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H.J. Heinz Company Reports Operating Results (10-K)
Posted by: gurufocus (IP Logged)
Date: June 15, 2012 12:13PM
H.J. Heinz Company (HNZ) filed Annual Report for the period ended 2012-04-29.
Highlight of Business Operations:Sales for Fiscal 2012 increased $942 million, or 8.8%, to $11.65 billion. Net pricing increased sales by 3.8%, driven by price increases across the Company, particularly in the U.S., Latin America, U.K. and China. Volume decreased 0.3%, as favorable volume in emerging markets, Japan and Germany were more than offset by declines in the U.S., Australia and Italy. Emerging markets, global ketchup and the Company's top 15 brands continued to be the most significant growth drivers, with organic sales growth of 16.4%, 8.0%, and 5.0%, respectively (40.9%, 9.7% and 12.3%, respectively, reported). Acquisitions, net of divestitures, increased sales by 3.5%. Foreign exchange translation rates increased sales by 1.8%.
Net income attributable to H. J. Heinz Company was $923 million, a decrease of 6.7%. Excluding charges for productivity initiatives, net income attributable to H. J. Heinz Company was $1.09 billion compared to $990 million in the prior year, an increase of 9.8%. This increase was largely due to higher sales and a lower effective tax rate, partially offset by a lower gross margin and investments in marketing, emerging markets capabilities and Project Keystone. Diluted earnings per share were $2.85 in the current year, down 6.9%. Excluding charges for productivity initiatives, diluted earnings per share were $3.35 in the current year compared to $3.06 in the prior year, up 9.5%. EPS movements were favorably impacted by $0.06 from currency translation and translation hedges.
Sales for Fiscal 2011 increased $212 million, or 2.0%, to $10.71 billion. Volume increased 0.7%, as favorable volume in emerging markets as well as improvements in North American Consumer Products were partially offset by declines in U.S. Foodservice, Australia and Germany. Emerging markets and our Top 15 brands realized combined volume and pricing gains of 14.4% and 3.8%, respectively. Net pricing increased sales by 1.2%, as price increases in emerging markets, particularly Latin America, U.S. Foodservice and the U.K. were partially offset by increased trade promotions in the North American Consumer Products and Australian businesses. Acquisitions increased sales by 0.6%, while foreign exchange translation rates reduced sales by 0.5%.
Income from continuing operations attributable to H. J. Heinz Company was $990 million compared to $914 million in Fiscal 2010, an increase of 8.2%. The increase was due to higher operating income, reduced interest expense, a lower tax rate and $28 million in Fiscal 2010 after-tax charges ($0.09 per share) for targeted workforce reductions and non-cash asset write-offs. These were partially offset by an $11 million after-tax gain in Fiscal 2010 related to property sold in the Netherlands and a $15 million after-tax gain in Fiscal 2010 on a total rate of return swap. Diluted earnings per share from continuing operations were $3.06 in Fiscal 2011 compared to $2.87 in Fiscal 2010, up 6.6%. EPS movements were unfavorably impacted by 1.5% higher shares outstanding and by $0.06 from currency fluctuations, after taking into account the net effect of Fiscal 2011 and 2010 currency translation contracts and foreign currency movements on translation.
Cash used for investing activities totaled $402 million compared to $950 million of cash last year. Capital expenditures totaled $419 million (3.6% of sales) compared to $336 million (3.1% of sales) in the prior year, which is in-line with planned levels. Higher capital spending reflects increased investments in Project Keystone, capacity projects in emerging markets and productivity initiatives. The Company expects capital spending as a percentage of sales to be approximately 4% in Fiscal 2013. Proceeds from disposals of property, plant and equipment were $10 million in the current year compared to $13 million in the prior year. The current year increase in restricted cash of $39 million primarily represents collateral that the Company is required to maintain in connection with a total rate of return swap entered into during the third quarter of Fiscal 2012. (See Note 13, "Derivative Financial Instruments and Hedging Activities" in Item 8- “Financial Statements and Supplementary Data” for addition information.) The prior year increase in restricted cash of $5 million relates to restricted funds in our Foodstar business in China. Cash received for the sale of short-term investments in Brazil in the current year was $57 million. Cash paid for acquisitions in the current year totaled $3 million compared to $618 million in the prior year primarily related to Coniexpress in Brazil and Foodstar in China.