Exhibit 99
NEWS RELEASE
HEINZ
WORLD HEADQUARTERS
"THE GOOD FOOD COMPANY"
FOR RELEASE UPON RECEIPT
HEINZ REPORTS SECOND QUARTER FISCAL 2006 EPS FROM
CONTINUING OPERATIONS OF $0.62, UP 10.7% (EXCLUDING SPECIAL ITEMS), AND
OPERATING FREE CASH FLOW OF $175 MILLION
- - EPS ON A GAAP BASIS WAS $0.60 VERSUS $0.56 LAST YEAR, UP 7.1%. EPS FROM
CONTINUING OPERATIONS WAS $0.50 VERSUS $0.56 IN THE PRIOR YEAR.
- - SPECIAL ITEMS OF $0.12 FOR THE QUARTER REFLECT PREVIOUSLY ANNOUNCED
REORGANIZATION CHARGES AND COSTS RELATED TO POTENTIAL SALE OF BUSINESS
UNITS.
- - SALES INCREASED 6.3%, REFLECTING CONTINUED STRONG PERFORMANCE IN NORTH
AMERICAN CONSUMER PRODUCTS AND ASIA PACIFIC.
- - OPERATING FREE CASH FLOW OF $175 MILLION UP 17.4% VERSUS PRIOR YEAR.
- - OPERATING INCOME UP 5.2% (EXCLUDING SPECIAL ITEMS).
- - Q2 EPS BENEFITED FROM A LOWER TAX RATE, WITH THE FULL-YEAR RATE NOW
EXPECTED TO BE 30% TO 31%.
PITTSBURGH - NOVEMBER 22, 2005 - H.J. Heinz Company (NYSE: HNZ) today
reported net income of $203.8 million, or $0.60 per diluted share, for its
second quarter ended October 26, 2005. This represents a 7.1% increase in EPS
versus the second quarter of Fiscal 2005 on a Generally Accepted Accounting
Principles and total company basis. Net income from discontinued operations for
the second quarter of Fiscal 2006 was $32.0 million ($0.09 of EPS), reflecting
the resolution of tax liabilities related to the businesses spun-off to Del
Monte in Fiscal 2003. The second quarter net income from continuing operations,
excluding special items, was $212.0 million, or $0.62 per diluted share, a 10.7%
increase over earnings of $0.56 in the prior year. On a GAAP basis, income from
continuing operations was $171.8 million, compared to $197.3 million in the
prior year.
Special items in the second quarter of Fiscal 2006 totaled $50.9 million
pretax ($40.2 million after tax) and related to previously announced
reorganization charges for targeted workforce reductions at various worldwide
locations, as well as costs incurred in connection with strategic reviews
related to the potential divestiture of several non-core businesses. The special
items include a charge recognized by the Company related to the sale of
Star-Kist Food D'Or in Israel, which had been anticipated during the quarter and
occurred subsequently. The Company
H.J. Heinz Company, P.O. Box 57, Pittsburgh 15230-0057
2
is still projecting to incur net expenses totaling approximately $100 million in
Fiscal 2006 for reorganization activities, portfolio reviews and costs to
integrate acquisitions.
Commenting on the Company's performance, Heinz's Chairman, President and
CEO William R. Johnson said: "We are generally pleased with results for the
quarter. Volume, operating income and operating free cash flow, all showed solid
progress. We achieved these results despite significant cost headwinds and
during a period of extensive efforts to reshape the portfolio and streamline our
core businesses. We are making good progress on our potential divestitures and
will carefully assess offers to ensure good value for our shareholders."
(Comments on the second quarter and six months that follow refer to results
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.)
SECOND QUARTER SUMMARY
Overall, Heinz's second quarter sales increased 6.3%, reflecting
improvements in all sales measures. Volume increased 0.6%, driven primarily by
the North American Consumer Products segment, as well as the Australian and
Indonesian businesses. These volume increases were partially offset by declines
in the European frozen food and convenience meals businesses, the Tegel(R)
poultry business in New Zealand and the U.S. Foodservice segment. Pricing and
foreign exchange increased sales slightly, both by 0.2%.
Acquisitions, net of divestitures, increased sales by 5.4%, and
consisted primarily of the following:
- HP Foods Limited, HP Foods Holdings Limited, and HP Foods
International Limited, collectively referred to as "HPF", a
manufacturer and marketer of sauces that are primarily sold in
the United Kingdom, the United States and Canada;
- Nancy's Specialty Foods, Inc., a producer of premium appetizers,
quiche entrees and desserts in the United States and Canada;
- A majority interest in Petrosoyuz, a leading Russian maker of
ketchup, condiments and sauces; and,
- Appetizers And, Inc. ("AAI"), a manufacturer and marketer of
high-quality, frozen hors d'oeuvres sold primarily in the U.S.
foodservice industry.
3
Adjusted gross profit increased 5.6%, due primarily to the increased
volume and favorable impact of acquisitions. Adjusted gross profit margins were
off slightly, as a modest increase in net price and strong productivity
initiatives largely offset increases in commodity and fuel costs. Adjusted
operating income grew 5.2% despite the significant cost headwinds buffeting the
industry. The increase in adjusted operating income and a lower effective tax
rate offset increased net interest expense, resulting in the 10.7% increase in
EPS.
The effective tax rate for the quarter was 24.8% versus 32.0% in the
prior year. This decline is primarily due to the reversal of a tax provision of
$23.4 million related to a foreign affiliate as a result of a favorable court
decision involving an unrelated party. As a result of this favorable outcome and
other tax initiatives, the Company has revised its projected tax rate for the
year from a range of 31% - 33% to 30% - 31%.
Heinz's working capital management improved over the prior year and the
Cash Conversion Cycle improved by one day. The Company generated $175 million of
Operating Free Cash Flow in the second quarter of Fiscal 2006, a 17.4%
improvement over last year.
SECOND QUARTER SEGMENT HIGHLIGHTS
NORTH AMERICAN CONSUMER PRODUCTS
Sales of the North American Consumer Products segment increased 10.4%.
Volume increased 4.2%, as a result of strong growth in Smart Ones(R) frozen
entrees and desserts, TGI Friday's(R) and Delimex(R) brands of frozen snacks and
Classico(R) pasta sauces. Frozen potatoes volume also improved. Pricing
increased 0.7% largely due to reduced trade promotion expense, primarily in the
frozen food category. The HPF and Nancy's acquisitions increased sales 4.1% and
exchange translation rates increased sales 1.4%.
Adjusted operating income increased 9.3%, driven primarily by the
favorable impact of volume growth and acquisitions, partially offset by
increased commodity costs and Selling and Distribution expenses ("S&D").
HEINZ U.S. FOODSERVICE
Sales of the U.S. Foodservice segment increased 1.5%. The acquisition of
AAI in the fourth quarter of Fiscal 2005 increased sales 4.6%. Lower volume in
the base business decreased sales 2.5%, largely due to the timing of trade
promotions on ketchup and reduced traffic at some key customers.
Adjusted operating income decreased 9.4% primarily due to the volume
decline, higher commodity costs and increased S&D expense, partially offset by
the favorable impact of the AAI acquisition.
4
EUROPE
Heinz Europe's sales increased 5.4%. The HPF and Petrosoyuz acquisitions
increased sales 9.7%. Volume decreased 2.0% but would have been flat without the
impact of the non-core frozen, seafood and HAK(R) businesses targeted for
divestiture. Lower pricing decreased sales 0.5%, driven primarily by increased
promotional spending on Heinz(R) soup in the U.K., partially offset by
improvements in the Italian infant nutrition business and price increases on
Heinz(R) beans. Divestitures reduced sales 1.0%, and unfavorable exchange
translation rates decreased sales by 0.8%.
Adjusted operating income increased 8.6%, driven mainly by the favorable
impact of the HPF acquisition, the settlement of a supplier claim in the U.K.
related to the Sudan 1 recall, improved performance in European seafood and
reduced European headquarter costs. These increases were partially offset by
lower volume and higher manufacturing costs in Northern Europe and Italy.
ASIA PACIFIC
Sales in Asia/Pacific increased 7.1%. Volume increased sales 3.9%,
reflecting strong results in Australia and Indonesia, largely due to new product
introductions and increased promotions. These increases were partially offset by
a decline in the Tegel(R) poultry business in New Zealand. Favorable exchange
translation rates increased sales by 1.6%. Pricing also increased sales
slightly, up 0.4%. Acquisitions, net of divestitures, increased sales 1.2%,
largely due to the acquisition of Shanghai LongFong Foods, a maker of popular
frozen Chinese snacks and desserts.
Adjusted operating income was virtually flat, due primarily to commodity
and manufacturing cost increases in Indonesia and China, and lower sales in the
Tegel(R) poultry business, partially offset by volume improvements and the
LongFong acquisition.
REST OF WORLD
Strong top line growth was generated in Heinz's ROW segment. Heinz India
showed both double-digit sales and profit growth for the quarter. Other markets
posting strong growth were South Africa, Egypt and Mexico, where the new
single-serve foodservice acquisition is doing quite well.
YEAR-TO-DATE HIGHLIGHTS
Heinz reported income from continuing operations, excluding special
items, of $393.7 million in the six months ended October 26, 2005, up 0.4%
compared to income from continuing operations of $392.1 million for the
year-earlier period. Diluted earnings per share from continuing operations,
excluding special items, was $1.14, a 2.7% increase over $1.11 in the prior
year.
5
Sales increased 5.9% for the first half of Fiscal 2006, driven by volume
increases of 1.4% and acquisitions, net of divestitures, of 3.4%. The favorable
volume was due primarily to the
North American Consumer Products segment, as well as the Australian, Eastern
European, Indonesian, Indian and Italian infant nutrition businesses. These
volume increases were partially offset by declines in European frozen food,
convenience meals and seafood, U.S. Foodservice segment and Tegel(R) poultry.
Gross profit increased 4.0%, despite a 60 basis point decline in adjusted gross
profit margin, primarily from the favorable impact of acquisitions, higher
volume and favorable exchange translation rates. Adjusted operating income
declined 1.0%, largely due to the lower gross profit margin, higher fuel and
transportation costs and increased G&A expense.
On a GAAP basis, net income for the six months was $361.1 million
compared to $393.8 million in the prior year, and EPS was $1.04 compared to
$1.11 in the prior year. The current year includes charges for special items of
$84.8 million pretax ($64.6 million after tax) and income of $32.0 million
related to discontinued operations.
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 1-800-955-1760 (listen only). It will be hosted by William R.
Johnson, Chairman, President & CEO; Art Winkleblack, Executive Vice President
and Chief Financial 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
ability to identify and anticipate and respond through innovation to consumer
trends, the need for product recalls, the ability to maintain favorable supplier
relationships, achieving cost savings and gross margins objectives, currency
valuations and interest rate fluctuations, change in credit ratings, the ability
to identify and complete and the timing, pricing and success of acquisitions,
joint ventures, divestitures and other strategic initiatives, approval of
acquisitions and
6
divestitures by competition authorities, including potential divestitures of
certain HPF product lines in the U.K., the success of Heinz's growth and
innovation strategy and the ability to limit disruptions to the business
resulting from the emphasis on three core categories and potential divestitures,
the ability to effectively integrate acquired businesses, new product and
packaging innovations, product mix, the effectiveness of advertising, marketing,
and promotional programs,
supply chain efficiency and cash flow initiatives, risks inherent in litigation,
including tax litigation, 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 27, 2005. 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.
# #
ABOUT HEINZ: H.J. Heinz Company, offering "Good Food, Every Day(TM)," 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), HP(R) and
Lea & Perrins(R), Ore-Ida(R) french fries and roasted potatoes, 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(TM). 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)
Second Quarter Ended Six Months Ended
----------------------------------------- ------------------------------------------
October 26, 2005 October 27, 2004 October 26, 2005 October 27, 2004
FY2006 FY2005 FY2006 FY2005
------------------- ------------------ ------------------- -------------------
Sales $ 2,338,848 $ 2,199,560 $ 4,449,001 $ 4,202,586
Cost of products sold 1,496,477 1,399,546 2,852,879 2,663,819
------------------- ------------------ ------------------- -------------------
Gross profit
842,371 800,014 1,596,122 1,538,767
Selling, general and
administrative expenses 531,835 456,566 1,004,384 855,665
------------------- ------------------ ------------------- -------------------
Operating income 310,536 343,448 591,738 683,102
Interest income 5,896 5,983 14,085 12,644
Interest expense 76,571 56,600 143,043 109,946
Other expense, net (9,088) (2,777) (13,628) (9,160)
------------------- ------------------ ------------------- -------------------
Income from continuing operations before
income taxes 230,773 290,054 449,152 576,640
Provision for income taxes 58,991 92,775 120,096 184,525
------------------- ------------------ ------------------- -------------------
Income from continuing operations 171,782 197,279 329,056 392,115
Income from discontinued operations, net of
tax 32,039 1,686 32,039 1,686
------------------- ------------------ ------------------- -------------------
Net income $ 203,821 $ 198,965 $ 361,095 $ 393,801
=================== ================== =================== ===================
Income per common share - Diluted
Continuing operations $ 0.50 $ 0.56 $ 0.95 $ 1.11
Discontinued operations 0.09 - 0.09 -
------------------- ------------------ ------------------- -------------------
Net Income $ 0.60 $ 0.56 $ 1.04 $ 1.11
=================== ================== =================== ===================
Average common shares
outstanding - diluted 342,533 353,275 345,963 354,145
=================== ================== =================== ===================
Income per common share - Basic
Continuing operations $ 0.51 $ 0.56 $ 0.96 $ 1.12
Discontinued operations 0.09 - 0.09 -
------------------- ------------------ ------------------- -------------------
Net Income $ 0.60 $ 0.57 $ 1.05 $ 1.12
=================== ================== =================== ===================
Average common shares
outstanding - basic 339,475 349,655 342,856 350,569
=================== ================== =================== ===================
Cash dividends per share $ 0.30 $ 0.285 $ 0.60 $ 0.57
=================== ================== =================== ===================
Note: Fiscal 2006 includes special items.
(Totals may not add due to rounding)
</Table>
8
H. J. HEINZ COMPANY AND SUBSIDIARIES
SEGMENT DATA
Second Quarter Ended Six Months Ended
------------------------------------------ -----------------------------------------
October 26, 2005 October 27, 2004 October 26, 2005 October 27, 2004
FY2006 FY2005 FY2006 FY2005
-------------------- -------------------- -------------------- --------------------
Net external sales:
North American Consumer Products $ 625,039 $ 565,927 $ 1,169,999 $ 1,054,759
U.S. Foodservice 385,345 379,832 738,556 723,700
Europe 858,692 814,771 1,646,856 1,603,496
Asia/Pacific 369,110 344,787 692,640 639,059
Other Operating Entities 100,662 94,243 200,950 181,572
-------------------- -------------------- -------------------- --------------------
Consolidated Totals $ 2,338,848 $ 2,199,560 $ 4,449,001 $ 4,202,586
==================== ==================== ==================== ====================
Intersegment revenues:
North American Consumer Products $ 13,128 $ 12,965 $ 25,431 $ 25,691
U.S. Foodservice 5,307 5,339 10,205 9,581
Europe 3,239 4,494 6,474 9,166
Asia/Pacific 449 1,013 1,223 1,610
Other Operating Entities 301 368 564 758
Non-Operating (22,424) (24,179) (43,897) (46,806)
-------------------- -------------------- -------------------- --------------------
Consolidated Totals $ - $ - $ - $ -
==================== ==================== ==================== ====================
Operating income (loss):
North American Consumer Products $ 147,018 $ 134,977 $ 270,949 $ 246,069
U.S. Foodservice 47,202 57,964 97,664 112,304
Europe 112,727 125,480 229,017 279,571
Asia/Pacific 39,633 42,858 59,986 75,121
Other Operating Entities (5,002) 8,162 1,365 22,488
Non-Operating (31,042) (25,993) (67,243) (52,451)
-------------------- -------------------- -------------------- --------------------
Consolidated Totals $ 310,536 $ 343,448 $ 591,738 $ 683,102
==================== ==================== ==================== ====================
Operating income (loss) excluding special items:
North American Consumer Products $ 147,571 $ 134,977 $ 273,338 $ 246,069
U.S. Foodservice 52,535 57,964 104,345 112,304
Europe 136,288 125,480 266,019 279,571
Asia/Pacific 42,750 42,858 70,021 75,121
Other Operating Entities 10,419 8,162 18,751 22,488
Non-Operating (28,111) (25,993) (55,986) (52,451)
-------------------- -------------------- -------------------- --------------------
Consolidated Totals $ 361,452 $ 343,448 $ 676,488 $ 683,102
==================== ==================== ==================== ====================
The company's revenues are generated via the sale of products in the following
categories:
Ketchup, Condiments and Sauces $ 870,080 $ 800,435 $ 1,673,009 $ 1,563,035
Frozen Foods 602,455 543,050 1,106,337 1,004,590
Convenience Meals 477,358 480,431 931,634 931,300
Infant Feeding 207,318 202,437 401,696 381,388
Other 181,637 173,207 336,325 322,273
-------------------- -------------------- -------------------- --------------------
Total $ 2,338,848 $ 2,199,560 $ 4,449,001 $ 4,202,586
==================== ==================== ==================== ====================
9
H.J. HEINZ COMPANY AND SUBSIDIARIES
SPECIAL ITEMS - SECOND QUARTER ENDED OCTOBER 26, 2005
The Company reports its financial results in accordance with accounting
principles generally accepted in the United States of America ("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 second quarter ended October 26, 2005:
Second Quarter Ended October 26, 2005
--------------------------------------------------------
(amounts in millions) Net Gross Operating Per
Sales Profit Income Income Share
---------- --------- --------- -------- --------
Reported results from continuing operations $ 2,338.8 $ 842.4 $ 310.5 $ 171.8 $ 0.50
Reorganization costs - 4.0 31.5 22.2 0.06
Strategic review costs - 1.5 6.8 4.4 0.01
Net loss on disposals - (3.3) 12.7 13.6 0.04
---------- -------- --------- -------- --------
Results from continuing operations
excluding special items $ 2,338.8 $ 844.5 $ 361.5 $ 212.0 $ 0.62
============ ======== ========== ======== ========
(Note: Totals may not add due to rounding.)
</Table>
10
H.J. HEINZ COMPANY AND SUBSIDIARIES
SPECIAL ITEMS - SIX MONTHS ENDED OCTOBER 26, 2005
The Company reports its financial results in accordance with accounting
principles generally accepted in the United States of America ("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 six months ended October 26, 2005:
Six Months Ended October 26, 2005
--------------------------------------------------------
(amounts in millions) Net Gross Operating Per
Sales Profit Income Income Share
---------- ---------- --------- ------- --------
Reported results from continuing operations $ 4,449.0 $ 1,596.1 $ 591.7 $ 329.1 $ 0.95
Reorganization costs - 6.0 56.5 39.1 0.11
Strategic review costs - 1.5 15.6 12.0 0.03
Net loss on disposals - (3.3) 12.7 13.6 0.04
---------- ----------- --------- ------- --------
Results from continuing operations
excluding special items $ 4,449.0 $ 1,600.3 $ 676.5 $ 393.7 $ 1.14
========== =========== ========= ======= ========
(Note: Totals may not add due to rounding.)
</Table>
H.J. HEINZ COMPANY AND SUBSIDIARIES
NON-GAAP PERFORMANCE RATIOS
The Company reports its financial results in accordance with accounting
principles generally accepted in the United States of America ("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 the non-GAAP performance
ratio discussed in the Company's press release dated November 22, 2005:
OPERATING FREE CASH FLOW CALCULATION
(amounts in thousands) Second Quarter Ended Six Months Ended
----------------------------------- -----------------------------------
October 26, 2005 October 27, 2004 October 26, 2005 October 27, 2004
FY 2006 FY 2005 FY 2006 FY 2005
---------------- ---------------- ---------------- ----------------
Cash provided by operating activities $ 227,567 $ 193,382 $ 393,483 $ 379,562
Capital expenditures (52,447) 44,180) (99,609) (82,620)
---------------- ---------------- ---------------- ----------------
Operating Free Cash Flow $ 175,120 $ 149,202 $ 293,874 $ 296,942
================ ================ ================ ================