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FORM 10-K

(Mark One)

For the fiscal year ended June 30, 2002

OR

For the transition period from ____________ to ____________ .

Commission file number 001-14335

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)

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act: NONE

     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 [   ]

     Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  [X]

     The aggregate market value of the voting stock held by non-affiliates of the Registrant as of August 30, 2002, based upon the closing price of the Common Stock as reported by the New York Stock Exchange on such date, was approximately $292,205,980.

     The number of shares outstanding of Common Stock, par value $0.01, as of close of business on August 30, 2002 was 52,307,131.

DOCUMENTS INCORPORATED BY REFERENCE

     The Registrant’s definitive proxy statement to be included as part of the Registrant’s Registration Statement on Form S-4, No. 333-98827, for the 2002 Annual Meeting of Stockholders is incorporated by reference in Part III of this Form 10-K to the extent stated herein.

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DEL MONTE FOODS COMPANY
For the Fiscal Year Ended June 30, 2002

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     As used throughout this Annual Report, unless the context otherwise requires, “DMFC” means Del Monte Foods Company, and “Del Monte” or “the Company” means DMFC and its consolidated subsidiaries. “DMC” means Del Monte Corporation, a wholly-owned subsidiary of Del Monte. Del Monte’s fiscal year ends on June 30, and its fiscal quarters typically end on the last Sunday of September, December and March. As used throughout this Form 10-K, “fiscal 2002” means Del Monte’s fiscal year ended June 30, 2002; “fiscal 2001” means Del Monte’s fiscal year ended June 30, 2001 and “fiscal 2000” means Del Monte’s fiscal year ended June 30, 2000.

     Unless otherwise indicated, all statements presented in this Form 10-K regarding Del Monte brands are based on data obtained from ACNielsen. References to U.S. market share are based on equivalent case volume sold through retail grocery stores (excluding Wal-Mart Supercenters, other supercenters and club stores) with at least $2.0 million in sales. References to processed vegetables, fruit and tomato products do not include frozen products. Market share data for processed vegetables and solid tomato products include only those categories in which Del Monte competes. The data for processed fruit includes major fruit and single-serve categories in which Del Monte competes and excludes specialty and pineapple categories. References to fiscal 2002 market share refer to the 52-week period ended June 29, 2002. Fiscal 2002 market share data excludes Wal-Mart Stores, Inc. and includes share data for Del Monte’s S&W brand. Market share references within “Management’s Discussion and Analysis of Financial Condition and Results of Operations” comparing full fiscal year periods prior to fiscal 2002, exclude market share data for Wal-Mart Stores, Inc. and include market share data for S&W for the period following the March 2001 acquisition of the S&W brand by Del Monte.

     ACNielsen is an independent market research firm and makes its data available to the public at prescribed rates. We have not independently verified information obtained from ACNielsen.

     Results for fiscal years 2001, 2000, 1999 and 1998 have been reclassified to conform with Del Monte’s adoption of Emerging Issue Task Force (“EITF”) Issue No. 00-14, “Accounting for Certain Sales Incentives” (“EITF 00-14”) and EITF Issue No. 00-25, “Vendor Income Statement Characterization of Consideration to a Purchaser of the Vendor’s Products or Services” (“EITF 00-25”). These pronouncements were subsequently codified by EITF Issue No. 01-9, “Accounting for Consideration Given by a Vendor to Customer (Including a Reseller of the Vendor’s Products)” (“EITF 01-9”). Del Monte adopted EITF 00-14 and EITF 00-25 on July 1, 2001. For more information about the EITF reclassification, see Note 1 to Del Monte’s Consolidated Financial Statements for the year ended June 30, 2002.

     Unless otherwise indicated, the information presented in this Form 10-K does not reflect the proposed merger of DMC with SKF Foods Inc., a wholly-owned subsidiary of the H.J. Heinz Company, described below in “Recent Developments”.

PART I

Item 1. Business

Overview

     Del Monte manufactures and distributes premium quality, nutritious food products and is one of the largest producers and distributors of processed vegetables, fruit and tomato products in the United States. Our products are sold under the Del Monte, Contadina, S&W and other brand names. The Del Monte brand was introduced in 1892, and we believe it is one of the best known brands for processed food products in the United States. We estimate that our branded products are purchased by approximately 80% of U.S. households. Through strategic acquisitions, we have expanded our product offerings, strengthened our penetration of grocery chains, club stores, supercenters and mass merchandisers, improved market share, increased international sales opportunities and leveraged our low-cost manufacturing capabilities.

     During fiscal 2002, we generated approximately $1.3 billion in net sales and we were the brand leader in our three core categories:

	•		Processed vegetables — 22.8% U.S. market share, larger than the market shares of our four largest branded competitors combined;
	•		Processed fruit — 43.2% U.S. market share, larger than the market shares of all other branded competitors combined; and
	•		Solid tomato products — 21.3% U.S. market share, the largest branded marketer in the solid tomato category.

     As the brand leader in our core categories, we have a full-line, multi-category presence that we believe provides us with a substantial competitive advantage in selling to the retail grocery industry. We sell our products primarily through grocery chains, club

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stores, supercenters and mass merchandisers. Sales through these channels accounted for approximately 78.6% of our fiscal 2002 sales. We believe that club stores, supercenters and mass merchandisers, such as Wal-Mart, Sam’s and Costco, are the fastest growing channels of retail distribution. Our long-term relationships with our customers allow them to rely on our continuity of supply and value-added services, such as our category and inventory management programs, which in turn enable these customers to more effectively manage their inventory and business.

     DMC was incorporated under the laws of the State of New York in 1978. DMFC, then known as DMPF Holdings Corp., was incorporated under the laws of the State of Maryland in 1989, renamed DMFC in December 1991, and was reincorporated under the laws of the State of Delaware in 1998. Each of DMC and DMFC maintains its principal executive office at One Market @ The Landmark, San Francisco, California 94105. Del Monte’s telephone number is (415) 247-3000 and its website is www.delmonte.com.

Recent Developments

     On June 12, 2002, Del Monte and the H. J. Heinz Company (“Heinz”) entered into an Agreement and Plan of Merger (which is referred to as the “Merger Agreement”) under which Del Monte will acquire Heinz’s:

	•		pet food and pet snacks business in the United States and Canada and certain of Heinz’s worldwide specialty pet food businesses;
	•		U.S. ambient tuna and other ambient seafood products businesses;
	•		U.S. retail private label soup and retail private label gravy businesses;
	•		U.S. “College Inn” broth business; and
	•		U.S. infant feeding business, including certain pureed foods.

     We refer to these businesses collectively as the “Heinz Businesses”.

     Heinz will contribute the Heinz Businesses to SKF Foods Inc., a newly created, wholly-owned subsidiary of Heinz, which is referred to as “SKF Foods”, in exchange for all of the issued and outstanding shares of SKF Foods common stock, $800.0 million in cash (subject to certain adjustments) and debt securities of SKF Foods in the principal amount of $300.0 million. In addition, SKF Foods will assume all of the liabilities relating to the Heinz Businesses, subject to certain exceptions. Heinz will then spin-off SKF Foods to its shareholders. Immediately after the spin-off, DMC will merge with and into SKF Foods, which will become a wholly-owned subsidiary of DMFC. After the merger, SKF Foods will change its name to “Del Monte Corporation”.

     Immediately after the merger, Heinz shareholders and current Del Monte stockholders will own 74.5% and 25.5%, respectively, of the Del Monte common stock on a fully diluted basis determined in accordance with the exchange ratio set forth in the Merger Agreement. Heinz shareholders will receive a fraction of a share of Del Monte common stock equal to the exchange ratio for each share of SKF Foods common stock issued to them in the spin-off. The transaction is expected to be tax-free to the stockholders of both companies.

     The merger will be accounted for under the purchase method of accounting and SKF Foods will be considered the acquirer of Del Monte Corporation for accounting purposes. Accordingly, the historical combined financial statements of the Heinz Businesses will become the historical financial statements of Del Monte after the merger. After the merger is completed, Del Monte’s fiscal year will end on the Sunday closest to April 30.

     Subject to various terms and conditions, we currently anticipate that financing in an aggregate amount of up to $1.7 billion for the spin-off and the merger will be in the form of:

	•		a new bank facility consisting of a tranche A term loan in the amount of $250.0 million, a tranche B term loan in the amount of $800.0 million and a $350.0 million revolving credit facility; and
	•		debt securities with an aggregate principal amount currently expected to be $300.0 million.

     See “Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources” for a further description of the proposed financing for the spin-off and merger.

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     Richard G. Wolford, Del Monte’s current Chairman, President and Chief Executive Officer, will continue in these capacities after the completion of the merger. At the effective time of the merger, the board of directors of Del Monte will have nine members, including three directors designated by Del Monte and approved by Heinz (one of which shall be the current Chief Executive Officer of Del Monte) and six directors designated by Heinz and approved by Del Monte. Del Monte has indicated that it intends to nominate William Price, who is currently serving as a director of Del Monte, as one of its three designees to Del Monte’s board following the merger and Heinz has indicated that it intends to nominate David Williams, who is currently serving as a director of Heinz, as one of its six designees to Del Monte’s board following the merger. None of Heinz’s director designees will be directors or officers of Heinz at the time they become directors of Del Monte.

     The completion of the merger requires approval by the Del Monte stockholders of the issuance of Del Monte shares in the merger. TPG Partners, L.P. and TPG Parallel I, L.P. (which is referred to collectively as “Texas Pacific Group”), together currently own approximately 46.5% of the outstanding Del Monte common stock and have agreed with Heinz to vote to approve the issuance of shares in connection with the merger. Completion of the merger is also subject to a number of other conditions, including the receipt by Heinz of a ruling from the Internal Revenue Service that the spin-off qualifies as a tax-free transaction under the Internal Revenue Code of 1986 (which is referred to as the “Code”) and the receipt of tax opinions stating that the merger will constitute a tax-free reorganization under the Code. Subject to the approval of the Del Monte stockholders and the satisfaction or waiver (where permissible) of the other conditions to the merger, we currently anticipate that the merger will be completed during the fourth calendar quarter of 2002 or the first calendar quarter of 2003.

     On August 28, 2002, Del Monte filed a registration statement on Form S-4 containing a proxy statement-prospectus and relevant documents concerning the merger with the Securities and Exchange Commission (“SEC”). Del Monte will mail this proxy statement/prospectus to its stockholders prior to its 2002 annual meeting of stockholders. We urge you to read these documents because they contain important information about the proposed merger. You can also obtain the proxy statement-prospectus and the other documents filed with the SEC free of charge at the SEC website, www.sec.gov. In addition, you may obtain the proxy statement-prospectus and the other documents filed by the Company with the SEC by requesting them in writing from Del Monte Foods Company, P.O. Box 193575, San Francisco, CA 94119-3575, Attention: Investor Relations, or by telephone at (415) 247-3382.

     In addition, Del Monte adopted a stockholders rights plan on June 12, 2002. The rights were distributed to stockholders as a dividend at the rate of one right for each share of common stock of Del Monte held by stockholders of record as of the close of business on June 12, 2002. The rights generally will be exercisable only if a person or group acquires beneficial ownership of 15% or more of Del Monte’s common stock. The transactions contemplated by the Merger Agreement have been excluded from triggering the rights plan.

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The Industry

     The United States processed food industry is generally characterized by relatively stable growth based on modest price and population increases. We believe that fundamentals for the overall packaged food industry are favorable since these products are generally considered to be staple items purchased by consumers. While consumption growth is predicted to be modest in the United States, we believe that certain product segments that address changing consumer needs, such as the healthy snacking and packaged produce market segments, offer opportunities for faster growth.

     Food producers have been impacted by two key trends affecting their retail customers: consolidation and increased competitive pressures. Retailers are rationalizing costs in an effort to improve profitability. In addition, more traditional grocers have experienced increasing competition from rapidly growing club stores, supercenters and mass merchandisers, which offer every-day low prices. This competitive pressure has further focused retailers on increasing supply-chain efficiencies and decreasing working capital requirements. In addition, club stores, supercenters and mass merchandisers generally offer a private label store brand in addition to offering the number one and number two national or regional brands in different product categories. Sustaining strong relationships with retailers has become a critical success factor for food companies and is driving initiatives such as category and inventory management. Food companies that offer such value-added services have been able to increase shelf space, maximize distribution efficiencies, further strengthen their relationships with retailers and maintain their leadership positions.

     Although consumer consumption for certain processed food categories has historically been relatively stable, over the last few years retailers generally sold more products from their inventory and decreased purchases from food producers in an effort to reduce their inventory levels. As a result, many food producers experienced reduced shipment volumes as trade customers reduced their inventory levels, which adversely affected sales, operating margins, cash flow and working capital requirements of the food producers.

     Branded food manufacturers typically establish pricing and lead innovation in the processed food categories in which we compete. However, based on statistical information compiled by ACNielsen, private label products collectively have the largest market shares in the vegetable and solid tomato categories. The aggregate market share of the private label segment has remained relatively stable over the past several years in each of our principal product categories. We believe that the private label segment has historically been fragmented among regional vegetable and tomato producers seeking to compete principally based on price. Private label products as a group represented 45.1%, 40.2% and 31.5% of processed vegetable; major fruit, which includes cling peaches, pears and fruit cocktail/mixed fruit; and solid tomato product sales, respectively, in fiscal 2002.

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Company Products

     We have a full-line, multi-category presence with products in four processed food categories:

	•		Vegetables — core and specialty vegetables;
	•		Fruit — major, specialty, single-serve, fruit-in-glass and pineapple;
	•		Tomato products — solid tomato products and paste-based products; and
	•		Specialty products — beans and pickles.

     The following table sets forth our total net sales, expressed in dollar amounts and as percentages of our total net sales, for the periods indicated:

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     We compete on the basis of providing quality products to consumers as well as value-added services, such as category and inventory management services, to grocery retailers.

     Vegetables

     We are the number one branded producer of processed vegetables in the United States. Our 22.8% U.S. market share in fiscal 2002 was larger than the market shares of our four largest branded competitors combined.

     We view the processed retail vegetable market as consisting of two distinct categories:

	•		Core vegetables; and
	•		Specialty.

     We believe that the domestic processed vegetable industry is a mature category characterized by high household penetration. We sell our core and specialty vegetable products under the Del Monte and S&W brands, as well as private label to key customers.

     The core vegetable category includes cut green beans, French-style green beans, whole kernel and cream-style corn, peas, mixed vegetables, spinach, carrots and potatoes. We offer a no-salt product line across most of our core varieties. Del Monte’s core vegetable products are distributed in substantially all retail grocery outlets, while S&W products are sold primarily in the western United States. In fiscal 2002, we held U.S. market shares of 25.2% in green beans, 22.6% in corn and 19.7% in peas.

     The specialty category includes asparagus, lima beans, wax beans, zucchini and seasoned corn products. We are one of the branded market share leaders in the specialty category. Many of our specialty vegetable products are enhanced with flavors and seasonings, such as our zucchini in tomato sauce and Fiesta corn, which is made with red and green peppers. By creating value-added products, we are able to price our specialty vegetables at a premium compared to our other vegetable products, which enables us to realize higher margins.

     Our vegetable products are sold in 14 to 15 ounce sizes, as well as in smaller can sizes known as buffet products, and larger sizes, known as family size. The buffet sizes have pull-top lids that can be opened without a can opener. We also produce six, eight and twelve can multi-packs, primarily sold to our club store, supercenters and mass merchandiser customers.

     Competitors in processed vegetables include branded and private label vegetable processors. Private label products taken as a whole command the largest share of the processed vegetable market, but their market share has remained relatively stable over the past decade. Our primary branded competitors in the market include Green Giant nationally, and regional brands such as Freshlike, Stokely and Libby’s. We believe that one of our competitive advantages in the processed vegetable category derives from our proprietary seed varieties. For example, we believe that our “Del Monte Blue Lake Green Bean” variety delivers higher yields and recovery than green bean varieties used by our competitors. In fiscal 2002, our vegetable products enjoyed an average premium of $0.22 (44.0%) per item over private label products.

     We purchase raw product from approximately 700 vegetable growers located primarily in Wisconsin, Illinois, Minnesota, Washington and Texas.

     Fruit

     We are the largest branded marketer of fruit processed in the United States. We currently compete in five distinct industry categories:

	•		Major fruit;
	•		Single-serve fruit products;
	•		Specialty fruit;
	•		Fruit-in-glass; and
	•		Pineapple.

     We are the branded market share leader in the processed fruit category with 43.2% market share in fiscal 2002. With single-serve plastic cups and multi-serve glass packaging, we have expanded our fruit products beyond our traditional canned product lines. We

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believe the domestic processed fruit industry is a mature category characterized by high household penetration. We sell our fruit products under the Del Monte, S&W and SunFresh brands.

     Major fruit includes cling peaches, pears and fruit cocktail/mixed fruit. We are the branded market share leader in the major fruit category with 41.3% market share in fiscal 2002. Our major fruit products are offered in can sizes ranging from 15 to 30 ounces.

     Single-serve fruit has been a substantial sales growth area for us. In single-serve diced fruit products, such as peaches, pears and mixed fruit, we have a 51.3% U.S. market share. We sell our single-serve products under the Fruit Cup, Fruit To-Go and Fruit Naturals brands.

     We are the leading brand in specialty fruit products, which include apricots, freestone and spiced peaches, mandarin oranges, cherries, grapefruit and other citrus fruit, and tropical mixed fruit. Specialty fruits are higher margin, lower volume “niche” items, which benefit from Del Monte and S&W brand recognition. Through our SunFresh brand, we have extended our specialty fruit product line into processed grapefruit and other citrus and tropical fruits.

     We are the leading marketer of fruit-in-glass products under our Orchard Select and SunFresh brands. Orchard Select is a premium fruit product packaged in glass primarily sold in the produce section of the grocery store. Orchard Select products include peaches, pears, mixed fruit and apricots. The SunFresh brand is targeted towards the breakfast food market. SunFresh products include grapefruit and other citrus, mango, papaya and mixed tropical fruit.

     We are the second leading brand of processed pineapple in the United States with a 11.9% market share in fiscal 2002. Our retail pineapple line consists of sliced, chunk, tidbits, crushed and juice products in a variety of container sizes. We also sell a significant amount of our pineapple products through the foodservice and food ingredients channels.

     The fruit industry’s highest sales volume is in the 15 to 16 ounce can size, in which we commanded an average $0.19 (19.8%) per item premium over private label products in fiscal 2002. We face competition from private label and branded competitors including Signature Fruit Company, Pacific Coast Producers (a grower cooperative), and Dole.

     We purchase raw product from approximately 500 fruit growers located in California, Oregon and Washington. We source the majority of our pineapple requirements from our former subsidiary, Del Monte Philippines, under a long-term supply agreement. The agreement provides pricing based on fixed margins.

     Tomato Products

     We are the largest branded marketer in the solid tomato category with a U.S. market share of 21.3% in fiscal 2002. We sell our tomato products under the Del Monte, Contadina and S&W brand names.

     The processed tomato category can be separated into two distinct product categories, which differ widely in terms of profitability, price sensitivity and growth potential:

	•		Solid tomatoes; and
	•		Paste-based tomato products.

     Processed solid tomato products include stewed, crushed, diced, chunky, wedges and puree products. It is the fastest growing category of our tomato business and generally has higher margins than paste-based tomato products. During fiscal 2002, our solid tomato products enjoyed an average premium of $0.34 (52.2%) per item over private label products.

     We believe that the diced tomato subcategory (which also includes chunky tomatoes and tomato wedges) has been growing at a substantially greater rate than the solid tomato category as a whole, as consumer preferences have trended toward more convenient cut and seasoned tomato products for meal preparation. The solid tomato category now includes value-added items, such as flavored and petite diced tomato products. We believe that there is opportunity to increase sales of solid tomato products through line extensions that capitalize on our manufacturing and marketing expertise.

     The paste-based tomato category includes ketchup, tomato sauce, tomato paste and spaghetti and pizza sauces. We market certain products under the Del Monte brand name using a “niche” marketing strategy targeted toward value-conscious consumers seeking a branded, high quality product. We also market certain products under the Contadina brand name, which is an established national brand

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for Italian-style tomato products. The Contadina brand also targets the food service tomato market, including small restaurants that use Contadina brand products such as finished spaghetti and pasta sauces.

     Del Monte faces competition in the tomato product category from brand name competitors including ConAgra’s Hunt’s and Rotel in the solid tomato and paste categories; Heinz and ConAgra’s Hunt’s in the ketchup subcategory; Campbell Soup’s Prego, Unilever’s Ragu, and Hunt’s in the spaghetti sauce subcategory. In addition, Del Monte faces competition from private label products in all major categories.

     We purchase raw product from approximately 20 tomato growers located in California, where approximately 90% of domestic tomatoes for processing are grown.

     Specialty Products

     Through the S&W brand, we market a line of specialty products including flavored and unflavored variety beans (which include kidney, black, garbanzo and chili beans) and baked beans (a significant part of the larger beans with meat category). The S&W bean business is primarily a western U.S. business, with estimated shares in these markets of 23.0% in variety beans and 1.6% in beans with meat in fiscal 2002. In addition, we sell Del Monte branded pickles in the western United States.

Sales, Marketing and Value-Added Services

     Sales and Marketing

     We sell our retail grocery products at the market level through independent retail brokers managed by our sales managers, and through an in-house, or direct, sales force for most club stores, supercenters and mass merchandisers. Retail brokers are independent, commissioned sales organizations which represent multiple manufacturers. During fiscal 2002, sales to these grocery customers accounted for 55.3% of our total net sales. In June 2001, we appointed Advantage Sales and Marketing (“Advantage”) to act as a single national retail grocery broker representing our products. We pay commissions to Advantage based on a percentage of sales. Advantage represents us to a broad range of grocery retailers and selected club stores. Advantage represented us on approximately 56.0% of our total net sales in fiscal 2002.

     Our club store, supercenter and mass merchandiser sales force calls on these customers, which include Wal-Mart, Sam’s, BJ’s and Target, directly (non-brokered) and is responsible for the development and implementation of sales programs for non-grocery channels of distribution. During fiscal 2002, this channel accounted for 23.3% of our total net sales. We sell to other channels, which include foodservice, food ingredients, private label and military through both our direct sales force and brokers. During fiscal 2002, these sales accounted for 21.4% of our total net sales.

     We believe that a focused and consistent marketing strategy is critical to the growth of our business. Our marketing function includes new product development, pricing strategy, consumer promotion, advertising, publicity and package design. We use consumer advertising, together with trade spending, to support awareness of new items and initial trial by consumers and to build recognition of the Del Monte, Contadina, S&W and SunFresh brand names.

     Value-Added Services

     Our category management software is designed to assist customers in managing an entire product category, including other branded and private label products in the same category. Customers using our category management services are able to more rapidly identify sales levels for various product categories so as to achieve an optimal product mix. We believe that utilization of these category management tools has contributed to increased shelf presence for our products, relative to those of our competitors.

     We also offer vendor managed inventory services which enable our customers to optimize their inventory requirements while maintaining their ability to service consumers. We manage the inventory of our products for customers who account for approximately 40% of our retail sales, or approximately 34% of our total sales. The services we provide include proprietary inventory management software that analyzes market trends to determine optimal inventory levels, and the human resources necessary to implement the software to maintain optimal inventory and service levels. We believe providing these value-added services will continue to enhance our relationships with our retail customers and will continue to help drive our long-term sales growth and competitiveness.

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Foreign Sales and Operations

     Export Markets

     The following table sets forth U.S. net sales to export markets by geographic region:

     We sell our products in Asia to U.S. exporters for distribution in Asia, to Asian based distributors, licensees and Del Monte Philippines. Net sales to South America relate to sales to U.S. exporters for distribution in South America. Net sales to Mexico, Central America, the Caribbean and other countries are made to licensees and U.S. exporters.

     Foreign Operations

     In South America, we operate a food processing plant and have subsidiaries in Venezuela, Columbia, Ecuador and Peru. We purchase raw product, primarily vegetables, from approximately 12 growers in Venezuela. Any remaining raw product requirements are obtained through the open market. Our products in Venezuela are sold through seven local distributors. In Columbia, Ecuador and Peru, our products are sold through one national distributor in each country.

Customers

     Our products are carried by most food retailers in the U.S., and we have developed strong, long-term relationships with all major participants in the retail grocery trade. Our 15 largest customers during fiscal 2002 represented approximately 61% of our sales, with sales to one customer, Wal-Mart Stores, Inc., representing approximately 18% of sales. These top 15 customers have all been customers for at least ten years and, in some cases, for 20 years or more. In recent years, there has been significant consolidation in the grocery industry through acquisitions. We have sought to establish and strengthen our alliances with key customers by offering them sophisticated proprietary software applications to assist in managing their inventories. These customers increasingly rely on sophisticated manufacturers, such as Del Monte, as they become more diverse through consolidations.

Supply

     We own virtually no agricultural land. Each year, we buy over one million tons of fresh vegetables, fruit and tomatoes under approximately 2,500 contracts with individual growers and cooperatives located primarily in the United States. No supplier accounts for more than 5% of our total raw product requirements, and we do not consider our relationship with any particular raw product supplier to be material to our operations. Like other vegetable, fruit and tomato product processors, we are subject to market-wide raw product price fluctuations resulting from seasonal or other factors, however, historically these fluctuations have been negligible. We have maintained long-term relationships with growers to help ensure a consistent supply of raw product.

     We purchase raw product from approximately 700 vegetable growers located primarily in Wisconsin, Illinois, Minnesota, Washington and Texas. We provide the growers with planting schedules, seed, insecticide management, harvesting and hauling capabilities and actively participate in agricultural management and quality control with respect to all sources of supply. Our vegetable supply contracts are generally for a one-year term and require delivery from contracted acreage with specified quality. Prices are negotiated annually. In addition, our green beans are grown primarily on irrigated fields, which facilitates production of high quality, uniformly-sized beans.

     Our fruit and tomato growers are located primarily in California. Pear and cherry growers are also located in Oregon and Washington. Our fruit supply contracts range from one to ten years. Prices are generally negotiated with grower associations and are reset each year.

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Contracts to purchase yellow cling peaches generally require us to purchase all of the fruit produced by a particular orchard or block of trees. Contracts for other fruits require delivery of specified quantities each year. We actively participate in agricultural management, agricultural practices, quality control and ensure compliance with all pesticide/herbicide regulations.

     In conjunction with the acquisition of the rights to the SunFresh brand citrus and tropical fruits line of the UniMark Group, Inc. (“UniMark”) in fiscal 2001, we executed a five-year supply agreement under which a UniMark affiliate produces certain chilled, jarred and canned fruit products at its facility in Mexico. We purchase products under this supply agreement at market prices.

     In connection with the March 29, 1996 sale of DMC’s 50.1% interest in Del Monte Philippines, a joint venture operating primarily in the Philippines, we signed an eight-year supply agreement under which we source the majority of our pineapple requirements from Del Monte Philippines.

Production and Distribution

     Production

     We have a seasonal production cycle and produce the majority of our products between the months of June and October. Most of our seasonal plants operate at close to full capacity during the packing season. As of June 30, 2002, we operated twelve production facilities in the United States. See “Item 2 — Properties” for a listing of production facilities.

     Three of our production facilities and one distribution facility are located in California. As a result of California’s energy shortages, we proactively focused on securing sufficient electric and natural gas supplies for our production needs and implemented energy reduction projects to reduce our energy usage and costs. Although California’s power supplies remain unpredictable, all of our California production facilities have had the necessary energy to operate during the 2002 pack season. We also developed operating procedures to mitigate the risk of unexpected service interruptions during some of our pack operations. The Hanford plant is connected to a high-voltage transmission line that is an integral component of the service grid. We adopted a plan to voluntarily reduce power usage at Hanford by 5% to 20% to lessen the possibility of a total service interruption during peak operating periods. The Modesto plant is serviced by the Modesto Irrigation District (“MID”), which generates electricity locally and has long-term supply contracts for its remaining requirements. We have an electric supply contract effective through December 31, 2002. Upon the expiration of the contract, we expect to either enter into a new contract with the MID, or to default to the MID tariff rates.

     In the third quarter of fiscal 1998, we committed to a plan to consolidate processing operations in order to enhance the efficiency of our processing operations and to better meet competitive challenges. Implementation of the plan occurred in a specific sequence over a three-year period. In fiscal 1999, the tomato processing formerly performed at the Modesto facility was moved to the Hanford facility. During fiscal 1999, the Modesto tomato facility underwent reconfiguration to accommodate fruit processing which previously took place at the San Jose and Stockton facilities. We closed the Arlington vegetable processing facility in August 1998, the San Jose facility in December 1999 and the Stockton facility in September 2000. In January 2001, the Woodland bulk tomato paste processing plant was closed and the Hanford facility became the sole internal source of bulk tomato paste, a component of several of our tomato products.

     Co-packers are used for pineapple, tropical fruit salad, citrus fruits, mandarin oranges, pickles and certain other products, including several products sold under the S&W brand. From time to time, we also use co-packers to supplement supplies of certain processed vegetables, fruit, tomato and specialty products.

     Prior to December 1993, we produced almost all of the cans we used to package our products in the United States at our nine can manufacturing facilities located throughout the United States. In December 1993, we sold substantially all the assets (and certain related liabilities) of our can manufacturing business to the Silgan Container Corporation (“Silgan”). The transaction included the sale or lease of our nine can manufacturing facilities. In connection with this agreement, Silgan and Del Monte entered into a ten-year supply agreement, with optional successive five-year extensions by either party. The base term of the supply agreement has since been extended to December 21, 2006. Under the agreement and subject to certain exceptions, we must purchase all of our requirements for metal food and beverage containers in the United States from Silgan. However, we are entitled to consider competitive bids for up to 50% of our requirements. Silgan has the right to match any competitive offer. In addition, if Silgan is unable to supply all of such requirements for any reason, we are entitled to purchase the excess from another supplier. Price levels were originally set based on our costs of self-manufactured containers. Price changes under the contract reflect changes in Silgan’s costs or as otherwise negotiated. The agreement may be terminated by either party, without penalty, on notice given 12 months prior to the end of the term of the agreement. Our current total annual can usage is approximately two billion cans.

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     Distribution

     We distribute finished goods to approximately 1,900 customer destinations. See “Item 2 — Properties” for a listing of distribution centers. Customers can order products to be delivered via third party trucking, rail or on a customer pickup basis. Our distribution centers provide, among other services, casing, labeling, special packaging and cold storage. Other services we provide to customers include One Purchase Order/One Shipment, in which our most popular products are listed on a consolidated invoicing service; and the UCS Electronic Data Interchange, a paperless system of purchase orders and invoices.

Competition

     We face substantial competition throughout our product lines from numerous well-established businesses operating nationally or regionally with single or multiple branded product lines, as well as with private label manufacturers. In general, we compete on the basis of quality, breadth of product line, brand awareness and price. See “Business — The Industry” and “Business — Company Products.”

Information Services

     On November 1, 1992, we entered into a ten-year agreement with Electronic Data Systems Corporation (“EDS”) to provide services and administration in support of our information services functions for all domestic operations. The agreement expires at the end of October 2002.

     On June 30, 2002, we entered into a ten-year agreement with EDS to provide similar services beginning November 2002. Monthly payments will be based on scheduled costs for services, a portion of which will be subject to an inflation adjustment. See Note 12 to the consolidated financial statements. Total payments to EDS were $19.6 million, $17.8 million, and $17.0 million for fiscal years 2002, 2001 and 2000, respectively.

     In June 2000, we began implementing a capability improvement program to upgrade business processes and information systems. The program is being implemented in phases and is scheduled to be substantially completed by the end of fiscal year 2004. We have contracted with Accenture to manage the implementation of this program.

Research and Development

     Del Monte’s research and development organization provides product, packaging and process development, and analytical and microbiological services, as well as agricultural research and seed production. In fiscal 2002, 2001 and 2000, research and development expenditures were $7.5 million, $7.0 million and $6.6 million, respectively. These expenditures were net of revenue for services to third parties in fiscal 2002, 2001 and 2000 of $0.5 million, $0.5 million and $0.6 million, respectively. We maintain a research and development facility in Walnut Creek, California, where we develop product line extensions and conduct research in a number of areas related to our business including seed production, packaging, pest management, food science and plant breeding.

Employees

     As of June 30, 2002, we had approximately 2,800 full-time employees. In addition, approximately 9,800 individuals are hired on a temporary basis during the pack season. We consider our relations with our employees to be good.

     We have eight collective bargaining agreements with nine union locals covering approximately 7,800 of our hourly full time and seasonal employees. Two collective bargaining agreements expire in calendar 2003, and two expire in calendar 2004. For more than 20 years, Del Monte has not experienced any work stoppages or strikes.

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Intellectual Property

     We own a number of registered and unregistered trademarks for use in connection with various food products, including the following:

     These trademarks are important to us because brand name recognition and the product quality associated with our brands are key factors in the success of our products. The current registrations of these trademarks in the United States and foreign countries are effective for varying periods of time, and may be renewed periodically, provided that we, as the registered owner, or our licensees, where applicable, comply with all applicable renewal requirements including, where necessary, the continued use of the trademarks in connection with similar goods. We are not aware of any material challenge to our ownership of our major trademarks.

     We own seven issued U.S. patents covering food preservation methods, extracts and colors, and a method for sealing cans. The patents expire between 2006 and 2014 and cannot be renewed. Patents are generally not material to our business.

     We have developed a number of proprietary vegetable seed varieties, which we protect by restricting access and/or by the use of non-disclosure agreements. There is no guarantee that these means will be sufficient to protect the secrecy of our seed varieties. In addition, other companies may independently develop similar seed varieties. We have obtained U.S. plant variety protection certificates under the Plant Variety Protection Act on some of our proprietary seed varieties. Under a protection certificate, the breeder has the right, among other rights, to exclude others from offering or selling the variety or reproducing it in the United States. The protection afforded by a protection certificate generally runs for 20 years from the date of its filing and is not renewable.

     In March 2001, we acquired the worldwide rights to the S&W brand name from Tri-Valley Growers, an agricultural cooperative.

     In September 2000, we acquired the rights to the SunFresh brand of citrus and tropical fruit from UniMark.

     In December 1997, we acquired the rights to the Contadina brand from Nestle USA, Inc. for processed tomato products. Nestle retained the rights to use the Contadina brand name on refrigerated pastas and sauces through December 2002, at which time those rights will revert to Del Monte.

     We have granted various perpetual, exclusive, royalty-free licenses for use of the Del Monte name and trademark, along with certain other trademarks, patents, copyrights and trade secrets, generally outside of the United States to acquiring companies or their affiliates. In particular, Kraft Foods Inc. holds the rights to use the Del Monte trademark in Canada; Kikkoman Corporation holds the rights to use Del Monte trademarks in Asia and the South Pacific (excluding the Philippines); Cirio Del Monte Foods International and its affiliates hold the rights in Europe, Africa, the Middle East and the Indian Subcontinent. ConAgra Foods Inc., through the acquisition of International Home Foods, holds the right to use the Del Monte trademarks with respect to processed food and beverage products in Mexico. Del Monte Pan American of Panama holds similar rights in Central America and the Caribbean. Del Monte Pacific Resources Limited controls the rights in the Philippines to the Del Monte brand name. With the South America acquisition, we reacquired the rights to the Del Monte brand in South America. Fresh Del Monte Produce Inc. holds the rights to use the Del Monte name and trademark with respect to fresh fruit, vegetables and produce throughout the world. With respect to dried fruit, nuts and dried fruit and nut mixes, Premier Valley Foods holds the rights to use Del Monte trademarks in the United States, Mexico, Central America and the Caribbean.

     We retain the right to review the quality of the licensee’s products under each of our license agreements. We generally may inspect the licensees’ facilities for quality and the licensees must periodically submit samples to us for inspection. Licensees may grant sublicenses but all sublicensees are bound by these quality control standards and other terms of the license.

     We have also granted various security and tangible interests in our trademarks and related trade names, copyrights, patents, trade secrets and other intellectual property to our creditors, in connection with certain bank financing, and to our licensees, to secure certain obligations of Del Monte under the license agreements.

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Governmental Regulation; Environmental Compliance

     As a manufacturer and marketer of food products, our operations are subject to extensive regulation by various federal government agencies, including the Food and Drug Administration, the United States Department of Agriculture and the Federal Trade Commission (“FTC”), as well as state and local agencies, with respect to production processes, product attributes, packaging, labeling, storage and distribution. Under various statutes and regulations, these agencies prescribe requirements and establish standards for safety, purity and labeling. In addition, advertising of our products is subject to regulation by the FTC, and our operations are subject to certain health and safety regulations, including those issued under the Occupational Safety and Health Act. Our manufacturing facilities and products are subject to periodic inspection by federal, state and local authorities. We seek to comply at all times with all such laws and regulations and to obtain any necessary permits and licenses, and we are not aware of any instances of material non-compliance. We believe our facilities and practices are sufficient to maintain compliance with applicable governmental laws, regulations, permits and licenses. Nevertheless, there is no guarantee that we will be able to comply with any future laws and regulations or requirements for necessary permits and licenses. Our failure to comply with applicable laws and regulations or obtain any necessary permits and licenses could subject us to civil remedies including fines, injunctions, recalls or seizures as well as potential criminal sanctions.

     As a result of our agricultural, food processing and canning activities, we are subject to numerous environmental laws and regulations. These laws and regulations govern the treatment, handling, storage and disposal of materials and waste and the remediation of contaminated properties. Violations or non-compliance with these laws and regulations could result in the imposition of fines or civil liability against us by governmental entities or private parties. We seek to comply at all times with all of these laws and regulations and are not aware of any instances of material non-compliance. However, we cannot predict the extent to which the enforcement of any existing or future environmental law or regulation may affect our operations. Among the environmental matters currently affecting us are the following:

	•		We are conducting groundwater remediation at our Stockton, California property associated with petroleum hydrocarbon contamination that resulted from the operations of a prior owner of the property. We are in discussions with governmental authorities regarding remedial alternatives. At the present time, we are unable to predict the total cost for the remediation. Further, investigation and remediation of environmental conditions may be required in the future at other properties currently or formerly owned or operated by us. Nonetheless, based on current information, we do not expect that the costs associated with the Stockton, California remediation or any other potential future remediation will have a material adverse effect on our financial condition.
	•		Governmental authorities and private claimants have notified us that we may be liable for environmental investigation and remediation costs at certain contaminated sites, including certain third-party sites at which we disposed of wastes. We may be liable because of alleged leaks, spills, releases or disposal of certain wastes or other substances at these sites. With respect to a majority of these sites, we have settled our liability. Based upon the information currently available, we do not expect that our liability for the remaining sites will be material. We may receive additional claims that we are potentially liable for environmental investigation and remediation costs at other sites in the future.

     We spent approximately $6.9 million on environmental expenditures from fiscal 2000 through fiscal 2002, primarily related to wastewater treatment systems, settlement of environmental litigation and underground storage tank (“UST”) remediation activities. We project that we will spend an aggregate of approximately $2.5 million in fiscal 2003 and 2004 on capital projects and other expenditures in connection with environmental compliance, primarily for boiler upgrades, compliance costs related to the consolidation of our fruit and tomato processing operations and continued UST remediation activities. We believe that our environmental liabilities will not have a material adverse effect on our financial position or results of operations.

Working Capital

     We maintain a revolving line of credit to fund our seasonal working capital needs. Our quarterly operating results have varied in the past and are likely to vary in the future based upon a number of factors. (See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Seasonality”) Our working capital requirements are seasonally affected by the growing cycle of the vegetables, fruits and tomatoes we process. Our inventory position is seasonally affected by this growing cycle. 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 throughout the year.

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Backlog

     We do not experience significant backlog.

History

     The predecessor of Del Monte was originally incorporated in 1916 and remained a publicly traded company until its acquisition in 1979 by the predecessor of RJR Nabisco, Inc. (“RJR Nabisco”). In December 1989, RJR Nabisco sold Del Monte’s fresh produce operations to Polly Peck International PLC. In January 1990, an investor group led by Merrill Lynch & Co. purchased Del Monte and certain of its subsidiaries from RJR Nabisco for $1.5 billion (“RJR Nabisco Sale”). Following this sale, Del Monte divested several of its non-core businesses and all of its foreign operations. In April 1997, Del Monte was recapitalized with an equity infusion from Texas Pacific Group, its affiliates and other investors. In February 1999, Del Monte again became a publicly traded company and is listed on the New York Stock Exchange and the Pacific Exchange under the symbol “DLM”.

     On December 19, 1997, we acquired assets comprising Nestle USA, Inc.’s U.S. business of manufacturing and marketing certain processed tomato products (“Contadina”) and the rights to Contadina processed tomato products.

     On August 28, 1998, we reacquired the rights to the Del Monte brand in South America from Nabisco, Inc. and purchased Nabisco’s processed vegetable and tomato business in Venezuela.

     On September 1, 2000, we acquired the rights to the SunFresh brand citrus and tropical fruits line of UniMark and entered into a five-year supply agreement under which a UniMark affiliate would produce certain chilled and processed fruit products at its facility in Mexico. We purchase products under this supply agreement at market prices.

     On March 13, 2001, we acquired the inventory and rights to the brand name of the S&W business from Tri Valley Growers, an agricultural cooperative association. S&W products are distributed nationally with a strong concentration in the western United States. These products include processed fruits, tomatoes, vegetables, beans and specialty sauces.

     On June 12, 2002, Del Monte and Heinz entered into the Merger Agreement under which Del Monte expects to merge with the Heinz Businesses. Subject to the approval of our stockholders, receipt by Heinz of a private revenue ruling from the Internal Revenue Service and satisfaction of other conditions to closing, we currently anticipate that the merger will be completed during the fourth calendar quarter of 2002 or the first calendar quarter of 2003.

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Item 2. Properties

     As of June 30, 2002, we operate twelve production facilities and seven distribution centers in the United States. See “Business — Sales, Marketing and Value-Added Services,” “— Supply” and “— Production and Distribution”. Our production facilities are owned properties, while our distribution centers are owned or leased. We have various warehousing and storage facilities, which are primarily leased facilities. Our leases are generally long-term. Virtually all of our properties, whether owned or leased, are subject to liens or security interests.

     The following table lists our production facilities and distribution centers located in the United States:

     We have one food processing plant in Venezuela, which was purchased from Nabisco, Inc. as part of the reacquisition of the rights to the Del Monte brand in South America in August 1998. The plant in Venezuela is located in Turmero, approximately 70 miles from Caracas.

     Our principal administrative headquarters are located in leased office space in San Francisco, California. We own our primary research and development facility in Walnut Creek, California.

     We hold certain properties for sale and dispose of land and facilities no longer required for our operations. See Note 14 to the consolidated financial statements of Del Monte for the year ended June 30, 2002.

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     We consider our facilities to be suitable and adequate for our business and to have sufficient production capacity for the purposes for which they are currently intended.

Item 3. Legal Proceedings

     We are a defendant in an action brought by PPI Enterprises (U.S.), Inc. in the U.S. District Court for the Southern District of New York on May 25, 1999. The plaintiff has alleged that we breached certain purported contractual and fiduciary duties and made misrepresentations and failed to disclose material information to the plaintiff about the value of our company and our prospects for sale. The plaintiff also alleges that it relied on our alleged statements in selling its preferred and common stock interest in our company to a third party at a price lower than that which the plaintiff asserts it could have received absent our alleged conduct. The complaint seeks compensatory damages of at least $22.0 million, plus punitive damages. The discovery phase of the case has been completed and we have filed a motion for summary judgment of the plaintiff’s claims. We cannot at this time reasonably estimate a range of exposure, if any, of our potential liability. Nevertheless, we believe that our insurance coverage will be adequate to cover any material liability, fees and costs that we may incur with respect to this litigation. We are defending this proceeding vigorously.

     We are also involved from time to time in various legal proceedings incidental to our business, including claims with respect to product liability, worker’s compensation and other employee claims, tort and other general liability, for which we carry insurance, as well as trademark, copyright and related litigation. While it is not feasible to predict or determine the ultimate outcome of these matters, we believe that none of these legal proceedings will have a material adverse effect on our financial position. See “Business — Governmental Regulation; Environmental Compliance” for a description of certain environmental matters in which we are involved.

Item 4. Submission of Matters to a Vote of Security Holders

     None.

Executive Officers of Del Monte Foods Company

     The following table sets forth the name, age and position of individuals who hold positions as executive officers of our company. There are no family relationships between any director or executive officer and any other director or executive officer of our company. These individuals hold the same positions with DMC. Executive officers are elected by the Board of Directors and serve at the discretion of the Board.

     Richard G. Wolford, Chairman, President, Director and Chief Executive Officer. Mr. Wolford joined Del Monte as Chief Executive Officer and a Director in April 1997. He was elected President of Del Monte in February 1998 and was elected Chairman of

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the Board in May 2000. From 1967 to 1987, he held a variety of positions at Dole Foods, including President of Dole Packaged Foods from 1982 to 1987. From 1988 to 1996, he was Chief Executive Officer of HK Acquisition Corp. where he developed food industry investments with venture capital investors.

     Wesley J. Smith, Director and Chief Operating Officer. Mr. Smith joined Del Monte as Chief Operating Officer and a Director in April 1997. From 1972 to 1995, he was employed by Dole Foods in a variety of positions, including senior positions in finance, marketing, operations and general management in California, Hawaii and Honduras.

     David L. Meyers, Executive Vice President, Administration and Chief Financial Officer. Mr. Meyers joined Del Monte in 1989. He was elected Chief Financial Officer of Del Monte in December 1992 and served as a member of the Board of Directors of Del Monte from January 1994 until consummation of Del Monte’s recapitalization. Prior to joining Del Monte, Mr. Meyers held a variety of financial and accounting positions with RJR Nabisco (1987 to 1989), Nabisco Brands USA (1983 to 1987) and Standard Brands, Inc. (1973 to 1983).

     Marvin A. Berg, Senior Vice President, Eastern Region. Mr. Berg joined Del Monte in 1976 and was elected to his current position in October 2000. Mr. Berg was Vice President, Eastern Manufacturing from 1995 to October 2000 and has held a variety of manufacturing positions at Del Monte.

     Richard L. French, Senior Vice President, Chief Accounting Officer and Controller. Mr. French joined Del Monte in 1980 and was elected to his current position in May 1998. Mr. French was Vice President and Chief Accounting Officer of Del Monte from August 1993 through May 1998 and has held a variety of positions within Del Monte’s financial organization.

     Thomas E. Gibbons, Senior Vice President and Treasurer. Mr. Gibbons joined Del Monte in 1969 and was elected to his current position in February 1995. He was elected Vice President and Treasurer of Del Monte in January 1990. Mr. Gibbons’ prior experience also includes a variety of positions within Del Monte’s and RJR Nabisco’s tax and financial organizations.

     Marc D. Haberman, Senior Vice President, Marketing. Mr. Haberman joined Del Monte in January 1999 and was elected to his current position in August 2001. From February 2000 until July 2001, Mr. Haberman was Senior Vice President, Strategic Planning and Business Development. From January 1999 until February 2000 Mr. Haberman was Vice President, Strategic Planning and Business Development. Prior to that he was with Sunbeam Corporation from 1996 until 1998 where he was Category Leader for Sunbeam’s appliance business. From 1992 to 1996, Mr. Haberman was a consultant with McKinsey & Co.

     Irvin R. Holmes, Senior Vice President, Customer Marketing and Sales Development. Mr. Holmes joined Del Monte in November 1990 and was elected to his current position in August 2001. From November 1999 until July 2001, Mr. Holmes was Senior Vice President, Marketing. From May 1998 to November 1999 he was Senior Vice President, Marketing, Vegetables and Tomatoes. Since joining Del Monte in 1990, Mr. Holmes has held a variety of marketing positions.

     Robert P. Magrann, Senior Vice President, Sales. Mr. Magrann joined Del Monte in April 2001 as Senior Vice President, Sales. Prior to that he was with The Couponbasket, Inc. where he was President and Chief Executive Officer since July 2000. From March 2000 to July 2000, Mr. Magrann was Executive Vice President, Worldwide Sales for Kenosia Marketing Corporation. He was Senior Vice President, Sales and Marketing at Tetley USA from 1996 until March 2000.

     James Potter, Senior Vice President, General Counsel and Secretary. Mr. Potter joined Del Monte in October 2001. From December 1997 to December 2000, he was Executive Vice President, General Counsel and Secretary of Provident Mutual Life Insurance Company. From 1989 to November 1997, Mr. Potter was the Chief Legal Officer of The Prudential Bank and Trust Company and The Prudential Savings Bank, subsidiaries of The Prudential Insurance Company of America.

     William J. Spain, Senior Vice President and Chief Corporate Affairs Officer. Mr. Spain joined Del Monte in 1966 and was elected to his current position in January 1999. Previously, he was Del Monte’s Senior Vice President, Technology. Mr. Spain has also held various positions within Del Monte in corporate affairs, production management, quality assurance, environmental and energy management, and consumer services.

     David L. Withycombe, Senior Vice President, Western Region. Mr. Withycombe joined Del Monte in 1974 and was elected to his current position in October 2000. Mr. Withycombe was Vice President, Western Manufacturing from 1992 to October 2000 and has held a variety of manufacturing positions at Del Monte.

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PART II

Item 5. Market for Registrant’s Common Equity and Related Stockholder Matters

     Not applicable.

Item 6. Selected Financial Data

     The following table sets forth historical consolidated financial information of Del Monte. The statement of operations data for each of the fiscal years in the five-year period ended June 30, 2002 and the balance sheet data as of June 30, 2002, 2001, 2000, 1999 and 1998 have been derived from consolidated financial statements of Del Monte audited by KPMG LLP, independent auditors. The table should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” the consolidated financial statements of Del Monte and related notes and other financial information included elsewhere in this Annual Report on Form 10-K.

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			had previously been written-down in fiscal 1996 upon our adoption of SFAS No. 121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of”. The value assigned to this property, which was contributed in the joint venture, was higher than the carrying cost resulting in a recapture of the previous write-down.
	(e)		Acquisition-related expenses. In fiscal 2001, acquisition-related expenses of $0.1 million were included in selling, administrative and general expense in relation to the SunFresh acquisition. In fiscal 1999, indirect acquisition-related expenses of $0.9 million and $0.5 million of start-up costs were included in selling, administrative and general expense in relation to the Contadina and South America acquisitions. In fiscal 1998, $6.9 million of indirect acquisition-related expenses were included in selling, administrative and general expense in connection with the Contadina acquisition.
	(f)		Benefit costs. In fiscal 1998, non-cash charges of $2.9 million were included in selling, administrative and general expense relating to stock compensation and related benefit expense.
	(g)		Special charges related to plant consolidation. Special charges related to plant consolidation includes ongoing fixed costs and other restructuring costs resulting from the consolidation of certain Del Monte facilities. Refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section for further information.
	(h)		Merger-related expenses. In fiscal 2002, $7.3 million of merger-related expenses were recorded in relation to the proposed merger with some of Heinz’s businesses. See Note 2 to the consolidated financial statements for the year ended June 30, 2002.
	(i)		Interest expense. In fiscal 2002, interest expense includes a credit to interest expense of $2.9 million reflecting a release to earnings from the $5.8 million swap liability attributed to the January 23, 2002 to June 30, 2002 period.
	(j)		Loss on financial instruments. On January 23, 2002, the fair value of certain interest rate swaps was a liability of $5.8 million. Changes in fair value of the swaps, prior to January 23, 2002, are reflected in the income statement. On January 23, 2002 these swaps were designated as cash flow hedging instruments under SFAS No. 133 “Accounting for Derivative Instruments and Hedging Instruments” (as amended by SFAS 137 and 138). Changes in the fair value of the swaps subsequent to the January 23, 2002 designation date are recorded primarily in accumulated other comprehensive income/loss in Stockholders’ Equity.
	(k)		Release of a contingent liability. Credits of $0.7 million and $4.8 million in fiscal 2002 and 2001, respectively, were included in other (income) expense and reflect the reversal of an accrual for a contingent liability no longer required.
	(l)		Terminated transactions. In fiscal 1999, terminated transactions expense of $2.1 million were included in other (income) expense and relates to costs of a public equity offering that was withdrawn due to conditions in the equity securities market in July 1998.
	(m)		Legal expenses. In fiscal 2002, legal expenses of $0.7 million were included in other (income) expense related to litigation associated with the 1997 recapitalization transaction.
	(n)		Extraordinary loss, net of tax benefit. Del Monte made prepayments on its term loan that totaled $120.0 million during fiscal 2002. As a result, Del Monte incurred an extraordinary loss of $2.1 million ($1.3 million net of tax) related to the write-off of previously capitalized debt issuance costs. On May 15, 2001, Del Monte refinanced its debt outstanding, as described more fully in Note 6 of the consolidated financial statements as of and for the year ended June 30, 2002. In connection with this refinancing, an extraordinary loss of $42.3 million ($26.2 million net of tax) was recorded. This extraordinary loss consisted of $32.0 million of prepayment premiums and a $10.3 million write-off of previously capitalized deferred issuance costs and original issue discount. During February 2000, Del Monte repurchased $31.0 million of senior subordinated notes. In conjunction with this repurchase, an extraordinary loss of $5.2 million ($4.3 million net of tax) was recorded. This extraordinary loss consisted of $3.7 million ($3.1 million net of tax) of prepayment premiums and a $1.5 million ($1.2 million net of tax) write-off of previously capitalized deferred debt issuance costs and original issue discount. In fiscal 1999, Del Monte recorded a $19.2 million extraordinary loss. In conjunction with the February 1999 public equity offering, Del Monte redeemed all outstanding preferred stock, a portion of senior subordinated notes and a portion of senior discount notes, as well as an early retirement of senior debt. In connection with these payments, $5.5 million of previously capitalized debt issuance costs were written off and $13.7 million of redemption premiums were paid, both of which Del Monte recorded as extraordinary items.

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	(o)		Net income per common share is computed as net income reduced by the cash and in-kind dividends for the period on redeemable preferred stock, divided by the weighted average number of diluted shares outstanding.
	(p)		Other data includes non-GAAP measures that may not be comparable to similarly titled measures reported by other companies.
	(q)		EBIT represents income before income taxes and extraordinary item plus interest expense.
	(r)		Depreciation and amortization excludes amortization of $3.1 million, $3.3 million, $3.0 million, $3.4 million and $3.3 million of deferred debt issuance costs for fiscal 2002, 2001, 2000, 1999 and 1998, respectively, which are included in the caption “Interest expense.” In addition, in fiscal 2001, 2000, 1999 and 1998, depreciation and amortization excludes accelerated depreciation of $0.9 million, $4.3 million, $9.4 million and $3.0 million, respectively. Accelerated depreciation is included in the caption “Special charges related to plant consolidation”.
	(s)		EBITDA is a measure of liquidity used by Del Monte and members of the financial community to assess the cash flow generating capabilities of our on-going operations and our ability to service debt.

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

     This discussion summarizes the significant factors affecting the consolidated operating results, financial condition and liquidity of our company during the three-year period ended June 30, 2002. This discussion should be read in conjunction with the consolidated financial statements of our company for the three-year period ended June 30, 2002 and related notes included elsewhere in this Annual Report on Form 10-K.

General

     We report our financial results on a July 1 to June 30 fiscal year basis to coincide with our inventory production cycle, which is highly seasonal. Raw product is harvested and processed primarily in the months of June through October, during which time inventories rise to their highest levels. At the same time, consumption of processed products declines, reflecting, in part, lower levels of promotional activity, the availability of fresh alternatives and other factors. This situation impacts operating results as sales volumes, revenues and profitability decline during this period. Results over the remainder of the fiscal year are affected by many factors including industry supply and our share of that supply. See “— Seasonality”.

     Our processed vegetables, fruits and tomato products are generally considered staple foods. We believe consumers purchase our products, like other basic food items, reasonably independent of economic cycles. However, retail consolidation and competitive pressures are causing many food retailers to concentrate on increasing operating efficiencies, generating cash flow and decreasing working capital requirements. Retailers are focused on decreasing their own inventory requirements by reducing the inventory carried, implementing more sophisticated shelf-management programs and consolidating their distribution centers and other infrastructures. Although consumer consumption of our products generally has remained stable, retailers have been selling more of our products from their inventory rather than purchasing from us. As a result, the volume of our products shipped to retailers has been less than the volume of our products purchased by consumers at retailers.

     During the fourth quarter of fiscal 2000, trade customers reduced the inventory levels they had built earlier in preparation of possible “Year 2000” shortages. This inventory reduction continued at a modest rate into fiscal 2001 and continued to a lesser extent throughout this year. This reduction of retail inventory decreased our shipments in the short-term and adversely affected our sales growth, operating margins, cash flows and working capital. In addition, it caused us to have excess inventory. The resulting lower sales volume also affected our ability to offset the increase in production costs experienced in fiscal 2001. Because we produce the majority of our products in the summer months, we decreased our summer 2001 production of vegetables to reduce our inventory levels, which lowered our working capital requirements. We reduced our summer 2001 production below our anticipated level of sales for fiscal 2002, generating significant cash flows that contributed to our $120.0 million prepayment of our term loan.

     Consistent with our strategy to generate growth through acquisitions, we consummated the acquisitions of Contadina in December 1997, SunFresh in September 2000 and S&W in March 2001. The Contadina acquisition solidified us as the branded market leader in the high margin processed solid tomato category and established a strong presence for us in the branded paste-based tomato products category, which includes tomato paste, tomato sauce and pizza sauce. In addition to further diversifying our revenue base, the Contadina acquisition expanded our processing scale, which has resulted in production cost efficiencies. We believe the SunFresh and S&W acquisitions will also provide further cost savings through manufacturing efficiencies and growth opportunities in new markets. We also reacquired the rights to the Del Monte brand in South America in August 1998, which opened a new geographic market for our company.

     In the third quarter of fiscal 1998, we developed a plan to consolidate processing operations over a three-year period. Among the facilities we acquired in connection with the Contadina acquisition was a state-of-the-art tomato processing facility at Hanford, California. We closed the Arlington vegetable processing facility in August 1998, the San Jose fruit processing facility in December 1999, the Stockton fruit processing facility in September 2000 and the Woodland bulk tomato-paste processing facility in January 2001. We recorded special charges related to plant consolidations of $1.3 million, $14.6 million and $10.9 million for the years ended June 30, 2002, 2001 and 2000, respectively. We expect to incur ongoing costs for security, insurance, taxes and other miscellaneous caretaker expenses until these properties are sold. See Note 14 to the consolidated financial statements for the year ended June 30, 2002.

     This plant consolidation plan is a major component of a capital investment program identified over five years ago. As of June 30, 2002, approximately $98.9 million has been capitalized for this program over the preceding five years. We achieved cumulative cost savings of approximately $165.0 million from this capital investment program. Cost savings were achieved through reduced

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headcount from closing the facilities; reduced raw product costs and freight savings, improved raw product recovery as a result of sourcing produce closer to where it is processed and reduced facility fixed costs for depreciation, maintenance, taxes and insurance due to the closure of processing facilities.

Results of Operations

     The following table sets forth certain items from our consolidated statements of income, expressed as percentages of our total net sales, for the periods indicated:

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     The following table sets forth our total net sales, expressed in dollar amounts and as percentages of our total net sales, for the periods indicated:

Seasonality

     Our quarterly operating results have varied in the past and are likely to vary in the future based upon a number of factors. Our historical net sales have exhibited seasonality, with the second and third fiscal quarters generally having the highest net sales. These two quarters reflect increased sales of our products during the holiday period in the United States extending from late November through December, as well as sales associated with the Easter holiday. Lower levels of promotional activity, the availability of fresh produce and other factors have historically affected net sales in the first fiscal quarter. Quarterly gross profit primarily reflects fluctuations in sales volumes and is also affected by the overall product mix. Our fruit operations have a greater percentage of annual sales and cost of products sold in the first fiscal quarter, as compared to our vegetable and tomato operations, due principally to increased sales of single-serve fruit products during the “back to school” period. Generally, we have a greater percentage of annual sales and cost of products sold in the second and third fiscal quarters, principally due to the year-end holiday season. Promotional expenses, which are presented as a reduction to net sales, tend to be greater in the first half of the fiscal year, primarily due to the “back to school” period and the year-end holiday season, while Easter is the only major holiday in the second half of the fiscal year.

     The annual production volume of vegetables, fruit and tomatoes is planned based on anticipated demand for the following year. Annual production is also influenced by raw product availability related to general seasonal fluctuations primarily due to weather and overall growing conditions.

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Fiscal 2002 vs. Fiscal 2001

     Net sales. Consolidated net sales for fiscal 2002 increased $31.0 million, or 2.4%, from fiscal 2001. The increase in net sales in fiscal 2002 is due primarily to the acquisition of the S&W business ($71.8 million) and the impact of a July 1 retail price increase, net of the impact of higher trade promotion expenses related to the price increase. Net sales also continue to reflect the shift in sales volume from the slower-growth grocery channel to the higher-growth club, supercenter and mass merchandiser channel. Fiscal 2002 net sales includes the effect of $1.3 million of trade promotion expenses to convert the universal product codes on Contadina products resulting from the acquisition of the business in December 1997. We were required to pay retailers reshelving costs resulting from the change to Del Monte universal product codes. Approximately 1.2% of consolidated net sales was generated by our South American businesses in both fiscal 2002 and 2001.

     The increase in retail sales prices contributed to a decline in the major vegetable and fruit categories in fiscal 2002 compared to fiscal 2001. We led the industry in raising our vegetable prices and were quickly followed by branded competitors and then private label. In fruit, our price spread versus private label widened during fiscal 2002 due to the price increase and although private label prices increased, they did not fully match our price increase. Consumption of processed fruit in the grocery channel declined in fiscal 2002 versus fiscal 2001, and the price spread versus private label contributed to consumption of our fruit products declining at a rate greater than the category. For tomato products, our price increase followed an increase initiated by another branded competitor and followed broadly across the category.

     We continued to respond to consumer trends in the single-serve fruit snacking business by introducing two new Fruit & Gel To-Go items in the first quarter of fiscal 2002. We also incurred trade promotion expenses to expand our distribution of our SunFresh processed citrus products acquired in fiscal 2001. The new product introductions and distribution expansion resulted in increases in trade promotion expenses of $3.5 million in fiscal 2002 compared to fiscal 2001.

     We continue to be impacted by competitive pressure in the single-serve fruit business, which has resulted, and may continue to result, in higher trade and consumer promotion expenses. We believe the single-serve fruit business is an important high-growth category and we expect to continue to invest in this category.

     In fiscal 2002, our market share for vegetable products, based on case volume, was 22.8% versus 22.1% in the previous year. Our market share for fruit products was 43.2% compared to 43.9% in the previous year, and our market share for solid tomato products was 21.3% in fiscal 2002 compared to 20.1% in fiscal 2001.

     Cost of products sold. Cost of products sold increased $23.3 million, or 2.3%, compared to fiscal 2001. The increase in cost of products sold was primarily due to higher manufacturing costs due to lower production volumes as a result of our initiative to reduce inventory levels, and an unfavorable sales mix. The increase in manufacturing costs was somewhat offset by continued cost savings from capital spending initiatives. Cost of products sold includes inventory step-up charges resulting from the sale of inventory on-hand at acquisition for the S&W and SunFresh businesses. Fiscal 2002 includes $1.0 million of inventory step-up charges related to the S&W acquisition, and fiscal 2001 includes $2.6 million of inventory step-up charges related to the acquisition of both the S&W and SunFresh businesses. Fiscal 2001 includes $0.6 million of packaging obsolescence resulting from the conversion of universal product codes for Contadina products related to the acquisition of the business.

     Selling, administrative and general expenses. Selling, administrative and general expenses increased by $21.5 million, or 15.3%, compared to fiscal 2001. This increase was due primarily to lower returns on pension assets, higher information technology expense, and higher rental expense due to the relocation of our corporate headquarters in December 2000. In addition, sales and marketing expenses to support the S&W business and new products contributed to the increases over fiscal 2001.

     Research and development costs of $7.5 million and $7.0 million in fiscal 2002 and 2001, respectively, were included in general and administrative expenses.

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     Special charges related to plant consolidation. As discussed in Note 14 to the consolidated financial statements for fiscal 2002, we incurred special charges of $1.3 million in fiscal 2002 compared to special charges of $14.6 million in fiscal 2001. Details of the special charges are as follows:

     Both the severance accrual and severance accrual reversal were related to the closure of the Woodland facility. Asset write-off was related to assets no longer used in operations at the Woodland and Stockton facilities. Asset write-down reversal was related to a reduction of an accrual for the closure of the Woodland facility, as the proceeds from the sale of the facility exceeded the original projections. On-going fixed costs and asset removal/disposal costs of dormant facilities included period costs primarily incurred at the San Jose, Stockton and Woodland facilities, as well as costs incurred for removal of fruit processing equipment to be disposed at the Stockton facility. We expect to incur ongoing costs for security, insurance, taxes and other miscellaneous caretaker expenses until these properties are sold. Special charges also included accelerated depreciation expense resulting from the effects of adjusting the assets’ remaining useful lives to accelerate the depreciation thereof.

     Merger-related expenses. In fiscal 2002, merger-related expenses included $7.3 million primarily related to the proposed merger of DMC and the Heinz Businesses. See “Recent Developments” and Note 2 to the consolidated financial statements for the year ended June 30, 2002 for a description of the proposed merger. In addition, part of the $7.3 million merger-related expenses related to a proposed alternative transaction with a third party.

     Interest expense. Interest expense decreased 22.9% in fiscal 2002 compared to fiscal 2001. This decrease was due primarily to lower interest rates and lower average debt balances. Interest expense includes $4.2 million of expense in excess of market rates due to the impact of interest rate swap agreements. On January 23, 2002, we designated our interest rate swaps as cash flow hedging instruments in accordance with SFAS No. 133, “Accounting for Derivative Instruments and Hedging Instruments” (“SFAS 133”), as amended by SFAS 137 and 138. We recorded a liability of $5.8 million representing the fair value of the swaps on January 23, 2002. Interest expense includes a credit of $2.9 million, reflecting a release to earnings from the $5.8 million liability attributed to the January 23, 2002 to June 30, 2002 period. See Note 7 to the consolidated financial statements for further information about the interest rate swaps.

     Interest expense includes amortization of deferred debt issuance costs of $3.1 million and $3.3 million in fiscal 2002 and 2001, respectively.

     Loss on financial instruments. Loss on financial instruments for fiscal 2002 was $5.8 million due to the change in the fair value of the interest rate swaps before they were designated as hedging instruments on January 23, 2002, as described in Note 7 of the consolidated financial statements.

     Other income. The $0.5 million other income for fiscal 2002 consists primarily of dividend income and the reversal of an accrual of $0.7 million for a contingent liability that is no longer required, offset by an accrual of $0.7 million for litigation expense related to our recapitalization transaction in 1997. The $4.8 million other income for fiscal 2001 was due to the reversal of an accrual for a contingent liability that is no longer required.

     Provision for income taxes. The provision for income taxes decreased $0.6 million to $16.1 million for fiscal 2002 from $16.7 million for fiscal 2001. The decrease in the fiscal 2002 provision was due primarily to the reversal of a larger amount of valuation allowances in fiscal 2002 compared to fiscal 2001. The effective tax rate for fiscal 2002 was lower than the statutory U.S. federal income tax

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rate due to the utilization of state tax credits and net operating loss carryforwards. The amount of state tax credits utilized in fiscal 2002 was smaller than the amount utilized in fiscal 2001.

     Extraordinary item. The extraordinary item resulted from the write-off of $2.1 million ($1.3 million net of tax) of previously capitalized debt issuance costs related to the prepayment of $120.0 million of our term loan in fiscal 2002. In connection with the May 15, 2001 refinancing, an extraordinary loss of $42.3 million ($26.2 million net of tax) was recorded in fiscal 2001. This extraordinary loss consisted of $32.0 million of prepayment premiums and a $10.3 million write-off of previously capitalized deferred issuance costs and original issue discount.

Fiscal 2001 vs. Fiscal 2000

     Net sales. Consolidated net sales for fiscal 2001 increased $76.6 million, or 6.3%, from fiscal 2000. The increase in sales in fiscal 2001 primarily reflects the acquisition of the S&W and SunFresh businesses ($42.0 million), an increase in non-retail channel sales and lower promotional expense for new products. Sales for fiscal 2001 were impacted by a reduction in inventory levels by our customers, which resulted in a reduction of shipments of products. Although consumer consumption remained relatively stable, we believe retailers have sold more out of inventory on hand rather than purchasing product. As a result of this trend, our shipments decreased in the short-term affecting sales growth, operating margins, cash flow and working capital. The resulting lower sales volume also affected our ability to offset the increase in production costs for fiscal 2001. Approximately 1.2% and 1.0% of consolidated net sales were generated by our South American businesses in fiscal 2001 and 2000, respectively.

     Promotional expense was lower in fiscal 2001 due to fewer new product introductions than fiscal 2000. In fiscal 2001, new product introductions were limited to Fruit To-Go line extensions. In fiscal 2000, we introduced nationally the new Fruit To-Go line of fruit in single-serve plastic cups along with new flavors of diced tomatoes and new sizes of ketchup. In addition, lower spending in fiscal 2001 for tomato products resulted from a change in trade promotion strategy on selected tomato products to focus trade promotion spending on more efficient and less costly promotion types.

     In fiscal 2001, our market share for vegetables products, based on case volume, was 22.1% versus 23.1% in the previous year. Our market share for fruit products was 43.9% compared to 44.0% for the previous year, and our market share for solid tomato products was 20.1% in fiscal 2001 compared to 17.7% in the fiscal 2000.

     Cost of products sold. Cost of products sold increased by $89.4 million, or 9.7%, compared to fiscal 2000. The increase in cost of products sold in fiscal 2001 was primarily due to the acquisition of the S&W and SunFresh businesses. In addition, an unfavorable sales mix, together with increased manufacturing costs in 2001 due to lower production volumes and higher fruit production costs contributed to the increase in cost of products sold. These increases in manufacturing costs were somewhat offset by continued cost savings from capital spending initiatives. Cost of products sold includes $0.6 million of packaging obsolescence in fiscal 2001 resulting from the conversion of universal product codes for Contadina products related to the acquisition of the business in December 1997. In addition, fiscal 2001 includes $2.6 million of inventory step-up charges resulting from the sale of inventory acquired in the S&W and SunFresh acquisitions.

     Selling, administrative and general expense. Selling, administrative and general expense increased by $3.5 million, or 2.6%, compared to fiscal 2000, due primarily to additional sales and marketing expenses to support the S&W and SunFresh businesses. In addition, fiscal 2000 includes the recapture of $2.3 million of a previously recorded impairment in value of a closed production facility, resulting from contributing this facility to a joint venture real estate development.

     Research and development costs of $7.0 million and $6.6 million in fiscal 2001 and 2000, respectively, were included in general and administrative expenses.

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     Special charges related to plant consolidation. We incurred special charges of $14.6 million in fiscal 2001 compared to special charges of $10.9 million in fiscal 2000. Details of the special charges are as follows:

     Both the severance accrual and severance accrual reversal were related to the closure of the Woodland and Arlington facilities. Asset write-off was related to assets no longer used in operations at the Woodland and Stockton facilities. Asset write-down reversal was related to a reduction of an accrual for the closure of the Arlington facility, as the proceeds from the sale of the facility exceeded the original projections. On-going fixed costs and asset removal/disposal costs of dormant facilities included period costs primarily incurred at the Modesto and Woodland facilities, as well as costs incurred for removal of fruit processing equipment to be disposed at the Stockton and San Jose facilities. Special charges also included accelerated depreciation expense resulting from the effects of adjusting the assets’ remaining useful lives to accelerate the depreciation thereof.

     Interest expense. Interest expense increased 11.2% in fiscal 2001 compared to fiscal 2000. This increase was due to the higher average outstanding debt balances.

     Interest expense includes amortization of deferred debt issuance costs of $3.3 million and $3.0 million in fiscal 2001 and 2000, respectively.

     Other income. The $4.8 million other income for fiscal 2001 was due to the reversal of an accrual for a contingent liability that was no longer required. There was no other (income) expense for fiscal 2000.

     Provision (Benefit) for income taxes. Provision (benefit) for income taxes changed from a benefit of $53.6 million in fiscal 2000 to a provision of $16.7 million in fiscal 2001. The change was mainly due to the $67.7 million release of the valuation allowance in fiscal 2000. The effective tax rate for fiscal 2001 was lower than the statutory U.S. federal income tax rate due to the utilization of state tax credits and net operating loss carryforwards.

     Extraordinary item. In connection with the May 15, 2001 refinancing, an extraordinary loss of $42.3 million ($26.2 million net of tax) was recorded in fiscal 2001. This extraordinary loss consisted of $32.0 million of prepayment premiums and a $10.3 million write-off of previously capitalized deferred issuance costs and original issue discount. In conjunction with the repayment of $31.0 million of senior subordinated notes, we recorded an extraordinary loss of $5.2 million ($4.3 million net of tax) in fiscal 2000. The extraordinary loss consisted of the write-off of $1.5 million ($1.2 million net of tax) of previously capitalized debt issuance costs related to the redeemed notes and original issuance discount and $3.7 million ($3.1 million net of tax) of redemption premiums.

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     The following table summarizes certain items included in the “Fiscal 2002 vs. Fiscal 2001” and “Fiscal 2001 vs. Fiscal 2000” discussions above.

Critical Accounting Policies and Estimates

     Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. On an on-going basis, we re-evaluate all of our estimates, including those related to trade promotions, coupon redemption, retirement benefits, retained-insurance liabilities and intangibles and long-lived assets. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may materially differ from these estimates under different assumptions or conditions and as additional information becomes available in future periods. Management has discussed the development and selection of critical accounting policies and estimates with the Audit Committee of the Board of Directors and the Audit Committee has reviewed our disclosure relating to critical accounting policies and estimates in this Form 10-K.

     We believe the following are the more significant judgments and estimates used in the preparation of our consolidated financial statements.

     Trade Promotions: Trade promotions are an important component of the sales and marketing of our products, and are critical to the support of our business. Trade promotion costs include amounts paid to encourage retailers to offer temporary price reductions for the sale of our products to consumers, amounts paid to obtain favorable display positions in retailers’ stores, and amounts paid to customers for shelf space in retail stores. Accruals for trade promotions are recorded primarily at the time of sale of product to the customer based on expected levels of performance. Settlement of these liabilities typically occurs in subsequent periods primarily through an authorized process for deductions taken by a customer from amounts otherwise due to us. As a result, the ultimate cost of a trade promotion program is dependent on the relative success of the events and the actions and level of deductions taken by our customers for amounts they consider due to them. Final determination of the permissible deductions may take extended periods of time.

     Coupon Redemption: We offer coupons to consumers in the normal course of business. Coupon redemption costs are accrued in the period in which the coupons are offered, based on estimates of redemption rates that are developed by independent coupon redemption clearing-houses based on historical information. Should actual redemption rates vary from amounts estimated, adjustments to accruals may be required.

     Retirement Benefits: We sponsor non-contributory defined benefit pension plans and unfunded defined benefit postretirement plans providing certain medical, dental and life insurance benefits to eligible retired, salaried, non-union hourly and union employees. Several statistical and other factors which attempt to anticipate future events are used in calculating the expense and liabilities related to these plans. These factors include assumptions about the discount rate, expected return on plan assets, the health care cost trend rate,

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withdrawal and mortality rates and the rate of increase in compensation levels. The actuarial assumptions used by us may differ materially from actual results due to changing market and economic conditions, higher or lower withdrawal rates or longer or shorter mortality of participants. These differences may impact the amount of retirement benefit expense recorded by us in future periods.

     Retained-insurance Liabilities: We retain liabilities up to $0.25 million ($0.5 million effective July 1, 2002) per claim under our loss sensitive worker’s compensation insurance policy. For our general and automobile insurance policy, we retain liabilities up to $0.25 million per claim. An independent, third-party actuary estimates the outstanding retained-insurance liabilities by projecting incurred losses to their ultimate liability and subtracting amounts paid to-date to obtain the remaining liabilities. Actuarial estimates of ultimate liability are based on actual incurred losses, estimates of incurred but not yet reported losses based on historical information from both our company and the industry, and the projected costs to resolve these losses. Retained-insurance liabilities may differ based on new events or circumstances that might materially impact the ultimate cost to settle these losses.

     Intangible and Long-lived Assets: Intangible assets consist of trademarks and distribution rights. As a result of the adoption of SFAS No. 142, “Goodwill and Other Intangible Assets” on July 1, 2001, intangible assets with indefinite useful lives are no longer amortized, but are instead tested for impairment at least annually, by comparing the carrying value with the estimated fair value of the intangible assets. 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 of sales trends and profitability, consistent with our 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.

     We review long-lived assets held and used, intangible assets with finite useful lives and assets held for sale for impairment annually or whenever events or circumstances indicate that the carrying amount of an asset may not be recoverable. If an evaluation of recoverability is required, the estimated undiscounted future cash flows associated with the asset are compared to the asset’s carrying amount to determine if an impairment charge is required. All long-lived assets for which management has committed to a plan of disposal are reported at the lower of carrying amount or fair value. Changes in projected cash flows generated by an asset based on new events or circumstances may indicate a change in fair value and require a new evaluation of recoverability of the asset.

Liquidity and Capital Resources

     Del Monte’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 which provides for a $325.0 million line of credit (the “Revolver”), described in “Financing Activities — 2001” below, are our primary sources of liquidity.

     Our ability to fund our cash requirements and to remain in compliance with all of the financial covenants under our debt agreements depends on our future operating performance and cash flow. These are in turn subject to prevailing economic conditions and to financial, business and other factors, some of which are beyond our control.

     We believe that cash flows from operations and availability under the Revolver will provide adequate funds for our working capital needs, planned capital expenditures and debt service obligations for at least the next 12 months. In addition, following the closing of the proposed merger and the financing described below under the heading “Proposed Financing”, we believe that cash flows from operations and availability under the new bank facility will provide adequate funds for our working capital needs, planned capital expenditures and debt service obligations for at least 12 months following the merger.

     On June 12, 2002, Del Monte and Heinz entered into the Merger Agreement under which we expect to acquire the Heinz Businesses by merging Del Monte Corporation with and into SKF Foods. See “Recent Developments” and Note 2 to the consolidated financial statements for the year ended June 30, 2002 for a description of the proposed merger. We believe merger-related costs will require a significant use of cash. As of June 30, 2002, we had incurred $7.3 million of merger-related expenses, including expenses related to a proposed alternative transaction with a third party. As of June 30, 2002, $0.4 million of the $7.3 million had been paid; the remainder is expected to be paid during fiscal 2003. If the amount of certain merger-related expenses we incur exceeds $26.5 million in aggregate, Heinz is entitled to receive an amount equal to three times the excess of our merger-related expenses over $26.5 million. Heinz may elect to have this amount paid by (1) having Del Monte pay directly or reimburse Heinz for certain Heinz’s merger-related expenses, (2) increasing the amount of debt to be incurred by SKF Foods prior to the spin-off of SKF Foods to the Heinz shareholders, the proceeds of which shall be subsequently distributed to Heinz or (3) by a combination of (1) and (2) above.

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Contractual and Other Cash Obligations

     The following table summarizes our contractual and other cash obligations at June 30, 2002: