Exhibit 99
NEWS RELEASE
[HEINZ Logo]
FOR RELEASE UPON RECEIPT
HEINZ REPORTS FIRST QUARTER NET INCOME OF $214 MILLION OR 60 CENTS PER SHARE
VS. $100 MILLION, OR $0.28 PER SHARE IN THE PRIOR YEAR
o EPS OF 53 CENTS PER SHARE FROM CONTINUING OPERATIONS, UP 20% OVER PRIOR YEAR;
o EPS OF 51 CENTS PER SHARE FROM CONTINUING OPERATIONS, EXCLUDING SPECIAL ITEMS,
UP 9% OVER PRIOR YEAR;
o STRONG PERFORMANCE BY FOODSERVICE, GLOBAL KETCHUP AND CONDIMENTS, AND ASIA
PACIFIC BUSINESSES;
o SALES FROM CONTINUING OPERATIONS UP 3.1% TO $1.90 BILLION;
o VOLUME GROWS 2.2%;
o IMPROVED SALES MIX AND SKU REDUCTION HELP INCREASE GROSS MARGINS 0.9 POINTS
TO 37.5%
PITTSBURGH - September 3, 2003 -- H.J. Heinz Company today announced results for
the first quarter ended July 30, 2003. Heinz reported net income of $214.0
million, or $0.60 per diluted share, compared with $100.0 million, or $0.28 per
diluted share, in the year-earlier quarter. Earnings per share from continuing
operations were $0.53 in the current year versus $0.44 in the prior year, which
excludes profit associated with the spun-off business units and the effect of a
change in accounting in the prior year related to the adoption of SFAS No. 142.
Excluding special items and the effect of adopting SFAS No. 142, Heinz reported
earnings from continuing operations of $179.8 million or $0.51 per diluted
share, which compares with $166.0 million, or $0.47 per diluted share for these
operations in the year-earlier quarter. (Comments that follow refer to the
results of continuing operations, excluding special items. See attached tables
for further details.)
Commenting on the first quarter, H.J. Heinz Company Chairman, President
and CEO William R. Johnson said: "Heinz's strong first quarter performance
indicates continued progress in generating sales, cash and earnings growth, and
confirms that Heinz is on track to achieve its EPS, Net Sales and Operating Free
Cash Flow (cash from operations less capital expenditures) target ranges for
Fiscal 2004. Increased volume and improved mix were key factors in driving
growth in sales, gross margins and operating income. We are particularly pleased
with the continued strength in our ketchup, condiments and sauces business and
the growth in our domestic Foodservice and Asia Pacific businesses, all of which
performed exceptionally well.
"We also continued the significant progress in our balance sheet and
cash management initiatives during the quarter, as reduced Working Capital and,
in particular, lower inventories helped improve our Cash Conversion Cycle by 14
days versus the year-ago period. We continued to pare net debt and significantly
increased Operating Free Cash Flow while at the same time boosting total
consumer and trade marketing spending by nearly 15%. All of these achievements
affirm the impact of Heinz's growth strategy and the efficacy of our Four
Imperatives - to drive profitable growth; remove clutter; squeeze out costs; and
measure and recognize performance."
H.J. Heinz Company, P.O. Box 57, Pittsburgh 15230-0057
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First quarter sales grew by 3.1% to $1.90 billion, driven by favorable
volume of 2.2% and foreign exchange translation rates of 7.5%, partially offset
by a 0.4% decline in price and a 6.3% decline from divestitures, net of
acquisitions. The favorable volume impact is primarily due to increases in the
North American Consumer Products, U.S. Foodservice and Asia Pacific segments.
EPS from discontinued operations was $0.08 per share in the current
quarter, reflecting the favorable settlement of prior-year tax liabilities
related to the spun-off businesses, versus $0.07 per share in the year-earlier
quarter. (On December 20, 2002, Heinz completed the transaction by which it spun
off its U.S. and Canadian pet food, U.S. tuna and retail private label soup, and
U.S. infant feeding businesses to its shareholders and then merged these
businesses with Del Monte Corporation, a subsidiary of Del Monte Foods Company,
NYSE:DLM. The results of the spun-off businesses have been accounted for as
discontinued operations.)
Heinz's Gross Profit Margin was 37.5% in the quarter, an increase of
0.9 points over the year-ago period. This improvement reflects the company's
progress in reducing less-profitable SKUs and improving sales mix, especially in
developing markets. The company's Effective Tax Rate of 33.1% reflects a change
in country mix and effective tax planning.
FIRST QUARTER SEGMENT HIGHLIGHTS
In the first quarter of Fiscal 2004, the Company changed its segment
reporting to reflect changes in organizational structure and management of its
business. The company is now managing and reporting its North American
businesses under two segments, designated North American Consumer Products and
U.S. Foodservice. Certain changes were also made to the composition of the
remaining segments; prior periods have been restated to conform with the current
presentation.
Heinz is a brand-focused company with a powerful line up of 15
mega-brands, led by the $2.7 billion Heinz brand. More than 60% of the company's
sales come from outside the United States.
NORTH AMERICAN CONSUMER PRODUCTS
Sales volume in the North American Consumer Products segment was up
$18.7 million or 4.1%, driven by strong volume increases in Heinz(R) ketchup and
Classico(R) pasta sauces. There was some weakness in frozen food, and the
overall business improvement was more than offset by the impact of divestitures,
resulting in a segment sales decrease of $3.4 million or 0.7%. Overall, pricing
was down 2%, as Heinz continued its strategy of value pricing directly to
consumers. Operating income increased $1.4 million, or 1.3%, to $107.8 million.
In Canada, Heinz(R) ketchup reached it highest quarterly level in five
years and the Classico(R) brand continued its market-leading share of the
country's pasta sauce category.
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U.S. FOODSERVICE
U.S. Foodservice's sales rose $23.5 million, or 7.6%, due primarily to
a significant volume increase for Heinz(R) ketchup, along with increased sales
of Escalon(R) specialty sauces and Dianne's(R) frozen desserts.
Acquisitions, net of divestitures, increased sales slightly due
primarily to the current year acquisition of Truesoups LLC, a manufacturer and
marketer of premium frozen soups. Operating income grew $8.6 million, or 20.0%,
to $51.7 million, due primarily to volume growth, favorable pricing and sales
mix.
Heinz's Chairman noted that the acquisition of Truesoups supports the
company's leadership position in the premium soup category and expands its
customer base among well-known and rapidly growing fast-casual dining chains.
"It is a well-focused strategic addition to a powerful foodservice portfolio
whose leading brands include Heinz(R) ketchup, Escalon(R) tomato products, Chef
Francisco(R) soups and Dessert Inspiration(R) frozen desserts," he said.
EUROPE
Heinz Europe's sales increased $61.8 million, or 9.2% primarily due to
favorable exchange translation rates and significant volume increases in Petit
Navire(R) seafood. European sales were impacted by lower volumes in convenience
meals and infant feeding due to promotional timing, elimination of low-margin
SKUs, and, to a lesser extent, by volume decreases in ready-to-serve soups and
Heinz(R) beans due to changes in summer eating patterns induced by the record
European heat wave. By contrast, Heinz(R) ketchup volume grew by 6% in the U.K.,
with dollar market share up 3 points to 76%. The enduringly popular Heinz Salad
Cream(R) grew volume by 17%, with its dollar share up more than 5 points,
reaching 78%.
Operating income increased $6.7 million, or 4.8%, to $146.5 million,
largely attributable to improvements in the seafood business and favorable
exchange translation rates. These increases were partially offset by unfavorable
manufacturing costs in Northern Europe as well as sales mix and lower volumes.
General and administrative expenses also increased primarily due to exchange and
increased pension expense.
Heinz Europe has translated the popular U.S. upside-down Heinz Easy
Squeeze!(R)ketchup concept into Top Down(R), a packaging concept now rolling out
to 19 countries across the European continent.
Heinz Europe is re-energizing its German ketchup market with a new
flight of television commercials and strong store promotions. The result has
been double-digit growth in ketchup sales.
In Italy, the Plasmon(R) baby food range introduced 4 varieties of
Ready Meals(R) and two new Winnie the Pooh(R) biscuits under license. Russian
parents are being introduced to a range of Heinz(R) canned baby foods, which
complement the existing range of jarred varieties.
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ASIA PACIFIC
Asia Pacific had an excellent quarter, with volume up a strong 5.2% and
sales up $52.8 million, or 22.2%. This was primarily driven by significant
volume increases in Tegel(R) poultry in New Zealand and ABC(R) sauces and juice
concentrates in Indonesia as well as the favorable impact of exchange
translation rates.
Operating income rose $15.3 million, to $34.3 million, primarily due to
strong net pricing and manufacturing cost improvements in Australia and New
Zealand as well as favorable exchange translation rates.
Asia Pacific, which now represents 15% of Heinz's global sales, showed
solid marketing results, led by Heinz ABC in Indonesia, whose strong showing in
seasonal juices and soy sauce helped drive overall sales growth of 45%. Heinz
China, despite the difficulties of the SARS epidemic, increased sales by 40%.
In New Zealand, the Wattie's(R) range expanded with the addition of Wok
Creations(R), a healthful mix of frozen vegetables and stir-fry sauces, and the
Good Taste(R) range of dressings and marinades.
Heinz Australia's Greenseas(R) tuna range recorded a strong quarter
with a significant rise in sales of traditional varieties and new flavored
tunas. The company's Very Vegetable(R) soup range concluded the cold-weather
season with strong double-digit growth over the prior year.
In other developing markets such as Latin America and India, volumes
were up 7%, responding to marketing and product innovations.
# #
MEETING WITH SECURITIES ANALYSTS - INTERNET BROADCASTS
Heinz will host a conference call with security analysts today at 8:30 a.m.
(Eastern time). The call will be webcast live on www.heinz.com and will be
archived for playback beginning at 2 p.m. The call is available live via
conference call at 1-888-757-3036 (listen only). It will be hosted by Art
Winkleblack, Executive Vice President and Chief Financial Officer; Casey Keller,
Chief Growth Officer; Jack Runkel, Vice President - Investor Relations; and
Edward J. McMenamin, Vice President - Finance.
# #
SAFE HARBOR PROVISIONS FOR FORWARD-LOOKING STATEMENTS:
This press release contains forward-looking statements within the meaning of the
"safe harbor" provisions of the Private Securities Litigation Reform Act of
1995. These forward-looking statements reflect management's view of future
events and financial performance. These statements are subject to risks,
uncertainties, assumptions and other important factors, many of which may be
beyond Heinz's control and could cause actual results to differ materially from
those expressed or implied in these forward-looking statements. Uncertainties
contained in such statements include, but are not limited to, sales,
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earnings, and volume growth, general economic, political, and industry
conditions, competitive conditions, production, energy and raw material costs,
the ability to maintain favorable supplier relationships, achieving cost savings
programs and gross margins, currency valuations and interest rate fluctuations,
success of acquisitions, joint ventures, and divestitures, new product and
packaging innovations, the effectiveness of advertising, marketing, and
promotional programs, supply chain efficiency and cash flow initiatives, the
impact of e-commerce and e-procurement, risks inherent in international
operations, particularly the performance of business in hyperinflationary
environments and litigation, changes in estimates in critical accounting
judgments, the possibility of increased pension expense and contributions, and
other factors described in "Cautionary Statement Relevant to Forward-Looking
Information" in the Company's Form 10-K for the fiscal year ended April 30,
2003, and the Company's subsequent filings with the Securities and Exchange
Commission. The forward-looking statements are and will be based on management's
then current views and assumptions regarding future events and speak only as of
their dates. The Company undertakes no obligation to publicly update or revise
any forward-looking statements, whether as a result of new information, future
events or otherwise.
# #
ABOUT HEINZ: H.J. Heinz Company is one of the world's leading producers and
marketers of branded foods in ketchup, condiments, sauces, meals, soups,
seafood, snacks and infant foods. Heinz is a global family of leading brands,
including Heinz(R) Ketchup, sauces, soups, beans, pasta and infant foods
(representing nearly one-third of total sales), Ore-Ida(R) french fries, Boston
Market(R) and Smart Ones(R) meals and Plasmon(R) baby food. Heinz's 50 companies
have number-one or number-two brands in 200 countries, showcased by Heinz(R)
Ketchup, the world's favorite ketchup. Information on Heinz is available at
www.heinz.com/news.
# # #
CONTACT: Media:
-----
Ted Smyth, 412-456-5780;
Debbie Foster, 412-456-5778;
Jack Kennedy, 412-456-5923;
OR
Investors:
---------
Jack Runkel, 412-456-6034
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H.J. HEINZ COMPANY AND SUBSIDIARIES
SPECIAL ITEMS - FIRST QUARTERS ENDED JULY 30, 2003 AND JULY 31, 2002
The following table provides a comparison of the company's reported results from
continuing operations and the results excluding special items for the first
quarters ended July 30, 2003 and July 31, 2002:
First Quarter Ended July 30, 2003
----------------------------------------------------------
Net Gross Operating Per
Sales Profit Income Income * Share*
-------- ------ ------ ------ ------
Reported results from continuing operations $ 1,895.5 $ 707.1 $ 349.1 $ 186.8 $ 0.53
Reorganization costs -- 4.0 9.5 6.2 0.02
Gain on sale of the Northern Europe
bakery business -- -- (28.8) (13.3) (0.04)
--------- ------- ------- ------- -------
Results from continuing operations
excluding special items $ 1,895.5 $ 711.1 $ 329.7 $ 179.8 $ 0.51
========= ======= ======= ======= =======
First Quarter Ended July 31, 2002
----------------------------------------------------------
Net Gross Operating Per
Sales Profit Income Income * Share*
-------- ------ ------ ------ ------
Reported results from continuing operations $ 1,839.3 $ 672.7 $ 295.9 $ 154.4 $ 0.44
Reorganization costs -- -- 18.4 11.6 0.03
--------- ------- ------ ------- -------
Results from continuing operations
excluding special items $ 1,839.3 $ 672.7 $ 314.3 $ 166.0 $ 0.47
========= ======= ======= ======= =======
* Excludes the impact of cumulative effect of accounting change.
(Note: Totals may not add due to rounding.)
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H. J. HEINZ COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
First Quarter Ended
-------------------------------
July 30, 2003 July 31, 2002
FY2004 FY2003
----------- -----------
Sales $ 1,895,524 $ 1,839,314
Cost of products sold 1,188,448 1,166,635
----------- -----------
Gross profit 707,076 672,679
Selling, general and
administrative expenses 358,000 376,782
----------- -----------
Operating income 349,076 295,897
Interest income 5,765 6,223
Interest expense 52,237 51,853
Other expense, net (16,979) (13,185)
----------- -----------
Income from continuing operations before income
taxes and effect of change in accounting
principle 285,625 237,082
Provision for income taxes 98,800 82,710
----------- -----------
Income from continuing operations before effect
of change in accounting principle 186,825 154,372
Income from discontinued operations, net of tax 27,200 23,423
----------- -----------
Income before effect of change in
accounting principle 214,025 177,795
Effect of change in accounting principle -- (77,812)
----------- -----------
Net income $ 214,025 $ 99,983
=========== ===========
Income per common share - Diluted
Continuing operations $ 0.53 $ 0.44
Discontinued operations 0.08 0.07
Effect of change in accounting principle -- (0.22)
----------- -----------
Net Income $ 0.60 $ 0.28
=========== ===========
Average common shares
outstanding - diluted 354,522 353,529
=========== ===========
Income per common share - Basic
Continuing operations $ 0.53 $ 0.44
Discontinued operations 0.08 0.07
Effect of change in accounting principle -- (0.22)
----------- -----------
Net Income $ 0.61 $ 0.28
=========== ===========
Average common shares
outstanding - basic 352,094 351,026
=========== ===========
Cash dividends per share $ 0.2700 $ 0.4050
=========== ===========
Note: Fiscals 2004 and 2003 include special items.
(Totals may not add due to rounding)
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H. J. HEINZ COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
First Quarter Ended
-------------------------------
July 30, 2003 July 31, 2002
FY2004 FY2003
----------- -----------
Net external sales:
North American Consumer Products $ 450,778 $ 454,145
U.S. Foodservice 331,217 307,728
Europe 735,153 673,398
Asia/Pacific 290,007 237,240
Other Operating Entities 88,369 166,803
----------- -----------
Consolidated Totals $ 1,895,524 $ 1,839,314
=========== ===========
Intersegment revenues:
North American Consumer Products $ 14,077 $ 13,379
U.S. Foodservice 3,532 3,554
Europe 4,535 3,531
Asia/Pacific 674 915
Other Operating Entities 499 462
Non-Operating (23,317) (21,841)
----------- -----------
Consolidated Totals $ -- $ --
=========== ===========
Operating income (loss):
North American Consumer Products $ 106,262 $ 101,628
U.S. Foodservice 49,200 40,948
Europe 171,316 139,779
Asia/Pacific 34,266 18,932
Other Operating Entities 11,238 21,460
Non-Operating (23,206) (26,850)
----------- -----------
Consolidated Totals $ 349,076 $ 295,897
=========== ===========
Operating income (loss) excluding special items:
North American Consumer Products $ 107,758 $ 106,394
U.S. Foodservice 51,700 43,076
Europe 146,517 139,779
Asia/Pacific 34,266 18,932
Other Operating Entities 11,238 21,460
Non-Operating (21,748) (15,339)
----------- -----------
Consolidated Totals $ 329,731 $ 314,302
=========== ===========
The company's revenues are generated via the sale of products in the following
categories:
<Table>
Ketchup, Condiments and Sauces $ 742,295 $ 639,975
Frozen Foods 392,709 437,715
Convenience Meals 427,180 380,233
Infant Feeding 186,582 176,927
Other 146,758 204,464
----------- -----------
Total $ 1,895,524 $ 1,839,314
=========== ===========
</Table>
The above amounts include the impact of acquisitions, divestitures (primarily
affecting the Other and Frozen Foods categories) and foreign exchange.