<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 JANUARY 25, 1995
OR
[X] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ------------------ TO ------------------
FOR THE NINE MONTHS ENDED JANUARY 25, 1995 COMMISSION FILE NUMBER 1-3385
H. J. HEINZ COMPANY
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
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)
</TABLE>
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 February 22, 1995, was 243,494,218 shares.
<PAGE>
PART I--FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
H. J. HEINZ COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Nine Months Nine Months
Ended Ended
January 25, 1995 January 26, 1994
---------------- ----------------
FY 1995 FY 1994
(Unaudited)
(In Thousands, Except
per Share Amounts)
<S> <C> <C>
Sales.................................................................... $5,665,334 $5,101,250
Cost of products sold.................................................... 3,603,479 3,161,123
---------- ----------
Gross profit............................................................. 2,061,855 1,940,127
Selling, general and administrative expenses............................. 1,228,604 1,199,141
Gain on sale of confectionery and specialty rice business................ -- 127,001
---------- ----------
Operating income......................................................... 833,251 867,987
Interest income.......................................................... 25,655 25,455
Interest expense......................................................... 141,576 111,884
Other expense, net....................................................... 30,395 23,439
---------- ----------
Income before income taxes............................................... 686,935 758,119
Provision for income taxes............................................... 254,360 284,248
---------- ----------
Net income............................................................... $ 432,575 $ 473,871
========== ==========
Net income per share..................................................... $ 1.74 $ 1.84
========== ==========
Cash dividends per share................................................. $ 1.05 $ .96
========== ==========
Average common shares outstanding........................................ 248,933 257,527
========== ==========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
------------------
2
<PAGE>
H. J. HEINZ COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
January 25, 1995 January 26, 1994
---------------- ----------------
FY 1995 FY 1994
(Unaudited)
(In Thousands, Except
per Share Amounts)
<S> <C> <C>
Sales.................................................................... $1,953,855 $1,710,209
Cost of products sold.................................................... 1,232,404 1,039,063
---------- ----------
Gross profit............................................................. 721,451 671,146
Selling, general and administrative expenses............................. 447,078 423,804
---------- ----------
Operating income......................................................... 274,373 247,342
Interest income.......................................................... 9,021 10,487
Interest expense......................................................... 55,315 37,138
Other expense, net....................................................... 12,037 5,459
---------- ----------
Income before income taxes............................................... 216,042 215,232
Provision for income taxes............................................... 77,775 86,665
---------- ----------
Net income............................................................... $ 138,267 $ 128,567
========== ==========
Net income per share..................................................... $ .56 $ .50
========== ==========
Cash dividends per share................................................. $ .36 $ .33
========== ==========
Average common shares outstanding........................................ 248,933 257,527
========== ==========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
------------------
3
<PAGE>
H. J. HEINZ COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
January 25, 1995 April 27, 1994*
---------------- ---------------
FY 1995 FY 1994
(Unaudited)
(Thousands of Dollars)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................................ $ 116,120 $ 98,536
Short-term investments, at cost which
approximates market.................................................... 68,549 43,868
Receivables, net......................................................... 875,925 812,501
Inventories.............................................................. 1,400,081 1,145,747
Prepaid expenses and other current assets................................ 234,268 190,878
---------- ----------
Total current assets................................................ 2,694,943 2,291,530
---------- ----------
Property, plant and equipment............................................ 3,886,149 3,442,940
Less accumulated depreciation............................................ 1,494,556 1,275,213
---------- ----------
Total property, plant and equipment, net............................ 2,391,593 2,167,727
---------- ----------
Investments, advances and other assets................................... 567,896 579,420
Goodwill, net............................................................ 1,149,514 992,994
Other intangibles, net................................................... 525,720 349,475
---------- ----------
Total other noncurrent assets....................................... 2,243,130 1,921,889
---------- ----------
Total assets........................................................ $7,329,666 $6,381,146
========== ==========
</TABLE>
*Summarized from audited fiscal year 1994 balance sheet.
See Notes to Condensed Consolidated Financial Statements.
------------------
4
<PAGE>
H. J. HEINZ COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
January 25, 1995 April 27, 1994*
---------------- ---------------
FY 1995 FY 1994
(Unaudited)
(Thousands of Dollars)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Short-term debt.......................................................... $ 855,817 $ 416,372
Portion of long-term debt due within one year............................ 34,635 23,329
Accounts payable......................................................... 526,866 575,269
Salaries and wages....................................................... 69,907 72,312
Accrued marketing........................................................ 114,370 105,102
Other accrued liabilities................................................ 376,070 369,443
Income taxes............................................................. 112,428 130,535
---------- ----------
Total current liabilities........................................... 2,090,093 1,692,362
---------- ----------
Long-term debt........................................................... 2,094,567 1,727,002
Deferred income taxes.................................................... 311,286 248,630
Non-pension postretirement benefits...................................... 217,716 217,044
Other liabilities........................................................ 251,272 157,557
---------- ----------
Total long-term debt and other liabilities.......................... 2,874,841 2,350,233
---------- ----------
Shareholders' Equity:
Capital stock............................................................ 72,215 72,248
Additional capital....................................................... 166,332 170,179
Retained earnings........................................................ 3,808,140 3,633,385
Cumulative translation adjustments....................................... (191,649) (264,119)
---------- ----------
3,855,038 3,611,693
Less:
Treasury stock at cost (44,272,918 shares at January 25,
1995 and 38,359,744 shares at April 27, 1994)....................... 1,461,191 1,239,177
Unearned compensation relating to the ESOP............................. 29,115 33,965
---------- ----------
Total shareholders' equity.......................................... 2,364,732 2,338,551
---------- ----------
Total liabilities and shareholders' equity.......................... $7,329,666 $6,381,146
========== ==========
</TABLE>
*Summarized from audited fiscal year 1994 balance sheet.
See Notes to Condensed Consolidated Financial Statements.
------------------
5
<PAGE>
H. J. HEINZ COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine Months Nine Months
Ended Ended
January 25, 1995 January 26, 1994
---------------- ----------------
FY 1995 FY 1994
(Unaudited)
(Thousands of Dollars)
<S> <C> <C>
Cash Provided by Operating Activities.................................. $ 286,401 $ 445,631
----------- ---------
Cash Flows from Investing Activities:
Capital expenditures.............................................. (210,601) (195,102)
Acquisitions, net of cash acquired................................ (449,212) (97,575)
Proceeds from divestitures........................................ -- 255,574
Purchases of short-term investments............................... (1,368,048) (252,832)
Sales and maturities of short-term investments.................... 1,372,627 336,271
Other items, net.................................................. 14,303 5,344
----------- ---------
Cash (used for) provided by investing activities............. (640,931) 51,680
----------- ---------
Cash Flows from Financing Activities:
Proceeds from long-term debt...................................... 318,923 976
Payments on long-term debt........................................ (10,247) (23,543)
Proceeds (payments) on short-term debt, net....................... 471,194 (56,438)
Dividends......................................................... (257,820) (243,124)
Purchases of treasury stock....................................... (255,634) (110,651)
Proceeds from minority interest.................................. 56,971 --
Proceeds from borrowings against insurance policies............. 70,931 65,264
Repayments of borrowings against insurance policies............... (68,898) (65,264)
Other items, net.................................................. 33,497 23,472
----------- ---------
Cash provided by (used for) financing activities............. 358,917 (409,308)
----------- ---------
Effect of exchange rate changes on cash and cash
equivalents.......................................................... 13,197 (26,175)
----------- ---------
Net increase in cash and cash equivalents.............................. 17,584 61,828
Cash and cash equivalents at beginning of year......................... 98,536 68,432
----------- ---------
Cash and cash equivalents at end of period............................. $ 116,120 $ 130,260
=========== =========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
------------------
6
<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>
January 25, 1995 April 27, 1994
---------------- --------------
(Thousands of Dollars)
<S> <C> <C>
Finished goods and work-in-process................................... $1,025,253 $ 851,944
Packaging material and ingredients................................... 374,828 293,803
---------- ----------
$1,400,081 $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, at
which time it is anticipated that a new one year facility will be
established. The remaining $800 million expires in September 1999. As a
result, $800 million of the $1.3 billion domestic commercial paper is
classified as long-term debt as of January 25, 1995. 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.
On January 5, 1995, the company issued $300 million of three-year 8.0%
notes in the international capital markets. The proceeds from the notes
have been utilized to repay domestic commercial paper. The company entered
into an interest rate swap agreement that effectively converted the fixed
interest rate associated with the notes to a variable rate based on LIBOR.
Due to favorable market conditions, the interest rate swap agreement has
been terminated and the resulting gain will be amortized over the remaining
life of the notes, producing an effective borrowing rate of 7.3%.
(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 foods and adult nutrition business from
The Boots Company PLC of Nottingham, England for a total purchase
7
<PAGE>
H. J. HEINZ COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Unaudited)
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.
On September 30, 1994, the company acquired the Family Products Division of
Glaxo India Limited for a total purchase price of approximately $65
million. Glaxo's Family Products Division, based in Bombay, produces a wide
range of nutritional drinks, baby foods and other consumer products.
On December 2, 1994, the company acquired The All American Gourmet Company
for a total purchase price of approximately $200 million. All American
Gourmet produces The Budget Gourmet frozen meals and side dishes and was
formerly a part of Kraft General Foods, Inc. During 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 on a
preliminary basis 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.
(8) On September 13, 1994, the board of directors authorized the repurchase of
up to an additional 10.0 million shares of the company's common stock,
which may take place over an extended period of time. As of January 25,
1995, the company had repurchased approximately 3.2 million shares of the
currently authorized 10.0 million share repurchase program. The previous
10.0 million share repurchase program was completed during the second
quarter of fiscal 1995.
(9) On February 6, 1995, the company announced that it had signed an agreement
with The Quaker Oats Company to acquire all of its U.S. and Canadian pet
food businesses for $725 million. Among the major brands to be acquired in
this transaction are Kibbles'n Bits dry dog food; Gravy Train dry and
canned dog food (U.S. only); Ken-L Ration canned dog food; and Snausages,
Pup-Peroni and Pounce pet treats. Quaker's Pet Foods division records
annual North American sales of approximately $540 million; Heinz Pet
Products last year had sales of more than $600 million. The transaction
is expected to be completed on March 14, 1995.
It is anticipated that this acquisition will initially be funded primarily
through privately placed commercial paper borrowings supported by a new
$700 million line of credit agreement. The company is currently evaluating
alternative sources of financing to replace these commercial paper
borrowings on a long-term basis.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS
NINE MONTHS ENDED JANUARY 25, 1995 AND JANUARY 26, 1994
For the nine months ended January 25, 1995, sales increased $564.1 million or
11% to $5.67 billion from $5.10 billion recorded in the same period a year
ago. The sales increase came primarily from volume increases of 5% and
acquisitions, net of divestitures, of 5%. The impact of foreign currency
translation rates contributed approximately one percent to the sales dollar
increase, while increased prices added less than one percent.
Volume increases were noted in many of the company's grocery products, such as
StarKist tuna, Heinz sauces, Heinz grocery ketchup, Heinz petfoods, Ore-Ida
Bagel Bites and Heinz pasta. Foodservice products exhibited growth in Ore-Ida
frozen potatoes, Heinz foodservice ketchup, frozen bakery products and coated
products.
Price increases on Heinz babyfood and Ore-Ida frozen potatoes were offset by
price decreases in Weight Watchers brand frozen entrees, Heinz petfoods, Heinz
pasta and Heinz beans.
Gross profit increased $121.7 million to $2.06 billion from $1.94 billion a year
ago. The ratio of gross profit to sales decreased 1.6% to 36.4%. The current
year's gross profit ratio was negatively impacted by an unfavorable profit mix
related to recent acquisitions and divestitures, increased goodwill amortization
associated with acquisitions and higher foodservice sales. Operating
improvements resulting from the company's restructuring strategy had a positive
effect on gross profit. 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.
During the first nine months of fiscal 1995, the company continued with the
productivity improvement and cost reduction initiatives. Specifically, the
company transferred pickle and soup production from Canadian to U.S.
facilities and announced that it will close the Chef Francisco factory in
Eugene, Oregon, relocating production to other company facilities.
Cost synergies arising from the acquisition of the Borden Foodservice Group and
The All American Gourmet Company (which manufactures and markets The Budget
Gourmet brand of frozen meals and side dishes) have only been partially
realized. The company expects additional cost synergies from each of these
acquisitions going forward.
Operating income decreased $34.7 million or 4.0% to $833.3 million from $868.0
million for the same period last year. The decrease in operating income is
primarily attributable to the $127.0 million gain from the sale of the
confectionery and specialty rice businesses recorded in the prior year.
Exclusive of the gain, operating income increased $92.3 million, or 12.5%,
mainly due to the increase in gross profit. Selling, general and administrative
expenses increased by $29.5 million, but decreased as a percentage of net sales,
reflecting lower administrative and marketing costs. Selling and distribution
costs have remained comparable as a percentage of sales from period to period.
Net interest expense for the nine months ended January 25, 1995 increased to
$115.9 million from $86.4 million last year due mainly to higher short-term
interest rates combined with higher average borrowings resulting from
acquisitions and the company's share repurchase program.
Net income for the nine months ended January 25, 1995 was $432.6 million
compared to $473.9 million for the same period last year and earnings per share
was $1.74 compared to $1.84. The effective tax rate was 37.0% compared to 37.5%
for the same period last year. The fiscal 1994 effective tax rate of 37.5%
resulted from the recognition of the benefits attributable to prior years'
operating losses overseas and a reduction in the statutory rate in Australia.
The 1995 effective tax rate benefited from the recognition of tax benefits
primarily relating to overseas operations.
9
<PAGE>
Earnings per share benefited from the effect of a reduction in the number of
common shares outstanding resulting from the company's share repurchase
program.
The impact of fluctuating exchange rates on sales, as described above, remained
relatively consistent on a line-by-line basis throughout the Consolidated
Statements of Income for the periods presented.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JANUARY 25, 1995 AND JANUARY 26, 1994
For the three months ended January 25, 1995, sales increased $243.6 million or
14% to $1.95 billion from $1.71 billion recorded in the same period a year
ago. The increase is due to acquisitions, net of divestitures, of 7%, volume
gains of 4% and the effect of foreign exchange translation rates of 3%. The
effect of price increases was negligible on results for the quarter.
Volume increases were noted in many of the company's retail product lines, such
as StarKist tuna, Heinz grocery ketchup, Ore-Ida Bagel Bites and Heinz sauces.
Foodservice volumes continued to show growth in Heinz ketchup, Ore-Ida frozen
potatoes, frozen bakery products and coated products. These volume gains were
partially offset by volume declines in certain of Heinz United Kingdom's (U.K.)
core products.
Pricing was comparable to that of a year ago, with modest gains on a variety of
products offset by price declines in StarKist tuna, Weight Watchers brand frozen
entrees and in certain of Heinz U.K.'s core products.
Heinz U.K. is dealing with competitive pressures and a difficult trade
environment affecting both volume and pricing. In addition, unseasonably warm
weather has adversely affected soup sales in the U.K. The above factors have not
had a material effect on the company's results of operations or financial
position nor are they expected to in the future.
The Weight Watchers businesses (meetings and food products) have posted third
quarter results that are improved when compared to the prior year's third
quarter. This favorable trend is expected to continue through the fourth
quarter.
Gross profit increased $50.3 million to $721.5 million from $671.1 million a
year ago. The ratio of gross profit to sales decreased by 2.3% to 36.9%. The
current year's gross profit ratio was negatively impacted by an unfavorable
profit mix and increased goodwill amortization related to recent acquisitions
and higher foodservice sales, partially offset by cost reductions and
productivity improvements.
Operating income increased $27.0 million or 10.9% to $274.4 million from $247.3
million for the same period last year. Selling, general and administrative
expenses increased by $23.3 million but decreased as a percentage of net sales,
reflecting lower administrative and marketing costs.
Net interest expense increased $19.6 million, or 73.7%, to $46.3 million from
$26.7 million in the third quarter a year ago, mainly due to higher interest
rates combined with higher average borrowings related to recent acquisitions and
the company's share repurchase program.
Net income for the quarter was $138.3 million compared to $128.6 million for the
same period last year and earnings per share was $0.56 compared to $0.50. The
tax rate for the third quarter of fiscal 1995 was 36.0%, which includes the
recognition of tax benefits primarily relating to overseas operations. The 1994
effective tax rate was 40.3%.
LIQUIDITY AND FINANCIAL POSITION
Cash provided by operating activities totaled $286.4 million for the nine month
period ended January 25, 1995 compared to $445.6 million last year. The decrease
in cash provided by operations is mainly due to higher inventories required to
meet the higher sales volume.
10
<PAGE>
Cash used by investing activities required $640.9 million compared to providing
$51.7 million last year. Cash used for acquisitions in the current period
totaled $449.2 million and resulted from the following acquisitions: The All
American Gourmet Company, maker of The Budget Gourmet frozen meals and side
dishes; the Family Products Division of Glaxo India, Ltd.; Farley's infant foods
and adult nutrition business from The Boots Company PLC; 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 amount included the
purchase of the Moore's and Domani product lines from the Clorox Company for
approximately $90.0 million. Proceeds from divestitures totaled $255.6 million
in the first nine months of fiscal 1994, due mainly to the sale of the
confectionery and specialty rice businesses. Purchases of property, plant and
equipment totaled $210.6 million compared to $195.1 million a year ago.
Financing activities provided $358.9 million for the nine months ended January
25, 1995 compared to using $409.3 million a year ago. Net proceeds on short-term
debt provided $471.2 million in the current period versus using $56.4 million in
the prior year's comparable period. Proceeds from long-term debt totaled $318.9
million for the current period, mainly due to the issuance of the $300 million
three-year 8.0% notes (see below). During the nine months ended January 25,
1995, treasury stock purchases totaled $255.6 million (7.2 million shares) while
dividend payments totaled $257.8 million.
On September 13, 1994, the board of directors authorized the repurchase of up to
an additional 10.0 million shares of the company's common stock, which may take
place over an extended period of time. As of January 25, 1995, the company had
repurchased approximately 3.2 million shares of the currently authorized 10.0
million share repurchase program. The previous 10.0 million share repurchase
program was completed during the second quarter of fiscal 1995.
On September 13, 1994, the company's board of directors raised the quarterly
dividend on the company's common stock to $0.36 per share from $0.33 per share,
for an indicated annual rate of $1.44 per share.
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, at which time
it is anticipated that a new one year facility will be established. The
remaining $800 million expires in September 1999. As a result, $800 million of
the $1.3 billion domestic commercial paper is classified as long-term debt as of
January 25, 1995. 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.
On January 5, 1995, the company issued $300 million of three-year 8.0% notes in
the international capital markets. The proceeds from the notes have been
utilized to repay domestic commercial paper. The company entered into an
interest rate swap agreement that effectively converted the fixed interest rate
associated with the notes to a variable rate based on LIBOR. Due to favorable
market conditions, the interest rate swap agreement has been terminated and the
resulting gain will be amortized over the remaining life of the notes, producing
an effective borrowing rate of 7.3%.
During the quarter ended January 25, 1995, the company participated in the
formation of a business which purchases a portion of the trade receivables
generated by the company. Outside investors contributed $57.0 million in capital
to the new entity. The company fully consolidates this entity and the capital
contributed by the outside investors is classified as minority interest (other
liabilities) in the January 25, 1995 Condensed Consolidated Balance Sheet.
Subsequent to quarter end, outside investors contributed an additional $38.4
million.
The company's Heinz Pet Products division completed the purchase of $10.0
million of common stock of Veterinary Centers of America, Inc. (VCA) on
January 18, 1995. The investment gives Heinz Pet Products an approximate 18%
interest in VCA, which owns and operates a nationwide network of veterinary
hospitals and veterinary clinical laboratories. Heinz Pet Products and VCA
11
<PAGE>
participate in a joint venture, Vet's Choice, which markets and distributes
a line of specialty pet foods.
On February 6, 1995, Standard & Poor's Corporation placed its AA- senior
unsecured debt and A-1+ commercial paper ratings on H.J. Heinz Company on
CreditWatch with negative implications. On December 9, 1994, Moody's Investors
Service placed the Aa2 long-term debt ratings of H.J. Heinz under review
for downgrade. The P-1 rating for commercial paper is not under review and
is confirmed.
The company's financial position continues to remain strong, enabling it to meet
cash requirements for operations, capital expansion programs and dividends to
shareholders.
SUBSEQUENT EVENTS
On February 6, 1995, the company announced that it had signed an agreement with
The Quaker Oats Company to acquire all of its U. S. and Canadian pet food
businesses for $725 million. Among the major brands to be acquired in this
transaction are Kibbles'n Bits dry dog food; Gravy Train dry and canned dog food
(U. S. only); Ken-L Ration canned dog food; and Snausages, Pup-Peroni and Pounce
pet treats. Quaker's Pet Foods division records annual North American sales of
approximately $540 million; Heinz Pet Products last year had sales of more than
$600 million. The transaction is expected to be completed on March 14, 1995.
It is anticipated that this acquisition will initially be funded primarily
through privately placed commercial paper borrowings supported by a new $700
million line of credit agreement. The company is currently evaluating
alternative sources of financing to replace these commercial paper borrowings on
a long-term basis.
In connection with the recent acquisition of The All American Gourmet Company,
which produces and markets The Budget Gourmet brand of frozen meals and side
dishes, the company has announced its plan to relocate certain administrative
functions related to its Weight Watchers Foods business and to close certain
facilities, including The All American Gourmet Company headquarters in Orange,
California. The charges associated with existing company facilities and
functions are considered immaterial and will be treated as period costs.
12
<PAGE>
PART II--OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Nothing to report under this item.
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
On December 2, 1994, the Registrant completed the acquisition of The All
American Gourmet Company, formerly a part of Kraft General Foods, Inc.
On January 5, 1995, the Registrant issued $300 million of 8.0% three-year
notes in the international capital markets.
On February 6, 1995, the company announced that it had signed an agreement
with The Quaker Oats Company to acquire all of its U.S. and Canadian pet food
businesses for $725 million. The transaction is expected to be completed on
March 14, 1995.
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 January 25,
1995.
13
<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.
<TABLE>
<S> <C>
H. J. HEINZ COMPANY
(Registrant)
/s/ DAVID R. WILLIAMS
Date: March 13, 1995 By......................................................
David R. Williams
Senior Vice President--Finance and
Chief Financial Officer
(Principal Financial Officer)
/s/ TRACY E. QUINN
Date: March 13, 1995 By......................................................
Tracy E. Quinn
Corporate Controller
(Principal Accounting Officer)
</TABLE>
14
<PAGE>
EXHIBIT 11
H. J. Heinz Company and Subsidiaries
COMPUTATION OF NET INCOME PER SHARE
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
January 25, January 26,
---------- -----------
1995 1994
FY 1995 FY 1994
<S> <C> <C>
Primary income per share:
Net income....................................................................... $432,575 $473,871
Preferred dividends.............................................................. 49 53
-------- --------
Net income applicable to common stock............................................ $432,526 $473,818
======== ========
Average common shares outstanding and
common stock equivalents....................................................... 248,933 257,527
======== ========
Net income per share--primary.................................................... $ 1.74 $ 1.84
======== ========
Fully diluted income per share:
Net income....................................................................... $432,575 $473,871
======== ========
Average common shares outstanding and
common stock equivalents....................................................... 248,933 257,527
Additional common shares assuming:
Conversion of $1.70 third cumulative preferred stock........................... 346 377
Additional common shares assuming options were exercised
at the period-end market price.............................................. 688 96
-------- --------
Average common shares outstanding and
common stock equivalents....................................................... 249,967 258,000
======== ========
Net income per share--fully diluted............................................ $ 1.73 $ 1.84
======== ========
</TABLE>
All amounts in thousands except per share amounts.
------------------
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM 10-Q FOR THE
PERIOD ENDED JANUARY 25, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAY-03-1995
<PERIOD-START> APR-28-1994
<PERIOD-END> JAN-25-1995
<EXCHANGE-RATE> 1.0
<CASH> 116,120
<SECURITIES> 68,549
<RECEIVABLES> 875,925
<ALLOWANCES> 0
<INVENTORY> 1,400,081
<CURRENT-ASSETS> 2,694,943
<PP&E> 3,886,149
<DEPRECIATION> 1,494,556
<TOTAL-ASSETS> 7,329,666
<CURRENT-LIABILITIES> 2,090,093
<BONDS> 2,094,567
<COMMON> 71,850
0
365
<OTHER-SE> 2,292,517
<TOTAL-LIABILITY-AND-EQUITY> 7,329,666
<SALES> 5,665,334
<TOTAL-REVENUES> 5,665,334
<CGS> 3,603,479
<TOTAL-COSTS> 3,603,479
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 141,576
<INCOME-PRETAX> 686,935
<INCOME-TAX> 254,360
<INCOME-CONTINUING> 432,575
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 432,575
<EPS-PRIMARY> 1.74
<EPS-DILUTED> 1.73
</TABLE>
