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Heinz Reports Double-Digit EPS Growth to $0.90 from Continuing Operations; Reaffirms Previously Announced Fiscal 2013 Full-Year Sales and Profit Outlook

Fiscal 2013 Second-Quarter Results – Continuing Operations, Excluding Fiscal 2012 Productivity Charges:

  • Heinz delivered its 30th consecutive quarter of organic sales growth (volume plus price) of 3.3%.
  • Reported sales grew 0.5% to $2.83 billion, despite a -2.4% foreign currency exchange impact.
  • Emerging Markets delivered 13.2% organic sales growth (+10.3% reported) and represented 23% of total Company sales.
  • Top 15 Brands delivered organic sales growth of 4.6% (+1.7% reported).
  • Global Ketchup posted 5.0% organic sales growth (+3.8% reported).
  • Net income grew 10.4% to $290 million (+22.3% reported).
  • Marketing investment increased 13.4% on a constant currency basis (10.0% reported).
  • Operating income declined 1.0% (+9.4% reported).
  • EPS grew 11.1% (+23.3% reported).
  • On a constant currency basis, sales grew 2.9%, operating income increased 0.5% and EPS rose 13.6% (excluding charges for productivity initiatives in Fiscal 2012).
  • Heinz reaffirms previously announced Fiscal 2013 full-year sales and profit outlook.

Reconciliations of non-GAAP amounts are set forth in the attached financial tables. Results excluding productivity chargesin Fiscal 2012 represent the Company’s reported results adjusted to exclude charges for targeted workforce reductions, asset write-offs associated with factory closures and other implementation costs taken in Fiscal 2012 to, among other things, increase manufacturing effectiveness and accelerate growth. Organic sales are defined as volume plus price or total sales growth excluding the impact of foreign exchange and acquisitions and divestitures. Operating free cash flow is defined as cash from operations less capital expenditures net of proceeds from disposal of Property, Plant & Equipment. Also, constant currency as used in this press release is defined as the reported amount adjusted for translation (the effect of changes in average foreign exchange rates between the current period and the corresponding prior year) and the impact of current-year foreign currency translation hedges.

Category:

Tuesday, November 20, 2012 7:06 am EST

Dateline:

PITTSBURGH

Public Company Information:

NYSE:
HNZ

PITTSBURGH--(BUSINESS WIRE)--H.J. Heinz Company (NYSE:HNZ) today reported solid second-quarter results, with growth of 11.1% in earnings per share from continuing operations (excluding charges for productivity initiatives in Fiscal 2012). The results were fueled by dynamic growth in Emerging Markets, continued growth in Global Ketchup and the Company's Top 15 Brands, and a favorable tax rate. This enabled Heinz to significantly increase investment in marketing and global capabilities to drive future growth.

“Heinz delivered solid results while making significant investments in our businesses and brands to drive growth,” said Chairman, President and CEO William R. Johnson. “Notably, Heinz delivered its 30th consecutive quarter of organic sales growth, led by our trio of growth engines: Emerging Markets, Global Ketchup and the Company's Top 15 Brands.”

Second-Quarter Results - Continuing Operations

In the second quarter ended October 28, 2012, reported sales increased 0.5% to $2.83 billion, with unfavorable foreign currency impacting sales by 2.4%. Net pricing increased 1.9% and volume grew 1.4%. Divestitures reduced total sales by 0.4%.

Heinz delivered organic sales growth of 3.3%, led by Emerging Markets, which posted organic sales growth of 13.2% for the quarter (10.3% reported). Organic sales growth was again impacted by prior-year decisions to exit T.G.I. Friday's® frozen meals and downsize the Long Fong® frozen business in China. Emerging Markets represented 23% of total Company sales.

The Company's Top 15 Brands achieved organic sales growth of 4.6% (1.7% reported), led by Heinz®, Quero®, ABC®, Classico®, Golden Circle®, Master® and Ore-Ida® brands. Global Ketchup delivered organic sales growth of 5.0% (3.8% on a reported basis), driven by strong performance in the U.S., Brazil and Russia.

Gross profit of $1.01 billion grew 4.7% and gross margin increased 140 basis points to 35.8%. Excluding charges for productivity initiatives in Fiscal 2012, gross profit increased 1.8% and gross margin increased 40 basis points, despite a $22 million unfavorable impact from foreign exchange and higher commodity costs.

Marketing increased 13.4% on a constant currency basis (10.0% increase on a reported basis), reflecting a significant increase in the U.S. and continued support in Emerging Markets.

SG&A expenses (which excludes marketing) of $502 million increased 0.3% to 17.8% of sales, and increased 2.3% excluding charges for productivity initiatives in Fiscal 2012, reflecting strategic investments to drive growth primarily in Emerging Markets and global systems.

Operating income of $392 million grew 9.4%. Excluding charges for productivity initiatives in Fiscal 2012, operating income declined 1.0% due to a 1.5% unfavorable impact from foreign exchange.

Heinz benefited from a previously projected low tax rate for the quarter. The effective tax rate was 9.6% compared to 18.1% a year ago or 19.6% excluding charges for productivity initiatives in Fiscal 2012. The Company expects a full-year tax rate of around 20%.

Net income from continuing operations of $290 million grew 22.3%, or 10.4% excluding charges for productivity initiatives in Fiscal 2012.

Diluted earnings per share from continuing operations of $0.90 grew 23.3%, or 11.1% excluding charges for productivity initiatives in Fiscal 2012. EPS was unfavorably impacted by $0.02 from foreign currency translation and translation hedges.

On a constant currency, continuing operations basis, sales grew 2.9% and excluding charges for productivity initiatives in Fiscal 2012, operating income increased 0.5% and EPS rose 13.6%. Total Company net income, including discontinued operations, was $289 million and EPS grew to $0.90.

Fiscal 2013 Outlook

“Heinz remains on track to deliver our previously announced sales and profit outlook for Fiscal 2013,” Mr. Johnson said.

For the full year, Heinz expects:

  • At least 4.0% organic sales growth;
  • Constant currency EPS growth of 5-8% on a continuing operations basis and excluding charges for productivity initiatives in Fiscal 2012; and
  • Strong operating free cash flow of $1 billion plus.

The Heinz Board of Directors on November 14 approved the continuation of the Company's share repurchase program by authorizing the multi-year repurchase of up to 15,000,000 additional shares.

SECOND-QUARTER OPERATING RESULTS BY BUSINESS SEGMENT

North American Consumer Products

Sales of $795 million increased 0.1%, while increasing 0.4% on an organic basis. Volume increased 1.2%, driven by Heinz® Gravy and Ketchup, Classico® pasta sauces and Ore-Ida® frozen potatoes, partially offset by the exit of T.G.I. Friday's® frozen meals. Net pricing declined 0.8%. Sales were unfavorably impacted 0.6% from the exit of the Boston Market® license. Favorable Canadian exchange translation rates increased sales 0.3%. Operating income of $190 million decreased 5.7%, reflecting a significant increase in marketing.

Europe

Sales of $808 million declined 4.2%, while increasing 0.1% on an organic basis. Volume increased 0.3% as strong growth in Russia and the U.K. was partially offset by declines in Italy and The Netherlands. Net pricing decreased 0.2%. Divestitures decreased sales by 0.6%. Unfavorable foreign exchange translation rates reduced sales 3.8%. Operating income of $140 million declined 2.8%, reflecting the impact of foreign currency and higher marketing investment.

Asia/Pacific

Sales of $606 million grew 2.3%, while increasing 4.1% on an organic basis. Volume increased 1.9% led by Master® soy sauce and Heinz® Ketchup and sauces in China. These results reflect the planned decreases in Long Fong® frozen products. Pricing increased 2.2%, driven primarily by Indonesia. Unfavorable foreign exchange translation rates reduced sales 1.9%. Operating income of $50 million grew 24.5%, reflecting strong results in both Developed and Emerging Markets.

U.S. Foodservice

Both reported and organic sales grew 4.1% to $348 million. Volume was unchanged in the quarter as growth in Heinz® Ketchup was largely offset by a decline in soup. Pricing increased sales 4.1%, largely due to prior-year increases to offset commodity cost increases. Operating income of $44 million rose 26.8%, due to higher sales and the benefit from productivity initiatives.

Rest of World

Sales of $270 million grew 8.6%, while increasing 19.8% on an organic basis. Volume increased 6.5%, led by Quero® in Brazil. Pricing increased 13.3%, led by Brazil and Venezuela. Unfavorable foreign exchange translation rates reduced sales 11.3%. Operating income of $27 million decreased 15.6% from a very strong growth quarter last year, reflecting unfavorable foreign exchange, inflation in Venezuela and capability investments in Brazil.

Year-to-Date

For the six months ended October 28, 2012, sales of $5.62 billion decreased 0.5%, and increased 4.0% on an organic basis. Operating income of $802 million increased 10.1%, while decreasing 0.6% excluding charges for productivity initiatives in Fiscal 2012. Net income of $569 million from continuing operations grew 22.7%. Excluding charges for productivity initiatives in Fiscal 2012, net income rose 9.9%. The year-to-date tax rate was 13.8% versus 20.7% last year. The lower tax rate reflects foreign tax planning initiatives and has helped fund marketing capability investments in the business. Diluted earnings per share from continuing operations of $1.76 grew 23.1% and increased 10.0% excluding charges for productivity initiatives in Fiscal 2012. EPS this year was reduced by $0.07 from unfavorable foreign currency translation. On a constant currency, continuing operations basis, sales grew 3.5% and excluding charges for productivity initiatives in Fiscal 2012, operating income grew 2.8% and EPS rose 14.4%. Total Company net income including discontinued operations was $547 million and EPS grew to $1.70.

Discontinued Operations

In the first quarter of Fiscal 2013, Heinz completed the previously announced sale of its U.S. Foodservice frozen desserts business. This transaction resulted in a $32.7 million pre-tax ($21.1 million after-tax) loss, which has been recorded in discontinued operations. The frozen desserts business had reported sales of $35 million in the six months ended October 26, 2011.

Conference Call/Webcast on Second-Quarter Fiscal 2013 Results

H.J. Heinz Company will host a conference call and Webcast for Securities Analysts and Media (listen only) to discuss the Company’s second-quarter Fiscal 2013 results and its Fiscal 2013 outlook today, November 20, 2012 at 8:00 a.m. Eastern time.

The meeting will be hosted by:

  • William R. Johnson, Chairman, President and Chief Executive Officer
  • Art Winkleblack, Executive Vice President and Chief Financial Officer
  • Margaret Nollen, Senior Vice President, Strategy and Investor Relations

A Webcast of the meeting and the presentation slides will be available to the general public in real-time and archived for playback on the Company Website, www.Heinz.com.

Live Event Dial-in Details:

Participants:
Institutional Investors/Analysts – U.S. Dial-In: 1-866-318-8614
Institutional Investors/Analysts – International Dial-In: 1-617-399-5133
Passcode: Heinz Earnings

Listen Only:
Media – U.S. Dial-In: 1-877-280-4953
Media – International Dial-In: 1-857-244-7310
Passcode: Heinz Earnings

SAFE HARBOR PROVISIONS FOR FORWARD-LOOKING STATEMENTS:

This press release and our other public pronouncements contain forward-looking statements within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are generally identified by the words “will,” “expects,” “anticipates,” “believes,” “estimates” or similar expressions and include our expectations as to future revenue growth, earnings, capital expenditures and other spending, dividend policy, and planned credit rating, as well as anticipated reductions in spending. These forward-looking statements reflect management’s view of future events and financial performance. These statements are subject to risks, uncertainties, assumptions and other important factors, many of which may be beyond Heinz’s control, and could cause actual results to differ materially from those expressed or implied in these forward-looking statements. Factors that could cause actual results to differ from such statements include, but are not limited to:

  • sales, 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 requirements being met at the time of declaration, as well as our Board’s view of our anticipated cash needs, and
  • other factors described in “Risk Factors” and “Cautionary Statement Relevant to Forward-Looking Information” in the Company’s Annual Report on Form 10-K for the fiscal year ended April 29, 2012 and reports on Forms 10-Q thereafter.

The forward-looking statements are and will be based on management’s then current views and assumptions regarding future events and speak only as of their dates. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by the securities laws.

ABOUT HEINZ: H.J. Heinz Company, offering “Good Food Every Day”™ is one of the world’s leading marketers and producers of healthy, convenient and affordable foods specializing in ketchup, sauces, meals, soups, snacks and infant nutrition. Heinz provides superior quality, taste and nutrition for all eating occasions whether in the home, restaurants, the office or “on-the-go.” Heinz is a global family of leading branded products, including Heinz® Ketchup, sauces, soups, beans, pasta and infant foods (representing over one third of Heinz’s total sales), Ore-Ida® potato products, Weight Watchers® Smart Ones® entrées, T.G.I. Friday’s® snacks, and Plasmon infant nutrition. Heinz is famous for its iconic brands on six continents, showcased by Heinz® Ketchup, The World’s Favorite Ketchup®.

 
 

H.J. Heinz Company and Subsidiaries

Consolidated Statements of Income

         
         
     Second Quarter Ended  Six Months Ended
     

October 28,

 

October 26,

  October 28, October 26,
     2012 2011  2012 2011
(In Thousands, Except per Share Amounts)    FY 2013 FY 2012  FY 2013 FY 2012
Sales    $2,827,210  $2,813,964   $5,618,434  $5,646,562 
Cost of products sold    1,813,801  1,846,345   3,603,037  3,695,311 
Gross profit    1,013,409  967,619   2,015,397  1,951,251 
Selling, general and administrative expenses    621,712  609,474   1,213,362  1,222,568 
Operating income    391,697  358,145   802,035  728,683 
Interest income    7,833  9,191   16,191  18,968 
Interest expense    69,963  75,177   143,334  146,132 
Other (expense)/income, net    (6,264) 1,244   (3,998) (1,036)
Income from continuing operations before income taxes    323,303  293,403   670,894  600,483 
Provision for income taxes    31,037  52,999   92,624  124,505 
Income from continuing operations    292,266  240,404   578,270  475,978 
Loss from discontinued operations, net of tax    (678) (268)  (22,004) (883)
Net income    291,588  240,136   556,266  475,095 
Less: Net income attributable to the noncontrolling interest    2,144  3,127   8,795  11,972 
Net income attributable to H.J. Heinz Company    $289,444  $237,009   $547,471  $463,123 
Income/(loss) per common share:            
Diluted            
Continuing operations attributable to H.J. Heinz Company common shareholders    $0.90  $0.73   $1.76  $1.43 
Discontinued operations attributable to H.J. Heinz Company common shareholders         (0.07)  
Net income attributable to H.J. Heinz Company common shareholders    $0.90  $0.73   $1.70  $1.43 
Average common shares outstanding - diluted    323,058  323,561   322,969  323,910 
Basic            
Continuing operations attributable to H.J. Heinz Company common shareholders    $0.91  $0.74   $1.78  $1.44 
Discontinued operations attributable to H.J. Heinz Company common shareholders         (0.07)  
Net income attributable to H.J. Heinz Company common shareholders    $0.90  $0.74   $1.71  $1.44 
Average common shares outstanding - basic    320,492  320,876   320,415  321,158 
Cash dividends per share    $0.515  $0.48   $1.03  $0.96 
Amounts attributable to H.J. Heinz Company common shareholders:            
Income from continuing operations, net of tax    $290,122  $237,277   $569,475  $464,006 
Loss from discontinued operations, net of tax    (678) (268)  (22,004) (883)
Net income    $289,444  $237,009   $547,471  $463,123 
(Totals may not add due to rounding)            
             
 
 

H.J. Heinz Company and Subsidiaries

Segment Data

 
         
     Second Quarter Ended  Six Months Ended
     October 28, October 26,  October 28, October 26,
     2012 2011  2012 2011
(Amounts in thousands)    FY 2013 FY 2012  FY 2013 FY 2012
Net external sales:            
North American Consumer Products    $794,957  $794,271   $1,553,809  $1,568,892 
Europe    808,427  844,187   1,586,343  1,682,019 
Asia/Pacific    606,283  592,825   1,264,216  1,263,591 
U.S. Foodservice    348,028  334,436   663,374  642,403 
Rest of World    269,515  248,245   550,692  489,657 
Consolidated Totals    $2,827,210  $2,813,964   $5,618,434  $5,646,562 
Operating income (loss):            
North American Consumer Products    $190,341  $201,927   $373,772  $392,705 
Europe    140,398  144,470   277,592  281,909 
Asia/Pacific    49,784  39,989   122,613  101,234 
U.S. Foodservice    44,223  34,886   80,873  67,417 
Rest of World    27,094  32,119   58,107  64,415 
Other:            
Non-Operating    (60,143) (57,929)  (110,922) (101,169)
Productivity initiatives (a)      (37,317)    (77,828)
Consolidated Totals    $391,697  $358,145   $802,035  $728,683 
             
The company's revenues are generated via the sale of products in the following categories:
             
Ketchup and Sauces    $1,315,116  $1,268,332   $2,634,416  $2,578,812 
Meals and Snacks    1,072,892  1,090,462   2,043,544  2,081,912 
Infant/Nutrition    285,254  301,508   581,972  623,622 
Other    153,948  153,662   358,502  362,216 
Total    $2,827,210  $2,813,964   $5,618,434  $5,646,562 
                     

(a) Includes costs in Fiscal 2012 associated with targeted workforce reductions, asset write-offs associated with factory closures and other implementation costs in order to increase manufacturing effectiveness and accelerate productivity on a global scale. Other implementation costs primarily include professional fees and relocation costs for the establishment of a European supply chain hub in the Netherlands.

 
 

H.J. Heinz Company and Subsidiaries

Non-GAAP Performance Ratios

 

The Company reports its financial results in accordance with accounting principles generally accepted in the United States of America ("GAAP"). However, management believes that certain non-GAAP performance measures and ratios, used in managing the business, may provide users of this financial information with additional meaningful comparisons between current results and results in prior periods. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, the Company's reported results prepared in accordance with GAAP. The following table provides the calculation of the non-GAAP performance ratios discussed in the Company's press release dated November 20, 2012:

Fiscal 2013 Second Quarter Sales Variances

The following table illustrates the components of the change in net sales versus the prior year for each of the five reported business segments.

     Second Quarter Ended October 28, 2012
             Organic   Net       Total Net
             Sales   Acquisitions/   Foreign   Sales
     Volume + Price = Growth (a) + (Divestitures) + Exchange = Change
Segment:                         
North American Consumer Products    1.2%   (0.8)%   0.4%   (0.6)%   0.3%   0.1%
Europe    0.3%   (0.2)%   0.1%   (0.6)%   (3.8)%   (4.2)%
Asia/Pacific    1.9%   2.2%   4.1%   %   (1.9)%   2.3%
U.S. Foodservice    (0.1)%   4.1%   4.1%   %   %   4.1%
Rest of World    6.5%   13.3%   19.8%   %   (11.3)%   8.6%
Consolidated Totals    1.4%   1.9%   3.3%   (0.4)%   (2.4)%   0.5%
                          

Fiscal 2012 Results Excluding Charges for Productivity Initiatives

The following table reconciles the Company's Fiscal 2012 reported results to results excluding charges for productivity initiatives.

(amounts in thousands)    Second Quarter Ended October 26, 2011
         Charges for   Results excluding charges
         productivity   for productivity
Continuing Operations    Reported Results - initiatives = initiatives (b)
Sales    $2,813,964    $    $2,813,964 
Gross Profit    $967,619    $(27,451)   $995,070 
Gross Profit Margin    34.4%   (1.0)%   35.4%
SG&A excluding marketing    $500,797    $9,866    $490,931 
Operating Income    $358,145    $(37,317)   $395,462 
Effective tax rate    18.1%   31.6%   19.6%
Income from continuing operations, net of tax    $237,277    $(25,534)   $262,811 
Diluted earnings per share from continuing operations    $0.73    $(0.08)   $0.81 
                    
(amounts in thousands)    Six Months Ended October 26, 2011
         Charges for   Results excluding charges
         productivity   for productivity
Continuing Operations    Reported Results - initiatives = initiatives (b)
Operating Income    $728,683    $(77,828

)

 

  

$

806,511 
Income from continuing operations, net of tax    $464,006    $(53,982

)

 

  

$

517,988 
Diluted earnings per share from continuing operations    $1.43    $(0.17

)

 

  

$

1.60 
                    

Constant Currency

The following table reconciles the Company's results from continuing operations excluding charges for productivity initiatives in Fiscal 2012 to constant currency results for the current period.

      Results           Constant Currency
      excluding           Results excluding
      charges for           

charges for

      productivity       Currency   productivity
(amounts in thousands, except     initiatives in   Currency   Translation   initiatives in
per share amounts)     FY12 - Translation - Hedges = FY12
Continuing Operations                    
                     
Sales                    
Second Quarter Ended October 28, 2012     $2,827,210    (68,664)       $2,895,874  (c)
Second Quarter Ended October 26, 2011     $2,813,964            $2,813,964   
Change     $13,246            $81,910   
% Change     0.5%           2.9%  
                     
Six Months Ended October 28, 2012     $5,618,434    (228,062)       $5,846,496  (c)
Six Months Ended October 26, 2011     $5,646,562            $5,646,562   
Change     $(28,128)           $199,934   
% Change     (0.5)%           3.5%  
                     
Marketing                    
Second Quarter Ended October 28, 2012     $119,553    (3,726)       $123,279  (c)
Second Quarter Ended October 26, 2011     $108,677            $108,677   
Change     $10,876            $14,602   
% Change     10.0%           13.4%  
                     
Operating Income                    
Second Quarter Ended October 28, 2012     $391,697    (5,775)       $397,472  (c)
Second Quarter Ended October 26, 2011     $395,462  (b)         $395,462  (b)
Change     $(3,765)           $2,010   
% Change     (1.0)%           0.5%  
                       
      Results           Constant Currency
      excluding           Results excluding
      charges for           charges for
      productivity       Currency   productivity
      initiatives in   Currency   Translation   initiatives in
      FY12 - Translation - Hedges = FY12
Operating Income                    
Six Months Ended October 28, 2012     $802,035    (27,366)       $829,401  (c)
Six Months Ended October 26, 2011     $806,511  (b)         $806,511  (b)
Change     $(4,476)           $22,890   
% Change     (0.6)%           2.8%  
                     
Earnings per share from continuing operations- Diluted              
Second Quarter Ended October 28, 2012     $0.90    (0.01)   (0.01)   $0.92  (c)
Second Quarter Ended October 26, 2011     $0.81  (b)         $0.81  (b)
Change     $0.09            $0.11   
% Change     11.1%           13.6%  
                     
Six Months Ended October 28, 2012     $1.76    (0.07)       $1.83  (c)
Six Months Ended October 26, 2011     $1.60  (b)         $1.60  (b)
Change     $0.16            $0.23   
% Change     10.0%           14.4%  
                       
             Second Quarter Ended October 28, 2012
             Organic Sales       Acquisitions/   Total Net Sales
Organic Sales            Growth (a) + Foreign Exchange + Divestitures = Change
Emerging Markets            13.2%   (7.6)%   4.7% (d) 10.3%
Global Ketchup            5.0%   (1.1)%       3.8%
Top 15 Brands            4.6%   (2.9)%       1.7%
                          
             Six Months Ended October 28, 2012
Total Company            4.0%   (4.0)%   (0.5)%   (0.5)%
                              

(a) Organic sales growth is a non-GAAP measure that is defined as volume plus price or total sales growth excluding the impact of foreign currency translation rates and acquisitions/divestitures.
(b) Excludes costs in Fiscal 2012 associated with targeted workforce reductions, asset write-offs associated with factory closures and other implementation costs in order to increase manufacturing effectiveness and accelerate productivity on a global scale. Other implementation costs primarily include professional fees and relocation costs for the establishment of a European supply chain hub in the Netherlands.
(c) Excludes currency translation versus FY12 average rates as well as current year translation hedge.
(d) Emerging Markets sales in Fiscal 2013 now include the markets of Papua New Guinea, South Korea and Singapore. Sales in these markets were included in Developed Markets sales in the prior year and therefore, were treated as an acquisition variance when comparing current year sales to the prior year for Emerging Markets.

(Totals may not add due to rounding)

 
 

H.J. Heinz Company

Non-GAAP Performance Ratios

 

Sales Variances

The following table illustrates the components of the change in net sales versus the prior year.

Total Heinz (Continuing Operations) 2006(b)(d) 2007(b)(d) 2008(d) Q109(d) Q209(d) Q309(d) Q409(d) 2009
                    
Volume        3.9% 0.8% 3.9% 5.4% (0.9)% (6.2)% (1.9)% (1.2)%
Price        (0.1)% 2.2% 3.5% 5.3% 7.2% 8.1% 7.6% 7.2%
Acquisition        5.0% 1.3% 0.7% 0.7% 1.2% 2.5% 3.4% 2.0%
Divestiture        (1.2)% (3.1)% (0.8)%   (0.2)% (0.1)% (0.2)% (0.2)%
Exchange        (1.4)% 2.8% 5.2% 4.1% (3.2)% (11.3)% (13.9)% (6.6)%
Total Change in Net Sales        6.1% 3.9% 12.3% 15.5% 4.0% (7.1)% (5.0)% 1.3%
Total Organic Growth (a)        3.8% 3.0% 7.4% 10.7% 6.3% 1.9% 5.7% 6.0%
                        
     Q110(d) Q210(d) Q310(d) Q410(d) 2010 Q111(d) Q211(d) Q311(d) Q411(d) 2011
Volume    (3.9)% (3.8)% 1.2% 1.6% (1.3)% 2.5% 0.3% 0.5% (0.3)% 1.0%
Price    6.0% 4.6% 1.8% 1.0% 3.4% 1.1% 0.6% 1.2% 1.9% 1.2%
Acquisition    3.1% 3.1% 2.9% 0.3% 2.4% 0.1% 0.1% 1.2% 1.1% 0.6%
Divestiture    (0.2)%       (0.1)%          
Exchange    (9.0)% (1.0)% 6.9% 5.5% 0.5% (2.1)% (2.3)% (1.4)% 3.3% (0.5)%
Total Change in Net Sales    (4.0)% 2.9% 12.7% 8.3% 4.9% 1.6% (1.2)% 1.5% 6.0% 2.2%
Total Organic Growth (a)    2.1% 0.8% 3.0% 2.6% 2.1% 3.6% 0.9% 1.7% 1.6% 2.2%
                        
     Q112 Q212 Q312 Q412(c) 2012(c) Q113 Q213      
Volume    (0.6)% (2.8)% 0.5% 1.5% (0.3)% 2.5% 1.4%      
Price    3.7% 4.4% 4.2% 3.0% 3.8% 2.3% 1.9%      
Acquisition    4.7% 5.0% 3.7% 3.1% 4.1%          
Divestiture      (0.6)% (0.7)% (0.7)% (0.5)% (0.6)% (0.4)%      
Exchange    7.2% 2.4% (0.4)% (1.4)% 1.8% (5.6)% (2.4)%      
Total Change in Net Sales    15.0% 8.4% 7.3% 5.5% 8.9% (1.5)% 0.5%      
Total Organic Growth (a)    3.1% 1.6% 4.7% 4.5% 3.5% 4.8% 3.3%      

____________________________________________________
(a) Organic sales growth is a non-GAAP measure that is defined as volume plus price or total sales growth excluding the impact of foreign currency translation rates and acquisitions/divestitures.
(b) Fiscal 2007 had one less week than Fiscal 2006.
(c) Fiscal 2012 had 2 extra business days than Fiscal 2011.
(d) Amounts have not been restated for the disposal of the U.S. Foodservice frozen desserts business, which was reported in discontinued operations in Fiscal 2013.

(Totals may not add due to rounding)

Contact:

H.J. Heinz Company
Media:
Michael Mullen, 412-456-5751
Michael.mullen@us.hjheinz.com
or
Investors:
Mary Ann Bell, 412-237-9760
Maryann.bell@us.hjheinz.com