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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

FORM 10-Q

For the quarterly period ended January 29, 2003

OR

For the transition period from               to

Commission file number 001-14335

DEL MONTE FOODS COMPANY

One Market @ The Landmark, San Francisco, California 94105
(Address of Principal Executive Offices including Zip Code)

(415) 247-3000
(Registrant’s Telephone Number, Including Area Code)

     Indicate by check mark whether the 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 o

     Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
Yes x   Noo

As of February 28, 2003, 209,302,321 shares of Common Stock, par value $0.01 per share, were outstanding.

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

DEL MONTE FOODS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions, except share and per share data)

See Accompanying Notes to Condensed Consolidated Financial Statements.

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DEL MONTE FOODS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In millions, except per share data)

See Accompanying Notes to Condensed Consolidated Financial Statements.

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DEL MONTE FOODS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(In millions)

See Accompanying Notes to Condensed Consolidated Financial Statements.

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DEL MONTE FOODS COMPANY AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the three and nine months ended January 29, 2003
(In millions, except share and per share data)

Note 1. The Merger and Basis of Presentation

On December 20, 2002, Del Monte Foods Company (the “Company” or “Del Monte”) announced the completion of the acquisition of certain businesses of H. J. Heinz Company (“Heinz”), including Heinz’s U.S. and Canadian pet food and pet snacks, U.S. tuna and retail private label soup, and U.S. infant feeding businesses (the “Spun-Off Businesses”). The acquisition was completed pursuant to a Separation Agreement (the “Separation Agreement”), dated as of June 12, 2002, between Heinz and SKF Foods Inc., a wholly-owned direct subsidiary of Heinz (“SKF”), and an Agreement and Plan of Merger (the “Merger Agreement”), dated as of June 12, 2002, by and among the Company, Heinz, SKF and Del Monte Corporation, a wholly-owned direct subsidiary of the Company (“DMC”).

Under the terms of the Merger Agreement and Separation Agreement, immediately prior to the merger (i) Heinz transferred the Spun-Off Businesses to SKF and distributed all of the issued and outstanding shares of SKF common stock on a pro rata basis (the “Spin-Off”) to the holders of the outstanding common stock of Heinz on December 19, 2002, and (ii) immediately following the Spin-Off, DMC merged with and into SKF, with SKF being the surviving corporation and a wholly-owned subsidiary of the Company (the “Merger”). In connection with the Merger, each share of SKF common stock was converted into the right to receive 0.4466 shares of Del Monte common stock. The Company issued 156.9 million shares of Del Monte’s common stock as a result of the Merger. Immediately following the Merger, SKF changed its name to “Del Monte Corporation”.

The Company believes Del Monte stockholders will benefit from the financial strength; enhanced strategic and market position; and increased scale, scope and diversity of operations, distribution channels, product lines, served markets and customers that it expects to achieve by combining Del Monte’s businesses and the Spun-Off Businesses. The Company also believes the Merger will increase the liquidity and trading volume of Del Monte’s common stock, expand Del Monte’s investor base and generate enhanced analyst coverage of Del Monte.

The Merger has been accounted for as a reverse acquisition in which SKF is treated as the acquirer and DMC the acquiree, primarily because Heinz shareholders owned a majority, approximately 74.5 percent, of the Company’s common stock upon completion of the Merger. As a result, the historical financial statements of SKF became the historical financial statements of the Company as of the completion of the Merger. For the current reporting period, the Company’s financial statements reflect the combined operations of SKF and DMC for periods after December 20, 2002, and reflect solely the operations of SKF for periods prior to December 20, 2002.

The preparation of the historical financial statements include the use of “carve out” and “push down” accounting procedures in which certain assets, liabilities and expenses historically recorded or incurred at the Heinz parent company or affiliate level, which related to or were incurred on behalf of SKF, have been identified and allocated or pushed down, as appropriate, to the financial results of SKF for the periods presented. Allocations were made primarily on a percentage-of-revenue basis. No debt or interest expense was allocated to SKF from Heinz.

SKF was not historically managed as a stand-alone entity but as part of the operations of Heinz. As such, quarterly balance sheets and quarterly statements of cash flows were not historically prepared for SKF, and it would not be practicable to retroactively prepare such statements. Accordingly, a comparative statement of cash flows has not been presented.

These historical financial statements are not indicative of the results of operations that would have existed or will exist in the future assuming SKF was operated as an independent company or as a subsidiary of Del Monte. Further, since the historical financial statements of the Company do not include the historical financial results of pre-merger DMC for periods prior to December 20, 2002, the financial statements may not be indicative of future results of operations or the historical results that would have resulted if the Merger had occurred at the beginning of a historical financial period.

Del Monte’s assets and liabilities were adjusted to their fair values upon the completion of the Merger for purchase price allocation purposes. The Company obtained an independent valuation of Del Monte’s property, plant and equipment, trademarks and retirement benefits, and internally determined the fair value of its other assets and liabilities. The purchase price allocation may change as the Company continues to

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refine the fair value determination. The purchase price of $455.3 has been calculated as follows:

The total purchase price of the transaction has been allocated as follows:

The accompanying unaudited consolidated financial statements as of January 29, 2003 and for the three and nine months ended January 29, 2003 and January 30, 2002 have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments consisting of normal and recurring entries considered necessary for a fair presentation of the results for the interim period presented have been included. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect reported amounts in the financial statements and accompanying notes. These estimates are based on information available as of the date of the condensed consolidated financial statements. Therefore, actual results could differ from those estimates. Furthermore, operating results for the three and nine month periods ending January 29, 2003 are not necessarily indicative of the results for the year ending April 27, 2003. The notes to the financial statements contained in the Company’s Registration Statement on Form S-4/A dated November 19, 2002, for the year ended May 2, 2002, should be read in conjunction with these condensed consolidated financial statements. All significant intercompany balances and transactions have been eliminated. Certain prior period amounts have been reclassified to conform to the current presentation.

Note 2. Pro Forma Financial Information

The following table summarizes unaudited pro forma financial information assuming the Merger occurred at the beginning of the periods presented. This pro forma financial information is for informational purposes only and is not necessarily indicative of actual results that would have existed had the Merger occurred on the assumed dates and it is not necessarily indicative of future results. In addition, the following pro forma financial information has not been adjusted to reflect any operating efficiencies that may be realized as a result of the Merger.

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(a)

Merger-related expenses for legal and financial advisory services of $24.7 ($15.1 net of taxes) and $34.6 ($21.1 net of taxes) have been excluded from net income for the three and nine months ended January 29, 2003, respectively.

Note 3. Significant Accounting Policies

Fiscal Year: The Company operates on a fiscal year ending the Sunday closest to April 30.

Earnings Per Share: Earnings per share is computed by dividing net income attributable to common shares by the weighted average number of common shares and share equivalents outstanding during the period.

Prior to the Merger, weighted average shares outstanding have been retroactively restated to reflect the number of shares received by Heinz shareholders in the Merger. Stock options previously held by SKF employees, which were converted to DMC options in accordance with the Financial Accounting Standards Board (“FASB”) Interpretation No. 44, “Accounting for Certain Transactions Involving Stock Compensation” (“FIN 44”) as part of the Merger, have also been retroactively restated to determine the dilutive effect during prior periods based on the average stock prices during those periods. The computation of current period weighted average shares outstanding includes all outstanding shares for the period after December 20, 2002 and the retroactively restated number of shares received by Heinz shareholders for the period prior to December 20, 2002 and the dilutive effect of stock options outstanding for the period.

Stock Option Plans: The Company accounts for its stock-based compensation plans using the intrinsic value method prescribed by Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees,” and related interpretations, as allowed under FASB Statement No. 123, “Accounting for Stock-Based Compensation.” Accordingly, compensation cost is measured as the excess, if any, of the fair value of Del Monte’s stock at the date of grant over the price the employee must pay to acquire the stock.

Inventories. Prior to December 20, 2002, all inventories were valued using the first-in, first-out (“FIFO”) method. The fruit, vegetable and tomato product inventories, which have been acquired in connection with the Merger, are valued using the last-in, first-out (“LIFO”) method. The Company’s inventories will continue to be valued using both LIFO and FIFO. Each production facility will be designated as either a LIFO or FIFO inventory facility. All inventories have been stated at the lower of cost or market.

Intangibles: The Company adopted the provisions of FASB Statement No. 142, “Goodwill and Other Intangible Assets” (“SFAS 142”) during the first quarter of fiscal 2003. SFAS 142 requires that goodwill and intangible assets with indefinite useful lives no longer be amortized, but instead be tested for impairment at least annually in accordance with the provisions of SFAS 142. SFAS 142 also requires that intangible assets with estimable useful lives be amortized over their respective estimated useful lives, and reviewed for impairment in accordance with FASB Statement No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.”

For intangible assets with indefinite useful lives, estimated fair value is determined using various valuation methods, including the relief from royalty method and the residual income method. In estimating discounted future cash flows, management uses historical financial information in addition to assumptions regarding sales trends and profitability, consistent with the Company’s performance and industry trends. Estimates of fair value may differ if projected cash flows, market interest rates and discount factors change as a result of new events or circumstances.

For intangible assets with estimable useful lives, the Company reviews for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If an evaluation of recoverability was required, the estimated undiscounted future cash flows associated with the asset would be compared to the asset’s carrying amount to determine if a write-down was required. All long-lived assets, for which management has committed to a plan to dispose of, are reported at the lower of carrying amount or fair value.

The SFAS 142 goodwill impairment model involves a two-step process. During the first step, the Company compares the fair value of a reporting unit (one level below operating segments) with the goodwill assigned to its carrying value. The estimated fair value is computed using the present value of expected cash flows, discounted at a risk-adjusted weighted average cost of capital. If the fair value of the reporting unit is determined to be less than its carrying value, goodwill impairment, if any, is computed. During the second step, the Company allocates the fair value of the reporting unit to the reporting unit’s net assets other than goodwill. The excess of the fair value of the

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reporting unit over the amounts assigned to its net assets other than goodwill is considered the implied fair value of the reporting unit’s goodwill. The implied fair value of the reporting unit’s goodwill is then compared to the carrying value of its goodwill. Any shortfall represents the amount of the goodwill impairment. During the fourth quarter of fiscal 2003, the Company will conduct its annual goodwill and intangibles impairment testing, which will be repeated every fourth quarter.

Parent Company’s Investment: Parent company’s investment represents the original investment by Heinz adjusted for accumulated net income or loss, dividends, capital contributions, inter-company accounts, other comprehensive income and current federal and state income taxes payable. On December 20, 2002, in accordance with the Separation Agreement, Heinz received a cash payment, debt securities, and all of the issued and outstanding common shares of SKF in exchange for its investment in the Spun-Off Businesses.

Derivative Financial Instruments: The Company accounts for derivative financial instruments in accordance with FASB Statement No. 133, “Accounting for Derivative Instruments and Hedging Activities,” as amended. The Company designates each derivative contract as one of the following: (1) a hedge of a recognized asset or liability or an unrecognized firm commitment (“Fair Value Hedge”), (2) a hedge of a forecasted transaction or of the variability of cash flows to be received or paid related to a recognized asset or liability (“Cash Flow Hedge”), (3) a hedge of a net investment in a foreign operation (“Net Investment Hedge”) or (4) a hedging instrument whose change in fair value is recognized to act as an economic hedge but does not qualify as one of the above hedges (“Economic Hedge”).

For a Fair Value Hedge, both the effective and ineffective portions of the change in the fair value of the derivative, along with the change in fair value on the hedged item that is attributable to the hedged risk, are reported in earnings and reported in the consolidated statements of income in other expense. If a hedge designation is removed prior to maturity, previous adjustments to the carrying value of the hedged item are recognized in earnings to match the earnings recognition pattern of the hedged item. If the underlying item being hedged is removed, the derivative will subsequently be accounted for as an Economic Hedge.

The effective portion of the change in the fair value of a derivative that is designated as a Cash Flow Hedge is reported in other comprehensive income. When the cash flows associated with the hedged item are realized, the gain or loss included in other comprehensive income is recognized on the same line in the consolidated statements of income as the hedged item. The ineffective portion of a change in fair value of a Cash Flow Hedge is reported in other expense.

Foreign exchange futures, forward contracts, or swaps may be used to hedge net investments in foreign subsidiaries. These derivative contracts are commitments to buy or sell foreign currency at a future date for a contracted rate. The effective portion of the change in the fair value of a derivative used as a Net Investment Hedge of a foreign operation is reported in the foreign currency translation adjustment account in other comprehensive income. The ineffective portion of the change in the fair value of a Net Investment Hedge is reported in other expense. For derivatives designated as Economic Hedges, all changes in fair value are reported in other expense.

The Company formally documents its hedge relationships, including identification of the hedging instruments and the hedged items, as well as its risk management objectives and strategies for undertaking hedge transactions. Derivatives are reported in the consolidated financial statements at fair value in other assets and other non-current liabilities. The Company also formally assesses, both at inception and at least quarterly thereafter, whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in either the fair value or cash flows of the hedged item. If it is determined that a derivative ceases to be a highly effective hedge, the Company will discontinue hedge accounting.

Revenue Recognition: The Company recognizes revenue from sales of products, and related cost of products sold, when persuasive evidence of an arrangement exists, delivery has occurred, the selling price is fixed or determinable and collectibility is reasonably assured. This generally occurs when the customer receives the product, at which time title passes to the customer. Customers generally do not have the right to return product unless damaged or defective. Net sales is comprised of gross sales reduced by consumer promotion costs relating to coupon redemption, customer promotion costs relating to performance allowances and discounts.

Recently Adopted Accounting Standards: In June 2001, the FASB issued Statement No. 141, “Business Combinations” (“SFAS 141”). This standard requires that all business combinations be accounted for using the

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purchase method. The provisions of SFAS 141 apply to all business combinations after June 30, 2001. The Merger was accounted for in accordance with SFAS 141.

The FASB issued SFAS 142 simultaneously with SFAS 141. The Company adopted the provisions of SFAS 142 during the first quarter of fiscal 2003. Upon the adoption of SFAS 142, the Company reassessed the useful lives and residual values of its intangible assets, and concluded that the majority of its trademarks have indefinite lives. The Company ceased amortizing these intangible assets with indefinite useful lives and performed impairment tests on them in accordance with the provisions of SFAS 142. No impairment losses relating to these intangible assets were identified. The Company determined that certain intangible assets have an estimated useful life between 10 and 40 years and is amortizing these assets on a straight-line basis. Amortization expense for the three and nine months ended January 29, 2003 was $1.0 and $2.8, respectively.

In addition, the Company completed the transitional goodwill impairment tests during the second quarter of fiscal 2003. No impairment was identified as a result of completing these transitional impairment tests. The Company also recognized goodwill of $73.9 upon the completion of the Merger, which represents the excess of the purchase price over the fair value of net assets acquired. This goodwill may change as the Company continues to refine the fair value determination.

During the fourth quarter of fiscal 2003, the Company will conduct its annual goodwill and intangibles impairment testing, which will be repeated every fourth quarter.

In August 2001, the FASB issued Statement No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” (“SFAS 144”). While SFAS 144 supersedes FASB Statement No. 121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of”, it retains many of the fundamental provisions of that Statement. The adoption of SFAS 144 at the beginning of fiscal 2003 did not have a material effect on the Company’s consolidated financial statements.

Note 4. Recently Issued Accounting Standards

In June 2001, the FASB issued Statement No. 143, “Accounting for Asset Retirement Obligations” (“SFAS 143”). SFAS 143 addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. SFAS 143 applies to legal obligations associated with the retirement of long-lived assets that result from the acquisition, construction, development and normal use of the asset. SFAS 143 applies to all entities and amends FASB Statement No. 19, “Financial Accounting and Reporting by Oil and Gas Producing Companies”. SFAS 143 requires that the fair value of a liability for an asset retirement obligation be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. SFAS 143 will be effective for the Company’s fiscal year 2004. The Company believes that adoption of SFAS 143 will not have a material effect on its consolidated financial statements.

In April 2002, the FASB issued Statement No. 145, “Rescission of FASB Statement No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections” (“SFAS 145”). SFAS 145 rescinds FASB Statement No. 4, “Reporting Gains and Losses from Extinguishment of Debt” and amends other existing authoritative pronouncements. As a result of SFAS 145, gains and losses from extinguishment of debt should be classified as extraordinary items only if they meet the criteria in Accounting Principles Board Opinion No. 30, “Reporting the Results of Operations – Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions” (“APB 30”). Applying the provisions of APB 30 will distinguish transactions that are part of an entity’s recurring operations from those that are unusual or infrequent or that meet the criteria for classification as an extraordinary item. The write-off of previously capitalized debt issuance costs as a result of debt prepayments would no longer constitute an extraordinary item under the guidance of SFAS 145. The Company will apply SFAS 145 prospectively at the beginning of fiscal 2004.

In June 2002, the FASB issued Statement No. 146, “Accounting for Costs Associated with Exit or Disposal Activities” (“SFAS 146”). SFAS 146 replaces Emerging Issues Task Force (“EITF”) Issue 94-3, “Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)”. SFAS 146 requires companies to recognize costs associated with exit or disposal activities when they are incurred rather than at the date of a commitment to an exit or disposal plan. SFAS 146 will be applied prospectively to exit or disposal activities initiated after December 31, 2002.

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In December 2002, the FASB issued Statement No. 148, “Accounting for Stock-Based Compensation, Transition and Disclosure” (“SFAS 148”). SFAS 148 provides alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. SFAS 148 also requires that disclosures of the pro forma effect of using the fair value method of accounting for stock-based employee compensation be displayed more prominently and in a tabular format. Additionally, SFAS 148 requires disclosure of the pro forma effect in interim financial statements. The transition and annual disclosure requirements of SFAS 148 are effective for the Company’s current fiscal year. The interim disclosure requirements will be effective for the fourth quarter of the Company’s fiscal year 2003. The Company does not expect SFAS 148 to have a material effect on its consolidated financial statements.

In November 2002, the FASB issued Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others” (“FIN 45”). FIN 45 requires that a liability be recorded on the guarantor’s balance sheet upon issuance of a guarantee. In addition, FIN 45 requires disclosures about the guarantees that an entity has issued. The Company will apply the recognition provisions of FIN 45 prospectively to guarantees issued after December 31, 2002. The disclosure provisions of FIN 45 have been adopted in this report. The Company does not expect the prospective recognition provisions of FIN 45 to have a material effect on its consolidated financial statements.

In January 2003, the FASB issued Interpretation No. 46, “Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51” (“FIN 46”). FIN 46 requires certain variable interest entities to be consolidated by the primary beneficiary of the entity if the equity investors in the entity do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. FIN 46 is effective for all new variable interest entities created or acquired after January 31, 2003. For variable interest entities created or acquired prior to February 1, 2003, the provisions of FIN 46 must be applied for the first interim or annual period beginning after June 15, 2003. The Company does not expect FIN 46 to have a material effect on its consolidated financial statements.

Note 5. Inventories

The fruit, vegetable and tomato product inventories were recorded at their fair value on December 20, 2002, for purchase price allocation purposes. The adjustment to fair value added $76.2 to the value of the inventory and reduced purchased goodwill. When the inventories are sold, the cost of products sold will be higher, which has the effect of decreasing operating income. For the three and nine months ended January 29, 2003, the fair value adjustment increased the cost of products sold by $11.0. The fair value adjustment to the fruit, vegetable, and tomato product inventories was estimated based upon the historical gross margins of the fruit, vegetable and tomato products. The fair value of the inventories may be adjusted as the Company continues to refine the fair value determination used in the purchase price allocation.

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Note 6. Intangible Assets

The following table presents the Company’s intangible assets: