Pinnacle Foods Finance LLC - FORM 10-K

Attached files

file	filename
EX-12.1 - COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES - Pinnacle Foods Finance LLC	dex121.htm
EX-32.2 - SECTION 906 CFO CERTIFICATION - Pinnacle Foods Finance LLC	dex322.htm
EX-31.2 - SECTION 302 CFO CERTIFICATION - Pinnacle Foods Finance LLC	dex312.htm
EX-21.1 - LIST OF SUBSIDIARIES - Pinnacle Foods Finance LLC	dex211.htm
EX-31.1 - SECTION 302 CEO CERTIFICATION - Pinnacle Foods Finance LLC	dex311.htm
EX-32.1 - SECTION 906 CEO CERTIFICATION - Pinnacle Foods Finance LLC	dex321.htm
EX-10.43 - TERMS OF EMPLOYMENT LETTER - Pinnacle Foods Finance LLC	dex1043.htm
EX-10.44 - AMENDMENT TO EMPLOYMENT AGREEMENT. (ROBERT J. GAMGORT) - Pinnacle Foods Finance LLC	dex1044.htm
EX-10.10 - TAX SHARING AGREEMENT - Pinnacle Foods Finance LLC	dex1010.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

x	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 26, 2010

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 333-148297

Pinnacle Foods Finance LLC

(Exact name of registrant as specified in its charter)


Delaware		20-8720036
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

1 Bloomfield Avenue Mt. Lakes, New Jersey		07046
(Address of Principal Executive Offices)		(Zip Code)

Registrant’s telephone number, including area code: (973) 541-6620

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to section 12(g) of the Act: None

(Title of class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes x No ¨

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ¨ No x

(The Registrant believes it is a voluntary filer and it has filed all reports under Section 13 or 15(d) of the Securities ExchangeAct of 1934 during the preceding 12 months.)

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act (Check One):

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller Reporting Company

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 ¨ No ¨

*	The registrant has not yet been phased into the interactive data requirements

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934). Yes ¨ No x

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the Registrant’s most recently completed second fiscal quarter.

Not applicable.

As of March 10, 2011, there were outstanding 100 shares of common stock, par value $0.01 per share, of the Registrant.

Documents incorporated by reference

None

TABLE OF CONTENTS

FORM 10-K


		Page No.
PART I			2
ITEM 1.	BUSINESS		2
ITEM 1A.	RISK FACTORS		15
ITEM 1B.	UNRESOLVED STAFF COMMENTS		21
ITEM 2.	PROPERTIES		21
ITEM 3.	LEGAL PROCEEDINGS		23
ITEM 4.	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS		23
PART II			24
ITEM 5.	MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES		24
ITEM 6.	SELECTED FINANCIAL DATA		25
ITEM 7:	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		27
ITEM 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		52
ITEM 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA		58
CONSOLIDATED STATEMENTS OF OPERATIONS			62
CONSOLIDATED BALANCE SHEETS			63
CONSOLIDATED STATEMENTS OF CASH FLOWS			64
CONSOLIDATED STATEMENTS OF SHAREHOLDER’S EQUITY			65
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS			66
1.	Summary of Business Activities		66
2.	Summary of Significant Accounting Policies		66
3.	Acquisition		69
4.	Lehman Brothers Holdings, Inc. Bankruptcy and Related Events		72
5.	Fair Value Measurements		72
6.	Shareholder’s Equity and Stock-Based Compensation Expense		74
7.	Restructuring and Impairment Charges		76
8.	Other Expense (Income), net		79
9.	Balance Sheet Information		80
10.	Goodwill, Tradenames and Other Assets		82
11.	Debt and Interest Expense		85
12.	Pension and Retirement Plans		91
13.	Taxes on Earnings		100
14.	Financial Instruments		104
15.	Commitments and Contingencies		110
16.	Related Party Transactions		111
17.	Segments		112
18.	Quarterly Results (Unaudited)		114
19.	Guarantor and Nonguarantor Statements		116
ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE		125
ITEM 9A.	CONTROLS AND PROCEDURES		125
ITEM 9B.	OTHER INFORMATION		126
PART III			127
ITEM 10.	DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT		127
ITEM 11.	EXECUTIVE COMPENSATION		133
ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT		146
ITEM 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE		147
ITEM 14.	PRINCIPAL ACCOUNTANT FEES AND SERVICES		150
ITEM 15.	EXHIBITS, FINANCIAL STATEMENTS AND SCHEDULES		151

DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

This annual report on Form 10-K contains “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act. Forward-looking statements include 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 that is not historical information. When used in this annual report on Form 10-K, 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. All forward-looking statements, including, without limitation, management’s examination of historical operating trends, are based upon our current expectations and various assumptions. Our expectations, beliefs and projections are expressed in good faith and we believe there is a reasonable basis for them. However, there can be no assurance that management’s expectations, beliefs and projections will result or be achieved and actual results may vary materially from what is expressed in or indicated by the forward-looking statements.

There are a number of risks and uncertainties that could cause our actual results to differ materially from the forward-looking statements contained in this annual report. Such risks, uncertainties and other important factors include, among others, the risks, uncertainties and factors set forth below under “Item 1A: Risk Factors,” other matters discussed from time to time in subsequent filings with the Securities and Exchange Commission, and the following risks, uncertainties and factors:

•

general economic and business conditions;

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industry trends;

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changes in our leverage;

•

interest rate changes;

•

the funding of our defined benefit pension plans;

•

future impairments of our goodwill and intangible assets;

•

changes in our ownership structure;

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competition;

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the loss of any of our major customers or suppliers;

•

changes in demand for our products;

•

changes in distribution channels or competitive conditions in the markets where we operate;

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costs and timeliness of integrating future acquisitions;

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loss or litigation;

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loss of our intellectual property rights;

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our ability to achieve cost savings;

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fluctuations in price and supply of raw materials;

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seasonality;

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

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

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restrictions imposed on our business by the terms of our indebtedness;

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our reliance on co-packers to meet our manufacturing needs;

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availability of qualified personnel; and

•

changes in the cost of compliance with laws and regulations, including environmental laws and regulations.

There may be other factors that may cause our actual results to differ materially from the forward-looking statements.

All forward-looking statements in this Form 10-K apply only as of the date of this annual report on Form 10-K and are expressly qualified in their entirety by the cautionary statements included in this annual report on Form 10-K. We undertake no obligation to publicly update or revise any forward-looking statements to reflect subsequent events or circumstances.

EXPLANATORY NOTE

Unless the context requires otherwise, in this Form 10-K, “Pinnacle,” the “Company,” “we,” “us” and “our” refers to Pinnacle Foods Finance LLC, or “PFF”, and the entities that are its consolidated subsidiaries (including Pinnacle Foods Group LLC, or “PFG LLC”, formerly known as Pinnacle Foods Group Inc. or “PFGI”), which includes all of Pinnacle’s existing operations. In addition, where the context so requires, we use the term “Predecessor” to refer to the historical financial results and operations of PFG LLC and its subsidiaries prior to the consummation of our acquisition by The Blackstone Group L.P. described herein and the term “Successor” to refer to the historical financial results and operations of PFF and its subsidiaries after our acquisition by The Blackstone Group L.P. described herein.

PART I

ITEM 1.

BUSINESS

INDUSTRY OVERVIEW

The U.S. packaged food manufacturing industry has historically been characterized by relatively stable sales growth, driven primarily by population growth and modest sales price increases. Given the non-discretionary nature of food consumption, our industry historically has demonstrated stability during periods of economic recession. In recent years, our industry has been characterized by a number of broad trends, including:

•

Changing Consumer Lifestyles. Food manufacturers are highly attuned to changing consumer preferences and needs, and have responded to consumers’ increasingly busy lifestyles and greater focus on health and nutrition by introducing a variety of convenient, high-quality, and healthy food products and meal solutions. Industry participants seek to gain a competitive advantage by addressing consumer needs through new product introductions, core product renovations, and marketing. Pinnacle continues to expand and refine its brands and offerings so they remain relevant and continue to be preferred by consumers.

•

Channel Shifting. Consumers are increasingly purchasing food products at outlets other than traditional grocery retailers. Mass merchandisers, club stores, dollar stores, and other alternative channels are gaining share versus traditional grocery stores, though at a slower rate than at the peak of the recession. Pinnacle is well positioned in grocery and alternative channels, maintaining strong customer relationships across key retailers in each segment.

•

Eating at Home. Historically, U.S. consumers had been increasing the proportion of their food consumption at restaurants and other food service venues. During the recession in 2008 and 2009, this trend reversed with more consumers eating at home. In 2010, we saw an increase in away from home compared to 2009, but still below 2007 levels. We believe eating at home has been driven by consumers’ increased desire to spend time with family in the home, the growing popularity of cooking as a leisure activity, and consumers’ renewed focus on managing their personal finances prudently given the economic environment.

•

Increase in Private Label. Private label and store brands represent approximately 20% of total packaged food purchases at grocery retail, flat from a year ago. We believe private label share in recent years has been driven by consumers’ increased focus on food prices, certain retailers’ support of store brands, and the improved quality of some private label offerings. However, we believe that brands with well established equities, strong awareness, and consumer preference that continue to differentiate themselves and provide value to the consumer are well positioned to withstand private label competition. In addition, there is significant private label penetration in only four of the twelve categories in which we compete. Therefore, we do not believe the increase in private label presents a significant risk for us.

INDUSTRY SEGMENTS

The packaged food industry is comprised of numerous product categories, each with their own unique competitive dynamics. Pinnacle competes in the following categories within the food industry:

Birds Eye Frozen Division


*Industry Category*	*Category Size*	*Pinnacle Brands Competing*
Frozen vegetables	$2.3 billion	Birds Eye Birds Eye Steamfresh
Frozen complete bagged meals	$618 million	Birds Eye Voila!
Full calorie single-serve frozen dinners and entrees	$1.9 billion	Hungry-Man Swanson (1)
Frozen prepared seafood	$600 million	Mrs. Paul’s Van de Kamp’s
Frozen breakfast	$1.5 billion	Aunt Jemima
Bagels	$679 million	Lenders
Frozen pizza for one	$788 million	Celeste

(1)	In 2010, we discontinued our Swanson brand in the U.S. Market.

Duncan Hines Grocery Division


*Industry Category*	*Category Size*	*Pinnacle Brands Competing*
Baking mixes and frostings	$1.4 billion	Duncan Hines
Shelf-stable pickles, peppers and relish	$974 million	Vlasic
Table syrup	$460 million	Mrs. Butterworth’s Log Cabin
Canned meat	$1.0 billion	Armour Brooks Nalley
Pie and pastry fillings	$198 million	Comstock Wilderness

We also market Open Pit Barbeque sauce in the Midwest market and other smaller brands regionally.

Specialty Foods Division

Snack Products. Our snack products primarily consist of Tim’s Cascade and Snyder of Berlin. These brands have strong local awareness and hold leading market share positions in their core geographic markets.

Food Service and Private Label. We distribute frozen breakfast items, frozen dinners, pickles, peppers, and relish, pie and pastry fillings, bagels, canned meat, and table syrup through the food service channel. We also manufacture private label and/or co-pack products for canned meats, pie and pastry fillings, pickles, peppers, and relish, and frozen seafood.

COMPANY OVERVIEW

We are a leading manufacturer, marketer, and distributor of high-quality, branded convenience food products in North America. Our major brands hold leading market positions in their respective retail categories and enjoy high consumer awareness. Our products are sold through a combination of a national sales broker, regional sales brokers, and a direct sales force that reaches supermarkets, grocery wholesalers and distributors, mass merchandisers, super centers, convenience stores, dollar stores, drug stores, warehouse clubs, foodservice, and other alternative channels in the United States and Canada. We also distribute a selection of our products internationally, primarily in Mexico, the Caribbean, and Latin America. The combination of new product innovation, core product renovation, effective consumer marketing, and strategic acquisitions has helped us create and grow our diverse brand portfolio.

Pinnacle’s products and operations are managed and reported in three operating segments: the Birds Eye Frozen Division, the Duncan Hines Grocery Division and the Specialty Foods Division. Our United States retail frozen vegetables (Birds Eye), frozen complete bagged meals (Birds Eye Voila!), single-serve frozen dinners and entrées (Hungry-Man, Swanson), frozen seafood (Van de Kamp’s, Mrs. Paul’s), frozen breakfast (Aunt Jemima), bagels (Lender’s), and frozen pizza (Celeste) are reported in the Birds Eye Frozen Division. Our baking mixes and frostings (Duncan Hines), shelf-stable pickles, peppers, and relish (Vlasic), barbeque sauces (Open Pit), pie fillings (Comstock, Wilderness), syrups (Mrs. Butterworth’s and Log Cabin), salad dressing (Bernstein’s), canned meat (Armour, Nalley, Brooks), and all Canadian operations are reported in the Duncan Hines Grocery Division. The Specialty Foods Division consists of snack products (Tim’s Cascade and Snyder of Berlin) and our food service and private label businesses.

On December 23, 2009, we acquired all of the common stock of Birds Eye Foods, Inc. (“Birds Eye”, the “Birds Eye Acquisition”). Birds Eye’s product offering includes an expanding platform of healthy, high-quality frozen vegetables and frozen meals and a portfolio of primarily branded dry foods which are well-aligned with our existing Duncan Hines Grocery Division. Frozen food products are marketed under the Birds Eye brand name, which holds the #1 branded market share in frozen vegetables and the #2 market share in frozen complete bagged meals. Birds Eye markets traditional boxed and bagged frozen vegetables, as well as steamed vegetables using innovative steam-in-packaging technology, under the Birds Eye and Birds Eye Steamfresh brands. Birds Eye’s frozen complete bagged meals, marketed primarily under the family-oriented Birds Eye Voila! brand, offer consumers value-added meal solutions that include a protein, starch, and vegetables in one convenient package. Birds Eye’s branded dry food products hold leading market share positions in their core geographic markets, and include Comstock and Wilderness fruit pie fillings and toppings, Brooks and Nalley chili and chili ingredients, and snack foods by Tim’s Cascade and Snyder of Berlin.

Our product portfolio consists of a diverse mix of product lines and leading, well-recognized brands. Our major brands hold leading market positions in their respective retail markets and enjoy high consumer awareness. Through our managed broker network, our products reach all traditional classes of trade, including grocery wholesalers and distributors, grocery stores and supermarkets, convenience stores, mass and drug merchandisers and warehouse clubs. We also distribute a select assortment of our products through foodservice and private label channels.

COMPETITIVE STRENGTHS

We believe that our competitive strengths include the following:

Diverse Portfolio of Iconic Brands with Leading Market Positions

We are a strong competitor in the packaged food industry with $2.4 billion in net sales during the year ended December 26, 2010, and a diverse portfolio of brands which are market leaders in their respective categories. We offer a broad mix of well-recognized food products that, we believe, consumers purchase largely independent of economic cycles. Most of our brands have been a part of American lives for at least 50 years and about 85% of U.S. households purchase a Pinnacle product. Our Birds Eye brand holds the #1 branded market share in both frozen vegetables and the value sub-segment of frozen complete bagged meals. We believe that this iconic brand with strong health and nutrition credentials has significantly enhanced our frozen food offerings. Our combined brands maintain the #1 or #2 positions in 8 of the 12 major category segments in which they compete. In addition, we believe that consumer awareness of our brands, combined with our national retail distribution and continued consumer investment, help ensure that our brands maintain their iconic standing.

Successful History of Product Innovation, Renovation, and Upgrades

We are focused on tailoring our products to meet changing consumer preferences by improving their health and nutrition profile, increasing convenience, expanding into new occasions, and upgrading and renovating to differentiate and contemporize our products. Our introduction of Birds Eye Voila! frozen complete bagged meals into the market took advantage of consumer trends towards eating healthy and easy to prepare meals. In July 2010, we introduced three new items to the Birds Eye Steamfresh Lightly Sauced line: Rotini and Vegetables with Garlic Butter Sauce, Rigatoni and Vegetables with Tomato Parmesan Sauce and Roasted Red Potatoes with Garlic Butter Sauce. The conversion of Van de Kamp’s to whole white fish fillets, the elimination of high-fructose corn syrup in Log Cabin, and the move to whole grain formulas for Duncan Hines muffins are examples of recent successful product upgrades and renovations. Both Pinnacle and Birds Eye have a history of developing and introducing innovative products into the marketplace. We expect to continue product launches by leveraging our business unit management structure supported by focused research and development teams to deliver new ideas, build new product platforms, and expand into adjacent categories. We plan to drive further sales growth and pursue market share gains through continued investment in product innovations and core product renovation initiatives.

Diversity of Distribution Channels and Customers

We have strong representation in multiple food distribution channels, as well as a broad customer base. The diversity of our multi-channel sales and distribution system enhances our financial results by allowing us to capitalize on differing growth trends within these various distribution channels and customers. Our Birds Eye brand is a market leader in its respective categories and in addition to our Pinnacle brands, provides us a large scale (we are the fifth largest frozen food manufacturer in the United States as measured by IRI in the supermarket, drug and mass merchandise channels (“FDMX”)) which we use to better manage shelf space and product mix, as well as leverage our promotional activities to enhance profitability across our Birds Eye Frozen Division. We continue to expand our significant existing distribution presence in alternative channels including dollar stores, club stores, and mass merchandisers.

Consistent Margins and Strong Free Cash Flow Characteristics

We have historically generated consistent margins and strong cash flows, which we believe are driven by our established and diverse portfolio of brands, focus on operational excellence and lean organizational structure, and extensive distribution system. Additionally, we require limited working capital investments. We also have attractive tax attributes, including $1.1 billion in federal net operating losses, which we believe will result in minimal cash taxes over the next several years. These characteristics lead to strong free cash flows that we believe will provide us an opportunity to reinvest in the business and to reduce our leverage over time.

Successful Track Record of Acquisitions and Integrations

We believe we have the expertise to identify and integrate value-enhancing acquisitions. We selectively pursue acquisitions of complementary businesses, such as Armour and Birds Eye, which we believe are a compelling strategic fit with our existing brands and operations. We acquired Armour in March 2006 and successfully integrated its significant business functions within 120 days. We are realizing significant cost synergies through the integration of Birds Eye into our existing business, which was substantially completed within six months of acquisition.

Proven Management Team and Board of Directors

Our senior management team is highly regarded in the food and beverage industry, with significant prior experience in key leadership roles at leading consumer products organizations. Our top six senior executives have an average of over 25 years of professional experience at large food and beverage companies. The team has a track record of delivering strong operating performance through brand-building initiatives and achieving cost savings through increased productivity. Additionally, our team has been successful at acquiring and integrating companies.

Our Company is led by our CEO, Bob Gamgort, who spent over 10 years at Mars Incorporated (“Mars”), where he served as President of Mars North America from 2002 to 2009, managing the company’s portfolio of confectionery, main meal, pet food, and retail businesses. During his tenure, he was responsible for integrating four acquisitions of significant size. Craig Steeneck, our CFO since July 2007, joined Pinnacle in 2005 as Executive Vice President, Supply Chain Finance & IT, prior to which he served as Executive Vice President, CFO and CAO of Cendant Timeshare Resort Group. Mr. Steeneck has integrated seven acquisitions in his various roles. Other key executives have extensive industry expertise and most of the management team has significant experience integrating acquisitions.

Additionally, our Board of Directors provides significant additional industry experience and guidance. Chairman Roger Deromedi, who has nearly 30 years of experience in the food industry globally, has held the positions of CEO of Kraft Foods Inc. and President and CEO of Kraft Foods International.

STRATEGIES

We intend to profitably grow our business through the following strategic initiatives:

Maximize the Value of Our Brands

Our strategy is to drive demand for our brands through developing consumer insights, investing in targeted product innovation and core product renovation, and executing effective consumer marketing. We believe that our business model, which appropriately balances consumer marketing, trade support and brand innovation, will strengthen our brands and enhance sales for us and our customers. We make extensive use of marketing mix modeling tools to optimize marketing investments and utilize consumer insights to contemporize our brands through relevant products, packaging, and communication. Our innovation program is focused on expanding into new occasions and attracting new users into our franchises. We intend to continue to improve the health and nutrition profile of our offerings to satisfy changing consumer preferences.

We create new ideas to generate incremental sales and earnings through new platforms and expansion into adjacent categories. We utilize rigorous and consistently applied models and protocols to launch successful new products, and then support these new products with strategic consumer marketing and trade promotions.

We strive to be a preferred supplier to our key customers. We have longstanding relationships with leading retailers, and we intend to continue to partner with them to maximize mutual profitability. Our strategy prioritizes resources to customers and channels that are growing share of consumer purchases. Our consumer and category insights allow us to enhance customer category management and optimize SKU range to ensure distribution of high-velocity items. We expect to continue to leverage the strengths of our national food broker for improved retail merchandising and in-store promotional performance.

Enhance Margins through Optimization of Product Mix and Ongoing Cost Reduction Initiatives

We intend to continue to enhance profitability through proactive line and SKU management and harmonization of packaging and ingredients. In 2008, we began an initiative to exit significant portions of our private label business, retaining only certain strategic accounts and products. We plan to continue to focus our attention and resources on driving the growth of our core brands. Through actively managing product mix toward our branded business, we believe we can reduce operational complexity, increase productivity in the supply chain, and drive margin enhancement. This is consistent with how Birds Eye ran its business prior to the acquisition.

We have a strong organizational focus on obtaining annual productivity-related cost savings through the active management of procurement, manufacturing, logistics and selling, general and administrative costs. We have various ongoing initiatives designed to better manage our purchasing, manufacturing, and warehousing and transportation costs, while improving customer service levels and reducing our net working capital requirements. Among other initiatives, we have implemented LEAN manufacturing programs and installed process monitoring systems across our plants.

Evaluate Targeted Strategic Acquisition Opportunities

In addition to pursuing organic revenue and earnings growth in our existing businesses, we will continue to evaluate targeted, value-enhancing acquisitions that complement our current portfolio. These acquisitions will be evaluated using the following criteria:

•

iconic brands with leading market positions and attractive and sustainable margins;

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in existing or adjacent growth categories; and

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allowing us to leverage existing capabilities in marketing, sales, manufacturing, and/or logistics

Our management team has demonstrated its ability to identify and successfully integrate value-enhancing acquisitions, and we believe our capabilities are further enhanced with the support of Blackstone and our Board of Directors.

BUSINESS SEGMENTS

Birds Eye Frozen Division

Birds Eye is the largest brand in the $2.3 billion frozen vegetables category. Collectively, our steamed and non-steamed product offerings hold the #1 position among branded products, with a 26.7% market share, making Birds Eye the most recognized frozen vegetables brand in the United States. With the launch of Birds Eye Steamfresh vegetables in January 2006, Birds Eye was the first company to capture a nationwide market share with a product that enables consumers to conveniently steam vegetables in microwaveable packaging. The steamed segment represents 30.6% of the overall category, and Birds Eye holds a 50.3% market share of the steamed segment. The non-steamed segment comprises 69.4% of the overall category, and Birds Eye holds a 16.3% market share of the non-steamed segment. We believe that enhancing vegetables is an effective way to encourage healthy and nutritious eating in America, by elevating the taste experience. In July 2010, we introduced three new items to the Birds Eye Steamfresh Lightly Sauced line: Rotini and Vegetables with Garlic Butter Sauce, Rigatoni and Vegetables with Tomato Parmesan Sauce and Roasted Red Potatoes with Garlic Butter Sauce. We also compete in the frozen complete bagged meals category with our Birds Eye Voila! brand. Birds Eye Voila! is the #2 competitor in the $618 million frozen complete bagged meals segment, with a 17.4% market share and is the fastest growing established brand in the segment having grown share by 2.7 points in 2010. Birds Eye Voila! frozen complete bagged meals offer consumers value-added meal solutions that include a protein, starch, and vegetables in one convenient package.

In addition, our Birds Eye Frozen Division competes in various other segments as described under the caption “Business – Industry Overview” in Item 1 of this Form 10-K. All of our brands are ranked within the top four with respect to market share for the individual categories in which they compete, with many holding either the #1 or #2 positions in their respective category segments.

Duncan Hines Grocery Division

Our baking mixes and frostings include Duncan Hines cake mixes, ready-to-serve frostings, brownie mixes, muffin mixes, and cookie mixes. Duncan Hines was introduced as a national brand in 1956 when Duncan Hines, a renowned restaurant critic and gourmet, launched the brand as part of his efforts to bring restaurant-quality food to American homes. Duncan Hines has expanded its presence at retail over the past year through a commitment to innovation. In 2010, Duncan Hines launched Amazing Glazes, a light, decadent dessert topping in both chocolate and vanilla flavors. This heat and pour topping establishes a new sub-segment unique from spreadable frosting. Also in 2010, we continued to expand our line of Decadent Cake with the introduction of Duncan Hines Decadent Triple Chocolate Cake and Duncan Hines Decadent Apple Caramel Cake. Duncan Hines is the #2 brand with a 17.1% market share of the $1.4 billion baking mixes and frostings category.

We also offer a complete line of shelf-stable pickle, pepper, and relish products that we market and distribute nationally, primarily under the Vlasic brand, and regionally under the Milwaukee’s and Wiejske Wyroby brands. Our Vlasic brand, represented by its trademark Vlasic stork, was introduced over 65 years ago and has the highest consumer awareness and quality ratings in the pickle category. Vlasic is the #1 brand in the $974 million shelf-stable pickles, peppers, and relish category, with an 18.7% share of the overall category and a 30.0% share of the $517 million shelf-stable pickle segment.

In addition, our Duncan Hines Grocery Division competes in various other segments as described under the caption “Business – Industry Overview” in Item 1 of this Form 10-K. All of our national brands are ranked within the top four with respect to market share for the individual categories in which they compete, with many holding either the #1 or #2 positions in their respective category segments.

Specialty Foods Division

Food Service and Private Label. We distribute frozen breakfast, frozen dinners, bagels, pickles, peppers, and relish, canned meat, and table syrup through the food service channel. We also manufacture private label and/or co-pack products for canned meats, pickles, peppers, and relish, and frozen seafood.

Our business segments are discussed in greater detail in Note 17 to our Consolidated Financial Statements.

ACQUISITIONS

Pinnacle Foods Group Inc., (“PFGI”) was incorporated under Delaware law on June 19, 1998. Pinnacle Foods Finance LLC and Pinnacle Foods Finance Corp. were formed under Delaware law on March 5, 2007 and February 28, 2007, respectively. Our principal executive offices are located at 1 Bloomfield Avenue, Mountain Lakes, New Jersey 07046. Our telephone number is (973) 541-6620.

Armour Acquisition

On March 1, 2006, PFGI acquired certain assets and assumed certain liabilities of the food products business (the “Armour Business”) of The Dial Corporation for $189.2 million in cash, including transaction expenses. The Armour Business is a leading manufacturer, distributor, and marketer of products in the $1.0 billion canned meat category. The Armour Business offers products in twelve of the fifteen segments within the canned meat category and maintains the leading market position in the Vienna sausage, potted meat, and sliced beef categories. The business also includes meat spreads, chili, luncheon meat, corned and roast beef hash, and beef stew. The majority of the products are produced at the manufacturing facility located in Ft. Madison, Iowa, which was acquired in the transaction. Products are sold under the Armour brand name as well as through certain private label and co-pack arrangements.

Blackstone Transaction

On February 10, 2007, Crunch Holding Corp. (“CHC”), a Delaware corporation and the parent company of PFGI, entered into an Agreement and Plan of Merger with Peak Holdings LLC (“Peak Holdings”), a Delaware limited liability company controlled by affiliates of The Blackstone Group L.P. (“Blackstone”), Peak Acquisition Corp. (“Peak Acquisition”), a wholly-owned subsidiary of Peak Holdings, and Peak Finance LLC (“Peak Finance”), an indirect wholly-owned subsidiary of Peak Acquisition, providing for the acquisition of CHC. Under the terms of the Agreement and Plan of Merger, the purchase price for CHC was $2,162.5 million in cash less the amount of indebtedness (including capital lease obligations) of CHC and its subsidiaries outstanding immediately prior to the closing and certain transaction costs, subject to purchase price adjustments based on the balance of working capital and indebtedness as of the closing. Pursuant to the Agreement and Plan of Merger, immediately prior to the closing, CHC contributed all of the outstanding shares of capital stock of its wholly-owned subsidiary PFGI to a newly-formed Delaware limited liability company, PFF. At the closing, Peak Acquisition merged with and into CHC, with CHC as the surviving corporation, and Peak Finance merged with and into PFF, with PFF as the surviving entity. As a result of this transaction, CHC became a wholly-owned subsidiary of Peak Holdings. This transaction (the “Blackstone Transaction”) closed on April 2, 2007.

Reorganization of Subsidiaries

In order to simplify administrative matters and financial reporting, on September 30, 2007, Pinnacle Foods Corporation (“PFC”) merged with and into PFGI. As a final step to the reorganization, PFGI was converted from a Delaware corporation into a Delaware limited liability company under Delaware law on October 1, 2007 under the name Pinnacle Foods Group LLC.

Birds Eye Acquisition

On November 18, 2009, PFG LLC entered into the Stock Purchase Agreement with Birds Eye Holdings and Birds Eye Foods, Inc. pursuant to which PFG LLC acquired all of the issued and outstanding common stock of Birds Eye Foods, Inc. from Birds Eye Holdings. PFG LLC is controlled by Blackstone. At the closing of the Birds Eye Acquisition on December 23, 2009, PFG LLC purchased all of the outstanding shares of Birds Eye’s common stock, par value $0.01 per share, for a purchase price of $670.0 million in cash.

The following chart illustrates our growth:


Date	Event	Selected Brands Acquired
2001	• Pinnacle Foods Holding Corporation formed by Hicks, Muse, Tate & Furst Incorporated and CDM Investor Group LLC to acquire the North American business of Vlasic Foods International Inc.	• Hungry-Man and Swanson (1) • Vlasic • Open Pit

2003	• Crunch Holding Corp., indirectly owned by J.P. Morgan Partners LLC, J.W. Childs Associates, L.P. and CDM Investor Group LLC acquire Pinnacle Foods Holding Corporation

2004	• Merger of Pinnacle Foods Holding Corporation with Aurora completed and surviving company renamed Pinnacle Foods Group Inc.	• Duncan Hines • Van de Kamp’s and Mrs. Paul’s • Log Cabin and Mrs. Butterworth’s • Lender’s • Celeste • Aunt Jemima (frozen breakfast products) (1)

2006	• Acquired Armour Business from the Dial Corporation	• Armour (1)

2007	• Crunch Holding Corp. acquired by The Blackstone Group

Date

Event

Selected Brands Acquired

2009

• Birds Eye Foods, Inc. acquired by Pinnacle Foods Group LLC

• Birds Eye

• Birds Eye Steamfresh

• Birds Eye Voila!

• Comstock

• Wilderness

• Brooks

• Nalley

• Tim’s Cascade

• Snyder of Berlin

(1)	We manufacture and market these products under licenses granted by Campbell Soup Company (Swanson), the Quaker Oats Company (Aunt Jemima) and Smithfield Foods (Armour). These licenses are discussed further in the section titled “Trademarks and Patents”.

CUSTOMERS

We have several large customers that account for a significant portion of our net sales. Wal-Mart and its affiliates is our largest customer and represented approximately 25%, 25% and 23% of our consolidated net sales in fiscal 2010, 2009 and 2008, respectively. Cumulatively, including Wal-Mart, our top ten customers accounted for approximately 61% in fiscal 2010, 58% in fiscal 2009 and 57% of our net sales in fiscal year 2008.

MARKETING

Our marketing programs consist of consumer advertising, consumer promotions, trade promotions, direct marketing, cause related marketing and public relations. Our advertising consists of television, newspaper, magazine, and digital and social advertising aimed at increasing consumer preference and usage of our brands. Consumer promotions include free trial offers, targeted coupons, and on-package offers to generate trial usage and increase purchase frequency. Our trade promotions focus on obtaining retail feature and display support, achieving optimum retail product prices, and securing retail shelf space. We continue to shift our marketing efforts toward building long-term brand equity through increased consumer marketing.

RESEARCH AND DEVELOPMENT

Pinnacle’s Product Development and Technical Services teams are currently located in Cherry Hill, New Jersey, Mountain Lakes, New Jersey and Green Bay, Wisconsin. These teams focus on new product development, product-quality improvements, regulatory compliance, package development, quality assurance, consumer affairs and brand extensions for our Duncan Hines Grocery, Birds Eye Frozen and Specialty Food products. Our Green Bay, Wisconsin team primarily focuses on Birds Eye Frozen products, while our Cherry Hill, New Jersey team focuses on Duncan Hines Grocery products. Our Cherry Hill, New Jersey team is in the process of being relocated to Parsippany, New Jersey to facilitate interaction with the marketing staff in accomplishing our product development goals. Pinnacle’s internal research and development expenditures totaled $9.4 million, $4.6 million and $3.5 million for fiscal years 2010, 2009 and 2008, respectively. In 2010, our costs were much higher compared to prior years due to the Birds Eye Acquisition.

INTELLECTUAL PROPERTY

We own a number of registered trademarks in the United States, Canada and other countries, including Appian Way^®, Birds Eye^®, Bernstein’s^®, Brooks^®, C&W^®, Casa Regina^®, Celeste^®, Chocolate Lovers^®, Comstock^®, Country Kitchen^®, Duncan Hines^®, Freshlike^®, Fun Frosters^®, Grabwich^®, Great Starts^®, Hawaiian Style Bowls^®, Hearty Bowls^®, Hearty Hero^®, Hungry-Man^®, Hungry-Man Sports Grill^®, Hungry-Man Steakhouse^®, Husman’s^®, It’s Good to be Full^®, Lender’s^®, Log Cabin^®, Lunch Bucket^®, Magic Mini’s^®, McKenzie’s^®, Milwaukee’s^®, Moist Deluxe^®, Mrs. Butterworth’s^®, Mrs. Paul’s^®, Nalley^®, Open Pit^®, Oval’s^®, Signature Desserts^®, Simply Classic^®, Snack’mms^®, Stackers^®, Snyder of Berlin^®, Steamfresh^®, Taste the Juicy Crunch^®, The Original TV Dinner^®, Tim’s Cascade^®, Treet^®, Van de Kamp’s^®, Vlasic^® and Wilderness^®. We also have applications pending with the United States Patent and Trademark Office for a number of trademarks, including So Rich, So Moist, So Very Duncan Hines™, So Moist, So Delicious and So Much More™, Just Add the Warmth™ and That’s the Tastiest Crunch I Ever Heard™. We own the trademark Snyder of Berlin while a third party owns the trademark Snyder of Hanover. Per a court order, the use of the trademark must include the word “Snyder” in combination with the words “of Berlin.” We protect our trademarks by obtaining registrations where appropriate and opposing any infringement in key markets. We also own a design trademark in the United States, Canada, and other countries on the Vlasic stork. We manufacture and market certain of our frozen food products under the Swanson brand pursuant to two royalty-free, exclusive and perpetual trademark licenses granted by Campbell Soup Company. The licenses give us the right to use certain Swanson trademarks both inside and outside of the United States in connection with the manufacture, distribution, marketing, advertising, and promotion of frozen foods and beverages of any type except for frozen soup or broth. The licenses require us to obtain the prior written approval of Campbell Soup Company for the visual appearance and labeling of all packaging, advertising materials, and promotions bearing the Swanson trademark. The licenses contain standard provisions, including those dealing with quality control and termination by Campbell Soup Company as well as assignment and consent. If we were to breach any material term of the licenses and not timely cure such breach, Campbell Soup Company could terminate the licenses.

We manufacture and market certain of our frozen breakfast products under the Aunt Jemima brand pursuant to a royalty-free, exclusive (as to frozen breakfast products only) and perpetual license granted by The Quaker Oats Company, a subsidiary of PepsiCo Inc. The license gives us the right to use certain Aunt Jemima trademarks both inside and outside the United States in connection with the manufacture and sale of waffles, pancakes, French toast, pancake batter, biscuits, muffins, strudel, croissants, and all other frozen breakfast products, excluding frozen cereal. The license requires us to obtain the approval of The Quaker Oats Company for any labels, packaging, advertising, and promotional materials bearing the Aunt Jemima trademark. The license contains standard provisions, including those dealing with quality control and termination by The Quaker Oats Company as well as assignment and consent. If we were to breach any material term of the license and not timely cure such breach, The Quaker Oats Company could terminate the license.

We have a license agreement granting us an exclusive, royalty bearing, perpetual license to use certain Armour trademarks. Under the license agreement, Smithfield Foods, as successor to ConAgra, Inc., the licensor, grants us a license for the use of various Armour-related trademarks in conjunction with shelf-stable products within the United States. The shelf-stable products must be manufactured according to approved formulas and specifications, and new specifications must be approved by the licensor, with such approval not to be unreasonably withheld or delayed. Proposed labels, packaging, advertising, and promotional materials must first be submitted to the licensor for approval, with such approval not to be unreasonably withheld or delayed. We are required to make annual royalty payments to the licensor equal to the greater of $0.3 million or a percentage royalty based upon our annual net sales of the approved shelf-stable products. If we were to materially breach the license agreement, Smithfield Foods could terminate the license. We maintain Armour-related registrations in many other countries.

We have a license agreement whereby the Company receives $0.8 million per year in royalties from the Dean Pickle and Specialty Products Company, a subsidiary of TreeHouse Foods, Inc., for the use of the Nalley^® trademark in the production of the Nalley’s Pickle brand.

We also manufacture frozen complete bagged meals under the The Voila! trademark which is subject to an exclusive license agreement with a third party and limited to use in connection with meat and vegetable products.

Although we own a number of patents covering manufacturing processes, we do not believe that our business depends on any one of these patents to a material extent.

SALES AND DISTRIBUTION

We sell a majority of our products in the United States through one national broker with whom we have a long-term working relationship. In Canada, we use one national broker to distribute the majority of our products. We employ other brokers for the foodservice and club channels. Through this sales broker network, our products reach all traditional classes of trade, including supermarkets, grocery wholesalers and distributors, mass merchandisers, super centers, convenience stores, drug stores, warehouse clubs, foodservice, and other alternative channels.

Due to the different demands of distribution for frozen and shelf-stable products, we maintain separate distribution systems. Our Birds Eye Frozen Division’s product warehouse and distribution network consists of 17 locations. Birds Eye Frozen Division products are distributed by means of five owned and operated warehouses at our Mattoon, Illinois, Waseca, Minnesota, Fulton, New York, Jackson, Tennessee and Darien, Wisconsin plants. In addition, we utilize ten distribution centers in the United States and two distribution centers in Canada, all of which are owned and operated by third-party logistics providers. Our Duncan Hines Grocery Division’s product warehouse and distribution network consists of 14 locations. Duncan Hines Grocery Division products are distributed through a system of thirteen distribution sites in the United States, which include six warehouses that are owned and operated by us at our plants in Millsboro, Delaware, St. Elmo, Illinois, Ft. Madison, Iowa, Fennville, Michigan, Imlay City, Michigan and Tacoma, Washington, as well as seven other locations which are owned and operated by third-party logistics providers. We also distribute Duncan Hines Grocery products from one leased distribution center in Canada. In each third-party operated location, the provider receives, handles and stores products. Our distribution system uses a combination of common carrier trucking and inter-modal rail transport. In addition to these locations, our snack products are primarily distributed through a direct store delivery (“DSD”) network in the Midwest, Mid-Atlantic, and Pacific Northwest, a portion of which is owned and operated by Pinnacle and a portion of which utilizes third-party providers. We believe that our sales and distribution network is scalable and has the capacity to support substantial increases in volume.

INGREDIENTS AND PACKAGING

We believe that the ingredients and packaging used to produce our products are readily available through multiple sources. Our ingredients typically account for approximately 54% of our annual cost of products sold, and primarily include sugar, cucumbers, flour (wheat), vegetables, fruits, poultry, seafood, proteins, vegetable oils, shortening, meat, corn syrup, and other agricultural products. Certain vegetables and fruits are purchased under dedicated acreage supply contracts from a number of growers prior to each growing season, while a smaller portion is sourced directly from third parties. Our packaging costs, primarily for aluminum, glass jars, plastic trays, corrugated fiberboard, polyfilm, and plastic packaging materials, typically account for approximately 21% of our annual cost of products sold.

MANUFACTURING

Owned and Operated Manufacturing Facilities. We own and operate thirteen manufacturing facilities for our products. See Item 2, “Properties” for a listing of our manufacturing facilities.

Co-Packing Arrangements. In addition to our own manufacturing facilities, we source a significant portion of our products under “co-packing” agreements, a common industry practice in which manufacturing is outsourced to other companies. We regularly evaluate our co-packing arrangements to ensure the most cost-effective manufacturing of our products and to utilize company-owned manufacturing facilities most effectively. Third-parties produce our Duncan Hines product line, Aunt Jemima breakfast sandwich product line, and certain seafood and vegetable products. Each of our co-packers produces products for other companies as well. We believe that there are alternative sources of co-packing production readily available for the majority of our products, although we may experience short-term disturbances in our operations if we are required to change our co-packing arrangements.

SEASONALITY

Our sales and cash flows are affected by seasonal cyclicality. Sales of frozen foods, including seafood, frozen vegetables, and frozen complete bagged meals tend to be marginally higher during the winter months. 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 fruit fillings tend to be higher around the Easter, Thanksgiving, and Christmas holidays. We pack the majority of our pickles during a season extending from May through September, and also increase our Duncan Hines inventories at that time, in advance of the selling season. Since many of the raw materials we process under the Birds Eye brand are agricultural crops, production of these products is predominantly seasonal, occurring during and

immediately following the purchase of such crops. As a result, our inventory levels tend to be higher during August, September, and October, and thus we require more working capital during these months. We are a seasonal net user of cash in the third quarter of the calendar year.

COMPETITION

We face competition in each of our respective product lines. Although we operate in a highly competitive industry, we believe that the strength of our brands has resulted in strong respective competitive positions. We compete with producers of similar products on the basis of, among other things, product quality, brand recognition and loyalty, price, customer service, effective consumer marketing and promotional activities, and the ability to identify and satisfy emerging consumer preferences.

Our most significant competitors for our products are:


Our Products		Competitor
Single-serve frozen dinners, and entrées		Nestle, ConAgra and Heinz
Multi-serve frozen dinners and entrées		Unilever, Contessa, Nestle, and ConAgra
Shelf-stable pickles, peppers, and relishes.		B&G Foods, Inc. , Mt. Olive and private label
Baking mixes, pie fillings and frostings		General Mills, J.M. Smucker Co. and Knouse Fruit
Table syrups		PepsiCo Inc, Kellogg’s and private label
Frozen vegetables		General Mills and private label
Frozen prepared seafood		Gorton’s and Seapak
Frozen breakfast		Kellogg’s, General Mills and Sara Lee
Bagels		Bimbo Bakeries USA, Sara Lee and private label
Canned meat		ConAgra and Hormel
Frozen pizza-for-one		General Mills, Schwan’s and private label
Snacks		PepsiCo, and private label

EMPLOYEES

We employed approximately 4,400 people as of December 26, 2010 with approximately 70% of our hourly employees unionized. Due to the seasonality of our pickle and vegetable businesses our employment fluctuates throughout the year, and thus our average number of employees was approximately 5,000 throughout 2010. In 2011, collective bargaining agreements expire for 479 of our union employees in Fayetteville (October 2011) and 113 of our union employees in Tacoma (January – April 2011). Collective bargaining agreements for our Tacoma employees will not be renegotiated, as we are in the process of relocating our canning operations in Tacoma to our Ft. Madison facility. This is discussed in greater detail in Note 7 to our Consolidated Financial Statements.

GOVERNMENTAL, LEGAL AND REGULATORY MATTERS

Food Safety and Labeling

We are subject to the Food, Drug and Cosmetic Act and regulations promulgated thereunder by the Food and Drug Administration. This comprehensive and evolving regulatory program governs, among other things, the manufacturing, composition and ingredients, labeling, packaging, and safety of food. In addition, the Nutrition Labeling and Education Act of 1990 prescribes the format and content of certain information required to appear on the labels of food products. We are also subject to regulation by certain other governmental agencies, including the U.S. Department of Agriculture.

Our operations and products are also subject to state and local regulation, including the registration and licensing of plants, enforcement by state health agencies of various state standards, and the registration and inspection of facilities. Enforcement actions for violations of federal, state, and local regulations may include seizure and condemnation of products, cease and desist orders, injunctions, or monetary penalties. We believe that our practices are sufficient to maintain compliance with applicable government regulations, although there can be no assurances in this regard.

Federal Trade Commission

We are subject to certain regulations by the Federal Trade Commission. Advertising of our products is subject to such regulation pursuant to the Federal Trade Commission Act and the regulations promulgated thereunder.

Employee Safety Regulations

We are subject to certain health and safety regulations, including regulations issued pursuant to the Occupational Safety and Health Act. These regulations require us to comply with certain manufacturing, health, and safety standards to protect our employees from accidents.

Environmental Regulation

We are subject to a number of federal, state, and local laws and other requirements relating to the protection of the environment and the safety and health of personnel and the public. These requirements relate to a broad range of our activities, including:

•

the discharge of pollutants into the air and water;

•

the identification, generation, storage, handling, transportation, disposal, record-keeping, labeling, and reporting of, and emergency response in connection with, hazardous materials (including asbestos) associated with our operations;

•

noise emissions from our facilities; and

•

safety and health standards, practices, and procedures that apply to the workplace and the operation of our facilities.

In order to comply with these requirements, we may need to spend substantial amounts of money and other resources from time to time to (i) construct or acquire new equipment, (ii) acquire or amend permits to authorize facility operations, (iii) modify, upgrade, or replace existing and proposed equipment and (iv) clean up or decommission our facilities or other locations to which our wastes have been sent. For example, some of our baking facilities are required to obtain air emissions permits and to install bag filters. Many of our facilities discharge wastewater into municipal treatment works, and may be required to pre-treat the wastewater and/or to pay surcharges. Some of our facilities use and store in tanks large quantities of materials, such as sodium chloride and ammonia, that could cause environmental damage if accidentally released. We use some hazardous materials in our operations, and we generate and dispose of hazardous wastes as a conditionally exempt small quantity generator. Our capital and operating budgets include costs and expenses associated with complying with these laws. If we do not comply with environmental requirements that apply to our operations, regulatory agencies could seek to impose civil, administrative, and/or criminal liabilities, as well as seek to curtail our operations. Under some circumstances, private parties could also seek to impose civil fines or penalties for violations of environmental laws or recover monetary damages, including those relating to property damage or personal injury.

Many of our plants were in operation before current environmental laws and regulations were enacted. Our predecessors have in the past had to remediate soil and/or groundwater contamination at a number of locations, including petroleum contamination caused by leaking underground storage tanks which they removed, and we may be required to do so again in the future. We have sold a number of plants where we have discontinued operations, and it is possible that future renovations or redevelopment at these facilities might reveal additional contamination that may need to be addressed. Although the remediation of contamination that was undertaken in the past by our predecessors has been routine, we cannot assure you that future remediation costs will not be material. The presence of hazardous materials at our facilities or at other locations to which we have sent hazardous wastes for treatment or disposal, may expose us to potential liabilities associated with the cleanup of contaminated soil and groundwater under federal or state “Superfund” statutes. Under the federal Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended (“CERCLA”), owners and operators of facilities from which there has been a release or threatened release of hazardous materials, together with those who have transported or arranged for the transportation or disposal of those materials, are liable for (i) the costs of responding to and remediating that release and (ii) the restoration of natural resources damaged by any such release. Under CERCLA and similar state statutes, liability for the entire cost of cleaning up the contaminated site can, subject to certain exceptions, be imposed upon any such party regardless of the lawfulness of the activities that led to the contamination.

In working to resolve an environmental wastewater investigation by the State of Michigan Department of Natural Resources and Environment (MDNRE) at the Company’s Birds Eye Foods Fennville MI production facility, on July 20, 2010, the Company and the MDNRE reached an agreement (“Administrative Consent Order” or “ACO”). Under the terms of the ACO, Birds Eye Foods will construct a new wastewater treatment system at the facility currently estimated at $4.6 million and contribute a minimum of $70 thousand to the hookup of the city’s water supply extension to affected residents. We have not incurred, nor do we anticipate incurring, any other material expenditures made in order to comply with current environmental laws or regulations. We are not aware of any environmental liabilities that we would expect to have a material adverse effect on our business. However, discovery of additional contamination for which we are responsible, the enactment of new laws and regulations, or changes in how existing requirements are enforced could require us to incur additional costs for compliance or subject us to unexpected liabilities.

INSURANCE

We maintain general liability and product liability, property, worker’s compensation, director and officer and other insurance in amounts and on terms that we believe are customary for companies similarly situated. In addition, we maintain excess insurance where we reasonably believe it is cost effective.

ADDITIONAL INFORMATION

Additional information pertaining to our businesses, including operating segments, is set forth under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations and Related Information” under Item 7 of this Form 10-K and in Note 17 to the Consolidated Financial Statements, “Segments”, which is included under Item 8 of this Form 10-K.

Our reports on Form 10-K, along with all other reports and amendments, are filed with or furnished to the SEC. You may read and copy any materials we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, D.C., 20549. Please call 1-800-SEC-0330 for further information on the operation of the Public Reference Room. Our filings are also available to the public from commercial document retrieval services and at the web site maintained by the SEC at http://www.sec.gov. We also make available through our internet website under the heading “Investors,” our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports after we electronically file any such materials with the SEC.

ITEM 1A.

RISK FACTORS

Our substantial leverage could adversely affect our ability to raise additional capital to fund our operations, limit our ability to react to changes in the economy or our industry, expose us to interest rate risk to the extent of our variable rate debt, and prevent us from meeting our obligations under our notes.

We are highly leveraged. As of December 26, 2010, our total indebtedness was $2.8 billion. Our high degree of leverage could have important consequences, including:

•

requiring a substantial portion of cash flow from operations to be dedicated to the payment of principal and interest on our indebtedness, therefore reducing our ability to use our cash flow to fund our operations, capital expenditures, and future business opportunities;

•

exposing us to the risk of increased interest rates because certain of our borrowings, including certain borrowings under our senior secured credit facilities, are at variable rates;

•

making it more difficult for us to make payments on our notes;

•

increasing our vulnerability to general economic and industry conditions;

•

restricting us from making strategic acquisitions or causing us to make non-strategic divestitures;

•

limiting our ability to obtain additional financing for working capital, capital expenditures, product development, debt service requirements, acquisitions, and general corporate or other purposes; and

•

placing us at a competitive disadvantage compared to our competitors who are less highly leveraged.

We face significant competition in our industry.

The food products business is highly competitive. Numerous brands and products compete for shelf space and sales, with competition based primarily on product quality, brand recognition and loyalty, price, trade promotion, consumer promotion, customer service, and the ability to identify and satisfy emerging consumer preferences. We compete with a significant number of companies of varying sizes, including divisions, subdivisions, or subsidiaries of larger companies. Many of these competitors have multiple product lines, substantially greater financial and other resources available to them, and may be substantially less leveraged than we are. In addition, private label is a significant competitor in the frozen vegetables, shelf-stable pickles, peppers, and relish, and table syrup categories. We cannot guarantee that we will be able to compete successfully with these companies and private label. Competitive pressures or other factors could cause us to lose market share, which may require us to lower prices, increase marketing and advertising expenditures, or increase the use of discounting or promotional campaigns, each of which would adversely affect our margins and could result in a decrease in our operating results and profitability.

Sales of our products are subject to changing consumer preferences, and our success depends upon our ability to predict, identify, and interpret changes in consumer preferences and develop and offer new products rapidly enough to meet those changes.

Our success depends on our ability to predict, identify, and interpret the tastes and dietary habits of consumers and to offer products that appeal to those preferences. There are inherent marketplace risks associated with new product or packaging introductions, including uncertainties about trade and consumer acceptance. If we do not succeed in offering products that consumers want to buy, our sales and market share will decrease, resulting in reduced profitability. A significant challenge for us is distinguishing among fads, mid-term trends, and lasting changes in our consumer environment. If we are unable to accurately predict which shifts in consumer preferences will be long-lasting, or to introduce new and improved products to satisfy those preferences, our sales will decline. In addition, given the variety of backgrounds and identities of consumers in our consumer base, we must offer a sufficient array of products to satisfy the broad spectrum of consumer preferences. As such, we must be successful in developing innovative products across a multitude of product categories. Finally, if we fail to rapidly develop products in faster-growing and more profitable categories, we could experience reduced demand for our products.

If we lose one or more of our major customers, or if any of our major customers experience significant business interruption, our results of operations and our ability to service our indebtedness could be adversely affected.

Pinnacle is dependent upon a limited number of large customers for a significant percentage of its sales. Wal-Mart Stores, Inc. (“Wal-Mart”) and its affiliates are Pinnacle’s largest customer and represented approximately 25%, 25%, and 23% of our consolidated net sales in fiscal 2010, 2009 and 2008, respectively. Cumulatively, including Wal-Mart, our top ten customers accounted for approximately 61% in fiscal 2010, 58% in fiscal 2009 and 57% in fiscal 2008.

We do not have long-term supply contracts with any of our major customers. The loss of one or more major customers, a material reduction in sales to these customers as a result of competition from other food manufacturers, or the occurrence of a significant business interruption of our customers’ operations would result in a decrease in our revenues, operating results, and earnings and could adversely affect our ability to service our indebtedness.

Termination of our material licenses would have a material adverse effect on our business.

As described in greater detail under the caption “Business – Intellectual Property” in Item 1 of this Form 10-K, we manufacture our Aunt Jemima, Armour, Swanson and Voila! brands under license agreements from various third parties. The loss of any of these licenses would have a material adverse effect on our business.

For many of our products, we primarily rely on a single source manufacturing system where a significant disruption in a facility could affect our business, financial condition, and results of operations.

With the exception of our pickles, peppers, and relish products that are produced in two facilities (Imlay City, Michigan and Millsboro, Delaware), Birds Eye’s frozen vegetables products which are produced in three facilities (Fulton, New York, Waseca, Minnesota, and Darien, Wisconsin) and Birds Eye’s frozen complete bagged meals products, which are produced in two facilities (Fulton, New York, and Darien, Wisconsin), none of our products are produced in significant amounts at multiple manufacturing facilities or co-packers. Significant unscheduled downtime at any of our facilities or co-packers due to equipment breakdowns, power failures, natural disasters, or any other cause could adversely affect our ability to provide products to our customers, which would affect our sales, financial condition, and results of operations.

We are vulnerable to fluctuations in the price and supply of food ingredients, packaging materials, and freight.

The prices of the food ingredients, packaging materials, and freight are subject to fluctuations in price attributable to, among other things, changes in supply and demand of crops or other commodities, fuel prices, and government-sponsored agricultural and livestock programs. The sales prices to our customers are a delivered price. Therefore, changes in our input costs could impact our gross margins. Our ability to pass along higher costs through price increases to our customers is dependent upon competitive conditions and pricing methodologies employed in the various markets in which we compete.

We use significant quantities of sugar, cucumbers, broccoli, corn, peas, green beans, flour (wheat), poultry, seafood, vegetable oils, shortening, meat, corn syrup and other agricultural products as well as aluminum, glass jars, plastic trays, corrugated fiberboard, and plastic packaging materials provided by third-party suppliers. We buy from a variety of producers and manufacturers, and alternate sources of supply are generally available. However, the supply and price are subject to market conditions and are influenced by other factors beyond our control, such as general economic conditions, unanticipated demand, problems in production or distribution, natural disasters, weather conditions during the growing and harvesting seasons, insects, plant diseases, and fungi.

Many of our packaging materials are purchased on the open market or from multiple suppliers; however, packaging used for Birds Eye Steamfresh vegetables and meals is purchased pursuant to an exclusive U.S. license and supply agreement that expires in 2013. The loss of this supplier or any significant interruption in the supply of packaging used for Birds Eye Steamfresh vegetables and meals, such as manufacturing problems or shipping delays, could have an adverse effect on our business.

We do not have long-term contracts with many of our suppliers, and, as a result, they could increase prices or fail to deliver. The occurrence of any of the foregoing could increase our costs and disrupt our operations.

We may not be able to successfully integrate businesses we may acquire in the future and we may not be able to realize anticipated cost savings, revenue enhancements, or other synergies from such acquisitions.

Our ability to successfully implement our business plan and achieve targeted financial results is dependent on our ability to successfully integrate businesses we may acquire in the future. The process of integrating an acquired business, involves risks. These risks include, but are not limited to:

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demands on management related to the significant increase in the size of our business;

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diversion of management’s attention from the management of daily operations;

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difficulties in the assimilation of different corporate cultures and business practices;

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difficulties in conforming the acquired company’s accounting policies to ours;

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retaining the loyalty and business of the customers of acquired businesses;

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retaining employees that may be vital to the integration of acquired businesses or to the future prospects of the combined businesses;

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difficulties and unanticipated expenses related to the integration of departments, information technology systems, including accounting systems, technologies, books and records, and procedures, and maintaining uniform standards, such as internal accounting controls, procedures, and policies;

•

costs and expenses associated with any undisclosed or potential liabilities;

•

the use of more cash or other financial resources on integration and implementation activities than we expect;

•

increases in other expenses unrelated to the acquisition, which may offset the cost savings and other synergies from the acquisition;

•

our ability to eliminate duplicative back office overhead and redundant selling, general, and administrative functions, obtain procurement-related savings, rationalize our distribution and warehousing networks, rationalize manufacturing capacity and shift production to more economical facilities; and

•

our ability to avoid labor disruptions in connection with any integration, particularly in connection with any headcount reduction.

Failure to successfully integrate acquired businesses may result in reduced levels of revenue, earnings, or operating efficiency than might have been achieved if we had not acquired such businesses.

In addition, any future acquisitions could result in the incurrence of additional debt and related interest expense, contingent liabilities, and amortization expenses related to intangible assets, which could have a material adverse effect on our financial condition, operating results, and cash flow.

Loss of any of our current co-packing arrangements could decrease our sales and earnings and put us at a competitive disadvantage.

We rely upon co-packers for our Duncan Hines cake mixes, brownie mixes, specialty mixes, and frosting products, and a limited portion of our other manufacturing needs. We believe that there are a limited number of competent, high-quality co-packers in the industry, and if we were required to obtain additional or alternative co-packing agreements or arrangements in the future, we cannot assure you we will be able to do so on satisfactory terms or in a timely manner.

We may be subject to product liability claims should the consumption of any of our products cause injury, illness, or death.

We sell food products for human consumption, which involves risks such as product contamination or spoilage, misbranding, product tampering, and other adulteration of food products. Consumption of a misbranded, adulterated, contaminated, or spoiled product may result in personal illness or injury. We could be subject to claims or lawsuits relating to an actual or alleged illness or injury, and we could incur liabilities that are not insured or exceed our insurance coverage. Even if product liability claims against us are not successful or fully pursued, these claims could be costly and time consuming and may require our management to spend time defending the claims rather than operating our business.

A product that has been actually or allegedly misbranded or becomes adulterated could result in product withdrawals or recalls, destruction of product inventory, negative publicity, temporary plant closings, and substantial costs of compliance or remediation. Any of these events, including a significant product liability judgment against us, could result in a loss of demand for our food products, which could have an adverse effect on our financial condition, results of operations or cash flows.

Due to the seasonality of the business, our revenue and operating results may vary quarter to quarter.

As described in greater detail under the caption “Seasonality” in Item 1 of this Form 10-K, our sales and cash flows are affected by seasonal cyclicality. For these reasons, sequential quarterly comparisons are not a good indication of our performance or how we may perform in the future. If we are unable to obtain access to working capital or if seasonal fluctuations are greater than anticipated, there could be an adverse effect on our financial condition, results of operations or cash flows.

The deterioration of the credit and capital markets may adversely affect our access to sources of funding.

We rely on our revolving credit facilities to fund a portion of our seasonal working capital needs and other general corporate purposes. If any of the banks in the syndicates backing these facilities were unable to perform on its commitments, our liquidity could be impacted, which could adversely affect funding of seasonal working capital requirements. In the event that we need to access the capital markets or other sources of financing, there can be no assurance that we will be able to obtain financing on acceptable terms or within an acceptable time, if at all. Our inability to obtain financing on terms and within a time acceptable to us could have an adverse impact on our operations, financial condition, and liquidity.

We face risks associated with certain pension obligations.

We hold investments in equity and debt securities in our qualified defined benefit pension plans. Deterioration in the value of plan assets, resulting from a general financial downturn or otherwise, could cause an increase in the underfunded status of our defined benefit pension plans, thereby increasing our obligation to make contributions to the plans. For example, from December 2007 to December 2008, the underfunding in the Pinnacle Foods Pension Plan For Employees Covered By Collective Bargaining Agreements (“Pinnacle Foods Pension Plan”) increased from $7.4 million to $36.5 million. This was primarily caused by the economic downturn in the US in the fourth quarter of 2008. The underfunding in our Pinnacle Foods Pension Plan as of December 26, 2010 was $28.6 million.

We also maintain a defined benefit plan acquired in connection with the Birds Eye Acquisition (“Birds Eye Foods Pension Plan”). Although the benefits under these defined benefit pension plans for many employees are frozen, we remain obligated to ensure that the plan is funded in accordance with applicable regulations. The Birds Eye Foods Pension Plan is underfunded by approximately $44.2 million as of December 26, 2010.

Our obligation to make contributions to the pension plans could reduce the cash available for working capital and other corporate uses, and may have an adverse impact on our operations, financial condition, and liquidity.

Our financial well-being could be jeopardized by unforeseen changes in our employees’ collective bargaining agreements or shifts in union policy.

We employed approximately 4,400 people as of December 26, 2010 with approximately 70% of our hourly employees unionized. Due to the seasonality of our pickle and vegetable businesses our employment fluctuates throughout the year, and thus our average number of employees was about 5,000 throughout 2010. In 2011, collective bargaining agreements expire for 479 of our union employees in Fayetteville (October 2011) and 113 of our union employees in Tacoma (January – April 2011). Collective bargaining agreements for our Tacoma employees will not be renegotiated as we are in the process of relocating our canning operations in Tacoma to our Ft. Madison facility. This is discussed in greater detail in Note 7 to our Consolidated Financial Statements.

Although we consider our employee relations to generally be good, failure to extend or renew our collective bargaining agreements or a prolonged work stoppage or strike at any facility with union employees could have a material adverse effect on our business, financial condition, or results of operations. In addition, we cannot assure you that upon the expiration of our existing collective bargaining agreements, new agreements will be reached without any union action, if at all, or that any such new agreements will be on terms satisfactory to us.

Our strategy of evaluating targeted acquisition opportunities may not be successful.

We may not be able to identify and complete acquisitions in the future, and our failure to identify and complete acquisitions could limit our ability to grow our business beyond our existing brands. In addition, we may require additional debt or equity financing for future acquisitions. Our strategy of evaluating targeted acquisition opportunities involves a number of risks, including the following:

•

we may not be able to find suitable businesses to acquire at affordable valuations or on other acceptable terms;

•

our acquisition of suitable businesses could be prohibited by U.S. or foreign antitrust laws; and

•

we may have to incur additional debt to finance future acquisitions, and no assurance can be given as to whether, and on what terms, such additional debt will be available.

We are subject to laws and regulations relating to protection of the environment, worker health, and workplace safety. Costs to comply with these laws and regulations, or claims with respect to environmental, health and safety matters, could have a significant negative impact on our business.

Our operations are subject to various federal, state and local laws and regulations relating to the protection of the environment, including those governing the discharge of pollutants into the air and water, the management and disposal of solid and hazardous materials and wastes, employee exposure to hazards in the workplace and the cleanup of contaminated sites. We are required to obtain and comply with environmental permits for many of our operations, and sometimes we are required to install pollution control equipment or to implement operational changes to limit air emissions or wastewater discharges and/or decrease the likelihood of accidental releases of hazardous materials. We could incur substantial costs, including cleanup costs, civil or criminal fines or penalties, and third-party claims for property damage or personal injury as a result of any violations of environmental laws and regulations, noncompliance with environmental permit conditions or contamination for which we may be responsible that is identified or that may occur in the future. Such costs may be material.

Under federal and state environmental laws, we may be liable for the costs of investigation, removal or remediation of certain hazardous or toxic substances, as well as related costs of investigation and damage to natural resources, at various properties, including our current and former properties and the former properties of our predecessors, as well as offsite waste handling or disposal sites that we, or that our predecessors have used. Liability may be imposed upon us without regard to whether we knew of or caused the presence of such hazardous or toxic substances. There can be no assurances that any such locations, or locations that we may acquire in the future, will not result in liability to us under such laws or expose us to third party actions such as tort suits based on alleged conduct or environmental conditions. In addition, we may be liable if hazardous or toxic substances migrate from properties for which we may be responsible to other properties.

We cannot predict what environmental or health and safety legislation or regulations will be enacted in the future or how existing or future laws or regulations will be enforced, administered or interpreted. We also cannot predict the amount of future expenditures that may be required in order to comply with such environmental or health and safety laws or regulations or to respond to environmental claims.

Our operations are subject to FDA and USDA governmental regulation, and there is no assurance that we will be in compliance with all regulations.

Our operations are subject to extensive regulation by the U.S. Food and Drug Administration, the U.S. Department of Agriculture and other national, state, and local authorities. Specifically, we are subject to the Food, Drug and Cosmetic Act and regulations promulgated thereunder by the FDA. This comprehensive regulatory program governs, among other things, the manufacturing, composition and ingredients, packaging, and safety of food. Under this program, the FDA regulates manufacturing practices for foods through its current “good manufacturing practices” regulations and specifies the recipes for certain foods. Our processing facilities and products are subject to periodic inspection by federal, state, and local authorities. In addition, we must comply with similar laws in Canada. In January 2011, the FDA’s Food Safety Modernization Act was signed into law. The law will increase the number of inspections at food facilities in the U.S. in an effort to enhance the detection of food borne illness outbreaks, and order recalls of tainted food products. We seek to comply with applicable regulations through a combination of employing internal personnel to ensure quality-assurance compliance (for example, assuring that food packages contain only ingredients as specified on the package labeling) and contracting with third-party laboratories that conduct analyses of products for the nutritional-labeling requirements.

Failure to comply with applicable laws and regulations or maintain permits and licenses relating to our operations could subject us to civil remedies, including fines, injunctions, recalls or seizures, as well as potential criminal sanctions, which could result in increased operating costs resulting in a material adverse effect on our operating results and business.

We have a significant amount of goodwill and intangible assets on our consolidated balance sheet that is subject to impairment based upon future adverse changes in our business and the overall economic environment.

At December 26, 2010, the carrying value of goodwill and tradenames was $1,564.4 million and $1,629.8 million, respectively. We evaluate the carrying amount of goodwill and indefinite-lived intangible assets for impairment on an annual basis, in December, or more frequently if an event occurs or circumstances change that would more likely than not reduce the fair value below its carrying amount. We have recorded impairment charges in recent years, including in 2010. The value of goodwill and intangible assets will be derived from our business operating plans and is susceptible to an adverse change in demand, input costs, general changes in the business, or changes in the overall economic environment and could require an impairment charge in the future.

Litigation regarding our trademarks and any other proprietary rights may have a significant, negative impact on our business.

We rely upon a combination of copyright, trademark and patent laws as well as, where appropriate, contractual arrangements, including licensing agreements to establish and protect our intellectual property rights. Although we devote resources to the establishment and protection of our intellectual property rights, we cannot assure you that the actions we have taken or will take in the future will be adequate to prevent violation of our trademark and proprietary rights by others or prevent others from seeking to block sales of our products as an alleged violation of their trademarks or other proprietary rights. There can be no assurance that litigation by or against us will not be necessary to enforce our trademark or proprietary rights or to defend ourselves against claimed infringement, or other claimed violation of the rights of others. Any ongoing or future litigation of this type could result in adverse determinations that could have a material adverse effect on our business, financial condition or results of operations. Our inability to use our trademarks and other proprietary rights, including via temporary or permanent injunctions directed against such rights in ongoing or future litigations, could also harm our business and sales through reduced demand for our products and reduced revenues.

Although we have rights to the Birds Eye and Steamfresh trademarks in the United States and certain other jurisdictions, unaffiliated third parties own rights to the Birds Eye and Steamfresh trademarks in many other countries. These third-party trademark rights may impose legal barriers on our use of these trademarks in those and other jurisdictions and may therefore limit the expansion of the business conducted under these trademarks into these jurisdictions. However, any negative publicity surrounding third-party products, such as product recalls and product liability claims, with respect to the Birds Eye or Steamfresh trademarks in these jurisdictions could nonetheless adversely affect our reputation and the value of our trademarks.

If we are unable to retain our key management personnel, our future performance may be impaired and our financial condition could suffer as a result.

Our success depends to a significant degree upon the continued contributions of senior management, certain of whom would be difficult to replace. Departure by certain of our executive officers could have a material adverse effect on our business, financial condition, or results of operations. We do not maintain key-man life insurance on any of our executive officers. We cannot assure you that the services of such personnel will continue to be available to us.

We may not be able to utilize all of our net operating loss carryforwards.

If there is an unfavorable adjustment from an IRS examination (whether as a result of a change in law or IRS policy or otherwise) that reduces any of our net operating loss carryforwards (“NOLs”), cash taxes may increase and impact our ability to make interest payments on our indebtedness, including the notes. As of December 26, 2010, we had NOLs for U.S. federal income tax purposes of $1.1 billion. Certain of these NOLs are subject to annual limitations under Section 382 of the Internal Revenue Code of 1986 (“the Code”). These limitations and/or our failure to generate sufficient taxable income may result in the expiration of the NOLs before they are utilized.

Blackstone controls Pinnacle and may have conflicts of interest with us or you in the future.

Investment funds associated with or designated by Blackstone own substantially all of our capital stock. Blackstone has control over our decisions to enter into any corporate transaction and has the ability to prevent any transaction that requires the approval of unit holders regardless of whether noteholders believe that any such transactions are in their interests. For example, Blackstone could collectively cause us to make acquisitions that increase our amount of indebtedness, including secured indebtedness, or to sell assets, which may impair our ability to make payments under the notes.

Additionally, Blackstone is in the business of making investments in companies and may from time to time acquire and hold interests in businesses that compete directly or indirectly with us. Blackstone may also pursue acquisition opportunities that may be complementary to our business and, as a result, those acquisition opportunities may not be available to us. So long as investment funds associated with or designated by Blackstone collectively continue to indirectly own a significant amount of our capital stock, even if such amount is less than 50%, Blackstone will continue to be able to influence or effectively control our decisions.

ITEM 1B.

UNRESOLVED STAFF COMMENTS

None

ITEM 2.

PROPERTIES

We own and operate the following thirteen manufacturing and warehouse facilities:


Facility location	Principal products	Facility size
Darien, Wisconsin	Frozen vegetables and complete bagged meals	551,600 square feet
Millsboro, Delaware	Pickles, peppers, relish	460,000 square feet
Ft. Madison, Iowa	Canned meat	450,000 square feet
Imlay City, Michigan	Pickles, peppers, relish	344,000 square feet
Fayetteville, Arkansas	Frozen dinners and entrees	335,000 square feet
Fennville, Michigan	Fruit toppings and fillings	329,866 square feet
Jackson, Tennessee	Frozen breakfast, frozen pizza, frozen prepared seafood	302,000 square feet
Tacoma, Washington	Chili and chili ingredients, dressings	286,468 square feet
Waseca, Minnesota	Frozen vegetables	258,475 square feet
Fulton, New York	Frozen vegetables and complete bagged meals	254,856 square feet
St. Elmo, Illinois	Syrup, barbecue sauce	250,000 square feet
Mattoon, Illinois	Bagels, frozen breakfast	215,000 square feet
Berlin, Pennsylvania	Snack foods	183,500 square feet

We have entered into co-packing (third-party manufacturing) agreements with several manufacturers for certain of our finished products. Our co-packed finished products include our Duncan Hines product line, Aunt Jemima breakfast sandwich product line, and certain seafood and vegetable products. All of our Duncan Hines cake mix, brownie mix, specialty mix and frosting production equipment, including co-milling, blending and packaging equipment, is located at the contract manufacturers’ facilities. The most significant Duncan Hines co-packing agreement will expire in June 2015. We believe that our manufacturing facilities, together with our co-packing agreements, provide us with sufficient capacity to accommodate our planned internal growth.

We also lease a manufacturing plant, warehouse and distribution center in Algona, Washington, warehouses in Darien, Wisconsin and Waseca, Minnesota.

We also lease office space under operating leases (expiring) in Mountain Lakes, New Jersey (November 2013); Parsippany, New Jersey (April 2023), Cherry Hill, New Jersey (October 2021); Rochester, New York (December 2011); Lewisburg, Pennsylvania (Month to Month); Fayetteville, Arkansas (Month to Month); Mississauga, Ontario (August 2015) and Green Bay, Wisconsin (June 2012). The lease for our Parsippany, New Jersey office began in 2011 and we will transition our Mountain Lakes office to this location during 2011 and 2012. This office will become the new corporate headquarters of our company.

ITEM 3.

LEGAL PROCEEDINGS

Lehman Brothers Special Financing

On June 4, 2010 Lehman Brothers Special Financing (LBSF) initiated a claim against the Company in LBSF’s bankruptcy proceeding for an additional payment from the Company of $19.7 million, related to certain derivative contracts which the Company had earlier terminated due to LBSF’s default as a result of its bankruptcy filing in 2008. In accordance with the terms of the contracts, following LBSF’s bankruptcy filing, the Company terminated the contracts and paid LBSF approximately $22.3 million. The Company believes that the claim is without merit and intends to vigorously defend against it.

Commitment of $4.6 Million Capital Expenditure

ITEM 4.

SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None

PART II

ITEM 5.

MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

There is no established trading market for our common stock. As of December 26, 2010, one hundred percent of our common stock was held by our parent, Crunch Holding Corp. We did not pay any dividends in respect to our common stock in fiscal 2010.

Our senior secured credit facilities, the indentures governing our 9.25% Senior Notes due 2015 and 8.25% Senior Notes due 2017 (collectively referred to as the “Senior Notes Indentures”) and the indentures governing our 10.625% Senior Subordinated Notes due 2017 (the “Senior Subordinated Notes Indenture” and together with the Senior Notes Indentures, the “Indentures”) each contain covenants that limit our ability to pay dividends and take on additional indebtedness. The Indentures contain a limitation on restricted payments, including dividends, that is described in greater detail in footnotes (3) and (4) to the last table in “Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Debt—Covenant Compliance” included elsewhere in this Form 10-K. The senior secured credit facilities also limit our ability to make restricted payments, including dividends, subject to exceptions, including an exception that permits restricted payments up to an aggregate amount of (together with certain other amounts) the greater of $50 million and 2% of our consolidated total assets, so long as no default has occurred and is continuing and our pro forma Senior Secured Leverage Ratio would be no greater than 4.25 to 1.00. For the description of our Senior Secured Leverage Ratio and its level as of the last balance sheet date, see “Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations Liquidity and Capital Resources Debt Covenant Compliance.” In addition, the senior secured credit facilities and the Indentures contain exceptions from the limitation on restricted payments that would allow dividends on common stock following the first public offering, if any, of our common stock in an amount up to 6% per year of the net proceeds received by or contributed to our company in or from such public offering, subject to exceptions.

ITEM 6.

SELECTED FINANCIAL DATA

PFG LLC is referred to as the “Predecessor” for the period prior to the acquisition of our Company by The Blackstone Group and PFF is referred to as the “Successor” subsequent to the acquisition of our Company by The Blackstone Group.

The following table sets forth selected historical consolidated financial and other operating data for the following periods:

•

for Successor and its subsidiaries as of and for the fiscal years ended December 26, 2010, December 27, 2009, December 28, 2008, and the 39 weeks ended December 30, 2007;

•

for Predecessor and its subsidiaries for the period from January 1, 2007 to April 2, 2007, immediately prior to our acquisition by The Blackstone Group and for the fiscal year ended December 31, 2006.

The selected financial data of the Successor as of December 26, 2010 and December 27, 2009 and for the fiscal years ended December 26, 2010, December 27, 2009 and December 28, 2008 have been derived from the audited consolidated financial statements included elsewhere in this Form 10-K. The selected financial data for the Successor for the 39 weeks ended December 30, 2007 has been derived from prior 10-K filings of the Successor. The selected financial data of the Predecessor for the period from January 1, 2007 to April 2, 2007, and for the fiscal year ended December 31, 2006 have been derived from the audited consolidated financial statements of the Predecessor.

The selected financial data presented below should be read in conjunction with our consolidated financial statements and the notes to those statements and “Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this Form 10-K.


	Successor												Predecessor
($ in Thousands)	Fiscal Year ended December 26, 2010			Fiscal Year ended December 27, 2009			Fiscal Year ended December 28, 2008			39 weeks ended December 30, 2007			13 weeks ended April 2, 2007			Fiscal Year ended December 31, 2006
Statement of operations data:
Net sales	$	2,436,703		$	1,642,931		$	1,556,408		$	1,137,898		$	376,587		$	1,442,256
Cost of products sold		1,834,375			1,263,627			1,217,929			895,306			293,191			1,122,646

Gross profit		602,328			379,304			338,479			242,592			83,396			319,610
Operating expenses
Marketing and selling expenses		172,344			123,833			111,372			87,409			34,975			103,550
Administrative expenses		109,950			62,737			47,832			40,715			17,714			52,447
Research and development expenses		9,387			4,562			3,496			2,928			1,437			4,037
Other expense (income), net		45,495			42,214			24,363			12,028			51,042			14,186

Total operating expenses		337,176			233,346			187,063			143,080			105,168			174,220

Earnings (loss) before interest and taxes		265,152			145,958			151,416			99,512			(21,772	)		145,390
Interest expense		236,004			121,167			153,280			124,504			39,079			86,615
Interest income		288			89			319			1,029			486			1,247

Earnings (loss) before income taxes		29,436			24,880			(1,545	)		(23,963	)		(60,365	)		60,022
Provision (benefit) for income taxes		7,399			(277,723	)		27,036			24,746			6,284			26,098

Net earnings (loss)	$	22,037		$	302,603		$	(28,581	)	$	(48,709	)	$	(66,649	)	$	33,924

Other financial data:
Net cash provided by operating activities	$	256,978		$	116,243		$	16,759		$	60,139		$	55,684		$	161,563
Net cash used in investing activities		(81,272	)		(1,366,776	)		(32,598	)		(1,340,353	)		(5,027	)		(213,657	)
Net cash provided by (used in) financing activities		(134,321	)		1,319,828			14,239			1,286,062			(46,293	)		63,912
Depreciation and amortization		78,049			65,468			62,509			45,671			10,163			42,187
Capital expenditures		81,272			52,030			32,598			22,935			5,027			26,202
Ratio of earnings to fixed charges ⁽¹⁾		1.12x			1.20x			NM			NM			NM			1.68x
Balance sheet data:
Cash and cash equivalents	$	115,286		$	73,874		$	4,261		$	5,999		$	—		$	12,337
Working capital ⁽²⁾		344,392			364,577			131,234			80,556			—			105,569
Total assets		4,491,616			4,538,498			2,632,200			2,667,079			—			1,792,081
Total debt ⁽³⁾		2,803,546			2,888,711			1,785,352			1,770,171			—			920,963
Total liabilities		3,596,531			3,664,145			2,324,627			2,307,464			—			1,353,726
Shareholders’ equity		895,085			874,353			307,573			359,615			—			438,355

The selected financial data presented above is impacted by the acquisition of our Company by The Blackstone Group in 2007 and by our acquisition of Birds Eye in 2009.

(1)

For purposes of computing the ratio of earnings to fixed charges, earnings consist of earnings (loss) before income taxes and fixed charges. Fixed charges consist of (i) interest expense, including amortization of debt acquisition costs and (ii) one-third of rent expense, which management believes to be representative of the interest factor thereon. The Successor’s earnings for the fiscal years ending 2008 and the 39 weeks ending December 30, 2007 were insufficient to cover fixed charges by $1.5 million and $24.0 million, respectively. The Predecessor’s earnings for the 13 weeks ending April 2, 2007 were insufficient to cover fixed charges by $60.3 million.

(2)	Working capital excludes notes payable, revolving debt facility and current portion of long term debt.

(3)	Total debt includes notes payable, revolving debt facility and current portion of long term debt.

ITEM 7:

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 with the “Selected Financial Data” and the audited consolidated financial statements appearing elsewhere in this Form 10-K. This discussion contains forward-looking statements and involves numerous risks and uncertainties, including, but not limited to, those described in the “Item 1A: Risk Factors” section of this Form 10-K. Actual results may differ materially from those contained in any forward-looking statements.

Information presented for the fiscal years ended December 26, 2010, December 27, 2009 and December 28, 2008 is derived from our audited consolidated financial statements for those periods. The results for the fiscal year ended December 27, 2009 include the results of operations of Birds Eye Foods, Inc. from the date of acquisition on December 23, 2009.

Overview

On December 23, 2009, we acquired all of the common stock of Birds Eye Foods, Inc. (“Birds Eye Foods”) (the “Birds Eye Foods Acquisition”). Birds Eye Foods’ product offering includes an expanding platform of healthy, high-quality frozen vegetables and frozen meals and a portfolio of primarily branded specialty foods which are highly-complimentary to our existing product offerings. Frozen food products are marketed under the Birds Eye brand name, which holds the #1 branded market share in frozen vegetables and Birds Eye Voila! holds the #2 market share in frozen complete bagged meals. Birds Eye Foods markets traditional boxed and bagged frozen vegetables, as well as steamed vegetables using innovative steam-in-packaging technology, under the Birds Eye and Birds Eye Steamfresh brands. Birds Eye Foods’ frozen complete bagged meals, marketed under the Birds Eye Voila! brand, offer consumers value-added meal solutions that include a protein, starch, and vegetables in one convenient package. Birds Eye Foods’ branded specialty food products hold leading market share positions in their core geographic markets, and include Comstock and Wilderness fruit pie fillings and toppings, Brooks and Nalley chili and chili ingredients, and snack foods by Tim’s Cascade and Snyder of Berlin.

We are a leading producer, marketer and distributor of high quality, branded food products. In the first quarter of 2010, we implemented a reorganization of the Company’s products into three operating segments: Birds Eye Frozen, Duncan Hines Grocery and Specialty Foods. Our United States retail frozen vegetables (Birds Eye^®), multi-serve frozen dinners and entrées (Birds Eye Voila!^®), single-serve frozen dinners and entrées (Hungry-Man^®, Swanson^®), frozen seafood (Van de Kamp’s^®, Mrs. Paul’s^®), frozen breakfast (Aunt Jemima^®), bagels (Lender’s^®), and frozen pizza (Celeste^®) are reported in the Birds Eye Frozen Division. Our baking mixes and frostings (Duncan Hines^®), shelf-stable pickles, peppers and relish (Vlasic^®), barbeque sauces (Open Pit^®), pie fillings (Comstock^®, Wilderness^®), syrups (Mrs. Butterworth’s^® and Log Cabin^®), salad dressing (Bernstein’s^®), canned meat (Armour^®, Nalley^®, Brooks^®) and all Canadian Operations are reported in the Duncan Hines Grocery Division. The Specialty Foods Division consists of snack products (Tim’s Cascade^® and Snyder of Berlin^®) and our food service and private label businesses. Segment performance is evaluated by the Company’s Chief Operating Decision Maker and is based on earnings before interest and taxes. Transfers between segments and geographic areas are recorded at cost plus markup or at market. Identifiable assets are those assets, including goodwill, which are identified with the operations in each segment or geographic region. Corporate assets consist of prepaid and deferred tax assets and assets held for sale. Unallocated corporate expenses consist of corporate overhead such as executive management, and finance and legal functions and the costs to integrate the Birds Eye Foods Acquisition. Prior period amounts have been reclassified for consistent presentation of our segments.

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. This discussion includes forward-looking statements that are based on our current expectations.

Industry Factors

Our industry is characterized by the following general trends:

•

Industry Growth. Growth in our industry is driven primarily by population and modest product selling price increases and changes in consumption between out-of-home and in-home eating. Incremental growth is principally driven by product, packaging and process innovation.

•

Competition. The food products business is competitive. Numerous brands and products compete for shelf space and sales, with competition based primarily on product quality, convenience, price, trade promotion, consumer promotion, brand recognition and loyalty, customer service and the ability to identify and satisfy emerging consumer preferences. In order to maintain and grow our business, we must be able to react to these competitive pressures.

•

Consumer Tastes and Trends. Consumer trends, such as changing health trends and focus on convenience and products tailored for busy lifestyles, present both opportunities and challenges for our business. In order to maintain and grow our business, we must react to these trends by offering products that respond to evolving consumer needs. In the current economic climate, the long term trend for food consumption at home is flat and the increase that was experienced during the most severe part of the recession is now moderating. Additionally, consumers are looking for value alternatives, which have caused a shifting from traditional retail grocery to mass merchandisers and the value channel.

•

Customer Consolidation. In recent years, our industry had been characterized by consolidation in the retail grocery and food service industries, with mass merchandisers gaining market share. This trend could increase customer concentration within the industry.

Revenue Factors

Our net sales are driven principally by the following factors:

•

Gross Sales, which changes as a function of changes in volume and list price; and

•

the costs that we deduct from gross sales to reach net sales, which consist of:

•

Cash discounts, returns and other allowances

•

Trade marketing expenses, which include the cost of temporary price reductions (“on sale” prices), promotional displays and advertising space in store circulars.

•

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

Our important costs include the following:

•

Raw materials, such as sugar, cucumbers, broccoli, corn, peas, green beans, flour (wheat), poultry, seafood, vegetable oils, shortening, meat and corn syrup, among others, are available from numerous independent suppliers but are subject to price fluctuations due to a number of factors, including changes in crop size, federal and state agricultural programs, export demand, weather conditions and insects, among others.

•

Packaging costs. Our broad array of products entails significant costs for packaging and is subject to fluctuations in the price of aluminum, glass jars, plastic trays, corrugated fiberboard, and plastic packaging materials.

•

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 retailers from both those centers and directly from our manufacturing plants. Our freight and distribution costs are influenced by fuel costs.

•

Advertising and other marketing expenses. We record expenses related to advertising and other consumer and trade-oriented marketing programs under “Marketing and selling expenses” in our consolidated financial statements. A key strategy is to continue to invest in marketing that builds our iconic brands.

Working Capital

Our working capital is primarily driven by accounts receivable and inventories, which fluctuate throughout the year due to seasonality in both sales and production, as described below in “Seasonality.” We will continue to focus on reducing our working capital requirements while simultaneously maintaining our customer service levels and production needs. We have historically relied on internally generated cash flows and temporary borrowings under our revolving credit facility to satisfy our working capital requirements.

Other Factors

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

•

Interest Expense. As a result of the Blackstone Transaction and Birds Eye Foods Acquisition, we have significant indebtedness. Although we expect to reduce our leverage over time, we expect interest expense to continue to be a significant component of our expenses. See “Liquidity and Capital Resources.”

•

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

•

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

•

Impairment of Goodwill and Long-Lived Assets. We test our goodwill and intangible assets annually or more frequently (if necessary) for impairment and have recorded impairment charges in recent years. The value of goodwill and intangibles from the allocation of purchase price from the Blackstone Transaction and the Birds Eye Foods Acquisition is derived from our business operating plans at that time and is therefore susceptible to an adverse change that could require an impairment charge. In the first quarter of 2010, we tested for impairment due to our reorganization into new segments and it resulted in no impairment charges. See “Impairment of Goodwill and Other Long-Lived Assets” below for impairment charges recorded in 2010, 2009 and 2008.

Seasonality

Recent Transactions

On December 23, 2009, Pinnacle Foods Group LLC acquired the common stock of Birds Eye Foods, Inc. (the “Birds Eye Acquisition”) for $1.34 billion. In connection with the acquisition, Pinnacle purchased all of the issued and outstanding capital stock of Birds Eye Foods, Inc. from Birds Eye Holdings LLC for a purchase price of $670.0 million in cash. In accordance with the Stock Purchase Agreement, Pinnacle funded approximately $670.4 million to pay off Birds Eye Foods Inc.’s remaining indebtedness and other obligations. Birds Eye Foods, Inc., along with its subsidiaries, is now a direct, wholly-owned subsidiary of Pinnacle. Results of Operations are included beginning December 23, 2009.

Restructuring Charges

Rochester, NY Office

The Rochester, NY office was the former headquarters of Birds Eye Foods, Inc. which was acquired by PFG on December 23, 2009, as described in Note 3 to our Consolidated Financial Statements. In connection with the consolidation of activities into PFG’s New Jersey offices, the Rochester office has been closed. Notification letters under the Worker Adjustment and Retraining Notification (WARN) Act of 1988 were issued in the first quarter of 2010. Activities related to the closure of the Rochester office began in the second quarter of 2010 and resulted in the elimination of approximately 200 positions.

In accordance with the authoritative guidance with respect to accounting for costs associated with exit or disposal activities, the full cost of termination benefits related to employees who were not retained beyond the minimum retention period was $7.6 million recorded in first quarter 2010. The full cost of termination benefits of employees who were retained beyond the minimum retention period was $3.7 million and was recorded throughout the fiscal year. The total cost of termination benefits recorded for the fiscal year ended December 26, 2010 was $11.3 million and was recorded in the segments as follows: Birds Eye Frozen segment $8.0 million, Duncan Hines Grocery segment $2.0 million and Specialty Foods segment $1.3 million. There will be no termination costs for closure of the Rochester office recorded beyond fiscal 2010. Severance payments will occur through mid 2012.

In addition to the termination benefits, we recorded net lease termination costs of $1.2 milllion for the fiscal year ended December 26, 2010 related to vacating the Birds Eye Foods’ Corporate headquarters prior to the expiration of the lease. These costs are expected to be paid over the remaining term of the lease, which runs through December 2011.

Tacoma, WA Plant

We currently have two canning operations, our Tacoma, Washington plant that produces our Nalley and Brooks brands and our Ft. Madison, Iowa facility that produces our Armour brand. In an effort to enhance the long-term strength of our brands and improve our supply chain operations we will close our Tacoma plant and consolidate production in our Ft. Madison plant. The closure of the Tacoma plant is targeted for the second half of 2011 and will result in the termination of approximately 160 employees. The full cost of termination benefits of employees that was recorded was recorded in the fourth quarter of 2010 was $1.5 million and is expected to be paid in 2011. Termination costs for Tacoma are recorded in the Duncan Hines Grocery segment. In addition to termination benefits, we revised the estimated useful lives of the Tacoma plant assets and therefore incurred accelerated depreciation of $0.7 million in the fourth quarter of 2010, and expect to record an additional $4.8 million of accelerated depreciation in 2011. We also adjusted the timing of the settlement of asset retirement obligations at Tacoma and as a result recorded an additional liability of $1.0 million which was capitalized and will be depreciated over the remaining useful life of the plant.

Impairment of Goodwill and Other Long-Lived Assets

In fiscal 2010, we experienced declines in sales of our Hungry-Man branded products. Upon reassessing the long-term growth rates at the end of 2010, we recorded an impairment of the tradename asset in the amount of $29.0 million. The charge is recorded in Other expense (income), net on the Consolidated Statements of Operations and is reported in the Birds Eye Frozen segment.

In fiscal 2009, we experienced declines in net sales of our Swanson branded products. Upon reassessing the long-term growth rates of the brand, we recorded an impairment charge of the tradename asset in the amount of $1.3 million. The charge is recorded in Other expense (income), net in the Consolidated Statements of Operations and is reported in the Birds Eye Frozen segment.

In 2008, we recorded impairment charges for its Van de Kamp’s ($8.0 million), Mrs. Paul’s ($5.6 million), Lenders ($0.9 million) and Open Pit tradenames ($0.6 million). The charges are the result of us reassessing the long-term growth rates for our branded products. The charges are recorded in Other expense (income), net on the Consolidated Statements of Operations and are reported in the Birds Eye Frozen ($14.5 million) and Duncan Hines Grocery ($0.6 million) segments.

Items Affecting Comparability

During fiscal 2010, our earnings before interest and taxes were impacted by certain items. These items included:

•

In accordance with the requirements of the acquisition method of accounting for acquisitions, inventories obtained in the Birds Eye 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 was $37.6 million higher than historical manufacturing cost. Cost of products sold for the year ended December 26, 2010, includes pre-tax charges of $37.1 million related to the finished products at December 23, 2009, which were subsequently sold. Cost of products sold for the year ended December 27, 2009, includes pre-tax charges of $0.5 million related to the finished products at December 23, 2009, which were subsequently sold.

•

In December 2010, the Company recorded an impairment charge of $29.0 million for its Hungry-Man tradename. The charge is the result of the Company’s reassessment of the long-term growth rates for its branded products and is recorded in Other expense (income), net in the Consolidated Statements of Operations.

•

We recorded costs of $12.6 million related to the closure of former headquarters of Birds Eye Foods in Rochester, New York. These costs are recorded in Administrative Expenses in the Consolidated Statements of Operations.

•

In December 2010, we announced the planned closure of our Tacoma, Washington plant. The full cost of termination benefits of employees that was recorded in the fourth quarter of 2010 was $1.5 million and is expected to be paid in the first half of 2011. Termination costs for Tacoma are recorded in the Duncan Hines Grocery segment. In addition to termination benefits, we revised the estimated useful lives of the Tacoma plant assets and therefore incurred accelerated depreciation of $0.7 million in the fourth quarter of 2010, and expect to record an additional $4.8 million in 2011. We also adjusted the timing of the settlement of asset retirement obligations at Tacoma and as a result recorded an additional liability of $1.0 million which was capitalized and will be depreciated over the remaining useful life of the plant.

During the year ended December 26, 2010, our net earnings were impacted by certain items. These items included:

•

In connection with the refinancing of our Tranche C term loans, we wrote off approximately $17.2 million of original issue costs and discounts. In addition, we incurred approximately $3.2 million of costs related to the issuance of our Tranche D term loans, which were considered to be loan modification costs under the accounting guidance and therefore were expensed. All of these charges are recorded in the Interest Expense, net in the Consolidated Financial Statements.

•

We recorded an out-of-period adjustment to correct an error in the tax effects of Accumulated other comprehensive loss as of December 27, 2009. During the twelve months ended December, 26, 2010, this adjustment reduced the provision for income taxes by $3.7 million. Accordingly, Accumulated other comprehensive loss was increased by the related effect of this adjustment during the twelve months ended December 26, 2010.

During fiscal 2009, our earnings (loss) before interest and taxes were impacted by certain items. These items included:

•

On July 10, 2009, Jeffrey P. Ansell left his position as Chief Executive Officer and as a Director of the Company to pursue other interests. As a result of the change, we recorded a provision for severance in the amount of $2.4 million in Administrative expenses in the Consolidated Statements of Operations.

•

In December 2009, the Company recorded an impairment charge of $1.3 million for its Swanson tradename. The charge is the result of the Company’s reassessment of the long-term growth rates for its branded products and is recorded in Other expense (income), net in the Consolidated Statements of Operations.

•

In December 2009, in connection with the Birds Eye Foods Acquisition, the Company incurred merger-related cost of $24.1 million. These costs include $19.3 million in merger, acquisition and advisory fees, $4.0 million in legal, accounting and other professional fees and $0.8 million in other costs. The costs are recorded in Other expense (income), net in the Consolidated Statements of Operations.

In addition, during fiscal 2009, our net earnings were impacted by:

•

We recorded a $315.6 million benefit to income taxes related to the reversal of the valuation allowance, as we concluded that it is more likely than not that certain of our US deferred tax assets will be recognized in future years. Prior to the realization of these deferred tax assets we maintained a full valuation allowance against net deferred tax assets excluding indefinite-lived intangible assets.

During fiscal 2008, our earnings (loss) before interest and taxes were impacted by certain items. These items included:

•

In April of 2008, the Company settled a lawsuit with R2 Top Hat, Ltd., relating to its claim against Aurora Foods Inc., which merged with the Company in March 2004. Under the settlement, the Company paid R2 Top Hat, Ltd. $10 million in full payment of the excess leverage fees related to the Aurora prepetition bank facility, all related interest and all other out-of-pocket costs. After this settlement, there are no remaining contingencies related to the excess leverage fees under the Aurora prepetition bank facility. Accordingly, the remaining $10.0 million accrued liability assumed in the merger with Aurora and recorded at fair value of $20.1 million in the purchase price allocation for the Blackstone Transaction was reduced to $0 and the related credit, net of related expenses, was recorded in Other expense (income), net in the Consolidated Statements of Operations.

•

In December 2008, the Company recorded impairment charges for its Van de Kamp’s ($8.0 million), Mrs. Paul’s ($5.6 million), Lenders ($0.9 million) and Open Pit tradenames ($0.6 million). The charges are the result of the Company reassessing the long-term growth rates for its branded products and are recorded in Other expense (income), net in the Consolidated Statements of Operations.

Results of Operations:

Consolidated Statements of Operations

The following tables set forth statement of operations data expressed in dollars and as a percentage of net sales. In accordance with GAAP, the results for fiscal 2009 only include the results of operations of the Birds Eye business from the date of the acquisition, December 23, 2009, through December 27, 2009, the end of the fiscal year.


	Fiscal 2010				Fiscal 2009				Fiscal 2008
Net sales	$	2,436.7	100.0	%	$	1,643.0	100.0	%	$	1,556.4	100.0	%
Cost of products sold		1,834.4	75.3	%		1,263.7	76.9	%		1,217.9	78.3	%

Gross profit		602.3	24.7	%		379.3	23.1	%		338.5	21.7	%

Operating expenses
Marketing and selling expenses		172.3	7.1	%		123.8	7.5	%		111.4	7.2	%
Administrative expenses		109.9	4.5	%		62.7	3.8	%		47.8	3.1	%
Research and development expenses		9.4	0.4	%		4.6	0.3	%		3.5	0.2	%
Other expense (income), net		45.5	1.9	%		42.2	2.6	%		24.4	1.6	%

Total operating expenses		337.1	13.8	%		233.3	14.2	%		187.1	12.0	%

Earnings before interest and taxes	$	265.2	10.9	%	$	146.0	8.9	%	$	151.4	9.7	%


	Fiscal 2010			Fiscal 2009			Fiscal 2008
Net sales:
Birds Eye Frozen Segment	$	1,065.9		$	473.3		$	457.5
Duncan Hines Grocery Segment		958.0			854.8			804.0
Specialty Foods Segment		412.8			314.9			294.9

Total	$	2,436.7		$	1,643.0		$	1,556.4

Earnings (loss) before interest and taxes
Birds Eye Frozen Segment	$	114.5		$	38.7		$	20.9
Duncan Hines Grocery Segment		158.8			145.9			135.6
Specialty Foods Segment		27.1			6.7			(2.0	)
Unallocated corporate expenses		(35.2	)		(45.3	)		(3.1	)

Total	$	265.2		$	146.0		$	151.4

Depreciation and amortization
Birds Eye Frozen Segment	$	34.1		$	22.8		$	20.1
Duncan Hines Grocery Segment		24.2			22.7			22.2
Specialty Foods Segment		19.7			20.0			20.2

Total	$	78.0		$	65.5		$	62.5

Fiscal year ended December 26, 2010 (52 weeks) compared to fiscal year ended December 27, 2009 (52 weeks)

Net sales: Net sales in the twelve months ended December 26, 2010 were $2.44 billion, an increase of $793.7 million, compared to net sales in the twelve months ended December 27, 2009 of $1.64 billion. The acquisition of Birds Eye Foods, Inc. resulted in $892.7 million of increased net sales. In 2010, we exited the Birds Eye Steamfresh meals business. Net sales for all other businesses decreased $99.0 million, or 6.1%. This decrease was primarily driven by high levels of promotional activity driven by price sensitive consumers. Our product volume decreased 6.7% as Pinnacle chose not to participate in inefficient promotions during the year. Our strategic decision to emphasize higher margin non-retail products and the discontinuance of our Swanson meals business in the United States also contributed to the decrease. Favorable product mix increased net sales by 1.1%. Weighted average net selling prices decreased 0.7%, reflecting increased promotional competition at retail. In spite of the competitive environment, Pinnacle’s brands remained strong, with brands representing 66% of product contribution holding or growing market share compared to 2009.

Birds Eye Frozen Segment: Net sales increased $592.6 million for the twelve months ended December 26, 2010. The acquisition of Birds Eye Foods, Inc. resulted in $625.5 million of increased net sales. Net sales for all other businesses decreased $32.9 million. The decrease was driven by lower sales of our U.S. Swanson dinners brand, which we exited during the year, as well as lower sales of our Hungry-Man and Lenders brands, partially offset by increased sales of our Aunt Jemima brand. This decrease was also mitigated by improved product mix, which contributed a 0.6% increase.

Duncan Hines Grocery Segment: Net sales increased $103.2 million for the twelve months ended December 26, 2010. The acquisition of Birds Eye Foods, Inc. resulted in $120.9 million of increased net sales. Net sales for all other businesses decreased $17.7 million. The decrease was driven by lower sales of our Duncan Hines brand due to intense competition and our choice not to participate in inefficient promotions. Sales were also lower in our Mrs. Butterworth’s brand, partially offset by strong sales in our Canadian business and our Armour brand. This decrease was also mitigated by a favorable currency impact, which contributed a 0.5% increase.

Specialty Foods Segment: Net sales increased $97.9 million for the twelve months ended December 26, 2010. The acquisition of Birds Eye Foods, Inc. resulted in $146.3 million of increased net sales. Net sales for all other businesses decreased $48.4 million. The decrease was in line with of our strategy of emphasizing our higher margin products within this segment, which led to decreased sales of our lower margin products.

Gross profit:. Gross profit was $602.3 million, or 24.7% of net sales, in the twelve months ended December 26, 2010, versus gross profit of $379.3 million, or 23.1% of net sales, in the twelve months ended December 27, 2009. The acquisition of Birds Eye Foods, Inc. resulted in $236.5 million of gross profit. For the remaining businesses, gross profit for the twelve months ending December 26, 2010 was $365.8 million, or 23.7% of net sales, a 0.6 percentage point increase compared to the twelve months ending December 27, 2009 of $378.8 million, or 23.1% of net sales. The principal driver of the increased gross profit margin was improved product mix, accounting for approximately 1.0 percentage point of improvement. Partially offsetting this increase were a slightly higher rate of trade marketing and coupon redemption expenses, and a higher rate of freight and storage costs, each of which resulted in a 0.2 percentage point decrease in the gross margin.

Marketing and selling expenses: Marketing and selling expenses were $172.3 million, or 7.1% of net sales, in the twelve months ended December 26, 2010, an increase of $48.5 million compared to $123.8 million, or 7.5% of net sales, in the twelve months ended December 27, 2009. The acquisition of Birds Eye Foods, Inc. resulted in an additional $66.3 million of expenses for the year. The remaining decrease was driven by lower selling, advertising, and promotional expenses of $17.8 million, primarily in our Seafood, Duncan Hines, Aunt Jemima and Syrup businesses.

Administrative expenses: Administrative expenses were $109.9 million, or 4.5% of net sales, in the year ended December 26, 2010 compared to $ 62.7 million, or 3.8% of net sales, in the year ended December 27, 2009, an increase of $47.2 million. The acquisition and integration of Birds Eye Foods resulted in $46.6 million of the increase for the year ended December 26, 2010, and included charges of $13.1 million for the employee termination benefits and integration costs and $1.3 million of net lease termination costs related to the announced closure of the Rochester, N.Y. office. Also included are lease termination costs of $0.7 million related to the relocation of the Cherry Hill, NJ office facility and $1.7 million of stock option expense related to a catch up vesting of our 2008 B-units as described in Note 5 to the Consolidated Financial Statements. Excluding these charges and expenses, administrative expenses were 3.8% of net sales in the year ended December 26, 2010.

Research and development expenses: Research and development expenses were $9.4 million, or 0.4% of net sales, in the year ended December 26, 2010 compared with $4.6 million, or 0.3% of net sales, in the year ended December 27, 2009. The increase was primarily driven by the acquisition of Birds Eye Foods Inc.

Other expense (income), net.

Other expense (income), net consists of the following:


	Fiscal year ended December 26, 2010			Fiscal year ended December 27, 2009		Fiscal year ended December 28, 2008
Amortization of intangibles/other assets	$	17,170		$	16,824	$	19,245
Restructuring and impairment charges		29,000			1,300		15,100
Birds Eye Acquisition merger-related costs		224			24,090		—
Gain on litigation settlement		—			—		(9,988	)
Royalty income		(750	)		—		—
Other		(149	)		—		6

Total other expense	$	45,495		$	42,214	$	24,363

Earnings before interest and taxes. Earnings before interest and taxes (EBIT) increased $119.2 million to $265.2 million in the twelve months ended December 26, 2010 from $146.0 million in EBIT in the twelve months ended December 27, 2009. The acquisition of Birds Eye Foods, Inc. increased EBIT by $120.6 million for the twelve months ended December 26, 2010. The remaining decrease in EBIT resulted from a $20.2 million decrease in the Birds Eye Frozen Division, a $6.4 million decrease in the Duncan Hines Grocery Division, a $5.8 million increase in the Specialty Foods Division, and a $19.4 million decrease in unallocated corporate expenses. Included in the unallocated corporate expenses are integration and transaction costs associated with the acquisition of Birds Eye Foods, Inc. of $6.7 million for the twelve months ended December 26, 2010, and $24.1 million for the twelve months ended December 27, 2009. Also included in the twelve months ended December 26, 2010 are lease termination costs of $0.7 million related to the relocation of the Cherry Hill, NJ office facility. The remaining change in unallocated corporate expenses resulted from lower management incentive and equity related compensation accruals, and reduced severance and recruiting provisions, principally related to the change in the CEO in 2009. Synergies realized, defined as reduction in operating costs resulting from the combination of Pinnacle and Birds Eye Foods, Inc., increased EBIT by $25.0 million in the twelve months ended December 26, 2010.

Birds Eye Frozen Division: EBIT increased by $75.8 million in the twelve months ended December 26, 2010, to $114.5 million from $38.7 million in the twelve months ended December 27, 2009. The acquisition of Birds Eye Foods, Inc. increased EBIT by $96.1 million for the twelve months ended December 26, 2010. For the year ended December 26, 2010, impairment charges totaled $29.0 million, consisting of the trade name impairment charge on our Hungry-Man brand. For the year ended December 27, 2009, impairment charges totaled $1.3 million, consisting of the trade name impairment charge on our Swanson brand. The remaining increase of $7.4 million was principally driven by lower raw material commodity costs, decreased advertising expense, principally in our Seafood and Aunt Jemima brands, and reduced overhead expenses, partially offset by the gross margin impact of the decrease in net sales.

Duncan Hines Grocery Division: EBIT increased by $12.9 million in the twelve months ended December 26, 2010, to $158.8 million from $145.9 million in the twelve months ended December 27, 2009. The acquisition of Birds Eye Foods, Inc. increased EBIT by $19.3 million for the twelve months ended December 26, 2010. The remaining decrease of $6.4 million was principally driven by the gross margin impact of the lower net sales and the higher aggregate trade marketing and consumer coupon redemption expense and slotting expenses, as well as higher manufacturing conversion costs and market research and package design expenses, partially offset by reduced overhead expenses.

Specialty Foods Division: EBIT increased by $20.4 million in the twelve months ended December 26, 2010, to $27.1 million from $6.7 million in the twelve months ended December 27, 2009. The acquisition of Birds Eye Foods, Inc. increased EBIT $14.6 million for the twelve months ended December 26, 2010. The remaining increase of $5.8 million was principally driven by lower amortization expense and improved gross margin rates, partially offset by the gross margin impact of the $48.4 million decrease in net sales resulting from the execution of our stated strategy of de-emphasizing lower margin foodservice and private label products.

Interest expense, net. Interest expense, net was $235.7 million in the year ended December 26, 2010, compared to $121.1 million in the year ended December 27, 2009. The increase principally related to borrowings to fund the Birds Eye Foods acquisition, which occurred at the end of 2009, as detailed below.

Included in interest expense, net was $3.3 million and $4.4 million for the years ended December 26, 2010 and December 27, 2009, respectively, for the amortization of the cumulative mark-to-market adjustment for an interest rate swap that was de-designated for swap accounting in the fourth quarter of 2008 and subsequently terminated. The counterparty to the interest rate swap was Lehman Brothers Special Financing (“LBSF”), a subsidiary of Lehman Brothers, and the hedge was de-designated for swap accounting at the time of LBSF’s bankruptcy filing. At the time of de-designation, the cumulative mark-to-market adjustment was $11.5 million. As of December 26, 2010, the remaining unamortized balance was $2.9 million.

Also included in interest expense, net for the year ended December 26, 2010 were charges of $20.9 million of costs incurred in connection with the refinancing of Tranche C Term Loans. These charges included write-offs of $11.6 million and $5.6 million, respectively, of deferred financing costs and original issue discount associated with the refinanced Tranche C Term Loans, $3.2 million of costs to modify existing banking arrangements that were maintained after the refinancing, and $0.5 million of hedge ineffectiveness related to hedges of interest payments due on the refinanced Tranche C Term Loans.

Excluding the impact of the items in the previous paragraphs, the increase in interest expense, net, was $94.8 million, of which $52.1 million was attributable to higher bank debt interest principally related to the Tranche C Term Loan borrowings to partially fund the Birds Eye Foods Acquisition and the related Tranche D Term Loan refinancing after August 17, 2010, somewhat offset by lower debt levels on the existing term loans and lower average revolver borrowings, $39.6 million of higher bond debt levels which also partially funded the Birds Eye Foods Acquisition and included interest on the new 8.25% Senior Notes issued on August 17, 2010, $3.8 million of higher amortization of debt issue costs, with all other items amounting to a $0.7 million reduction in interest expense. Included in the interest expense, net, amount was $17.7 million and $14.2 million for the twelve months ended December 26, 2010 and the twelve months ended December 27, 2009 respectively, recorded from losses on interest rate swap agreements, a net change of $3.2 million. We utilize interest rate swap agreements to reduce the potential exposure to interest rate movements and to achieve a desired proportion of variable versus fixed rate debt. Any gains or losses realized on the interest rate swap agreements, excluding the Accumulated other comprehensive (loss) income (“AOCI”) portion, are recorded as an adjustment to interest expense.

Provision for income taxes. The effective tax rate was 25.1% in the twelve months ended December 26, 2010, compared to (1,116.3%) in the twelve months ended December 27, 2009. The effective rate difference is primarily due to a $2.2 million benefit to the state effective tax rate as a result of restructuring arising from the Birds Eye Foods integration and an out of period adjustment of $4.2 million to correct errors related to the reversal of our income tax valuation allowance as of December 27, 2009. For the year ended December 26, 2010, this adjustment reduced provision for income taxes by $4.2 million, increased deferred tax assets by $5.0 million, increased uncertain tax benefits by $4.5 million and increased accumulated other comprehensive income (loss) by $3.7 million. Since these were not material to the prior or current year financial statements, we have recorded these adjustments in the financial statements for the year ended December 26, 2010. For the twelve-months ended December 27, 2009 we recorded a benefit of $315.6 million related to the reversal of the valuation allowance as we concluded that it was more likely than not that certain US deferred tax assets would be recognized in future years.

Under Internal Revenue Code Section 382, the Company is a loss corporation. Section 382 of the Code places limitations on our ability to use certain of our net operating loss carry-forwards to offset income. The annual net operating loss limitation is approximately $14 to 18 million subject to other rules and restrictions. A substantial portion of our net operating loss carry-forwards and certain other tax attributes may not be utilized to offset Birds Eye income from recognized built in gains pursuant to Section 384 of the Code. See Note 13 to the consolidated financial statements.

Fiscal year ended December 27, 2009 (52 weeks) compared to fiscal year ended December 28, 2008 (52 weeks)

Net sales. Net sales in the twelve months ended December 27, 2009 were $1,643.0 million, an increase of $86.6 million, compared to net sales in the twelve months ended December 28, 2008 of $1,556.4 million. The acquisition of Birds Eye Foods, Inc. resulted in $3.0 million of increased net sales. Net sales for all other businesses increased $83.6 million. Increased volumes contributed to 1.1% of the increase and weighted average net selling prices contributed 3.4%. The stronger U.S. dollar versus the Canadian dollar reduced net sales by 0.3%.

Birds Eye Frozen Segment: Net sales increased $15.8 million, or 3.5%, for the year ended December 27, 2009, which includes a 2.2% weighted average selling price increase. The change was mainly driven by an increase in sales in our seafood business.

Duncan Hines Grocery Segment: Net sales increased $50.8 million, or 6.3%, for the year ended December 27, 2009, which includes a 3.5% weighted average net selling price increase. The increase was due to increases in sales by our Duncan Hines and Vlasic businesses.

Specialty Foods Segment: Net sales increased $20.0 million, or 6.8%, for the year ended December 27, 2009, which includes a 5.5% weighted average net selling price increase. The increase was due to increases in sales of private label canned meat and pickles and frozen foodservice products.

Gross profit. Gross profit was $379.3 million, or 23.1% of net sales, in the twelve months ended December 27, 2009, versus gross profit of $338.5 million, or 21.7%, of net sales in the twelve months ended December 28, 2008. The post acquisition operations of Birds Eye Foods, Inc. resulted in $0.5 million of gross profit. Included in the gross profit of Birds Eye Foods, Inc. was a $0.5 million charge related to the sales of inventories written up to fair value at the date of the acquisition. For the remaining businesses, gross profit for the twelve months ending December 27, 2009 was $378.8 million, or 23.1% of net sales, a 1.4 percentage point increase versus the remaining businesses gross profit for the twelve months ending December 28, 2008 of $338.5 million, or 21.7% of net sales. The principal driver of the increased gross profit as a percent of net sales rate was reduced freight and distribution expenses accounting for a 1.5 percentage point improvement. In addition, selling price increases in excess of raw material commodity cost (principally wheat, corn, edible oils, and to a lesser extent, dairy) and conversion cost increases, improved gross margin by 0.4 percentage points. Partially offsetting these improvements was the impact of the higher rate of aggregate trade marketing and consumer coupon redemption expenses which reduced the gross profit percentage in 2009 by 0.5 percentage points.

Marketing and selling expenses. Marketing and selling expenses were $123.8 million, or 7.5% of net sales, in the twelve months ended December 27, 2009 compared to $111.4 million, or 7.2% of net sales, in the twelve months ended December 28, 2008. The acquisition of Birds Eye Foods, Inc. contributed $0.3 million of the increase for the year ended December 27, 2009. The remaining change was due to higher advertising expense of $5.3 million, primarily in our seafood and Duncan Hines businesses, higher management incentive and equity related compensation accruals, and increased market research expense.

Administrative expenses. Administrative expenses were $62.7 million, or 3.8% of net sales, in the twelve months ended December 27, 2009 compared to $47.8 million, or 3.1% of net sales, in the twelve months ended December 28, 2008. The acquisition of Birds Eye Foods, Inc. contributed $0.5 million of the increase for the year ended December 27, 2009. The balance of the increase was principally related to higher management incentive and equity related compensation accruals, higher severance and recruiting provisions, principally related to the change in the CEO, and spending on additional capabilities, both in terms of headcount and outside services.

Research and development expenses. Research and development expenses were $4.6 million, or 0.3% of net sales, in the twelve months ended December 27, 2009 compared with $3.5 million, or 0.2% of net sales, in the twelve months ended December 28, 2008.

Other expense (income), net. The following table shows other expense (income), net:


	Twelve Months Ended
	December 27, 2009		December 28, 2008
Other expense (income), net consists of:		In Thousands
Amortization of intangibles/other assets	$	16,824	$	19,245
Restructuring and impairment charges		1,300		15,100
Birds Eye Acquisition transaction costs		24,090		—
Gain on litigation settlement		—		(9,988	)
Royalty expense (income), net and other, net		—		6

Total other expense (income), net	$	42,214	$	24,363

For the year ended December 27, 2009, transaction costs associated with the acquisition of Birds Eye Foods, Inc. totaled $24.1 million, consisting of $19.3 million in merger, acquisition and advisory fees, $4.0 million in legal, accounting and other professional fees and $0.8 million in other costs. For the year ended December 27, 2009, impairment charges totaled $1.3 million, related to a trade name impairment charge on our Swanson brand. For the year ended December 28, 2008, trade name impairment charges totaled $15.1 million, consisting of $8.0 million on our Van de Kamp brand, $5.6 million on our Mrs. Paul’s brand, $0.9 million on our Lenders brand, and $0.6 million on our Open Pit brand. Amortization was $16.8 million in the year ended December 27, 2009 as compared to $19.2 million in the year ended December 28, 2008. In the year ended December 28, 2008, we recorded the impact of the final settlement of litigation related to excess leverage fees incurred by Aurora under its credit agreement prior to its acquisition by us in 2004, resulting in a reduction of the accrued liability and a gain on litigation settlement of $10.0 million.

Earnings before interest and taxes. Earnings before interest and taxes (EBIT) decreased $5.4 million to $146.0 million in the twelve months ended December 27, 2009 from $151.4 million in EBIT in the twelve months ended December 28, 2008. This decrease in EBIT resulted from a $42.2 million increase in unallocated corporate expenses partially offset by a $17.8 million increase in Birds Eye Frozen Segment EBIT, a $10.3 million increase in Duncan Hines Grocery Segment EBIT and a $8.7 increase in Specialty Foods Segment EBIT. Unallocated corporate expenses increased due to the transaction costs associated with the acquisition of Birds Eye Foods, Inc. of $24.1 million in fiscal 2009, the $10.0 million gain on litigation settlement in fiscal 2008 as described in other expense (income) above, and in 2009, higher management incentive and equity related compensation accruals, and higher severance and recruiting provisions, principally related to the change in the CEO.

Birds Eye Frozen Segment: EBIT increased by $17.8 million in the twelve months ended December 27, 2009, to $38.7 million from $20.9 million in the twelve months ended December 28, 2008. For the year ended December 27, 2009, impairment charges totaled $1.3 million, related to a trade name impairment charge on our Swanson brand. For the year ended December 28, 2008, trade name impairment charges totaled $14.5 million, consisting of $8.0 million on our Van de Kamp brand, $5.6 million on our Mrs. Paul’s brand, and $0.9 million on our Lenders brand. The balance of the EBIT increased $4.6 million and was principally driven by a 3.5% increase in net sales, which includes an effective 2.2% weighted average net selling price increase on some of our brands, and reduced freight and distribution expenses, partially offset by increased overhead expense related to higher management incentive and equity related compensation accruals and higher advertising expense

Duncan Hines Grocery Segment: EBIT increased $10.3 million in the twelve months ended December 27, 2009, to $145.9 million from $135.6 million in the twelve months ended December 28, 2008. The year ended December 28, 2008 included a tradename impairment charge of $0.6 million related to our Open Pit brand. The balance of the EBIT increased $9.7 million and was principally driven a 6.3% increase in net sales, which includes an effective 3.5% weighted average net selling price increase on some of our products. Additionally, reduced freight and distribution expenses and lower consumer promotion expense contributed to the EBIT increase. These improvements were partially offset by higher overhead expense, principally related to higher management incentive and equity related compensation accruals

Specialty Foods Segment: EBIT was $6.7 million in the twelve months ended December 27, 2009, an increase of $8.7 million from the loss of $2.0 million in the twelve months ended December 28, 2008. The improved profitability was the result of management’s strategy to increase net selling prices, which increased by 5.5%, and eliminating low margin SKUs. Profitability was also impacted by lower input costs.

Interest expense, net. Interest expense, net was $121.1 million in the twelve months ended December 27, 2009, compared to $153.0 million in the twelve months ended December 28, 2008.

Included in interest expense, net, was $4.4 million and $1.3 million for the twelve months ended December 27, 2009 and the twelve months ended December 28, 2008 respectively, for the amortization of the cumulative mark to market adjustment for an interest rate swap that was de-designated for swap accounting in the fourth quarter of 2008 and subsequently terminated. The counterparty to the interest rate swap was Lehman Brothers Special Financing (LBSF), a subsidiary of Lehman Brothers, and the hedge was de-designated for swap accounting at the time of LBSF’s bankruptcy filing. At the time of de-designation, the cumulative mark to market adjustment was $11.5 million. As of December 27, 2009, the remaining unamortized balance is $5.9 million. In addition, in the twelve months ended December 28, 2008 interest expense includes a mark to market adjustment of $5.5 million for the period from the de-designation date of October 3, 2008 to the date we terminated the interest rate hedges on October 24, 2008.

Excluding the impact of the items in the previous paragraph, the decrease in interest expense, net, was $29.5 million, of which $34.2 million was attributable to lower interest rates on our bank borrowings, and $0.1 million of the decline was attributed to lower average bank debt levels, partially offset by $5.5 million of amortization of the bridge financing costs related to the Birds Eye Acquisition, $0.3 million of higher bond debt levels, $0.2 million in lower interest income, and $0.8 million of other items.

Also, included in the interest expense, net, amount was $14.2 million and $16.2 million for the twelve months ended December 27, 2009 and the twelve months ended December 28, 2008 respectively, recorded from losses on interest rate swap agreements, a net change of $2.0 million. We utilize interest rate swap agreements to reduce the potential exposure to interest rate movements and to achieve a desired proportion of variable versus fixed rate debt. Any gains or losses realized on the interest rate swap agreements are recorded as an adjustment to interest expense.

Provision for income taxes: The effective tax rate was (1,116.3%) in the twelve months ended December 27, 2009, compared to (1,749.9%) in the twelve months ended December 28, 2008. The effective rate difference is primarily due to the change in the valuation allowance for the twelve-month period. We recorded a benefit of $315.6 million related to the reversal of the valuation allowance as we concluded that it is more likely than not that certain of our US deferred tax assets will be recognized in future years. Prior to the realization of these deferred tax assets the Company maintained a full valuation allowance against net deferred tax assets excluding indefinite-lived intangible assets. Deferred tax liabilities were recognized for the differences between the book and tax bases of certain goodwill and indefinite-lived intangible assets.

Under Internal Revenue Code Section 382, the Company is a loss corporation. Section 382 of the Code places limitations on our ability to use Aurora’s net operating loss carry-forward to offset our income. The annual net operating loss limitation is approximately $14 to 18 million subject to other rules and restrictions. Our net operating loss carryovers and certain other tax attributes may not be utilized to offset Birds Eye income from recognized built in gains pursuant to Section 384 of the Code. See Note 13 to the consolidated financial statements.

LIQUIDITY AND CAPITAL RESOURCES

Historical

Overview. Our cash flows are very seasonal. Typically we are a net user of cash in the third quarter of the calendar year (i.e., the quarter ending in September) and a net generator of cash over the balance of the year.

Our principal liquidity requirements have been, and we expect will be, for working capital and general corporate purposes, including capital expenditures and debt service. Capital expenditures are expected to be approximately $100 million in 2011. We have historically satisfied our liquidity requirements with internally generated cash flows and availability under our revolving credit facilities.

Statements of Cash Flows for the Fiscal Year Ended December 26, 2010 Compared to the Fiscal Year Ended December 27, 2009

Net cash provided by operating activities was $257.0 million for fiscal 2010, which consisted of net earnings excluding non-cash charges of $166.4 million, and a decrease in working capital of $90.6 million. The decrease in working capital was principally due to a continued concerted effort to reduce inventories while, at the same time, improving customer service levels. Inventories were reduced by $60.6 million. In addition, accounts receivable declined by $13.0 million in line with lower sales on a like for like basis. Working capital also decreased due to a $14.5 million increase in accrued liabilities, principally driven by a $16.1 million increase in accrued interest, caused by the timing of the Birds Eye acquisition borrowing in 2009.

Net cash provided by operating activities was $116.2 million for fiscal 2009, which consisted of net earnings excluding non-cash charges of $111.5 million, and a decrease in working capital of $4.7 million. The decrease in working capital was principally due to a concerted effort to reduce inventories while, at the same time, improving customer service levels. Inventories were reduced by $12.8 million. Also, accounts receivable declined by $2.7 million due to the timing of sales. Working capital decreased due to a $19.8 million increase in accrued liabilities, principally driven by a $12.2 million increase in performance-based incentive plan accruals. Offsetting these reductions in working capital were a $13.4 million reduction in accounts payable principally driven by year-on-year changes in the timing of production, a $12.4 million increase in other current assets, principally related to a letter-of-credit cash collateral deposit of $9.2 million subsequent to the acquisition of Birds Eye Foods, Inc., and accrued trade marketing expense decreased $4.8 million as a result of the timing of when the trade marketing payments were made.

Net cash used in investing activities was $81.3 and $1,366.8 million for the year ended December 26, 2010 and December 27, 2009, respectively. Net cash used in investing activities for 2010 related entirely to capital expenditures. Net cash used in investing activities for fiscal 2009 included $1,314.8 million for the acquisition of Birds Eye Foods, Inc., net of cash acquired of $25.6 million, as well as $52.0 million for capital expenditures.

Net cash used in financing activities was $134.3 million during the year ended December 26, 2010. The usage primarily related to a $27.0 million prepayment of our term loans in accordance with the “Excess Cash Flow” requirements of our Senior Secured Credit Facility, $3.1 million of normally scheduled repayments of the term loans, a $73.0 million voluntary prepayment of the Tranche D Term Loan made in December 2010, $14.3 million in repayments of bank overdrafts, $13.4 million of refinancing costs in connection with the refinancing of the Tranche C Term Loan, and $5.7 million in repayments of our notes payable and capital lease obligations, partially offset by $2.2 million of other activities, net. In August, we refinanced our Tranche C Term Loan by issuing $400 million of 8.25% Senior Notes and executing a new Tranche D Term Loan in the amount of $442.3 million. Except for the refinancing costs referred to above, this refinancing did not impact net cash used in financing activities. Net cash provided by financing activities was $1,319.8 million for fiscal 2009. This primarily related to the funding of the acquisition of Birds Eye Foods, Inc., which included $838.3 million, net of original issue discount, from an $850.0 million term loan borrowing under the Senior Secured Credit Facility, $300.0 million of Senior Notes, and $262.1 million in net equity contributions, reduced by debt acquisition costs of $40.2 million. Other significant cash flows from financing activities were net payments on the Revolving Credit Facility of $26.0 million and payments of the Term Loan of $12.5 million and a reduction in bank overdrafts of $2.6 million.

Statements of Cash Flows for the Fiscal Year Ended December 27, 2009 Compared to the Fiscal Year Ended December 28, 2008

Net cash provided by operating activities was $116.2 million for fiscal 2009, which consisted of net earnings excluding non-cash charges of $111.5 million, and a decrease in working capital of $4.7 million. The decrease in working capital was principally due to a concerted effort to reduce inventories while, at the same time, improving customer service levels. Inventories were reduced by $12.8 million. Also, accounts receivable declined by $2.7 million due to the timing of sales. Working capital was also decreased by a $19.8 million increase in accrued liabilities, principally driven by a $12.2 million increase in performance-based incentive plan accruals. Offsetting these reductions in working capital were a $13.4 million reduction in accounts payable principally driven by year on year changes in the timing of production, a $12.4 million increase in other current assets, principally related to a letter-of-credit cash collateral deposit of $9.2 million subsequent to the acquisition of Birds Eye Foods, Inc., and accrued trade marketing expense decreased $4.8 million as a result of the timing of when the trade marketing payments were made.

Net cash provided by operating activities was $16.8 million for fiscal 2008, which consisted of net earnings excluding non-cash charges of $72.6 million, $17.0 million paid to terminate early interest rate derivatives and an increase in working capital of $38.8 million. The increase in working capital was primarily the result of a $25.5 million increase in inventories that was primarily done in order to better service our customers going forward, as well as caused by higher commodity costs, and a decline of $29.5 million in accrued liabilities (a result of the legal settlement with R2 Top Hat, Ltd., the payment of the 2007 performance bonus and an decrease in accrued interest), partially offset by a $6.7 million decline in accounts receivable and a $4.9 million increase in accrued trade marketing. All other working capital accounts generated $4.6 million in cash.

Net cash used in investing activities for fiscal 2009 totaled $1,366.8 million and included $1,314.8 million for the acquisition of Birds Eye Foods, Inc., net of cash acquired of $25.6 million, as well as $52.0 million for capital expenditures. Net cash used in investing activities for fiscal 2008 was $32.6 million and consisted entirely of capital expenditures. The principal reason for the increase in fiscal 2009 capital expenditures compared to fiscal 2008 is improvements to the pizza production process at our Jackson, TN facility.

Net cash provided by financing activities was $1,319.8 million for fiscal 2009. This primarily related to the funding of the acquisition of Birds Eye Foods, Inc., which included $838.3 million, net of original issue discount, from an $850.0 million term loan borrowing under the Senior Secured Credit Facility, $300.0 million of Senior Notes, and $262.1 million in net equity contributions, reduced by debt acquisition costs of $40.2 million. Other significant cash flows from financing activities were net payments on the Revolving Credit Facility of $26.0 million and payments of the Term Loan of $12.5 million and a reduction in bank overdrafts of $2.6 million. Net cash provided by financing activities was $14.2 million for fiscal 2008. Borrowings under the Revolving Credit Facility of $26.0 million were primarily offset with $9.4 million repayments of the term loan and $1.5 million in net repayments of our short-term borrowings.

Debt

The Senior Secured Credit Agreement (the “Senior Secured Credit Facility”) consists of (i) term loans in an initial aggregate amount of $1,250.0 million (the “Term Loans”) and (ii) revolving credit commitments in the initial aggregate amount of $125.0 million (the “Revolving Credit Facility”). The term loan matures April 2, 2014. The Revolving Credit Facility matures April 2, 2013.

As part of the Birds Eye Foods Acquisition on December 23, 2009, as described in Note 3, we entered into an amendment to the Senior Secured Credit Facility in the form of (i) incremental term loans in the amount of $850.0 million (the “Tranche C Term Loans”) and (ii) an incremental revolving credit facility in the amount of $25.0 million, bringing our total revolving credit commitment to $150.0 million. In connection with the Tranche C Term Loans, we also incurred $11.8 million in original issue discount fees. These fees were recorded in Long-term debt on the Consolidated Balance Sheet and were being amortized over the life of the loan using the effective interest method prior to the repayment of the Tranche C Term Loans.

On August 17, 2010 we entered into an amendment to the Senior Secured Credit Facility, which provided for incremental term loans in the amount of $442.3 million (the “Tranche D Term Loans). The proceeds from the Tranche D Term Loans, along with the proceeds from the 8.25% Senior Notes described below were used to repay the outstanding Tranche C Term Loans. In accordance with the authoritative guidance for debt extinguishments and modifications, the lending relationship between us and each bank in the original lending syndicate was examined and determined to be either a modification or an extinguishment. As a result of this analysis, we recorded interest expense in the Consolidated Statement of Operations for the write-off of $11.6 million of deferred financing costs and $5.6 million of original issue discount related to extinguished lending relationships from the Tranche C Term Loans. In addition, we incurred approximately $3.9 million of legal, consulting and placement fees in connection with the Tranche D Term Loans. Of the fees incurred, $3.2 million were costs of modifying existing lending relationships and thus charged the interest expense in the Consolidated Statement of Operations during the third quarter of 2010. The remaining $0.7 million of fees related to obtaining new lending relationships and thus was deferred. We also incurred approximately $8.8 million of legal, consulting, audit and placement fees in connection with the execution of the 8.25% Senior Notes, all of which were deferred. All costs deferred in connection with the above transactions were recorded in Other Assets, net on the consolidated balance sheet.

There were no borrowings outstanding under the Revolving Credit Facility as of December 26, 2010 and December 27, 2009. There have been no borrowings under the revolver at any time in 2010.

The total combined amount of the Term Loans, the Tranche C Term Loans and the Tranche D Term Loans that were owed to affiliates of The Blackstone Group as of December 26, 2010 and December 27, 2009, was $125.7 million and $109.2 million, respectively.

Our borrowings under the Senior Secured Credit Facility, as amended, bear interest at a floating rate and are maintained as base rate loans or as Eurocurrency rate loans. Base rate loans bear interest at the base rate plus the applicable base rate margin, as defined in the Senior Secured Credit Facility. The base rate is defined as the higher of (i) the prime rate and (ii) the Federal Reserve reported overnight funds rate plus 1/2 of 1%. Eurocurrency rate loans bear interest at the adjusted Eurocurrency rate, as described in the Senior Secured Credit Facility, plus the applicable Eurocurrency rate margin. Solely with respect to Tranche C Term Loans, the Eurocurrency rate shall be no less than 2.50% per annum. Solely with respect to Tranche C Term Loans, the base rate shall be no less than 3.50% per annum. Solely with respect to Tranche D Term Loans, the Eurocurrency rate shall be no less than 1.75% per annum. Solely with respect to Tranche D Term Loans, the base rate shall be no less than 2.75% per annum.

The applicable margins with respect to our Senior Secured Credit Facility vary from time to time in accordance with the terms thereof and agreed upon pricing grids based on our leverage ratio as defined in the credit agreement. The applicable margins with respect to the Senior Secured Credit Facility are currently:


Applicable Margin (per annum)
Revolving Credit Facilty and Letters of Credit								Term Loans						Tranche D Term Loans
Eurocurrency Rate for Revolving Loans and Letter of Credit Fees		Base Rate for Revolving Loans			Commitment Fees Rate			Eurocurrency Rate for Term Loans			Base Rate for Term Loans			Eurocurrency Rate for Term Loan D			Base Rate for Term Loan D
	2.25%		1.25	%		0.50	%		2.50	%		1.50	%		4.25	%		3.25	%

The obligations under the Senior Secured Credit Facility are unconditionally and irrevocably guaranteed by each of our direct or indirect domestic subsidiaries (collectively, the “Guarantors”). In addition, the Senior Secured Credit Facility is collateralized by first priority or equivalent security interests in (i) all the capital stock of, or other equity interests in, each of our direct or indirect domestic subsidiaries and 65% of the capital stock of, or other equity interests in, our direct foreign subsidiaries, or any of its domestic subsidiaries and (ii) certain of our tangible and intangible assets and those of the Guarantors (subject to certain exceptions and qualifications).

A commitment fee of 0.50% per annum is applied to the unused portion of the Revolving Credit Facility. For the fiscal years ended December 26, 2010, December 27, 2009 and December 28, 2008, the weighted average interest rates on the term loan components of the Senior Credit Facility were 4.44%, 3.13% and 6.21%, respectively. As of December 26, 2010, the interest rate on the revolving credit facility was 2.76%, however no borrowings were made during 2010. For the fiscal years ended December 27, 2009 and December 28, 2008, the weighted average interest rates on the Revolving Credit Facility were 3.19% and 5.45%, respectively. As of December 26, 2010 and December 27, 2009, the Eurodollar interest rates on the term loan components of the Senior Credit Facility were 3.52% and 4.84%, respectively.

We pay a fee for all outstanding letters of credit drawn against the Revolving Credit Facility at an annual rate equivalent to the Applicable Margin then in effect with respect to Eurocurrency rate loans under the Revolving Credit Facility, less the fronting fee payable in respect of the applicable letter of credit. The fronting fee is equal to 0.125% per annum of the daily maximum amount then available to be drawn under such letter of credit. The fronting fees are computed on a quarterly basis in arrears. Total letters of credit issued under the Revolving Credit Facility cannot exceed $50.0 million as of March 24, 2010 (previously $25.0 million). As of December 26, 2010 and December 27, 2009, we had utilized $34.2 million and $22.1 million, respectively, of the Revolving Credit Facility for letters of credit. As of December 26, 2010, there were no borrowings under the Revolving Credit Facility. Therefore, of the $150.0 million Revolving Credit Facility available, we had an unused balance of $115.8 million available for future borrowing and letters of credit. As of December 27, 2009, there were no borrowings under the Revolving Credit Facility. Therefore, of the $150.0 million Revolving Credit Facility available, we had an unused balance of $127.9 million available for future borrowing and letters of credit. The remaining amounts that could be used for letters of credit as of December 26, 2010 and December 27, 2009 were $15.8 million and $2.9 million, respectively.

Under the terms of the Senior Secured Credit Facility, we are required to use 50% of our “Excess Cash Flow”, to prepay the Term Loans and the Tranche D Term Loans. Excess Cash Flow is determined by taking consolidated net income (as defined) and adjusting it for certain items, including (1) all non cash charges and credits included in arriving at consolidated net income, (2) changes in working capital, (3) capital expenditures (to the extent they were not financed with debt), (4) the aggregate amount of principle payments of indebtedness and (5) certain other items defined in the Senior Secured Credit Facility. In December 2010, we made a voluntary prepayment of $73.0 million to the Tranche D Term Loans. As a result of this prepayment, no payment in reference to 2010 is expected to be due under the Excess Cash Flow requirements of Senior Secured Credit Facility. In March 2010, in accordance with the Excess Cash Flow requirements of the Senior Secured Credit Facility, we made a mandatory prepayment of the Term Loans of $27.0 million in reference to 2009.

The Term Loans mature in quarterly 0.25% installments from September 2007 to December 2013 with the remaining balance due in April 2014. The aggregate maturities of the Term Loans outstanding as of December 26, 2010 are $2.5 million in 2011, $12.5 million in 2012, $12.5 million in 2013 and $1,171.9 million in 2014. The Tranche D Term Loans mature in quarterly 0.25% installments from December 2010 to December 2013 with the remaining balance due in April 2014. The aggregate maturities of the Tranche D Term Loans outstanding as of December 27, 2009 are no payments due in 2011, 2012 and 2013, with a lump sum payment of $368.2 million due in 2014.

We issued $325.0 million of 9.25% Senior Notes (the “Senior Notes”) due 2015, and $250.0 million of 10.625% Senior Subordinated Notes (the “Senior Subordinated Notes”) due 2017. On December 23, 2009, as part of the Birds Eye Foods Acquisition described in Note 3, we issued an additional $300 million of 9.25% Senior Notes due in 2015 (the “Additional Senior Notes”). The Senior Notes and the Additional Senior Notes are collectively referred to herein as the 9.25% Senior Notes. As described above, on August 17, 2010 the Company issued $400.0 million of 8.25% Senior Notes, due 2017 (the “8.25% Senior Notes”) and utilized the proceeds to repay the Tranche C Term Loans.

The 9.25% Senior Notes and the 8.25% Senior Notes are general unsecured obligations of ours, effectively subordinated in right of payment to all of our existing and future senior secured indebtedness and guaranteed on a full, unconditional, joint and several basis by our wholly-owned domestic subsidiaries that guarantee our other indebtedness. The Senior Subordinated Notes are general unsecured obligations of ours, subordinated in right of payment to all of our existing and future senior indebtedness and guaranteed on a full, unconditional, joint and several basis by our wholly-owned domestic subsidiaries that guarantee our other indebtedness. See Note 17 to the Consolidated Financial Statements for Guarantor and Nonguarantor Financial Statements.

We may redeem some or all of the 9.25% Senior Notes at any time prior to April 1, 2011, some or all of the 8.25% Senior Notes at any time prior to September 1, 2013, and some or all of the Senior Subordinated Notes at any time prior to April 1, 2012, in each case at a price equal to 100% of the principal amount of notes redeemed plus the Applicable Premium as of, and accrued and unpaid interest to, the redemption date, subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date. The “Applicable Premium” is defined as the greater of (1) 1.0% of the principal amount of such note and (2) the excess, if any, of (a) the present value at such redemption date of (i) the redemption price of such 9.25% Senior Note at April 1, 2011 or such 8.25% Senior Note at September 1, 2013 or such Senior Subordinated Note at April 1, 2012, plus (ii) all required interest payments due on such 9.25% Senior Note through April 1, 2011 or such 8.25% Senior Note through September 1 2013 or such Senior Subordinated Note through April 1, 2012 (excluding accrued but unpaid interest to the redemption date), computed using a discount rate equal to the Treasury Rate plus 50 basis points over (b) the principal amount of such note.

We may redeem the 9.25% Senior Notes, the 8.25% Senior Notes or the Senior Subordinated Notes at the redemption prices listed below, if redeemed during the twelve-month period beginning on April 1^st (for the 9.25% Senior Notes and Senior Subordinated Notes ) or September 1^st (for the 8.25% Senior Notes) of each of the years indicated below:


9.25% Senior Notes			8.25% Senior Notes
Year	Percentage		Year	Percentage
2011	104.625	%	2013	106.188	%
2012	102.313	%	2014	104.125	%
2013 and thereafter	100.000	%	2015	102.063	%
			2016 and thereafter	100.000	%


Senior Subordinated Notes
Year	Percentage
2012	105.313	%
2013	103.542	%
2014	101.771	%
2015 and thereafter	100.000	%

In addition, until September 1, 2013, we may redeem up to 35% of the aggregate principal amount of the 8.25% Senior Notes at a redemption price equal to 100% of the aggregate principal amount thereof, plus a premium equal to the rate per annum on the 8.25% Senior Notes, as the case may be, plus accrued and unpaid interest and Additional Interest, if any, to the redemption date, subject to the right of holders of the 8.25% Senior Notes of record on the relevant record date to receive interest due on the relevant interest payment date, with the net cash proceeds received by us from one or more equity offerings; provided that (i) at least 50% of the aggregate principal amount of the 8.25% Senior Notes, as the case may be, originally issued under the applicable indenture remains outstanding immediately after the occurrence of each such redemption and (ii) each such redemption occurs within 90 days of the date of closing of each such equity offering.

On November 22, 2010, we completed the exchange of $300.0 million of our 9.25% Senior Notes and $400.0 million of our 8.25% Senior Notes. Under the transaction, the originally issued private placement notes were exchanged for freely tradable registered notes. The terms underlying the notes and related indenture did not change.

In December 2007, we repurchased $51.0 million in aggregate principal amount of the 10.625% Senior Subordinated Notes at a discounted price of $44.2 million. We currently have outstanding $199.0 million in aggregate principal amount of Senior Subordinated Notes.

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

The estimated fair value of our long-term debt, including the current portion, as of December 26, 2010, is as follows:


(million $)	December 26, 2010
Issue	Recorded Amount		Fair Value
Senior Secured Credit Facility - Term Loans	$	1,199.4	$	1,171.3
Senior Secured Credit Facility - Tranche D Term Loans		368.2		372.0
8.25% Senior Notes		400.0		409.0
9.25% Senior Notes		625.0		648.4
10.625% Senior Subordinated Notes		199.0		214.0

	$	2,791.6	$	2,814.7

The fair value is based on the quoted market price for such notes and borrowing rates currently available to us for loans with similar terms and maturities.

Covenant Compliance

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

Senior Secured Credit Facility

Our Senior Secured Credit Facility contains a number of covenants that, among other things, restrict, subject to certain exceptions, our ability to:

•

incur additional indebtedness and make guarantees;

•

create liens on assets;

•

engage in mergers or consolidations;

•

sell assets;

•

pay dividends and distributions or repurchase our capital stock;

•

make investments, loans and advances, including acquisitions;

•

repay the Senior Subordinated Notes or enter into certain amendments thereof; and

•

engage in certain transactions with affiliates.

The Senior Secured Credit Facility also contains certain customary affirmative covenants and events of default.

8.25% Senior Notes, 9.25% Senior Notes and Senior Subordinated Notes

Additionally, on April 2, 2007, we issued the 9.25% Senior Notes and the 10.625% Senior Subordinated Notes. On December 23, 2009, we issued additional 9.25% Senior Notes. On August 17^th 2010, we issued the 8.25% Senior Notes. The Senior Notes are general unsecured obligations, effectively subordinated in right of payment to all of our existing and future senior secured indebtedness, and guaranteed on a full, unconditional, joint and several basis by our wholly-owned domestic subsidiaries that guarantee other indebtedness of the Company. The Senior Subordinated Notes are general unsecured obligations, subordinated in right of payment to all of our existing and future senior indebtedness, and guaranteed on a full, unconditional, joint and several basis by our wholly-owned domestic subsidiaries that guarantee other indebtedness of the Company.

The indentures governing the 8.25% Senior Notes, 9.25% Senior Notes and Senior Subordinated Notes limit our (and most or all of our subsidiaries’) ability to, subject to certain exceptions:

•

incur additional debt or issue certain preferred shares;

•

pay dividends on or make other distributions in respect of our capital stock or make other restricted payments;

•

make certain investments;

•

sell certain assets;

•

create liens on certain assets to secure debt;

•

consolidate, merge, sell or otherwise dispose of all or substantially all of our assets;

•

enter into certain transactions with our affiliates; and

•

designate our subsidiaries as unrestricted subsidiaries.

Subject to certain exceptions, the indentures governing the notes permit us and our restricted subsidiaries to incur additional indebtedness, including secured indebtedness.

Consolidated EBITDA

Pursuant to the terms of the Senior Secured Credit Facility, if at any time there are borrowings outstanding under the revolving credit facility in an aggregate amount greater than $10.0 million, we are required to maintain a ratio of consolidated total senior secured debt to Consolidated EBITDA (defined below) for the most recently concluded four consecutive fiscal quarters (the “Senior Secured Leverage Ratio”) less than a ratio starting at a maximum of 7.00:1 at September 30, 2007 and stepping down over time to 6.50 in 2008, 5.75 in 2009, 5.00 in 2010 and 4.00 in 2011 and thereafter. Consolidated total senior secured debt is defined under the Senior Secured Credit Facility as aggregate consolidated secured indebtedness of the Company less the aggregate amount of all unrestricted cash and cash equivalents. In addition, under the Senior Secured Credit Facility and the indentures governing the Senior Notes and Senior Subordinated Notes, our ability to engage in activities such as incurring additional indebtedness, making investments and paying dividends is tied to the Senior Secured Leverage Ratio, in the case of the Senior Secured Credit Facility, or to the ratio of Consolidated EBITDA to fixed charges for the most recently concluded four consecutive fiscal quarters or the Senior Secured Leverage Ratio, in the case of the Senior Notes and the Senior Subordinated Notes.

Consolidated EBITDA is defined as earnings (loss) before interest expense, taxes, depreciation and amortization (“EBITDA”), further adjusted to exclude non-cash items, non-recurring items and other adjustment items permitted in calculating covenant compliance under the Senior Secured Credit Facility and the indentures governing the Senior Notes and Senior Subordinated Notes. We believe that the inclusion of supplementary adjustments to EBITDA applied in presenting Consolidated EBITDA is appropriate to provide additional information to investors to demonstrate compliance with our financial covenants.

EBITDA and Consolidated EBITDA do not represent net earnings or loss or cash flow from operations as those terms are defined by Generally Accepted Accounting Principles (“GAAP”) and do not necessarily indicate whether cash flows will be sufficient to fund cash needs. In particular, the definitions of Consolidated EBITDA in the Senior Secured Credit Facility and the indentures allow us to add back certain non-cash, extraordinary, unusual or non-recurring charges that are deducted in calculating net earnings or loss. However, these are expenses that may recur, vary greatly and are difficult to predict. While EBITDA and Consolidated EBITDA and similar measures are frequently used as measures of operations and the ability to meet debt service requirements, they are not necessarily comparable to other similarly titled captions of other companies due to the potential inconsistencies in the method of calculation.

Our ability to meet the covenants specified above in future periods will depend on events beyond our control, and we cannot assure you that we will meet those ratios. A breach of any of these covenants in the future could result in a default under, or an inability to undertake certain activities in compliance with, the Senior Secured Credit Facility and the indentures governing the Senior Notes and Senior Subordinated Notes, at which time the lenders could elect to declare all amounts outstanding under the Senior Secured Credit Facility to be immediately due and payable. Any such acceleration would also result in a default under the indentures governing the Senior Notes and Senior Subordinated Notes.

The following table provides a reconciliation from our net earnings (loss) to EBITDA and Consolidated EBITDA for the year ended December 26, 2010 and the year ended December 27, 2009. The terms and related calculations are defined in the Senior Secured Credit Facility and the indentures governing the 8.25% Senior Notes, 9.25% Senior Notes and Senior Subordinated Notes.


	Fiscal Year Ended December 26, 2010		Fiscal Year Ended December 27, 2009
Net earnings	$	22,037	$	302,603
Interest expense, net		235,716		121,078
Income tax expense (benefit)		7,399		(277,723	)
Depreciation and amortization expense		78,049		65,468

EBITDA	$	343,201	$	211,426

Acquired EBITDA - Birds Eye Foods Acquisition (1)		—		142,268
Non-cash items (a)		71,500		4,738
Non-recurring items (b)		27,489		29,835
Other adjustment items (c)		7,580		26,673
Net cost savings projected to be realized as a result of initiatives taken, including acquisition synergies (d)		25,000		57,188

Consolidated EBITDA	$	474,770	$	472,128

(1)

In accordance with our Senior Secured Credit Facility and the indentures governing the Senior Notes and Senior Subordinated Notes, we have included an adjustment for the Acquired EBITDA for Birds Eye Foods for the period prior to its acquisition, calculated consistent with the definition of Consolidated EBITDA.

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


	Fiscal Year Ended December 26, 2010		Fiscal Year Ended December 27, 2009
Non-cash compensation charges (1)	$	4,727	$	3,190
Unrealized losses or (gains) resulting from hedging activities (2)		697		(277	)
Impairment charges (3)		29,000		1,300
Effects of adjustments related to the application of purchase accounting (4)		37,076		525

Total non-cash items	$	71,500	$	4,738

(1)	For fiscal 2010 and fiscal 2009 represents non-cash compensation charges related to the granting of equity awards.

(2)	For fiscal 2010 and fiscal 2009 represents non-cash gains and losses resulting from mark-to-market adjustments of obligations under natural gas and diesel fuel contracts for 2009 and 2010, and heating oil contracts for 2009 only.

(3)	For fiscal 2010 represents an impairment for the Hungry-Man tradename. For fiscal 2009 represents an impairment charge for the Swanson tradename.

(4)	For fiscal 2010 and fiscal 2009, represents expense related to the write-up to fair market value of inventories acquired as a result of the Birds Eye Foods Acquisition.

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


	Fiscal Year Ended December 26, 2010		Fiscal Year Ended December 27, 2009
Expenses in connection with an acquisition or other non-recurring merger costs (1)	$	923	$	25,238
Restructuring charges, integration costs and other business optimization expenses (2)		25,472		986
Employee severance and recruiting (3)		1,094		3,611

Total non-recurring items	$	27,489	$	29,835

(1)	For fiscal 2010 and fiscal 2009, primarily represents costs related to the Birds Eye Foods Acquisition as well as other expenses related to due diligence investigations.

(2)

For fiscal 2010 primarily represents employee termination benefits and lease termination costs related to the announced closing of the Rochester, NY office ($12,599) and integration costs related to the Birds Eye Foods Acquisition. For fiscal 2009, represents consultant expense incurred to execute yield and labor savings in our plants.

(3)	For fiscal 2010 represents severance costs paid, or to be paid, to terminated employees. For fiscal 2009 principally represents severance and recruiting costs related to the change in the CEO.

(c)	Other adjustment items are comprised of the following:


	Fiscal Year Ended December 26, 2010		Fiscal Year Ended December 27, 2009
Management, monitoring, consulting and advisory fees (1)	$	4,555	$	2,540
Variable product contribution on Birds Eye Steamfresh complete bagged meals no longer being offered for sale (2)		2,837		24,133
Other (3)		188		—

Total other adjustments	$	7,580	$	26,673

(1)	For fiscal 2010 and fiscal 2009 represents management/advisory fees and expenses paid to Blackstone.

(2)

For fiscal 2010 and fiscal 2009 represents the variable contribution loss principally from Steamfresh frozen complete bagged meals and others which will no longer be offered by Pinnacle management following the Birds Eye Foods Acquisition and the variable contribution loss applicable to a discontinued contract in the Birds Eye Foods Industrial-Other segment.

(3)	For fiscal 2010 represents costs from the Watsonville, California plant held for sale.

(d)	Net cost savings projected to be realized as a result of initiatives taken:


	Fiscal Year Ended December 26, 2010		Fiscal Year Ended December 27, 2009
Productivity initiatives in our supply chain (1)	$	—	$	12,188
Estimated net cost savings associated with the Birds Eye Foods Acquisition (2)		25,000		45,000

Total net cost savings projected to be realized as a result of initiatives taken	$	25,000	$	57,188

(1)

For fiscal 2009 represents net cost savings projected to be realized as a result of specified actions taken or initiated, net of the amount of actual benefits realized. Such savings primarily relate to productivity initiatives in our manufacturing facilities, our freight and distribution systems, and our purchasing programs.

(2)

For fiscal 2010 and fiscal 2009 represents the estimated reduction in operating costs that we anticipate will result from the combination of Pinnacle and Birds Eye Foods as a result of eliminating duplicate overhead functions and overlapping operating expenses, leveraging supplier relationships and combined purchasing power to obtain procurement savings on raw materials and packaging, and optimizing and rationalizing overlapping warehouse and distribution networks less what has been realized.

Our covenant requirements and actual ratios for the twelve months ended December 26, 2010 are as follows:


	Covenant Requirement	Actual Ratio
Senior Secured Credit Facility
Senior Secured Leverage Ratio (1)	5.00:1		3.06
Total Leverage Ratio (2)	Not applicable		5.67

Senior Notes and Senior Subordinated Notes (3)
Minimum Consolidated EBITDA to fixed charges ratio required to incur additional debt pursuant to ratio provisions (4)	2.00:1		2.33

(1)

Pursuant to the terms of the Senior Secured Credit Facility, if at any time there are borrowings outstanding under the Revolving Credit Facility in an aggregate amount greater than $10.0 million, we are required to maintain a consolidated total senior secured debt to Consolidated EBITDA ratio for the most recently concluded four consecutive fiscal quarters (the “Senior Secured Leverage Ratio”) less than a ratio starting at a maximum of 7.00:1 at September 30, 2007 and stepping down over time to 4.00:1 on March 31, 2011. Consolidated total senior secured debt is defined as our aggregate consolidated secured indebtedness less the aggregate amount of all unrestricted cash and cash equivalents.

(2)

The Total Leverage Ratio is not a financial covenant but is used to determine the applicable rate under the Senior Secured Credit Facility. The Total Leverage Ratio is calculated by dividing consolidated total debt less the aggregate amount of all unrestricted cash and cash equivalents by Consolidated EBITDA.

(3)	Our ability to incur additional debt and make certain restricted payments under the indentures governing the Senior Notes and Senior Subordinated Notes, subject to specified exceptions, is tied to a Consolidated EBITDA to fixed charges ratio of at least 2.0:1.

(4)

Fixed charges is defined in the indentures governing the Senior Notes and Senior Subordinated Notes as (i) consolidated interest expense (excluding specified items) plus consolidated capitalized interest less consolidated interest income, plus (ii) cash dividends and distributions paid on preferred stock or disqualified stock.

INFLATION

Prior to 2005, inflation did not have a significant effect on us as we have been successful in mitigating the effects of inflation with cost reduction and productivity programs, as well as increasing selling prices during periods of higher inflation. Beginning 2005 and continuing into 2008, we experienced higher energy and commodity costs in production and higher fuel surcharges for product delivery. Inflation was less pronounced in 2009 and in 2010, but is expected to be more pronounced in 2011. Although we have no such expectation, severe increases in inflation could have an adverse impact on our business, financial condition and results of operations.

Contractual Commitments

The table below provides information on our contractual commitments as of December 26, 2010:


	Total		Less Than 1 Year		1-3 Years		3-5 Years		After 5 Years
	(in thousands)
Long-term debt(1)		2,791,616		2,547		25,000		2,165,069		599,000
Projected interest payments on long term debt(2)		881,349		193,920		370,951		235,262		81,216
Operating lease obligations		100,411		13,657		24,913		19,218		42,623
Capital lease obligations		25,727		3,228		5,079		3,685		13,735
Purchase obligations (3)		793,138		641,821		48,538		28,651		74,128
Pension and Other Postretirement benefits(4)		105,896		16,900		42,294		32,328		16,612

Total (5)		4,698,137		870,954		515,656		2,484,213		827,314

(1)	Long-term debt at face value includes scheduled principal repayments and excludes interest payments.

(2)

The total projected interest payments on long-term debt are based upon borrowings and interest rates as of December 26, 2010, including the effect of interest rate swaps in place. The interest rate on variable rate debt is subject to changes beyond our control and may result in actual interest expense and payments differing from the amounts above.

(3)

The amounts indicated in this line primarily reflect future contractual payments, including certain take-or-pay arrangements entered into as part of the normal course of business. The amounts do not include obligations related to other contractual purchase obligations that are not take-or-pay arrangements. Such contractual purchase obligations are primarily purchase orders at fair value that are part of normal operations and are reflected in historical operating cash flow trends. Purchase obligations also include trade and consumer promotion and advertising commitments. We do not believe such purchase obligations will adversely affect our liquidity position.

(4)	The funding of the defined benefit pension plan is based upon our planned 2011 cash contribution. The future years’ contributions are based upon our expectations taking into consideration the funded status of the plan at December 26, 2010.

(5)	The total excludes the liability for uncertain tax positions. We are not able to reasonably estimate the timing of the long-term payments or the amount by which the liability will increase or decrease over time. Therefore, the long-term portion of the liability is excluded from the preceding table.

Off-Balance Sheet Arrangements

As of December 26, 2010, we did not have any off-balance sheet obligations.

Accounting Policies and Pronouncements

Critical Accounting Policies and Estimates

The preparation of financial statements in accordance with generally accepted accounting principles in the United States requires the use of judgment, estimates and assumptions. We make such subjective determinations after careful consideration of our historical performance, management’s experience, current economic trends and events and information from outside sources. Inherent in this process is the possibility that actual results could differ from these estimates and assumptions for any particular period.

Our significant accounting policies are detailed in Note 2 to our Consolidated Financial Statements for the fiscal year ended December 26, 2010. The following areas are the most important and require the most difficult, subjective judgments.

Revenue recognition. Revenue consists of sales of our food products. We recognize revenue from product sales upon shipment to our customers, at which point title and risk of loss are transferred and the selling price is fixed or determinable. Shipment completes the revenue-earning process, as an arrangement exists, delivery has occurred, the price is fixed and collectability is reasonably assured. We estimate discounts and product return allowances based upon our historical performance, management’s experience and current economic trends and record them as a reduction of sales in the same period that the revenue is recognized. Variances between historical estimates and actual results have not been significant.

Trade and consumer promotional expenses. We offer various sales incentive programs to retailers and consumers. We record consumer incentive and trade promotion costs as a reduction of revenues in the year in which we offer these programs. The recognition of expense for these programs involves the exercise of judgment related to performance and redemption estimates that we base on historical experience and other factors. Actual expenses may differ if the level of redemption rates and performance vary from estimates. We also record slotting fees, which refers to payments to retailers to obtain shelf placement for new and existing product introductions. We reduce revenues for the amount of slotting estimated to each customer in full at the time of the first shipment of the new product to that customer.

Inventories. We state inventories at the lower of average cost or market. In determining market value, we provide allowances to adjust the carrying value of our inventories to the lower of cost or net realizable value, including any costs to sell or dispose. Appropriate consideration is given to obsolescence, excessive inventory levels, product deterioration and other factors in evaluating net realizable value. These adjustments are estimates, which could vary significantly from actual requirements if future economic conditions, customer inventory levels or competitive conditions differ from expectations.

Goodwill and Indefinite-lived tradenames. We evaluate the carrying amount of goodwill for impairment on an annual basis, in December, or more frequently if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. The goodwill impairment review consists of a two-step process of first comparing the fair value of the reporting unit with its carrying value. If this fair value exceeds the carrying value, no further analysis or goodwill impairment charge is required. If the fair value is below the carrying value, the Company would proceed to the next step, which is to measure the amount of the impairment loss. The impairment loss is measured as the difference between the carrying value and implied fair value of goodwill. To measure the implied fair value goodwill we would make a hypothetical allocation of the estimated fair value of the reporting unit to the tangible and intangible assets (other than goodwill) within the respective reporting unit using the same rules for determining fair value and allocation under the authoritative guidance for business combination as we would use if it were an original purchase price allocation. If the implied fair value of the reporting unit’s goodwill is less than its carrying amount the shortfall would be charged to earnings.

In estimating the fair value or our reporting units we primarily use the income approach, which utilizes forecasted discounted cash flows to estimate the fair value. The utilization of the income approach utilizes management’s business plans and projections as the basis for expected future cash flows for five years. In addition, we make significant assumptions including long-term growth rates and discounts rates. In our recent impairment tests, we forecasted cash flows for five years plus a terminal year and assumed a discount rate of 8.75%. Such cash flows for each of the five years and terminal year assume growth rates that generally average between 0% and 3.0%, which are determined based upon our expectations for each of the individual reporting units and are consistent within the industry.

The results of this test indicated that none of the reporting units were impaired.

We also evaluate the carrying amount of our tradenames for impairment on an annual basis, in December, or more frequently if events or changes in circumstances indicate that the asset might be impaired. The impairment test consists of a comparison of the fair value of an intangible asset with its carrying value. If the carrying value of a tradename exceeds its fair value at the time of the evaluation, we would charge the shortfall to earnings.

To estimate the fair value of our tradenames we primarily use the relief from royalty method, which utilizes forecasted discounted cash flows to estimate the fair value. The utilization of the relief from royalty method requires us to make significant assumptions including long-term growth rates, implied royalty rates and discount rates. In fiscal 2010, the results include a $29.0 million impairment of the Hungry-Man tradename. In fiscal 2009, the results include a $1.3 million impairment of the Swanson tradename. In fiscal 2008, the results include an impairment of the Van de Kamp’s ($8.0 million), Mrs. Paul’s ($5.6 million), Lenders ($0.9 million) and Open Pit tradenames ($0.6 million).

Pensions and retiree medical benefits. We provide pension and post-retirement benefits to certain employees and retirees. Determining the costs associated with such benefits depends on various actuarial assumptions, including discount rates, expected return on plan assets, compensation increases, turnover rates and health care trend rates. Independent actuaries, in accordance with GAAP, perform the required calculations to determine expense. We generally accumulate actual results that differ from the actuarial assumptions and amortize such results over future periods.

Insurance reserves. We are self-insured and retain liabilities under our worker’s compensation insurance policy. We estimate the outstanding retained-insurance liabilities by projecting incurred losses to their ultimate liability and subtracting amounts paid-to-date to obtain the remaining liabilities. We base actuarial estimates of ultimate liability on actual incurred losses, estimates of incurred but not yet reported losses—based on historical information from both us and the industry—and the projected costs to resolve these losses. Retained-insurance liabilities may differ based on new events or circumstances that might materially impact the ultimate cost to settle these losses.

Income taxes. We record income taxes based on the amounts that are refundable or payable in the current year, and we include results of any difference between generally accepted accounting principles and U.S. tax reporting that we record as deferred tax assets or liabilities. We review our deferred tax assets for recovery. A valuation allowance is established when the Company believes that it is more likely than not that some portion of its deferred tax assets will not be realized. Changes in valuation allowances from period to period are included in our tax provision in the period of change. Assessment of the appropriate amount and classification of income taxes is dependent on several factors, including estimates of the timing and realization of deferred income tax assets and the timing of income tax payments. Actual collections and payments may differ from these estimates as a result of changes in tax laws as well as unanticipated future transactions impacting related income tax balances.

Stock-based compensation. We use the authoritative guidance for stock compensation accounting using the modified prospective transition method to calculate stock-based compensation. The guidance requires companies to estimate the fair value of stock-based payment awards on the date of grant using an option-pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as expense using the straight-line method over the requisite service periods in our Consolidated Statements of Operations.

We currently use the Black-Scholes option-pricing model as our method of valuation for stock-based awards. Since our stock is not publicly traded, the determination of fair value of stock-based payment awards on the date of grant using an option-pricing model is based upon estimates of enterprise value as well as assumptions regarding a number of highly complex and subjective variables. The estimated enterprise value is based upon forecasted cash flows for five years plus a terminal year and an assumed discount rate. The other variables used to determine fair value of stock-based payment awards include, but are not limited to, the expected stock price volatility of a group of industry comparable companies over the term of the awards, and actual and projected employee stock option exercise behaviors. Option-pricing models were developed for use in estimating the value of traded options that have no vesting or hedging restrictions and are fully transferable.

Because our employee stock options have certain characteristics that are significantly different from traded options, and because changes in the subjective assumptions can materially affect the estimated value, in management’s opinion, the existing valuation models may not provide an accurate measure of the fair value of our employee stock-based awards. Although the fair value of employee stock awards is determined in accordance with the authoritative guidance for stock compensation using an option-pricing model, that value may not be indicative of the fair value observed in a willing buyer/willing seller market transaction.

Recently Issued Accounting Pronouncements

In June 2009, new guidance was issued on the consolidation of variable interest entities. We adopted the guidance effective January 1, 2010. This guidance increases the likelihood of an enterprise being classified as a variable interest entity. The adoption of this guidance did not have a material impact on our financial results.

ITEM 7A.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

FINANCIAL INSTRUMENTS

Risk Management Objective of Using Derivatives

We are exposed to certain risks arising from both our business operations and economic conditions. We principally manage our exposure 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.

We manage interest rate risk based on the varying circumstances of anticipated borrowings and existing variable and fixed rate debt, including our revolving line of credit. 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 our foreign operations in Canada expose us to fluctuations in foreign exchange rates. Our goal is to reduce our exposure to such foreign exchange risks on our 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. We enter into derivative financial instruments to protect the value or fix the amount of certain obligations in terms of our functional currency.

We purchase raw materials in quantities expected to be used in a reasonable period of time in the normal course of business. We generally enter 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 our manufacturing process.

In July 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act was enacted. The intent of this law is to establish a regulatory structure for the derivatives market and to increase the transparency of financial reporting related to derivatives. We anticipate that it will not have a material impact on our consolidated financial position or results of operations.

Cash Flow Hedges of Interest Rate Risk

Our objectives in using interest rate derivatives are to add stability to interest expense and to manage our exposure to interest rate movements. To accomplish this objective, we primarily use interest rate swaps as part of our interest rate risk management strategy. Interest rate swaps designated as cash flow hedges in accordance with the authoritative guidance for derivative and hedge accounting involve the receipt of variable-rate amounts from a counterparty in exchange for us making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. During the fiscal years ended December 26, 2010 and December 27, 2009, such derivatives were used to hedge the variable cash flows associated with existing variable-rate debt.

As of December 26, 2010, we had the following interest rate swaps (in aggregate) that were designated as cash flow hedges

Product

Number of
Instruments

Notional Amount

Fixed Rate Range

Index

Trade Dates

Maturity Dates

Interest Rate Swaps

$939.4 million

1.06% -3.33%

USD-LIBOR-BBA

Oct 2008 -Aug

2010

Jan 2011 -July

2012

of interest rate risk:

According to the authoritative guidance for derivative and hedge accounting, the effective portion of changes in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in Accumulated other comprehensive (loss) income (“AOCI”) on the Consolidated Balance Sheet and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. Amounts reported in AOCI related to derivatives will be reclassified to Interest expense as interest payments are made on our variable-rate debt.

Due to the counterparty bank declaring bankruptcy in October 2008, we discontinued prospectively the hedge accounting on our interest rate derivatives with Lehman Brothers Specialty Financing on the bankruptcy date as those hedging relationships no longer met the authoritative guidance for derivative and hedge accounting. We terminated these positions during the fourth quarter of 2008. We continue to report the net gain or loss related to the discontinued cash flow hedge in AOCI which is expected to be reclassified into earnings during the original contractual terms of the derivative agreements as the hedged interest payments are expected to occur as forecasted. For the fiscal years ended December 26, 2010, December 27, 2009 and December 28, 2008, $3,295, $4,429 and $1,259, respectively, were reclassified as an increase to Interest expense relating to the terminated hedges.

On August 17, 2010, we prepaid a portion of our existing term loan facilities that were being hedged with our two interest rate caps that matured in January 2011. As a result, we discontinued prospective hedge accounting on the interest rate caps and the net loss in accumulated other comprehensive income was reclassified to interest expense as the hedged transactions were no longer probable to occur. The amounts recorded to interest expense were a loss of $0.2 million. Prospective changes in the values of the interest rate cap hedge contracts will be recorded directly into Interest expense, net in the Consolidated Statements of Operations.

On August 17, 2010 we amended four of our existing forward starting interest rate swaps due to a change in the expected terms of the hedged forecasted transactions. As a result, we prospectively discontinued hedge accounting on the original interest rate swap agreements. Simultaneously, we designated the amended interest rate swap agreements into new cash flow hedging relationships. We continue to report the net loss related to the discontinued cash flow hedges in AOCI, which is being reclassified into earnings as the original hedged forecasted transactions affect earnings. Due to the off-market nature of the amended interest rate swap agreements at the date of designation, we anticipate the potential for hedge ineffectiveness However, such ineffectiveness is not expected to be significant.

During the next twelve months, we estimate that an additional $22.7 million will be reclassified as an increase to Interest expense relating to both active and terminated hedges.

Cash Flow Hedges of Foreign Exchange Risk

Our operations in Canada have exposed us to changes in the US Dollar – Canadian Dollar (USD-CAD) foreign exchange rate. From time to time, our Canadian subsidiary purchases inventory denominated in US Dollars (USD), a currency other than its functional currency. Our subsidiary sells that inventory in Canadian dollars. Our subsidiary uses currency forward and collar agreements to manage our exposure to fluctuations in the USD-CAD exchange rate. Currency forward agreements involve fixing the USD-CAD exchange rate for delivery of a specified amount of foreign currency on a specified date. Currency collar agreements involve the sale of Canadian Dollar (CAD) currency in exchange for receiving US dollars if exchange rates rise above an agreed upon rate and sale of USD currency in exchange for receiving CAD dollars if exchange rates fall below an agreed upon rate at specified dates.

As of December 26, 2010, we 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

Notional Purchased

in Aggregate

USD to CAD
Exchange Rates

Trade Date

Maturity Dates

CAD Forward

$50.4 million CAD

$48.5 million USD

1.027-1.051

March 2010 -

Sep 2010

Jan 2011 -
Dec 2011

According to the authoritative guidance for derivative and hedge accounting, 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 AOCI on the Consolidated Balance Sheet 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 our exposure to commodity price risk but do not meet the authoritative guidance for derivative and hedge accounting. From time to time, we enter into commodity forward contracts to fix the price of natural gas and diesel fuel purchases 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.

We previously entered into interest rate cap hedge contracts to add stability to interest expense and to manage our exposure to interest rate movements. In connection with the refinancing of the Tranche C Term Loans, these contracts have been de-designated as of August 17, 2010. Changes in the values of the interest rate cap hedge contracts are recorded directly into Interest expense in the Consolidated Statements of Operations.

As of December 26, 2010, we had the following natural gas swaps (in aggregate), diesel fuel (in aggregate) and interest rate caps (in aggregate) that were not designated in qualifying hedging relationships:

Product

Number of
Instruments

Notional Amount

Price/Index

Trade Dates

Maturity Dates

Natural Gas Swap

230,000 MMBTU’s

$4.16 per MMBTU

Oct 2010

Mar 2011

Diesel Fuel Swap

5,263,259 Gallons

$2.90 - $3.14 per Gallon

Feb 2010 - Aug 2010

Dec 2010 - Mar 2011

Interest Rate Caps

$800.0 million

2.5% USD-LIBOR-BBA

Dec 2009

Jan 2011

The table below presents the fair value of our derivative financial instruments as well as their classification on the Consolidated Balance Sheet as of December 26, 2010 and December 27, 2009.


	Tabular Disclosure of Fair Values of Derivative Instruments
	Asset Derivatives			Liability Derivatives
	Balance Sheet Location	Fair Value As of December 26, 2010		Balance Sheet Location	Fair Value As of December 26, 2010
Derivatives designated as hedging instruments
Interest Rate Contracts		$	—	Accrued liabilities	$	3.3
			—	Other long-term liabilities		23.3
Foreign Exchange Contracts			—	Accrued liabilities		1.1

Total derivatives designated as hedging instruments		$	—		$	27.7

Derivatives not designated as hedging instruments
Natural Gas Contracts		$	—		$	—
Diesel Fuel Contracts	Other current assets		0.4			—

Total derivatives not designated as hedging instruments		$	0.4		$	—


	Balance Sheet Location	Fair Value As of December 27, 2009		Balance Sheet Location	Fair Value As of December 27, 2009
Derivatives designated as hedging instruments
Interest Rate Contracts	Other assets, net	$	0.2	Other long-term liabilities	$	21.2
Foreign Exchange Contracts			—	Accrued liabilities		2.5

Total derivatives designated as hedging instruments		$	0.2		$	23.7

Derivatives not designated as hedging instruments
Natural Gas Contracts		$	—	Accrued liabilities	$	0.1
Heating Oil Contracts	Other current assets		—			—
Diesel Fuel Contracts	Other current assets		0.9			—

Total derivatives not designated as hedging instruments		$	0.9		$	0.1

The table below presents the effect of our derivative financial instruments on the Consolidated Statements of Operations and Accumulated other comprehensive (loss) income as of the fiscal years ending December 26, 2010 and December 27, 2009.

Tabular Disclosure of the Effect of Derivative Instruments

Gain/(Loss)


Derivatives in Cash Flow Hedging Relationships	Recognized in AOCI on Derivative (Effective Portion)			Effective portion reclassified from AOCI to:	Reclassified from AOCI into Earnings (Effective Portion)			Ineffective portion reclassified from AOCI to:	Recognized in Earnings on Derivative (Ineffective Portion)
Interest Rate Contracts - Active	$	(22.8	)	Interest expense	$	(17.1	)	Interest expense	$	(0.6	)
Interest Rate Contracts - Terminated		—		Interest expense		(3.3	)	Interest expense		—
Foreign Exchange Contracts		(1.8	)	Cost of products sold		(3.2	)	Cost of products sold		(0.2	)

Fiscal year ended December 26, 2010	$	(24.6	)		$	(23.6	)		$	(0.8	)

Interest Rate Contracts - Active	$	(23.5	)	Interest expense	$	(14.2	)	Interest expense	$	—
Interest Rate Contracts - Terminated		—		Interest expense		(4.4	)	Interest expense		—
Foreign Exchange Contracts		(5.4	)	Cost of products sold		2.5		Cost of products sold		—

Fiscal year ended December 27, 2009	$	(28.9	)		$	(16.1	)		$	—


Derivatives Not Designated as Hedging Instruments				Recognized in Earnings on:	Recognized in Earnings on Derivative
Natural Gas Contracts				Cost of products sold	$	(0.6	)
Diesel Contracts				Cost of products sold		(0.6	)

Fiscal year ended December 26, 2010					$	(1.2	)

Natural Gas Contracts				Cost of products sold	$	(1.4	)
Heating Oil Swaps				Cost of products sold		0.1

Fiscal year ended December 27, 2009					$	(1.3	)

Credit-risk-related Contingent Features

We have agreements with certain counterparties that contain a provision whereby we could be declared in default on our derivative obligations if repayment of the underlying indebtedness is accelerated by the lender due to our default on the indebtedness. As of December 26, 2010, we have not posted any collateral related to these agreements. If we had breached this provision at December 26, 2010, we could have been required to settle our obligations under the agreements at their termination value. The table below summarizes the aggregate fair values of those derivatives that contain credit risk contingent features as of December 26, 2010 and December 27, 2009.


	December 26, 2010

Asset/(Liability)
Counterparty	Contract Type	Termination Value			Non-Performance Risk Adjustment		Accrued Interest			Fair Value (excluding interest)
Barclays	Interest Rate Contracts	$	(26.5	)	$	0.6	$	(1.2	)	$	(24.7	)
	Foreign Exchange Contracts		(0.7	)		—					(0.7	)
	Natural Gas Contracts		—			—					—
	Diesel Fuel Contracts		0.4			—					0.4
Credit Suisse	Interest Rate Contracts		(2.0	)		0.1		—			(1.9	)
	Foreign Exchange Contracts		(0.4	)		—					(0.4	)

Total		$	(29.2	)	$	0.7	$	(1.2	)	$	(27.3	)


	December 27, 2009

Counterparty	Contract Type	Termination Value			Non-Performance Risk Adjustment		Accrued Interest			Fair Value (excluding interest)
Barclays	Interest Rate Contracts	$	(23.1	)	$	1.0	$	(1.0	)	$	(21.1	)
	Foreign Exchange Contracts		(2.6	)		0.1					(2.5	)
	Natural Gas Contracts		—			—					—
	Heating Oil Contracts		—								—

Total		$	(25.7	)	$	1.1	$	(1.0	)	$	(23.6	)

ITEM 8.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Financial statements begin on the following page

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholder of

Pinnacle Foods Finance LLC

Mountain Lakes, New Jersey

We have audited the accompanying consolidated balance sheet of Pinnacle Foods Finance LLC and subsidiaries (the “Company”) as of December 26, 2010, and the related consolidated statements of operations, shareholder’s equity, and cash flows for the year then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the consolidated financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Pinnacle Foods Finance LLC and subsidiaries as of December 26, 2010, and the results of their operations and their cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of December 26, 2010, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 10, 2011 expressed an unqualified opinion on the Company’s internal control over financial reporting.

/s/ Deloitte & Touche LLP

Parsippany, New Jersey

March 10, 2011

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholder of

Pinnacle Foods Finance LLC

Mountain Lakes, New Jersey

We have audited the internal control over financial reporting of Pinnacle Foods Finance LLC and subsidiaries (the “Company”) as of December 26, 2010, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Annual Report on Internal Control over Financial Reporting, appearing under Item 9A. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 26, 2010, based on the criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements as of and for the year ended December 26, 2010 of the Company and our report dated March 10, 2011 expressed an unqualified opinion on those financial statements.

/s/ Deloitte & Touche LLP

Parsippany, New Jersey

March 10, 2011

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholder of

Pinnacle Foods Finance LLC:

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations, cash flows and shareholder’s equity present fairly, in all material respects, the financial position of Pinnacle Foods Finance LLC and its subsidiaries at December 27, 2009 and December 29, 2008, and the results of their operations and their cash flows for each of the fiscal years ended December 27, 2009 and December 28, 2008 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 27, 2009 based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Annual Report on Internal Control over Financial Reporting (not presented herein), appearing under Item 9A of Pinnacle Foods Finance LLC’s 2009 Annual Report on Form 10-K. Our responsibility is to express opinions on these financial statements and on the Company’s internal control over financial reporting based on our audits (which was an integrated audit in 2009). We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

As discussed in Notes 2 and 3 to the consolidated financial statements, the Company changed the manner in which it accounts for business combinations in 2009.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

As described in Management’s Annual Report on Internal Controls Over Financial Reporting, management has excluded Birds Eye Foods, Inc. from its assessment of internal control over financial reporting as of December 27, 2009 because it was acquired by the Company in a purchase business combination during 2009. We have also excluded Birds Eye Foods, Inc. from our audit of internal control over financial reporting. Birds Eye Foods, Inc. is a wholly-owned subsidiary whose total assets and total net sales represent represented 25.5% and 0.2%, respectively, of the related consolidated financial statement amounts as of and for the fiscal year ended December 27, 2009.

PricewaterhouseCoopers LLP

Philadelphia, Pennsylvania

March 23, 2010, except for Note 10 and Note 17, as to which the date is June 9, 2010

PINNACLE FOODS FINANCE LLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(thousands of dollars)


	Fiscal year ended December 26, 2010		Fiscal year ended December 27, 2009			Fiscal year ended December 28, 2008
Net sales	$	2,436,703	$	1,642,931		$	1,556,408
Cost of products sold		1,834,375		1,263,627			1,217,929

Gross profit		602,328		379,304			338,479
Operating expenses
Marketing and selling expenses		172,344		123,833			111,372
Administrative expenses		109,950		62,737			47,832
Research and development expenses		9,387		4,562			3,496
Other expense (income), net		45,495		42,214			24,363

Total operating expenses		337,176		233,346			187,063

Earnings before interest and taxes		265,152		145,958			151,416
Interest expense		236,004		121,167			153,280
Interest income		288		89			319

Earnings (loss) before income taxes		29,436		24,880			(1,545	)
Provision (benefit) for income taxes		7,399		(277,723	)		27,036

Net earnings (loss)	$	22,037	$	302,603		$	(28,581	)

See accompanying Notes to Consolidated Financial Statements

PINNACLE FOODS FINANCE LLC AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(thousands of dollars)


	December 26, 2010			December 27, 2009
Current assets:
Cash and cash equivalents	$	115,286		$	73,874
Accounts receivable, net		145,258			158,004
Inventories, net		329,635			389,967
Other current assets		21,507			26,960
Deferred tax assets		38,288			25,670

Total current assets		649,974			674,475

Plant assets, net		447,068			412,208
Tradenames		1,629,812			1,658,812
Other assets, net		200,367			233,823
Goodwill		1,564,395			1,559,180

Total assets	$	4,491,616		$	4,538,498

Current liabilities:
Short-term borrowings	$	1,591		$	1,232
Current portion of long-term obligations		4,648			38,228
Accounts payable		115,369			130,360
Accrued trade marketing expense		47,274			49,048
Accrued liabilities		142,746			130,035
Accrued income taxes		193			455

Total current liabilities		311,821			349,358

Long-term debt (includes $125,698 and $109,237 owed to related parties)		2,797,307			2,849,251
Pension and other postretirement benefits		78,606			82,437
Other long-term liabilities		43,010			39,383
Deferred tax liabilities		365,787			343,716

Total liabilities		3,596,531			3,664,145

Commitments and contingencies (note 15)

Shareholder’s equity:
Common stock		—			—
Additional paid-in-capital		697,267			693,196
Notes receivable from officers		—			(565	)
Retained earnings		247,350			225,313
Accumulated other comprehensive (loss) income		(49,532	)		(43,591	)

Total shareholder’s equity		895,085			874,353

Total liabilities and shareholder’s equity	$	4,491,616		$	4,538,498

See accompanying Notes to Consolidated Financial Statements

PINNACLE FOODS FINANCE LLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(thousands of dollars)


	Fiscal year ended December 26, 2010			Fiscal year ended December 27, 2009			Fiscal year ended December 28, 2008
Cash flows from operating activities
Net earnings (loss) from operations	$	22,037		$	302,603		($	28,581	)
Non-cash charges (credits) to net earnings (loss)
Depreciation and amortization		78,049			65,468			62,509
Impairment charges		29,000			1,300			15,100
Amortization of discount on term loan		2,157			28			—
Amortization of debt acquisition costs		13,541			10,230			4,714
Write off of debt acquisition and refinancing costs		17,281			—			—
Amortization of deferred mark-to-market adjustment on terminated swaps		3,295			4,429			1,259
Change in value of financial instruments		1,043			(292	)		3,347
Termination of derivative contracts		—			—			(17,030	)
Gain on litigation settlement		—			—			(9,988	)
Stock-based compensation charge		4,727			3,190			806
Postretirement healthcare benefits		(120	)		(25	)		(25	)
Pension expense net of contributions		(8,096	)		2,126			(996	)
Other long-term liabilities		(1,398	)		(1,007	)		—
Other long term assets		447			1,160			(320	)
Deferred income taxes		4,382			(277,711	)		24,757
Changes in working capital
Accounts receivable		12,958			2,705			6,690
Inventories		60,578			12,786			(25,541	)
Accrued trade marketing expense		(1,899	)		(4,759	)		4,888
Accounts payable		(548	)		(13,370	)		3,419
Accrued liabilities		14,544			19,785			(29,467	)
Other current assets		5,000			(12,403	)		1,218

Net cash provided by operating activities		256,978			116,243			16,759

Cash flows from investing activities
Payments for business acquisitions, net of cash acquired		—			(1,314,746	)		—
Capital expenditures		(81,272	)		(52,030	)		(32,598	)

Net cash used in investing activities		(81,272	)		(1,366,776	)		(32,598	)

Cash flows from financing activities
Proceeds from bond offerings		400,000			300,000			—
Proceeds from bank term loans		442,300			838,250			—
Repayments of long term obligations		(946,558	)		(12,500	)		(9,375	)
Borrowings under revolving credit facility		—			74,888			101,008
Repayments of revolving credit facility		—			(100,888	)		(75,008	)
Proceeds from short-term borrowings		3,409			1,921			324
Repayments of short-term borrowings		(3,049	)		(852	)		(1,531	)
Repayment of capital lease obligations		(2,658	)		(345	)		(238	)
Debt acquisition costs		(13,370	)		(40,162	)		(704	)
Change in bank overdrafts		(14,304	)		(2,602	)		—
Equity contributions		626			264,325			234
Repurchases of equity		(1,282	)		(2,207	)		(471	)
Repayment of notes receivable from officers		565			—			—

Net cash used in financing activities		(134,321	)		1,319,828			14,239

Effect of exchange rate changes on cash		27			318			(138	)

Net change in cash and cash equivalents		41,412			69,613			(1,738	)
Cash and cash equivalents - beginning of period		73,874			4,261			5,999

Cash and cash equivalents - end of period	$	115,286		$	73,874		$	4,261

Supplemental disclosures of cash flow information:
Interest paid	$	179,766		$	117,468		$	167,748
Interest received		271			89			319
Income taxes paid		6,998			589			4,336
Non-cash investing and financing activities:
New capital leases		13,587			1,200			—

See accompanying Notes to Consolidated Financial Statements

PINNACLE FOODS FINANCE LLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDER’S EQUITY

(thousands of dollars, except share amounts)


	Common stock				Additional Paid In Capital			Notes Receivable From Officers			Retained earnings (Accumulated Deficit)			Accumulated Other Comprehensive (Loss) Income			Total Shareholder’s Equity
	Shares		Amount		Additional Paid In Capital			Notes Receivable From Officers			Retained earnings (Accumulated Deficit)			Accumulated Other Comprehensive (Loss) Income			Total Shareholder’s Equity
Balance at December 30, 2007		100	$	—	$	426,754		$	—		$	(48,709	)	$	(18,430	)	$	359,615

Equity contribution:
Cash						234												234
Repurchases of equity						(471	)											(471	)
Equity related compensation						806												806
Comprehensive income:
Net loss												(28,581	)					(28,581	)
Swap mark to market adjustment															5,292			5,292
Amortization of deferred mark-to-market adjustment on terminated swap															1,259			1,259
Foreign currency translation															(1,070	)		(1,070	)
Net loss on Pension and OPEB actuarial assumptions															(29,511	)		(29,511	)

Total comprehensive loss																		(52,611	)

Balance at December 28, 2008		100	$	—	$	427,323		$	—		$	(77,290	)	$	(42,460	)	$	307,573

Equity contribution:
Cash						264,890												264,890
Repurchases of equity						(2,207	)											(2,207	)
Equity related compensation						3,190												3,190
Notes receivable from officers									(565	)								(565	)
Comprehensive income:
Net earnings												302,603						302,603
Swap mark to market adjustment, net of tax benefit of $6,567															(10,610	)		(10,610	)
Amortization of deferred mark-to-market adjustment on terminated swap															4,429			4,429
Foreign currency translation															(791	)		(791	)
Net gain on Pension and OPEB actuarial assumptions															5,841			5,841
Total comprehensive income																		301,472

Balance at December 27, 2009		100	$	—	$	693,196		$	(565	)	$	225,313		$	(43,591	)	$	874,353

Equity contribution:
Cash						626												626
Repurchases of equity						(1,282	)											(1,282	)
Equity related compensation						4,727												4,727
Collection of notes receivable from officers									565									565
Comprehensive income:
Net earnings												22,037						22,037
Swap mark to market adjustments, net of tax benefit of $1,473															(1,955	)		(1,955	)
Amortization of deferred mark-to-market adjustment on terminated swaps, net of tax provision of $3,036															260			260
Foreign currency translation, net of tax benefit of $167															534			534
Net loss on Pension and OPEB actuarial assumptions, net of tax provision of $682															(4,780	)		(4,780	)

Total comprehensive income																		16,096

Balance at December 26, 2010		100	$	—	$	697,267		$	—		$	247,350		$	(49,532	)	$	895,085

See accompanying Notes to Consolidated Financial Statements

PINNACLE FOODS FINANCE LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

1.	Summary of Business Activities

Business Overview

Pinnacle Foods Finance LLC (hereafter referred to as the “Company” or “PFF”) is a leading manufacturer, marketer and distributor of high quality, branded convenience food products, the products and operations of which are managed and reported in three operating segments: (i) Birds Eye Frozen, (ii) Duncan Hines Grocery and (iii) Specialty Foods. Our United States retail frozen vegetables (Birds Eye^®), multi-serve frozen dinners and entrées (Birds Eye Voila!^®), single-serve frozen dinners and entrées (Hungry-Man^®, Swanson^®), frozen seafood (Van de Kamp’s^®, Mrs. Paul’s^®), frozen breakfast (Aunt Jemima^®), bagels (Lender’s^®), and frozen pizza (Celeste^®) are reported in the Birds Eye Frozen Division. Our baking mixes and frostings (Duncan Hines^®), shelf-stable pickles, peppers and relish (Vlasic^®), barbeque sauces (Open Pit^®), pie fillings (Comstock^®, Wilderness^®), syrups (Mrs. Butterworth’s^® and Log Cabin^®), salad dressing (Bernstein’s^®), canned meat (Armour^®, Nalley^®, Brooks^®) and all Canadian Operations are reported in the Duncan Hines Grocery Division. The Specialty Foods Division consists of snack products (Tim’s Cascade^® and Snyder of Berlin^®) and our food service and private label businesses.

History and Current Ownership

Since 2001, the Company and its predecessors have been involved in several business combinations to acquire certain assets and liabilities related to the brands discussed above.

Effective April 2, 2007, PFF became a direct wholly-owned subsidiary of Peak Finance Holdings LLC (“Peak”). Peak is a direct wholly-owned subsidiary of Crunch Holding Corp. (“Crunch”) and Crunch is 100% owned by Peak Holdings LLC (“Peak Holdings”) and certain members of the Company’s senior management. Peak Holdings is an entity controlled by affiliates of The Blackstone Group (“Blackstone”), a global private investment and advisory firm.

On December 23, 2009, the Company’s subsidiary, Pinnacle Foods Group LLC (“PFG LLC”), purchased Birds Eye Foods, Inc (the “Birds Eye Acquisition”). See Note 3, for a full description of the transaction, and brands of Birds Eye Foods, Inc.

2.	Summary of Significant Accounting Policies

Consolidation. The consolidated financial statements include the accounts of PFF and its wholly-owned subsidiaries. The results of companies acquired during the year are included in the consolidated financial statements from the effective date of the acquisition. Intercompany transactions have been eliminated in consolidation.

Foreign Currency Translation. Foreign-currency-denominated assets and liabilities are translated into U.S. dollars at exchange rates existing at the respective balance sheet dates. Translation adjustments resulting from fluctuations in exchange rates are recorded as a separate component of Accumulated other comprehensive (loss) income within shareholder’s equity. The Company translates the results of operations of its foreign subsidiary at the average exchange rates during the respective periods. Gains and losses resulting from foreign currency transactions are included in Cost of products sold on the Consolidated Statement of Operations and were a $3,388 loss the year ended December 26, 2010, a $2,788 gain in the year ended December 27, 2009 and a $3,983 gain in the year ended December 28, 2008. These amounts include the mark to market and realized gains and losses on our foreign currency swaps as discussed in Note 14 to our Consolidated Financial Statements.

Fiscal Year. The Company’s fiscal year ends on the last Sunday in December.

Cash and Cash Equivalents. The Company considers investments in all highly liquid debt instruments with an initial maturity of three months or less to be cash equivalents. Cash equivalents are measured at fair value and are Level 1 assets.

PINNACLE FOODS FINANCE LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Inventories. Substantially all inventories are valued at the lower of average cost or market. Cost is determined by the first-in, first-out method. The nature of costs included in inventory is: ingredients, containers, packaging, other raw materials, direct manufacturing labor and fully absorbed manufacturing overheads. When necessary, the Company provides allowances to adjust the carrying value of its inventories to the lower of cost or net realizable value, including any costs to sell or dispose and consideration for obsolescence, excessive inventory levels, product deterioration and other factors in evaluating net realizable value.

Plant Assets. Plant assets are stated at historical cost, and depreciation is computed using the straight-line method over the lives of the assets. Buildings and machinery and equipment are depreciated over periods not exceeding 45 years and 15 years, respectively. The weighted average estimated remaining useful lives are approximately 12 years for buildings and 6 years for machinery and equipment. When assets are retired, sold, or otherwise disposed of, their gross carrying value and related accumulated depreciation are removed from the accounts and included in determining gain or loss on such disposals. Costs of assets acquired in a business combination are based on the estimated fair value at the date of acquisition.

Goodwill and Indefinite-lived Intangible Assets. The Company evaluates the carrying amount of goodwill and indefinite-lived tradenames for impairment on at least an annual basis and when events occur or circumstances change that impairment might exist. Such a test was performed in the first quarter of 2010, when we reclassified our segments. No impairment resulted. The Company performs goodwill impairment testing for each business which constitutes a component of the Company’s operating segments, known as reporting units. The Company compares the fair value of these reporting units with their carrying values inclusive of goodwill. If the carrying amount of the reporting unit exceeds its fair value, the Company compares the implied fair value of the reporting unit’s goodwill to its carrying amount and any shortfall is charged to earnings. In estimating the implied fair value of the goodwill, the Company estimates the fair value of the reporting unit’s tangible and intangible assets (other than goodwill). For indefinite-lived tradename intangible assets the Company determines recoverability by comparing the carrying value to its fair value estimated based on discounted cash flows attributable to the tradename and charges the shortfall, if any, to earnings. In estimating the fair value, the Company primarily uses the income method for goodwill and the relief from royalty method for tradenames, both of which utilize forecasted discounted cash flows to estimate fair values. Assumptions underlying fair value estimates are subject to risks and uncertainties. These measurements would be considered level 3 under the fair value hierarchy described in note 5.

Valuation of Long-Lived Assets. The carrying value of long-lived assets held and used, other than goodwill and indefinite-lived intangibles, is evaluated by asset group level when events or changes in circumstances indicate the carrying value may not be recoverable. The carrying value of a long-lived asset group is considered impaired when the total projected undiscounted cash flows from such asset group are separately identifiable and are less than the carrying value. In that event, a loss is recognized based on the amount by which the carrying value exceeds the fair market value of the long-lived asset group. Fair market value is determined primarily using the projected cash flows from the asset group discounted at a rate commensurate with the risk involved. Losses on long-lived asset groups held for sale, other than goodwill, are determined in a similar manner, except that fair market values are reduced for disposal costs.

Revenue Recognition. Revenue from product sales is recognized upon shipment to the customers as terms are FOB shipping point, at which point title and risk of loss is transferred and the selling price is fixed or determinable. This completes the revenue-earning process specifically that an arrangement exists, delivery has occurred, ownership has transferred, the price is fixed and collectability is reasonably assured. A provision for payment discounts and product return allowances, which is estimated based upon the Company’s historical performance, management’s experience and current economic trends, is recorded as a reduction of sales in the same period that the revenue is recognized.

Trade promotions, consisting primarily of customer pricing allowances and merchandising funds, and consumer coupons are offered through various programs to customers and consumers. Sales are recorded net of estimated trade promotion spending, which is recognized as incurred at the time of sale. Certain retailers require the payment of slotting fees in order to obtain space for the Company’s products on the retailer’s store shelves. The fees are recognized as reductions of revenue at the earlier of the date cash is paid or a liability to the retailer is created. These amounts are included in the determination of net sales. Accruals for expected payouts under these programs are included as accrued trade marketing expense in the Consolidated Balance Sheet. Coupon redemption costs are also recognized as reductions of net sales when the coupons are issued. Estimates of trade promotion expense and coupon redemption costs are based upon programs offered, timings of those offers, estimated redemption/usage rates from historical performance, management’s experience and current economic trends.

PINNACLE FOODS FINANCE LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Marketing Expenses. Trade marketing expense is comprised of amounts paid to retailers for programs designed to promote our products. These costs include standard introductory allowances for new products (slotting fees). They also include the cost of in-store product displays, feature pricing in retailers’ advertisements and other temporary price reductions. These programs are offered to our customers both in fixed and variable (rate per case) amounts. The ultimate cost of these programs depends on retailer performance and is the subject of significant management estimates. The Company records as expense the estimated ultimate cost of the program in the period during which the program occurs. In accordance with the authoritative guidance for revenue recognition, these trade marketing expenses are classified in the Consolidated Statements of Operations as a reduction of net sales. Also, in accordance with the guidance, coupon redemption costs are also recognized as reductions of net sales when issued.

Advertising. Advertising costs include the cost of working media (advertising on television, radio or in print), the cost of producing advertising, and the cost of coupon insertion and distribution. Working media and coupon insertion and distribution costs are expensed in the period the advertising is run or the coupons are distributed. The cost of producing advertising is expensed as of the first date the advertisement takes place. Advertising included in the Company’s marketing and selling expenses were $40,725 for fiscal 2010, $42,433 for fiscal 2009 and $37,088 for fiscal 2008.

Shipping and Handling Costs. In accordance with the authoritative guidance for revenue recognition, costs related to shipping and handling of products shipped to customers are classified as cost of products sold.

Stock Based Compensation. Grant-date fair value of stock options is estimated using the Black-Scholes option-pricing model. Compensation expense is reduced based on estimated forfeitures with adjustments to actual recorded at the time of vesting. Forfeitures are estimated based on historical experience. We recognize compensation cost for awards over the vesting period. The majority of our stock options have a five-year vesting.

Insurance reserves. The Company is self-insured under its worker’s compensation insurance policy. We estimate the outstanding retained-insurance liabilities by projecting incurred losses to their ultimate liability and subtracting amounts paid-to-date to obtain the remaining liabilities. The Company bases actuarial estimates of ultimate liability on actual incurred losses, estimates of incurred but not yet reported losses and the projected costs to resolve these losses.

Income Taxes. Income taxes are accounted for in accordance with the authoritative guidance for accounting for income taxes under which deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities, using enacted tax rates in effect for the year in which the differences are expected to reverse. The Company continually reviews its deferred tax assets for recovery. A valuation allowance is established when the Company believes that it is more likely than not that some portion of its deferred tax assets will not be realized. Changes in valuation allowances from period to period are included in the Company’s tax provision in the period of change.

Financial Instruments. The Company uses financial instruments; primarily interest rate swaps, to manage its exposure to movements in interest rates, certain commodity prices and foreign currencies. The use of these financial instruments modifies the exposure of these risks with the intent to reduce the risk or cost to the Company. The Company does not use derivatives for trading purposes and is not a party to leveraged derivatives. The authoritative guidance for derivative and hedge accounting requires that all derivatives be recognized as either assets or liabilities at fair value. Changes in the fair value of derivatives not designated as hedging instruments are recognized in earnings. The cash flows associated with the financial instruments are included in the cash flow from operating activities.

Deferred financing costs. Deferred financing costs are amortized over the life of the related debt using the effective interest rate method. If debt is prepaid or retired early, the related unamortized deferred financing costs are written off in the period the debt is retired.

Capitalized Internal Use Software Costs. The Company capitalizes the cost of internal-use software that has a useful life in excess of one year. These costs consist of payments made to third parties and the salaries of employees working on such software development. Subsequent additions, modifications or upgrades to internal-use software are capitalized only to the extent that they allow the software to perform a task it previously did not perform. Capitalized internal use software costs are amortized using the straight-line method over their estimated useful lives, generally 2¹/2 to 3 years. The Company amortized $5,030 in fiscal 2010, $3,850 in fiscal 2009 and $3,663 in fiscal 2008. Additionally, as of December 26, 2010 and December 27, 2009, the net book value of capitalized internal use software totaled $7,378 and $7,019, respectively.

PINNACLE FOODS FINANCE LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Comprehensive Income. Comprehensive income includes net earnings (loss), loss on financial instruments, foreign currency translation adjustments, net gains or (losses) on Pension and OPEB actuarial assumptions and the related tax provisions or benefits that are currently presented as a component of shareholder’s equity. The components of Accumulated other comprehensive (loss) income at year end were as follows:


	December 26, 2010			December 27, 2009
Loss on financial instruments, net of tax benefit ($8,040 and $6,567)	$	(30,656	)	$	(28,701	)
Gain on amortization of deferred mark-to-market adjustment on terminated swap, net of tax provision ($3,036 and $0)		5,948			5,688
Loss on Pension and OPEB actuarial assumptions net of tax provision ($682 and $0)		(24,063	)		(19,283	)
Foreign currency translation adjustments net of tax benefit ($167 and $0)		(761	)		(1,295	)

Total	$	(49,532	)	$	(43,591	)

Use of Estimates. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Recently Issued Accounting Pronouncements

3.	Acquisition

Acquisition of Birds Eye Foods, Inc.

On December 23, 2009, our wholly owned subsidiary, Pinnacle Foods Group LLC acquired all of the common stock of Birds Eye Foods. Birds Eye Foods’ product offering includes an expanding platform of healthy, high-quality frozen vegetables and frozen meals and a portfolio of primarily branded specialty foods which are highly-complimentary to Pinnacle’s existing product offerings. Frozen products are marketed under the Birds Eye brand name. Birds Eye Foods markets traditional boxed and bagged frozen vegetables, as well as steamed vegetables using innovative steam-in-packaging technology, under the Birds Eye and Birds Eye Steamfresh brands. Birds Eye Foods’ frozen complete bagged meals, marketed under the family-oriented Birds Eye Voila! brand, offer consumers value-added meal solutions that include a protein, starch, and vegetables in one convenient package. Birds Eye Foods’ branded specialty food products hold leading market share positions in their core geographic markets, and include Comstock and Wilderness fruit pie fillings and toppings, Brooks and Nalley chili and chili ingredients, and snack foods by Tim’s Cascade and Snyder of Berlin.

The Company accounts for business combinations by using acquisition method of accounting. This provides that goodwill and other intangible assets with indefinite lives are not to be amortized, but tested for impairment on an annual basis. Acquisition costs are expensed as incurred. The Birds Eye Foods Acquisition has been accounted for in accordance with these standards.

PINNACLE FOODS FINANCE LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

The cost of the Birds Eye Foods Acquisition consisted of:


Stated purchase price	$	670,000
Net repayment of Birds Eye’s debt		670,383

Total cost of acquisition	$	1,340,383

The following table summarizes the allocation of the total cost of the Birds Eye Foods Acquisition to the assets acquired and liabilities assumed:


Assets acquired:
Cash and cash equivalents	$	25,637
Account receivable		67,697
Inventories		212,612
Other current assets		2,806
Assets held for sale		7,402
Deferred tax assets		3,092
Plant assets		146,813
Tradenames		750,000
Distributor relationships and license agreements		52,875
Goodwill		570,228
Other assets		53

Fair value of assets acquired		1,839,215
Liabilities assumed
Accounts payable		78,652
Accrued liabilities		59,269
Pension and post retirement benefit plans		49,307
Capital leases		1,657
Other long-term liabilities		15,966
Deferred tax liabilities		293,981

Total cost of acquisition	$	1,340,383

Based upon the allocation, the value assigned to intangible assets and goodwill totaled $1,367.9 million at the valuation date. At the time our acquisition of Birds Eye, we were pending receipt of certain information relative to Birds Eye’s income tax accounts. The required information was received during the fourth quarter of 2010 and resulted in an adjustment of $5.2 million to the opening goodwill balance. The 2009 Balance Sheet was not restated for this adjustment because it is not material. Of the total intangible assets, $48.0 million has been assigned to distributor relationships. Distributor relationships are being amortized on an accelerated basis over 30 years, this life was based on an attrition rate based on industry experience which management believes is appropriate in the Company’s circumstances. The Company has also assigned $750.0 million to the value of the tradenames acquired, of which $624.0 million is allocated to the Birds Eye Frozen segment, $90.0 million is allocated to the Duncan Hines Grocery segment and $36.0 million is allocated to the Specialty Foods segment. The values of the tradenames are not subject to amortization but are reviewed annually for impairment. Goodwill, which is also not subject to amortization, totaled $570.2 million, of which $307.4 million is allocated to the Birds Eye Frozen segment, $108.2 million is allocated to the Duncan Hines Grocery segment and $154.6 million is allocated to the Specialty Foods segment. No new tax-deductible goodwill or intangible assets were created as a result of the Birds Eye Foods Acquisition, but historical tax-deductible goodwill and intangible assets in the amount of $79.4 million existed as of the closing of the Birds Eye Foods Acquisition.

During the year ended December 27, 2009, the acquisition resulted in an additional $2.9 million of net sales and net loss of $0.6 million, related to Birds Eye’s operations from December 23, 2009 to December 27, 2009.

In accordance with the requirements of the acquisition method of accounting for acquisitions, inventories obtained in the Birds Eye Foods 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 $37.6 million higher than historical manufacturing cost. Cost of products sold for the fiscal year ended December 26, 2010, and the fiscal year ended December 27, 2009 includes pre-tax charges of $37.1 million and $0.5 million, respectively, related to the finished products at December 23, 2009, which were subsequently sold.

PINNACLE FOODS FINANCE LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

The Birds Eye Foods Acquisition was financed through borrowings of $850.0 million in term loans (“the Tranche C Term Loans”), $300.0 million of 9.25% Senior Notes due 2015 (the “Senior Notes”), a $260.0 million equity contribution from The Blackstone Group L.P., a $3.1 million investment from members of the board and management, less transaction costs of $0.2 million and $24.1 million in the fiscal year ended December 26, 2010 and fiscal year ended December 27, 2009, respectively, and deferred financing costs of $40.2 million. Included in the transaction costs of $0.2 million for the fiscal year ended December 26, 2010 are primarily legal, accounting and other professional fees. Included in the transaction costs of $24.1 million for the fiscal year ended December 27, 2009 are: $19.3 million in merger, acquisition and advisory fees, $4.0 million in legal, accounting and other professional fees and $0.8 million in other costs. The costs are recorded in Other expense (income), net in the Consolidated Statements of Operations. The Company also incurred $11.8 million in original issue discount, in connection with the Tranche C Term Loans. This was recorded in Long-term debt on the Consolidated Balance Sheet and was being amortized over the life of the loan using the effective interest method prior to the repayment of the Tranche C Term Loans on August 17, 2010. For more information on the refinancing, see Note 11 to the Consolidated Financial Statements for Debt and Interest Expense.

Pro forma Information

The following schedule includes consolidated statements of operations data for the unaudited pro forma results for the fiscal years ended December 27, 2009 and December 28, 2008 as if the Birds Eye Foods Acquisition had occurred as of the beginning of fiscal years 2009 and 2008. The pro forma information includes the actual results with pro forma adjustments for the change in interest expense related to the Birds Eye Foods Acquisition, purchase accounting adjustments related to fixed assets, intangible assets, pension and other post-employment benefit liabilities, and related adjustments to the provision for income taxes.

The unaudited pro forma information is provided for illustrative purposes only. It does not purport to represent what the consolidated results of operations would have been had the Birds Eye Foods Acquisition occurred on the date indicated above, nor does it purport to project the consolidated results of operations for any future period or as of any future date.


	Year ended December 27, 2009 (unaudited)		Year ended December 28, 2008 (unaudited)
Net sales	$	2,548,439	$	2,480,084
Earnings before interest and taxes	$	249,817	$	268,996
Net earnings (loss)	$	312,508	$	(19,492	)

PINNACLE FOODS FINANCE LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

4.	Lehman Brothers Holdings, Inc. Bankruptcy and Related Events

On September 15, 2008, Lehman Brothers Holdings Inc. (“Lehman”) filed for protection under Chapter 11 of the federal Bankruptcy Code in the United States Bankruptcy Court in the Southern District of New York.

The Company had an aggregate revolving credit facility commitment of $125.0 million with a consortium of banks, including Lehman Commercial Paper Inc. (“LCPI”), a subsidiary of Lehman, which was not included in the original bankruptcy filing but subsequently filed for bankruptcy on October 3, 2008. As of December 28, 2008, LCPI’s total commitment within this credit facility was $15.0 million. Starting on September 19, 2008 when the Company attempted to borrow under the revolving facility, LCPI failed to fund its pro-rata commitment. Each of the remaining banks within the revolving credit facility did fund their pro-rata commitments. In December 2009, the Company obtained replacement loan commitments from another bank.

In addition, LCPI was the administrative agent under the Senior Secured Credit Facility, including the revolving credit facility commitment. In December 2009, the Company effected a transition of these duties to a new administrative agent Barclays Bank PLC.

The Company was also a counterparty with Lehman Brothers Special Financing (“LBSF”), a subsidiary of Lehman, on an Interest Rate Swap, an Interest Rate Collar, Natural Gas Swaps and Foreign Currency Options (collectively, the “Derivatives”). Lehman is a credit support provider for these Derivatives obligations of LBSF. On October 3, 2008, LBSF also filed for Chapter 11 bankruptcy. The bankruptcy filings of Lehman and LBSF constitute an event of default with respect to the Derivatives. On October 24, 2008, the Company, as is its right under the contractual agreement with LBSF, terminated all of its Derivatives contracts at a cash cost to the Company of $17.5 million. See further discussion of the Derivatives in Note 14 to our Consolidated Financial Statements.

On June 4, 2010 Lehman Brothers Special Financing (LBSF) initiated a claim against the Company in LBSF’s bankruptcy proceeding for an additional payment from the Company of $19.7 million, related to certain derivative contracts which the Company had earlier terminated due to LBSF’s default as a result of its’ bankruptcy filing in 2008. In accordance with the terms of the contracts, following LBSF’s bankruptcy filing, the Company terminated the contracts and paid LBSF approximately $22.3 million ($17.5 million of termination payments and $4.8 million of normal monthly settlements). The Company believes that the claim is without merit and intends to vigorously defend against it.

5.	Fair Value Measurements

In January of 2010, the FASB updated the authoritative guidance for fair value disclosure. The updated guidance requires new disclosures for significant transfers in and out of Level 1 and 2 of the fair value hierarchy and activity within Level 3 of the fair value hierarchy. The update provides amendments to the level of disaggregation that an entity should provide in each class of assets and liabilities, as well as disclosures about the inputs and valuation techniques used to measure fair value. The Company adopted this guidance in the first quarter of 2010 and it did not have a material impact on the Company’s consolidated financial position or results of operations.

In the first quarter of 2009, the Company adopted the authoritative guidance for fair value disclosure as it relates to nonfinancial assets and nonfinancial liabilities that are not recognized or disclosed at fair value in the financial statements on at least an annual basis. The guidance for nonfinancial assets and nonfinancial liabilities defines fair value, establishes a framework for fair value disclosure in accounting principles generally accepted in the United States of America (GAAP), and expands disclosures about fair value measurements. The provisions of this guidance apply to other accounting pronouncements that require or permit fair value measurements and are to be applied prospectively with limited exceptions. The adoption of the authoritative guidance for fair value disclosure, as it relates to nonfinancial assets and nonfinancial liabilities, had no impact on the Company’s consolidated financial statements. The provisions of the authoritative guidance for fair value disclosure will be applied at such time a fair value measurement of a nonfinancial asset or nonfinancial liability is required, which may result in a fair value that is materially different than would have been calculated prior to the adoption of the guidance.

PINNACLE FOODS FINANCE LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

The 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 population of financial assets and liabilities subject to recurring fair value measurements and the required disclosures are as follows:


	Fair Value As of December 26,		Fair Value Measurements Using Fair Value Hierarchy						Fair Value As of December 27,		Fair Value Measurements Using Fair Value Hierarchy
	2010		Level 1		Level 2		Level 3		2009		Level 1		Level 2		Level 3
Assets
Interest rate derivatives	$	—	$	—	$	—	$	—	$	165	$	—	$	165	$	—
Natural gas derivatives		28		—		28		—		—		—		—		—
Heating oil derivatives		—		—		—		—		25		—		25		—
Diesel fuel derivatives		380		—		380		—		902		—		902		—

Total assets at fair value	$	408	$	—	$	408	$	—	$	1,092	$	—	$	1,092	$	—

Liabilities
Interest rate derivatives	$	26,646	$	—	$	26,646	$	—	$	21,145	$	—	$	21,145	$	—
Foreign currency derivatives		1,100		—		1,100		—		2,522		—		2,522		—
Natural gas derivatives		—		—		—		—		57		—		57		—

Total liabilities at fair value	$	27,746	$	—	$	27,746	$	—	$	23,724	$	—	$	23,724	$	—

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.

Below are descriptions of the techniques used to estimate the fair value of financial instruments on the Company’s financial statements as of December 26, 2010.

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 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 nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, the Company has considered the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts, and guarantees. The Company had no fair value measurements based upon significant unobservable inputs (Level 3) as of December 26, 2010 or December 27, 2009.

PINNACLE FOODS FINANCE LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

6.	Shareholder’s Equity and Stock-Based Compensation Expense

Shareholder’s Equity

In connection with the capital contributions at the time of the Birds Eye Acquisition on December 23, 2009, certain members of the Board of Directors and management purchased ownership units of our ultimate parent Peak Holdings LLC. To fund these purchases, certain members of management signed 30 day notes receivable at a market interest rate. The total of the notes receivable were $565 and were fully paid in January 2010.

Stock-based Compensation

Stock-based compensation expense recognized during the period is based on the value of the portion of stock-based payment awards that is ultimately expected to vest during the period. As stock-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 stock 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.

The Company currently uses the Black-Scholes option-pricing model as its method of valuation for stock-based awards. Since the underlying equity is not publicly traded, the determination of fair value of stock-based payment awards on the date of grant using an option-pricing model is based upon estimates of enterprise value as well as assumptions regarding a number of highly complex and subjective variables. The estimated enterprise value is based upon forecasted cash flows for five years plus a terminal year and an assumed discount rate. The other variables used to determine fair value of stock-based payment awards include, but are not limited to, the expected stock price volatility of a group of industry comparable companies over the term of the awards, and actual and projected employee stock option exercise behaviors. Option-pricing models were developed for use in estimating the value of traded options that have no vesting or hedging restrictions and are fully transferable. Because the Company’s employee stock options have certain characteristics that are significantly different from traded options, and because changes in the subjective assumptions can materially affect the estimated value, in management’s opinion, the existing valuation models may not provide an accurate measure of the fair value of the Company’s employee stock-based awards. Although the fair value of employee stock awards is determined in accordance with the authoritative guidance for stock compensation and SEC Staff Accounting Bulletin No. 110 using an option-pricing model, that value may not be indicative of the fair value observed in a willing buyer/willing seller market transaction.

The fair value of the options granted during the fiscal year ended December 26, 2010 was estimated on the date of the grant using the Black-Scholes model with the following weighted average assumptions:


Risk-free interest rate	1.52	%
Expected life of option	2.93 years
Expected volatility of Pinnacle stock	70	%
Expected dividend yield on Pinnacle Stock	0	%

Volatility was based on the average volatility of a group of publicly traded food companies. The Company estimates that the annual forfeiture rates to be 7.6%.

PINNACLE FOODS FINANCE LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Expense Information

The following table summarizes stock-based compensation expense related to employee stock options and employee stock purchases under the authoritative guidance for stock compensation which was allocated as follows:


	Fiscal year ended December 26, 2010		Fiscal year ended December 27, 2009		Fiscal year ended December 28, 2008
Cost of products sold	$	394	$	982	$	140
Marketing and selling expenses		1,936		172		188
Administrative expenses		2,184		1,962		457
Research and development expenses		213		74		21

Pre-Tax Stock-Based Compensation Expense		4,727		3,190		806
Income Tax Benefit		141		75		—

Net Stock-Based Compensation Expense	$	4,586	$	3,115	$	806

The Company has two long-term incentive programs: The 2007 Stock Incentive Plan and the 2007 Unit Plan.

2007 Stock Incentive Plan

Crunch Holding Corp. (“CHC”), which continues to own all of the common stock in the Company adopted a stock option plan (the “2007 Stock Incentive Plan”) providing for the issuance of up to 20,000 shares of CHC’s common stock. Pursuant to the option plan, certain officers, employees, managers, directors and other persons are eligible to receive grants of nonqualified stock options, as permitted by applicable law. Generally 25% of the options will vest ratably over five years (“Time-Vested Options”). Fifty percent of the options vest ratably over five years depending on if annual or cumulative EBITDA targets are met (“Performance Options”). The final 25% of the options vest either on a change of control or similar event, if a 20% annual internal rate of is attained by Blackstone (“Exit Options”). The Company recently modified the 2007 Stock Incentive Plan to revise the EBITDA targets included in the plan to levels the Company believes are reasonably attainable in light of the current global economic and financial crisis. In addition, the plan was also revised to provide that if the EBITDA target is achieved in any two consecutive fiscal years during the employee’s continued employment, then that year’s and all prior years’ performance options will vest and become exercisable, and if the exit options vest and become exercisable during the employees continued employment, then all the performance options will also vest and become exercisable. The Company met the 2010 and 2009 EBITDA targets and as a result all previously issued Performance Options vested, thus resulting in an increase in stock compensation expense for the year. Options under the plan have a termination date of 10 years from the date of issuance.

The following table summarizes the stock option transactions under the 2007 Stock Incentive Plan:

PINNACLE FOODS FINANCE LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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


	Number of Shares			Average Exercise Price		Remaining Life		Intrinsic Value (000’s)
Outstanding - December 30, 2007		5,976			471.87		9.73

Granted		564			472.22
Exercised		—			—
Forfeitures		(847	)		471.89

Outstanding - December 28, 2008		5,693		$	471.91		8.75

Granted		1,072			457.92
Exercised		—			—
Forfeitures		(335	)		471.95

Outstanding - December 27, 2009		6,430		$	469.57		8.02

Granted		2,244			554.99
Exercised		—			—
Forfeitures		(415	)		490.31

Outstanding - December 26, 2010		8,259		$	491.74		7.69

Exercisable - December 26, 2010		3,150		$	478.53			$	522

2007 Unit Plan

Peak Holdings, the parent of CHC, adopted an equity plan (the “2007 Unit Plan”) providing for the issuance of profit interest units (PIUs) in Peak. Certain employees were given the opportunity to invest in Peak on April 1, 2007 through the purchase of Peak’s Class A-2 Units. In addition, each manager who so invested was awarded profit interests in Peak in the form of Class B-1, Class B-2 and Class B-3 Units. Generally 25% of the PIUs will vest ratably over five years (“Class B-1 Units”). Fifty percent of the PIUs vest ratably over five years depending on whether annual or cumulative EBITDA targets are met (“Class B-2 Units”). The final 25% of the PIUs granted under the 2007 Equity Plans vest either on a change of control or similar event, if a 20% annual internal rate of return is attained by Blackstone (“Class B-3 Units”). The plan also provides that if the EBITDA target is achieved in any two consecutive fiscal years (excluding 2007 and 2008) during the employee’s continued employment, then that year’s and all prior years’ Class B-2 units will vest and become exercisable, and if the Class B-3 units vest and become exercisable during the employees continued employment, then all the Class B-2 units will also vest and become exercisable. On April 1, 2010, the Company awarded a second tranche of PIUs to certain employees in the form of Class B-1 Units and Class B-2 Units. The Class B-1 Units and Class B-2 Units have the same vesting provisions as stated above.

The PIUs align the interest of management and the shareholders by providing certain members of management an interest in the overall return earned by Blackstone upon the exit of their investment. The intrinsic value of the PIU’s is based upon the enterprise value of the Company. The following table summarizes the activities under the 2007 Unit Plan:


	Number of Shares			Aggregate Intrinsic Value (000’s)
Outstanding - December 30, 2007		8,124

Granted		326
Exercised		(552	)
Forfeitures		(14	)

Outstanding - December 28, 2008		7,884

Granted		3,305
Exercised		(2,612	)
Forfeitures

Outstanding - December 27, 2009		8,577

Granted		3,316
Exercised		(689	)
Forfeitures		(841	)

Outstanding - December 26, 2010		10,363

Vested - December 26, 2010		3,150		$	5,677

7.	Restructuring and Impairment Charges

Tradenames

In 2010, the Company experienced declines in sales of its Hungry-Man branded products. Upon reassessing the long term sales growth rates, the Company recorded an impairment of the tradename asset in the amount of $29.0 million. The charge is recorded in Other expense (income), net on the Consolidated Statements of Operations and is reported in the Birds Eye Frozen segment. In 2009, the Company made the decision to discontinue sales of its Swanson branded products in the United States. Upon reassessing the long term growth rates, the Company recorded an impairment of the tradename asset in the amount of $1.3 million. The charge is recorded in the Other expense (income), net line on the Consolidated Statements of Operations and is reported in the Birds Eye Frozen segment. In 2008, the Company recorded impairment charges for its Van de Kamp’s ($8.0 million), Mrs. Paul’s ($5.6 million), Lenders ($0.9 million) and Open Pit tradenames ($0.6 million). The charges are recorded in the Other expense (income), net line on the Consolidated Statements of Operations and are reported in the Duncan Hines Grocery ($0.6 million) and Birds Eye Frozen ($14.5 million) segments.

PINNACLE FOODS FINANCE LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Rochester, NY Office

The Rochester, NY office was the former headquarters of Birds Eye Foods, Inc. which was acquired by PFG on December 23, 2009, as described in Note 3 to our Consolidated Financial Statements. In connection with the consolidation of activities into PFG’s New Jersey offices, the Rochester office was closed in December 2010. Notification letters under the Worker Adjustment and Retraining Notification (WARN) Act of 1988 were issued in the first quarter of 2010. Activities related to the closure of the Rochester office began in the second quarter of 2010 and resulted in the elimination of approximately 200 positions.

In accordance with the authoritative guidance with respect to accounting for costs associated with exit or disposal activities, the full cost of termination benefits of $7,587 related to employees who were not retained beyond the minimum retention period were recorded in first quarter 2010. The full cost of termination benefits of employees who were retained beyond the minimum retention period was $3,669 and was recorded throughout the fiscal year. The total cost of termination benefits recorded for the fiscal year ended December 26, 2010 was $11,393 and was recorded in the segments as follows: Birds Eye Frozen segment $8,052, Duncan Hines Grocery segment $2,076 and Specialty Foods segment $1,265.

In addition to the termination benefits, the Company recorded net lease termination costs of $1,206 for the fiscal year ended December 26, 2010 related to vacating the Birds Eye Foods’ Corporate headquarters prior to the expiration of the lease. These costs are expected to be paid over the remaining term of the lease, which runs through December 2011.

Tacoma, WA Plant

Pinnacle currently has two canning operations, our Tacoma, Washington plant that produces our Nalley and Brooks brands and our Ft. Madison, Iowa facility that produces our Armour brand. In an effort to enhance the long-term strength of our brands and improve our supply chain operations, we will close our Tacoma plant and consolidate production in our Ft. Madison plant. The closure of the Tacoma plant is targeted for the second half of 2011 and will result in the termination of approximately 160 employees. The full cost of termination benefits of employees that was recorded was recorded in the fourth quarter of 2010 was $1,533 and is expected to be paid in 2011. Termination costs for Tacoma are recorded in the Duncan Hines Grocery segment. In addition to termination benefits, the company revised the estimated useful lives of the Tacoma plant assets and therefore incurred additional accelerated depreciation of $736 in the fourth quarter of 2010, and expects to record an additional $4,782 of accelerated depreciation in 2011. We also adjusted the timing of the settlement of asset retirement obligations at Tacoma and as a result recorded an additional liability of $1,025 which was capitalized and will be depreciated over the remaining useful life of the plant.

PINNACLE FOODS FINANCE LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

The following table summarizes restructuring charges accrued as of December 26, 2010.


Description	Balance at December 31, 2007		Expense		Other Increases			Noncash Reductions			Cash Reductions			Balance at December 28, 2008
Impairment charges	$	—	$	15,100	$	—		$	(15,100	)	$	—		$	—
Employee severance		119		—		—			—			(16	)		103

Total	$	119	$	15,100	$	—		$	(15,100	)	$	(16	)	$	103


Description	Balance at December 29, 2008		Expense		Other Increases			Noncash Reductions			Cash Reductions			Balance at December 27, 2009
Impairment charges	$	—	$	1,300	$	—		$	(1,300	)	$	—		$	—
Employee severance		103		—		—			(33	)		—			70

Total	$	103	$	1,300	$	—		$	(1,333	)	$	—		$	70


Description	Balance at December 27, 2009		Expense		Other Increases			Noncash Reductions			Cash Reductions			Balance at December 26, 2010
Impairment charges	$	—	$	29,000	$	—		$	(29,000	)	$	—		$	—
Facility shutdowns		—		1,206		1,025	(1)		—			(380	)		1,851
Employee severance		70		12,926		—			(70	)		(6,830	)		6,096

Total	$	70	$	43,132	$	1,025		$	(29,070	)	$	(7,210	)	$	7,947

(1)	consists of asset retirement obligation for Tacoma facilty.

PINNACLE FOODS FINANCE LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

8.	Other Expense (Income), net


	Fiscal year ended December 26, 2010			Fiscal year ended December 27, 2009		Fiscal year ended December 28, 2008
Amortization of intangibles/other assets	$	17,170		$	16,824	$	19,245
Restructuring and impairment charges		29,000			1,300		15,100
Birds Eye Acquisition merger-related costs		224			24,090		—
Gain on litigation settlement		—			—		(9,988	)
Royalty income		(750	)		—		—
Other		(149	)		—		6

Total other expense	$	45,495		$	42,214	$	24,363

Restructuring and impairment charges. In 2010, the Company recorded an impairment of $29.0 million on the Hungry-Man tradename. In 2009, the Company recorded an impairment of $1.3 million on the Swanson tradename. In 2008, the Company recorded impairment charges for its Van de Kamp’s ($8.0 million), Mrs. Paul’s ($5.6 million), Lenders ($0.9 million) and Open Pit tradenames ($0.6 million). The charges are the result of the Company reassessing the long-term growth rates for its branded products

Royalty expense (income), net. We have a license agreement whereby the Company receives $750 per year in royalties from the Dean Pickle and Specialty Products Company, a subsidiary of TreeHouse Foods, Inc., for the use of the Nalley^® trademark in the production of the Nalley’s Pickle brand.

Birds Eye Acquisition merger-related costs. In connection with the Birds Eye Foods Acquisition, as described in Note 3, the Company incurred costs of $224 in the fiscal year ended December 26, 2010 and $24.1 million in the fiscal year ended December 27, 2009. These costs relate primarily to merger, acquisition and advisory fees, legal, accounting and other professional fees.

Gain on litigation settlement. On April 17, 2008, the Company settled a lawsuit with R2 Top Hat, Ltd., relating to its claim against Aurora Foods Inc., which merged with the Company in March 2004. Under the settlement, the Company paid R2 Top Hat, Ltd. $10 million in full payment of the excess leverage fees related to the Aurora prepetition bank facility, all related interest and all other out-of-pocket costs. After this settlement, there are no remaining contingencies related to the excess leverage fees under the Aurora prepetition bank facility. Accordingly, the remaining $10.0 million accrued liability assumed in the merger with Aurora and recorded at fair value of $20.1 million in the purchase price allocation for the Blackstone Transaction was reduced to $0 and the related credit, net of related expenses, was recorded in Other expense (income), net in the Consolidated Statements of Operations.

PINNACLE FOODS FINANCE LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

9.	Balance Sheet Information

Accounts Receivable. Customer accounts receivable are recorded at the invoiced amount and do not bear interest. The allowance for cash discounts, returns and bad debts is our best estimate of the amount of uncollectible amounts in our existing accounts receivable. The Company determines the allowance based on historical discounts taken and write-off experience. The Company reviews its allowance for doubtful accounts monthly. Account balances are charged off against the allowance when the Company concludes it is probable the receivable will not be recovered. The Company does not have any off-balance sheet credit exposure related to our customers. Accounts receivable are as follows:


	December 26, 2010			December 27, 2009
Customers	$	142,795		$	154,788
Allowances for cash discounts, bad debts and returns		(5,214	)		(3,826	)

		137,581			150,962
Other		7,677			7,042

Total	$	145,258		$	158,004

Following are the changes in the allowance for cash discounts, bad debts, and returns:


	Beginning Balance		Additions		Deductions			Ending Balance
Fiscal year ended December 26, 2010	$	3,826	$	60,870	$	(59,482	)	$	5,214
Fiscal year ended December 27, 2009		3,680		41,580		(41,434	)		3,826
Fiscal year ended December 28, 2008		4,028		39,028		(39,376	)		3,680

Inventories. Inventories are as follows:


	December 26, 2010		December 27, 2009
Raw materials, containers and supplies	$	39,528	$	40,912
Finished product		290,107		349,055

Total	$	329,635	$	389,967

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

In the fourth quarter of 2009, in connection with the Birds Eye Foods Acquisition, inventories were required to be valued at fair value, which is $37.6 million higher than historical manufacturing cost. Cost of products sold for the fiscal year ended December 26, 2010, and the fiscal year ended December 27, 2009 includes pre-tax charges of $37.1 million and $0.5 million, respectively, related to the finished products at December 23, 2009, which were subsequently sold.

PINNACLE FOODS FINANCE LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Other Current Assets. Other Current Assets are as follows:


	December 26, 2010		December 27, 2009
Prepaid expenses	$	8,144	$	7,849
Prepaid income taxes		5,961		2,534
Assets held for sale		7,402		7,402
Cash collateral for letter of credit		—		9,175

	$	21,507	$	26,960

Assets held for sale represents the estimated fair value of the former Birds Eye plant in Watsonville, CA.

Plant Assets. Plant assets are as follows:


	December 26, 2010			December 27, 2009
Land	$	19,811		$	19,717
Buildings		148,746			129,743
Machinery and equipment		412,147			355,819
Projects in progress		25,063			13,794

		605,767			519,073
Accumulated depreciation		(158,699	)		(106,865	)

Total	$	447,068		$	412,208

Depreciation was $60,879 during the fiscal year ended December 26, 2010, $48,644 during the fiscal year ended December 27, 2009 and $43,264 during the fiscal year ended December 28, 2008. As of December 26, 2010 and December 27, 2009, Plant Assets included assets under capital lease with a book value of $14,621 and $3,078 (net of Accumulated depreciation of $2,779 and $1,057), respectively.

Accrued Liabilities. Accrued liabilities are as follows:


	December 26, 2010		December 27, 2009
Employee compensation and benefits	$	59,877	$	69,331
Consumer coupons		4,708		6,711
Interest payable		39,914		23,808
Accrued restructuring charges		6,816		70
Other		31,431		30,115

Total	$	142,746	$	130,035

PINNACLE FOODS FINANCE LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

10.

Goodwill, Tradenames and Other Assets

Goodwill by segment is as follows:


	Birds Eye Frozen		Duncan Hines Grocery		Specialty Foods		Total
Balance, December 28, 2008	$	271,387	$	632,260	$	90,521	$	994,167

Birds Eye Acquisition allocation of purchase price		304,572		107,215		153,226		565,013

Balance, December 27, 2009	$	575,958	$	739,475	$	243,747	$	1,559,180

Birds Eye Acquisition adjustment		2,811		990		1,414		5,215

Balance, December 26, 2010	$	578,769	$	740,465	$	245,161	$	1,564,395

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 and other intangible assets provides that goodwill and other intangible assets with indefinite lives will not be amortized, but will be tested for impairment on an annual basis or more often when events indicate. The authoritative guidance for accounting for goodwill states that impairment is to be tested on an annual basis, unless an event occurs that could potentially reduce the fair value of a reporting unit below its book value. The Company completed its annual testing as of December 26, 2010. No impairments were identified.

The Birds Eye Foods Acquisition was accounted for in accordance the authoritative guidance for business combinations and resulted in $565,013 in goodwill, as of December 27, 2009. At the time our acquisition of Birds Eye, we were pending receipt of certain information relative to Birds Eye’s income tax accounts. The required information was received during the fourth quarter of 2010 and resulted in an adjustment of $5,215 to the opening goodwill balance.

Tradenames

Tradenames by segment are as follows:


	Birds Eye Frozen			Duncan Hines Grocery		Specialty Foods		Total
Balance, December 28, 2008	$	227,880		$	682,232	$	—	$	910,112

Birds Eye Acquisition allocation of purchase price		624,000			90,000		36,000		750,000
Impairment		(1,300	)		—		—		(1,300	)

Balance, December 27, 2009	$	850,580		$	772,232	$	36,000	$	1,658,812

Impairment		(29,000	)		—		—		(29,000	)

Balance, December 26, 2010	$	821,580		$	772,232	$	36,000	$	1,629,812

In December 2010, the Company recorded an impairment charge of $29,000 for its Hungry-Man tradename which is reported in the Birds Eye Frozen segment. In December 2009, the Company recorded an impairment charge of $1,300 for its Swanson tradename which was reported in the Birds Eye Frozen segment. In 2008, the Company recorded impairment charges for its Van de Kamp’s ($8,000), Mrs. Paul’s ($5,600), Lenders ($900) and Open Pit tradenames ($600). The charges were reported in the Birds Eye Frozen ($14,500) and Duncan Hines Grocery ($600) segments. All impairment charges were the result of the Company’s reassessment of the long-term growth rates for its branded products and were recorded Other expense (income), net on the Consolidated Statements of Operations

The allocation of the Birds Eye Acquisition purchase price resulted in indefinite-lived tradename intangible assets of $750,000.

PINNACLE FOODS FINANCE LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Other Assets


	December 26, 2010
	Weighted Avg Life		Gross Carrying Amount		Accumulated Amortization			Net
Amortizable intangibles
Recipes		10	$	52,810	$	(19,804	)	$	33,006
Customer relationships - Distributors		36		125,489		(16,755	)		108,734
Customer relationships - Food Service		7		36,143		(25,063	)		11,080
Customer relationships - Private Label		7		9,214		(7,445	)		1,769
License		7		4,875		(750	)		4,125

Total amortizable intangibles			$	228,531	$	(69,817	)	$	158,714
Deferred financing costs				76,391		(35,166	)		41,225
Notes receivable (Roskam Baking)				427		—			428

Total other assets, net								$	200,367


	December 27, 2009
	Weighted Avg Life		Gross Carrying Amount		Accumulated Amortization			Net
Amortizable intangibles
Recipes		10	$	52,810	$	(14,523	)	$	38,287
Customer relationships - Distributors		36		125,305		(10,154	)		115,151
Customer relationships - Food Service		7		36,143		(21,655	)		14,488
Customer relationships - Private Label		7		9,213		(6,316	)		2,897
License		7		4,875		—			4,875

Total amortizable intangibles			$	228,346	$	(52,648	)	$	175,698
Deferred financing costs				80,730		(23,833	)		56,897
Foreign currency swap (See Note 11)				165		—			165
Notes receivable (Roskam Baking)				1,009		—			1,009
Other				54		—			54

Total other assets, net								$	233,823

Amortization of the intangible assets was $17,170 for the fiscal year ended 2010, $16,824 for the fiscal year ended 2009 and $19,245 for the fiscal year ended 2008. Estimated amortization expense for each of the next five years and thereafter is as follows: 2011 - $16,170, 2012 - $15,811, 2013 - $15,473, 2014 - $12,190, 2015 - $10,903 and thereafter - $88,167.

Intangible Assets by segment for the fiscal year ended December 26, 2010 were $82,749 in the Birds Eye Frozen segment, $59,205 in the Duncan Hines Grocery segment and $16,760 in the Specialty Foods segment. Intangible Assets by segment for the fiscal year ended December 27, 2009 were $85,713 in the Birds Eye Frozen segment, $68,567 in the Duncan Hines Grocery segment and $21,420 in the Specialty Foods segment.

Deferred financing costs, which relate to the Senior Secured Credit Facility, Senior Notes and Senior Subordinated Notes entered into in connection with the Blackstone Transaction, amounted to $40,567 as of December 26, 2010. Deferred financing costs in connection with the Birds Eye Foods Acquisition, amounted to $40,253 prior to the refinancing. As a result of the refinancing described below, deferred financing costs in connection with the Birds Eye Foods Acquisition were reduced to $35,824 as of December 26, 2010.

PINNACLE FOODS FINANCE LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

As discussed in Note 11, the Company refinanced its existing Tranche C Term Loans on August 17, 2010 by issuing $400.0 million 8.25% Senior Notes due 2017 (the “8.25% Senior Notes”) and entering into an amendment to the Senior Secured Credit Facility pursuant to which the Company borrowed incremental term loans (the “Tranche D Term Loans”) in an aggregate principal amount of $442.3 million. In accordance with the authoritative guidance for debt extinguishments and modifications, the lending relationship between the Company and each bank in the original lending syndicate was examined and determined to be either a modification or an extinguishment. As a result of this analysis, the Company recorded interest expense in the Consolidated Statement of Operations for the write-off of $11,633 of deferred financing costs and $5,648 of original issue discount related to extinguished lending relationships from the Tranche C Term Loans. In addition, the Company incurred approximately $3,880 of legal, consulting and placement fees in connection with the Tranche D Term Loans. Of the fees incurred, $3,221 were costs of modifying existing lending relationships and thus the Company charged the interest expense in the Consolidated Statement of Operations during the third quarter of 2010. The remaining $660 of fees related to obtaining new lending relationships and thus was deferred. The Company also incurred approximately $8,790 of legal, consulting, audit and placement fees in connection with the execution of the 8.25% Senior Notes, all of which were deferred. All costs deferred in connection with the above transactions were recorded in Other Assets, net on the consolidated balance sheet.

All deferred financing costs are amortized into interest expense over the life of the related debt facility using the effective interest method. Amortization was $13,541 for the fiscal year ended 2010, $10,230 for the fiscal year ended 2009 (including $5,410 related to stand by bridge financing fees) and $4,714 for the fiscal year ended 2008.

The following summarizes deferred financing cost activity in 2010:

Deferred Financing Costs


	Gross Carrying Amount			Accumulated Amortization			Net
December 27, 2009	$	80,730		$	(23,833	)	$	56,897
2010 - Additions		10,002			—			10,002
Amortization		—			(13,541	)		(13,541	)
Term Loan C - Write Off		(13,841	)		2,208			(11,633	)
Other		(500	)		—			(500	)

December 26, 2010	$	76,391		$	(35,166	)	$	41,225

In February 2009, the Company entered into an agreement with Roskam Baking, which began co-packing certain Duncan Hines products in April 2009. This agreement included a provision to loan Roskam $1,900. As of December 26, 2010 the balance of the notes receivable is $978, of which $550 is recorded on the Consolidated Balance Sheet in Other Current Assets and $428 is recorded in Other Assets, net. This loan is being paid back to the Company based on cases produced and will be paid back in no less than 5 years.

PINNACLE FOODS FINANCE LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

11.

Debt and Interest Expense


	December 26, 2010			December 27, 2009
Short-term borrowings
- Revolving Credit Facility	$	—		$	—
- Notes payable		1,591			1,232

Total short-term borrowings		1,591			1,232

Long-term debt
- Senior Secured Credit Facility - Term Loans due 2014	$	1,199,422		$	1,221,875
- Senior Secured Credit Facility - Tranche C Term Loans due 2014		—			850,000
- Senior Secured Credit Facility - Tranche D Term Loans due 2014		368,194			—
- 8.25% Senior Notes due 2017		400,000			—
- 9.25% Senior Notes due 2015		625,000			625,000
- 10.625% Senior Subordinated Notes due 2017		199,000			199,000
- Unamortized discount on long term debt		(3,917	)		(11,722	)
- Capital lease obligations		14,256			3,326

		2,801,955			2,887,479
Less: current portion of long-term obligations		4,648			38,228

Total long-term debt	$	2,797,307		$	2,849,251


Interest expense
	Fiscal year ended December 26, 2010		Fiscal year ended December 27, 2009		Fiscal year ended December 28, 2008
Third party interest expense	$	184,857	$	90,899	$	127,974
Related party interest expense		4,996		1,446		3,106
Amortization of debt acquisition costs (Note 10)		13,541		10,230		4,714
Write off of debt issue costs (Note 10)		11,633		—		—
Amortization of deferred mark-to-market adjustment on terminated swap (Note 14)		3,295		4,429		1,259
Interest rate swap (gains) losses (Note 14)		17,682		14,163		16,227

	$	236,004	$	121,167	$	153,280

PINNACLE FOODS FINANCE LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

As part of the Birds Eye Foods Acquisition on December 23, 2009, as described in Note 3, the Company entered into an amendment to the Senior Secured Credit Facility in the form of (i) incremental term loans in the amount of $850.0 million (the “Tranche C Term Loans”) and (ii) an incremental revolving credit facility the amount of $25.0 million, bringing our total revolving credit commitment to $150.0 million. In connection with the Tranche C Term Loans, the Company also incurred $11.8 million in original issue discount fees. These fees were recorded in Long-term debt on the Consolidated Balance Sheet and were being amortized over the life of the loan using the effective interest method prior to the repayment of the Tranche C Term Loans.

On August 17, 2010 the Company entered into an amendment to the Senior Secured Credit Facility, which provided for incremental term loans in the amount of $442.3 million (the “Tranche D Term Loans). The proceeds from the Tranche D Term Loans, along with the proceeds from the 8.25% Senior Notes described below were used to repay the outstanding Tranche C Term Loans. In accordance with the authoritative guidance for debt extinguishments and modifications, the lending relationship between the Company and each bank in the original lending syndicate was examined and determined to be either a modification or an extinguishment. As a result of this analysis, the Company recorded interest expense in the Consolidated Statement of Operations for the write-off of $11,633 of deferred financing costs and $5,648 of original issue discount related to extinguished lending relationships from the Tranche C Term Loans. In addition, the Company incurred approximately $3,880 of legal, consulting and placement fees in connection with the Tranche D Term Loans. Of the fees incurred, $3,221 were costs of modifying existing lending relationships and thus charged the interest expense in the Consolidated Statement of Operations during the third quarter of 2010. The remaining $660 of fees related to obtaining new lending relationships and thus was deferred. The Company also incurred approximately $8,790 of legal, consulting, audit and placement fees in connection with the execution of the 8.25% Senior Notes, all of which were deferred. All costs deferred in connection with the above transactions were recorded in Other Assets, net on the consolidated balance sheet.

There were no borrowings outstanding under the Revolving Credit Facility as of December 26, 2010 and December 27, 2009. There have been no borrowings under the revolver at any time in 2010.

The total combined amount of the Term Loans and the Tranche C and Tranche D Term Loans that were owed to affiliates of The Blackstone Group as of December 26, 2010 and December 27, 2009, was $125,698 and $109,237, respectively.

The Company’s borrowings under the Senior Secured Credit Facility, as amended, bear interest at a floating rate and are maintained as base rate loans or as Eurocurrency rate loans. Base rate loans bear interest at the base rate plus the applicable base rate margin, as defined in the Senior Secured Credit Facility. The base rate is defined as the higher of (i) the prime rate and (ii) the Federal Reserve reported overnight funds rate plus 1/2 of 1%. Eurocurrency rate loans bear interest at the adjusted Eurocurrency rate, as described in the Senior Secured Credit Facility, plus the applicable Eurocurrency rate margin. Solely with respect to Tranche C Term Loans, the Eurocurrency rate was no less than 2.50% per annum. Solely with respect to Tranche C Term Loans, the base rate was no less than 3.50% per annum. Solely with respect to Tranche D Term Loans, the Eurocurrency rate shall be no less than 1.75% per annum. Solely with respect to Tranche D Term Loans, the base rate shall be no less than 2.75% per annum.

PINNACLE FOODS FINANCE LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

The applicable margins with respect to the Company’s Senior Secured Credit Facility vary from time to time in accordance with the terms thereof and agreed upon pricing grids based on the Company’s leverage ratio as defined in the credit agreement. The applicable margins with respect to the Senior Secured Credit Facility are currently:


Applicable Margin (per annum)
Revolving Credit Facilty and Letters of Credit								Term Loans						Tranche D Term Loans
Eurocurrency Rate for Revolving Loans and Letter of Credit Fees		Base Rate for Revolving Loans			Commitment Fees Rate			Eurocurrency Rate for Term Loans			Base Rate for Term Loans			Eurocurrency Rate for Term Loan D			Base Rate for Term Loan D
	2.25%		1.25	%		0.50	%		2.50	%		1.50	%		4.25	%		3.25	%

The obligations under the Senior Secured Credit Facility are unconditionally and irrevocably guaranteed by each of the Company’s direct or indirect domestic subsidiaries (collectively, the “Guarantors”). In addition, the Senior Secured Credit Facility is collateralized by first priority or equivalent security interests in (i) all the capital stock of, or other equity interests in, each direct or indirect domestic subsidiary of the Company and 65% of the capital stock of, or other equity interests in, each direct foreign subsidiaries of the Company, or any of its domestic subsidiaries and (ii) certain tangible and intangible assets of the Company and those of the Guarantors (subject to certain exceptions and qualifications).

A commitment fee of 0.50% per annum is applied to the unused portion of the Revolving Credit Facility. For the fiscal years ended December 26, 2010, December 27, 2009 and December 28, 2008, the weighted average interest rate on the term loan components of the Senior Credit Facility was 4.44%, 3.13% and 6.21%, respectively. As of December 26, 2010, the interest rate on the revolving credit facility was 2.76%, however no borrowings were made during 2010. For the fiscal years ended December 27, 2009 and December 28, 2008, the weighted average interest rates on the Revolving Credit Facility were 3.19% and 5.45%, respectively. As of December 26, 2010 and December 27, 2009, the Eurodollar interest rate on the term loan components of the Senior Credit Facility was 3.52% and 4.84%, respectively.

The Company pays a fee for all outstanding letters of credit drawn against the Revolving Credit Facility at an annual rate equivalent to the Applicable Margin then in effect with respect to Eurodollar loans under the Revolving Credit Facility, less the fronting fee payable in respect of the applicable letter of credit. The fronting fee is equal to 0.125% per annum of the daily maximum amount then available to be drawn under such letter of credit. The fronting fees are computed on a quarterly basis in arrears. Total letters of credit issued under the Revolving Credit Facility cannot exceed $50,000 as of March 24, 2010 (previously $25,000). As of December 26, 2010 and December 27, 2009, the Company had utilized $34,187 and $22,072, respectively of the Revolving Credit Facility for letters of credit. As of December 26, 2010 and December 27, 2009, there were no borrowings under the Revolving Credit Facility. As of December 26, 2010 and December 27, 2009, respectively, there was $115,813 and $127,928 of borrowing capacity under the Revolving Credit Facility, of which $15,813 and $2,828 was available to be used for letters of credit.

Under the terms of the Senior Secured Credit Facility, the Company is required to use 50% of its “Excess Cash Flow”, to prepay the Term Loans and the Tranche D Term Loans. Excess Cash Flow is determined by taking consolidated net income (as defined) and adjusting it for certain items, including (1) all non cash charges and credits included in arriving at consolidated net income, (2) changes in working capital, (3) capital expenditures (to the extent they were not financed with debt), (4) the aggregate amount of principle payments of indebtedness and (5) certain other items defined in the Senior Secured Credit Facility. In December 2010, the Company made a voluntary prepayment of $73.0 million to the Tranche D Term Loans. As a result of this prepayment, no payment is expected to be due under the Excess Cash Flow requirements of Senior Secured Credit Facility. In March 2010, in accordance with the Excess Cash Flow requirements of the Senior Secured Credit Facility, the Company made a mandatory prepayment of the Term Loans of $27.0 million.

The Term Loans mature in quarterly 0.25% installments from September 2007 to December 2013 with the remaining balance due in April 2014. The aggregate maturities of the Term Loan outstanding as of December 26, 2010 are $2.5 million in 2011, $12.5 million in 2012, $12.5 million in 2013 and $1,171.9 million in 2014. The Tranche D Term Loans mature in quarterly 0.25% installments from December 2010 to December 2013 with the remaining balance due in April 2014. The aggregate maturities of the Tranche D Term Loans outstanding as of December 27, 2009 are no payments due in 2011, 2012 and 2013, with a lump sum payment of $368.2 million due in 2014.

PINNACLE FOODS FINANCE LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

The Company issued $325.0 million of 9.25% Senior Notes (the “Senior Notes”) due 2015, and $250.0 million of 10.625% Senior Subordinated Notes (the “Senior Subordinated Notes”) due 2017. On December 23, 2009, as part of the Birds Eye Foods Acquisition described in Note 3, the Company issued an additional $300 million of 9.25% Senior Notes due in 2015 (the “Additional Senior Notes”). The Senior Notes and the Additional Senior Notes are collectively referred to herein as the 9.25% Senior Notes. As described above, on August 17, 2010 the Company issued $400.0 million of 8.25% Senior Notes, due 2017 (the “8.25% Senior Notes”) and utilized the proceeds to repay the Tranche C Term Loans.

The 9.25% Senior Notes and the 8.25% Senior Notes are general unsecured obligations of the Company, effectively subordinated in right of payment to all existing and future senior secured indebtedness of the Company and guaranteed on a full, unconditional, joint and several basis by the Company’s wholly-owned domestic subsidiaries that guarantee other indebtedness of the Company. The Senior Subordinated Notes are general unsecured obligations of the Company, subordinated in right of payment to all existing and future senior indebtedness of the Company and guaranteed on a full, unconditional, joint and several basis by the Company’s wholly-owned domestic subsidiaries that guarantee other indebtedness of the Company. See Note 17 to the Consolidated Financial Statements for Guarantor and Nonguarantor Financial Statements.

The Company may redeem some or all of the 9.25% Senior Notes at any time prior to April 1, 2011, some or all of the 8.25% Senior Notes at any time prior to September 1, 2013, and some or all of the Senior Subordinated Notes at any time prior to April 1, 2012, in each case at a price equal to 100% of the principal amount of notes redeemed plus the Applicable Premium as of, and accrued and unpaid interest to, the redemption date, subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date. The “Applicable Premium” is defined as the greater of (1) 1.0% of the principal amount of such note and (2) the excess, if any, of (a) the present value at such redemption date of (i) the redemption price of such 9.25% Senior Note at April 1, 2011 or such 8.25% Senior Note at September 1, 2013 or such Senior Subordinated Note at April 1, 2012, plus (ii) all required interest payments due on such 9.25% Senior Note through April 1, 2011 or such 8.25% Senior Note through September 1 2013 or such Senior Subordinated Note through April 1, 2012 (excluding accrued but unpaid interest to the redemption date), computed using a discount rate equal to the Treasury Rate plus 50 basis points over (b) the principal amount of such note.

PINNACLE FOODS FINANCE LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

The Company may redeem the 9.25% Senior Notes, the 8.25% Senior Notes, or the Senior Subordinated Notes at the redemption prices listed below, if redeemed during the twelve-month period beginning on April 1^st (for the 9.25% Senior Notes and Senior Subordinated Notes ) or September 1^st ( for the 8.25% Senior Notes) of each of the years indicated below:


9.25% Senior Notes				8.25% Senior Notes
Year	Percentage			Year	Percentage
2011		104.625	%	2013		106.188	%
2012		102.313	%	2014		104.125	%
2013 and thereafter		100.000	%	2015		102.063	%
				2016 and thereafter		100.000	%


Senior Subordinated Notes
Year	Percentage
2012	105.313	%
2013	103.542	%
2014	101.771	%
2015 and thereafter	100.000	%

In addition, until September 1, 2013, the Company is able to redeem up to 35% of the aggregate principal amount of the 8.25% Senior Notes at a redemption price equal to 100% of the aggregate principal amount thereof, plus a premium equal to the rate per annum on the the 8.25% Senior Notes, as the case may be, plus accrued and unpaid interest and Additional Interest, if any, to the redemption date, subject to the right of holders of the 8.25% Senior Notes of record on the relevant record date to receive interest due on the relevant interest payment date, with the net cash proceeds received by the Company from one or more equity offerings; provided that (i) at least 50% of the aggregate principal amount of the 8.25% Senior Notes, as the case may be, originally issued under the applicable indenture remains outstanding immediately after the occurrence of each such redemption and (ii) each such redemption occurs within 90 days of the date of closing of each such equity offering.

PINNACLE FOODS FINANCE LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

On November 22, 2010, the Company completed the exchange of $300.0 million of its 9.25% Senior Notes and $400.0 million of its 8.25% Senior Notes. Under the transaction, the originally issued private placement notes were exchanged for freely tradable registered notes. The terms underlying the notes and related indenture did not change.

In December 2007, the Company repurchased $51.0 million in aggregate principal amount of the 10.625% Senior Subordinated Notes at a discounted price of $44.2 million. The Company currently has outstanding $199.0 million in aggregate principal amount of Senior Subordinated Notes.

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

The estimated fair value of the Company’s long-term debt, including the current portion, as of December 26, 2010, is as follows:


	December 26, 2010
Issue	Recorded Amount		Fair Value
Senior Secured Credit Facility - Term Loans	$	1,199,422	$	1,171,308
Senior Secured Credit Facility - Tranche D Term Loans		368,194		372,031
8.25% Senior Notes		400,000		409,000
9.25% Senior Notes		625,000		648,438
10.625% Senior Subordinated Notes		199,000		213,925

	$	2,791,616	$	2,814,702

The estimated fair value of the Company’s long-term debt, including the current portion, as of December 27, 2009, is as follows:


	December 27, 2009
Issue	Recorded Amount		Fair Value
Senior Secured Credit Facility - Term Loans	$	1,221,875	$	1,134,303
Senior Secured Credit Facility - Tranche C Term Loans		850,000		853,536
9.25% Senior notes		625,000		628,906
10.625% Senior subordinated notes		199,000		206,214

	$	2,895,875	$	2,822,959

The fair value is based on the quoted market price for such notes and borrowing rates currently available to the Company for loans with similar terms and maturities.

PINNACLE FOODS FINANCE LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

12.

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 income of certain gains and losses that arise during the period but are deferred under pension accounting rules.

The Company uses a measurement date for the pension and postretirement benefit plans that coincides with its year end.

Pinnacle Foods Pension Plan

As of December 26, 2010, the Company maintains a noncontributory defined benefit pension plan (“Pinnacle Foods Pension Plan”) that covers eligible union employees and provides benefits generally based on years of service and employees’ compensation. The Pinnacle Foods Pension Plan is funded in conformity with the funding requirements of applicable government regulations.

In March 2008, as a result of the collective bargaining process, the employees at our Ft. Madison facility elected to stop participating in the Company-sponsored pension plan and are now part of the United Food and Commercial Workers multi-employer pension plan. In June 2010, the pension plan benefits for Imlay City, Michigan participants were frozen effective July 1, 2010 and, accordingly, the Company recorded a curtailment loss of $992 in earnings and a related curtailment gain of $2,646 in Accumulated Other Comprehensive Income during the second quarter of 2010.

PINNACLE FOODS FINANCE LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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


	Pinnacle Foods Pension Plan Pension Benefits
	Fiscal year ended December 26, 2010			Fiscal year ended December 27, 2009			Fiscal year ended December 28, 2008
Change in Benefit Obligation
Net benefit obligation at beginning of the period	$	78,740		$	75,212		$	63,389
Service cost		1,228			1,815			1,539
Interest cost		4,558			4,437			4,264
Amendments		—			—			1,739
Actuarial (gain) loss		6,173			1,208			7,861
Gross benefits paid		(4,239	)		(3,932	)		(3,580	)
Curtailment gain		(2,646	)		—			—

Net benefit obligation at end of the period		83,814			78,740			75,212

Change in Plan Assets
Fair value of plan assets at beginning of the period		45,948			38,705			56,030
Employer contributions		8,881			2,777			2,501
Actual return on plan assets		4,636			8,398			(16,246	)
Gross benefits paid		(4,239	)		(3,932	)		(3,580	)

Fair value of plan assets at end of the period		55,226			45,948			38,705

Funded status at end of the year	$	(28,588	)	$	(32,792	)	$	(36,507	)

Amounts recognized in the Consolidated Balance Sheet
Accrued pension benefits	$	(28,588	)	$	(32,792	)	$	(36,507	)

Net amount recognized at end of the period	$	(28,588	)	$	(32,792	)	$	(36,507	)

Amounts recognized in Accumulated Other Comprehensive (Loss) / Income
Net loss / (gain)	$	20,339		$	18,656		$	24,356
Prior service cost		386			1,456			1,597

Net amount recognized at end of the period	$	20,725		$	20,112		$	25,953

Accumulated benefit obligation	$	79,753		$	71,860		$	68,246

Weighted average assumptions
Discount rate		5.45	%		5.94	%		6.05	%
Expected return on plan assets		7.50	%		7.50	%		7.50	%
Rate of compensation increase		3.00	%		3.00	%		3.00	%

PINNACLE FOODS FINANCE LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

The following represents the components of net periodic benefit costs:


	Pinnacle Foods Pension Plan Pension Benefits
	Fiscal year ended December 26, 2010			Fiscal year ended December 27, 2009			Fiscal year ended December 28, 2008
Service cost	$	1,228		$	1,815		$	1,539
Interest cost		4,558			4,437			4,264
Expected return on assets		(3,611	)		(2,867	)		(4,440	)
Amortization of prior service cost		77			142			142
Amortization of actuarial loss		819			1,377			—
Curtailment loss		992			—			—

Net periodic benefit cost	$	4,063		$	4,904		$	1,505

Weighted average assumptions:
Discount rate		5.87	%		6.05	%		6.48	%
Expected return on plan assets		7.50	%		7.50	%		8.00	%
Rate of compensation increase		3.00	%		3.00	%		3.50	%

The discount rate used to calculate the present value of the projected benefit obligation is set based on long-term high quality bonds that match the expected benefit payments. The projected return of plan assets assumption is based on projected long-term market returns for the various asset classes in which the plans are invested, weighted by the target asset allocations. The rate of compensation increase represents the long-term assumption for expected increases to salaries for pay-related plans.

Plan Assets

The Company’s pension plan weighted-average asset allocations at December 26, 2010 and December 27, 2009, by asset category, are as follows:


	December 26, 2010			December 27, 2009
Asset category
Equity securities		60	%		61	%
Debt securities		35	%		34	%
Cash		5	%		5	%

Total		100	%		100	%

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

PINNACLE FOODS FINANCE LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

The following table summarizes the Pinnacle Foods Pension Plan’s investments measured at fair value on a recurring basis:


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.


	Fair Value As of December 26, 2010		Fair Value Measurements Using Fair Value Hierarchy						Fair Value As of December 27, 2009		Fair Value Measurements Using Fair Value Hierarchy
	Fair Value As of December 26, 2010		Level 1		Level 2		Level 3		Fair Value As of December 27, 2009		Level 1		Level 2		Level 3
Short-term investments:
Short-term Investment Fund	$	2,744	$	2,744	$	—	$	—	$	2,170	$	2,170	$	—	$	—
Equity Common/collective trusts:
Small Cap Fund		1,097		—		1,097		—		940		—		940		—
Large Cap Fund		7,682		—		7,682		—		6,507		—		6,507		—
International Fund		9,329		—		9,329		—		7,827		—		7,827		—
Growth Fund		5,484		—		5,484		—		4,689		—		4,689		—
U.S. Value Fund		9,329		—		9,329		—		7,894		—		7,894		—
Fixed Income Common/collective trusts:
Fixed Income Fund		19,207		—		19,207		—		15,586		—		15,586		—

Total assets at fair value	$	54,872	$	2,744	$	52,128	$	—	$	45,613	$	2,170	$	43,443	$	—

The plan had $52,128 and $43,443 of investments, in common and collective trusts which are reported at fair value and categorized as level 2 in the above tables as of December 26, 2010 and December 27, 2009, respectively. The plan has concluded that net asset value (“NAV”) reported by the underlying funds approximates fair market value of these investments. The investments are redeemable with the fund at NAV under the original terms of the partnership agreements and/or subscription agreements and the operations of the underlying funds. However, it is possible that these redemption rights may be restricted or eliminated by the funds in the future in accordance with the underlying fund agreements.

As of December 26, 2010, total assets at fair value of $54,872 do not include a $354 receivable from broker that is included in total assets of the plan of $55,226. As of December 27, 2009, total assets at fair value of $45,613 do not include a $335 receivable from broker that is included in total assets of the plan of $45,948.

Cash Flows

Contributions. The Company made contributions to the Pinnacle Foods Pension Plan totaling $8.9 million in fiscal 2010, $2.8 million in fiscal 2009 and $2.5 million in fiscal 2008. In fiscal 2011, the Company expects to make contributions of $4.8 million.

Birds Eye Foods Pension Plan

The Company’s Birds Eye Foods Pension Plan (“Birds Eye Foods Pension Plan”) consists of hourly and salaried employees and has primarily noncontributory defined-benefit schedules. Benefits for salaried participants are frozen. In May 2010, the pension plan benefits for certain locations were frozen. The Company recorded a curtailment gain of $588 in earnings during the fiscal year ended December 26, 2010.

The Company acquired an Excess Benefit Retirement Plan from Birds Eye Foods which serves to provide employees with the same retirement benefit they would have received from Birds Eye’s retirement plan under the career average base pay formula. Benefits for this plan are frozen.

PINNACLE FOODS FINANCE LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

The Company maintains a non-tax qualified Supplemental Executive Retirement Plan (“SERP”) which provides additional retirement benefits to two prior executives of Birds Eye Foods who retired prior to November 4, 1994.

For purposes of this disclosure, all defined-benefit pension plans acquired with Birds Eye Foods have been combined. The benefits for these plans are based primarily on years of service and employees’ pay near retirement. The Company’s funding policy is consistent with the funding requirements of Federal laws and regulations. Plan assets consist principally of common stocks, corporate bonds and US government obligations. Plan assets do not include any of the Company’s own equity or debt securities.


	Birds Eye Foods Pension Plan Pension Benefits
	Fiscal year ended December 26, 2010			Fiscal year ended December 27, 2009
Change in Benefit Obligation
Net benefit obligation at beginning of the period	$	148,890		$	148,890
Service cost		2,086			—
Interest cost		8,221			—
Participant contributions		14			—
Actuarial (gain) loss		7,564			—
Gross benefits paid		(10,333	)		—
Curtailment gain		(588	)		—

Net benefit obligation at end of the period		155,854			148,890

Change in Plan Assets
Fair value of plan assets at beginning of the period		101,710			101,710
Employer contributions		4,741			—
Participant contributions		14			—
Actual return on plan assets		12,314			—
Gross benefits paid		(10,333	)		—

Fair value of plan assets at end of the period		108,446			101,710

Funded status at end of the year	$	(47,408	)	$	(47,180	)


Amounts recognized in the Consolidated Balance Sheet
Accrued pension benefits	$	(46,953	)	$	(46,459	)
Accrued pension benefits (part of Accrued Liabilities)		(455	)		(721	)

Net amount recognized at end of the period	$	(47,408	)	$	(47,180	)

Amounts recognized in Accumulated Other Comprehensive (Loss) / Income
Net loss / (gain)	$	3,455		$	—

Net amount recognized at end of the period	$	3,455		$	—

Accumulated benefit obligation	$	152,202		$	144,400

Weighted average assumptions
Discount rate		5.27	%		5.80	%
Expected return on plan assets		7.00	%		8.00	%
Rate of compensation increase		3.00	%		3.80	%

PINNACLE FOODS FINANCE LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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


	Birds Eye Foods Pension Plan Pension Benefits
	Fiscal year ended December 26, 2010
Service cost	$	2,086
Interest cost		8,221
Expected return on assets		(8,205	)
Curtailment gain		(588	)

Net periodic benefit cost	$	1,514

Weighted average assumptions:
Discount rate		5.67	%
Expected return on plan assets		8.00	%
Rate of compensation increase		3.80	%

There was no significant pension expense related to this plan between our acquisition date of Birds Eye Foods December 23, 2009 and our fiscal year end December 27, 2009.

To develop the expected long-term rate of return on assets assumption, the Company considered the current level of expected returns on risk-free investments (primarily government bonds), the historical level of the risk premium associated with the other asset classes in which the portfolio is invested and the expectations for future returns of each asset class. The expected return for each asset class was then weighted based on the target asset allocation to develop the expected long-term rate of return on assets assumption.

Plan Assets

The following table sets forth the weighted-average asset allocations of the Company’s pension plans by asset category:


	December 26, 2010			December 27, 2009
Asset category
Equity securities		45	%		48	%
Debt securities		52	%		51	%
Cash		3	%		1	%

Total		100	%		100	%

PINNACLE FOODS FINANCE LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

The investment policy for the Birds Eye Foods Pension Plan is to invest approximately 50% of plan assets in equity securities and 50% in fixed income securities. Periodically, the plan assets are rebalanced to maintain these allocation percentages and the investment policy is reviewed. Within each investment category, assets are allocated to various investment styles. Professional managers manage all assets and a consultant is engaged to assist in evaluating these activities. The expected long-term rate of return on assets was determined by assessing the rates of return on each targeted asset class, return premiums generated by portfolio management and by comparison of rates utilized by other companies.

The following table summarizes the Birds Eye Food Pension Plan’s investments measured at fair value on a recurring basis:


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.


	Fair Value As of December 26, 2010		Fair Value Measurements Using Fair Value Hierarchy						Fair Value As of December 27, 2009		Fair Value Measurements Using Fair Value Hierarchy
	Fair Value As of December 26, 2010		Level 1		Level 2		Level 3		Fair Value As of December 27, 2009		Level 1		Level 2		Level 3
Short-term investments:
Short-term Investment Fund	$	3,281	$	3,281	$	—	$	—	$	233	$	233	$	—	$	—
Equity Common/collective trusts:
Small Cap Fund		9,477		—		9,477		—		159		—		159		—
Large Cap Fund		29,879		—		29,879		—		332		—		332		—
Equity Mutual Funds:
Small Cap Fund		—		—		—		—		9,873		9,873		—		—
Large Cap Fund		—		—		—		—		32,013		32,013		—		—
International Fund		9,522		9,522		—		—		9,922		9,922		—		—
Equity Securities Stocks
Stocks		—		—		—		—		430		—		430		—
Fixed Income Common/collective trusts:
Government Agencies		55,867		55,867		—		—		48,194		48,194		—		—
Fixed Income Debt Securities
Debt Securities		407		—		407		—		554		—		554		—

Total assets at fair value	$	108,433	$	68,670	$	39,763	$	—	$	101,710	$	100,235	$	1,475	$	—

The plan had $39,763 and $1,475 of investments, in common and collective trusts which are reported at fair value and categorized as level 2 in the above tables as of December 26, 2010 and December 27, 2009, respectively. The plan has concluded that net asset value (“NAV”) reported by the underlying funds approximates fair market value of these investments. The investments are redeemable with the fund at NAV under the original terms of the partnership agreements and/or subscription agreements and the operations of the underlying funds. However, it is possible that these redemption rights may be restricted or eliminated by the funds in the future in accordance with the underlying fund agreements.

As of December 26, 2010, total assets at fair value of $108,433 do not include certain broker receivables of $13 that are included in total assets of the plan of $108,446.

Cash Flows

Contributions. The Company made contributions to the Birds Eye Foods Pension Plan totaling $4.3 million in fiscal 2010. In fiscal 2011, the Company expects to make contributions of $11.7 million.

PINNACLE FOODS FINANCE LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Other Postretirement Benefits Plans

The Company maintains postretirement benefits plans that provide health care and life insurance benefits to eligible retirees, principally those of Birds Eye Foods, Inc. The plans cover certain current and former employees and their dependents and are self-funded. For the most part, current employees are not eligible for the postretirement medical coverage. The plan is unfunded and therefore has no assets.


	Other Postretirement Benefits
	Fiscal year ended December 26, 2010			Fiscal year ended December 27, 2009
Change in Benefit Obligation
Net benefit obligation at beginning of the period	$	3,252		$	—
Acquisitions		—			3,252
Service cost		—			—
Interest cost		200			—
Curtailment Gain		—			—
Actuarial gain		(10	)		—
Gross benefits paid		(317	)		—

Net benefit obligation at end of the period		3,125			3,252

Funded status at end of the year	$	(3,125	)	$	(3,252	)

Reconciliation
Unrecognized net actuarial gain
Unamortized prior service credit
Net amount recognized at end of the period		NA			NA

Amounts recognized in the Consolidated Balance Sheet
Accrued other postretirement benefits	$	(2,729	)	$	(2,849	)
Accrued liabilities		(396	)		(403	)

Net amount recognized at end of the period	$	(3,125	)	$	(3,252	)

Amounts recognized in Accumulated Other Comprehensive (Loss) / Income
Net loss / (gain)	$	39		$	39

Net amount recognized at end of the period	$	39		$	39

Weighted average assumptions
Discount rate		5.18	%		5.80	%

For the fiscal year ended December 26, 2010, total expense recognized relative to this plan was $200 and consisted entirely of interest cost. The discount rate used to calculate the present value of the projected benefit obligation is set based on long-term high quality bonds that match the expected benefit payments. The assumed health care trend rates used in determining other post-retirement benefits at December 26, 2010 are 8.8% gradually decreasing to 4.5%. The assumed health care trend rates used in determining other post-retirement benefits at December 27, 2009 are 9.1% gradually decreasing to 4.5%. A 1% increase of decrease in the health care trend rate assumption would not have a material impact on the financial statements for any period presented.

Cash Flows

Contributions. The Company made contributions to Other Postretirement Benefits totaling $0.3 million in fiscal 2010. In fiscal 2011, the Company expects to make contributions of $0.4 million.

PINNACLE FOODS FINANCE LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Estimated Future Benefit Payments for all Plans

The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid:


	Pinnale Foods Pension Plan		Birds Eye Foods Pension Plan		Other Postretirement Benefits Plan
2011		3,939		8,141		396
2012		3,796		8,844		371
2013		3,719		9,026		332
2014		3,691		9,796		307
2015		3,604		9,379		293
2015- 2020		20,595		53,230		1,212

Savings Plans

Employees participate in 401(k) plans. Pinnacle matches 50% of employee contributions up to five percent of compensation for union employees after one year of continuous service and six percent of compensation for salaried employees and it is our current intent to continue the match at these levels. Employer contributions made by the Company relating to this plan were $4,269 for fiscal 2010, $2,784 for fiscal 2009 and $2,744 for fiscal 2008.

In addition, the Company acquired a Non-Qualified 401(k) Plan from Birds Eye Foods. Under the Non-Qualified 401(k) Plan, the Company allocates matching contributions for the benefit of “highly compensated employees” as defined under Section 414(q) of the Internal Revenue Code. The plan ceased accepting future contributions on April 1, 2010.

PINNACLE FOODS FINANCE LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

13.	Taxes on Earnings

The components of the provision (benefit) for income taxes are as follows:


Provision (benefit) for income taxes
	Fiscal year ended December 26, 2010			Fiscal year ended December 27, 2009			Fiscal year ended December 28, 2008
Current
Federal		215		$	(386	)	$	(192	)
State		2,065			161			257
Non-U.S.		737			213			2,214

		3,017			(12	)		2,279

Deferred
Federal		9,318			(259,051	)		20,894
State		(4,936	)		(18,660	)		3,808
Non-U.S.		—			—			55

		4,382			(277,711	)		24,757

Provision (benefit) for income taxes	$	7,399		$	(277,723	)	$	27,036

Earnings (loss) before income taxes
United States		27,253		$	24,295		$	(7,803	)
Non-U.S.		2,183			585			6,258

Total	$	29,436		$	24,880		$	(1,545	)


The effective tax rate differs from the federal statutory income tax rate as explained below:
Effective Income Tax Rate
Federal statutory income tax rate		35.0	%		35.0	%		35.0	%
State income taxes (net of federal benefit)		-3.7	%		-48.3	%		-170.7	%
Tax effect resulting from international activities		1.8	%		1.9	%		-133.8	%
Change in federal deferred tax valuation allowance		0.0	%		-1,117.3	%		-1,470.3	%
Non-deductible expenses		6.8	%		12.6	%		-20.3	%
Tax Credits		-2.0	%		0.0	%		7.9	%
Uncertain tax benefits		2.6	%		0.0	%		0.0	%
Out of Period adjustment		-14.4	%		0.0	%		0.0	%
Other		-1.0	%		-0.2	%		2.4	%

Effective income tax rate		25.1	%		-1,116.3	%		-1,749.9	%

100

PINNACLE FOODS FINANCE LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

The components of deferred tax assets and liabilities are as follows:


Deferred Tax Assets and Liabilities
	December 26, 2010			December 27, 2009
Current
Accrued liabilities		15,357			19,596
Inventories		7,593			(4,764	)
Benefits and compensation		14,158			13,329
Other		2,884			862
Valuation allowance		(1,704	)		(3,353	)

		38,288			25,670

Non Current
Postretirement benefits		34,844		$	35,224
Accrued liabilities		2,163			977
Benefits and compensation		256			628
Net operating loss carryforwards		335,787			335,942
Federal & state tax credits		7,231			9,539
Alternative minimum tax		1,901			1,901
Hedging		10,844			11,990
Other intangible assets		(39,189	)		(30,745	)
Indefinite-lived intangible assets		(630,316	)		(617,048	)
Partnership Interest		(8,855	)		(8,648	)
Plant assets		(71,089	)		(71,275	)
Unremitted earnings		(1,890	)		(1,649	)
Other		(894	)		887
Valuation allowance		(6,580	)		(11,439	)

		(365,787	)		(343,716	)

Net deferred tax asset (liability)	$	(327,499	)	$	(318,046	)

Amounts recognized in the Consolidated Balance Sheet
Current deferred tax assets		38,288		$	25,670
Non-current deferred tax liabilities		(365,787	)		(343,716	)

Net deferred tax asset (liability)	$	(327,499	)	$	(318,046	)

As described in Note 1, on April 2, 2007, Crunch Holding Corp. (“Crunch”), the parent to PFF, was acquired by Peak Holdings LLC (“Peak Holdings”). As described in Note 3, on December 23, 2009, our wholly owned subsidiary, Pinnacle Foods Group LLC, acquired all of the common stock of Birds Eye Foods, Inc (“the Birds Eye Acquisition”). Pursuant to a tax sharing agreement among Crunch Holding Corp., the Company and other members of the Crunch affiliated group, each member is liable for its share of the federal income tax liability of the consolidated group.

Income taxes are accounted for in accordance with the authoritative guidance for accounting for income taxes under which deferred tax assets and liabilities are determined based on the difference between the financial statement basis and the tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. For the year ended December 26, 2010, the Company recorded a $2.2 million benefit to the income tax provision reflecting a change in the effective tax rate as a result of restructuring following the Birds Eye Foods integration.

The authoritative guidance for accounting for income taxes requires that a valuation allowance be established when it is “more likely than not” that all or a portion of deferred tax assets will not be realized. The Company regularly evaluates its deferred tax assets for future realization. A review of all available positive and negative evidence must be considered,

101

PINNACLE FOODS FINANCE LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

including a company’s performance, the market environment in which the company operates, the utilization of past tax credits, length of carryback and carryforward periods, and existing contracts or sales backlog that will result in future profits.

The authoritative guidance further states that where there is negative evidence such as cumulative losses in recent years, concluding that a valuation allowance is not required is problematic. Therefore, cumulative losses weigh heavily in the overall assessment. For all reporting periods prior to December 27, 2009, management had determined that it was no longer more likely than not that the Company would be able to realize the net deferred tax assets. This conclusion was reached due to cumulative losses recognized in preceding years.

Based on a review of both the positive and negative evidence as of December 27, 2009, it was determined that the Company had sufficient positive evidence to outweigh any negative evidence and support that it was more likely that not that substantially all of the deferred tax assets would be realized. The evaluation of the realization of deferred tax assets is inherently subjective. Following are key items that provided positive evidence to support the reversal of the valuation allowance for substantially all of the deferred assets in the fourth quarter of 2009:

•

Positive earnings before tax in the U.S. for the fiscal year ended December 27, 2009

•

Continued positive earnings before tax and future taxable income

•

Lapse of cumulative loss history

The reversal of the valuation allowance of $315.6 million was recorded as a benefit to the provision for income taxes in the Consolidated Statement of Operations for the fiscal year ended December 27, 2009. The reversal of the state valuation allowance of $0.8 million was recorded as a benefit to the provision for income taxes for the fiscal year ended December 26, 2010.

The Company recorded out of period adjustment of $4.2 million to correct errors related to the reversal of the Company’s income tax valuation allowance as of December 27, 2009. For the year ended December 26, 2010, this adjustment reduced provision for income taxes by $4.2 million, increased deferred tax assets by $5.0 million, increased uncertain tax benefits by $4.5 million and increased accumulated other comprehensive income (loss) by $3.7 million. Since these were not material to the prior or current year financial statements, the Company has recorded these adjustments in the financial statements for the year ended December 26, 2010.

In accordance with the authoritative guidance, deferred assets and liabilities have been recognized for the differences between the assigned values and the tax bases of the assets and liabilities recognized in a purchase business combination. As of the April 2, 2007, the Company established a deferred tax liability of $268.0 million, net of valuation allowance of $236.0 million. The deferred tax liability relates to the book and tax basis differences for indefinite lived intangible assets consisting primarily of tradenames and goodwill. As of December 26, 2010, the remaining valuation allowance is $2.0 million, for certain state net operating loss carryovers and state tax credit carryovers. In connection with the Birds Eye Acquisition a valuation allowance of $6.3 million, as adjusted, was established for foreign and state net operating losses and state tax credits for which the Company cannot assure that the realization of the associated deferred tax assets is more likely than not to occur. The tax benefit from any future release of the acquisition date valuation allowances would be reflected in the provision for income taxes.

Crunch, the parent of the Company, is a loss corporation as defined by Internal Revenue Code Section 382. As of December 26, 2010, Crunch has a federal Net Operating Loss Carryover of $1,140.9 million of which $898.1 million is subject to various Section 382 limitations. Approximately $240.9 million of the carryover, as adjusted, exceeds the estimated Section 382 limitation. As noted below, in connection with the adoption of the authoritative guidance for accounting for uncertainty in income taxes, Crunch reduced its deferred tax assets for this limitation. Section 382 places an annual limitation on Crunch’s ability to utilize loss carryovers to reduce future taxable income. It is expected that Crunch’s annual Section 382 limitation will approximate $14 million to $18 million, which may increase or decrease pending resolution of certain tax matters. This annual limitation can affect the Company’s ability to utilize other tax attributes such as tax credit carryforwards. A substantial portion of our net operating loss carryovers and certain other tax attributes may not be utilized to offset Birds Eye income from recognized built in gains pursuant to Internal Revenue Code Section 384.

As of December 26, 2010 our valuation allowance for state net operating losses and credits is $7.3 million and the foreign valuation allowance is $1.0 million.

102

PINNACLE FOODS FINANCE LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Crunch’s federal net operating losses have expiration periods from 2017 through 2030. Crunch and its subsidiaries also have state tax net operating loss carryforwards that are limited and vary in amount by jurisdiction. State net operating losses are approximately $694.7 million with expiration periods beginning in 2011 through 2030. State tax credits total $9.5 million of which $2.1 million expire on or before 2025. The remaining $7.4 million of state credits do not expire, except upon the occurrence of specific events. The Company’s foreign net operating losses of $1.0 million expire on or before December 2020.

Following are the changes in the deferred tax valuation allowance:


	Beginning Balance		Additions		Acquisitions			Deductions			Ending Balance
Fiscal year ended December 26, 2010		14,792		—		(5,721	)		(787	)		8,284
Fiscal year ended December 27, 2009	$	318,298	$	54	$	12,063		$	(315,623	)	$	14,792
Fiscal year ended December 28, 2008		268,854		50,103		—			(659	)		318,298

Authoritative Guidance for Accounting for Uncertainty in Income Taxes

A reconciliation of the beginning and ending amount of gross unrecognized tax benefits (“UTB”) is as follows:


Gross unrecognized tax benefits at December 27, 2009	$	3,410

Increase ( decrease) for tax positions related to prior periods		9,779
Increase ( decrease) for tax positions related to the current period		573
Decrease related to settlement with tax authorities		(163	)
Reductions due to lapse of applicable statutes of limitations		(84	)

Gross unrecognized tax benefits at December 26, 2010	$	13,515

The Company’s liability for UTB as of December 26, 2010 is $13,515, reflecting a net increase of $10,105 for uncertainties related to federal and state tax matters. The amount, if recognized, that would impact the effective tax rate as of December 26, 2010 is $3,468. The amount of the liability for unrecognized tax benefits classified as a long-term liability is $3,728. A decrease in the UTB liability of approximately $684 may occur within the next twelve months from lapse of certain statute of limitations or resolution of uncertainties. The decrease, if realized, would be recorded as a tax benefit to the provision for income taxes.

The Company recognizes interest and penalties associated with uncertain tax positions as a component of the provision for income taxes. The Company’s liability includes accrued interest and penalties of $1,231and $430 as of December 26, 2010 and December 27, 2009, respectively. A reduction in accrued interest of $23 was recorded during 2010 as the result of the expiration of certain statutes of limitation.

The Company files income tax returns with the U.S. federal government and various state and international jurisdictions. With few exceptions, the Company’s 1999 and subsequent federal and state tax years remain open by statute, principally relating to net operating loss carryovers. International jurisdictions remain open for 2004 and subsequent periods. As a matter of course, from time to time various taxing authorities may audit the Company’s tax returns. The IRS is currently auditing the Birds Eye federal tax return for the fiscal year ended June 27, 2009 and has notified the Company of its intent to audit the federal tax return for the fiscal year ended December 23, 2009. The Company is also under audit by other tax jurisdictions. At this time an estimate of the range of reasonably possible outcomes cannot be made. We do not anticipate these possible outcomes to have a significant impact on the results of operations or our financial position.

103

PINNACLE FOODS FINANCE LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

14.

Financial Instruments

Risk Management Objective of Using Derivatives

The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate, liquidity, and credit risk primarily by managing the amount, sources, and duration of its debt funding and the use of derivative financial instruments. The primary risks managed by using derivative instruments are interest rate risk, foreign currency exchange risk and commodity price risk. Specifically, the Company enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates, foreign exchange rates or commodity prices.

The Company manages interest rate risk based on the varying circumstances of anticipated borrowings and existing variable and fixed rate debt, including the Company’s revolving line of credit. 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 purchases raw materials in quantities expected to be used in a reasonable period of time in the normal course of business. The Company generally enters into agreements for either spot market delivery or forward delivery. The prices paid in the forward delivery contracts are generally fixed, but may also be variable within a capped or collared price range. Forward derivative contracts on certain commodities are entered into to manage the price risk associated with forecasted purchases of materials used in the Company’s manufacturing process.

In July 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act was enacted. The intent of this law is to establish a regulatory structure for the derivatives market and to increase the transparency of financial reporting related to derivatives. The Company anticipates that it will not have a material impact on our consolidated financial position or results of operations.

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 as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges in accordance with the authoritative guidance for derivative and hedge accounting 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 fiscal years ended December 26, 2010 and December 27, 2009, such derivatives were used to hedge the variable cash flows associated with existing variable-rate debt.

As of December 26, 2010, the Company had the following interest rate swaps that were designated as cash flow hedges of interest rate risk:

Product

Number of
Instruments

Notional
Amount

Fixed Rate Range

Index

Trade Dates

Maturity Dates

Interest Rate Swaps

939,363

1.06% - 3.33%

USD-LIBOR-BBA

Oct 2008 -Aug

2010

Jan 2011 -July

2012

104

PINNACLE FOODS FINANCE LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Due to the counterparty bank declaring bankruptcy in October 2008, the Company discontinued prospectively the hedge accounting on its interest rate derivatives with Lehman Brothers Specialty Financing on the bankruptcy date as those hedging relationships no longer met the authoritative guidance for derivative and hedge accounting. The Company terminated these positions during the fourth quarter of 2008. The Company continues to report the net gain or loss related to the discontinued cash flow hedge in AOCI which is expected to be reclassified into earnings during the original contractual terms of the derivative agreements as the hedged interest payments are expected to occur as forecasted. For the fiscal years ended December 26, 2010, December 27, 2009 and December 28, 2008, $3,295, $4,429 and $1,259, respectively, were reclassified as an increase to Interest expense relating to the terminated hedges.

On August 17, 2010, the Company prepaid a portion of its existing term loan facilities that was being hedged with its two interest rate caps that mature in January 2011. As a result, the Company discontinued prospective hedge accounting on the interest rate caps and the net loss in accumulated other comprehensive income was reclassified to interest expense as the hedged transactions were no longer probable to occur. The amounts recorded to interest expense were a loss of $226. Prospective changes in the values of the interest rate cap hedge contracts will be recorded directly into Interest expense, net in the Consolidated Statements of Operations.

On August 17, 2010 the Company amended four of its existing forward starting interest rate swaps due to a change in the expected terms of the hedged forecasted transactions. As a result, the Company prospectively discontinued hedge accounting on the original interest rate swap agreements. Simultaneously, the Company designated the amended interest rate swap agreements into new cash flow hedging relationships. The Company continues to report the net loss related to the discontinued cash flow hedges in AOCI, which is being reclassified into earnings as the original hedged forecasted transactions affect earnings. Due to the off-market nature of the amended interest rate swap agreements at the date of designation, the Company anticipates the potential for hedge ineffectiveness. However, such ineffectiveness is not expected to be significant.

During the next twelve months, the Company estimates that an additional $22,726 will be reclassified as an increase to Interest expense relating to both active and terminated hedges.

Cash Flow Hedges of Foreign Exchange Risk

The Company’s operations in Canada have exposed the Company to changes in the US Dollar – Canadian Dollar (USD-CAD) foreign exchange rate. From time to time, the Company’s Canadian subsidiary purchases inventory denominated in US Dollars (USD), a currency other than its functional currency. The subsidiary sells that inventory in Canadian dollars. The subsidiary uses currency forward and collar agreements to manage its exposure to fluctuations in the USD-CAD exchange rate. Currency forward agreements involve fixing the USD-CAD exchange rate for delivery of a specified amount of foreign currency on a specified date. Currency collar agreements involve the sale of Canadian Dollar (CAD) currency in exchange for receiving US dollars if exchange rates rise above an agreed upon rate and sale of USD currency in exchange for receiving CAD dollars if exchange rates fall below an agreed upon rate at specified dates.

As of December 26, 2010, 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

Notional Purchased
in Aggregate

USD to CAD Exchange
Rates

Trade Date

Maturity Dates

CAD Forward

$50,400 CAD

$48,523 USD

1.027-1.051

March 2010 -

Sep 2010

Jan 2011 - Dec

2011

105

PINNACLE FOODS FINANCE LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Non-designated Hedges of Commodity and Interest Rate Risk

Derivatives not designated as hedges are not speculative and are used to manage the Company’s exposure to commodity price risk but do not meet the authoritative guidance for derivative and hedge accounting. From time to time, the Company enters into commodity forward contracts to fix the price of natural gas and diesel fuel purchases 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.

The Company had previously entered into interest rate cap hedge contracts to add stability to interest expense and to manage its exposure to interest rate movements. In connection with the refinancing of the Tranche C Term Loans, these contracts have been de-designated as of August 17, 2010. Changes in the values of the interest rate cap hedge contracts are recorded directly into Interest expense in the Consolidated Statements of Operations.

As of December 26, 2010, the Company had the following natural gas swaps (in aggregate), diesel fuel swaps (in aggregate) and interest rate caps (in aggregate) that were not designated in qualifying hedging relationships:


Product	Number of Instruments	Notional Amount	Price/Index	Trade Dates	Maturity Dates
Natural Gas Swap	1	230,000 MMBTU’s	$4.16 per MMBTU	Oct 2010	Mar 2011
Diesel Fuel Swap	3	5,263,259 Gallons	$2.90 - $3.14 per Gallon	Feb 2010 -Aug 2010	Dec 2010 - Mar 2011
Interest Rate Caps	2	$800,000	2.5% USD-LIBOR-BBA	Dec 2009	Jan 2011

106

PINNACLE FOODS FINANCE LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(thousands of dollars, except 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 on the Consolidated Balance Sheet as of December 26, 2010 and December 27, 2009.


	Tabular Disclosure of Fair Values of Derivative Instruments
	Asset Derivatives			Liability Derivatives

	Balance Sheet Location	Fair Value As of December 26, 2010		Balance Sheet Location	Fair Value As of December 26, 2010
Derivatives designated as hedging instruments
Interest Rate Contracts		$	—	Accrued liabilities	$	3,300
			—	Other long term liabilities		23,346
Foreign Exchange Contracts			—	Accrued liabilities		1,100

Total derivatives designated as hedging instruments		$	—		$	27,746


Derivatives not designated as hedging instruments
Natural Gas Contracts		$	28		$	—
Diesel Fuel Contracts	Other current assets		380			—

Total derivatives not designated as hedging instruments		$	408		$	—


	Balance Sheet Location	Fair Value As of December 27, 2009		Balance Sheet Location	Fair Value As of December 27, 2009
Derivatives designated as hedging instruments
Interest Rate Contracts	Other assets, net	$	165	Other long-term liabilities	$	21,145
Foreign Exchange Contracts			—	Accrued liabilities		2,522

Total derivatives designated as hedging instruments		$	165		$	23,667


Derivatives not designated as hedging instruments
Natural Gas Contracts		$	—	Accrued liabilities	$	57
Heating Oil Contracts	Other current assets		25			—
Diesel Fuel Contracts	Other current assets		902			—

Total derivatives not designated as hedging instruments		$	927		$	57

107

PINNACLE FOODS FINANCE LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

The table below presents the effect of the Company’s derivative financial instruments on the Consolidated Statements of Operations and Accumulated other comprehensive (loss) income as of the fiscal years ending December 26, 2010 and December 27, 2009.

Tabular Disclosure of the Effect of Derivative Instruments

Gain/(Loss)


Derivatives in Cash Flow Hedging Relationships	Recognized in AOCI on Derivative (Effective Portion)			Effective portion reclassified from AOCI to:	Reclassified from AOCI into Earnings (Effective Portion)			Ineffective portion reclassified from AOCI to:	Recognized in Earnings on Derivative (Ineffective Portion)
Interest Rate Contracts—Active	$	(22,773	)	Interest expense	$	(17,114	)	Interest expense	$	(568	)
Interest Rate Contracts—Terminated		—		Interest expense		(3,295	)	Interest expense		—
Foreign Exchange Contracts		(1,792	)	Cost of products sold		(3,214	)	Cost of products sold		(238	)

Fiscal year ended December 26, 2010	$	(24,565	)		$	(23,623	)		$	(806	)

Interest Rate Contracts—Active	$	(23,489	)	Interest expense	$	(14,163	)	Interest expense	$	—
Interest Rate Contracts—Terminated		—		Interest expense		(4,429	)	Interest expense		—
Foreign Exchange Contracts		(5,360	)	Cost of products sold		2,508		Cost of products sold		(17	)

Fiscal year ended December 27, 2009	$	(28,849	)		$	(16,084	)		$	(17	)


Derivatives Not Designated as Hedging Instruments	Recognized in Earnings on:	Recognized in Earnings on Derivative
Natural Gas Contracts	Cost of products sold	$	(641	)
Diesel Contracts	Cost of products sold		(574	)

Fiscal year ended December 26, 2010		$	(1,215	)

Natural Gas Contracts	Cost of products sold	$	(1,420	)
Heating Oil Swaps	Cost of products sold		152

Fiscal year ended December 27, 2009		$	(1,268	)

108

PINNACLE FOODS FINANCE LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(thousands of dollars, except 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 December 26, 2010, the Company has not posted any collateral related to these agreements. If the Company had breached this provision at December 26, 2010, it could have been required to settle its obligations under the agreements at their termination value. The table below summarizes the aggregate fair values of those derivatives that contain credit risk contingent features as of December 26, 2010 and December 27, 2009.

December 26, 2010

Asset/(Liability)


Counterparty	Contract Type	Termination Value			Non- Performance Risk Adjustment		Accrued Interest			Fair Value (excluding interest)
Barclays	Interest Rate Contracts	$	(26,519	)	$	614	$	(1,178	)	$	(24,727	)
	Foreign Exchange Contracts		(678	)		18					(660	)
	Natural Gas Contracts		28			—					28
	Diesel Fuel Contracts		380			—					380
Credit Suisse	Interest Rate Contracts		(1,980	)		61		—			(1,919	)
	Foreign Exchange Contracts		(457	)		17					(440	)

Total		$	(29,226	)	$	710	$	(1,178	)	$	(27,338	)


December 27, 2009

Counterparty	Contract Type	Termination Value			Non- Performance Risk Adjustment		Accrued Interest			Fair Value (excluding interest)

Barclays	Interest Rate Contracts	$	(23,089	)	$	983	$	(1,044	)	$	(21,062	)
	Foreign Exchange Contracts		(2,599	)		77					(2,522	)
	Natural Gas Contracts		(57	)		—					(57	)
	Heating Oil Contracts		25								25

Total		$	(25,720	)	$	1,060	$	(1,044	)	$	(23,616	)

109

PINNACLE FOODS FINANCE LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

15.

Commitments and Contingencies

General

From time to time, the Company and its operations are parties to, or targets of, lawsuits, claims, investigations, and proceedings, which are being handled and defended in the ordinary course of business. Although the outcome of such items cannot be determined with certainty, the Company’s general counsel and management are of the opinion that the final outcome of these matters should not have a material effect on the Company’s financial condition, results of operations or cash flows.

Commitment of $4.6 Million Capital Expenditure

Lehman Brothers Special Financing

Minimum Contractual Payments

As of December 31, 2010, the company had entered into non-cancellable lease and purchase contracts, with terms in excess of 1 year, requiring the following minimum payments:


Description	2011		2012		2013		2014		2015		Thereafter
Operating leases	$	13,657	$	13,070	$	11,841	$	10,114	$	9,103	$	42,622
Capital leases		3,227		2,800		2,279		2,087		1,596		13,735
Purchase Commitments		41,429		30,977		17,258		14,827		13,824		74,128

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PINNACLE FOODS FINANCE LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

16.

Related Party Transactions

Advisory Agreement

The Company entered into an advisory agreement with an affiliate of The Blackstone Group pursuant to which such entity or its affiliates provide certain strategic and structuring advice and assistance. In addition, under this agreement, affiliates of The Blackstone Group provide certain monitoring, advisory and consulting services to the Company for an aggregate annual management fee equal to the greater of $2,500 or 1.0% of Consolidated EBITDA (as defined in the credit agreement governing the Company’s Senior Secured Credit Facility). Affiliates of Blackstone also receive reimbursement for out-of-pocket expenses. Expenses relating to the management fee were $4,500 for fiscal year ended December 26, 2010, $2,500 for the fiscal year ended December 27, 2009 and $2,500 for the fiscal year ended December 28, 2008 and were recorded in the administrative expense in the Consolidated financial statements. In addition, the Company reimbursed The Blackstone Group out-of-pocket expenses totaling $55, $44 and $110 for the fiscal years ended December 26, 2010, December 27, 2009 and December 28, 2008, respectively.

In connection with the Birds Eye Foods Acquisition, the transaction and advisory fee agreement with an affiliate of Blackstone was amended and restated to include a provision that granted the affiliates a 1% transaction fee based on the transaction purchase price. This fee totaled $14,009. Also, there was an advisory fee with an affiliate for $3,005. These fees are contained within the $24,090 of transaction fees discussed in Note 3 to the Consolidated Financial Statements. Also, as described in Note 3, the Company incurred an original issue discount, in connection with the Tranche C Term Loans. A portion of that discount, $750 related to loans from an affiliate of The Blackstone Group.

Supplier Costs

Graham Packaging, which is owned by affiliates of The Blackstone Group, supplies packaging for some of the Company’s products. Purchases from Graham Packaging were $6,601 for the fiscal year ended December 26, 2010, $6,181 for the fiscal year ended December 27, 2009 and $11,322 for the fiscal year ended December 28, 2008.

Customer Purchases

Performance Food Group, which is owned by affiliates of The Blackstone Group, is a food service supplier that purchases products from the Company. Sales to Performance Food Group were $5,885 for the fiscal year ended December 26, 2010, $5,187 for the fiscal year ended December 27, 2009 and $5,007 for the fiscal year ended December 28, 2008.

Debt and Interest Expense

Related party interest for affiliates of The Blackstone Group for the fiscal years ended December 26, 2010, December 27, 2009 and December 28, 2008 were $4,996, $1,446 and $3,106, respectively.

Notes receivable from officers

111

PINNACLE FOODS FINANCE LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

17.

Segments

The Company is organized into three operating segments: Birds Eye Frozen, Duncan Hines Grocery and Specialty Foods. Our United States retail frozen vegetables (Birds Eye^®), multi-serve frozen dinners and entrées (Birds Eye Voila!^®), single-serve frozen dinners and entrées (Hungry-Man^®, Swanson^®), frozen seafood (Van de Kamp’s^®, Mrs. Paul’s^®), frozen breakfast (Aunt Jemima^®), bagels (Lender’s^®), and frozen pizza (Celeste^®) are reported in the Birds Eye Frozen segment. Our baking mixes and frostings (Duncan Hines^®), shelf-stable pickles, peppers and relish (Vlasic^®), barbeque sauces (Open Pit^®), pie fillings (Comstock^®, Wilderness^®), syrups (Mrs. Butterworth’s^® and Log Cabin^®), salad dressing (Bernstein’s^®), canned meat (Armour^®, Nalley^®, Brooks^®) and all Canadian Operations are reported in the Duncan Hines Grocery segment. The Specialty Foods segment consists of snack products (Tim’s Cascade^® and Snyder of Berlin^®) and our food service and private label businesses. Segment performance is evaluated by the Company’s Chief Operating Decision Maker and is based on earnings before interest and taxes. Transfers between segments and geographic areas are recorded at cost plus markup or at market. Identifiable assets are those assets which are identified with the operations in each segment or geographic region. Corporate assets consist of prepaid and deferred tax assets and assets held for sale. Unallocated corporate expenses consist of corporate overhead such as executive management, finance and legal functions and the costs to integrate the Birds Eye Foods Acquisition. Prior period amounts have been reclassified for consistent presentation.


SEGMENT INFORMATION	Fiscal year ended December 26, 2010			Fiscal year ended December 27, 2009			Fiscal year ended December 28, 2008
Net sales
Birds Eye Frozen	$	1,065,860		$	473,305		$	457,480
Duncan Hines Grocery		958,045			854,737			803,991
Specialty Foods		412,798			314,889			294,937

Total	$	2,436,703		$	1,642,931		$	1,556,408

Earnings (loss) before interest and taxes
Birds Eye Frozen	$	114,459		$	38,665		$	20,966
Duncan Hines Grocery		158,819			145,861			135,575
Specialty Foods		27,098			6,740			(1,997	)
Unallocated corporate expenses		(35,224	)		(45,308	)		(3,128	)

Total	$	265,152		$	145,958		$	151,416

Depreciation and amortization
Birds Eye Frozen	$	34,149		$	22,547		$	20,071
Duncan Hines Grocery		24,177			22,716			22,196
Specialty Foods		19,723			20,205			20,242

Total	$	78,049		$	65,468		$	62,509

Capital expenditures *
Birds Eye Frozen	$	48,291		$	34,835		$	14,130
Duncan Hines Grocery		35,315			14,442			14,626
Specialty Foods		11,253			3,953			3,842

Total	$	94,859		$	53,230		$	32,598

GEOGRAPHIC INFORMATION

Net sales
United States	$	2,409,548		$	1,625,434		$	1,524,030
Canada		82,870			72,808			77,853
Intercompany		(55,715	)		(55,311	)		(45,475	)
Total	$	2,436,703		$	1,642,931		$	1,556,408

* Includes new capital leases.

112

PINNACLE FOODS FINANCE LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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


SEGMENT INFORMATION	December 26, 2010		December 27, 2009
Total assets
Birds Eye Frozen	$	2,004,956	$	2,057,562
Duncan Hines Grocery		1,963,939		1,945,986
Specialty Foods		440,693		503,395
Corporate		82,028		31,555

Total	$	4,491,616	$	4,538,498

GEOGRAPHIC INFORMATION

Long-lived assets
United States	$	447,014	$	412,171
Canada		54		37

Total	$	447,068	$	412,208

113

PINNACLE FOODS FINANCE LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

18.

Quarterly Results (Unaudited)

Summarized quarterly financial data is presented below


	Quarter Ended
	March 2010			June 2010			September 2010			December 2010			Fiscal 2010
Net sales	$	656,436		$	576,,080		$	541,729		$	662,458		$	2,436,703
Cost of products sold		500,706			434,142			418,256			481,271			1,834,375

Gross profit		155,730			141,938			123,473			181,187			602,328

Net earnings(loss)		3,930			14,174			(12,167	)		16,100			22,037

	Quarter Ended
	March 2009			June 2009			September 2009			December 2009			Fiscal 2009
Net sales	$	427,408		$	408,822		$	394,185		$	412,516		$	1,642,931
Cost of products sold		339,993			318,152			298,606			306,876			1,263,627

Gross profit		87,415			90,670			95,579			105,640			379,304

Net earnings(loss)		(2,100	)		2,525			10,393			291,785			302,603

Net earnings during fiscal 2010 and fiscal 2009 were affected by the following unusual charges:

	Quarter Ended
	March 2010			June 2010			September 2010			December 2010			Fiscal 2010
Cost of Products Sold
Write up of inventory to fair value (See Note 3)		17,324			9,724			9,724			304			37,076

Other expense (income), net
Impairment and restructuring charges (a)		—			—			—			29,000			29,000

Administrative expenses
Impairment and restructuring charges (b)		8,733			1,756			1,752			358			12,599

Interest expense
Amortization of deferred mark-to-market on terminated swap (see Note 14)		1,033			796			736			730			3,295

Provision (benefit) for income taxes (d)
Out of period adjustment (See Note 13)		400			(4,100	)		—			—			(3,700	)

	Quarter Ended
	March 2009			June 2009			September 2009			December 2009			Fiscal 2009
Cost of Products Sold
Write up of inventory to fair value (See Note 3)		—			—			—			525			525

Other expense (income), net
Merger related costs -Birds Eye Acquisition (See Note 3)		—			—			—			24,090			24,090
Impairment and restructuring charges (a)		—			—			—			1,300			1,300

Administrative expenses
Severance costs (c)		—			2,377			—			—			2,377

Interest expense
Amortization of deferred mark-to-market on terminated swap (see Note 14)		1,312			1,082			1,040			995			4,429

Provision (benefit) for income taxes (d) (See Note 13)		—			—			—		($	315,600	)	($	315,600	)

114

PINNACLE FOODS FINANCE LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

(a)

Impairment and restructuring charges consist of the following

•

Fourth quarter 2010 – Impairment charge for the Hungry-Man tradename.

•

Fourth quarter 2009 – Impairment charge for the Swanson tradename.

(b)

Termination and office closure costs related to the Rochester, NY office closure.

(c)

(d)

Includes the reversal of the deferred tax valuation allowance.

115

PINNACLE FOODS FINANCE LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

19.

Guarantor and Nonguarantor Statements

The 10.625% Senior Subordinated Notes are general unsecured obligations of the Company, subordinated in right of payment to all existing and future senior indebtedness of the Company and guaranteed on a full, unconditional, joint and several basis by the Company’s wholly-owned domestic subsidiaries that guarantee other indebtedness of the Company.

The following consolidating financial information presents:

(1)

(a) Consolidating balance sheets as of December 26, 2010 and December 27, 2009 for the Company.

(b) The related consolidating statements of operations for the Company, all guarantor subsidiaries and the non- guarantor subsidiaries for the following:

Fiscal year ended December 26, 2010.

ii.

Fiscal year ended December 27, 2009.

iii.

Fiscal year ended December 28, 2008.

(c) The related consolidating statements of cash flows for the Company, all guarantor subsidiaries and the nonguarantor subsidiaries for the following:

Fiscal year ended December 26, 2010.

ii.

Fiscal year ended December 27, 2009.

iii.

Fiscal year ended December 28, 2008.

(2)

Elimination entries necessary to consolidate the Company with its guarantor subsidiaries and non-guarantor subsidiaries.

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

116

PINNACLE FOODS FINANCE LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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


	Pinnacle Foods Finance LLC Consolidating Balance Sheet December 26, 2010
	Pinnacle Foods Finance LLC			Guarantor Subsidiaries			Nonguarantor Subsidiaries			Eliminations and Reclassifications			Consolidated Total


Current assets:
Cash and cash equivalents	$	—		$	109,324		$	5,962		$	—		$	115,286
Accounts receivable, net		—			138,607			6,651			—			145,258
Intercompany accounts receivable		—			127,271			—			(127,271	)		—
Inventories, net		—			323,750			5,885			—			329,635
Other current assets		—			21,396			111			—			21,507
Deferred tax assets		—			37,976			312			—			38,288

Total current assets		—			758,324			18,921			(127,271	)		649,974

Plant assets, net		—			447,014			54			—			447,068
Investment in subsidiaries		1,731,592			7,774			—			(1,739,366	)		—
Intercompany note receivable		1,936,073			—			—			(1,936,073	)		—
Tradenames		—			1,629,812			—			—			1,629,812
Other assets, net		41,225			159,142			—			—			200,367
Deferred tax assets		166,231			—			—			(166,231	)		—
Goodwill		—			1,564,395			—			—			1,564,395

Total assets	$	3,875,121		$	4,566,461		$	18,975		$	(3,968,941	)	$	4,491,616


Current liabilities:
Short-term borrowings	$	—		$	1,591		$	—		$	—		$	1,591
Current portion of long-term obligations		2,547			2,101			—			—			4,648
Accounts payable		—			113,652			1,717			—			115,369
Intercompany accounts payable		122,459			—			4,812			(127,271	)		—
Accrued trade marketing expense		—			43,473			3,801			—			47,274
Accrued liabilities		46,532			95,603			611			—			142,746
Accrued income taxes		—			—			193			—			193

Total current liabilities		171,538			256,420			11,134			(127,271	)		311,821

Long-term debt		2,785,152			12,155			—			—			2,797,307
Intercompany note payable		—			1,936,073			—			(1,936,073	)		—
Pension and other postretirement benefits		—			78,606			—			—			78,606
Other long-term liabilities		23,346			19,664			—			—			43,010
Deferred tax liabilities		—			531,951			67			(166,231	)		365,787

Total liabilities		2,980,036			2,834,869			11,201			(2,229,575	)		3,596,531

Commitments and contingencies (note 15)

Shareholder's equity:
Common stock and other equity	$	—		$	—		$	—		$	—			—
Additional paid-in-capital		697,267			1,284,155			2,324			(1,286,479	)		697,267
Notes receivable from officers		—			—			—			—			—
Retained earnings		247,350			471,255			6,784			(478,039	)		247,350
Accumulated other comprehensive (loss) income		(49,532	)		(23,818	)		(1,334	)		25,152			(49,532	)

Total shareholder's equity		895,085			1,731,592			7,774			(1,739,366	)		895,085

Total liabilities and shareholder's equity	$	3,875,121		$	4,566,461		$	18,975		$	(3,968,941	)	$	4,491,616

117

PINNACLE FOODS FINANCE LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Pinnacle Foods Finance LLC

Consolidating Balance Sheet

December 27, 2009


	Pinnacle Foods Finance LLC			Guarantor Subsidiaries			Nonguarantor Subsidiaries			Eliminations and Reclassifications			Consolidated Total
Current assets:
Cash and cash equivalents	$	—		$	68,249		$	5,625		$	—		$	73,874
Accounts receivable, net		—			152,961			5,043			—			158,004
Intercompany accounts receivable		—			68,227			—			(68,227	)		—
Inventories, net		—			384,787			5,180			—			389,967
Other current assets		9,200			17,060			700			—			26,960
Deferred tax assets		—			24,839			831			—			25,670

Total current assets		9,200			716,123			17,379			(68,227	)		674,475

Plant assets, net		—			412,171			37			—			412,208
Investment in subsidiaries		1,642,385			4,695			—			(1,647,080	)		—
Intercompany note receivable		2,044,797			—			—			(2,044,797	)		—
Tradenames		—			1,658,812			—			—			1,658,812
Other assets, net		57,062			176,761			—			—			233,823
Deferred tax assets		115,733			—			—			(115,733	)		—
Goodwill		—			1,559,180			—			—			1,559,180

Total assets	$	3,869,177		$	4,527,742		$	17,416		$	(3,875,837	)	$	4,538,498


Current liabilities:
Short-term borrowings	$	—		$	1,232		$	—		$	—		$	1,232
Current portion of long-term obligations		37,170			1,058			—			—			38,228
Accounts payable		—			129,142			1,218			—			130,360
Intercompany accounts payable		60,376			—			7,851			(68,227	)		—
Accrued trade marketing expense		—			46,067			2,981			—			49,048
Accrued liabilities		29,150			100,214			671			—			130,035
Accrued income taxes		—			455			—			—			455

Total current liabilities		126,696			278,168			12,721			(68,227	)		349,358

Long-term debt		2,846,983			2,268			—			—			2,849,251
Intercompany note payable		—			2,044,797			—			(2,044,797	)		—
Pension and other postretirement benefits		—			82,437			—			—			82,437
Other long-term liabilities		21,145			18,238			—			—			39,383
Deferred tax liabilities		—			459,449			—			(115,733	)		343,716

Total liabilities		2,994,824			2,885,357			12,721			(2,228,757	)		3,664,145

Commitments and contingencies (note 15)

Shareholder’s equity:
Common stock and other equity	$	—		$	—		$	—		$	—			—
Additional paid-in-capital		693,196			1,284,155			2,324			(1,286,479	)		693,196
Notes receivable from officers		(565	)		—			—			—			(565	)
Retained earnings		225,313			378,809			5,341			(384,150	)		225,313
Accumulated other comprehensive (loss) income		(43,591	)		(20,579	)		(2,970	)		23,549			(43,591	)

Total shareholder’s equity		874,353			1,642,385			4,695			(1,647,080	)		874,353

Total liabilities and shareholder’s equity	$	3,869,177		$	4,527,742		$	17,416		$	(3,875,837	)	$	4,538,498

118

PINNACLE FOODS FINANCE LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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


Pinnacle Foods Finance LLC Consolidated Statement of Operations For the fiscal year ended December 26, 2010
	Pinnacle Foods Finance LLC			Guarantor Subsidiaries			Nonguarantor Subsidiaries		Eliminations			Consolidated Total
Net sales	$	—		$	2,409,548		$	82,870	$	(55,715	)	$	2,436,703
Cost of products sold		624			1,817,475			71,197		(54,921	)		1,834,375

Gross profit		(624	)		592,073			11,673		(794	)		602,328

Operating expenses
Marketing and selling expenses		1,902			164,712			5,730		—			172,344
Administrative expenses		5,199			101,786			2,965		—			109,950
Research and development expenses		210			9,177			—		—			9,387
Intercompany royalties		—			—			83		(83	)		—
Intercompany technical service fees		—			—			711		(711	)		—
Other (income) expense, net		—			45,495			—		—			45,495
Equity in (earnings) loss of investees		(92,447	)		(1,447	)		—		93,894			—

Total operating expenses		(85,136	)		319,723			9,489		93,100			337,176

Earnings before interest and taxes		84,512			272,350			2,184		(93,894	)		265,152

Intercompany interest (income) expense		(121,371	)		121,371			—		—			—
Interest expense		234,759			1,245			—		—			236,004
Interest income		20			268			—		—			288

Earnings (loss) before income taxes		(28,856	)		150,002			2,184		(93,894	)		29,436
Provision (benefit) for income taxes		(50,893	)		57,555			737		—			7,399

Net earnings (loss)	$	22,037		$	92,447		$	1,447	$	(93,894	)	$	22,037

119

PINNACLE FOODS FINANCE LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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


Pinnacle Foods Finance LLC Consolidated Statement of Operations For the fiscal year ended December 27, 2009
	Pinnacle Foods Finance LLC			Guarantor Subsidiaries			Nonguarantor Subsidiaries		Eliminations and Reclassifications			Consolidated Total
Net sales	$	—		$	1,625,434		$	72,808	$	(55,311	)	$	1,642,931
Cost of products sold		508			1,253,937			63,736		(54,554	)		1,263,627

Gross profit		(508	)		371,497			9,072		(757	)		379,304

Operating expenses
Marketing and selling expenses		662			117,724			5,447		—			123,833
Administrative expenses		4,590			55,859			2,288		—			62,737
Research and development expenses		74			4,488			—		—			4,562
Intercompany royalties		—			—			61		(61	)		—
Intercompany technical service fees		—			—			696		(696	)		—
Other expense (income), net		—			42,214			—		—			42,214
Equity in (earnings) loss of investees		(294,423	)		(374	)		—		294,797			—

Total operating expenses		(289,097	)		219,911			8,492		294,040			233,346

Earnings before interest and taxes		288,589			151,586			580		(294,797	)		145,958

Intercompany interest (income) expense		(25,188	)		25,188			—		—			—
Interest expense		121,170			(5	)		2		—			121,167
Interest income		—			82			7		—			89

Earnings (loss) before income taxes		192,607			126,485			585		(294,797	)		24,880
Provision (benefit) for income taxes		(109,996	)		(167,938	)		211		—			(277,723	)

Net earnings (loss)	$	302,603		$	294,423		$	374	$	(294,797	)	$	302,603

120

PINNACLE FOODS FINANCE LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Pinnacle Foods Finance LLC

Consolidated Statement of Operations

For the fiscal year ended December 28, 2008


	Pinnacle Foods Finance LLC			Guarantor Subsidiaries			Nonguarantor Subsidiary		Eliminations and Reclassifications			Consolidated Total
Net sales	$	—		$	1,524,033		$	77,850	$	(45,475	)	$	1,556,408
Cost of products sold		57			1,201,233			61,312		(44,673	)		1,217,929

Gross profit		(57	)		322,800			16,538		(802	)		338,479

Operating expenses
Marketing and selling expenses		77			104,064			7,231		—			111,372
Administrative expenses		2,876			42,673			2,283		—			47,832
Research and development expenses		8			3,488			—		—			3,496
Intercompany royalties		—			—			67		(67	)		—
Intercompany technical service fees		—			—			735		(735	)		—
Other expense (income), net		—			24,363			—		—			24,363
Equity in (earnings) loss of investees		(67,485	)		(4,075	)		—		71,560			—

Total operating expenses		(64,524	)		170,513			10,316		70,758			187,063

Earnings before interest and taxes		64,467			152,287			6,222		(71,560	)		151,416

Intercompany interest (income) expense		(59,036	)		59,036			—		—			—
Interest expense		152,084			1,186			10		—			153,280
Interest income		—			264			55		—			319

(Loss) earnings before income taxes		(28,581	)		92,329			6,267		(71,560	)		(1,545	)
Provision for income taxes		—			24,844			2,192		—			27,036

Net (loss) earnings	$	(28,581	)	$	67,485		$	4,075	$	(71,560	)	$	(28,581	)

121

PINNACLE FOODS FINANCE LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Pinnacle Foods Finance LLC

Consolidating Statement of Cash Flows

For the fiscal year ended December 26, 2010


	Pinnacle Foods Finance LLC			Guarantor Subsidiaries			Nonguarantor Subsidiaries			Eliminations and Reclassifications			Consolidated Total
Cash flows from operating activities
Net earnings (loss) from operations	$	22,037		$	92,447		$	1,447		($	93,894	)	$	22,037
Non-cash charges (credits) to net earnings (loss)
Depreciation and amortization		—			78,036			13			—			78,049
Impairment charges		—			29,000			—			—			29,000
Amortization of discount on term loan		2,157			—			—			—			2,157
Amortization of debt acquisition costs		13,541			—			—			—			13,541
Write off of debt acquisition and refinancing costs		17,281			—			—			—			17,281
Amortization of deferred mark-to-market adjustment on terminated swap		3,295			—			—			—			3,295
Change in value of financial instruments		805			238			—			—			1,043
Equity in loss (earnings) of investees		(92,447	)		(1,447	)		—			93,894			—
Stock-based compensation charges		—			4,727			—			—			4,727
Postretirement healthcare benefits		—			(120	)		—			—			(120	)
Pension expense net of contributions		—			(8,096	)		—			—			(8,096	)
Other long-term liabilities		119			(1,517	)		—			—			(1,398	)
Other long-term assets		(852	)		1,299			—			—			447
Deferred income taxes		(52,632	)		56,919			95			—			4,382
Changes in working capital, net of acquisitions
Accounts receivable		—			14,354			(1,396	)		—			12,958
Intercompany accounts receivable/payable		—			1,227			(1,227	)		—			—
Inventories		—			61,065			(487	)		—			60,578
Accrued trade marketing expense		—			(2,593	)		694			—			(1,899	)
Accounts payable		—			(996	)		448			—			(548	)
Accrued liabilities		19,102			(4,663	)		105			—			14,544
Other current assets		9,129			(4,747	)		618			—			5,000

Net cash provided by operating activities		(58,465	)		315,133			310			—			256,978

Cash flows from investing activities
Intercompany accounts receivable/payable		16,986			—			—			(16,986	)		—
Repayments of intercompany loans		159,198			—			—			(159,198	)		—
Capital expenditures		—			(81,272	)		—			—			(81,272	)

Net cash used in investing activities		176,184			(81,272	)		—			(176,184	)		(81,272	)

Cash flows from financing activities
Proceeds from bond offering		400,000			—			—			—			400,000
Proceeds from bank term loan		442,300			—			—			—			442,300
Repayments of long term obligations		(946,558	)		—			—			—			(946,558	)
Proceeds from short-term borrowing		—			3,409			—			—			3,409
Repayments of short-term borrowing		—			(3,049	)		—			—			(3,049	)
Intercompany accounts receivable/payable		—			(16,986	)		—			16,986			—
Repayments of intercompany loans		—			(159,198	)		—			159,198			—
Repayment of capital lease obligations		—			(2,658	)		—			—			(2,658	)
Debt acquisition costs		(13,370	)		—			—			—			(13,370	)
Change in bank overdrafts		—			(14,304	)		—			—			(14,304	)
Equity contributions		626			—			—			—			626
Reduction of equity contributions		(1,282	)		—			—			—			(1,282	)
Repayment of notes receivable from officers		565			—			—			—			565

Net cash provided by (used in) financing activities		(117,719	)		(192,786	)		—			176,184			(134,321	)

Effect of exchange rate changes on cash		—			—			27			—			27
Net change in cash and cash equivalents		—			41,075			337			—			41,412
Cash and cash equivalents-beginning of period		—			68,249			5,625			—			73,874

Cash and cash equivalents-end of period	$	—		$	109,324		$	5,962		$	—		$	115,286

Supplemental disclosures of cash flow information:
Interest paid	$	178,530		$	1,236		$	—		$	—		$	179,766
Interest received		20			251			—			—			271
Income taxes paid		—			6,989			9			—			6,998
Non-cash investing and financing activities:
New capital leases		—			13,587			—			—			13,587

122

PINNACLE FOODS FINANCE LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Pinnacle Foods Finance LLC

Consolidating Statement of Cash Flows

For the fiscal year ended December 27, 2009


	Pinnacle Foods Finance LLC			Guarantor Subsidiaries			Nonguarantor Subsidiaries			Eliminations and Reclassifications			Consolidated Total
Cash flows from operating activities
Net earnings (loss) from operations	$	302,603		$	294,423		$	374		($	294,797	)	$	302,603
Non-cash charges (credits) to net earnings (loss)
Depreciation and amortization		—			65,453			15			—			65,468
Impairment charges		—			1,300			—			—			1,300
Amortization of discount on term loan		28			—			—			—			28
Amortization of debt acquisition costs		10,230			—			—			—			10,230
Amortization of deferred mark-to-market adjustment on terminated swap		4,429			—			—			—			4,429
Change in value of financial instruments		17			(309	)		—			—			(292	)
Equity in loss (earnings) of investees		(294,423	)		(374	)		—			294,797			—
Stock-based compensation charges		—			3,190			—			—			3,190
Postretirement healthcare benefits		—			(25	)		—			—			(25	)
Pension expense net of contributions		—			2,126			—			—			2,126
Other long-term liabilities		—			1,160			—			—			1,160
Other long-term assets		—			(1,007	)		—			—			(1,007	)
Deferred income taxes		(109,996	)		(167,715	)		—			—			(277,711	)
Changes in working capital, net of acquisitions
Accounts receivable		—			1,595			1,110			—			2,705
Intercompany accounts receivable/payable		—			(3,910	)		3,910			—			—
Inventories		—			12,560			226			—			12,786
Accrued trade marketing expense		—			(3,002	)		(1,757	)		—			(4,759	)
Accounts payable		—			(12,583	)		(787	)		—			(13,370	)
Accrued liabilities		(1,549	)		20,868			466			—			19,785
Other current assets		(9,175	)		(2,975	)		(253	)		—			(12,403	)

Net cash provided by operating activities		(97,836	)		210,776			3,303			—			116,243

Cash flows from investing activities
Payments for business acquisitions, net of cash acquired		—			(1,314,746	)		—			—			(1,314,746	)
Intercompany accounts receivable/payable		(103,110	)		—			—			103,110			—
Intercompany loans		(1,376,705	)		—			—			1,376,705			—
Repayments of intercompany loans		255,945			—			—			(255,945	)		—
Capital expenditures		—			(52,030	)		—			—			(52,030	)

Net cash used in investing activities		(1,223,870	)		(1,366,776	)		—			1,223,870			(1,366,776	)

Cash flows from financing activities
Proceeds from bond offering		300,000			—			—			—			300,000
Proceeds from bank term loan		838,250			—			—			—			838,250
Repayments of long term obligations		(12,500	)		—			—			—			(12,500	)
Borrowings under revolving credit facility		74,888			—			—			—			74,888
Repayments of revolving credit facility		(100,888	)		—			—			—			(100,888	)
Intercompany accounts receivable/payable		—			103,110			—			(103,110	)		—
Intercompany loans		—			1,376,705			—			(1,376,705	)		—
Repayments of intercompany loans		—			(255,945	)		—			255,945			—
Proceeds from short-term borrowings		—			1,921			—			—			1,921
Repayments of short-term borrowings		—			(852	)		—			—			(852	)
Repayment of capital lease obligations		—			(345	)		—			—			(345	)
Debt acquisition costs		(40,162	)		—			—			—			(40,162	)
Change in bank overdrafts		—			(2,602	)		—			—			(2,602	)
Equity contributions		264,325			—			—			—			264,325
Repurchases of equity		(2,207	)		—			—			—			(2,207	)

Net cash provided by (used in) financing activities		1,321,706			1,221,992			—			(1,223,870	)		1,319,828

Effect of exchange rate changes on cash		—			—			318			—			318
Net change in cash and cash equivalents		—			65,992			3,621			—			69,613
Cash and cash equivalents-beginning of period		—			2,257			2,004			—			4,261

Cash and cash equivalents-end of period	$	—		$	68,249		$	5,625		$	—		$	73,874

Supplemental disclosures of cash flow information:
Interest paid	$	117,466		$	4		$	(2	)	$	—		$	117,468
Interest received		—			82			7			—			89
Income taxes paid		—			201			388			—			589
Non-cash investing activity:
New capital leases		—			1,200			—			—			1,200

123

PINNACLE FOODS FINANCE LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Pinnacle Foods Finance LLC

Consolidating Statement of Cash Flows

For the fiscal year ended December 28, 2008


	Pinnacle Foods Finance LLC			Guarantor Subsidiaries			Nonguarantor Subsidiary			Eliminations and Reclassifications			Consolidated Total
Cash flows from operating activities
Net (loss) earnings from operations	$	(28,581	)	$	67,485		$	4,075		$	(71,560	)	$	(28,581	)
Non-cash charges (credits) to net (loss) earnings
Depreciation and amortization		—			62,495			14			—			62,509
Impairment charges		—			15,100			—			—			15,100
Amortization of debt acquisition costs		4,714			—			—			—			4,714
Amortization of deferred mark-to-market adjustment on terminated swap		1,259			—			—			—			1,259
Gain on litigation settlement		—			(9,988	)		—			—			(9,988	)
Change in value of financial instruments		5,489			(2,142	)		—			—			3,347
Equity in loss (earnings) of investees		(67,485	)		(4,075	)		—			71,560			—
Stock-based compensation charges		—			806			—			—			806
Postretirement healthcare benefits		—			(25	)		—			—			(25	)
Pension expense net of contributions		—			(996	)		—			—			(996	)
Other long-term liabilities		—			(320	)		—			—			(320	)
Deferred income taxes		—			24,757			—			—			24,757
Termination of derivative contracts		(17,030	)		—			—			—			(17,030	)
Changes in working capital, net of acquisition
Accounts receivable		654			6,721			(685	)		—			6,690
Intercompany accounts receivable/payable		—			(1,448	)		1,448			—			—
Inventories		—			(26,073	)		532			—			(25,541	)
Accrued trade marketing expense		—			3,699			1,189			—			4,888
Accounts payable		—			3,800			(381	)		—			3,419
Accrued liabilities		(10,543	)		(14,255	)		(4,669	)		—			(29,467	)
Other current assets		(4,940	)		6,241			(83	)		—			1,218

Net cash (used in) provided by operating activities		(116,463	)		131,782			1,440			—			16,759

Cash flows from investing activities
Intercompany accounts receivable/payable		100,779			—			—			(100,779	)		—
Capital expenditures		—			(32,598	)		—			—			(32,598	)

Net cash used in investing activities		100,779			(32,598	)		—			(100,779	)		(32,598	)

Cash flows from financing activities
Repayments of long term obligations		(9,375	)		—			—			—			(9,375	)
Borrowings under revolving credit facility		101,008			—			—			—			101,008
Repayments of revolving credit facility		(75,008	)		—			—			—			(75,008	)
Intercompany accounts receivable/payable		—			(100,779	)		—			100,779			—
Proceeds from short-term borrowings		—			324			—			—			324
Repayments of short-term borrowings		—			(1,531	)		—			—			(1,531	)
Repayment of capital lease obligations		—			(238	)		—			—			(238	)
Debt acquisition costs		(704	)		—			—			—			(704	)
Equity contribution		234			—			—			—			234
Reduction of equity contributions		(471	)		—			—			—			(471	)

Net cash provided by financing activities		15,684			(102,224	)		—			100,779			14,239


Effect of exchange rate changes on cash		—			—			(138	)		—			(138	)
Net change in cash and cash equivalents		—			(3,040	)		1,302			—			(1,738	)
Cash and cash equivalents-beginning of period		—			5,297			702			—			5,999

Cash and cash equivalents-end of period	$	—		$	2,257		$	2,004		$	—		$	4,261

Supplemental disclosures of cash flow information:
Interest paid	$	167,453		$	295		$	—		$	—		$	167,748
Interest received		—			272			47			—			319
Income taxes paid		—			277			4,059			—			4,336

124

PINNACLE FOODS FINANCE LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

ITEM 9.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A.

CONTROLS AND PROCEDURES

(a) 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.

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of December 26, 2010. Based upon that evaluation and subject to the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that the design and operation of our disclosure controls and procedures are effective at a level of reasonable assurance.

(b) Management’s Annual Report on Internal Control Over Financial Reporting.

The management of Pinnacle Foods Finance LLC and subsidiaries (the “Company”) is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Exchange Act Rule 13a-15(f) and 15d-15(f). The Company’s internal control system was designed to provide reasonable assurance to the Company’s management and board of directors regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 26, 2010. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control—Integrated Framework. Based on this assessment, management believes that, as of December 26, 2010, the Company’s internal control over financial reporting is effective based on those criteria.

/S/ ROBERT J. GAMGORT

Robert J. Gamgort

Chief Executive Officer

/S/ CRAIG STEENECK

Craig Steeneck

Executive Vice President and Chief Financial Officer

125

(c) Attestation Report of the Registered Public Accounting Firm.

The effectiveness of the Company’s internal control over financial reporting as of December 26, 2010 has been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report which appears herein.

(d) Changes in Internal Control Over Financial Reporting

There was no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that occurred during the fiscal quarter ended December 26, 2010 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B.

OTHER INFORMATION

None.

126

PART III

ITEM 10.

DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Executive Officers and Directors

Our executive officers and directors are as follows:


Name	Age	Position
Robert J. Gamgort	48	Chief Executive Officer and Director
Craig Steeneck	53	Executive Vice President and Chief Financial Officer
John L. Butler	64	Executive Vice President and Chief Human Resources Officer
Sara Genster Robling	54	Executive Vice President and Division President – Birds Eye Frozen Division
Mark L. Schiller	49	Executive Vice President and Division President – Duncan Hines Grocery Division
Raymond O’Brien	56	Executive Vice President – Sales and Chief Customer Officer
Antonio F. Fernandez	51	Executive Vice President and Chief Supply Chain Officer
M. Kelley Maggs	59	Senior Vice President, Secretary and General Counsel
Lynne M. Misericordia	47	Senior Vice President, Treasurer and Assistant Secretary
Tony Landretti	43	Senior Vice President and General Manager, Specialty Foods Division
John F. Kroeger	55	Vice President and Deputy General Counsel
Roger Deromedi	57	Non-Executive Chairman of the Board and Director
Jason Giordano	32	Director
Prakash A. Melwani	52	Director
Jeff Overly	52	Director
Raymond P. Silcock	60	Director

Robert J. Gamgort was appointed Chief Executive Officer effective July 13, 2009. Prior to joining Pinnacle, Mr. Gamgort served as North American President for Mars Incorporated, where he managed the company’s portfolio of confectionery, main meal, pet food and retail businesses in North America. Mr. Gamgort joined Mars in 1998, initially serving as Vice President of Marketing for M&M / Mars and then as General Manager of its Chocolate Unit. Prior to joining Mars, Mr. Gamgort served as President of Major League Baseball Properties. Mr. Gamgort began his career at General Foods, which later merged with and became Kraft Foods, where he served in key marketing, sales, corporate strategy, and general management roles. Mr. Gamgort holds an MBA from the Kellogg Graduate School of Management at Northwestern University and a BA in Economics from Bucknell University. Mr. Gamgort serves on the Board of Trustees for Bucknell University and the Morristown Memorial Hospital Foundation.

Craig Steeneck has been Executive Vice President and Chief Financial Officer since July 2007. From June 2005 to July 2007, Mr. Steeneck served as Executive Vice President, Supply Chain Finance and IT. From April 2003 to June 2005, Mr. Steeneck served as Executive Vice President, Chief Financial Officer and Chief Administrative Officer of Cendant Timeshare Resort Group. From March 2001 to April 2003, Mr. Steeneck served as Executive Vice President and Chief Financial Officer of Resorts Condominiums International, a subsidiary of Cendant. From October 1999 to February 2001, he was the Chief Financial Officer of International Home Foods Inc. Mr. Steeneck is also a Certified Public Accountant in the State of New Jersey.

John L. Butler has been Executive Vice President and Chief Human Resources Officer since March 2008. From February, 2007 to March, 2008, Mr. Butler was self-employed and oversaw personal investments. From November 2004 to February 2007, Mr. Butler served as Senior Vice President, Human Resources for Toys R Us. Prior to joining Toys R Us, Mr. Butler held senior level positions with Federated Department Stores and Nabisco. Mr. Butler spent 18 years at Nabisco, with his last two positions being Senior Vice President, Human Resources, Nabisco Biscuit Company and Senior Vice President, Human Resources, Nabisco International. He began his business career with RHR International, a management consulting firm.

Sara Genster Robling was named Executive Vice President and Division President – Birds Eye Frozen Division in 2010. In this role, Sara manages Pinnacle’s frozen portfolio which includes brands such as Birds Eye frozen vegetables, Birds Eye Voila! and Hungry-Man frozen dinners and entrees, Van de Kamp’s and Mrs. Paul’s frozen seafood, and Aunt Jemima frozen breakfasts. Before her current position, Sara held the role of Executive Vice President and Chief Marketing Officer. Prior to her roles at Pinnacle, Sara served as Chief Marketing Officer at Trane, Inc. (formerly American Standard), Vice President and General Manager of Global Beverage at Campbell Soup Company, and held various marketing-related roles at Kraft General Foods. Sara is a graduate of Princeton University and holds an MBA from the Darden School of Business at the University of Virginia.

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Mark L. Schiller has been Executive Vice President and Division President – Duncan Hines Grocery Division since June 2010. Mr. Schiller began his career at the Quaker Oats Company in 1985 where he progressed through a number of marketing and supply chain roles. Mark served as president of Valley Recreation Products, Inc. and Chief Operating Officer and Co-President of Tutor Time Learning Systems, Inc. before rejoining Quaker in 2002. Prior to joining Pinnacle, Mr. Schiller served as Senior Vice President of Frito Lay New Ventures. Mr. Schiller also held the positions of President of Quaker Foods and Snacks North America and Senior Vice President & General Manager of Frito Lay Convenience Foods Division. He holds a Bachelor of Arts degree from Tulane University and an MBA from Columbia University Graduate School of Business.

Raymond O’Brien was promoted to Executive Vice President – Sales and Chief Customer Officer at Pinnacle in October 2010. Mr. O’Brien joined the Company in 2006 and most recently was Senior Vice President – General Manager, Specialty Foods Division. Prior to joining the Company, Mr. O’Brien was a founding partner for S&H Solutions, a customer relations management consulting firm. Mr. O’Brien has more than 25 years of sales, marketing and general management experience at Nabisco, Campbell Soup Company, and Entenmann’s. Mr. O’Brien holds an MBA from Northwestern University’s Kellogg Graduate School of Management, and a Bachelor of Business Administration from The State University of New York, Utica.

Antonio F. Fernandez recently joined Pinnacle in February of 2011 and serves as Executive Vice President and Chief Supply Chain Officer. Prior to joining Pinnacle, Mr. Fernandez was most recently employed with Kraft Foods Inc. as Senior Vice President, Operations Excellence from 2010 to 2011, following the acquisition of Cadbury, plc. Mr. Fernandez worked at Cadbury from 1998 to 2010 in a series of senior management positions, the last being Chief Supply Chain Officer where he was responsible for all aspects of the confectionary company’s supply chain, which had a global footprint of 65 manufacturing facilities and over 60 distribution centers. Mr. Fernandez’s early career includes positions in manufacturing, procurement, engineering and consulting with Procter & Gamble Co., PepsiCo, Inc. and the Canaan Group, a general management-consulting firm. He holds a Bachelor of Science Degree in Chemical Engineering from Lafayette College.

M. Kelley Maggs has been Senior Vice President, General Counsel and Secretary since Pinnacle’s inception in 2001. He was associated with affiliates of CDM Investor Group LLC from 1993 until 2007. Prior to his involvement with Pinnacle, Mr. Maggs held the same position with International Home Foods Inc. from November 1996 to December 2000. From 1993 to 1996, Mr. Maggs was employed with Stella Foods, Inc. as Vice President and General Counsel. Prior to that time, he was engaged in the private practice of law in Virginia and New York.

Lynne M. Misericordia has been Senior Vice President and Treasurer since Pinnacle’s inception in 2001. Ms. Misericordia previously held the position of Treasurer with International Home Foods Inc. from November 1996 to December 2000. Before that, Ms. Misericordia was employed by Wyeth from August 1985 to November 1996 and held various financial positions.

Tony Landretti was named Senior Vice President and General Manager of our Specialty Foods Division in October 2010. Before his role as General Manager of Pinnacle’s Specialty Foods Division, Tony was most recently Vice President of Sales and National Sales Manager for Pinnacle’s Duncan Hines Grocery Division. Before joining Pinnacle, Tony served as the Eastern Region Team Leader of Sales at the Campbell Soup Company. At Campbell Soup Company, he also held roles in business development and category management. He began his career with The Quaker Oats Company with experiences in consumer affairs, supply chain management and direct sales. Tony has a Bachelor of Science from the University of Wisconsin, Madison and is a graduate of the Master Executive Program at Baker University.

John F. Kroeger has been our Vice President and Deputy General Counsel since joining the Company in November 2001. In addition, Mr. Kroeger was also the Vice President of Human Resources from 2004 through 2006. From January 2001 to October 2001, Mr. Kroeger was the Vice President and General Counsel of Anadigics, Inc., a semiconductor company. From August 1998 until December 2000, Mr. Kroeger was Vice President and Assistant General Counsel at International Home Foods Inc. Mr. Kroeger has also held general management and legal positions with leading companies in the chemical, pharmaceutical and petroleum-refining industries.

Roger Deromedi was appointed Non-Executive Chairman of the Board on July 13, 2009, and is a Director. Previously, he was Executive Chairman of the Board since April 2, 2007. Prior thereto, Mr. Deromedi served as Chief Executive Officer of Kraft Foods Inc. from December 2003 to June 2006. Prior to that, he was co-CEO, Kraft Foods Inc. and President and Chief Executive Officer, Kraft Foods International since 2001. He was President and Chief Executive Officer of Kraft Foods International from 1999 to 2001 and previously held a series of increasingly responsible positions since joining General Foods, Kraft’s predecessor company, in 1977. Mr. Deromedi is on the Board of Directors of the Rainforest Alliance and the Board of Trustees of the Field Museum of Natural History. Mr. Deromedi earned an MBA from the Stanford Graduate School of Business in 1977 and a BA in economics and mathematics from Vanderbilt University in 1975.

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Jason Giordano is a Director. Mr. Giordano is a Principal in the private equity group at Blackstone. Since joining Blackstone in 2006, Mr. Giordano has been involved in the execution of the firm’s investments in Pinnacle Foods, Birds Eye Foods and Polymer Group, Inc. and in analyzing investment opportunities across various industries, including Food and Beverage, Consumer Products, Chemicals, and Industrials. Before joining Blackstone, Mr. Giordano was an Associate at Bain Capital where he evaluated and executed global private equity investments in a wide range of industries. Prior to that, he worked in investment banking at Goldman, Sachs & Co. focused on Communications, Media, and Entertainment clients. Mr. Giordano received an AB from Dartmouth College and an MBA with High Distinction from Harvard Business School, where he graduated as a George F. Baker Scholar. Mr. Giordano also serves on the Board of Directors of HealthMarkets, Inc. and Polymer Group, Inc.

Prakash A. Melwani is a Director. Mr. Melwani is a Senior Managing Director in the Private Equity Group at Blackstone. He is based in New York. Since joining Blackstone in 2003, Mr. Melwani has led Blackstone’s investments in Ariel Re, Foundation Coal, Kosmos Energy, Performance Food Group, Pinnacle Foods, RGIS Inventory Specialists, and Texas Genco. Prior to joining Blackstone, Mr. Melwani was a founding partner of Vestar Capital Partners and served as its Chief Investment Officer. Previous to that, he was with the management buyout group at The First Boston Corporation and with N.M. Rothschild & Sons in Hong Kong and London. Mr. Melwani is currently a Director of Ariel Re, Kosmos Energy, Performance Food Group, Pinnacle Foods, and RGIS Inventory Specialists. He is also President and a Director of the India Fund and The Asia Tigers Fund. Mr. Melwani graduated with a First Class Honors degree in Economics from Cambridge University, England. He received an MBA with High Distinction from the Harvard Business School and graduated as a Baker Scholar and a Loeb Rhodes Fellow.

Jeff Overly is a Director. Mr. Overly is an Executive Director in the private equity group at Blackstone. Mr. Overly is involved in monitoring, advising, and supporting Lean Operational Excellence and Supply Chain improvement opportunities within Blackstone’s portfolio company holdings. Before joining Blackstone in 2008, Mr. Overly was Vice President of Global Fixture Operations at Kohler Company where he was responsible for global manufacturing operations, including the entire supply chain from procurement to shipment of finished product through a multi-warehouse regional distribution center network. Prior to that, he served 25 years at General Motors Corporation and Delphi Corporation in numerous operations and engineering positions with global responsibilities. Mr. Overly has a BS in Industrial Management from the University of Cincinnati, and a Masters in Business from Central Michigan University.

Raymond P. Silcock is a Director. He was appointed Audit Committee Chairman effective May 2008. Formerly in 2009, Mr. Silcock was the Executive Vice President and Chief Financial Officer of KB Home, and prior to that served as Senior Vice President and Chief Financial Officer of UST Inc. from 2007 up to its acquisition by Altria, Inc. in January 2009. Before joining UST, Mr. Silcock was Executive Vice President and Chief Financial Officer of Swift & Company from 2006 to 2007 when the Company was acquired by JBS S.A. Prior to that, he was Executive Vice President and Chief Financial Officer of Cott Corporation from 1998 to 2005. In addition, Mr. Silcock spent 18 years with Campbell Soup Company, serving in a variety of progressively more responsible roles, culminating as Vice President, Finance for the Bakery and Confectionary Division. Mr. Silcock served on the Boards of Prestige Brand Holdings Inc. (2006 to 2009) and American Italian Pasta Company (2006 to 2007).

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Equity Investment by Chairman and Executive Officers

At the time of our acquisition by The Blackstone Group L.P., our senior management invested $8.0 million to acquire equity interests in Peak Holdings in the form of Class A-2 Units of Peak Holdings. In addition, each was awarded non-voting profits interest units in Peak Holdings under our equity incentive plans described in “Item 11: Executive Compensation—Compensation Discussion and Analysis—Elements of Compensation,” subject to future vesting conditions. At the time of the Birds Eye Acquisition, some of our Directors and senior management invested an additional $3.1 million to acquire equity interests in Peak Holdings in the form of Class A-2 Units of Peak Holdings.

Each of these members of management executed a management unit subscription agreement. Under these agreements, the executives have the right to put their Class A-2 Units and any vested profits interest units to Peak Holdings for a price at least equal to their fair market value if their employment terminates due to disability or death prior to the earlier of an initial public offering of Peak Holdings or a change of control of Peak Holdings. The agreements also contain terms that allow Peak Holdings or Blackstone at its option to purchase from executives the Class A-2 Units and any recently vested profits interest units if the executive engages in activity competing with our company or if the executive is terminated due to death or disability, a termination without cause or constructive termination (other than, in such case, the Class A-2 Units, unless the executive has engaged in activity competing with our company), a termination for cause or a voluntary termination of their employment. Should Peak Holdings or Blackstone elect to exercise their purchase rights under the agreements, the price per unit will depend on the nature of the executive’s termination of employment.

Corporate Governance Matters

The Board of Directors met four times during 2010.

Background and Experience of Directors. When considering whether directors and nominees have the experience, qualifications, attributes or skills, taken as a whole, to enable our Board of Directors to satisfy its oversight responsibilities effectively in light of our business and structure, the Board of Directors focused primarily on each person’s background and experience as reflected in the information discussed in each of the directors’ individual biographies set forth above. We believe that our directors provide an appropriate mix of experience and skills relevant to the size and nature of our business. Once appointed, Directors serve until they resign or are terminated by the Shareholders. In particular, the members of our Board of Directors considered the following important characteristics: (i) Mr. Melwani, Mr. Giordano and Mr. Overly are representatives appointed by The Blackstone Group, our principal stockholder and have significant financial, investment and operational experience from their involvement in Blackstone’s investment in numerous portfolio companies and have played active roles in overseeing those businesses, (ii) Mr. Deromedi, our Non-Executive Chairman of the Board and Mr. Silcock each have had significant executive level experience throughout their careers in leading consumer package goods companies, and (iii) Mr. Gamgort, our Chief Executive Officer, previously served as North American President for Mars Incorporated, where he managed the company’s North American portfolio. In addition, Mr. Gamgort served as President of Major League Baseball Properties and at Kraft Foods, where he held key marketing, sales, corporate strategy, and general management roles.

Joseph Jimenez was also a member of the Board of Directors during 2010, but resigned effective February 2011. Mr. Jimenez resigned because he was not able to devote the time required to perform his duties as director of the Company with his appointment as CEO of Novartis AG. His resignation was not in connection with any known disagreement with the Company.

Board Leadership Structure. Our Board of Directors is led by the Non-Executive Chairman, who is appointed by our principal stockholder. The Chief Executive Officer position is separate from the Chairman position. We believe that the separation of the Chairman and CEO positions is appropriate corporate governance.

Role of Board in Risk Oversight. The Board of Directors has extensive involvement in the oversight of risk management related to the company and its business and accomplishes this oversight through the regular reporting by the Audit Committee. The Audit Committee represents the Board by periodically reviewing the accounting, reporting and financial practices of the company, including the integrity of our financial statements, the surveillance of administrative and financial controls and the company’s compliance with legal and regulatory requirements. Through its regular meetings with management, including the finance, legal, and internal audit functions, the Audit Committee reviews and discusses all significant areas of our business and summarizes for the Board of Directors all areas of risk and the appropriate mitigating factors. In addition, our Board receives periodic detailed operating performance reviews from management.

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Audit Committee

The board of directors has adopted a written charter for the audit committee. Our audit committee is responsible for (1) selecting the independent auditors, (2) approving the overall scope of the audit, (3) assisting the board of directors in monitoring the integrity of our financial statements, the independent accountant’s qualifications and independence, the performance of the independent accountants and our internal audit function and our compliance with legal and regulatory requirements, (4) annually reviewing an independent auditors’ report describing the auditing firms’ internal quality-control procedures, any material issues raised by the most recent internal quality-control review, or peer review, of the auditing firm, (5) discussing the annual audited financial and quarterly statements with management and the independent auditor, (6) periodically meeting separately with each of management, internal auditors and the independent auditor, (7) reviewing with the independent auditor any audit problems or difficulties and managements’ response, (8) handling such other matters that are specifically delegated to the audit committee by the board of directors from time to time and (9) reporting regularly to the full board of directors.

The members of the current audit committee are Mr. Silcock (Chairman), Mr. Giordano and Mr. Overly. Our board of directors has not affirmatively determined whether any of the members of the current audit committee is an “audit committee financial expert” or whether any such person is independent under the applicable standards of the New York Stock Exchange or any other standard. Because our securities are not listed on any stock exchange or inter-dealer quotation system, we are not required to have a separately designated audit committee whose members are independent, and therefore our board has not made a formal determination of whether the members of our audit committee are independent or whether that committee includes at least one audit committee financial expert. However, we believe that Mr. Silcock would be considered an audit committee financial expert within the meaning of the rules and regulations of the Securities and Exchange Commission if our board of directors were to make such a determination. The Audit Committee met seven times during 2010. See “Executive Officers and Directors” above for a description of Mr. Silcock’s relevant experience. See also “Item 13: Certain Relationships and Related Transactions and Director Independence-Director Independence.”

Compensation Committee Interlocks and Insider Participation

The members of our Compensation Committee are Prakash Melwani (Chairman), a Senior Managing Director of Blackstone, Jason Giordano, a Principal of Blackstone, and Roger Deromedi, Chairman of the Board. Joseph Jimenez was a member of the Compensation Committee in 2010, but his membership ceased upon his resignation from the Board of Directors in February 2011. Other than Mr. Deromedi, none of the other members are current or former officers or employees of our company. We are parties to certain transactions with Blackstone described in “Certain Relationship and Related Transactions” section below. Mr. Deromedi does not participate in Compensation Committee discussions regarding his own compensation. The Compensation Committee met three times during 2010.

Audit Committee Report

We have reviewed and discussed with management the Company’s audited financial statements for the year ended December 26, 2010.

We have discussed with the independent accountant the matters required to be discussed by Statement on Audited Standards No. 114, Communication with Audit Committees, as adopted, by the Public Company Accounting Oversight Board.

We have received and reviewed the written disclosures and the letter from the independent auditors required by the applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant’s communications with the audit committee concerning independence, and has discussed with the independent accountant the independent accountant’s independence.

Based on the reviews and discussions referred to above, we have recommended to the Board of Directors that the financial statements referred to above be included in this Form 10-K.


		THE AUDIT COMMITTEE
		Mr. Raymond P. Silcock
		Mr. Jason Giordano
		Mr. Jeff Overly

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Code of Ethics

Our employee handbook contains certain standards for ethical conduct required of our employees. We require all employees to meet our ethical standards which include compliance with all laws while performing their job duties with high integrity and professionalism.

We have also adopted a Code of Ethics for our Chief Executive Officer, our Chief Financial Officer and all other executive officers and other key employees. This Code of Ethics is intended to promote honest and ethical conduct, full and accurate reporting, and compliance with all applicable laws and regulations.

A copy of our Code of Ethics can be obtained free of charge by emailing investorrealations@pinnaclefoods.com.

Section 16(a) Beneficial Ownership Reporting Compliance

Not applicable.

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ITEM 11.

EXECUTIVE COMPENSATION

Compensation Discussion and Analysis

Compensation Program Objectives and Design

Our primary objective in establishing our comprehensive compensation program is to recruit, attract, retain and properly incent high-level talent to work for and ultimately add value to our company for the benefit of our shareholders.

Each element of the overall comprehensive program (discussed in greater detail below) is intended to be competitive with similar elements offered both locally and nationally by other like-size employers and competitors, and the elements taken together are intended to present a comprehensive competitive program to accomplish the objectives noted above.

We designed most of the major elements of our comprehensive compensation program by soliciting initial thoughts and ideas from our senior management team, consisting of our Chief Executive Officer, Executive Vice President and Chief Financial Officer, Executive Vice President and Chief Human Resources Officer, Senior Vice President, Treasurer and Assistant Secretary and Senior Vice President, Secretary and General Counsel, and in consultation with other members of our senior management. Additional input and suggested objectives were received from representatives of our major shareholders and outside, independent service providers. Major compensation elements are reviewed annually by our senior management.

After receipt of the input noted and development of final draft plans, such plans were (and in the case of annual bonus plans, are annually) presented to our Compensation Committee. The Compensation Committee consists of Directors Prakash Melwani, a Senior Managing Director of Blackstone, Jason Giordano, a Principal of Blackstone, and Chairman of the Board Roger Deromedi. Other than Mr. Deromedi, none of these members are current or former officers or employees of our company. We are parties to certain transactions with Blackstone described in “Item 13 - Certain Relationships and Related Transactions.” Mr. Deromedi does not participate in Compensation Committee discussions involving his compensation.

The Compensation Committee comments on and ultimately adopts the major compensation program.

Our compensation program is designed to reward performance by our company’s executives, which in turn creates value for our company’s shareholders. Performance is reviewed annually for both our company’s executives and our company as a whole. Our Compensation Committee reviews and approves annual compensation elements such as bonus plan attainment, and our company’s full Board of Directors reviews full year earnings and management performance by our company’s executives. The Board as a whole also approves elements of our annual budgets, which include certain elements of the compensation program such as annual bonuses and annual merit increases, if any, for our company’s executives.

In short, if value is not added to our company annually, certain of the elements of the compensation program are not paid or do not vest, i.e., annual bonuses, annual base compensation increases and certain equity grants.

The compensation program is not intended to reward only short-term or annual performance. It is also intended to reward long-term company performance. Therefore, employee equity programs, which are discussed in more detail below, are key elements of the compensation program.

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Elements of Compensation

For the fiscal year ending December 26, 2010, our company had five principal elements which made up our compensation program. They were:

•

Base salary and potential annual merit adjustment;

•

Bonus plan (MIP or “Management Incentive Plan”);

•

Employee equity plans;

•

Severance, change of control and other termination-related programs; and

•

401(k) and other benefits.

The following is a brief discussion of each principal element of compensation.

(a)

Base salary. Our Chief Executive Officer sets the base salaries for all executive officers of our company, with the exception of his own, which is set by the Compensation Committee. Base salaries are intended to compensate the executive officers and all other salaried employees for their basic services performed for our company on an annual basis. All salaried employees are paid bi-weekly in equal increments. In setting base salaries, our company takes into account the employee’s experience, the functions and responsibilities of the job, salaries for similar positions within the community and for competitive positions in the food industry generally and any other factor relevant to that particular job. We establish salary grades for all levels of the organization. Each grade has a minimum, a midpoint and a maximum. On average, we attempt to pay in the middle range for each job but do not confine ourselves to this practice if other factors such as experience warrant a higher base salary. In determining applicable salaries, we also consult with outside consultants and recruiters, senior members of our management team who have contacts and experience at other relevant companies, board members and shareholder employment related personnel. Base salaries may be adjusted annually and, in certain circumstances, adjusted throughout the year to deal with competitive pressures or changes in job responsibilities.

(b)

Bonus plan (MIP). We use our MIP plans to incent our eligible employees on an annual basis. The MIP plans, together with base salary and basic benefits (other than 401(k)) are considered short-term compensation programs. Our MIP plans are intended to reward executives and other eligible employees for achieving annual profit and operational goals. Generally under all bonus programs, our EBITDA target, which is derived from our operating plan for the year and approved annually by the Board of Directors, is a major component, and individual goals or “MBO’s” account for the balance. We consider the specific EBITDA targets applicable to the MIP plans to be confidential commercial and financial information, the disclosure of which could result in competitive harm to us. However, we believe that each of these targets, while difficult to attain, is reasonably attainable if we achieve our planned performance and growth objectives over the period applicable to the MIP plans. The actual 2010 EBITDA was slightly under target and the overall rating on 2010 operational goals was under target, principally as a result of a challenging retail environment in the food industry, although the Board of Directors and the Compensation Committee did recognize in their evaluation the excellent performance in the integration of the Birds Eye Foods acquisition. Actual 2009 EBITDA exceeded target and the overall rating on operational goals was over target. In 2008, the EBITDA target was not met, but the operational goals were on target. Senior management of our company decides who is eligible to participate in the MIP plans and what the terms of the plans are, including what an employee’s bonus potential is. All jobs at our company have grade levels attached to them, and some of these grade levels have target bonus levels assigned to them. The full Board of Directors must approve the bonus pool contained in the annual budget; the Compensation Committee must approve actual payment of bonuses pursuant to the MIP plans and must specifically consider and approve the bonuses to the named senior executive officers. All bonus targets are equal to a preset percentage of a person’s salary with minimum and maximum payout if certain business objectives are attained.

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(c)

Equity programs.

We currently have three long-term incentive plans: the 2007 Stock Incentive Plan, the 2007 Unit Plan (the 2007 Stock Incentive Plan and the 2007 Unit Plan are collectively referred to as the “2007 Equity Plans”) and the Crunch Holding Corp. stock purchase plan (“SPP”). The 2007 Equity Plans provide executives with the opportunity to acquire a proprietary interest in our company as an incentive for them to remain in our service. The total percentage of equity reserved for issuance under the 2007 Equity Plans is 10% of the total equity of Crunch Holding Corp. The Stock Incentive Plan includes approximately 175 salaried employees and is authorized to issue up to 20,000 options to purchase shares of Crunch Holding Corp. common stock. All options granted under the plan must be awarded with a strike price that is no less than the fair market value of a share of Crunch Holding Corp. common stock on the date of the grant. Under the 2007 Unit Plan, approximately 60 management employees were given the opportunity to invest in our company through the purchase of Class A-2 Units in our ultimate parent, Peak Holdings LLC. In addition, each manager who so invested was awarded profits interests in Peak Holdings LLC in the form of Class B-1, Class B-2 and Class B-3 Units (collectively, “PIUs”). Generally, 25% of the options and PIUs will vest ratably over five years. Fifty percent of the options (the “performance options”) and PIU’s (consisting of the Class B-2 units) vest ratably over five years depending whether annual or cumulative EBITDA targets are met. We consider the specific EBITDA targets applicable to both plans to be confidential commercial and financial information, the disclosure of which could result in competitive harm to us. However, we believe that each of these targets, while difficult to attain, is reasonably attainable if we achieve our planned performance and growth objectives over the period applicable to the plans. The plan also provides that, if the EBITDA target is achieved in any two consecutive fiscal years during the employee’s continued employment, then that year’s and all prior years’ Class B-2 units will vest and become exercisable, and if the Class B-3 units vest and become exercisable during the employees continued employment, then all the Class B-2 units will also vest and become exercisable. In 2009 and 2010, the EBITDA targets were met and Class B-2 Units were vested. In 2008, the EBITDA target was not met and therefore the Class B-2 Units did not vest in 2008, however since the EBITDA targets were met in 2009 and 2010, the Class B-2 units that were originally set to become exercisable in 2008, vested in 2010. The final 25% of the options (the “exit options”) and PIUs (consisting of the Class B-3 units) granted under the 2007 Equity Plans vest either on a change of control or similar event, if a 20% annual internal rate of return is attained by Blackstone. On April 1, 2010, the Company awarded a second tranche of PIUs to certain employees in the form of Class B-1 Units and Class B-2 Units. The Class B-1 Units and Class B-2 Units have the same vesting provisions as stated above.

Under the 2007 Equity Plans, vesting terminates upon an employee’s termination, but in most cases a terminated employee may exercise his vested options within 90 days of termination. Under these plans, the executives have the right to put their Class A-2 Units, any vested PIUs and any shares held as a result of the exercise of any option to Peak Holdings or Crunch Holding Corp., as the case may be, for a price at least equal to their fair market value if their employment terminates due to disability or death prior to the earlier of an initial public offering or change of control of Peak Holdings or Crunch Holding Corp., as the case may be. The plans contain terms that allow Peak Holdings or Crunch Holding Corp., as the case may be, at its option to purchase from executives the Class A-2 Units, any vested PIUs and any shares held as a result of the exercise of any option if the executive engages in activity competing with our company or if the executive is terminated due to death or disability, a termination without cause or constructive termination (in the case of the Unit Plan other than the Class A-2 Units, unless the executive has engaged in activity competing with our company), a termination for cause or a voluntary termination of employment. Should Peak Holdings or Blackstone elect to exercise its purchase rights under the agreements, the price per unit will depend on the nature of the executive’s termination of employment. Equity awards under both plans are granted based on recommendations of various members of senior management to an internal company committee.

The third long-term incentive plan provided for our executives is the Stock Purchase Plan (“SPP”), which allows executives to purchase our stock at market rates. We believe that the SPP aligns the long-term interests of our executives with those of our shareholders. Together, the 2007 Equity Plans and SPP are intended to foster long-term growth for our company and provide a means of creating financial security for our senior executives.

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(d)

Severance, change of control and other termination-related programs. We generally have two forms of post-termination compensation—the use of change of control language in employment letters or agreements and basic severance plan provisions. Each of these two forms of compensation is necessary in our opinion to help attract and retain qualified top quality executives. In addition, we believe that we benefit from such plans as they help to insure continuity of management. Without these plans, and in the event of a possible or actual change in control, certain executives may feel the need to find other employment before they were forced to leave after a change of control event. With such plans in place, we believe that there will be more stability with our senior executives, allowing for more efficient operation of our company and the creation of additional value for our company and our shareholders. At present, we have only one type of change of control provision in our existing employment agreements and letter agreements with our various members of management. This provision essentially provides that, unless the applicable executive is retained in his or her job following a change in control with the same or similar duties, responsibilities, compensation and location of job, the executive may terminate his or her employment and receive a change of control payment.

Further, we maintain a severance plan which is intended to be in the middle of the range in terms of value to employees when compared against companies of similar size, location and industry type. The severance plan provides a weekly severance based upon the employee’s total years of service with our company, with minimums of four weeks pay for new hires and up to 16 weeks pay for executives at higher levels. All executives of our company who do not have change of control provisions applicable to them are eligible for the benefits of the severance plan.

(e)

401(k) and other benefits. We provide various other benefits and compensation-related programs to executives and other salaried employees, which allow us to provide a full and comprehensive compensation package. This full package of compensation elements is important to our company’s objectives to attract, retain and incent high-quality employees. We do not sponsor a defined benefit pension program for salaried employees. The elements of our company’s compensation program not otherwise discussed above are:

(i)

A 401(k) program wherein our company matches up to 50% of employee contributions, up to a maximum company contribution of 3% of the employee’s pay (up to the I.R.S. annual covered compensation limit);

(ii)

Medical and dental insurance for which our company pays approximately 70% of the premiums;

(iii)

Life and Accidental Death and Dismemberment insurance paid for by our company; and

(iv)

Long-term Disability and Short-Term Disability insurance paid for by our company.

In establishing and providing the plans noted above, our company uses outside 401(k) and benefits consultants for medical and 401(k) plan design. Each of the outside consultants provides not less than annual advice about the plan designs for similar manufacturing companies across the United States and in the communities where our company is located. As with other elements of compensation, our company strives to provide competitive benefits to attract quality executives. Based on our general perception of the market and while we have not identified specific companies, we believe that the benefits noted in this section generally are at the 50th percentile of all similarly situated manufacturers and competitors with exceptions made where we believe necessary based on the communities where our company is located.

(f)

Executive compensation as a package of compensation elements. In summary, we have developed various elements of compensation for our executives that we feel are consistent with standard industry practices and with the view that each element complements the rest of the elements of the compensation program. Most importantly, we provide a total program that allows us to attain the objectives set forth above. If any of the elements were missing, we do not believe we could attain our objectives. While we do not have a fixed policy that an incoming executive must receive a certain salary, a certain bonus amount, a certain amount of equity, etc., each of the elements is critical to providing a competitive compensation package to executives. Therefore, although no predetermined amount is set, we are careful to give adequate weight to short-term compensation vs. long-term compensation, and no one decision is made with regard to one element of compensation without considering the impact upon the other elements and ultimately the objectives we wish to achieve.

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Summary Compensation Table

The following table provides summary information concerning compensation paid or accrued by us to or on behalf of our named executive officers for 2010, 2009 and 2008, for services rendered to us during the respective fiscal years.


Name and Principal Position	Year		Salary ($)		Bonus ($)			Stock Awards (a) ($)		Option Awards ($)		Non-Equity Incentive Plan Compensation ($)			All Other Compensation ($)			Total ($)
Robert J. Gamgort (b)		2010	$	868,942	$	—		$	3,138,263	$	—	$	1,515,000	(i)		7,890	(j)	$	5,530,095
Chief Executive Officer		2009		375,962		458,333	(g)		10,246,500		—		537,624			228	(j)		11,618,647
Director		2008		—		—			—		—		—			—	(j)		—

Craig Steeneck (c)		2010		509,850		—			1,031,223		—		347,429			8,178	(k)		1,896,680
Executive Vice President and		2009		500,000		200,000	(h)		—		—		776,250			8,210	(k)		1,484,460
Chief Financial Officer		2008		431,000		—			—		—		100,800			7,728	(k)		539,528

Mark L. Schiller (d)		2010		245,192		—			2,787,090		—		205,870			339,809			3,577,961
Executive Vice President		2009		—		—			—		—		—			—	(l)		—
and Division President -		2008		—		—			—		—		—			—	(l)		—
Duncan Hines Grocery Division																	(l)

Raymond O’Brien (e)		2010		263,178		—			1,254,191		—		141,876			15,109	(m)		1,674,354
Executive Vice President -		2009		237,955		—			55,742		—		149,022			15,743	(m)		458,463
Sales and Chief Customer Officer		2008		221,067		—			—		—		27,700			14,234	(m)		263,001

Sara Genster Robling (f)		2010		374,096		—			836,127		—		274,890			8,178	(n)		1,493,291
Executive Vice President		2009		339,308		—			1,366,200		—		369,495			8,210	(n)		2,083,213
and Division President -		2008		38,942		—			—		—		10,500			875	(n)		50,317
Birds Eye Frozen Division

(a)

Stock Awards and Option Awards, which were valued in accordance with the authoritative guidance for stock compensation, represent grant date fair value for the Class B-1, Class B-2 and Class B-3 units. The assumptions used in the valuation are discussed in Note 6 to our Consolidated Financial Statements for the years ended December 26, 2010, December 27, 2009 and December 28, 2008.

(b)	On July 13, 2009, Mr. Gamgort was appointed Chief Executive Officer and Director of the Company.

(c)	On July 1, 2007, Mr. Steeneck was appointed Chief Financial Officer of the Company.

(d)	Mr. Schiller was hired by the Company on June 7, 2010 and serves as Executive Vice President and Division President - Duncan Hines Grocery Division.

(e)	Mr. O’Brien was promoted to Executive Vice President — Sales and Chief Customer Officer on October 10, 2010.

(f)	Ms. Robling was hired by the Company on November 10, 2008 and was promoted to Executive Vice President and Division President – Birds Eye Frozen Division on April 1, 2010.

(g)	For Mr. Gamgort, represents a deferred cash incentive award of $458,333 earned in 2009.

(h)	For Mr. Steeneck, represents a retention bonus in the amount of $200,000 earned in 2009.

(i)	For Mr. Gamgort, 2010 includes $735,000 awarded under the regular Management Incentive Plan and $780,000 annual deferred cash incentive award in 2010 based upon the Board of Directors’ evaluation of attainment of specific performance objectives.

(j)	For Mr. Gamgort, “All other compensation” for 2010 includes contributions made by the Company to his 401(k) account and group life insurance. For 2009, includes contributions made by the Company to his group life insurance.

(k)	For Mr. Steeneck, “All other compensation” for 2010, 2009 and 2008 includes contributions made by the Company to his 401(k) account and group life insurance.

(l)	For Mr. Schiller, “All other compensation” for 2010 includes contributions made by the Company to his 401(k) account, group life insurance and relocation and moving expenses of $332,185.

(m)	For Mr. O’Brien, “All other compensation” for 2010, 2009 and 2008 includes an automobile allowance, contributions made by the Company to his 401(k) account and group life insurance.

(n)	For Ms. Robling, “All other compensation” for 2010, 2009 and 2008 includes contributions made by the Company to her 401(k) account and group life insurance.

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Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards for 2010

Employment Agreements

Crunch Holding Corp., one of our parent companies, entered into substantially similar employment agreements with each of Robert J. Gamgort and Craig Steeneck that govern the terms of each executive’s employment. Mr. Gamgort entered into an employment agreement for an initial term of five years commencing on July 13, 2009 which is filed as Exhibit 10.33. Mr. Gamgort’s employment agreement was amended on March 8, 2011 and is filed as Exhibit 10.44. Mr. Steeneck entered into an employment agreement, which is filed as Exhibit 10.17 and is for an initial term of five years commencing on April 2, 2007. The initial term of the contracts for each of Mr. Gamgort and Mr. Steeneck will be automatically extended for an additional one-year period on each anniversary date after the initial term, unless one of the parties provides the other 60 days’ prior written notice before the expiration that the term shall not be extended. The agreements are terminable by either party at any time, provided that an executive must give no less than 30 days’ notice prior to a resignation.

The financial terms of the amended employment agreement for Mr. Gamgort sets forth (a) his annual base salary, which will be subject to discretionary annual increases upon review by the Board of Directors; (b) states that he will be eligible to earn an annual bonus award at a target of 100% of the base salary, and up to a maximum of 200% of the base salary, based upon the achievement of annual EBITDA target or maximum performance objectives established annually by the Board; (c) states that he will be eligible to receive an annual deferred cash incentive award with a target of $1 million contingent on satisfaction of specified performance objectives established by the Board (the Board may, at its sole discretion, award pro-rata portions of any deferred award up to $1 million if the performance objectives are not satisfied in full), with each award payable on the third anniversary of its grant date (the award for the 2009 fiscal year was pro-rated and was not subject to performance criteria); and (d) Eligibility to receive a $3-4 million transaction incentive award, in the event of a qualified public offering or a change of control that occurs during Mr. Gamgort’s employment, with the grant of the transaction incentive award contingent on the valuation of Peak Holdings at the time of the transaction.

The Company has an employment agreement with Mr. Steeneck that sets forth the his annual base salary, which will be subject to discretionary annual increases upon review by the Board of Directors, and states that the executive will be eligible to earn an annual bonus as a percentage of salary with respect to each fiscal year (with a target percentage between 75% and 150%), based upon the extent to which annual performance targets established by the Board of Directors are achieved. The annual bonus, if any, shall be paid within two and one-half (2.5) months after the end of the applicable fiscal year. Mr. Steeneck also has the opportunity to earn an enhanced annual bonus, which would increase his target percentage from 75% to 100% and his maximum target percentage from 150% to 200%. The enhanced annual bonus is based upon the Company achieving certain EBITDA and other financial targets, which would be in excess of the targets established annually by the Board of Directors. In 2009, the enhanced target was met, but was not met in 2010. We recently modified the EBITDA targets included in Mr. Steeneck’s plan to levels we believe are reasonably attainable in light of the current global economic and financial crisis. A copy of the enhanced target annual bonus and its modification are filed as Exhibit 10.23 and 10.25, respectively.

Pursuant to each employment agreement listed above, if an executive’s employment terminates for any reason, the executive is entitled to receive (i) any base salary and unused vacation accrued through the date of termination; (ii) any annual bonus earned, but unpaid, as of the date of termination, (iii) reimbursement of any unreimbursed business expenses properly incurred by the executive; and (iv) such employee benefits, if any, as to which the executive may be entitled under our employee benefit plans (the payments and benefits described in (i) through (iv) being “accrued rights”). If an executive’s employment is terminated by us without “cause” (as defined below) (other than by reason of death or disability) or if the executive resigns as a result of a “constructive termination” (as defined below) (each a “qualifying termination”), the executive is entitled to (i) the accrued rights; (ii) a pro rata portion of a target annual bonus based upon the percentage of the fiscal year that shall have elapsed through the date of the executive’s termination of employment; (iii) subject to compliance with certain confidentiality, non-competition and non-solicitation covenants contained in his employment agreement and execution of a general release of claims on behalf of the Company, an amount equal to the product of (x) one-and-a-half in the case of Mr. Gamgort or one in the case of Mr. Steeneck and (y) the sum of (A) the executive’s base salary and (B) the executive’s target annual bonus amount, which shall be payable to the executive in equal installments in accordance with the Company’s normal payroll practices; (iv) continued coverage under our group health plans until the earlier of (A) eighteen months in the case of Mr. Gamgort and one year in the case of Mr. Steeneck from the executive’s date of termination of employment with the Company and (B) the date the executive is or becomes eligible for comparable coverage under health, life and disability plans of another employer; and, in the case of Mr. Gamgort, (v) the applicable payments under the terms of the annual deferred cash incentive award and the transaction incentive award.

138

For purposes of these agreements, “cause” is defined as (A) the executive’s continued failure substantially to perform his material duties under executive’s employment (other than as a result of total or partial incapacity due to physical or mental illness) following notice by the Company to the executive of such failure and 30 days within which to cure; (B) theft or embezzlement of Company property; (C) any act on the part of executive that constitutes a felony under the laws of the United States or any state thereof (provided, that if a executive is terminated for any action described in this clause (C) and the executive is never indicted in respect of such action, then the burden of establishing that such action occurred will be on the Company in respect of any proceeding related thereto between the parties and the standard of proof will be clear and convincing evidence (and if the Company fails to meet that standard, the Company will reimburse the executive for his reasonable legal fees in connection with that proceeding)); (D) the executive’s willful material misconduct in connection with his duties to the Company or any act or omission which is materially injurious to the financial condition or business reputation of the Company or any of its subsidiaries or affiliates; (E) the executive’s breach of the provisions of the non-competition clause of these agreements; or, solely in the case of Mr. Steeneck, (F) dishonesty in the performance of manager’s duties resulting in material harm to the Company. No act will be deemed to be “willful” if conducted in good faith with a reasonable belief that the conduct was in the best interests of the Company.

For purposes of these agreements, “constructive termination” is defined as (A) the failure of the Company to pay or cause to be paid the executive’s base salary or annual bonus (if any) when due; (B) a reduction in the executive’s base salary or target bonus opportunity percentage of base salary (excluding any change in value of equity incentives or a reduction in base salary affecting substantially all similarly situated executives by the same percentage of base salary); (C) any substantial and sustained diminution in the executive’s duties, authority or responsibilities as of the date of the agreement; (D) a relocation of the executive’s primary work location more than 50 miles without his prior written consent; (E) the failure to assign the executive’s employment agreement to a successor, and the failure of such successor to assume that employment agreement, in any public offering or change of control (each as defined in the Securityholders Agreement, dated April 2, 2007, described under “Item 13: Certain Relationships and Related Transactions and Director Independence—Securityholders Agreement of Peak Holdings LLC”); (F) a Company notice to the executive of the Company’s election not to extend the employment term; or, solely in the case of Mr. Gamgort, (G) a failure to elect or reelect or the removal as a member of the board of directors; provided, that none of these events will constitute constructive termination unless the Company fails to cure the event within 30 days after notice is given by the executive specifying in reasonable detail the event which constitutes constructive termination; provided, further, that constructive termination will cease to exist for an event on the 60^th day following the later of its occurrence or the executive’s knowledge thereof, unless the executive has given the Company notice thereof prior to such date.

In the event of an executive’s termination of employment that is not a qualifying termination or a termination due to death or disability, he will only be entitled to the accrued rights (as defined above); and, in the case of Mr. Gamgort’s death or disability, the applicable payments under the terms of the annual deferred cash incentive award and the transaction incentive award.

For information with respect to potential payments to the named executive officers pursuant to their employment agreements upon termination or change of control, see the tables set forth under “—Potential Payments Upon Termination or Change in Control.”

Each of the agreements also contains non-competition provisions that limit the executive’s ability to engage in activity competing with our company for 18 months, in the case of Mr. Gamgort, or one year, in the case of Mr. Steeneck, after termination of employment.

Other Change of Control and Severance Agreements

Mr. Schiller and Ms. Robling have entered into severance agreements that are different from the general Company policy. Under Mr. Schiller’s agreement, if his employment is terminated by us without cause (as defined), then he would be entitled to a cash payment equal to his then current salary and target bonus for 12 months. Under Ms. Robling’s agreement, if her employment is terminated by us without cause (as defined), then she would be entitled to a cash payment equal to her then current salary for up to 12 months (nine months guaranteed plus three additional months should she not be employed after the initial nine months). Mr. Schiller’s agreement is filed as Exhibit 10.38. Ms. Robling’s agreement is filed as Exhibit 10.37.

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Grants of Plan-Based Awards for 2010

The following table provides supplemental information relating to grants of plan-based awards to help explain information provided above in our Summary Compensation Table.


			Estimated Future Payouts Under Non-Equity Incentive Plan Awards						Estimated Future Payout Under Equity Incentive Plan Awards		All Other Stock Awards: Number of		Grant Date Fair Value of Stock
Name	Grant Date		Threshold ($)		Target ($)		Maximum ($)		Target (a) (#)		Units (a) (#)		Awards (a) ($)
Robert J. Gamgort		2010	$	—	$	875,000	$	1,750,000
		June 17, 2010								422.25		140.75	$	3,138,263
Craig Steeneck		2010		—		384,750		769,500
		June 17, 2010								138.75		46.25	$	1,031,223
Mark L. Schiller		2010		—		361,250		677,344
		June 17, 2010								375.00		125.00	$	2,787,090
Raymond O’Brien		2010		—		225,000		421,875
		June 17, 2010								56.25		18.75	$	418,064
		December 10, 2010								112.50		37.50	$	836,127
Sara Genster Robling		2010		—		288,750		541,406
		June 17, 2010								112.50		37.50	$	836,127

(a)

In connection with the Birds Eye Acquisition, profits interests in Peak Holdings LLC under the 2007 Unit Plan in the form of Class B-1and Class B-2 Units were awarded on June 17, 2010. In addition, Mr. O’Brien was granted additional Class B-1 and Class B-2 Units on December 10, 2010 as a result of his promotion.

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Outstanding Equity Awards at 2010 Fiscal Year End

The following table provides information regarding outstanding awards made to our named executive officers as of our most recent fiscal year end.


	Stock Awards
Name	Number of Shares or Units of Stock That Have Not Vested (#) (a)			Market Value of Shares or Units of Stock That Have Not Vested (h) ($)		Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) (b)			Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested (h) ($)
Robert J. Gamgort		590.8	(c)	$	3,292,947		1,575.3	(c)	$	8,781,006

Craig Steeneck		123.3	(d)		687,018		380.5	(d)		2,120,975
							100.0	(d)		557,418

Mark L. Schiller		125.0	(e)		696,773		300.0	(e)		1,672,254

Raymond O’Brien		59.8	(f)		333,057		145.8	(f)		812,437

Sara Genster Robling		97.5	(g)		543,483		255.0	(g)		1,421,416

(a)	Represents Class B-1 profits interest units (“PIU’s”), which vest ratably over five years.

(b)	Represents Class B-2 PIU’s, which vest ratably over five years depending whether annual or cumulative EBITDA targets are met and Class B-3 PIU’s, which vest either on a change of control or similar event if certain internal rates of return are met.

(c)	Assuming certain Company performance targets are met, Mr. Gamgort’s unvested Class B PIU’s vest as follows: in fiscal 2011 – 450.1; in fiscal 2012 – 450.1; in fiscal 2013 – 450.1; in fiscal 2014 – 787.6 and in fiscal 2015 – 28.15.

(d)	Assuming certain Company performance targets are met, Mr. Steeneck’s unvested Class B PIU’s vest as follows: in fiscal 2011 – 252.5; in fiscal 2012 – 268; in fiscal 2013 – 37; in fiscal 2014 – 37 and in fiscal 2015 – 9.3.

(e)	Assuming certain Company performance targets are met, Mr. Schiller’s unvested Class B PIU’s vest as follows: in fiscal 2011 – 100; in fiscal 2012 – 100; in fiscal 2013 – 100; in fiscal 2014 – 100 and in fiscal 2015 – 25.

(f)	Assuming certain Company performance targets are met, Mr. O’Brien’s unvested Class B PIU’s vest as follows: in fiscal 2011 – 48.8; in fiscal 2012 – 51; in fiscal 2013 – 46.5; in fiscal 2014 – 48 and in fiscal 2015 – 11.3.

(g)	Assuming certain Company performance targets are met, Ms. Robling’s unvested Class B PIU’s vest as follows: in fiscal 2011 – 75; in fiscal 2012 – 75; in fiscal 2013 – 75; in fiscal 2014 – 120 and in fiscal 2015 – 7.5.

(h)	The value ascribed to the units was calculated based upon a value of $5,574 per B unit, which is the value calculated at April 1, 2010 and is the value used in calculating stock compensation expense under the authoritative guidance for stock compensation.

141

Option Exercises and Stock Vested in 2010

The following table provides information regarding the amounts received by our named executive officers upon exercise of options or similar instruments or the vesting of stock or similar instruments during our most recent fiscal year.


	Stock Awards
Name	Number of Shares Acquired on Vesting (a) (#)		Value Received on Vesting (a) ($)
Robert J. Gamgort		422.0	$	2,352,025

Craig Steeneck		220.3		1,227,713

Mark L. Schiller		75.0		418,064

Raymond O’Brien		39.0		217,393

Sara Genster Robling		67.5		376,257

(a)	During 2010, a portion of the Class B-1 Units and Class B-2 Units vested. The value ascribed to the vested units was calculated based upon a value of $5,574 per B unit, which is the value used in calculating stock compensation expense under the authoritative guidance for stock compensation.

Nonqualified Deferred Compensation for 2010

None of our named executive officers are currently in a nonqualified deferred compensation plan.

Pension Benefits for 2010

None of our named executive officers are currently in a defined benefit plan sponsored by us or our subsidiaries or affiliates.

Potential Payments Upon Termination or Change in Control

The following tables show the estimated amount of potential cash severance payable to each of the named executive officers, as well as the estimated value of continuing benefits, based on compensation and benefit levels in effect on December 26, 2010, assuming the executive’s employment terminated effective December 26, 2010. Due to the numerous factors involved in estimating these amounts, the actual value of benefits and amounts to be paid can only be determined upon an executive’s termination of employment.

In the tables below, the value of the accelerated stock vesting was based upon an estimated value of Peak Holdings LLC Class B Units as of December 26, 2010 of $3,928 each. The value of accelerated stock vesting does not include unvested Class B-2 Units and Class B-3 Units that would vest upon a change of control only if certain internal rate of return targets were met because such targets had not been met as of December 26, 2010. The value of the health and welfare benefits in the tables below was estimated at $1,000 per month.

You should read this section together with the subsection above entitled “ – Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards for 2010-Employment Agreements,” which includes, among other things, definitions of the terms “cause” and “constructive termination” used in the tables below with respect to Messrs. Gamgort and Steeneck. The term “change of control” is defined in the applicable employment agreement or severance agreement for each such executive officer. Each of these agreements is filed as an exhibit to this Annual Report on Form 10-K.

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Robert J. Gamgort
	Voluntary Termination		Involuntary Termination Without Cause		Termination For Cause		Constructive Termination		Change in Control		Disability		Death
Cash Severance	$	—	$	2,625,000	$	—	$	2,625,000	$	—	$	—	$	—
Acceleration of Stock Vesting		—		—		—		—		2,320,466		—		—
Vested Stock Awards		—		2,541,220		—		2,541,220		—		—		—
Health and Welfare Benefits		—		18,000		—		18,000		—		—		—

Total	$	—	$	5,184,220	$	—	$	5,184,220	$	2,320,466	$	—	$	—


Craig Steeneck
	Voluntary Termination		Involuntary Termination Without Cause		Termination For Cause		Constructive Termination		Change in Control		Disability		Death
Cash Severance	$	—	$	897,750	$	—	$	897,750	$	—	$	—	$	—
Acceleration of Stock Vesting		—		—		—		—		484,126		—		—
Vested Stock Awards		—		1,968,910		—		1,968,910		—		—		—
Health and Welfare Benefits		—		12,000		—		12,000		—		—		—

Total	$	—	$	2,878,660	$	—	$	2,878,660	$	484,126	$	—	$	—


Mark L. Schiller
	Voluntary Termination		Involuntary Termination Without Cause		Termination For Cause		Constructive Termination		Change in Control		Disability		Death
Cash Severance	$	—	$	786,250	$	—	$	—	$	—	$	—	$	—
Acceleration of Stock Vesting		—		—		—		—		491,000		—		—
Vested Stock Awards		—		294,600		—		—		—		—		—
Health and Welfare Benefits		—		—		—		—		—		—		—

Total	$	—	$	1,080,850	$	—	$	—	$	491,000	$	—	$	—


Raymond O’Brien
	Voluntary Termination		Involuntary Termination Without Cause		Termination For Cause		Constructive Termination		Change in Control		Disability		Death
Cash Severance	$	—	$	225,000	$	—	$	—	$	—	$	—	$	—
Acceleration of Stock Vesting		—		—		—		—		234,698		—		—
Vested Stock Awards		—		174,796		—		—		—		—		—
Health and Welfare Benefits		—		—		—		—		—		—		—

Total	$	—	$	399,796	$	—	$	—	$	234,698	$	—	$	—


Sara Genster Robling
	Voluntary Termination		Involuntary Termination Without Cause		Termination For Cause		Constructive Termination		Change in Control		Disability		Death
Cash Severance	$	—	$	385,000	$	—	$	—	$	—	$	—	$	—
Acceleration of Stock Vesting		—		—		—		—		382,980		—		—
Vested Stock Awards		—		382,980		—		—		—		—		—
Health and Welfare Benefits		—		—		—		—		—		—		—

Total	$	—	$	767,980	$	—	$	—	$	382,980	$	—	$	—

Compensation of Directors

Our directors who are also our employees or employees of Blackstone receive no additional compensation for their services as director. Mr. Deromedi’s compensation is discussed below under “Director Services Agreement.” Joseph Jimenez, the current CEO of Novartis AG, was also a member of the Board of Directors during 2010, but resigned effective February 2011. Mr. Jimenez and Mr. Silcock, who are neither employees of the Company nor of Blackstone, received (1) an annual retainer of $30,000 to be paid annually in arrears on April 2^nd, (2) an annual payment of $10,000 for Mr. Silcock serving as Chairman of the Audit Committee and (3) an annual option grant with an after-tax value of approximately $50,000.

The table below sets forth information regarding director compensation for the year ended December 26, 2010.


Name	Fees Paid in Cash ($)		Stock Awards (a) ($)		Option Awards (a) ($)		Non-Equity Incentive Plan Compensation ($)		All Other Compensation ($)		Total ($)
Roger Deromedi	$	158,031	$	139,355	$	—		89,484		—	$	386,870

Joseph Jimenez		30,000		111,484		—		—		—		141,484

Ray Silcock		40,000		111,484		—		—		—		151,484

(a)	Stock Awards and Stock Option Grants, which were valued and expensed in accordance with the authoritative guidance for stock compensation, represent grant date fair value for the Class B-1 and Class B-2 Units.

Director Service Agreement

In connection with the Blackstone Transaction, on April 2, 2007, Crunch Holding Corp. entered into a director service agreement with Roger Deromedi that governs the terms of his services to the Company. The term of the agreement commenced on April 2, 2007 and ends on April 2, 2012; provided, however, that commencing on April 2, 2012 and on each April 2nd thereafter, the agreement term shall be extended for an additional one-year period unless the Company or Mr. Deromedi provides the other party 60 days’ prior notice before the next extension date that the term will not be so extended. This agreement is terminable by either party at any time; provided that Mr. Deromedi must give no less than 30 days’ notice prior to a resignation.

The director service agreement sets forth Mr. Deromedi’s annual fee, which will be subject to discretionary annual increases upon review by the Board of Directors, and is payable in regular installments. The agreement states that Mr. Deromedi will also be eligible to earn an annual bonus as a percentage of his annual fee with respect to each fiscal year (with a target percentage of 66.7%), based upon the sole discretion of the Board of Directors.

Pursuant to Mr. Deromedi’s agreement, if his services are terminated due to death or disability, he is entitled to receive (i) any base salary accrued through the date of termination, (ii) any annual bonus earned, but unpaid, as of the date of the termination and (iii) reimbursement of any unreimbursed business expenses properly incurred by the director prior to the date of termination (the payments described in (i) through (iii) being “accrued rights”).

Pursuant to the director service agreement, if Mr. Deromedi is terminated by us without “cause,” as defined under “—Employment Agreements,” or as a result of a constructive termination (as defined below), he is entitled to: (i) the accrued rights and (ii) subject to compliance with certain confidentiality, non-competition and non-solicitation covenants contained in his director service agreement and execution of a general release of claims on behalf of the Company, an amount equal to (x) one multiplied by (y) the sum of the annual base salary plus his target annual bonus, which shall be payable to him in equal installments in accordance with our normal payroll practices.

144

For purposes of Mr. Deromedi’s agreement, “constructive termination” means (A) the failure by us to pay or cause to be paid his annual compensation or annual bonus, if any, when due; (B) a reduction in his annual compensation (excluding any change in value of equity incentives or a reduction affecting substantially all senior managers); or (C) a material reduction or a material increase in his duties and responsibilities; provided, that none of these events constitutes constructive termination unless we fail to cure the event within 30 days after written notice is given by him specifying in reasonable detail the event that constitutes the constructive termination; provided, further, that constructive termination will cease to exist for an event on the 60^th day following the later of its occurrence or his knowledge thereof, unless he has given us written notice thereof prior to such date.

If Mr. Deromedi’s services are terminated by us for “cause” or if he resigns for reasons other than as a result of a constructive termination, he will only be entitled to receive his accrued rights.

Mr. Deromedi’s agreement also contains non-competition provisions that limit his ability to engage in activity competing with our company for six months after termination of his services.

A copy of Mr. Deromedi’s original employment agreement is filed as Exhibit 10.18.

On July 13, 2009, Roger K. Deromedi, who served as Executive Chairman of the Board of Directors of the Company, became Non-Executive Chairman. All other details of his compensation, duties and authority remained unchanged. The amendment of Mr. Deromedi’s director services agreement is filed as Exhibit 10.35.

145

ITEM 12.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth information with respect to the beneficial ownership of the Class A-1 and Class A-2 Units of our ultimate parent company, Peak Holdings LLC, a Delaware limited liability company, as of December 26, 2010 for (i) each individual or entity known by us to own beneficially more than 5% of the Class A-1 Units or Class A-2 Units of Peak Holdings LLC, (ii) each of our named executive officers, (iii) each of our directors and (iv) all of our directors and our executive officers as a group. The Class A-1 Units and the Class A-2 Units have equal voting rights. For additional information about the equity investment by certain members of our senior management, see “Item 10: Directors and Executive Officers of the Registrant—Equity Investment by Chairman and Executive Officers.”

The amounts and percentages of shares beneficially owned are reported on the basis of SEC regulations governing the determination of beneficial ownership of securities. Under SEC rules, a person is deemed to be a “beneficial owner” of a security if that person has or shares voting power or investment power, which includes the power to dispose of or to direct the disposition of such security. A person is also deemed to be a beneficial owner of any securities of which that person has a right to acquire beneficial ownership within 60 days. Securities that can be so acquired are deemed to be outstanding for purposes of computing such person’s ownership percentage, but not for purposes of computing any other person’s percentage. Under these rules, more than one person may be deemed to be a beneficial owner of the same securities and a person may be deemed to be a beneficial owner of securities as to which such person has no economic interest.

Except as otherwise indicated in the footnotes below, each of the beneficial owners has, to our knowledge, sole voting and investment power with respect to the indicated Class A-1 Units and Class A-2 Units. Unless otherwise noted, the address of each beneficial owner of Class A-1 Units is 345 Park Avenue, New York, New York 10017, and the address of each beneficial owner of Class A-2 Units is c/o Pinnacle Foods Group LLC, 1 Bloomfield Avenue, Mt. Lakes, New Jersey 07046.


Title of Class	Name and Address of Beneficial Owner	Amount and Nature of Beneficial Ownership		Percent
A-1	Blackstone Funds(1)		674,178,549		98	%
A-2	Roger Deromedi(2)		4,000,000		*
A-2	Robert J. Gamgort		1,109,579		*
A-2	Craig Steeneck		800,000		*
A-2	Ray Silcock		600,000		*
A-2	Joseph Jimenez		350,000		*
A-2	Mark L. Schiller		165,300		*
A-2	Sara Genster Robling		125,000		*
A-2	Raymond O’Brien		46,340		*
A-2	Directors and Executive Officers as a Group (thirteen persons)		8,809,278		1.3	%

*	Less than one percent

(1)

Reflects beneficial ownership of 503,200,144 Class A-1 Units held by Blackstone Capital Partners V L.P., 110,119,478 Class A-1 Units held by Blackstone Capital Partners V–A L.P.,36,251,411 Class A-1 Units held by Blackstone Capital Partners V-AC L.P., 16,406,594 Class A-1 Units held by Blackstone Family Investment Partnership V L.P., 5,626,741 Class A-1 Units held by Blackstone Family Investment Partnership V-SMD L.P., 1,216,966 Class A-1 Units held by Blackstone Family Investment Partnership V-A .P. and 1,357,215 Class A-1 Units held by Blackstone Participation Partnership V L.P. (collectively, the “Blackstone Funds”). The general partner of all Blackstone Funds is Blackstone Management Associates V L.L.C. BMA V L.L.C. is the sole member of Blackstone Management Associates V L.L.C. Blackstone Holdings III L.P. is the managing member and majority in interest owner of BMA V L.L.C. Blackstone Holdings III L.P. is indirectly controlled by The Blackstone Group L.P. and is owned, directly or indirectly, by Blackstone professionals and The Blackstone Group L.P. The Blackstone Group L.P. is controlled by its general partner, Blackstone Group Management L.L.C., which is in turn wholly owned by Blackstone’s senior managing directors and controlled by its founder Stephen A. Schwarzman. Mr. Schwarzman disclaims beneficial ownership of such Units.

(2)	All of the units are held in a revocable trust for the benefit of Mr. Deromedi.

146

ITEM 13.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

Securityholders Agreement of Peak Holdings LLC

In connection with the Blackstone Transaction, Peak Holdings LLC, our ultimate parent company, entered into a securityholders agreement with the equity owners (Blackstone and management investors).

Under the securityholders agreement, each of the securityholders of Peak Holdings LLC agrees to take all necessary actions to cause the persons designated by Blackstone to be elected to the boards of directors of Peak Holdings LLC and each of its subsidiaries, including our company. The parties also agree to vote the securities of Peak Holdings LLC and its subsidiaries, including our company, as Blackstone directs in connection with the merger or consolidation of Peak Holdings LLC, the sale of all or substantially all its assets, the amendment of its organizational documents and certain other matters.

The securityholders agreement also restricts transfers by employee holders of securities of Peak Holdings LLC from transferring those securities prior to the earliest of a qualified public offering, a change of control and the seventh anniversary of the closing of the Blackstone Transaction (the “lapse date”), subject to exceptions, and grants Peak Holdings LLC a right of first refusal in connection with sales by employee holders on or after the lapse date and before a public offering by Peak Holdings LLC. The securityholders agreement also gives employee holders customary tag-along rights with respect to sales of securities held by Blackstone and gives Blackstone customary drag-along rights in connection with a change of control, subject in certain instances to a minimum threshold of sales by Blackstone.

The agreement grants Blackstone demand registration rights with respect to the securities of Peak Holdings LLC and grants all securityholders certain piggyback registration rights. The agreement contains customary indemnification provisions in connection with any such registration. A copy of the agreement is attached as Exhibit 10.8.

For additional information about the equity investment by certain members of our senior management in connection with the Blackstone Transaction, see “Item 10: Directors and Executive Officers of the Registrant—Equity Investment by Chairman and Executive Officers.”

Securityholders Agreement of Crunch Holding Corp.

In connection with the 2007 Stock Incentive Plan described under “Item 11: Executive Compensation—Compensation Discussion and Analysis—Elements of Compensation,” Crunch Holding Corp., the immediate subsidiary of Peak Holdings LLC, entered into a securityholders agreement with Peak Holdings LLC and the employee shareholders of Crunch Holding Corp. from time to time.

Under the securityholders agreement, each of the shareholders of Crunch Holding Corp. agrees to take all necessary actions to cause the persons designated by Peak Holdings LLC to be elected to the boards of directors of Crunch Holding Corp. and each of its subsidiaries, including our company. The parties also agree to vote the securities of Crunch Holding Corp. and its subsidiaries, including our company, as Peak Holdings LLC directs in connection with the merger or consolidation of Crunch Holding Corp., the sale of all or substantially all its assets, the amendment of its organizational documents and certain other matters.

The securityholders agreement also restricts transfers by employee holders of securities of Crunch Holding Corp. from transferring those securities prior to the earliest of a qualified public offering, a change of control and the seventh anniversary of the closing of the Blackstone Transaction (the “lapse date”), subject to exceptions, and grants Crunch Holding Corp. a right of first refusal in connection with sales by employee holders on or after the lapse date and before a public offering by Crunch Holding Corp. The securityholders agreement also gives Blackstone and Peak Holdings LLC customary drag-along rights in connection with a change of control. A copy of the agreement is attached as Exhibit 10.9.

147

Advisory Agreement

We and one or more of our parent companies entered into a transaction and advisory fee agreement with an affiliate of Blackstone pursuant to which such entity or its affiliates will provide certain strategic and structuring advice and assistance to us. In addition, under this agreement, affiliates of Blackstone will provide certain monitoring, advisory and consulting services to us for an aggregate annual management fee equal to the greater of $2.5 million or 1.0% of adjusted EBITDA (as defined in the credit agreement governing our senior secured credit facilities) for each year thereafter. Affiliates of Blackstone also receive reimbursement for out-of-pocket expenses.

Expenses relating to the management fee were $4.5 million for fiscal year ended December 26, 2010, $2.5 million for the fiscal year ended December 27, 2009 and $2.5 million for the fiscal year ended December 28, 2008. In addition, the Company reimbursed The Blackstone Group out-of-pocket expenses totaling less than $0.1 million in each fiscal year.

In connection with the Birds Eye Acquisition the transaction and advisory fee agreement with an affiliate of Blackstone was updated to include a provision that granted the affiliates a 1% transaction fee based on the transaction purchase price. This fee totaled $14.0 million. Also, there was an advisory fee with an affiliate for $3.0 million. These fees are contained within the $24.1 million of transaction fees discussed in Note 3 to the Consolidated Financial Statements. Also, as described in Note 3, the Company incurred original issue discount, in connection with the Tranche C Term Loans. A portion of that discount, $0.8 million related to loans from an affiliate of The Blackstone Group.

A copy of the Blackstone advisory fee agreement is attached as Exhibit 10.7.

Upon a change of control in our ownership, a sale of all of our assets, or an initial public offering of our equity, and in recognition of facilitation of such change of control, asset sale or public offering by affiliates of Blackstone, these affiliates of Blackstone may elect to receive, in lieu of annual payments of the management fee, a single lump sum cash payment equal to the then-present value of all then-current and future management fees payable under this agreement. The lump sum payment would only be payable to the extent that it is permitted under the indentures and other agreements governing our indebtedness.

Supplier Costs

Graham Packaging, which is owned by affiliates of The Blackstone Group, supplies packaging for some of our products. Purchases from Graham Packaging were $6.6 million for the fiscal year ended December 26, 2010, $6.2 million for the fiscal year ended December 27, 2009 and $11.3 million for the fiscal year ended December 28, 2008.

Customer Purchases

Performance Food Group, which is owned by affiliates of The Blackstone Group, is a food service supplier that purchases products from us. Sales to Performance Food Group were $5.9 million for the fiscal year ended December 26, 2010, $5.2 million for the fiscal year ended December 27, 2009 and $5.0 million for the fiscal year ended December 28, 2008.

Debt and Interest Expense

As of December 26, 2010, $125.7 million of our senior secured term loan was owed to affiliates of The Blackstone Group. Related party interest for affiliates of The Blackstone Group for the fiscal year ended December 26, 2010 was $5.0 million. As of December 27, 2009, $109.2 million of our senior secured term loan was owed to affiliates of The Blackstone Group. Related party interest for affiliates of The Blackstone Group for the fiscal year ended December 27, 2009 was $1.4 million. As of December 28, 2008, $34.6 million of our senior secured term loan was owed to affiliates of The Blackstone Group. Related party interest for affiliates of The Blackstone Group for the fiscal year ended December 28, 2008 was $3.1 million.

Notes receivable from officers

148

Director Independence

We have not made a determination that any of our directors is independent under the applicable standards of the New York Stock Exchange or any other standard. Because our securities are not listed on any stock exchange or inter-dealer quotation system, we are not subject to the independence standards of any such exchange or quotation system. In addition, if we were a listed company, we believe we would be eligible for the controlled company exception set forth in Section 303A of the Listed Company Manual of the New York Stock Exchange (if that were the exchange on which we were listed) from the rule that would ordinarily require that a majority of a listed issuer’s board of directors be independent and from certain other rules. If we were subject to the New York Stock Exchange’s standard of independence, we believe that, at a minimum, our Executive Chairman, each of our directors who is an executive officer of our company and each of our directors who is associated with Blackstone, our controlling shareholder, would not be considered independent, including Messrs. Deromedi, Gamgort, Melwani, Overly and Giordano.

149

ITEM 14.

PRINCIPAL ACCOUNTANT FEES AND SERVICES

APPROVAL PROCESS

Pursuant to a policy originally adopted by the Audit Committee in November 2007, and reapproved in December 2009, the Audit Committee pre-approves all auditing services and all permitted non-auditing services (including the fees and terms thereof) to be performed by our independent registered public accounting firm (the “Auditor”) subject to the de minimis exceptions for permitted non-audit services described in Section 10A(i)(1)(B) of the 1934 Act, which are approved by the Committee prior to the completion of the audit. The Auditor shall not be retained to perform certain prohibited non-audit functions set forth in Section 10A(g) and (h) of the 1934 Act and Rule 2-01(c)(4) of Regulation S-X of the SEC. Such pre-approval can be given as part of the Committee’s approval of the scope of the engagement of the Auditor on an individual basis. The approved non-auditing services must be disclosed in the Company’s periodic public reports filed or submitted by it pursuant to Section 15(d) of the 1934 Act. The pre-approval of permitted non-auditing services can be delegated by the Committee to one or more of its members, but the decision must be presented to the full Committee at the next regularly scheduled Committee meeting. In 2010, the Board of Directors of Pinnacle Foods Finance LLC dismissed PricewaterhouseCoopers LLP as its independent registered public accounting firm and named Deloitte & Touche LLP as its successor.

INDEPENDENT AUDITOR’S FEES

Aggregate fees, including out-of-pocket expenses, for professional services rendered for the Company by our Auditor for the fiscal year ended December 26, 2010 and December 27, 2009:


	Deloitte & Touche LLP Fiscal year Ended December 26, 2010		PricewaterhouseCoopers LLP Fiscal year Ended December 27, 2009
	(Dollars in thousands)
Audit	$	1,020	$	1,145
Tax		720		29
All other		300		3

Total	$	2,040	$	1,177

AUDIT FEES

Audit fees for fiscal 2010 listed above are the aggregate fees, including out-of-pocket expenses, approved by the audit committee to be paid for professional services rendered by Deloitte & Touche LLP in connection with (i) the audit of the Company’s Consolidated Financial Statements, and our internal control over financial reporting as of and for the year ended December 26, 2010, and (ii) the reviews of the Company’s unaudited Consolidated Interim Financial Statements as of March 28, 2010, June 27, 2010 and September 26, 2010 and (iii) the review of debt offering documents.

Audit fees for fiscal 2009 listed above are the aggregate fees, including out-of-pocket expenses, approved by the audit committee to be paid for professional services rendered by PricewaterhouseCoopers LLP in connection with (i) the audit of the Company’s Consolidated Financial Statements, and our internal control over financial reporting as of and for the year ended December 27, 2009, (ii) the reviews of the Company’s unaudited Consolidated Interim Financial Statements as of March 29, 2009, June 28, 2009 and September 27, 2009, and (iii) assistance in reviewing debt offering documents.

TAX FEES

Tax fees in 2010 consist of fees and out-of-pocket expenses for professional services rendered by Deloitte & Touche in connection with tax research and tax return compliance. Tax fees in 2009 consist of fees and out-of-pocket expenses for professional services rendered by PricewaterhouseCoopers in connection with tax research.

ALL OTHER FEES

All other fees in 2010 consists of due diligence assistance and accounting research software. All other fees in 2009 consist of accounting research software.

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PART IV

ITEM 15.

EXHIBITS, FINANCIAL STATEMENTS AND SCHEDULES

a)	Documents filed as part of this report

The Consolidated Financial Statements and accompanying reports of our independent registered public accounting firm are included in Item 8 of this 10-K.

Exhibits


Exhibit Number		Description of exhibit
3.1		Pinnacle Foods Finance LLC Certificate of Formation (previously filed as Exhibit 3.1 to the Registration Statement on Form S-4 of Pinnacle Foods Finance LLC filed with the SEC on December 21, 2007 (Commission File Number: 333-148297), and incorporated herein by reference).

3.2		Pinnacle Foods Finance LLC Amended and Restated Limited Liability Company Agreement, dated as of April 2, 2007 (previously filed as Exhibit 3.2 to the Registration Statement on Form S-4 of Pinnacle Foods Finance LLC filed with the SEC on December 21, 2007 (Commission File Number: 333-148297), and incorporated herein by reference).

4.1		Senior Notes Indenture, dated as of April 2, 2007, among the Issuers, the Guarantors and the Trustee (previously filed as Exhibit 4.1 to the Registration Statement on Form S-4 of Pinnacle Foods Finance LLC filed with the SEC on December 21, 2007 (Commission File Number: 333-148297), and incorporated herein by reference).

4.2		Senior Subordinated Notes Indenture, dated as of April 2, 2007, among the Issuers, the Guarantors and the Trustee (previously filed as Exhibit 4.2 to the Registration Statement on Form S-4 of Pinnacle Foods Finance LLC filed with the SEC on December 21, 2007 (Commission File Number: 333-148297), and incorporated herein by reference).

4.3		Supplemental Senior Notes Indenture, dated as of November 18, 2009, by and among Birds Eye Holdings, Inc., Birds Eye Group, Inc., Kennedy Endeavors Incorporated, Seasonal Employers, Inc., BEMSA Holding, Inc., GLK Holdings, Inc., GLK, LLC, Rochester Holdco, LLC and Wilmington Trust Company, (previously filed as Exhibit 4.1 to the Current Report on Form 8-K of Pinnacle Foods Finance LLC filed with the SEC on December 24, 2009 (Commission File Number: 333-148297), and incorporated herein by reference).

4.4		Senior Notes Indenture, dated as of August 17, 2010, among the Issuers, the Guarantors and the Trustee. (previously filed as Exhibit 4.2 to the Registration Statement on Form S-4 filed with the SEC on October 5, 2010 (Commission File Number: 333-148297), and incorporated herein by reference).

10.1		Credit Agreement, dated as of April 2, 2007, among Peak Finance LLC (to be merged with and into Pinnacle Foods Finance LLC), Peak Finance Holdings LLC, Lehman Commercial Paper Inc., Goldman Sachs Credit Partners L.P. and other lenders party hereto (previously filed as Exhibit 4.8 to the Registration Statement on Form S-4 of Pinnacle Foods Finance LLC filed with the SEC on December 21, 2007 (Commission File Number: 333-148297), and incorporated herein by reference).

10.2		Second Amendment to the Credit Agreement, dated December 23, 2009, by and among Pinnacle Foods Finance LLC, Peak Finance Holdings LLC, Barclays Bank PLC, the Revolving Commitment Increase Lenders, the Tranche C Term Lenders and the Guarantors. (previously filed as Exhibit 10.2 to the Current Report on Form 8-K of Pinnacle Foods Finance LLC filed with the SEC on December 24, 2009 (Commission File Number: 333-148297), and incorporated herein by reference).

10.3		Fourth Amendment to the Credit Agreement, dated August 17, 2010, by and among Pinnacle Foods Finance LLC, Peak Finance Holdings LLC, Barclays Bank PLC, the Tranche D Term Lenders and the Guarantors (previously filed as Exhibit 10.40 to the Registration Statement on Form S-4 filed with the SEC on October 5, 2010 (Commission File Number: 333-148297), and incorporated herein by reference).

151



10.4		Security Agreement, dated as of April 2, 2007, among Peak Finance LLC (to be merged with and into Pinnacle Foods Finance LLC), Peak Finance Holdings LLC, Certain Subsidiaries of Borrower and Holdings identified herein and Lehman Commercial Paper Inc. (previously filed as Exhibit 4.9 to the Registration Statement on Form S-4 of Pinnacle Foods Finance LLC filed with the SEC on December 21, 2007 (Commission File Number: 333-148297), and incorporated herein by reference).

10.5		Guaranty, dated as of April 2, 2007, among Peak Finance Holdings LLC, Certain Subsidiaries of Borrower and Holdings identified herein and Lehman Commercial Paper Inc. (previously filed as Exhibit 4.10 to the Registration Statement on Form S-4 of Pinnacle Foods Finance LLC filed with the SEC on December 21, 2007 (Commission File Number: 333-148297), and incorporated herein by reference).

10.6		Intellectual Property Security Agreement, dated as of April 2, 2007, among Peak Finance LLC (to be merged with and into Pinnacle Foods Finance LLC), Peak Finance Holdings LLC, Certain Subsidiaries of Borrower and Holdings identified herein and Lehman Commercial Paper Inc. (previously filed as Exhibit 4.11 to the Registration Statement on Form S-4 of Pinnacle Foods Finance LLC filed with the SEC on December 21, 2007 (Commission File Number: 333-148297), and incorporated herein by reference).

10.7		Amended and Restated Transaction and Advisory Fee Agreement, dated as of November 18, 2009, between Peak Finance LLC and Blackstone Management Partners V L.L.C. (previously filed as Exhibit 10.1 to the Current Report on Form 8-K of Pinnacle Foods Finance LLC filed with the SEC on December 24, 2009 (Commission File Number: 333-148297), and incorporated herein by reference).

10.8		Securityholders Agreement, dated as of April 2, 2007, among Peak Holdings LLC and the other parties hereto (previously filed as Exhibit 10.15 to the Registration Statement on Form S-4 of Pinnacle Foods Finance LLC filed with the SEC on December 21, 2007 (Commission File Number: 333-148297), and incorporated herein by reference).

10.9		Securityholders Agreement, dated as of September 21, 2007 among Crunch Holding Corp. and the other parties hereto (previously filed as Exhibit 10.18 to the Registration Statement on Form S-4 of Pinnacle Foods Finance LLC filed with the SEC on December 21, 2007 (Commission File Number: 333-148297), and incorporated herein by reference).

10.10*		Tax Sharing Agreement, dated as of November 25, 2003 and amended as of December 23, 2009, by and among Crunch Holding Corp., Pinnacle Foods Holding Corporation, Pinnacle Foods Corporation, Pinnacle Foods Management Corporation, Pinnacle Foods Brands Corporation, PF Sales (N. Central Region) Corp., PF Sales, LLC, PF Distribution, LLC, PF Standards Corporation, Pinnacle Foods International Corp., Peak Finance Holdings LLC, Pinnacle Foods Finance Corp., Pinnacle Foods Finance LLC and Pinnacle Foods Group LLC, BEMSA Holding, Inc., Birds Eye Foods, Inc., Birds Eye Holdings, Inc., Birds Eye Group, Inc., GLK Holdings, Inc., Kennedy Endeavors, Incorporated, Rochester Holdco LLC, and Seasonal Employers, Inc..

10.11		Trademark License Agreement by and between The Dial Corporation and Conagra, Inc., dated July 1, 1995 (previously filed as Exhibit 10.33 to the Annual Report on Form 10-K of Pinnacle Foods Group Inc. for the fiscal year ended December 25, 2005 (Commission File Number: 333-118390), and incorporated herein by reference).

10.12		Swanson Trademark License Agreement (U.S.) by and between CSC Brands, Inc. and Vlasic International Brands Inc., dated as of March 24, 1998 (previously filed as Exhibit 10.27 to the Registration Statement on Form S-4 of Pinnacle Foods Group Inc. filed with the SEC on August 20, 2004 (Commission File Number: 333-1183900), and incorporated herein by reference).

10.13		Swanson Trademark License Agreement (Non-U.S.) by and between Campbell Soup Company and Vlasic International Brands Inc., dated as of March 26, 1998 (previously filed as Exhibit 10.28 to the Registration Statement on Form S-4 of Pinnacle Foods Group Inc. filed with the SEC on August 20, 2004 (Commission File Number: 333-118390), and incorporated herein by reference).

10.14		Trademark License Agreement, dated as of July 9, 1996, by and between The Quaker Oats Company, The Quaker Oats Company of Canada Limited and Van de Kamp’s, Inc. (previously filed as Exhibit 10.21 to the Registration Statement on Form S-4 of Pinnacle Foods Finance LLC filed with the SEC on December 21, 2007 (Commission File Number: 333-148297), and incorporated herein by reference).

10.15		Technology Sharing Agreement by and between Campbell Soup Company and Vlasic Foods International Inc., dated as of March 26, 1998 (previously filed as Exhibit 10.29 to the Registration Statement on Form S-4 of Pinnacle Foods Group Inc. with the SEC on August 20, 2004 (Commission File Number: 333-118390), and incorporated herein by reference).

152



10.16 +		Employment Agreement, dated April 2, 2007 (Jeffrey P. Ansell) (previously filed as Exhibit 10.3 to the Registration Statement on Form S-4 of Pinnacle Foods Finance LLC filed with the SEC on December 21, 2007 (Commission File Number: 333-148297), and incorporated herein by reference).

10.17 +		Employment Agreement, dated April 2, 2007 (Craig Steeneck) (previously filed as Exhibit 10.4 to the Registration Statement on Form S-4 of Pinnacle Foods Finance LLC filed with the SEC on December 21, 2007 (Commission File Number: 333-148297), and incorporated herein by reference).

10.18 +		Director Service Agreement, dated April 2, 2007 (Roger Deromedi) (previously filed as Exhibit 10.5 to the Registration Statement on Form S-4 of Pinnacle Foods Finance LLC filed with the SEC on December 21, 2007 (Commission File Number: 333-148297), and incorporated herein by reference).

10.19 +		Peak Holdings LLC 2007 Unit Plan, effective as of April 2, 2007 (previously filed as Exhibit 10.16 to the Registration Statement on Form S-4 of Pinnacle Foods Finance LLC filed with the SEC on December 21, 2007 (Commission File Number: 333-148297), and incorporated herein by reference).

10.20 +		Peak Holdings LLC Form of Award Management Unit Subscription Agreement (previously filed as Exhibit 10.17 to the Registration Statement on Form S-4 of Pinnacle Foods Finance LLC filed with the SEC on December 21, 2007 (Commission File Number: 333-148297), and incorporated herein by reference).

10.21 +		Crunch Holding Corp. 2007 Stock Incentive Plan, effective as of August 8, 2007 (previously filed as Exhibit 10.19 to the Registration Statement on Form S-4 of Pinnacle Foods Finance LLC filed with the SEC on December 21, 2007 (Commission File Number: 333-148297), and incorporated herein by reference).

10.22 +		Crunch Holding Corp. 2007 Stock Incentive Plan Form of Nonqualified Stock Option Agreement (previously filed as Exhibit 10.20 to the Registration Statement on Form S-4 of Pinnacle Foods Finance LLC filed with the SEC on December 21, 2007 (Commission File Number: 333-148297), and incorporated herein by reference).

10.23 +		Enhanced Target Annual Bonus letter, dated June 11, 2007 (Craig Steeneck) (previously filed as Exhibit 10.22 to the Annual Report on Form 10-K of Pinnacle Foods Finance LLC filed with the SEC on March 3, 2009 (Commission File Number: 333-148297), and incorporated herein by reference).

10.24 +		Supplemental Peak Holdings LLC Management Unit Subscription Agreement, dated June 11, 2007 (Craig Steeneck) (previously filed as Exhibit 10.23 to the Annual Report on Form 10-K of Pinnacle Foods Finance LLC filed with the SEC on March 3, 2009 (Commission File Number: 333-148297), and incorporated herein by reference).

10.25 +		Modification of the Enhanced Target Annual Bonus letter, dated February 27, 2009 (Craig Steeneck) (previously filed as Exhibit 10.24 to the Annual Report on Form 10-K of Pinnacle Foods Finance LLC filed with the SEC on March 3, 2009 (Commission File Number: 333-148297), and incorporated herein by reference).

10.26 +		Modification of the Supplemental Peak Holdings LLC Management Unit Subscription Agreement, dated February 27, 2009 (Craig Steeneck) (previously filed as Exhibit 10.25 to the Annual Report on Form 10-K of Pinnacle Foods Finance LLC filed with the SEC on March 3, 2009 (Commission File Number: 333-148297), and incorporated herein by reference).

10.27 +		Modification of the Peak Holdings LLC Form of Award Management Unit Subscription Agreement (previously filed as Exhibit 10.26 to the Annual Report on Form 10-K of Pinnacle Foods Finance LLC filed with the SEC on March 3, 2009 (Commission File Number: 333-148297), and incorporated herein by reference).

10.28 +		Modification of the Crunch Holding Corp. 2007 Stock Incentive Plan Form of Nonqualified Stock Option Agreement (previously filed as Exhibit 10.27 to the Annual Report on Form 10-K of Pinnacle Foods Finance LLC filed with the SEC on March 3, 2009 (Commission File Number: 333-148297), and incorporated herein by reference).

10.29 +		Severance benefit letter, dated October 7, 2008 (Chris L. Kiser) (previously filed as Exhibit 10.29 to the Annual Report on Form 10-K of Pinnacle Foods Finance LLC filed with the SEC on March 3, 2009 (Commission File Number: 333-148297), and incorporated herein by reference).

153



10.30+		Employment offer letter dated May 25, 2001 (Lynne M. Misericordia) (previously filed as Exhibit 10.30 to the Annual Report on Form 10-K of Pinnacle Foods Finance LLC filed with the SEC on March 3, 2009 (Commission File Number: 333-148297), and incorporated herein by reference).

10.31+		Employment offer letter dated May 25, 2001 (M. Kelley Maggs) (previously filed as Exhibit 10.31 to the Annual Report on Form 10-K of Pinnacle Foods Finance LLC filed with the SEC on March 3, 2009 (Commission File Number: 333-148297), and incorporated herein by reference).

10.32+		Separation Agreement, dated July 31, 2009 (Jeffrey P. Ansell). (previously filed as Exhibit 10.32 to the Quarterly Report on Form 10-Q of Pinnacle Foods Finance LLC filed with the SEC on August 12, 2009 (Commission File Number: 333-148297), and incorporated herein by reference).

10.33+		Employment Agreement, dated July 13, 2009 (Robert J. Gamgort). (previously filed as Exhibit 10.33 to the Quarterly Report on Form 10-Q of Pinnacle Foods Finance LLC filed with the SEC on August 12, 2009 (Commission File Number: 333-148297), and incorporated herein by reference).

10.34+		Peak Holdings LLC Management Unit Subscription Agreement, dated July 13, 2009 (Robert J. Gamgort). (previously filed as Exhibit 10.34 to the Quarterly Report on Form 10-Q of Pinnacle Foods Finance LLC filed with the SEC on August 12, 2009 (Commission File Number: 333-148297), and incorporated herein by reference).

10.35+		Amendment to Director Services Agreement, dated July 31, 2009 (Roger Deromedi). (previously filed as Exhibit 10.35 to the Quarterly Report on Form 10-Q of Pinnacle Foods Finance LLC filed with the SEC on August 12, 2009 (Commission File Number: 333-148297), and incorporated herein by reference).

10.36+		Employment offer letter dated November 24, 2008 (Edward L. Sutter) (previously filed as Exhibit 10.38 to the Annual Report on Form 10-K of Pinnacle Foods Finance LLC filed with the SEC on March 23, 2010 (Commission File Number: 333-148297), and incorporated herein by reference).

10.37+		Employment offer letter dated October 28, 2008 (Sara Genster Robling) (previously filed as Exhibit 10.39 to the Annual Report on Form 10-K of Pinnacle Foods Finance LLC filed with the SEC on March 23, 2010 (Commission File Number: 333-148297), and incorporated herein by reference).

10.38+		Employment offer letter dated June 3, 2010 (Mark L. Schiller) (previously filed as Exhibit 10.41 to the Quarterly Report on Form 10-Q of Pinnacle Foods Finance LLC filed with the SEC on August 9, 2010 (Commission File Number: 333-148297), and incorporated herein by reference).

10.39+		Lease, dated May 23, 2001, between Brandywine Operating Partnership, L.P. and Pinnacle Foods Corporation (Cherry Hill, New Jersey) (previously filed as Exhibit 10.25 to the Registration Statement on Form S-4 of Pinnacle Foods Group Inc. filed with the SEC on August 20, 2004 (Commission File Number: 333-118390), and incorporated herein by reference).

10.40		Lease, dated August 10, 2001, between 485 Properties, LLC and Pinnacle Foods Corporation (Mountain Lakes, New Jersey); Amendment No. 1, dated November 23, 2001; Amendment No. 2, dated October 16, 2003 (previously filed as Exhibit 10.26 to the Registration Statement on Form S-4 of Pinnacle Foods Group Inc. filed with the SEC on August 20, 2004 (Commission File Number: 333-118390), and incorporated herein by reference).

10.41		Amendment to Lease Agreement, dated February 10, 2007 (previously filed as Exhibit 10.1 to the Current Report on Form 8-K of Pinnacle Foods Group Inc. filed with the SEC on February 15, 2007 (Commission File Number: 333-118390), and incorporated herein by reference).

10.42		Lease, dated April 15, 2010, between Woodcrest Road Associates, L.P. and Pinnacle Foods Group LLC (Cherry Hill, New Jersey) (previously filed as Exhibit 10.40 to the Quarterly Report on Form 10-Q of Pinnacle Foods Finance LLC filed with the SEC on August 9, 2010 (Commission File Number: 333-148297), and incorporated herein by reference).

10.43+*		Terms of Employment letter dated February 7, 2011. (Antonio F. Fernandez)

10.44+**		Amendment to Employment Agreement. (Robert J. Gamgort)

12.1*		Computation of Ratios of Earnings to Fixed Charges.

21.1*		List of Subsidiaries

31.1		Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer.

154



31.2		Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer.

32.1		Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (A)

32.2		Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (A)

+	Identifies exhibits that consist of a management contract or compensatory plan or arrangement.

*	Identifies exhibits that are filed as attachments to this document.

(A)

Pursuant to Commission Release No. 33-8212, this certification will be treated as “accompanying” this Form 10-K and not “filed” as part of such report for purposes of Section 18 of Exchange Act, or otherwise subject to the liability of Section 18 of the Exchange Act and this certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference.

155

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

PINNACLE FOODS FINANCE LLC


By:		/s/ CRAIG STEENECK

Name:		Craig Steeneck
Title:		Executive Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)
Date:		March 10, 2011

Pursuant to the requirement of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.


NAME	TITLE	DATE

/S/ ROGER DEROMEDI By: Roger Deromedi	Chairman of the Board and Director	March 10, 2011

/S/ ROBERT J. GAMGORT By: Robert J. Gamgort	Chief Executive Officer and Director (Principal Executive Officer)	March 10, 2011

/S/ JASON GIORDANO By: Jason Giordano	Director	March 10, 2011

/S/ PRAKASH A. MELWANI By: Prakash A. Melwani	Director	March 10, 2011

/S/ JEFF OVERLY By: Jeff Overly	Director	March 10, 2011

/S/ RAYMOND P. SILCOCK By: Raymond P. Silcock	Director	March 10, 2011

/S/ CRAIG STEENECK By: Craig Steeneck	Executive Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)	March 10, 2011

Pinnacle Foods Finance LLC - FORM 10-K - March 10, 2011

Attached files