ANYTIMEkANYPLACEkANYWHERE - Heinz

Realigning the company’s management teams will provide processing and product
expertise across the regions of North America, Europe and Asia/Pacific. Specifically,
Operation Excel includes:
Creating a single U.S. frozen food headquarters, resulting in the closure of the company’s
Ore-Ida head office in Boise, Idaho (completed in Fiscal 2000)
Consolidating many European administrative support functions
Creating a single North American Grocery & Foodservice headquarters in Pittsburgh,
Pennsylvania, resulting in the relocation of the company’s domestic seafood and pet food
headquarters from Newport, Kentucky
Creating two Asia/Pacific management teams with headquarters in Melbourne (for the
Australian, New Zealand and Japanese businesses) and Singapore (for all other Asian
businesses).
Growth initiatives include relaunching many of our core brands and additional investments
in marketing and pricing programs for our core businesses, particularly in ketchup, condiments
and sauces, frozen foods, infant foods and tuna.
The initiatives will result in the closure or exit of 21 factories or businesses. Management
estimates that these actions will impact approximately 6,000 employees with a net reduction
in the workforce of approximately 4,600, after expansion of certain facilities.
The pretax savings generated from all Operation Excel initiatives was $70.0 million in Fiscal
2000 and is projected to grow to $145 million in Fiscal 2001 and $215 million in Fiscal 2002,
with non-cash savings of $15 million or less in any year.
Successful execution of Operation Excel will help the company achieve the following
targets over the next three years:
$240 million in annual ongoing pretax savings upon full implementation
Earnings per share growth of 10 to 12 percent per year on average
Sales growth of 4 to 5 percent per year on average
Gross margins of 42%
Return on invested capital of 40%
$2.5 billion of free cash flow.
Operation Excel Status Update
During Fiscal 2000, the company recognized net restructuring charges and implementation
costs totaling $392.7 million pretax ($0.74 per share). [Note: All earnings per share amounts
included in Management’s Discussion and Analysis are presented on an after-tax diluted basis.]
Pretax charges of $170.4 million were classified as cost of products sold and $222.3 million
as selling, general and administrative expenses (‘‘SG&A’’). During Fiscal 1999, the company
recognized restructuring charges and implementation costs totaling $552.8 million pretax
($1.11 per share). Pretax charges of $396.4 million were classified as cost of products sold and
$156.4 million as SG&A.
Included in the $392.7 million of net restructuring and implementation costs recognized
in Fiscal 2000 is a reversal of $18.2 million pretax of Fiscal 1999 restructuring accruals (exit
costs, $0.4 million and severance costs, $1.3 million) and asset write-downs ($16.5 million),
primarily for the closure of the West Chester, Pennsylvania facility, which will now remain
in operation as a result of the sale of the Bloomsburg facility in April of Fiscal 2000.
In Fiscal 2000, 11 factories and four businesses were sold or closed including those located
in England, Hungary, the Czech Republic, New Zealand and the U.S., resulting in a net
reduction of the company’s workforce of approximately 3,000 employees. During Fiscal 1999,
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