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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 29, 1998
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)
PENNSYLVANIA 25-0542520
(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)
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
Name of each exchange
Title of each class on which registered
------------------- ---------------------
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
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. [ ]
As of June 30, 1998 the aggregate market value of the Registrant's voting
stock held by non-affiliates of the Registrant was approximately
$19,292,688,181.
The number of shares of the Registrant's Common Stock, par value $.25 per
share, outstanding as of June 30, 1998, was 362,050,565 shares.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of Registrant's Annual Report to Shareholders for the fiscal year
ended April 29, 1998 are incorporated into Part I, Items 1 and 3; Part II,
Items 5, 7, 7A and 8; and Part IV, Item 14.
Portions of Registrant's Proxy Statement for the 1998 Annual Meeting of
Shareholders are incorporated into Part III, Items 10, 11, 12 and 13.
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 and other products),
beans, pasta, bakery products, full calorie frozen dinners and entrees,
chicken, vegetables and fruits (frozen and canned), frozen pizza and pizza
components, coated products, meats, edible oils, pickles, vinegar,
nutritional/performance drinks, margarine/shortening, juices 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 three 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.
1998 1997 1996
---- ---- ----
Ketchup, sauces and other condiments....................... 19% 18% 19%
Pet food................................................... 14 13 12
Tuna and other seafood products............................ 12 9 9
All other classes of products, none of which accounts
for 10% or more of consolidated sales..................... 55 60 60
--- --- ---
100% 100% 100%
=== === ===
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 generally 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
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 passed the International Dolphin Conservation
Program Act ("IDCPA") on August 15, 1997, which if ratified by other nations,
will become effective on January 1, 1999. If the IDCPA becomes effective, it
may 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", depending on the results of a study to be
conducted between October 1, 1997 and March 1, 1999 on the effect of the
encirclement of dolphins in the course of purse seine fishing for yellowfin
tuna in the eastern tropical Pacific Ocean. Revision of the definition of
"dolphin safe" and modification of the regulation of the incidental taking of
dolphins in the course of fishing for yellowfin tuna in the eastern tropical
Pacific Ocean is 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, central and eastern Europe, 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" and
"Pounce" are 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, and "Nature's Recipe" for dog and cat foods, most 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, 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, "Teddy" and "Fattoria Scaldasole" for yogurt,
"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. The "Frank Coopers" brand is used
for single-serve foodservice products in the United Kingdom. The "Pudliszki"
and "Kecskemet" trademarks are used for tomato based and other vegetable
products in Poland and the Czech Republic. The "Sunar" trademark is used for
infant feeding products in the Czech Republic. "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.
"Bruno" and "Winna" are used for petfood in New Zealand. "Hellaby", "Hamper",
"Tom Piper Imperial", "Pacific", "Crown", "Hellabys" and "Oak" are used for
canned meats in New Zealand, Australia 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 the United Kingdom and 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 "Medi-Cal" is used for dog and cat foods in
Canada and Japan. "Techni-cal" is used for dog and cat foods in Canada,
certain European countries, Argentina, Chile, Hong Kong, Japan and South
Africa. "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 for frozen entrees. The
Company also markets certain products under other trademarks and brand names
and under private labels.
3
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.
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 1999 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 29, 1998,
approximately 40,500 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 29, 1998. 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
Section 21E of the Securities Exchange Act of 1934 (the "Exchange 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
Exchange 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 the Letter from the
President and CEO (pages 2 to 7 of the Company's Annual Report to Shareholders
for the fiscal year ended April 29, 1998), Management's Discussion and
Analysis (pages 25 to 34 of the Company's Annual Report to Shareholders for
the fiscal year ended April 29, 1998) 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 exchange rate fluctuations; interest rate fluctuations; the
effects of changing prices for the raw materials used by the Company; and the
effectiveness of the Company's marketing, advertising and promotional
programs.
4
ITEM 2. PROPERTIES.
The Company has 32 food processing plants in the United States and its
possessions, of which 26 are owned and six are leased, as well as 64 food
processing plants outside of the United States, of which 56 are owned and
eight are leased, including eight in New Zealand, eight in Canada, six in
South Africa, five in the United Kingdom, five in Australia, four in Italy,
three in Venezuela, 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, Poland, Russia, Seychelles and Thailand. The
Company also leases two can-making factories in the United States and its
possessions. The 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 15
to the Consolidated Financial Statements on page 56 of the Company's Annual
Report to Shareholders for the fiscal year ended April 29, 1998, 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, 1997.
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 8, 1998.
Positions and Offices Held with the Company and
Age (as of Principal Occupations or
Name September 8, 1998) Employment During Past Five Years
---- ------------------ ---------------------------------
William R. Johnson 49 President and Chief Executive Officer of H. J.
Heinz Company since April 30, 1998; President and
Chief Operating Officer from June 12, 1996 until
April 29, 1998; Senior Vice President from
September 8, 1993 until June 12, 1996; President
and Chief Executive Officer of Star-Kist Foods,
Inc. from September 8, 1993 until June 12, 1996.
Daniel J. O'Neill 46 Executive Vice President of H. J. Heinz Company and
President and Chief Executive Officer of Star-Kist
Foods, Inc. from January 6, 1997; Vice President of
Campbell Soup Company from January 1994 to
January 5, 1997; Group Vice President of S. C.
Johnson & Son, Inc. from January 1990 to January
1994.
Paul F. Renne 55 Executive Vice President and Chief Financial
Officer of H. J. Heinz Company since June 11, 1997;
Senior Vice President--Finance and Chief Financial
Officer from September 13, 1996 to June 11, 1997;
Vice President--Treasurer from October 1, 1986 to
September 13, 1996.
5
Positions and Offices Held with the Company and
Age (as of Principal Occupations or
Name September 8, 1998) Employment During Past Five Years
---- ------------------ ---------------------------------
Malcolm Ritchie 44 Executive Vice President and President--Europe of
H. J. Heinz Company since May 1, 1998; Vice
President of European Grocery and Foodservice--H.
J. Heinz Company, Ltd. from May 1, 1997 to May 1,
1998; Managing Director of H. J. Heinz Company,
Ltd. from August 15, 1994 to May 1, 1997; Chief
Executive of Hillsdown European Ambient Foods
Group--Hillsdown Holdings plc from March 1993 to
July 1994.
William C. Springer 58 Executive Vice President of H. J. Heinz Company
since June 12, 1996 and in charge of Heinz U.S.A.,
Heinz Canada, Weight Watchers International and
Heinz Bakery Products; Senior Vice President from
September 8, 1993 until June 12, 1996; President--
Heinz North America from June 1992 until September
1993.
Richard H. Wamhoff 52 Executive Vice President--Global
Manufacturing/Supply Chain and Frozen Foods of H.
J. Heinz Company since May 1, 1998 and President
and Chief Executive Officer--Ore-Ida Foods, Inc.
from May 1, 1993.
David R. Williams 55 Executive Vice President of H. J. Heinz Company
since June 12, 1996 and in charge of Heinz
operations in Latin America, India, Pakistan,
southern Africa and the Pacific Rim; 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 until June 12, 1996.
Michael J. Bertasso 48 Senior Vice President--Strategy, Process and
Business Development of H. J. Heinz Company since
May 1, 1998; Executive Vice President--Star-Kist
Foods, Inc. from July 1, 1996 to May 1, 1998; Chief
Cost Officer--Star-Kist Foods, Inc. from May 1,
1995 to July 1, 1996; Vice President Purchasing &
Logistics--Star-Kist Foods, Inc. from November 1,
1988 to May 1, 1995.
Lawrence J. McCabe 63 Senior Vice President, General Counsel and
Secretary of H. J. Heinz Company since November 1,
1997; Senior Vice President--General Counsel from
June 12, 1991 to October 30, 1997.
D. Edward I. Smyth 48 Senior Vice President--Corporate and Government
Affairs of H. J. Heinz Company since May 1, 1998;
Vice President--Corporate Affairs from March 14,
1990 to May 1, 1998.
William C. Goode 57 Vice President and Chief Administrative Officer of
H. J. Heinz Company since May 1, 1998; Vice
President--Operations of Heinz Pet Products from
October 1, 1996 until April 30, 1997; Vice
President--Human Resources & Quality Systems of
Star-Kist Foods, Inc. from May 1, 1993 until
September 30, 1996.
6
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 55 in Note
14, "Quarterly Results (Unaudited)," of the Company's Annual Report to
Shareholders for the fiscal year ended April 29, 1998. 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 1994 through
1998. 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.
Fiscal year ended
---------------------------------------------------------------
April 29, April 30, May 1, May 3, April 27,
1998 1997 1996 1995 1994
(52 Weeks) (52 Weeks) (52 Weeks) (53 Weeks) (52 Weeks)
---------- ---------- ---------- ---------- ----------
Sales................... $9,209,284 $9,357,007 $9,112,265 $8,086,794 $7,046,738
Interest expense........ 258,616 274,746 277,411 210,585 149,243
Net income.............. 801,566 301,871 659,319 591,025 602,944
Net income per share--
diluted................ 2.15 0.81 1.75 1.58 1.56
Net income per share--
basic.................. 2.19 0.82 1.79 1.61 1.59
Short-term debt and
current portion
of long-term debt...... 339,626 1,163,442 1,082,169 1,074,291 439,701
Long-term debt,
exclusive of
current portion........ 2,768,277 2,283,993 2,281,659 2,326,785 1,727,002
Total assets............ 8,023,421 8,437,787 8,623,691 8,247,188 6,381,146
Cash dividends per
common share............ 1.23 1/2 1.13 1/2 1.03 1/2 0.94 0.86
Results recorded in 1998 include non-recurring costs of $84.1 million pre-
tax ($0.14 per share) related to the implementation of Project Millennia,
offset by the gain on the sale of the Ore-Ida frozen foodservice business,
$96.6 million pretax ($0.14 per share). See Notes 3 and 4 to the Consolidated
Financial Statements beginning on page 43 of the Company's Annual Report to
Shareholders for the fiscal year ended April 29, 1998.
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 43 of the Company's Annual
Report to Shareholders for the fiscal year ended April 29, 1998. 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 14 to
the Consolidated Financial Statements beginning on pages 43 and 55,
respectively, of the Company's Annual Report to Shareholders for the fiscal
year ended April 29, 1998.
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).
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.
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.
Note: In the third quarter of Fiscal 1998, the Company adopted SFAS No. 128,
"Earnings Per Share." Previously reported earnings per share amounts have been
restated, as necessary, to conform to Statement No. 128 requirements. All
earnings per share amounts are presented on a diluted basis unless otherwise
noted. See Notes 1 and 13 to the Consolidated Financial Statements beginning
on pages 39 and 55, respectively, of the Company's Annual Report to
Shareholders for the fiscal year ended April 29, 1998.
7
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 25 through 34 of the Company's Annual Report to Shareholders
for the fiscal year ended April 29, 1998. Such information is incorporated
herein by reference.
Subsequent to the end of fiscal year 1998, on July 6, 1998, the Company
purchased from Nabisco Inc. the College Inn brand of canned broths. This
acquisition did not involve the purchase of any plants or equipment.
Also subsequent to the end of fiscal year 1998, on July 15, 1998, the
Company, under its current shelf registration statement, issued $250 million
of 6.375% debentures due 2028. The proceeds were used to repay domestic
commercial paper.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
This information is set forth in the Management's Discussion and Analysis
section on pages 31 through 33 of the Company's Annual Report to Shareholders
for the fiscal year ended April 29, 1998. 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 29, 1998 and April 30, 1997 and the related Consolidated Statements of
Income, Retained Earnings and Cash Flows for the fiscal years ended April 29,
1998, April 30, 1997 and May 1, 1996 together with the related Notes to
Consolidated Financial Statements, included in the Company's Annual Report to
Shareholders for the fiscal year ended April 29, 1998, 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 8, 1998. 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 8,
1998. 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 caption
"Security Ownership of Management" in the Company's definitive Proxy Statement
in connection with its Annual Meeting of Shareholders to be held September 8,
1998. 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 Agreements" in the Company's definitive Proxy
Statement in connection with its Annual Meeting of Shareholders to be held
September 8, 1998. Such information is incorporated herein by reference.
8
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 29, 1998
are incorporated herein by reference:
Consolidated Balance Sheets as of April 29, 1998 and April 30, 1997
Consolidated Statements of Income for the fiscal years ended April
29, 1998, April 30, 1997 and May 1, 1996
Consolidated Statements of Retained Earnings for the fiscal years
ended April 29, 1998, April 30, 1997, and May 1, 1996
Consolidated Statements of Cash Flows for the fiscal years ended
April 29, 1998, April 30, 1997, and May 1, 1996
Notes to Consolidated Financial Statements
Report of Independent Accountants of PricewaterhouseCoopers LLP
dated June 15, 1998 on the Company's consolidated financial
statements for the fiscal years ended April 29, 1998, April 30, 1997
and May 1, 1996
(2)The following report and schedule is filed herewith as a part hereof:
Report of Independent Accountants of PricewaterhouseCoopers LLP
dated June 15, 1998 on the Company's consolidated financial
statement schedule filed as a part hereof for the fiscal years ended
April 29, 1998, April 30, 1997 and May 1, 1996
Schedule II (Valuation and Qualifying Accounts and Reserves) for the
three fiscal years ended April 29, 1998, April 30, 1997, and May 1,
1996
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 April 30, 1998.
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) The Indenture between the Company and The First National Bank of
Chicago dated as of July 15, 1992 is incorporated herein by
reference to Exhibit 4(a) to the Company's Registration
Statement on Form S-3 (Reg. No. 333-48017) and the supplements
to such Indenture are incorporated herein by reference to the
Company's Form 8-Ks dated October 29, 1992, January 27, 1993,
March 25, 1998 and July 16, 1998 relating to the Company's
$300,000,000 6 3/4% Notes due 1999, $200,000,000 6 7/8% Notes
due 2003, $300,000,000 6% Notes due 2008 and $250,000,000 6.375%
Debentures due 2028, 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
(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, is incorporated herein
by reference to Exhibit 10(c)(i) to the Company's Annual
Report on Form 10-K for the fiscal year ended May 1, 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
(xi) Employment Agreement between H. J. Heinz Company and Daniel
J. O'Neill is incorporated herein by reference to Exhibit 10
to the Company's Quarterly Report on Form 10-Q for the six
months ended October 29, 1997
(xii) Service Agreement between H. J. Heinz Company and Anthony J.
F. O'Reilly is incorporated herein by reference to Exhibit 10
to the Company's Quarterly Report on Form 10-Q for the nine
months ended January 28, 1998
(xiii) H. J. Heinz Company Deferred Compensation Plan for Directors
13. Pages 25 through 57 of the H. J. Heinz Company Annual Report to
Shareholders for the fiscal year ended April 29, 1998, 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 PricewaterhouseCoopers LLP.
24. Powers-of-attorney of the Company's directors.
27. Financial Data Schedule.
10
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) During the last fiscal quarter of the period covered by this Report the
Company filed a Current Report on Form 8-K dated March 25, 1998 relating
its $300,000,000 6% Notes due 2008.
11
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 24, 1998.
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 24, 1998.
Signature Capacity
--------- --------
/s/ William R. Johnson
............................. President and
WILLIAM R. JOHNSON Chief Executive Officer
(Principal Executive Officer)
/s/ Paul F. Renne Executive Vice President and
............................. Chief Financial Officer
PAUL F. RENNE (Principal Financial Officer)
/s/ Edward J. McMenamin Vice President-Corporate Controller
............................. (Principal Accounting Officer)
EDWARD J. MCMENAMIN
Anthony J. F. O'Reilly Director
William R. Johnson Director
Nicholas F. Brady Director
Candace K. Bryan Director
Richard M. Cyert Director
Edith E. Holiday Director
Samuel C. Johnson Director
Donald R. Keough Director /s/ Lawrence J. McCabe
Lawrence J. McCabe Director By............................................
Paul F. Renne Director LAWRENCE J. MCCABE
Herman J. Schmidt Director Director and Attorney-in-Fact
Eleanor B. Sheldon Director
William P. Snyder III Director
William C. Springer Director
S. Donald Wiley Director
David R. Williams Director
12
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 29, 1998 and appears on page 57 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.
PricewaterhouseCoopers LLP
Pittsburgh, PA
June 15, 1998
---------------
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Registration Statements
of H. J. Heinz Company on Form S-3 (Registration No. 333-48017) and Form S-8
(Registration Nos. 2-51719, 2-45120, 33-00390, 33-19639, 33-32563, 33-42015,
33-55777, 33-62623, 333-13849) of our reports dated June 15, 1998 on our
audits of the consolidated financial statements and financial statement
schedule of H. J. Heinz Company and Subsidiaries as of April 29, 1998 and
April 30, 1997 and for the fiscal years ended April 29, 1998, April 30, 1997
and May 1, 1996 which reports are included or incorporated by reference in
this Annual Report on Form 10-K.
PricewaterhouseCoopers LLP
Pittsburgh, PA
July 24, 1998
13
SCHEDULE II
H. J. HEINZ COMPANY AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FISCAL YEARS ENDED APRIL 29, 1998, APRIL 30, 1997 AND MAY 1, 1996
(THOUSANDS OF DOLLARS)
Additions
-------------------
Balance at Charged to Charged Balance at
beginning costs and to other end of
Description of period expenses accounts Deductions period
----------- ---------- ---------- -------- ---------- ----------
Fiscal year ended April
29, 1998:
Reserves deducted in
the balance sheet
from
the assets to which
they apply:
Receivables......... $ 18,934 $ 4,934 $ -- $ 6,241(1) $ 17,627
======== ======= ====== ======= ========
Investments,
advances and other
assets.............. $ 4,767 $ -- $ -- $ 2,375 $ 2,392
======== ======= ====== ======= ========
Goodwill............ $259,019 $51,890 $ -- $13,041(1) $297,868
======== ======= ====== ======= ========
Trademarks.......... $ 57,186 $13,857 $ -- $ 3,252 $ 67,791
======== ======= ====== ======= ========
Other intangibles... $106,046 $14,788 $ -- $ 8,066(1) $112,768
======== ======= ====== ======= ========
Deferred tax assets
(2)................. $ 5,459 $16,755 $ -- $ 1,222 $ 20,992
======== ======= ====== ======= ========
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
======== ======= ====== ======= ========
Trademarks.......... $ 49,093 $12,102 $ -- $ 4,009 $ 57,186
======== ======= ====== ======= ========
Other intangibles... $ 92,793 $16,973 $ -- $ 3,720(1) $106,046
======== ======= ====== ======= ========
Deferred tax assets
(3)................. $ 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
======== ======= ====== ======= ========
Trademarks.......... $ 34,712 $13,983 $ -- $ (398) $ 49,093
======== ======= ====== ======= ========
Other intangibles... $ 82,718 $16,536 $ -- $ 6,461(1) $ 92,793
======== ======= ====== ======= ========
Deferred tax assets
(4)................. $ 49,487 $ 3,195 $ -- $17,088 $ 35,594
======== ======= ====== ======= ========
Notes:
(1) Principally reserves on assets sold, written-off or reclassified.
(2) The net change in the valuation allowance for deferred tax assets was an
increase of $15.5 million. The increase was due to increases in the
valuation allowance related to additional deferred tax assets for foreign
tax credit carryforwards ($9.5 million) and loss carryforwards ($7.2
million). The increase was partially offset by a decrease in the valuation
allowance related to the utilization of loss carryforwards ($1.2 million).
See Note 5 to the Consolidated Financial Statements on pages 44 and 45 of
the Company's Annual Report to Shareholders for the fiscal year ended
April 29, 1998.
(3) 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 44 and 45 of the Company's Annual Report to
Shareholders for the fiscal year ended April 29, 1998.
(4) 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 44 and 45 of the Company's
Annual Report to Shareholders for the fiscal year ended April 29, 1998.
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 April 30, 1998.
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) The Indenture between the Company and The First National Bank of
Chicago dated as of July 15, 1992 is incorporated herein by
reference to Exhibit 4(a) to the Company's Registration
Statement on Form S-3 (Reg. No. 333-48017) and the supplements
to such Indenture are incorporated herein by reference to the
Company's Form 8-Ks dated October 29, 1992, January 27, 1993,
March 25, 1998 and July 16, 1998 relating to the Company's
$300,000,000 6 3/4% Notes due 1999, $200,000,000 6 7/8% Notes
due 2003, $300,000,000 6% Notes due 2008 and $250,000,000 6.375%
Debentures due 2028, 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, is incorporated herein
by reference to Exhibit 10(c)(i) to the Company's Annual
Report on Form 10-K for the fiscal year ended May 1, 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
EXHIBIT
(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
(xi) Employment Agreement between H. J. Heinz Company and Daniel
J. O'Neill is incorporated herein by reference to Exhibit 10
to the Company's Quarterly Report on Form 10-Q for the six
months ended October 29, 1997
(xii) Service Agreement between H. J. Heinz Company and Anthony J.
F. O'Reilly is incorporated herein by reference to Exhibit 10
to the Company's Quarterly Report on Form 10-Q for the nine
months ended January 28, 1998
(xiii) H. J. Heinz Company Deferred Compensation Plan for Directors
13. Pages 25 through 57 of the H. J. Heinz Company Annual Report to
Shareholders for the fiscal year ended April 29, 1998, 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 PricewaterhouseCoopers LLP.
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.