<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED OCTOBER 29, 1997
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
---------------- ---------------
FOR THE SIX MONTHS ENDED OCTOBER 29, 1997 COMMISSION FILE NUMBER 1-3385
H. J. HEINZ COMPANY
(Exact name of registrant as specified in its charter)
PENNSYLVANIA 25-0542520
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
600 GRANT STREET, PITTSBURGH, PENNSYLVANIA 15219
(Address of Principal Executive Offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 412-456-5700
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such requirements for the past 90 days. Yes X No
--- ---
The number of shares of the Registrant's Common Stock, par value $.25 per
share, outstanding as of December 1, 1997, was 365,469,863 shares.
<PAGE>
PART I--FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
H. J. HEINZ COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Six Months Six Months
Ended Ended
October 29, 1997 October 30, 1996
---------------- ----------------
FY 1998 FY 1997
(Unaudited)
(In Thousands, Except
per Share Amounts)
<S> <C> <C>
Sales................... $4,497,352 $4,602,818
Cost of products sold... 2,817,617 2,959,675
---------- ----------
Gross profit............ 1,679,735 1,643,143
Selling, general and
administrative
expenses............... 856,741 942,109
---------- ----------
Operating income........ 822,994 701,034
Interest income......... 15,542 20,377
Interest expense........ 126,108 133,985
Other expense, net...... 13,788 20,681
---------- ----------
Income before income
taxes.................. 698,640 566,745
Provision for income
taxes.................. 266,473 209,695
---------- ----------
Net income.............. $ 432,167 $ 357,050
========== ==========
Net income per share.... $ 1.16 $ .95
========== ==========
Cash dividends per
share.................. $ .60 1/2 $ .55 1/2
========== ==========
Average shares for
earnings per share..... 373,732 374,500
========== ==========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
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2
<PAGE>
H. J. HEINZ COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
October 29, 1997 October 30, 1996
---------------- ----------------
FY 1998 FY 1997
(Unaudited)
(In Thousands, Except
per Share Amounts)
<S> <C> <C>
Sales................... $2,264,082 $2,394,058
Cost of products sold... 1,409,414 1,546,554
---------- ----------
Gross profit............ 854,668 847,504
Selling, general and
administrative
expenses............... 498,891 494,746
---------- ----------
Operating income........ 355,777 352,758
Interest income......... 7,636 9,947
Interest expense........ 62,797 68,141
Other expense, net...... 7,290 12,787
---------- ----------
Income before income
taxes.................. 293,326 281,777
Provision for income
taxes.................. 104,460 104,257
---------- ----------
Net income.............. $ 188,866 $ 177,520
========== ==========
Net income per share.... $ .51 $ .47
========== ==========
Cash dividends per
share.................. $ .31 1/2 $ .29
========== ==========
Average shares for
earnings per share..... 373,732 374,500
========== ==========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
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3
<PAGE>
H. J. HEINZ COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
October 29, 1997 April 30, 1997*
---------------- ---------------
FY 1998 FY 1997
(Unaudited)
(Thousands of Dollars)
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents..................... $ 178,980 $ 156,986
Short-term investments, at cost which
approximates market.......................... 42,246 31,451
Receivables, net.............................. 1,070,948 1,118,874
Inventories................................... 1,555,231 1,432,511
Prepaid expenses and other current assets..... 239,068 273,284
---------- ----------
Total current assets........................ 3,086,473 3,013,106
---------- ----------
Property, plant and equipment................. 4,183,217 4,380,598
Less accumulated depreciation................. 1,819,255 1,901,378
---------- ----------
Total property, plant and equipment, net.... 2,363,962 2,479,220
---------- ----------
Goodwill, net................................. 1,785,483 1,803,552
Other intangibles, net........................ 633,917 627,096
Other non-current assets...................... 513,828 514,813
---------- ----------
Total other non-current assets.............. 2,933,228 2,945,461
---------- ----------
Total assets................................ $8,383,663 $8,437,787
========== ==========
</TABLE>
*Summarized from audited fiscal year 1997 balance sheet.
See Notes to Condensed Consolidated Financial Statements.
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4
<PAGE>
H. J. HEINZ COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
October 29, 1997 April 30, 1997*
---------------- ---------------
FY 1998 FY 1997
(Unaudited)
(Thousands of Dollars)
<S> <C> <C>
Liabilities and Shareholders' Equity
Current Liabilities:
Short-term debt............................... $ 448,729 $ 589,893
Portion of long-term debt due within one year. 320,233 573,549
Accounts payable.............................. 915,999 865,154
Salaries and wages............................ 74,556 64,836
Accrued marketing............................. 165,696 164,354
Accrued restructuring costs................... 155,397 210,804
Other accrued liabilities..................... 352,626 315,662
Income taxes.................................. 207,030 96,163
---------- ----------
Total current liabilities................... 2,640,266 2,880,415
---------- ----------
Long-term debt................................ 2,457,043 2,283,993
Deferred income taxes......................... 253,586 265,409
Non-pension postretirement benefits........... 210,151 211,500
Other......................................... 386,778 356,049
---------- ----------
Total long-term debt and other liabilities.. 3,307,558 3,116,951
---------- ----------
Shareholders' Equity:
Capital stock................................. 107,991 108,015
Additional capital............................ 204,366 175,811
Retained earnings............................. 4,251,260 4,041,285
Cumulative translation adjustments............ (257,227) (210,864)
---------- ----------
4,306,390 4,114,247
Less:
Treasury shares at cost (65,696,859 shares
at October 29, 1997 and 63,912,463 shares
at April 30, 1997).......................... 1,827,745 1,629,501
Unfunded pension obligation.................. 26,465 26,962
Unearned compensation relating to the ESOP... 16,341 17,363
---------- ----------
Total shareholders' equity.................. 2,435,839 2,440,421
---------- ----------
Total liabilities and shareholders' equity.. $8,383,663 $8,437,787
========== ==========
</TABLE>
*Summarized from audited fiscal year 1997 balance sheet.
See Notes to Condensed Consolidated Financial Statements.
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5
<PAGE>
H. J. HEINZ COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Six Months
Ended Ended
October 29, 1997 October 30, 1996
---------------- ----------------
FY 1998 FY 1997
(Unaudited)
(Thousands of Dollars)
<S> <C> <C>
Cash Provided by Operating Activities........ $ 397,160 $ 211,796
--------- ---------
Cash Flows from Investing Activities:
Capital expenditures....................... (171,830) (193,938)
Acquisitions, net of cash acquired......... (117,939) (119,539)
Proceeds from sale of Ore-Ida frozen
foodservice foods business................ 490,739 --
Purchases of short-term investments........ (448,509) (628,707)
Sales and maturities of short-term
investments............................... 453,926 639,207
Other items, net........................... 23,559 21,523
--------- ---------
Cash provided by (used for) investing
activities.............................. 229,946 (281,454)
--------- ---------
Cash Flows from Financing Activities:
Proceeds from long-term debt............... -- 36,907
Payments on long-term debt................. (252,876) (91,577)
Proceeds from short-term debt, net......... 35,430 430,515
Dividends.................................. (222,192) (203,700)
Purchases of treasury stock................ (316,721) (155,494)
Exercise of stock options.................. 114,366 66,775
Other items, net........................... 40,894 16,906
--------- ---------
Cash (used for) provided by financing
activities.............................. (601,099) 100,332
--------- ---------
Effect of exchange rate changes on cash and
cash equivalents............................. (4,013) 3,292
--------- ---------
Net increase in cash and cash equivalents.... 21,994 33,966
Cash and cash equivalents at beginning of
year......................................... 156,986 90,064
--------- ---------
Cash and cash equivalents at end of period... $ 178,980 $ 124,030
========= =========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
------------
6
<PAGE>
H. J. HEINZ COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) The Management's Discussion and Analysis of Financial Condition and
Results of Operations which follows these notes contains additional
information on the results of operations and the financial position of the
company. Those comments should be read in conjunction with these notes.
The company's annual report on Form 10-K for the fiscal year ended April
30, 1997 includes additional information about the company, its
operations, and its financial position, and should be read in conjunction
with this quarterly report on Form 10-Q.
(2) The results for the interim periods are not necessarily indicative of the
results to be expected for the full fiscal year due to the seasonal nature
of the company's business. Certain prior year amounts have been
reclassified in order to conform with the fiscal 1998 presentation.
(3) In the opinion of management, all adjustments, which are of a normal and
recurring nature, necessary for a fair statement of the results of
operations of these interim periods have been included.
(4) The composition of inventories at the balance sheet dates was as follows:
<TABLE>
<CAPTION>
October 29, 1997 April 30, 1997
---------------- --------------
(Thousands of Dollars)
<S> <C> <C>
Finished goods and work-in-process.......... $1,193,514 $1,040,104
Packaging material and ingredients.......... 361,717 392,407
---------- ----------
$1,555,231 $1,432,511
========== ==========
</TABLE>
(5) The provision for income taxes consists of provisions for federal, state,
U.S. possessions and foreign income taxes. The company operates in an
international environment with significant operations in various locations
outside the United States. Accordingly, the consolidated income tax rate
is a composite rate reflecting the earnings in the various locations and
the applicable tax rates.
(6) On June 30, 1997, the company completed the sale of its Ore-Ida frozen
foodservice foods business to McCain Foods Limited of New Brunswick,
Canada. The transaction resulted in a pretax gain of approximately $96.6
million ($0.14 per share), and was recorded as an offset to selling,
general and administrative expenses. The transaction included the sale of
the company's Ore-Ida appetizer, pasta and potato foodservice business and
five of the Ore-Ida plants that manufacture the products. The Ore-Ida
frozen foodservice foods business contributed approximately $525 million
in net sales for fiscal 1997. This sale was an essential part of Project
Millennia as it will allow the company to focus its efforts on the Ore-Ida
retail frozen potato and pasta business, and on the frozen retail snacks
business. The sale is not expected to have an adverse impact on the
company's results of operations.
(7) 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 were not included in the transaction.)
On July 21, 1997, the company announced that it had acquired a majority
interest in a joint venture with Tiger Oats Limited of Johannesburg, South
Africa. The new company will be known as Pet Products (Pty) Limited with
its headquarters in Cape Town. Pet Products will manufacture and market pet
food brands formerly owned exclusively by Tiger Oats. These brands include
Dogmor, Husky, Pamper and Catmor.
7
<PAGE>
On August 28, 1997, the company acquired a majority interest in one of
Poland's leading food processors, Pudliszki S.A. Pudliszki is the largest
ketchup producer in Poland and also markets tomato concentrate, canned
vegetables and cooking sauces.
During the current year the company also made other acquisitions, primarily
in Australasia.
All of the above acquisitions have been accounted for as purchases and,
accordingly, the respective purchase prices have been allocated on a
preliminary basis to the respective assets and liabilities based on their
estimated fair values as of the dates of the acquisitions. Operating
results of these acquisitions have been included in the Consolidated
Statement of Income from the dates of the acquisitions.
Pro forma results of the company, assuming all of the above transactions
had been made at the beginning of each period presented, would not be
materially different from the results reported.
(8) The company's $2.30 billion credit agreement, which expires in September
2001, supports its domestic commercial paper program. At October 29, 1997,
the company had $1.53 billion of domestic commercial paper outstanding,
all of which has been classified as long-term debt due to the long-term
nature of the credit agreement. As of April 30, 1997, the company had
$1.35 billion of domestic commercial paper outstanding and classified as
long-term debt.
(9) On September 10, 1997, the company's board of directors raised the
quarterly dividend on the company's common stock to $0.31 1/2 per share
from $0.29 per share, for an indicated annual rate of $1.26 per share.
(10) On September 10, 1997, the company's board of directors authorized the
repurchase of additional shares of its common stock, par value $0.25 per
share. As of October 29, 1997, there is authorization to repurchase up to
14.7 million shares.
(11) 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>
Six Months Ended
---------------------------------
<S> <C> <C>
October 29, 1997 October 30, 1996
---------------- ----------------
As presented.............................. $1.16 $0.95
Pro forma:
Basic earnings per share................ $1.18 $0.97
Diluted earnings per share.............. $1.16 $0.95
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended
---------------------------------
<S> <C> <C>
October 29, 1997 October 30, 1996
---------------- ----------------
As presented.............................. $0.51 $0.47
Pro forma:
Basic earnings per share................ $0.52 $0.48
Diluted earnings per share.............. $0.51 $0.47
</TABLE>
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
SIX MONTHS ENDED OCTOBER 29, 1997 AND OCTOBER 30, 1996
H. J. Heinz Company announced its largest-ever reorganization plan in the
fourth quarter of Fiscal 1997. This reorganization and restructuring program
("Project Millennia") is designed to strengthen the company's six core
businesses and improve the company's profitability and global growth.
On June 30, 1997, the company completed the sale of its Ore-Ida frozen
foodservice foods business to McCain Foods Limited. The transaction resulted
in a pretax gain of approximately $96.6 million ($0.14 per share), and was
recorded as an offset to selling, general and administrative expenses. This
sale was an essential part of Project Millennia as it will allow the company
to focus its efforts on the Ore-Ida retail frozen potato and pasta business,
and on the frozen retail snacks business. In addition, the company has
announced the closure or sale of 19 plants worldwide, with another 6 to be
announced.
During the first six months of Fiscal 1998, the company incurred non-
recurring costs related to the ongoing implementation of Project Millennia of
$31.0 million pretax ($0.05 per share). These non-recurring costs consist
primarily of relocation, training, consulting and start-up costs. In the
second half of the fiscal year, the company expects additional non-recurring
costs associated with the implementation of Project Millennia of between $0.06
and $0.09 per share.
RESULTS OF OPERATIONS
For the six months ended October 29, 1997, sales decreased $105.5 million,
or 2.3%, to $4,497.4 million from $4,602.8 million recorded in the same period
a year ago. The sales decrease resulted from divestitures of 5.8% and the
unfavorable effect of foreign exchange translation rates of 2.0%; partially
offset by acquisitions of 3.4%, price of 1.7% and volume gains of 0.4%.
Domestic operations provided 53.2% of the current period's net sales compared
to 56.2% in the same period last year.
During the first six months of Fiscal 1998, the company acquired John West
Foods Limited in Europe, a majority interest in Pudliszki S.A., one of
Poland's top food processors, and other smaller acquisitions. Fiscal 1997
acquisitions impacting the period to period sales dollar comparison include
substantially all of the pet food businesses of Martin Feed Mills Limited in
Canada, the canned beans and pasta business of Nestle Canada, Inc. and other
acquisitions, primarily in Australasia. The sales impact of these acquisitions
was more than offset by divestitures, primarily the Ore-Ida frozen foodservice
foods business and the New Zealand ice cream business.
Price increases recorded in Heinz ketchup, pet food, infant food, tuna and
condiments were offset partially by price decreases in frozen entrees and
bakery products.
Volume increases recorded in bakery products, sauces and pastes, weight loss
classroom activities, soups and retail frozen potatoes were partially offset
by volume declines in Heinz ketchup, dog food, infant food and frozen entrees.
Gross profit increased $36.6 million to $1,679.7 million from $1,643.1
million a year ago. The ratio of gross profit to sales increased to 37.3% from
35.7%. Excluding the impact of non-recurring costs related to the ongoing
implementation of Project Millennia, gross profit would have increased $47.4
million to $1,690.5 million, and the gross profit percentage would have
increased to 37.6%. The current year's gross profit and gross profit ratio
were favorably impacted by price increases and reduced trade allowances which
resulted from the discontinuance of inefficient end-of-quarter trade
promotions, cost savings resulting from Project Millennia and a favorable
product mix.
9
<PAGE>
Operating income increased $122.0 million, or 17.4%, to $823.0 million from
$701.0 million for the same period last year. Excluding the impact of the gain
on the sale of the Ore-Ida frozen foodservice foods business and non-recurring
costs related to the ongoing implementation of Project Millennia, operating
income would have increased $56.4 million to $757.4 million. The increase in
operating income, excluding the effects of these non-recurring items, is
primarily due to the increase in gross profit as SG&A expenses were relatively
flat period to period.
Interest expense decreased $7.9 million to $126.1 million from $134.0
million in the comparable period a year ago as the impact of higher average
interest rates was more than offset by lower average borrowings.
The effective tax rate for the first six months of Fiscal 1998 was 38.1%
compared to 37.0% for the same period a year ago. The current period effective
rate reflects the benefit of a recent reduction in the income tax rate in the
United Kingdom, partially offset by a significantly higher tax rate associated
with the sale of the Ore-Ida frozen foodservice foods business. Excluding the
impact of the Ore-Ida foodservice sale, the effective tax rate through six
months is 37.0%.
Net income for the first six months was $432.2 million compared to $357.1
million for the same period last year, and earnings per share was $1.16
compared to $0.95 a year ago. Excluding the impact of the gain on the sale of
the Ore-Ida frozen foodservice foods business and non-recurring costs related
to the ongoing implementation of Project Millennia, net income would have
increased 11.6% to $398.6 million, and earnings per share would have increased
12.6% to $1.07 per share.
THREE MONTHS ENDED OCTOBER 29, 1997 AND OCTOBER 30, 1996
RESULTS OF OPERATIONS
For the three months ended October 29, 1997, sales decreased $130.0 million,
or 5.4%, to $2,264.1 million from $2,394.1 million recorded in the same period
a year ago. The sales decrease resulted from the impact of divestitures of
7.3%, the unfavorable effect of foreign exchange translation rates of 2.6% and
sales volume declines of 0.4%; partially offset by acquisitions which
contributed 3.9% to sales and price of 1.0%. Domestic operations provided
52.3% of the current period's net sales compared to 56.8% in the same period
last year.
Acquisitions impacting the quarter to quarter sales dollar comparison
included John West Foods Limited in Europe, substantially all of the pet food
businesses of Martin Feed Mills Limited in Canada, the canned beans and pasta
business of Nestle Canada, Inc., a majority interest in Pudliszki S.A., one of
Poland's top food processors and other acquisitions, primarily in Australasia.
The sales impact of these acquisitions was more than offset by divestitures,
primarily the Ore-Ida frozen foodservice foods business and the New Zealand
ice cream business.
Volume decreases occurred in Heinz ketchup, dog food and infant food, and
were partially offset by volume increases in weight loss classroom activities,
sauces and pastes, cat food and bakery products.
Price increases noted in Heinz ketchup and infant food were partially offset
by a decrease in frozen entrees.
Gross profit increased $7.2 million to $854.7 million from $847.5 million a
year ago. The ratio of gross profit to sales increased to 37.7% from 35.4%.
Excluding the impact of non-recurring costs related to the ongoing
implementation of Project Millennia, gross profit would have increased $17.0
million to $864.5 million, and the gross profit percentage would have
increased to 38.2%. The current quarter's gross profit and gross profit ratio
were favorably impacted by price increases and reduced trade allowances which
resulted from the discontinuance of inefficient end-of-quarter trade
promotions, cost savings resulting from Project Millennia and a favorable
product mix.
10
<PAGE>
Operating income increased to $355.8 million from $352.8 million for the
same period last year. Excluding non-recurring costs related to the ongoing
implementation of Project Millennia of $19.5 million pre-tax, operating income
for the second quarter would have increased 6.4% to $375.2 million. The
increase in operating income, excluding these non-recurring costs, is
primarily due to the increase in gross profit as SG&A expenses were relatively
flat quarter to quarter.
Interest expense decreased $5.3 million to $62.8 million from $68.1 million
in the second quarter a year ago as the impact of higher average interest
rates was more than offset by lower average borrowings.
The effective tax rate for the second quarter was 35.6% compared to 37.0%
for the same period a year ago. The decrease in the effective tax rate for the
current quarter reflects the benefit of a recent reduction in the income tax
rate in the United Kingdom.
Net income for the current quarter was $188.9 million compared to $177.5
million for the same quarter last year, and earnings per share was $0.51
compared to $0.47, an increase of 8.5%. Excluding the impact of non-recurring
costs related to the ongoing implementation of Project Millennia, net income
would have increased 13.4% to $201.3 million, and earnings per share would
have increased 14.9% to $0.54 per share.
LIQUIDITY AND FINANCIAL POSITION
Cash provided by operating activities totaled $397.2 million for the six
month period ended October 29, 1997 compared to $211.8 million last year.
Cash provided by investing activities totaled $229.9 million compared to
requiring $281.5 million last year. Cash provided by divestitures in the
current period totaled $490.7 million, due to the sale of the Ore-Ida frozen
foodservice food business. Acquisitions in the current period required $117.9
million, due mainly to the purchases of John West Limited in Europe, a
majority interest in Pudliszki S.A. of Poland, a majority interest in a pet
food joint venture with Tiger Oats Limited of Johannesburg, South Africa and
other acquisitions, primarily in Australasia. Acquisitions in the prior year's
comparable period totaled $119.5 million, due mainly to the purchases of
substantially all of the pet food businesses of Martin Feed Mills Limited in
Canada and Southern Country Foods Ltd. in Australia. Purchases of property,
plant and equipment totaled $171.8 million in the current period compared to
$193.9 million a year ago.
In the current period, $601.1 million was applied to financing activities
while financing activities provided $100.3 million a year ago. Treasury stock
purchases totaled $316.7 million (7.0 million shares) versus $155.5 million
(4.8 million shares) in the prior year's first six months. Payments on long-
term debt totaled $252.9 million for the current period compared to $91.6
million last year. Dividend payments totaled $222.2 million compared to $203.7
million a year ago. Proceeds from long-term debt provided $36.9 million in the
prior period. Stock options exercised provided $114.4 million in the current
period versus $66.8 million in the prior year's comparable period. Net
proceeds from short-term debt provided $35.4 million in the current period
versus $430.5 million in the prior year's comparable period.
The company's $2.30 billion credit agreement, which expires in September
2001, supports its domestic commercial paper program. As of October 29, 1997,
the company had $1.53 billion of domestic commercial paper outstanding, all of
which has been classified as long-term debt due to the long-term nature of the
credit agreement. As of April 30, 1997, the company had $1.35 billion of
domestic commercial paper outstanding and classified as long-term debt. The
company continues to evaluate long-term financing vehicles in order to reduce
short-term variable interest rate debt.
On September 10, 1997, the company's board of directors raised the quarterly
dividend on the company's common stock to $0.31 1/2 per share from $0.29 per
share, for an indicated annual rate of $1.26 per share. On December 2, 1997,
the company's board of directors declared the quarterly dividend
11
<PAGE>
on the company's common stock of $0.31 1/2 per share payable on January 10,
1998 to shareholders of record at the close of business on December 19, 1997.
On September 10, 1997, the company's board of directors authorized the
repurchase of additional shares of its common stock, par value $0.25 per
share. As of October 29, 1997, there is authorization to repurchase up to 14.7
million shares. In the second half of the fiscal year, the company expects to
spend approximately $275 million on share repurchases, net of proceeds from
stock options exercised.
The company's financial position continues to remain strong, enabling it to
meet cash requirements for operations, capital expansion programs and
dividends to shareholders.
OTHER MATTERS
On December 2, 1997, following the recommendation of the Chairman and Chief
Executive Officer Anthony J. F. O'Reilly, to the Management Development and
Compensation Committee of outside directors, the board of directors of the
company announced the appointment of William R. Johnson as president and chief
executive officer, effective April 30, 1998, the beginning of the company's
financial year. Dr. O'Reilly has agreed to remain as non-executive chairman of
the company through the annual meeting of shareholders in September 2000.
12
<PAGE>
PART II--OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
See the description of legal proceedings set forth under this caption in the
company's Quarterly Report on Form 10-Q for the three months ended July 30,
1997.
ITEM 2. CHANGES IN SECURITIES
Nothing to report under this item.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Nothing to report under this item.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Shareholders of H. J. Heinz Company was held in
Pittsburgh, Pennsylvania on September 10, 1997. The following individuals were
elected as directors for a one-year term expiring in September 1998:
<TABLE>
<CAPTION>
Shares
Director Shares for Withheld
-------- ---------- --------
<S> <C> <C>
A. J. F. O'Reilly 318,625,447 6,388,905
W. P. Snyder III 318,831,139 6,183,213
J. J. Bogdanovich 318,095,104 6,919,248
H. J. Schmidt 318,804,925 6,209,427
A. Lippert 319,109,389 5,904,963
E. B. Sheldon 318,991,851 6,022,501
R. M. Cyert 318,944,398 6,069,954
S. C. Johnson 319,453,810 5,560,542
D. R. Keough 319,311,228 5,703,124
S. D. Wiley 318,767,533 6,246,819
L. J. McCabe 319,055,291 5,959,061
D. R. Williams 319,056,625 5,957,727
L. Ribolla 318,995,386 6,018,966
N. F. Brady 318,808,593 6,205,759
W. R. Johnson 319,037,552 5,976,800
W. C. Springer 318,978,965 6,035,387
E. E. Holiday 319,425,598 5,588,754
*T. S. Foley 318,284,440 6,729,912
P. F. Renne 318,984,305 6,030,047
</TABLE>
- --------
* Mr. Foley resigned from the Board of Directors effective November 6, 1997 to
become the United States Ambassador to Japan.
Shareholders also acted upon the following proposal at the Annual Meeting:
Elected Coopers & Lybrand L.L.P. the company's independent accountants for
the fiscal year ending April 29, 1998. Votes totaled 322,879,487 for; 740,848
against; and 1,394,018 abstentions.
ITEM 5. OTHER INFORMATION
See Note 7 to the Condensed Consolidated Financial Statements in Part I--
Item 1 of this Quarterly Report on Form 10-Q and "Other Matters" in Part I--
Item 2 of this Quarterly Report on Form 10-Q.
This report contains certain forward-looking statements which are based on
management's current views and assumptions regarding future events and
financial performance. Reference should be made
13
<PAGE>
to the section "Forward-Looking Statements" in Item 1 of the registrant's
Annual Report on Form 10-K for the fiscal year ended April 30, 1997 for a
description of the important factors that could cause actual results to differ
materially from those discussed herein.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits required to be furnished by Item 601 of Regulation S-K are
listed below and are filed as part hereof. The Registrant has omitted
certain exhibits in accordance with Item 601(b)(4)(iii)(A) of Regulation
S-K. The Registrant agrees to furnish such documents to the Commission upon
request. Documents not designated as being incorporated herein by reference
are filed herewith. The paragraph numbers correspond to the exhibit numbers
designated in Item 601 of Regulation S-K.
10. Employment Agreement between H. J. Heinz Company and
Daniel J. O'Neill.
11. Computation of net income per share.
27. Financial Data Schedule.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the quarter ended October 29, 1997.
14
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
H. J. HEINZ COMPANY
(Registrant)
Date: December 12, 1997 /s/ Paul F. Renne
By...................................
Paul F. Renne
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
Date: December 12, 1997 /s/ Edward J. McMenamin
By...................................
Edward J. McMenamin
Vice President and Corporate
Controller
(Principal Accounting Officer)
15
<PAGE>
Exhibit 10
EMPLOYMENT AGREEMENT
--------------------
THIS AGREEMENT, made as of the 6th day of January, 1997, by and between
H. J. HEINZ COMPANY, a Pennsylvania corporation ("Heinz"), and DANIEL J. O'NEILL
of 591 Longchamps Drive, Devon, Pennsylvania ("Employee").
W I T N E S S E T H
- - - - - - - - - -
WHEREAS, Heinz is the parent company of multiple subsidiaries and business
units; and
WHEREAS, Star-Kist Foods, Inc. ("Star-Kist") is a wholly owned subsidiary
of Heinz engaged in the business of tuna and pet food processing and related
activities and businesses; and
WHEREAS, Employee desires to contribute his professional skills and
abilities to Heinz as an executive vice president with responsibility as
president and chief executive officer of Star-Kist; and
WHEREAS, Employee is the signator of an Employee Agreement Relating to
Confidential and Proprietary Information with Campbell Soup Company dated
December 6, 1995 (the "Restrictive Agreement") which places certain restraints
on Employee, including those restraints on subsequent employment under Section 9
thereof as are reasonable and necessary under applicable law (the "Restraint")
but which specifies permitted types of employment with "Conflicting
Organizations" in Section 9(b) thereof (the "Restraint Exception"); and
WHEREAS, the employment of Employee hereunder shall be limited to
employment authorized under the Restraint Exception only during the term of the
Restraint and which is otherwise not in violation of the Restrictive Agreement.
NOW, THEREFORE, intending to be legally bound, Heinz agrees to employ
Employee, and Employee hereby agrees to be employed by Heinz, upon the following
terms and conditions:
<PAGE>
-2-
ARTICLE I
EMPLOYMENT
----------
1.01 (a) Office. Employee is hereby employed by Heinz, and Employee
------
hereby accepts employment by Heinz as Executive Vice President of Heinz with
responsibility as President and Chief Executive Officer of Star-Kist. Employee
shall be based in Pittsburgh, Pennsylvania. Employee's Position Description is
set forth in Exhibit A, attached hereto and made a part hereof. Employee shall
use his best energies and abilities in the performance of these duties. In no
case shall Employee's duties involve, directly or indirectly, any role or
function in any product, process, equipment, project or service, or component
thereof, in violation of the Restraint unless the same qualifies under the
Restraint Exception. The Position Description and the job description and
requirements of Employee's job under this Agreement shall be subject to and
superseded by the requirements of the Restraint and shall be deemed to be
modified and amended in order that the Position Description, the job description
and requirements strictly confirm to the scope of the Restraint Exception. As
soon as Employee is released from restrictions under the Restraint, Employee
shall be considered for appointment to additional executive duties on behalf of
Heinz.
(b) Nomination. Dr. Anthony J. F. O'Reilly, Chairman of the Board of
----------
Directors and Chief Executive Officer of Heinz shall recommend Employee to the
nominating committee of the Board of Directors of Heinz for nomination to the
Board of Directors of Heinz and such nomination shall be considered and promptly
acted upon by the nominating committee of the Heinz Board of Directors upon the
expiration of the Restraint or at any time prior to such expiration upon receipt
by Heinz of an opinion of Paul, Weiss, Rifkind, Wharton & Garrison stating that
Employee's nomination and election to the Heinz Board of Directors should not
breach the Restraint or the Restrictive Agreement.
1.02 Term. Employee's employment hereunder shall commence on the first
----
business day after the effective date of the termination of his present
employment. Employee has advised Heinz that he shall submit his resignation from
his present employment on the first business day after execution of this
Agreement with the effective date thereof to be set in the discretion of
Employee, but in no case shall such effective date extend more than three weeks
from the date of resignation.
<PAGE>
-3-
1.03. Initial Payment. Upon Employee's resignation from his current
---------------
employment, and execution of this Agreement, Heinz shall forthwith pay to
Employee the non-refundable sum of One Million Dollars ($1,000,000).
1.04. Base Salary. Upon commencement of his employment with Heinz
-----------
hereunder, Heinz shall pay Employee compensation at the rate of $400,000.00 per
year (hereinafter the "Base Salary"), with such adjustments from time to time
which, as determined by Heinz, are appropriate to recognize and reward Employee
for his achievements for, and contributions to, Heinz pursuant to established
guidelines of Heinz.
1.05. Incentive Compensation. Employee shall be a participant in the
----------------------
Shareholder Success Program ("SSP") or any successor program to SSP. Employee
shall receive payments annually in accordance with the SSP or any successor
program applicable to Employee. For the Heinz fiscal year ending April 30, 1997,
Employee shall receive from the SSP and, if necessary, a supplemental payment
for a bonus totaling not less than $200,000.00. For the Heinz fiscal year ending
April 29, 1998, Employee shall receive from the SSP and, if necessary, a
supplemental payment for a bonus totaling not less than $400,000.00. During the
term of the Restraint, all payments to Employee from the SSP, any successor
program to the SSP or any other bonus payments shall be based upon and
calculated from the performance of Star-Kist Foods, Inc.; no such SSP or any
other bonus program shall be based on the performance of H. J. Heinz Company as
a whole during the term of the Restraint; except that should the bonuses
calculated as described above be less than the guaranties provided above, then
Heinz shall be permitted to pay Employee such guaranteed amounts. Employee shall
have Hay Points under the Heinz compensation system as recommended by Heinz'
Chief Executive Officer and such Hay Point total shall not be less than that of
any officer of Heinz or any affiliate of Heinz other than the Chairman of the
Board of Directors and Chief Executive Officer of Heinz or the President of
Heinz.
1.06 Stock Options. Upon Employee's resignation from his current
-------------
employment and his execution of this Agreement, Employee shall be deemed to be
an employee under the 1996 H. J. Heinz Company Stock Option Plan and shall be
granted options for the purchase of 500,000 shares of Heinz
<PAGE>
-4-
stock on the following terms:
. Grant in accordance with the 1996 H. J. Heinz Company Stock Option
Plan and shall have a term of ten (10) years; and
. All of such options shall vest on January 6, 2000.
Any and all unvested options granted under this Section 1.06 shall become vested
and immediately exercisable upon a Change in Control of Heinz as defined in the
1996 H. J. Heinz Company Stock Option Plan or upon Employee's termination by
Heinz under Section 2.03. Pursuant to the 1996 H. J. Heinz Company Stock Option
Plan, vested and unvested options become immediately exercisable upon the death
or physical disability of the Employee during his employment hereunder and shall
remain exercisable at all times prior to expiration of such options. Should
Employee's employment hereunder terminate under Section 2.03, Employee may
exercise his options at any time within three months of his last date of
employment hereunder. Should Employee choose to resign his employment hereunder,
all of his options shall terminate on the effective date of this resignation.
1.07. Employee Benefits and Related Items
-----------------------------------
(a) Employee shall participate in and shall receive from time to time
such fringe benefits as other executives in comparable or similar positions with
Heinz, in accordance with employment policies of Heinz, including but not
limited to participation in any vacation plan, any disability or wage
continuation plan, or group insurance, hospitalization or other benefit plan
arrangement of Heinz, which is applicable to employees generally and which is or
may be applicable to executive employees. The vacation entitlement of Employee
shall be five (5) weeks per year.
(b) Employee shall receive a car for his use while he is employed by
Heinz pursuant to the Heinz executive automobile policy and guidelines.
<PAGE>
-5-
(c) Heinz shall reimburse Employee for Employee's reasonable costs to
relocate at Heinz' request.
(d) Heinz shall pay or, if Employee pays, shall reimburse Employee, for
such reasonable business expenses as he incurs in performing his
responsibilities under this Agreement.
ARTICLE II
TERMINATION
-----------
2.01. Illness, Incapacity. If during the term of Employee's employment
-------------------
hereunder Employee shall be prevented, in accordance with the then current Heinz
disability policy and based upon the judgment of competent medical personnel,
from effectively performing his duties hereunder for a period of six consecutive
months or six months in any 12 month period by reason of illness or disability,
then Heinz may, by written notice to Employee, terminate Employee's employment
hereunder. Upon delivery to Employee of such notice, together with payment of
any accrued Base Salary, and pro-rata fiscal year Incentive Compensation, if
any, Employee's employment and all obligations of Heinz under Article I hereof
shall forthwith terminate; provided, however, Employee shall continue to own
those Heinz stock options issued to him under their terms as specified in
Section 1.06 and shall receive any disability benefits to which he is entitled
under the Heinz benefit plan then in effect and applicable to Employee. The
obligations of Employee under Article III hereof shall continue notwithstanding
termination of Employee's employment pursuant to this Section 2.01.
2.02. Death. If Employee dies during the term of his employment,
-----
Employee's employment hereunder shall terminate and all obligations of Heinz
hereunder, other than obligations with respect to the payment of accrued and
unpaid Base Salary, stock options as specified in Section 1.06, pro-rata fiscal
year Incentive Compensation, if any, and benefits, shall terminate.
2.03. Heinz Termination. Employee's employment hereunder may be terminated
-----------------
at any time by Heinz with or without cause. Following such termination, Heinz
shall pay Employee the amount of his base salary ordinarily due for twelve
months work hereunder plus the amount of the last Incentive
<PAGE>
-6-
Compensation bonus received by Employee. Payment of all other compensation and
benefits to Employee hereunder shall cease effective as of the date of any such
termination; provided, however, Employee shall retain his rights in vested stock
options as specified in Section 1.06 and shall retain the Initial Payment made
to Employee under 1.03 hereinabove. The obligations of Employee under Article
III hereof shall continue notwithstanding termination of Employee's employment
under this Section 2.03.
2.04. Employee Termination. Employee's employment hereunder may be
--------------------
terminated at any time by Employee. Employee shall give Heinz sixty (60) days
prior written notice of such termination of his employment with Heinz. The
obligations of Employee under Article III hereof shall continue notwithstanding
termination of Employee's employment pursuant to this Section 2.04. If Employee
terminates his employment with Heinz, Employee shall not be entitled to any
further payments or other compensation or benefits from Heinz.
ARTICLE III
CERTAIN EMPLOYEE ACKNOWLEDGEMENTS AND COVENANTS
-----------------------------------------------
3.01. Confidential Information. For purposes of this Agreement, the "Heinz
------------------------
Group" shall mean Heinz, Star-Kist and any subsidiary and affiliate of Heinz.
Employee recognizes and acknowledges that: (a) in the course of Employee's
employment hereunder it may be necessary for Employee to acquire or be exposed
to information which could include, in whole or in part, information concerning
the Heinz Group's business plans and strategies, marketing research, sales
techniques, methods, customers and prospective customers, sources of supply,
computer programs, system documentation, special hardware, software development,
manuals, formulae, processes, machine, compositions, ideas, improvements,
inventions or any other confidential or proprietary information belonging to the
Heinz Group or relating to the Heinz Group's affairs (collectively referred to
herein as the "Confidential Information"); (b) the Confidential Information is
the property of the Heinz Group; (c) the unauthorized use, misappropriation or
disclosure of the Confidential Information would constitute a breach of trust
and could cause irreparable injury to the Heinz Group; and (d) it is essential
to the protection of the Heinz Group's goodwill and to the maintenance of the
Heinz Group's competitive position that the Confidential Information be kept
secret and that Employee not disclose the Confidential Information to others or
use
<PAGE>
-7-
the Confidential Information to Employee's own advantage or the advantage of
others. Confidential Information shall not include information that becomes
publicly available through no fault of Employee. Nothing herein shall conflict
with the strict compliance of Employee with the Restraint and the Restrictive
Agreement; Employee shall have no role in the receipt, handling or consideration
of information about businesses not authorized or permitted for Employee's
receipt, handling or consideration by the Restraint Exception and Restrictive
Agreement.
3.02. Non-Disclosure of Confidential Information. Employee agrees to, and
------------------------------------------
hereby shall, hold and abide by Heinz procedures to safeguard the Confidential
Information in trust for Heinz, its successors and assigns, and shall not,
without the prior written consent of Heinz, misappropriate or disclose or make
available to anyone for use outside the Heinz Group at any time, either during
his employment with Heinz or the Heinz Group or subsequent to the termination of
his employment with Heinz for any reason, including without limitation
termination by Heinz for cause or without cause, any of the Confidential
Information, whether or not developed by Employee, except as required in the
performance of Employee's duties to Heinz.
3.03. Disclosure of Works and Inventions/Assignment of Patents. Employee
--------------------------------------------------------
shall disclose promptly to Heinz or its nominee or assignee any and all works,
inventions, trademarks, discoveries and improvements authored, conceived or made
by Employee during the period of employment and related to the business or
activities of Heinz, and hereby assigns and agrees to assign all his interest
therein to Heinz or its nominee. Whenever requested to do so by Heinz, Employee
shall execute any and all applications, assignments or other instruments which
Heinz shall deem necessary to apply for and obtain Letters Patent or Copyrights
of the United States or any foreign country or to otherwise protect Heinz'
interest therein. Such obligations shall continue beyond the termination of
employment with respect to works, inventions, trademarks, discoveries and
improvements authored, conceived or made by Employee during the period of
employment, and shall be binding upon Employee's assigns, executors,
administrators and other legal representatives. Heinz agrees to reimburse
Employee for all reasonable expenses incurred in complying with this Section
3.03.
3.04. Duties. Employee agrees to be a loyal employee of Heinz. Employee
------
agrees to devote his
<PAGE>
-8-
best efforts full time to the performance of his duties for Heinz, to give
proper time and attention to furthering Heinz' business, and to comply with all
rules, regulations and instruments established or issued by Heinz. Employee
further agrees that during the term of this Agreement, Employee shall not,
directly or indirectly, engage in any business which, in the reasonable judgment
of Heinz, would detract from Employee's ability to apply his best efforts to the
performance of his duties hereunder. Employee also agrees that he shall not
usurp any corporate opportunities of the Heinz Group while employed by Heinz or
which came to Employee's attention while engaged at Heinz.
3.05. Return of Materials. Upon the termination of Employee's employment
-------------------
with Heinz, Employee shall promptly deliver to Heinz all correspondence,
business plans, drawings, blueprints, manuals, letters, notes, notebooks,
reports, flow-charts, programs, computer storage media, proposals and any
documents concerning the Heinz Group's businesses, customers, products, services
or processes and, without limiting the foregoing, will promptly deliver to Heinz
any and all other documents or materials containing or constituting Confidential
Information.
3.06. Non-Solicitation of Employees. Employee agrees that, during his
-----------------------------
employment with Heinz and for two (2) years following termination of Employee's
employment with Heinz, including without limitation termination by Heinz for
cause or without cause, Employee shall not, directly or indirectly, solicit or
induce, or attempt to solicit or induce, any employee of Heinz or the Heinz
Group to leave Heinz or the Heinz Group for any reason whatsoever or hire any
employee of Heinz or the Heinz Group.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
------------------------------
4.01. No Prior Agreements. Employee states that he is not aware of and,
-------------------
to the best of his knowledge has not signed or agreed to, any contract,
agreement or understanding which in any manner would limit or otherwise affect
his ability to perform his obligations hereunder, including without limitation
any contract, agreement or understanding containing terms and provisions
restricting his employment after leaving the employ of Campbell Soup Company,
with the sole exception of the Restrictive Agreement, a copy of which was
delivered to Heinz by Employee. To the best of Employee's
<PAGE>
-9-
recollection, Employee did not sign the Patent-Trade Secret Agreement referenced
in the Restrictive Agreement but if he did sign it or is bound by it, Employee
does not believe such Patent-Trade Secret Agreement is inconsistent with
Employee's obligations and duties under this Agreement. Employee and Heinz
acknowledge that Employee's employment with Heinz will not require him to, and
Employee shall not, (i) disclose or use any confidential information belonging
to prior employers or other persons or entities in violation of the Restrictive
Agreement or any other agreement to which Employee is bound, or (ii) directly or
indirectly engage in any activity on behalf of or in furtherance of Heinz or the
Heinz Group in breach of the Restraint or the Restrictive Agreement and shall at
all times during the term of the Restraint restrict his employment and
activities to those permitted under the Restraint Exception. It is Heinz'
policy, and the policy of the Heinz Group and a specific direction to Employee,
that Employee shall not (i) disclose or use any of the confidential information
of Campbell Soup Company or any prior employer of Employee, to or for the
benefit of Heinz or the Heinz Group, (ii) retain or withdraw from Campbell Soup
Company any materials, documents or property of Campbell Soup Company upon his
termination of employment with them, or (iii) breach the Restraint or undertake
any activity not permitted by the Restraint Exception or the Restrictive
Agreement. If at any meeting which Employee attends there is any discussion
concerning businesses in which Employee may not participate or to which he may
not contribute under the Restraint or the Restrictive Agreement, then Employee
shall be and hereby is directed to withdraw from such meeting and not
participate in or be a party to such meeting.
4.02. Review by Counsel. Both Heinz and Employee represent and warrant
-----------------
that their respective counsel have reviewed this Agreement.
ARTICLE V
MISCELLANEOUS
-------------
5.01. Entire Agreement. This Agreement represents the entire agreement
----------------
of the parties and may be amended only by a writing signed by each of them.
5.02. Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the Commonwealth of Pennsylvania.
<PAGE>
-10-
5.03. Agreement Binding. The obligations of Employee under this Agreement
-----------------
shall continue after the termination of his employment with Heinz for any reason
and shall be binding on his heirs, executors, legal representatives and assigns
and shall inure to the benefit of any successors and assigns of Heinz.
5.04. Assignment. This Agreement may be assigned by Heinz to any company
----------
or entity in the Heinz Group and may be further assigned by any assignee
hereunder to any company or entity in the Heinz Group; provided, however, that
any such assignment shall not occur during the term of the Restraint unless
employment with the assignee qualifies under the Restraint Exception. Any
assignment of this Agreement shall not constitute termination of employment
under this Agreement nor shall any assignment constitute new employment for the
Employee and all obligations specified in this Agreement shall be binding upon
the Employee and the assignee after any such assignment. Employee may not assign
this Agreement and any attempted assignment by Employee shall be invalid.
5.05. Confidentiality of this Agreement. This Agreement shall be deemed a
---------------------------------
part of the Confidentiality Information and shall not be disclosed, in whole or
in part, by Employee or Heinz to any third party, or to any employees within
Heinz, its affiliates or subsidiaries, other than to or at the direction of
Employee's supervisor; provided, however, Employee shall disclose it to his
legal counsel for the purposes of receiving legal advice thereon and Heinz may
disclose it as required by law or stock exchange rules.
5.06. Legal Proceedings.
-----------------
(a) If Employee is barred from the commencement or continuation of
employment with Heinz hereunder by reason of a court order or injunction
resulting from enforcement of the Restraint or the Restrictive Agreement, during
the effective period of such order or injunction Employee shall be entitled to
(i) retain in any case the payment under Section 1.03 above and those stock
options already vested under Section 1.06 above and (ii) receive the Base Salary
and Incentive Compensation under Sections 1.04 and 1.05 as if Employee was
actively employed with Heinz hereunder provided that such continuing
<PAGE>
-11-
payments under Sections 1.04 and 1.05 shall cease if the order or injunction is
not fully released within twelve (12) months of its initial effective date.
(b) If a court with jurisdiction hereof determines that Employee's
duties as described in Section 1.01 are not permissable, then Employee's duties,
at Heinz' option, shall be changed and amended, the intent of this Agreement
being that Employee shall not violate any term of the Restraint or the
Restrictive Agreement and, despite any such changes or amendments in Employee's
duties, Employee's rights and benefits shall continue as provided in this
Agreement without reduction.
5.07. (a) Counterparts, Section Headings. This Agreement may be executed
------------------------------
in any number of counterparts, each of which shall be deemed to be an original,
but all of which together shall constitute one and the same instrument. The
section headings of this Agreement are for convenience of reference only and
shall not affect the construction or interpretation of any of the provisions
hereof.
(b) By-Laws. Employee shall be entitled to the benefit of the
-------
Heinz By-Laws applicable for presidents of Heinz' North American affiliates. A
copy of the current By-Laws is attached hereto as Exhibit B. In particular,
Employee shall be and hereby is indemnified by Heinz against legal fees and
other reasonable out of pocket expenses and any liability paid or incurred by
Employee in connection with any actual, threatened or completed claim, action,
suit or proceeding by reason of Employee having executed this Agreement and
performing or seeking to perform his duties and obligations under this
Agreement. This indemnification does not apply to any claim, action, suit or
proceeding initiated by Employee against Heinz or Heinz' officers, directors or
employees.
<PAGE>
-12-
EMPLOYEE ACKNOWLEDGES THAT HE HAS READ AND UNDERSTANDS THE FOREGOING
PROVISIONS.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement or
caused this Agreement to be executed the day and year first above written.
Attest:
January 6, 1996 /s/ Daniel J. O'Neill (SEAL)
- ---------------------------- ---------------------------------
Daniel J. O'Neill
Attest: H.J. HEINZ COMPANY
/s/ John Cartwright By: /s/ Anthony J. F. O'Reilly
- ---------------------------- ----------------------------------
Title: Chairman and Chief Executive Officer
------------------------------------
<PAGE>
EXHIBIT 11
H. J. Heinz Company and Subsidiaries
COMPUTATION OF NET INCOME PER SHARE
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
-----------------------
October 29, October 30,
1997 1996
----------- -----------
FY 1998 FY 1997
<S> <C> <C>
Primary income per share:
Net income........................................... $432,167 $357,050
Preferred dividends.................................. 19 22
-------- --------
Net income applicable to common stock................ $432,148 $357,028
======== ========
Average common shares outstanding and
common stock equivalents.......................... 373,732 374,500
======== ========
Net income per share--primary........................ $ 1.16 $ 0.95
======== ========
Fully diluted income per share:
Net income........................................... $432,167 $357,050
======== ========
Average common shares outstanding and
common stock equivalents.......................... 373,732 374,500
Additional common shares assuming:
Conversion of $1.70 third cumulative preferred
stock........................................... 310 350
Additional common shares assuming options were
exercised at the period-end market price........ 547 531
-------- --------
Average common shares outstanding and
common stock equivalents.......................... 374,589 375,381
======== ========
Net income per share--fully diluted................. $ 1.15 $ 0.95
======== ========
</TABLE>
All amounts in thousands except per share amounts.
------------
<PAGE>
EXHIBIT 11
H. J. Heinz Company and Subsidiaries
COMPUTATION OF NET INCOME PER SHARE
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
-----------------------
October 29, October 30,
1997 1996
----------- -----------
FY 1998 FY 1997
<S> <C> <C>
Primary income per share:
Net income........................................... $188,866 $177,520
Preferred dividends.................................. 9 11
-------- --------
Net income applicable to common stock................ $188,857 $177,509
======== ========
Average common shares outstanding and
common stock equivalents.......................... 373,732 374,500
======== ========
Net income per share--primary........................ $ 0.51 $ 0.47
======== ========
Fully diluted income per share:
Net income........................................... $188,866 $177,520
======== ========
Average common shares outstanding and
common stock equivalents.......................... 373,732 374,500
Additional common shares assuming:
Conversion of $1.70 third cumulative preferred
stock........................................... 310 350
Additional common shares assuming options were
exercised at the period-end market price........ 547 531
-------- --------
Average common shares outstanding and
common stock equivalents.......................... 374,589 375,381
======== ========
Net income per share--fully diluted................. $ 0.50 $ 0.47
======== ========
</TABLE>
All amounts in thousands except per share amounts.
------------
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q
FOR THE PERIOD ENDED OCTOBER 29, 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> 6-MOS
<FISCAL-YEAR-END> APR-29-1998
<PERIOD-START> MAY-01-1997
<PERIOD-END> OCT-29-1997
<EXCHANGE-RATE> 1
<CASH> 178,980
<SECURITIES> 42,246
<RECEIVABLES> 1,070,948
<ALLOWANCES> 0
<INVENTORY> 1,555,231
<CURRENT-ASSETS> 3,086,473
<PP&E> 4,183,217
<DEPRECIATION> 1,819,255
<TOTAL-ASSETS> 8,383,663
<CURRENT-LIABILITIES> 2,640,266
<BONDS> 2,457,043
0
217
<COMMON> 107,774
<OTHER-SE> 2,327,848
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<SALES> 4,497,352
<TOTAL-REVENUES> 4,497,352
<CGS> 2,817,617
<TOTAL-COSTS> 2,817,617
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 126,108
<INCOME-PRETAX> 698,640
<INCOME-TAX> 266,473
<INCOME-CONTINUING> 432,167
<DISCONTINUED> 0
<EXTRAORDINARY> 0
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<NET-INCOME> 432,167
<EPS-PRIMARY> 1.16
<EPS-DILUTED> 1.15
</TABLE>
