ANYTIMEkANYPLACEkANYWHERE - Heinz

The weighted-average discount rate used in the calculation of the accumulated postretirement
benefit obligation and the net postretirement benefit cost was 7.7% in 2000, 6.9% in 1999
and 1998. The assumed annual composite rate of increase in the per capita cost of companyprovided
health care benefits begins at 7.2% for 2000, gradually decreases to 5.3% by 2007,
and remains at that level thereafter. Assumed health care cost trend rates have a significant
effect on the amounts reported for postretirement medical benefits. A one-percentage-point
change in assumed health care cost trend rates would have the following effects:
1% Increase 1% Decrease
Effect on total service and interest cost components $ 1,537 $ (1,349)
Effect on postretirement benefit obligation 15,860 (13,988)
12. FINANCIAL
INSTRUMENTS
Interest Rate Swap Agreements: As of May 3, 2000, the company was party to an interest rate
swap with a notional amount of £50 million and a settlement date of April 2001. The swap
converts a 6.25% fixed rate exposure, on long-term debt maturing in 2030, to a floating rate
exposure. As of April 28, 1999, no such agreements were outstanding.
Foreign Currency Contracts: As of May 3, 2000 and April 28, 1999, the company held currency
swap contracts with an aggregate notional amount of approximately $90 million and
$110 million, respectively. As of May 3, 2000, these contracts mature in 2002. The company
held separate contracts to purchase certain foreign currencies as of May 3, 2000 and April 28,
1999 totaling approximately $490 million and $510 million, respectively, which mature within
one year of the respective fiscal year-end. The company also held separate contracts to sell
certain foreign currencies as of May 3, 2000 and April 28, 1999 of approximately $105 million
and $390 million, respectively. As of May 3, 2000, these contracts mature in 2001 and 2002.
Net unrealized gains and losses associated with the company’s foreign currency contracts as
of May 3, 2000 and April 28, 1999 were not material.
Commodity Contracts: As of May 3, 2000 and April 28, 1999, the notional values and unrealized
gains or losses related to commodity contracts held by the company were not material.
Fair Value of Financial Instruments: The company’s significant financial instruments include
cash and cash equivalents, short- and long-term investments, short- and long-term debt,
currency exchange agreements, interest rate swaps and guarantees.
In evaluating the fair value of significant financial instruments, the company generally
uses quoted market prices of the same or similar instruments or calculates an estimated fair
value on a discounted cash flow basis using the rates available for instruments with the
same remaining maturities. As of May 3, 2000 and April 28, 1999, the fair value of financial
instruments held by the company approximated the recorded value.
Concentrations of Credit Risk: Counterparties to currency exchange and interest rate derivatives
consist of large major international financial institutions. The company continually monitors
its positions and the credit ratings of the counterparties involved and, by policy, limits the
amount of credit exposure to any one party. While the company may be exposed to potential
losses due to the credit risk of non-performance by these counterparties, losses are not
anticipated. Concentrations of credit risk with respect to accounts receivable are limited due
to the large number of customers, generally short payment terms, and their dispersion across
geographic areas.
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