<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
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 [ ]
As of October 30, 1999, 52,179,599 shares of Common Stock, par value
$.01 per share, were outstanding.
<PAGE> 2
DEL MONTE FOODS COMPANY AND SUBSIDIARIES
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets
September 30, 1999 and June 30, 1999 1
Consolidated Statements of Operations
Three Months Ended September 30, 1999 and 1998 2
Consolidated Statements of Cash Flows
Three Months Ended September 30, 1999 and 1998 3
Notes to Consolidated Financial Statements 4
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 7
Item 3. Quantitative and Qualitative Disclosures about Market Risk 10
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 11
Item 2. Changes in Securities 11
Item 3. Defaults Upon Senior Securities 11
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 5. Other Information 11
Item 6. Exhibits and Reports on Form 8-K 11
SIGNATURES
</TABLE>
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DEL MONTE FOODS COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Millions, Except Share Data)
<TABLE>
<CAPTION>
September 30, June 30,
1999 1999
-------------- ---------
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 11 $ 7
Trade accounts receivable, net of allowance 166 138
Inventories 707 343
Prepaid expenses and other current assets 9 14
------- --------
TOTAL CURRENT ASSETS 893 502
Property, plant and equipment, net 312 312
Intangibles 43 43
Other assets 14 15
------- --------
TOTAL ASSETS $ 1,262 $ 872
======= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 444 $ 266
Short-term borrowings 230 16
Current portion of long-term debt 32 32
------- --------
TOTAL CURRENT LIABILITIES 706 314
Long-term debt 487 496
Other noncurrent liabilities 180 180
Stockholders' equity (deficit):
Common stock ($.01 par value per share, 500,000,000 shares authorized;
issued and outstanding: 52,177,416 at September 30, 1999 and 52,171,537
at June 30, 1999) 1 1
Paid-in capital 399 399
Retained earnings (deficit) (511) (518)
------- --------
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) (111) (118)
------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,262 $ 872
======= ========
</TABLE>
See Notes to Consolidated Financial Statements.
1
<PAGE> 4
DEL MONTE FOODS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(In Millions, Except Share Data)
<TABLE>
<CAPTION>
Three Months
Ended
September 30,
------------------
1999 1998
----- ------
<S> <C> <C>
Net sales $ 334 $ 318
Cost of products sold 212 218
Selling, administrative and general expenses 94 80
Special charges related to plant consolidation 3 7
Acquisition expense -- 1
----- ------
OPERATING INCOME 25 12
Interest expense 16 21
Other expense -- 2
----- ------
INCOME (LOSS) BEFORE INCOME TAXES 9 (11)
Provision for income taxes 2 --
----- ------
NET INCOME (LOSS) $ 7 $ (11)
===== ======
Basic net income (loss) per common share $0.13 $(0.34)
===== ======
Diluted net income (loss) per common share $0.13 $(0.34)
===== ======
</TABLE>
See Notes to Consolidated Financial Statements
2
<PAGE> 5
DEL MONTE FOODS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In Millions)
<TABLE>
<CAPTION>
Three Months Ended
September
30,
------------------
1999 1998
----- -----
<S> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) $ 7 $ (11)
Adjustments to reconcile net income (loss) to net cash flows
(used in) operating activities:
Depreciation and amortization 11 13
Loss on disposal of assets -- 3
Changes in operating assets and liabilities:
Accounts receivable (28) (14)
Inventories (364) (324)
Prepaid expenses and other current assets 5 7
Accounts payable and accrued expenses 177 173
Other non-current liabilities -- --
----- -----
NET CASH USED IN OPERATING ACTIVITIES (192) (153)
----- -----
INVESTING ACTIVITIES:
Capital expenditures (10) (5)
Acquisition of business -- (32)
----- -----
NET CASH USED IN INVESTING ACTIVITIES (10) (37)
----- -----
FINANCING ACTIVITIES:
Short-term borrowings 258 256
Payments on short-term borrowings (44) (54)
Principal payments on long-term borrowings (8) (8)
----- -----
NET CASH PROVIDED BY FINANCING ACTIVITIES 206 194
----- -----
NET CHANGE IN CASH AND CASH EQUIVALENTS 4 4
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 7 7
----- -----
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 11 $ 11
===== =====
</TABLE>
See Notes to Consolidated Financial Statements.
3
<PAGE> 6
DEL MONTE FOODS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1999
(In Millions, Except Share Data)
NOTE 1 -- BASIS OF FINANCIAL STATEMENTS
Business and Basis of Presentation: Del Monte Foods Company ("Del
Monte") and its wholly-owned subsidiary, Del Monte Corporation ("DMC"), (Del
Monte together with DMC, "the Company") operate in one business segment: the
manufacturing and marketing of processed foods, primarily canned vegetables,
fruit and tomato products.
The accompanying consolidated financial statements at September 30, 1999
and for the three-month periods ended September 30, 1999 and 1998, 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, 1999, and notes thereto, included in the
Annual Report on Form 10-K.
Depreciation and amortization. Depreciation of plant and equipment and
leasehold amortization was $10 and $12 for the three months ended September 30,
1999 and 1998, respectively. For the three months ended September 30, 1999 and
1998, $1 and $4 of such depreciation was related to acceleration of depreciation
resulting from the effects of adjusting the assets' remaining useful lives to
match the period of use prior to plant closure. (The accelerated depreciation is
included in the caption "Special charges related to plant consolidation" in the
Consolidated Statements of Operations.) Depreciation and amortization also
includes $1 of amortization of deferred debt issuance costs for both three-month
periods ended September 30, 1999 and 1998.
NOTE 2 -- INVENTORIES
The major classes of inventory are as follows:
<TABLE>
<CAPTION>
September 30, June 30,
1999 1999
------------- --------
<S> <C> <C>
Finished product $648 $219
Raw materials and supplies 20 18
Other, principally packaging material 39 106
---- ----
$707 $343
==== ====
</TABLE>
During the three months ended September 30, 1999 and 1998 respectively,
and the twelve months ended June 30, 1999, 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 September 30, 1999
and June 30, 1999 or on results of operations for the three months ended
September 30, 1999 and 1998, respectively.
4
<PAGE> 7
DEL MONTE FOODS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-Continued
September 30, 1999
(In Millions, Except Share Data)
NOTE 3 -- EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted
earnings per share:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
SEPTEMBER 30,
----------------------------------
1999 1998
------------ ------------
<S> <C> <C>
BASIC EARNINGS PER SHARE
Numerator:
Income (loss) per common share $ 7 $ (11)
Preferred stock dividends -- (1)
------------ ------------
Numerator for basic earnings (loss) per share - income (loss)
attributable to common shares $ 7 $ (12)
============ ============
Denominator:
Denominator for basic earnings per share - weighted
average shares 52,174,548 35,495,683
Basic income (loss) per common share $ 0.13 $ (0.34)
DILUTED EARNINGS PER SHARE
Numerator:
Income (loss) per common share $ 7 $ (11)
Preferred stock dividends -- (1)
------------ ------------
Numerator for diluted earnings (loss) per share - income
(loss) attributable to common shares $ 7 $ (12)
============ ============
Denominator:
Denominator for diluted earnings per share - weighted
average shares 53,564,778 35,495,683
Diluted income (loss) per common share $ 0.13 $ (0.34)
</TABLE>
The effect of outstanding options is not included in the computation of
diluted earnings per share for the three months ended September 30, 1998 as the
result would be antidilutive due to a net operating loss.
NOTE 4 -- PLANT CONSOLIDATION
In fiscal 1998, management committed to a plan to consolidate processing
operations. In connection with this plan, the Company established an accrual of
$7 in fiscal 1998 relating to severance and benefit costs for employees to be
terminated. No expenditures have been recorded against this accrual as of
September 30, 1999. At this time, there have been no significant changes to this
plan.
NOTE 5 -- COMPREHENSIVE INCOME
The Company has no items of other comprehensive income in any period
presented. Therefore, net income (loss) as presented in the Consolidated
Statements of Operations equals comprehensive income.
5
<PAGE> 8
DEL MONTE FOODS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-Continued
September 30, 1999
(In Millions, Except Share Data)
NOTE 6 -- INCOME TAXES
Income tax expense was calculated using an effective tax rate, which is
the Company's best estimate of the effective tax rate expected to be applicable
for the full year. The rate so determined has been computed taking into
consideration the utilization of net operating loss carryforwards and the
applicable limitations on their use under the tax laws.
NOTE 7 -- NEW ACCOUNTING STANDARDS
Effective July 1, 1999, the Company adopted Statement of Position
("SOP") No. 98-1 "Accounting for the Cost of Computer Software Developed or
Obtained for Internal Use." This SOP provides guidance with respect to the
recognition, measurement and disclosure of costs of computer software developed
or obtained for internal use.
In fiscal 1998, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities."
SFAS No. 133 (as amended by SFAS No. 137) is required to be adopted for all
fiscal quarters and fiscal years beginning after June 15, 2000 and relates to
accounting for derivative instruments, including certain derivative instruments
embedded in other contracts, and hedging activities. It requires that an entity
recognize all derivatives as either assets or liabilities and measure those
instruments at fair value. The Company is currently reviewing the effect of
adoption of this statement on its financial statements.
6
<PAGE> 9
DEL MONTE FOODS COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
September 30, 1999
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1999 VS. THREE MONTHS ENDED SEPTEMBER 30, 1998
Net Sales. Consolidated net sales for the first quarter of fiscal 2000
increased by $16 million, or 5%, compared to the prior year quarter, primarily
due to growth in the club and mass merchandisers channel. Total club and mass
merchandisers sales increased 58% in the current year quarter compared to the
same period in fiscal 1999 due to expanded distribution, WalMart Supercenter new
store growth, new products and improved packaging. Vegetable product sales have
increased in the current year quarter due to increased promotional effectiveness
in the grocery channel and increased sales in the club and mass merchandisers
channel. Fruit net sales are relatively flat compared to prior year quarter with
an increase in retail sales to club and mass merchandisers partially offset by a
decrease in the foodservice channel. The decline in foodservice sales results
from continued implementation of the Company's strategy to shift emphasis to
sales of higher margin products, expand penetration of high growth distribution
channels and reduce emphasis on lower margin commodity items. Tomato product net
sales decreased in the current period as compared to prior year quarter due to
lower foodservice and food ingredient sales related to the strategic decision to
shift emphasis to higher margin products.
Cost of Products Sold. Cost of products sold as a percent of net sales
was 63.5% for the three months ended September 30, 1999 and 68.5% for the prior
year quarter. Manufacturing costs are favorable in the current year due to
continued cost savings from capital spending initiatives, a favorable sales mix
and the absence of a $2 million inventory step-up charge taken during the three
months ended September 30, 1998, attributable to the purchase price allocation
related to the acquisition of Contadina.
Selling, Administrative and General Expenses. Selling, administrative
and general expenses increased by $14 million versus the same period of the
prior year. This increase was due to higher selling and promotion costs
associated with higher volumes of retail products and increased marketing
spending for fruit consumer programs.
Special Charges Related to Plant Consolidation. The Company incurred
charges representing accelerated depreciation of $1 million during the three
months ended September 30, 1999 and $4 million during the three months ended
September 30, 1998. This acceleration results from the effects of adjusting the
remaining useful lives of certain tomato and fruit processing assets to match
the period of use prior to the closures of these plants. Also included in
special charges during the current period was approximately $2 million of
ongoing fixed costs and other period costs incurred in connection with the plant
closures. In the three months ended September 30, 1998, in addition to
accelerated depreciation, special charges included $3 million representing the
write-down to fair value of assets held for sale related to the closure of the
Arlington, Wisconsin plant.
Interest expense. Interest expense decreased by $5 million compared to
the prior year quarter due to lower debt balances than in the prior year. The
proceeds of the February 1999 public equity offering were used primarily to
repay debt.
Other expense. Other expense for the quarter ended September 30, 1998
represents expenses of the cancelled public equity offering.
Provision for Income Taxes. Income tax expense was $2 million for the
three months ended September 30, 1999 compared to no tax provision in the three
months ended September 30, 1998. This was primarily due to an increase in
7
<PAGE> 10
DEL MONTE FOODS COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS-Continued
September 30, 1999
income before taxes and the impact of the annual limitation under applicable tax
laws on the use of net operating loss carryforwards.
Net income (loss). Net income for the quarter ended September 30, 1999
was $7 million compared to a net loss for the quarter ended September 30, 1998
of $11 million. The increase in income in the current year quarter was primarily
due to lower interest expense, lower special charges related to the plant
consolidation plan, increased sales of higher margin products and lower cost of
products sold due to cost savings from capital spending initiatives. Also
contributing to the loss in the quarter ended September 30, 1998 was the
inventory step-up cost related to the acquisition of Contadina and costs of the
public equity offering that was withdrawn in July 1998.
OTHER PERFORMANCE MEASURES
Adjusted EBITDA. The Company believes EBITDA, as adjusted, is a measure
widely-used by the financial community to evaluate the Company's cash-based
operating performance and its ability to provide cash flows to service debt. The
Company believes that this measure presents a meaningful measure of operating
cash flow (excluding the effects of working capital changes and capital
expenditures) by eliminating the effects of one-time charges or credits.
Adjusted EBITDA represents EBITDA (income (loss) before income taxes and
extraordinary item, and depreciation and amortization expense, plus interest
expense) before special charges and other one-time and non-cash charges.
Adjusted EBITDA should not be considered in isolation from, and is not presented
as an alternative measure of, operating income or cash flow from operations (as
determined in accordance with GAAP). Adjusted EBITDA as presented may not be
comparable to similarly titled measures reported by other companies.
Adjusted EBITDA increased by 23% to $37 million in the current period as
compared to $30 million for the three months ended September 30, 1998. For the
three months ended September 30, 1999, income before income taxes, plus interest
expense was $9 million and was adjusted for special charges and non-cash charges
of $12 million. The special charges and non-cash charges consisted of special
charges related to plant consolidation of $3 million and depreciation and
amortization of $9 million (excluding accelerated depreciation of $1 million and
amortization of deferred debt issuance costs of $1 million).
YEAR 2000
In the first quarter of fiscal 1998, the Company contracted with its
information services outsourcing provider, EDS, to assist the Company in
implementation of the Company's Year 2000 compliance project. The Company's Year
2000 compliance project was initiated to address the issue of computer hardware
and software that are time-sensitive or define dates using two digits rather
than four. EDS maintains and operates most of the Company's software
applications and also owns and operates a significant portion of the related
hardware under a base service contract. The Company's compliance project
includes both information technology ("IT") systems and non-IT systems that
could be impacted by Year 2000 issues.
The Company has substantially completed the evaluation, modification and
implementation of key systems for Year 2000 compliance. Testing and unforeseen
issues resolution will be ongoing through early calendar 2000. Due to the
Company's production cycle, most non-IT equipment will not be in full use until
mid-calendar 2000. Therefore, testing on this equipment and resolution of any
unforeseen issues are expected to continue through early calendar 2000. However,
substantially all of the Company's embedded systems are Year 2000 compliant as
of September 30, 1999.
The Company expects costs incremental to the Company's base service
contract with EDS to total approximately $2 million over the life of the
project, which began in fiscal 1998. The Company is funding these costs through
operating
8
<PAGE> 11
DEL MONTE FOODS COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS-Continued
September 30, 1999
cash flow. More than $1 million of this $2 million estimate had been incurred as
of September 30, 1999. The Company is expensing all costs associated with these
system changes as the costs are incurred.
The Company is continuing to conduct inquiries regarding the Year 2000
compliance programs of its key suppliers and customers and will continue to
update its understanding of their Year 2000 programs throughout calendar 1999.
No assurance can be given that the Company's suppliers and customers or the
Company's own systems will all be Year 2000 compliant. The failure of the
Company's suppliers and customers to address the Year 2000 issue adequately, or
the failure of any material aspect of the Company's Year 2000 compliance project
with respect to its own systems, could result in disruption to the Company's
operations and have a significant adverse impact on its results of operations,
the extent of which the Company cannot yet determine.
The Company is developing contingency plans to address internal system
failures, as well as external supplier and customer failures, that may result
from Year 2000 issues. The Company will continue to update these contingency
plans through calendar 1999 as new information becomes known. These contingency
plans identify alternatives for the Company's business operations it believes
could be affected by external Year 2000 system failures. These operations
include principally communications with key suppliers and customers and
distribution of finished goods to distribution centers and customer locations.
The contingency plans include the development of risk avoidance actions, such as
increasing the Company's finished goods and materials inventory position during
calendar 1999 to carry the Company through any brief period of disruption that
may occur due to either internal or external Year 2000 system failures. The
Company believes that with completion of the project as scheduled and ongoing
monitoring, any significant disruptions of core operations should be reduced.
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.
The Company's quarterly operating results have varied in the past and
are likely to vary in the future based upon a number of factors. 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
through October and depleted through the remaining seven months. Accordingly,
working capital requirements fluctuate significantly. The Company's historical
net sales have exhibited seasonality, with net sales in the first fiscal quarter
affected by lower levels of promotional activity, the availability of fresh
produce and other factors. This situation impacts operating results as sales
volumes, revenues and profitability decline during this period. Historically,
the second and third fiscal quarters reflect increased sales of the Company's
products, and related increased cost of products sold and selling and
promotional expenses, during the holiday period extending from late November
through December, as well as sales associated with the Easter holiday. Quarterly
gross profit primarily reflects fluctuations in sales volumes and is also
affected by the overall product mix.
To finance working capital requirements, the Company relies on its
revolving credit facility, which has a maximum availability of $350 million,
subject to an asset-based borrowing base. As of September 30, 1999, $230 million
was outstanding under the revolving credit facility, compared to $16 million at
June 30, 1999. The increase in inventories at September 30, 1999 from June 30,
1999 reflects the seasonal inventory buildup and depletion. The increase in
accounts payable and accrued expenses from June 30, 1999 to September 30, 1999
primarily reflects accrued expenses resulting from the peak production period.
9
<PAGE> 12
DEL MONTE FOODS COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS-Continued
September 30, 1999
As of September 30, 1999, the Company's short-term borrowings and long
term debt primarily consisted of a revolving credit facility, bank term loans,
senior subordinated notes and senior discount notes (collectively, the "Debt").
The Debt agreements contain restrictive covenants, the most restrictive of which
currently is minimum EBITDA (as defined in the agreements). The Company is in
compliance with all such covenants for the first quarter of fiscal 2000.
FACTORS THAT MAY AFFECT FUTURE RESULTS
This quarterly report contains forward-looking statements, including
those in the sections captioned "Financial Statements" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
Statements that are not historical facts, including statements about the
Company's beliefs or expectations, are forward-looking statements. These
statements are based on plans, estimates and projections at the time the Company
makes the statements, and you should not place undue reliance on them. The
Company does not undertake to update any of these statements in light of new
information or future events.
Forward-looking statements involve inherent risks and uncertainties. The
Company cautions you that a number of important factors could cause actual
results to differ materially from those contained in any forward-looking
statement. These factors include, among others: general economic and business
conditions; weather conditions; crop yields; competition; raw material costs and
availability; the loss of significant customers; availability of qualified
personnel; market acceptance of new products; successful integration of acquired
businesses; consolidation of processing plants; changes in business strategy or
development plans; availability, terms and deployment of capital; Year 2000
issues; changes in, or the failure or inability to comply with, governmental
regulations, including, without limitation, environmental regulations; industry
trends; production capacity constraints and other factors referenced in this
quarterly report.
The Company currently anticipates that its sales for the quarter ending
December 31, 1999 may be greater than would otherwise have been expected,
primarily as a result of Y2K. This increase, which the Company currently
believes may be in the range of one to two million cases, will probably result
in a similar decrease in sales for the quarter ending March 31, 2000. This
estimate is subject to a large number of uncertainties, including the effect of
Y2K on customer and consumer behavior both this year and next. This estimate is
also subject to the inherent uncertainty in the estimation process.
Please see the Company's Annual Report on Form 10-K for the year ended
June 30, 1999 filed with the Securities and Exchange Commission on September 7,
1999 for a more detailed discussion of factors that may affect future results.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Reference is made to the discussion of Del Monte Foods Company's
Financial Instruments and Risk Management Policies in "Management's Discussion
and Analysis of Operations and Financial Condition and Results of Operations" in
Del Monte's Annual Report on Form 10-K for the year ended June 30, 1999. As of
September 30, 1999, there were no material changes to the information presented.
10
<PAGE> 13
DEL MONTE FOODS COMPANY AND SUBSIDIARIES
PART II. OTHER INFORMATION
ITEM 1.LEGAL PROCEEDINGS.
The Company is a defendant in an action brought by PPI Enterprises
(U.S.), Inc. in the U.S. District Court for the Southern District of New York on
May 25,1999. The plaintiff has alleged that the Company breached certain
purported contractual and fiduciary duties and made misrepresentations and
failed to disclose material information to the plaintiff about the value of the
Company and its prospects for sale. The plaintiff also alleges that it relied on
the Company's alleged statements in selling its preferred and common stock
interest in the Company to a third party at a price lower than that which the
plaintiff asserts it could have received absent the Company's alleged conduct.
The complaint seeks compensatory damages of at least $24 million, plus punitive
damages. This case is in the early stages of procedural motions and the Company
cannot at this time reasonably estimate a range of exposure, if any. The Company
believes that this proceeding is without merit and plans to defend it
vigorously.
The Company is also involved from time to time in various legal
proceedings incidental to its business, including claims with respect to product
liability, worker's compensation and other employee claims, tort and other
general liability, for which the Company carries insurance or is self-insured,
as well as trademark, copyright and related litigation. While it is not feasible
to predict or determine the ultimate outcome of these matters, the Company
believes that none of these legal proceedings will have a material adverse
effect on the Company's financial position.
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. None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
(27) Financial Data Schedule
(b) Reports on Form 8-K
No Reports on Form 8-K were required to be filed during the quarter for
which this report is filed.
11
<PAGE> 14
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, THEREUNTO DULY AUTHORIZED.
DEL MONTE FOODS COMPANY
Date: November 5, 1999
By: /s/ RICHARD G. WOLFORD
-------------------------------------
Richard G. Wolford
President and Chief Executive Officer
By: /s/ DAVID L. MEYERS Date: November 5, 1999
-------------------------------------
David L. Meyers
Executive Vice President, Administration
and Chief Financial Officer
<PAGE> 15
Exhibit Index
<TABLE>
<CAPTION>
Exhibit
No. Description
- ------- -----------
<S> <C>
(27) Financial Data Schedule
</TABLE>
11
<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 SEPTEMBER 30, 1999,
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-30-1999
<PERIOD-START> JUL-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 11
<SECURITIES> 0
<RECEIVABLES> 168
<ALLOWANCES> 2
<INVENTORY> 707
<CURRENT-ASSETS> 893
<PP&E> 518
<DEPRECIATION> 206
<TOTAL-ASSETS> 1,262
<CURRENT-LIABILITIES> 706
<BONDS> 0
0
0
<COMMON> 1
<OTHER-SE> (112)
<TOTAL-LIABILITY-AND-EQUITY> 1,262
<SALES> 334
<TOTAL-REVENUES> 334
<CGS> 212
<TOTAL-COSTS> 212
<OTHER-EXPENSES> 1
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 16
<INCOME-PRETAX> 9
<INCOME-TAX> 2
<INCOME-CONTINUING> 7
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7
<EPS-BASIC> 0.13
<EPS-DILUTED> 0.13
</TABLE>
