ANYTIMEkANYPLACEkANYWHERE - Heinz

Asia/Pacific’s operating income decreased $46.7 million, or 34.2%, to $89.8 million from
$136.5 million. Excluding special items in both years (see Note 14 to the Consolidated Financial
Statements), operating income increased $3.3 million to $145.7 million from $142.3 million
in Fiscal 1998. Strong performances in all of the company’s Asia/Pacific businesses more than
offset the unfavorable impact of foreign exchange translation rates, which reduced operating
income by approximately $19.5 million.
Other Operating Entities reported an increase in operating income of $42.0 million to
$95.7 million from $53.7 million. Excluding special items in both years (see Note 14 to the
Consolidated Financial Statements), operating income increased $58.4 million, or 91.8%, to
$122.0 million from $63.6 million. The increase is primarily due to the exceptional performance
of the Weight Watchers 123 Success Plan. The unfavorable fluctuation of foreign exchange
translation rates, primarily in Africa, caused a $12.5 million decrease in operating income.
Other income and expenses totaled $274.2 million in Fiscal 1999 compared to $265.3 million
in Fiscal 1998. Interest expense was relatively flat year-on-year as the increase in average
borrowings was offset by lower interest rates. Interest income decreased $7.6 million, or 23.2%,
to $25.1 million from $32.7 million due to decreased invested funds and significantly lower
interest rates on investments, primarily in Italy.
The effective tax rate for Fiscal 1999 was 43.2% compared to 36.1% in Fiscal 1998. The Fiscal
1999 higher rate includes the impact of restructuring expenses in lower tax rate jurisdictions
and nondeductible expenses related to the restructuring. Excluding the special items noted
above, the effective rate for Fiscal 1999 was 36.0% compared to 35.5% in Fiscal 1998. The Fiscal
1998 effective tax rate reflects the benefits of tax legislation in Italy and the U.K. (See Note 5 to
the Consolidated Financial Statements.)
Net income decreased $327.2 million to $474.3 million from $801.6 million in Fiscal 1998
and earnings per share decreased to $1.29 from $2.15. Excluding the special items discussed
above, net income increased $81.0 million, or 10.1%, to $882.4 million in Fiscal 1999 from
$801.4 million in Fiscal 1998, and earnings per share increased to $2.40 from $2.15.
The impact of fluctuating exchange rates for Fiscal 1999 remained relatively consistent on
a line-by-line basis throughout the Consolidated Statement of Income.
LIQUIDITY AND
FINANCIAL POSITION
Return on average shareholders’ equity (‘‘ROE’’) was 52.4% in Fiscal 2000, 23.6% in Fiscal 1999
and 34.4% in Fiscal 1998. Excluding the special items identified above, ROE was 54.4% in Fiscal
2000, 43.9% in Fiscal 1999 and 34.4% in Fiscal 1998. Pretax return on average invested capital
(‘‘ROIC’’) was 31.4% in Fiscal 2000, 20.4% in Fiscal 1999 and 26.4% in Fiscal 1998. Excluding the
special items identified above, ROIC was 30.6% in Fiscal 2000, 30.7% in Fiscal 1999 and 26.2%
in Fiscal 1998.
Cash provided by operating activities decreased to $543.1 million in Fiscal 2000, compared
to $910.1 million in Fiscal 1999 and $1.07 billion in Fiscal 1998. The decrease in Fiscal 2000
versus Fiscal 1999 is primarily due to expenditures on Operation Excel and increased inventory
levels. In order to facilitate the anticipated plant shutdowns and reconfigurations for Operation
Excel, the company has increased inventory levels at certain locations.
Cash used for investing activities was $268.7 million in Fiscal 2000 compared to
$390.5 million in Fiscal 1999. Acquisitions in the current year required $394.4 million versus
$269.0 million last year. Current year acquisitions included United Biscuit’s European Frozen
and Chilled Division, Quality Chef Foods, Yoshida, Thermo Pac, Inc. and Remedia Limited
in Israel. Fiscal 1999 acquisitions included the College Inn brand of canned broths, ABC Sauces
in Indonesia, and other smaller acquisitions. (See Note 2 to the Consolidated Financial
(39)