Delivering Superior Value & Growth: The Economic Impact of Heinz

The H. J. Heinz Company defines success not only by money earned, but by money well spent for shareholders, employees, consumers, and the public good. From Pittsburgh, Pennsylvania, where the Company is based, to countries such as the United Kingdom, Poland, China, India, and Italy, to name just a few, Heinz plays a vital role in the economic landscape of communities where Heinz is a trusted partner and employer, as it delivers superior value and growth to our shareholders. At the same time, we recognize and monitor major operational risks and challenges to our ongoing economic performance. These risks include: climate change, higher energy costs, and increases in the cost of raw materials (agricultural products) and packaging.

Our Financial Results
In Fiscal 2007, Heinz sales rose 4.1% to $9 billion (despite one less selling week than in Fiscal 2006) as the Company achieved dynamic growth due in part to healthy, innovative new products. Heinz reported in Fiscal 2007 net income of $785.7 million, or $2.36 per share, an increase of 22% versus Fiscal 2006. In Fiscal 2006, Heinz reported sales of $8.64 billion and net income of $645.6 million, or $1.89 per share.

Overall, Heinz markets more than 16,000 products, primarily in three core categories: Ketchup and Sauces, Meals and Snacks, and Infant Nutrition. In Fiscal 2007, Meals and Snacks accounted for more than 44% of the Company’s total sales, followed by Ketchup and Sauces (41%), and Infant Nutrition (10%). Sales for the Company’s top 15 brands, which account for about 70% of the Company’s sales, grew by 8.5%.

Reflecting Heinz’s global presence, more than half of our sales are outside North America. In Fiscal 2007, Heinz reported sales of $3.1 billion in Europe, $1.2 billion in Asia/Pacific, and $427 million in other regions outside North America. Heinz has been investing in emerging markets, including Russia, India, China, Indonesia, Poland, and Latin America, to drive growth. These emerging markets are growing at double-digit rates and generating almost one-third of the Company’s sales growth. We expect these markets to achieve total sales of approximately $1 billion in Fiscal 2008.

Operating free cash flow (cash from operations less capital expenditures, plus proceeds from the disposition of plants, property and equipment) is an important benchmark of economic performance. In Fiscal 2007, Heinz’s growth, cost savings, and working capital productivity drove operating free cash flow to $878 million, or almost 10% of revenue, up from $863 million a year earlier. A significant part of the Company’s operating free cash flow was returned directly to Heinz shareholders through a 17% dividend increase and net share repurchases of $501 million. For Fiscal 2007, Total Shareholder Return was almost 15%, and after-tax Return on Invested Capital improved to 15.8% from 14.8% a year earlier.

Bringing Economic Benefit To Local Communities
With strong financial results fueled by investments in growth and innovation, Heinz’s economic performance is benefiting shareholders, consumers, customers, employees and communities at the heart of our mission.

Heinz employs approximately 33,000 people and pays competitive wages that comply with local laws and typically exceed the prevailing local minimum wage standards. In addition, almost all employees hired at our manufacturing facilities are drawn from the local communities, thereby supporting the vitality of local economies.

Heinz also makes a positive economic impact by funding retirement benefit plans, which in most cases are 401(k) Savings Plans and/or a Company Contribution Accounts (which is an age-related contribution). Retirement benefit plans are provided for all eligible employees.

Both full-time and part-time employees are eligible for benefits. Heinz also funds state-sponsored retirement programs for close to 100% of our global workforce. The Company contributed $62.5 million to its defined benefit plans in Fiscal 2007, compared to $64.6 million in Fiscal 2006.

Pension plans also are available for certain employees. The Company recognized pension expense of $31.6 million and $77.1 million for Fiscal 2007 and 2006 respectively, which reflected expected return on plan assets of $198.5 million and $169.0 million respectively.

At Heinz, we are proud to report that our retirement benefit plans and pension plans are adequately funded. The Company funds its U.S. defined benefit plans in accordance with Internal Revenue Service regulations, while foreign defined benefit plans are funded in accordance with the local laws and regulations in each country.

The presence of Heinz as a major employer enhances the tax revenue of the nations and communities where we do business. In Fiscal 2007, Heinz paid $283.4 million in income taxes globally, compared with $326.4 million a year earlier. Heinz also has a longstanding practice of purchasing goods and services from local suppliers, once again benefiting the economic vitality of the communities in which we operate.

Our economic impact extends to making charitable contributions that benefit communities where we operate. Heinz makes voluntary contributions and grants through the H. J. Heinz Company Foundation and other Company programs. Heinz donated more than $17 million globally during Fiscal 2007 and Fiscal 2006 to support community programs, with a focus on promoting the health, nutrition, and the well-being of children and families.

Delivering Product Value
Because Heinz understands consumers’ financial concerns, we make product value one of the main ingredients in our recipe for achieving sustainable growth and economic success. We are dedicated to competitive pricing for our nutritious, high-quality products, which are trusted and enjoyed around the world.

When marketing and selling our products in emerging markets, Heinz measures the local purchasing power of low-income consumers to ensure that our products are priced fairly and with affordability in mind. We also adapt many product lines and recipes so our products meet taste and nutritional needs of consumers in different markets.

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