<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended April 30, 1997
or
[] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 1-3385
H. J. HEINZ COMPANY
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
PENNSYLVANIA 25-0542520
<S> <C>
(State of Incorporation) (I.R.S. Employer Identification No.)
600 GRANT STREET,
PITTSBURGH, PENNSYLVANIA 15219
(Address of principal (Zip Code)
executive offices)
412-456-5700
(Registrant's telephone number)
</TABLE>
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
<TABLE>
<CAPTION>
Name of each exchange
Title of each class on which registered
------------------- ---------------------
<S> <C>
Common Stock, par value $.25
per share New York Stock Exchange; Pacific Stock Exchange
Third Cumulative Preferred
Stock,
$1.70 First Series, par value
$10 per share New York Stock Exchange
</TABLE>
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: None.
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 X No
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 Registrant's 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. [X]
As of June 30, 1997 the aggregate market value of the Registrant's voting
stock held by non-affiliates of the Registrant was approximately
$16,110,335,000.
The number of shares of the Registrant's Common Stock, par value $.25 per
share, outstanding as of June 30, 1997, was 369,301,849 shares.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of Registrant's Annual Report to Shareholders for the fiscal year
ended April 30, 1997, are incorporated into Part I, Items 1 and 3; Part II,
Items 5, 7 and 8; and Part IV, Item 14.
Portions of Registrant's Proxy Statement for the 1997 Annual Meeting of
Shareholders are incorporated into Part III, Items 10, 11, 12 and 13.
<PAGE>
PART I
ITEM 1. BUSINESS.
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 at Sharpsburg,
Pennsylvania by Henry J. Heinz. H. J. Heinz Company and its consolidated
subsidiaries (collectively, the "Company" or the "Registrant" unless the
context indicates otherwise) manufacture and market an extensive line of
processed food products throughout the world. The Company's products include
ketchup and sauces/condiments, pet food, tuna and other seafood products, baby
food, frozen potato products, soup (canned and frozen), lower-calorie products
(frozen entrees, frozen desserts, frozen breakfasts, dairy and other
products), beans, pasta, full calorie frozen dinners and entrees, coated
products, bakery products, vegetables and fruits (frozen and canned), chicken,
frozen pizza and pizza components, edible oils, margarine/shortening, vinegar,
pickles, juices, canned meats and other processed food products. The Company
operates principally in one segment of business--processed food products--
which represents more than 90% of consolidated sales. The Company also
operates and franchises weight control classes and operates other related
programs and activities. The Company intends to continue to engage principally
in the business of manufacturing and marketing processed food products and the
ingredients for food products.
The Company's products are manufactured and packaged to provide safe,
stable, wholesome foods which are used directly by consumers and foodservice
and institutional customers. Many products are prepared from recipes developed
in the Company's research laboratories and experimental kitchens. Ingredients
are carefully selected, washed, trimmed, inspected and passed on to modern
factory kitchens where they are processed, after which the finished product is
filled automatically into containers of glass, metal, plastic, paper or
fiberboard which are then closed, processed, labeled and cased for market.
Finished products are processed by sterilization, homogenization, chilling,
freezing, pickling, drying, freeze drying, baking or extruding. Certain
finished products and seasonal raw materials are aseptically packed into
sterile containers after in-line sterilization.
The Company has two classes of similar products, each of which has accounted
for 10% or more of consolidated sales in one or more of the prior three fiscal
years listed below. The following table shows sales, as a percentage of
consolidated sales, for each of these classes of similar products for each of
the last three fiscal years.
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Ketchup, sauces and other condiments....................... 18% 19% 21%
Pet food................................................... 13 12 9
All other classes of products, none of which accounts
for 10% or more of consolidated sales..................... 69 69 70
--- --- ---
100% 100% 100%
=== === ===
</TABLE>
The Company manufactures its products from a wide variety of raw foods. Pre-
season contracts are made with farmers for a substantial portion of raw
materials such as tomatoes, cucumbers, potatoes, onions and some other fruits
and vegetables. Dairy products, meat, sugar, spices, flour and other fruits
and vegetables are purchased on the open market.
Tuna is obtained through spot and term contracts directly with tuna vessel
owners or their cooperatives and by brokered transactions. In some instances,
in order to insure the continued availability of adequate supplies of tuna,
the Company assists, directly or indirectly, in financing the acquisition and
operation of fishing vessels. The provision of such assistance is not expected
to affect materially the operations of the Company. The Company also engages
in the tuna fishing business through wholly and partially owned subsidiaries.
The Marine Mammal Protection Act of 1972, as amended (the "Act"), and
regulations thereunder (the "Regulations") regulate the incidental taking of
dolphin in the course of fishing for yellowfin tuna in the eastern tropical
Pacific Ocean, where a portion of the Company's light-meat tuna is caught. In
1990, the Company voluntarily adopted a worldwide policy of refusal to
purchase tuna caught in the eastern tropical Pacific Ocean through the
intentional encirclement of dolphin by purse seine nets and reaffirmed its
policy of not purchasing tuna caught anywhere using gill nets or drift nets.
Also in 1990, the Dolphin Protection Consumer Information Act (the "Dolphin
Information Act") was enacted which regulates the labeling of tuna products as
"dolphin
2
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safe" and bans the importation of tuna caught using high seas drift nets. The
Act was amended in 1992 to further regulate tuna fishing methods which involve
marine mammals. Compliance with the Act, the Regulations, the Dolphin
Information Act, and the Company's voluntary policy and the 1992 amendments
has not had, and is not expected to have, a material adverse effect on the
Company's operations. Congress is considering amendments (the "proposed
amendments") to the Act and the Dolphin Information Act which, if enacted,
would modify the regulation of the incidental taking of dolphins in the course
of fishing for yellowfin tuna in the eastern tropical Pacific Ocean and revise
the definition of "dolphin safe." If enacted, the proposed amendments are not
expected to have a material effect on the Company's operations.
In recent years, the supply of raw tuna has been variable causing a
fluctuation in raw fish prices; however, such variation in supply has not
affected materially, nor is it expected to affect materially, the Company's
operations.
The Company has participated in the development of certain of its food
processing equipment, some of which is patented. The Company regards these
patents as important but does not consider any one or group of them to be
materially important to its business as a whole.
The Company's products are widely distributed around the world. Many of the
Company's products are marketed under the "Heinz" trademark, principally in
the United States, Canada, the United Kingdom, other western European
countries, Australia, Venezuela, Japan, the People's Republic of China, the
Republic of Korea and Thailand. Other important trademarks include "Star-Kist"
for tuna products, "Ore-Ida" for frozen retail potato products, "Bagel Bites"
for pizza snack products, "Moore's" for retail coated vegetables, "Rosetto"
for frozen pasta products, "Earth's Best" for baby food and "Dyna Bites" and
"Cheese Bites" for retail snack products, all of which are marketed in the
United States. "9 Lives" is used for cat foods, "Kibbles N' Bits", "Ken-L-
Ration", "Reward" and "IVD" for dog food, "Jerky Treats", "Meaty Bone",
"Snausages" and "Pup-Peroni" for dog snacks, "Nature's Recipe" for dog and cat
foods, all of which are marketed in the United States and Canada. "Amore" is
used for cat foods, "Kozy Kitten" for canned cat foods, "Cycle", "Gravy
Train", "Skippy Premium", "Recipe" and "Vets" for dog food, "Pounce" for cat
treats, all of which are marketed in the United States. "Chef Francisco" is
used for frozen soups and "Omstead" is used for frozen vegetables, frozen
coated products and frozen fish products, both of which are marketed in the
United States and Canada. "Pablum" is used for baby food products marketed in
Canada. "Plasmon", "Nipiol" and "Dieterba" are used for baby food products,
"Ortobuono" for pickled vegetables and fruit in syrup, "Mare D'Oro" for
seafood and "Mareblu" for tuna, "Mr. Foody" for table and kitchen sauces, "Bi-
Aglut", "Aproten", "Polial" and "Dialibra" for nutraceutical products, all of
which are mainly marketed in Italy. "Petit Navire" is used for tuna and
mackerel products, "Marie Elisabeth" for sardines and tuna and "Orlando" and
"Guloso" for tomato products, all of which are marketed in various European
countries. "John West" is used for tuna, salmon and other products in the
United Kingdom and other European countries. "Wattie's" is used for various
grocery products and frozen foods, "Tegel" for poultry products, "Chef" and
"Champ" for cat and dog foods and "Craig's" for jams and marmalades, all of
which are marketed in New Zealand, Australia and the Asia/Pacific region.
"Hellaby" is used for canned meats in New Zealand and the Asia/Pacific region.
"Farley's" and "Farex" are used for baby food products marketed in Europe,
Canada, India, Australia and New Zealand. "Glucon D" and "Complan" are used
for nutritional drink mixes marketed in India and in the case of "Complan"
also Latin America and New Zealand. "Ganave" is used for pet food in
Argentina. "N/R Original Recipe" is used for dog and cat foods marketed in
various European countries and "Martins", "Medi-Cal" and "Techni-cal" is used
for dog and cat foods in Canada and certain European countries. "Weight
Watchers" is used in numerous countries in conjunction with owned and
franchised weight control classes, programs, related activities and certain
food products. "Budget Gourmet" is used on frozen entrees and dinners. The
Company also markets certain products under other trademarks and brand names
and under private labels.
Although crops constituting some of the Company's raw food ingredients are
harvested on a seasonal basis, most of the Company's products are produced
throughout the year. Seasonal factors inherent in the business have always
influenced the quarterly sales and net income of the Company. Consequently,
comparisons between quarters have always been more meaningful when made
between the same quarters of different 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 processed 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 Company's Weight Watchers International, Inc. subsidiary
also competes with a wide variety of weight control programs.
3
<PAGE>
The Company's products are sold through its own sales force and through
independent brokers, agents and distributors to chain, wholesale, cooperative
and independent grocery accounts, pharmacies, mass merchants, club stores, pet
stores, foodservice distributors and institutions, including hotels,
restaurants and certain government agencies. The Company is not dependent on
any single customer or a few customers for a material part of its sales.
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 Company's
estimated capital expenditures for environmental control facilities for the
remainder of fiscal year 1998 and the succeeding fiscal year are not material
and will not materially affect either the earnings or competitive position of
the Company.
The Company's factories are subject to inspections by various governmental
agencies, and its products must comply with the applicable laws, including
food and drug laws, of the jurisdictions in which they are manufactured and
marketed.
The Company employed, on a full-time basis as of April 30, 1997,
approximately 44,700 persons around the world.
Financial segment information by major geographic area for the most recent
three fiscal years is set forth on page 34 of the Company's Annual Report to
Shareholders for the fiscal year ended April 30, 1997. Such information is
incorporated herein by reference.
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 Company's
international operations.
FORWARD-LOOKING STATEMENTS
The Private Securities Litigation Reform Act of 1995 (the "Act") provides a
"safe harbor" for forward-looking statements to encourage companies to provide
prospective information about their companies, so long as those statements are
identified as forward-looking and are accompanied by meaningful cautionary
statements identifying important factors that could cause actual results to
differ materially from those discussed in the statement. The Company desires
to take advantage of the "safe harbor" provisions of the Act with regard to
oral and written forward-looking statements made from time to time including,
but not limited to, the forward-looking statements contained in the Letter
from the Chairman and CEO and the Letter from the President and COO (pages 2
to 7 of the Company's Annual Report to Shareholders for the fiscal year ended
April 30, 1997), Management's Discussion and Analysis (pages 26 to 33 of the
Company's Annual Report to Shareholders for the fiscal year ended April 30,
1997) and statements set forth in this Annual Report on Form 10-K and other
filings with the Securities and Exchange Commission. The forward-looking
statements are and will be based on management's then current views and
assumptions regarding future events and financial performance. The factors
identified by the Company include, among other things, the following: general
economic and business conditions in the domestic and global markets; actions
of competitors, including competitive pricing; changes in consumer preferences
and spending patterns; changes in social and demographic trends; changes in
laws and regulations, including changes in taxation and accounting standards;
foreign economic conditions, including currency rate fluctuations; interest
rate fluctuations; the effects of changing prices for the raw materials used
by the Company and its subsidiaries; and the effectiveness of the Company's
marketing, advertising and promotional programs.
ITEM 2. PROPERTIES.
The Company has 37 food processing plants in the United States and its
possessions, of which 32 are owned and five are leased, as well as 61 food
processing plants outside of the United States, of which 57 are owned and four
are leased, including 11 in New Zealand, eight in Canada, six in the United
Kingdom, five in Italy, five in Australia, two in Spain, two in Greece, two in
Portugal, two in Zimbabwe, and one in each of Argentina, Botswana, the Czech
Republic, Ecuador, France, Ghana, Hungary, India, Ireland, Japan, Netherlands,
People's Republic of China, Republic of Korea, Russia, Seychelles, South
Africa, Thailand and Venezuela. The Company also leases two can-making
factories in the United States and its possessions. The
4
<PAGE>
Company and certain of its subsidiaries also own or lease office space,
warehouses, distribution centers and research and other facilities. The
Company's food processing plants and principal properties are in good
condition and are satisfactory for the purposes for which they are being
utilized.
ITEM 3. LEGAL PROCEEDINGS.
With respect to the antitrust litigation against the Company and its two
principal competitors in the United States baby food industry which was
previously reported in the Company's Annual Report on Form 10-K, see Note 14
to the Consolidated Financial Statements on page 58 of the Company's Annual
Report to Shareholders for the fiscal year ended April 30, 1997, which is
incorporated herein by reference. The Company continues to believe that all of
the suits and claims are without merit and is defending itself vigorously
against them.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company has not submitted any matters to a vote of security holders
since the last annual meeting of shareholders on September 10, 1996.
EXECUTIVE OFFICERS OF THE REGISTRANT
The following is a list of the names and ages of all of the executive
officers of the Company indicating all positions and offices with the Company
held by each such person and each such person's 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 or until their
successors are elected, or until their earlier resignation or removal. The
annual election of officers is scheduled to occur on September 10, 1997.
<TABLE>
<CAPTION>
Positions and Offices Held with the Company and
Age (as of Principal Occupations or
Name September 10, 1997) Employment During Past Five Years
---- ------------------- ---------------------------------
<C> <C> <S>
Anthony J. F. O'Reilly 61 Chairman of the Board since March 11, 1987, Chief
Executive Officer since July 1, 1979 and President
from July 1, 1979 to June 12, 1996.
Joseph J. Bogdanovich 85 Vice Chairman of the Board since September 7, 1988;
also in charge of Heinz Japan Ltd. since June 20,
1973 and Chairman of the Board of Star-Kist Foods,
Inc.
William R. Johnson 48 President and Chief Operating Officer since June
12, 1996; Senior Vice President in charge of Star-
Kist Foods, Inc. and Heinz operations in the Asia
Pacific area from September 8, 1993 to June 12,
1996; Chief Executive Officer of Star-Kist Foods,
Inc. and President and Chief Executive Officer of
Heinz Pet Products Company to June 12, 1996 from
May 1, 1992 and November 1, 1988, respectively.
Lawrence J. McCabe 62 Senior Vice President-General Counsel since June
12, 1991.
Paul F. Renne 54 Executive Vice President and Chief Financial
Officer since June 11, 1997; Senior Vice President-
Finance and Chief Financial Officer from September
13, 1996 to June 11, 1997 and Vice President-
Treasurer from October 1, 1986 to September 13,
1996.
</TABLE>
5
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<TABLE>
<CAPTION>
Positions and Offices Held with the Company and
Age (as of Principal Occupations or
Name September 10, 1997) Employment During Past Five Years
---- ------------------- ---------------------------------
<C> <C> <S>
Luigi Ribolla 60 Executive Vice President and President-Heinz Europe
since June 12, 1996 and in charge of all Heinz
affiliates in Europe, Cairo Foods Industries SAE in
Egypt and Heinz development activities in Russia,
Eastern Europe, the Middle East and North Africa
since August 1, 1992; Senior Vice President from
August 1, 1992 to June 12, 1996; Director of Heinz
Mediterranean Area from 1988 to July 31, 1992.
William C. Springer 57 Executive Vice President-The Americas since June
12, 1996 and in charge of Heinz U.S.A. and Heinz
Canada since September 8, 1993 and in charge of
Weight Watchers operations worldwide and Heinz
Bakery Products since June 12, 1996; in charge of
Heinz operations in Latin America from September 8,
1993 to January 6, 1997 and in charge of Ore-Ida
Foods, Inc. from June 12, 1996 to January 6, 1997;
President of Heinz North America since June 1, 1992
and President and Chief Executive Officer of Heinz
U.S.A. division since May 1, 1989; Senior Vice
President from September 8, 1993 to June 12, 1996.
David R. Williams 54 Executive Vice President since June 12, 1996 in
charge of Ore-Ida Foods, Inc. Star-Kist Foods, Inc.
and Heinz operations in Latin America since January
6, 1997 and in charge of all Heinz affiliates and
development activities in India, Pakistan and
southern Africa since October 12, 1994; Executive
Vice President-Finance and Chief Financial Officer
from June 12, 1996 to September 13, 1996; Senior
Vice President-Finance and Chief Financial Officer
from August 1, 1992 to June 12, 1996.
</TABLE>
6
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
Information relating to the Company's common stock is set forth beginning on
page 33 under the caption "Stock Market Information" and on page 57 in Note
13, "Quarterly Results (Unaudited)," of the Company's Annual Report to
Shareholders for the fiscal year ended April 30, 1997. Such information is
incorporated herein by reference.
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 1993 through
1997. All amounts are in thousands except per share data. Prior years per
share amounts have been adjusted to reflect the three-for-two stock split,
which was effective October 3, 1995.
<TABLE>
<CAPTION>
Fiscal year ended
------------------------------------------------------------
April 30, May 1, May 3, April 27, April 28,
1997 1996 1995 1994 1993
(52 Weeks) (52 Weeks) (53 Weeks) (52 Weeks) (52 Weeks)
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Sales................... $9,357,007 $9,112,265 $8,086,794 $7,046,738 $7,103,374
Interest expense........ 274,746 277,411 210,585 149,243 146,491
Income before cumulative
effect of
accounting change...... 301,871 659,319 591,025 602,944 529,943
Net income.............. 301,871 659,319 591,025 602,944 396,313
Income before cumulative
effect of
accounting change per
common share........... 0.81 1.75 1.59 1.57 1.36
Net income per common
share.................. 0.81 1.75 1.59 1.57 1.02
Short-term debt and
current portion
of long-term debt...... 1,163,442 1,082,169 1,074,291 439,701 1,604,355
Long-term debt,
exclusive of
current portion........ 2,283,993 2,281,659 2,326,785 1,727,002 1,009,381
Total assets............ 8,437,787 8,623,691 8,247,188 6,381,146 6,821,321
Cash dividends per
common share............ 1.13 1/2 1.03 1/2 0.94 0.86 0.78
</TABLE>
Results recorded in 1997 include a pretax charge for restructuring and
related costs of $647.2 million ($1.09 per share). See Note 4 to the
Consolidated Financial Statements beginning on page 44 of the Company's Annual
Report to Shareholders for the fiscal year ended April 30, 1997. These charges
were partially offset by gains recognized on the sale of the New Zealand ice
cream business, $72.1 million pretax ($0.12 per share) and real estate in the
United Kingdom, $13.2 million pretax ($0.02 per share). See Notes 3 and 13 to
the Consolidated Financial Statements on pages 44 and 57, respectively, of the
Company's Annual Report to Shareholders for the fiscal year ended April 30,
1997.
Results recorded in 1996 include gains related to the sale of the Weight
Watchers Magazine ($0.02 per share) and the sale of two regional dry pet food
product lines ($0.02 per share) and a charge for restructuring costs at
certain overseas affiliates ($0.01 per share). See Note 13 to the Consolidated
Financial Statements on page 57 of the Company's Annual Report to Shareholders
for the fiscal year ended April 30, 1997.
During 1995, the Company invested approximately $1.2 billion in
acquisitions, the most significant of which was the North American pet food
businesses of The Quaker Oats Company. See Note 2 to the Consolidated
Financial Statements, beginning on page 41 of the Company's Annual Report to
Shareholders for the fiscal year ended April 30, 1997.
Results recorded in 1994 include gains from the sale of the confectionery
business of Heinz Italy and the sale of Heinz U.S.A.'s Near East specialty
rice business.
During 1993, the Company adopted the provisions of SFAS No. 106 and elected
immediate recognition of the accumulated postretirement benefit obligation for
active and retired employees, resulting in an after-tax cumulative charge of
$133.6 million (net of income tax benefit of $85.4 million), or $0.34 per
share. In addition, the adoption of SFAS No. 106 increased the company's
pretax postretirement benefit expense by $16.3 million ($0.03 per share) in
1993.
In 1993, restructuring charges of $192.3 million on a pretax basis ($0.30
per share) were reflected in operating income. The major components of the
restructuring plan related to employee severance and relocation costs ($99.0
million) and facilities consolidation and closure costs ($73.0 million).
7
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
This information is set forth in the Management's Discussion and Analysis
section on pages 26 through 33 of the Company's Annual Report to Shareholders
for the fiscal year ended April 30, 1997. Such information is incorporated
herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The Consolidated Balance Sheets of the Company and its subsidiaries as of
April 30, 1997 and May 1, 1996 and the related Consolidated Statements of
Income, Retained Earnings and Cash Flows for the fiscal years ended April 30,
1997, May 1, 1996 and May 3, 1995 together with the related Notes to
Consolidated Financial Statements, included in the Company's Annual Report to
Shareholders for the fiscal year ended April 30, 1997, are incorporated herein
by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
There is nothing to be reported under this item.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Information relating to the Directors of the Company is set forth under the
captions "Information Regarding Nominees for Election of Directors" and
"Additional Information--Section 16 Beneficial Ownership Reporting Compliance"
in the Company's definitive Proxy Statement in connection with the Annual
Meeting of Shareholders to be held September 10, 1997. Such information is
incorporated herein by reference. Information relating to the executive
officers of the Company is set forth under the caption "Executive Officers of
the Registrant" in Part I above.
ITEM 11. EXECUTIVE COMPENSATION.
Information relating to executive compensation is set forth under the
caption "Executive Compensation" in the Company's definitive Proxy Statement
in connection with its Annual Meeting of Shareholders to be held September 10,
1997. Such information is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
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 Beneficial Owners" and "Security Ownership of
Management" in the Company's definitive Proxy Statement in connection with its
Annual Meeting of Shareholders to be held September 10, 1997. Such information
is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Information relating to certain relationships with a beneficial shareholder
and certain related transactions is set forth under the caption "Certain
Business Relationships" and "Additional Information--Transactions with Certain
Beneficial Owners" in the Company's definitive Proxy Statement in connection
with its Annual Meeting of Shareholders to be held September 10, 1997. Such
information is incorporated herein by reference.
8
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a)(1) The following financial statements and report included in the Company's
Annual Report to Shareholders for the fiscal year ended April 30, 1997
are incorporated herein by reference:
Consolidated Balance Sheets as of April 30, 1997 and May 1, 1996
Consolidated Statements of Income for the fiscal years ended April
30, 1997, May 1, 1996 and May 3, 1995
Consolidated Statements of Retained Earnings for the fiscal years
ended April 30, 1997, May 1, 1996 and May 3, 1995
Consolidated Statements of Cash Flows for the fiscal years ended
April 30, 1997, May 1, 1996 and May 3, 1995
Notes to Consolidated Financial Statements
Report of Independent Accountants of Coopers & Lybrand L.L.P. dated
June 17, 1997 except for Note 16, as to which the date is June 30,
1997, on the Company's consolidated financial statements for the
fiscal years ended April 30, 1997, May 1, 1996 and May 3, 1995
(2)The following report and schedule is filed herewith as a part hereof:
Report of Independent Accountants of Coopers & Lybrand L.L.P. dated
June 17, 1997, on the Company's consolidated financial statement
schedule filed as a part hereof for the fiscal years ended April 30,
1997, May 1, 1996 and May 3, 1995
Schedule II (Valuation and Qualifying Accounts and Reserves) for the
three fiscal years ended April 30, 1997, May 1, 1996 and May 3, 1995
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 incorporated herein by reference.
(3) Exhibits required to be filed by Item 601 of Regulation S-K are listed
below and are filed as a part hereof. 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) The Company's Articles of Amendment dated July 13, 1994, amending
and restating the Company's amended and restated Articles of
Incorporation in their entirety are incorporated herein by reference
to Exhibit 3(i) to the Company's Annual Report on Form 10-K for the
fiscal year ended April 27, 1994.
3(ii) The Company's By-Laws, as amended effective July 10, 1996.
4. Except as set forth below, there are no instruments with respect to
long-term debt of the Company that involve indebtedness or
securities authorized thereunder exceeding 10 percent of the total
assets of the Company and its subsidiaries on a consolidated basis.
The Company agrees to file 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) Form of Indenture between the Company and The First National
Bank of Chicago dated as of July 15, 1992, is incorporated
herein by reference to Exhibits 4(a) and 4(c) to the Company's
Registration Statement on Form S-3 (Reg. No. 33-46680) and the
supplements to such Indenture are incorporated herein by
reference to the Company's Form 8-Ks dated September 21, 1992,
October 29, 1992 and January 27, 1993 relating to the Company's
$250,000,000 5 1/2% Notes due 1997, $300,000,000 6 3/4% Notes
due 1999 and $200,000,000 6 7/8% Notes due 2003, respectively.
10(a) Permit No. 408 (lease) granted by the City of Los Angeles to Star-
Kist Foods, Inc. dated September 6, 1979 for premises located at
Terminal Island, California is incorporated herein by reference to
Exhibit 10(e) to the Company's Annual Report on Form 10-K for the
fiscal year ended April 29, 1981.
9
<PAGE>
(b) Lease of Land in American Samoa, dated as of September 17, 1983, by
and between the American Samoa Government and Star-Kist Samoa, Inc.
is incorporated herein by reference to Exhibit 10(m) to the
Company's Annual Report on Form 10-K for the fiscal year ended May
2, 1984.
(c) 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 December 6, 1995
(ii) H. J. Heinz Company's 1984 Stock Option Plan, as amended, is
incorporated herein by reference to Exhibit 10(n) to the
Company's Annual Report on Form 10-K for the fiscal year
ended May 2, 1990
(iii) H. J. Heinz Company's 1987 Stock Option Plan, as amended, is
incorporated herein by reference to Exhibit 10(o) to the
Company's Annual Report on Form 10-K for the fiscal year
ended May 2, 1990
(iv) H. J. Heinz Company's 1990 Stock Option Plan is incorporated
herein by reference to Appendix A to the Company's Proxy
Statement dated August 3, 1990
(v) H. J. Heinz Company's 1994 Stock Option Plan is incorporated
herein by reference to Appendix A to the Company's Proxy
Statement dated August 5, 1994
(vi) H. J. Heinz Company Supplemental Executive Retirement Plan,
as amended, is incorporated herein by reference to Exhibit
10(c)(ix) to the Company's Annual Report on Form 10-K for the
fiscal year ended April 28, 1993
(vii) H. J. Heinz Company Executive Deferred Compensation Plan is
incorporated herein by reference to Exhibit 10(c)(x) to the
Company's Annual Report on Form 10-K for the fiscal year
ended April 27, 1994
(viii) H. J. Heinz Company Incentive Compensation Plan is
incorporated herein by reference to Appendix B to the
Company's Proxy Statement dated August 5, 1994
(ix) H. J. Heinz Company Stock Compensation Plan for Non-Employee
Directors is incorporated herein by reference to Appendix A
to the Company's Proxy Statement dated August 3, 1995
(x) H. J. Heinz Company's 1996 Stock Option Plan is incorporated
herein by reference to Appendix A to the Company's Proxy
Statement dated August 2, 1996
11. Computation of net income per share.
13. Pages 26 through 59 of the H. J. Heinz Company Annual Report to
Shareholders for the fiscal year ended April 30, 1997, portions of
which are incorporated herein by reference. Those portions of the
Annual Report to Shareholders that are not incorporated herein by
reference shall not be deemed to be filed as a part of this Report.
21. Subsidiaries of the Registrant.
23. The following Exhibit is filed by incorporation by reference to Item
14(a)(2) of this Report:
(a) Consent of Coopers & Lybrand L.L.P.
24. Powers-of-attorney of the Company's directors.
27. Financial Data Schedule.
99. H. J. Heinz Company Board of Directors' Guidelines on Political
Contributions.
Copies of the exhibits listed above will be furnished upon request to
holders or beneficial holders of any class of the Company's stock,
subject to payment in advance of the cost of reproducing the exhibits
requested.
(b) There have been no reports filed on Form 8-K during the last fiscal
quarter of the period covered by this Report.
10
<PAGE>
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 July 28, 1997.
H. J. HEINZ COMPANY
(Registrant)
/s/ Paul F. Renne
By......................................
PAUL F. RENNE
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 July 28, 1997.
Signature Capacity
/s/ Anthony J. F. O'Reilly
............................. Chairman of the Board and
ANTHONY J. F. O'REILLY Chief Executive Officer
(Principal Executive
Officer)
/s/ Paul F. Renne
............................. Executive Vice President and Chief
PAUL F. RENNE Financial Officer (Principal Financial
Officer)
/s/ Edward J. McMenamin Vice President-Corporate
............................. Controller (Principal
EDWARD J. MCMENAMIN Accounting Officer)
Anthony J. F. O'ReillyDirector
Joseph J. BogdanovichDirector
Nicholas F. BradyDirector
Richard M. CyertDirector
Thomas S. FoleyDirector
Edith E. HolidayDirector
Samuel C. JohnsonDirector
William R. JohnsonDirector
Donald R. KeoughDirector
Albert LippertDirector /s/ Lawrence J. McCabe
Lawrence J. McCabeDirector By............................................
Paul F. RenneDirector LAWRENCE J. MCCABE
Luigi RibollaDirector Director and Attorney-in-Fact
Herman J. SchmidtDirector
Eleanor B. SheldonDirector
William P. Snyder IIIDirector
William C. SpringerDirector
S. Donald WileyDirector
David R. WilliamsDirector
11
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
The Shareholders
H. J. Heinz Company:
Our report on the consolidated financial statements of H. J. Heinz Company
and Subsidiaries has been incorporated by reference in this Annual Report on
Form 10-K from the Company's Annual Report to Shareholders for the fiscal year
ended April 30, 1997 and appears on page 59 therein. In connection with our
audits of such financial statements, we have also audited the related
financial statement schedule listed in Item 14(a) of this Annual Report on
Form 10-K.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.
COOPERS & LYBRAND L.L.P.
Pittsburgh, PA
June 17, 1997
---------------
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Registration Statements
of H. J. Heinz Company on Form S-8 (Registration Nos. 2-51719, 2-45120, 33-
00390, 33-19639, 33-32563, 33-42015, 33-55777, 33-62623 and 333-13849) of our
reports dated June 17, 1997, except for Note 16, as to which the date is June
30, 1997, on our audits of the consolidated financial statements and financial
statement schedule of H. J. Heinz Company and Subsidiaries as of April 30,
1997, and May 1, 1996 and for the fiscal years ended April 30, 1997, May 1,
1996 and May 3, 1995 which reports are included or incorporated by reference
in this Annual Report on Form 10-K.
COOPERS & LYBRAND L.L.P.
Pittsburgh, PA
July 25, 1997
12
<PAGE>
SCHEDULE II
H. J. HEINZ COMPANY AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FISCAL YEARS ENDED APRIL 30, 1997, MAY 1, 1996 AND MAY 3, 1995
(THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
Additions
-------------------
Balance at Charged to Charged Balance at
beginning costs and to other end of
Description of period expenses accounts Deductions period
----------- ---------- ---------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Fiscal year ended April
30, 1997:
Reserves deducted in
the balance sheet
from the assets to
which they apply:
Receivables......... $ 17,298 $11,106 $ -- $ 9,470(1) $ 18,934
======== ======= ====== ======= ========
Investments,
advances and other
assets.............. $ 5,864 $ -- $ -- $ 1,097 $ 4,767
======== ======= ====== ======= ========
Goodwill............ $211,693 $50,955 $ -- $ 3,629(1) $259,019
======== ======= ====== ======= ========
Other intangibles... $141,886 $29,075 $ -- $ 7,729(1) $163,232
======== ======= ====== ======= ========
Deferred tax assets
(2)................. $ 35,594 $ 2,987 $ -- $33,122 $ 5,459
======== ======= ====== ======= ========
Fiscal year ended May 1,
1996:
Reserves deducted in
the balance sheet
from the assets to
which they apply:
Receivables......... $ 16,309 $ 7,254 $ -- $ 6,265(1) $ 17,298
======== ======= ====== ======= ========
Investments,
advances and other
assets.............. $ 7,466 $ -- $ -- $ 1,602 $ 5,864
======== ======= ====== ======= ========
Goodwill............ $163,793 $48,583 $ -- $ 683 $211,693
======== ======= ====== ======= ========
Other intangibles... $117,430 $30,519 $ -- $ 6,063(1) $141,886
======== ======= ====== ======= ========
Deferred tax assets
(3)................. $ 49,487 $ 3,195 $ -- $17,088 $ 35,594
======== ======= ====== ======= ========
Fiscal year ended May 3,
1995:
Reserves deducted in
the balance sheet
from the assets to
which they apply:
Receivables......... $ 15,407 $ 5,135 $ -- $ 4,233(1) $ 16,309
======== ======= ====== ======= ========
Investments,
advances and other
assets.............. $ 19,841 $ -- $ -- $12,375(4) $ 7,466
======== ======= ====== ======= ========
Goodwill............ $127,708 $33,970 $ -- $(2,115) $163,793
======== ======= ====== ======= ========
Other intangibles... $ 85,862 $31,441 $ -- $ (127) $117,430
======== ======= ====== ======= ========
Deferred tax assets
(5)................. $ 28,888 $28,178 $ -- $ 7,579 $ 49,487
======== ======= ====== ======= ========
</TABLE>
Notes:
(1) Principally reserves on assets sold, written-off or reclassified.
(2) The net change in the valuation allowance for deferred tax assets was a
decrease of $30.1 million. The decrease was due to the utilization of tax
credit ($27.0 million) and loss ($5.0 million) carryforwards and
recognition of the realizability of certain other deferred tax assets in
future years ($1.1 million). An increase in the valuation allowance
primarily related to deferred tax assets for loss carryforwards ($2.7
million) partially offset the decrease. See Note 5 to the Consolidated
Financial Statements on pages 45 to 47 of the Company's Annual Report to
Shareholders for the fiscal year ended April 30, 1997.
(3) The net change in the valuation allowance for deferred tax assets was a
decrease of $13.9 million. The decrease was primarily due to the
utilization of loss carryforwards ($4.6 million) and recognition of the
realizability of certain other deferred tax assets in future years ($12.5
million). An increase in the valuation allowance related to the deferred
tax asset for foreign tax credit carryforwards ($1.7 million) and loss
carryforwards ($1.5 million) partially offset the decrease. See Note 5 to
the Consolidated Financial Statements on pages 45 to 47 of the Company's
Annual Report to Shareholders for the fiscal year ended April 30, 1997.
(4) Represents amounts reclassified as a result of consolidation of certain
fishing vessel operations.
(5) The net change in the valuation allowance for deferred tax assets was an
increase of $20.6 million. The increase is primarily due to increases in
the valuation allowance related to additional deferred tax assets for
foreign tax credit carryforwards ($25.3 million) and loss carryforwards
($2.9 million). This increase was partially offset by the recognition of
the realizability of certain other deferred tax assets in future years
($3.1 million) and the utilization of loss carryforwards ($4.5 million).
See Note 5 to the Consolidated Financial Statements on pages 45 to 47 of
the Company's Annual Report to Shareholders for the fiscal year ended
April 30, 1997.
<PAGE>
EXHIBIT INDEX
Exhibits required to be filed by Item 601 of Regulation S-K are listed below
and are filed as a part hereof. 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.
EXHIBIT
- --------
3(i) The Company's Articles of Amendment dated July 13, 1994, amending and
restating the Company's amended and restated Articles of Incorporation
in their entirety are incorporated herein by reference to Exhibit 3(i)
to the Company's Annual Report on Form 10-K for the fiscal year ended
April 27, 1994.
3(ii) The Company's By-Laws, as amended effective July 10, 1996.
4. Except as set forth below, there are no instruments with respect to
long-term debt of the Company that involve indebtedness or securities
authorized thereunder exceeding 10 percent of the total assets of the
Company and its subsidiaries on a consolidated basis. The Company agrees
to file 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) Form of Indenture between the Company and The First National Bank of
Chicago dated as of July 15, 1992, is incorporated herein by
reference to Exhibits 4(a) and 4(c) to the Company's Registration
Statement on Form S-3 (Reg. No. 33-46680) and the supplements to such
Indenture are incorporated herein by reference to the Company's Form
8-Ks dated September 21, 1992, October 29, 1992 and January 27, 1993
relating to the Company's $250,000,000 5 1/2% Notes due 1997,
$300,000,000 6 3/4% Notes due 1999 and $200,000,000 6 7/8% Notes due
2003, respectively.
10(a) Permit No. 408 (lease) granted by the City of Los Angeles to Star-Kist
Foods, Inc. dated September 6, 1979 for premises located at Terminal
Island, California is incorporated herein by reference to Exhibit 10(e)
to the Company's Annual Report on Form 10-K for the fiscal year ended
April 29, 1981.
(b) Lease of Land in American Samoa, dated as of September 17, 1983, by and
between the American Samoa Government and Star-Kist Samoa, Inc. is
incorporated herein by reference to Exhibit 10(m) to the Company's
Annual Report on Form 10-K for the fiscal year ended May 2, 1984.
(c) 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 December 6, 1995
(ii)H. J. Heinz Company's 1984 Stock Option Plan, as amended, is
incorporated herein by reference to Exhibit 10(n) to the Company's
Annual Report on Form 10-K for the fiscal year ended May 2, 1990
(iii)H. J. Heinz Company's 1987 Stock Option Plan, as amended, is
incorporated herein by reference to Exhibit 10(o) to the Company's
Annual Report on Form 10-K for the fiscal year ended May 2, 1990
(iv)H. J. Heinz Company's 1990 Stock Option Plan is incorporated herein
by reference to Appendix A to the Company's Proxy Statement dated
August 3, 1990
(v)H. J. Heinz Company's 1994 Stock Option Plan is incorporated herein
by reference to Appendix A to the Company's Proxy Statement dated
August 5, 1994
(vi)H. J. Heinz Company Supplemental Executive Retirement Plan, as
amended, is incorporated herein by reference to Exhibit 10(c)(ix) to
the Company's Annual Report on Form 10-K for the fiscal year ended
April 28, 1993
<PAGE>
EXHIBIT
(vii)H. J. Heinz Company Executive Deferred Compensation Plan is
incorporated herein by reference to Exhibit 10(c)(x) to the
Company's Annual Report on Form 10-K for the fiscal year ended
April 27, 1994
(viii)H. J. Heinz Company Incentive Compensation Plan is incorporated
herein by reference to Appendix B to the Company's Proxy Statement
dated August 5, 1994
(ix)H. J. Heinz Company Stock Compensation Plan for Non-Employee
Directors is incorporated herein by reference to Appendix A to the
Company's Proxy Statement dated August 3, 1995
(x)H. J. Heinz Company's 1996 Stock Option Plan is incorporated herein
by reference to Appendix A to the Company's Proxy Statement dated
August 2, 1996
11.Computation of net income per share.
13.Pages 26 through 59 of the H. J. Heinz Company Annual Report to
Shareholders for the fiscal year ended April 30, 1997, portions of which
are incorporated herein by reference. Those portions of the Annual Report
to Shareholders that are not incorporated herein by reference shall not be
deemed to be filed as a part of this Report.
21.Subsidiaries of the Registrant.
23.The following Exhibit is filed by incorporation by reference to Item
14(a)(2) of this Report:
(a)Consent of Coopers & Lybrand L.L.P.
24.Powers-of-attorney of the Company's directors.
27.Financial Data Schedule.
99.H. J. Heinz Company Board of Directors' Guidelines on Political
Contributions.
<PAGE>
EXHIBIT 3(ii)
BY-LAWS
of
H. J. HEINZ COMPANY
(Incorporated Under the Laws of Pennsylvania)
[Logo of Heinz]
Approved by the Board of Directors: June 10, 1970
Adopted by the Shareholders: September 9, 1970
Amended by the Board of Directors: June 13, 1973, November 9, 1977,
June 13, 1979, July 11, 1979,
September 9, 1987, July 6, 1990,
October 12, 1994 and July 10, 1996
Amended by the Shareholders: September 9, 1987
<PAGE>
BY-LAWS OF H. J. HEINZ COMPANY
ARTICLE I - IDENTIFICATION
SECTION 1. Principal Office. The principal office of the Company shall be
at such place in the Commonwealth of Pennsylvania as the Board of Directors
shall by resolution from time to time designate.
SECTION 2. Seal. The Company shall have a corporate seal in such form as
the Board of Directors shall by resolution from time to time prescribe.
SECTION 3. Fiscal Year. The fiscal year shall end on the Wednesday nearest
to April 30 of each year and begin on the following day.
ARTICLE II - SHAREHOLDERS' MEETING
SECTION 1. Place of Meetings. Meetings of the shareholders of the Company
shall be held at the principal office of the Company or at such other place
within or without the Commonwealth of Pennsylvania as may be fixed by the Board
of Directors.
SECTION 2. Annual Meeting. The annual meeting of the shareholders shall be
held on the second Wednesday in September each year at two o'clock p.m., or on
such other day or at such other time as may be fixed by the Board of Directors.
The shareholders at the annual meeting shall: (i) elect a Board of Directors;
(ii) elect independent certified public accountants to examine the annual
financial statements of the Company and to report on such examination to the
shareholders; and (iii) transact such other business as may properly be brought
before such meeting.
SECTION 3. Chairman of Meeting. All meetings of shareholders shall be
called to order and presided over by the Chairman of the Board or in his
absence, by the President, or in the absence of both, by the person designated
in writing by the Chairman or President./1/
SECTION 4. Determination of Record Dates. The Board of Directors shall fix
a time, not less than ten or more than seventy days, prior to the date of any
meeting of shareholders, as a record date for the determination of the
shareholders entitled to notice of and to vote on such meeting.
SECTION 5. Notice to Shareholders. Written notice of every meeting of the
shareholders shall be given by, or at the direction of, the person or persons
authorized to call the meeting, to each shareholder of record entitled to vote
at the meeting: (i) at least thirty days prior to the date fixed for the annual
meeting; (ii) at least ten days prior to the date fixed for any special meeting,
unless, in either case, a greater period of notice is required by law to be
given in advance of such particular meeting. Written notice shall be deemed to
be
<PAGE>
sufficient if given to the shareholder personally, or by sending a copy thereof
through the mail to his address appearing on the books of the Company, or
supplied by him to the Company for the purpose of notice. The notice required
by this By-Law shall specify the place, date and hour of the meeting, and in
case of a special meeting, the general nature of the business to be transacted.
ARTICLE III - DIRECTORS
SECTION 1. General Powers of Board of Directors. The business and affairs
of the Company shall be managed by its Board of Directors which is hereby
authorized and empowered to exercise all corporate powers of the Company.
SECTION 2. Qualification and Number. The Board of Directors shall have the
power to fix the number of directors and from time to time by proper resolution
to increase or decrease the number thereof without a vote of the shareholders
provided that the number so determined shall not be less than three.
SECTION 3. Election and Term. Except as provided in the Company's Restated
Articles of Incorporation as amended, the shareholders shall at each annual
meeting elect directors each of whom shall serve until the annual meeting of
shareholders next following his election and until his successor is elected and
shall qualify.
SECTION 4. Vacancies. Vacancies on the Board of Directors, including
vacancies from any increase in the number of directors, shall be filled by a
majority of the remaining members of the Board though less than a quorum, and
each person so elected shall be a director until his successor is elected by the
shareholders who may make such election at the next annual meeting of the
shareholders or at any special meeting to be called for that purpose and held
prior thereto.
SECTION 5. Nomination of Directors. Candidates for election to the Board
of Directors at an annual meeting of the shareholders shall be nominated at a
regular or special meeting of the Board held at least sixty days prior to such
annual meeting. Candidates for such election also may be nominated by notice in
writing setting forth the name and address of each candidate, signed by a
shareholder or shareholders and received by the Secretary of the Company at
least thirty days before such annual meeting. If any nominee shall be unwilling
or unable to serve as a director if elected, a substitute nominee shall be
designated by the Board or may be designated by the said shareholder or
shareholders, as the case may be, and announcement of such designation shall be
made at the meeting of the shareholders prior to the voting upon election of
directors.
SECTION 6. Organization Meeting of Board of Directors. The Board of
Directors shall without notice meet each year upon adjournment of the annual
meeting of the shareholders at the principal office of the Company, or at such
other time or place as shall be designated in a notice given to all nominees for
director, for the purposes of organization, fixing of times and places for
regular meetings of the Board for the ensuing year, election of
2
<PAGE>
officers and consideration of any other business that may properly be brought
before the meeting.
SECTION 7. Regular Meetings. Regular meetings of the Board of Directors
shall be held at such times and places as shall be fixed at the organization
meeting of the Board or as may be otherwise determined by the Board.
SECTION 8. Special Meetings. Special meetings of the Board of Directors
may be called by the Chairman of the Board, the President or the Secretary and
shall be called by the Secretary at the written request of any two directors./1/
SECTION 9. Notice of Regular and Special Meetings. No notice of a regular
meeting of the Board of Directors shall be necessary if the meeting is held at
the time and place fixed by the Board at its organization meeting or at the
immediately preceding Board meeting. Notice of any regular meeting to be held
at another time or place and of all special meetings of the Board, setting forth
the time and place of the meeting, and in the case of a special meeting the
purpose or purposes thereof, shall be given by letter or other writing deposited
in the United States mail not later than during the third day immediately
preceding the day for such meeting, or by telephone, telex, facsimile or other
oral, written or electronic means, received not later than during the day
immediately preceding the day for such meeting or such shorter period as the
person or persons calling such meeting may deem necessary or appropriate under
the circumstances./2/
SECTION 10. Quorum. A majority of the directors in office shall be
necessary to constitute a quorum for the transaction of business, and the acts
of the majority of the directors present at a meeting at which a quorum is
present shall be the acts of the Board of Directors. If at any meeting a quorum
shall not be present, the meeting may adjourn from time to time until a quorum
shall be present.
SECTION 11. Written Consent. Any action which may be taken at a meeting
of the Board of Directors or at a meeting of the executive or other committee as
hereinafter provided may be taken without a meeting, if a consent or consents in
writing setting forth the action so taken shall be signed by all the directors
or the members of the committee, as the case may be, and shall be filed with the
Secretary of the Company.
SECTION 12. Participation by Conference Telephone. One or more directors
may participate in a meeting of the Board of Directors or of a committee of the
Board as hereinafter provided for by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other.
SECTION 13. Executive Committee. The Board of Directors may, by
resolution adopted by a majority of the whole Board, constitute, abolish or
reconstitute an Executive Committee. The Executive Committee shall be composed
of such number of members of the Board as the Board may determine, but in no
event less than three, and shall include the Chairman of the Board and the
President. The other members of the Executive Committee
3
<PAGE>
shall be appointed and may be removed by the Board. The Chairman of the Board
shall act as Chairman of such Committee, and in his absence, the President shall
act as Chairman./3/
The Chairman of the Committee shall have power to vote on all questions.
The members of the Committee shall hold office until the first meeting of the
Board of Directors after the next succeeding annual meeting of the shareholders
and until their successors are appointed.
The Board of Directors shall fill any vacancy in the Executive Committee,
and it shall be its duty to keep the membership of such Committee full.
The Executive Committee shall keep proper minutes and records of its
proceedings, and all actions of the Executive Committee shall be reported to the
Board of Directors at its meeting next succeeding such actions, and when the
Board is not in session the Executive Committee shall have all powers and rights
of the Board unless limited by a resolution of the Board.
A quorum of the Executive Committee shall consist of three of its members.
All questions shall be decided by the vote of the majority of the members of
such Committee present.
SECTION 14. Other Committees. The Board of Directors may, by resolution
adopted by a majority of the whole Board, designate one or more committees, each
committee to consist of three or more directors.
SECTION 15. Compensation of Officers and Assistant Officers. Unless
otherwise determined by resolution adopted by the majority of the entire Board
of Directors, the Chief Executive Officer of the Company or such officer as he
may designate shall have the authority to determine, fix and change the
compensation of all officers and assistant officers of the Company elected or
appointed by the Board.
ARTICLE IV - OFFICERS
SECTION 1. Number and Election. The Board of Directors shall elect a
Chairman of the Board, a President, a Secretary and a Treasurer, and may elect
such other officers and assistant officers as the Board may deem appropriate./1/
SECTION 2. Term of Office. The term of office for all officers shall be
until the organization meeting of the Board of Directors following the next
annual meeting of shareholders or until their respective successors are elected
and shall qualify, but any officer may be removed from office, either with or
without cause, at any time by the affirmative vote of the majority of the
members of the Board then in office. A vacancy in any office arising from any
cause may be filled for the unexpired term by the Board.
4
<PAGE>
SECTION 3. Chairman of the Board. The Chairman of the Board shall preside
at all meetings of the shareholders and of the Board of Directors at which he is
present. He shall be a member of the Executive Committee and may be a member of
the other committees of the Board. He shall also serve as Chief Executive
Officer and shall have general supervision over the business and affairs of the
Company./4/
SECTION 4. President. The President shall be the Chief Operating Officer
and shall have general supervision over all of the operations of the Company.
He shall be a member of the Executive Committee and may be a member of the other
committees of the Board. In addition, he shall perform all duties as may be
assigned to him by the Chief Executive Officer and/or the Board of Directors./3/
SECTION 5. Secretary. The Secretary shall attend meetings of the
shareholders, the Board of Directors and the Executive Committee, shall keep
minutes thereof in suitable books, and shall send out all notices of meetings as
required by law or by these By-Laws. He shall, in general, perform all duties
incident to the office of the Secretary and perform such other duties as may be
assigned to him by the Board, the Chairman of the Board or the President./1/
SECTION 6. Treasurer. The Treasurer shall have charge and custody of and
be responsible for all funds and deposit all sums in the name of the Company in
banks, trust companies or other depositories; he shall receive and give receipts
for money due and payable to the Company from any source whatsoever, and in
general shall perform all the duties incident to the office of the Treasurer and
such other duties as may be assigned to him by the Board of Directors, the Chief
Executive Officer or by any officer to whom the Chief Executive Officer has
directed him to report./3/
SECTION 7. Other Officers. The powers and duties of other officers shall
be such as may, from time to time, be prescribed by the Board of Directors, the
Chairman of the Board or the President./1/
SECTION 8. Delegation of Duties of Officers. In case of the absence of any
officer of the Company or for any other reason that the Board of Directors may
deem sufficient, the Board, or in the absence of action by the Board, the
Chairman of the Board, may delegate for the time being the powers and duties of
any officer to any other officer or to any director./3/
ARTICLE V - EXECUTION OF WRITTEN INSTRUMENTS
The Board of Directors shall, from time to time, designate the officers,
employees or agents of the Company who shall have power in its name to sign and
endorse checks and other negotiable instruments, and to borrow money for the
Company and in its name to make notes or other evidence of indebtedness. Any
officer so designated by the Board may further delegate his powers to the extent
provided in any resolution of the Board. Unless otherwise authorized by the
Board, all contracts, leases, deeds and deeds of trust, mortgages, powers
5
<PAGE>
of attorney to transfer stock and all other documents requiring the seal of the
Company shall be executed for and on behalf of the Company by the Chairman of
the Board, the President or any Vice President, and shall be attested by the
Secretary or an Assistant Secretary./1/
ARTICLE VI - CERTIFICATES OF STOCK AND TRANSFERS OF STOCK
SECTION 1. Form of Share Certificates and Transfer. Share certificates
representing the capital stock of the Company shall be in such form as the Board
of Directors may from time to time determine. Each certificate shall be signed
by the Chairman of the Board, the President or one of the Vice Presidents or
other officer designated by the Board and shall be countersigned by the
Treasurer or an Assistant Treasurer and sealed with the seal of the Company. If
such certificates of stock are signed or countersigned by a corporate transfer
agent and a corporate registrar of the Company, such signature of the Chairman
of the Board, the President or other officer, and the countersignature of the
Treasurer or Assistant Treasurer, and such seal, or any of them, may be a
facsimile, engraved or printed./1/
SECTION 2. Transfer Agent and Registrar. The Board of Directors may
appoint an incorporated bank or trust company in the City of Pittsburgh and a
similar institution in the City of New York to act as transfer agents for the
Company's capital stock with such duties and powers as may be prescribed by the
Board in the resolutions appointing them; and an incorporated bank or trust
company in the City of Pittsburgh and a similar institution in the City of New
York to act as registrars of the Company's capital stock. A share certificate
of the Company shall not be valid or binding unless countersigned by a transfer
agent and registered before issue by a registrar.
SECTION 3. Registered Shareholders. The Company shall be entitled to treat
the holder of record of any share or shares of stock as the holder in fact
thereof and accordingly shall not be bound to recognize any equitable or other
claim to or interest in such share on the part of any other person, whether or
not it shall have express or other notice thereof, save as expressly provided by
the laws of Pennsylvania.
SECTION 4. Lost Certificate. Any person claiming a certificate of stock to
be lost or destroyed shall make an affidavit or affirmation of that fact and
advertise the same in such manner as the Board of Directors may require, and
shall, if the directors so require, give the Company a bond of indemnity, in
form and with one or more sureties satisfactory to the Board, whereupon a new
certificate may be issued of the same tenor and for the same number of shares as
the one alleged to be lost or destroyed./5/
SECTION 5. Determination of Shareholders Entitled to Dividends,
Distributions or Rights. The Board of Directors may fix a time not more than
fifty days prior to the date fixed for the payment of any dividend or
distribution or the date for the allotment of rights or the date when any change
or conversion or exchange of shares will be made or go into effect as a record
date for the determination of the shareholders entitled to receive payment of
any such dividend or distribution or to receive any such allotment or rights or
to exercise the rights in respect to any such change, conversion or exchange of
shares./6/
6
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ARTICLE VII - LIMITATION OF DIRECTOR LIABILITY/7/
To the fullest extent that the laws of the Commonwealth of Pennsylvania, as
in effect on January 27, 1987 or as thereafter amended, permit elimination or
limitation of the liability of directors, no director of the Company shall be
personally liable for monetary damages as such for any action taken, or any
failure to take any action, as a director. This Article shall not apply to any
action filed prior to January 27, 1987, nor to any breach of performance of duty
or any failure of performance of duty by any director occurring prior to January
27, 1987. The provisions of this Article shall be deemed to be a contract with
each director of the Company who serves as such at any time while such
provisions are in effect, and each such director shall be deemed to be serving
as such in reliance on the provisions of this Article. This Article shall not
be amended, altered or repealed without the affirmative vote of the holders of
at least 80% of the voting power (without consideration of the rights of any
class of stock to elect directors by a separate class) of the then outstanding
shares of Capital stock of the Company entitled to vote in an annual election of
directors, voting together and not as separate classes, unless such amendment,
alteration or repeal is first recommended and approved by a majority of the
entire Board of Directors in which case only a majority shareholder vote shall
be required. Such affirmative vote shall be required notwithstanding the fact
that no vote is required, or that a lesser percentage may be specified, by law
or in any agreement with any national securities exchange or otherwise. Any
amendment to, alternation, or repeal or adoption of this Article which has the
effect of increasing director liability shall operate prospectively only and
shall not have any effect with respect to any action taken, or any failure to
act, by a director prior thereto.
ARTICLE VIII - ADDITIONAL INDEMNIFICATION PROVISIONS APPLICABLE TO PROCEEDINGS
BASED ON ACTS OR OMISSIONS ON OR AFTER JANUARY 27, 1987/7/
SECTION 1. Right of Indemnification. Except as prohibited by law, every
director and officer of the Company shall be entitled as of right to be
indemnified by the Company against reasonable expenses and any liability paid or
incurred by such person in connection with any actual, threatened or completed
claim, action, suit or proceeding, civil, criminal, administrative,
investigative or other, whether brought by or in the right of the Company or
otherwise, in which he or she may be involved, as a party or otherwise, by
reason of such person being or having been a director or officer of the Company
or by reason of the fact that such person is or was serving at the request of
the Company as a director, officer, employee, fiduciary or other representative
of another corporation, partnership, joint venture, trust, employee benefit plan
or other enterprise (such claim, action, suit or proceeding hereinafter being
referred to as an "action"); provided, however, that no such right of
indemnification shall exist with respect to an action brought by a director or
officer against the Company other than a suit for indemnification as provided in
Section 3. Persons or classes of persons who are not directors or officers of
the Company may be similarly indemnified in respect of service to the Company or
to another such enterprise at the request of the Company to the extent the Board
of Directors at any time denominates such person or such class of persons as
entitled to the benefits of this Article. As used herein, "expenses" shall
include fees and
7
<PAGE>
expenses of counsel selected by such person; and "liability" shall include
amounts of judgments, excise taxes, fines, penalties, and amounts paid in
settlement.
SECTION 2. Right to Advancement of Expenses. Indemnification under Section
1 shall include the right to have expenses incurred by such person in connection
with an action (other than an action brought by such person against the Company)
paid in advance by the Company prior to final disposition of such action,
subject to such conditions as may be prescribed by law or by a provision in the
Company's Related Articles of Incorporation, these By-Laws, agreement or
otherwise to reimburse the Company in certain events.
SECTION 3. Right of Claimant to Bring Suit. If a claim under Section 1 or
Section 2 of this Article is not paid in full by the Company within thirty days
after a written claim has been received by the Company, the claimant may at any
time thereafter bring suit against the Company to recover the unpaid amount of
the claim, and, if successful in whole or in part, the claimant shall also be
entitled to be paid the expense of prosecuting such claim. It shall be a
defense to any such action that the conduct of the claimant was such that under
Pennsylvania law the Company would be prohibited from indemnifying the claimant
for the amount claimed, but the burden of proving such defense shall be on the
Company. Neither the failure of the Company (including its Board of Directors,
independent legal counsel and its shareholders) to have made a determination
prior to the commencement of such action that indemnification of the claimant is
proper in the circumstances because the conduct of the claimant was not such
that indemnification would be prohibited by law, nor an actual determination by
the Company (including its Board of Directors, independent legal counsel or its
shareholders) that the conduct of the claimant was such that indemnification
would be prohibited by law, shall be a defense to the action or create a
presumption that the conduct of the claimant was such that indemnification would
be prohibited by law. The only defense to any such action to receive payment of
expenses in advance under Section 2 of this Article shall be failure to make an
undertaking to reimburse if such undertaking is required by law or by a
provision in the Company's Restated Articles of Incorporation, these By-Laws,
agreement or otherwise.
SECTION 4. Insurance and Funding. The Company may purchase and maintain
insurance to protect itself and any person eligible to be indemnified hereunder
against any liability or expense asserted or incurred by such person in
connection with any action, whether or not the Company would have the power to
indemnify such person against such liability or expense by law or under the
provisions of this Article. The Company may create a trust fund, grant a
security interest, cause a letter of credit to be issued or use other means
(whether or not similar to the foregoing) to ensure the payment of such sums as
may become necessary to effect indemnification as provided herein.
SECTION 5. Non-Exclusivity, Nature and Extent of Rights. The rights of
indemnification and advancement of expenses provided for herein (i) shall not be
deemed exclusive of any other rights, whether now existing or hereafter created,
to which those seeking indemnification hereunder may be entitled under any
agreement, by-law or charter provision, vote of shareholders or directors or
otherwise, (ii) shall be deemed to create
8
<PAGE>
contractual rights in favor of persons entitled to indemnification hereunder,
(iii) shall continue as to persons who have ceased to have the status pursuant
to which they were entitled or were denominated as entitled to indemnification
hereunder and shall inure to the benefit of the heirs and legal representatives
of persons entitled to indemnification and (iv) shall be applicable to actions,
suits or proceedings commenced after the adoption hereof, whether arising from
acts or omissions occurring before or after the adoption hereof.
SECTION 6. Effective Date. This Article shall apply to every action other
than an action filed prior to January 27, 1987, except that it shall not apply
to the extent that Pennsylvania law prohibits its application to any breach of
performance of duty or any failure of performance of duty by a claimant
occurring prior to January 27, 1987.
SECTION 7. Indemnification Agreement. The Company may enter into
agreements with any director, officer or employee of the Company, which
agreements may grant rights to any person eligible to be indemnified hereunder
or create obligations of the Company in furtherance of, different from, or in
addition to, but not in limitation of, those provided in this Article, without
shareholder approval of any such agreement. Without limitation of the
foregoing, the Company may obligate itself (i) to maintain insurance on behalf
of any person eligible to be indemnified hereunder against certain expenses and
liabilities and (ii) to contribute to expenses and liabilities incurred by such
person in accordance with the application of relevant equitable considerations
to the relative benefits to, and the relative fault of, the Company.
SECTION 8. Partial Indemnification. If any person is entitled under any
provision of this Article to indemnification by the Company of a portion, but
not all, of the expenses or liability resulting from an action, the Company
shall nevertheless indemnify such person for the portion thereof to which he is
entitled.
SECTION 9. Severability. If any provision of this Article shall be held to
be invalid, illegal or unenforceable for any reason (i) such provision shall be
invalid, illegal or unenforceable only to the extent of such prohibition and the
validity, legality and enforceability of the remaining provisions of this
Article shall not in any way be affected or impaired thereby, and (ii) to the
fullest extent possible, the remaining provisions of this Article shall be
construed so as to give effect to the intent manifested by the provision held
invalid, illegal or unenforceable.
SECTION 10. Amendment, Alteration or Repeal. This Article may be amended,
altered or repealed at any time in the future by vote of the majority of the
entire Board of Directors without shareholder approval; provided that any
amendment, alteration or repeal, or adoption of any Article of the Restated
Articles of Incorporation or any By-Law of the Company, which has the effect of
limiting the rights granted under this Article, shall require the affirmative
vote of the holders of at least 80% of the voting power (without consideration
of the rights of any class of stock to elect directors by a separate class) of
the then outstanding shares of capital stock of the Company entitled to vote in
an annual election of directors, voting together and not as separate classes,
unless such amendment, alteration or repeal is first recommended and approved by
a majority of the entire Board of Directors in which case only a majority
shareholder vote shall be required. Such affirmative vote shall be required
notwithstanding the fact that no vote is required, or that a lesser percentage
may be specified, by law or in any agreement with any national securities
exchange or otherwise. Any amendment to, alteration or
9
<PAGE>
repeal of this Article, or such other Article or other By-Law, which has the
effect of limiting the rights granted under this Article shall operate
prospectively only, and shall not limit in any way the indemnification provided
for herein with respect to any action taken, or failure to act, occurring prior
thereto.
ARTICLE IX - INDEMNIFICATION OF DIRECTORS, OFFICERS AND OTHERS
SECTION 1. Indemnification for Actions, etc., Other Than By or In the Right
of the Company. The Company shall indemnify any person who was or is a party or
is threatened with being made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action, suit or proceeding by or in the right of
the Company) by reason of the fact that he is or was a director or officer of
the Company, or is or was serving at the request of the Company as a director,
officer or employee of another corporation, partnership, joint venture, trust or
other enterprise, against expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding if he acted in good faith and in
a manner he reasonably believed to be in or not opposed to the best interests of
the Company and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction or upon a
plea of nolo contendere or its equivalent, shall not of itself create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the Company
and, with respect to any criminal action or proceeding, had reasonable cause to
believe that his conduct was unlawful.
SECTION 2. Indemnification for Actions, etc., By or In the Right of the
Company. The Company shall indemnify any person who was or is a party or is
threatened with being made a party to any threatened, pending or completed
action or suit by or in the right of the Company to procure a judgment in its
favor by reason of the fact that he is or was a director or officer of the
Company, or is or was serving at the request of the Company as a director,
officer or employee of another corporation, partnership, joint venture, trust or
other enterprise, against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection with the defense or settlement of such
action or suit if he acted in good faith and in a manner he reasonably believed
to be in, or not opposed to, the best interests of the Company and except that
no indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable for negligence or
misconduct in the performance of his duty to the Company unless and only to the
extent that the court or body in or before which such action, suit or proceeding
was finally brought shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the case, such
person is fairly and reasonably entitled to indemnification for such expenses
which the court of competent jurisdiction shall deem proper.
10
<PAGE>
SECTION 3. Determination of Right to Indemnification. To the extent that a
director or officer of the Company has been successful on the merits or
otherwise in defense of any action, suit or proceeding referred to in Section
(1) and (2) of this Article or in defense of any claim, issue or matter therein,
he shall be indemnified against expenses (including attorneys' fees) actually
and reasonably incurred by him in connection therewith.
Any indemnification under Sections (1) or (2) of this Article (unless
ordered by a court) shall be made by the Company only as authorized in the
specific case upon a determination that indemnification of a director or officer
is proper in the circumstances because he has met the applicable standard of
conduct set forth in this Article. Such determination shall be made:
(a) By the Board of Directors by a majority vote of a quorum
consisting of directors who were not parties to such action, suit or
proceeding, or
(b) If such a quorum is not obtainable, or, even if obtainable a
majority vote of a quorum of disinterested directors so directs, by
independent legal counsel in a written opinion, or
(c) By the shareholders.
SECTION 4. Payment of Expenses. Expenses incurred in defending a civil or
criminal action, suit or proceeding may be paid by the Company in advance of the
final disposition of such action, suit or proceeding as authorized in the manner
provided in Section 3 of this Article upon receipt of an undertaking by or on
behalf of the director or officer, to repay such amount unless it shall
ultimately be determined that he is entitled to be indemnified by the Company as
authorized in this Article.
SECTION 5. Indemnification of Managerial and Retired Employees. Each
employee of the Company acting in a managerial capacity (and each retired
employee who is or was, after retirement, a party to an agreement under which he
is or was obligated to render services to the Company or such other entity)
shall be reimbursed and indemnified in the same manner and to the same extent as
provided in this Article for a director or officer in connection with any
proceeding in which he may be involved or to which he may be a party by reason
of his being or having been such employee or a party to any such agreement or by
reason of any action alleged to have been taken or omitted by him in any such
capacity.
SECTION 6. Other Rights and Remedies. The indemnification provided by this
Article shall not be deemed exclusive of any other rights to which those seeking
indemnification may be entitled under any by-law, agreement, vote of
shareholders or disinterested directors or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a director or
officer, and shall inure to the benefit of the heirs, executors and
administrators of such a person.
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<PAGE>
SECTION 7. Insurance. To the extent permitted by law, the Board of
Directors may at its discretion from time to time purchase and maintain
insurance on behalf of any person who is or was a director, officer or employee
of the Company or is or was serving at the request of the Company as a director,
officer or employee of another corporation, partnership, joint venture, trust or
other enterprise against any liability asserted against him and incurred by him
in any such capacity, or arising out of his status as such, whether or not the
Company would have power to indemnify him against such liability under the
provisions of this Article.
SECTION 8. Applicability. The indemnification and reimbursement provided
under this Article shall continue to be provided to all persons described herein
unless such persons have received the benefits of indemnification under Article
VIII of these By-Laws.
ARTICLE X - NON-APPLICABILITY OF PROVISIONS
OF PENNSYLVANIA ACT NO. 36 of 1990/9/
SECTION 1. Non-Applicability. The following provisions of Pennsylvania Act
No. 36 of 1990 shall not be applicable to the Company;
A. Subsections (d) through (f) of Section 511 of Title 15 of the
Pennsylvania Consolidated Statutes.
B. Subsections (e) through (g) of Section 1721 of Title 15 of the
Pennsylvania Consolidated Statutes.
C. Subchapter G of Chapter 25 of Title 15 of the Pennsylvania
Consolidated Statutes.
D. Subchapter H of Chapter 25 of Title 15 of the Pennsylvania
Consolidated Statutes.
SECTION 2. Expressed Intention. Nothing in the foregoing paragraphs of
Section 1 of this Article X (including, without limitation, paragraphs A and B
thereof) is intended to limit, or shall limit or be deemed to limit, the right,
power or discretion of the Board of Directors, or of any committee of the Board
of Directors, or of any individual director, in discharging the duties of their
respective positions, to consider to the extent, if any, they deem, appropriate:
(i) the effects of any action or proposed action (or of any omission to act)
upon any or all groups affected by such action (or omission to act), including
effects upon shareholders, employees, suppliers, customers and creditors of the
Company and upon communities in which offices or other establishments of the
Company are located; (ii) the short-term and/or long-term interests of the
Company, including benefits that may accrue or be expected to accrue to the
Company from its long-term or intermediate plans and strategies (and/or the
long-term or intermediate plans and strategies of one or more of its affiliates)
and the effect thereon of any action or proposed action (including, without
12
<PAGE>
limitation, any proposed acquisition, divestiture or other transaction), and the
possibility that such short-term and/or longer-term interests might be served by
the continued independence of the Company; (iii) the resources, intent and
conduct (past, stated and potential) of any person seeking to acquire control of
the Company or proposing any transaction with the Company; and (iv) all other
factors deemed pertinent by the Board of Directors or any such committee or
individual director.
ARTICLE XI - BY-LAWS SUBJECT TO PROVISIONS OF ARTICLES OF INCORPORATION
In case of any conflict between the provisions of these By-Laws and the
Company's Restated Articles of Incorporation as amended from time to time, the
provisions of the Articles of Incorporation shall control, and with respect to
any provisions required to be set forth in the By-Laws, the applicable
provisions of the Articles of Incorporation are and shall be incorporated herein
by reference and shall be deemed a part of these By-Laws.
ARTICLE XII - AMENDMENTS/10/
Except as otherwise provided in Articles VII and VIII, these By-Laws may be
altered, amended, added to or repealed by the Board of Directors at any meeting
of the Board duly convened with or without notice of that purpose, subject to
the power of the shareholders to change such action.
- ----------------------------
/1/ Section amended by the Board of Directors on June 13, 1973 and
June 13, 1979.
/2/ Section amended by the Board of Directors on October 12, 1994.
/3/ Section amended by the Board of Directors on June 13, 1973, June 13, 1979
and July 10, 1996.
/4/ Section amended by the Board of Directors on June 13, 1979 and
July 10, 1996.
/5/ Section amended by the Board of Directors on July 11, 1979.
/6/ Section amended by the Board of Directors on November 9, 1977.
/7/ Article added by the Shareholders on September 9, 1987.
/8/ Section added by the Board of Directors on September 9, 1987.
/9/ Article added by the Board of Directors on July 6, 1990.
/10/ Article amended by the Board of Directors on September 9, 1987.
13
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EXHIBIT 11
H. J. HEINZ COMPANY AND SUBSIDIARIES
COMPUTATION OF NET INCOME PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Fiscal Year Ended
-----------------------------
April 30, May 1, May 3,
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Primary income per share:
Net income..................................... $ 301,871 $ 659,319 $ 591,025
Less-preferred dividends....................... 43 56 64
--------- --------- ---------
Net income applicable to common stock.......... $ 301,828 $ 659,263 $ 590,961
========= ========= =========
Average common shares outstanding and
common stock equivalents........................ 373,703 377,156 372,806
========= ========= =========
Net income per share--primary.................. $ 0.81 $ 1.75 $ 1.59
========= ========= =========
Fully diluted income per share:
Net income..................................... $ 301,871 $ 659,319 $ 591,025
========= ========= =========
Average common shares outstanding and
common stock equivalents...................... 373,703 377,156 372,806
Additional common shares assuming:
Conversion of $1.70 third cumulative
preferred stock.............................. 340 451 511
Additional common shares assuming options
were
exercised at the year-end market price...... 1,101 1,491 1,501
--------- --------- ---------
375,144 379,098 374,818
========= ========= =========
Net income per share--fully diluted............ $ 0.80 $ 1.74 $ 1.58
========= ========= =========
</TABLE>
<PAGE>
Exhibit 13
MANAGEMENT'S DISCUSSION AND ANALYSIS
H.J. Heinz Company and Subsidiaries
- ------------------------------------------------------------------------------
H.J. Heinz Company announced its largest-ever
reorganization plan on March 14, 1997 during a meeting
before The Security Analysts of San Francisco. This
reorganization and restructuring program ("Project
Millennia") is designed to strengthen the company's six
core businesses and improve Heinz's profitability and
global growth.
Among the important elements in Project Millennia are
brand building, increasing media spending by 30% over two
years, overseas expansion, efficient consumer response
(ECR), value-added manufacturing, price-based costing and
working capital savings. The company will close or divest
approximately 25 plants throughout the world, while
investing heavily to upgrade and build plants to add
capacity in fast-growing markets. Excluding the sale of
plants and businesses, the global workforce will be
reduced by approximately 2,500.
In the fourth quarter of Fiscal 1997, the company's
Board of Directors approved the initiatives which comprise
Project Millennia. These initiatives include:
_ The exit of at least four non-strategic businesses,
including the divestitures of Ore-Ida's foodservice
business and the New Zealand ice cream business. (See
Notes 3 and 16 to the Consolidated Financial
Statements.)
_ The elimination of inefficient end-of-quarter trade
promotion practices which will improve inventory turns,
cash flow and working capital for Heinz and its
customers.
_ The restructuring of the U.S. Weight Watchers meeting
system by exiting the Personal Cuisine business in the
centers which sold food and closing 55 inefficient
centers.
_ The closure of Heinz Pet Products' Kankakee, Illinois
pet food manufacturing facility and distribution center
and the realignment of other pet food manufacturing and
distribution operations to locations closer to large
customer bases.
_ The closure of the Tracy, California ketchup and
condiment factory.
_ The establishment of a pan-European category-based
strategy in Europe, aligning most of the company's
European operations around its six core businesses
rather than by geographic area.
_ The implementation of a voluntary early retirement
incentive program for domestic salaried employees.
_ The revision of the manufacturing configuration of Heinz
Bakery Products, including the closure, sale or
downsizing of up to five of the ten bakery facilities.
_ The consolidation of the three Heinz-Wattie businesses
into one company to improve the overall performance and
provide greater leverage of various functions.
The plan is expected to generate approximately $120
million in annual pretax savings in Fiscal 1998,
increasing to approximately $200 million upon full
implementation. A portion of the savings will be
reinvested in marketing, pricing and quality improvements
for the company's key brands.
H.J. Heinz Company's financial results for Fiscal 1997
were significantly impacted by Project Millennia.
Restructuring charges and related costs recorded in Fiscal
1997 for Project Millennia totaled $647.2 million pretax
($1.09 per share).
During Fiscal 1997, the company recognized gains on the
sale of non-strategic assets. Gains were recognized on the
sale of the New Zealand ice cream business, $72.1
million pretax ($0.12 per share) and real estate in the
United Kingdom, $13.2 million pretax ($0.02 per share).
Excluding the restructuring charges and related costs
($1.09 per share) and the gains on the sale of non-
strategic assets ($0.14 per share), Fiscal 1997 earnings
would have been $1.76 per share.
26
<PAGE>
As an integral part of Project Millennia, the company
implemented a program to eliminate inefficient end-of-
quarter trade promotion practices. This change in trade
promotion practices reduced Fiscal 1997 earnings by an
estimated $102.7 million pretax ($0.17 per share).
Excluding the restructuring charges and related costs,
gains on the sale of non-strategic assets and adjusting
for the change in trade promotion practices, Fiscal 1997
earnings would have been $1.93 per share, an increase of
10.3% over last year.
- ------------------------------------------------------------------------------
RESULTS OF 1997 versus 1996: Sales for 1997 increased $244.7
OPERATIONS million, or 2.7%, to $9.36 billion from $9.11 billion in
1996. The sales increase was primarily due to acquisitions
(net of divestitures) and increased prices in a number of
product lines. Sales volume was reduced by the company's
program to eliminate inefficient end-of-quarter trade
promotion practices, primarily in North America. Domestic
operations contributed approximately 55% of consolidated
sales in 1997, compared to approximately 57% in 1996.
Acquisitions (net of divestitures) contributed $225.5
million, or 2.5%, to the sales increase. Fiscal 1997
acquisitions impacting the year-to-year sales dollar
comparison included: Southern Country Foods Limited in
Australia, one of the world's largest producers of canned
corned beef and meals; substantially all of the pet food
businesses of Martin Feed Mills Limited in Canada, which
produces and markets cat and dog food throughout Canada;
the canned beans and pasta business of Nestle Canada Inc.;
and other smaller acquisitions.
Also contributing to the sales dollar increase were the
following 1996 acquisitions: Nature's Recipe Pet Food in
the U.S., which markets a brand of premium specialty pet
foods; Alimentos Pilar S.A. of Argentina, a leading
producer of pet and animal feed; Fattoria Scaldasole
S.p.A. in Italy, a processor of organic foods; Earth's
Best, Inc. in the U.S., which produces a leading brand of
premium organic baby foods; Britwest Ltd. in the United
Kingdom, which markets single-serve condiments, beverages
and sauces in Britain and France; the Craig's brand of
jams and dressings in New Zealand; Indian Ocean Tuna Ltd.
in the Seychelles; and the Mareblu brand of canned tuna in
Italy. Sales were reduced by the divestitures of the
following non-strategic businesses: an overseas mushroom
business; Weight Watchers Magazine; two regional dry pet
food product lines; the New Zealand ice cream business;
and other smaller divestitures.
Worldwide prices increased $152.7 million, or 1.7%, in
1997. Domestic price increases occurred in Ore-Ida retail
frozen potatoes, single-serve condiments and pet food.
Overseas, prices increased in infant foods and soups.
Worldwide volume decreased $104.5 million, or 1.2%, in
1997. Sales volume was reduced by the company's program to
eliminate inefficient end-of-quarter trade promotion
practices as discussed above, primarily in North America.
Domestic sales volume decreased 3.4%, as volume declined
in Ore-Ida retail frozen potatoes, ketchup and infant
foods. Sales volume also declined in frozen entrees
(including weight control) due primarily to a very
competitive marketplace. Domestic sales volume increased
in foodservice frozen potatoes, bakery products,
condiments and pet food. Foreign sales volume increased
1.9%, driven by increased attendance overseas at the
Weight Watchers meeting business.
As noted above, domestic frozen entree volume (including
weight control) was down in a very competitive
marketplace. The company is implementing "price-based
costing" for The Budget Gourmet brand of frozen entrees,
using low manufacturing costs to include a larger
selection at a more competitive price point. The company
believes this strategy will offset recent volume trends
and strengthen its competitive position in this category.
The company
27
<PAGE>
is also refocusing on the "Smart Ones from
Weight Watchers" line of frozen entrees, which involves
improving the overall quality of the line, adding product
varieties and introducing new packaging.
Overall, attendance was up in the Weight Watchers
meeting business due to a strong increase in attendance
overseas, offset partially by lower attendance in the U.S.
Domestically, the company plans to launch, in September
1997, the new Weight Watchers 1*2*3 Success(TM) Plan, which
has been very successful in Europe. In addition, to reduce
costs in the Weight Watchers meeting business in the U.S.,
the company has exited the Personal Cuisine business in
the centers which sold food and is closing 55 inefficient
centers.
Foreign currencies declined against the U.S. dollar,
decreasing sales $29.0 million, or less than 1%. This
decrease came primarily from sales in Japan, Central
Europe and Zimbabwe, offset partially by sales in the
United Kingdom.
Gross profit decreased $365.0 million to $2.97 billion
from $3.34 billion a year ago. The ratio of gross profit
to sales decreased to 31.8% from 36.6%. Excluding the
effects of the 1997 restructuring charges and related
costs of $477.8 million, and the gains on the sale of the
New Zealand ice cream business and real estate in the
United Kingdom of $85.3 million, gross profit would have
increased $27.5 million to $3.36 billion, however, the
ratio of gross profit to sales would have decreased to
36.0%. The current year's adjusted gross profit ratio of
36.0% was impacted by the company's change in trade
promotion practices and higher commodity prices, offset
partially by favorable pricing.
Selling, general and administrative (SG&A) expenses
increased $166.3 million to $2.22 billion from $2.05
billion and increased as a percentage of sales to 23.7%
from 22.5%. Excluding the effects of the 1997
restructuring charges and related costs of $169.4 million,
SG&A expenses would have remained flat at $2.05 billion
and would have decreased as a percentage of sales to
21.9%.
Total marketing support (including trade and consumer
promotions and media) increased 3.8% to $2.05 billion on a
sales increase of 2.7%.
Operating income decreased $531.3 million to $756.3
million from $1.29 billion. Excluding the effects of the
1997 restructuring charges and related costs, and gains
recognized on the sale of certain non-strategic assets,
operating income would have increased $30.6 million to
$1.32 billion. The increase in operating income, excluding
the impact of these non-recurring items, was primarily due
to the increase in gross profit as SG&A expenses were
relatively flat year-on-year. Domestic operations provided
approximately 23% of operating income in 1997 compared to
approximately 57% in 1996. Excluding the effects of the
1997 restructuring charges and related costs, and gains
recognized on the sale of certain non-strategic assets,
domestic operations would have provided approximately 53%
of operating income.
Non-operating expenses totaled $277.2 million in 1997
compared to $263.9 million in 1996. Net interest expense
increased 1.2% to $235.4 million from $232.6 million.
The effective tax rate was 37.0% in 1997 and 35.6% in
1996. The lower effective tax rate in 1996 reflects the
recognition of operating losses overseas. (See Notes 5 and
13 to the Consolidated Financial Statements.)
Net income decreased $357.4 million to $301.9 million
from $659.3 million in the prior year and earnings per
share decreased to $0.81 from $1.75. After-tax
restructuring charges and related costs, net of gains
recognized on the sale of certain non-strategic assets,
totaled $356.0 million, or $0.95 per share. Excluding the
impact of these non-recurring items, net income would have
28
<PAGE>
decreased slightly to $657.9 million and earnings per
share would have increased to $1.76. Earnings per share
benefited slightly from a reduction in the average number
of shares used for the calculation of earnings per share,
which was due primarily to the company's share repurchase
program.
The impact of fluctuating exchange rates for 1997
remained relatively consistent on a line-by-line basis
throughout the Consolidated Statement of Income.
1996 versus 1995: Sales for 1996 increased $1.03 billion,
or 13%, to $9.11 billion from $8.09 billion in 1995. The
increase was primarily due to acquisitions (net of
divestitures) as well as volume and price. Domestic
operations contributed approximately 57% of consolidated
sales in both 1996 and 1995. Fiscal 1996 comprised 52
weeks compared to 53 weeks in 1995.
Acquisitions (net of divestitures) contributed $617.3
million, or 8%, to the sales increase. Sales benefited
from the following Fiscal 1996 acquisitions: PMV/Zabreh,
which sells infant formula through pharmacies under the
Sunar and Feminar brand names in both the Czech and Slovak
Republics; Kecskemeti Konzervgyar RT, which produces
jarred baby foods and canned vegetable products in
Kecskemet, Hungary; Britwest Ltd.; Fattoria Scaldasole
S.p.A.; Craig's; Indian Ocean Tuna Ltd.; Earth's Best,
Inc.; and Nature's Recipe. Fiscal 1995 acquisitions
impacting the year-to-year sales dollar comparison
included: the North American pet food business of the
Quaker Oats Company ("the Pet Food Business"); The All
American Gourmet Company, maker of The Budget Gourmet
brand of frozen meals and side dishes; the Farley's infant
foods and adult nutrition business; and the Family
Products Division of Glaxo India, Ltd. Divestitures
impacting the sales comparison included a domestic bulk
oil business and an overseas sweetener business.
Volume increased $313.5 million, or 4%, in 1996. Foreign
volume increases occurred in seafood, pasta, Heinz beans,
sauces/pastes and infant foods. Domestic volume increased
in StarKist tuna, Ore-Ida foodservice frozen potatoes,
pasta, coated products, Bagel Bites and Heinz ketchup,
offset by decreases in Weight Watchers brand dairy
products and single-serve condiments.
Prices increased $85.8 million, or 1%, in 1996.
Overseas, prices increased in infant foods, Heinz beans
and edible oil. Domestic price increases occurred in Heinz
ketchup, single-serve condiments and Ore-Ida retail frozen
potatoes while decreases occurred in StarKist tuna, frozen
entrees (including weight control) and pet food.
The strengthening of overseas currencies, particularly
in New Zealand and Western Europe, against the U.S. dollar
increased sales $60.4 million, or less than 1%.
Gross profit increased $369.7 million to $3.34 billion
in 1996 from $2.97 billion in 1995. The ratio of gross
profit to sales decreased slightly to 36.6% in 1996 from
36.7% in 1995. The gross profit ratio in 1996 was impacted
by repositioning the business portfolio through
acquisitions and divestitures, cost reductions, profit mix
and the effect of increased goodwill amortization
associated with acquisitions. In the fourth quarter of
1996, gross profit was also impacted by gains relating to
the sale of the Weight Watchers Magazine ($0.02 per share)
and the sale of two regional dry pet food product lines
($0.02 per share). (See Note 13 to the Consolidated
Financial Statements.) The gains were offset in the fourth
quarter of 1996 in SG&A expenses by restructuring charges
at certain overseas affiliates ($0.01 per share) and an
increase in marketing expenses of $27.5 million, or 12%.
SG&A expenses increased $237.9 million to $2.05 billion
in 1996 from $1.81 billion in 1995 and increased slightly
as a percentage of sales to 22.5% from 22.4%. As a
percentage of sales, increased general and administrative
expenses (due mainly to acquisitions) and increased
29
<PAGE>
marketing expenses were offset by lower selling and
distribution expenses.
Total marketing support (including trade and consumer
promotions and media) increased 15% to $1.97 billion on a
sales increase of 13%.
Operating income increased $131.8 million, or 11%, to
$1.29 billion from $1.16 billion for 1995. The increase in
operating income was primarily due to the increase in
gross profit, partially offset by increased marketing
expenses; higher selling and distribution expenses related
to increased volume; and higher general and administrative
expenses associated with acquisitions. Domestic operations
provided approximately 57% of operating income in both
1996 and 1995.
Attendance at the Weight Watchers meeting business in
the U.S. was adversely affected by the severe winter
weather and an industry-wide decrease in attendance in
1996. Although the entire domestic weight-loss industry
continued to show weakness, the Weight Watchers meetings
market share exceeded 50%.
Frozen entree volume (including weight control) was flat
in a very competitive marketplace, where downward pricing
pressures in the U.S. affected profitability.
Heinz U.K.'s results improved significantly over 1995,
primarily as a result of improved sales volumes and
prices.
The company's New Zealand affiliate, Wattie's Ltd.,
experienced operational difficulties as new poultry
production facilities were brought on-line during 1996.
Poor poultry market conditions also impacted the New
Zealand operations, as well as higher commodity prices in
the frozen food business and more competitive markets in
the frozen food and ice cream businesses.
The company continued to invest in Eastern Europe. In
general, the Eastern European operations have progressed,
but have not yet contributed margins comparable to the
company's traditional product lines.
As expected, cost synergies resulting from the
combination of acquired businesses with existing company
operations were realized in 1996. In connection with the
acquisition of the Pet Food Business, the closure of the
cannery at the Topeka, Kansas factory (dedicating that
facility to the production of dry pet food) and the
combination of selling, distribution and administrative
functions with existing company operations produced
efficiencies that met or exceeded expectations.
Also during 1996, the Weight Watchers Gourmet Food
Company announced the closure of The All American Gourmet
plant in Atlanta, Georgia, where operations were phased
out in January 1996. Production was consolidated with
other company facilities.
Non-operating expenses totaled $263.9 million in 1996
compared to $217.8 million in 1995. Net interest expense
increased 34% to $232.6 million from $174.0 million, due
mainly to higher average borrowings resulting from 1995
acquisitions and from repurchases of company stock under
the stock repurchase program.
The effective tax rate was 35.6% in 1996 and 37.0% in
1995. The 1996 tax rate was favorably affected by the
recognition of operating losses overseas and higher
profits from operations in lower tax jurisdictions. (See
Notes 5 and 13 to the Consolidated Financial Statements.)
Net income increased $68.3 million, or 12%, to $659.3
million in 1996 from $591.0 million in 1995. Earnings per
share increased to $1.75 in 1996 from $1.59 in 1995. The
average number of shares used for the calculation of
earnings per share increased to 377.2 million in 1996 from
372.8 million in 1995, due mainly to increased shares
outstanding resulting from stock options
exercised, and higher common stock equivalents due to a
higher average share price. The increase
30
<PAGE>
in the average number of shares caused 1996 earnings per
share to decrease $0.02 per share compared to 1995.
The impact of fluctuating exchange rates for 1996
remained relatively consistent on a line-by-line basis
throughout the Consolidated Statement of Income.
- ------------------------------------------------------------------------------
LIQUIDITY AND Return on average shareholders' equity (ROE) was 11.7%
FINANCIAL POSITION in 1997 (23.9% excluding the restructuring charges and
related costs recorded in Fiscal 1997 for Project
Millennia, net of gains recognized on the sale of certain
non-strategic assets), 25.5% in 1996 and 24.6% in 1995.
Pretax return on average invested capital (ROIC) was 12.6%
in 1997 (21.4% excluding the items mentioned above), 21.8%
in 1996 and 22.1% in 1995.
Cash provided by operating activities was $875.0 million
in 1997, compared to $737.1 million in 1996. The increase
in 1997 versus 1996 was primarily the result of lower
working capital requirements resulting from the company's
program to eliminate inefficient end-of-quarter trade
promotion practices, offset partially by expenditures
related to the restructuring program.
In 1996, cash provided by operating activities decreased
slightly to $737.1 million, from $752.5 million in 1995.
The decrease was the result of higher working capital
needs, due mainly to higher sales levels.
Cash used for investing activities was $386.3 million in
1997 versus $290.1 million in 1996. In 1997, the company
spent $208.4 million on acquisitions compared to $156.0
million in 1996. (See Note 2 to the Consolidated Financial
Statements.) Proceeds from divestitures totaled $165.6
million in 1997 versus $82.1 million in 1996. (See Note 3
to the Consolidated Financial Statements.)
Capital expenditures totaled $377.5 million in 1997 and
$334.8 million in 1996. Both years reflect expenditures
for productivity improvements and plant expansions,
principally at the company's United Kingdom, Heinz Pet
Products, Ore-Ida, StarKist Seafood, Heinz U.S.A., Heinz
Bakery Products, Weight Watchers Gourmet Food Company,
Heinz Italia and Wattie's operations.
Purchases and sales/maturities of short-term investments
increased in 1997. The company periodically sells a
portion of its short-term investment portfolio in order to
reduce its borrowings. In 1995, increased activity
provided liquidity to fund various acquisitions.
Investments in tax benefits provided $62.1 million in
1996, due mainly to the company's sale of certain domestic
investments.
Financing activities used $429.8 million in 1997
compared to $470.8 million in 1996. The company borrowed
funds totaling $82.0 million in 1997 versus making net
repayments of $81.7 million in 1996. Cash used for
dividends paid to shareholders increased by $35.0 million,
while treasury stock purchases increased $121.8 million.
Stock options exercised provided an additional $39.2
million in 1997 compared to 1996.
The average amount of short-term debt outstanding
(excluding the long-term portion of domestic commercial
paper) during 1997, 1996 and 1995 was $520.5 million,
$1.52 billion and $1.15 billion, respectively. Total
short-term debt had a weighted-average interest rate
during 1997 of 7.6% and at year-end of 6.1%. The weighted-
average interest rate on short-term debt during 1996 was
6.5% and at year-end was 6.2%.
Aggregate domestic commercial paper had a weighted-
average interest rate during 1997 of 5.4% and at year-end
of 5.6%. In 1996, the weighted-average rate was 5.8% and
the rate at year-end was 5.4%. Based upon the amount of
commercial paper recorded at April 30, 1997, a variance
31
<PAGE>
of 1/8% in the related interest rate would cause interest
expense to change by approximately $1.8 million. The
company continues to evaluate long-term financing vehicles
in order to reduce short-term variable interest rate debt.
On August 29, 1996, the company amended the line of
credit agreements which support its domestic commercial
paper programs, increasing availability and extending
maturity dates. The amended terms provide for one
agreement totaling $2.30 billion that expires in September
2001. The previous agreements provided for lines of credit
totaling $2.00 billion, of which $1.20 billion was
scheduled to expire in September 1996 and $800.0 million
was scheduled to expire in September 2000.
As of April 30, 1997, $1.35 billion of domestic
commercial paper is classified as long-term debt due to
the long-term nature of the supporting line of credit
agreements. At May 1, 1996, $800.0 million of domestic
commercial paper outstanding was classified as long-term.
As of May 1, 1996, domestic commercial paper of $450.0
million was privately placed. As of April 30, 1997, there
was no privately placed domestic commercial paper
outstanding.
On September 10, 1996, the Board of Directors raised the
quarterly dividend on the company's common stock to $0.29
per share from $0.26 1/2 per share, for an indicated
annual rate of $1.16 per share. The company paid $417.0
million in dividends to both common and preferred
shareholders, an increase of $35.0 million, or 9.2%, over
1996. The dividend rate in effect at the end of each year
resulted in a payout ratio of 143.2% in 1997 (65.9%
excluding the restructuring charges and related costs
recorded in Fiscal 1997 for Project Millennia, net of
gains recognized on the sale of certain non-strategic
assets), 60.6% in 1996 and 60.5% in 1995.
In 1997, the company repurchased 7.9 million shares of
treasury stock, or 2% of the amount outstanding at the
beginning of Fiscal 1997, at a cost of $277.0 million. As
of April 30, 1997, the company had repurchased 3.3 million
shares as part of the current 15.0 million share
repurchase program, which was authorized by the Board of
Directors on July 10, 1996. The previous 15.0 million
share repurchase program, which was authorized by the
Board of Directors on September 13, 1994, was completed in
October 1996. During 1996, 4.8 million shares were
repurchased at a cost of $155.2 million. The company may
reissue repurchased shares upon the exercise of stock
options, conversion of preferred stock and for general
corporate purposes.
Components of the charge for Project Millennia requiring
the utilization of cash total $304.0 million, against
which $93.2 million was spent in Fiscal 1997. The company
expects to spend a significant portion of the remainder
during Fiscal 1998. In addition, the company expects to
make capital expenditures totaling approximately $250
million over the life of the program, with a significant
portion to be spent in Fiscal 1998. The company expects to
finance the cash requirements of the program through
operations, proceeds from the sale of non-strategic assets
and with borrowings under the company's currently existing
credit arrangements. The cash requirements of Project
Millennia will not have a significant impact on the
company's liquidity or financial position.
During 1995, the company participated in the formation
of a business (the "entity") which purchases a portion of
the trade receivables generated by the company. The
company sells receivables to Jameson, Inc., a wholly owned
subsidiary, which then sells undivided interests in the
receivables to the entity. Outside investors contributed
$95.4 million in capital to the entity. The company
consolidates the entity, and the capital contributed by
the outside investors is classified as minority interest
("other long-term liabilities") on the Consolidated
Balance Sheets.
32
<PAGE>
The company uses derivative financial instruments for
the purpose of hedging currency, commodity price and
interest rate exposures which exist as part of ongoing
business operations. 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. (See Notes 1 and 12 to the Consolidated
Financial Statements.)
The impact of inflation on both the company's financial
position and results of operations has been minimal and is
not expected to adversely affect 1998 results.
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 DEVELOPMENTS On June 30, 1997, the company completed the sale of its
frozen foodservice foods business to McCain Foods Limited
of New Brunswick, Canada for approximately $500 million.
The transaction included the sale of Heinz's Ore-Ida
appetizer, pasta and potato foodservice business and the
five Ore-Ida plants that manufacture the products. The
Ore-Ida foodservice business contributed approximately
$525 million in net sales for Fiscal 1997. The sale is not
expected to have an adverse impact on the company's
results of operations.
On June 30, 1997, the company acquired John West Foods
Limited from Unilever. John West Foods Limited, with
annual sales of more than $250 million, is the leading
brand of canned tuna and fish in the United Kingdom. Based
in Liverpool, John West Foods Limited sells its canned
fish products throughout Continental Europe and in a
number of other international markets. (John West
operations in Australia, New Zealand and South Africa are
not included in the transaction.)
- ------------------------------------------------------------------------------
STOCK MARKET H.J. Heinz Company common stock is traded principally on
INFORMATION the New York Stock Exchange and the Pacific Stock
Exchange, under the symbol HNZ. The number of shareholders
of record of the company's common stock as of June 27,
1997 approximated 67,754. The closing price of the common
stock on the New York Stock Exchange composite listing on
April 30, 1997 was $41 1/2.
Stock price information for common stock by quarter
follows:
<TABLE>
<CAPTION>
Stock Price Range
- ----------------------------------------------------------------
High Low
- ----------------------------------------------------------------
<S> <C> <C>
1997
FIRST $ 34 $ 29 3/4
SECOND 36 1/8 31 1/4
THIRD 41 1/2 35 1/4
FOURTH 44 7/8 38 1/8
- ----------------------------------------------------------------
1996
First $ 31 3/8 $ 27 5/8
Second 31 7/8 27 5/8
Third 34 7/8 30 5/8
Fourth 36 5/8 30 7/8
- ----------------------------------------------------------------
</TABLE>
33
<PAGE>
- ------------------------------------------------------------------------------
SEGMENT AND The company is engaged principally in one line of
GEOGRAPHIC DATA business--processed food products--which represents more
than 90% of consolidated sales. The following table
presents information about the company by geographic area.
There were no material amounts of sales or transfers among
geographic areas and no material amounts of United States
export sales.
<TABLE>
<CAPTION>
(Dollars in thousands) Domestic Foreign Worldwide North America Europe Asia/Pacific Other
- --------------------------------------------------------------------- --------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1997
SALES $ 5,169,779 $ 4,187,228 $ 9,357,007 $ 5,586,730 $ 2,281,364 $ 1,129,788 $ 359,125
OPERATING INCOME 174,280 581,991 756,271 208,585 320,347 166,552 60,787
OPERATING INCOME
EXCLUDING
RESTRUCTURING
RELATED ITEMS* 704,880 613,309 1,318,189 751,685 374,202 130,515 61,787
IDENTIFIABLE ASSETS 4,474,740 3,963,047 8,437,787 4,941,301 2,241,006 995,762 259,718
CAPITAL EXPENDITURES** 192,682 184,775 377,457 213,574 102,677 31,442 29,764
DEPRECIATION AND
AMORTIZATION EXPENSE 203,587 136,903 340,490 221,249 81,932 29,944 7,365
1996
Sales $5,235,847 $3,876,418 $9,112,265 $5,598,286 $2,133,690 $1,085,747 $294,542
Operating income 739,807 547,765 1,287,572 801,090 336,481 114,239 35,762
Identifiable assets 4,801,790 3,821,901 8,623,691 5,099,632 2,289,919 978,292 255,848
Capital expenditures** 185,874 148,913 334,787 195,517 65,485 40,294 33,491
Depreciation and
amortization expense 206,912 136,897 343,809 224,824 72,530 30,674 15,781
1995
Sales $4,628,507 $3,458,287 $8,086,794 $4,982,959 $1,881,013 $1,006,198 $216,624
Operating income 656,897 498,912 1,155,809 715,592 282,941 121,951 35,325
Identifiable assets 4,812,122 3,435,066 8,247,188 5,161,418 1,979,351 919,988 186,431
Capital expenditures** 188,099 153,689 341,788 201,912 72,384 48,435 19,057
Depreciation and
amortization expense 197,009 118,258 315,267 213,243 68,122 28,214 5,688
- --------------------------------------------------------------------- --------------------------------------------------------
</TABLE>
*Excludes domestic and foreign charges for restructuring and related costs of
$530.6 million and $116.6 million, respectively. Also excludes gains on the
sale of an ice cream business in New Zealand and real estate in the U.K. of
$72.1 million and $13.2 million, respectively.
**Excludes property, plant and equipment acquired through acquisitions.
34
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
H.J. Heinz Company and Subsidiaries
<TABLE>
<CAPTION>
Fiscal Year Ended APRIL 30, 1997 May 1, 1996 May 3, 1995
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
(Dollars in thousands, except per
share data) (52 WEEKS) (52 weeks) (53 weeks)
- ------------------------------------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF
INCOME:
Sales $ 9,357,007 $ 9,112,265 $ 8,086,794
Cost of products sold 6,385,091 5,775,357 5,119,597
- ------------------------------------------------------------------------------------------------------------
Gross profit 2,971,916 3,336,908 2,967,197
Selling, general and
administrative expenses 2,215,645 2,049,336 1,811,388
- ------------------------------------------------------------------------------------------------------------
Operating income 756,271 1,287,572 1,155,809
Interest income 39,359 44,824 36,566
Interest expense 274,746 277,411 210,585
Other expense, net 41,820 31,324 43,783
- ------------------------------------------------------------------------------------------------------------
Income before income taxes 479,064 1,023,661 938,007
Provision for income taxes 177,193 364,342 346,982
Net income $ 301,871 $ 659,319 $ 591,025
- ------------------------------------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF
RETAINED EARNINGS:
Amount at beginning of year $ 4,156,380 $ 3,878,988 $ 3,633,385
Net income 301,871 659,319 591,025
Cash dividends:
Common stock 416,923 381,871 345,358
Preferred stock 43 56 64
Amount at end of year $ 4,041,285 $ 4,156,380 $ 3,878,988
- ------------------------------------------------------------------------------------------------------------
PER COMMON SHARE AMOUNTS:
Net income $ 0.81 $ 1.75 $ 1.59
Cash dividends $ 1.13 1/2 $ 1.03 1/2 $ 0.94
- ------------------------------------------------------------------------------------------------------------
Average shares for earnings per
share 373,703,246 377,155,837 372,806,306
- ------------------------------------------------------------------------------------------------------------
See Notes to Consolidated Financial Statements.
</TABLE>
35
<PAGE>
CONSOLIDATED BALANCE SHEETS
H.J. Heinz Company and Subsidiaries
<TABLE>
<CAPTION>
Assets (Dollars in thousands) APRIL 30, 1997 May 1, 1996
- ------------------------------------------------------------------------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 156,986 $ 90,064
Short-term investments, at cost
which approximates market 31,451 18,316
Receivables (net of allowances:
1997 - $18,934 and 1996 -
$17,298) 1,118,874 1,207,874
Inventories:
Finished goods and work-in-
process 1,040,104 1,115,367
Packaging material and
ingredients 392,407 378,596
- ------------------------------------------------------------------------------
1,432,511 1,493,963
- ------------------------------------------------------------------------------
Prepaid expenses 208,246 221,669
Other current assets 65,038 14,806
- ------------------------------------------------------------------------------
Total current assets 3,013,106 3,046,692
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
PROPERTY, PLANT AND EQUIPMENT:
Land 55,992 62,243
Buildings and leasehold
improvements 871,417 824,308
Equipment, furniture and other 3,453,189 3,333,493
- ------------------------------------------------------------------------------
4,380,598 4,220,044
Less accumulated depreciation 1,901,378 1,603,216
- ------------------------------------------------------------------------------
Total property, plant and
equipment, net 2,479,220 2,616,828
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
OTHER NON-CURRENT ASSETS:
Goodwill (net of amortization:
1997 - $259,019 and 1996 -
$211,693) 1,803,552 1,737,478
Other intangibles (net of
amortization: 1997 - $163,232
and 1996 - $141,886) 627,096 649,048
Other non-current assets 514,813 573,645
- ------------------------------------------------------------------------------
Total other non-current assets 2,945,461 2,960,171
- ------------------------------------------------------------------------------
Total assets $ 8,437,787 $ 8,623,691
- ------------------------------------------------------------------------------
</TABLE>
See Notes to Consolidated Financial Statements.
36
<PAGE>
<TABLE>
<CAPTION>
Liabilities and Shareholders'
Equity (Dollars in thousands) APRIL 30, 1997 May 1, 1996
- ------------------------------------------------------------------------------
<S> <C> <C>
CURRENT LIABILITIES:
Short-term debt $ 589,893 $ 994,586
Portion of long-term debt due
within one year 573,549 87,583
Accounts payable 865,154 870,337
Salaries and wages 64,836 72,678
Accrued marketing 164,354 146,055
Accrued restructuring costs 210,804 -
Other accrued liabilities 315,662 368,182
Income taxes 96,163 175,701
- ------------------------------------------------------------------------------
Total current liabilities 2,880,415 2,715,122
- ------------------------------------------------------------------------------
LONG-TERM DEBT AND OTHER
LIABILITIES:
Long-term debt 2,283,993 2,281,659
Deferred income taxes 265,409 319,936
Non-pension postretirement
benefits 211,500 209,994
Other 356,049 390,223
- ------------------------------------------------------------------------------
Total long-term debt and other
liabilities 3,116,951 3,201,812
- ------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY:
Capital stock:
Third cumulative preferred,
$1.70 first series, $10 par
value 241 271
Common stock, 431,096,485 shares
issued, $.25 par value 107,774 107,774
- ------------------------------------------------------------------------------
108,015 108,045
Additional capital 175,811 154,602
Retained earnings 4,041,285 4,156,380
Cumulative translation adjustments (210,864) (155,753)
- ------------------------------------------------------------------------------
4,114,247 4,263,274
Less:
Treasury shares, at cost
(63,912,463 shares at April
30, 1997 and 62,498,417 shares
at May 1, 1996) 1,629,501 1,500,866
Unfunded pension obligation 26,962 32,550
Unearned compensation relating
to the ESOP 17,363 23,101
- ------------------------------------------------------------------------------
Total shareholders' equity 2,440,421 2,706,757
Total liabilities and
shareholders' equity $ 8,437,787 $ 8,623,691
- ------------------------------------------------------------------------------
</TABLE>
37
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
H.J. Heinz Company and Subsidiaries
<TABLE>
<CAPTION>
Fiscal Year Ended APRIL 30, 1997 May 1, 1996 May 3, 1995
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
(Dollars in thousands) (52 WEEKS) (52 weeks) (53 weeks)
- ------------------------------------------------------------------------------
OPERATING ACTIVITIES:
Net income $ 301,871 $ 659,319 $ 591,025
Adjustments to reconcile net
income to cash
provided by operating
activities:
Depreciation 244,388 254,640 238,229
Amortization 96,102 89,169 77,038
Deferred tax (benefit)
provision (33,450) 135,235 134,304
Gain on sale of New Zealand
ice cream business and
U.K. real estate (85,282) - -
Provision for restructuring 647,200 - -
Other items, net (42,527) (82,198) (43,680)
Changes in current assets and
liabilities, excluding
effects of acquisitions and
divestitures:
Receivables 74,445 (222,894) (77,039)
Inventories (5,329) (102,269) (87,580)
Prepaid expenses and other
current assets 5,094 (14,361) (27,634)
Accounts payable 18,003 126,596 111,361
Accrued liabilities (182,555) (114,015) (72,644)
Income taxes (162,962) 7,866 (90,874)
- ------------------------------------------------------------------------------
Cash provided by operating
activities 874,998 737,088 752,506
- ------------------------------------------------------------------------------
INVESTING ACTIVITIES:
Capital expenditures (377,457) (334,787) (341,788)
Acquisitions, net of cash
acquired (208,383) (156,006) (1,178,819)
Proceeds from divestitures 165,555 82,061 52,497
Purchases of short-term
investments (1,223,884) (982,824) (1,808,327)
Sales and maturities of short-
term investments 1,233,919 1,050,971 1,800,992
Investment in tax benefits 139 62,081 14,436
Other items, net 23,798 (11,637) (12,819)
- ------------------------------------------------------------------------------
Cash (used for) investing
activities (386,313) (290,141) (1,473,828)
- ------------------------------------------------------------------------------
FINANCING ACTIVITIES:
Proceeds from long-term debt 47,483 4,860 573,689
Payments on long-term debt (99,176) (46,791) (10,209)
Proceeds from (payments on)
commercial paper and
short-term borrowings 133,732 (39,745) 630,310
Dividends (416,966) (381,927) (345,422)
Purchase of treasury stock (277,046) (155,200) (273,671)
Proceeds from minority interest - - 95,400
Exercise of stock options 135,082 95,853 44,263
Other items, net 47,131 52,149 19,047
- ------------------------------------------------------------------------------
Cash (used for) provided by
financing activities (429,760) (470,801) 733,407
- ------------------------------------------------------------------------------
Effect of exchange rate changes
on cash and cash equivalents 7,997 (10,420) 13,717
- ------------------------------------------------------------------------------
Net increase (decrease) in cash
and cash equivalents 66,922 (34,274) 25,802
Cash and cash equivalents at
beginning of year 90,064 124,338 98,536
Cash and cash equivalents at end
of year $ 156,986 $ 90,064 $ 124,338
- ------------------------------------------------------------------------------
</TABLE>
See Notes to Consolidated Financial Statements.
38
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
H.J. Heinz Company and Subsidiaries
- ------------------------------------------------------------------------------
1. SIGNIFICANT Fiscal Year: H.J. Heinz Company (the "company") operates
ACCOUNTING POLICIES on a 52- 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 30, 1997, May 1, 1996 and May 3, 1995.
Principles of Consolidation: The consolidated financial
statements include the accounts of the company and its
subsidiaries. All intercompany accounts and transactions
were eliminated. Certain prior-year amounts have been
reclassified in order to conform with the 1997
presentation.
Use of Estimates: The preparation of financial statements,
in conformity with generally accepted accounting
principles, 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 shareholders' equity. Gains and losses from
foreign currency transactions are included in net income
for the period.
Cash Equivalents: Cash equivalents are defined as highly
liquid investments with original maturities of 90 days or
less.
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.
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 depreciation are removed from the accounts and
any related gains or losses are included in income.
Intangibles: Goodwill and other intangibles arising from
acquisitions are being amortized on a straight-line basis
over periods not exceeding 40 years. The company regularly
reviews the individual components of the balances by
evaluating the future cash flows of the businesses to
determine the recoverability of the assets and recognizes,
on a current basis, any diminution in value.
Long-Lived Assets: On May 2, 1996, the company adopted
Statement of Financial Accounting Standard ("SFAS") No.
121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to Be Disposed Of." The
implementation of this standard did not have a material
effect on results of operations or financial position.
39
<PAGE>
Revenue Recognition: The company generally recognizes
revenue upon shipment of goods to customers or upon
performance of services. However, in certain overseas
countries, revenue is recognized upon receipt of the
product by the customer.
Advertising Expenses: Advertising costs are generally
expensed in the year in which the advertising first takes
place.
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.
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.
Where it is contemplated that earnings will be remitted,
credit for foreign taxes already paid generally will
offset applicable U.S. income taxes. In cases where they
will not offset U.S. income taxes, appropriate provisions
are included in the Consolidated Statements of Income.
Net Income Per Common Share: Net income per common share
has been computed by dividing income applicable to common
shareholders by the weighted-average number of shares of
common stock outstanding and common stock equivalents
during the respective years. Fully diluted earnings per
share are not significantly different from primary
earnings per share and, accordingly, are not presented.
In February 1997, the FASB issued SFAS No. 128,
"Earnings Per Share," effective for financial statements
issued for periods ending after December 15, 1997. The new
standard specifies the computation, presentation and
disclosure requirements for earnings per share for
entities with publicly held common stock. Since early
adoption of the standard is prohibited, pro forma earnings
per share amounts computed using the new standard are
presented below.
<TABLE>
<CAPTION>
Fiscal Year Ended
- ------------------------------------------------------------------------------
1997 1996 1995
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
As presented $ 0.81 $ 1.75 $ 1.59
Pro forma:
Basic earnings per share $ 0.82 $ 1.79 $ 1.61
Diluted earnings per share $ 0.81 $ 1.75 $ 1.59
- ------------------------------------------------------------------------------
</TABLE>
Stock-Based Employee Compensation Plans: Stock-based
compensation is accounted for by using the intrinsic
value-based method in accordance with Accounting
Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees."
Financial Instruments: The company uses derivative
financial instruments for the purpose of hedging currency,
price and interest rate exposures which exist as part of
ongoing business operations. 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.
40
<PAGE>
_ Interest Rate Swap Agreements: The company may utilize
interest rate swap agreements to lower funding costs, to
diversify sources of funding or to alter interest rate
exposure. Amounts paid or received on interest rate swap
agreements are deferred and recognized as adjustments to
interest expense. Gains and losses realized upon the
settlement of such contracts are deferred and amortized to
interest expense over the remaining term of the debt
instrument or are recognized immediately if the underlying
instrument is settled.
_ Foreign Currency Contracts: The company enters into
forward, option and swap contracts to hedge transactions
denominated in foreign currencies in order to reduce the
currency risk associated with fluctuating exchange rates.
Such contracts are used primarily to hedge purchases of
certain raw materials and finished goods and payments
arising from certain intercompany transactions with
foreign subsidiaries. Gains and losses are deferred in the
cost basis of the underlying transaction.
_ Commodity Contracts: In connection with purchasing
certain commodities for future manufacturing requirements,
the company enters into commodities futures and option
contracts, as deemed appropriate, to reduce the effect of
price fluctuations. Such contracts are accounted for as
hedges, with gains and losses recognized as part of cost
of products sold, and generally have a term of less than
one year.
The cash flows related to the above financial instruments
are classified in the Statements of Cash Flows in a manner
consistent with those of the transactions being hedged.
Business Segment Information: Information concerning
business segment and geographic data is in Management's
Discussion and Analysis.
- ------------------------------------------------------------------------------
2. ACQUISITIONS All of the following acquisitions have been accounted
for as purchases and, accordingly, the respective purchase
prices have been allocated to the respective assets and
liabilities based upon their estimated fair values as of
the acquisition date. Operating results of businesses
acquired have been included in the Consolidated Statements
of Income from the respective acquisition dates forward.
Fiscal 1997: The company acquired the following businesses
for a total of $222.6 million, including notes to seller
of $14.2 million. The preliminary allocations of the
purchase price resulted in goodwill of $144.9 million and
other intangible assets of $26.9 million, which will be
amortized on a straight-line basis over periods not
exceeding 40 years.
On November 4, 1996, the company acquired the assets of
the canned beans and pasta business of Nestle Canada Inc.,
together with a two-year license to use the Libby's brand.
Under the agreement, the company also acquired the
trademarks Deep-Browned Beans, Alpha-Getti and Zoodles,
among others.
41
<PAGE>
On September 23, 1996, the company acquired
substantially all of the pet food businesses of Martin
Feed Mills Limited of Elmira, Ontario. Martin produces and
markets cat and dog food throughout Canada and also
exports to Japan and Europe. Martin sells pet food under
the Techni-Cal brand and markets products under the Medi-
Cal label through veterinary offices and clinics.
On July 10, 1996, the company acquired Southern Country
Foods Limited in Australia, one of the world's largest
producers of canned corned beef and meals. During Fiscal
1997, the company also made other smaller acquisitions.
Pro forma results of the company, assuming the Fiscal
1997 acquisitions had been made at the beginning of each
period presented, would not be materially different from
the results reported.
Fiscal 1996: The company acquired the following businesses
for a total of $193.4 million, including notes to sellers
of $37.4 million. The allocations of purchase price
resulted in goodwill of $128.1 million and other
intangibles of $6.6 million, which is being amortized on a
straight-line basis over periods not exceeding 40 years.
On March 28, 1996, the company acquired the Nature's
Recipe business, which markets a brand of premium
specialty pet foods.
On March 6, 1996, the company acquired Earth's Best,
Inc., which produces a leading brand of premium, organic
baby foods and will complement the company's range of
infant cereals, juices and strained and junior foods.
The company acquired a majority interest in PMV/Zabreh,
a producer of infant formulas and dairy products located
in Zabreh, Moravia, Czech Republic.
The company increased its investment to 97% of
Kecskemeti Konzervgyar RT, which produces jarred baby
foods and canned vegetable products in Kecskemet, Hungary.
Other small acquisitions were also made during Fiscal
1996, including Fattoria Scaldasole S.p.A., which is a
processor of organic foods in Italy; Alimentos Pilar S.A.
of Argentina, a leading producer of pet and animal feed;
the Craig's brand of jams and dressings in New Zealand;
the Mareblu brand of canned tuna, which is sold
exclusively in Italy; a majority interest in Indian Ocean
Tuna Ltd., located in the Seychelles; and Britwest Ltd.,
which markets single-serve condiments, beverages and
sauces in Britain and France.
Pro forma results of the company, assuming the Fiscal
1996 acquisitions had been made at the beginning of each
period presented, would not be materially different from
the results reported.
Fiscal 1995: On March 14, 1995, the company completed the
acquisition of the North American pet food businesses of
The Quaker Oats Company (the "Pet Food Business") for
approximately $725 million. The acquisition has
significantly strengthened the company's presence in the
pet food industry. The funds used to acquire the Pet Food
Business were provided primarily through the issuance of
privately placed commercial paper.
The allocation of the purchase price has resulted in
goodwill of $532.5 million and other intangible assets of
$146.2 million. These items are being amortized on a
straight-line basis over periods not exceeding 40 years.
The following pro forma information combines the
consolidated results of operations as if the acquisition
of the Pet Food Business had been consummated as of the
beginning of
42
<PAGE>
Fiscal 1995, after including the impact of certain
adjustments. Adjustments include (i) the amortization of
goodwill and other intangibles; (ii) interest expense
related to the acquisition debt; (iii) depreciation on
the restated values of property, plant and equipment;
and (iv) the related income tax effects.
<TABLE>
<CAPTION>
(Dollars in thousands, except per 1995
share amounts) (Unaudited)
---------------------------------------------------------
<S> <C>
Sales $ 8,502,405
Net income $ 585,803
Net income per share $ 1.57
---------------------------------------------------------
</TABLE>
In connection with the acquisition of the Pet Food
Business, the company established certain opening balance
sheet accruals for employee severance and relocation costs
(approximately $7 million) and facilities consolidation
and closure costs (exit costs of approximately $24
million) based upon a preliminary assessment of such
actions to be undertaken. The aforementioned amounts were
included in "other accrued liabilities" as of May 3, 1995.
During 1996, management finalized integration plans and
made minor adjustments to the opening balance sheet, while
approximately $29 million was spent against the
established accruals. As of May 1, 1996, remaining
accruals were considered adequate for any severance,
relocation or exit costs associated with the acquisition.
During 1995, the company also acquired the following
other businesses (the "other 1995 acquisitions").
On December 2, 1994, the company acquired The All
American Gourmet Company for a purchase price of
approximately $200 million. The All American Gourmet
Company produces The Budget Gourmet brand of frozen meals
and side dishes.
On September 30, 1994, the company acquired the Family
Products Division of Glaxo India, Ltd. for a purchase
price of approximately $65 million. The Family Products
Division, based in Bombay, India, produces a wide range of
nutritional drinks, baby food and other consumer products.
On July 22, 1994, the company acquired the Farley's
infant foods and adult nutrition business from The Boots
Company PLC of Nottingham, England for a total purchase
price of approximately $140 million.
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.
Other acquisitions during 1995 included Dega, a
foodservice products company located in Italy.
The allocation of the purchase prices of the other 1995
acquisitions (excluding the Pet Food Business) has
resulted in goodwill of $142.0 million and other
intangible assets of $168.3 million, which will be
amortized on a straight-line basis over periods not
exceeding 40 years.
43
<PAGE>
The company established opening balance sheet accruals
for the other 1995 acquisitions for employee severance and
relocation costs (approximately $9 million) and facilities
consolidation and closure costs (exit costs of
approximately $37 million) based upon a preliminary
assessment of such actions to be undertaken. These amounts
were included in "other accrued liabilities" as of May 3,
1995.
During 1996, accruals for exit costs were reduced by
approximately $23 million, resulting in a corresponding
reduction to goodwill. This was primarily attributable to
not pursuing a course of action that was anticipated at
the acquisition date. Also during 1996, approximately
$15 million was spent against the accruals established
for employee severance and relocation costs, and exit
costs. As of May 1, 1996, remaining accruals were
considered adequate for any severance, relocation or
exit costs associated with the other 1995 acquisitions.
On an unaudited pro forma basis, the sales of the
company, as if the acquisition of the Pet Food Business
and the other 1995 acquisitions were made as of the
beginning of Fiscal 1995, would be $8.7 billion. The
results of operations would not be materially different
from those reported.
Pro forma results are not necessarily indicative of what
actually would have occurred if the acquisitions had been
in effect for all of Fiscal 1995. In addition, they are
not intended to be a projection of future results and do
not reflect any synergies that might be achieved from
combined operations.
- ------------------------------------------------------------------------------
3. DIVESTITURES During 1997 and 1996, the company sold several non-
strategic businesses. Pro forma results of the company,
assuming all of the divestitures had been made at the
beginning of each period presented, would not be
materially different from the results reported.
In the fourth quarter of Fiscal 1997, the company sold
its New Zealand ice cream business to Peters & Brownes
Limited of Perth, Australia for approximately $150
million. The pretax gain on the divestiture totaled $72.1
million, or $0.12 per share.
Fiscal 1996 divestitures included: an overseas sweetener
business, the Weight Watchers Magazine and two regional
dry pet food product lines. (See Note 13 to the
Consolidated Financial Statements.)
- ------------------------------------------------------------------------------
4. RESTRUCTURING Charges related to the company's reorganization and
CHARGES restructuring program ("Project Millennia") were recorded
in Fiscal 1997 and were recognized to reflect the closure
or divestiture of approximately 25 facilities throughout
the world, the net reduction of the global workforce by
approximately 2,500 (excluding the businesses or
facilities to be sold), and other initiatives involving
the exit of certain underperforming businesses and product
lines.
Restructuring and related costs recorded in Fiscal 1997
totaled $647.2 million pretax or $1.09 per share. Pretax
charges of $477.8 million are classified as cost of
products sold and $169.4 million as selling, general and
administrative expenses.
44
<PAGE>
The major components of the Fiscal 1997 charges and the
remaining accrual balance as of April 30, 1997 were as
follows:
<TABLE>
<CAPTION>
Accrued
Amounts Restructuring
(Dollars in millions) Charge Utilized Costs
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Employee termination and
severance costs $ 164.5 $ (32.1)* $ 132.4
Exit costs 158.4 (80.0) 78.4
Non-cash asset write-downs 324.3 (324.3) -
$ 647.2 $ (436.4) $ 210.8
- ------------------------------------------------------------------------------
</TABLE>
*Includes $18.9 million in non-cash charges resulting from termination
benefit programs.
Asset write-downs consist primarily of fixed asset and
other long-term asset impairments that were recorded as a
direct result of the company's decision to exit businesses
or facilities ($206.8 million). Such assets were written
down based on management's estimate of fair value. Write-
downs were also recognized for estimated losses from
disposals of inventories, packaging materials and other
assets related to product line rationalizations and
process changes as a direct result of the company's
decision to exit businesses or facilities ($117.5
million).
- ------------------------------------------------------------------------------
5. INCOME TAXES The following table summarizes the provision/(benefit)
for U.S. federal and U.S. possessions, state and foreign
taxes on income.
<TABLE>
<CAPTION>
(Dollars in thousands) 1997 1996 1995
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Current:
U.S. federal and U.S.
possessions $ 67,274 $ 106,848 $ 114,819
State 6,458 11,475 19,106
Foreign 136,911 110,784 78,753
- ------------------------------------------------------------------------------
210,643 229,107 212,678
- ------------------------------------------------------------------------------
Deferred:
U.S. federal and U.S.
possessions (38,988) 87,239 47,676
State (10,763) 10,408 6,897
Foreign 16,301 37,588 79,731
- ------------------------------------------------------------------------------
(33,450) 135,235 134,304
Total tax provision $ 177,193 $ 364,342 $ 346,982
- ------------------------------------------------------------------------------
</TABLE>
The tax benefit resulting from adjustments to the
beginning-of-the-year valuation allowance, due to a change
in circumstances, to recognize the realizability of
deferred tax assets in future years totaled $1.1 million
in 1997, $12.5 million in 1996 and $3.1 million in 1995.
The 1996 tax provision was reduced by $24.9 million due to
the recognition of foreign tax losses. Tax
45
<PAGE>
expense resulting from allocating certain tax benefits
directly to additional capital totaled $33.8 million in
1997 and $41.7 million in 1996.
The components of income before income taxes consist of
the following:
<TABLE>
<CAPTION>
(Dollars in thousands) 1997 1996 1995
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Domestic $ (47,219) $ 500,034 $ 495,159
Foreign 526,283 523,627 442,848
$ 479,064 $ 1,023,661 $ 938,007
- ------------------------------------------------------------------------------
</TABLE>
The differences between the U.S. federal statutory tax
rate and the company's consolidated effective tax rate are
as follows:
<TABLE>
<CAPTION>
1997 1996 1995
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. federal statutory tax
rate 35.0% 35.0% 35.0%
Tax on income of foreign
subsidiaries 5.6 2.2 2.6
State income taxes (net of
federal benefit) (0.2) 1.8 2.1
Net valuation allowance (0.7) (1.3) 2.2
Tax credits (2.1) (0.2) (2.7)
Earnings repatriation 5.5 1.3 (0.1)
Recognition of foreign tax
losses (0.7) (2.4) (0.1)
Tax on income of U.S.
possessions subsidiaries (2.8) (1.7) (1.4)
Other (2.6) 0.9 (0.6)
Effective tax rate 37.0% 35.6% 37.0%
- ------------------------------------------------------------------------------
</TABLE>
The deferred tax (assets) and deferred tax liabilities
recorded on the balance sheets as of April 30, 1997 and
May 1, 1996 are as follows:
<TABLE>
<CAPTION>
(Dollars in thousands) 1997 1996
- --------------------------------------------------------------------------
<S> <C> <C>
Depreciation/
amortization $ 448,327 $ 420,179
Benefit plans 73,081 69,040
Other 87,223 133,673
- --------------------------------------------------------------------------
608,631 622,892
- --------------------------------------------------------------------------
Provision for
estimated expenses (188,220) (45,910)
Operating loss
carryforwards (51,685) (55,717)
Benefit plans (100,327) (122,448)
Tax credit
carryforwards (3,845) (52,924)
Other (112,607) (142,609)
- --------------------------------------------------------------------------
(456,684) (419,608)
- --------------------------------------------------------------------------
Valuation allowance 5,459 35,594
Net deferred tax
liabilities $ 157,406 $ 238,878
- --------------------------------------------------------------------------
</TABLE>
46
<PAGE>
At the end of 1997, net operating loss carryforwards
totaled $121.5 million. Of that amount, $79.6 million
expire between 1998 and 2010; the other $41.9 million do
not expire. Foreign tax credit carryforwards total $3.8
million and expire through 2001.
The company's consolidated United States income tax
returns have been audited by the Internal Revenue Service
for all years through 1991.
Undistributed earnings of foreign subsidiaries
considered to be reinvested permanently amounted to $2.35
billion at April 30, 1997.
The net change in the valuation allowance for deferred
tax assets was a decrease of $30.1 million. The majority
of this decrease, $27.0 million, partially offset the
charge incurred for earnings repatriation due to the
utilization of foreign tax credit carryforwards.
- ------------------------------------------------------------------------------
6. DEBT
<TABLE>
<CAPTION>
Short-Term (Dollars in thousands) 1997 1996
- ------------------------------------------------------------------------------
<S> <C> <C>
Commercial paper $ 97,008 $ 685,067
Bank and other borrowings 492,885 309,519
$ 589,893 $ 994,586
- ------------------------------------------------------------------------------
</TABLE>
On August 29, 1996, the company amended the line of
credit agreements that support its domestic commercial
paper programs, increasing availability and extending
maturity dates. The amended terms provide for one
agreement totaling $2.30 billion that expires in September
2001. The previous agreements provided for lines of credit
totaling $2.00 billion, of which $1.20 billion was
scheduled to expire in September 1996 and $800.0 million
was scheduled to expire in September 2000.
At April 30, 1997, the company had $1.35 billion of
domestic commercial paper outstanding. Due to the long-
term nature of the amended credit agreement, all of the
outstanding domestic commercial paper has been classified
as long-term debt as of April 30, 1997. As of May 1, 1996,
$1.48 billion of domestic commercial paper was
outstanding, of which $800.0 million was classified as
long-term debt due to the long-term nature of the
supporting line of credit agreements. Aggregate domestic
commercial paper had a weighted-average interest rate
during 1997 of 5.4% and at year-end of 5.6%. In 1996, the
weighted-average rate was 5.8% and the rate at year-end
was 5.4%.
Total short-term debt had a weighted-average interest
rate during 1997 of 7.6% and at year-end of 6.1%. The
weighted-average interest rate on short-term debt during
1996 was 6.5% and at year-end was 6.2%.
47
<PAGE>
The company had $850.3 million of other foreign lines of
credit available at year-end, principally for overdraft
protection.
<TABLE>
<CAPTION>
Range of Maturity
Long-Term (Dollars in thousands) Interest (Fiscal Year) 1997 1996
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
United States Dollars:
Commercial paper Variable 2002 $ 1,346,779 $ 800,000
Senior unsecured notes 5.50-6.88% 1998-2003 749,681 749,532
Eurodollar bonds 7.50-8.00 1998-2000 551,423 628,119
Revenue bonds 3.10-11.25 1999-2027 16,121 10,781
Promissory notes 4.00-10.00 1998-2005 49,220 60,154
Other Variable 1998 7,072 6,797
- -----------------------------------------------------------------------------------------------------------------------------------
2,720,296 2,255,383
- -----------------------------------------------------------------------------------------------------------------------------------
Foreign Currencies
(U.S. Dollar Equivalents):
Promissory notes:
Pounds sterling 8.85% 1998-2006 41,260 51,100
Italian lire 8.50-12.55 1998-2004 28,209 34,487
Australian dollar 7.35 1998-2002 28,323 -
Other 6.95-14.90 1998-2022 39,454 28,272
- -----------------------------------------------------------------------------------------------------------------------------------
137,246 113,859
- -----------------------------------------------------------------------------------------------------------------------------------
Total long-term debt 2,857,542 2,369,242
Less portion due within one year 573,549 87,583
$ 2,283,993 $ 2,281,659
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The amount of long-term debt that matures in each of the
four years succeeding 1998 is: $30.3 million in 1999,
$590.4 million in 2000, $19.0 million in 2001 and $1.37
billion in 2002.
On January 5, 1995, the company issued $300.0 million of
three-year 8.0% notes in the international capital
markets. The proceeds from the notes were 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 company terminated the interest rate swap
agreement and is amortizing the resulting gain over the
remaining life of the notes, producing an effective
borrowing rate of 7.3%.
In 1993, the company's United Kingdom affiliate
privately placed with various banks Pds125.0 million
($197.0 million) aggregate principal of 8.85% notes due
during 2013. In April 1993, an affiliated company paid
Pds70.6 million ($111.3 million) for an interest in the
notes. The notes are shown in the balance sheet as a net
amount outstanding of Pds24.9 million ($40.3 million),
which will be fully amortized in three years. The
effective interest rate was 8.3% at April 30, 1997 and
May 1, 1996.
48
<PAGE>
- ------------------------------------------------------------------------------
7. SHAREHOLDERS' Capital Stock: The preferred stock outstanding is
EQUITY convertible at a rate of one share of preferred stock into
13.5 shares of common stock. The company can redeem the
stock at $28.50 per share.
On April 30, 1997, there were authorized, but unissued,
2,200,000 shares of third cumulative preferred stock for
which the series had not been designated.
Employee Stock Ownership Plan (ESOP): The company
established an ESOP in 1990 to replace in full or in part
the company's cash-matching contributions to the H.J.
Heinz Company Employees Retirement and Savings Plan, a 401
(k) plan for salaried employees. Matching contributions to
the 401(k) plan are based on a percentage of the
participants' contributions, subject to certain
limitations.
To finance the plan, the ESOP borrowed $50.0 million
directly from the company in 1990. The loan is in the form
of a 15-year variable-rate interest-bearing note (an
average of 5.6%, 5.5% and 5.6% for 1997, 1996 and 1995,
respectively) and is included in the company's
Consolidated Balance Sheets as unearned compensation. The
proceeds of the note were used to purchase 2,366,862
shares of treasury stock from the company at approximately
$21.13 per share.
The stock held by the ESOP is released for allocation to
the participants' accounts over the term of the loan as
company contributions to the ESOP are made. The company
contributions are reported as compensation and interest
expense. Compensation expense related to the ESOP for
1997, 1996 and 1995 was $3.0 million, $2.3 million and
$3.7 million, respectively. Interest expense was $1.1
million, $1.5 million and $1.9 million for 1997, 1996 and
1995, respectively. The company's contributions to the
ESOP and the dividends on the company stock held by the
ESOP are used to repay loan interest and principal.
The dividends on the company stock held by the ESOP were
$2.3 million, $2.1 million and $2.5 million in 1997, 1996
and 1995, respectively.
The ESOP shares outstanding at April 30, 1997 and May 1,
1996, respectively, were as follows: unallocated 711,725
and 958,141; committed-to-be-released 61,724 and 29,553;
and allocated 1,156,236 and 1,036,904. Shares held by the
ESOP are considered outstanding for purposes of
calculating the company's net income per share.
Cumulative Translation Adjustments: Changes in the
cumulative translation component of shareholders' equity
result principally from translation of financial
statements of foreign subsidiaries into U.S. dollars. The
reduction in shareholders' equity related to the
translation component increased $55.1 million in 1997,
decreased $1.4 million in 1996 and decreased $107.0
million in 1995. During 1997, a gain of $13.8 million was
transferred from the cumulative translation component of
shareholders' equity and included in the determination of
net income as a component of the $72.1 million gain
recognized as a result of the liquidation of the company's
investment in its New Zealand ice cream business. (See
Note 3 to the Consolidated Financial Statements.)
49
<PAGE>
Unfunded Pension Obligation: An adjustment for unfunded
foreign pension obligations in excess of unamortized prior
service costs was recorded, net of tax, as a reduction in
shareholders' equity. (See Note 10 to the Consolidated
Financial Statements.)
<TABLE>
<CAPTION>
Cumulative
Preferred
Stock Common Stock
----------------------------------- --------------------------------------------------------------
Third, $1.70
First Series Additional
$10 Par Issued In Treasury Capital
- -----------------------------------------------------------------------------------------------------------------------------------
(Amounts in thousands) Amount Amount Shares Amount Shares Amount
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance April 27, 1994 $398 $107,774 431,096 $1,239,177 57,540 $134,255
Reacquired - - - 273,671 11,456 -
Conversion of preferred into
common stock (40) - - (976) (54) (937)
Stock options exercised, net
of shares tendered for
payment - - - (53,305) (3,035) (12,264)*
Other, net - - - (7,843) (320) 237
- -----------------------------------------------------------------------------------------------------------------------------------
Balance May 3, 1995 $358 $107,774 431,096 $1,450,724 65,587 $121,291
Reacquired - - - 155,200 4,806 -
Conversion of preferred into
common stock (87) - - (2,674) (117) (2,587)
Stock options exercised, net
of shares tendered for
payment - - - (101,751) (7,747) 35,797*
Other, net - - - (633) (31) 101
- -----------------------------------------------------------------------------------------------------------------------------------
Balance May 1, 1996 $ 271 $ 107,774 431,096 $ 1,500,866 62,498 $ 154,602
Reacquired - - - 277,046 7,939 -
Conversion of preferred into
common stock (30) - - (963) (41) (932)
Stock options exercised, net
of shares tendered for
payment - - - (147,071) (6,466) 21,946*
Other, net - - - (377) (18) 195
Balance April 30, 1997 $ 241 $ 107,774 431,096 $ 1,629,501 63,912 $ 175,811
- -----------------------------------------------------------------------------------------------------------------------------------
Authorized Shares--April 30,
1997 24 600,000
- -----------------------------------------------------------------------------------------------------------------------------------
*Includes income tax benefit resulting from exercised stock options.
</TABLE>
50
<PAGE>
- ------------------------------------------------------------------------------
8. SUPPLEMENTAL CASH FLOWS INFORMATION
<TABLE>
<CAPTION>
(Dollars in thousands) 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash Paid During The Year For:
Interest $ 310,146 $ 308,564 $ 210,610
Income taxes 295,008 143,646 251,358
- ----------------------------------------------------------------------------------------------------------------------
Details of Acquisitions:
Fair value of assets $ 264,560 $ 269,907 $ 1,359,028
Liabilities* 56,168 113,697 179,942
- ----------------------------------------------------------------------------------------------------------------------
Cash paid 208,392 156,210 1,179,086
Less cash acquired 9 204 267
Net cash paid for acquisitions $ 208,383 $ 156,006 $ 1,178,819
- ----------------------------------------------------------------------------------------------------------------------
* Includes notes to sellers of $14.2 million and $37.4 million in 1997 and
1996, respectively.
</TABLE>
- ------------------------------------------------------------------------------
9. EMPLOYEES' STOCK Under the company's stock option plans, officers and
OPTION PLANS other key employees may be granted options to purchase
AND MANAGEMENT shares of the company's common stock. The option price on
INCENTIVE PLANS all outstanding options is equal to the fair market value
of the stock at the date of grant. Generally, options are
exercisable beginning from three years after date of grant
and have a maximum term of 10 years.
The company has adopted the disclosure-only provisions
of SFAS No. 123, "Accounting for Stock-Based
Compensation." Accordingly, no compensation cost has been
recognized for the company's stock option plans. If the
company had elected to recognize compensation cost based
on the fair value of the options granted at grant date as
prescribed by SFAS No. 123, net income and earnings per
share would have been reduced to the pro forma amounts
indicated below:
<TABLE>
<CAPTION>
(Dollars in thousands, except
per share data) 1997 1996
- ------------------------------------------------------------------------------
<S> <C> <C>
Pro forma net income $ 295,605 $ 658,798
Pro forma net income per
common share $ 0.79 $ 1.75
- ------------------------------------------------------------------------------
</TABLE>
The pro forma effect on net income for 1997 and 1996 is
not representative of the pro forma effect on net income
in future years because it does not take into
consideration pro forma compensation expense related to
grants made prior to 1996.
The weighted-average fair value of options granted was
$6.94 per share in 1997 and $6.27 per share in 1996.
The fair value of each option grant is estimated on the
date of grant using the Black-Scholes option-pricing model
with the following assumptions:
<TABLE>
<CAPTION>
1997 1996
- ------------------------------------------------------------------------------
<S> <C> <C>
Dividend yield 3.25% 3.28%
Volatility 17.46% 17.83%
Risk-free interest rate 6.33% 6.03%
Expected term (years) 5.5 5.5
- ------------------------------------------------------------------------------
</TABLE>
51
<PAGE>
Data regarding the company's stock option plans follows:
<TABLE>
<CAPTION>
Weighted-Average
Exercise Price
Shares Per Share
- ------------------------------------------------------------------------------
<S> <C> <C>
Shares under option April 27,
1994 42,096,318 $ 20.55
Options granted 3,568,050 27.36
Options exercised (3,038,937) 14.60
Options surrendered (454,500) 24.27
- ------------------------------------------------------------------------------
Shares under option May 3,
1995 42,170,931 $21.52
Options granted 2,154,100 32.11
Options exercised (11,713,653) 18.40
Options surrendered (115,500) 25.26
- ------------------------------------------------------------------------------
Shares under option May 1,
1996 32,495,878 $ 23.33
Options granted 7,508,500 34.68
Options exercised (6,466,030) 20.92
Options surrendered (463,500) 25.87
Shares under option April 30,
1997 33,074,848 $ 26.34
- ------------------------------------------------------------------------------
Options exercisable at:
May 3, 1995 17,754,381 $ 18.49
May 1, 1996 12,252,228 21.53
April 30, 1997 18,473,073 22.53
- ------------------------------------------------------------------------------
</TABLE>
The following summarizes information about shares under
option in the respective exercise price ranges at April
30, 1997:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
- -----------------------------------------------------------------------------------------------------------------------------------
Range of Weighted-Average Weighted-Average Weighted-Average
Exercise Price Number Remaining Life Exercise Price Number Exercise Price
Per Share Outstanding (Years) Per Share Exercisable Per Share
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 12.67-22.08 13,178,735 6.09 $ 21.33 11,905,235 $ 21.25
23.00-32.13 16,374,113 6.59 27.87 6,482,838 24.64
33.00-42.38 3,522,000 9.66 37.96 85,000 39.73
33,074,848 18,473,073
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The shares authorized but not granted under the
company's stock option plans were 11,316,235 at April 30,
1997 and 3,421,235 at May 1, 1996. Common stock reserved
for options totaled 44,391,083 at April 30, 1997 and
35,917,113 at May 1, 1996.
Effective June 12, 1996, the Board of Directors adopted
and the shareholders approved a new stock option plan
providing for the grant of up to 15.0 million shares of
common stock at any time over the next 10 years. In
general, the terms of the 1996 plan are similar to the
company's other stock option plans.
52
<PAGE>
The company's management incentive plan covers 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 plans was
approximately $37 million in 1997, $37 million in 1996 and
$24 million in 1995.
- ------------------------------------------------------------------------------
10. RETIREMENT The company maintains retirement plans for the majority
PLANS of its employees. Current defined benefit plans are
provided primarily for domestic union and foreign
employees. Benefits are based on years of service and
compensation or stated amounts for each year of service.
Plan assets are primarily invested in equities and fixed-
income securities. The company's funding policy for
domestic defined benefit plans is to contribute annually
not less than the ERISA minimum funding standards nor more
than the maximum amount which can be deducted for federal
income tax purposes. Generally, foreign defined benefit
plans are funded in amounts sufficient to comply with
local regulations and ensure adequate funds to pay
benefits to retirees as they become due.
Effective in 1993, the company discontinued future
benefit accruals under the defined benefit plans for
domestic non-union hourly and salaried employees and
expanded its defined contribution plans for these same
employees.
The company maintains defined contribution plans for the
majority of its domestic non-union hourly and salaried
employees. Defined contribution benefits are provided
through company contributions that are a percentage of the
participant's pay based on age, with the contribution rate
increasing with age, and matching contributions based on a
percentage of the participant's contributions to the
401(k) portion of the plan. (The company's matching
contributions for salaried employees are provided under
the ESOP. See Note 7 to the Consolidated Financial
Statements.) In addition, certain non-union hourly
employees receive supplemental contributions, which are
paid at the discretion of the company.
Total pension cost consisted of the following:
<TABLE>
<CAPTION>
(Dollars in thousands) 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Defined Benefit Plans:
Benefits earned during the year $ 15,583 $ 13,675 $ 14,648
Interest cost on projected
benefit obligation 81,620 74,623 66,734
Actual return on plan assets (149,513) (200,592) (26,254)
Net amortization and deferral 64,499 117,461 (56,285)
- ----------------------------------------------------------------------------------------------------------------------
12,189 5,167 (1,157)
Defined contribution plans
(excluding the ESOP) 23,658 25,946 17,222
Total pension cost $ 35,847 $ 31,113 $ 16,065
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
53
<PAGE>
The following table sets forth the combined funded
status of the company's principal defined benefit plans at
April 30, 1997 and May 1, 1996.
<TABLE>
<CAPTION>
Plans for Which Plans for Which
Assets Exceed Accumulated Benefits
Accumulated Benefits Exceed Assets
- ---------------------------------------------------------------------------------------------------------------------------------
(Dollars in thousands) 1997 1996 1997 1996
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Actuarial present value of:
Accumulated benefit obligation,
primarily vested $ 814,721 $ 737,026 $ 193,114 $ 187,275
Additional obligation for
projected compensation
increases 32,850 26,725 36,293 27,896
- ---------------------------------------------------------------------------------------------------------------------------------
Projected benefit obligation 847,571 763,751 229,407 215,171
Plan assets, at fair value 1,079,148 962,510 149,868 138,505
- ---------------------------------------------------------------------------------------------------------------------------------
Projected benefit obligation less
than (in excess of) assets 231,577 198,759 (79,539) (76,666)
Unamortized prior service cost 81,879 71,824 5,067 7,735
Unamortized actuarial (gains)
losses, net (70,324) (60,439) 66,001 75,944
Unamortized net (assets) at date
of adoption (18,479) (23,366) (828) (1,310)
Additional minimum liability - - (44,870) (54,472)
Prepaid (accrued) pension costs $ 224,653 $ 186,778 $ (54,169) $ (48,769)
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The adjustment for unfunded foreign pension obligations
in excess of the unamortized prior service costs was
recorded, net of tax, as a reduction in shareholders'
equity of $27.0 million and $32.6 million in 1997 and
1996, respectively. In 1997, the remaining portion of the
unfunded obligation was recorded as other long-term
assets and deferred taxes in the amounts of $2.1 million
and $15.8 million, respectively. In 1996, the remaining
portion of the unfunded obligation was recorded as other
long-term assets and deferred taxes in the amounts of $2.8
million and $19.1 million, respectively.
The weighted-average rates used for the years ended
April 30, 1997, May 1, 1996 and May 3, 1995 in determining
the net pension costs and projected benefit obligations
for defined benefit plans were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Expected rate of return on plan
assets 9.6% 9.4% 10.0%
Discount rate 8.2% 8.4% 8.7%
Compensation increase rate 5.2% 5.3% 5.2%
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
Assumptions for foreign defined benefit plans are
developed on a basis consistent with those for U.S. plans,
adjusted for prevailing economic conditions.
54
<PAGE>
- ------------------------------------------------------------------------------
11. POSTRETIREMENT The company and certain of its subsidiaries provide
BENEFITS OTHER health care and life insurance benefits for retired
THAN PENSIONS employees and their eligible dependents. Certain of the
AND OTHER company's U.S. and Canadian employees may become eligible
POSTEMPLOYMENT for such benefits. In general, postretirement medical
BENEFITS coverage is provided for eligible non-union hourly and
salaried employees with at least 10 years of service
rendered after the age of 45 and certain eligible union
employees who retire with an immediate pension benefit.
Effective May 1, 1996, retired employees share in the cost
of the plan at a rate of 50%. The company currently does
not fund these benefit arrangements and may modify plan
provisions or terminate plans at its discretion.
Net postretirement costs consisted of the following:
<TABLE>
<CAPTION>
(Dollars in thousands) 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Postretirement benefits earned
during the year $ 3,864 $ 2,736 $ 2,700
Interest cost on accumulated
postretirement benefit
obligation 11,694 13,350 13,249
Net amortization and deferral (7,014) (6,583) (5,165)
Net postretirement benefit costs $ 8,544 $ 9,503 $ 10,784
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
The following table sets forth the combined status of
the company's postretirement benefit plans at April 30,
1997 and May 1, 1996.
<TABLE>
<CAPTION>
(Dollars in thousands) 1997 1996
- ------------------------------------------------------------------------------
<S> <C> <C>
Accumulated postretirement
benefit obligation:
Retirees and spouses $ 104,300 $ 109,006
Employees currently
eligible to retire 14,790 21,756
Employees not yet eligible
to retire 24,787 31,899
- ------------------------------------------------------------------------------
Total accumulated
postretirement benefit
obligation 143,877 162,661
Unamortized prior service
cost 15,346 21,380
Unrecognized net gain 62,277 34,953
- ------------------------------------------------------------------------------
Accrued postretirement
benefit obligation 221,500 218,994
Current portion, included in
other accrued liabilities 10,000 9,000
Non-pension postretirement
benefits $ 211,500 $ 209,994
- ------------------------------------------------------------------------------
</TABLE>
The weighted-average discount rate used in the
calculation of the accumulated postretirement benefit
obligation and the net postretirement benefit cost was
8.0% in 1997, 8.1% in 1996 and 8.4% in 1995. The assumed
annual composite rate of increase in the per capita cost
of company-provided health care benefits begins at 9.0%
for 1998, gradually decreases to 5.2% by 2007, and remains
at that level thereafter. A 1% increase in these health
care cost trend rates would cause the accumulated
postretirement obligation to increase by $16.9 million,
and the aggregate of the service and interest components
of 1997 net postretirement benefit costs to increase by
$2.6 million.
55
<PAGE>
- ------------------------------------------------------------------------------
12. FINANCIAL Foreign Currency Contracts: As of April 30, 1997 and May
INSTRUMENTS 1, 1996, the company held currency swap contracts with an
aggregate notional amount of approximately $400 million.
These contracts have maturity dates extending from 1998
through 2012. The company also had separate contracts to
purchase certain foreign currencies as of April 30, 1997
and May 1, 1996 totaling $598.7 million and $444.8
million, respectively, and to sell certain foreign
currencies totaling $62.2 million and $66.5 million,
respectively, most of which mature within one year of the
respective fiscal year-end. Net unrealized gains and
losses associated with the company's foreign currency
contracts as of April 30, 1997 and May 1, 1996 were not
material.
Commodity Contracts: As of April 30, 1997 and May 1, 1996,
the notional values and unrealized gains or losses related
to commodity contracts held by the company were not
material.
Fair Value of Financial Instruments: The company's
significant financial instruments include cash and cash
equivalents, short- and long-term investments, short- and
long-term debt, interest rate swap agreements, currency
exchange agreements and guarantees.
In evaluating the fair value of significant financial
instruments, the company generally uses quoted market
prices of the same or similar instruments or calculates an
estimated fair value on a discounted cash flow basis using
the rates available for instruments with the same
remaining maturities. As of April 30, 1997 and May 1,
1996, the fair value of financial instruments held by the
company approximated the recorded value.
Effective April 28, 1994, the company adopted SFAS No.
115, "Accounting for Certain Investments in Debt and
Equity Securities." SFAS No. 115 requires that the
carrying value of certain investments be adjusted to their
fair value. The adoption of SFAS No. 115 had no effect on
the company's financial position or results of operations.
The company's investments are considered to be "available-
for-sale" securities and are principally debt securities
issued by foreign governments.
Concentrations of Credit Risk: Counterparties to currency
exchange and interest rate derivatives consist of large
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. Concentrations of credit risk
with respect to accounts receivable are limited due to the
large number of customers, generally short payment terms,
and their dispersion across geographic areas.
56
<PAGE>
- ------------------------------------------------------------------------------
13. QUARTERLY RESULTS (UNAUDITED)
<TABLE>
<CAPTION>
1997
- -----------------------------------------------------------------------------------------------------------------------------------
(Dollars in thousands,
except per share data) First Second Third Fourth Total
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sales $ 2,208,760 $ 2,394,058 $ 2,307,538 $ 2,446,651 $ 9,357,007
Gross profit 795,639 847,504 848,289 480,484 2,971,916
Net income (loss) 179,530 177,520 174,387 (229,566) 301,871
Per Common Share Amounts:
Net income (loss) $0.48 $0.47 $0.47 $(0.61) $0.81
Dividends 0.26 1/2 0.29 0.29 0.29 1.13 1/2
<CAPTION>
1996
- -----------------------------------------------------------------------------------------------------------------------------------
(Dollars in thousands,
except per share data) First Second Third Fourth Total
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sales $ 2,094,293 $ 2,288,277 $ 2,193,138 $ 2,536,557 $ 9,112,265
Gross profit 774,308 822,931 812,308 927,361 3,336,908
Net income 174,469 158,167 156,484 170,199 659,319
Per Common Share Amounts:
Net income $0.46 $0.42 $0.42 $0.45 $1.75
Dividends 0.24 0.26 1/2 0.26 1/2 0.26 1/2 1.03 1/2
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Third-quarter 1997 results include restructuring and
related costs ($0.03 per share), partially offset by a
gain on the sale of real estate in the U.K. ($0.02 per
share).
Fourth-quarter 1997 results include restructuring and
related costs ($1.06 per share). (See Note 4 to the
Consolidated Financial Statements.) These charges were
partially offset by a gain on the sale of the New Zealand
ice cream business ($0.12 per share). (See Note 3 to the
Consolidated Financial Statements.)
Fourth-quarter 1996 results include gains related to the
sale of the Weight Watchers Magazine ($0.02 per share) and
the sale of two regional dry pet food product lines ($0.02
per share) and a charge for restructuring costs at certain
overseas affiliates ($0.01 per share).
Fourth-quarter 1996 earnings also benefited from a lower
effective tax rate resulting from the recognition of tax
losses overseas and increased profits from operations in
lower tax rate jurisdictions ($0.04 per share). (See Note
5 to the Consolidated Financial Statements.)
57
<PAGE>
- ------------------------------------------------------------------------------
14. COMMITMENTS Legal Matters: On December 31, 1992, a food wholesale
AND CONTINGENCIES distributor filed suit against the company and its
principal competitors in the U.S. baby food industry.
Subsequent to that date, several similar lawsuits were
filed in the same court and have been consolidated into a
class action suit. The complaints, each of which seeks an
injunction and unspecified treble money damages, allege a
conspiracy to fix, maintain and stabilize the prices of
baby food. Related suits have also been filed in Alabama
and California state courts, seeking to represent a class
of indirect purchasers of baby food in the respective
states. The defendants have filed a motion for summary
judgment to which the plaintiffs have filed a response.
The company believes all of the suits are without merit
and will defend itself vigorously against them. Certain
other claims have been filed against the company or its
subsidiaries and have not been finally adjudicated. The
above-mentioned suits and claims, when finally concluded
and determined, in the opinion of management, based upon
the information that it presently possesses, will not have
a material adverse effect on the company's consolidated
financial position or results of operations.
Lease Commitments: Operating lease rentals for warehouse,
production and office facilities and equipment amounted to
approximately $93.2 million in 1997, $87.1 million in 1996
and $89.5 million in 1995. Future lease payments for non-
cancellable operating leases as of April 30, 1997 totaled
$276.7 million (1998-$55.6 million, 1999-$44.8 million,
2000-$37.3 million, 2001-$33.0 million, 2002-$26.9 million
and thereafter-$79.1 million).
- ------------------------------------------------------------------------------
15. ADVERTISING Advertising costs for fiscal years 1997, 1996 and 1995
COSTS were $346.8 million, $377.8 million and $314.8 million,
respectively.
- ------------------------------------------------------------------------------
16. SUBSEQUENT On June 30, 1997, the company completed the sale of its
EVENTS frozen foodservice foods business to McCain Foods Limited
of New Brunswick, Canada for approximately $500 million.
The transaction included the sale of Heinz's Ore-Ida
appetizer, pasta and potato foodservice business and the
five Ore-Ida plants that manufacture the products. The
Ore-Ida foodservice business contributed approximately
$525 million in net sales for Fiscal 1997. The sale is not
expected to have an adverse effect on the company's
results of operations.
On June 30, 1997, the company acquired John West Foods
Limited from Unilever. John West Foods Limited, with
annual sales of more than $250 million, is the leading
brand of canned tuna and fish in the United Kingdom. Based
in Liverpool, John West Foods Limited sells its canned
fish products throughout Continental Europe and in a
number of other international markets. (John West
operations in Australia, New Zealand and South Africa are
not included in the transaction.)
58
<PAGE>
RESPONSIBILITY STATEMENTS
- ------------------------------------------------------------------------------
RESPONSIBILITY FOR FINANCIAL STATEMENTS
Management of H.J. Heinz Company is responsible for the
preparation of the financial statements and other information included in this
annual report. The financial statements have been prepared in conformity with
generally accepted accounting principles, incorporating management's best
estimates and judgments, where applicable.
Management believes that the company's internal control systems provide
reasonable assurance that assets are safeguarded, transactions are recorded
and reported appropriately, and policies are followed. The concept of
reasonable assurance recognizes that the cost of a control procedure should
not exceed the expected benefits. Management believes that its systems
provide this appropriate balance. An important element of the company's
control systems is the ongoing program to promote control consciousness
throughout the organization. Management's commitment to this program is
emphasized through written policies and procedures (including a code of
conduct), an effective internal audit function and a qualified
financial staff.
The company engages independent public accountants who are responsible for
performing an independent audit of the financial statements. Their report,
which appears herein, is based on obtaining an understanding of the company's
accounting systems and procedures and testing them as they deem necessary.
The company's Audit Committee is composed entirely of outside directors. The
Audit Committee meets regularly, and when appropriate separately, with the
independent public accountants, the internal auditors and financial management
to review the work of each and to satisfy itself that each is discharging its
responsibilities properly. Both the independent public accountants and the
internal auditors have unrestricted access to the Audit Committee.
- -----------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders of
H.J. Heinz Company:
We have audited the accompanying Consolidated Balance Sheets of H.J. Heinz
Company and Subsidiaries at April 30, 1997 and May 1, 1996, and the related
Consolidated Statements of Income, Retained Earnings and Cash Flows for each
of the three years in the period ended April 30, 1997. These financial
statements are the responsibility of the company's management. Our
responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of H.J. Heinz
Company and Subsidiaries at April 30, 1997 and May 1, 1996, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended April 30, 1997, in conformity with generally
accepted accounting principles.
600 Grant Street
Pittsburgh, Pennsylvania
June 17, 1997 except for Note 16,
as to which the date is June 30, 1997
59
<PAGE>
EXHIBIT 21
H. J. HEINZ COMPANY AND SUBSIDIARIES
SUBSIDIARIES OF THE REGISTRANT
Following are the subsidiairies of H.J. Heinz Company (the "Company"), other
than those which if considered in the aggregate as a single subsidiary would
not constitute a significant subsidiary, and the state or country in which
each subsidiary was incorporated or organized. The accounts of each of the
listed subsidiaries are a part of the Company's consolidated financial
statements.
<TABLE>
<CAPTION>
Subsidiary State or Country
---------- ----------------
<S> <C>
Alimentos Heinz, C.A. Venezuela
Alimentos Pilar S.A. Argentina
The All American Gourmet Company State of Delaware
Crestar Food Products, Inc. State of Delaware
Custom Foods Limited Ireland
Earth's Best, Inc. State of Delaware
Ets. Paul Paulet France
Gaines Pet Food Corp. State of Delaware
Heinz Bakery Products, Inc. State of Delaware
Heinz Iberica S.A. Spain
Heinz India Private Ltd. India
Heinz Italia, S.p.A. Italy
Heinz Japan Ltd. Japan
Heinz South Africa (Pty) Limited South Africa
Heinz-UFE Ltd. People's Republic of China
Heinz-Wattie Ltd. New Zealand
Heinz Win Chance Ltd. Thailand
H.J. Heinz (Botswana Proprietary) Ltd. Botswana
H.J. Heinz B.V. Netherlands
H.J. Heinz Company Australia Limited Australia
H.J. Heinz Company of Canada Ltd. Canada
H.J. Heinz Company Limited United Kingdom
H.J. Heinz Credit Company State of Delaware
Industrias de Alimentacao, Lda. Portugal
Olivine Industries (Private) Limited Zimbabwe
Ore-Ida Foods, Inc. State of Delaware
PMV/Zabreh Czech Republic
Portion Pac, Inc. State of Ohio
Pro Pastries Inc. Canada
Seoul-Heinz Ltd. Republic of Korea
Star-Kist Foods, Inc. State of California
Weight Watchers Gourmet Food Company State of Delaware
Weight Watchers International, Inc. Commonwealth of Virginia
</TABLE>
<PAGE>
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Anthony J. F. O'Reilly, Lawrence J.
McCabe and Paul F. Renne, and each of them, such person's true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for such person and in such person's name, place and stead, in any and all
capacities, to sign H. J. Heinz Company's Annual Report on Form 10-K for the
fiscal year ended April 30, 1997, and to sign any and all amendments to such
Annual Report, and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done, as fully to all intents and purposes as such person might
or could do in person, hereby ratifying and confirming all that said attorneys-
in-fact and agents or any of them, or such persons' or person's substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
This Power of Attorney has been signed below as of the 9th day of
July, 1997 by the following persons in the capacities indicated.
Signature Title
--------- -----
/s/ Anthony J. F. O'Reilly Chairman of the Board and Chief
- -------------------------- Executive Officer and Director (Principal
Anthony J. F. O'Reilly Executive Officer)
/s/ Paul F. Renne Executive Vice President and Chief
- ----------------- Financial Officer and Director (Principal
Paul F. Renne Financial Officer)
/s/ Lawrence J. McCabe Senior Vice President - General Counsel
- ---------------------- and Director
Lawrence J. McCabe
<PAGE>
/s/ William P. Snyder III Director
- -------------------------
William P. Snyder III
/s/ Joseph J. Bogdanovich Director
- -------------------------
Joseph J. Bogdanovich
/s/ Herman J. Schmidt Director
- ---------------------
Herman J. Schmidt
/s/ Albert Lippert Director
- ------------------
Albert Lippert
/s/ Eleanor B. Sheldon Director
- ----------------------
Eleanor B. Sheldon
/s/ Richard M. Cyert Director
- --------------------
Richard M. Cyert
/s/ Samuel C. Johnson Director
- ---------------------
Samuel C. Johnson
/s/ Donald R. Keough Director
- --------------------
Donald R. Keough
/s/ S. Donald Wiley Director
- -------------------
S. Donald Wiley
<PAGE>
/s/ David R. Williams Director
- ---------------------
David R. Williams
/s/ Luigi Ribolla Director
- -----------------
Luigi Ribolla
/s/ Nicholas F. Brady Director
- ---------------------
Nicholas F. Brady
/s/ William R. Johnson Director
- ----------------------
William R. Johnson
/s/ William C. Springer Director
- -----------------------
William C. Springer
/s/ Edith E. Holiday Director
- --------------------
Edith E. Holiday
/s/ Thomas S. Foley Director
- -------------------
Thomas S. Foley
/s/ Edward J. McMenamin Vice President - Corporate Controller
- ----------------------- (Principal Accounting Officer)
Edward J. McMenamin
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-K
FOR THE FISCAL YEAR ENDED APRIL 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> APR-30-1997
<PERIOD-START> MAY-02-1996
<PERIOD-END> APR-30-1997
<EXCHANGE-RATE> 1
<CASH> 156,986
<SECURITIES> 31,451
<RECEIVABLES> 1,118,874
<ALLOWANCES> 18,934
<INVENTORY> 1,432,511
<CURRENT-ASSETS> 3,013,106
<PP&E> 4,380,598
<DEPRECIATION> 1,901,378
<TOTAL-ASSETS> 8,437,787
<CURRENT-LIABILITIES> 2,880,415
<BONDS> 2,283,993
0
241
<COMMON> 107,774
<OTHER-SE> 2,332,406
<TOTAL-LIABILITY-AND-EQUITY> 8,437,787
<SALES> 9,357,007
<TOTAL-REVENUES> 9,357,007
<CGS> 6,385,091
<TOTAL-COSTS> 6,385,091
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 274,746
<INCOME-PRETAX> 479,064
<INCOME-TAX> 177,193
<INCOME-CONTINUING> 301,871
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 301,871
<EPS-PRIMARY> 0.81
<EPS-DILUTED> 0.80
</TABLE>
<PAGE>
EXHIBIT 99
H.J. Heinz Company Board of Directors' Guidelines On Political Contributions
- ----------------------------------------------------------------------------
No Company or subsidiary funds, facilities or services shall be used for
political contributions of any kind in support of or in opposition to (1) any
political party or political committee, (2) any candidate for office of any
government--state, federal or local, or (3) any initiative, recall or referendum
appearing on the ballot for a special or general election at any level of
government relating to a candidate or office holder. This prohibition is
absolute and applies to all elections or political candidates, campaigns or
committees whether or not contributions might be lawful under the laws of any
particular state or country wherein the Company or a subsidiary operates; except
that the Company may: (i) pay the costs of establishing, administering and
soliciting contributions to political action committees established under
applicable law; (ii) contribute funds to non-profit organizations, provided such
funds are not used to influence election campaigns, and such contribution has
been pre-cleared with the Chairman of the Public Issues Committee; and (iii)
contribute funds in equal amounts to both the Republican National Committee Non-
Federal Account and the Democratic National Committee Non-Federal Account in a
manner that is not prohibited by the Federal Election Campaign Act of 1971, as
amended, or the regulations of the Federal Election Commission, provided the
total amount of such contributions is approved by the Public Issues Committee.
"Political contributions" include but are not limited to subscriptions,
membership in associations or committees whose purpose it is to support or
oppose political parties or committees, candidates for public office or any
initiative, recall or referendum, loans of any sort, purchase of tickets for any
event in support of or in opposition to any political party or committee,
candidate for public office or any initiative, recall or referendum, purchase
of advertising space or furnishing of any supplies or performing services for or
against any political organization, committee candidate, public official or any
initiative, recall or referendum.
Nothing herein shall be construed to prohibit individual officers or employees
of the Company or a subsidiary from contributing their personal funds or their
personal free time to any political candidate or party, but under no
circumstances shall such officers or employees be reimbursed for such
contributions or be granted time off the job for such activity; nor prohibit the
Company or a subsidiary from contributing funds to a non-political organization
that opposes or supports a ballot, initiative or referendum (unrelated to a
specific candidate or office holder) that could, in the opinion of management,
adversely affect the business of the Company.
Fiscal Year 1997 Political Contributions
- ----------------------------------------
In fiscal year 1997, the Company made contributions in the amount of
$50,000 to each of the Republican and Democratic National Committees Non-Federal
Accounts.
