SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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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 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to __________
Commission File Number 33-36374-01
DEL MONTE FOODS COMPANY
(Exact name of registrant as specified in its charter)
Maryland 13-3542950
- ------------------------------- ---------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization
One Market, San Francisco, California 94105
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code (415) 247-3000
Indicate by check mark whether registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark whether the registrant has filed all
documents and reports required to be filed by Section 12, 13 or
15(d) of the Securities Exchange Act of 1934 subsequent to the
distribution of securities under a plan confirmed by a court.
Yes No
--- ---
As of September 30, 1997, 140,000 shares of Common Stock,
par value $.01 per share, were outstanding.
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DEL MONTE FOODS COMPANY AND SUBSIDIARIES
TABLE OF CONTENTS
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Page No.
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets
September 30, 1997 and June 30, 1997 1
Consolidated Statements of Operations
Three Months Ended September 30, 1997
and 1996 2
Consolidated Statements of Cash Flows
Three Months Ended September 30, 1997
and 1996 3
Notes to Consolidated Financial Statements 4
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operation 6
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 8
Item 2. Changes in Securities 8
Item 3. Defaults Upon Senior Securities 8
Item 4. Submission of Matters to a Vote
of Security Holders 8
Item 5. Other Information 8
Item 6. Exhibits and Reports on Form 8-K 8
SIGNATURES
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DEL MONTE FOODS COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in Millions Except Per Share Amounts)
September 30, June 30,
1997 1997
------------- --------
(unaudited)
ASSETS
- ------
Current assets:
Cash and cash equivalents $ 5 $ 5
Trade accounts receivable,
net of allowance 79 67
Other receivables 5 2
Inventories 624 339
Prepaid expenses and other
current assets 3 9
--- ---
TOTAL CURRENT ASSETS 716 422
Property, plant and equipment, net 218 222
Other assets 22 23
--- ---
TOTAL ASSETS $956 $667
==== ====
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Accounts payable and accrued
expenses $354 $222
Short-term borrowings 237 82
Current portion of long-term debt 10 2
---- ----
TOTAL CURRENT LIABILITIES 601 306
Long-term debt 518 526
Other noncurrent liabilities 216 215
Redeemable preferred stock ($.01 par
value per share, 1,000,000 shares
authorized; issued and outstanding:
35,000 at September 30, 1997,
aggregate liquidation preference:
$37 and 35,000 at June 30, 1997;
aggregate liquidation preference:
$35) 32 32
Stockholders' equity (deficit):
Common stock ($.01 par value per
share, 1,000,000 shares authorized;
issued and outstanding: 140,000 at
September 30, 1997 and June 30, 1997)
Paid-in capital 129 129
Retained earnings (deficit) (540) (541)
---- ----
TOTAL STOCKHOLDERS'
EQUITY (DEFICIT) (411) (412)
---- ----
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $956 $667
==== ====
See Notes to Consolidated Financial Statements.
1
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DEL MONTE FOODS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(Dollars in Millions Except Per Share Amounts)
Three Months
Ended
September 30,
-------------
1997 1996
----- -----
Net sales $ 251 $ 264
Cost of products sold 171 183
----- -----
Gross profit 80 81
Selling, advertising, administrative
and general expenses 62 63
----- -----
OPERATING INCOME 18 18
Interest expense 17 13
----- -----
INCOME BEFORE INCOME TAXES, AND
EXTRAORDINARY ITEM 1 5
Provision for income taxes 1
----- -----
INCOME BEFORE EXTRAORDINARY ITEM 1 4
Extraordinary loss from the early
retirement of debt 4
----- -----
NET INCOME $ 1 $
===== =====
Net loss attributable to
common shares $ (1) $ (22)
===== =====
Loss per common share:
Loss before
extraordinary item ($4.54) $(48.63)
Extraordinary loss from the
early retirement of debt (9.34)
----- -------
Net loss per
common share ($4.54) $(57.97)
===== ========
See Notes to Consolidated Financial Statements
2
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DEL MONTE FOODS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(Dollars in Millions)
Three Months
Ended
September 30,
-------------
1997 1996
----- -----
OPERATING ACTIVITIES:
Net income $ 1
Adjustments to reconcile net income
to net cash flows provided by
(used in) operating activities:
Depreciation and amortization 7 $ 8
Extraordinary loss from the
early retirement of debt 4
Changes in operating assets and
liabilities:
Accounts receivable (15) (3)
Inventories (285) (290)
Prepaid expense and other
current assets 6 6
Accounts payable and accrued
expenses 132 148
Other non-current liabilities 1 (1)
----- -----
NET CASH USED IN OPERATING ACTIVITIES (153) (128)
INVESTING ACTIVITIES:
Capital expenditures (2) (1)
----- -----
NET CASH USED IN INVESTING ACTIVITIES (2) (1)
FINANCING ACTIVITIES:
Short-term borrowings 189 409
Payments on short-term borrowings (34) (241)
Proceeds from long-term borrowings 55
Principal payments on long-term
borrowings (115)
Deferred debt issuance costs (7)
Specific Proceeds Collateral Account 30
----- -----
NET CASH PROVIDED BY FINANCING
ACTIVITIES 155 131
Effect of exchange rate changes on cash
and cash equivalents (1)
----- -----
NET CHANGE IN CASH AND CASH
EQUIVALENTS 1
Cash and cash equivalents at beginning
of period 5 6
----- -----
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 5 $ 7
===== =====
See Notes to Consolidated Financial Statements.
3
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DEL MONTE FOODS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1997
(Dollars in Millions)
NOTE A - BASIS OF FINANCIAL STATEMENTS
Basis of Presentation: The accompanying consolidated
financial statements at September 30, 1997 and for the
three-month periods ended September 30, 1997 and 1996, are
unaudited, but are prepared in accordance with generally accepted
accounting principles for interim financial information and
include all adjustments (consisting only of normal recurring
entries) which, in the opinion of management, are necessary for a
fair presentation of financial position, results of operations
and cash flows. These unaudited consolidated financial statements
should be read in conjunction with the audited consolidated
financial statements as of and for the year ended June 30, 1997,
and notes thereto, included in the Annual Report on Form 10-K.
NOTE B - INVENTORIES
The major classes of inventory are as follows:
September 30, June 30,
1997 1997
------------- --------
Finished product $576 $239
Raw materials and supplies 19 13
Other, principally packaging
material 29 87
---- ----
$624 $339
==== ====
During the twelve months ended June 30, 1997 and the three
months ended September 30, 1997 and 1996, respectively, inflation
had a minimal impact on production costs. As a result, the effect
of accounting for these inventories by the LIFO method has had no
material effect on inventories at June 30, 1997 and September 30,
1997 or on results of operations for the three months ended
September 30, 1997 and 1996, respectively.
NOTE C - NET INCOME (LOSS) PER COMMON SHARE
Net income (loss) per common share was computed by dividing
net income (loss) attributable to common shares by the weighted
average number of common and redeemable common shares outstanding
during the period. Net income (loss) attributable to common
shares is computed as net income or loss reduced by cash and
in-kind dividends for the period on redeemable preferred stock.
4
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DEL MONTE FOODS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
September 30, 1997
(Dollars in Millions)
NOTE D - PREFERRED STOCK
On October 13, 1997, the Company authorized a new series of
cumulative redeemable preferred stock, Series C, and issuance of
shares of such new series of preferred stock in exchange for all
of the issued and outstanding shares of cumulative redeemable
preferred stock, Series A and B, currently held by preferred
stock shareholders. The Series A and B preferred stock were
retired upon completion of this exchange.
The terms of the Series C preferred stock are substantially
identical to those of the Series A and B stock with the exception
of a call premium and right of holders to require redemption upon
a change in control. The Series C preferred stock will be
redeemable at the option of the Company at redemption price
ranging from 103% of the liquidation preference, if redeemed
prior to October 1998, to 100% of the liquidation preference, if
redeemed after October 2000. The Series A and B preferred stock
was redeemable by the Company at par. In the event of a change of
control of the Company, the holders of the Series C preferred
stock will have the right to require the Company to repurchase
shares of such stock at 101% of the liquidation preference. Under
the terms of the Series A and B preferred stock, shares of such
stock were mandatorily redeemable (i.e., the holder did not have
the option of continuing to hold such shares) at 101% of the
liquidation preference.
NOTE E - SUBSEQUENT EVENT
On November 12, 1997, the Company entered into an agreement
to purchase the Contadina processed tomato businesses, including
the Contadina trademark worldwide, capital assets and inventory.
The acquisition is expected to close in December 1997.
5
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DEL MONTE FOODS COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
September 30, 1997
(Dollars in Millions)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operation
During the first half of fiscal 1997, the Company sold its
interests Del Monte Latin America. At the end of fiscal 1997, a
distribution agreement under which the Company sold certain
products at cost or Yorkshire Dried Fruit & Nuts, Inc. expired.
These events are collectively referred to as the "Divested
Operations".
Three Months Ended September 30, 1997 vs. Three Months Ended
September 30, 1996
Net Sales. Consolidated net sales for the first fiscal
quarter of 1998 decreased by $13 compared to prior year quarter
due to the absence of the Divested Operations. Net sales, after
adjusting for the effect of the invested Operations, increased by
$6 compared to the prior year quarter primarily due to higher
volumes in the vegetable and tomato businesses. The vegetable and
tomato businesses have experienced an increase in sales volumes
(3% and 19%, respectively) and net sales (3% and 15%,
respectively) compared to prior year period, which has been
partially offset by volume and net sales decreases of 2% and 3%
respectively in the fruit business. The Company's current
vegetable and tomato pricing has begun to meet some resistance
due to competitive discounting in the marketplace. As a result of
this competitive activity, the Company has experienced some
market share loss in vegetables for the current year quarter
versus prior year quarter.
Cost of Sales and Gross Profit. Gross profit for the first
quarter decreased by $1 from the prior year period. Gross margin
percentage, after adjusting for the effect of the Divested
Operations, has remained relatively stable (31.9% for first
quarter fiscal 1998 versus 31.8% for first quarter fiscal
1997). Gross margin for the fruit segment (which includes
pineapple) increased from 26.3% in prior year quarter to 27.5%
in current year quarter, but this gain was offset as the gross
margin percentages for vegetables and tomatoes decreased form
38.1% to 37.1% and from 32.0% to 29.4%, respectively.
Costs are expected to increase in the current year primarily
due to an increase in processing costs. The Company's peach and
pear growing regions experienced a compressed harvesting season.
This shortened time frame for harvesting caused an increase in
the use of cold storage for peaches and pears until processing
capacity became available. In addition, smaller fruit size
lowered raw product recoveries. Cooler weather than normal
resulted in late plantings for some vegetables, lower field
yields and slower recoveries. The adverse weather and harvesting
conditions are not expected to impact the Company's supply of
product available for sale, however, since carry-in inventories
were adequate to cover shortfalls from the current year harvest.
Selling, Advertising, Administrative and General Expenses.
Selling, advertising, administrative and general expenses, after
adjusting for Divested Operations, increased by $1 versus the
same period of the prior year. Administrative and general
expenses have increased from the prior year period due to an
increase in marketing spending support offset by lower benefit
plan costs. This higher spending is a combination of spending
earlier in the year (timing) and higher trade promotion expense
resulting form the competitive situation in vegetables and
tomatoes.
Interest Expense. Interest expense has increased by $4
compared to the prior year quarter, primarily due to higher
outstanding debt balances in first quarter of the current year
resulting from the recapitalization transaction that occurred in
the fourth quarter of fiscal 1997.
6
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DEL MONTE FOODS COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - Continued
September 30, 1997
(Dollars in Millions)
Financial condition - Liquidity and Capital Resources
The Company's primary cash requirements are to fund debt
service, finance seasonal working capital needs and make capital
expenditures. Internally generated funds and amounts available
under its Revolving Credit Facility are the Company's primary
sources of liquidity.
As of September 30, 1997, the Company's Short Term
Borrowings and Long Term Debt primarily consisted of a revolving
credit facility, bank term loans, and senior subordinated notes
(collectively, the "Debt"). The Debt agreements contain
restrictive covenants, the most restrictive of which is the
maximum senior debt ratio. The Company is in compliance with all
such covenants for the first quarter of fiscal 1998.
The working capital requirements of the Company are
seasonally affected by the growing cycle of the vegetables, fruits
and tomatoes it processes. Substantially all inventories are
produced during the harvesting and packing months of June trough
October and depleted through the remaining seven months.
Accordingly, working capital requirements fluctuate significantly.
The increase in inventories at September 30, 1997 from June 30,
1997 reflects the seasonal inventory buildup. The increase in
accounts payable and accrued expenses from June 30, 1997 to
September 30, 1997 primarily reflects accrued expenses resulting
from higher levels of trade and consumer promotions and accruals
remaining from the peak production period.
To finance this seasonal production, the Company relies on
its Revolving Credit Facility, which has a maximum availability
of $350, subject to an asset-based borrowing base. As of
September 30, 1997, $237 was outstanding under the Revolving
Credit Facility, compared to $82 at June 30, 1997.
The Company expects that its fiscal 1998 capital
expenditures will be approximately $40.
Certain Forward-Looking Statements
Certain statements in this quarterly report under the
captions "Management's Discussion and Analysis of Financial
Condition and Results of Operations", "Financial Statements" and
elsewhere constitute "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995.
Such forward-looking statements involve known and unknown risks,
uncertainties and other important factors that could cause the
actual results, performance or achievements of the Company, or
industry results, to differ materially from any future results,
performances or achievements expressed or implied by such
forward-looking statements. Such risks and uncertainties and
other important factors include among others: general economic
and business conditions; weather conditions; crop yields;
competition; raw material costs and availability; the loss of
significant customers; changes in business strategy or
development plans; availability, terms and deployment of capital;
availability of qualified personnel; changes in, or failure or
inability to comply with, governmental regulations, including,
without limitation, environmental regulations; industry trends
and capacity and other factors referenced in this quarterly
report. These forward-looking statements speak only as of the
date of the quarterly report. The Company expressly disclaims any
obligation or undertaking to disseminate any updates or revisions
to any forward-looking statement contained herein to reflect any
change in the Company's expectations with regard thereto or any
change in events, conditions or circumstances on which any such
statement is based.
7
<PAGE>
DEL MONTE FOODS COMPANY AND SUBSIDIARIES
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS. None
ITEM 2. CHANGES IN SECURITIES. None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES. None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. None
ITEM 5. OTHER INFORMATION.
On November 12, 1997, the Company entered into an agreement
to purchase the Contadina processed tomato businesses, including
the Contadina trademark worldwide, capital assets and inventory.
The acquisition is expected to close in December 1997.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. None.
(a) Exhibits
(3) Articles Supplementary to the Charter of Del Monte
Foods Company, filed October 15, 1997
(27) Financial Data Schedule
(b) Report on Form 8-K
No reports on Form 8-K were required to be filed during the
quarter for which this report is filed.
8
<PAGE>
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
DEL MONTE FOODS COMPANY
Date November 14, 1997
By: /s/ RICHARD G. WOLFORD
-------------------------------
Richard G. Wolford
Chief Executive Officer
By: /s/ DAVID L MEYERS Date November 14, 1997
------------------------------
David L. Meyers
Executive Vice President,
Administration
And Chief Financial Officer
S-1
Conformed Copy
--------------
DEL MONTE FOODS COMPANY
-----------------------
ARTICLES SUPPLEMENTARY
Del Monte Foods Company, a Maryland corporation (the
"Corporation"), hereby certifies to the State Department of
Assessments and Taxation of Maryland that:
FIRST: Under a power contained in Article Sixth of the
Restated and Amended Articles of Incorporation of the Corporation
(the "Restated Articles of Incorporation"), the Board of
Directors of the Corporation (the "Board of Directors"), by
resolution at a special meeting held on October 13, 1997,
classified and designated one hundred fifty thousand (150,000)
shares (the "Series C Shares") of Preferred Stock (as defined in
the Restated Articles of Incorporation) as shares of Series C
Redeemable Preferred Stock, with preferences, conversion and
other rights, voting powers, restrictions, limitations as to
dividends and other distributions, qualifications and terms and
conditions of redemption of shares as set forth below:
Section 1. Designation and Amount.
The shares of such series shall be designated as
the "Series C Redeemable Preferred Stock" ("Series C
Preferred Stock") and the number of shares constituting
such series shall be one hundred fifty thousand (150,000),
which number may be decreased and, only for purposes of
Section 2(b) below, increased by the Board of Directors
without a vote of stockholders; provided, however, that
such number may not be decreased below the number of then
currently outstanding shares of Series C Preferred Stock.
Section 2. Dividends and Distributions.
(a) The holders of shares of Series C Preferred
Stock, in preference to the holders of shares of the
Corporation's Common Stock, par value $.01 per share (the
"Common Stock"), and to any other capital stock of the
Corporation ranking junior to Series C Preferred Stock as
to payment of dividends, shall be entitled to receive,
when, as and if declared by the Board of Directors out of
funds of the Corporation legally available for the payment
of dividends, cumulative dividends at the annual rate of
14% of the Liquidation Value, as defined in Section 7, per
share, and, subject to the provisions of Section 4(d)(ii),
no more. Dividends payable in respect of the outstanding
shares of Series C Preferred Stock shall begin to accrue
and be cumulative from the respective dates of original
issue of such shares (which dates shall be reflected on the
certificates evidencing the same), and shall be payable in
quarterly payments on April 15, July 15, October 15 and
January 15 (or, if any such day is not a Business Day, as
defined in Section 7, the Business Day next preceding such
day) in each year (each such date being referred to herein
as a "Quarterly Dividend Payment Date") for each of the
fiscal quarters ended March 31, June 30, September 30 and
December 31, respectively, commencing in respect of each
share of Series C Preferred Stock on the first Quarterly
Dividend Payment Date which is at
<PAGE>
least seven days after the date of original issue thereof;
provided, however, that dividends payable in respect of
outstanding shares of Series C Preferred Stock with an
original issuance date of October 15, 1997 or October 16,
1997 (which date shall be reflected on the certificate
evidencing such shares) shall begin to accrue and be
cumulative from October 1, 1997.
(b) Any dividend payable in respect of shares of
Series C Preferred Stock may, at the election of the Board
of Directors, be declared and paid in additional shares of
Series C Preferred Stock, to the extent legally
permissible, in lieu of declaration and payment therefor in
cash. The number of shares of Series C Preferred Stock to
be issued in lieu of cash dividends shall be calculated
based on the Liquidation Value of each share of Series C
Preferred Stock. The shares of Series C Preferred Stock so
issued shall be duly authorized, validly issued, fully paid
and nonassessable. To the extent not declared and paid in
cash or in additional shares of Series C Preferred Stock,
or declared and funds necessary therefor shall have been
Set Aside for Payment, as defined in Section 7, on each
Quarterly Dividend Payment Date, an amount equal to all
dividends which have accumulated on each share of Series C
Preferred Stock then outstanding during the period from the
immediately preceding Quarterly Dividend Payment Date (or
from the date of issuance in the case of the initial
Quarterly Dividend Payment Date) to such Quarterly Dividend
Payment Date will be added to the Liquidation Value of such
shares of Series C Preferred Stock and will remain a part
thereof until such dividends are paid in cash or additional
shares of Series C Preferred Stock, at which time such
Liquidation Value will be reduced by the amount of
dividends so paid.
(c) The amount of dividends payable shall be
determined on the basis of twelve 30-day months and a
360-day year. Dividends paid on the shares of Series C
Preferred Stock in an amount less than the total amount of
such dividends at the time accumulated and payable on such
shares shall be allocated pro rata on a share-by-share
basis among all such shares at the time outstanding. The
Board of Directors may fix a record date (a "Regular Record
Date") for the determination of holders of shares of Series
C Preferred Stock entitled to receive payment of a dividend
declared thereon, which record date shall be no more than
60 days nor less than ten days prior to the date fixed for
the payment thereof. Any dividend declared by the Board of
Directors as payable and punctually paid or Set Apart for
Payment on a Quarterly Dividend Payment Date will be paid
to the Persons, as defined in Section 7, in whose names
Series C Preferred Stock is registered at the close of
business on the Regular Record Date set with respect to
that Quarterly Dividend Payment Date (the "Registered
Holders"). Any dividend not so paid or Set Apart for
Payment shall forthwith cease to be payable to such
Registered Holders and may be paid to the Registered Holder
at the close of business on the record date for the payment
of such defaulted dividends and interest to be fixed by the
Board of Directors (a "Special Record Date"). The Board of
Directors shall provide Registered Holders of Series C
Preferred Stock not less than 10 days' prior notice of a
Special Record Date. All cash
2
<PAGE>
payments shall be made in such coin or currency of the
United States of America as at the time of payment is legal
tender for payment of public and private debts.
(d) The Registered Holder of any shares of Series
C Preferred Stock, upon the Corporation's written request
therefor containing a reasonably complete description of
the basis for such request, shall indemnify the Corporation
for any and all withholding tax liabilities incurred by the
Corporation in connection with any dividends paid or
distributions made (including, without limitation, in
connection with any redemption of Series C Preferred Stock,
but excluding any penalties other than penalties resulting
from the failure of the Registered Holder to provide any
required information) to such holder in respect of Series C
Preferred Stock. Each Registered Holder, by acceptance of
the certificate evidencing such holder's shares of Series C
Preferred Stock, shall be deemed to have agreed to the
terms of this Section 2(d).
(e) The holders of shares of Series C Preferred
Stock shall not be entitled to receive any dividends or
other distributions in respect of such shares of Series C
Preferred Stock except as provided for in these Articles
Supplementary.
Section 3. Restrictive Covenants; Voting Rights.
(a) So long as any shares of Series C Preferred
Stock shall be outstanding and unless the consent or
approval of a greater number of shares shall then be
required by law, without first obtaining the consent or
approval of the holders of at least a majority of the
number of then-outstanding shares of Series C Preferred
Stock, voting as a single class, given in person or by
proxy at a meeting at which the holders of such shares
shall be entitled to vote separately as a class, or by
written consent, the Corporation shall not:
(i) authorize or create any class or series,
or any shares of any class or series, of stock having
any preference or priority as to dividends or upon
redemption, liquidation, dissolution, or winding up
over Series C Preferred Stock ("Senior Stock");
provided, however, that no such vote shall be required
with respect to the authorization or creation by the
Corporation of one or more series of Senior Stock if
the proceeds of the Corporation's issuance of such
Senior Stock are sufficient, and are used, to redeem
all outstanding shares of Series C Preferred Stock
concurrently with the issuance of such Senior Stock;
(ii) authorize or create any class or
series, or any shares of any class or series, of
stock, other than Series A Redeemable Preferred Stock
or Series B Redeemable Preferred Stock of the
Corporation, ranking on a parity (either as to
dividends or upon redemption, liquidation, dissolution
or winding up) with Series C Preferred Stock ("Parity
Stock"); provided, however, that no such vote shall be
required with respect to the authorization or creation
by the Corporation of one or more new series of Parity
Stock if the
3
<PAGE>
proceeds of the Corporation's issuance of such Parity
Stock are sufficient, and are used, to redeem all
outstanding shares of Series C Preferred Stock
concurrently with the issuance of such Parity Stock;
(iii) reclassify, convert or exchange any shares
of stock of the Corporation into shares of Senior Stock
or Parity Stock;
(iv) authorize any security exchangeable for,
convertible into, or evidencing the right to purchase any
shares of Senior Stock or Parity Stock;
(v) amend, alter or repeal the Corporation's
Restated and Amended Articles of Incorporation, as it
may be amended from time to time (the "Restated
Articles of Incorporation") or the Corporation's
By-Laws, as they may be amended from time to time (the
"By-Laws"), to alter or change the preferences, rights
or powers of Series C Preferred Stock so as to affect
Series C Preferred Stock adversely or, except for
purposes of Section 2(b) above, to increase the
authorized number of shares of Series C Preferred
Stock;
(vi) declare or pay dividends or make any
other distributions on, or redeem or repurchase any,
shares of Common Stock or other capital stock of the
Corporation ranking junior (either as to dividends or
upon redemption, liquidation, dissolution or winding
up) to the Series C Preferred Stock ("Junior Stock"),
other than (A) dividends, redemptions, repurchases or
distributions made in the form of, or exchangeable
for, shares of Junior Stock, or warrants, rights or
options to acquire shares of Junior Stock, (B)
provided that dividends on shares of Series C
Preferred Stock payable pursuant to the terms of
Section 2(a) on the four most recent Quarterly
Dividend Payment Dates shall have been paid in full in
cash (or shares of Series C Preferred Stock issued in
respect of such dividends pursuant to Section 2(b)
shall have been redeemed or repurchased for cash)
dividends, redemptions, repurchases and distributions
in an amount which, when taken together with the
amount of cash dividends and redemption or repurchase
proceeds previously paid in respect of the
Corporation's stock (other than in accordance with the
proviso to clause (ix) of this Section 3(a)), does not
exceed the amount of dividends, redemptions,
repurchases or distributions permitted to be made by
Del Monte Corporation, a wholly owned subsidiary of
the Corporation ("DMC"), under the Indenture with
respect to the Senior Subordinated Notes dated April
18, 1997, among the Corporation, as guarantor, DMC, as
issuer, and Marine Midland Bank, as trustee, as in
effect on the date hereof; (C) from time to time
during the period in which shares of Series C
Preferred Stock are outstanding, up to an aggregate of
$10,000,000 in redemptions or repurchases of Junior
Stock held by management of the Corporation in
connection with termination of employment, retirement
and
4
<PAGE>
similar circumstances; and (D) dividends, redemptions,
repurchases and distributions permitted by the proviso
to clause (ix) of this Section 3(a);
(vii) declare or pay dividends or make any
other distributions on, or redeem or repurchase any,
shares of Parity Stock, other than (A) dividends or
distributions made in the form of, or exchangeable
for, shares of Junior Stock, or warrants, rights or
options to acquire shares of Junior Stock, (B) other
dividends or distributions paid ratably on Series C
Preferred Stock and all Parity Stock on which
dividends are payable or in arrears, in proportion to
the total amounts to which the holders of all such
shares are then entitled, (C) redemptions or
repurchases in exchange for shares of Junior Stock, or
warrants, rights or options to acquire shares of
Junior Stock, and (D) other redemptions or repurchases
effected ratably on Series C Preferred Stock and all
Parity Stock, in proportion to the total amounts to
which the holders of all such shares are then
entitled;
(viii) merge or consolidate with, or sell
all or substantially all of the Corporation's assets
to, another entity unless shares of Series C Preferred
Stock outstanding immediately prior to such
transaction (A) remain outstanding after such
transaction without change to the preferences, rights
or powers thereof, (B) are exchanged for securities
containing substantially the same preferences, rights
and powers or (C) are redeemed concurrently with the
effectiveness of such transaction;
(ix) use cash proceeds of any
recapitalization or refinancing transaction to redeem
or repurchase any shares of Junior Stock without also
redeeming or repurchasing each outstanding share of
Series C Preferred Stock at the Redemption Price
therefor; provided, however, that the Corporation
shall be permitted to use the proceeds of the issuance
of Junior Stock (other than pursuant to an
underwritten public offering) to redeem or repurchase
shares of Junior Stock to the extent that, after
giving effect to such transaction, TPG Partners, L.P.
("TPG") and its Affiliates would hold at least 55% of
the common equity interest in the Corporation that TPG
and its Affiliates held immediately following the
consummation of the merger effected pursuant to the
Agreement and Plan of Merger, dated as of February 21,
1997, as amended, among the Corporation, TPG and Del
Monte Foods Company; or
(x) permit DMC to issue shares of preferred
stock other than to the Corporation or another wholly
owned subsidiary of the Corporation.
(b) Whenever (i) there shall have occurred six
consecutive Quarterly Dividend Payment Dates on which
dividends payable on shares of Series C Preferred Stock
pursuant to the terms of Section 2(a) shall not have been
paid, in cash or in additional shares of Series C Preferred
Stock or by increasing the Liquidation
5
<PAGE>
Value of the shares of Series C Preferred Stock pursuant to
Section 2(b), at the annual rate of 14% of Liquidation
Value per share (a "Dividend Default"), (ii) the
Corporation shall not have redeemed shares of Series C
Preferred Stock within ten days of the date (a "Redemption
Date") of any redemption of which it has given, or is
required to give, notice pursuant to Section 4(c),
regardless of whether there shall be funds legally
available to effect such redemption (a "Redemption
Default"), or (iii) the Corporation shall not have
repurchased shares of Series C Preferred Stock required to
be repurchased pursuant to Section 4(e) within ten days of
the Change of Control Payment Date, regardless of whether
there shall be funds legally available to effect such
repurchase (a "Repurchase Default"), thereafter and until
such time as all dividends on Series C Preferred Stock
shall have been paid, in cash or in additional shares of
Series C Preferred Stock or by increasing the Liquidation
Value of the shares of Series C Preferred Stock pursuant to
Section 2(b), in full (and no dividend arrearages shall
exist on the Series A Preferred Stock) (hereafter a cure of
such Dividend Default), or such repurchase shall have been
effected by the Corporation (hereafter a cure of such
Repurchase default), as the case may be, the holders of
shares of Series C Preferred Stock shall have the right,
notwithstanding anything to the contrary contained in the
Restated Articles of Incorporation or By-Laws of the
Corporation, voting together as a single class, to elect
two directors. This right to elect two directors may be
exercised at any annual meeting or at any special meeting
called for such purpose as hereinafter provided or at any
adjournments thereof, or by the unanimous written consent
delivered to the Secretary of the Corporation of the
holders of all of the outstanding shares of Series C
Preferred Stock as of the record date of such written
consent, until any Dividend Default, Redemption Default or
Repurchase Default shall have been cured, at which time the
term of office of the directors so elected shall terminate
automatically. So long as such right to vote continues (and
unless such right has been exercised by the unanimous
written consent of the holders of all of the outstanding
shares of Series C Preferred Stock as hereinbefore
authorized), the Secretary of the Corporation may call, and
upon the written request of the holders of record of a
majority of the outstanding shares of Series C Preferred
Stock addressed to him or her at the principal office of
the Corporation shall call, a special meeting of
the holders of Series C Preferred Stock for the
election of two directors as provided herein. Such
meeting shall be held within 10 days after delivery of such
notice to the Secretary, at the place and upon the notice
provided by law and in the By-Laws or in the notice of
meeting. No such special meeting or adjournment thereof
shall be held on a date less than 10 days before any annual
meeting of stockholders or any special meeting in lieu
thereof. If at any such annual or special meeting or any
adjournment thereof the holders of a majority of the then
outstanding shares of Series C Preferred Stock entitled to
vote in such election shall be present or represented by
proxy, or if the holders of all of the outstanding shares
of Series C Preferred Stock shall have acted by unanimous
written consent in lieu of a meeting with respect thereto,
then the authorized number of directors shall be increased
by two and the holders of Series C Preferred Stock, voting
as a class, shall be entitled to elect the additional two
directors. The absence of a quorum of the holders of any
class or series of capital stock of the Corporation at any
such annual or
6
<PAGE>
special meeting shall not affect the exercise by the
holders of Series C Preferred Stock of its voting rights.
Any director so elected shall serve until the next annual
meeting or until his or her successor shall be elected and
shall qualify, unless the director's term of office shall
have terminated under the circumstances set forth in the
second sentence of this Section 3(b). If any director
elected by the holders of Series C Preferred Stock as a
class dies or becomes incapacitated, the holders of Series
C Preferred Stock then outstanding are entitled to vote for
such director by written consent as hereinabove provided,
or at a special meeting of such holders called as provided
above, may elect his or her successor to hold office for
the unexpired term. Holders of Series C Preferred Stock
shall have the right to remove, with or without cause, any
director originally elected by such holders, upon the
affirmative vote of a majority of such holders at a special
meeting of such holders called as provided above or by
unanimous written consent as hereinabove provided. The
rights of the holders of Series C Preferred Stock to elect
two directors pursuant to the terms of this Section 3(b)
shall not be affected adversely by the voting or other
rights applicable to any other security of the Corporation.
(c) Except as otherwise provided in these
Articles Supplementary or in the Restated Articles of
Incorporation, or as required by law, the holders of shares
of Series C Preferred Stock shall have no voting rights and
their consent shall not be required for the taking of any
corporate action.
Section 4. Redemption and Repurchase.
(a) The Corporation may redeem, in whole or in
part, any outstanding shares of Series C Preferred Stock at
any time, but only out of funds legally available therefor,
by paying for each share of Series C Preferred Stock an
amount in cash equal to the sum of (i) the applicable
percentage of the Liquidation Value (as of the redemption
date) as set forth in the table below and (ii) the amount,
if any, of Accrued Dividends, as defined in Section 7,
thereon to the date of redemption (the "Redemption Price").
If less than all outstanding shares of Series C Preferred
Stock are to be redeemed, the Corporation shall redeem
shares pro rata among the holders thereof in accordance
with the respective numbers of shares of Series C Preferred
Stock held by each of them.
Redemption Date During Applicable
Twelve Month Period Commencing Percentage
------------------------------ ----------
October 15, 1997 103.0%
October 15, 1998 101.5%
October 15, 1999 100.5%
October 15, 2000 and thereafter 100.0%
(b) On or before April 17, 2008, the Corporation
shall redeem all outstanding shares of Series C Preferred
Stock, if any, but only out of funds legally available
therefor, by paying the Redemption Price therefor.
7
<PAGE>
(c) Notice of any redemption of shares of Series C
Preferred Stock pursuant to Section 4(a) or 4(b) shall
specify a date for such redemption and shall be mailed not
less than 10, but not more than 60, days prior to such date
fixed for redemption to each holder of shares of Series C
Preferred Stock to be redeemed, at such holder's address as
it appears on the transfer books of the Corporation. In
order to facilitate the redemption of shares of Series C
Preferred Stock, the Board of Directors may fix a record
date for the determination of the holders of shares of
Series C Preferred Stock to be redeemed, not more than 60
days or less than 10 days prior to the date fixed for such
redemption.
(d) Notice having been given pursuant to Section
4(c), from and after the date specified therein as the date
of redemption, unless default shall be made by the
Corporation in providing for the payment of the applicable
Redemption Price, all dividends on shares of Series C
Preferred Stock thereby called for redemption shall cease
to accrue, and from and after the earlier of (x) the date
of redemption so specified, unless default shall be made by
the Corporation as aforesaid, and (y) the date (prior to
the date of redemption so specified) on which funds of the
Corporation sufficient for the payment of the Redemption
Price shall have been Set Apart for Payment thereof if the
notice of redemption shall state the intention of the
Corporation so to deposit such funds on a date specified in
such notice, all rights of the holders thereof as
stockholders of the Corporation, except the right to
receive the applicable Redemption Price (but without
interest), shall cease and terminate. Any interest allowed
on moneys so deposited shall be paid to the Corporation.
Any moneys so deposited which shall remain unclaimed by the
holders of such Series C Preferred Stock at the end of six
years after the redemption date shall to the fullest extent
permitted by law become the property of, and be paid by
such bank or trust company to, the Corporation. If the
Corporation shall default in providing for the payment of
the Redemption Price as required pursuant to this Section
4, dividends on such Series C Preferred Stock shall accrue
at the rate of 16% per annum and be added to the required
redemption payments as provided in Section 2(a).
(e) Upon the occurrence of (i) a Change of
Control, as defined in Section 7, or (ii) a merger or
consolidation of the Corporation with another entity in
which holders of the common equity of the Corporation
immediately prior to the consummation of the transaction
hold, directly or indirectly, immediately following the
consummation of the transaction, 50% or less of the common
equity interest in the surviving corporation in such
transaction (a "Merger Transaction"), if the Corporation
does not redeem the outstanding shares of Series C
Preferred Stock pursuant to Section 4(a) or 4(b), each
holder of Series C Preferred Stock shall have the right to
require the Corporation to repurchase each outstanding
share of its Series C Preferred Stock, if any, but only out
of funds legally available therefor, by paying in cash, in
respect of each share of Series C Preferred Stock, an
amount equal to the sum of (A) the product of 101% and the
Liquidation Value of such share as of the repurchase date
plus (B) Accrued Dividends to the repurchase date. Within
30 days following any Change of Control or Merger
Transaction, unless the Corporation shall have mailed
8
<PAGE>
the notice with respect to a redemption pursuant to Section
4(a) or 4(b), the Corporation shall mail a notice (a
"Change of Control Notice") to each holder of Series C
Preferred Stock describing the transaction or transactions
that constitute the Change of Control or Merger Transaction
and offering to repurchase each share of Series C Preferred
Stock on the date specified in such notice, which date
shall be no earlier than 30 days (or such shorter time
period as may be permitted under applicable law, rules and
regulations) and no later than 60 days from the date such
notice is mailed (the "Change of Control Payment Date").
The Corporation shall comply with the requirements of Rule
14e-1 under the Securities Exchange Act of 1934, as amended
(the "Exchange Act") and any other securities laws and
regulations thereunder to the extent such laws and
regulations are applicable in connection with the
repurchase of the shares of Series C Preferred Stock as a
result of a Change of Control or Merger Transaction.
Section 5. Reacquired Shares.
Any shares of Series C Preferred Stock redeemed,
purchased or otherwise acquired by the Corporation or any
Subsidiary of the Corporation in any manner whatsoever
shall become authorized but unissued shares of Preferred
Stock, $.01 par value per share, of the Corporation and may
be reissued as part of another series of Preferred Stock,
$.01 par value per share, of the Corporation, subject to
the conditions or restrictions on authorizing or creating
any class or series, or any shares of any class or series,
set forth in Section 3(a).
Section 6. Liquidation, Dissolution or Winding Up.
(a) If the Corporation shall liquidate, dissolve
or wind up, whether pursuant to federal bankruptcy laws,
state laws or otherwise, no distribution shall be made (i)
to the holders of shares of Junior Stock, unless prior
thereto the holders of shares of Series C Preferred Stock
shall have received the Liquidation Value for each share
plus an amount equal to all Accrued Dividends thereon to
the date of such payment or (ii) to the holders of shares
of Parity Stock, except distributions made ratably on
Series C Preferred Stock and all such Parity Stock in
proportion to the total amounts to which the holders of all
such shares are entitled upon such liquidation, dissolution
or winding up of the Corporation.
(b) Neither the consolidation, merger or other
business combination of the Corporation with or into any
other Person or Persons, nor the sale, lease, exchange or
conveyance of all or any part of the property, assets or
business of the Corporation to a Person or Persons other
than the holders of Junior Stock shall be deemed to be a
liquidation, dissolution or winding up of the Corporation
for purposes of this Section 6.
9
<PAGE>
Section 7. Definitions.
As used herein, the following terms shall have
the meanings indicated.
"Accrued Dividends" to a particular date (the
"Applicable Date") means all unpaid dividends payable
pursuant to Section 2(a), whether or not declared,
accumulated to the Applicable Date.
"Affiliate" means any Person that directly, or
indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, the Person
specified.
"Business Day" means any day other than a
Saturday, Sunday, or a day on which banking institutions in
the State of New York are authorized or obligated by law or
executive order to close.
"Change in Control" means the occurrence of one
or more of the following events: (i) any sale, lease,
exchange or other transfer (in one transaction or a series
of related transactions) of all or substantially all of the
assets of the Corporation or DMC to any Person or group of
related persons for purposes of Section 13(d) of the
Exchange Act (a "Group"), together with any Affiliates
thereof (whether or not otherwise in compliance with the
provisions of this Series A Preferred Stock) other than to
TPG or any of its Affiliates; (ii) the approval by the
holders of capital stock of the Corporation or DMC of any
plan or proposal for the liquidation or dissolution of the
Corporation or DMC, as the case may be (whether or not
otherwise in compliance with the provisions of this Series
C Preferred Stock); (iii) (A) any Person or Group (other
than TPG or any of its Affiliates) shall become the owner,
directly or indirectly, beneficially or of record, of
shares representing more than 40% of the aggregate voting
power of the issued and outstanding stock entitled to vote
in the election of directors, managers or trustees (the
"Voting Stock") of the Corporation or DMC and (B) TPG and
any of its Affiliates beneficially own, directly or
indirectly, in the aggregate a lesser percentage of the
Voting Stock of the Corporation than such other Person or
Group; or (iv) the replacement of a majority of the Board
of Directors of the Corporation or DMC over a two-year
period from the directors who constituted the Board of
Directors of the Corporation or DMC, as the case may be, at
the beginning of such period, and such replacement shall
not have been approved by a vote of at least a majority of
the Board of Directors of the Corporation or DMC, as the
case may be, then still in office who either were members
of such Board of Directors at the beginning of such period
or whose election as a member of such Board of Directors
was previously so approved or who were nominated by, or
designees of, either of TPG or any of its Affiliates.
"Liquidation Value" with respect to any share of
Series C Preferred Stock as of any particular date means an
amount equal to the sum of $1,000 plus (A) an amount equal
to any accumulated and unpaid dividends on such share of
Series C Preferred Stock added to the Liquidation Value of
such share pursuant to Section 2, as
10
<PAGE>
such amount may be reduced in accordance with the
provisions of Section 2, and (B) in any liquidation,
dissolution or winding up of the Corporation or any
redemption, as the case may be, an amount equal to
dividends accumulating from and including the next
preceding Quarterly Dividend Payment Date to but excluding
the Quarterly Dividend Payment Date.
"Person" means any person or entity of any nature
whatsoever, specifically including an individual, a firm, a
company, a corporation, a partnership, a trust or other
entity.
"Set Apart for Payment" means, when used with
respect to funds of the Corporation to be used to pay
dividends or effect redemptions of shares of Series C
Preferred Stock, that the funds of the Corporation to be
used to pay dividends on or effect redemptions of any
shares of Series C Preferred Stock to the Corporation shall
have irrevocably deposited with a bank or trust company
doing business in the Borough of Manhattan in the City of
New York, and having a capital and surplus of at least $50
million, in trust for the exclusive benefit of the holders
of shares of Series C Preferred Stock, funds sufficient to
satisfy such payment of redemption obligation.
"Subsidiary" of any Person means any corporation
or other entity of which all the voting power of the voting
equity securities or equity interest is owned, directly or
indirectly, by such Person.
Section 8. Rank.
Series C Preferred Stock will rank, with respect
to dividends and upon distribution of assets in
liquidation, dissolution or winding up, prior to the Common
Stock and pari passu with the Series A Redeemable Preferred
Stock and Series B Redeemable Preferred Stock of the
Corporation.
SECOND: The Shares have been classified and designated
by the Board of Directors under the authority contained in the
Restated Articles of Incorporation.
THIRD: These Articles Supplementary have been approved
by the Board of Directors in the manner and by the vote required
by law.
FOURTH: The undersigned President of the Corporation
acknowledges these Articles Supplementary to be the corporate act
of the Corporation and as to all matters or facts required to be
verified under oath, the undersigned President acknowledges that
to the best of his knowledge, information and belief, these
matters and facts are true in all material respects and that this
statement is made under the penalties for perjury.
11
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused these
Articles Supplementary to be executed under seal in its name and
on its behalf by its Senior Vice President and attested to by its
Secretary on this 14th day of October, 1997.
ATTEST: DEL MONTE FOODS COMPANY
/s/ William R. Sawyers By: /s/ Thomas E. Gibbons (SEAL)
---------------------- ---------------------
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION FROM THE FINANCIAL
STATEMENTS OF DEL MONTE FOODS COMPANY FOR THE QUARTER ENDED SPETEMBER 30, 1997,
AS PRESENTED IN THE COMPANY'S FORM 10-Q FILED FOR SUCH PERIOD, AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 5
<SECURITIES> 0
<RECEIVABLES> 80
<ALLOWANCES> 1
<INVENTORY> 624
<CURRENT-ASSETS> 716
<PP&E> 374
<DEPRECIATION> 156
<TOTAL-ASSETS> 956
<CURRENT-LIABILITIES> 601
<BONDS> 0
32
0
<COMMON> 0
<OTHER-SE> (411)
<TOTAL-LIABILITY-AND-EQUITY> 956
<SALES> 251
<TOTAL-REVENUES> 251
<CGS> 171
<TOTAL-COSTS> 171
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 17
<INCOME-PRETAX> 1
<INCOME-TAX> 0
<INCOME-CONTINUING> 1
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1
<EPS-PRIMARY> (4.54)
<EPS-DILUTED> (4.54)
</TABLE>
