HEINZ H J CO - 10-Q Quarterly Report

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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 OCTOBER 30, 2002

OR

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

FOR THE TRANSITION PERIOD FROM _______________ TO _______________

FOR THE SIX MONTHS ENDED OCTOBER 30, 2002 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 (I.R.S. Employer
incorporation or organization) Identification No.)

600 GRANT STREET, PITTSBURGH, PENNSYLVANIA 15219
(Address of Principal Executive Offices) (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 __

The number of shares of the Registrant's Common Stock, par value $.25 per
share, outstanding as of December 6, 2002 was 351,368,769 shares.

PART I -- FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

H.J. HEINZ COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME

*Reclassified, see Note 5

See Notes to Condensed Consolidated Financial Statements.

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H.J. HEINZ COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME

* Reclassified, see Note 5.

See Notes to Condensed Consolidated Financial Statements.

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H.J. HEINZ COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS

*Summarized from audited fiscal year 2002 balance sheet.

See Notes to Condensed Consolidated Financial Statements.

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H.J. HEINZ COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS

*Summarized from audited fiscal year 2002 balance sheet.

See Notes to Condensed Consolidated Financial Statements.

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H.J. HEINZ COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

See Notes to Condensed Consolidated Financial Statements.

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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, 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 2003 presentation.

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 to Shareholders and which are
incorporated by reference into the Company's Annual Report on Form 10-K for
the year ended May 1, 2002.

(2) AGREEMENT BETWEEN H.J. HEINZ COMPANY AND DEL MONTE FOODS COMPANY

On June 13, 2002, Heinz announced that it will transfer to a wholly-owned
subsidiary ("Spinco") assets and liabilities of its U.S. and Canadian pet
food and pet snacks, U.S. tuna, U.S. retail private label soup and private
label gravy, College Inn broth and U.S. infant feeding businesses and
distribute all of the shares of Spinco common stock on a pro rata basis to
its shareholders. Immediately thereafter, Spinco will merge with a
wholly-owned subsidiary of Del Monte Foods Company ("Del Monte") resulting
in Spinco becoming a wholly-owned subsidiary of Del Monte (the "Merger").
In connection with the Merger, each share of Spinco common stock will be
automatically converted into shares of Del Monte common stock that will
result in the fully diluted Del Monte common stock at the effective time
of the Merger being held approximately 74.5% by Heinz shareholders and
approximately 25.5% by the Del Monte stockholders. As a result of the
transaction, Heinz will receive approximately $1.1 billion in cash that
will be used to retire debt.

Included in the transaction will be the following brands: StarKist(R),
9-Lives(R), Kibbles 'n Bits(R), Pup-Peroni(R), Snausages(R), Nawsomes(R),
Heinz Nature's Goodness(R) baby food and College Inn(R) broths. The
following is a summary of the Fiscal 2003 and Fiscal 2002 second quarter
and first half operating results of the businesses to be spun off (See
Exhibit 99(d) for a discussion of results of operations and the Combined
Financial Statements of SKF Foods (Spinco) for the three and six months
ended October 30, 2002 and October 31, 2001):

The Merger, which has been approved by the Boards of Directors of Heinz and
Del Monte, is subject to the approval by the stockholders of Del Monte and
it's expected that the transaction could close as early as December 20,
2002. Heinz received on November 21, 2002, a private letter ruling from the
Internal Revenue Service that the contribution of the assets and
liabilities to Spinco and the distribution of the shares of common stock of
Spinco to Heinz

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shareholders will be tax-free to Heinz, Spinco and the shareholders of
Heinz. The Merger is also subject to other customary closing conditions.

During the three and six months ended October 30, 2002, the Company
recognized transaction related costs and costs to reduce overhead of the
remaining businesses totaling $10.1 million pretax ($0.02 per share) and
$28.5 million pretax ($0.05 per share), respectively.

(3) INVENTORIES
The composition of inventories at the balance sheet dates was as follows:

(4) RESTRUCTURING
In the fourth quarter of Fiscal 2001, the Company announced a
restructuring initiative named "Streamline". This initiative includes a
worldwide organizational restructuring aimed at reducing overhead costs,
the closure of the Company's tuna operations in Puerto Rico, the
consolidation of the Company's North American canned pet food production
to Bloomsburg, Pennsylvania (which resulted in ceasing canned pet food
production at the Company's Terminal Island, California facility), and the
divestiture of the Company's U.S. fleet of fishing boats and related
equipment.

The major components of the restructuring charges and implementation costs
and the remaining accrual balances as of October 30, 2002 were as follows:

During the first six months of Fiscal 2003, the Company utilized $9.5
million of severance and exit cost accruals, principally related to its
global overhead reduction plan, primarily in Europe and North America.

(5) RECENTLY ADOPTED ACCOUNTING STANDARDS
During the fourth quarter of Fiscal 2002, the Company adopted Emerging
Issues Task Force ("EITF") statements relating to the classification of
vendor consideration and certain sales incentives. The adoption of these
EITF statements has no impact on operating income, net earnings, or basic
or diluted earnings per share; however, revenues and gross profit were
reduced by approximately $150.9 million and $259.1 million in the second
quarter and first six months of Fiscal 2002, respectively. Prior period
data has been reclassified to conform to the current year presentation.

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The Company adopted Statement of Financial Accounting Standards (SFAS) No.
141, "Business Combinations" which requires that the purchase method of
accounting be applied to all business combinations after June 30, 2001. SFAS No.
141 also established criteria for recognition of intangible assets and goodwill.
Effective May 2, 2002, the Company adopted SFAS No. 142 "Goodwill and Other
Intangible Assets." Under this standard, goodwill and intangibles with
indefinite useful lives are no longer amortized. This standard also requires, at
a minimum, an annual impairment assessment of the carrying value of goodwill and
intangibles with indefinite useful lives. The reassessment of intangible assets,
including the ongoing impact of amortization, and the assignment of goodwill to
reporting units was completed during the first quarter of Fiscal 2003.

The Company completed its transitional goodwill impairment tests during the
second quarter of Fiscal 2003. The SFAS No. 142 goodwill impairment model is a
two-step process. The first step compares the fair value of a reporting unit
(one level below the Company's operating segments) that has goodwill assigned to
it, to its carrying value. The Company estimates the fair value of a reporting
unit using discounted cash flows, using a risk-adjusted weighted average cost of
capital for the business as the discount rate. If the fair value of the
reporting unit is determined to be less than its carrying value, a second step
is performed to compute the amount of goodwill impairment, if any. Step two
allocates the fair value of the reporting unit to the reporting unit's net
assets other than goodwill. The excess of the fair value of the reporting unit
over the amounts assigned to its net assets other than goodwill is considered
the implied fair value of the reporting unit's goodwill. The implied fair value
of the reporting unit's goodwill is then compared to the carrying value of its
goodwill. Any shortfall represents the amount of the goodwill impairment.

Using the SFAS No. 142 approach described above, the Company recorded a
transitional impairment charge calculated as of May 2, 2002, and recorded as an
effect of a change in accounting principle in the six-month period ended October
30, 2002, of $77.8 million ($0.22 per share). There was no tax effect associated
with this charge. The charge, which relates to certain of the Company's
reporting units, has been reflected in its segments as follows: Europe $54.6
million, Asia/Pacific $2.7 million, and Other Operating Entities $20.5 million.

The transitional impairment charge resulted from application of the new
impairment methodology introduced by SFAS No. 142. Previous accounting rules
incorporated a comparison of carrying value to undiscounted cash flows, whereas
new rules require a comparison of carrying value to discounted cash flows, which
are lower. Under previous requirements, no goodwill impairment would have been
recorded on May 2, 2002.

The effects of adopting the new standards on net income and diluted
earnings per share are as follows:

Net income for the three and six-month periods ended October 31, 2001 would have
been $224,187 and $439,563 or $0.05 and $0.09 per share higher, respectively,
and net income for Fiscal 2002

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would have been $896,184 or $0.18 per share higher had the provisions of the new
standards been applied as of May 3, 2001.

Changes in the carrying amount of goodwill for the six months ended October
30, 2002, by reportable segment, are as follows:

Trademarks and other intangible assets at October 30, 2002 and May 1, 2002,
subject to amortization expense, are as follows:

Amortization expense for trademarks and other intangible assets subject to
amortization was $11.2 million for the six months ended October 30, 2002.
Based upon the amortizable intangible assets recorded on the balance sheet
at October 30, 2002, amortization expense for each of the next five years
is estimated to be approximately $25.0 million.

Intangible assets not subject to amortization at October 30, 2002 and May
1, 2002, were $642.1 million and $601.1 million respectively, and consisted
solely of trademarks.

Effective May 2, 2002, the Company adopted SFAS No. 144, "Accounting for
the Impairment or Disposal of Long-Lived Assets." This statement provides
updated guidance concerning the recognition and measurement of an
impairment loss for certain types of long-lived assets, expands the scope
of a discontinued operation to include a component of an entity and
eliminates the current exemption to consolidation when control over a
subsidiary is likely to be temporary. The adoption of this new standard did
not have a material impact on the Company's financial position, results of
operations or cash flows for the six months ended October 30, 2002.

(6) RECENTLY ISSUED ACCOUNTING STANDARDS
In June 2001, the FASB approved SFAS No. 143, "Accounting for Asset
Retirement Obligations." SFAS No. 143, addresses accounting for legal
obligations associated with the retirement of long-lived assets that
result from the acquisition, construction, development and the normal
operation of a long-lived asset, except for certain obligations of
lessees. This standard is effective for the Company in Fiscal 2004. The
Company does not expect that the adoption of this standard will have a
significant impact on the consolidated financial statements.

In June 2002, the FASB approved SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities." SFAS No. 146 addresses
financial accounting and reporting for costs associated with exit or
disposal activities. This Statement requires that a liability for a cost

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associated with an exit or disposal activity be recognized when the
liability is incurred. This Statement also establishes that fair value is
the objective for initial measurement of the liability. The provisions of
SFAS No. 146 are effective for exit or disposal activities that are
initiated after December 31, 2002.

(7) SEGMENTS
The Company's segments are primarily organized by geographical area. The
composition of segments and measure of segment profitability is consistent
with that used by the Company's management.

The Company has changed its segment reporting for its North American
business to reflect changes in organizational structure and management.
The Company is reporting and grouping the results of certain businesses
under a new segment designated SKF Foods. SKF Foods consists of Heinz's
U.S. and Canadian pet food and pet snacks, U.S. tuna, U.S. retail private
label soup and private label gravy, College Inn broth and U.S. infant
feeding businesses. SKF Foods also includes the former U.S. Pet Products
and Seafood segment. These businesses have been separated from the
remaining Heinz businesses in preparation for their spin-off and
subsequent merger with Del Monte Corporation, a subsidiary of Del Monte
Foods Company. The remaining Heinz North America segment now includes the
following businesses that will be retained by Heinz following the Del
Monte transaction, including: ketchup, condiments, sauces, and pasta meals
sold to the grocery and foodservice channels in North America.

Prior periods have been restated to conform with the current presentation.
Descriptions of the Company's reportable segment are as follows:

Heinz North America--This segment manufactures, markets and sells
ketchup, condiments, sauces and pasta meals to the grocery and
foodservice channels in North America.

SKF Foods--This segment includes the U.S. and Canadian pet food and pet
snacks, U.S. tuna, U.S. retail private label soup and private label
gravy, College Inn broth and U.S. infant feeding businesses.

U.S. Frozen--This segment manufactures, markets and sells frozen
potatoes, entrees, snacks and appetizers.

Europe--This segment includes the Company's operations in Europe and
sells products in all of the Company's core categories.

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

Other Operating Entities--This segment includes the Company's operations
in Africa, Venezuela and other areas which sell products in all of the
Company's core categories.

The Company's management evaluates performance based on several factors
including net sales and the use of capital resources; however, the
primary measurement focus is operating income excluding unusual costs
and gains. Intersegment sales are accounted for at current market
values. Items below the operating income line of the Consolidated
Statements of Income are not presented by segment, since they are not
the primary measure of segment profitability reviewed by the Company's
management.

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

*Reclassified, see Note 5.
- ---------------
(a) Includes corporate overhead, intercompany eliminations and charges not
directly attributable to operating segments.
(b) Second Quarter ended October 30, 2002 - Excludes Del Monte transaction
related costs and cost to reduce overhead of the remaining core businesses
as follows: Heinz North America $5.3 million and Non-Operating $4.8 million.
Six Months ended October 30, 2002 - Excludes Del Monte transaction related
costs and cost to reduce overhead of the remaining core businesses as
follows: Heinz North America $12.2 million and Non-Operating $16.3 million.
Six Months ended October 31, 2001 - Excludes implementation and
restructuring costs of Streamline as follows: Heinz North America $4.8
million, SKF $7.9 million, Europe $1.7 million, Asia/Pacific $0.6 million
and Non-Operating $1.2 million.
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The Company's revenues are generated via the sale of products in the
following categories:

*Reclassified, see Note 5

(8) EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings
per share in accordance with the provisions of SFAS No. 128:

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(9) COMPREHENSIVE INCOME

(10) FINANCIAL INSTRUMENTS
The Company operates internationally, with manufacturing and sales
facilities in various locations around the world, and utilizes certain
financial instruments to manage its foreign currency, commodity price and
interest rate exposures.

FOREIGN CURRENCY HEDGING: The Company uses forward contracts and currency
swaps to mitigate its foreign currency exchange rate exposure due to
anticipated purchases of raw materials and sales of finished goods, and
future settlement of foreign currency denominated assets and liabilities.
Hedges of anticipated transactions and hedges of specific cash flows
associated with foreign currency denominated financial assets and
liabilities are designated as cash flow hedges, and consequently, the
effective portion of unrealized gains and losses is deferred as a component
of accumulated other comprehensive loss and is recognized in earnings at
the time the hedged item affects earnings.

The Company uses certain foreign currency debt instruments as net
investment hedges of foreign operations. During the six months ended
October 30, 2002, losses of $14.7 million, net of income taxes of $8.6
million, which represented effective hedges of net investments, were
reported as a component of accumulated other comprehensive loss within
unrealized translation adjustment.

COMMODITY PRICE HEDGING: The Company uses commodity futures, swaps and
options in order to reduce price risk associated with anticipated purchases
of raw materials such as corn, soybean oil and soybean meal. Commodity
price risk arises due to factors such as weather conditions, government
regulations, economic climate and other unforeseen circumstances. Hedges of
anticipated commodity purchases which meet the criteria for hedge
accounting are designated as cash flow hedges.

INTEREST RATE HEDGING: The Company uses interest rate swaps to manage
interest rate exposure. These derivatives are designated as cash flow
hedges or fair value hedges depending on the nature of the particular risk
being hedged.

HEDGE INEFFECTIVENESS: During the six months ended October 30, 2002, hedge
ineffectiveness related to cash flow hedges was a net gain of $0.4 million,
which is reported in the consolidated statements of income as other
expenses, net.

DEFERRED HEDGING GAINS AND LOSSES: As of October 30, 2002, the Company is
hedging forecasted transactions for periods not exceeding 18 months. During
the next 12 months, the Company expects $2.3 million of net deferred loss
reported in accumulated other comprehensive loss to be reclassified to
earnings.

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

AGREEMENT BETWEEN H.J. HEINZ COMPANY AND DEL MONTE FOODS COMPANY

On June 13, 2002, Heinz announced that it will transfer to a wholly-owned
subsidiary ("Spinco") assets and liabilities of its U.S. and Canadian pet food
and pet snacks, U.S. tuna, U.S. retail private label soup and private label
gravy, College Inn broth and U.S. infant feeding businesses and distribute all
of the shares of Spinco common stock on a pro rata basis to its shareholders.
Immediately thereafter, Spinco will merge with a wholly-owned subsidiary of Del
Monte Foods Company ("Del Monte") resulting in Spinco becoming a wholly-owned
subsidiary of Del Monte (the "Merger"). In connection with the Merger, each
share of Spinco common stock will be automatically converted into shares of Del
Monte common stock that will result in the fully diluted Del Monte common stock
at the effective time of the Merger being held approximately 74.5% by Heinz
shareholders and approximately 25.5% by the Del Monte shareholders. As a result
of the transaction, Heinz will receive approximately $1.1 billion in cash that
will be used to retire debt.

Included in the transaction will be the following brands: StarKist(R),
9-Lives(R), Kibbles 'n Bits(R), Pup-Peroni(R), Snausages(R), Nawsomes(R), Heinz
Nature's Goodness(R) baby food and College Inn(R) broths. The following is a
summary of the Fiscal 2003 and Fiscal 2002 second quarter and first half
operating results of the businesses to be spun off (See Exhibit 99(d) for a
discussion of results of operations and for the Combined Financial Statements of
SKF Foods (Spinco) for the three and six months ended October 30, 2002 and
October 31, 2001.):

Pending completion of the transaction, Heinz expects to adjust its common
stock dividend beginning in April 2003. The expected dividend will be $1.08 per
share, a 33% reduction from the present rate of $1.62 per share. The new
dividend rate is consistent with Heinz's peer group and above the S&P 500
average. [Note: All earnings per share amounts included in Management's
Discussion and Analysis are presented on an after-tax diluted basis]. Upon
completion of the transaction, Heinz intends to accelerate its focus on cash
flows with improvements in working capital and a tight control on capital
expenditures. In addition to the approximate $1.1 billion debt reduction as a
result of the transaction, Heinz is targeting an additional $1.0 billion of debt
reduction by the end of Fiscal 2005.

The Merger, which has been approved by the Boards of Directors of Heinz and
Del Monte, is subject to the approval by the stockholders of Del Monte and it's
expected that the transaction could close as early as December 20, 2002. Heinz
received on November 21, 2002, a private letter ruling from the Internal Revenue
Service that the contribution of the assets and liabilities to Spinco and the
distribution of the shares of common stock of Spinco to Heinz shareholders will
be tax-free to Heinz, Spinco and the shareholders of Heinz. The Merger is also
subject to other customary closing conditions.

During the three months and six months ended October 30, 2002, the Company
recognized transaction related costs and costs to reduce overhead of the
remaining businesses totaling $10.1 million pretax ($0.02 per share) and $28.5
million pretax ($0.05 per share), respectively. Heinz anticipates transaction
related and restructuring costs of approximately $160 million after tax to be
incurred in Fiscal 2003. For more information regarding this transaction, please
refer to the Company's Annual Report to Shareholders for the fiscal year ended
May 1, 2002.

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STREAMLINE

In the fourth quarter of Fiscal 2001, the Company announced a restructuring
initiative named "Streamline". This initiative included a worldwide
organizational restructuring aimed at reducing overhead costs, the closure of
the Company's tuna operations in Puerto Rico, the consolidation of the Company's
North American canned pet food production to Bloomsburg, Pennsylvania (which
resulted in ceasing canned pet food production at the Company's Terminal Island,
California facility), and the divestiture of the Company's U.S. fleet of fishing
boats and related equipment. For more information regarding Streamline, please
refer to the Company's Annual Report to Shareholders for the fiscal year ended
May 1, 2002.

RECENTLY ADOPTED ACCOUNTING STANDARDS

The Company adopted Statement of Financial Accounting Standards (SFAS) No.
141, "Business Combinations" which requires that the purchase method of
accounting be applied to all business combinations after June 30, 2001. SFAS No.
141 also established criteria for recognition of intangible assets and goodwill.
Effective May 2, 2002, the Company adopted SFAS No. 142 "Goodwill and Other
Intangible Assets." Under this standard, goodwill and intangibles with
indefinite useful lives are no longer amortized. This standard also requires, at
a minimum, an annual assessment of the carrying value of goodwill and
intangibles with indefinite useful lives. The reassessment of intangible assets,
including the ongoing impact of amortization, was completed during the first
quarter of Fiscal 2003. Net income for the quarter and six months ended October
31, 2001 would have been $224.2 million or $0.05 per share higher and $439.6
million or $0.09 per share higher, respectively, had the provisions of the new
standards been applied as of May 3, 2001.

During the first half of Fiscal 2003, the Company completed its
transitional goodwill impairment review and recognized a transition adjustment
of $77.8 million ($0.22 per share) to write down goodwill associated with its
businesses in Eastern Europe, Argentina, Spain, Korea and South Africa. This is
recorded as an effect of change in accounting principle as of May 2, 2002.

Effective May 2, 2002, the Company adopted SFAS No. 144, "Accounting for
the Impairment of Disposal of Long-Lived Assets." This statement provides
updated guidance concerning the recognition and measurement of an impairment
loss for certain types of long-lived assets, expands the scope of a discontinued
operation to include a component of an entity and eliminates the current
exemption to consolidation when control over a subsidiary is likely to be
temporary. The adoption of this new standard did not have a material impact on
the Company's financial position, results of operations or cash flows.

During the fourth quarter of Fiscal 2002, the Company adopted Emerging
Issues Task Force ("EITF") statements relating to the classification of vendor
consideration and certain sales incentives. The adoption of these EITF
statements has no impact on operating income, net earnings, or basic or diluted
earnings per share; however, revenues and gross profit were reduced by
approximately $150.9 million and $259.1 million in the second quarter and first
six months of Fiscal 2002, respectively. Prior period data has been reclassified
to conform to the current year presentation.

THREE MONTHS ENDED OCTOBER 30, 2002 AND OCTOBER 31, 2001

RESULTS OF OPERATIONS

For the three months ended October 30, 2002, sales increased $154.6
million, or 6.4%, to $2.57 billion. Sales were favorably impacted by pricing
(3.9%), exchange rates (2.7%) and acquisitions (1.9%.) The favorable impact of
acquisitions is primarily related to prior year acquisitions in the Heinz North
America and U.S. Frozen segments. The favorable pricing was realized primarily
in certain highly inflationary countries and in Europe. Sales were negatively
impacted by unfavor-

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able volumes (1.7%), primarily in the European segment and certain highly
inflationary countries and by divestitures (0.4%.)

The current year's second quarter was negatively impacted by costs related
to the Del Monte transaction and costs to reduce overhead of the remaining
businesses totaling $10.1 million pretax ($0.02 per share) which are classified
primarily as selling, general and administrative expenses ("SG&A".) These
include employee termination and severance costs, legal and other professional
service costs.

The following tables provide a comparison of the Company's reported results
and the results excluding special items for the second quarter of Fiscal 2003.
There were no special items in the year-earlier quarter.

(Totals may not add due to rounding)

Gross profit increased $41.8 million, or 4.8%, to $904.4 million. Excluding
the special items noted above, gross profit increased $43.7 million, or 5.1%, to
$906.3 million; however, the gross profit margin decreased to 35.3% from 35.7%.
The decrease in gross profit margin occurred primarily in the Heinz North
America segment. This decrease was partially offset by the favorable pricing
discussed above and the benefit of reduced amortization of intangible assets of
approximately $16.9 million.

SG&A expenses increased $32.6 million, or 7.1%, to $494.1 million.
Excluding the special items noted above, SG&A increased $24.4 million, or 5.3%,
to $485.8 million; however, it decreased as a percentage of sales to 18.9% from
19.1%. The increase is primarily driven by increases in Selling and Distribution
(S&D) expenses in the European and U.S. Frozen segments and increased General
and Administrative (G&A) expenses in the Non-operating and Asia/Pacific
segments. Marketing spend was consistent with the prior year, reflecting
increased spending in all North American segments offset by reductions in
Europe.

Operating income increased $9.2 million, or 2.3%, to $410.3 million.
Excluding the special items noted above, operating income increased $19.3
million, or 4.8%, to $420.5 million but decreased slightly as a percentage of
sales to 16.4% from 16.6%.

Net interest expense decreased $6.2 million to $64.6 million, driven
primarily by lower interest rates over the past year. Other expense increased
$11.5 million to $21.5 million from $10.0 million last year. The increase is
primarily attributable to increases in minority interest expense, largely
related to increased profitability in joint ventures in certain highly
inflationary countries. The effective tax rate for the current quarter was 34.6%
compared to 35.0% last year. Excluding the special items noted above, the
effective rate was 34.5% in the current quarter compared to 35.0% last year.

Net income in the current quarter was $212.1 million compared to $208.2
million last year and diluted earnings per share was $0.60 in the current
quarter versus $0.59 in the same period last year. Excluding the special items
noted above, net income increased $10.8 million to $219.0 million, and diluted
earnings per share increased 5.0%, to $0.62 from $0.59 last year.

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OPERATING RESULTS BY BUSINESS SEGMENT

The Company has changed its segment reporting for its North American
business to reflect changes in organizational structure and management. The
Company is reporting and grouping the results of certain businesses under a new
segment designated SKF Foods. SKF Foods consists of Heinz's U.S. and Canadian
pet food and pet snacks, U.S. tuna, U.S. retail private label soup and private
label gravy, College Inn broth and U.S. infant feeding businesses. SKF Foods
also includes the former U.S. Pet Products and Seafood segment. These businesses
have been separated from the remaining Heinz businesses in preparation for their
spin-off and subsequent merger with Del Monte Corporation, a subsidiary of Del
Monte Foods Company. The remaining Heinz North America segment now includes the
following businesses that will be retained by Heinz following the Del Monte
transaction, including: ketchup, condiments, sauces, and pasta meals sold to the
grocery and foodservice channels in North America. Prior periods have been
restated to conform with the current presentation.

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HEINZ NORTH AMERICA

Sales of the Heinz North America segment increased $10.3 million, or 1.8%.
Acquisitions increased sales by 2.1%, due primarily to the prior year
acquisition of Dianne's Gourmet Desserts. Lower pricing decreased sales 0.8%.
Sales volume increased 0.7% as the favorable increase in ketchup was partially
offset by decreases in gravy and portion control. The weaker Canadian dollar
decreased sales 0.2%.

Gross profit decreased $11.8 million, or 5.3% to $209.9 million. Excluding
special items, gross profit decreased $9.9 million, or 4.5% due primarily to
increased manufacturing costs, partially offset by reduced amortization expense
on intangible assets. Operating income decreased $25.7 million, or 18.4% to
$114.1 million. Excluding special items, operating income decreased $20.4
million, or 14.6%, to $119.4 million, due primarily to the change in gross
profit, increased marketing and G&A expenses, partially offset by acquisitions.

SKF FOODS

Sales of the SKF Foods segment decreased $6.6 million, or 1.4%. Sales
volume was down 1.5% versus last year as increases in tuna, driven by pouch,
were more than offset by decreases in pet products and infant feeding. Reduced
volume in pet products largely reflects planned reductions in low margin private
label products, lower volume of non-core brands and reductions in pet snacks.
Pricing remained consistent with the prior year as increases in pet products
were offset by decreases in tuna.

Gross profit increased $2.7 million, or 1.8% and the gross profit margin
increased to 32.6% from 31.6%, primarily due to lower tuna costs, favorable
sales mix and the benefit of reduced amortization expense related to intangible
assets. Operating income increased $7.8 million, or 10.8%, to $79.7 million, due
primarily to the change in gross profit and reduced G&A expense, partially
offset by increased marketing.

U.S. FROZEN

U.S. Frozen's sales increased $17.0 million, or 5.7%. Acquisitions
increased sales 7.8%, due primarily to the prior year acquisitions of Delimex
frozen Mexican foods, Anchor's Poppers retail frozen appetizers and licensing
rights to the T.G.I. Friday's brand of frozen snacks and appetizers. Sales
volume increased 1.3% driven primarily by SmartOnes frozen entrees, partially
offset by a reduction in Hot Bites, Boston Market HomeStyle sides and frozen
potatoes. Lower pricing decreased sales 3.4%, primarily due to increased trade
promotions related to SmartOnes frozen entrees.

Gross profit increased $9.5 million, or 8.5%, and the gross profit margin
increased to 38.4% from 37.4%, primarily due to acquisitions and efforts to
reduce manufacturing costs partially offset by price decreases. Operating income
increased $3.8 million, or 6.3%, to $64.9 million primarily due to the change in
gross profit and reduced G&A expense, partially offset by increased marketing
and S&D expenses primarily related to acquisitions.

EUROPE

Heinz Europe's sales increased $31.6 million, or 4.4%. Favorable exchange
rates increased sales by 6.6%. Higher pricing increased sales 1.9%, primarily
due to seafood, beans and soup. Lower volume decreased sales 2.7%, in soups,
beans and pasta meals and seafood, partially offset by volume increases in
infant feeding and frozen entrees. The decreases in soups, beans and pasta meals
were partially driven by planned SKU rationalizations. Divestitures reduced
sales 1.4%.

Gross profit increased $17.6 million, or 6.5%, due primarily to favorable
exchange rates, pricing and reduced amortization expense related to intangible
assets. Operating income increased $18.3 million, or 15.3%, to $137.7 million,
primarily attributable to the increase in gross profit,
19

favorable impact of exchange and reduced marketing expense, offset partially by
increased S&D expense.

ASIA/PACIFIC

Sales in Asia/Pacific increased $33.2 million, or 13.3%. Favorable exchange
rates increased sales by 7.4%. Higher pricing increased sales 2.9%, primarily
due to poultry and juices/drinks, partially offset by decreases in frozen
vegetables. Volume increased 0.8%, driven primarily by juices/drinks and
poultry, partially offset by cooking oils. Acquisitions increased sales by 2.3%.

Gross profit increased $9.6 million, or 12.3%, due primarily to favorable
exchange rates and increased pricing. Operating income increased $3.0 million,
or 12.0%, to $27.8 million from $24.8 million, primarily due to the change in
gross profit, partially offset by increased G&A and marketing expenses.

OTHER OPERATING ENTITIES

Sales for Other Operating Entities increased $69.0 million, or 62.8%,
primarily due to favorable pricing in certain highly inflationary countries.
Gross profit increased $16.4 million, or 60.1%, due primarily to favorable
pricing. Operating income increased $12.6 million, or 83.9%, due primarily to
the increase in gross profit.

SIX MONTHS ENDED OCTOBER 30, 2002 AND OCTOBER 31, 2001

RESULTS OF OPERATIONS

For the six months ended October 30, 2002, sales increased $280.9 million,
or 6.3%, to $4.77 billion from $4.49 billion last year. Sales were favorably
impacted by pricing (3.9%) and foreign exchange translation rates (3.0%) and
acquisitions (2.9%). The favorable impact of acquisitions is primarily related
to the prior year acquisitions in the Heinz North America and U.S. Frozen
segments. The favorable pricing was realized primarily in certain highly
inflationary countries and Europe. Sales were negatively impacted by unfavorable
volumes of 3.0% driven by the current year strategic shift from trade
promotional spending to consumer focused promotional and marketing programs.
This strategic shift has caused a realignment of promotional timing,
particularly in the United States, primarily during the first quarter.
Divestitures reduced sales by 0.5%.

The current year's results were negatively impacted by costs related to the
Del Monte transaction and costs to reduce overhead of the remaining core
businesses totaling $28.5 million pretax ($0.05 per share) which are classified
primarily as selling, general and administrative expenses ("SG&A".) These
expenses include employee termination and severance costs, legal and other
professional service costs. Last year's results were negatively impacted by
Streamline restructuring charges and implementation costs totaling $16.2 million
pretax ($0.04 per share.)

20

The following tables provide a comparison of the Company's reported results
and the results excluding special items for the six months ended October 30,
2002 and October 31, 2001.

- ---------------

* Before effect of change in accounting principle related to SFAS No. 142

(Note: Totals may not add due to rounding.)

Gross profit increased $66.4 million, or 4.1%, to $1,691.3 million.
Excluding the special items noted above, gross profit increased $59.6 million,
or 3.6%, to $1,693.2 million; however, the gross profit margin decreased to
35.5% from 36.4%. The decrease in gross profit margin is primarily related to
the Heinz North America and SKF Foods segments. This decrease was partially
offset by the favorable pricing discussed above and the benefit of reduced
amortization of intangible assets of approximately $33.5 million.

SG&A increased $96.3 million, or 11.5%, to $935.8 million. Excluding the
special items noted above, SG&A increased $77.0 million, or 9.3%, to $909.2
million and increased as a percentage of sales to 19.1% from 18.5%. The increase
is primarily driven by increased marketing spend in the U.S. Frozen, Heinz North
America and SKF Foods segments and increased G&A expenses in the Heinz North
America, Europe and Asia/Pacific segments.

Operating income decreased $29.9 million, or 3.8%, to $755.5. Excluding the
special items noted above, operating income decreased $17.5 million, or 2.2%, to
$784.0 million and decreased as a percentage of sales to 16.4% from 17.8%.

Net interest expense decreased $13.7 million to $127.3 million, driven
primarily by lower interest rates over the past year. Other expense increased
$21.4 million to $33.2 million. The increase is primarily attributable to
increases in minority interest expense, largely related to increased
profitability in joint ventures in certain highly inflationary countries. The
effective tax rate for the six months ended October 30, 2002 was 34.5% compared
to 35.4% last year. Excluding the special items noted above, the effective rate
was 34.5% in the current period compared to 35.0% last year.

Net income for the current six months (before effect of change in
accounting principle related to the adoption of SFAS No. 142) was $389.9 million
compared to $408.7 million last year and diluted earnings per share (before
cumulative effect of change in accounting related to the adoption of SFAS No.
142) was $1.10 in the current six months versus $1.16 in the same period last
year. Excluding the special items noted above, net income decreased $13.3
million to $408.4 million from $421.7 million last year, and diluted earnings
per share decreased 3.3%, to $1.16.

21

HEINZ NORTH AMERICA

Sales of the Heinz North America segment increased $43.5 million, or 4.1%.
Acquisitions, net of divestitures, increased sales 3.6%, due primarily to the
prior year acquisitions of Classico and Aunt Millie's pasta sauce, Mrs. Grass
Recipe soups, Wyler's bouillons and soups and Dianne's Gourmet Desserts. Higher
pricing increased sales 0.7% due mainly to ketchup, portion control and frozen
soup. Sales volume remained consistent with the prior year as increases in
foodservice ketchup and specialty sauces were offset by decreases in retail
ketchup and frozen soup. Retail ketchup is being impacted by the ongoing trade
efforts to reduce inventory levels as well as by the current year strategic
shift from trade promotional spending to consumer focused promotional and
marketing programs, mainly during the first quarter. The weaker Canadian dollar
decreased sales 0.1%.

Gross profit decreased $8.2 million, or 2.0%, to $395.2 million. Excluding
special items, gross profit decreased $6.3 million, or 1.6%, and the gross
profit margin decreased to 36.3% from 38.4%, due primarily to unfavorable sales
mix and increased manufacturing costs, partially offset by reduced amortization
expense on intangible assets with indefinite lives and acquisitions. Operating
income decreased $46.0 million, or 18.4%, to $204.6 million. Excluding special
items, operating income decreased $38.6 million, or 15.1%, to $216.9 million
from $255.5 million, due primarily to the change in gross profit, increased
marketing and higher G&A expense partially offset by acquisitions.

SKF FOODS

Sales of the SKF Foods segment decreased $42.4 million, or 4.8%. Sales
volume decreased 4.0% primarily in pet products and infant feeding partially
offset by volume increases in tuna, driven by pouch. Reduced volume in pet
products largely reflects planned reductions in low margin private label
products, timing of promotional activities and reductions in trade inventories.
Lower pricing decreased sales 0.8%, primarily in tuna and infant feeding
partially offset by price increases in pet products.

Gross profit decreased $12.9 million or 4.6% to $267.6 million. Excluding
special items, gross profit decreased $20.2 million, or 7.0% and the gross
profit margin decreased to 32.1% from 32.8%, primarily due to lower tuna pricing
and higher tuna and soup costs, as well as, lower volume of pet snacks.
Operating income decreased $7.7 million, or 5.6%, to $129.4 million. Excluding
special items, operating income decreased $15.5 million, or 10.7%, to $129.4
million from $145.0 million, due primarily to the change in gross profit and
increased marketing expenses, partially offset by reductions in S&D and G&A.

U.S. FROZEN

U.S. Frozen's sales increased $53.8 million, or 10.6%. Acquisitions, net of
divestitures increased sales 14.9%, due primarily to the prior year acquisitions
of Delimex frozen Mexican foods, Anchor's Poppers retail frozen appetizers and
licensing rights to the T.G.I. Friday's brand of frozen snacks and appetizers.
Higher pricing increased sales 0.1%, primarily due to SmartOnes frozen entrees
and appetizers and a reduction in trade promotions primarily related to the
launch of Hot Bites in the prior year. This was partially offset by increased
trade promotions related to SmartOnes frozen entrees. Sales volume decreased
4.4% driven by declines in Hot Bites, Boston Market HomeStyle sides and frozen
potatoes, partially offset by SmartOnes frozen entrees. The volume decrease is
partially attributed to the rationalization of the Hot Bites product lines with
increased focus on the base Bagel Bites business.

Gross profit increased $26.9 million or 13.9% and the gross profit margin
increased to 39.1% from 38.0%. The increase in gross profit is primarily due to
acquisitions and reduced manufacturing costs. Operating income increased $11.3
million, or 10.7%, to $116.6 million due primarily to the change in gross
profit, partially offset by increased marketing and S&D.
22

EUROPE

Heinz Europe's sales increased $70.1 million, or 5.1%. Favorable exchange
rates increased sales by 7.0%. Higher pricing increased sales 1.3%, primarily
due to seafood, beans and soups partially offset by lower pricing in frozen
foods. Lower volume decreased sales 2.3%, driven primarily by planned SKU
rationalizations, seafood and frozen pizza, partially offset by volume increases
in frozen entrees. Divestitures reduced sales by 0.9%.

Gross profit increased $30.0 million, or 5.6% to $567.5 million. Excluding
special items, gross profit increased $28.6 million, or 5.3%, due primarily to
favorable exchange rates, pricing and reduced amortization expense related to
intangible assets. Operating income increased $10.2 million, or 3.8% to $280.2
million. Excluding special items, operating income increased $8.5 million, or
3.1%, to $280.2 million primarily attributable to the favorable change in gross
profit and reduced marketing expense, offset partially by increased S&D and G&A
expense.

ASIA/PACIFIC

Sales in Asia/Pacific increased $54.0 million, or 11.2%. Favorable exchange
rates increased sales by 8.5%. Higher pricing increased sales 3.4%, primarily
due to poultry, juices/drinks and sauces. Volume decreased sales 1.6%, driven
primarily by cooking oils and pet food. Acquisitions, net of divestitures,
increased sales by 0.9%.

Gross profit increased $10.6 million, or 6.8%, due primarily to favorable
exchange rates and increased pricing. Operating income decreased $1.9 million,
or 3.8% to $49.0 million. Excluding special items, operating income decreased
$2.5 million, or 4.9%, to $49.0 million primarily due to increased marketing and
G&A expenses.

OTHER OPERATING ENTITIES

Sales for Other Operating Entities increased $101.9 million, or 50.1%,
primarily due to favorable pricing in certain highly inflationary countries.
Gross profit increased $20.3 million, or 37.1%, due primarily to favorable
pricing. Operating income increased $17.7 million or, 65.8%, due primarily to
the increase in gross profit.

LIQUIDITY AND FINANCIAL POSITION

Cash provided by operating activities was $552.1 million compared to $197.9
million last year. The increase in Fiscal 2003 versus Fiscal 2002 is primarily
due to improved working capital performance.

Cash used for investing activities totaled $70.8 million compared to $870.5
million last year. Acquisitions in the current period required $13.5 million.
Acquisitions in the prior period required $805.5 million, due primarily to the
purchase of Borden Food Corporation's pasta and dry bouillon and soup business,
Delimex Holdings, Inc. and Anchor Food Products branded retail business which
includes the retail licensing rights to the T.G.I. Friday's brand of frozen
snacks and appetizers. Capital expenditures in the current six months required
$77.9 million compared to $86.6 million last year.

Cash used for financing activities totaled $421.7 million compared to cash
provided by financing activities of $705.7 million last year. There were no
proceeds from long-term debt during the current period compared to $768.3 last
year. Payments on long-term debt required $9.9 million in the current six months
compared to $32.2 million last year. Payments on commercial paper and short-term
borrowings required $145.8 million compared to $88.0 million last year. In
addition, $325.0 million was provided during the prior year via the issuance of
Preferred Stock. Cash provided from stock options exercised totaled $5.5 million
versus $46.4 million last year. Dividend payments totaled $284.4 million
compared to $278.8 million for the same period last year. There

23

were no share repurchases in the current six months and share repurchases
required $45.4 million in the prior year.

In the first six months of Fiscal 2003, the cash requirements of Streamline
were $9.5 million, relating to severance and exit costs.

On August 16, 2002, Fitch Ratings initiated coverage of the Company
assigning an 'A' rating to the Company's senior unsecured debt and a 'F1' rating
to the Company's commercial paper. Fitch indicated that the ratings outlook was
stable. In connection with the announcement of the Del Monte transaction,
Moody's Investors Service changed the Company's 'A3' senior unsecured debt
ratings outlook from negative to stable.

On September 5, 2002, the Company, Heinz Finance Company and a group of
domestic and international banks renewed an $800 million 364-day credit
agreement. That credit agreement and the $1.5 billion credit agreement that
expires in September 2006 support the Company's commercial paper programs. As of
October 30, 2002, there was no commercial paper outstanding. As of May 1, 2002,
the Company had $119.1 million of commercial paper outstanding and classified as
long-term debt.

The impact of inflation on both the Company's financial position and
results of operations is not expected to adversely affect Fiscal 2003 results.
The Company's financial position continues to remain strong, enabling it to meet
cash requirements for operations, capital expansion programs and dividends to
shareholders. The Company's goal remains the achievement of previously
communicated earnings per share for the full year.

RECENTLY ISSUED ACCOUNTING STANDARDS

In June 2001, the FASB approved SFAS No. 143, "Accounting for Asset
Retirement Obligations." SFAS No. 143, addresses accounting for legal
obligations associated with the retirement of long-lived assets that result from
the acquisition, construction, development and the normal operation of a
long-lived asset, except for certain obligations of lessees. This standard is
effective for the Company in Fiscal 2004. The Company does not expect that the
adoption of this standard will have a significant impact on the consolidated
financial statements.

In June 2002, the FASB approved SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities." SFAS No. 146 addresses financial
accounting and reporting for costs associated with exit or disposal activities.
This Statement requires that a liability for a cost associated with an exit or
disposal activity be recognized when the liability is incurred. This Statement
also establishes that fair value is the objective for initial measurement of the
liability. The provisions of SFAS No. 146 are effective for exit or disposal
activities that are initiated after December 31, 2002.

CAUTIONARY STATEMENT RELEVANT TO FORWARD-LOOKING INFORMATION

The Private Securities Litigation Reform Act of 1995 (the "Act") provides a
safe harbor for forward-looking statements made by or on behalf of the Company.
The Company and its representatives may from time to time make written or oral
forward-looking statements, including statements contained in the Company's
filings with the Securities and Exchange Commission and in its reports to
shareholders. These forward-looking statements are based on management's views
and assumptions of future events and financial performance. The words or phrases
"will likely result," "are expected to," "will continue," "is anticipated,"
"should," "estimate," "project," "target," "goal" or similar expressions
identify "forward-looking statements" within the meaning of the Act.

In order to comply with the terms of the safe harbor, the Company notes
that a variety of factors could cause the Company's actual results and
experience to differ materially from the anticipated results or other
expectations expressed in the Company's forward-looking statements. These
forward-looking statements are uncertain. The risks and uncertainties that may
affect

24

operations and financial performance and other activities, some of which may be
beyond the control of the Company, include the following:

- Changes in laws and regulations, including changes in food and drug laws,
accounting standards, taxation requirements (including tax rate changes,
new tax laws and revised tax law interpretations) and environmental laws
in domestic or foreign jurisdictions;

- Competitive product and pricing pressures and the Company's ability to
gain or maintain share of sales in the global market as a result of
actions by competitors and others;

- Fluctuations in the cost and availability of raw materials, including
tuna, and the ability to maintain favorable supplier arrangements and
relationships;

- The impact of higher energy costs and other factors on the cost of
producing, transporting and distributing the Company's products;

- The Company's ability to generate sufficient cash flows to support
capital expenditures, share repurchase programs, debt repayment and
general operating activities;

- The inherent risks in the marketplace associated with new product or
packaging introductions, including uncertainties about trade and consumer
acceptance;

- The Company's ability to achieve sales and earnings forecasts, which are
based on assumptions about sales volume, product mix and other items;

- The Company's ability to integrate acquisitions and joint ventures into
its existing operations and the availability of new acquisition and joint
venture opportunities and the success of divestitures and other business
combinations;

- The Company's ability to achieve its cost savings objectives, including
any restructuring programs and its working capital initiative;

- The impact of unforeseen economic and political changes in international
markets where the Company competes, such as currency exchange rates,
(notably with respect to the euro and the pound sterling) inflation
rates, recession, foreign ownership restrictions and other external
factors over which the Company has no control;

- Interest rate fluctuations and other capital market conditions;

- The effectiveness of the Company's advertising, marketing and promotional
programs;

- Weather conditions, which could impact demand for Company products and
the supply and cost of raw materials;

- The impact of e-commerce and e-procurement, supply chain efficiency and
cash flow initiatives;

- The Company's ability to maintain its profit margin in the face of a
consolidating retail environment;

- The impact of global industry conditions, including the effect of the
economic downturn in the food industry and the foodservice business in
particular;

- The Company's ability to offset the reduction in volume and revenue
resulting from participation in categories experiencing declining
consumption rates;

- With respect to the proposed spin-off and merger between the Company's
U.S. and Canadian pet food and pet snacks, U.S. tuna, U.S. retail private
label soup and private label gravy, College Inn broth and U.S. infant
feeding businesses, and a wholly-owned subsidiary of Del Monte Foods
Company ("Del Monte,") the ability to obtain Del Monte stockholders'
approval and other customary closing conditions;

25

- With respect to future dividends on Company stock, meeting certain legal
requirements at the time of declaration.

The foregoing list of important factors is not exclusive. The
forward-looking statements are and will be based on management's then current
views and assumptions regarding future events and operating performance 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.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes in the Company's market risk during the
six months ended October 30, 2002. For additional information, refer to pages
43-45 of the Company's Annual Report to Shareholders for the fiscal year ended
May 1, 2002.

ITEM 4. CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures

Within 90 days before filing this report, an evaluation of the
effectiveness of the design and operation of the Company's disclosure controls
and procedures was carried out by the Company under the supervision and with the
participation of the Company's management, including the Chief Executive Officer
and Chief Financial Officer. Based on that evaluation, the Chief Executive
Officer and Chief Financial Officer concluded that, as of the date of their
evaluation, the Company's disclosure controls and procedures have been designed
and are being operated in a manner that provides reasonable assurance that the
information required to be disclosed by the Company in reports filed under the
Securities Exchange Act of 1934 is recorded, processed, summarized and reported
within the time periods specified in the SEC's rules and forms. The Company
believes that a controls system, no matter how well designed and operated,
cannot provide absolute assurance that the objectives of the controls system are
met, and no evaluation of controls can provide absolute assurance that all
control issues and instances of fraud, if any, within a company have been
detected.

(b) Changes in Internal Controls

Subsequent to the date of the most recent evaluation of the Company's
internal controls, there were no significant changes in the Company's internal
controls or in other factors that could significantly affect the internal
controls, including any corrective actions with regard to significant
deficiencies and material weaknesses.

26

PART II--OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Nothing to report under this item.

ITEM 2. CHANGES IN SECURITIES

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

The Annual Meeting of Shareholders of H.J. Heinz Company was held in
Pittsburgh, Pennsylvania on September 12, 2002. The following individuals were
elected as directors for a one-year term expiring in September 2003:

Shareholders also acted upon the following proposals at the Annual Meeting:

Elected PricewaterhouseCoopers, LLP the Company's independent
accountants for the fiscal year ending May 30, 2003. Votes totaled
267,595,154 for; 21,079,145 against; and 2,577,794 abstentions.

Approved the Fiscal Year 2003 Stock Incentive Plan. Vote totaled
247,869,651 for; 37,626,351 against; and 5,756,091 abstentions.

Approved the Senior Executive Incentive Compensation Plan. Votes
totaled 256,457,143 for; 30,580,445 against; and 4,214,505 abstentions.

ITEM 5. OTHER INFORMATION

See Note 7 to the Condensed Consolidated Financial Statements in Part
I--Item 1 of this Quarterly Report on Form 10-Q and "Other Matters" in Part
I--Item 2 of this Quarterly Report on Form 10-Q.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits required to be furnished by Item 601 of Regulation S-K are
listed below and are filed as part hereof. The Company has 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 refer-

27

ence are filed herewith. The paragraph numbers correspond to the exhibit
numbers designated in Item 601 of Regulation S-K.

4. The Supplemental Indenture between the Company and Bank One, National
Association dated as of November 15, 2002.

12. Computation of Ratios of Earnings to Fixed Charges.

99(a). Certification by the Chief Executive Officer Relating to a
Periodic Report Containing Financial Statements.

99(b). Certification by the Chief Financial Officer Relating to a
Periodic Report Containing Financial Statements.

99(c). Condensed Consolidated Financial Statements of HFC filed in
accordance with rule 3-10 of Regulation S-X. H.J. Heinz Company
is a guarantor of all of HFC's outstanding debt.

99(d). Discussion of Results of Operations and Combined Financial
Statements of SKF Foods for the three and six months ended
October 30, 2002 and October 31, 2001.

(b) Reports on Form 8-K

A report on Form 8-K was filed with the Securities and Exchange Commission
on August 14, 2002 in connection with the filing by the Chairman, President and
Chief Executive Officer and Executive Vice President and Chief Financial Officer
of certifications pursuant to Section 21(a)(1) of the Securities Exchange Act of
1934.

28

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: December 12, 2002
By: /s/ ARTHUR WINKLEBLACK
..........................................

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

Date: December 12, 2002
By: /s/ EDWARD MCMENAMIN
..........................................

Edward McMenamin
Vice President -- Finance
(Principal Accounting Officer)

29

I, William R. Johnson, Chairman, President and Chief Executive Officer of
H.J. Heinz Company certify that:

1. I have reviewed this quarterly report on Form 10-Q of H.J. Heinz
Company;

2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report.

Date: December 12, 2002

By: /s/ WILLIAM R. JOHNSON
------------------------------------
Name: William R. Johnson
Title: Chairman, President and
Chief Executive Officer

30

I, Arthur Winkleblack, Executive Vice President and Chief Financial Officer
of H.J. Heinz Company certify that:

1. I have reviewed this quarterly report on Form 10-Q of H. J. Heinz
Company;

2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report.

Date: December 12, 2002

By: /s/ ARTHUR WINKLEBLACK
------------------------------------
Name: Arthur Winkleblack
Title: Executive Vice President
and Chief
Financial Officer

31