Sales were up for Del Monte Foods (NYSE:DLM) in the quarter ending Jan. 25, as were earnings. That's despite a December FDA warning about mercury contamination in tuna. Indeed, Del Monte's Star-Kist brand, with its high-margin tuna pouch products, continued to grow. Charlie the Tuna, so often told in commercials, "Sorry, Charlie," is anything but sorry.

Del Monte's other star is pet food. Morris the Cat has been trotted out, giving 9Lives cat food its recognized spokes-feline back, and hopefully a boost in sales. So far, that dancing Kibbles `n Bits dog and new product introductions appear to be driving sales higher.

Meanwhile, Del Monte unloaded three non-core pet food brands for $82.5 million. After taxes and fees, the company will use the roughly $65 million in proceeds to pay down debt. Good move. Del Monte has $1.7 billion in debt and a high debt-to-equity ratio of 154%.

Just over $1 billion of that debt was assumed in the Dec. 2002 acquisition of various product lines from H.J. Heinz (NYSE:HNZ). With combined revenues of $1.8 billion, these products represented 20% of Heinz's total sales, but were largely regarded as slow growth vehicles, if that.

In the latest quarter, revenues rose slightly, but net income soared 8.6%. For the fiscal year (ending May 2), the company expects a modest 2% to 4% jump in sales and a not-so-modest 6% to 9% boost in earnings, resulting in $0.73 to $0.77 in earnings per share. Based on those estimates, the stock trades at around 14 times earnings.

Of course, every company has its problems, and Del Monte has one, too. Wal-Mart (NYSE:WMT) accounts for roughly a quarter of sales. Clearly, Del Monte can ill afford to lose that account, and Wal-Mart has significant bargaining power when it comes to pricing. That said, Dial (NYSE:DL) and Clorox (NYSE:CLX), both with similar percentage of sales to Wal-Mart, trade at much higher multiples than Del Monte.

Moreover, Del Monte is on track to generate in excess of $150 million in annual free cash flow. Add that to the proceeds from asset sales, and the company has the resources to start paring down its mountain of debt. Again, with the stock trading a discount to other quality food companies -- for instance, Kraft Foods (NYSE:KFT) and General Mills (NYSE:GIS) -- there is the potential for Del Monte's earnings multiple to expand.

Blame it on the sorry tuna or the finicky cat, but something is clearly helping Del Monte boost its operating results. And just as clearly, this is one that bears watching for more than its talking animals.

Will the fish and cat carry Del Monte Foods to a prosperous future? Talk it over with other Fools on the Del Monte Foods discussion boards.

Besides being a tuna lover and feeding 9Lives tuna to his cats , W.D. Crotty used to work for Star-Kist -- and met Morris annually during company events. W.D. Crotty does not own any of the stocks mentioned.