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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

For the quarterly period ended October 2, 2004

or

For the transition period from              to             

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

Eagle Family Foods Holdings, Inc.

(Exact name of registrant as specified in its charter)

Eagle Family Foods, Inc.

(Exact name of registrant as specified in its charter)

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 the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrants’ most recent completed second fiscal year. None.

As of November 12, 2004, there were 957,235 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.

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PART I – FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

EAGLE FAMILY FOODS HOLDINGS, INC.

Consolidated Statements of Operations

(Dollars in Thousands)

(Unaudited)

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

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EAGLE FAMILY FOODS HOLDINGS, INC.

Consolidated Balance Sheets

(Dollars in Thousands Except Share Data)

(unaudited)

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

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EAGLE FAMILY FOODS HOLDINGS, INC.

Consolidated Statements of Cash Flows

(Dollars in Thousands)

(Unaudited)

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

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EAGLE FAMILY FOODS HOLDINGS, INC.

Consolidated Statement of Changes in Stockholders’ Deficit

For the Thirteen Week Period Ended October 2, 2004

(Dollars in Thousands)

(Unaudited)

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

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EAGLE FAMILY FOODS HOLDINGS, INC.

Notes to the Financial Statements

(Unaudited)

1. Basis of Presentation:

The accompanying financial statements as of October 2, 2004 and July 3, 2004 and for the thirteen week periods ended October 2, 2004 and September 27, 2003 present the consolidated financial position, results of operations and cash flows of Eagle Family Foods Holdings, Inc. (“Holdings”) and its wholly-owned subsidiary, Eagle Family Foods, Inc. (“Eagle”). Eagle and Holdings are collectively referred to as the “Company,” unless the context indicates otherwise. Eagle is a 100% wholly owned subsidiary of Holdings; Holdings fully and unconditionally guarantees the registered debt issued by Eagle; Holdings has no independent assets or operations; and Holdings has no other subsidiaries.

During the thirteen week period ended October 2, 2004, the Company had negative cash generated from operating activities for reasons discussed in the Liquidity and Capital Resources section of Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations included elsewhere in this Quarterly Report on Form 10-Q. In addition, the classification of the Revolving Financing Facility as a current liability caused a working capital deficit. This Revolving Financing Facility is available to the Company through March 23, 2007. The Company will be required to temporarily reduce the amount outstanding under the Revolver B obligations by $20.3 million. Management has evaluated its estimated cash flows in the next operating period and believes that cash generated from operations and borrowings available under Revolver A obligations will be sufficient to service interest on the Notes and required reductions in Revolver B obligations, satisfy working capital requirements, meet temporary requirements to reduce the amount of outstanding indebtedness, and make required capital expenditures in fiscal year 2005. However, significant changes in interest rates, the Company’s business, customers and cost of raw materials could have a material adverse effect on the Company’s results of operations and the Company’s ability to meet its obligations. See Note 6 to the financial statements included in this Quarterly Report on Form 10-Q for the definition of Revolving Financing Facility, Revolver A obligations, and Revolver B obligations.

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. Included in these reclassifications is the presentation of the sale of the non-dairy business as discontinued operations pursuant to the Statement of Financial Accounting Standards (“SFAS”) No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” (“SFAS No. 144”). See Note 2 to the financial statements included in this Quarterly Report on Form 10-Q.

The financial statements as of October 2, 2004 and July 3, 2004, and for the thirteen week periods ended October 2, 2004 and September 27, 2003 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. 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 SFAS No. 144, the results of operations of the Non-Dairy Creamer Business for the thirteen week period ended September 27, 2003 has been classified as discontinued operations and the results of operations for that period have been reclassified. Interest expense related to the term loan principal repaid from the proceeds of the Non-Dairy Creamer Sale has been allocated to discontinued operations.

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EAGLE FAMILY FOODS HOLDINGS, INC.

Notes to the Financial Statements

(Unaudited)

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

3. Inventories:

Inventories are stated at the lower of cost or market at October 2, 2004 and July 3, 2004 and consisted of the following (in thousands):

4. Property and Equipment:

Property and equipment is recorded at cost at October 2, 2004 and July 3, 2004 and consisted of the following (in thousands):

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. 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.

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EAGLE FAMILY FOODS HOLDINGS, INC.

Notes to the Financial Statements

(Unaudited)

6. Debt:

Debt consisted of the following (in thousands):

On March 23, 2004, the Company entered into a Financing Agreement (the “Financing Agreement’) by and among Eagle, Holdings, as a guarantor, 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 $27,000,000 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 $55,000,000. 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 October 2, 2004 and July 3, 2004, the borrowings under Revolver A were $22,112,000 and $15,688,000, respectively, and the borrowings under Revolver B were $55,000,000. The maturity date of the Financing Agreement is March 23, 2007, subject to extensions if certain conditions are met.

On September 20, 2004, the Company entered into a First Amendment to Financing Agreement (the “First Amendment”) by and among Holdings, as guarantor, Eagle, as borrower, certain financial institutions from time to time party thereto, Fortress, as collateral agent for the Lenders, and Congress, as administrative agent for the Lenders. The First Amendment temporarily increases the principal amount available for borrowing under Revolver A from $27,000,000 to $30,000,000 through and including November 3, 2004.

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 in accordance with the FASB’s Emerging Issues Task Force Issue No. 95-22, “Balance Sheet Classification of Borrowings Outstanding under Revolving Credit Agreements that Include Both a Subjective Acceleration Clause and a Lock-Box Arrangement” (“EITF 95-22”). 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 October 2, 2004 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.

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EAGLE FAMILY FOODS HOLDINGS, INC.

Notes to the Financial Statements

(Unaudited)

As of October 2, 2004, the Company had letters of credit outstanding totaling $1,664,000 under the Revolving Financing Facility, as required by certain insurance policies.

The Company’s $115,000,000 of Senior Subordinated Notes (the “Notes”) are due January 15, 2008 bearing interest of 8.75% per annum, payable on January 15 and July 15, commencing July 15, 1998. The fair market value of the Notes was approximately $87,400,000 and $80,500,000 at October 2, 2004 and July 3, 2004, respectively.

GEI and Warburg, Holdings’ principal stockholders, each owned $14,092,000 in aggregate principal amount of Notes as of October 21, 2004. These stockholders have guaranteed payment of Revolver B obligations and associated costs to the extent of interest paid to the stockholders on the Notes after March 23, 2004.

7. Income Taxes:

The Company assesses the recoverability of the deferred tax assets and records a valuation allowance when it is probable that any or all of the deferred tax assets will not be realized. Management continues to see lower industry market values in the current economic environment, which could affect the tax planning strategies available to the Company. The Company maintains a full valuation allowance for its net deferred tax assets and net operating loss carryforwards as sufficient positive evidence does not exist to support reversal of the reserve. Until such time, except for minor state and local tax provisions, the Company will have no reported tax provision, net of valuation allowance adjustments.

8. Comprehensive Income (Loss):

The components of other comprehensive income (loss) for the thirteen week periods ended October 2, 2004 and September 27, 2003 consisted of the following (in thousands):

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EAGLE FAMILY FOODS HOLDINGS, INC.

Notes to the Financial Statements

(Unaudited)

9. Pension Plan:

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

The Company contributed $30,000 during the thirteen-week period ended October 2, 2004. The Company anticipates contributing at a minimum $90,000 to fund its Benefit Plan during the twelve-month period ending December 31, 2004.

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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Executive Overview

Set forth below is a discussion of the consolidated financial condition and consolidated results of operations for the thirteen week periods ended October 2, 2004 and September 27, 2003 of Eagle Family Foods Holdings, Inc. (“Holdings”), and its wholly-owned subsidiary, Eagle Family Foods, Inc. (“Eagle,” together with Holdings, the “Company”). 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 (“Dean Foods”) the Non-Dairy Creamer Business and related assets, including inventory. In accordance with the provisions of the Statement of Financial Accounting Standards (“SFAS”) No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” (“SFAS No. 144”), the results of operations of the Non-Dairy Creamer Business for the thirteen week period ended September 27, 2003 have been classified as discontinued operations and the results of operations for the period have been reclassified.

The following table sets forth the consolidated results of operations as a percentage of net sales for the thirteen week periods ended October 2, 2004 and September 27, 2003. 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.

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Results of Operations

Thirteen Week Periods ended October 2, 2004 (“first quarter 2005”) and September 27, 2003 (“first quarter 2004”) (Unaudited).

Net Sales. The Company’s net sales for first quarter 2005 were $32.2 million as compared to $28.1 million for first quarter 2004, an increase of $4.1 million, or 14.5%. The table below sets forth the Company’s net sales data for each of the Company’s product lines for first quarter 2005 and first quarter 2004 (dollars in millions):

Net sales of the sweetened condensed milk product line increased by $3.8 million in first quarter 2005 as compared to first quarter 2004 due to early seasonal shipments to certain customers and an increase in sales volume of premium dessert kits. The dessert kits utilize the Company’s Eagle Brand sweetened condensed milk product in popular sweetened condensed milk recipes and were launched by the Company in its fiscal year ended July 3, 2004.

Cost of Goods Sold. Cost of goods sold was $20.4 million for first quarter 2005 as compared to $16.6 million for first quarter 2004, an increase of $3.8 million, or 22.8%. Expressed as a percentage of net sales, cost of goods sold for first quarter 2005 increased to 63.3% from 58.9% for first quarter 2004. The increase in the percentage is primarily due to the change in the sales mix to products with a higher production cost.

Distribution Expense. Distribution expense was $2.4 million for first quarter 2005 as compared to $2.0 million for first quarter 2004, an increase of $0.4 million, or 19.2%. Expressed as a percentage of net sales, distribution expense for first quarter 2005 increased to 7.5% from 7.3% for first quarter 2004. The increase in distribution costs was due to additional costs associated with storing and handling the premium dessert kits and higher transportation costs.

Marketing Expense. Marketing expense was $3.2 million for first quarter 2005 as compared to $2.7 million for first quarter 2004, an increase of $0.5 million, or 18.4%. Expressed as a percentage of net sales, marketing expense increased to 9.9% for first quarter 2005 from 9.6% for first quarter 2004. The increase in marketing expense was primarily due to investments in development and promotion of the premium dessert kits in first quarter 2004.

General and Administrative (“G&A”) Expense. G&A expense was $1.4 million for first quarter 2005 as compared to $1.9 for first quarter 2004, a decrease of $0.5 million, or 27.2%. Expressed as a percentage of net sales, G&A expense for first quarter 2005 decreased to 4.4% from 6.9% for first quarter 2004. The decrease is primarily the result of lower depreciation as certain computer software and systems have been fully depreciated.

Operating Income. Operating income was $4.8 million for first quarter 2005 as compared to $4.9 million for first quarter 2004, a decrease of $0.1 million, or 1.5%. Expressed as a percentage of net sales, operating income for first quarter 2005 decreased to 14.9% from 17.3% for first quarter 2004. The decrease in operating income was due to the change in sales mix to products with a higher production cost and investments in development and promotion of the premium dessert kits.

Interest Expense. Net interest expense was $4.9 million for first quarter 2005 as compared to $3.9 million for first quarter 2004, an increase of $1.0 million, or 25.9%. The increase in interest expense was due to a higher average interest rate of 10.19% in first quarter 2005 as compared to an average interest rate of 8.17% in first quarter 2004. The average debt balance in first quarter 2005 was $193.3 million as compared $199.8 million in first quarter 2004.

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Income Taxes. The Company recorded an income tax expense for state and local taxes of $0.01 million for first quarter 2005 and $0.06 million for first quarter 2004.

Income from Discontinued Operations. Income from discontinued operations was $0.2 million for first quarter 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.

Liquidity and Capital Resources

The Company’s secured Revolving Financing Facility consists of (1) an asset-based Revolving Financing Facility (“Revolver A”) in an aggregate principal amount not to exceed $27.0 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 $55.0 million. As of October 2, 2004 and July 3, 2004, the borrowings under Revolver A were $22.1 and $15.7 million, respectively, and under Revolver B were $55.0 million at both dates.

On September 20, 2004, the Company entered into a First Amendment to Financing Agreement (the “First Amendment”) by and among Holdings, as guarantor, Eagle, as borrower, certain financial institutions from time to time party thereto, Fortress, as collateral agent for the Lenders, and Congress, as administrative agent for the Lenders. The First Amendment temporarily increases the principal amount available for borrowing under Revolver A from $27.0 million to $30.0 million through and including November 3, 2004. Because the Company had sufficient cash flows, the additional borrowing capacity was not utilized.

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 is to be less than $34.7 million. 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.

Interest payments on the Company’s $115 million of outstanding senior subordinated notes (“Notes”) 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.

The Company’s remaining liquidity needs are for capital expenditures and increases in working capital. The Company had capital expenditures of less than $0.1 million in first quarter 2005. The Company expects to spend $1.0 million on capital expenditures during its fiscal year ending July 2, 2005 for enhancements at existing facilities. The Company’s primary sources of liquidity are cash flows from operations and available borrowings under the Revolving Financing Facility.

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Net cash used in operating activities was $6.9 million and $4.3 million in first quarter 2005 and first quarter 2004, respectively, an increase of $2.6 million. The increase was primarily due to an increase in accounts receivable due to higher sales in first quarter 2005 as compared to first quarter 2004.

Cash used in investing activities was $0.03 million in first quarter 2005 as compared to $0.07 million in first quarter 2004. The cash was used for capital expenditures.

Cash from financing activities was $6.4 million and $4.5 million in first quarter 2005 and first quarter 2004, respectively, an increase of $1.9 million. This increase in cash from financing activities supported the cash requirements related to the Company’s investment in, and operating requirements of, the premium dessert kits, as well as other seasonal operating requirements.

During the thirteen week period ended October 2, 2004, the Company had negative cash generated from operating activities for reasons discussed above. In addition, the classification of the Revolving Financing Facility as a current liability caused a working capital deficit. This Revolving Financing Facility is available to the Company through March 23, 2007. The Company will be required to temporarily reduce the amount outstanding under the Revolver B obligations by $20.3 million. Management has evaluated its estimated cash flows in the next operating period and believes that cash generated from operations and borrowings available under Revolver A obligations will be sufficient to service interest on the Notes and required reductions in Revolver B obligations, satisfy working capital requirements, meet temporary requirements to reduce the amount of outstanding indebtedness, and make required capital expenditures in fiscal year 2005. However, significant changes in interest rates, the Company’s business, customers and cost of raw materials could have a material adverse effect on the Company’s results of operations and the Company’s ability to meet its obligations.

As of October 30, 2004, GE Investment Private Placement Partners II, a Limited Partnership and Warburg, Pincus Ventures, L.P., Holdings’ principal stockholders, each owned $14.1 million in aggregate principal amount of Notes. These stockholders have guaranteed payment of Revolver B obligations and associated costs to the extent of interest paid to the stockholders on the Notes after March 23, 2004.

Contractual Obligations

The Company may enter into long-term contracts for the purchase of certain raw materials. At October 2, 2004, the Company did not have any long-term purchase commitments. The Company intends to utilize the raw material under its outstanding purchase commitments in production. The Company leases buildings and equipment under various noncancellable lease agreements for periods of one to ten years. The lease agreements generally require the Company to pay taxes, insurance and maintenance expenses related to the leased assets. The Company has employment arrangements 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 contractual obligations at October 2, 2004 (dollars in thousands):

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

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Facility balance to be classified as a current liability on the balance sheet in accordance with EITF No. 95-22. 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 maturity date of the Revolving Financing Facility is March 23, 2007.

Redeemable Preferred Stock

The 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 subject to mandatory redemption at a price per share equal to $100 for Series A Preferred Stock and $100,000 for Series B Preferred Stock plus all dividends accrued and unpaid there 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 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 four major brands (Eagle Brand sweetened condensed milk, Borden eggnog and None Such mincemeat pie filling) are consumed primarily during the November and December holiday season. In recent years, approximately 47% of the Company’s net sales, excluding the net sales of the Non-Dairy Creamer Business and the shelf stable juice business sold under the ReaLemon and ReaLime brand names, 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 Financing Facility in that 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 October 2, 2004, the outstanding indebtedness was $192.1 million, with maturities of $77.1 million in fiscal year 2007 on the Revolving Financing Facility and $115 million in fiscal year 2008 on the Notes. This substantial indebtedness could have important consequences. For example, it could:

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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 Financing Agreement governing the Revolving Financing Facility restricts management’s discretion in operating the Company’s business. 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 Financing Agreement requires the Company to maintain specified financial ratios and tests, among other obligations. The Financing 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.

The 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 ingredients in the premium dessert kits are procured by the Company and converted into a finished product by a 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:

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 manufacturers could also adversely affect its ability to react quickly and effectively to changes in the market for its products.

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 future contracts, the Company tries to establish a known price for future milk purchases in order to protect against fluctuating milk prices. Milk prices in April 2004 rose dramatically and the forward milk prices from May through December have also increased significantly. Future contracts purchased by the Company reduced a significant portion of the negative impact these higher milk prices would have had on the Company’s operating results. However, if milk prices continue to rise and the Company is not able or does not secure lower priced milk future contracts, the impact of higher milk prices could adversely affect the Company’s business, financial condition, and results of operations.

The Company manufactures all of its U. S. sweetened condensed milk at two facilities and is dependent on such facilities for production. The Company manufactures sweetened condensed milk for the U.S. markets at the Wellsboro, PA and Starkville, MS facilities. These facilities are subject to the normal hazards that could result in any material damage to any such facility. Damage to the facilities, or prolonged interruption in the operations of the facilities for repairs or other reasons, would have a material adverse effect on the Company’s business, financial condition and results of operations.

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.

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Furthermore, there can be no assurance that the Company will be able to develop and introduce new products or improvements to its existing products, which satisfy customer needs or achieve market acceptance. The failure to develop products and introduce them successfully in a timely manner could adversely affect the Company’s business, financial condition and results of operations.

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. If 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 relationships 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 thereunder 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, prescribes 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. In connection with the Acquisition, the Company assumed all past and future environmental liabilities related to the acquired business. The Company would have been indemnified by BFC and BFC Investments with respect to certain pre-Acquisition Closing environmental liabilities identified by January 2003. No liabilities were identified. 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.

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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.

Revenue Recognition. The Company recognizes revenues when there is persuasive evidence of a sale arrangement, delivery has occurred and title, ownership and risk of loss transfers to the customer, the price is fixed or determinable, and collection is reasonably assured. Liabilities are established for estimated returns, allowances, 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 differing from the Company’s estimates. The Company periodically reviews the useful lives of its property, plant and equipment, and where warranted, changes are made that may result in acceleration of depreciation.

Intangible Assets and Goodwill. 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 are determined using a royalty savings methodology and discounted cash flows and the fair value of goodwill is determined using estimated future discounted cash flow earnings and market valuations based on these cash flow earnings.

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”). The Company intends to maintain a full valuation allowance for the net deferred tax assets and net operating loss carryforwards 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.

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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.

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 October 2, 2004 and that were sensitive to changes in interest rates. In the ordinary course of business, the Company enters into derivative financial instrument transactions in order to manage or reduce market risk. The Company does not enter into derivative financial instrument 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.

All amounts, except percentage rates, are reflected in U.S. dollars (in thousands).

As the table incorporates only the exposures that existed as of October 2, 2004, 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 $0.8 million in forecasted interest expense. The Company’s variable rate liability has a stated maturity date of March 23, 2007. In accordance with EITF No. 95-22, the Company has presented the outstanding balance as a current obligation. See additional disclosure in Note 6 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 October 2, 2004, the Company had purchased 13 milk futures contracts, which settle

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during various months through April 2005, at a cost and current market value of $0.3 million. The aggregate market value will increase or decrease based on the future milk prices. In addition, the Company has less than $0.1 million of deferred gain on contracts sold prior to the contracts’ settlement dates. The gain will be recognized at the time the original contracts would have matured.

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.

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 4. CONTROLS AND PROCEDURES

The Company’s management reviewed the Company’s internal controls and procedures and the effectiveness of these controls. As of October 2, 2004, 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 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, including the event described below and identified in the Annual Report on Form 10-K of the Company for the year ended July 3, 2004, the Chief Executive Officer and Chief Financial Officer concluded that the registrants’ disclosure controls and procedures are not effective for the reason described in Item 4(b) below. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Securities Exchange Act of 1934 is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including cost limitations, the possibility of human error, judgments and assumptions regarding the likelihood of future events, and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can provide only reasonable assurance of achieving their control objective.

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Subsequent to the issuance of the Company’s financial statements for the quarterly period ended April 3, 2004, the Company determined that borrowings under its Revolving Financing Facility should have been classified as short-term on the balance sheet of Eagle and the consolidated balance sheet of Holdings. As a result, the balance sheet of Eagle at April 3, 2004 and the consolidated balance sheet of Holdings at April 3, 2004 were restated and a Form 10-Q/A was filed with the Securities and Exchange Commission on October 1, 2004 for the quarterly period ended April 3, 2004.

In making the evaluation of the effectiveness of the design and operation of the registrants’ disclosure controls and procedures, the Chief Executive Officer and Chief Financial Officer considered matters relating to this restatement and its impact on the financial statements taken as a whole, including the processes that were undertaken to ensure that all material adjustments necessary to correct the classification were recorded. This restatement reflected the Company’s compliance with an accounting standard that was brought to light with respect to the new Financing Agreement entered into on March 23, 2004. In light of the facts and circumstances relating to the restatement, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the restatement was reflective of a material weakness (as defined under standards established by the Public Company Accounting Oversight Board) in the Company’s disclosure controls.

The material weakness was caused by an inadequate control over the review process of new material debt agreements. The Company has subsequently implemented a more robust review policy of new material debt agreements using accounting checklists and additional levels of review. As of the end of this period, the Company has not had enough time to evaluate the effectiveness of this procedure.

There was no other 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.

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PART II – OTHER INFORMATION

Item 6. EXHIBITS

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.

Date: November 12, 2004

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