Table of Contents

As filed with the Securities and Exchange Commission on October 27, 2009

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 10-Q

(Mark one)

x       Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended October 3, 2009

or

o          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 001-32316

B&G FOODS, INC.

(Exact name of Registrant as specified in its charter)

Registrant’s telephone number, including area code:  (973) 401-6500

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 x No o

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 o No o

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 the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes o No x

As of October 3, 2009, the registrant had 47,367,292 shares of Class A common stock, par value $0.01 per share, issued and outstanding, 18,199,058 of which were held in the form of Enhanced Income Securities (EISs) and 29,168,234 of which were held separate from EISs.  Each EIS represents one share of Class A common stock and $7.15 principal amount of 12% senior subordinated notes due 2016.  As of October 3, 2009, the registrant had no shares of Class B common stock, par value $0.01 per share, issued or outstanding.

Table of Contents

B&G Foods, Inc. and Subsidiaries

Index

i

Table of Contents

PART I

FINANCIAL INFORMATION

Item 1.  Financial Statements (Unaudited)

B&G Foods, Inc. and Subsidiaries

Consolidated Balance Sheets

(In thousands, except share and per share data)

(Unaudited)

See Notes to Consolidated Financial Statements.

1

Table of Contents

B&G Foods, Inc. and Subsidiaries

Consolidated Statements of Operations

(In thousands, except per share data)

(Unaudited)

See Notes to Consolidated Financial Statements.

2

Table of Contents

B&G Foods, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

See Notes to Consolidated Financial Statements.

3

Table of Contents

B&G Foods, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

(1)                               Nature of Operations

B&G Foods, Inc. is a holding company, the principal assets of which are the capital stock of its subsidiaries.  Unless the context requires otherwise, references in this report to “B&G Foods,” “our company,” “we,” “us” and “our” refer to B&G Foods, Inc. and its subsidiaries.  We operate in one industry segment and manufacture, sell and distribute a diverse portfolio of high-quality shelf-stable foods across the United States, Canada and Puerto Rico.  Our products include hot cereals, fruit spreads, canned meats and beans, spices, seasonings, marinades, hot sauces, wine vinegar, maple syrup, molasses, salad dressings, Mexican-style sauces, taco shells and kits, salsas, pickles, peppers and other specialty food products.  We compete in the retail grocery, food service, specialty, private label, club and mass merchandiser channels of distribution.  We distribute our products throughout the United States via a nationwide network of independent brokers and distributors to supermarket chains, food service outlets, mass merchants, warehouse clubs, non-food outlets and specialty food distributors.

(2)                               Summary of Significant Accounting Policies

Fiscal Year

Our financial statements are presented on a consolidated basis.  Typically, our fiscal quarters and fiscal year consist of 13 and 52 weeks, respectively, ending on the Saturday closest to December 31 in the case of our fiscal year and fourth fiscal quarter, and on the Saturday closest to the end of the corresponding calendar quarter in the case of our fiscal quarters.  As a result, a 53rd week is added to our fiscal year every five or six years.  In a 53-week fiscal year our fourth fiscal quarter contains 14 weeks.  Our fiscal year ending January 2, 2010 (fiscal 2009) contains 52 weeks and our fiscal year ended January 3, 2009 (fiscal 2008) contained 53 weeks.  Each quarter of fiscal 2009 and 2008 contains 13 weeks, except the fourth quarter of 2008 which contained 14 weeks.

Basis of Presentation

The accompanying consolidated interim financial statements for the thirteen and thirty-nine week periods ended October 3, 2009 (third quarter of 2009 and first three quarters of 2009) and September 27, 2008 (third quarter of 2008 and first three quarters of 2008) have been prepared by our company in accordance with accounting principles generally accepted in the United States of America without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (SEC), and include the accounts of B&G Foods, Inc. and its subsidiaries.  Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with generally accepted accounting principles have been omitted pursuant to such rules and regulations.  However, our management believes, to the best of their knowledge, that the disclosures herein are adequate to make the information presented not misleading.  All intercompany balances and transactions have been eliminated.  The accompanying unaudited consolidated financial statements contain all adjustments (consisting only of normal and recurring adjustments) that are, in the opinion of management, necessary to present fairly our consolidated financial position as of October 3, 2009, the results of our operations for the third quarter and first three quarters of 2009 and 2008, and cash flows for the first three quarters of 2009 and 2008.  Our results of operations for the third quarter and first three quarters of 2009 are not necessarily indicative of the results to be expected for the full year.  We have evaluated subsequent events for disclosure through October 27, 2009, the date of issuance of the accompanying unaudited consolidated financial statements.  The accompanying unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes for fiscal 2008 included in our Annual Report on Form 10-K for fiscal 2008 filed with the SEC on March 5, 2009.

4

Table of Contents

B&G Foods, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

(2)                               Summary of Significant Accounting Policies (Continued)

Use of Estimates

The preparation of financial statements in accordance with U.S. generally accepted accounting principles requires our management to make a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.  Some of the more significant estimates and assumptions made by management involve trade and consumer promotion expenses; allowances for excess, obsolete and unsaleable inventories; pension benefits; purchase accounting allocations; the recoverability of goodwill, trademarks, customer relationship intangibles, property, plant and equipment and deferred tax assets; the accounting for our enhanced income securities (EISs); and the accounting for share-based compensation expense.  Actual results could differ significantly from these estimates and assumptions.

Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, that management believe to be reasonable under the circumstances.  We adjust such estimates and assumptions when facts and circumstances dictate.  Recent volatility in the credit, equity and foreign currency markets has increased the uncertainty inherent in such estimates and assumptions.

Enhanced Income Securities

Each of our EISs represents one share of our Class A common stock and $7.15 principal amount of our senior subordinated notes. The holders of our EISs may separate each EIS into one share of Class A common stock and $7.15 principal amount of senior subordinated notes at any time.  Upon the occurrence of certain events (including redemption of the senior subordinated notes or upon maturity of the senior subordinated notes), EISs will automatically separate.  Conversely, subject to limitations, a holder of separate shares of Class A common stock and senior subordinated notes can combine such securities to form EISs.  Separation and combination of EISs will automatically result in increases and decreases, respectively, in the number of shares of Class A common stock not held in the form of EISs.  As of October 3, 2009, we had 47,367,292 shares of Class A common stock issued and outstanding, 18,199,058 of which were held in the form of EISs and 29,168,234 of which were held separate from EISs.  As of September 27, 2008 we had 36,796,988 shares of Class A common stock issued and outstanding, 17,077,331 of which were held in the form of EISs and 19,719,657 of which were held separate from EISs.  See note 5 for a discussion of the automatic separation of EISs that is scheduled to occur on October 30, 2009 in connection with the partial redemption of the senior subordinated notes on November 2, 2009.  Following the automatic separation of the EISs, holders of shares of Class A common stock and senior subordinated notes will no longer be able to combine such securities to form EISs.

Recently Issued Accounting Standards

In June 2009, the Financial Accounting Standards Board (FASB) established the FASB Accounting Standards CodificationTM (Codification) as the single source of authoritative GAAP recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the SEC under authority of federal securities laws are also sources of authoritative U.S. GAAP for SEC registrants.  The Codification, which is effective as of our third quarter of fiscal 2009, supersedes all existing non-SEC accounting and reporting standards.  All other nongrandfathered non-SEC accounting literature not included in the Codification will become nonauthoritative.  The adoption of this standard did not have any impact on our results of operations or financial position.

In September 2006, the FASB issued a new standard relating to fair value measurements, which defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements.  This standard was effective as of the beginning of our fiscal 2008, with the exception of certain provisions deferred until the beginning of our fiscal 2009.  In February 2008, the FASB delayed the effective date of the standard for all non-financial assets and liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis, until the beginning of our fiscal 2009.  We adopted the standard effective at the beginning of our fiscal 2008 for financial assets and financial liabilities, which did not have a material impact on our results of operations or financial position.  We adopted the standard effective at the beginning of our fiscal 2009 for non-financial

5

Table of Contents

B&G Foods, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

(2)                               Summary of Significant Accounting Policies (Continued)

assets and non-financial liabilities, which did not have a material impact on our results of operations or financial position.

In December 2007, the FASB issued new standards relating to business combinations and noncontrolling interests in consolidated financial statements.  The standard relating to business combinations requires an acquirer to measure the identifiable assets acquired, the liabilities assumed and any noncontrolling interest in the acquiree at their fair values on the acquisition date, with goodwill being the excess value over the net identifiable assets acquired.  The noncontrolling interest standard clarifies that a noncontrolling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements.  These standards were effective as of the beginning of our fiscal 2009.  The business combinations standard will be applied prospectively, and any effects will depend on future acquisitions.  The standard relating to noncontrolling interests in consolidated financial statements requires retroactive adoption.  We currently do not have any noncontrolling interests in subsidiaries.

In March 2008, the FASB issued a standard that amended existing standards about derivative instruments and hedging activities to require enhanced disclosures about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows.  The amendments were effective as of the beginning of our fiscal 2009.  Since the amendments require enhanced disclosures, without a change to existing standards relative to measurement and recognition, our adoption of the standard did not have any effect on our results of operations or financial position.  See notes 6 and 7 for the required disclosures about our derivative instruments and hedging activities.

In April 2008, the FASB issued a standard relating to how companies should determine the useful life of intangible assets.  The standard requires companies estimating the useful life of a recognized intangible asset to consider their historical experience in renewing or extending similar arrangements or, in the absence of historical experience, to consider assumptions that market participants would use about renewal or extension as adjusted for entity-specific factors.  We adopted this standard effective at the beginning of our fiscal 2009, which did not have a material impact on our results of operations or financial position.

In December 2008, the FASB issued a standard relating to an employer’s disclosure about postretirement benefit plan assets.  The standard requires additional disclosures about plan assets for defined benefit pension and other postretirement benefit plans.  The standard will be effective as of the end of our fiscal 2009.  Since this requires enhanced disclosures, without a change to existing standards relative to measurement and recognition, our adoption of the standard will not have a material impact on our results of operations or financial position.

In May 2009, the FASB established a general standard of accounting for, and requiring disclosure of, events that occur after the balance sheet date but before financial statements are issued or are available to be issued.  The standard was effective beginning with our second quarter of fiscal 2009.  The adoption of the standard did not have a material effect on our on our results of operations or financial position.

6

Table of Contents

B&G Foods, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

(3)                               Inventories

Inventories consist of the following, as of the dates indicated (dollars in thousands):

(4)                               Goodwill, Trademarks and Customer Relationship Intangibles

There has been no change in the carrying amount of goodwill for the period from January 3, 2009 to October 3, 2009.

There has been no change in the carrying amount of trademarks (indefinite-lived intangibles) for the period from January 3, 2009 to October 3, 2009.

The following table reconciles the changes in the carrying amount of customer relationship intangibles for the period from January 3, 2009 to October 3, 2009 (dollars in thousands):

Customer relationship intangibles are presented at cost, net of accumulated amortization, and are amortized on a straight-line basis over their estimated useful lives of 20 years.  Amortization expense associated with customer relationship intangibles for each of the third quarter and first three quarters of 2009 and 2008 was $1.6 million and $4.8 million, respectively, and is recorded in operating expenses.  We expect to recognize an additional $1.7 million of amortization expense associated with our current customer relationship intangibles during the remainder of fiscal 2009, and thereafter $6.5 million per year for each of the next four succeeding fiscal years.

7

Table of Contents

B&G Foods, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

(5)                               Long-term Debt

Long-term debt consists of the following, as of the dates indicated (dollars in thousands):

As of October 3, 2009, the aggregate maturities of long-term debt are as follows (dollars in thousands):

Senior Secured Credit Facility.  During the third quarter of 2009, Credit Suisse replaced Lehman Commercial Paper Inc. (Lehman CPI) as the administrative agent under our credit facility.  Also during the third quarter of 2009, the credit facility was amended to, among other things, extend the maturity date for the undrawn revolving credit facility from January 2011 to February 2013.  As amended, our $25.0 million revolving credit facility and our $130.0 million of term loan borrowings mature in February 2013, provided, however, that if we do not repay, redeem or refinance our senior notes prior to April 1, 2011, the revolving credit facility and the outstanding term loan borrowings will become immediately due and payable on April 1, 2011.  The following discussion of the credit facility describes the credit facility as amended through the date of issuance of the accompanying unaudited consolidated financial statements.

Interest under the revolving credit facility, including any outstanding letters of credit, is determined based on alternative rates that we may choose in accordance with the revolving credit facility, including the base lending rate per annum plus an applicable margin of 2.00%, and LIBOR plus an applicable margin of 3.00%.  We pay a commitment fee of 0.50% per annum on the unused portion of the revolving credit facility.  Interest under the term loan facility is determined based on alternative rates that we may choose in accordance with the credit facility, including the base lending rate per annum plus an applicable margin of 1.00%, and LIBOR plus an applicable margin of 2.00%.

Our obligations under the credit facility are jointly and severally and fully and unconditionally guaranteed on a senior basis by all of our existing and certain future domestic subsidiaries.  The credit facility

8

Table of Contents

B&G Foods, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

(5)                               Long-term Debt (Continued)

is secured by substantially all of our and our domestic subsidiaries’ assets except our and our domestic subsidiaries’ real property.  The credit facility provides for mandatory prepayment upon certain asset dispositions and issuances of securities, as defined.  The credit facility contains covenants that restrict, among other things, our ability to incur additional indebtedness, pay dividends and create certain liens.  The credit facility also contains certain financial maintenance covenants, which, among other things, specify maximum capital expenditure limits, a minimum interest coverage ratio and a maximum senior and total leverage ratio, each ratio as defined.  As of October 3, 2009, we were in compliance with all of the covenants in the credit facility.  Proceeds of the revolving credit facility are restricted to funding our working capital requirements, capital expenditures and acquisitions of companies in the same line of business as our company, subject to specified criteria.  The maximum letter of credit capacity under the revolving credit facility is $10.0 million, with a fronting fee of 3.0% per annum for all outstanding letters of credit.

On September 15, 2008, Lehman CPI filed for protection under Chapter 11 of the U.S. Bankruptcy Code.  Following that date, we no longer believed that Lehman CPI would honor its $3.1 million funding commitment under the revolving credit facility if we were to make a funding request.  Therefore, when Lehman CPI’s commitment was assumed by other lenders during the third quarter of 2009, the effective available borrowing capacity under our revolving credit facility, net of outstanding letters of credit increased by $3.1 million.  At October 3, 2009, the available borrowing capacity under our revolving credit facility, net of outstanding letters of credit of $0.5 million, was $24.5 million.  We have not drawn upon the revolving credit facility since its inception in October 2004 and, based upon our cash on hand and working capital requirements, we have no plans to do so for the foreseeable future.

Effective as of February 26, 2007, we entered into a six year interest rate swap agreement in order to effectively fix at 7.0925% the interest rate payable for $130.0 million of term loan borrowings through the life of the term loan, ending on February 26, 2013.  The counterparty to the swap is Lehman Special Financing Inc. (Lehman SFI) and the counterparty’s guarantor is Lehman Brothers Holdings Inc.  On September 15, 2008, (Lehman) filed for protection under Chapter 11 of the U.S. Bankruptcy Code.  Lehman SFI filed for protection under Chapter 11 of the U.S. Bankruptcy Code on October 3, 2008.

We initially designated the swap as a cash flow hedge.  Prior to Lehman’s bankruptcy filing, we recorded changes in the fair value of the swap in other comprehensive income (loss), net of tax in our consolidated balance sheet.  However, as a result of the Lehman bankruptcy filing, we determined in September 2008 that the interest rate swap was no longer an effective hedge.  Accordingly, subsequent to that determination, we record changes in the swap’s fair value in current earnings in net interest expense in our consolidated statements of operations.  We obtain third-party verification of fair value at the end of each reporting period.  As of October 3, 2009, the fair value of our interest rate swap was an unrealized loss of $13.0 million and is recorded in other liabilities on our consolidated balance sheet.  The amount recorded in accumulated other comprehensive income (loss) will be reclassified to net interest expense over the remaining life of the term loan borrowings as we make interest payments.  Net interest expense in the third quarter and first three quarters of 2009 includes a charge of $0.6 million and a benefit of $0.1 million, respectively, relating to the unrealized gain (loss) on our interest rate swap and a reclassification of $0.4 million and $1.3 million, respectively, of the amount recorded in accumulated other comprehensive income (loss) related to the swap.  During the remainder of fiscal 2009, we expect to reclassify to net interest expense $0.4 million of the amount recorded in accumulated other comprehensive income (loss).

Subsidiary Guarantees.  We have no assets or operations independent of our direct and indirect subsidiaries.  All of our present domestic subsidiaries jointly and severally and fully and unconditionally guarantee our senior subordinated notes and our senior notes, and management has determined that our Canadian subsidiary, which is our only subsidiary that is not a guarantor of our senior subordinated notes and

9

Table of Contents

B&G Foods, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

(5)                               Long-term Debt (Continued)

senior notes, is a “minor subsidiary” as that term is used in Rule 3-10 of Regulation S-X promulgated by the SEC.  There are no significant restrictions on our ability and the ability of our subsidiaries to obtain funds from our respective subsidiaries by dividend or loan.  Consequently, separate financial statements have not been presented for our subsidiaries because management has determined that they would not be material to investors.

Deferred Debt Financing Costs.  In connection with the issuance of our senior subordinated notes and our senior notes in October, 2004, we capitalized approximately $23.1 million of debt financing costs, which will be amortized over their respective terms.  In connection with the issuance of term loan borrowings of $25.0 million in January 2006, we capitalized approximately $0.4 million of additional debt financing costs, which will be amortized over the term of the loan.  In connection with the issuance of additional term loan borrowings of $205.0 million in February 2007 we capitalized approximately $4.0 million of additional debt financing costs, which will be amortized over the term of the loan.  During the second quarter of 2007 we wrote-off and expensed $1.8 million of deferred debt financing costs in connection with our May 2007 prepayment of $100.0 million of term loan borrowings.  During the third quarter of 2009, we wrote-off and expensed $0.3 million of deferred debt financing costs relating to the repurchase during the quarter of $6.3 million principal amount of senior subordinated notes.  During the third quarter of 2009, we also capitalized approximately $0.7 million of additional debt financing costs in connection with an amendment to our credit facility.  As of October 3, 2009 and January 3, 2009 we had net deferred debt financing costs of $11.3 million and $13.2 million, respectively.

At October 3, 2009 and January 3, 2009 accrued interest of $4.5 million and $9.4 million, respectively, is included in accrued expenses in the accompanying consolidated balance sheets.

Repurchase and Partial Redemption of Senior Subordinated Notes.  During the third quarter of 2009, we repurchased $6.3 million principal amount of senior subordinated notes in a privately negotiated transaction, which resulted in a pre-tax charge in our third quarter of $0.7 million, representing a cash charge of $0.4 million relating to the repurchase premium and a non-cash charge of $0.3 million relating to the write-off of unamortized deferred debt financing costs.

Also during the third quarter of 2009, we issued a notice of partial redemption for $90.0 million principal amount of our senior subordinated notes at a cash redemption price of 106% of the principal amount of the notes being redeemed, plus accrued and unpaid interest on such amount, to, but excluding, the redemption date of November 2, 2009.  Upon completion of the redemption, $69.5 million principal amount of the senior subordinated notes will remain outstanding.  As a result of the foregoing, we have reclassified $90.0 million principal amount of our senior subordinated notes from long-term debt to current portion of long-term debt in the accompanying unaudited consolidated financial statements.

Pursuant to the terms of the indenture governing the senior subordinated notes, the partial redemption of the senior subordinated notes will result in an automatic separation of all of the EISs into the component shares of Class A common stock and senior subordinated notes.  The automatic separation is expected to occur on October 30, 2009.

The partial redemption of the senior subordinated notes is expected to result in a pre-tax charge in our fourth quarter of fiscal 2009 of $9.5 million, which represents a cash charge of $5.4 million relating to the call premium and a non-cash charge of $4.1 million relating to the write-off of unamortized deferred debt financing costs.

10

Table of Contents

B&G Foods, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

(6)                               Fair Value Measurements

The FASB standard relating to fair value measurements defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). The standard outlines a valuation framework and creates a fair value hierarchy in order to increase the consistency and comparability of fair value measurements and the related disclosures.  Under generally accepted accounting principles, certain assets and liabilities must be measured at fair value, and the standard details the disclosures that are required for items measured at fair value.

Financial assets and liabilities are measured using inputs from the three levels of the standard’s fair value hierarchy. The three levels are as follows:

Level 1—Inputs are unadjusted quoted prices in active markets for identical assets or liabilities.

Level 2—Inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (i.e., interest rates, yield curves, etc.), and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs).

Level 3—Unobservable inputs that reflect our assumptions about the assumptions that market participants would use in pricing the asset or liability.

In accordance with the fair value hierarchy described above, the following table shows the fair value of our interest rate swap as of October 3, 2009 and January 3, 2009, which is included in other liabilities in our consolidated balance sheet (dollars in thousands):

Cash and cash equivalents, trade accounts receivable, income tax receivable, trade accounts payable, accrued expenses and dividends payable are reflected in the consolidated balance sheets at carrying value, which approximates fair value due to the short-term nature of these instruments.

The carrying values and fair values of our term loan borrowings, senior notes and senior subordinated notes as of October 3, 2009 and January 3, 2009 are as follows (dollars in thousands):

(1)          Fair values are estimated based on quoted market prices, except as otherwise noted in footnotes (2) and (3) below.

11

Table of Contents

B&G Foods, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

(6)                               Fair Value Measurements (Continued)

(2)          Solely for purposes of this presentation, we have assumed that the fair value of each senior subordinated note at October 3, 2009 was $7.36, based upon the $7.84 per share closing price of our separately traded Class A common stock and the $15.20 per EIS closing price of our EISs on the New York Stock Exchange on October 2, 2009 (the last business day of the third quarter of 2009).  Each EIS represents one share of Class A common stock and $7.15 principal amount of our senior subordinated notes.

(3)          Solely for purposes of this presentation, we have assumed that the fair value of each senior subordinated note at January 3, 2009 was $5.17, based upon the $5.49 per share closing price of our separately traded Class A common stock and the $10.66 per EIS closing price of our EISs on the New York Stock Exchange on January 2, 2009 (the last business day of fiscal 2008).

Our term loan borrowings are subject to an interest rate swap discussed in notes 5 and 7.

(7)                               Disclosures about Derivative Instruments and Hedging Activities

We recognize all derivative instruments either as an asset or a liability in the balance sheet and to measure such instruments at fair value.  We do not engage in derivative instruments for trading purposes.

The following table presents the fair value and the location within our consolidated balance sheet of all assets and liabilities associated with derivative instruments not designated as hedging instruments (dollars in thousands):

See notes 5 and 6 for additional information regarding our interest rate swap.  We do not currently have any derivatives designated as hedging instruments under FASB standards.

The following tables present the impact of derivative instruments and their location within our consolidated statement of operations (dollars in thousands):

*                 The amount included in net interest expense for the third quarter and first three quarters of 2009 consists of $631 unrealized loss and $108 unrealized gain on our interest rate swap, and $424 and $1,270 (pre-tax) reclassified to net interest expense from accumulated other comprehensive income, respectively.

12

Table of Contents

B&G Foods, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

(8)                               Stockholders’ Equity

Sale of Class A Common Stock.  In September 2009, we completed an underwritten public offering of 11,500,000 shares of our Class A common stock as a separately traded security at $8.00 per share.  The proceeds of the offering were $86.6 million, after deducting underwriting discounts and commissions and other transaction expenses.  The offering was made by means of a prospectus and the related prospectus supplement included as part of an effective shelf registration statement previously filed with the SEC.  The net proceeds of the offering, together with cash on hand, will be used to fund a partial redemption of $90.0 million principal amount of our senior subordinated notes.  See note 5 for a discussion of the partial redemption.

(9)                               Comprehensive Income

Comprehensive income includes net income, foreign currency translation adjustments relating to assets and liabilities located in our Canadian subsidiary, changes in our pension benefits, net of tax and the change in the fair value of an interest rate swap during the period it was designated as an effective cash flow hedge, net of tax.  The amount recorded in accumulated other comprehensive income (loss) related to the swap will be reclassified to net interest expense over the remaining life of the term loan as we make interest payments.

The components of comprehensive income are as follows (dollars in thousands):

(10)                        Pension Benefits

Net periodic costs for the third quarter and first three quarters of 2009 and 2008 include the following components (dollars in thousands):

13

Table of Contents

B&G Foods, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

(10)         Pension Benefits (Continued)

During the first three quarters of 2009, we made approximately $2.8 million in contributions to our defined benefit pension plans, $0.7 million of which were made during the third quarter.  We do not anticipate electing to make contributions to our defined benefit pension plans during the remainder of fiscal 2009.

(11)         Commitments and Contingencies

Environmental.  We are subject to environmental laws and regulations in the normal course of business.  We did not make any material expenditures during the third quarter and first three quarters of 2009 or in fiscal 2008 in order to comply with environmental laws and regulations.  Based on our experience to date, management believes that the future cost of compliance with existing environmental laws and regulations (and liability for any known environmental conditions) will not have a material adverse effect on our consolidated financial position, results of operations or liquidity.  However, we cannot predict what environmental or health and safety legislation or regulations will be enacted in the future or how existing or future laws or regulations will be enforced, administered or interpreted, nor can we predict the amount of future expenditures that may be required in order to comply with such environmental or health and safety laws or regulations or to respond to such environmental claims.

Legal Proceedings.  We are from time to time involved in various claims and legal actions arising in the ordinary course of business, including proceedings involving product liability claims, worker’s compensation and other employee claims, and tort and other general liability claims, as well as trademark, copyright, patent infringement and related claims and legal actions.  In the opinion of our management, the ultimate disposition of any currently pending claims or actions will not have a material adverse effect on our consolidated financial position, results of operations or liquidity.

Collective Bargaining Agreements.  Approximately 339 of our 724 employees, or 46.8%, as of October 3, 2009, were covered by collective bargaining agreements.  None of our collective bargaining agreements is scheduled to expire within one year.

Severance and Change of Control Agreements.  We have employment agreements with each of our six executive officers.  The agreements generally continue until terminated by the executive or by us, and provide for severance payments under certain circumstances, including termination by us without cause (as defined) or as a result of the employees’ disability, or termination by us or a deemed termination upon a change of control (as defined).  Severance benefits include payments for salary continuation, continuation of health care and insurance benefits, present value of additional pension credits and, in the case of a change of control, accelerated vesting under compensation plans and potential excise tax liability and gross up payments.

(12)         Earnings per Share

We currently have only one class of common stock issued and outstanding, designated as Class A common stock.  During the periods presented there were no shares of Class B common stock issued or outstanding.  Basic earnings per share for the Class A common stock is calculated by dividing net income by the weighted average number of shares of Class A common stock outstanding.  Diluted earnings per share for each of the periods presented are equal to basic earnings per share because no potentially dilutive securities were outstanding during either period.

14

Table of Contents

B&G Foods, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

(13)         Business and Credit Concentrations and Geographic Information

Our exposure to credit loss in the event of non-payment of accounts receivable by customers is estimated in the amount of the allowance for doubtful accounts.  We perform ongoing credit evaluations of our customers’ financial conditions.  Our top ten customers accounted for approximately 50.1% and 46.3% of consolidated net sales for the first three quarters of 2009 and 2008, respectively.  Our top ten customers accounted for approximately 53.2% and 56.1% of our receivables as of October 3, 2009 and January 3, 2009, respectively.  Other than Wal-Mart, which accounted for 15.9% and 13.4% of our consolidated net sales for the first three quarters of 2009 and 2008, respectively, no single customer accounted for more than 10.0% of our consolidated net sales for the first three quarters of 2009 or 2008.  Other than C&S Wholesale Grocery and Wal-Mart, which accounted for 13.8% and 11.8% of our consolidated receivables, respectively, as of October 3, 2009, no single customer accounted for more than 10.0% of our consolidated receivables as of the end of the first three quarters of 2009.  Other than C&S Wholesale Grocery and Wal-Mart, which accounted for 17.7% and 13.2% of our consolidated receivables, respectively, as of January 3, 2009, no single customer accounted for more than 10.0% of our consolidated receivables as of the end of fiscal 2008.

During the third quarter and first three quarters of 2009 and 2008, our sales to foreign countries represented less than 1.0% of net sales.  Our foreign sales are primarily to customers in Canada.

(14)         Share-Based Compensation

The recognition of compensation expense for our performance share long-term incentive awards (LTIAs) is initially based on the probable outcome of the applicable performance condition based on the fair value of the award on the date of grant and the anticipated number of shares to be awarded on a straight-line basis over the applicable performance period.  Our company’s performance against the performance goal defined in the award agreements will be re-evaluated on a quarterly basis throughout the applicable performance period and the recognition of compensation expense will be adjusted for subsequent changes in the estimated or actual outcome.  The cumulative effect on current and prior periods of a change in the estimated number of performance share awards is recognized as an adjustment to earnings in the period of the revision.

During the third quarter and first three quarters of 2009, we recognized $1.5 million and $3.1 million, respectively, of compensation expense related to performance share LTIAs for the 2008 to 2009, 2008 to 2010 and 2009 to 2011 performance periods, which is reflected in general and administrative and sales, marketing and distribution expenses in our consolidated statements of operations.  As of October 3, 2009, there was $3.2 million of unrecognized compensation expense related to performance share LTIAs, which is expected to be recognized over the next 27 months.

The following table details the activity in our performance share LTIAs for the first three quarters of 2009:

15

Table of Contents

B&G Foods, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

(14)         Share-Based Compensation (Continued)

(1)   The target number of unvested performance shares is based on the participants earning their target number of performance shares at 100%.  The ultimate award, which we determine at the end of the applicable performance period, can range from zero to 300% of the target number of performance shares.  The estimated number of unvested performance shares is based upon the quarterly evaluation we completed at the end of the third quarter of 2009 of our company’s performance goals against the performance goals defined in the applicable award agreements.

(2)   The fair value of the awards was determined based upon the closing price of our Class A common stock on the applicable measurement dates reduced by the present value of expected dividends using the risk-free interest-rate as the award holders are not entitled to dividends or dividend equivalents during the vesting period.

(3)   Represents unvested 2008 to 2009 and 2008 to 2010 performance share LTIAs granted in fiscal 2008.

(4)   Represents unvested 2009 to 2011 performance share LTIAs granted in the first three quarters of 2009.

Non-Employee Director Stock Grants.  Each of our non-employee directors receives an annual equity grant of approximately $35,000 of Class A Common Stock as part of his or her non-employee director compensation.  These shares fully vest when issued.  On June 1, 2009, 24,135 shares of Class A common stock in the aggregate were issued to the non-employee directors based upon the closing price of our Class A common stock on May 29, 2009 (the business day immediately prior to the date of grant) of $7.25 per share.  Share-based compensation expense of $0.2 million relating to the non-employee director grants is reflected in general and administrative expenses in our consolidated statements of operations for the first three quarters of 2009.

(15)         Stock and Debt Repurchase Plan

On October 27, 2008, our board of directors authorized a stock and debt repurchase program for the repurchase of up to $10.0 million of our Class A common stock and/or senior notes over the next twelve months.  On May 5, 2009, the board of directors authorized an increase in the authorization to $25.0 million and extended the authorization through May 4, 2010.  Under the authorization, we may purchase shares of Class A common stock and/or senior notes from time to time in the open market or in privately negotiated transactions in compliance with the applicable rules and regulations of the SEC.

The timing and amount of such repurchases, if any, will be at the discretion of management, and will depend on market conditions and other considerations.  Therefore, there can be no assurance as to the number or aggregate dollar amount of shares that will be repurchased under the stock and debt repurchase program.  Likewise, there can be no assurance as to the principal amount of senior notes, if any, that will be repurchased.  We may discontinue the program at any time.  Any shares repurchased pursuant to the stock repurchase program will be retired.  Likewise, any senior notes repurchased will be cancelled.

During the first two quarters of 2009 we repurchased and retired 403,500 shares of Class A common stock at an average cost per share (excluding fees and commissions) of $5.76, or $2.3 million in the aggregate.  We did not repurchase any shares of Class A common stock during the third quarter of 2009.  During the third quarter of 2009, we repurchased $6.3 million principal amount of our senior subordinated notes for $6.6 million plus accrued and unpaid interest.  As of October 3, 2009, we had $13.5 million available for future repurchases of Class A common stock and/or senior notes under the stock and debt repurchase plan.

16

Table of Contents

Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements that involve risks and uncertainties.  Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth under the heading “Forward-Looking Statements” below and elsewhere in this report.  The following discussion should be read in conjunction with the unaudited consolidated financial statements and related notes for the thirteen and thirty-nine weeks ended October 3, 2009 (third quarter of 2009 and first three quarters of 2009) included elsewhere in this report and the audited consolidated financial statements and related notes for the fiscal year ended January 3, 2009 (fiscal 2008) included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (SEC) on March 5, 2009 (which we refer to as our 2008 Annual Report on Form 10-K).

General

We manufacture, sell and distribute a diverse portfolio of branded, high quality, shelf-stable food products, many of which have leading regional or national market shares.  In general, we position our branded products to appeal to the consumer desiring a high quality and reasonably priced product.  We complement our branded product retail sales with institutional and food service sales and limited private label sales.

Our goal is to continue to increase sales, profitability and cash flows by enhancing our existing portfolio of branded shelf stable products and by capitalizing on our competitive strengths.  We intend to implement our growth strategy through the following initiatives: expanding our brand portfolio with acquisitions of complementary branded businesses, continuing to develop innovative new products and delivering them to market quickly, leveraging our multiple channel sales and distribution system and continuing to focus on higher growth customers and distribution channels.  Since 1996, we have successfully acquired and integrated 18 separate brands into our operations.

We are subject to a number of challenges that may adversely affect our businesses.  These challenges, which are discussed below and under the heading “Forward-Looking Statements,” include:

Fluctuations in Commodity Prices and Production and Distribution Costs:  We purchase raw materials, including agricultural products, meat, poultry, other raw materials, ingredients and packaging materials from growers, commodity processors, other food companies and packaging manufacturers.  Raw materials, ingredients and packaging materials are subject to fluctuations in price attributable to a number of factors.  Fluctuations in commodity prices can lead to retail price volatility and intensive price competition, and can influence consumer and trade buying patterns.  Although our commodity prices for wheat were lower in the first three quarters of 2009 than those incurred during the first three quarters of 2008, our commodity prices for beans and packaging were higher than those incurred during the first three quarters of 2008.

We purchase maple syrup primarily from Canada and Vermont.  In 2008, maple syrup production in Canada, which represents the great majority of global production, was significantly below industry needs due to growing global demand and one of the worst crop yields in nearly 40 years.  As a result, the price we paid for maple syrup increased significantly and we were faced with a shortfall in supply as compared to our needs, which had a negative impact on our sales volume of maple syrup products during fiscal 2008 that continued through the first two quarters of 2009.  The 2009 maple syrup crop yield is more consistent with historic levels.  This together with the granting of additional production quotas by the Federation of Québec Maple Syrup Producers has brought global supply more in line with global demand and is expected to reduce the price we will pay for maple syrup during the remainder of 2009 as compared to 2008.  In addition, unlike 2008, we have been able to purchase sufficient maple syrup in 2009 to meet our needs.

The cost of labor, manufacturing, energy, fuel, packaging materials and other costs related to the production and distribution of our food products have also risen significantly in recent years.  We attempt to

17

Table of Contents

manage these risks by entering into short-term supply contracts and advance commodities purchase agreements from time to time, implementing cost saving measures and by raising sales prices.  To date, our cost saving measures and sales price increases have offset increases to our raw material, ingredient and packaging costs, although in certain cases on a lagging basis.  To the extent we are unable to offset present and future cost increases, our operating results will be negatively impacted.

Consolidation in the Retail Trade and Consequent Inventory Reductions:  As the retail grocery trade continues to consolidate and our retail customers grow larger and become more sophisticated, our retail customers may demand lower pricing and increased promotional programs.  These customers are also reducing their inventories and increasing their emphasis on private label products.

Changing Customer Preferences:  Consumers in the market categories in which we compete frequently change their taste preferences, dietary habits and product packaging preferences.

Consumer Concern Regarding Food Safety, Quality and Health:  The food industry is subject to consumer concerns regarding the safety and quality of certain food products.

Fluctuations in Currency Exchange Rates:  We purchase the majority of our maple syrup requirements from suppliers located in Québec, Canada.  Any weakening of the U.S. dollar against the Canadian dollar, could significantly increase our costs relating to the production of our maple syrup products to the extent that we have not purchased Canadian dollars in advance of any such weakening of the U.S. dollar.

To confront these challenges, we continue to take steps to build the value of our brands, to improve our existing portfolio of products with new product and marketing initiatives, to reduce costs through improved productivity and to address consumer concerns about food safety, quality and health and to favorably manage currency fluctuations.

Critical Accounting Policies; Use of Estimates

The preparation of financial statements in accordance with U.S. generally accepted accounting principles requires our management to make a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.  Some of the more significant estimates and assumptions made by management involve trade and consumer promotion expenses; allowances for excess, obsolete and unsaleable inventories; pension benefits; purchase accounting allocations; the recoverability of goodwill, trademarks, customer relationship intangibles, property, plant and equipment, and deferred tax assets; the accounting for our EISs; and the accounting for share-based compensation expense.  Actual results could differ significantly from these estimates and assumptions.

In our 2008 Annual Report on Form 10-K, we identified the critical accounting policies which affect our more significant estimates and assumptions used in preparing our consolidated financial statements. There have been no significant changes to these policies since January 3, 2009.

18

Table of Contents

Results of Operations

The following table sets forth the percentages of net sales represented by selected items for the third quarter of 2009 and 2008 and first three quarters of 2009 and 2008 reflected in our consolidated statements of operations.  The comparisons of financial results are not necessarily indicative of future results:

As used in this section the terms listed below have the following meanings:

Net Sales.  Our net sales represents gross sales of products shipped to customers plus amounts charged to customers for shipping and handling, less cash discounts, coupon redemptions, slotting fees and trade promotional spending.

Gross Profit.  Our gross profit is equal to our net sales less cost of goods sold.  The primary components of our cost of goods sold are cost of internally manufactured products, purchases of finished goods from co-packers plus freight costs to our distribution centers and to our customers.

Sales, Marketing and Distribution Expenses.  Our sales, marketing and distribution expenses include costs for marketing personnel, consumer advertising programs, internal sales forces, brokerage costs and warehouse facilities.

General and Administrative Expenses.  Our general and administrative expenses include administrative employee compensation and benefit costs, as well as information technology infrastructure and communication costs, office rent and supplies, professional services and other general corporate expenses.

Amortization Expense—Customer Relationships. Amortization expense—customer relationships includes the amortization expense associated with customer relationship intangibles, which are amortized over their useful lives of 20 years.

Net Interest Expense.  Net interest expense includes interest relating to our outstanding indebtedness and amortization of deferred debt financing costs, net of interest income and subsequent to our determination in September 2008, that our interest rate swap is no longer an effective hedge as defined by FASB standards, unrealized gains (losses) on the interest rate swap and the reclassification of amounts recorded in accumulated other comprehensive income (loss) related to the swap.

19

Table of Contents

Loss on Extinguishment of Debt.  Loss on extinguishment of debt for the third quarter and first three quarters of 2009 includes costs relating to our repurchase of senior subordinated notes, including the repurchase premium and the write-off of deferred debt financing costs.

Non-GAAP Financial Measures

Certain disclosures in this report include “non-GAAP (generally accepted accounting principles) financial measures.”  A non-GAAP financial measure is defined as a numerical measure of our financial performance that excludes or includes amounts so as to be different than the most directly comparable measure calculated and presented in accordance with GAAP in our consolidated balance sheets and related consolidated statements of operations, changes in stockholders’ equity and comprehensive income, and cash flows.

EBITDA is a measure used by management to measure operating performance.  We define EBITDA as net income before net interest expense (as defined above), income taxes, depreciation and amortization and loss on extinguishment of debt (as defined above). Management believes that it is useful to eliminate net interest expense, income taxes, depreciation and amortization and loss on extinguishment of debt because it allows management to focus on what it deems to be a more reliable indicator of ongoing operating performance and our ability to generate cash flow from operations. We use EBITDA in our business operations, among other things, to evaluate our operating performance, develop budgets and measure our performance against those budgets, determine employee bonuses and evaluate our cash flows in terms of cash needs. We also present EBITDA because we believe it is a useful indicator of our historical debt capacity and ability to service debt and because covenants in our credit facility, our senior notes indenture and our senior subordinated notes indenture contain ratios based on this measure.  As a result, internal management reports used during monthly operating reviews feature the EBITDA metric. However, management uses this metric in conjunction with traditional GAAP operating performance and liquidity measures as part of its overall assessment of company performance and liquidity and therefore does not place undue reliance on this measure as its only measure of operating performance and liquidity.

EBITDA is not a recognized term under GAAP and does not purport to be an alternative to operating income or net income as an indicator of operating performance or any other GAAP measure. EBITDA is not a complete net cash flow measure because EBITDA is a measure of liquidity that does not include reductions for cash payments for an entity’s obligation to service its debt, fund its working capital, capital expenditures and acquisitions, if any, and pay its income taxes and dividends. Rather, EBITDA is a potential indicator of an entity’s ability to fund these cash requirements. EBITDA is not a complete measure of an entity’s profitability because it does not include costs and expenses for depreciation and amortization, interest and related expenses, loss on extinguishment of debt and income taxes. Because not all companies use identical calculations, this presentation of EBITDA may not be comparable to other similarly titled measures of other companies. However, EBITDA can still be useful in evaluating our performance against our peer companies because management believes this measure provides users with valuable insight into key components of GAAP amounts.

A reconciliation of EBITDA to net income and to net cash provided by operating activities for the third quarter and first three quarters of 2009 and 2008 along with the components of EBITDA follows:

20

Table of Contents

(A)  Loss on extinguishment of debt for the third quarter and first three quarters of 2009 includes costs relating to our repurchase of senior subordinated notes, including the repurchase premium and the write-off of deferred debt financing costs.

Third quarter of 2009 compared to the third quarter of 2008.

Net Sales.  Net sales increased $7.4 million or 6.3% to $123.9 million for the third quarter of 2009 from $116.5 million for the third quarter of 2008.  Net sales for the third quarter of 2009 were negatively impacted by the poor maple syrup crop in Canada in 2008 that led to a global shortfall of pure maple syrup.  Net sales of our Maple Grove Farms pure maple syrup products decreased by $0.1 million, consisting of a sales price decline of $0.5 million, partially offset by unit volume increases of $0.4 million.  Excluding net sales of our pure maple syrup products, net sales for the third quarter of 2009 increased $7.5 million or 7.1%.  The $7.5 million increase was attributable to sales price and unit volume increases of $6.7 million and $0.8 million, respectively.

Net sales of our lines of Ortega, Cream of Wheat, Ac’cent, Las Palmas, Grandma’s and Joan of Arc products increased in the amounts of $6.0 million, $1.2 million, $0.9 million, $0.8 million, $0.7 million and $0.5 million or 24.3%, 7.9%, 22.3%, 12.5%, 29.5% and 18.4%, respectively.  These increases were offset by a reduction in net sales of Bloch & Guggenheimer, B&M, Emeril’s and private label pickles and peppers products of $1.2 million, $0.7 million, $0.7 million and $0.3 million or 12.6%, 13.9%, 13.9% and 27.1%.  In the aggregate, net sales for all other brands increased $0.3 million, or 0.8%.

Gross Profit.  Gross profit increased $5.5 million or 17.9% to $36.2 million for the third quarter of 2009 from $30.7 million for the third quarter of 2008.  Gross profit expressed as a percentage of net sales increased 2.8 percentage points to 29.2% in the third quarter of 2009 from 26.4% in the third quarter of 2008.  This increase in gross profit expressed as a percentage of net sales was primarily attributable to increased sales prices of $6.2 million and reduced wheat and maple syrup costs partially offset by increased costs for beans and packaging and an increase in our accrual for performance-based compensation of $0.4 million.

Sales, Marketing and Distribution Expenses.  Sales, marketing and distribution expenses decreased $0.1 million or 1.4% to $10.7 million for the third quarter of 2009 from $10.8 million for the third quarter of

21

Table of Contents

2008.  This decrease is primarily due to a decrease in consumer marketing and trade spending of $0.7 million and selling expense of $0.5 million, offset by an increase in warehousing expense of $0.4 million and an increase in our accrual for performance-based compensation of $0.7 million.  Expressed as a percentage of net sales, our sales, marketing and distribution expenses decreased to 8.6% for the third quarter of 2009 from 9.3% for the third quarter of 2008.

General and Administrative Expenses.  General and administrative expenses increased $0.8 million or 42.0% to $2.9 million for the third quarter of 2009 from $2.1 million in the third quarter of 2008.  The increase in general and administrative expenses primarily resulted from an increase in our accrual for performance-based compensation of $1.5 million, partially offset by a decrease in professional fees, reduced head count and a decrease in other expenses.

Amortization Expense—Customer Relationships.  Amortization expense—customer relationships remained consistent at $1.6 million for the third quarter of 2009 as compared to the third quarter of 2008.

Operating Income.  As a result of the foregoing, operating income increased $4.8 million or 29.4% to $21.0 million for the third quarter of 2009 from $16.2 million for the third quarter of 2008.  Operating income expressed as a percentage of net sales increased to 17.0% in the third quarter of 2009 from 13.9% in the third quarter of 2008.

Net Interest Expense.  Net interest expense increased $2.0 million or 17.4% to $13.6 million for the third quarter of 2009 from $11.6 million in the third quarter of 2008.  Net interest expense in the third quarter of 2009 includes a $0.6 million charge relating to an unrealized loss on our interest rate swap, and a reclassification of $0.4 million of the amount recorded in accumulated other comprehensive income (loss) related to the swap.  Net interest expense for the third quarter of 2009 also reflects a reduction in interest income primarily due to lower interest rates.  See “—Liquidity and Capital Resources—Debt” below.

Loss on Extinguishment of Debt.  Loss on extinguishment of debt for the third quarter includes $0.7 million of costs relating to our repurchase of senior subordinated notes during the third quarter, including $0.4 million for the payment of a repurchase premium and a non-cash charge of $0.3 million for the write-off of unamortized deferred debt financing costs associated with the notes repurchased.  During the third quarter of 2008 we did not extinguish any debt.

Income Tax Expense.  Income tax expense increased $0.8 million to $2.6 million for the third quarter of 2009 from $1.8 million for the third quarter of 2008.  Our effective tax rate was 37.9% for the third quarter of 2009 and 2008.  In the third quarter of 2009 and 2008, we recorded a true-up for year-end tax provisions, which, for each period, was less than $0.1 million.

First three quarters of 2009 compared to first three quarters of 2008.

Net Sales.  Net sales increased $13.4 million or 3.8% to $365.4 million for the first three quarters of 2009 from $352.0 million for the first three quarters of 2008.  Net sales for the first three quarters of 2009 were negatively impacted by the poor maple syrup crop in Canada in 2008 that led to a global shortfall of pure maple syrup.  Net sales of our Maple Grove Farms pure maple syrup products decreased by $2.8 million, consisting of a unit volume decline of $4.1 million, partially offset by sales price increases of $1.3 million.  Excluding net sales of our pure maple syrup products, net sales for the first three quarters of 2009 increased $16.2 million or 5.1%.  The $16.2 million increase was attributable to sales price increases of $21.8 million partially offset by a decrease in unit volume of $5.6 million.

Net sales of our lines of Ortega, Las Palmas, Ac’cent, Joan of Arc, B&M and Grandma’s products increased in the amounts of $12.8 million, $1.8 million, $1.5 million, $1.3 million, $0.8 million and $0.6 million or 16.9%, 9.2%, 12.3%, 18.2%, 4.2% and 10.1%, respectively.  These increases were offset by a reduction in net sales of our Bloch & Guggenheimer, private label pickles and peppers, and Cream of Wheat

22

Table of Contents

products of $1.8 million, $1.0 million and $0.6 million or 6.6%, 29.0% and 1.4%.  In the aggregate, net sales for all other brands increased $0.8 million, or 0.8%.

Gross Profit.  Gross profit increased $12.6 million or 12.7% to $111.8 million for the first three quarters of 2009 from $99.2 million for the first three quarters of 2008.  Gross profit expressed as a percentage of net sales increased 2.4 percentage points to 30.6% in the first three quarters of 2009 from 28.2% in the first three quarters of 2008.  The increase in gross profit expressed as percentage of net sales was primarily attributable to increased sales prices of $23.2 million and reduced wheat and maple syrup costs offset by increased costs for beans and packaging and an increase in our accrual for performance-based compensation of $0.9 million.

Sales, Marketing and Distribution Expenses.  Sales, marketing and distribution expenses decreased $2.0 million or 5.8% to $32.6 million for the first three quarters of 2009 from $34.6 million for the first three quarters of 2008.  The decrease is primarily due to a decrease in consumer marketing and trade spending of $2.9 million and selling expense of $0.9 million, offset by an increase in our accrual for performance-based compensation of $1.2 million and an increase in warehousing expenses of $0.6 million.  Expressed as a percentage of net sales, our sales, marketing and distribution expenses decreased to 8.9% for the first three quarters of 2009 from 9.8% for the first three quarters of 2008.

General and Administrative Expenses.  General and administrative expenses increased $2.5 million or 46.1% to $7.8 million for the first three quarters of 2009 from $5.3 million in the first three quarters of 2008.  The increase in general and administrative expenses primarily resulted from an increase in our accrual for performance-based compensation of $3.2 million offset by a decrease in professional fees, reduced head count and a decrease in other expenses.

Amortization Expense—Customer Relationships.  Amortization expense—customer relationships remained consistent at $4.8 million for the first three quarters of 2009 as compared to the first three quarters of 2008.

Operating Income.  As a result of the foregoing, operating income increased $12.2 million or 22.3% to $66.7 million for the first three quarters of 2009 from $54.5 million for the first three quarters of 2008.  Operating income expressed as a percentage of net sales increased to 18.2% in the first three quarters of 2009 from 15.5% in the first three quarters of 2008.