UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended ~~September~~January 271, ~~2003~~2005

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

For the transition period from to

Commission file numbers 333-50305-01 and 333-50305~~-01~~

Eagle Family Foods Holdings, Inc.

(Exact name of registrant as specified in its charter)

Delaware

13-3983598

(State or other jurisdiction of

incorporation or organization)

(IRS Employer

Identification Number)

Eagle Family Foods, Inc.

(Exact name of registrant as specified in its charter)


Delaware		13-3982757
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification Number)

735 Taylor Road, Suite 200 Gahanna, OH		43230
(Address of principal executive offices)		(Zip Code)

Registrants’ telephone number, including area code: (614) 501-4200

Indicate by check mark whether the registrants (1) have 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 registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

~~State~~As ~~the aggregate market value~~ of ~~the~~February ~~voting~~15, ~~and non-voting~~2005, ~~common~~there ~~equity~~were ~~held~~2,386,723 byshares ~~non-affiliates~~of ~~computed~~Common byStock, ~~reference~~par tovalue ~~the~~$.01 ~~price~~per atshare, ~~which~~of ~~the~~Eagle ~~common~~Family ~~equity~~Foods ~~was last sold~~Holdings, orInc. ~~the average bid~~ and ~~asked~~10,000 ~~price~~shares of Common ~~such common equity~~Stock, aspar ofvalue ~~the~~$.01 ~~last~~per ~~business~~share, ~~day~~ of ~~the~~Eagle ~~registrants’~~Family ~~most~~Foods, ~~recent completed~~Inc. ~~second~~outstanding, ~~fiscal year~~respectively. ~~None.~~

As of October 29, 2003, there were 1,002,282 shares of Common Stock, par value $.01 per share, of Eagle Family Foods Holdings, Inc. and 10,000 shares of Common Stock, par value $.01 per share, of Eagle Family Foods, Inc. outstanding, respectively.

TABLE OF CONTENTS

		Page
Part I – Financial Information
Part I - Financial Information
	Item 1. Financial Statements
	Eagle Family Foods, Inc.
	Eagle Family Foods, Inc. Statements of Operations and Comprehensive Income (Loss) for the Thirteen Week Periods ended September 27, 2003 and September 28, 2002	3
	Eagle Family Foods, Inc. Balance Sheets as of September 27, 2003 and June 28, 2003	4
	Eagle Family Foods, Inc. Statements of Cash Flows for the Thirteen Week Periods ended September 27, 2003 and September 28, 2002	5
	Eagle Family Foods, Inc. Statement of Changes in Stockholder’s Deficit for the Thirteen Week Period ended September 27, 2003	6
	Eagle Family Foods Holdings, Inc.
	Eagle Family Foods Holdings, Inc. Consolidated Statements of Operations and Comprehensive Income (Loss) for the Thirteen Week Periods ended September 27, 2003 and September 28, 2002	7
	Consolidated Statements of Income for the thirteen and twenty-six week periods ended January 1, 2005 and the fourteen and twenty-seven week periods ended January 3, 2004	3
	Eagle Family Foods Holdings, Inc. Consolidated Balance Sheets as of September 27, 2003 and June 28, 2003	8
	Consolidated Balance Sheets as of January 1, 2005 and July 3, 2004	4
	Eagle Family Foods Holdings, Inc. Consolidated Statements of Cash Flows for the Thirteen Week Periods ended September 27, 2003 and September 28, 2002	9
	Consolidated Statements of Cash Flows for the twenty-six week period ended January 1, 2005 and twenty-seven week period ended January 3, 2004	5
	Eagle Family Foods Holdings, Inc. Consolidated Statement of Changes in Stockholders’ Deficit for the Thirteen Week Period ended September 27, 2003	10
	Consolidated Statement of Changes in Stockholders’ Deficit for the twenty-six week period ended January 1, 2005	6
	Notes to the Financial Statements	117
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	1514
	Item 3. Quantitative and Qualitative Disclosures About Market Risk	2226
	Item 4. Controls and Procedures	2327
Part II – Other Information
	Item 6. Exhibits and Reports on Form 8-K	23
	Item 6. Exhibits	28

PART I. FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

EAGLE FAMILY FOODS HOLDINGS, INC.

Consolidated Statements of ~~Operations and Comprehensive~~ Income ~~(Loss)~~

(Dollars in Thousands)

(Unaudited)

	Thirteen Week Period Ended
	Thirteen-WeekPeriod EndedJanuary 1,2005		Fourteen-WeekPeriod EndedJanuary 3,2004			Twenty-SixWeek PeriodEndedJanuary 1,2005		Twenty-SevenWeek PeriodEndedJanuary 3,2004
	September 27,2003		September 28,2002
Sales, before marketing allowance	$	70,575	$	63,275		$	109,429	$	97,624
Net sales, before marketing allowance	$	38,976	$	36,378
Marketing allowance		13,291		11,981			19,946		18,207
Marketing allowance		7,719		6,475
Net sales		57,284		51,294			89,483		79,417
Net sales		31,257		29,903
Cost of goods sold		35,608		29,012			55,975		45,592
Cost of goods sold		18,527		19,016
Gross margin		21,676		22,282			33,508		33,825
Gross margin		12,730		10,887
Distribution expense		2,994		2,187			5,424		4,227
Distribution expense		2,372		1,953
Marketing expense		4,461		4,635			7,660		7,337
Marketing expense		3,159		2,508
General and administrative expense		1,511		2,060			2,918		3,992
General and administrative expense		1,933		1,881
Impairment charge on plant closure		2,612		—			2,612		—
Amortization of intangible assets		—		711
Operating income		10,098		13,400			14,894		18,269
Operating income		5,266		3,834
Interest expense, net		4,610		3,824			9,536		7,738
Interest expense, net		4,081		4,198
Income before income taxes from continuing operations		5,488		9,576			5,358		10,531
Income (loss) before income taxes and cumulative effect of accounting change		1,185		(364	)
Income tax expense		5		9			15		64
Income tax expense		55		12
Income from continuing operations		5,483		9,567			5,343		10,467
Net income (loss) before cumulative effect of accounting change		1,130		(376	)
Income from discontinued operations		—		380			—		610
Cumulative effect of accounting change		—		56,614
Loss on disposal of discontinued operations		—		(1,097	)		—		(1,097	)
Net income (loss)	$	1,130	$	(56,990	)
Loss from disposal of discontinued operations		—		(717	)		—		(487	)
Other comprehensive income (loss):
Net income	$	5,483	$	8,850		$	5,343	$	9,980
Change in fair value of commodity contracts (net of tax expense of $0 and $40)		432		68
Reclassification to interest expense (net of tax benefit of $33)		—		(56	)
Foreign translation adjustment		9		(28	)
Comprehensive income (loss)	$	1,571	$	(57,006	)

The accompanying notes are an integral part of these consolidated financial statements.

EAGLE FAMILY FOODS HOLDINGS, INC.

Consolidated Balance Sheets

(Dollars in Thousands Except Share Data)

	September 27,2003			June 28,2003
	(Unaudited)
Assets
Current assets
Cash and cash equivalents	$	1,758		$	1,616
Accounts receivable, net		13,631			7,261
Inventories		31,411			32,594
Other current assets		1,627			1,222
Total current assets		48,427			42,693
Property and equipment, net		4,801			5,574
Intangible assets, net		104,571			104,571
Other non-current assets		3,881			4,274
Intercompany receivable		1,382			1,382
Total assets	$	163,062		$	158,494
Liabilities and Stockholder’s Deficit
Current liabilities
Current portion of long-term debt	$	7,799		$	8,578
Accounts payable		5,419			5,504
Other accrued liabilities		7,212			6,111
Accrued interest		2,863			5,402
Total current liabilities		23,293			25,595
Long-term debt		189,973			184,674
Commitments and contingencies
Stockholder’s deficit
Common stock, $0.01 par value, 250,000 shares authorized, 10,000 shares issued and outstanding		1			1
Additional paid-in capital		92,500			92,500
Accumulated deficit		(143,158	)		(144,288	)
Accumulated other comprehensive income		453			12
Total stockholder’s deficit		(50,204	)		(51,775	)
Total liabilities and stockholder’s deficit	$	163,062		$	158,494

(Unaudited)

The accompanying notes are an integral part of these financial statements.


	January 1, 2005			July 3, 2004
Assets
Current assets
Cash and cash equivalents	$	1,474		$	2,030
Accounts receivable, net		16,667			8,075
Inventories		16,517			33,298
Other current assets		648			1,634

Total current assets		35,306			45,037
Property and equipment, net		12,257			3,960
Goodwill		64,932			61,047
Other intangible assets		35,787			33,783
Other non-current assets		4,345			4,547

Total assets	$	152,627		$	148,374

Liabilities and Stockholders’ Deficit

Current liabilities
Revolving financing facility	$	24,504		$	70,688
Accounts payable		11,428			7,093
Other accrued liabilities		12,707			5,904
Accrued interest		5,092			4,907

Total current liabilities		53,731			88,592

Long-term debt		126,346			115,000

Commitments and contingencies

Redeemable preferred stock, 1,000,000 shares authorized:
Series A preferred stock, $100 stated value, 816,750 shares issued and outstanding at redemption value		—			152,518
Treasury stock, 10,962 shares at cost		—			(1,382	)

Series A preferred stock, net		—			151,136
Series B preferred stock, $100,000 stated value, 99 shares issued and outstanding at redemption value		—			15,769
Series I preferred stock, $40,000 stated value, 150 shares issued and outstanding		5,913			—

Total redeemable preferred stock		5,913			166,905

Stockholders’ deficit
Common stock $0.01 par value, 2,750,000 shares authorized, 2,386,723 and 957,235 shares issued and outstanding, respectively		24			10
Additional paid-in capital		23,443			958
Accumulated deficit		(56,455	)		(223,445	)
Unearned compensation		(699	)		—
Accumulated other comprehensive income		324			354

Total stockholders’ deficit		(33,363	)		(222,123	)

Total liabilities and stockholders’ deficit	$	152,627		$	148,374

The accompanying notes are an integral part of these consolidated financial statements.

EAGLE FAMILY FOODS HOLDINGS, INC.

Consolidated Statements of Cash Flows

(Dollars in Thousands)

(Unaudited)

	Thirteen Week Period Ended
	Twenty-Six WeekPeriod EndedJanuary 1, 2005			Twenty-Seven WeekPeriod EndedJanuary 3, 2004
	September 27,2003			September 28,2002
Cash flows from operating activities:
Cash flows (used in) from operating activities:
Net income	$	5,343		$	9,980
Net income (loss)	$	1,130		$	(56,990	)
Adjustments to reconcile net income to cash from operating activities:
Adjustments to reconcile net loss to net cash (used in) from operating activities:
Depreciation and amortization		505			1,729
Depreciation and amortization		841			1,625
Amortization of deferred financing costs		800			741
Amortization of deferred financing costs		393			373
Loss on disposal of discontinued operations		—			1,097
Cumulative effect of accounting change		—			56,614
Impairment charge on plant closure		2,612			—
Net change in assets and liabilities:
Accounts receivable, net		(61,~~370~~991	)		(3,~~253~~767	)
Inventories		120,~~183~~303			119,~~050~~091
Accounts payable		~~(85~~778	)		~~(1,347~~81	)
Other assets		~~(405~~170	)		(~~249~~825	)
Other liabilities		~~(997~~6,189	)		(15,~~329~~503	)
Cash used in operating activities		(4,310	)		(3,506	)
Cash from operating activities		34,709			33,630
Cash used in investing activities:
Cash (used in) from investing activities:
Capital expenditures		(681,964	)		—(546	)
Cash used in investing activities		(68	)		—
Payment for purchase of subsidiary, net of cash acquired		(14,322	)		—
Cash from (used in) financing activities:
Proceeds from sale of discontinued operations		—			12,201
Payment under term loan facility		(780	)		—
Cash (used in) from investing activities		(16,286	)		11,655
Borrowings under revolving credit facility		15,200			9,200
Cash (used in) from financing activities
Payments under revolving credit facility		(9109,~~900~~740	)		(449,~~800~~900	)
Cash from financing activities		4,520			4,400
Other financing costs		(575	)		(248	)
Increase in cash and cash equivalents		142			894
Borrowings under revolving credit facility		63,556			23,900
Cash and cash equivalents at beginning of period		1,616			892
Proceeds from borrowing		12,000			—
Cash and cash equivalents at end of period	$	1,758		$	1,786
Proceeds from sale of common stock, net of expenses		9,786			—
Proceeds from sale of preferred stock, net of expenses		5,913			—
Payment under term loan facility		—			(13,663	)
Cash used in financing activities		(19,060	)		(39,911	)
Effect of exchange rate changes on cash		81			36
(Decrease) increase in cash and cash equivalents		(556	)		5,410
Cash and cash equivalents at beginning of period		2,030			1,616
Cash and cash equivalents at end of period	$	1,474		$	7,026
Supplemental disclosure:
Non-cash financing activities including dividends accrued on redeemable preferred stock	$	5,436		$	7,832
Note payable received in purchase of subsidiary	$	2,000		$	—
Common stock exchanged for property, plant and equipment	$	4,450		$	—

The accompanying notes are an integral part of these consolidated financial statements.

EAGLE FAMILY FOODS HOLDINGS, INC.

Consolidated Statement of Changes in ~~Stockholder~~Stockholders’s Deficit

For the ~~Thirteen~~Twenty-Six Week Period Ended ~~September~~January 271, ~~2003~~2005

(Dollars in Thousands)

(Unaudited)

	CommonStock		AdditionalPaid–InCapital		AccumulatedDeficit			AccumulatedOtherComprehensiveIncome			Total
	Common Stock		AdditionalPaid-In Capital		AccumulatedDeficit			UnearnedCompensation				AccumulatedOtherComprehensiveIncome			Total
Balance, June 28, 2003	$	1	$	92,500	$	(144,288	)	$	12		$	(51,775	)
Balance, July 3, 2004	$	10	$	958	$	(223,445	)	$	—			$	354		$	(222,123	)
Net income		—		—		15,~~130~~343			—			~~1,130~~	—			5,343
Other comprehensive income:
Preferred stock dividends		—		—		(5,436	)		—				—			(5,436	)
Change in fair value of commodities		—		—		—			432			432
Issuance of common stock		10		14,226		—			—				—			14,236
Foreign translation adjustment		—		—		—			9			9
Extinguishment of preferred stock		4		5,256		167,083			—				—			172,343
Balance, September 27, 2003	$	1	$	92,500	$	(143,158	)	$	453		$	(50,204	)
Discount on notes payable		—		2,304		—			—				—			2,304
Issuance of restricted common stock		—		699		—			(699	)			—			—
Other comprehensive income:
Change in fair value of commodities		—		—		—			—				106			106
Deferred gain on commodity contracts sold		—		—		—			—				23			23
Recognition of deferred gain on commodity contracts sold		—		—		—			—				(287	)		(287	)
Foreign currency translation adjustment		—		—		—			—				128			128
Balance, January 1, 2005	$	24	$	23,443	$	(56,455	)	$	(699	)		$	324		$	(33,363	)

The accompanying notes are an integral part of these consolidated financial statements.

EAGLE FAMILY FOODS HOLDINGS, INC.

~~Consolidated~~Notes ~~Statements~~to ofthe ~~Operations~~Financial ~~and~~Statements ~~Comprehensive Income (Loss)~~

(Dollars in Thousands)

(Unaudited)

	Thirteen Week Period Ended
	September 27,2003		September 28,2002
Net sales, before marketing allowance	$	38,976	$	36,378
Marketing allowance		7,719		6,475
Net sales		31,257		29,903
Cost of goods sold		18,527		19,016
Gross margin		12,730		10,887
Distribution expense		2,372		1,953
Marketing expense		3,159		2,508
General and administrative expense		1,933		1,881
Amortization of intangible assets		—		711
Operating income		5,266		3,834
Interest expense, net		4,081		4,198
Income (loss) before income taxes and cumulative effect of accounting change		1,185		(364	)
Income tax expense		55		12
Net income (loss) before cumulative effect of accounting change		1,130		(376	)
Cumulative effect of accounting change		—		56,614
Net income (loss)	$	1,130	$	(56,990	)
Other comprehensive income (loss):
Change in fair value of commodity contracts (net of tax expense of $0 and $40)		432		68
Reclassification to interest expense (net of tax benefit of $33)		—		(56	)
Foreign translation adjustment		9		(28	)
Comprehensive income (loss)	$	1,571	$	(57,006	)

1. Basis of Presentation:

The accompanying ~~notes~~financial statements as of January 1, 2005 and July 3, 2004 and for the thirteen and twenty-six week periods ended January 1, 2005 and ~~are~~the anfourteen ~~integral~~and ~~part~~twenty-seven ofweek ~~these~~periods ended January 3, 2004 present the consolidated financial ~~statements~~position, results of operations and cash flows of Eagle Family Foods Holdings, Inc. (“Holdings”) and its subsidiaries. On December 23, 2004, Eagle Family Foods, Inc. (“Eagle”) purchased all of the outstanding capital stock of the Milnot Company (“Milnot”). The results of Milnot’s operations have been included in the Company’s Consolidated Financial Statements since December 24, 2004. Eagle, Holdings, and Milnot are collectively referred to as the “Company,” unless the context indicates otherwise. Eagle is a 100% wholly owned subsidiary of Holdings; Holdings and Milnot fully and unconditionally guarantee the registered debt issued by Eagle; Holdings has no independent assets or operations; and Holdings has no other subsidiaries.

All significant intercompany balances and transactions have been eliminated in consolidation. Certain prior year amounts have been reclassified to conform to the current year’s presentation.

The financial statements as of January 1, 2005 and for the thirteen and twenty-six week periods ended January 1, 2005 and the fourteen and twenty-seven week periods ended January 3, 2004 are unaudited and are presented pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, these financial statements should be read in conjunction with the financial statements and notes thereto contained in the Annual Report on Form 10-K of Holdings for the year ended July 3, 2004. In the opinion of management, the accompanying financial statements reflect all adjustments (which are of a normal recurring nature) necessary to present fairly the financial position and results of operations and cash flows for the interim periods, but are not necessarily indicative of the results of operations for a full fiscal year.

2. Investment and Acquisition Activities:

On November 23, 2004, Dairy Farmers of America, Inc. (“DFA”) was issued 1,048,091 shares of Common Stock of Holdings (“DFA Transaction”), representing approximately 44% of the voting equity of Holdings. In exchange for these shares, DFA contributed $10,000,000 into the Company and transferred ownership of a manufacturing plant in El Paso, Texas (the “Texas Plant”) with an appraised value of $4,450,000. In addition, Mid-Am Capital, L.L.C. (“Mid-Am”), an affiliate of DFA, invested $6,000,000 for 150 shares of a new series of Preferred Stock of Holdings (“Series I Preferred Stock”). The Company will use the majority of these proceeds to refurbish the Texas Plant and expand the Texas Plant’s capabilities into processing sweetened and condensed milk.

The Company has engaged a third-party appraiser to assess the relative fair value of the common stock and preferred stock issued for the above transaction. This appraisal is expected to be completed by April 2, 2005, the end of the Company’s third quarter 2005. The Company has recorded the value of the common stock issued to DFA at $14,450,000, less an allocation of cost of issuance, and the value of Series I Preferred Stock issued to Mid-Am at $6,000,000, less an allocation of cost of issuance. The value is subject to appraisal adjustments.

Eagle entered into a five year milk supply agreement in which DFA will supply raw milk, on an ongoing basis, to the Texas Plant to manufacture canned milk. In addition Eagle entered into a tolling agreement, in which the Company from time to time will process raw milk supplied by DFA into condensed milk or dry milk powder. As stated in the tolling agreement, the Company will not purchase the raw milk but will process the milk to a condensed milk or dry milk powder form for a processing fee.

On December 23, 2004, Eagle purchased all of the outstanding capital stock of Milnot (the “Milnot Acquisition”) from Milnot Holding Corporation (“MHC”). Milnot is a manufacturer of sweetened condensed and evaporated milk products. The Company expects that the Milnot Acquisition will increase the Company’s presence in the private label sector of the canned milk category and will position the Company for future growth in both retail private label and foodservice businesses. Eagle paid an aggregate purchase price of $17,000,000, subject to adjustment pursuant to the Stock Purchase Agreement. The form of payment included (i) cash in the amount of $15,000,000 and (ii) a Subordinated Promissory Note in the aggregate principal amount of $2,000,000 (“Milnot

EAGLE FAMILY FOODS HOLDINGS, INC.

~~Consolidated~~Notes ~~Balance~~to ~~Sheets~~the Financial Statements

(~~Dollars in Thousands Except Share Data~~Unaudited)

	September 27,2003			June 28,2003
	(unaudited)
Assets
Current assets
Cash and cash equivalents	$	1,758		$	1,616
Accounts receivable, net		13,631			7,261
Inventories		31,411			32,594
Other current assets		1,627			1,222
Total current assets		48,427			42,693
Property and equipment, net		4,801			5,574
Intangible assets, net		104,571			104,571
Other non-current assets		3,881			4,274
Total assets	$	161,680		$	157,112
Liabilities and Stockholders’ Deficit
Current liabilities
Current portion of long-term debt	$	7,799		$	8,578
Accounts payable		5,419			5,504
Other accrued liabilities		7,212			6,111
Accrued interest		2,863			5,402
Total current liabilities		23,293			25,595
Long-term debt		189,973			184,674
Commitments and contingencies
Redeemable preferred stock, 1,000,000 shares authorized:
Series A preferred stock, $100 stated value, 816,750 shares issued and outstanding, at redemption value		141,657			138,247
Treasury stock, 10,962 shares at cost		(1,382	)		(1,382	)
		140,275			136,865
Series B preferred stock, $100,000 stated value, 99 shares issued and outstanding, at redemption value		14,636			14,280
Total redeemable preferred stock		154,911			151,145
Stockholders’ deficit
Common stock, $0.01 par value, 1,200,000 shares authorized, 1,002,282 shares issued and outstanding		10			10
Additional paid-in capital		958			958
Accumulated deficit		(207,918	)		(205,282	)
Accumulated other comprehensive income		453			12
Total stockholders’ deficit		(206,497	)		(204,302	)
Total liabilities and stockholders’ deficit	$	161,680		$	157,112

Note”) between Eagle and MHC. A portion of the purchase price was financed with the proceeds of the DFA Note (see Note 7 to the Financial Statements) and additional borrowings under the Company’s Revolving Financing Facility.

~~The~~This ~~accompanying~~acquisition ~~notes~~was accounted for by the purchase method of accounting. Accordingly, the Company has estimated the fair value of assets acquired and ~~are~~liabilities anassumed. ~~integral~~The ~~part~~estimated fair values of ~~these~~the ~~consolidated~~assets acquired and liabilities assumed at the date of acquisition have been included in the statement of financial ~~statements~~position of the Company. However, these estimated fair values are subject to adjustment upon the completion of the third party appraisal valuation of property, plant and equipment, and the Company’s continuing review. The estimated fair values of the assets acquired and liabilities assumed at the date of acquisition were as follows (in thousands):


	As of December 23, 2004
Current assets	$	7,730
Property, plant and equipment		5,000
Goodwill		3,885
Other intangible assets		2,004

Total assets acquired		18,619
Current liabilities assumed		4,069

Net assets acquired	$	14,550

3. Divestiture Activities:

On December 24, 2003, the Company sold to Dean Specialty Foods Group, LLC the Company’s business of marketing, distributing and selling powdered non-dairy creamer sold under the Cremora and Cremora Royale brand names (“Non-Dairy Creamer Business”) and related assets, including inventory (“Non-Dairy Creamer Sale”). In accordance with the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,”, the results of operations of the Non-Dairy Creamer Business for the fourteen and twenty-seven week periods ended January 3, 2004 have been classified as discontinued operations and the results of operations for that period have been reclassified. Interest expense related to the principal of the term loan repaid from the proceeds of the Non-Dairy Creamer Sale has been allocated to discontinued operations.

The results of operations of the discontinued business were as follows (in thousands):


	Fourteen Week Period Ended January 3, 2004		Twenty-Seven Week Period Ended January 3, 2004
Net sales	$	4,234	$	7,368

Operating income	$	526	$	923
Interest expense		146		313

Income from discontinued operations	$	380	$	610

On December 10, 2004, the Company announced its plan to close its sweetened condensed milk and mincemeat pie filling plant located in Wellsboro, Pennsylvania (“PA Plant”) by the end of April 2005 (“Plant Closure”). Future production will be shifted to the Texas Plant, or in the case of the mincemeat pie filling products, outsourced to a third party manufacturer. The Company recorded an impairment charge of $2,612,000 in the quarterly period ended January 1, 2005 for the production assets at the PA Plant. The employee costs, including benefits and severance for the 89 employees, are expected to be approximately $1,200,000, and will be expensed ratably over the future service period. In accordance with the provision of SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities,” these employee costs have not been recognized during the quarter as the agreement with the bargaining unit employees was signed in January 2005.

EAGLE FAMILY FOODS HOLDINGS, INC.

~~Consolidated~~Notes ~~Statements~~to ofthe ~~Cash~~Financial ~~Flows~~Statements

(Dollars in Thousands)

(Unaudited)

	Thirteen Week Period Ended
	September 27,2003			September 28,2002
Cash flows (used in) from operating activities:
Net income (loss)	$	1,130		$	(56,990	)
Adjustments to reconcile net loss to net cash (used in) from operating activities:
Depreciation and amortization		841			1,625
Amortization of deferred financing costs		393			373
Cumulative effect of accounting change		—			56,614
Net change in assets and liabilities:
Accounts receivable, net		(6,370	)		(3,253	)
Inventories		1,183			1,050
Accounts payable		(85	)		(1,347	)
Other assets		(405	)		(249	)
Other liabilities		(997	)		(1,329	)
Cash used in operating activities		(4,310	)		(3,506	)
Cash used in investing activities:
Capital expenditures		(68	)		—
Cash used in investing activities		(68	)		—
Cash from (used in) financing activities:
Payment under term loan facility		(780	)		—
Borrowings under revolving credit facility		15,200			9,200
Payments under revolving credit facility		(9,900	)		(4,800	)
Cash from financing activities		4,520			4,400
Increase in cash and cash equivalents		142			894
Cash and cash equivalents at beginning of period		1,616			892
Cash and cash equivalents at end of period	$	1,758		$	1,786
Supplemental disclosure:
Non-cash financing activities including dividends accrued on redeemable preferred stock	$	3,766		$	3,418

4. Inventories:

~~The~~Inventories ~~accompanying notes~~ are anstated ~~integral~~at ~~part~~the lower of ~~these~~cost ~~consolidated~~or ~~financial~~market ~~statements.~~at January 1, 2005 and July 3, 2004 and consisted of the following (in thousands):


	January 1, 2005		July 3, 2004
Finished goods	$	12,656	$	31,342
Raw materials		3,861		1,956

Total inventories	$	16,517	$	33,298

5. Property and Equipment:

Property and equipment is recorded at cost at January 1, 2005 and July 3, 2004 and consisted of the following (in thousands):


	January 1, 2005			July 3, 2004
Land	$	778		$	355
Buildings and improvements		7,744			3,575
Machinery and equipment		18,024			13,147
Computer equipment and software		11,145			11,033
Construction in progress		1,941			110

Total property and equipment		39,632			28,220
Accumulated depreciation		(27,375	)		(24,260	)

Property and equipment, net	$	12,257		$	3,960

The Company reviews the value of its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. An impairment loss is recognized whenever evidence exists that the carrying value is not recoverable. Because of the pending Plant Closure, the Company recorded an impairment charge of $2,612,000 in the quarterly period ended January 1, 2005 for the production assets at its PA Plant.

6. Goodwill and Intangible Assets:

The Company performed its annual impairment test of goodwill and intangible assets during the thirteen-week period ended October 2, 2004, and determined there was no impairment. There have been no facts or circumstances that would affect that determination as of January 1, 2005. The Company recorded goodwill of $3,885,000 based on the estimated fair value of assets acquired and liabilities assumed in the Milnot Acquisition.

7. Debt:

Debt consisted of the following (in thousands):


	January 1, 2005			July 3, 2004
Senior subordinated notes due January 15, 2008	$	115,000		$	115,000
Revolving financing facility due March 23, 2007		24,504			70,688
Subordinated promissory notes due November 1, 2007		14,000			—
Unamortized discount on subordinated promissory notes		(2,654	)		—

Total debt		150,850			185,688
Less revolving financing facility		(24,504	)		(70,688	)

Long-term debt	$	126,346		$	115,000

EAGLE FAMILY FOODS HOLDINGS, INC.

~~Consolidated~~Notes ~~Statement~~to ofthe ~~Changes~~Financial inStatements ~~Stockholders’ Deficit~~

For the Thirteen Week Period Ended September 27, 2003

(Dollars in Thousands)

(Unaudited)

	CommonStock		AdditionalPaid-InCapital		AccumulatedDeficit			AccumulatedOtherComprehensiveIncome		Total
Balance, June 28, 2003	$	10	$	958	$	(205,282	)	$	12	$	(204,302	)
Net income		—		—		1,130			—		1,130
Preferred stock dividend		—		—		(3,766	)		—		(3,766	)
Other comprehensive income
Change in fair value of commodities		—		—		—			432		432
Foreign translation adjustment		—		—		—			9		9
Balance, September 27, 2003	$	10	$	958	$	(207,918	)	$	453	$	(206,497	)

The Company is the borrower under a financing agreement (the “Financing Agreement’), dated March 23, 2004, as amended by and among Eagle, as borrower, Holdings and Milnot, as guarantors, and certain financial institutions party thereto from time to time (the “Lenders”), Fortress Credit Opportunities I LP (“Fortress”), as collateral agent for the Lenders, and Congress Financial Corporation (Central) (“Congress”), an administrative agent for the Lenders. The Financing Agreement provides for a secured Revolving Financing Facility that consists of (1) an asset-based Revolving Financing Facility (“Revolver A”) in an aggregate principal amount not to exceed $40,000,000 at any time outstanding, including a subfacility for the issuance of letters of credit in an aggregate amount not to exceed $5,000,000, and (2) a Revolving Financing Facility (“Revolver B”, and together with Revolver A, the “Revolving Financing Facility”) in an aggregate principal amount not to exceed $63,000,000, until December 31, 2005, thereafter until maturity not to exceed $53,000,000. The borrowings under Revolver A are subject to a maximum borrowing base based on the calculation of 65% of the book value of eligible inventory and 85% of the value of the net amount of eligible accounts receivable as defined in the Financing Agreement. The Company must borrow the maximum amount available under Revolver B before the Company can utilize Revolver A. As of July 3, 2004, the borrowings under Revolver A were $15,688,000, and as of January 1, 2005 and July 3, 2004, the borrowings under Revolver B were $24,504,000 and $55,000,000, respectively. The maturity date of the Financing Agreement is March 23, 2007, subject to extensions if certain conditions are met.

The ~~accompanying~~amendments ~~notes~~to the Financing Agreement occurring ~~are~~during anthe ~~integral~~Company’s ~~part~~fiscal year were as follows. On September 20, 2004, the Company entered into a First Amendment to the Financing Agreement that temporarily increased the principal amount available for borrowing under Revolver A from $27,000,000 to $30,000,000 through and including November 3, 2004. On November 23, 2004 the Company entered into a Second Amendment to the Financing Agreement which, among other things, (i) temporarily increased the credit commitment under the Revolving B loan to $63,000,000 beginning on January 1, 2005 until and including December 31, 2005, (ii) expressly permitted the acquisition by the Company of ~~these~~Texas ~~consolidated~~Plant, (iii) expressly permitted the issuance of shares by Holdings of its capital stock of DFA, and/or one or more of its affiliates and (iv) amended the financial ~~statements~~covenants to, among other things, account for the inclusion of the Texas Plant in the Company’s business. On December 23, 2004, the Company entered into a Third Amendment to the Financing Agreement which, among other things, (i) increased the Revolving A Credit Commitment to $40,000,000, (ii) consented to the Milnot Acquisition, (iii) allowed for the issuance by Eagle of the DFA Note and the Milnot Note, as described below, and (iv) amended the financial covenants to include the impact of the inclusion of Milnot in the Company’s business.

The Company’s Revolving Financing Facility includes a lockbox arrangement, which provides for all cash receipts to be swept daily to reduce borrowings outstanding under the Revolving Financing Facility. This arrangement, combined with the existence of a subjective acceleration clause, causes the Revolving Financing Facility balance to be classified as a current liability on the balance sheet. The acceleration clause allows the Company’s lenders to accelerate payment of the obligation or to terminate the Financing Agreement upon the occurrence of an event or development that would be reasonably likely to result in a material adverse effect on the Company’s operations, business, assets, properties or condition (financial or otherwise). Management believes that no such event or development has occurred.

The interest rate on Revolver A is LIBOR plus 3.0% or the reference rate as announced by Wachovia Bank (the “Reference Rate”) plus 0.5%. The interest rate on Revolver B is (1) 10.0% plus the greater of 2.0% and LIBOR or (2) 8.0% plus the greater of 4.0% and the Reference Rate. The fair market value of the Revolving Financing Facility at January 1, 2005 and July 3, 2004 was approximately the carrying value.

The Company’s ability to meet the covenants in the Financing Agreement will be dependent upon the Company’s future performance, which will be subject to general economic conditions and financial operations. There can be no assurance that the Company’s future performance will not be affected negatively by changes in the above factors to such a degree that it affects the Company’s ability to meet covenants in the Financing Agreement.

As of January 1, 2005, the Company had letters of credit outstanding totaling $1,183,000 under the Revolving Financing Facility, as required by certain insurance policies.

EAGLE FAMILY FOODS, INC.

EAGLE FAMILY FOODS HOLDINGS, INC.

Notes to the Financial Statements

(Unaudited)

1Eagle’s $115,000,000 of 8 3/4% Senior Subordinated Notes (the “Senior Notes”) are due January 15, 2008. ~~Basis~~The Senior Notes bear interest at a rate of ~~Presentation:~~8.75% per annum, payable on January 15 and July 15, commencing July 15, 1998. The fair market value of the Senior Notes was approximately $88,550,000 and $80,500,000 at January 1, 2005 and July 3, 2004, respectively.

~~The~~GE ~~accompanying~~Investment ~~financial~~Private ~~statements~~Placement asPartners ~~of September 27~~II, ~~2003~~a ~~and~~Limited ~~June 28,~~Partnership ~~2003 and for the thirteen week periods ended September 27~~(“GEI”), ~~2003~~ and ~~September 28~~Warburg, ~~2002~~Pincus ~~present the financial position~~Ventures, ~~results of operations and cash flows of Eagle Family Foods, Inc~~L.P. (“~~Eagle~~Warburg”) ~~and the consolidated financial position~~, ~~results~~ ofsignificant ~~operations~~shareholders ~~and cash flows~~ of ~~Eagle Family Foods~~ Holdings, ~~Inc.~~each ~~(“Holdings”) and its wholly-~~owned ~~subsidiary~~$14,092,000 ~~Eagle.~~in ~~Eagle~~aggregate ~~and~~principal ~~Holdings~~amount ~~are~~of ~~collectively~~Senior ~~referred~~Notes to as ~~the~~of ~~“Company~~February 6,” ~~unless~~2005. ~~the~~These ~~context~~stockholders ~~indicates~~have guaranteed ~~otherwise.~~payment ~~All~~of ~~significant~~Revolver ~~intercompany~~B ~~balances~~obligations and ~~transactions~~associated ~~have~~costs ~~been~~to ~~eliminated~~the inextent ~~consolidation.~~of ~~Certain~~interest ~~prior~~paid ~~year~~to ~~amounts~~the ~~have~~stockholders ~~been~~on ~~reclassified~~the toSenior ~~conform~~Notes toafter ~~the~~March ~~current~~23, ~~year’s presentation~~2004.

~~The~~On ~~financial~~December ~~statements~~21, as2004, ofEagle ~~September~~issued ~~27,~~an ~~2003~~unsecured ~~and~~Subordinated Promissory Note in favor of DFA for the ~~thirteen~~aggregate ~~week periods~~principal ~~ended~~amount ~~September~~of 27$12,000,000 ~~2003~~(the “DFA Note”, and ~~September~~together 28with the Milnot Note, ~~2002~~the ~~are~~“Acquisition ~~unaudited~~Notes”) and ~~are~~on ~~presented~~December ~~pursuant~~23, to2004, the ~~rules~~Company ~~and~~issued ~~regulations~~the Milnot Note, each in connection with the Milnot Acquisition. Each of the ~~Securities~~Acquisition Notes bears interest at 90-Day LIBOR plus two percent (2%) per annum and ~~Exchange~~matures ~~Commission.~~on ~~Accordingly~~the earlier of (i) November 1, ~~these~~2007 ~~financial~~or ~~statements~~(ii) ~~should~~a beSale ~~read~~or Recapitalization of the Company ( as defined in ~~conjunction~~the ~~with~~Acquisition Notes). Interest on the DFA Note is payable quarterly and interest on ~~financial~~the ~~statements~~Milnot Note compounds and ~~notes~~is ~~thereto~~payable ~~contained~~at inmaturity. ~~the~~The ~~Annual~~Acquisition ~~Report~~Notes onaccelerate ~~Form~~upon ~~10-K~~an Event of ~~Holdings~~Default, ~~and~~which shall be deemed to occur if (i) Eagle ~~for~~fails to pay when due and payable (whether at maturity or otherwise) the ~~year~~principal ~~ended~~payment on ~~June~~the 28DFA Note or the Milnot Note, ~~2003.~~as Inapplicable, together with accrued and unpaid interest thereof; within five (5) business days after the ~~opinion~~due date thereof, (ii) Eagle breaches any term of ~~management~~the DFA Note or the Milnot Note, as the ~~accompanying~~case ~~financial~~may ~~statements~~be, ~~reflect~~and fails ~~all~~to ~~adjustments~~remedy the same within thirty (~~which~~30) ~~are~~days following receipt of ~~a normal~~notice ~~recurring~~of ~~nature~~such breach from DFA or MHC, as applicable; (iii) ~~necessary~~an toInsolvency ~~present~~Event ~~fairly~~occurs; or (iv) the ~~financial~~Revolving ~~position~~Financing ~~and~~Facility ~~results~~has ofbecome ~~operations~~due and ~~cash~~payable ~~flows~~in ~~for~~full ~~the~~by ~~interim~~acceleration prior ~~periods,~~to ~~but~~maturity. ~~are~~The ~~not~~Revolving ~~necessarily~~Financing ~~indicative~~Facility ofmust be paid in full before the ~~results~~Acquisition ofNotes ~~operations~~are ~~for~~paid. aThe ~~full~~Acquisition ~~fiscal~~Notes ~~year~~rank on parity with Eagle’s Senior Notes.

In accordance with Accounting Principles Board Opinion No. 21, “Interest on Receivables and Payables,” the Company recorded the Acquisition Notes at the present value using the Company’s current interest rate for long-term borrowings. The purchase price of the Milnot Acquisition has been adjusted by $371,000 for the discount on the Milnot Note. The DFA Note is from a significant shareholder, and therefore the discount of $2,304,000 has been credited to additional paid in capital. ~~Recently~~The ~~Adopted~~discount ~~Accounting~~is ~~Statements:~~amortized over the term of the Acquisition Notes using the interest method.

~~In January 2003, the Financial Accounting Standards Board (the “FASB”) issued Interpretation No~~8. ~~46,~~Income ~~“Consolidation~~Taxes: of Variable Interest Entities, an interpretation of ARB No. 51” (“FIN No. 46”). FIN No. 46 expands existing accounting guidance regarding when a variable interest entity is consolidated by a company if that company is subject to a majority of the risk of loss from the variable interest entity’s activities or is entitled to receive a majority of the variable interest entity’s residual returns or both. This pronouncement applies immediately to variable interest entities created after January 31, 2003 and to variable interest entities in which a company obtains an interest after that date. For variable interest entities created before February 1, 2003, the provisions of this pronouncement are effective for periods ending after December 15, 2003. The adoption of FIN No. 46 will not have any effect on the Company’s results of operations or financial condition.

InThe ~~April~~Company ~~2003,~~assesses the ~~FASB~~recoverability ~~issued Statement~~ of ~~Financial~~the ~~Accounting~~deferred ~~Standards (“SFAS”)~~tax ~~No.~~assets ~~149, “Amendment of Statement 133 on Derivative Instruments~~ and ~~Hedging~~records ~~Activities”~~a ~~(“SFAS~~valuation ~~No.~~allowance ~~149”).~~when ~~SFAS~~it ~~No.~~is ~~149 amends and clarifies the accounting guidance on derivative instruments (including certain~~probable ~~derivative instruments embedded in other contracts) and hedging activities~~ that ~~fall~~any ~~within~~or ~~the~~all ~~scope~~ of ~~SFAS~~the ~~No.~~deferred ~~133,~~tax ~~“Accounting~~assets ~~for~~will ~~Derivative~~not ~~Instruments~~be ~~and Hedging Activities”~~realized. ~~SFAS~~Management ~~No.~~continues ~~149~~to ~~also~~see ~~amends~~lower ~~certain~~industry ~~other~~market ~~existing pronouncements,~~values ~~which will result~~ in ~~more~~the ~~consistent~~current ~~reporting~~economic ofenvironment, ~~contracts~~which ~~that~~could ~~are~~affect ~~derivatives~~the intax ~~their~~planning ~~entirety~~strategies oravailable ~~that~~to ~~contain~~the ~~embedded~~Company. ~~derivatives~~The ~~that~~Company maintains ~~warrant~~a ~~separate~~full ~~accounting.~~valuation ~~SFAS~~allowance ~~No.~~for ~~149~~its isnet ~~effective~~deferred ~~for~~tax ~~contracts~~assets ~~entered~~and ~~into~~net ~~or modified~~operating ~~after~~loss ~~June~~carry 30forwards, ~~2003,~~as ~~with~~sufficient ~~certain~~positive ~~exceptions,~~evidence ~~and~~does ~~for~~not ~~hedging~~exist ~~relationships~~to ~~initiated~~support ~~after~~reversal ~~June~~of ~~30,~~the ~~2003~~reserve. ~~The~~Until ~~guidance~~such ~~outlined~~time, inexcept ~~this~~for ~~pronouncement~~minor isstate toand belocal ~~applied prospectively~~tax provisions, ~~and was effective in~~ the ~~first quarter of the~~ Company’s ~~fiscal~~will ~~year 2004. The adoption of this pronouncement did not~~ have ~~any~~no ~~effect~~reported ontax ~~the~~provision, ~~Company’s~~net ~~results~~ of ~~operations~~valuation orallowance ~~financial condition~~adjustments.

~~In July 2003, the Company adopted SFAS No~~9. ~~150,~~Redeemable ~~“Accounting~~Preferred ~~for~~Stock: Certain Financial Instruments With Characteristics of Both Liabilities and Equity.” SFAS No. 150 establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. SFAS No. 150 requires that an issuer classify a financial instrument that is within its scope as a liability, or as an asset in some circumstances. SFAS No. 150 applies to three types of freestanding financial instruments, other than outstanding shares. One type is mandatory redeemable shares, which the issuing company is obligated to buy back in exchange for cash or assets; a second type includes put options and forward purchase contracts that require or may require the issuer to buy back some of its shares in exchange for cash or other assets; the third type is obligations that can be settled with shares, the monetary value of which is fixed, ties solely or predominantly to a variable such as a market index, or varies inversely with the value of the issuers’ shares. SFAS No. 150 does not apply to features embedded in a financial

In November 2004, Holdings effected a recapitalization of its existing Common Stock, Series A Non-Voting Preferred Stock (the “Series A Preferred Stock”), and Series B Non-Voting Preferred Stock (the “Series B Preferred Stock”) (the “Recapitalization”). In order to effect the Recapitalization, Holdings (i) amended its Certificate of Incorporation (as amended on November 23, 2004) (the “Certification of Incorporation”), to provide for (A) an increase in the authorized shares of Common Stock from 1,200,000 to 2,750,000 and (B) authorization of its Series I Preferred Stock and ii) entered into Contribution and Exchange Agreements (together, the “Contribution and Exchange Agreements”) with its existing equity holders (the “Existing Stockholders”), Warburg, GEI and Mr. Craig A. Steinke, Chief Executive Officer, Chief Financial Officer and President of Holdings pursuant to which the Existing Stockholders contributed and exchanged their existing shares of Common Stock, Series A Preferred Stock (plus accrued and unpaid dividends) and Series B Preferred Stock (plus accrued and unpaid dividends) as applicable, for shares of Common Stock.

EAGLE FAMILY FOODS, INC.

EAGLE FAMILY FOODS HOLDINGS, INC.

Notes to the Financial Statements

(Unaudited)

For accounting purposes, the Recapitalization has been treated as an ~~instrument~~extinguishment ~~that~~of isSeries ~~not~~A aPreferred ~~derivative~~Stock inand ~~its~~Series ~~entirety~~B Preferred Stock. The ~~adoption~~estimated fair value of ~~this~~Common ~~standard~~Stock ~~had~~exchanged nowas ~~impact~~$5,256,000 onand the carrying value of Series A Preferred Stock and Series B Preferred Stock aggregated to $172,343,000. The resulting extinguishment gain of $167,083,000 has been reflected as an adjustment to accumulated deficit. The Company’s ~~results~~estimated the fair value of ~~operations~~the orCommon ~~financial~~Stock exchanged using the value assigned to Common Stock issued to DFA which is subject ~~condition~~to the completion of a third party appraisal. Upon completion of this appraisal, the Company may adjust the estimated fair values assigned to Common Stock and the extinguishment gain.

3On November 23, 2004, Mid-Am, an affiliate of DFA, invested $6,000,000 into Holdings for 150 shares of Series I Preferred Stock at a stated value of $40,000 per share (the “Series I Stated Value”). ~~Inventories:~~The Series I Preferred Stock provides for the accretion of preferential cumulative dividends at an annual rate of 10%, compounded quarterly to a liquidation value. Dividends are payable as declared by the Holdings Board of Directors and shall be paid before any dividends shall be set apart for or paid upon the Common Stock of Holdings, par value $0.01 per share (the “Common Stock”).

~~Inventories~~In the event of liquidation, dissolution, or winding up, the holders of shares of Series I Preferred Stock are ~~stated~~entitled atto be paid out of the ~~lower~~assets of ~~cost~~Holdings available for distribution to its stockholders before any payment is made to the holders of stock junior to the Series I Preferred Stock. Holders of Series I Preferred Stock are not entitled to vote on any matters presented to the stockholders of Holdings. However, the affirmative vote or ~~market~~written consent of the holders of at ~~September~~least ~~27,~~two-thirds ~~2003~~of the then outstanding shares of Series I Preferred Stock is ~~and~~required ~~June~~to 28amend, ~~2003~~alter, ~~and~~or ~~consisted~~repeal the preferences, special rights or other powers of the ~~following~~Series I Preferred Stock. The Series I Preferred Stock is subject to mandatory redemption at a price per share equal to the Stated Value of Series I Preferred Stock plus all accretion thereon upon (1) the closing of a public offering pursuant to an effective registration statement under the Securities Act of 1933, (2) the sale of all or substantially all of the assets of Holdings or the merger or consolidation of Holdings with or into any other corporation or other entity in ~~thousands~~which the holders of Holdings’ outstanding shares before the merger or consolidation do not retain a majority of the voting power of the surviving corporation or other entity or (3): the acquisition by any person of shares of Common Stock representing a majority of the issued and outstanding shares of Common Stock then outstanding.

	September 27,2003		June 23,2003
Finished goods	$	30,196	$	31,384
Raw materials		1,215		1,210
Total inventories	$	31,411	$	32,594

Cumulative accrued dividends on the Series A Preferred Stock and Series B Preferred Stock totaled $76,712,000 at July 3, 2004. They are classified with Redeemable Preferred Stock in the consolidated balance sheet of Holdings. Accretion on the Series I Preferred Stock will occur when an event requiring redemption is probable.

4. Property and Equipment:

Property and equipment is recorded at cost at September 27, 2003 and June 28, 2003 and consisted of the following (in thousands):

	September 27,2003			June 28,2003
Land	$	355		$	355
Buildings and improvements		3,700			3,694
Machinery and equipment		12,835			12,732
Computer equipment and software		10,859			10,859
Construction in progress		400			442
Total property and equipment		28,149			28,082
Accumulated depreciation		(23,348	)		(22,508	)
Property and equipment, net	$	4,801		$	5,574

The Company periodically reviews the useful lives of its assets, and when warranted, changes are made that may result in an acceleration of depreciation.

5. Intangible Assets:

Effective June 30, 2002, the Company adopted SFAS No. 142, “Goodwill and Other Intangible Assets” (“SFAS 142”). In accordance with this standard, goodwill and certain other intangible assets have been classified as indefinite-lived assets that are no longer subject to amortization. Indefinite-lived intangible assets are subject to an impairment test upon adoption and at least annually thereafter. As of June 30, 2002, the value of the indefinite-lived tradenames was determined using a royalty savings methodology and discounted cash flows. As a result, the Company recorded an impairment charge of $43,736,000 against tradenames. After completing the valuation and impairment of the tradenames, the goodwill was assessed using estimated future discounted cash flow earnings and market valuation based on these cash flow earnings. As a result, the Company recorded an impairment charge of $12,878,000 against goodwill. The transitional impairment charge was recorded as a cumulative effect of accounting change. The useful lives of intangible assets that were subject to amortization were not revised because of the adoption of SFAS No. 142.

The Company performed its annual impairment test of intangible assets during the period ended September 27. 2003, and determined there was no impairment.

EAGLE FAMILY FOODS, INC.

EAGLE FAMILY FOODS HOLDINGS, INC.

Notes to the Financial Statements

(Unaudited)

~~The~~10. ~~net~~Comprehensive ~~carrying~~Income ~~amount of intangible assets consisted of the following~~ (~~in thousands~~Loss):

	September 27,2003		June 28,2003
Intangible assets not subject to amortization:
Tradenames	$	37,217	$	37,217
Goodwill		67,354		67,354
Total unamortized intangible assets	$	104,571	$	104,571

The components of other comprehensive income (loss) for the thirteen and twenty-six week periods ended January 1, 2005 and the fourteen and twenty-seven week periods ended January 3, 2004 consisted of the following (in thousands):

Total amortization of intangible assets of $711,000 for the thirteen week period ended September 28, 2002 represented amortization on an intangible asset, covenant not to compete, which was fully amortized by March 29, 2003.


	Thirteen Week Period Ended January 1, 2005		Fourteen Week Period Ended January 3, 2004		Twenty-Six Week Period Ended January 1, 2005			Twenty-Seven Week Period Ended January 3, 2004
Net income	$	5,483	$	8,850	$	5,343		$	9,980
Other comprehensive income (loss):
Change in fair value of commodity contracts		29		67		106			499
Deferred gain on commodity contracts sold		—		—		23			—
Recognition of deferred (gain) loss on commodity contracts sold		5		—		(287	)		—
Foreign currency translation adjustment		69		8		128			17

Comprehensive income	$	5,586	$	8,925	$	5,313		$	10,496

611. ~~Debt~~Pension Plan:

~~Debt~~The Company sponsors a defined benefit plan covering all eligible union employees (“Benefit Plan”). The Benefit Plan information is determined on a calendar year. The components of the net periodic benefit cost for the Benefit Plan consisted of the following (in thousands):

	September 27,2003			June 28,2003
	Three Months Ended						Twelve Months Ended
Senior subordinated notes due January 15, 2008	$	115,000		$	115,000
	December 31,2004			December 31,2003			December 31,2004			December 31,2003
Term loan facility due December 31, 2005		51,472			52,252
Service cost	$	17		$	15		$	68		$	60
Revolving credit facility due December 31, 2004		29,000			26,000
Interest cost		7			5			27			21
Revolving credit facility swingline loan due December 31, 2004		2,300			—
Expected return on plan assets		(5	)		(4	)		(19	)		(16	)
Total debt		197,772			193,252
Amortization of net loss		2			1			9			6
Less current portion of long-term debt		(7,799	)		(8,578	)
Net periodic benefit cost	$	21		$	17		$	85		$	71
Long-term debt	$	189,973		$	184,674

The Company ~~is the~~ ~~borrower~~contributed ~~under a credit agreement, dated as of January 23, 1998 and as amended, which consists of (i) a~~ $~~50.0 million seven-year revolving credit facility~~60,000 ~~including~~during ~~a $10.0 million swingline loan (~~the ~~“Revolving Credit Facility”) and (ii) an eight~~twenty-~~year~~six ~~term~~week ~~loan~~period ~~(the~~ended ~~“Term~~January ~~Loan~~1, ~~Facility”)~~2005. The ~~interest~~Company ~~rate~~contributed ona ~~the~~total ~~Term~~$90,000 ~~Loan~~to ~~Facility~~fund isits ~~LIBOR~~Benefit ~~plus~~Plan ~~4.25%.~~for ~~The interest rate on~~ the ~~Revolving~~calendar ~~Credit~~year ~~Facility~~ended isDecember ~~LIBOR plus 4.25% with the swingline loan portion bearing interest at the Prime rate plus 3.25%. The fair market value of the Term Loan Facility and the Revolving Credit Facility at September 27~~31, ~~2003 was approximately the carrying value~~2004.

~~The Company’s $115 million of senior subordinated notes (the “Notes”) are due January 15, 2008 and bear interest at 8~~12.~~75%~~ ~~per~~Stock ~~annum,~~Options ~~payable on January 15~~ and ~~July~~Restricted 15Stock: ~~of each year. The fair market value of the Notes was approximately $78,200,000 at September 27, 2003.~~

AsOn ofNovember ~~September 27~~23, ~~2003~~2004, the Company ~~had~~granted ~~letters~~a restricted stock award under the Eagle Family Foods Holdings, Inc. 1998 Stock Incentive Plan (“Incentive Plan”) of ~~credit~~50,700 ~~totaling~~shares of the Common Stock of Holdings at an estimated fair value of $~~600~~699,000, ~~under~~with a vesting period of three years. The Company estimated the ~~Revolving~~fair value ~~Credit~~of ~~Facility~~the Common Stock exchanged using the value assigned to Common Stock issued to DFA which is subject to the completion of a third party appraisal. The unearned compensation is shown as a reduction of stockholders’ deficit in the ~~required~~accompanying byConsolidated ~~certain~~Balance ~~insurance~~Sheets ~~policies~~of Holdings. Unearned compensation is amortized ratably over the restricted period.

7. Income Taxes:

Income taxes are recognized using the liability method. Under this method, deferred tax assets and liabilities are recognized based on the difference between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates in effect in the years in which those temporary differences are expected to reverse. The Company assesses the recoverability of the deferred tax assets in accordance with the provisions of SFAS No. 109, “Accounting for Income Taxes” (“SFAS No.109”). In accordance with SFAS No. 109, the Company determined that a valuation allowance for the net deferred tax assets and net operating loss carryforwards was required as of June 29, 2002. The Company continued to record a full valuation allowance. The valuation allowance was $52,853,000 and $53,291,000 as of September 27, 2003 and June 28, 2003, respectively. The Company intends to maintain a full valuation allowance for the net

~~EAGLE~~ Item ~~FAMILY~~2. ~~FOODS,~~MANAGEMENT’S ~~INC.~~DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

~~EAGLE~~Executive ~~FAMILY~~Summary ~~FOODS HOLDINGS, INC.~~

~~Notes~~On November 23, 2004, Dairy Farmers of America, Inc. (“DFA”) was issued 1,048,091 shares of Common Stock of Holdings to DFA (“DFA Transaction”), representing approximately 44% of the ~~Financial~~voting ~~Statements~~equity of Holdings. In exchange for these shares, DFA contributed $10.0 million into the Company and transferred ownership of a manufacturing plant in El Paso, Texas (the “Texas Plant”) with an appraised value of $4.5 million. In addition, Mid-Am Capital, L.L.C. (“Mid-Am”), an affiliate of DFA, invested $6.0 million for 150 shares of a new series of Preferred Stock of Holdings (“Series I Preferred Stock”). The Company will use the majority of these proceeds to refurbish the Plant (“El Paso Project”) and expand the Texas Plant’s capabilities into processing sweetened and condensed milk

On December 23, 2004, Eagle purchased all of the outstanding capital stock of Milnot Company (~~Unaudited~~“Milnot”) (the “Milnot Acquisition”) from Milnot Holding Corporation (“MHC”). Milnot is a manufacturer of sweetened condensed and evaporated milk products. The Company expects that the Milnot Acquisition will increase the Company’s presence in the private label sector of the canned milk category and will position the Company for future growth in both retail private label and foodservice businesses. Eagle paid an aggregate purchase price of $17.0 million, subject to adjustment pursuant to the Stock Purchase Agreement. The form of payment included (i) cash in the amount of $15.0 million and (ii) a Subordinated Promissory Note in the aggregate principal amount of $2.0 million (“Milnot Note”) between Eagle and MHC. A portion of the purchase price was financed with monies received from DFA as described in the Liquidity and Capital Resource section and additional borrowings under the Company’s Revolving Financing Facility.

On December 10, 2004, the Company ~~deferred~~announced ~~tax~~its ~~assets~~plan to close its sweetened condensed milk and ~~net~~mincemeat ~~operating~~pie ~~loss~~filling ~~carryforwards~~plant ~~until~~located ~~sufficient~~in ~~positive~~Wellsboro, ~~evidence~~Pennsylvania ~~exists~~(“PA toPlant”) ~~support~~by ~~reversal~~the end of ~~the~~April ~~remaining~~2005 ~~reserve~~(“Plant Closure”). ~~Until~~Future ~~such~~production will be shifted to the Texas ~~time~~Plant, ~~except~~or ~~for~~in ~~minor~~the ~~state~~case ~~and~~of ~~local~~the ~~tax~~mincemeat ~~expenses~~pie filling products, ~~the~~outsourced ~~Company~~to ~~will~~a ~~have~~third noparty ~~reported~~manufacturer. ~~tax~~The ~~provision,~~Company ~~net~~recorded ofan ~~valuation~~impairment ~~allowance~~charge ~~adjustments~~of $2.6 Inmillion in the ~~event~~quarterly period ended January 1, 2005 for the ~~Company~~production ~~were~~assets toat ~~determine~~the PA Plant. The employee costs, ~~based~~including onbenefits ~~the~~and ~~existence~~severance offor ~~sufficient~~the ~~positive~~89 ~~evidence~~employees, ~~that~~are ~~it would~~expected to be ~~able~~approximately to$1.2 ~~realize~~million, ~~deferred~~and ~~tax~~will ~~assets~~be inexpensed ratably over the future inservice ~~excess~~period. ofIn accordance with the ~~net~~provision ~~recorded~~of ~~amount~~Statement of Financial Accounting Standards (‘SFAS”) No. 146, an“Accounting ~~adjustment~~for toCosts ~~the~~Associated ~~valuation~~with ~~allowance~~Exit ~~would~~or ~~increase~~Disposal ~~income~~Activities,” inthese costs have not been recognized during the ~~period~~quarter ~~such~~as ~~determination~~the agreement with the bargaining unit employees was ~~made~~signed in January 2005.

Set forth below is a discussion of the consolidated financial condition and consolidated results of operations for the thirteen and twenty-six week periods ended January 1, 2005 and the fourteen and twenty-seven week periods ended January 3, 2004 of Eagle Family Foods Holdings, Inc. and its subsidiaries. The following discussion should be read in conjunction with the financial statements of the Company and the notes thereto included elsewhere in this Quarterly Report on Form 10-Q.

The discussion and analysis of the Company’s financial condition and results of operations relates to the business exclusive of the powdered non-dairy creamer business (“Non-Dairy Creamer Business”) unless otherwise described. On December 24, 2003, the Company sold to Dean Specialty Foods Group, LLC its Non-Dairy Creamer Business and related assets, including inventory (“Non Dairy Creamer Sale”). In accordance with the provisions of the SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” the results of operations of the Non-Dairy Creamer Business have been classified as discontinued operations and the results of operations for the period have been reclassified.

~~Item~~The 2.following ~~MANAGEMENT’S~~table ~~DISCUSSION~~sets ~~AND~~forth ~~ANALYSIS~~the OFconsolidated ~~FINANCIAL~~results ~~CONDITION~~of ~~AND~~operations ~~RESULTS~~as OFa ~~OPERATIONS~~percentage of net sales for the thirteen and twenty-six week periods ended January 1, 2005 and the fourteen and twenty-seven week periods ended January 3, 2004.

General


	Results of Operations
	Thirteen Week Period Ended January 1, 2005		Fourteen Week Period Ended January 3, 2004		Twenty-Six Week Period Ended January 1, 2005		Twenty-Seven Week Period Ended January 3, 2004
			(unaudited)				(unaudited)
Net sales	100.0	%	100.0	%	100.0	%	100.0	%
Cost of goods sold	62.2		56.5		62.6		57.4

Gross margin	37.8		43.5		37.4		42.6
Distribution expense	5.2		4.3		6.1		5.3
Marketing expense	7.8		9.0		8.6		9.2
General and administrative expense	2.6		4.1		3.3		5.0
Impairment charge on plant closure	4.6		—		2.9		—

Operating income	17.6	%	26.1	%	16.5	%	23.1	%

Set forth below is a discussion of the financial condition and results of operations for the thirteen week periods ended September 27, 2003 and September 28, 2002. With the exception of Stockholder’s Equity, Redeemable Preferred Stock and intercompany payable, the financial condition and results of operations of Eagle Family Foods, Inc. (“Eagle”) are substantially consistent with that of Eagle Family Foods Holdings, Inc. (“Holdings”). Eagle and Holdings are collectively referred to as the “Company,” unless the context indicates otherwise. The following discussion should be read in conjunction with the financial statements of the Company and the notes thereto included elsewhere in this Quarterly Report on Form 10-Q.

The following table sets forth the consolidated results of operations as a percentage of net sales for the thirteen week periods ended September 27, 2003 and September 28, 2002. This data is not intended to represent and should not be considered more meaningful than, or an alternative to, operating income, cash flows from operating activities or other measures of performance in accordance with generally accepted accounting principles.

	Results of Operations
	Thirteen Week Period Ended
	September 27,2003		September 28,2002
	(unaudited)
Net sales	100.0	%	100.0	%
Cost of goods sold	59.3		63.6
Gross margin	40.7		36.4
Distribution expense	7.6		6.5
Marketing expense	10.1		8.4
General and administrative expense	6.2		6.3
Amortization of intangible assets	—		2.4
Operating income	16.8	%	12.8	%

Results of Operations

Thirteen Week ~~Periods~~Period ended ~~September~~January 271, ~~2003~~ 2005 (“~~first~~second quarter ~~2004~~ 2005”) and ~~September~~Fourteen 28Week Period ended January 3, ~~2002~~2004 (“~~first~~second quarter ~~2003~~2004”) (Unaudited)

Net Sales. The Company’s net sales for ~~first~~second quarter ~~2004~~2005 were $3157.3 million as compared to $2951.93 million for ~~first~~second quarter ~~2003~~2004, an increase of $16.40 million, or 411.7%. The table below sets forth the Company’s net sales data for each of the Company’s product lines for ~~first~~second quarter ~~2004~~2005 and ~~first~~second quarter ~~2003~~2004 (dollars in millions):

Product Line	Company’s Principal Brands	Net ~~SalesFirstQuarter2004~~SalesSecondQuarter 2005		Percentage ofNet Sales		Net ~~SalesFirstQuarter2003~~SalesSecondQuarter 2004		Percentage ofNet Sales
Sweetened condensed milk	Eagle Brand, Meadow Gold, Magnolia, Star and other	$	25.9	82.7	%	$	22.7	75.9	%
Canned milk	Eagle Brand, Magnolia, Premium Dessert Kits and other	$	51.1	89.2	%	$	44.0	85.8	%
Non-dairy creamer	Cremora, Cremora Royale and other		3.1	9.9			5.2	17.4
Niche brand products	Borden, None Such and Kava		6.2	10.8			7.3	14.2
Niche brand products	Borden, None Such and Kava		2.3	7.4			2.0	6.7
Total net sales		$	57.3	100.0	%	$	51.3	100.0	%
Total net sales		$	31.3	100.0	%	$	29.9	100.0	%

Net sales of the ~~sweetened~~canned ~~condensed~~ milk product line increased by $37.21 million in ~~first~~second quarter ~~2004~~2005 as compared to first quarter ~~2003~~2004. This was primarily due to ~~early~~an ~~seasonal~~increase ~~shipments~~in tosales ~~certain~~volume ~~customers~~ of premium dessert kits. The dessert kits utilize the ~~branded~~Company’s ~~products~~Eagle Brand ~~and~~sweetened ~~higher~~condensed ~~sales~~milk ~~volume~~product ~~for~~in popular sweetened condensed milk ~~private~~recipes ~~label~~and ~~brands~~were launched by the Company in its fiscal year ended July 3, 2004.

Cost of Goods Sold. Cost of goods sold was $35.6 million for second quarter 2005 as compared to $29.0 million for second quarter 2004, an increase of $6.6 million, or 22.8%. Expressed as a percentage of net sales, cost of goods sold for second quarter 2005 increased to 62.2% from 56.5% for second quarter 2004. The increase in cost of goods sold is primarily due to the change in the sales mix to products with a higher production costs, primarily the premium dessert kits, and due to higher raw material costs.

Distribution Expense. Distribution expense was $3.0 million for second quarter 2005 as compared to $2.2 million for second quarter 2004, an increase of $0.8 million, or 36.4%. Expressed as a percentage of net sales, distribution expense for second quarter 2005 increased to 5.2% from 4.3% for second quarter 2004. The increase in distribution expense was primarily due to higher freight costs due to higher fuel surcharges and premium fees charged to obtain carriers to ensure customer deliveries when demand for trucks nationally was high, and due to higher distribution costs associated with the increased sales volume of the premium dessert kits.

~~Non-dairy~~Marketing ~~creamer~~Expense. ~~net~~Marketing ~~sales~~expense ~~decreased~~was by $24.15 million infor ~~first~~second quarter ~~2004~~2005 as compared to ~~first quarter 2003~~$4.6 million ~~This~~for ~~decrease~~second ~~was~~quarter ~~driven~~2004, bya ~~the~~decrease ~~Company~~of ~~exiting~~$0.1 ~~the~~million, ~~private~~or ~~label~~2.2%. ~~and~~Expressed ~~industrial~~as ~~non-dairy~~a ~~creamer~~percentage ~~business.~~of ~~Upon~~net ~~the~~sales, ~~closure~~marketing ofexpense ~~the~~for ~~Company’s~~second ~~non-dairy~~quarter ~~creamer~~2005 ~~facility~~decreased into ~~December~~7.8% ~~2002,~~from ~~the~~9.0% ~~Company~~for ~~decided~~second toquarter no2004. ~~longer~~The ~~manufacture~~Company ~~and market~~supported ~~products~~its ~~within~~growth in the premium ~~private~~dessert ~~label~~kits ~~and~~with ~~industrial~~marketing ~~non-dairy~~programs, ~~creamer~~offsetting ~~category.~~this ~~The~~increased ~~Company~~cost ~~continues~~with toreduced ~~focus~~marketing onexpenditures for its ~~core~~other ~~branded non-dairy creamer~~ product lines.

~~Cost~~General ofand ~~Goods~~Administrative ~~Sold~~(“G&A”) Expense. ~~Cost~~G&A ofexpense ~~goods sold~~ was $181.5 million for ~~first~~second quarter ~~2004~~2005 as compared to $192.01 million for ~~first~~second quarter ~~2003~~2004, a decrease of $0.56 million, or 228.6%. Expressed as a percentage of net sales, ~~cost~~G&A ofexpense ~~goods sold~~ for ~~first~~second quarter ~~2004~~2005 decreased to 592.36% from 634.61% for ~~first~~second quarter ~~2003~~2004. The decrease ~~in the percentage~~ is primarily ~~due to~~ the ~~favorable~~ ~~costs~~result of ~~the~~lower depreciation ~~non-dairy creamer products~~ as acertain ~~result~~computer ofsoftware ~~the~~and ~~Company~~systems ~~outsourcing~~have ~~the~~been ~~production~~fully ~~of this product line~~depreciated.

~~Distribution~~Impairment ~~Expense.~~charge ~~Distribution~~on ~~expense~~plant ~~was $2~~closure.4 ~~million~~Because ~~for~~of ~~first~~the ~~quarter~~pending ~~2004~~Plant asClosure, ~~compared~~the toCompany ~~$2.0~~recorded ~~million~~an ~~for~~impairment ~~first~~charge ~~quarter 2003, an increase~~ of $02.46 million, ~~or 20%. Expressed as a percentage of net sales, distribution expense~~ for ~~first~~the ~~quarter~~production ~~2004~~assets ~~increased~~at toits ~~7.6%~~PA ~~from~~Plant ~~6.5%~~in ~~for~~second ~~first~~ quarter ~~2003~~2005. ~~The increase in distribution costs was due to higher transportation costs.~~

~~Marketing~~Operating ~~Expense~~Income. ~~Marketing~~Operating ~~expense~~income was $310.21 million for ~~first~~second quarter ~~2004~~2005 as compared to $213.54 million for ~~first~~second quarter ~~2003~~2004, ana ~~increase~~decrease of $03.73 million, or 2824.06%. Expressed as a percentage of net sales, ~~marketing~~operating ~~expense~~income ~~increased~~for tosecond ~~10.1%~~quarter ~~for~~2005 ~~first~~decreased ~~quarter~~to ~~2004~~17.6% from 826.41% for ~~first~~second quarter ~~2003~~2004. The ~~increase~~decrease ~~in marketing expense~~ was due to the ~~costs~~impairment ~~associated~~charge because of the pending Plant Closure, the change in sales mix to products with ~~consumer~~a ~~marketing~~higher ~~programs~~production ~~promoting~~cost ~~Eagle~~and ~~Brand~~increased ~~sweetened~~raw ~~condensed~~material ~~milk~~costs infor ~~first~~the ~~quarter~~base ~~2004~~business.

~~General~~Interest ~~and Administrative (“G&A”)~~ Expense. ~~G&A~~Net interest expense was $14.96 million for ~~first~~ second quarter ~~2004~~2005 ~~and first~~as ~~quarter~~compared ~~2003~~to $3.8 ~~Expressed~~million asfor asecond ~~percentage~~quarter 2004, an increase of ~~net~~$0.8 ~~sales~~million, ~~G&A~~or 21.1%. The increase in interest expense ~~for~~was ~~first~~due to a higher average interest rate of 10.93% in second quarter ~~2004~~2005 ~~decreased~~as compared to 6an average interest rate of 8.274% ~~from~~in 6second quarter 2004.3% ~~for~~The ~~first~~average debt balance in second quarter ~~2003~~2005 was $168.5 million as compared $181.8 million in second quarter 2004.

~~Amortization~~Income ~~of Intangible Assets~~Taxes. ~~Amortization~~The ofCompany ~~intangible~~recorded ~~assets~~minimal ~~was~~state ~~$0.7~~and ~~million~~local ~~for~~income ~~first~~tax ~~quarter~~expense ~~2003.~~in ~~Effective~~second ~~with~~quarter ~~the~~2005 ~~fiscal year 2003~~ and insecond ~~accordance~~quarter ~~with Statement of Financial Accounting Standards (‘SFAS”) No~~2004. ~~142,~~The ~~“Goodwill and Other Intangible Assets”, the~~ Company ~~will~~was ~~not~~able to ~~amortize~~use ~~indefinite-lived~~its ~~assets,~~net ~~but~~operating ~~will~~loss ~~evaluate~~carryforwards in the ~~assets~~current ~~for impairment~~periods.

~~Operating~~ Income. ~~Operating~~(Loss) ~~income~~from ~~was~~Discontinued $5Operations.3 ~~million~~Income ~~for first~~from ~~quarter~~discontinued ~~2004~~operations aswas ~~compared to operating income of~~ $30.84 million for ~~first~~second quarter ~~2003, an increase of $1~~2004.5 ~~million,~~This orrepresents ~~39.5%.~~the ~~The~~results ~~increase~~of inoperations ~~operating~~of ~~income was primarily due to~~ the ~~increase~~Non-Dairy inCreamer ~~sales~~Business. ~~volume~~The inCompany ~~first~~sold ~~quarter~~the ~~2004~~Non-Dairy Creamer asBusiness ~~compared~~on ~~to first~~December ~~quarter~~24, 2003 ~~and~~to aDean ~~reduction in amortization of intangible assets in first quarter 2004~~Foods.

~~Interest~~Loss on ~~Expense.~~Disposal ~~Net~~of ~~interest~~Discontinued ~~expense was $4~~Operations.1 ~~million~~In ~~and~~second ~~$4.2 million for first~~ quarter 2004, ~~and~~the ~~first~~Company ~~quarter~~recorded ~~2003, respectively,~~ a ~~decrease~~loss of $01.1 million. ~~The~~from ~~decrease~~the ~~was~~Non-Dairy ~~primarily~~Creamer ~~due to lower average interest rates and lower average debt balances for first quarter 2004 as compared to first quarter 2003~~Sale.

~~Income~~Twenty-Six ~~Taxes.~~Week ~~The~~Period ~~Company~~ended ~~recorded~~January an1, ~~income~~2005 ~~tax~~(“first ~~expense~~half of2005”) ~~$0.06 million~~ and ~~$0.01~~Twenty-Seven ~~million~~Week ~~for~~Period ~~first~~ended ~~quarter~~January 3, 2004 ~~and~~ (“first ~~quarter 2003,~~half ~~respectively.~~2004”) (Unaudited)

~~Liquidity~~Net Sales. The Company’s net sales for first half 2005 were $89.5 million as compared to $79.4 million for first half 2004, an increase of $10.1 million, or 12.7%. The table below sets forth the Company’s net sales data for each of the Company’s product lines for first half 2005 and ~~Capital~~first ~~Resources~~half 2004 (dollars in millions):

Borrowings under the Term Loan Facility were $51.5 and $52.3 million at September 27, 2003 and June 28, 2003, respectively. $7.8 million, $25.0 million and $18.7 million under the Term Loan Facility matures in fiscal years 2004 through 2006, respectively. The Company has a $50.0 million Revolving Credit Facility, of which $31.3 million and $26.0 million were outstanding at September 27, 2003 and June 28, 2003, respectively. Included in the Revolving Credit Facility is a $10.0 million swingline loan that is utilized for short-term borrowings for periods less than thirty days. The Revolving Credit Facility matures in fiscal year 2005.


Product Line	Company’s Principal Brands	Net Sales First Half 2005		Percentage of Net Sales		Net Sales First Half 2004		Percentage of Net Sales
Canned milk	Eagle Brand, Magnolia, Premium Dessert Kits and other	$	80.9	90.4	%	$	69.8	87.9	%
Niche brand products	Borden, None Such and Kava		8.6	9.6			9.6	12.1

Total net sales		$	89.5	100.0	%	$	79.4	100.0	%

The increase in canned milk net sales of $11.1 million is primarily due to an increase in sales volume of premium dessert kits. The dessert kits utilize the Company’s Eagle Brand sweetened condensed milk product in

~~Interest~~ popular ~~payments~~sweetened oncondensed ~~the~~milk ~~Notes~~recipes and ~~interest~~were ~~and~~launched ~~principal~~by ~~payments under~~ the ~~Term~~Company ~~Loan~~in ~~Facility~~its ~~and~~fiscal ~~the Revolving~~year ~~Credit~~ended ~~Facility~~July ~~(collectively~~3, ~~the~~2004. ~~“Senior~~In ~~Credit~~addition, ~~Facilities”) represent significant cash requirements for~~ the Company. ~~Borrowings~~had ~~under~~increased ~~the~~sales volume ~~Term~~of ~~Loan Facility and~~ the ~~Revolving~~private ~~Credit~~label ~~Facility~~sweetened ~~bear~~condensed ~~interest~~milk ~~at floating rates~~ and ~~require~~ ~~interest~~evaporated ~~payments on varying dates~~milk.

~~The~~Cost ~~Company’s remaining~~of ~~liquidity~~Goods ~~needs~~Sold. ~~are~~Cost ~~for~~of ~~capital~~goods ~~expenditures~~sold ~~and~~was ~~increases~~$56.0 inmillion ~~working~~for ~~capital.~~first ~~The~~half ~~Company~~2005 ~~had~~as ~~capital~~compared ~~expenditures~~to of $045.16 million infor first ~~quarter~~half 2004., ~~The~~an ~~Company~~increase ~~expects~~of ~~to spend~~ $110.04 million, onor ~~capital~~22.8%. ~~expenditures~~Expressed ~~during~~as ~~its~~a ~~fiscal year~~percentage ~~ending~~of ~~July~~net 3sales, cost ~~2004,~~of ~~which~~goods ~~will~~sold ~~consist~~for offirst ~~enhancements~~half at2005 ~~existing~~increased ~~facilities~~to 62.6% from 57.4% for first half 2004. The ~~Company’s~~increase ~~primary~~in ~~sources~~cost of ~~liquidity~~goods ~~are~~sold ~~cash~~is ~~flows~~primarily ~~from~~due ~~operations~~to ~~and~~the ~~available~~change ~~borrowings~~in ~~under~~the sales mix to products with higher production costs, primarily the ~~Revolving~~premium ~~Credit~~dessert kits, ~~Facility~~and due to higher raw material costs.

~~Net~~Distribution Expense. ~~cash~~Distribution ~~used~~expense ~~in operating activities~~ was $45.34 million ~~and~~for ~~$3.5~~first ~~million~~half ~~in first~~2005 ~~quarter~~as ~~2004~~compared ~~and~~to $4.2 million for first ~~quarter~~half ~~2003~~2004, ~~respectively,~~ an increase of $01.82 million, or 28.6%. ~~The~~Expressed ~~increase~~as ~~was~~a ~~primarily~~percentage ~~due~~of net sales, distribution expense for first half 2005 increased to an6.1% from 5.3% for first half 2004. The increase in ~~accounts~~distribution ~~receivable~~expense was primarily due to higher ~~sales~~warehousing and freight costs, in ~~first~~part ~~quarter~~associated ~~2004~~with asthe ~~compared~~increased tosales ~~first~~volume ~~quarter~~of ~~2003~~the premium dessert kits.

~~Cash~~Marketing ~~used~~Expense. inMarketing ~~investing~~expense ~~activities~~ was $7.7 million for first half 2005 as compared to $7.3 million for first half 2004, an increase of $0.14 million, inor 5.5%. Expressed as a percentage of net sales, marketing expense for first ~~quarter~~half 2005 decreased to 8.6% from 9.2% for first half 2004. The Company supported its ~~cash~~growth ~~was~~in ~~used~~the ~~for~~premium ~~capital~~dessert kits with marketing programs, offsetting these costs with reduced marketing expenditures for its other product lines.

~~Cash~~General ~~from~~and ~~financing activities~~Administrative Expense. G&A expense was $42.59 million ~~and~~for first half 2005 as compared to $4.40 million infor first ~~quarter~~half 2004, ~~and~~a decrease ~~first~~of ~~quarter~~$1.1 ~~2003~~million, ~~respectively~~or 27.5%. ~~The~~Expressed ~~Company’s~~as ~~financing~~a ~~activities~~percentage inof net sales, G&A expense for first ~~quarter~~half ~~2004~~2005 ~~were~~was ~~consistent~~3.3% ~~with~~as compared to 5.0% for first ~~quarter~~half ~~2003~~2004. The decrease is primarily the result of lower depreciation as certain computer software and systems have been fully depreciated.

~~Management~~Impairment ~~believes that cash generated from operations and borrowings under~~charge ~~the~~on ~~Term~~plant ~~Loan Facility and the Revolving Credit Facility will be sufficient to satisfy working capital requirements and required capital expenditures~~closure. ~~Further~~Because ~~expansion~~ of the ~~business~~pending ~~through~~Plant ~~acquisitions~~Closure, ~~may require~~ the Company torecorded ~~incur~~an ~~additional indebtedness~~impairment orcharge toof ~~sell additional equity securities~~$2.6 ~~There~~million ~~can~~for ~~be no assurance that~~ the ~~Company~~production ~~will~~assets beat ~~able~~its toPA ~~secure~~Plant ~~additional~~in ~~financing~~first onhalf ~~favorable terms, if at all~~2005.

GEOperating ~~Investment~~Income. ~~Private~~Operating ~~Placement~~income ~~Partners~~was ~~II,~~$14.9 amillion ~~Limited~~for ~~Partnership~~first ~~and~~half ~~Warburg~~2005 as compared to operating income of $18.3 million for first half 2004, ~~Pincus~~a ~~Ventures~~decrease of $3.4 million, Lor 18.P6%., ~~Holdings’ principal~~Expressed ~~stockholders~~as a percentage of net sales, ~~each~~operating ~~owned~~income ~~$14~~for first half 2005 decreased to 16.5% from 23.1% ~~million~~for first half 2004. The decrease in ~~aggregate~~operating ~~principal~~income ~~amount~~was due to the impairment charge because of ~~Notes~~the aspending Plant Closure, change in sales mix to products with a higher production cost, investments in development and promotion of ~~October~~the 28premium dessert kits, ~~2003.~~and increased raw material costs for the base business.

Interest Expense. Net interest expense was $9.5 million for first half 2005 as compared to net interest expense of $7.7 million for first half 2004, an increase of $1.8 million. The increase in interest expense was due to a higher average interest rate of 10.54% in first half 2005 as compared to an average interest rate of 8.44% in first half 2004. The average debt balance in first half 2005 was $180.9 million as compared $190.8 million in first half 2004.

Income Taxes. The Company recorded income tax expense of less than $0.1 million for first half 2005 and first half 2004. Such expense resulted from estimated state and local income taxes. The Company is carrying a full valuation allowance for its net deferred tax assets and net operating loss carryforwards until such time that sufficient positive evidence exists to support realization of these tax assets. The Company was able to use its net operating loss carryforwards in the current periods. The Company recorded minimal state and local income tax expense in first half 2005 and first half 2004.

Income (Loss) from Discontinued Operations. Income from discontinued operations was $0.6 million for first half 2004. This represents the results of operations of the Non-Dairy Creamer Business. The Company sold the Non-Dairy Creamer Business on December 24, 2003 to Dean Foods.

Loss on Disposal of Discontinued Operations. In first half 2004, the Company recorded a loss of $1.1 million for the Non-Dairy Creamer Sale.

Liquidity and Capital Resources

The Company’s borrowing requirements are sourced primarily through its Revolving Financing Facility that consists of (1) an asset-based Revolving Financing Facility (“Revolver A”) in an aggregate principal amount not to exceed $40.0 million at any time outstanding, including a subfacility for the issuance of letters of credit in an aggregate amount not to exceed $5.0 million, and (2) a Revolving Financing Facility (“Revolver B”, and together with Revolver A, the “Revolving Financing Facility”) in an aggregate principal amount not to exceed $63.0 million until December 31, 2005, thereafter until maturity not to exceed $53.0 million. As of July 3, 2004, the borrowing under Revolver A was $15.7 million, and as of January 1, 2005 and July 3, 2004, the borrowings under Revolver B were $24.5 and $55.0 million, respectively.

The amendments to the Financing Agreement occurring during the Company’s fiscal year were as follows. On September 20, 2004, the Company entered into a First Amendment to the Financing Agreement that temporarily increased the principal amount available for borrowing under Revolver A from $27.0 million to $30.0 million through and including November 3, 2004. On November 23, 2004 the Company entered into a Second Amendment to the Financing Agreement which, among other things, (i) temporarily increased the credit commitment under the Revolving B loan to $63.0 million beginning on January 1, 2005 until and including December 31, 2005, (ii) expressly permitted the acquisition by the Company of Texas Plant, (iii) expressly permitted the issuance of shares by Holdings of its capital stock of DFA, and/or one or more of its affiliates and (iv) amended the financial covenants to, among other things, account for the inclusion of the Texas Plant in the Company’s business. On December 23, 2004, the Company entered into a Third Amendment to the Financing Agreement which, among other things, (i) increased the Revolving A Credit Commitment to $40.0 million, (ii) consented to the Milnot Acquisition, (iii) allowed for the issuance by Eagle of the DFA Note and the Milnot Note, as described below, and (iv) amended the financial covenants to include the impact of the inclusion of Milnot in the Company’s business.

The Revolving Financing Facility contains financial covenants, which require the Company to meet certain financial tests including senior debt leverage, fixed charge coverage, and consolidated earnings before interest, income tax and depreciation and amortization expenses. The Company is required to reduce the outstanding principal amount of Revolver B to specific amounts by December 31 of each of the next three years. The principal amount as of December 31, 2004 was to be less than $34.7 million. The Company met this requirement. In addition, the Company is restricted from accumulating or maintaining an aggregate amount of cash in bank accounts, other cash equivalents and investments in excess of $2.0 million for a period of more than ten consecutive business days, subject to certain exceptions as permitted by the Financing Agreement. The Revolving Financing Facility includes a subjective acceleration clause and a lockbox arrangement, which provides for all cash receipts to be swept daily to reduce borrowings outstanding under the Revolving Financing Facility.

The Revolving Financing Facility also contains covenants including limitations on liens, indebtedness, dispositions, acquisitions, mergers, consolidations, changes in the nature of business, loans, advances, investments, sale and leaseback transactions, capital expenditures, transactions with affiliates, dividends and other payments, issuances of capital stock and excess cash. The Revolving Financing Facility contains customary events of default, including certain changes in control of the Company. The Company is currently in compliance with the covenants of the Financing Agreement.

On December 21, 2004, Eagle issued an unsecured Subordinated Promissory Note in favor of DFA for the aggregate principal amount of $12.0 million (the “DFA Note”, and together with the Milnot Note, the “Acquisition Notes”). Each of the Acquisition Notes bears interest at 90-Day LIBOR plus two percent (2%) per annum and matures on the earlier of (i) November 1, 2007 or (ii) a Sale or Recapitalization of the Company (as defined in the Acquisition Notes). Interest on the DFA Note is payable quarterly and interest on the Milnot Note compounds and is payable at maturity. The Acquisition Notes accelerates upon an Event of Default which shall be deemed to occur if (i) Eagle fails to pay when due and payable (whether at maturity or otherwise) the principal payment on the DFA Note or the Milnot Note, as applicable, together with accrued and unpaid interest thereof; within five (5) business days after the due date thereof, (ii) Eagle breaches any term of the DFA Note or the Milnot Note, as the case may be, and fails to remedy the same within thirty (30) days following receipt of notice of such breach from DFA or MHC, as applicable; (iii) an Insolvency Event (as defined in the Acquisition Notes) occurs; or (iv) the Revolving Financing

Facility has become due and payable in full by acceleration prior to maturity. The Revolving Financing Facility must be paid in full before the Acquisition Notes are paid. The Acquisition Notes rank on parity with Eagle’s 8³/4% Senior Subordinated Notes due 2008 (“Senior Notes”).

In accordance with Accounting Principles Board Opinion No. 21, “Interest on Receivables and Payables,” the Company recorded the Milnot and DFA Notes at the present value using the Company’s current interest rate for long-term borrowings. The purchase price of the Milnot Acquisition has been adjusted by $0.4 million for the discount on the Milnot Note. The DFA Note is from a significant shareholder, and therefore the discount of $2.3 million has been credited to additional paid in capital. The discount costs are amortized over the life of the Acquisition Notes, using the interest method.

Interest payments on the Company’s $115 million of Senior Notes and DFA Note, and interest and principal payments under the Revolving Financing Facility represent significant cash requirements for the Company. Borrowings under the Revolving Financing Facility bear interest at floating rates and require interest payments monthly.

In addition, the Company’s liquidity requirements include capital expenditures and changes in working capital. The Company had capital expenditures of $2.0 million in second quarter 2005, of which $1.6 million related to the El Paso Project. The Company expects to spend approximately $15.0 million on the El Paso Project and approximately $1.0 on other capital expenditures. As mentioned above, the El Paso Project is supported by the investment from DFA and Mid-Am. The Company’s remaining sources of liquidity are cash flows from operations and available borrowings under the Revolving Financing Facility.

Net cash from operating activities was $34.7 million and $33.6 million in first half 2005 and first half 2004, respectively, an increase of $1.1 million. This increase is primarily due the increase in sales volume related to the premium dessert kit product offered to the retail market.

Cash used in investing activities in first half 2005 was $16.3 million and cash from investing activities in first half 2004 was $11.7 million. The Company purchased Milnot in first half 2005 for a net cash price of $14.3 million and in first half 2004 received $12.2 million for the Non-Dairy Creamer Sale.

Cash used in financing activities was $19.1 million and $39.9 million in first half 2005 and first half 2004, respectively, a decrease of $20.8 million. As described above, the Company received $15.7 million, net of cash charges from DFA and Mid-Am in exchange for an equity investment in the Company, and $12.0 million in a form of a loan from DFA to purchase Milnot.

As of February 6, 2005, GE Investment Private Placement Partners II, a Limited Partnership and Warburg, Pincus Ventures, L.P., significant shareholders of Holdings, each owned $14.1 million in aggregate principal amount of Senior Notes.

Commitments and Contingencies

The Company may enter into long-term contracts for the purchase of certain raw materials. At ~~September~~January 271, ~~2003~~2005, the Company ~~did~~has ~~not~~a ~~have~~five ~~any~~year ~~long-term purchase~~milk ~~commitments~~supply agreement with DFA. The Company leases buildings and equipment under various noncancellable lease agreements for periods of one to five years. The lease agreements generally require the Company to pay taxes, insurance and maintenance expenses related to the leased assets. The Company has entered into employment agreements with certain key executives. Such agreements provide for annual salaries, bonuses and severance payments and include non-compete and non-solicitation provisions. ~~The following table lists the Company’s commitments and contingencies at September 27, 2003 (dollars in thousands):~~

	Payments Due by Period
Contractual Obligations	Total		Less Than1 Year		1-3Years		3-5Years		More Than5 Years
Long-term debt obligations	$	197,772	$	7,799	$	74,973	$	115,000	$	—
Operating lease obligations		415		318		97		—		—
Purchase obligations		14,015		14,015		—		—		—
Total	$	212,202	$	22,132	$	75,070	$	115,000	$	—

The following table lists the Company’s commitments and contingencies at January 1, 2005 (dollars in thousands):


	Payments Due by Period
Contractual Obligations	Total		Less Than 1 Year		1-3 Years		3-5 Years		More Than 5 Years
Long-term debt obligations	$	129,000	$	—	$	14,000	$	115,000	$	—
Revolving financing obligations		24,504		24,504		—		—		—
Operating lease obligations		2,062		751		805		371		135
Purchase obligations		42,220		19,069		11,217		11,934		—

Total	$	197,786	$	44,324	$	26,022	$	127,305	$	135

Redeemable Preferred Stock

~~The~~In November 2004, Holdings effected a recapitalization of its existing Common Stock, Series A Non-Voting Preferred Stock (the “Series A Preferred Stock”) and ~~the~~ Series B Non-Voting Preferred Stock (the “Series B Preferred Stock”) ~~are~~(the ~~subject~~“Recapitalization”). In order to ~~mandatory~~effect ~~redemption~~the atRecapitalization, aHoldings ~~price~~(i) ~~per~~amended ~~share~~its ~~equal~~Amended and Restated Certificate of Incorporation (as amended on November 23, 2004 (the “Certification of Incorporation”), to ~~$100~~provide for ~~Series~~ (A) ~~Preferred~~an increase in the authorized shares of Common Stock from 1.2 million to 2.8 million and ~~$100,000~~(B) ~~for~~authorization of its Series BI Preferred Stock ~~plus~~and ~~all~~ii) entered ~~dividends~~into ~~accrued~~Contribution and ~~unpaid~~Exchange ~~there~~Agreements ~~upon~~ (1together, the “Contribution and Exchange Agreements”) with its existing equity holders (the ~~closing~~“Existing ofStockholders”), aWarburg, ~~public~~GEI ~~offering~~and Mr. Craig A. Steinke, Chief Executive Officer, Chief Financial Officer and President of Holdings pursuant to anwhich ~~effective~~the ~~registration~~Existing ~~statement~~Stockholders ~~under~~contributed ~~the~~and ~~Securities~~exchanged ~~Act~~their existing shares of Common Stock, Series A Preferred Stock (plus accrued and unpaid dividends) and Series B Preferred Stock (plus accrued and unpaid dividends) as applicable, for shares of Common Stock.

17For accounting purposes, the Recapitalization has been treated as an extinguishment of Series A Preferred Stock and Series B Preferred Stock. The estimated fair value of Common Stock exchanged was $5.3 million and the carrying value of Series A Preferred Stock and Series B Preferred Stock aggregated to $172.3 million. The resulting extinguishment gain of $167.1 million has been reflected as an adjustment to accumulated deficit. The Company estimated the fair value of the Common Stock exchanged using the value assigned to Common Stock issued to DFA which is subject to the completion of a third party appraisal. Upon completion of this appraisal, the Company may adjust the estimated fair values assigned to Common Stock and the extinguishment gain.

Series I Preferred Stock is subject to mandatory redemption at a price per share equal to the Stated Value of Series I Preferred Stock plus all dividends accrued and unpaid thereon upon (1) the closing of a public offering pursuant to an effective registration statement under the Securities Act of 1933, (2) the sale of all or substantially all of the assets of Holdings or the merger or consolidation of Holdings with or into any other corporation or other entity in which the holders of Holdings’ outstanding shares before the merger or consolidation do not retain a majority of the voting power of the surviving corporation or other entity or (3) the acquisition by any person of shares of Common Stock representing a majority of the issued and outstanding shares of Common Stock then outstanding.

of 1933, (2) the sale of all or substantially all of the assets of Holdings or the merger or consolidation of Holdings with or into any other corporation or other entity in which the holders of Holdings’ outstanding shares before the merger or consolidation do not retain a majority of the voting power of the surviving corporation or other entity or (3) the acquisition by any person of shares of Common Stock of Holdings representing a majority of the issued and outstanding shares of Common Stock of Holdings then outstanding.

Seasonality

The Company’s net sales, operating income and cash flows are affected by a seasonal bias toward the second quarter of the Company’s fiscal year due to increased sales during the holiday season. Three of the Company’s ~~five~~four major brands (Eagle Brand ~~and the Company’s other~~ sweetened condensed milk ~~products~~, Borden eggnog and None Such mincemeat pie filling) are consumed primarily during the November and December holiday season. In recent years, approximately 4745% of the Company’s net sales, excluding the net sales of the Non-Dairy Creamer Business, have occurred in the second quarter of the Company’s fiscal year. Because of this seasonality, the Company’s working capital needs have historically increased throughout the year, normally peaking in the August/September period, requiring the Company to draw additional amounts on its Revolving ~~Credit~~Financing Facility ~~during~~in that ~~this~~ period.

Risk Factors

In connection with a review of this Quarterly Report on Form 10-Q, the following risk factors should be considered carefully.

The Company has a significant amount of indebtedness. As of ~~September~~January 271, ~~2003~~2005, the outstanding indebtedness was $~~197~~153.85 million, with maturities of $724.85 million, ~~$56.3 million and $18.7 million~~ in ~~the~~ fiscal ~~years~~year ~~2004~~2007 ~~through 2006~~ on the ~~Senior~~Revolving ~~Credit~~Financing ~~Facilities~~Facility and $~~115~~129 million in fiscal year 2008 on the Senior Notes and Acquisition Notes. This substantial indebtedness could have important consequences. For example, it could:

• make it more difficult for the Company to satisfy its obligations to creditors, including holders of its Senior Notes and Acquisition Notes, who could upon default require the Company to accelerate principal and interest ~~payment~~payments;

• limit the Company’s ability to borrow additional amounts for working capital, capital expenditures, acquisitions, debt service requirements, the ~~Company’s~~sales growth, research and development costs or other general corporate purposes;

• require the Company to dedicate a substantial portion of its cash flow from operations to payments on its indebtedness and corresponding interest, which will reduce the cash flow available for working capital, capital expenditures, acquisitions and other general corporate purposes;

•

limit the Company’s flexibility in planning for, or reacting to, changes in its business and in the industry in which the Company operates;

•

increase the vulnerability to adverse changes in general economic, industry and competitive conditions and adverse changes in government regulation;

•

place the Company at a disadvantage compared to its competitors that have less debt; and

•

expose the Company to risks inherent in interest rate fluctuations because some of the indebtedness bears interest at variable rates, which could result in higher interest expense in the event of increases in interest rates.

Any of the above listed factors could have a material adverse affect on the Company’s business and results of operations and its ability to meet its obligations.

The ~~credit~~Financing ~~agreement~~Agreement governing the ~~Senior~~Revolving ~~Credit~~Financing ~~Facilities~~Facility restricts management’s discretion in operating the Company’s business. The Revolving Financing Facility must be paid in full before the Acquisition Notes are paid. The Financing Agreement requires the Company to dedicate a substantial portion of its cash flow from operations to payments on its indebtedness and corresponding interest, which will reduce the cash flow available for working capital, capital expenditures, acquisitions, and other general corporate purposes. In addition, the ~~credit~~Financing ~~agreement~~Agreement requires the Company to maintain specified financial ratios and tests, among other obligations. The ~~credit~~Financing ~~agreement~~Agreement also restricts the Company’s ability to incur additional indebtedness, make acquisitions and make capital expenditures.

The markets in which the Company competes are highly competitive. The Company competes with large and established national and multinational companies, as well as smaller companies. Some of these competitors have, and new competitors may have, substantially greater resources than the Company has. Consequently, it cannot be assured that the Company will be able to compete effectively in the future.

18The Company relies upon its suppliers and third party manufacturers. The Company purchases many of its raw materials from numerous independent suppliers. Milk is purchased through one cooperative at each of its manufacturing plants. Kava instant coffee, sweetened condensed milk marketed in Canada, evaporated canned milk, and Borden eggnog are obtained in final product form from third party manufacturers, or co-packers. The

~~The~~ ingredients ~~Company~~in ~~relies~~the ~~upon~~premium ~~its~~dessert ~~suppliers~~kits ~~and~~are ~~third~~procured ~~party~~by ~~manufacturers.~~the ~~The~~ Company ~~purchases many of its raw materials from numerous independent suppliers. Milk is purchased through one cooperative at each of its manufacturing plants. Cremora~~ and ~~Cremora~~converted ~~Royale~~into ~~powdered~~a ~~non-dairy~~finished ~~creamer, Kava instant coffee, sweetened condensed milk marketed in Canada, and Borden eggnog are obtained in final~~ product ~~form~~by ~~from~~a ~~third party manufacturers~~co-packer. Any adverse change in any of the following could have a material adverse effect on the Company’s business, financial condition and results of operations:

•

relationships with the Company’s suppliers or third party manufacturers;

•

financial condition of the suppliers or third party manufacturers; or

•

the suppliers’ or third party manufacturers’ ability to manufacture and deliver outsourced products on a timely basis.

There is no assurance that the Company could quickly or effectively replace any of its suppliers or third party manufacturers if the need arose. The Company’s dependence on these suppliers and third party ~~manufactures~~manufacturers could also adversely affect its ability to react quickly and effectively to changes in the market for its products.

The Company ~~manufactures~~uses ~~all~~milk ofas ~~its~~a U.major S.ingredient in its sweetened condensed milk atand ~~two~~evaporated ~~facilities~~milk product line and is ~~dependent~~subject onto ~~such~~the ~~facilities~~risk ~~for~~of ~~production~~rising milk prices that increase manufacturing costs and erode profit margins. ~~The~~By purchasing future contracts, the Company ~~manufactures~~tries ~~sweetened~~to ~~condensed~~establish ~~milk~~a known price for ~~the~~future ~~U.S.~~milk ~~markets~~purchases atin ~~its~~order ~~Wellsboro,~~to PAprotect ~~and~~against ~~Starkville,~~fluctuating MSmilk ~~facilities~~prices. ~~These~~The ~~facilities~~class ~~are subject~~of tomilk procured for the ~~normal~~production ~~hazards~~of ~~that~~canned ~~could~~milk ~~result~~was inchanged, ~~any~~and ~~material~~this ~~damage~~new toclass ~~any~~does ~~such~~not ~~facility.~~have ~~Damage~~an toactive commodity future contract market traded on the Chicago ~~facilities~~Mercantile Exchange. Therefore, orif ~~prolonged~~milk ~~interruption~~prices incontinue ~~the~~to ~~operations~~rise ofand the ~~facilities~~Company ~~for~~is ~~repairs~~not able or ~~other~~does ~~reasons~~not secure lower priced milk future contracts, ~~would~~the ~~have~~impact aof ~~material~~higher ~~adverse~~milk ~~effect on~~prices could adversely affect the Company’s business, financial condition, and results of operations. Eagle entered into a long term milk supply agreement in which DFA will supply raw milk, on an ongoing basis, to the Texas Plant to manufacture canned milk.

The Company ~~cannot~~manufactures beall ~~certain~~ of ~~the results of~~ its ~~product~~U. ~~innovations and marketing programs~~S. ~~The~~canned ~~Company~~milk ~~believes~~at ~~that~~three ~~its~~facilities and ~~future~~is ~~success~~dependent ~~will~~on ~~depend,~~such infacilities ~~part,~~for ~~upon~~production. ~~its~~The ~~ability~~Company tomanufactures ~~develop,~~sweetened ~~manufacture~~condensed ~~and market~~milk ~~new~~for ~~products~~the orU.S. ~~line~~markets ~~extensions~~at tothe ~~its~~Wellsboro, ~~existing~~PA ~~product~~and ~~lines.~~Starkville, ~~The~~MS ~~Company~~facilities, ~~cannot~~and ~~predict~~effective ~~whether~~December it23, ~~will~~2004, bemanufactures ~~successful~~sweetened incondensed ~~the introduction, marketing~~ milk and ~~manufacture~~evaporated ofmilk ~~any~~at ~~new~~Seneca, ~~products~~MO. ~~Furthermore,~~These ~~there~~facilities ~~can~~are besubject noto ~~assurance that~~ the ~~Company~~ ~~will~~normal behazards ~~able~~that tocould ~~develop~~result ~~and~~in ~~introduce~~any ~~new~~material ~~products~~damage ~~or improvements~~ to ~~its~~any ~~existing~~such ~~product,~~facility. ~~which~~Damage ~~satisfy~~to ~~customer~~the ~~needs~~facilities, or ~~achieve~~prolonged ~~market~~interruption ~~acceptance.~~in ~~The~~the ~~failure~~operations toof ~~develop~~the ~~products~~facilities ~~and~~for ~~introduce~~repairs or ~~them~~other ~~successfully~~reasons, inwould have a ~~timely~~material ~~manner~~adverse ~~could adversely~~effect ~~affect~~on the Company’s business, financial condition and results of operations.

The Company isannounced ~~dependent~~the onclosure aof ~~concentrated~~the ~~customer~~Wellsboro, ~~base~~PA facility. The Company ~~does~~has ~~not~~negotiated ~~have~~with ~~long-term~~the ~~sales~~union ~~agreements~~to orcontinue ~~other contractual assurances as~~ to ~~future~~manufacture ~~sales~~products through ~~with~~April ~~any of its customers~~2005. InAny ~~addition, continued~~operational ~~consolidation~~disruptions inor ~~the~~reduction ~~retail~~of ~~industry~~staffing ~~has~~could ~~resulted~~adversely inaffect ~~an increasingly concentrated retail base. To~~ the ~~extent such concentration continues to occur, the~~ Company’s ~~net~~business, ~~sales and operating income may be increasingly sensitive to deterioration in the~~ financial condition ~~of its customer base~~, orand ~~other~~results ~~adverse~~of ~~developments involving the Company’s relationship with its customers~~operations.

The Company is refurbishing the Texas Plant and expanding its capabilities into processing sweetened condensed milk. The Texas Plant is expected to be operational by early September 2005. The refurbishment of the Texas Plant is dependent upon third-party engineering and consulting knowledge and direction, obtaining appropriate construction and builder personnel, receipt of equipment and other building material on a timely basis, and obtaining proper permits. There can be no assurance that the refurbishment may result in quality issues or delays in production or shipment to customers. Any of the above mentioned factors could have a material adverse effect on the Company’s business, financial condition and results of operations.

While the Company believes that the refurbishment will result in the Company obtaining more competitive position in the canned milk business and should increase gross profits and reduce operating costs, there can be no assurance that the Company will succeed in achieving these goals.

The Company cannot be certain of the results of its product innovations and marketing programs. The Company believes that its future success will depend, in part, upon its ability to develop, manufacture and market new products or line extensions to its existing product lines. The Company is making an investment in the development, test marketing, and promotion of premium dessert kits utilizing popular sweetened condensed milk recipes, which were introduced into the market in fiscal year 2004. The Company cannot predict whether it will be successful in the introduction, marketing and manufacturing of this product offering or any other new products.

The Company is dependent on a concentrated customer base. The Company does not have long-term sales agreements or other contractual assurances as to future sales with any of its customers. In addition, continued

consolidation in the retail industry has resulted in an increasingly concentrated retail base. To the extent such concentration continues to occur, the Company’s net sales and operating income may be increasingly sensitive to deterioration in the financial condition of its customer base, or other adverse developments involving the Company’s relationship with its customers.

The Company’s operations are subject to comprehensive public health regulations. The Company is subject to the Federal Food, Drug and Cosmetic Act and regulations promulgated there under by the Food and Drug Administration. This comprehensive 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, as amended, prescribe the format and content of certain information required to appear on the labels of food products.

The operations and the products of the Company are also subject to state and local regulation through such measures as licensing of plants, enforcement by state health agencies of various state standards and inspection of facilities. Enforcement actions for violations of federal, state and local regulations may include seizure and condemnation of volatile products, cease and desist orders, injunctions and/or monetary penalties.

The Company is subject to certain health and safety regulations, including regulations issued pursuant to the Occupational Safety and Health Act. These regulations require the Company to comply with certain manufacturing, health and safety standards to protect its employees from accidents.

Management believes that the Company’s facilities and practices comply with applicable government regulations in all material respects, but there can be no assurance that the Company will not incur liabilities in the future. In addition, future events, such as changes in existing laws and regulations or their interpretation, and more vigorous enforcement policies of regulatory agencies, may give rise to additional expenditures or liabilities that could be material.

The Company’s operations and properties are subject to a wide variety of increasingly complex and stringent federal, state and local environmental regulations governing the storage, handling, generation, treatment, emission, and disposal of certain substances and wastes, the remediation of contaminated soil and groundwater. As such, the nature of the Company’s operations exposes it to the risk of claims with respect to environmental matters. The Company believes that it is substantially in compliance with all applicable laws and regulations for the protection of the environment. Based upon its experience to date, the Company believes that the future cost of compliance with existing environmental laws and regulations and liability for known environmental claims will not have a material adverse effect on the Company’s business, financial condition or results of operations. There can be no assurances that past material environmental liabilities will not be identified or that new material environmental liabilities will not be incurred. In addition, future events, such as changes in existing laws and regulations or their interpretation, and more vigorous enforcement policies of regulatory agencies, may give rise to additional expenditures or liabilities that could be material.

Off-Balance Sheet Arrangements

The Company does not have any off-balance sheet arrangements.

Critical Accounting Policies and Estimates

The process of preparing financial statements in conformity with accounting principles generally accepted in the United States of America requires the use of significant judgment and estimates on the part of the Company’s management about the effect of matters that are inherently uncertain. Actual results could differ significantly from the estimates under different assumptions or conditions. The following discussion addresses the Company’s most critical accounting policies.

~~Marketing~~Revenue ~~Costs~~Recognition. The Company ~~offers~~recognizes revenues ~~market~~when ~~development~~there ~~funds,~~is ~~slotting,~~persuasive ~~and~~evidence ~~other~~of ~~trade~~a ~~spending~~sale ~~programs~~arrangement, todelivery ~~its~~has ~~customers~~occurred toand ~~support~~title, ~~the~~ownership ~~customers’ promotional activities related to the Company’s product lines. The Company regularly reviews~~ and ~~revises~~risk ~~estimates~~ of ~~costs~~loss transfers to the ~~Company~~customer, ~~when deemed necessary, for~~ the ~~marketing~~price ~~programs~~is ~~based~~fixed ~~on actual costs incurred~~ or ~~revised~~determinable, ~~spending~~and ~~level~~collection byis ~~the~~reasonably ~~customers~~assured. ~~Actual~~Liabilities ~~costs may differ~~are ~~significantly,~~established asfor ~~the~~estimated ~~performance~~returns, ~~from~~allowances, ~~the marketing program may differ from previous expectations.~~

consumer and certain trade promotions and discounts when revenues are recognized. The Company utilizes certain consumer and trade promotions, such as coupons, co-op advertising, featured price discounts and in store display incentives. These expenses are classified as a reduction of sales.

Marketing Costs. The Company offers market development funds, slotting, and other trade spending programs to its customers to support the customers’ promotional activities related to the Company’s product lines. The Company provides accruals for marketing costs based on historical information and known promotional programs that may deviate from prior years’ activity. At interim dates and year end, the Company reviews and revises estimates of costs to the Company, when deemed necessary, for the marketing programs based on actual costs incurred or revised spending level by the customers. Actual costs may differ significantly if factors, such as the level and success of the customers’ programs, changes in customer utilization practices, or other conditions, differ from previous expectations.

Inventories. Inventories are stated at the lower of cost or market, with cost of goods sold principally determined using the first-in, first-out method. The Company reviews the value of the inventory, and based on the physical condition (e.g., age and quality) of the inventories and forecasted sales plans, may require adjustments, either favorable or unfavorable. These inventory adjustments are estimates and may differ if future economic conditions, customer inventory levels or competitive conditions differ from the Company’s expectations.

Property, Plant and Equipment. Property, plant and equipment are stated at cost, and are depreciated on a straight-line method over the estimated useful lives of the assets. Changes in circumstances, such as technological advances or changes to the Company’s capital strategy, can result in the actual lives or carrying value differing from the Company’s estimates. The Company ~~periodically~~ reviews the ~~useful~~ ~~lives~~value of its ~~property,~~long-lived ~~plant~~assets ~~and~~for ~~equipment,~~impairment ~~and~~whenever ~~where~~such ~~warranted,~~events or changes ~~are~~in ~~made~~circumstances indicate that the carrying amount of an asset may ~~result~~not inbe recoverable. ~~acceleration~~An ofimpairment ~~depreciation~~loss will be recognized whenever evidence exists that the carrying value is not recoverable.

~~Intangible~~Goodwill ~~Assets~~ and ~~Goodwill~~Intangible Assets. Intangible assets are stated at fair value as recorded at acquisition and adjusted for impairment as deemed appropriately. In accordance with SFAS 142, the Company reviews indefinite-lived assets for impairment, at a minimum, annually or whenever events or changes in circumstances indicate that the carrying value of any such asset may not be recoverable. The fair value of the indefinite-lived ~~tradenames~~trade ~~are~~names is determined using a royalty savings methodology and discounted cash flows. ~~and~~The ~~the~~ fair value of goodwill is determined using estimated future discounted cash flow earnings and market valuations ~~based~~ based on these cash flow earnings. The fair value of covenant not to compete agreements are determined as the difference in estimated future discounted cash flow earnings with and without the agreement, and are amortized over the contractual life.

~~Income~~Notes ~~taxes~~Payable. ~~Income taxes~~The ~~are~~Company ~~recognized~~assesses ~~using~~ the ~~liability~~relative ~~method.~~fair value ~~Under~~of ~~this~~any ~~method,~~note ~~deferred~~arrangement ~~tax~~in ~~assets~~accordance ~~and~~with ~~liabilities~~Accounting ~~are~~Principles ~~recognized~~Board ~~based~~Opinion onNo. ~~the~~21, ~~difference~~“Interest ~~between~~on ~~the~~Receivables ~~financial statement carrying amounts of existing assets~~ and ~~liabilities and their respective tax bases~~Payables.” ~~Deferred tax assets and liabilities are measured using enacted tax~~

20Income taxes. Income taxes are recognized using the liability method. Under this method, deferred tax assets and liabilities are recognized based on the difference between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates in effect in the years in which those temporary differences are expected to reverse. The Company assesses the recoverability of the deferred tax assets in accordance with the provisions of SFAS No. 109, “Accounting for Income Taxes” (“SFAS No. 109”). The Company intends to maintain a full valuation allowance for the net deferred tax assets and net operating loss carry forwards until sufficient positive evidence exists to support reversal of the remaining reserve. Until such time, except for minor state and local tax expenses, the Company will have no reported tax provision, net of valuation allowance adjustments. In the event the Company were to determine, based on the existence of sufficient positive evidence, that it would be able to realize deferred tax assets in the future in excess of the net recorded amount, an adjustment to the valuation allowance would increase income in the period such determination was made.

Costs Associated with Exit or Disposal Activities. In establishing accruals for restructuring costs associated with exit or disposal activities, the Company measures the liability at fair value in the period in which the liability is incurred in accordance with SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities.” Additionally, in accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived

~~rates~~Assets,” inlong-lived ~~effect~~assets inare ~~the~~evaluated ~~years~~for inimpairment, which ~~those~~involves ~~temporary differences are expected to reverse. The Company assesses~~ the ~~recoverability~~use of ~~the~~estimates ~~deferred~~to ~~tax~~calculate ~~assets in~~fair ~~accordance with the provisions of SFAS No. 109~~value, ~~“Accounting~~future ~~for~~cash ~~Income~~flows ~~Taxes” (“SFAS No. 109”). In accordance with SFAS No. 109, the Company has recorded a valuation allowance for the net deferred tax assets~~ and ~~net~~costs ~~operating~~to ~~loss carryforwards totaling $52~~sell.9 ~~million~~These asestimates ofare ~~September~~reviewed ~~27,~~by ~~2003.~~management ~~The~~at ~~Company~~each ~~intends~~reporting toperiod ~~maintain a full valuation allowance for the net deferred tax assets~~ and ~~net~~are ~~operating~~adjusted ~~loss carryforwards until sufficient positive evidence exists to support reversal of the remaining reserve. Until such time, except~~ for ~~minor~~current ~~state~~facts and ~~local tax expenses, the Company will have no reported tax provision, net of valuation allowance adjustments~~circumstances. In the event the Company were to determine, based on the existence of sufficient positive evidence, that it would be able to realize deferred tax assets in the future in excess of the net recorded amount, an adjustment to the valuation allowance would increase income in the period such determination was made.

Recently Adopted Accounting Statements

In January 2003, the Financial Accounting Standards Board (the “FASB”) issued Interpretation No. 46, “Consolidation of Variable Interest Entities, an interpretation of ARB No. 51” (“FIN No. 46”). FIN No. 46 expands existing accounting guidance regarding when a variable interest entity is consolidated by a company if that company is subject to a majority of the risk of loss from the variable interest entity’s activities or is entitled to receive a majority of the variable interest entity’s residual returns or both. This pronouncement applies immediately to variable interest entities created after January 31, 2003 and to variable interest entities in which a company obtains an interest after that date. For variable interest entities created before February 1, 2003, the provisions of this pronouncement are effective for periods ending after December 15, 2003. The adoption of FIN No. 46 will not have any effect on the Company’s results of operations or financial condition.

In April 2003, the FASB issued SFAS No. 149, “Amendment of Statement 133 on Derivative Instruments and Hedging Activities” (“SFAS No. 149”). SFAS No. 149 amends and clarifies the accounting guidance on derivative instruments (including certain derivative instruments embedded in other contracts) and hedging activities that fall within the scope of SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities”. SFAS No. 149 also amends certain other existing pronouncements, which will result in more consistent reporting of contracts that are derivatives in their entirety or that contain embedded derivatives that warrant separate accounting. SFAS No. 149 is effective for contracts entered into or modified after June 30, 2003, with certain exceptions, and for hedging relationships initiated after June 30, 2003. The guidance outlined in this pronouncement is to be applied prospectively, and was effective in the first quarter of the Company’s fiscal year 2004. The adoption of this pronouncement did not have any effect on the Company’s results of operations or financial condition.

In July 2003, the Company adopted SFAS No. 150, “Accounting for Certain Financial Instruments With Characteristics of Both Liabilities and Equity.” SFAS No. 150 establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. SFAS No. 150 requires that an issuer classify a financial instrument that is within its scope as a liability, or as an asset in some circumstances. SFAS No. 150 applies to three types of freestanding financial instruments, other than outstanding shares. One type is mandatory redeemable shares, which the issuing company is obligated to buy back in exchange for cash or assets; a second type includes put options and forward purchase contracts that require or may require the issuer to buy back some of its shares in exchange for cash or other assets; the third type is obligations that can be settled with shares, the monetary value of which is fixed, ties solely or predominantly to a variable such as a market index, or varies inversely with the value of the issuers’ shares. SFAS No. 150 does not apply to features embedded in a financial instrument that is not a derivative in its entirety. The adoption of this standard had no impact on the Company’s results of operations or financial condition.

Cautionary Statement Regarding Forward-Looking Statements

This section may contain forward-looking statements, which include assumptions about future market conditions, operations and financial results. These statements are based on current expectations and are subject to risks and uncertainties. They are made pursuant to safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The Company’s actual results, performance or achievements in the future could differ significantly from the results, performance or achievements discussed or implied in such forward-looking statements herein and in prior Securities and Exchange Commission filings by the Company. The Company assumes no obligation to update these forward-looking statements or advise of changes in the assumptions on which they were based.

prior Securities and Exchange Commission filings by the Company. The Company assumes no obligation to update these forward-looking statements or advise of changes in the assumption on which they were based.

Factors that could cause or contribute to such differences include, but are not limited to, the success of new product introductions and promotions, changes in the competitive environment of the Company’s products, general economic and business conditions, industry trends, raw material costs, dependence on the Company’s labor force, and changes in, or the failure or inability to comply with, government rules and regulations, including, without limitation, Food and Drug Administration and environmental rules and regulations. Statements concerning interest rates and other financial instrument fair values and their estimated contribution to the Company’s future results of operations are based upon market information as of a specific date. This market information is often a function of significant judgment and estimation. Further, market interest rates and commodity prices are subject to significant volatility.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rates

The following table presents descriptions of the financial instruments and derivative instruments that were held by the Company at ~~September~~January 271, ~~2003~~2005 and ~~which~~that ~~are~~were sensitive to changes in interest rates. In the ordinary course of business, the Company ~~uses~~enters into derivative financial ~~instruments~~instrument transactions in order to manage or reduce market risk. The Company does not enter into derivative financial instrument ~~instruments~~transactions for speculative purposes. For the liabilities, the table represents principal fiscal year cash flows that exist by maturity date and the related average interest rate. The variable rates are estimated based upon the six-month forward LIBOR rate.

For the liabilities, the table represents principal fiscal year cash flows that exist by maturity date and the related average interest rate. The variable rates are estimated based upon the six-month forward LIBOR rate. All amounts, except percentage rates, are reflected in U.S. dollars (in thousands).

	2004			2005				2006				Thereafter				Balance atSeptember 27,2003				FairValue
	2005			2006			2007			2008				Balance atJanuary 1, 2004				FairValue
Liabilities
Fixed rate										$	115,000	$	~~115,000~~	$	115,000	$	~~115,000~~	$	88,550	$	~~78,200~~
Average interest rate											8.750	%	~~8.750~~	%	8.750	%	~~8.750~~	%
Variable rate	$	7$24,~~799~~504		$	~~56,255~~$ —		$	$—	~~18,718~~	$	14,000	$	—	$	38,504	$	~~82,772~~	$	38,504	$	~~82,772~~
Average interest rate		512.~~390~~420	%		~~5.446~~	%			~~5.390~~	%	4.420	%	—		9.511	%	~~5.428~~	%

As the table incorporates only the exposures that existed as of ~~September~~January 271, ~~2003~~2005, it does not consider exposure to changes in the LIBOR rate that arise after that date. As a result, our ultimate interest expense with respect to interest rate fluctuations will depend on the interest rates that are applicable during the period. A 1% change in interest rate will cause a variance of approximately $0.84 million in forecasted interest expense. A portion of the Company’s variable rate liability has a stated maturity date of March 23, 2007. In accordance with generally accepted accounting principles, the Company has presented the outstanding balance as a current obligation. See additional disclosure in Note 7 of the financial statements of the Company included elsewhere in this Quarterly Report on Form 10-Q.

Milk Hedging

The Company uses milk as a major ingredient in its sweetened condensed milk product line and is subject to the risk of rising milk prices that increase manufacturing costs and erode profit margins. By purchasing futures contracts, however, the Company establishes a known price for future milk purchases in order to protect against fluctuating milk prices. As of ~~September~~January 271, ~~2003~~2005, the Company had purchased ~~540~~28 milk futures contracts, which settle during various months through ~~December~~April ~~2004~~2005, at a cost ~~of $12.6 million~~ and a current market value of $120.7 million,. orThe an aggregate market ~~gain~~value ofwill increase or decrease based on the future milk prices. In addition, the Company has less than $0.1 million. ~~The~~of ~~aggregate~~deferred ~~market~~gain ~~value~~on contracts sold prior to the contracts’ settlement dates. The gain will be ~~increase~~recognized orat ~~decrease~~the ~~based~~time on the ~~future~~original ~~milk~~contracts ~~prices~~would have matured.

Cautionary Statement Regarding Forward-Looking Statements

22Factors that could cause or contribute to such differences include, but are not limited to, the success of new product introductions and promotions, changes in the competitive environment of the Company’s products, general economic and business conditions, industry trends, raw material costs, dependence on the Company’s labor force, dependence on the Company’s Revolving Credit Facility to meet financial obligations, and changes in, or the failure or inability to comply with, government rules and regulations, including, without limitation, Food and Drug

~~from~~Administration ~~the~~and ~~results,~~environmental ~~performance~~rules orand ~~achievements~~regulations. ~~discussed~~Statements orconcerning ~~implied~~interest inrates ~~such~~and ~~forward-looking~~other ~~statements~~financial ~~herein~~instrument ~~and~~fair invalues ~~prior Securities~~ and ~~Exchange~~their ~~Commission~~estimated ~~filings~~contribution byto the Company.’s ~~The~~future ~~Company~~results ~~assumes~~of nooperations ~~obligation~~are tobased ~~update~~upon ~~these~~market ~~forward-looking~~information ~~statements~~as orof ~~advise~~a specific date. This market information is often a function of ~~changes~~significant injudgment ~~the~~and ~~assumption~~estimation. onFurther, ~~which~~market ~~they~~interest ~~were~~rates ~~based~~and commodity prices are subject to significant volatility.

Item 4. CONTROLS AND PROCEDURES

(a)

Evaluation of disclosure controls and procedures.

The Company’s management reviewed the Company’s internal controls and procedures and the effectiveness of these controls. As of ~~September~~January 271, ~~2003,~~ 2005, the registrants carried out an evaluation, under the supervision and with the participation of the registrants’ management, including the registrants’ Chief Executive Officer and Chief Financial Officer, of the effectiveness of the ~~design~~ design and operation of the registrants’ disclosure controls and procedures pursuant to Rule 13a-14(c) and 15d-14(c) of the Securities Exchange Act of 1934. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer ~~concluded~~ concluded that the registrants’ disclosure controls and procedures are effective in timely alerting them to material information relating to the registrants required to be included in the registrants’ periodic SEC filings.

(b)

Change in internal controls.

There was no change in the registrants’ internal controls over financial reporting or in other factors during the Company’s last fiscal quarter that materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting. There were no significant deficiencies or material weaknesses, and therefore there were no corrective actions taken.

~~PART~~27 ~~II – OTHER INFORMATION~~

Item 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

31.1		Certification, pursuant to 15 U.S.C. Section 7241, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of Eagle Family Foods, Inc.
31.2		Certification, pursuant to 15 U.S.C. Section 7241, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of Eagle Family Foods Holdings, Inc.

(b) Reports on Form 8-K

None.

PART II. OTHER INFORMATION

Item 6. EXHIBITS


31.1		Certification, pursuant to 15 U.S.C. Section 7241, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of Eagle Family Foods, Inc.

31.2		Certification, pursuant to 15 U.S.C. Section 7241, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of Eagle Family Foods Holdings, Inc.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrants have duly caused this report to be signed on their behalf by the undersigned thereunto duly authorized.

EAGLE FAMILY FOODS HOLDINGS, INC. EAGLE FAMILY FOODS, INC. By: /s/ Craig A. Steinke President, Chief Executive Officer and Chief Financial Officer

Date: ~~October~~February 2915, ~~2003~~2005

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Filing Compare · EAGLE FAMILY FOODS HOLDINGS INC