10-K 1 hnz10k42912.htm FORM 10-K HNZ 10K 4/29/12


SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
þ
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 
For the fiscal year ended April 29, 2012
or
o
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.)
One PPG Place
 
15222
Pittsburgh, Pennsylvania
 
(Zip Code)
(Address of principal executive offices)
 
 
412-456-5700
(Registrant’s telephone number)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Title of each class
 
Name of each exchange on which registered
Common Stock, par value $.25 per share
 
The New York Stock Exchange
 
 
 
Third Cumulative Preferred Stock,
 
 
$1.70 First Series, par value $10 per share
 
The New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
None.
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes þ     No o
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  Yes o     No þ
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 þ     No o
Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes þ     No o
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.  þ
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer þ
 
Accelerated filer o
 
Non-accelerated filer o
(Do not check if a smaller reporting company)
 
Smaller reporting company o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes o     No þ
As of October 26, 2011, the aggregate market value of the Registrant’s voting stock held by non-affiliates of the Registrant was approximately $16.9 billion.
The number of shares of the Registrant’s Common Stock, par value $.25 per share, outstanding as of May 31, 2012, was 320,337,764 shares.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant’s Proxy Statement for the Annual Meeting of Shareholders to be held on August 28, 2012, which will be filed with the Securities and Exchange Commission within 120 days after the end of the Registrant’s fiscal year ended April 29, 2012, are incorporated into Part III, Items 10, 11, 12, 13, and 14.




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 in Sharpsburg, Pennsylvania by Henry J. Heinz. H. J. Heinz Company and its subsidiaries (collectively, the “Company”) manufacture and market an extensive line of food products throughout the world. The Company’s principal products include ketchup, condiments and sauces, frozen food, soups, beans and pasta meals, infant nutrition and other food products.
The Company’s products are manufactured and packaged to provide safe, wholesome foods for consumers, as well as foodservice and institutional customers. Many products are prepared from recipes developed in the Company’s innovation and research centers. Ingredients are carefully selected, inspected and passed on to factory kitchens where they are processed, after which the intermediate product is filled automatically into containers of glass, metal, plastic, paper or fiberboard, which are then sealed. Products are prepared by sterilization, blending, fermentation, pasteurization, homogenization, chilling, freezing, pickling, drying, freeze drying, baking or extruding, then labeled and cased for market. Quality assurance procedures are designed for each product and process and applied for quality and compliance with applicable laws.
The Company manufactures (and contracts for the manufacture of) its products from a wide variety of raw food materials. Pre-season contracts are made with farmers for certain raw materials such as a portion of the Company’s requirements of tomatoes, cucumbers, potatoes, onions and some other fruits and vegetables. Ingredients, such as dairy products, meat, sugar and other sweeteners, including high fructose corn syrup, spices, flour and fruits and vegetables, are purchased from approved suppliers.
During Fiscal 2012, the Company invested in productivity initiatives designed to increase manufacturing effectiveness and efficiency as well as accelerate overall productivity on a global scale. The initiatives included the closure of a number of factories worldwide and a reduction of the global workforce. See Note 3, "Productivity Initiatives" in Item 8- "Financial Statements and Supplementary Data" and the "Liquidity and Financial Position" section below for additional information on these productivity initiatives. 
The following table lists the number of the Company’s principal food processing factories and major trademarks by region as of May 31, 2012:

 
Factories
 
 
 
Owned
 
Leased
 
Major Owned and Licensed Trademarks
North America
15

 
4

 
Heinz, Classico, Quality Chef Foods, Jack Daniel’s*, Catelli*, Wyler’s, Heinz Bell ’Orto, Bella Rossa, Chef Francisco, Ore-Ida, Tater Tots, Bagel Bites, Weight Watchers* Smart Ones, Poppers, T.G.I. Friday’s*, Delimex, Truesoups, Escalon, PPI, Todd’s, Nancy’s, Lea & Perrins, Renee’s Gourmet, HP, Diana, Bravo, Arthur’s Fresh
Europe
17

 
1

 
Heinz, Orlando, Karvan Cevitam, Brinta, Roosvicee, Venz, Weight Watchers*, Farley’s, Plasmon, Nipiol, Dieterba, Bi-Aglut, Aproten, Pudliszki, Ross, Honig, De Ruijter, Aunt Bessie*, Mum’s Own, Moya Semya, Picador, Derevenskoye, Mechta Hoziajki, Lea & Perrins, HP, Amoy*, Daddies, Squeezme!, Wyko, Benedicta
Asia/Pacific
24

 

 
Heinz, Tom Piper, Wattie’s, ABC, Chef, Craig’s, Winna, Hellaby, Hamper, Farley’s, Greenseas, Gourmet, Nurture, LongFong, Ore-Ida, SinSin, Lea & Perrins, HP, Classico, Weight Watchers*, Cottee’s, Rose’s*, Complan, Glucon D, Nycil, Golden Circle, La Bonne Cuisine, Original Juice Co., The Good Taste Company, Master, Guanghe
Rest of World
7

 
2

 
Heinz, Wellington’s, Today, Mama’s, John West, Farley’s, Complan, HP, Lea & Perrins, Classico, Banquete, Wattie’s, Quero
 
63


7

 
* Used under license

The Company also owns or leases office space, warehouses, distribution centers and research and other facilities throughout the world. The Company’s food processing factories and principal properties are in good condition and are satisfactory for the purposes for which they are being utilized.
The Company has developed or participated in the development of certain of its equipment, manufacturing processes and packaging, and maintains patents and has applied for patents for some of those developments. The Company regards these patents and patent applications as important but does not consider any one or group of them to be materially important to its business as a whole.
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

2



quarterly sales, operating income and cash flows of the Company. Consequently, comparisons between quarters have always been more meaningful when made between the same quarters of prior 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 prepared 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 products are sold through its own sales organizations and through independent brokers, agents and distributors to chain, wholesale, cooperative and independent grocery accounts, convenience stores, bakeries, pharmacies, mass merchants, club stores, foodservice distributors and institutions, including hotels, restaurants, hospitals, health-care facilities, and certain government agencies. For Fiscal 2012, one customer, Wal-Mart Stores Inc., represented approximately 10% of the Company’s sales. We closely monitor the credit risk associated with our customers and to date have not experienced material losses.
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 2013 and the succeeding fiscal year are not material and are not expected to materially affect the earnings, cash flows or competitive position of the Company.
The Company’s factories are subject to inspections by various governmental agencies in the U.S. and other countries where the Company does business, including the United States Department of Agriculture, and the Occupational Health and Safety Administration, and its products must comply with the applicable laws, including food and drug laws, such as the Federal Food and Cosmetic Act of 1938, as amended, and the Federal Fair Packaging or Labeling Act of 1966, as amended, of the jurisdictions in which they are manufactured and marketed.
The Company employed, on a full-time basis as of May 31, 2012, approximately 32,200 people around the world.
Segment information is set forth in this report on pages 70 through 72 in Note 16, “Segment Information” in Item 8—“Financial Statements and Supplementary Data.”
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 operations.
The Company’s annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to section 13(a) or 15(d) of the Exchange Act are available free of charge on the Company’s web site at www.heinz.com, as soon as reasonably practicable after being filed or furnished to the Securities and Exchange Commission (“SEC”). Our reports filed with the SEC are also made available on its website at www.sec.gov.

3



Executive Officers of the Registrant
The following is a list of the names and ages of all of the executive officers of H. J. Heinz Company indicating all positions and offices 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, until their successors are elected, or until their earlier resignation or removal. The next annual election of officers is scheduled to occur on August 28, 2012.

 
 
Age (as of
 
Positions and Offices Held with the Company and
Principal Occupations or
Name
 
August 28, 2012)
 
Employment During Past Five Years
William R. Johnson
 
63

 
Chairman, President, and Chief Executive Officer since September 2000.
Theodore N. Bobby
 
61

 
Executive Vice President, General Counsel and Corporate Secretary since May 2012. Executive Vice President and General Counsel from January 2007 to May 2012.
Stephen S. Clark
 
44

 
Vice President—Chief People Officer since October 2005.
Edward J. McMenamin
 
55

 
Senior Vice President—Finance since May 2010; Senior Vice President—Finance and Corporate Controller from August 2004 to May 2010.
Michael D. Milone(1)
 
56

 
Executive Vice President from May 2012; Executive Vice President—Heinz Rest of World, and Global Enterprise Risk Management and Global Infant/Nutrition from May 2010 to May 2012; Senior Vice President—Heinz Rest of World, Enterprise Risk Management and Global Infant/Nutrition from June 2008 to April 2010; Senior Vice President—Heinz Pacific, Rest of World and Enterprise Risk Management from May 2006 to June 2008.
David C. Moran
 
54

 
Executive Vice President, President and Chief Executive Officer of Heinz Europe and Global Infant/Nutrition since May 2012. Executive Vice President and President and Chief Executive Officer of Heinz Europe from July 2009 to May 2012; Executive Vice President & Chief Executive Officer and President of Heinz North America from May 2007 to July 2009.
Michael Mullen
 
43

 
Vice President—Corporate and Government Affairs since February 2009; Director Global Corporate Affairs from May 2006 to February 2009.
Margaret R. Nollen
 
49

 
Senior Vice President—Investor Relations and Global Program Management Officer since January 2011; Senior Vice President—Investor Relations from May 2010 to January 2011; Vice President—Investor Relations from February 2007 to May 2010.
C. Scott O’Hara
 
51

 
Executive Vice President and President and Chief Executive Officer of Heinz North America since July 2009; Executive Vice President—President and Chief Executive Officer Heinz Europe from May 2006 to July 2009.
Robert P. Ostryniec
 
51

 
Senior Vice President, Chief Supply Chain Officer and Global Enterprise Risk Management, Environmental Health, Safety and Sustainability and Quality since May 2012; Senior Vice President and Chief Supply Chain Officer from February 2010 to May 2012; Chief Supply Chain Officer from January 2009 to February 2010; Global Supply Chain Officer from April 2008 to January 2009; Chief Supply Chain Officer from June 2005 to April 2008.
Christopher J. Warmoth
 
53

 
Executive Vice President—Heinz Asia Pacific since June 2008; Senior Vice President—Heinz Asia from May 2006 to June 2008.
Arthur B. Winkleblack
 
55

 
Executive Vice President and Chief Financial Officer since January 2002.
David C. Woodward
 
47

 
Executive Vice President—Heinz Rest of World since May 2012; President—Heinz United Kingdom, Ireland, Africa and Middle East from January 2011 to May 2012; President—Heinz United Kingdom and Ireland from July 2006 to May 2012.

(1) In March 2012, Michael D. Milone announced his intention to retire from the Company in June 2012.


4




Item 1A.
Risk Factors.
In addition to the factors discussed elsewhere in this report, the following risks and uncertainties could materially and adversely affect the Company’s business, financial condition, and results of operations. Additional risks and uncertainties that are not presently known to the Company or are currently deemed by the Company to be immaterial also may impair the Company’s business operations and financial condition.
Competitive product and pricing pressures in the food industry and the financial condition of customers and suppliers could adversely affect the Company’s ability to gain or maintain market share and/or profitability.
The Company operates in the highly competitive food industry, competing with other companies that have varying abilities to withstand changing market conditions. Any significant change in the Company’s relationship with a major customer, including changes in product prices, sales volume, or contractual terms may impact financial results. Such changes may result because the Company’s competitors may have substantial financial, marketing, and other resources that may change the competitive environment. Private label brands sold by retail customers, which are typically sold at lower prices, are a source of competition for certain of our product lines. Such competition could cause the Company to reduce prices and/or increase capital, marketing, and other expenditures, or could result in the loss of category share. Such changes could have a material adverse impact on the Company’s net income. As the retail grocery trade continues to consolidate, the larger retail customers of the Company could seek to use their positions to improve their profitability through lower pricing and increased promotional programs. If the Company is unable to use its scale, marketing expertise, product innovation, and category leadership positions to respond to these changes, or is unable to increase its prices, its profitability and volume growth could be impacted in a materially adverse way. The success of our business depends, in part, upon the financial strength and viability of our suppliers and customers. The financial condition of those suppliers and customers is affected in large part by conditions and events that are beyond our control. A significant deterioration of their financial condition could adversely affect our financial results.
The Company’s performance may be adversely affected by economic and political conditions in the U.S. and in various other nations where it does business.
The Company’s performance has been in the past and may continue in the future to be impacted by economic and political conditions in the United States and in other nations. Such conditions and factors include changes in applicable laws and regulations, including changes in food and drug laws, accounting standards and critical accounting estimates, taxation requirements and environmental laws. Other factors impacting our operations in the U.S., Venezuela and other international locations where the Company does business include export and import restrictions, currency exchange rates, currency devaluation, recessionary conditions, foreign ownership restrictions, nationalization, the impact of hyperinflationary environments, terrorist acts, and political unrest. Such factors in either domestic or foreign jurisdictions could materially and adversely affect our financial results.
Increases in the cost and restrictions on the availability of raw materials could adversely affect our financial results.
The Company sources raw materials including agricultural commodities such as tomatoes, cucumbers, potatoes, onions, other fruits and vegetables, dairy products, meat, sugar and other sweeteners, including high fructose corn syrup, spices, and flour, as well as packaging materials such as glass, plastic, metal, paper, fiberboard, and other materials and inputs such as water, in order to manufacture products. The availability or cost of such commodities may fluctuate widely due to government policy and regulation, crop failures or shortages due to plant disease or insect and other pest infestation, weather conditions, potential impact of climate change, increased demand for biofuels, or other unforeseen circumstances. Additionally, the cost of raw materials and finished products may fluctuate due to movements in cross-currency transaction rates. To the extent that any of the foregoing or other unknown factors increase the prices of such commodities or materials and the Company is unable to increase its prices or adequately hedge against such changes in a manner that offsets such changes, the results of its operations could be materially and adversely affected. Similarly, if supplier arrangements and relationships result in increased and unforeseen expenses, the Company’s financial results could be materially and adversely impacted.
Disruption of our supply chain could adversely affect our business.
Damage or disruption to our manufacturing or distribution capabilities due to weather, natural disaster, fire, terrorism, pandemic, strikes, the financial and/or operational instability of key suppliers, distributors, warehousing and transportation providers, or brokers, or other reasons could impair our ability to manufacture or sell our products. To the extent the Company is unable to, or cannot, financially mitigate the likelihood or potential impact of such events, or to effectively manage such events if they occur, particularly when a product is sourced from a single location, there could be a materially adverse affect on our business and results of operations, and additional resources could be required to restore our supply chain.

5



Higher energy costs and other factors affecting the cost of producing, transporting, and distributing the Company’s products could adversely affect our financial results.
Rising fuel and energy costs may have a significant impact on the cost of operations, including the manufacture, transportation, and distribution of products. Fuel costs may fluctuate due to a number of factors outside the control of the Company, including government policy and regulation and weather conditions. Additionally, the Company may be unable to maintain favorable arrangements with respect to the costs of procuring raw materials, packaging, services, and transporting products, which could result in increased expenses and negatively affect operations. If the Company is unable to hedge against such increases or raise the prices of its products to offset the changes, its results of operations could be materially and adversely affected.
The results of the Company could be adversely impacted as a result of increased pension, labor, and people-related expenses.
Inflationary pressures and any shortages in the labor market could increase labor costs, which could have a material adverse effect on the Company’s consolidated operating results or financial condition. The Company’s labor costs include the cost of providing employee benefits in the U.S. and foreign jurisdictions, including pension, health and welfare, and severance benefits. Any declines in market returns could adversely impact the funding of pension plans, the assets of which are invested in a diversified portfolio of equity and fixed income securities and other investments. Additionally, the annual costs of benefits vary with increased costs of health care and the outcome of collectively-bargained wage and benefit agreements.
The impact of various food safety issues, environmental, legal, tax, and other regulations and related developments could adversely affect the Company’s sales and profitability.
The Company is subject to numerous food safety and other laws and regulations regarding the manufacturing, marketing, and distribution of food products. These regulations govern matters such as ingredients, advertising, taxation, relations with distributors and retailers, health and safety matters, and environmental concerns. The ineffectiveness of the Company’s planning and policies with respect to these matters, and the need to comply with new or revised laws or regulations with regard to licensing requirements, trade and pricing practices, environmental permitting, or other food or safety matters, or new interpretations or enforcement of existing laws and regulations, as well as any related litigation, may have a material adverse effect on the Company’s sales and profitability. Influenza or other pandemics could disrupt production of the Company’s products, reduce demand for certain of the Company’s products, or disrupt the marketplace in the foodservice or retail environment with consequent material adverse effects on the Company’s results of operations.
The need for and effect of product recalls could have an adverse impact on the Company’s business.
If any of the Company’s products become misbranded or adulterated, the Company may need to conduct a product recall. The scope of such a recall could result in significant costs incurred as a result of the recall, potential destruction of inventory, and lost sales. Should consumption of any product cause injury, the Company may be liable for monetary damages as a result of a judgment against it. A significant product recall or product liability case could cause a loss of consumer confidence in the Company’s food products and could have a material adverse effect on the value of its brands and results of operations.
The failure of new product or packaging introductions to gain trade and consumer acceptance and changes in consumer preferences could adversely affect our sales.
The success of the Company is dependent upon anticipating and reacting to changes in consumer preferences, including health and wellness. There are inherent marketplace risks associated with new product or packaging introductions, including uncertainties about trade and consumer acceptance. Moreover, success is dependent upon the Company’s ability to identify and respond to consumer trends through innovation. The Company may be required to increase expenditures for new product development. The Company may not be successful in developing new products or improving existing products, or its new products may not achieve consumer acceptance, each of which could materially and negatively impact sales.
The failure to successfully integrate acquisitions and joint ventures into our existing operations or the failure to gain applicable regulatory approval for such transactions or divestitures could adversely affect our financial results.
The Company’s ability to efficiently integrate acquisitions and joint ventures into its existing operations also affects the financial success of such transactions. The Company may seek to expand its business through acquisitions and joint ventures, and may divest underperforming or non-core businesses. The Company’s success depends, in part, upon its ability to identify such acquisition, joint venture, and divestiture opportunities and to negotiate favorable contractual terms. Activities in such areas are regulated by numerous antitrust and competition laws in the U. S., the European Union, and other jurisdictions, and the Company may be required to obtain the approval of acquisition and joint venture transactions by competition authorities, as well as satisfy other legal requirements. The failure to obtain such approvals could materially and adversely affect our results.

6



The Company’s operations face significant foreign currency exchange rate exposure, which could negatively impact its operating results.
The Company holds assets and incurs liabilities, earns revenue, and pays expenses in a variety of currencies other than the U.S. dollar, primarily the British Pound, Euro, Australian dollar, Canadian dollar, and New Zealand dollar. The Company’s consolidated financial statements are presented in U.S. dollars, and therefore the Company must translate its assets, liabilities, revenue, and expenses into U.S. dollars for external reporting purposes. Increases or decreases in the value of the U.S. dollar relative to other currencies may materially and negatively affect the value of these items in the Company’s consolidated financial statements, even if their value has not changed in their original currency. In addition, the impact of fluctuations in foreign currency exchange rates on transaction costs ( i.e., the impact of foreign currency movements on particular transactions such as raw material sourcing), most notably in the U.K., could materially and adversely affect our results.
The Company could incur more debt, which could have an adverse impact on our business.
The Company may incur additional indebtedness in the future to fund acquisitions, repurchase shares, or fund other activities for general business purposes, which could result in a downward change in credit rating. The Company’s ability to make payments on and refinance its indebtedness and fund planned capital expenditures depends upon its ability to generate cash in the future. The cost of incurring additional debt could increase in the event of possible downgrades in the Company’s credit rating.
The failure to implement our growth plans could adversely affect the Company’s ability to increase net income and generate cash.
The success of the Company could be impacted by its inability to continue to execute on its growth plans regarding product innovation, implementing cost-cutting measures, improving supply chain efficiency, enhancing processes and systems, including information technology systems, on a global basis, and growing market share and volume. The failure to fully implement the plans, in a timely manner or within our cost estimates, could materially and adversely affect the Company’s ability to increase net income. Additionally, the Company’s ability to pay cash dividends will depend upon its ability to generate cash and profits, which, to a certain extent, is subject to economic, financial, competitive, and other factors beyond the Company’s control.

The Company is increasingly dependent on information technology, and potential disruption, cyber attacks, security problems, and expanding social media vehicles present new risks.

The Company is increasingly dependent on information technology systems to manage and support a variety of business processes and activities, and any significant breakdown, invasion, destruction, or interruption of these systems could negatively impact operations. In addition, there is a risk of business interruption and reputational damage from leakage of confidential information.

The inappropriate use of certain media vehicles could cause brand damage or information leakage. Negative posts or comments about the Company on any social networking web site could seriously damage its reputation. In addition, the disclosure of non-public company sensitive information through external media channels could lead to information loss. Identifying new points of entry as social media continues to expand presents new challenges. Any business interruptions or damage to the Company's reputation could negatively impact the Company's financial condition, results of operation, and the market price of the Company's common stock.

The Company's operating results may be adversely affected by the current sovereign debt crisis in Europe and elsewhere and by related global economic conditions.

The current European debt crisis, particularly most recently in Greece, Italy, Ireland, Portugal and Spain, and related European financial restructuring efforts may cause the value of the European currencies, including the Euro, to further deteriorate, thus reducing the purchasing power of European customers. One potential extreme outcome of the European financial situation is the re-introduction of individual currencies in one or more Eurozone countries or the dissolution of the Euro entirely. Should the Euro dissolve entirely, the legal and contractual consequences for holders of Euro-denominated obligations would be determined by laws in effect at such time. The potential dissolution of the Euro, or market perceptions concerning this and related issues, could adversely affect the value of the Company's Euro-denominated assets and obligations. In addition, the European crisis is contributing to instability in global credit markets. The world has recently experienced a global macroeconomic downturn, and if global economic and market conditions, or economic conditions in Europe, the United States or other key markets, remain uncertain, persist, or deteriorate further, consumer purchasing power and demand for Company products could decline, and the Company may experience material adverse impacts on its business, operating results, and financial condition.

7



CAUTIONARY STATEMENT RELEVANT TO FORWARD-LOOKING INFORMATION
Statements about future growth, profitability, costs, expectations, plans, or objectives included in this report, including in management’s discussion and analysis, and the financial statements and footnotes, are forward-looking statements based on management’s estimates, assumptions, and projections. These forward-looking statements are subject to risks, uncertainties, assumptions and other important factors, many of which may be beyond the Company’s control and could cause actual results to differ materially from those expressed or implied in this report and the financial statements and footnotes. Uncertainties contained in such statements include, but are not limited to:
sales, volume, earnings, or cash flow growth,
general economic, political, and industry conditions, including those that could impact consumer spending,
competitive conditions, which affect, among other things, customer preferences and the pricing of products, production, and energy costs,
competition from lower-priced private label brands,
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 and customer relationships, and the financial viability of those suppliers and customers,
currency valuations and devaluations and interest rate fluctuations,
changes in credit ratings, leverage, and economic conditions, and the impact of these factors on our cost of borrowing and access to capital markets,
our ability to effectuate our strategy, including our continued evaluation of potential opportunities, such as strategic acquisitions, joint ventures, divestitures, and other initiatives, our ability to identify, finance and complete these transactions and other initiatives, and our ability to realize anticipated benefits from them,
the ability to successfully complete cost reduction programs and increase productivity,
the ability to effectively integrate acquired businesses,
new products, packaging innovations, and product mix,
the effectiveness of advertising, marketing, and promotional programs,
supply chain efficiency,
cash flow initiatives,
risks inherent in litigation, including tax litigation,
the ability to further penetrate and grow and the risk of doing business in international markets, particularly our emerging markets, economic or political instability in those markets, strikes, nationalization, and the performance of business in hyperinflationary environments, in each case such as Venezuela; and the uncertain global macroeconomic environment and sovereign debt issues, particularly in Europe,
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, and the potential impact of climate change,
the ability to implement new information systems, potential disruptions due to failures in information technology systems, and risks associated with social media,
with regard to dividends, dividends must be declared by the Board of Directors and will be subject to certain legal

8



requirements being met at the time of declaration, as well as our Board’s view of our anticipated cash needs, and
other factors as described in “Risk Factors” above.
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.

Item 1B.
Unresolved Staff Comments.
Nothing to report under this item.

Item 2.
Properties.
See table in Item 1.

Item 3.
Legal Proceedings.
Nothing to report under this item.

Item 4.
Mine Safety Disclosures.
Nothing to report under this item.



9



PART II

Item 5.
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Information relating to the Company’s common stock is set forth in this report on page 29 under the caption “Stock Market Information” in Item 7—“Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and on pages 72 and 73 in Note 17, “Quarterly Results” in Item 8—“Financial Statements and Supplementary Data.”

The Board of Directors authorized a share repurchase program on May 31, 2006 for a maximum of 25 million shares. The Company did not repurchase any shares of its common stock during the fourth quarter of Fiscal 2012. As of April 29, 2012, the maximum number of shares that may yet be purchased under the 2006 program is 1,431,270.

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 2008 through 2012. All amounts are in thousands except per share data.

 
Fiscal Year Ended
 
April 29, 2012
 
April 27, 2011

 
April 28, 2010

 
April 29, 2009

 
April 30, 2008

 
(52 1/2 Weeks)
 
(52 Weeks)
 
(52 Weeks)
 
(52 Weeks)
 
(52 Weeks)
Sales(1)
$
11,649,079

 
$
10,706,588

 
$
10,494,983

 
$
10,011,331

 
$
9,885,556

Interest expense(1)
294,104

 
275,398

 
295,711

 
339,635

 
364,808

Income from continuing operations attributable to H.J. Heinz Company common shareholders(1)
923,159

 
989,510

 
914,489

 
929,511

 
846,623

Income from continuing operations per share attributable to H.J. Heinz Company common shareholders—diluted(1)
2.85

 
3.06

 
2.87

 
2.91

 
2.62

Income from continuing operations per share attributable to H.J. Heinz Company common shareholders—basic(1)
2.87

 
3.09

 
2.89

 
2.95

 
2.65

Short-term debt and current portion of long-term debt
246,708

 
1,534,932

 
59,020

 
65,638

 
452,708

Long-term debt, exclusive of current portion(2)
4,779,981

 
3,078,128

 
4,559,152

 
5,076,186

 
4,730,946

Total assets
11,983,293

 
12,230,645

 
10,075,711

 
9,664,184

 
10,565,043

Cash dividends per common share
1.92

 
1.80

 
1.68

 
1.66

 
1.52


(1)
Amounts exclude the operating results related to the Company’s private label frozen desserts business in the U.K. as well as the Kabobs and Appetizers And, Inc. businesses in the U.S., which were divested in Fiscal 2010 and have been presented as discontinued operations.
(2)
Long-term debt, exclusive of current portion, includes $128.4 million, $150.5 million, $207.1 million, $251.5 million, and $198.3 million of hedge accounting adjustments associated with interest rate swaps at April 29, 2012, April 27, 2011, April 28, 2010, April 29, 2009, and April 30, 2008, respectively. H.J. Heinz Finance Company’s (“HFC”) mandatorily redeemable preferred shares of $350 million in Fiscals 2012-2009 and $325 million in Fiscal 2008 are classified as long-term debt.

Fiscal 2012 results include expenses of $224.3 million pre-tax ($162.9 million after-tax or $0.50 per share) for productivity initiatives. See Note 3, "Productivity Initiatives" in Item 8—"Financial Statement and Supplementary Data" for further explanation of these initiatives.

Fiscal 2010 results from continuing operations include expenses of $37.7 million pretax ($27.8 million after tax) for upfront productivity charges and a gain of $15.0 million pretax ($11.1 million after tax) on a property disposal in the Netherlands. The upfront productivity charges include costs associated with targeted workforce reductions and asset write-offs, that were part of a corporation-wide initiative to improve productivity. The asset write-offs related to two factory closures and the exit of a formula business in the U.K. See “Discontinued Operations and Other Disposals” in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” on pages 12 and 13 for further explanation of the property disposal in the Netherlands.

10




Item 7.
Management's Discussion and Analysis of Financial Condition and Results of Operations.

Executive Overview- Fiscal 2012
The H.J. Heinz Company has been a pioneer in the food industry for over 140 years and possesses one of the world’s best and most recognizable brands—Heinz®. The Company has a global portfolio of leading brands focused in three core categories, Ketchup and Sauces, Meals and Snacks, and Infant/Nutrition.

The Company's Fiscal 2012 results reflect strong sales growth of 8.8%, led by a trio of growth engines- emerging markets, our top 15 brands and global ketchup. The emerging markets posted organic sales growth(1) of 16.4% for the fiscal year (40.9% reported). Emerging markets represented 21.0% of total Company sales reflecting this strong organic growth and our Fiscal 2011 acquisitions of Quero® in Brazil and Master® in China. The Company's top 15 brands performed well with organic sales growth of 5.0% (12.3% reported) driven by the Heinz®, Master®, Complan® and ABC® brands. The Quero® and Master® brands acquired in Fiscal 2011 are now part of the Company's top 15 brands and drove an additional 4.0% increase in total Company sales. Global ketchup grew organically 8.0% (9.7% reported). Favorable foreign exchange increased sales by 1.8% while the Company's strategic decision to exit the Boston Market® license in the U.S. reduced sales by 0.5%. Overall, the Company's Fiscal 2012 organic sales growth of 3.5% reflects a 3.8% increase in net pricing and a 0.3% decline in volume. This quarter marks the 28th consecutive quarter of organic sales growth for the Company.

On May 26, 2011, the Company announced that in order to accelerate growth and drive global productivity, it would invest in productivity initiatives in Fiscal 2012 that are expected to make the Company stronger and even more competitive (see “Productivity Initiatives” section below for further detail). During Fiscal 2012, the Company incurred charges of $224 million pre-tax or $0.50 per share related to these productivity initiatives.
On a reported basis, gross margin for Fiscal 2012 declined 260 basis points to 34.3% compared to prior year. Excluding charges for productivity initiatives(2), gross margin for the year declined 140 basis points to 35.5% reflecting industry-wide commodity cost inflation, unfavorable sales mix and lower gross margin on recent acquisitions, partially offset by higher pricing and productivity improvements. Operating income for the fiscal year decreased 12.0% to $1.45 billion. Excluding charges for productivity initiatives, operating income increased 1.7% versus prior year to $1.68 billion reflecting higher sales, effective cost management and lower incentive compensation expenses. The Company continued to invest for the future, despite the tough economic environment, increasing marketing spending by 9.4% and spending approximately $80 million on Project Keystone, a multi-year program designed to drive productivity and make Heinz much more competitive by adding capabilities, harmonizing global processes and standardizing our systems through SAP.
Diluted earnings per share were $2.85 for Fiscal 2012, compared to $3.06 in the prior year. Excluding charges for productivity initiatives, earnings per share were $3.35 in the current year, up 9.5%. Earnings per share benefited from the increase in operating income excluding charges for productivity initiatives and a lower effective tax rate. The Company also generated $1.08 billion of operating free cash flow(3) this year or $1.21 billion excluding the $122 million of cash paid in Fiscal 2012 for productivity initiatives. The remaining cash required for these initiatives of approximately $80 million is expected to be paid in the first quarter of Fiscal 2013.
The Company believes these Fiscal 2012 results are indicative of the effectiveness of its business plan, which is focused on the following four strategic pillars:
    Accelerate growth in emerging markets;

    Expand the core portfolio;

    Strengthen and leverage global scale; and

    Make talent an advantage.
The Company remains confident in its underlying business fundamentals and plans to continue to focus on these four strategic pillars in Fiscal 2013.
(1)
Organic sales growth is defined as volume plus price or total sales growth excluding the impact of foreign exchange, acquisitions and divestitures. See “Non-GAAP Measures” section below for the reconciliation of all of these organic sales growth measures to the reported GAAP measure.
(2)
All results excluding charges for productivity initiatives are non-GAAP measures used for management reporting and incentive compensation purposes. See “Non-GAAP Measures” section below and the following reconciliation of all non-GAAP measures to the reported GAAP measures.
(3)
Operating Free Cash Flow is defined as cash from operations less capital expenditures net of proceeds from disposals of Property, Plant and Equipment. See “Non-GAAP Measures” section below for the reconciliation of this measure to the reported GAAP measure.


11



 
Fiscal Year Ended
 
April 29, 2012
 
Sales
Gross Profit
SG&A
Operating Income
Effective Tax Rate
Net Income attributable to H.J. Heinz Company
Diluted EPS
 
(In thousands except per share amounts)
Reported results
$11,649,079
$3,999,530
$2,548,362
$1,451,168
20.6
%
$923,159
$2.85
Charges for productivity initiatives

139,830

84,487

224,317

27.4
%
162,874

0.50

Results excluding charges for productivity initiatives
$11,649,079
$4,139,360
$2,463,875
$1,675,485
21.7
%
$1,086,033
$3.35
(Totals may not add due to rounding)
 
 
 
 
 
 


Productivity Initiatives

The Company announced on May 26, 2011 that it would invest in productivity initiatives during Fiscal 2012 designed to increase manufacturing effectiveness and efficiency as well as accelerate overall productivity on a global scale. The Company originally anticipated investing at least $130 million of cash and $160 million of pre-tax income ($0.35 per share) on these initiatives during Fiscal 2012. During Fiscal 2012, the Company's Board of Directors gave its approval for the Company to invest an incremental $40 million cash and $75 million of pre-tax income ($0.21 per share) on additional productivity initiatives. The Company was able to execute these projects under budget and is on track to deliver the expected benefits. All of these costs in Fiscal 2012 were reported in the Non-Operating segment. See Note 3, "Productivity Initiatives" in Item 8- "Financial Statements and Supplementary Data" and the "Liquidity and Financial Position" section below for additional information on these productivity initiatives. 

Discontinued Operations
During the third quarter of Fiscal 2010, the Company completed the sale of its Appetizers And, Inc. frozen hors d’oeuvres business which was previously reported within the U.S. Foodservice segment, resulting in a $14.5 million pre-tax ($10.4 million after-tax) loss. Also during the third quarter of Fiscal 2010, the Company completed the sale of its private label frozen desserts business in the U.K., resulting in a $31.4 million pre-tax ($23.6 million after-tax) loss. During the second quarter of Fiscal 2010, the Company completed the sale of its Kabobs frozen hors d’oeuvres business which was previously reported within the U.S. Foodservice segment, resulting in a $15.0 million pre-tax ($10.9 million after-tax) loss. The losses on each of these transactions have been recorded in discontinued operations.
In accordance with accounting principles generally accepted in the United States of America, the operating results related to these businesses have been included in discontinued operations in the Company’s consolidated statements of income for Fiscal 2010. The following table presents summarized operating results for these discontinued operations:

 
Fiscal Year Ended
 
April 28,
2010
FY 2010
 
(In millions)
Sales
$63.0
Net after-tax losses
$(4.7)
Tax benefit on losses
$2.0

During the first quarter of Fiscal 2013, the Company's Board of Directors approved the sale of its U.S. Foodservice frozen desserts business. This business had annual sales of approximately $75 million in Fiscal 2012. The disposal transaction included the sale of two factories. As a result of this transaction, the Company will recognize a pre-tax loss of approximately $33 million ($21 million after-tax), which will be recorded in discontinued operations in the first quarter of Fiscal 2013. The sale will not significantly affect the Company's profit on a continuing operations basis going forward.

12




Other Disposals

During the fourth quarter of Fiscal 2010, the Company received cash proceeds of $95 million from the government of the Netherlands for property the government acquired through eminent domain proceedings. The transaction included the purchase by the government of the Company’s factory located in Nijmegen, which produces soups, pasta and cereals. The cash proceeds are intended to compensate the Company for costs, both capital and expense, which are being incurred over a three year period from the date of the transaction, which is the length of time the Company has to exit the current factory location and construct new facilities. Note, the Company has and will incur costs to build an R&D facility in the Netherlands, costs to transfer a cereal line to another factory location, employee costs for severance and other costs directly related to the closure and relocation of the existing facilities. The Company also entered into a three-year leaseback on the Nijmegen factory. The Company will continue to operate in the leased factory while executing its plans for closure and relocation of the operations. The Company has accounted for the proceeds on a cost recovery basis. In doing so, the Company has made its estimates of cost, both of a capital and expense nature, to be incurred and recovered and to which proceeds from the transaction will be applied. Of the initial proceeds received, $81 million was deferred based on management’s total estimated future costs to be recovered and these deferred amounts are recognized as the related costs are incurred. If estimated costs differ from what is actually incurred, these adjustments will be reflected in earnings. As of April 29, 2012 and April 27, 2011, the remaining deferred amounts on the consolidated balance sheets were $21 million and $63 million, respectively, and were recorded in other non-current liabilities and other accrued liabilities. No significant adjustments were reflected in earnings in Fiscal 2012 and 2011. The excess of the $95 million of proceeds received over estimated costs to be recovered and incurred was $15 million and was recorded as a reduction of cost of products sold in the consolidated statement of income for the year ended April 28, 2010.

Results of Continuing Operations
On March 14, 2012 the Company's Board of Directors of H. J. Heinz Company authorized a change in the Company's fiscal year end from the Wednesday nearest April 30 to the Sunday nearest April 30. The change in the fiscal year end resulted in Fiscal 2012 changing from a 53 week year to a 52 1/2 week year and was intended to better align the Company's financial reporting period with its business partners and production schedules. This change did not have a material impact on the Company's financial statements.
The Company’s revenues are generated via the sale of products in the following categories:

 
Fiscal Year Ended
 
April 29, 2012
 
April 27, 2011
 
April 28, 2010
 
(52 1/2 Weeks)
 
(52 Weeks)
 
(52 Weeks)
 
(In thousands)
Ketchup and Sauces
$
5,232,607

 
$
4,607,971

 
$
4,446,911

Meals and Snacks
4,479,502

 
4,282,318

 
4,289,977

Infant/Nutrition
1,232,248

 
1,175,438

 
1,157,982

Other
704,722

 
640,861

 
600,113

Total
$
11,649,079

 
$
10,706,588

 
$
10,494,983


Fiscal 2012 Company Results- Fiscal Year Ended April 29, 2012 compared to Fiscal Year Ended April 27, 2011

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%.

Gross profit increased $47 million, or 1.2%, to $4.0 billion however, the gross profit margin decreased 260 basis points to 34.3%. Excluding charges for productivity initiatives, gross profit increased $187 million, or 4.7%, to $4.14 billion, largely due to higher pricing, acquisitions and a $59 million favorable impact from foreign exchange, partially offset by lower volume and commodity cost inflation. Gross profit margin excluding charges for productivity initiatives reflected industry-wide price and cost pressure and decreased 140 basis points to 35.5%, resulting from higher commodity and other costs, the impact of recent

13



acquisitions and unfavorable sales mix, partially offset by higher pricing and productivity improvements.

Selling, general and administrative expenses ("SG&A") increased $244 million, or 10.6% to $2.55 billion. Excluding charges for productivity initiatives, SG&A increased $160 million, or 6.9% to $2.46 billion, and decreased as a percentage of sales to 21.2% versus 21.5% last year. This increase in SG&A reflects a $38 million unfavorable impact from foreign exchange translation rates, as well as increases from acquisitions, higher marketing spending and incremental investments in Project Keystone. In addition, selling and distribution expense ("S&D") was unfavorably impacted by higher fuel prices, particularly in the U.S., and general and administrative expenses ("G&A") were higher as a result of strategic investments to drive growth in emerging markets, partially offset by effective cost management in developed markets and lower incentive compensation expense. SG&A, excluding marketing and charges for productivity initiatives, decreased as percentage of sales by 40 basis points, to 17.1%.

Operating income decreased $197 million, or 12.0%, to $1.45 billion. Excluding charges for productivity initiatives, operating income was up $27 million, or 1.7%, to $1.68 billion.

Net interest expense increased $7 million, to $259 million, reflecting a $19 million increase in interest expense, partially offset by a $12 million increase in interest income. The increase in interest income is mainly due to earnings on short-term investments and the increase in interest expense is largely due to interest rate mix in the Company's debt portfolio and acquisitions made last fiscal year. Other expenses, net, decreased $13 million, to $8 million, primarily due to currency gains this year compared to currency losses in the prior year.

The effective tax rate for Fiscal 2012 was 20.6%. Excluding charges for productivity initiatives, the effective tax rate was 21.7% in the current year compared to 26.8% last year. The decrease in the effective tax rate is primarily the result of the increased benefits from the revaluation of the tax basis of foreign assets, the reversal of an uncertain tax position liability due to the expiration of the statute of limitations in a foreign tax jurisdiction, the beneficial resolution of a foreign tax case, and lower tax on the income of foreign subsidiaries primarily resulting from a statutory tax rate reduction in the U.K. These benefits were partially offset by the current year expense for changes in valuation allowances.

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.

The impact of fluctuating translation exchange rates in Fiscal 2012 has had a relatively consistent impact on all components of operating income on the consolidated statement of income.

FISCAL YEAR 2012 OPERATING RESULTS BY BUSINESS SEGMENT

North American Consumer Products

Sales of the North American Consumer Products segment decreased $24 million, or 0.7%, to $3.24 billion. Higher net price of 2.8% reflects price increases across the leading brands and reduced trade promotions. Despite volume gains from new product launches, overall volume declined 2.3% across most of our key brands reflecting reduced promotional activity and the impact of price increases. Sales were also unfavorably impacted by 1.6% from the Company's strategic decision to exit the Boston Market® license effective July 2011. Favorable Canadian exchange translation rates increased sales 0.3%.

Gross profit decreased $51 million, or 3.7%, to $1.32 billion, and the gross profit margin decreased to 40.9% from 42.1%. Gross profit declined as higher pricing and productivity improvements were more than offset by increased commodity and fuel costs, lower volume and the impact from the exit of the Boston Market® license. The decline in gross margin is due to higher commodity costs and unfavorable sales mix. Operating income decreased $21 million, or 2.5% to $812 million, as the decline in gross profit was partially offset by a decrease in G&A reflecting effective cost management, lower incentive compensation expenses and decreased S&D largely due to lower volume.

Europe

Heinz Europe sales increased $204 million, or 6.3%, to $3.44 billion. Net pricing increased 3.7%, driven by price increases across Europe and reduced promotions in the U.K. Volume increased by 0.6% as growth in ketchup across Europe, soup in the

14



U.K., sauces in Germany and Heinz® branded sauces in Russia were offset by declines in Italian infant nutrition and frozen products in the U.K. The Italian infant nutrition business was unfavorably impacted by weakness in the Italian economy and corresponding softness in the category. Favorable foreign exchange translation rates increased sales by 1.9%.

Gross profit increased $52 million, or 4.1%, to $1.32 billion, while the gross profit margin decreased to 38.3% from 39.1%. The $52 million increase in gross profit is due to favorable net pricing, increased volume and foreign exchange translation rates. The decrease in the gross margin reflects the benefits from higher pricing and productivity improvements which were more than offset by higher commodity costs, unfavorable sales mix and a prior year gain on the sale of distribution rights on Amoy® products to ethnic channels in the U.K. Operating income increased $28 million, or 4.8%, to $609 million, due to higher pricing, increased volume and favorable foreign currency translation, partially offset by increased marketing investments.

Asia/Pacific

Heinz Asia/Pacific sales increased $248 million, or 10.7%, to $2.57 billion. Favorable exchange translation rates increased sales by 5.4%. The acquisition of Foodstar in China during the third quarter of Fiscal 2011 increased sales 3.1%. Pricing increased 2.5% and volume decreased 0.3%. Total segment volume was negatively impacted by poor operating results in Australia. The Australian business has been impacted by a challenging market environment, higher promotions and reduced market demand. Price increases were realized on ABC® products in Indonesia, Complan® products in India, and Long Fong® frozen products and Heinz® infant feeding products in China. Significant volume growth occurred in Complan® nutritional beverages in India, frozen potatoes and sauces in Japan, ABC® sauces in Indonesia, and Heinz® and Master® branded sauces and Heinz® branded infant feeding products in China. Beyond Australia, volume declines were noted in Glucon D® and Nycil® branded products in India and Long Fong® frozen products in China.

Gross profit increased $50 million, or 6.9%, to $764 million, and the gross profit margin decreased to 29.8% from 30.8%. The $50 million increase in gross profit largely reflects favorable net pricing and foreign exchange translation rates and the Foodstar acquisition, partially offset by weakness in Australia, prior year gains from the favorable renegotiation of a long-term supply contract in Australia and the sale of a factory in India. The decline in gross margin is a result of higher commodity costs and poor operating results in Australia which were only partially offset by higher pricing and productivity improvements. SG&A increased as a result of foreign exchange translation rates, the Foodstar acquisition, increased marketing and investments to improve capabilities in our emerging markets businesses. Operating income decreased by $15 million, or 6.9%, to $206 million, reflecting results in Australia.

U.S. Foodservice

Sales of the U.S. Foodservice segment increased $6 million, or 0.4%, to $1.42 billion. Pricing increased sales 2.6%, largely due to price increases across this segment's product portfolio to offset commodity cost increases. Volume decreased by 2.2%, due largely to ongoing weakness in restaurant foot traffic at some key customers, which is beginning to improve, and the impact of price increases.

Gross profit decreased $25 million, or 5.9%, to $397 million, and the gross profit margin decreased to 28.0% from 29.9%, as pricing and productivity improvements were more than offset by increased commodity and fuel costs and unfavorable volume and product mix. Operating income decreased $10 million, or 5.5%, to $166 million, which is primarily due to higher commodity costs, partially offset by a decrease in G&A expenses which reflects effective cost management, including reduced incentive compensation expense.

Rest of World

Sales for Rest of World increased $509 million, or 108.3%, to $979 million. The Coniexpress acquisition in Brazil ("Quero"), which was completed at the end of Fiscal 2011, increased sales 76.6%. Higher pricing increased sales by 21.5%, largely due to price increases in Latin America taken to mitigate inflation. (See the “Venezuela - Foreign Currency and Inflation” section below for further discussion on inflation in Venezuela.) Volume increased 11.9% mainly due to increases in Heinz® ketchup and baby food in Latin America. Volume in Latin America was unfavorably impacted in the prior year by labor disruptions which occurred in Venezuela. Ketchup and sauces in South Africa and improvements across product categories in the Middle East also drove favorable volume. Foreign exchange translation rates decreased sales 1.7%.

Gross profit increased $158 million, or 93.2%, to $327 million, due mainly to the Quero acquisition in Brazil and higher pricing and volume, partially offset by increased commodity costs. The gross profit margin declined to 33.4% from 36.0% primarily reflecting the impact of the Quero acquisition. Operating income increased $52 million, or 96.9%, to $105 million resulting from higher pricing and volume and the Quero acquisition.

15




Fiscal 2011 Company Results- Fiscal Year Ended April 27, 2011 compared to Fiscal Year Ended April 28, 2010
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%.
Gross profit increased $158 million, or 4.2%, to $3.95 billion, and the gross profit margin increased to 36.9% from 36.2%. Gross profit increased as higher volume, net pricing, productivity improvements and the favorable impact from the Foodstar acquisition were partially offset by a $33 million unfavorable impact from foreign exchange translation rates as well as higher commodity costs. In addition, Fiscal 2010’s gross profit included $24 million in charges for a corporation-wide initiative to improve productivity, partially offset by a $15 million gain related to property sold in the Netherlands as discussed previously.
SG&A increased $69 million, or 3.1% to $2.30 billion, and increased slightly as a percentage of sales to 21.5% from 21.3%. SG&A was unfavorably impacted by S&D, largely resulting from the higher volume and fuel costs, and higher G&A, reflecting investments in global process and system upgrades, increased capabilities in emerging markets and acquisition costs related to the Coniexpress acquisition. These increases were partially offset by reduced marketing expense, a $17 million favorable impact from foreign exchange translation rates and a $14 million impact related to Fiscal 2010 targeted workforce reductions. Operating income increased $89 million, or 5.7%, to $1.65 billion, reflecting the items above.
Net interest expense increased $2 million, to $253 million, reflecting a $23 million decrease in interest income and a $20 million decrease in interest expense. The decrease in interest income is mainly due to a $24 million gain in Fiscal 2010 on a total rate of return swap, which was terminated in August 2009. Interest expense decreased due to lower average interest rates and debt balances. Other expenses, net, increased $3.0 million, to $21 million, primarily due to currency losses partially offset by $9 million of charges in Fiscal 2010 recognized in connection with the dealer remarketable securities exchange transaction (see below in “Liquidity and Financial Position” for further explanation of this transaction).
The effective tax rate for Fiscal 2011 was 26.8% compared to 27.8% for Fiscal 2010. The Fiscal 2011 effective tax rate was lower than Fiscal 2010 primarily due to increased benefits from foreign tax planning and increased tax exempt foreign income, partially offset by higher taxes on repatriation of earnings.
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.
The impact of fluctuating translation exchange rates in Fiscal 2011 has had a relatively consistent impact on all components of operating income on the consolidated statement of income.
FISCAL YEAR 2011 OPERATING RESULTS BY BUSINESS SEGMENT
North American Consumer Products
Sales of the North American Consumer Products segment increased $74 million, or 2.3%, to $3.27 billion. Volume increased 2.0% as new products and increased trade promotions drove improvements in Heinz® ketchup and gravy, Smart Ones® frozen entrees, Classico® pasta sauces, Ore-Ida® frozen potatoes and TGI Friday’s® frozen meals and appetizers (TGI Friday’s® frozen meals were discontinued at the end of Fiscal 2012). These increases were partially offset by declines in Boston Market® frozen products as we transitioned away from the Boston Market® license which was completed in the first quarter of Fiscal 2012. In addition, volume was up across most product categories in Canada. Net prices decreased 1.1% reflecting trade promotion increases in Canada, the Consumer Value Program launched in the U.S. in the second half of Fiscal 2010 and trade spending in Fiscal 2011 to support the launch of TGI Friday’s® single serve frozen products. The acquisition of Arthur’s Fresh Company, a small chilled smoothies business in Canada, in the third quarter of Fiscal 2010, increased sales 0.2%. Favorable Canadian exchange translation rates increased sales 1.1%.

16



Gross profit increased $38 million, or 2.8%, to $1.38 billion, and the gross profit margin increased to 42.1% from 41.9%. The increase in gross profit dollars was aided by favorable volume and foreign exchange translation rates. The gross profit margin improved as productivity improvements more than offset the shift in marketing funds to trade promotion investments and increased commodity costs. SG&A decreased as a result of the shift of marketing funds to trade promotions. Operating income increased $61 million, or 7.9%, to $833 million, reflecting higher volume, gross margin improvements and tight control of SG&A.
Europe
Heinz Europe sales decreased $96 million, or 2.9%, to $3.24 billion. The decrease was due to unfavorable foreign exchange translation rates, which decreased sales by 3.5%, or $117 million. Volume decreased 0.4%, as increases in Weight Watchers® and Aunt Bessies® frozen products in the U.K, improvements in ketchup, particularly in Russia and France, and increases in drinks in The Netherlands, were more than offset by declines in soups in the U.K. and Germany, Honig® branded products in The Netherlands, and infant nutrition across Europe. Net pricing increased 1.0%, due to reduced promotions on Heinz® soup in the U.K. and increased net pricing in our Russian and Italian infant nutrition businesses.
Gross profit increased $19 million, or 1.5%, to $1.27 billion, and the gross profit margin increased to 39.1% from 37.4%. These increases resulted from productivity improvements and higher net pricing partially offset by increased commodity costs and unfavorable foreign exchange translation rates. Gross profit also benefited from a gain in Fiscal 2011 on the sale of distribution rights on Amoy® products in certain ethnic channels in the U.K. Operating income increased $27 million, or 4.8%, to $581 million, reflecting the items above as well as reduced SG&A. The decline in SG&A was largely related to foreign exchange translation rates, partially offset by increased marketing and investments in global process and system upgrades.
Asia/Pacific
Heinz Asia/Pacific sales increased $314 million, or 15.6%, to $2.32 billion. Volume increased 4.8%, due to significant growth in Complan® and Glucon D® nutritional beverages in India, ABC® products in Indonesia and infant feeding and frozen products in China and Japan. These increases were partially offset by softness in Australia, which has been impacted by a difficult trade environment and generally weak category trends. Pricing rose 0.2%, reflecting increases on ABC® products in Indonesia and Complan® and Glucon D® products in India offset by higher promotions in Australia. The acquisition of Foodstar during the third quarter of Fiscal 2011 increased sales 2.9%. Favorable exchange translation rates increased sales by 7.7%.
Gross profit increased $103 million, or 16.8%, to $715 million, and the gross profit margin increased to 30.8% from 30.5%. These increases reflect higher volume and pricing, favorable foreign exchange translation rates, the impact of the Foodstar acquisition, a gain in Fiscal 2011 on the sale of a factory in India, and productivity improvements, which include the favorable renegotiation of a long-term supply contract in Australia. These increases were reduced by higher commodity costs, particularly in Indonesia and India, partially offset by transactional currency benefits. Operating income increased $26 million, or 13.5%, to $222 million, primarily reflecting higher volume, improved gross margins and favorable foreign exchange. These improvements were partially offset by increased marketing investments and higher G&A.
U.S. Foodservice
Sales of the U.S. Foodservice segment decreased $16 million, or 1.1%, to $1.41 billion. Pricing increased sales 2.3%, largely due to Heinz® ketchup and other tomato products, reflecting reduced trade promotions and price increases taken to offset commodity cost increases. Volume decreased by 3.5%, due to declines in frozen desserts and soup as well as non-branded sauces. The volume reflects ongoing weakness in restaurant foot traffic, rationalization of less-profitable products, and the timing of new product launches and promotions in Fiscal 2010.
Gross profit increased $20 million, or 5.1%, to $422 million, and the gross profit margin increased to 29.9% from 28.1%, as pricing and productivity improvements more than offset increased commodity costs and lower volume. Operating income increased $25 million, or 16.8%, to $176 million, due to the gross margin improvements and lower SG&A costs relating to reduced incentive compensation expense.
Rest of World
Sales for Rest of World decreased $64 million, or 11.9%, to $470 million. Foreign exchange translation rates decreased sales 24.6%, or $131 million, largely due to the devaluation of the Venezuelan bolivar fuerte (“VEF”) late in the third quarter of Fiscal 2010. Higher pricing increased sales by 17.2%, largely due to price increases in Latin America taken to mitigate inflation. Volume decreased 4.5% as increases in the Middle East resulting from new products, market expansion and increased marketing and promotions were more than offset by declines in Venezuela resulting from labor disruptions which occurred during Fiscal 2011.
Gross profit decreased $29 million, or 14.8%, to $169 million, due mainly to the impact of VEF devaluation, increased commodity costs and lower volume, partially offset by increased pricing. Operating income decreased $16 million, or 22.9%, to

17



$53 million, reflecting the VEF devaluation. In order to facilitate timely reporting in Fiscal 2011, the operating results of Coniexpress in Brazil, which was acquired on April 1, 2011, was first reported in the Rest of World segment beginning in the first quarter of Fiscal 2012.

Liquidity and Financial Position

For Fiscal 2012, cash provided by operating activities was $1.49 billion compared to $1.58 billion in the prior year. The decline in Fiscal 2012 versus Fiscal 2011 reflects the cash impact of spending on productivity initiatives, as well as unfavorable movements in accounts payable and accrued income taxes, partially offset by favorable movements in receivables and inventories. The Company's cash conversion cycle, which is calculated using a 5 quarter average, was consistent with the prior year at 42 days in Fiscal 2012.
In Fiscal 2012, cash required for productivity initiatives was $122 million. The remaining cash required for these initiatives of approximately $80 million is expected to be paid in the first quarter of Fiscal 2013. Ongoing pre-tax savings relative to these initiatives was approximately $25 million in Fiscal 2012 and is expected to be approximately $95 million in Fiscal 2013, the majority of which will be realized as a reduction in cost of products sold.
In Fiscal 2010, the Company entered into a three-year $175 million accounts receivable securitization program. Under the terms of the agreement, the Company sells, on a revolving basis, U.S. trade receivables to a wholly-owned, bankruptcy-remote-subsidiary. This subsidiary then sells all of the rights, title and interest in these receivables, all of which are short-term, to an unaffiliated entity in return for cash consideration of up to $175 million and a receivable for the remainder of the purchase price (the "Deferred Purchase Price"). The cash consideration and the carrying amount of receivables removed from the consolidated balance sheets were $162 million and $29 million as of April 29, 2012 and April 27, 2011, respectively, resulting in an increase of $133 million in cash for sales under this program for Fiscal 2012 and a decrease in cash of $55 million for Fiscal 2011. The increase in cash proceeds related to the Deferred Purchase Price was $117 million in Fiscal 2012 and was a decrease in cash of $85 million in Fiscal 2011. See Note 8, “Debt and Financing Arrangements” in Item 8- “Financial Statements and Supplementary Data” for additional information. On June 8, 2012, subsequent to the Fiscal 2012 year end, the Company entered into an amendment of the $175 million accounts receivables securitization program that extended the term until June 7, 2013.

During the second quarter of Fiscal 2012, a foreign subsidiary of the Company exercised a tax option under local law to revalue certain of its intangible assets, increasing the local tax basis by approximately $220 million. This revaluation resulted in a reduction in Fiscal 2012 tax expense, fully recognized in Fiscal 2012, of $35 million reflecting the deferred tax benefit from the higher tax basis partially offset by the current tax liability arising from this revaluation of $35 million. The subsidiary paid $10 million of the $35 million during Fiscal 2012 and will pay approximately $14 million in Fiscal 2013 with the remainder due during Fiscal 2014. The tax benefit from the higher basis amortization will result in a reduction in cash taxes over the five year amortization period totaling approximately $69 million partially offset by the $35 million aforementioned tax payments.
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.
Coniexpress is a leading Brazilian manufacturer of the Quero® brand of tomato-based sauces, tomato paste, ketchup, condiments and vegetables. The Quero® brand holds number one or number two positions in tomato product categories in Brazil and the leading position in vegetables. This Fiscal 2011 acquisition included a modern factory that is centrally located in Neropolis and a new distribution center. Based near Sao Paulo, the Quero® business has over 1,800 employees. The Company has the right to exercise a call option at any time requiring the minority partner to sell his 20% equity interest, while the minority partner has the right to exercise a put option requiring the Company to purchase his 20% equity interest (see Note 18, “Commitments and Contingencies” in Item 8- “Financial Statements and Supplementary Data” for additional explanation).
Foodstar is a manufacturer of soy sauces and fermented bean curd in China. The acquisition of Foodstar in Fiscal 2011 included a contingent earn-out payment in Fiscal 2014 based upon certain net sales and EBITDA (earnings before interest, taxes, depreciation and amortization) targets during Fiscals 2013 and 2014. In accordance with accounting principles generally accepted

18



in the United States of America, a liability of $45 million was recognized as an estimate of the acquisition date fair value of the earn-out and is included in the Other non-current liabilities line item of our consolidated balance sheets as of April 29, 2012 and April 27, 2011. Any change in the fair value of the earn-out subsequent to the acquisition date, including an increase resulting from the passage of time, is and will be recognized in earnings in the period of the estimated fair value change. As of April 29, 2012, there was no significant change to the fair value of the earn-out recorded for Foodstar at the acquisition date. A change in fair value of the earn-out could have a material impact on the Company’s earnings in the period of the change in estimate. The fair value of the earn-out was estimated using a discounted cash flow model. This fair value measurement is based on significant inputs not observed in the market and thus represents a Level 3 measurement. (See Note 11, “Fair Value Measurements” in Item 8- “Financial Statements and Supplementary Data” for the definition of a Level 3 instrument.) Key assumptions in determining the fair value of the earn-out include the discount rate and revenue and EBITDA projections for Fiscals 2013 and 2014.
Cash used for financing activities totaled $363 million compared to $483 million last year.
Proceeds from long-term debt were $1.91 billion in the current year and $230 million in the prior year. During the fourth quarter of Fiscal 2012, the Company issued $300 million 1.50% Notes due 2017 and $300 million 2.85% Notes due 2022. During the second quarter of Fiscal 2012, the Company issued $300 million 2.00% Notes due 2016 and $400 million 3.125% Notes due 2021. During the first quarter of Fiscal 2012, the Company issued $500 million of private placement notes at an average interest rate of 3.48% with maturities of three, five, seven and ten years. Additionally, during the first quarter of Fiscal 2012, the Company issued $100 million of private placement notes at an average interest rate of 3.38% with maturities of five and seven years. The prior year proceeds relate to a variable rate, three-year 16 billion Japanese yen denominated credit agreement entered into in the third quarter of Fiscal 2011which was swapped to $193 million and the interest rate was fixed at 2.66%.
The current year proceeds discussed above were used for the repayment of commercial paper and to pay off the Company's $750 million of notes which matured on July 15, 2011 and $600 million notes which matured on March 15, 2012. Overall, payments on long-term debt were $1.44 billion in the current year compared to $46 million in the prior year. The prior year proceeds discussed above were used in the funding of the Foodstar acquisition and for general corporate purposes.
Net payments on commercial paper and short-term debt were $43 million this year compared to $193 million in the prior year.
Cash payments for treasury stock purchases, net of cash from option exercises, used $119 million of cash in the current year as the Company purchased 3.9 million shares of stock at a total cost of $202 million, in-line with its strategy to hold fully diluted shares outstanding flat. Cash proceeds from option exercises, net of treasury stock purchases, provided $85 million of cash in the prior year. During Fiscal 2011, the Company purchased 1.4 million shares of stock at a total cost of $70 million.
Dividend payments totaled $619 million this year, compared to $580 million for the same period last year, reflecting an increase in the annualized dividend per common share to $1.92.
During the second quarter of Fiscal 2012, the Company acquired an additional 10% interest in P.T. Heinz ABC Indonesia for $55 million. P.T. Heinz ABC Indonesia is an Indonesian subsidiary of the Company that manufacturers Asian sauces and condiments as well as juices and syrups. Prior to the transaction, the Company owned 65% of this business. During Fiscal 2011, $6 million of cash was paid for the purchase of the remaining 21% interest in Heinz UFE Ltd., a Chinese subsidiary of the Company that manufactures infant feeding products.
During the first quarter of Fiscal 2012, the Company modified its $1.2 billion credit agreement to increase the available borrowings under the facility to $1.5 billion as well as to extend its maturity date from April 2012 to June 2016. The $1.5 billion credit agreement supports the Company's commercial paper borrowings. As a result, the commercial paper borrowings, if any, are classified as long-term debt based upon the Company's intent and ability to refinance these borrowings on a long-term basis. The Company has historically maintained a commercial paper program that is used to fund operations in the U.S., principally within fiscal quarters. There were no commercial paper borrowings outstanding at April 29, 2012. The Company's average commercial paper borrowings during the fourth quarter of Fiscal 2012 was approximately $700 million and the maximum amount of commercial paper borrowings outstanding during the fourth quarter of Fiscal 2012 was $880 million. The Company's commercial paper maturities are funded principally through new issuances and are repaid by quarter-end using cash from operations and overseas cash which is available for use in the U.S. on a short-term basis without being subject to U.S. tax. In addition, the Company has $500 million of foreign lines of credit available at April 29, 2012. Certain of the Company's debt agreements contain customary covenants, including a leverage ratio covenant. The Company was in compliance with all of its debt covenants as of April 29, 2012. In anticipation of these Fiscal 2012 modifications above, the Company terminated a $500 million credit agreement during April 2011.

19



On August 6, 2009, H.J. Heinz Finance Company ("HFC") issued $681 million of 7.125% notes due 2039, and paid $218 million of cash, in exchange for $681 million of its outstanding dealer remarketable securities ("DRS") due December 1, 2020. In addition, HFC terminated a portion of the remarketing option by paying the remarketing agent a cash payment of $89 million. The exchange transaction was accounted for as a modification of debt. Accordingly, cash payments used in the exchange, including the payment to the remarketing agent, were accounted for as a reduction in the book value of the debt, and are being amortized to interest expense under the effective yield method. Additionally, the Company terminated its $175 million notional total rate of return swap in August 2009 in connection with the DRS exchange transaction. (See Note 13, “Derivative Financial Instruments and Hedging Activities” in Item 8-“Financial Statements and Supplementary Data” for additional information.)
On December 1, 2011, the Company remarketed the remaining $119 million remarketable securities. The next remarketing is scheduled for December 1, 2014. If these securities are not remarketed, then the Company is required to repurchase all of the remaining securities at 100% of the principal amount plus accrued interest. If the Company purchases or otherwise acquires these securities from the holders, the Company is required to pay to the holder of the remaining remarketing option the option settlement amount. This value fluctuates based on market conditions. Also on December 1, 2011, the Company entered into a three year total rate of return swap with a notional amount of $119 million. The swap has not been designated as a hedge, but will have the economic impact of reducing a portion of the interest cost related to the remarketable securities. (See Note 13, “Derivative Financial Instruments and Hedging Activities” in Item 8- “Financial Statements and Supplementary Data” for additional information.)
At April 29, 2012, the Company had total debt of $5.03 billion (including $128 million relating to the hedge accounting adjustments) and cash and cash equivalents of $1.33 billion. Total debt balances have increased since prior year end due to the items discussed above.
At April 29, 2012, approximately $1.2 billion of cash and short-term investments was held by international subsidiaries whose undistributed earnings are considered permanently reinvested. Our intent is to reinvest these funds in our international operations and our current plans do not demonstrate a need to repatriate them to fund our U.S. operations. If we decide at a later date to repatriate these funds to the U.S., the Company would be required to provide taxes on these amounts based on the applicable U.S. tax rates net of credits for foreign taxes already paid.
After-tax return on invested capital (“ROIC”) is calculated by taking net income attributable to H.J. Heinz Company, plus net interest expense net of tax, divided by average invested capital. Average invested capital is a five-point quarterly average of debt plus total H.J. Heinz Company shareholders’ equity less cash and cash equivalents, short-term investments, restricted cash, and the hedge accounting adjustments. ROIC was 16.8% in Fiscal 2012, 19.3% in Fiscal 2011, and 17.8% in Fiscal 2010. Fiscal 2012 ROIC was unfavorably impacted by 240 basis points from charges for productivity initiatives and Fiscal 2012 and 2011 ROIC was unfavorably impacted by 120 and 60 basis points, respectively, as a result of the Quero and Foodstar acquisitions. Therefore, excluding these impacts, ROIC would have improved 50 basis points in Fiscal 2012 compared to 2011 which is largely due to higher earnings excluding charges for productivity initiatives in Fiscal 2012 compared to 2011. The increase in ROIC in Fiscal 2011 compared to Fiscal 2010 is largely due to higher earnings and reduced debt levels partially offset by higher equity reflecting the impact of cumulative translation adjustments. Fiscal 2010 ROIC was negatively impacted by 90 basis points for the losses on discontinued operations.
The Company will continue to monitor the credit markets to determine the appropriate mix of long-term debt and short-term debt going forward. The Company believes that its strong operating cash flow, existing cash balances, together with the credit facilities and other available capital market financing, will be adequate to meet the Company’s cash requirements for operations, including capital spending, dividends to shareholders, debt maturities, acquisitions and share repurchases. While the Company is confident that its needs can be financed, there can be no assurance that increased volatility and disruption in the global capital and credit markets will not impair its ability to access these markets on commercially acceptable terms.
On May 24, 2012, the Company announced that its Board of Directors approved a 7.3% increase in the quarterly dividend on common stock from 48 cents to 51.5 cents, an annual indicative rate of $2.06 per share for Fiscal 2013, effective with the July 2012 dividend payment. Fiscal 2013 dividend payments are expected to be approximately $664 million.

20





Contractual Obligations and Other Commitments
Contractual Obligations
The Company is obligated to make future payments under various contracts such as debt agreements, lease agreements and unconditional purchase obligations. In addition, the Company has purchase obligations for materials, supplies, services and property, plant and equipment as part of the ordinary conduct of business. A few of these obligations are long-term and are based on minimum purchase requirements. Certain purchase obligations contain variable pricing components, and, as a result, actual cash payments are expected to fluctuate based on changes in these variable components. Due to the proprietary nature of some of the Company’s materials and processes, certain supply contracts contain penalty provisions for early terminations. The Company does not believe that a material amount of penalties is reasonably likely to be incurred under these contracts based upon historical experience and current expectations.
The following table represents the contractual obligations of the Company as of April 29, 2012.
 
Fiscal Year
 
 
 
2013
 
2014-2015
 
2016-2017
 
2018
Forward
 
Total
 
(In thousands)
Long Term Debt(1)
$
436,210

 
$
1,490,363

 
$
1,081,656

 
$
5,529,263

 
$
8,537,492

Capital Lease Obligations
9,208

 
19,463

 
19,522

 
17,707

 
65,900

Operating Leases
96,385

 
137,253

 
86,009

 
172,877

 
492,524

Purchase Obligations
985,678

 
676,159

 
92,989

 
28,013

 
1,782,839

Other Long Term Liabilities Recorded on the Balance Sheet
150,650

 
398,228

 
304,661

 
316,651

 
1,170,190

Total
$
1,678,131

 
$
2,721,466

 
$
1,584,837

 
$
6,064,511

 
$
12,048,945


(1)
Amounts include expected cash payments for interest on fixed rate long-term debt. Due to the uncertainty of forecasting expected variable rate interest payments, those amounts are not included in the table.

Other long-term liabilities primarily consist of certain specific incentive compensation arrangements and pension and postretirement benefit commitments. Long-term liabilities related to income taxes and insurance accruals included on the consolidated balance sheet are excluded from the table above as the Company is unable to estimate the timing of the payments for these items.
At April 29, 2012, the total amount of gross unrecognized tax benefits for uncertain tax positions, including an accrual of related interest and penalties along with positions only impacting the timing of tax benefits, was approximately $81 million. The timing of payments will depend on the progress of examinations with tax authorities. The Company does not expect a significant tax payment related to these obligations within the next year. The Company is unable to make a reasonably reliable estimate as to when any significant cash settlements with taxing authorities may occur.

Off-Balance Sheet Arrangements and Other Commitments
The Company does not have guarantees or other off-balance sheet financing arrangements that we believe are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenue or expenses, results of operations, liquidity, capital expenditures or capital resources. In addition, the Company does not have any related party transactions that materially affect the results of operations, cash flow or financial condition.
As of April 29, 2012, the Company was a party to two operating leases for buildings and equipment under which the Company has guaranteed supplemental payment obligations of approximately $134 million at the termination of these leases. The Company believes, based on current facts and circumstances, that any payment pursuant to these guarantees is remote.
The Company acted as servicer for $162 million and $29 million of U.S. trade receivables sold through an accounts receivable securitization program that are not recognized on the balance sheet as of April 29, 2012 and April 27, 2011, respectively. In addition, the Company acted as servicer for approximately $206 million and $146 million of trade receivables which were sold to unrelated third parties without recourse as of April 29, 2012 and April 27, 2011, respectively.
No significant credit guarantees existed between the Company and third parties as of April 29, 2012.


21



Market Risk Factors
The Company is exposed to market risks from adverse changes in foreign exchange rates, interest rates, commodity prices and production costs. As a policy, the Company does not engage in speculative or leveraged transactions, nor does the Company hold or issue financial instruments for trading purposes.
Foreign Exchange Rate Sensitivity:  The Company’s cash flow and earnings are subject to fluctuations due to exchange rate variation. Foreign currency risk exists by nature of the Company’s global operations. The Company manufactures and sells its products on six continents around the world, and hence foreign currency risk is diversified.
The Company may attempt to limit its exposure to changing foreign exchange rates through both operational and financial market actions. These actions may include entering into forward contracts, option contracts, or cross currency swaps to hedge existing exposures, firm commitments and forecasted transactions. The instruments are used to reduce risk by essentially creating offsetting currency exposures.
The following table presents information related to foreign currency contracts held by the Company:
 
Aggregate Notional Amount
 
Net Unrealized Gains/(Losses)
 
April 29, 2012

April 27, 2011
 
April 29, 2012
 
April 27, 2011
 
(In millions)
Purpose of Hedge:
 

 
 

 
 

 
 

Intercompany cash flows
$
1,090

 
1,031

 
$
13

 
29

Forecasted purchases of raw materials and finished goods and foreign currency denominated obligations
578

 
726

 
(5
)
 
(32
)
Forecasted sales and foreign currency denominated assets
245

 
104

 
9

 
12

 
$
1,913

 
1,861

 
$
17

 
9


As of April 29, 2012, the Company’s foreign currency contracts mature within three years. Contracts that meet qualifying criteria are accounted for as either foreign currency cash flow hedges, fair value hedges or net investment hedges of foreign operations. Any gains and losses related to contracts that do not qualify for hedge accounting are recorded in current period earnings in other income and expense.
Substantially all of the Company’s foreign business units’ financial instruments are denominated in their respective functional currencies. Accordingly, exposure to exchange risk on foreign currency financial instruments is not material. (See Note 13, “Derivative Financial Instruments and Hedging Activities” in Item 8—“Financial Statements and Supplementary Data.”)
Interest Rate Sensitivity:  The Company is exposed to changes in interest rates primarily as a result of its borrowing and investing activities used to maintain liquidity and fund business operations. The nature and amount of the Company’s long-term and short-term debt can be expected to vary as a result of future business requirements, market conditions and other factors. The Company’s debt obligations totaled $5.03 billion (including $128 million relating to hedge accounting adjustments) and $4.61 billion (including $151 million relating to hedge accounting adjustments) at April 29, 2012 and April 27, 2011, respectively. The Company’s debt obligations are summarized in Note 8, “Debt and Financing Arrangements” in Item 8—“Financial Statements and Supplementary Data.”
In order to manage interest rate exposure, the Company utilizes interest rate swaps to convert fixed-rate debt to floating. These derivatives are primarily accounted for as fair value hedges. Accordingly, changes in the fair value of these derivatives, along with changes in the fair value of the hedged debt obligations that are attributable to the hedged risk, are recognized in current period earnings. Based on the amount of fixed-rate debt converted to floating as of April 29, 2012, a variance of 1/8% in the related interest rate would cause annual interest expense related to this debt to change by approximately $0.2 million. The following table presents additional information related to interest rate contracts designated as fair value hedges by the Company:

 
April 29, 2012
 
April 27, 2011
 
(Dollars in millions)
Pay floating swaps—notional amount
$
160

 
$
1,510

Net unrealized gains
$
36

 
$
55

Weighted average maturity (years)
8.2

 
1.4

Weighted average receive rate
6.09
%
 
6.30
%
Weighted average pay rate
1.57
%
 
1.32
%

22




The Company entered into a three-year total rate of return swap with an unaffiliated international financial institution during the third quarter of Fiscal 2012 with a notional amount of $119 million. This instrument is being used as an economic hedge to reduce the interest cost related to the Company's $119 million remarketable securities. The swap is being accounted for on a full mark-to-market basis through current earnings, with gains and losses recorded as a component of interest income. During the fiscal year ended April 29, 2012, the Company recorded a $0.1 million reduction in interest income, representing changes in the fair value of the swap and interest earned on the arrangement. Net unrealized gains totaled $0.2 million as of April 29, 2012. In connection with this swap, the Company is required to maintain a restricted cash collateral balance of $34 million with the counterparty for the term of the swap. See Note 13, “Derivative Financial Instruments and Hedging Activities” in Item 8-“Financial Statements and Supplementary Data” for additional information.
The Company had outstanding cross-currency interest rate swaps with a total notional amount of $386 million and $377 million as of April 29, 2012 and April 27, 2011, respectively, which were designated as cash flow hedges of the future payments of loan principal and interest associated with certain foreign denominated variable rate debt obligations. Net unrealized gains related to these swaps totaled $20 million and $9 million as of April 29, 2012 and April 27, 2011, respectively. These contracts are scheduled to mature in Fiscal 2013 and 2014.
Effect of Hypothetical 10% Fluctuation in Market Prices:  As of April 29, 2012, the potential gain or loss in the fair value of the Company’s outstanding foreign currency contracts, interest rate contracts and cross-currency interest rate swaps assuming a hypothetical 10% fluctuation in currency and swap rates would be approximately:

 
Fair Value Effect
 
(In millions)
Foreign currency contracts
$
145

Interest rate swap contracts
$
3

Cross-currency interest rate swaps
$
40


However, it should be noted that any change in the fair value of the contracts, real or hypothetical, would be significantly offset by an inverse change in the value of the underlying hedged items. In relation to currency contracts, this hypothetical calculation assumes that each exchange rate would change in the same direction relative to the U.S. dollar.


Venezuela- Foreign Currency and Inflation

The Company applies highly inflationary accounting to its business in Venezuela. Under highly inflationary accounting, the financial statements of our Venezuelan subsidiary are remeasured into the Company's reporting currency (U.S. dollars) and exchange gains and losses from the remeasurement of monetary assets and liabilities are reflected in current earnings, rather than accumulated other comprehensive loss on the balance sheet, until such time as the economy is no longer considered highly inflationary. The impact of applying highly inflationary accounting for Venezuela on our consolidated financial statements is dependent upon movements in the official exchange rate between the Venezuelan bolivar fuerte and the U.S. dollar and the amount of net monetary assets and liabilities included in our subsidiary's balance sheet, which was $100 million at April 29, 2012.

The Venezuelan government recently announced that it will be instituting price controls on a number of food and personal care products sold in the country.   Such controls could impact the products that the Company currently sells within this country. In Fiscal 2012, sales in Venezuela represented less than 3% of the Company's total sales.


Recently Issued Accounting Standards
See Note 2 to the Consolidated Financial Statements in Item 8-“Financial Statements and Supplementary Data” of this Form 10-K.

23




Non-GAAP Measures

Included in this report are measures of financial performance that are not defined by generally accepted accounting principles in the United States (“GAAP”). Each of the measures is used in reporting to the Company's executive management and as a component of the Board of Directors' measurement of the Company's performance for incentive compensation purposes. Management and the Board of Directors believe that these measures provide useful information to investors, and include these measures in other communications to investors.
 
For each of these non-GAAP financial measures, a reconciliation of the differences between the non-GAAP measure and the most directly comparable GAAP measure has been provided. In addition, an explanation of why management believes the non-GAAP measure provides useful information to investors and any additional purposes for which management uses the non-GAAP measure are provided below. These non-GAAP measures should be viewed in addition to, and not in lieu of, the comparable GAAP measure.

Results Excluding Charges for Productivity Initiatives
  
Management believes that this measure provides useful information to investors because it is the profitability measure used to evaluate earnings performance on a comparable year-over-year basis. The adjustments are charges for non-recurring productivity initiatives that, in management's judgment, significantly affect the year-over-year assessment of operating results. See the above “Productivity Initiatives” section for further explanation of these charges and the “Executive Overview” section above for the reconciliation of the Company's results excluding charges for productivity initiatives to the relevant GAAP measure.

Organic Sales Growth

Organic sales growth is a non-GAAP measure that is defined as either volume plus price or total sales growth excluding the impact of foreign exchange and acquisitions and divestitures. This measure is utilized by senior management to provide investors with a more complete understanding of underlying sales trends by providing sales growth on a consistent basis. The limitation of this measure is its exclusion of the impact of foreign exchange and acquisitions and divestitures.
 
 
Organic Sales Growth
+
Foreign Exchange
+
Acquisitions/ Divestitures
=
Total Net Sales Change
FY12 Total Company
 
3.5
%
 
1.8
 %
 
3.5
%
 
8.8
%
FY12 global ketchup
 
8.0
%
 
0.5
 %
 
1.2
%
 
9.7
%
FY12 Emerging Markets
 
16.4
%
 
(0.4
)%
 
24.9
%
 
40.9
%
FY12 Top 15 brands
 
5.0
%
 
1.7
 %
 
5.6
%
 
12.3
%

Operating Free Cash Flow

Operating free cash flow is defined by the Company as cash flow from operations less capital expenditures net of proceeds from disposal of property, plant and equipment. This measure is utilized by senior management and the Board of Directors to gauge the Company's business operating performance, including the progress of management to profitably monetize low return assets. The limitation of operating free cash flow is that it adjusts for cash used for capital expenditures and cash received from disposals of property, plant and equipment, the net of which is no longer available to the Company for other purposes. Management compensates for this limitation by using the GAAP operating cash flow number as well. Operating free cash flow does not represent residual cash flow available for discretionary expenditures and does not provide insight to the entire scope of the historical cash inflows or outflows of the Company's operations that are captured in the other cash flow measures reported in the statement of cash flows.
Total Company (in millions)
2012
Cash provided by operating activities
$
1,493.1

Capital expenditures
(418.7
)
Proceeds from disposals of property, plant and equipment
9.8

Operating Free Cash Flow
$
1,084.2

Cash paid for productivity initiatives
121.9

Operating Free Cash Flow excluding cash paid for productivity initiatives
$
1,206.1

(Totals may not add due to rounding)

24




Discussion of Significant Accounting Estimates
In the ordinary course of business, the Company has made a number of estimates and assumptions relating to the reporting of results of operations and financial condition in the preparation of its financial statements in conformity with GAAP. Actual results could differ significantly from those estimates under different assumptions and conditions. The Company believes that the following discussion addresses its most critical accounting policies, which are those that are most important to the portrayal of the Company’s financial condition and results and require management’s most difficult, subjective and complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.
Marketing Costs—Trade promotions are an important component of the sales and marketing of the Company’s products and are critical to the support of the business. Trade promotion costs include amounts paid to retailers to offer temporary price reductions for the sale of the Company’s products to consumers, amounts paid to obtain favorable display positions in retailers’ stores, and amounts paid to customers for shelf space in retail stores. Accruals for trade promotions are initially recorded at the time of sale of product to the customer based on an estimate of the expected levels of performance of the trade promotion, which is dependent upon factors such as historical trends with similar promotions, expectations regarding customer participation, and sales and payment trends with similar previously offered programs. Our original estimated costs of trade promotions may change in the future as a result of changes in customer participation, particularly for new programs and for programs related to the introduction of new products. We perform monthly evaluations of our outstanding trade promotions, making adjustments where appropriate to reflect changes in estimates. Settlement of these liabilities typically occurs in subsequent periods primarily through an authorization process for deductions taken by a customer from amounts otherwise due to the Company. As a result, the ultimate cost of a trade promotion program is dependent on the relative success of the events and the actions and level of deductions taken by the Company’s customers for amounts they consider due to them. Final determination of the permissible deductions may take extended periods of time and could have a significant impact on the Company’s results of operations depending on how actual results of the programs compare to original estimates.
We offer coupons to consumers in the normal course of our business. Expenses associated with this activity, which we refer to as coupon redemption costs, are accrued in the period in which the coupons are offered. The initial estimates made for each coupon offering are based upon historical redemption experience rates for similar products or coupon amounts. We perform monthly evaluations of outstanding coupon accruals that compare actual redemption rates to the original estimates. We review the assumptions used in the valuation of the estimates and determine an appropriate accrual amount. Adjustments to our initial accrual may be required if actual redemption rates vary from estimated redemption rates.
Long-lived Assets, including Property, Plant and Equipment—Long-lived assets are recorded at their respective cost basis on the date of acquisition. Buildings, equipment and leasehold improvements are depreciated on a straight-line basis over the estimated useful life of such assets. The Company reviews long-lived assets, including intangibles with finite useful lives, and property, plant and equipment, whenever circumstances change such that the recorded value of an asset, or asset group, may not be recoverable. Factors that may affect recoverability include changes to the planned use of the asset and the closing of facilities. The estimates implicit in a recoverability test require significant judgment on the part of management, and require assumptions that can include: future volume trends and revenue and expense growth rates developed in connection with the Company's internal projections and annual operating plans, and in addition, external factors such as changes in macroeconomic trends. As each is management's best estimate on then available information, resulting estimates may differ from actual cash flows and estimated fair values. When the carrying value of an asset, or asset group, exceeds the future undiscounted cash flows, an impairment is indicated and the asset is written down to its fair value.
Goodwill and Indefinite-Lived Intangibles—Carrying values of goodwill and intangible assets with indefinite lives are reviewed for impairment at least annually, or when circumstances indicate that a possible impairment may exist. Indicators such as unexpected adverse economic factors, unanticipated technological change or competitive activities, decline in expected cash flows, lower growth rates, loss of key personnel, and changes in regulation, may signal that an asset has become impaired.

All goodwill is assigned to reporting units, which are primarily one level below our operating segments. Goodwill is assigned to the reporting unit that benefits from the cash flows arising from each business combination. The Company performs its impairment tests of goodwill at the reporting unit level. The Company has 19 reporting units globally that have assigned goodwill and are thus required to be evaluated for impairment. The Company tests goodwill for impairment by either performing a qualitative evaluation or a two-step quantitative test. The qualitative evaluation is an assessment of factors to determine whether it is more likely than not that the fair values of a reporting unit is less than its carrying amount, including goodwill.   The Company may elect to bypass this qualitative assessment for some or all of its reporting units and perform a two-step quantitative test.

The Company's estimates of fair value when testing for impairment of both goodwill and intangible assets with indefinite lives is based on a discounted cash flow model as management believes forecasted cash flows are the best indicator of fair

25



value. A number of significant assumptions and estimates are involved in the application of the discounted cash flow model, including future volume trends, revenue and expense growth rates, terminal growth rates, weighted-average cost of capital, tax rates, capital spending and working capital changes. The assumptions used in the discounted cash flow models were determined utilizing historical data, current and anticipated market conditions, product category growth rates, management plans, and market comparables. Most of these assumptions vary among the reporting units, but generally, higher assumed growth rates and discount rates were utilized for tests of reporting units for which the principal market is an emerging market compared to those for which the principal market is a developed market. For each of the reporting units tested quantitatively, and for indefinite-lived intangible assets, we used a market-participant, risk-adjusted-weighted-average cost of capital to discount the projected cash flows of those operations or assets. Such discount rates ranged from 7% to 15% in Fiscal 2012. Management believes the assumptions used for the impairment evaluation are consistent with those that would be utilized by market participants performing similar valuations of our reporting units. We validated our fair values for reasonableness by comparing the sum of the fair values for all of our reporting units, including those with no assigned goodwill, to our market capitalization and a reasonable control premium.

During the fourth quarter of Fiscal 2012, the Company completed its annual review of goodwill and indefinite-lived intangible assets. No impairments were identified during the Company's annual assessment of goodwill and indefinite-lived intangible assets. We performed a qualitative assessment over 11 of the Company's 19 reporting units. Factors considered as part of the qualitative assessment process include reporting unit specific operating results as well as industry, market and general economic conditions. In addition, the results of the Fiscal 2011 quantitative test performed for these 11 reporting units were considered, and these tests each indicated that the fair values of these reporting units significantly exceeded their carrying amounts. We concluded that there were no significant events in Fiscal 2012 which had a material impact on the fair values of these reporting units.

For the 8 reporting units which were tested quantitatively, the fair values of each reporting unit significantly exceeded their carrying values, with the exception of one reporting unit, where the fair value exceeded the carrying value of its net assets by 9%. The goodwill associated with this reporting unit was $40 million as of April 29, 2012.
Retirement Benefits—The Company sponsors pension and other retirement plans in various forms covering substantially all employees who meet eligibility requirements. Several actuarial and other factors that attempt to anticipate future events are used in calculating the expense and obligations related to the plans. These factors include assumptions about the discount rate, expected return on plan assets, turnover rates and rate of future compensation increases as determined by the Company, within certain guidelines. In addition, the Company uses best estimate assumptions, provided by actuarial consultants, for withdrawal and mortality rates to estimate benefit expense. The financial and actuarial assumptions used by the Company may differ materially from actual results due to changing market and economic conditions, higher or lower withdrawal rates or longer or shorter life spans of participants. These differences may result in a significant impact to the amount of pension expense recorded by the Company.
The Company recognized pension expense related to defined benefit programs of $25 million, $27 million, and $25 million for fiscal years 2012, 2011, and 2010, respectively, which reflected expected return on plan assets of $235 million, $229 million, and $211 million, respectively. The Company contributed $23 million to its pension plans in Fiscal 2012 compared to $22 million in Fiscal 2011 and $540 million in Fiscal 2010. The Company expects to contribute approximately $80 million to its pension plans in Fiscal 2013.
One of the significant assumptions for pension plan accounting is the expected rate of return on pension plan assets. Over time, the expected rate of return on assets should approximate actual long-term returns. In developing the expected rate of return, the Company considers average real historic returns on asset classes, the investment mix of plan assets, investment manager performance and projected future returns of asset classes developed by respected advisors. When calculating the expected return on plan assets, the Company primarily uses a market-related-value of assets that spreads asset gains and losses (difference between actual return and expected return) uniformly over 3 years. The weighted average expected rate of return on plan assets used to calculate annual expense was 8.2% for the years ended April 29, 2012 and April 27, 2011, and 8.1% for the year ended April 28, 2010. For purposes of calculating Fiscal 2013 expense, the weighted average rate of return will be 8.2%.
Another significant assumption used to value benefit plans is the discount rate. The discount rate assumptions used to value pension and postretirement benefit obligations reflect the rates available on high quality fixed income investments available (in each country where the Company operates a benefit plan) as of the measurement date. The Company uses bond yields of appropriate duration for each country by matching it with the duration of plan liabilities. The weighted average discount rate used to measure the projected benefit obligation for the year ending April 29, 2012 decreased to 4.8% from 5.5% as of April 27, 2011.
Deferred gains and losses result from actual experience differing from expected financial and actuarial assumptions. The pension plans currently have a deferred loss amount of $1.17 billion at April 29, 2012. Deferred gains and losses are amortized through the actuarial calculation into annual expense over the estimated average remaining service period of plan participants,

26



which is currently 10 years. However, if all or almost all of a plan’s participants are inactive, deferred gains and losses are amortized through the actuarial calculation into annual expense over the estimated average remaining life expectancy of the inactive participants.
The Company’s investment policy specifies the type of investment vehicles appropriate for the Plan, asset allocation guidelines, criteria for the selection of investment managers, procedures to monitor overall investment performance as well as investment manager performance. It also provides guidelines enabling Plan fiduciaries to fulfill their responsibilities.
The Company’s defined benefit pension plans’ weighted average actual and target asset allocation at April 29, 2012 and April 27, 2011 were as follows:

 
 
Plan Assets at
 
Target
Allocation at
Asset Category
 
2012
 
2011
 
2012
 
2011
Equity securities
 
61
%
 
62
%
 
59
%
 
58
%
Debt securities
 
31
%
 
32
%
 
32
%
 
32
%
Real estate
 
7
%
 
3
%
 
8
%
 
9
%
Other
 
1
%
 
3
%
 
1
%
 
1
%
 
 
100
%
 
100
%
 
100
%
 
100
%

The Company also provides certain postretirement health care benefits. The postretirement health care benefit expense and obligation are determined using the Company’s assumptions regarding health care cost trend rates. The health care trend rates are developed based on historical cost data, the near-term outlook on health care trends and the likely long-term trends. The postretirement health care benefit obligation at April 29, 2012 was determined using an average initial health care trend rate of 7.1% which gradually decreases to an average ultimate rate of 4.8% in 5 years. A one percentage point increase in the assumed health care cost trend rate would increase the service and interest cost components of annual expense by $2 million and increase the benefit obligation by $18 million. A one percentage point decrease in the assumed health care cost trend rates would decrease the service and interest cost by $1 million and decrease the benefit obligation by $16 million.
The Patient Protection and Affordable Care Act (PPACA) was signed into law on March 23, 2010, and on March 30, 2010, the Health Care and Education Reconciliation Act of 2010 (HCERA) was signed into law, which amends certain aspects of the PPACA. Among other things, the PPACA reduces the tax benefits available to an employer that receives the Medicare Part D subsidy. As a result of the PPACA, the Company was required to recognize in Fiscal 2010 tax expense of $4 million (approximately $0.01 per share) related to reduced deductibility in future periods of the postretirement prescription drug coverage. The PPACA and HCERA will have both immediate and long-term ramifications for many employers, including the Company, that provide retiree health benefits.
Sensitivity of Assumptions
If we assumed a 100 basis point change in the following rates, the Company’s Fiscal 2012 projected benefit obligation and expense would increase (decrease) by the following amounts (in millions):

 
100 Basis Point
 
Increase
 
Decrease
Pension benefits
 
 
 
Discount rate used in determining projected benefit obligation
$(339)
 
$406
Discount rate used in determining net pension expense
$(33)
 
$36
Long-term rate of return on assets used in determining net pension expense
$(29)
 
$29
Other benefits
 
 
 
Discount rate used in determining projected benefit obligation
$(21)
 
$24
Discount rate used in determining net benefit expense
$(2)
 
$1

Income Taxes—The Company computes its annual tax rate based on the statutory tax rates and tax planning opportunities available to it in the various jurisdictions in which it earns income. Significant judgment is required in determining the Company’s annual tax rate and in evaluating uncertainty in its tax positions. The Company recognizes a benefit for tax positions that it believes will more likely than not be sustained upon examination. The amount of benefit recognized is the largest amount of benefit that

27



the Company believes has more than a 50% probability of being realized upon settlement. The Company regularly monitors its tax positions and adjusts the amount of recognized tax benefit based on its evaluation of information that has become available since the end of its last financial reporting period. The annual tax rate includes the impact of these changes in recognized tax benefits. When adjusting the amount of recognized tax benefits the Company does not consider information that has become available after the balance sheet date, but does disclose the effects of new information whenever those effects would be material to the Company’s financial statements. The difference between the amount of benefit taken or expected to be taken in a tax return and the amount of benefit recognized for financial reporting represents unrecognized tax benefits. These unrecognized tax benefits are presented in the balance sheet principally within other non-current liabilities.
The Company records valuation allowances to reduce deferred tax assets to the amount that is more likely than not to be realized. When assessing the need for valuation allowances, the Company considers future taxable income and ongoing prudent and feasible tax planning strategies. Should a change in circumstances lead to a change in judgment about the realizability of deferred tax assets in future years, the Company would adjust related valuation allowances in the period that the change in circumstances occurs, along with a corresponding increase or charge to income.
The Company has a significant amount of undistributed earnings of foreign subsidiaries that are considered to be indefinitely reinvested. Our intent is to continue to reinvest these earnings to support our priorities for growth in international markets and our current plans do not demonstrate a need to repatriate them to fund our U.S. operations. If we decided at a later date to repatriate these funds to the U.S., the Company would be required to provide taxes on these amounts based on the applicable U.S. tax rates net of credits for foreign taxes already paid. The Company has not determined the deferred tax liability associated with these undistributed earnings, as such determination is not practicable. The Company believes it is not practicable to calculate the deferred tax liability associated with these undistributed earnings as there is a significant amount of uncertainty with respect to the tax impact resulting from the significant judgment required to analyze the amount of foreign tax credits attributable to the earnings, the potential timing of any distributions, as well as the local withholding tax and other indirect tax consequences that may arise due to the potential distribution of these earnings.

Input Costs
In general, the effects of cost inflation may be experienced by the Company in future periods. During Fiscals 2012, 2011, and 2010, the Company experienced wide-spread inflationary increases in commodity input costs, which is expected to continue in Fiscal 2013. Price increases and continued productivity improvements are expected to more than offset these cost increases.

28




Stock Market Information
H. J. Heinz Company common stock is traded principally on The New York Stock Exchange under the symbol HNZ. The number of shareholders of record of the Company’s common stock as of May 31, 2012 approximated 33,400. The closing price of the common stock on The New York Stock Exchange composite listing on April 29, 2012 was $53.16.
Stock price information for common stock by quarter follows:

 
Stock Price Range
 
High
 
Low
2012
 

 
 

First
$
55.00

 
$
50.95

Second
53.46

 
48.17

Third
54.82

 
49.75

Fourth
54.83

 
51.51

2011
 

 
 

First
$
47.48

 
$
40.00

Second
49.95

 
44.35

Third
50.77

 
47.51

Fourth
51.38

 
46.99



Item 7A.
Quantitative and Qualitative Disclosures About Market Risk.
This information is set forth in this report in Item 7—“Management’s Discussion and Analysis of Financial Condition and Results of Operations” on pages 22 through 23.


29



Item 8.
Financial Statements and Supplementary Data.

TABLE OF CONTENTS



30



Report of Management on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. Internal control over financial reporting refers to the process designed by, or under the supervision of, our Chief Executive Officer and Chief Financial Officer, and effected by our Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles in the United States of America, and includes those policies and procedures that:
(1) Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company;
(2) Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles;
(3) Provide reasonable assurance that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and
(4) Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management has used the framework set forth in the report entitled “Internal Control—Integrated Framework” published by the Committee of Sponsoring Organizations of the Treadway Commission to evaluate the effectiveness of the Company’s internal control over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act. Based on this evaluation, management has concluded that the Company’s internal control over financial reporting was effective as of the end of the most recent fiscal year. PricewaterhouseCoopers LLP, an independent registered public accounting firm, audited the effectiveness of the Company’s internal control over financial reporting as of April 29, 2012, as stated in their report which appears herein.

/s/  William R. Johnson
Chairman, President and
Chief Executive Officer
 
 
/s/  Arthur B. Winkleblack
Executive Vice President and
Chief Financial Officer

June 15, 2012


31



Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of
H. J. Heinz Company:
In our opinion, the consolidated financial statements listed in the index appearing under Item 15(a)(1) present fairly, in all material respects, the financial position of H. J. Heinz Company and its subsidiaries at April 29, 2012 and April 27, 2011, and the results of their operations and their cash flows for each of the three years in the period ended April 29, 2012 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the index appearing under Item 15(a)(2) presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of April 29, 2012, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for these financial statements and financial statement schedule, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the Report of Management on Internal Control over Financial Reporting appearing under Item 8. Our responsibility is to express opinions on these financial statements, on the financial statement schedule, and on the Company’s internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/  PRICEWATERHOUSECOOPERS LLP

Pittsburgh, Pennsylvania
June 15, 2012


32



H. J. Heinz Company and Subsidiaries
Consolidated Statements of Income
 
Fiscal Year Ended
 
April 29, 2012
 
April 27, 2011
 
April 28, 2010
 
(52 1/2 Weeks)
 
(52 Weeks)
 
(52 Weeks)
 
(In thousands, except per share amounts)
Sales
$
11,649,079

 
$
10,706,588

 
$
10,494,983

Cost of products sold
7,649,549

 
6,754,048

 
6,700,677

Gross profit
3,999,530

 
3,952,540

 
3,794,306

Selling, general and administrative expenses
2,548,362

 
2,304,350

 
2,235,078

Operating income
1,451,168

 
1,648,190

 
1,559,228

Interest income
34,615

 
22,565

 
45,137

Interest expense
294,104

 
275,398

 
295,711

Other expense, net
(8,236
)
 
(21,188
)
 
(18,200
)
Income from continuing operations before income taxes
1,183,443

 
1,374,169

 
1,290,454

Provision for income taxes
243,535

 
368,221

 
358,514

Income from continuing operations
939,908

 
1,005,948

 
931,940

Loss from discontinued operations, net of tax

 

 
(49,597
)
Net income
939,908

 
1,005,948

 
882,343

Less: Net income attributable to the noncontrolling interest
16,749

 
16,438

 
17,451

Net income attributable to H. J. Heinz Company
$
923,159

 
$
989,510

 
$
864,892

Income/(loss) per common share:
 

 
 

 
 

Diluted
 

 
 

 
 

Continuing operations attributable to H. J. Heinz Company common shareholders
$
2.85

 
$
3.06

 
$
2.87

Discontinued operations attributable to H. J. Heinz Company common shareholders

 

 
(0.16
)
Net income attributable to H. J. Heinz Company common shareholders
$
2.85

 
$
3.06

 
$
2.71

Average common shares outstanding—diluted
323,321

 
323,042

 
318,113

Basic
 

 
 

 
 

Continuing operations attributable to H. J. Heinz Company common shareholders
$
2.87

 
$
3.09

 
$
2.89

Discontinued operations attributable to H. J. Heinz Company common shareholders

 

 
(0.16
)
Net income attributable to H. J. Heinz Company common shareholders
$
2.87

 
$
3.09

 
$
2.73

Average common shares outstanding—basic
320,686

 
320,118

 
315,948

Cash dividends per share
$
1.92

 
$
1.80

 
$
1.68

Amounts attributable to H. J. Heinz Company common shareholders:
 

 
 

 
 

Income from continuing operations, net of tax
$
923,159

 
$
989,510

 
$
914,489

Loss from discontinued operations, net of tax

 

 
(49,597
)
Net income
$
923,159

 
$
989,510

 
$
864,892


See Notes to Consolidated Financial Statements


33



H. J. Heinz Company and Subsidiaries
Consolidated Balance Sheets

 
April 29,
2012
 
April 27,
2011
 
(In thousands)
Assets
 

 
 

Current assets:
 

 
 

Cash and cash equivalents
$
1,330,441

 
$
724,311

Trade receivables (net of allowances: 2012—$10,680 and 2011—$10,909)
815,600

 
1,039,064

Other receivables (net of allowances: 2012—$607 and 2011—$503)
177,910

 
225,968

Inventories:
 

 
 

Finished goods and work-in-process
1,082,317

 
1,165,069

Packaging material and ingredients
247,034

 
286,477

Total inventories
1,329,351

 
1,451,546

Prepaid expenses
174,795

 
159,521

Other current assets
54,139

 
153,132

Total current assets
3,882,236

 
3,753,542

Property, plant and equipment:
 

 
 

Land
81,185

 
85,457

Buildings and leasehold improvements
1,009,379

 
1,019,311

Equipment, furniture and other
4,175,997

 
4,119,947

 
5,266,561

 
5,224,715

Less accumulated depreciation
2,782,423

 
2,719,632

Total property, plant and equipment, net
2,484,138

 
2,505,083

Other non-current assets:
 

 
 

Goodwill
3,185,527

 
3,298,441

Trademarks, net
1,090,892

 
1,156,221

Other intangibles, net
407,802

 
442,563

Other non-current assets
932,698

 
1,074,795

Total other non-current assets
5,616,919

 
5,972,020

Total assets
$
11,983,293

 
$
12,230,645


See Notes to Consolidated Financial Statements


34



H. J. Heinz Company and Subsidiaries
Consolidated Balance Sheets
 
April 29,
2012
 
April 27,
2011
 
(In thousands)
Liabilities and Equity
 

 
 

Current liabilities:
 

 
 

Short-term debt
$
46,460

 
$
87,800

Portion of long-term debt due within one year
200,248

 
1,447,132

Trade payables
1,202,398

 
1,337,620

Other payables
146,414

 
162,047

Accrued marketing
303,132

 
313,389

Other accrued liabilities
647,769

 
715,147

Income taxes
101,540

 
98,325

Total current liabilities
2,647,961

 
4,161,460

Long-term debt and other non-current liabilities:
 

 
 

Long-term debt
4,779,981

 
3,078,128

Deferred income taxes
817,928

 
897,179

Non-pension post-retirement benefits
231,452

 
216,172

Other non-current liabilities
581,390

 
570,571

Total long-term debt and other non-current liabilities
6,410,751

 
4,762,050

Redeemable noncontrolling interest
113,759

 
124,669

Equity:
 

 
 

Capital stock:
 

 
 

Third cumulative preferred, $1.70 first series, $10 par value(1)
61

 
69

Common stock, 431,096 shares issued, $0.25 par value
107,774

 
107,774

 
107,835

 
107,843

Additional capital
594,608

 
629,367

Retained earnings
7,567,278

 
7,264,678

 
8,269,721

 
8,001,888

Less:
 

 
 

Treasury shares, at cost (110,870 shares at April 29, 2012 and 109,818 shares at April 27, 2011)
4,666,404

 
4,593,362

Accumulated other comprehensive loss
844,728

 
299,564

Total H.J. Heinz Company shareholders’ equity
2,758,589

 
3,108,962

Noncontrolling interest
52,233

 
73,504

Total equity
2,810,822

 
3,182,466

Total liabilities and equity
$
11,983,293

 
$
12,230,645



(1)
The preferred stock outstanding is convertible at a rate of one share of preferred stock into 15 shares of common stock. The Company can redeem the stock at $28.50 per share. As of April 29, 2012, there were authorized, but unissued, 2,200 shares of third cumulative preferred stock for which the series had not been designated.
See Notes to Consolidated Financial Statements


35



H. J. Heinz Company and Subsidiaries
Consolidated Statements of Equity
 
April 29, 2012
 
April 27, 2011
 
April 28, 2010
 
 
Shares
 
Dollars
 
Shares
 
Dollars
 
Shares
 
Dollars
 
 
(In thousands, expect per share amounts)
PREFERRED STOCK
 

 
 

 
 

 
 

 
 

 
 

 
Balance at beginning of year
7

 
$
69

 
7

 
$
70

 
7

 
$
70

 
Conversion of preferred into common stock
(1
)
 
(8
)
 

 
(1
)
 

 

 
Balance at end of year
6

 
61

 
7

 
69

 
7

 
70

 
Authorized shares- April 29, 2012
6

 
 

 
 

 
 

 
 

 
 

 
COMMON STOCK
 

 
 

 
 

 
 

 
 

 
 

 
Balance at beginning of year
431,096

 
107,774

 
431,096

 
107,774

 
431,096

 
107,774

 
Balance at end of year
431,096

 
107,774

 
431,096

 
107,774

 
431,096

 
107,774

 
Authorized shares- April 29, 2012
600,000

 
 

 
 

 
 

 
 

 
 

 
ADDITIONAL CAPITAL
 

 
 

 
 

 
 

 
 

 
 

 
Balance at beginning of year
 

 
629,367

 
 

 
657,596

 
 

 
737,917

 
Conversion of preferred into common stock
 

 
(539
)
 
 

 
(39
)
 
 

 
(29
)
 
Stock options exercised, net of shares tendered for payment
 

 
(15,220
)
(3) 
 

 
(26,482
)
(3) 
 

 
(21,717
)
(3) 
Stock option expense
 

 
10,864

 
 

 
9,447

 
 

 
7,897

 
Restricted stock unit activity
 

 
4,305

 
 

 
(8,119
)
 
 

 
(9,698
)
 
Purchase of subsidiary shares from noncontrolling interests(1)
 

 
(34,483
)
 
 

 
(2,411
)
 
 

 
(54,209
)
 
Other, net(2)
 

 
314

 
 

 
(625
)
 
 

 
(2,565
)
 
Balance at end of year
 

 
594,608

 
 

 
629,367

 
 

 
657,596

 
RETAINED EARNINGS
 

 
 

 
 

 
 

 
 

 
 

 
Balance at beginning of year
 

 
7,264,678

 
 

 
6,856,033

 
 

 
6,525,719

 
Net income attributable to H.J. Heinz Company
 

 
923,159

 
 

 
989,510

 
 

 
864,892

 
Cash dividends:
 

 
 

 
 

 
 

 
 

 
 

 
Preferred (per share $1.70 per share in 2012, 2011 and 2010)
 

 
(9
)
 
 

 
(12
)
 
 

 
(9
)
 
Common (per share $1.92, $1.80, and $1.68 in 2012, 2011 and 2010, respectively)
 

 
(619,095
)
 
 

 
(579,606
)
 
 

 
(533,543
)
 
Other(4)
 

 
(1,455
)
 
 

 
(1,247
)
 
 

 
(1,026
)
 
Balance at end of year
 

 
7,567,278

 
 

 
7,264,678

 
 

 
6,856,033

 
TREASURY STOCK
 

 
 

 
 

 
 

 
 

 
 

 
Balance at beginning of year
(109,819
)
 
(4,593,362
)
 
(113,404
)
 
(4,750,547
)
 
(116,237
)
 
(4,881,842
)
 
Shares reacquired
(3,860
)
 
(201,904
)
 
(1,425
)
 
(70,003
)
 

 

 
Conversion of preferred into common stock
12

 
547

 
1

 
40

 
1

 
29

 
Stock options exercised, net of shares tendered for payment
2,298

 
105,144

 
4,495

 
203,196

 
2,038

 
94,315

 
Restricted stock unit activity
303

 
14,087

 
296

 
13,756

 
470

 
21,864

 
Other, net(2)
195

 
9,084

 
218

 
10,196

 
324

 
15,087

 
Balance at end of year
(110,871
)
 
$
(4,666,404
)
 
(109,819
)
 
$
(4,593,362
)
 
(113,404
)
 
$
(4,750,547
)
 


(1)
See Note No. 5 for further details.
(2)
Includes activity of the Global Stock Purchase Plan.
(3)
Includes income tax benefit resulting from exercised stock options.
(4)
Includes unpaid dividend equivalents on restricted stock units.
(5)
Comprised of unrealized translation adjustment of $(23,152), pension and post-retirement benefits net prior service cost of $(12,134) and net losses of $(816,060), and deferred net losses on derivative financial instruments of $6,618.
See Notes to Consolidated Financial Statements


36



H. J. Heinz Company and Subsidiaries
Consolidated Statements of Equity
 
April 29, 2012
 
April 27, 2011
 
April 28, 2010
 
 
Shares
 
Dollars
 
Shares
 
Dollars
 
Shares
 
Dollars
 
 
(In thousands, expect per share amounts)
 
OTHER COMPREHENSIVE (LOSS)/INCOME
 
 
 

 
 
 
 

 
 
 
 

 
Balance at beginning of year
 
 
$
(299,564
)
 
 
 
$
(979,581
)
 
 
 
$
(1,269,700
)
 
Net pension and post-retirement benefit (losses)/gains
 
 
(258,067
)
 
 
 
77,355

 
 
 
78,871

 
Reclassification of net pension and post-retirement benefit losses to net income
 
 
56,813

 
 
 
53,353

 
 
 
38,903

 
Unrealized translation adjustments
 
 
(359,771
)
 
 
 
563,060

 
 
 
193,600

 
Net change in fair value of cash flow hedges
 
 
30,405

 
 
 
9,790

 
 
 
(32,488
)
 
Net hedging (gains)/losses reclassified into earnings
 
 
(14,088
)
 
 
 
(21,365
)
 
 
 
13,431

 
Purchase of subsidiary shares from noncontrolling interests(1)
 
 
(456
)
 
 
 
(2,176
)
 
 
 
(2,198
)
 
Balance at end of year
 
 
(844,728
)
(5) 
 
 
(299,564
)
 
 
 
(979,581
)
 
TOTAL H.J. HEINZ COMPANY SHAREHOLDERS’ EQUITY
 
 
2,758,589

 
 
 
3,108,962

 
 
 
1,891,345

 
NONCONTROLLING INTEREST
 
 
 

 
 
 
 

 
 
 
 

 
Balance at beginning of year
 
 
73,504

 
 
 
57,151

 
 
 
59,167

 
Net income attributable to the noncontrolling interest
 
 
15,884

 
 
 
16,438

 
 
 
17,451

 
Other comprehensive income, net of tax:
 
 
 

 
 
 
 

 
 
 
 

 
Net pension and post-retirement benefit losses
 
 
(12
)
 
 
 
(57
)
 
 
 
(1,266
)
 
Unrealized translation adjustments
 
 
(5,945
)
 
 
 
4,816

 
 
 
8,411

 
Net change in fair value of cash flow hedges
 
 
(28
)
 
 
 
(395
)
 
 
 
(788
)
 
Net hedging losses reclassified into earnings
 
 
277

 
 
 
571

 
 
 
254

 
Purchase of subsidiary shares from noncontrolling interests(1)
 
 
(19,885
)
 
 
 
(1,750
)
 
 
 
(5,467
)
 
Dividends paid to noncontrolling interest
 
 
(11,562
)
 
 
 
(3,270
)
 
 
 
(20,611
)
 
Balance at end of year
 
 
52,233

 
 
 
73,504

 
 
 
57,151

 
TOTAL EQUITY
 
 
$
2,810,822

 
 
 
$
3,182,466

 
 
 
$
1,948,496

 
COMPREHENSIVE INCOME
 
 
 

 
 
 
 

 
 
 
 

 
Net income
 
 
$
939,908

 
 
 
$
1,005,948

 
 
 
$
882,343

 
Other comprehensive income/loss, net of tax:
 
 
 

 
 
 
 

 
 
 
 

 
Net pension and post-retirement benefit (losses)/gains
 
 
(258,079
)
 
 
 
77,298

 
 
 
77,605

 
Reclassification of net pension and post-retirement benefit losses to net income
 
 
56,813

 
 
 
53,353

 
 
 
38,903

 
Unrealized translation adjustments
 
 
(377,491
)
 
 
 
567,876

 
 
 
202,011

 
Net change in fair value of cash flow hedges
 
 
30,377

 
 
 
9,395

 
 
 
(33,276
)
 
Net hedging (gains)/losses reclassified into earnings
 
 
(13,811
)
 
 
 
(20,794
)
 
 
 
13,685

 
Total comprehensive income
 
 
377,717

 
 
 
1,693,076

 
 
 
1,181,271

 
Comprehensive loss/(income) attributable to the noncontrolling interest
 
 
734

 
 
 
(21,373
)
 
 
 
(24,062
)
 
Comprehensive income attributable to H.J. Heinz Company
 
 
$
378,451

 
 
 
$
1,671,703

 
 
 
$
1,157,209

 
Note: See Footnote explanations on Page 36.
 
 
 

 
 
 
 

 
 
 
 

 

See Notes to Consolidated Financial Statements


37



H. J. Heinz Company and Subsidiaries
Consolidated Statements of Cash Flows
 
Fiscal Year Ended
 
April 29,
2012
 
April 27,
2011
 
April 28,
2010
 
(52 1/2 Weeks)
 
(52 Weeks)
 
(52 Weeks)
 
(In thousands)
Operating activities:
 

 
 

 
 

Net income
$
939,908

 
$
1,005,948

 
$
882,343

Adjustments to reconcile net income to cash provided by operating activities:
 

 
 

 
 

Depreciation
295,718

 
255,227

 
254,528

Amortization
47,075

 
43,433

 
48,308

Deferred tax (benefit)/provision
(94,816
)
 
153,725

 
220,528

Net losses on divestitures

 

 
44,860

Pension contributions
(23,469
)
 
(22,411
)
 
(539,939
)
Asset write-downs from Fiscal 2012 productivity initiatives
58,736

 

 

Other items, net
75,375

 
98,172

 
90,938

Changes in current assets and liabilities, excluding effects of acquisitions and divestitures:
 

 
 

 
 

Receivables (includes proceeds from securitization)
171,832

 
(91,057
)
 
121,387

Inventories
60,919