<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended July 27, 1994
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from __________________ to __________________
For the Three Months Ended July 27, 1994 Commission File Number 1-3385
H. J. HEINZ COMPANY
(Exact name of registrant as specified in its charter)
PENNSYLVANIA 25-0542520
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
600 Grant Street, Pittsburgh, Pennsylvania 15219
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: 412-456-5700
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
requirements for the past 90 days. Yes X No
--- ---
The number of shares of the Registrant's Common Stock, par value $.25 per
share, outstanding as of August 31, 1994, was 246,611,779 shares.
<PAGE>
PART I--FINANCIAL INFORMATION
Item 1. Financial Statements.
H. J. HEINZ COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
July 27, 1994 July 28, 1993
------------- -------------
FY 1995 FY 1994
(Unaudited)
(In Thousands, Except
per Share Amounts)
<S> <C> <C>
Sales.......................................................................... $ 1,736,098 $ 1,583,312
Cost of products sold.......................................................... 1,101,450 963,338
------------- --------------
Gross profit................................................................... 634,648 619,974
Selling, general and administrative expenses................................... 347,894 346,761
------------- --------------
Operating income............................................................... 286,754 273,213
Interest income................................................................ 9,361 8,513
Interest expense............................................................... 40,710 39,168
Other expense, net............................................................. 7,860 8,375
------------- --------------
Income before income taxes..................................................... 247,545 234,183
Provision for income taxes..................................................... 92,829 82,004
------------- --------------
Net income..................................................................... $ 154,716 $ 152,179
============= ==============
Net income per share........................................................... $ .62 $ .59
============= ==============
Cash dividends per share....................................................... $ .33 $ .30
============= ==============
Average shares for earnings per share.......................................... 251,237 258,710
============= ==============
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
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2
<PAGE>
H. J. HEINZ COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
July 27, 1994 April 27, 1994*
------------- --------------
FY 1995 FY 1994
(Unaudited)
(Thousands of Dollars)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents..................................................... $ 90,715 $ 98,536
Short-term investments, at cost which approximates market..................... 71,603 43,868
Receivables, net.............................................................. 809,318 812,501
Inventories................................................................... 1,171,957 1,145,747
Prepaid expenses and other current assets..................................... 200,827 190,878
------------- --------------
Total current assets..................................................... 2,344,420 2,291,530
------------- --------------
Property, plant and equipment................................................. 3,616,347 3,442,940
Less accumulated depreciation................................................. 1,338,584 1,275,213
------------- --------------
Total property, plant and equipment, net................................. 2,277,763 2,167,727
------------- --------------
Investments, advances and other assets........................................ 543,290 579,420
Goodwill, net................................................................. 1,000,335 992,994
Other intangibles, net........................................................ 477,822 349,475
------------- --------------
Total other noncurrent assets............................................ 2,021,447 1,921,889
------------- --------------
Total assets............................................................. $ 6,643,630 $ 6,381,146
============= ==============
</TABLE>
*Summarized from audited fiscal year 1994 balance sheet.
See Notes to Condensed Consolidated Financial Statements.
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3
<PAGE>
H. J. HEINZ COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
July 27, 1994 April 27, 1994*
------------- --------------
FY 1995 FY 1994
(Unaudited)
(Thousands of Dollars)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Short-term debt............................................................... $ 688,487 $ 416,372
Portion of long-term debt due within one year................................. 41,014 23,329
Accounts payable.............................................................. 525,058 575,269
Salaries and wages............................................................ 64,408 72,312
Accrued marketing............................................................. 92,776 105,102
Other accrued liabilities..................................................... 319,204 369,443
Income taxes.................................................................. 120,966 130,535
------------- --------------
Total current liabilities................................................ 1,851,913 1,692,362
------------- --------------
Long-term debt................................................................ 1,761,231 1,727,002
Deferred income taxes......................................................... 262,633 248,630
Non-pension postretirement benefits........................................... 218,731 217,044
Other liabilities............................................................. 163,730 157,557
------------- --------------
Total long-term debt and other liabilities............................... 2,406,325 2,350,233
------------- --------------
Shareholders' Equity:
Capital stock................................................................. 72,239 72,248
Additional capital............................................................ 168,011 170,179
Retained earnings............................................................. 3,706,152 3,633,385
Cumulative translation adjustments............................................ (217,938) (264,119)
------------- --------------
3,728,464 3,611,693
Less:
Treasury stock at cost (40,397,029 shares at July 27, 1994 and 38,359,744
shares at April 27, 1994)................................................ 1,311,372 1,239,177
Unearned compensation relating to the ESOP.................................. 31,700 33,965
------------- --------------
Total shareholders' equity............................................... 2,385,392 2,338,551
------------- --------------
Total liabilities and shareholders' equity............................... $ 6,643,630 $ 6,381,146
============= ==============
</TABLE>
*Summarized from audited fiscal year 1994 balance sheet.
See Notes to Condensed Consolidated Financial Statements.
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4
<PAGE>
H. J. HEINZ COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
July 27, 1994 July 28, 1993
------------- -------------
FY 1995 FY 1994
(Unaudited)
(Thousands of Dollars)
<S> <C> <C>
Cash Provided by Operating Activities......................................... $ 105,761 $ 206,259
------------- -------------
Cash Flows from Investing Activities:
Capital expenditures..................................................... (60,626) (71,242)
Acquisitions, net of cash acquired....................................... (209,411) (90,120)
Proceeds from divestitures............................................... -- 38,834
Purchases of short-term investments...................................... (855,105) (62,744)
Sales and maturities of short-term investments........................... 851,004 496
Other items, net......................................................... (3,993) (11,883)
------------- -------------
Cash used for investing activities.................................. (278,131) (196,659)
------------- -------------
Cash Flows from Financing Activities:
Proceeds from short-term debt, net....................................... 315,454 45,302
Dividends................................................................ (81,949) (76,299)
Purchases of treasury stock.............................................. (89,086) (42,772)
Proceeds from borrowings against insurance policies...................... 70,930 65,264
Repayments of borrowings against insurance policies...................... (68,898) --
Other items, net......................................................... 14,216 (2,890)
------------- -------------
Cash provided by (used for) financing activities.................... 160,667 (11,395)
------------- -------------
Effect of exchange rate changes on cash and cash equivalents.................. 3,882 (1,407)
------------- -------------
Net decrease in cash and cash equivalents..................................... (7,821) (3,202)
Cash and cash equivalents at beginning of year................................ 98,536 68,432
------------- -------------
Cash and cash equivalents at end of period.................................... $ 90,715 $ 65,230
============= =============
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
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5
<PAGE>
H. J. HEINZ COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) The Management's Discussion and Analysis of Financial Condition and Results
of Operations which follows these notes contains additional information on
the results of operations and the financial position of the company. Those
comments should be read in conjunction with these notes. The company's
annual report on Form 10-K for the fiscal year ended April 27, 1994
includes additional information about the company, its operations, and its
financial position, and should be read in conjunction with this quarterly
report on Form 10-Q.
(2) The results for the interim periods are not necessarily indicative of the
results to be expected for the full fiscal year due to the seasonal nature
of the company's business. Certain prior year amounts have been
reclassified in order to conform with the fiscal 1995 presentation.
(3) In the opinion of management, all adjustments, which are of a normal and
recurring nature, necessary for a fair statement of the results of
operations of these interim periods have been included.
(4) The composition of inventories at the balance sheet dates was as follows:
<TABLE>
<CAPTION>
July 27, 1994 April 27, 1994
------------- -------------
<S> <C> <C>
(Thousands of Dollars)
Finished goods and work-in-process....................................... $ 869,710 $ 851,944
Packaging material and ingredients....................................... 302,247 293,803
------------- -------------
$ 1,171,957 $ 1,145,747
============= =============
</TABLE>
(5) The provision for income taxes consists of provisions for federal, state,
U.S. possessions and foreign income taxes. The company operates in an
international environment with significant operations in various locations
outside the United States. Accordingly, the consolidated income tax rate is
a composite rate reflecting the earnings in the various locations and the
applicable tax rates.
(6) On September 6, 1994, the company replaced its line of credit agreements
supporting domestic commercial paper. The new line of credit agreements
total $1.6 billion, of which $800 million expires on September 5, 1995
unless otherwise extended and the remaining $800 million expires in
September 1999. As a result, $800 million of the $1.1 billion domestic
commercial paper outstanding is classified as long-term debt at July 27,
1994. Fiscal year 1994 domestic line of credit agreements of $1.5 billion
have been terminated. As of fiscal year end 1994, $750 million of domestic
commercial paper was classified as long-term debt.
(7) On May 16, 1994, the company acquired the Borden Foodservice Group, a unit
of Borden, Inc. The group's product range includes a single-serve line of
condiments. On July 22, 1994, the company announced the completion of the
acquisition of the Farley's infant food and adult nutrition business from
The Boots Company PLC of Nottingham, England for a total purchase price of
approximately $140 million. Farley's product offerings include a wide range
of infant feeding products from formulas to post-weaning biscuits, cereals
and dry meals. During the first quarter of fiscal 1995, the company also
made other small acquisitions.
All of the above acquisitions have been accounted for as purchases and,
accordingly, the respective purchase prices have been allocated to the
respective assets and liabilities based on their estimated fair values as
of the dates of the acquisitions. Operating results of these acquisitions
have been included in the Consolidated Statements of Income from the dates
of the acquisitions. Pro forma results of the company, assuming the
above-noted acquisitions had been made at the beginning of each period
presented, would not be materially different from the results reported.
6
<PAGE>
H. J. HEINZ COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Unaudited)
(8) On August 9, 1994, the company entered into an agreement with Glaxo India
Limited, based in Bombay, to acquire Glaxo's Family Products Division,
which produces a wide range of nutritional drinks, baby foods and other
consumer products. All necessary corporate approvals to complete the
transaction have been obtained, but the closing is subject to final
governmental approvals.
7
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
THREE MONTHS ENDED JULY 27, 1994 AND JULY 28, 1993
Results of Operations
For the three months ended July 27, 1994, sales increased $152.8 million or
10% to $1,736.1 million from $1,583.3 million recorded in the same period a year
ago. The sales increase came primarily from volume increases of 7%,
acquisitions, net of divestitures of 2% and price increases of one percent. The
effect of foreign exchange translation rates was negligible on the results of
the quarter.
Volume increases were noted in many of the company's core products, such as
StarKist tuna, Heinz grocery ketchup, Heinz petfoods, Ore-Ida frozen potatoes
and foodservice, which exhibited strong growth in Heinz ketchup.
Price increases on Heinz grocery ketchup, Heinz babyfood and Ore-Ida
foodservice frozen potatoes were partially offset by price decreases in Heinz
petfoods, Heinz beans and Heinz pasta.
Although the Weight Watchers businesses (meetings and foods) were down
slightly for the quarter, recent indicators show that the downward trend
experienced throughout last year is slowing. Attendance increased in markets
where new marketing programs were tested and, as a result, it is expected that
both of these businesses will exhibit improved performance when the marketing
programs are fully implemented later this year.
Gross profit increased $14.7 million to $634.6 million from $620.0 million
a year ago. The ratio of gross profit to sales decreased 2.6% to 36.6%. The
current year's gross profit ratio was negatively impacted by an unfavorable
profit mix related to recent acquisitions and divestitures and higher
foodservice sales, partially offset by lower costs and operating improvements
resulting from the implementation of the restructuring strategy. The prior
year's gross profit ratio was favorably impacted by the divestiture of the
Chico-San rice cake business and lower costs associated with restructuring
projects.
Operating income increased $13.5 million or 5.0% to $286.8 million from
$273.2 million for the same period last year. The increase in operating income
is directly attributable to the increase in gross profit. Selling, general and
administrative expenses increased by $1.1 million but decreased slightly as a
percentage of net sales, reflecting lower administrative costs, offset by higher
volume-driven selling and distribution costs.
Net interest expense increased slightly to $31.3 million from $30.7 million
in the first quarter a year ago mainly due to higher average short-term
borrowings and higher short-term interest rates, offset by the favorable effect
of the refinancing of certain long-term debt issuances.
Net income for the current quarter was $154.7 million compared to $152.2
million for the same period last year and earnings per share was $0.62 compared
to $0.59. The effective tax rate for the first quarter increased to 37.5% from
35.0%. The fiscal 1994 effective tax rate of 35.0% resulted from the recognition
of the benefits attributable to prior years' operating losses overseas and a
reduction in the statutory rate in Australia. The reduction in the number of
common shares outstanding offset the effect of the higher tax rate on earnings
per share.
Liquidity and Financial Position
Cash provided by operating activities totaled $105.8 million for the three
month period ended July 27, 1994 compared to $206.3 million last year. Cash
provided by operations in the first quarter of the prior year benefited from a
$249.4 million reduction in receivables related to the company's trade
"de-loading" strategy.
Cash used by investing activities required $278.1 million compared to
$196.7 million last year. Cash used for acquisitions in the current quarter
totaled $209.4 million and resulted from the following
8
<PAGE>
acquisitions: Farley's infant foods and adult nutrition business from The Boots
Company PLC on July 22, 1994; the Borden Foodservice Group, a unit of Borden,
Inc.; DEGA, a foodservice products company located in Italy; and other smaller
acquisitions. The prior year's acquisitions included the purchase of the Moore's
and Domani product lines from the Clorox Company for approximately $90.0
million, which was partially offset by the proceeds received from the
divestiture of Chico-San and other small businesses. Purchases of property,
plant and equipment totaled $60.6 million, compared to $71.2 million a year ago.
Financing activities provided $160.7 million in the current quarter
compared to using $11.4 million a year ago. Net proceeds on short-term debt
provided $315.5 million in the current period versus providing $45.3 million in
the prior year's first quarter. Short-term debt proceeds were used to finance
treasury stock purchases of $89.1 million (2.7 million shares) and dividend
payments of $81.9 million in the quarter ended July 27, 1994. As of July 27,
1994, the company has repurchased approximately 8.7 million shares of the
currently authorized 10.0 million share repurchase program.
On September 6, 1994, the company replaced its line of credit agreements
supporting domestic commercial paper. The new line of credit agreements total
$1.6 billion, of which $800 million expires on September 5, 1995 unless
otherwise extended and the remaining $800 million expires in September 1999. As
a result, $800 million of the $1.1 billion domestic commercial paper
outstanding is classified as long-term debt at July 27, 1994. Fiscal year 1994
domestic line of credit agreements of $1.5 billion have been terminated. As of
fiscal year end 1994, $750 million of domestic commercial paper was classified
as long-term debt.
The company's financial position continues to remain strong, enabling it to
meet cash requirements for operations, capital expansion programs and dividends
to shareholders.
Recent Development
On August 9, 1994, the company entered into an agreement with Glaxo India
Limited, based in Bombay, to acquire Glaxo's Family Products Division, which
produces a wide range of nutritional drinks, baby foods and other consumer
products. All necessary corporate approvals to complete the transaction
have been obtained, but the closing is subject to final governmental approvals.
The transaction is expected to close during the second quarter of fiscal 1995.
9
<PAGE>
PART II--OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Mayaguez Water Treatment Company, Inc. ("MWTC"), an indirect 70%-owned
subsidiary of the Company, has been advised that the Puerto Rico Environmental
Quality Board is contemplating initiating proceedings against MWTC which could
result in a fine being assessed in excess of $100,000 as a consequence of
violations of an administrative order relating to MWTC's NPDES permit at its
Mayaguez, Puerto Rico facility.
ITEM 2. CHANGES IN SECURITIES
Nothing to report under this item.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Nothing to report under this item.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Nothing to report under this item.
ITEM 5. OTHER INFORMATION
Nothing to report under this item.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits required to be furnished by Item 601 of Regulation S-K are
listed below and are filed as part hereof. The Registrant has omitted
certain exhibits in accordance with Item 601(b)(4)(iii)(A) of Regulation
S-K. The Registrant agrees to furnish such documents to the Commission upon
request. 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.
11. Computation of net income per share.
27. Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended July 27, 1994.
10
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
H. J. HEINZ COMPANY
(Registrant)
/s/ DAVID R. WILLIAMS
Date: September 12, 1994 By.........................................
David R. Williams
Senior Vice President-Finance and
Chief Financial Officer
(Principal Financial Officer)
/s/ TRACY E. QUINN
Date: September 12, 1994 By.........................................
Tracy E. Quinn
Corporate Controller
(Principal Accounting Officer)
11
<PAGE>
EXHIBIT 11
H. J. Heinz Company and Subsidiaries
COMPUTATION OF NET INCOME PER SHARE
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
----------------------
July 27, July 28,
1994 1993
---------- ----------
FY 1995 FY 1994
<S> <C> <C>
Primary income per share:
Net income.......................................................................... $ 154,716 $ 152,179
Preferred dividends................................................................. 17 18
---------- ----------
Net income applicable to common stock............................................... $ 154,699 $ 152,161
========== ==========
Average common shares outstanding and common stock equivalents...................... 251,237 258,710
========== ==========
Net income per share--primary....................................................... $ .62 $ .59
========== ==========
Fully diluted income per share:
Net income.......................................................................... $ 154,716 $ 152,179
========== ==========
Average common shares outstanding and common stock equivalents...................... 251,237 258,710
Additional common shares assuming:
Conversion of $1.70 third cumulative preferred stock.............................. 360 387
Additional common shares assuming options were exercised
at the period-end market price................................................. 124 13
---------- ----------
Average common shares outstanding and common stock equivalents...................... 251,721 259,110
========== ==========
Net income per share--fully diluted............................................... $ .61 $ .59
========== ==========
</TABLE>
All amounts in thousands except per share amounts.
------------------
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
Form 10-Q for the Period Ended July 27, 1994 and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> QTR-1
<FISCAL-YEAR-END> MAY-03-1995
<PERIOD-START> APR-28-1994
<PERIOD-END> JUL-27-1994
<CASH> 90,715
<SECURITIES> 71,603
<RECEIVABLES> 809,318
<ALLOWANCES> 0
<INVENTORY> 1,171,957
<CURRENT-ASSETS> 2,344,420
<PP&E> 3,616,347
<DEPRECIATION> 1,338,584
<TOTAL-ASSETS> 6,643,630
<CURRENT-LIABILITIES> 1,851,913
<BONDS> 1,761,231
<COMMON> 71,850
0
389
<OTHER-SE> 2,313,153
<TOTAL-LIABILITY-AND-EQUITY> 6,643,630
<SALES> 1,736,098
<TOTAL-REVENUES> 1,736,098
<CGS> 1,101,450
<TOTAL-COSTS> 1,101,450
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 40,710
<INCOME-PRETAX> 247,545
<INCOME-TAX> 92,829
<INCOME-CONTINUING> 154,716
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 154,716
<EPS-PRIMARY> 0.62
<EPS-DILUTED> 0.61
</TABLE>
