-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, NWf2WQNb0OJ1+Z39Bdp/DtvY1aqS0aJ7mLMEVT1G3Zp2tJFKW2WwF6dtTxxFGbtw OPk1BlHGpMNzIs4HiJc6PA== 0000950132-94-000183.txt : 19940727 0000950132-94-000183.hdr.sgml : 19940727 ACCESSION NUMBER: 0000950132-94-000183 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19940427 FILED AS OF DATE: 19940726 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HEINZ H J CO CENTRAL INDEX KEY: 0000046640 STANDARD INDUSTRIAL CLASSIFICATION: 2030 IRS NUMBER: 250542520 STATE OF INCORPORATION: PA FISCAL YEAR END: 0430 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-03385 FILM NUMBER: 94540024 BUSINESS ADDRESS: STREET 1: 600 GRANT ST CITY: PITTSBURGH STATE: PA ZIP: 15219 BUSINESS PHONE: 4124565700 MAIL ADDRESS: STREET 2: P O BOX 57 CITY: PITTSBURGH STATE: PA ZIP: 15230 10-K 1 FORM 10-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended April 27, 1994 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 1-3385 H. J. HEINZ COMPANY (Exact name of registrant as specified in its charter) PENNSYLVANIA 25-0542520 (State of Incorporation) (I.R.S. Employer Identification No.) 600 Grant Street, Pittsburgh, Pennsylvania 15219 (Address of principal executive offices) (Zip Code) 412-456-5700 (Registrant's telephone number) SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: Name of each exchange Title of each class on which registered ------------------- --------------------- Common Stock, par value $.25 per share New York Stock Exchange; Pacific Stock Exchange Third Cumulative Preferred Stock, $1.70 First Series, par value $10 per share New York Stock Exchange SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: None. Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes _X_ No ____ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] As of June 30, 1994, the aggregate market value of the Registrant's voting stock held by non-affiliates of the Registrant was approximately $7,322,326,211. The number of shares of the Registrant's Common Stock, par value $.25 per share, outstanding as of June 30, 1994, was 247,983,070 shares. DOCUMENTS INCORPORATED BY REFERENCE Portions of Registrant's Annual Report to Shareholders for the fiscal year ended April 27, 1994, are incorporated into Part I, Item 1; Part II, Items 5, 7 and 8; and Part IV, Item 14. Portions of Registrant's Proxy Statement for the 1994 Annual Meeting of Shareholders are incorporated into Part III, Items 10, 11, 12 and 13. PART I Item 1. Business. H. J. Heinz Company was incorporated in Pennsylvania on July 27, 1900. In 1905 it succeeded to the business of a partnership operating under the same name which had developed from a food business founded in 1869 at Sharpsburg, Pennsylvania by Henry J. Heinz. H. J. Heinz Company and its consolidated subsidiaries (collectively, the "Company" or the "Registrant" unless the context indicates otherwise) manufacture and market an extensive line of processed food products throughout the world. The Company's products include ketchup, tuna and other seafood products, pet food, baby food, frozen potato products, lower-calorie products (frozen entrees, frozen desserts, frozen breakfasts, dairy and other products), soup (canned and frozen), sauces/pastes, beans, condiments and pickles, coated products, pasta, bakery products, frozen pizza and pizza components, chicken, vegetables (frozen and canned), ice cream and ice cream novelties, edible oils, vinegar, margarine/shortening, juices and other processed food products. The Company operates principally in one segment of business--processed food products--which represents more than 90% of consolidated sales. The Company also operates and franchises weight control classes and operates other related programs and activities. The Company intends to continue to engage principally in the business of manufacturing and marketing processed food products and the ingredients for food products. The Company's products are manufactured and packaged to provide safe, stable, wholesome foods which are used directly by consumers and foodservice and institutional customers. Many products are prepared from recipes developed in the Company's research laboratories and experimental kitchens. Ingredients are carefully selected, washed, trimmed, inspected and passed on to modern factory kitchens where they are processed, after which the finished product is filled automatically into containers of glass, metal, plastic, paper or fiberboard which are then closed, processed, labeled and cased for market. Finished products are processed by sterilization, chilling, freezing, pickling, drying, baking or extruding. Certain finished products and seasonal raw materials are aseptically packed into sterile containers after in-line sterilization. The Company has three classes of similar products, each of which has accounted for 10% or more of consolidated sales in one or more of the prior three fiscal years listed below. The following table shows sales, as a percentage of consolidated sales, for each of these classes of similar products for each of the last three fiscal years.
1994 1993 1992 ---- ---- ---- Ketchup, sauces and other condiments.................................. 19% 18% 19% Tuna and other seafood products....................................... 10 10 10 Baby food............................................................. 9 10 10 All other classes of products, none of which accounts for 10% or more of consolidated sales............................... 62 62 61 --- --- --- 100% 100% 100%
The Company manufactures its products from a wide variety of raw foods. Pre-season contracts are made with farmers for a substantial portion of raw materials such as tomatoes, cucumbers, potatoes, onions and some other fruits and vegetables. Dairy products, meat, sugar, spices, flour and other fruits and vegetables are purchased on the open market. Tuna is obtained through direct negotiations with tuna vessel owners, negotiated contracts directly with the owners or through the owners' cooperatives and by bid-and-ask transactions. In some instances, in order to insure the continued availability of adequate supplies of tuna, the Company assists, directly or indirectly, in financing the acquisition and operation of fishing vessels. The provision of such assistance is not expected to affect materially the operations of the Company. The Company also engages in the tuna fishing business through wholly and partially owned subsidiaries. The Marine Mammal Protection Act of 1972, as amended (the "Act"), and regulations thereunder (the "Regulations") regulate the incidental taking of dolphin in the course of fishing for yellowfin tuna in the eastern tropical Pacific Ocean, where a portion of the Company's light-meat tuna is caught. In 1990, the Company voluntarily adopted a worldwide policy of refusal to purchase tuna caught in the eastern tropical 2 Pacific Ocean through the intentional encirclement of dolphin by purse seine nets and reaffirmed its policy of not purchasing tuna caught anywhere using gill nets or drift nets. Also in 1990, the Dolphin Protection Consumer Information Act (the "Dolphin Information Act") was enacted which regulates the labeling of tuna products as "dolphin safe" and bans the importation of tuna caught using high seas drift nets. "Dolphin Safe" labels appear on the Company's StarKist tuna products in grocery stores throughout the United States. The Act was amended in 1992 to further regulate tuna fishing methods which involve marine mammals. Compliance with the Act, the Regulations, the Dolphin Information Act, the Company's voluntary policy, and the 1992 amendments has not had, and is not expected to have, a material adverse effect on the Company's operations. In recent years, the supply of raw tuna has been variable causing a fluctuation in raw fish prices; however, such variation in supply has not affected materially, nor is it expected to affect materially, the Company's operations. The Company has participated in the development of certain of its food processing equipment, some of which is patented. The Company regards these patents as important but does not consider any one or group of them to be materially important to its business as a whole. The Company's products are widely distributed around the world. Many of the Company's products are marketed under the "Heinz" trademark, principally in the United States, Canada, the United Kingdom, other western European countries, Australia, Venezuela, Japan, the People's Republic of China, the Republic of Korea and Thailand. Other important trademarks include "Star-Kist" for tuna products, "9-Lives", "Amore" and "Kozy Kitten" for cat foods, "Ore-Ida" for frozen potato and onion products, "Skippy Premium", "Recipe", "Reward" and "Vets" for dog food, "Jerky Treats" and "Meaty Bones" for dog snacks, "Bagel Bites" for pizza snack products, "Moore's" for coated vegetables and "Domani" for frozen pasta products, all of which are marketed in the United States. "Chef Francisco" is used for frozen soups and "Omstead" is used for frozen vegetables, frozen coated products and frozen fish products, both of which are marketed in the United States and Canada. "Plasmon", "Nipiol" and "Dieterba" are used for baby food products, "Misura" for dietetic products for adults, "Ortobuono" for pickled vegetables and fruit in syrup, "Mare D'Oro" for seafood and "Mr. Foody" for table and kitchen sauces, all of which are mainly marketed in Italy. "Petit Navire" is used for tuna and mackerel products, "Marie Elisabeth" for sardines and tuna and "Orlando" and "Guloso" for tomato products, all of which are marketed in various European countries. "Wattie's" is used for various grocery products and frozen foods, "Tip Top" for ice cream and frozen desserts and "Tegel" for poultry products, all of which are marketed in New Zealand, Australia and the Asia/Pacific region. "Weight Watchers" is used in numerous countries in conjunction with owned and franchised weight control classes, programs, related activities and certain food products. The Company also markets certain products under other trademarks and brand names and under private labels. Although crops constituting some of the Company's raw food ingredients are harvested on a seasonal basis, most of the Company's products are produced throughout the year. Seasonal factors inherent in the business have always influenced the quarterly sales and net income of the Company. Consequently, comparisons between quarters have always been more meaningful when made between the same quarters of different years. The products of the Company are sold under highly competitive conditions, with many large and small competitors. The Company regards its principal competition to be other manufacturers of processed foods, including branded, retail products, foodservice products and private label products, that compete with the Company for consumer preference, distribution, shelf space and merchandising support. Product quality and consumer value are important areas of competition. The Company's Weight Watchers International, Inc. subsidiary also competes with a wide variety of weight control programs. The Company's products are sold through its own sales force and through independent brokers and agents to chain, wholesale, cooperative and independent grocery accounts, to foodservice distributors and to institutions, including hotels, restaurants and certain government agencies. The Company is not dependent on any single customer or a few customers for a material part of its sales. Compliance with the provisions of national, state and local environmental laws and regulations has not had a material effect upon the capital expenditures, earnings or competitive position of the Company. The Company's estimated capital expenditures for environmental control facilities for the remainder of fiscal 3 year 1995 and the succeeding fiscal year are not material and will not materially affect either the earnings or competitive position of the Company. The Company's factories are subject to inspections by various governmental agencies, and its products must comply with the applicable laws, including food and drug laws, of the jurisdictions in which they are manufactured and marketed. The Company employed, on a full-time basis as of April 27, 1994, approximately 35,700 persons around the world. Financial segment information by major geographic area for the most recent three fiscal years is set forth on page 38 of the Company's Annual Report to Shareholders for the fiscal year ended April 27, 1994. Such information is incorporated herein by reference. Income from international operations is subject to fluctuation in currency values, export and import restrictions, foreign ownership restrictions, economic controls and other factors. From time to time exchange restrictions imposed by various countries have restricted the transfer of funds between countries and between the Company and its subsidiaries. To date such exchange restrictions have not had a material adverse effect on the Company's international operations. Item 2. Properties. The Company has 44 food processing plants in the United States and its possessions, of which 39 are owned and five are leased, as well as 44 food processing plants in foreign countries, of which 39 are owned and five are leased, including six in Canada, six in New Zealand, four in Australia, four in the United Kingdom, three in Italy, three in Spain, two in Greece, two in Portugal, two in Zimbabwe, two in Botswana, one in France, one in Ireland, one in The Netherlands, one in Venezuela, one in Japan, one in the People's Republic of China, one in Ghana, one in the Republic of Korea, one in Thailand and one in Ecuador. The Company also leases one can-making factory in the United States. The Company and certain of its subsidiaries also own or lease office space, warehouses and research facilities. The Company's food processing plants and principal properties are in good condition and are satisfactory for the purposes for which they are being utilized. Item 3. Legal Proceedings. On December 31, 1992, a food wholesale distributor filed suit in Federal District Court in Newark, New Jersey against the Company and its two principal competitors in the United States baby food industry. Subsequent to that date, several similar lawsuits have been filed in the same court. The complaints, each of which seeks an injunction and unspecified treble money damages, allege a conspiracy to fix, maintain and stabilize the prices of baby food. All of the above actions have been consolidated and styled In Re Baby Food Antitrust Litigation, No. 92-5495 (NHP) and are pending in the Federal District Court in Newark, New Jersey. In September 1993, the court authorized class certification providing that the case will proceed as a class action. In addition, an action has been filed in state court in San Francisco under California state law against the Company and its two principal competitors. An action filed in Alabama state court relating to the same matters has been stayed pending a decision in the New Jersey case. The plaintiffs in the California and Alabama actions seek to represent a class of indirect purchasers of baby food in the respective states. The Company believes all of the suits are without merit and will defend itself vigorously against them. On June 29, 1994, pursuant to an agreement with the United States Attorney for the District of Oregon, which was approved by the Federal District Court in Oregon, the Federal District Court imposed a $1,000,000 fine on the Company's Ore-Ida Foods, Inc. subsidiary ("Ore-Ida") and placed Ore-Ida on probation for three years. The agreement permits Ore-Ida to invest $750,000 of the fine in additional wastewater treatment processes. The agreement concerns violations of Ore-Ida's NPDES permit at its Ontario, Oregon plant during a period from March 1988 through March 1990 which were reported previously in the Company's Annual Report on Form 10-K for the fiscal year ended April 28, 1993. Item 4. Submission of Matters to a Vote of Security Holders The Company has not submitted any matters to a vote of security holders since the last annual meeting of shareholders on September 8, 1993. 4 Executive Officers of the Registrant The following is a list of the names and ages of all of the executive officers of the Company indicating all positions and offices with the Company held by each such person and each such person's principal occupations or employment during the past five years. All the executive officers have been elected to serve until the next annual election of officers or until their successors are elected, or until their earlier resignation or removal. The annual election of officers is scheduled to occur on September 13, 1994.
Positions and Offices Held with the Company and Age (as of Principal Occupations or Name September 13, 1994) Employment During Past Five Years ---- ------------------- --------------------------------- Anthony J. F. O'Reilly 58 Chairman of the Board since March 11, 1987 and President and Chief Executive Officer since July 1, 1979. Joseph J. Bogdanovich 82 Vice Chairman of the Board since September 7, 1988; also in charge of Heinz Japan Ltd. since June 20, 1973 and Chairman of the Board of Star-Kist Foods, Inc. David W. Sculley 48 Senior Vice President in charge of Weight Watchers International, Inc. since June 1, 1989, Weight Watchers Food Company since July 1, 1991, and Heinz Bakery Products Division and Ore-Ida Foods, Inc. since January 1, 1992; from June 1, 1989 to December 31, 1991, in charge of H. J. Heinz Company of Canada Ltd.; also until January 31, 1992, in charge of Heinz companies in Africa, Australia, the People's Republic of China, the Republic of Korea and Thailand. Lawrence J. McCabe 59 Senior Vice President-General Counsel since June 12, 1991; Vice President-General Counsel from October 1, 1990 to June 11, 1991; Vice President-Associate General Counsel from July 1, 1982 through September 30, 1990. David R. Williams 51 Senior Vice President-Finance and Chief Financial Officer since August 1, 1992; Vice President-Finance and Chief Financial Officer from February, 1, 1992 to July 31, 1992; Vice President and Corporate Controller from August 1, 1988 until January 31, 1992. Luigi Ribolla 57 Senior Vice President in charge of all Heinz affiliates in Europe, Cairo Foods Industries SAE in Egypt and Heinz development activities in Russia, Eastern Europe, the Middle East and North Africa since August 1, 1992; Director of Heinz Mediterranean Area from 1988 to July 31, 1992. William R. Johnson 45 Senior Vice President in charge of Star-Kist Foods, Inc. and Heinz operations in the Asia Pacific area since September 8, 1993; President and Chief Executive Officer of Star-Kist Foods, Inc. since May 1, 1992 and President and Chief Executive Officer of Heinz Pet Products Company since November 1, 1988. William C. Springer 54 Senior Vice President in charge of Heinz North America, Heinz Service Company and Heinz operations in Latin America since September 8, 1993; President of Heinz North America since June 1, 1992 and President and Chief Executive Officer of Heinz U.S.A. Division since May 1, 1989.
J. Wray Connolly, formerly Senior Vice President and a director, retired from the Company on December 1, 1993. 5 PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters. Information relating to the Company's common stock is set forth on page 37 under the caption "Stock Market Information" and on page 52 in Note 12, "Quarterly Results (Unaudited)," of the Company's Annual Report to Shareholders for the fiscal year ended April 27, 1994. Such information is incorporated herein by reference. Item 6. Selected Financial Data. The following table presents selected consolidated financial data for the Company and its subsidiaries for each of the five fiscal years 1990 through 1994. All amounts are in thousands except per share data.
Fiscal year ended ------------------------------------------------------------------- April 27, April 28, April 29, May 1, May 2, 1994 1993 1992 1991 1990 (52 Weeks) (52 Weeks) (52 Weeks) (52 Weeks) (52 Weeks) ---------- ---------- ---------- ---------- ---------- Sales............................................ $ 7,046,738 $ 7,103,374 $ 6,581,867 $ 6,647,118 $ 6,085,687 Interest expense................................. 149,243 146,491 134,948 137,592 108,542 Income before cumulative effect of accounting change.................... 602,944 529,943 638,295 567,999 504,451 Net income....................................... 602,944 396,313 638,295 567,999 504,451 Income before cumulative effect of accounting change per common share........................ 2.35 2.04 2.40 2.13 1.90 Net income per common share...................... 2.35 1.53 2.40 2.13 1.90 Short-term debt and current portion of long-term debt.............................. 439,701 1,604,355 1,724,095 509,757 381,379 Long-term debt, exclusive of current portion................................ 1,727,002 1,009,381 178,388 716,937 875,228 Total assets..................................... 6,381,146 6,821,321 5,931,901 4,935,382 4,487,451 Cash dividends per common share.................. 1.29 1.17 1.05 .93 .81
Results recorded in 1994 include gains from the sale of the confectionery business of Heinz Italy and the sale of Heinz U.S.A.'s Near East specialty rice business. See Note 3 to the Consolidated Financial Statements on page 45 of the Company's Annual Report to Shareholders for the fiscal year ended April 27, 1994. During 1993, the Company adopted the provisions of FAS No. 106 and elected immediate recognition of the cumulative effect. See Note 11 to the Consolidated Financial Statements on page 51 of the Company's Annual Report to Shareholders for the fiscal year ended April 27, 1994. Net income and net income per share for 1993 and 1992 include restructuring charges. See Note 4 to the Consolidated Financial Statements on page 45 of the Company's Annual Report to Shareholders for the fiscal year ended April 27, 1994. Results recorded in 1992 also include a gain on the sale of The Hubinger Company. See Note 3 to the Consolidated Financial Statements on page 45 of the Company's Annual Report to Shareholders for the fiscal year ended April 27, 1994. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. This information is set forth in the Management's Discussion and Analysis section on pages 32 through 37 of the Company's Annual Report to Shareholders for the fiscal year ended April 27, 1994. Such information is incorporated herein by reference. Item 8. Financial Statements and Supplementary Data. The Consolidated Balance Sheets of the Company and its subsidiaries as of April 27, 1994 and April 28, 1993 and the related Consolidated Statements of Income, Retained Earnings and Cash Flows for the fiscal years ended April 27, 1994, April 28, 1993 and April 29, 1992, together with the related Notes to Consolidated Financial Statements, included in the Company's Annual Report to Shareholders for the fiscal year ended April 27, 1994, are incorporated herein by reference. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. There is nothing to be reported under this item. 6 PART III Item 10. Directors and Executive Officers of the Registrant. Information relating to the Directors of the Company is set forth under the captions "Information Regarding Nominees for Election of Directors" and "Additional Information--Director and Officer Securities Reports" in the Company's definitive Proxy Statement in connection with the Annual Meeting of Shareholders to be held September 13, 1994. Such information is incorporated herein by reference. Information relating to the executive officers of the Company is set forth under the caption "Executive Officers of the Registrant" in Part I above. Item 11. Executive Compensation. Information relating to executive compensation is set forth under the caption "Executive Compensation" in the Company's definitive Proxy Statement in connection with its Annual Meeting of Shareholders to be held September 13, 1994. Such information is incorporated herein by reference. Item 12. Security Ownership of Certain Beneficial Owners and Management. Information relating to the ownership of equity securities of the Company by certain beneficial owners and management is set forth under the captions "Security Ownership of Certain Beneficial Owners" and "Security Ownership of Management" in the Company's definitive Proxy Statement in connection with its Annual Meeting of Shareholders to be held September 13, 1994. Such information is incorporated herein by reference. Item 13. Certain Relationships and Related Transactions. Information relating to certain relationships with a beneficial shareholder and certain related transactions is set forth under the caption "Additional Information--Transactions with Beneficial Shareholders" in the Company's definitive Proxy Statement in connection with its Annual Meeting of Shareholders to be held September 13, 1994. Such information is incorporated herein by reference. 7 PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K. (a) (1) The following financial statements and report included in the Company's Annual Report to Shareholders for the fiscal year ended April 27, 1994 are incorporated herein by reference: Consolidated Balance Sheets as of April 27, 1994 and April 28, 1993 Consolidated Statements of Income for the fiscal years ended April 27, 1994, April 28, 1993 and April 29, 1992 Consolidated Statements of Retained Earnings for the fiscal years ended April 27, 1994, April 28, 1993 and April 29, 1992 Consolidated Statements of Cash Flows for the fiscal years ended April 27, 1994, April 28, 1993 and April 29, 1992 Notes to Consolidated Financial Statements Independent Accountants' Report of Coopers & Lybrand dated June 14, 1994, on the Company's consolidated financial statements for the fiscal years ended April 27, 1994, April 28, 1993 and April 29, 1992 (2) The following report and schedules are filed herewith as a part hereof: Independent Accountants' Report of Coopers & Lybrand dated June 14, 1994, on the Company's consolidated financial statement schedules filed as a part hereof for the fiscal years ended April 27, 1994, April 28, 1993 and April 29, 1992 and related consent dated July 25, 1994. Schedules II, V, VI, VIII, IX and X for the three fiscal years ended April 27, 1994, April 28, 1993 and April 29, 1992 and VII as of April 27, 1994:
Schedule number Schedule title ------ -------------- II Amounts Receivable from Related Parties and Underwriters, Promoters, and Employees Other than Related Parties V Property, Plant and Equipment VI Accumulated Depreciation of Property, Plant and Equipment VII Guarantees of Securities of Other Issuers VIII Valuation and Qualifying Accounts and Reserves IX Short-Term Borrowings X Supplementary Income Statement Information
All other schedules are omitted because they are not applicable or the required information is included herein or is shown in the consolidated financial statements or notes thereto incorporated herein by reference. (3) Exhibits required to be filed by Item 601 of Regulation S-K are listed below and are filed as a part hereof. Documents not designated as being incorporated herein by reference are filed herewith. The paragraph numbers correspond to the exhibit numbers designated in Item 601 of Regulation S-K. 3(i) The Company's Articles of Amendment dated July 13, 1994, amending and restating the Company's amended and restated Articles of Incorporation in their entirety. 3(ii) The Company's By-Laws, as amended effective July 6, 1990 are incorporated by reference to Exhibit 3(c) to the Company's Annual Report on Form 10-K for the fiscal year ended May 2, 1990. 4. Except as set forth below, there are no instruments with respect to long-term debt of the Company that involve indebtedness or securities authorized thereunder exceeding 10 percent of the total assets of the Company and its subsidiaries on a consolidated basis. The Company agrees to file a copy of any instrument or agreement defining the rights of holders of long-term debt of the Company upon request of the Securities and Exchange Commission. 8 (a) Form of Indenture between the Company and The First National Bank of Chicago dated as of July 15, 1992, is incorporated herein by reference to Exhibits 4(a) and 4(c) to the Company's Registration Statement on Form S-3 (Reg. No. 33-46680) and the supplements to such Indenture are incorporated herein by reference to the Company's Form 8-Ks dated September 21, 1992, October 29, 1992 and January 27, 1993 relating to the Company's $250,000,000 5-1/2% Notes due 1997, $300,000,000 6-3/4% Notes due 1999 and $200,000,000 6-7/8% Notes due 2003, respectively. 10(a) Permit No. 408 (lease) granted by the City of Los Angeles to Star-Kist Foods, Inc. dated September 6, 1979 for premises located at Terminal Island, California is incorporated herein by reference to Exhibit 10(e) to the Company's Annual Report on Form 10-K for the fiscal year ended April 29, 1981. (b) Lease of Land in American Samoa, dated as of September 17, 1983, by and between the American Samoa Government and Star-Kist Samoa, Inc. is incorporated herein by reference to Exhibit 10(m) to the Company's Annual Report on Form 10-K for the fiscal year ended May 2, 1984. (c) Management contracts and compensatory plans: (i) Management Incentive Plan, as amended, is incorporated herein by reference to Exhibit 10(a) to the Company's Annual Report on Form 10-K for the fiscal year ended April 30, 1986 (ii) Long-Term Incentive Plan for senior executives, as amended, is incorporated herein by reference to Appendix B to the Company's Definitive Proxy Statement dated August 3, 1990 (iii) 1986 Deferred Compensation Program for H. J. Heinz Company and affiliated companies is incorporated herein by reference to Exhibit 10(p) to the Company's Annual Report on Form 10-K for the fiscal year ended April 30, 1986 (iv) Executive Employment Agreement dated as of March 14, 1990 between the Company and A. J. F. O'Reilly is incorporated herein by reference to Exhibit 10(k) to the Company's Annual Report on Form 10-K for the fiscal year ended May 2, 1990 (v) H. J. Heinz Company's 1982 Stock Option Plan, as amended, is incorporated herein by reference to Exhibit 10(m) to the Company's Annual Report on Form 10-K for the fiscal year ended May 2, 1990 (vi) H. J. Heinz Company's 1984 Stock Option Plan, as amended, is incorporated herein by reference to Exhibit 10(n) to the Company's Annual Report on Form 10-K for the fiscal year ended May 2, 1990 (vii) H. J. Heinz Company's 1987 Stock Option Plan, as amended, is incorporated herein by reference to Exhibit 10(o) to the Company's Annual Report on Form 10-K for the fiscal year ended May 2, 1990 (viii) H. J. Heinz Company's 1990 Stock Option Plan is incorporated herein by reference to Appendix A to the Company's Definitive Proxy Statement dated August 3, 1990 (ix) H. J. Heinz Company Supplemental Executive Retirement Plan, as amended, is incorporated by reference to Exhibit 10(c)(ix) to the Company's Annual Report on Form 10-K for the fiscal year ended April 28, 1993 (x) H. J. Heinz Company Executive Deferred Compensation Plan 11. Computation of net income per share. 13. Pages 32 through 54 of the H. J. Heinz Company Annual Report to Shareholders for the fiscal year ended April 27, 1994, portions of which are incorporated herein by reference. Those portions of the Annual Report to Shareholders that are not incorporated herein by reference shall not be deemed to be filed as a part of this Report. 21. Subsidiaries of the Registrant 9 23. The following Exhibit is filed by incorporation by reference to Item 14(a)(2) of this Report: (a) Consent of Coopers & Lybrand. 24. Powers-of-attorney of the Company's directors. Copies of the exhibits listed above will be furnished upon request to holders or beneficial holders of any class of the Company's stock, subject to payment in advance of the cost of reproducing the exhibits requested. (b) There have been no reports filed on Form 8-K during the last fiscal quarter of the period covered by this Report. 10 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, on July 26, 1994. H. J. HEINZ COMPANY (Registrant) /s/ DAVID R. WILLIAMS By.................................................... David R. Williams Senior Vice President-Finance and Chief Financial Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated, on July 26, 1994. Signature Capacity --------- -------- /s/ ANTHONY J. F. O'REILLY ......................................... Chairman of the Board, Anthony J. F. O'Reilly President and Chief Executive Officer (Principal Executive Officer) /s/ DAVID R. WILLIAMS ......................................... Senior Vice President-Finance David R. Williams and Chief Financial Officer (Principal Financial Officer) /s/ TRACY E. QUINN ......................................... Corporate Controller Tracy E. Quinn (Principal Accounting Officer) Anthony J. F. O'Reilly Director Joseph J. Bogdanovich Director Nicholas F. Brady Director Richard M. Cyert Director Edith E. Holiday Director Samuel C. Johnson Director William R. Johnson Director Donald R. Keough Director /s/ LAWRENCE J. McCABE Albert Lippert Director By.............................. Lawrence J. McCabe Director Lawrence J. McCabe Luigi Ribolla Director Director and Attorney-in-Fact Herman J. Schmidt Director David W. Sculley Director Eleanor B. Sheldon Director William P. Snyder III Director William C. Springer Director S. Donald Wiley Director David R. Williams Director 11 INDEPENDENT ACCOUNTANTS' REPORT The Shareholders H. J. Heinz Company: Our report on the consolidated financial statements of H. J. Heinz Company and subsidiaries has been incorporated by reference in this Annual Report on Form 10-K from the Company's Annual Report to Shareholders for the fiscal year ended April 27, 1994 and appears on page 54 therein. In connection with our audits of such financial statements, we have also audited the related financial statement schedules listed in Item 14(a) of this Annual Report on Form 10-K. In our opinion, the financial statement schedules referred to above, when considered in relation to the basic financial statements taken as a whole, present fairly, in all material respects, the information required to be included therein. COOPERS & LYBRAND Pittsburgh, PA June 14, 1994 ------------------------------------ CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the incorporation by reference in the Registration Statements of H. J. Heinz Company on Form S-8 (Registration Nos. 2-51719, 2-45120, 2-79306, 33-00390, 33-19639, 33-32563, 33-42015 and 33-44540) of our reports dated June 14, 1994, on our audits of the consolidated financial statements and financial statement schedules of H. J. Heinz Company and subsidiaries as of April 27, 1994 and April 28, 1993 and for the fiscal years ended April 27, 1994, April 28, 1993 and April 29, 1992, which reports are included or incorporated by reference in this Annual Report on Form 10-K. COOPERS & LYBRAND Pittsburgh, PA July 25, 1994 12 Schedule II H. J. Heinz Company and Subsidiaries AMOUNTS RECEIVABLE FROM RELATED PARTIES AND UNDERWRITERS, PROMOTORS AND EMPLOYEES OTHER THAN RELATED PARTIES Fiscal Years Ended April 27, 1994, April 28, 1993 and April 29, 1992 (Thousands of Dollars)
Deductions -------------------- Balance at Amounts Balance at end of period beginning Amounts written Translation ------------------------ Description of period Additions collected off adjustment Current Not Current ----------- --------- --------- --------- --- ---------- ------- ----------- Fiscal year ended April 27, 1994: J. Crawshaw(1)............... $615 $ 78 $ 61 $ -- $ (42) $590 $ -- R.F. Brady(2)................ 195 14 -- -- -- -- 209 T. Ward(3)................... 225 51 8 -- -- -- 268 D.E.I. Smyth(4).............. -- 600 600 -- -- -- -- N. Fielke(5)................. -- 354 -- -- -- 354 -- Fiscal year ended April 28, 1993: J. Crawshaw(1)............... $683 $ -- $ 24 $ -- $ (44) $615 $ -- R.F. Brady(2)................ 165 37 -- -- (7) -- 195 T. Ward(3)................... 173 64 6 -- (6) -- 225 Fiscal year ended April 29, 1992: J. Crawshaw(1)............... $ 87 $620 $ -- $ -- $ (24) $683 $ -- R.F. Brady(2)................ 94 77 -- -- (6) -- 165 T. Ward(3)................... 134 45 -- -- (6) -- 173
NOTES: (1) Represents an unsecured non-interest bearing demand note related to the purchase of a residence. The loan is expected to be repaid upon the sale of the employee's previous residence. (2) Represents a loan secured by certain employee benefit plan balances carrying an interest rate tied to the current Australian Fringe Benefit Rate (currently 7.25% per annum). The loan is related to the purchase of a residence and is payable upon the employee's termination from the Company. (3) Represents a loan secured by certain employee benefit plan balances carrying an interest rate tied to the current Australian Fringe Benefit Rate (currently 7.25% per annum). The loan is related to the purchase of a residence and is payable upon the employee's termination from the Company. (4) Represents a non-interest bearing loan secured by real property, which was related to the purchase of a residence. The loan was repaid in full during fiscal 1994. (5) Represents an unsecured interest bearing loan related to the purchase of a residence which is due in September 1994. The interest rate is tied to the current Australian Fringe Benefit Rate (currently 7.25% per annum). Schedule V H. J. Heinz Company and Subsidiaries PROPERTY, PLANT AND EQUIPMENT Fiscal Years Ended April 27, 1994, April 28, 1993 and April 29, 1992 (Thousands of Dollars)
Balance at Other Balance at beginning Additions Translation changes end of Classification of period at cost Retirements adjustment add (deduct) period -------------- --------- ------- ----------- ---------- ------------ ------ Fiscal year ended April 27, 1994: Land.......................... $ 51,438 $ 268 $ 351 $ (290) $ (264)(1) $ 50,801 Buildings and leasehold improvements................ 732,488 31,260 5,641 (12,961) (54,663)(1) 690,483 Equipment, furniture and other................... 2,544,425 243,524 41,298 (56,529) 11,534(1) 2,701,656 ---------- -------- ------- -------- -------- ---------- $3,328,351 $275,052 $47,290 $ (69,780) $(43,393) $3,442,940 ========== ======== ======= ========= ======== ========== Fiscal year ended April 28, 1993: Land.......................... $ 44,988 $ 451 $ 1,384 $ (648) $ 8,031(2) $ 51,438 Buildings and leasehold improvements................ 655,323 83,531 6,698 (23,119) 23,451(2) 732,488 Equipment, furniture and other................... 2,279,471 346,731 50,469 (101,592) 70,284(2) 2,544,425 ---------- -------- ------- --------- -------- ---------- $2,979,782 $430,713 $58,551 $(125,359) $101,766 $3,328,351 ========== ======== ======= ========= ======== ========== Fiscal year ended April 29, 1992: Land.......................... $ 39,918 $ 1,455 $ 100 $ (815) $ 4,530(3) $ 44,988 Buildings and leasehold improvements................ 529,041 114,115 3,846 966 15,047(3) 655,323 Equipment, furniture and other................... 2,195,511 215,573 65,977 15,508 (81,144)(3) 2,279,471 ---------- -------- ------- --------- -------- ---------- $2,764,470 $331,143 $69,923 $ 15,659 $(61,567) $2,979,782 ========== ======== ======= ========= ======== ==========
NOTES: (1) Includes opening balances of acquisitions, primarily the assets of the Food Service Products Company (Moore's and Domani), and transfers among accounts. Additionally, includes balances of divested businesses, the Near East specialty rice business, the confectionery business of Heinz Italy, the Chico-San rice cake business and certain other small businesses, and includes amortization charged to income of $6,359 for buildings and leasehold improvements and $2,505 for equipment, furniture and other. (2) Includes opening balances of acquisitions, including assets of Wattie's Limited, Canadian Pizza Company, Sonrissa and Arimpex. Additionally, includes balances of divested company, BMJ Foods - P.R. - Inc. and includes amortization charged to income of $5,823 for buildings and leasehold improvements and $2,348 for equipment, furniture and other. (3) Includes opening balances of acquisitions, including assets of JLFoods, Continental Delights, Inc., Escalon Packers, Inc., Sausville Foods, Inc. and certain Weight Watchers franchises. Additionally, includes balances of divested companies, The Hubinger Company and Somycel, S.A. and includes amortization charged to income of $5,902 for buildings and leasehold improvements and $2,723 for equipment, furniture and other. For financial reporting purposes, depreciation is primarily provided on the straight-line method over the estimated useful lives of the assets, not exceeding 50 years. Schedule VI H. J. Heinz Company and Subsidiaries ACCUMULATED DEPRECIATION OF PROPERTY, PLANT AND EQUIPMENT Fiscal Years Ended April 27, 1994, April 28, 1993 and April 29, 1992 (Thousands of Dollars)
Additions Other Balance at charged to changes Balance at beginning costs and Translation add end of Description of period expenses Retirements adjustment (deduct) period ----------- --------- -------- ----------- ---------- -------- ------ Fiscal year ended April 27, 1994: Buildings..................... $ 167,822 $ 16,930 $ 581 $ (2,972) $ (4,686)(1) $ 176,513 Equipment, furniture and other................... 998,318 174,145 30,874 (21,198) (21,691)(1) 1,098,700 ---------- -------- ------- -------- --------- ---------- $1,166,140 $191,075 $31,455 $(24,170) $(26,377) $1,275,213 ========== ======== ======= ======== ======== ========== Fiscal year ended April 28, 1993: Buildings..................... $ 158,872 $ 15,626 $ 2,090 $ (4,787) $ 201 (1) $ 167,822 Equipment, furniture and other................... 908,801 161,630 34,739 (37,183) (191)(1) 998,318 ---------- -------- ------- --------- --------- ---------- $1,067,673 $177,256 $36,829 $(41,970) $ 10 $1,166,140 ========== ======== ======= ======== ========= ========== Fiscal year ended April 29, 1992: Buildings..................... $ 155,340 $ 14,512 $ 1,096 $ 432 $ (10,316)(1) $ 158,872 Equipment, furniture and other................... 886,389 146,973 35,417 3,159 (92,303)(1) 908,801 ---------- -------- ------- ---------- --------- ---------- $1,041,729 $161,485 $36,513 $ 3,591 $(102,619) $1,067,673 ========== ======== ======= ========== ========= ==========
NOTES: (1) Includes divestitures. Schedule VII H. J. Heinz Company and Subsidiaries GUARANTEES OF SECURITIES OF OTHER ISSUERS April 27, 1994 (Thousands of Dollars)
Name of issuer of securities guaranteed Title of issue Total amount by person for of each class guaranteed which statement of securities and Nature of is filed guaranteed outstanding(1) guarantee -------- ---------- -------------- --------- Guarantees by Registrant and certain of its consolidated subsidiaries of: Unconsolidated subsidiaries (2) Mortgages and loans $ 1,212 Principal and interest Equity interests Bank loans 2,522 Other entities (3) Mortgages and promissory notes 21,561 ------- $25,295 =======
NOTES: (1) The Registrant does not own any of the securities guaranteed, nor are any such securities held in the treasury of the issuer of such securities. There are no defaults by issuer of securities guaranteed in principal, interest, sinking fund or redemption provisions, or payment of dividends. (2) Interest on the guarantees of unconsolidated subsidiaries and other entities is at varying rates. (3) The securities issued by other entities and guaranteed by the Registrant include $12.8 million of secured promissory notes of Nu-BMJ Inc., which Nu-BMJ Inc. issued in connection with its purchase of the Registrant's BMJ Foods subsidiary. Schedule VIII H. J. Heinz Company and Subsidiaries VALUATION AND QUALIFYING ACCOUNTS AND RESERVES Fiscal Years Ended April 27, 1994, April 28, 1993 and April 29, 1992 (Thousands of Dollars)
Additions ----------------------- Balance at Charged to Charged Balance at beginning costs and to other end of Description of period expenses accounts Deductions period ----------- --------- -------- -------- ---------- ------ Fiscal year ended April 27, 1994: Reserves deducted in the balance sheet from the assets to which they apply: Receivables............................... $ 16,299 $ 4,535 $ -- $ 5,427(1) $ 15,407 ======== ======== ======= ======= ======== Investments, advances and other assets............................ $ 20,165 $ -- $ -- $ 324 $ 19,841 ======== ======== ======= ======= ======== Goodwill.................................. $115,631 $ 30,275 $ -- $18,198(1) $127,708 ======== ======== ======= ======= ======== Other intangibles......................... $ 72,673 $ 17,396 $ -- $ 4,207(1) $ 85,862 ======== ======== ======= ======= ======== Deferred tax assets (2)................... $ 85,071 $ 4,655 $ -- $60,838 $ 28,888 ======== ======== ======= ======= ======== Fiscal year ended April 28, 1993: Reserves deducted in the balance sheet from the assets to which they apply: Receivables............................... $ 15,390 $ 4,018 $ 1,976 $ 5,085(1) $ 16,299 ======== ======== ======= ======== ======== Investments, advances and other assets............................ $ 20,554 $ 298 $ -- $ 687 $ 20,165 ======== ======== ======= ======== ======== Goodwill.................................. $ 88,892 $ 29,845 $ -- $ 3,106 $115,631 ======== ======== ======= ======== ======== Other intangibles......................... $ 63,197 $ 16,382 $ -- $ 6,906(1) $ 72,673 ======== ======== ======= ======== ======== Deferred tax assets (3)................... $139,976 $ 5,025 $ -- $ 59,930 $ 85,071 ======== ======== ======= ======== ======== Fiscal year ended April 29, 1992: Reserves deducted in the balance sheet from the assets to which they apply: Receivables............................... $ 11,563 $ 5,345 $ 91 $ 1,609(1) $ 15,390 ======== ======== ======= ======== ======== Investments, advances and other assets............................ $ 25,424 $ 3,945 $ -- $ 8,815(1) $ 20,554 ======== ======== ======= ======== ======== Goodwill.................................. $ 67,553 $ 22,992 $ -- $ 1,653(1) $ 88,892 ======== ======== ======= ======= ======== Other intangibles......................... $ 44,285 $ 19,052 $ -- $ 140 $ 63,197 ======== ======== ======= ======== ======== Deferred tax assets (4)................... $ -- $139,976 $ -- $ -- $139,976 ======== ======== ======= ======== ========
NOTES: (1) Principally reserves on assets sold, written off or reclassified. (2) The net change in the valuation allowance for deferred tax assets was a decrease of $56.2 million. The decrease was primarily due to the utilization of loss carryforwards ($2.8 million) and recognition of the realizability of certain other deferred tax assets in future years ($57.3 million). An increase in the valuation allowance related to the deferred tax asset for loss carryforwards ($4.7 million) partially offset the decrease. See Note 5 to the Consolidated Financial Statements on pages 45 and 46 of the Company's Annual Report to Shareholders for the fiscal year ended April 27, 1994. (3) The net change in the valuation allowance for deferred tax assets was a decrease of $54.9 million. The decrease was primarily due to the utilization of loss carryforwards ($5.3 million), amortization of asset revaluations ($10.7 million) and recognition of the realizability of certain other deferred tax assets in future years ($41.8 million). An increase in the valuation allowance related to the deferred tax asset for loss carryforwards ($5.0 million) partially offset the decrease. See Note 5 to the Consolidated Financial Statements on pages 45 and 46 of the Company's Annual Report to Shareholders for the fiscal year ended April 27, 1994. (4) Due to the adoption of FAS No. 109. See Note 5 to the Consolidated Financial Statements on pages 45 and 46 of the Company's Annual Report to Shareholders for the fiscal year ended April 27, 1994. Schedule IX H. J. Heinz Company and Subsidiaries SHORT-TERM BORROWINGS Fiscal Years Ended April 27, 1994, April 28, 1993 and April 29, 1992 (Thousands of Dollars)
Fiscal Year Ended -------------------------------------- April 27, April 28, April 29, 1994 1993 1992 ---- ---- ---- Commercial paper.............................................................. $ 257,202 $1,294,705 $1,236,383 Bank and other borrowings..................................................... 159,170 275,757 371,942 ---------- ---------- --------- Short-term borrowings......................................................... $ 416,372 $1,570,462 $1,608,325 ========== ========== ========== Weighted average interest rate at end of period............................... 5.2% 4.3% 5.6% Maximum amount outstanding during the period (a).............................. $1,506,523 $1,925,266 $1,809,328 Average amount outstanding during the period (b).............................. $1,159,960 $1,915,846 $1,439,186 Weighted average interest rate during the period (c).......................... 4.3% 4.8% 6.8%
NOTES: (a) Represents maximum amount outstanding at any month end. (b) Average borrowings were determined by dividing the sum of the daily principal balances by 365. (c) The weighted average interest rate was computed by dividing interest expense by average short-term borrowings. Schedule X H. J. Heinz Company and Subsidiaries SUPPLEMENTARY INCOME STATEMENT INFORMATION Fiscal Years Ended April 27, 1994, April 28, 1993 and April 29, 1992 (Thousands of Dollars)
Charged to Costs and Expenses ------------------------------- Fiscal Year Ended -------------------------------- April 27, April 28, April 29, Item 1994 1993 1992 ---- ---- ---- ---- Maintenance and repairs..................................................... $142,944 $129,764 $135,377 ======== ======== ======== Advertising (1)............................................................. $741,920 $700,126 $692,314 ======== ======== ======== Depreciation and amortization expense....................................... $259,809 $234,935 $211,786 ======== ======== ========
NOTES: (1) Comprised of media, consumer promotions and cooperative advertising. EXHIBIT INDEX Exhibits required to be filed by Item 601 of Regulation S-K are listed below and are filed as a part hereof. Documents not designated as being incorporated herein by reference are filed herewith. The paragraph numbers correspond to the exhibit numbers designated in Item 601 of Regulation S-K. Exhibit - ------- 3(i) The Company's Articles of Amendment dated July 13, 1994, amending and restating the Company's amended and restated Articles of Incorporation in their entirety. 3(ii) The Company's By-Laws, as amended effective July 6, 1990 are incorporated by reference to Exhibit 3(c) to the Company's Annual Report on Form 10-K for the fiscal year ended May 2, 1990. 4. Except as set forth below, there are no instruments with respect to long-term debt of the Company that involve indebtedness or securities authorized thereunder exceeding 10 percent of the total assets of the Company and its subsidiaries on a consolidated basis. The Company agrees to file a copy of any instrument or agreement defining the rights of holders of long-term debt of the Company upon request of the Securities and Exchange Commission. (a) Form of Indenture between the Company and The First National Bank of Chicago dated as of July 15, 1992, is incorporated herein by reference to Exhibits 4(a) and 4(c) to the Company's Registration Statement on Form S-3 (Reg. No. 33-46680) and the supplements to such Indenture are incorporated herein by reference to the Company's Form 8-Ks dated September 21, 1992, October 29, 1992 and January 27, 1993 relating to the Company's $250,000,000 5-1/2% Notes due 1997, $300,000,000 6-3/4% Notes due 1999 and $200,000,000 6-7/8% Notes due 2003, respectively. 10(a) Permit No. 408 (lease) granted by the City of Los Angeles to Star-Kist Foods, Inc. dated September 6, 1979 for premises located at Terminal Island, California is incorporated herein by reference to Exhibit 10(e) to the Company's Annual Report on Form 10-K for the fiscal year ended April 29, 1981. (b) Lease of Land in American Samoa, dated as of September 17, 1983, by and between the American Samoa Government and Star-Kist Samoa, Inc. is incorporated herein by reference to Exhibit 10(m) to the Company's Annual Report on Form 10-K for the fiscal year ended May 2, 1984. (c) Management contracts and compensatory plans: (i) Management Incentive Plan, as amended, is incorporated herein by reference to Exhibit 10(a) to the Company's Annual Report on Form 10-K for the fiscal year ended April 30, 1986 (ii) Long-Term Incentive Plan for senior executives, as amended, is incorporated herein by reference to Appendix B to the Company's Definitive Proxy Statement dated August 3, 1990 (iii) 1986 Deferred Compensation Program for H. J. Heinz Company and affiliated companies is incorporated herein by reference to Exhibit 10(p) to the Company's Annual Report on Form 10-K for the fiscal year ended April 30, 1986 (iv) Executive Employment Agreement dated as of March 14, 1990 between the Company and A. J. F. O'Reilly is incorporated herein by reference to Exhibit 10(k) to the Company's Annual Report on Form 10-K for the fiscal year ended May 2, 1990 (v) H. J. Heinz Company's 1982 Stock Option Plan, as amended, is incorporated herein by reference to Exhibit 10(m) to the Company's Annual Report on Form 10-K for the fiscal year ended May 2, 1990 (vi) H. J. Heinz Company's 1984 Stock Option Plan, as amended, is incorporated herein by reference to Exhibit 10(n) to the Company's Annual Report on Form 10-K for the fiscal year ended May 2, 1990 (vii) H. J. Heinz Company's 1987 Stock Option Plan, as amended, is incorporated herein by reference to Exhibit 10(o) to the Company's Annual Report on Form 10-K for the fiscal year ended May 2, 1990 Exhibit - ------- (viii) H. J. Heinz Company's 1990 Stock Option Plan is incorporated herein by reference to Appendix A to the Company's Definitive Proxy Statement dated August 3, 1990 (ix) H. J. Heinz Company Supplemental Executive Retirement Plan, as amended, is incorporated by reference to Exhibit 10(c)(ix) to the Company's Annual Report on Form 10-K for the fiscal year ended April 28, 1993 (x) H. J. Heinz Company Executive Deferred Compensation Plan 11. Computation of net income per share. 13. Pages 32 through 54 of the H. J. Heinz Company Annual Report to Shareholders for the fiscal year ended April 27, 1994, portions of which are incorporated herein by reference. Those portions of the Annual Report to Shareholders that are not incorporated herein by reference shall not be deemed to be filed as a part of this Report. 21. Subsidiaries of the Registrant 23. The following Exhibit is filed by incorporation by reference to Item 14(a)(2) of this Report: (a) Consent of Coopers & Lybrand. 24. Powers-of-attorney of the Company's directors. EX-3.I 2 ARTICLES OF AMENDMENT Exhibit 3(i) ARTICLES OF AMENDMENT In compliance with the requirements of 15 Pa.C.S. (section)1915 (relating to articles of amendment), the undersigned business corporation, H. J. HEINZ COMPANY, desiring to amend its Articles, hereby certifies under its corporate seal that: 1. The name of the corporation is H. J. HEINZ COMPANY and its current registered office in the Commonwealth of Pennsylvania is located at 600 Grant Street, Pittsburgh, Pennsylvania 15219. 2. The corporation was formed under the Act of the General Assembly of the Commonwealth of Pennsylvania, approved April 29, 1874, as supplemented and amended, as shown by its Certificate of Incorporation dated the 27th day of July, 1900 and recorded in the office of the Secretary of the Commonwealth in Charter Book Volume No. 61, page 212, and in the office of the Recorder of Deeds in and for the County of Allegheny on the 23rd day of February, 1905 in Charter Book Volume 37, page 250. 3. The amendment shall be effective upon filing these Articles of Amendment in the Department of State. 4. The amendment was adopted by the board of directors pursuant to 15 Pa.C.S. (section)1914 (c). 5. The amendment adopted by the corporation, set forth in full, is as follows: RESOLVED that the Amended and Restated Articles of Incorporation of H. J. Heinz Company (hereinafter called the "corporation") be amended and restated in their entirety so that the same shall read in full as follows: 1. The name of the corporation is H. J. HEINZ COMPANY. 2. The location and post office address of the current registered office of the corporation in the Commonwealth of Pennsylvania is 600 Grant Street, Pittsburgh, Pennsylvania 15219. 3. The business of the corporation shall be to manufacture, produce, buy, sell and generally deal in food and grocery products and goods, wares, merchandise and personal property of every kind and description and, without limitation, to engage in, and do any and all lawful act concerning any or all lawful business for which corporations may be incorporated under the Business Corporation Law of the Commonwealth of Pennsylvania. 4. The term of its existence is perpetual. 5. The aggregate number of shares which the corporation shall have authority to issue as of July 13, 1994 shall be 602,238,876 shares, of which 2,238,876 shares shall be Third Cumulative Preferred Stock of the par value of $10 per share, issuable in one or more series, and 600,000,000 shares shall be Common Stock of the par value of $.25 per share. A description of each class of shares which the corporation shall have authority to issue and a statement of the preferences, qualifications, limitations, restrictions and the special or relative rights granted to or imposed upon the shares of each class are as follows: SECTION I. THIRD CUMULATIVE PREFERRED STOCK This Section I sets forth a description of the Third Cumulative Preferred Stock (hereinafter called the "Third Preferred Stock") and a statement of certain of the voting rights, designations, preferences, privileges, qualifications, limitations, options and common rights, and of certain of the special or relative rights granted to or imposed upon the shares of the Third Preferred Stock, together with a statement of the authority vested in the Board of Directors of the corporation to establish series and to fix and determine the variations in the relative rights and preferences as between series, insofar as they are not fixed by this Section I, and a statement of the rights and preferences of a series of the Third Preferred Stock designated as the "Third Cumulative Preferred Stock, $1.70 First Series" established by the Board of Directors of the corporation pursuant to the aforesaid authority, viz.: 1 Subsection A. Issuance in Series. Subparagraph (1). The Third Preferred Stock shall be divided into and from time to time may be issued in series, and the Board of Directors is hereby expressly vested with the authority, in the resolution or resolutions providing for the issue of shares of particular series, before issuance, to fix and determine: (a) the distinctive serial designation of such series; (b) the annual dividend rate for such series, and the date from which such dividends shall commence to accrue; (c) the full, limited, multiple, fractional or no voting rights of such series; (d) the redemption price or prices for such series, which may consist of a redemption price or scale of redemption prices applicable only to redemption for a sinking fund (which term as used herein shall include any fund or requirement for the periodic retirement of shares) and a different redemption price or scale of redemption prices applicable to any other redemption, and the terms and conditions on which shares of such series may be redeemed; (e) the sinking fund provisions, if any, for the redemption or purchase of shares of such series; (f) the amounts payable upon shares of such series in the event of the voluntary or involuntary liquidation of the corporation; and (g) the terms and conditions, if any, upon which shares of such series may be converted and the class or classes or series of shares of the corporation into which such shares may be converted. Subparagraph (2). All shares of the Third Preferred Stock shall be of equal rank with each other, regardless of series, and shall be identical with each other in all respects except as provided in subparagraph (1) of this Subsection A. Subparagraph (3). In case the stated dividends and the amounts payable on liquidation are not paid in full, the shares of all series of the Third Preferred Stock shall share ratably in the payment of dividends, including accruals, if any, in proportion to the sums which would be payable on said shares if all dividends were declared and paid in full, and in any distribution of assets other than by way of dividends in accordance with the sums which would be payable on such distribution if all sums payable were discharged in full. Subsection B. Dividends on Third Preferred Stock and Junior Stock. The holders of the Third Preferred Stock shall be entitled to receive, when and as declared by the Board of Directors, but only out of funds legally available for the payment of dividends, cumulative cash dividends at the annual rate for each particular series theretofore fixed by the Board of Directors as hereinbefore authorized, and no more, payable quarter-yearly, on the first days of January, April, July and October in each year, to shareholders of record on the respective dates, not exceeding forty days preceding such dividend payment dates, fixed for the purpose by the Board of Directors in advance of payment of each particular dividend. Such dividends on the Third Preferred Stock shall be payable before any dividend on any junior stock (which term as used in this Section I shall mean the Common Stock and any other class of stock of the corporation hereafter authorized ranking junior to the Third Preferred Stock as to dividends or assets) shall be paid or set apart for payment. Dividends on each series of the Third Preferred Stock shall be cumulative from such date as may be fixed by the Board of Directors prior to the issue thereof. Arrearages in the payment of dividends shall not bear interest. So long as any of the Third Preferred Stock remains outstanding, no dividend whatever shall be paid or declared on any junior stock nor shall any distribution be made on any junior stock, other than a dividend payable in junior stock, nor shall any shares of any junior stock be acquired for a consideration by the corporation: 2 (1) unless all dividends on the Third Preferred Stock of all series for all past quarter-yearly dividend periods shall have been paid and the full dividends thereon for the then current quarter-yearly dividend period shall have been paid or shall have been declared and a sum sufficient for the payment thereof set apart; and (2) unless, if at any time the corporation is obligated to retire shares of any series of the Third Preferred Stock pursuant to a sinking fund, all arrears in respect of each sinking fund for the Third Preferred Stock of all series shall have been made good. Subject to the foregoing provisions, and not otherwise, such dividends (payable in cash, stock or otherwise) as may be determined by the Board of Directors may be declared and paid on any junior stock from time to time out of the remaining funds of the corporation legally available for the payment of dividends, and the Third Preferred Stock shall not be entitled to participate in any such dividends, whether payable in cash, stock or otherwise. Subsection C. Redemption. Subject to the provisions of subparagraph (3) of Subsection E of this Section I and subject to the provisions of the resolution or resolutions of the Board of Directors providing for the issue of shares of any particular series, the corporation, at the option of the Board of Directors, may redeem the whole or any part of the Third Preferred Stock at any time outstanding, or the whole or any part of any series thereof, at any time or from time to time, upon notice duly given as hereinafter specified, at the applicable redemption price or prices fixed by the Board of Directors as hereinbefore authorized, together with a sum, in the case of each share so to be redeemed, computed at the annual dividend rate for the series of which the particular share is a part from and after the date on which dividends on such share became cumulative to and including the date fixed for such redemption, less the aggregate of the dividends theretofore paid thereon, but computed without interest. Notice of every such redemption of the Third Preferred Stock shall be published at least once in a newspaper printed in the English language and customarily published on each business day and of general circulation in the Borough of Manhattan, The City of New York, New York, and in a similar newspaper similarly published and of general circulation in the City of Pittsburgh, Pennsylvania, and in a similar newspaper similarly published and of general circulation in such other city or cities as may be specified in the resolution or resolutions of the Board of Directors providing for the issue of shares of any particular series, such publications to be at least thirty days prior to the date fixed for such redemption. Notice of every such redemption shall also be mailed at least thirty days prior to the date fixed for such redemption to the holders of record of the shares so to be redeemed at their respective addresses as the same shall appear on the books of the corporation; but no failure to mail such notice nor any defect therein or in the mailing thereof shall affect the validity of the proceeding for the redemption of any shares so to be redeemed. In case of redemption of a part only of any series of the Third Preferred Stock at the time outstanding, the redemption may be either pro rata or by lot. The Board of Directors shall have full power and authority to prescribe the manner in which the drawings by lot or the pro rata redemption shall be conducted and, subject to the provisions herein contained, the terms and conditions upon which the Third Preferred Stock shall be redeemed from time to time. On or at any time before any redemption date, the corporation may deposit in trust, for the account of the holders of the shares to be redeemed, the moneys necessary for such redemption with a bank or trust company, to be designated in the notice of such redemption, in good standing, having capital, surplus and undivided profits aggregating at least $5,000,000, organized under the laws of the United States of America or of the State of New York, doing business in the Borough of Manhattan, The City of New York, New York, or organized under the laws of the United States of America or of the Commonwealth of Pennsylvania and doing business in the City of Pittsburgh, Pennsylvania. In the event such deposit is so made, then, upon the publication, as hereinabove provided, of the notice of such redemption, or upon the earlier delivery to said bank or trust company of irrevocable authorization and direction to publish such notice, all shares with respect to the redemption of which such deposit shall have been made and such publication 3 effected or authorization therefor given shall, whether or not the certificates for such shares shall have been surrendered for cancellation, be deemed to be no longer outstanding for any purpose, and all rights with respect to such shares shall thereupon cease and terminate except the right of the holders of the certificates for such shares to receive, from and after the time of such deposit, the amount payable upon the redemption thereof, without interest, and the right to exercise, on or before the date fixed for redemption, any unexpired privileges of conversion. Any funds so deposited by the corporation which shall not be required for such redemption because of the exercise of any right of conversion or exchange subsequent to the time of such deposit shall be released or repaid to the corporation forthwith. Any funds so deposited which are unclaimed at the end of six years from such redemption date shall be repaid to the corporation, after which the holders of the shares so called for redemption shall look only to the corporation for payment thereof, provided, however, that if any unclaimed funds so repaid to the corporation shall have been paid by it to the Commonwealth of Pennsylvania under or in lieu of escheat, the holders of the shares so called for redemption shall thenceforth look only to the said Commonwealth for the payment thereof. Subsection D. Amounts Payable on Liquidation or Dissolution. In the event of any liquidation, dissolution or winding up of the corporation, whether voluntary or involuntary, the holders of the Third Preferred Stock of each series then outstanding shall be entitled to receive in cash out of the assets of the corporation, before any distribution or payment shall be made to the holders of any junior stock, the full preferential amount or amounts fixed by the Board of Directors for such series as herein authorized, plus in respect of each such share a sum computed at the annual dividend rate applicable thereto from and after the date on which dividends on such share became cumulative to and including the date fixed for such payment, less the aggregate of dividends theretofore paid thereon, but computed without interest; provided that if such assets available for the holders of the Third Preferred Stock of each series then outstanding shall be less than the total amount all such holders would be so entitled to receive if all such preferential amount or amounts and dividends were paid in full then the corporation shall, in lieu of making such payments in full to the holders of the Third Preferred Stock of each series then outstanding, make payments to the holders of the Third Preferred Stock of each series then outstanding (in proportion to the respective amounts which would be payable on account of such liquidation, dissolution or winding up if all such payments were paid in full) of an aggregate amount equal to such assets so available. If such payment shall have been made in full to the holders of the Third Preferred Stock on voluntary or involuntary liquidation, dissolution or winding up, the remaining assets of the corporation shall be distributed among the holders of junior stock according to their respective rights and preferences and in accordance with their respective holdings. For the purposes of this Subsection D, a consolidation or merger of the corporation with any other corporation shall not be deemed, as such, to constitute a liquidation, dissolution or winding up of the corporation, but any reorganization of the corporation required by any court or administrative body in order to comply with any provision of law shall be deemed to be an involuntary liquidation, dissolution or winding up of the corporation unless the preferences, qualifications, limitations, restrictions and special or relative rights granted to or imposed upon the Third Preferred Stock are not adversely affected by such reorganization. Subsection E. Restrictions on Corporate Action. The consent of the holders of at least two-thirds of the Third Preferred Stock (subject to the provisions of subparagraph (2) hereof) at the time outstanding, given in person or by proxy, either in writing or at a special meeting called for the purpose, at which the Third Preferred Stock entitled to vote shall vote separately as a class, regardless of series, shall be necessary to effect or validate any one or more of the following: Subparagraph (1). The authorization of, or any increase in the authorized amount of, any class of stock of the corporation ranking prior to or on a parity with the Third Preferred Stock, either as to dividends or upon liquidation, or any increase in the authorized amount of the Third Preferred Stock; 4 Subparagraph (2). The amendment, alteration or repeal of any of the provisions of the Restated Articles of Incorporation, as now or hereafter amended, of the corporation, or any of the provisions of the resolution or resolutions of the Board of Directors providing for the issue of shares of any series of the Third Preferred Stock, so as to affect adversely the rights, preferences or powers of the Third Preferred Stock or of any series of the Third Preferred Stock; provided, however, that if any such amendment, alteration or repeal shall affect adversely the rights, preferences or powers of one or more, but not all, of the series of Third Preferred Stock at the time outstanding, the consent of the holders of at least two-thirds in interest of the shares then outstanding of each series so affected entitled to vote, similarly given, shall be required in lieu of the consent of the holders of two-thirds of the Third Preferred Stock entitled to vote voting as a class; or Subparagraph (3). The redemption of less than all of the Third Preferred Stock at the time outstanding or the purchase of any of the Third Preferred Stock except in accordance with a purchase offer made to all holders thereof, unless the full dividend on the Third Preferred Stock for all past quarter-yearly dividend periods shall have been paid or declared and a sum sufficient for the payment thereof set apart; provided that no consent of the holders of the Third Preferred Stock entitled to vote or of the holders of a particular series of the Third Preferred Stock entitled to vote shall be required under the provisions of this Subsection E if, at or prior to the time of the act with respect to which such vote would otherwise be required, provision is made in accordance with the provisions of the fourth paragraph of Subsection C of this Section I for the redemption of all shares of Third Preferred Stock or of all shares of the particular series of the Third Preferred Stock at the time outstanding. If in any case the amounts payable with respect to any requirements to retire shares of the Third Preferred Stock are not paid in full in the case of all series with respect to which such requirements exist, the number of shares to be retired in each series shall be in proportion to the respective amounts which would be payable on account of such requirements if all amounts payable were met in full. Subsection F. Voting Rights. Holders of the Third Preferred Stock entitled to vote shall be entitled to vote together with the Common Stock and not as a separate class on all matters at every meeting of the holders of Common Stock of the corporation, and, in addition, holders of the Third Preferred Stock entitled to vote shall be entitled to vote, separately as a class, to the extent provided in Subsection E above, and as hereinafter in this Subsection F set forth. If and when six quarter-yearly dividends payable on the Third Preferred Stock of any series shall be in default, in whole or in part, the holders of the outstanding Third Preferred Stock entitled to vote, voting separately as a class regardless of series, shall, in addition to the voting rights provided in Subsection E of this Section I and hereinabove provided in this Subsection F, become entitled to elect two Directors, who shall be additional Directors to the then existing Board, and the holders of the Third Preferred Stock entitled to vote and the Common Stock, voting together, shall be entitled to elect the remaining Directors of the corporation. When all dividends then in default on the Third Preferred Stock then outstanding shall thereafter be paid, the Third Preferred Stock shall then be divested of such additional voting power, but always subject to the same provisions for the vesting of such additional voting power in the Third Preferred Stock entitled to vote in case of any similar future default or defaults. A meeting of the holders of the Third Preferred Stock for the election of such Directors, at which the holders of the Third Preferred Stock entitled to vote shall vote as a class, shall be held at any time after the accrual of such additional voting power, upon notice similar to that provided in the By-Laws for a special meeting of shareholders, upon call by the Secretary of the corporation, who shall call such meeting at the written request of the holders of record of not less than 5% of the Third Preferred Stock entitled to vote then outstanding, addressed to him at the principal business office of the corporation. The holders of a majority of the Third Preferred Stock entitled to vote present in person or by proxy shall be entitled to elect the additional Directors above provided for. Upon termination of the additional voting power of the Third Preferred Stock at any time by reason of the payment of all accumulated and defaulted dividends on such 5 stock, the terms of office of all persons who may have been elected Directors of the corporation by vote of the holders of the Third Preferred Stock shall forthwith terminate. At all times each holder of a share of the Third Preferred Stock of any series who at the time possessed voting power for any purpose shall, for such purpose, be entitled to such vote, or no vote, for each share of the Third Preferred Stock standing in such holder's name on the books of the corporation as shall have been theretofore fixed by the Board of Directors as hereinbefore authorized. Subsection G. Status of Redeemed and Purchased Shares. Except as otherwise required by law, all shares of the Third Preferred Stock redeemed, purchased or otherwise acquired by the corporation shall be cancelled and shall have the status of authorized but unissued shares, and the Board of Directors of the corporation shall have authority, by resolution, to change shares of any particular series redeemed or purchased into shares of another series of the Third Preferred Stock, subject to such limitations, if any, as are stated in the Restated Articles of Incorporation, as now or hereafter amended, of the corporation. However, no shares of the Third Preferred Stock of any series redeemed or purchased (whether or not so changed into shares of another series) shall be re-issued as a part of such series or any other series of the Third Preferred Stock so long as any shares of the Third Preferred Stock of such series shall remain outstanding. Any such cancellation of shares of any series of the Third Preferred Stock redeemed pursuant to Subsection C of this Section I shall not prevent the corporation from subsequently using such shares in satisfaction of sinking fund requirements with respect to the same series if and to the extent permitted by the terms of such series. Subsection H. Status of Converted Shares. Upon conversion of any shares of any series of the Third Preferred Stock into another class or classes or series of shares of the corporation pursuant to the provisions of the resolution or resolutions of the Board of Directors providing for the issue of such series, the number of shares which the corporation is authorized to issue shall be thereby so reduced. Subsection I. Relative Rights and Preferences of the First Series of Third Cumulative Preferred Stock. Pursuant to a resolution duly adopted by the Board of Directors of the corporation on December 10, 1975 the first series of the Third Cumulative Preferred Stock was established, such series having originally consisted of 1,800,000 shares but having been thereafter reduced to 38,876 shares through conversion and cancellation, the designation and the relative rights and preferences thereof, in addition to those set forth in Subsections A through H of this Section I, being as follows: (1) The designation is "Third Cumulative Preferred Stock, $1.70 First Series" (hereinafter called the "First Series") (2) The amount of $1.70 per share of the First Series per year, and no more, is hereby fixed as the rate per annum at which the holders of shares of the First Series shall be entitled to receive dividends; and the date of issue of the First Series is hereby fixed as the date from and after which such dividends shall accumulate. (3) Each holder of a share of the First Series shall have voting rights and shall be entitled to one-half vote for each share of the First Series standing in such holder's name on the books of the corporation. (4) The shares of the First Series are redeemable in whole or in part at any time. The redemption price payable upon the exercise of the right to redeem the shares of the First Series is fixed at $28.50 plus dividends accrued and unpaid thereon to the date fixed for redemption. In addition to the publication of notice of redemption in the newspapers specified in Subsection C of this Section I, such notice shall also be published in the City of Keokuk, Iowa. (5) Upon any voluntary or involuntary liquidation, dissolution or winding up of the corporation the holders of shares of the First Series shall be entitled to receive at the time thereof in cash out of the assets of the corporation, before any distribution or payment shall be made to the holders of any junior 6 stock, an amount equal to the redemption price of $28.50 plus dividends accrued and unpaid thereon to such time. (6) At the option of the holder thereof and upon surrender to the corporation at the office of a Transfer Agent of the Common Stock, either in the Borough of Manhattan, The City of New York, New York or in the City of Pittsburgh, Pennsylvania, each share of the First Series shall be convertible (or if such share is called for redemption, then in respect of such share to and including but not after the date fixed for such redemption), into fully paid non-assessable shares of Common Stock of the corporation (as such Common Stock shall then be constituted) at the conversion rate of 9.0 shares of Common Stock per share of stock of the First Series, the conversion rate having been previously adjusted from the initial conversion rate through the date of these Amended and Restated Articles of Incorporation pursuant to subparagraph (d) of this Paragraph 6 being subject to further adjustment as hereinafter provided: (a) If and whenever the corporation shall at any time after the date of issue of the First Series make any distribution described in paragraph (b) below or issue any shares of Common Stock (excluding shares of Common Stock or other securities issued upon the conversion of shares of the First Series, and excluding shares of Common Stock or other securities issued on the exercise of options and warrants outstanding on the date of issue of the First Series, and excluding shares of Common Stock or other securities issued on the exercise of options granted at any time after the date of issue of the First Series pursuant to any option plan for employees of the corporation or its subsidiaries, all of which are hereinafter in this Paragraph (6) referred to as "Excluded Shares"), then successively upon each such distribution or issuance the conversion rate shall be immediately (except as provided in subparagraph (g) below) adjusted in accordance with the following formula: $28.50 shall be multiplied by the number of shares of Common Stock outstanding after any such issuance (other than Excluded Shares) and the resulting product shall be divided by the aggregate consideration, determined in accordance with subparagraph (b) of this Paragraph (6), received by the corporation for shares of Common Stock then outstanding (other than Excluded Shares). The resulting quotient, adjusted to the nearest one-thousandth, shall thereafter be the conversion rate until further adjusted as herein provided, except that if by any such computation the current conversion rate would be decreased to less than the basic conversion rate as defined in subparagraph (d) of this Paragraph (6), then the conversion rate shall nevertheless be the basic conversion rate. (b) For the purpose of this Paragraph (6), the corporation shall be deemed to have received as consideration for the shares of its Common Stock outstanding at the time of making any computation hereunder $862,332,309, minus the aggregate of the amount (as valued by the Board of Directors) of all distributions (other than dividends payable in cash and/or in equity or other securities of the corporation) which have been made payable to holders of Common Stock as of a record date occurring after the date of issue of the First Series, plus any additional consideration received by the corporation after the date of issue of the First Series (other than the consideration received by the corporation in connection with the issue of shares of the First Series), which additional consideration shall be determined as follows: (i) In the case of the issuance of shares for cash, the consideration shall be the amount of such cash, provided that in no case under this subparagraph (b) shall any deduction be made for any underwriting discounts or commissions or any expenses incurred by the corporation for any underwriting of the issue or otherwise in connection therewith; (ii) In the case of the issuance of shares for a consideration in whole or in part other than cash, the consideration other than cash shall be deemed to be the fair value thereof as determined by the Board of Directors; (iii) In the case of shares issued as a stock dividend, no consideration shall be deemed to have been received therefor and such securities shall be deemed to have been issued at the 7 close of business on the record date for the determination of shareholders entitled to receive the same; and (iv) In case the corporation shall at any time after the date of issue of the First Series issue any new securities, other than the shares of the First Series, convertible into Common Stock, or any options (other than options granted pursuant to any option plan for employees of the corporation or its subsidiaries) or rights (including warrants) to subscribe to Common Stock, the shares of Common Stock issuable on the conversion of any such securities or upon the exercise of any such options or rights shall (A) if inclusion thereof would result in a current conversion rate greater than if excluded be deemed (so long as such conversion or purchase privilege is outstanding), for the purpose of the computation made pursuant to subparagraph (a) of this Paragraph (6), to have been forthwith issued and (B) in every other case shall be deemed to be issued at the close of business on the date of conversion of such convertible securities or exercise of such options or rights. The corporation for the purpose of any computation under this subdivision (iv) shall be deemed to have received a consideration for such Common Stock equal to the consideration received by the corporation for the convertible securities, options or rights so issued, plus the consideration, if any, to be received by the corporation upon their conversion or the exercise of any such options or rights, as the case may be. (c) For the purpose of this Paragraph (6), a sale or other disposition by the corporation of its securities which had been issued and outstanding and were acquired by the corporation and which have not been retired, or an issuance of Common Stock to the corporation upon conversion of shares of the First Series held by it, or a sale or other disposition by it of such Common Stock, or a purchase or other acquisition by it of its securities, shall not effect, result in or require any adjustment in the conversion rate or be taken into account in computing any future adjustment in the conversion rate. (d) In case shares of Common Stock at any time outstanding shall be subdivided into a greater or consolidated into a lesser number of shares, either with or without par value, then the current conversion rate and the basic conversion rate shall be proportionately increased or decreased, as the case may be, and in the case of a stock dividend, the basic conversion rate shall be proportionately increased. The basic conversion rate as used in this Paragraph (6) shall mean the conversion rate hereinbefore stated, as such conversion rate may be adjusted from time to time pursuant to this subparagraph (d); provided that if any such adjustment of the basic conversion rate has once been made, then each subsequent adjustment thereof shall be made with respect to the last previously established basic conversion rate. (e) In case of any reclassification or change of outstanding shares of Common Stock of the class issuable upon conversion of the shares of the First Series (other than a change from no par value to par value, or from par value to no par value, or a change in par value, or as a result of a subdivision or consolidation of shares), or in case of any consolidation or merger of the corporation with or into another corporation (other than a merger with a subsidiary in which merger the corporation is the continuing corporation and which does not result in any reclassification or change of outstanding shares of Common Stock of the class issuable upon conversion of the shares of the First Series), or in case of any sale or conveyance to another corporation of the property of the corporation as an entirety or substantially as an entirety, the holder of each share of the First Series then outstanding shall have the right thereafter (or if such share is called for redemption, then in respect of such share to and including but not after the date fixed for such redemption), to convert such share into the kind and amount of shares of stock and other securities and property receivable upon such reclassification, change, consolidation, merger, sale or conveyance by a holder of the number of shares of Common Stock of the corporation into which such share might have been converted immediately prior to such reclassification, change, consolidation, merger, sale or conveyance. 8 (f) In case at any time conditions shall arise by reason of action taken by the corporation which, in the opinion of the Board of Directors of the corporation, are not adequately covered by the other provisions of this Paragraph (6) and which might materially and adversely affect the conversion rights pertaining to the shares of the First Series, or in case at any time any such conditions are expected to arise by reason of any action contemplated by the corporation, the Board of Directors of the corporation shall appoint a firm of independent public accountants of recognized standing (which may be the firm that regularly examines the financial statements of the corporation) who shall give their opinion as to the adjustment, if any (not inconsistent with the standards established in this Paragraph (6)), of the conversion rate (including, if necessary, any adjustment as to the securities into which the shares of the First Series may thereafter be converted) which is, or would be, required to preserve without dilution the conversion rights pertaining to the shares of the First Series. The Board of Directors shall make the adjustment recommended forthwith upon the receipt of such opinion or the taking of any such action contemplated, as the case may be; provided, however, that no adjustment of the conversion rate shall be made which in the opinion of the accountant or firm of accountants giving the aforesaid opinion would result in a decrease of the conversion rate to less than the then basic conversion rate, except as otherwise provided in subparagraph (d) of this Paragraph (6). (g) Anything in this Paragraph (6) to the contrary notwithstanding, the corporation shall not be required to make any adjustment of the conversion rate in any case in which the amount by which such conversion rate would be increased or decreased in accordance with the foregoing provisions of this Paragraph (6) would be less than one one-hundredth of a share of Common Stock but in such case any adjustment that would otherwise be required then to be made shall be carried forward and made at the time and together with the next subsequent adjustment which, together with any and all such adjustments so carried forward, shall amount to one one-hundredth of a share of Common Stock. (h) The corporation shall give written notice of each adjustment in the conversion rate to each holder of record of the First Series at the address of each such holder as shown on the books of the corporation at the time of payment of the regular cash dividend on the First Series occurring next after such adjustment. Whenever the corporation shall make any adjustment in the conversion rate as herein provided, the corporation shall forthwith file with the Transfer Agents of the Common Stock in the Borough of Manhattan, The City of New York, New York and in the City of Pittsburgh, Pennsylvania, a statement, signed by the President or a Vice President of the corporation and by its Treasurer or an Assistant Treasurer, showing in detail the facts requiring such adjustment and the conversion rate that will be effective after such adjustment. In case at any time: (1) the corporation shall pay any dividend payable in shares of its Common Stock upon its Common Stock or make any distribution (other than a quarterly cash dividend in an amount per share not in excess of the amount per share of the last preceding quarterly cash dividend) to the holders of its Common Stock; (2) the corporation shall offer for subscription pro rata to the holders of its Common Stock any additional shares of stock of any class or other rights; (3) there shall be any capital reorganization or reclassification of the capital stock of the corporation or consolidation or merger of the corporation with, or sale of all or substantially all of its assets to, another corporation; or (4) there shall be a voluntary or involuntary dissolution, liquidation or winding up of the corporation; 9 then, in any one or more of said cases, the corporation shall give written notice, by first class mail, postage prepaid, addressed to each holder of record of the First Series at the address of each such holder as shown on the books of the corporation, of the date on which (a) the books of the corporation shall close or a record shall be taken for such dividend, distribution or subscription rights or (b) such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding up shall take place, as the case may be. Such notice shall also specify the date as of which the holders of Common Stock of record shall participate in such dividend, distribution or subscription rights, or shall be entitled to exchange their Common Stock for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation, or winding up, as the case may be. Such written notice shall be given at least 21 days prior to the action in question and not less than 21 days prior to the record date or the date on which the corporation's transfer books are closed with respect thereto. No fraction of share of Common Stock shall be issued upon conversion of shares of the First Series but, in lieu thereof the corporation shall pay to the holder of such shares so converted who would otherwise be entitled to a fractional share, a cash adjustment in respect of such fraction in an amount equal to the same fraction of the market value of a full share of Common Stock on the date immediately preceding the date upon which any such shares are surrendered for conversion. The market value of a share of Common Stock shall be computed on the basis of the average of the bid and asked quotations in the over-the-counter market on the last business day before the conversion date or, if the Common Stock shall at the time be dealt in on a securities exchange, shall be the last recorded sale price of a share of Common Stock on such exchange on the last business day preceding the conversion date or, if there be no such last recorded sale price, the last quoted bid price on such exchange at the close of trading on such day. The corporation shall at all times reserve and keep available out of its authorized but unissued Common Stock the full number of shares of Common Stock deliverable upon the conversion of all shares of the First Series from time to time outstanding. The corporation will pay any and all taxes that may be payable in respect of the issue or delivery of shares of Common Stock on conversion of shares of the First Series pursuant hereto. The corporation shall not, however, be required to pay any tax which may be payable in respect of any transfer involved in the issue and delivery of shares of Common Stock in a name other than that in which the shares of the First Series so converted were registered, and no such issue or delivery shall be made unless and until the person requesting such issue has paid to the corporation the amount of any such tax or has established, to the satisfaction of the corporation, that such tax has been paid. SECTION II. COMMON STOCK This Section II sets forth the powers, preferences and rights and the qualifications, limitations or restrictions in respect to the Common Stock of the corporation. Subsection A. Equal Rights. Each share of Common Stock issued or to be issued under the provisions of this Article Fifth shall be equal in all respects one with the other, and no dividend shall be paid on any shares of Common Stock unless the same dividend is paid on all shares of Common Stock outstanding at the time of such payment, and there shall be no distinction or difference between any share of Common Stock, or any rights appertaining thereto, and any other share of Common Stock. Subsection B. Other Rights. Except for and subject to those rights expressly granted in Section I of this Article Fifth to the holders of the Third Cumulative Preferred Stock, or except as may be provided by the laws of the Commonwealth of Pennsylvania, the holders of the Common Stock shall have exclusively all other rights of stockholders 10 including but not by way of limitation: (a) exclusive voting power for all purposes and exclusive rights to all notices of meetings or of any action to be taken by the corporation or by its stockholders, (b) the right to receive dividends, when and as declared by the Board of Directors out of assets lawfully available therefor, and (c) in the event of any distribution of assets upon liquidation, dissolution or winding up of the corporation or otherwise, the right to receive ratably and equally all of the assets and funds of the corporation remaining after the payment to the holders of other classes of stock of the corporation of the specific amounts which they are entitled to receive upon such liquidation, dissolution or winding up of the corporation as hereinbefore provided in Section I of this Article Fifth. Subsection C. Issuance of Common Stock. The Common Stock shall be issued from time to time and at such time and in such manner and for such consideration, whether in cash or property or otherwise, as the Board of Directors shall in their absolute discretion by a duly adopted resolution provide. SECTION III. PREEMPTIVE RIGHTS No holder of stock of the corporation of any class, whether now or hereafter outstanding, shall be entitled or have any right, as such holder, to subscribe for or to purchase any part of (i) any shares of any class whatsoever which the corporation may hereafter issue or sell or (ii) any obligations or securities which the corporation may hereafter issue or sell convertible into or exchangeable for any shares of the corporation of any class or (iii) any warrants which the corporation may hereafter issue or sell that shall confer upon the holder or owner thereof the right to subscribe for or purchase from the corporation any of its shares of any class. The provisions of this Section III shall be effective to eliminate and deny any preemptive right which may exist or may have existed in respect of any outstanding shares. SECTION IV. CUMULATIVE VOTING RIGHTS No shareholder shall in any election of directors have any right to cumulate his votes and cast them for one candidate or distribute them among two or more candidates. 6. Section I. Limitation of Director Liability. To the fullest extent that laws of the Commonwealth of Pennsylvania, as in effect on January 27, 1987 or as thereafter amended, permit elimination of limitation of the liability of directors, no Director of the corporation shall be personally liable for monetary damages as such for any action taken, or any failure to take any action, as a Director. This Section I shall not apply to any action filed prior to January 27, 1987, nor to any breach of performance of duty or any failure of performance of duty by any Director occurring prior to January 27, 1987. The provisions of this Section I shall be deemed to be a contract with each Director of the corporation who serves as such at any time while such provisions are in effect, and each such Director shall be deemed to be serving as such in reliance on the provisions of this Section I. This Section I shall not be amended, altered or repealed without the affirmative vote of the holders of at least 80% of the voting power (without consideration of the rights of any class of stock to elect directors by a separate class vote) of the then outstanding shares of capital stock of the corporation entitled to vote in an annual election of Directors, voting together and not as separate classes, unless such amendment, alteration or repeal is first recommended and approved by a majority of the entire Board of Directors in which case only a majority shareholder vote shall be required. Such affirmative vote shall be required notwithstanding the fact that no vote is required, or that a lesser percentage may be specified, by law or in any agreement with any national securities exchange or otherwise. Any amendment to, alteration or repeal of this Section I which has the effect of increasing Director liability shall operate prospectively only and shall not have any effect with respect to any action taken, or any failure to act, by a Director prior thereto. Section II. Indemnification of Directors, Officers and Others. Except as prohibited by law, the corporation may indemnify any person who is or was a director, officer, employee or agent of the corporation or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise (including, without limitation, any 11 employee benefit plan) and may take such steps as may be deemed appropriate by the Board of Directors, including purchasing and maintaining insurance, entering into contracts (including, without limitation, contracts or indemnification between the corporation and its directors, officers or employees), creating a trust fund, granting security interests or using other means (including, without limitation, a letter of credit) to ensure the payment of such amount as may be necessary to effect such indemnification. This Section II shall apply to any action taken, or any failure to take any action, on or after January 27, 1987. This Section II shall not be amended, altered or repealed without the affirmative vote of the holders of at least 80% of the voting power (without consideration of the rights of any class of stock to elect directors by a separate class) of the then outstanding shares of capital stock of the corporation entitled to vote in an annual election of Directors, voting together and not as separate classes, unless such amendment, alteration or repeal is first recommended and approved by a majority of the entire Board of Directors in which case only a majority shareholder vote shall be required. Such affirmative vote shall be required notwithstanding the fact that no vote is required, or that a lesser percentage may be specified, by law or in any agreement with any national securities exchange or otherwise. Any amendment to, alteration or repeal of this Section II which has the effect of limiting the authority of the corporation to indemnify persons under this Section II shall operate prospectively only and shall not limit in any way any indemnification provided pursuant to this Section II with respect to any action taken, or failure to act, occurring prior thereto. 7.1 A higher than majority shareholder vote for certain Business Combinations shall be required as follows (all capitalized terms being used as subsequently defined herein): (a) In addition to any affirmative vote required by law or the Articles of Incorporation, and except as otherwise expressly provided in Section 7.2 of this Article Seventh: (1) any merger or consolidation of the corporation or any Subsidiary with (A) any Interested Shareholder or with (B) any other corporation (whether or not itself an Interested Shareholder) which is, or after such merger or consolidation would be, an Affiliate or Associate of an Interested Shareholder; (2) any sale, lease, exchange, loan, mortgage, pledge, transfer or other disposition (in one transaction or a series of transactions) to or with any Interested Shareholder or any Affiliate or Associate of any Interested Shareholder of any assets of the corporation or any Subsidiary having an aggregate Fair Market Value of $15,000,000 or more; (3) the issuance or sale by the corporation or any Subsidiary (in one transaction or a series of transactions) of any securities of the corporation or any Subsidiary to any Interested Shareholder or any Affiliate or Associate of any Interested Shareholder in exchange for cash, securities or other consideration (or a combination thereof) having an aggregate Fair Market Value of $15,000,000 or more; (4) the adoption of any plan or proposal for the liquidation or dissolution of the corporation proposed by or on behalf of any Interested Shareholder or any Affiliate or Associate of any Interested Shareholder; or (5) any reclassification of securities (including any reverse stock split), or recapitalization of the corporation, or any merger or consolidation of the corporation with any of its Subsidiaries or any other transaction (whether or not with or into or otherwise involving any Interested Shareholder or any Affiliate or Associate of any Interested Shareholder) which has the effect, directly or indirectly, of increasing the proportionate share of the outstanding shares of any class of equity securities or securities convertible into equity securities of the corporation or any Subsidiary which is directly or indirectly owned by any Interested Shareholder or any Affiliate or Associate of any Interested Shareholder; shall require the affirmative vote of the holders of at least 80% of the voting power (without consideration of the rights of any class of stock to elect directors by a separate class vote) of the then outstanding shares of capital stock of the corporation entitled to vote in an annual election of directors (the "Voting 12 Stock"), voting together and not as separate classes. Such affirmative vote shall be required notwithstanding the fact that no vote is required, or that a lesser percentage may be specified, by law or in any agreement with any national securities exchange or otherwise. (b) the term "Business Combination" as used in this Article Seventh shall mean any transaction which is referred to in any one or more of clauses (1) through (5) of paragraph (a) of Section 7.1 of this Article Seventh. 7.2 The provisions of Section 7.1 of this Article Seventh shall not be applicable to any Business Combination, and such Business Combination shall require only such affirmative vote (if any) as is required by law or any other provision of the Articles of Incorporation if the conditions specified in either of the following paragraphs (a) or (b) are met: (a) The Business Combination shall have been approved by a majority of the Continuing Directors; or (b) All of the following six conditions shall have been met: (1) The transaction constituting the Business Combination shall provide for a consideration to be received by holders of Common Stock in exchange for their stock, and the aggregate amount of the cash and the Fair Market Value as of the date of the consummation of the Business Combination of consideration other than cash to be received per share by holders of Common Stock in such Business Combination shall be at least equal to the highest of the following: (A) (if applicable) the highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers' fees) paid in order to acquire any shares of Common Stock beneficially owned by the Interested Shareholder which were acquired (i) within the two-year period immediately prior to the first public announcement of the proposed Business Combination (the "Announcement Date") or (ii) in the transaction in which it became an Interested Shareholder, whichever is higher; (B) the Fair Market Value per share of Common Stock on the Announcement Date or on the date on which the Interested Shareholder became an Interested Shareholder (the "Determination Date"), whichever is higher; and (C) (if applicable) the price per share equal to the Fair Market Value per share of Common Stock determined pursuant to clause (B) immediately preceding, multiplied by the ratio of (i) the highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers' fees) paid in order to acquire any shares of Common Stock beneficially owned by the Interested Shareholder which were acquired within the two-year period immediately prior to the Announcement Date to (ii) the Fair Market Value per share of Common Stock on the first day in such two-year period on which the Interested Shareholder beneficially owned any shares of Common Stock. All per share prices shall be adjusted to reflect any intervening stock splits, stock dividends and reverse stock splits. (2) If the transaction constituting the Business Combination shall also provide for a consideration to be received by holders of any class of outstanding Voting Stock (other than Common Stock and other than Institutional Voting Stock) in exchange for their stock, the aggregate amount of the cash and the Fair Market Value as of the date of the consummation of the Business Combination of consideration other than cash to be received per share by holders of Shares of such Voting Stock shall be at least equal to the highest of the following (it being intended that the requirements of this clause (b) (2) shall be required to be met with respect to every class of outstanding Voting Stock (other than Institutional Voting Stock), whether or not the Interested Shareholder beneficially owns any shares of a particular class of Voting Stock): 13 (A) (if applicable) the highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers' fees) paid in order to acquire any shares of such class of Voting Stock beneficially owned by the Interested Shareholder which were acquired (i) within the two-year period immediately prior to the Announcement Date or (ii) in the transaction in which it became an Interested Shareholder, whichever is higher; (B) (if applicable) the highest preferential amount per share to which the holders of shares of such class of Voting Stock are entitled in the event of any voluntary or involuntary liquidation, dissolution or winding up of the corporation; (C) the Fair Market Value per share of such class of Voting Stock on the Announcement Date or on the Determination Date, whichever is higher; and (D) (if applicable) the price per share equal to the Fair Market Value per share of such class of Voting Stock determined pursuant to clause (C) immediately preceding, multiplied by the ratio of (i) the highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers' fees) paid in order to acquire any shares of such class of Voting Stock beneficially owned by the Interested Shareholder which were acquired within the two-year period immediately prior to the Announcement Date to (ii) the Fair Market Value per share of such class of Voting Stock on the first day in such two-year period on which the Interested Shareholder beneficially owned any shares of such class of Voting Stock. All per share prices shall be adjusted for intervening stock splits, stock dividends and reverse stock splits. (3) The consideration to be received by holders of a particular class of outstanding Voting Stock (including Common Stock) shall be in cash or in the same form as was previously paid in order to acquire shares of such class of Voting Stock which are beneficially owned by the Interested Shareholder. If the Interested Shareholder beneficially owns shares of any class of Voting Stock which were acquired with varying forms of consideration, the form of consideration to be received by holders of such class of Voting Stock shall be either cash or the form used to acquire the largest number of shares of such class of Voting Stock beneficially owned by it. (4) After such Interested Shareholder has become an Interested Shareholder and prior to the consummation of such Business Combination: (A) except as approved by a majority of the Continuing Directors, there shall have been no failure to declare and pay at the regular date therefor any full quarterly dividends (whether or not cumulative) on any outstanding preferred stock; (B) there shall have been (i) no reduction in the annual rate of dividends paid on the Common Stock (except as necessary to reflect any subdivision of the Common Stock) except as approved by a majority of the Continuing Directors, and (ii) an increase in such annual rate of dividends (as necessary to prevent any such reduction) in the event of any reclassification (including any reverse stock split), recapitalization, reorganization or any similar transaction which has the effect of reducing the number of outstanding shares of the common Stock, unless the failure so to increase such annual rate is approved by a majority of the Continuing Directors; and (C) such Interested Shareholder shall not have become the beneficial owner of any shares of Voting Stock except as part of the transaction in which it became an Interested Shareholder. (5) After such Interested Shareholder has become an Interested Shareholder, such Interested Shareholder shall not have received the benefit, directly or indirectly (except proportionately as a shareholder), of any loans, advances, guarantees, pledges or other financial assistance or any tax credits or other tax advantages provided by the corporation, whether in anticipation of or in connection with such Business Combination or otherwise. (6) A proxy or information statement describing the proposed Business Combination and complying with the requirements of the Securities Exchange Act of 1934 and the rules and regulations thereunder (or any subsequent provisions replacing such Act, rules or regulations) shall be mailed to all shareholders of the corporation at least 30 days prior to the consummation of such 14 Business Combination (whether or not such proxy or information statement is required to be mailed pursuant to such Act or subsequent provisions). 7.3 For the purposes of this Article Seventh: (a) A "person" shall mean any individual, firm, corporation or other entity. (b) "Interested Shareholder" at any particular time shall mean any person (other than the corporation or any Subsidiary) who or which: (1) is at such time the beneficial owner, directly or indirectly, of shares of the corporation having more than 10% of the voting power of the then outstanding Voting Stock; or (2) at any time within the two-year period immediately prior to such time was the beneficial owner, directly or indirectly, of shares of the corporation having more than 10% of the voting power of the then outstanding Voting Stock; or (3) is at such time an assignee of or has otherwise succeeded to the beneficial ownership of any shares of Voting Stock which were at any time within the two-year period immediately prior to such time beneficially owned by any Interested Shareholder, if such assignment or succession shall have occurred in the course of a transaction or series of transactions not involving a public offering within the meaning of the Securities Act of 1933. (c) A person shall be a "beneficial owner" of any shares of Voting Stock: (1) which are beneficially owned, directly or indirectly, by such person or any of its Affiliates or Associates; (2) which such person or any of its Affiliates or Associates has (A) the right to acquire (whether or not such right is exercisable immediately) pursuant to any agreement, arrangement or understanding or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise, or (B) the right to vote pursuant to any agreement, arrangement or understanding; or (3) which are beneficially owned, directly or indirectly, by any other person with which such person or any of its Affiliates or Associates has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of any shares of Voting Stock. (d) For the purposes of determining whether a person is an Interested Shareholder pursuant to paragraph (b) of this Section 7.3, the number of shares of Voting Stock deemed to be outstanding shall include shares deemed owned by an Interested Shareholder through application of paragraph (c) of this Section 7.3 but shall not include any other shares of Voting Stock which may be issuable pursuant to any agreement, arrangement or understanding, or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise. (e) "Affiliate" and "Associate" shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934, as in effect on September 14, 1983 (the term "registrant" in said Rule 12b-2 meaning, in this case, the corporation). (f) "Beneficially owned" shall have the meaning ascribed to such term in Rule 13d-3 of the General Rules and Regulations under the Securities Exchange Act of 1934, as in effect on September 14, 1983. (g) "Subsidiary" means any corporation of which a majority of any class of equity security is owned, directly or indirectly, by the corporation; provided, however, that for the purposes of the definition of Interested Shareholder set forth in paragraph (b) of this Section 7.3, the term "Subsidiary" shall mean only a corporation of which a majority of each class of equity security is owned, directly or indirectly, by the corporation. (h) "Continuing Director" means any member of the Board of Directors of the corporation who is unaffiliated with, and not a representative of, the Interested Shareholder and was a member of the 15 Board of Directors on September 14, 1983 or prior to the time that the Interested Shareholder became an Interested Shareholder, and any successor of a Continuing Director who is unaffiliated with, and not a representative of, the Interested Shareholder and is recommended to succeed a Continuing Director by a majority of the Continuing Directors then on the Board of Directors. (i) "Fair Market Value" means: (1) in the case of stock, the highest closing sale price during the 30-day period immediately preceding the date in question of a share of such stock on the Composite Tape for New York Stock Exchange-Listed Stocks, or, if such stock is not quoted on the Composite Tape, on the New York Stock Exchange, or if such stock is not listed on such exchange, on the principal United States securities exchange registered under the Securities Exchange Act of 1934 on which such stock is listed, or, if such stock is not listed on any such exchange, the highest closing bid quotation with respect to a share of such stock during the 30-day period preceding the date in question on the National Association of Securities Dealers, Inc. Automated Quotations System or any system then in use, or if no such quotations are available, the fair market value on the date in question of a share of such stock as determined by a majority of the Continuing Directors in good faith; and (2) in the case of property other than cash or stock, the fair market value of such property on the date in question as determined by the Board of Directors in good faith. (j) "Institutional Voting Stock" shall mean any class of Voting Stock which was issued directly to and continues to be held solely by one or more insurance companies, pension funds, commercial banks, savings banks or similar financial institutions or institutional investors. (k) In the event of any Business Combination in which the corporation survives, the phrase "consideration other than cash to be received" as used in paragraph (b) of Section 7.2 of this Article Seventh shall include the shares of Common Stock and/or the shares of any other class of outstanding Voting Stock retained by the holders of such shares. 7.4 The Board of Directors shall have the power and duty to determine for the purposes of this Article Seventh, on the basis of information known to them after reasonable inquiry, (a) whether a person is an Interested Shareholder, (b) the number of shares of Voting Stock beneficially owned by any person, (c) whether a person is an Affiliate or Associate of another, (d) whether a class of Voting Stock is Institutional Voting Stock and (e) whether the assets which are the subject of any Business Combination have, or the consideration to be received for the issuance or transfer of securities by the corporation or any Subsidiary in any Business Combination has, an aggregate Fair Market Value of $15,000,000 or more. Any such determination made in good faith shall be binding and conclusive. 7.5 Nothing contained in this Article Seventh shall be construed to relieve any Interested Shareholder from any fiduciary obligation imposed by law. 7.6 Notwithstanding any other provisions of law, the Articles of Incorporation or the By-Laws of the corporation, the affirmative vote of the holders of at least 80% of the voting power of the then outstanding shares of Voting Stock, voting together as a single class, shall be required to amend or repeal, or to adopt any provision inconsistent with, this Article Seventh. 8. The Articles of Incorporation, as amended and restated herein, supersede the original Articles of Incorporation and all amendments thereto. FURTHER RESOLVED, that the Chairman of the Board, President and Chief Executive Officer or any Vice President of the corporation be, and they hereby are, authorized, empowered and directed to execute, under 16 the corporate seal of the corporation, Articles of Amendment to the Amended and Restated Articles of Incorporation of the corporation and to cause said Articles of Amendment to be filed forthwith with the Department of State of the Commonwealth of Pennsylvania. IN WITNESS WHEREOF, H. J. Heinz Company has caused these Articles of Amendment to be signed by its Chairman, President and Chief Executive Officer and its corporate seal, duly attested by its Secretary, to be hereunto affixed this 13th day of July 1994. Attest: H. J. HEINZ COMPANY /s/ BENJAMIN E. THOMAS, JR. /s/ A. J. F. O'REILLY BY ................................... BY ..................................... Benjamin E. Thomas, Jr., Secretary A. J. F. O'Reilly, Chairman, President and Chief Executive Officer (Corporate Seal) Filed in the Department of State on July 25, 1994. Commonwealth of Pennsylvania /s/ ..................................... Secretary of the Commonwealth 17 EX-10.C.X 3 DEFERRED COMPENSATION Exhibit 10(c)(x) H. J. Heinz Company Executive Deferred Compensation Plan Article 1. Establishment and Purposes 1.1 Establishment. H. J. Heinz Company (the "Company"), hereby establishes, effective as of June 8, 1994 (the "Effective Date"), a deferred compensation plan for key employees as described herein, which shall be known as the "H. J. Heinz Company Executive Deferred Compensation Plan" (the "Plan"). 1.2 Purpose. The primary Purpose of the Plan is to provide certain key employees of the Company, its subsidiaries, and affiliates with the opportunity to voluntarily defer a portion of their compensation, subject to the terms of the Plan. By adopting the Plan, the Company desires to enhance its ability to attract and retain employees of outstanding competence. Article 2. Administration 2.1 The Committee. The Plan shall be administered by the Management Development and Compensation Committee of the Board of Directors of the Company or any other successor Committee appointed by the Board (the "Committee"). The members of the Committee shall be appointed by, and shall serve at the discretion of, the Board. 2.2 Authority of the Committee. Except as limited by law or by the Company's Articles of Incorporation or Bylaws, and subject to the provisions herein, the Committee shall have authority to select eligible employees of the Company for participation in the Plan; determine the terms and conditions of each employee's participation in the Plan; interpret the Plan; establish, amend, or waive rules and regulations for the Plan's administration; and, subject to Article 8 herein, amend the terms and conditions of the Plan and any agreement entered into under the Plan. Further, the Committee shall make all other determinations which may be necessary or advisable for the administration of the Plan. As permitted by law, the Committee may delegate any of its authority granted under the Plan to such other person or entity it deems appropriate, including, but not limited to, senior management of the Company. 2.3 Guidelines. Subject to the provisions herein, the Committee may adopt written guidelines for the implementation and administration of the Plan. 2.4 Decisions Binding. All determinations and decisions of the Committee arising under the Plan shall be final, binding, and conclusive upon all parties. 1 Article 3. Eligibility and Participation 3.1 Eligibility. Subject to Section 3.2, Employees eligible to be selected to participate in the Plan in any fiscal year of the Company (hereinafter, a "Year") include all full-time, salaried employees of the Company, its subsidiaries, and affiliates who are key employees, as determined by the Committee in its sole discretion. 3.2 Limitation on Eligibility. It is the intent of the Company that the Plan qualify for treatment as a "top hat" plan under the Employee Retirement Income Security Act of 1974, as amended from time to time, or any successor Act thereto ("ERISA"). Accordingly, to the extent required by ERISA to obtain such "top hat" treatment, eligibility shall be extended only to those executives who comprise a select group of management or highly compensated employees. Further, the Committee may place such additional limitations on eligibility as it deems necessary and appropriate under the circumstances. 3.3 Participation. Participation in the Plan shall be determined annually by the Committee based upon the criteria set forth in Sections 3.1 and 3.2 herein. An employee who is chosen to participate in the Plan in any Year (a "Participant") shall be so notified in writing. In the event a Participant selected to participate in the Plan no longer meets the criteria for participation, such Participant shall become an inactive Participant, retaining all the rights described under the Plan, except the right to make any further deferrals, until such time that the Participant again becomes an active Participant. 3.4 Partial Year Eligibility. In the event that an employee first becomes eligible to participate in the Plan during a Year, such employee shall, within thirty (30) calendar days of becoming eligible, be notified by the Company of his or her eligibility to participate, and the Company shall provide each such employee with an "Election to Defer Form," which must be completed by the employee as provided in Section 4.2 herein; provided, however, that such employee may only make an election to defer with respect to that portion of his or her compensation, as defined herein, for such Year which is to be earned after the filing of the deferral election. 3.5 No Right to Participate. No employee shall have the right to be selected as a Participant, or, having been so selected for any given Year, to be selected again as a Participant for any other Year. 2 Article 4. Deferral Opportunity 4.1 Amount Which May Be Deferred. A Participant may elect to defer, in any Year, up to one hundred percent (100%) of eligible components of Compensation, including but not limited to Salary, Bonus, and Long-Term Awards, all as defined herein; provided, however, that the Committee shall have sole discretion to designate which components of Compensation are eligible for deferral elections under the Plan in any given Year. In addition, the Committee may, in its sole discretion, designate the minimum amount or increments of any single eligible component of Compensation which may be deferred in any Year or establish any other limitations as it deems appropriate in any Year. The following definitions shall apply for purposes of this Plan: (a) "Bonus" means any incentive award based on an assessment of performance, payable by the Company to a Participant with respect to the Participant's services during a Year, including but not limited to amounts awarded under the Company's Incentive Compensation Plan; provided, however, that for purposes of the Plan, "Bonus" shall be deemed earned only upon award by the Company and shall not include incentive awards which relate to a period exceeding one (1) Year. (b) "Compensation" means the gross Salary, Bonus, Long-Term Awards, and other payments eligible for deferral under the Plan, which are payable to a Participant with respect to services performed during a Year. (c) "Long-Term Award" means any cash award payable to a Participant pursuant to a Company program which establishes incentive award opportunities which are contingent upon performance which is measured over periods greater than one (1) Year. (d) "Salary" means all regular, basic wages, before reduction for amounts deferred pursuant to the Plan or any other plan of the Company, payable in cash to a Participant for services to be rendered during the Year, exclusive of any Bonus, Long-Term Awards, other special fees, awards, or incentive compensation, allowances, or amounts designated by the Company as payment toward or reimbursement of expenses. 4.2 Deferral Election. Participants shall make their elections to defer Compensation under the Plan at least thirty (30) calendar days prior to the beginning of each Year, or not later than thirty (30) calendar days following notification of eligibility to participate for a partial Year. All deferral elections shall be irrevocable, and shall be made on an "Election to Defer Form," as described herein. 3 Participants shall make the following irrevocable elections on each "Election to Defer Form": (a) The amount to be deferred with respect to each eligible component of Compensation for the Year; (b) The length of the deferral period with respect to each eligible component of Compensation, pursuant to the terms of Section 4.3 herein; and (c) The form of payment to be made to the Participant at the end of the deferral period(s), pursuant to the terms of Section 4.4 herein. Notwithstanding the amounts requested to be deferred pursuant to Subparagraph (a) above, the limits on deferrals set forth in Section 4.1 herein shall apply to the requested deferrals each Year. 4.3 Length of Deferral. The deferral periods elected by each Participant with respect to deferrals of Compensation for any Year shall be at least equal to one (1) year following the end of the Year in which the Compensation is earned, and shall be no greater than the date of retirement or other termination of employment, whichever is earlier. However, notwithstanding the deferral periods elected by a Participant, payment of deferred amounts and accumulated interest thereon shall be made to the Participant in a single lump sum in the event the Participant's employment with the Company is terminated by reason of death or total disability, as defined in the Company's Long-Term Disability Plan, at any time prior to full payment of deferred amounts and interest thereon. Such payment following employment termination shall be made in cash, within thirty (30) calendar days after the termination of the Participant's employment, or as soon thereafter as practicable. 4.4 Payment of Deferred Amounts. Participants shall be entitled to elect to receive payment of deferred amounts, together with interest earned thereon, at the end of the deferral period in a single lump-sum cash payment, by means of installments, or in such other format approved by the Committee. (a) Lump-Sum Payment. Such payment shall be made in cash within thirty (30) calendar days of the date specified by the Participant as the date for payment of deferred Compensation, as described in Sections 4.2 and 4.3 herein, or as soon thereafter as practicable. 4 (b) Installment Payments. Participants may elect payout in installments, with a minimum number of installments of two (2), and a maximum of ten (10). The initial payment shall be made in cash within thirty (30) calendar days after the commencement date selected by the Participant pursuant to Sections 4.2 and 4.3 herein, or as soon thereafter as practicable. The remaining installment payments shall be made in cash each year thereafter, until the Participant's entire deferred compensation account has been paid. Interest shall accrue on the deferred amounts in the Participant's deferred compensation account, as provided in Section 5.2 of this Plan. The amount of each installment payment shall be equal to the balance remaining in the Participant's deferred compensation account immediately prior to each such payment, multiplied by a fraction, the numerator of which is one (1), and the denominator of which is the number of installment payments remaining. In the event a Participant's employment with the Company is terminated by reason of death or total disability at a time when there is a balance in the Participant's deferred compensation account, the entire balance shall be paid out to the Participant, as set forth in Section 4.3 herein. (c) Alternative Payment Schedule. A participant may submit an alternate payment schedule to the Committee for approval; provided, however, that no such alternate payment schedule shall be permitted unless approved by the Committee. 4.5 Financial Hardship. The Committee shall have the authority to alter the timing or manner of payment of deferred amounts in the event that the Participant establishes, to the satisfaction of the Committee, severe financial hardship. In such event, the Committee may, in its sole discretion: (a) Authorize the cessation of deferrals by such Participant under the Plan; or (b) Provide that all or a portion of the amount previously deferred by the Participant shall immediately be paid in a lump-sum cash payment; or (c) Provide that all or a portion of the installments payable over a period of time shall immediately be paid in a lump-sum cash payment; or (d) Provide for such other installment payment schedule as deemed appropriate by the Committee under the circumstances. 5 For purposes of this Section 4.5, "severe financial hardship" shall be determined by the Committee, in its sole discretion, in accordance with all applicable laws. The Committee's's decision with respect to the severity of financial hardship and the manner in which, if at all, the Participant's future deferral opportunities shall be ceased, and/or the manner in which, if at all, the payment of deferred amounts to the Participant shall be altered or modified, shall be final, conclusive, and not subject to appeal. The Participant's account will be credited with earnings in accordance with the Plan up to the date of distribution. Article 5. Deferred Compensation Accounts 5.1 Participants' Accounts. The Company shall establish and maintain an individual bookkeeping account for deferrals made by each Participant under Article 4 herein. Each account shall be credited as of the date the amount deferred otherwise would have become due and payable to the Participant. 5.2 Interest on Deferred Amounts. Compensation deferred under Article 4 shall accrue interest at the rate selected by the Committee. Each Participant's deferred compensation account shall be credited on the last day of each calendar quarter, with interest computed on the average balance in the account during such quarter. Interest earned on deferred amounts shall be paid out to Participants at the same time and in the same manner as the underlying deferred amounts. 5.3 Charges Against Accounts. There shall be charged against each Participant's deferred compensation account any payments made to the Participant or to his or her beneficiary. Article 6. Rights of Participants 6.1 Contractual Obligation. The Plan shall create a contractual obligation on the part of the Company to make payments from the Participants' accounts when due. Payment of account balances shall be made out of the general funds of the Company. 6.2 Unsecured Interest. No Participant or party claiming an interest in amounts deferred by a Participant, including any interest thereon, shall have any interest whatsoever in any specific asset of the Company. To the extent that any party acquires a right to receive payments under the Plan, such right shall be equivalent to that of an unsecured general creditor of the Company. 6 The Company may, but shall not be required to, establish one or more trusts, with such trustee as the Committee may approve, for the purpose of providing for the payment of deferred amounts. Such trust or trusts may be irrevocable, but the assets thereof shall be subject to the claims of the Company's general creditors. To the extent any amounts deferred under the Plan are actually paid from any such trust, the Company shall have no further obligation with respect thereto, but to the extent not so paid, such deferred amounts shall remain the obligation of, and shall be paid by, the Company. 6.3 Employment. Nothing in the Plan shall interfere with nor limit, in any way, the right of the Company to terminate any Participant's employment at any time, nor confer upon any Participant any right to continue in the employ of the Company. Article 7. Withholding of Taxes The Company shall have the right to require Participants to remit to the Company an amount sufficient to satisfy any withholding tax requirements or to deduct from all payments made pursuant to the Plan amounts sufficient to satisfy withholding tax requirements. Article 8. Amendment and Termination The Company hereby reserves the right to amend, modify, or terminate the Plan at any time by action of the Committee. Except as described below in this Article 8, no such amendment or termination shall in any material manner adversely affect any Participant's rights to amounts previously deferred hereunder, or interest earned thereon, without the consent of the Participant. The Plan is intended to be an unfunded plan which is maintained primarily to provide deferred compensation benefits for a select group of "management or highly compensated employees" within the meaning of Sections 201, 301, and 401 of ERISA, and to therefore be exempt from the provisions of Parts 2, 3, and 4 of Title I of ERISA. Accordingly, the Board may terminate the Plan and commence termination payout for all or certain Participants, or remove certain employees as Participants, if it is determined by the United States Department of Labor or a court of competent jurisdiction that the Plan constitutes an employee pension benefit plan within the meaning of Section 3(2) of ERISA which is not so exempt. If payout is commenced pursuant to the operation of this Article 8, the payment of such amounts shall be made in the manner selected by each Participant under Section 4.4 herein as applicable. 7 Article 9. Miscellaneous 9.1 Notice. Any notice or filing required or permitted to be given to the Company under the Plan shall be sufficient if in writing and hand delivered, or sent by registered or certified mail to the Vice President--Organization Development and Administration of the Company. Notice to the Vice President--Organization Development and Administration of the Company, if mailed, shall be addressed to the principal executive offices of the Company. Notice mailed to a Participant shall be at such address as is given in the records of the Company. Notices shall be deemed given as of the date of delivery or, if delivery is made by mail, as of the date shown on the postmark on the receipt for registration or certification. 9.2 Nontransferability. Participants' rights to deferred amounts, contributions, and interest earned thereon under the Plan may not be sold, transferred, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution. In no event shall the Company make any payment under the Plan to any assignee or creditor of a Participant. 9.3 Severability. In the event any provision of the Plan shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of the Plan, and the Plan shall be construed and enforced as if the illegal or invalid provision had not been included. 9.4 Costs of the Plan. All costs of implementing and administering the Plan shall be borne by the Company. 9.5 Applicable Law. The Plan shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania. 9.6 Successors. All obligations of the Company under the Plan shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business and/or assets of the Company. 8 EX-11 4 COMP. NET INCOME PER SHARE Exhibit 11 H. J. Heinz Company and Subsidiaries COMPUTATION OF NET INCOME PER SHARE (In Thousands, except Per Share Amounts)
Fiscal Year Ended ---------------------------------- April 27, April 28, April 29, 1994 1993 1992 ---- ---- ---- Primary income per share: Net income............................................................. $ 602,944 $ 396,313 $ 638,295 Less-preferred dividends............................................... 71 78 86 ---------- ---------- ---------- Net income applicable to common stock.................................. $ 602,873 $ 396,235 $ 638,209 ========== ========== ========== Average common shares outstanding and common stock equivalents.................................................. 256,812 259,788 266,339 ========== ========== ========== Net income per share--primary.......................................... $ 2.35 $ 1.53 $ 2.40 ========== ========== ========== Fully diluted income per share: Net income............................................................. $ 602,944 $ 396,313 $ 638,295 ========== ========== ========== Average common shares outstanding and common stock equivalents............................................. 256,812 259,788 266,339 Additional common shares assuming: Conversion of $1.70 third cumulative preferred stock.............. 418 461 507 Additional common shares assuming options were exercised at the year-end market price.......................... 86 578 407 ---------- ---------- ---------- 257,316 260,827 267,253 ========== ========== ========== Net income per share--fully diluted.................................... $ 2.34 $ 1.52 $ 2.39 ========== ========== ==========
EX-13 5 ANNUAL REPORT Exhibit 13 Pages 32 through 54 of the H.J. Heinz Company Annual Report to Shareholders for the fiscal year ended April 27, 1994 MANAGEMENT'S DISCUSSION AND ANALYSIS H.J. HEINZ COMPANY AND SUBSIDIARIES ............................................................................. In 1994, the company continued to restructure its portfolio of businesses and operations to be better positioned for future profit growth. During the year, the company acquired the Moore's and Domani product lines and divested businesses that did not fit with the company's long-term growth objectives. The company implemented several productivity improvement and cost reduction initiatives in 1994 for which a $192.3 million pretax charge had been recorded in 1993. The major components of the 1993 restructuring plan related to employee severance and relocation costs ($99 million) and facilities consolidation and closure costs ($73 million). Specifically, the company reduced headcount at its Australian operations; closed a pet food plant in Pascagoula, Mississippi; downsized and consolidated StarKist Seafood headquarters functions with those of Heinz Pet Products in Newport, Kentucky; realigned production at Ore-Ida's Ontario, Oregon factory; downsized the administration of Weight Watchers International meeting operations; downsized the administrative functions of the Italian operations; reduced manufacturing headcount and reorganized the administrative functions in the United Kingdom; consolidated domestic sales service functions into the Heinz Service Company; and realigned production between Canada and the United States. Remaining restructuring initiatives provided for in 1993 in both the United States and foreign locations will be completed in 1995. At the time the restructuring charges were recorded, it was anticipated that the company would reduce headcount by 3,000 and realize cost savings of approximately $100 million annually. The company expects to achieve the original projections of cost savings and headcount reductions upon completion of the remaining projects. Fiscal 1994 was a disappointing year for the Weight Watchers businesses (meetings and food) which were affected by the Los Angeles earthquake, one of the worst winters in many years in the U.S. and declining meeting attendance in the U.S. of 15%, all of which have affected the entire weight-loss industry. One of the company's primary objectives is to stabilize and rebuild domestic attendance volumes in order to improve the overall profitability of the Weight Watchers businesses, which currently represent less than 10% of sales. Several of the company's domestic operations were affected by the company's trade "de-loading" strategy implemented in 1994, whereby shipments to meet the trade's promotional period sales activity were more closely aligned with the consumer demand for certain grocery products. This strategy had a negative impact on the company's sales volume. In 1994, the strengthening dollar against most currencies had a negative impact on the company's results from overseas operations. Fluctuating exchange rates adversely impacted the company's results during the first three quarters of 1994, mainly due to the depreciation of the United Kingdom pound sterling and Italian lira associated with the breakdown of the Exchange Rate Mechanism (ERM) of the European Monetary System experienced in Fiscal 1993. As the company moved beyond the twelve-month anniversary of the breakdown of the ERM, the adverse impact of foreign exchange comparisons on the results of operations has diminished. The company does not anticipate exchange rate fluctuations to have a significant impact on the results of operations in the near future. .............................................................................. RESULTS OF OPERATIONS: 1994 versus 1993: Sales for 1994 decreased $56.6 million, or 0.8%, to $7.05 billion from $7.10 billion in 1993. The sales decrease was due to the effects of the stronger U.S. dollar against most foreign currencies and to divestitures, partially offset by price increases and acquisitions. Volume remained flat. For the third year in a row, unfavorable foreign currency translation rates adversely impacted sales. The negative sales impact of foreign currency translation was $278.6 million, or 3.9%, the largest dollar decline in the company's history. This resulted principally from an unprecedented decline of the United Kingdom pound sterling and Italian lira against the U.S. dollar as a result of these two countries leaving the European Monetary System in Fiscal 1993. Prices increased $134.1 million in 1994, or 1.9%, principally in the U.S. Increases in StarKist tuna, Ore-Ida frozen potatoes and Heinz grocery ketchup were partially offset by declines in pet food. Overseas, price increases occurred in several countries, 32 notably Italy, Zimbabwe and Venezuela. Acquisitions, net of divestitures, increased sales $89.1 million, or 1.3%. Acquisitions included the 1994 purchase of the Moore's and Domani product lines (coated frozen foods and Italian frozen pastas) from The Clorox Company of Oakland, California; the purchases of Wattie's Limited of New Zealand in October 1992; and several domestic Weight Watchers franchises in 1993. Divestitures included the confectionery business of Heinz Italia, the Near East specialty rice business and other smaller businesses, including the Chico-San rice cake business. Volume was flat year-on-year; increases at foreign operations were offset by decreases at domestic operations. Foreign volume increases were noted in baby food, sauces and pastes and Heinz beans. Foreign volume declines occurred in condiments and soups. Domestically, volume decreases were noted in the Weight Watchers businesses (meetings and food), Ore-Ida grocery frozen potatoes, Heinz grocery ketchup, StarKist tuna and Heinz baby food; the volume decrease was due in part to the strategy to "de-load" the trade's inventories implemented in 1994. Domestic volume increases occurred in Ore-Ida foodservice potatoes, pet food, Heinz foodservice ketchup and single-serve condiments. Gross profit increased $92.2 million in 1994 to $2.66 billion from $2.57 billion. Excluding the effect of the 1993 restructuring charges of $143.5 million, gross profit declined $51.3 million due primarily to the sales decline in the Weight Watchers businesses (meetings and food), the trade "de- loading" strategy and foreign exchange. This was partially offset by the effects of acquisition and divestiture activities, reduced trade promotions, lower costs associated with the restructuring projects and operating improvements resulting from the implementation of the restructuring strategy. The ratio of gross profit to sales increased to 37.8% from 36.2%. Excluding the effect of the restructuring charges, the 1993 gross profit ratio was 38.2%. Selling, general and administrative (SG&A) expenses increased $11.7 million to $1.72 billion from $1.71 billion, primarily due to increased consumer promotions as well as incremental selling and distribution expenses resulting from the full- year effect of the Wattie's Limited acquisition, partially offset by a decrease in general and administrative expenses. The decline in general and administrative expenses was due to restructuring charges recorded in 1993, lower costs associated with the restructuring projects and operating improvements resulting from the implementation of the restructuring strategy. Operating income increased $207.5 million in 1994 to $1.07 billion from $860.9 million in 1993. The increase in operating income was primarily due to the inclusion of the gains on the sale of the confectionery business of Heinz Italia and the sale of the Near East specialty rice business in 1994 ($127.0 million) and to the restructuring charges recorded in 1993 ($192.3 million). Adjusting for these items, operating income declined $111.8 million, or 10.6% (declined to 13.4% of sales from 14.8% of sales). This decline was principally due to the decline in gross profit and increase in SG&A expenses, as discussed above. Non-operating expenses totaled $146.0 million in 1994 compared to $145.1 million in 1993. Interest income increased $7.3 million from $29.5 million in 1993 to $36.8 million in 1994 due to higher invested cash generated from recent divestitures. Interest expense increased $2.8 million to $149.2 million in 1994 from $146.5 million in 1993, primarily the result of the additional interest associated with the $750 million of debentures issued in the second and third quarters of 1993, partially offset by lower average short-term borrowings. Offsetting this decrease in net interest were lower foreign government grants in 1994. The effective tax rate was 34.6% in 1994 and 26.0% in 1993. Both years' effective tax rates reflect tax benefits from overseas operations ($57.3 million in 1994 and $41.8 million in 1993). The 1993 tax rate also benefited from the recognition of foreign tax credits associated with the company's overseas dividend strategy ($40.0 million). (See Note 5 to the Consolidated Financial Statements.) Net income increased $206.6 million, or 52.1%, to $602.9 million from $396.3 million in the prior year and net income per share increased to $2.35 from $1.53. The increase in net income per share of 53.6% in 1994, versus the 52.1% increase in net income, reflected the favorable benefit of the company's share repurchase plan. The 1994 results included gains of $0.24 per share from the sale of the confectionery business of Heinz Italia and the sale of the Near East specialty rice business. In addition, 1994 33 and 1993 benefited from lower effective tax rates. The 1993 results included the effect of the adoption of FAS No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions" ($0.51 per share) and restructuring charges ($0.45 per share). The impact of fluctuating exchange rates for 1994 remained relatively consistent on a line-by-line basis throughout the Consolidated Statement of Income. 1993 versus 1992: Sales for 1993 increased $521.5 million, or 7.9%, to $7.10 billion. The sales increase came primarily from volume and acquisitions, partially offset by the effects of the stronger U.S. dollar against most foreign currencies. Volume increased 5.7%, or $376.6 million, and reflected sustained marketing support and restructuring initiatives that occurred in 1992. Approximately 70% of the volume increase came from domestic operations, with gains in: StarKist tuna; Weight Watchers brand entrees, desserts and specialty foods; 9-Lives cat food; Ore-Ida frozen potatoes; coated frozen foods; various dog food; Chef Francisco frozen soup; and Heinz foodservice ketchup. Domestically, volume declines occurred in Weight Watchers meeting operations, Heinz grocery ketchup and Heinz baby food. Overseas, volume increases were noted in baby food, Heinz ketchup and sauces and pastes, with declines in Heinz soup and beans. Acquisitions, net of divestitures, accounted for $245.6 million, or 3.7%. Companies acquired during 1993 included Wattie's Limited (a producer of a broad range of grocery products in New Zealand), Arimpex (an Italian foodservice distribution company) and several Weight Watchers franchises. Unfavorable foreign currency translation rates adversely impacted sales in 1993. Declines came principally from the stronger U.S. dollar versus the United Kingdom pound sterling, the Italian lira, the Zimbabwean dollar, the Canadian dollar and the Australian dollar. The net reduction in sales attributable to foreign currency translation was $120.7 million, or 1.8%. Prices were flat year-on-year, with increases in foreign prices offset by domestic declines. Increases in baby food, soups, Weight Watchers meeting operations and Weight Watchers brand desserts, StarKist white meat tuna, edible oils, margarines and soaps were offset by price declines in Ore-Ida frozen potatoes, various pet foods, StarKist light meat tuna, Weight Watchers brand frozen entrees, Heinz beans and domestic Heinz ketchup. The results of operations for 1993 and 1992 included the effect of the company's restructuring strategy. A pretax charge of $192.3 million was recorded in 1993, versus a charge of $88.3 million in 1992. Gross profit increased $93.8 million in 1993 to $2.57 billion from $2.48 billion, primarily as a result of the increase in sales. The ratio of gross profit to sales declined to 36.2% from 37.7%. The decline in the gross profit ratio was principally the result of increased restructuring charges associated with consolidating and downsizing manufacturing operations; the ratio was favorably impacted by product mix, cost efficiencies realized at the company's pet products operations and lower raw fish prices. Excluding the 1993 restructuring charge, the gross profit ratio would have been 38.2%. In 1993, the company continued to invest heavily in marketing its brands. Total marketing support, which consists of trade and consumer promotions and media, increased approximately 3% over the record level established in 1992. Increased marketing support was noted primarily in Ore-Ida frozen potatoes and Weight Watchers brand entrees and at Wattie's Limited in New Zealand. SG&A expenses increased $117.9 million to $1.71 billion from $1.59 billion, primarily due to: increased marketing; higher selling and distribution expenses resulting from the increased sales volume; and the curtailment gain of the domestic salaried defined benefit pension plan of $38.8 million pretax included in the 1992 results. (See Note 10 to the Consolidated Financial Statements.) As a percentage of sales, SG&A expenses declined to 24.1% in 1993 from 24.2% in 1992. Operating income declined $245.6 million in 1993, to $860.9 million from $1.11 billion in 1992. The decline in operating income year-on-year was primarily due to higher restructuring charges recorded in 1993 and the inclusion in 1992 of the gain on the sale of The Hubinger Company. Operating income as a percentage of sales declined to 12.1% in 1993 from 16.8% in 1992. 34 Non-operating expenses totaled $145.1 million in 1993, compared to $122.2 million in 1992. The increase was primarily due to higher interest expense resulting from higher average debt, offset partially by lower average interest rates. The higher average debt resulted from borrowings for acquisitions, higher operating needs, capital expenditures and purchases of treasury shares. Also contributing to the increase in non-operating expenses was lower interest income as a result of a reduction in the company's Italian short-term investment portfolio. Partially offsetting the increase were higher foreign government grants. The effective tax rate was 26.0% in 1993 and 35.2% in 1992. The 1993 effective rate of 26.0% resulted from tax benefits overseas and the recognition of foreign tax credits associated with the company's overseas dividend strategy. The effective rate on income from operations before the current year charges for postretirement benefits and restructuring was 29.0%. (See Note 5 to the Consolidated Financial Statements.) In 1993 the company adopted FAS No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions." The company elected to immediately recognize the transition obligation. The cumulative effect of adopting FAS No. 106 was $133.6 million ($0.51 per share) and the incremental current year after-tax effect was $9.9 million ($0.04 per share). (See Note 11 to the Consolidated Financial Statements.) Net income declined $242.0 million in 1993 to $396.3 million from $638.3 million in 1992 and net income per share declined to $1.53 from $2.40. The 1993 results included the effects of the prescribed accounting change, the company's restructuring strategy and the lower effective tax rate. The 1992 results included the gain on the sale of The Hubinger Company. .............................................................................. LIQUIDITY AND FINANCIAL Return on average shareholders' equity (ROE) was POSITION: 25.9% in 1994, 22.0% in 1993 (before the cumulative effect of adopting FAS No. 106) and 27.5% in 1992. Pretax return on average invested capital (ROIC) was 22.7% in 1994 compared to 18.7% in 1993 and 28.8% in 1992. Both ROE and ROIC in 1992 included the effect of the gain on the sale of The Hubinger Company. The increase in both ROE and ROIC in 1994 was primarily attributable to restructuring initiatives and divestitures. Cash provided by operating activities was $931.2 million in 1994, which increased $519.3 million from $411.9 million in 1993. The increase was the result of lower working capital requirements, resulting from trade "de-loading," offset partially by expenditures on the restructuring program. In 1993, cash provided by operating activities decreased $65.3 million to $411.9 million, from $477.2 million in 1992. The decline was primarily the result of increased working capital, specifically receivables, inventories and income taxes payable. Cash used for investing activities was $27.4 million in 1994 versus $829.8 million in 1993. The decrease in cash used for investing activities was due primarily to lower capital expenditures, a reduction in cash used for acquisitions and increased proceeds from divestitures. Capital expenditures totaled $275.1 million in 1994 and $430.7 million in 1993. Both years reflected expenditures for productivity improvements and plant expansions, principally at the company's Ore-Ida, United Kingdom, Heinz U.S.A., StarKist Foods and Weight Watchers operations. Major capital spending projects, such as the Pittsburgh factory and the factory improvements in the United Kingdom, have been completed and the company does not anticipate undertaking any additional significant projects in the near future. Acquisitions in 1994 included the Moore's and Domani product lines (see Note 2 to the Consolidated Financial Statements) and Farex (a baby food company in Australia). Acquisitions in 1993 totaled $370.2 million, which included: the purchase of Wattie's Limited (see Note 2 to the Consolidated Financial Statements); Arimpex (a foodservice distribution company in Italy); Weight Watchers franchises in Chicago, Wisconsin, Minnesota and Kentucky; and assets of a Venezuelan company which produces gelatins and puddings. Current-year divestitures included proceeds from the Near East specialty rice business and the Italian confectionery 35 business. In addition, the company sold several small businesses in 1994, including the Chico-San rice cake business. The financial statement impact of these other small divestitures, taken together, was not material. Pro forma results of the company, assuming all of the 1994 divestitures had been made at the beginning of each period presented, would not be materially different from the results reported. (See Note 3 to the Consolidated Financial Statements.) Purchases and sales/maturities of short-term investments increased from 1993 to 1994, primarily as a result of the investment of the proceeds from the sale of the Italian confectionery business in Italian short-term securities. Financing activities required $861.5 million in 1994, compared to providing $405.2 million in 1993. In 1994, cash was used to reduce short-term debt, to pay dividends and to purchase treasury stock. In 1993, proceeds from long-term debt totaled $969.4 million, primarily due to the issuance of the long- term senior unsecured notes totaling $750 million. Cash provided by financing activities in 1993 also included proceeds from the issuance of (pound sterling)125 million ($197.0 million) of 8.85% notes. These notes were issued by the company's United Kingdom affiliate and were privately placed with various banks. The proceeds of the above-mentioned issuances were used to refinance existing debt. (See Note 6 to the Consolidated Financial Statements.) In 1993, payments on long-term debt totaled $240.2 million and were mainly the result of the payment of the NZ$150.0 million debt ($84.3 million). Also, in April 1993, an affiliated company paid (pound sterling)70.6 million ($111.3 million) for an interest in the 8.85% (pound sterling)125 million notes discussed above. During 1994, the Board of Directors authorized an increase of 10.0% in the quarterly dividend for common stock from 30 cents per share to 33 cents per share. The company paid $326.0 million in dividends to both common and preferred shareholders, an increase of $28.9 million over 1993. The dividend rate in effect at the end of each year resulted in a payout ratio of 56.2% in 1994, 58.8% in 1993 (before the cumulative effect of the accounting change) and 45.0% in 1992. Cash used for financing activities also included the purchase of treasury stock. In 1994, 6.5 million shares were repurchased at a cost of $222.6 million. The 10 million share repurchase program, which began in December 1991, was completed in June 1993. As of April 27, 1994, 6.0 million shares were repurchased as part of the new 10 million share repurchase program, which was authorized by the Board of Directors on June 9, 1993. The company plans to complete the current program in 1995. During 1993, 3.9 million shares were repurchased at a cost of $148.5 million under the previous repurchase program. The company may reissue repurchased shares upon the exercise of stock options, conversion of preferred stock and for general corporate purposes. The Board of Directors adopted, effective April 13, 1994, subject to the approval of the shareholders at the annual meeting in September 1994, a new stock option plan providing for the grant of up to 12.0 million shares of common stock at any time over the next 10 years. As of April 27, 1994, options for approximately 6.3 million shares had been contingently granted under this plan. In general, the terms of the 1994 plan are similar to the company's other stock option plans. On September 7, 1993, the company replaced its line of credit agreements supporting domestic commercial paper. The new line of credit agreements total $1.5 billion, of which $750 million expires in September 1994, at which time it is anticipated that a new credit facility of at least one year in length will be established. The remaining $750 million expires in August 1996. As a result, $750 million of the domestic commercial paper outstanding as of April 27, 1994 is classified as long-term debt. At fiscal year-end 1993, total domestic commercial paper outstanding of $1.2 billion was classified as short- term debt. The domestic commercial paper had a weighted average interest rate during 1994 of 3.3% and at year-end of 3.6%. In 1993, the weighted average rate was 3.4% and the rate at year-end was 3.2%. In November 1992, the Financial Accounting Standards Board (FASB) issued Financial Accounting Standard (FAS) No. 112, "Employers' Accounting for Postemployment Benefits." This statement requires recognition of benefits provided by an employer to former or inactive employees after employment but before retirement. In May 1993, the FASB issued FAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities." This statement expands the use of fair value accounting for debt and equity securities, but retains the use of the amortized cost method for investments in debt securities that the company intends to hold to 36 maturity. These statements must be implemented in the first quarter of Fiscal 1995. The impact of the adoption of these standards is not expected to have a material impact on the company's financial position or results of operations. The impact of inflation on both the company's financial position and results of operations has been minimal and is not expected to adversely affect 1995 results. The company's financial position continues to remain strong, enabling it to meet cash requirements for operations, capital expansion programs and dividends to shareholders. .............................................................................. RECENT DEVELOPMENTS: Subsequent to fiscal year-end 1994, the company announced the following: the purchase of the Borden Foodservice Group, a unit of Borden, Inc.; an agreement to negotiate with Glaxo India Limited to acquire Glaxo's Family Products Division; and the agreement to acquire the Farley's infant food and milk businesses, as well as its adult nutrition business, from The Boots Company PLC. (See Note 14 to the Consolidated Financial Statements.) .............................................................................. STOCK MARKET H.J. Heinz Company common stock is traded INFORMATION: principally on the New York Stock Exchange and the Pacific Stock Exchange, under the symbol HNZ. The number of shareholders of record of the company's common stock as of June 23, 1994 approximated 61,655. The closing price of the common stock on the New York Stock Exchange composite listing on April 26, 1994 was $33 1/8. Stock price information for common stock by quarter follows:
Stock Price Range ..................... High Low ................................................................. 1994 First $39 1/4 $35 1/8 Second 39 7/8 34 1/8 Third 38 1/2 34 Fourth 35 7/8 30 3/4 ................................................................. 1993 First $39 7/8 $35 1/4 Second 42 5/8 37 5/8 Third 45 1/2 38 1/2 Fourth 45 1/4 35 1/4 -----------------------------------------------------------------
37 .............................................................................. SEGMENT AND GEOGRAPHIC The company is engaged principally in one line DATA: of business--processed food products--which represents more than 90% of consolidated sales. The following table presents information about the company by geographic area. Prior years' geographic data have been restated to reflect the regrouping of geographic areas to more closely align the operating results with the management strategy of the company. There were no material amounts of sales or transfers among geographic areas and no material amounts of United States export sales.
(Dollars in thousands) Domestic Foreign Worldwide North America Europe Asia/Pacific Other ................................................................................................................................ 1994 | Sales $4,021,436 $3,025,302 $7,046,738 | $4,380,310 $1,685,167 $816,943 $164,318 Operating income# 534,395 533,948 1,068,343 | 587,622 371,794 89,359 19,568 Identifiable assets 3,657,114 2,724,032 6,381,146 | 3,992,820 1,551,477 729,240 107,609 Capital expenditures* 154,505 120,547 275,052 | 167,473 65,802 33,491 8,286 Depreciation and | amortization expense 161,219 98,590 259,809 | 177,398 54,543 23,433 4,435 | 1993 | Sales $4,049,901 $3,053,473 $7,103,374 | $4,429,916 $1,952,831 $565,465 $155,162 Operating income# 412,998 447,887 860,885 | 478,053 300,463 58,620 23,749 Identifiable assets 3,930,173 2,891,148 6,821,321 | 4,296,904 1,772,138 669,420 82,859 Capital expenditures* 266,670 164,043 430,713 | 291,980 101,736 27,046 9,951 Depreciation and | amortization expense 136,590 98,345 234,935 | 155,530 60,142 15,076 4,187 | 1992 | Sales $3,848,026 $2,733,841 $6,581,867 | $4,231,781 $1,865,010 $354,946 $130,130 Operating income# 697,852 408,663 1,106,515 | 739,867 298,617 46,613 21,418 Identifiable assets 3,360,687 2,571,214 5,931,901 | 3,744,989 1,834,821 259,235 92,856 Capital expenditures* 226,758 104,385 331,143 | 246,629 62,885 13,060 8,569 Depreciation and | amortization expense 125,649 86,137 211,786 | 144,519 56,431 6,860 3,976 - --------------------------------------------------------------------------------------------------------------------------------
*Excludes property, plant and equipment acquired through acquisitions. #Fiscal 1994 domestic and foreign operating income includes the gain on the sale of the confectionery and specialty rice businesses of $46.3 million and $80.7 million, respectively. Fiscal 1993 domestic and foreign operating income includes restructuring charges of $109.7 million and $82.6 million, respectively. Fiscal 1992 domestic operating income includes a gain on the sale of The Hubinger Company of $221.5 million and restructuring charges of $37.2 million. In addition, Fiscal 1992 foreign operating income includes restructuring charges of $51.1 million. 38 CONSOLIDATED STATEMENTS OF INCOME AND H.J. HEINZ COMPANY AND SUBSIDIARIES RETAINED EARNINGS
Fiscal Year Ended April 27, 1994 April 28, 1993 April 29, 1992 (Amounts in thousands except per share data) (52 weeks) (52 weeks) (52 weeks) .................................................................................................................................. CONSOLIDATED Sales $7,046,738 $7,103,374 $6,581,867 STATEMENTS OF Cost of products sold 4,381,745 4,530,563 4,102,816 INCOME: ................................................................................................................ Gross profit 2,664,993 2,572,811 2,479,051 Selling, general and administrative expenses 1,723,651 1,711,926 1,593,995 Gain on sale of confectionery and specialty rice businesses 127,001 - - Gain on sale of The Hubinger Company - - 221,459 ................................................................................................................ Operating income 1,068,343 860,885 1,106,515 Interest income 36,771 29,495 46,607 Interest expense 149,243 146,491 134,948 Other expense, net 33,485 28,108 33,829 ................................................................................................................ Income before income taxes and cumulative effect of accounting change 922,386 715,781 984,345 Provision for income taxes 319,442 185,838 346,050 ................................................................................................................ Income before cumulative effect of accounting change 602,944 529,943 638,295 Cumulative effect of FAS No. 106 adoption - (133,630) - ................................................................................................................ Net income $ 602,944 $ 396,313 $ 638,295 .................................................................................................................................. CONSOLIDATED Amount at beginning of year $3,356,399 $3,257,173 $2,889,476 STATEMENTS OF Net income 602,944 396,313 638,295 RETAINED Cash dividends: EARNINGS: Common stock 325,887 297,009 270,512 Preferred stock 71 78 86 ................................................................................................................ Amount at end of year $3,633,385 $3,356,399 $3,257,173 .................................................................................................................................. PER COMMON Income before cumulative effect of accounting SHARE AMOUNTS: change $ 2.35 $ 2.04 $ 2.40 Cumulative effect of FAS No. 106 adoption - (.51) - ................................................................................................................ Net income $ 2.35 $ 1.53 $ 2.40 Cash dividends $ 1.29 $ 1.17 $ 1.05 ---------------------------------------------------------------------------------------------------------------- Average shares for earnings per share 256,812 259,788 266,339 ----------------------------------------------------------------------------------------------------------------
See Notes to Consolidated Financial Statements. 39 CONSOLIDATED BALANCE SHEETS
Assets (Dollars in thousands) April 27, 1994 April 28, 1993 .......................................................................................................................... CURRENT ASSETS: Cash and cash equivalents $ 98,536 $ 68,432 Short-term investments, at cost which approximates market 43,868 155,872 Receivables (net of allowances: 1994 - $15,407 and 1993 - $16,299) 812,501 978,935 Inventories: Finished goods and work-in-process 851,944 874,912 Packaging material and ingredients 293,803 310,516 ................................................................................................. 1,145,747 1,185,428 ................................................................................................. Prepaid expenses 154,017 172,630 Other current assets 36,861 62,114 ................................................................................................. Total current assets 2,291,530 2,623,411 .......................................................................................................................... PROPERTY, PLANT AND Land 50,801 51,438 EQUIPMENT: Buildings and leasehold improvements 690,483 732,488 Equipment, furniture and other 2,701,656 2,544,425 ................................................................................................. 3,442,940 3,328,351 Less accumulated depreciation 1,275,213 1,166,140 ................................................................................................. Total property, plant and equipment, net 2,167,727 2,162,211 .......................................................................................................................... OTHER NON-CURRENT Investments, advances and other assets 579,420 665,073 ASSETS: Goodwill (net of amortization: 1994 - $127,708 and 1993 - $115,631) 992,994 1,013,051 Other intangibles (net of amortization: 1994 - $85,862 and 1993 - $72,673) 349,475 357,575 ................................................................................................. Total other non-current assets 1,921,889 2,035,699 ................................................................................................. Total assets $6,381,146 $6,821,321 -------------------------------------------------------------------------------------------------
See Notes to Consolidated Financial Statements. 40 H.J. HEINZ COMPANY AND SUBSIDIARIES
Liabilities and Shareholders' Equity (Dollars in thousands) April 27, 1994 April 28, 1993 .......................................................................................................................... CURRENT LIABILITIES: Short-term debt $ 416,372 $1,570,462 Portion of long-term debt due within one year 23,329 33,893 Accounts payable 575,269 533,835 Salaries and wages 72,312 76,624 Accrued marketing 105,102 112,277 Other accrued liabilities 300,058 301,301 Accrued restructuring costs 69,385 179,328 Income taxes 130,535 58,623 ................................................................................................. Total current liabilities 1,692,362 2,866,343 .......................................................................................................................... LONG-TERM DEBT AND Long-term debt 1,727,002 1,009,381 OTHER LIABILITIES: Deferred income taxes 248,630 195,128 Non-pension postretirement benefits 217,044 221,684 Other 157,557 207,789 ................................................................................................. Total long-term debt and other liabilities 2,350,233 1,633,982 .......................................................................................................................... SHAREHOLDERS' EQUITY: Capital stock: Third cumulative preferred, $1.70 first series, $10 par value 398 438 Common stock, 287,401,000 shares issued, $.25 par value 71,850 71,850 ................................................................................................. 72,248 72,288 Additional capital 170,179 170,308 Retained earnings 3,633,385 3,356,399 Cumulative translation adjustments (264,119) (193,407) ................................................................................................. 3,611,693 3,405,588 Less: Treasury shares, at cost (38,359,744 shares at April 27, 1994 and 33,036,046 shares at April 28, 1993) 1,239,177 1,046,905 Unearned compensation relating to the ESOP 33,965 37,687 ................................................................................................. Total shareholders' equity 2,338,551 2,320,996 ................................................................................................. Total liabilities and shareholders' equity $6,381,146 $6,821,321 -------------------------------------------------------------------------------------------------
41 CONSOLIDATED STATEMENTS OF CASH FLOWS H.J. HEINZ COMPANY AND SUBSIDIARIES
April 27, April 28, April 29, Fiscal Year Ended (Dollars in thousands) 1994 1993 1992 ............................................................................................... OPERATING ACTIVITIES: Net income $ 602,944 $ 396,313 $ 638,295 Adjustments to reconcile net income to cash provided by operating activities: Depreciation 200,035 185,962 170,281 Amortization 59,774 48,973 41,505 Deferred tax provision 106,803 (75,263) (77,295) Gain on sale of confectionery and specialty rice businesses (127,001) - - Gain on sale of The Hubinger Company - - (221,459) Prepaid foreign income taxes (11,078) (5,978) (45,010) Provision for restructuring - 179,328 50,523 Cumulative effect of FAS No. 106 adoption - 133,630 - Other items, net (55,767) (44,479) (4,018) Changes in current assets and liabilities, excluding effects of acquisitions and divestitures: Receivables 135,195 (137,499) (132,810) Inventories 9,742 (114,347) (25,015) Prepaid expenses and other current assets 14,688 (47,433) 26,248 Accounts payable 67,660 15,038 (11,429) Accrued liabilities (110,822) (5,854) 12,622 Income taxes 39,032 (116,493) 54,723 ...................................................................... Cash provided by operating activities 931,205 411,898 477,161 ............................................................................................... INVESTING ACTIVITIES: Capital expenditures (275,052) (430,713) (331,143) Acquisitions, net of cash acquired (95,685) (370,189) (574,136) Proceeds from divestitures 265,573 1,872 344,036 Purchases of short-term investments (598,486) (116,153) (373,248) Sales and maturities of short-term investments 680,208 129,462 358,763 Investment in tax benefits 1,400 (37,226) (53,272) Other items, net (5,377) (6,872) 24,956 ...................................................................... Cash (used for) investing activities (27,419) (829,819) (604,044) ............................................................................................... FINANCING ACTIVITIES: Proceeds from long-term debt 991 969,394 823 Payments on long-term debt (18,249) (240,246) (134,007) (Payments on) proceeds from short-term debt, net (398,333) 11,730 756,666 Dividends (325,958) (297,087) (270,598) Purchase of treasury stock (222,582) (148,511) (398,051) Proceeds from borrowings against insurance policies 134,162 - - Repayments of borrowings against insurance policies (65,264) - - Exercise of stock options 22,645 72,043 63,718 Tax benefits from stock options exercised 7,320 34,036 41,744 Other items, net 3,722 3,884 2,582 ...................................................................... Cash (used for) provided by financing activities (861,546) 405,243 62,877 ...................................................................... Effect of exchange rate changes on cash and cash equivalents (12,136) (11,597) 5,734 ...................................................................... Net increase (decrease) in cash and cash equivalents 30,104 (24,275) (58,272) Cash and cash equivalents at beginning of year 68,432 92,707 150,979 ...................................................................... Cash and cash equivalents at end of year $98,536 $68,432 $92,707 ---------------------------------------------------------------------- See Notes to Consolidated Financial Statements.
42 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS H.J. HEINZ COMPANY AND SUBSIDIARIES .............................................................................. 1. SIGNIFICANT Fiscal Year: The company operates on a fiscal year ACCOUNTING POLICIES: ending the Wednesday nearest April 30. However, certain foreign subsidiaries have earlier closing dates to facilitate timely reporting. Fiscal years for the financial statements included herein ended April 27, 1994, April 28, 1993 and April 29, 1992. Principles of Consolidation: The consolidated financial statements include the accounts of the company and its subsidiaries. All intercompany accounts and transactions were eliminated. Translation of Foreign Currencies: For all significant foreign operations, the functional currency is the local currency. Assets and liabilities of these operations are translated at the exchange rate in effect at each year-end. Income statement accounts are translated at the average rate of exchange prevailing during the year. Translation adjustments arising from the use of differing exchange rates from period to period are included as a component of shareholders' equity. Gains and losses from foreign currency transactions are included in net income for the period. Inventories: Inventories are stated at the lower of cost or market. Cost is determined principally under the average cost method. Property, Plant and Equipment: Land, buildings and equipment are recorded at cost. For financial reporting purposes, depreciation is provided on the straight-line method over the estimated useful lives of the assets. Accelerated depreciation methods are generally used for income tax purposes. Expenditures for new facilities and improvements that substantially extend the capacity or useful life of an asset are capitalized. Ordinary repairs and maintenance are expensed as incurred. When property is retired or otherwise disposed, the cost and related depreciation are removed from the accounts and any related gains or losses are included in income. Income Taxes: Deferred income taxes result primarily from temporary differences between financial and tax reporting. If it is more likely than not that some portion or all of a deferred tax asset will not be realized, a valuation allowance is recognized. The company has not provided for possible U.S. taxes on the undistributed earnings of foreign subsidiaries that are considered to be reinvested indefinitely. Calculation of the unrecognized deferred tax liability for temporary differences related to these earnings is not practicable. Where it is contemplated that earnings will be remitted, credit for foreign taxes already paid generally will offset applicable U.S. income taxes. In cases where they will not offset U.S. income taxes, appropriate provisions are included in the Consolidated Statements of Income. Net Income Per Common Share: Net income per common share has been computed by dividing income applicable to common shareholders by the weighted average number of shares of common stock outstanding and common stock equivalents during the respective years. Fully diluted earnings per share are not significantly different from primary earnings per share and, accordingly, are not presented. Intangibles: Goodwill and other intangibles arising from acquisitions are being amortized on a straight- line basis over periods not exceeding 40 years. The company regularly reviews the individual components of the balances by analyzing the future recoverability of the assets and recognizes, on a current basis, any diminution in value. Cash Equivalents: Cash equivalents are defined as highly liquid investments with original maturities of 90 days or less. 43 Business Segment Information: Information concerning business segment and geographic data is in Management's Discussion and Analysis. .............................................................................. 2. ACQUISITIONS: On July 1, 1993, the company purchased the Moore's and Domani product lines from The Clorox Company of Oakland, California for approximately $90 million. The acquisition resulted in goodwill of approximately $53 million, which will be amortized over a period of 40 years. The Moore's product range includes coated frozen foods, specifically breaded onion rings, cheeses and vegetables. Domani offers frozen pasta, including manicotti, shells, tortellini, ravioli and lasagna. The acquired product lines strengthen the company's presence in the foodservice industry. On October 7, 1992, the company purchased Wattie's Limited of Auckland, New Zealand from Goodman Fielder Wattie Limited of Sydney, Australia for approximately $300 million. The acquisition resulted in goodwill of approximately $115 million and other intangible assets of approximately $35 million. These items are being amortized over periods not exceeding 40 years. During 1993, the company also acquired Arimpex, a foodservice distribution company in Italy; Weight Watchers franchises in Chicago, Wisconsin, Minnesota and Kentucky; and assets of a Venezuelan company that produces gelatins and puddings. The above acquisitions have been accounted for as purchases and, accordingly, the purchase prices have been allocated to the respective assets and liabilities based on their estimated fair values as of the dates of the acquisitions. Operating results of these acquisitions have been included in the Consolidated Statements of Income from the dates of the acquisitions forward. Pro forma results of the company, assuming the above-noted acquisitions had been made at the beginning of each period presented, would not be materially different from the results reported. On August 23, 1991, the company completed the acquisition of substantially all of the assets of JLFoods, Inc. (JLFoods) of Eugene, Oregon and certain other related assets from John Labatt Ltd. of Canada for $537.5 million. The acquisition has been accounted for under the purchase method and, accordingly, the operating results of JLFoods have been included in the consolidated operating results since the date of acquisition. The acquisition resulted in goodwill of $320.5 million and other intangible assets of $79.8 million. These items are being amortized over periods not exceeding 40 years. The following summary, prepared on a pro forma basis, combines the consolidated results of operations as if JLFoods had been acquired as of the beginning of 1992, after including the impact of certain adjustments, such as amortization of intangibles, increased interest expense on the acquisition debt, and the related income tax effects.
(Dollars in thousands, except per 1992 share amount) (Unaudited) ..................................................... Sales $6,721,511 Net income $ 635,595 Net income per share $ 2.39 -----------------------------------------------------
The pro forma results are not necessarily indicative of what actually would have occurred if the acquisition had been in effect for all of 1992. During 1992, the company also acquired Continental Delights, Inc., a manufacturer of frozen sandwiches; Escalon Packers, Inc., a specialty processor of branded and foodservice tomato products; and two Weight Watchers franchises. Other smaller acquisitions were made. The results of operations of these companies are included in the Consolidated Statements of Income from the acquisition dates forward. Pro forma results of the company, assuming the other 1992 acquisitions had been made at the beginning of the year, would not be materially different from the results reported. 44 .............................................................................. 3. DIVESTITURES: On August 20, 1993, the company sold its Near East specialty rice business to Golden Grain Company, a subsidiary of The Quaker Oats Company, for approximately $80 million. The sale included trademarks, inventory and fixed assets, including Near East's Leominster, Massachusetts plant, where Near East products are produced. On September 15, 1993, the company sold its confectionery business of Heinz Italia S.p.A. to Hershey Foods Corporation for approximately $133 million. The divestiture included brand names, inventory and fixed assets. The pretax gains on these divestitures totaled $127.0 million, or $0.24 per share. During 1994, the company also sold several other small businesses, including the Chico-San rice cake business, which did not have a material impact on the results of operations. Pro forma results of the company, assuming all of the 1994 divestitures had been made at the beginning of each period presented, would not be materially different from the results reported. In June 1991, the company sold The Hubinger Company of Keokuk, Iowa to Roquette Freres, a major worldwide producer of corn starches, for approximately $325.3 million. Hubinger is a producer of corn derivatives, including corn syrup, starch and ethanol. The sale resulted in a pretax gain of $221.5 million. Other 1992 divestitures did not have a material effect on operations. .............................................................................. 4. RESTRUCTURING CHARGES:In 1993, restructuring charges of $192.3 million on a pretax basis ($0.45 per share) were reflected in operating income. The major components of the restructuring plan related to employee severance and relocation costs ($99 million) and facilities consolidation and closure costs ($73 million). At the time these charges were recorded, it was anticipated that the company would reduce headcount by 3,000. As of April 27, 1994, headcount has been reduced by approximately 2,000. Upon completion of all of the projects in 1995, it is anticipated that the total headcount reduction will be achieved. In 1992, restructuring charges of $88.3 million on a pretax basis ($0.20 per share) were reflected in operating income to provide for the consolidation of functions, staff reductions, organizational reform and plant modernizations and closures. .............................................................................. 5. INCOME TAXES: During 1992, the company adopted FAS No. 109, "Accounting for Income Taxes." The statement requires the use of the asset and liability approach for financial accounting and reporting for income taxes. Financial statements for prior years have not been restated and the cumulative effect of the accounting change was not material. The following table summarizes the provision for U.S. federal and U.S. possessions, state and foreign taxes on income.
(Dollars in thousands) 1994 1993 1992 ........................................................................ Current: U.S. federal and U.S. possessions $ 65,242 $119,746 $197,287 State 22,093 28,153 48,001 Foreign 125,304 113,202 178,057 ........................................................................ 212,639 261,101 423,345 ........................................................................ Deferred: U.S. federal and U.S. possessions 88,989 (25,129) (6,979) State (2,635) (581) 2,508 Foreign 20,449 (49,553) (72,824) ........................................................................ 106,803 (75,263) (77,295) ........................................................................ Total tax provision $319,442 $185,838 $346,050 ------------------------------------------------------------------------
The tax benefit resulting from adjustments to the beginning-of-the-year valuation allowance, due to a change in circumstances, to recognize the realizability of deferred tax assets in future years totaled $57.3 million in 1994, and $41.8 million in 1993. The 1993 tax provision also benefited from an adjustment of deferred taxes for an enacted foreign statutory rate change ($19.8 million) and an increase in deferred tax assets for foreign tax credit carryforwards ($40.0 million). Changes in U.S. tax law that increased the U.S. federal statutory tax rate from 34% to 35% and provided for the deductibility of certain purchased intangibles and the change in the Australian tax rate did not have a material effect on the company's results of operations. Tax expense resulting from allocating certain tax benefits directly to additional capital totaled: $3.9 million in 1994, $32.3 million in 1993 and $41.4 million in 1992. 45 The components of income before income taxes and cumulative effect of accounting change consist of the following:
(Dollars in thousands) 1994 1993 1992 ........................................................................ Domestic $418,395 $359,773 $643,396 Foreign 503,991 356,008 340,949 ........................................................................ $922,386 $715,781 $984,345 ------------------------------------------------------------------------
The differences between the U.S. federal statutory tax rate and the company's consolidated effective tax rate are as follows:
1994 1993 1992 ....................................................................... U.S. federal statutory tax rate 35.0% 34.0% 34.0% Tax on income of foreign subsidiaries 2.9 3.1 - State income taxes (net of federal benefit) 1.4 2.5 3.4 Net adjustment to valuation allowance (6.1) (7.7) - Enacted changes in tax laws (0.1) (2.8) - Tax credits - (5.9) - Other 1.5 2.8 (2.2) ....................................................................... Effective tax rate 34.6% 26.0% 35.2% -----------------------------------------------------------------------
The deferred tax (assets) and deferred tax liabilities recorded on the balance sheet as of April 27, 1994 and April 28, 1993 are as follows:
(Dollars in thousands) 1994 1993 ...................................................................... Depreciation/amortization $295,248 $274,277 Benefit plans 58,498 52,582 Other 99,729 111,234 ...................................................................... 453,475 438,093 ...................................................................... Asset revaluations (92,802) (156,334) Provision for estimated expenses (30,259) (86,474) Operating loss carryforwards (32,234) (33,625) Benefit plans (100,363) (86,514) Tax credit carryforwards (25,907) (39,958) Other (122,647) (137,877) ...................................................................... (404,212) (540,782) ...................................................................... Valuation allowance 28,888 85,071 ...................................................................... Net deferred tax liabilities/(assets) $ 78,151 $ (17,618) ----------------------------------------------------------------------
Net operating loss carryforwards total $79.7 million in 1994. Of that amount, $39.0 million expires between 1995 and 2001; the other $40.7 million does not expire. Foreign tax credit carryforwards total $25.9 million and expire through 1998. The company's consolidated United States income tax returns have been audited by the Internal Revenue Service for all years through 1989. Undistributed earnings of foreign subsidiaries considered to be reinvested permanently amounted to $1.14 billion at April 27, 1994. The valuation allowance for deferred tax assets decreased by $56.2 million in 1994 and $54.9 million in 1993. In June 1991, Heinz's Italian affiliate, PLADA, elected to revalue for tax purposes certain assets as a result of legislation enacted by the Italian Parliament. The revaluation required payment of $77 million over two years for approximately $180 million in future tax benefits. One installment payment was made in 1992 for $44.7 million. The remaining payment was made in 1993 for $32.3 million. 46 .............................................................................. 6. DEBT:
Short-Term (Dollars in thousands) 1994 1993 ......................................................................................................................... Commercial paper $257,202 $1,294,705 Bank and other borrowings 159,170 275,757 ......................................................................................................................... $416,372 $1,570,462 -------------------------------------------------------------------------------------------------------------------------
Maturity Range of (Fiscal Long-Term (Dollars in thousands) Interest Year) 1994 1993 ......................................................................................................................... United States Dollars: Commercial paper Variable 1997 $ 750,000 $ - Senior unsecured notes 5.5-6.875% 1998-2003 749,238 749,090 Eurodollar bonds 7.5 1997 75,000 75,000 Revenue bonds 5.625-11.75 1995-2016 12,383 23,968 Promissory notes 6-12 1995-2005 30,279 36,745 Other 8.1 1995-2001 5,360 5,762 ......................................................................................................................... 1,622,260 890,565 ......................................................................................................................... Foreign Currencies (U.S. Dollar Equivalents): Promissory notes: Pounds sterling 8.85% 1995-2000 71,490 85,747 Italian lire 8.1-17.2 1995-2003 19,067 22,158 Spanish pesetas 3.98-9.05 1995-1999 7,253 9,060 Other 5.6-18.4 1995-2005 30,261 35,744 ......................................................................................................................... 128,071 152,709 ......................................................................................................................... Total long-term debt 1,750,331 1,043,274 Less portion due within one year 23,329 33,893 ......................................................................................................................... $1,727,002 $1,009,381 -------------------------------------------------------------------------------------------------------------------------
The amount of long-term debt that matures in each of the four years succeeding 1995 is: $49.1 million in 1996, $844.6 million in 1997, $269.3 million in 1998 and $23.9 million in 1999. On September 7, 1993, the company replaced its line of credit agreements supporting domestic commercial paper. The new line of credit agreements total $1.5 billion, of which $750 million expires in September 1994, at which time it is anticipated that a new credit facility of at least one year in length will be established. The remaining $750 million expires in August 1996. As a result, $750 million of the domestic commercial paper outstanding as of April 27, 1994 is classified as long-term debt. The domestic commercial paper had a weighted average interest rate during the year of 3.3% and at year-end of 3.6%. The company also maintains a commercial paper program in Canada. Outstanding Canadian commercial paper, which is also classified as short-term debt, was $107.7 million as of April 27, 1994. The weighted average interest rate for Canadian commercial paper during 1994 was 4.8% and at year-end was 4.4%. In addition, the company had $673.3 million of other foreign and other domestic lines of credit available at year-end, principally for overdraft protection. During 1993, the company issued senior unsecured notes in three separate issuances totaling approximately $750 million. These notes were issued at interest rates ranging from 5.5% to 6.875% and with maturity dates extending from 1998 through 2003. In 1993, the company's United Kingdom affiliate privately placed with various banks (pound sterling)125 million ($197.0 million) aggregate principal of 8.85% notes due during 2013. In April 1993, an affiliated company paid (pound sterling)70.6 million ($111.3 million) for an interest in the notes. The notes are shown in the balance sheet as a net amount outstanding of (pound sterling)48.0 million ($71.5 million), which will be fully amortized in six years. The effective interest rate was 8.3% at April 27, 1994 and April 28, 1993. 47 .............................................................................. 7. SHAREHOLDERS' EQUITY:
Cumulative Preferred Stock Common Stock ............ .......................................................... Third, $1.70 First Series Additional $10 Par Issued In Treasury Capital ............ .......................... ........................... ........... (In thousands) Amount Amount Shares Amount Shares Amount ............................................................................................................................. Balance May 1, 1991 $538 $71,850 287,401 $ 692,547 27,966 $149,526 Reacquired - - - 398,051 10,334 - Conversion of preferred into common stock (58) - - (1,198) (52) (1,139) Stock options exercised, net of shares tendered for payment - - - (89,867) (4,866) 15,243 Other, net - - - 312 (38) 1,482 ............................................................................................................................. Balance April 29, 1992 $480 $71,850 287,401 $ 999,845 33,344 $165,112 Reacquired - - - 148,511 3,885 - Conversion of preferred into common stock (42) - - (946) (38) (904) Stock options exercised, net of shares tendered for payment - - - (99,078) (4,093) 5,112 Other, net - - - (1,427) (62) 988 ............................................................................................................................. Balance April 28, 1993 $438 $71,850 287,401 $1,046,905 33,036 $170,308 Reacquired - - - 222,582 6,475 - Conversion of preferred into common stock (40) - - (985) (36) (945) Stock options exercised - - - (27,605) (1,054) 267 Other, net - - - (1,720) (61) 549 ............................................................................................................................. Balance April 27, 1994 $398 $71,850 287,401 $1,239,177 38,360 $170,179 - ----------------------------------------------------------------------------------------------------------------------------- Authorized Shares--April 27, 1994 40 600,000 - -----------------------------------------------------------------------------------------------------------------------------
Capital Stock: The preferred stock outstanding is convertible at a rate of one share of preferred stock into 9.0 shares of common stock. The company can redeem the stock at $28.50 per share. On April 27, 1994, there were authorized, but unissued, 2,200,000 shares of third cumulative preferred stock for which the series had not been designated. Employee Stock Ownership Plan (ESOP): The company established an ESOP in 1990 to replace in full or in part the company's cash-matching contributions to the H.J. Heinz Company Employees Retirement and Savings Plan, a 401(k) plan for salaried employees. Matching contributions to the 401(k) plan are based on a percentage of the participant's contributions, subject to certain limitations. To finance the plan, the ESOP borrowed $50.0 million directly from the company in 1990. The loan is in the form of a 15-year variable-rate interest- bearing note (an average of 4.2%, 4.1% and 6.1% for 1994, 1993 and 1992, respectively) and is included in the company's Consolidated Balance Sheets as unearned compensation. The proceeds of the note were used to purchase 1,577,908 shares of treasury stock from the company at approximately $31.70 per share. The stock held by the ESOP is released for allocation to the participants' accounts over the term of the loan as company contributions to the ESOP are made. The company contributions are reported as compensation and interest expense. Compensation expense related to the ESOP for 1994, 1993 and 1992 was $3.3 million, $2.7 million and $2.7 million, respectively. Interest expense was $1.7 million, $1.7 million and $2.1 million for 1994, 1993 and 1992, respectively. The company's contributions to the ESOP and the dividends on the company stock held by the ESOP are used to repay loan interest and principal. The dividends on the company stock held by the ESOP were $1.9 million, $1.7 million and $1.4 million in 1994, 1993 and 1992, respectively. Cumulative Translation Adjustments: Changes in the cumulative translation component of shareholders' equity result principally from translation of financial statements of foreign subsidiaries into U.S. dollars. The reduction in shareholders' equity related to the translation component increased $70.7 million in 1994, increased $107.6 million in 1993, and decreased $13.9 million in 1992. 48 ............................................................................... 8. SUPPLEMENTAL CASH FLOWS INFORMATION:
(Dollars in thousands) 1994 1993 1992 ........................................................................ Cash Paid During The Year For: Interest $146,951 $134,179 $139,784 Income taxes 153,000 347,701 339,425 ........................................................................ Details of Acquisitions: Fair value of assets acquired $102,382 $478,240 $689,246 Liabilities assumed* 6,697 106,893 114,836 ........................................................................ Cash paid 95,685 371,347 574,410 Less cash acquired - 1,158 274 ........................................................................ Net cash paid for acquisitions $ 95,685 $370,189 $574,136 ------------------------------------------------------------------------ *Includes notes to seller.
............................................................................. 9. EMPLOYEES' STOCK Under the company's stock option plans, officers and OPTION PLANS AND other key employees may be granted options, each of MANAGEMENT INCENTIVE which allows for the purchase of shares of the PLANS: company's common stock. The option price on all outstanding options is equal to the fair market value of the stock at the date of grant. The Board of Directors adopted, effective April 13, 1994, subject to the approval of the shareholders at the annual meeting in September 1994, a new stock option plan providing for the grant of up to 12.0 million shares of common stock at any time over the next 10 years. As of April 27, 1994, options for approximately 6.3 million shares had been contingently granted under this plan. In general, the terms of the 1994 plan are similar to the company's other stock option plans. The shares authorized but not granted under the company's stock option plans were 5,717,590 at April 27, 1994 and 2,711,590 at April 28, 1993. Data regarding the company's stock option plans follows:
Range of Shares Option Price ....................................................................... Shares under option May 1, 1991 26,592,656 $ 4 1/4-39 Options granted 1,149,000 36-40 1/2 Options exercised (5,839,939) 4 1/4-34 1/2 Options surrendered (101,500) 20-37 3/4 ....................................................................... Shares under option April 29, 1992 21,800,217 $ 6 3/8-40 1/2 Options granted 2,482,500 35 7/8-43 1/4 Options exercised (4,109,275) 6 3/8-37 3/4 Options surrendered (49,000) 22-38 7/8 ....................................................................... Shares under option April 28, 1993 20,124,442 $ 8 7/8-43 1/4 Options granted 9,467,500 30 7/8-39 3/4 Options exercised (1,054,230) 9 1/2-37 3/4 Options surrendered (473,500) 34 1/2-43 1/4 ....................................................................... Shares under option April 27, 1994 28,064,212 $ 8 7/8-43 1/4 ----------------------------------------------------------------------- Options exercisable at: April 28, 1993 7,198,040 April 27, 1994 8,307,710 -----------------------------------------------------------------------
Common stock reserved for options totaled 33,781,802 shares as of April 27, 1994 and 22,836,032 shares as of April 28, 1993. The company's management incentive plans cover certain officers and other key employees. Participants may elect to be paid on a current or deferred basis. The aggregate amount of all awards may not exceed certain limits in any year. Compensation under the management incentive plans was approximately $12 million in 1994, $17 million in 1993 and $18 million in 1992. 49 .............................................................................. 10. RETIREMENT PLANS: The company maintains retirement plans for the majority of its employees. Benefits are based on years of service and compensation or stated amounts for each year of service. Plan assets are primarily invested in equities and fixed income securities. The company's funding policy for the domestic plans is to contribute annually not less than the ERISA minimum funding standards nor more than the maximum amount which can be deducted for federal income tax purposes. Generally, foreign plans are funded in amounts sufficient to comply with local regulations and ensure adequate funds to pay benefits to retirees as they become due. Net pension costs consisted of the following:
(Dollars in thousands) 1994 1993 1992 ........................................................................ Benefits earned during the year $ 15,215 $ 20,384 $ 22,801 Interest cost on projected benefit obligation 66,706 65,612 66,668 Actual return on plan assets (98,673) (98,358) (105,940) Net amortization and deferral 25,028 21,292 23,235 ........................................................................ Net pension costs $ 8,276 $ 8,930 $ 6,764 ------------------------------------------------------------------------
The following table sets forth the combined funded status of the company's principal plans at April 27, 1994 and April 28, 1993.
(Dollars in thousands) 1994 1993 ...................................................................... Actuarial present value of: Accumulated benefit obligation, primarily vested $775,986 $748,089 Additional obligation for projected compensation increases 43,074 69,992 ...................................................................... Projected benefit obligation 819,060 818,081 Plan assets, at fair value 933,257 908,745 ...................................................................... Plan assets in excess of projected benefit obligation 114,197 90,664 Unamortized prior service cost 60,238 63,427 Unamortized actuarial losses, net 22,910 56,819 Unamortized net assets at date of adoption (36,885) (44,688) ...................................................................... Prepaid pension costs $160,460 $166,222 ----------------------------------------------------------------------
The weighted average rates used for the years ended April 27, 1994, April 28, 1993 and April 29, 1992 in determining the net pension costs and projected benefit obligations were as follows:
1994 1993 1992 ....................................................................... Expected rate of return on plan assets 10.0% 10.1% 10.1% Discount rate 8.3% 8.6% 8.8% Compensation increase rate 4.8% 6.2% 6.7% -----------------------------------------------------------------------
Assumptions for foreign plans are developed on a basis consistent with those for U.S. plans, adjusted for prevailing economic conditions. In April 1992, the Board of Directors amended the domestic salaried defined benefit pension plan to provide that no benefits would accrue under this plan on or after January 1, 1993. At the same time, the Board expanded, effective January 1, 1993, the defined contribution plan covering substantially all domestic salaried employees, described below. The Board's actions on the defined benefit pension plan resulted in an after-tax curtailment gain of $23.6 million, which was recorded in 1992. No plan assets were withdrawn from the pension plan as a result of this curtailment. The company maintains defined contribution plans for the majority of its domestic non-union and salaried employees. Benefits are provided through company contribution accounts which consist solely of company contributions that are a percentage of the participant's pay based on age, with the contribution rate increasing with age. In addition, certain non- union employees receive supplemental contributions, which are paid at the discretion of the company, and matching contributions based on a percentage of the participant's contributions to the 401(k) portion of the plan. (The company's matching contributions for salaried employees are provided under the ESOP.) The expense recognized as a result of company contributions to the defined contribution plans, excluding the ESOP, totaled $16.5 million in 1994. In 1993, $4.5 million was expensed for the company defined contribution plans. 50 .............................................................................. 11. POSTRETIREMENT In addition to providing pension benefits, the BENEFITS OTHER THAN company and certain of its subsidiaries provide PENSIONS AND OTHER health care and life insurance benefits for retired POSTEMPLOYMENT BENEFITS: employees and their eligible dependents. Certain of the company's U.S. and Canadian employees may become eligible for such benefits. In general, postretirement medical coverage is provided for eligible non-union and salaried employees with at least 10 years of service rendered after the age of 45 and eligible union employees who retire with an immediate pension benefit. The company currently does not fund these benefit arrangements and may modify plan provisions or terminate plans at its discretion. Effective January 1, 1994, certain changes were made to postretirement medical benefits offered to U.S. salaried and non-union employees who retire after May 1, 1994. Those retirees will be required to share in the cost of providing these benefits at percentages increasing from 20% in 1994 to 100% in 1998. The resulting curtailment gain was immaterial. In 1993, the company adopted Statement of Financial Accounting Standards (FAS) No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions." FAS No. 106 requires that the accrual method of accounting for postretirement benefits other than pensions be used and the accrual period be based on the period that the employees render the services necessary to earn their postretirement benefits. Effective April 30, 1992, the company elected to recognize immediately the accumulated postretirement benefit obligation for active and retired employees, resulting in an after- tax cumulative charge of $133.6 million (net of income tax benefit of $85.4 million), or $0.51 per share. In addition, the adoption of FAS No. 106 increased the company's pretax postretirement benefit expense by $16.3 million ($0.04 per share) in 1993. These charges had no effect on consolidated cash flows. Net postretirement costs consisted of the following:
(Dollars in thousands) 1994 1993 ...................................................................... Postretirement benefits earned during the year $ 6,512 $ 8,462 Interest cost on accumulated postretirement benefit obligation 15,740 16,457 Net amortization and deferral (2,986) (885) ...................................................................... Net postretirement benefit costs $19,266 $24,034 ----------------------------------------------------------------------
The following table sets forth the combined status of the company's postretirement benefit plans at April 27, 1994 and April 28, 1993.
(Dollars in thousands) 1994 1993 ...................................................................... Accumulated postretirement benefit obligation: Retirees and spouses $110,892 $108,907 Employees currently eligible to retire 20,939 40,289 Employees not yet eligible to retire 49,922 65,645 ...................................................................... Total accumulated postretirement benefit obligation 181,753 214,841 Unamortized prior service cost 34,633 15,434 Unrecognized net gain 9,658 - ...................................................................... Accrued postretirement benefit obligation 226,044 230,275 Current portion, included in other accrued liabilities 9,000 8,591 ...................................................................... Non-pension postretirement benefits $217,044 $221,684 ----------------------------------------------------------------------
The weighted average discount rate used in the calculation of the accumulated postretirement benefit obligation and the net postretirement benefit cost was 8.0% in 1994 and 8.1% in 1993. The assumed annual composite rate of increase in the per capita cost of company-provided health care benefits begins at 11.5% for 1995, gradually decreases to 5.8% by 2010, and remains at that level thereafter. A 1% increase in these health care cost trend rates would cause the accumulated postretirement obligation to increase by $20.0 million, and the aggregate of the service and interest components of 1994 net postretirement benefit costs to increase by $3.2 million. Prior to 1993, the cost of retiree health care and life insurance benefits was expensed as incurred. These costs totaled $6.8 million in 1992. In November 1992, the FASB issued FAS No. 112, "Employers' Accounting for Postemployment Benefits." This statement requires recognition of benefits provided by an employer to former or inactive employees after employment but before retirement. The statement must be implemented in the first quarter of Fiscal 1995. The impact of the adoption of this standard is not expected to have a material impact on the company's financial position or results of operations. 51 .................................................................. 12. QUARTERLY RESULTS: (Unaudited)
1994 ................................................................................ (Dollars in thousands, except per share data) First Second Third Fourth Total ............................................................................................................................... Sales $1,583,312 $1,807,729 $1,710,209 $1,945,488 $7,046,738 Gross profit 619,974 649,007 671,146 724,866 2,664,993 Net income 152,179 193,125 128,567 129,073 602,944 Per Share Data: Net income $0.59 $0.75 $0.50 $0.51 $2.35 Dividends 0.30 0.33 0.33 0.33 1.29 1993 ................................................................................ (Dollars in thousands, except per share data) First Second Third Fourth Total ............................................................................................................................... Sales $1,564,441 $1,738,559 $1,766,712 $2,033,662 $7,103,374 Gross profit 601,502 652,295 701,181 617,833 2,572,811 Income before cumulative effect of accounting change 143,790 154,166 162,312 69,675 529,943 Cumulative effect of FAS No. 106 adoption (133,630) - - - (133,630) Net income 10,160 154,166 162,312 69,675 396,313 Per Share Data: Income before cumulative effect of accounting change $0.55 $0.60 $0.62 $0.27 $2.04 Cumulative effect of FAS No. 106 adoption (0.51) - - - (0.51) Net income 0.04 0.60 0.62 0.27 1.53 Dividends 0.27 0.30 0.30 0.30 1.17 - -------------------------------------------------------------------------------------------------------------------------------
Second-quarter 1994 results include gains on the sale of the confectionery and specialty rice businesses, that totaled $127.0 million on a pretax basis ($0.24 per share). (See Note 3 to the Consolidated Financial Statements.) Fourth-quarter 1994 earnings benefited from a lower effective tax rate resulting from tax benefits from overseas operations of $57.3 million ($0.22 per share). (See Note 5 to the Consolidated Financial Statements.) First-quarter 1993 results have been restated to include the cumulative effect of adopting FAS No. 106. (See Note 11 to the Consolidated Financial Statements.) The fourth quarter also includes a $16.3 million pretax charge ($0.04 per share), which represents the 1993 effect of adopting FAS No. 106. Also in the fourth quarter of 1993, pretax restructuring charges of $181.9 million ($0.43 per share) were recorded. (See Note 4 to the Consolidated Financial Statements.) Fourth-quarter earnings benefited from a lower effective tax rate resulting from tax benefits overseas and the recognition of foreign tax credits associated with the company's overseas dividend strategy. (See Note 5 to the Consolidated Financial Statements.) 52 .................................................................. 13. COMMITMENTS AND Legal Matters: On December 31, 1992, a food wholesale CONTINGENCIES: distributor filed suit against the company and its principal competitors in the U.S. baby food industry. Subsequent to that date, several similar lawsuits were filed in the same court and have been consolidated into a class action suit. The complaints, each of which seeks an injunction and unspecified treble money damages, allege a conspiracy to fix, maintain and stabilize the prices of baby food. Related suits have also been filed in Alabama and California state courts, seeking to represent a class of indirect purchasers of baby food in the respective states. The company believes all of the suits are without merit and will defend itself vigorously against them. Certain other claims have been filed against the company or its subsidiaries and have not been finally adjudicated. The above- mentioned claims, when finally concluded and determined, in the opinion of management, based upon the information that it presently possesses, will not have a material adverse effect on the company's consolidated financial position or results of operations. Financial Instruments: The company's financial instruments include cash and cash equivalents, short- and long-term investments, short- and long-term debt, interest rate swap agreements, currency exchange agreements and guarantees. The carrying values of all instruments approximated their fair values at April 27, 1994 and April 28, 1993. The fair values of the instruments were based upon quoted market prices of the same or similar instruments or on a discounted basis using the rates available to the company for instruments of the same remaining maturities. The counterparties to the currency exchange and swap agreements consist of large major international financial institutions. The company continually monitors its positions and the credit ratings of its counterparties and, by policy, limits the amount of credit exposure to any one party. While the company may be exposed to potential losses due to credit risk in the event of non-performance by these counterparties, it does not anticipate losses. In May 1993, the FASB issued FAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities." This statement expands the use of fair value accounting for debt and equity securities, but retains the use of the amortized cost method for investments in debt securities that the company intends to hold to maturity. This statement must be implemented in the first quarter of Fiscal 1995. The impact of the adoption of this standard is not expected to have a material impact on the company's financial position or results of operations. Lease Commitments: Operating lease rentals for warehouse, production and office facilities and equipment amounted to approximately $94.0 million in 1994, $89.7 million in 1993 and $78.4 million in 1992. Future lease payments for non-cancellable operating leases as of April 27, 1994 totaled $202.2 million (1995-$49.7 million, 1996-$37.6 million, 1997-$28.7 million, 1998-$21.2 million, 1999-$13.0 million and thereafter-$52.0 million). .................................................................. 14. SUBSEQUENT EVENTS: On May 16, 1994, the company acquired the Borden Foodservice Group, a unit of Borden, Inc. Borden's Foodservice Group includes a single-serve line of condiments and bulk-sized oil-based products, such as salad dressings and mayonnaise. On May 26, 1994, the company announced that it had entered into negotiations with Glaxo India Limited, based in Bombay, to acquire Glaxo's Family Products Division, which produces a wide range of nutritional drinks, baby food and other consumer products. This transaction has been approved by both companies' boards of directors, but is subject to completion of negotiations, authorization from the Indian government and approval by Glaxo India Limited's shareholders. On May 27, 1994, the company announced that it had agreed to acquire the Farley's infant food and milk business as well as its adult nutrition business from The Boots Company PLC of Nottingham, England for approximately $140 million. Farley's product offerings include a wide range of baby feeding products, from formulas to post-weaning biscuits, cereals and dry meals. It also sells adult meal supplements under the brand name Complan. The transaction is subject to the approval of the appropriate governmental authorities. Pro forma results of the company, assuming probable and completed acquisitions had been made at the beginning of each period presented, would not be materially different from the results reported. 53 RESPONSIBILITY STATEMENTS .................................................................... Responsibility for Financial Statements Management of H.J. Heinz Company is responsible for the preparation of the financial statements and other information included in this annual report. The financial statements have been prepared in conformity with generally accepted accounting principles, incorporating management's best estimates and judgments, where applicable. Management believes that the company's internal control systems provide reasonable assurance that assets are safeguarded, transactions are recorded and reported appropriately, and policies are followed. The concept of reasonable assurance recognizes that the cost of a control procedure should not exceed the expected benefits. Management believes that its systems provide this appropriate balance. An important element of the company's control systems is the ongoing program to promote control consciousness throughout the organization. Management's commitment to this program is emphasized through written policies and procedures (including a code of conduct), an effective internal audit function and a qualified financial staff. The company engages independent public accountants who are responsible for performing an independent audit of the financial statements. Their report, which appears herein, is based on obtaining an understanding of the company's accounting systems and procedures and testing them as they deem necessary. The company's Audit Committee is composed entirely of outside directors. The Audit Committee meets regularly, and when appropriate separately, with the independent public accountants, the internal auditors and financial management to review the work of each and to satisfy itself that each is discharging its responsibilities properly. Both the independent public accountants and the internal auditors have unrestricted access to the Audit Committee. .................................................................... Independent Accountants' Report The Shareholders H.J. Heinz Company: We have audited the accompanying consolidated balance sheets of H.J. Heinz Company and subsidiaries as of April 27, 1994 and April 28, 1993, and the related consolidated statements of income, retained earnings and cash flows for each of the three years in the period ended April 27, 1994. These financial statements are the responsibility of the company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of H.J. Heinz Company and subsidiaries as of April 27, 1994 and April 28, 1993, and the consolidated results of their operations and their cash flows for each of the three years in the period ended April 27, 1994 in conformity with generally accepted accounting principles. As discussed in Note 11 to the Consolidated Financial Statements, the company adopted the provisions of Statement of Financial Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions" in Fiscal 1993. /s/ Cooper's & Lybrand ----------------------- 600 Grant Street Pittsburgh, Pennsylvania June 14, 1994 54 EX-21 6 SUBSIDIARIES Exhibit 21 H. J. Heinz Company and Subsidiaries SUBSIDIARIES OF THE REGISTRANT Following are the subsidiaries of H. J. Heinz Company (the "Company"), other than those which if considered in the aggregate as a single subsidiary would not constitute a significant subsidiary, and the state or country in which each subsidiary was incorporated or organized. The accounts of each of the listed subsidiaries are a part of the Company's consolidated financial statements.
Subsidiary State or Country ---------- ---------------- Alimentos Heinz, C. A. Venezuela Crestar Food Products, Inc. State of Delaware Ets. Paul Paulet France Food Service Products Company State of Delaware Heinz Iberica S.A. Spain Heinz Italia, S.p.A. Italy Heinz Japan Ltd. Japan Heinz-UFE Ltd. People's Republic of China Heinz Win Chance Ltd. Thailand H. J. Heinz (Botswana Proprietary) Ltd. Botswana H. J. Heinz B. V. Netherlands H. J. Heinz Company Australia Limited Australia H. J. Heinz Company of Canada Ltd. Canada H. J. Heinz Company Limited United Kingdom H. J. Heinz Credit Company State of Delaware Olivine Industries (Private) Limited Zimbabwe Ore-Ida Foods, Inc. State of Delaware Portion Pac, Inc. State of Ohio Pro Bakers Ltd. State of New York Pro Pastries Inc. Canada Seoul-Heinz Ltd. Republic of Korea Star-Kist Foods, Inc. State of California Wattie's Limited New Zealand Weight Watchers Food Company State of Delaware Weight Watchers International, Inc. Commonwealth of Virginia
EX-24 7 POWER OF ATTORNEY Exhibit 24 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Anthony J. F. O'Reilly, David R. Williams and Lawrence J. McCabe, and each of them, such person's true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for such person and in such person's name, place and stead, in any and all capacities, to sign H. J. Heinz Company's Annual Report on Form 10-K for the fiscal year ended April 27, 1994, and to sign any and all amendments to such Annual Report, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as such person might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or such persons' or person's substitute or substitutes, may lawfully do or cause to be done by virtue hereof. This Power of Attorney has been signed below as of the 13th day of July, 1994 by the following persons in the capacities indicated. Signature Title --------- ----- /s/ Anthony J. F. O'Reilly Chairman of the Board, President and .............................. Chief Executive Officer and Director Anthony J. F. O'Reilly (Principal Executive Officer) /s/ David R. Williams Senior Vice President--Finance and .............................. Chief Financial Officer and Director David R. Williams (Principal Financial Officer) /s/ Lawrence J. McCabe Senior Vice President-- .............................. General Counsel and Director Lawrence J. McCabe /s/ William P. Snyder III Director .............................. William P. Snyder III /s/ Joseph J. Bogdanovich Director .............................. Joseph J. Bogdanovich /s/ Herman J. Schmidt Director .............................. Herman J. Schmidt /s/ Albert Lippert Director .............................. Albert Lippert /s/ Eleanor B. Sheldon Director .............................. Eleanor B. Sheldon /s/ Richard M. Cyert Director .............................. Richard M. Cyert /s/ Samuel C. Johnson Director .............................. Samuel C. Johnson /s/ David W. Sculley Director .............................. David W. Sculley /s/ Donald R. Keough Director .............................. Donald R. Keough /s/ S. Donald Wiley Director .............................. S. Donald Wiley /s/ Luigi Ribolla Director .............................. Luigi Ribolla /s/ Nicholas F. Brady Director .............................. Nicholas F. Brady /s/ William R. Johnson Director .............................. William R. Johnson /s/ William C. Springer Director .............................. William C. Springer /s/ Edith E. Holiday Director .............................. Edith E. Holiday -----END PRIVACY-ENHANCED MESSAGE-----