Margaret Nollen - Senior Vice President of Investor Relations Karen Alber - Chief Information Officer, Senior Vice President, Global Program Management Officer and Office of the Chairman Bob Ostryniec - Chief Supply Chain Officer Arthur Winkleblack - Chief Financial Officer and Executive Vice President William Johnson - Executive Chairman, Chief Executive Officer, President and Chairman of Executive Committee

Good morning. I'm Meg Nollen, Senior Vice President, Investor Relation for the H.J. Heinz Co., and I'd like to welcome everyone to our 2010 Analyst and Investor Day here in Pittsburgh. For those of you attending today's session, you're in for quite a treat as you're going to meet Heinz leadership from around the world. For those of you who are unable to travel to Pittsburgh today, our webcast is also being simultaneously videocast. This is not your typical Analyst Day, and I simply couldn't let you miss out on the experience. For those of you on a simultaneously listen-only call or webcast, the presentation will be made available by section throughout the day on the Investor Relations page of our website at www.heinz.com, as well as Thomson StreetEvents (sic) Thomson Reuters StreetEvents. Start pages including five-year financial and statistical summaries and Reg G reconciliations are also available on the front page of the IR section of the website. Note that our P&L has been updated for the fourth quarter, and the balance sheet and cash flows will be updated in June, pending the filing of our 10-K. We have a great day planned for you as we elaborate on the familiar Heinz's four-pillar strategy, grow the core portfolio, accelerate growth in Emerging Markets, strengthen and leverage global scale and make talent a competitive advantage. The agenda for the day is in front of your folder and also on the screen. We'll start with the strategic and financial overview from Bill and Art, and then we'll detail productivity initiatives and deleveraging global scale with Bob Ostryniec and Karen Alber, followed by a Q&A session. We'll take a break and then begin the regional reviews at 9:45. We will hear from each of our regional presidents. We'll give you a chance…

Thank you, Meg. Good morning, and welcome to our 2010 Investor and Analyst Conference. One change on the agenda, we'll do the Q&A right after the Infant/Nutrition section. So those of you who'd like to get out of here and catch the planes, without listening to our people strategy and me, are able to do so. Today, more than 20 executives from our senior management team will share their insights about Heinz's businesses and brands around the world and our plans to drive continued growth in fiscal 2011. Many of you know that I consider the Managing Director position the most important in our company, which is why you will hear from so many of them throughout the day. My purpose today is to briefly recap our outstanding performance in fiscal 2010, discuss the outlook for 2011, which commenced on April 29, and provide an overview of our global strategy to drive continued sales, profit and cash flow growth. My message today is unmistakably clear. We delivered very strong result in a challenging and volatile global environment in fiscal 2010. And with our proven strategy, brands and team, we plan to do it again in 2011. Fiscal 2010, as we announced this morning, was another excellent year with record sales of $10.5 billion, organic sales growth of more than 15% in Emerging Markets, over 3% in our top 15 brands and more than 2% over all. We had a 50 basis point improvement in gross profit margin reflecting increased pricing and higher productivity, strong earnings per share of $2.87 from continuing operations despite the unfavorable impact of currency and higher commodity cost, and solid growth and are already a top-tier return on invested capital. Obviously, we're pretty pleased with our results, which included a solid finish to the year as…

Thanks, Bill. Good morning, everyone. How is everybody? All right, ready to roll. Well, today, I'll take you through a review of fiscal 2010, starting with the summary of the full year results, and then just a brief recap of Q4 performance. I'll follow that with a summary of our targets for fiscal 2011. And as Bill indicated, we're very pleased with the strong results that we delivered for the year. From a constant-currency P&L perspective, sales grew 4.3%, which was driven largely by growth in Emerging Markets. Operating income improved 6.3% despite sizable marketing and productivity investments, and EPS rose 9.3%. Importantly, while driving these strong P&L results, we had another great year in balance sheet terms. We delivered an all-time Heinz record for operating free cash flow of $1.08 billion, up 23% despite significant incremental pension funding. ROIC improved another 30 basis points, reflecting our continuing focus on returns to shareholders. Overall, a very good result in this tough economic environment. And turning to EPS, as you recall, we've experienced a lot of foreign currency movements this year. And we divested three small businesses that have been recorded as discontinued operations. Thus, it's important you get grounded in the dynamics of our P&L for the year. Taking out all the noise from changes in foreign exchange and the impact of discontinued operations, EPS increased $0.25 or a very strong 9.3%. This is captured on the left side of the page and will be the focus of my discussion today. But for completeness, you can see that our results from continuing operations on a reported basis were down $0.04 after you include the impact of foreign exchange on each year. And finally, total company reported EPS was down $0.18, primarily reflecting the loss on sale of our discontinued operations.…

Thanks, Art. Good morning. I appreciate Art's insights on currencies and commodities, because as the great Yogi Berra once said, it seems like a nickel isn't worth a dime anymore. As the Global Supply Chain Officer, it's my challenge to leverage our global scale and drive productivity initiatives, so that we can save many more nickels, dimes and even dollars as we look into the future. Turning to our strategy, our global supply chain footprint encompasses four regions, of which North America and Europe account for 75% of the $6.7 billion cost of goods sold. Between our cost of goods sold and our $2 billion of indirect and other spend, our global productivity initiatives will address roughly about $8 billion of spend on an annual basis. We started our supply chain transformation back in 2005, when we consolidated various supply-chain networks, we introduced our Six Sigma principles to our various factories and we began the talent upgrade across the organization. Building from these learnings of our regional focus, in 2008, we launched the global supply chain task force, which focused in on driving sustainable productivity, improving our capital efficiency and A CI culture with best-practice sharing. This structure gave us the validation to move forward with the current global supply chain organization, which we're going to leverage our global scale to drive top growth, margins through higher productivity and cost containment. During the last two years, we focused on four key initiatives that will enable us to achieve our productivity targets. Number one was indirect procurement. We partnered with Ariba, who was a third-party expert to assist us in launching our indirect cost out program, which drove $135 million over the last two years. Some examples were in information technology spend where we consolidated our hardware and software central link…

Good morning. Thanks, Bob. Before Bill makes the comment for me, I'm assuming you're probably going to have a hard time seeing me behind the podium. So I think, I'm going to ditch the podium. I think, they designed it for maybe Art and Bob, not for me. But anyway, good morning. I'd like to share a little bit with you today about our Keystone program. And as you can see, we've got a pretty extensive scope on what Keystone is going to cover to capitalize on our game plan to leverage global scale. We'd also like to capitalize on our ability to maintain our local market excellence as we move forward. So the Keystone program has been developed to both leverage the scale as well as maintain that local market excellence. We've also incorporated our SAP success thus far into our learnings and our plans to date. Leveraging global scale is a significant key enabler to our overall strategy as you can see here in our third pillar. So it is a key part of our overall strategy for the organization. The global process design and wall-to-wall SAP will actually cover three major things that we're actually going to do. First of all, provide the organization with improved information and insight. Secondly, as you've heard, improve our ability to share best practices and resources. And then certainly, build the capabilities collectively across the organization versus on a market-by-market basis. Harmonizing our processes and systems is a key critical part of our strategy moving forward for Heinz. There are numerous strategic benefits to these effort. As mentioned, we are looking at this on an enterprise scale and seeing great benefits. Our business units can adopt best practices versus spending the time and money to build this on their own. From…

All right. Any questions?

I'm Terry Bivens from JPMorgan. Bill, we talked a little bit about this last night, but could you give us some more color on the hedging policy or, I guess, unlike '09, you've decided, I guess, at this point in time, not to do it as we go forward into '11. What was the decision process?

There are two elements. Transactions had been hedged certainly in the U.K. for the first quarter and other markets across the year. So from a transaction standpoint, I think, if anything, we'll maybe be slightly positive this year, probably close to immaterial to slightly positive. From a translation standpoint, time was the issue. Because of the accounting rules and the mark-to-market rules, the currency started to move at the end of April. We could not take a position at the end of April, because all that would have been reflected in the prior fiscal year. So rather than chase a falling knife, we're going to wait this out and see how this plays out. We got a bit of a balance today, the Aussies is up pretty significantly, the pound's up significantly this morning, vis-a-vis the euro. So I think the prudent approach right now, Terry, is to wait this out and see how this goes. Lots of moving parts here that also make this a very difficult time to do it. The last time we did this, there was a clear trend and downward bias that had been in place for a while, and we were coming off very high numbers and we're trying to protect the budget. Now the trends are completely unclear. The Aussie dropped by $0.08, primarily as a function of tax issues in Australia, which the government appears to be at least temporarily backing off on with pressure from the HP and others. And so I think as we look at these, it's just the timing was an issue. And right now, I just think we'd put ourselves in jeopardy to try to guess this market. As I've said to someone last night, I could sit here and give you a 30-minute debate on it'll go down in a 30-minute upside argument also. So I think we're just going to wait this out the best way we can. If we start to see a clear and discernible trend in some of these markets, we may get back to you. But from a translation standpoint, we are fundamentally for the most part unhedged.

Bill, I wonder if you just can speak to just kind of conditions in the EU, and how you at look 2011? You look into your fourth quarter, the volumes are a little softer in the fourth quarter. And just sequentially, is that an underlying weak consumer environment? Do you see that continuing in 2011? How will Europe kind of play out in coming year?

Well, I think you have to look at Europe in two segments. The second half in Europe last year was obviously much better than the first half. We're still going through a lot of SKU rationalization in the European businesses, particularly in the Continent and the U.K. We've got some repositioning of some brands going on in those markets. I mean, I feel relatively optimistic on a -- not a completely optimistic view of Europe this year. Europe for me is going to be an issue of a couple of things. How bad the austerity programs get, and what's going to happen to the consumers as a consequence of that. Britain announced in Australia program the other day, Italy followed yesterday and whether or not those start to impinge upon the consumers ability to spend, the good news is, I mean, where at the bottom of that chain. The last thing will go will be food. And so, I think, from that standpoint I think the plans we have in place this year, the innovation we have in place, puts us in pretty good position. I think the second thing, if you go back to Europe and you look at our ketchup performance, 9.5% organic growth, 6% volume growth last year in a very difficult environment, yet we're only selling one out of every five bottles sold in the continent. We have very specific plans to help alleviate that and to drive that. So if we get to two bottles or 1.5 bottles, are significant upside on ketchup. I mean, we have a lot of peer companies that would love to be up here talking about 100-year-old brand that's still is growing in a compound rate of almost double digit in a market that most of the market views as…

Dave Palmer, UBS. It seems like you're excited about reinvesting in marketing and advertising in some of these opportunities overseas, whether it be condiments or some infant nutrition and some of the marketing elasticities into volume that you're getting overseas. How do you balance that and the returns you see there with what you get in the U.S. and not overly sort of orphaning that U.S. business in ways that you might be spending through a trough period in terms of those returns? Does that make sense?

Yes, you'll see some of the orphans up here later today. I think what they'll show you in the U.S. is the plans behind Ore-Ida are very exciting. We got lot of new news and innovation coming in Ore-Ida, and brand's responding quite well. Kristen Clark will show you very exciting plans behind small ones. So I don't think, David, I would look at it that we're shipping all the investment out of U.S. market. Over the last two years, our marketing spending in the U.S. has grown significantly. Total support between marketing and deals and allowances issue in the U.S. will be up pretty significantly again. I think you may see more of a balance in the U.S. because of the pressure from the trade and the customers in terms of how we allocate funding. But we're also going to put money where we get the best return. You expect us to do that, our shareholders expects us to do that, our Board expects us to do that and I expect us to do that. And if you look at some of our volumes in the fourth quarter in the Emerging Markets with one small exception, we literally had double-digit volume growth across almost all of our Emerging Markets, obviously, Venezuela had an issue with currency and with the devaluation. But if you look at all our other Emerging Markets, particularly in Asia, you're looking at 13%, 14%, 15% volume growth, we've had 15% volume growth in Russia. So we had very strong volume performance. Now the balance act is, why not feed those animals that are growing the fastest and running the fastest, and then make sure that you're not disinvesting or not starving the other animals that are critically important to you and I think we've done a pretty good job of balancing that. But this is going to be an ongoing question, frankly from your part to us, because it's going to be an ongoing rebalancing of our spending against these markets. But you'll see a lot of good stuff out of the North American team today, so really exciting plans, particularly in our key brands.

Andrew Lazar at Barclays Capital. You talked about, Bill and Art, the likelihood that pricing would be probably flattish maybe up slightly for the year in fiscal '11. Would you expect that to be the case in NACP as well? Just given what we've seen going on in the fourth quarter with respect to price, but also what you're seeing generally kind in the industry, maybe not surprisingly, but it seems like obviously, the promotional levels are up a bit trying to drive volumes, consumers are still strapped. So I want to get a sense of how that kind of plays out?

I think our North American CP pricing is a downward bias. It's not significant, but we're going to see a downward bias as we make some decisions in terms of how we invest against those brands. We're going to get significant pricing in the Emerging Markets as a function of commodity cost and the ability to move price in those markets given where we stand relative to peers. And I think the rest of the world is just going to be -- we'll take opportunities where we have opportunities. But I think, individually, we'll look at brand by brand, Andrew. It's going to be very difficult than historically, because there are brands where we can take price. I mean, we don't have to get price back. There are other brands where it's going to be from a promotion-intensity standpoint or decisions strategically, that we think there's upside opportunity, and that the volume lift outweighs the cost to generate that volume when we make that decision. But in North America, I think, you'll see a downward bias, Europe will be flattish and the rest of the world should be up fairly significantly.

Alexia Howard with Sanford Bernstein. Art, one for you on the gross margins, you've been pedaling hard against traveling commodity cost pressures over the last year. The gross margins have been coming up quite nicely recently. So could you talk a little bit more about the puts and takes within the gross margin line? It seems like 50 basis points for this year may be a little conservative. You've got productivity improvements coming through. Is it pricing concerns, or what are the things that you're worried about in there?

No, I think, Bob's got broad shoulders, so we're expecting good strong gross margin growth. But I think as we look at it, and we've got visibility on the commodity costs as we look forward. As I mentioned, some are going up and some are going down. They're starting to look like some inflationary pressure coming on some of the commodities more toward the back half. With the current economic gyrations, we're not so sure if that inflation will occur. Pricing is the question mark also. As Bill mentioned, in developed markets, I think, pricing will come hard. So we're looking at that closely. But we're very excited about the productivity plans. Bob, if you want to add anything from a productivity standpoint?

I think our biggest leverage is, as you heard, is how do we take what we've developed in North America and Europe, and expand that into the Emerging Markets.

I would be disappointed, Alexia, if we don't beat those numbers. And by the way, you should see Karen try to ride Art's bike.

I think the other thing, Art, you may have mentioned, that we've got some incremental investments this year as well.

Yes. Less so in the gross profit margin, but more so in the fixed, or in the SG&A or in subsidiary with Keystone. So we're building that into the algorithm as we go forward. Feel good about where we are on that, but it does cost some money as we go.

I guess this is for Art and for Karen, just on productivity, a couple of clarifications. First, in terms of reaching the billion of productivity, how much are you expecting to spend in order to get that? And then also, if I look at the schedule, where you kind of lay out the plan ahead, it looks like in terms of a year-on-year step up, the most incremental year is fiscal '12, is that an accurate way to read this slide?

Yes. The step up primarily in that year is with us ramping up our North America business. So as we do, the global template does allow us to start to do multiple regions simultaneously and we will be ramping up North America, while simultaneously completing for the Europe piece.

The benefits that we would see in the P&L would come through in fiscal '12 or fiscal '13?

You're starting to see, for instance, an indirect procurement. We're already streaming one savings, and Bob had talked about that, so you've seen some of that coming through. Right now, in relatively earlier stages, you're seeing more costs coming through the benefit. Over time, you'll see that cost starting to plateau, it will increase over time a little bit. I think we've got that built in the algorithm, but that will start plateauing in a habitual, I'll pace it.

Yes, we got a slightly different brand. I mean, I look at the way we performed over the last four or five years with SAP and 25% of the company with 90 global supply chain, and these are all incremental opportunities that should add to what we've gotten. And the reality is, one of the reasons you're not seeing some of that factored in is we just don't know how much the increments' going to be. The U.S. has pretty good ERP systems. On a relative basis, we'll get a lot of opportunity as we're able to consolidate certain functions and so forth. But to me, I sort of look at it differently. If you look at Bob's progression and you look at Karen's progression, marry that with our performance over the last four or five years and then recognize the step up that we ought to see, and the ability to not only get improved performance in those markets but the ability to share that improve performance. I mean, one of the big criticisms leveled against this company historically, that's an appropriate criticism I mentioned in my comments and Steve Clark will mention it later, is either an inability or unwillingness to share across regions. Now we've improved dramatically between the U.S. and Europe, but we haven't touched the Pacific or the rest of the world. And there is clear upside in those markets. Bob, as he said, has spent a fair amount of time in Australia, and the Pacific and in China over the last couple of weeks because we see huge upside. So I think what you would see, you will see ongoing benefits from the continued rollout of implementation across the markets we're in now, you'll see disproportionate benefits as Bob brings some of the HGPS opportunities to the markets that haven't been involved and then you'll see the incremental benefits in '13 and '14 as we get the North American team fully up and running. And you got to remember, Canada has been on a version of SAP for a better part of a decade. So I think that the response to that is we're not sure exactly how much we're going to get beyond that. I mean, my team has heard me talk about the $1 billion. I set the goal and frankly, as I've said to the Board, I'd be disappointed if we don't do better than that as we really get these systems in place, and the transparency of our operations becomes very clear and our ability, more importantly, to transfer that knowledge across our BUs. Our business units is really where the leverages.

I don't know if you think about it, if you benchmark us against our peers, we stack up very, very well in most measures. Gross margin is still lagging some, so we think we've got some opportunity there to drive that forward, and what Bob and Karen are doing are driving toward that.

If we're sitting here in five years and you put up your scorecard looking back to prior five years, what would you like to see on that scorecard?

I'd like to see what you saw today. I'd like to see consistent, continued improvement, both from a margin standpoint and a top line standpoint. I think you will see a dramatically different company five years from now; you will see a dramatically more important Emerging Markets business; you'll see some portfolio shifts, probably in the developing and the developed world as we begin to recognize the difficulty in some of those markets and I'm not going to tell you exactly what those are going to be, but I have a pretty good sense. So you'll see a business five years out that I would hope, short of currency, in a constant-currency basis, would have shown similar metrics to what we've done, continued improvement in returns, continued improvement in margins. In fact, I think, more rapid improvement in margins. Continued improvement in the top line vis-à-vis the shipped to Emerging Markets as a more significant piece of the portfolio and the opportunity, in my view, to leverage that into markets where we can't now in terms of limitations on the balance sheet that we shouldn't have five years from now as we continue to pay down debt, and as we continue to look for better opportunities in the emerging world and we make bigger bets. But the one thing I can tell you almost assuredly and I will share this with you is five years from now, Emerging Markets will represent every bit of 25% to 30% of this company. Every bit of that. I'm short of some kind of transformative situation someplace else, which is you heard me say at CAGNY, I certainly don't anticipate.

Okay. So we've got a 15-minute break. For those of you on the webcast, we'll start promptly at 9:45 and we'll have a regional overview by the President. Thank you.