HJ Heinz Company Earnings Call Nuggets: Tax Rate and the Frozen Entrees Business
HJ Heinz Company (NYSE:HNZ) reported its second quarter earnings and discussed the following topics in its earnings conference call. Take a look.
Ken Goldman – JPMorgan: I guess the obvious question is on the tax rate. Can you just help us understand how sustainable the rate of about 20% is going forward, I realize some of these are one-time, and some of these are permanent, but as we think about perhaps your cash going forward into ’14 and ’15 maybe any parameters you can help us within that would be appreciated?
Art Winkleblack – EVP and CFO: Ken, I think as we mentioned on the last earnings call we feel very good about the tax work that we have done to-date and where we’re coming out for the year we expect this year to be around 20% and I think at this point our plans in FY ’14 call for a rate that’s somewhere in that same zip code. So, we believe it’s relatively sustainable, in each quarter, in each month, each year we continue to work on new foreign tax planning initiatives to keep the rate low and in line.
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William R. Johnson – Chairman, President & CEO: Yeah, I think, Ken, as we continue to expand even more outside the United States, and particularly in some of these emerging markets that have low flat taxes there are real opportunities for tax planning and our guys did a very good job of exercising those opportunities and leveraging them. So, our view is going forward, as Art said, for certainly next fiscal year, I think, we feel pretty good about being fairly consistent with this year. I’m not going to say anything beyond next fiscal year because I have no idea what’s going to happen with tax regimes around the world, but certainly for the next six quarters, the two this year and the four next year we should be in pretty good shape…
Frozen Entrees Business
Alexia Howard – Sanford C. Bernstein: Can I ask about the frozen entrees business? I know we only get a sliver of the Smart Ones brand within frozen entrees, but it looked quite weak this last quarter. Could you talk about what you are seeing for Smart Ones overall as it enters adjacent eating occasions or is it actually still under a lot of pressure competitively?
William R. Johnson – Chairman, President & CEO: Well, let me step back and let’s talk about the category for a minute and I’ll come back and talk specifically about our business. In the category over the last five years has lost 20 million cases about a third of the total category volume, it has lost $500 million in sales. Within that period, our overall business as we define it is up 2.5 to 3 share points. Currently, what we are seeing is very strong performance in our breakfast business, good performance in some of our sides and in terms of the snacks and our base entree business we are not promoting as aggressively as maybe we could and that’s a decision we have made and so the focus has really been on Frozen on getting Ore-Ida and our snacks business growing which we did very successfully in the second quarter. So, generally Smart Ones was not as strong in the second quarter as I think we would have liked. We’ll see how the season plays out. But my bigger issue, Alexia, continues to be the nutritional category where the industry has lost about a third of its sales over the last five years and so rather than chasing volume in a category that’s still not sure where it is going we are planning on innovation, we are doing a lot of good things, particularly in breakfast which is the fastest growing day part in the freezer case and really focusing our other efforts on Ore-Ida and our frozen snacks businesses which are performing quite well.
A Closer Look: HJ Heinz Earnings Cheat Sheet>>