<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 March 31, 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
incorporation or organization) Identification No.)
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 April 30, 1999, 52,166,940 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> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets
June 30, 1998 and March 31, 1999 1
Consolidated Statements of Operations
Three and Nine Months Ended March 31, 1998 and 1999 2
Consolidated Statements of Cash Flows
Nine Months Ended March 31, 1998 and 1999 3
Notes to Consolidated Financial Statements 4
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 10
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 15
Item 2. Changes in Securities 15
Item 3. Defaults Upon Senior Securities 15
Item 4. Submission of Matters to a Vote of Security Holders 15
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 15
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>
June 30, March 31,
1998 1999
------- --------
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 7 $ 7
Trade accounts receivable, net of allowance 108 149
Other receivables 6 6
Inventories 366 435
Prepaid expenses and other current assets 14 5
----- -----
TOTAL CURRENT ASSETS 501 602
Property, plant and equipment, net 305 298
Intangible assets, net 16 44
Other assets 23 15
----- -----
TOTAL ASSETS $ 845 $ 959
===== =====
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 259 $ 306
Short-term borrowings -- 77
Current portion of long-term debt 32 32
----- -----
TOTAL CURRENT LIABILITIES 291 415
Long-term debt 677 497
Other noncurrent liabilities 194 186
Redeemable preferred stock ($.01 par value per share, 1,000,000 shares authorized;
37,253 issued and outstanding; aggregate liquidation preference: $41 at
June 30, 1998) 33 --
Stockholders' equity (deficit):
Common stock ($.01 par value per share, 500,000,000 shares authorized; issued and
outstanding: 35,495,058 at June 30, 1998 and 52,165,380 at March 31, 1999) -- 1
Paid-in capital 172 399
Retained earnings (deficit) (522) (539)
----- -----
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) (350) (139)
----- -----
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 845 $ 959
===== =====
</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 Nine Months
Ended Ended
March 31, March 31,
------------------------ ------------------------
1998 1999 1998 1999
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net sales $ 348 $ 390 $ 968 $ 1,135
Cost of products sold 241 255 655 755
Selling, administrative and general expense 80 100 242 288
Special charges related to plant consolidation 7 3 7 15
Acquisition expense -- -- 7 1
------- ------- ------- -------
OPERATING INCOME 20 32 57 76
Interest expense 22 20 58 63
Other (income) expense -- -- (1) 2
------- ------- ------- -------
INCOME (LOSS) BEFORE INCOME TAXES AND
EXTRAORDINARY ITEM (2) 12 -- 11
Provision for income taxes -- -- -- --
------- ------- ------- -------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM (2) 12 -- 11
Extraordinary loss from early retirement of debt -- 19 -- 19
------- ------- ------- -------
NET INCOME (LOSS) $ (2) $ (7) $ -- $ (8)
======= ======= ======= =======
Basic and diluted net income (loss) per common
share before extraordinary item $ (0.10) $ 0.25 $ (0.12) $ 0.20
Less extraordinary loss per common share -- (0.42) -- (0.49)
------- ------- ------- -------
Basic and diluted net loss per common share after
extraordinary item $ (0.10) $ (0.17) $ (0.12) $ (0.29)
======= ======= ======= =======
</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>
Nine Months Ended
March 31,
1998 1999
----- -----
<S> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) $ -- $ (8)
Adjustments to reconcile net income (loss) to net cash flows
used in operating activities:
Depreciation and amortization 23 36
Extraordinary loss from early retirement of debt -- 19
Loss on disposal of assets 1 4
Other 2 --
Changes in operating assets and liabilities net of effects of
acquisitions:
Accounts receivable (40) (41)
Inventories (24) (66)
Prepaid expenses and other current assets 3 9
Intangibles and other assets (1) --
Accounts payable and accrued expenses 46 47
Other non-current liabilities (1) 2
----- -----
NET CASH PROVIDED BY OPERATING ACTIVITIES 9 2
----- -----
INVESTING ACTIVITIES:
Capital expenditures (15) (29)
Proceeds from the sale of assets 5 --
Acquisition of business (195) (32)
----- -----
NET CASH USED IN INVESTING ACTIVITIES (205) (61)
----- -----
FINANCING ACTIVITIES:
Short-term borrowings 261 435
Payments on short-term borrowings (275) (358)
Proceeds from long-term borrowings 176 --
Principal payments on long-term borrowings (2) (189)
Preferred stock redemption -- (35)
Preferred stock dividends -- (10)
Prepayment penalty -- (14)
Deferred debt issuance costs (7) --
Issuance of stock 42 --
Proceeds of public equity offering -- 250
Equity offering costs -- (20)
----- -----
NET CASH PROVIDED BY FINANCING ACTIVITIES 195 59
----- -----
NET CHANGE IN CASH AND CASH EQUIVALENTS (1) --
Cash and cash equivalents at beginning of period 5 7
----- -----
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 4 $ 7
===== =====
</TABLE>
See Notes to Consolidated Financial Statements.
3
<PAGE> 6
DEL MONTE FOODS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1999
(In Millions, Except Share Data)
NOTE 1 - BASIS OF FINANCIAL STATEMENTS
Basis of Presentation. The accompanying consolidated financial
statements at March 31, 1999 and for the three-and nine-month periods ended
March 31, 1998 and 1999, 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, 1998, and notes
thereto, included in the Annual Report on Form 10-K.
Stock Split. On July 22, 1998, the Company declared, by way of a stock
dividend effective July 24, 1998, a 191.542-for-one stock split of all of the
Company's outstanding shares of Common Stock (the "Stock Split"). Accordingly,
all share and per share amounts for all prior periods presented herein have been
retroactively adjusted to give effect to the Stock Split.
Depreciation and amortization. Depreciation and amortization for the
nine months ended March 31, 1998 and 1999 consisted of depreciation of plant and
equipment and leasehold amortization (including acceleration of depreciation
resulting from the adjustment of certain assets' remaining useful lives to match
the period of use prior to plant closure), amortization of deferred debt
issuance costs and amortization of intangible assets.
<TABLE>
<CAPTION>
Three Months Nine Months
Ended Ended
March 31, March 31,
1998 1999 1998 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Depreciation of plant and equipment and
leasehold amortization (excluding
accelerated depreciation) $ 7 $ 8 $20 $25
Accelerated depreciation -- 1 -- 8
Amortization of deferred debt issuance costs 1 1 3 2
Amortization of intangibles -- -- -- 1
--- --- --- ---
Depreciation and amortization $ 8 $10 $23 $36
=== === === ===
</TABLE>
Accelerated depreciation is included in the caption "Special charges
related to plant consolidation" in the Consolidated Statements of Operations.
NOTE 2 - INVENTORIES
The major classes of inventory were as follows:
<TABLE>
<CAPTION>
June 30, March 31,
1998 1999
-------- ---------
<S> <C> <C>
Finished product $237 $347
Raw materials and supplies 19 14
Other, principally packaging material 110 74
---- ----
$366 $435
==== ====
</TABLE>
4
<PAGE> 7
DEL MONTE FOODS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
March 31, 1999
(In Millions, Except Share Data)
NOTE 2 - INVENTORIES (CONTINUED)
During the twelve months ended June 30, 1998 and the three and nine
months ended March 31, 1998 and 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 June 30, 1998 and
March 31, 1999, or on results of operations for the three and nine months ended
March 31, 1998 and 1999.
NOTE 3 - STOCK INCENTIVE PLAN
The Del Monte Foods Company 1998 Stock Incentive Plan (the "1998 Stock
Incentive Plan") was adopted initially by the Board of Directors on April 24,
1998, was modified by the Board on September 23, 1998, and was approved by the
stockholders on October 28, 1998. Under the 1998 Stock Incentive Plan, grants of
incentive and nonqualified stock options ("Options"), stock appreciation rights
("SARs") and stock bonuses (together with Options and SARs, "Awards")
representing 3,195,687 shares of common stock may be made to certain employees
of the Company. The term of any Option or SAR may not be more than ten years
from the date of its grant. Subject to certain limitations, the Compensation
Committee has authority to grant Awards under the 1998 Stock Incentive Plan and
to set the terms of any Awards. The Chief Executive Officer also has limited
authority to grant Awards. On December 4, 1998, Options for 1,824,433 shares
were granted under the 1998 Stock Incentive Plan at an exercise price of $13.00
per share, which was determined to be fair value at that time. For each of these
grants, 50% of the option shares vest annually on a proportionate basis over a
four-year period and 50% of the option shares vest annually on a proportionate
basis over a five-year period.
NOTE 4 - EARNINGS PER SHARE
The following tables set forth the computation of basic and diluted
earnings per share:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
MARCH 31, MARCH 31,
---------------------------------- ----------------------------------
1998 1999 1998 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
BASIC EARNINGS PER SHARE
Numerator:
Income (loss) before extraordinary item $ (2) $ 12 $ -- $ 11
Preferred stock dividends (1) (1) (4) (4)
Extraordinary item -- (19) -- (19)
------------ ------------ ------------ ------------
Numerator for basic loss per share -
loss attributable to common shares $ (3) $ (8) $ (4) $ (12)
============ ============ ============ ============
Denominator:
Denominator for basic earnings per share -
weighted average shares 34,883,757 44,757,090 30,389,671 38,583,239
Basic loss per common share $ (0.10) $ (0.17) $ (0.12) $ (0.29)
</TABLE>
5
<PAGE> 8
DEL MONTE FOODS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
March 31, 1999
(In Millions, Except Share Data)
NOTE 4 - EARNINGS PER SHARE (CONTINUED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
MARCH 31, MARCH 31,
---------------------------------- ----------------------------------
1998 1999 1998 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
DILUTED EARNINGS PER SHARE
Numerator:
Income (loss) before extraordinary item $ (2) $ 12 $ -- $ 11
Preferred stock dividends (1) (1) (4) (4)
Extraordinary item -- (19) -- (19)
------------ ------------ ------------ ------------
Numerator for diluted loss per share -
loss attributable to common shares $ (3) $ (8) $ (4) $ (12)
============ ============ ============ ============
Denominator:
Denominator for diluted earnings per share -
weighted average shares 34,883,757 45,911,301 30,389,671 39,694,767
Diluted loss per common share $ (0.10) $ (0.17) $ (0.12) $ (0.29)
</TABLE>
NOTE 5 - ACQUISITIONS
On August 28, 1998, the Company reacquired rights to the Del Monte
brand in South America from Nabisco, Inc. and purchased Nabisco's canned fruit
and vegetable business in Venezuela, including a food processing plant in
Venezuela, for a cash purchase price of $32 (the "South America Acquisition").
In connection with the South America Acquisition, approximately $1 of
acquisition-related expenses were incurred which included a transaction advisory
fee to a designee of Texas Pacific Group, which owns a controlling interest in
the Company. Nabisco had retained ownership of the Del Monte brand in South
America and the Venezuela Del Monte business when it sold other Del Monte
businesses in 1990.
The South America Acquisition has been reflected in the balance sheet
at March 31, 1999 and was accounted for using the purchase method of accounting.
The total purchase price has been allocated as $3 to inventory, $1 to property,
plant and equipment, and $28 representing intangible assets. Results of
operations of the acquired business and any other expenses of the transaction
are included in the Consolidated Statements of Operations for the three- and
nine-month periods ended March 31, 1999, and did not significantly effect the
results of operations of the Company for these periods.
NOTE 6 - STOCKHOLDERS' EQUITY AND REDEEMABLE STOCK
In fiscal 1998, the Company filed a registration statement on Form S-1
with the Securities and Exchange Commission for the purpose of making a public
offering of shares of its Common Stock (the "Offering"). The Offering was
withdrawn in July 1998 due to conditions in the equity securities market. During
the second quarter of fiscal 1999, a post-effective amendment to the
registration statement was filed with the SEC for the purpose of reinitiating
the Offering.
6
<PAGE> 9
DEL MONTE FOODS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
March 31, 1999
(In Millions, Except Share Data)
NOTE 6 - STOCKHOLDERS' EQUITY AND REDEEMABLE STOCK (CONTINUED)
On February 10, 1999, the public equity offering, consisting of
16,667,000 shares of Common Stock sold by the Company and 3,333,000 shares of
Common Stock sold by certain stockholders of the Company, was consummated at an
initial offering price of $15.00 per share. The Company received net proceeds of
$230. Total common shares outstanding after the Offering were 52,163,943. The
Company used a portion of the net proceeds from the Offering to redeem $46 of
its Series A Redeemable Preferred Stock, including $2 of unamortized discount,
$10 of accreted dividends and $1 of redemption premium. In connection with the
Offering, the Company paid Texas Pacific Group, which owns a controlling
interest in the Company, and its designee approximately $4 for financial
advisory services.
The following table presents the changes in stockholders' equity
(deficit) during the quarter ended March 31, 1999:
<TABLE>
<S> <C>
December 31, 1998 $(351)
Net loss (7)
Initial Public Offering 250
Preferred Stock dividends (10)
Equity offering costs (20)
Other (1)
-----
March 31, 1999 $(139)
=====
</TABLE>
The Company used $57 of the net proceeds of the public equity offering
to redeem a portion of its senior discount notes, including $1 of accrued
interest and $6 of redemption premium. The Company contributed the remainder of
the net proceeds to Del Monte Corporation, its principal subsidiary. Del Monte
Corporation used the contribution to prepay $63 of its indebtedness under its
bank term loans, to redeem $62 of its senior subordinated notes, including $1 of
accelerated amortization of original issue discount, $3 of accrued interest and
$7 of redemption premium, and to repay $2 of indebtedness under the revolving
credit facility. In connection with the repayment of debt, $5 of previously
capitalized debt issue costs were charged to income during the third quarter and
accounted for as an extraordinary item, as well as a total of $14 of premiums,
as discussed above, resulting in total extraordinary item charges of $19.
Long-term debt consisted of the following as of December 31, 1998 on a
pre-offering basis and as of March 31, 1999 on a post-offering basis :
<TABLE>
<CAPTION>
December 31, 1998 March 31, 1999
----------------- --------------
<S> <C> <C>
Term Loan $411 $341
Senior Subordinated Notes 147 96
Senior Discount Notes 142 92
---- ---
700 529
Less current portion 35 32
--- ---
$665 $497
==== ====
</TABLE>
7
<PAGE> 10
DEL MONTE FOODS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
March 31, 1999
(In Millions, Except Share Data)
NOTE 6 - STOCKHOLDERS' EQUITY AND REDEEMABLE STOCK (CONTINUED)
At March 31, 1999, scheduled maturities of long-term debt in
each of the next five fiscal years and thereafter will be as follows:
<TABLE>
<S> <C>
4th quarter 1999 $ 7
2000 32
2001 36
2002 40
2003 43
2004 47
Thereafter 383
----
588
Less discount on notes 59
----
$529
====
</TABLE>
NOTE 7 - PLANT CONSOLIDATION
In the third quarter of fiscal 1998, management committed to a plan to
consolidate the Company's tomato and fruit 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. At March 31,
1999, no costs have been charged to this accrual. At this time, there have been
no significant changes to this plan.
As anticipated upon adoption of the plan, the Company established an
accrual of $2 during the second quarter of fiscal 1999 upon the closure of the
Modesto facility to accommodate reconfiguration of the plant to a fruit
processing operation. This accrual represents direct costs to be incurred to
remove and dispose of tomato processing equipment at Modesto that will not be
transferred to the Company's tomato processing operations at the Hanford
facility. Under current accounting rules, these costs could not be accrued until
the Company had the ability to dispose of the equipment. The Company expects to
establish additional accruals for similar costs at the time of the closure of
the San Jose and Stockton facilities in fiscal 2000 and 2001. At March 31, 1999,
$2 of costs have been charged to this accrual. As the equipment removal project
at Modesto is substantially complete, the Company does not expect that there
will be any adjustments to this reserve. The Company incurred charges
representing accelerated depreciation of $1 during the quarter and $8 during the
nine months ended March 31, 1999. This acceleration results from the effects of
adjusting the tomato and fruit processing assets' remaining useful lives to
match the period of use prior to the closures of these plants.
In August 1998, management announced its intention to close the
Company's vegetable processing plant located in Arlington, Wisconsin after the
summer 1998 pack. Upon completion of this pack, a charge of $3 was taken during
the first quarter of fiscal 1999 representing the write-down to fair value of
the assets held for sale. These assets primarily included building, building
improvements, and machinery and equipment with a carrying value of $4. Fair
value was based on current market values of land and buildings in the area and
estimates of market values of equipment to be disposed of. Based on the level of
interest demonstrated in the facility by third parties, it is expected that
these assets will be disposed of within a year. At March 31, 1999, no costs have
been charged against this accrual.
NOTE 8 - 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.
8
<PAGE> 11
DEL MONTE FOODS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
March 31, 1999
(In Millions, Except Share Data)
NOTE 9 - NEW ACCOUNTING STANDARDS
In March 1998, the AICPA Accounting Standards Executive Committee
issued 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. SOP 98-1 is required
to be adopted for fiscal years beginning after December 15, 1998. The Company
will adopt this statement in fiscal 2000 and is currently evaluating the impact
of adoption on the Company's financial statements.
The Company will adopt Statement of Financial Accounting Standards
("SFAS") No. 131, "Disclosures about Segments of an Enterprise and Related
Information" for its 1999 fiscal year. This statement establishes annual and
interim reporting standards for an enterprise's operating segments and related
disclosures about its products, services, geographic areas, and major customers.
The Company is not required to disclose segment information in accordance with
SFAS No. 131 until its fiscal June 30, 1999 year end and for subsequent interim
periods in fiscal 2000 with comparative fiscal 1999 interim disclosures.
Adoption will not impact the Company's consolidated financial position, results
of operations or cash flows, and any effect will be limited to the form and
content of its disclosures.
Effective July 1, 1998, the Company adopted SFAS No. 132, "Employers'
Disclosures about Pensions and Other Postretirement Benefits." SFAS No. 132
amends only the disclosure requirements with respect to pensions and other
postretirement benefits. Adoption of this statement will not impact the
Company's consolidated financial position, results of operations or cash flows,
and any effect will be limited to the form and content of its disclosures.
In fiscal 1998, the Financial Accounting Standards Board issued SFAS
No. 133, "Accounting for Derivative Instruments and Hedging Activities." SFAS
No. 133 is required to be adopted for all fiscal quarters and fiscal years
beginning after June 15, 1999 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.
9
<PAGE> 12
DEL MONTE FOODS COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
March 31, 1999
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The Company reports its financial results on a July 1 to June 30 fiscal
year basis to coincide with its inventory production cycle, which is highly
seasonal. The following discussion and analysis of the Company's financial
condition and results of operations should be read in conjunction with the
historical financial information included in the Financial Statements and notes
to the financial statements elsewhere in this quarterly report.
RESULTS OF OPERATIONS
THREE AND NINE MONTHS ENDED MARCH 31, 1998 VS. THREE AND NINE MONTHS ENDED MARCH
31, 1999
South America Acquisition. On August 28, 1998, the Company reacquired
rights to the Del Monte brand in South America from Nabisco, Inc. and purchased
Nabisco's canned fruit and vegetable business in Venezuela, including a food
processing plant in Venezuela, for a cash purchase price of $32 million (the
"South America Acquisition"). In connection with the South America Acquisition,
approximately $1 million of acquisition-related expenses were incurred. RJR
Nabisco had retained ownership of the Del Monte brand in South America and the
Venezuela Del Monte business when it sold other Del Monte businesses in 1990.
The South America Acquisition was accounted for using the purchase method of
accounting. The total purchase price has been allocated as $3 million to
inventory, $1 million to property, plant and equipment and $28 million
representing intangible assets.
Net sales. Consolidated net sales increased by $42 million, or 12%, and
$167 million, or 17%, for the three and nine months ended March 31, 1999,
compared to the same periods of the prior year, primarily due to higher volumes
in the vegetable and fruit businesses, sales growth in the club and mass
merchandisers channel and Contadina product sales (which accounted for $22
million of the increase for the three months ended March 31, 1999 and $96
million of the increase for the nine months ended March 31, 1999). The following
discusses the increases within the Company's major product lines. Vegetable
product sales have increased in the current year due to increased consumer and
trade promotional programs. For the 13 weeks ended March 27, 1999, market share
for vegetables was 17.8% versus 17.7% for the same period of the prior year
(source for market share data: ACNielsen SCANTRACK, based on equivalent cases).
For the 52-week period ended March 27,1999, market share for vegetables was
20.8% versus 19.4% in the prior year. Fruit product sales have increased in
fiscal 1999 as compared to the prior year, primarily due to the introduction of
new products (FruitRageous and Fruit Pleasures single-serve fruit products and
the Orchard Select fruit-in-glass product), which began national distribution
during the first quarter of fiscal 1999. For the 13 weeks ended March 27, 1999,
market share for major fruit products was 42.2% versus 41.6% for the same period
of the prior year. For the 52-week period ended March 27,1999, the major fruit
market share was 42.3% versus 41.5% for the prior year. During the month of
March 1999, the Company increased prices on certain of its major fruit products
and certain of its tomato products. The Company may, as a result, lose market
share temporarily to its competitors in these categories. Tomato product net
sales (exclusive of Contadina) have increased for the quarter ended March 31,
1999 as compared with the prior year quarter primarily due to the price
increases. For the 13 weeks ended March 27, 1999, solid tomatoes market share
was 17.3% versus 16.1% for the same period of the prior year. For the 52-week
period ended March 27,1999, market share for solid tomatoes was 16.5% versus
16.3% for the to prior year.
Cost of products sold. Cost of products sold as a percent of net sales
was 65% and 67% for the three and nine months ended March 31, 1999, compared to
69% and 68% for the same periods of the prior year. The decrease in cost of
products sold as a percent of net sales was primarily due to manufacturing cost
decreases. Manufacturing costs were favorable in the current year periods as
compared to the prior year periods due to more favorable raw product costs, cost
savings from capital spending initiatives and increased production levels.
10
<PAGE> 13
DEL MONTE FOODS COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS-CONTINUED
March 31, 1999
Selling, administrative and general expense. Selling, administrative
and general expense increased by $20 million for the three months and $46
million for the nine months ended March 31, 1999 compared to the same periods of
the prior year. The increase in selling, administrative and general expense was
due to promotion cost increases resulting from higher volumes of product sold
(including the increase due to the acquisition of Contadina), higher marketing
costs associated with the introduction of new products and increased spending
resulting from higher levels of promotional activity.
Special charges related to plant consolidation. The Company incurred
charges of $3 million and $15 million for the three and nine months ended March
31, 1999. These amounts included $1 million and $8 million, respectively, of
accelerated depreciation related to buildings and machinery and equipment that
will no longer be needed following the consolidation of the operations of two
fruit processing plants and two tomato processing plants. Special charges for
the three and nine months ended March 31, 1999 also included $1 million of
on-going fixed costs for the Modesto facility which is under reconfiguration and
$1 million to relocate equipment. In addition, special charges for the nine
months ended March 31, 1999 also included $3 million, representing the
write-down to fair value of assets held for sale related to the closure of the
Arlington, Wisconsin plant, which was recorded in the first quarter of fiscal
1999, as well as a $2 million charge, recorded during the second quarter of
fiscal 1999, representing costs to be incurred for removal of equipment to be
disposed of.
Interest expense. Interest expense decreased by $2 million for the
three months ended March 31, 1999 compared to the same period of the prior year,
primarily due to the repayment of debt through the proceeds of the February 1999
public equity offering. For the nine months ended March 31, 1999, interest
expense increased by $5 million as compared with fiscal 1998, due to the higher
debt balances from the Contadina Acquisition (which occurred in December 1997).
Other expense. Other expense for the nine months ended March 31, 1999
represents expenses of the public equity offering that was withdrawn due to
conditions in the equity securities market in July 1998. These expenses were
charged to earnings during the first quarter of fiscal 1999 upon the withdrawal
of that offering.
Net income (loss) before extraordinary item. Net income before
extraordinary item for the three months ended March 31, 1999 was $12 million
compared to a net loss of $2 million in the same period of the prior year. Net
income before extraordinary item for the nine months ended March 31, 1999 was
$11 million as compared to no earnings for the nine months ended March 31, 1998.
This increase was primarily due to an increase in operating income resulting
from higher net sales and more favorable manufacturing and product costs in the
three and nine-month periods ended March 31, 1999 compared to the same periods
of the prior year. The increase was somewhat offset by the presence of special
charges related to plant consolidation and costs of the withdrawn July 1998
public equity offering.
Extraordinary item. Proceeds of the February 1999 public equity
offering were used to redeem preferred stock and a portion of the outstanding
subordinated notes and to repay senior debt. The extraordinary item charge
consisted of $5 million of previously capitalized debt issue costs related to
the redeemed notes and early debt retirement and $14 of redemption premiums.
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.
Since the Company has undergone significant structural changes during the
periods presented, the Company believes that this measure presents a meaningful
measure of operating cash flow (excluding the effects of working capital
11
<PAGE> 14
DEL MONTE FOODS COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS-CONTINUED
March 31, 1999
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 10% to $43 million in the current period
as compared to $39 million for the three months ended March 31, 1998. For the
three months ended March 31, 1999, income before income taxes and extraordinary
item, plus interest expense was $32 million and was adjusted for special charges
and other one-time and non-cash charges of $11 million. The special charges and
non-cash charges consisted of special charges related to plant consolidation of
$3 million and depreciation and amortization of $8 million (excluding
accelerated depreciation of $1 million and amortization of deferred debt
issuance costs of $1 million).
Adjusted EBITDA increased by 24% in the current nine-month period to
$120 million as compared to $97 million for the nine months ended March 31,
1998. For the nine months ended March 31, 1999, income before income taxes and
extraordinary item, plus interest expense was $74 million and was adjusted for
special charges and other one-time and non-cash charges of $46 million. The
special charges and other one-time and non-cash charges consisted of special
charges related to plant consolidation of $15 million, expenses of the withdrawn
public equity offering of $2 million, the fair value step-up of inventory of $3
million, South America Acquisition expenses of $1 million and depreciation and
amortization of $25 million (excluding accelerated depreciation of $8 million,
amortization of deferred debt issuance costs of $2 million and $1 million
intangible asset amortization).
YEAR 2000
In the first quarter of fiscal 1998, the Company contracted with its
information services outsourcing provider, Electronic Data Systems Corporation
("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 expects to complete its project to evaluate, modify and
implement Year 2000 compliant systems by June 1999, with customer and supplier
assessments and testing ongoing. 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 is expected to continue through early calendar 2000.
Overall, the project is proceeding as scheduled and was estimated to be over 90%
complete as of March 31, 1999.
The Company expects costs incremental to the Company's base service
contract with EDS to total under $2 million, which is not material to the
Company's financial position. The Company is funding these costs through
operating cash flow. Approximately $1 million of this $2 million estimate had
been incurred as of March 31, 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 the current status of their Year 2000 programs
throughout calendar 1999. No assurance can be given that the Company's suppliers
and customers will all be Year 2000
12
<PAGE> 15
DEL MONTE FOODS COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS-CONTINUED
March 31, 1999
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 March 31, 1999, $77 million was
outstanding under the revolving credit facility, compared to a zero balance at
June 30, 1998. The increase in inventories at March 31, 1999 from June 30, 1998
reflects the seasonal inventory buildup and depletion. The increase in accounts
payable and accrued expenses from June 30, 1998 to March 31, 1999 reflects
accrued expenses resulting from the peak production period and higher marketing
accruals. The higher marketing accruals reflect increased promotional activity
in the current year primarily related to new product introductions.
As of March 31, 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 third quarter of fiscal 1999.
13
<PAGE> 16
DEL MONTE FOODS COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS-CONTINUED
March 31, 1999
On February 10, 1999, the public equity offering, consisting of
16,667,000 shares of Common Stock sold by the Company and 3,333,000 shares of
Common Stock sold by certain stockholders of the Company, was consummated at an
initial offering price of $15.00 per share. The Company received net proceeds of
$230 million. Total common shares outstanding after the Offering were
52,163,943. The Company used the net proceeds from the Offering to redeem $45
million of its Series A Redeemable Preferred Stock, to redeem $51 million of its
senior discount notes, to prepay $63 million of its indebtedness under its bank
term loans, to redeem $53 million of its senior subordinated notes, and to repay
$2 million of indebtedness under the revolving credit facility. In connection
with the Offering, the Company paid Texas Pacific Group, which owns a
controlling interest in the Company, and its designee, approximately $4 million
for financial advisory services.
In April 1999, the Company completed a $38 million lease financing that
will be used to finance construction of four warehouse facilities adjacent to
the Company's Hanford, Kingsburg and Modesto, California, and Plymouth, Indiana
production plants. Construction of the new facilities (totaling approximately
1.4 million square feet) has begun and is expected to be completed at all four
sites during calendar 1999. The lease bears interest at a floating rate equal to
a blended spread of 368 basis points over three-month LIBOR (currently at
approximately 5.0%). The lease has an initial term of five years. Under certain
circumstances, the lease can be renewed for up to five additional years. At the
expiration of the lease, the Company has the option to purchase the leased
facilities for specified amounts, or to sell them on behalf of the lessor.
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; 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 compliance; changes in,
or the 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.
Please see the Company's registration statement on Form S-1 filed with
the Securities and Exchange Commission on January 19, 1999 for a discussion of
risk factors related to an investment in the Company.
14
<PAGE> 17
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.
On January 21, 1999, an Annual Meeting of Stockholders of DMFC was
held. At the meeting, Timothy G. Bruer, Brian E. Haycox and William S. Price,
III were elected as Class I directors for a three-year term. Wesley J. Smith,
Patrick Foley and Jeffrey A. Shaw continued as Class II directors and Richard W.
Boyce, Al Carey, Denise M. O'Leary and Richard G. Wolford continued as Class III
directors.
In addition, the appointment of KPMG LLP as independent auditors of
DMFC was ratified at the meeting and the minutes of the annual meeting held on
February 24, 1998, and the special meetings held April 2, 1998 and April 13,
1998 were approved.
The vote on each of these matters was 35,383,050 in favor, no votes in
opposition and no abstentions.
ITEM 5. OTHER INFORMATION. None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
(3)(i) Certificate of Incorporation of Del Monte Foods Company
(incorporated by reference to Exhibit 3.1 to Amendment No. 1
to the Registration on Form S-1 No. 333-48235, filed May 18,
1998)
(3)(ii) Amended and Restated Bylaws of Del Monte Food Company adopted
on April 22, 1999
(11) Statement re: Computation of Per Share Earnings The
information required by this exhibit is contained in the
financial statements included in this quarterly report on Form
10-Q
(27) Financial Data Schedule
(b) Reports on Form 8-K
A Report on Form 8-K was filed on January 19, 1999, which reported the
Company's financial results for the three and six months ended December
31, 1998.
15
<PAGE> 18
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: May 13, 1999
By: /s/ RICHARD G. WOLFORD
------------------------------
Richard G. Wolford
Chief Executive Officer
By: /s/ DAVID L. MEYERS Date: May 13, 1999
------------------------------
David L. Meyers
Executive Vice President,
Administration and Chief
Financial Officer
<PAGE> 19
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
- -------------- --------------------------------
<S> <C>
3(ii) Amended and Restated Bylaws of Del Monte Foods
Company adopted on April 22, 1999.
27 Financial Data Schedule.
</TABLE>
<PAGE> 1
EXHIBIT 3(ii)
DEL MONTE FOODS COMPANY
AMENDED AND RESTATED BYLAWS
APRIL 22, 1999
ARTICLE I
OFFICES
Section 1. REGISTERED OFFICE. The registered office of Del Monte
Foods Company, a Delaware corporation (the "Company"), shall be located at 1209
Orange Street, in the City of Wilmington, in the County of New Castle, in the
State of Delaware. The name of its registered agent at that address is The
Corporation Trust Company.
Section 2. OTHER OFFICES. The Company may have other offices,
either within or without the State of Delaware, at such place or places as the
Board of Directors may from time to time select or the business of the Company
may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. ANNUAL MEETINGS. Each annual meeting of stockholders
for the election of directors, and for such other business as may be stated in
the notice of the meeting, shall be held at such a time, date and place as the
Board of Directors may determine by resolution. At each annual meeting, the
stockholders entitled to vote shall elect directors by a plurality vote, and
stockholders may transact such other corporate business as shall be stated in
the notice of the meeting.
Section 2. SPECIAL MEETINGS. Except as provided in the
Certificate of Incorporation, special meetings of the stockholders may be called
only on the order of the Chairman of the Board or the Board of Directors and
shall be held at such date and time as may be specified by such order. The
business permitted to be conducted at any special meeting of the stockholders is
limited to the purpose or purposes specified by such order.
Section 3. PLACE. All meetings of stockholders shall be held at
the principal office of the Company, One Market, San Francisco, California or at
such other place within or without the State of Delaware as shall be stated in
the notice of the meeting.
Section 4. NOTICE OF MEETINGS. Written notice of each meeting of
the stockholders shall be mailed or delivered to each stockholder entitled to
vote at such meeting not less than ten nor more than sixty days before the
meeting. The notice shall state the place, date and hour of the meeting, and, in
the case of a special meeting, the purpose or purposes for which the meeting is
called.
<PAGE> 2
Other business may be transacted at the annual meeting (but not
at any special meeting), only if the Secretary of the Company has received from
the sponsoring stockholder (a) not less than sixty nor more than ninety days
before the date designated for the annual meeting or, if such date has not been
publicly disclosed at least seventy-five days in advance, then not more than
fifteen days after such initial public disclosure, a written notice setting
forth (i) as to each matter the stockholder proposes to bring before the annual
meeting, a brief description of the proposal desired to be brought before the
annual meeting and the reasons for conducting such business at the annual
meeting, (ii) the name and address, as they appear on the Company's books, of
the stockholder proposing such business, (iii) the class and number of shares
which are beneficially owned by the stockholder on the date of such
stockholder's notice and (iv) any material interest of the stockholder in such
proposal, and (b) not more than ten days after receipt by the sponsoring
stockholder of a written request from the Secretary, such additional information
as the Secretary may reasonably require. Notwithstanding anything in these
Bylaws to the contrary, no business shall be brought before or conducted at an
annual meeting except in accordance with the provisions of this Section 4 of
Article II. The officer of the Company or other person presiding over the annual
meeting shall, if the facts so warrant, determine and declare to the meeting
that business was not properly brought before the meeting in accordance with the
provisions of this Section 4 of Article II and, if he or she should so
determine, such officer shall so declare to the meeting and any business so
determined to be not properly brought before the meeting shall not be
transacted.
Candidates for election to the Board of Directors of the Company
(other than nominees proposed by the Board of Directors) may be nominated at the
annual meeting (but not at any special meeting), only if the Secretary of the
Company has received from the nominating stockholder (a) not less than sixty nor
more than ninety days before the date designated for the annual meeting or, if
such date has not been publicly disclosed at least seventy-five days in advance,
then not more than fifteen days after such initial public disclosure, a written
notice setting forth (i) with respect to each person whom such stockholder
proposes to nominate for election or re-election as a director, all information
relating to such person that would be required to be disclosed in solicitations
of proxies for election of directors, or would otherwise be required, in each
case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as
amended, if such Regulation 14A were applicable (including such person's written
consent to being named in the proxy statement as a nominee and to serving as a
director if elected) or any successor regulation or statute, (ii) the name and
address, as they appear on the Company's books, of the stockholder proposing
such business and (iii) the class and number of shares which are beneficially
owned by the stockholder on the date of such stockholder's notice, and (b) not
more than ten days after receipt by the nominating stockholder of a written
request from the Secretary, such additional information as the Secretary may
reasonably require. Notwithstanding anything in these Bylaws to the contrary, no
person shall be eligible for election as a director except in accordance with
the provisions of this Section 4 of Article II. The officer of the Company or
other person presiding over the annual meeting shall, if the facts so warrant,
determine and declare to the meeting that a nomination was not made in
accordance with the provisions of this Section 4 of Article II and, if he or she
should so determine, such officer shall so declare to the meeting and any such
defective nomination shall be disregarded.
2
<PAGE> 3
Section 5. QUORUM. Except as otherwise required by law, by the
Certificate of Incorporation of the Company or by these Bylaws, the presence, in
person or by proxy, of stockholders holding shares of capital stock constituting
a majority of the shares of capital stock of the Company issued and outstanding
and entitled to vote thereat, shall constitute a quorum at all meetings of the
stockholders. In case a quorum shall not be present at any meeting, a majority
in interest of the stockholders present in person or by proxy and entitled to
vote thereat, shall have the power to adjourn the meeting from time to time,
without notice other than announcement at the meeting, until the requisite
amount of stock entitled to vote shall be present. At any such adjourned meeting
at which the requisite amount of stock entitled to vote shall be represented,
any business may be transacted that might have been transacted at the meeting as
originally noticed; but only those stockholders entitled to vote at the meeting
as originally noticed shall be entitled to vote at any adjournment or
adjournments thereof.
Section 6. VOTING. Each stockholder entitled to vote in
accordance with the terms of the Certificate of Incorporation of the Company and
these Bylaws may vote in person or by proxy executed in writing by the
stockholder or by his or her duly authorized attorney-in-fact. Any such proxy
shall be filed with the Secretary of the Corporation before or at the time of
the meeting. If a quorum is present, the affirmative vote of a majority of the
votes cast at a meeting of the stockholders by the holders of shares entitled to
vote thereon shall be the act of the stockholders, unless the vote of a greater
or lesser number of shares of stock is required by law, the Certificate of
Incorporation of the Company or these Bylaws.
A complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, with the address of each, and the
number of shares held by each, shall be open to the examination of any
stockholder, for any purpose germane to the meeting, during ordinary business
hours, for a period of at least ten days prior to the meeting, either at a place
within the city where the meeting is to be held, which place shall be specified
in the notice of the meeting, or, if not so specified, at the place where the
meeting is to be held. The list shall also be produced and kept at the time and
place of the meeting during the whole time thereof, and may be inspected by any
stockholder who is entitled to be present.
Section 7. ORGANIZATION. At every meeting of stockholders, the
Chairman of the Board, if there be one, shall conduct the meeting or, in the
case of vacancy in office or absence of the Chairman of the Board, one of the
following officers present shall conduct the meeting in the order stated: the
Vice Chairman of the Board, the Chief Executive Officer, the Chief Operating
Officer, the President, any Vice President, or a Chairman chosen by the
stockholders entitled to cast, shall act as Chairman, and the Secretary, or in
his or her absence, an Assistant Secretary, or in the absence of both the
Secretary and Assistant Secretaries, a person appointed by the Chairman, shall
act as Secretary.
ARTICLE III
DIRECTORS
Section 1. NUMBER. Subject to the provisions of the Certificate
of Incorporation, the number of directors of the Company shall initially be
fixed at ten and
3
<PAGE> 4
thereafter shall be determined from time to time by resolution adopted by
affirmative vote of a majority of such directors then in office.
Section 2. COMMITTEES. The Board of Directors may, by resolution
or resolutions passed by a majority of the entire Board of Directors, designate
one or more committees, each committee to consist of one or more directors of
the Company.
Section 3. MEETINGS. The newly elected directors may hold their
first meeting for the purpose of organization and the transaction of business,
if a quorum be present, immediately after the first annual meeting of the
stockholders; or the time and place of such meeting may be fixed by consent of
all the directors.
Regular meetings of the Board of Directors may be held without
notice at such places and times as shall be determined from time to time by
resolution of the Board of Directors.
Special meetings of the Board of Directors may be called by the
Chairman of the Board, the Chief Executive Officer or the President, and shall
be called by the Secretary on the written request of a majority of the directors
then in office, on at least one hour's notice to each director (except that
notice to any director may be waived in writing by such director) and shall be
held at such place or places as may be determined by the Board of Directors, or
as shall be stated in the call of the meeting.
Unless otherwise restricted by the Certificate of Incorporation
of the Company or these Bylaws, members of the Board of Directors, or any
committee designated by the Board of Directors, may participate in any meeting
of the Board of Directors or any committee thereof by means of a conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and such participation in a
meeting shall constitute presence in person at the meeting.
Section 4. QUORUM. A majority of the entire Board of Directors
shall constitute a quorum for the transaction of business. If at any meeting of
the Board of Directors there shall be less than a quorum present, a majority of
those present may adjourn the meeting from time to time until a quorum is
obtained, and no further notice thereof need be given other than by announcement
at the meeting which shall be so adjourned. The vote of the majority of the
Directors present at a meeting at which a quorum is present shall be the act of
the Board of Directors unless the Certificate of Incorporation of the Company or
these Bylaws shall require the vote of a greater number.
Section 5. COMPENSATION. The directors shall receive such
compensation for their services as may be prescribed by the Board of Directors.
Expenses for attendance at meetings of the Board of Directors and committees of
the Board of Directors may be reimbursed for all members of the Board of
Directors. Nothing herein contained shall be construed to preclude any director
from serving the Company in any other capacity as an officer, agent or
otherwise, and receiving compensation therefor.
4
<PAGE> 5
Section 6. ACTION WITHOUT MEETING. Any action required or
permitted to be taken at any meeting of the Board of Directors or of any
committee thereof may be taken without a meeting if a written consent thereto is
signed by all members of the Board of Directors or of such committee, as the
case may be, and such written consent is filed with the minutes of proceedings
of the Board of Directors or such committee.
ARTICLE IV
OFFICERS
Section 1. ELECTION; QUALIFICATIONS. As soon as practicable after
each annual meeting of stockholders, the Board of Directors shall elect or
appoint a Chairman of the Board, one or more Vice Chairmen, a President, one or
more Executive Vice Presidents, one or more Senior Vice Presidents, one or more
Vice Presidents, a Secretary, a Treasurer, and such other officers, including
assistant officers, as the Board of Directors may from time to time deem
advisable. No officer need be a director of the Company. Any two or more offices
may be held by the same person, except the offices of President and Secretary.
Section 2. TERM OF OFFICE; VACANCIES. All officers shall be
elected or appointed to hold office until the meeting of the Board of Directors
following the next annual meeting of stockholders. Each officer shall hold
office for such term, and until his or her successor has been elected or
appointed and qualified unless he or she shall earlier resign, die, or be
removed. Any vacancy occurring in any office, whether because of death,
resignation or removal, with or without cause, or any other reason, shall be
filled by the Board of Directors.
Section 3. REMOVAL; RESIGNATION. Any officer may be removed by
the Board of Directors with or without cause. Any officer may resign his or her
office at any time, such resignation to be made in writing and to take effect
immediately or on any future date stated in such writing, without acceptance by
the Company.
Section 4. POWERS AND DUTIES OF OFFICERS. Officers of the Company
shall, unless otherwise provided by the Board of Directors, each have such
powers and duties as generally pertain to their respective offices as well as
such powers and duties as may be set forth in these Bylaws or may from time to
time be specifically conferred or imposed by the Board of Directors.
Section 5. SHARES OF OTHER CORPORATIONS. Whenever the Company is
the holder of shares of any other corporation, any right or power of the Company
as such stockholder (including the attendance, acting and voting at
stockholders' meetings and execution of waivers, consents, proxies or other
instruments) may be exercised on behalf of the Company by the Chairman, any Vice
Chairman, the President, any Executive Vice President, any Senior Vice
President, Secretary or such other person as the Board of Directors may
authorize from time to time.
Section 6. DELEGATION. In the event of the absence of any officer
of the Company or for any other reason that the Board of Directors may deem
sufficient, the Board of
5
<PAGE> 6
Directors may at any time and from time to time delegate all or any part of the
powers or duties of any officer to any other officer or officers or to any
director or directors.
ARTICLE V
TRANSFER RESTRICTIONS
Any direct or indirect sale, transfer, assignment, pledge,
hypothecation or other encumbrance or disposition (a "Transfer") of legal or
beneficial ownership of any stock heretofore or hereafter issued and sold by the
Company pursuant to Rule 144A or Regulation S under the Securities Act of 1933,
as amended (the "Securities Act"), may be made only (i) pursuant to an effective
registration statement under the Securities Act or (ii) pursuant to a
transaction that is exempt from, or not subject to, the registration
requirements of the Securities Act. Neither the Company nor any employee or
agent of the Company shall record any Transfer prohibited by the preceding
sentence, and the purported transferee of such a prohibited Transfer (the
"Purported Transferee") shall not be recognized as a securityholder of the
Company for any purpose whatsoever in respect of the security or securities that
are the subject of the prohibited Transfer. The Purported Transferee shall not
be entitled, with respect to such securities, to any rights of a securityholder
of the Company, including without limitation, in the case of securities that are
Common Stock, the right to vote such Common Stock or to receive dividends or
distributions in respect thereof, if any. All certificates representing
securities subject to the transfer restrictions set forth in this Article V
shall bear a legend to the effect that the securities represented by such
certificates are subject to such restrictions, unless and until the Company
determines in its sole discretion that such legend may be removed consistent
with applicable law.
ARTICLE VI
MISCELLANEOUS
Section 1. CERTIFICATES OF STOCK. A certificate of stock shall be
issued to each stockholder certifying the number of shares owned by such
stockholder in the Company. Certificates of stock of the Company shall be of
such form and device as the Board of Directors may from time to time determine.
Section 2. LOST CERTIFICATES. A new certificate of stock may be
issued in the place of any certificate theretofore issued by the Company,
alleged to have been lost or destroyed, and the Board of Directors may, in its
discretion, require the owner of the lost or destroyed certificate, or such
owner's legal representatives, to give the Company a bond, in such sum as they
may direct, not exceeding double the value of the stock, to indemnify the
Company against any claim that may be made against it on account of the alleged
loss of any such certificate, or the issuance of any such new certificate.
Section 3. TRANSFER OF SHARES. The shares of stock of the Company
shall be transferable only upon its books by the holders thereof in person or by
their duly authorized attorneys or legal representatives, and upon such transfer
the old certificates shall be surrendered to the Company by the delivery thereof
to the person in charge of the stock and
6
<PAGE> 7
transfer books and ledgers, or to such other person as the Board of Directors
may designate, by whom they shall be canceled, and new certificates shall
thereupon be issued. A record shall be made of each transfer and whenever a
transfer shall be made for collateral security, and not absolutely, it shall be
so expressed in the entry of the transfer.
Section 4. STOCKHOLDERS RECORD DATE. In order that the Company
may determine the stockholders entitled to notice of or to vote at any meeting
of stockholders or any adjournment thereof, or to express consent to corporate
action in writing without a meeting, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock or
for the purpose of any other lawful action, the Board of Directors may fix a
record date, which record date shall not precede the date upon which the
resolution fixing the record date is adopted by the Board of Directors and which
record date: (1) in the case of determination of stockholders entitled to vote
at any meeting of stockholders or adjournment thereof, shall, unless otherwise
required by law, not be more than sixty nor less than ten days before the date
of such meeting; (2) in the case of determination of stockholders entitled to
express consent to corporate action in writing without a meeting, shall not be
more than ten days from the date upon which the resolution fixing the record
date is adopted by the Board of Directors; and (3) in the case of any other
action, shall not be more than sixty days prior to such other action. If no
record date is fixed: (1) the record date for determining stockholders entitled
to notice of or to vote at a meeting of stockholders shall be at the close of
business on the day next preceding the day on which notice is given, or, if
notice is waived, at the close of business on the day next preceding the day on
which the meeting is held; (2) the record date for determining stockholders
entitled to express consent to corporate action in writing without a meeting
when no prior action of the Board of Directors is required by law, shall be the
first day on which a signed written consent setting forth the action taken or
proposed to be taken is delivered to the Company in accordance with applicable
law, or, if prior action by the Board of Directors is required by law, shall be
at the close of business on the day on which the Board of Directors adopts the
resolution taking such prior action; and (3) the record date for determining
stockholders for any other purpose shall be at the close of business on the day
on which the Board of Directors adopts the resolution relating thereto. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for the adjourned
meeting.
Section 5. DIVIDENDS. Subject to the provisions of the
Certificate of Incorporation of the Company, the Board of Directors may, out of
funds legally available therefor at any regular or special meeting, declare
dividends upon stock of the Company as and when they deem appropriate. Before
declaring any dividend there may be set apart out of any funds of the Company
available for dividends, such sum or sums as the Board of Directors from time to
time in their discretion deem proper for working capital or as a reserve fund to
meet contingencies or for equalizing dividends or for such other purposes as the
Board of Directors shall deem conducive to the interests of the Company.
Section 6. SEAL. The corporate seal of the Company shall be in
such form as shall be determined by resolution of the Board of Directors. Said
seal may be used by causing
7
<PAGE> 8
it or a facsimile thereof to be impressed or affixed or reproduced or otherwise
imprinted upon the subject document or paper.
Section 7. FISCAL YEAR. The fiscal year of the Company shall end
on June 30 of each year unless otherwise determined by resolution of the Board
of Directors.
Section 8. CHECKS. All checks, drafts or other orders for the
payment of money, notes or other evidences of indebtedness issued in the name of
the Company shall be signed by such officer or officers, or agent or agents, of
the Company, and in such manner as shall be determined from time to time by
resolution of the Board of Directors.
Section 9. NOTICE AND WAIVER OF NOTICE. Whenever any notice is
required to be given under these Bylaws, personal notice is not required (except
in the case of notices pursuant to Article III, Section 3), and any notice so
required shall be deemed to be sufficient if given by depositing the same in the
United States mail, postage prepaid, addressed to the person entitled thereto at
his or her address as it appears on the records of the Company, and such notice
shall be deemed to have been given on the day of such mailing. Stockholders not
entitled to vote shall not be entitled to receive notice of any meetings except
as otherwise provided by law. Whenever any notice is required to be given under
the provisions of any law, or under the provisions of the Certificate of
Incorporation of the Company or of these Bylaws, a waiver thereof, in writing
and signed by the person or persons entitled to said notice, whether before or
after the time stated thereon, shall be deemed equivalent to such required
notice.
ARTICLE VII
AMENDMENTS
In furtherance and not in limitation of the powers conferred by
law, the Board of Directors of the Company is expressly authorized and empowered
to adopt, amend and repeal the Bylaws of the Company by a majority vote at any
regular or special meeting of the Board of Directors or by written consent,
subject to the power of the stockholders of the Company to amend or repeal any
Bylaws made by the Board of Directors.
8
<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 MARCH 31, 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> 9-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1998
<PERIOD-END> MAR-31-1999
<CASH> 7
<SECURITIES> 0
<RECEIVABLES> 150
<ALLOWANCES> 1
<INVENTORY> 435
<CURRENT-ASSETS> 602
<PP&E> 499
<DEPRECIATION> 201
<TOTAL-ASSETS> 959
<CURRENT-LIABILITIES> 415
<BONDS> 0
1
0
<COMMON> 0
<OTHER-SE> (139)
<TOTAL-LIABILITY-AND-EQUITY> 959
<SALES> 1,135
<TOTAL-REVENUES> 1,135
<CGS> 755
<TOTAL-COSTS> 755
<OTHER-EXPENSES> 8
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 63
<INCOME-PRETAX> 11
<INCOME-TAX> 0
<INCOME-CONTINUING> 11
<DISCONTINUED> 0
<EXTRAORDINARY> 19
<CHANGES> 0
<NET-INCOME> (8)
<EPS-PRIMARY> (0.29)
<EPS-DILUTED> (0.29)
</TABLE>
