EXHIBIT 99
NEWS RELEASE
(HEINZ LOGO)
WORLD HEADQUARTERS
"THE GOOD FOOD COMPANY"
FOR RELEASE UPON RECEIPT
HEINZ DELIVERS STRONG TOP-LINE GROWTH IN Q3 AS SALES INCREASE 7.8%
o Volume increased almost 4% for the quarter
o Q3 earnings impacted by commodity and fuel costs, offset by lower
tax rate
o Full-year earnings expected to be in previously communicated
range, excluding special items
o Reported earnings for Q3 reflect asset impairment charge of $74
million after tax, or 21 cents per share
PITTSBURGH - February 28, 2005 - H.J. Heinz Company (NYSE: HNZ) today announced
strong sales increases of 7.8% for its third quarter, led by particularly strong
performances on Ore-Ida(R) frozen potatoes, Bagel Bites(R), TGI Friday's(R)
frozen snacks and Heinz(R) Ketchup.
Overall, the Company reported net income of $152.4 million, or $0.43
per diluted share, for its third quarter ended January 26, 2005. The current
quarter includes $73.8 million of non-cash asset impairment charges, primarily
related to Heinz's investment in The Hain Celestial Group, Inc. (Nasdaq:HAIN),
the possibility of which was disclosed in the November 23 second-quarter
earnings release. Excluding these impairment charges and income of $0.04 per
diluted share from discontinued operations, net income for the current quarter
was $212.4 million, or $0.60 per diluted share, up 5.3% from the prior quarter.
The Company's effective tax rate, excluding special items in the current
quarter, was 22.7% compared to 33.1% last year. The reduction in the effective
tax rate is attributable to tax planning in foreign jurisdictions and favorable
audit settlements.
Commenting on the results, Heinz's Chairman, President and CEO William
R. Johnson said: "I am pleased by our strong sales increase of 7.8% and the
positive results from many of our recent innovations. I am particularly pleased
by the strong sales and profit growth delivered by our North American
businesses, especially U.S. Consumer Products. This growth reaffirms our
decision to realign and simplify our North American portfolio as part of our
current three-year plan. We are exploring similar strategic options for our
businesses outside of North America."
"Our focus on developing markets is progressing well. Heinz India
posted significant sales growth, as did the Company's other businesses in
Poland, Russia and parts of Asia," Mr. Johnson commented.
H.J. Heinz Company, P.O. Box 57, Pittsburgh 15230-0057
2
"Looking forward to the balance of Fiscal 2005, excluding special
items, Heinz remains on track with our full-year EPS target range of $2.32 -
2.42, with an expectation toward the lower end of the range," he said.
Gross profit increased 5.2%, despite a 90-basis-point decline in gross
profit margin. The decline in gross margin reflects increased commodity and fuel
costs, lower pricing and substantially higher supply chain costs in the European
seafood business. Operating income decreased 7.3%, due primarily to the lower
gross profit margin and increased Selling, General and Administrative expenses
("SG&A"). As a percentage of sales, selling and delivery costs increased due to
substantially higher fuel and trucking costs. General and Administrative
expenses ("G&A") increased primarily as a result of increased employee-related
costs, litigation costs and professional fees related to various projects,
including increased administrative expenses associated with Section 404 of
Sarbanes-Oxley.
Heinz's balance sheet and working capital management showed continued
improvement over the prior year. Cash Conversion Cycle for the quarter improved
five days, and net debt (total debt less cash and cash equivalents and the value
of interest rate swaps) was reduced by $138 million versus the prior-year
period. Operating Free Cash Flow (cash from operations less capital
expenditures) was $78 million in the quarter, after a $125 million tax
pre-payment in Europe. The Company said it now expects operating free cash flow
to be in the range of $750 to $850 million for Fiscal Year 2005.
(Comments on the third quarter and nine months that follow refer to results from
continuing operations, excluding special items. See attached tables for further
details, including reconciliation of non-GAAP financial measures. Management
believes that the adjusted GAAP measures provide additional clarity in
understanding the trends of the business as they provide management with a view
of the business excluding special items.)
THIRD-QUARTER SEGMENT HIGHLIGHTS
North American Consumer Products
Sales of the North American Consumer Products segment increased at a
strong double digit rate of 11.0%. Volume increased a significant 6.7%,
reflecting strong growth in Ore-Ida(R) brand products, Bagel Bites(R) and TGI
Friday's(R) frozen snacks. Heinz's marketing programs for these brands have been
very effective and consumers have responded positively to new recipes and
packaging. Sales of the Ore-Ida(R) brand increased 12.0% and Bagel Bites(R)
expanded by 23.0% during the quarter. In addition to strong volume and sales
growth in Consumer Products, gross profit increased by 11% versus last year,
enabled by very effective trade management and customer service initiatives.
Heinz looks forward to continued growth in Consumer Products, with plans to
launch a new kids-oriented ketchup this summer.
Pricing increased 2.8%, primarily related to Heinz(R) Ketchup, Bagel
Bites(R) and TGI Friday's(R) frozen snacks, and Ore-Ida(R) frozen potatoes. The
prior year acquisition of the Unifine Richardson business in Canada, which
manufactures and sells salad dressings, sauces and dessert toppings, increased
sales by 1.8%. Divestitures reduced sales 1.4% due to the sale of
3
Ethnic Gourmet Foods(R) and Rosetto(R) pasta in the first quarter of
Fiscal 2005. Operating income increased 17.2%, as the substantial increases in
sales volume and net pricing offset higher commodity, fuel and pension costs.
Heinz U.S. Foodservice
Sales of the U.S. Foodservice segment increased 5.9%. Strong volume
increased sales 4.5%, largely driven by the strength of the Truesoups(R) frozen
soup business and by increased sales of custom recipe tomato products, as well
as sales improvements in single-serve condiments and Heinz(R) Ketchup. Heinz's
restaurant sales are responding well to its new solutions-oriented operating
model for soups, desserts and sauces.
Higher pricing increased sales by 1.4%, reflecting price increases on
ketchup and frozen soup, implemented to offset fuel and commodity cost
pressures. Operating income was virtually flat to prior year as favorable
pricing and mix were offset by increased commodity, fuel and fixed selling
costs.
Europe
Heinz Europe's sales increased 6.9%. Favorable exchange translation
rates increased sales by 7.9%. Volume increased 1.5% principally due to
promotional timing on European seafood, increased Heinz(R) Ketchup sales behind
the successful introduction of the new "Top Down" bottle, the successful restage
of Heinz(R) beans and growth in the Italian infant nutrition business. These
marketing successes were partially offset by declines in sauces and jarred
vegetables in the Netherlands related to increased competition and pricing
pressures. Lower pricing decreased sales 2.2%, due to the cost of the Italian
infant nutrition restage and increased promotional spending in the Netherlands.
Although Heinz's U.K. unit experienced some softness, its overall core
business remains healthy and during the quarter, it achieved record market
shares for Heinz(R) Ketchup (81%) and Heinz(R) Salad Cream (83%). In Italy,
consumption grew 6% in the infant nutrition category, boosted by the success of
new Plasmon(R) marketing initiatives.
Operating income decreased 21.2% due to lower pricing, increased
commodity and supply chain costs in the European seafood business, and increased
G&A, primarily for employee-related costs, litigation costs and professional
fees tied to various projects across Europe.
Asia Pacific
Sales in Asia Pacific increased 7.3%. Volume increased sales by a solid
5.5%, reflecting strong volume in China, Australia and New Zealand. These
increases were partially offset by the discontinuation of an Indonesian energy
drink and declines in the Tegel(R) poultry business in New Zealand.
4
Heinz sales in New Zealand and in Australia grew by double digits,
behind several successful new product offerings.
Favorable exchange translation rates increased sales by 4.4%. Lower
pricing reduced sales 3.4%, primarily due to market price pressures on the
Tegel(R) poultry business in New Zealand. The acquisition of a controlling
interest in Shanghai LongFong Foods, a maker of popular frozen Chinese snacks
and desserts, increased sales 3.4%, which was essentially offset by the
divestiture of a Korean oils and fats product line which reduced sales 2.6%.
This is in line with the Company's strategy to improve its mix and focus on core
businesses while minimizing net out-of-pocket acquisition costs.
Operating income decreased 4.2%, to $32.6 million, primarily due to
lower pricing, increased commodity costs, and a decline in profitability in our
Tegel(R) poultry business.
YEAR-TO-DATE HIGHLIGHTS (for continuing operations, excluding special items)
Heinz reported income from continuing operations of $604.5 million in
the nine months ended January 26, 2005, up 5.4% compared to income from
continuing operations of $573.5 million for the year-earlier period. Diluted
earnings per share were $1.71 for the period, a 5.6% increase over $1.62 from
continuing operations in the prior year.
Sales increased 6.3% for the nine-month period, driven by volume
increases of 2.1%, which exceeds the Company's 1-2% annual volume growth target,
and exchange translation rates of 4.2%. The favorable volume reflects good
results across the Company, most notably in the North American Consumer Products
and U.S. Foodservice segments. Sales were moderately impacted by lower pricing
of 0.5%. These price reductions were partially offset by net price gains across
North America and U.S. Foodservice.
The Gross Profit Margin was 36.5%, down 90 basis points versus the
prior year, mainly due to increased commodity costs, lower pricing in Italy, and
increased supply chain costs in the European seafood business. Operating income
decreased $21.5 million, or 2.1%, reflecting the lower gross margin and higher
SG&A costs.
Operating free cash flow was $375 million versus $697 million in Fiscal
2004. The reduction reflects a $125 million tax pre-payment in Europe. Progress
in the Cash Conversion Cycle produced an eight-day improvement versus year ago.
For the full year, operating free cash flow is expected to be in the $750 to
$850 million range.
# #
5
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 1-866-783-5359 (listen only). It will be hosted by William R.
Johnson, Chairman, President & CEO; Art Winkleblack, Executive Vice President
and Chief Financial Officer; Jane S. Miller, Chief Growth Officer; and Jack
Runkel, Vice President - Investor Relations.
# #
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, earnings,
and volume growth, general economic, political, and industry conditions,
competitive conditions, which affect, among other things, customer preferences
and the pricing of products, production, energy and raw material costs, the need
for product recalls, 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, product mix, 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 litigation (including the Remedia-related
claims in Israel and rights against third parties) and international operations,
particularly the performance of business in hyperinflationary environments,
changes in estimates in critical accounting judgments and other laws and
regulations, including tax laws, the success of tax-planning strategies, the
possibility of increased pension expense and contributions and other
people-related costs, the possibility of an impairment in Heinz's investments,
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 28,
2004, 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, except as required by the securities laws.
# #
6
ABOUT HEINZ: H.J. Heinz Company, offering "Good Food Every Day," is one of the
world's leading marketers and producers of branded foods in ketchup, condiments,
sauces, meals, soups, seafood, snacks, and infant foods. Heinz satisfies hungry
consumers in every outlet, from supermarkets, to restaurants to convenience
stores and kiosks. 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 or close to $3 billion), Ore-Ida(R) french
fries, Boston Market(R) and SmartOnes(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;
OR
Investors:
Jack Runkel, 412-456-6034.
7
H. J. HEINZ COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<Table>
<Caption>
Third Quarter Ended Nine Months Ended
--------------------------------- ----------------------------------
January 26, 2005 January 28, 2004 January 26, 2005 January 28, 2004
FY2005 FY2004 FY2005 FY2004
---------------- ---------------- ---------------- ----------------
Sales $ 2,261,219 $ 2,097,181 $ 6,463,805 $ 6,083,166
Cost of products sold 1,441,306 1,317,934 4,105,125 3,815,625
------------ ------------ ------------ ------------
Gross profit 819,913 779,247 2,358,680 2,267,541
Selling, general and
administrative expenses 490,345 423,880 1,346,010 1,214,063
------------ ------------ ------------ ------------
Operating income 329,568 355,367 1,012,670 1,053,478
Interest income 7,534 5,588 20,178 15,901
Interest expense 60,880 53,725 170,826 160,254
Asset impairment charges for cost and
equity investments 73,842 -- 73,842 --
Other expense, net 1,671 5,095 10,831 35,019
------------ ------------ ------------ ------------
Income from continuing operations before
income taxes 200,709 302,135 777,349 874,106
Provision for income taxes 62,189 99,898 246,714 293,557
------------ ------------ ------------ ------------
Income from continuing operations 138,520 202,237 530,635 580,549
Income from discontinued operations, net
of tax 13,891 -- 15,577 27,200
------------ ------------ ------------ ------------
Net income $ 152,411 $ 202,237 $ 546,212 $ 607,749
============ ============ ============ ============
Income per common share - Diluted
Continuing operations $ 0.39 $ 0.57 $ 1.50 $ 1.64
Discontinued operations 0.04 -- 0.04 0.08
------------ ------------ ------------ ------------
Net Income $ 0.43 $ 0.57 $ 1.54 $ 1.72
============ ============ ============ ============
Average common shares
outstanding - diluted 353,842 354,254 353,842 354,254
============ ============ ============ ============
Income per common share - Basic
Continuing operations $ 0.40 $ 0.58 $ 1.51 $ 1.65
Discontinued operations 0.04 -- 0.04 0.08
------------ ------------ ------------ ------------
Net Income $ 0.44 $ 0.58 $ 1.56 $ 1.73
============ ============ ============ ============
Average common shares
outstanding - basic 350,357 351,725 350,357 351,725
============ ============ ============ ============
Cash dividends per share $ 0.285 $ 0.27 $ 0.855 $ 0.81
============ ============ ============ ============
Note: Fiscal 2005 and 2004 include special items
(Totals may not add due to rounding)
</Table>
8
H. J. HEINZ COMPANY AND SUBSIDIARIES
SEGMENT DATA
<Table>
<Caption>
Third Quarter Ended Nine Months Ended
----------------------------------- ----------------------------------
January 26, 2005 January 28, 2004 January 26, 2005 January 28, 2004
FY2005 FY2004 FY2005 FY2004
---------------- ---------------- ---------------- ----------------
Net external sales:
North American Consumer Products $ 579,039 $ 521,753 $ 1,633,798 $ 1,494,413
U.S. Foodservice 374,835 353,884 1,098,535 1,056,993
Europe 884,771 827,451 2,488,267 2,337,255
Asia/Pacific 323,865 301,885 962,924 926,661
Other Operating Entities 98,709 92,208 280,281 267,844
------------ ------------ ------------ ------------
Consolidated Totals $ 2,261,219 $ 2,097,181 $ 6,463,805 $ 6,083,166
============ ============ ============ ============
Intersegment revenues:
North American Consumer Products $ 12,773 $ 13,449 $ 38,464 $ 42,429
U.S. Foodservice 7,130 3,747 16,711 10,378
Europe 4,455 2,729 13,621 10,352
Asia/Pacific 825 581 2,435 2,158
Other Operating Entities 434 609 1,192 1,727
Non-Operating (25,617) (21,115) (72,423) (67,044)
------------ ------------ ------------ ------------
Consolidated Totals $ -- $ -- $ -- $ --
============ ============ ============ ============
Operating income (loss):
North American Consumer Products $ 148,352 $ 126,534 $ 394,421 $ 359,265
U.S. Foodservice 54,378 54,658 166,682 161,308
Europe 128,517 163,147 408,088 479,130
Asia/Pacific 32,599 34,026 107,720 112,029
Other Operating Entities 2,587 2,554 25,075 22,184
Non-Operating (36,865) (25,552) (89,316) (80,438)
------------ ------------ ------------ ------------
Consolidated Totals $ 329,568 $ 355,367 $ 1,012,670 $ 1,053,478
============ ============ ============ ============
Operating income (loss) excluding special items:
North American Consumer Products $ 148,352 $ 126,534 $ 394,421 $ 360,761
U.S. Foodservice 54,378 54,658 166,682 163,808
Europe 128,517 163,147 408,088 454,331
Asia/Pacific 32,599 34,026 107,720 112,029
Other Operating Entities 2,587 2,554 25,075 22,184
Non-Operating (36,865) (25,552) (89,316) (78,980)
------------ ------------ ------------ ------------
Consolidated Totals $ 329,568 $ 355,367 $ 1,012,670 $ 1,034,133
============ ============ ============ ============
The company's revenues are generated via the sale of products in the following categories:
Ketchup, Condiments and Sauces $ 793,614 $ 735,347 $ 2,356,649 $ 2,229,197
Frozen Foods 594,690 526,150 1,599,280 1,402,629
Convenience Meals 515,215 464,000 1,446,515 1,349,012
Infant Feeding 220,431 222,652 601,819 629,769
Other 137,269 149,032 459,542 472,559
------------ ------------ ------------ ------------
Total $ 2,261,219 $ 2,097,181 $ 6,463,805 $ 6,083,166
============ ============ ============ ============
</Table>
9
H.J. HEINZ COMPANY AND SUBSIDIARIES
SPECIAL ITEMS - THIRD QUARTER ENDED JANUARY 26, 2005
The company reports its financial results in accordance with generally accepted
accounting principles ("GAAP").
However, management believes that certain non-GAAP performance measures and
ratios, used in managing the business, may provide users of this financial
information with additional meaningful comparisons between current results and
results in prior periods. Non-GAAP financial measures should be viewed in
addition to, and not as an alternative for, the company's reported results
prepared in accordance with GAAP. The following table provides a reconciliation
of the company's reported results from continuing operations to the results
excluding special items for the third quarter ended January 26, 2005:
<Table>
<Caption>
Third Quarter Ended January 26, 2005
----------------------------------------------------------------------
Net Gross Operating Per
Sales Profit Income Income Share
---------- ---------- ---------- ---------- ----------
Reported results from continuing operations $ 2,261.2 $ 819.9 $ 329.6 $ 138.5 $ 0.39
Asset impairment charges for cost and
equity investments -- -- -- 73.8 0.21
Results from continuing operations
excluding special items $ 2,261.2 $ 819.9 $ 329.6 $ 212.4 $ 0.60
========== ========== ========== ========== ==========
</Table>
(Note: Totals may not add due to rounding.)
10
H.J. HEINZ COMPANY AND SUBSIDIARIES
SPECIAL ITEMS - NINE MONTHS ENDED JANUARY 26, 2005 AND JANUARY 28, 2004
The company reports its financial results in accordance with generally accepted
accounting principles ("GAAP"). However, management believes that certain
non-GAAP performance measures and ratios, used in managing the business, may
provide users of this financial information with additional meaningful
comparisons between current results and results in prior periods. Non-GAAP
financial measures should be viewed in addition to, and not as an alternative
for, the company's reported results prepared in accordance with GAAP. The
following table provides a reconciliation of the company's reported results from
continuing operations to the results excluding special items for the nine months
ended January 26, 2005 and January 28, 2004:
<Table>
<Caption>
Nine Months Ended January 26, 2005
----------------------------------------------------------------------
Net Gross Operating Per
Sales Profit Income Income Share
---------- ---------- ---------- ---------- ----------
Reported results from continuing operations $ 6,463.8 $ 2,358.7 $ 1,012.7 $ 530.6 $ 1.50
Asset impairment charges for cost and
equity investments -- -- -- 73.8 0.21
---------- ---------- ---------- ---------- ----------
Results from continuing operations
excluding special items $ 6,463.8 $ 2,358.7 $ 1,012.7 $ 604.5 $ 1.71
========== ========== ========== ========== ==========
</Table>
<Table>
<Caption>
Nine Months Ended January 28, 2004
----------------------------------------------------------------------
Net Gross Operating Per
Sales Profit Income Income Share
---------- ---------- ---------- ---------- ----------
Reported results from continuing operations $ 6,083.2 $ 2,267.5 $ 1,053.5 $ 580.5 $ 1.64
Write-down of U.K. pizza crust assets -- 4.0 4.0 2.8 0.01
Reorganization costs -- -- 5.5 3.4 0.01
Gain on sale of the Northern European
bakery business -- -- (28.8) (13.3) (0.04)
---------- ---------- ---------- ---------- ----------
Results from continuing operations
excluding special items $ 6,083.2 $ 2,271.5 $ 1,034.1 $ 573.5 $ 1.62
========== ========== ========== ========== ==========
</Table>
(Note: Totals may not add due to rounding.)
11
H.J. HEINZ COMPANY AND SUBSIDIARIES
NON-GAAP PERFORMANCE RATIOS
The company reports its financial results in accordance with generally accepted
accounting principles ("GAAP"). However, management believes that certain
non-GAAP performance measures and ratios, used in managing the business, may
provide users of this financial information with additional meaningful
comparisons between current results and results in prior periods. Non-GAAP
financial measures should be viewed in addition to, and not as an alternative
for, the company's reported results prepared in accordance with GAAP. The
following table provides the calculation of those non-GAAP performance ratios
discussed in the company's press release dated February 28, 2005:
<Table>
<Caption>
NET DEBT CALCULATION
(amounts in thousands) January 26, 2005 April 28, 2004 January 28, 2004
FY 2005 FY 2004 FY 2004
---------------- -------------- ----------------
Short-term debt $ 34,102 $ 11,434 $ 11,358
Long-term debt, including current portion 4,757,161 4,962,996 5,096,471
----------- ----------- -----------
Total debt 4,791,263 4,974,430 5,107,829
Less:
Value of interest rate swaps (208,173) (125,324) (206,563)
Cash and cash equivalents (834,805) (1,180,039) (1,016,166)
----------- ----------- -----------
Net Debt $ 3,748,285 $ 3,669,067 $ 3,885,100
=========== =========== ===========
</Table>
<Table>
<Caption>
OPERATING FREE CASH FLOW CALCULATION
(amounts in thousands) Third Quarter Ended Nine Months Ended
---------------------------------- ---------------------------------
January 26, 2005 January 28, 2004 January 26, 2005 January 28, 2004
FY 2005 FY 2004 FY 2005 FY 2004
---------------- ---------------- ---------------- ----------------
Cash provided by operating activities $ 126,584 $ 323,794 $ 506,146 $ 817,053
Capital expenditures (48,404) (44,980) (131,024) (119,817)
----------- ----------- ----------- -----------
Operating Free Cash Flow $ 78,180 $ 278,814 $ 375,122 $ 697,236
=========== =========== =========== ===========
</Table>