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H. J. Heinz Company and Subsidiaries
Notes to Consolidated Financial Statements — (Continued)
17. Commitments and Contingencies
Legal Matters:
Certain suits and claims have been filed against the Company and have not been finally
adjudicated. In the opinion of management, based upon the information that it presently
possesses, the final conclusion and determination of these suits and claims would not be expected
to have a material adverse effect on the Company’s consolidated financial position, results of
operations or liquidity.
Lease Commitments:
Operating lease rentals for warehouse, production and office facilities and equipment amounted
to approximately $115.1 million in 2011, $119.1 million in 2010 and $113.4 million in 2009. Future
lease payments for non-cancellable operating leases as of April 27, 2011 totaled $524.4 million
(2012-$90.8 million, 2013-$79.9 million, 2014-$69.1 million, 2015-$48.9 million, 2016-$41.3 million
and thereafter-$194.4 million).
As of April 27, 2011, the Company was a party to two operating leases for buildings and
equipment, one of which also includes land, under which the Company has guaranteed
supplemental payment obligations of approximately $135 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. No significant credit guarantees existed between the
Company and third parties as of April 27, 2011.
Redeemable Noncontrolling Interest:
The minority partner in Coniexpress has the right, at any time, to exercise a put option to require
the Company to purchase his 20% equity interest at a redemption value determinable from a
specified formula based on a multiple of EBITDA (subject to a fixed minimum linked to the
original acquisition date value). The Company also has a call right on this noncontrolling interest
exercisable at any time and subject to the same redemption price. The put and call options can not be
separated from the noncontrolling interest and the combination of a noncontrolling interest and the
redemption feature require classification of the minority partner’s interest as a redeemable
noncontrolling interest in the consolidated balance sheet. The initial carrying amount of the
redeemable noncontrolling interest is its fair value which will be adjusted, through retained
earnings, in subsequent periods to an amount equal to its maximum redemption value.
18. Advertising Costs
Advertising expenses (including production and communication costs) for fiscal years 2011, 2010
and 2009 were $369.6 million, $375.8 million and $303.1 million, respectively. For fiscal years 2011,
2010 and 2009, $119.0 million, $108.9 million and $105.3 million, respectively, were recorded as a
reduction of revenue and $250.6 million, $266.9 million and $197.8 million, respectively, were
recorded as a component of selling, general and administrative expenses.
19. Venezuela- Foreign Currency and Inflation
Foreign Currency
The local currency in Venezuela is the Venezuelan bolivar fuerte (“VEF”). A currency control
board exists in Venezuela that is responsible for foreign exchange procedures, including approval of
requests for exchanges of VEF for U.S. dollars at the official (government established) exchange rate.
Our business in Venezuela has historically been successful in obtaining U.S. dollars at the official
exchange rate for imports of ingredients, packaging, manufacturing equipment, and other necessary
inputs, and for dividend remittances, albeit on a delay. In May 2010, the government of Venezuela
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