SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

For the quarterly period ended July 27, 2005

OR

For the transition period from                        to                       

Commission File Number 1-3385

H. J. HEINZ COMPANY

(Exact name of registrant as specified in its charter)

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 an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes  X    No    

      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 July 31, 2005 was 340,854,053 shares.

PART I—FINANCIAL INFORMATION

H. J. HEINZ COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

See Notes to Condensed Consolidated Financial Statements.

H. J. HEINZ COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

* 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

See Notes to Condensed Consolidated Financial Statements.

H. J. HEINZ COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

See Notes to Condensed Consolidated Financial Statements.

H. J. HEINZ COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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:

Special Items

      During the first quarter of Fiscal 2006, the Company recorded pretax reorganization charges of $25.0 million ($16.9 million after tax) for severance and employee benefit costs consistent with the Company’s goals to streamline its businesses. As a result of this program, approximately 200 positions are being eliminated, primarily in the General & Administrative (“G&A”) area. Additionally, $8.9 million of pretax costs ($7.6 million after tax) were incurred in the first quarter, primarily as a result of the previously announced strategic review related to the potential divestiture of several non-core businesses. The strategic review costs are primarily associated with portfolio reviews of the Company’s non-core European seafood and frozen foods businesses and the Tegel poultry business in New Zealand. The total impact of these initiatives was $33.8 million pre-tax ($24.5 million after-tax), of which $2.1 million was recorded as costs of products sold and $31.8 million in selling, general and administrative expense (“SG&A”).

THREE MONTHS ENDED JULY 27, 2005 AND JULY 28, 2004

Results of Operations

      Sales for the three months ended July 27, 2005 increased $107.1 million, or 5.3%, to $2.11 billion. Sales were favorably impacted by a volume increase of 2.3% driven primarily by the North American Consumer Products segment, as well as our Australian and Italian infant nutrition businesses. These volume increases were partially offset by declines in the European frozen food, convenience meals and seafood product lines. Pricing increased sales slightly by 0.2%. Acquisitions, net of divestitures, increased sales by 1.4%, and consisted primarily of the acquisition of Appetizers And, Inc. (“AAI”), a manufacturer and marketer of high-quality, frozen hors d’oeuvres sold primarily in the U.S. foodservice industry, and the acquisition of Petrosoyuz, a leading Russian maker of ketchup, condiments and sauces. Foreign exchange translation rates increased sales by 1.5%.

      Gross profit increased $15.0 million, or 2.0%, to $753.8 million; however, the gross profit margin decreased to 35.7% from 36.9%. The decrease in the gross profit margin is mainly due to the Europe segment. The 2.0% increase in gross profit is primarily a result of higher volume and favorable exchange translation rates.

      SG&A increased $73.5 million, or 18.4%, to $472.5 million and increased as a percentage of sales to 22.4% from 19.9%. The increase as a percentage of sales is primarily due to the $31.8 million of special items discussed above and increased G&A related primarily to increased employee-related costs.

      Operating income decreased $58.5 million, or 17.2%, to $281.2 million, which was unfavorably impacted by the $33.8 million of special items discussed above, the lower gross profit margin and increased G&A expense.

      Total marketing support (recorded as a reduction of revenue or as a component of SG&A) increased $46.8 million, or 8.5%, to $600.6 million on a sales increase of 5.3%. Marketing support recorded as a reduction of revenue, typically deals and allowances, increased $45.1 million, or 9.1%, to $538.0 million. This increase is largely a result of increased trade promotion spending across the European businesses, Heinz ketchup and Classico pasta sauces in U.S. businesses, and foreign exchange translation rates. Marketing support recorded as a component of SG&A increased $1.7 million, or 2.9%, to $62.7 million.

      Net interest expense increased $11.6 million, to $58.3 million largely due to higher average net debt and higher average interest rates in Fiscal 2006. Other expenses, net, decreased $1.8 million to $4.5 million. The effective tax rate for the current quarter was 28.0% compared to 32.0% last year. The decrease in the effective tax rate is attributable to discrete benefits from foreign tax

credit carryforwards of approximately $16 million recognized in the first quarter as a result of tax planning initiatives, partially offset by the elimination of certain tax benefits as well as no tax benefit on some of the special items discussed above. For full year Fiscal 2006, the Company anticipates its effective income tax rate to be approximately 31% to 33%, excluding special items.

      Net income for the first quarter of Fiscal 2006 was $157.3 million compared to $194.8 million in the year earlier quarter, a decrease of 19.3%, primarily due to the $24.5 million of special items discussed above, the decline in operating income, and increased net interest expense, partially offset by a lower effective tax rate. Diluted earnings per share was $0.45 in the current year compared to $0.55 in the prior year, down 18.2%.

OPERATING RESULTS BY BUSINESS SEGMENT

North American Consumer Products

      Sales of the North American Consumer Products segment increased $56.1 million, or 11.5%, to $545.0 million. Volume increased significantly, up 11.3%, as a result of strong growth in Heinz ketchup and TGI Friday’s and Poppers brands of frozen snacks driven by successful marketing initiatives. 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 decreased 1.0% largely due to increased trade promotion expense, primarily related to Heinz ketchup and Classico pasta sauces, and decreased price on the new larger size Picnic Pak. These price decreases were partially offset by reduced trade spending on Ore-Ida frozen potatoes. Divestitures reduced sales 0.4% and exchange translation rates increased sales 1.7%.

      Gross profit increased $21.7 million, or 10.7%, to $224.4 million. The 10.7% increase in gross profit was driven primarily by the increased volume. Operating income increased $12.8 million, or 11.6%, to $123.9 million, due to the increase in gross profit partially offset by increased G&A and marketing expenses.

U.S. Foodservice

      Sales of the U.S. Foodservice segment increased $9.3 million, or 2.7%, to $353.2 million. The acquisition of AAI in the fourth quarter of Fiscal 2005 increased sales 3.6%. Higher pricing increased sales by 0.5%, as price increases were initiated primarily on frozen soup and tomato products. Volume decreased sales 1.3%, largely due to single serve condiments, resulting from unfavorable product mix, and ketchup, chiefly due to the timing of promotions, partially offset by volume increases in frozen soup.

      Gross profit increased $6.0 million, or 5.9%, to $107.7 million, and the gross profit margin increased to 30.5% from 29.6% primarily due to favorable pricing and the AAI acquisition. Operating income decreased $3.9 million, or 7.1%, to $50.5 million, as the increase in gross profit was offset by increased selling and distribution expenses, largely due to higher fuel and distribution costs, increased personnel costs and the AAI acquisition.

Europe

      Heinz Europe’s sales decreased $0.6 million, or 0.1%, to $788.2 million. Volume decreased 3.0%, principally due to frozen foods and convenience meals in the U.K. and the European seafood business. The frozen food decline is mainly a result of promotional timing, category softness and the loss of a contract related to chilled sandwiches, and the decrease in convenience meals is primarily from price increases. These volume declines were partially offset by increases in the Italian infant nutrition business and Heinz top-down ketchup. Higher pricing increased sales 1.0%, driven primarily by price increases initiated on Heinz beans. The acquisition of Petrosoyuz, a

leading Russian maker of ketchup, condiments and sauces, in the first quarter of Fiscal 2006 increased sales 2.5%. Divestitures reduced sales 1.1%, and favorable exchange translation rates increased sales by 0.5%.

      Gross profit decreased $14.5 million, or 4.8%, to $288.5 million, and the gross profit margin decreased to 36.6% from 38.4%. The decrease in gross profit margin is primarily due to the U.K., Northern Europe, and the European seafood businesses, resulting from unfavorable sales mix and higher manufacturing costs. Operating income decreased $37.8 million, or 24.5%, to $116.3 million, due to the decline in gross profit, $13.4 million of reorganization costs related to targeted workforce reductions and strategic review costs for our non-core seafood and frozen businesses in Europe, and increased G&A, primarily due to employee-related and SAP system implementation costs.

Asia/Pacific

      Sales in Asia/Pacific increased $29.3 million, or 9.9%, to $323.5 million. Volume increased sales 4.7%, reflecting strong volume in Australia and Indonesia, largely due to new product introductions and increased marketing. These increases were partially offset by continued declines in the Tegel poultry business in New Zealand. Favorable exchange translation rates increased sales by 6.4%. Lower pricing reduced sales 2.0%, primarily due to continuing market price pressures on the Tegel poultry business in New Zealand as well as increased promotional spending in our Australian business. Acquisitions, net of divestitures, increased sales 0.7%, largely due to the acquisition of Shanghai LongFong Foods, a maker of popular frozen Chinese snacks and desserts.

      Gross profit increased $3.0 million, or 3.1%, to $98.5 million. The gross profit margin decreased to 30.4% from 32.5%. The gross profit margin decline was primarily a result of lower pricing, commodity cost increases and unfavorable sales mix in China, and lost distribution and competitive pressures in the Tegel poultry business. The 3.1% increase in gross profit benefited from volume improvements and the favorable impact of exchange translation rates in Australia and New Zealand. Operating income decreased $11.9 million, or 36.9%, to $20.4 million, primarily due to the decline in gross profit margin and $6.9 million of reorganization costs related to targeted workforce reductions and strategic review costs for our non-core Tegel poultry business.

Other Operating Entities

      Sales for Other Operating Entities increased $13.0 million, or 14.8%, to $100.3 million. Volume increased 5.9% due primarily to ketchup and baby food in Latin America and sales in India. Higher pricing increased sales by 6.6%, largely due to price increases taken in Latin America and reduced trade spending in India. Sales were also favorably impacted by 4.2% from the acquisition in the fourth quarter Fiscal 2005 of a sauce and condiments business in Mexico. Divestitures reduced sales by 0.4% and foreign exchange translation rates reduced sales by 1.4%.

      Gross profit increased $3.4 million, or 11.9%, to $32.3 million, due mainly to increased pricing. Operating income decreased $8.0 million, or 55.6% to $6.4 million. Last year’s results include the proceeds of an agreement related to the recall in Israel.

      Zimbabwe remains in a period of economic uncertainty. Should the current situation continue, the Company could experience disruptions and delays in its Zimbabwean operations. 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. Although the Company’s business continues to operate profitably and is able to source raw materials, the country’s economic situation remains uncertain and there are government restrictions on the repatriation of earnings. The Company’s ability to recover its investment could become impaired if the economic and political uncertainties continue to deteriorate.

Liquidity and Financial Position

      Cash provided by operating activities was $165.9 million, a decrease of $20.3 million from the prior year. The decrease in the first quarter of Fiscal 2006 versus Fiscal 2005 is primarily due to a decline in net income and the timing of income tax payments and accounts receivable, partially offset by a favorable movement in accounts payable. However, the Company continues to make progress in reducing our cash conversion cycle, with a reduction of 3 days in the first quarter of Fiscal 2006 compared to Fiscal 2005.

      Cash used for investing activities totaled $112.3 million compared to $241.4 million last year. Acquisitions, net of divestitures, used $61.5 million in Fiscal 2006 primarily related to the Company’s purchase in the first quarter of Petrosoyuz, a leading Russian maker of ketchup, condiments and sauces. In Fiscal 2005, proceeds from divestitures, net of acquisitions, provided $10.8 million in cash. Capital expenditures totaled $47.2 million (2.2% of sales) compared to $38.4 million (1.9% of sales) last year.

      Cash provided by financing activities totaled $132.2 million compared to using $160.4 million last year. Proceeds from short-term debt and commercial paper were $456.3 million this year compared to $1.7 million in the prior year. Cash used for the purchases of treasury stock, net of proceeds from option exercises, was $231.9 million this year compared to $67.2 million in the prior year, in line with the Company’s plans of moderately reducing shares outstanding. Dividend payments totaled $104.2 million, compared to $100.0 million for the same period last year, reflecting a 5.3% increase in the annual dividend on common stock.

      At July 27, 2005, the Company had total debt of $5.2 billion (including $180 million relating to the fair value of interest rate swaps) and cash and cash equivalents of $1.2 billion. The increase in total debt is primarily the result of stock repurchases and acquisitions during the first 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 and the remarketable securities. As a result, these 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 $1 billion, strong operating cash flow and access to the capital market, if required should enable the Company to meet its cash requirements for operations, including capital expansion programs, debt maturities and dividends to shareholders.

      On August 16, 2005, the Company completed its acquisition of HP Foods Limited, HP Foods Holdings Limited, and HP Foods International Limited, collectively referred to as “HPF”, from Groupe Danone S.A. HPF is a manufacturer and marketer of sauces which are primarily sold in the United Kingdom, 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. The purchase price for this acquisition totaled approximately $850 million and was primarily funded with cash. In addition, on July 29, 2005, the Company acquired Nancy’s Specialty Foods, Inc., a producer of premium appetizers, quiche entrees and desserts in the United States and Canada.

      In Fiscal 2006, cash required for reorganization costs, related to both workforce reductions and strategic review costs, was approximately $8.0 million. The Company expects the aggregate amount of 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 $100 million, which will be primarily cash expenditures. On-going savings relative to these initiatives are anticipated to be approximately $28 million and $60 million in fiscal years 2006 and 2007, respectively.

      The Company’s long-term debt ratings were A- at Standard & Poors and Fitch and A-3 at Moody’s. Moody’s has put Heinz’s long term rating under review for possible downgrade.

      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. There have been no material changes to contractual obligations during the three months ended July 27, 2005. For additional information, refer to page 21 of the Company’s Annual Report on Form 10-K for the fiscal year ended April 27, 2005.

Recently Issued Accounting Standards

      In December 2004, the Financial Accounting Standards Board (“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 employee services through share-based payments. This Statement requires an entity to measure the cost of employee services received in exchange for an award of equity 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 reward. 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. Early adoption of the Statement is permissible. The Company plans on adopting this Statement in Fiscal 2007.

      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.” The FSP provides guidance on the accounting and disclosures for the temporary repatriation provision of the American Jobs Creation Act. The Company has adopted the disclosure provisions of the FSP which apply to entities that have not yet completed their evaluation of the repatriation provision, and will expand its disclosures in accordance with the FSP upon completion of the final evaluation.

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 anticipate and respond 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, the ability to complete and the success of acquisitions, joint ventures, divestitures, and other strategic initiatives, 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 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 investment impairment, 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.

      There have been no material changes in the Company’s market risk during the first quarter ended July 27, 2005. 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.

      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 disclosure.

      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

      Nothing to report under this item.

      In the first quarter of Fiscal 2006, the Company repurchased the following number of shares of its common stock:

      Of the shares repurchased, 6,996,392 shares were acquired under the share repurchase program authorized by the Board of Directors on January 14, 2004 for a maximum of 15 million shares. Once that program was completed in July, the remaining 154,624 shares were repurchased in July under the 30 million program authorized by the Board of Directors on June 8, 2005. All repurchases were made in open market transactions. As of July 27, 2005, the maximum number of shares that may yet be purchased under the 2005 program is 29,845,376.

      Nothing to report under this item.

      Nothing to report under this item.

      Nothing to report under this item.

      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.

Date: August 22, 2005

Date: August 22, 2005

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 and has omitted certain schedules to Exhibit 4 in accordance with Item 601(b)(2) 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.