Exhibit 99.1
Heinz Second Quarter EPS Rises 20% to $0.71, Sales Increase 13%
Second Quarter Highlights
-- 13% sales growth to $2.5 billion.
-- 8% organic sales growth (excluding the impact of foreign
exchange, acquisitions and divestitures).
-- 10% operating income growth, despite the impact of significant
commodity cost inflation increases and a 23% increase in
consumer marketing.
-- 15% net income growth to $227 million benefiting from the
strong increase in operating profit and a lower tax rate for
the quarter.
-- Raises the top end of its FY08 EPS range to $2.62.
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PITTSBURGH--(BUSINESS WIRE)--Nov. 29, 2007--H. J. Heinz Company
(NYSE:HNZ) today reported strong double-digit growth in second-quarter
sales, operating profit and earnings per share and announced that it
is on track to achieve record full-year sales in Fiscal 2008.
Second-quarter results were fueled by the Company's focus on
innovation, accelerated growth in Europe and emerging markets, and a
26% increase in infant nutrition sales. Heinz spent 23% more on
marketing in support of the Company's consumer-driven innovation
initiatives. As a result of its momentum, Heinz today raised the top
end of its Fiscal 2008 range to $2.62 per share.
"Heinz is connecting well with consumers across the world through
creative marketing and a full pipeline of innovation. This has
contributed to our strong momentum, including the excellent sales and
profit performance in the second quarter and our improved outlook for
Fiscal 2008," said Heinz Chairman, President and CEO William R.
Johnson.
Mr. Johnson continued, "Based on our momentum, we expect to
achieve Fiscal 2008 earnings per share growth of approximately 9-10%,
while incrementally investing in marketing, global processes and
systems, and managing continuing commodity inflation. Heinz is driving
strong operating income and is managing commodity inflation with
faster sales growth, strong net pricing, productivity gains, and
currency tailwinds resulting from our unique international scale."
In the second quarter, Heinz sales increased 13.0% to $2.52
billion, from $2.23 billion a year ago. Organic sales, which exclude
the impact of foreign currency exchange rates and
acquisitions/divestitures, grew 8.1%. Second-quarter net income rose
15% to $227 million or 71 cents per share, compared with income from
continuing operations of $197 million, or 59 cents per share, a year
ago.
Operating income in the second quarter rose 9.9% to $421 million
despite the incremental marketing investments and the impact of higher
commodity costs affecting the entire food industry. The strong growth
in operating income reflected broad-based profit growth in Europe,
Asia/Pacific, and North American Consumer Products, driven by strong
volume, net price gains, the success of productivity initiatives and
Heinz's increased investments in marketing and R&D to drive innovation
and growth, especially in its top 15 brands.
Second Quarter Highlights
-- Sales of the Company's top 15 brands grew 14%.
-- Core categories -- Heinz's consumer-validated innovation and
marketing produced compelling sales growth in each of its core
categories in the quarter. Ketchup and Sauces grew 9%, Meals
and Snacks increased 14%, and Infant Nutrition posted an
impressive increase in sales of 26%.
-- Ketchup & Sauces -- Global ketchup sales were up 5% driven by
strong performance in Europe. In the U.K., Heinz(R) Ketchup
achieved its highest household penetration in over three years
as new varieties such as Reduced Sugar & Salt, Organic Top
Down, and Tomato Ketchup with a Twist brought new consumers
into the category.
-- Meals & Snacks -- Globally, soup sales increased 18% and beans
rose 13%. Sales of Heinz soups in the U.K. rose 23.4% and
achieved record value share following the launch of the new
Taste of Home, Farmers' Market, and Soups of the World ranges.
-- Infant Nutrition -- Sales of Plasmon, Italy's leading brand of
infant nutrition products, rose 18.9%, reflecting increased
innovation, higher volume on existing products, and increased
net pricing.
-- Emerging Markets -- Heinz's emerging markets continued to
excel, with sales up 24% in the quarter driven by new products
and packaging improvements. In China, sales of Long Fong
frozen dumplings, rice balls, appetizers, and hot pot soups
increased more than 25%, and sales of Heinz infant nutrition
products in China increased more than 40% following the
successful relaunch of both Heinz infant cereals and jars.
Heinz managed commodity inflation with strong growth, price
increases averaging 2.6% and continued productivity gains. Favorable
foreign exchange offset a small portion of commodity cost increases in
the quarter.
The tax rate for the quarter was 29.8% versus a rate of 34.8% in
the prior year. Heinz expects its full-year tax rate to be around 31%,
compared to last year's full year rate of 29.6%.
SECOND-QUARTER SEGMENT HIGHLIGHTS
NORTH AMERICAN CONSUMER PRODUCTS
Sales of the North American Consumer Products segment increased
12.6%, with organic sales up 9.7%. Volume increased an impressive
6.7%, driven primarily by Smart Ones(R) frozen entrees and desserts,
Boston Market(R) frozen entrees and Classico(R) pasta sauces. Net
price increases on Ore-Ida(R) frozen potatoes, along with reduced
promotions on Classico(R) pasta sauces, resulted in overall price
gains of 3.0%. The prior year acquisition of Renee's Gourmet Foods
increased sales 0.9% and favorable Canadian exchange translation rates
increased sales 1.9%.
Heinz will continue to deliver against its commitment to Health &
Wellness with the December 3 launch of Smart Ones Fruit
Inspirations(TM), the first line of frozen meals to contain a
half-serving of fruit.
Operating income increased almost 7%, due to volume and pricing
increases, which were partially offset by continued increases in
commodity costs.
EUROPE
Heinz Europe posted very strong results in the quarter as sales
increased 18.0%, with organic sales growth of 10.4%. Volume increased
9.1%, principally due to excellent performance on Heinz(R) ketchup,
soup, beans and salad cream, Italian infant nutrition, and
Pudliszki(R) branded products in Poland. Net pricing increased sales
1.3%. Divestitures reduced sales 1.6%, while favorable exchange
translation rates increased sales by 9.2%.
Operating income increased 14.8%, driven largely by increased
volume and price along with favorable foreign exchange rates. These
increases were partially offset by increased commodity costs and
incremental marketing investments.
ASIA/PACIFIC
Heinz Asia/Pacific also generated very strong results in the
quarter as sales increased 16.8%. Organic sales growth was 6.1%
reflecting strong results in India, China and Australia, related
primarily to new product introductions. Volume rose 3.5% behind
increased marketing to support new products. Pricing increased sales
2.6% and acquisitions, net of divestitures, increased sales 2.2%,
primarily due to the first quarter acquisition of the Cottee's(R) and
Rose's(R) premium branded jams, jellies and toppings business in
Australia and New Zealand. Favorable exchange translation rates
increased sales by 8.4%.
Operating income increased 21.8%, due to increased volume and
pricing, favorable sales mix and favorable foreign exchange
translation rates, partially offset by increased commodity costs and
marketing expense.
U.S. FOODSERVICE
Sales of the U.S. Foodservice segment increased slightly behind a
2.1% improvement in net price largely related to commodity driven
price increases and reduced promotional spending on Heinz Ketchup,
tomato products and frozen soup. Volume decreased 1.7% reflecting
decreases in tomato products and frozen appetizers, partially offset
by increases in frozen desserts. Divestitures reduced sales 0.3%.
Operating income decreased 13.5%, as U.S. Foodservice was
disproportionately hit by rising commodity costs, particularly dairy
and oil. This performance is factored into the Company's outlook for
the full year.
REST OF WORLD
Sales for Rest of World increased 21.7% due to organic sales
growth of 20.5%. Volume was up 6.7% due primarily to strong
performances in the emerging markets, led by infant nutrition sales in
Latin America. Higher pricing increased sales by 13.8%, due primarily
to price increases and reduced promotions in Latin America. Favorable
foreign exchange translation rates increased sales 1.3%. These strong
commercial gains drove an increase in operating income of 23.4%.
YEAR-TO-DATE HIGHLIGHTS
Sales for the six months ended October 31, 2007 increased 11.2%,
well above the long-term target growth rate of 4%. Organic sales
increased 6.7%, with organic growth generated in all five business
segments. Volume increased 4.0%, reflecting strong volume growth of
5.9% in Europe and sustained growth in North American Consumer
Products, Australia, New Zealand, and the emerging markets. Net
pricing increased sales by 2.7%, mainly in North America, as well as
Heinz's businesses in the U.K. and Latin America. Divestitures, net of
acquisitions, decreased sales by 0.3%. Foreign exchange translation
rates increased sales by 4.8%.
Operating income increased 12.1%, as strong volume, net price
increases, and productivity improvements, were partially offset by
continued increased commodity costs. For the first half of the year,
SG&A excluding marketing is favorable by 110 basis points as a
percentage of sales. On a year-to-date basis, the tax rate is
consistent with last year at 28.3%. Income from continuing operations
was $432 million compared to $392 million in the prior year, an
increase of 10.4%. Diluted earnings per share from continuing
operations was $1.34 in the current year compared to $1.17 in the
prior year, up 14.5%, which also benefited from a 3.3% reduction in
fully diluted shares outstanding. Net income was $432 million compared
to $386 million, an increase of 12.1%.
MEETING WITH SECURITIES ANALYSTS - INTERNET BROADCASTS
Heinz will host an investor and analyst call today at 8:30 a.m.
(Eastern Time). The call will be webcast live on www.heinz.com and
will be archived for playback. The call is available live for Media
(listen only) at 800-955-1760. Slides are now available for this call
on www.heinz.com.
The conference call will be hosted by William R. Johnson -
Chairman, President and Chief Executive Officer; Art Winkleblack -
Executive Vice President and Chief Financial Officer; Ed McMenamin,
Senior Vice President - Finance and Corporate Controller; and Margaret
Nollen - Vice President, Investor Relations.
SAFE HARBOR PROVISIONS FOR FORWARD-LOOKING STATEMENTS:
This press release contains forward-looking statements within the
meaning of the "safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995. Forward-looking statements are
generally identified by the words "will," "expects," "anticipates,"
"believes," "estimates" or similar expressions and include our
expectations as to future revenue growth, earnings, capital
expenditures and other spending, as well as anticipated reductions in
spending. These forward-looking statements reflect management's view
of future events and financial performance. These statements are
subject to risks, uncertainties, assumptions and other important
factors, many of which may be beyond Heinz's control, and could cause
actual results to differ materially from those expressed or implied in
these forward-looking statements. Factors that could cause actual
results to differ from such statements include, but are not limited
to:
-- sales, earnings, and volume growth,
-- general economic, political, and industry conditions,
-- competitive conditions, which affect, among other things,
customer preferences and the pricing of products, production,
and energy costs,
-- increases in the cost and restrictions on the availability of
raw materials, including agricultural commodities and
packaging materials, the ability to increase product prices in
response, and the impact on profitability,
-- the ability to identify and anticipate and respond through
innovation to consumer trends,
-- the need for product recalls,
-- the ability to maintain favorable supplier relationships,
-- currency valuations and interest rate fluctuations,
-- changes in credit ratings and economic conditions and the
impact of these factors on the cost of borrowing and access to
capital markets,
-- the ability to identify and complete and the timing, pricing,
and success of acquisitions, joint ventures, divestitures, and
other strategic initiatives,
-- approval of acquisitions and divestitures by competition
authorities and satisfaction of other legal requirements,
-- the ability to successfully complete cost reduction programs
and increase productivity,
-- the ability to effectively integrate acquired businesses, new
product and packaging innovations,
-- product mix,
-- the effectiveness of advertising, marketing, and promotional
programs,
-- supply chain efficiency,
-- cash flow initiatives,
-- risks inherent in litigation, including tax litigation, and
international operations, particularly the performance of
business in hyperinflationary environments,
-- changes in estimates in critical accounting judgments and
changes in laws and regulations, including tax laws,
-- the success of tax planning strategies,
-- the possibility of increased pension expense and contributions
and other people-related costs,
-- the potential adverse impact of natural disasters, such as
flooding and crop failures,
-- the ability to implement new information systems, and
-- other factors described in "Risk Factors" and "Cautionary
Statement Relevant to Forward-Looking Information" in the
Company's Form 10-K for the fiscal year ended May 2, 2007.
The forward-looking statements are and will be based on
management's then current views and assumptions regarding future
events and speak only as of their dates. The Company undertakes no
obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or
otherwise, except as required by the securities laws.
ABOUT HEINZ: H. J. Heinz Company, offering "Good Food Every
Day"(TM) is one of the world's leading marketers and producers of
healthy and convenient foods specializing in ketchup, sauces, meals,
soups, snacks and infant nutrition. Heinz provides superior quality,
taste and nutrition for all eating occasions whether in the home,
restaurants, the office or "on-the-go." Heinz is a global family of
leading branded products, including Heinz(R) ketchup, sauces, soups,
beans, pasta and infant foods (representing over one third of Heinz's
total sales), Ore-Ida(R) potato products, Weight Watchers(R) Smart
Ones(R) entrees, Boston Market(R) meals, T.G.I. Friday's(R) snacks,
and Plasmon infant nutrition. Heinz is famous for its iconic brands on
five continents, showcased by Heinz(R) ketchup, The World's Favorite
Ketchup(R). Information on Heinz is available at 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
----------------------- -----------------------
October 31, November 1, October 31, November 1,
2007 2006 2007 2006
FY2008 FY2007 FY2008 FY2007
----------- ----------- ----------- -----------
Sales $2,523,379 $2,232,225 $4,771,664 $4,292,145
Cost of products sold 1,591,577 1,385,627 3,001,462 2,673,130
----------- ----------- ----------- -----------
Gross profit 931,802 846,598 1,770,202 1,619,015
Selling, general and
administrative
expenses 510,806 463,613 982,552 916,388
----------- ----------- ----------- -----------
Operating income 420,996 382,985 787,650 702,627
Interest income 10,482 7,103 23,363 14,395
Interest expense 97,482 80,172 188,712 155,798
Other expense, net (10,778) (7,106) (19,368) (14,817)
----------- ----------- ----------- -----------
Income from continuing
operations before
income taxes 323,218 302,810 602,933 546,407
Provision for income
taxes 96,181 105,379 170,602 154,875
----------- ----------- ----------- -----------
Income from continuing
operations 227,037 197,431 432,331 391,532
Loss from discontinued
operations, net of
tax - (5,856) - (5,856)
----------- ----------- ----------- -----------
Net income $ 227,037 $ 191,575 $ 432,331 $ 385,676
=========== =========== =========== ===========
Income/(loss) per
common share -
Diluted
Continuing
operations $ 0.71 $ 0.59 $ 1.34 $ 1.17
Discontinued
operations - (0.02) - (0.02)
----------- ----------- ----------- -----------
Net Income $ 0.71 $ 0.57 $ 1.34 $ 1.15
=========== =========== =========== ===========
Average common shares
outstanding - diluted 321,903 334,617 323,790 334,767
=========== =========== =========== ===========
Income/(loss) per
common share - Basic
Continuing
operations $ 0.72 $ 0.60 $ 1.36 $ 1.18
Discontinued
operations - (0.02) - (0.02)
----------- ----------- ----------- -----------
Net Income $ 0.72 $ 0.58 $ 1.36 $ 1.16
=========== =========== =========== ===========
Average common shares
outstanding - basic 317,073 330,670 319,069 331,077
=========== =========== =========== ===========
Cash dividends per
share $ 0.38 $ 0.35 $ 0.76 $ 0.70
=========== =========== =========== ===========
(Totals may not add due to rounding)
H. J. Heinz Company and Subsidiaries
Segment Data
Second Quarter Ended Six Months Ended
----------------------- -----------------------
October 31, November 1, October 31, November 1,
2007 2006 2007 2006
FY2008 FY2007 FY2008 FY2007
----------- ----------- ----------- -----------
Net external sales:
North American
Consumer Products $ 756,233 $ 671,644 $1,420,905 $1,287,221
Europe 872,446 739,428 1,638,463 1,425,290
Asia/Pacific 395,846 338,999 767,191 654,845
U.S. Foodservice 406,441 406,222 770,109 772,835
Rest of World 92,413 75,932 174,996 151,954
----------- ----------- ----------- -----------
Consolidated Totals $2,523,379 $2,232,225 $4,771,664 $4,292,145
=========== =========== =========== ===========
Operating income (loss):
North American
Consumer Products $ 177,471 $ 165,965 $ 329,881 $ 309,179
Europe 159,987 139,386 298,382 258,735
Asia/Pacific 55,755 45,761 107,006 79,929
U.S. Foodservice 51,494 59,537 95,043 114,593
Rest of World 12,809 10,384 22,960 19,102
Non-Operating (36,520) (38,048) (65,622) (78,911)
----------- ----------- ----------- -----------
Consolidated Totals $ 420,996 $ 382,985 $ 787,650 $ 702,627
=========== =========== =========== ===========
The company's revenues are generated via the sale of products in the
following categories:
Ketchup and Sauces $ 999,421 $ 915,149 $1,971,263 $1,816,124
Meals and Snacks 1,147,943 1,009,344 2,092,765 1,863,287
Infant Foods 268,875 213,202 507,825 426,899
Other 107,140 94,530 199,811 185,835
----------- ----------- ----------- -----------
Total $2,523,379 $2,232,225 $4,771,664 $4,292,145
=========== =========== =========== ===========
H. J. Heinz Company and Subsidiaries
Sales Variances
The following table illustrates the components of the change in net
sales versus the prior year for each of the five reported business
segments.
Second Quarter ended October 31, 2007
--------------------------------------------------
Organic Total
Sales Net
Growth Foreign Acquisitions/ Sales
Volume+Price= (a) +Exchange+Divestitures =Change
--------------------------------------------------
Segment:
North American
Consumer Products 6.7% 3.0% 9.7% 1.9% 0.9% 12.6%
Europe 9.1% 1.3% 10.4% 9.2% (1.6%) 18.0%
Asia/Pacific 3.5% 2.6% 6.1% 8.4% 2.2% 16.8%
U.S. Foodservice (1.7%) 2.1% 0.4% 0.0% (0.3%) 0.1%
Rest of World 6.7% 13.8% 20.5% 1.3% (0.1%) 21.7%
Consolidated
Totals 5.5% 2.6% 8.1% 5.0% 0.0% 13.0%
Six Months ended October 31, 2007
--------------------------------------------------
Organic Total
Sales Net
Growth Foreign Acquisitions/ Sales
Volume+Price= (a) +Exchange+Divestitures =Change
--------------------------------------------------
Segment:
North American
Consumer Products 5.1% 2.5% 7.6% 1.4% 1.4% 10.4%
Europe 5.9% 2.3% 8.2% 8.6% (1.8%) 15.0%
Asia/Pacific 4.8% 1.9% 6.7% 9.7% 0.8% 17.2%
U.S. Foodservice (2.2%) 2.6% 0.4% 0.0% (0.8%) (0.4%)
Rest of World 6.5% 11.6% 18.1% 0.5% (3.5%) 15.2%
Consolidated
Totals 4.0% 2.7% 6.7% 4.8% (0.3%) 11.2%
(a) The Company reports its financial results in accordance with
accounting principles generally accepted in the United States of
America ("GAAP"). However, management believes that certain non-GAAP
performance measures and ratios, used in managing the business, may
provide users of this financial information with additional
meaningful comparisons between current results and results in prior
periods. Non-GAAP financial measures should be viewed in addition to,
and not as an alternative for, the Company's reported results
prepared in accordance with GAAP. Organic sales growth is a non-GAAP
measure that excludes the impact of foreign currency exchange rates
and acquisitions/divestitures. These tables provide the calculation
of these non-GAAP performance ratios discussed in the Company's press
release dated November 29, 2007.
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CONTACT: H. J. Heinz Company
Media:
Ted Smyth, 412-456-5780
Michael Mullen, 412-456-5751
Michael.mullen@us.hjheinz.com
or
Investors:
Margaret Nollen, 412-456-1048