What do you get when you mix squished tomatoes, vinegar, corn syrup, salt, spices, and a little onion powder? Cash, that's what. Ketchup king and Motley Fool Income Investor pick H.J.Heinz (NYSE:HNZ) this morning reported a record $545 million in free cash flow for the fourth quarter and $920 million for the year, easily better than net income over the same periods. You'd think that would have investors turning handsprings, or at least pining for a bucket of fries. But neither has happened; the stock is trading lower by about 1% as I write.

I'd attribute the lukewarm reaction to Heinz's earnings results, because they look pretty average on the surface. For example, full-year net income was $752.7 million, much lower than fiscal 2004's $804.3 million. Gross margin was also down for the both the quarter and the year, while operating margin was flat for the quarter and down more than a percentage point for the year.

A discerning Fool looks deeper, however. Doing so here reveals a company that has become more financially fit in recent quarters, allowing it to continue piling up cash while eliminating more than $200 million worth of debt -- even in the face of higher spending for essential commodities, fuel, and advertising. Much of the credit can be given to Heinz's vast improvements in its cash-conversion cycle, down another six days from fiscal 2004 to 2005 and down 34 days since 2002.

Core operations are also performing better. After removing $91.8 million in charges for cost and equity investments, removing income associated with discontinued operations, and a writedown for its HAK vegetable product line, Heinz ends fiscal 2005 with $827.6 million in income. When you normalize 2004 results the same way, you end up with $779.5 million. That's a 6% year-over-year boost to the bottom line.

Yet even with the gains, management isn't sitting idle. For example, the company is in the midst of streamlining international operations to achieve efficiencies similar to those earned here in North America. Executives also said they would continue buying back shares -- a welcome addition to the 5% quarterly dividend increase announced earlier in the month.

Income Investor chief Mathew Emmert professed his love for Heinz in February. Since then, the share price has declined in spite of obvious sings of business improvement. That's why today my Foolish heart has become similarly smitten. Flowers, chocolates, and maybe even some shares probably aren't far behind.

For other tasty bites of Foolishness:

  • I was anticipating increased cash flow last year. Today it arrived.
  • Heinz is one of the five stocks you meet in high-carb heaven.
  • The ketchup king's 3.2% yield is the epitome of a good dividend.

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Fool contributor Tim Beyers now knows why they call ketchup the toddler's favorite vegetable. His little girl will put it on anything. Really. Tim didn't own shares in any of the companies mentioned in this story at the time of publication. You can find out what's in his portfolio by checking Tim's Fool profile, which is here. The Motley Fool has a disclosure policy.