H. Roger Schwall
Assistant Director
Division of Corporation Finance
U.S. Securities and Exchange Commission
100 F Street, N.W. Mail Stop: 7010
Washington, D.C. 20549
Re:
Del Monte Foods Company
Annual Report for the fiscal year ended April 27, 2008
File No. 1-14335
Dear Mr. Schwall:
On behalf of Del Monte Foods Company, this letter responds to your letter of October 30, 2008
in connection with the above-referenced Annual Report. For your convenience the heading and text of
your comments precede our responses.
In future filings, please tailor the risk factor discussion to your circumstances by
referencing facts and events that provide further detail about or illustrate the risks you
describe. For example, revise the risk factors entitled “We may not be able to
successfully implement our business strategies to reduce costs...” to address how cost
increases impacted your results in 2008 and “Our Senior Credit Facility and indentures
include certain covenants...” to disclose the applicable financial ratios. Also revise the
risk factor entitled “Risk associated with
foreign operations, including changes in
import/export duties...” to discuss material risks relating to your operations in Venezuela.
Response
The Company notes the staff’s comment. As discussed with the staff, the Company conducts a
thorough review of its risk factors annually to consider developments that may impact the Company’s
business in the future as well as to revise risk factors to reflect changes in the Company’s
business. For example, in reviewing and revising risk factors for its annual report on Form 10-K
for the year ended May 3, 2009, the Company plans to make changes resulting from the disposition of
its seafood business (e.g. eliminating the risk factor titled “If we are unable to cover increases
in the minimum wage rate in American Samoa, our results of operations would be adversely
affected”). In connection with reviewing and revising risk factors for its annual report on Form
10-K for the year ended May 3, 2009, the Company will strive to add additional specificity and
color related to recent developments.
Business, page 3
Customers, page 9
2.
Please disclose whether customers other than Wal-Mart accounted for more than 10% of
your consolidated revenues. Also, discuss the terms of your arrangements with customers
accounting for more than 10% of your revenues. Please file all material contracts with
such customers.
Response
The Company confirms that no customer other than Wal-Mart accounted for more than 10% of its
consolidated revenues. We note the disclosure obligation set forth in Item 101(c)(vii) of
Regulation S-K and will comply with that requirement should any additional customers account for
more than 10% of the Company’s consolidated revenues in the future.
With respect to the terms of our arrangements with customers accounting for more than 10% of our
revenues, the Company notes that it does not have long-term contracts with such customers
obligating
them to purchase our products. Instead, as with other consumer packaged goods companies, our 10%
and other customers issue purchase orders when they desire to purchase product from us (whether our
branded products or our private label products). To clarify how we interact with our customers
generally, we propose adding the following as a new second paragraph to the section captioned
“Customers” in Item 1 Business in our annual report on Form 10-K for the year ended May 3, 2009:
Our sales teams work with our customers to promote the resale of our products in
their stores. These efforts include working with customers in the areas of
merchandising, product assortment and distribution and shelving. Our customers
provide us with purchase orders as they desire product and we fill these orders
based on generally standard terms of sale. Where we provide private label
products for our customers, we typically supply those customers on a purchase
order basis as well. These purchase orders could be on a stand-alone basis, or
issued under a master agreement that sets forth matters such as payment and
delivery terms. Our arrangements with our largest customer, Wal-Mart, operate in
generally the same fashion as those with our other customers and on overall
similar terms.
We note the staff’s comment regarding filing all material contracts. The Company confirms that
there are no contracts with Wal-Mart that are required to be filed as a material contract under
Item 601(b)(10) of Regulation S-K. As noted above, purchase
orders and related master agreements ordinarily accompany the kind
of business conducted by Del Monte. Del Monte is not substantially dependent upon any such
purchase order or master agreement with Wal-Mart. Del Monte acknowledges its obligation to file any material contracts
that may arise in the future.
Management’s Discussion and Analysis of Financial Conditions and Results of Operations, page
40
3.
Please discuss your planned capital expenditures and disclose the estimated amounts you
believe you will need to fund those expenditures.
Response
The Company will include a forward-looking statement regarding its expected capital expenditures
for the remainder of fiscal 2009 in its upcoming quarterly report on Form 10-Q for the period ended
October 26, 2008 as well as its expectation that cash from operations will be sufficient to fund
such planned expenditures. Additionally, the Company will include a forward-looking statement
regarding its expected capital expenditures for fiscal 2010 in its annual report on Form 10-K for
the fiscal year ended May 3, 2009.
Definitive Proxy Statement on Schedule 14A
Review, Approval and Ratification of Transactions with Related Parties, page 14
4.
Please confirm that no related party transaction, as defined by Item 404(a) of
Regulation S-K, occurred during the fiscal year 2008.
The Company is not aware of any related person transaction during fiscal 2008 that would be
required to be disclosed pursuant to Item 404(a) of Regulation S-K in its annual report for the
fiscal year ended April 27, 2008.
Executive Compensation, page 36
5.
Please amend your filing to include the disclosure in Item 407(e)(4) of Regulation S-K,
as required by Item 11 of Form 10-K.
Response
We believe that an amendment of our filing is not required. The Company advises the staff that
there are no relationships or transactions that would trigger disclosure under Item 407(e)(4) of
Regulation S-K. Accordingly, in reliance on the Regulation S-K Compliance and Disclosure
Interpretation 233.02, the Company omitted the Item 407(e)(4) caption.
6.
Please disclose whether the CEO provides any input to the Compensation Committee
regarding the determination of his compensation.
Response
We respectfully direct the staff’s attention to the information included under the caption “What
are the roles of the Compensation Committee, compensation consultant and management in determining
executive compensation?” on page 40 of our definitive proxy statement. We believe that this
provides all material disclosure regarding any input our CEO may have with respect to his own
compensation. However, in the interest of clarity, we propose to modify such disclosure in future
filings generally as set forth below (marked to show changes from our 2008 disclosure):
What are the roles of the Compensation Committee, compensation consultant and
management in determining executive compensation?
Executive compensation is set by the Compensation Committee, with support provided
by its compensation consultant Hewitt Associates, the CEO and other members of
management. In fiscal 2008, both Hewitt Associates and the CEO attended portions
of all the regularly scheduled Committee meetings. The processes of the peer
group analysis and performance assessments described above are used to evaluate
the compensation of our executive officers.
Generally, this process begins with
management’s (including the CEO’s) identification of the
responsibilities, leadership competencies, technical skills and experience
required for each executive officer position.
Any changes made to these executive position descriptions are discussed with and
approved by the Committee. Hewitt Associates then compiles the peer group
comparator data and market survey data relevant to the executive position
descriptions provided by management and submits it to the Committee for its
consideration, typically at its regularly scheduled September Committee meeting.
The Committee determines base salary and target levels of annual and long-term
incentive awards for each of the named executive officers after considering the
peer group data and other factors as discussed further below in “Components of
Executive Compensation.”In connection with the Committee’s determination, the
CEO maytypically provides the Committee with his insights
regarding these other factors that may impact base salary, annual incentive and
long-term incentive targets
for the other executive officers.
However,In addition, the CEO provides the Committee with a
self-evaluation regarding his performance during the year. Although the CEO
provides the Committee with his self-evaluations,
the CEO’s base salary and incentive compensation are determined during an
executive session where only the Committee members and Hewitt Associates are
present. The CEO’s annual base salary and target annual and long-term incentive
awards are further subject to review and approval by the independent members of
the Board of Directors.
Specifically, with regard to annual incentive compensation, each year the
Committee also approves the corporate objectives as well as the individual
objectives for each executive officer, which impact the amount of the executive’s
annual incentive compensation. As discussed in greater detail below, the
corporate objectives are based on the annual operating plan. Management
(including the CEO) recommends to the Compensation Committee the financial metrics
(e.g. EPS, cash flow and net sales) relating to the annual operating plan it
believes should be used for the corporate objectives. The CEO also is
significantly involved in establishing and evaluating the individual objectives
approved by the Committee for the executive officers under the Annual Incentive
Plan (AIP). As part of this process, the CEO submits to the Committee proposed
individual performance objectives for each of the Company’s executive officers,
including the named executive officersCEO, which are reviewed and approved
by the Committee. At the end of the fiscal year, the CEO provides his evaluation
of each executive officer’s performance against their individual objectives for
the Committee’s consideration and approval as part of his recommendation for
appropriate compensation awards under the AIP. Like the other participants in
the AIP, the CEO completes a self-evaluation of his performance against his
individual objectives under the
AIP. The Committee then determines the CEO’s individual objective score and
related compensation award under the AIP during an executive session where only
the Committee members and Hewitt Associates are present.
Please note that the foregoing is intended as an example of the revisions to be made in response to
the staff’s comment. In the event there are changes in the roles of the Compensation Committee,
the compensation consultant, and management (including the CEO) in connection with establishing
executive compensation, this section of Compensation Discussion & Analysis in future filings would
be revised accordingly.
***
In connection with responding to your letter of October 30, 2008, Del Monte Foods Company
acknowledges that:
•
the Company is responsible for the adequacy and accuracy of the disclosure in our
Annual Report for the fiscal year ended April 27, 2008;
•
staff comments or changes to disclosure in response to staff comments do not foreclose
the Commission from taking any action with respect to our Annual Report for the fiscal year
ended April 27, 2008; and
•
the Company may not assert staff comments as a defense in any proceeding initiated by
the Commission or any person under the federal securities laws of the United States.
Del Monte is available to discuss the matters addressed in this letter in further detail should
that be helpful to the staff. If we can provided additional information or respond to any
questions or comments regarding the foregoing, please do not hesitate to contact Isobel Jones,
Associate General Counsel, at 415-247-3477 or Julie Aldridge, Vice President, External Reporting,
at 415-247-3199.
