e10vk
SECURITIES AND EXCHANGE
COMMISSION
Washington, D.C. 20549
FORM 10-K
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
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For the fiscal year ended April 27, 2011
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or
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
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For the transition period from
to
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Commission File Number 1-3385
H. J. HEINZ COMPANY
(Exact name of registrant as
specified in its charter)
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PENNSYLVANIA
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25-0542520
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(State of
Incorporation)
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(I.R.S. Employer Identification
No.)
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One PPG Place
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15222
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Pittsburgh, Pennsylvania
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(Zip Code)
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(Address of principal executive
offices)
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412-456-5700
(Registrants telephone number)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE
ACT:
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Title of each class
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Name of each exchange on which registered
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Common Stock, par value $.25 per share
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The New York Stock Exchange
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Third Cumulative Preferred Stock,
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$1.70 First Series, par value $10 per share
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The New York Stock Exchange
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SECURITIES
REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
None.
Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes þ No o
Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the
Act. Yes o No þ
Indicate by check mark whether the Registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the Registrant
was required to file such reports), and (2) has been
subject to such filing requirements for the past
90 days. Yes þ No o
Indicate by check mark whether the Registrant has submitted
electronically and posted on its corporate Web site, if any,
every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of
Regulation S-T
during the preceding 12 months (or for such shorter period
that the registrant was required to submit and post such
files). Yes þ No o
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of
Regulation S-K
is not contained herein, and will not be contained, to the best
of the Registrants knowledge, in definitive proxy or
information statements incorporated by reference in
Part III of this
Form 10-K
or any amendment to this
Form 10-K. þ
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated
filer and smaller reporting company in
Rule 12b-2
of the Exchange Act. (Check one):
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Large accelerated filer þ
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Accelerated filer o
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Non-accelerated filer o
(Do not check if a smaller reporting
company)
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Smaller reporting company o
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Indicate by check mark whether the registrant is a shell company
(as defined in
Rule 12b-2
of the Exchange
Act). Yes o No þ
As of October 27, 2010 the aggregate market value of the
Registrants voting stock held by non-affiliates of the
Registrant was approximately $15.5 billion.
The number of shares of the Registrants Common Stock, par
value $.25 per share, outstanding as of May 31, 2011, was
321,767,370 shares.
DOCUMENTS
INCORPORATED BY REFERENCE
Portions of the Registrants Proxy Statement for the Annual
Meeting of Shareholders to be held on August 30, 2011,
which will be filed with the Securities and Exchange Commission
within 120 days after the end of the Registrants
fiscal year ended April 27, 2011, are incorporated into
Part III, Items 10, 11, 12, 13, and 14.
PART I
H. J. Heinz Company was incorporated in Pennsylvania on
July 27, 1900. In 1905, it succeeded to the business of a
partnership operating under the same name which had developed
from a food business founded in 1869 in Sharpsburg, Pennsylvania
by Henry J. Heinz. H. J. Heinz Company and its subsidiaries
(collectively, the Company) manufacture and market
an extensive line of food products throughout the world. The
Companys principal products include ketchup, condiments
and sauces, frozen food, soups, beans and pasta meals, infant
nutrition and other food products.
The Companys products are manufactured and packaged to
provide safe, wholesome foods for consumers, as well as
foodservice and institutional customers. Many products are
prepared from recipes developed in the Companys research
laboratories and experimental kitchens. Ingredients are
carefully selected, inspected and passed on to modern factory
kitchens where they are processed, after which the intermediate
product is filled automatically into containers of glass, metal,
plastic, paper or fiberboard, which are then sealed. Products
are prepared by sterilization, blending, fermentation,
pasteurization, homogenization, chilling, freezing, pickling,
drying, freeze drying, baking or extruding, then labeled and
cased for market. Quality assurance procedures are designed for
each product and process and applied for quality and compliance
with applicable laws.
The Company manufactures (and contracts for the manufacture of)
its products from a wide variety of raw food materials.
Pre-season contracts are made with farmers for certain raw
materials such as a portion of the Companys requirements
of tomatoes, cucumbers, potatoes, onions and some other fruits
and vegetables. Ingredients, such as dairy products, meat, sugar
and other sweeteners, including high fructose corn syrup,
spices, flour and fruits and vegetables, are purchased from
approved suppliers.
The following table lists the number of the Companys
principal food processing factories and major trademarks by
region:
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Factories
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Owned
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Leased
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Major Owned and Licensed Trademarks
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North America
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20
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4
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Heinz, Classico, Quality Chef Foods, Jack Daniels*,
Catelli*, Wylers, Heinz Bell Orto, Bella Rossa,
Chef Francisco, Diannes, Ore-Ida, Tater Tots, Bagel
Bites, Weight Watchers* Smart Ones, Poppers, T.G.I.
Fridays*, Delimex, Truesoups, Alden Merrell, Escalon, PPI,
Todds, Nancys, Lea & Perrins, Renees
Gourmet, HP, Diana, Bravo, Arthurs Fresh
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Europe
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21
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Heinz, Orlando, Karvan Cevitam, Brinta, Roosvicee, Venz,
Weight Watchers*, Farleys, Sonnen Bassermann, Plasmon,
Nipiol, Dieterba, Bi-Aglut, Aproten, Pudliszki, Ross, Honig, De
Ruijter, Aunt Bessie*, Mums Own, Moya Semya, Picador,
Derevenskoye, Mechta Hoziajki, Lea & Perrins, HP, Amoy*,
Daddies, Squeezme!, Wyko, Benedicta
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Asia/Pacific
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25
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2
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Heinz, Tom Piper, Watties, ABC, Chef, Craigs,
Bruno, Winna, Hellaby, Hamper, Farleys, Greenseas,
Gourmet, Nurture, LongFong, Ore-Ida, SinSin, Lea &
Perrins, HP, Classico, Weight Watchers*, Cottees,
Roses*, Complan, Glucon D, Nycil, Golden Circle,
La Bonne Cuisine, Original Juice Co., The Good Taste
Company, Master, Guanghe
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Rest of World
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7
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2
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Heinz, Wellingtons, Today, Mamas, John West,
Farleys, Complan, HP, Lea & Perrins, Classico,
Banquete, Watties, Quero
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73
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* Used under license
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2
The Company also owns or leases office space, warehouses,
distribution centers and research and other facilities
throughout the world. The Companys food processing
factories and principal properties are in good condition and are
satisfactory for the purposes for which they are being utilized.
The Company has developed or participated in the development of
certain of its equipment, manufacturing processes and packaging,
and maintains patents and has applied for patents for some of
those developments. The Company regards these patents and patent
applications as important but does not consider any one or group
of them to be materially important to its business as a whole.
Although crops constituting some of the Companys raw food
ingredients are harvested on a seasonal basis, most of the
Companys products are produced throughout the year.
Seasonal factors inherent in the business have always influenced
the quarterly sales, operating income and cash flows of the
Company. Consequently, comparisons between quarters have always
been more meaningful when made between the same quarters of
prior years.
The products of the Company are sold under highly competitive
conditions, with many large and small competitors. The Company
regards its principal competition to be other manufacturers of
prepared foods, including branded retail products, foodservice
products and private label products, that compete with the
Company for consumer preference, distribution, shelf space and
merchandising support. Product quality and consumer value are
important areas of competition.
The Companys products are sold through its own sales
organizations and through independent brokers, agents and
distributors to chain, wholesale, cooperative and independent
grocery accounts, convenience stores, bakeries, pharmacies, mass
merchants, club stores, foodservice distributors and
institutions, including hotels, restaurants, hospitals,
health-care facilities, and certain government agencies. For
Fiscal 2011, one customer, Wal-Mart Stores Inc., represented
approximately 11% of the Companys sales. We closely
monitor the credit risk associated with our customers and to
date have not experienced material losses.
Compliance with the provisions of national, state and local
environmental laws and regulations has not had a material effect
upon the capital expenditures, earnings or competitive position
of the Company. The Companys estimated capital
expenditures for environmental control facilities for the
remainder of Fiscal 2012 and the succeeding fiscal year are not
material and are not expected to materially affect the earnings,
cash flows or competitive position of the Company.
The Companys factories are subject to inspections by
various governmental agencies in the U.S. and other
countries where the Company does business, including the United
States Department of Agriculture, and the Occupational Health
and Safety Administration, and its products must comply with the
applicable laws, including food and drug laws, such as the
Federal Food and Cosmetic Act of 1938, as amended, and the
Federal Fair Packaging or Labeling Act of 1966, as amended, of
the jurisdictions in which they are manufactured and marketed.
The Company employed, on a full-time basis as of April 27,
2011, approximately 34,800 people around the world.
Segment information is set forth in this report on pages 83
through 85 in Note 15, Segment Information in
Item 8Financial Statements and Supplementary
Data.
Income from international operations is subject to fluctuation
in currency values, export and import restrictions, foreign
ownership restrictions, economic controls and other factors.
From time to time, exchange restrictions imposed by various
countries have restricted the transfer of funds between
countries and between the Company and its subsidiaries. To date,
such exchange restrictions have not had a material adverse
effect on the Companys operations.
The Companys annual report on
Form 10-K,
quarterly reports on
Form 10-Q,
current reports on
Form 8-K,
and amendments to those reports filed or furnished pursuant to
section 13(a) or 15(d) of the Exchange Act are available
free of charge on the Companys website at
www.heinz.com, as soon as
3
reasonably practicable after filed or furnished to the
Securities and Exchange Commission (SEC). Our
reports filed with the SEC are also made available on its
website at www.sec.gov.
Executive
Officers of the Registrant
The following is a list of the names and ages of all of the
executive officers of H. J. Heinz Company indicating all
positions and offices held by each such person and each such
persons principal occupations or employment during the
past five years. All the executive officers have been elected to
serve until the next annual election of officers, until their
successors are elected, or until their earlier resignation or
removal. The next annual election of officers is scheduled to
occur on August 30, 2011.
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Positions and Offices Held with the Company and
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Age (as of
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Principal Occupations or
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Name
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August 30, 2011)
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Employment During Past Five Years
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William R. Johnson
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Chairman, President, and Chief Executive Officer since September
2000.
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Theodore N. Bobby
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60
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Executive Vice President and General Counsel since January 2007;
Senior Vice President and General Counsel from April 2005 to
January 2007.
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Stephen S. Clark
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Vice PresidentChief People Officer since October 2005.
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Edward J. McMenamin
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54
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Senior Vice PresidentFinance since May 2010; Senior Vice
PresidentFinance and Corporate Controller from August 2004
to May 2010.
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Michael D. Milone
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55
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Executive Vice PresidentHeinz Rest of World, and Global
Enterprise Risk Management and Global Infant/Nutrition since May
2010; Senior Vice PresidentHeinz Rest of World, Enterprise
Risk Management and Global Infant/Nutrition from June 2008 to
April 2010; Senior Vice PresidentHeinz Pacific, Rest of
World and Enterprise Risk Management from May 2006 to June 2008.
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David C. Moran
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53
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Executive Vice President and President and Chief Executive
Officer of Heinz Europe since July 2009; Executive Vice
President & Chief Executive Officer and President of Heinz
North America from May 2007 to July 2009; Executive Vice
President & Chief Executive Officer and President of Heinz
North America Consumer Products from November 2005 to May 2007.
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Michael Mullen
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42
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Vice PresidentCorporate and Government Affairs since
February 2009; Director Global Corporate Affairs from May 2006
to February 2009.
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Positions and Offices Held with the Company and
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Age (as of
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Principal Occupations or
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Name
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August 30, 2011)
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Employment During Past Five Years
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Margaret R. Nollen
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48
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Senior Vice PresidentInvestor Relations and Global Program
Management Officer since January 2011; Senior Vice
PresidentInvestor Relations from May 2010 to
January 2011; Vice PresidentInvestor Relations from
February 2007 to May 2010; Vice PresidentInvestor
Relations of Capital Source from June 2006 to October 2006.
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C. Scott OHara
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50
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Executive Vice President and President and Chief Executive
Officer of Heinz North America since July 2009; Executive Vice
PresidentPresident and Chief Executive Officer Heinz
Europe from May 2006 to July 2009.
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Robert P. Ostryniec
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50
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Senior Vice President and Chief Supply Chain Officer since
February 2010; Chief Supply Chain Officer from January 2009 to
February 2010; Global Supply Chain Officer from April 2008 to
January 2009; Chief Supply Chain Officer from June 2005 to April
2008; Group Vice President Consumer ProductsProduct Supply
from July 2003 to June 2005.
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Christopher J. Warmoth
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52
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Executive Vice PresidentHeinz Asia Pacific since June
2008; Senior Vice PresidentHeinz Asia from May 2006 to
June 2008.
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Arthur B. Winkleblack
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54
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Executive Vice President and Chief Financial Officer since
January 2002.
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In addition to the factors discussed elsewhere in this report,
the following risks and uncertainties could materially and
adversely affect the Companys business, financial
condition, and results of operations. Additional risks and
uncertainties that are not presently known to the Company or are
currently deemed by the Company to be immaterial also may impair
the Companys business operations and financial condition.
Competitive
product and pricing pressures in the food industry and the
financial condition of customers and suppliers could adversely
affect the Companys ability to gain or maintain market
share and/or profitability.
The Company operates in the highly competitive food industry,
competing with other companies that have varying abilities to
withstand changing market conditions. Any significant change in
the Companys relationship with a major customer, including
changes in product prices, sales volume, or contractual terms
may impact financial results. Such changes may result because
the Companys competitors may have substantial financial,
marketing, and other resources that may change the competitive
environment. Private label brands sold by retail customers,
which are typically sold at lower prices, are a source of
competition for certain of our product lines. Such competition
could cause the Company to reduce prices
and/or
increase capital, marketing, and other expenditures, or could
5
result in the loss of category share. Such changes could have a
material adverse impact on the Companys net income. As the
retail grocery trade continues to consolidate, the larger retail
customers of the Company could seek to use their positions to
improve their profitability through lower pricing and increased
promotional programs. If the Company is unable to use its scale,
marketing expertise, product innovation, and category leadership
positions to respond to these changes, or is unable to increase
its prices, its profitability and volume growth could be
impacted in a materially adverse way. The success of our
business depends, in part, upon the financial strength and
viability of our suppliers and customers. The financial
condition of those suppliers and customers is affected in large
part by conditions and events that are beyond our control. A
significant deterioration of their financial condition could
adversely affect our financial results.
The
Companys performance may be adversely affected by economic
and political conditions in the U.S. and in various other
nations where it does business.
The Companys performance has been in the past and may
continue in the future to be impacted by economic and political
conditions in the United States and in other nations. Such
conditions and factors include changes in applicable laws and
regulations, including changes in food and drug laws, accounting
standards and critical accounting estimates, taxation
requirements and environmental laws. Other factors impacting our
operations in the U.S., Venezuela and other international
locations where the Company does business include export and
import restrictions, currency exchange rates, currency
devaluation, recessionary conditions, foreign ownership
restrictions, nationalization, the impact of hyperinflationary
environments, and terrorist acts and political unrest. Such
factors in either domestic or foreign jurisdictions could
materially and adversely affect our financial results.
Our
operating results may be adversely affected by the current
sovereign debt crisis in Europe and elsewhere and by related
global economic conditions.
The current Greek debt crisis and related European financial
restructuring efforts may cause the value of the European
currencies, including the Euro, to further deteriorate, thus
reducing the purchasing power of European customers. In
addition, the European crisis is contributing to instability in
global credit markets. The world has recently experienced a
global macroeconomic downturn, and if global economic and market
conditions, or economic conditions in Europe, the United States
or other key markets, remain uncertain, persist, or deteriorate
further, consumer purchasing power and demand for Company
products could decline, and we may experience material adverse
impacts on our business, operating results, and financial
condition.
Increases
in the cost and restrictions on the availability of raw
materials could adversely affect our financial
results.
The Company sources raw materials including agricultural
commodities such as tomatoes, cucumbers, potatoes, onions, other
fruits and vegetables, dairy products, meat, sugar and other
sweeteners, including high fructose corn syrup, spices, and
flour, as well as packaging materials such as glass, plastic,
metal, paper, fiberboard, and other materials and inputs such as
water, in order to manufacture products. The availability or
cost of such commodities may fluctuate widely due to government
policy and regulation, crop failures or shortages due to plant
disease or insect and other pest infestation, weather
conditions, potential impact of climate change, increased demand
for biofuels, or other unforeseen circumstances. Additionally,
the cost of raw materials and finished products may fluctuate
due to movements in cross-currency transaction rates. To the
extent that any of the foregoing or other unknown factors
increase the prices of such commodities or materials and the
Company is unable to increase its prices or adequately hedge
against such changes in a manner that offsets such changes, the
results of its operations could be materially and adversely
affected. Similarly, if supplier arrangements and relationships
result in increased and unforeseen expenses, the Companys
financial results could be materially and adversely impacted.
6
Disruption
of our supply chain could adversely affect our
business.
Damage or disruption to our manufacturing or distribution
capabilities due to weather, natural disaster, fire, terrorism,
pandemic, strikes, the financial
and/or
operational instability of key suppliers, distributors,
warehousing and transportation providers, or brokers, or other
reasons could impair our ability to manufacture or sell our
products. To the extent the Company is unable to, or cannot
financially mitigate the likelihood or potential impact of such
events, or to effectively manage such events if they occur,
particularly when a product is sourced from a single location,
there could be a materially adverse affect on our business and
results of operations, and additional resources could be
required to restore our supply chain.
Higher
energy costs and other factors affecting the cost of producing,
transporting, and distributing the Companys products could
adversely affect our financial results.
Rising fuel and energy costs may have a significant impact on
the cost of operations, including the manufacture,
transportation, and distribution of products. Fuel costs may
fluctuate due to a number of factors outside the control of the
Company, including government policy and regulation and weather
conditions. Additionally, the Company may be unable to maintain
favorable arrangements with respect to the costs of procuring
raw materials, packaging, services, and transporting products,
which could result in increased expenses and negatively affect
operations. If the Company is unable to hedge against such
increases or raise the prices of its products to offset the
changes, its results of operations could be materially and
adversely affected.
The
results of the Company could be adversely impacted as a result
of increased pension, labor, and people-related
expenses.
Inflationary pressures and any shortages in the labor market
could increase labor costs, which could have a material adverse
effect on the Companys consolidated operating results or
financial condition. The Companys labor costs include the
cost of providing employee benefits in the U.S. and foreign
jurisdictions, including pension, health and welfare, and
severance benefits. Any declines in market returns could
adversely impact the funding of pension plans, the assets of
which are invested in a diversified portfolio of equity and
fixed income securities and other investments. Additionally, the
annual costs of benefits vary with increased costs of health
care and the outcome of collectively-bargained wage and benefit
agreements.
The
impact of various food safety issues, environmental, legal, tax,
and other regulations and related developments could adversely
affect the Companys sales and profitability.
The Company is subject to numerous food safety and other laws
and regulations regarding the manufacturing, marketing, and
distribution of food products. These regulations govern matters
such as ingredients, advertising, taxation, relations with
distributors and retailers, health and safety matters, and
environmental concerns. The ineffectiveness of the
Companys planning and policies with respect to these
matters, and the need to comply with new or revised laws or
regulations with regard to licensing requirements, trade and
pricing practices, environmental permitting, or other food or
safety matters, or new interpretations or enforcement of
existing laws and regulations, as well as any related
litigation, may have a material adverse effect on the
Companys sales and profitability. Influenza or other
pandemics could disrupt production of the Companys
products, reduce demand for certain of the Companys
products, or disrupt the marketplace in the foodservice or
retail environment with consequent material adverse effects on
the Companys results of operations.
7
The
need for and effect of product recalls could have an adverse
impact on the Companys business.
If any of the Companys products become misbranded or
adulterated, the Company may need to conduct a product recall.
The scope of such a recall could result in significant costs
incurred as a result of the recall, potential destruction of
inventory, and lost sales. Should consumption of any product
cause injury, the Company may be liable for monetary damages as
a result of a judgment against it. A significant product recall
or product liability case could cause a loss of consumer
confidence in the Companys food products and could have a
material adverse effect on the value of its brands and results
of operations.
The
failure of new product or packaging introductions to gain trade
and consumer acceptance and changes in consumer preferences
could adversely affect our sales.
The success of the Company is dependent upon anticipating and
reacting to changes in consumer preferences, including health
and wellness. There are inherent marketplace risks associated
with new product or packaging introductions, including
uncertainties about trade and consumer acceptance. Moreover,
success is dependent upon the Companys ability to identify
and respond to consumer trends through innovation. The Company
may be required to increase expenditures for new product
development. The Company may not be successful in developing new
products or improving existing products, or its new products may
not achieve consumer acceptance, each of which could materially
and negatively impact sales.
The
failure to successfully integrate acquisitions and joint
ventures into our existing operations or the failure to gain
applicable regulatory approval for such transactions or
divestitures could adversely affect our financial
results.
The Companys ability to efficiently integrate acquisitions
and joint ventures into its existing operations also affects the
financial success of such transactions. The Company may seek to
expand its business through acquisitions and joint ventures, and
may divest underperforming or non-core businesses. The
Companys success depends, in part, upon its ability to
identify such acquisition, joint venture, and divestiture
opportunities and to negotiate favorable contractual terms.
Activities in such areas are regulated by numerous antitrust and
competition laws in the U. S., the European Union, and other
jurisdictions, and the Company may be required to obtain the
approval of acquisition and joint venture transactions by
competition authorities, as well as satisfy other legal
requirements. The failure to obtain such approvals could
materially and adversely affect our results.
The
Companys operations face significant foreign currency
exchange rate exposure, which could negatively impact its
operating results.
The Company holds assets and incurs liabilities, earns revenue,
and pays expenses in a variety of currencies other than the
U.S. dollar, primarily the British Pound, Euro, Australian
dollar, Canadian dollar, and New Zealand dollar. The
Companys consolidated financial statements are presented
in U.S. dollars, and therefore the Company must translate
its assets, liabilities, revenue, and expenses into
U.S. dollars for external reporting purposes. Increases or
decreases in the value of the U.S. dollar relative to other
currencies may materially and negatively affect the value of
these items in the Companys consolidated financial
statements, even if their value has not changed in their
original currency. In addition, the impact of fluctuations in
foreign currency exchange rates on transaction costs ( i.e., the
impact of foreign currency movements on particular transactions
such as raw material sourcing), most notably in the U.K., could
materially and adversely affect our results.
8
The
Company could incur more debt, which could have an adverse
impact on our business.
The Company may incur additional indebtedness in the future to
fund acquisitions, repurchase shares, or fund other activities
for general business purposes, which could result in a downward
change in credit rating. The Companys ability to make
payments on and refinance its indebtedness and fund planned
capital expenditures depends upon its ability to generate cash
in the future. The cost of incurring additional debt could
increase in the event of possible downgrades in the
Companys credit rating.
The
failure to implement our growth plans could adversely affect the
Companys ability to increase net income and generate
cash.
The success of the Company could be impacted by its inability to
continue to execute on its growth plans regarding product
innovation, implementing cost-cutting measures, improving supply
chain efficiency, enhancing processes and systems, including
information technology systems, on a global basis, and growing
market share and volume. The failure to fully implement the
plans, in a timely manner or within our cost estimates, could
materially and adversely affect the Companys ability to
increase net income. Additionally, the Companys ability to
pay cash dividends will depend upon its ability to generate cash
and profits, which, to a certain extent, is subject to economic,
financial, competitive, and other factors beyond the
Companys control.
We are increasingly dependent on information technology,
and expanding social media vehicles present new risks.
We are increasingly dependent on information technology systems
and any significant breakdown, invasion, destruction, or
interruption of these systems could negatively impact
operations. In addition, there is a risk of business
interruption or reputational damage from leakage of confidential
information.
The inappropriate use of certain media vehicles could cause
brand damage or information leakage. Negative posts or comments
about us on any social networking web site could seriously
damage our reputation. In addition, the disclosure of non-public
company sensitive information through external media channels
could lead to information loss. Identifying new points of entry
as social media continues to expand presents new challenges. Any
business interruptions or damage to the Companys
reputation could negatively impact the Companys financial
condition, results of operation, and the market price of the
Companys common stock.
CAUTIONARY
STATEMENT RELEVANT TO FORWARD-LOOKING INFORMATION
Statements about future growth, profitability, costs,
expectations, plans, or objectives included in this report,
including in managements discussion and analysis, and the
financial statements and footnotes, are forward-looking
statements based on managements estimates, assumptions,
and projections. These forward-looking statements are subject to
risks, uncertainties, assumptions and other important factors,
many of which may be beyond the Companys control and could
cause actual results to differ materially from those expressed
or implied in this report and the financial statements and
footnotes. Uncertainties contained in such statements include,
but are not limited to:
|
|
|
|
|
sales, volume, earnings, or cash flow growth,
|
|
|
|
general economic, political, and industry conditions, including
those that could impact consumer spending,
|
|
|
|
competitive conditions, which affect, among other things,
customer preferences and the pricing of products, production,
and energy costs,
|
9
|
|
|
|
|
competition from lower-priced private label brands,
|
|
|
|
increases in the cost and restrictions on the availability of
raw materials including agricultural commodities and packaging
materials, the ability to increase product prices in response,
and the impact on profitability,
|
|
|
|
the ability to identify and anticipate and respond through
innovation to consumer trends,
|
|
|
|
the need for product recalls,
|
|
|
|
the ability to maintain favorable supplier and customer
relationships, and the financial viability of those suppliers
and customers,
|
|
|
|
currency valuations and devaluations and interest rate
fluctuations,
|
|
|
|
changes in credit ratings, leverage, and economic conditions,
and the impact of these factors on our cost of borrowing and
access to capital markets,
|
|
|
|
our ability to effectuate our strategy, including our continued
evaluation of potential opportunities, such as strategic
acquisitions, joint ventures, divestitures, and other
initiatives, our ability to identify, finance and complete these
transactions and other initiatives, and our ability to realize
anticipated benefits from them,
|
|
|
|
the ability to successfully complete cost reduction programs and
increase productivity,
|
|
|
|
the ability to effectively integrate acquired businesses,
|
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|
|
new products, packaging innovations, and product mix,
|
|
|
|
the effectiveness of advertising, marketing, and promotional
programs,
|
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|
|
supply chain efficiency,
|
|
|
|
cash flow initiatives,
|
|
|
|
risks inherent in litigation, including tax litigation,
|
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|
|
the ability to further penetrate and grow and the risk of doing
business in international markets, particularly our emerging
markets; economic or political instability in those markets,
strikes, nationalization, and the performance of business in
hyperinflationary environments, in each case, such as Venezuela;
and the uncertain global macroeconomic environment and sovereign
debt issues, particularly in Europe,
|
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|
changes in estimates in critical accounting judgments and
changes in laws and regulations, including tax laws,
|
|
|
|
the success of tax planning strategies,
|
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|
|
the possibility of increased pension expense and contributions
and other people-related costs,
|
|
|
|
the potential adverse impact of natural disasters, such as
flooding and crop failures,
|
|
|
|
the ability to implement new information systems and potential
disruptions due to failures in information technology systems,
|
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|
|
with regard to dividends, dividends must be declared by the
Board of Directors and will be subject to certain legal
requirements being met at the time of declaration, as well as
our Boards view of our anticipated cash needs, and
|
|
|
|
other factors as described in Risk Factors above.
|
The forward-looking statements are and will be based on
managements then current views and assumptions regarding
future events and speak only as of their dates. The Company
undertakes no
10
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 1B.
|
Unresolved
Staff Comments.
|
Nothing to report under this item.
See table in Item 1.
|
|
Item 3.
|
Legal
Proceedings.
|
Nothing to report under this item.
|
|
Item 4.
|
(Removed
and Reserved).
|
11
PART II
|
|
Item 5.
|
Market
for Registrants Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities.
|
Information relating to the Companys common stock is set
forth in this report on page 36 under the caption
Stock Market Information in
Item 7Managements Discussion and Analysis
of Financial Condition and Results of Operations, and on
page 86 in Note 16, Quarterly Results in
Item 8Financial Statements and Supplementary
Data.
In the fourth quarter of Fiscal 2011, the Company repurchased
the following number of shares of its common stock:
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maximum
|
|
|
|
Total
|
|
|
|
|
|
Total Number of
|
|
|
Number of Shares
|
|
|
|
Number of
|
|
|
Average
|
|
|
Shares Purchased as
|
|
|
that May Yet Be
|
|
|
|
Shares
|
|
|
Price Paid
|
|
|
Part of Publicly
|
|
|
Purchased Under
|
|
Period
|
|
Purchased
|
|
|
per Share
|
|
|
Announced Programs
|
|
|
the Programs
|
|
|
January 27, 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
February 23, 2011
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
February 24, 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 23, 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 24, 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April 27, 2011
|
|
|
1,425,000
|
|
|
|
49.12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
1,425,000
|
|
|
$
|
49.12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The shares repurchased were acquired under the share repurchase
program authorized by the Board of Directors on May 31,
2006 for a maximum of 25 million shares. All repurchases
were made in open market transactions. As of April 27,
2011, the maximum number of shares that may yet be purchased
under the 2006 program is 5,291,192.
12
|
|
Item 6.
|
Selected
Financial Data.
|
The following table presents selected consolidated financial
data for the Company and its subsidiaries for each of the five
fiscal years 2007 through 2011. All amounts are in thousands
except per share data.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended
|
|
|
April 27,
|
|
April 28,
|
|
April 29,
|
|
April 30,
|
|
May 2,
|
|
|
2011
|
|
2010
|
|
2009
|
|
2008
|
|
2007
|
|
|
(52 Weeks)
|
|
(52 Weeks)
|
|
(52 Weeks)
|
|
(52 Weeks)
|
|
(52 Weeks)
|
|
Sales(1)
|
|
$
|
10,706,588
|
|
|
$
|
10,494,983
|
|
|
$
|
10,011,331
|
|
|
$
|
9,885,556
|
|
|
$
|
8,800,071
|
|
Interest expense(1)
|
|
|
275,398
|
|
|
|
295,711
|
|
|
|
339,635
|
|
|
|
364,808
|
|
|
|
333,037
|
|
Income from continuing operations(1)
|
|
|
1,005,948
|
|
|
|
931,940
|
|
|
|
944,400
|
|
|
|
858,176
|
|
|
|
794,398
|
|
Income from continuing operations per share attributable to H.J.
Heinz Company common shareholdersdiluted(1)
|
|
|
3.06
|
|
|
|
2.87
|
|
|
|
2.91
|
|
|
|
2.62
|
|
|
|
2.34
|
|
Income from continuing operations per share attributable to H.J.
Heinz Company common shareholdersbasic(1)
|
|
|
3.09
|
|
|
|
2.89
|
|
|
|
2.95
|
|
|
|
2.65
|
|
|
|
2.37
|
|
Short-term debt and current portion of long- term debt
|
|
|
1,534,932
|
|
|
|
59,020
|
|
|
|
65,638
|
|
|
|
452,708
|
|
|
|
468,243
|
|
Long-term debt, exclusive of current portion(2)
|
|
|
3,078,128
|
|
|
|
4,559,152
|
|
|
|
5,076,186
|
|
|
|
4,730,946
|
|
|
|
4,413,641
|
|
Total assets
|
|
|
12,230,645
|
|
|
|
10,075,711
|
|
|
|
9,664,184
|
|
|
|
10,565,043
|
|
|
|
10,033,026
|
|
Cash dividends per common share
|
|
|
1.80
|
|
|
|
1.68
|
|
|
|
1.66
|
|
|
|
1.52
|
|
|
|
1.40
|
|
|
|
|
(1) |
|
Amounts exclude the operating results related to the
Companys private label frozen desserts business in the
U.K. as well as the Kabobs and Appetizers And, Inc. businesses
in the U.S., which were divested in Fiscal 2010 and have been
presented as discontinued operations. |
|
(2) |
|
Long-term debt, exclusive of current portion, includes
$150.5 million, $207.1 million, $251.5 million,
$198.3 million, and $71.0 million of hedge accounting
adjustments associated with interest rate swaps at
April 27, 2011, April 28, 2010, April 29, 2009,
April 30, 2008, and May 2, 2007, respectively. H.J.
Heinz Finance Companys (HFC) mandatorily
redeemable preferred shares of $350 million in Fiscals
2011-2009
and $325 million in Fiscals 2008 and 2007 are classified as
long-term debt. |
Fiscal 2010 results from continuing operations include expenses
of $37.7 million pretax ($27.8 million after tax) for
upfront productivity charges and a gain of $15.0 million
pretax ($11.1 million after tax) on a property disposal in
the Netherlands. The upfront productivity charges include costs
associated with targeted workforce reductions and asset
write-offs, that were part of a corporation-wide initiative to
improve productivity. The asset write-offs related to two
factory closures and the exit of a formula business in the U.K.
See Discontinued Operations and Other Disposals in
Item 7, Managements Discussion and Analysis of
Financial Condition and Results of Operations on pages 15
through 16 for further explanation of the property disposal in
the Netherlands.
13
|
|
Item 7.
|
Managements
Discussion and Analysis of Financial Condition and Results of
Operations.
|
Executive
Overview- Fiscal 2011
The H.J. Heinz Company has been a pioneer in the food industry
for over 140 years and possesses one of the worlds
best and most recognizable
brandsHeinz®.
The Company has a global portfolio of leading brands focused in
three core categories, Ketchup and Sauces, Meals and Snacks, and
Infant/Nutrition.
In Fiscal 2011, the Company reported record diluted earnings per
share from continuing operations of $3.06, compared to $2.87 in
the prior year, an increase of 6.6%, overcoming a $0.06 per
share unfavorable impact from currency translation and
translation hedges and a $0.02 per share unfavorable impact for
acquisition costs from our recent acquisition in Brazil. Given
that almost two-thirds of the Companys sales and net
income are generated outside of the U.S., foreign currency
movements can have a significant impact on the Companys
financial results.
The Company generated record sales of $10.7 billion in
Fiscal 2011, a 2.0% increase versus prior year. Full year sales
benefited from combined volume and pricing gains of 1.9%
reflecting effective consumer marketing investments and new
product development. Foreign exchange unfavorably impacted sales
by 0.5% while acquisitions increased sales 0.6%. In Fiscal 2011,
the Company continued to execute its strategy to grow in
emerging economies by completing two important acquisitions in
these markets. On November 2, 2010, the Company acquired
Foodstar Holding Pte (Foodstar), a manufacturer of
soy sauces and fermented bean curd in China and on April 1,
2011, the Company acquired an 80% stake in Coniexpress S.A.
Industrias Alimenticias (Coniexpress), a leading
Brazilian manufacturer of the
Quero®
brand of tomato-based sauces, tomato paste, ketchup, condiments
and vegetables. The Coniexpress acquisition will accelerate the
Companys growth in Latin America and gives the Company its
first major business in Brazil, the worlds fifth most
populous nation. Overall, emerging markets continued to be an
important growth driver in Fiscal 2011, with combined volume and
pricing gains of 14.4% and representing 16.2% of total Company
sales for the year. Our top 15 brands also performed well, with
combined volume and pricing gains of 3.8% driven primarily by
the
Heinz®,
Complan®,
ABC®,
Smart
Ones®
and
Ore-Ida®
brands.
EPS from continuing operations for Fiscal 2011 also reflects a
70 basis point improvement in the gross profit margin. The
increased gross profit margin reflected productivity
improvements and higher net pricing, partially offset by higher
commodity input costs. The improvement in gross margin was
partially offset by investments in global process and system
upgrades in Fiscal 2011. Operating income increased 5.7% in
Fiscal 2011, despite the unfavorable impact of foreign currency,
transaction costs related to the Coniexpress acquisition in
Brazil and the investment in global systems capabilities. The
Company reported record net income in Fiscal 2011 of
$990 million compared to $914 million from continuing
operations in Fiscal 2010. In Fiscal 2010, the Company
incurred $28 million in after-tax charges for targeted
workforce reductions and non-cash asset write-offs that were
part of a corporate-wide initiative to improve productivity.
These prior year charges were partially offset by after-tax
gains in the prior year of $11 million related to a
property sale in the Netherlands and $15 million on a total
rate of return swap. In Fiscal 2011, the Company generated
record cash flow from operating activities of
$1.58 billion, a $321 million increase from the prior
year.
Management believes these Fiscal 2011 results are indicative of
the effectiveness of the Companys business plan, which is
focused on the following four strategic pillars:
|
|
|
|
|
Accelerate Growth in Emerging Markets
|
|
|
|
Expand the Core Portfolio
|
|
|
|
Strengthen and Leverage Global Scale
|
|
|
|
Make Talent an Advantage
|
14
In order to continue to drive sustainable growth, the Company
will invest in new productivity initiatives in Fiscal 2012 that
are expected to make the Company stronger and even more
competitive. The Company anticipates investing approximately
$130 million in cash and $160 million of pre-tax
income ($0.35 cents per share) on initiatives that will
increase manufacturing efficiency and accelerate productivity on
a global scale.
To enhance our manufacturing effectiveness and efficiency, we
plan to exit five of our 81 factories, including two in Europe,
two in the U.S. and one in the Pacific. We will also
establish a European supply chain hub in the Netherlands in
order to consolidate and centrally lead procurement,
manufacturing, logistics and inventory control. We also intend
to streamline our global workforce by approximately 800 to 1,000
positions. Certain projects included in the plan are subject to
consultation and any necessary agreements being reached with
appropriate employee representative bodies, trade unions and
work councils as required by law.
Separately during Fiscal 2012, we are also accelerating our
investment in Project Keystone, which is a multi-year program
designed to drive productivity and make Heinz much more
competitive by adding capabilities, harmonizing global processes
and standardizing our systems through SAP. We expect an
incremental cost of $40 million, or $0.08 cents per share,
for Project Keystone during Fiscal 2012.
The Company remains confident in its underlying business
fundamentals and plans to continue to focus on our four
strategic pillars in Fiscal 2012. We are expecting an
unfavorable impact in the coming year from commodity cost
inflation which we plan to offset with pricing and productivity
initiatives.
Discontinued
Operations and Other Disposals
During the third quarter of Fiscal 2010, the Company completed
the sale of its Appetizers And, Inc. frozen hors doeuvres
business which was previously reported within the
U.S. Foodservice segment, resulting in a $14.5 million
pre-tax ($10.4 million after-tax) loss. Also during the
third quarter of Fiscal 2010, the Company completed the sale of
its private label frozen desserts business in the U.K.,
resulting in a $31.4 million pre-tax ($23.6 million
after-tax) loss. During the second quarter of Fiscal 2010, the
Company completed the sale of its Kabobs frozen hors
doeuvres business which was previously reported within the
U.S. Foodservice segment, resulting in a $15.0 million
pre-tax ($10.9 million after-tax) loss. The losses on each
of these transactions have been recorded in discontinued
operations.
In accordance with accounting principles generally accepted in
the United States of America, the operating results related to
these businesses have been included in discontinued operations
in the Companys consolidated statements of income for
Fiscal 2010 and 2009. The following table presents summarized
operating results for these discontinued operations:
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended
|
|
|
April 28,
|
|
April 29,
|
|
|
2010
|
|
2009
|
|
|
FY 2010
|
|
FY 2009
|
|
|
(Millions of Dollars)
|
|
Sales
|
|
$
|
63.0
|
|
|
$
|
136.8
|
|
Net after-tax losses
|
|
$
|
(4.7
|
)
|
|
$
|
(6.4
|
)
|
Tax benefit on losses
|
|
$
|
2.0
|
|
|
$
|
2.4
|
|
During the fourth quarter of Fiscal 2010, the Company received
cash proceeds of $95 million from the government of the
Netherlands for property the government acquired through eminent
domain proceedings. The transaction includes the purchase by the
government of the Companys factory located in Nijmegen,
which produces soups, pasta and cereals. The cash proceeds are
intended to compensate the Company for costs, both capital and
expense, the Company will incur three years from the date of the
transaction, which is the length of time the Company has to exit
the current
15
factory location and construct new facilities. Note, the Company
will likely incur costs to rebuild an R&D facility in the
Netherlands, costs to transfer a cereal line to another factory
location, employee costs for severance and other costs directly
related to the closure and relocation of the existing
facilities. The Company also entered into a three-year leaseback
on the Nijmegen factory. The Company will continue to operate in
the leased factory while commencing to execute its plans for
closure and relocation of the operations. The Company has
accounted for the proceeds on a cost recovery basis. In doing
so, the Company has made its estimates of cost, both of a
capital and expense nature, to be incurred and recovered and to
which proceeds from the transaction will be applied. Of the
proceeds received, $81 million was deferred based on
managements total estimated future costs to be recovered
and incurred and recorded in other non-current liabilities,
other accrued liabilities and accumulated depreciation in the
Companys consolidated balance sheet as of April 28,
2010. These deferred amounts are recognized as the related costs
are incurred. If estimated costs differ from what is actually
incurred, these adjustments are reflected in earnings. As of
April 27, 2011, the remaining deferred amount on the
consolidated balance sheet was $63 million and was recorded
in other non-current liabilities, other accrued liabilities and
accumulated depreciation. No significant adjustments were
reflected in earnings in Fiscal 2011. The excess of the
$95 million of proceeds received over estimated costs to be
recovered and incurred was $15 million which has been
recorded as a reduction of cost of products sold in the
consolidated statement of income for the year ended
April 28, 2010.
Results
of Continuing Operations
The Companys revenues are generated via the sale of
products in the following categories:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended
|
|
|
|
April 27,
|
|
|
April 28,
|
|
|
April 29,
|
|
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
|
(52 Weeks)
|
|
|
(52 Weeks)
|
|
|
(52 Weeks)
|
|
|
|
(Dollars in thousands)
|
|
|
Ketchup and sauces
|
|
$
|
4,607,971
|
|
|
$
|
4,446,911
|
|
|
$
|
4,251,583
|
|
Meals and snacks
|
|
|
4,282,318
|
|
|
|
4,289,977
|
|
|
|
4,225,127
|
|
Infant/Nutrition
|
|
|
1,175,438
|
|
|
|
1,157,982
|
|
|
|
1,105,313
|
|
Other
|
|
|
640,861
|
|
|
|
600,113
|
|
|
|
429,308
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
10,706,588
|
|
|
$
|
10,494,983
|
|
|
$
|
10,011,331
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal
Year Ended April 27, 2011 compared to Fiscal Year Ended
April 28, 2010
Sales for Fiscal 2011 increased $212 million, or 2.0%, to
$10.71 billion. Volume increased 0.7%, as favorable volume
in emerging markets as well as improvements in North American
Consumer Products were partially offset by declines in
U.S. Foodservice, Australia and Germany. Emerging markets
and our Top 15 brands continued to be important growth drivers,
with combined volume and pricing gains of 14.4% in emerging
markets and 3.8% in our Top 15 brands. Net pricing increased
sales by 1.2%, as price increases in emerging markets,
particularly Latin America, U.S. Foodservice and the U.K.
were partially offset by increased trade promotions in the North
American Consumer Products and Australian businesses.
Acquisitions increased sales by 0.6%, while foreign exchange
translation rates reduced sales by 0.5%.
Gross profit increased $158 million, or 4.2%, to
$3.95 billion, and the gross profit margin increased to
36.9% from 36.2%. Gross profit increased as higher volume, net
pricing, productivity improvements and the favorable impact from
the Foodstar acquisition were partially offset by a
$33 million unfavorable impact from foreign exchange
translation rates as well as higher commodity costs. In
addition, last years gross profit included
$24 million in charges for a corporation-wide initiative to
improve productivity, partially offset by a $15 million
gain related to property sold in the Netherlands as discussed
previously.
16
Selling, general and administrative expenses
(SG&A) increased $69 million, or 3.1% to
$2.30 billion, and increased slightly as a percentage of
sales to 21.5% from 21.3%. SG&A was unfavorably impacted by
higher selling and distribution expenses (S&D),
largely resulting from the higher volume and fuel costs, and
higher general and administrative expenses
(G&A), reflecting investments in global process
and system upgrades, increased capabilities in emerging markets
and acquisition costs related to the Coniexpress acquisition.
These increases were partially offset by reduced marketing
expense, a $17 million favorable impact from foreign
exchange translation rates and a $14 million impact related
to prior year targeted workforce reductions. Operating income
increased $89 million, or 5.7%, to $1.65 billion,
reflecting the items above.
Net interest expense increased $2 million, to
$253 million, reflecting a $23 million decrease in
interest income and a $20 million decrease in interest
expense. The decrease in interest income is mainly due to a
$24 million gain in the prior year on a total rate of
return swap, which was terminated in August 2009. Interest
expense decreased due to lower average interest rates and debt
balances. Other expenses, net, increased $3.0 million, to
$21 million, primarily due to currency losses partially
offset by $9 million of charges in the prior year
recognized in connection with the dealer remarketable securities
exchange transaction (see below in Liquidity and Financial
Position for further explanation of this transaction).
The effective tax rate for Fiscal 2011 was 26.8% compared to
27.8% for the prior year. The current year effective tax rate
was lower than the prior year primarily due to increased
benefits from foreign tax planning and increased tax exempt
foreign income, partially offset by higher taxes on repatriation
of earnings.
Income from continuing operations attributable to H. J. Heinz
Company was $990 million compared to $914 million in
the prior year, an increase of 8.2%. The increase was due to
higher operating income, reduced interest expense, a lower tax
rate and $28 million in prior year after-tax charges ($0.09
per share) for targeted workforce reductions and non-cash asset
write-offs. These were partially offset by an $11 million
after-tax gain in the prior year related to property sold in the
Netherlands and a $15 million after-tax gain in the prior
year on a total rate of return swap. Diluted earnings per share
from continuing operations were $3.06 in the current year
compared to $2.87 in the prior year, up 6.6%. EPS movements were
unfavorably impacted by 1.5% higher shares outstanding and by
$0.06 from currency fluctuations, after taking into account the
net effect of current and prior year currency translation
contracts and foreign currency movements on translation.
The impact of fluctuating translation exchange rates in Fiscal
2011 has had a relatively consistent impact on all components of
operating income on the consolidated statement of income.
FISCAL
YEAR 2011 OPERATING RESULTS BY BUSINESS SEGMENT
North
American Consumer Products
Sales of the North American Consumer Products segment increased
$74 million, or 2.3%, to $3.27 billion. Volume
increased 2.0% as new products and increased trade promotions
drove improvements in
Heinz®
ketchup and gravy, Smart
Ones®
frozen entrees,
Classico®
pasta sauces,
Ore-Ida®
frozen potatoes and TGI
Fridays®
frozen meals and appetizers. These increases were partially
offset by declines in Boston
Market®
frozen products as we transition away from the Boston
Market®
license which should be completed in the first quarter of Fiscal
2012. In addition, volume is up across most product categories
in Canada. Net prices decreased 1.1% reflecting trade promotion
increases in Canada, the Consumer Value Program launched in the
U.S. in the second half of the prior year and trade
spending in the current year to support the launch of TGI
Fridays®
single serve frozen products. The acquisition of
Arthurs Fresh Company, a small chilled smoothies business
in Canada, in the third quarter of Fiscal 2010, increased sales
0.2%. Favorable Canadian exchange translation rates increased
sales 1.1%.
17
Gross profit increased $38 million, or 2.8%, to
$1.38 billion, and the gross profit margin increased to
42.1% from 41.9%. The increase in gross profit dollars was aided
by favorable volume and foreign exchange translation rates. The
gross profit margin improved as productivity improvements more
than offset the shift in marketing funds to trade promotion
investments and increased commodity costs. SG&A decreased
as a result of the shift of marketing funds to trade promotions.
Operating income increased $61 million, or 7.9%, to
$833 million, reflecting higher volume, gross margin
improvements and tight control of SG&A.
Europe
Heinz Europe sales decreased $96 million, or 2.9%, to
$3.24 billion. The decrease was due to unfavorable foreign
exchange translation rates, which decreased sales by 3.5%, or
$117 million. Volume decreased 0.4%, as increases in
Weight
Watchers®
and Aunt
Bessies®
frozen products in the U.K, improvements in ketchup,
particularly in Russia and France, and increases in drinks in
The Netherlands, were more than offset by declines in soups in
the U.K. and Germany,
Honig®
branded products in The Netherlands, and infant nutrition
across Europe. Net pricing increased 1.0%, due to reduced
promotions on
Heinz®
soup in the U.K. and increased net pricing in our Russian
and Italian infant nutrition businesses.
Gross profit increased $19 million, or 1.5%, to
$1.27 billion, and the gross profit margin increased to
39.1% from 37.4%. These increases resulted from productivity
improvements and higher net pricing partially offset by
increased commodity costs and unfavorable foreign exchange
translation rates. Gross profit also benefited from a gain in
the current year on the sale of distribution rights on
Amoy®
products in certain ethnic channels in the U.K. Operating income
increased $27 million, or 4.8%, to $581 million,
reflecting the items above as well as reduced SG&A. The
decline in SG&A was largely related to foreign exchange
translation rates, partially offset by increased marketing and
investments in global process and system upgrades.
Asia/Pacific
Heinz Asia/Pacific sales increased $314 million, or 15.6%,
to $2.32 billion. Volume increased 4.8%, due to significant
growth in
Complan®
and Glucon
D®
nutritional beverages in India,
ABC®
products in Indonesia and infant feeding and frozen products in
China and Japan. These increases were partially offset by
softness in Australia, which has been impacted by a difficult
trade environment and generally weak category trends. Pricing
rose 0.2%, reflecting increases on
ABC®
products in Indonesia and
Complan®
and Glucon
D®
products in India offset by higher promotions in Australia. The
acquisition of Foodstar during the third quarter of Fiscal 2011
increased sales 2.9%. Favorable exchange translation rates
increased sales by 7.7%.
Gross profit increased $103 million, or 16.8%, to
$715 million, and the gross profit margin increased to
30.8% from 30.5%. These increases reflect higher volume and
pricing, favorable foreign exchange translation rates, the
impact of the Foodstar acquisition, a gain in the current year
on the sale of a factory in India, and productivity
improvements, which include the favorable renegotiation of a
long-term supply contract in Australia. These increases were
reduced by higher commodity costs, particularly in Indonesia and
India, partially offset by transactional currency benefits.
Operating income increased $26 million, or 13.5%, to
$222 million, primarily reflecting higher volume, improved
gross margins and favorable foreign exchange. These improvements
were partially offset by increased marketing investments and
higher G&A.
U.S.
Foodservice
Sales of the U.S. Foodservice segment decreased
$16 million, or 1.1%, to $1.41 billion. Pricing
increased sales 2.3%, largely due to
Heinz®
ketchup and other tomato products, reflecting reduced trade
promotions and price increases taken to help offset commodity
cost increases. Volume decreased by 3.5%, due to declines in
frozen desserts and soup as well as non-branded sauces.
18
The volume reflects ongoing weakness in restaurant foot traffic,
rationalization of less-profitable products, and the timing of
new product launches and promotions in the prior year.
Gross profit increased $20 million, or 5.1%, to
$422 million, and the gross profit margin increased to
29.9% from 28.1%, as pricing and productivity improvements more
than offset increased commodity costs and lower volume.
Operating income increased $25 million, or 16.8%, to
$176 million, due to the gross margin improvements and
lower SG&A costs relating to reduced incentive compensation
expense.
Rest of
World
Sales for Rest of World decreased $64 million, or 11.9%, to
$470 million. Foreign exchange translation rates decreased
sales 24.6%, or $131 million, largely due to the
devaluation of the Venezuelan bolivar fuerte (VEF)
late in the third quarter of Fiscal 2010 (See the
Venezuela-Foreign Currency and Inflation section
below for further explanation). Higher pricing increased sales
by 17.2%, largely due to price increases in Latin America taken
to mitigate inflation. Volume decreased 4.5% as increases in the
Middle East resulting from new products, market expansion and
increased marketing and promotions were more than offset by
declines in Venezuela resulting from labor disruptions which
occurred during Fiscal 2011.
Gross profit decreased $29 million, or 14.8%, to
$169 million, due mainly to the impact of VEF devaluation,
increased commodity costs and lower volume, partially offset by
increased pricing. Operating income decreased $16 million,
or 22.9%, to $53 million, reflecting the VEF devaluation.
In order to facilitate timely reporting in Fiscal 2011, the
operating results of Coniexpress in Brazil, which was acquired
on April 1, 2011, will first be reported in the Rest of
World segment beginning in the first quarter of Fiscal 2012.
Fiscal
Year Ended April 28, 2010 compared to Fiscal Year Ended
April 29, 2009
Sales for Fiscal 2010 increased $484 million, or 4.8%, to
$10.49 billion. Net pricing increased sales by 3.4%,
largely due to the carryover impact of broad-based price
increases taken in Fiscal 2009 to help offset increased
commodity costs. Volume decreased 1.3%, as favorable volume in
emerging markets was more than offset by declines in the
U.S. and Australian businesses. Volume was impacted by
aggressive competitor promotional activity and softness in some
of the Companys product categories, as well as reduced
foot traffic in U.S. restaurants in Fiscal 2010. Emerging
markets continued to be an important growth driver, with
combined volume and pricing gains of 15.3%. In addition, the
Companys top 15 brands performed well, with combined
volume and pricing gains of 3.4%, led by the
Heinz®,
Complan®
and
ABC®
brands. Acquisitions, net of divestitures, increased sales by
2.2%. Foreign exchange translation rates increased sales by 0.5%
compared to Fiscal 2009.
Gross profit increased $225 million, or 6.3%, to
$3.79 billion, and the gross profit margin increased to
36.2% from 35.7%. The improvement in gross margin reflects
higher net pricing and productivity improvements, partially
offset by higher commodity costs including transaction currency
costs. Acquisitions had a favorable impact on gross profit
dollars but reduced overall gross profit margin. In addition,
gross profit was unfavorably impacted by lower volume and
$24 million of charges for a corporation-wide initiative to
improve productivity, partially offset by a $15 million
gain related to property sold in the Netherlands as discussed
previously.
SG&A increased $168 million, or 8.1%, to
$2.24 billion, and increased as a percentage of sales to
21.3% from 20.6%. The increase reflects the impact from
additional marketing investments, acquisitions, inflation in
Latin America, and higher pension and incentive compensation
expenses. In addition, SG&A was impacted by
$14 million related to targeted workforce reductions in
Fiscal 2010 and a gain in Fiscal 2009 on the sale of a small
portion control business in the U.S. These increases were
partially offset by improvements in S&D, reflecting
productivity improvements and lower fuel costs.
19
Operating income increased $57 million, or 3.8%, to
$1.56 billion, reflecting the items above.
Net interest expense decreased $25 million, to
$251 million, reflecting a $44 million decrease in
interest expense and a $19 million decrease in interest
income. The decreases in interest income and interest expense
are primarily due to lower average interest rates.
Other expenses, net, increased $111 million primarily due
to a $105 million decrease in currency gains, and
$9 million of charges recognized in connection with the
August 2009 dealer remarketable securities (DRS)
exchange transaction (see below in Liquidity and Financial
Position for further explanation of this transaction). The
decrease in currency gains reflects Fiscal 2009 gains of
$107 million related to forward contracts that were put in
place to help mitigate the unfavorable impact of translation
associated with key foreign currencies for Fiscal 2009.
The effective tax rate for Fiscal 2010 was 27.8% compared to
28.4% in Fiscal 2009. The Fiscal 2010 effective tax rate was
lower than Fiscal 2009 primarily due to tax efficient financing
of the Companys operations, partially offset by higher
taxes on repatriation of earnings.
Income from continuing operations attributable to H. J. Heinz
Company was $914 million compared to $930 million in
Fiscal 2009, a decrease of 1.6%. The decrease reflects the
Fiscal 2009 currency gains discussed above, which were
$66 million after-tax ($0.21 per share), and
$28 million in after-tax charges ($0.09 per share) in
Fiscal 2010 for targeted workforce reductions and non-cash asset
write-offs, partially offset by higher operating income, reduced
net interest expense, a lower effective tax rate and an
$11 million after-tax gain related to property sold in the
Netherlands. Diluted earnings per share from continuing
operations was $2.87 in Fiscal 2010 compared to $2.91 in Fiscal
2009, down 1.4%. EPS movements were unfavorably impacted by
$0.29, or $90 million of net income, from currency
fluctuations, after taking into account the net effect Fiscal
2010 and 2009 currency translation contracts, as well as foreign
currency movements on translation and U.K. transaction costs.
The impact of fluctuating translation exchange rates in Fiscal
2010 has had a relatively consistent impact on all components of
operating income on the consolidated statement of income. The
impact of cross currency sourcing of inventory reduced gross
profit and operating income but did not affect sales.
FISCAL
YEAR 2010 OPERATING RESULTS BY BUSINESS SEGMENT
North
American Consumer Products
Sales of the North American Consumer Products segment increased
$56 million, or 1.8%, to $3.19 billion. Net prices
grew 1.9% reflecting the carryover impact of price increases
taken across the majority of the product portfolio throughout
Fiscal 2009, partially offset by increased promotional spending
in Fiscal 2010, particularly on Smart
Ones®
frozen entrees and
Heinz®
ketchup. Volume decreased 1.5%, reflecting declines in frozen
meals and desserts due to category softness, competitor
promotional activity and the impact of price increases. Volume
declines were also noted in
Ore-Ida®
frozen potatoes,
Classico®
pasta sauces and frozen snacks. These volume declines were
partially offset by increases in TGI
Fridays®
Skillet Meals due to new product introductions and increased
trade promotions and marketing as well as growth in
Heinz®
ketchup. The acquisition of Arthurs Fresh Company, a small
chilled smoothies business in Canada, at the beginning of the
third quarter of Fiscal 2010 increased sales 0.2%. Favorable
Canadian exchange translation rates increased sales 1.3%.
Gross profit increased $80 million, or 6.3%, to
$1.34 billion, and the gross profit margin increased to
41.9% from 40.1%. The higher gross margin reflects productivity
improvements and the carryover impact of price increases,
partially offset by increased commodity costs. The favorable
impact of foreign exchange on gross profit was more than offset
by unfavorable volume. Operating income increased
$47 million, or 6.4%, to $771 million, reflecting the
improvement in gross profit and
20
reduced S&D, partially offset by increased marketing
investment, pension costs and incentive compensation expense.
The improvement in S&D was a result of productivity
projects, tight cost control and lower fuel costs.
Europe
Heinz Europe sales increased $4 million, or 0.1%, to
$3.33 billion. Unfavorable foreign exchange translation
rates decreased sales by 1.9%. Net pricing increased 2.4%,
driven by the carryover impact of price increases taken in
Fiscal 2009, partially offset by increased promotions,
particularly in the U.K. and Continental Europe. Volume
decreased 0.9%, principally due to decreases in France from the
rationalization of low-margin sauces, and increased competitor
promotional activity on frozen products in the U.K. Volume for
infant nutrition products in the U.K. and Italy also declined,
along with decreases in
Heinz®
pasta meals as a result of reduced promotional activities. Lower
volume in Italy reflects the overall category decline in that
country. Volume improvements were posted on soups in the U.K.
and Germany as well as
Heinz®
ketchup across Europe, particularly in Russia where both
ketchup, sauces and infant feeding products are growing at
double digit rates. Acquisitions, net of divestitures, increased
sales 0.5%, largely due to the acquisition of the
Bénédicta®
sauce business in France in the second quarter of Fiscal 2009.
Gross profit decreased $9 million, or 0.7%, to
$1.25 billion, and the gross profit margin decreased to
37.4% from 37.7%. The decline in gross profit is largely due to
unfavorable foreign exchange translation rates and increased
commodity costs, including the cross currency rate movements in
the British pound versus the euro and U.S. dollar. These
declines were partially mitigated by higher pricing and
productivity improvements. Operating income decreased
$17 million, or 2.9%, to $554 million, due to
unfavorable foreign currency translation and transaction
impacts, as well as increased marketing and higher incentive
compensation expense, partially offset by reduced S&D.
Asia/Pacific
Heinz Asia/Pacific sales increased $380 million, or 23.3%,
to $2.01 billion. Acquisitions increased sales 12.6% due to
the Fiscal 2009 acquisitions of Golden Circle Limited, a
health-oriented fruit and juice business in Australia, and
La Bonne Cuisine, a chilled dip business in New Zealand.
Pricing increased 2.0%, reflecting Fiscal 2010 and 2009
increases on
ABC®
products in Indonesia as well as the carryover impact of Fiscal
2009 price increases and reduced promotions in New Zealand.
These increases were partially offset by reduced net pricing on
Long
Fong®
frozen products in China due to increased promotional spending.
Volume increased 1.0%, as significant growth in
Complan®
and Glucon
D®
nutritional beverages in India and
ABC®
products in Indonesia was more than offset by general softness
in both Australia and New Zealand, which have been impacted by
competitive activity and reduced market demand associated with
higher prices. Favorable exchange translation rates increased
sales by 7.8%.
Gross profit increased $83 million, or 15.6%, to
$612 million, and the gross profit margin declined to 30.5%
from 32.5%. The $83 million increase in gross profit was
due to higher volume and pricing, productivity improvements and
favorable foreign exchange translation rates. These increases
were partially offset by increased commodity costs, which
include the impact of cross-currency rates on inventory costs.
Acquisitions had a favorable impact on gross profit dollars but
reduced overall gross profit margin. Operating income increased
by $13 million, or 7.0%, to $195 million, as the
increase in gross profit was partially offset by increased
SG&A related to acquisitions, the impact of foreign
exchange translation rates and increased marketing investments.
U.S.
Foodservice
Sales of the U.S. Foodservice segment decreased
$21 million, or 1.5%, to $1.43 billion. Pricing
increased sales 4.4%, largely due to Fiscal 2009 price increases
taken across the portfolio. Volume decreased by 5.5%, due to
industry-wide declines in U.S. restaurant traffic and
sales, targeted SKU
21
reductions, the unfavorable impact from price increases and
increased competitive activity. Fiscal 2009 divestitures reduced
sales 0.4%.
Gross profit increased $49 million, or 13.8%, to
$402 million, and the gross profit margin increased to
28.1% from 24.3%, as cumulative price increases helped return
margins for this business closer to their historical levels. In
Fiscal 2010, gross profit benefited from pricing and
productivity improvements as well as commodity cost favorability
which more than offset unfavorable volume. Operating income
increased $21 million, or 16.4%, to $151 million,
which is primarily due to gross profit improvements and reduced
S&D reflecting productivity projects, tight cost control
and lower fuel costs. These improvements were partially offset
by increased marketing expense and higher G&A resulting
from increased pension and incentive compensation costs and a
Fiscal 2009 gain on the sale of a small, non-core portion
control business.
Rest of
World
Sales for Rest of World increased $65 million, or 14.0%, to
$533 million. Higher pricing increased sales by 23.1%,
largely due to Fiscal 2010 and 2009 price increases in Latin
America taken to mitigate the impact of raw material and labor
inflation. Volume increased 2.3% reflecting increases in Latin
America and the Middle East. Acquisitions increased sales 0.8%
due to the Fiscal 2009 acquisition of Papillon, a small chilled
products business in South Africa. Foreign exchange translation
rates decreased sales 12.2%, largely due to the devaluation of
the VEF late in the third quarter of Fiscal 2010 (See the
Venezuela- Foreign Currency and Inflation section
below for further explanation).
Gross profit increased $37 million, or 23.1%, to
$199 million, due mainly to increased pricing, partially
offset by increased commodity costs and the impact of the VEF
devaluation. Operating income increased $17 million, or
32.2% to $69 million, as the increase in gross profit was
partially offset by increased marketing and higher S&D and
G&A expenses reflecting growth-related investments and
inflation in Latin America.
Liquidity
and Financial Position
For Fiscal 2011, cash provided by operating activities was a
record $1.58 billion compared to $1.26 billion in the
prior year. The improvement in Fiscal 2011 versus Fiscal 2010
reflects higher earnings, reduced pension contributions and
favorable movements in payables. These improvements were
partially offset by declines in cash flows from receivables,
largely due to the timing of cash received under an accounts
receivable securitization program (see additional explanation
below), and from inventories, accrued expenses and income taxes.
The Company received $12 million of cash in Fiscal 2011 for
the termination of foreign currency hedge contracts (see
Note 12, Derivative Financial Instruments and Hedging
Activities in Item 8Financial Statements
and Supplementary Data for additional information) and
received $48 million in the prior year from the termination
of a total rate of return swap. The Companys cash
conversion cycle improved 5 days, to 42 days in Fiscal
2011 due to the improvements in accounts payable.
During Fiscal 2011, the Company contributed $22 million to
the pension plans compared to $540 million in the prior
year. Of the $540 million of payments in Fiscal 2010,
$475 million were discretionary contributions that were
made to help offset the impact of adverse conditions in the
global equity and bond markets. Contributions for Fiscal 2012
are expected to be less than $40 million; however, actual
contributions may be affected by pension asset and liability
valuation changes during the year.
In Fiscal 2010, the Company entered into a three-year
$175 million accounts receivable securitization program.
For the sale of receivables under the program, the Company
receives initial cash funding and a deferred purchase price. The
initial cash funding was $29 million and $84 million
during the years ended April 27, 2011 and April 28,
2010, respectively, resulting in a decrease of $55 million
in cash for sales under this program for Fiscal 2011 and an
increase in cash of $84 million for Fiscal 2010. The
decrease in cash proceeds related to the deferred purchase price
was
22
$85 million for the fiscal year ended April 27, 2011.
See Note 14, Financing Arrangements in
Item 8-
Financial Statements and Supplementary Data for
additional information.
Cash used for investing activities totaled $950 million
compared to providing $13 million of cash last year.
Capital expenditures totaled $336 million (3.1% of sales)
compared to $278 million (2.6% of sales) in the prior year,
which is in-line with planned levels. The Company expects
capital spending as a percentage of sales to be 3.4% to 3.8% in
Fiscal 2012. Cash paid for acquisitions in the current year
totaled $618 million primarily related to Foodstar in China
and Coniexpress in Brazil. In the prior year, cash paid for
acquisitions was $11 million and primarily related to the
Arthurs Fresh Company in Canada. Proceeds from
divestitures provided cash of $2 million in the current
year compared to $19 million in the prior year which
primarily related to the sale of our Kabobs and Appetizers And,
Inc. frozen hors doeuvres foodservice businesses in the
U.S. and our private label frozen desserts business in the
U.K. Proceeds from disposals of property, plant and equipment
were $13 million in the current year compared to
$96 million in the prior year reflecting proceeds received
in Fiscal 2010 related to property sold in The Netherlands as
discussed previously. The current year increase in restricted
cash of $10 million relates to restricted funds in our
Foodstar business in China, and the prior year decrease of
$193 million in restricted cash represents collateral that
was returned to the Company in connection with the termination
of a total rate of return swap in August 2009.
On November 2, 2010, the Company acquired Foodstar for
$165 million in cash, which includes $30 million of
acquired cash, as well as a contingent earn-out payment in
Fiscal 2014 based upon certain net sales and EBITDA (earnings
before interest, taxes, depreciation and amortization) targets
during Fiscals 2013 and 2014. In accordance with accounting
principles generally accepted in the United States of America, a
liability of $45 million was recognized as an estimate of
the acquisition date fair value of the earn-out and is included
in the Other non-current liabilities line item of our
consolidated balance sheet as of April 27, 2011. Any change
in the fair value of the earn-out subsequent to the acquisition
date, including an increase resulting from the passage of time,
is and will be recognized in earnings in the period of the
estimated fair value change. As of April 27, 2011, there
was no significant change to the fair value of the earn-out
recorded for Foodstar at the acquisition date. A change in fair
value of the earn-out could have a material impact on the
Companys earnings in the period of the change in estimate.
The fair value of the earn-out was estimated using a discounted
cash flow model. This fair value measurement is based on
significant inputs not observed in the market and thus
represents a Level 3 measurement. See Note 10,
Fair Value Measurements in
Item 8-
Financial Statements and Supplementary Data for the
definition of a Level 3 instrument. Key assumptions in
determining the fair value of the earn-out include the discount
rate and revenue and EBITDA projections for Fiscals 2013 and
2014.
On April 1, 2011, the Company acquired an 80% stake in
Coniexpress, a leading Brazilian manufacturer of the
Quero®
brand of tomato-based sauces, tomato paste, ketchup, condiments
and vegetables for $494 million in cash, which includes
$11 million of acquired cash and $60 million of
short-term investments. The
Quero®
brand holds number one or number two positions in tomato product
categories in Brazil and the leading position in vegetables. The
acquisition includes a modern factory that is centrally located
in Neropolis and a new distribution center. Based near Sao
Paulo, the
Quero®
business has over 1,800 employees. The Company has the
right to exercise a call option at any time requiring the
minority partner to sell his 20% equity interest, while the
minority partner has the right to exercise a put option
requiring the Company to purchase his 20% equity interest (see
Note 17, Commitments and Contingencies in
Item 8-
Financial Statements and Supplementary Data for
additional explanation). In addition, the stock purchase
agreement provides the Company with rights to recover from the
sellers a portion of the costs associated with certain
contingent liabilities incurred pre-acquisition. Based on the
Companys assessment as of the acquisition date, a
$26 million indemnification asset has been recorded in
Other non-current assets related to a contingent liability of
$53 million recorded in Other non-current liabilities.
23
Cash used for financing activities totaled $483 million
compared to $1.15 billion last year.
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Proceeds from long-term debt were $230 million in the
current year and $447 million in the prior year. The
current year proceeds primarily relate to a variable rate,
three-year 16 billion Japanese yen denominated credit
agreement the Company entered into in the third quarter of the
year. The proceeds were used in the funding of the Foodstar
acquisition and for general corporate purposes and were swapped
to $193.2 million and the interest rate was fixed at 2.66%.
See Note 12, Derivative Financial Instruments and
Hedging Activities in
Item 8-
Financial Statements and Supplementary Data for
additional information. The prior year proceeds relate to the
issuance of $250 million of 7.125% notes due 2039 by
H. J. Heinz Finance Company (HFC), a subsidiary of
Heinz, in July 2009. These notes were fully, unconditionally and
irrevocably guaranteed by the Company. The proceeds from the
notes were used for payment of the cash component of the
exchange transaction discussed below as well as various expenses
relating to the exchange, and for general corporate purposes.
Also in the prior year, the Company received cash proceeds of
$167 million related to a 15 billion Japanese yen
denominated credit agreement that was entered into during the
second quarter of Fiscal 2010.
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Payments on long-term debt were $46 million in the current
year compared to $630 million in the prior year. Prior year
payments reflect cash payments on the Fiscal 2010 DRS exchange
transaction discussed below and the payoff of our
A$281 million Australian denominated borrowings which
matured on December 16, 2009.
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Net payments on commercial paper and short-term debt were
$193 million this year compared to $427 million in the
prior year.
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Cash proceeds from option exercises, net of treasury stock
purchases, provided $85 million of cash in the current
year. During the fourth quarter of Fiscal 2011, the Company
purchased 1.4 million shares of stock at a total cost of
$70 million. Cash proceeds from option exercises provided
$67 million of cash in the prior year, and the Company had
no treasury stock purchases in the prior year.
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Dividend payments totaled $580 million this year, compared
to $534 million for the same period last year, reflecting a
7.1% increase in the annualized dividend per common share to
$1.80.
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In the current year, $6 million of cash was paid for the
purchase of the remaining 21% interest in Heinz UFE Ltd., a
Chinese subsidiary of the Company that manufactures infant
feeding products. In the prior year, $62 million of cash
was paid for the purchase of the remaining 49% interest in Cairo
Food Industries, S.A.E., an Egyptian subsidiary of the Company
that manufactures ketchup, condiments and sauces.
|
On August 6, 2009, HFC issued $681 million of
7.125% notes due 2039 (of the same series as the notes
issued in July 2009), and paid $218 million of cash, in
exchange for $681 million of its outstanding 15.590% DRS
due December 1, 2020. In addition, HFC terminated a portion
of the remarketing option by paying the remarketing agent a cash
payment of $89 million. The exchange transaction was
accounted for as a modification of debt. Accordingly, cash
payments used in the exchange, including the payment to the
remarketing agent, have been accounted for as a reduction in the
book value of the debt, and will be amortized to interest
expense under the effective yield method. Additionally, the
Company terminated its $175 million notional total rate of
return swap in August 2009 in connection with the DRS exchange
transaction. See Note 12, Derivative Financial
Instruments and Hedging Activities in
Item 8-Financial
Statements and Supplementary Data for additional
information.
On May 26, 2011, the Company announced that its Board of
Directors approved a 6.7% increase in the quarterly dividend on
common stock from 45 cents to 48 cents, an annual indicative
rate of $1.92 per share for Fiscal 2012, effective with the July
2011 dividend payment. Fiscal 2012 dividend payments are
expected to be approximately $620 million.
24
At April 27, 2011, the Company had total debt of
$4.61 billion (including $151 million relating to the
hedge accounting adjustments) and cash and cash equivalents and
short-term investments of $784 million. Total debt balances
have decreased slightly since prior year end due to the items
discussed above. The Company is currently evaluating
alternatives for the refinancing
and/or
retirement of the $1.45 billion of long-term debt maturing
in Fiscal 2012. On May 26, 2011, subsequent to the fiscal
year end, the Company issued $500 million of private
placement notes at an average interest rate of 3.48% with
maturities of three, five, seven and ten years. The proceeds
will be used to partially refinance debt that matures in Fiscal
2012.
At April 27, 2011, approximately $600 million of cash
and short-term investments was held by international
subsidiaries whose undistributed earnings are considered
permanently reinvested. Our intent is to reinvest these funds in
our international operations and our current plans do not
demonstrate a need to repatriate them to fund our
U.S. operations. If we decided at a later date to
repatriate these funds to the U.S., the Company would be
required to provide taxes on these amounts based on the
applicable U.S. tax rates net of foreign taxes already paid.
At April 27, 2011, the Company had a $1.2 billion
credit agreement which expires in April 2012. This credit
agreement supports the Companys commercial paper
borrowings. As a result, the commercial paper borrowings at
April 28, 2010 are classified as long-term debt based upon
the Companys intent and ability to refinance these
borrowings on a long-term basis. There were no commercial paper
borrowings outstanding at April 27, 2011. The credit
agreement has customary covenants, including a leverage ratio
covenant. The Company was in compliance with all of its
covenants as of April 27, 2011 and April 28, 2010. In
June 2011, the Company expects to modify the credit agreement to
increase the available borrowings under the facility to
$1.5 billion as well as to extend its maturity date to
2016. In anticipation of these modifications, the Company
terminated a $500 million credit agreement during April
2011. In addition, the Company has $439 million of foreign
lines of credit available at April 27, 2011.
After-tax return on invested capital (ROIC) is
calculated by taking net income attributable to H.J. Heinz
Company, plus net interest expense net of tax, divided by
average invested capital. Average invested capital is a
five-point quarterly average of debt plus total H.J. Heinz
Company shareholders equity less cash and cash
equivalents, short-term investments, restricted cash, and the
hedge accounting adjustments. ROIC was 19.3% in Fiscal 2011,
17.8% in Fiscal 2010, and 18.4% in Fiscal 2009. Fiscal 2011 ROIC
was unfavorably impacted by 40 basis points as a result of
the Coniexpress acquisition. Fiscal 2010 ROIC was negatively
impacted by 90 basis points for the losses on discontinued
operations. The increase in ROIC in Fiscal 2011 compared to
Fiscal 2010 is largely due to higher earnings and reduced debt
levels partially offset by higher equity reflecting the impact
of cumulative translation adjustments. ROIC in Fiscal 2009 was
favorably impacted by 110 basis points due to the
$107 million gain on foreign currency forward contracts
discussed earlier. The remaining increase in Fiscal 2010 ROIC
compared to Fiscal 2009 is largely due to reduced debt levels
and effective management of the asset base.
The Company will continue to monitor the credit markets to
determine the appropriate mix of long-term debt and short-term
debt going forward. The Company believes that its strong
operating cash flow, existing cash balances, together with the
credit facilities and other available capital market financing,
will be adequate to meet the Companys cash requirements
for operations, including capital spending, debt maturities,
acquisitions, share repurchases and dividends to shareholders.
While the Company is confident that its needs can be financed,
there can be no assurance that increased volatility and
disruption in the global capital and credit markets will not
impair its ability to access these markets on commercially
acceptable terms.
25
Contractual
Obligations and Other Commitments
Contractual
Obligations
The Company is obligated to make future payments under various
contracts such as debt agreements, lease agreements 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. Certain purchase obligations
contain variable pricing components, and, as a result, actual
cash payments are expected to fluctuate based on changes in
these variable components. Due to the proprietary nature of some
of the Companys materials and processes, certain supply
contracts contain penalty provisions for early terminations. The
Company does not believe that a material amount of penalties is
reasonably likely to be incurred under these contracts based
upon historical experience and current expectations.
The following table represents the contractual obligations of
the Company as of April 27, 2011.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017
|
|
|
|
|
|
|
2012
|
|
|
2013-2014
|
|
|
2015-2016
|
|
|
Forward
|
|
|
Total
|
|
|
|
(Amounts in thousands)
|
|
|
Long Term Debt(1)
|
|
$
|
1,627,834
|
|
|
$
|
1,630,192
|
|
|
$
|
285,750
|
|
|
$
|
4,455,247
|
|
|
$
|
7,999,023
|
|
Capital Lease Obligations
|
|
|
65,275
|
|
|
|
34,845
|
|
|
|
13,611
|
|
|
|
19,389
|
|
|
|
133,120
|
|
Operating Leases
|
|
|
90,828
|
|
|
|
149,015
|
|
|
|
90,190
|
|
|
|
194,345
|
|
|
|
524,378
|
|
Purchase Obligations
|
|
|
989,102
|
|
|
|
762,729
|
|
|
|
278,488
|
|
|
|
51,715
|
|
|
|
2,082,034
|
|
Other Long Term Liabilities Recorded on the Balance Sheet
|
|
|
67,734
|
|
|
|
196,198
|
|
|
|
105,797
|
|
|
|
160,147
|
|
|
|
529,876
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
2,840,773
|
|
|
$
|
2,772,979
|
|
|
$
|
773,836
|
|
|
$
|
4,880,843
|
|
|
$
|
11,268,431
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Amounts include expected cash payments for interest on fixed
rate long-term debt. Due to the uncertainty of forecasting
expected variable rate interest payments, those amounts are not
included in the table. |
Other long-term liabilities primarily consist of certain
specific incentive compensation arrangements and pension and
postretirement benefit commitments. The following long-term
liabilities included on the consolidated balance sheet are
excluded from the table above: income taxes and insurance
accruals. The Company is unable to estimate the timing of the
payments for these items.
At April 27, 2011, the total amount of gross unrecognized
tax benefits for uncertain tax positions, including an accrual
of related interest and penalties along with positions only
impacting the timing of tax benefits, was approximately
$117 million. The timing of payments will depend on the
progress of examinations with tax authorities. The Company does
not expect a significant tax payment related to these
obligations within the next year. The Company is currently
unable to make a reasonably reliable estimate as to when any
significant cash settlements with taxing authorities may occur.
Off-Balance
Sheet Arrangements and Other Commitments
The Company does not have guarantees or other off-balance sheet
financing arrangements that we believe are reasonably likely to
have a current or future effect on our financial condition,
changes in financial condition, revenue or expenses, results of
operations, liquidity, capital expenditures or capital
resources. In addition, the Company does not have any related
party transactions that materially affect the results of
operations, cash flow or financial condition.
26
As of April 27, 2011, the Company was a party to two
operating leases for buildings and equipment under which the
Company has guaranteed supplemental payment obligations of
approximately $135 million at the termination of these
leases. The Company believes, based on current facts and
circumstances, that any payment pursuant to these guarantees is
remote.
The Company acted as servicer for $29 million and
$84 million of U.S. trade receivables sold through an
accounts receivable securitization program that are not
recognized on the balance sheet as of April 27, 2011 and
April 28, 2010, respectively. In addition, the Company
acted as servicer for approximately $146 million and
$126 million of trade receivables which were sold to
unrelated third parties without recourse as of April 27,
2011 and April 28, 2010, respectively.
No significant credit guarantees existed between the Company and
third parties as of April 27, 2011.
Market
Risk Factors
The Company is exposed to market risks from adverse changes in
foreign exchange rates, interest rates, commodity prices and
production costs. As a policy, the Company does not engage in
speculative or leveraged transactions, nor does the Company hold
or issue financial instruments for trading purposes.
Foreign Exchange Rate Sensitivity: The
Companys cash flow and earnings are subject to
fluctuations due to exchange rate variation. Foreign currency
risk exists by nature of the Companys global operations.
The Company manufactures and sells its products on six
continents around the world, and hence foreign currency risk is
diversified.
The Company may attempt to limit its exposure to changing
foreign exchange rates through both operational and financial
market actions. These actions may include entering into forward
contracts, option contracts, or cross currency swaps to hedge
existing exposures, firm commitments and forecasted
transactions. The instruments are used to reduce risk by
essentially creating offsetting currency exposures.
The following table presents information related to foreign
currency contracts held by the Company:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aggregate Notional Amount
|
|
|
Net Unrealized Gains/(Losses)
|
|
|
|
April 27, 2011
|
|
|
April 28, 2010
|
|
|
April 27, 2011
|
|
|
April 28, 2010
|
|
|
|
(Dollars in millions)
|
|
|
Purpose of Hedge:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intercompany cash flows
|
|
$
|
1,031
|
|
|
$
|
726
|
|
|
$
|
29
|
|
|
$
|
(5
|
)
|
Forecasted purchases of raw materials and finished goods and
foreign currency denominated obligations
|
|
|
726
|
|
|
|
814
|
|
|
|
(32
|
)
|
|
|
(17
|
)
|
Forecasted sales and foreign currency denominated assets
|
|
|
104
|
|
|
|
98
|
|
|
|
12
|
|
|
|
22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,861
|
|
|
$
|
1,638
|
|
|
$
|
9
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of April 27, 2011, the Companys foreign currency
contracts mature within three years. Contracts that meet
qualifying criteria are accounted for as either foreign currency
cash flow hedges, fair value hedges or net investment hedges of
foreign operations. Any gains and losses related to contracts
that do not qualify for hedge accounting are recorded in current
period earnings in other income and expense.
Substantially all of the Companys foreign business
units financial instruments are denominated in their
respective functional currencies. Accordingly, exposure to
exchange risk on
27
foreign currency financial instruments is not material. (See
Note 12, Derivative Financial Instruments and Hedging
Activities in Item 8Financial Statements
and Supplementary Data.)
Interest Rate Sensitivity: The Company
is exposed to changes in interest rates primarily as a result of
its borrowing and investing activities used to maintain
liquidity and fund business operations. The nature and amount of
the Companys long-term and short-term debt can be expected
to vary as a result of future business requirements, market
conditions and other factors. The Companys debt
obligations totaled $4.61 billion (including
$151 million relating to hedge accounting adjustments) and
$4.62 billion (including $207 million relating to
hedge accounting adjustments) at April 27, 2011 and
April 28, 2010, respectively. The Companys debt
obligations are summarized in Note 7, Debt and
Financing Arrangements in Item 8Financial
Statements and Supplementary Data.
In order to manage interest rate exposure, the Company utilizes
interest rate swaps to convert fixed-rate debt to floating.
These derivatives are primarily accounted for as fair value
hedges. Accordingly, changes in the fair value of these
derivatives, along with changes in the fair value of the hedged
debt obligations that are attributable to the hedged risk, are
recognized in current period earnings. Based on the amount of
fixed-rate debt converted to floating as of April 27, 2011,
a variance of 1/8% in the related interest rate would cause
annual interest expense related to this debt to change by
approximately $2 million. The following table presents
additional information related to interest rate contracts
designated as fair value hedges by the Company:
|
|
|
|
|
|
|
|
|
|
|
April 27, 2011
|
|
April 28, 2010
|
|
|
(Dollars in millions)
|
|
Pay floating swapsnotional amount
|
|
$
|
1,510
|
|
|
$
|
1,516
|
|
Net unrealized gains
|
|
$
|
55
|
|
|
$
|
109
|
|
Weighted average maturity (years)
|
|
|
1.4
|
|
|
|
2.5
|
|
Weighted average receive rate
|
|
|
6.30
|
%
|
|
|
6.30
|
%
|
Weighted average pay rate
|
|
|
1.32
|
%
|
|
|
1.47
|
%
|
During Fiscal 2010, the Company terminated its $175 million
notional total rate of return swap that was being used as an
economic hedge to reduce a portion of the interest cost related
to the Companys DRS. The unwinding of the total rate of
return swap was completed in conjunction with the exchange of
$681 million of DRS discussed in Note 7, Debt
and Financing Arrangements in Item 8-Financial
Statements and Supplementary Data. Upon termination of the
swap, the Company received net cash proceeds of
$48 million, in addition to the release of the
$193 million of restricted cash collateral that the Company
was required to maintain with the counterparty for the term of
the swap. Prior to termination, the swap was being accounted for
on a full
mark-to-market
basis through earnings, as a component of interest income. The
Company recorded a benefit in interest income of
$28 million for the year ended April 28, 2010, and
$28 million for the year ended April 29, 2009,
representing changes in the fair value of the swap and interest
earned on the arrangement, net of transaction fees.
The Company had outstanding cross-currency interest rate swaps
with a total notional amount of $377 million and
$160 million as of April 27, 2011 and April 28,
2010, respectively, which were designated as cash flow hedges of
the future payments of loan principal and interest associated
with certain foreign denominated variable rate debt obligations.
Net unrealized gains/(losses) related to these swaps totaled
$9 million and $(12) million as of April 27, 2011
and April 28, 2010, respectively. The swaps that were
entered into in Fiscal 2010 are scheduled to mature in Fiscal
2013 and the swaps that were entered into in the third quarter
of Fiscal 2011 are scheduled to mature in Fiscal 2014.
Effect of Hypothetical 10% Fluctuation in Market
Prices: As of April 27, 2011, the
potential gain or loss in the fair value of the Companys
outstanding foreign currency contracts,
28
interest rate contracts and cross-currency interest rate swaps
assuming a hypothetical 10% fluctuation in currency and swap
rates would be approximately:
|
|
|
|
|
|
|
Fair Value Effect
|
|
|
(Dollars in millions)
|
|
Foreign currency contracts
|
|
$
|
137
|
|
Interest rate swap contracts
|
|
$
|
5
|
|
Cross-currency interest rate swaps
|
|
$
|
39
|
|
However, it should be noted that any change in the fair value of
the contracts, real or hypothetical, would be significantly
offset by an inverse change in the value of the underlying
hedged items. In relation to currency contracts, this
hypothetical calculation assumes that each exchange rate would
change in the same direction relative to the U.S. dollar.
Venezuela-
Foreign Currency and Inflation
Foreign
Currency
The local currency in Venezuela is the VEF. A currency control
board exists in Venezuela that is responsible for foreign
exchange procedures, including approval of requests for
exchanges of VEF for U.S. dollars at the official
(government established) exchange rate. Our business in
Venezuela has historically been successful in obtaining
U.S. dollars at the official exchange rate for imports of
ingredients, packaging, manufacturing equipment, and other
necessary inputs, and for dividend remittances, albeit on a
delay. In May 2010, the government of Venezuela effectively
closed down the unregulated parallel market, which existed for
exchanging VEF for U.S. dollars through securities
transactions. Our Venezuelan subsidiary has no recent history of
entering into exchange transactions in this parallel market.
The Company uses the official exchange rate to translate the
financial statements of its Venezuelan subsidiary, since we
expect to obtain U.S. dollars at the official rate for
future dividend remittances. The official exchange rate in
Venezuela had been fixed at 2.15 VEF to 1 U.S. dollar for
several years, despite significant inflation. On January 8,
2010, the Venezuelan government announced the devaluation of its
currency relative to the U.S. dollar. The official exchange
rate for imported goods classified as essential, such as food
and medicine, changed from 2.15 to 2.60, while payments for
other non-essential goods moved to an exchange rate of 4.30.
Effective January 1, 2011, the Venezuelan government
eliminated the 2.60 exchange rate for essential goods leaving
one flat official exchange rate of 4.30.
The majority, if not all, of our imported products in Venezuela
fell into the essential classification and qualified for the
2.60 exchange rate. The elimination of the 2.60 rate had and is
expected to have an immaterial unfavorable impact on the
Companys cost of imported goods, capital spending and the
payment of U.S. dollar-denominated payables to suppliers
recorded as of January 1, 2011 in Venezuela. Also, since
our Venezuelan subsidiarys financial statements are
remeasured using the 4.30 rate, as this is the rate expected to
be applicable to dividend repatriations, the elimination of the
2.60 rate had no impact relative to this remeasurement. As of
April 27, 2011, the amount of VEF pending government
approval to be used for dividend repatriations is
$28 million at the 4.30 rate, of which $8 million has
been pending government approval since September 2008 and
$19 million since November 2009.
During Fiscal 2010, the Company recorded a $62 million
currency translation loss as a result of the currency
devaluation, which had been reflected as a component of
accumulated other comprehensive loss within unrealized
translation adjustment. The net asset position of our Venezuelan
subsidiary has also been reduced as a result of the devaluation
to approximately $107 million at April 27, 2011. While
our operating results in Venezuela have been negatively impacted
by the currency devaluation, actions have been and will continue
to be taken to mitigate
29
these effects. Accordingly, this devaluation has not and is not
expected to materially impact our operating results.
Highly
Inflationary Economy
An economy is considered highly inflationary under
U.S. GAAP if the cumulative inflation rate for a three-year
period meets or exceeds 100 percent. Based on the blended
National Consumer Price Index, the Venezuelan economy exceeded
the three-year cumulative inflation rate of 100 percent
during the third quarter of Fiscal 2010. As a result, the
financial statements of our Venezuelan subsidiary have been
consolidated and reported under highly inflationary accounting
rules beginning on January 28, 2010, the first day of our
Fiscal 2010 fourth quarter. Under highly inflationary
accounting, the financial statements of our Venezuelan
subsidiary are remeasured into the Companys reporting
currency (U.S. dollars) and exchange gains and losses from
the remeasurement of monetary assets and liabilities are
reflected in current earnings, rather than accumulated other
comprehensive loss on the balance sheet, until such time as the
economy is no longer considered highly inflationary.
The impact of applying highly inflationary accounting for
Venezuela on our consolidated financial statements is dependent
upon movements in the applicable exchange rates (at this time,
the official rate) between the local currency and the
U.S. dollar and the amount of monetary assets and
liabilities included in our subsidiarys balance sheet. At
April 27, 2011, the U.S. dollar value of monetary
assets, net of monetary liabilities, which would be subject to
an earnings impact from exchange rate movements for our
Venezuelan subsidiary under highly inflationary accounting was
$67 million.
Recently
Issued Accounting Standards
In May 2011, the Financial Accounting Standards Board
(FASB) issued an amendment to revise the wording
used to describe the requirements for measuring fair value and
for disclosing information about fair value measurements. For
many of the requirements, the FASB does not intend for the
amendments to result in a change in the application of the
current requirements. Some of the amendments clarify the
FASBs intent about the application of existing fair value
measurement requirements, such as specifying that the concepts
of highest and best use and valuation premise in a fair value
measurement are relevant only when measuring the fair value of
nonfinancial assets. Other amendments change a particular
principle or requirement for measuring fair value or for
disclosing information about fair value measurements such as
specifying that, in the absence of a Level 1 input (refer
to Note 10, Fair Value Measurements in
Item 8Financial Statements and Supplementary
Data for additional information), a reporting entity
should apply premiums or discounts when market participants
would do so when pricing the asset or liability. The Company is
required to adopt this amendment on January 26, 2012, the
first day of the fourth quarter of Fiscal 2012. The Company is
currently evaluating the impact this amendment will have, if
any, on its financial statements.
In December 2010, the FASB issued an amendment to the disclosure
requirements for Business Combinations. This amendment clarifies
that if a public entity is required to disclose pro forma
information for business combinations, the entity should
disclose such pro forma information as though the business
combination(s) that occurred during the current year had
occurred as of the beginning of the comparable prior annual
reporting period only. This amendment also expands the
supplemental pro forma disclosures for business combinations to
include a description of the nature and amount of material
nonrecurring pro forma adjustments directly attributable to the
business combination included in reported pro forma revenue and
earnings. The Company is required to adopt this amendment on
April 28, 2011, the first day of Fiscal 2012 for any
business combinations that are material on an individual or
aggregate basis.
30
In December 2010, the FASB issued an amendment to the accounting
requirements for Goodwill and Other Intangibles. This amendment
modifies Step 1 of the goodwill impairment test for reporting
units with zero or negative carrying amounts. For those
reporting units, an entity is required to perform Step 2 of the
goodwill impairment test if it is more likely than not that a
goodwill impairment exists. In determining whether it is more
likely than not that a goodwill impairment exists, an entity
should consider whether there are any adverse qualitative
factors indicating that impairment may exist. The Company is
required to adopt this amendment on April 28, 2011, the
first day of Fiscal 2012 and this adoption is not expected to
have an impact on the Companys financial statements.
In June 2009, the FASB issued an amendment to the accounting and
disclosure requirements for transfers of financial assets. This
amendment removes the concept of a qualifying special-purpose
entity and requires that a transferor recognize and initially
measure at fair value all assets obtained and liabilities
incurred as a result of a transfer of financial assets accounted
for as a sale. This amendment also requires additional
disclosures about any transfers of financial assets and a
transferors continuing involvement with transferred
financial assets. The Company adopted this amendment on
April 29, 2010, the first day of Fiscal 2011. This adoption
did not have a material impact on the Companys financial
statements. Refer to Note 7, Debt and Financing
Arrangements in Item 8Financial
Statements and Supplementary Data for additional
information.
In June 2009, the FASB issued an amendment to the accounting and
disclosure requirements for variable interest entities. This
amendment changes how a reporting entity determines when an
entity that is insufficiently capitalized or is not controlled
through voting (or similar rights) should be consolidated. The
determination of whether a reporting entity is required to
consolidate another entity is based on, among other things, the
purpose and design of the other entity and the reporting
entitys ability to direct the activities of the other
entity that most significantly impact its economic performance.
The amendment also requires additional disclosures about a
reporting entitys involvement with variable interest
entities and any significant changes in risk exposure due to
that involvement. A reporting entity is required to disclose how
its involvement with a variable interest entity affects the
reporting entitys financial statements. The Company
adopted this amendment on April 29, 2010, the first day of
Fiscal 2011. This adoption did not have a material impact on the
Companys financial statements.
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 its most critical
accounting policies, which are those that are most important to
the portrayal of the Companys financial condition and
results and require managements 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 CostsTrade promotions are an important
component of the sales and marketing of the Companys
products and are critical to the support of the business. Trade
promotion costs include amounts paid to retailers to offer
temporary price reductions for the sale of the Companys
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 initially recorded 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 may change in the
future as a result of changes in customer participation,
particularly for new programs and for programs related to the
introduction of new products. We perform monthly evaluations of
our
31
outstanding trade promotions, making adjustments where
appropriate to reflect changes in estimates. Settlement of these
liabilities typically occurs in subsequent periods primarily
through an authorization 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 Companys 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 Companys 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. Expenses 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 monthly evaluations of outstanding coupon accruals that
compare 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 actual redemption rates vary
from estimated redemption rates.
Investments and Long-lived Assets, including Property, Plant
and EquipmentInvestments 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
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 and revenue and expense growth rates
developed in connection with the Companys internal
projections and annual operating plans, and in addition,
external factors such as changes in macroeconomic trends. As
each is managements best estimate on then available
information, resulting estimates may differ from actual cash
flows and estimated fair values. When the carrying value of the
asset exceeds the future undiscounted cash flows, an impairment
is indicated and the asset is written down to its fair value.
Goodwill and Indefinite-Lived IntangiblesCarrying
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.
Indicators such as unexpected adverse economic factors,
unanticipated technological change or competitive activities,
decline in expected cash flows, slower growth rates, loss of key
personnel, and acts by governments and courts, may signal that
an asset has become impaired.
All goodwill is assigned to reporting units, which are primarily
one level below our operating segments. Goodwill is assigned to
the reporting unit that benefits from the cash flows arising
from each business combination. We perform our impairment tests
of goodwill at the reporting unit level. The Company has 19
reporting units globally that have assigned goodwill and are
thus required to be tested for impairment.
The Companys estimates of fair value when testing for
impairment of both goodwill and intangible assets with
indefinite lives is based on a discounted cash flow model as
management believes forecasted cash flows are the best indicator
of fair value. A number of significant assumptions and estimates
are involved in the application of the discounted cash flow
model, including future volume trends, revenue and expense
growth rates, terminal growth rates, weighted-average cost of
capital, tax rates, capital spending and working capital
changes. The assumptions used in the models were determined
utilizing historical data, current and anticipated market
conditions, product category growth rates, management plans, and
market comparables.
32
Most of these assumptions vary significantly among the reporting
units, but generally, higher assumed growth rates were utilized
in emerging markets when compared to developed markets. For each
reporting unit and indefinite-lived intangible asset, we used a
market-participant, risk-adjusted-weighted-average cost of
capital to discount the projected cash flows of those operations
or assets. Such discount rates ranged from 7-16% in Fiscal 2011.
Management believes the assumptions used for the impairment
evaluation are consistent with those that would be utilized by
market participants performing similar valuations of our
reporting units. We validated our fair values for reasonableness
by comparing the sum of the fair values for all of our reporting
units, including those with no assigned goodwill, to our market
capitalization and a reasonable control premium.
During the fourth quarter of Fiscal 2011, the Company completed
its annual review of goodwill and indefinite-lived intangible
assets. No impairments were identified during the Companys
annual assessment of goodwill and indefinite-lived intangible
assets. The fair values of each reporting unit significantly
exceeded their carrying values, with the exception of one
reporting unit, in which there was only a minor excess. The
goodwill associated with this reporting unit was
$57 million as of April 27, 2011.
Retirement BenefitsThe Company sponsors pension and
other retirement plans in various forms covering substantially
all employees who meet eligibility requirements. Several
actuarial and other factors that attempt to anticipate future
events are used in calculating the expense and obligations
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. In addition, the Company
uses best estimate assumptions, provided by actuarial
consultants, for withdrawal and mortality rates to estimate
benefit expense. The financial and 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.
The Company recognized pension expense related to defined
benefit programs of $27 million, $25 million, and
$6 million for fiscal years 2011, 2010, and 2009,
respectively, which reflected expected return on plan assets of
$229 million, $211 million, and $208 million,
respectively. The Company contributed $22 million to its
pension plans in Fiscal 2011 compared to $540 million in
Fiscal 2010 and $134 million in Fiscal 2009. The Company
expects to contribute less than $40 million to its pension
plans in Fiscal 2012.
One of the significant assumptions for pension plan accounting
is the expected rate of return on pension plan assets. Over
time, the expected rate of return on assets should approximate
actual long-term returns. In developing the expected rate of
return, the Company considers average real historic returns on
asset classes, the investment mix of plan assets, investment
manager performance and projected future returns of asset
classes developed by respected advisors. When calculating the
expected return on plan assets, the Company primarily uses a
market-related-value of assets that spreads asset gains and
losses (difference between actual return and expected return)
uniformly over 3 years. The weighted average expected rate
of return on plan assets used to calculate annual expense was
8.2% for the year ended April 27, 2011, 8.1% for the year
end April 28, 2010, and 8.2% for year ended April 29,
2009. For purposes of calculating Fiscal 2012 expense, the
weighted average rate of return will be approximately 8.2%.
Another significant assumption used to value benefit plans is
the discount rate. 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 where the Company operates a benefit plan) as of
the measurement date. The Company uses bond yields of
appropriate duration for each country by matching it with the
duration of plan liabilities. The weighted average discount rate
used to measure the projected benefit obligation for the year
ending April 27, 2011 decreased to 5.5% from 5.6% as of
April 28, 2010.
33
Deferred gains and losses result from actual experience
differing from expected financial and actuarial assumptions. The
pension plans currently have a deferred loss amount of
$910 million at April 27, 2011. Deferred gains and
losses are amortized through the actuarial calculation into
annual expense over the estimated average remaining service
period of plan participants, which is currently 9 years.
However, if all or almost all of a plans participants are
inactive, deferred gains and losses are amortized through the
actuarial calculation into annual expense over the estimated
average remaining life expectancy of the inactive participants.
The Companys investment policy specifies the type of
investment vehicles appropriate for the Plan, asset allocation
guidelines, criteria for the selection of investment managers,
procedures to monitor overall investment performance as well as
investment manager performance. It also provides guidelines
enabling Plan fiduciaries to fulfill their responsibilities.
The Companys defined benefit pension plans weighted
average asset allocation at April 27, 2011 and
April 28, 2010 and weighted average target allocation were
as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Target
|
|
|
|
Plan Assets at
|
|
|
Allocation at
|
|
Asset Category
|
|
2011
|
|
|
2010
|
|
|
2011
|
|
|
2010
|
|
|
Equity securities
|
|
|
62
|
%
|
|
|
58
|
%
|
|
|
58
|
%
|
|
|
63
|
%
|
Debt securities
|
|
|
32
|
%
|
|
|
29
|
%
|
|
|
32
|
%
|
|
|
35
|
%
|
Real estate
|
|
|
3
|
%
|
|
|
1
|
%
|
|
|
9
|
%
|
|
|
1
|
%
|
Other(1)
|
|
|
3
|
%
|
|
|
12
|
%
|
|
|
1
|
%
|
|
|
1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Plan assets at April 28, 2010 in the Other asset category
include 11% of cash which reflects significant cash
contributions to the pension plans prior to the end of Fiscal
2010. |
The Company also provides certain postretirement health care
benefits. The postretirement health care benefit expense and
obligation are determined using the Companys assumptions
regarding health care cost trend rates. The health care trend
rates are developed based on historical cost data, the near-term
outlook on health care trends and the likely long-term trends.
The postretirement health care benefit obligation at
April 27, 2011 as determined using an average initial
health care trend rate of 7.4% which gradually decreases to an
average ultimate rate of 4.8% in 6 years. A one percentage
point increase in the assumed health care cost trend rate would
increase the service and interest cost components of annual
expense by $2 million and increase the benefit obligation
by $16 million. A one percentage point decrease in the
assumed health care cost trend rates would decrease the service
and interest cost by $1 million and decrease the benefit
obligation by $14 million.
The Patient Protection and Affordable Care Act (PPACA) was
signed into law on March 23, 2010, and on March 30,
2010, the Health Care and Education Reconciliation Act of 2010
(HCERA) was signed into law, which amends certain aspects of the
PPACA. Among other things, the PPACA reduces the tax benefits
available to an employer that receives the Medicare Part D
subsidy. As a result of the PPACA, the Company was required to
recognize in Fiscal 2010 tax expense of $4 million
(approximately $0.01 per share) related to reduced deductibility
in future periods of the postretirement prescription drug
coverage. The PPACA and HCERA (collectively referred to as the
Act) will have both immediate and long-term ramifications for
many employers that provide retiree health benefits.
34
Sensitivity
of Assumptions
If we assumed a 100 basis point change in the following
rates, the Companys Fiscal 2011 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
|
|
$
|
(359
|
)
|
|
$
|
387
|
|
Discount rate used in determining net pension expense
|
|
$
|
(28
|
)
|
|
$
|
33
|
|
Long-term rate of return on assets used in determining net
pension expense
|
|
$
|
(28
|
)
|
|
$
|
28
|
|
Other benefits
|
|
|
|
|
|
|
|
|
Discount rate used in determining projected benefit obligation
|
|
$
|
(20
|
)
|
|
$
|
21
|
|
Discount rate used in determining net benefit expense
|
|
$
|
(1
|
)
|
|
$
|
1
|
|
Income TaxesThe 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 Companys annual tax rate and in evaluating
uncertainty in its tax positions. The Company recognizes a
benefit for tax positions that it believes will more likely than
not be sustained upon examination. The amount of benefit
recognized is the largest amount of benefit that the Company
believes has more than a 50% probability of being realized upon
settlement. The Company regularly monitors its tax positions and
adjusts the amount of recognized tax benefit based on its
evaluation of information that has become available since the
end of its last financial reporting period. The annual tax rate
includes the impact of these changes in recognized tax benefits.
When adjusting the amount of recognized tax benefits the Company
does not consider information that has become available after
the balance sheet date, but does disclose the effects of new
information whenever those effects would be material to the
Companys financial statements. The difference between the
amount of benefit taken or expected to be taken in a tax return
and the amount of benefit recognized for financial reporting
represents unrecognized tax benefits. These unrecognized tax
benefits are presented in the balance sheet principally within
other non-current liabilities.
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 Company has a significant amount of undistributed earnings
of foreign subsidiaries that are considered to be indefinitely
reinvested or which may be remitted tax free in certain
situations. Our intent is to continue to reinvest these earnings
to support our priorities for growth in international markets
and our current plans do not demonstrate a need to repatriate
them to fund our U.S. operations. If we decided at a later
date to repatriate these funds to the U.S., the Company would be
required to provide taxes on these amounts based on the
applicable U.S. tax rates net of foreign taxes already
paid. The Company has not determined the deferred tax liability
associated with these undistributed earnings, as such
determination is not practicable. The Company believes it is not
practicable to calculate the deferred tax liability associated
with these undistributed earnings as there is a significant
amount of uncertainty with respect to the tax impact resulting
from the significant judgment required to analyze the amount of
foreign tax credits attributable to the earnings, the potential
timing of any distributions, as well as the local withholding
tax and other indirect tax consequences that may arise due to
the potential distribution of these earnings.
35
Input
Costs
In general, the effects of cost inflation may be experienced by
the Company in future periods. During Fiscals 2010 and 2011, the
Company experienced wide-spread inflationary increases in
commodity input costs, which is expected to continue in Fiscal
2012. Price increases and continued productivity improvements
have and are expected to continue to help offset these cost
increases.
Stock
Market Information
H. J. Heinz Company common stock is traded principally on
The New York Stock Exchange under the symbol HNZ. The number of
shareholders of record of the Companys common stock as of
May 31, 2011 approximated 34,400. The closing price of the
common stock on The New York Stock Exchange composite listing on
April 27, 2011 was $51.23.
Stock price information for common stock by quarter follows:
|
|
|
|
|
|
|
|
|
|
|
Stock Price Range
|
|
|
High
|
|
Low
|
|
2011
|
|
|
|
|
|
|
|
|
First
|
|
$
|
47.48
|
|
|
$
|
40.00
|
|
Second
|
|
|
49.95
|
|
|
|
44.35
|
|
Third
|
|
|
50.77
|
|
|
|
47.51
|
|
Fourth
|
|
|
51.38
|
|
|
|
46.99
|
|
2010
|
|
|
|
|
|
|
|
|
First
|
|
$
|
38.85
|
|
|
$
|
34.03
|
|
Second
|
|
|
41.60
|
|
|
|
37.30
|
|
Third
|
|
|
43.75
|
|
|
|
39.69
|
|
Fourth
|
|
|
47.84
|
|
|
|
42.67
|
|
|
|
Item 7A.
|
Quantitative
and Qualitative Disclosures About Market Risk.
|
This information is set forth in this report in
Item 7Managements Discussion and Analysis
of Financial Condition and Results of Operations on pages
27 through 29.
36
|
|
Item 8.
|
Financial
Statements and Supplementary Data.
|
TABLE OF
CONTENTS
37
Report of
Management on Internal Control over Financial
Reporting
Management is responsible for establishing and maintaining
adequate internal control over financial reporting for the
Company. Internal control over financial reporting refers to the
process designed by, or under the supervision of, our Chief
Executive Officer and Chief Financial Officer, and effected by
our Board of Directors, management and other personnel, to
provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements
for external purposes in accordance with generally accepted
accounting principles in the United States of America, and
includes those policies and procedures that:
(1) Pertain to the maintenance of records that, in
reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the Company;
(2) Provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting
principles;
(3) Provide reasonable assurance that receipts and
expenditures of the Company are being made only in accordance
with authorizations of management and directors of the
Company; and
(4) Provide reasonable assurance regarding prevention or
timely detection of unauthorized acquisition, use or disposition
of the Companys assets that could have a material effect
on the financial statements.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
Management has used the framework set forth in the report
entitled Internal ControlIntegrated Framework
published by the Committee of Sponsoring Organizations of the
Treadway Commission to evaluate the effectiveness of the
Companys internal control over financial reporting, as
required by Section 404 of the Sarbanes-Oxley Act. This
evaluation excluded the business of Coniexpress S.A. Industrias
Alimenticias (Coniexpress S.A.) which was acquired on
April 1, 2011. As of April 27, 2011, Coniexpress
S.A.s total assets represented 6.6% of our total
consolidated assets as of fiscal year end. Based on this
evaluation, management has concluded that the Companys
internal control over financial reporting was effective as of
the end of the most recent fiscal year. PricewaterhouseCoopers
LLP, an independent registered public accounting firm, audited
the effectiveness of the Companys internal control over
financial reporting as of April 27, 2011, as stated in
their report which appears herein.
/s/ William
R. Johnson
Chairman, President and
Chief Executive Officer
/s/ Arthur
B. Winkleblack
Executive Vice President and
Chief Financial Officer
June 16, 2011
38
Report of
Independent Registered Public Accounting Firm
To the Board of Directors and
Shareholders of
H. J. Heinz Company:
In our opinion, the consolidated financial statements listed in
the index appearing under Item 15(a)(1) present fairly, in
all material respects, the financial position of H. J. Heinz
Company and its subsidiaries at April 27, 2011 and
April 28, 2010, and the results of their operations and
their cash flows for each of the three years in the period ended
April 27, 2011 in conformity with accounting principles
generally accepted in the United States of America. In addition,
in our opinion, the financial statement schedule listed in the
index appearing under Item 15(a)(2) presents fairly, in all
material respects, the information set forth therein when read
in conjunction with the related consolidated financial
statements. Also in our opinion, the Company maintained, in all
material respects, effective internal control over financial
reporting as of April 27, 2011, based on criteria
established in Internal ControlIntegrated Framework
issued by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO). The Companys management is
responsible for these financial statements and financial
statement schedule, for maintaining effective internal control
over financial reporting and for its assessment of the
effectiveness of internal control over financial reporting,
included in the Report of Management on Internal Control over
Financial Reporting appearing under Item 8. Our
responsibility is to express opinions on these financial
statements, on the financial statement schedule, and on the
Companys internal control over financial reporting based
on our integrated audits. We conducted our audits in accordance
with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether
the financial statements are free of material misstatement and
whether effective internal control over financial reporting was
maintained in all material respects. Our audits of the financial
statements included examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the
overall financial statement presentation. Our audit of internal
control over financial reporting included obtaining an
understanding of internal control over financial reporting,
assessing the risk that a material weakness exists, and testing
and evaluating the design and operating effectiveness of
internal control based on the assessed risk. Our audits also
included performing such other procedures as we considered
necessary in the circumstances. We believe that our audits
provide a reasonable basis for our opinions.
A companys internal control over financial reporting is a
process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
generally accepted accounting principles. A companys
internal control over financial reporting includes those
policies and procedures that (i) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the
company; (ii) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of
financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the
company are being made only in accordance with authorizations of
management and directors of the company; and (iii) provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the
companys assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
As described in the Report of Management on Internal Control
over Financial Reporting, management has excluded Coniexpress
S.A. Industrias Alimenticias (Coniexpress S.A.) from its
assessment of internal control over financial reporting as of
April 27, 2011 because it was acquired by the Company in a
purchase business combination on April 1, 2011. We have
also excluded Coniexpress S.A. from our audit of internal
control over financial reporting. Coniexpress S.A. is a
majority-owned subsidiary whose total assets represent 6.6% of
the Companys total consolidated assets as of
April 27, 2011.
/s/ PricewaterhouseCoopers
LLP
Pittsburgh, Pennsylvania
June 16, 2011
39
H. J.
Heinz Company and Subsidiaries
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended
|
|
|
|
April 27, 2011
|
|
|
April 28, 2010
|
|
|
April 29, 2009
|
|
|
|
(52 Weeks)
|
|
|
(52 Weeks)
|
|
|
(52 Weeks)
|
|
|
|
(In thousands, except per share amounts)
|
|
|
Sales
|
|
$
|
10,706,588
|
|
|
$
|
10,494,983
|
|
|
$
|
10,011,331
|
|
Cost of products sold
|
|
|
6,754,048
|
|
|
|
6,700,677
|
|
|
|
6,442,075
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
3,952,540
|
|
|
|
3,794,306
|
|
|
|
3,569,256
|
|
Selling, general and administrative expenses
|
|
|
2,304,350
|
|
|
|
2,235,078
|
|
|
|
2,066,810
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
1,648,190
|
|
|
|
1,559,228
|
|
|
|
1,502,446
|
|
Interest income
|
|
|
22,565
|
|
|
|
45,137
|
|
|
|
64,150
|
|
Interest expense
|
|
|
275,398
|
|
|
|
295,711
|
|
|
|
339,635
|
|
Other (expense)/income, net
|
|
|
(21,188
|
)
|
|
|
(18,200
|
)
|
|
|
92,922
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations before income taxes
|
|
|
1,374,169
|
|
|
|
1,290,454
|
|
|
|
1,319,883
|
|
Provision for income taxes
|
|
|
368,221
|
|
|
|
358,514
|
|
|
|
375,483
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
|
1,005,948
|
|
|
|
931,940
|
|
|
|
944,400
|
|
Loss from discontinued operations, net of tax
|
|
|
|
|
|
|
(49,597
|
)
|
|
|
(6,439
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
1,005,948
|
|
|
|
882,343
|
|
|
|
937,961
|
|
Less: Net income attributable to the noncontrolling interest
|
|
|
16,438
|
|
|
|
17,451
|
|
|
|
14,889
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to H. J. Heinz Company
|
|
$
|
989,510
|
|
|
$
|
864,892
|
|
|
$
|
923,072
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income/(loss) per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations attributable to H. J. Heinz Company common
shareholders
|
|
$
|
3.06
|
|
|
$
|
2.87
|
|
|
$
|
2.91
|
|
Discontinued operations attributable to H. J. Heinz Company
common shareholders
|
|
|
|
|
|
|
(0.16
|
)
|
|
|
(0.02
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to H. J. Heinz Company common
shareholders
|
|
$
|
3.06
|
|
|
$
|
2.71
|
|
|
$
|
2.89
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average common shares outstandingdiluted
|
|
|
323,042
|
|
|
|
318,113
|
|
|
|
318,063
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations attributable to H. J. Heinz Company common
shareholders
|
|
$
|
3.09
|
|
|
$
|
2.89
|
|
|
$
|
2.95
|
|
Discontinued operations attributable to H. J. Heinz Company
common shareholders
|
|
|
|
|
|
|
(0.16
|
)
|
|
|
(0.02
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to H. J. Heinz Company common
shareholders
|
|
$
|
3.09
|
|
|
$
|
2.73
|
|
|
$
|
2.93
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average common shares outstandingbasic
|
|
|
320,118
|
|
|
|
315,948
|
|
|
|
313,747
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends per share
|
|
$
|
1.80
|
|
|
$
|
1.68
|
|
|
$
|
1.66
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts attributable to H. J. Heinz Company common shareholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations, net of tax
|
|
$
|
989,510
|
|
|
$
|
914,489
|
|
|
$
|
929,511
|
|
Loss from discontinued operations, net of tax
|
|
|
|
|
|
|
(49,597
|
)
|
|
|
(6,439
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
989,510
|
|
|
$
|
864,892
|
|
|
$
|
923,072
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Notes to Consolidated Financial Statements
40
|
|
|
|
|
|
|
|
|
|
|
April 27,
|
|
|
April 28,
|
|
|
|
2011
|
|
|
2010
|
|
|
|
(In thousands)
|
|
|
Assets
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
724,311
|
|
|
$
|
483,253
|
|
Trade receivables (net of allowances: 2011$10,909 and
2010$10,196)
|
|
|
1,039,064
|
|
|
|
794,845
|
|
Other receivables (net of allowances: 2011$503 and
2010$268)
|
|
|
225,968
|
|
|
|
250,493
|
|
Inventories:
|
|
|
|
|
|
|
|
|
Finished goods and
work-in-process
|
|
|
1,165,069
|
|
|
|
979,543
|
|
Packaging material and ingredients
|
|
|
286,477
|
|
|
|
269,584
|
|
|
|
|
|
|
|
|
|
|
Total inventories
|
|
|
1,451,546
|
|
|
|
1,249,127
|
|
Prepaid expenses
|
|
|
159,521
|
|
|
|
130,819
|
|
Other current assets
|
|
|
153,132
|
|
|
|
142,588
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
3,753,542
|
|
|
|
3,051,125
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment:
|
|
|
|
|
|
|
|
|
Land
|
|
|
85,457
|
|
|
|
77,248
|
|
Buildings and leasehold improvements
|
|
|
1,019,311
|
|
|
|
842,346
|
|
Equipment, furniture and other
|
|
|
4,119,947
|
|
|
|
3,546,046
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,224,715
|
|
|
|
4,465,640
|
|
Less accumulated depreciation
|
|
|
2,719,632
|
|
|
|
2,373,844
|
|
|
|
|
|
|
|
|
|
|
Total property, plant and equipment, net
|
|
|
2,505,083
|
|
|
|
2,091,796
|
|
|
|
|
|
|
|
|
|
|
Other non-current assets:
|
|
|
|
|
|
|
|
|
Goodwill
|
|
|
3,298,441
|
|
|
|
2,770,918
|
|
Trademarks, net
|
|
|
1,156,221
|
|
|
|
895,138
|
|
Other intangibles, net
|
|
|
442,563
|
|
|
|
402,576
|
|
Other non-current assets
|
|
|
1,074,795
|
|
|
|
864,158
|
|
|
|
|
|
|
|
|
|
|
Total other non-current assets
|
|
|
5,972,020
|
|
|
|
4,932,790
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
12,230,645
|
|
|
$
|
10,075,711
|
|
|
|
|
|
|
|
|
|
|
See Notes to Consolidated Financial Statements
41
H. J.
Heinz Company and Subsidiaries
Consolidated Balance Sheets
|
|
|
|
|
|
|
|
|
|
|
April 27,
|
|
|
April 28,
|
|
|
|
2011
|
|
|
2010
|
|
|
|
(In thousands)
|
|
|
Liabilities and Equity
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Short-term debt
|
|
$
|
87,800
|
|
|
$
|
43,853
|
|
Portion of long-term debt due within one year
|
|
|
1,447,132
|
|
|
|
15,167
|
|
Trade payables
|
|
|
1,337,620
|
|
|
|
1,007,517
|
|
Other payables
|
|
|
162,047
|
|
|
|
121,997
|
|
Accrued marketing
|
|
|
313,389
|
|
|
|
288,579
|
|
Other accrued liabilities
|
|
|
715,147
|
|
|
|
667,653
|
|
Income taxes
|
|
|
98,325
|
|
|
|
30,593
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
4,161,460
|
|
|
|
2,175,359
|
|
|
|
|
|
|
|
|
|
|
Long-term debt and other non-current liabilities:
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
|
3,078,128
|
|
|
|
4,559,152
|
|
Deferred income taxes
|
|
|
897,179
|
|
|
|
665,089
|
|
Non-pension post-retirement benefits
|
|
|
216,172
|
|
|
|
216,423
|
|
Other non-current liabilities
|
|
|
570,571
|
|
|
|
511,192
|
|
|
|
|
|
|
|
|
|
|
Total long-term debt and other non-current liabilities
|
|
|
4,762,050
|
|
|
|
5,951,856
|
|
|
|
|
|
|
|
|
|
|
Redeemable noncontrolling interest
|
|
|
124,669
|
|
|
|
|
|
Equity:
|
|
|
|
|
|
|
|
|
Capital stock:
|
|
|
|
|
|
|
|
|
Third cumulative preferred, $1.70 first series, $10 par
value(1)
|
|
|
69
|
|
|
|
70
|
|
Common stock, 431,096 shares issued, $0.25 par value
|
|
|
107,774
|
|
|
|
107,774
|
|
|
|
|
|
|
|
|
|
|
|
|
|
107,843
|
|
|
|
107,844
|
|
Additional capital
|
|
|
629,367
|
|
|
|
657,596
|
|
Retained earnings
|
|
|
7,264,678
|
|
|
|
6,856,033
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,001,888
|
|
|
|
7,621,473
|
|
Less:
|
|
|
|
|
|
|
|
|
Treasury shares, at cost (109,818 shares at April 27,
2011 and 113,404 shares at April 28, 2010)
|
|
|
4,593,362
|
|
|
|
4,750,547
|
|
Accumulated other comprehensive loss
|
|
|
299,564
|
|
|
|
979,581
|
|
|
|
|
|
|
|
|
|
|
Total H.J. Heinz Company shareholders equity
|
|
|
3,108,962
|
|
|
|
1,891,345
|
|
Noncontrolling interest
|
|
|
73,504
|
|
|
|
57,151
|
|
|
|
|
|
|
|
|
|
|
Total equity
|
|
|
3,182,466
|
|
|
|
1,948,496
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and equity
|
|
$
|
12,230,645
|
|
|
$
|
10,075,711
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
The preferred stock outstanding is
convertible at a rate of one share of preferred stock into
15 shares of common stock. The Company can redeem the stock
at $28.50 per share. As of April 27, 2011, there were
authorized, but unissued, 2,200 shares of third cumulative
preferred stock for which the series had not been designated.
|
See Notes to Consolidated Financial Statements
42
H. J.
Heinz Company and Subsidiaries
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April 27, 2011
|
|
|
April 28, 2010
|
|
|
April 29, 2009
|
|
|
|
Shares
|
|
|
Dollars
|
|
|
Shares
|
|
|
Dollars
|
|
|
Shares
|
|
|
Dollars
|
|
|
|
|
|
|
(Amounts in thousands, expect per share amounts)
|
|
|
|
|
|
PREFERRED STOCK
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of year
|
|
|
7
|
|
|
$
|
70
|
|
|
|
7
|
|
|
$
|
70
|
|
|
|
7
|
|
|
$
|
72
|
|
Conversion of preferred into common stock
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of year
|
|
|
7
|
|
|
|
69
|
|
|
|
7
|
|
|
|
70
|
|
|
|
7
|
|
|
|
70
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Authorized shares- April 27, 2011
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COMMON STOCK
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of year
|
|
|
431,096
|
|
|
|
107,774
|
|
|
|
431,096
|
|
|
|
107,774
|
|
|
|
431,096
|
|
|
|
107,774
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of year
|
|
|
431,096
|
|
|
|
107,774
|
|
|
|
431,096
|
|
|
|
107,774
|
|
|
|
431,096
|
|
|
|
107,774
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Authorized shares- April 27, 2011
|
|
|
600,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ADDITIONAL CAPITAL
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of year
|
|
|
|
|
|
|
657,596
|
|
|
|
|
|
|
|
737,917
|
|
|
|
|
|
|
|
617,811
|
|
Conversion of preferred into common stock
|
|
|
|
|
|
|
(39
|
)
|
|
|
|
|
|
|
(29
|
)
|
|
|
|
|
|
|
(95
|
)
|
Stock options exercised, net of shares tendered for payment
|
|
|
|
|
|
|
(26,482
|
)(4)
|
|
|
|
|
|
|
(21,717
|
)(4)
|
|
|
|
|
|
|
98,736
|
(4)
|
Stock option expense
|
|
|
|
|
|
|
9,447
|
|
|
|
|
|
|
|
7,897
|
|
|
|
|
|
|
|
9,405
|
|
Restricted stock unit activity
|
|
|
|
|
|
|
(8,119
|
)
|
|
|
|
|
|
|
(9,698
|
)
|
|
|
|
|
|
|
(538
|
)
|
Tax settlement(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,537
|
|
Purchase of subsidiary shares from noncontrolling interests(2)
|
|
|
|
|
|
|
(2,411
|
)
|
|
|
|
|
|
|
(54,209
|
)
|
|
|
|
|
|
|
|
|
Other, net(3)
|
|
|
|
|
|
|
(625
|
)
|
|
|
|
|
|
|
(2,565
|
)
|
|
|
|
|
|
|
4,061
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of year
|
|
|
|
|
|
|
629,367
|
|
|
|
|
|
|
|
657,596
|
|
|
|
|
|
|
|
737,917
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RETAINED EARNINGS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of year
|
|
|
|
|
|
|
6,856,033
|
|
|
|
|
|
|
|
6,525,719
|
|
|
|
|
|
|
|
6,129,008
|
|
Net income attributable to H.J. Heinz Company
|
|
|
|
|
|
|
989,510
|
|
|
|
|
|
|
|
864,892
|
|
|
|
|
|
|
|
923,072
|
|
Cash dividends:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred (per share $1.70 per share in 2011, 2010 and 2009)
|
|
|
|
|
|
|
(12
|
)
|
|
|
|
|
|
|
(9
|
)
|
|
|
|
|
|
|
(12
|
)
|
Common (per share $1.80, $1.68, and $1.66 in 2011, 2010 and
2009, respectively)
|
|
|
|
|
|
|
(579,606
|
)
|
|
|
|
|
|
|
(533,543
|
)
|
|
|
|
|
|
|
(525,281
|
)
|
Other(5)
|
|
|
|
|
|
|
(1,247
|
)
|
|
|
|
|
|
|
(1,026
|
)
|
|
|
|
|
|
|
(1,068
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of year
|
|
|
|
|
|
|
7,264,678
|
|
|
|
|
|
|
|
6,856,033
|
|
|
|
|
|
|
|
6,525,719
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TREASURY STOCK
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of year
|
|
|
(113,404
|
)
|
|
|
(4,750,547
|
)
|
|
|
(116,237
|
)
|
|
|
(4,881,842
|
)
|
|
|
(119,628
|
)
|
|
|
(4,905,755
|
)
|
Shares reacquired
|
|
|
(1,425
|
)
|
|
|
(70,003
|
)
|
|
|
|
|
|
|
|
|
|
|
(3,650
|
)
|
|
|
(181,431
|
)
|
Conversion of preferred into common stock
|
|
|
1
|
|
|
|
40
|
|
|
|
1
|
|
|
|
29
|
|
|
|
3
|
|
|
|
97
|
|
Stock options exercised, net of shares tendered for payment
|
|
|
4,495
|
|
|
|
203,196
|
|
|
|
2,038
|
|
|
|
94,315
|
|
|
|
6,179
|
|
|
|
178,559
|
|
Restricted stock unit activity
|
|
|
296
|
|
|
|
13,756
|
|
|
|
470
|
|
|
|
21,864
|
|
|
|
485
|
|
|
|
15,026
|
|
Other, net(3)
|
|
|
218
|
|
|
|
10,196
|
|
|
|
324
|
|
|
|
15,087
|
|
|
|
374
|
|
|
|
11,662
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of year
|
|
|
(109,819
|
)
|
|
$
|
(4,593,362
|
)
|
|
|
(113,404
|
)
|
|
$
|
(4,750,547
|
)
|
|
|
(116,237
|
)
|
|
$
|
(4,881,842
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
See Note No. 6 for further
details.
|
|
(2)
|
|
See Note No. 4 for further
details.
|
|
(3)
|
|
Includes activity of the Global
Stock Purchase Plan.
|
|
(4)
|
|
Includes income tax benefit
resulting from exercised stock options.
|
|
(5)
|
|
Includes adoption of the
measurement date provisions of accounting guidance for defined
benefit pension and other postretirement plans and unpaid
dividend equivalents on restricted stock units.
|
|
(6)
|
|
Comprised of unrealized translation
adjustment of $337,075, pension and post-retirement benefits net
prior service cost of $(7,232) and net losses of $(619,708), and
deferred net gains on derivative financial instruments of
$(9,699).
|
See Notes to Consolidated Financial
Statements
43
H. J.
Heinz Company and Subsidiaries
Consolidated
Statements of Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April 27, 2011
|
|
|
April 28, 2010
|
|
|
April 29, 2009
|
|
|
|
Shares
|
|
|
Dollars
|
|
|
Shares
|
|
|
Dollars
|
|
|
Shares
|
|
|
Dollars
|
|
|
|
(Amounts in thousands, expect per share amounts)
|
|
|
OTHER COMPREHENSIVE (LOSS)/INCOME
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of year
|
|
|
|
|
|
$
|
(979,581
|
)
|
|
|
|
|
|
$
|
(1,269,700
|
)
|
|
|
|
|
|
$
|
(61,090
|
)
|
Net pension and post-retirement benefit gains/(losses)
|
|
|
|
|
|
|
77,355
|
|
|
|
|
|
|
|
78,871
|
|
|
|
|
|
|
|
(301,347
|
)
|
Reclassification of net pension and post-retirement benefit
losses to net income
|
|
|
|
|
|
|
53,353
|
|
|
|
|
|
|
|
38,903
|
|
|
|
|
|
|
|
24,744
|
|
Unrealized translation adjustments
|
|
|
|
|
|
|
563,060
|
|
|
|
|
|
|
|
193,600
|
|
|
|
|
|
|
|
(944,439
|
)
|
Net change in fair value of cash flow hedges
|
|
|
|
|
|
|
9,790
|
|
|
|
|
|
|
|
(32,488
|
)
|
|
|
|
|
|
|
33,204
|
|
Net hedging (gains)/losses reclassified into earnings
|
|
|
|
|
|
|
(21,365
|
)
|
|
|
|
|
|
|
13,431
|
|
|
|
|
|
|
|
(20,772
|
)
|
Purchase of subsidiary shares from noncontrolling interests(2)
|
|
|
|
|
|
|
(2,176
|
)
|
|
|
|
|
|
|
(2,198
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of year
|
|
|
|
|
|
|
(299,564
|
)(6)
|
|
|
|
|
|
|
(979,581
|
)
|
|
|
|
|
|
|
(1,269,700
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL H.J. HEINZ COMPANY SHAREHOLDERS EQUITY
|
|
|
|
|
|
|
3,108,962
|
|
|
|
|
|
|
|
1,891,345
|
|
|
|
|
|
|
|
1,219,938
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NONCONTROLLING INTEREST
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of year
|
|
|
|
|
|
|
57,151
|
|
|
|
|
|
|
|
59,167
|
|
|
|
|
|
|
|
65,727
|
|
Net income attributable to the noncontrolling interest
|
|
|
|
|
|
|
16,438
|
|
|
|
|
|
|
|
17,451
|
|
|
|
|
|
|
|
14,889
|
|
Other comprehensive income, net of tax:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net pension and post-retirement benefit losses
|
|
|
|
|
|
|
(57
|
)
|
|
|
|
|
|
|
(1,266
|
)
|
|
|
|
|
|
|
(464
|
)
|
Unrealized translation adjustments
|
|
|
|
|
|
|
4,816
|
|
|
|
|
|
|
|
8,411
|
|
|
|
|
|
|
|
(8,110
|
)
|
Net change in fair value of cash flow hedges
|
|
|
|
|
|
|
(395
|
)
|
|
|
|
|
|
|
(788
|
)
|
|
|
|
|
|
|
131
|
|
Net hedging losses/(gains) reclassified into earnings
|
|
|
|
|
|
|
571
|
|
|
|
|
|
|
|
254
|
|
|
|
|
|
|
|
(56
|
)
|
Purchase of subsidiary shares from noncontrolling interests(2)
|
|
|
|
|
|
|
(1,750
|
)
|
|
|
|
|
|
|
(5,467
|
)
|
|
|
|
|
|
|
|
|
Dividends paid to noncontrolling interest
|
|
|
|
|
|
|
(3,270
|
)
|
|
|
|
|
|
|
(20,611
|
)
|
|
|
|
|
|
|
(12,950
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of year
|
|
|
|
|
|
|
73,504
|
|
|
|
|
|
|
|
57,151
|
|
|
|
|
|
|
|
59,167
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL EQUITY
|
|
|
|
|
|
$
|
3,182,466
|
|
|
|
|
|
|
$
|
1,948,496
|
|
|
|
|
|
|
$
|
1,279,105
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COMPREHENSIVE INCOME
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
$
|
1,005,948
|
|
|
|
|
|
|
$
|
882,343
|
|
|
|
|
|
|
$
|
937,961
|
|
Other comprehensive income, net of tax:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net pension and post-retirement benefit gains/(losses)
|
|
|
|
|
|
|
77,298
|
|
|
|
|
|
|
|
77,605
|
|
|
|
|
|
|
|
(301,811
|
)
|
Reclassification of net pension and post-retirement benefit
losses to net income
|
|
|
|
|
|
|
53,353
|
|
|
|
|
|
|
|
38,903
|
|
|
|
|
|
|
|
24,744
|
|
Unrealized translation adjustments
|
|
|
|
|
|
|
567,876
|
|
|
|
|
|
|
|
202,011
|
|
|
|
|
|
|
|
(952,549
|
)
|
Net change in fair value of cash flow hedges
|
|
|
|
|
|
|
9,395
|
|
|
|
|
|
|
|
(33,276
|
)
|
|
|
|
|
|
|
33,335
|
|
Net hedging (gains)/losses reclassified into earnings
|
|
|
|
|
|
|
(20,794
|
)
|
|
|
|
|
|
|
13,685
|
|
|
|
|
|
|
|
(20,828
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income/(loss)
|
|
|
|
|
|
|
1,693,076
|
|
|
|
|
|
|
|
1,181,271
|
|
|
|
|
|
|
|
(279,148
|
)
|
Comprehensive income attributable to the noncontrolling interest
|
|
|
|
|
|
|
(21,373
|
)
|
|
|
|
|
|
|
(24,062
|
)
|
|
|
|
|
|
|
(6,390
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income/(loss) attributable to H.J. Heinz Company
|
|
|
|
|
|
$
|
1,671,703
|
|
|
|
|
|
|
$
|
1,157,209
|
|
|
|
|
|
|
$
|
(285,538
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note: See Footnote explanations on Page 43.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Notes to Consolidated Financial
Statements
44
H. J.
Heinz Company and Subsidiaries
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended
|
|
|
|
April 27,
|
|
|
April 28,
|
|
|
April 29,
|
|
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
|
(52 Weeks)
|
|
|
(52 Weeks)
|
|
|
(52 Weeks)
|
|
|
|
(Dollars in thousands)
|
|
|
Operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
1,005,948
|
|
|
$
|
882,343
|
|
|
$
|
937,961
|
|
Adjustments to reconcile net income to cash provided by
operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
255,227
|
|
|
|
254,528
|
|
|
|
241,294
|
|
Amortization
|
|
|
43,433
|
|
|
|
48,308
|
|
|
|
40,081
|
|
Deferred tax provision
|
|
|
153,725
|
|
|
|
220,528
|
|
|
|
108,950
|
|
Net losses/(gains) on disposals
|
|
|
|
|
|
|
44,860
|
|
|
|
(6,445
|
)
|
Pension contributions
|
|
|
(22,411
|
)
|
|
|
(539,939
|
)
|
|
|
(133,714
|
)
|
Other items, net
|
|
|
98,172
|
|
|
|
90,938
|
|
|
|
(85,029
|
)
|
Changes in current assets and liabilities, excluding effects of
acquisitions and divestitures:
|
|
|
|
|
|
|
|
|
|
|
|
|
Receivables (includes proceeds from securitization)
|
|
|
(91,057
|
)
|
|
|
121,387
|
|
|
|
(10,866
|
)
|
Inventories
|
|
|
(80,841
|
)
|
|
|
48,537
|
|
|
|
50,731
|
|
Prepaid expenses and other current assets
|
|
|
(1,682
|
)
|
|
|
2,113
|
|
|
|
996
|
|
Accounts payable
|
|
|
233,339
|
|
|
|
(2,805
|
)
|
|
|
(62,934
|
)
|
Accrued liabilities
|
|
|
(60,862
|
)
|
|
|
96,533
|
|
|
|
24,641
|
|
Income taxes
|
|
|
50,652
|
|
|
|
(5,134
|
)
|
|
|
61,216
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash provided by operating activities
|
|
|
1,583,643
|
|
|
|
1,262,197
|
|
|
|
1,166,882
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
|
(335,646
|
)
|
|
|
(277,642
|
)
|
|
|
(292,121
|
)
|
Proceeds from disposals of property, plant and equipment
|
|
|
13,158
|
|
|
|
96,493
|
|
|
|
5,407
|
|
Acquisitions, net of cash acquired
|
|
|
(618,302
|
)
|
|
|
(11,428
|
)
|
|
|
(293,898
|
)
|
Proceeds from divestitures
|
|
|
1,939
|
|
|
|
18,637
|
|
|
|
13,351
|
|
Change in restricted cash
|
|
|
(5,000
|
)
|
|
|
192,736
|
|
|
|
(192,736
|
)
|
Other items, net
|
|
|
(5,781
|
)
|
|
|
(5,353
|
)
|
|
|
(1,197
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash (used for)/provided by investing activities
|
|
|
(949,632
|
)
|
|
|
13,443
|
|
|
|
(761,194
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments on long-term debt
|
|
|
(45,766
|
)
|
|
|
(630,394
|
)
|
|
|
(427,417
|
)
|
Proceeds from long-term debt
|
|
|
229,851
|
|
|
|
447,056
|
|
|
|
853,051
|
|
Net payments on commercial paper and short-term debt
|
|
|
(193,200
|
)
|
|
|
(427,232
|
)
|
|
|
(483,666
|
)
|
Dividends
|
|
|
(579,618
|
)
|
|
|
(533,552
|
)
|
|
|
(525,293
|
)
|
Purchases of treasury stock
|
|
|
(70,003
|
)
|
|
|
|
|
|
|
(181,431
|
)
|
Exercise of stock options
|
|
|
154,774
|
|
|
|
67,369
|
|
|
|
264,898
|
|
Acquisition of subsidiary shares from noncontrolling interests
|
|
|
(6,338
|
)
|
|
|
(62,064
|
)
|
|
|
|
|
Other items, net
|
|
|
27,791
|
|
|
|
(9,099
|
)
|
|
|
(16,478
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash used for financing activities
|
|
|
(482,509
|
)
|
|
|
(1,147,916
|
)
|
|
|
(516,336
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash and cash equivalents
|
|
|
89,556
|
|
|
|
(17,616
|
)
|
|
|
(133,894
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase/(decrease) in cash and cash equivalents
|
|
|
241,058
|
|
|
|
110,108
|
|
|
|
(244,542
|
)
|
Cash and cash equivalents at beginning of year
|
|
|
483,253
|
|
|
|
373,145
|
|
|
|
617,687
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of year
|
|
$
|
724,311
|
|
|
$
|
483,253
|
|
|
$
|
373,145
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Notes to Consolidated Financial
Statements
45
H. J.
Heinz Company and Subsidiaries
|
|
1.
|
Significant
Accounting Policies
|
Fiscal
Year:
H. J. Heinz Company (the Company) operates on a
52-week or 53-week fiscal year ending the Wednesday nearest
April 30. However, certain foreign subsidiaries have
earlier closing dates to facilitate timely reporting. Fiscal
years for the financial statements included herein ended
April 27, 2011, April 28, 2010, and April 29,
2009.
Principles
of Consolidation:
The consolidated financial statements include the accounts of
the Company, all wholly-owned and majority-owned subsidiaries,
and any variable interest entities for which we are the primary
beneficiary. 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. All intercompany accounts and transactions
are eliminated. Certain prior year amounts have been
reclassified to conform with the Fiscal 2011 presentation.
Use of
Estimates:
The preparation of financial statements, in conformity with
accounting principles generally accepted in the United States of
America, requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities at the date of
the financial statements, and the reported amounts of revenues
and expenses during the reporting period. Actual results could
differ from these estimates.
Translation
of Foreign Currencies:
For all significant foreign operations, the functional currency
is the local currency. Assets and liabilities of these
operations are translated at the exchange rate in effect at each
year-end. Income statement accounts are translated at the
average rate of exchange prevailing during the year. Translation
adjustments arising from the use of differing exchange rates
from period to period are included as a component of other
comprehensive income/(loss) within shareholders equity.
Gains and losses from foreign currency transactions are included
in net income for the period.
Highly
Inflationary Accounting:
The Company applies highly inflationary accounting if the
cumulative inflation rate in an economy for a three-year period
meets or exceeds 100 percent. Under highly inflationary
accounting, the financial statements of a subsidiary are
remeasured into the Companys reporting currency
(U.S. dollars) and exchange gains and losses from the
remeasurement of monetary assets and liabilities are reflected
in current earnings, rather than accumulated other comprehensive
loss on the balance sheet, until such time as the economy is no
longer considered highly inflationary. See Note 19 for
additional information.
Cash
Equivalents:
Cash equivalents are defined as highly liquid investments with
original maturities of 90 days or less.
46
H. J.
Heinz Company and Subsidiaries
Notes to
Consolidated Financial
Statements (Continued)
Inventories:
Inventories are stated at the lower of cost or market. Cost is
determined principally under the average cost method.
Property,
Plant and Equipment:
Land, buildings and equipment are recorded at cost. For
financial reporting purposes, depreciation is provided on the
straight-line method over the estimated useful lives of the
assets, which generally have the following ranges:
buildings40 years or less, machinery and
equipment15 years or less, computer software3
to 7 years, and leasehold improvementsover the life
of the lease, not to exceed 15 years. Accelerated
depreciation methods are generally used for income tax purposes.
Expenditures for new facilities and improvements that
substantially extend the capacity or useful life of an asset are
capitalized. Ordinary repairs and maintenance are expensed as
incurred. When property is retired or otherwise disposed, the
cost and related accumulated depreciation are removed from the
accounts and any related gains or losses are included in income.
The Company reviews property, plant and equipment, whenever
circumstances change such that the indicated recorded value of
an asset may not be recoverable. Factors that may affect
recoverability include changes in planned use of equipment or
software, and the closing of facilities. The Companys
impairment review is based on an undiscounted cash flow analysis
at the lowest level for which identifiable cash flows exist and
are largely independent. When the carrying value of the asset
exceeds the future undiscounted cash flows, an impairment is
indicated and the asset is written down to its fair value.
Goodwill
and Intangibles:
Intangible assets with finite useful lives are amortized on a
straight-line basis over the estimated periods benefited, and
are reviewed when appropriate for possible impairment, similar
to property, plant and equipment. Goodwill and intangible assets
with indefinite useful lives are not amortized. The carrying
values of goodwill and other intangible assets with indefinite
useful lives are tested at least annually for impairment, or
when circumstances indicate that a possible impairment may
exist. The annual impairment tests are performed during the
fourth quarter of each fiscal year. All goodwill is assigned to
reporting units, which are primarily one level below our
operating segments. We perform our impairment tests of goodwill
at the reporting unit level. The Companys estimates of
fair value when testing for impairment of both goodwill and
intangible assets with indefinite lives is based on a discounted
cash flow model, using a market participant approach, that
requires significant judgment and requires assumptions about
future volume trends, revenue and expense growth rates, terminal
growth rates, discount rates, tax rates, working capital changes
and macroeconomic factors.
Revenue
Recognition:
The Company recognizes revenue when title, ownership and risk of
loss pass to the customer. This primarily occurs upon delivery
of the product to the customer. For the most part, customers do
not have the right to return products unless damaged or
defective. Revenue is recorded, net of sales incentives, and
includes shipping and handling charges billed to customers.
Shipping and handling costs are primarily classified as part of
selling, general and administrative expenses.
Marketing
Costs:
The Company promotes its products with advertising, consumer
incentives and trade promotions. Such programs include, but are
not limited to, discounts, coupons, rebates, in-store
47
H. J.
Heinz Company and Subsidiaries
Notes to
Consolidated Financial
Statements (Continued)
display incentives and volume-based incentives. Advertising
costs are expensed as incurred. Consumer incentive and trade
promotion activities are primarily recorded as a reduction of
revenue or as a component of cost of products sold based on
amounts estimated as being due to customers and consumers at the
end of a period, based principally on historical utilization and
redemption rates. Accruals for trade promotions are initially
recorded 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. We perform monthly evaluations of
our outstanding trade promotions, making adjustments where
appropriate to reflect changes in estimates. Settlement of these
liabilities typically occurs in subsequent periods primarily
through an authorization process for deductions taken by a
customer from amounts otherwise due to the Company. Expenses
associated with coupons, 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 monthly evaluations of
outstanding coupon accruals that compare actual redemption rates
to the original estimates. For interim reporting purposes,
advertising, consumer incentive and product placement expenses
are charged to operations as a percentage of volume, based on
estimated volume and related expense for the full year.
Income
Taxes:
Deferred income taxes result primarily from temporary
differences between financial and tax reporting. If it is more
likely than not that some portion or all of a deferred tax asset
will not be realized, a valuation allowance is recognized. 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 Company has not provided for possible U.S. taxes on the
undistributed earnings of foreign subsidiaries that are
considered to be reinvested indefinitely. Calculation of the
unrecognized deferred tax liability for temporary differences
related to these earnings is not practicable.
Stock-Based
Employee Compensation Plans:
The Company recognizes the cost of all stock-based awards to
employees, including grants of employee stock options, on a
straight-line basis over their respective requisite service
periods (generally equal to an awards vesting period). A
stock-based award is considered vested for expense attribution
purposes when the employees retention of the award is no
longer contingent on providing subsequent service. Accordingly,
the Company recognizes compensation cost immediately for awards
granted to retirement-eligible individuals or over the period
from the grant date to the date retirement eligibility is
achieved, if less than the stated vesting period. The vesting
approach used does not affect the overall amount of compensation
expense recognized, but could accelerate the recognition of
expense. The Company follows its previous vesting approach for
the remaining portion of those outstanding awards that were
unvested and granted prior to May 4, 2006, and accordingly,
will recognize expense from the grant date to the earlier of the
actual date of retirement or the vesting date. Judgment is
required in estimating the amount of stock-based awards expected
to be forfeited prior to vesting. If actual forfeitures differ
significantly from these estimates, stock-based compensation
expense could be materially impacted.
48
H. J.
Heinz Company and Subsidiaries
Notes to
Consolidated Financial
Statements (Continued)
Compensation cost related to all stock-based awards is
determined using the grant date fair value. Determining the fair
value of employee stock options at the grant date requires
judgment in estimating the expected term that the stock options
will be outstanding prior to exercise as well as the volatility
and dividends over the expected term. Compensation cost for
restricted stock units is determined based on the fair value of
the Companys stock at the grant date. The Company applies
the modified-prospective transition method for stock options
granted on or prior to, but not vested as of, May 3, 2006.
Compensation cost related to these stock options is determined
using the grant date fair value originally estimated and
disclosed in a pro-forma manner in prior period financial
statements in accordance with the original provisions of the
Financial Accounting Standards Boards
(FASBs) guidance for stock compensation.
All stock-based compensation expense is recognized as a
component of selling, general and administrative expenses in the
Consolidated Statements of Income.
Financial
Instruments:
The Companys financial instruments consist primarily of
cash and cash equivalents, receivables, accounts payable,
short-term and long-term debt, swaps, forward contracts, and
option contracts. The carrying values for the Companys
financial instruments approximate fair value, except as
disclosed in Note 10. As a policy, the Company does not
engage in speculative or leveraged transactions, nor does the
Company hold or issue financial instruments for trading purposes.
The Company uses derivative financial instruments for the
purpose of hedging foreign currency, debt and interest rate
exposures, which exist as part of ongoing business operations.
The Company carries derivative instruments on the balance sheet
at fair value, determined using observable market data.
Derivatives with scheduled maturities of less than one year are
included in other receivables or other payables, based on the
instruments fair value. Derivatives with scheduled
maturities beyond one year are classified between current and
long-term based on the timing of anticipated future cash flows.
The current portion of these instruments is included in other
receivables or other payables and the long-term portion is
presented as a component of other non-current assets or other
non-current liabilities, based on the instruments fair
value.
The accounting for changes in the fair value of a derivative
instrument depends on whether it has been designated and
qualifies as part of a hedging relationship and, if so, the
reason for holding it. Gains and losses on fair value hedges are
recognized in current period earnings in the same line item as
the underlying hedged item. The effective portion of gains and
losses on cash flow hedges are deferred as a component of
accumulated other comprehensive loss and are recognized in
earnings at the time the hedged item affects earnings, in the
same line item as the underlying hedged item. Hedge
ineffectiveness related to cash flow hedges is reported in
current period earnings within other income and expense. The
income statement classification of gains and losses related to
derivative contracts that do not qualify for hedge accounting is
determined based on the underlying intent of the contracts. Cash
flows related to the settlement of derivative instruments
designated as net investment hedges of foreign operations are
classified in the consolidated statements of cash flows within
investing activities. Cash flows related to the termination of
derivative instruments designated as fair value hedges of fixed
rate debt obligations are classified in the consolidated
statements of cash flows within financing activities. All other
cash flows related to derivative instruments are generally
classified in the consolidated statements of cash flows within
operating activities.
49
H. J.
Heinz Company and Subsidiaries
Notes to
Consolidated Financial
Statements (Continued)
|
|
2.
|
Recently
Issued Accounting Standards
|
In May 2011, the Financial Accounting Standards Board
(FASB) issued an amendment to revise the wording
used to describe the requirements for measuring fair value and
for disclosing information about fair value measurements. For
many of the requirements, the FASB does not intend for the
amendments to result in a change in the application of the
current requirements. Some of the amendments clarify the
FASBs intent about the application of existing fair value
measurement requirements, such as specifying that the concepts
of highest and best use and valuation premise in a fair value
measurement are relevant only when measuring the fair value of
nonfinancial assets. Other amendments change a particular
principle or requirement for measuring fair value or for
disclosing information about fair value measurements such as
specifying that, in the absence of a Level 1 input (refer
to Note 10 for additional information), a reporting entity
should apply premiums or discounts when market participants
would do so when pricing the asset or liability. The Company is
required to adopt this amendment on January 26, 2012, the
first day of the fourth quarter of Fiscal 2012. The Company is
currently evaluating the impact this amendment will have, if
any, on its financial statements.
In December 2010, the FASB issued an amendment to the disclosure
requirements for Business Combinations. This amendment clarifies
that if a public entity is required to disclose pro forma
information for business combinations, the entity should
disclose such pro forma information as though the business
combination(s) that occurred during the current year had
occurred as of the beginning of the comparable prior annual
reporting period only. This amendment also expands the
supplemental pro forma disclosures for business combinations to
include a description of the nature and amount of material
nonrecurring pro forma adjustments directly attributable to the
business combination included in reported pro forma revenue and
earnings. The Company is required to adopt this amendment on
April 28, 2011, the first day of Fiscal 2012 for any
business combinations that are material on an individual or
aggregate basis.
In December 2010, the FASB issued an amendment to the accounting
requirements for Goodwill and Other Intangibles. This amendment
modifies Step 1 of the goodwill impairment test for reporting
units with zero or negative carrying amounts. For those
reporting units, an entity is required to perform Step 2 of the
goodwill impairment test if it is more likely than not that a
goodwill impairment exists. In determining whether it is more
likely than not that a goodwill impairment exists, an entity
should consider whether there are any adverse qualitative
factors indicating that impairment may exist. The Company is
required to adopt this amendment on April 28, 2011, the
first day of Fiscal 2012 and this adoption is not expected to
have an impact on the Companys financial statements.
In June 2009, the FASB issued an amendment to the accounting and
disclosure requirements for transfers of financial assets. This
amendment removes the concept of a qualifying special-purpose
entity and requires that a transferor recognize and initially
measure at fair value all assets obtained and liabilities
incurred as a result of a transfer of financial assets accounted
for as a sale. This amendment also requires additional
disclosures about any transfers of financial assets and a
transferors continuing involvement with transferred
financial assets. The Company adopted this amendment on
April 29, 2010, the first day of Fiscal 2011. This adoption
did not have a material impact on the Companys financial
statements. Refer to Note 7 for additional information.
In June 2009, the FASB issued an amendment to the accounting and
disclosure requirements for variable interest entities. This
amendment changes how a reporting entity determines when an
entity that is insufficiently capitalized or is not controlled
through voting (or similar rights) should be consolidated. The
determination of whether a reporting entity is required to
consolidate another entity is based on, among other things, the
purpose and design of the other entity and the reporting
entitys ability to direct the activities of the other
entity that most significantly impact its economic
50
H. J.
Heinz Company and Subsidiaries
Notes to
Consolidated Financial
Statements (Continued)
performance. The amendment also requires additional disclosures
about a reporting entitys involvement with variable
interest entities and any significant changes in risk exposure
due to that involvement. A reporting entity is required to
disclose how its involvement with a variable interest entity
affects the reporting entitys financial statements. The
Company adopted this amendment on April 29, 2010, the first
day of Fiscal 2011. This adoption did not have a material impact
on the Companys financial statements.
|
|
3.
|
Discontinued
Operations and Other Disposals
|
During the third quarter of Fiscal 2010, the Company completed
the sale of its Appetizers And, Inc. frozen hors doeuvres
business which was previously reported within the
U.S. Foodservice segment, resulting in a $14.5 million
pre-tax ($10.4 million after-tax) loss. Also during the
third quarter of Fiscal 2010, the Company completed the sale of
its private label frozen desserts business in the U.K.,
resulting in a $31.4 million pre-tax ($23.6 million
after-tax) loss. During the second quarter of Fiscal 2010, the
Company completed the sale of its Kabobs frozen hors
doeuvres business which was previously reported within the
U.S. Foodservice segment, resulting in a $15.0 million
pre-tax ($10.9 million after-tax) loss. The losses on each
of these transactions have been recorded in discontinued
operations.
In accordance with accounting principles generally accepted in
the United States of America, the operating results related to
these businesses have been included in discontinued operations
in the Companys consolidated statements of income for
Fiscal 2010 and 2009. The following table presents summarized
operating results for these discontinued operations:
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended
|
|
|
April 28, 2010
|
|
April 29, 2009
|
|
|
FY 2010
|
|
FY 2009
|
|
|
(Millions of Dollars)
|
|
Sales
|
|
$
|
63.0
|
|
|
$
|
136.8
|
|
Net after-tax losses
|
|
$
|
(4.7
|
)
|
|
$
|
(6.4
|
)
|
Tax benefit on losses
|
|
$
|
2.0
|
|
|
$
|
2.4
|
|
During the fourth quarter of Fiscal 2010, the Company received
cash proceeds of $94.6 million from the government of the
Netherlands for property the government acquired through eminent
domain proceedings. The transaction includes the purchase by the
government of the Companys factory located in Nijmegen,
which produces soups, pasta and cereals. The cash proceeds are
intended to compensate the Company for costs, both capital and
expense, the Company will incur three years from the date of the
transaction, which is the length of time the Company has to exit
the current factory location and construct certain new
facilities. Note, the Company will likely incur costs to rebuild
an R&D facility in the Netherlands, costs to transfer a
cereal line to another factory location, employee costs for
severance and other costs directly related to the closure and
relocation of the existing facilities. The Company also entered
into a three-year leaseback on the Nijmegen factory. The Company
will continue to operate in the leased factory while commencing
to execute its plans for closure and relocation of the
operations. The Company has accounted for the proceeds on a cost
recovery basis. In doing so, the Company has made its estimates
of cost, both of a capital and expense nature, to be incurred
and recovered and to which proceeds from the transaction will be
applied. Of the proceeds received, $81.2 million was
deferred based on managements total estimated future costs
to be recovered and incurred and recorded in other non-current
liabilities, other accrued liabilities and accumulated
depreciation in the Companys consolidated balance sheet as
of April 28, 2010. These deferred amounts are recognized as
the related costs are incurred. If estimated costs differ from
what is actually incurred, these adjustments are reflected in
earnings. As of April 27, 2011, the remaining deferred
amount on the consolidated balance sheet was $63.2 million
and was
51
H. J.
Heinz Company and Subsidiaries
Notes to
Consolidated Financial
Statements (Continued)
recorded in other non-current liabilities, other accrued
liabilities and accumulated depreciation. No significant
adjustments were reflected in earnings in Fiscal 2011. The
excess of the $94.6 million of proceeds received over
estimated costs to be recovered and incurred was
$15.0 million which has been recorded as a reduction of
cost of products sold in the consolidated statement of income
for the year ended April 28, 2010.
On April 1, 2011, the Company acquired an 80% stake in
Coniexpress S.A. Industrias Alimenticias
(Coniexpress), a leading Brazilian manufacturer of
the
Quero®
brand of tomato-based sauces, tomato paste, ketchup, condiments
and vegetables for $493.5 million in cash, which includes
$10.6 million of acquired cash and $60.1 million of
short-term investments. The Company also incurred
$11.3 million of pre-tax costs related to the acquisition,
consisting primarily of professional fees, which have been
recorded in selling, general and administrative expenses in the
consolidated statement of income. The Company has the right to
exercise a call option at any time requiring the minority
partner to sell his 20% equity interest, while the minority
partner has the right to exercise a put option requiring the
Company to purchase his 20% equity interest (see Note 17
for additional explanation). The Coniexpress acquisition has
been accounted for as a business combination and, accordingly,
the purchase price has been allocated to the assets and
liabilities based upon their estimated fair values as of the
acquisition date. The preliminary allocations of the purchase
price resulted in goodwill of $300.2 million, which was
assigned to the Rest of World segment and is not deductible for
tax purposes. In addition, $161.9 million of intangible
assets were acquired, $142.0 million of which relate to
trademarks which are not subject to amortization. The remaining
$19.9 million represents customer-related assets which will
be amortized over 15 years. In addition, the stock purchase
agreement provides the Company with rights to recover from the
sellers a portion of the costs associated with certain
contingent liabilities incurred pre-acquisition. Based on the
Companys assessment as of the acquisition date, a
$26.3 million indemnification asset has been recorded in
Other non-current assets related to a contingent liability of
$52.6 million recorded in Other non-current liabilities.
On November 2, 2010, the Company acquired Foodstar Holding
Pte (Foodstar), a manufacturer of soy sauces and
fermented bean curd in China for $165.4 million in cash,
which includes $30.0 million of acquired cash, as well as a
potential earn-out payment in Fiscal 2014 contingent upon
certain net sales and EBITDA (earnings before interest, taxes,
depreciation and amortization) targets during Fiscals 2013 and
2014. In accordance with accounting principles generally
accepted in the United States of America, a liability of
$44.5 million was recognized for an estimate of the
acquisition date fair value of the earn-out and is included in
Other non-current liabilities in our consolidated balance sheet
as of April 27, 2011. Any change in the fair value of the
earn-out subsequent to the acquisition date, including an
increase resulting from the passage of time, is and will be
recognized in earnings in the period of the estimated fair value
change. See Note 10 for further explanation. A change in
fair value of the earn-out could have a material impact on the
Companys earnings in the period of the change in estimate.
The Foodstar acquisition has been accounted for as a business
combination and, accordingly, the purchase price has been
allocated to the assets and liabilities based upon their
estimated fair values as of the acquisition date. The
allocations of the purchase price resulted in goodwill of
$77.3 million, which was assigned to the Asia/Pacific
segment and is not deductible for tax purposes. In addition
$70.7 million of intangible assets were acquired,
$42.4 million of which relate to trademarks and are not
subject to amortization. The remaining $28.3 million will
be amortized over a weighted average life of 31 years.
52
H. J.
Heinz Company and Subsidiaries
Notes to
Consolidated Financial
Statements (Continued)
During the third quarter of Fiscal 2010, the Company acquired
Arthurs Fresh Company, a chilled smoothies business in
Canada for approximately $11 million in cash as well as an
insignificant amount of contingent consideration which is
scheduled to be paid in Fiscal 2013. The Company also made
payments during Fiscal 2010 related to acquisitions completed in
prior fiscal years, none of which were significant.
During the second quarter of Fiscal 2009, the Company acquired
Bénédicta, a sauce business in France for
approximately $116 million. During the third quarter of
Fiscal 2009, the Company acquired Golden Circle Limited, a fruit
and juice business in Australia for approximately
$211 million, including the assumption of $68 million
of debt that was immediately refinanced by the Company.
Additionally, the Company acquired La Bonne Cuisine, a
chilled dip business in New Zealand for approximately
$28 million in the third quarter of Fiscal 2009. During the
fourth quarter of Fiscal 2009, the Company acquired Papillon, a
South African producer of chilled products for approximately
$6 million. The Company also made payments during Fiscal
2009 related to acquisitions completed in prior fiscal years,
none of which were significant.
All of the Fiscal 2010 and 2009 acquisitions have been accounted
for as business combinations and accordingly, the purchase price
has been allocated to assets and liabilities based upon their
estimated fair values as of the acquisition date.
Operating results of the above-mentioned businesses acquired
have been included in the consolidated statements of income from
the respective acquisition dates forward. Pro forma results of
the Company, assuming all of the acquisitions had occurred at
the beginning of each period presented, would not be materially
different from the results reported. There are no significant
contingent payments, options or commitments associated with any
of the acquisitions, except as disclosed above.
During Fiscal 2011, the Company acquired the remaining 21%
interest in Heinz UFE Ltd., a Chinese subsidiary of the Company
that manufactures infant feeding products, for
$6.3 million. The purchase has been accounted for primarily
as a reduction in additional capital and noncontrolling interest
on the consolidated statements of equity. Prior to the
transaction, the Company was the owner of 79% of the business.
During Fiscal 2010, the Company acquired the remaining 49%
interest in Cairo Food Industries, S.A.E, an Egyptian subsidiary
of the Company that manufactures ketchup, condiments and sauces,
for $62.1 million. The purchase has been accounted for
primarily as a reduction in additional capital and
noncontrolling interest on the consolidated statements of
equity. Prior to the transaction, the Company was the owner of
51% of the business.
53
H. J.
Heinz Company and Subsidiaries
Notes to
Consolidated Financial
Statements (Continued)
|
|
5.
|
Goodwill
and Other Intangible Assets
|
Changes in the carrying amount of goodwill for the fiscal year
ended April 27, 2011, by reportable segment, are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
American
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer
|
|
|
|
|
|
Asia/
|
|
|
U.S.
|
|
|
Rest of
|
|
|
|
|
|
|
Products
|
|
|
Europe
|
|
|
Pacific
|
|
|
Foodservice
|
|
|
World
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
(Thousands of Dollars)
|
|
|
|
|
|
|
|
|
Balance at April 29, 2009
|
|
$
|
1,074,841
|
|
|
$
|
1,090,998
|
|
|
$
|
248,222
|
|
|
$
|
260,523
|
|
|
$
|
13,204
|
|
|
$
|
2,687,788
|
|
Acquisitions
|
|
|
6,378
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,378
|
|
Purchase accounting adjustments
|
|
|
|
|
|
|
(895
|
)
|
|
|
(3,030
|
)
|
|
|
|
|
|
|
|
|
|
|
(3,925
|
)
|
Disposals
|
|
|
|
|
|
|
(483
|
)
|
|
|
|
|
|
|
(2,849
|
)
|
|
|
|
|
|
|
(3,332
|
)
|
Translation adjustments
|
|
|
21,672
|
|
|
|
17,124
|
|
|
|
44,233
|
|
|
|
|
|
|
|
980
|
|
|
|
84,009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at April 28, 2010
|
|
|
1,102,891
|
|
|
|
1,106,744
|
|
|
|
289,425
|
|
|
|
257,674
|
|
|
|
14,184
|
|
|
|
2,770,918
|
|
Acquisitions
|
|
|
|
|
|
|
|
|
|
|
77,345
|
|
|
|
|
|
|
|
300,227
|
|
|
|
377,572
|
|
Purchase accounting adjustments
|
|
|
|
|
|
|
(278
|
)
|
|
|
(10,688
|
)
|
|
|
|
|
|
|
|
|
|
|
(10,966
|
)
|
Translation adjustments
|
|
|
8,846
|
|
|
|
114,774
|
|
|
|
35,998
|
|
|
|
|
|
|
|
1,299
|
|
|
|
160,917
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at April 27, 2011
|
|
$
|
1,111,737
|
|
|
$
|
1,221,240
|
|
|
$
|
392,080
|
|
|
$
|
257,674
|
|
|
$
|
315,710
|
|
|
$
|
3,298,441
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During the fourth quarter of Fiscal 2011, the Company completed
its annual review of goodwill and indefinite-lived intangible
assets. No impairments were identified during the Companys
annual assessment of goodwill and indefinite-lived intangible
assets.
During the fourth quarter of Fiscal 2011, the Company finalized
the purchase price allocation for the Foodstar acquisition
resulting primarily in immaterial adjustments between goodwill,
accrued liabilities and income taxes. Also, during the fourth
quarter of Fiscal 2011, the Company acquired Coniexpress and a
preliminary purchase price allocation was recorded. The Company
expects to finalize the purchase price allocation related to the
Coniexpress acquisition upon completion of third party valuation
procedures. All of the purchase accounting adjustments reflected
in the above table relate to acquisitions completed prior to
April 30, 2009, the first day of Fiscal 2010. Total
goodwill accumulated impairment losses for the Company were
$84.7 million consisting of $54.5 million for Europe,
$2.7 million for Asia/Pacific and $27.4 million for
Rest of World as of April 29, 2009, April 28, 2010 and
April 27, 2011.
During Fiscal 2010, the Company divested its Kabobs and
Appetizers And, Inc. frozen hors doeuvres businesses
within the U.S. Foodservice segment, and completed the sale
of its private label frozen desserts business in the U.K. These
sale transactions resulted in disposals of goodwill, trademarks
and other intangible assets. See Note 3 for additional
information.
54
H. J.
Heinz Company and Subsidiaries
Notes to
Consolidated Financial
Statements (Continued)
Trademarks and other intangible assets at April 27, 2011
and April 28, 2010, subject to amortization expense, are as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April 27, 2011
|
|
|
April 28, 2010
|
|
|
|
Gross
|
|
|
Accum Amort
|
|
|
Net
|
|
|
Gross
|
|
|
Accum Amort
|
|
|
Net
|
|
|
|
|
|
|
|
|
|
(Thousands of dollars)
|
|
|
|
|
|
|
|
|
Trademarks
|
|
$
|
297,020
|
|
|
$
|
(83,343
|
)
|
|
$
|
213,677
|
|
|
$
|
267,435
|
|
|
$
|
(73,500
|
)
|
|
$
|
193,935
|
|
Licenses
|
|
|
208,186
|
|
|
|
(158,228
|
)
|
|
|
49,958
|
|
|
|
208,186
|
|
|
|
(152,509
|
)
|
|
|
55,677
|
|
Recipes/processes
|
|
|
90,553
|
|
|
|
(31,988
|
)
|
|
|
58,565
|
|
|
|
78,080
|
|
|
|
(26,714
|
)
|
|
|
51,366
|
|
Customer-related assets
|
|
|
224,173
|
|
|
|
(57,555
|
)
|
|
|
166,618
|
|
|
|
180,302
|
|
|
|
(43,316
|
)
|
|
|
136,986
|
|
Other
|
|
|
79,045
|
|
|
|
(54,833
|
)
|
|
|
24,212
|
|
|
|
66,807
|
|
|
|
(54,157
|
)
|
|
|
12,650
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
898,977
|
|
|
$
|
(385,947
|
)
|
|
$
|
513,030
|
|
|
$
|
800,810
|
|
|
$
|
(350,196
|
)
|
|
$
|
450,614
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization expense for trademarks and other intangible assets
was $29.0 million, $28.2 million and
$28.2 million for the fiscal years ended April 27,
2011, April 28, 2010 and April 29, 2009, respectively.
Based upon the amortizable intangible assets recorded on the
balance sheet as of April 27, 2011, amortization expense
for each of the next five fiscal years is estimated to be
approximately $29 million.
Intangible assets not subject to amortization at April 27,
2011 totaled $1,085.7 million and consisted of
$942.5 million of trademarks, $122.5 million of
recipes/processes, and $20.7 million of licenses.
Intangible assets not subject to amortization at April 28,
2010 totaled $847.1 million and consisted of
$701.2 million of trademarks, $113.8 million of
recipes/processes, and $32.1 million of licenses.
The following table summarizes the (benefit)/provision for
U.S. federal, state and foreign taxes on income from
continuing operations.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
|
(Dollars in thousands)
|
|
|
Current:
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. federal
|
|
$
|
38,686
|
|
|
$
|
(24,446
|
)
|
|
$
|
73,490
|
|
State
|
|
|
14,507
|
|
|
|
(809
|
)
|
|
|
1,855
|
|
Foreign
|
|
|
161,304
|
|
|
|
163,241
|
|
|
|
192,765
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
214,497
|
|
|
|
137,986
|
|
|
|
268,110
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred:
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. federal
|
|
|
123,601
|
|
|
|
165,141
|
|
|
|
73,130
|
|
State
|
|
|
(4,318
|
)
|
|
|
8,141
|
|
|
|
8,230
|
|
Foreign
|
|
|
34,441
|
|
|
|
47,246
|
|
|
|
26,013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
153,724
|
|
|
|
220,528
|
|
|
|
107,373
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for income taxes
|
|
$
|
368,221
|
|
|
$
|
358,514
|
|
|
$
|
375,483
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax benefits related to stock options and other equity
instruments recorded directly to additional capital totaled
$21.4 million in Fiscal 2011, $9.3 million in Fiscal
2010 and $17.6 million in Fiscal 2009.
55
H. J.
Heinz Company and Subsidiaries
Notes to
Consolidated Financial
Statements (Continued)
The components of income from continuing operations before
income taxes consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
|
(Dollars in thousands)
|
|
|
Domestic
|
|
$
|
565,831
|
|
|
$
|
499,059
|
|
|
$
|
534,217
|
|
Foreign
|
|
|
808,338
|
|
|
|
791,395
|
|
|
|
785,666
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
From continuing operations
|
|
$
|
1,374,169
|
|
|
$
|
1,290,454
|
|
|
$
|
1,319,883
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The differences between the U.S. federal statutory tax rate
and the Companys consolidated effective tax rate on
continuing operations are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
U.S. federal statutory tax rate
|
|
|
35.0
|
%
|
|
|
35.0
|
%
|
|
|
35.0
|
%
|
Tax on income of foreign subsidiaries
|
|
|
(5.3
|
)
|
|
|
(3.5
|
)
|
|
|
(4.1
|
)
|
State income taxes (net of federal benefit)
|
|
|
0.3
|
|
|
|
0.3
|
|
|
|
0.6
|
|
Earnings repatriation
|
|
|
3.3
|
|
|
|
1.2
|
|
|
|
0.4
|
|
Tax free interest
|
|
|
(4.2
|
)
|
|
|
(4.6
|
)
|
|
|
(2.5
|
)
|
Effects of revaluation of tax basis of foreign assets
|
|
|
(1.6
|
)
|
|
|
(0.5
|
)
|
|
|
(0.7
|
)
|
Other
|
|
|
(0.7
|
)
|
|
|
(0.1
|
)
|
|
|
(0.3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective tax rate
|
|
|
26.8
|
%
|
|
|
27.8
|
%
|
|
|
28.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The decrease in the effective tax rate in Fiscal 2011 is
primarily the result of increased benefits from foreign tax
planning and increased tax exempt foreign income, partially
offset by higher taxes on repatriation of earnings. The decrease
in the effective tax rate in Fiscal 2010 was primarily the
result of tax efficient financing of the Companys
operations, partially offset by higher taxes on repatriation of
earnings. The effective tax rate in Fiscal 2009 was impacted by
a smaller benefit from tax free interest partially offset by
lower earnings repatriation costs.
56
H. J.
Heinz Company and Subsidiaries
Notes to
Consolidated Financial
Statements (Continued)
The following table and note summarize deferred tax (assets) and
deferred tax liabilities as of April 27, 2011 and
April 28, 2010.
|
|
|
|
|
|
|
|
|
|
|
2011
|
|
|
2010
|
|
|
|
(Dollars in thousands)
|
|
|
Depreciation/amortization
|
|
$
|
939,545
|
|
|
$
|
754,353
|
|
Benefit plans
|
|
|
93,916
|
|
|
|
38,718
|
|
Deferred income
|
|
|
126,917
|
|
|
|
66,920
|
|
Financing costs
|
|
|
118,118
|
|
|
|
118,512
|
|
Other
|
|
|
48,839
|
|
|
|
102,663
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities
|
|
|
1,327,335
|
|
|
|
1,081,166
|
|
|
|
|
|
|
|
|
|
|
Operating loss carryforwards and carrybacks
|
|
|
(120,261
|
)
|
|
|
(159,519
|
)
|
Benefit plans
|
|
|
(168,001
|
)
|
|
|
(178,363
|
)
|
Depreciation/amortization
|
|
|
(108,873
|
)
|
|
|
(74,925
|
)
|
Tax credit carryforwards
|
|
|
(41,850
|
)
|
|
|
(62,284
|
)
|
Deferred income
|
|
|
(24,235
|
)
|
|
|
(36,373
|
)
|
Other
|
|
|
(109,929
|
)
|
|
|
(123,681
|
)
|
|
|
|
|
|
|
|
|
|
Deferred tax assets
|
|
|
(573,149
|
)
|
|
|
(635,145
|
)
|
|
|
|
|
|
|
|
|
|
Valuation allowance
|
|
|
64,386
|
|
|
|
62,519
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax liabilities
|
|
$
|
818,572
|
|
|
$
|
508,540
|
|
|
|
|
|
|
|
|
|
|
The Company also has foreign deferred tax assets and valuation
allowances of $135.1 million, each related to statutory
increases in the capital tax bases of certain internally
generated intangible assets for which the probability of
realization is remote.
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 resolution of tax reserves and changes in valuation
allowances could be material to the Companys results of
operations for any period, but is not expected to be material to
the Companys financial position.
At the end of Fiscal 2011, foreign operating loss carryforwards
totaled $419.2 million. Of that amount, $288.8 million
expire between 2012 and 2031; the other $130.4 million do
not expire. Deferred tax assets of $18.1 million have been
recorded for foreign tax credit carryforwards. These credit
carryforwards expire in 2020. Deferred tax assets of
$12.6 million have been recorded for state operating loss
carryforwards. These losses expire between 2012 and 2031.
Additionally, the Company has incurred losses in a foreign
jurisdiction where realization of the future economic benefit is
so remote that the benefit is not reflected as a deferred tax
asset.
The net change in the Fiscal 2011 valuation allowance shown
above is an increase of $1.9 million. The increase was
primarily due to the recording of additional valuation allowance
for foreign loss carryforwards that are not expected to be
utilized, partially offset by the release of valuation allowance
related to state tax loss and credit carryforwards resulting
from a reorganization plan. The net change in the Fiscal 2010
valuation allowance was an increase of $3.4 million. The
increase was primarily due to the recording of additional
valuation allowance for foreign loss carryforwards that are not
expected to be utilized prior to their expiration date,
partially offset by a reduction in
57
H. J.
Heinz Company and Subsidiaries
Notes to
Consolidated Financial
Statements (Continued)
unrealizable net state deferred tax assets. The net change in
the Fiscal 2009 valuation allowance was an increase of
$7.1 million. The increase was primarily due to the
recording of additional valuation allowance for foreign loss
carryforwards and state deferred tax assets that were not
expected to be utilized prior to their expiration date.
A reconciliation of the beginning and ending amount of gross
unrecognized tax benefits is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
|
(Dollars in millions)
|
|
|
Balance at the beginning of the fiscal year
|
|
$
|
57.1
|
|
|
$
|
86.6
|
|
|
$
|
129.1
|
|
Increases for tax positions of prior years
|
|
|
13.5
|
|
|
|
3.7
|
|
|
|
9.4
|
|
Decreases for tax positions of prior years
|
|
|
(26.0
|
)
|
|
|
(35.4
|
)
|
|
|
(59.5
|
)
|
Increases based on tax positions related to the current year
|
|
|
10.8
|
|
|
|
10.4
|
|
|
|
13.1
|
|
Increases due to business combinations
|
|
|
26.9
|
|
|
|
|
|
|
|
3.8
|
|
Decreases due to settlements with taxing authorities
|
|
|
(5.4
|
)
|
|
|
(0.8
|
)
|
|
|
(0.8
|
)
|
Decreases due to lapse of statute of limitations
|
|
|
(6.2
|
)
|
|
|
(7.4
|
)
|
|
|
(8.5
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at the end of the fiscal year
|
|
$
|
70.7
|
|
|
$
|
57.1
|
|
|
$
|
86.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The amount of unrecognized tax benefits that, if recognized,
would impact the effective tax rate was $56.5 million and
$38.2 million, on April 27, 2011 and April 28,
2010, respectively.
The Company classifies interest and penalties on tax
uncertainties as a component of the provision for income taxes.
For Fiscal 2011, the total amount of net interest and penalty
expense included in the provision for income taxes was a benefit
of $1.3 million and $0.1 million, respectively. For
Fiscal 2010, the total amount of net interest and penalty
expense included in the provision for income taxes was a benefit
of $5.2 million and $1.0 million, respectively. For
Fiscal 2009, the total amount of net interest and penalty
expense included in the provision for income taxes was an
expense of $3.1 million and a benefit of $0.6 million,
respectively. The total amount of interest and penalties accrued
as of April 27, 2011 was $27.3 million and
$21.1 million, respectively. The corresponding amounts of
accrued interest and penalties at April 28, 2010 were
$17.3 million and $1.2 million, respectively.
It is reasonably possible that the amount of unrecognized tax
benefits will decrease by as much as $17.9 million in the
next 12 months primarily due to the expiration of statutes
in various foreign jurisdictions along with the progression of
state and foreign audits in process.
During Fiscal 2009, the Company effectively settled its appeal
filed October 15, 2007 of a U.S. Court of Federal
Claims decision regarding a refund claim resulting from a Fiscal
1995 transaction. The effective settlement resulted in a
$42.7 million decrease in the amount of unrecognized tax
benefits, $8.5 million of which was recorded as a credit to
additional capital and was received as a refund of tax during
Fiscal 2009.
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 various locations and the applicable tax rates. In
the normal course of business the Company is subject to
examination by taxing authorities throughout the world,
including such major jurisdictions as Australia, Canada, Italy,
the United Kingdom and the United States. The Company has
substantially concluded all national income tax matters for
58
H. J.
Heinz Company and Subsidiaries
Notes to
Consolidated Financial
Statements (Continued)
years through Fiscal 2009 for the U.S., through Fiscal 2008 for
the United Kingdom, through Fiscal 2007 for Italy, and through
Fiscal 2006 for Australia and Canada.
Undistributed earnings of foreign subsidiaries considered to be
indefinitely reinvested or which may be remitted tax free in
certain situations, amounted to $4.4 billion at
April 27, 2011. The Company has not determined the deferred
tax liability associated with these undistributed earnings, as
such determination is not practicable.
|
|
7.
|
Debt and
Financing Arrangements
|
In the first quarter of Fiscal 2010, the Company entered into a
three-year $175 million accounts receivable securitization
program. Under the terms of the agreement, the Company sells, on
a revolving basis, its U.S. trade receivables to a
wholly-owned, bankruptcy-remote-subsidiary. This subsidiary then
sells all of the rights, title and interest in these
receivables, all of which are short-term, to an unaffiliated
entity. On April 29, 2010, the Company adopted new
accounting guidance related to the transfer of financial assets.
The securitization agreement continues to qualify for sale
accounting treatment under the new guidance. After the sale, the
Company, as servicer of the assets, collects the receivables on
behalf of the unaffiliated entity. On the statements of cash
flows, all cash flows related to this securitization program are
included as a component of operating activities because the cash
received from the unaffiliated entity and the cash collected
from servicing the transferred assets are not subject to
significantly different risks due to the short-term nature of
the Companys trade receivables.
For the sale of receivables under the program, the Company
receives initial cash funding and a deferred purchase price. The
initial cash funding was $29.0 million and
$84.2 million during the years ended April 27, 2011
and April 28, 2010, respectively, resulting in a decrease
of $55.2 million in cash for sales under this program for
Fiscal 2011 and an increase in cash of $84.2 million for
Fiscal 2010. The fair value of the deferred purchase price was
$173.9 million and $89.2 million as of April 27,
2011 and April 28, 2010, respectively. The decrease in cash
proceeds related to the deferred purchase price was
$84.7 million for the fiscal year ended April 27,
2011. This deferred purchase price is included as a trade
receivable on the consolidated balance sheets and has a carrying
value which approximates fair value as of April 27, 2011
and April 28, 2010, due to the nature of the short-term
underlying financial assets.
Short-term debt consisted of bank debt and other borrowings of
$87.8 million and $43.9 million as of April 27,
2011 and April 28, 2010, respectively. The weighted average
interest rate was 3.4% and 4.7% for Fiscal 2011 and Fiscal 2010,
respectively.
At April 27, 2011, the Company had a $1.2 billion
credit agreement which expires in April 2012. This credit
agreement supports the Companys commercial paper
borrowings. As a result, the commercial paper borrowings at
April 28, 2010 are classified as long-term debt based upon
the Companys intent and ability to refinance these
borrowings on a long-term basis. There were no commercial paper
borrowings outstanding at April 27, 2011. The credit
agreement has customary covenants, including a leverage ratio
covenant. The Company was in compliance with all of its
covenants as of April 27, 2011 and April 28, 2010. In
June 2011, the Company expects to modify the credit agreement to
increase the available borrowings under the facility to
$1.5 billion as well as to extend its maturity date to
2016. In anticipation of these modifications, the Company
terminated a $500 million credit agreement during April
2011. In addition, the Company has $439.2 million of
foreign lines of credit available at April 27, 2011.
59
H. J.
Heinz Company and Subsidiaries
Notes to
Consolidated Financial
Statements (Continued)
Long-term debt was comprised of the following as of
April 27, 2011 and April 28, 2010:
|
|
|
|
|
|
|
|
|
|
|
2011
|
|
|
2010
|
|
|
|
(Dollars in thousands)
|
|
|
Commercial Paper (variable rate)
|
|
$
|
|
|
|
$
|
232,829
|
|
7.125% U.S. Dollar Notes due August 2039
|
|
|
625,569
|
|
|
|
624,531
|
|
8.0% Heinz Finance Preferred Stock due July 2013
|
|
|
350,000
|
|
|
|
350,000
|
|
5.35% U.S. Dollar Notes due July 2013
|
|
|
499,923
|
|
|
|
499,888
|
|
6.625% U.S. Dollar Notes due July 2011
|
|
|
749,982
|
|
|
|
749,878
|
|
6.00% U.S. Dollar Notes due March 2012
|
|
|
599,631
|
|
|
|
599,187
|
|
U.S. Dollar Remarketable Securities due December 2020
|
|
|
119,000
|
|
|
|
119,000
|
|
6.375% U.S. Dollar Debentures due July 2028
|
|
|
230,878
|
|
|
|
230,619
|
|
6.25% British Pound Notes due February 2030
|
|
|
206,590
|
|
|
|
188,928
|
|
6.75% U.S. Dollar Notes due March 2032
|
|
|
435,038
|
|
|
|
440,942
|
|
Japanese Yen Credit Agreement due October 2012 (variable rate)
|
|
|
182,571
|
|
|
|
159,524
|
|
Japanese Yen Credit Agreement due December 2013 (variable rate)
|
|
|
194,742
|
|
|
|
|
|
Other U.S. Dollar due May 2011November 2034
(0.907.94)%
|
|
|
112,829
|
|
|
|
110,339
|
|
Other
Non-U.S.
Dollar due May 2011May 2023 (3.5011.25)%
|
|
|
67,964
|
|
|
|
61,558
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,374,717
|
|
|
|
4,367,223
|
|
Hedge Accounting Adjustments (See Note 12)
|
|
|
150,543
|
|
|
|
207,096
|
|
Less portion due within one year
|
|
|
(1,447,132
|
)
|
|
|
(15,167
|
)
|
|
|
|
|
|
|
|
|
|
Total long-term debt
|
|
$
|
3,078,128
|
|
|
$
|
4,559,152
|
|
|
|
|
|
|
|
|
|
|
Weighted-average interest rate on long-term debt, including the
impact of applicable interest rate swaps
|
|
|
4.23
|
%
|
|
|
4.45
|
%
|
|
|
|
|
|
|
|
|
|
On May 26, 2011, subsequent to the fiscal year end, the
Company issued $500 million of private placement notes at
an average interest rate of 3.48% with maturities of three,
five, seven and ten years. The proceeds will be used to
partially refinance debt that matures in Fiscal 2012.
During the third quarter of Fiscal 2011, the Company entered
into a variable rate, three-year 16 billion Japanese yen
denominated credit agreement. The proceeds were used in the
funding of the Foodstar acquisition and for general corporate
purposes and were swapped to $193.2 million and the
interest rate was fixed at 2.66%. See Note 12 for
additional information.
During the first quarter of Fiscal 2010, H. J. Heinz Finance
Company (HFC), a subsidiary of Heinz, issued
$250 million of 7.125% notes due 2039. The notes are
fully, unconditionally and irrevocably guaranteed by the
Company. The proceeds from the notes were used for payment of
the cash component of the exchange transaction discussed below
as well as various expenses relating to the exchange, and for
general corporate purposes.
During the second quarter Fiscal 2010, HFC issued
$681 million of 7.125% notes due 2039 (of the same
series as the notes discussed above), and paid
$217.5 million of cash, in exchange for $681 million
of its outstanding 15.590% dealer remarketable securities due
December 1, 2020. In addition, HFC terminated a portion of
the remarketing option by paying the remarketing agent a
60
H. J.
Heinz Company and Subsidiaries
Notes to
Consolidated Financial
Statements (Continued)
cash payment of $89.0 million. The exchange transaction was
accounted for as a modification of debt. Accordingly, cash
payments used in the exchange, including the payment to the
remarketing agent, have been accounted for as a reduction in the
book value of the debt, and will be amortized to interest
expense under the effective yield method. Additionally, the
Company terminated its $175 million notional total rate of
return swap in the second quarter of Fiscal 2010 in connection
with the dealer remarketable securities exchange transaction.
See Note 12 for additional information. The next
remarketing on the remaining remarketable securities
($119 million) is scheduled for December 1, 2011. If
the remaining securities are not remarketed, then the Company is
required to repurchase all of the remaining securities at 100%
of the principal amount plus accrued interest. If the Company
purchases or otherwise acquires the remaining securities from
the holders, the Company is required to pay to the holder of the
remaining remarketing option the option settlement amount. This
value fluctuates based on market conditions.
During the second quarter of Fiscal 2010, the Company entered
into a three-year 15 billion Japanese yen denominated
credit agreement. The proceeds were swapped to
$167.3 million and the interest rate was fixed at 4.084%.
See Note 12 for additional information.
During the third quarter of Fiscal 2010, the Company paid off
its A$281 million Australian denominated borrowings
($257 million), which matured on December 16, 2009.
HFCs 3,500 mandatorily redeemable preferred shares are
classified as long-term debt. Each share of preferred stock is
entitled to annual cash dividends at a rate of 8% or $8,000 per
share. On July 15, 2013, each share will be redeemed for
$100,000 in cash for a total redemption price of
$350 million.
Annual maturities of long-term debt during the next five fiscal
years are $1,447.1 million in 2012, $225.1 million in
2013, $1,082.9 million in 2014, $5.4 million in 2015
and $5.6 million in 2016.
|
|
8.
|
Supplemental
Cash Flows Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
|
(Dollars in thousands)
|
|
|
Cash Paid During the Year For:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
268,131
|
|
|
$
|
305,332
|
|
|
$
|
310,047
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes
|
|
$
|
154,527
|
|
|
$
|
138,953
|
|
|
$
|
203,298
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Details of Acquisitions:
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of assets
|
|
$
|
1,057,870
|
|
|
$
|
16,072
|
|
|
$
|
478,440
|
|
Liabilities(1)
|
|
|
274,294
|
|
|
|
4,644
|
|
|
|
181,093
|
|
Redeemable noncontrolling interest(2)
|
|
|
124,669
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid
|
|
|
658,907
|
|
|
|
11,428
|
|
|
|
297,347
|
|
Less cash acquired
|
|
|
40,605
|
|
|
|
|
|
|
|
3,449
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash paid for acquisitions
|
|
$
|
618,302
|
|
|
$
|
11,428
|
|
|
$
|
293,898
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Includes contingent obligations to sellers of $44.5 million
in 2011. |
|
(2) |
|
See Note 17 for additional information. |
During Fiscal 2010, HFC issued $681 million of 30 year
notes and paid $217.5 million of cash in exchange for
$681 million of its outstanding dealer remarketable
securities. The $681 million of notes
61
H. J.
Heinz Company and Subsidiaries
Notes to
Consolidated Financial
Statements (Continued)
exchanged was a non-cash transaction and has been excluded from
the consolidated statement of cash flows for the year ended
April 28, 2010. See Note 7 for additional information.
The Company recognized $41.8 million of property, plant and
equipment and debt in Fiscal 2010 related to contractual
arrangements that contain a lease. These non-cash transactions
have been excluded from the consolidated statement of cash flows
for the year ended April 28, 2010.
In addition, the Company acted as servicer for approximately
$146 million and $126 million of trade receivables
which were sold to unrelated third parties without recourse as
of April 27, 2011 and April 28, 2010, respectively.
These trade receivables are short-term in nature. The proceeds
from these sales are also recognized on the statements of cash
flows as a component of operating activities.
The Company has not recorded any servicing assets or liabilities
as of April 27, 2011 or April 28, 2010 for the
arrangements discussed above because the fair value of these
servicing agreements as well as the fees earned were not
material to the financial statements.
|
|
9.
|
Employees
Stock Incentive Plans and Management Incentive Plans
|
As of April 27, 2011, the Company had outstanding stock
option awards, restricted stock units and restricted stock
awards issued pursuant to various shareholder-approved plans and
a shareholder-authorized employee stock purchase plan. The
compensation cost related to these plans recognized in selling,
general and administrative expenses, and the related tax benefit
was $32.7 million and $10.4 million for the fiscal
year ended April 27, 2011, $33.4 million and
$10.3 million for the fiscal year ended April 28,
2010, and $37.9 million and $12.8 million for the
fiscal year ended April 29, 2009, respectively.
The Company has two plans from which it issued equity based
awards, the Fiscal Year 2003 Stock Incentive Plan (the
2003 Plan), which was approved by shareholders on
September 12, 2002, and the 2000 Stock Option Plan (the
2000 Plan), which was approved by shareholders on
September 12, 2000 for a ten-year period. The
Companys primary means for issuing equity-based awards is
the 2003 Plan. Pursuant to the 2003 Plan, the Management
Development & Compensation Committee is authorized to
grant a maximum of 9.4 million shares for issuance as
restricted stock units or restricted stock. Any available shares
may be issued as stock options. The maximum number of shares
that may be granted under this plan is 18.9 million shares.
Shares issued under these plans are sourced from available
treasury shares.
Stock
Options:
Stock options generally vest over a period of one to four years
after the date of grant. Awards granted prior to Fiscal 2006
generally had a maximum term of ten years. Beginning in Fiscal
2006, awards have a maximum term of seven years.
In accordance with their respective plans, stock option awards
are forfeited if a holder voluntarily terminates employment
prior to the vesting date. The Company estimates forfeitures
based on an analysis of historical trends updated as discrete
new information becomes available and will be re-evaluated on an
annual basis. Compensation cost in any period is at least equal
to the grant-date fair value of the vested portion of an award
on that date.
The Company presents all benefits of tax deductions resulting
from the exercise of stock-based compensation as operating cash
flows in the consolidated statements of cash flows, except the
benefit of tax deductions in excess of the compensation cost
recognized for those options (excess tax benefits)
which are classified as financing cash flows. For the fiscal
year ended April 27, 2011, $12.4 million of cash tax
benefits was reported as an operating cash inflow and
$8.6 million of excess
62
H. J.
Heinz Company and Subsidiaries
Notes to
Consolidated Financial
Statements (Continued)
tax benefits as a financing cash inflow. For the fiscal year
ended April 28, 2010, $6.9 million of cash tax
benefits was reported as an operating cash inflow and
$2.4 million of excess tax benefits as a financing cash
inflow. For the fiscal year ended April 29, 2009,
$9.5 million of cash tax benefits was reported as an
operating cash inflow and $4.8 million of excess tax
benefits as a financing cash inflow.
As of April 27, 2011, there were no shares available for
issuance under the 2000 Plan due to the expiration of the 2000
Plan in September 2010. During the fiscal year ended
April 27, 2011, 7,465 shares were forfeited and
returned to the plan. During the fiscal year ended
April 27, 2011, 10,117 shares were issued from the
2000 Plan.
A summary of the Companys 2003 Plan at April 27, 2011
is as follows:
|
|
|
|
|
|
|
2003 Plan
|
|
|
|
(Amounts in
|
|
|
|
thousands)
|
|
|
Number of shares authorized
|
|
|
18,869
|
|
Number of stock option shares granted
|
|
|
(8,343
|
)
|
Number of stock option shares cancelled/forfeited and returned
to the plan
|
|
|
236
|
|
Number of restricted stock units and restricted stock issued
|
|
|
(4,532
|
)
|
|
|
|
|
|
Shares available for grant as stock options
|
|
|
6,230
|
|
|
|
|
|
|
During Fiscal 2011, the Company granted 1,733,135 option awards
to employees sourced from the 2000 and 2003 Plans. The weighted
average fair value per share of the options granted during the
fiscal years ended April 27, 2011, April 28, 2010 and
April 29, 2009 as computed using the Black-Scholes pricing
model was $5.36, $4.71, and $5.75, respectively. The weighted
average assumptions used to estimate these fair values are as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended
|
|
|
April 27,
|
|
April 28,
|
|
April 29,
|
|
|
2011
|
|
2010
|
|
2009
|
|
Dividend yield
|
|
|
3.9
|
%
|
|
|
4.3
|
%
|
|
|
3.3
|
%
|
Expected volatility
|
|
|
20.5
|
%
|
|
|
20.2
|
%
|
|
|
14.9
|
%
|
Expected term (years)
|
|
|
5.5
|
|
|
|
5.5
|
|
|
|
5.5
|
|
Risk-free interest rate
|
|
|
1.7
|
%
|
|
|
2.7
|
%
|
|
|
3.1
|
%
|
The dividend yield assumption is based on the current fiscal
year dividend payouts. The expected volatility of the
Companys common stock at the date of grant is estimated
based on a historic daily volatility rate over a period equal to
the average life of an option. The weighted average expected
life of options is based on consideration of historical exercise
patterns adjusted for changes in the contractual term and
exercise periods of current awards. The risk-free interest rate
is based on the U.S. Treasury (constant maturity) rate in
effect at the date of grant for periods corresponding with the
expected term of the options.
63
H. J.
Heinz Company and Subsidiaries
Notes to
Consolidated Financial
Statements (Continued)
A summary of the Companys stock option activity and
related information is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
Number of
|
|
|
Exercise Price
|
|
|
Aggregate
|
|
|
|
Options
|
|
|
(per share)
|
|
|
Intrinsic Value
|
|
|
|
(Amounts in thousands, except per share data)
|
|
|
Options outstanding at April 30, 2008
|
|
|
22,134
|
|
|
$
|
40.06
|
|
|
$
|
886,758
|
|
Options granted
|
|
|
1,551
|
|
|
|
50.91
|
|
|
|
78,978
|
|
Options exercised
|
|
|
(6,684
|
)
|
|
|
42.35
|
|
|
|
(283,064
|
)
|
Options cancelled/forfeited and returned to the plan
|
|
|
(2,901
|
)
|
|
|
47.77
|
|
|
|
(138,601
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options outstanding at April 29, 2009
|
|
|
14,100
|
|
|
|
38.59
|
|
|
|
544,071
|
|
Options granted
|
|
|
1,768
|
|
|
|
39.12
|
|
|
|
69,166
|
|
Options exercised
|
|
|
(2,921
|
)
|
|
|
35.46
|
|
|
|
(103,558
|
)
|
Options cancelled/forfeited and returned to the plan
|
|
|
(26
|
)
|
|
|
40.44
|
|
|
|
(1,068
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options outstanding at April 28, 2010
|
|
|
12,921
|
|
|
|
39.36
|
|
|
|
508,611
|
|
Options granted
|
|
|
1,733
|
|
|
|
46.42
|
|
|
|
80,460
|
|
Options exercised
|
|
|
(4,813
|
)
|
|
|
35.73
|
|
|
|
(171,980
|
)
|
Options cancelled/forfeited and returned to the plan
|
|
|
(73
|
)
|
|
|
42.81
|
|
|
|
(3,147
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options outstanding at April 27, 2011
|
|
|
9,768
|
|
|
$
|
42.38
|
|
|
$
|
413,944
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options vested and exercisable at April 29, 2009
|
|
|
10,933
|
|
|
$
|
36.18
|
|
|
$
|
395,558
|
|
Options vested and exercisable at April 28, 2010
|
|
|
9,300
|
|
|
$
|
37.59
|
|
|
$
|
349,600
|
|
Options vested and exercisable at April 27, 2011
|
|
|
5,744
|
|
|
$
|
40.65
|
|
|
$
|
233,507
|
|
The following summarizes information about shares under option
in the respective exercise price ranges at April 27, 2011:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options Outstanding
|
|
|
Options Exercisable
|
|
|
|
|
|
|
Weighted-
|
|
|
Weighted-
|
|
|
|
|
|
Weighted-
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Average
|
|
|
|
|
|
Average
|
|
|
Weighted-
|
|
|
|
|
|
|
Remaining
|
|
|
Remaining
|
|
|
|
|
|
Remaining
|
|
|
Average
|
|
Range of Exercise
|
|
Number
|
|
|
Life
|
|
|
Exercise Price
|
|
|
Number
|
|
|
Life
|
|
|
Exercise Price
|
|
Price Per Share
|
|
Outstanding
|
|
|
(Years)
|
|
|
Per Share
|
|
|
Exercisable
|
|
|
(Years)
|
|
|
Per Share
|
|
|
|
(Options in thousands)
|
|
|
$29.18-$35.38
|
|
|
1,280
|
|
|
|
2.0
|
|
|
$
|
33.47
|
|
|
|
1,274
|
|
|
|
2.0
|
|
|
$
|
33.47
|
|
$35.39-$42.42
|
|
|
3,964
|
|
|
|
3.5
|
|
|
|
39.09
|
|
|
|
2,647
|
|
|
|
2.6
|
|
|
|
39.11
|
|
$42.43-$51.25
|
|
|
4,524
|
|
|
|
4.8
|
|
|
|
47.77
|
|
|
|
1,823
|
|
|
|
3.7
|
|
|
|
47.90
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,768
|
|
|
|
3.9
|
|
|
$
|
42.38
|
|
|
|
5,744
|
|
|
|
2.8
|
|
|
$
|
40.65
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company received proceeds of $154.8 million,
$67.4 million, and $264.9 million from the exercise of
stock options during the fiscal years ended April 27, 2011,
April 28, 2010 and April 29, 2009, respectively. The
tax benefit recognized as a result of stock option exercises was
$21.0 million, $9.3 million and $14.3 million for
the fiscal years ended April 27, 2011, April 28, 2010
and April 29, 2009, respectively.
64
H. J.
Heinz Company and Subsidiaries
Notes to
Consolidated Financial
Statements (Continued)
A summary of the status of the Companys unvested stock
options is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
Grant Date
|
|
|
|
Number of
|
|
|
Fair Value
|
|
|
|
Options
|
|
|
(per share)
|
|
|
|
(Amounts in thousands, except per share data)
|
|
|
Unvested options at April 28, 2010
|
|
|
3,621
|
|
|
$
|
5.36
|
|
Options granted
|
|
|
1,733
|
|
|
|
5.36
|
|
Options vested
|
|
|
(1,282
|
)
|
|
|
5.64
|
|
Options forfeited
|
|
|
(48
|
)
|
|
|
5.19
|
|
|
|
|
|
|
|
|
|
|
Unvested options at April 27, 2011
|
|
|
4,024
|
|
|
$
|
5.27
|
|
|
|
|
|
|
|
|
|
|
Unrecognized compensation cost related to unvested option awards
under the 2000 and 2003 Plans totaled $7.7 million and
$8.1 million as of April 27, 2011 and April 28,
2010, respectively. This cost is expected to be recognized over
a weighted average period of 1.5 years.
Restricted
Stock Units and Restricted Shares:
The 2003 Plan authorizes up to 9.4 million shares for
issuance as restricted stock units (RSUs) or
restricted stock with vesting periods from the first to the
fifth anniversary of the grant date as set forth in the award
agreements. Upon vesting, the RSUs are converted into shares of
the Companys stock on a
one-for-one
basis and issued to employees, subject to any deferral elections
made by a recipient or required by the plan. Restricted stock is
reserved in the recipients name at the grant date and
issued upon vesting. The Company is entitled to an income tax
deduction in an amount equal to the taxable income reported by
the holder upon vesting of the award. RSUs generally vest over a
period of one to four years after the date of grant.
Total compensation expense relating to RSUs and restricted stock
was $23.2 million, $24.8 million and
$26.6 million for the fiscal years ended April 27,
2011, April 28, 2010 and April 29, 2009, respectively.
Unrecognized compensation cost in connection with RSU and
restricted stock grants totaled $29.4 million,
$29.8 million and $31.8 million at April 27,
2011, April 28, 2010 and April 29, 2009, respectively.
The cost is expected to be recognized over a weighted-average
period of 1.7 years.
A summary of the Companys RSU and restricted stock awards
at April 27, 2011 is as follows:
|
|
|
|
|
|
|
2003 Plan
|
|
|
|
(Amounts in thousands)
|
|
|
Number of shares authorized
|
|
|
9,440
|
|
Number of shares reserved for issuance
|
|
|
(5,851
|
)
|
Number of shares forfeited and returned to the plan
|
|
|
1,319
|
|
|
|
|
|
|
Shares available for grant
|
|
|
4,908
|
|
|
|
|
|
|
65
H. J.
Heinz Company and Subsidiaries
Notes to
Consolidated Financial
Statements (Continued)
A summary of the activity of unvested RSU and restricted stock
awards and related information is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
Grant Date
|
|
|
|
|
|
|
Fair Value
|
|
|
|
Number of Units
|
|
|
(Per Share)
|
|
|
|
(Amounts in thousands,
|
|
|
|
except per share data)
|
|
|
Unvested units and stock at April 30, 2008
|
|
|
2,087
|
|
|
$
|
39.88
|
|
Units and stock granted
|
|
|
577
|
|
|
|
49.69
|
|
Units and stock vested
|
|
|
(910
|
)
|
|
|
37.91
|
|
Units and stock cancelled/forfeited and returned to the plan
|
|
|
(32
|
)
|
|
|
46.52
|
|
|
|
|
|
|
|
|
|
|
Unvested units and stock at April 29, 2009
|
|
|
1,722
|
|
|
|
44.08
|
|
Units and stock granted
|
|
|
628
|
|
|
|
39.55
|
|
Units and stock vested
|
|
|
(834
|
)
|
|
|
40.59
|
|
Units and stock cancelled/forfeited and returned to the plan
|
|
|
(20
|
)
|
|
|
44.12
|
|
|
|
|
|
|
|
|
|
|
Unvested units and stock at April 28, 2010
|
|
|
1,496
|
|
|
|
44.13
|
|
Units and stock granted
|
|
|
574
|
|
|
|
46.74
|
|
Units and stock vested
|
|
|
(725
|
)
|
|
|
44.96
|
|
Units and stock cancelled/forfeited and returned to the plan
|
|
|
(49
|
)
|
|
|
43.47
|
|
|
|
|
|
|
|
|
|
|
Unvested units and stock at April 27, 2011
|
|
|
1,296
|
|
|
$
|
44.84
|
|
|
|
|
|
|
|
|
|
|
Upon share option exercise or vesting of restricted stock and
RSUs, the Company uses available treasury shares and maintains a
repurchase program that anticipates exercises and vesting of
awards so that shares are available for issuance. The Company
records forfeitures of restricted stock as treasury share
repurchases. The Company repurchased approximately
1.4 million shares during Fiscal 2011.
Global
Stock Purchase Plan:
The Company has a shareholder-approved employee global stock
purchase plan (the GSPP) that permits substantially
all employees to purchase shares of the Companys common
stock at a discounted price through payroll deductions at the
end of two six-month offering periods. Currently, the offering
periods are February 16 to August 15 and August 16 to
February 15. From the February 2006 to February 2009
offering periods, the purchase price of the option was equal to
85% of the fair market value of the Companys common stock
on the last day of the offering period. Commencing with the
August 2009 offering period, the purchase price of the option is
equal to 95% of the fair market value of the Companys
common stock on the last day of the offering period. The number
of shares available for issuance under the GSPP is a total of
five million shares. During the two offering periods from
February 16, 2010 to February 15, 2011, employees
purchased 185,716 shares under the plan. During the two
offering periods from February 16, 2009 to
February 15, 2010, employees purchased 280,006 shares
under the plan.
Annual
Incentive Bonus:
The Companys management incentive plans cover officers and
other key employees. Participants may elect to be paid on a
current or deferred basis. The aggregate amount of all awards
may not exceed certain limits in any year. Compensation under
the management incentive
66
H. J.
Heinz Company and Subsidiaries
Notes to
Consolidated Financial
Statements (Continued)
plans was approximately $45 million, $49 million and
$38 million in fiscal years 2011, 2010 and 2009,
respectively.
Long-Term
Performance Program:
In Fiscal 2011, the Company granted performance awards as
permitted in the Fiscal Year 2003 Stock Incentive Plan, subject
to the achievement of certain performance goals. These
performance awards are tied to the Companys relative Total
Shareholder Return (Relative TSR) Ranking within the
defined Long-term Performance Program (LTPP) peer
group and the
2-year
average after-tax Return on Invested Capital (ROIC)
metrics. The Relative TSR metric is based on the two-year
cumulative return to shareholders from the change in stock price
and dividends paid between the starting and ending dates. The
starting value was based on the average of each LTPP peer group
company stock price for the 60 trading days prior to and
including April 29, 2010. The ending value will be based on
the average stock price for the 60 trading days prior to and
including the close of the Fiscal 2012 year end, plus
dividends paid over the 2 year performance period. The
Company also granted performance awards in Fiscal 2010 under the
2010-2011
LTPP and in Fiscal 2009 under the
2009-2010
LTPP. The compensation cost related to LTPP awards recognized in
selling, general and administrative expenses
(SG&A) was $21.5 million and the related
tax benefit was $7.4 million for the fiscal year ended
April 27, 2011. The compensation cost related to these
plans, recognized in SG&A was $20.7 million, and the
related tax benefit was $7.0 million for the fiscal year
ended April 28, 2010. The compensation cost related to
these plans, recognized in SG&A was $17.4 million, and
the related tax benefit was $5.9 million for the fiscal
year ended April 29, 2009.
|
|
10.
|
Fair
Value Measurements
|
Fair value is defined as the price that would be received to
sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date.
The fair value hierarchy consists of three levels to prioritize
the inputs used in valuations, as defined below:
Level 1: Observable inputs that reflect unadjusted quoted
prices for identical assets or liabilities in active markets.
Level 2: Inputs other than quoted prices included within
Level 1 that are observable for the asset or liability,
either directly or indirectly.
Level 3: Unobservable inputs for the asset or liability.
As of April 27, 2011 and April 28, 2010, the fair
values of the Companys assets and liabilities measured on
a recurring basis are categorized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April 27, 2011
|
|
|
April 28, 2010
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
|
(Thousands of Dollars)
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives(a)
|
|
$
|
|
|
|
$
|
115,705
|
|
|
$
|
|
|
|
$
|
115,705
|
|
|
$
|
|
|
|
$
|
133,773
|
|
|
$
|
|
|
|
$
|
133,773
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets at fair value
|
|
$
|
|
|
|
$
|
115,705
|
|
|
$
|
|
|
|
$
|
115,705
|
|
|
$
|
|
|
|
$
|
133,773
|
|
|
$
|
|
|
|
$
|
133,773
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives(a)
|
|
$
|
|
|
|
$
|
43,007
|
|
|
$
|
|
|
|
$
|
43,007
|
|
|
$
|
|
|
|
$
|
36,036
|
|
|
$
|
|
|
|
$
|
36,036
|
|
Earn-out(b)
|
|
$
|
|
|
|
$
|
|
|
|
$
|
45,325
|
|
|
$
|
45,325
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities at fair value
|
|
$
|
|
|
|
$
|
43,007
|
|
|
$
|
45,325
|
|
|
$
|
88,332
|
|
|
$
|
|
|
|
$
|
36,036
|
|
|
$
|
|
|
|
$
|
36,036
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
67
H. J.
Heinz Company and Subsidiaries
Notes to
Consolidated Financial
Statements (Continued)
|
|
|
(a) |
|
Foreign currency derivative contracts are valued based on
observable market spot and forward rates, and are classified
within Level 2 of the fair value hierarchy. Interest rate
swaps are valued based on observable market swap rates, and are
classified within Level 2 of the fair value hierarchy.
Cross-currency interest rate swaps are valued based on
observable market spot and swap rates, and are classified within
Level 2 of the fair value hierarchy. There have been no
transfers between Levels 1 and 2 in Fiscals 2011 and 2010. |
|
(b) |
|
The fair value of the earn-out associated with the Foodstar
acquisition was estimated using a discounted cash flow model.
See Note 4 for further information regarding the Foodstar
acquisition. This fair value measurement is based on significant
inputs not observed in the market and thus represents a
Level 3 measurement. Key assumptions in determining the
fair value of the earn-out include the discount rate and revenue
and EBITDA projections for Fiscals 2013 and 2014. As of
April 27, 2011 there was no significant change to the fair
value of the earn-out recorded for Foodstar at the acquisition
date. |
The Company recognized $12.6 million of non-cash asset
write-offs during Fiscal 2010 related to two factory closures
and the exit of a formula business in the U.K. These charges
reduced the Companys carrying value in the assets to net
realizable value. The fair value of the assets was determined
based on observable inputs.
As of April 27, 2011 and April 28, 2010, the aggregate
fair value of the Companys debt obligations, based on
market quotes, approximated the recorded value, with the
exception of the 7.125% notes issued as part of the dealer
remarketable securities exchange transaction. The book value of
these notes has been reduced as a result of the cash payments
made in connection with the exchange, which occurred in Fiscal
2010. See Note 7.
|
|
11.
|
Pension
and Other Postretirement Benefit Plans
|
Pension
Plans:
The Company maintains retirement plans for the majority of its
employees. Current defined benefit plans are provided primarily
for domestic union and foreign employees. Defined contribution
plans are provided for the majority of its domestic non-union
hourly and salaried employees as well as certain employees in
foreign locations.
Other
Postretirement Benefit Plans:
The Company and certain of its subsidiaries provide health care
and life insurance benefits for retired employees and their
eligible dependents. Certain of the Companys U.S. and
Canadian employees may become eligible for such benefits. The
Company currently does not fund these benefit arrangements until
claims occur and may modify plan provisions or terminate plans
at its discretion.
Measurement
Date:
The Company uses the last day of its fiscal year as the
measurement date for all of its defined benefit plans and other
postretirement benefit plans.
68
H. J.
Heinz Company and Subsidiaries
Notes to
Consolidated Financial
Statements (Continued)
Obligations
and Funded Status:
The following table sets forth the changes in benefit
obligation, plan assets and funded status of the Companys
principal defined benefit plans and other postretirement benefit
plans at April 27, 2011 and April 28, 2010.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits
|
|
|
Other Retiree Benefits
|
|
|
|
2011
|
|
|
2010
|
|
|
2011
|
|
|
2010
|
|
|
|
(Dollars in thousands)
|
|
|
Change in Benefit Obligation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit obligation at the beginning of the year
|
|
$
|
2,585,984
|
|
|
$
|
2,230,102
|
|
|
$
|
235,297
|
|
|
$
|
234,175
|
|
Service cost
|
|
|
32,329
|
|
|
|
30,486
|
|
|
|
6,311
|
|
|
|
5,999
|
|
Interest cost
|
|
|
142,133
|
|
|
|
149,640
|
|
|
|
12,712
|
|
|
|
15,093
|
|
Participants contributions
|
|
|
2,444
|
|
|
|
2,674
|
|
|
|
822
|
|
|
|
905
|
|
Amendments
|
|
|
377
|
|
|
|
5,807
|
|
|
|
(3,710
|
)
|
|
|
(21,115
|
)
|
Actuarial (gain)/loss
|
|
|
(8,457
|
)
|
|
|
238,168
|
|
|
|
(3,786
|
)
|
|
|
9,672
|
|
Divestitures
|
|
|
|
|
|
|
(413
|
)
|
|
|
|
|
|
|
|
|
Settlement
|
|
|
(3,275
|
)
|
|
|
(4,663
|
)
|
|
|
|
|
|
|
|
|
Curtailment
|
|
|
|
|
|
|
(3,959
|
)
|
|
|
|
|
|
|
|
|
Benefits paid
|
|
|
(159,307
|
)
|
|
|
(156,807
|
)
|
|
|
(16,986
|
)
|
|
|
(18,395
|
)
|
Exchange/other
|
|
|
173,088
|
|
|
|
94,949
|
|
|
|
3,770
|
|
|
|
8,963
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit obligation at the end of the year
|
|
$
|
2,765,316
|
|
|
$
|
2,585,984
|
|
|
$
|
234,430
|
|
|
$
|
235,297
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in Plan Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets at the beginning of the year
|
|
$
|
2,869,971
|
|
|
$
|
1,874,702
|
|
|
$
|
|
|
|
$
|
|
|
Actual return on plan assets
|
|
|
318,494
|
|
|
|
561,997
|
|
|
|
|
|
|
|
|
|
Divestitures
|
|
|
|
|
|
|
(413
|
)
|
|
|
|
|
|
|
|
|
Settlement
|
|
|
(3,275
|
)
|
|
|
(4,663
|
)
|
|
|
|
|
|
|
|
|
Employer contribution
|
|
|
22,411
|
|
|
|
539,939
|
|
|
|
16,164
|
|
|
|
17,490
|
|
Participants contributions
|
|
|
2,444
|
|
|
|
2,674
|
|
|
|
822
|
|
|
|
905
|
|
Benefits paid
|
|
|
(159,307
|
)
|
|
|
(156,807
|
)
|
|
|
(16,986
|
)
|
|
|
(18,395
|
)
|
Exchange
|
|
|
211,143
|
|
|
|
52,542
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets at the end of the year
|
|
|
3,261,881
|
|
|
|
2,869,971
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funded status
|
|
$
|
496,565
|
|
|
$
|
283,987
|
|
|
$
|
(234,430
|
)
|
|
$
|
(235,297
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts recognized in the consolidated balance sheets consist of
the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits
|
|
|
Other Retiree Benefits
|
|
|
|
2011
|
|
|
2010
|
|
|
2011
|
|
|
2010
|
|
|
|
(Dollars in thousands)
|
|
|
Other non-current assets
|
|
$
|
644,598
|
|
|
$
|
424,554
|
|
|
$
|
|
|
|
$
|
|
|
Other accrued liabilities
|
|
|
(31,589
|
)
|
|
|
(12,842
|
)
|
|
|
(18,259
|
)
|
|
|
(18,874
|
)
|
Other non-current liabilities
|
|
|
(116,444
|
)
|
|
|
(127,725
|
)
|
|
|
(216,171
|
)
|
|
|
(216,423
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net amount recognized
|
|
$
|
496,565
|
|
|
$
|
283,987
|
|
|
$
|
(234,430
|
)
|
|
$
|
(235,297
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Certain of the Companys pension plans have projected
benefit obligations in excess of the fair value of plan assets.
For these plans, the projected benefit obligations and the fair
value of plan assets at April 27, 2011 were
$175.0 million and $27.0 million, respectively. For
pension plans having
69
H. J.
Heinz Company and Subsidiaries
Notes to
Consolidated Financial
Statements (Continued)
projected benefit obligations in excess of the fair value of
plan assets at April 28, 2010, the projected benefit
obligations and the fair value of plan assets were
$160.9 million and $20.3 million, respectively.
The accumulated benefit obligation for all defined benefit
pension plans was $2,602.0 million at April 27, 2011
and $2,414.3 million at April 28, 2010.
Certain of the Companys pension plans have accumulated
benefit obligations in excess of the fair value of plan assets.
For these plans, the accumulated benefit obligations, projected
benefit obligations and the fair value of plan assets at
April 27, 2011 were $154.3 million,
$175.0 million and $27.0 million, respectively. For
pension plans having accumulated benefit obligations in excess
of the fair value of plan assets at April 28, 2010, the
accumulated benefit obligations, projected benefit obligations
and the fair value of plan assets were $137.0 million,
$160.9 million and $20.3 million, respectively.
Components
of Net Periodic Benefit Cost and Defined Contribution Plan
Expense:
Total pension cost of the Companys principal pension plans
and postretirement plans consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits
|
|
|
Other Retiree Benefits
|
|
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
|
(Dollars in thousands)
|
|
|
Components of defined benefit net periodic benefit cost:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost
|
|
$
|
32,329
|
|
|
$
|
30,486
|
|
|
$
|
33,321
|
|
|
$
|
6,311
|
|
|
$
|
5,999
|
|
|
$
|
6,501
|
|
Interest cost
|
|
|
142,133
|
|
|
|
149,640
|
|
|
|
143,601
|
|
|
|
12,712
|
|
|
|
15,093
|
|
|
|
15,357
|
|
Expected return on assets
|
|
|
(229,258
|
)
|
|
|
(211,408
|
)
|
|
|
(207,774
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prior service cost/(credit)
|
|
|
2,455
|
|
|
|
2,173
|
|
|
|
3,182
|
|
|
|
(5,155
|
)
|
|
|
(3,796
|
)
|
|
|
(3,812
|
)
|
Net actuarial loss
|
|
|
77,687
|
|
|
|
53,882
|
|
|
|
33,206
|
|
|
|
1,604
|
|
|
|
540
|
|
|
|
3,681
|
|
Loss due to curtailment, settlement and special termination
benefits
|
|
|
2,039
|
|
|
|
612
|
|
|
|
635
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit cost
|
|
|
27,385
|
|
|
|
25,385
|
|
|
|
6,171
|
|
|
|
15,472
|
|
|
|
17,836
|
|
|
|
21,727
|
|
Defined contribution plans
|
|
|
49,089
|
|
|
|
47,356
|
|
|
|
36,404
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cost
|
|
|
76,474
|
|
|
|
72,741
|
|
|
|
42,575
|
|
|
|
15,472
|
|
|
|
17,836
|
|
|
|
21,727
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less periodic benefit cost associated with discontinued
operations
|
|
|
|
|
|
|
618
|
|
|
|
1,376
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Periodic benefit cost associated with continuing operations
|
|
$
|
76,474
|
|
|
$
|
72,123
|
|
|
$
|
41,199
|
|
|
$
|
15,472
|
|
|
$
|
17,836
|
|
|
$
|
21,727
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
70
H. J.
Heinz Company and Subsidiaries
Notes to
Consolidated Financial
Statements (Continued)
Accumulated
Other Comprehensive Income:
Amounts recognized in accumulated other comprehensive loss,
before tax, consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits
|
|
|
Other Retiree Benefits
|
|
|
|
2011
|
|
|
2010
|
|
|
2011
|
|
|
2010
|
|
|
|
(Dollars in thousands)
|
|
|
Net actuarial loss
|
|
$
|
909,796
|
|
|
$
|
1,085,471
|
|
|
$
|
11,816
|
|
|
$
|
17,206
|
|
Prior service cost/(credit)
|
|
|
28,649
|
|
|
|
30,683
|
|
|
|
(20,335
|
)
|
|
|
(21,780
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net amount recognized
|
|
$
|
938,445
|
|
|
$
|
1,116,154
|
|
|
$
|
(8,519
|
)
|
|
$
|
(4,574
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The change in other comprehensive loss related to pension
benefit gains arising during the period was $95.5 million
and $106.6 million at April 27, 2011 and
April 28, 2010, respectively. The change in other
comprehensive loss related to the reclassification of pension
benefit losses to net income was $82.2 million and
$60.6 million at April 27, 2011 and April 28,
2010, respectively.
The change in other comprehensive loss related to postretirement
benefit gains arising during the period is $7.5 million and
$11.4 million at April 27, 2011 and at April 28,
2010, respectively. The change in other comprehensive loss
related to the reclassification of postretirement benefit gains
to net income is $3.6 million and $3.2 million at
April 27, 2011 and at April 28, 2010, respectively.
Amounts in accumulated other comprehensive loss (income)
expected to be recognized as components of net periodic benefit
costs/(credits) in the following fiscal year are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits
|
|
|
Other Retiree Benefits
|
|
|
|
2011
|
|
|
2010
|
|
|
2011
|
|
|
2010
|
|
|
|
(Dollars in thousands)
|
|
|
Net actuarial loss
|
|
$
|
85,932
|
|
|
$
|
76,963
|
|
|
$
|
1,095
|
|
|
$
|
1,604
|
|
Prior service cost/(credit)
|
|
|
2,020
|
|
|
|
2,373
|
|
|
|
(6,116
|
)
|
|
|
(5,155
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net amount recognized
|
|
$
|
87,952
|
|
|
$
|
79,336
|
|
|
$
|
(5,021
|
)
|
|
$
|
(3,551
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assumptions:
The weighted-average rates used for the fiscal years ended
April 27, 2011 and April 28, 2010 in determining the
projected benefit obligations for defined benefit pension plans
and the accumulated postretirement benefit obligation for other
postretirement plans were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits
|
|
Other Retiree Benefits
|
|
|
2011
|
|
2010
|
|
2011
|
|
2010
|
|
Discount rate
|
|
|
5.5
|
%
|
|
|
5.6
|
%
|
|
|
5.0
|
%
|
|
|
5.5
|
%
|
Compensation increase rate
|
|
|
3.8
|
%
|
|
|
4.0
|
%
|
|
|
|
|
|
|
|
|
The weighted-average rates used for the fiscal years ended
April 27, 2011, April 28, 2010 and April 29, 2009
in determining the defined benefit plans net pension costs
and net postretirement benefit costs were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits
|
|
Other Retiree Benefits
|
|
|
2011
|
|
2010
|
|
2009
|
|
2011
|
|
2010
|
|
2009
|
|
Expected rate of return
|
|
|
8.2
|
%
|
|
|
8.1
|
%
|
|
|
8.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount rate
|
|
|
5.6
|
%
|
|
|
6.5
|
%
|
|
|
6.1
|
%
|
|
|
5.5
|
%
|
|
|
6.4
|
%
|
|
|
5.9
|
%
|
Compensation increase rate
|
|
|
4.0
|
%
|
|
|
4.3
|
%
|
|
|
4.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
71
H. J.
Heinz Company and Subsidiaries
Notes to
Consolidated Financial
Statements (Continued)
The Companys expected rate of return is determined based
on a methodology that considers investment real returns for
certain asset classes over historic periods of various
durations, in conjunction with the long-term outlook for
inflation (i.e. building block approach). This
methodology is applied to the actual asset allocation, which is
in line with the investment policy guidelines for each plan. The
Company also considers long-term rates of return for each asset
class based on projections from consultants and investment
advisors regarding the expectations of future investment
performance of capital markets.
The weighted-average assumed annual composite rate of increase
in the per capita cost of company-provided health care benefits
begins at 7.4% for 2012, gradually decreases to 4.8% by 2018 and
remains at that level thereafter. Assumed health care cost trend
rates have a significant effect on the amounts reported for
postretirement medical benefits. A one-percentage-point change
in assumed health care cost trend rates would have the following
effects:
|
|
|
|
|
|
|
|
|
|
|
1% Increase
|
|
1% Decrease
|
|
|
(Dollars in thousands)
|
|
Effect on total service and interest cost components
|
|
$
|
1,632
|
|
|
$
|
1,472
|
|
Effect on postretirement benefit obligations
|
|
$
|
15,831
|
|
|
$
|
14,417
|
|
Pension
Plan Assets:
The underlying basis of the investment strategy of the
Companys defined benefit plans is to ensure that pension
funds are available to meet the plans benefit obligations
when they are due. The Companys investment objectives
include: investing plan assets in a high-quality, diversified
manner in order to maintain the security of the funds; achieving
an optimal return on plan assets within specified risk
tolerances; and investing according to local regulations and
requirements specific to each country in which a defined benefit
plan operates. The investment strategy expects equity
investments to yield a higher return over the long term than
fixed income securities, while fixed income securities are
expected to provide certain matching characteristics to the
plans benefit payment cash flow requirements. Company
common stock held as part of the equity securities amounted to
less than one percent of plan assets at April 27, 2011 and
April 28, 2010. The Companys investment policy
specifies the type of investment vehicles appropriate for the
Plan, asset allocation guidelines, criteria for the selection of
investment managers, procedures to monitor overall investment
performance as well as investment manager performance. It also
provides guidelines enabling Plan fiduciaries to fulfill their
responsibilities.
The Companys defined benefit pension plans weighted
average asset allocation at April 27, 2011 and
April 28, 2010 and weighted average target allocation were
as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Target
|
|
|
|
Plan Assets at
|
|
|
Allocation at
|
|
Asset Category
|
|
2011
|
|
|
2010
|
|
|
2011
|
|
|
2010
|
|
|
Equity securities
|
|
|
62
|
%
|
|
|
58
|
%
|
|
|
58
|
%
|
|
|
63
|
%
|
Debt securities
|
|
|
32
|
%
|
|
|
29
|
%
|
|
|
32
|
%
|
|
|
35
|
%
|
Real estate
|
|
|
3
|
%
|
|
|
1
|
%
|
|
|
9
|
%
|
|
|
1
|
%
|
Other(1)
|
|
|
3
|
%
|
|
|
12
|
%
|
|
|
1
|
%
|
|
|
1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Plan assets at April 28, 2010 in the Other asset category
include 11% of cash which reflects significant cash
contributions to the pension plans prior to the end of fiscal
year 2010. |
72
H. J.
Heinz Company and Subsidiaries
Notes to
Consolidated Financial
Statements (Continued)
In Fiscal 2010, the Company adopted a new accounting standard
requiring additional disclosures for Plan assets of defined
benefit pension and other post-retirement plans. As required by
the standard, the Company categorized Plan assets within a three
level fair value hierarchy. The following section describes the
valuation methodologies used to measure the fair value of
pension plan assets, including an indication of the level in the
fair value hierarchy in which each type of asset is generally
classified.
Equity Securities. These securities consist of
direct investments in the stock of publicly traded companies.
Such investments are valued based on the closing price reported
in an active market on which the individual securities are
traded. As such, the direct investments are classified as
Level 1.
Equity Securities (mutual and pooled
funds). Mutual funds are valued at the net asset
value of shares held by the Plan at year end. As such, these
mutual fund investments are classified as Level 1. Pooled
funds are similar in nature to retail mutual funds, but are more
efficient for institutional investors than retail mutual funds.
As pooled funds are only accessible by institutional investors,
the net asset value is not readily observable by
non-institutional investors; therefore, pooled funds are
classified as Level 2.
Fixed Income Securities. These securities
consist of publicly traded U.S. and
non-U.S. fixed
interest obligations (principally corporate bonds and
debentures). Such investments are valued through consultation
and evaluation with brokers in the institutional market using
quoted prices and other observable market data. As such, a
portion of these securities are included in Levels 1, 2 and
3.
Other Investments. Primarily consist of real
estate, private equity holdings and interest rate swaps. Direct
investments of real estate and private equity are valued by
investment managers based on the most recent financial
information available, which typically represents significant
observable data. As such, these investments are generally
classified as Level 3. The fair value of interest rate
swaps is determined through use of observable market swap rates
and are classified as Level 2.
Cash and Cash Equivalents. This consists of
direct cash holdings and institutional short-term investment
vehicles. Direct cash holdings are valued based on cost, which
approximates fair value and are classified as Level 1.
Institutional short-term investment vehicles are valued daily
and are classified as Level 2.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April 27, 2011
|
|
Asset Category
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
|
(Dollars in thousands)
|
|
|
Equity Securities
|
|
$
|
863,404
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
863,404
|
|
Equity Securities (mutual and pooled funds)
|
|
|
157,296
|
|
|
|
1,005,678
|
|
|
|
|
|
|
|
1,162,974
|
|
Fixed Income Securities
|
|
|
53,381
|
|
|
|
966,157
|
|
|
|
9,649
|
|
|
|
1,029,187
|
|
Other Investments
|
|
|
|
|
|
|
|
|
|
|
131,095
|
|
|
|
131,095
|
|
Cash and Cash Equivalents
|
|
|
16,270
|
|
|
|
58,951
|
|
|
|
|
|
|
|
75,221
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,090,351
|
|
|
$
|
2,030,786
|
|
|
$
|
140,744
|
|
|
$
|
3,261,881
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
73
H. J.
Heinz Company and Subsidiaries
Notes to
Consolidated Financial
Statements (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April 28, 2010
|
|
Asset Category
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
|
(Dollars in thousands)
|
|
|
Equity Securities
|
|
$
|
894,684
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
894,684
|
|
Equity Securities (mutual and pooled funds)
|
|
|
122,753
|
|
|
|
641,727
|
|
|
|
|
|
|
|
764,480
|
|
Fixed Income Securities
|
|
|
49,951
|
|
|
|
785,924
|
|
|
|
8,646
|
|
|
|
844,521
|
|
Other Investments
|
|
|
|
|
|
|
7,491
|
|
|
|
35,569
|
|
|
|
43,060
|
|
Cash and Cash Equivalents
|
|
|
14,260
|
|
|
|
308,966
|
|
|
|
|
|
|
|
323,226
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,081,648
|
|
|
$
|
1,744,108
|
|
|
$
|
44,215
|
|
|
$
|
2,869,971
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level 3
Gains and Losses:
Changes in the fair value of the Plans Level 3 assets
are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair
|
|
|
|
Fair Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value
|
|
|
|
April 28,
|
|
|
|
|
|
|
|
|
Realized
|
|
|
Unrealized
|
|
|
April 27,
|
|
|
|
2010
|
|
|
Acquisitions
|
|
|
Dispositions
|
|
|
Gain/(Loss)
|
|
|
Gain/(Loss)
|
|
|
2011
|
|
|
|
(Dollars in thousands)
|
|
|
Fixed Income Securities
|
|
$
|
8,646
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
1,003
|
|
|
$
|
9,649
|
|
Other Investments
|
|
|
35,569
|
|
|
|
95,518
|
|
|
|
(619
|
)
|
|
|
2,727
|
|
|
|
(2,100
|
)
|
|
|
131,095
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
44,215
|
|
|
$
|
95,518
|
|
|
$
|
(619
|
)
|
|
$
|
2,727
|
|
|
$
|
(1,097
|
)
|
|
$
|
140,744
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair
|
|
|
|
Fair Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value
|
|
|
|
April 29,
|
|
|
|
|
|
|
|
|
Realized
|
|
|
Unrealized
|
|
|
April 28,
|
|
|
|
2009
|
|
|
Acquisitions
|
|
|
Dispositions
|
|
|
Gain/(Loss)
|
|
|
Gain/(Loss)
|
|
|
2010
|
|
|
|
(Dollars in thousands)
|
|
|
Fixed Income Securities
|
|
$
|
8,873
|
|
|
$
|
|
|
|
$
|
(1,500
|
)
|
|
$
|
246
|
|
|
$
|
1,027
|
|
|
$
|
8,646
|
|
Other Investments
|
|
|
38,306
|
|
|
|
3,362
|
|
|
|
(2,658
|
)
|
|
|
(2,627
|
)
|
|
|
(814
|
)
|
|
|
35,569
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
47,179
|
|
|
$
|
3,362
|
|
|
$
|
(4,158
|
)
|
|
$
|
(2,381
|
)
|
|
$
|
213
|
|
|
$
|
44,215
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
Flows:
The Company contributed $22.4 million to the defined
benefit plans in Fiscal 2011, none of which was discretionary.
The Company funds its U.S. defined benefit plans in
accordance with IRS regulations, while foreign defined benefit
plans are funded in accordance with local laws and regulations
in each respective country. Discretionary contributions to the
pension funds may also be made by the Company from time to time.
Defined benefit plan contributions for the next fiscal year are
expected to be less than $40 million; however, actual
contributions may be affected by pension asset and liability
valuation changes during the year.
The Company paid $16.2 million for benefits in the
postretirement medical plans in Fiscal 2011. The Company makes
payments on claims as they occur during the fiscal year.
Payments for the next fiscal year are expected to be
approximately $18 million. The medical subsidy received in
Fiscal 2011 was $1.4 million. Estimated future medical
subsidy receipts are approximately $0.3 million for 2012,
$0.3 million for 2013, $0.4 million annually from 2014
through 2016 and $2.5 million for the period from 2017
through 2021. The Patient Protection and Affordable Care Act
(PPACA) was signed into law on March 23, 2010, and on
March 30, 2010, the Health Care and Education
Reconciliation Act of
74
H. J.
Heinz Company and Subsidiaries
Notes to
Consolidated Financial
Statements (Continued)
2010 (HCERA) was signed into law, which amends certain aspects
of the PPACA. Among other things, the PPACA reduces the tax
benefits available to an employer that receives the Medicare
Part D subsidy. As a result of the PPACA, the Company was
required to recognize in Fiscal 2010 tax expense of
$3.9 million (approximately $0.01 per share) related to the
reduced deductibility in future periods of the postretirement
prescription drug coverage. The PPACA and HCERA (collectively
referred to as the Act) will have both immediate and long-term
ramifications for many employers that provide retiree health
benefits.
Benefit payments expected in future years are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
Pension
|
|
Retiree
|
|
|
Benefits
|
|
Benefits
|
|
|
(Dollars in thousands)
|
|
2012
|
|
$
|
201,912
|
|
|
$
|
18,259
|
|
2013
|
|
$
|
189,005
|
|
|
$
|
18,679
|
|
2014
|
|
$
|
192,729
|
|
|
$
|
19,237
|
|
2015
|
|
$
|
188,400
|
|
|
$
|
19,599
|
|
2016
|
|
$
|
192,655
|
|
|
$
|
20,115
|
|
Years
2017-2021
|
|
$
|
1,008,931
|
|
|
$
|
103,641
|
|
|
|
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, debt and interest rate exposures. At
April 27, 2011, the Company had outstanding currency
exchange, interest rate, and cross-currency interest rate
derivative contracts with notional amounts of
$1.86 billion, $1.51 billion and $377 million,
respectively. At April 28, 2010, the Company had
outstanding currency exchange, interest rate, and cross-currency
interest rate derivative contracts with notional amounts of
$1.64 billion, $1.52 billion and $160 million,
respectively. The fair value of derivative financial instruments
was a net asset of $72.7 million and $97.7 million at
April 27, 2011 and April 28, 2010, respectively.
75
H. J.
Heinz Company and Subsidiaries
Notes to
Consolidated Financial
Statements (Continued)
The following table presents the fair values and corresponding
balance sheet captions of the Companys derivative
instruments as of April 27, 2011 and April 28, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April 27, 2011
|
|
|
April 28, 2010
|
|
|
|
|
|
|
|
|
|
Cross-
|
|
|
|
|
|
|
|
|
Cross-
|
|
|
|
|
|
|
|
|
|
Currency
|
|
|
|
|
|
|
|
|
Currency
|
|
|
|
Foreign
|
|
|
Interest
|
|
|
Interest Rate
|
|
|
Foreign
|
|
|
Interest
|
|
|
Interest Rate
|
|
|
|
Exchange
|
|
|
Rate
|
|
|
Swap
|
|
|
Exchange
|
|
|
Rate
|
|
|
Swap
|
|
|
|
Contracts
|
|
|
Contracts
|
|
|
Contracts
|
|
|
Contracts
|
|
|
Contracts
|
|
|
Contracts
|
|
|
|
(Dollars in Thousands)
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives designated as hedging instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other receivables, net
|
|
$
|
28,139
|
|
|
$
|
38,703
|
|
|
$
|
|
|
|
$
|
7,408
|
|
|
$
|
70,746
|
|
|
$
|
|
|
Other non-current assets
|
|
|
7,913
|
|
|
|
16,723
|
|
|
|
14,898
|
|
|
|
16,604
|
|
|
|
38,460
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36,052
|
|
|
|
55,426
|
|
|
|
14,898
|
|
|
|
24,012
|
|
|
|
109,206
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives not designated as hedging instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other receivables, net
|
|
|
9,329
|
|
|
|
|
|
|
|
|
|
|
|
555
|
|
|
|
|
|
|
|
|
|
Other non-current assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,329
|
|
|
|
|
|
|
|
|
|
|
|
555
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
45,381
|
|
|
$
|
55,426
|
|
|
$
|
14,898
|
|
|
$
|
24,567
|
|
|
$
|
109,206
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives designated as hedging instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other payables
|
|
$
|
27,804
|
|
|
$
|
|
|
|
$
|
6,125
|
|
|
$
|
16,672
|
|
|
$
|
|
|
|
$
|
3,510
|
|
Other non-current liabilities
|
|
|
8,054
|
|
|
|
|
|
|
|
|
|
|
|
4,279
|
|
|
|
|
|
|
|
8,422
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35,858
|
|
|
|
|
|
|
|
6,125
|
|
|
|
20,951
|
|
|
|
|
|
|
|
11,932
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives not designated as hedging instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other payables
|
|
|
1,024
|
|
|
|
|
|
|
|
|
|
|
|
3,153
|
|
|
|
|
|
|
|
|
|
Other non-current liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,024
|
|
|
|
|
|
|
|
|
|
|
|
3,153
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
$
|
36,882
|
|
|
$
|
|
|
|
$
|
6,125
|
|
|
$
|
24,104
|
|
|
$
|
|
|
|
$
|
11,932
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Refer to Note 10 for further information on how fair value
is determined for the Companys derivatives.
76
H. J.
Heinz Company and Subsidiaries
Notes to
Consolidated Financial
Statements (Continued)
The following table presents the pre-tax effect of derivative
instruments on the statement of income for the fiscal year ended
April 27, 2011:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended
|
|
|
|
April 27, 2011
|
|
|
|
|
|
|
|
|
|
Cross-Currency
|
|
|
|
Foreign Exchange
|
|
|
Interest Rate
|
|
|
Interest Rate
|
|
|
|
Contracts
|
|
|
Contracts
|
|
|
Swap Contracts
|
|
|
|
(Dollars in Thousands)
|
|
|
Cash flow hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net gains recognized in other comprehensive loss (effective
portion)
|
|
$
|
3,626
|
|
|
$
|
|
|
|
$
|
16,649
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net gains/(losses) reclassified from other comprehensive loss
into earnings (effective portion):
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
$
|
3,375
|
|
|
$
|
|
|
|
$
|
|
|
Cost of products sold
|
|
|
(23,372
|
)
|
|
|
|
|
|
|
|
|
Selling, general and administrative expenses
|
|
|
(141
|
)
|
|
|
|
|
|
|
|
|
Other (expense)/income, net
|
|
|
35,744
|
|
|
|
|
|
|
|
24,644
|
|
Interest income/(expense)
|
|
|
226
|
|
|
|
|
|
|
|
(4,484
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,832
|
|
|
|
|
|
|
|
20,160
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net losses recognized in other (expense)/income, net
|
|
|
|
|
|
|
(51,125
|
)
|
|
|
|
|
Net losses recognized in interest expense
|
|
|
|
|
|
|
(351
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(51,476
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives not designated as hedging instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net gains recognized in other (expense)/income, net
|
|
|
3,351
|
|
|
|
|
|
|
|
|
|
Net gains recognized in interest income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,351
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total amount recognized in statement of income
|
|
$
|
19,183
|
|
|
$
|
(51,476
|
)
|
|
$
|
20,160
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
77
H. J.
Heinz Company and Subsidiaries
Notes to
Consolidated Financial
Statements (Continued)
The following table presents the pre-tax effect of derivative
instruments on the statement of income for the fiscal year ended
April 28, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended
|
|
|
|
April 28, 2010
|
|
|
|
|
|
|
|
|
|
Cross-Currency
|
|
|
|
Foreign Exchange
|
|
|
Interest Rate
|
|
|
Interest Rate
|
|
|
|
Contracts
|
|
|
Contracts
|
|
|
Swap Contracts
|
|
|
|
(Dollars in Thousands)
|
|
|
Cash flow hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net losses recognized in other comprehensive loss (effective
portion)
|
|
$
|
(38,422
|
)
|
|
$
|
|
|
|
$
|
(13,692
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net gains/(losses) reclassified from other comprehensive loss
into earnings (effective portion):
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
$
|
1,141
|
|
|
$
|
|
|
|
$
|
|
|
Cost of products sold
|
|
|
(5,104
|
)
|
|
|
|
|
|
|
|
|
Selling, general and administrative expenses
|
|
|
108
|
|
|
|
|
|
|
|
|
|
Other (expense)/income, net
|
|
|
(11,574
|
)
|
|
|
|
|
|
|
(7,819
|
)
|
Interest income/(expense)
|
|
|
20
|
|
|
|
|
|
|
|
(1,867
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(15,409
|
)
|
|
|
|
|
|
|
(9,686
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net losses recognized in other (expense)/income, net
|
|
|
|
|
|
|
(41,730
|
)
|
|
|
|
|
Derivatives not designated as hedging instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net losses recognized in other (expense)/income, net
|
|
|
(59
|
)
|
|
|
|
|
|
|
|
|
Net gains recognized in interest income
|
|
|
|
|
|
|
30,469
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(59
|
)
|
|
|
30,469
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total amount recognized in statement of income
|
|
$
|
(15,468
|
)
|
|
$
|
(11,261
|
)
|
|
$
|
(9,686
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
78
H. J.
Heinz Company and Subsidiaries
Notes to
Consolidated Financial
Statements (Continued)
The following table presents the pre-tax effect of derivative
instruments on the statement of income for the fiscal year ended
April 29, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended
|
|
|
|
April 29, 2009
|
|
|
|
|
|
|
|
|
|
Cross-Currency
|
|
|
|
Foreign Exchange
|
|
|
Interest Rate
|
|
|
Interest Rate
|
|
|
|
Contracts
|
|
|
Contracts
|
|
|
Swap Contracts
|
|
|
|
(Dollars in Thousands)
|
|
|
Cash flow hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net gains recognized in other comprehensive loss (effective
portion)
|
|
$
|
42,617
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net gains/(losses) reclassified from other comprehensive loss
into earnings (effective portion):
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
$
|
(6,809
|
)
|
|
$
|
|
|
|
$
|
|
|
Cost of products sold
|
|
|
45,836
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative expenses
|
|
|
1,896
|
|
|
|
|
|
|
|
|
|
Other (expense)/income, net
|
|
|
(15,777
|
)
|
|
|
|
|
|
|
|
|
Interest income/(expense)
|
|
|
1,112
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26,258
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net gains recognized in other income/(expense), net
|
|
|
|
|
|
|
57,976
|
|
|
|
|
|
Derivatives not designated as hedging instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net gains/(losses) recognized in other income/(expense), net
|
|
|
65,135
|
|
|
|
(110
|
)
|
|
|
|
|
Net gains recognized in interest income
|
|
|
|
|
|
|
20,200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
65,135
|
|
|
|
20,090
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total amount recognized in statement of income
|
|
$
|
91,393
|
|
|
$
|
78,066
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
Currency Hedging:
The Company uses forward contracts and to a lesser extent,
option contracts to mitigate its foreign currency exchange rate
exposure due to forecasted purchases of raw materials and sales
of finished goods, and future settlement of foreign currency
denominated assets and liabilities. The Companys principal
foreign currency exposures include the Australian dollar,
British pound sterling, Canadian dollar, euro, and the New
Zealand dollar. Derivatives used to hedge forecasted
transactions and specific cash flows associated with foreign
currency denominated financial assets and liabilities that meet
the criteria for hedge accounting are designated as cash flow
hedges. Consequently, the effective portion of gains and losses
is deferred as a component of accumulated other comprehensive
loss and is recognized in earnings at the time the hedged item
affects earnings, in the same line item as the underlying hedged
item.
The Company has used certain foreign currency debt instruments
as net investment hedges of foreign operations. Losses of
$32.3 million, net of income taxes of $20.4 million,
which represented effective hedges of net investments, were
reported as a component of accumulated other comprehensive loss
within unrealized translation adjustment for the fiscal year
ended April 28, 2010.
79
H. J.
Heinz Company and Subsidiaries
Notes to
Consolidated Financial
Statements (Continued)
During the first quarter of Fiscal 2011, the Company early
terminated certain foreign currency forward contracts, receiving
cash proceeds of $11.6 million, and will release the gain
in accumulated other comprehensive loss to earnings when the
underlying transactions occur. The underlying transactions are
scheduled to occur at various points in time through 2014.
Interest
Rate Hedging:
The Company uses interest rate swaps to manage debt and interest
rate exposures. The Company is exposed to interest rate
volatility with regard to existing and future issuances of fixed
and floating rate debt. Primary exposures include
U.S. Treasury rates, London Interbank Offered Rates
(LIBOR), and commercial paper rates in the United States.
Derivatives used to hedge risk associated with changes in the
fair value of certain fixed-rate debt obligations are primarily
designated as fair value hedges. Consequently, changes in the
fair value of these derivatives, along with changes in the fair
value of the hedged debt obligations that are attributable to
the hedged risk, are recognized in current period earnings.
The Company had outstanding cross-currency interest rate swaps
with a total notional amount of $377.3 million and
$159.5 million as of April 27, 2011 and April 28,
2010, respectively, which were designated as cash flow hedges of
the future payments of loan principal and interest associated
with certain foreign denominated variable rate debt obligations.
The swaps that were entered into in Fiscal 2010 are scheduled to
mature in 2013 and the swaps that were entered into in the third
quarter of Fiscal 2011 are scheduled to mature in Fiscal 2014.
Hedge accounting adjustments related to debt obligations totaled
$150.5 million and $207.1 million as of April 27,
2011 and April 28, 2010, respectively. See Note 7 for
further information.
Deferred
Hedging Gains and Losses:
As of April 27, 2011, the Company is hedging forecasted
transactions for periods not exceeding 3 years. During the
next 12 months, the Company expects $7.8 million of
net deferred losses reported in accumulated other comprehensive
loss to be reclassified to earnings, assuming market rates
remain constant through contract maturities. Hedge
ineffectiveness related to cash flow hedges, which is reported
in current period earnings as other income/(expense), net, was
not significant for the years ended April 27, 2011,
April 28, 2010 and April 29, 2009. The Company
excludes the time value component of option contracts from the
assessment of hedge effectiveness. Amounts reclassified to
earnings because the hedged transaction was no longer expected
to occur were not significant for the years ended April 27,
2011, April 28, 2010 and April 29, 2009.
Other
Activities:
The Company enters into certain derivative contracts in
accordance with its risk management strategy that do not meet
the criteria for hedge accounting but which have the economic
impact of largely mitigating foreign currency or interest rate
exposures. The Company maintained foreign currency forward
contracts with a total notional amount of $309.9 million
and $284.5 million that did not meet the criteria for hedge
accounting as of April 27, 2011 and April 28, 2010,
respectively. These forward contracts are accounted for on a
full
mark-to-market
basis through current earnings, with gains and losses recorded
as a component of other income/(expense), net. Net unrealized
gains/(losses) related to outstanding contracts totaled
$8.3 million and $(2.6) million as of April 27,
2011 and April 28, 2010, respectively. These contracts are
scheduled to mature within one year.
Forward contracts that were put in place to help mitigate the
unfavorable impact of translation associated with key foreign
currencies resulted in (losses)/gains of $(16.9) million,
$(2.5) million and
80
H. J.
Heinz Company and Subsidiaries
Notes to
Consolidated Financial
Statements (Continued)
$107.3 million for the years ended April 27, 2011,
April 28, 2010 and April 29, 2009, respectively.
During Fiscal 2011, 2010 and 2009, the Company also
(paid)/received $(11.5) million, $(1.7) million and
$106.3 million of cash related to these forward contracts,
respectively.
During Fiscal 2010, the Company terminated its $175 million
notional total rate of return swap that was being used as an
economic hedge to reduce a portion of the interest cost related
to the Companys remarketable securities. The unwinding of
the total rate of return swap was completed in conjunction with
the exchange of $681 million of dealer remarketable
securities discussed in Note 7. Upon termination of the
swap, the Company received net cash proceeds of
$47.6 million, in addition to the release of the
$192.7 million of restricted cash collateral that the
Company was required to maintain with the counterparty for the
term of the swap. Prior to termination, the swap was being
accounted for on a full
mark-to-market
basis through earnings, as a component of interest income. The
Company recorded a benefit in interest income of
$28.3 million for the year ended April 28, 2010, and
$28.1 million for the year ended April 29, 2009,
representing changes in the fair value of the swap and interest
earned on the arrangement, net of transaction fees.
Concentration
of Credit Risk:
Counterparties to currency exchange and interest rate
derivatives consist of major international financial
institutions. The Company continually monitors its positions and
the credit ratings of the counterparties involved and, by
policy, limits the amount of credit exposure to any one party.
While the Company may be exposed to potential losses due to the
credit risk of non-performance by these counterparties, losses
are not anticipated. During Fiscal 2011, one customer
represented approximately 11% of the Companys sales. The
Company closely monitors the credit risk associated with its
counterparties and customers and to date has not experienced
material losses.
|
|
13.
|
Income
Per Common Share
|
The following are reconciliations of income from continuing
operations to income from continuing operations applicable to
common stock and the number of common shares outstanding used to
calculate basic EPS to those shares used to calculate diluted
EPS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended
|
|
|
|
April 27,
|
|
|
April 28,
|
|
|
April 29,
|
|
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
|
(52 Weeks)
|
|
|
(52 Weeks)
|
|
|
(52 Weeks)
|
|
|
|
(Amounts in thousands)
|
|
|
Income from continuing operations attributable to H.J. Heinz
Company
|
|
$
|
989,510
|
|
|
$
|
914,489
|
|
|
$
|
929,511
|
|
Allocation to participating securities
|
|
|
1,746
|
|
|
|
2,153
|
|
|
|
4,121
|
|
Preferred dividends
|
|
|
12
|
|
|
|
9
|
|
|
|
12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations applicable to common stock
|
|
$
|
987,752
|
|
|
$
|
912,327
|
|
|
$
|
925,378
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average common shares outstanding-basic
|
|
|
320,118
|
|
|
|
315,948
|
|
|
|
313,747
|
|
Effect of dilutive securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible preferred stock
|
|
|
105
|
|
|
|
105
|
|
|
|
106
|
|
Stock options, restricted stock and the global stock purchase
plan
|
|
|
2,819
|
|
|
|
2,060
|
|
|
|
4,210
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average common shares outstanding-diluted
|
|
|
323,042
|
|
|
|
318,113
|
|
|
|
318,063
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
81
H. J.
Heinz Company and Subsidiaries
Notes to
Consolidated Financial
Statements (Continued)
In Fiscal 2010, the Company adopted accounting guidance for
determining whether instruments granted in share-based payment
transactions are participating securities. This guidance states
that unvested share-based payment awards that contain
non-forfeitable rights to dividends or dividend equivalents
(whether paid or unpaid) are participating securities and shall
be included in the computation of earnings per share pursuant to
the two-class method.
Diluted earnings per share is based upon the average shares of
common stock and dilutive common stock equivalents outstanding
during the periods presented. Common stock equivalents arising
from dilutive stock options, restricted common stock units, and
the global stock purchase plan are computed using the treasury
stock method.
Options to purchase an aggregate of 2.4 million,
4.4 million and 3.7 million shares of common stock as
of April 27, 2011, April 28, 2010 and April 29,
2009 respectively, were not included in the computation of
diluted earnings per share because inclusion of these options
would be anti-dilutive. These options expire at various points
in time through 2018.
|
|
14.
|
Other
Comprehensive Income
|
The tax (expense)/benefit associated with each component of
other comprehensive income are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
H. J. Heinz
|
|
Noncontrolling
|
|
|
|
|
Company
|
|
Interest
|
|
Total
|
|
|
(Amounts in thousands)
|
|
April 27, 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
Net pension and post-retirement benefit gains/losses
|
|
$
|
(25,670
|
)
|
|
$
|
14
|
|
|
$
|
(25,656
|
)
|
Reclassification of net pension and post-retirement benefit
losses to net income
|
|
$
|
25,276
|
|
|
$
|
|
|
|
$
|
25,276
|
|
Unrealized translation adjustments
|
|
$
|
(1,158
|
)
|
|
$
|
|
|
|
$
|
(1,158
|
)
|
Net change in fair value of cash flow hedges
|
|
$
|
(10,348
|
)
|
|
$
|
132
|
|
|
$
|
(10,216
|
)
|
Net hedging gains/losses reclassified into earnings
|
|
$
|
(15,149
|
)
|
|
$
|
191
|
|
|
$
|
(14,958
|
)
|
April 28, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
Net pension and post-retirement benefit gains/losses
|
|
$
|
(39,186
|
)
|
|
$
|
351
|
|
|
$
|
(38,835
|
)
|
Reclassification of net pension and post-retirement benefit
losses to net income
|
|
$
|
18,468
|
|
|
$
|
|
|
|
$
|
18,468
|
|
Unrealized translation adjustments
|
|
$
|
20,491
|
|
|
$
|
|
|
|
$
|
20,491
|
|
Net change in fair value of cash flow hedges
|
|
$
|
13,713
|
|
|
$
|
260
|
|
|
$
|
13,973
|
|
Net hedging losses reclassified into earnings
|
|
$
|
7,885
|
|
|
$
|
83
|
|
|
$
|
7,968
|
|
April 29, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
Net pension and post-retirement benefit losses
|
|
$
|
138,862
|
|
|
$
|
139
|
|
|
$
|
139,001
|
|
Reclassification of net pension and post-retirement benefit
losses to net income
|
|
$
|
12,273
|
|
|
$
|
|
|
|
$
|
12,273
|
|
Unrealized translation adjustments
|
|
$
|
14,004
|
|
|
$
|
|
|
|
$
|
14,004
|
|
Net change in fair value of cash flow hedges
|
|
$
|
(9,413
|
)
|
|
$
|
(51
|
)
|
|
$
|
(9,464
|
)
|
Net hedging gains reclassified into earnings
|
|
$
|
(5,486
|
)
|
|
$
|
(22
|
)
|
|
$
|
(5,508
|
)
|
82
H. J.
Heinz Company and Subsidiaries
Notes to
Consolidated Financial
Statements (Continued)
The Companys segments are primarily organized by
geographical area. The composition of segments and measure of
segment profitability are consistent with that used by the
Companys management.
Descriptions of the Companys reportable segments are as
follows:
|
|
|
|
|
North American Consumer ProductsThis segment
primarily 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.
|
|
|
|
EuropeThis segment includes the
Companys operations in Europe and sells products in all of
the Companys categories.
|
|
|
|
Asia/PacificThis segment includes the
Companys operations in Australia, New Zealand, India,
Japan, China, South Korea, Indonesia, and Singapore. This
segments operations include products in all of the
Companys categories.
|
|
|
|
U.S. FoodserviceThis segment primarily
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, frozen soups and desserts.
|
|
|
|
Rest of WorldThis segment includes the
Companys operations in Africa, Latin America, and the
Middle East that sell products in all of the Companys
categories.
|
The Companys management evaluates performance based on
several factors including net sales, operating income and the
use of capital resources. Inter-segment revenues, items below
the operating income line of the consolidated statements of
income, and certain costs associated with the corporation-wide
productivity initiatives in Fiscal 2010 are not presented by
segment, since they are not reflected in the measure of segment
profitability reviewed by the Companys management.
83
H. J.
Heinz Company and Subsidiaries
Notes to
Consolidated Financial
Statements (Continued)
The following table presents information about the
Companys reportable segments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended
|
|
|
|
April 27,
|
|
|
April 28,
|
|
|
April 29,
|
|
|
April 27,
|
|
|
April 28,
|
|
|
April 29,
|
|
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
|
(52 Weeks)
|
|
|
(52 Weeks)
|
|
|
(52 Weeks)
|
|
|
(52 Weeks)
|
|
|
(52 Weeks)
|
|
|
(52 Weeks)
|
|
|
|
(Dollars in thousands)
|
|
|
|
Net External Sales
|
|
|
Operating Income (Loss)
|
|
|
North American Consumer Products
|
|
$
|
3,265,857
|
|
|
$
|
3,192,219
|
|
|
$
|
3,135,994
|
|
|
$
|
832,719
|
|
|
$
|
771,497
|
|
|
$
|
724,763
|
|
Europe
|
|
|
3,236,800
|
|
|
|
3,332,619
|
|
|
|
3,329,043
|
|
|
|
581,148
|
|
|
|
554,300
|
|
|
|
571,111
|
|
Asia/Pacific
|
|
|
2,320,789
|
|
|
|
2,007,252
|
|
|
|
1,627,443
|
|
|
|
221,580
|
|
|
|
195,261
|
|
|
|
182,472
|
|
U.S. Foodservice
|
|
|
1,413,456
|
|
|
|
1,429,511
|
|
|
|
1,450,894
|
|
|
|
175,977
|
|
|
|
150,628
|
|
|
|
129,358
|
|
Rest of World
|
|
|
469,686
|
|
|
|
533,382
|
|
|
|
467,957
|
|
|
|
53,371
|
|
|
|
69,219
|
|
|
|
52,348
|
|
Non-Operating(a)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(216,605
|
)
|
|
|
(158,989
|
)
|
|
|
(157,606
|
)
|
Upfront productivity charges(d)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(37,665
|
)
|
|
|
|
|
Gain on property disposal in the Netherlands(e)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,977
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Totals
|
|
$
|
10,706,588
|
|
|
$
|
10,494,983
|
|
|
$
|
10,011,331
|
|
|
$
|
1,648,190
|
|
|
$
|
1,559,228
|
|
|
$
|
1,502,446
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and Amortization Expenses
|
|
|
Capital Expenditures(b)
|
|
|
Total North America
|
|
$
|
123,817
|
|
|
$
|
122,774
|
|
|
$
|
122,241
|
|
|
$
|
101,001
|
|
|
$
|
88,841
|
|
|
$
|
87,912
|
|
Europe
|
|
|
91,222
|
|
|
|
105,684
|
|
|
|
101,899
|
|
|
|
97,964
|
|
|
|
74,095
|
|
|
|
91,898
|
|
Asia/Pacific
|
|
|
53,326
|
|
|
|
46,976
|
|
|
|
35,969
|
|
|
|
71,419
|
|
|
|
46,105
|
|
|
|
39,263
|
|
Rest of World
|
|
|
6,324
|
|
|
|
6,638
|
|
|
|
5,728
|
|
|
|
12,829
|
|
|
|
11,785
|
|
|
|
15,574
|
|
Non-Operating(a)
|
|
|
23,971
|
|
|
|
16,978
|
|
|
|
8,270
|
|
|
|
52,433
|
|
|
|
56,816
|
|
|
|
57,474
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Totals
|
|
$
|
298,660
|
|
|
$
|
299,050
|
|
|
$
|
274,107
|
|
|
$
|
335,646
|
|
|
$
|
277,642
|
|
|
$
|
292,121
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Identifiable Assets
|
|
|
|
|
|
|
|
|
|
|
|
Total North America
|
|
$
|
3,633,276
|
|
|
$
|
3,532,477
|
|
|
$
|
3,605,670
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Europe
|
|
|
4,398,944
|
|
|
|
3,815,179
|
|
|
|
3,602,753
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asia/Pacific
|
|
|
2,424,739
|
|
|
|
1,869,591
|
|
|
|
1,505,895
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rest of World
|
|
|
1,149,802
|
|
|
|
276,902
|
|
|
|
292,266
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Operating(c)
|
|
|
623,884
|
|
|
|
581,562
|
|
|
|
657,600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Totals
|
|
$
|
12,230,645
|
|
|
$
|
10,075,711
|
|
|
$
|
9,664,184
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
Includes corporate overhead, intercompany eliminations and
charges not directly attributable to operating segments. |
|
|
|
(b) |
|
Excludes property, plant and equipment obtained through
acquisitions. |
|
(c) |
|
Includes identifiable assets not directly attributable to
operating segments. |
|
(d) |
|
Includes costs associated with targeted workforce reductions and
asset write-offs, that were part of a corporation-wide
initiative to improve productivity. The asset write-offs related
to two factory closures and the exit of a formula business in
the U.K. The amount included in other accrued liabilities
related to these initiatives totaled $5.8 million at
April 28, 2010. |
84
H. J.
Heinz Company and Subsidiaries
Notes to
Consolidated Financial
Statements (Continued)
|
|
|
(e) |
|
Includes payments received from the government in the
Netherlands net of estimated costs to exit the facility. See
Note 3 for additional explanation. |
The Companys revenues are generated via the sale of
products in the following categories:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended
|
|
|
|
April 27,
|
|
|
April 28,
|
|
|
April 29,
|
|
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
|
(52 Weeks)
|
|
|
(52 Weeks)
|
|
|
(52 Weeks)
|
|
|
|
(Dollars in thousands)
|
|
|
Ketchup and Sauces
|
|
$
|
4,607,971
|
|
|
$
|
4,446,911
|
|
|
$
|
4,251,583
|
|
Meals and Snacks
|
|
|
4,282,318
|
|
|
|
4,289,977
|
|
|
|
4,225,127
|
|
Infant/Nutrition
|
|
|
1,175,438
|
|
|
|
1,157,982
|
|
|
|
1,105,313
|
|
Other
|
|
|
640,861
|
|
|
|
600,113
|
|
|
|
429,308
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
10,706,588
|
|
|
$
|
10,494,983
|
|
|
$
|
10,011,331
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company has significant sales and long-lived assets in the
following geographic areas. Sales are based on the location in
which the sale originated. Long-lived assets include property,
plant and equipment, goodwill, trademarks and other intangibles,
net of related depreciation and amortization.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended
|
|
|
|
Net External Sales
|
|
|
Long-Lived Assets
|
|
|
|
April 27,
|
|
|
April 28,
|
|
|
April 29,
|
|
|
|
|
|
|
|
|
|
|
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
April 27,
|
|
|
April 28,
|
|
|
April 29,
|
|
|
|
(52 Weeks)
|
|
|
(52 Weeks)
|
|
|
(52 Weeks)
|
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
|
(Dollars in thousands)
|
|
|
United States
|
|
$
|
3,991,344
|
|
|
$
|
3,993,692
|
|
|
$
|
4,018,973
|
|
|
$
|
2,425,446
|
|
|
$
|
2,403,078
|
|
|
$
|
2,402,798
|
|
United Kingdom
|
|
|
1,506,607
|
|
|
|
1,519,278
|
|
|
|
1,534,392
|
|
|
|
1,245,047
|
|
|
|
1,151,660
|
|
|
|
1,166,085
|
|
Other
|
|
|
5,208,637
|
|
|
|
4,982,013
|
|
|
|
4,457,966
|
|
|
|
3,731,815
|
|
|
|
2,605,690
|
|
|
|
2,392,373
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
10,706,588
|
|
|
$
|
10,494,983
|
|
|
$
|
10,011,331
|
|
|
$
|
7,402,308
|
|
|
$
|
6,160,428
|
|
|
$
|
5,961,256
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
85
H. J.
Heinz Company and Subsidiaries
Notes to
Consolidated Financial
Statements (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011
|
|
|
First
|
|
Second
|
|
Third
|
|
Fourth
|
|
Total
|
|
|
(13 Weeks)
|
|
(13 Weeks)
|
|
(13 Weeks)
|
|
(13 Weeks)
|
|
(52 Weeks)
|
|
|
(Unaudited)
|
|
|
(Dollars in thousands, except per share amounts)
|
|
Sales
|
|
$
|
2,480,825
|
|
|
$
|
2,614,623
|
|
|
$
|
2,722,350
|
|
|
$
|
2,888,790
|
|
|
$
|
10,706,588
|
|
Gross profit
|
|
|
907,977
|
|
|
|
966,627
|
|
|
|
1,028,293
|
|
|
|
1,049,643
|
|
|
|
3,952,540
|
|
Income from continuing operations attributable to H.J. Heinz
Company common shareholders, net of tax
|
|
|
240,427
|
|
|
|
251,435
|
|
|
|
273,785
|
|
|
|
223,863
|
|
|
|
989,510
|
|
Net income attributable to H.J. Heinz Company
|
|
|
240,427
|
|
|
|
251,435
|
|
|
|
273,785
|
|
|
|
223,863
|
|
|
|
989,510
|
|
Per Share Amounts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income from continuing operationsdiluted
|
|
$
|
0.75
|
|
|
$
|
0.78
|
|
|
$
|
0.84
|
|
|
$
|
0.69
|
|
|
$
|
3.06
|
|
Net income from continuing operationsbasic
|
|
|
0.76
|
|
|
|
0.78
|
|
|
|
0.85
|
|
|
|
0.70
|
|
|
|
3.09
|
|
Cash dividends
|
|
|
0.45
|
|
|
|
0.45
|
|
|
|
0.45
|
|
|
|
0.45
|
|
|
|
1.80
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
First
|
|
Second
|
|
Third
|
|
Fourth
|
|
Total
|
|
|
(13 Weeks)
|
|
(13 Weeks)
|
|
(13 Weeks)
|
|
(13 Weeks)
|
|
(52 Weeks)
|
|
|
(Unaudited)
|
|
|
(Dollars in thousands, except per share amounts)
|
|
Sales
|
|
$
|
2,441,686
|
|
|
$
|
2,646,785
|
|
|
$
|
2,681,702
|
|
|
$
|
2,724,810
|
|
|
$
|
10,494,983
|
|
Gross profit
|
|
|
872,303
|
|
|
|
953,255
|
|
|
|
1,005,266
|
|
|
|
963,482
|
|
|
|
3,794,306
|
|
Income from continuing operations attributable to H.J. Heinz
Company common shareholders, net of tax
|
|
|
214,724
|
|
|
|
243,076
|
|
|
|
264,115
|
|
|
|
192,574
|
|
|
|
914,489
|
|
Net income attributable to H.J. Heinz Company
|
|
|
212,564
|
|
|
|
231,435
|
|
|
|
228,527
|
|
|
|
192,366
|
|
|
|
864,892
|
|
Per Share Amounts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income from continuing operationsdiluted
|
|
$
|
0.68
|
|
|
$
|
0.76
|
|
|
$
|
0.83
|
|
|
$
|
0.60
|
|
|
$
|
2.87
|
|
Net income from continuing operationsbasic
|
|
|
0.68
|
|
|
|
0.77
|
|
|
|
0.83
|
|
|
|
0.61
|
|
|
|
2.89
|
|
Cash dividends
|
|
|
0.42
|
|
|
|
0.42
|
|
|
|
0.42
|
|
|
|
0.42
|
|
|
|
1.68
|
|
Continuing operations for the first quarter of Fiscal 2010
includes charges of $15.7 million pre-tax
($11.6 million after-tax) associated with targeted
workforce reductions and asset write-offs related to a factory
closure. Continuing operations for the fourth quarter of Fiscal
2010 includes charges of $21.9 million pre-tax
($16.2 million after-tax) associated with targeted
workforce reductions and asset write-offs related to two factory
closures and the exit of a formula business in the U.K. These
Fiscal 2010 charges were part of a corporation-wide initiative
to improve productivity. In addition, continuing operations for
the fourth quarter of Fiscal 2010 includes a gain of
$15.0 million pre-tax ($11.1 million after-tax) on a
property disposal in the Netherlands.
86
H. J.
Heinz Company and Subsidiaries
Notes to
Consolidated Financial
Statements (Continued)
|
|
17.
|
Commitments
and Contingencies
|
Legal
Matters:
Certain suits and claims have been filed against the Company and
have not been finally adjudicated. In the opinion of management,
based upon the information that it presently possesses, the
final conclusion and determination of these suits and claims
would not be expected to have a material adverse effect on the
Companys consolidated financial position, results of
operations or liquidity.
Lease
Commitments:
Operating lease rentals for warehouse, production and office
facilities and equipment amounted to approximately
$115.1 million in 2011, $119.1 million in 2010 and
$113.4 million in 2009. Future lease payments for
non-cancellable operating leases as of April 27, 2011
totaled $524.4 million
(2012-$90.8 million,
2013-$79.9 million, 2014-$69.1 million,
2015-$48.9 million, 2016-$41.3 million and
thereafter-$194.4 million).
As of April 27, 2011, the Company was a party to two
operating leases for buildings and equipment, one of which also
includes land, under which the Company has guaranteed
supplemental payment obligations of approximately
$135 million at the termination of these leases. The
Company believes, based on current facts and circumstances, that
any payment pursuant to these guarantees is remote. No
significant credit guarantees existed between the Company and
third parties as of April 27, 2011.
Redeemable
Noncontrolling Interest:
The minority partner in Coniexpress has the right, at any time,
to exercise a put option to require the Company to purchase his
20% equity interest at a redemption value determinable from a
specified formula based on a multiple of EBITDA (subject to a
fixed minimum linked to the original acquisition date value).
The Company also has a call right on this noncontrolling
interest exercisable at any time and subject to the same
redemption price. The put and call options can not be separated
from the noncontrolling interest and the combination of a
noncontrolling interest and the redemption feature require
classification of the minority partners interest as a
redeemable noncontrolling interest in the consolidated balance
sheet. The initial carrying amount of the redeemable
noncontrolling interest is its fair value which will be
adjusted, through retained earnings, in subsequent periods to an
amount equal to its maximum redemption value.
Advertising expenses (including production and communication
costs) for fiscal years 2011, 2010 and 2009 were
$369.6 million, $375.8 million and
$303.1 million, respectively. For fiscal years 2011, 2010
and 2009, $119.0 million, $108.9 million and
$105.3 million, respectively, were recorded as a reduction
of revenue and $250.6 million, $266.9 million and
$197.8 million, respectively, were recorded as a component
of selling, general and administrative expenses.
|
|
19.
|
Venezuela-
Foreign Currency and Inflation
|
Foreign
Currency
The local currency in Venezuela is the Venezuelan bolivar fuerte
(VEF). A currency control board exists in Venezuela
that is responsible for foreign exchange procedures, including
approval of requests for exchanges of VEF for U.S. dollars
at the official (government established) exchange rate. Our
business in Venezuela has historically been successful in
obtaining U.S. dollars at the official exchange rate for
imports of ingredients, packaging, manufacturing equipment, and
other necessary inputs, and for dividend remittances, albeit on
a delay. In May 2010, the government of Venezuela
87
H. J.
Heinz Company and Subsidiaries
Notes to
Consolidated Financial
Statements (Continued)
effectively closed down the unregulated parallel market, which
existed for exchanging VEF for U.S. dollars through
securities transactions. Our Venezuelan subsidiary has no recent
history of entering into exchange transactions in this parallel
market.
The Company uses the official exchange rate to translate the
financial statements of its Venezuelan subsidiary, since we
expect to obtain U.S. dollars at the official rate for
future dividend remittances. The official exchange rate in
Venezuela had been fixed at 2.15 VEF to 1 U.S. dollar for
several years, despite significant inflation. On January 8,
2010, the Venezuelan government announced the devaluation of its
currency relative to the U.S. dollar. The official exchange
rate for imported goods classified as essential, such as food
and medicine, changed from 2.15 to 2.60, while payments for
other non-essential goods moved to an exchange rate of 4.30.
Effective January 1, 2011, the Venezuelan government
eliminated the 2.60 exchange rate for essential goods leaving
one flat official exchange rate of 4.30.
The majority, if not all, of our imported products in Venezuela
fell into the essential classification and qualified for the
2.60 exchange rate. The elimination of the 2.60 rate had an
immaterial unfavorable impact on the Companys cost of
imported goods, capital spending and the payment of
U.S. dollar-denominated payables to suppliers recorded as
of January 1, 2011 in Venezuela. Also, since our Venezuelan
subsidiarys financial statements are remeasured using the
4.30 rate, as this is the rate expected to be applicable to
dividend repatriations, the elimination of the 2.60 rate had no
impact relative to this remeasurement. As of April 27,
2011, the amount of VEF pending government approval to be used
for dividend repatriations is $27.9 million at the 4.30
rate, of which $8.5 million has been pending government
approval since September 2008 and $19.4 million since
November 2009.
During Fiscal 2010, the Company recorded a $61.7 million
currency translation loss as a result of the currency
devaluation, which had been reflected as a component of
accumulated other comprehensive loss within unrealized
translation adjustment. The net asset position of our Venezuelan
subsidiary has also been reduced as a result of the devaluation
to approximately $106.7 million at April 27, 2011.
Highly
Inflationary Economy
An economy is considered highly inflationary under
U.S. GAAP if the cumulative inflation rate for a three-year
period meets or exceeds 100 percent. Based on the blended
National Consumer Price Index, the Venezuelan economy exceeded
the three-year cumulative inflation rate of 100 percent
during the third quarter of Fiscal 2010. As a result, the
financial statements of our Venezuelan subsidiary have been
consolidated and reported under highly inflationary accounting
rules beginning on January 28, 2010, the first day of our
Fiscal 2010 fourth quarter. Under highly inflationary
accounting, the financial statements of our Venezuelan
subsidiary are remeasured into the Companys reporting
currency (U.S. dollars) and exchange gains and losses from
the remeasurement of monetary assets and liabilities are
reflected in current earnings, rather than accumulated other
comprehensive loss on the balance sheet, until such time as the
economy is no longer considered highly inflationary.
The impact of applying highly inflationary accounting for
Venezuela on our consolidated financial statements is dependent
upon movements in the applicable exchange rates (at this time,
the official rate) between the local currency and the
U.S. dollar and the amount of monetary assets and
liabilities included in our subsidiarys balance sheet. At
April 27, 2011, the U.S. dollar value of monetary
assets, net of monetary liabilities, which would be subject to
an earnings impact from exchange rate movements for our
Venezuelan subsidiary under highly inflationary accounting was
$66.8 million.
88
|
|
Item 9.
|
Changes
in and Disagreements with Accountants on Accounting and
Financial Disclosure.
|
There is nothing to be reported under this item.
|
|
Item 9A.
|
Controls
and Procedures.
|
(a) Evaluation of Disclosure Controls and Procedures
The Companys management, with the participation of the
Companys Chief Executive Officer and Chief Financial
Officer, evaluated the effectiveness of the Companys
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
Companys disclosure controls and procedures, as of the end
of the period covered by this report, were effective and
provided 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
SECs 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 required disclosure. See also
Report of Management on Internal Control over Financial
Reporting.
(b) Managements Report on Internal Control Over
Financial Reporting.
Our managements report on Internal Control Over Financial
Reporting is set forth in Item 8 and incorporated herein by
reference.
PricewaterhouseCoopers LLP, an independent registered public
accounting firm, audited the effectiveness of the Companys
internal control over financial reporting as of April 27,
2011, as stated in their report as set forth in Item 8.
(c) Changes in Internal Control over Financial Reporting
During the fourth quarter of Fiscal 2011, the Company continued
its implementation of SAP software across its Netherlands and
Nordic countries operations. As appropriate, the Company is
modifying the design and documentation of internal control
processes and procedures relating to the new systems to simplify
and harmonize existing internal control over financial
reporting. There were no additional changes in the
Companys internal control over financial reporting during
the Companys most recent fiscal quarter that has
materially affected, or are reasonably likely to materially
affect, the Companys internal control over financial
reporting.
|
|
Item 9B.
|
Other
Information.
|
There is nothing to be reported under this item.
89
PART III
|
|
Item 10.
|
Directors,
Executive Officers and Corporate Governance.
|
Information relating to the Directors of the Company is set
forth under the captions Election of Directors and
Additional InformationSection 16 Beneficial
Ownership Reporting Compliance in the Companys
definitive Proxy Statement in connection with its Annual Meeting
of Shareholders to be held August 30, 2011. Information
regarding the Audit Committee members and the audit committee
financial expert is set forth under the captions Report of
the Audit Committee and Relationship with
Independent Registered Public Accounting Firm in the
Companys definitive Proxy Statement in connection with its
Annual Meeting of Shareholders to be held on August 30,
2011. Information relating to the executive officers of the
Company is set forth under the caption Executive Officers
of the Registrant in Part I of this report, and such
information is incorporated herein by reference. The
Companys Global Code of Conduct, which is applicable to
all employees, including the principal executive officer, the
principal financial officer, and the principal accounting
officer, as well as the charters for the Companys Audit,
Management Development & Compensation, Corporate
Governance, and Corporate Social Responsibility Committees, as
well as periodic and current reports filed with the SEC are
available on the Companys website, www.heinz.com, and are
available in print to any shareholder upon request. Such
specified information is incorporated herein by reference.
|
|
Item 11.
|
Executive
Compensation.
|
Information relating to executive and director compensation is
set forth under the captions Compensation Discussion and
Analysis, Director Compensation Table, and
Compensation Committee Report in the Companys
definitive Proxy Statement in connection with its Annual Meeting
of Shareholders to be held on August 30, 2011. Such
information is incorporated herein by reference.
|
|
Item 12.
|
Security
Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters.
|
Information relating to the ownership of equity securities of
the Company by certain beneficial owners and management is set
forth under the captions Security Ownership of Certain
Principal Shareholders and Security Ownership of
Management in the Companys definitive Proxy
Statement in connection with its Annual Meeting of Shareholders
to be held on August 30, 2011. Such information is
incorporated herein by reference.
The number of shares to be issued upon exercise and the number
of shares remaining available for future issuance under the
Companys equity compensation plans at April 27, 2011
were as follows:
Equity
Compensation Plan Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
|
(b)
|
|
|
(c)
|
|
|
|
|
|
|
|
|
|
Number of securities
|
|
|
|
|
|
|
|
|
|
remaining available
|
|
|
|
|
|
|
|
|
|
for future issuance
|
|
|
|
Number of securities to
|
|
|
Weighted-average
|
|
|
under equity
|
|
|
|
be issued upon exercise
|
|
|
exercise price of
|
|
|
compensation Plans
|
|
|
|
of outstanding options,
|
|
|
outstanding options,
|
|
|
(excluding securities
|
|
|
|
warrants and rights
|
|
|
warrants and rights
|
|
|
reflected in column (a))
|
|
|
Equity compensation plans approved by stockholders
|
|
|
11,928,440
|
|
|
$
|
42.43
|
|
|
|
6,230,347
|
|
Equity compensation plans not approved by stockholders(1)
|
|
|
17,569
|
|
|
|
N/A
|
(2)
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
11,946,009
|
|
|
$
|
42.43
|
|
|
|
6,230,347
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
90
|
|
|
(1) |
|
The Executive Deferred Compensation Plan, as amended and
restated effective January 1, 2005 and the Deferred
Compensation Plan for Non-Employee Directors as amended and
restated effective January 1, 2005, permit full-time
salaried personnel based in the U.S. who have been identified as
key employees and non-employee directors, to defer all or part
of his or her cash compensation into either a cash account that
accrues interest or a Heinz stock account. The election to defer
is irrevocable. The Management Development &
Compensation Committee of the Board of Directors administers the
Plan. All amounts are payable at the times and in the amounts
elected by the executives at the time of the deferral. The
deferral period shall be at least one year and shall be no
greater than the date of retirement or other termination,
whichever is earlier. Amounts deferred into cash accounts are
payable in cash, and amounts deferred into the Heinz stock
account are payable in Heinz Common Stock. Compensation deferred
into the Heinz stock account appreciates or depreciates
according to the fair market value of Heinz Common Stock. |
|
(2) |
|
The grants made under the Restricted Stock Plan, the Executive
Deferred Compensation Plan and the Deferred Compensation Plan
for Non-Employee Directors are restricted or reserved shares of
Common Stock, and therefore there is no exercise price. |
|
|
Item 13.
|
Certain
Relationships and Related Transactions, and Director
Independence.
|
Information relating to the Companys policy on related
person transactions and certain relationships with a beneficial
shareholder is set forth under the caption Related Person
Transactions in the Companys definitive Proxy
Statement in connection with its Annual Meeting of Shareholders
to be held on August 30, 2011. Such information is
incorporated herein by reference.
Information relating to director independence is set forth under
the caption Director Independence Standards in the
Companys definitive Proxy Statement in connection with its
Annual Meeting of Shareholders to be held on August 30,
2011. Such information is incorporated herein by reference.
|
|
Item 14.
|
Principal
Accountant Fees and Services.
|
Information relating to the principal auditors fees and
services is set forth under the caption Relationship With
Independent Registered Public Accounting Firm in the
Companys definitive Proxy Statement in connection with its
Annual Meeting of Shareholders to be held on August 30,
2011. Such information is incorporated herein by reference.
91
PART IV
|
|
Item 15.
|
Exhibits
and Financial Statement Schedules.
|
|
|
|
|
|
|
|
|
|
(a)(1)
|
|
The following financial statements and reports are filed as part
of this report under Item 8Financial Statements
and Supplementary Data:
|
|
|
|
|
Consolidated Balance Sheets as of April 27, 2011 and
April 28, 2010
|
|
|
|
|
Consolidated Statements of Income for the fiscal years ended
April 27, 2011, April 28, 2010 and April 29, 2009
|
|
|
|
|
Consolidated Statements of Equity for the fiscal years ended
April 27, 2011, April 28, 2010 and April 29, 2009
|
|
|
|
|
Consolidated Statements of Cash Flows for the fiscal years ended
April 27, 2011, April 28, 2010 and April 29, 2009
|
|
|
|
|
Notes to Consolidated Financial Statements
|
|
|
|
|
Report of Independent Registered Public Accounting Firm of
PricewaterhouseCoopers LLP dated June 16, 2011, on the
Companys consolidated financial statements and financial
statement schedule filed as a part hereof for the fiscal years
ended April 27, 2011, April 28, 2010 and
April 29, 2009
|
(2)
|
|
The following report and schedule is filed herewith as a part
hereof:
|
|
|
|
|
Schedule II (Valuation and Qualifying Accounts and
Reserves) for the three fiscal years ended April 27, 2011,
April 28, 2010 and April 29, 2009
|
|
|
|
|
All other schedules are omitted because they are not applicable
or the required information is included herein or is shown in
the consolidated financial statements or notes thereto filed as
part of this report incorporated herein by reference.
|
(3)
|
|
Exhibits required to be filed by Item 601 of
Regulation S-K
are listed below. Documents not designated as being incorporated
herein by reference are filed herewith. The paragraph numbers
correspond to the exhibit numbers designated in Item 601 of
Regulation S-K.
|
|
|
3(i)
|
|
Third Amended and Restated Articles of Incorporation of H. J.
Heinz Company dated August 21, 2008, are incorporated
herein by reference to Exhibit 3(i) of the Companys
Quarterly Report on
Form 10-Q
for the quarterly period ended July 30, 2008.
|
|
|
3(ii)
|
|
The Companys By-Laws, as amended effective August 12,
2009, are incorporated herein by reference to Exhibit 3(ii)
of the Companys Quarterly Report on
Form 10-Q
for the quarterly period ended July 29, 2009.
|
|
|
4.
|
|
Except as set forth below, there are no instruments with respect
to long-term unregistered debt of the Company that involve
indebtedness or securities authorized thereunder in amounts that
exceed 10 percent of the total assets of the Company on a
consolidated basis. The Company agrees to furnish a copy of any
instrument or agreement defining the rights of holders of
long-term debt of the Company upon request of the Securities and
Exchange Commission.
|
|
|
|
|
(a)
|
|
Indenture among the Company, H. J. Heinz Finance Company, and
Bank One, National Association dated as of July 6, 2001
relating to H. J. Heinz Finance Companys $750,000,000
6.625% Guaranteed Notes due 2011, $700,000,000 6.00% Guaranteed
Notes due 2012, $550,000,000 6.75% Guaranteed Notes due 2032 and
$250,000,000 7.125% Guaranteed Notes due 2039 is incorporated
herein by reference to Exhibit 4 of the Companys
Annual Report on
Form 10-K
for the fiscal year ended May 1, 2002.
|
|
|
|
|
(b)
|
|
Three-Year Credit Agreement dated April 29, 2009 among H.
J. Heinz Company, H. J. Heinz Finance Company, the Banks listed
on the signature pages thereto and JPMorgan Chase Bank, N.A. as
Administrative Agent is incorporated by reference to
Exhibit 10.1 of the Companys Current Report on
Form 8-K
dated April 29, 2009.
|
92
|
|
|
|
|
|
|
|
|
|
|
|
|
(c)
|
|
Indenture among H. J. Heinz Company and Union Bank of
California, N.A. dated as of July 15, 2008 relating to the
Companys $500,000,000 5.35% Notes due 2013 is
incorporated herein by reference to Exhibit 4(d) of the
Companys Annual Report on
Form 10-K
for the fiscal year ended April 29, 2009.
|
|
|
10(a)
|
|
Management contracts and compensatory plans:
|
|
|
|
|
|
|
(i)
|
|
1986 Deferred Compensation Program for H. J. Heinz Company and
affiliated companies, as amended and restated in its entirety
effective January 1, 2005, is incorporated herein by
reference to Exhibit 10(a)(xi) to the Companys
Quarterly Report on
Form 10-Q
for the quarterly period ended July 30, 2008.
|
|
|
|
|
|
|
(ii)
|
|
H. J. Heinz Company 1994 Stock Option Plan, as amended and
restated effective August 13, 2008, is incorporated herein
by reference to Exhibit 10(a)(vi) to the Companys
Quarterly Report on
Form 10-Q
for the quarterly period ended July 30, 2008.
|
|
|
|
|
|
|
(iii)
|
|
H. J. Heinz Company Supplemental Executive Retirement Plan, as
amended and restated effective November 12, 2008, is
incorporated herein by reference to Exhibit 10(a)(ii) to
the Companys Quarterly Report on
Form 10-Q
for the quarterly period ended October 29, 2008.
|
|
|
|
|
|
|
(iv)
|
|
H. J. Heinz Company Executive Deferred Compensation Plan, as
amended and restated effective January 1, 2005, is
incorporated herein by reference to Exhibit 10(a)(xii) of
the Companys Quarterly Report on
Form 10-Q
for the quarterly period ended July 30, 2008.
|
|
|
|
|
|
|
(v)
|
|
H. J. Heinz Company Stock Compensation Plan for Non-Employee
Directors is incorporated herein by reference to Appendix A
to the Companys Proxy Statement dated August 3, 1995.
|
|
|
|
|
|
|
(vi)
|
|
H. J. Heinz Company 1996 Stock Option Plan, as amended and
restated effective August 13, 2008, is incorporated herein
by reference to Exhibit 10(a)(vii) to the Companys
Quarterly Report on
Form 10-Q
for the quarterly period ended July 30, 2008.
|
|
|
|
|
|
|
(vii)
|
|
H. J. Heinz Company Deferred Compensation Plan for Directors is
incorporated herein by reference to Exhibit 10(a)(xiii) to
the Companys Annual Report on
Form 10-K
for the fiscal year ended April 29, 1998.
|
|
|
|
|
|
|
(viii)
|
|
H. J. Heinz Company 2000 Stock Option Plan, as amended and
restated effective August 13, 2008, is incorporated herein
by reference to Exhibit 10(a)(viii) to the Companys
Quarterly Report on
Form 10-Q
for the quarterly period ended July 30, 2008.
|
|
|
|
|
|
|
(ix)
|
|
H. J. Heinz Company Executive Estate Life Insurance Program is
incorporated herein by reference to Exhibit 10(a)(xv) to
the Companys Annual Report on
Form 10-K
for the fiscal year ended May 1, 2002.
|
|
|
|
|
|
|
(x)
|
|
H. J. Heinz Company Senior Executive Incentive Compensation
Plan, as amended and restated effective January 1, 2008, is
incorporated herein by reference to Exhibit 10(a)(xiii) to
the Companys Quarterly Report on
Form 10-Q
for the quarterly period ending July 30, 2008.
|
|
|
|
|
|
|
(xi)
|
|
Deferred Compensation Plan for Non-Employee Directors of H. J.
Heinz Company, as amended and restated effective January 1,
2005, is incorporated herein by reference to
Exhibit 10(a)(x) to the Companys Quarterly Report on
Form 10-Q
for the quarterly period ended July 30, 2008.
|
93
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(xii)
|
|
Form of Stock Option Award and Agreement for U.S. Employees
is incorporated herein by reference to Exhibit 10(a) to the
Companys Quarterly Report on
Form 10-Q
for the quarterly period ended January 26, 2005.
|
|
|
|
|
|
|
(xiii)
|
|
Named Executive Officer and Director Compensation
|
|
|
|
|
|
|
(xiv)
|
|
Form of Revised Severance Protection Agreement is incorporated
herein by reference to Exhibit 10(a)(i) to the
Companys Quarterly Report on Form
10-Q for the
quarterly period ended October 29, 2008.
|
|
|
|
|
|
|
(xv)
|
|
Form of Fiscal Year 2007 Restricted Stock Unit Award and
Agreement is incorporated herein by reference to the
Companys Quarterly Report on Form
10-Q for the
quarterly period ended November 1, 2006.
|
|
|
|
|
|
|
(xvi)
|
|
Form of Fiscal Year 2008 Stock Option Award and Agreement
(U.S. Employees) is incorporated herein by reference to the
Companys Quarterly Report on
Form 10-Q
for the quarterly period ended August 1, 2007.
|
|
|
|
|
|
|
(xvii)
|
|
Form of Stock Option Award and Agreement is incorporated herein
by reference to the Companys Quarterly Report on
Form 10-Q
for the quarterly period ended August 1, 2007.
|
|
|
|
|
|
|
(xviii)
|
|
Form of Restricted Stock Unit Award and Agreement is
incorporated herein by reference to the Companys Quarterly
Report on
Form 10-Q
for the quarterly period ended August 1, 2007.
|
|
|
|
|
|
|
(xix)
|
|
Form of Revised Fiscal Year 2008 Restricted Stock Unit Award and
Agreement is incorporated herein by reference to the
Companys Quarterly Report on
Form 10-Q
for the quarterly period ended August 1, 2007.
|
|
|
|
|
|
|
(xx)
|
|
Form of Restricted Stock Award and Agreement
(U.S. Employees Retention) is incorporated herein by
reference to the Companys Quarterly Report on
Form 10-Q
for the quarterly period ended August 1, 2007.
|
|
|
|
|
|
|
(xxi)
|
|
Third Amended and Restated Fiscal Year 2003 Stock Incentive Plan
is incorporated herein by reference to Exhibit 10(a)(ix) to
the Companys Quarterly Report on
Form 10-Q
for the quarterly period ended July 30, 2008.
|
|
|
|
|
|
|
(xxii)
|
|
Third Amended and Restated Global Stock Purchase Plan is
incorporated herein by reference to Exhibit 10(a)(xiv) to
the Companys Quarterly Report on
Form 10-Q
for the quarterly period ended July 30, 2008.
|
|
|
|
|
|
|
(xxiii)
|
|
Time Sharing Agreement dated as of September 14, 2007,
between H. J. Heinz Company and William R. Johnson is
incorporated herein by reference to Exhibit 10.1 of the
Companys
Form 8-K
dated September 14, 2007.
|
|
|
|
|
|
|
(xxiv)
|
|
H. J. Heinz Company Annual Incentive Plan, as amended and
restated effective January 1, 2008, is incorporated herein
by reference to Exhibit 10(a)(xv) to the Companys
Quarterly Report on
Form 10-Q
for the quarterly period ended July 30, 2008.
|
|
|
|
|
|
|
(xxv)
|
|
Form of Stock Option Award and Agreement for U.K. Employees on
International Assignment is incorporated herein by reference to
Exhibit 10(a)(xvii) to the Companys Quarterly Report on
Form 10-Q
for the quarterly period ended July 30, 2008.
|
|
|
|
|
|
|
(xxvi)
|
|
Form of Fiscal Year 2008 Restricted Stock Unit Award and
Agreement (U.S. EmployeesRetention) is incorporated
herein by reference to Exhibit 10(a)(xxx) to the
Companys Annual Report on
Form 10-K
for the fiscal year ended April 29, 2009.
|
94
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(xxvii)
|
|
Form of Fiscal Year 2009 Restricted Stock Unit Award and
Agreement (U.S. Employees) is incorporated herein by
reference to Exhibit 10(a)(i) to the Companys
Quarterly Report on
Form 10-Q
for the quarterly period ended July 30, 2008.
|
|
|
|
|
|
|
(xxviii)
|
|
Form of Fiscal Year
2010-11
Long-Term Performance Program Award Agreement
(U.S. Employees) is incorporated herein by reference to
Exhibit 10(a)(xxxiv) to the Companys Annual Report on
Form 10-K
for the fiscal year ended April 29, 2009.
|
|
|
|
|
|
|
(xxix)
|
|
Form of Fiscal Year 2010 Restricted Stock Unit Award and
Agreement (U.S. Employees) is incorporated herein by
reference to Exhibit 10(a)(i) to the Companys
Quarterly Report on
Form 10-Q
for the quarterly period ended July 29, 2009.
|
|
|
|
|
|
|
(xxx)
|
|
Form of Fiscal Year 2010 Restricted Stock Unit Award and
Agreement
(Non-U.S. Employees)
is incorporated herein by reference to Exhibit 10(a)(ii) to
the Companys Quarterly Report on
Form 10-Q
for the quarterly period ended July 29, 2009.
|
|
|
|
|
|
|
(xxxi)
|
|
Form of Fiscal Year 2010 Restricted Stock Unit Award and
Agreement (U.S. EmployeesTime Based Vesting) is
incorporated herein by reference to Exhibit 10(a)(i) to the
Companys Quarterly Report on
Form 10-Q
for the quarterly period ended October 28, 2009.
|
|
|
|
|
|
|
(xxxii)
|
|
Form of Fiscal Year
2010-11
Long-Term Performance Program Award Agreement
(Non-U.S. Employees)
is incorporated herein by reference to the Exhibit 10(a)(xxxv)
to the Companys Annual Report on
Form 10-K
for the fiscal year ended April 29, 2009.
|
|
|
|
|
|
|
(xxxiii)
|
|
Form of Fiscal Year 2011 Restricted Stock Unit Award and
Agreement (U.S. Employees) is incorporated herein by reference
to the Exhibit 10(a)(i) to the Companys Quarterly
Report on
Form 10-Q
for the quarterly period ended July 28, 2010.
|
|
|
|
|
|
|
(xxxiv)
|
|
Form of Fiscal Year 2011 Restricted Stock Unit Award and
Agreement (Non-U.S. Employees) is incorporated herein by
reference to the Exhibit 10(a)(ii) to the Companys
Quarterly Report on Form 10-Q for the quarterly period
ended July 28, 2010.
|
|
|
|
|
|
|
(xxxv)
|
|
Form of Fiscal Year 2011 Stock Option Award Agreement for U.S.
Employees is incorporated herein by reference to the
Exhibit 10(a)(iii) to the Companys Quarterly Report
on Form 10-Q for the quarterly period ended July 28,
2010.
|
|
|
|
|
|
|
(xxxvi)
|
|
Form of Fiscal Year 2011 Stock Option Award and Agreement for
U.K. Expatriates on International Assignment is incorporated
herein by reference to the Exhibit 10(a)(iv) to the
Companys Quarterly Report on Form 10-Q for the
quarterly period ended July 28, 2010.
|
|
|
|
|
|
|
(xxxvii)
|
|
Form of Fiscal Year 2012 Restricted Stock Unit Award and
Agreement (U.S. Employees).
|
|
|
|
|
|
|
(xxxviii)
|
|
Form of Fiscal Year 2012 Restricted Stock Unit Award and
Agreement (Non-U.S. Employees).
|
|
|
|
|
|
|
(xxxix)
|
|
Form of Fiscal Year 2012 Restricted Stock Unit Award and
Agreement (U.S. Employees Time Based Vesting).
|
|
|
|
|
|
|
(xl)
|
|
Form of Fiscal Year 2012 Restricted Stock Unit Award and
Agreement (U.S. Employees Retention).
|
|
|
|
|
|
|
(xli)
|
|
Form of Fiscal Year 2012 Stock Option Award and Agreement for
U.S. Employees.
|
|
|
|
|
|
|
(xlii)
|
|
Form of Fiscal Year 2012 Stock Option Award and Agreement for
U.K. Expatriates on International Assignment.
|
95
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(xliii)
|
|
Form of Fiscal Year 2012-13 Long-Term Performance Program Award
Agreement (U.S. Employees).
|
|
|
|
|
|
|
(xliv)
|
|
Form of Fiscal Year 2012-13 Long-Term Performance Program Award
Agreement (Non-U.S. Employees).
|
|
|
|
|
|
|
(xlv)
|
|
First Amendment to Third Amended and Restated Global Stock
Purchase PlanH.J. Heinz Company U.K.
Sub-Plan.
|
|
|
12.
|
|
Computation of Ratios of Earnings to Fixed Charges.
|
|
|
21.
|
|
Subsidiaries of the Registrant.
|
|
|
23.
|
|
Consent of PricewaterhouseCoopers LLP.
|
|
|
24.
|
|
Powers-of-attorney
of the Companys directors.
|
|
|
31(a)
|
|
Rule 13a-14(a)/15d-14(a)
|
|
|
|
|
Certification by William R. Johnson.
|
|
|
31(b)
|
|
Rule 13a-14(a)/15d-14(a)
Certification by Arthur B. Winkleblack.
|
|
|
32(a)
|
|
Certification by the Chief Executive Officer Relating to the
Annual Report Containing Financial Statements.
|
|
|
32(b)
|
|
Certification by the Chief Financial Officer Relating to the
Annual Report Containing Financial Statements.
|
|
|
|
|
|
|
|
|
101
|
.INS
|
|
XBRL
|
|
Instance Document*
|
|
101
|
.SCH
|
|
XBRL
|
|
Schema Document*
|
|
101
|
.CAL
|
|
XBRL
|
|
Calculation Linkbase Document*
|
|
101
|
.LAB
|
|
XBRL
|
|
Labels Linkbase Document*
|
|
101
|
.PRE
|
|
XBRL
|
|
Presentation Linkbase Document*
|
|
101
|
.DEF
|
|
XBRL
|
|
Definition Linkbase Document*
|
Copies of the exhibits listed above will be furnished upon
request to holders or beneficial holders of any class of the
Companys stock, subject to payment in advance of the cost
of reproducing the exhibits requested.
|
|
|
* |
|
In accordance with
Regulation S-T,
the XBRL-related information in Exhibit 101 to this Annual
Report on
Form 10-K
shall be deemed to be furnished and not
filed. |
96
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized, on June 16, 2011.
H. J. HEINZ COMPANY
(Registrant)
|
|
|
|
By:
|
/s/ Arthur
B. Winkleblack
|
Arthur B. Winkleblack
Executive Vice President and Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the Registrant and in the capacities indicated, on
June 16, 2011.
|
|
|
Signature
|
|
Capacity
|
|
/s/ William
R. Johnson
William
R. Johnson
|
|
Chairman, President and
Chief Executive Officer
(Principal Executive Officer)
|
/s/ Arthur
B. Winkleblack
Arthur
B. Winkleblack
|
|
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
|
/s/ Edward
J. McMenamin
Edward
J. McMenamin
|
|
Senior Vice President-Finance
(Principal Accounting Officer)
|
|
|
|
|
|
William R. Johnson
Charles E. Bunch
Leonard S. Coleman, Jr.
John G. Drosdick
Edith E. Holiday
Candace Kendle
Dean R. OHare
Nelson Peltz
Dennis H. Reilley
Lynn C. Swann
Thomas J. Usher
Michael F. Weinstein
|
|
Director }
Director }
Director }
Director }
Director }
Director }
Director }
Director }
Director }
Director }
Director }
Director }
|
|
By: /s/ Arthur
B. Winkleblack
Arthur
B. Winkleblack
Attorney-in-Fact
|
97
Schedule
Schedule Of Valuation And Qualifying Accounts Disclosure
Schedule II
H. J.
Heinz Company and Subsidiaries
VALUATION
AND QUALIFYING ACCOUNTS AND RESERVES
Fiscal Years Ended April 27, 2011, April 28, 2010 and
April 29, 2009
(Thousands of Dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at
|
|
|
Charged to
|
|
|
|
|
|
|
|
|
Balance at
|
|
|
|
beginning
|
|
|
costs and
|
|
|
|
|
|
|
|
|
end of
|
|
Description
|
|
of period
|
|
|
expenses
|
|
|
Deductions
|
|
|
Exchange
|
|
|
period
|
|
|
Fiscal year ended April 27, 2011:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reserves deducted in the balance sheet from the assets to which
they apply:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade receivables
|
|
$
|
10,196
|
|
|
$
|
1,997
|
|
|
$
|
2,053
|
|
|
$
|
769
|
|
|
$
|
10,909
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other receivables
|
|
$
|
268
|
|
|
$
|
203
|
|
|
$
|
|
|
|
$
|
32
|
|
|
$
|
503
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal year ended April 28, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reserves deducted in the balance sheet from the assets to which
they apply:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade receivables
|
|
$
|
10,233
|
|
|
$
|
2,158
|
|
|
$
|
2,575
|
|
|
$
|
380
|
|
|
$
|
10,196
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other receivables
|
|
$
|
1,162
|
|
|
$
|
(367
|
)
|
|
$
|
602
|
|
|
$
|
75
|
|
|
$
|
268
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal year ended April 29, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reserves deducted in the balance sheet from the assets to which
they apply:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade receivables
|
|
$
|
13,255
|
|
|
$
|
4,913
|
|
|
$
|
6,585
|
|
|
$
|
(1,350
|
)
|
|
$
|
10,233
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other receivables
|
|
$
|
2,432
|
|
|
$
|
(946
|
)
|
|
$
|
|
|
|
$
|
(324
|
)
|
|
$
|
1,162
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EXHIBIT INDEX
|
|
|
|
|
|
|
|
|
|
|
Description of Exhibit
|
|
|
|
|
|
|
|
|
|
|
|
|
Exhibits required to be filed by Item 601 of
Regulation S-K
are listed below. Documents not designated as being incorporated
herein by reference are filed herewith. The paragraph numbers
correspond to the exhibit numbers designated in Item 601 of
Regulation S-K.
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3(i)
|
|
Third Amended and Restated Articles of Incorporation of H. J.
Heinz Company dated August 21, 2008, are incorporated
herein by reference to Exhibit 3(i) of the Companys
Quarterly Report on
Form 10-Q
for the quarterly period ended July 30, 2008.
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3(ii)
|
|
The Companys By-Laws, as amended effective August 12,
2009, are incorporated herein by reference to Exhibit 3(ii)
of the Companys Quarterly Report on
Form 10-Q
for the quarterly period ended July 29, 2009.
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4.
|
|
Except as set forth below, there are no instruments with respect
to long-term unregistered debt of the Company that involve
indebtedness or securities authorized thereunder in amounts that
exceed 10 percent of the total assets of the Company on a
consolidated basis. The Company agrees to furnish a copy of any
instrument or agreement defining the rights of holders of
long-term debt of the Company upon request of the Securities and
Exchange Commission.
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(a)
|
|
Indenture among the Company, H. J. Heinz Finance Company, and
Bank One, National Association dated as of July 6, 2001
relating to H. J. Heinz Finance Companys $750,000,000
6.625% Guaranteed Notes due 2011, $700,000,000 6.00% Guaranteed
Notes due 2012, $550,000,000 6.75% Guaranteed Notes due 2032 and
$250,000,000 7.125% Guaranteed Notes due 2039 is incorporated
herein by reference to Exhibit 4 of the Companys Annual
Report on
Form 10-K
for the fiscal year ended May 1, 2002.
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(b)
|
|
Three-Year Credit Agreement dated April 29, 2009 among H.
J. Heinz Company, H. J. Heinz Finance Company, the Banks listed
on the signature pages thereto and JPMorgan Chase Bank, N.A. as
Administrative Agent is incorporated by reference to
Exhibit 10.1 of the Companys Current Report on
Form 8-K
dated April 29, 2009.
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(c)
|
|
Indenture among H. J. Heinz Company and Union Bank of
California, N.A. dated as of July 15, 2008 relating to the
Companys $500,000,000 5.35% Notes due 2013 is
incorporated herein by reference to Exhibit 4(d) of the
Companys Annual Report on
Form 10-K
for the fiscal year period April 29, 2009.
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10(a)
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Management contracts and compensatory plans:
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(i)
|
|
1986 Deferred Compensation Program for H.J. Heinz Company and
affiliated companies, as amended and restated in its entirety
effective January 1, 2005, is incorporated herein by
reference to the Exhibit 10(a)(xi) to the Companys
Quarterly Report on
Form 10-Q
for the quarterly period ended July 30, 2008.
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(ii)
|
|
H. J. Heinz Company 1994 Stock Option Plan, as amended and
restated effective August 13, 2008, is incorporated herein
by reference to Exhibit 10(a)(vi) to the Companys
Quarterly Report on Form
10-Q for the
period ended July 30, 2008.
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(iii)
|
|
H. J. Heinz Company Supplemental Executive Retirement Plan, as
amended and restated effective November 12, 2008, is
incorporated herein by reference to Exhibit 10(a)(ii) to
the Companys Quarterly Report on
Form 10-Q
for the quarterly period ended October 29, 2008.
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(iv)
|
|
H. J. Heinz Company Executive Deferred Compensation Plan, as
amended and restated effective January 1, 2005, is
incorporated herein by reference to Exhibit 10(a)(xii) of
the Companys Quarterly Report on
Form 10-Q
for the quarterly period ended July 30, 2008.
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|
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|
|
Description of Exhibit
|
|
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(v)
|
|
H. J. Heinz Company Stock Compensation Plan for Non-Employee
Directors is incorporated herein by reference to Appendix A
to the Companys Proxy Statement dated August 3, 1995.
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(vi)
|
|
H. J. Heinz Company 1996 Stock Option Plan, as amended and
restated effective August 13, 2008, is incorporated herein
by reference to Exhibit 10(a)(vii) to the Companys
Quarterly Report on Form
10-Q for the
quarterly period ended July 30, 2008.
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(vii)
|
|
H. J. Heinz Company Deferred Compensation Plan for Directors is
incorporated herein by reference to Exhibit 10(a)(xiii) to
the Companys Annual Report on
Form 10-K
for the fiscal year ended April 29, 1998.
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(viii)
|
|
H. J. Heinz Company 2000 Stock Option Plan, as amended and
restated effective August 13, 2008, is incorporated herein
by reference to Exhibit 10(a)(viii) to the Companys
Quarterly Report on Form
10-Q for the
quarterly period ended July 30, 2008.
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(ix)
|
|
H. J. Heinz Company Executive Estate Life Insurance Program is
incorporated herein by reference to Exhibit 10(a)(xv) to
the Companys Annual Report on
Form 10-K
for the fiscal year ended May 1, 2002.
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(x)
|
|
H. J. Heinz Company Senior Executive Incentive Compensation
Plan, as amended and restated effective January 1, 2008, is
incorporated herein by reference to Exhibit 10(a)(xiii) to
the Companys Quarterly Report on
Form 10-Q
for the quarterly period ending July 30, 2008.
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(xi)
|
|
Deferred Compensation Plan for Non-Employee Directors of H. J.
Heinz Company, as amended and restated effective January 1,
2005, is incorporated herein by reference to
Exhibit 10(a)(x) to the Companys Quarterly Report on
Form 10-Q
for the quarterly period ended July 30, 2008.
|
|
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(xii)
|
|
Form of Stock Option Award and Agreement for U.S. Employees
is incorporated herein by reference to Exhibit 10(a) to the
Companys Quarterly Report on
Form 10-Q
for the quarterly period ended January 26, 2005.
|
|
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|
|
(xiii)
|
|
Named Executive Officer and Director Compensation.
|
|
|
|
|
(xiv)
|
|
Form of Revised Severance Protection Agreement is incorporated
herein by reference to Exhibit 10(a)(i) to the Companys
Quarterly Report on
Form 10-Q
for the quarterly period ended October 29, 2008.
|
|
|
|
|
(xv)
|
|
Form of Fiscal Year 2007 Restricted Stock Unit Award and
Agreement is incorporated herein by reference to the
Companys Quarterly Report on
Form 10-Q
for the quarterly period ended November 1, 2006.
|
|
|
|
|
(xvi)
|
|
Form of Fiscal Year 2008 Stock Option Award and Agreement
(U.S. Employees) is incorporated herein by reference to the
Companys Quarterly Report on
Form 10-Q
for the quarterly period ended August 1, 2007.
|
|
|
|
|
(xvii)
|
|
Form of Stock Option Award and Agreement is incorporated herein
by reference to the Companys Quarterly Report on
Form 10-Q
for the quarterly period ended August 1, 2007.
|
|
|
|
|
(xxviii)
|
|
Form of Restricted Stock Unit Award and Agreement is
incorporated herein by reference to the Companys Quarterly
Report on
Form 10-Q
for the quarterly period ended August 1, 2007.
|
|
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|
|
(xix)
|
|
Form of Revised Fiscal Year 2008 Restricted Stock Unit Award and
Agreement is incorporated herein by reference to the
Companys Quarterly Report on
Form 10-Q
for the quarterly period ended August 1, 2007.
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|
(xx)
|
|
Form of Restricted Stock Award and Agreement
(U.S. Employees Retention) is incorporated herein by
reference to the Companys Quarterly Report on
Form 10-Q
for the quarterly period ended August 1, 2007.
|
|
|
|
|
|
|
|
|
|
|
|
Description of Exhibit
|
|
|
|
|
|
(xxi)
|
|
Third Amended and Restated Fiscal Year 2003 Stock Incentive Plan
is incorporated herein by reference to Exhibit 10(a)(ix) to
the Companys Quarterly Report on
Form 10-Q
for the quarterly period ended July 30, 2008.
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|
|
|
|
(xxii)
|
|
Third Amended and Restated Global Stock Purchase Plan is
incorporated herein by reference to Exhibit 10(a)(xiv) to
the Companys Quarterly Report on
Form 10-Q
for the quarterly period ended July 30, 2008.
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|
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(xxiii)
|
|
Time Sharing Agreement dated as of September 14, 2007,
between H. J. Heinz Company and William R. Johnson is
incorporated herein by reference to Exhibit 10.1 of the
Companys
Form 8-K
dated September 14, 2007.
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|
(xxiv)
|
|
H. J. Heinz Company Annual Incentive Plan, as amended and
restated effective January 1, 2008, is incorporated herein
by reference to Exhibit 10(a)(xv) to the Companys
Quarterly Report on Form
10-Q for the
quarterly period ended July 30, 2008.
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|
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|
|
(xxv)
|
|
Form of Stock Option Award and Agreement for U.K. Employees on
International Assignment is incorporated herein by reference to
Exhibit 10(a)(xvii) to the Companys Quarterly Report
on Form 10-Q
for the quarterly period ended July 30, 2008.
|
|
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|
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(xxvi)
|
|
Form of Fiscal Year 2008 Restricted Stock Unit Award and
Agreement (U.S. EmployeesRetention) is incorporated
herein by reference to Exhibit 10(a)(xxx) to the
Companys Annual Report on
Form 10-K
for the fiscal year ended April 29, 2009.
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|
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|
|
(xxvii)
|
|
Form of Fiscal Year 2009 Restricted Stock Unit Award and
Agreement (U.S. Employees) is incorporated herein by
reference to Exhibit 10(a)(i) to the Companys
Quarterly Report on
Form 10-Q
for the quarterly period ended July 30, 2008.
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|
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|
|
(xxviii)
|
|
Form of Fiscal Year
2010-11
Long-Term Performance Program Award Agreement
(U.S. Employees) is incorporated herein by reference to
Exhibit 10(a)(xxxiv) to the Companys Annual Report on
Form 10-K
for the fiscal year ended April 29, 2009.
|
|
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|
|
(xxix)
|
|
Form of Fiscal Year 2010 Restricted Stock Unit Award and
Agreement (U.S. Employees) is incorporated herein by
reference to Exhibit 10(a)(i) to the Companys
Quarterly Report on
Form 10-Q
for the quarterly period ended July 29, 2009.
|
|
|
|
|
(xxx)
|
|
Form of Fiscal Year 2010 Restricted Stock Unit Award and
Agreement
(Non-U.S. Employees)
is incorporated herein by reference to Exhibit 10(a)(ii) to
the Companys Quarterly Report on
Form 10-Q
for the quarterly period ended July 29, 2009.
|
|
|
|
|
(xxxi)
|
|
Form of Fiscal Year 2010 Restricted Stock Unit Award and
Agreement (U.S. EmployeesTime Based Vesting) is
incorporated herein by reference to Exhibit 10(a)(i) to the
Companys Quarterly Report on
Form 10-Q
for the quarterly period ended October 28, 2009.
|
|
|
|
|
(xxxii)
|
|
Form of Fiscal Year
2010-11
Long-Term Performance Program Award Agreement
(Non-U.S. Employees)
is incorporated herein by reference to the
Exhibit 10(a)(xxxv) to the Companys Annual Report on
Form 10-K
for the fiscal year ended April 29, 2009.
|
|
|
|
|
(xxxiii)
|
|
Form of Fiscal Year 2011 Restricted Stock Unit Award and
Agreement (U.S. Employees) is incorporated herein by reference
to the Exhibit 10(a)(i) to the Companys Quarterly
Report on Form 10-Q for the quarterly period ended
July 28, 2010.
|
|
|
|
|
(xxxiv)
|
|
Form of Fiscal Year 2011 Restricted Stock Unit Award and
Agreement (Non-U.S. Employees) is incorporated herein by
reference to the Exhibit 10(a)(ii) to the Companys
Quarterly Report on Form 10-Q for the quarterly period
ended July 28, 2010.
|
|
|
|
|
|
|
|
|
|
|
|
Description of Exhibit
|
|
|
|
|
|
(xxxv)
|
|
Form of Fiscal Year 2011 Stock Option Award Agreement for U.S.
Employees is incorporated herein by reference to the
Exhibit 10(a)(iii) to the Companys Quarterly Report
on Form 10-Q for the quarterly period ended July 28,
2010.
|
|
|
|
|
(xxxvi)
|
|
Form of Fiscal Year 2011 Stock Option Award and Agreement for
U.K. Expatriates on International Assignment is incorporated
herein by reference to the Exhibit 10(a)(iv) to the
Companys Quarterly Report on Form 10-Q for the
quarterly period ended July 28, 2010.
|
|
|
|
|
(xxxvii)
|
|
Form of Fiscal Year 2012 Restricted Stock Unit Award and
Agreement (U.S. Employees).
|
|
|
|
|
(xxxviii)
|
|
Form of Fiscal Year 2012 Restricted Stock Unit Award and
Agreement (Non-U.S. Employees).
|
|
|
|
|
(xxxix)
|
|
Form of Fiscal Year 2012 Restricted Stock Unit Award and
Agreement (U.S. Employees Time Based Vesting).
|
|
|
|
|
(xl)
|
|
Form of Fiscal Year 2012 Restricted Stock Unit Award and
Agreement (U.S. Employees Retention).
|
|
|
|
|
(xli)
|
|
Form of Fiscal Year 2012 Stock Option Award and Agreement for
U.S. Employees.
|
|
|
|
|
(xlii)
|
|
Form of Fiscal Year 2012 Stock Option Award and Agreement for
U.K. Expatriates on International Assignment.
|
|
|
|
|
(xliii)
|
|
Form of Fiscal Year 2012-13 Long-Term Performance Program Award
Agreement (U.S. Employees).
|
|
|
|
|
(xliv)
|
|
Form of Fiscal Year 2012-13 Long-Term Performance Program Award
Agreement (Non-U.S. Employees).
|
|
|
|
|
(xlv)
|
|
First Amendment to Third Amended and Restated Global Stock
Purchase PlanH.J. Heinz Company U.K.
Sub-Plan.
|
|
|
12.
|
|
Computation of Ratios of Earnings to Fixed Charges.
|
|
|
21.
|
|
Subsidiaries of the Registrant.
|
|
|
23.
|
|
Consent of PricewaterhouseCoopers LLP.
|
|
|
24.
|
|
Powers of attorney of the Companys directors.
|
|
|
31(a)
|
|
Rule 13a-14(a)/15d-14(a)
Certification by William R. Johnson.
|
|
|
31(b)
|
|
Rule 13a-14(a)/15d-14(a)
Certification by Arthur B. Winkleblack.
|
|
|
32(a)
|
|
Certification by the Chief Executive Officer Relating to the
Annual Report Containing Financial Statements.
|
|
|
32(b)
|
|
Certification by the Chief Financial Officer Relating to the
Annual Report Containing Financial Statements.
|
|
|
|
|
|
|
|
|
101
|
.INS
|
|
XBRL
|
|
Instance Document*
|
|
101
|
.SCH
|
|
XBRL
|
|
Schema Document*
|
|
101
|
.CAL
|
|
XBRL
|
|
Calculation Linkbase Document*
|
|
101
|
.LAB
|
|
XBRL
|
|
Labels Linkbase Document*
|
|
101
|
.PRE
|
|
XBRL
|
|
Presentation Linkbase Document*
|
|
101
|
.DEF
|
|
XBRL
|
|
Definition Linkbase Document*
|
|
|
|
* |
|
In accordance with
Regulation S-T,
the XBRL-related information in Exhibit 101 to this Annual
Report on
Form 10-K
shall be deemed to be furnished and not
filed. |