Big Heart Pet Brands 10-Q 2013 Q1 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended July 28, 2013

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission file number 333-107830-05

DEL MONTE CORPORATION

(Exact name of registrant as specified in its charter)

Delaware	75-3064217
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification Number)

One Maritime Plaza,

San Francisco, California 94111

(Address of Principal Executive Offices including Zip Code)

(415) 247-3000

(Registrant’s Telephone Number, Including Area Code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes  ¨    No  x

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	x  (Do not check if a smaller reporting company)	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

The number of shares outstanding of the Company’s common stock, par value $0.01, as of close of business on September 6, 2013 was 10.

Table of Contents

PART I.	FINANCIAL INFORMATION	3
ITEM 1.	FINANCIAL STATEMENTS	3
	CONDENSED CONSOLIDATED BALANCE SHEETS – July 28, 2013 (unaudited) and April 28, 2013	3
	CONDENSED CONSOLIDATED STATEMENTS OF INCOME (unaudited) – three months ended July 28, 2013 and July 29, 2012	4
	CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (unaudited) – three months ended July 28, 2013 and July 29, 2012	5
	CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) – three months ended July 28, 2013 and July 29, 2012	6
	NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)	7
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	19
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	31
ITEM 4.	CONTROLS AND PROCEDURES	33
PART II.	OTHER INFORMATION	34
ITEM 1.	LEGAL PROCEEDINGS	34
ITEM 1A.	RISK FACTORS	34
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	35
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	35
ITEM 4.	MINE SAFETY DISCLOSURES	35
ITEM 5.	OTHER INFORMATION	35
ITEM 6.	EXHIBITS	36
	SIGNATURES	37

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

DEL MONTE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in millions, except share and per share data)

	July 28, 2013			April 28, 2013
	(unaudited)			(derived from audited financial statements)
ASSETS
Cash and cash equivalents	$	85.1		$	594.2
Trade accounts receivable, net of allowance		193.3			191.7
Inventories		904.7			722.1
Prepaid expenses and other current assets		144.5			130.1
Total current assets		1,327.6			1,638.1
Property, plant and equipment, net		772.3			763.9
Goodwill		2,266.3			2,119.7
Intangible assets, net		2,991.9			2,724.3
Other assets, net		124.7			117.1
Total assets	$	7,482.8		$	7,363.1
LIABILITIES AND STOCKHOLDER’S EQUITY
Accounts payable and accrued expenses	$	604.2		$	541.8
Short-term borrowings		2.2			3.2
Current portion of long-term debt		6.6			74.5
Total current liabilities		613.0			619.5
Long-term debt, net of discount		3,896.4			3,902.7
Deferred tax liabilities		1,083.8			968.5
Other non-current liabilities		272.2			278.5
Total liabilities		5,865.4			5,769.2
Stockholder’s equity:
Common stock ($0.01 par value per share, shares authorized: 1,000; 10 issued and outstanding)		—			—
Additional paid-in capital		1,592.8			1,590.0
Accumulated other comprehensive loss		(15.6	)		(16.4	)
Retained earnings		40.2			20.3
Total stockholder’s equity		1,617.4			1,593.9
Total liabilities and stockholder’s equity	$	7,482.8		$	7,363.1

See accompanying Notes to the Condensed Consolidated Financial Statements.

3

DEL MONTE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (unaudited)

(in millions)

	Three Months Ended
	July 28, 2013			July 29, 2012
Net sales	$	823.9		$	821.1
Cost of products sold		575.0			600.6
Gross profit		248.9			220.5
Selling, general and administrative expense		163.1			174.7
Operating income		85.8			45.8
Interest expense		59.7			65.2
Other (income) expense, net		(8.4	)		(25.8	)
Income from continuing operations before income taxes		34.5			6.4
Provision for income taxes		14.6			0.1
Net income	$	19.9		$	6.3

See accompanying Notes to the Condensed Consolidated Financial Statements.

4

DEL MONTE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (unaudited)

(in millions)

	Three Months Ended
	July 28, 2013			July 29, 2012
Net income	$	19.9		$	6.3
Other comprehensive income (loss):
Foreign currency translation adjustments		(0.1	)		(0.4	)
Pension and other postretirement benefits adjustments:
Prior service (cost) credit arising during the period, net of tax		(0.2	)		—
Gain on cash flow hedging instruments, net of tax		1.1			—
Total other comprehensive income (loss)		0.8			(0.4	)
Comprehensive income	$	20.7		$	5.9

See accompanying Notes to the Condensed Consolidated Financial Statements.

5

DEL MONTE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

(in millions)

	Three Months Ended
	July 28, 2013			July 29, 2012
Operating activities:
Net income	$	19.9		$	6.3
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization		35.5			41.1
Deferred taxes		13.5			7.5
Write off of debt issuance cost		1.7			2.9
Loss on asset disposals		0.6			0.2
Stock compensation expense		3.0			2.5
Unrealized (gain) loss on derivative financial instruments		(16.9	)		(29.1	)
Changes in operating assets and liabilities		(111.1	)		(32.2	)
Net cash used in operating activities		(53.8	)		(0.8	)
Investing activities:
Capital expenditures		(28.4	)		(25.4	)
Purchase of equity method investment		(14.6	)		—
Cash used in business acquisition, net of cash acquired		(337.5	)		—
Payment for asset acquisition		—			(12.0	)
Net cash used in investing activities		(380.5	)		(37.4	)
Financing activities:
Proceeds from short-term borrowings		2.2			—
Payments on short-term borrowings		(3.2	)		—
Principal payments on long-term debt		(74.5	)		(91.1	)
Net cash used in financing activities		(75.5	)		(91.1	)
Effect of exchange rate changes on cash and cash equivalents		0.7			(1.1	)
Net change in cash and cash equivalents		(509.1	)		(130.4	)
Cash and cash equivalents at beginning of period		594.2			402.8
Cash and cash equivalents at end of period	$	85.1		$	272.4

See accompanying Notes to the Condensed Consolidated Financial Statements.

6

DEL MONTE CORPORATION AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the three months ended July 28, 2013

(unaudited)

Note 1. Business and Basis of Presentation

On March 8, 2011, Del Monte Foods Company (“DMFC”) was acquired by an investor group led by funds affiliated with Kohlberg Kravis Roberts & Co. L.P. (“KKR”), Vestar Capital Partners (“Vestar”) and Centerview Capital, L.P. (“Centerview,” and together with KKR and Vestar, the “Sponsors”). Del Monte Corporation (“DMC” and, together with its consolidated subsidiaries, “Del Monte” or the “Company”) was a direct, wholly-owned subsidiary of DMFC. On April 26, 2011, DMFC merged with and into DMC, with DMC being the surviving corporation.

The Company operates on a 52 or 53-week fiscal year ending on the Sunday closest to April 30. The results of operations for the three months ended July 28, 2013 and July 29, 2012 each reflect periods that contain 13 weeks.

Del Monte is one of the country’s largest producers, distributors and marketers of premium quality, branded pet products and food products for the U.S. retail market. The Company’s pet food and pet snacks brands includeMeow Mix, Kibbles ‘n Bits,Milk-Bone, 9Lives, Natural Balance, Pup-Peroni, Gravy Train, Nature’s Recipe, Canine Carry Outs, Milo’s Kitchenand other brand names, and food brands includeDel Monte,Contadina, College Inn, S&Wand other brand names. The Company also produces and distributes private label pet products and food products. The majority of its products are sold nationwide in all channels serving retail markets, mass merchandisers, the U.S. military, certain export markets, the foodservice industry and food processors.

For reporting purposes the Company has two segments: Pet Products and Consumer Products. The Pet Products segment manufactures, markets and sells branded and private label dry and wet pet food and pet snacks. The Consumer Products segment manufactures, markets and sells branded and private label shelf-stable products, including fruit, vegetable, tomato and broth products.

The accompanying unaudited condensed consolidated financial statements of Del Monte as of July 28, 2013 and for the three months ended July 28, 2013 and July 29, 2012 have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for annual financial statements. These unaudited condensed consolidated financial statements should be read in conjunction with the notes to the consolidated financial statements in the Company’s 2013 Annual Report on Form 10-K (“2013 Annual Report”). In the opinion of management, all adjustments consisting of normal and recurring entries considered necessary for a fair presentation of the results for the interim periods presented have been included. All significant intercompany balances and transactions have been eliminated. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect reported amounts in the financial statements and accompanying notes. These estimates are based on information available as of the date of the unaudited condensed consolidated financial statements. Therefore, actual results could differ from those estimates. Furthermore, operating results for the three months ended July 28, 2013 are not necessarily indicative of the results expected for the fiscal year ending April 27, 2014.

As described in Note 4, on July 15, 2013, DMC completed the acquisition of 100% of the voting interest of Natural Balance Pet Foods, Inc. (“Natural Balance”), maker of premium pet food for dogs and cats sold throughout North America.

On July 11, 2013, the Company purchased a minority equity interest in a co-packer of some of the Company’s dog products for $14.6 million. While the Company exercises significant influence over the co-packer, it does not hold a controlling interest in the company. As such, the investment is accounted for under the equity method and is stated at cost plus the Company’s share of undistributed earnings or losses.

Note 2. Recently Issued Accounting Standards

In February 2013, the Financial Accounting Standards Board (“FASB”) issued an Accounting Standards Update related to comprehensive income. The amendments require an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component. This new accounting pronouncement is effective for fiscal years and interim periods within those years beginning after December 15, 2012, with early adoption permitted. Accordingly, the Company has included the enhanced disclosure in Note 9.

7

DEL MONTE CORPORATION AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the three months ended July 28, 2013

(unaudited)

Note 3. Supplemental Financial Statement Information

	Three Months Ended
	July 28, 2013			April 28, 2013
	(in millions)
Trade accounts receivable:
Trade	$	193.4		$	191.8
Allowance for doubtful accounts		(0.1	)		(0.1	)
Total	$	193.3		$	191.7
Inventories:
Finished products	$	706.7		$	560.1
Raw materials and in-process materials		61.2			50.6
Packaging materials and other		138.4			96.6
LIFO reserve		(1.6	)		14.8
Total	$	904.7		$	722.1
Prepaid expenses and other current assets:
Prepaid expenses	$	83.8		$	62.8
Other current assets		60.7			67.3
Total	$	144.5		$	130.1
Property, plant and equipment, net:
Land and land improvements	$	46.5		$	46.2
Buildings and leasehold improvements		279.7			274.5
Machinery and equipment		486.0			471.5
Computers and software		62.8			61.0
Construction in progress		64.7			61.7
		939.7			914.9
Accumulated depreciation		(167.4	)		(151.0	)
Total	$	772.3		$	763.9
Accounts payable and accrued expenses:
Accounts payable - trade	$	316.4		$	245.8
Marketing, advertising and trade promotion		70.9			59.4
Accrued benefits, payroll and related costs		60.5			80.3
Accrued interest		57.9			33.7
Current portion of pension liability		21.1			21.0
Other current liabilities		77.4			101.6
Total	$	604.2		$	541.8
Other non-current liabilities:
Accrued postretirement benefits	$	132.8		$	132.2
Pension liability		31.6			31.3
Long-term hedge payable		25.6			33.5
Other non-current liabilities		82.2			81.5
Total	$	272.2		$	278.5
Accumulated other comprehensive loss:
Foreign currency translation adjustments	$	(0.9	)	$	(0.8	)
Pension and other postretirement benefits adjustments, net of tax		(9.3	)		(9.1	)
Gain on cash flow hedging instruments, net of tax		(5.4	)		(6.5	)
Total accumulated other comprehensive loss	$	(15.6	)	$	(16.4	)

Note 4. Natural Balance Acquisition

On July 15, 2013, DMC completed the acquisition of 100% of the voting interest of Natural Balance, a California corporation and maker of premium pet food for dogs and cats sold throughout North America. The total cost of the Natural Balance acquisition was $341.4 million and consisted of an initial $341.1 million cash payment (including $26.2 million paid into an escrow account) and contingent consideration of $0.3 million. The total cost of the acquisition is subject to a post-closing working capital adjustment after 90 days from the closing date. The financial results of Natural Balance are reported within the Pet Products segment.

8

DEL MONTE CORPORATION AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the three months ended July 28, 2013

(unaudited)

The acquisition is being accounted for under the acquisition method of accounting. The purchase price was allocated to the identifiable assets and liabilities, including brand names, based on estimated fair value, with any remaining purchase price being recorded as goodwill. The Company utilized an independent valuation firm to assist in estimating the fair value of Natural Balance’s real estate, machinery and equipment, and identifiable intangible assets. The Company’s allocation of purchase price to the net tangible and intangible assets acquired and liabilities assumed is as follows (in millions):

	July 15, 2013
Cash and cash equivalents	$	3.9
Trade accounts receivable		10.8
Inventories		26.8
Prepaid expenses and other current assets		0.4
Property, plant and equipment		5.6
Goodwill		146.6
Identifiable intangible assets		280.4
Deferred tax assets		2.7
Other assets		0.2
Total assets acquired		477.4
Accounts payable and accrued expenses		16.5
Other current liabilities		6.6
Deferred tax liabilities		108.5
Other non-current liabilities		4.1
Contingent consideration		0.3
Total liabilities assumed		136.0
Net assets acquired	$	341.4

The acquisition of Natural Balance includes a contingent consideration arrangement that requires additional cash to be paid by the Company based on the future net sales of Natural Balance over a one year period. The range of the undiscounted amounts the Company could pay under the contingent consideration agreement is $0.0 million to $17.5 million, and is based on net sales measured for the 12 month period ending May 1, 2016 with payment due August 22, 2016. The estimated fair value of the contingent consideration recognized on the acquisition date was $0.3 million and was based on the purchase agreement. The fair value was estimated by applying the income approach and approximates the calculated value. The Company has classified the contingent consideration as Level 3 of the fair value hierarchy.

Goodwill is not expected to be deductible for tax purposes. All of the goodwill of $146.6 million was assigned to the Pet Products segment.

Refinements to the fair values of the assets acquired and liabilities assumed (including property, plant and equipment, goodwill and accrued expenses) are expected to be recorded as the Company receives further information during the remainder of fiscal 2014.

The Company executed the acquisition of Natural Balance with the objective of complementing the Company’s substantial pet products portfolio because Natural Balance operates in high growth channels in which the Company is currently underrepresented.

The results of operations for Natural Balance are included in the Pet Products segment beginning July 15, 2013. The acquired business contributed net sales of $11.8 million from the acquisition date to July 28, 2013. The following unaudited pro forma financial information presents the combined results of operations of the Company, including Natural Balance, as if the acquisition had occurred as of the beginning of the periods presented. The unaudited pro forma financial information is not intended to represent or be indicative of the Company’s consolidated financial results of operations that would have been reported had the business combination been completed as of the beginning of the period presented and should not be taken as indicative of the Company’s future consolidated results of operations (in millions):

9

DEL MONTE CORPORATION AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the three months ended July 28, 2013

(unaudited)

	Three Months Ended (unaudited)
	July 28, 2013		July 29, 2012
Net sales	$	874.1	$	881.0
Income from continuing operations before income taxes		35.1		4.3
Net income		20.3		5.0

Note 5. Goodwill and Intangible Assets

The following table presents the Company’s goodwill and intangible assets (in millions):

	July 28, 2013			April 28, 2013
Goodwill:
Pet Products segment	$	2,122.7		$	1,976.1
Consumer Products segment		143.6			143.6
Total goodwill	$	2,266.3		$	2,119.7
Non-amortizable intangible assets:
Trademarks	$	1,994.7		$	1,871.4
Amortizable intangible assets:
Trademarks		82.3			82.3
Customer relationships		1,033.8			876.7
		1,116.1			959.0
Accumulated amortization		(118.9	)		(106.1	)
Amortizable intangible assets, net		997.2			852.9
Total intangible assets, net	$	2,991.9		$	2,724.3

During the three months ended July 28, 2013, the Company’s goodwill and intangible assets increased by a total of $427.0 million, with a $123.3 million and $157.1 million increase for trademarks and customer relationships, respectively, and a $146.6 million increase for goodwill, due to the Natural Balance acquisition (see Note 4). Further, changes to goodwill or intangible assets may be recorded as the purchase price allocations are finalized through the remainder of fiscal 2014.

Amortization expense for the periods indicated below was as follows (in millions):

	Three Months Ended
	July 28, 2013		July 29, 2012
Amortization expense	$	12.8	$	12.5

Customer relationships acquired during the period were classified as amortizable intangible assets, and had a weighted average amortization period of 17.1 years. Trademarks acquired during the period were classified as non-amortizable intangible assets.

10

DEL MONTE CORPORATION AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the three months ended July 28, 2013

(unaudited)

As of July 28, 2013, expected amortization of intangible assets for each of the five succeeding fiscal years and thereafter is as follows (in millions):

2014 (remainder)	$	44.4
2015		59.2
2016		59.0
2017		58.6
2018		58.6
2019 and thereafter		717.4

Note 6. Derivative Financial Instruments

The Company uses interest rate swaps, commodity swaps, futures, option and swaption (an option on a swap) contracts as well as forward foreign currency contracts to hedge market risks relating to possible adverse changes in interest rates, commodity, transportation and other input prices and foreign currency exchange rates. The Company continually monitors its positions and the credit ratings of the counterparties involved to mitigate the amount of credit exposure to any one party.

The Company designates each derivative contract as one of the following: (1) a hedge of a forecasted transaction or of the variability of cash flows to be received or paid related to a recognized asset or liability (“cash flow hedge”) or (2) a hedging instrument for which the change in fair value is recognized to act as an economic hedge but does not meet the requirements to receive hedge accounting treatment (“economic hedge”). As of July 28, 2013, the Company had both cash flow and economic hedges.

Interest Rates: The Company’s debt primarily consists of floating rate term loans and fixed rate notes. The Company maintains its floating rate revolver for flexibility to fund seasonal working capital needs and for other uses of cash. Interest expense on the Company’s floating rate debt is typically calculated based on a fixed spread over a reference rate, such as LIBOR (also known as the Eurodollar rate). Therefore, fluctuations in market interest rates will cause interest expense increases or decreases on a given amount of floating rate debt.

The Company from time to time manages a portion of its interest rate risk related to floating rate debt by entering into interest rate swaps in which the Company receives floating rate payments and makes fixed rate payments. Swaps are recorded as an asset or liability in the Company’s consolidated balance sheet at fair value. Any gains and losses on economic hedges are recorded as an adjustment to other (income) expense.

As of July 28, 2013, the following economic hedge swaps were outstanding:

Contract date	Notional amount (in millions)		Fixed LIBOR rate			Effective date		Maturity date
April 12, 2011	$	900.0		3.029	%		September 4, 2012		September 1, 2015
August 13, 2010	$	300.0		1.368	%		February 1, 2011		February 3, 2014

Commodities: Certain commodities such as soybean meal, corn, wheat, soybean oil, diesel fuel and natural gas (collectively, “commodity contracts”) are used in the production and transportation of the Company’s products. Generally these commodities are purchased based upon market prices that are established with the vendor as part of the purchase process. The Company uses futures, swaps, swaption or option contracts, as deemed appropriate, to reduce the effect of price fluctuations on anticipated purchases. These contracts may have a term of up to 24 months. The Company accounted for these commodity derivatives as either economic or cash flow hedges. For cash flow hedges, the effective portion of derivative gains and losses is deferred in equity and recognized as part of cost of products sold in the appropriate period and the ineffective portion is recognized as other (income) expense. Changes in the value of economic hedges are recorded directly in earnings.

11

DEL MONTE CORPORATION AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the three months ended July 28, 2013

(unaudited)

The table below presents the notional amounts of the Company’s commodity contracts as of the dates indicated (in millions):

	July 28,		April 28,
	2013		2013
Commodity contracts	$	254.7	$	269.4

Foreign Currency: The Company manages its exposure to fluctuations in foreign currency exchange rates by entering into forward contracts to cover a portion of its projected expenditures paid in local currency. These contracts may have a term of up to 24 months. The Company accounted for these contracts as either cash flow or economic hedges. For cash flow hedges, the effective portion of derivative gains and losses is deferred in equity and recognized as part of cost of products sold in the appropriate period and the ineffective portion is recognized as other income or expense. Changes in the value of the economic hedges are recorded directly in earnings.

The table below presents foreign currency derivative contracts as of the dates indicated (in millions). All of the foreign currency derivative contracts held on July 28, 2013 are scheduled to mature prior to the end of fiscal 2015.

	July 28,		April 28,
	2013		2013
Contract amount (Mexican pesos)	$	17.9	$	—

Fair Value of Derivative Instruments

The fair value of derivative instruments recorded in the Condensed Consolidated Balance Sheet as of July 28, 2013 was as follows (in millions):

	Asset derivatives				Liability derivatives
Derivatives in economic hedging relationships	Balance Sheet location	Fair value			Balance Sheet location	Fair value
Interest rate contracts	Other non-current assets	$	—		Other non-current liabilities	$	25.6
Interest rate contracts	Prepaid expenses and other current assets		—		Accounts payable and accrued expenses		27.3
Commodity and other contracts	Prepaid expenses and other current assets		4.9	(1)	Accounts payable and accrued expenses		6.5	(2)
Foreign currency exchange contracts	Prepaid expenses and other current assets		1.4		Accounts payable and accrued expenses		—
Total		$	6.3			$	59.4

⁽¹⁾  Includes $(3.1) million of commodity contracts (asset derivatives) designated as cash flow hedges.

⁽²⁾  Represents commodity contracts (liability derivatives) designated as cash flow hedges.

The fair value of derivative instruments recorded in the Consolidated Balance Sheet as of April 28, 2013 was as follows (in millions):

	Asset derivatives				Liability derivatives
Derivatives in economic hedging relationships	Balance Sheet location	Fair value			Balance Sheet location	Fair value
Interest rate contracts	Other non-current assets	$	—		Other non-current liabilities	$	33.5
Interest rate contracts	Prepaid expenses and other current assets		—		Accounts payable and accrued expenses		28.4
Commodity and other contracts	Prepaid expenses and other current assets		3.8	(1)	Accounts payable and accrued expenses		10.6	(2)
Total		$	3.8			$	72.5

⁽¹⁾  Includes $0.3 million of commodity contracts (asset derivatives) designated as cash flow hedges.

⁽²⁾  Represents commodity contracts (liability derivatives) designated as cash flow hedges.

12

DEL MONTE CORPORATION AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the three months ended July 28, 2013

(unaudited)

The effect of the Company’s economic hedges on other (income) expense in the Condensed Consolidated Statements of Income for the periods indicated below was as follows (in millions):

	Three Months Ended
	July 28, 2013			July 29, 2012
Interest rate contracts	$	(1.9	)	$	7.4
Commodity and other contracts		(7.3	)		(34.7	)
Foreign currency exchange contracts		—			0.9
Included in other (income) expense	$	(9.2	)	$	(26.4	)

The effect of the Company’s cash flow hedges in the Condensed Consolidated Statements of Income for the three months ended July 28, 2013 was as follows (in millions):

Derivatives in cash flow hedging relationships	(Gain) loss recognized in AOCI			Location of (gain) loss reclassified in AOCI	(Gain) loss reclassified from AOCI into income			Location of (gain) loss recognized in income (ineffective portion and amount excluded from effectiveness testing)	(Gain) loss recognized in income (ineffective portion and amount excluded from effectiveness testing)
Interest rate contracts	$	—		Interest expense	$	—		Other (income) expense	$	—
Commodity contracts		—		Cost of products sold		(0.3	)	Other (income) expense		0.3
Foreign currency exchange contracts		(1.4	)	Cost of products sold		(0.1	)	Other (income) expense		—
Total	$	(1.4	)		$	(0.4	)		$	0.3

At July 28, 2013, $8.3 million is expected to be reclassified from AOCI to cost of products sold within the next 12 months.

Note 7. Fair Value Measurements

A three-tier fair value hierarchy is utilized to prioritize the inputs used in measuring fair value. The hierarchy gives the highest priority to quoted prices in active markets (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels are defined as follows:

• Level 1 Inputs—unadjusted quoted prices in active markets for identical assets or liabilities;

• Level 2 Inputs—quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument; and

• Level 3 Inputs—unobservable inputs reflecting the Company’s own assumptions in measuring the asset or liability at fair value.

The Company uses interest rate swaps, commodity contracts and forward foreign currency contracts to hedge market risks relating to possible adverse changes in interest rates, commodity prices, diesel fuel prices and foreign exchange rates.

13

DEL MONTE CORPORATION AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the three months ended July 28, 2013

(unaudited)

The following table provides the fair values hierarchy for financial assets and liabilities measured on a recurring basis (in millions):

		Level 1				Level 2				Level 3
		July 28,		April 28,		July 28,		April 28,		July 28,		April 28,
Description		2013		2013		2013		2013		2013		2013
Assets
Interest rate contracts		$	—	$	—	$	—	$	—	$	—	$	—
Commodity and other contracts			1.1		2.1		3.8		1.7		—		—
Foreign currency exchange contracts			—		—		1.4		—		—		—
Total		$	1.1	$	2.1	$	5.2	$	1.7	$	—	$	—
Liabilities
Interest rate contracts		$	—	$	—	$	52.9	$	61.9	$	—	$	—
Commodity and other contracts			—		5.2		6.5		5.4		—		—
Foreign currency exchange contracts			—		—		—		—		—		—
	��
Total		$	—	$	5.2	$	59.4	$	67.3	$	—	$	—

The Company’s determination of the fair value of its interest rate swaps was calculated using a discounted cash flow analysis based on the terms of the swap contracts and the observable interest rate curve. The Company’s futures and options contracts are traded on regulated exchanges such as the Chicago Board of Trade, Kansas City Board of Trade and the New York Mercantile Exchange. The Company values these contracts based on the daily settlement prices published by the exchanges on which the contracts are traded. The Company’s commodities swap and swaption contracts are traded over-the-counter and are valued based on the Chicago Board of Trade quoted prices for similar instruments in active markets or corroborated by observable market data available from the Energy Information Administration. The Company measures the fair value of foreign currency forward contracts using an income approach based on forward rates (obtained from market quotes for futures contracts with similar terms) less the contract rate multiplied by the notional amount.

As of July 28, 2013, the book value of the Company’s floating rate debt instruments approximates fair value. The Company uses Level 2 inputs to estimate the fair value of such debt. The following table provides the book value and the fair value of the Company’s fixed rate notes (“Senior Notes”) (in millions):

	July 28,		April 28,
Senior Notes	2013		2013
Book value	$	1,300.0	$	1,300.0
Fair value	$	1,357.6	$	1,381.3

Fair value was estimated based on quoted market prices from the trading desk of a nationally recognized investment bank. As the Senior Notes are available to investors through certain brokerage firms, the Company has classified this debt as Level 2 of the fair value hierarchy.

Note 8. Retirement Benefits

Del Monte sponsors a qualified defined benefit pension plan and several unfunded defined benefit postretirement plans providing certain medical, dental and life insurance benefits to eligible retired, salaried, non-union hourly and union employees. See Note 9 of the 2013 Annual Report for additional information about these plans. The components of net periodic benefit cost of the qualified defined benefit and post-retirement plans for the periods indicated below are as follows (in millions):

	Pension Benefits						Other Benefits
	Three Months Ended
	July 28,			July 29,			July 28,			July 29,
	2013			2012			2013			2012
Components of net periodic benefit cost:
Service cost for benefits earned during the period	$	3.4		$	3.4		$	0.3		$	0.4
Interest cost on projected benefit obligation		4.6			5.1			1.4			1.9
Expected return on plan assets		(8.5	)		(8.1	)		—			—
Net (loss) gain amortization		—			—			(0.6	)		—
Net periodic benefit cost	$	(0.5	)	$	0.4		$	1.1		$	2.3

14

DEL MONTE CORPORATION AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the three months ended July 28, 2013

(unaudited)

Note 9. Accumulated Other Comprehensive Loss

The following table summarizes the reclassifications from accumulated other comprehensive loss to the Condensed Consolidated Statements of Income for the three months ended July 28, 2013 (in millions):

Details about Accumulated Other Comprehensive Loss Components	Amount Reclassified from Accumulated Other Comprehensive Loss			Affected Line Item in the Condensed Consolidated Statements of Income
Gains/(losses) on cash flow hedges:
Foreign currency exchange contracts	$	(0.1	)	Cost of products sold
Commodity contracts		(0.3	)	Cost of products sold
		(0.4	)	Total before tax
		(0.2	)	Benefit for income taxes
	$	(0.2	)	Net of tax
Defined benefit pension plan items:
Amortization of prior service benefits	$	0.3	(1)
Amortization of actuarial gains/(losses)		(0.6	)(1)
		(0.3	)	Total before tax
		(0.1	)	Benefit for income taxes
Total reclassifications	$	(0.2	)	Net of tax

⁽¹⁾  These accumulated other comprehensive loss components are included in the computation of net periodic pension and postretirement benefit costs. See Note 8 for additional information.

Note 10. Legal Proceedings

Except as set forth below, there have been no material developments in the Company’s legal proceedings since the legal proceedings reported in the 2013 Annual Report.

Commercial Litigation Involving the Company

On April 22, 2013, Plaintiffs filed a complaint in the U.S. District Court for the Northern District of California (Langille, et al. v. Del Monte)alleging false and misleading advertising under California’s consumer protection laws. Plaintiffs allege the Company made a variety of false and misleading advertising claims including, but not limited to, implying that its refrigerated fruit products are “fresh” and “natural.” The complaint seeks certification as a class action and damages in excess of $5.0 million. The Company denies these allegations and intends to vigorously defend itself. On May 1, 2013, Plaintiffs filed a motion to relate this case to theKosta v. Del Monte matter. The Company filed a Joinder in support of Plaintiffs’ Motion on May 6, 2013. The Court ordered the cases related in an Order on May 15, 2013. The parties filed a Joint Stipulation to consolidate these cases on June 3, 2013 and the Judge granted this Order on June 5, 2013. TheKosta andLangille plaintiffs filed their Consolidated Class Action Complaint on June 11, 2013. The Company filed its Answer on June 28, 2013. The Company cannot at this time reasonably estimate a range of exposure, if any, of the potential liability.

On April 19, 2013, Plaintiff filed a complaint on behalf of himself and all other similarly situated employees in Superior Court of California, Alameda County (Montgomery v. Del Monte) alleging,inter alia, failure to provide meal and rest periods and pay wages properly in violation of various California wage and hour statutes. On May 24, 2013, Plaintiff filed its First Amended Complaint. The Court granted the parties’ Application to Transfer to Kings County on June 14, 2013. The Company denies these allegations and intends to vigorously defend itself. The Company cannot at this time reasonably estimate a range of exposure, if any, of the potential liability.

15

DEL MONTE CORPORATION AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the three months ended July 28, 2013

(unaudited)

On January 31, 2013, a putative class action complaint was filed against the Company in the Circuit Court of Jackson County, Missouri (Harmon v. Del Monte) alleging thatMilo’s Kitchen chicken jerky treats (“Chicken Jerky Treats”) andMilo’s KitchenChicken Grillers Recipe home-style dog treats contain “poisonous antibiotics and other potentially lethal substances.” Plaintiff seeks restitution and damages not to exceed $75,000 per class member and the aggregated claim for damages of the class not to exceed $5.0 million under the Missouri Merchandising Practices Act. The complaint also alleges the Company continued to sell its Chicken Jerky Treats in Jackson County, Missouri after it announced its recall of the product on January 9, 2013. The complaint seeks certification as a class action. The Company successfully removed this case to federal court on March 12, 2013. On April 9, 2013, Plaintiff filed its Second Amended Class Action Petition against the Company. The Company filed its Motion to Transfer to the Western District of Pennsylvania on April 19, 2013 and its Motion to Stay Pending the Motion to Transfer on April 25, 2013. The Motion to Stay was granted the same day it was filed. On May 6, 2013, Plaintiffs filed their Opposition to Defendant’s Motion to Transfer. The Company filed its Reply in Support of its Motion to Transfer on May 23, 2013. The Court denied the Company’s Motion to Transfer on July 22, 2013. The Company denies these allegations and intends to vigorously defend itself. The Company cannot at this time reasonably estimate a range of exposure, if any, of the potential liability.

On September 6, 2012, October 12, 2012 and October 16, 2012, three separate putative class action complaints were filed against the Company in U.S. District Court for the Northern District of California (Langone v. Del Monte,Ruff v. Del Monte, andFunke v. Del Monte, respectively) alleging product liability claims relating to Chicken Jerky Treats. Specifically, the complaints allege that Plaintiffs’ dogs became ill as a result of consumption of Chicken Jerky Treats. The complaints also allege that the Company breached its warranties and California’s consumer protection laws. Each of the complaints seeks certification as a class action and damages in excess of $5.0 million. The Company denies these allegations and intends to vigorously defend itself. On December 18, 2012, Plaintiffs filed a motion to relate and consolidate theLangone,Ruff andFunke matters. The Company agreed that the cases are related but argued in its response that they should not be consolidated. The Court ordered the cases are related in an Order on January 24, 2013. In theLangone case, the Company filed a Motion to Transfer/Dismiss on February 1, 2013. Plaintiff in theLangonematter voluntarily dismissed his Complaint without prejudice on February 21, 2013 and re-filed in the U.S. District Court for the Western District of Pennsylvania on May 21, 2013. On April 9, 2013, the Court transferredRuff andFunke to the U.S. District Court for the Western District of Pennsylvania but denied without prejudice Defendant’s motions to consolidate and dismiss. On April 23, 2013, the Company filed its Motion to Dismiss inRuff andFunke with the U.S. District Court for the Western District of Pennsylvania and its Reply in Support of its Motion to Dismiss in both cases on June 3, 2013. The Company filed its Motion to Dismiss in theLangone case with the U.S. District Court for the Western District of Pennsylvania on August 2, 2013. The Company cannot at this time reasonably estimate a range of exposure, if any, of the potential liability.

On July 19, 2012, a putative class action complaint was filed against the Company in U.S. District Court for the Western District of Pennsylvania (Mazur v. Del Monte) alleging product liability claims relating to Chicken Jerky Treats. Specifically, the complaint alleges that Plaintiff’s dog became ill and had to be euthanized as a result of consumption of Chicken Jerky Treats. The complaint also alleges that the Company breached its warranties and Pennsylvania’s consumer protection laws. The complaint seeks certification as a class action and damages in excess of $5.0 million. The Company denies these allegations and intends to vigorously defend itself. On August 3, 2012, Plaintiff’s counsel filed a Motion to Consolidate the previously filed two similar class actions against Nestle Purina Petcare Company, owner of the Waggin’ Train brand of chicken jerky treats, in U.S. District Court for the Northern District of Illinois under the federal rules for multi-district litigation (“MDL”). Plaintiff’s Motion also sought to include the case against the Company in the proposed MDL consolidation as a “related case.” On September 28, 2012, the Court denied the MDL Motion. The case will now proceed in the jurisdiction in which it was originally filed. Plaintiff filed a Motion for Leave to Commence Limited Discovery on the subject of the voluntary recall of Chicken Jerky Treats on January 25, 2013. The Company filed its response opposing the Motion on February 8, 2013. The Court denied Plaintiff’s Motion on March 12, 2013; thus, discovery is stayed until the Court rules on the Company’s Motion to Dismiss, which was filed on September 24, 2012. On May 24, 2013, the Judge in the matter issued a Report and Recommendation stating that the Motion to Dismiss be granted as to Plaintiff’s claim for unjust enrichment and denied in all other respects. The Company filed its Objections to the Report and Recommendation on June 7, 2013. The Court issued an Order adopting the Magistrate Judge’s Report and Recommendation on June 25, 2013. The Court denied the Company’s Motion for Reconsideration on July 8, 2013. The Company filed its answer on August 2, 2013. The Company cannot at this time reasonably estimate a range of exposure, if any, of the potential liability.

On August 16, 2013, theLangone,Ruff, Funke andMazur cases were consolidated.

16

DEL MONTE CORPORATION AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the three months ended July 28, 2013

(unaudited)

On April 5, 2012, a complaint was filed against the Company in U.S. District Court for the Northern District of California (Kosta v. Del Monte) alleging false and misleading advertising under California’s consumer protection laws. The complaint seeks certification as a class action and damages in excess of $5.0 million. On June 15, 2012, the Company filed a Motion to Dismiss Plaintiff’s complaint. Plaintiff filed an amended complaint on July 6, 2012, negating the Company’s Motion to Dismiss. In its amended complaint, Plaintiff alleges the Company made a variety of false and misleading advertising claims including, but not limited to, its lycopene and antioxidant claims for tomato products; implying that its refrigerated products are fresh and all natural; implying that Fresh Cut vegetables are fresh; and making misleading claims regarding sugar, nutrient content, preservatives and serving size. The Company denies these allegations and intends to vigorously defend itself. The Company filed a new Motion to Dismiss Plaintiff’s complaint on July 31, 2012. The Motion to Dismiss was denied on May 15, 2013. Plaintiff moved on November 5, 2012 to seek application of the doctrine of collateral estoppel in this matter based on the jury’s finding in the Fresh Del Monte Inc. v. Del Monte case. The Company’s Response to Plaintiff’s Motion for Application of Collateral Estoppel was filed on January 17, 2013. Plaintiff’s Reply was filed on February 21, 2013. The Court denied Plaintiff’s Motion on May 17, 2013. The Court in Langille ordered these two matters related in an Order on May 15, 2013. The parties filed a joint stipulation to consolidate these cases on June 3, 2013 and the Judge granted this Order on June 5, 2013. The Kosta and Langille plaintiffs filed their Consolidated Class Action Complaint on June 11, 2013. The Company filed its Answer on June 28, 2013. The Company cannot at this time reasonably estimate a range of exposure, if any, of the potential liability.

On September 28, 2011, a complaint was filed against the Company by the Environmental Law Foundation in California Superior Court for the County of Alameda alleging violations of California Health and Safety Code sections 25249.6 et seq. (commonly known as “Proposition 65”). Specifically, the Plaintiff alleges that the Company violated Proposition 65 by distributing certain pear, peach and fruit cocktail products without providing warnings required by Proposition 65. The Plaintiff seeks injunctive relief, damages in an unspecified amount and attorneys’ fees. Trial commenced on April 8, 2013 and closing oral arguments were heard on May 16, 2013. The Judge issued his final decision on July 31, 2013, finding that the Defendants proved their case under the Proposition 65 safe harbor defense, therefore the Company currently does not need to place Proposition 65 warning labels on the applicable food products. The Company has denied these allegations and has vigorously defended itself. The Plaintiff has 60 days after the issuance of a final judgment to appeal the decision. The Company cannot at this time estimate a range of exposure, if any, of the potential liability.

Note 11. Segment Information

The Company has the following reportable segments:

• The Pet Products segment manufactures, markets and sells branded and private label dry and wet pet food and pet snacks.

• The Consumer Products segment manufactures, markets and sells branded and private label shelf-stable products, including fruit, vegetable, tomato and broth products.

The Company’s chief operating decision-maker, its CEO, reviews financial information presented on a consolidated basis accompanied by disaggregated information on net sales and operating income, by operating segment, for purposes of making decisions about resources to be allocated and assessing financial performance. The chief operating decision-maker reviews assets of the Company on a consolidated basis only. Fixed assets are neither maintained nor available by operating segment. The accounting policies of the individual operating segments are the same as those of the Company.

17

DEL MONTE CORPORATION AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the three months ended July 28, 2013

(unaudited)

The following table presents financial information about the Company’s reportable segments (in millions):

	Three Months Ended
	July 28,			July 29,
	2013			2012
Net sales:
Pet Products	$	481.0		$	458.3
Consumer Products		342.9			362.8
Total	$	823.9		$	821.1
Operating income:
Pet Products	$	91.3		$	51.5
Consumer Products		10.2			13.8
Corporate(1)		(15.7	)		(19.5	)
Total		85.8			45.8
Reconciliation to income from continuing operations before income taxes:
Interest expense		59.7			65.2
Other (income) expense, net		(8.4	)		(25.8	)
Income from continuing operations before income taxes	$	34.5		$	6.4

⁽¹⁾  Corporate represents expenses not directly attributable to reportable segments. For the three months ended July 28, 2013 and July 29, 2012, Corporate included $0.4 million and $6.0 million, respectively, of restructuring related expense.

Note 12. Related Party Transactions

See Note 14 of the 2013 Annual Report for a description of the Company’s related party transactions. As of July 28, 2013, there was a payable of $1.2 million due to the managers related to the monitoring agreement, which is included in accounts payable and accrued expenses on the Condensed Consolidated Balance Sheets. As of April 28, 2013, there was a payable of $1.7 million due to the managers related to the monitoring agreement. For the three months ended July 28, 2013, the Company paid $0.7 million to a KKR affiliate for rent related to leased administrative space in Pittsburgh, PA.

During the three months ended July 28, 2013, the Company paid $3.5 million to a Vestar advisor for a finder’s fee related to the Natural Balance acquisition.

18

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This discussion is intended to further the reader’s understanding of the consolidated financial condition and results of operations of our Company. It should be read in conjunction with the financial statements included in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the year ended April 28, 2013 (the “2013 Annual Report”). These historical financial statements may not be indicative of our future performance. This Management’s Discussion and Analysis of Financial Condition and Results of Operations contains a number of forward-looking statements, all of which are based on our current expectations and could be affected by the uncertainties and risks described in “Part I, Item 1A. Risk Factors” in our 2013 Annual Report and in “Part II, Item 1A. Risk Factors” of this Quarterly Report on Form 10-Q.

Corporate Overview

Our Business

Del Monte Corporation (“DMC”) and its consolidated subsidiaries (together, “Del Monte” or the “Company”) is one of the country’s largest producers, distributors and marketers of premium quality, branded pet products and food products for the U.S. retail market, with pet food and pet snack brands for dogs and cats such asMeow Mix, Kibbles ‘n Bits, Milk-Bone, 9Lives, Natural Balance, Pup-Peroni, Gravy Train, Nature’s Recipe, Canine Carry Outs, Milo’s Kitchen and other brand names and food brands such asDel Monte, Contadina, College Inn, S&W, and other brand names. We have two reportable segments: Pet Products and Consumer Products. The Pet Products segment manufactures, markets and sells branded and private label dry and wet pet food and pet snacks. The Consumer Products segment manufactures, markets and sells branded and private label shelf-stable products, including fruit, vegetable, tomato and broth products.

Merger

On March 8, 2011, we were acquired by an investor group led by funds affiliated with Kohlberg Kravis Roberts & Co. L.P. (“KKR”), Vestar Capital Partners (“Vestar”) and Centerview Capital, L.P. (“Centerview,” and together with KKR and Vestar, the “Sponsors”). The acquisition (also referred to as the “Merger”) was effected by the merger of Blue Merger Sub Inc. (“Blue Sub”) with and into Del Monte Foods Company (“DMFC”), with DMFC being the surviving corporation. As a result of the Merger, DMFC became a wholly-owned subsidiary of Blue Acquisition Group, Inc. (“Parent”). On April 26, 2011, DMFC merged with and into DMC, with DMC being the surviving corporation. As a result of this merger, DMC became a direct wholly-owned subsidiary of Parent.

Key Performance Indicators

The following tables set forth some of our key performance indicators that we utilize to assess results of operations (in millions, except percentages):

	Three Months Ended
	July 28,			July 29,
	2013			2012			Change			% Change			Volume (1)			Rate (2)
Net sales	$	823.9		$	821.1		$	2.8			0.3	%		(5.3	%)		5.6	%
Cost of products sold		575.0			600.6			(25.6	)		(4.3	%)		(3.7	%)		(0.6	%)
Gross profit		248.9			220.5			28.4			12.9	%
Selling, general and administrative expense (“SG&A”)		163.1			174.7			(11.6	)		(6.6	%)
Operating income	$	85.8		$	45.8		$	40.0			87.3	%
Gross margin		30.2	%		26.9	%
SG&A as a % of net sales		19.8	%		21.3	%
Operating income margin		10.4	%		5.6	%

⁽¹⁾  This column represents the change, as compared to the prior year period, due to volume and mix. Volume represents the change resulting from the number of units sold, exclusive of any change in price. Volume changes in the above tables include elasticity, the volume decline associated with price increases. Mix represents the change attributable to shifts in volume across products or channels.

⁽²⁾  This column represents the change, as compared to the prior year period, attributable to per unit changes in net sales or cost of products sold.

19

					Trailing Twelve
	Three Months Ended				Months Ended
	July 28,		July 29,		July 28,
	2013		2012		2013
Adjusted EBITDA(3)	$	139.5	$	113.6	$	621.4
Ratio of net debt to Adjusted EBITDA(4)		n/a		n/a		6.2	x

⁽³⁾  Refer to “Reconciliation of Non-GAAP Financial Measures—Adjusted EBITDA” below.

⁽⁴⁾  Net debt is calculated as total debt at the end of the period (including both short-term borrowings and long-term debt) less cash and cash equivalents.

Executive Overview

In the first quarter of fiscal 2014, we had net sales of $823.9 million, operating income of $85.8 million and net income of $19.9 million, compared to net sales of $821.1 million, operating income of $45.8 million and net income of $6.3 million in the first quarter of fiscal 2013. Adjusted EBITDA was $139.5 million for the three months ended July 28, 2013 and $113.6 million for the three months ended July 29, 2012. Refer to “Reconciliation of Non-GAAP Financial Measures—Adjusted EBITDA” below.

Net sales in our Pet Products segment increased by 5.0% and net sales in our Consumer Products segment decreased by 5.5%, resulting in an overall increase in net sales of 0.3% for the quarter. This increase was driven by net pricing (pricing net of trade spending) primarily in the Pet Products segment, offset by decreased sales of existing products in both our Pet and Consumer Products segments. Sales ofNatural Balancepet products also contributed to the increase in net sales. See below for more information on the acquisition of Natural Balance Pet Foods, Inc. (“Natural Balance”).

Operating income for the quarter increased 87.3% as compared to the year-ago quarter. The increase in operating income was driven primarily by net pricing, decreased marketing spending and decreased costs associated with the closure of our Kingsburg, California facility.

Adjusted EBITDA increased 22.8% as compared to the year-ago quarter. The positive impact of net pricing and decreased marketing costs drove the increase in Adjusted EBITDA, partially offset by the cash impact of hedging activities. Gains and losses on economic hedging positions are recorded as other (income) expense. The cash impact of these activities is reflected in Adjusted EBITDA.

On July 15, 2013, we completed the acquisition of Natural Balance, maker of premium pet food for dogs and cats sold throughout North America. The total cost of the acquisition was $341.4 million. The financial results of Natural Balance are reported within the Pet Products segment.

As of July 28, 2013, our total debt was $3,909.6 million. On June 27, 2013, in accordance with the terms of our Senior Secured Term Loan Credit Agreement, we made a payment of $74.5 million representing the excess annual cash flow payment due for fiscal 2013. As a result of this excess cash flow payment, no quarterly payments will be due in fiscal 2014.

Results of Operations

The following discussion provides a summary of operating results for the three months ended July 28, 2013, compared to the results for the three months ended July 29, 2012 (in millions, except percentages).

Net sales

	Three Months Ended
	July 28,		July 29,
	2013		2012		Change			% Change			Volume (1)			Rate (2)
Net sales:
Pet Products	$	481.0	$	458.3	$	22.7			5.0	%		(2.5	%)		7.5	%
Consumer Products		342.9		362.8		(19.9	)		(5.5	%)		(8.8	%)		3.3	%
Total	$	823.9	$	821.1	$	2.8			0.3	%

20

⁽¹⁾  This column represents the change, as compared to the prior year period, due to volume and mix. Volume represents the change resulting from the number of units sold, exclusive of any change in price. Volume changes in the above tables include elasticity, the volume decline associated with price increases. Mix represents the change attributable to shifts in volume across products or channels.

⁽²⁾  This column represents the change, as compared to the prior year period, attributable to per unit changes in net sales or cost of products sold.

Net sales increased 0.3% for the three months ended July 28, 2013 compared to the three months ended July 29, 2012. The increase was driven by net pricing primarily in our Pet Products segment, offset by decreased sales of existing products in both our Pet and Consumer Products segments. Natural Balance sales also contributed to the increase in net sales.

Net sales in our Pet Products segment were $481.0 million for the three months ended July 28, 2013, an increase of $22.7 million or 5.0%, compared to $458.3 million for the three months ended July 29, 2012. This increase was primarily driven by net pricing, as well as Natural Balance sales, partially offset by decreased volumes, including the impact of pricing elasticity.

Net sales in our Consumer Products segment were $342.9 million for the three months ended July 28, 2013, a decrease of $19.9 million, or 5.5% compared to $362.8 million for the three months ended July 29, 2012. This decrease was primarily driven by decreased sales of existing products, partially offset by reduced trade spending and pricing. The decrease in sales volumes resulted from fewer promotional activities due to industry-wide supply constraints of peaches, as well as continued business challenges in South America, including high inflation and currency devaluation in Venezuela.

Cost of products sold

Cost of products sold for the three months ended July 28, 2013 was $575.0 million, a decrease of $25.6 million or 4.3% compared to $600.6 million for the three months ended July 29, 2012. This decrease was primarily due to the lower volumes mentioned above, as well as productivity savings, partially offset by increased ingredient costs in our Pet Products segment. Lower costs related to the closure of our Kingsburg, California facility also contributed to the decrease.

While the impact of economic hedge transactions is reflected in Corporate other (income) expense in the current period, we are now utilizing and expect to continue to utilize hedge accounting treatment for certain of our hedging transactions which will primarily impact the second quarter of fiscal 2014 and beyond and will cause the impact of hedged costs to be reflected in our cost of products sold in those future periods. See other (income) expense below.

Gross margin

Our gross margin percentage for the three months ended July 28, 2013 increased 3.3 points to 30.2% compared to 26.9% for the three months ended July 29, 2012. Net pricing benefitted gross margin by 3.9 margin points and the lower costs noted above benefitted gross margin by 0.4 margin points, partially offset by a 1.0 margin point decrease due to product mix.

Selling, general and administrative expense

SG&A expense for the three months ended July 28, 2013 was $163.1 million, a decrease of $11.6 million, or 6.6%, compared to $174.7 million for the three months ended July 29, 2012. This decrease was primarily driven by lower marketing expense as we lap the new product introduction expenses incurred in the prior year. Conversely, we incurred transaction costs related to the Natural Balance acquisition which were offset by lower general and administrative expenses.

Operating income

	Three Months Ended
	July 28, 2013			July 29, 2012			Change			% Change
Operating income:
Pet Products	$	91.3		$	51.5		$	39.8			77.3	%
Consumer Products		10.2			13.8			(3.6	)		(26.1	%)
Corporate(1)		(15.7	)		(19.5	)		3.8			(19.5	%)
Total	$	85.8		$	45.8		$	40.0			87.3	%

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⁽¹⁾  Corporate represents expenses not directly attributable to reportable segments. For the three months ended July 28, 2013 and July 29, 2012, Corporate includes $0.4 million and $6.0 million, respectively, of restructuring related expenses.

Operating income for the three months ended July 28, 2013 was $85.8 million, an increase of $40.0 million, or 87.3%, compared to $45.8 million for the three months ended July 29, 2012. This increase reflects the net pricing and lower SG&A expense, both as noted previously.

Our Pet Products segment operating income increased by $39.8 million, or 77.3%, to $91.3 million for the three months ended July 28 2013 from $51.5 million for the three months ended July 29, 2012. Net pricing, as well as decreased marketing expense and continued strong productivity savings, contributed to the increase in operating income, partially offset by increased ingredient costs.

Our Consumer Products segment operating income decreased by $3.6 million, or 26.1%, to $10.2 million for the three months ended July 28, 2013 from $13.8 million for the three months ended July 29, 2012. Lower volumes, increased raw product costs and higher marketing expense drove the decrease in operating income. Net pricing partially offset the decline in operating income.

Our Corporate expenses decreased by $3.8 million, or 19.5%, during the three months ended July 28, 2013 compared to the prior year period. This decrease was primarily due to decreased costs associated with the closure of our Kingsburg, California facility.

Interest expense

Interest expense decreased by $5.5 million, or 8.4%, to $59.7 million for the three months ended July 28, 2013 from $65.2 million for the three months ended July 29, 2013. This decrease was primarily driven by a lower average debt balance as a result of the excess annual cash flow payments.

Other (income) expense

Other income of $8.4 million for the three months ended July 28, 2013 was comprised primarily of gains on commodity hedging contracts, as well as gains on interest rate swaps. Other income of $25.8 million for the three months ended July 29, 2012 was comprised primarily of gains on commodity hedging contracts, partially offset by losses on interest rate swaps.

Provision for income taxes

The effective tax rate for continuing operations for the three months ended July 28, 2013 was 42.3% compared to 1.6% for the three months ended July 29, 2012. The change in the effective tax rate for the three month period was primarily due to the prior year tax rate being benefited from a change in state tax law and an increase in the state tax rate in the current year.

Reconciliation of Non-GAAP Financial Measures—Adjusted EBITDA

We report our financial results in accordance with generally accepted accounting principles in the United States (“GAAP”). In this Quarterly Report on Form 10-Q, we also provide certain non-GAAP financial measures — Adjusted EBITDA and ratio of net debt to Adjusted EBITDA. We present Adjusted EBITDA because we believe that this is an important supplemental measure relating to our financial condition since it is used in certain covenant calculations that may be required from time to time under the indenture that governs our 7.625% Senior Notes due 2019 (referred to therein as “EBITDA”) and the credit agreements relating to our term loan and revolver (referred to therein as “Consolidated EBITDA”). We present the ratio of net debt to Adjusted EBITDA because it is used internally to focus management on year-over-year changes in our leverage and we believe this information is also helpful to investors. We use Adjusted EBITDA in this leverage measure because we believe our investors are familiar with Adjusted EBITDA and that consistency in presentation of EBITDA-related measures is helpful to investors.

EBITDA is defined as income before interest expense, provision for income taxes, and depreciation and amortization. Adjusted EBITDA is defined as EBITDA, further adjusted as required by the definitions of “EBITDA” and “Consolidated EBITDA” contained in our indenture and credit agreements. Our presentation of Adjusted EBITDA has limitations as an analytical tool. Adjusted EBITDA is not a measure of liquidity or profitability and should not be considered as an alternative to net income, operating income, net cash provided by operating activities or any other measure determined in accordance with GAAP. Additionally, Adjusted EBITDA is not intended to be a measure of cash flow for management’s discretionary use, as it does not consider debt service requirements, obligations under the monitoring agreement with our Sponsors, capital expenditures or other non-discretionary expenditures that are not deducted from the measure.

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We caution investors that our presentation of Adjusted EBITDA and ratio of net debt to Adjusted EBITDA may not be comparable to similarly titled measures of other companies.

The following table provides a reconciliation of Adjusted EBITDA for the periods indicated, (in millions):

	Three Months Ended						Trailing Twelve Months Ended
	July 28, 2013			July 29, 2012			July 28, 2013
Reconciliation:
Operating income - Quarter ended July 29, 2012	$	—		$	45.8		$	—
Operating income - Quarter ended October 28, 2012		—			—			105.2
Operating income - Quarter ended January 27, 2013		—			—			108.9
Operating income - Quarter ended April 28, 2013		—			—			124.6
Operating income - Quarter ended July 28, 2013		85.8			—			85.8
Other income (expense)		8.4			25.8			(4.9	)
Adjustments to arrive at EBITDA:		—						—
Depreciation and amortization(1)		35.5			41.1			148.9
Amortization of debt issuance costs and debt discount(2)		(5.1	)		(6.1	)		(23.2	)
EBITDA		124.6			106.6			545.3
Non-cash charges		0.6			0.2			4.3
Derivative transactions(3)		(2.2	)		(7.6	)		4.5
Non-cash stock based compensation		3.0			2.5			7.8
Non-recurring (gains) losses		0.5			2.4			10.7
Merger/acquisition-related items		7.6			—			15.4
Business optimization charges		2.3			6.9			22.5
Other		3.1			2.6			10.9
Adjusted EBITDA	$	139.5		$	113.6		$	621.4
Net Debt(4)							$	3,824.5
Ratio of net debt to Adjusted EBITDA								6.2	x

⁽¹⁾  Includes $0.1 million, $4.8 million and $3.1 million of accelerated depreciation in the three months ended July 28, 2013 and July 29, 2012, and the trailing twelve months ended July 28, 2013, respectively, related to the closure of our Kingsburg, California facility. See “Note 18. Exit or Disposal Activities” to our consolidated financial statements in our 2013 Annual Report.

⁽²⁾  Represents adjustments to exclude amortization of debt issuance costs and debt discount reflected in depreciation and amortization because such costs are not deducted in arriving at operating income.

⁽³⁾  Represents adjustments needed to reflect only the cash impact of derivative transactions in the calculation of Adjusted EBITDA.

⁽⁴⁾  Net debt is calculated as total debt at the end of the period (including both short-term borrowings and long-term debt and excluding debt discount) less cash and cash equivalents.

Liquidity and Capital Resources

We have cash requirements that vary based primarily on the timing of our inventory production for fruit, vegetable and tomato items. Inventory production relating to these items typically peaks during the first and second fiscal quarters. Our most significant cash needs relate to this seasonal inventory production, as well as to continuing cash requirements related to the production of our other products. In addition, our cash is used for the repayment, including interest and fees, of our primary debt obligations (i.e. our revolver and our term loans, our senior notes and, if necessary, our letters of credit), contributions to our pension plan, expenditures for capital assets, lease payments for some of our equipment and properties and other general business purposes. We have also used cash for acquisitions, legal settlements and transformation and restructuring plans. We may from time to time consider other uses for our cash flow from operations and other sources of cash. Such uses may include, but are not limited to, future acquisitions, transformation or restructuring plans. Our primary sources of cash are typically funds we receive as payment for the products we produce and sell and from our revolving credit facility.

As of July 28, 2013 and July 29, 2012, we had not made any contributions to our defined benefit pension plan for fiscal 2014 or fiscal 2013, respectively. We currently meet and plan to continue to meet the minimum funding levels required under the Pension Protection Act of 2006 (the “Act”). The Act imposes certain consequences on our defined benefit plan if it does not

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meet the minimum funding levels. We have made contributions in excess of our required minimum amounts during fiscal 2013 and 2012. Due to uncertainties of future funding levels as well as plan financial returns, we cannot predict whether we will continue to achieve specified plan funding thresholds. We currently expect to make contributions of approximately $15.0 million in fiscal 2014.

We believe that cash on hand, cash flow from operations and availability under our revolver will provide adequate funds for our working capital needs, planned capital expenditures, debt service obligations and planned pension plan contributions for at least the next 12 months. We anticipate utilizing our revolver during fiscal 2014, with usage peaking in September or October.

On July 11, 2013, we purchased a minority equity interest in a co-packer of some of our dog products for $14.6 million. While we exercise significant influence over the co-packer, we do not hold a controlling interest in the company. As such, the investment is accounted for under the equity method and is stated at cost plus our share of undistributed earnings or losses.

On July 15, 2013, we completed the acquisition of Natural Balance Pet Foods, Inc. (“Natural Balance”), a California corporation and maker of premium pet food for dogs and cats sold throughout North America. The total cost of the acquisition was $341.4 million. The total cost of the acquisition is subject to a post-closing working capital adjustment after 90 days from the closing date.

Our debt consists of the following, as of the dates indicated, (in millions):

	July 28,		April 28,
	2013		2013
Short-term borrowings:
Revolver	$	—	$	—
Other		2.2		3.2
Total short-term borrowings	$	2.2	$	3.2
Long-term debt:
Term Loan Facility	$	2,607.4	$	2,681.9
7.625% Notes		1,300.0		1,300.0
		3,907.4		3,981.9
Less unamortized discount		4.4		4.7
Less current portion		6.6		74.5
Total long-term debt	$	3,896.4	$	3,902.7

Description of Indebtedness

The summary of our indebtedness and restrictive and financial covenants set forth below is qualified by reference to our senior secured term loan credit agreement, our senior secured asset-based revolving credit facility, our senior notes indenture, and the amendments thereto, all of which are set forth as exhibits to our public filings with the Securities and Exchange Commission (“SEC”).

Senior Secured Term Loan Credit Agreement

Our senior secured term loan credit agreement initially provided for a $2,700.0 million senior secured term loan B facility (with all related loan documents, and as amended from time to time, the “Term Loan Facility”) with a term of seven years.

On February 5, 2013, we entered into an amendment to our Senior Secured Term Loan Credit Agreement. The amendment, among other things, (1) lowered the LIBOR rate floor on term loans under the credit agreement from 1.50% to 1.00% and the base rate floor from 2.50% to 2.00%; (2) added a leverage-based pricing step-down whereby, in the event our ratio of consolidated total debt to EBITDA is at or less than 5.75 to 1.00, the applicable interest margin decreases from 3.00% to 2.75% on LIBOR rate loans and from 2.00% to 1.75% on base rate loans; and (3) provided for an increase by $100 million in the aggregate principal amount of term loans outstanding.

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Loans under the amended Term Loan Facility bear interest at a rate equal to an applicable margin, plus, at our option, either (i) a LIBOR rate (with a floor of 1.00%) or (ii) a base rate (with a floor of 2.00%) equal to the highest of (a) the federal funds rate plus 0.50%, (b) JPMorgan Chase Bank, N.A.’s “prime rate” and (c) the one-month LIBOR rate plus 1.00%. As of July 28, 2013, the applicable margin with respect to LIBOR borrowings is 3.00% and with respect to base rate borrowings is 2.00%.

The amended Term Loan Facility generally requires quarterly scheduled principal payments of 0.25% of the outstanding principal per quarter from March 31, 2013 to December 31, 2017. The balance is due in full on the maturity date of March 8, 2018. Under the Term Loan Facility, on June 27, 2013 we made a payment of $74.5 million representing the excess annual cash flow payment due for the fiscal year ended April 28, 2013. Scheduled principal payments with respect to the Term Loan Facility are subject to reduction following any mandatory or voluntary prepayments on terms and conditions set forth in the Senior Secured Term Loan Credit Agreement. As of July 28, 2013, the amount of outstanding loans under the Term Loan Facility was $2,607.4 million and the blended interest rate payable was 4.0%, or 5.1% after giving effect to our interest rate swaps. See “Note 6. Derivative Financial Instruments” to our condensed consolidated financial statements in this Quarterly Report on Form 10-Q for a discussion of our interest rate swaps.

The Senior Secured Term Loan Credit Agreement also requires us to prepay outstanding loans under the Term Loan Facility, subject to certain exceptions, with, among other things:

• 50% (which percentage will be reduced to 25% if our leverage ratio is 5.5x or less and to 0% if our leverage ratio is 4.5x or less) of our annual excess cash flow, as defined in the Senior Secured Term Loan Credit Agreement;

• 100% of the net cash proceeds of certain casualty events and non-ordinary course asset sales or other dispositions of property for a purchase price above $10 million, in each case, subject to our right to reinvest the proceeds; and

• 100% of the net cash proceeds of any incurrence of debt, other than proceeds from debt permitted under the Senior Secured Term Loan Credit Agreement.

We have the right to request an additional $500.0 million plus an additional amount of secured indebtedness under the Term Loan Facility. Lenders under this facility are under no obligation to provide any such additional loans, and any such borrowings will be subject to customary conditions precedent, including satisfaction of a prescribed leverage ratio, subject to the identification of willing lenders and other customary conditions precedent.

Senior Secured Asset-Based Revolving Credit Agreement

Our senior secured asset-based revolving facility provides for senior secured financing of up to $750 million (with all related loan documents, and as amended from time to time, the “ABL Facility”) with a term of five years. We maintain the ABL Facility for flexibility to fund our seasonal working capital needs, which are affected by, among other things, the growing cycle of the fruits, vegetables and tomatoes we process, and for other general corporate purposes. The vast majority of our fruit, vegetable and tomato inventories are produced during the harvesting and packing months of June through October and depleted through the remaining seven months. Accordingly, our need to draw on the ABL Facility may fluctuate significantly during the year.

Borrowings under the ABL Facility bear interest at an initial interest rate equal to an applicable margin, plus, at our option, either (i) a LIBOR rate, or (ii) a base rate equal to the highest of (a) the federal funds rate plus 0.50%, (b) Bank of America, N.A.’s “prime rate” and (c) the one-month LIBOR rate plus 1.00%. The applicable margin with respect to LIBOR borrowings is currently 2.0% (and may increase to 2.50% depending on average excess availability) and with respect to base rate borrowings is currently 1.00% (and may increase to 1.50% depending on average excess availability).

In addition to paying interest on outstanding principal under the ABL Facility, we are required to pay a commitment fee at an initial rate of 0.500% per annum in respect of the unutilized commitments thereunder. The commitment fee rate may be reduced to 0.375% depending on the amount of excess availability under the ABL Facility. We must also pay customary letter of credit fees and fronting fees for each letter of credit issued.

Availability under the ABL Facility is subject to a borrowing base. The borrowing base, determined at the time of calculation, is an amount equal to: (a) 85% of eligible accounts receivable and (b) the lesser of (1) 75% of the net book value of eligible inventory and (2) 85% of the net orderly liquidation value of eligible inventory, of the borrowers under the facility at such time, less customary reserves. The ABL Facility will mature, and the commitments thereunder will terminate, on March 8, 2016. As of July 28, 2013, there were no loans outstanding under the ABL Facility, the amount of letters of credit issued under the ABL Facility was $29.2 million and the net availability under the ABL Facility was $539.0 million.

The ABL Facility includes a sub-limit for letters of credit and for borrowings on same-day notice, referred to as “swingline loans.” No new letters of credit were issued under the ABL Facility on March 8, 2011 but certain letters of credit outstanding under a prior credit facility were deemed to be outstanding under the ABL Facility. We are the lead borrower under the ABL Facility and other domestic subsidiaries may be designated as borrowers on a joint and several basis.

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The commitments under the ABL Facility may be increased, subject only to the consent of the new or existing lenders providing such increases, such that the aggregate principal amount of commitments does not exceed $1.0 billion. The lenders under this facility are under no obligation to provide any such additional commitments, and any increase in commitments will be subject to customary conditions precedent. Notwithstanding any such increase in the facility size, our ability to borrow under the facility will remain limited at all times by the borrowing base (to the extent the borrowing base is less than the commitments).

Senior Notes Due 2019

Our senior notes due February 15, 2019 have an aggregate principal amount of $1,300.0 million and a stated interest rate of 7.625% (the “7.625% Notes”). Interest on the 7.625% Notes is payable semi-annually on February 15 and August 15 of each year.

The 7.625% Notes are required to be fully and unconditionally guaranteed by each of our existing and future domestic restricted subsidiaries that guarantee our obligations under the Term Loan Facility and ABL Facility.

Prior to February 15, 2014, we have the option of redeeming (a) all or a part of the 7.625% Notes at 100% of the principal amount plus a “make whole” premium, or, using the proceeds from certain equity offerings and subject to certain conditions, (b) up to 35% of the then-outstanding 7.625% Notes at a premium of 107.625% of the aggregate principal amount and a special interest payment. Beginning on February 15, 2014, we may redeem all or a part of the 7.625% Notes at a premium ranging from 103.813% to 101.906% of the aggregate principal amount. Finally, beginning on February 15, 2016, we may redeem all or a part of the 7.625% Notes at face value. Any redemption as described above is subject to the concurrent payment of accrued and unpaid interest, if any, upon redemption.

Pursuant to the terms of a registration rights agreement, we were obligated, among other things, to use our commercially reasonable efforts to file and cause to become effective an exchange offer registration statement with the SEC with respect to a registered offer (the “Exchange Offer”) to exchange the 7.625% Notes for freely tradable notes having substantially identical terms as the 7.625% Notes. Substantially all of the 7.625% Notes were exchanged for substantially identical registered notes pursuant to an Exchange Offer that was consummated on December 16, 2011.

Security Interests and Guarantees

Indebtedness under the Term Loan Facility is generally secured by a first priority lien on substantially all of our assets other than inventories and accounts receivable, and by a second priority lien with respect to inventories and accounts receivable. The ABL Facility is generally secured by a first priority lien on our inventories and accounts receivable and by a second priority lien on substantially all of our other assets. The 7.625% Notes are our senior unsecured obligations and rank senior in right of payment to the existing and future indebtedness and other obligations that expressly provide for their subordination to the 7.625% Notes; rank equally in right of payment to all of the existing and future unsecured indebtedness; are effectively subordinated to all of the existing and future secured debt (including obligations under the Term Loan Facility and ABL Facility described above) to the extent of the value of the collateral securing such debt; and are structurally subordinated to all existing and future liabilities, including trade payables, of the non-guarantor subsidiaries, to the extent of the assets of those subsidiaries.

All our obligations under the senior secured term loan credit agreement and senior secured asset-based revolving facility agreement are unconditionally guaranteed by Parent and by substantially all our existing and future, direct and indirect, wholly-owned material restricted domestic subsidiaries, subject to certain exceptions. The 7.625% Notes are required to be fully and unconditionally guaranteed by each of our existing and future domestic restricted subsidiaries that guarantee our obligations under the Term Loan Facility and ABL Facility. Subsequent to the July acquisition described above, Natural Balance is expected to become a guarantor subsidiary under our debt agreements.

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Maturities

As of July 28, 2013, scheduled maturities of long-term debt (representing debt under the Term Loans and 7.625% Notes) are as follows (in millions)⁽¹⁾:

2014 (remainder)	$	—
2015		26.4
2016		26.4
2017		26.4
2018		2,528.2
Thereafter		1,300.0

⁽¹⁾ Does not reflect any excess cash flow or other principal prepayments that may be required under the terms of the senior secured term loan credit agreement, as described above.

Restrictive and Financial Covenants

The Term Loan Facility, ABL Facility and indenture related to our 7.625% Notes contain restrictive covenants. See “Note 5. Short-Term Borrowings and Long-Term Debt” to our consolidated financial statements in our 2013 Annual Report for additional information regarding the covenants.

The Term Loan Facility, ABL Facility and indenture related to our 7.625% Notes generally do not require that we comply with financial maintenance covenants. The ABL Facility, however, contains a financial covenant that applies if availability under the ABL Facility falls below a certain level.

The restrictive and financial covenants in the Term Loan Facility, the ABL Facility and indenture related to the 7.625% Notes may adversely affect our ability to finance our future operations or capital needs or engage in other business activities that may be in our interest, such as acquisitions.

We believe that we are currently in compliance with all of our applicable covenants and were in compliance therewith as of July 28, 2013. Compliance with these covenants is monitored periodically in order to assess the likelihood of continued compliance. Our ability to continue to comply with these covenants may be affected by events beyond our control. If we are unable to comply with the covenants under the Term Loan Facility, the ABL Facility and indenture related to the 7.625% Notes, there would be a default, which, if not waived, could result in the acceleration of a significant portion of our indebtedness. See “Part II, Item 1A. Risk Factors—Restrictive covenants in the Credit Facilities and the indenture governing the Notes may restrict our operational flexibility. If we fail to comply with these restrictions, we may be required to repay our debt, which would materially and adversely affect our financial position and results of operations” in our 2013 Annual Report.

Cash Flow

During the three months ended July 28, 2013, our cash and cash equivalents decreased by $509.1 million and during the three months ended July 29, 2012, our cash and cash equivalents decreased by $130.4 million.

	Three Months Ended
	July 28,			July 29,
	2013			2012
	(in millions)
Net cash used in operating activities	$	(53.8	)	$	(0.8	)
Net cash used in investing activities		(380.5	)		(37.4	)
Net cash used in financing activities		(75.5	)		(91.1	)

Operating Activities

Cash used in operating activities was $53.8 million for the three months ended July 28, 2013, compared to cash used by operating activities of $0.8 million for the three months ended July 29, 2012. This change was driven by higher inventories due to lower volume of sales and timing of production, the $16.6 million payment related to the judgment in the Fresh Del Monte Produce, Inc. litigation, and higher cash taxes.

Typically, the cash requirements of the Consumer Products segment vary significantly during the year to coincide with the seasonal growing cycles of fruit, vegetables and tomatoes. The vast majority of our fruit, vegetable and tomato inventories are produced during the packing season, from June through October, and then depleted during the remaining months of the fiscal year. As a result, the vast majority of our total operating cash flow is generated during the second half of the fiscal year.

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Investing Activities

Cash used in investing activities was $380.5 million for the three months ended July 28, 2013 and $37.4 million for the three months ended July 29, 2012. During the three months ended July 28, 2013, we used $337.5 million for the acquisition of Natural Balance and $14.6 million to acquire a minority equity interest in a co-packer of some of our dog products. Capital spending was $28.4 million for the three months ended July 28, 2013 compared to $25.4 million for the three months ended July 29, 2012. In addition, we paid approximately $12.0 million for the purchase of a fruit processing plant and warehouse facility based in Yakima County, Washington out of the bankruptcy estate of Snokist Growers during the three months ended July 29, 2012. Capital spending for the remainder of fiscal 2014 is expected to be approximately $70 million to $90 million and is expected to be funded by cash on hand and cash generated by operating activities.

Financing Activities

During the first three months of fiscal 2014, we made $74.5 million in payments on long-term debt representing the excess annual cash flow payment due for the fiscal year ended April 28, 2013.

During the first three months of fiscal 2013, we made $91.1 million in payments on long-term debt representing the excess annual cash flow payment due for the fiscal year ended April 29, 2012.

Recently Issued Accounting Standards

In February 2013, the Financial Accounting Standards Board (“FASB”) issued an Accounting Standards Update related to comprehensive income. The amendments require an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component. This new accounting pronouncement is effective for fiscal years and interim periods within those years beginning after December 15, 2012, with early adoption permitted. Accordingly, we have included the enhanced footnote disclosure in our condensed consolidated financial statements in this Quarterly Report on Form 10-Q. See “Note 9. Accumulated Other Comprehensive Loss.”

Critical Accounting Policies and Estimates

Our discussion and analysis of the financial condition and results of operations are based upon our 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 ongoing basis, we reevaluate our estimates, including those related to trade promotions, goodwill and intangibles, retirement benefits and retained-insurance liabilities. Estimates in the assumptions used in the valuation of our stock compensation expense are updated periodically and reflect conditions that existed at the time of each new issuance of stock awards. We base estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the book values of assets and liabilities that are not readily apparent from other sources. For all of these estimates, we caution that future events rarely develop exactly as forecasted, and, therefore, these estimates routinely require adjustment.

Management has discussed the 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 Quarterly Report on Form 10-Q. Our significant accounting policies are described in “Note 2. Significant Accounting Policies” to our consolidated financial statements in our 2013 Annual Report. The following is a summary of the more significant judgments and estimates used in the preparation of our 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 spending includes amounts paid to encourage retailers to offer temporary price reductions for the sale of our products to consumers, to advertise our products in their circulars, to obtain favorable display positions in their stores and to obtain shelf space. We accrue for trade promotions, primarily at the time products are sold to customers, by reducing sales and recording a corresponding accrued liability. The amount we accrue is based on an estimate of the level of performance of the trade promotion, which is dependent upon factors such as historical trends with similar promotions, expectations regarding customer and consumer participation, and sales and payment trends with similar previously offered programs. Our original estimated costs of trade promotions are reasonably likely to change in the future as a result of changes in trends with regard to customer and consumer participation, particularly for new programs and for programs related to the introduction of

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new products. We perform monthly evaluations of our outstanding trade promotions, making adjustments, where appropriate, to reflect changes in our estimates. 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 trade promotion amounts due to a customer generally may take up to 18 months from the product shipment date. Our evaluations during the three months ended July 28, 2013 and July 29, 2012 resulted in no significant adjustments to our estimates relating to trade promotion liability.

Goodwill and Intangibles

Del Monte produces, distributes and markets products under many different brand names (also referred to as trademarks). During an acquisition, the purchase price is allocated to identifiable assets and liabilities, including brand names and other intangibles, based on estimated fair value, with any remaining purchase price recorded as goodwill. As a result of the Merger, we applied the acquisition method of accounting and established a new basis of accounting on March 8, 2011. Accordingly, each of our active brand names now has a value on our balance sheet.

We have evaluated our capitalized brand names and determined that some have lives that generally range from 5 to 25 years (“Amortizing Brands”) and others have indefinite lives (“Non-Amortizing Brands”). Non-Amortizing Brands typically have significant market share and a history of strong earnings and cash flow, which we expect to continue into the foreseeable future.

Amortizing Brands and customer relationships are amortized over their estimated lives. We review the asset groups containing Amortizing Brands and customer relationships (including related tangible assets) for impairment whenever events or changes in circumstances indicate that the book value of an asset group may not be recoverable. An asset or asset group is considered impaired if its book value exceeds the undiscounted future net cash flow the asset or asset group is expected to generate. If an asset or asset group is considered to be impaired, the impairment to be recognized is measured by the amount by which the book value of the asset exceeds its fair value. Non-Amortizing Brands and goodwill are not amortized, but are instead tested for impairment at least annually. Our annual impairment tests occur during the fourth quarter of our fiscal year. Non-Amortizing Brands are considered impaired if the book value exceeds the estimated fair value. The goodwill impairment test is a two-step process. Initially, we compare the book value of net assets to the fair value of each reporting unit that has goodwill assigned to it. If the fair value is determined to be less than the book value, a second step is performed to compute the amount of the impairment.

The estimated fair value of our Non-Amortizing Brands is determined using the relief from royalty method, which is based upon the estimated rent or royalty we would pay for the use of a brand name if we did not own it. For goodwill, the estimated fair value of a reporting unit is determined using the income approach, which is based on the cash flows that the unit is expected to generate over its remaining life, and the market approach, which is based on market multiples of similar businesses. Our reporting units are the same as our operating segments—Pet Products and Consumer Products—reflecting the way that we manage our business. Annually, we engage third-party valuation experts to assist in this process. Considerable management judgment is necessary in estimating future cash flows, market interest rates, discount rates and other factors affecting the valuation of goodwill and intangibles, including the operating and macroeconomic factors that may affect them. We use historical financial information, internal plans and projections, and industry information in making such estimates.

We did not recognize any impairment charges for our Amortizing Intangibles, Non-Amortizing Brands or goodwill during the three months ended July 28, 2013 and July 29, 2012. In connection with the acquisition of Natural Balance, we recorded $146.6 million of goodwill, $123.3 million of Non-Amortizing Brands and $157.1 million of customer relationships. As of July 28, 2013, we had $2,266.3 million of goodwill, $1,994.7 million of Non-Amortizing Brands, $68.7 million of Amortizing Brands, net of amortization and $928.5 million of customer relationships, net of amortization. The Pet Products segment has 94% of the goodwill and 70% of the Non-Amortizing Brands. TheDel Monte brand itself, which is included in the Consumer Products segment, comprises 28% of Non-Amortizing Brands. TheMeow Mixand Milk-Bone brands together, which are included in the Pet Products segment, comprise 38% of Non-Amortizing Brands.

Retirement Benefits

We sponsor a non-contributory defined benefit pension plan (“DB plan”), defined contribution plans, multi-employer plans and certain other unfunded retirement benefit plans for our eligible employees. The amount of DB plan benefits eligible retirees receive is based on their earnings and age. Retirees may also be eligible for medical, dental and life insurance benefits (“other benefits”) if they meet certain age and service requirements at retirement. Generally, other benefit costs are subject to plan maximums, such that the Company and retiree both share in the cost of these benefits.

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Our Assumptions

We utilize third-party actuaries to assist us in calculating the expense and liabilities related to the DB plan benefits and other benefits. DB plan benefits and other benefits which are expected to be paid are expensed over the employees’ expected service period. The actuaries measure our annual DB plan benefits and other benefits expense by relying on certain assumptions made by us. Such assumptions include:

• The discount rate used to determine projected benefit obligation and net periodic benefit cost (DB plan benefits and other benefits);

• The expected long-term rate of return on assets (DB plan benefits);

• The rate of increase in compensation levels (DB plan benefits); and

• Other factors including employee turnover, retirement age, mortality and health care cost trend rates.

These assumptions reflect our historical experience and our best judgment regarding future expectations. The assumptions, the plan assets and the plan obligations are used to measure our annual DB plan benefits expense and other benefits expense.

Since the DB plan benefits and other benefits liabilities are measured on a discounted basis, the discount rate is a significant assumption. The discount rate was determined based on an analysis of interest rates for high-quality, long-term corporate debt at the measurement date. In order to appropriately match the bond maturities with expected future cash payments, we utilize differing bond portfolios to estimate the discount rates for the DB plan and for the other benefits. The discount rate used to determine DB plan and other benefits projected benefit obligation as of the balance sheet date is the rate in effect at the measurement date. The same rate is also used to determine DB plan and other benefits expense for the following fiscal year. The long-term rate of return for DB plan’s assets is based on our historical experience, our DB plan’s investment guidelines and our expectations for long-term rates of return. Our DB plan’s investment guidelines are established based upon an evaluation of market conditions, tolerance for risk and cash requirements for benefit payments.

For fiscal 2014, expected return on assets for our qualified DB plan exceeds service and interest costs, resulting in a net credit of approximately $2.1 million to pension expense. We recognized a net credit of approximately $0.5 million during the three months ended July 28, 2013 and estimate we will recognize an additional credit of approximately $1.6 million during the remainder of fiscal 2014. During the three months ended July 28, 2013, we recognized other benefits expense of $1.1 million. Our remaining fiscal 2014 other benefits expense is currently estimated to be approximately $3.3 million. Our actual future pension and other benefit expense amounts may vary depending upon the accuracy of our original assumptions and future assumptions.

Stock Compensation Expense

We believe an effective way to align the interests of certain employees with those of our equity stakeholders is through employee stock-based incentives. Stock options are stock incentives in which employees benefit to the extent that the stock price for the stock underlying the option exceeds the strike price of the stock option before expiration. A stock option is the right to purchase a share of common stock at a predetermined exercise price. Restricted stock incentives are stock incentives in which employees receive the right to own shares of common stock and do not require the employee to pay an exercise price. Restricted stock incentives include restricted stock, restricted stock units, performance share units and performance accelerated restricted stock units. We follow the fair value method of accounting for stock-based compensation, under which employee stock option grants and other stock-based compensation are expensed over the vesting period, based on the fair value at the time the stock-based compensation is granted.

Subsequent to the Merger, Parent has issued to certain of our executive officers and other employees service-based stock options and performance-based stock options and restricted common stock. Service-based stock options generally vest in equal annual installments over a four or five-year period and generally have a ten-year term until expiration. Performance-based stock options granted prior to fiscal 2013 initially were to vest only if certain pre-determined performance criteria are met and also have a ten-year term. Certain shares of restricted common stock vested immediately, while certain other shares vest in equal annual installments over a three-year period.

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Our Post Merger Stock Option Assumptions.We measure stock option expense for both service-based options and performance-based options at the date of grant using the Black-Scholes valuation model. This model estimates the fair value of the options based on a number of assumptions, such as interest rates, employee exercises, the current price and expected volatility of common stock and expected dividends. The fair value of service-based stock options granted during the three months ended July 28, 2013 was $2.0 million. The fair value of performance-based stock options granted during the three months ended July 28, 2013 was $1.0 million. The following table presents the weighted-average valuation assumptions used for the recognition of stock option expense for stock options granted during the three months ended July 28, 2013:

	Service-based			Performance-based
	Options			Options
Expected life (in years)		5.9			5.9
Expected volatility		45.0	%		45.0	%
Risk-free interest rate		1.03	%		1.03	%
Dividend yield		0.0	%		0.0	%
Weighted average exercise price	$	5.95		$	5.95
Weighted average option value	$	2.57		$	2.57

Valuation of Restricted Common Stock.The fair value of restricted common stock is calculated by multiplying the price of Parent’s common stock on the date of grant by the number of shares granted.

Retained-Insurance Liabilities

Our business exposes us to the risk of liabilities arising out of our operations. For example, liabilities may arise out of claims of employees, customers or other third parties for personal injury or property damage occurring in the course of our operations. We manage these risks through various insurance contracts from third-party insurance carriers. We, however, retain an insurance risk for the deductible portion of each claim. For example, the deductible under our loss-sensitive worker’s compensation insurance policy is up to $0.5 million per claim. A third-party actuary is engaged to assist us in estimating the ultimate costs of certain retained insurance risks. Actuarial determination of our estimated retained-insurance liability is based upon the following factors:

• Losses which have been reported and incurred by us;

• Losses which we have knowledge of but have not yet been reported to us;

• Losses which we have no knowledge of but are projected based on historical information from both our Company and our industry; and

• The projected costs to resolve these estimated losses.

Our estimate of retained-insurance liabilities is subject to change as new events or circumstances develop which might materially impact the ultimate cost to settle these losses. During the three months ended July 28, 2013 and July 29, 2012, we experienced no significant adjustments to our estimates.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We have a risk management program that was adopted with the objective of minimizing our exposure to changes in interest rates, commodity, transportation and other price and foreign currency exchange rates. We do not trade or use instruments with the objective of earning financial gains on price fluctuations alone or use instruments where there are not underlying exposures. We believe that the use of derivative instruments to manage risk is in our best interest. As of July 28, 2013, we had both cash flow and economic hedges.

During the first quarter of fiscal 2014, we were primarily exposed to the risk of loss resulting from adverse changes in interest rates, commodity and other input prices as well as foreign currency exchange rates.

Interest Rates:Our debt primarily consists of floating rate term loans and fixed rate notes. We maintain our floating rate revolver for flexibility to fund seasonal working capital needs and for other uses of cash. Interest expense on our floating rate debt is typically calculated based on a fixed spread over a reference rate, such as LIBOR (also known as the Eurodollar rate). Therefore, fluctuations in market interest rates will cause interest expense increases or decreases on a given amount of floating rate debt.

From time to time, we manage a portion of our interest rate risk related to floating rate debt by entering into interest rate swaps in which we receive floating rate payments and make fixed rate payments. On April 12, 2011, we entered into interest rate swaps with a total notional amount of $900.0 million as the fixed rate payer. The interest rate swaps fix LIBOR at 3.029% for the term of the swaps. The swaps have an effective date of September 4, 2012 and a maturity date of September 1, 2015. On August 13, 2010, we entered into an interest rate swap with a notional amount of $300.0 million as the fixed rate payer. The interest rate swap fixes LIBOR at 1.368% for the term of the swap. The swap has an effective date of February 1, 2011 and a maturity date of February 3, 2014.

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The fair values of the Company’s interest rate swaps were recorded as current liabilities of $27.3 million and non-current liabilities of $25.6 million at July 28, 2013. The fair values of the Company’s interest rate swaps were recorded as current liabilities of $28.4 million and non-current liabilities of $33.5 million at April 28, 2013.

Assuming average floating rate term loans during the period and average revolver borrowings for the period equal to the trailing twelve months average (which were zero), a hypothetical one percentage point increase in interest rates would increase interest expense by approximately $3.8 million for the three months ended July 28, 2013.

Commodities: Certain commodities such as soybean meal, corn, wheat, soybean oil, diesel fuel and natural gas (collectively, “commodity contracts”) are used in the production or transportation of our products. As part of our commodity risk management activities, we use derivative financial instruments, primarily futures, swaps, options and swaptions (an option on a swap), to reduce the effect of changing prices and as a mechanism to procure the underlying commodity where applicable. We account for these commodities derivatives as either economic or cash flow hedges. Changes in the value of economic hedges are recorded directly in earnings. For cash flow hedges, the effective portion of the derivative gains and losses was deferred in equity and recognized as part of costs of products sold in the appropriate period and the ineffective portion was recognized as other (income) expense.

On July 28, 2013, the fair values of our commodities hedges were recorded as current assets of $4.9 million and current liabilities of $6.5 million. On April 28, 2013, the fair values of our commodities hedges were recorded as current assets of $3.8 million and current liabilities of $10.6 million.

The sensitivity analyses presented below (in millions) reflect potential losses of fair value resulting from hypothetical changes in market prices related to commodities. Sensitivity analyses do not consider the actions we may take to mitigate our exposure to changes, nor do they consider the effects such hypothetical adverse changes may have on overall economic activity. Actual changes in market prices may differ from hypothetical changes.

	July 28,		April 28,
	2013		2013
Effect of a hypothetical 10% change in market price :
Commodity contracts	$	23.5	$	26.4

Foreign Currency: We manage our exposure to fluctuations in foreign currency exchange rates by entering into forward contracts to cover a portion of our projected expenditures paid in local currency. These contracts may have a term of up to 24 months. We account for these contracts as either economic or cash flow hedges. Changes in the value of the economic hedges are recorded directly in earnings. For cash flow hedges, the effective portion of derivative gains and losses was deferred in equity and recognized as part of cost of products sold in the appropriate period and the ineffective portion was recognized as other (income) expense. As of July 28, 2013, we did not have any outstanding Canadian dollar currency hedges because we believe it is not in our best interest at this time. We may again in the future enter into Canadian dollar forward contracts.

As of July 28, 2013, the fair values of our foreign currency hedges were recorded as current assets of $1.4 million. As of April 28, 2013, we did not have any outstanding foreign currency hedges because we did not believe it was not in our best interest at the time. The table below (in millions) presents our foreign currency derivative contracts as of July 28, 2013 and April 28, 2013. All of the foreign currency derivative contracts held on July 28, 2013 are scheduled to mature prior to the end of fiscal 2015.

	July 28, 2013		April 28, 2013
Contract amount (Mexican pesos)	$	17.9	$	—

A summary of the fair value and the market risk associated with a hypothetical 10% adverse change in foreign currency exchange rates on our foreign currency hedges is as follows (in millions):

	July 28, 2013			April 28, 2013
Potential net loss in fair value of a hypothetical 10% adverse change in currency exchange rates	$	(1.7	)		n/a

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ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, or “Disclosure Controls,” as of the end of the period covered by this Quarterly Report on Form 10-Q. This evaluation, or “Controls Evaluation” was performed under the supervision and with the participation of management, including our President and Chief Executive Officer (our “CEO”) and our Executive Vice President, Chief Financial Officer and Treasurer (our “CFO”). Disclosure Controls are controls and procedures designed to reasonably ensure that information required to be disclosed in our reports filed under the Exchange Act, such as this quarterly report, is recorded, processed, summarized and reported within the time periods specified in the U.S. Securities and Exchange Commission’s rules and forms. Disclosure Controls include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, as amended, is accumulated and communicated to our management, including our CEO and CFO, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure. Our Disclosure Controls include some, but not all, components of our internal control over financial reporting.

Based upon the Controls Evaluation, and subject to the limitations noted in this Part I, Item 4, our CEO and CFO have concluded that as of the end of the period covered by this Quarterly Report on Form 10-Q, our Disclosure Controls were effective to provide reasonable assurance that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified by the Securities and Exchange Commission, and that material information relating to Del Monte Corporation and its consolidated subsidiaries is made known to management, including the CEO and CFO, particularly during the period when our periodic reports are being prepared.

Limitations on the Effectiveness of Controls

Our management, including our CEO and CFO, does not expect that our Disclosure Controls or our internal controls will prevent all error and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within Del Monte have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with associated policies or procedures. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

Changes in Internal Control Over Financial Reporting

There have not been any changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Securities Exchange Act of 1934, as amended) during the most recent fiscal quarter that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

CEO and CFO Certifications

The certifications of the CEO and the CFO required by Rule 13a-14 of the Securities Exchange Act of 1934, as amended, or the “Rule 13a-14 Certifications” are filed as Exhibits 31.1 and 31.2 of this Quarterly Report on Form 10-Q. This Part I, Item 4 of the Quarterly Report on Form 10-Q should be read in conjunction with the Rule 13a-14 Certifications for a more complete understanding of the topics presented.

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

For a description of material developments in our pending legal proceedings, see “Note 10. Legal Proceedings” in our Notes to the Condensed Consolidated Financial Statements included in Part I, Item  1 of this Quarterly Report on Form 10-Q, which is incorporated herein by reference.

ITEM 1A. RISK FACTORS

This Quarterly Report on Form 10-Q, including the section entitled “Item 1. Financial Statements” and the section entitled “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations,” contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, and Section 21E of the Securities Act of 1934. Statements that are not historical facts, including statements about our beliefs or expectations, are forward-looking statements. In some cases, you can identify forward-looking statements by the use of forward-looking terms such as “may,” “will,” “should,” “expect,” “intend,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” or “continue” or the negative of these terms or other comparable terms.

Forward-looking statements are based on our plans, estimates, expectations and assumptions as of the date of this Quarterly Report on Form 10-Q, and are subject to risks and uncertainties that may cause actual results to differ materially from the forward-looking statements. Accordingly, you should not place undue reliance on them. A detailed discussion of the known risks and uncertainties that could cause actual results and events to differ materially from such forward-looking statements is included in the section entitled “Risk Factors” in our 2013 Annual Report. Such risks and uncertainties include matters relating to:

• our debt levels and ability to service our debt and comply with covenants;

• the failure of the financial institutions that are part of the syndicate of our revolving credit facility to extend credit to us;

• competition, including pricing and promotional spending levels by competitors;

• our ability to launch new products and anticipate changing pet and consumer preferences;

• our ability to maintain or increase prices and persuade consumers to purchase our branded products versus lower-priced branded and private label offerings and shifts in consumer purchases to lower-priced or other value offerings, particularly during economic downturns;

• our ability to implement productivity initiatives to control or reduce costs;

• cost and availability of inputs, commodities, ingredients and other raw materials, including without limitation, energy (including natural gas), fuel, packaging, fruits, vegetables, tomatoes, grains (including corn), sugar, spices, meats, meat by-products, soybean meal, water, fats, oils and chemicals;

• logistics and other transportation-related costs;

• hedging practices and the financial health of the counterparties to our hedging programs;

• currency and interest rate fluctuations;

• the loss of significant customers or a substantial reduction in orders from these customers or the financial difficulties, bankruptcy or other business disruption of any such customer;

• contaminated ingredients;

• allegations that our products cause injury or illness, product recalls and product liability claims and other litigation;

• transformative plans;

• strategic transaction endeavors, if any, including identification of appropriate targets and successful implementation;

• reliance on certain third parties, including co-packers, our broker and third-party distribution centers or managers;

• changes in, or the failure or inability to comply with, U.S., foreign and local governmental regulations, including packaging and labeling regulations, environmental regulations and import/export regulations or duties;

• sufficiency and effectiveness of marketing and trade promotion programs;

• failure of our information technology systems;

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• adverse weather conditions, natural disasters, pestilences and other natural conditions that affect crop yields or other inputs or otherwise disrupt operations;

• any disruption to our manufacturing or supply chain, particularly any disruption in or shortage of seasonal pack;

• impairments in the book value of goodwill or other intangible assets;

• risks associated with foreign operations;

• pension costs and funding requirements;

• currency and interest rate fluctuations;

• negative comments posted on social media which may influence consumers’ perception of our brands;

• protecting our intellectual property rights or intellectual property infringement or violation claims; and

• the control of substantially all of our common stock by a group of private investors and conflicts of interest potentially posed by such ownership.

All forward-looking statements in this Quarterly Report on Form 10-Q are made only as of the date of this report. We undertake no obligation, other than as required by law, to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

(a) NONE.

(b) NONE.

(c) NONE.

See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources” in our 2013 Annual Report for a description of the restrictions on our ability to pay dividends.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

NONE.

ITEM 4. MINE SAFETY DISCLOSURES

NONE.

ITEM 5. OTHER INFORMATION

(a) NONE.

(b) NONE.

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ITEM 6. EXHIBITS

(a) Exhibits.

Exhibit Number	Description	Incorporated by Reference
		Form	Exhibit	Filing Date
*31.1	Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
*31.2	Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
*32.1	Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
*32.2	Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
^101.INS	XBRL Instance Document
^101.SCH	XBRL Taxonomy Extension Schema Document
^101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
^101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
^101.LAB	XBRL Taxonomy Extension Label Linkbase Document
^101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

* filed herewith

^ furnished herewith

XBRL (eXtensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, and otherwise is not subject to liability under these sections.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

DEL MONTE CORPORATION
By:	/S/    DAVID J. WEST
	David J. West
	President and Chief Executive Officer; Director
By:	/S/    LARRY E. BODNER
	Larry E. Bodner
	Executive Vice President,
	Chief Financial Officer and Treasurer

Dated: September 11, 2013

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