H.J. Heinz Company (ticker: HNZ, exchange: New York Stock Exchange (.N))
News Release -
31-May-2007
Heinz Announces Outstanding Results for Fiscal Year 2007, Exceeding Key Targets Established in Its Superior Value and Growth Plan
Heinz Raises Earnings Outlook for Fiscal Year 2008,
Citing Strong Innovation Pipeline and Solid Business Fundamentals
Heinz Raises Dividend by 8.6%
PITTSBURGH--(BUSINESS WIRE)--May 31, 2007--FULL YEAR HIGHLIGHTS:
-- For the full year, Heinz drove EPS growth of 13.3% to $2.38
(including 55 cents in the fourth quarter) from continuing
operations excluding prior year special items. Prior year EPS
of $2.10 excludes special charges of $0.80 per share. On a
reported basis, EPS from continuing operations grew 84%.
-- Sales grew 4.1%, driven by net pricing gains and solid volume
growth, despite one less week in Fiscal 2007 versus the prior
year. Sales for the Company's Top 15 Brands grew 8.5% and
sales in the emerging "RICIP" markets increased 13%.
-- Heinz achieved 7.2% growth in Operating Income (from
continuing operations excluding prior year special items),
including a $64 million incremental investment in consumer
marketing - an increase of 24%. On a reported basis, operating
income from continuing operations increased 30%.
-- The Company generated $878 million of operating free cash flow
(cash from operations less capital expenditures plus proceeds
from disposals of PP&E), 10% above its target for the year and
ahead of Fiscal 2006. Return on invested capital increased by
100 basis points to 15.8%.
-- Heinz raised its earnings outlook for Fiscal 2008 to an EPS
range of $2.54 to $2.60.
The H. J. Heinz Company (NYSE:HNZ) today announced its fourth
quarter and Fiscal Year 2007 results with full year EPS from
continuing operations of $2.38, an increase of 13.3% over the prior
year, excluding special items. The strong EPS results reflect solid
top-line growth, margin improvement, and a renewed commitment to
consumer-focused innovation. On a total company basis, Heinz reported
net income growth of 21.7% to $785.7 million.
For the full year, sales increased 4.1% to $9.0 billion and
operating income increased $96.7 million, or 7.2%, excluding prior
year special items, to $1.45 billion, driven by the sustained strong
performance of the Company's North American Consumer Products, Asian,
Latin American, Australian, and New Zealand businesses, and improving
performance of the European business. The Company's top 15 brands all
achieved impressive sales growth including Heinz(R) (+7%), Boston
Market(R) (+39%), Pudliszki(R) (+32%), Smart Ones(R) (+13%) and
Classico(R) (+12%). Heinz's global ketchup business reported strong
results with 9% sales growth in Fiscal Year 2007.
"Fiscal 2007 was a great year for Heinz as our business units
successfully executed the first year of the FY07/08 Superior Value and
Growth Plan, meeting or exceeding our key financial targets. We
greatly enhanced our focus on the consumer with a stronger spotlight
on health and wellness, increased investment in marketing for future
growth, greater R&D, and impressive productivity measures that helped
offset $180 million in commodity inflation," said William R. Johnson,
Chairman, President and Chief Executive Officer. "Our increased
investment in growth this past year establishes a strong foundation
for Fiscal 2008, giving us the confidence to increase our earnings
outlook to a range of $2.54 to $2.60 and to raise the dividend by 8.6%
on top of last year's 16.7% increase."
The Company outlined its two-year financial targets and operating
goals on June 1, 2006, when Heinz unveiled its Superior Value and
Growth Plan. The plan called for 12% EPS growth in FY07, $1 billion in
net share repurchases and $355 million in productivity improvements
over two years.
"The quality of our FY07 results and our enhanced outlook for
Fiscal 2008, confirm that our talented people, tighter portfolio and
stronger brand focus have transformed Heinz into a more nimble,
innovative and consumer-focused company," said William R. Johnson.
(Comments herein refer to the following non-GAAP financial
measures: adjusted operating income for Fiscal 2006, which excludes
special items, and operating free cash flow. There have been no
special items in Fiscal 2007. See attached tables for further details,
including reconciliation of non-GAAP financial measures. Management
believes that the adjusted GAAP measures provide additional clarity in
understanding the trends of the business as they enable investors to
use financial measures that management uses in addition to GAAP
measures to evaluate the day-to-day operations of the business.)
FULL YEAR SEGMENT HIGHLIGHTS
NORTH AMERICAN CONSUMER PRODUCTS
Sales of the North American Consumer Products segment increased
7.3%. Volume increased 2.6%, (despite one less week than last year)
primarily as a result of strong growth in Smart Ones(R) and Boston
Market(R) frozen entrees and desserts and Classico(R) pasta sauces.
Pricing increased 2.1% largely due to Heinz(R) ketchup, Ore-Ida(R)
frozen potatoes, Smart Ones(R) frozen entrees and Bagel Bites(R) and
T.G.I. Friday's(R) frozen snacks. Acquisitions increased sales 1.9%.
Adjusted operating income increased 6.1% driven by the strong
growth in sales and reduced manufacturing costs. Operating income was
constrained by increased commodity costs, and a 40% increase in
marketing investment to sustain future growth.
U.S. FOODSERVICE
Reflecting the impact of one less week in the fiscal year and the
impact of divestitures, sales of the U.S. Foodservice segment
decreased 0.9%. Importantly, sales of the flagship ketchup business
grew by more than 5%. Pricing increased sales 1.7%, largely due to
Heinz(R) ketchup and tomato products, single serve condiments and
frozen desserts. Volume decreased 0.4%, as higher volume in Heinz(R)
ketchup was offset by declines resulting primarily from one less week
in the fiscal year and a decision to exit certain low margin accounts.
Divestitures, net of acquisitions, reduced sales 2.1%.
Adjusted operating income increased 1.9%, primarily due to
increased pricing and reduced selling and distribution expense (S&D),
partially offset by higher commodity costs. S&D as a percentage of
sales declined due to reduced transportation costs resulting from
strong productivity initiatives.
EUROPE
Heinz Europe sales increased 3.0%. Pricing increased 1.7%, driven
by value-added innovation and reduced promotions on Heinz(R) soup and
pasta meals in the UK and in the Italian infant nutrition business.
While the regions' volume declined 2.4% including the impact of one
less week in the fiscal year, there were important volume improvements
in ketchup, Heinz(R) beans and Weight Watchers(R) branded products.
These were offset by Heinz(R) soup in the UK and market softness in
non-Heinz Russian products and the non-branded European frozen
businesses. Net divestitures reduced sales 3.7%, and favorable
exchange translation rates increased sales by 7.3%.
Adjusted operating income increased 7.6% due to higher pricing,
the favorable impact of exchange translation rates and reduced general
and administrative expenses ("G&A"), partially offset by increased
marketing and by increased raw potato and other manufacturing costs in
our frozen food business. The decrease in G&A is chiefly a result of
prior year targeted workforce reductions, including the elimination of
European headquarters.
ASIA/PACIFIC
Sales in Asia/Pacific increased 7.6%. Volume increased sales 4.2%,
as a result of strong performance in Australia, New Zealand and China,
reflecting increased brand marketing and new product introductions.
Higher pricing increased sales 2.1%, mainly in response to commodity
costs related to Indonesian sauces and drinks. Adjusted operating
income increased 20.8% as a result of strong volume and margin
improvement.
REST OF WORLD
Sales for Rest of World increased 2.9%. Volume increased 6.1% due
primarily to market and share growth in nutritional drinks in India
and sales growth in ketchup and baby food in Latin America. Pricing
increased sales by 7.6% reflecting new product introductions and
reduced promotions on ketchup as well as price increases on baby food
in Latin America. Divestitures reduced sales 8.8% and foreign exchange
translation rates reduced sales 1.9%. Adjusted operating income
increased 17.8% due to increased volume and higher pricing.
FOURTH QUARTER HIGHLIGHTS
Solid fourth quarter results were in line with Heinz's
expectations given one less week in the quarter which reduced order
days by approximately 7% (2% for the full year). Heinz's top 15 brands
grew sales 4.4% as a result of innovation and increased investment in
marketing.
During the fourth quarter, the Company substantially increased its
marketing spend (+44%) as Heinz invested in future growth to support
its upcoming robust new product pipeline. This spending was weighted
heavily to the North American retail business which doubled its
marketing investment from a year ago to drive brand awareness and
trial as the Company enters the new Fiscal Year.
In the quarter, sales increased by 0.6% as our healthy business
momentum offset the one less week in the quarter compared to the
previous year. Operating income equaled last year's operating income
from continuing operations despite an increase in consumer marketing
of $32 million in the fourth quarter. The effective tax rate in the
quarter was 35.8%. EPS was $0.55 in the fourth quarter compared to
$0.54 in the fourth quarter last year, excluding prior year special
items.
Heinz reported net income of $181.0 million, compared to net
income of $167.9 million in the same period in the prior year.
FISCAL YEAR 2008 OUTLOOK
Looking ahead to Fiscal 2008, Heinz forecasts sales growth of
around 4%, operating income growth of 7 to 9%, and an EPS range of
$2.54 to $2.60 (up 7 to 9%).
"Heinz is confident in its plans for sustaining momentum in Fiscal
2008 with a global pipeline of more than 200 consumer-validated new
products designed to meet consumer demands for convenient healthy
foods. We plan to support these initiatives with further increased
marketing of $30 to $40 million," said William R. Johnson. "By the end
of Fiscal Year 2008, we expect to have increased Heinz marketing spend
by around $100 million or approximately 40% from FY2006 levels."
Heinz expects its North American, Australian and New Zealand
businesses to deliver strong and predictable growth in Fiscal 2008,
and expects its emerging markets businesses in the RICIP and Latin
American markets to grow to more than $1 billion in sales, driven by
double-digit growth in China, India and Indonesia. Additionally, the
Company is encouraged by the building momentum in Europe.
With the May 2007 consolidation of the U.S. Foodservice and North
American Consumer Products business under Executive Vice President,
Dave Moran's leadership, Heinz expects to see improved results from
the U.S. Foodservice business in the second half of Fiscal 2008.
As Heinz previously announced on June 1, 2006, the Company expects
to exit four to six manufacturing facilities in FY08 and will pursue
additional global sourcing opportunities.
Heinz will also continue to develop and improve its talent. "I am
confident we have one of the best senior management teams in the
consumer goods industry," Mr. Johnson said. "Our focus now is on
developing our bench strength in the middle management ranks in each
business unit through enhanced training, retention, and recruitment to
ensure optimal execution of our business strategies."
"Encouragingly, our more than 30,000 people across the world are
collaborating more than ever to share their best ideas for product and
process improvements."
MEETING WITH SECURITIES ANALYSTS - INTERNET BROADCASTS
Heinz will host its 2007 investment and analyst presentation today
at 8:30 a.m. (Eastern Time). The presentation will be webcast live on
www.heinz.com and will be archived for playback beginning at 2 p.m.
The presentation is available live for Media (listen only) at (866)
648-9952.
The meeting will be hosted by William R. Johnson - Chairman,
President and Chief Executive Officer; Art Winkleblack - EVP and Chief
Financial Officer; David Moran - EVP, President & CEO, Heinz North
America; Scott O'Hara - EVP, President & CEO, Heinz Europe; and
Margaret Nollen - Vice President, Investor Relations.
SAFE HARBOR PROVISIONS FOR FORWARD-LOOKING STATEMENTS:
This press release contains forward-looking statements within the
meaning of the "safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995. Forward-looking statements are
generally identified by the words "will," "expects," "anticipates,"
"believes," "estimates" or similar expressions and include our
expectations as to future revenue growth, earnings, capital
expenditures and other spending, as well as anticipated reductions in
spending. These forward-looking statements reflect management's view
of future events and financial performance. These statements are
subject to risks, uncertainties, assumptions and other important
factors, many of which may be beyond Heinz's control, and could cause
actual results to differ materially from those expressed or implied in
these forward-looking statements. Factors that could cause actual
results to differ from such statements include, but are not limited
to:
-- sales, earnings, and volume growth,
-- general economic, political, and industry conditions,
-- competitive conditions, which affect, among other things,
customer preferences and the pricing of products, production,
energy and raw material costs,
-- the availability of raw materials and packaging,
-- the ability to identify and anticipate and respond through
innovation to consumer trends,
-- the need for product recalls,
-- the ability to maintain favorable supplier relationships,
-- currency valuations and interest rate fluctuations,
-- changes in credit ratings,
-- the ability to identify and complete and the timing, pricing
and success of acquisitions, joint ventures, divestitures and
other strategic initiatives,
-- approval of acquisitions and divestitures by competition
authorities, and satisfaction of other legal requirements,
-- the ability to successfully complete cost reduction programs,
-- the ability to effectively integrate acquired businesses, new
product and packaging innovations,
-- product mix,
-- the effectiveness of advertising, marketing, and promotional
programs,
-- supply chain efficiency,
-- cash flow initiatives,
-- risks inherent in litigation, including tax litigation, and
international operations, particularly the performance of
business in hyperinflationary environments,
-- changes in estimates in critical accounting judgments and
changes in laws and regulations, including tax laws,
-- the success of tax planning strategies,
-- the possibility of increased pension expense and contributions
and other people-related costs,
-- the potential adverse impact of natural disasters, such as
flooding and crop failures,
-- the ability to implement new information systems; and
-- other factors described in "Risk Factors" and "Cautionary
Statement Relevant to Forward-Looking Information" in the
Company's Form 10-K for the fiscal year ended May 3, 2006.
The forward-looking statements are and will be based on
management's then current views and assumptions regarding future
events and speak only as of their dates. The Company undertakes no
obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or
otherwise, except as required by the securities laws.
ABOUT HEINZ: H. J. Heinz Company, offering "Good Food Every
Day"(TM) is one of the world's leading marketers and producers of
nutritious foods in ketchup, condiments, sauces, meals, soups, snacks
and infant foods. Heinz provides superior quality, taste and nutrition
to people eating at home, at restaurants, at the office and
"on-the-go." Heinz is a global family of leading brands, including
Heinz(R) ketchup, sauces, soups, beans, pasta and infant foods
(representing over one third of Heinz's total sales), Ore-Ida(R)
potato products, Weight Watchers(R) Smart Ones(R) entrees, Boston
Market(R) meals, T.G.I. Friday's(R) snacks, and Plasmon infant
nutrition. Heinz has number-one or number-two brands on five
continents, showcased by Heinz(R) ketchup, The World's Favorite
Ketchup(R). Information on Heinz is available at www.heinz.com.
H. J. Heinz Company and Subsidiaries
Consolidated Statements of Income
(In Thousands, Except per Share Amounts)
Fourth Quarter Ended Fiscal Year Ended
----------------------- -----------------------
May 2, 2007 May 3, 2006 May 2, 2007 May 3, 2006
FY 2007 FY 2006 FY 2007 FY 2006
----------- ----------- ----------- -----------
Sales $2,414,293 $2,399,652 $9,001,630 $8,643,438
Cost of products sold 1,492,524 1,593,629 5,608,730 5,550,364
----------- ----------- ----------- -----------
Gross profit 921,769 806,023 3,392,900 3,093,074
Selling, general and
administrative
expenses 554,009 557,873 1,946,185 1,979,462
----------- ----------- ----------- -----------
Operating income 367,760 248,150 1,446,715 1,113,612
Interest income 12,722 11,699 41,869 33,190
Interest expense 91,418 87,155 333,270 316,296
Asset impairment
charge for cost and
equity investments - 110,994 - 110,994
Other expense, net (6,895) (6,215) (30,915) (26,051)
----------- ----------- ----------- -----------
Income from continuing
operations before
income taxes 282,169 55,485 1,124,399 693,461
Provision for income
taxes 101,137 54,405 332,797 250,700
----------- ----------- ----------- -----------
Income from continuing
operations 181,032 1,080 791,602 442,761
Income/(loss) from
discontinued
operations, net of
tax - 166,829 (5,856) 202,842
----------- ----------- ----------- -----------
Net income $ 181,032 $ 167,909 $ 785,746 $ 645,603
=========== =========== =========== ===========
Income/(loss) per
common share -
Diluted
Continuing
operations $ 0.55 $ - $ 2.38 $ 1.29
Discontinued
operations - 0.50 (0.02) 0.59
----------- ----------- ----------- -----------
Net Income $ 0.55 $ 0.50 $ 2.36 $ 1.89
=========== =========== =========== ===========
Average common shares
outstanding - diluted 327,784 337,471 332,468 342,121
=========== =========== =========== ===========
Income/(loss) per
common share - Basic
Continuing
operations $ 0.56 $ - $ 2.41 $ 1.31
Discontinued
operations - 0.50 (0.02) 0.60
----------- ----------- ----------- -----------
Net Income $ 0.56 $ 0.50 $ 2.39 $ 1.90
=========== =========== =========== ===========
Average common shares
outstanding - basic 323,763 334,625 328,625 339,102
=========== =========== =========== ===========
Cash dividends per
share $ 0.35 $ 0.30 $ 1.40 $ 1.20
=========== =========== =========== ===========
Note: Fiscal 2006 includes special items.
(Totals may not add due to rounding)
H. J. Heinz Company and Subsidiaries
Segment Data
Fourth Quarter Ended Fiscal Year Ended
----------------------- -----------------------
May 2, 2007 May 3, 2006 May 2, 2007 May 3, 2006
FY 2007 FY 2006 FY 2007 FY 2006
----------- ----------- ----------- -----------
Net external sales:
North American
Consumer Products $ 737,770 $ 725,348 $2,739,527 $2,554,118
U.S. Foodservice 397,491 430,179 1,556,339 1,569,833
Europe 838,484 828,083 3,076,770 2,987,737
Asia/Pacific 316,309 297,564 1,201,928 1,116,864
Rest of World 124,239 118,478 427,066 414,886
----------- ----------- ----------- -----------
Consolidated Totals $2,414,293 $2,399,652 $9,001,630 $8,643,438
=========== =========== =========== ===========
Intersegment revenues:
North American
Consumer Products $ 12,739 $ 12,856 $ 51,204 $ 51,489
U.S. Foodservice 5,962 6,354 23,513 23,285
Europe 6,166 3,249 21,308 12,455
Asia/Pacific 915 602 4,225 2,304
Rest of World 293 901 1,569 1,843
Non-Operating (26,075) (23,962) (101,819) (91,376)
----------- ----------- ----------- -----------
Consolidated Totals $ - $ - $ - $ -
=========== =========== =========== ===========
Operating income
(loss):
North American
Consumer Products $ 154,634 $ 157,978 $ 625,675 $ 583,367
U.S. Foodservice 47,179 22,726 216,115 177,292
Europe 155,723 89,421 566,362 414,178
Asia/Pacific 32,762 31,467 135,782 85,211
Rest of World 18,310 11,562 53,879 17,854
Non-Operating (40,848) (65,004) (151,098) (164,290)
----------- ----------- ----------- -----------
Consolidated Totals $ 367,760 $ 248,150 $1,446,715 $1,113,612
=========== =========== =========== ===========
Operating income
(loss) excluding
special items:
North American
Consumer Products $ 154,634 $ 162,141 $ 625,675 $ 589,958
U.S. Foodservice 47,179 50,436 216,115 212,053
Europe 155,723 153,913 566,362 526,372
Asia/Pacific 32,762 31,765 135,782 112,440
Rest of World 18,310 18,688 53,879 45,732
Non-Operating (40,848) (48,847) (151,098) (136,564)
----------- ----------- ----------- -----------
Consolidated Totals $ 367,760 $ 368,096 $1,446,715 $1,349,991
=========== =========== =========== ===========
The company's revenues are generated via the
sale of products in the following categories:
Ketchup and Sauces $ 975,960 $ 985,223 $3,682,102 $3,530,346
Meals and Snacks 1,077,453 1,055,505 4,026,168 3,876,743
Infant Foods 266,157 265,313 929,075 863,943
Other 94,723 93,611 364,285 372,406
----------- ----------- ----------- -----------
Total $2,414,293 $2,399,652 $9,001,630 $8,643,438
=========== =========== =========== ===========
H. J. Heinz Company and Subsidiaries
Special Items - Fourth Quarter Ended May 3, 2006
The Company reports its financial results in accordance with
accounting principles generally accepted in the United States of
America ("GAAP"). However, management believes that certain non-GAAP
performance measures and ratios, used in managing the business, may
provide users of this financial information with additional
meaningful comparisons between current results and results in prior
periods. Non-GAAP financial measures should be viewed in addition to,
and not as an alternative for, the Company's reported results
prepared in accordance with GAAP. The following table provides a
reconciliation of the Company's reported results from continuing
operations to the results excluding special items for the fourth
quarter ended May 3, 2006:
Fourth Quarter Ended May 3, 2006
----------------------------------------------
Income
from
Net Gross Operating Continuing Per
(amounts in millions) Sales Profit Income Operations Share
--------- ------- --------- ---------- -------
Reported results from
continuing operations $2,399.7 $806.0 $248.2 $ 1.1 $ 0.00
Separation, downsizing
and integration - 8.1 58.7 26.1 0.08
Net loss on disposals
& impairments - 61.8 61.3 51.2 0.15
Asset impairment
charges for cost and
equity investments - - - 105.6 0.31
American Jobs Creation
Act - - - (3.3) (0.01)
--------- ------- --------- ---------- -------
Results from continuing
operations excluding
special items $2,399.7 $876.0 $368.1 $180.7 $ 0.54
========= ======= ========= ========== =======
(Note: Totals may not add due to rounding.)
H. J. Heinz Company and Subsidiaries
Special Items - Fiscal Year Ended May 3, 2006
The Company reports its financial results in accordance with
accounting principles generally accepted in the United States of
America ("GAAP"). However, management believes that certain non-GAAP
performance measures and ratios, used in managing the business, may
provide users of this financial information with additional
meaningful comparisons between current results and results in prior
periods. Non-GAAP financial measures should be viewed in addition to,
and not as an alternative for, the Company's reported results
prepared in accordance with GAAP. The following table provides a
reconciliation of the Company's reported results from continuing
operations to the results excluding special items for the fiscal year
ended May 3, 2006:
Fiscal Years Ended May 3, 2006
-----------------------------------------------
Income
from
Net Gross Operating Continuing Per
(amounts in millions) Sales Profit Income Operations Share
--------- --------- --------- ---------- ------
Reported results from
continuing operations $8,643.4 $3,093.1 $1,113.6 $ 442.8 $1.29
Separation,
downsizing and
integration - 17.4 146.7 96.6 0.28
Net loss on disposals
& impairments - 74.1 89.7 48.3 0.14
Asset impairment
charges for cost and
equity investments - - - 105.6 0.31
American Jobs
Creation Act - - - 24.4 0.07
--------- --------- --------- ---------- ------
Results from
continuing operations
excluding special
items $8,643.4 $3,184.6 $1,350.0 $ 717.7 $2.10
========= ========= ========= ========== ======
(Note: Totals may not add due to rounding.)
H. J. Heinz Company and Subsidiaries
Non-GAAP Performance Ratios
The Company reports its financial results in accordance with
accounting principles generally accepted in the United States of
America ("GAAP"). However, management believes that certain non-GAAP
performance measures and ratios, used in managing the business, may
provide users of this financial information with additional
meaningful comparisons between current results and results in prior
periods. Non-GAAP financial measures should be viewed in addition to,
and not as an alternative for, the Company's reported results
prepared in accordance with GAAP. The following table provides the
calculation of the non-GAAP performance ratio discussed in the
Company's press release dated May 31, 2007:
Operating Free Cash Flow Calculation
(amounts in thousands) Fourth Quarter Ended Fiscal Year Ended
----------------------- -----------------------
May 2, 2007 May 3, 2006 May 2, 2007 May 3, 2006
FY 2007 FY 2006 FY 2007 FY 2006
----------- ----------- ----------- -----------
Cash provided by
operating activities $672,623 $572,041 $1,062,288 $1,074,961
Capital expenditures (94,046) (79,560) (244,562) (230,577)
Proceeds from
disposals of
property, plant and
equipment 18,811 14,218 60,661 19,373
----------- ----------- ----------- -----------
Operating Free
Cash Flow $597,388 $506,699 $ 878,387 $ 863,757
=========== =========== =========== ===========
CONTACT: H. J. Heinz Company
Media:
Ted Smyth, 412-456-5780
Michael Mullen, 412-456-5751
Michael.mullen@us.hjheinz.com
or
Investors:
Margaret Nollen, 412-456-1048
SOURCE: H. J. Heinz Company
|
H.J. Heinz Company
