Debt and Financing Arrangements

12 Months Ended

Apr. 27, 2011

Debt and Financing Arrangements [Abstract]


7.	Debt and Financing Arrangements

In the first quarter of 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, its 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. On April 29, 2010, the Company adopted new accounting guidance related to the transfer of financial assets. The securitization agreement continues to qualify for sale accounting treatment under the new guidance. After the sale, the Company, as servicer of the assets, collects the receivables on behalf of the unaffiliated entity. On the statements of cash flows, all cash flows related to this securitization program are included as a component of operating activities because the cash received from the unaffiliated entity and the cash collected from servicing the transferred assets are not subject to significantly different risks due to the short-term nature of the Company’s trade receivables.

For the sale of receivables under the program, the Company receives initial cash funding and a deferred purchase price. The initial cash funding was $29.0 million and $84.2 million during the years ended April 27, 2011 and April 28, 2010, respectively, resulting in a decrease of $55.2 million in cash for sales under this program for Fiscal 2011 and an increase in cash of $84.2 million for Fiscal 2010. The fair value of the deferred purchase price was $173.9 million and $89.2 million as of April 27, 2011 and April 28, 2010, respectively. The decrease in cash proceeds related to the deferred purchase price was $84.7 million for the fiscal year ended April 27, 2011. This deferred purchase price is included as a trade receivable on the consolidated balance sheets and has a carrying value which approximates fair value as of April 27, 2011 and April 28, 2010, due to the nature of the short-term underlying financial assets.

Short-term debt consisted of bank debt and other borrowings of $87.8 million and $43.9 million as of April 27, 2011 and April 28, 2010, respectively. The weighted average interest rate was 3.4% and 4.7% for Fiscal 2011 and Fiscal 2010, respectively.

At April 27, 2011, the Company had a $1.2 billion credit agreement which expires in April 2012. This credit agreement supports the Company’s commercial paper borrowings. As a result, the commercial paper borrowings at April 28, 2010 are classified as long-term debt based upon the Company’s intent and ability to refinance these borrowings on a long-term basis. There were no commercial paper borrowings outstanding at April 27, 2011. The credit agreement has customary covenants, including a leverage ratio covenant. The Company was in compliance with all of its covenants as of April 27, 2011 and April 28, 2010. In June 2011, the Company expects to modify the credit agreement to increase the available borrowings under the facility to $1.5 billion as well as to extend its maturity date to 2016. In anticipation of these modifications, the Company terminated a $500 million credit agreement during April 2011. In addition, the Company has $439.2 million of foreign lines of credit available at April 27, 2011.

Long-term debt was comprised of the following as of April 27, 2011 and April 28, 2010:


	2011			2010
	(Dollars in thousands)

Commercial Paper (variable rate)	$	—		$	232,829
7.125% U.S. Dollar Notes due August 2039		625,569			624,531
8.0% Heinz Finance Preferred Stock due July 2013		350,000			350,000
5.35% U.S. Dollar Notes due July 2013		499,923			499,888
6.625% U.S. Dollar Notes due July 2011		749,982			749,878
6.00% U.S. Dollar Notes due March 2012		599,631			599,187
U.S. Dollar Remarketable Securities due December 2020		119,000			119,000
6.375% U.S. Dollar Debentures due July 2028		230,878			230,619
6.25% British Pound Notes due February 2030		206,590			188,928
6.75% U.S. Dollar Notes due March 2032		435,038			440,942
Japanese Yen Credit Agreement due October 2012 (variable rate)		182,571			159,524
Japanese Yen Credit Agreement due December 2013 (variable rate)		194,742			—
Other U.S. Dollar due May 2011—November 2034 (0.90—7.94)%		112,829			110,339
Other Non-U.S. Dollar due May 2011—May 2023 (3.50—11.25)%		67,964			61,558

		4,374,717			4,367,223
Hedge Accounting Adjustments (See Note 12)		150,543			207,096
Less portion due within one year		(1,447,132	)		(15,167	)

Total long-term debt	$	3,078,128		$	4,559,152

Weighted-average interest rate on long-term debt, including the impact of applicable interest rate swaps		4.23	%		4.45	%

On May 26, 2011, subsequent to the fiscal year end, 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. The proceeds will be used to partially refinance debt that matures in Fiscal 2012.

During the third quarter of Fiscal 2011, the Company entered into a variable rate, three-year 16 billion Japanese yen denominated credit agreement. The proceeds were used in the funding of the Foodstar acquisition and for general corporate purposes and were swapped to $193.2 million and the interest rate was fixed at 2.66%. See Note 12 for additional information.

During the first quarter of Fiscal 2010, H. J. Heinz Finance Company (“HFC”), a subsidiary of Heinz, issued $250 million of 7.125% notes due 2039. The notes are fully, unconditionally and irrevocably guaranteed by the Company. The proceeds from the notes were used for payment of the cash component of the exchange transaction discussed below as well as various expenses relating to the exchange, and for general corporate purposes.

During the second quarter Fiscal 2010, HFC issued $681 million of 7.125% notes due 2039 (of the same series as the notes discussed above), and paid $217.5 million of cash, in exchange for $681 million of its outstanding 15.590% dealer remarketable securities due December 1, 2020. In addition, HFC terminated a portion of the remarketing option by paying the remarketing agent a cash payment of $89.0 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, have been accounted for as a reduction in the book value of the debt, and will be amortized to interest expense under the effective yield method. Additionally, the Company terminated its $175 million notional total rate of return swap in the second quarter of Fiscal 2010 in connection with the dealer remarketable securities exchange transaction. See Note 12 for additional information. The next remarketing on the remaining remarketable securities ($119 million) is scheduled for December 1, 2011. If the remaining 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 the remaining 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.

During the second quarter of Fiscal 2010, the Company entered into a three-year 15 billion Japanese yen denominated credit agreement. The proceeds were swapped to $167.3 million and the interest rate was fixed at 4.084%. See Note 12 for additional information.

During the third quarter of Fiscal 2010, the Company paid off its A$281 million Australian denominated borrowings ($257 million), which matured on December 16, 2009.

HFC’s 3,500 mandatorily redeemable preferred shares are classified as long-term debt. Each share of preferred stock is entitled to annual cash dividends at a rate of 8% or $8,000 per share. On July 15, 2013, each share will be redeemed for $100,000 in cash for a total redemption price of $350 million.

Annual maturities of long-term debt during the next five fiscal years are $1,447.1 million in 2012, $225.1 million in 2013, $1,082.9 million in 2014, $5.4 million in 2015 and $5.6 million in 2016.