13. Successors in Interest . Any successor to the Company shall have the benefits of the Company under, and be entitled to enforce, this Agreement. Likewise, the Participant’s legal representative shall have the benefits of Participant under, and be entitled to enforce, this Agreement. All obligations imposed upon the Participant and all rights granted to the Company under this Agreement shall be final, binding and conclusive upon the Participant’s heirs, executors, administrators and successors.

14. Limitation on Rights; No Right to Future Grants; Extraordinary Item of Compensation . By accepting this Agreement and the grant of the RSUs contemplated hereunder, the Participant expressly acknowledges that (a) the Plan is discretionary in nature and may be suspended or terminated by the Company at any time; (b) the grant of RSUs is a one-time benefit that does not create any contractual or other right to receive future grants of RSUs, or benefits in lieu of RSUs; (c) all determinations with respect to future grants of RSUs, if any, including the grant date, the number of Shares granted and the applicable vesting terms, will be at the sole discretion of the Company; (d) the Participant’s participation in the Plan is voluntary; (e) the value of the RSUs is an extraordinary item of compensation that is outside the scope of the Participant’s employment contract, if any, and nothing can or must automatically be inferred from such employment contract or its consequences; (f) grants of RSUs are not part of normal or expected compensation for any purpose and are not to be used for calculating any severance, resignation, bonuses, pension or retirement benefits or similar payments, the Participant waives any claim on such basis, and for the avoidance of doubt, the RSUs shall not constitute an “acquired right” under the applicable law of any jurisdiction; and (g) the future value of the underlying Shares is unknown and cannot be predicted with certainty. In addition, the Participant understands, acknowledges and agrees that the Participant will have no rights to compensation or damages related to RSU proceeds in consequence of the termination of the Participant’s Service for any reason whatsoever and whether or not in breach of contract.

Agreement in any respect as may be necessary or appropriate to comply with Section 409A of the Code or any regulations promulgated thereunder, including without limitation by delaying the issuance of the Shares contemplated hereunder.

16. Book Entry Delivery of Shares . Whenever reference in this Agreement is made to the issuance or delivery of certificates representing one or more Shares, the Company may elect to issue or deliver such Shares in book entry form in lieu of certificates.

17. Electronic Acceptance; Agreement by the Participant; Forfeiture upon Failure to Accept . The Company may, in its sole discretion, decide to deliver any documents related to current or future participation in the Plan by electronic means. The Participant hereby consents to receive such documents by electronic delivery and agrees to participate in the Plan through an on-line or electronic system established and maintained by the Company or a third party designated by the Company. By accepting the RSUs (including through electronic means), the Participant agrees to be bound by the terms, conditions, and restrictions set forth in the Plan, this Agreement, and the Company’s policies, as in effect from time to time, relating to the Plan. The Participant's rights under the RSUs will lapse ninety (90) days from the Date of Grant, and the RSUs will be forfeited on such date if the Participant shall not have accepted this Agreement by such date. For the avoidance of doubt, the Participant's failure to accept this Agreement shall not affect the Participant’s continuing obligations under any other agreement between the Company and the Participant.

18. Prior Agreements; Full Satisfaction .

(a) This Agreement and the documents referred to herein or delivered pursuant hereto which form a part hereof contain the entire understanding of the parties with respect to the subject matter hereof and thereof, provided that if the Company or its Affiliates is a party to one or more agreements with the Participant related to the matters subject to Section 7, such other agreements shall remain in full force and effect and continue in addition to this Agreement and nothing in this Agreement or incorporated by reference shall supersede or replace any other confidentiality or similar agreement entered into between the Participant and the Company (or any subsidiary or Affiliate) to the extent that such agreement is more protective of the business of the Company or any subsidiary or Affiliate). There are no restrictions, agreements, promises, representations, warranties, covenants or undertakings with respect to the subject matter hereof other than those expressly set forth herein and therein.

(b) This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter, subject to the provisos in the first sentence of Section 18(a). The RSUs granted herein are in full satisfaction of any equity grants or long-term stock-based incentive awards set forth in any offer letter or description of the Participant’s terms of employment entered into by and between the Participant and the Company or provided to the Participant by the Company.

legal or administrative reasons, and to require the Participant to sign any additional agreements or undertakings that may be necessary to accomplish the foregoing. Upon the acquisition of any Shares pursuant to the settlement of an RSU, the Participant will make or enter into such written representations, warranties and agreements as the Committee may reasonably request in order to comply with applicable securities laws or with this Agreement.

20. Notices . Any notice necessary under this Agreement shall be addressed to the Company in care of its Treasurer and a copy to the General Counsel, each copy addressed to the principal Participant office of the Company and to the Participant at the address appearing in the personnel records of the Company for the Participant or to either party at such other address as either party hereto may hereafter designate in writing to the other. Any such notice shall be deemed effective upon receipt thereof by the addressee.

21. Governing Law . This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware without regard to conflicts of laws.

22. Award Subject to Plan . The Participant acknowledges that the Participant has received and read a copy of the Plan. The RSUs granted hereunder and the Shares received upon settlement of the RSUs are subject to the Plan. The terms and provisions of the Plan, as it may be amended from time to time, are hereby incorporated herein by reference. In the event of a conflict between any term or provision contained herein and a term or provision of the Plan, the applicable terms and provisions of the Plan will govern and prevail.

23. Amendment . The Committee may waive any conditions or rights under, amend any terms of, or alter, suspend, discontinue, cancel or terminate this Agreement, but no such waiver, amendment, alteration, suspension, discontinuance, cancellation or termination shall materially adversely affect the rights of the Participant hereunder without the consent of the Participant. The Participant acknowledges that a waiver by the Company of breach of any provision of this Agreement shall not operate or be construed as a waiver of any other provision of this Agreement, or of any subsequent breach by the Participant or any other participant in the Plan.

[ Signatures follow ]

IN WITNESS WHEREOF, this Agreement has been executed and delivered by the parties hereto as of the Date of Grant.

Participant : _____

Date of Grant : _____

Restricted Stock Units Granted : _____ RSUs




	Participant

Agreed and accepted:



	PINNACLE FOODS INC.


	/s/ Kelley Maggs
	By: Kelley Maggs
	Its: EVP – General Counsel

Schedule I

Vesting

1. Vesting . Subject to the Participant’s continued Service, the RSUs shall become vested as to 100% of the RSUs on the earlier of (a) the first (1 ^st ) anniversary of the Date of Grant, and (b) the next annual meeting of the shareholders of the Company. Notwithstanding any other provision of this Agreement to the contrary, within twelve (12) months following a Change in Control, in the event of a Participant’s termination, the RSUs shall, to the extent not then vested or previously forfeited or cancelled, become fully vested.

2. Termination of Service on the Board . If the Participant ceases to serve as a member of the Board for any reason, the RSUs shall, to the extent not then vested or previously forfeited, immediately become forfeited without any further action by the Company or the Participant, and without any payment of consideration therefor.

Exhibit 10.3

PINNACLE FOODS INC.

2013 OMNIBUS INCENTIVE PLAN

PERFORMANCE SHARE UNIT AGREEMENT

(Form 0001)

This Performance Share Unit Agreement (the “ Agreement ”), effective as of the Date of Grant (as defined below), is between Pinnacle Foods Inc., a Delaware corporation (the “ Company ”), and the participant identified on the Signature Page hereto (the “ Participant ”). Capitalized terms not otherwise defined herein shall have the same meanings as in the Plan.

RECITALS :

WHEREAS, the Company has adopted the Plan (as defined below), the terms of which are hereby incorporated by reference and made a part of this Agreement; and

WHEREAS, the Committee has determined that it would be in the best interests of the Company and its stockholders to grant the PSUs (as defined below) provided for herein to the Participant pursuant to the Plan and the terms set forth herein.

NOW, THEREFORE, in consideration of the mutual covenants hereinafter set forth, the parties agree as follows:

1. Definitions . The following terms shall have the following meanings for purposes of this Agreement:

(a) Date of Grant : the Date of Grant set forth on the Signature Page hereto.

(b) Employment : the term “Employment” shall mean (i) the Participant’s employment if the Participant is an employee of the Company or any of its Affiliates or Subsidiaries, (ii) the Participant’s services as a consultant, if the Participant is a consultant to the Company or any of its Affiliates or Subsidiaries and (iii) the Participant’s services as a non-employee director, if the Participant is a non-employee member of the Board.

(d) Performance Period : the “Performance Period” set forth on the Signature Page hereto.

(e) Performance Share Units or PSUs : the target number of performance share units set forth on the Signature Page hereto.

(f) Plan : the Pinnacle Foods Inc. 2013 Omnibus Incentive Plan, as amended from time to time.

(g) Restrictive Covenant Violation : the Participant’s breach of the Restrictive Covenants set forth in Section 7 or any covenant regarding noncompetition, nonsolicitation, noninterference, non-disparagement, confidentiality, or any similar provision, applicable to or agreed to by the Participant.

(h) Retirement : the Participant’s termination of Employment with the Company, other than for Cause, following the date on which (i) the Participant’s age is 55 or greater, and (ii) the number of years of the Participant’s Employment and other business relationships with the Company and any predecessor company is 10 or greater.

(i) Share : a share of Common Stock of the Company.

(j) Termination Date : the date upon which the Participant’s Employment with the Company and its Affiliates and Subsidiaries is terminated.

2. Grant of Performance Share Units . The Company hereby grants, as of the Date of Grant, the PSUs to the Participant, each of which represents the right to receive one Share upon vesting of such PSUs, subject to and in accordance with the terms, conditions and restrictions set forth in the Plan and this Agreement.

3. Performance Share Unit Account . The Company shall cause an account (the “ Performance Share Unit Account ”) to be established and maintained on the books of the Company to record the number of PSUs credited to the Participant under the terms of this Agreement. The Participant’s interest in the Performance Share Unit Account shall be that of a general, unsecured creditor of the Company.

4. Vesting; Settlement .

(a) The PSUs shall become vested in accordance with the schedule set forth in Schedule I attached hereto. As promptly as practicable (and, in any event, within 2.5 months) following the last day of the Performance Period, the Committee shall determine whether the Performance Conditions have been satisfied (the date of such determination, the “ Determination Date ”), and any PSUs with respect to which the Performance Conditions have been satisfied shall become vested effective as of the last day of the Performance Period. Following the Determination Date, the Company shall deliver to the Participant, without charge, one share of Common Stock for each vested PSU (as adjusted under the Plan) in accordance with Section 11, and such vested PSU shall be cancelled upon such delivery. Any PSU which does not become vested effective as of the last day of the Performance Period shall be forfeited without consideration or any further action by the Participant or the Company.

manner of such adjustment shall be determined by the Committee in its sole discretion. For this purpose, “equity restructuring” shall mean an “equity restructuring” as defined in Financial Accounting Standards Board Accounting Standards Codification 718-10 (formerly Statement of Financial Accounting Standards 123R).

5. Dividend Equivalents . A Participant holding unvested PSUs shall be entitled to be credited with a dividend equivalent payment on each PSU upon the payment by the Company of any cash dividend on Shares equal to the amount of such dividend per Share, which dividend equivalent payment shall be payable in cash (or if elected by the Committee in its sole discretion, in Shares having a Fair Market Value as of the settlement date equal to the amount of such dividends), at the same time as the underlying PSUs are settled following the vesting of PSUs. If any PSU is forfeited, the Participant shall have no right to such dividend equivalent payments in respect of such PSU. For the avoidance of doubt, no dividend equivalent payment shall accrue or be credited in respect of a PSU which does not vest based on the achievement of the Performance Conditions applicable to the PSU.

6. Termination of Employment .

(a) Except as expressly set forth in Schedule I, in the event that the Participant’s Employment with the Company and its Subsidiaries is terminated for any reason, any unvested PSUs shall be forfeited and all of the Participant’s rights hereunder with respect to such unvested PSUs shall cease as of the Termination Date (unless otherwise provided for by the Committee in accordance with the Plan).

(b) The Participant’s rights with respect to the PSUs shall not be affected by any change in the nature of the Participant’s Employment so long as the Participant continues to be an employee of the Company or any of its Subsidiaries. Whether (and the circumstances under which) Employment has been terminated and the determination of the Termination Date for the purposes of this Agreement shall be determined by the Committee (or, with respect to any Participant who is not a director or “officer” as defined under Rule 16a-1(f) of the Securities Exchange Act of 1934, as amended, its designee, whose good faith determination shall be final, binding and conclusive; provided , that such designee may not make any such determination with respect to the designee’s own Employment for purposes of the PSUs).

7. Restrictive Covenants . To the extent that the Participant and the Company (or an Affiliate of the Company) is a party to an employment agreement with the Company containing noncompetition, nonsolicitation, noninterference, non-disparagement, or confidentiality restrictions (or two or more such restrictions), those restrictions and related enforcement provisions under such employment agreement shall govern and the following provisions of this Section 7 shall not apply.

with, or plan or policy of the Company or an Affiliate (the “ Restricted Period ”), the Participant, whether on the Participant’s own behalf or on behalf of or in conjunction with any other person or entity, directly or indirectly violates any of the following prohibitions:

(A) During the Restricted Period, the Participant will not solicit or assist in soliciting in a Competitive Business (as defined below) the business of any client or prospective client:

(1) with whom the Participant had personal contact or dealings on behalf of the Company during the one-year period preceding the Participant’s termination of Employment;

(2) with whom employees directly reporting to the Participant (or the Participant’s direct reports) have had personal contact or dealings on behalf of the Company during the one year immediately preceding the Participant’s termination of Employment; or

(3) for whom the Participant had direct or indirect responsibility during the one year immediately preceding the Participant’s termination of Employment.

(B) During the Restricted Period, the Participant will not directly or indirectly:

(1) engage in any business that is engaged in, or has plans to engage in, at any time during the Restricted Period, any activity that competes in the business of manufacturing and marketing food products that directly compete with the core brands of the Company as of the Termination Date (and for such purpose, a “core brand” shall be any brand generating annual revenues in an amount equal to at least 5% of the Company’s annual revenues, in the fiscal year preceding the fiscal year of such Termination Date) in any geographical area that is within 100 miles from any geographical area where the Company or its Affiliates manufactures and markets its products or services (a “ Competitive Business ”);

(2) enter the employ of, or render any services to, any Person (or any division or controlled or controlling affiliate of any Person) who or which engages in a Competitive Business;

(3) acquire a financial interest in, or otherwise become actively involved with, any Competitive Business, directly or indirectly, as an individual, partner, shareholder, officer, director, principal, agent, trustee or consultant; or

(4) interfere with, or attempt to interfere with, business relationships (whether formed before, on or after the date of this Agreement) between the

Company or any of its Affiliates and customers, clients, suppliers, partners, members or investors of the Company or its Affiliates.

(C) Notwithstanding anything to the contrary in this Agreement, the Participant may, directly or indirectly own, solely as an investment, securities of any Person engaged in a Competitive Business which are publicly traded on a national or regional stock exchange or on the over-the-counter market if the Participant (i) is not a controlling person of, or a member of a group which controls, such person and (ii) does not, directly or indirectly, own 5% or more of any class of securities of such Person.

(D) During the Restricted Period, the Participant will not, whether on the Participant’s own behalf or on behalf of or in conjunction with any Person, directly or indirectly:

(1) solicit or encourage any employee of the Company or its Affiliates to leave the employment of the Company or its Affiliates; or

(2) hire any such employee who was employed by the Company or its Affiliates as of the date of the Participant’s termination of Employment with the Company or who left the employment of the Company or its Affiliates coincident with, or within 120 days (one year in the case of any such employee who reported directly to the Participant immediately preceding the Participant’s termination of Employment (or the Participant’s direct reports)) prior to or after, the termination of the Participant’s Employment with the Company.

(3) During the Restricted Period, the Participant will not, directly or indirectly, solicit or encourage to cease to work with the Company or its Affiliates any consultant then under contract with the Company or its Affiliates, is such action would result in the Company being disadvantaged. Any solicitation or hiring, that the Participant is not personally involved in, of an employee or former employee of the Company through general advertising shall not, of itself, be a breach of this Section 7(a)(i)(D)

(ii) It is expressly understood and agreed that although the Participant and the Company consider the restrictions contained in this Section 7 to be reasonable, if a final judicial determination is made by a court of competent jurisdiction that the time or territory or any other restriction contained in this Agreement is an unenforceable restriction against the Participant, the provisions of this Agreement shall not be rendered void but shall be deemed amended to apply as to such maximum time and territory and to such maximum extent as such court may judicially determine or indicate to be enforceable. Alternatively, if any court of competent jurisdiction finds that any restriction contained in this Agreement is unenforceable, and such restriction cannot be amended so as to make it enforceable, such finding shall not affect the enforceability of any of the other restrictions contained herein

(iii) The period of time during which the provisions of this Section 7 shall be in effect shall be extended by the length of time during which the Participant is in breach of the terms hereof as determined by any court of competent jurisdiction on the Company’s application for injunctive relief.

(b) Confidentiality .(i) The Participant will not at any time (whether during or after the Participant’s Employment with the Company) (x) retain or use for the benefit, purposes or account of the Participant or any other person; or (y) disclose, divulge, reveal, communicate, share, transfer or provide access to any person outside the Company (other than its professional advisers who are bound by confidentiality obligations), any non-public, proprietary or confidential information –including without limitation trade secrets, know-how, research and development, software, databases, inventions, processes, formulae, technology, designs and other intellectual property, information concerning finances, investments, profits, pricing, costs, products, services, vendors, customers, clients, partners, investors, personnel, compensation, recruiting, training, advertising, sales, marketing, promotions, government and regulatory activities and approvals – concerning the past, current or future business, activities and operations of the Company, its Subsidiaries or Affiliates and/or any third party that has disclosed or provided any of same to the Company on a confidential basis (“ Confidential Information ”) without the prior written authorization of the Board or the Chief Executive Officer of the Company.

(ii) “Confidential Information” shall not include any information that is (i) generally known to the industry or the public other than as a result of the Participant’s breach of this covenant or any breach of other confidentiality obligations by third parties; (ii) made legitimately available to the Participant (A) by a third party without breach of any confidentiality obligation, or (B) prior to the Participant’s Employment as a result of the Participant’s prior experience related to the business of manufacturing and marketing food products; or (iii) required by law to be disclosed (including via subpoena); provided that the Participant shall give prompt written notice to the Company of such requirement of law, disclose no more information than is so required, and cooperate, at the Company’s cost, with any attempts by the Company to obtain a protective order or similar treatment.

(iii) Except as required by law, the Participant will not disclose to anyone, other than the Participant’s immediate family and legal or financial advisors, the existence or contents of this Agreement (unless this Agreement shall be publicly available as a result of a regulatory filing made by the Company or its Affiliates) or otherwise is disclosed by the Company to any unaffiliated party that is not under a restriction of confidentiality at least as restrictive as this restriction upon the Participant; provided, that the Participant may disclose to any prospective future employer any of the termination notice provisions under any agreement between the Participant and the Company (or an Affiliate of the Company) and the provisions of this Section 7(b) provided they agree to maintain the confidentiality of such terms.

(iv) Upon termination of the Participant’s Employment with the Company for any reason, the Participant shall (x) cease and not thereafter commence use of any Confidential Information or intellectual property (including without limitation, any patent, invention, copyright, trade secret, trademark, trade name, logo, domain name or other source indicator) owned or used by the Company, its Subsidiaries or Affiliates; (y) immediately destroy, delete, or return to the Company, at the Company’s option, all originals and copies in any form or medium (including memoranda, books, papers, plans, computer files, letters and other data) in the Participant’s possession or control (including any of the foregoing stored or located in the Participant’s office, home, laptop or other computer, whether or not Company property) that contain Confidential Information or otherwise relate to the business of the Company, its Affiliates and Subsidiaries, except that the Participant may retain only those portions of any personal notes, notebooks and diaries that do not contain any Confidential Information and his or her rolodex (or other physical or electronic address book); and (z) fully cooperate with the Company regarding the delivery or destruction of any other Confidential Information not within the Participant’s possession or control of which the Participant is or becomes aware.

(c) Repayment of Proceeds . If the Participant engages in Competitive Activity or breaches the confidentiality provisions of Section 7, or if the Company discovers after a termination of employment that grounds for Cause existed at the time thereof, then the Participant shall be required (in addition to any other remedy available (on a non-exclusive basis)) to pay to the Company, within ten business days following the first date on which the Participant engages in such Competitive Activity or first breaches such provisions (or in the case of a discovery of grounds for Cause, upon the Company’s request therefor), an amount equal to the aggregate after-tax proceeds (taking into account all amounts of tax that would be recoverable upon a claim of loss for payment of such proceeds in the year of repayment) the Participant received upon the sale or other disposition of, or distributions or dividends in respect of, the PSUs or any Shares received in settlement of the PSUs.

8. No Right to Continued Employment . Neither the Plan nor this Agreement nor the granting of the PSUs evidenced hereby shall be construed as giving the Participant the right to be retained in the employ of, or in any consulting relationship to, the Company or any Affiliate. Further, the Company or any Affiliate may at any time dismiss the Participant or discontinue any consulting relationship, free from any liability or any claim under the Plan or this Agreement, except as otherwise expressly provided herein.

9. Transferability . The Participant may not assign, alienate, pledge, attach, sell or otherwise transfer or encumber the PSUs or the Participant’s right under the PSUs to receive Shares, except other than by will or by the laws of descent and distribution and any such purported assignment, alienation, pledge, attachment, sale, transfer or encumbrance shall be void and unenforceable against the Company or an Affiliate; provided that the designation of a beneficiary (if permitted by the Committee) shall not constitute an assignment, alienation, pledge, attachment, sale, transfer or encumbrance.

10. No Rights as a Stockholder . The Participant’s interest in the PSUs shall not entitle the Participant to any rights as a stockholder of the Company. The Participant shall not be deemed to be the holder of, or have any of the rights and privileges of a stockholder of the Company in respect of, the Shares unless and until such Shares have been issued to the Participant in accordance with Section 11.

11. Issuance of Shares; Tax Withholding . Upon the vesting of a PSU, the Company shall, as soon as reasonably practicable (and, in any event, within 2.5 months) following the applicable vesting date, issue the Share underlying such vested PSU to the Participant, free and clear of all restrictions, less a number of Shares equal in value (using the closing price per Share on the New York Stock Exchange (or other principal exchange on which the Shares then trade) on the trading day immediately prior to the date of delivery of the Shares) to the minimum amount necessary to satisfy Federal, state, local or foreign withholding tax requirements, if any (“ Withholding Taxes ”) in accordance with Section 14(d) of the Plan (unless the Participant shall have made other arrangements acceptable to the Company to pay such Withholding Taxes, in which case the full number of Shares shall be issued). Any fractional Share which would otherwise be delivered shall be cancelled and only a whole number of Shares shall be delivered. The Company shall pay any costs incurred in connection with issuing the Shares. Upon the issuance of the Shares to the Participant, the Participant’s Performance Unit Account shall be eliminated. Notwithstanding anything in this Agreement to the contrary, the Company shall have no obligation to issue or transfer the Shares as contemplated by this Agreement unless and until such issuance or transfer shall comply with all relevant provisions of law and the requirements of any stock exchange on which the Company’s shares are listed for trading.

value of the PSUs is an extraordinary item of compensation that is outside the scope of the Participant’s employment contract, if any, and nothing can or must automatically be inferred from such employment contract or its consequences; (f) grants of PSUs are not part of normal or expected compensation for any purpose and are not to be used for calculating any severance, resignation, bonuses, pension or retirement benefits or similar payments, the Participant waives any claim on such basis, and, for the avoidance of doubt, the PSUs shall not constitute an “acquired right” under the applicable law of any jurisdiction; and (g) the future value of the underlying Shares is unknown and cannot be predicted with certainty. In addition, the Participant understands, acknowledges and agrees that the Participant will have no rights to compensation or damages related to PSU proceeds in consequence of the termination of the Participant’s Employment for any reason whatsoever and whether or not in breach of contract.

15. Section 409A . This Agreement is intended to comply with the provisions of Section 409A of the Code and the regulations promulgated thereunder. Without limiting the foregoing, the Committee shall have the right to amend the terms and conditions of this Agreement in any respect as may be necessary or appropriate to comply with Section 409A of the Code or any regulations promulgated thereunder, including without limitation by delaying the issuance of the Shares contemplated hereunder.

16 Book Entry Delivery of Shares . Whenever reference in this Agreement is made to the issuance or delivery of certificates representing one or more Shares, the Company may elect to issue or deliver such Shares in book entry form in lieu of certificates.

17. Electronic Acceptance; Agreement by the Participant; Forfeiture upon Failure to Accept . The Company may, in its sole discretion, decide to deliver any documents related to current or future participation in the Plan by electronic means. The Participant hereby consents to receive such documents by electronic delivery and agrees to participate in the Plan through an on-line or electronic system established and maintained by the Company or a third party designated by the Company. By accepting the PSUs (including through electronic means), the Participant agrees to be bound by the terms, conditions, and restrictions set forth in the Plan, this Agreement, and the Company’s policies, as in effect from time to time, relating to the Plan. The Participant's rights under the PSUs will lapse ninety (90) days from the Date of Grant, and the PSUs will be forfeited on such date if the Participant shall not have accepted this Agreement by such date. For the avoidance of doubt, the Participant's failure to accept this Agreement shall not affect the Participant’s continuing obligations under any other agreement between the Company and the Participant.

18. Prior Agreements; Full Satisfaction .

reference shall supersede or replace any other confidentiality, non-competition, non-solicitation, non-disparagement or similar agreement entered into between the Participant and the Company (or any subsidiary or Affiliate) to the extent that such agreement is more protective of the business of the Company or any subsidiary or Affiliate), and provided, further, that to the extent a Participant is party to any agreement that would, by its terms, vary the terms of this Agreement (other than with respect to the matters subject to Section 7 hereof) or provide more favorable rights and remedies to the Participant, such terms will be deemed amended and shall not apply to the PSUs granted herein. There are no restrictions, agreements, promises, representations, warranties, covenants or undertakings with respect to the subject matter hereof other than those expressly set forth herein and therein.

(b) This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter, subject to the provisos in the first sentence of Section 19(a). The PSUs granted herein are in full satisfaction of any equity grants or long-term stock-based incentive awards set forth in any offer letter or description of the Participant’s terms of employment entered into by and between the Participant and the Company or provided to the Participant by the Company.

19. Securities Laws . The Company reserves the right to impose other requirements on the Participant's participation in the Plan, on the PSUs and on any Shares acquired under the Plan, to the extent the Company determines it is necessary or advisable for legal or administrative reasons, and to require the Participant to sign any additional agreements or undertakings that may be necessary to accomplish the foregoing. Upon the acquisition of any Shares pursuant to the settlement of an PSU, the Participant will make or enter into such written representations, warranties and agreements as the Committee may reasonably request in order to comply with applicable securities laws or with this Agreement.

21. Governing Law . This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware without regard to conflicts of laws.

22. Award Subject to Plan . The Participant acknowledges that the Participant has received and read a copy of the Plan. The PSUs granted hereunder and the Shares received upon settlement of the PSUs are subject to the Plan. The terms and provisions of the Plan, as it may be amended from time to time, are hereby incorporated herein by reference. In the event of a conflict between any term or provision contained herein and a term or provision of the Plan, the applicable terms and provisions of the Plan will govern and prevail.

23. Amendment . The Committee may waive any conditions or rights under, amend any terms of, or alter, suspend, discontinue, cancel or terminate this Agreement, but no

such waiver, amendment, alteration, suspension, discontinuance, cancellation or termination shall materially adversely affect the rights of the Participant hereunder without the consent of the Participant. The Participant acknowledges that a waiver by the Company of breach of any provision of this Agreement shall not operate or be construed as a waiver of any other provision of this Agreement, or of any subsequent breach by the Participant or any other participant in the Plan.

[ Signatures follow ]

IN WITNESS WHEREOF, this Agreement has been executed and delivered by the parties hereto as of the Date of Grant.

Participant :

Date of Grant : April 1, 2016

Target Number of Performance Share Units Granted :

Performance Period : April 1, 2016 to March 31, 2019




	Participant

Agreed and accepted:



	PINNACLE FOODS INC.


	/s/ Kelley Maggs
	By: Kelley Maggs
	Its: EVP – General Counsel

Schedule I
Vesting


1.	Performance Conditions .

(a) Generally . The extent to which the Performance Conditions are satisfied and the number of PSUs which become vested shall be calculated with respect to the performance criteria set forth below. All determinations with respect to the performance criteria shall be made by the Committee in its sole discretion and the applicable performance targets shall not be achieved and the PSUs shall not vest until the Committee certifies that such performance targets have been met.

(b) Total Shareholder Return Position . The total number of PSUs which become vested based on the Total Shareholder Return of the Company shall be equal to (x) the target number of PSUs multiplied by (y) the Achievement Percentage determined based on the applicable Total Shareholder Return Position for the Performance Period as follows:



Percentile Performance	Performance Characterization	Percentage of Award Vested
91 ^th -100 ^th Percentile	Top 10%	200%
76 ^th - 90 ^th Percentile	Upper Quartile	150%
61 ^st -75 ^th Percentile	Above Median	125%
41 ^th -60 ^th Percentile	Median	100%
26 ^th -40 ^th Percentile	Below Median	75%
11 ^th -25 ^th Percentile	Lower Quartile	50%
1 ^st -10 ^th Percentile	Bottom 10%	0%

(c) The Committee shall determine (i) the Total Shareholder Return for the Company for the Performance Period and (ii) the Total Shareholder Return for each Peer Group Member for the Performance Period. The “Total Shareholder Return Position” for the Company for the Performance Period will then be determined by ranking each of the Company and each Peer Group Member from highest to lowest according to its Total Shareholder Return and then calculating the position (as a percentile) of the Company relative to Peer Group Members and the Company collectively.


2.	Termination of Employment .

(a) If the Participant’s Employment with the Company and its Subsidiaries shall be terminated during the Performance Period (i) by the Company or any Subsidiary due to or during Participant’s Disability or due to Participant’s death, or (ii) by either party when the Participant is eligible for Retirement (unless the termination is by the Company with Cause, or by the Participant when grounds existed for Cause at the time thereof), the target number of PSUs granted hereunder shall be prorated and then remain eligible to vest based on the Performance Conditions as of the last date of the Performance Period, with such pro ration based on the number of days in the Performance Period prior to the Termination Date relative to the number of the days in the full Performance Period.

(b) If the Participant’s Employment with the Company and its Subsidiaries shall be terminated for any reason after the Performance Period and before the Determination Date (other than a termination by the Company for Cause or by the Participant while grounds for Cause exist), then all PSUs shall remain outstanding and eligible to vest based on (and to the extent) the Committee’s determines that the Performance Conditions have been satisfied on the Determination Date.


3.	Effect of a Change in Control .

In each case within twelve (12) months following a Change in Control, in the event of (i) a Participant’s termination other than for Cause or (ii) a Participant’s termination due to death or Disability, and prior to the completion of the Performance Period, the number of PSUs to vest will be calculated based on actual performance through the date of termination as determined by the Committee. To the extent the Committee determines that measurement of actual performance cannot be reasonably assessed, the Committee will use assumed achievement of target performance, prorated based on the time elapsed from the date of grant to the date of termination.


4.	Definitions .

For the purposes of this Schedule I:

(a) “ Achievement Percentage ” means the “Percentage of Award Vested” specified with respect to the Percentile Performance for the performance criteria.

(b) “ Peer Group Members ” means the companies identified by the Committee at the time this Agreement was approved (provided however, that in the event one Peer Group Member merges with or is acquired by another Peer Group Member only the surviving company will be considered a Peer Group Member, or if one Peer Group Member is acquired by a company who is not a Peer Group Member then such acquired company will cease to be a Peer Group Member for all purposes hereunder).

(c) “ Total Shareholder Return ” of either the Company or a Peer Group Member means: (i) the 20 trading day average in March 2019 minus the 20 trading day average prior to the start of the Performance Period (the “ Base Price ”), divided by (ii) the Base Price. Total Shareholder Return shall be adjusted for stock splits, reverse stock splits, stock dividends, and other extraordinary transactions or other changes in the capital structure of the Company or the Peer Group Member, as applicable.

Exhibit 10.4

PINNACLE FOODS INC.
2013 OMNIBUS INCENTIVE PLAN

NONQUALIFIED STOCK OPTION AGREEMENT

THIS AGREEMENT (the “ Agreement ”), is made effective as of the date set forth on the signature page (the “ Signature Page ”) attached hereto (the “ Date of Grant ”), between Pinnacle Foods Inc., a Delaware corporation or any successor thereto (the “ Company ”) and the participant identified on the signature page attached hereto (the “ Participant ”).

RECITALS :

WHEREAS, the Company has adopted the Plan (as defined below), the terms of which are hereby incorporated by reference and made a part of this Agreement; and

WHEREAS, the Committee has determined that it would be in the best interests of the Company and its stockholders to grant the Option provided for herein to the Participant pursuant to the Plan and the terms set forth herein.

NOW, THEREFORE, in consideration of the mutual covenants hereinafter set forth, the parties agree as follows:

1. Definitions . Whenever the following terms are used in this Agreement, they shall have the meanings set forth below. Capitalized terms not otherwise defined herein shall have the same meanings as in the Plan.

(a) Employment : The term “Employment” shall mean (i) the Participant’s employment if the Participant is an employee of the Company or any of its Affiliates or Subsidiaries, (ii) the Participant’s services as a consultant, if the Participant is a consultant to the Company or any of its Affiliates or Subsidiaries and (iii) the Participant’s services as a non-employee director, if the Participant is a non-employee member of the Board.

(b) Exercise Price : The term “Exercise Price” shall have the meaning set forth in Section 2 of this Agreement.

(d) Option Period : The period beginning on the Date of Grant and ending on the tenth anniversary of the Date of Grant.

(e) Plan : The Pinnacle Foods Inc. 2013 Omnibus Incentive Plan, as amended from time to time.

(f) Retirement : the Participant’s termination of Employment with the Company, other than for Cause, following the date on which (i) the Participant’s age is 55 or greater, and (ii) the number of years of the Participant’s Employment and other business relationships with the Company and any predecessor company is 10 or greater.

(g) Share : A share of Common Stock of the Company.

(h) Termination Date : The date upon which the Participant’s Employment with the Company and its Affiliates and Subsidiaries is terminated.

(i) Vested Portion : At any time, the portion of the Option which has become vested in accordance with Section 3 of this Agreement and Schedule I attached hereto.

2. Grant of Option . The Company hereby grants to the Participant the right and option to purchase, on the terms and conditions hereinafter set forth, all or any part of the aggregate number of Shares set forth on the Signature Page (the “ Option ”), subject to adjustment as set forth in the Plan. The purchase price per Share shall be the amount per Share set forth on the Signature Page (the “ Exercise Price ”). The Option is intended to be a nonqualified stock option, and is not intended to be treated as an option that complies with Section 422 of the Code.

3. Vesting of the Option . The Option shall vest and become exercisable in accordance with Schedule I attached hereto.

4. Exercise of Options .

(a) Period of Exercise . Subject to the provisions of the Plan and this Agreement, the Participant may exercise all or any part of the Vested Portion of the Option at any time prior to the expiration of the Option Period. Notwithstanding the foregoing, if the Participant’s Employment terminates prior to the expiration of the Option Period, the Vested Portion of an Option shall remain exercisable for the period set forth below:

(i) Death or Disability; Retirement. If the Participant’s Employment is terminated (x) due to the Participant’s death or Disability, or (y) by either party when the Participant is eligible for Retirement (unless the termination is by the Company with Cause, or by the Participant when grounds existed for Cause at the time thereof), the Participant may exercise the Vested Portion of an Option for a period ending on the earlier of (A) 180 days following such termination of Employment and (B) the expiration of the Option Period;

(ii) Termination by the Company for Cause. If the Participant’s Employment is terminated by the Company for Cause, the Vested Portion of an Option shall immediately terminate in full and cease to be exercisable.

(iii) Termination Other than for Cause or Due to Death or Disability. If the Participant’s Employment is terminated other than by the Company for Cause or due to death or Disability, the Participant may exercise the Vested Portion of an Option that became vested on or prior to the date of termination for a period ending on the earlier of (A) 90 days following such termination of Employment and (B) the expiration of the Option Period.

(b) Method of Exercise .

(i) Subject to Section 4(a) of this Agreement and Section 7(d) of the Plan, the Vested Portion of an Option may be exercised by delivery of written or electronic notice of exercise to the Company, specifying the number of Shares for which the Option is being exercised, and accompanied by payment of the aggregate Exercise Price in respect of such Shares. The Exercise Price shall be payable (A) in cash or cash equivalent (e.g., by check), in shares of Common Stock valued at the Fair Market Value at the time the Option is exercised; provided, that such shares of Common Stock are not subject to any pledge or other security interest and that such Shares have been held by the Participant for no less than six months (or such other period as established from time to time by the Committee in order to avoid adverse accounting treatment applying generally accepted accounting principles); (B) partly in cash and partly in such Shares; (C) if there is a public market for the shares of Common Stock at such time, by means of a broker-assisted “cashless exercise” pursuant to which the Company is delivered a copy of irrevocable instructions to a stockbroker to sell the shares of Common Stock otherwise deliverable upon the exercise of the Option and to deliver promptly to the Company an amount equal to the Exercise Price; or (D) through a “net exercise” procedure effected by withholding the minimum number of shares of Common Stock otherwise deliverable in respect of an Option that are needed to pay the Exercise Price. No Participant shall have any rights to dividends or other rights of a stockholder with respect to Shares subject to an Option until the Participant has given written notice of exercise of the Option, paid in full for such Shares and, if applicable, has satisfied any other conditions imposed by the Committee pursuant to the Plan.

(ii) Notwithstanding any other provision of the Plan or this Agreement to the contrary, absent an available exemption to registration or qualification, an Option may not be exercised prior to the completion of any registration or qualification of an Option or the Shares under applicable state and federal securities or other laws, or under any

ruling or regulation of any governmental body or national securities exchange that the Committee shall in its sole discretion determine to be necessary or advisable.

(iii) Upon the Company’s determination that an Option has been validly exercised as to any of the Shares, the Company shall issue certificates in the Participant’s name for such Shares. However, the Company shall not be liable to the Participant for damages relating to any delays in issuing the certificates to the Participant, any loss by the Participant of the certificates, or any mistakes or errors in the issuance of the certificates or in the certificates themselves. Notwithstanding the foregoing, the Company may elect to recognize the Participant’s ownership through uncertificated book entry.

(iv) In the event of the Participant’s death, the Vested Portion of an Option shall remain exercisable by the Participant’s executor or administrator, or the person or persons to whom the Participant’s rights under this Agreement shall pass by will or by the laws of descent and distribution as the case may be, to the extent set forth in Section 4(a) of this Agreement. Any heir or legatee of the Participant shall take rights herein granted subject to the terms and conditions hereof, and any exercise of the Option pursuant to this Section 4(b) by any person or persons other than the Participant shall be accompanied by appropriate proof of the right of such person or persons to exercise the Option.

5. Restrictive Covenants . To the extent that the Participant and the Company (or an Affiliate of the Company) is a party to an employment agreement with the Company containing noncompetition, nonsolicitation, noninterference or confidentiality restrictions (or two or more such restrictions), those restrictions and related enforcement provisions under such employment agreement shall govern and the following provisions of this Section 5 shall not apply.

(a) Competitive Activity . (i) The Participant shall be deemed to have engaged in “ Competitive Activity ” if, during the period commencing on the date hereof and ending on the later of (x) the date that is 12 months after the date the Participant’s employment with the Company and its Subsidiaries is terminated or (y) the maximum number of years of base salary the Participant is entitled to receive as severance under any agreement with, or plan or policy of the Company or an Affiliate (the “ Restricted Period ”), the Participant, whether on the Participant’s own behalf or on behalf of or in conjunction with any other person or entity, directly or indirectly violates any of the following prohibitions:

(A) During the Restricted Period, the Participant will not solicit or assist in soliciting in a Competitive Business (as defined below) the business of any client or prospective client:

(1) with whom the Participant had personal contact or dealings on behalf of the Company during the one-year period preceding the Participant’s termination of employment;

(3) for whom the Participant had direct or indirect responsibility during the one year immediately preceding the Participant’s termination of employment.

(B) During the Restricted Period, the Participant will not directly or indirectly:

(2) enter the employ of, or render any services to, any Person (or any division or controlled or controlling affiliate of any Person) who or which engages in a Competitive Business;

(4) interfere with, or attempt to interfere with, business relationships (whether formed before, on or after the date of this Agreement) between the Company or any of its Affiliates and customers, clients, suppliers, partners, members or investors of the Company or its Affiliates.

(D) During the Restricted Period, the Participant will not, whether on the Participant’s own behalf or on behalf of or in conjunction with any Person, directly or indirectly:

(1) solicit or encourage any employee of the Company or its Affiliates to leave the employment of the Company or its Affiliates; or

(2) hire any such employee who was employed by the Company or its Affiliates as of the date of the Participant’s termination of employment with the Company or who left the employment of the Company or its Affiliates coincident with, or within 120 days (one year in the case of any such employee who reported directly to the Participant immediately preceding the Participant’s termination of employment (or the Participant’s direct reports)) prior to or after, the termination of the Participant’s employment with the Company.

(ii) It is expressly understood and agreed that although the Participant and the Company consider the restrictions contained in this Section 5 to be reasonable, if a final judicial determination is made by a court of competent jurisdiction that the time or territory or any other restriction contained in this Agreement is an unenforceable restriction against the Participant, the provisions of this Agreement shall not be rendered void but shall be deemed amended to apply as to such maximum time and territory and to such maximum extent as such court may judicially determine or indicate to be enforceable. Alternatively, if any court of competent jurisdiction finds that any restriction contained in this Agreement is unenforceable, and such restriction cannot be amended so

as to make it enforceable, such finding shall not affect the enforceability of any of the other restrictions contained herein

(iii) The period of time during which the provisions of this Section 5 shall be in effect shall be extended by the length of time during which the Participant is in breach of the terms hereof as determined by any court of competent jurisdiction on the Company’s application for injunctive relief.

(b) Confidentiality .(i) The Participant will not at any time (whether during or after the Participant’s employment with the Company) (x) retain or use for the benefit, purposes or account of the Participant or any other person; or (y) disclose, divulge, reveal, communicate, share, transfer or provide access to any person outside the Company (other than its professional advisers who are bound by confidentiality obligations), any non-public, proprietary or confidential information –including without limitation trade secrets, know-how, research and development, software, databases, inventions, processes, formulae, technology, designs and other intellectual property, information concerning finances, investments, profits, pricing, costs, products, services, vendors, customers, clients, partners, investors, personnel, compensation, recruiting, training, advertising, sales, marketing, promotions, government and regulatory activities and approvals – concerning the past, current or future business, activities and operations of the Company, its Subsidiaries or Affiliates and/or any third party that has disclosed or provided any of same to the Company on a confidential basis (“ Confidential Information ”) without the prior written authorization of the Board or the Chief Executive Officer of the Company.

disclosed by the Company to any unaffiliated party that is not under a restriction of confidentiality at least as restrictive as this restriction upon the Participant; provided, that the Participant may disclose to any prospective future employer any of the termination notice provisions under any agreement between the Participant and the Company (or an Affiliate of the Company) and the provisions of this Section 5(b) provided they agree to maintain the confidentiality of such terms.

(iv) Upon termination of the Participant’s employment with the Company for any reason, the Participant shall (x) cease and not thereafter commence use of any Confidential Information or intellectual property (including without limitation, any patent, invention, copyright, trade secret, trademark, trade name, logo, domain name or other source indicator) owned or used by the Company, its Subsidiaries or Affiliates; (y) immediately destroy, delete, or return to the Company, at the Company’s option, all originals and copies in any form or medium (including memoranda, books, papers, plans, computer files, letters and other data) in the Participant’s possession or control (including any of the foregoing stored or located in the Participant’s office, home, laptop or other computer, whether or not Company property) that contain Confidential Information or otherwise relate to the business of the Company, its Affiliates and Subsidiaries, except that the Participant may retain only those portions of any personal notes, notebooks and diaries that do not contain any Confidential Information and his or her rolodex (or other physical or electronic address book); and (z) fully cooperate with the Company regarding the delivery or destruction of any other Confidential Information not within the Participant’s possession or control of which the Participant is or becomes aware.

(c) Repayment of Proceeds . If the Participant engages in Competitive Activity or breaches the confidentiality provisions of Section 5, or the Company discovers after a termination of employment that grounds for Cause existed at the time thereof, then the Participant shall be required (in addition to any other remedy available (on a non-exclusive basis) to pay to the Company, within ten business days following the first date on which the Participant engages in such Competitive Activity or first breaches such provisions (or in the case of a discovery of grounds for Cause, upon the Company’s request therefor), an amount equal to the excess, if any, of (A) the aggregate after-tax proceeds (taking into account all amounts of tax that would be recoverable upon a claim of loss for payment of such proceeds in the year of repayment) the Participant received upon the sale or other disposition of, or distributions or dividends in respect of, the Option or any Shares received pursuant to exercise of the Option over (B) the aggregate Cost of such Option or Shares (which, in the case of Shares obtained pursuant to the exercise of the Option, shall be the Exercise Price).

6. No Right to Continued Employment . Neither the Plan nor this Agreement nor the granting of the Option evidence hereby shall be construed as giving the Participant the

right to be retained in the employ of, or in any consulting relationship to, the Company or any Affiliate. Further, the Company or any Affiliate may at any time dismiss the Participant or discontinue any consulting relationship, free from any liability or any claim under the Plan or this Agreement, except as otherwise expressly provided herein.

7. Legend on Certificates. The certificates representing the Shares purchased by exercise of an Option shall be subject to such stop transfer orders and other restrictions as the Committee may deem advisable under the Plan or the rules, regulations, and other requirements of the Securities and Exchange Commission, any stock exchange upon which such Shares are listed or quoted or market to which the Shares are admitted for trading and, any applicable federal or state or any other applicable laws and the Company’s Certificate of Incorporation and Bylaws, and the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions.

8. Transferability .

(a) The Option shall be exercisable only by the Participant during the Participant’s lifetime, or, if permissible under applicable law, by the Participant’s legal guardian or representative. The Option may not be assigned, alienated, pledged, attached, sold or otherwise transferred or encumbered by the Participant other than by will or by the laws of descent and distribution and any such purported assignment, alienation, pledge, attachment, sale, transfer or encumbrance shall be void and unenforceable against the Company or an Affiliate; provided that the designation of a beneficiary shall not constitute an assignment, alienation, pledge, attachment, sale, transfer or encumbrance.

(b) Notwithstanding the foregoing and subject to Section 14(b) of the Plan, the Option may be transferred to: (A) any person who is a “family member” of the Participant, as such term is used in the instructions to Form S-8 under the Securities Act or any successor form of registration statement promulgated by the Securities and Exchange Commission (collectively, the “ Immediate Family Members ”); (B) a trust solely for the benefit of the Participant and his or her Immediate Family Members; (C) a partnership or limited liability company whose only partners or stockholders are the Participant and his or her Immediate Family Members; or (D) a beneficiary to whom donations are eligible to be treated as “charitable contributions” for federal income tax purposes (each transferee described in clauses (A), (B), (C) and (D) above hereinafter referred to as a “ Permitted Transferee ”); provided that the Participant gives the Committee advance written notice describing the terms and conditions of the proposed transfer and the Committee notifies the Participant in writing that such a transfer would comply with the requirements of the Plan.

9. Limitation on Rights; No Right to Future Grants; Extraordinary Item of Compensation . By accepting this Agreement and the grant of the Option contemplated hereunder, the Participant expressly acknowledges that (a) the Plan is discretionary in nature and may be suspended or terminated by the Company at any time; (b) the grant of the Option is a one-time benefit that does not create any contractual or other right to receive future grants of Options, or benefits in lieu of Options; (c) all determinations with respect to future grants of Options, if any, including the grant date, the number of Shares granted and the applicable vesting terms, will be at the sole discretion of the Company; (d) the Participant’s participation in the Plan is voluntary; (e) the value of the Option is an extraordinary item of compensation that is outside the scope of the Participant’s employment contract, if any, and nothing can or must automatically be inferred from such employment contract or its consequences; (f) grants of Options are not part of normal or expected compensation for any purpose and are not to be used for calculating any severance, resignation, bonuses, pension or retirement benefits or similar payments, the Participant waives any claim on such basis, and for the avoidance of doubt, the Option shall not constitute an “acquired right” under the applicable law of any jurisdiction; and (g) the future value of the underlying Shares is unknown and cannot be predicted with certainty. In addition, the Participant understands, acknowledges and agrees that the Participant will have no rights to compensation or damages related to Option proceeds in consequence of the termination of the Participant’s Employment for any reason whatsoever and whether or not in breach of contract.

10. Electronic Acceptance; Agreement by the Participant; Forfeiture upon Failure to Accept . The Company may, in its sole discretion, decide to deliver any documents related to current or future participation in the Plan by electronic means. The Participant hereby consents to receive such documents by electronic delivery and agrees to participate in the Plan through an on-line or electronic system established and maintained by the Company or a third party designated by the Company. By accepting the Option (including through electronic means), the Participant agrees to be bound by the terms, conditions, and restrictions set forth in the Plan, this Agreement, and the Company’s policies, as in effect from time to time, relating to the Plan. The Participant's rights under the Option will lapse ninety (90) days from the Date of Grant, and the Option will be forfeited on such date if the Participant shall not have accepted this Agreement by such date. For the avoidance of doubt, the Participant's failure to accept this Agreement shall not affect the Participant’s continuing obligations under any other agreement between the Company and the Participant.

11. Prior Agreements; Full Satisfaction .

the matters subject to Section 3 other than an agreement which is an “employment agreement” for the purposes of Section 5 hereof, such other agreements shall remain in full force and effect and continue in addition to this Agreement and nothing in this Agreement or incorporated by reference shall supersede or replace any other confidentiality, non-competition, non-solicitation, non-disparagement or similar agreement entered into between the Participant and the Company (or any subsidiary or Affiliate) to the extent that such agreement is more protective of the business of the Company or any subsidiary or Affiliate), and provided, further, that to the extent a Participant is party to any agreement that would, by its terms, vary the terms of this Agreement (other than with respect to the matters subject to Section 5 hereof) or provide more favorable rights and remedies to the Participant, such terms will be deemed amended and shall not apply to the Options granted herein. There are no restrictions, agreements, promises, representations, warranties, covenants or undertakings with respect to the subject matter hereof other than those expressly set forth herein and therein.

(b) This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter, subject to the provisos in the first sentence of Section 9(a). The Options granted herein are in full satisfaction of any equity grants or long-term stock-based incentive awards set forth in any offer letter or description of your terms of employment entered into by and between you and the Company or provided to you by the Company.

12. Withholding .

(a) Subject to Section 4(b) of this Agreement, the Participant shall be required to pay to the Company, and the Company shall have the right and is hereby authorized to withhold, from any shares of Common Stock other property deliverable under the Option or from any compensation (including from payroll or any other amounts payable to the Participant) the amount (in cash, Common Stock, or other property) of any required withholding taxes in respect of an Award, its exercise, or any other payment or transfer of the Option and to take such other action as may be necessary in the opinion of the Committee or the Company to satisfy all obligations for the payment of such withholding and taxes; provided, however, that no amounts shall be withheld in excess of the Company’s statutory minimum withholding liability.

(b) Without limiting the generality of the foregoing, to the extent permitted by the Committee, the Participant may satisfy, in whole or in part, the foregoing withholding liability by delivery of Shares held by the Participant (which are fully vested and not subject to any pledge or other security interest) or by having the Company withhold from the number of Shares otherwise deliverable to the Participant hereunder Shares with a Fair Market Value not in excess of the statutory minimum withholding liability. The Participant agrees to make adequate

provision for any sums required to satisfy all applicable federal, state, local and foreign tax withholding obligations of the Company which may arise in connection with the Option.

13. Severability . Should any provision of this Agreement be held by a court of competent jurisdiction to be unenforceable or invalid for any reason, the remaining provisions of this Agreement shall not be affected by such holding and shall continue in full force in accordance with their terms.

14. Successors in Interest . Any successor to the Company shall have the benefits of the Company under, and be entitled to enforce, this Agreement. Likewise, the Participant’s legal representative shall have the benefits of Participant under, and be entitled to enforce, this Agreement. All obligations imposed upon the Participant and all rights granted to the Company under this Agreement shall be final, binding and conclusive upon the Participant’s heirs, executors, administrators and successors.

15. Securities Laws . The Company reserves the right to impose other requirements on the Participant's participation in the Plan, on the Options and on any Shares acquired under the Plan, to the extent the Company determines it is necessary or advisable for legal or administrative reasons, and to require the Participant to sign any additional agreements or undertakings that may be necessary to accomplish the foregoing. Upon the acquisition of any Shares pursuant to the exercise of an Option, the Participant will make or enter into such written representations, warranties and agreements as the Committee may reasonably request in order to comply with applicable securities laws or with this Agreement.

16. Notices . Any notice necessary under this Agreement shall be addressed to the Company in care of its Treasurer and a copy to the General Counsel, each copy addressed to the principal Participant office of the Company and to the Participant at the address appearing in the personnel records of the Company for the Participant or to either party at such other address as either party hereto may hereafter designate in writing to the other. Any such notice shall be deemed effective upon receipt thereof by the addressee.

17. Governing Law . This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware without regard to conflicts of laws.

18. Option Subject to Plan . The Participant acknowledges that the Participant has received and read a copy of the Plan. The Option and the Shares received upon exercise of an Option are subject to the terms and provisions of the Plan, as may be amended from time to time, and which are hereby incorporated by reference. In the event of a conflict between any term or provision contained herein and a term or provision of the Plan, the applicable terms and provisions of the Plan will govern and prevail.

19. Amendment . The Committee may waive any conditions or rights under, amend any terms of, or alter, suspend, discontinue, cancel or terminate this Agreement, but no such waiver, amendment, alteration, suspension, discontinuance, cancellation or termination shall materially adversely affect the rights of the participant hereunder without the consent of the Participant. The Participant acknowledges that a waiver by the Company of breach of any provision of this Agreement shall not operate or be construed as a waiver of any other provision of this Agreement, or of any subsequent breach by the Participant or any other participant in the Plan.

[ The remainder of this page intentionally left blank .]

IN WITNESS WHEREOF, this Agreement has been executed and delivered by the parties hereto as of the Grant Date.

Grant Date : April 1, 2016

Shares subject to Option :

Exercise Price per Share : $45.28



	Participant

[ Signature Page – Option Agreement ]

Agreed and accepted:



	PINNACLE FOODS INC.


	/s/ Kelley Maggs
	By: Kelley Maggs
	Its: EVP – General Counsel

Schedule I
Vesting

1. Vesting .

Subject to the Participant’s continued Employment, the Option shall become vested and exercisable as to 100% of the Shares subject to the Option on the third (3 ^rd ) anniversary of the Grant Date. Notwithstanding any other provision of this Agreement to the contrary, in each case within twelve (12) months following a Change in Control, in the event of (i) a Participant’s termination other than for Cause or (ii) a Participant’s termination due to death or Disability, the Option shall, to the extent not then vested or previously forfeited or cancelled, become fully vested and exercisable.

2. Termination of Employment .

(a) If the Participant’s Employment terminates for any reason, subject to Section 5 of the Plan and Section 2(b) of Schedule I hereof, to the extent not then vested and exercisable, the Option shall be immediately canceled by the Company without consideration. Following any Termination Date, the Vested Portion shall remain exercisable for the period set forth in Section 4(a) of the Agreement.

(b) A portion of the Option granted hereunder shall become immediately vested and exercisable as of a Termination Date if the Participant’s Employment with the Company and its Subsidiaries shall be terminated (A) by the Company or any Subsidiary due to or during Participant’s Disability, or due to Participant’s death, or (B) by either party when the Participant is eligible for Retirement (unless the termination is by the Company with Cause, or by the Participant when grounds existed for Cause at the time thereof), with the number of Shares with respect to which the Option becomes vested and exercisable equal to (x) a fraction, the numerator of which is the number of days between the Date of Grant and the Termination Date, inclusive, and the denominator of which is 1095, multiplied by (y) the total number of Shares subject to the Option granted hereunder.

Exhibit 10.5

PINNACLE FOODS INC.

2013 OMNIBUS INCENTIVE PLAN

RESTRICTED STOCK AWARD AGREEMENT

THIS RESTRICTED STOCK AWARD AGREEMENT (the “ Agreement ”), is made effective as of the date set forth on the signature page (the “ Signature Page ”) attached hereto (the “ Date of Grant ”), between Pinnacle Foods Inc., a Delaware corporation or any successor thereto (the “ Company ”) and the participant identified on the Signature Page attached hereto (the “ Participant ”).

R E C I T A L S :

WHEREAS, the Company has adopted the Pinnacle Foods Inc. 2013 Omnibus Incentive Plan (the “ Plan ”), the terms of which Plan are incorporated herein by reference and made a part of this Agreement, and capitalized terms not otherwise defined herein shall have the same meanings as in the Plan; and

WHEREAS, the Committee has determined that it would be in the best interests of the Company and its stockholders to grant the restricted stock award provided for herein to the Participant pursuant to the Plan and the terms set forth herein;

NOW THEREFORE, in consideration of the mutual covenants hereinafter set forth, the parties agree as follows:

1. The Restricted Shares .

(a) Subject to the terms and conditions of the Plan and the additional terms and conditions set forth in this Agreement, effective as of the Date of Grant specified on the Signature Page attached hereto, the Company hereby grants to the Participant an Award consisting of the number of shares of Restricted Stock (the “ Restricted Shares ”) set forth on the Signature Page attached hereto.

2. Vesting of the Restricted Shares . The Restricted Shares shall vest and become non-forfeitable in accordance with Schedule I attached hereto.

3. Restrictive Covenants .

(a) General . To the extent that the Participant and the Company (or an Affiliate of the Company) is a party to an employment agreement with the Company containing

noncompetition, nonsolicitation, noninterference or confidentiality restrictions (or two or more such restrictions), those restrictions and related enforcement provisions under such employment agreement shall govern and the following provisions of this Section 3 shall not apply. Participant acknowledges and recognizes the highly competitive nature of the businesses of the Company and its Affiliates and accordingly agrees, in Participant’s capacity as an equity holder in the Company, to the provisions of Section 3 of this Agreement (the “ Restrictive Covenants ”).

(b) Competitive Activity . (i) The Participant shall be deemed to have engaged in “ Competitive Activity ” if, during the period commencing on the date hereof and ending on the later of (x) the date that is 12 months after the date the Participant’s employment with the Company and its Subsidiaries is terminated or (y) the maximum number of years of base salary the Participant is entitled to receive as severance under any agreement with, or plan or policy of the Company or an Affiliate (the “ Restricted Period ”), the Participant, whether on the Participant’s own behalf or on behalf of or in conjunction with any other person or entity, directly or indirectly violates any of the following prohibitions:

(ii) During the Restricted Period, the Participant will not solicit or assist in soliciting in a Competitive Business (as defined below) the business of any client or prospective client:

A. with whom the Participant had personal contact or dealings on behalf of the Company during the one-year period preceding the Participant’s termination of employment;

B. with whom employees directly reporting to the Participant (or the Participant’s direct reports) have had personal contact or dealings on behalf of the Company during the one year immediately preceding the Participant’s termination of employment; or

C. for whom the Participant had direct or indirect responsibility during the one year immediately preceding the Participant’s termination of employment.

(iii) During the Restricted Period, the Participant will not directly or indirectly:

A. engage in any business that is engaged in, or has plans to engage in, at any time during the Restricted Period, any activity that competes in the business of manufacturing and marketing food products that directly compete with the core brands of the Company as of the Termination Date (and for such purpose, a “core brand” shall be any brand generating annual revenues in an

amount equal to at least 5% of the Company’s annual revenues, in the fiscal year preceding the fiscal year of such Termination Date) in any geographical area that is within 100 miles from any geographical area where the Company or its Affiliates manufactures and markets its products or services (a “ Competitive Business ”);

B. enter the employ of, or render any services to, any Person (or any division or controlled or controlling affiliate of any Person) who or which engages in a Competitive Business;

C. acquire a financial interest in, or otherwise become actively involved with, any Competitive Business, directly or indirectly, as an individual, partner, shareholder, officer, director, principal, agent, trustee or consultant; or

D. interfere with, or attempt to interfere with, business relationships (whether formed before, on or after the date of this Agreement) between the Company or any of its Affiliates and customers, clients, suppliers, partners, members or investors of the Company or its Affiliates.

(iv) Notwithstanding anything to the contrary in this Agreement, the Participant may, directly or indirectly own, solely as an investment, securities of any Person engaged in a Competitive Business which are publicly traded on a national or regional stock exchange or on the over-the-counter market if the Participant (A) is not a controlling person of, or a member of a group which controls, such person and (B) does not, directly or indirectly, own 5% or more of any class of securities of such Person.

(v) During the Restricted Period, the Participant will not, whether on the Participant’s own behalf or on behalf of or in conjunction with any Person, directly or indirectly:

A. solicit or encourage any employee of the Company or its Affiliates to leave the employment of the Company or its Affiliates; or

B. hire any such employee who was employed by the Company or its Affiliates as of the date of the Participant’s termination of employment with the Company or who left the employment of the Company or its Affiliates coincident with, or within 120 days (one year in the case of any such employee who reported directly to the Participant immediately preceding the Participant’s termination of employment (or the Participant’s direct reports)) prior to or after, the termination of the Participant’s employment with the Company.

(vi) During the Restricted Period, the Participant will not, directly or indirectly, solicit or encourage to cease to work with the Company or its Affiliates any consultant then under contract with the Company or its Affiliates, as such action would result in the Company being disadvantaged. Any solicitation or hiring, that the Participant is not personally involved in, of an employee or former employee of the Company through general advertising shall not, of itself, be a breach of this Section 3(b)(vi).

(vii) It is expressly understood and agreed that although the Participant and the Company consider the restrictions contained in this Section 3(b) to be reasonable, if a final judicial determination is made by a court of competent jurisdiction that the time or territory or any other restriction contained in this Agreement is an unenforceable restriction against the Participant, the provisions of this Agreement shall not be rendered void but shall be deemed amended to apply as to such maximum time and territory and to such maximum extent as such court may judicially determine or indicate to be enforceable. Alternatively, if any court of competent jurisdiction finds that any restriction contained in this Agreement is unenforceable, and such restriction cannot be amended so as to make it enforceable, such finding shall not affect the enforceability of any of the other restrictions contained herein.

(viii) The period of time during which the provisions of this Section 3(b) shall be in effect shall be extended by the length of time during which the Participant is in breach of the terms hereof as determined by any court of competent jurisdiction on the Company's application for injunctive relief.

(c) Confidentiality . (i) The Participant will not at any time (whether during or after the Participant’s employment with the Company) (x) retain or use for the benefit, purposes or account of the Participant or any other person; or (y) disclose, divulge, reveal, communicate, share, transfer or provide access to any person outside the Company (other than its professional advisers who are bound by confidentiality obligations), any non-public, proprietary or confidential information --including without limitation trade secrets, know-how, research and development, software, databases, inventions, processes, formulae, technology, designs and other intellectual property, information concerning finances, investments, profits, pricing, costs, products, services, vendors, customers, clients, partners, investors, personnel, compensation, recruiting, training, advertising, sales, marketing, promotions, government and regulatory activities and approvals -- concerning the past, current or future business, activities and operations of the Company, its Subsidiaries or Affiliates and/or any third party that has disclosed or provided any of same to the Company on a confidential basis (“ Confidential Information ”) without the prior written authorization of the Board or the Chief Executive Officer of the Company.

(ii) “ Confidential Information ” shall not include any information that is (A) generally known to the industry or the public other than as a result of the Participant’s breach of this covenant or any breach of other confidentiality obligations by third parties; (B) made legitimately available to the Participant by a third party without breach of any confidentiality obligation; or (C) required by law to be disclosed (including via subpoena); provided that the Participant shall give prompt written notice to the Company of such requirement of law, disclose no more information than is so required, and cooperate, at the Company’s cost, with any attempts by the Company to obtain a protective order or similar treatment.

(iii) Except as required by law, the Participant will not disclose to anyone, other than the Participant’s immediate family and legal or financial advisors, the existence or contents of this Agreement (unless this Agreement shall be publicly available as a result of a regulatory filing made by the Company or its Affiliates) or otherwise is disclosed by the Company to any unaffiliated party that is not under a restriction of confidentiality at least as restrictive as this restriction upon the Participant; provided , that the Participant may disclose to any prospective future employer any the termination notice provisions under any agreement between the Participant and the Company (or an Affiliate of the Company) and the provisions of this Section 3(c) provided they agree to maintain the confidentiality of such terms.

(d) Relief . Participant acknowledges and agrees that the Company’s remedies at law for a breach or threatened breach of any of the provisions of Section 3(b) of this Agreement or any similar provision applicable to Participant (or a material breach or material threatened breach of any of the provisions of Section 3(c) of this Agreement) (a “ Restrictive

Covenant Violation ”) would be inadequate and the Company would suffer irreparable damages as a result of such Restrictive Covenant Violation. In recognition of this fact, Participant agrees that, in the event of such a breach or threatened breach, in addition to any remedies at law, the Company, without posting any bond, shall be entitled to cease making any payments or providing any benefit otherwise required by this Agreement and obtain equitable relief in the form of specific performance, temporary restraining order, temporary or permanent injunction or any other equitable remedy which may then be available.

(e) Repayment of Proceeds . If the Participant engages in Competitive Activity or breaches the confidentiality provisions of Section 3(c), then the Participant shall be required (in addition to any other remedy available (on a non-exclusive basis) to pay to the Company, within ten business days following the first date on which the Participant engages in such Competitive Activity or first breaches such provisions, an amount equal to the excess, if any, of (A) the aggregate after-tax proceeds (taking into account all amounts of tax that would be recoverable upon a claim of loss for payment of such proceeds in the year of repayment) the Participant received upon the sale or other disposition of, or distributions or dividends in respect of, the Restricted Shares over (B) the aggregate Cost of such Restricted Shares (if any).

4. Certificates . Certificates evidencing the Restricted Shares may be issued by the Company and any such certificates shall be registered in the Participant’s name on the stock transfer books of the Company promptly after the date hereof, but shall remain in the physical custody of the Company or its designee at all times prior to the later of (x) the vesting of Restricted Shares pursuant to this Agreement, and (y) the expiration of any transfer restrictions set forth in this Agreement or otherwise applicable to the Restricted Shares. As soon as practicable following such time, certificates for the Shares shall be delivered to the Participant or to the Participant’s legal guardian or representative along with the stock powers relating thereto. No certificates shall be issued for fractional Shares. Notwithstanding the foregoing, the Company may elect to recognize the Participant’s ownership through uncertificated book entry. To the extent required by the Company, the Participant shall deliver to the Company a stock power, duly endorsed in blank, relating to the Restricted Shares that have not previously vested. However, the Company shall not be liable to the Participant for damages relating to any delays in issuing the certificates to the Participant, any loss by the Participant of the certificates, or any mistakes or errors in the issuance of the certificates or in the certificates themselves.

5. Rights as a Stockholder . The Participant shall be the record owner of the Restricted Shares until or unless such Restricted Shares are forfeited pursuant to the terms of this Agreement, and as record owner shall be entitled to all rights of a common stockholder of the Company, including, without limitation, voting rights with respect to the Restricted Shares; provided that (i) any cash or in‑kind dividends paid with respect to the Restricted Shares shall be accumulated by the Company and shall be paid to the Participant only when, and if, such

Restricted Shares shall become vested pursuant to the terms of this Agreement, and (ii) the Restricted Shares shall be subject to the limitations on transfer and encumbrance set forth in Section 8 of this Agreement.

6. Legend on Certificates . To the extent applicable, all book entries (or certificates, if any) representing the Restricted Shares delivered to the Participant as contemplated by Section 1 above shall be subject to such stop transfer orders and other restrictions as the Committee may deem advisable under the Plan or the rules, regulations, and other requirements of the Securities and Exchange Commission, any stock exchange upon which such Restricted Shares are listed or quoted or market to which the Shares are admitted for trading, and any applicable Federal or state or any other applicable laws and the Company’s Certificate of Incorporation and Bylaws, and the Committee may cause notations to be made next to the book entries (or a legend or legends put on certificates, if any) to make appropriate reference to such restrictions. Any such book entry notations (or legends on certificates, if any) shall include a description to the effect of the restrictions set forth in Section 8 below.

7. No Right to Continued Employment . Neither the Plan nor this Agreement nor the granting of the Restricted Shares evidenced impose any obligation on the Company or any Affiliate to continue the employment or consulting relationship of the Participant. Further, the Company or any Affiliate may at any time dismiss the Participant or discontinue any consulting relationship, free from any liability or any claim under the Plan or this Agreement, except as otherwise expressly provided herein.

8. Transfer Restrictions . The Restricted Shares may not, at any time prior to becoming vested pursuant to the terms of this Agreement, be Transferred and any such purported Transfer shall be void and unenforceable against the Company or any Affiliate; provided that the designation of a beneficiary shall not constitute an assignment, alienation, pledge, attachment, sale, transfer or encumbrance. “ Transfer ” shall mean (in either the noun or the verb form, including with respect to the verb form, all conjugations thereof within their correlative meanings) with respect to any security, the gift, sale, assignment, transfer, pledge, hypothecation or other disposition (whether for or without consideration, whether directly or indirectly, and whether voluntary, involuntary or by operation of law) of such security or any interest therein.

9. Prior Agreements; Full Satisfaction .

continue in addition to this Agreement and nothing in this Agreement or incorporated by reference shall supersede or replace any other confidentiality, non-competition, non-solicitation, non-disparagement or similar agreement entered into between the Participant and the Company (or any subsidiary or Affiliate) to the extent that such agreement is more protective of the business of the Company or any subsidiary or Affiliate), and provided, further, that to the extent a Participant is party to any agreement that would, by its terms, vary the terms of this Agreement (other than with respect to the matters subject to Section 3 hereof) or provide more favorable rights and remedies to the Participant, such terms will be deemed amended and shall not apply to the Restricted Shares acquired herein. There are no restrictions, agreements, promises, representations, warranties, covenants or undertakings with respect to the subject matter hereof other than those expressly set forth herein and therein.

(b) This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter, subject to the provisos in the first sentence of Section 9(a). The Restricted Shares granted herein are in full satisfaction of any equity grants or long-term stock-based incentive awards set forth in any offer letter or description of your terms of employment entered into by and between you and the Company or provided to you by the Company.

10. Withholding .

(a) The Participant shall be required to pay to the Company or any Affiliate and the Company shall have the right and is hereby authorized to withhold, from any Shares or from any compensation (including from payroll or any other amounts payable to the Participant) the amount (in cash, Shares, or other property) of any required withholding taxes in respect of the Restricted Shares, their grant or vesting or any payment or transfer with respect to the Restricted Shares, and to take such action as may be necessary in the opinion of the Committee to satisfy all obligations for the payment of such withholding taxes, provided, however, that no amounts shall be withheld in excess of the Company’s statutory minimum withholding liability.

(b) Without limiting the generality of the foregoing, to the extent permitted by the Committee, the Participant may satisfy, in whole or in part, the foregoing withholding liability (i) by delivery of Shares held by the Participant (which are fully vested and not subject to any pledge or other security interest) or (ii) by having the Company withhold from the number of Shares otherwise deliverable to the Participant hereunder Shares with a Fair Market Value not in excess of the statutory minimum withholding liability. The Participant agrees to make adequate provision for any sums required to satisfy all applicable federal, state, local and foreign tax withholding obligations of the Company which may arise in connection with the grant of the Restricted Shares hereunder.

11. Securities Laws; Cooperation . Upon the vesting of any Restricted Shares, the Participant will make or enter into such written representations, warranties and agreements as the Committee may reasonably request in order to comply with applicable securities laws, the Plan or with this Agreement.

12. Notices . Any notice necessary under this Agreement shall be addressed to the Company in care of its Treasurer and a copy to the General Counsel, each copy addressed to the principal Participant office of the Company and to the Participant at the address appearing in the personnel records of the Company for the Participant or to either party at such other address as either party hereto may hereafter designate in writing to the other. Any such notice shall be deemed effective upon receipt thereof by the addressee.

13. Choice of Law; Jurisdiction; Venue . This Agreement shall be governed by and construed in accordance with the laws of the state of Delaware without regard to conflicts of laws. Any suit, action or proceeding with respect to this Agreement (or any provision incorporated by reference), or any judgment entered by any court in respect of any thereof, shall be brought in any court of competent jurisdiction in the state of New York or the State of Delaware, and each of the Participant, the Company, and any transferees hereby submits to the exclusive jurisdiction of such courts for the purpose of any such suit, action, proceeding, or judgment. Each of the Participant, the Company, and any transferees hereby irrevocably waives (a) any objections which it may now or hereafter have to the laying of the venue of any suit, action, or proceeding arising out of or relating to this Agreement (or any provision incorporated by reference) brought in any court of competent jurisdiction in the state of Delaware, (b) any claim that any such suit, action, or proceeding brought in any such court has been brought in any inconvenient forum and (c) any right to a jury trial.

14. Shares Subject to Plan . The Participant acknowledges that the Participant has received and read a copy of the Plan. The Restricted Shares granted hereunder are subject to the terms and provisions of the Plan, as may be amended from time to time, and which are hereby incorporated by reference. In the event of a conflict between any term or provision contained herein and a term or provision of the Plan, the applicable terms and provisions of the Plan will govern and prevail.

15. Amendment . The Committee may waive any conditions or rights under, amend any terms of, or alter, suspend, discontinue, cancel or terminate this Agreement, but no such waiver, amendment, alteration, suspension, discontinuance, cancellation or termination shall materially adversely affect the rights of the participant hereunder without the consent of the Participant.

16. Signature in Counterparts . This Agreement may be signed in counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.

[ Signatures on next page. ]

IN WITNESS WHEREOF, this Agreement has been executed and delivered by the parties hereto as of the Grant Date.

Grant Date : May 23, 2016

Restricted Shares :



	Participant
	Mark Clouse


	/s/ Mark Clouse

[ Signature Page – Restricted Stock Award Agreement ]

Agreed and accepted:



	PINNACLE FOODS INC.


	/s/ Kelley Maggs
	By: Kelley Maggs
	Its: EVP – General Counsel

Schedule I
Vesting

1. Vesting . Subject to Section 2 below, so long as the Participant continues to be employed by the Company, the Restricted Shares shall become vested with respect to 100% of the Restricted Shares on the second anniversary of the Date of Grant

2. Termination of Employment .

If the Participant’s employment with the Company and its Subsidiaries is terminated by the Company or any Subsidiary (i) due to or during Participant’s Disability or due to Participant’s death, (ii) for any reason other than for Cause at the time thereof, or (iii) within 12 months following a Change in Control, the Restricted Shares shall, to the extent not then vested or previously forfeited or cancelled, become fully vested.

Exhibit 10.6