<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A NO. 3
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): December 19, 1997
DEL MONTE FOODS COMPANY
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware. 33-36374-01 13-3542950
- ---------------------------- ----------- ----------------------
(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation) File Number) Identification Number)
One Market, San Francisco, CA 94105
---------------------------------------- ---------
(Address of principal executive offices) (Zip Code)
(415) 247-3000
----------------------------------------------------
(Registrant's telephone number, including area code)
<PAGE> 2
Item 2. Acquisition or Disposition of Assets.
As previously reported in a Quarterly Report of Del Monte Foods
Company (the "Company") on Form 10-Q filed November 14, 1997 for
the period ended September 30, 1997, the Company and Del Monte
Corporation, its wholly owned subsidiary, entered into an Asset
Purchase Agreement dated as of November 12, 1997 (the
"Agreement") with Nestle USA, Inc. ("Nestle") and its subsidiary
Contadina Services, Inc., providing, among other things, for the
Company's purchase of certain assets comprising Nestle's U.S.
business of manufacturing and marketing certain canned tomato
products for the retail, foodservice and industrial markets (the
"Acquisition").
The closing and effective date of the Acquisition was December
19, 1997. The initial purchase price of approximately $197
million was funded by (i) Del Monte Corporation's senior credit
facility, as amended and restated as of December 17, 1997 to
permit the Acquisition and increase the amount available for
borrowing under the credit facility, among Del Monte Corporation,
Bank of America National Trust and Savings Association, as
Administrative Agent, Bankers Trust Company, as Documentation
Agent, and other financial institutions parties thereto; (ii)
proceeds from an issuance of 12 1/2% Senior Discount Notes due
2007 under an indenture, dated as of December 17, 1997 between
the Company and Marine Midland Bank, as Trustee, (the
"Indenture"); and (iii) an equity contribution from the Company's
majority shareholder. The Acquisition purchase price was
determined in arm's-length negotiations between the parties and
was based on their valuation of the assets to be acquired and the
associated contractual commitments. This description of the
Acquisition is subject to, and is qualified in its entirety by
reference to, the provisions of the Agreement, which is filed as
an Exhibit to this Current Report on Form 8-K.
FORWARD-LOOKING STATEMENTS
STATEMENTS MADE HEREIN THAT ARE FORWARD-LOOKING IN NATURE ARE
INTENDED TO BE "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF
SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.
ALTHOUGH THE COMPANY BELIEVES THAT THE EXPECTATIONS DESCRIBED
HEREIN ARE REASONABLE, THE ACTUAL RESULTS MAY DIFFER MATERIALLY
FROM ANY OR ALL ANTICIPATED RESULTS DUE TO FINANCIAL AND OTHER
ECONOMIC CONDITIONS AND OTHER RISKS, UNCERTAINTIES AND
CIRCUMSTANCES PARTLY OR TOTALLY OUTSIDE THE CONTROL OF THE
COMPANY, INCLUDING THOSE ATTRIBUTABLE TO THE CONDITIONS AND TERMS
SET FORTH IN THE AGREEMENT, SUCH AS A CONSEQUENCE OF THE DUE
DILIGENCE BEING PERFORMED. WORDS SUCH AS "ANTICIPATED," "EXPECT,"
"ESTIMATE," "PROJECT" AND SIMILAR EXPRESSIONS ARE INTENDED TO
IDENTIFY FORWARD-LOOKING STATEMENTS.
2
<PAGE> 3
DEL MONTE FOODS COMPANY
INDEX TO FORM 8-K/A
Item 7. Financial Statements and Exhibits
<TABLE>
<CAPTION>
Page No.
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<S> <C>
(a) Financial Statements of Business Acquired.
The following financial statements of Contadina (a division of Nestle
USA, Inc.) are filed with this amendment to Del Monte Foods Company (the
"Company") Form 8-K/A which was previously filed on March 19, 1998.
Contadina (a division of Nestle USA, Inc.)
Independent Auditors' Report 4
Combined Balance Sheets at December 31, 1996 and
December 18, 1997 5
Combined Statements of Operations and Divisional Equity for the
year ended December 31, 1996 and the period from January 1,
1997 through December 18, 1997 6
Combined Statements of Cash Flows for the year ended
December 31,1996 and the period from January 1, 1997
through December 18, 1997 7
Notes to Combined Financial Statements for the year ended
December 31, 1996 and the period from January 1, 1997
through December 18, 1997 8
</TABLE>
3
<PAGE> 4
Independent Auditors' Report
The Board of Directors
Del Monte Foods Company
We have audited the accompanying combined balance sheets of Contadina (a
division of Nestle USA, Inc.) as of December 18, 1997 and December 31, 1996 and
the related statements of operations, divisional equity, and cash flows for the
period January 1, 1997 through December 18, 1997 and for the year December 31,
1996. These financial statements are the responsibility of Del Monte Foods
Company management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Contadina (a division of Nestle
USA, Inc.) as of December 18, 1997 and December 31, 1996, and the results of its
operations and its cash flows for the period January 1, 1997 through December
18, 1997 and for the year ended December 31, 1996 in conformity with generally
accepted accounting principles.
KPMG PEAT MARWICK LLP
March 16, 1998
Los Angeles, California
4
<PAGE> 5
CONTADINA
(A DIVISION OF NESTLE USA, INC.)
COMBINED BALANCE SHEETS
(IN MILLIONS)
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 18,
1996 1997
----------- -----------
<S> <C> <C>
ASSETS
Current assets:
Trade accounts receivable $ 10 $ 17
Other receivables 3 --
Inventories 92 98
---- ----
TOTAL CURRENT ASSETS 105 115
Property, plant and equipment 94 90
Goodwill 32 31
---- ----
TOTAL ASSETS $231 $236
==== ====
LIABILITIES AND DIVISIONAL EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 10 $ 13
Payable to Nestle USA, Inc. 17 52
---- ----
TOTAL CURRENT LIABILITIES 27 65
Divisional equity 204 171
---- ----
TOTAL LIABILITIES AND DIVISIONAL EQUITY $231 $236
==== ====
</TABLE>
See Notes to Combined Financial Statements.
5
<PAGE> 6
CONTADINA
(A DIVISION OF NESTLE USA, INC.)
COMBINED STATEMENTS OF OPERATIONS AND
DIVISIONAL EQUITY
(IN MILLIONS)
<TABLE>
<CAPTION>
JANUARY 1
YEAR ENDED THROUGH
DECEMBER 31, DECEMBER 18,
1996 1997
------------ ------------
<S> <C> <C>
Net sales $ 160 $ 162
Cost of products sold 151 163
----- -----
Gross profit (loss) 9 (1)
Selling, advertising, administrative and general
expense 20 26
----- -----
OPERATING LOSS (11) (27)
Interest expense 6 6
----- -----
NET LOSS BEFORE INCOME TAXES (17) (33)
DIVISIONAL EQUITY, BEGINNING OF PERIOD 221 204
----- -----
DIVISIONAL EQUITY, END OF PERIOD $ 204 $ 171
===== =====
</TABLE>
See Notes to Combined Financial Statements.
6
<PAGE> 7
CONTADINA
(A DIVISION OF NESTLE USA, INC.)
COMBINED STATEMENTS OF CASH FLOWS
(IN MILLIONS)
<TABLE>
<CAPTION>
JANUARY 1
YEAR ENDED THROUGH
DECEMBER 31, DECEMBER 18,
1996 1997
------ ----
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss $(17) $(33)
Adjustments to reconcile net loss to net cash flows used in
operating activities:
Depreciation and amortization 12 13
Changes in operating assets and liabilities:
Accounts receivable 9 (4)
Inventories (16) (6)
Accounts payable and accrued expenses 4 3
---- ----
NET CASH USED IN OPERATING ACTIVITIES (8) (27)
INVESTING ACTIVITIES:
Capital expenditures (10) (8)
Proceeds from sale of assets 1
---- ----
NET CASH USED IN INVESTING ACTIVITIES (9) (8)
FINANCING ACTIVITIES: Net borrowings from Nestle USA, Inc. 17 35
---- ----
NET CHANGE IN CASH AND CASH EQUIVALENTS -- --
Cash and cash equivalents at beginning of period -- --
---- ----
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ -- $ --
==== ====
</TABLE>
See Notes to Combined Financial Statements.
7
<PAGE> 8
CONTADINA
(A DIVISION OF NESTLE USA, INC.)
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 18, 1997
(IN MILLIONS)
NOTE A - ORGANIZATION, OPERATIONS AND BASIS OF PRESENTATION
General: The accompanying combined financial statements include the
accounts of Contadina Services, Inc., a wholly-owned subsidiary of Nestle USA,
Inc. ("Nestle") and other divisional accounts related to the Contadina canned
tomato business within the culinary division of Nestle ("Contadina") on a
carve-out basis, excluding the effects of product lines not acquired (see Note
E). Contadina operates in one business segment which manufactures and markets
branded, private label, industrial and foodservice processed tomato products
from manufacturing facilities in Hanford, California and Woodland, California.
Contadina's products are distributed throughout the United States.
Contadina does not maintain stand-alone corporate treasury, legal, tax
and other similar corporate support functions. Therefore, corporate general and
administrative expense and interest expense, as well as certain other expenses
(see Note D), are allocated to Contadina from Nestle generally on a proportional
basis. Allocations and estimates, as described in Note D, are based on
assumptions that Del Monte Foods Company management believes are reasonable. It
is impracticable to determine whether such costs are comparable to those which
would have been incurred on a stand-alone basis. Long-term debt and income taxes
are not allocated by Nestle.
All purchases of inventory, payroll, capital and other expenditures are
funded through Contadina's intercompany account with Nestle. Remittances from
sales to customers are collected by Nestle and are accounted for through the
intercompany account. Accordingly, Contadina has no cash on a stand-alone basis.
Trade receivables and payables do represent the amounts due from/to
customers/suppliers at the dates presented.
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Inventories: Inventories are stated at the lower of cost (first-in,
first-out) or market.
Property, plant and equipment and depreciation: Property, plant and
equipment are stated at cost and depreciated over their estimated useful lives,
principally by the straight-line method. Maintenance and repairs are expensed as
incurred. Significant expenditures that increase useful lives are capitalized.
The ranges of estimated useful lives for computing depreciation are: buildings -
30 years; leasehold improvements - the shorter of useful life or life of lease;
and machinery and equipment - 5 to 17 years. Depreciation of plant and equipment
and building and leasehold improvements amortization was $11 for the year ended
December 31, 1996 and $12 for the period ended December 18, 1997.
8
<PAGE> 9
CONTADINA
(A DIVISION OF NESTLE USA, INC.)
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(IN MILLIONS)
Goodwill: Goodwill represents the excess purchase price over fair value
of acquired assets and liabilities. Goodwill is amortized on a straight-line
basis over 40 years.
Fair Value of Financial Instruments: The carrying amount of the
Company's financial instruments, which include trade accounts receivable,
accounts payable, and accrued expenses, approximates fair value due to the
relatively short maturity of such instruments. The carrying amount of the
payable to Nestle USA, Inc. approximates fair value due to the regular
settlement of this account.
Cost of Products Sold: Cost of products sold includes raw material,
labor, and overhead.
Royalties: Under a royalty agreement with Nestle S.A. (parent of Nestle
and legal entity which owns the Contadina trademarks), royalties are charged for
the license of the Contadina trademarks at a rate of 3% of net sales. Royalty
expense under this agreement was $5 for both the year ended December 31, 1996
and the period ended December 18, 1997.
Divisional Equity: Divisional equity includes the combined historical
legal capital of Contadina Services, Inc. and profit and losses of Contadina
subsequent to December 31, 1995 on a carve-out basis. Pre-1996 results of
operations for the acquired product line are not available. Transactions with
Nestle for all other intercompany transactions are included in and settled
through the intercompany account payable to Nestle.
Use of Estimates: Certain amounts reported in the financial statements
are based on management estimates and assumptions that affect the reported
amounts of assets and liabilities and the disclosure of contingent assets and
liabilities as of December 31, 1996 and December 18, 1997, and the reported
amounts of income and expenses for the year ended December 31, 1996 and the
period ended December 18, 1997. The ultimate resolution of these items may
differ from those estimates.
Change in Accounting Principle: Effective January 1, 1996, Contadina
adopted the provisions of SFAS 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of". The statement requires that
assets held and used be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. Contadina evaluates impairment based upon undiscounted future cash
flows. If such cash flows indicate that long-lived assets may not be
recoverable, the loss is measured by discounting cash flows to present value.
The statement also requires that all long-lived assets, for which management has
committed to a plan to dispose, be reported at the lower of carrying amount or
fair value. Contadina does not depreciate long-lived assets held for sale. There
was no material effect upon the adoption of this statement.
9
<PAGE> 10
CONTADINA
(A DIVISION OF NESTLE USA, INC.)
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(IN MILLIONS)
NOTE C - SUPPLEMENTAL BALANCE SHEET INFORMATION
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 18,
1996 1997
----- -----
<S> <C> <C>
Trade Accounts Receivable:
Trade $ 10 $ 17
Allowance for doubtful accounts -- --
----- -----
TOTAL TRADE ACCOUNTS RECEIVABLE $ 10 $ 17
===== =====
Inventories:
Finished product $ 60 $ 69
Raw materials and supplies 35 32
Other, principally packaging material 2 2
Reserves (5) (5)
----- -----
TOTAL INVENTORIES $ 92 $ 98
===== =====
Property, Plant and Equipment:
Land and land improvements $ 4 $ 4
Buildings 40 40
Machinery and equipment 110 125
Construction in progress 10 3
----- -----
164 172
Accumulated depreciation (70) (82)
----- -----
PROPERTY, PLANT AND EQUIPMENT, NET $ 94 $ 90
===== =====
Goodwill:
Goodwill $ 44 $ 44
Accumulated amortization (12) (13)
----- -----
GOODWILL, NET $ 32 $ 31
===== =====
Accounts payable and accrued expenses
Accounts payable $ 6 $ 2
Payroll 1 1
Marketing 1 8
Other 2 2
----- -----
TOTAL ACCOUNTS PAYABLE AND ACCRUED EXPENSES $ 10 $ 13
===== =====
</TABLE>
10
<PAGE> 11
CONTADINA
(A DIVISION OF NESTLE USA, INC.)
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(IN MILLIONS)
NOTE D - CORPORATE ALLOCATIONS AND RELATED PARTY INFORMATION
Goodwill is associated with the acquisition of Carnation Foods in 1985,
the then-parent of Contadina, and was not recorded in the individual business
units' accounts. As such, goodwill relating to Contadina has been allocated
based on a percentage derived from the tax basis goodwill specifically
identified to Contadina in relation to total tax basis goodwill. This relative
percentage was then applied to aggregate goodwill to determine book basis
goodwill attributable to Contadina. This allocation basis was determined to be
reasonable by Del Monte Foods Company management.
Since invoicing is centralized at Nestle for all business units,
customer discounts and unapplied cash related to trade receivables are allocated
based on Contadina relative sales dollars on a customer invoice as a percentage
of the total sales dollars on the customer invoice. Cash discounts are allocated
to Contadina based on Contadina receivables as a percent of total consolidated
Nestle receivables. A specific reserve for doubtful accounts is not maintained
on a business unit basis. Therefore, a reserve for doubtful accounts was
established for Contadina through an allocation of the corporate reserve based
on the percentage of Contadina's outstanding receivables to the total Nestle
outstanding accounts receivable balance.
Variable distribution costs are allocated based on the applied usage
rate for the respective products. Fixed distribution costs are allocated on an
historical average cost per case basis. Allocated distribution costs included in
cost of products sold for the year ended December 31, 1996 were $5 and for the
period ended December 18, 1997 were $7. Marketing and sales force expense is
allocated based on relative Contadina sales dollars to total Nestle sales
dollars. The majority of warehousing costs reported are actual costs related to
Contadina's two facilities; however, a component of warehousing cost also
includes costs allocated from Nestle based on historical average inventory
stored at the distribution center.
General and administrative expenses are, for the most part, allocated by
function. Allocated selling, marketing, general and administrative expenses
amounted to $12 for the year ended December 31, 1996 and $20 for the period
ended December 18, 1997. Benefit costs are allocated at a rate of 40% of gross
wages which is representative of total benefit costs (including pension,
postretirement benefits, bonus, 401(k) matching contribution and vacation) to
total compensation. Interest expense is charged to Contadina based on the
end-of-month working capital balance at an intercompany rate equal to 7% for all
periods.
Contadina's sales of product to Nestle were $6 for both the year ended
December 31, 1996 and the period ended December 18, 1997. Contadina sales price
to Nestle is on a basis that approximates cost.
11
<PAGE> 12
CONTADINA
(A DIVISION OF NESTLE USA, INC.)
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(IN MILLIONS)
NOTE E - SALE OF CONTADINA
On December 19, 1997, Del Monte Foods Company acquired the Contadina
canned tomato businesses, including the Contadina trademark worldwide, capital
assets and inventory from Nestle and Contadina Services, Inc. for a total
purchase price of $197 paid solely in cash, comprised of a base price of $177
and an estimated net working capital adjustment of $20. The purchase price is
subject to adjustment based on the final calculation of net working capital as
of the closing date. In accordance with the asset purchase agreement dated
November 12, 1997 by and among Del Monte Foods Company, Del Monte Corporation
("DMC"), and Nestle USA, Inc., Nestle has provided its calculation of the net
working capital which would result in a payment to DMC of approximately $2. DMC
has until April 18, 1998 to review this calculation and determine if it has an
objection to this calculation.
12
<PAGE> 13
DEL MONTE FOODS COMPANY
INDEX TO FORM 8-K/A
<TABLE>
<CAPTION>
Page No.
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<S> <C>
(b) Pro Forma Financial Information.
The following unaudited pro forma information required pursuant to
Article 11 of Regulation S-X is filed with this amendment to the
Company's Form 8-K/A which was previously filed on March 19, 1998.
Del Monte Foods Company
Basis of Presentation 14
Pro Forma Consolidated Statement of Operations (unaudited)
for the year ended June 30, 1997 15
Pro Forma Consolidated Statement of Operations (unaudited)
for the six months ended December 31, 1997 16
Notes to Pro Forma Consolidated Financial Statements (unaudited) 17
</TABLE>
13
<PAGE> 14
DEL MONTE FOODS COMPANY AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(IN MILLIONS)
BASIS OF PRESENTATION
The following unaudited pro forma consolidated financial statements of
Del Monte Foods Company (the "Unaudited Pro Forma Consolidated Financial
Statements") give effect to (A) the acquisition by Del Monte Foods Company (the
"Company") from Nestle USA, Inc. and Contadina Services, Inc. on December 19,
1997 of certain assets comprising Nestle's U.S. business of manufacturing and
marketing certain canned tomato products for the retail, foodservice and
industrial markets (the "Contadina Acquisition"); and (B) the recapitalization
of the Company on April 18, 1997, through the merger of TPG Shield Acquisition
Corporation with and into the Company, with the Company being the surviving
corporation pursuant to an agreement and plan of merger (the
"Recapitalization"); and (C) all financings related to the Contadina Acquisition
and the Recapitalization. The unaudited pro forma adjustments are based on
available information and certain assumptions that the Company believes are
reasonable.
The Unaudited Pro Forma Consolidated Financial Statements have been
prepared as if the Contadina Acquisition, the Recapitalization and related
financings had occurred as of July 1, 1996. The Contadina Acquisition was
accounted for using the purchase method of accounting. The allocation of
purchase price to the assets acquired and liabilities assumed has been made
using estimated fair values that include values based on independent appraisals
and management estimates. These estimates may be subject to adjustment to
reflect actual amounts, primarily in the case of accrued liabilities. Any
subsequent adjustments are expected to occur by the Company's 1998 fiscal
year-end and are not expected to be material. Allocation of the $195 purchase
price is as follows: inventory $95, prepaid expenses $5, property, plant and
equipment $84, intangibles $16 and accrued liabilities $5. The Recapitalization
was accounted for as a leveraged recapitalization transaction.
The historical financial information for Contadina for the twelve-month
period ended September 30, 1997 was derived from the audited and unaudited
financial statements of Contadina. The Unaudited Pro Forma Statement of
Operations for the six-month period ended December 31, 1997 reflects the
historical revenues and expenses of Contadina from July 1, 1997 through December
18, 1997. The historical financial data obtained by the Company includes certain
allocated expenses for functions and services provided by Nestle. Such allocated
expenses are comprised of, without limitation, costs of utilizing outside
storage facilities; all selling costs including, without limitation, direct
sales force and brokerage expenses; costs for utilizing centralized distribution
and storage facilities; costs associated with marketing services; general and
administrative costs associated with support services such as, finance, legal,
human resources and information services and interest.
The Unaudited Pro Forma Consolidated Financial Statements do not purport
to be indicative of what the Company's results of operations would actually have
been had the Contadina Acquisition, Recapitalization and related financings been
completed on the date indicated or to project the Company's results of
operations for any future period. The Unaudited Pro Forma Consolidated Financial
Statements should be read in conjunction with the accompanying notes and the
historical consolidated financial statements of the Company (previously filed
with the Securities and Exchange Commission) and the financial statements and
notes of Contadina contained herein.
14
<PAGE> 15
DEL MONTE FOODS COMPANY AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
YEAR ENDED JUNE 30, 1997
(IN MILLIONS)
<TABLE>
<CAPTION>
HISTORICAL
-----------------------------
CONTADINA
DEL MONTE TWELVE MONTHS PRO FORMA
FOODS COMPANY ENDED CONSOLIDATED
YEAR ENDED SEPTEMBER 30, PRO FORMA YEAR ENDED
JUNE 30, 1997 1997(a)(b) ADJUSTMENTS JUNE 30, 1997
------------- ------------- ----------- -------------
<S> <C> <C> <C>
Net sales $ 1,217 $ 156 $ 1,373
Cost of products sold 819 155 $ (21) (c) 953
------- ------- ------- -------
Gross profit 398 1 21 420
Selling, advertising, administrative and
general expense 327 20 14 (d) 361
------- ------- ------- -------
OPERATING INCOME (LOSS) 71 (19) 7 59
Interest expense 52 6 35 (e) 93
Loss on sale of divested assets 5 5
Other (income) expense 30 (f) 30
------- ------- ------- -------
INCOME (LOSS) BEFORE INCOME TAXES
AND EXTRAORDINARY ITEM (16) (25) (28) (69)
Provision for income taxes
------- ------- ------- -------
INCOME (LOSS) BEFORE EXTRAORDINARY
ITEM $ (16) $ (25) $ (28) $ (69)
======= ======= ======= =======
</TABLE>
See Notes to Unaudited Pro Forma Consolidated Financial Statements.
15
<PAGE> 16
DEL MONTE FOODS COMPANY AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
SIX MONTHS ENDED DECEMBER 31, 1997
(IN MILLIONS)
<TABLE>
<CAPTION>
HISTORICAL
-------------------------------
DEL MONTE PRO FORMA PRO FORMA
FOODS COMPANY CONTADINA(a)(b) ADJUSTMENTS CONSOLIDATED
------------- --------------- ----------- ------------
<S> <C> <C> <C> <C>
Net sales $ 620 $ 92 $ 712
Cost of products sold 414 91 $(18) (c) 487
----- ----- ----- -----
Gross profit 206 1 18 225
Selling, advertising, administrative and
general expense 162 13 12 (d) 187
Acquisition expenses 7 7
----- ----- ----- -----
OPERATING INCOME (LOSS) 37 (12) 6 31
Interest expense 36 3 10 (e) 49
Other income (1) (1)
----- ----- ----- -----
INCOME (LOSS) BEFORE INCOME TAXES 2 (15) (4) (17)
Provision for income taxes
----- ----- ----- -----
INCOME (LOSS) $ 2 $ (15) $ (4) $ (17)
===== ===== ===== =====
</TABLE>
See Notes to Unaudited Pro Forma Consolidated Financial Statements.
16
<PAGE> 17
DEL MONTE FOODS COMPANY AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(IN MILLIONS)
(a) Represents the historical revenue and expenses of Contadina. The historical
financial information for Contadina for the twelve-month period ended
September 30, 1997 was derived from the audited and unaudited financial
statements of Contadina. Selling, advertising, administrative and general
expense includes non-trade marketing expenses such as coupon redemptions
and fixed marketing expenses. Certain other operating costs include
allocations from Nestle comprising, without limitation, costs of utilizing
outside storage facilities; all selling costs including, without
limitation, direct sales force and brokerage expenses; costs for utilizing
centralized distribution and storage facilities; costs associated with
marketing services; general and administrative costs associated with
support services such as, finance, legal, human resources and information
services and interest.
(b) Represents the historical revenue and expenses of Contadina from October 1,
1996 through September 30, 1997 and July 1, 1997 through December 18, 1997
for the Unaudited Pro Forma Statements of Operations for the year ended
June 30, 1997 and the six months ended December 31, 1997, respectively. As
described in the "Basis of Presentation", pro forma statement of operations
data for the 12-month period ending September 30, 1997 for Contadina has
been derived using Contadina's results of operations for the nine-month
periods ended September 30, 1996 and 1997 and the year ended December 31,
1996. Contadina's results of operations for the period from July 1, 1997 to
September 30, 1997 are accordingly presented in both the pro forma
statement of operations for the year ended June 30, 1997 and the pro forma
statement of operations for the six months ended December 31, 1997. Net
sales included in both periods amount to $37, and the net loss included in
both periods is $8. There were no significant transactions or unusual
events occurring during the three-month period ended September 30, 1997,
nor were there any significant transactions or unusual events omitted by
not including the period from July 1, 1996 to September 30, 1996.
(c) Adjustment to cost of products sold reflects the following:
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
JUNE 30, DECEMBER 31,
1997 1997
---------- ------------
<S> <C> <C>
Reclassification of Contadina trade promotion
costs $(14) $(13)
Elimination of royalties to Nestle for
trademark license (5) (3)
Reduction in depreciation expense arising from
fair value adjustment for property, plant and equipment
acquired (6) (2)
Inventory step-up 4
---- ----
$(21) $(18)
==== ====
</TABLE>
Trade promotion costs for Contadina were reclassified from cost of products sold
to selling, advertising, general and administrative expense to conform with Del
Monte's classification of such costs.
17
<PAGE> 18
DEL MONTE FOODS COMPANY AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN MILLIONS)
The expense represented by Contadina's historical charge to cost of products
sold for royalties due to Nestle, S.A. has been replaced by amortization of
trademark recorded as selling, advertising, general and administrative expense
which treatment is more representative of the continuing costs associated with
the use of the Contadina trademark.
(d) Adjustment to selling, advertising, general and administrative expense
reflects the following:
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
JUNE 30, DECEMBER 31,
1997 1997
---------- ------------
<S> <C> <C>
Reclassification of Contadina trade promotion $ 14 $ 13
costs
Elimination of amortization of Nestle goodwill (1) (1)
Amortization of intangibles acquired 1
---- ----
$ 14 $ 12
==== ====
</TABLE>
Selling, advertising, administrative and general expense for the year ended June
30, 1997 includes $25 of one-time charges incurred in connection with the
Recapitalization primarily for management incentive payments and, in part, for
severance payments.
(e) Represents adjustments necessary to reflect pro forma interest expense and
amortization of deferred financing expense as shown below based upon pro
forma debt levels and applicable interest rates. The table below presents
pro forma interest expense noted with the respective interest rates and
fees, and pro forma amortization of deferred financing costs:
<TABLE>
<CAPTION>
Year Ended Six Months Ended
June 30, 1997 December 31, 1997(3)
--------------------------------------------------------------------------
Interest Principal Interest Interest Principal Interest
Rate(1) Balance(2) Expense(3) Rate(1) Balance(2) Expense(3)
-------- ---------- ---------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Revolver 7.82% $238 $ 18 7.83% $259 $ 10
Term Loan A 7.82 200 16 8.21 199 9
Term Loan B 8.57 230 20 8.57 229 10
Senior Subordinated Notes 12.25 150 18 12.25 150 9
Senior Discount Notes 12.50 129 16 12.50 142 9
---- ----
Pro forma interest expense 88 47
Pro forma amortization of
deferred financing costs 5 2
---- ----
Total pro forma interest expense $93 $49
==== ====
</TABLE>
- ----------------
(1) Average of month-end interest rates.
(2) Average of month-end principal balances.
(3) Represents product of average month-end interest rate and average month-end
principal balance for the applicable period.
(f) For the year ended June 30, 1997, includes $22 of one-time expenses incurred
in connection with the Recapitalization.
18
<PAGE> 19
(c) Exhibits
10.1 Asset Purchase Agreement dated as of November 12, 1997, by and between the
Company, Del Monte Corporation, Contadina Services, Inc. and Nestle.
(Incorporated by reference to Exhibit 10.1 to report on Form 8-K filed
January 5, 1998.)
23.1 Consent of KPMG Peat Marwick LLP, Independent Accountants
19
<PAGE> 20
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THE
REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, HEREUNTO DULY AUTHORIZED.
DEL MONTE FOODS COMPANY
Date: July 2, 1998
By: /s/ RICHARD G. WOLFORD
---------------------------------
Richard G. Wolford
Chief Executive Officer
By: /s/ DAVID L. MEYERS Date: July 2, 1998
---------------------------------
David L. Meyers
Executive Vice President, Administration
and Chief Financial Officer
20
<PAGE> 21
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<S> <C>
10.1 Asset Purchase Agreement dated as of November 12, 1997, by and between the
Company, Del Monte Corporation, Contadina Services, Inc. and Nestle.
(Incorporated by reference to Exhibit 10.1 to report on Form 8-K filed
January 5, 1998.)
23.1 Consent of KPMG Peat Marwick LLP, Independent Accountants
</TABLE>
<PAGE> 1
Exhibit 23.1
The Board of Directors
Del Monte Foods Company
We consent to the inclusion of our report dated March 16, 1998, with respect to
the combined balance sheet of Contadina (a division of Nestle USA, Inc.) as of
December 18, 1997 and December 31, 1996 and the related statements of
operations, divisional equity, and cash flows for the period January 1, 1997
through December 18, 1997 and for the year ended December 31, 1996 which report
appears in the Form 8-K/A of Del Monte Foods Company dated July 2, 1998.
/s/ KPMG Peat Marwick LLP
- --------------------------------------
Los Angeles, California
July 2, 1998
