-----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, Dh0VPErdYZHtUdvwg6gRcbRW2yM1qB7qFNYL61ge++Vu6B6RJwzslztxfH3Xwzuj G2rFEeXx3lHNRwlX34aU/Q== 0000950152-05-001612.txt : 20050301 0000950152-05-001612.hdr.sgml : 20050301 20050228185539 ACCESSION NUMBER: 0000950152-05-001612 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 15 CONFORMED PERIOD OF REPORT: 20050126 FILED AS OF DATE: 20050301 DATE AS OF CHANGE: 20050228 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HEINZ H J CO CENTRAL INDEX KEY: 0000046640 STANDARD INDUSTRIAL CLASSIFICATION: CANNED, FROZEN & PRESERVED FRUIT, VEG & FOOD SPECIALTIES [2030] IRS NUMBER: 250542520 STATE OF INCORPORATION: PA FISCAL YEAR END: 0430 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-03385 FILM NUMBER: 05647452 BUSINESS ADDRESS: STREET 1: 600 GRANT ST CITY: PITTSBURGH STATE: PA ZIP: 15219 BUSINESS PHONE: 4124565700 MAIL ADDRESS: STREET 1: P O BOX 57 STREET 2: P O BOX 57 CITY: PITTSBURGH STATE: PA ZIP: 15230 10-Q 1 j1227701e10vq.txt H.J. HEINZ COMPANY 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JANUARY 26, 2005 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _______________ TO _______________ FOR THE NINE MONTHS ENDED JANUARY 26, 2005 COMMISSION FILE NUMBER 1-3385 H. J. HEINZ COMPANY (Exact name of registrant as specified in its charter) PENNSYLVANIA 25-0542520 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 600 GRANT STREET, PITTSBURGH, PENNSYLVANIA 15219 (Address of Principal Executive Offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (412) 456-5700 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such requirements for the past 90 days. Yes X No __ Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes X No __ The number of shares of the Registrant's Common Stock, par value $0.25 per share, outstanding as of January 31, 2005 was 350,060,868 shares. PART I--FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS H. J. HEINZ COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME
Third Quarter Ended ----------------------------------- January 26, 2005 January 28, 2004 FY 2005 FY 2004 ---------------- ---------------- (Unaudited) (In Thousands, Except per Share Amounts) Sales....................................................... $2,261,219 $2,097,181 Cost of products sold....................................... 1,441,306 1,317,934 ---------- ---------- Gross profit................................................ 819,913 779,247 Selling, general and administrative expenses................ 490,345 423,880 ---------- ---------- Operating income............................................ 329,568 355,367 Interest income............................................. 7,534 5,588 Interest expense............................................ 60,880 53,725 Asset impairment charges for cost and equity investments.... 73,842 -- Other expense, net.......................................... 1,671 5,095 ---------- ---------- Income from continuing operations before income taxes....... 200,709 302,135 Provision for income taxes.................................. 62,189 99,898 ---------- ---------- Income from continuing operations........................... 138,520 202,237 Income from discontinued operations, net of tax............. 13,891 -- ---------- ---------- Net income.................................................. $ 152,411 $ 202,237 ========== ========== Income per common share Diluted Continuing operations.................................. $ 0.39 $ 0.57 Discontinued operations................................ 0.04 -- ---------- ---------- Net income........................................... $ 0.43 $ 0.57 ========== ========== Average common shares outstanding--diluted................ 353,842 354,254 ========== ========== Basic Continuing operations.................................. $ 0.40 $ 0.58 Discontinued operations................................ 0.04 -- ---------- ---------- Net income........................................... $ 0.44 $ 0.58 ========== ========== Average common shares outstanding--basic.................. 350,357 351,725 ========== ========== Cash dividends per share.................................... $ 0.285 $ 0.27 ========== ==========
See Notes to Condensed Consolidated Financial Statements. ------------------ 2 H. J. HEINZ COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME
Nine Months Ended ----------------------------------- January 26, 2005 January 28, 2004 FY 2005 FY 2004 ---------------- ---------------- (Unaudited) (In Thousands, Except per Share Amounts) Sales....................................................... $6,463,805 $6,083,166 Cost of products sold....................................... 4,105,125 3,815,625 ---------- ---------- Gross profit................................................ 2,358,680 2,267,541 Selling, general and administrative expenses................ 1,346,010 1,214,063 ---------- ---------- Operating income............................................ 1,012,670 1,053,478 Interest income............................................. 20,178 15,901 Interest expense............................................ 170,826 160,254 Asset impairment charges for cost and equity investments.... 73,842 -- Other expense, net.......................................... 10,831 35,019 ---------- ---------- Income from continuing operations before income taxes....... 777,349 874,106 Provision for income taxes.................................. 246,714 293,557 ---------- ---------- Income from continuing operations........................... 530,635 580,549 Income from discontinued operations, net of tax............. 15,577 27,200 ---------- ---------- Net income.................................................. $ 546,212 $ 607,749 ========== ========== Income per common share Diluted Continuing operations.................................. $ 1.50 $ 1.64 Discontinued operations................................ 0.04 0.08 ---------- ---------- Net income........................................... $ 1.54 $ 1.72 ========== ========== Average common shares outstanding--diluted................ 353,842 354,254 ========== ========== Basic Continuing operations.................................. $ 1.51 $ 1.65 Discontinued operations................................ 0.04 0.08 ---------- ---------- Net income........................................... $ 1.56 $ 1.73 ========== ========== Average common shares outstanding--basic.................. 350,357 351,725 ========== ========== Cash dividends per share.................................... $ 0.855 $ 0.81 ========== ==========
See Notes to Condensed Consolidated Financial Statements. ------------------ 3 H. J. HEINZ COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS
January 26, 2005 April 28, 2004* FY 2005 FY 2004 ---------------- --------------- (Unaudited) (Thousands of Dollars) ASSETS Current Assets: Cash and cash equivalents................................... $ 834,805 $1,180,039 Receivables, net............................................ 1,073,592 1,093,155 Inventories................................................. 1,394,383 1,156,932 Prepaid expenses............................................ 204,824 165,177 Other current assets........................................ 23,842 15,493 ---------- ---------- Total current assets................................... 3,531,446 3,610,796 ---------- ---------- Property, plant and equipment............................... 3,954,016 3,727,224 Less accumulated depreciation............................... 1,828,456 1,669,938 ---------- ---------- Total property, plant and equipment, net............... 2,125,560 2,057,286 ---------- ---------- Goodwill.................................................... 2,061,009 1,959,914 Trademarks, net............................................. 672,936 643,901 Other intangibles, net...................................... 152,551 149,920 Other non-current assets.................................... 1,409,365 1,455,372 ---------- ---------- Total other non-current assets......................... 4,295,861 4,209,107 ---------- ---------- Total assets........................................... $9,952,867 $9,877,189 ========== ==========
* Summarized from audited fiscal year 2004 balance sheet. See Notes to Condensed Consolidated Financial Statements. ------------------ 4 H. J. HEINZ COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS
January 26, 2005 April 28, 2004* FY 2005 FY 2004 ---------------- --------------- (Unaudited) (Thousands of Dollars) LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Short-term debt............................................. $ 34,102 $ 11,434 Portion of long-term debt due within one year............... 67,725 425,016 Accounts payable............................................ 974,217 1,063,113 Salaries and wages.......................................... 43,688 50,101 Accrued marketing........................................... 213,055 230,495 Accrued interest............................................ 98,739 81,473 Other accrued liabilities................................... 253,662 280,123 Income taxes................................................ 129,745 327,313 ---------- ---------- Total current liabilities.............................. 1,814,933 2,469,068 ---------- ---------- Long-term debt.............................................. 4,689,436 4,537,980 Deferred income taxes....................................... 354,235 313,343 Non-pension postretirement benefits......................... 196,409 192,599 Other liabilities and minority interest..................... 576,964 470,010 ---------- ---------- Total long-term liabilities............................ 5,817,044 5,513,932 Shareholders' Equity: Capital stock............................................... 107,866 107,868 Additional capital.......................................... 418,087 403,043 Retained earnings........................................... 5,103,878 4,856,918 ---------- ---------- 5,629,831 5,367,829 Less: Treasury stock at cost (81,038,982 shares at January 26, 2005 and 79,139,249 shares at April 28, 2004).......... 3,039,292 2,927,839 Unearned compensation..................................... 32,068 32,275 Accumulated other comprehensive loss...................... 237,581 513,526 ---------- ---------- Total shareholders' equity............................. 2,320,890 1,894,189 ---------- ---------- Total liabilities and shareholders' equity............. $9,952,867 $9,877,189 ========== ==========
* Summarized from audited fiscal year 2004 balance sheet. See Notes to Condensed Consolidated Financial Statements. ------------------ 5 H. J. HEINZ COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended ----------------------------------- January 26, 2005 January 28, 2004 FY 2005 FY 2004 ---------------- ---------------- (Unaudited) (Thousands of Dollars) Cash Flows from Operating Activities: Net income................................................ $ 546,212 $ 607,749 Income from discontinued operations, net of tax........... (15,577) (27,200) ---------- ---------- Income from continuing operations......................... 530,635 580,549 Adjustments to reconcile net income to cash provided by operating activities: Depreciation............................................ 168,807 153,944 Amortization............................................ 15,893 15,836 Deferred tax provision.................................. 65,970 48,427 Gain on sale of the Northern Europe bakery business..... -- (26,338) Asset impairment charges for cost and equity investments........................................... 73,842 -- Tax pre-payment in Europe............................... (124,886) -- Other items, net........................................ 31,850 25,106 Changes in current assets and liabilities, excluding effects of acquisitions and divestitures: Receivables........................................... 130,463 168,842 Inventories........................................... (165,749) (45,758) Prepaid expenses and other current assets............. (35,633) (50,175) Accounts payable...................................... (140,777) (125,864) Accrued liabilities................................... (67,835) (68,863) Income taxes.......................................... 23,566 141,347 ---------- ---------- Cash provided by operating activities.............. 506,146 817,053 ---------- ---------- Cash Flows from Investing Activities: Capital expenditures.................................... (131,024) (119,817) Acquisitions, net of cash acquired...................... (38,121) (75,368) Proceeds from divestitures.............................. 39,878 60,467 Other items, net........................................ 4,135 14,775 ---------- ---------- Cash used for investing activities................. (125,132) (119,943) ---------- ---------- Cash Flows from Financing Activities: Payments on long-term debt.............................. (418,466) (73,988) Payments on commercial paper and short-term debt, net... (24,128) (143,288) Dividends............................................... (299,252) (284,908) Purchases of treasury stock............................. (169,016) (122,730) Exercise of stock options............................... 59,337 66,762 Other items, net........................................ 11,323 12,467 ---------- ---------- Cash used for financing activities................. (840,202) (545,685) ---------- ---------- Effect of exchange rate changes on cash and cash equivalents............................................... 85,758 63,009 Effect of discontinued operations........................... 28,196 -- ---------- ---------- Net increase/(decrease) in cash and cash equivalents........ (345,234) 214,434 Cash and cash equivalents at beginning of year.............. 1,180,039 801,732 ---------- ---------- Cash and cash equivalents at end of period.................. $ 834,805 $1,016,166 ========== ==========
See Notes to Condensed Consolidated Financial Statements. ------------------ 6 H. J. HEINZ COMPANY AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (1) BASIS OF PRESENTATION The interim condensed consolidated financial statements of H. J. Heinz Company, together with its subsidiaries (collectively referred to as the "Company"), are unaudited. In the opinion of management, all adjustments, which are of a normal and recurring nature, except those which have been disclosed elsewhere in this Quarterly Report on Form 10-Q, necessary for a fair statement of the results of operations of these interim periods have been included. The results for interim periods are not necessarily indicative of the results to be expected for the full fiscal year due to the seasonal nature of the Company's business. Certain prior year amounts have been reclassified in order to conform with the Fiscal 2005 presentation. These statements should be read in conjunction with the Company's consolidated financial statements and related notes, and management's discussion and analysis of financial condition and results of operations which appear in the Company's Annual Report on Form 10-K for the year ended April 28, 2004. (2) SPECIAL ITEMS ASSET IMPAIRMENTS The Company holds an equity investment in The Hain Celestial Group, Inc. ("Hain"), a rapid growth natural, specialty and snack food company. Hain shares have been trading at less than 80% of Heinz's carrying value since late January 2004. Due to the length of time and the amount that Hain stock has traded below the Company's basis, the Company has determined that the decline is other-than-temporary as defined by Accounting Principles Board Opinion No. 18 and as a result, has recognized a $64.5 million non-cash impairment charge during the third quarter of Fiscal 2005. The charge reduced Heinz's carrying value in Hain to fair market value as of January 26, 2005, with no resulting impact on cash flows. Heinz currently owns approximately six million shares of Hain stock at a new basis of $19.86 per share as of January 26, 2005. In the future, should the market value of Hain common stock decline and remain below current market value for a substantial time, the Company may need to record additional writedowns of its investment in Hain. The Company also recorded a $9.3 million non-cash charge in the third quarter of Fiscal 2005 to recognize the impairment of a cost-basis investment in a grocery industry sponsored e-commerce business venture. There was no tax benefit associated with these impairment charges. DISCONTINUED OPERATIONS Net income from discontinued operations for the three and nine months ended January 26, 2005 was $13.9 million and $15.6 million, respectively, and for the nine months ended January 28, 2004 was $27.2 million, and reflects the favorable settlement of tax liabilities related to the businesses spun-off to Del Monte on December 20, 2002. DIVESTITURES During the first quarter of Fiscal 2004, the Company sold its bakery business in Northern Europe for $57.9 million. The transaction resulted in a pretax gain of $26.3 million ($13.3 million after tax), which was recorded as a component of selling, general and administrative expenses ("SG&A"). REORGANIZATION COSTS During the first quarter of Fiscal 2004, the Company recognized $5.5 million pretax ($3.4 million after tax) of reorganization costs. These costs were recorded as a component of SG&A and 7 were primarily due to employee termination and severance costs to reduce overhead costs at its North American operations following the Fiscal 2003 spin-off transaction with Del Monte. Additionally, during the first quarter of Fiscal 2004, the Company wrote down pizza crust assets in the United Kingdom totaling $4.0 million pretax ($2.8 million after tax) which has been included as a component of cost of products sold. (3) INVENTORIES The composition of inventories at the balance sheet dates was as follows:
January 26, 2005 April 28, 2004 ---------------- -------------- (Thousands of Dollars) Finished goods and work-in-process........................ $1,048,964 $ 897,778 Packaging material and ingredients........................ 345,419 259,154 ---------- -------------- $1,394,383 $ 1,156,932 ========== ==============
(4) GOODWILL AND OTHER INTANGIBLE ASSETS Changes in the carrying amount of goodwill for the nine months ended January 26, 2005, by reportable segment, are as follows:
North American Other Consumer U.S. Asia/ Operating Products Foodservice Europe Pacific Entities Total -------- ----------- -------- -------- --------- ---------- (Thousands of Dollars) Balance at April 28, 2004........ $923,939 $179,544 $670,935 $165,646 $19,850 $1,959,914 Acquisition...................... -- 6,558 1,541 27,062 -- 35,161 Purchase accounting reclassifications.............. (10,304) (1,185) -- (298) -- (11,787) Disposal......................... (2,548) -- -- -- (483) (3,031) Translation adjustments.......... 8,066 -- 57,597 20,431 1,506 87,600 Impairment....................... -- -- -- -- (6,848) (6,848) -------- -------- -------- -------- ------- ---------- Balance at January 26, 2005...... $919,153 $184,917 $730,073 $212,841 $14,025 $2,061,009 ======== ======== ======== ======== ======= ==========
During the second quarter of Fiscal 2005 based on preliminary valuation results, purchase accounting adjustments were recorded to reclassify goodwill to trademarks and other intangibles related to the Fiscal 2004 acquisition of Unifine Richardson B.V., within the North American Consumer Products segment. The Company expects to finalize the purchase price allocation related to this acquisition in the fourth quarter of Fiscal 2005. In addition, during the third quarter of Fiscal 2005 the Company acquired a controlling interest in Shanghai LongFong Foods, a maker of frozen Chinese snacks and desserts. The Company expects to finalize the purchase price allocation related to this acquisition in Fiscal 2006. The above impairment, which was classified within cost of products sold, was due to a deterioration of current and expected operating results of a consolidated joint venture following a recall in Fiscal 2004. The Company reached an agreement with third parties, the proceeds of which were offset by the impairment and other damages incurred to date. The annual impairment tests are performed in the fourth quarter of each fiscal year unless events suggest an impairment may have occurred in the interim. 8 Trademarks and other intangible assets at January 26, 2005 and April 28, 2004, subject to amortization expense, are as follows:
January 26, 2005 April 28, 2004 ------------------------------- ------------------------------- Accum Accum Gross Amort Net Gross Amort Net -------- --------- -------- -------- --------- -------- (Thousands of Dollars) Trademarks............................ $188,130 $ (53,854) $134,276 $188,927 $ (50,505) $138,422 Licenses.............................. 208,186 (122,919) 85,267 208,186 (118,504) 89,682 Other................................. 135,437 (68,153) 67,284 123,394 (63,156) 60,238 -------- --------- -------- -------- --------- -------- $531,753 $(244,926) $286,827 $520,507 $(232,165) $288,342 ======== ========= ======== ======== ========= ========
Amortization expense for trademarks and other intangible assets subject to amortization was $11.3 million and $11.6 million for the nine months ended January 26, 2005 and January 28, 2004, respectively. Based upon the amortizable intangible assets recorded on the balance sheet at January 26, 2005, annual amortization expense for each of the next five years is estimated to be approximately $15 million. Intangible assets not subject to amortization at January 26, 2005 and April 28, 2004 were $538.7 million and $505.5 million, respectively, and consisted solely of trademarks. (5) INCOME TAXES The provision for income taxes consists of provisions for federal, state and foreign income taxes. The Company operates in an international environment with significant operations in various locations outside the U.S. Accordingly, the consolidated income tax rate is a composite rate reflecting the earnings in the various locations and the applicable tax rates. The reduction in the effective tax rate is attributable to changes to the capital structure in certain foreign subsidiaries, tax credits resulting from tax planning associated with a change in certain foreign tax legislation, and the settlement of tax audits, partially offset by impairment charges for Hain and an e-commerce business venture for which no tax benefit can currently be recorded. The American Jobs Creation Act ("the AJCA") provides a deduction of 85% of certain foreign earnings repatriation. The Company may elect to apply this provision in either Fiscal 2005 or in Fiscal 2006. The Company does not expect to be able to complete its evaluation of the effects of the repatriation provisions until after Congress and the Treasury Department enacts needed technical corrections and provides additional clarifying language on key elements of the provision. The Company expects to complete its evaluation within a reasonable period of time after these events occur. The range of amounts that the Company is considering for repatriation under this provision is between zero and $700 million. The related potential range of income tax (assuming enactment of needed technical corrections) is between zero and $40 million. The AJCA provides a deduction calculated as a percentage of qualified income from manufacturing in the United States. The percentage increases from 3% to 9% over a 6 year period beginning with the Company's 2006 fiscal year. In December 2004, the FASB issued a new staff position providing for this deduction to be treated as a special deduction, as opposed to a tax rate reduction, in accordance with SFAS No. 109. The benefit of this deduction is not expected to have a material impact on the Company's effective tax rate in Fiscal 2006. (6) STOCK-BASED COMPENSATION PLANS Stock-based compensation is accounted for by using the intrinsic value-based method in accordance with Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees." 9 The Company has adopted the disclosure-only provisions of SFAS No. 123, "Accounting for Stock-Based Compensation." Accordingly, no compensation cost has been recognized for the Company's stock option plans. If the Company had elected to recognize compensation cost based on the fair value of the options granted at grant date as prescribed by SFAS No. 123, income and income per common share from continuing operations would have been as follows:
Third Quarter Ended Nine Months Ended ----------------------------------- ----------------------------------- January 26, 2005 January 28, 2004 January 26, 2005 January 28, 2004 ---------------- ---------------- ---------------- ---------------- (In Thousands, Except per Share Amounts) Income from continuing operations: As reported........ $138,520 $202,237 $530,635 $580,549 Fair value-based expense, net of tax.............. 4,360 7,834 15,191 20,830 -------- -------- -------- -------- Pro forma.......... $134,160 $194,403 $515,444 $559,719 ======== ======== ======== ======== Income per common share from continuing operations: Diluted As reported...... $ 0.39 $ 0.57 $ 1.50 $ 1.64 Pro forma........ $ 0.38 $ 0.55 $ 1.46 $ 1.58 Basic As reported...... $ 0.40 $ 0.58 $ 1.51 $ 1.65 Pro forma........ $ 0.38 $ 0.55 $ 1.47 $ 1.59
The weighted-average fair value of options granted was $9.33 and $5.91 per share in the nine months ended January 26, 2005 and January 28, 2004, respectively. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions:
Nine Months Ended ------------------------- January 26, January 28, 2005 2004 ----------- ----------- Dividend yield.............................................. 3.0% 3.3% Volatility.................................................. 25.4% 20.2% Risk-free interest rate..................................... 4.4% 3.7% Expected term (years)....................................... 7.9 6.5
During the first nine months of Fiscal 2005, the Company granted 325,426 restricted stock units to employees. The fair value of restricted stock units awarded to employees is recorded as unearned compensation and is shown as a separate component of shareholders' equity. Unearned compensation is amortized over the vesting period for the particular grant, and is recognized as a component of general and administrative expenses. The Company recognized amortization (net of forfeitures) related to unearned compensation of $0.4 million and $4.3 million for the third quarter ended January 26, 2005 and January 28, 2004, respectively, and $9.0 million and $10.5 million for the nine months ended January 26, 2005 and January 28, 2004, respectively. 10 (7) PENSIONS AND OTHER POST RETIREMENT BENEFITS The components of net periodic benefit cost are as follows:
Third Quarter Ended ------------------------------------------------------------------------- January 26, 2005 January 28, 2004 January 26, 2005 January 28, 2004 ---------------- ---------------- ---------------- ---------------- Pension Benefits Post Retirement Benefits ----------------------------------- ----------------------------------- (Thousands of Dollars) Service cost................. $ 12,351 $ 10,879 $1,376 $1,207 Interest cost................ 31,352 29,558 3,971 3,831 Expected return on plan assets..................... (42,903) (38,595) -- -- Amortization of net initial asset...................... (220) (204) -- -- Amortization of prior service cost....................... 2,343 2,213 (757) (569) Amortization of unrecognized loss....................... 14,372 10,463 1,306 948 -------- -------- ------ ------ Net periodic benefit cost.... $ 17,295 $ 14,314 $5,896 $5,417 ======== ======== ====== ======
Nine Months Ended ------------------------------------------------------------------------- January 26, 2005 January 28, 2004 January 26, 2005 January 28, 2004 ---------------- ---------------- ---------------- ---------------- Pension Benefits Post Retirement Benefits ----------------------------------- ----------------------------------- (Thousands of Dollars) Service cost................. $ 34,796 $ 31,329 $ 4,111 $ 3,600 Interest cost................ 91,545 85,881 12,119 11,454 Expected return on plan assets..................... (125,398) (112,104) -- -- Amortization of net initial asset...................... (642) (584) -- -- Amortization of prior service cost....................... 6,903 6,416 (2,269) (1,719) Amortization of unrecognized loss....................... 41,953 30,473 4,373 2,852 Loss/(gain) due to curtailment, settlement and special termination benefits................... -- (2,348) -- 380 --------- --------- ------- ------- Net periodic benefit cost.... $ 49,157 $ 39,063 $18,334 $16,567 ========= ========= ======= =======
As of January 26, 2005, the Company has contributed $29.8 million to fund its obligations under these plans. As previously disclosed, the Company expects to make combined cash contributions of approximately $40 million in Fiscal 2005. (8) RECENTLY ISSUED ACCOUNTING STANDARDS In December 2004, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standard ("SFAS") No. 123(R), "Share-Based Payment", which revises SFAS No. 123, "Accounting for Stock-Based Compensation" and supersedes APB Opinion No. 25, "Accounting for Stock Issued to Employees". This Statement focuses primarily on accounting for transactions in which an entity obtains employee services in share-based payment transactions. This Statement requires an entity to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. That cost will be recognized over the period during which an employee is 11 required to provide service in exchange for the reward. The Company is required to adopt this Statement in the second quarter of Fiscal 2006; however, early adoption of this Statement is encouraged. The Company is currently evaluating the timing and method of the adoption of this Statement. In December 2004, the FASB issued FASB Staff Position ("FSP") No. FAS 109-2, "Accounting and Disclosure Guidance for the Foreign Earnings Repatriation Provision within the American Jobs Creation Act of 2004." The FSP provided guidance on the accounting and disclosures for the temporary repatriation provision of the AJCA. The Company has adopted the disclosure provisions of the FSP which apply to entities that have not yet completed their evaluation of the repatriation provision, and will expand its disclosures in accordance with the FSP upon completion of the final evaluation. In November 2004, the FASB issued SFAS No. 151, "Inventory Costs, an amendment of ARB No. 43, Chapter 4". This Statement is meant to eliminate any narrow differences existing between the FASB standards and the standards issued by the International Accounting Standards Board by clarifying that any abnormal idle facility expense, freight, handling costs and spoilage be recognized as current-period charges. This Statement is required to be adopted by the Company in the first quarter of Fiscal 2007; however, early application is permitted. The Company does not expect the adoption of this Statement to have a material impact on results of operations, financial position or cash flows. In December 2003, the Medicare Prescription Drug, Improvement and Modernization Act of 2003 ("the Act") was signed into law. The Act introduced a prescription drug benefit under Medicare (Medicare Part D) and a federal subsidy to sponsors of retirement health care plans that provide a benefit that is at least actuarially equivalent to Medicare Part D. In accordance with FASB Staff Position 106-1, the Company elected to defer recognizing the effects of the Act on the accounting for its retirement health care plans in Fiscal 2004. In May 2004, the FASB issued Staff Position 106-2 providing final guidance on the accounting for benefits provided by the Act. Based on the preliminary regulations, management believes that certain drug benefits offered under the postretirement health care plans will qualify for the subsidy under Medicare Part D. Accordingly, the Company adopted Staff Position 106-2 as of its second quarter reporting period beginning July 29, 2004 and has performed a remeasurement of its plan obligations as of that date. The reduction in the benefit obligation of approximately $18.8 million has been reflected as an actuarial gain. The total reduction in benefit cost for Fiscal 2005 is $2.3 million, comprised of $0.9 million of interest cost, $0.1 million of service cost, and $1.4 million reduction in unrecognized loss amortization, recognized on a pro-rata basis. In January 2005 final Medicare prescription drug rules were issued. Although the Company is currently evaluating these regulations, management believes the impact of the Act based upon the final rules will not differ significantly from the impact recorded in the second quarter of Fiscal 2005. In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity". This statement affects the classification, measurement and disclosure requirements of certain freestanding financial instruments including mandatorily redeemable shares. SFAS No. 150 was effective for the Company for the second quarter of Fiscal 2004. The adoption of SFAS No. 150 required the prospective classification of H.J. Heinz Finance Company's $325 million of mandatorily redeemable preferred shares from minority interest to long-term debt and the $5.1 million quarterly preferred dividend from other expenses to interest expense beginning in the second quarter ended October 29, 2003, with no resulting effect on the Company's profitability. 12 (9) SEGMENTS The Company's reportable segments are primarily organized by geographical area. The composition of segments and measure of segment profitability is consistent with that used by the Company's management. Descriptions of the Company's reportable segments are as follows: North American Consumer Products--This segment manufactures, markets and sells ketchup, condiments, sauces, pasta meals, and frozen potatoes, entrees, snacks, and appetizers to the grocery channels in the United States of America and includes our Canadian business. U.S. Foodservice--This segment manufactures, markets and sells branded and customized products to commercial and non-commercial food outlets and distributors in the United States of America including ketchup, condiments, sauces, and frozen soups and desserts. Europe--This segment includes the Company's operations in Europe and sells products in all of the Company's core categories. Asia/Pacific--This segment includes the Company's operations in New Zealand, Australia, Japan, China, South Korea, Indonesia, Singapore, and Thailand. This segment's operations include products in all of the Company's core categories. Other Operating Entities--This segment includes the Company's operations in Africa, India, Latin America, the Middle East, and other areas that sell products in all of the Company's core categories. The Company's management evaluates performance of segments based on several factors including net sales, operating income excluding special items, and the use of capital resources. Intersegment revenues are accounted for at current market values. Items below the operating income line of the consolidated statements of income are not presented by segment, since they are excluded from the measure of segment profitability reviewed by the Company's management. The following table presents information about the Company's reportable segments:
Third Quarter Ended Nine Months Ended ----------------------------------- ----------------------------------- January 26, 2005 January 28, 2004 January 26, 2005 January 28, 2004 FY 2005 FY 2004 FY 2005 FY 2004 ---------------- ---------------- ---------------- ---------------- (Thousands of Dollars) Net external sales: North American Consumer Products.......... $ 579,039 $ 521,753 $1,633,798 $1,494,413 U.S. Foodservice..... 374,835 353,884 1,098,535 1,056,993 Europe............... 884,771 827,451 2,488,267 2,337,255 Asia/Pacific......... 323,865 301,885 962,924 926,661 Other Operating Entities.......... 98,709 92,208 280,281 267,844 ---------- ---------- ---------- ---------- Consolidated Totals............ $2,261,219 $2,097,181 $6,463,805 $6,083,166 ========== ========== ========== ==========
13
Third Quarter Ended Nine Months Ended ----------------------------------- ----------------------------------- January 26, 2005 January 28, 2004 January 26, 2005 January 28, 2004 FY 2005 FY 2004 FY 2005 FY 2004 ---------------- ---------------- ---------------- ---------------- (Thousands of Dollars) Intersegment revenues: North American Consumer Products.......... $ 12,773 $ 13,449 $ 38,464 $ 42,429 U.S. Foodservice..... 7,130 3,747 16,711 10,378 Europe............... 4,455 2,729 13,621 10,352 Asia/Pacific......... 825 581 2,435 2,158 Other Operating Entities.......... 434 609 1,192 1,727 Non-Operating (a).... (25,617) (21,115) (72,423) (67,044) ---------- ---------- ---------- ---------- Consolidated Totals............ $ -- $ -- $ -- $ -- ========== ========== ========== ========== Operating income (loss): North American Consumer Products.......... $ 148,352 $ 126,534 $ 394,421 $ 359,265 U.S. Foodservice..... 54,378 54,658 166,682 161,308 Europe............... 128,517 163,147 408,088 479,130 Asia/Pacific......... 32,599 34,026 107,720 112,029 Other Operating Entities.......... 2,587 2,554 25,075 22,184 Non-Operating (a).... (36,865) (25,552) (89,316) (80,438) ---------- ---------- ---------- ---------- Consolidated Totals............ $ 329,568 $ 355,367 $1,012,670 $1,053,478 ========== ========== ========== ========== Operating income (loss) excluding special items (b): North American Consumer Products.......... $ 148,352 $ 126,534 $ 394,421 $ 360,761 U.S. Foodservice..... 54,378 54,658 166,682 163,808 Europe............... 128,517 163,147 408,088 454,331 Asia/Pacific......... 32,599 34,026 107,720 112,029 Other Operating Entities.......... 2,587 2,554 25,075 22,184 Non-Operating (a).... (36,865) (25,552) (89,316) (78,980) ---------- ---------- ---------- ---------- Consolidated Totals............ $ 329,568 $ 355,367 $1,012,670 $1,034,133 ========== ========== ========== ==========
-------------------- (a) Includes corporate overhead, intercompany eliminations and charges not directly attributable to operating segments. (b) Nine Months ended January 28, 2004--Excludes the gain on disposal of the bakery business in Northern Europe and costs to reduce overhead of the remaining businesses as follows: North American Consumer Products $1.5 million, U.S. Foodservice $2.5 million, Europe $(24.8) million, and Non-Operating $1.5 million. The results for the nine months ended January 26, 2005 were impacted by a $21.1 million charge for trade promotion spending for the Italian infant nutrition business. The charge relates to an under-accrual in fiscal years 2001, 2002 and 2003. The amount of the charge that corresponds to each of the fiscal years 2001, 2002 and 2003 is less than 1% of net income for each of those years. 14 The Company's revenues are generated via the sale of products in the following categories:
Third Quarter Ended Nine Months Ended ----------------------------------- ----------------------------------- January 26, 2005 January 28, 2004 January 26, 2005 January 28, 2004 FY 2005 FY 2004 FY 2005 FY 2004 ---------------- ---------------- ---------------- ---------------- (Thousands of Dollars) Ketchup, Condiments and Sauces............... $ 793,614 $ 735,347 $2,356,649 $2,229,197 Frozen Foods........... 594,690 526,150 1,599,280 1,402,629 Convenience Meals...... 515,215 464,000 1,446,515 1,349,012 Infant Foods........... 220,431 222,652 601,819 629,769 Other.................. 137,269 149,032 459,542 472,559 ---------- ---------- ---------- ---------- Total............. $2,261,219 $2,097,181 $6,463,805 $6,083,166 ========== ========== ========== ==========
(10) NET INCOME PER COMMON SHARE The following are reconciliations of income to income applicable to common stock and the number of common shares outstanding used to calculate basic EPS to those shares used to calculate diluted EPS:
Third Quarter Ended Nine Months Ended ----------------------------------- ----------------------------------- January 26, 2005 January 28, 2004 January 26, 2005 January 28, 2004 FY 2005 FY 2004 FY 2005 FY 2004 ---------------- ---------------- ---------------- ---------------- (In Thousands) Income from continuing operations........... $138,520 $202,237 $530,635 $580,549 Preferred dividends.... 4 4 12 12 -------- -------- -------- -------- Income from continuing operations applicable to common stock...... $138,516 $202,233 $530,623 $580,537 ======== ======== ======== ======== Average common shares outstanding--basic.. 350,357 351,725 350,357 351,725 Effect of dilutive securities: Convertible preferred stock........... 139 146 139 146 Stock options and restricted stock........... 3,346 2,383 3,346 2,383 -------- -------- -------- -------- Average common shares outstanding--diluted.. $353,842 $354,254 $353,842 $354,254 ======== ======== ======== ========
Stock options outstanding in the amounts of 16.1 million and 18.3 million were not included in the computation of diluted earnings per share for the nine months ended January 26, 2005 and January 28, 2004, respectively, because inclusion of these options would be antidilutive. 15 (11) COMPREHENSIVE INCOME
Third Quarter Ended Nine Months Ended ----------------------------------- ----------------------------------- January 26, 2005 January 28, 2004 January 26, 2005 January 28, 2004 FY 2005 FY 2004 FY 2005 FY 2004 ---------------- ---------------- ---------------- ---------------- (In Thousands) Net income........... $152,411 $202,237 $546,212 $607,749 Other comprehensive income: Foreign currency translation adjustments..... 88,534 207,546 282,233 383,956 Minimum pension liability adjustment...... (3,800) (28,613) (9,861) (53,632) Net deferred gains/(losses) on derivatives from periodic revaluations.... 1,493 (8,321) 27,227 (6,285) Net deferred (gains)/losses on derivatives reclassified to earnings........ (6,647) 936 (23,654) (6,400) -------- -------- -------- -------- Comprehensive income............. $231,991 $373,785 $822,157 $925,388 ======== ======== ======== ========
(12) DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES The Company operates internationally, with manufacturing and sales facilities in various locations around the world, and utilizes certain derivative financial instruments to manage its foreign currency, commodity price, and interest rate exposures. There have been no material changes in the Company's market risk during the nine months ended January 26, 2005. For additional information, refer to pages 23-24 of the Company's Annual Report on Form 10-K for the fiscal year ended April 28, 2004. As of January 26, 2005, the Company is hedging forecasted transactions for periods not exceeding two years. During the next 12 months, the Company expects $1.7 million of net deferred losses reported in accumulated other comprehensive loss to be reclassified to earnings. Hedge ineffectiveness related to cash flow hedges, which is reported in current period earnings as other income and expense, was not significant for the nine months ended January 26, 2005 and January 28, 2004. Amounts reclassified to earnings because the hedged transaction was no longer expected to occur were not significant for the nine months ended January 26, 2005 and January 28, 2004. The Company uses certain foreign currency debt instruments as net investment hedges of foreign operations. Losses of $32.2 million (net of income taxes of $18.9 million), which represented effective hedges of net investments, were reported as a component of accumulated other comprehensive loss within unrealized translation adjustment for the nine months ended January 26, 2005. The Company enters into certain derivative contracts in accordance with its risk management strategy that do not meet the criteria for hedge accounting. As of January 26, 2005, the Company maintained forward contracts with a total notional amount of $205.4 million that 16 do not qualify as hedges, but which have the impact of largely mitigating volatility associated with earnings from foreign subsidiaries. These forward contracts are accounted for on a full mark-to-market basis through current earnings and mature during the fourth quarter of Fiscal 2005. Net unrealized gains related to these contracts totaled $3.0 million at January 26, 2005. (13) INVESTMENTS AND UNCONSOLIDATED SUBSIDIARIES The consolidated financial statements include the accounts of the Company, and entities in which the Company maintains a controlling financial interest. Control is generally determined based on the majority ownership of an entity's voting interests. In certain situations, control is based on participation in the majority of an entity's economic risks and rewards. Investments in certain companies over which the Company exerts significant influence, but does not control the financial and operating decisions, are accounted for as equity method investments. The Company has no material investments in variable interest entities. Zimbabwe remains in a period of economic uncertainty. Should the current situation continue, the Company could experience disruptions and delays associated with its Zimbabwe operations. As of the end of November 2002, the Company deconsolidated its Zimbabwean operations and classified its remaining net investment of approximately $110 million as a cost investment included in other non-current assets on the consolidated balance sheets. Although the Company's business continues to operate profitably and it is able to source raw materials, the country's economic situation remains uncertain and there are currently government restrictions on the repatriation of earnings. The Company's ability to recover its investment could become impaired if the economic and political conditions continue to deteriorate. 17 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS SPECIAL ITEMS ASSET IMPAIRMENTS The Company holds an equity investment in The Hain Celestial Group, Inc. ("Hain"), a rapid growth natural, specialty and snack food company. Hain shares have been trading at less than 80% of Heinz's carrying value since late January 2004. Due to the length of time and the amount that Hain stock has traded below the Company's basis, the Company has determined that the decline is other-than-temporary as defined by Accounting Principles Board Opinion No. 18 and as a result, has recognized a $64.5 million non-cash impairment charge during the third quarter of Fiscal 2005. The charge reduced Heinz's carrying value in Hain to fair market value as of January 26, 2005, with no resulting impact on cash flows. Heinz currently owns approximately six million shares of Hain stock at a new basis of $19.86 per share as of January 26, 2005. In the future, should the market value of Hain common stock decline and remain below current market value for a substantial time, the Company may need to record additional writedowns of its investment in Hain. The Company also recorded a $9.3 million non-cash charge in the third quarter of Fiscal 2005 to recognize the impairment of a cost-basis investment in a grocery industry-sponsored e-commerce business venture. There was no tax benefit associated with these impairment charges. DISCONTINUED OPERATIONS Net income from discontinued operations for the three and nine months ended January 26, 2005 was $13.9 million and $15.6 million, respectively, and for the nine months ended January 28, 2004 was $27.2 million, and reflects the favorable settlement of tax liabilities related to the businesses spun-off to Del Monte on December 20, 2002. DIVESTITURES During the first quarter of Fiscal 2004, the Company sold its bakery business in Northern Europe for $57.9 million. The transaction resulted in a pretax gain of $26.3 million ($13.3 million after tax), which was recorded as a component of selling, general and administrative expenses ("SG&A"). REORGANIZATION COSTS During the first quarter of Fiscal 2004, the Company recognized $5.5 million pretax ($3.4 million after tax) of reorganization costs. These costs were recorded as a component of SG&A and were primarily due to employee termination and severance costs to reduce overhead costs at its North American operations following the Fiscal 2003 spin-off transaction with Del Monte. Additionally, during the first quarter of Fiscal 2004, the Company wrote down pizza crust assets in the United Kingdom totaling $4.0 million pretax ($2.8 million after tax) which has been included as a component of cost of products sold. THREE MONTHS ENDED JANUARY 26, 2005 AND JANUARY 28, 2004 RESULTS OF CONTINUING OPERATIONS Sales for the three months ended January 26, 2005 increased $164.0 million, or 7.8%, to $2.26 billion. Sales were favorably impacted by volume increases across the Company of 3.8% and exchange translation rates of 4.1%. The favorable volume impact is due to strong increases in the North American Consumer Products and U.S. Foodservice segments, as well as in our Australia and New Zealand businesses and in the European seafood business. Pricing decreased sales by 0.4% as improvements in the North American Consumer Products and U.S. Foodservice segments 18 were offset by declines in the Italian infant nutrition business related to its recent restage activities, increased promotional spending in the Netherlands and lower pricing in our Tegel poultry and Indonesian businesses. Acquisitions, net of divestitures, increased sales by 0.4%. Gross profit increased $40.7 million, or 5.2%, to $819.9 million. The gross profit margin decreased to 36.3% from 37.2%. The decrease in the gross profit margin is mainly due to increased commodity costs of approximately 1%, primarily in the U.S. and U.K. businesses, lower pricing of 0.4%, and unfavorable supply chain costs in the European seafood business. These decreases were partially offset by margin improvements in the U.S. Foodservice segment. The 5.2% increase in gross profit is primarily a result of higher volume and favorable exchange translation rates. SG&A increased $66.5 million, or 15.7%, to $490.3 million and increased as a percentage of sales to 21.7% from 20.2%. The increase as a percentage of sales is primarily due to increased General and Administrative expenses ("G&A") of approximately 1.0% and higher fuel and trucking costs of approximately 0.4%. The G&A expense increase is related primarily to increased employee-related costs and professional fees for various projects across the Company, including compliance work associated with Section 404 of the Sarbanes-Oxley Act, and litigation costs in Europe. Operating income decreased $25.8 million, or 7.3%, to $329.6 million. Total marketing support (recorded as a reduction of revenue or as a component of SG&A) increased $26.3 million, or 4.3%, to $643.1 million on a sales increase of 7.8%. Marketing support recorded as a reduction of revenue, typically deals and allowances, increased $25.7 million, or 4.7%, to $570.7 million. This increase is largely a result of foreign exchange translation rates and costs of the restage of the Italian infant nutrition business, partially offset by reduced trade promotion spending in the U.S. Consumer Products and U.K. businesses. Marketing support recorded as a component of SG&A increased $0.6 million, or 0.9%, to $72.4 million, driven by foreign exchange translation rates offset by reduced consumer spending in the European segment. Net interest expense increased $5.2 million, to $53.3 million largely due to higher average interest rates in Fiscal 2005 offset by the benefits of lower average net debt. Other expenses, net, decreased $3.4 million to $1.7 million. The quarter was also unfavorably impacted by a $64.5 million non-cash impairment charge related to Hain and a $9.3 million non-cash impairment charge related to a grocery industry-sponsored cost-basis investment in an e-commerce business venture, as discussed previously. The effective tax rate for the current quarter was 31.0% compared to 33.1% last year. The reduction in the effective tax rate is attributable to changes to the capital structure in certain foreign subsidiaries, tax credits resulting from tax planning associated with a change in certain foreign tax legislation, and the settlement of tax audits, partially offset by impairment charges for Hain and an e-commerce business venture for which no tax benefit can currently be recorded. Income from continuing operations for the third quarter of Fiscal 2005 was $138.5 million compared to $202.2 million in the year earlier quarter, a decrease of 31.5%, primarily due to the $73.8 million of asset impairments discussed above and the decline in operating income, partially offset by the impact of the reduced effective tax rate. Diluted earnings per share was $0.39 in the current year compared to $0.57 in the prior year, down 31.6%. OPERATING RESULTS BY BUSINESS SEGMENT NORTH AMERICAN CONSUMER PRODUCTS Sales of the North American Consumer Products segment increased $57.3 million, or 11.0%, to $579.0 million. Volume increased significantly, up 6.7%, as a result of strong growth in frozen potatoes, reflecting the success of the introduction of Ore-Ida Extra Crispy Potatoes and new microwavable Easy Fries, and new distribution related to a co-packing agreement. Bagel Bites and TGI Friday's frozen snacks also contributed to the significant volume increase reflecting the 19 success of new, more effective promotional programs. Pricing increased 2.8% largely due to reduced trade promotion spending, primarily related to Heinz ketchup, Bagel Bites and TGI Friday's frozen snacks, and reduced product placement fees on Ore-Ida frozen potatoes. The prior year acquisition of the Canadian business of Unifine Richardson B.V., which manufactures and sells salad dressings, sauces, and dessert toppings, increased sales by 1.8%. Divestitures reduced sales 1.4% due to the sale of Ethnic Gourmet Foods and Rosetto pasta to Hain in the first quarter. Exchange translation rates increased sales 1.1%. Gross profit increased $24.7 million, or 11.1%, to $247.7 million, and the gross profit margin increased slightly to 42.8% from 42.7%, as increases in sales volume and net pricing were partially offset by higher commodity and fuel costs. Gross profit also benefited from favorable termination of a long-term co-packing arrangement with a customer. Operating income increased $21.8 million, or 17.2%, to $148.4 million, due to the increase in gross profit partially offset by increased pension and fuel costs. U.S. FOODSERVICE Sales of the U.S. Foodservice segment increased $21.0 million, or 5.9%, to $374.8 million. Strong volume increased sales 4.5%, largely driven by our Truesoups frozen soup business, increased sales of our custom recipe tomato products, and improvements in single serve condiments and Heinz ketchup. Higher pricing increased sales by 1.4%, as price increases were initiated, primarily on Heinz ketchup and frozen soup, to offset fuel and commodity cost pressures. Gross profit increased $14.3 million, or 14.0%, to $116.4 million, and the gross profit margin increased to 31.1% from 28.9% primarily due to favorable pricing and mix, partly offset by increased commodity and fuel costs. Operating income decreased $0.3 million, or 0.5%, to $54.4 million, as the increase in gross profit was offset by increased distribution, fuel and fixed selling costs. EUROPE Heinz Europe's sales increased $57.3 million, or 6.9%, to $884.8 million. Favorable exchange translation rates increased sales by 7.9%. Volume increased 1.5% principally due to promotional timing on European seafood, increases in Heinz ketchup resulting from the successful introduction of the Top Down bottle, the successful restage of Heinz beans and growth in the Italian infant nutrition business. These increases were partially offset by declines in sauces and jarred vegetables in the Netherlands as a result of increased competition and pricing pressure. Lower pricing decreased sales 2.2%, due to the restage of the Italian infant nutrition business and increased promotional spending in the Netherlands. Divestitures reduced sales 0.3%. Gross profit decreased $6.8 million, or 2.1%, to $319.7 million, and the gross profit margin decreased to 36.1% from 39.5%. The decrease in gross profit margin is primarily due to lower pricing, increased commodity costs and increased production costs in the European seafood business. Operating income decreased $34.6 million, or 21.2%, to $128.5 million, due to the decline in gross profit and increased G&A, primarily due to employee-related and litigation costs and professional fees related to various projects across Europe. ASIA/PACIFIC Sales in Asia/Pacific increased $22.0 million, or 7.3%, to $323.9 million. Volume increased sales 5.5%, reflecting strong volume in Australia, New Zealand and China, largely due to new product introductions in tuna and frozen food. These increases were partially offset by the discontinuation of an Indonesian energy drink and continued declines in the Tegel poultry business in New Zealand. Favorable exchange translation rates increased sales by 4.4%. Lower pricing reduced sales 3.4%, primarily due to continuing market price pressures on the Tegel poultry business in New Zealand as well as increased promotional spending in our Australian and Indonesian businesses. The acquisition of a controlling interest in Shanghai LongFong Foods, a maker of popular 20 frozen Chinese snacks and desserts, increased sales 3.4%; however, the divestiture of a Korean oils and fats product line reduced sales 2.6%. Gross profit increased $4.6 million, or 4.6%, to $103.7 million. The gross profit margin decreased to 32.0% from 32.8%. The gross profit margin decline was primarily a result of lower pricing and increased commodity costs. The 4.6% increase in gross profit benefited from volume improvements and the favorable impact of exchange translation rates in Australia and New Zealand. Operating income decreased $1.4 million, or 4.2%, to $32.6 million, primarily due to the decline in profitability in our Tegel poultry business. OTHER OPERATING ENTITIES Sales for Other Operating Entities increased $6.5 million, or 7.1%, to $98.7 million. Volume decreased 0.7% due primarily to a discontinued pet food business in Latin America, partially offset by strong sales in India which grew 13.6%. Lower pricing reduced sales by 0.2%. Sales were also favorably impacted by 6.1% from the prior year acquisition of a frozen food business in South Africa and by foreign exchange translation rates of 1.8%. Gross profit increased $2.3 million, or 8.7%, to $28.2 million, due mainly to the impact of the prior year acquisition in South Africa and cost improvements in India. Operating income remained stable, as the increase in gross profit was offset by lower profits in Israel. Zimbabwe remains in a period of economic uncertainty. Should the current situation continue, the Company could experience disruptions and delays associated with its Zimbabwe operations. As of the end of November 2002, the Company deconsolidated its Zimbabwean operations and classified its remaining net investment of approximately $110 million as a cost investment included in other non-current assets on the consolidated balance sheets. Although the Company's business continues to operate profitably and it is able to source raw materials, the country's economic situation remains uncertain and there are currently government restrictions on the repatriation of earnings. The Company's ability to recover its investment could become impaired if the economic and political conditions continue to deteriorate. NINE MONTHS ENDED JANUARY 26, 2005 AND JANUARY 28, 2004 RESULTS OF CONTINUING OPERATIONS Sales for the nine months ended January 26, 2005 increased $380.6 million, or 6.3%, to $6.46 billion. Sales were favorably impacted by volume growth of 2.1% and exchange translation rates of 4.2%. The favorable volume impact reflects strong increases across much of the Company, most notably in the North American Consumer Products and U.S. Foodservice segments. Lower pricing decreased sales by 0.5%, principally due to a $21.1 million charge for trade spending in the Italian infant nutrition business (as described in our Fiscal 2005 second quarter Form 10-Q and in Note No. 9, "Segments" in Item 1--"Financial Statements"), the restage of our Italian infant nutrition business and market price pressures impacting Northern Europe and the Tegel poultry business in New Zealand. The second quarter trade spending charge in the Italian infant nutrition business relates to prior years and reflects an under-accrual quantified as the Company was upgrading trade management processes and systems in Italy. These price decreases were partially offset by increases in the North American Consumer Products and U.S. Foodservice segments. Acquisitions, net of divestitures, increased sales by 0.5%. Gross profit increased $91.1 million, or 4.0%, to $2.36 billion; however, the gross profit margin decreased to 36.5% from 37.3%. The decrease in the gross profit margin is mainly due to increased commodity costs, lower pricing as discussed above, and increased production costs in the European seafood business. These declines were offset by increases in the U.S. Foodservice segment as well as cost improvements in Northern Europe. The 4.0% increase in gross profit is primarily a result of 21 higher volume and favorable exchange translation rates. Last year's gross profit was unfavorably impacted by the write down of U.K. pizza crust assets totaling $4.0 million. SG&A increased $131.9 million, or 10.9%, to $1.35 billion, and increased as a percentage of sales to 20.8% from 20.0%. The increase as a percentage of sales is primarily due to the gain recorded on the sale of the Northern European bakery business in the prior year, and higher fuel/distribution costs and increased G&A expense in the current year. The G&A expense increase is primarily a result of employee-related costs, including the cost of the new non-stock option long-term incentive compensation program disclosed at the beginning of the year, professional fees related to various projects across the Company, including compliance work associated with Section 404 of the Sarbanes-Oxley Act, and litigation costs in Europe. Last year's SG&A was unfavorably impacted by reorganization costs totaling $5.5 million. Operating income decreased $40.8 million, or 3.9%, to $1.01 billion. Total marketing support (recorded as a reduction of revenue or as a component of SG&A) increased $72.4 million, or 4.2%, to $1.81 billion on a sales increase of 6.3%. Marketing support recorded as a reduction of revenue, typically deals and allowances, increased $77.5 million, or 5.1%, to $1.60 billion, which is largely a result of the foreign exchange translation rates, the restage of the Italian infant nutrition business, and increased promotional spending in European seafood, partially offset by reduced trade promotion spending in the U.S. Consumer Products and U.K. businesses. Marketing support recorded as a component of SG&A decreased $5.0 million, or 2.4%, to $205.7 million, primarily in the Europe segment where most marketing resources were focused on increased trade promotion spending in order to improve retail price points. Net interest expense increased $6.3 million, to $150.6 million. Net interest expense was unfavorably impacted by the adoption of SFAS No. 150 (see below for further discussion) beginning in the second quarter of Fiscal 2004 and higher interest rates during Fiscal 2005. These amounts were largely offset by the benefits of lower average net debt. Other expenses, net, decreased $24.2 million, resulting primarily from the SFAS 150 reclassification and lower currency losses. The year was also unfavorably impacted by a $64.5 million non-cash impairment charge related to Hain and a $9.3 million non-cash impairment charge related to a cost-basis investment in a grocery industry sponsored e-commerce business venture, as discussed previously. The effective tax rate for the current year was 31.7% compared to 33.6% last year. The reduction in the effective tax rate is attributable to changes to the capital structure in certain foreign subsidiaries, tax credits resulting from tax planning associated with a change in certain foreign tax legislation, and the settlement of tax audits, partially offset by impairment charges for Hain and an e-commerce business venture for which no tax benefit can currently be recorded. Income from continuing operations for the first nine months of Fiscal 2005 was $530.6 million compared to $580.5 million in the year earlier period, a decrease of 8.6%, again reflecting the $73.8 million of third quarter asset impairments discussed above and the decline in operating income, partially offset by the impact of the reduced effective tax rate. Diluted earnings per share was $1.50 in the current year compared to $1.64 in the prior year, down 8.5%. OPERATING RESULTS BY BUSINESS SEGMENT NORTH AMERICAN CONSUMER PRODUCTS Sales of the North American Consumer Products segment increased $139.4 million, or 9.3%, to $1.63 billion. Sales volume increased 5.5% due to significant growth in Ore-Ida frozen potatoes and SmartOnes frozen entrees, aided by the introduction of Ore-Ida Extra Crispy Potatoes, new microwavable Easy Fries, and several new "Truth About Carbs" frozen entrees. Strong performance in Boston Market HomeStyle meals and in the frozen snack brands of Delimex, Bagel Bites and TGI Friday's, as well as new distribution related to a co-packing agreement also contributed to the 22 volume increase. Pricing increased sales 2.2% largely due to more efficient trade spending and decreased product placement fees on SmartOnes frozen entrees and Ore-Ida potatoes as well as increases related to Classico pasta sauces and Heinz ketchup. Sales increased 2.2% due to the prior year acquisition of the Canadian business of Unifine Richardson B.V. Divestitures reduced sales 1.4% due to the sale of Ethnic Gourmet Food and Rosetto pasta to Hain in the first quarter. Exchange translation rates increased sales 0.8%. Gross profit increased $49.2 million, or 7.7%, to $691.2 million driven by the increase in sales volume. The gross profit margin decreased to 42.3% from 43.0% due primarily to higher commodity costs and sales mix, partially offset by higher net pricing. Gross profit also benefited from favorable determination of a long-term co-packing arrangement with a customer. Operating income increased $35.2 million, or 9.8%, to $394.4 million, due to the increase in volume and gross profit, partially offset by higher selling and distribution costs, reflecting the volume increase and higher fuel costs. Operating income for the nine months ended January 28, 2004 was impacted by reorganization costs totaling $1.5 million. U.S. FOODSERVICE Sales of the U.S. Foodservice segment increased $41.5 million, or 3.9%, to $1.10 billion. Higher pricing increased sales by 1.8%, as price increases were initiated on Heinz ketchup and frozen soup to offset fuel and commodity cost pressures. Volume increased sales 1.4% due to stronger performance on Truesoups frozen soup, growth in custom recipe tomato products, and growth in Heinz ketchup. These increases were partially offset by declines at Portion Pac Inc. resulting from the startup of a new warehouse management system that temporarily impacted shipments of some portion control products in the first quarter of Fiscal 2005. Acquisitions increased sales 0.7%, due to the prior year acquisition of Truesoups LLC. Gross profit increased $27.2 million, or 8.9%, to $333.0 million, and the gross profit margin increased to 30.3% from 28.9%. The gross profit margin increase was primarily due to favorable pricing, partly offset by increases in commodity costs. Operating income increased $5.4 million, or 3.3%, to $166.7 million, reflecting the growth in gross profit, partially offset by increased selling and distribution costs, some of which relates to the Portion Pac, Inc. issues discussed above, and increased fuel and trucking costs. Operating income for the nine months ended January 28, 2004, was impacted by reorganization costs totaling $2.5 million. EUROPE Heinz Europe's sales increased $151.0 million, or 6.5%, to $2.49 billion. Favorable exchange translation rates increased sales by 8.5%. Volume increased 1.0% principally due to increases in Heinz ketchup resulting from the successful introduction of the Top Down bottle, increases in frozen desserts in the U.K due to increased promotional activity and new customer distribution, and improvements from the successful restage of the Italian infant nutrition business, new products in U.K. frozen potatoes and increases in Heinz ready-to-serve soups. These increases were offset by declines in Weight Watchers frozen entrees reflecting softness in the overall category, lower market share in jarred vegetables in Northern Europe and the discontinuation of frozen pizza and Bagel Bites in the U.K. Lower pricing decreased sales 2.4%, primarily due to the trade spending charge in the Italian infant nutrition business, increased trade promotion spending in European seafood, the cost of the restage of the Italian infant nutrition business, and lower prices in the Netherlands. Divestitures reduced sales 0.5%. Gross profit increased $0.7 million, or 0.1%, to $922.6 million, while the gross profit margin decreased to 37.1% from 39.4%. The decrease in gross profit margin is primarily related to increased commodity costs, particularly in the European seafood and UK businesses, as well as lower pricing discussed above. These decreases were partially offset by manufacturing improvements in the Netherlands. Gross profit for the nine months ended January 28, 2004 was impacted by the 23 write-down of the U.K. pizza crust assets totaling $4.0 million. Operating income decreased $71.0 million, or 14.8%, to $408.1 million, largely due to the gain recognized in the prior year on the sale of the Northern European bakery business, the Italian trade spending charge related to prior years and increased employee-related and litigation costs and professional fees from various projects across Europe. ASIA/PACIFIC Sales in Asia/Pacific increased $36.3 million, or 3.9%, to $962.9 million. Favorable exchange translation rates increased sales by 4.5%. Volume increased sales 1.0%, chiefly due to new product introductions in the frozen foods, convenience meals and tuna categories in the Australia and New Zealand businesses. These were partially offset by the discontinuation of an Indonesian energy drink, as well as declines in Tegel, China and Japan. Lower pricing reduced sales 1.9% primarily due to market price pressures on Tegel poultry and declines across the New Zealand business. The acquisition of a controlling interest in Shanghai LongFong Foods increased sales 1.1%; however, the divestiture of a Korean oils and fats product line reduced sales 0.9%. Gross profit increased $5.6 million, or 1.8%, to $310.6 million. The gross profit margin decreased to 32.3% from 32.9%. The decrease in gross profit margin is primarily due to lower pricing and increased commodity costs, partially offset by improved sales mix in Indonesia reflecting the aforementioned discontinuance of an energy drink. Operating income decreased $4.3 million, or 3.8%, to $107.7 million, primarily due to the decline in profitability in our Tegel poultry business, partially offset by improvements in Australia. OTHER OPERATING ENTITIES Sales for Other Operating Entities increased $12.4 million, or 4.6%, to $280.3 million. Volume decreased 1.8% due primarily to lower sales in Israel, following a product recall in the third quarter of Fiscal 2004, and discontinued products in Latin America, partially offset by strong sales in ketchup and beverages in India. Lower pricing reduced sales by 2.4%, mainly due to decreases in Latin America as a result of market price pressures and price declines in Israel resulting from the effects of the recall. The prior year acquisition of a frozen food business in South Africa increased sales by 7.7%. Gross profit increased $1.1 million, or 1.3%, to $86.9 million. Operating income increased $2.7 million, primarily due to the acquisition in South Africa. During the first quarter of Fiscal 2005, the Company reached an agreement with third parties related to a recall in Fiscal 2004. The proceeds of the agreement offset recall related damages incurred to date. LIQUIDITY AND FINANCIAL POSITION The following discussion of liquidity and financial position references the business measures of operating free cash flow and net debt as defined below. These measures are utilized by senior management and the board of directors to gauge our business operating performance, and management believes these measures provide clarity in understanding the trends of the business. Management, and investors, can benefit from the use of the operating free cash flow measure as it provides cash flow derived from product sales and the short-term application of cash, including the effect of capital expenditures. The limitation of operating free cash flow is that it adjusts for cash used for capital expenditures that is no longer available to the Company for other purposes. Management compensates for this limitation by using the GAAP operating cash flow number as well. Operating free cash flow does not represent residual cash flow available for discretionary expenditures and does not provide insight to the entire scope of the historical cash inflows or outflows of our operations that are 24 captured in the other cash flow measures reported in the statement of cash flows. Net debt is an additional measure that is important to our liquidity and financial condition. The Company's primary measure of cash flow performance is operating free cash flow (cash provided by operating activities less capital expenditures). The following is the Company's calculation of operating free cash flow for the nine months ended January 26, 2005 and January 28, 2004 (amounts in millions):
Nine Months Ended ----------------------------------- January 26, 2005 January 28, 2004 FY 2005 FY 2004 ---------------- ---------------- Cash provided by operating activities....................... $ 506.1 $ 817.1 Capital expenditures........................................ (131.0) (119.8) ------- ------- Operating Free Cash Flow.................................. $ 375.1 $ 697.2 ======= =======
Cash provided by continuing operating activities was $506.1 million, a decrease of $310.9 million from the prior year. The decrease in Fiscal 2005 versus Fiscal 2004 is primarily due to a planned tax pre-payment of $125 million made in Europe during the third quarter and unfavorable working capital movements, particularly accounts receivable and inventories. While we continue to make progress in reducing our cash conversion cycle (8 days lower than a year ago); as expected, the rate of improvement has lessened when compared to last fiscal year. The Company expects operating free cash flow to be in the range of $750 to $850 million for Fiscal Year 2005. Cash used for investing activities totaled $125.1 million compared to $119.9 million last year. Proceeds from divestitures provided $39.9 million in the first nine months of Fiscal 2005 and related primarily to the sale of an oil and fats product line in Korea, which was completed during the third quarter. Acquisitions used $38.1 million in Fiscal 2005 primarily related to the Company's purchase in the third quarter of a controlling interest in Shanghai LongFong Foods, a maker of frozen Chinese snacks and desserts. In Fiscal 2004, acquisitions, net of divestitures, used $14.9 million in cash. Capital expenditures totaled $131.0 million (2.0% of sales) compared to $119.8 million (2.0% of sales) last year. Cash used for financing activities totaled $840.2 million compared to $545.7 million last year. Long-term debt was reduced by $418.5 million during the current period, compared to $74.0 million last year. Payments on short-term debt were $24.1 million this year compared to $143.3 million in the prior year. Cash used for the purchases of treasury stock, net of proceeds from option exercises, was $109.7 million this year compared to $56.0 million in the prior year, in line with the Company's plans of maintaining fully diluted shares at a constant level. Dividend payments totaled $299.3 million, compared to $284.9 million for the same period last year, reflecting a 5.5% increase in the annual dividend on common stock. Net debt is defined as total debt, net of the value of interest rate swaps, less cash and cash equivalents. The following is the Company's calculation of net debt as of January 26, 2005 and January 28, 2004 (amounts in millions):
January 26, 2005 January 28, 2004 FY 2005 FY 2004 ---------------- ---------------- Short-term debt............................................. $ 34.1 $ 11.4 Long-term debt, including current portion................... 4,757.2 5,096.5 -------- --------- Total debt................................................ 4,791.3 5,107.8 Less: Value of interest rate swaps.............................. (208.2) (206.6) Cash and cash equivalents................................. (834.8) (1,016.2) -------- --------- Net Debt.................................................... $3,748.3 $ 3,885.1 ======== =========
25 Overall, net debt decreased $136.8 million, or 3.5%, versus prior year. Long-term debt decreased $339.3 million from the prior year primarily due to the payoff of E300 million of bonds ($404.7 million) which matured on January 5, 2005; offset by increases in debt as a result of higher foreign exchange rates and debt assumed through acquisitions. The Company anticipates that it will have additional long-term debt reduction in the balance of Fiscal 2005 and Fiscal 2006, including the payoff of E417.9 million of bonds in April 2006. The Company completed the remarketing of its $800 million remarketable securities due 2020 on December 1, 2004. The Company's $2.0 billion Five-Year Credit Agreement supports the Company's commercial paper borrowings and the remarketable securities. As a result, these borrowings are classified as long-term debt based upon the Company's ability to refinance these borrowings on a long-term basis. The Company also maintains in excess of $500 million of other credit facilities used primarily by the Company's foreign subsidiaries. These resources, the Company's existing cash balance of more than $800 million, strong operating cash flow and access to the capital market, if required, should enable the Company to meet its cash requirements for operations, including capital expansion programs, debt maturities, and dividends to shareholders. In August 2004, the Company and H.J. Heinz Finance Company, a subsidiary of the Company, amended their $600 million 364-Day Credit Agreement and their $1.5 billion Five-Year Credit Agreement by combining the agreements into a $2.0 billion Five-Year Credit Agreement, expiring August 2009. The Credit Agreement supports the Company's commercial paper borrowings and the remarketable securities. As a result, these borrowings are classified as long-term debt based upon the Company's ability to refinance these borrowings on a long-term basis. The impact of inflation on both the Company's financial position and the results of operations is not expected to adversely affect Fiscal 2005 results. The Company enters into certain derivative contracts in accordance with its risk management strategy that do not meet the criteria for hedge accounting. As of January 26, 2005, the Company maintained forward contracts with a total notional amount of $205.4 million that do not qualify as hedges, but which have the impact of largely mitigating volatility associated with earnings from foreign subsidiaries. These forward contracts are accounted for on a full mark-to-market basis through current earnings and mature during the fourth quarter of Fiscal 2005. Net unrealized gains related to these contracts totaled $3.0 million at January 26, 2005. CONTRACTUAL OBLIGATIONS The Company is obligated to make future payments under various contracts such as debt agreements, lease arrangements and unconditional purchase obligations. In addition, the Company has purchase obligations for materials, supplies, services and property, plant and equipment as part of the ordinary conduct of business. A few of these obligations are long-term and are based on minimum purchase requirements. In the aggregate, such commitments are not at prices in excess of current markets. Due to the proprietary nature of some of the Company's materials and processes, certain supply contracts contain penalty provisions for early terminations. The Company does not believe that a material amount of penalties are reasonably likely to be incurred under these contracts based upon historical experience and current expectations. There have been no material changes to contractual obligations during the nine months ended January 26, 2005. For additional information, refer to page 22 of the Company's Annual Report on Form 10-K for the fiscal year ended April 28, 2004. RECENTLY ISSUED ACCOUNTING STANDARDS In December 2004, the Financial Accounting Standards Board ("FASB") issued SFAS No. 123(R), "Share-Based Payment", which revises SFAS No. 123, "Accounting for Stock-Based Compensation" and supersedes APB Opinion No. 25, "Accounting for Stock Issued to Employees". This Statement focuses primarily on accounting for transactions in which an entity 26 obtains employee services in share-based payment transactions. This Statement requires an entity to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. That cost will be recognized over the period during which an employee is required to provide service in exchange for the reward. The Company is required to adopt this Statement in the second quarter of Fiscal 2006; however, early adoption of this Statement is encouraged. The Company is currently evaluating the timing and method of the adoption of this Statement. In December 2004, the FASB issued FASB Staff Position ("FSP") No. FAS 109-2, "Accounting and Disclosure Guidance for the Foreign Earnings Repatriation Provision within the American Jobs Creation Act of 2004." The FSP provided guidance on the accounting and disclosures for the temporary repatriation provision of the AJCA. The Company has adopted the disclosure provisions of the FSP which apply to entities that have not yet completed their evaluation of the repatriation provision, and will expand its disclosures in accordance with the FSP upon completion of the final evaluation. In November 2004, the FASB issued SFAS No. 151, "Inventory Costs, an amendment of ARB No. 43, Chapter 4". This Statement is meant to eliminate any narrow differences existing between the FASB standards and the standards issued by the International Accounting Standards Board by clarifying that any abnormal idle facility expense, freight, handling costs and spoilage be recognized as current-period charges. This Statement is required to be adopted by the Company in the first quarter of Fiscal 2007; however, early application is permitted. The Company does not expect the adoption of this Statement to have a material impact on results of operations, financial position or cash flows. In December 2003, the Medicare Prescription Drug, Improvement and Modernization Act of 2003 ("the Act") was signed into law. The Act introduced a prescription drug benefit under Medicare (Medicare Part D) and a federal subsidy to sponsors of retirement health care plans that provide a benefit that is at least actuarially equivalent to Medicare Part D. In accordance with FASB Staff Position 106-1, the Company elected to defer recognizing the effects of the Act on the accounting for its retirement health care plans in Fiscal 2004. In May 2004, the FASB issued Staff Position 106-2 providing final guidance on the accounting for benefits provided by the Act. Based on the preliminary regulations, management believes that certain drug benefits offered under the postretirement health care plans will qualify for the subsidy under Medicare Part D. Accordingly, the Company adopted Staff Position 106-2 as of its second quarter reporting period beginning July 29, 2004 and has performed a remeasurement of its plan obligations as of that date. The reduction in the benefit obligation of approximately $18.8 million has been reflected as an actuarial gain. The total reduction in benefit cost for Fiscal 2005 is $2.3 million, comprised of $0.9 million of interest cost, $0.1 million of service cost, and $1.4 million reduction in unrecognized loss amortization, recognized on a pro-rata basis. In January 2005, final Medicare prescription drug rules were issued. Although the Company is currently evaluating these regulations, management believes the impact of the Act based upon the final rules will not differ significantly from the impact recorded in the second quarter of Fiscal 2005. In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity". This statement affects the classification, measurement and disclosure requirements of certain freestanding financial instruments including mandatorily redeemable shares. SFAS No. 150 was effective for the Company for the second quarter of Fiscal 2004. The adoption of SFAS No. 150 required the prospective classification of H.J. Heinz Finance Company's $325 million of mandatorily redeemable preferred shares from minority interest to long-term debt and the $5.1 million quarterly preferred dividend from other expenses to interest expense beginning in the second quarter ended October 29, 2003, with no resulting effect on the Company's profitability. 27 DISCUSSION OF SIGNIFICANT ACCOUNTING ESTIMATES In the ordinary course of business, the Company has made a number of estimates and assumptions relating to the reporting of results of operations and financial condition in the preparation of its financial statements in conformity with accounting principles generally accepted in the United States of America. Actual results could differ significantly from those estimates under different assumptions and conditions. The Company believes that the following discussion addresses the Company's most critical accounting policies, which are those that are most important to the portrayal of the Company's financial condition and results and require management's most difficult, subjective and complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. Marketing Costs--Trade promotions are an important component of the sales and marketing of the Company's products and are critical to the support of the business. Trade promotion costs include amounts paid to encourage retailers to offer temporary price reductions for the sale of the Company's products to consumers, amounts paid to obtain favorable display positions in retailers' stores, and amounts paid to customers for shelf space in retail stores. Accruals for trade promotions are recorded primarily at the time of sale of product to the customer based on an estimate of the expected levels of performance of the trade promotion, which is dependent upon factors such as historical trends with similar promotions, expectations regarding customer participation, and sales and payment trends with similar previously offered programs. Our original estimated costs of trade promotions are reasonably likely to change in the future as a result of changes in trends with regard to customer participation, particularly for new programs and for programs related to the introduction of new products. We perform monthly and quarterly evaluations of our outstanding trade promotions; making adjustments, where appropriate, to reflect changes in our estimates. Settlement of these liabilities typically occurs in subsequent periods primarily through an authorized process for deductions taken by a customer from amounts otherwise due to the Company. As a result, the ultimate cost of a trade promotion program is dependent on the relative success of the events and the actions and level of deductions taken by the Company's customers for amounts they consider due to them. Final determination of the permissible deductions may take extended periods of time and could have a significant impact on the Company's results of operations depending on how actual results of the programs compare to original estimates. We offer coupons to consumers in the normal course of our business. Costs associated with this activity, which we refer to as coupon redemption costs, are accrued in the period in which the coupons are offered. The initial estimates made for each coupon offering are based upon historical redemption experience rates for similar products or coupon amounts. We perform subsequent estimates that compare our actual redemption rates to the original estimates. We review the assumptions used in the valuation of the estimates and determine an appropriate accrual amount. Adjustments to our initial accrual may be required if our actual redemption rates vary from our estimated redemption rates. Inventories--Inventories are stated at the lower of cost or market value. Cost is principally determined by the average cost method. The Company records adjustments to the carrying value of inventory based upon its forecasted plans to sell its inventories. The physical condition (e.g., age and quality) of the inventories is also considered in establishing its valuation. These adjustments are estimates, which could vary, either favorably or unfavorably, from actual requirements if future economic conditions, customer inventory levels or competitive conditions differ from our expectations. Investments and Long-lived Assets and Property, Plant and Equipment--Investments and long-lived assets are recorded at their respective cost basis on the date of acquisition. Buildings, equipment and leasehold improvements are depreciated on a straight-line basis over the estimated useful life of such assets. The Company reviews investments and long-lived assets, including intangibles with finite useful lives, and property, plant and equipment, whenever circumstances 28 change such that the indicated recorded value of an asset may not be recoverable or has suffered an other than temporary impairment. Factors that may affect recoverability include changes in planned use of equipment or software, the closing of facilities and changes in the underlying financial strength of investments. The estimate of current value requires significant management judgment and requires assumptions that can include: future volume trends, revenue and expense growth rates and foreign exchange rates developed in connection with the Company's internal projections and annual operating plans, and in addition, external factors such as market value devaluation and inflation which are developed in connection with the Company's longer-term strategic planning. As each is management's best estimate on then available information, resulting estimates may differ from actual cash flows. Goodwill and Indefinite Lived Intangibles--Carrying values of goodwill and intangible assets with indefinite lives are reviewed for impairment at least annually, or when circumstances indicate that a possible impairment may exist, in accordance with SFAS No. 142, "Goodwill and Other Intangible Assets." Indicators such as unexpected adverse economic factors, unanticipated technological change or competitive activities, loss of key personnel, and acts by governments and courts, may signal that an asset has become impaired. The Company's measure of impairment is based on a discounted cash flow model that requires significant judgment and requires assumptions about future volume trends, revenue and expense growth rates and foreign exchange rates developed in connection with the Company's internal projections and annual operating plans, and in addition, external factors such as changes in macroeconomic trends and cost of capital developed in connection with the Company's longer-term strategic planning. Inherent in estimating future performance, in particular assumptions regarding external factors such as capital markets, are uncertainties beyond the Company's control. Management believes that because fair values of goodwill and intangible assets with indefinite lives significantly exceed carrying value, it is unlikely that a material impairment charge would be recognized. Retirement Benefits--The Company sponsors pension and other retirement plans in various forms covering substantially all employees who meet eligibility requirements. Several statistical and other factors that attempt to anticipate future events are used in calculating the expense and liability related to the plans. These factors include assumptions about the discount rate, expected return on plan assets, turnover rates and rate of future compensation increases as determined by the Company, within certain guidelines. The discount rate assumptions used to value pension and postretirement benefit obligations reflect the rates available on high quality fixed income investments available (in each country that the Company operates a benefit plan) as of the measurement date. The weighted average discount rate used to measure the projected benefit obligation for the year ending April 28, 2004 was 5.8%. Over time, the expected rate of return on pension plan assets should approximate the actual long-term returns. In developing the expected rate of return, the Company considers actual real historic returns of asset classes, the investment mix of plan assets, investment manager performance and projected future returns of asset classes developed by respected consultants. The weighted average expected rate of return on plan assets used to calculate annual expense was 8.2% for the year ending April 28, 2004. For purposes of calculating Fiscal 2005 expense, the weighted average rate of return will remain at approximately 8.2%. In addition, the Company's actuarial consultants also use subjective factors such as withdrawal and mortality rates to estimate these factors. The actuarial assumptions used by the Company may differ materially from actual results due to changing market and economic conditions, higher or lower withdrawal rates or longer or shorter life spans of participants. These differences may result in a significant impact to the amount of pension expense recorded by the Company. 29 SENSITIVITY OF ASSUMPTIONS If we assumed a 100 basis point change in the following assumption, our Fiscal 2004 projected benefit obligation and expense would increase (decrease) by the following amounts (in millions):
100 Basis Point ------------------- Increase Decrease -------- -------- PENSION BENEFITS Discount rate used in determining projected benefit obligation................................................ $(289.1) $312.4 Discount rate used in determining net pension expense....... $ (31.7) $ 37.4 Long-term rate of return on assets used in determining net pension expense........................................... $ (18.4) $ 18.4 OTHER BENEFITS Discount rate used in determining projected benefit obligation................................................ $ (21.2) $ 23.2
Income Taxes--The Company computes its annual tax rate based on the statutory tax rates and tax planning opportunities available to it in the various jurisdictions in which it earns income. Significant judgment is required in determining the Company's annual tax rate and in evaluating its tax positions. The Company establishes reserves when it becomes probable that a tax return position that it considers supportable may be challenged and that the Company may not succeed in completely defending that challenge. The Company adjusts these reserves in light of changing facts and circumstances, such as the settlement of a tax audit. The Company's annual tax rate includes the impact of reserve provisions and changes to reserves. While it is often difficult to predict the final outcome or the timing of resolution of any particular tax matter, the Company believes that its reserves reflect the probable outcome of known tax contingencies. Favorable resolution would be recognized as a reduction to the Company's tax rate in the period of resolution. The Company's tax reserves are presented in the balance sheet principally within accrued income taxes. The Company records valuation allowances to reduce deferred tax assets to the amount that is more likely than not to be realized. When assessing the need for valuation allowances, the Company considers future taxable income and ongoing prudent and feasible tax planning strategies. Should a change in circumstances lead to a change in judgment about the realizability of deferred tax assets in future years, the Company would adjust related valuation allowances in the period that the change in circumstances occurs, along with a corresponding increase or charge to income. The American Jobs Creation Act ("the AJCA") provides a deduction of 85% of certain foreign earnings repatriation. The Company may elect to apply this provision in either Fiscal 2005 or in Fiscal 2006. The Company does not expect to be able to complete its evaluation of the effects of the repatriation provisions until after Congress and the Treasury Department enacts needed technical corrections and provides additional clarifying language on key elements of the provision. The Company expects to complete its evaluation within a reasonable period of time after these events occur. The range of amounts that the Company is considering for repatriation under this provision is between zero and $700 million. The related potential range of income tax (assuming enactment of needed technical corrections) is between zero and $40 million. The AJCA provides a deduction calculated as a percentage of qualified income from manufacturing in the United States. The percentage increases from 3% to 9% over a 6 year period beginning with the Company's 2006 fiscal year. In December 2004, the FASB issued a new staff position providing for this deduction to be treated as a special deduction, as opposed to a tax rate reduction, in accordance with SFAS No. 109. The benefit of this deduction is not expected to have a material impact on the Company's effective tax rate in Fiscal 2006. 30 CAUTIONARY STATEMENT RELEVANT TO FORWARD-LOOKING INFORMATION Statements about future growth, profitability, costs, expectations, plans, or objectives included in this report, including the management's discussion and analysis, the financial statements and footnotes, are forward-looking statements based on management's estimates, assumptions, and projections. These forward-looking statements are subject to risks, uncertainties, and other important factors that could cause actual results to differ materially from those expressed or implied in this report and the financial statements and footnotes. These include, but are not limited to, sales, earnings, and volume growth, general economic, political, and industry conditions, competitors' actions, which affect, among other things, customer preferences and the pricing of products, production, energy and raw material costs, product recalls, the ability to maintain favorable supplier relationships, achieving cost savings programs and gross margins, currency valuations and interest rate fluctuations, success of acquisitions, joint ventures, and divestitures, new product and packaging innovations, product mix, the effectiveness of advertising, marketing, and promotional programs, supply chain efficiency and cash flow initiatives, the impact of e-commerce and e-procurement, risks inherent in litigation, including the Remedia related claims in Israel and rights against third parties, international operations, particularly the performance of business in hyperinflationary environments, changes in estimates in critical accounting judgments and other laws and regulations, including tax laws, the success of tax planning strategies, the possibility of increased pension expense and contributions and other people-related costs, the possibility of investment impairment, and other factors described in "Cautionary Statement Relevant to Forward-Looking Information" in the Company's Form 10-K for the fiscal year ended April 28, 2004, and the Company's subsequent filings with the Securities and Exchange Commission. The forward-looking statements are and will be based on management's then current views and assumptions regarding future events and speak only as of their dates. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by the securities laws. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK There have been no material changes in the Company's market risk during the nine months ended January 26, 2005. For additional information, refer to pages 23-24 of the Company's Annual Report on Form 10-K for the fiscal year ended April 28, 2004. ITEM 4. CONTROLS AND PROCEDURES (a) Evaluation of Disclosure Controls and Procedures The Company's management, with the participation of the Company's Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the Company's disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures, as of the end of the period covered by this report, were designed and are functioning effectively to provide reasonable assurance that the information required to be disclosed by the Company in reports filed under the Securities Exchange Act of 1934 is (i) recorded, processed, summarized, and reported within the time periods specified in the SEC's rules and forms, and (ii) accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding disclosure. The Company believes that no controls system can provide absolute assurance that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected. (b) Changes in Internal Control over Financial Reporting No change in the Company's internal control over financial reporting occurred during the Company's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting. 31 PART II--OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS Nothing to report under this item. ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS Nothing to report under this item. ITEM 3. DEFAULTS UPON SENIOR SECURITIES Nothing to report under this item. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Nothing to report under this item. ITEM 5. OTHER INFORMATION On January 12, 2005, the Board of Directors of the Company conducted its annual review of compensation to be paid to the non-employee directors of the Board of the Company, and approved the following fees to be paid to such directors. These fees were developed with the assistance of an independent consulting firm and were recommended to the Board by the Corporate Governance Committee to reflect current best practices and simplification of the Board compensation structure. These changes were effective January 1, 2005. During calendar year 2005, each non-employee director will receive a $60,000 annual retainer fee. The Chair of each of the Audit and Management Development and Compensation Committees will receive a $15,000 retainer, and the Chair of each of the Corporate Governance and Public Issues Committees will receive a $10,000 retainer. Each non-employee director will receive a fee equal to $1,500 for each meeting day attended. In addition to cash compensation, each non-employee director will receive a grant of 2,500 restricted shares of Company Common Stock on the date of the Company's Annual Meeting of Shareholders. On January 14, 2004, the Board approved a guideline that each non-employee director should own 10,000 shares of Company stock; each director is asked to comply with this guideline by the fifth anniversary of his or her election to the Board. Prior to these changes, the non-employee directors received an annual Board retainer fee of $55,000 and an additional annual retainer of $6,000 for service on a Board committee. The $6,000 annual committee retainer was eliminated and the annual Board retainer was increased to $60,000, resulting in a net $1,000 reduction in annual compensation. ITEM 6. EXHIBITS Exhibits required to be furnished by Item 601 of Regulation S-K are listed below. The Company may have omitted certain exhibits in accordance with Item 601(b)(4)(iii)(A) of Regulation S-K. The Company agrees to furnish such documents to the Commission upon request. Documents not designated as being incorporated herein by reference are set forth herewith. The paragraph numbers correspond to the exhibit numbers designated in Item 601 of Regulation S-K. 10(a) (xxiii) Form of Stock Option Award and Agreement for U.S. Employees (xxiv) Form of Stock Option Award and Agreement for U.S. Employees Based in the U.K. on International Assignment 32 (xxv) Form of Restricted Stock Unit Award and Agreement for U.S. Employees (xxvi) Form of Restricted Stock Unit Award and Agreement for Non-U.S. Based Employees (xxvii) Form of Five-Year Restricted Stock Unit Retention Award and Agreement for U.S. Employees (xxviii) Form of Five-Year Restricted Stock Unit Retention Award and Agreement for Non-U.S. Based Employees (xxix) Form of Three-Year Restricted Stock Unit Retention Award and Agreement for U.S. Employees (xxx) Form of Three-Year Restricted Stock Unit Retention Award and Agreement for Non-U.S. Based Employees (xxxi) Form of Performance Unit Award Agreement 12. Computation of Ratios of Earnings to Fixed Charges. 31(a). Rule 13a-14(a)/15d-14(a) Certification by the Chief Executive Officer. 31(b). Rule 13a-14(a)/15d-14(a) Certification by the Chief Financial Officer. 32(a). Certification by the Chief Executive Officer Relating to a Periodic Report Containing Financial Statements. 32(b). Certification by the Chief Financial Officer Relating to a Periodic Report Containing Financial Statements. 33 Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. H. J. HEINZ COMPANY (Registrant) Date: February 28, 2005 By: /s/ ARTHUR B. WINKLEBLACK .......................................... Arthur B. Winkleblack Executive Vice President and Chief Financial Officer (Principal Financial Officer) Date: February 28, 2005 By: /s/ EDWARD J. MCMENAMIN .......................................... Edward J. McMenamin Senior Vice President--Finance and Corporate Controller (Principal Accounting Officer) 34 EXHIBIT INDEX DESCRIPTION OF EXHIBIT Exhibits required to be furnished by Item 601 of Regulation S-K are listed below. Documents not designated as being incorporated herein by reference are furnished herewith. The paragraph numbers correspond to the exhibit numbers designated in Item 601 of Regulation S-K. 10(a) (xxiii) Form of Stock Option Award and Agreement for U.S. Employees (xxiv) Form of Stock Option Award and Agreement for U.S. Employees Based in the U.K. on International Assignment (xxv) Form of Restricted Stock Unit Award and Agreement for U.S. Employees (xxvi) Form of Restricted Stock Unit Award and Agreement for Non-U.S. Based Employees (xxvii) Form of Five-Year Restricted Stock Unit Retention Award and Agreement for U.S. Employees (xxviii) Form of Five-Year Restricted Stock Unit Retention Award and Agreement for Non-U.S. Based Employees (xxix) Form of Three-Year Restricted Stock Unit Retention Award and Agreement for U.S. Employees (xxx) Form of Three-Year Restricted Stock Unit Retention Award and Agreement for Non-U.S. Based Employees (xxxi) Form of Performance Unit Award Agreement 12. Computation of Ratios of Earnings to Fixed Charges. 31(a). Rule 13a-14(a)/15d-14(a) Certification by the Chief Executive Officer. 31(b). Rule 13a-14(a)/15d-14(a) Certification by the Chief Financial Officer. 32(a). Certification by the Chief Executive Officer Relating to a Periodic Report Containing Financial Statements. 32(b). Certification by the Chief Financial Officer Relating to a Periodic Report Containing Financial Statements. EX-10.01.23 2 j1227701exv10w01w23.txt EXHIBIT 10(A)(XXIII) Exhibit 10(a)(xxiii) Stock Option Award and Agreement [DATE] Dear _______________: H. J. Heinz Company is pleased to advise you that, effective ______, ____, you have been granted options ("Options") to purchase _________ shares of H. J. Heinz Company Common Stock, at an exercise price of $ _______ per share, in accordance with the terms and conditions of the stock option plan under which the Options were granted (the "Plan"), and a copy of which is attached together with a copy of the Prospectus. The Options are also granted under and governed by the terms and conditions of this letter agreement ("Agreement"), which shall control in the event of a conflict with the terms and conditions of the Plan. For purposes of this Agreement, the "Company" shall refer to H. J. Heinz Company and its Affiliated Companies (as defined in Section 4 below) in the United States, Canada and throughout the world. Unless otherwise specifically defined herein, all other capitalized terms used in this Agreement shall have the same defined meanings as provided in the H.J. Heinz Company Fiscal Year 2003 Stock Incentive Plan (the "2003 Stock Incentive Plan"), a copy of which is included as Exhibit A to the 2003 Stock Incentive Plan Prospectus that is attached hereto. 1. The Options are Non-Statutory Options, as defined in the Plan. The Options will vest in _________________ _____________ on _________, and will expire on __________, subject to earlier expiration in accordance with the terms of this Agreement or the Plan. 2. Subject to paragraphs 3 and 4 of this Agreement, the exercise period for the Options, including the effect of the termination of your employment with the Company or a "Change in Control", shall be governed by and determined in accordance with Section 8(B) of the 2003 Stock Incentive Plan, which is incorporated herein by reference and which shall control over and supersede any additional, different or inconsistent terms or provisions contained in the Plan; provided, however, that in the event of termination of your employment without "Cause", the "Expiration Date" shall be five years after the "Date of Termination" or the date of expiration specified in Section 1 above, whichever is sooner. 3. You agree that you shall not, during the term of your employment by the Company and for 12 months after termination of your employment, regardless of the reason for the termination, either directly or indirectly, solicit, take away or attempt to solicit or take away any other employee of the Company, either for your own purpose or for any other person or entity. You further agree that you shall not, during the term of your employment by the Company or at any time thereafter, use or disclose Confidential Information (as defined in Section 4 below) except as directed by, and in furtherance of the business purposes of, the Company. You acknowledge that the breach or threatened breach of this paragraph 3 will result in irreparable injury to the Company for which there is no adequate remedy at law because, among other things, it is not readily susceptible of proof as to the monetary damages that would result to the Company. You consent to the issuance of any restraining order or preliminary restraining order or injunction with respect to any conduct by you that is directly or indirectly a violation or a threatened violation of this paragraph. Any breach by you of the provisions of this paragraph 3 will, at the option of the Company and in addition to all other rights and remedies available to the Company at law, in equity or under this Agreement, result in the forfeiture of all unexercised options granted to you under this Agreement as of the date of such breach. 4. As used in this paragraph 4, the following terms shall have the respective indicated meanings: "Affiliated Company or Companies" means any person, corporation, limited liability company, partnership or other entity controlling, controlled by or under common control with the Company. "Confidential Information" means technical or business information not readily available to the public or generally known in the trade, including but not limited to inventions; ideas; improvements; discoveries; developments; formulations; ingredients; recipes; specifications; designs; standards; financial data; sales, marketing and distribution plans, techniques and strategies; customer and supplier information; equipment; mechanisms; manufacturing plans; processing and packaging techniques; trade secrets and other confidential information, knowledge, data and know-how of the Company, whether or not they originated with you, or information which the Company received from third parties under an obligation of confidentiality. "Conflicting Product" means any product or process of any person or organization, other than the Company, in existence or under development, (1) that competes with a product or process of the Company upon or with which you shall have worked during the two years prior to the termination of your employment with the Company or (2) whose use or marketability could be enhanced by application to it of Confidential Information acquired by you in connection with your employment by the Company during such two year period. For purposes of this definition, it shall be conclusively presumed that you have knowledge of information to which you have been directly exposed through actual receipt or review of memorandum or documents containing such information or through actual attendance at meetings at which such information was discussed or disclosed. "Conflicting Organization" means any person or organization that is engaged in or about to become engaged in research on or the development, production, marketing or selling of or the use in production, marketing or sale of a Conflicting Product. In partial consideration for the Options granted to you hereunder, you agree that, for a period of eighteen (18) months following the date of the termination of your employment with the Company, you shall not render services, directly or indirectly, as a director, officer, employee, agent, consultant or otherwise to any Conflicting Organization in any geographic area or territory in which such Conflicting Organization is engaged in or about to become engaged in the research on or the development, production, marketing or sale of or the use in production, marketing or sale of a Conflicting Product. The foregoing limitation does not apply to a Conflicting Organization whose business is diversified and that, as to that part of its business to which you render services, is not engaged in the development, production, marketing, use or sale of a Conflicting Product, provided that the Company shall receive separate written assurances satisfactory to the Company from you and the Conflicting Organization that you shall not render services during such period with respect to a Conflicting Product or directly or indirectly provide or reveal Confidential Information to such organization. If you shall render services to any Conflicting Organization other than as expressly permitted herein or shall provide or reveal Confidential Information to such Conflicting Organization, you shall (i) immediately return to the Company the pre-tax income resulting from any exercise of the Options or any portion thereof by you, unless such exercise occurred more than twelve (12) months prior to the date of the termination of your employment; and (ii) forfeit any unexercised portion of the Options. You acknowledge and agree that the restrictions set forth in this paragraph 4 are reasonable and necessary to protect the goodwill and legitimate business interests of the Company and to prevent the disclosure of the Company's Confidential Information and trade secrets. If any of the provisions herein shall for any reason be determined by a court of competent jurisdiction to be overly broad as to scope of activity, duration or territory, such provision shall be limited or reduced so as to be enforceable to the extent compatible with existing law. 5. You acknowledge and agree that nothing in this Agreement, the Plan or the 2003 Stock Incentive Plan shall confer upon you any right with respect to future awards or continuation of your employment, nor shall it constitute an employment agreement or interfere in any way with your right or the right of the Company to terminate your employment, with or without cause, and with or without notice, subject to the terms of any written employment contract that you may have with the Company that is signed by both you and an authorized representative of the Company. 6. You consent to the collection, use, and processing of personal data (including name, home address and telephone number, identification number and number of options held) by the Company or a third party engaged by the Company for the purpose of implementing, administering and managing the Plan and other stock option plans of the Company (the "Plans"). You further consent to the release of personal data (a) to such a third party administrator, which, at the option of the Company, may be designated as the exclusive broker in connection with the Plans, or (b) to any Affiliated Company, wherever located. You hereby waive any data privacy rights with respect to such data to the extent that receipt, possession, use, retention, or transfer of the data is authorized hereunder. 7. The Plan is discretionary in nature and the Company may modify, cancel or terminate it at any time without prior notice. While stock options may be granted under any of the Company's Plans on one or more occasions or even on a regular schedule, each grant is a one time event, is not an entitlement to an award of grants of stock options in the future, and does not create any contractual or other right to receive an award of stock options, compensation or benefits in lieu of stock options or any other compensation or benefits in the future. 8. This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania, without regard to its choice of law provisions. THIS GRANT OF OPTIONS IS SUBJECT TO YOUR ON-LINE ACCEPTANCE OF THE TERMS AND CONDITIONS OF THIS AGREEMENT. H.J. HEINZ COMPANY By: ------------------------------------ Accepted: Signed electronically Date: Acceptance Date EX-10.01.24 3 j1227701exv10w01w24.txt EXHIBIT 10(A)(XXIV) Exhibit 10(a)(xxiv) Stock Option Award and Agreement [DATE] Dear _______________: H. J. Heinz Company is pleased to advise you that, effective ______, ____, you have been granted options ("Options") to purchase _________ shares of H. J. Heinz Company Common Stock, at an exercise price of $ _______ per share, in accordance with the terms and conditions of the stock option plan under which the Options were granted (the "Plan"), and a copy of which is attached together with a copy of the Prospectus. The Options are also granted under and governed by the terms and conditions of this letter agreement ("Agreement"), which shall control in the event of a conflict with the terms and conditions of the Plan. For purposes of this Agreement, the "Company" shall refer to H. J. Heinz Company and its Affiliated Companies (as defined in Section 4 below) in the United States, Canada and throughout the world. Unless otherwise specifically defined herein, all other capitalized terms used in this Agreement shall have the same defined meanings as provided in the H.J. Heinz Company Fiscal Year 2003 Stock Incentive Plan (the "2003 Stock Incentive Plan"), a copy of which is included as Exhibit A to the 2003 Stock Incentive Plan Prospectus that is attached hereto. 1. The Options are Non-Statutory Options, as defined in the Plan. The Options will vest in __________ _________ _______ on ___________, and will expire on __________, subject to earlier expiration in accordance with the terms of this Agreement or the Plan. 2. Subject to paragraphs 3 and 4 of this Agreement, the exercise period for the Options, including the effect of the termination of your employment with the Company or a "Change in Control", shall be governed by and determined in accordance with Section 8(B) of the 2003 Stock Incentive Plan, which is incorporated herein by reference and which shall control over and supersede any additional, different or inconsistent terms or provisions contained in the Plan; provided, however, that in the event of termination of your employment without "Cause", the "Expiration Date" shall be five years after the "Date of Termination" or the date of expiration specified in Section 1 above, whichever is sooner. 3. You agree that you shall not, during the term of your employment by the Company and for 12 months after termination of your employment, regardless of the reason for the termination, either directly or indirectly, solicit, take away or attempt to solicit or take away any other employee of the Company, either for your own purpose or for any other person or entity. You further agree that you shall not, during the term of your employment by the Company or at any time thereafter, use or disclose Confidential Information (as defined in Section 4 below) except as directed by, and in furtherance of the business purposes of, the Company. You acknowledge that the breach or threatened breach of this paragraph 3 will result in irreparable injury to the Company for which there is no adequate remedy at law because, among other things, it is not readily susceptible of proof as to the monetary damages that would result to the Company. You consent to the issuance of any restraining order or preliminary restraining order or injunction with respect to any conduct by you that is directly or indirectly a violation or a threatened violation of this paragraph. Any breach by you of the provisions of this paragraph 3 will, at the option of the Company and in addition to all other rights and remedies available to the Company at law, in equity or under this Agreement, result in the forfeiture of all unexercised options granted to you under this Agreement as of the date of such breach. 4. As used in this paragraph 4, the following terms shall have the respective indicated meanings: "Affiliated Company or Companies" means any person, corporation, limited liability company, partnership or other entity controlling, controlled by or under common control with the Company. "Confidential Information" means technical or business information not readily available to the public or generally known in the trade, including but not limited to inventions; ideas; improvements; discoveries; developments; formulations; ingredients; recipes; specifications; designs; standards; financial data; sales, marketing and distribution plans, techniques and strategies; customer and supplier information; equipment; mechanisms; manufacturing plans; processing and packaging techniques; trade secrets and other confidential information, knowledge, data and know-how of the Company, whether or not they originated with you, or information which the Company received from third parties under an obligation of confidentiality. "Conflicting Product" means any product or process of any person or organization, other than the Company, in existence or under development, (1) that competes with a product or process of the Company upon or with which you shall have worked during the two years prior to the termination of your employment with the Company or (2) whose use or marketability could be enhanced by application to it of Confidential Information acquired by you in connection with your employment by the Company during such two year period. For purposes of this definition, it shall be conclusively presumed that you have knowledge of information to which you have been directly exposed through actual receipt or review of memorandum or documents containing such information or through actual attendance at meetings at which such information was discussed or disclosed. "Conflicting Organization" means any person or organization that is engaged in or about to become engaged in research on or the development, production, marketing or selling of or the use in production, marketing or sale of a Conflicting Product. In partial consideration for the Options granted to you hereunder, you agree that, for a period of eighteen (18) months following the date of the termination of your employment with the Company, you shall not render services, directly or indirectly, as a director, officer, employee, agent, consultant or otherwise to any Conflicting Organization in any geographic area or territory in which such Conflicting Organization is engaged in or about to become engaged in the research on or the development, production, marketing or sale of or the use in production, marketing or sale of a Conflicting Product. The foregoing limitation does not apply to a Conflicting Organization whose business is diversified and that, as to that part of its business to which you render services, is not engaged in the development, production, marketing, use or sale of a Conflicting Product, provided that the Company shall receive separate written assurances satisfactory to the Company from you and the Conflicting Organization that you shall not render services during such period with respect to a Conflicting Product or directly or indirectly provide or reveal Confidential Information to such organization. If you shall render services to any Conflicting Organization other than as expressly permitted herein or shall provide or reveal Confidential Information to such Conflicting Organization, you shall (i) immediately return to the Company the pre-tax income resulting from any exercise of the Options or any portion thereof by you, unless such exercise occurred more than twelve (12) months prior to the date of the termination of your employment; and (ii) forfeit any unexercised portion of the Options. You acknowledge and agree that the restrictions set forth in this paragraph 4 are reasonable and necessary to protect the goodwill and legitimate business interests of the Company and to prevent the disclosure of the Company's Confidential Information and trade secrets. If any of the provisions herein shall for any reason be determined by a court of competent jurisdiction to be overly broad as to scope of activity, duration or territory, such provision shall be limited or reduced so as to be enforceable to the extent compatible with existing law. 5. You acknowledge and agree that nothing in this Agreement, the Plan or the 2003 Stock Incentive Plan shall confer upon you any right with respect to future awards or continuation of your employment, nor shall it constitute an employment agreement or interfere in any way with your right or the right of the Company to terminate your employment, with or without cause, and with or without notice, subject to the terms of any written employment contract that you may have with the Company that is signed by both you and an authorized representative of the Company. 6. You consent to the collection, use, and processing of personal data (including name, home address and telephone number, identification number and number of options held) by the Company or a third party engaged by the Company for the purpose of implementing, administering and managing the Plan and other stock option plans of the Company (the "Plans"). You further consent to the release of personal data (a) to such a third party administrator, which, at the option of the Company, may be designated as the exclusive broker in connection with the Plans, or (b) to any Affiliated Company, wherever located. You hereby waive any data privacy rights with respect to such data to the extent that receipt, possession, use, retention, or transfer of the data is authorized hereunder. 7. The Plan is discretionary in nature and the Company may modify, cancel or terminate it at any time without prior notice. While stock options may be granted under any of the Company's Plans on one or more occasions or even on a regular schedule, each grant is a one time event, is not an entitlement to an award of grants of stock options in the future, and does not create any contractual or other right to receive an award of stock options, compensation or benefits in lieu of stock options or any other compensation or benefits in the future. 8. This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania, without regard to its choice of law provisions. U.K. ACKNOWLEDGEMENT AND WAIVER FORM (INTERNATIONAL ASSIGNMENT) This Acknowledgement and Waiver Form is incorporated into and made a part of the Stock Option Award and Agreement (the "Agreement"), under which I have been awarded a grant of options to purchase shares of H. J. Heinz Company Common Stock pursuant to the H. J. Heinz Company 1994, 1996 or 2000 Stock Option Plans and/or the H.J. Heinz Company Fiscal Year 2003 Stock Incentive Plan. I understand that my award and future awards of stock options, if any, granted to me under these plans or any future plans (any such plan, the "Plan") are subject to my on-line acceptance of the Agreement and this Acknowledgement and Waiver Form. I understand that I will not be able to exercise any of these stock options until I accept on-line this Acknowledgement and Waiver Form. The Plan is discretionary in nature and H. J. Heinz Company ("Company") may modify, cancel, or terminate it at any time without prior notice and without affecting any vested rights. While stock options may be granted under a Plan on one or more occasions or even on a regular schedule, each grant is considered a one time event, is not part of any contractual compensation I may have, and does not create any contractual or other right to receive an award of stock options, compensation or benefits in lieu of stock options, or any other compensations or benefits in the future. The Plan is a voluntary program, and future grants, if any, will be at the sole discretion of the Company including, but not limited to, the timing of any grant, the number of stock options, vesting provisions, and the option price. Awards under a Plan are available to employees only during the course of their employment relationship in accordance with the terms and conditions of the Plan, and awards under a Plan will have no bearing in the computation of termination indemnities, if any. As with past awards, if any, the value of the award is an extraordinary item of compensation outside the scope of any employment contract. As such, the award, as with past awards, if any, is not part of normal or expected compensation for purposes of calculating any termination, resignation, severance, redundancy, end of service payments, bonuses, service awards, pension benefits, retirement benefits, or similar payments. The award and any vesting of any award cease upon termination of employment for any reason except as may otherwise be explicitly provided in the Plan or any written agreement entered into by you and the Company, including the Grant Agreement. The future value of the underlying shares of Heinz Common Stock is unknown and cannot be predicted with certainty. I consent to the collection, use, processing and transfer of data, as described in this paragraph for the purpose of implementing, managing and administering the Plan. I understand that the Company, its subsidiaries and my employer hold for such purpose certain personal information about me, including my name, home address and telephone number, salary, nationality, job title, any shares of stock or directorships held in the Company, details of all options or other entitlement to shares of stock awarded, canceled, exercised, vested, unvested or outstanding in my favor, my global identification number or social security number, birth date, hire date, job grade, the location where I work, and any termination information, such as date of termination and the reason for termination ("Data"). The Company, its subsidiaries and/or other third parties assisting the Company will transfer data among themselves as necessary for the purpose of implementation, administration, and management of my participation in the Plan. The Company, its subsidiaries, or third parties may be located in the U.S. or elsewhere. I authorize them to receive, possess, use, retain, and transfer the Data, in electronic or other form, for the purposes of implementing, administering, and managing my participation in the Plan, including transferring such Data as may be required for the administration of the Plan and/or the subsequent holding of shares of stock on my behalf to a broker or other third party with whom I may elect to deposit any shares of stock acquired pursuant to the Plan, but for no other purpose. Each of the data recipients will maintain security measures to ensure its security and confidentiality. I hereby waive any data privacy rights I may have with respect to the Data to the extent of receipt, possession, use, retention or transfer of the Data authorized hereunder. I understand that I may, at any time, view Data, require any necessary amendments to it, or withdraw the consents with respect to the Data contained herein by written notice addressed and delivered to the General Counsel or Secretary of the Company. I understand that withdrawal of such consent may affect my ability to participate in the Plan and/or result in the forfeiture of any awards, whether vested or unvested, made to me under the Plan. The Plan and the Agreement govern all aspects of my award, and the provisions of the Plan are summarized in the Plan prospectus. Additional copies of the Plan documents may be obtained from the Company. To the extent permitted by applicable law, the Plan is subject to U.S. law, and the interpretation of the Plan and my rights under the Plan will be governed by applicable U.S. law as specified in the Agreement. I understand and agree that (A) at the date of exercise of these stock options, I will be liable for income tax on any gain that arises - that is, any excess of market value of the shares at the date of exercise over the total acquisition price payable for the shares; (B) in addition, subject to the arrangements made relating to my international assignment regarding payment of taxes, I will be responsible for any U.K. National Insurance Contributions (employer's and employee's) that arise on the exercise of my option; and (C) the Company will supply details of the exercise to the Inland Revenue, but I will remain under an obligation to make a return of any gain in my annual tax return. I also understand and agree that, subject to the arrangements made relating to my international assignment regarding payment of taxes, I will be responsible for paying to, or reimbursing, the Company or any other company by which I may be employed for any amounts for which it becomes liable to account in respect of my U.K. income tax (by way of the PAYE system) and employee's and employer's National Insurance Contribution incurred upon the exercise of my stock. I acknowledge that I have read and understand the foregoing. THIS GRANT OF OPTIONS IS SUBJECT TO YOUR ON-LINE ACCEPTANCE OF THE TERMS AND CONDITIONS OF THIS AGREEMENT AND U.K. ACKNOWLEDGEMENT AND WAIVER FORM (INTERNATIONAL ASSIGNMENT). H.J. HEINZ COMPANY By: ------------------------------------ Accepted: Signed electronically Date: Acceptance Date EX-10.01.25 4 j1227701exv10w01w25.txt EXHIBIT 10(A)(XXV) Exhibit 10(a)(xxv) RESTRICTED STOCK UNIT AWARD AND AGREEMENT [DATE] Dear _______________: H. J. Heinz Company is pleased to confirm that, effective as of ________, ____, you have been granted an award of Restricted Stock Units ("RSUs") for Fiscal Year ____ in accordance with the terms and conditions of the H.J. Heinz Company Fiscal Year 2003 Stock Incentive Plan (the "Plan"). This Award is also made under and governed by the terms and conditions of this letter agreement ("Agreement"), which shall control in the event of a conflict with the terms and conditions of the Plan. For purposes of this Agreement, the "Company" shall refer to H. J. Heinz Company and its Subsidiaries. Unless otherwise defined in this Agreement, all capitalized terms used in this Agreement shall have the same defined meanings as in the Plan. 1. RSU Award. You have been awarded a total of ____________ RSUs for Fiscal Year ____. 2. RSU Account. RSUs entitle you to receive a corresponding number of shares of H. J. Heinz Company Common Stock ("Common Stock") in the future, subject to the conditions and restrictions set forth in this Agreement, including, without limitation, the vesting conditions set forth in Paragraph 3 below. Your RSUs will be credited to a separate account established and maintained by the Company on your behalf. Until the Distribution Date (as defined herein), your RSUs are treated as deferred compensation amounts, the value of which is subject to change based on increases or decreases in the market price of the Common Stock. Because the RSUs are not actual shares of Common Stock, you cannot exercise voting rights on them until the Distribution Date. 3. Vesting. You will become vested in the RSUs credited to your account according to the following schedule: (a) Normal Vesting. You will become 100% vested in the RSUs upon the fifth anniversary of the Effective Date. Except as provided in Paragraphs 3(b), 4(b) and 4(c) below, none of the RSUs will become vested prior to this date. (b) Accelerated Vesting. If, in either Fiscal Year ____, ____ or ____, the Company's earnings per share ("EPS") equals or exceeds the EPS Target established by the Management Development & Compensation Committee of the Company's Board of Directors for that fiscal year as set forth in this Agreement, one-third of the RSUs granted hereunder (plus any RSUs granted hereunder that did not vest in any prior fiscal year or years because of failure to achieve the requisite EPS Target) will automatically vest on the anniversary date of the Effective Date that immediately follows the date on which EPS results are released for that fiscal year. The EPS Targets for this award are: FY ____ - $____ FY ____ - $____ FY ____ - $____
RSUs that remain unvested after Fiscal Year ____ as the result of failure to achieve the requisite EPS Targets shall vest in accordance with Paragraph 3(a) above. 4. Termination of Employment. The termination of your employment with the Company will have the following effect on your RSUs: (a) Retirement, Disability or Involuntary Termination without Cause. If the termination of your employment with the Company is the result of Retirement, Disability, or involuntary termination without Cause, any RSUs granted hereunder that remain unvested as of your Date of Termination shall continue to vest in accordance with the vesting schedule set forth in Paragraphs 3(a) and 3(b) above, subject to the requirements of Paragraph 5 of this Agreement. (b) Death. In the event that you should die while you are continuing to perform services for the Company or following Retirement, any RSUs that remain unvested as of the date of your death shall continue to vest in accordance with the vesting schedule set forth in Paragraphs 3(a) and 3(b) above. (c) Change in Control. In the event of a Change in Control, any RSUs that remain unvested as of the date of the Change in Control shall immediately become vested unless your RSU award is replaced by an award of equivalent value provided by the Surviving Corporation, which replacement award vests not later than the replaced award and, to the extent not previously vested, vests in full in the event of any involuntary termination of your employment with the Surviving Corporation following the Change in Control (other than an involuntary termination for Cause). (d) Other Termination. If your employment with the Company terminates for any reason other than as set forth in subparagraphs (a), (b) and (c) above, including without limitation any voluntary termination of employment or an involuntary termination for Cause, no further vesting will occur and you will immediately forfeit all of your rights in any RSUs that remain unvested as of your Date of Termination. 5. Non-Solicitation/Confidential Information. In partial consideration for the RSUs granted to you hereunder, you agree that you shall not, during the term of your employment by the Company and for 12 months after termination of your employment, regardless of the reason for the termination, either directly or indirectly, solicit, take away or attempt to solicit or take away any other employee of the Company, either for your own purpose or for any other person or entity. You further agree that you shall not, during the term of your employment by the Company or at any time thereafter, use or disclose the Confidential Information (as defined below) except as directed by, and in furtherance of the business purposes of, the Company. You acknowledge that the breach or threatened breach of this Paragraph 5 will result in irreparable injury to the Company for which there is no adequate remedy at law because, among other things, it is not readily susceptible of proof as to the monetary damages that would result to the Company. You consent to the issuance of any restraining order or preliminary restraining order or injunction with respect to any conduct by you that is directly or indirectly a breach or threatened breach of this Paragraph 5. Any breach by you of the provisions of this Paragraph 5 will, at the option of the Company and in addition to all other rights and remedies available to the Company at law, in equity or under this Agreement, result in the immediate forfeiture of all of your rights in any RSUs that remain unvested as of the date of such breach. "Confidential Information" as used herein shall mean technical or business information not readily available to the public or generally known in the trade, including but not limited to inventions; ideas; improvements; discoveries; developments; formulations; ingredients; recipes; specifications; designs; standards; financial data; sales, marketing and distribution plans, techniques and strategies; customer and supplier information; equipment; mechanisms; manufacturing plans; processing and packaging techniques; trade secrets and other confidential information, knowledge, data and know-how of the Company, whether or not they originated with you, or information which the Company received from third parties under an obligation of confidentiality. 6. Dividends. An amount equal to the dividends payable on the shares of Common Stock represented by the RSUs will be paid directly to you as soon as practicable following the date on which a dividend is declared by the Company. These payments will be calculated based upon the number of RSUs credited to your account as of the date that a dividend is declared. These payments will be reported as income to the applicable taxing authorities, and federal, state, local and/or foreign income and/or employment taxes will be withheld from such payments as and to the extent required by applicable law. 7. Distribution. All RSU distributions will be made in the form of actual shares of Common Stock and will be distributed to you on one of the following dates (each, a "Distribution Date"): (a) Default Distribution Date. Shares of Common Stock representing your RSUs will be distributed to you when the RSUs vest, unless you make an election to defer receipt to a later date, as provided in subparagraph (b) below. (b) Deferred Distribution Date. You may elect to defer distribution of your RSUs to a date subsequent to the Default Distribution Date by providing a written election form to the Company by no later than ___________, ____. A copy of the election form is attached. (c) Executive Officer/Management Committee Member Exception. If you are a named executive officer of the Company on the Distribution Date (as listed in the proxy statement filed by the Company most recent to the Distribution Date) or are a member of the Company's Management Committee on the Distribution Date, the Distribution Date will automatically be deferred to the close of business on the last day of your employment with the Company. Certificates representing the distributed shares of Common Stock will be delivered to the firm maintaining your account as soon as practicable after a Distribution Date occurs. Notwithstanding the foregoing, all vested RSUs will be immediately distributed to you at the close of business on the last day of your employment with the Company, or as soon as practicable thereafter, if you terminate employment with the Company for any reason including death, disability, retirement or Change of Control of the Company. 8. Impact on Benefits. Of the _____ RSUs being credited to your account, _____ are deemed to be a replacement for award opportunity under the Company's Shareholder Success Plan (SSP). To the extent that your RSU Award replaces a cash SSP award opportunity, the face value of the award on the date of the grant (the number of RSUs multiplied by the closing price, as listed on the New York Stock Exchange, of the shares of Common Stock represented by the RSUs on the date of the grant) will be included as compensation for the year of the grant for purposes of the H.J. Heinz Company Supplemental Executive Retirement Plan and the H.J. Heinz Company Employees Retirement and Savings Excess Plan, regardless of whether or not the RSUs subsequently vest. 9. Tax Withholding. On the Distribution Date, the Company will withhold a number of shares of Common Stock that is equal, based on the Fair Market Value of the Common Stock on the Distribution Date, to the amount of the federal, state, local, and/or foreign income and/or employment taxes required to be collected or withheld with respect to the distribution. 10. Non-Transferability. Your RSUs may not be sold, transferred, pledged, assigned or otherwise encumbered except by will or the laws of descent and distribution. You may also designate a beneficiary(ies) in the event that you die before a Distribution Date occurs, who shall succeed to all your rights and obligations under this Agreement and the Plan. A beneficiary election form is attached. If you do not designate a beneficiary, your RSUs will pass to the person or persons entitled to receive them under your will. If you shall have failed to make a testamentary disposition of your RSUs in your will or shall have died intestate, your RSUs will pass to the legal representative or representatives of your estate. 11. Employment At-Will. You acknowledge and agree that nothing in this Agreement or the Plan shall confer upon you any right with respect to future awards or continuation of your employment, nor shall it constitute an employment agreement or interfere in any way with your right or the right of Company to terminate your employment at any time, with or without cause, and with or without notice. 12. Collection and Use of Personal Data. You consent to the collection, use, and processing of personal data (including name, home address and telephone number, identification number and number of RSUs held) by the Company or a third party engaged by the Company for the purpose of implementing, administering and managing the Plan and any other stock option or stock incentive plans of the Company (the "Plans"). You further consent to the release of personal data to such a third party administrator, which, at the option of the Company, may be designated as the exclusive broker in connection with the Plans. You hereby waive any data privacy rights with respect to such data to the extent that receipt, possession, use, retention, or transfer of the data is authorized hereunder. 13. Future Awards. The Plan is discretionary in nature and the Company may modify, cancel or terminate it at any time without prior notice in accordance with the terms of the Plan. While RSUs or other awards may be granted under the Plan on one or more occasions or even on a regular schedule, each grant is a one time event, is not an entitlement to an award of RSUs in the future, and does not create any contractual or other right to receive an award of RSUs, compensation or benefits in lieu of RSUs or any other compensation or benefits in the future. 14. Compliance with Stock Ownership Guidelines. All RSUs granted to you under this Agreement shall be counted as shares of Common Stock that are owned by you for purposes of satisfying the minimum share requirements under the Company's Simplified Stock Ownership Guidelines ("SOG"). Notwithstanding the foregoing, you acknowledge and agree that, with the exception of the number of shares of Common Stock withheld to satisfy income tax withholding requirements pursuant to Paragraph 9 above, the shares of Common Stock represented by the RSUs granted to you hereunder cannot be sold or otherwise transferred, even after the Distribution Date, unless and until you have met SOG's minimum share ownership requirements. The Management Development & Compensation Committee will not approve additional RSU awards to you unless you are in compliance with the terms of this Paragraph 15 and the SOG requirements. 15. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania, without regard to its choice of law provisions. THIS RSU AWARD IS SUBJECT TO YOUR ON-LINE ACCEPTANCE OF THE TERMS AND CONDITIONS OF THIS AGREEMENT. H. J. HEINZ COMPANY By: ------------------------------------ Accepted: --------------------------- Date: ------------------------------- BENEFICIARY DESIGNATION Upon my death, the vested Restricted Stock Units earned by me under all Restricted Stock Unit Agreements shall be paid to the beneficiary(ies) I designate below. This designation supercedes any prior beneficiary designation I have made regarding my Restricted Stock Unit account balance, and shall remain in effect unless and until I file a subsequent Beneficiary Designation Form with the Company. Primary Beneficiary Designation The vested Restricted Stock Units distributable to me shall be paid, in equal portions unless otherwise indicated, to the following Primary Beneficiary(ies) then surviving:
Name Relationship Date of Birth Social Security Number - ---- ------------ ------------- ---------------------- - ------------- ------------ ------------- ---------------------- - ------------- ------------ ------------- ---------------------- - ------------- ------------ ------------- ---------------------- - ------------- ------------ ------------- ----------------------
Contingent Beneficiary Designation If none of the above-named Primary Beneficiaries survives me, the vested Restricted Stock Units distributable to me shall be paid, in equal portions unless otherwise indicated, to the following Contingent Beneficiary(ies) then surviving:
Name Relationship Date of Birth Social Security Number - ---- ------------ ------------- ---------------------- - ------------- ------------ ------------- ---------------------- - ------------- ------------ ------------- ---------------------- - ------------- ------------ ------------- ---------------------- - ------------- ------------ ------------- ----------------------
- ---------------------------- ----------------------------- Signature Date EX-10.01.26 5 j1227701exv10w01w26.txt EXHIBIT 10(A)(XXVI) Exhibit 10(a)(xxvi) RESTRICTED STOCK UNIT AWARD AND AGREEMENT [DATE] Dear _______________: H. J. Heinz Company is pleased to confirm that, effective as of ______, ____, you have been granted an award of Restricted Stock Units ("RSUs") for Fiscal Year ____ in accordance with the terms and conditions of the H.J. Heinz Company Fiscal Year 2003 Stock Incentive Plan (the "Plan"). This Award is also made under and governed by the terms and conditions of this letter agreement ("Agreement"), which shall control in the event of a conflict with the terms and conditions of the Plan. For purposes of this Agreement, the "Company" shall refer to H. J. Heinz Company and its Subsidiaries. Unless otherwise defined in this Agreement, all capitalized terms used in this Agreement shall have the same defined meanings as in the Plan. 1. RSU Award. You have been awarded a total of ____________ RSUs for Fiscal Year ____. 2. RSU Account. RSUs entitle you to receive a corresponding number of shares of H. J. Heinz Company Common Stock ("Common Stock") in the future, subject to the conditions and restrictions set forth in this Agreement, including, without limitation, the vesting conditions set forth in Paragraph 3 below. Your RSUs will be credited to a separate account established and maintained by the Company on your behalf. Until the Distribution Date (as defined herein), your RSUs are treated as deferred compensation amounts, the value of which is subject to change based on increases or decreases in the market price of the Common Stock. Because the RSUs are not actual shares of Common Stock, you cannot exercise voting rights on them until the Distribution Date. 3. Vesting. You will become vested in the RSUs credited to your account according to the following schedule: (a) Normal Vesting. You will become 100% vested in the RSUs upon the fifth anniversary of the date of the award. Except as provided in Paragraphs 3(b), 4(b) and 4(c) below, none of the RSUs will become vested prior to this date. (b) Accelerated Vesting. If, in either Fiscal Year ____, ____ or ____, the Company's earnings per share ("EPS") equals or exceeds the EPS Target established by the Management Development & Compensation Committee of the Company's Board of Directors for that fiscal year as set forth in this Agreement, one-third of the RSUs granted hereunder (plus any RSUs granted hereunder that did not vest in any prior fiscal year or years because of failure to achieve the requisite EPS Target) will automatically vest on the anniversary date of the award that immediately follows the date on which EPS results are released for that fiscal year. The EPS Targets for this award are: FY ____ - $____ FY ____ - $____ FY ____ - $____
RSUs that remain unvested after Fiscal Year ____ as the result of failure to achieve the requisite EPS Targets shall vest in accordance with Paragraph 3(a) above. 4. Termination of Employment. The termination of your employment with the Company will have the following effect on your RSUs: (a) Retirement, Disability or Involuntary Termination without Cause. If the termination of your employment with the Company is the result of Retirement, Disability, or involuntary termination without Cause, any RSUs granted hereunder that remain unvested as of your Date of Termination shall continue to vest in accordance with the vesting schedule set forth in Paragraphs 3(a) and 3(b) above, subject to the requirements of Paragraph 5 of this Agreement. (b) Death. In the event that you should die while you are continuing to perform services for the Company or following Retirement, any RSUs that remain unvested as of the date of your death shall continue to vest in accordance with the vesting schedule set forth in Paragraphs 3(a) and 3(b) above. (c) Change in Control. In the event of a Change in Control, any RSUs that remain unvested as of the date of the Change in Control shall immediately become vested unless your RSU award is replaced by an award of equivalent value provided by the Surviving Corporation, which replacement award vests not later than the replaced award and, to the extent not previously vested, vests in full in the event of any involuntary termination of your employment with the Surviving Corporation following the Change in Control (other than an involuntary termination for Cause). (d) Other Termination. If your employment with the Company terminates for any reason other than as set forth in subparagraphs (a), (b) and (c) above, including without limitation any voluntary termination of employment or an involuntary termination for Cause, no further vesting will occur and you will immediately forfeit all of your rights in any RSUs that remain unvested as of your Date of Termination. 5. Non-Solicitation/Confidential Information. In partial consideration for the RSUs granted to you hereunder, you agree that you shall not, during the term of your employment by the Company and for 12 months after termination of your employment, regardless of the reason for the termination, either directly or indirectly, solicit, take away or attempt to solicit or take away any other employee of the Company, either for your own purpose or for any other person or entity. You further agree that you shall not, during the term of your employment by the Company or at any time thereafter, use or disclose the Confidential Information (as defined below) except as directed by, and in furtherance of the business purposes of, the Company. You acknowledge that the breach or threatened breach of this Paragraph 5 will result in irreparable injury to the Company for which there is no adequate remedy at law because, among other things, it is not readily susceptible of proof as to the monetary damages that would result to the Company. You consent to the issuance of any restraining order or preliminary restraining order or injunction with respect to any conduct by you that is directly or indirectly a breach or threatened breach of this Paragraph 5. Any breach by you of the provisions of this Paragraph 5 will, at the option of the Company and in addition to all other rights and remedies available to the Company at law, in equity or under this Agreement, result in the immediate forfeiture of all of your rights in any RSUs that remain unvested as of the date of such breach. "Confidential Information" as used herein shall mean technical or business information not readily available to the public or generally known in the trade, including but not limited to inventions; ideas; improvements; discoveries; developments; formulations; ingredients; recipes; specifications; designs; standards; financial data; sales, marketing and distribution plans, techniques and strategies; customer and supplier information; equipment; mechanisms; manufacturing plans; processing and packaging techniques; trade secrets and other confidential information, knowledge, data and know-how of the Company, whether or not they originated with you, or information which the Company received from third parties under an obligation of confidentiality. 6. Dividends. An amount equal to the dividends payable on the shares of Common Stock represented by the RSUs will be paid directly to you as soon as practicable following the date on which a dividend is declared by the Company. These payments will be calculated based upon the number of RSUs credited to your account as of the date that a dividend is declared. These payments will be reported as income to the applicable taxing authorities, and federal, state, local and/or foreign income and/or employment taxes will be withheld from such payments as and to the extent required by applicable law. 7. Distribution. All RSU distributions will be made in the form of actual shares of Common Stock and will be distributed to you on one of the following dates (each, a "Distribution Date"): (a) Default Distribution Date. Shares of Common Stock representing your RSUs will be distributed to you when the RSUs vest, unless the Distribution Date is automatically deferred as provided in subparagraph (b) below. (b) Executive Officer/Management Committee Member Exception. If you are a named executive officer of the Company on the Distribution Date (as listed in the proxy statement filed by the Company most recent to the Distribution Date) or are a member of the Company's Management Committee on the Distribution Date, the Distribution Date will automatically be deferred to the close of business on the last day of your employment with the Company. Certificates representing the distributed shares of Common Stock will be delivered to the firm maintaining your account as soon as practicable after a Distribution Date occurs. Notwithstanding the foregoing, all vested RSUs will be immediately distributed to you at the close of business on the last day of your employment with the Company, or as soon as practicable thereafter, if you terminate employment with the Company for any reason including death, disability, retirement or Change of Control of the Company. 8. Impact on Benefits. Of the _____ RSUs being credited to your account, _____ are deemed to be a replacement for award opportunity under the Company's Shareholder Success Plan (SSP). To the extent that your RSU Award replaces a cash SSP award opportunity, the face value of the award on the date of the grant (the number of RSUs multiplied by the closing price, as listed on the New York Stock Exchange, of the shares of Common Stock represented by the RSUs on the date of the grant) will be included as compensation for the year of the grant for purposes of the H.J. Heinz Company Supplemental Executive Retirement Plan and the H.J. Heinz Company Employees Retirement and Savings Excess Plan, regardless of whether or not the RSUs subsequently vest. 9. Tax Withholding. On the Distribution Date, the Company will withhold a number of shares of Common Stock that is equal, based on the Fair Market Value of the Common Stock on the Distribution Date, to the amount of the federal, state, local, and/or foreign income and/or employment taxes required to be collected or withheld with respect to the distribution. 10. Non-Transferability. Your RSUs may not be sold, transferred, pledged, assigned or otherwise encumbered except by will or the laws of descent and distribution. You may also designate a beneficiary(ies) in the event that you die before a Distribution Date occurs, who shall succeed to all your rights and obligations under this Agreement and the Plan. A beneficiary election form is attached. If you do not designate a beneficiary, your RSUs will pass to the person or persons entitled to receive them under your will. If you shall have failed to make a testamentary disposition of your RSUs in your will or shall have died intestate, your RSUs will pass to the legal representative or representatives of your estate. 11. Employment Rights. You acknowledge and agree that nothing in this Agreement or the Plan shall confer upon you any right with respect to future awards or continuation of your employment, nor shall it constitute an employment agreement or interfere in any way with your right or the right of Company to terminate your employment at any time, with or without cause, and with or without notice, subject to the terms of any written employment contract that you may have with the Company that is signed by both you and an authorized representative of the Company. 12. Collection and Use of Personal Data. You consent to the collection, use, and processing of personal data (including name, home address and telephone number, identification number and number of RSUs held) by the Company or a third party engaged by the Company for the purpose of implementing, administering and managing the Plan and any other stock option or stock incentive plans of the Company (the "Plans"). You further consent to the release of personal data (a) to such a third party administrator, which, at the option of the Company, may be designated as the exclusive broker in connection with the Plans, or (b) to any affiliated company within the definition of the Company, wherever located. You hereby waive any data privacy rights with respect to such data to the extent that receipt, possession, use, retention, or transfer of the data is authorized hereunder. 13. Future Awards. The Plan is discretionary in nature and the Company may modify, cancel or terminate it at any time without prior notice in accordance with the terms of the Plan. While RSUs or other awards may be granted under the Plan on one or more occasions or even on a regular schedule, each grant is a one time event, is not an entitlement to an award of RSUs in the future, and does not create any contractual or other right to receive an award of RSUs, compensation or benefits in lieu of RSUs or any other compensation or benefits in the future. 14. Compliance with Stock Ownership Guidelines. All RSUs granted to you under this Agreement shall be counted as shares of Common Stock that are owned by you for purposes of satisfying the minimum share requirements under the Company's Simplified Stock Ownership Guidelines ("SOG"). Notwithstanding the foregoing, you acknowledge and agree that, with the exception of the number of shares of Common Stock withheld to satisfy income tax withholding requirements pursuant to Paragraph 9 above, the shares of Common Stock represented by the RSUs granted to you hereunder cannot be sold or otherwise transferred, even after the Distribution Date, unless and until you have met SOG's minimum share ownership requirements. The Management Development & Compensation Committee will not approve additional RSU awards to you unless you are in compliance with the terms of this Paragraph 15 and the SOG requirements. 15. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania, without regard to its choice of law provisions. THIS RSU AWARD IS SUBJECT TO YOUR ON-LINE ACCEPTANCE OF THE TERMS AND CONDITIONS OF THIS AGREEMENT. H. J. HEINZ COMPANY By: ------------------------------------ Accepted: --------------------------- Date: ------------------------------- BENEFICIARY DESIGNATION Upon my death, the vested Restricted Stock Units earned by me under all Restricted Stock Unit Agreements shall be paid to the beneficiary(ies) I designate below. This designation supercedes any prior beneficiary designation I have made regarding my Restricted Stock Unit account balance, and shall remain in effect unless and until I file a subsequent Beneficiary Designation Form with the Company. Primary Beneficiary Designation The vested Restricted Stock Units distributable to me shall be paid, in equal portions unless otherwise indicated, to the following Primary Beneficiary(ies) then surviving:
Name Relationship Date of Birth Social Security Number - ---- ------------ ------------- ---------------------- - ------------- ------------ ------------- ---------------------- - ------------- ------------ ------------- ---------------------- - ------------- ------------ ------------- ---------------------- - ------------- ------------ ------------- ----------------------
Contingent Beneficiary Designation If none of the above-named Primary Beneficiaries survives me, the vested Restricted Stock Units distributable to me shall be paid, in equal portions unless otherwise indicated, to the following Contingent Beneficiary(ies) then surviving:
Name Relationship Date of Birth Social Security Number - ---- ------------ ------------- ---------------------- - ------------- ------------ ------------- ---------------------- - ------------- ------------ ------------- ---------------------- - ------------- ------------ ------------- ---------------------- - ------------- ------------ ------------- ----------------------
- ---------------------------- ----------------------------- Signature Date EX-10.01.27 6 j1227701exv10w01w27.txt EXHIBIT 10(A)(XXVII) Exhibit 10(a)(xxvii) RESTRICTED STOCK UNIT AWARD AND AGREEMENT [DATE] Dear _______________: H. J. Heinz Company is pleased to confirm that, effective as of ____________ (the "Effective Date"), you have been granted an award of Restricted Stock Units ("RSUs") for Fiscal Year ____ in accordance with the terms and conditions of the H.J. Heinz Company Fiscal Year 2003 Stock Incentive Plan (the "Plan"). This Award is also made under and governed by the terms and conditions of this letter agreement ("Agreement"), which shall control in the event of a conflict with the terms and conditions of the Plan. For purposes of this Agreement, the "Company" shall refer to H. J. Heinz Company and its Subsidiaries. Unless otherwise defined in this Agreement, all capitalized terms used in this Agreement shall have the same defined meanings as in the Plan. 1. RSU Award. You have been awarded a total of ____________ RSUs for Fiscal Year ____. 2. RSU Account. RSUs entitle you to receive a corresponding number of shares of H. J. Heinz Company Common Stock ("Common Stock") in the future, subject to the conditions and restrictions set forth in this Agreement, including, without limitation, the vesting conditions set forth in Paragraph 3 below. Your RSUs will be credited to a separate account established and maintained by the Company on your behalf. Until the Distribution Date (as defined herein), your RSUs are treated as deferred compensation amounts, the value of which is subject to change based on increases or decreases in the market price of the Common Stock. Because the RSUs are not actual shares of Common Stock, you cannot exercise voting rights on them until the Distribution Date. 3. Vesting. You will become vested in the RSUs credited to your account according to the following schedule: You will become 100% vested in the RSUs upon the fifth anniversary of the Effective Date. None of the RSUs will become vested prior to this date. 4. Termination of Employment. The termination of your employment with the Company will have the following effect on your RSUs: (a) Retirement, Disability or Involuntary Termination without Cause. If the termination of your employment with the Company is the result of Retirement, Disability, or involuntary termination without Cause, any RSUs granted hereunder that remain unvested as of your Date of Termination shall continue to vest in accordance with the vesting schedule set forth in Paragraph 3 above, subject to the requirements of Paragraph 5 of this Agreement. (b) Death. In the event that you should die while you are continuing to perform services for the Company, any RSUs that remain unvested as of the date of your death shall continue to vest in accordance with the vesting schedule set forth in Paragraph 3 above. (c) Change in Control. In the event of a Change in Control, any RSUs that remain unvested as of the date of the Change in Control shall immediately become vested unless your RSU award is replaced by an award of equivalent value provided by the Surviving Corporation, which replacement award vests not later than the replaced award and, to the extent not previously vested, vests in full in the event of any involuntary termination of your employment with the Surviving Corporation following the Change in Control (other than an involuntary termination for Cause). (d) Other Termination. If your employment with the Company terminates for any reason other than as set forth in subparagraphs (a), (b) and (c) above, including without limitation as a result of any voluntary termination of employment or an involuntary termination for Cause, any RSUs granted hereunder that remain unvested as of your Date of Termination shall be immediately forfeited and cancelled. 5. Non-Solicitation/Confidential Information. In partial consideration for the RSUs granted to you hereunder, you agree that you shall not, during the term of your employment by the Company and for 12 months after termination of your employment, regardless of the reason for the termination, either directly or indirectly, solicit, take away or attempt to solicit or take away any other employee of the Company, either for your own purpose or for any other person or entity. You further agree that you shall not, during the term of your employment by the Company or at any time thereafter, use or disclose the Confidential Information (as defined below) except as directed by, and in furtherance of the business purposes of, the Company. You acknowledge that the breach or threatened breach of this Paragraph 5 will result in irreparable injury to the Company for which there is no adequate remedy at law because, among other things, it is not readily susceptible of proof as to the monetary damages that would result to the Company. You consent to the issuance of any restraining order or preliminary restraining order or injunction with respect to any conduct by you that is directly or indirectly a breach or threatened breach of this Paragraph 5. Any breach by you of the provisions of this Paragraph 5 will, at the option of the Company and in addition to all other rights and remedies available to the Company at law, in equity or under this Agreement, result in the immediate forfeiture of all of your rights in any RSUs that remain unvested as of the date of such breach. "Confidential Information" as used herein shall mean technical or business information not readily available to the public or generally known in the trade, including but not limited to inventions; ideas; improvements; discoveries; developments; formulations; ingredients; recipes; specifications; designs; standards; financial data; sales, marketing and distribution plans, techniques and strategies; customer and supplier information; equipment; mechanisms; manufacturing plans; processing and packaging techniques; trade secrets and other confidential information, knowledge, data and know-how of the Company, whether or not they originated with you, or information which the Company received from third parties under an obligation of confidentiality. 6. Dividends. An amount equal to the dividends payable on the shares of Common Stock represented by the RSUs will be paid directly to you as soon as practicable following the date on which a dividend is declared by the Company. These payments will be calculated based upon the number of RSUs credited to your account as of the date that a dividend is declared. These payments will be reported as income to the applicable taxing authorities, and federal, state, local and/or foreign income and/or employment taxes will be withheld from such payments as and to the extent required by applicable law. 7. Distribution. All RSU distributions will be made in the form of actual shares of Common Stock and will be distributed to you on one of the following dates (each, a "Distribution Date"): (a) Default Distribution Date. Shares of Common Stock representing your RSUs will be distributed to you when the RSUs vest, unless you make an election to defer receipt to a later date, as provided in subparagraph (b) below. (b) Deferred Distribution Date. You may elect to defer distribution of your RSUs to a date subsequent to the Default Distribution Date by providing a written election form to the Company by no later than ________________. A copy of the election form is attached. (c) Executive Officer/Management Committee Member Exception. If you are a named executive officer of the Company on the Distribution Date (as listed in the proxy statement filed by the Company most recent to the Distribution Date) or are a member of the Company's Management Committee on the Distribution Date, the Distribution Date will automatically be deferred to the close of business on the last day of your employment with the Company. Certificates representing the distributed shares of Common Stock will be delivered to the firm maintaining your account as soon as practicable after a Distribution Date occurs. Notwithstanding the foregoing, all vested RSUs will be immediately distributed to you at the close of business on the last day of your employment with the Company, or as soon as practicable thereafter, if you terminate employment with the Company for any reason including death, disability, retirement or Change of Control of the Company. 8. Impact on Benefits. None of the RSUs being credited to your account are deemed to be a replacement for award opportunity under the Company's Shareholder Success Plan (SSP), and no portion of your RSU Award will be included as compensation for the year of the grant for purposes of the H.J. Heinz Company Supplemental Executive Retirement Plan and the H.J. Heinz Company Employees Retirement and Savings Excess Plan. 9. Tax Withholding. On the Distribution Date, the Company will withhold a number of shares of Common Stock that is equal, based on the Fair Market Value of the Common Stock on the Distribution Date, to the amount of the federal, state, local, and/or foreign income and/or employment taxes required to be collected or withheld with respect to the distribution. 10. Non-Transferability. Your RSUs may not be sold, transferred, pledged, assigned or otherwise encumbered except by will or the laws of descent and distribution. You may also designate a beneficiary(ies) in the event that you die before a Distribution Date occurs, who shall succeed to all your rights and obligations under this Agreement and the Plan. A beneficiary election form is attached. If you do not designate a beneficiary, your RSUs will pass to the person or persons entitled to receive them under your will. If you shall have failed to make a testamentary disposition of your RSUs in your will or shall have died intestate, your RSUs will pass to the legal representative or representatives of your estate. 11. Employment At-Will. You acknowledge and agree that nothing in this Agreement or the Plan shall confer upon you any right with respect to future awards or continuation of your employment, nor shall it constitute an employment agreement or interfere in any way with your right or the right of Company to terminate your employment at any time, with or without cause, and with or without notice. 12. Collection and Use of Personal Data. You consent to the collection, use, and processing of personal data (including name, home address and telephone number, identification number and number of RSUs held) by the Company or a third party engaged by the Company for the purpose of implementing, administering and managing the Plan and any other stock option or stock incentive plans of the Company (the "Plans"). You further consent to the release of personal data to such a third party administrator, which, at the option of the Company, may be designated as the exclusive broker in connection with the Plans. You hereby waive any data privacy rights with respect to such data to the extent that receipt, possession, use, retention, or transfer of the data is authorized hereunder. 13. Future Awards. The Plan is discretionary in nature and the Company may modify, cancel or terminate it at any time without prior notice in accordance with the terms of the Plan. While RSUs or other awards may be granted under the Plan on one or more occasions or even on a regular schedule, each grant is a one time event, is not an entitlement to an award of RSUs in the future, and does not create any contractual or other right to receive an award of RSUs, compensation or benefits in lieu of RSUs or any other compensation or benefits in the future. 14. Compliance with Stock Ownership Guidelines. All RSUs granted to you under this Agreement shall be counted as shares of Common Stock that are owned by you for purposes of satisfying the minimum share requirements under the Company's Simplified Stock Ownership Guidelines ("SOG"). Notwithstanding the foregoing, you acknowledge and agree that, with the exception of the number of shares of Common Stock withheld to satisfy income tax withholding requirements pursuant to Paragraph 9 above, the shares of Common Stock represented by the RSUs granted to you hereunder cannot be sold or otherwise transferred, even after the Distribution Date, unless and until you have met SOG's minimum share ownership requirements. The Management Development & Compensation Committee will not approve additional RSU awards to you unless you are in compliance with the terms of this Paragraph 14 and the SOG requirements. 15. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania, without regard to its choice of law provisions. THIS RSU AWARD IS SUBJECT TO YOUR ON-LINE ACCEPTANCE OF THE TERMS AND CONDITIONS OF THIS AGREEMENT. H. J. HEINZ COMPANY By: ------------------------------------ Accepted: --------------------------- Date: ------------------------------- BENEFICIARY DESIGNATION Upon my death, the vested Restricted Stock Units earned by me under all Restricted Stock Unit Agreements shall be paid to the beneficiary(ies) I designate below. This designation supercedes any prior beneficiary designation I have made regarding my Restricted Stock Unit account balance, and shall remain in effect unless and until I file a subsequent Beneficiary Designation Form with the Company. Primary Beneficiary Designation The vested Restricted Stock Units distributable to me shall be paid, in equal portions unless otherwise indicated, to the following Primary Beneficiary(ies) then surviving:
Name Relationship Date of Birth Social Security Number - ---- ------------ ------------- ---------------------- - ------------- ------------ ------------- ---------------------- - ------------- ------------ ------------- ---------------------- - ------------- ------------ ------------- ---------------------- - ------------- ------------ ------------- ----------------------
Contingent Beneficiary Designation If none of the above-named Primary Beneficiaries survives me, the vested Restricted Stock Units distributable to me shall be paid, in equal portions unless otherwise indicated, to the following Contingent Beneficiary(ies) then surviving:
Name Relationship Date of Birth Social Security Number - ---- ------------ ------------- ---------------------- - ------------- ------------ ------------- ---------------------- - ------------- ------------ ------------- ---------------------- - ------------- ------------ ------------- ---------------------- - ------------- ------------ ------------- ----------------------
- ---------------------------- ---------------------------- Signature Date EX-10.01.28 7 j1227701exv10w01w28.txt EXHIBIT 10(A)(XXVIII) Exhibit 10(a)(xxviii) RESTRICTED STOCK UNIT AWARD AND AGREEMENT [DATE] Dear _______________: H. J. Heinz Company is pleased to confirm that, effective as of __________, you have been granted an award of Restricted Stock Units ("RSUs") for Fiscal Year ____ in accordance with the terms and conditions of the H.J. Heinz Company Fiscal Year 2003 Stock Incentive Plan (the "Plan"). This Award is also made under and governed by the terms and conditions of this letter agreement ("Agreement"), which shall control in the event of a conflict with the terms and conditions of the Plan. For purposes of this Agreement, the "Company" shall refer to H. J. Heinz Company and its Subsidiaries. Unless otherwise defined in this Agreement, all capitalized terms used in this Agreement shall have the same defined meanings as in the Plan. 1. RSU Award. You have been awarded a total of ____________ RSUs for Fiscal Year ____. 2. RSU Account. RSUs entitle you to receive a corresponding number of shares of H. J. Heinz Company Common Stock ("Common Stock") in the future, subject to the conditions and restrictions set forth in this Agreement, including, without limitation, the vesting conditions set forth in Paragraph 3 below. Your RSUs will be credited to a separate account established and maintained by the Company on your behalf. Until the Distribution Date (as defined herein), your RSUs are treated as deferred compensation amounts, the value of which is subject to change based on increases or decreases in the market price of the Common Stock. Because the RSUs are not actual shares of Common Stock, you cannot exercise voting rights on them until the Distribution Date. 3. Vesting. You will become vested in the RSUs credited to your account according to the following schedule: You will become 100% vested in the RSUs upon the fifth anniversary of the Effective Date. None of the RSUs will become vested prior to this date. 4. Termination of Employment. The termination of your employment with the Company will have the following effect on your RSUs: (a) Retirement, Disability or Involuntary Termination without Cause. If the termination of your employment with the Company is the result of Retirement, Disability, or involuntary termination without Cause, any RSUs granted hereunder that remain unvested as of your Date of Termination shall continue to vest in accordance with the vesting schedule set forth in Paragraph 3 above, subject to the requirements of Paragraph 5 of this Agreement. (b) Death. In the event that you should die while you are continuing to perform services for the Company, any RSUs that remain unvested as of the date of your death shall continue to vest in accordance with the vesting schedule set forth in Paragraph 3 above. (c) Change in Control. In the event of a Change in Control, any RSUs that remain unvested as of the date of the Change in Control shall immediately become vested unless your RSU award is replaced by an award of equivalent value provided by the Surviving Corporation, which replacement award vests not later than the replaced award and, to the extent not previously vested, vests in full in the event of any involuntary termination of your employment with the Surviving Corporation following the Change in Control (other than an involuntary termination for Cause). (d) Other Termination. If your employment with the Company terminates for any reason other than as set forth in subparagraphs (a), (b) and (c) above, including without limitation as a result of any voluntary termination of employment or an involuntary termination for Cause, any RSUs granted hereunder that remain unvested as of your Date of Termination shall be immediately forfeited and cancelled. 5. Non-Solicitation/Confidential Information. In partial consideration for the RSUs granted to you hereunder, you agree that you shall not, during the term of your employment by the Company and for 12 months after termination of your employment, regardless of the reason for the termination, either directly or indirectly, solicit, take away or attempt to solicit or take away any other employee of the Company, either for your own purpose or for any other person or entity. You further agree that you shall not, during the term of your employment by the Company or at any time thereafter, use or disclose the Confidential Information (as defined below) except as directed by, and in furtherance of the business purposes of, the Company. You acknowledge that the breach or threatened breach of this Paragraph 5 will result in irreparable injury to the Company for which there is no adequate remedy at law because, among other things, it is not readily susceptible of proof as to the monetary damages that would result to the Company. You consent to the issuance of any restraining order or preliminary restraining order or injunction with respect to any conduct by you that is directly or indirectly a breach or threatened breach of this Paragraph 5. Any breach by you of the provisions of this Paragraph 5 will, at the option of the Company and in addition to all other rights and remedies available to the Company at law, in equity or under this Agreement, result in the immediate forfeiture of all of your rights in any RSUs that remain unvested as of the date of such breach. "Confidential Information" as used herein shall mean technical or business information not readily available to the public or generally known in the trade, including but not limited to inventions; ideas; improvements; discoveries; developments; formulations; ingredients; recipes; specifications; designs; standards; financial data; sales, marketing and distribution plans, techniques and strategies; customer and supplier information; equipment; mechanisms; manufacturing plans; processing and packaging techniques; trade secrets and other confidential information, knowledge, data and know-how of the Company, whether or not they originated with you, or information which the Company received from third parties under an obligation of confidentiality. 6. Dividends. An amount equal to the dividends payable on the shares of Common Stock represented by the RSUs will be paid directly to you as soon as practicable following the date on which a dividend is declared by the Company. These payments will be calculated based upon the number of RSUs credited to your account as of the date that a dividend is declared. These payments will be reported as income to the applicable taxing authorities, and federal, state, local and/or foreign income and/or employment taxes will be withheld from such payments as and to the extent required by applicable law. 7. Distribution. All RSU distributions will be made in the form of actual shares of Common Stock and will be distributed to you on one of the following dates (each, a "Distribution Date"): (a) Default Distribution Date. Shares of Common Stock representing your RSUs will be distributed to you when the RSUs vest, unless the Distribution Date is automatically deferred as provided in subparagraph (b) below. (b) Executive Officer/Management Committee Member Exception. If you are a named executive officer of the Company on the Distribution Date (as listed in the proxy statement filed by the Company most recent to the Distribution Date) or are a member of the Company's Management Committee on the Distribution Date, the Distribution Date will automatically be deferred to the close of business on the last day of your employment with the Company. Certificates representing the distributed shares of Common Stock will be delivered to the firm maintaining your account as soon as practicable after a Distribution Date occurs. Notwithstanding the foregoing, all vested RSUs will be immediately distributed to you at the close of business on the last day of your employment with the Company, or as soon as practicable thereafter, if you terminate employment with the Company for any reason including death, disability, retirement or Change of Control of the Company. 8. Impact on Benefits. None of the RSUs being credited to your account are deemed to be a replacement for award opportunity under the Company's Shareholder Success Plan (SSP), and no portion of your RSU Award will be included as compensation for the year of the grant for purposes of the H.J. Heinz Company Supplemental Executive Retirement Plan and the H.J. Heinz Company Employees Retirement and Savings Excess Plan. 9. Tax Withholding. On the Distribution Date, the Company will withhold a number of shares of Common Stock that is equal, based on the Fair Market Value of the Common Stock on the Distribution Date, to the amount of the federal, state, local, and/or foreign income and/or employment taxes required to be collected or withheld with respect to the distribution. 10. Non-Transferability. Your RSUs may not be sold, transferred, pledged, assigned or otherwise encumbered except by will or the laws of descent and distribution. You may also designate a beneficiary(ies) in the event that you die before a Distribution Date occurs, who shall succeed to all your rights and obligations under this Agreement and the Plan. A beneficiary election form is attached. If you do not designate a beneficiary, your RSUs will pass to the person or persons entitled to receive them under your will. If you shall have failed to make a testamentary disposition of your RSUs in your will or shall have died intestate, your RSUs will pass to the legal representative or representatives of your estate. 11. Employment Rights. You acknowledge and agree that nothing in this Agreement or the Plan shall confer upon you any right with respect to future awards or continuation of your employment, nor shall it constitute an employment agreement or interfere in any way with your right or the right of Company to terminate your employment at any time, with or without cause, and with or without notice, subject to the terms of any written employment contract that you may have with the Company that is signed by both you and an authorized representative of the Company. 12. Collection and Use of Personal Data. You consent to the collection, use, and processing of personal data (including name, home address and telephone number, identification number and number of RSUs held) by the Company or a third party engaged by the Company for the purpose of implementing, administering and managing the Plan and any other stock option or stock incentive plans of the Company (the "Plans"). You further consent to the release of personal data (a) to such a third party administrator, which, at the option of the Company, may be designated as the exclusive broker in connection with the Plans, or (b) to any affiliated company within the definition of the Company, wherever located. You hereby waive any data privacy rights with respect to such data to the extent that receipt, possession, use, retention, or transfer of the data is authorized hereunder. 13. Future Awards. The Plan is discretionary in nature and the Company may modify, cancel or terminate it at any time without prior notice in accordance with the terms of the Plan. While RSUs or other awards may be granted under the Plan on one or more occasions or even on a regular schedule, each grant is a one time event, is not an entitlement to an award of RSUs in the future, and does not create any contractual or other right to receive an award of RSUs, compensation or benefits in lieu of RSUs or any other compensation or benefits in the future. 14. Compliance with Stock Ownership Guidelines. All RSUs granted to you under this Agreement shall be counted as shares of Common Stock that are owned by you for purposes of satisfying the minimum share requirements under the Company's Simplified Stock Ownership Guidelines ("SOG"). Notwithstanding the foregoing, you acknowledge and agree that, with the exception of the number of shares of Common Stock withheld to satisfy income tax withholding requirements pursuant to Paragraph 9 above, the shares of Common Stock represented by the RSUs granted to you hereunder cannot be sold or otherwise transferred, even after the Distribution Date, unless and until you have met SOG's minimum share ownership requirements. The Management Development & Compensation Committee will not approve additional RSU awards to you unless you are in compliance with the terms of this Paragraph 14 and the SOG requirements. 15. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania, without regard to its choice of law provisions. THIS RSU AWARD IS SUBJECT TO YOUR ON-LINE ACCEPTANCE OF THE TERMS AND CONDITIONS OF THIS AGREEMENT. H. J. HEINZ COMPANY By: ------------------------------------ Accepted: --------------------------- Date: ------------------------------- BENEFICIARY DESIGNATION Upon my death, the vested Restricted Stock Units earned by me under all Restricted Stock Unit Agreements shall be paid to the beneficiary(ies) I designate below. This designation supercedes any prior beneficiary designation I have made regarding my Restricted Stock Unit account balance, and shall remain in effect unless and until I file a subsequent Beneficiary Designation Form with the Company. Primary Beneficiary Designation The vested Restricted Stock Units distributable to me shall be paid, in equal portions unless otherwise indicated, to the following Primary Beneficiary(ies) then surviving:
Name Relationship Date of Birth Social Security Number - ---- ------------ ------------- ---------------------- - ------------- ------------ ------------- ---------------------- - ------------- ------------ ------------- ---------------------- - ------------- ------------ ------------- ---------------------- - ------------- ------------ ------------- ----------------------
Contingent Beneficiary Designation If none of the above-named Primary Beneficiaries survives me, the vested Restricted Stock Units distributable to me shall be paid, in equal portions unless otherwise indicated, to the following Contingent Beneficiary(ies) then surviving:
Name Relationship Date of Birth Social Security Number - ---- ------------ ------------- ---------------------- - ------------- ------------ ------------- ---------------------- - ------------- ------------ ------------- ---------------------- - ------------- ------------ ------------- ---------------------- - ------------- ------------ ------------- ----------------------
- ---------------------------- ----------------------------- Signature Date EX-10.01.29 8 j1227701exv10w01w29.txt EXHIBIT 10(A)(XXIX) Exhibit 10(a)(xxix) RESTRICTED STOCK UNIT AWARD AND AGREEMENT [DATE] Dear _____________________: H. J. Heinz Company is pleased to confirm that, effective as of ____________ (the "Effective Date"), you have been granted an award of Restricted Stock Units ("RSUs") for Fiscal Year _____ in accordance with the terms and conditions of the H.J. Heinz Company Fiscal Year 2003 Stock Incentive Plan (the "Plan"). This Award is also made under and governed by the terms and conditions of this letter agreement ("Agreement"), which shall control in the event of a conflict with the terms and conditions of the Plan. For purposes of this Agreement, the "Company" shall refer to H. J. Heinz Company and its Subsidiaries. Unless otherwise defined in this Agreement, all capitalized terms used in this Agreement shall have the same defined meanings as in the Plan. 1. RSU Award. You have been awarded a total of ____________ RSUs for Fiscal Year ____. 2. RSU Account. RSUs entitle you to receive a corresponding number of shares of H. J. Heinz Company Common Stock ("Common Stock") in the future, subject to the conditions and restrictions set forth in this Agreement, including, without limitation, the vesting conditions set forth in Paragraph 3 below. Your RSUs will be credited to a separate account established and maintained by the Company on your behalf. Until the Distribution Date (as defined herein), your RSUs are treated as deferred compensation amounts, the value of which is subject to change based on increases or decreases in the market price of the Common Stock. Because the RSUs are not actual shares of Common Stock, you cannot exercise voting rights on them until the Distribution Date. 3. Vesting. You will become vested in the RSUs credited to your account according to the following schedule: You will become 100% vested in the RSUs upon the third anniversary of the Effective Date. None of the RSUs will become vested prior to this date. 4. Termination of Employment. The termination of your employment with the Company will have the following effect on your RSUs: (a) Retirement, Disability or Involuntary Termination without Cause. If the termination of your employment with the Company is the result of Retirement, Disability, or involuntary termination without Cause, any RSUs granted hereunder that remain unvested as of your Date of Termination shall continue to vest in accordance with the vesting schedule set forth in Paragraph 3 above, subject to the requirements of Paragraph 5 of this Agreement. (b) Death. In the event that you should die while you are continuing to perform services for the Company, any RSUs that remain unvested as of the date of your death shall continue to vest in accordance with the vesting schedule set forth in Paragraph 3 above. (c) Change in Control. In the event of a Change in Control, any RSUs that remain unvested as of the date of the Change in Control shall immediately become vested unless your RSU award is replaced by an award of equivalent value provided by the Surviving Corporation, which replacement award vests not later than the replaced award and, to the extent not previously vested, vests in full in the event of any involuntary termination of your employment with the Surviving Corporation following the Change in Control (other than an involuntary termination for Cause). (d) Other Termination. If your employment with the Company terminates for any reason other than as set forth in subparagraphs (a), (b) and (c) above, including without limitation as a result of any voluntary termination of employment or an involuntary termination for Cause, any RSUs granted hereunder that remain unvested as of your Date of Termination shall be immediately forfeited and cancelled. 5. Non-Solicitation/Confidential Information. In partial consideration for the RSUs granted to you hereunder, you agree that you shall not, during the term of your employment by the Company and for 12 months after termination of your employment, regardless of the reason for the termination, either directly or indirectly, solicit, take away or attempt to solicit or take away any other employee of the Company, either for your own purpose or for any other person or entity. You further agree that you shall not, during the term of your employment by the Company or at any time thereafter, use or disclose the Confidential Information (as defined below) except as directed by, and in furtherance of the business purposes of, the Company. You acknowledge that the breach or threatened breach of this Paragraph 5 will result in irreparable injury to the Company for which there is no adequate remedy at law because, among other things, it is not readily susceptible of proof as to the monetary damages that would result to the Company. You consent to the issuance of any restraining order or preliminary restraining order or injunction with respect to any conduct by you that is directly or indirectly a breach or threatened breach of this Paragraph 5. Any breach by you of the provisions of this Paragraph 5 will, at the option of the Company and in addition to all other rights and remedies available to the Company at law, in equity or under this Agreement, result in the immediate forfeiture of all of your rights in any RSUs that remain unvested as of the date of such breach. -12- "Confidential Information" as used herein shall mean technical or business information not readily available to the public or generally known in the trade, including but not limited to inventions; ideas; improvements; discoveries; developments; formulations; ingredients; recipes; specifications; designs; standards; financial data; sales, marketing and distribution plans, techniques and strategies; customer and supplier information; equipment; mechanisms; manufacturing plans; processing and packaging techniques; trade secrets and other confidential information, knowledge, data and know-how of the Company, whether or not they originated with you, or information which the Company received from third parties under an obligation of confidentiality. 6. Dividends. An amount equal to the dividends payable on the shares of Common Stock represented by the RSUs will be paid directly to you as soon as practicable following the date on which a dividend is declared by the Company. These payments will be calculated based upon the number of RSUs credited to your account as of the date that a dividend is declared. These payments will be reported as income to the applicable taxing authorities, and federal, state, local and/or foreign income and/or employment taxes will be withheld from such payments as and to the extent required by applicable law. 7. Distribution. All RSU distributions will be made in the form of actual shares of Common Stock and will be distributed to you on one of the following dates (each, a "Distribution Date"): (a) Default Distribution Date.Shares of Common Stock representing your RSUs will be distributed to you when the RSUs vest, unless you make an election to defer receipt to a later date, as provided in subparagraph (b) below. (b) Deferred Distribution Date. You may elect to defer distribution of your RSUs to a date subsequent to the Default Distribution Date by providing a written election form to the Company by no later than _____________________. A copy of the election form is attached. (c) Executive Officer/Management Committee Member Exception. If you are a named executive officer of the Company on the Distribution Date (as listed in the proxy statement filed by the Company most recent to the Distribution Date) or are a member of the Company's Management Committee on the Distribution Date, the Distribution Date will automatically be deferred to the close of business on the last day of your employment with the Company. Certificates representing the distributed shares of Common Stock will be delivered to the firm maintaining your account as soon as practicable after a Distribution Date occurs. Notwithstanding the foregoing, all vested RSUs will be immediately distributed to you at the close of business on the last day of your employment with the Company, or as soon as practicable thereafter, if you terminate employment with the Company for any reason including death, disability, retirement or Change of Control of the Company. 8. Impact on Benefits. None of the RSUs being credited to your account are deemed to be a replacement for award opportunity under the Company's Shareholder Success Plan (SSP), and no portion of your RSU Award will be included as compensation for the year of the grant for purposes of the H.J. Heinz Company Supplemental Executive Retirement Plan and the H.J. Heinz Company Employees Retirement and Savings Excess Plan. 9. Tax Withholding. On the Distribution Date, the Company will withhold a number of shares of Common Stock that is equal, based on the Fair Market Value of the Common Stock on the Distribution Date, to the amount of the federal, state, local, and/or foreign income and/or employment taxes required to be collected or withheld with respect to the distribution. 10. Non-Transferability. Your RSUs may not be sold, transferred, pledged, assigned or otherwise encumbered except by will or the laws of descent and distribution. You may also designate a beneficiary(ies) in the event that you die before a Distribution Date occurs, who shall succeed to all your rights and obligations under this Agreement and the Plan. A beneficiary election form is attached. If you do not designate a beneficiary, your RSUs will pass to the person or persons entitled to receive them under your will. If you shall have failed to make a testamentary disposition of your RSUs in your will or shall have died intestate, your RSUs will pass to the legal representative or representatives of your estate. 11. Employment At-Will. You acknowledge and agree that nothing in this Agreement or the Plan shall confer upon you any right with respect to future awards or continuation of your employment, nor shall it constitute an employment agreement or interfere in any way with your right or the right of Company to terminate your employment at any time, with or without cause, and with or without notice. 12. Collection and Use of Personal Data. You consent to the collection, use, and processing of personal data (including name, home address and telephone number, identification number and number of RSUs held) by the Company or a third party engaged by the Company for the purpose of implementing, administering and managing the Plan and any other stock option or stock incentive plans of the Company (the "Plans"). You further consent to the release of personal data to such a third party administrator, which, at the option of the Company, may be designated as the exclusive broker in connection with the Plans. You hereby waive any data privacy rights with respect to such data to the extent that receipt, possession, use, retention, or transfer of the data is authorized hereunder. -14- 13. Future Awards. The Plan is discretionary in nature and the Company may modify, cancel or terminate it at any time without prior notice in accordance with the terms of the Plan. While RSUs or other awards may be granted under the Plan on one or more occasions or even on a regular schedule, each grant is a one time event, is not an entitlement to an award of RSUs in the future, and does not create any contractual or other right to receive an award of RSUs, compensation or benefits in lieu of RSUs or any other compensation or benefits in the future. 14. Compliance with Stock Ownership Guidelines. All RSUs granted to you under this Agreement shall be counted as shares of Common Stock that are owned by you for purposes of satisfying the minimum share requirements under the Company's Simplified Stock Ownership Guidelines ("SOG"). Notwithstanding the foregoing, you acknowledge and agree that, with the exception of the number of shares of Common Stock withheld to satisfy income tax withholding requirements pursuant to Paragraph 9 above, the shares of Common Stock represented by the RSUs granted to you hereunder cannot be sold or otherwise transferred, even after the Distribution Date, unless and until you have met SOG's minimum share ownership requirements. The Management Development & Compensation Committee will not approve additional RSU awards to you unless you are in compliance with the terms of this Paragraph 14 and the SOG requirements. 15. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania, without regard to its choice of law provisions. THIS RSU AWARD IS SUBJECT TO YOUR ON-LINE ACCEPTANCE OF THE TERMS AND CONDITIONS OF THIS AGREEMENT. H. J. HEINZ COMPANY By: ______________________________ Accepted: ______________________________ Date: ______________________________ BENEFICIARY DESIGNATION Upon my death, the vested Restricted Stock Units earned by me under all Restricted Stock Unit Agreements shall be paid to the beneficiary(ies) I designate below. This designation supercedes any prior beneficiary designation I have made regarding my Restricted Stock Unit account balance, and shall remain in effect unless and until I file a subsequent Beneficiary Designation Form with the Company. Primary Beneficiary Designation The vested Restricted Stock Units distributable to me shall be paid, in equal portions unless otherwise indicated, to the following Primary Beneficiary(ies) then surviving: Name Relationship Date of Birth Social Security Number - ---- ------------ ------------- ---------------------- - -------------------- ------------ ------------- ---------------------- - -------------------- ------------ ------------- ---------------------- - -------------------- ------------ ------------- ---------------------- - -------------------- ------------ ------------- ---------------------- Contingent Beneficiary Designation If none of the above-named Primary Beneficiaries survives me, the vested Restricted Stock Units distributable to me shall be paid, in equal portions unless otherwise indicated, to the following Contingent Beneficiary(ies) then surviving: Name Relationship Date of Birth Social Security Number - ---- ------------ ------------- ---------------------- - -------------------- ------------ ------------- ---------------------- - -------------------- ------------ ------------- ---------------------- - -------------------- ------------ ------------- ---------------------- - -------------------- ------------ ------------- ---------------------- - --------------------------------- -------------------- Signature Date EX-10.01.30 9 j1227701exv10w01w30.txt EXHIBIT 10(A)(XXX) Exhibit 10(a)(xxx) RESTRICTED STOCK UNIT AWARD AND AGREEMENT [DATE] Dear _____________________: H. J. Heinz Company is pleased to confirm that, effective as of __________, you have been granted an award of Restricted Stock Units ("RSUs") for Fiscal Year _____ in accordance with the terms and conditions of the H.J. Heinz Company Fiscal Year 2003 Stock Incentive Plan (the "Plan"). This Award is also made under and governed by the terms and conditions of this letter agreement ("Agreement"), which shall control in the event of a conflict with the terms and conditions of the Plan. For purposes of this Agreement, the "Company" shall refer to H. J. Heinz Company and its Subsidiaries. Unless otherwise defined in this Agreement, all capitalized terms used in this Agreement shall have the same defined meanings as in the Plan. 1. RSU Award. You have been awarded a total of ____________ RSUs for Fiscal Year _____. 2. RSU Account. RSUs entitle you to receive a corresponding number of shares of H. J. Heinz Company Common Stock ("Common Stock") in the future, subject to the conditions and restrictions set forth in this Agreement, including, without limitation, the vesting conditions set forth in Paragraph 3 below. Your RSUs will be credited to a separate account established and maintained by the Company on your behalf. Until the Distribution Date (as defined herein), your RSUs are treated as deferred compensation amounts, the value of which is subject to change based on increases or decreases in the market price of the Common Stock. Because the RSUs are not actual shares of Common Stock, you cannot exercise voting rights on them until the Distribution Date. 3. Vesting. You will become vested in the RSUs credited to your account according to the following schedule: You will become 100% vested in the RSUs upon the third anniversary of the Effective Date. None of the RSUs will become vested prior to this date. 4. Termination of Employment. The termination of your employment with the Company will have the following effect on your RSUs: (a) Retirement, Disability or Involuntary Termination without Cause. If the termination of your employment with the Company is the result of Retirement, Disability, or involuntary termination without Cause, any RSUs granted hereunder that remain unvested as of your Date of Termination shall continue to vest in accordance with the vesting schedule set forth in Paragraph 3 above, subject to the requirements of Paragraph 5 of this Agreement. (b) Death. In the event that you should die while you are continuing to perform services for the Company, any RSUs that remain unvested as of the date of your death shall continue to vest in accordance with the vesting schedule set forth in Paragraph 3 above. (c) Change in Control. In the event of a Change in Control, any RSUs that remain unvested as of the date of the Change in Control shall immediately become vested unless your RSU award is replaced by an award of equivalent value provided by the Surviving Corporation, which replacement award vests not later than the replaced award and, to the extent not previously vested, vests in full in the event of any involuntary termination of your employment with the Surviving Corporation following the Change in Control (other than an involuntary termination for Cause). (d) Other Termination. If your employment with the Company terminates for any reason other than as set forth in subparagraphs (a), (b) and (c) above, including without limitation as a result of any voluntary termination of employment or an involuntary termination for Cause, any RSUs granted hereunder that remain unvested as of your Date of Termination shall be immediately forfeited and cancelled. 5. Non-Solicitation/Confidential Information. In partial consideration for the RSUs granted to you hereunder, you agree that you shall not, during the term of your employment by the Company and for 12 months after termination of your employment, regardless of the reason for the termination, either directly or indirectly, solicit, take away or attempt to solicit or take away any other employee of the Company, either for your own purpose or for any other person or entity. You further agree that you shall not, during the term of your employment by the Company or at any time thereafter, use or disclose the Confidential Information (as defined below) except as directed by, and in furtherance of the business purposes of, the Company. You acknowledge that the breach or threatened breach of this Paragraph 5 will result in irreparable injury to the Company for which there is no adequate remedy at law because, among other things, it is not readily susceptible of proof as to the monetary damages that would result to the Company. You consent to the issuance of any restraining order or preliminary restraining order or injunction with respect to any conduct by you that is directly or indirectly a breach or threatened breach of this Paragraph 5. Any breach by you of the provisions of this Paragraph 5 will, at the option of the Company and in addition to all other rights and remedies available to the Company at law, in equity or under this Agreement, result in the immediate forfeiture of all of your rights in any RSUs that remain unvested as of the date of such breach. "Confidential Information" as used herein shall mean technical or business information not readily available to the public or generally known in the trade, including but not limited to inventions; ideas; improvements; discoveries; developments; formulations; ingredients; recipes; specifications; designs; standards; financial data; sales, marketing and distribution plans, techniques and strategies; customer and supplier information; equipment; mechanisms; manufacturing plans; processing and packaging techniques; trade secrets and other confidential information, knowledge, data and know-how of the Company, whether or not they originated with you, or information which the Company received from third parties under an obligation of confidentiality. 6. Dividends. An amount equal to the dividends payable on the shares of Common Stock represented by the RSUs will be paid directly to you as soon as practicable following the date on which a dividend is declared by the Company. These payments will be calculated based upon the number of RSUs credited to your account as of the date that a dividend is declared. These payments will be reported as income to the applicable taxing authorities, and federal, state, local and/or foreign income and/or employment taxes will be withheld from such payments as and to the extent required by applicable law. 7. Distribution. All RSU distributions will be made in the form of actual shares of Common Stock and will be distributed to you on one of the following dates (each, a "Distribution Date"): (a) Default Distribution Date. Shares of Common Stock representing your RSUs will be distributed to you when the RSUs vest, unless the Distribution Date is automatically deferred as provided in subparagraph (b) below. (b) Executive Officer/Management Committee Member Exception. If you are a named executive officer of the Company on the Distribution Date (as listed in the proxy statement filed by the Company most recent to the Distribution Date) or are a member of the Company's Management Committee on the Distribution Date, the Distribution Date will automatically be deferred to the close of business on the last day of your employment with the Company. Certificates representing the distributed shares of Common Stock will be delivered to the firm maintaining your account as soon as practicable after a Distribution Date occurs. Notwithstanding the foregoing, all vested RSUs will be immediately distributed to you at the close of business on the last day of your employment with the Company, or as soon as practicable thereafter, if you terminate employment with the Company for any reason including death, disability, retirement or Change of Control of the Company. 8. Impact on Benefits. None of the RSUs being credited to your account are deemed to be a replacement for award opportunity under the Company's Shareholder Success Plan (SSP), and no portion of your RSU Award will be included as compensation for the year of the grant for purposes of the H.J. Heinz Company Supplemental Executive Retirement Plan and the H.J. Heinz Company Employees Retirement and Savings Excess Plan. 9. Tax Withholding. On the Distribution Date, the Company will withhold a number of shares of Common Stock that is equal, based on the Fair Market Value of the Common Stock on the Distribution Date, to the amount of the federal, state, local, and/or foreign income and/or employment taxes required to be collected or withheld with respect to the distribution. 10. Non-Transferability. Your RSUs may not be sold, transferred, pledged, assigned or otherwise encumbered except by will or the laws of descent and distribution. You may also designate a beneficiary(ies) in the event that you die before a Distribution Date occurs, who shall succeed to all your rights and obligations under this Agreement and the Plan. A beneficiary election form is attached. If you do not designate a beneficiary, your RSUs will pass to the person or persons entitled to receive them under your will. If you shall have failed to make a testamentary disposition of your RSUs in your will or shall have died intestate, your RSUs will pass to the legal representative or representatives of your estate. 11. Employment Rights. You acknowledge and agree that nothing in this Agreement or the Plan shall confer upon you any right with respect to future awards or continuation of your employment, nor shall it constitute an employment agreement or interfere in any way with your right or the right of Company to terminate your employment at any time, with or without cause, and with or without notice, subject to the terms of any written employment contract that you may have with the Company that is signed by both you and an authorized representative of the Company. 12. Collection and Use of Personal Data. You consent to the collection, use, and processing of personal data (including name, home address and telephone number, identification number and number of RSUs held) by the Company or a third party engaged by the Company for the purpose of implementing, administering and managing the Plan and any other stock option or stock incentive plans of the Company (the "Plans"). You further consent to the release of personal data (a) to such a third party administrator, which, at the option of the Company, may be designated as the exclusive broker in connection with the Plans, or (b) to any affiliated company within the definition of the Company, wherever located. You hereby waive any data privacy rights with respect to such data to the extent that receipt, possession, use, retention, or transfer of the data is authorized hereunder. 13. Future Awards. The Plan is discretionary in nature and the Company may modify, cancel or terminate it at any time without prior notice in accordance with the terms of the Plan. While RSUs or other awards may be granted under the Plan on one or more occasions or even on a regular schedule, each grant is a one time event, is not an entitlement to an award of RSUs in the future, and does not create any contractual or other right to receive an award of RSUs, compensation or benefits in lieu of RSUs or any other compensation or benefits in the future. 14. Compliance with Stock Ownership Guidelines. All RSUs granted to you under this Agreement shall be counted as shares of Common Stock that are owned by you for purposes of satisfying the minimum share requirements under the Company's Simplified Stock Ownership Guidelines ("SOG"). Notwithstanding the foregoing, you acknowledge and agree that, with the exception of the number of shares of Common Stock withheld to satisfy income tax withholding requirements pursuant to Paragraph 9 above, the shares of Common Stock represented by the RSUs granted to you hereunder cannot be sold or otherwise transferred, even after the Distribution Date, unless and until you have met SOG's minimum share ownership requirements. The Management Development & Compensation Committee will not approve additional RSU awards to you unless you are in compliance with the terms of this Paragraph 14 and the SOG requirements. 15. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania, without regard to its choice of law provisions. THIS RSU AWARD IS SUBJECT TO YOUR ON-LINE ACCEPTANCE OF THE TERMS AND CONDITIONS OF THIS AGREEMENT. H. J. HEINZ COMPANY By: ______________________________ Accepted: ______________________________ Date: ______________________________ BENEFICIARY DESIGNATION Upon my death, the vested Restricted Stock Units earned by me under all Restricted Stock Unit Agreements shall be paid to the beneficiary(ies) I designate below. This designation supercedes any prior beneficiary designation I have made regarding my Restricted Stock Unit account balance, and shall remain in effect unless and until I file a subsequent Beneficiary Designation Form with the Company. Primary Beneficiary Designation The vested Restricted Stock Units distributable to me shall be paid, in equal portions unless otherwise indicated, to the following Primary Beneficiary(ies) then surviving: Name Relationship Date of Birth Social Security Number - ---- ------------ ------------- ---------------------- - -------------------- ------------ ------------- ---------------------- - -------------------- ------------ ------------- ---------------------- - -------------------- ------------ ------------- ---------------------- - -------------------- ------------ ------------- ---------------------- Contingent Beneficiary Designation If none of the above-named Primary Beneficiaries survives me, the vested Restricted Stock Units distributable to me shall be paid, in equal portions unless otherwise indicated, to the following Contingent Beneficiary(ies) then surviving: Name Relationship Date of Birth Social Security Number - ---- ------------ ------------- ---------------------- - -------------------- ------------ ------------- ---------------------- - -------------------- ------------ ------------- ---------------------- - -------------------- ------------ ------------- ---------------------- - -------------------- ------------ ------------- ---------------------- - --------------------------------------- --------------------- Signature Date EX-10.01.31 10 j1227701exv10w01w31.txt EXHIBIT 10(A)(XXXI) Exhibit 10(a)(xxxi) PERFORMANCE UNIT AWARD AGREEMENT [DATE] Dear ____________________: H. J. Heinz Company is pleased to confirm that, effective as of __________, you have been granted a Performance Unit Award in accordance with the terms and conditions of the H. J. Heinz Company Fiscal Year 2003 Stock Incentive Plan (the "Plan"). This Performance Unit Award is also made under and pursuant to this letter agreement ("Agreement"), the terms and conditions of which shall govern and control in the event of a conflict with the terms and conditions of the Plan. For purposes of this Agreement, the "Company" shall refer to H. J. Heinz Company and its Subsidiaries. Unless otherwise defined in this Agreement, all capitalized terms used in this Agreement shall have the same defined meanings as in the Plan. 1. Performance Unit Award. The annual unadjusted target value of the Performance Units awarded to you under this Agreement is $____________. The total target award opportunity for the Performance Period is equal to twice this amount, subject to prorating pursuant to Paragraph 3 below (the "Award Opportunity"). Your actual Award will be paid as a percentage of the Award Opportunity, as determined pursuant to Paragraph 2 below (the "Payout Percentage"). The "Performance Period" means the two-year period spanning the Company's Fiscal Year __ and Fiscal Year __. 2. Performance Goals. The Payout Percentage will be determined based upon the level of success the Company achieves during the Performance Period relative to the Performance Goals established by the Management Development and Compensation Committee of the Board of Directors as set forth below. [PERFORMANCE GOALS] 3. Payment of Performance Award. Your Performance Unit Award, if earned, will be paid promptly after the end of the Performance Period, subject to Paragraphs 4 and 5 below. If your employment with the Company began after the commencement of the Performance Period, the actual amount of your Award will be pro-rated based upon the number of months that you were employed by the Company (in an eligible position) during the Performance Period. The Performance Unit Award will be paid in cash; provided, however, that in the event that you are an executive covered by the Company's Stock Ownership Guidelines and you have not yet attained the requisite level of stock ownership, your Performance Award will be paid in the form of shares of Heinz Common Stock, which you would be expected to thereafter retain in accordance with the Stock Ownership Guidelines. Notwithstanding the foregoing or any other provision or term of this Agreement to the contrary, you must have been employed by the Company in an eligible position for a minimum of twelve (12) months during the Performance Period in order to be eligible to receive payment of a Performance Unit Award hereunder. 4. Termination of Employment. The termination of your employment with the Company will have the following effect on your Performance Unit Award: (a) Termination of Employment During First Year of Performance Period. In the event that your employment with the Company ends during the first year of the Performance Period for any reason, including without limitation as a result of death, disability, retirement, voluntary termination or involuntary termination with or without Cause, your Performance Unit Award will automatically be forfeited. (b) Termination of Employment During Second Year of Performance Period. (i) Death, Disability or Retirement. In the event that your employment with the Company ends during the second year of the Performance Period as the result of your Death, Retirement, or Disability, you will receive a Performance Unit Award at the end of the Performance Period determined in accordance with Paragraph 2 above, prorated through the date your employment ends or the date of your disability, as applicable. (ii) Involuntary Termination without Cause. In the event your employment with the Company ends during the second year of the Performance Period as the result of an Involuntary Termination without Cause, the MD&CC may, in its sole discretion, authorize the payment of a Performance Unit Award at the end of the Performance Period, determined in accordance with Paragraph 2 above, prorated through your last day of employment with the Company. (iii) Other Termination. In the event your employment with the Company ends during the second year of the Performance Period as the result of any reason other than as set forth in subparagraphs 4(b)(i) and 4(b)(ii) above, including without limitation any voluntary termination of employment or an involuntary termination for Cause, your Performance Unit Award will automatically be forfeited. (c) Change in Control. In the event of a Change in Control (as defined in IRS Notice 2005-1, Section IV, Q&A-12) during the Performance Period, payment of this Performance Award will be immediately accelerated. The amount of the Performance Award will be prorated as of the date the Change in Control become effective, and shall be determined based upon verifiable Company performance as of such date. 5. Non-Solicitation/Confidential Information. In partial consideration for the Performance Unit Award granted to you hereunder, you agree that you shall not, during the term of your employment by the Company and for 12 months after termination of your employment, regardless of the reason for the termination, either directly or indirectly, solicit, take away or attempt to solicit or take away any other employee of the Company, either for your own purpose or for any other person or entity. You further agree that you shall not, during the term of your employment by the Company or at any time thereafter, use or disclose the Confidential Information (as defined below) except as directed by, and in furtherance of the business purposes of, the Company. You acknowledge that the breach or threatened breach of this Paragraph 5 will result in irreparable injury to the Company for which there is no adequate remedy at law because, among other things, it is not readily susceptible of proof as to the monetary damages that would result to the Company. You consent to the issuance of any restraining order or preliminary restraining order or injunction with respect to any conduct by you that is directly or indirectly a breach or threatened breach of this Paragraph 5. "Confidential Information" as used herein shall mean technical or business information not readily available to the public or generally known in the trade, including but not limited to inventions; ideas; improvements; discoveries; developments; formulations; ingredients; recipes; specifications; designs; standards; financial data; sales, marketing and distribution plans, techniques and strategies; customer and supplier information; equipment; mechanisms; manufacturing plans; processing and packaging techniques; trade secrets and other confidential information, knowledge, data and know-how of the Company, whether or not they originated with you, or information which the Company received from third parties under an obligation of confidentiality. 6. Impact on Benefits. The Performance Unit Award, if earned, will not be eligible for contributions under any of the Company's retirement and other benefit plans, including but not limited to the Company's Supplemental Executive Retirement Plan, the Savings Plan or the Company Match plan. 7. Tax Withholding. When your Performance Unit Award is paid, the Company will withhold the amount of money (or, if applicable, the number of shares of Common Stock that is equal, based on the Fair Market Value of the Common Stock on the payment date) to the amount of the federal, state, local, and/or foreign income and/or employment taxes required to be collected or withheld with respect to the payment. 8. Non-Transferability. Your Performance Unit Award may not be sold, transferred, pledged, assigned or otherwise encumbered except by will or the laws of descent and distribution. You may also designate a beneficiary(ies) in the event that you die before the Performance Unit Award is paid, who shall succeed to all your rights and obligations under this Agreement and the Plan, subject to Paragraph 4 above. A beneficiary election form is attached. 9. Employment At-Will. You acknowledge and agree that nothing in this Agreement or the Plan shall confer upon you any right with respect to future awards or continuation of your employment, nor shall it constitute an employment agreement or interfere in any way with your right or the right of Company to terminate your employment at any time, with or without cause, and with or without notice. 10. Collection and Use of Personal Data. You consent to the collection, use, and processing of personal data (including name, home address and telephone number, identification number) by the Company or a third party engaged by the Company for the purpose of implementing, administering and managing the Plan and any other stock option or stock or long-term incentive plans of the Company (the "Plans"). You further consent to the release of personal data to such a third party administrator, which, at the option of the Company, may be designated as the exclusive broker in connection with the Plans. You hereby waive any data privacy rights with respect to such data to the extent that receipt, possession, use, retention, or transfer of the data is authorized hereunder. 11. Future Awards. The Plan is discretionary in nature and the Company may modify, cancel or terminate it at any time without prior notice in accordance with the terms of the Plan. While Performance Unit Awards or other awards may be granted under the Plan on one or more occasions or even on a regular schedule, each grant is a one time event, is not an entitlement to an award of cash or stock in the future, and does not create any contractual or other right to receive a Performance Award or other compensation or benefits in the future. 12. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania, without regard to its choice of law provisions. THIS PERFORMANCE UNIT AWARD IS SUBJECT TO YOUR SIGNING BOTH COPIES OF THIS AGREEMENT AND RETURNING ONE SIGNED AND DATED COPY TO THE COMPANY. H. J. HEINZ COMPANY By: ______________________________ Accepted: ______________________________ Date: ______________________________ BENEFICIARY DESIGNATION Upon my death, the Performance Award earned by me under all Performance Award Agreements shall be paid to the beneficiary(ies) I designate below. This designation supercedes any prior beneficiary designation I have made regarding my Performance Awards, and shall remain in effect unless and until I file a subsequent Beneficiary Designation Form with the Company. Primary Beneficiary Designation All Performance Awards earned by and payable to me shall be paid, in equal portions unless otherwise indicated, to the following Primary Beneficiary(ies) then surviving: Name Relationship Date of Birth Social Security Number - ---- ------------ ------------- ---------------------- - -------------------- ------------ ------------- ---------------------- - -------------------- ------------ ------------- ---------------------- - -------------------- ------------ ------------- ---------------------- - -------------------- ------------ ------------- ---------------------- Contingent Beneficiary Designation If none of the above-named Primary Beneficiaries survives me, the Performance Awards earned by and payable to me shall be paid, in equal portions unless otherwise indicated, to the following Contingent Beneficiary(ies) then surviving: Name Relationship Date of Birth Social Security Number - ---- ------------ ------------- ---------------------- - -------------------- ------------ ------------- ---------------------- - -------------------- ------------ ------------- ---------------------- - -------------------- ------------ ------------- ---------------------- - -------------------- ------------ ------------- ---------------------- - ----------------------------------- ----------------------- Signature Date EX-12 11 j1227701exv12.txt EXHIBIT 12 . . . EXHIBIT 12 H. J. HEINZ COMPANY AND SUBSIDIARIES COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
Nine Months Ended January 26, 2005 ------------- (Thousands of Dollars) Fixed Charges: Interest expense*......................................... $175,369 Capitalized interest...................................... -- Interest component of rental expense...................... 22,231 -------- Total fixed charges.................................... $197,600 -------- Earnings: Income from continuing operations before income taxes..... $777,349 Add: Interest expense*.................................... 175,369 Add: Interest component of rental expense................. 22,231 Add: Amortization of capitalized interest................. 1,512 -------- Earnings as adjusted................................... $976,461 -------- Ratio of earnings to fixed charges........................ 4.94 ========
- --------------- * Interest expense includes amortization of debt expense and any discount or premium relating to indebtedness. EX-31.01 12 j1227701exv31w01.txt EXHIBIT 31(A) EXHIBIT 31(A) I, William R. Johnson, Chairman, President and Chief Executive Officer of H. J. Heinz Company certify that: 1. I have reviewed this quarterly report on Form 10-Q of H. J. Heinz Company; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) [Paragraph omitted pursuant to SEC Release Nos. 33-8238 and 34-47986] c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: February 28, 2005 By: /s/ WILLIAM R. JOHNSON ....................................... Name: William R. Johnson Title: Chairman, President and Chief Executive Officer EX-31.02 13 j1227701exv31w02.txt EXHIBIT 31(B) EXHIBIT 31(B) I, Arthur B. Winkleblack, Executive Vice President and Chief Financial Officer of H. J. Heinz Company certify that: 1. I have reviewed this quarterly report on Form 10-Q of H. J. Heinz Company; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) [Paragraph omitted pursuant to SEC Release Nos. 33-8238 and 34-47986] c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: February 28, 2005 By /s/ ARTHUR B. WINKLEBLACK .......................................... Name: Arthur B. Winkleblack Title: Executive Vice President and Chief Financial Officer EX-32.01 14 j1227701exv32w01.txt EXHIBIT 32(A) EXHIBIT 32(A) CERTIFICATION BY THE CHIEF EXECUTIVE OFFICER RELATING TO A PERIODIC REPORT CONTAINING FINANCIAL STATEMENTS I, William R. Johnson, Chairman, President and Chief Executive Officer, of H. J. Heinz Company, a Pennsylvania corporation (the "Company"), hereby certify that, to my knowledge: 1. The Company's periodic report on Form 10-Q for the period ended January 26, 2005 (the "Form 10-Q") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and 2. The information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company. Date: February 28, 2005 /s/ WILLIAM R. JOHNSON .......................................... Name: William R. Johnson Title: Chairman, President and Chief Executive Officer EX-32.02 15 j1227701exv32w02.txt EXHIBIT 32(B) EXHIBIT 32(B) CERTIFICATION BY THE CHIEF FINANCIAL OFFICER RELATING TO A PERIODIC REPORT CONTAINING FINANCIAL STATEMENTS I, Arthur B. Winkleblack, Executive Vice President and Chief Financial Officer of H. J. Heinz Company, a Pennsylvania corporation (the "Company"), hereby certify that, to my knowledge: 1. The Company's periodic report on Form 10-Q for the period ended January 26, 2005 (the "Form 10-Q") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and 2. The information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company. Date: February 28, 2005 /s/ ARTHUR B. WINKLEBLACK .......................................... Name: Arthur B. Winkleblack Title: Executive Vice President and Chief Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----