Berkshire Hathaway 2014 Annual Report Download - page 65

Notes to Consolidated Financial Statements (Continued)
(6) Investments in H.J. Heinz Holding Corporation
On June 7, 2013, Berkshire and an affiliate of the global investment firm 3G Capital (such affiliate, “3G”), through a newly
formed holding company, H.J. Heinz Holding Corporation (“Heinz Holding”), acquired H.J. Heinz Company (“Heinz”).
Berkshire and 3G each made equity investments in Heinz Holding, which, together with debt financing obtained by Heinz
Holding, was used to acquire Heinz for approximately $23.25 billion in the aggregate.
Heinz is one of the world’s leading marketers and producers of healthy, convenient and affordable foods specializing in
ketchup, sauces, meals, soups, snacks and infant nutrition. Heinz is a global family of leading branded products, including
Heinz®Ketchup, sauces, soups, beans, pasta, infant foods, Ore-Ida®potato products, Weight Watchers®Smart Ones®entrées
and T.G.I. Friday’s®snacks.
Berkshire’s investments in Heinz Holding consist of 425 million shares of common stock, warrants to acquire
approximately 46 million additional shares of common stock, and cumulative compounding preferred stock (“Preferred Stock”)
with a liquidation preference of $8 billion. The aggregate cost of these investments was $12.25 billion. 3G acquired 425 million
shares of Heinz Holding common stock for $4.25 billion. In addition, Heinz Holding reserved 39.6 million shares of common
stock for issuance under stock options.
The Preferred Stock possesses no voting rights except as required by law or for certain matters specified in the Heinz Holding
charter. The Preferred Stock is entitled to dividends at 9% per annum whether or not declared, is senior in priority to the common
stock and is callable after June 7, 2016 at the liquidation value plus an applicable premium and any accrued and unpaid dividends.
Under the Heinz Holding charter and a shareholders’ agreement entered into as of the acquisition date (the “shareholders’
agreement”), after June 7, 2021, Berkshire can cause Heinz Holding to attempt to sell shares of common stock through public
offerings or other issuances (“redemption offerings”), the proceeds of which would be required to be used to redeem any
outstanding shares of Preferred Stock. The warrants are exercisable for one cent per share and expire on June 7, 2018.
Berkshire and 3G each own 50% of the outstanding shares of common stock and possess equal voting interests in Heinz
Holding. Under the shareholders’ agreement, unless and until Heinz Holding engages in a public offering, Berkshire and 3G each
must approve all significant transactions and governance matters involving Heinz Holding and Heinz so long as Berkshire and 3G
each continue to hold at least 66% of their initial common stock investments, except for (i) the declaration and payment of
dividends on the Preferred Stock, and actions related to a Heinz Holding call of the Preferred Stock, for which Berkshire does not
have a vote or approval right, and (ii) redemption offerings and redemptions resulting therefrom, which may only be triggered by
Berkshire. No dividends may be paid on the common stock if there are any unpaid dividends on the Preferred Stock.
We are accounting for our investments in Heinz Holding common stock and common stock warrants on the equity method.
Accordingly, we included our proportionate share of net earnings attributable to common stockholders and other comprehensive
income in our Consolidated Statements of Earnings and Comprehensive Income beginning as of the acquisition date. We
account for our investment in Preferred Stock as an equity investment and it is carried at cost in our Consolidated Balance
Sheets. Dividends earned in connection with the Preferred Stock and our share of Heinz Holding’s net earnings or loss
attributable to common stockholders are included in interest, dividend and other investment income of Insurance and Other in
our Consolidated Statements of Earnings.
Summarized consolidated financial information of Heinz Holding and its subsidiaries follows (in millions).
December 28,
2014
December 29,
2013
Assets .................................................................. $36,763 $38,972
Liabilities ............................................................... 21,077 22,429
Fiscal Year ending
December 28, 2014
June 7, 2013 through
December 29, 2013
Sales ................................................................... $10,922 $ 6,240
Net earnings (loss) ........................................................ $ 657 $ (77)
Preferred stock dividends earned by Berkshire .................................. (720) (408)
Net earnings (loss) attributable to common stockholders .......................... $ (63) $ (485)
Earnings attributable to Berkshire Hathaway Shareholders * ....................... $ 687 $ 153
*Includes dividends earned and Berkshire’s share of net earnings (loss) attributable to common stockholders.
63