03/09 07:24 Heinz Reports Higher Earnings; Third Quarter EPS of 63 Cents Up
5%, <HNZ.N>
Heinz Reports Higher Earnings;
Third Quarter EPS of 63 Cents Up 5%, Excluding Special Items;
EPS up 12.5%, Excluding Effect of Weight Watchers and Special Items
PITTSBURGH, Pa., March 9, 2000 /PRNewswire/ -- H. J. Heinz Company (NYSE: HNZ) today reported that third quarter Fiscal 2000 diluted earnings per share increased 5.0% to $0.63 per share from $0.60 per share last year. (Note: All earnings per share amounts are presented on an after-tax diluted basis.) Net income increased $7.7 million to $227.2 million from $219.5 million. These results exclude special items which are described in the tables below. Additionally, removing the impact of the Weight Watchers classroom business which was sold in the second quarter, diluted earnings per share increased 12.5% and net income increased 9.5%. Including the special items, third quarter diluted earnings per share was $0.47 per share compared to $0.33 per share in last year's third quarter, and net income was $171.1 million compared to $120.6 million last year.
Sales were up 8.7% from volume and acquisitions (volume increased 2.6% and acquisitions increased 6.1%). Sales were reduced by divestitures of 5.3% (primarily the Weight Watchers classroom business), pricing of 1.6% and foreign exchange translation rates of 1.2%. On a consolidated basis, sales for the quarter increased $12.6 million or 0.6%.
Operating income for the third quarter increased 2.5% to $418.1 million from $408.1 million last year, excluding special items in both periods. Additionally, removing the impact of the Weight Watchers classroom business in the prior year, operating income increased 9.7%. Including special items, third quarter operating income increased to $336.6 million from $266.4 million last year.
The effective tax rate for the third quarter of Fiscal 2000 was 36.1% compared to 40.1% last year. Excluding special items, the effective tax rate for the third quarter was 35.0% compared to 36.0% last year.
Maintaining Growth Momentum
Commenting on the quarter, Heinz President and CEO William R. Johnson said: "Our top-line growth strategy continues to gain momentum, as we focus on our power brands and on marketing to key consumer trends. The quarter saw continued sales increases in ketchup, condiments and sauces, foodservice, and our businesses across Asia. Our third quarter performance confirms our confidence that we are on track to deliver our year-end target of 6 to 7% EPS growth while substantially increasing spending behind our key brands."
THIRD QUARTER HIGHLIGHTS
North American Dry
Mr. Johnson added: "In the U.S., we continue to generate excitement among young consumers through creative marketing in ketchup, such as the new Heinz ketchup Pokemon labels and video promotion. The recently announced agreement to acquire Beech-Nut baby food is expected to give Heinz greater critical mass to drive innovation and growth in the U.S. infant feeding category, just as we have done in the U.K., Italy, Canada, Australia and New Zealand."
Sales volume for North American Dry increased 3.0%, due to continued strong sales of ketchup and condiments, foodservice and tuna. This volume growth along with acquisitions and a slightly stronger Canadian dollar increased sales by 5.9%, offset by lower pricing, primarily in tuna and pet food, which reduced sales by 2.8%, and divestitures, which reduced sales by 2.5%. In pet food, lower prices were a result of the company's decision to refocus its marketing to achieve more competitive price points on the shelf.
Foodservice operations continued its impressive performance, with single- serve ketchup up 8.4% in volume.
Operating income increased 9.8%, excluding special items, led by the ongoing strong performance of Heinz U.S.A. Including special items, operating income decreased 6.1%.
North American Frozen Foods
Mr. Johnson said: "In frozen foods, we have become a leading innovator with a number of new products to drive growth and excitement in this category. The national roll-out of Boston Market Home Style Frozen Meals is well underway and Smart Ones frozen entrees continue to perform very well with another quarter of double-digit sales growth. The introduction of the new resealable Ore-Ida package should revolutionize the frozen potato business."
The continued roll-out of Boston Market meals in grocery, the elimination of several non-core product lines, and poor performance on Budget Gourmet resulted in reduced operating income of 8.5% for the quarter, excluding special items. The divestiture of several non-core product lines reduced sales in the quarter by 4.4%, volume decreased 1.0% and lower pricing reduced sales by 1.3%, resulting in an overall sales decrease of 6.7% to $227.1 million.
Europe
Mr. Johnson said: "Our European businesses had a strong quarter, with sales up 5.7% to $650.2 million. Our developing partnerships with global retail customers will enable us to leverage their international expansion into a new growth opportunity for Heinz brands. We are successfully integrating the newly acquired UB Frozen and Chilled Foods business with brands such as San Marco pizza and Linda McCartney vegetarian/meat-free products to make Heinz a major player in Europe's fast-growing frozen market."
Sales volume increased 2.3%, largely as a result of an increase in canned seafood sales. Acquisitions, net of divestitures, increased sales 11.8%, primarily due to the acquisition of the brands of United Biscuit's European Frozen and Chilled Division. Excluding special items, operating income for the quarter increased 6.8%, or 14.1%, on a constant currency basis. Asia/Pacific
Mr. Johnson noted: "We had outstanding third-quarter results with sales up 23.5% and operating income up 35%. This growing business represented 13% of global sales for the quarter. We also are focused on sustaining our growth in these rapidly growing markets through new product introductions, acquisitions, joint ventures and geographic expansion. Our recently announced joint venture with Nutri Asia will make us the leader in the Philippines' ketchup and sauces market and builds on the success of our Indonesian joint venture, ABC Sauces, the world's second largest soy sauce brand, whose sales are growing better than 20% per year. Our launch of jarred baby food in China significantly expands our presence in the world's most populous market. And our introduction of Heinz ketchup in India adds another power brand for Heinz in this large and growing market."
New Products
During the third quarter, Heinz introduced a number of new products and line extensions around the world to address changing tastes and trends across its major categories, including:
Ketchup, Condiments and Sauces
Japan: Nichiryu Meat Sauce
Holland: Pasar Sweet Soy Sauce
Malaysia: Heinz Ketchup Away-from-home
United States: Cristoforo Colombo Pizza Sauce
Hong Kong: Salty Soy Sauce
Japan: Fondue de Tomates; Hayashi Rice Sauce
Convenience Foods
Caribbean: Macaroni and Cheese, Beef Ravioli, Spaghetti and
Meatballs
Australia: Tom Piper Braised Steak, Tomato and Onions; Breakfast
Sausage
Japan: Clam and Vegetable Chowder
United Kingdom: Tweenies pasta shapes; Happy New Year 2000 Spaghetti
Hoops
Frozen Food
South Africa: Microwaveable Heinz French Fries
Infant Feeding
India: Farex infant biscuits
Malaysia: Bread Sticks with cheese
Australia: Heinz creamy apricot rice pudding, chicken and brown rice
risotto
Italy: Plasmon strained rabbit
China: 15 varieties of Heinz strained fruits and vegetables
Tuna
Australia: Greenseas Heat and Serve Tuna Plus range
Pet Foods
Japan: Nekono Kimochi tuna and vegetable
Uruguay: Top Nutrition dry cat and dog foods
Argentina: Rosco meat with vegetables
Organic and Nutritional
Italy: Bi-Aglut vanilla-creme caramel dessert, Bi-Aglut biscuit,
Aproten grain-shaped pasta
India: Complan Crunch Timers nutritional biscuits, Glucon D
energy biscuits
Indonesia: ABC orange, jasmine and mango teas
Third Quarter Special Items
The third quarter results include Operation Excel implementation costs of $62.7 million pre-tax ($0.12 per share) and additional Operation Excel restructuring charges of $18.8 million pre-tax ($0.03 per share). Last year's third quarter results included restructuring charges and implementation costs of $141.7 million pre-tax ($0.27 per share). At its March meeting, the company's Board of Directors approved additional Operation Excel initiatives which will be recognized in the fourth quarter and will be implemented
COPYRIGHT ¸ 1999 REUTERS LIMITED. ALL RIGHTS RESERVED.
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