SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------
FORM 10-Q/A
(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)
Delaware 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.
<PAGE>
DEL MONTE FOODS COMPANY AND SUBSIDIARIES
TABLE OF CONTENTS
-----------------
Page No.
--------
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
<PAGE>
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
------------- --------
(restated)
(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 $352 $220
Short-term borrowings 237 82
Current portion of long-term debt 10 2
---- ----
TOTAL CURRENT LIABILITIES 599 304
Long-term debt 518 526
Other noncurrent liabilities 205 203
Redeemable preferred stock ($.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) (527) (527)
---- ----
TOTAL STOCKHOLDERS'
EQUITY (DEFICIT) (398) (398)
---- ----
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $956 $667
==== ====
See Notes to Consolidated Financial Statements.
1
<PAGE>
DEL MONTE FOODS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(Dollars in Millions Except Per Share Amounts)
Three Months
Ended
September 30,
-------------
(restated)
1997 1996
----- -----
Net sales $ 251 $ 264
Cost of products sold 172 184
------- -------
Gross profit 79 80
Selling, advertising, administrative
and general expenses 62 63
------- -------
OPERATING INCOME 17 17
Interest expense 17 13
------- -------
INCOME BEFORE INCOME TAXES, AND
EXTRAORDINARY ITEM -- 4
Provision for income taxes 1
------- -------
INCOME BEFORE EXTRAORDINARY ITEM -- 3
Extraordinary loss from the early
retirement of debt 4
------- -------
NET INCOME $ -- $ (1)
======= =======
Net loss attributable to
common shares $ (2) $ (23)
======= =======
Loss per common share:
Loss before
extraordinary item $(11.68) $(51.24)
Extraordinary loss from the
early retirement of debt (9.34)
------- -------
Net loss per
common share $(11.68) $(60.58)
======= =======
See Notes to Consolidated Financial Statements
2
<PAGE>
DEL MONTE FOODS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(Dollars in Millions)
Three Months
Ended
September 30,
-------------
(restated)
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 2
----- -----
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
<PAGE>
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.
Restatement of Financial Information: The Company has
restated its financial statements as of and for the three months
ended September 30, 1997 and 1996 and as of and for the years
ended June 30, 1997 and 1996. This action was taken following
consultation with the staff of the Securities and Exchange
Commission regarding the deferral of $16 of gain resulting from
the sale of the Company's 50.1% interest in Del Monte Philippines
in March 1996. The Company had allocated $16 of the $100 proceeds
from the sale to the supply agreement the Company signed in
conjunction with the sale. The deferred gain of $16 was being
recognized over the eight-year term of the supply agreement. After
discussions with the staff of the Securities and Exchange
Commission, the Company has recognized the $16 gain at the time
of the sale.
The financial statements as of and for the three months
ended September 30, 1997 and 1996 have been restated to include
the $16 gain in retained earnings and to reverse the recognition
of $1 of the deferred gain. The impact of these adjustments on
the Company's financial results as originally reported is
summarized below.
1997 1996
------------------ --------------------
As As As As
Reported Restated Reported Restated
-------- -------- -------- --------
Net income (loss)
before extra-
ordinary item $ 1 $ -- $ 4 $ 3
Net income (loss) 1 -- -- (1)
Net income (loss)
attributable to
common shares (1) (2) (22) (23)
Net income (loss)
per common share (4.54) (11.68) (57.97) (60.58)
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
<PAGE>
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
<PAGE>
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 (31.5% for first
quarter fiscal 1998 versus 31.4% for first quarter fiscal
1997). Gross margin for the fruit segment (which includes
pineapple) increased from 25.8% in prior year quarter to 27.1%
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
<PAGE>
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.
- ---------------
* Previously filed with Form 10-Q, filed November 14, 1997
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 July 7, 1998
By: /s/ RICHARD G. WOLFORD
-------------------------------
Richard G. Wolford
Chief Executive Officer
By: /s/ DAVID L MEYERS Date July 7, 1998
------------------------------
David L. Meyers
Executive Vice President,
Administration
And Chief Financial Officer
S-1
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS RESTATED 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>
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<PERIOD-START> JUL-01-1997
<PERIOD-END> SEP-30-1997
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<RECEIVABLES> 80
<ALLOWANCES> 1
<INVENTORY> 624
<CURRENT-ASSETS> 716
<PP&E> 374
<DEPRECIATION> 156
<TOTAL-ASSETS> 956
<CURRENT-LIABILITIES> 599
<BONDS> 0
32
0
<COMMON> 0
<OTHER-SE> (398)
<TOTAL-LIABILITY-AND-EQUITY> 956
<SALES> 251
<TOTAL-REVENUES> 251
<CGS> 172
<TOTAL-COSTS> 172
<OTHER-EXPENSES> 0
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<INTEREST-EXPENSE> 17
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<EPS-PRIMARY> (11.68)
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</TABLE>
