PITTSBURGH, Dec. 5, 2000 /PRNewswire/ -- H. J. Heinz Company (NYSE: HNZ)
today reported second quarter core diluted earnings per share increased 9.5%
to $0.69 from $0.63 last year. (Note: Core earnings exclude special items
and the divested Weight Watchers classroom business noted in the attached
table.) Reported earnings per share for the second quarter were $0.54
compared to $1.14 last year, which included a gain on the sale of Weight
Watchers classroom business.
"Our businesses are performing well as evidenced by sales growth of 6.4%
for the quarter on a constant currency basis," said William R. Johnson,
Chairman, President and Chief Executive Officer. "Heinz has a strong consumer
focus and a commitment to innovation that is generating break-through product
and packaging ideas around the world. These include Heinz EZ Squirt kids
ketchup, StarKist pouch tuna, Boston Market HomeStyle Meals, microwaveable
meals in Europe and a myriad of new foodservice products like the Forever Full
ketchup bottle. Additionally, the success of Project Millennia and Operation
Excel have driven core operating margins from 14.1% in Fiscal 1996 to 18.2% in
Fiscal 2000 and to 20.2% through the first six months of Fiscal 2001. This
gives us confidence in our ability to generate continued growth, performance
and, above all, shareholder value."
Mr. Johnson will be addressing security analysts in New York this morning
to review the second quarter results and is expected to focus his comments
primarily on the concept of "food solutions." The majority of Heinz
businesses are oriented around the customer- or consumer-identified groupings
of "Flavor/Taste Solutions," "Foodservice Solutions" and "Meal and Snack
Solutions." These businesses are growing at rates two or three times the food
average. Ketchup, condiments and sauces -- or Flavor/Taste Solutions -- have
grown at a compound annual growth rate (CAGR) of 7% in the two years since
fiscal 1998. In the same period, Heinz's outstanding Foodservice Solutions
business, now representing 17% of Heinz sales, has grown at nearly 10% CAGR
and Meal and Snack Solutions business (frozen and shelf-stable) has grown at a
5% CAGR and is expected to accelerate to double-digit rates this year. Heinz
anticipates that its current investment in new product development will enable
these businesses to stay on trend and capture an even greater proportion of
consumer disposable income.
Sales for the second quarter increased 6.4% on a constant currency basis
and 1.4% after the impact of foreign currency, each excluding the impact of
the Weight Watchers classroom business. Reported sales for the quarter
decreased to $2.30 billion from $2.34 billion last year, as increased volume
(1.0%) and acquisitions (6.6%) were offset by the impact of unfavorable
foreign exchange translation rates (5.0%), divestitures (4.2%) and lower
pricing (0.4%).
On a constant currency basis, core operating income increased 17.0%.
Including the adverse impact of currency, core operating income for the second
quarter increased 9.9% to $459.5 million from $418.0 million last year.
Reported operating income for the second quarter was $382.4 million compared
to $791.2 million last year, which included a $464.6 million gain on the sale
of Weight Watchers classroom business.
Core net income increased 5.8% to $241.7 million from $228.4 million last
year and reported net income was $190.0 million compared to $415.5 million
last year.
The effective tax rate on core earnings for the second quarter was 35.0%
compared to 34.8% last year.
Heinz also reported:
-- The core Gross Profit margin in the quarter improved to 41.8% from
39.9% last year.
-- The core operating income margin increased to 20.0% from 18.5% last
year.
-- Heinz's core EPS target for Fiscal 2001 is tracking against analysts'
consensus based on recent foreign exchange rates. (Note: This
anticipated strong performance is after the recognition of an
anticipated $0.17 cost to EPS because of foreign exchange, $0.08 of
which was in the first half of the fiscal year and an estimated $0.09
in the second half based on recent spot rates. Furthermore, these
lower foreign exchange rates are estimated to cost the company
$460 million in lower sales for the full year.)
SECOND QUARTER HIGHLIGHTS
North American Frozen
Second quarter sales increased 13.1%, driven by strong volume increases of
9.2% due primarily to Boston Market HomeStyle Meals and Smart Ones frozen
entrees. Core operating income for this segment increased 28.1% and reported
operating income was $59.6 million compared to $42.6 million last year.
"We are pleased with the performance of our new Boston Market HomeStyle
Meals line, which is on course to become a $100 million brand in its first
full year of national distribution," Mr. Johnson said. "Smart Ones frozen
entrees also continues its rapid growth behind the launch of the Main Street
Bistro bowls this past summer."
North American Grocery and Foodservice
Second quarter sales increased 1.0%, but showed a 10% increase excluding
pet food and tuna. There were particularly strong performances by ketchup,
condiments and sauces (+13%) and the new Heinz EZ Squirt kids ketchup is
expected to reach its annual sales forecast in just 90 days. Heinz
Foodservice had another excellent quarter, expanding its range of customized
recipes for restaurants and innovative packaging for sauces and jellies. Tuna
continues to experience record low prices of raw tuna, which are impacting
performance. Heinz is shifting to the higher-margin, value-added StarKist
pouch, which is enjoying a successful national launch. Core operating income
for this segment increased 7.7% and reported operating income was
$191.6 million compared to $181.1 million last year.
Europe
Second quarter sales increased 16.4% on a constant currency basis or 2.9%
after the impact of currency. Heinz is expanding its number-one soup business
(56% market share) in the U.K. with the launch of Fridge Door soup. Heinz
Microwaveable Meal Bowls are also being launched for the fast-growing "on-the-
go" market. Core operating income increased 18.8% on a constant currency
basis and 1.7% after adjusting for currency. Reported operating income was
$107.2 million compared to $105.0 million last year.
"Our market shares across Europe are strong and growing, and we are
strengthening our businesses in the U.K. with innovative products and
packaging like Fridge Door soup and microwaveable soups and meals," said
Heinz's Chairman.
Asia/Pacific
Asia/Pacific remains a significant growth opportunity for Heinz, with
strong performances in Indonesia and China. While cost savings associated
with Excel supply chain initiatives continue to drive profits, Australia and
New Zealand sales have been adversely impacted in the current period by
foreign exchange and by Excel-related organizational changes which are
expected to produce future efficiency and marketing advantages.
Second quarter sales decreased by 11.3%, due primarily to unfavorable
exchange rates. Core operating income decreased 3.4%, but increased 17.2% on
a constant currency basis. Reported operating income was $22.7 million
compared to $29.0 million last year.
INTERNET BROADCAST
As announced last week, today's analyst meeting will be broadcast live
over the Internet at Heinz's web site, http://www.heinz.com. The live Webcast will
begin at 8:30 a.m. EST and will be archived for playback beginning at
2:00 p.m.
SECOND QUARTER SPECIAL ITEMS
The second quarter results include net Operation Excel costs of
$77.1 million pre-tax, or $0.14 per share. (Note: All earnings per share
amounts are presented on an after-tax diluted basis.) These net Operation
Excel costs include implementation costs, and restructuring charges associated
with exiting the company's domestic can-making operations and exiting a tuna
processing facility in Ecuador, partially offset by the reversal of unutilized
Operation Excel accruals and asset write-downs. Also included in the second
quarter results is a pre-tax loss of $5.6 million ($0.01 per share) which
represents the company's equity loss associated with The Hain Celestial
Group's fourth quarter results which included charges for its merger with
Celestial Seasonings.
The following tables provide a comparison of the company's reported
results and the core results for the second quarters of Fiscal 2001 and Fiscal
2000.
(Dollars in millions Second Quarter Ended November 1, 2000
except per share amounts) ------------------------------------------
Operating
Income Net Income Per Share
---------- ----------- ----------
Reported results $382.4 $190.0 $0.54
Operation Excel Costs 77.1 48.1 0.14
Equity Loss on Investment in
The Hain Celestial Group - 3.5 0.01
---------- ----------- ----------
Core results $459.5 $241.7 $0.69
========== ========== ==========
Second Quarter Ended October 27, 1999
------------------------------------------
Operating
Income Net Income Per Share
---------- ----------- ----------
Reported results $791.2 $415.5 $1.14
Operation Excel Costs 77.1 60.1 0.17
Foundation Contribution 30.0 18.9 0.05
Gain on Sale of Weight
Watchers Classroom Business (464.6) (259.7) (0.72)
Impact of Weight Watchers
Classroom Business (15.6) (6.4) (0.02)
---------- ----------- ----------
Core results $418.0 $228.4 $0.63
========== ========== ==========
(Note: Totals may not add due to rounding.)
SIX-MONTH RESULTS
Excluding the impact of the Weight Watchers classroom business, sales for
the six months increased 2.3%, or 6.3% on a constant currency basis. Reported
sales for the six months decreased 1.7% to $4.45 billion from $4.53 billion
last year, as increased volume (1.5%) and acquisitions (6.5%), were offset by
the impact of unfavorable foreign exchange translation rates (4.0%),
divestitures (4.9%) and lower pricing (0.8%).
Core diluted earnings per share for the six months increased 9.6% to $1.37
from $1.25 last year, and core net income increased 6.0% to $479.4 million
from $452.2 million last year. Reported earnings per share was $1.11 compared
to $1.71 last year (which included a gain on the sale of the Weight Watchers
classroom business), and reported net income was $390.7 million compared to
$622.2 million last year.
The following tables provide a comparison of the company's reported
results and the core results for the first six months of Fiscal 2001 and
Fiscal 2000.
(Dollars in millions Six Months Ended November 1, 2000
except per share amounts) ------------------------------------------
Operating
Income Net Income Per Share
---------- ----------- ----------
Reported results $765.0 $390.7 $1.11
Operation Excel Costs 133.5 85.3 0.24
Equity Loss on Investment in
The Hain Celestial Group - 3.5 0.01
---------- ----------- ----------
Core results $898.5 $479.4 $1.37
========== ========== ==========
Six Months Ended October 27, 1999
------------------------------------------
Operating
Income Net Income Per Share
---------- ----------- ----------
Reported results $1,172.2 $622.2 $1.71
Operation Excel Costs 111.7 82.2 0.23
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)
Impact of Weight Watchers
Classroom Business (44.7) (19.6) (0.05)
---------- ----------- ----------
Core results $824.5 $452.2 $1.25
========== ========== ==========
(Note: Totals may not add due to rounding.)
Core operating income for the six months increased 9.0% to $898.5 million
from $824.5 million last year. Reported operating income was $765.0 million
compared to $1.17 billion last year.
The effective tax rate on core earnings for the six months was 35.0%
compared to 34.8% last year.
OPERATION EXCEL
Operation Excel, the company's restructuring program, continues to deliver
on its savings and efficiency goals. The company estimates that total costs
related to Operation Excel will amount to approximately $1.2 billion, an
increase from the original estimate of $1.1 billion. This increase is
attributable to additional projects and implementation costs including exiting
the company's domestic can-making operations, exiting a tuna processing
facility in Ecuador, and additional valuable initiatives throughout the globe.
These new projects are expected to deliver business simplifications and
improvements in the company's capital structure.
"Operation Excel is a highly successful program that is driving
efficiencies and productivity while also helping to underwrite a number of
important growth initiatives," Mr. Johnson said.
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 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, tuna prices, achieving cost savings and working capital
and debt reduction programs, success of acquisitions and new product and
packaging innovations, including the innovations referenced above and other
factors described in "Cautionary Statement Relevant to Forward-Looking
Information" in the company's Form 10-K for the fiscal year ended May 3, 2000,
as updated from time to time by the company in its subsequent filings with the
Securities and Exchange Commission.
ABOUT HEINZ: With sales over US$9 billion, H. J. Heinz Company is one of
the world's leading marketers of branded foods to consumers everywhere,
whether in supermarkets, restaurants or on the go. Its 50 companies operate
in some 200 countries, with more than 20 power brands, including the Heinz
brand with nearly $3 billion in annual sales. Among the company's famous
brands are Heinz, StarKist, Ore-Ida, 9-Lives, Weight Watchers, Wattie's,
Plasmon, Boston Market, Farley's, Smart Ones, The Budget Gourmet, Linda
McCartney, Bagel Bites, John West, Petit Navire, Kibbles 'n Bits, Pounce,
Pup-Peroni, Orlando, ABC, Olivine, Juran and Pudliszki. Information on Heinz
is available at http://www.heinz.com.
H. J. Heinz Company and Subsidiaries
Consolidated Statements of Income
(In Thousands, Except per Share Amounts)
Second Quarter Ended Six Months Ended
------------------------- ------------------------
November 1, October 27, November 1, October 27,
2000 1999 2000 1999
FY2001 FY2000 FY2001 FY2000
---------- ---------- ---------- ----------
Sales $2,296,478 $2,344,084 $4,449,970 $4,525,091
Cost of
products sold 1,383,126 1,431,644 2,644,464 2,755,901
---------- ---------- ---------- ----------
Gross profit 913,352 912,440 1,805,506 1,769,190
Selling, general and
administrative
expenses 530,965 585,850 1,040,461 1,061,627
Gain on sale of
Weight Watchers - 464,617 - 464,617
---------- ---------- ---------- ----------
Operating income 382,387 791,207 765,045 1,172,180
Interest income 5,658 2,884 11,299 8,169
Interest expense 82,061 64,191 163,120 126,783
Other expenses, net 16,878 11,074 14,713 6,701
---------- ---------- ---------- ----------
Income before income
taxes 289,106 718,826 598,511 1,046,865
Provision for income
taxes 99,073 303,328 207,851 424,699
---------- ---------- ---------- ----------
Net income $190,033 $415,498 $390,660 $622,166
========== ========== ========== ==========
Net income per share
- diluted $0.54 $1.14 $1.11 $1.71
========== ========== ========== ==========
Average common shares
outstanding -
diluted 350,575 363,113 350,575 363,113
========== ========== ========== ==========
Net income per share
- basic $0.55 $1.16 $1.13 $1.74
========== ========== ========== ==========
Average common shares
outstanding -
basic 347,218 357,866 347,218 357,866
========== ========== ========== ==========
Cash dividends
per share $0.3925 $0.3675 $0.76 $0.71
========== ========== ========== ==========
Note: Both Fiscal 2001 and Fiscal 2000 include restructuring related
items and other non-recurring items.
H. J. Heinz Company and Subsidiaries
Segment Data
(In Thousands)
Second Quarter Ended Six Months Ended
------------------------- ------------------------
November 1, October 27, November 1, October 27,
2000 1999 2000 1999
FY2001 FY2000 FY2001 FY2000
---------- ---------- ---------- ----------
Net external sales:
North American
Grocery &
Foodservice $1,039,331 $1,028,657 $1,971,908 $1,994,780
North American
Frozen 288,596 255,097 515,786 467,509
Europe 623,211 605,921 1,262,138 1,157,430
Asia/Pacific 261,724 295,024 534,297 580,853
Other Operating
Entities 83,616 159,385 165,841 324,519
---------- ---------- ---------- ----------
Consolidated
Totals $2,296,478 $2,344,084 $4,449,970 $4,525,091
========== ========== ========== ==========
Operating income (loss):
North American
Grocery &
Foodservice $191,575 $181,055 $394,851 $367,945
North American
Frozen 59,640 42,629 96,988 76,014
Europe 107,244 105,026 225,149 212,367
Asia/Pacific 22,713 29,001 59,050 64,932
Other Operating
Entities 18,920 487,468 29,984 524,407
Non-Operating (17,705) (53,972) (40,977) (73,485)
---------- ---------- ---------- ----------
Consolidated Totals $382,387 $791,207 $765,045 $1,172,180
========== ========== ========== ==========
Core operating income (loss):
North American
Grocery &
Foodservice $239,064 $221,979 $465,339 $438,771
North American
Frozen 62,905 49,116 105,727 91,800
Europe 124,368 122,315 263,119 241,409
Asia/Pacific 39,987 41,379 82,388 81,003
Other Operating
Entities 7,857 7,232 18,921 15,041
Non-Operating (14,684) (23,972) (36,981) (43,485)
---------- ---------- ---------- ----------
Consolidated Totals $459,497 $418,049 $898,513 $824,539
========== ========== ========== ==========
Core operating income (loss) excludes special items and the impact of the
Weight Watchers classroom business.
The company's revenues are generated via the sale of products in the
following categories:
Second Quarter Ended Six Months Ended
------------------------- ------------------------
November 1, October 27, November 1, October 27,
2000 1999 2000 1999
FY2001 FY2000 FY2001 FY2000
---------- ---------- ---------- ----------
Ketchup, Condiments
and Sauces $632,673 $580,557 $1,225,588 $1,192,169
Frozen Foods 490,998 357,974 910,743 659,054
Tuna 234,813 262,523 492,622 534,141
Soups, Beans and
Pasta Meals 316,072 312,663 559,532 546,430
Infant Foods 209,394 241,379 432,478 472,780
Pet Products 287,534 309,536 564,150 603,873
Other 124,994 279,452 264,857 516,644
---------- ---------- ---------- ----------
Total $2,296,478 $2,344,084 $4,449,970 $4,525,091
========== ========== ========== ==========
SOURCE H. J. Heinz Company
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Related links:
http://www.heinz.com
Company News On-Call:
http://www.prnewswire.com/comp/575757.html or fax,
800-758-5804, ext. 575757
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
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