-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Erct2oK1nzvvBJUGtlYEvf9Qs57csTh/J+LakSfpIruQnopjz0fAEvTLMSX9FKif cZTEOLmyz/k0HMD2rHe+8A== 0000950128-04-000867.txt : 20040824 0000950128-04-000867.hdr.sgml : 20040824 20040824152730 ACCESSION NUMBER: 0000950128-04-000867 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20040728 FILED AS OF DATE: 20040824 DATE AS OF CHANGE: 20040824 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HEINZ H J CO CENTRAL INDEX KEY: 0000046640 STANDARD INDUSTRIAL CLASSIFICATION: CANNED, FROZEN & PRESERVED FRUIT, VEG & FOOD SPECIALTIES [2030] IRS NUMBER: 250542520 STATE OF INCORPORATION: PA FISCAL YEAR END: 0430 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-03385 FILM NUMBER: 04994099 BUSINESS ADDRESS: STREET 1: 600 GRANT ST CITY: PITTSBURGH STATE: PA ZIP: 15219 BUSINESS PHONE: 4124565700 MAIL ADDRESS: STREET 1: P O BOX 57 STREET 2: P O BOX 57 CITY: PITTSBURGH STATE: PA ZIP: 15230 10-Q 1 j0853701e10vq.txt H.J. HEINZ 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JULY 28, 2004 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _______________ TO _______________ FOR THE THREE MONTHS ENDED JULY 28, 2004 COMMISSION FILE NUMBER 1-3385 H. J. HEINZ COMPANY (Exact name of registrant as specified in its charter) PENNSYLVANIA 25-0542520 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 600 GRANT STREET, PITTSBURGH, PENNSYLVANIA 15219 (Address of Principal Executive Offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (412) 456-5700 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 requirements for the past 90 days. Yes X No __ Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes X No __ The number of shares of the Registrant's Common Stock, par value $0.25 per share, outstanding as of August 20, 2004 was 349,448,646 shares. PART I--FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS H. J. HEINZ COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME
First Quarter Ended ------------------------------ July 28, 2004 July 30, 2003 FY 2005 FY 2004 ------------- ------------- (Unaudited) (In Thousands, Except per Share Amounts) Sales....................................................... $2,003,026 $1,895,524 Cost of products sold....................................... 1,264,273 1,188,448 ---------- ---------- Gross profit................................................ 738,753 707,076 Selling, general and administrative expenses................ 399,099 358,000 ---------- ---------- Operating income............................................ 339,654 349,076 Interest income............................................. 6,661 5,765 Interest expense............................................ 53,346 52,237 Other expense, net.......................................... 6,383 16,979 ---------- ---------- Income from continuing operations before income taxes....... 286,586 285,625 Provision for income taxes.................................. 91,750 98,800 ---------- ---------- Income from continuing operations........................... 194,836 186,825 Income from discontinued operations, net of tax............. -- 27,200 ---------- ---------- Net income.................................................. $ 194,836 $ 214,025 ========== ========== Income per common share Diluted Continuing operations.................................. $ 0.55 $ 0.53 Discontinued operations................................ -- 0.08 ---------- ---------- Net income........................................... $ 0.55 $ 0.60 ========== ========== Average common shares outstanding--diluted................ 354,977 354,522 ========== ========== Basic Continuing operations.................................. $ 0.56 $ 0.53 Discontinued operations................................ -- 0.08 ---------- ---------- Net income........................................... $ 0.56 $ 0.61 ========== ========== Average common shares outstanding--basic.................. 351,366 352,094 ========== ========== Cash dividends per share.................................... $ 0.285 $ 0.27 ========== ==========
See Notes to Condensed Consolidated Financial Statements. ------------------ 2 H. J. HEINZ COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS
July 28, 2004 April 28, 2004* FY 2005 FY 2004 ------------- --------------- (Unaudited) (Thousands of Dollars) ASSETS Current Assets: Cash and cash equivalents................................... $1,173,637 $1,180,039 Receivables, net............................................ 953,639 1,093,155 Inventories................................................. 1,167,564 1,156,932 Prepaid expenses and other current assets................... 262,386 180,670 ---------- ---------- Total current assets................................... 3,557,226 3,610,796 ---------- ---------- Property, plant and equipment............................... 3,750,702 3,727,224 Less accumulated depreciation............................... 1,699,051 1,669,938 ---------- ---------- Total property, plant and equipment, net............... 2,051,651 2,057,286 ---------- ---------- Goodwill.................................................... 1,977,529 1,959,914 Trademarks, net............................................. 644,510 643,901 Other intangibles, net...................................... 147,684 149,920 Other non-current assets.................................... 1,381,886 1,455,372 ---------- ---------- Total other non-current assets......................... 4,151,609 4,209,107 ---------- ---------- Total assets........................................... $9,760,486 $9,877,189 ========== ==========
* Summarized from audited fiscal year 2004 balance sheet. See Notes to Condensed Consolidated Financial Statements. ------------------ 3 H. J. HEINZ COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS
July 28, 2004 April 28, 2004* FY 2005 FY 2004 ------------- --------------- (Unaudited) (Thousands of Dollars) LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Short-term debt............................................. $ 13,026 $ 11,434 Portion of long-term debt due within one year............... 426,508 425,016 Accounts payable............................................ 910,085 1,063,113 Salaries and wages.......................................... 44,947 50,101 Accrued marketing........................................... 188,298 230,495 Other accrued liabilities................................... 347,819 361,596 Income taxes................................................ 319,087 327,313 ---------- ---------- Total current liabilities.............................. 2,249,770 2,469,068 ---------- ---------- Long-term debt.............................................. 4,523,797 4,537,980 Deferred income taxes....................................... 330,542 313,343 Non-pension postretirement benefits......................... 191,841 192,599 Other liabilities and minority interest..................... 497,307 470,010 ---------- ---------- Total long-term liabilities............................ 5,543,487 5,513,932 Shareholders' Equity: Capital stock............................................... 107,868 107,868 Additional capital.......................................... 423,919 403,043 Retained earnings........................................... 4,951,797 4,856,918 ---------- ---------- 5,483,584 5,367,829 Less: Treasury stock at cost (80,564,216 shares at July 28, 2004 and 79,139,249 shares at April 28, 2004)............... 3,001,340 2,927,839 Unearned compensation..................................... 38,544 32,275 Accumulated other comprehensive loss...................... 476,471 513,526 ---------- ---------- Total shareholders' equity............................. 1,967,229 1,894,189 ---------- ---------- Total liabilities and shareholders' equity............. $9,760,486 $9,877,189 ========== ==========
* Summarized from audited fiscal year 2004 balance sheet. See Notes to Condensed Consolidated Financial Statements. ------------------ 4 H. J. HEINZ COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
First Quarter Ended ------------------------------ July 28, 2004 July 30, 2003 FY 2005 FY 2004 ------------- ------------- (Unaudited) (Thousands of Dollars) Cash Flows from Operating Activities: Net income................................................ $ 194,836 $ 214,025 Income from discontinued operations, net of tax........... -- (27,200) ---------- --------- Income from continuing operations......................... 194,836 186,825 Adjustments to reconcile net income to cash provided by operating activities: Depreciation............................................ 53,654 51,857 Amortization............................................ 5,429 4,375 Deferred tax provision.................................. 34,657 19,529 Gain on sale of the Northern Europe bakery business..... -- (26,338) Other items, net........................................ 27,483 949 Changes in current assets and liabilities, excluding effects of acquisitions and divestitures: Receivables........................................... 129,979 166,734 Inventories........................................... (6,936) (8,314) Prepaid expenses and other current assets............. (50,799) (75,345) Accounts payable...................................... (169,936) (67,228) Accrued liabilities................................... (63,119) (59,088) Income taxes.......................................... 30,932 71,980 ---------- --------- Cash provided by operating activities.............. 186,180 265,936 ---------- --------- Cash Flows from Investing Activities: Capital expenditures.................................... (38,440) (29,597) Acquisitions, net of cash acquired...................... (8,393) (61,298) Proceeds from divestitures.............................. 19,179 57,938 Other items, net........................................ (6,814) 4,873 ---------- --------- Cash used for investing activities................. (34,468) (28,084) ---------- --------- Cash Flows from Financing Activities: Payments on long-term debt.............................. (6,170) (40,356) Proceeds from/(payments on) commercial paper and short-term debt, net................................... 1,650 (123,921) Dividends............................................... (99,970) (95,096) Purchases of treasury stock............................. (101,913) (38,796) Exercise of stock options............................... 34,688 34,643 Other items, net........................................ 11,323 12,466 ---------- --------- Cash used for financing activities................. (160,392) (251,060) ---------- --------- Effect of exchange rate changes on cash and cash equivalents............................................... 2,278 16,210 Net (decrease)/increase in cash and cash equivalents........ (6,402) 3,002 Cash and cash equivalents at beginning of year.............. 1,180,039 801,732 ---------- --------- Cash and cash equivalents at end of period.................. $1,173,637 $ 804,734 ========== =========
See Notes to Condensed Consolidated Financial Statements. ------------------ 5 H. J. HEINZ COMPANY AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (1) BASIS OF PRESENTATION The interim condensed consolidated financial statements of H. J. Heinz Company, together with its subsidiaries (collectively referred to as the "Company"), are unaudited. In the opinion of management, all adjustments, which are of a normal and recurring nature, necessary for a fair statement of the results of operations of these interim periods have been included. The results for interim periods are not necessarily indicative of the results to be expected for the full fiscal year due to the seasonal nature of the Company's business. These statements should be read in conjunction with the Company's consolidated financial statements and related notes, and management's discussion and analysis of financial condition and results of operations which appear in the Company's Annual Report on Form 10-K for the year ended April 28, 2004. (2) DISCONTINUED OPERATIONS AND SPIN-OFF On December 20, 2002, the Company transferred to a wholly-owned subsidiary ("SKF Foods") certain assets and liabilities, including its U.S. and Canadian pet food and pet snacks, U.S. tuna, U.S. retail private label soup and private label gravy, College Inn broths and its U.S. infant feeding businesses and distributed all of the shares of SKF Foods common stock on a pro rata basis to its shareholders. Immediately thereafter, SKF Foods merged with a wholly-owned subsidiary of Del Monte Foods Company ("Del Monte") resulting in SKF Foods becoming a wholly-owned subsidiary of Del Monte. Net income from discontinued operations for the three months ended July 30, 2003 reflects the favorable settlement of tax liabilities related to the spun off businesses. (3) SPECIAL ITEMS DIVESTITURES During the first quarter of Fiscal 2004, the Company sold its bakery business in Northern Europe for $57.9 million. The transaction resulted in a pretax gain of $26.3 million ($13.3 million after tax), which was used to offset reorganization costs during Fiscal 2004 and was recorded as a component of selling, general and administrative expenses ("SG&A"). REORGANIZATION COSTS During the first quarter of Fiscal 2004, the Company recognized $5.5 million pretax ($3.4 million after tax) of reorganization costs. These costs were recorded as a component of SG&A and were primarily due to employee termination and severance costs related to ongoing efforts to reduce overhead costs at its North American operations following the Fiscal 2003 spin-off transaction with Del Monte. Additionally, during the first quarter of Fiscal 2004, the Company wrote down pizza crust assets in the United Kingdom totaling $4.0 million pretax ($2.8 million after tax) which has been included as a component of cost of products sold. Amounts included in accrued expenses related to these initiatives totaled $4.2 million and $13.2 million at July 28, 2004 and April 28, 2004, respectively. 6 (4) INVENTORIES The composition of inventories at the balance sheet dates was as follows:
July 28, 2004 April 28, 2004 ------------- -------------- (Thousands of Dollars) Finished goods and work-in-process.......................... $ 916,019 $ 890,813 Packaging material and ingredients.......................... 251,545 266,119 ---------- ---------- $1,167,564 $1,156,932 ========== ==========
(5) GOODWILL AND OTHER INTANGIBLE ASSETS Changes in the carrying amount of goodwill for the first quarter ended July 28, 2004, by reportable segment, are as follows:
North American Other Consumer U.S. Asia/ Operating Products Foodservice Europe Pacific Entities Total -------- ----------- -------- -------- --------- ---------- (Thousands of Dollars) Balance at April 28, 2004........... $923,939 $179,544 $670,935 $165,646 $19,850 $1,959,914 Acquisition......................... -- 6,558 4,541 -- -- 11,099 Purchase accounting reclassifications................. -- (1,190) -- (298) -- (1,488) Disposal............................ (2,548) -- -- -- -- (2,548) Translation adjustments............. 2,109 -- 14,276 407 608 17,400 Impairment.......................... -- -- -- -- (6,848) (6,848) -------- -------- -------- -------- ------- ---------- Balance at July 28, 2004............ $923,500 $184,912 $689,752 $165,755 $13,610 $1,977,529 ======== ======== ======== ======== ======= ==========
The above impairment, which was classified within cost of products sold, was due to a deterioration of current and expected operating results of a consolidated joint venture following a recall in Fiscal 2004. The Company reached an agreement with third parties, the proceeds of which were offset by the impairment and other damages incurred to date. The annual impairment tests are performed in the fourth quarter of each fiscal year unless events suggest an impairment may have occurred in the interim. Trademarks and other intangible assets at July 28, 2004 and April 28, 2004, subject to amortization expense, are as follows:
July 28, 2004 April 28, 2004 ------------------------------- ------------------------------- Accum Accum Gross Amort Net Gross Amort Net -------- --------- -------- -------- --------- -------- (Thousands of Dollars) Trademarks........................... $185,071 $ (50,882) $134,189 $188,927 $ (50,505) $138,422 Licenses............................. 208,186 (119,976) 88,210 208,186 (118,504) 89,682 Other................................ 122,772 (63,298) 59,474 123,394 (63,156) 60,238 -------- --------- -------- -------- --------- -------- $516,029 $(234,156) $281,873 $520,507 $(232,165) $288,342 ======== ========= ======== ======== ========= ========
Amortization expense for trademarks and other intangible assets subject to amortization was $3.3 million and $3.5 million for the quarter ended July 28, 2004 and July 30, 2003, respectively. Based upon the amortizable intangible assets recorded on the balance sheet at July 28, 2004, amortization expense for each of the next five years is estimated to be approximately $13 million. Intangible assets not subject to amortization at July 28, 2004 and April 28, 2004 were $510.3 million and $505.5 million, respectively, and consisted solely of trademarks. (6) STOCK-BASED COMPENSATION PLANS Stock-based compensation is accounted for by using the intrinsic value-based method in accordance with Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees." 7 The Company has adopted the disclosure-only provisions of SFAS No. 123, "Accounting for Stock-Based Compensation." Accordingly, no compensation cost has been recognized for the Company's stock option plans. If the Company had elected to recognize compensation cost based on the fair value of the options granted at grant date as prescribed by SFAS No. 123, income and income per common share from continuing operations would have been as follows:
First Quarter Ended ----------------------------- July 28, 2004 July 30, 2003 ------------- ------------- (In Thousands, Except per Share Amounts) Income from continuing operations: As reported............................................ $194,836 $186,825 Fair value-based expense, net of tax................... 6,140 4,907 -------- -------- Pro forma.............................................. $188,696 $181,918 ======== ======== Income per common share from continuing operations: Diluted As reported.......................................... $ 0.55 $ 0.53 Pro forma............................................ $ 0.53 $ 0.51 Basic As reported.......................................... $ 0.56 $ 0.53 Pro forma............................................ $ 0.54 $ 0.52
The weighted-average fair value of options granted was $6.58 and $6.30 per share in the first quarter ended July 28, 2004 and July 30, 2003, respectively. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions:
First Quarter Ended -------------------- July 28, July 30, 2004 2003 -------- -------- Dividend yield.............................................. 3.0% 3.3% Volatility.................................................. 15.8% 21.9% Risk-free interest rate..................................... 4.4% 3.7% Expected term (years)....................................... 7.9 6.5
During the first quarter of Fiscal 2005, the Company granted 302,298 restricted stock units to employees. The fair value of the awards granted has been recorded as unearned compensation and is shown as a separate component of shareholders' equity. 8 (7) PENSIONS AND OTHER POST RETIREMENT BENEFITS The components of net periodic benefit cost are as follows:
Pension Benefits Post Retirement Benefits First Quarter Ended First Quarter Ended ----------------------------- ----------------------------- July 28, 2004 July 30, 2003 July 28, 2004 July 30, 2003 ------------- ------------- ------------- ------------- (Thousands of Dollars) Service cost........................ $ 11,198 $ 10,563 $1,372 $1,200 Interest cost....................... 30,004 28,706 4,054 3,819 Expected return on plan assets...... (41,150) (37,783) -- -- Amortization of net initial asset... (211) (200) -- -- Amortization of prior service cost.............................. 2,287 2,174 (756) (573) Amortization of unrecognized loss... 13,750 10,294 1,866 950 Loss/(gain) due to curtailment, settlement and special termination benefits.......................... -- (2,348) -- 380 -------- -------- ------ ------ Net periodic benefit cost........... $ 15,878 $ 11,406 $6,536 $5,776 ======== ======== ====== ======
As of July 28, 2004, the Company has contributed $11 million to fund its obligations under these plans. As previously disclosed, the Company expects to make combined cash contributions of approximately $40 million in Fiscal 2005. (8) RECENTLY ISSUED ACCOUNTING STANDARDS In December 2003, the Medicare Prescription Drug, Improvement and Modernization Act of 2003 ("the Act") was signed into law. The Act introduced a prescription drug benefit under Medicare (Medicare Part D) and a federal subsidy to sponsors of retirement health care plans that provide a benefit that is at least actuarially equivalent to Medicare Part D. In accordance with FASB Staff Position 106-1, the Company elected to defer recognizing the effects of the Act on the accounting for its retirement health care plans in Fiscal 2004. In May 2004, the FASB issued Staff Position 106-2 providing final guidance on the accounting for benefits provided by the Act. The Staff Position 106-2 will be implemented by the Company in the second quarter of Fiscal 2005. The Company is currently evaluating the impact of this guidance on the Company's financial position, results of operations and cash flows. In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity". This statement affects the classification, measurement and disclosure requirements of certain freestanding financial instruments including mandatorily redeemable shares. SFAS No. 150 was effective for the Company for the second quarter of Fiscal 2004. The adoption of SFAS No. 150 required the prospective classification of Heinz Finance Company's $325 million of mandatorily redeemable preferred shares from minority interest to long-term debt and the $5.1 million quarterly preferred dividend from other expenses to interest expense beginning in the second quarter ended October 29, 2003, with no resulting effect on the Company's profitability. 9 (9) SEGMENTS The Company's reportable segments are primarily organized by geographical area. The composition of segments and measure of segment profitability is consistent with that used by the Company's management. Descriptions of the Company's reportable segments are as follows: North American Consumer Products--This segment manufactures, markets and sells ketchup, condiments, sauces, pasta meals, and frozen potatoes, entrees, snacks and appetizers to the grocery channels in the United States of America and includes our Canadian business. U.S. Foodservice--This segment manufactures, markets and sells branded and customized products to commercial and non-commercial food outlets and distributors in the United States of America including ketchup, condiments, sauces and frozen soups and desserts. Europe--This segment includes the Company's operations in Europe and sells products in all of the Company's core categories. Asia/Pacific--This segment includes the Company's operations in New Zealand, Australia, Japan, China, South Korea, Indonesia, Singapore and Thailand. This segment's operations include products in all of the Company's core categories. Other Operating Entities--This segment includes the Company's operations in Africa, India, Latin America, the Middle East and other areas that sell products in all of the Company's core categories. The Company's management evaluates performance based on several factors including net sales, operating income excluding special items, and the use of capital resources. Intersegment revenues are accounted for at current market values. Items below the operating income line of the consolidated statements of income are not presented by segment, since they are excluded from the measure of segment profitability reviewed by the Company's management. 10 The following table presents information about the Company's reportable segments:
First Quarter Ended ----------------------------- July 28, 2004 July 30, 2003 FY 2005 FY 2004 ------------- ------------- (Thousands of Dollars) Net external sales: North American Consumer Products.......................... $ 488,832 $ 450,778 U.S. Foodservice.......................................... 343,868 331,217 Europe.................................................... 788,725 735,153 Asia/Pacific.............................................. 294,272 290,007 Other Operating Entities.................................. 87,329 88,369 ---------- ---------- Consolidated Totals....................................... $2,003,026 $1,895,524 ========== ========== Intersegment revenues: North American Consumer Products.......................... $ 12,726 $ 14,077 U.S. Foodservice.......................................... 4,242 3,532 Europe.................................................... 4,672 4,535 Asia/Pacific.............................................. 597 674 Other Operating Entities.................................. 390 499 Non-Operating (a)......................................... (22,627) (23,317) ---------- ---------- Consolidated Totals....................................... $ -- $ -- ========== ========== Operating income (loss): North American Consumer Products.......................... $ 111,092 $ 106,262 U.S. Foodservice.......................................... 54,340 49,200 Europe.................................................... 154,091 171,316 Asia/Pacific.............................................. 32,263 34,266 Other Operating Entities.................................. 14,326 11,238 Non-Operating (a)......................................... (26,458) (23,206) ---------- ---------- Consolidated Totals....................................... $ 339,654 $ 349,076 ========== ========== Operating income (loss) excluding special items (b): North American Consumer Products.......................... $ 111,092 $ 107,758 U.S. Foodservice.......................................... 54,340 51,700 Europe.................................................... 154,091 146,517 Asia/Pacific.............................................. 32,263 34,266 Other Operating Entities.................................. 14,326 11,238 Non-Operating (a)......................................... (26,458) (21,748) ---------- ---------- Consolidated Totals....................................... $ 339,654 $ 329,731 ========== ==========
-------------------- (a) Includes corporate overhead, intercompany eliminations and charges not directly attributable to operating segments. (b) First Quarter ended July 30, 2003--Excludes the gain on disposal of the bakery business in Northern Europe and costs to reduce overhead of the remaining businesses as follows: North American Consumer Products $1.5 million, U.S. Foodservice $2.5 million, Europe $(24.8) million, and Non-Operating $1.5 million. 11 The Company's revenues are generated via the sale of products in the following categories:
First Quarter Ended ----------------------------- July 28, 2004 July 30, 2003 FY 2005 FY 2004 ------------- ------------- (Thousands of Dollars) Ketchup, Condiments and Sauces.............................. $ 762,600 $ 742,295 Frozen Foods................................................ 461,540 392,709 Convenience Meals........................................... 450,869 427,180 Infant Foods................................................ 178,951 186,582 Other....................................................... 149,066 146,758 ---------- ---------- Total.................................................. $2,003,026 $1,895,524 ========== ==========
(10) NET INCOME PER COMMON SHARE The following are reconciliations of income to income applicable to common stock and the number of common shares outstanding used to calculate basic EPS to those shares used to calculate diluted EPS:
First Quarter Ended ----------------------------- July 28, 2004 July 30, 2003 FY 2005 FY 2004 ------------- ------------- (In Thousands) Income from continuing operations........................... $194,836 $186,825 Preferred dividends......................................... 4 4 -------- -------- Income from continuing operations applicable to common stock..................................................... $194,832 $186,821 ======== ======== Average common shares outstanding--basic.................. 351,366 352,094 Effect of dilutive securities: Convertible preferred stock............................ 140 151 Stock options and restricted stock..................... 3,471 2,277 -------- -------- Average common shares outstanding--diluted................ 354,977 354,522 ======== ========
(11) COMPREHENSIVE INCOME
First Quarter Ended ----------------------------- July 28, 2004 July 30, 2003 FY 2005 FY 2004 ------------- ------------- (Thousands of Dollars) Net income.................................................. $194,836 $214,025 Other comprehensive income: Foreign currency translation adjustment................ 43,318 54,800 Minimum pension liability adjustment................... (5,707) (4,810) Net deferred gains/(losses) on derivatives from periodic revaluations................................ (2,201) (2,626) Net deferred (gains)/losses on derivatives reclassified to earnings.......................................... 1,645 4,758 -------- -------- Comprehensive income........................................ $231,891 $266,147 ======== ========
(12) DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES The Company operates internationally, with manufacturing and sales facilities in various locations around the world, and utilizes certain derivative financial instruments to manage its foreign currency, commodity price, and interest rate exposures. There have been no material changes in the Company's market risk during the three months ended July 28, 2004. 12 For additional information, refer to pages 23-24 of the Company's Annual Report on Form 10-K for the fiscal year ended April 28, 2004. As of July 28, 2004, the Company is hedging forecasted transactions for periods not exceeding two years. During the next 12 months, the Company expects $7.1 million of net deferred loss reported in accumulated other comprehensive loss to be reclassified to earnings. Hedge ineffectiveness related to cash flow hedges, which is reported in current period earnings as other income and expense, was not significant for the first quarter ended July 28, 2004 and July 30, 2003. Amounts reclassified to earnings because the hedged transaction was no longer expected to occur were not significant for the first quarter ended July 28, 2004 and July 30, 2003. The Company uses certain foreign currency debt instruments as net investment hedges of foreign operations. Losses of $4.1 million (net of income taxes of $2.4 million), which represented effective hedges of net investments, were reported as a component of accumulated other comprehensive loss within unrealized translation adjustment for the first quarter ended July 28, 2004. (13) SUBSEQUENT EVENT In August 2004, the Company and H.J. Heinz Finance Company, a subsidiary of the Company, amended their $600 million 364-Day Credit Agreement and their $1.5 billion Five-Year Credit Agreement by combining the agreements into a $2.0 billion Five-Year Credit Agreement, expiring August 2009. The Credit Agreement supports the Company's commercial paper borrowings and the remarketable securities. 13 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS SPECIAL ITEMS DISCONTINUED OPERATIONS On December 20, 2002, Heinz transferred to a wholly-owned subsidiary ("SKF Foods") certain assets and liabilities, including its U.S. and Canadian pet food and pet snacks, U.S. tuna, U.S. retail private label soup and private label gravy, College Inn broths and its U.S. infant feeding businesses and distributed all of the shares of SKF Foods common stock on a pro rata basis to its shareholders. Immediately thereafter, SKF Foods merged with a wholly-owned subsidiary of Del Monte Foods Company ("Del Monte") resulting in SKF Foods becoming a wholly-owned subsidiary of Del Monte. Net income from discontinued operations for the three months ended July 30, 2003 reflects the favorable settlement of tax liabilities related to the spun off businesses. DIVESTITURES During the first quarter of Fiscal 2004, the Company sold its bakery business in Northern Europe for $57.9 million. The transaction resulted in a pretax gain of $26.3 million ($13.3 million after-tax), which was used to offset reorganization costs during Fiscal 2004 and was recorded as a component of selling, general and administrative expenses ("SG&A"). This sale impacted approximately 70 employees. REORGANIZATION COSTS During the first quarter of Fiscal 2004, the Company recognized $5.5 million pretax ($3.4 million after-tax) of reorganization costs. These costs were recorded as a component of SG&A and were primarily due to employee termination and severance costs related to ongoing efforts to reduce overhead costs at its North American operations following the Fiscal 2003 spin-off transaction with Del Monte. Additionally, during the first quarter of Fiscal 2004, the Company wrote down pizza crust assets in the United Kingdom totaling $4.0 million pretax ($2.8 million after-tax) which has been included as a component of cost of products sold. THREE MONTHS ENDED JULY 28, 2004 AND JULY 30, 2003 RESULTS OF OPERATIONS Sales for the three months ended July 28, 2004 increased $107.5 million, or 5.7%, to $2.0 billion. Sales were favorably impacted by volume of 1.9% and exchange translation rates of 4.0%. The favorable volume impact is mainly due to strong increases in the North American Consumer Products and Europe segments, aided by new product introductions. Acquisitions, net of divestitures, increased sales by 0.8%. Lower pricing decreased sales by 1.0%, principally due to increased trade promotional spending to support the restage of the Italian infant feeding business, and market price pressures impacting Northern Europe and the Tegel poultry business in New Zealand. Gross profit increased $31.7 million, or 4.5%, to $738.8 million, however the gross profit margin decreased to 36.9% from 37.3%. The decrease in the gross profit margin is mainly due to increased commodity costs, increased trade promotional spending in Europe, and market price pressures impacting the Tegel poultry business and Latin American businesses. The increase in gross profit is primarily a result of higher volume and favorable exchange translation rates, partially offset by lower pricing. Last year's gross profit was unfavorably impacted by the write down of U.K. pizza crust assets totaling $4.0 million. SG&A increased $41.1 million, or 11.5%, to $399.1 million, and increased as a percentage of sales to 19.9% from 18.9%. The increase is primarily due to the gain recorded on the sale of the 14 Northern European bakery business in the prior year, foreign exchange translation rates, and increased employee costs related to the new long-term incentive compensation program ("LTIP"). The new LTIP greatly reduces the use of stock options in favor of performance units. Last year's SG&A was unfavorably impacted by reorganization costs totaling $5.5 million. Operating income decreased $9.4 million, or 2.7%, to $339.7 million, and decreased as a percentage of sales to 17.0% from 18.4% as a result of the changes noted above. Net interest expense increased $0.2 million, to $46.7 million. Net interest expense was unfavorably impacted by the adoption of SFAS No. 150 (see below for further discussion) beginning in the second quarter of Fiscal 2004. The unfavorable impact on net interest expense related to the adoption of SFAS No. 150 was largely offset by lower debt balances in the first quarter of Fiscal 2005. Other expenses, net, decreased $10.6 million, resulting from the SFAS 150 reclassification and lower currency losses. The effective tax rate for the current quarter was 32.0% compared to 34.6% last year. The current year effective tax rate was favorably impacted by changes to the capital structure in certain foreign subsidiaries. The prior year effective tax rate was unfavorably impacted by the sale of the Northern European bakery business. Income from continuing operations for the first quarter of Fiscal 2005 was $194.8 million compared to $186.8 million in the year earlier quarter, an increase of 4.3%. Diluted earnings per share was $0.55 in the current year compared to $0.53 in the prior year, up 4.2%. OPERATING RESULTS BY BUSINESS SEGMENT NORTH AMERICAN CONSUMER PRODUCTS Sales of the North American Consumer Products segment increased $38.1 million, or 8.4%, to $488.8 million. Sales volume increased 6.7% due to significant growth in Ore-Ida frozen potatoes and SmartOnes frozen entrees, aided by the introduction of Ore-Ida Extra Crispy Potatoes, new microwavable Easy Fries, and several new "Truth About Carbs" frozen entrees. Strong performance in Boston Market HomeStyle meals, Delimex snacks, and TGI Friday's appetizers also contributed to the volume increase. Sales increased 2.6% due to the prior year acquisition of the Canadian business of Unifine Richardson B.V., which manufactures and sells salad dressings, sauces, and dessert toppings. Divestitures reduced sales 1.1% primarily due to the sale of Ethnic Gourmet Foods. Gross profit increased $5.9 million, or 3.0%, to $202.7 million driven by the increase in sales volume. The gross profit margin decreased to 41.5% from 43.7% due primarily to sales mix and higher commodity and other manufacturing costs. Operating income increased $4.8 million, or 4.5%, to $111.1 million, due to strong volume growth and reduced marketing expenses, partially offset by higher commodity and distribution costs. Operating income for the first quarter ended July 30, 2003 was impacted by reorganization costs totaling $1.5 million. U.S. FOODSERVICE Sales of the U.S. Foodservice segment increased $12.7 million, or 3.8%, to $343.9 million. Acquisitions increased sales 2.4%, due to the prior year acquisition of Truesoups LLC, a manufacturer and marketer of premium frozen soups. Higher pricing increased sales by 2.2% mainly due to Heinz Ketchup, single serve condiments, Chef Francisco frozen soups, and Dianne's and Alden Merrell frozen desserts. Sales volume decreased sales 0.7% due to customer service issues at Portion Pac Inc. resulting from the startup of a new warehouse management system that temporarily impacted shipments of some portion control products early in the quarter. The system is now fully operational. Gross profit increased $7.0 million, or 7.4%, to $101.7 million, and the gross profit margin increased to 29.6% from 28.6%. These increases are primarily due to favorable pricing, sales mix, 15 and the prior year acquisition of Truesoups LLC, partly offset by increases in commodity costs. Operating income increased $5.1 million, or 10.4%, to $54.3 million, primarily due to growth in gross profit, partially offset by increased distribution costs. Operating income for the first quarter ended July 30, 2003 was impacted by reorganization costs totaling $2.5 million. EUROPE Heinz Europe's sales increased $53.6 million, or 7.3%, to $788.7 million. Favorable exchange translation rates increased sales by 8.4%. Volume increased 2.1% principally due to newly introduced Weight Watchers products in the frozen foods category, increases in Heinz ketchup from the successful introduction of the top-down bottle, increases in Heinz ready-to-serve soups, and expanded retail distribution of frozen desserts in the U.K. Volume was also favorably impacted by increased promotional activity supporting John West seafood, Heinz frozen desserts in the U.K., and the restage of the Italian infant feeding business. Lower pricing decreased sales 2.2%, primarily due to increased trade promotion spending related to the restage of the Italian infant feeding business and lower trade prices in the Netherlands. Divestitures reduced sales 1.0%. Gross profit increased $15.0 million, or 5.2%, to $303.0 million, while the gross profit margin decreased from 39.2% to 38.4%. The increase in gross profit is primarily due to favorable exchange translation rates and strong sales volume, partially offset by trade promotional spending to reduce prices in Italy and the Netherlands. The decrease in gross profit margin is primarily related to lower net pricing and unfavorable raw material and production costs for the European seafood business. Gross profit for the first quarter ended July 30, 2003 was impacted by the write-down of the U.K. pizza crust assets totaling $4.0 million. Operating income decreased $17.2 million, or 10.1%, to $154.1 million, largely due to the gain recognized in the prior year on the sale of the Northern European bakery business, partially offset by growth in gross profit and reduced marketing expenses. ASIA/PACIFIC Sales in Asia/Pacific increased $4.3 million, or 1.5%, to $294.3 million. Favorable exchange translation rates increased sales by 4.2%. Volume decreased sales 1.0%, as strong volume in convenience meals and poultry in New Zealand were primarily offset by declines in Japan. Lower pricing reduced sales 1.7% primarily due to market price pressures on Tegel poultry in New Zealand. Gross profit increased $1.0 million, or 1.0%, to $95.5 million. The gross profit margin decreased slightly to 32.5% from 32.6%. The increase in gross profit is primarily due to favorable exchange translation rates in Australia and New Zealand and lower commodity costs in Indonesia, partially offset by lower volume and Tegel poultry's lower pricing. Operating income decreased $2.0 million, or 5.8%, to $32.3 million, due to reduced net pricing and increased distribution costs. OTHER OPERATING ENTITIES Sales for Other Operating Entities decreased $1.0 million, or 1.2%, to $87.3 million. Volume decreased 4.8% due primarily to lower sales in Israel, following a product recall in the third quarter of Fiscal 2004. Lower pricing reduced sales by 5.1%, mainly due to decreases in Latin America as a result of market price pressures. The prior year acquisition of a frozen food business in South Africa increased sales by 8.2%. Gross profit decreased $2.1 million, or 6.8%, to $28.8 million, due mainly to lower sales in Israel and Latin America, partially offset by the impact of a prior year acquisition in South Africa. Operating income increased $3.1 million due to reduced general and administrative expenses, partially offset by increased distribution costs. During the first quarter of Fiscal 2005, the Company reached an agreement with third parties related to a recall in Fiscal 2004. The proceeds of the agreement offset recall related damages incurred to date. 16 Zimbabwe remains in a period of economic uncertainty. Should the current situation continue, the Company could experience disruptions and delays associated with its Zimbabwe operations. As of the end of November 2002, the Company deconsolidated its Zimbabwean operations and classified its remaining net investment of approximately $110 million as a cost investment included in other non-current assets on the consolidated balance sheets. Although the Company's business continues to operate profitably and it is able to source raw materials, the country's economic situation remains uncertain and the Company's ability to recover its investment could become impaired. LIQUIDITY AND FINANCIAL POSITION The following discussion of liquidity and financial position references certain business measures utilized by Senior Management and the Board of Directors to gauge our business operating performance. Management believes the adjusted GAAP measures provide additional clarity in understanding the trends of the business. Cash provided by operating activities was $186.2 million, a decrease of $79.8 million from the prior year. The decrease in Fiscal 2005 versus Fiscal 2004 is primarily due to working capital movements compared to the exceptional performance in the last fiscal year, particularly accounts receivable and accounts payable. Cash used for investing activities totaled $34.5 million compared to $28.1 million last year. Proceeds from divestitures, net of acquisitions, provided $10.8 million in the first three months of Fiscal 2005. In Fiscal 2004, acquisitions, net of divestitures, used $3.4 million in cash. Capital expenditures totaled $38.4 million (1.9% of sales) compared to $29.6 million (1.6% of sales) last year. Cash used for financing activities totaled $160.4 million compared to $251.1 million last year. The Company paid down $6.2 million in long-term debt during the current period, compared to $40.4 million last year. Proceeds on short-term borrowings were $1.7 million this year, compared to payments of $123.9 million in the prior year. Cash used for the purchases of treasury stock, net of proceeds from option exercises, was $67.2 million this year compared to $4.2 million in the prior year, in line with the Company's strategy of maintaining fully diluted shares at a constant level. Dividend payments totaled $100.0 million, compared to $95.1 million for the same period last year, reflecting a 5.5% increase in the annual dividend on common stock. The Company's primary measure of cash flow performance is operating free cash flow (cash provided by operating activities less capital expenditures). For the first three months of Fiscal 2005, the Company had operating free cash flow totaling $147.7 million as compared to $236.3 million for the same period a year ago. This decrease in operating free cash flow is the result of less favorable working capital movement in the quarter, despite an absolute lower level of working capital this year, and increased capital expenditures in the current year. The Company continued its debt reduction efforts in the first three months of Fiscal 2005 by retiring approximately $6 million of debt. At July 28, 2004, the Company's net debt (total debt net of the value of interest rate swaps ($95.4 million), less cash and cash equivalents) was $3.69 billion. Excluding the reclassification of Heinz Finance Company's preferred stock (see below for further discussion), net debt would have been $3.37 billion, down approximately $320 million as compared to the prior year. The Company expects that over $400 million of long-term debt maturing in Fiscal 2005 will be retired. In August 2004, the Company and H.J. Heinz Finance Company, a subsidiary of the Company, amended their $600 million 364-Day Credit Agreement and their $1.5 billion Five-Year Credit Agreement by combining the agreements into a $2.0 billion Five-Year Credit Agreement, expiring August 2009. The Credit Agreement supports the Company's commercial paper borrowings and the remarketable securities. As a result, these borrowings are classified as long-term debt based upon 17 the Company's ability to refinance these borrowings on a long-term basis. The Company also maintains in excess of $500 million of other credit facilities used primarily by the Company's foreign subsidiaries. These resources together with the Company's existing cash balance of almost $1.2 billion, its anticipated strong operating cash flow and access to the capital market, if required, should enable the Company to meet its cash requirements for operations, including capital expansion programs, debt maturities, and dividends to shareholders. The impact of inflation on both the Company's financial position and the results of operations is not expected to adversely affect Fiscal 2005 results. CONTRACTUAL OBLIGATIONS The Company is obligated to make future payments under various contracts such as debt agreements, lease arrangements and unconditional purchase obligations. In addition, the Company has purchase obligations for materials, supplies, services and property, plant and equipment as part of the ordinary conduct of business. A few of these obligations are long-term and are based on minimum purchase requirements. In the aggregate, such commitments are not at prices in excess of current markets. Due to the proprietary nature of some of the Company's materials and processes, certain supply contracts contain penalty provisions for early terminations. The Company does not believe that a material amount of penalties are reasonably likely to be incurred under these contracts based upon historical experience and current expectations. There have been no material changes to contractual obligations during the three months ended July 28, 2004. For additional information, refer to page 22 of the Company's Annual Report on Form 10-K for the fiscal year ended April 28, 2004. RECENTLY ISSUED ACCOUNTING STANDARDS In December 2003, the Medicare Prescription Drug, Improvement and Modernization Act of 2003 ("the Act") was signed into law. The Act introduced a prescription drug benefit under Medicare (Medicare Part D) and a federal subsidy to sponsors of retirement health care plans that provide a benefit that is at least actuarially equivalent to Medicare Part D. In accordance with FASB Staff Position 106-1, the Company elected to defer recognizing the effects of the Act on the accounting for its retirement health care plans in Fiscal 2004. In May 2004, the FASB issued staff position 106-2 providing final guidance on accounting for the Act. The Staff Position 106-2 will be implemented by the Company in the second quarter of Fiscal 2005. The Company is currently evaluating the impact of this guidance on the Company's financial position, results of operations and cash flows. In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity". This statement affects the classification, measurement and disclosure requirements of certain freestanding financial instruments including mandatorily redeemable shares. SFAS No. 150 was effective for the Company for the second quarter of Fiscal 2004. The adoption of SFAS No. 150 required the prospective classification of Heinz Finance Company's $325 million of mandatorily redeemable preferred shares from minority interest to long-term debt and the $5.1 million quarterly preferred dividend from other expenses to interest expense beginning in the second quarter ended October 29, 2003, with no resulting effect on the Company's profitability. 18 CAUTIONARY STATEMENT RELEVANT TO FORWARD-LOOKING INFORMATION Statements about future growth, profitability, costs, expectations, plans, or objectives included in this report, including the management's discussion and analysis, the financial statements and footnotes, are forward-looking statements based on management's estimates, assumptions, and projections. These forward-looking statements are subject to risks, uncertainties, and other important factors that could cause actual results to differ materially from those expressed or implied in this report and the financial statements and footnotes. These include, but are not limited to, sales, earnings, and volume growth, general economic, political, and industry conditions, competitors' actions, which affect, among other things, customer preferences and the pricing of products, production, energy and raw material costs, product recalls, the ability to maintain favorable supplier relationships, achieving cost savings programs and gross margins, currency valuations and interest rate fluctuations, success of acquisitions, joint ventures, and divestitures, new product and packaging innovations, the effectiveness of advertising, marketing, and promotional programs, supply chain efficiency and cash flow initiatives, the impact of e-commerce and e-procurement, risks inherent in litigation, including the Remedia related claims in Israel and rights against third parties, international operations, particularly the performance of business in hyperinflationary environments, changes in estimates in critical accounting judgments, the possibility of increased pension expense and contributions, and other factors described in "Cautionary Statement Relevant to Forward-Looking Information" in the Company's Form 10-K for the fiscal year ended April 28, 2004, and the Company's subsequent filings with the Securities and Exchange Commission. The forward-looking statements are and will be based on management's then current views and assumptions regarding future events and speak only as of their dates. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by the securities laws. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK There have been no material changes in the Company's market risk during the three months ended July 28, 2004. For additional information, refer to pages 23-24 of the Company's Annual Report on Form 10-K for the fiscal year ended April 28, 2004. ITEM 4. CONTROLS AND PROCEDURES (a) Evaluation of Disclosure Controls and Procedures The Company's management, with the participation of the Company's Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the Company's disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures, as of the end of the period covered by this report, were designed and are functioning effectively to provide reasonable assurance that the information required to be disclosed by the Company in reports filed under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. The Company believes that a controls system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected. (b) Changes in Internal Control over Financial Reporting No change in the Company's internal control over financial reporting occurred during the Company's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting. 19 PART II--OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS Nothing to report under this item. ITEM 2. CHANGES IN SECURITIES, USE OF PROCEEDS AND ISSUER PURCHASES OF EQUITY SECURITIES In the first quarter of Fiscal 2005, the Company repurchased the following number of shares of its common stock:
(d) Maximum (a) Total (c) Total Number of Number of Shares Number of (b) Average Shares Purchased as that May Yet Be Shares Price Paid Part of Publicly Purchased Under Period Purchased per Share Announced Programs the Programs - ------ --------- ----------- ------------------- ---------------- April 29, 2004 - May 26, 2004....... -- -- -- -- May 27, 2004 - June 23, 2004...... 1,765,200 $37.77 -- -- June 24, 2004 - July 28, 2004...... 909,800 $38.73 -- -- --------- ------ ---- ---- Total................ 2,675,000 $38.10 -- -- ========= ====== ==== ====
The shares repurchased were acquired under the share repurchase program authorized by the Board of Directors on January 14, 2004 for a maximum of 15 million shares. All repurchases were made in open market transactions. As of July 28, 2004, the maximum number of shares that may yet be purchased under the 2004 program is 12,006,150. ITEM 3. DEFAULTS UPON SENIOR SECURITIES Nothing to report under this item. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Nothing to report under this item. ITEM 5. OTHER INFORMATION Nothing to report under this item. 20 ITEM 6. EXHIBITS Exhibits required to be furnished by Item 601 of Regulation S-K are listed below. The Company may have omitted certain exhibits in accordance with Item 601(b)(4)(iii)(A) of Regulation S-K. The Company agrees to furnish such documents to the Commission upon request. Documents not designated as being incorporated herein by reference are set forth herewith. The paragraph numbers correspond to the exhibit numbers designated in Item 601 of Regulation S-K. 12. Computation of Ratios of Earnings to Fixed Charges. 31(a). Rule 13a-14(a)/15d-14(a) Certification by the Chief Executive Officer. 31(b). Rule 13a-14(a)/15d-14(a) Certification by the Chief Financial Officer. 32(a). Certification by the Chief Executive Officer Relating to a Periodic Report Containing Financial Statements.* 32(b). Certification by the Chief Financial Officer Relating to a Periodic Report Containing Financial Statements.* - --------------- * The Exhibit attached to this Form 10-Q shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or otherwise subject to liability under that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in such filing. 21 Pursuant to the requirements 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. H. J. HEINZ COMPANY (Registrant) Date: August 24, 2004 By: /s/ ARTHUR B. WINKLEBLACK .......................................... Arthur B. Winkleblack Executive Vice President and Chief Financial Officer (Principal Financial Officer) Date: August 24, 2004 By: /s/ EDWARD J. MCMENAMIN .......................................... Edward J. McMenamin Senior Vice President--Finance and Corporate Controller (Principal Accounting Officer) 22 EXHIBIT INDEX DESCRIPTION OF EXHIBIT Exhibits required to be furnished by Item 601 of Regulation S-K are listed below. Documents not designated as being incorporated herein by reference are furnished herewith. The paragraph numbers correspond to the exhibit numbers designated in Item 601 of Regulation S-K. 12. Computation of Ratios of Earnings to Fixed Charges. 31(a). Rule 13a-14(a)/15d-14(a) Certification by the Chief Executive Officer. 31(b). Rule 13a-14(a)/15d-14(a) Certification by the Chief Financial Officer. 32(a). Certification by the Chief Executive Officer Relating to a Periodic Report Containing Financial Statements.* 32(b). Certification by the Chief Financial Officer Relating to a Periodic Report Containing Financial Statements.* - --------------- * The Exhibit attached to this Form 10-Q shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934 (the "Exchange Act") or otherwise subject to liability under that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in such filing. EX-12 2 j0853701exv12.txt EXHIBIT 12 . . . EXHIBIT 12 H. J. HEINZ COMPANY AND SUBSIDIARIES COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
Three Months Ended July 28, 2004 ------------ (Thousands of Dollars) Fixed Charges: Interest expense*......................................... $ 54,884 Capitalized interest...................................... -- Interest component of rental expense...................... 7,438 -------- Total fixed charges.................................... $ 62,322 -------- Earnings: Income from continuing operations before income taxes..... $286,586 Add: Interest expense*.................................... 54,884 Add: Interest component of rental expense................. 7,438 Add: Amortization of capitalized interest................. 508 -------- Earnings as adjusted................................... $349,416 -------- Ratio of earnings to fixed charges........................ 5.61 ========
- --------------- * Interest expense includes amortization of debt expense and any discount or premium relating to indebtedness. EX-31.A 3 j0853701exv31wa.txt EXHIBIT 31.A EXHIBIT 31(a) I, William R. Johnson, Chairman, President and Chief Executive Officer of H. J. Heinz Company certify that: 1. I have reviewed this quarterly report on Form 10-Q of H. J. Heinz Company; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) [Paragraph omitted pursuant to SEC Release Nos. 33-8238 and 34-47986] c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: August 24, 2004 By: /s/ WILLIAM R. JOHNSON ------------------------------------ Name: William R. Johnson Title: Chairman, President and Chief Executive Officer EX-31.B 4 j0853701exv31wb.txt EXHIBIT 31.B EXHIBIT 31(b) I, Arthur B. Winkleblack, Executive Vice President and Chief Financial Officer of H. J. Heinz Company certify that: 1. I have reviewed this quarterly report on Form 10-Q of H. J. Heinz Company; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) [Paragraph omitted pursuant to SEC Release Nos. 33-8238 and 34-47986] c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: August 24, 2004 By: /s/ ARTHUR B. WINKLEBLACK ------------------------------------ Name: Arthur B. Winkleblack Title: Executive Vice President and Chief Financial Officer EX-32.A 5 j0853701exv32wa.txt EXHIBIT 32.A EXHIBIT 32(a) CERTIFICATION BY THE CHIEF EXECUTIVE OFFICER RELATING TO A PERIODIC REPORT CONTAINING FINANCIAL STATEMENTS I, William R. Johnson, Chairman, President and Chief Executive Officer, of H. J. Heinz Company, a Pennsylvania corporation (the "Company"), hereby certify that, to my knowledge: 1. The Company's periodic report on Form 10-Q for the period ended July 28, 2004 (the "Form 10-Q") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and 2. The information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company. Date: August 24, 2004 /s/ WILLIAM R. JOHNSON -------------------------------------- Name: William R. Johnson Title: Chairman, President and Chief Executive Officer EX-32.B 6 j0853701exv32wb.txt EXHIBIT 32.B EXHIBIT 32(b) CERTIFICATION BY THE CHIEF FINANCIAL OFFICER RELATING TO A PERIODIC REPORT CONTAINING FINANCIAL STATEMENTS I, Arthur B. Winkleblack, Executive Vice President and Chief Financial Officer of H. J. Heinz Company, a Pennsylvania corporation (the "Company"), hereby certify that, to my knowledge: 1. The Company's periodic report on Form 10-Q for the period ended July 28, 2004 (the "Form 10-Q") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and 2. The information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company. Date: August 24, 2004 /s/ ARTHUR B. WINKLEBLACK -------------------------------------- Name: Arthur B. Winkleblack Title: Executive Vice President and Chief Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----