H.J. Heinz Company (ticker: HNZ, exchange: New York Stock Exchange (.N))
News Release -
9-Mar-2000
Heinz Reports Higher Earnings; Third Quarter EPS Of 63 Cents Up 5%, Excluding Special Items; EPS up 12.5%, Excluding Effect Of Weight Watchers And Special Items
PITTSBURGH, Pa., March 9, 2000 /PRNewswire/ -- H. J. Heinz Company
(NYSE: HNZ) today reported that third quarter Fiscal 2000 diluted earnings per
share increased 5.0% to $0.63 per share from $0.60 per share last year.
(Note: All earnings per share amounts are presented on an after-tax diluted
basis.) Net income increased $7.7 million to $227.2 million from $219.5
million. These results exclude special items which are described in the
tables below. Additionally, removing the impact of the Weight Watchers
classroom business which was sold in the second quarter, diluted earnings per
share increased 12.5% and net income increased 9.5%. Including the special
items, third quarter diluted earnings per share was $0.47 per share compared
to $0.33 per share in last year's third quarter, and net income was $171.1
million compared to $120.6 million last year.
Sales were up 8.7% from volume and acquisitions (volume increased 2.6% and
acquisitions increased 6.1%). Sales were reduced by divestitures of 5.3%
(primarily the Weight Watchers classroom business), pricing of 1.6% and
foreign exchange translation rates of 1.2%. On a consolidated basis, sales
for the quarter increased $12.6 million or 0.6%.
Operating income for the third quarter increased 2.5% to $418.1 million
from $408.1 million last year, excluding special items in both periods.
Additionally, removing the impact of the Weight Watchers classroom business in
the prior year, operating income increased 9.7%. Including special items,
third quarter operating income increased to $336.6 million from $266.4 million
last year.
The effective tax rate for the third quarter of Fiscal 2000 was 36.1%
compared to 40.1% last year. Excluding special items, the effective tax rate
for the third quarter was 35.0% compared to 36.0% last year.
Maintaining Growth Momentum
Commenting on the quarter, Heinz President and CEO William R. Johnson
said: "Our top-line growth strategy continues to gain momentum, as we focus on
our power brands and on marketing to key consumer trends. The quarter saw
continued sales increases in ketchup, condiments and sauces, foodservice, and
our businesses across Asia. Our third quarter performance confirms our
confidence that we are on track to deliver our year-end target of 6 to 7% EPS
growth while substantially increasing spending behind our key brands."
THIRD QUARTER HIGHLIGHTS
North American Dry
Mr. Johnson added: "In the U.S., we continue to generate excitement among
young consumers through creative marketing in ketchup, such as the new Heinz
ketchup Pokemon labels and video promotion. The recently announced agreement
to acquire Beech-Nut baby food is expected to give Heinz greater critical mass
to drive innovation and growth in the U.S. infant feeding category, just as we
have done in the U.K., Italy, Canada, Australia and New Zealand."
Sales volume for North American Dry increased 3.0%, due to continued
strong sales of ketchup and condiments, foodservice and tuna. This volume
growth along with acquisitions and a slightly stronger Canadian dollar
increased sales by 5.9%, offset by lower pricing, primarily in tuna and pet
food, which reduced sales by 2.8%, and divestitures, which reduced sales by
2.5%. In pet food, lower prices were a result of the company's decision to
refocus its marketing to achieve more competitive price points on the shelf.
Foodservice operations continued its impressive performance, with single-
serve ketchup up 8.4% in volume.
Operating income increased 9.8%, excluding special items, led by the
ongoing strong performance of Heinz U.S.A. Including special items, operating
income decreased 6.1%.
North American Frozen Foods
Mr. Johnson said: "In frozen foods, we have become a leading innovator
with a number of new products to drive growth and excitement in this category.
The national roll-out of Boston Market Home Style Frozen Meals is well
underway and Smart Ones frozen entrees continue to perform very well with
another quarter of double-digit sales growth. The introduction of the new
resealable Ore-Ida package should revolutionize the frozen potato business."
The continued roll-out of Boston Market meals in grocery, the elimination
of several non-core product lines, and poor performance on Budget Gourmet
resulted in reduced operating income of 8.5% for the quarter, excluding
special items. The divestiture of several non-core product lines reduced
sales in the quarter by 4.4%, volume decreased 1.0% and lower pricing reduced
sales by 1.3%, resulting in an overall sales decrease of 6.7% to
$227.1 million.
Europe
Mr. Johnson said: "Our European businesses had a strong quarter, with
sales up 5.7% to $650.2 million. Our developing partnerships with global
retail customers will enable us to leverage their international expansion into
a new growth opportunity for Heinz brands. We are successfully integrating
the newly acquired UB Frozen and Chilled Foods business with brands such as
San Marco pizza and Linda McCartney vegetarian/meat-free products to make
Heinz a major player in Europe's fast-growing frozen market."
Sales volume increased 2.3%, largely as a result of an increase in canned
seafood sales. Acquisitions, net of divestitures, increased sales 11.8%,
primarily due to the acquisition of the brands of United Biscuit's European
Frozen and Chilled Division. Excluding special items, operating income for
the quarter increased 6.8%, or 14.1%, on a constant currency basis.
Asia/Pacific
Mr. Johnson noted: "We had outstanding third-quarter results with sales up
23.5% and operating income up 35%. This growing business represented 13% of
global sales for the quarter. We also are focused on sustaining our growth in
these rapidly growing markets through new product introductions, acquisitions,
joint ventures and geographic expansion. Our recently announced joint venture
with Nutri Asia will make us the leader in the Philippines' ketchup and sauces
market and builds on the success of our Indonesian joint venture, ABC Sauces,
the world's second largest soy sauce brand, whose sales are growing better
than 20% per year. Our launch of jarred baby food in China significantly
expands our presence in the world's most populous market. And our
introduction of Heinz ketchup in India adds another power brand for Heinz in
this large and growing market."
New Products
During the third quarter, Heinz introduced a number of new products and
line extensions around the world to address changing tastes and trends across
its major categories, including:
Ketchup, Condiments and Sauces
Japan: Nichiryu Meat Sauce
Holland: Pasar Sweet Soy Sauce
Malaysia: Heinz Ketchup
Away-from-home
United States: Cristoforo Colombo Pizza Sauce
Hong Kong: Salty Soy Sauce
Japan: Fondue de Tomates; Hayashi Rice Sauce
Convenience Foods
Caribbean: Macaroni and Cheese, Beef Ravioli, Spaghetti and
Meatballs
Australia: Tom Piper Braised Steak, Tomato and Onions; Breakfast
Sausage
Japan: Clam and Vegetable Chowder
United Kingdom: Tweenies pasta shapes; Happy New Year 2000 Spaghetti
Hoops
Frozen Food
South Africa: Microwaveable Heinz French Fries
Infant Feeding
India: Farex infant biscuits
Malaysia: Bread Sticks with cheese
Australia: Heinz creamy apricot rice pudding, chicken and brown rice
risotto
Italy: Plasmon strained rabbit
China: 15 varieties of Heinz strained fruits and vegetables
Tuna
Australia: Greenseas Heat and Serve Tuna Plus range
Pet Foods
Japan: Nekono Kimochi tuna and vegetable
Uruguay: Top Nutrition dry cat and dog foods
Argentina: Rosco meat with vegetables
Organic and Nutritional
Italy: Bi-Aglut vanilla-creme caramel dessert, Bi-Aglut biscuit,
Aproten grain-shaped pasta
India: Complan Crunch Timers nutritional biscuits, Glucon D
energy biscuits
Indonesia: ABC orange, jasmine and mango teas
Third Quarter Special Items
The third quarter results include Operation Excel implementation costs of
$62.7 million pre-tax ($0.12 per share) and additional Operation Excel
restructuring charges of $18.8 million pre-tax ($0.03 per share). Last year's
third quarter results included restructuring charges and implementation costs
of $141.7 million pre-tax ($0.27 per share). At its March meeting, the
company's Board of Directors approved additional Operation Excel initiatives
which will be recognized in the fourth quarter and will be implemented
throughout Fiscal 2001.
The following tables provide a comparison of the company's reported
results and the results excluding special items for the third quarters of
Fiscal 2000 and Fiscal 1999.
(Dollars in millions except
per share amounts)
Third Quarter Ended January 26, 2000
------------------------------------
Operating Net
Income Income Per Share
-------- -------- --------
Reported results $336.6 $171.1 $0.47
Operation Excel restructuring
and implementation costs 81.6 56.0 0.15
-------- -------- --------
Results excluding special items $418.1 $227.2 $0.63
======== ======== ========
Third Quarter Ended January 27, 1999
------------------------------------
Operating Net
Income Income Per Share
-------- -------- --------
Reported results $266.4 $120.6 $0.33
Operation Excel restructuring
and implementation costs 141.7 98.9 0.27
-------- -------- --------
Results excluding special items $408.1 $219.5 $0.60
======== ======== ========
(Note: Totals may not add due to rounding.)
Nine-Month Results
Sales increased 3.6%, excluding the impact of divestitures. Acquisitions
increased sales by 4.0% and sales volume increased 2.0%. Sales were reduced
by the impact of divestitures of 3.8%, primarily as a result of the sale of
the Weight Watchers classroom business, pricing of 1.7% and foreign exchange
translation rates of 0.7%. Sales for the nine months decreased $13.0 million,
or 0.2%.
Diluted earnings per share for the nine months increased 7.2% to $1.93 per
share from $1.80 per share last year, and net income increased $35.9 million
to $698.9 million from $663.0 million, excluding special items which are
described in the tables below. Additionally, removing the impact of the
Weight Watchers classroom business in both years, diluted earnings per share
increased 8.0% and net income increased 6.2%. Including these items, diluted
earnings per share for the nine months was $2.19 per share compared to $1.54
per share last year, and net income was $793.3 million compared to
$565.7 million last year.
The following tables provide a comparison of the company's reported
results and the results excluding special items for the first nine months of
Fiscal 2000 and Fiscal 1999.
All of the following special items have been previously disclosed, except
for additional Operation Excel costs, which occurred in the third quarter of
Fiscal 2000.
(Dollars in millions except
per share amounts) Nine Months Ended January 26, 2000
-----------------------------------
Operating Net
Income Income Per Share
-------- -------- --------
Reported results $1,508.8 $793.3 $2.19
Operation Excel restructuring
and implementation costs 193.3 138.3 0.38
Ecuador expenses 20.0 20.0 0.05
Gain on U.K. building sale - (11.8) (0.03)
Foundation contribution 30.0 18.9 0.05
Gain on sale of Weight Watchers
classroom business (464.6) (259.7) (0.72)
-------- -------- --------
Results excluding special items $1,287.4 $698.9 $1.93
======== ======== ========
Nine Months Ended January 27, 1999
----------------------------------
Operating Net
Income Income Per Share
-------- -------- --------
Reported results $1,111.8 $565.7 $1.54
Operation Excel restructuring
and implementation costs 141.7 98.9 0.27
Project Millennia implementation
costs 22.3 14.3 0.04
(Gain)/loss on sale of
bakery products unit (5.7) 0.6 -
Reversal of unutilized Project
Millennia accruals (25.7) (16.4) (0.04)
-------- -------- --------
Results excluding special items $1,244.5 $663.0 $1.80
======== ======== ========
(Note: Totals may not add due to rounding.)
Operating income for the nine months of Fiscal 2000 increased 3.5% to
$1.29 billion from $1.24 billion last year, excluding special items.
Additionally, removing the impact of the Weight Watchers classroom business in
both years, operating income increased 4.9%. Including these items, operating
income increased 35.7% to $1.51 billion from $1.11 billion last year.
The effective tax rate for the first nine months of Fiscal 2000 was 39.7%
compared to 37.4% last year. Excluding special items, the effective tax rate
for the first nine months was 35.0% compared to 36.0% last year.
EDITOR'S NOTE: Heinz President and CEO William R. Johnson and senior
management will meet with securities analysts to discuss the quarterly results
at 8:30 a.m. on Thursday, March 9, at the Midtown Chase Manhattan Center, 600
Fifth Avenue, New York, NY. This presentation is also available via Internet
Webcast at www.heinz.com.
This news release contains forward-looking statements regarding the
company's future performance. These forward-looking statements are based on
management's views and assumptions, and involve unknown risks, uncertainties
and other important factors that could cause actual results to differ
materially from those expressed or implied in the forward-looking statements.
These include, but are not limited to, sales, earnings and volume growth,
competitive conditions, production costs, currency valuations, global economic
and industry conditions, achieving cost savings programs and the other factors
described in "Forward-Looking Statements" in the company's Form 10-K for the
fiscal year ended April 28, 1999, as updated from time to time by the company
in its subsequent filings with the SEC.
ABOUT HEINZ: With sales over US$9 billion, H. J. Heinz Company is one of
the world's leading marketers of branded foods to supermarkets and away-from-
home eating establishments. Its 50 companies operate in some 200 countries,
offering more than 57 hundred varieties. Among the company's famous brands
are Heinz, StarKist, Ore-Ida, 9-Lives, Weight Watchers, Wattie's, Plasmon,
Farley's, Smart Ones, The Budget Gourmet, Linda McCartney, San Marco, Go
Ahead!, Bagel Bites, John West, Petit Navire, Boston Market, Skippy, Kibbles
'n Bits, Pounce, Wagwells, Nature's Recipe, Orlando, ABC, Olivine and
Pudliszki. Information on Heinz is available at http://www.heinz.com.
H. J. Heinz Company
Segment Data
Third Quarter Ended Nine Months Ended
------------------- ------------------
Jan. 26, Jan. 27, Jan. 26, Jan. 27,
2000 1999 2000 1999
----------- ----------- ----------- -----------
Net external sales:
North
American Dry $1,032,721 $1,026,484 $3,027,501 $3,033,975
North American
Frozen 227,086 243,515 694,595 722,140
Europe 650,234 615,131 1,807,664 1,795,143
Asia/Pacific 305,022 247,081 885,875 732,301
Other Operating
Entities 79,574 149,851 404,093 549,135
Non-Operating - - - -
Consolidated ----------- ----------- ----------- -----------
Totals $2,294,637 $2,282,062 $6,819,728 $6,832,694
=========== =========== =========== ===========
Operating income
(loss):
North American Dry $184,832 $196,747 $552,777 $636,044
North American
Frozen 37,305 (58,726) 113,319 41,240
Europe 90,388 103,679 302,755 339,683
Asia/Pacific 39,997 27,395 104,929 90,739
Other Operating
Entities 6,742 29,164 531,149 83,126
Non-Operating (22,690) (31,870) (96,175) (78,994)
Consolidated ----------- ----------- ----------- -----------
Totals $336,574 $266,389 $1,508,754 $1,111,838
=========== =========== =========== ===========
Operating income
(loss) excluding
special items (a):
North American Dry $223,047 $203,128 $661,818 $649,635
North American
Frozen 42,745 46,693 134,545 132,982
Europe 120,751 113,014 362,160 344,864
Asia/Pacific 46,543 34,484 127,546 100,778
Other Operating
Entities 7,150 33,231 66,940 84,255
Non-Operating (22,101) (22,436) (65,586) (68,061)
Consolidated ----------- ----------- ----------- -----------
Totals $418,135 $408,114 $1,287,423 $1,244,453
=========== =========== =========== ===========
The company's revenues are generated via the sale of products in the
following categories:
Third Quarter Ended Nine Months Ended
------------------- ------------------
Jan. 26, Jan. 27, Jan. 26, Jan. 27,
2000 1999 2000 1999
----------- ----------- ----------- -----------
Ketchup, Condiments
and Sauces $577,838 $534,423 $1,770,007 $1,635,139
Frozen Foods 383,482 343,418 1,042,536 1,004,261
Tuna 237,459 237,704 771,600 800,612
Soups, Beans and
Pasta Meals 331,106 313,044 877,536 831,650
Infant Foods 244,046 254,943 716,826 730,929
Pet Products 326,801 345,552 930,674 985,429
Other 193,905 252,978 710,549 844,674
----------- ----------- ----------- -----------
Total $2,294,637 $2,282,062 $6,819,728 $6,832,694
=========== =========== =========== ===========
(a) Excludes restructuring and implementation costs in all period
presented. In addition, for the nine months ended January 26, 2000,
costs related to Ecuador ($20.0 million) are excluded from North
American Dry; the gain on the sale of the Weight Watchers weight
control business ($464.6 million) is excluded from Other Operating;
and the Foundation Contribution ($30.0 million) is excluded from
Non-Operating. For the nine months ended January 27, 1999, the
reversal of unutilized Project Millennia accruals is excluded from
North American Frozen ($16.6 million) and Europe ($9.1 million); and
the gain on the sale of the bakery division ($5.7 million) is
excluded from Other Operating.
H. J. Heinz Company
Consolidated Statements of Income
(000's omitted - except for per share amounts)
Third Quarter Ended Nine Months Ended
-------------------- ------------------
Jan. 26, Jan. 27, Jan. 26, Jan. 27,
2000 1999 2000 1999
----------- ----------- ----------- -----------
Sales $2,294,637 $2,282,062 $6,819,728 $6,832,694
Cost of
products sold 1,391,887 1,429,482 4,147,788 4,175,262
----------- ----------- ----------- -----------
Gross profit 902,750 852,580 2,671,940 2,657,432
Selling, general
and administrative
expenses 566,176 586,191 1,627,803 1,545,594
Gain on sale of
Weight Watchers - - 464,617 -
----------- ----------- ----------- -----------
Operating income 336,574 266,389 1,508,754 1,111,838
Interest income 8,598 5,993 16,767 20,145
Interest expense 61,594 63,522 188,377 195,081
Other expenses, net 15,665 7,634 22,366 33,545
----------- ----------- ----------- -----------
Income before
income taxes 267,913 201,226 1,314,778 903,357
Provision for
income taxes 96,801 80,672 521,500 337,684
----------- ----------- ----------- -----------
Net income $171,112 $120,554 $793,278 $565,673
=========== =========== =========== ===========
Dividends per share $0.3675 $0.3425 $1.0775 $1.00
=========== =========== =========== ===========
Net income per
share - diluted $0.47 $0.33 $2.19 $1.54
=========== =========== =========== ===========
Average shares for
Net income per
share - diluted 361,741 368,476 361,741 368,476
=========== =========== =========== ===========
Net income per
share - basic $0.48 $0.33 $2.22 $1.56
=========== =========== =========== ===========
Average shares for
Net income per
share - basic 356,690 361,750 356,690 361,750
| =========== =========== =========== =========== |
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| Note: |
Both Fiscal 2000 and Fiscal 1999 include restructuring related |
| |
items and other non-recurring items. |
SOURCE H. J. Heinz Company
CONTACT: MEDIA, Ted Smyth, SVP-Corp. & Govt. Affairs, 412-456-5780;
Debbie Foster, Director-Corp. Comm., 412-456-5778; or Jack Kennedy,
GM-Strategic Comm., 412-456-5923; INVESTORS, Jack Runkel, VP-Investor
Relations, 412-456-6034, all of Heinz/
|
H.J. Heinz Company
