-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CNwp/03sm5/BQQg9ISRC404SOPQjKps5MC+d2SyDYOhNf1vwUyFrfjttxK8mkX1I UjfuXzsi44e6Go1P0PxPUw== 0000950152-04-006470.txt : 20040824 0000950152-04-006470.hdr.sgml : 20040824 20040824160218 ACCESSION NUMBER: 0000950152-04-006470 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20040824 ITEM INFORMATION: Results of Operations and Financial Condition FILED AS OF DATE: 20040824 DATE AS OF CHANGE: 20040824 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HEINZ H J CO CENTRAL INDEX KEY: 0000046640 STANDARD INDUSTRIAL CLASSIFICATION: CANNED, FROZEN & PRESERVED FRUIT, VEG & FOOD SPECIALTIES [2030] IRS NUMBER: 250542520 STATE OF INCORPORATION: PA FISCAL YEAR END: 0430 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-03385 FILM NUMBER: 04994259 BUSINESS ADDRESS: STREET 1: 600 GRANT ST CITY: PITTSBURGH STATE: PA ZIP: 15219 BUSINESS PHONE: 4124565700 MAIL ADDRESS: STREET 1: P O BOX 57 STREET 2: P O BOX 57 CITY: PITTSBURGH STATE: PA ZIP: 15230 8-K 1 j0930301e8vk.txt H.J. HEINZ COMPANY ============================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of Earliest Event Reported): August 24, 2004 H. J. HEINZ COMPANY (Exact name of registrant as specified in its charter) Pennsylvania 1-3385 25-0542520 (State of Incorporation) (Commission File Number) (I.R.S. Employer Identification No.) 600 Grant Street, Pittsburgh, 15219 Pennsylvania (Zip Code) (Address of principal executive offices) 412-456-5700 (Registrant's telephone number, including area code) Not Applicable (Former name or former address, if changed since last report) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below): [ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) [ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) [ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) [ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) GENERAL ============================================================================= ITEM 2.02. RESULTS OF OPERATIONS AND FINANCIAL CONDITION H. J. Heinz Company wishes to disclose its press release dated August 24, 2004 furnished herewith as Exhibit 99*, which presents the financial results of the Registrant and its business segments and identifies certain special items that impacted the financial results that management deemed to be significant. These special items include, in Fiscal Year 2004, the impact of reorganization costs and the gain on the sale of the company's bakery business in Northern Europe. Operating segment income excluding these special items is not a measure that is defined in generally accepted accounting principles ("GAAP"), but it is used by management to assist in evaluating the Registrant's results of operations from period to period. Management believes this information also may be useful to the readers of the financial statements in evaluating the Registrant's operating results between fiscal periods and provides additional clarity in understanding the trends of the business. Also disclosed on Exhibit 99* is supplemental information regarding reconciliation of non-GAAP financial measures in connection with the financial results for the first quarters of Fiscal Years 2004 and 2005. INDEX TO EXHIBITS Exhibit Number (Referenced to Item 601 of Regulation S-K) Description of Exhibit - --------------- ---------------------- 99 (furnished but not filed)* H.J. Heinz Company Press Release dated August 24, 2004 * The Exhibit attached to this Form 8-K shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934 (the "Exchange Act") or otherwise subject to liability under that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in such filing. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. H.J. HEINZ COMPANY By /s/ Arthur Winkleblack ---------------------------------- Arthur Winkleblack Executive Vice President and Chief Financial Officer Dated: August 24, 2004 EXHIBIT INDEX Exhibit NO. Description - ----------- ----------- 99 (furnished but not filed) H. J. Heinz Company Press Release dated August 24, 2004 EX-99 2 j0930301exv99.txt EXHIBIT 99 Exhibit 99 NEWS RELEASE HEINZ logo World Headquarters "THE GOOD FOOD COMPANY" HEINZ REPORTS FIRST QUARTER RESULTS IN LINE WITH SALES, CASH & EARNINGS OUTLOOK FOR FISCAL 2005 o EPS OF 55 CENTS VS. 60 CENTS IN THE PRIOR YEAR WHICH INCLUDED DISCONTINUED OPERATIONS AND SPECIAL ITEMS o EPS OF 55 CENTS UP 7.8% OVER PRIOR-YEAR EPS FROM CONTINUING OPERATIONS, EXCLUDING SPECIAL ITEMS o SALES INCREASE 5.7%, WITH VOLUME UP 1.9% REFLECTING STRONG GROWTH IN NORTH AMERICAN CONSUMER PRODUCTS AND EUROPE o CASH CONVERSION CYCLE REDUCED 12 DAYS VERSUS PRIOR YEAR PITTSBURGH - August 24, 2004 - H.J. Heinz Company (NYSE: HNZ) today reported net income of $194.8 million, or $0.55 per diluted share, for the Fiscal 2005 first quarter ended July 28, 2004. This compares to $214.0 million, or $0.60 per share, for the first quarter of Fiscal 2004, which included profit associated with business units spun off to Del Monte Foods along with special items. Excluding discontinued operations and special items, Heinz's first quarter EPS in Fiscal 2005 increased 7.8% over earnings of $179.8 million, or $0.51 per diluted share for the prior-year period. Commenting on the Company's performance, H.J. Heinz Company Chairman, President and CEO William R. Johnson said: "Heinz is off to a strong start in Fiscal 2005, with first quarter results consistent with our full-year outlook. Innovation continues to drive profitable growth in our top brands, most notably Ore-Ida(R) frozen potatoes, which had excellent results behind the launch of our exciting new Extra Crispy(TM) and Easy Fries(TM) lines. This, combined with restaging and repricing initiatives around the world, helped generate strong first quarter sales and volume growth against our full-year objective of net sales growth of 2-3%. At the same time, we continued to remove clutter and squeeze out cost to improve our cash management and balance sheet performance, with reduced working capital and a 12-day improvement in the Cash Conversion Cycle. Overall, our first quarter performance is in line with our full-year target ranges of EPS of $2.32 - $2.42 and Operating Free Cash Flow of $800 million - $1 billion." Heinz's positive earnings performance reflected strong first quarter sales growth of 5.7% due to a combination of favorable foreign exchange rates and a 1.9% increase in volume/mix. The volume/mix improvement was driven mainly by very strong volume growth of 6.7% in the North American Consumer Products business, primarily in frozen brands such as Ore-Ida(R) frozen potatoes. Europe's volume increased 2.1%, reflecting strong volume growth in the U.K. and Italy. The Company also noted robust sales growth of 7.8% for its top 15 power brands. These volume increases were partially offset by a 1.0% drop in net pricing related to the Company's product restage in Italy and market pressure in the Netherlands and New Zealand. 2 The Company's balance sheet and working capital management showed continued improvement over the Fiscal 2004 first quarter. Operating Free Cash Flow (cash from operations less capital expenditures) was $148 million in the quarter, the Cash Conversion Cycle improved 12 days, and net debt (total debt less cash and cash equivalents and the value of interest rate swaps) was reduced by $320 million versus the prior-year period. (Comments on the first quarter that follow refer to the results from continuing operations, excluding special items, in Fiscal 2004. See attached tables for further details, including reconciliation of non-GAAP financial measures. Management believes that the adjusted GAAP measures provide additional clarity in understanding the trends of the business as they provide management with a view of the business excluding special items.) Heinz's Gross Profit Margin was 36.9% in the quarter, a decrease of 0.6 percentage points over the year-ago period. The decrease in the Gross Profit Margin was due mainly to increased trade promotion spending and higher commodity costs. Operating income increased 3.0%, primarily due to the favorable sales increase, partially offset by the reduced Gross Profit Margin and increases in SG&A. The higher SG&A cost largely reflects fuel cost inflation and the switch from stock options to performance-based pay, partially offset by reduced consumer marketing. Income from continuing operations grew 8.4%, mainly reflecting higher operating results, reduced interest expense and a lower effective tax rate. HIGHLIGHTS NORTH AMERICAN CONSUMER PRODUCTS Sales of the North American Consumer Products segment increased 8.4%. Volume increased sales 6.7%, due to significant growth in Ore-Ida(R) frozen potatoes behind the successful launch of the innovative Extra Crispy(TM) and microwaveable Easy Fries(TM) lines and the extension of the Smart Ones(R) Truth About Carbs(TM) line. Volume also grew in Delimex(R) and TGI Friday's(R) frozen snacks and appetizers. Acquisitions increased sales 2.6%, due to the prior-year purchase of the Canadian operations of Unifine Richardson B.V., which manufactures and sells salad dressings, sauces, and dessert toppings. The divestiture of Ethnic Gourmet Foods(R) and Rosetto(R) pasta during the quarter reduced sales 1.1%. Aided by the popularity of its innovative Easy Squeeze!(TM) upside-down bottle and expanded distribution of its One Carb ketchup, Heinz(R) Ketchup's U.S. market share remained strong, exceeding 60%. Heinz(R) Homestyle Gravy also recorded volume and market share growth, reflecting the positive impact of the Company's EDLP initiatives for these brands. Operating income increased 3.1%, driven by the increase in volume and lower consumer marketing, partially offset by higher commodity and fuel costs. HEINZ U.S. FOODSERVICE Heinz's U.S. Foodservice business increased sales 3.8%. Acquisitions increased sales 2.4% due to the prior year purchase of Truesoups LLC, a manufacturer and marketer of premium frozen soups. Higher pricing drove sales up 2.2% chiefly due to increases on Heinz(R) Ketchup 3 and single serve condiments, Chef Francisco(R) frozen soups, and Dianne's(R) and Alden Merrell(R) frozen desserts. Sales volume decreased 0.7%, primarily due to customer service issues at Portion Pac Inc. resulting from the startup of a new warehouse management system that temporarily impacted shipments of some portion control products early in the quarter. Operating income increased 5.1%, primarily due to favorable pricing, sales mix and the Truesoups acquisition, partially offset by higher commodity and distribution costs. EUROPE Heinz Europe's sales increased 7.3%. Favorable exchange translation rates boosted sales by 8.4%, with volume increasing 2.1% due primarily to strong performance in the U.K. and Italy. Key growth initiatives included the successful expansion of Heinz(R) Ketchup's new Top Down(TM) bottle, the relaunch of the Plasmon(R) baby food line in Italy, growth in Heinz(R) ready-to-serve soups, introduction of new Weight Watchers(R) frozen products and expanded retail distribution of frozen desserts in the U.K. Heinz(R) Ketchup hit a new market share record in the U.K. (78%), with Heinz(R) Salad Cream's share surpassing 79%. Heinz(R) Ketchup's market share exceeded 31% in France and reached new record highs in Germany, Spain and Switzerland. Lower pricing decreased sales 2.2%, primarily due to increased trade promotion spending related to the restage of the Italian infant feeding business and pricing pressures in Northern Europe. Divestitures lowered sales by 1% as the company continued to improve the focus of its European business. Operating income increased 5.2%, mainly due to strong sales volume and favorable currency exchange translation rates. These benefits were partially offset by increased trade promotional spending to improve price competitiveness in Italy and The Netherlands together with unfavorable raw material and production costs for the European seafood business. ASIA PACIFIC Sales in Asia Pacific increased 1.5%. Favorable exchange translation rates increased sales by 4.2%. Volumes decreased sales by 1.0% as volume increases in New Zealand and Indonesia were more than offset by declines, primarily in Japan. Lower pricing decreased sales 1.7% as Tegel(R) poultry responded to continuing market pressures in New Zealand. Creative marketing and innovation helped drive growth in Heinz(R) soups and beans in Australia, offset by declines in baby food and frozen vegetables. Wattie's(R) in New Zealand also grew sales in soups, beans and spaghetti meals through innovative recipes and strong trade support. Operating income decreased 5.8%, primarily due to reduced pricing in New Zealand. # # 4 MEETING WITH SECURITIES ANALYSTS - INTERNET BROADCASTS Heinz will host a conference call with security analysts today at 8:30 a.m. (Eastern time). The call will be webcast live on www.heinz.com and will be archived for playback beginning at 2 p.m. The call is available live via conference call at 1-800-377-5666 (listen only). It will be hosted by Art Winkleblack, Executive Vice President and Chief Financial Officer; Ed McMenamin, Senior Vice President - Finance & Corporate Controller; Casey Keller, Chairman & CEO - Heinz Italy and President - Heinz Southern Europe; and Jack Runkel, Vice President - Investor Relations. # # SAFE HARBOR PROVISIONS FOR FORWARD-LOOKING STATEMENTS: This press release contains forward-looking statements within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements reflect management's view of future events and financial performance. These statements are subject to risks, uncertainties, assumptions and other important factors, many of which may be beyond Heinz's control and could cause actual results to differ materially from those expressed or implied in these forward-looking statements. Uncertainties contained in such statements include, but are not limited to, sales, earnings, and volume growth, general economic, political, and industry conditions, competitive conditions, which affect, among other things, customer preferences and the pricing of products, production, energy and raw material costs, the need for product recalls, the ability to maintain favorable supplier relationships, achieving cost savings programs and gross margins, currency valuations and interest rate fluctuations, success of acquisitions, joint ventures, and divestitures, new product and packaging innovations, the effectiveness of advertising, marketing, and promotional programs, supply chain efficiency and cash flow initiatives, the impact of e-commerce and e-procurement, risks inherent in litigation and international operations, particularly the performance of business in hyperinflationary environments, changes in estimates in critical accounting judgments, the possibility of increased pension expense and contributions and other people-related costs, and other factors described in "Cautionary Statement Relevant to Forward-Looking Information" in the Company's Form 10-K for the fiscal year ended April 28, 2004, and the Company's subsequent filings with the Securities and Exchange Commission. The forward-looking statements are and will be based on management's then current views and assumptions regarding future events and speak only as of their dates. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by the securities laws. # # ABOUT HEINZ: H.J. Heinz Company is one of the world's leading producers and marketers of branded foods in ketchup, condiments, sauces, meals, soups, seafood, snacks and infant foods. Heinz is a global family of leading brands, including Heinz(R) Ketchup, sauces, soups, beans, pasta and infant foods (representing nearly one-third of total sales), Ore-Ida(R) french fries, Boston Market(R) and Smart Ones(R) meals and Plasmon(R) baby food. Heinz's 50 companies have number-one or number-two brands in 200 countries, showcased by Heinz(R) Ketchup, the world's favorite ketchup. Information on Heinz is available at www.heinz.com/news. # # # 5 CONTACT: Media: ----- Ted Smyth, 412-456-5780; Debbie Foster, 412-456-5778; Jack Kennedy, 412-456-5923; OR Investors: --------- Jack Runkel, 412-456-6034 6 H. J. HEINZ COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
First Quarter Ended ------------------------------------- July 28, 2004 July 30, 2003 FY2005 FY2004 ------------- ------------- Sales $ 2,003,026 $ 1,895,524 Cost of products sold 1,264,273 1,188,448 ----------- ----------- Gross profit 738,753 707,076 Selling, general and administrative expenses 399,099 358,000 ----------- ----------- Operating income 339,654 349,076 Interest income 6,661 5,765 Interest expense 53,346 52,237 Other income / (expense), net (6,383) (16,979) ----------- ----------- Income from continuing operations before income taxes 286,586 285,625 Provision for income taxes 91,750 98,800 ----------- ----------- Income from continuing operations 194,836 186,825 Income from discontinued operations, net of tax -- 27,200 ----------- ----------- Net income $ 194,836 $ 214,025 =========== =========== Income per common share - Diluted Continuing operations $ 0.55 $ 0.53 Discontinued operations -- 0.08 ----------- ----------- Net Income $ 0.55 $ 0.60 =========== =========== Average common shares outstanding - diluted 354,977 354,522 =========== =========== Income per common share - Basic Continuing operations $ 0.56 $ 0.53 Discontinued operations -- 0.08 ----------- ----------- Net Income $ 0.56 $ 0.61 =========== =========== Average common shares outstanding - basic 351,366 352,094 =========== =========== Cash dividends per share $ 0.2850 $ 0.2700 =========== ===========
Note: Fiscal 2004 includes special items. (Totals may not add due to rounding) 7 H. J. HEINZ COMPANY AND SUBSIDIARIES SEGMENT DATA
First Quarter Ended ------------------------------------- July 28, 2004 July 30, 2003 FY2005 FY2004 ------------- ------------- Net external sales: North American Consumer Products $ 488,832 $ 450,778 U.S. Foodservice 343,868 331,217 Europe 788,725 735,153 Asia/Pacific 294,272 290,007 Other Operating Entities 87,328 88,369 ----------- ----------- Consolidated Totals $ 2,003,026 $ 1,895,524 =========== =========== Intersegment revenues: North American Consumer Products $ 12,726 $ 14,077 U.S. Foodservice 4,242 3,532 Europe 4,672 4,535 Asia/Pacific 597 674 Other Operating Entities 390 499 Non-Operating (22,627) (23,317) ----------- ----------- Consolidated Totals $ -- $ -- =========== =========== Operating income (loss): North American Consumer Products $ 111,092 $ 106,262 U.S. Foodservice 54,340 49,200 Europe 154,091 171,316 Asia/Pacific 32,263 34,266 Other Operating Entities 14,326 11,238 Non-Operating (26,458) (23,206) ----------- ----------- Consolidated Totals $ 339,654 $ 349,076 =========== =========== Operating income (loss) excluding special items: North American Consumer Products $ 111,092 $ 107,758 U.S. Foodservice 54,340 51,700 Europe 154,091 146,517 Asia/Pacific 32,263 34,266 Other Operating Entities 14,326 11,238 Non-Operating (26,458) (21,748) ----------- ----------- Consolidated Totals $ 339,654 $ 329,731 =========== =========== The company's revenues are generated via the sale of products in the following categories: Ketchup, Condiments and Sauces $ 762,600 $ 742,295 Frozen Foods 461,540 392,709 Convenience Meals 450,869 427,180 Infant Feeding 178,951 186,582 Other 149,066 146,758 ----------- ----------- Total $ 2,003,026 $ 1,895,524 =========== ===========
8 H.J. HEINZ COMPANY AND SUBSIDIARIES SPECIAL ITEMS - FIRST QUARTER JULY 30, 2003 The Company reports its financial results in accordance with generally accepted accounting principles ("GAAP"). However, management believes that certain non-GAAP performance measures and ratios, used in managing the business, may provide users of this financial information with additional meaningful comparisons between current results and results in prior periods. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, the Company's reported results prepared in accordance with GAAP. The following table provides a reconciliation of the Company's reported results from continuing operations to the results excluding special items for the first quarter ended July 30, 2003:
First Quarter Ended July 30, 2003 --------------------------------------------------------------------- Net Gross Operating Per (in millions) Sales Profit Income Income Share --------- -------- -------- -------- ------- Reported results from continuing operations $ 1,895.5 $ 707.1 $ 349.1 $ 186.8 $ 0.53 Reorganization costs -- 4.0 9.5 6.2 0.02 Gain on divestiture of a business -- -- (28.8) (13.3) (0.04) --------- -------- -------- -------- ------- Results from continuing operations excluding special items $ 1,895.5 $ 711.1 $ 329.7 $ 179.8 $ 0.51 ========= ======== ======== ======== =======
(Note: Totals may not add due to rounding.) 9 H.J. HEINZ COMPANY AND SUBSIDIARIES Non-GAAP Performance Ratios The Company reports its financial results in accordance with generally accepted accounting principles ("GAAP"). However, management believes that certain non-GAAP performance measures and ratios, used in managing the business, may provide users of this financial information with additional meaningful comparisons between current results and results in prior periods. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, the Company's reported results prepared in accordance with GAAP. The following table provides the calculation of those non-GAAP performance ratios discussed in the Company's press release dated August 24, 2004:
NET DEBT CALCULATION (amounts in thousands) July 28, 2004 July 30, 2003 FY 2005 FY 2004 ------------- ------------- Short-term debt $ 13,026 $ 26,151 Long-term debt, including current portion 4,950,305 4,618,224 ----------- ----------- Total debt 4,963,331 4,644,375 Less: Value of interest rate swaps (95,423) (150,355) Cash and cash equivalents (1,173,637) (804,734) ----------- ----------- Net Debt $ 3,694,271 $ 3,689,286 ----------- ----------- Preferred stock -- 325,000 ----------- ----------- Net Debt including SFAS No. 150 reclassification* $ 3,694,271 $ 4,014,286 =========== ===========
* The adoption of SFAS No. 150 by the Company in the second quarter of Fiscal 2004 required the prospective classification of Heinz Finance Company's $325 million of mandatorily redeemable preferred shares from minority interest to long-term debt. The prior period calculation of net debt includes the effects of this reclassification in order to provide more meaningful comparisons with the current period.
OPERATING FREE CASH FLOW CALCULATION (amounts in thousands) First Quarter Ended ------------------------------- July 28, 2004 July 30, 2003 FY 2005 FY 2004 ------------- ------------- Cash provided by operating activities $ 186,180 $ 265,936 Capital expenditures (38,440) (29,597) --------- --------- Operating Free Cash Flow $ 147,740 $ 236,339 ========= =========
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