H.J. Heinz Company 10-Q

10-Q 1 j1769501e10vq.htm H.J. HEINZ COMPANY 10-Q H.J. Heinz Company 10-Q

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q


x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended January 25, 2006


o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 1-3385

H. J. HEINZ COMPANY

(Exact name of registrant as specified in its charter)


PENNSYLVANIA		25-0542520
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

600 Grant Street, Pittsburgh, Pennsylvania (Address of Principal Executive Offices)		15219 (Zip Code)

Registrant’s telephone number, including area code: (412) 456-5700

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such requirements for the past 90 days. Yes X No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer X Accelerated filer Non-accelerated filer

Indicate by check mark whether the registrant is a shell Company (as defined in Rule 12b-2 of the Exchange Act). Yes No X

The number of shares of the Registrant’s Common Stock, par value $0.25 per share, outstanding as of January 31, 2006 was 335,012,168 shares.

TABLE OF CONTENTS


PART I--FINANCIAL INFORMATION
	Item 1. Financial Statements
H. J. HEINZ COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME
H. J. HEINZ COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS
H. J. HEINZ COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS
H. J. HEINZ COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
THREE MONTHS ENDED JANUARY 25, 2006 AND JANUARY 26, 2005
OPERATING RESULTS BY BUSINESS SEGMENT
NINE MONTHS ENDED JANUARY 25, 2006 AND JANUARY 26, 2005
OPERATING RESULTS BY BUSINESS SEGMENT
CAUTIONARY STATEMENT RELEVANT TO FORWARD-LOOKING INFORMATION
	Item 3. Quantitative and Qualitative Disclosures About Market Risk
	Item 4. Controls and Procedures
PART II--OTHER INFORMATION
	Item 1. Legal Proceedings
	Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
	Item 3. Defaults upon Senior Securities
	Item 4. Submission of Matters to a Vote of Security Holders
	Item 5. Other Information
	Item 6. Exhibits
EXHIBIT INDEX
Exhibit 4
Exhibit 10
Exhibit 12
Exhibit 31(A)
Exhibit 31(B)
Exhibit 32(A)
Exhibit 32(B)

PART I— FINANCIAL INFORMATION

Item 1. Financial Statements

H. J. HEINZ COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME


				Third Quarter Ended

				January 25, 2006			January 26, 2005
				FY 2006			FY 2005

				(Unaudited)
				(In Thousands, Except
				per Share Amounts)
Sales				$	2,186,524		$	2,069,159
Cost of products sold					1,405,807			1,284,425

Gross profit					780,717			784,734
Selling, general and administrative expenses					473,081			465,365

Operating income					307,636			319,369
Interest income					7,693			7,370
Interest expense					86,336			60,434
Asset impairment charges for cost and equity investments					—			73,842
Other expense, net					9,918			2,173

Income from continuing operations before income taxes					219,075			190,290
Provision for income taxes					85,897			58,778

Income from continuing operations					133,178			131,512
(Loss)/income from discontinued operations, net of tax					(16,578	)		20,899

Net income				$	116,600		$	152,411

Income/(loss) per common share
	Diluted
		Continuing operations		$	0.39		$	0.37
		Discontinued operations			(0.05	)		0.06

			Net income	$	0.35		$	0.43

Average common shares outstanding— diluted					337,822			352,591

	Basic
		Continuing operations		$	0.40		$	0.38
		Discontinued operations			(0.05	)		0.06

			Net income	$	0.35		$	0.44

Average common shares outstanding— basic					334,879			349,729

Cash dividends per share				$	0.30		$	0.285

See Notes to Condensed Consolidated Financial Statements.

H. J. HEINZ COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME


				Nine Months Ended

				January 25, 2006		January 26, 2005
				FY 2006		FY 2005

				(Unaudited)
				(In Thousands, Except
				per Share Amounts)
Sales				$	6,243,786	$	5,872,950
Cost of products sold					3,956,735		3,637,655

Gross profit					2,287,051		2,235,295
Selling, general and administrative expenses					1,421,589		1,273,274

Operating income					865,462		962,021
Interest income					21,491		19,629
Interest expense					229,140		169,871
Asset impairment charges for cost and equity investments					—		73,842
Other expense, net					19,836		10,238

Income from continuing operations before income taxes					637,977		727,699
Provision for income taxes					196,295		231,179

Income from continuing operations					441,682		496,520
Income from discontinued operations, net of tax					36,013		49,692

Net income				$	477,695	$	546,212

Income per common share
	Diluted
		Continuing operations		$	1.29	$	1.40
		Discontinued operations			0.10		0.14

			Net income	$	1.39	$	1.54

	Average common shares outstanding— diluted				343,532		353,842

	Basic
		Continuing operations		$	1.30	$	1.42
		Discontinued operations			0.11		0.14

			Net income	$	1.40	$	1.56

	Average common shares outstanding— basic				340,484		350,357

Cash dividends per share				$	0.90	$	0.855

See Notes to Condensed Consolidated Financial Statements.

H. J. HEINZ COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS


		January 25, 2006		April 27, 2005*
		FY 2006		FY 2005

		(Unaudited)
		(Thousands of Dollars)
Assets
Current Assets:
Cash and cash equivalents		$	944,281	$	1,083,749
Receivables, net			1,056,326		1,092,394
Inventories			1,213,728		1,256,776
Prepaid expenses			182,761		174,818
Other current assets			28,207		37,839
Current assets of discontinued operations			325,867		—

	Total current assets		3,751,170		3,645,576



Property, plant and equipment			3,731,227		4,022,719
Less accumulated depreciation			1,814,412		1,858,781

	Total property, plant and equipment, net		1,916,815		2,163,938




Goodwill			2,776,025		2,138,499
Trademarks, net			775,496		651,552
Other intangibles, net			257,418		171,675
Other non-current assets			1,510,709		1,806,478
Non-current assets of discontinued operations			337,376		—

	Total other non-current assets		5,657,024		4,768,204




	Total assets	$	11,325,009	$	10,577,718


*	Summarized from audited fiscal year 2005 balance sheet.

See Notes to Condensed Consolidated Financial Statements.

H. J. HEINZ COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS


			January 25, 2006		April 27, 2005*
			FY 2006		FY 2005

			(Unaudited)
			(Thousands of Dollars)
Liabilities and Shareholders’ Equity
Current Liabilities:
Short-term debt			$	54,235	$	28,471
Portion of long-term debt due within one year				514,922		544,798
Accounts payable				915,288		1,181,652
Salaries and wages				76,204		76,020
Accrued marketing				254,043		260,550
Other accrued liabilities				393,592		365,022
Income taxes				100,931		130,555
Current liabilities of discontinued operations				167,683		—

		Total current liabilities		2,476,898		2,587,068

Long-term debt				5,312,015		4,121,984
Deferred income taxes				524,336		508,639
Non-pension post-retirement benefits				203,952		196,686
Other liabilities and minority interest				623,562		560,768
Non-current liabilities of discontinued operations				22,376		—

		Total long-term liabilities		6,686,241		5,388,077
Shareholders’ Equity:
Capital stock				107,857		107,857
Additional capital				463,333		430,073
Retained earnings				5,381,357		5,210,748

				5,952,547		5,748,678

Less:
	Treasury stock at cost (96,090,912 shares at January 25, 2006 and 83,419,356 shares at April 27, 2005)			3,627,780		3,140,586
	Unearned compensation			32,074		31,141
	Accumulated other comprehensive loss/(income)			130,823		(25,622	)

		Total shareholders’ equity		2,161,870		2,602,573

		Total liabilities and shareholders’ equity	$	11,325,009	$	10,577,718


*	Summarized from audited fiscal year 2005 balance sheet.

See Notes to Condensed Consolidated Financial Statements.

H. J. HEINZ COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


					Nine Months Ended

					January 25, 2006			January 26, 2005
					FY 2006			FY 2005

					(Unaudited)
					(Thousands of Dollars)
Cash Flows from Operating Activities:
	Net income				$	477,695		$	546,212
	Adjustments to reconcile net income to cash provided by operating activities:
		Depreciation				170,407			168,807
		Amortization				23,890			15,893
		Deferred tax provision				102,306			65,970
		Impairment charges and losses on disposals				21,861			74,449
		Tax pre-payment in Europe				—			(124,886	)
		Other items, net				30,017			31,243
		Changes in current assets and liabilities, excluding effects of acquisitions and divestitures:
			Receivables			46,694			130,463
			Inventories			(178,920	)		(165,749	)
			Prepaid expenses and other current assets			(23,893	)		(35,633	)
			Accounts payable			(58,270	)		(140,777	)
			Accrued liabilities			67,387			(67,835	)
			Income taxes			(176,254	)		7,989

				Cash provided by operating activities		502,920			506,146

Cash Flows from Investing Activities:
		Capital expenditures				(151,017	)		(131,024	)
		Acquisitions, net of cash acquired				(1,053,616	)		(38,121	)
		Proceeds from divestitures				171,649			39,878
		Purchases of short-term investments				—			(293,475	)
		Sales of short-term investments				—			333,475
		Other items, net				(251	)		4,135

				Cash used for investing activities		(1,033,235	)		(85,132	)

Cash Flows from Financing Activities:
		Proceeds from/(payments on) long-term debt				216,414			(418,466	)
		Proceeds from/(payments on) commercial paper and short-term debt, net				961,430			(24,128	)
		Dividends				(307,086	)		(299,252	)
		Purchases of treasury stock				(525,321	)		(169,016	)
		Exercise of stock options				51,536			59,337
		Other items, net				11,908			11,323

				Cash provided by/(used for) financing activities		408,881			(840,202	)

Cash provided by operating activities of discontinued operations spun-off to Del Monte						13,312			28,196
Cash presented in discontinued operations as of January 25, 2006						(15,984	)		—
Effect of exchange rate changes on cash and cash equivalents						(15,362	)		85,758

Net decrease in cash and cash equivalents						(139,468	)		(305,234	)
Cash and cash equivalents at beginning of year						1,083,749			1,140,039

Cash and cash equivalents at end of period					$	944,281		$	834,805

See Notes to Condensed Consolidated Financial Statements.

H. J. HEINZ COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)


(1)	Basis of Presentation


	The interim condensed consolidated financial statements of H. J. Heinz Company, together with its subsidiaries (collectively referred to as the “Company”), are unaudited. In the opinion of management, all adjustments, which are of a normal and recurring nature, except those which have been disclosed elsewhere in this Quarterly Report on Form 10-Q, necessary for a fair statement of the results of operations of these interim periods have been included. The results for interim periods are not necessarily indicative of the results to be expected for the full fiscal year due to the seasonal nature of the Company’s business. Certain prior year amounts have been reclassified in order to conform with the Fiscal 2006 presentation.

	The $40.0 million of auction rate securities that the Company held as of April 28, 2004, were reclassified from cash and cash equivalents to short-term investments. As such, a corresponding adjustment was made to the consolidated statement of cash flows for the nine months ended January 26, 2005 to reflect the gross purchases and sales of these securities as investing activities rather than as a component of cash and cash equivalents. The Company no longer owns auction rate securities as of April 27, 2005.

	These statements should be read in conjunction with the Company’s consolidated financial statements and related notes, and management’s discussion and analysis of financial condition and results of operations which appear in the Company’s Annual Report on Form 10-K for the year ended April 27, 2005.


(2)	Discontinued Operations


	In the third quarter of Fiscal 2006, the Company’s Board of Directors approved the divestitures of the European seafood business and the Tegel^® poultry business in New Zealand. The Company has entered into a definitive agreement to sell the European seafood business. Some of the brands included in this business are: John West^®, Petit Navire^®, Marie Elisabeth^® and Mareblu^®. The closing of the transaction is subject to customary European Union competition authority review and approval. A definitive agreement was signed on December 22, 2005 to sell the Tegel^® poultry business, which is subject to competition authority approval. The Company expects to complete the sale of the European seafood and Tegel^® poultry businesses in the fourth quarter of Fiscal 2006, with proceeds expected to approximate €425 million and NZ$250 million, respectively.

	In accordance with accounting principles generally accepted in the United States of America, the operating results related to these businesses have been included in discontinued operations in the Company’s consolidated statements of income for all periods presented, and the net assets related to these businesses have been presented as discontinued operations in the condensed consolidated balance sheet as of January 25, 2006.

	These discontinued operations generated sales of $184.5 million and $192.1 million and net income/(loss) of $(18.2) million (net of $27.3 million in tax expense) and $7.0 million (net of $3.4 million in tax expense) for the three months ended January 25, 2006 and January 26, 2005, respectively. These discontinued operations generated sales of $576.2 million and $590.9 million and net income of $2.3 million (net of $37.0 million in tax expense) and $34.1 million (net of $15.5 million in tax expense) for the nine months ended January 25, 2006 and January 26, 2005, respectively.


	Net assets related to discontinued operations of $473.2 million are reported on the January 25, 2006 condensed consolidated balance sheet. These assets consist of the following:


		January 25, 2006

		(Thousands of
		Dollars)
Cash and cash equivalents		$	15,984
Receivables, net			102,433
Inventories			190,802
Prepaid expenses and other current assets			16,647
Property, plant and equipment, net			215,749
Goodwill			58,599
Trademarks and other intangibles, net			15,462
Other non-current assets			47,567

	Total assets		663,243

Accounts payable			93,236
Accrued marketing			34,020
Other accrued liabilities			25,236
Income taxes			27,737
Other liabilities			9,830

	Total liabilities		190,059

	Net assets	$	473,184

In addition, net income from discontinued operations includes amounts related to the favorable settlement of tax liabilities associated with the businesses spun-off to Del Monte in Fiscal 2003. Such amounts totaled $1.7 million and $13.9 million for the quarters ended January 25, 2006 and January 26, 2005, respectively, and $33.7 million and $15.6 million for the nine months ended January 25, 2006 and January 26, 2005, respectively.


(3)	Special Items

Reorganization Costs


	The Company recorded pre-tax reorganization charges for targeted workforce reductions consistent with the Company’s goals to streamline its businesses totaling $14.0 million ($10.0 million after tax) and $70.4 million ($49.1 million after tax) during the third quarter and nine months ended January 25, 2006, respectively. Additionally, pre-tax costs of $13.9 million ($14.8 million after tax) and $29.6 million ($26.8 million after tax) were incurred in the third quarter and nine months ended January 25, 2006, respectively, primarily as a result of the previously announced strategic reviews related to the potential divestiture of several businesses which include the European seafood and frozen businesses and Tegel^® poultry business in New Zealand.

	For the third quarter, the total impact of these initiatives on continuing operations was $22.0 million pre-tax ($18.3 million after-tax), of which $1.8 million was recorded as costs of products sold and $20.2 million in selling, general and administrative expenses (“SG&A”). In addition, $6.6 million was recorded in income of discontinued operations, net of tax. For the nine months ended January 25, 2006, the total impact of these initiatives on continuing operations was $88.2 million pre-tax ($65.3 million after-tax), of which $9.3 million was recorded as costs of products sold and $78.9 million in SG&A. In addition, $10.7 million was recorded in income of discontinued operations, net of tax. The amount included in accrued

expenses related to these initiatives totaled $15.2 million at January 25, 2006, most of which is expected to be paid in the fourth quarter of Fiscal 2006.

Divestitures/ Impairment Charges

During the third quarter, the Company completed the sale of the HAK^® vegetable product line in Northern Europe and received proceeds from this divestiture of $51.1 million, which was in excess of the cost basis by $3.2 million ($3.5 million after tax). This excess was recorded in cost of products sold. In the fourth quarter of Fiscal 2005, the Company recognized a non-cash asset impairment charge of $27.0 million pre-tax ($18.0 million after-tax) related to the anticipated disposition of this product line.

Also during the third quarter of Fiscal 2006, the Company sold its equity investment in The Hain Celestial Group, Inc. (“Hain”) and recognized a $6.9 million ($4.5 million after-tax) loss which was recorded within other expense, net. Net proceeds from the sale of this investment were $116.1 million. During the third quarter of Fiscal 2005, the Company recognized a $64.5 million other-than-temporary impairment charge on its equity investment in Hain. The charge reduced Heinz’s carrying value in Hain to fair market value as of January 26, 2005, with no resulting impact on cash flows. The Company also recorded a $9.3 million non-cash charge in the third quarter of Fiscal 2005 to recognize the impairment of a cost-basis investment in a grocery industry sponsored e-commerce business venture. There was no tax benefit associated with these impairment charges in Fiscal 2005.

Also, in the third quarter of Fiscal 2006, the Company recognized a non-cash asset impairment charge of $15.8 million pre-tax ($8.5 million after-tax) on a small noodle business in Indonesia. The charge, which was primarily recorded as a component of cost of products sold, relates to the anticipated disposition of this business in the fourth quarter of 2006. The net assets related to this business total approximately $5.7 million.

During the second quarter of Fiscal 2006, the Company recognized a net $12.7 million ($13.6 million after tax) charge primarily related to the sale of a small seafood business in Israel which closed in the third quarter of Fiscal 2006.

Income Taxes

The American Jobs Creation Act (“AJCA”) provides a deduction of 85% of qualified foreign dividends in excess of a “Base Period” dividend amount. During the third quarter of Fiscal 2006, the Company finalized plans to repatriate an additional $253 million to satisfy the Base Period dividend requirement and an additional $562 million that will qualify under the AJCA (the “Qualified Dividends”). In addition, the Company expects that $154 million of $166 million of previously planned dividends will also qualify under the AJCA. The Company expects to incur a tax charge of $24.8 million on total Base Period dividends of $265 million, $10.3 million of which is incremental to the tax already accrued on the $154 million of qualifying previously planned dividends. The Fiscal 2006 net tax cost related to the $716 million of Qualified Dividends is $14.0 million. The $10.2 million of incremental tax related to the Base Period dividends and the $14.0 million of tax related to the Qualified Dividends were recorded during the third quarter as part of tax expense related to special items. The total impact of the AJCA on tax expense for the third quarter and nine months ended January 25, 2006 was $24.3 million, of which $27.7 million of expense was recorded in continuing operations and $3.4 million was a benefit in discontinued operations.

During the third quarter of Fiscal 2006, the Company reversed valuation allowances of $20.6 million in continuing operations related to the non-cash asset impairment charges recorded in Fiscal 2005 on the cost and equity investments discussed above. The reversal of the valuation allowances is based upon tax planning strategies that are expected to generate sufficient capital gains that will occur during the capital loss carryforward period.

The Company has not previously recorded deferred taxes on the difference between the book and tax bases of the European Seafood business because this basis difference was not expected to be realized in the foreseeable future. As a result of the European Seafood business being classified as discontinued operations, the Company now expects that this basis difference will be realized as a result of the anticipated sale and has recorded a deferred tax liability of $19.6 million in connection with this basis difference. The recording of the deferred tax liability resulted in a $24.6 million tax charge in discontinued operations and a tax benefit of $5.0 million recorded as part of other comprehensive income during the third quarter.


(4)	Acquisitions


	The Company acquired the following businesses during the first nine months of Fiscal 2006 for a total purchase price of $1.04 billion:

	In August 2005, the Company completed its acquisition of HP Foods Limited, HP Foods Holdings Limited, and HP Foods International Limited (collectively referred to as “HPF”) for a purchase price of approximately $877 million. HPF is a manufacturer and marketer of sauces which are primarily sold in the United Kingdom, the United States, and Canada. The Company acquired HPF’s brands including HP^® and Lea & Perrins^® and a perpetual license to market Amoy^® brand Asian sauces and products in Europe. This acquisition is currently under review by the British Competition Commission (“BCC”). The BCC has provisionally cleared the acquisition, concluding that the acquisition may not be expected to result in a substantial lessening of competition within the markets for tomato ketchup, brown sauce, barbecue sauce, canned baked beans and canned pasta in the United Kingdom. A final decision is expected in April, 2006. Pending the final decision, Heinz must delay integration of HPF into its U.K. operations. If the provisional findings become final in their current form, the Company would not be required to divest any of the acquired product lines in the U.K.

	In July 2005, the Company acquired Nancy’s Specialty Foods, Inc., a producer of premium appetizers, quiche entrees and desserts in the United States and Canada.

	On April 28, 2005, the Company acquired a controlling interest in Petrosoyuz, a leading Russian maker of ketchup, condiments and sauces. Petrosoyuz’s business includes brands such as Pikador^®, Derevenskoye^®, Mechta Hoziaiyki^® and Moya Sem’ya^®.

	All of these acquisitions have been accounted for as purchases and, accordingly, the respective purchase prices have been allocated to the respective assets and liabilities based upon their estimated fair values as of the acquisition date. The preliminary allocations of the purchase price resulted in goodwill of $722.5 million, which was assigned to the North American Consumer Products segment ($146.7 million) and the Europe segment ($575.8 million). In addition, $297.3 million of intangible assets were acquired, of which $155.1 million is not subject to amortization.

	Operating results of the businesses acquired have been included in the consolidated statements of income from the respective acquisition dates forward. Pro forma results of the Company, assuming all of the acquisitions had occurred at the beginning of each period presented, would not be materially different from the results reported. There are no significant contingent payments, options or commitments associated with any of the acquisitions.


(5)	Inventories


	The composition of inventories at the balance sheet dates was as follows:


	January 25, 2006		April 27, 2005

	(Thousands of Dollars)
Finished goods and work-in-process	$	908,591	$	974,974
Packaging material and ingredients		305,137		281,802

	$	1,213,728	$	1,256,776


(6)	Goodwill and Other Intangible Assets


	Changes in the carrying amount of goodwill for the nine months ended January 25, 2006, by reportable segment, are as follows:


	North
	American										Other
	Consumer		U.S.								Operating
	Products		Foodservice		Europe			Asia/Pacific			Entities			Total

	(Thousands of Dollars)
Balance at April 27, 2005	$	917,706	$	230,367	$	763,758		$	207,925		$	18,743		$	2,138,499
Acquisitions		146,707		4,079		583,503			7,400			—			741,689
Purchase accounting adjustments		—		2,922		—			2,506			702			6,130
Disposals		—		—		—			—			(2,638	)		(2,638	)
Translation adjustments		6,255		—		(48,693	)		(6,850	)		232			(49,056	)
Goodwill allocated to discontinued operations		—		—		(50,660	)		(7,939	)		—			(58,599	)

Balance at January 25, 2006	$	1,070,668	$	237,368	$	1,247,908		$	203,042		$	17,039		$	2,776,025


	During the first nine months of Fiscal 2006, the Company acquired HPF, Nancy’s Specialty Foods, Inc., and a controlling interest in Petrosoyuz. Preliminary purchase price allocations have been recorded for each of these acquisitions. The Company expects to finalize the purchase price allocations related to each of these acquisitions upon completion of third party valuation procedures. During the first nine months of Fiscal 2006, the Company finalized the purchase price allocations for the acquisitions of Appetizers And, Inc., Shanghai LongFong Foods and for certain assets from ABAL, S.A. de C.V..

	Trademarks and other intangible assets at January 25, 2006 and April 27, 2005, subject to amortization expense, are as follows:


		January 25, 2006							April 27, 2005

				Accum							Accum
		Gross		Amort			Net		Gross		Amort			Net

		(Thousands of Dollars)
Trademarks		$	221,838	$	(63,218	)	$	158,620	$	221,019	$	(61,616	)	$	159,403
	Licenses		208,186		(128,199	)		79,987		208,186		(123,911	)		84,275
	Other		252,905		(75,474	)		177,431		155,481		(68,081	)		87,400

		$	682,929	$	(266,891	)	$	416,038	$	584,686	$	(253,608	)	$	331,078


	Amortization expense for trademarks and other intangible assets subject to amortization was $7.7 million and $3.8 million for the third quarter ended January 25, 2006 and January 26,

2005, respectively, and $19.9 million and $11.0 million for the nine months ended January 25, 2006 and January 26, 2005, respectively. Based upon the amortizable intangible assets recorded on the balance sheet as of January 25, 2006, annual amortization expense for each of the next five fiscal years is estimated to be approximately $31 million.

Intangible assets with indefinite lives at January 25, 2006 and April 27, 2005 were $616.9 million and $492.2 million, respectively, and consisted solely of trademarks.


(7)	Income Taxes

The provision for income taxes consists of provisions for federal, state and foreign income taxes. The Company operates in an international environment with significant operations in various locations outside the U.S. Accordingly, the consolidated income tax rate is a composite rate reflecting the earnings in the various locations and the applicable tax rates. The current year-to-date effective tax rate was 30.8% compared to 31.8% for the prior year. The decrease in the effective tax rate is attributable to discrete benefits from foreign tax credit carryforwards of approximately $16.3 million related to tax planning initiatives, the reversal of $23.4 million of tax provision related to a foreign affiliate following a favorable court decision involving an unrelated party, and the reversal of $20.6 million of valuation allowance as part of tax expense related to special items discussed above. The majority of these benefits were offset by the elimination of certain tax benefits, the recording of tax charges for the American Jobs Creation Act discussed above, as well as no tax benefit on some of the special items.


(8)	Stock-Based Compensation Plans


	Stock-based compensation is accounted for by using the intrinsic value-based method in accordance with Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees.”

Stock Options

The Company has adopted the disclosure-only provisions of SFAS No. 123, “Accounting for Stock-Based Compensation.” Accordingly, no compensation cost has been recognized for the Company’s stock option plans. If the Company had elected to recognize compensation cost based on the fair value of the options granted at grant date as prescribed by SFAS No. 123, income and income per common share from continuing operations would have been as follows:


			Third Quarter Ended				Nine Months Ended

			January 25,		January 26,		January 25,		January 26,
			2006		2005		2006		2005

			(In Thousands, Except per Share Amounts)
Income from continuing operations:
	As reported		$	133,178	$	131,512	$	441,682	$	496,520
	Fair value-based expense, net of tax			1,907		4,360		8,909		15,191

	Pro forma		$	131,271	$	127,152	$	432,773	$	481,329


Income per common share from continuing operations:
	Diluted
		As reported	$	0.39	$	0.37	$	1.29	$	1.40
		Pro forma	$	0.39	$	0.36	$	1.26	$	1.36
	Basic
		As reported	$	0.40	$	0.38	$	1.30	$	1.42
		Pro forma	$	0.39	$	0.36	$	1.27	$	1.37


	The weighted-average fair value of options granted was $6.68 and $9.33 per share in the nine months ended January 25, 2006 and January 26, 2005, respectively.

	The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions:


	Nine Months Ended

	January 25,			January 26,
	2006			2005

Dividend yield		3.2	%		3.0	%
Volatility		22.0	%		25.4	%
Risk-free interest rate		4.0	%		4.4	%
Expected term (years)		5.1			7.9

The Company currently presents pro forma stock-based compensation cost for employees eligible to retire ratably over the vesting period of the applicable grants. Upon adoption of SFAS 123(R) in Fiscal 2007, the Company will recognize a compensation charge to such retirement-eligible employees over an accelerated period no greater than the first date of retirement eligibility as defined under the Company’s benefit plans. The financial impact of applying the accelerated method of expense recognition is immaterial to the comparative financial statements presented herein.

Restricted Stock Units

During the first nine months of Fiscal 2006, the Company granted 465,572 Restricted Stock Units (“RSUs”) to employees and non-employee directors. The number of RSUs awarded to employees is determined by the fair market value of the Company’s stock on the grant date. The fair value of the awards granted has been recorded as unearned compensation and is shown as a separate component of shareholders’ equity. Unearned compensation is amortized over the vesting period for the particular grant, and is recognized as a component of general and administrative expenses. The RSU liability is classified as a component of additional capital in the consolidated balance sheets. The Company recognized amortization related to the unearned compensation of $3.1 million and $1.7 million for the third quarter ended January 25, 2006 and January 26, 2005, respectively, and $13.4 million and $11.4 million for the nine months ended January 25, 2006 and January 26, 2005, respectively.

The Company currently records compensation expense for employees eligible to retire ratably over the vesting period of the applicable RSU grants. Upon adoption of SFAS 123(R) in Fiscal 2007, the Company will recognize a compensation charge to such retirement-eligible employees over an accelerated period no greater than the first date of retirement eligibility as defined under the Company’s benefit plans. The financial impact of applying the accelerated method of expense recognition is immaterial to the comparative financial statements presented herein.


(9)	Pensions and Other Post-Retirement Benefits


	The components of net periodic benefit cost are as follows:


	Third Quarter Ended

	January 25, 2006			January 26, 2005			January 25, 2006			January 26, 2005

	Pension Benefits						Post-Retirement Benefits

	(Thousands of Dollars)
Service cost	$	9,956		$	12,351		$	1,563		$	1,376
Interest cost		29,820			31,352			3,827			3,971
Expected return on plan assets		(41,229	)		(42,903	)		—			—
Amortization of net initial asset		(4	)		(220	)		—			—
Amortization of prior service cost		530			2,343			(707	)		(757	)
Amortization of unrecognized loss		14,706			14,372			1,826			1,306
Gain due to curtailment, settlement and special termination benefits		(6,733	)		—			—			—

Net periodic benefit cost	$	7,046		$	17,295		$	6,509		$	5,896


	Nine Months Ended

	January 25, 2006			January 26, 2005			January 25, 2006			January 26, 2005

	Pension Benefits						Post-Retirement Benefits

	(Thousands of Dollars)
Service cost	$	30,978		$	34,796		$	4,654		$	4,111
Interest cost		90,708			91,545			11,437			12,119
Expected return on plan assets		(125,090	)		(125,398	)		—			—
Amortization of net initial asset		(15	)		(642	)		—			—
Amortization of prior service cost		2,586			6,903			(2,122	)		(2,269	)
Amortization of unrecognized loss		44,246			41,953			5,477			4,373
(Gain)/loss due to curtailment, settlement and special termination benefits		(540	)		—			1,250			—

Net periodic benefit cost	$	42,873		$	49,157		$	20,696		$	18,334


	As of January 25, 2006, the Company has contributed $29 million to fund its obligations under these plans. The Company expects to make combined cash contributions of approximately $40 million in Fiscal 2006.

	Prepaid benefit cost of $716.9 million and $758.8 million is included as a component of other non-current assets in the condensed consolidated balance sheets at January 25, 2006 and April 27, 2005, respectively.


(10)	Recently Issued Accounting Standards


	In December 2004, the FASB issued SFAS No. 123(R), “Share-Based Payment,” which revises SFAS No. 123, “Accounting for Stock-Based Compensation” and supersedes APB Opinion No. 25, “Accounting for Stock Issued to Employees.” This Statement focuses primarily on accounting for transactions in which an entity compensates employees for services through share-based awards. This Statement requires an entity to measure the cost of employee services received in exchange for an award of equity or equity based instruments based on the grant-date fair value of the award. That cost will be recognized over the period during which an employee is required to provide service in exchange for the award. On April 18, 2005, the Securities and Exchange Commission adopted a new rule that amended the compliance dates of SFAS No. 123(R) to require the implementation no later than the beginning of the first fiscal year beginning after June 15, 2005. The impact of adoption in Fiscal 2007 is anticipated to be approximately $18 million before the impact of income taxes.

	In December 2004, the FASB issued FASB Staff Position (“FSP”) No. FAS 109-2, “Accounting and Disclosure Guidance for the Foreign Earnings Repatriation Provision within the American Jobs Creation Act of 2004” (“AJCA.”) The FSP provides guidance on the accounting and disclosures for the temporary repatriation provision of the AJCA. Refer to note 3 regarding the impact of the AJCA for the quarter and nine months ended January 25, 2006.


(11)	Segments


	The Company’s segments are primarily organized by geographical area. The composition of segments and measure of segment profitability are consistent with that used by the Company’s management. The Company’s management evaluates performance based on several factors including net sales, operating income, operating income excluding special items, and the use of capital resources. Intersegment revenues are accounted for at current market values. Items below the operating income line on the consolidated statements of income are not presented by segment, since they are excluded from the measure of segment profitability reviewed by the Company’s management.

	Descriptions of the Company’s reportable segments are as follows:


	North American Consumer Products— This segment primarily manufactures, markets and sells ketchup, condiments, sauces, pasta meals, and frozen potatoes, entrees, snacks, and appetizers to the grocery channels in the United States of America and includes our Canadian business.

	U.S. Foodservice— This segment primarily manufactures, markets and sells branded and customized products to commercial and non-commercial food outlets and distributors in the United States of America including ketchup, condiments, sauces, and frozen soups, desserts and appetizers.

	Europe— This segment includes the Company’s operations in Europe and sells products in all of the Company’s categories.

	Asia/ Pacific— This segment includes the Company’s operations in New Zealand, Australia, Japan, China, South Korea, Indonesia, Singapore, and Thailand. This segment’s operations include products in all of the Company’s categories.

	Other Operating Entities— This segment includes the Company’s operations in Africa, India, Latin America, the Middle East, and other areas that sell products in all of the Company’s categories.


	The following table presents information about the Company’s reportable segments:


		Third Quarter Ended						Nine Months Ended

		January 25, 2006			January 26, 2005			January 25, 2006			January 26, 2005
		FY 2006			FY 2005			FY 2006			FY 2005

		(Thousands of Dollars)
Net external sales:
	North American Consumer Products	$	658,771		$	579,039		$	1,828,770		$	1,633,798
	U.S. Foodservice		401,098			374,835			1,139,654			1,098,535
	Europe		772,212			762,602			2,159,654			2,101,586
	Asia/ Pacific		258,985			253,974			819,300			758,750
	Other Operating Entities		95,458			98,709			296,408			280,281

	Consolidated Totals	$	2,186,524		$	2,069,159		$	6,243,786		$	5,872,950

Intersegment revenues:
	North American Consumer Products	$	13,202		$	12,773		$	38,633		$	38,464
	U.S. Foodservice		6,726			7,130			16,931			16,711
	Europe		2,732			4,455			9,206			13,621
	Asia/ Pacific		479			825			1,702			2,435
	Other Operating Entities		378			434			942			1,192
	Non-Operating(a)		(23,517	)		(25,617	)		(67,414	)		(72,423	)

	Consolidated Totals	$	—		$	—		$	—		$	—

Operating income (loss):
	North American Consumer Products	$	154,440		$	148,352		$	425,389		$	394,421
	U.S. Foodservice		56,902			54,378			154,566			166,682
	Europe		124,147			123,933			324,757			374,912
	Asia/ Pacific		(957	)		27,073			53,744			90,471
	Other Operating Entities		4,927			2,587			6,292			25,075
	Non-Operating(a)		(31,823	)		(36,954	)		(99,286	)		(89,540	)

	Consolidated Totals	$	307,636		$	319,369		$	865,462		$	962,021

Operating income (loss) excluding special items(b):
	North American Consumer Products	$	154,479		$	148,352		$	427,817		$	394,421
	U.S. Foodservice		57,273			54,378			161,617			166,682
	Europe		138,509			123,933			372,459			374,912
	Asia/ Pacific		18,185			27,073			80,675			90,471
	Other Operating Entities		8,293			2,587			27,044			25,075
	Non-Operating(a)		(31,511	)		(36,954	)		(87,717	)		(89,540	)

	Consolidated Totals	$	345,228		$	319,369		$	981,895		$	962,021


	(a)	Includes corporate overhead, intercompany eliminations and charges not directly attributable to operating segments.


	(b)	Third Quarter ended January 25, 2006— Excludes costs associated with targeted workforce reductions, costs incurred in connection with strategic reviews of several non-core businesses and net losses/impairment charge on divestitures as follows: U.S. Foodservice, $0.4 million; Europe, $14.4 million; Asia/ Pacific, $19.1 million; Other Operating, $3.4 million; and Non-Operating $0.3 million.


	Nine Months ended January 25, 2006— Excludes costs associated with targeted workforce reductions, costs incurred in connection with strategic reviews of several non-core businesses and net losses/impairment charge on divestitures as follows: North American Consumer Products, $2.4 million; U.S. Foodservice, $7.1 million; Europe, $47.7 million;

Asia/ Pacific, $26.9 million; Other Operating, $20.7 million; and Non-Operating $11.6 million.


	The results for the nine months ended January 26, 2005 were impacted by a $21.1 million charge for trade promotion spending for the Italian infant nutrition business. The charge relates to an under-accrual in fiscal years 2001, 2002 and 2003. The amount of the charge that corresponds to each of the fiscal years 2001, 2002 and 2003 is less than 2% of net income for each of those years.

	The Company’s revenues are generated via the sale of products in the following categories:


		Third Quarter Ended				Nine Months Ended

		January 25, 2006		January 26, 2005		January 25, 2006		January 26, 2005
		FY 2006		FY 2005		FY 2006		FY 2005

		(Thousands of Dollars)
Ketchup, Condiments and Sauces		$	872,114	$	793,614	$	2,545,123	$	2,356,649
Frozen Foods			668,428		594,690		1,774,765		1,599,280
Convenience Meals			371,382		394,576		1,046,473		1,063,532
Infant Foods			196,934		220,431		598,630		601,819
Other			77,666		65,848		278,795		251,670

	Total	$	2,186,524	$	2,069,159	$	6,243,786	$	5,872,950

As a result of general economic uncertainty, coupled with government restrictions on the repatriation of earnings, as of the end of November 2002, the Company deconsolidated its Zimbabwean operations and classified its remaining net investment of approximately $110 million as a cost investment included in other non-current assets on the consolidated balance sheets. As previously noted, economic conditions have not improved and the currency continues to devalue. Should the current situation continue, the Company could experience disruptions and delays in its Zimbabwean operations. The ability to source raw materials, which at certain times of the year requires access to foreign currency, is critical to the sustainability of local operations. While the Company’s business continues to operate profitably and is able to source raw materials, the country’s economic situation remains uncertain. The Company’s ability to recover its investment could become impaired if the economic and political uncertainties continue to deteriorate.


(12)	Net Income Per Common Share


	The following are reconciliations of income to income applicable to common stock and the number of common shares outstanding used to calculate basic EPS to those shares used to calculate diluted EPS:


				Third Quarter Ended				Nine Months Ended

				January 25, 2006		January 26, 2005		January 25, 2006		January 26, 2005
				FY 2006		FY 2005		FY 2006		FY 2005

				(In Thousands)
Income from continuing operations				$	133,178	$	131,512	$	441,682	$	496,520
Preferred dividends					4		4		11		12

Income from continuing operations applicable to common stock				$	133,174	$	131,508	$	441,671	$	496,508

	Average common shares outstanding— basic				334,879		349,729		340,484		350,357
	Effect of dilutive securities:
			Convertible preferred stock		124		139		124		139
		Stock options and restricted stock			2,819		2,723		2,924		3,346

	Average common shares outstanding— diluted				337,822		352,591		343,532		353,842

Stock options outstanding in the amounts of 18.5 million and 16.2 million were not included in the computation of diluted earnings per share for the third quarters ended January 25, 2006 and January 26, 2005, respectively, and 18.6 million and 16.1 million were not included in the computation of diluted earnings per share for the nine months ended January 25, 2006 and January 26, 2005, respectively, because inclusion of these options would be antidilutive.


(13)	Comprehensive Income


		Third Quarter Ended						Nine Months Ended

		January 25, 2006			January 26, 2005			January 25, 2006			January 26, 2005
		FY 2006			FY 2005			FY 2006			FY 2005

		(Thousands of Dollars)
Net income		$	116,600		$	152,411		$	477,695		$	546,212
Other comprehensive income:
	Foreign currency translation adjustments		37,510			88,534			(157,888	)		282,233
	Minimum pension liability adjustment		(59	)		(3,800	)		(2,222	)		(9,861	)
	Net deferred gains on derivatives from periodic revaluations		7,587			1,493			19			27,227
	Net deferred (gains)/losses on derivatives reclassified to earnings		(5,394	)		(6,647	)		3,646			(23,654	)

Comprehensive income		$	156,244		$	231,991		$	321,250		$	822,157


(14)	Derivative Financial Instruments and Hedging Activities


	The Company operates internationally, with manufacturing and sales facilities in various locations around the world, and utilizes certain derivative financial instruments to manage its foreign currency and interest rate exposures. There have been no material changes in the Company’s market risk during the nine months ended January 25, 2006. For additional information, refer to pages 22-23 of the Company’s Annual Report on Form 10-K for the fiscal year ended April 27, 2005.

	As of January 25, 2006, the Company is hedging forecasted transactions for periods not exceeding two years. During the next 12 months, the Company expects $1.4 million of net deferred losses reported in accumulated other comprehensive loss/(income) to be reclassified to earnings, assuming market rates remain constant through contract maturities. Hedge ineffectiveness related to cash flow hedges, which is reported in current period earnings as other income and expense, was not significant for the three and nine months ended January 25, 2006 and January 26, 2005. Amounts reclassified to earnings because the hedged transaction was no longer expected to occur were not significant for the three and nine months ended January 25, 2006 and January 26, 2005.

	During the third quarter of Fiscal 2006, the Company entered into forward contracts and cross currency swaps with a combined notional amount of $2.0 billion, which were designated as net investment hedges of foreign operations. These contracts mature within two years. The Company assesses hedge effectiveness for these contracts based on changes in fair value attributable to changes in spot prices. Losses of $10.6 million (net of income taxes of $6.6 million) which represented effective hedges of net investments, were reported as a component of accumulated other comprehensive loss/(income) within foreign currency translation adjustment for the three and nine months ended January 25, 2006. Gains of $0.2 million, which represented the changes in fair value excluded from the assessment of hedge effectiveness, were included in current period earnings as a component of interest expense for the quarter and nine months ended January 25, 2006.


Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations

Discontinued Operations

In the third quarter of Fiscal 2006, the Company’s Board of Directors approved the divestitures of the European seafood business and the Tegel^® poultry business in New Zealand. The Company has entered into a definitive agreement to sell the European seafood business. Some of the brands included in this business are: John West^®, Petit Navire^®, Marie Elisabeth^® and Mareblu^®. The closing of the transaction is subject to customary European Union competition authority review and approval. A definitive agreement was signed on December 22, 2005 to sell the Tegel^® poultry business, which is subject to competition authority approval. The Company expects to complete the sale of the European seafood and Tegel^® poultry businesses in the fourth quarter of Fiscal 2006, with proceeds expected to approximate €425 million and NZ$250 million, respectively.

In accordance with accounting principles generally accepted in the United States of America, the operating results related to these businesses have been included in discontinued operations in the Company’s consolidated statements of income for all periods presented, and the net assets related to these businesses have been presented as discontinued operations in the condensed consolidated balance sheet as of January 25, 2006.

These discontinued operations generated sales of $184.5 million and $192.1 million and net income/(loss) of $(18.2) million (net of $27.3 million in tax expense) and $7.0 million (net of $3.4 million in tax expense) for the three months ended January 25, 2006 and January 26, 2005, respectively. These discontinued operations generated sales of $576.2 million and $590.9 million and net income of $2.3 million (net of $37.0 million in tax expense) and $34.1 million (net of $15.5 million in tax expense) for the nine months ended January 25, 2006 and January 26, 2005, respectively.

Portfolio Reviews

In the first half of Fiscal 2006, the Company initiated a strategic review of its European frozen business in addition to the above businesses which were classified as discontinued operations. Some of the brands involved in this strategic review include: Weight Watchers^® from Heinz^®, Linda McCartney^®, and Aunt Bessie’s^® in the United Kingdom. Management is currently in the process of finalizing this review and expects the Company’s assessment regarding the future of this business to be completed in the fourth quarter of Fiscal 2006. The Company is also evaluating the divestiture of several other small foreign businesses.

Special Items


	*Reorganization Costs*

The Company recorded pre-tax reorganization charges for targeted workforce reductions consistent with the Company’s goals to streamline its businesses totaling $14.0 million ($10.0 million after tax) and $70.4 million ($49.1 million after tax) during the third quarter and nine months ended January 25, 2006, respectively. Approximately 600 positions are being eliminated as a result of this program, primarily in the General & Administrative (“G&A”) area. Additionally, pre-tax costs of $13.9 million ($14.8 million after tax) and $29.6 million ($26.8 million after tax) were incurred in the third quarter and nine months ended January 25, 2006, respectively, primarily as a result of the previously announced strategic reviews related to the potential divestiture of several

businesses which include the European seafood and frozen businesses and Tegel^® poultry business in New Zealand.

For the third quarter, the total impact of these initiatives on continuing operations was $22.0 million pre-tax ($18.3 million after-tax), of which $1.8 million was recorded as costs of products sold and $20.2 million in selling, general and administrative expenses (“SG&A”). In addition, $6.6 million was recorded in income of discontinued operations, net of tax. For the nine months ended January 25, 2006, the total impact of these initiatives on continuing operations was $88.2 million pre-tax ($65.3 million after-tax), of which $9.3 million was recorded as costs of products sold and $78.9 million in SG&A. In addition, $10.7 million was recorded in income of discontinued operations, net of tax.


	*Divestitures/ Impairment Charges*

During the third quarter, the Company completed the sale of the HAK^® vegetable product line in Northern Europe and received proceeds from this divestiture of $51.1 million, which was in excess of the cost basis by $3.2 million ($3.5 million after tax). This excess was recorded in cost of products sold. In the fourth quarter of Fiscal 2005, the Company recognized a non-cash asset impairment charge of $27.0 million pre-tax ($18.0 million after-tax) related to the anticipated disposition of this product line.


	*Income Taxes*

third quarter and nine months ended January 25, 2006 was $24.3 million, of which $27.7 million of expense was recorded in continuing operations and $3.4 million was a benefit in discontinued operations.

HP/ LP Acquisition

In August 2005, the Company completed its acquisition of HP Foods Limited, HP Foods Holdings Limited, and HP Foods International Limited (collectively referred to as “HPF”) for a purchase price of approximately $877 million. HPF is a manufacturer and marketer of sauces which are primarily sold in the United Kingdom, the United States, and Canada. The Company acquired HPF’s brands including HP^® and Lea & Perrins^® and a perpetual license to market Amoy^® brand Asian sauces and products in Europe. This acquisition is currently under review by the British Competition Commission (“BCC”). The BCC has provisionally cleared the acquisition, concluding that the acquisition may not be expected to result in a substantial lessening of competition within the markets for tomato ketchup, brown sauce, barbecue sauce, canned baked beans and canned pasta in the United Kingdom. A final decision is expected in April, 2006. Pending the final decision, Heinz must delay integration of HPF into its U.K. operations. If the provisional findings become final in their current form, the Company would not be required to divest any of the acquired product lines in the U.K.

THREE MONTHS ENDED JANUARY 25, 2006 AND JANUARY 26, 2005

Results of Continuing Operations

Sales for the three months ended January 25, 2006 increased $117.4 million, or 5.7%, to $2.19 billion. Sales were favorably impacted by a volume increase of 2.9% driven primarily by the North American Consumer Products segment, as well as the Australian and U.K. businesses. These volume increases were partially offset by declines in the European frozen food and the Italian infant nutrition businesses. Net pricing was virtually flat as more efficient trade spending in the North American Consumer Products segment and price increases taken in Latin America were offset by increased promotional spending on Heinz^® soup in the U.K. Acquisitions, net of divestitures, increased sales by 6.6%, and foreign exchange translation rates decreased sales by 3.7%.

Gross profit decreased $4.0 million, or 0.5%, to $780.7 million, and the gross profit margin declined to 35.7% from 37.9%. These decreases are primarily a result of the $18.8 million asset impairment charge on an Indonesian noodle business discussed above, unfavorable exchange rates and increased commodity costs, particularly in the U.S. and Indonesian businesses. These declines were partially offset by the favorable impact of acquisitions and higher sales volume.

SG&A increased $7.7 million, or 1.7%, to $473.1 million, primarily due to acquisitions and increased volume, partially offset by the impact of exchange rates. As a percentage of sales, SG&A decreased to 21.6% from 22.5% primarily due to decreased G&A, which resulted from the Company’s streamlining efforts, particularly in Europe, and reduced litigation costs. These declines were offset by $20.2 million of special items previously discussed and the impact of higher fuel and transportation costs, particularly in the U.S. businesses. Operating income decreased $11.7 million, or 3.7%, to $307.6 million.

Total marketing support (recorded as a reduction of revenue or as a component of SG&A) increased $13.1 million, or 2.4%, to $550.4 million, on a sales increase of 5.7%. Marketing support recorded as a reduction of revenue, typically deals and allowances, increased $15.6 million, or 3.3%, to $483.8 million. This increase is largely a result of acquisitions and increased trade promotion spending in the U.K., partially offset by decreases in the Italian infant nutrition business and North American Consumer Products segment. Marketing support recorded as a component of SG&A decreased $2.5 million, or 3.6%, to $66.5 million, primarily from reductions in the U.K.

Net interest expense increased $25.6 million, to $78.6 million, due to higher average interest rates and higher average debt in Fiscal 2006.

Other expenses, net, increased $7.7 million, to $9.9 million, primarily due to the $6.9 million loss on the sale of the Company’s equity investment in Hain. The prior year includes the non-cash impairment charges totaling $73.8 million related to the cost and equity investments previously discussed.

The effective tax rate for the quarter was 39.2% versus 30.9% in the prior year. This increase was primarily a result of recording current period tax charges associated with the American Jobs Creation Act. The impact of these charges was partially offset by a $20.6 million reversal of valuation allowances associated with the prior year non-cash asset impairment charges. The Company reaffirms its projected effective tax rate for the year, excluding special items, of 30% to 31%.

Income from continuing operations increased to $133.2 million from $131.5 million in the year earlier quarter. Diluted earnings per share from continuing operations was $0.39 in the current year compared to $0.37 in the prior year, up 5.4%.

OPERATING RESULTS BY BUSINESS SEGMENT

North American Consumer Products

Sales of the North American Consumer Products segment increased $79.7 million, or 13.8%, to $658.8 million. Volume increased 4.9%, as a result of strong growth in Smart Ones^® frozen entrees and desserts, TGI Friday’s^® and Delimex^® brands of frozen snacks, Classico^® pasta sauces and Heinz^® ketchup. Overall, pricing increased 1.5% largely due to more efficient trade spending on SmartOnes^® frozen entrees and Ore-Ida^® frozen potatoes. The acquisitions of HPF and Nancy’s Specialty Foods, Inc. increased sales 6.6%. Favorable Canadian exchange translation rates increased sales 0.7%.

Gross profit increased $25.4 million, or 10.3%, to $273.1 million, driven primarily by the favorable impact of acquisitions, volume growth and increased net pricing. The gross profit margin declined to 41.5% from 42.8%, primarily due to increased commodity costs and a benefit in the prior year from the favorable termination of a long-term co-packing arrangement. Operating income increased $6.1 million, or 4.1%, to $154.4 million, due to the increase in gross profit partially offset by increased Selling and Distribution expenses (“S&D”), resulting from acquisitions, increased volume and higher fuel and trucking costs, and increased G&A, largely from acquisitions and increased personnel costs.

U.S. Foodservice

Sales of the U.S. Foodservice segment increased $26.3 million, or 7.0%, to $401.1 million. The acquisition of Appetizers And, Inc. (“AAI”) in the fourth quarter of Fiscal 2005 increased sales 5.2%. Volume increased 1.3%, as increases in Truesoups frozen soup and single serve condiments were partially offset by reductions in ketchup due to increased competition and reduced traffic at some key customers. Higher pricing increased sales by 0.6% as increases in custom recipe tomato products and single serve condiments were largely offset by declines in Heinz^® ketchup.

Gross profit increased $4.0 million, or 3.4%, to $120.4 million, largely due to the favorable impact of the AAI acquisition, partially offset by a decline in the gross profit margin to 30.0% from 31.1% resulting from higher commodity and fuel costs. Operating income increased $2.5 million, or 4.6%, to $56.9 million, largely due to the increase in gross profit, partially offset by increased G&A, largely due to the AAI acquisition.

Europe

Heinz Europe’s sales increased $9.6 million, or 1.3%, to $772.2 million. The acquisitions of HPF and Petrosoyuz increased sales 12.0%. Volume increased 2.1%, as increases from Heinz^® soup and top-down ketchup were partially offset by declines in the frozen foods business in the U.K., resulting mainly from category softness, and declines in the Italian infant nutrition business. Lower pricing decreased sales 2.8%, driven primarily by increased promotional spending on Heinz^® soup in the U.K. and other condiments in Northern Europe, partially offset by price increases initiated on Heinz^® beans. Divestitures reduced sales 1.5%, and unfavorable exchange translation rates decreased sales by 8.5%.

Gross profit decreased $5.2 million, or 1.7%, to $295.8 million, and the gross profit margin declined to 38.3% from 39.5%. These decreases were driven mainly by unfavorable pricing and exchange translation rates, partially offset by the favorable impact of acquisitions and higher volume. Operating income increased slightly by $0.2 million, or 0.2%, to $124.1 million, as reduced marketing expense and G&A, due primarily to the Company’s streamlining efforts and reduced litigation costs, were offset by $14.4 million of special items discussed above. These special items consist mainly of reorganization costs related to targeted workforce reductions and strategic review costs for the non-core frozen business in Europe, partially offset by a gain on the sale of the HAK^® vegetable product line in Northern Europe.

Asia/ Pacific

Sales in Asia/ Pacific increased $5.0 million, or 2.0%, to $259.0 million. Volume increased sales 3.7%, reflecting strong volume in Australia, largely due to new product introductions, partially offset by declines in Indonesian sauces and noodles resulting from price increases and increased competition. Pricing increased sales slightly, up 0.5%, resulting largely from price increases on various products in Indonesia. Acquisitions, net of divestitures, increased sales 1.8%, largely due to the acquisition of Shanghai LongFong Foods (“LongFong”), a maker of popular frozen Chinese snacks and desserts. Unfavorable exchange translation rates decreased sales by 4.0%.

Gross profit decreased $29.2 million, or 33.4%, to $58.1 million, and the gross profit margin decreased to 22.4% from 34.4%. These declines were primarily a result of an $18.8 million asset impairment charge on an Indonesian noodle business previously discussed, as well as increased commodity and manufacturing costs primarily in Indonesia. Operating income decreased $28.0 million, to $1.0 million, primarily due to the decline in gross profit.

Other Operating Entities

Sales for Other Operating Entities decreased $3.3 million, or 3.3%, to $95.5 million. Volume increased 1.4% due primarily to strong sales in Latin America and India. Higher pricing increased

sales by 6.4%, largely due to price increases taken in Latin America and India. Sales were also favorably impacted by 4.9% from the acquisition of a sauce and condiments business in Mexico in the fourth quarter Fiscal 2005. Divestitures reduced sales by 11.0% and foreign exchange translation rates reduced sales by 5.0%.

Gross profit increased $2.2 million, or 7.7%, to $30.3 million, due mainly to increased pricing, partially offset by the impact of divestitures. Operating income increased $2.3 million, to $4.9 million, due primarily to the increase in gross profit and decreased SG&A partially offset by strategic review costs in Israel.

NINE MONTHS ENDED JANUARY 25, 2006 AND JANUARY 26, 2005

Results of Continuing Operations

Sales for the nine months ended January 25, 2006 increased $370.8 million, or 6.3%, to $6.24 billion. Sales were favorably impacted by a volume increase of 2.3% driven primarily by the North American Consumer Products segment, as well as the Australian, Indonesian and Italian infant nutrition businesses. These volume increases were partially offset by declines in the European frozen food business and the U.S. Foodservice segment. Pricing increased sales slightly, by 0.1%, as improvements in Latin America and Indonesia were offset by declines in Australia, U.K. and Northern Europe. Acquisitions, net of divestitures, increased sales by 4.8%. Foreign exchange translation rates decreased sales by 0.9%.

Gross profit increased $51.8 million, or 2.3%, to $2.29 billion, primarily due to the favorable impact of acquisitions and higher sales volume, partially offset by unfavorable exchange translation rates. The gross profit margin decreased to 36.6% from 38.1% mainly due to the $18.8 million asset impairment charge on an Indonesian noodle business previously discussed, declines in the Europe segment, particularly in Northern and Eastern Europe, and increased commodity costs, particularly in the U.S. and Indonesian businesses.

SG&A increased $148.3 million, or 11.6%, to $1.42 billion, and increased as a percentage of sales to 22.8% from 21.7%. The increase as a percentage of sales is primarily due to the $94.8 million of special items discussed above, the impact of acquisitions, and higher fuel and transportation costs. These increases were partially offset by decreased G&A in Europe, due mainly to the Company’s streamlining efforts and reduced litigation costs. Operating income decreased $96.6 million, or 10.0%, to $865.5 million.

Total marketing support (recorded as a reduction of revenue or as a component of SG&A) increased $62.3 million, or 4.2%, to $1.55 billion on a sales increase of 6.3%. Marketing support recorded as a reduction of revenue, typically deals and allowances, increased $61.0 million, or 4.7%, to $1.35 billion. This increase is largely a result of increased trade promotion spending in the U.K. and Australia and the impact of acquisitions. These increases were partially offset by decreases in the Italian infant nutrition business and foreign exchange translation rates. Marketing support

recorded as a component of SG&A increased $1.4 million, or 0.7%, to $195.9 million, as increases from acquisitions were largely offset by reductions in the U.K.

Net interest expense increased $57.4 million, to $207.6 million due to higher average interest rates and higher average debt in Fiscal 2006.

Other expenses, net, increased $9.6 million to $19.8 million primarily due to the $6.9 million loss on the sale of the Company’s equity investment in Hain. The prior year includes the non-cash impairment charges totaling $73.8 million related to the cost and equity investments previously discussed.

The current year-to-date effective tax rate was 30.8% compared to 31.8% for the prior year. The decrease in the effective tax rate is attributable to discrete benefits from foreign tax credit carryforwards of approximately $16.3 million related to tax planning initiatives, the reversal of $23.4 million of tax provision related to a foreign affiliate following a favorable court decision involving an unrelated party, and the reversal of $20.6 million of valuation allowances as previously discussed. The majority of these benefits were offset by the elimination of certain tax benefits, the recording of tax charges for the American Jobs Creation Act, as well as no tax benefit on some of the special items discussed above.

Income from continuing operations for the first nine months of Fiscal 2006 was $441.7 million compared to $496.5 million in the year earlier period, a decrease of 11.0%. Diluted earnings per share from continuing operations was $1.29 in the current year compared to $1.40 in the prior year, down 7.9%.

OPERATING RESULTS BY BUSINESS SEGMENT

North American Consumer Products

Sales of the North American Consumer Products segment increased $195.0 million, or 11.9%, to $1.83 billion. Volume increased significantly, up 6.6%, as a result of strong growth in Heinz^® ketchup, and TGI Friday’s^® and Delimex^® brands of frozen snacks. In addition, Classico^® pasta sauces, Smart Ones^® frozen entrees and the launch of the new larger size Picnic Pak aided the volume increase. Frozen potatoes continued to perform well, as a result of last calendar year’s successful launch of Ore-Ida^® Extra Crispy Fries and microwavable Easy Fries^® as well as new distribution related to a co-packing agreement. Pricing was up 0.5%, as reduced trade spending on Ore-Ida^® frozen potatoes was largely offset by increased trade promotion expense on Heinz^® ketchup and Classico^® pasta sauces, and decreased price on the new larger size Picnic Pak. The HPF and Nancy’s acquisitions increased sales 3.8%. Divestitures reduced sales 0.1% and exchange translation rates increased sales 1.2%.

Gross profit increased $68.1 million, or 9.8%, to $759.2 million, driven primarily by volume growth and acquisitions. The gross profit margin declined to 41.5% from 42.3%, primarily due to increased commodity costs and a benefit in the prior year from the favorable termination of a long-term co-packing arrangement with a customer. Operating income increased $31.0 million, or 7.9%, to $425.4 million, due to the increase in gross profit, partially offset by increased SG&A, primarily due to acquisitions and volume and increased R&D associated with the new innovation center.

U.S. Foodservice

Sales of the U.S. Foodservice segment increased $41.1 million, or 3.7%, to $1.14 billion. The acquisition of AAI increased sales 4.5%. Volume decreased sales 0.8%, due primarily to ketchup, resulting from increased competition and reduced traffic at some key customers, partially offset by strong frozen soup sales. Pricing increased sales 0.1% as increases in custom recipe tomato products and frozen desserts were offset by declines in ketchup.

Gross profit increased $6.8 million, or 2.0%, to $339.8 million, primarily due to the AAI acquisition, partially offset by $3.0 million of reorganization costs discussed above, increased commodity and fuel costs and the unfavorable volume impact. The gross profit margin decreased to 29.8% from 30.3%. Operating income decreased $12.1 million, or 7.3%, to $154.6 million, chiefly due to $7.1 million of reorganization costs and increased S&D, largely due to higher fuel and distribution costs.

Europe

Heinz Europe’s sales increased $58.1 million, or 2.8%, to $2.16 billion. The HPF and Petrosoyuz acquisitions increased sales 9.1%. Volume decreased 0.9%, principally due to the frozen foods business and infant feeding in the U.K. The frozen food decline is mainly a result of category softness, reduced promotional spending and the loss of a chilled sandwich contract. The decrease in U.K. infant feeding is primarily from increased competition in canned and jarred baby food. These volume declines were partially offset by increases in the Italian infant nutrition business, as well as Heinz^® top-down ketchup and soup. Lower pricing decreased sales 0.9%, driven primarily by increased promotional spending on Heinz^® soup in the U.K., partially offset by improvements in the Italian infant nutrition business and price increases initiated on Heinz^® beans. The improvement in the Italian infant nutrition business is largely due to the $21.1 million charge for trade spending in the prior year which was partially offset by list price declines and promotional timing. Divestitures reduced sales 1.3%, and unfavorable exchange translation rates decreased sales by 3.1%.

Gross profit decreased $8.5 million, or 1.0%, to $839.4 million, and the gross profit margin decreased to 38.9% from 40.3%. These decreases are primarily due to unfavorable exchange translation rates, decreased volume and pricing and higher manufacturing costs in Northern Europe. These decreases were partially offset by higher margin acquisitions. Operating income decreased $50.2 million, or 13.4%, to $324.8 million, due largely to the gross profit decrease, unfavorable exchange translation rates and the $47.7 million of special items discussed above, partially offset by the favorable impact of acquisitions, reduced G&A and decreased marketing expense in the U.K. The special items consist mainly of reorganization costs related to targeted workforce reductions and strategic review costs for the frozen business in Europe.

Asia/ Pacific

Sales in Asia/ Pacific increased $60.5 million, or 8.0%, to $819.3 million. Volume increased sales 6.2%, reflecting strong volume in Australia and Indonesia, largely due to new product introductions and increased promotional spending. Favorable exchange translation rates increased sales by 0.6%. Lower pricing reduced sales 0.2%, primarily due to declines in the Australian business offset by increases in Indonesia. Acquisitions, net of divestitures, increased sales 1.5%, largely due to the acquisition of LongFong.

Gross profit decreased $19.2 million, or 7.3%, to $242.9 million, and the gross profit margin declined to 29.7% from 34.5%. These declines were primarily a result of an $18.8 million asset impairment charge on an Indonesian noodle business and increased commodity and manufacturing costs in Indonesia and China, partially offset by the favorable impact of acquisitions and sales volume. Operating income decreased $36.7 million, or 40.6%, to $53.7 million, primarily due to the decline in gross profit margin, increased S&D and G&A and $8.1 million of reorganization costs related to targeted workforce reductions discussed above.

Other Operating Entities

Sales for Other Operating Entities increased $16.1 million, or 5.8%, to $296.4 million. Volume increased 3.2% reflecting strong infant feeding sales in Latin America and beverage sales in India. Higher pricing increased sales by 6.1%, largely due to price increases and reduced promotions in

Latin America. Sales were also favorably impacted by 4.4% from the acquisition of a sauce and condiments business in Mexico in the fourth quarter Fiscal 2005. Divestitures reduced sales by 5.1%, and foreign exchange translation rates reduced sales by 2.9%.

Gross profit increased $9.6 million, or 11.1%, to $96.6 million, due mainly to increased pricing. Operating income decreased $18.8 million, to $6.3 million, as the increase in gross profit was more than offset by an asset impairment charge for the seafood business in Israel and strategic review costs in Israel. In addition, last year’s results include the proceeds of an agreement related to the recall in Israel.

Liquidity and Financial Position

For the first nine months, cash provided by operating activities was $502.9 million, a decrease of $3.2 million from the prior year. The decrease in Fiscal 2006 versus Fiscal 2005 is primarily due to favorable movement in accounts payable and accrued expenses, offset by a decline in accounts receivable and the timing of income tax payments. The Company continues to make progress in reducing its cash conversion cycle, with a reduction of two days in Fiscal 2006 compared to Fiscal 2005.

During the third quarter of Fiscal 2004, the Company reorganized certain of its foreign operations, resulting in a step-up in the tax basis of certain assets. As a consequence, the Company incurred a foreign income tax liability of $125 million, which was offset by an equal amount of prepaid tax asset. The tax liability was paid in the third quarter of Fiscal 2005. The prepaid tax asset is being amortized to tax expense to match the amortization of the stepped up tax basis in the assets. As a result of the step-up, the Company expects to realize a tax benefit in excess of the tax liability paid. Accordingly, cash flow and tax expense are expected to be improved by $120 million over the amortization period.

Cash used for investing activities totaled $1,033.2 million compared to $85.1 million last year. Capital expenditures were $151.0 million (2.2% of sales) compared to $131.0 million (2.0% of sales) last year. Acquisitions required $1,053.6 million in the first nine months of Fiscal 2006 primarily related to the Company’s purchase of HPF, Nancy’s Specialty Foods, Inc., and Petrosoyuz, compared to $38.1 million in the prior year, which related largely to the purchase of a controlling interest in Shanghai LongFong Foods. Proceeds from divestitures provided $171.6 million in the current year, related primarily to the third quarter sales of the equity investment in Hain and the HAK^® vegetable product line in Northern Europe. In Fiscal 2005, proceeds from divestitures provided $39.9 million related primarily to the sale of an oil and fats product line in Korea.

Cash provided by financing activities totaled $408.9 million compared to using $840.2 million last year. Proceeds from short-term debt and commercial paper were $961.4 million this year compared to payments on short-term debt of $24.1 million in the prior year. Proceeds from long-term debt were $216.4 million compared to payments on long-term debt of $418.5 million in the prior year, which relates primarily to the payoff of €300 million of bonds which matured in the third quarter of the prior year. Cash used for the purchases of treasury stock, net of proceeds from option exercises, was $473.8 million this year compared to $109.7 million in the prior year, in line with the Company’s plans of reducing shares outstanding. Dividend payments totaled $307.1 million, compared to $299.3 million for the same period last year, reflecting the increase in the annual dividend on common stock.

At January 25, 2006, the Company, on a continuing basis, had total debt of $5.88 billion (including $112.4 million relating to the fair value of interest rate swaps) and cash and cash equivalents of $944.3 million. The $1.19 billion increase in total debt and the $139.5 million decrease in cash from year-end Fiscal 2005 is primarily the result of acquisitions and stock repurchases during Fiscal 2006. The Company expects to use cash on hand and a portion of the proceeds from the pending divestitures to reduce commercial paper borrowings and to repay long-term debt that matures in the fourth quarter of Fiscal 2006.

The Company and H.J. Heinz Finance Company maintain a $2 billion credit agreement that expires in 2009. The credit agreement supports the Company’s commercial paper borrowings. As a result, the commercial paper borrowings are classified as long-term debt based upon the Company’s intent and ability to refinance these borrowings on a long-term basis. The Company maintains in excess of $1 billion of other credit facilities used primarily by the Company’s foreign subsidiaries. These resources, the Company’s existing cash balance of more than $900 million, strong operating cash flow, the impact of the repatriation provisions of the AJCA, and access to the capital markets, if required, should enable the Company to meet its cash requirements for operations, including capital expansion programs, debt maturities and dividends to shareholders.

On December 1, 2005, the Company remarketed the $800 million remarketable securities and amended the terms of the securities so that the securities will be remarketed every third year rather than annually. The next remarketing is scheduled for December 1, 2008.

In Fiscal 2006, cash required for reorganization costs, related to both workforce reductions and strategic review costs, was approximately $78.0 million. The Company expects the aggregate amount of net expense to be incurred in Fiscal 2006 relative to worldwide targeted headcount reductions, costs relative to portfolio reviews of several non-core businesses and integration costs for the above acquisitions to be approximately $120 million, which will be primarily cash expenditures. On-going savings relative to these initiatives are anticipated to be approximately $25 million and $30 million in fiscal years 2006 and 2007, respectively.

In the third quarter of Fiscal 2006, Moody’s changed the Company’s long-term debt rating from A3 to Baa1. The Company’s long-term debt rating was A- at Standard & Poors.

The impact of inflation on both the Company’s financial position and the results of operations is not expected to adversely affect Fiscal 2006 results.

Contractual Obligations

The Company is obligated to make future payments under various contracts such as debt agreements, lease agreements and unconditional purchase obligations. In addition, the Company has purchase obligations for materials, supplies, services and property, plant and equipment as part of the ordinary conduct of business. A few of these obligations are long-term and are based on minimum purchase requirements. In the aggregate, such commitments are not at prices in excess of current markets. Due to the proprietary nature of some of the Company’s materials and processes, certain supply contracts contain penalty provisions for early terminations. The Company does not believe that a material amount of penalties is reasonably likely to be incurred under these contracts based upon historical experience and current expectations.

The following table represents the contractual obligations of the Company as of January 25, 2006.


	Less than						More than
	1 Year		1-3 Years		3-5 Years		5 Years		Total

	(Thousands of Dollars)
Long-term Debt	$	514,286	$	625,303	$	1,050,619	$	3,509,828	$	5,700,036
Capital Lease Obligations		2,762		5,749		5,788		33,043		47,342
Operating Leases		40,359		244,146		73,755		203,419		561,679
Purchase Obligations		367,575		1,018,360		478,737		108,161		1,972,833
Other Long Term Liabilities Recorded on the Balance Sheet		91,902		139,629		150,348		167,555		549,434

Total	$	1,016,884	$	2,033,187	$	1,759,247	$	4,022,006	$	8,831,324

Other long-term liabilities primarily consist of certain specific incentive compensation arrangements and pension and postretirement benefit commitments. The following liabilities included on the consolidated balance sheet are excluded from the table above: interest payments, income taxes, minority interest and insurance accruals. The Company is unable to estimate the timing of the payments for these items.

Recently Issued Accounting Standards

In December 2004, the FASB issued SFAS No. 123(R), “Share-Based Payment,” which revises SFAS No. 123, “Accounting for Stock-Based Compensation” and supersedes APB Opinion No. 25, “Accounting for Stock Issued to Employees.” This Statement focuses primarily on accounting for transactions in which an entity compensates employees for services through share-based awards. This Statement requires an entity to measure the cost of employee services received in exchange for an award of equity or equity based instruments based on the grant-date fair value of the award. That cost will be recognized over the period during which an employee is required to provide service in exchange for the award. On April 18, 2005, the Securities and Exchange Commission adopted a new rule that amended the compliance dates of SFAS No. 123(R) to require the implementation no later than the beginning of the first fiscal year beginning after June 15, 2005. The impact of adoption in Fiscal 2007 is anticipated to be approximately $18 million before the impact of income taxes.

In December 2004, the FASB issued FASB Staff Position (“FSP”) No. FAS 109-2, “Accounting and Disclosure Guidance for the Foreign Earnings Repatriation Provision within the American Jobs Creation Act of 2004” (“AJCA.”) The FSP provides guidance on the accounting and disclosures for the temporary repatriation provision of the AJCA. Refer to note 3 regarding the impact of the AJCA for the quarter and nine months ended January 25, 2006.

CAUTIONARY STATEMENT RELEVANT TO FORWARD-LOOKING INFORMATION

Statements about future growth, profitability, costs, expectations, plans, or objectives included in this report, including the management’s discussion and analysis, the financial statements and footnotes, are forward-looking statements based on management’s estimates, assumptions, and projections. These forward-looking 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 this report and the financial statements and footnotes. 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, the approval of acquisitions and divestitures by competition authorities and satisfaction of other legal requirements, 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, and factors described under “Safe Harbor Provisions for Forward-Looking Statements” in 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.


Item 3.	Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes in the Company’s market risk during the nine months ended January 25, 2006. For additional information, refer to pages 22-23 of the Company’s Annual Report on Form 10-K for the fiscal year ended April 27, 2005.


Item 4.	Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures

The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the Company’s disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures, as of the end of the period covered by this report, were designed and are functioning effectively to provide reasonable assurance that the information required to be disclosed by the Company in reports filed under the Securities Exchange Act of 1934 is (i) recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and (ii) accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

(b) Changes in Internal Control over Financial Reporting

No change in the Company’s internal control over financial reporting occurred during the Company’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II— OTHER INFORMATION


Item 1.	Legal Proceedings


	Nothing to report under this item.


Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds


	Nothing to report under this item.


Item 3.	Defaults upon Senior Securities


	Nothing to report under this item.


Item 4.	Submission of Matters to a Vote of Security Holders


	Nothing to report under this item.


Item 5.	Other Information


	Nothing to report under this item.


Item 6.	Exhibits

Exhibits required to be furnished by Item 601 of Regulation S-K are listed below. The Company may have omitted certain exhibits in accordance with Item 601(b)(4)(iii)(A) of Regulation S-K. The Company agrees to furnish such documents to the Commission upon request. Documents not designated as being incorporated herein by reference are set forth herewith. The paragraph numbers correspond to the exhibit numbers designated in Item 601 of Regulation S-K.


	4.	Amended and Restated Five-Year Credit Agreement dated as of September 6, 2001 and amended and restated as of August 4, 2004 among H.J. Heinz Company, H.J. Heinz Finance Company, the Banks listed on the signature pages thereto and JP Morgan Chase Bank, as Administrative Agent.


	10.	Annual Non-Employee Director Compensation.

	12.	Computation of Ratios of Earnings to Fixed Charges.


	31(a).	Rule 13a-14(a)/15d-14(a) Certification by the Chief Executive Officer.

	31(b).	Rule 13a-14(a)/15d-14(a) Certification by the Chief Financial Officer.

	32(a).	18 U.S.C. Section 1350 Certification by the Chief Executive Officer.

	32(b).	18 U.S.C. Section 1350 Certification by the Chief Financial Officer.

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	H. J. HEINZ COMPANY
	(Registrant)

Date: February 28, 2006


	By	/s/ Arthur B. Winkleblack


	............................................ ............................................ ...................................


	Arthur B. Winkleblack
	Executive Vice President and
	Chief Financial Officer
	(Principal Financial Officer)

Date: February 28, 2006


	By	/s/ Edward J. Mcmenamin


	............................................ ............................................ ...................................
	Edward J. McMenamin
	Senior Vice President—Finance
	and Corporate Controller
	(Principal Accounting Officer)

EXHIBIT INDEX

DESCRIPTION OF EXHIBIT

Exhibits required to be furnished by Item 601 of Regulation S-K are listed below. Documents not designated as being incorporated herein by reference are furnished herewith. The Company may have omitted certain exhibits in accordance with Item 601(b)(4)(iii)(A) of Regulation S-K. The Company agrees to furnish such documents to the Commission upon request. The paragraph numbers correspond to the exhibit numbers designated in Item 601 of Regulation S-K.


	4.	Amended and Restated Five-Year Credit Agreement dated as of September 6, 2001 and amended and restated as of August 4, 2004 among H.J. Heinz Company, H.J. Heinz Finance Company, the Banks listed on the signature pages thereto and JP Morgan Chase Bank, as Administrative Agent.

10. Annual Non-Employee Director Compensation.

12. Computation of Ratios of Earnings to Fixed Charges.

31(a). Rule 13a-14(a)/15d-14(a) Certification by the Chief Executive Officer.

31(b). Rule 13a-14(a)/15d-14(a) Certification by the Chief Financial Officer.

32(a). 18 U.S.C. Section 1350 Certification by the Chief Executive Officer.

32(b). 18 U.S.C. Section 1350 Certification by the Chief Financial Officer.

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	2005, respectively, and $19.9 million and $11.0 million for the nine months ended January 25, 2006 and January 26, 2005, respectively. Based upon the amortizable intangible assets recorded on the balance sheet as of January 25, 2006, annual amortization expense for each of the next five fiscal years is estimated to be approximately $31 million.

	Intangible assets with indefinite lives at January 25, 2006 and April 27, 2005 were $616.9 million and $492.2 million, respectively, and consisted solely of trademarks.