HEINZ H J CO - 10-K Annual Report

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934

For the fiscal year ended April 30, 2003

or

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

For the transition period from __________ to __________

Commission File Number 1-3385

H. J. HEINZ COMPANY
(Exact name of registrant as specified in its charter)

PENNSYLVANIA 25-0542520
(State of Incorporation) (I.R.S. Employer Identification No.)

600 GRANT STREET, PITTSBURGH, PENNSYLVANIA 15219
(Address of principal executive offices) (Zip Code)

412-456-5700
(Registrant's telephone number)

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:

None.

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
filing requirements for the past 90 days. Yes X No _

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2). Yes X No _

As of June 30, 2003 the aggregate market value of the Registrant's voting
stock held by non-affiliates of the Registrant was approximately
$11,618,470,904.

The number of shares of the Registrant's Common Stock, par value $.25 per
share, outstanding as of June 30, 2003, was 352,745,885 shares.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of Registrant's Proxy Statement for the Annual Meeting of
Shareholders to be held on September 12, 2003, which will be filed with the
Securities and Exchange Commission within 120 days after the end of the
Registrant's fiscal year ended April 30, 2003, are incorporated into Part III,
Items 10, 11, 12, 13, and 14.

PART I

ITEM 1. BUSINESS.

H. J. Heinz Company was incorporated in Pennsylvania on July 27, 1900. In
1905, it succeeded to the business of a partnership operating under the same
name which had developed from a food business founded in 1869 at Sharpsburg,
Pennsylvania by Henry J. Heinz. H. J. Heinz Company and its subsidiaries
(collectively, the "Company") manufacture and market an extensive line of
processed food products throughout the world. The Company's principal products
include ketchup, condiments and sauces, frozen food, soups, beans and pasta
meals, tuna and other seafood products, infant food and other processed food
products.

The Company's products are manufactured and packaged to provide safe,
wholesome foods for consumers, foodservice and institutional customers. Many
products are prepared from recipes developed in the Company's research
laboratories and experimental kitchens. Ingredients are carefully selected,
washed, trimmed, inspected and passed on to modern factory kitchens where they
are processed, after which the finished product is filled automatically into
containers of glass, metal, plastic, paper or fiberboard which are then closed,
processed, labeled and cased for market. Finished products are processed by
sterilization, homogenization, chilling, freezing, pickling, drying, freeze
drying, baking or extruding. Certain finished products and seasonal raw
materials are aseptically packed into sterile containers after in-line
sterilization.

The Company manufactures and contracts for the manufacture of its products
from a wide variety of raw foods. Pre-season contracts are made with farmers for
a portion of raw materials such as tomatoes, cucumbers, potatoes, onions and
some other fruits and vegetables. Dairy products, meat, sugar, spices, flour and
certain other fruits and vegetables are generally purchased on the open market.
Tuna is obtained through spot and term contracts directly with tuna vessel
owners or their cooperatives and by brokered transactions.

The following table lists the number of the Company's principal food
processing factories and major trademarks by region:

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The Company also owns or leases office space, warehouses, distribution
centers and research and other facilities throughout the world. The Company's
food processing plants and principal properties are in good condition and are
satisfactory for the purposes for which they are being utilized.

The Company has participated in the development of certain of its food
processing equipment, some of which is patented. The Company regards these
patents as important but does not consider any one or group of them to be
materially important to its business as a whole.

Although crops constituting some of the Company's raw food ingredients are
harvested on a seasonal basis, most of the Company's products are produced
throughout the year. Seasonal factors inherent in the business have always
influenced the quarterly sales and net income of the Company. Consequently,
comparisons between quarters have always been more meaningful when made between
the same quarters of different years.

The products of the Company are sold under highly competitive conditions,
with many large and small competitors. The Company regards its principal
competition to be other manufacturers of processed foods, including branded,
retail products, foodservice products and private label products, that compete
with the Company for consumer preference, distribution, shelf space and
merchandising support. Product quality and consumer value are important areas of
competition.

The Company's products are sold through its own sales force and through
independent brokers, agents and distributors to chain, wholesale, cooperative
and independent grocery accounts, pharmacies, mass merchants, club stores,
foodservice distributors and institutions, including hotels, restaurants and
certain government agencies. For Fiscal 2003, no single customer represented
more than 10% of the Company's sales.

Compliance with the provisions of national, state and local environmental
laws and regulations has not had a material effect upon the capital
expenditures, earnings or competitive position of the Company. The Company's
estimated capital expenditures for environmental control facilities for the
remainder of fiscal year 2004 and the succeeding fiscal year are not material
and are not expected to materially affect either the earnings or competitive
position of the Company.

The Company's factories are subject to inspections by various governmental
agencies, including the United States Department of Agriculture, and the
Occupational Health and Safety Administration, and its products must comply with
the applicable laws, including food and drug laws, such as the Federal Food and
Cosmetic Act of 1938, as amended, and the Federal Fair Packaging or Labeling Act
of 1966, as amended, of the jurisdictions in which they are manufactured and
marketed.

The Company employed, on a full-time basis as of April 30, 2003,
approximately 38,900 persons around the world.

Segment information is set forth in this report on pages 56 through 58 in
Note 15, "Segment Information" in Item 8--"Financial Statements and
Supplementary Data."

Income from international operations is subject to fluctuation in currency
values, export and import restrictions, foreign ownership restrictions, economic
controls and other factors. From time to time, exchange restrictions imposed by
various countries have restricted the transfer of funds between countries and
between the Company and its subsidiaries. To date, such exchange restrictions
have not had a material adverse effect on the Company's operations.

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,"

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"are expected to," "will continue," "is anticipated," "should," "estimate,"
"project," "target," "goal", "outlook" 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 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 as a result of actions by competitors and
others;

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

- The impact of higher energy costs and other factors affecting 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, SKU rationalization programs and its working
capital initiatives;

- The impact of unforeseen economic and political changes in markets where
the Company competes, such as export and import restrictions, currency
exchange rates and restrictions, inflation rates, recession, foreign
ownership restrictions and other external factors over which the Company
has no control, including the possibility of increased pension expense
and contributions resulting from continued decline in stock market
returns;

- The performance of businesses in hyperinflationary environments;

- Changes in estimates in critical accounting judgments;

- 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; and
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- 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 2. PROPERTIES.

See table in Item 1.

ITEM 3. LEGAL PROCEEDINGS.

None.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

The Company has not submitted any matters to a vote of security holders
since the last annual meeting of shareholders on September 12, 2002.

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EXECUTIVE OFFICERS OF THE REGISTRANT

The following is a list of the names and ages of all of the executive
officers of H. J. Heinz Company indicating all positions and offices held by
each such person and each such person's principal occupations or employment
during the past five years. All the executive officers have been elected to
serve until the next annual election of officers or until their successors are
elected, or until their earlier resignation or removal. The annual election of
officers is scheduled to occur on September 12, 2003.

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PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

Information relating to the Company's common stock is set forth in this
report on page 26 under the caption "Stock Market Information", in Item
7--"Management's Discussion and Analysis of Financial Condition and Results of
Operations", and on page 59 in Note 16, "Quarterly Results" in Item
8--"Financial Statements and Supplementary Data."

ITEM 6. SELECTED FINANCIAL DATA.

The following table presents selected consolidated financial data for the
Company and its subsidiaries for each of the five fiscal years 1999 through
2003. All amounts are in thousands except per share data.

Fiscal year ended
------------------------------------------------------------------
April 30, May 1, May 2, May 3, April 28,
2003 2002 2001 2000 1999
(52 Weeks) (52 Weeks) (52 Weeks) (53 Weeks) (52 Weeks)(2)
---------- ----------- ---------- ---------- -------------

Sales(1)(2)..................... $8,236,836 $ 7,614,036 $6,987,698 $6,892,807 $9,299,610
Interest expense(2)............. 223,532 230,611 262,488 206,996 258,813
Income from continuing
operations before cumulative
effect of change in accounting
principle(2).................. 555,359 675,181 563,931 780,145 474,341
Income from continuing
operations before cumulative
effect of change in accounting
principle per
share--diluted(2)............. 1.57 1.91 1.61 2.17 1.29
Income from continuing
operations before cumulative
effect of change in accounting
principle per
share--basic(2)............... 1.58 1.93 1.62 2.20 1.31
Short-term debt and current
portion of long-term debt..... 154,786 702,645 1,870,834 176,575 904,207
Long-term debt, exclusive of
current portion(3)............ 4,776,143 4,642,968 3,014,853 3,935,826 2,472,206
Total assets.................... 9,224,751 10,278,354 9,035,150 8,850,657 8,053,634
Cash dividends per common
share......................... 1.485 1.6075 1.545 1.445 1.3425

(1) Sales for 2003, 2002, 2001 and 2000 reflect the adoption of the new EITF
guidelines relating to the classification of consideration from a vendor to
a purchaser of a vendor's products, including both customers and consumers.
Sales for 1999 have not been adjusted to reflect the new EITF
reclassifications as it is impracticable to do so.

(2) Amounts for 2003, 2002, 2001 and 2000 exclude the operating results related
to the businesses spun off to Del Monte which have been treated as
discontinued operations. See Item 7--"Management's Discussion and Analysis
of Financial Condition and Results of Operations" for further discussion of
the Del Monte transaction. These amounts for 1999 have not been adjusted to
reflect discontinued operations as it is impracticable to do so.

(3) Long-term debt, exclusive of current portion, includes $294.8 million and
$23.6 million of hedge accounting adjustments associated with interest rate
swaps at April 30, 2003 and May 1, 2002, respectively. There were no
interest rate swaps at May 2, 2001, May 3, 2000, and April 28, 1999.

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Fiscal 2003 results from continuing operations include costs related to the
Del Monte transaction and costs to reduce overhead of the remaining businesses
totaling $164.6 million pretax ($113.1 million after-tax). These include
employee termination and severance costs, legal and other professional service
costs and cost related to the early extinguishment of debt. In addition, Fiscal
2003 includes losses on the exit of non-strategic businesses of $62.4 million
pretax ($49.3 million after-tax).

Fiscal 2002 results from continuing operations include net restructuring
and implementation costs of $12.4 million pretax ($8.9 million after-tax) for
the Streamline initiative.

Fiscal 2001 results from continuing operations include restructuring and
implementation costs of $101.4 million pretax ($69.0 million after-tax) for the
Streamline initiative, net restructuring and implementation costs of $146.5
million pretax ($91.2 million after-tax) for Operation Excel, a benefit of $93.2
million from tax planning and new tax legislation in Italy, a loss of $94.6
million pretax ($66.2 million after-tax) on the sale of The All American Gourmet
business, company acquisition costs of $18.5 million pretax ($11.7 million
after-tax), the after-tax impact of adopting Staff Accounting Bulletin ("SAB")
No. 101 and Statement of Financial Accounting Standards ("SFAS") No. 133 of
$15.3 million and a loss of $5.6 million pretax ($3.5 million after-tax) which
represents the Company's equity loss associated with The Hain Celestial Group's
fourth quarter results which included charges for its merger with Celestial
Seasonings. See Notes 4 and 5 to the Consolidated Financial Statements beginning
on page 41 of Item 8--"Financial Statements and Supplementary Data" in this
report.

Fiscal 2000 results from continuing operations include net restructuring
and implementation costs of $284.0 million pretax ($190.7 million after-tax) for
Operation Excel, a pretax contribution of $30.0 million ($18.9 million
after-tax) to the H. J. Heinz Company Foundation, a gain of $464.6 million
pretax ($259.7 million after-tax) on the sale of the Weight Watchers classroom
business and a gain of $18.2 million pretax ($11.8 million after-tax) on the
sale of an office building in the U.K.

Fiscal 1999 results include restructuring and implementation costs of
$552.8 million pretax ($409.7 million after-tax) for Operation Excel and costs
of $22.3 million pretax ($14.3 million after-tax) related to the implementation
of Project Millennia, offset by the reversal of unutilized Project Millennia
accruals for severance and exit costs of $25.7 million pretax ($16.4 million
after-tax) and a gain of $5.7 million pretax ($0.6 million after-tax) on the
sale of the bakery products unit.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.

SPECIAL ITEMS

DISCONTINUED OPERATIONS

On December 20, 2002, Heinz transferred to a wholly-owned subsidiary ("SKF
Foods") certain assets and liabilities, including 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 broths and U.S. infant feeding businesses and distributed all
of the shares of SKF Foods common stock on a pro rata basis to its shareholders.
Immediately thereafter, SKF Foods merged with a wholly-owned subsidiary of Del
Monte Foods Company ("Del Monte") resulting in SKF Foods becoming a wholly-owned
subsidiary of Del Monte ("the Merger").

In accordance with accounting principles generally accepted in the United
States of America, the operating results and net assets related to these
businesses spun off to Del Monte have been included in discontinued operations
in the Company's consolidated statements of income and consolidated balance
sheets. Discontinued operations for the fiscal years ended April 30, 2003 and
May 1, 2002, represent operating results for eight and twelve months,
respectively. The net assets

10

distributed to Heinz shareholders have been treated as a dividend and charged to
retained earnings.

The discontinued operations generated sales of $1,091.3 million, $1,817.0
million and $1,833.2 million and net income of $88.7 million (net of $35.4
million in tax), net income of $158.7 million (net of $69.4 million in tax) and
a net loss of $70.6 million (net of $12.4 million of a tax benefit) for the
fiscal years ended April 30, 2003, May 1, 2002 and May 2, 2001, respectively.

DEL MONTE AND OTHER REORGANIZATION COSTS

In Fiscal 2003, Del Monte transaction costs and costs to reduce overhead of
the remaining business totaled $164.6 million pretax ($113.1 million after-tax)
and were comprised of $61.8 million for legal, professional and other related
costs, $51.3 million in employee termination and severance costs, $39.6 million
related to the early retirement of debt and $12.0 million in non-cash asset
write-downs. Of this amount, $6.1 million was included in cost of products sold,
$118.9 million in selling, general and administrative expenses ("SG&A"), and
$39.6 million in other expenses, net.

Additionally, in Fiscal 2003, losses on the exit of non-strategic
businesses, primarily the UK frozen pizza business and a North American fish and
frozen vegetable business, totaled $62.4 million pretax ($49.3 million
after-tax), comprising of $39.7 million in non-cash asset write-downs, $12.1
million in losses on the sale of businesses and $10.6 million in employee
termination, severance and other exit costs. Of these amounts, $47.3 million was
included in cost of products sold and $15.1 million in SG&A. To date, management
estimates that these actions have impacted approximately 1,000 employees
excluding those who were transferred to Del Monte.

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 and was completed
in the first half of Fiscal 2003.

During Fiscal 2003, the Company utilized $19.4 million of severance and
exit cost accruals, principally related to its global overhead reduction plan,
primarily in Europe and North America. In addition, as a result of the spin-off
of SKF Foods, a $3.4 million restructuring liability related to ceasing canned
pet food production at the Company's Terminal Island, California facility was
transferred to Del Monte.

During the first quarter of Fiscal 2002, the Company recognized
restructuring and implementation charges totaling $8.3 million pretax ($6.1
million after-tax). In the fourth quarter of Fiscal 2002, the Company recorded a
net charge of $4.1 million pretax ($2.8 million after-tax) to reflect revisions
in original cost estimates. This charge was primarily a result of higher than
expected severance costs (primarily in Europe and the U.S.). Total Fiscal 2002
pretax charges of $3.8 million were classified as cost of products sold and $8.6
million as SG&A.

During Fiscal 2001, the Company recognized restructuring charges and
implementation costs totaling $101.4 million pretax ($69.0 million after-tax),
which primarily include severance costs and were all classified as SG&A.
Implementation costs were recognized as incurred in Fiscal 2002 ($2.6 million
pretax) and Fiscal 2001 ($1.8 million pretax) and consist of incremental costs
directly related to the implementation of the Streamline initiative. The
Streamline initiative resulted in a net reduction of the Company's workforce of
approximately 2,600 employees.

OPERATION EXCEL

In Fiscal 1999, the Company announced a growth and restructuring initiative
named "Operation Excel." This initiative was a multi-year, multi-faceted program
that established manufacturing centers of excellence, focused the product
portfolio, realigned the Company's management
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teams and invested in growth initiatives. The Company substantially completed
Operation Excel in Fiscal 2002.

During Fiscal 2001, the Company recognized restructuring charges of $12.1
million pretax ($7.7 million after-tax). These charges were primarily associated
with higher than originally expected severance costs associated with creating
the single North American Grocery & Foodservice headquarters in Pittsburgh,
Pennsylvania. Of this charge, $9.7 million was recorded in cost of products sold
and $2.4 million in SG&A. This charge was offset by reversals of unutilized
Operation Excel accruals and asset write-downs of $68.4 million pretax ($52.3
million after-tax), of which $36.0 million was recorded in cost of products sold
and $32.3 million in SG&A and were primarily the result of lower than expected
lease termination costs related to exiting the Company's fitness business,
revisions in estimates of fair values of assets which were disposed of as part
of Operation Excel, and the Company's decision not to transfer certain European
baby food production. Implementation costs of $202.8 million pretax ($135.8
million after-tax) were also recognized in Fiscal 2001, of which $100.2 million
were recorded in cost of products sold and $102.6 million in SG&A. Operation
Excel resulted in a net reduction of the Company's workforce of approximately
7,100 employees.

RECENTLY ISSUED ACCOUNTING STANDARDS

In Fiscal 2001, the Company changed its method of accounting for revenue
recognition in accordance with SAB No. 101, "Revenue Recognition in Financial
Statements." Under this new accounting method, adopted retroactive to May 4,
2000, Heinz recognizes revenue upon the passage of title, ownership and risk of
loss to the customer. The cumulative effect of the change in prior years
resulted in a charge to income in Fiscal 2001 of $14.8 million (net of income
taxes of $9.3 million). The change did not have a significant effect on revenues
or results of operations for the fiscal year ended May 2, 2001.

Effective May 2, 2002, the Company adopted SFAS No. 142 "Goodwill and Other
Intangible Assets." Under this standard, goodwill and other 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 from continuing operations for the fiscal
years ended May 1, 2002 and May 2, 2001 would have been $720.4 million ($0.13
per share higher) and $583.7 million ($0.10 per share higher), respectively, had
the provisions of the new standards been applied as of May 4, 2000.

During the first half of Fiscal 2003, the Company completed its
transitional impairment review of goodwill and indefinite lived intangible
assets, and recognized a transition adjustment of $77.8 million ($0.22 per
share) to write down goodwill associated with businesses in Eastern Europe,
Argentina, Spain, South Korea and South Africa. This adjustment is recorded as
an effect of change in accounting principle as of May 2, 2002. Based on current
and forecasted operating results, the Company does not anticipate any further
goodwill impairment charges in the near term.

Effective May 2, 2002, the Company adopted SFAS No. 144 "Accounting for
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
fiscal year ended April 30, 2003.

During Fiscal 2003, the Company adopted SFAS No. 146 "Accounting for Costs
Associated with Exit or Disposal Activities." SFAS No. 146 addresses financial
accounting and reporting for
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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.

During Fiscal 2003, the Company adopted Financial Accounting Standards
Board ("FASB") Interpretation No. 45 ("FIN 45"), "Guarantor's Accounting and
Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others." FIN 45 elaborates on the disclosures to be made by a
guarantor about its obligations under certain guarantees that it has issued, and
it requires the recognition of a liability at fair value by a guarantor at the
inception of a guarantee. The initial recognition and measurement provisions of
FIN 45 are effective on a prospective basis for all guarantees issued or
modified after December 31, 2002. The Company has not issued or modified any
material guarantees since December 31, 2002.

In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation -- Transition and Disclosure -- an amendment of FASB Statement No.
123". SFAS No. 148 provides alternative methods of transitions for entities that
voluntarily change to the fair value method of accounting for stock-based
employee compensation, and it also amends the disclosure provisions of SFAS No.
123 to require disclosure about the effects of an entity's accounting policy
decisions with respect to stock-based employee compensation in both annual and
interim financial reporting. The disclosure provisions of SFAS No. 148 were
effective for the Company at April 30, 2003. The Company is currently evaluating
its policy for recognizing expense related to stock options.

In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity". This
statement affects the classification, measurement and disclosure requirements of
certain freestanding financial instruments, including mandatorily redeemable
shares. SFAS No. 150 is effective for all financial instruments entered into or
modified after May 31, 2003, and otherwise is effective for the Company for the
second quarter of Fiscal 2004. The adoption of SFAS No. 150 will require the
reclassification of the Company's $325 million of mandatorily redeemable
preferred shares from minority interest to long-term debt on the consolidated
balance sheet and the $20.2 million annual preferred dividend from other
expenses, net, to interest expense on the consolidated statement of income with
no resulting effect on the Company's profitability.

RESULTS OF CONTINUING OPERATIONS -- 2003 VERSUS 2002

Sales for Fiscal 2003 increased $622.8 million, or 8.2%, to $8.24 billion.
Sales were favorably impacted by pricing of 4.2%, foreign exchange translation
rates of 5.6% and acquisitions of 2.2%. 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, Europe and Asia/Pacific. Sales were negatively impacted
by unfavorable volumes of 2.0%, due mainly to certain highly inflationary
countries and the U.S. Frozen segment, as well as the continued impact of the
previously announced SKU ("Stock Keeping Unit") rationalization of low-margin
products across the Company. Divestitures reduced sales by 1.8%. Domestic
operations contributed approximately 38% of consolidated sales in Fiscal 2003
compared to 41% in Fiscal 2002.

The current year's results were negatively impacted by special charges
totaling $227.0 million pretax ($162.4 million after-tax) related to the
following items: Del Monte transaction costs, costs to reduce overhead of the
remaining businesses and losses on the exit of non-strategic businesses. The
Fiscal 2003 special charges were classified as cost of products sold ($53.4
million), SG&A ($134.0 million) and other expenses ($39.6 million). Last year's
results were negatively impacted by net Streamline restructuring charges and
implementation costs totaling $12.4 million pretax ($8.9 million after-tax).
Fiscal 2002 charges were classified as cost of products sold ($3.8 million) and
SG&A ($8.6 million).

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Gross profit increased $176.5 million, or 6.4%, to $2.93 billion and the
gross profit margin decreased slightly to 35.6% from 36.2%. This increase was
primarily a result of favorable pricing and exchange translation rates and the
benefit of reduced amortization of intangible assets of approximately $47.9
million, partially offset by the impact related to the special items discussed
above of $53.4 million in Fiscal 2003. Fiscal 2002 operating income was also
unfavorably impacted by $3.8 million for the special items discussed above.

SG&A increased $302.6 million, or 20.8%, to $1.76 billion and increased as
a percentage of sales to 21.4% from 19.1%. The increase is primarily driven by
the impact of the special items discussed above of $134.0 million in Fiscal
2003, increased Selling & Distribution ("S&D") expenses, increased marketing
spend across all segments and increased General & Administrative ("G&A")
expenses in the Europe, Heinz North America and Asia/Pacific segments. Fiscal
2002 SG&A was also impacted by $8.6 million for the special items discussed
above.

Total marketing support (recorded either as a reduction of revenue or as a
component of SG&A) increased $199.2 million, or 9.7%, to $2.26 billion on a
sales increase of 8.2%.

Operating income decreased $126.1 million, or 9.7%, to $1.17 billion and
decreased as a percentage of sales to 14.3% from 17.1%. This decrease was
primarily driven by the impact of the special items discussed above of $187.4
million in Fiscal 2003 and the U.S. Frozen segment partially offset by increases
in the Europe and Asia/Pacific segments due to favorable exchange rates and
pricing. Fiscal 2002 operating income was also unfavorably impacted by $12.4
million for the special items discussed above.

Net interest expense decreased $12.0 million to $192.4 million, driven by
lower interest rates and lower average debt over the past year. Other expense
increased $67.7 million to $112.6 million. The increase is primarily
attributable to the $39.6 million pretax charge related to early retirement of
debt and increases in minority interest expense, largely related to increased
profitability in joint ventures in certain highly inflationary countries. The
effective tax rate for Fiscal 2003 was 36.1% compared to 35.7% last year. The
effective tax rate was unfavorably impacted by 1.6% and 0.1% in Fiscal 2003 and
2002, respectively, by the special items discussed above.

Net income for Fiscal 2003 (before the effect of change in accounting
principle related to the adoption of SFAS No. 142) was $555.4 million compared
to $675.2 million last year. Diluted earnings per share (before cumulative
effect of change in accounting principle related to the adoption of SFAS No.
142) was $1.57 in Fiscal 2003 compared to $1.91 in Fiscal 2002. Net income was
negatively impacted by $162.4 million and $8.9 million in Fiscal 2003 and 2002,
respectively, by the special items discussed above.

The impact of fluctuating exchange rates for Fiscal 2003 remained
relatively consistent on a line-by-line basis throughout the consolidated
statement of income.

OPERATING RESULTS BY BUSINESS SEGMENT

HEINZ NORTH AMERICA

Sales of the Heinz North America segment increased $56.2 million, or 2.5%,
to $2.27 billion. Acquisitions, net of divestitures, increased sales 1.7%, 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 frozen
desserts. Higher pricing increased sales 1.3%, due mainly to retail ketchup,
Jack Daniels marinades and grilling sauces and frozen soup. Sales volume
decreased 0.7% as increases in foodservice ketchup, specialty sauces and
Dianne's frozen desserts were offset by decreases primarily in Heinz retail
ketchup and vinegar.

Gross profit increased $0.1 million to $830.7 million; however, the gross
profit margin decreased to 36.5% from 37.5% due primarily to unfavorable sales
mix and increased manufacturing

14

costs, partially offset by reduced amortization expense on intangible assets
with indefinite lives and favorable pricing. Gross profit was also unfavorably
impacted by $6.0 million and $2.4 million in Fiscal 2003 and 2002, respectively,
related to the special items discussed above. Operating income decreased $94.5
million, or 19.8%, to $382.8 million due primarily to the unfavorable impact of
the special items discussed above in Fiscal 2003 of $66.8 million, higher S&D
and G&A expenses and increased marketing of $11.2 million primarily behind Heinz
Easy Squeeze! ketchup, Classico pasta sauce and the foodservice ketchup "Insist
on Heinz" campaign. Fiscal 2002 operating income was also unfavorably impacted
by the special items of $6.1 million.

U.S. FROZEN

U.S. Frozen's sales decreased $15.2 million, or 1.3%. to $1.16 billion.
Acquisitions, net of divestitures, increased sales 5.1%, 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. Lower pricing decreased sales 1.9%, primarily due to
Boston Market HomeStyle meals and appetizers and SmartOnes frozen entrees,
partially offset by a reduction in trade promotions related to the launch of Hot
Bites in the prior year and in Ore-Ida frozen potatoes. Sales volume decreased
4.5% driven by Boston Market HomeStyle side dishes, Ore-Ida Funky Fries and Hot
Bites, partially offset by growth in SmartOnes frozen entrees.

Gross profit decreased $24.0 million, or 5.4%, and the gross profit margin
decreased to 36.2% from 37.8%. These decreases are primarily due to lower
pricing, unfavorable sales mix, increased trade promotions and costs to exit the
Ore-Ida Funky Fries and Hot Bites product lines, partially offset by
acquisitions. Operating income decreased $45.1 million, or 18.4%, to $199.7
million due primarily to the change in gross profit and increased consumer
marketing on SmartOnes frozen entrees and Ore-Ida frozen potatoes and increased
S&D, partially offset by reduced G&A expenses.

EUROPE

Heinz Europe's sales increased $314.0 million, or 11.1%, to $3.15 billion.
Favorable exchange translation rates increased sales by 10.8%. Higher pricing
increased sales 1.7%, primarily due to Heinz beans, ketchup and soups. Lower
volume decreased sales 0.8%, driven primarily by planned SKU rationalizations
and frozen pizza, partially offset by volume increases in ketchup and frozen
entrees. Divestitures reduced sales by 0.6%.

Gross profit increased $104.1 million, or 9.8%, to $1.17 billion; however,
the gross profit margin decreased to 37.2% from 37.7%. The increase in gross
profit is due primarily to favorable foreign exchange rates, pricing and reduced
amortization expense related to intangible assets. This increase was partially
offset by the unfavorable impact of $47.4 million related to the special items
discussed above in Fiscal 2003. Operating income increased $11.8 million, or
2.2%, to $553.7 million, primarily attributable to the favorable change in gross
profit, offset partially by increased SG&A expenses. Fiscal 2003 operating
income was also unfavorably impacted by $58.9 million related to the special
items discussed above, and Fiscal 2002 operating income was unfavorably impacted
by the special items of $3.6 million.

ASIA/PACIFIC

Sales in Asia/Pacific increased $169.8 million, or 17.3%, to $1.15 billion.
Favorable exchange translation rates increased sales by 12.0%. Higher pricing
increased sales 3.7%, primarily due to Heinz ready-to-serve soups, poultry,
juices/drinks and sauces. Volume increased sales 0.1%, driven primarily by
increases in sauces, poultry and ketchup, partially offset by declines driven by
planned SKU rationalizations and decreases in cooking oils and frozen
vegetables. Acquisitions, net of divestitures, increased sales by 1.5%.

Gross profit increased $75.0 million, or 25.6%, to $367.5 million, and the
gross profit margin increased to 31.9% from 29.8%. These increases are due
primarily to favorable foreign exchange

15

rates, increased pricing and reduced manufacturing costs. During Fiscal 2003,
the Company made significant progress in improving its supply chain and net
pricing across our businesses in Australia, New Zealand and Japan. Operating
income increased $35.4 million, or 43.2%, to $117.5 million, primarily due to
the change in gross profit, offset partially by increased marketing and G&A
expenses. Fiscal 2003 operating income was also unfavorably impacted by $6.6
million related to the special items discussed above.

OTHER OPERATING ENTITIES

Sales for Other Operating Entities increased $98.0 million, or 23.9%, to
$508.4 million primarily due to favorable pricing in certain highly inflationary
countries. Gross profit increased $24.5 million, or 20.7%, due primarily to
favorable pricing. Operating income increased $34.6 million due primarily to the
increase in gross profit; however, more than half of this increase was offset by
increased minority interest expense recorded below operating income.

Zimbabwe remains in a period of economic uncertainty. Should the current
situation continue, the Company could experience disruptions in its Zimbabwe
operations. Therefore, 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 sheet as of April 30, 2003. If
this situation continues to deteriorate, the Company's ability to recover its
investment could be impaired.

RESULTS OF CONTINUING OPERATIONS -- 2002 VERSUS 2001

Sales for Fiscal 2002 increased $626.3 million, or 9.0%, to $7.61 billion.
Acquisitions increased sales by 12.4% and higher pricing increased sales by
1.5%. Offsetting these improvements were decreases from divestitures of 2.2%,
exchange translation rates of 2.1% and volume of 0.6%. Domestic operations
contributed approximately 41% of consolidated sales in Fiscal 2002 compared to
40% in Fiscal 2001.

The favorable impact of acquisitions is primarily related to Classico and
Aunt Millie's pasta sauce, Mrs. Grass Recipe soups and Wyler's bouillons and
soups in the North America segment; 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 in the U.S. Frozen segment; and the Honig
brands of soups, sauces and pasta meals, HAK brand of vegetables packed in
glass, KDR brand of sport drinks, juices, spreads and sprinkles in the Europe
segment.

The Fiscal 2002 results were negatively impacted by net Streamline
restructuring charges and implementation costs totaling $12.4 million pretax
($8.9 million after-tax). Fiscal 2002 charges of $3.8 million were classified as
cost of products sold and $8.6 million as SG&A. Fiscal 2001 results were
negatively impacted by special items that net to $366.7 million pretax ($163.8
million after-tax). Fiscal 2001 special items include restructuring and
implementation costs of $101.4 million pretax ($69.0 million after-tax) for the
Streamline initiative, net restructuring and implementation costs of $146.5
million pretax ($91.2 million after-tax) for Operation Excel, a benefit of $93.2
million from tax planning and new tax legislation in Italy, a loss of $94.6
million pretax ($66.2 million after-tax) on the sale of The All American Gourmet
business, Company acquisition costs of $18.5 million pretax ($11.7 million
after-tax), a loss of $5.6 million pretax ($3.5 million after-tax) which
represents the Company's equity loss associated with The Hain Celestial Group's
fourth quarter results and the after-tax impact of adopting SAB No. 101 and SFAS
No. 133 of $15.3 million. Fiscal 2001 charges of $73.9 million were classified
as costs of products sold, $287.1 million as SG&A, and $5.6 million as other
expenses, net.

Gross profit increased $175.5 million, or 6.8%, to $2.76 billion; however,
the gross profit margin decreased to 36.2% from 36.9%. The increase in gross
profit is primarily driven by the impact of acquisitions and the special items
discussed above. The special items unfavorably impacted gross profit by $3.8
million and $73.9 million in Fiscal 2002 and 2001, respectively.

16

SG&A decreased $135.4 million, or 8.5%, to $1.46 billion, and decreased as
a percentage of sales to 19.1% from 22.8%. This decrease is primarily
attributable to the impact of the special items discussed above, partially
offset by acquisitions, increased S&D costs in North America and increased G&A
costs in Europe. The special items impacted SG&A by $8.6 million and $287.1
million in Fiscal 2002 and 2001, respectively.

Total marketing support (recorded either as a reduction of revenue or as a
component of SG&A) increased $291.2 million, or 16.5%, to $2.06 billion on a
sales increase of 9.0%.

Operating income increased $310.9 million, or 31.4%, to $1.30 billion, and
increased as a percentage of sales to 17.1% from 14.2%. This increase is
primarily driven by the impact of acquisitions and the special items discussed
above. The special items unfavorably impacted operating income by $12.4 million
and $361.0 million in Fiscal 2002 and 2001, respectively.

Net interest expense decreased $35.5 million to $204.4 million driven by
lower interest rates, partially offset by increased borrowings. Other expense
increased $50.3 million to $44.9 million, primarily due to an increase in
minority interest expense and gains from foreign currency hedge contracts
recorded in Fiscal 2001, offset by a decrease of $5.6 million related to the
special items discussed above.

The effective tax rate for Fiscal 2002 was 35.7% compared to 25.3% in
Fiscal 2001. The Fiscal 2001 rate includes a benefit of $93.2 million from tax
planning and new tax legislation in Italy, partially offset by restructuring
expenses in lower rate jurisdictions and nondeductible expenses. The effective
tax rate was unfavorably impacted by 0.1% in Fiscal 2002 and was favorably
impacted by 11.2% in Fiscal 2001 by the special items discussed above.

Net income increased $126.5 million to $675.2 million from $548.7 million
in Fiscal 2001 and earnings per share increased to $1.91 from $1.56. Net income
was negatively impacted by the special items identified above by $8.9 million
and $163.8 million in Fiscal 2002 and 2001, respectively. In Fiscal 2001, the
Company changed its method of accounting for revenue recognition in accordance
with Staff Accounting Bulletin (SAB) No. 101, "Revenue Recognition in Financial
Statements". The cumulative effect of adopting SAB No. 101 was $14.8 million
($0.04 per share) in Fiscal 2001.

The impact of fluctuating exchange rates for Fiscal 2002 remained
relatively consistent on a line-by-line basis throughout the consolidated
statement of income.

HEINZ NORTH AMERICA

Sales of the Heinz North America segment increased $130.2 million, or 6.2%,
to $2.22 billion. Acquisitions, net of divestitures, increased sales 12.7%.
Lower pricing decreased sales 2.7%, primarily related to increased marketing
spend across all major brands and to foodservice ketchup. Sales volume decreased
3.2%, primarily in the foodservice business and Heinz steak sauces, partially
offset by volume increases in grilling sauces. The weaker Canadian dollar
decreased sales 0.5%.

Gross profit increased $2.8 million, or 0.3%, to $830.6 million as the
favorable impact of acquisitions was offset by lower pricing and a decrease in
the foodservice business. Gross profit was also unfavorably impacted by $2.4
million and $7.0 million related to the special items discussed above in Fiscal
2002 and 2001, respectively. Operating income decreased $14.4 million, or 2.9%,
to $477.3 million due primarily to the decrease in gross profit driven by the
foodservice business and higher S&D costs, partially offset by the favorable
impact of acquisitions. Operating income in Fiscal 2002 and 2001 was also
unfavorably impacted by $6.1 million and $50.0 million, respectively, related to
the special items previously discussed.

17

U.S. FROZEN

U.S. Frozen's sales increased $214.9 million, or 22.5%, to $1.17 billion.
Acquisitions increased sales 26.8%. Sales volume increased 4.7% due primarily to
SmartOnes frozen entrees, Boston Market HomeStyle Meals and Bagel Bites snacks,
partially offset by volume decreases in Ore-Ida frozen potatoes. Lower pricing
decreased sales 1.0%, primarily due to increased marketing spend across all
major brands and lower pricing in Boston Market HomeStyle Meals, partially
offset by higher pricing of SmartOnes frozen entrees and frozen potatoes.
Divestures reduced sales by 8.0% due to the divestiture of Budget Gourmet.

Gross profit increased $106.3 million, or 31.6%, to $442.6 million due
primarily to acquisitions. In addition, gross profit in Fiscal 2001 was also
unfavorably impacted by $16.5 million related to the special items. Operating
income increased $160.8 million to $244.7 million as the favorable impact of
acquisitions was partially offset by lower pricing, increased S&D costs and the
divestiture of Budget Gourmet. Fiscal 2001 operating income was unfavorably
impacted by $118.0 million related to the special items discussed above.

EUROPE

Heinz Europe's sales increased $251.6 million, or 9.7%, to $2.83 billion.
Acquisitions, net of divestitures, increased sales 11.0%. Higher pricing
increased sales 1.5%, primarily due to higher pricing in seafood, infant
feeding, beans and soup. Volume decreased by 0.4%, driven primarily by infant
feeding, partially offset by increases in grocery ketchup, Heinz salad cream,
tuna, and weight control entrees. Unfavorable exchange translation rates
decreased sales by 2.4%.

Gross profit increased $94.1 million, or 9.7%, to $1,067.4 million due
primarily to acquisitions and increased pricing. Fiscal 2002 and 2001 gross
profit were also unfavorably impacted by $1.4 million and $21.1 million,
respectively, related to the special items. Operating income increased $153.2
million, or 39.4%, to $541.8 million primarily attributable to acquisitions,
favorable pricing, and the tuna business, partially offset by increased
marketing to support key brands across Europe and infrastructure costs. Fiscal
2002 and 2001 operating income was unfavorably impacted by $3.6 million and
$129.4 million, respectively, related to the special items.

ASIA/PACIFIC

Sales in Asia/Pacific decreased $60.5 million, or 5.8%. Unfavorable
exchange rates reduced sales by 6.5%. Higher pricing increased sales 1.8%,
primarily due to sauces and juices. Sales volume decreased 0.6% due primarily to
sauces and corned beef, partially offset by volume increases in poultry and
juices. Divestitures, net of acquisitions, reduced sales by 0.5%.

Gross profit decreased $41.5 million, or 12.4%, to $292.5 million due
primarily to poor factory operations in connection with the movement of
manufacturing to New Zealand from Australia and Japan and unfavorable foreign
exchange rates, partially offset by increased pricing. Gross profit was also
unfavorably impacted in Fiscal 2001 by $30.1 million related to the special
items. During Fiscal 2002, New Zealand's factories experienced inefficiencies as
a result of significant changes in the supply chain matrix. Operating income
decreased $14.1 million to $82.1 million, primarily attributable to the
unfavorable operating performance brought about by the movement of manufacturing
to New Zealand from Australia and Japan and the significant realignment of
manufacturing facilities. Operating income was also unfavorably impacted in
Fiscal 2001 by $51.5 million related to the special items.

OTHER OPERATING ENTITIES

Sales for Other Operating Entities increased $90.1 million, or 28.1%.
Favorable pricing increased sales 34.4%, primarily in certain highly
inflationary countries. Sales volume decreased

18

1.7%, primarily in tuna offset by infant feeding and grocery ketchup. Other
items, net, reduced sales by 4.6% mainly due to the divestitures of the South
African frozen and pet food businesses.

Gross profit increased $18.0 million, or 17.9%, due primarily to favorable
pricing. Operating income increased $5.8 million, or 11.9%, primarily due to
higher pricing. Operating income was also favorably impacted in Fiscal 2001 by
$11.3 million related to the special items discussed above.

LIQUIDITY AND FINANCIAL POSITION

Cash provided by continuing operating activities increased over 25% to
$906.0 million from $714.4 million last year. The increase in Fiscal 2003 versus
Fiscal 2002 is primarily due to improved working capital performance in accounts
receivable and inventory offset by increased pension contributions and higher
cash requirements for the special items discussed above.

Cash provided by investing activities totaled $961.1 million compared to
cash used by investing activities of $974.1 million last year. Cash provided by
the spin-off of SKF Foods was $1,063.6 million in the current year. Acquisitions
in the prior year required $834.8 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. Divestitures provided $55.0 million in Fiscal 2003 compared to $32.9
million in Fiscal 2002. Capital expenditures totaled $154.0 million compared to
$193.9 million last year, a decrease of approximately 21%.

As noted above, during Fiscal 2003, the Company focused on improving the
efficiency of its working capital. The working capital improvements, reduced
capital expenditures and the proceeds from the Del Monte transaction allowed the
Company to reduce net debt (total debt net of interest rate swaps, less cash and
cash equivalents) by approximately $1.3 billion to $3.8 billion in Fiscal 2003
from $5.1 billion in Fiscal 2002, despite pension contributions of $224 million
in Fiscal 2003, compared to $111 million in Fiscal 2002. A portion of the Del
Monte proceeds was used to retire $650 million of long-term debt. Additional net
debt reductions are anticipated in Fiscal 2004.

Cash used for financing activities totaled $1,416.5 million compared to
cash provided by financing activities of $181.3 million last year. There were no
proceeds from long-term debt in the current period compared to $2,009.1 million
last year. Payments on long-term debt required $741.2 million in Fiscal 2003,
compared to $329.2 million last year. Payments on commercial paper and
short-term borrowings required $176.2 million this year compared to $1,271.0
million last year. In addition, $325.0 million was provided during the prior
year via the issuance of preferred stock which is discussed below. Cash provided
from stock options exercised totaled $7.5 million this year versus $63.7 million
last year. Dividend payments totaled $521.6 million compared to $562.6 million
for the same period last year reflecting a reduction in the dividend rate in the
fourth quarter of Fiscal 2003 as a result of the spin off of SKF Foods. Fiscal
2004 dividends are expected to approximate $380 million. There were no share
repurchases in the current year and share repurchases required $45.4 million in
the prior year.

As discussed above, the Company made contributions to its pension plans
totaling $224 million in Fiscal 2003. In addition, the Company recorded an
additional minimum liability of $451.1 million as of April 30, 2003. Although
this non-cash adjustment did not impact the 2003 operating results, pension
expense is expected to increase in 2004 primarily due to the lower fair value of
pension assets due to poor equity market conditions, a reduction in the assumed
discount rate and the estimated return on plan assets.

Return on average shareholders' equity ("ROE") was 32.7% in Fiscal 2003,
43.7% in Fiscal 2002 and 37.0% in Fiscal 2001. ROE was unfavorably impacted by
11.2%, 0.6% and 11.0% in Fiscal 2003, 2002 and 2001, respectively, related to
the special items discussed above. Pretax return on

19

average invested capital ("ROIC") was 16.1% in Fiscal 2003, 18.8% in Fiscal 2002
and 16.6% in Fiscal 2001. ROIC was unfavorably impacted by 3.4%, 0.2% and 6.1%
in Fiscal 2003, 2002 and 2001, respectively, related to the special items
discussed above.

In Fiscal 2002, H. J. Heinz Finance Company ("Heinz Finance"), a subsidiary
of the Company, issued $325 million of 6.226% Voting Cumulative Preferred Stock.
The preferred stock is required to be redeemed in July 2008. Also during Fiscal
2002, Heinz Finance privately placed $750 million of 6.625% Notes due July 2011,
$700 million of 6.00% Notes due March 2012 and $550 million of 6.75% Notes due
March 2032. All of these notes are guaranteed by the Company and they were
exchanged in March 2003 for new notes, which were substantially identical in all
respects, except for being registered under the Securities Act of 1933. The
proceeds from the issuance of the preferred stock and the notes were used to
retire commercial paper borrowings and for other general corporate purposes.

In September 2001, the Company and Heinz Finance entered into a 364-Day
Credit Agreement, which was renewed in September 2002, and a Five-Year Credit
Agreement, expiring in September 2006. The 364-day agreement permits the Company
and Heinz Finance to borrow up to $800 million. The five-year agreement permits
the Company and Heinz Finance to borrow up to $1.5 billion. These agreements
support 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 ability to refinance these borrowings on a long-term basis.
In addition, the Company had $867 million of foreign lines of credit available
at April 30, 2003.

As of April 30, 2003, the Company had $800 million of remarketable
securities due November 2020. The securities are subject to an annual
remarketing on each November 15, and the interest rate will be reset on such
dates. If the securities are not remarketed, then the Company is required to
repurchase all of the securities on the remarketing date at 100% of the
principal amount plus accrued interest. On November 15, 2002, the securities
were remarketed at an effective yield to the Company of 6.56%. In January 2003,
$200 million of the remarketable securities were retired with proceeds from the
Del Monte transaction as described above.

At April 30, 2003, the Company's long-term debt ratings were "A" at
Standard & Poor's and Fitch and "A3" at Moody's and the Company's short-term
debt ratings were "A1" at Standard & Poor's, "F-1" at Fitch and "P2" at Moody's.

Since the beginning of Fiscal 2002, the Company has significantly increased
the proportion of long-term debt to total debt such that at April 30, 2003
long-term debt represented 96.7% of total debt as compared to a ratio of 61.7%
at May 2, 2001. Through the use of interest rate swaps, the Company has
converted $2.55 billion of fixed rate debt to floating rates in order to
maintain our desired mix of fixed and floating rate debt, while continuing to
maintain long-term financing. The nature and amount of the Company's long-term
and short-term debt as well as the proportionate amount of fixed-rate and
floating-rate debt can be expected to vary as a result of future business
requirements, market conditions and other factors.

As of April 30, 2003, the Company had repurchased a total of 15.4 million
shares under the 20.0 million share repurchase program authorized by the Board
of Directors in June 1999. However, in Fiscal 2003, the Company did not
repurchase any shares of common stock. The Company may reissue repurchased
shares upon the exercise of stock options, conversions of preferred stock and
for general corporate purposes.

In Fiscal 2003, the cash requirements of the Del Monte transaction and
costs to reduce overhead of the remaining businesses were approximately $138
million. In addition, approximately $104 million of cash was utilized to
purchase assets under operating lease obligations which were transferred to Del
Monte. Fiscal 2004 cash requirements related to the Del Monte transaction and
costs to reduce overhead of the remaining businesses are expected to be approxi-

20

mately $50 million. In Fiscal 2003, the cash requirements of Streamline were
$19.4 million, relating to severance and exit costs.

COMMITMENTS AND CONTINGENCIES

The Company is obligated to make future payments under various contracts
such as debt agreements, lease agreements and unconditional purchase
obligations. The following table represents the significant contractual cash
obligations of the Company as of April 30, 2003.

* Includes the purchase option related to certain warehouses and equipment
currently utilized under synthetic leases.

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

The Company does not have material financial guarantees or other
contractual commitments that are reasonably likely to adversely affect
liquidity. In addition, the Company does not have any related party transactions
that materially affect the results of operations, cash flow or financial
condition.

MARKET RISK FACTORS

The Company is exposed to market risks from adverse changes in foreign
exchange rates, interest rates, commodity prices and production costs. As a
policy, the Company does not engage in speculative or leveraged transactions,
nor does the Company hold or issue financial instruments for trading purposes.

FOREIGN EXCHANGE RATE SENSITIVITY: The Company's cash flow and earnings are
subject to fluctuations due to exchange rate variation. Foreign currency risk
exists by nature of the Company's global operations. The Company manufactures
and sells its products in a number of locations around the world, and hence
foreign currency risk is diversified.

The Company may attempt to limit its exposure to changing foreign exchange
rates through both operational and financial market actions. These actions may
include entering into forward or option contracts to hedge existing exposures,
firm commitments and forecasted transactions. The

21

instruments are used to reduce risk by essentially creating offsetting currency
exposures. The following table presents information related to foreign currency
contracts held by the Company:

As of April 30, 2003, the Company's contracts to hedge forecasted
transactions mature within 24 months of the fiscal year-end. Contracts that meet
qualifying criteria are accounted for as foreign currency cash flow hedges.
Accordingly, the effective portion of gains and losses is deferred as a
component of other comprehensive loss and is recognized in earnings at the time
the hedged item affects earnings. Any gains and losses due to hedge
ineffectiveness or related to contracts which do not qualify for hedge
accounting are recorded in current period earnings in other income and expense.

Substantially all of the Company's foreign affiliates' financial
instruments are denominated in their respective functional currencies.
Accordingly, exposure to exchange risk on foreign currency financial instruments
is not material. (See Note 13 to the consolidated financial statements.)

INTEREST RATE SENSITIVITY: The Company is exposed to changes in interest rates
primarily as a result of its borrowing and investing activities used to maintain
liquidity and fund business operations. The nature and amount of the Company's
long-term and short-term debt can be expected to vary as a result of future
business requirements, market conditions and other factors. The Company's net
debt obligations totaled $3.8 billion and $5.1 billion at April 30, 2003 and May
1, 2002, respectively. The Company's debt obligations are summarized in Note 7
to the consolidated financial statements.

In order to manage interest rate exposure, the Company utilizes interest
rate swaps under its fair value hedging strategy in order to convert fixed-rate
debt to floating. Accordingly, changes in the fair value of these derivatives,
along with changes in the fair value of the hedged debt obligations that are
attributable to the hedged risk are recognized in current period earnings. Based
on the amount of fixed-rate debt converted to floating as of April 30, 2003, a
variance of 1/8 % in the related interest rate would cause annual interest
expense related to this debt to change by approximately $3.2 million. The
following table presents additional information related to interest rate
contracts designated as fair value hedges by the Company:

At April 30, 2003, the Company also maintained interest rate swaps with a
total notional amount of $400 million that do not meet the criteria for hedge
accounting but effectively mitigate interest rate exposures. These swaps mature
within 12 months and are accounted for on a full

22

mark-to-market basis through current earnings. Net unrealized gains related to
these swaps totaled $2.1 million at April 30, 2003.

COMMODITY PRICE SENSITIVITY: The Company is the purchaser of certain
commodities such as corn, soybean oil and soybean meal. The Company generally
purchases these commodities based upon market prices that are established with
the vendor as part of the purchase process. The Company may enter into commodity
futures, swaps and option contracts to reduce the effect of price fluctuations
on forecasted purchases. The Company held commodity contracts to hedge certain
forecasted purchases with a notional amount of $21 million and $31 million at
April 30, 2003 and May 1, 2002, respectively. Such contracts generally have a
term of less than one year, and are accounted for as cash flow hedges if they
meet certain qualifying criteria. Accordingly, the effective portion of gains
and losses is deferred as a component of other comprehensive loss and is
recognized as part of cost of products sold at the time the hedged item affects
earnings. Any gains and losses due to hedge ineffectiveness or related to
contracts which do not qualify for hedge accounting are recorded in current
period earnings in other income and expense. Net unrealized losses related to
commodity contracts held by the Company were not material at April 30, 2003 or
May 1, 2002.

EFFECT OF HYPOTHETICAL 10% FLUCTUATION IN MARKET PRICES: As of April 30, 2003,
the potential gain or loss in the fair value of the Company's outstanding
foreign currency contracts, interest rate contracts and commodity contracts
assuming a hypothetical 10% fluctuation in currency rates, swap rates and market
prices, respectively, would be approximately:

However, it should be noted that any change in the fair value of the
contracts, real or hypothetical, would be significantly offset by an inverse
change in the value of the underlying hedged items. In relation to currency
contracts, this hypothetical calculation assumes that each exchange rate would
change in the same direction relative to the U.S. dollar.

DISCUSSION OF SIGNIFICANT ACCOUNTING ESTIMATES

In the ordinary course of business, the Company has made a number of
estimates and assumptions relating to the reporting of results of operations and
financial condition in the preparation of its financial statements in conformity
with accounting principles generally accepted in the United States of America.
Actual results could differ significantly from those estimates under different
assumptions and conditions. The Company believes that the following discussion
addresses the Company's most critical accounting policies, which are those that
are most important to the portrayal of the Company's financial condition and
results and require management's most difficult, subjective and complex
judgments, often as a result of the need to make estimates about the effect of
matters that are inherently uncertain.

Marketing Costs -- Trade promotions are an important component of the sales
and marketing of the Company's products, and are critical to the support of its
business. Trade promotion costs include amounts paid to encourage retailers to
offer temporary price reductions for the sale of the Company's products to
consumers, amounts paid to obtain favorable display positions in retailers'
stores, and amounts paid to customers for shelf space in retail stores. Accruals
for trade promotions are recorded primarily at the time of sale of product to
the customer based on expected levels of performance. Settlement of these
liabilities typically occurs in subsequent periods primarily through an
authorized process for deductions taken by a customer from amounts otherwise due
to the Company. As a result, the ultimate cost of a trade promotion program is
dependent on the relative success of the events and the actions and level of
deductions taken by the Company's

23

customers for amounts they consider due to them. Final determination of the
permissible deductions may take extended periods of time.

Inventories -- Inventories are stated at the lower of cost or market value.
Cost is principally determined by the average cost method. The Company records
adjustments to the carrying value of inventory based upon its forecasted plans
to sell its inventories. The physical condition (e.g., age and quality) of the
inventories is also considered in establishing its valuation. These adjustments
are estimates, which could vary significantly, either favorably or unfavorably,
from actual requirements if future economic conditions, customer inventory
levels or competitive conditions differ from our expectations.

Property, Plant and Equipment -- Land, buildings and equipment are recorded
at cost and are depreciated on a straight-line method over the estimated useful
lives of such assets. Changes in circumstances such as technological advances,
changes to the Company's business model or changes in the Company's capital
strategy could result in the actual useful lives differing from the Company's
estimates. In those cases where the Company determines that the useful life of
buildings and equipment should be shortened, the Company would depreciate the
net book value in excess of the salvage value, over its revised remaining useful
life thereby increasing depreciation expense. Factors such as changes in the
planned use of fixtures or software or closing of facilities could result in
shortened useful lives.

Long-lived Assets -- Long-lived assets including fixed assets and
intangible assets with finite useful lives are evaluated periodically by the
Company for impairment whenever events or changes in circumstances indicate that
the carrying amount of any such asset may not be recoverable. If the sum of the
undiscounted cash flows is less than the carrying value, the Company recognizes
an impairment loss, measured as the amount by which the carrying value exceeds
the fair value of the asset. The estimate of cash flow requires significant
management judgement and requires, among other things, certain assumptions about
future volume, revenue and expense growth rates, foreign exchange rates,
devaluation and inflation, and as such may differ from actual cash flows.

Goodwill and Indefinite Lived Intangibles -- Carrying values of goodwill
and intangible assets with indefinite lives are reviewed periodically for
possible impairment in accordance with SFAS No. 142, "Goodwill and Other
Intangible Assets". The Company's impairment review is based on a discounted
cash flow approach that requires significant management judgments similar to
those noted above for long-lived assets, and to the selection of an appropriate
discount rate. Impairment occurs when the carrying value of the reporting unit
exceeds the discounted present value of the cash flows for that reporting unit.
An impairment charge is recorded for the difference between the carrying value
and the net present value of estimated future cash flows, which represents the
estimated fair value of the asset. The Company uses its judgment in assessing
whether assets may have become impaired between annual valuations. Indicators
such as unexpected adverse economic factors, unanticipated technological change
or competitive activities, loss of key personnel, acts by governments and
courts, may signal that an asset has become impaired.

Retirement Benefits -- The Company sponsors pension and other retirement
plans in various forms covering substantially all employees who meet eligibility
requirements. Several statistical and other factors that attempt to anticipate
future events are used in calculating the expense and liability related to the
plans. These factors include assumptions about the discount rate, expected
return on plan assets, turnover rates and rate of future compensation increases
as determined by the Company, within certain guidelines. The discount rate
assumptions used to value pension and postretirement benefit obligations reflect
the rates available on high quality fixed income investments available (in each
country that the Company operates a benefit plan) as of the measurement date.
The weighted average discount rate for the year ending April 30, 2003 was
reduced to 5.9% from 6.6% as of May 1, 2002, and 6.7% as of May 2, 2001
reflecting the declining interest rate environment.

24

Over time, the expected rate of return on pension plan assets should
approximate the actual long-term returns. In developing the expected rate of
return, the Company considers actual real historic returns of asset classes, the
investment mix of plan assets, investment manager performance and projected
future returns of asset classes developed by respected consultants. The weighted
average expected rate of return on plan assets was 8.9% for the year ending
April 30, 2003 and 9.2% as of May 1, 2002. For purposes of calculating Fiscal
2004 expense, the weighted average rate of return will be reduced to
approximately 8.2%.

In addition, the Company's actuarial consultants also use subjective
factors such as withdrawal and mortality rates to estimate these factors. The
actuarial assumptions used by the Company may differ materially from actual
results due to changing market and economic conditions, higher or lower
withdrawal rates or longer or shorter life spans of participants. These
differences may result in a significant impact to the amount of pension expense
recorded by the Company.

Income Taxes -- The Company accounts for income taxes in accordance with
SFAS No. 109, "Accounting for Income Taxes". Judgment is required in determining
the Company's worldwide provision for income taxes. In the ordinary course of
the Company's global business, there are many transactions for which the
ultimate tax outcome is uncertain. The Company adjusts its income tax provision
in the period it is probable that actual results will differ from its estimates.
Tax law and rate changes are reflected in the income tax provision in the period
in which such changes are enacted.

The Company records valuation allowances to reduce deferred tax assets to
the amount that is more likely than not to be realized. When assessing the need
for valuation allowances, the Company considers future taxable income and
ongoing prudent and feasible tax planning strategies. Should a change in
circumstances lead to a change in judgment about the realizability of deferred
tax assets in future years, the Company would adjust related valuation
allowances in the period that the change in circumstances occurs, along with a
corresponding increase or charge to income.

INFLATION

In general, costs are affected by inflation and the effects of inflation
may be experienced by the Company in future periods. Management believes,
however, that such effects have not been material to the Company during the past
three years in the United States or foreign non-hyperinflationary countries. The
Company operates in certain countries around the world, such as Argentina,
Venezuela and Zimbabwe, that have experienced hyperinflation. In
hyperinflationary foreign countries, the Company attempts to mitigate the
effects of inflation by increasing prices in line with inflation, where
possible, and efficiently managing its working capital levels.

The impact of inflation on both the Company's financial position and
results of operations is not expected to adversely affect Fiscal 2004 results.
The Company's financial position continues to remain strong, enabling it to meet
cash requirements for operations, including anticipated additional pension plan
contributions, capital expansion programs and dividends to shareholders.

25

STOCK MARKET INFORMATION

H. J. Heinz Company common stock is traded principally on the New York
Stock Exchange and the Pacific Exchange, under the symbol HNZ. The number of
shareholders of record of the Company's common stock as of June 30, 2003
approximated 53,000. The closing price of the common stock on the New York Stock
Exchange composite listing on April 30, 2003 was $29.88. The value of the SKF
Foods stock that was distributed to shareholders on December 20, 2002 was
estimated to be $3.45 immediately prior to the merger of SKF Foods with Del
Monte.

Stock price information for common stock by quarter follows:

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

This information is set forth in this report in Item 7--"Management's
Discussion and Analysis of Financial Condition and Results of Operations" on
pages 21 through 23.

26

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

TABLE OF CONTENTS

Report of Independent Auditors.............................. 28
Consolidated Statements of Income........................... 29
Consolidated Balance Sheets................................. 30
Consolidated Statements of Shareholders' Equity............. 32
Consolidated Statements of Cash Flows....................... 34
Notes to Consolidated Financial Statements.................. 35

27

REPORT OF INDEPENDENT AUDITORS

To the Shareholders of
H. J. Heinz Company:

In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of income, shareholders' equity and cash flows
present fairly, in all material respects, the financial position of H. J. Heinz
Company and its subsidiaries (the "Company") at April 30, 2003 and May 1, 2002,
and the results of its operations and its cash flows for each of the three years
in the period ended April 30, 2003, in conformity with accounting principles
generally accepted in the United States of America. These financial statements
are the responsibility of the Company's management; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with auditing standards
generally accepted in the United States of America, which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

As discussed in Note 2 to the consolidated financial statements, the
Company changed its method of accounting for goodwill and other intangible
assets in conformity with Statement of Financial Accounting Standard No. 142,
"Goodwill and Other Intangible Assets" which was adopted as of May 2, 2002.

/s/ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP
Pittsburgh, Pennsylvania
June 11, 2003

28

H. J. HEINZ COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

See Notes to Consolidated Financial Statements.
29

H. J. HEINZ COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

See Notes to Consolidated Financial Statements.

30

H. J. HEINZ COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

See Notes to Consolidated Financial Statements.

31

H. J. HEINZ COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

* Includes activity of the Global Stock Purchase Plan.

See Notes to Consolidated Financial Statements.
32

+ Includes income tax benefit resulting from exercised stock options.
++ Comprised of unrealized translation adjustment of $(371,393), minimum pension
liability of $(451,110) and deferred net gains on derivative financial
instruments $5,368.

33

H. J. HEINZ COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

See Notes to Consolidated Financial Statements.
34

H. J. HEINZ COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SIGNIFICANT ACCOUNTING POLICIES

FISCAL YEAR:

H. J. Heinz Company (the "Company") operates on a 52- or 53-week fiscal
year ending the Wednesday nearest April 30. However, certain foreign
subsidiaries have earlier closing dates to facilitate timely reporting. Fiscal
years for the financial statements included herein ended April 30, 2003, May 1,
2002, and May 2, 2001.

PRINCIPLES OF CONSOLIDATION:

The consolidated financial statements include the accounts of the Company
and its subsidiaries. All intercompany accounts and transactions are eliminated.
Investments owned less than 50%, where significant influence exists, are
accounted for on an equity basis. Certain prior-year amounts have been
reclassified in order to conform with the Fiscal 2003 presentation.

On May 3, 2001, the Company reorganized its U.S. corporate structure by
consolidating its U.S. business into two major entities: H. J. Heinz Finance
Company ("Heinz Finance") manages treasury functions and H. J. Heinz Company, LP
("Heinz LP") owns or leases the operating assets and manages the U.S. business.
Heinz Finance assumed primary liability for payment of the Company's outstanding
senior unsecured debt and accrued interest by becoming a co-obligor with the
Company. All the assets, liabilities, results of operations and cash flows of
Heinz Finance and Heinz LP are included in the Company's consolidated financial
statements.

USE OF ESTIMATES:

The preparation of financial statements, in conformity with accounting
principles generally accepted in the United States of America, requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities, the disclosure of contingent assets and liabilities at
the date of the financial statements, and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from these
estimates.

TRANSLATION OF FOREIGN CURRENCIES:

For all significant foreign operations, the functional currency is the
local currency. Assets and liabilities of these operations are translated at the
exchange rate in effect at each year-end. Income statement accounts are
translated at the average rate of exchange prevailing during the year.
Translation adjustments arising from the use of differing exchange rates from
period to period are included as a component of shareholders' equity. Gains and
losses from foreign currency transactions are included in net income for the
period.

CASH EQUIVALENTS:

Cash equivalents are defined as highly liquid investments with original
maturities of 90 days or less.

INVENTORIES:

Inventories are stated at the lower of cost or market. Cost is determined
principally under the average cost method.

35

H. J. HEINZ COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

PROPERTY, PLANT AND EQUIPMENT:

Land, buildings and equipment are recorded at cost. For financial reporting
purposes, depreciation is provided on the straight-line method over the
estimated useful lives of the assets. Accelerated depreciation methods are
generally used for income tax purposes. Expenditures for new facilities and
improvements that substantially extend the capacity or useful life of an asset
are capitalized. Ordinary repairs and maintenance are expensed as incurred. When
property is retired or otherwise disposed, the cost and related depreciation are
removed from the accounts and any related gains or losses are included in
income. Property, plant and equipment are reviewed periodically for possible
impairment. The Company's impairment review is based on an undiscounted cash
flow analysis at the lowest level for which identifiable cash flows exist.
Impairment occurs when the carrying value of the asset exceeds the future
undiscounted cash flows. When an impairment is indicated, the asset is written
down to its fair value.

INTANGIBLES:

Intangible assets with finite useful lives are amortized on a straight-line
basis over the estimated periods benefited, and are reviewed periodically for
possible impairment, similar to property, plant and equipment. Goodwill and
intangible assets with indefinite useful lives are not amortized. Prior to 2002,
goodwill and intangible assets with indefinite useful lives were amortized over
periods not exceeding 40 years. The carrying values of goodwill and other
intangible assets with indefinite useful lives are tested at least annually for
impairment.

REVENUE RECOGNITION:

The Company recognizes revenue when title, ownership and risk of loss pass
to the customer.

ADVERTISING EXPENSES:

Advertising costs are expensed in the year in which the advertising first
takes place.

INCOME TAXES:

Deferred income taxes result primarily from temporary differences between
financial and tax reporting. If it is more likely than not that some portion or
all of a deferred tax asset will not be realized, a valuation allowance is
recognized.

The Company has not provided for possible U.S. taxes on the undistributed
earnings of foreign subsidiaries that are considered to be reinvested
indefinitely. Calculation of the unrecognized deferred tax liability for
temporary differences related to these earnings is not practicable. Where it is
contemplated that earnings will be remitted, credit for foreign taxes already
paid generally will offset applicable U.S. income taxes. In cases where they
will not offset U.S. income taxes, appropriate provisions are included in the
consolidated statements of income.

STOCK-BASED EMPLOYEE COMPENSATION PLANS:

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

The Company has adopted the disclosure-only provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation." Accordingly, no compensation cost has
been recognized for the Company's stock option plans. If the Company had elected
to recognize compensation cost based on the

36

H. J. HEINZ COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

fair value of the options granted at grant date as prescribed by SFAS No. 123,
income and earnings per share from continuing operations before cumulative
effect of change in accounting principle would have been reduced to the pro
forma amounts indicated below:

The weighted-average fair value of options granted was $6.86 per share in
Fiscal 2003, $8.54 per share in Fiscal 2002 and $8.46 per share in Fiscal 2001.

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

FINANCIAL INSTRUMENTS:

The Company's financial instruments consist primarily of cash and cash
equivalents, short-term and long-term debt, swaps, forward contracts, commodity
futures, and option contracts. The carrying values for the Company's financial
instruments approximate fair value with the exception at times of long-term
debt. As of April 30, 2003 and May 1, 2002, the fair value of debt obligations
approximated the recorded value. As a policy, the Company does not engage in
speculative or leveraged transactions, nor does the Company hold or issue
financial instruments for trading purposes.

The Company uses derivative financial instruments for the purpose of
hedging currency, price, and interest rate exposures, which exist as part of
ongoing business operations. The Company carries derivative instruments on the
balance sheet at fair value, determined by reference to quoted market prices.
Interest rate swaps designated as fair value hedges are presented as a component
of other non-current assets. All other derivatives are included in receivables
or accounts payable, based on the instrument's fair value. The accounting for
changes in the fair value of a derivative instrument depends on whether it has
been designated and qualifies as part of a hedging relationship and, if so, the
reason for holding it. The cash flows related to derivative instruments are
classified in the consolidated statements of cash flows within operating
activities as a component of other items, net.

37

H. J. HEINZ COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

2. RECENTLY ISSUED ACCOUNTING STANDARDS:

In Fiscal 2001, the Company changed its method of accounting for revenue
recognition in accordance with Staff Accounting Bulletin ("SAB") No. 101,
"Revenue Recognition in Financial Statements." Under the new accounting method,
adopted retroactive to May 4, 2000, Heinz recognizes revenue upon the passage of
title, ownership and risk of loss to the customer. The cumulative effect of the
change on prior years resulted in a charge to income in Fiscal 2001 of $14.8
million (net of income taxes of $9.3 million). The change did not have a
significant effect on revenues or results of operations for the year ended May
2, 2001.

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 and, as a result, recorded a transitional
impairment charge that was calculated as of May 2, 2002, and recorded as an
effect of a change in accounting principle for Fiscal 2003, of $77.8 million.
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:

Income from continuing operations for Fiscal 2002 and 2001 would have been
$720.4 million and $583.7 million ($0.13 and $0.10 per share higher)
respectively, had the provisions of the new standards been applied as of May 4,
2000.

38

H. J. HEINZ COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Changes in the carrying amount of goodwill for the fiscal year ended April
30, 2003, by reportable segment, are as follows:

Trademarks and other intangible assets at April 30, 2003 and May 1, 2002,
subject to amortization expense, are as follows:

Amortization expense for trademarks and other intangible assets subject to
amortization was $20.4 million for the fiscal year ended April 30, 2003. Based
upon the amortizable intangible assets recorded on the balance sheet as of April
30, 2003, amortization expense for each of the next five fiscal years is
estimated to be approximately $20.0 million.

Intangible assets not subject to amortization at April 30, 2003 and May 1,
2002, were $473.9 million and $398.4 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." SFAS No. 144 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
fiscal year ended April 30, 2003.

During Fiscal 2003, the Company adopted 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.

During Fiscal 2003, the Company adopted Financial Accounting Standards
Board ("FASB") Interpretation No. 45 ("FIN 45"), "Guarantor's Accounting and
Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others." Interpretation No. 45

39

H. J. HEINZ COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

elaborates on the disclosures to be made by a guarantor about its obligations
under certain guarantees that it has issued, and it requires the recognition of
a liability at fair value by a guarantor at the inception of a guarantee. The
initial recognition and measurement provisions of FIN 45 are effective on a
prospective basis for all guarantees issued or modified after December 31, 2002.
The Company has not issued or modified any material guarantees since December
31, 2002.

In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation--Transition and Disclosure--an amendment of FASB Statement No.
123". SFAS No. 148 provides alternative methods of transitions for entities that
voluntarily change to the fair value method of accounting for stock-based
employee compensation, and it also amends the disclosure provisions of SFAS No.
123 to require disclosure about the effects of an entity's accounting policy
decisions with respect to stock-based employee compensation in both annual and
interim financial reporting. The disclosure provisions of SFAS No. 148 were
effective for the Company at April 30, 2003.

In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity". This
statement affects the classification, measurement and disclosure requirements of
certain freestanding financial instruments including mandatorily redeemable
shares. SFAS No. 150 is effective for all financial instruments entered into or
modified after May 31, 2003, and otherwise is effective for the Company for the
second quarter of Fiscal 2004. The adoption of SFAS No. 150 will require the
reclassification of the Company's $325 million of mandatorily redeemable
preferred shares from minority interest to long-term debt on the consolidated
balance sheet and the $20.2 million annual preferred dividend from other
expenses, net to interest expense on the consolidated statement of income with
no resulting effect on the Company's profitability.

3. DISCONTINUED OPERATIONS AND SPIN-OFF

On December 20, 2002, Heinz transferred to a wholly-owned subsidiary ("SKF
Foods") certain assets and liabilities, including 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 broths and its U.S. infant feeding businesses and distributed
all of the shares of SKF Foods common stock on a pro rata basis to its
shareholders. Immediately thereafter, SKF Foods merged with a wholly-owned
subsidiary of Del Monte Foods Company ("Del Monte") resulting in SKF Foods
becoming a wholly-owned subsidiary of Del Monte ("the Merger").

In accordance with accounting principles generally accepted in the United
States of America, the operating results and net assets related to these
businesses spun off to Del Monte have been included in discontinued operations
in the Company's consolidated statements of income and consolidated balance
sheets. Discontinued operations for the fiscal years ended April 30, 2003, and
May 1, 2002, represent operating results for eight and twelve months
respectively. The net assets distributed to Heinz shareholders have been treated
as a dividend and charged to retained earnings.

The discontinued operations generated sales of $1,091.3 million, $1,817.0
million and $1,833.2 million and net income of $88.7 million (net of $35.4
million in tax), net income of $158.7 million (net of $69.4 million in tax) and
a net loss of $70.6 million (net of $12.4 million of a tax benefit) for the
fiscal years ended April 30, 2003, May 1, 2002, and May 2, 2001, respectively.

40

H. J. HEINZ COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Net assets related to discontinued operations of $1,660.0 million are
reported on the May 1, 2002 consolidated balance sheet. These assets consist of
the following:

4. ACQUISITIONS/DIVESTITURES

All of the following acquisitions have been accounted for as purchases and,
accordingly, the respective purchase prices have been allocated to the
respective assets and liabilities based upon their estimated fair values as of
the acquisition date. Operating results of businesses acquired have been
included in the consolidated statements of income from the respective
acquisition dates forward. There are no significant contingent payments, options
or commitments associated with any of the acquisitions.

Pro forma results of the Company, assuming all of the following
acquisitions and divestitures had occurred at the beginning of each period
presented, would not be materially different from the results reported.

FISCAL 2003:

In Fiscal 2003 there were no significant acquisitions or divestitures.

FISCAL 2002:

The Company acquired the following businesses for a total of $837.3
million, which was paid primarily in cash, including obligations to sellers of
$2.5 million:

- In July 2001, the Company completed the acquisition of Borden Food
Corporation's pasta sauce, dry bouillon and soup business including such
brands as Classico pasta sauces, Aunt Millie's pasta sauce, Mrs. Grass
Recipe soups and Wyler's bouillons and soups.

- In August 2001, the Company completed the acquisition of Delimex
Holdings, Inc., a leading maker of frozen Mexican food products such as
taquitos, quesadillas, tamales and rice bowls.

- In September 2001, the Company completed the acquisition of 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 and
the Poppers brand of retail appetizer lines.

- The Company also made other smaller acquisitions.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The allocations of the purchase price resulted in goodwill of $588.5
million, which was assigned to the U.S. Frozen segment ($380.7 million) and the
Heinz North America segment ($207.8 million). Of that amount, $375.3 million is
expected to be deductible for tax purposes. In addition, $192.1 million of
intangible assets were acquired, of which $97.2 million was assigned to brands
and trademarks that are not subject to amortization. The remaining $94.9 million
of acquired intangible assets has a weighted-average useful life of
approximately 27 years. The intangible assets that make up that amount include
brands and trademarks of $39.1 million (38-year weighted-average useful life),
licensing agreements of $45.8 million (20-year weighted-average useful life) and
patents of $10.0 million (18-year weighted-average useful life).

FISCAL 2001:

The Company acquired businesses for a total of $678.4 million, including
obligations to sellers of $5.5 million. The allocations of the purchase price
resulted in goodwill of $478.6 million and trademarks and other intangible
assets of $117.4 million.

On February 28, 2001, the Company completed the acquisition of the CSM Food
Division of CSM Nederland NV, one of the leading food companies in the Benelux
(Belgium, the Netherlands, Luxembourg) region which includes the following
brands: Honig brand of soups, sauces and pasta meals; HAK brand vegetables
packed in glass; KDR (Koninklijke de Ruijter) brand sport drinks and fortified
juices; and KDR brand spreads and sprinkles, which are traditional toppings for
breakfast breads and toasts.

On March 1, 2001, the Company acquired two privately held U.S. foodservice
companies: Cornucopia, Inc. of Irvine, California, and Central Commissary, Inc.
of Phoenix, Arizona. Both companies make and market refrigerated and frozen
reciped food products. Also during Fiscal 2001, the Company completed the
acquisitions of IDF Holdings, Inc., the parent of International DiverseFoods
Inc., a leading manufacturer of customized dressings, sauces, mixes and
condiments for restaurant chains and foodservice distributors, and Alden Merrell
Corporation, a manufacturer of high-quality, premium-priced frozen desserts for
casual dining restaurants and foodservice distributors. The Company also made
other smaller acquisitions.

On February 9, 2001, the Company announced it had sold The All American
Gourmet business and its Budget Gourmet and Budget Gourmet Value Classics brands
of frozen entrees for $55.0 million. The transaction resulted in a pretax loss
of $94.6 million ($66.2 million after-tax). During Fiscal 2001, the Company also
made other smaller divestitures.

5. SPECIAL ITEMS

DEL MONTE AND OTHER REORGANIZATION COSTS

In Fiscal 2003, Del Monte transaction costs and costs to reduce overhead of
the remaining business totaled $164.6 million pretax ($113.1 million after-tax)
and were comprised of $61.8 million for legal, professional and other related
costs, $51.3 million in employee termination and severance costs, $39.6 million
related to the early retirement of debt, and $12.0 million in non-cash asset
write-downs. Of this amount, $6.1 million was included in cost of products sold,
$118.9 million in selling, general and administrative expenses ("SG&A"), and
$39.6 million in other expense, net.

Additionally in Fiscal 2003, losses on the exit of non-strategic
businesses, primarily the UK frozen pizza business and a North American fish and
frozen vegetable business, totaled $62.4 million pretax ($49.3 million
after-tax), and were comprised of $39.7 million in non-cash asset write-downs,
$12.1 million in losses on the sale of businesses and $10.6 million in employee

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H. J. HEINZ COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

termination, severance and other exit costs. Of these amounts, $47.3 million was
included in cost of products sold and $15.1 million in SG&A. As of April 30,
2003, $46.2 million was included in accrued expenses related to Del Monte and
other reorganization costs.

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 and was completed
in the first half of Fiscal 2003.

During Fiscal 2003, the Company utilized $19.4 million of severance and
exit accruals, principally related to its global overhead reduction plan,
primarily in Europe and North America. In addition, as a result of the spin off
of SKF Foods, a $3.4 million restructuring liability related to ceasing canned
pet food production at the Company's Terminal Island, California facility was
transferred to Del Monte.

During the first quarter of Fiscal 2002, the Company recognized
restructuring and implementation charges totaling $8.3 million pretax ($6.1
million after-tax). In the fourth quarter of Fiscal 2002, the Company recorded a
net charge of $4.1 million pretax ($2.8 million after-tax) to reflect revisions
in original cost estimates. This charge was primarily a result of higher than
expected severance costs (primarily in Europe and the U.S.). Total Fiscal 2002
pretax charges of $3.8 million were classified as cost of products sold and $8.6
million as SG&A.

During Fiscal 2001, the Company recognized restructuring charges and
implementation costs totaling $101.4 million pretax ($69.0 million after-tax),
which primarily include severance costs and were all classified as SG&A.
Implementation costs were recognized as incurred in Fiscal 2002 ($2.6 million
pretax) and Fiscal 2001 ($1.8 million pretax) and consist of incremental costs
directly related to the implementation of the Streamline initiative.

OPERATION EXCEL

In Fiscal 1999, the Company announced a growth and restructuring initiative
named "Operation Excel." This initiative was a multi-year, multi-faceted program
that established manufacturing centers of excellence, focused the product
portfolio, realigned the Company's management teams and invested in growth
initiatives. The Company substantially completed Operation Excel in Fiscal 2002.

During Fiscal 2001, the Company recognized restructuring charges of $12.1
million pretax ($7.7 million after-tax). These charges were primarily associated
with higher than originally expected severance costs associated with creating
the single North American Grocery & Foodservice headquarters in Pittsburgh,
Pennsylvania. Of this charge, $9.7 million was recorded in cost of products sold
and $2.4 million in SG&A. This charge was offset by reversals of unutilized
Operation Excel accruals and asset write-downs of $68.4 million pretax ($52.3
million after-tax), $36.0 million of which were recorded in cost of products
sold and $32.3 million in SG&A and were primarily the result of lower than
expected lease termination costs related to exiting the Company's fitness
business, revisions in estimates of fair values of assets which were disposed of
as part of Operation Excel, and the Company's decision not to transfer certain
European baby food production. Implementation costs of $202.8 million pretax
($135.8 million after-tax) were also recognized in Fiscal 2001, of which $100.2
million was recorded in cost of products sold and $102.6 million in SG&A.

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H. J. HEINZ COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

6. INCOME TAXES

The following table summarizes the provision/(benefit) for U.S. federal,
state and foreign taxes on income from continuing operations.

Tax expense resulting from allocating certain tax benefits directly to
additional capital was $1.1 million in Fiscal 2003, $15.1 million in Fiscal
2002, and $12.5 million in Fiscal 2001.

The components of income from continuing operations before income taxes
consist of the following:

The differences between the U.S. federal statutory tax rate and the
Company's consolidated effective tax rate on continuing operations are as
follows:

The Fiscal 2001 effective tax rate was favorably impacted by the
recognition of a tax benefit of $93.2 million related to new tax legislation
enacted in Italy. The Fiscal 2003, 2002 and 2001 effective tax rates were
unfavorably impacted by restructuring and related costs expected to be realized
in lower tax rate jurisdictions and by nondeductible expenses related to the
restructurings.

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H. J. HEINZ COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The deferred tax (assets) and deferred tax liabilities related to
continuing operations recorded on the consolidated balance sheets as of April
30, 2003 and May 1, 2002 are as follows:

At the end of Fiscal 2003, net operating loss carryforwards totaled $128.9
million. Of that amount, $67.9 million expire through 2027; the other $61.0
million do not expire. Foreign tax credit carryforwards total $31.4 million and
expire through 2007.

The Company's consolidated United States income tax returns have been
audited by the Internal Revenue Service for all years through 1994. The Company
has retained responsibility for all income tax matters related to the spun-off
businesses prior to December 20, 2002.

Undistributed earnings of foreign subsidiaries considered to be reinvested
permanently amounted to $2.15 billion at April 30, 2003.

The Fiscal 2003 net change in valuation allowance for deferred tax assets
was a decrease of $37.6 million, due principally to a reduction of deferred tax
assets related to foreign tax credit carryforwards.

7. DEBT

Short-term debt consisted of bank debt and other borrowings of $146.8
million and $178.4 million as of April 30, 2003 and May 1, 2002, respectively.
The weighted average interest rate was 5.2% and 6.4% for Fiscal 2003 and Fiscal
2002, respectively.

In September 2001, the Company and Heinz Finance entered into a 364-Day
Credit Agreement, which was renewed in September 2002, and a Five-Year Credit
Agreement, expiring in September 2006. The 364-day agreement permits the Company
and Heinz Finance to borrow up to $800 million. The five-year agreement permits
the Company and Heinz Finance to borrow up to $1.5 billion. These agreements
support the Company's commercial paper borrowings and the remarketable
securities. As a result, these borrowings are classified as long-term debt based
upon

45

H. J. HEINZ COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

the Company's ability to refinance these borrowings on a long-term basis.
Long-term debt was comprised of the following as of April 30, 2003 and May 1,
2002:

The fair value of the debt obligations approximated the recorded value as
of April 30, 2003 and May 1, 2002. Annual maturities of long-term debt during
the next five fiscal years are $7.9 million in 2004, $397.1 million in 2005,
$509.8 million in 2006, $8.2 million in 2007 and $300.3 million in 2008.

In March 2002, Heinz Finance issued $700 million of 6% Notes due 2012 and
$550 million of 6.75% Notes due 2032. The notes are guaranteed by the Company
and the proceeds were used to retire commercial paper. The notes together with
Heinz Finance's $750 million 6.625% Notes due 2011 were initially privately
placed in reliance on exemptions from registration under the Securities Act of
1933. In March 2003, Heinz Finance exchanged new debt securities for these
initial debt securities, with the new debt securities being substantially
identical in all respects to the initial debt securities, except for being
registered under the Securities Act of 1933.

As of April 30, 2003, the Company had $800 million of remarketable
securities due November 2020. These securities are subject to an annual
remarketing on each November 15, and the interest rate is reset on such dates.
If the securities are not remarketed, then the Company is required to repurchase
all of the securities at 100% of the principal amount plus accrued interest. On
November 15, 2002, the securities were remarketed at an effective yield to the
Company of 6.56%.

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H. J. HEINZ COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

In Fiscal 2003, the Company used part of the proceeds from the Del Monte
transaction to retire the following long-term debt:

In connection with the early retirement of a portion of the Remarketable
Securities due November 2020, the Company recorded a $39.6 million pretax charge
in other expenses, net in the consolidated statement of income.

8. SHAREHOLDERS' EQUITY

CAPITAL STOCK:

The preferred stock outstanding is convertible at a rate of one share of
preferred stock into 15 shares of common stock. The Company can redeem the stock
at $28.50 per share.

As of April 30, 2003, there were authorized, but unissued, 2,200,000 shares
of third cumulative preferred stock for which the series had not been
designated.

EMPLOYEE STOCK OWNERSHIP PLAN ("ESOP"):

The Company established an ESOP in 1990 to replace in full or in part the
Company's cash-matching contributions to the H. J. Heinz Company Employees
Retirement and Savings Plan, a 401(k) plan for salaried employees. Matching
contributions to the 401(k) plan are based on a percentage of the participants'
contributions, subject to certain limitations.

GLOBAL STOCK PURCHASE PLAN ("GSPP"):

On September 8, 1999, the shareholders authorized the GSPP which provides
for the purchase by employees of up to 3,000,000 shares of the Company's stock
through payroll deductions. Employees who choose to participate in the plan
receive an option to acquire common stock at a discount. The purchase price per
share is the lower of 85% of the fair market value of the Company's stock on the
first or last day of a purchase period. During Fiscal 2003, employees purchased
217,235 shares under this plan.

PENSION OBLIGATION:

The Company made cash contributions to its pension plans totaling $224
million compared to $111 million in Fiscal 2002. In addition the Company
recorded an additional minimum liability of $451.1 million as of April 30, 2003.

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H. J. HEINZ COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

9. SUPPLEMENTAL CASH FLOWS INFORMATION

* Includes obligations to sellers of $2.5 million and $5.5 million in 2002 and
2001, respectively.

10. EMPLOYEES' STOCK OPTION PLANS AND MANAGEMENT INCENTIVE PLANS

Under the Company's stock option plans, officers and other key employees
may be granted options to purchase shares of the Company's common stock.
Generally, the option price on outstanding options is equal to the fair market
value of the stock at the date of grant. Options are generally exercisable
beginning from one to three years after date of grant and have a maximum term of
10 years. In Fiscal 1998, in order to place greater emphasis on creation of
shareholder value, performance-accelerated stock options were granted to certain
key executives. These options vest eight years after the grant date, subject to
acceleration if predetermined share price goals are achieved.

Data regarding the Company's stock option plans follows:

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H. J. HEINZ COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following summarizes information about shares under option in the
respective exercise price ranges at April 30, 2003:

The shares authorized but not granted under the Company's stock option
plans were 21,531,043 at April 30, 2003 and 7,840,147 at May 1, 2002. Common
stock reserved for options totaled 59,432,070 at April 30, 2003 and 39,149,243
at May 1, 2002.

The Company's management incentive plan covers officers and other key
employees. Participants may elect to be paid on a current or deferred basis. The
aggregate amount of all awards may not exceed certain limits in any year.
Compensation under the management incentive plans was approximately $19 million
in Fiscal 2003, $21 million in Fiscal 2002 and $20 million in Fiscal 2001.

RESTRICTED STOCK UNITS

On September 12, 2002, the shareholders of the Company approved the "Fiscal
Year 2003 Stock Incentive Plan", which permits the issuance of Restricted Stock
Units ("RSUs") to employees with vesting periods between one and five years
depending on the achievement of predefined goals. Upon vesting, the RSUs are
converted into shares of the Company's common stock on a one-for-one basis and
issued to the employees.

In Fiscal 2003, the Company granted 882,071 RSUs to employees, of which
7,731 were forfeited pursuant to the terms of the awards and 91,909 cancelled as
a result of the spin-off of SKF Foods. At April 30, 2003, 782,431 RSUs remain
outstanding.

RSUs are awarded to employees at a grant price equal to the fair market
value of the Company's stock on the date of grant. The fair value of the awards
granted has been recorded as unearned compensation and is shown as a separate
component of shareholders' equity. The Company recognized amortization related
to the unearned compensation of $5.8 million during the fiscal year.

11. RETIREMENT PLANS

The Company maintains retirement plans for the majority of its employees.
Current defined benefit plans are provided primarily for domestic union and
foreign employees. Defined contribution plans are provided for the majority of
its domestic non-union hourly and salaried employees.

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H. J. HEINZ COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Total pension cost consisted of the following:

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H. J. HEINZ COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following table sets forth the funded status of the Company's principal
defined benefit plans at April 30, 2003 and May 1, 2002.

The projected benefit obligation, accumulated benefit obligation and fair
value of plan assets for plans with accumulated benefit obligations in excess of
plan assets were $1,551.4 million, $1,423.6 million and $1,039.6 million,
respectively, as of April 30, 2003 and $347.8 million, $298.7 million and $207.0
million, respectively, as of May 1, 2002. During Fiscal 2003, a total

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H. J. HEINZ COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

prepaid pension asset in the amount of $10.2 million was transferred as a result
of the spin off of SKF Foods.

The weighted-average rates used for the years ended April 30, 2003, May 1,
2002 and May 2, 2001 in determining the net pension costs and projected benefit
obligations for defined benefit plans were as follows:

12. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS AND OTHER POST EMPLOYMENT
BENEFITS

The Company and certain of its subsidiaries provide health care and life
insurance benefits for retired employees and their eligible dependents. Certain
of the Company's U.S. and Canadian employees may become eligible for such
benefits. The Company currently does not fund these benefit arrangements and may
modify plan provisions or terminate plans at its discretion.

Net postretirement costs consisted of the following:

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H. J. HEINZ COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following table sets forth the combined status of the Company's
postretirement benefit plans at April 30, 2003 and May 1, 2002.

The weighted-average discount rate used in the calculation of the
accumulated post-retirement benefit obligation and the net postretirement
benefit cost was 6.3% in 2003, 7.2% in 2002 and 7.5% in 2001. The
weighted-average assumed annual composite rate of increase in the per capita
cost of company-provided health care benefits begins at 8.7% for 2004, gradually
decreases to 5.0% by 2009 and remains at that level thereafter. Assumed health
care cost trend rates have a significant effect on the amounts reported for
postretirement medical benefits. A one-percentage-point change in assumed health
care cost trend rates would have the following effects:

During Fiscal 2003, the Company transferred a net accrued benefit liability
of $24.0 million as a result of the spin off of SKF Foods.

13. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES

The Company operates internationally, with manufacturing and sales
facilities in various locations around the world, and utilizes certain
derivative and non-derivative financial instruments to manage its foreign
currency, commodity price, and interest rate exposures.

FOREIGN CURRENCY HEDGING:

The Company uses forward contracts and to a lesser extent, option contracts
to mitigate its foreign currency exchange rate exposure due to forecasted
purchases of raw materials and sales of finished goods, and future settlement of
foreign currency denominated assets and liabilities. Derivatives used to hedge
forecasted transactions and specific cash flows associated with foreign currency
denominated financial assets and liabilities which meet the criteria for hedge
accounting

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H. J. HEINZ COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

are designated as cash flow hedges. Consequently, the effective portion of 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, in
the same line item as the underlying hedged item.

The Company uses certain foreign currency debt instruments as net
investment hedges of foreign operations. Losses of $41.9 million (net of income
taxes of $23.5 million), $2.4 million (net of income taxes of $1.4 million) and
$0.2 million (net of income taxes of $0.1 million), which represented effective
hedges of net investments, were reported as a component of accumulated other
comprehensive loss within unrealized translation adjustment for the years ended
April 30, 2003, May 1, 2002, and May 2, 2001, respectively.

COMMODITY PRICE HEDGING:

The Company uses commodity futures, swaps and option contracts in order to
reduce price risk associated with forecasted 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. Derivatives used to hedge forecasted commodity
purchases that meet the criteria for hedge accounting are designated as cash
flow hedges. Consequently, the effective portion of changes in the fair value of
these derivatives is deferred as a component of accumulated other comprehensive
loss and is recognized as part of cost of products sold at the time the hedged
item affects earnings.

INTEREST RATE HEDGING:

The Company uses interest rate swaps to manage interest rate exposure.
These derivatives may be designated as cash flow hedges or fair value hedges
depending on the nature of the risk being hedged. Derivatives used to hedge risk
associated with changes in the fair value of certain fixed rate debt obligations
are designated as fair value hedges. Consequently, changes in the fair value of
these derivatives, along with changes in the fair value of the hedged debt
obligations that are attributable to the hedged risk, are recognized in current
period earnings.

HEDGE INEFFECTIVENESS:

Hedge ineffectiveness related to cash flow hedges, which is reported in
current period earnings as other income and expense, was a net loss of $0.8
million, $0.3 million, and $0.6 million for the years ended April 30, 2003, May
1, 2002, and May 2, 2001, respectively. The Company excludes the time value
component of option contracts from the assessment of hedge effectiveness.

DEFERRED HEDGING GAINS AND LOSSES:

As of April 30, 2003, the Company is hedging forecasted transactions for
periods not exceeding 24 months. During the next 12 months, the Company expects
$6.2 million of net deferred gain reported in accumulated other comprehensive
loss to be reclassified to earnings. Net deferred losses reclassified to
earnings because the hedged transaction was no longer expected to occur totaled
$0.6 million for the year ended April 30, 2003 and were not significant for the
years ended May 1, 2002 and May 2, 2001.

OTHER ACTIVITIES:

The Company enters into certain derivative contracts in accordance with its
risk management strategy that do not meet the criteria for hedge accounting.
Although these derivatives do not qualify as hedges, they have the economic
impact of largely mitigating foreign currency, commod-

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H. J. HEINZ COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

ity price or interest rate exposures. These derivative financial instruments are
accounted for on a full mark to market basis through current earnings even
though they were not acquired for trading purposes.

At April 30, 2003, the notional amount outstanding of currency exchange,
commodity, and interest rate derivative contracts was $715 million, $21 million,
and $2.95 billion, respectively. At May 1, 2002, the notional amount outstanding
of currency exchange, commodity, and interest rate derivative contracts was $845
million, $31 million, and $2.05 billion, respectively. The fair value of
derivative financial instruments was a net asset of $300 million and $24 million
at April 30, 2003 and May 1, 2002, respectively.

CONCENTRATION OF CREDIT RISK:

Counterparties to currency exchange and interest rate derivatives consist
of large major international financial institutions. The Company continually
monitors its positions and the credit ratings of the conterparties involved and,
by policy, limits the amount of credit exposure to any one party. While the
Company may be exposed to potential losses due to the credit risk of non-
performance by these counterparties, losses are not anticipated. During Fiscal
2003, no single customer represented more than 10% of the Company's sales.

14. NET INCOME PER COMMON SHARE

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

Stock options outstanding of 18.4 million, 14.9 million and 11.5 million as
of April 30, 2003, May 1, 2002 and May 2, 2001, respectively, were not included
in the above net income per diluted share calculations because to do so would
have been antidilutive for the periods presented.

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H. J. HEINZ COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

15. SEGMENT INFORMATION

The Company's reportable 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 Heinz North America
segment now includes only those businesses that were retained by Heinz following
the Del Monte transaction. Prior periods have been reclassified to conform with
the current presentation. Descriptions of the Company's reportable segments 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.

- 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 that sell products in all of the
Company's core categories. During Fiscal 2003, the Company deconsolidated
its Zimbabwe operations which have historically been reported in this
segment.

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 excluded from the measure of segment profitability
reviewed by the Company's management.

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H. J. HEINZ COMPANY AND SUBSIDIARIES

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

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

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H. J. HEINZ COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(b) FISCAL YEAR ENDED APRIL 30, 2003: Excludes Del Monte transaction related
costs, costs to reduce overhead of the remaining businesses and losses on
the exit of non-strategic businesses as follows: Heinz North America $66.8
million, Europe $58.9 million, Asia/Pacific $6.6 million and Non-Operating
$55.0 million.
FISCAL YEAR ENDED MAY 1, 2002: Excludes restructuring and implementation
costs of the Streamline initiative as follows: Heinz North America $6.1
million, Europe $3.6 million, Asia/ Pacific $(0.1) million and Non-Operating
$2.7 million.
FISCAL YEAR ENDED MAY 2, 2001: Excludes net restructuring and implementation
costs of Operation Excel as follows: Heinz North America $15.1 million, U.S.
Frozen $23.4 million, Europe $63.7 million, Asia/Pacific $46.3 million,
Other Operating Entities $(11.3) million and Non-Operating $9.4 million.
Excludes restructuring and implementation costs of the Streamline initiative
as follows: Heinz North America $16.3 million, Europe $65.7 million,
Asia/Pacific $5.2 million and Non-Operating $14.2 million. Excludes the loss
on the sale of The All American Gourmet in U.S. Frozen of $94.6 million.
Excludes acquisition costs in Heinz North America of $18.5 million.

(c) Excludes property, plant and equipment obtained through acquisitions.

(d) Includes identifiable assets not directly attributable to operating
segments.

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

The Company has significant sales and long-lived assets in the following
geographic areas. Sales are based on the location in which the sale originated.
Long-lived assets include property, plant and equipment, goodwill, trademarks
and other intangibles, net of related depreciation and amortization.

* Amounts include discontinued operations.

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H. J. HEINZ COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

16. QUARTERLY RESULTS

The first quarter of Fiscal 2003 includes costs related to the Del Monte
transaction and costs to reduce overhead of the remaining businesses of $11.6
million after tax. The first quarter of Fiscal 2002 includes restructuring and
implementation costs related to the Streamline initiative of $6.1 million after
tax.

The second quarter of Fiscal 2003 includes costs related to the Del Monte
transaction and costs to reduce overhead of the remaining businesses of $6.9
million after tax.

The third quarter of Fiscal 2003 includes costs related to the Del Monte
transaction and costs to reduce overhead of the remaining businesses of $51.5
million after tax and the loss on the disposal of a non-strategic business of
$10.1 million after tax.

The fourth quarter of Fiscal 2003 includes costs related to the Del Monte
transaction and costs to reduce overhead of the remaining businesses of $43.0
million after tax and losses on the exit of non-strategic businesses of $39.2
million after tax. The fourth quarter of Fiscal 2002 includes a net charge of
$2.8 million after tax related to the Streamline initiative.

59

H. J. HEINZ COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

17. COMMITMENTS AND CONTINGENCIES

LEGAL MATTERS:

Certain suits and claims have been filed against the Company and have not
been finally adjudicated. These suits and claims when finally concluded and
determined, in the opinion of management, based upon the information that it
presently possesses, will not have a material adverse effect on the Company's
consolidated financial position, results of operations or liquidity.

LEASE COMMITMENTS:

Operating lease rentals for warehouse, production and office facilities and
equipment amounted to approximately $95.2 million in 2003, $91.3 million in 2002
and $86.5 million in 2001. Future lease payments for non-cancellable operating
leases as of April 30, 2003 totaled $507.7 million (2004-$67.5 million,
2005-$53.6 million, 2006-$42.6 million, 2007-$155.5 million, 2008-$18.1 million
and thereafter-$170.4 million).

No significant credit guarantees existed between the Company and third
parties as of April 30, 2003.

18. ADVERTISING COSTS

Advertising costs for fiscal years 2003, 2002 and 2001 were $294.2 million,
$285.9 million and $244.8 million, respectively, and are recorded either as a
reduction of revenue or as a component of SG&A.

60

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.

There is nothing to be reported under this item.

ITEM 9A. CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures

The Company's management, with participation of the Company's Chief
Executive Officer and Chief Financial Officer, evaluated the effectiveness of
the design and operation 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 have been 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 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 over Financial Reporting

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

61

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

Information relating to the Directors of the Company is set forth under the
captions "Election of Directors" and "Additional Information--Section 16
Beneficial Ownership Reporting Compliance" in the Company's definitive Proxy
Statement in connection with its Annual Meeting of Shareholders to be held
September 12, 2003. Such information is incorporated herein by reference.
Information relating to the executive officers of the Company is set forth under
the caption "Executive Officers of the Registrant" in Part I above.

ITEM 11. EXECUTIVE COMPENSATION.

Information relating to executive compensation is set forth under the
caption "Executive Compensation" in the Company's definitive Proxy Statement in
connection with its Annual Meeting of Shareholders to be held September 12,
2003. Such information is incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

The number of shares to be issued upon exercise and the number of shares
remaining available for future issuance under the Company's equity compensation
plans at April 30, 2003 were as follows.

EQUITY COMPENSATION PLAN INFORMATION

(1) The H. J. Heinz Company Restricted Stock Recognition Plan for Salaried
Employees (the "Restricted Stock Plan") is designed to provide
recognition and reward in the form of awards of restricted stock to
employees who have a history of outstanding accomplishment and who,
because of their experience and skills, are expected to continue to
contribute significantly to the success of the Company. Eligible
employees are those full-time salaried employees not participating in
the shareholder-approved H. J. Heinz Company Incentive Compensation
Plan in effect as of May 1, 2002, and who have not been awarded an
option to purchase Company Common Stock. The Company has ceased issuing
shares from this Restricted Stock Plan, and it is the Company's
intention to terminate the Restricted Stock Plan once all restrictions
on previously issued shares are lifted. Future awards of this type will
be made under the Fiscal Year 2003 Stock Incentive Plan.

(2) Historically, the Company has awarded 300 shares to non-employee
directors on an annual basis as discretionary grants in lieu of cash
compensation, and an additional 400 shares were awarded to each
non-employee director in January, 2003 in the same manner. These grants
are not awarded under any equity compensation plan and are in addition
to 300 shares awarded annually to non-employee directors under the H.
J. Heinz Company Stock Compensation Plan for Non-Employee Directors,
which was approved by the Company's shareholders.

62

(3) The grants made under the Restricted Stock Plan are restricted shares
of Common Stock, and therefore there is no exercise price.

(4) The maximum number of shares of Common Stock that the Chief Executive
Officer may grant under the Restricted Stock Plan has been established
annually by the Executive Committee of the Board of Directors;
provided, however, that such number of shares shall not exceed in any
plan year 1% of all then outstanding shares of Common Stock.

Information relating to the ownership of equity securities of the Company
by certain beneficial owners and management is set forth under the caption
"Security Ownership of Management" in the Company's definitive Proxy Statement
in connection with its Annual Meeting of Shareholders to be held September 12,
2003. Such information is incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

Information relating to certain relationships with a beneficial shareholder
and certain related transactions is set forth under the caption "Certain
Business Relationships" in the Company's definitive Proxy Statement in
connection with its Annual Meeting of Shareholders to be held September 12,
2003. Such information is incorporated herein by reference.

ITEM 14. PRINCIPAL AUDITOR FEES AND SERVICES

Information relating to the principal auditor's fees and services is set
forth under the caption "Relationship With Independent Auditors" in the
Company's definitive Proxy Statement in connection with its Annual Meeting of
Shareholders to be held September 12, 2003. Such information is incorporated
herein by reference.

63

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.

(a)(1) The following financial statements and report are filed as
part of this report under Item 8--"Financial Statements and
Supplementary Data":
Consolidated Balance Sheets as of April 30, 2003 and May
1, 2002
Consolidated Statements of Income for the fiscal years ended
April 30, 2003, May 1, 2002 and May 2, 2001
Consolidated Statements of Shareholders' Equity for the
fiscal years ended April 30, 2003, May 1, 2002 and May 2,
2001
Consolidated Statements of Cash Flows for the fiscal years
ended April 30, 2003, May 1, 2002 and May 2, 2001
Notes to Consolidated Financial Statements
Report of Independent Auditors of PricewaterhouseCoopers LLP
dated June 11, 2003, on the Company's consolidated financial
statements for the fiscal years ended April 30, 2003, May 1,
2002 and May 2, 2001

(2) The following report and schedule is filed herewith as a
part hereof:
Report of Independent Auditors of PricewaterhouseCoopers
LLP dated June 11, 2003 on the Company's consolidated
financial statement schedule filed as a part hereof for
the fiscal years ended April 30, 2003, May 1, 2002 and
May 2, 2001
Consent of Independent Auditors of
PricewaterhouseCoopers LLP dated July 23, 2003 filed as a
part hereof
Schedule II (Valuation and Qualifying Accounts and
Reserves) for the three fiscal years ended April 30, 2003,
May 1, 2002 and May 2, 2001
All other schedules are omitted because they are not
applicable or the required information is included herein or
is shown in the consolidated financial statements or notes
thereto filed as part of this report incorporated herein by
reference.

(3) Exhibits required to be filed by Item 601 of Regulation S-K
are listed below. Documents not designated as being
incorporated herein by reference are filed herewith. The
paragraph numbers correspond to the exhibit numbers
designated in Item 601 of Regulation S-K.

3(i) The Company's Articles of Amendment dated July 13,
1994, amending and restating the Company's amended and
restated Articles of Incorporation in their entirety,
are incorporated herein by reference to Exhibit 3(i)
to the Company's Annual Report on Form 10-K for the
fiscal year ended April 27, 1994.
3(ii) The Company's By-Laws, as amended effective June 12,
2002 are incorporated herein by reference to Exhibit 3 to
the Company's Quarterly Report on Form 10-Q for the
three months ended July 31, 2002.
4. Except as set forth below, there are no instruments
with respect to long-term debt of the Company that involve
indebtedness or securities authorized thereunder
exceeding 10 percent of the total assets of the
Company on a consolidated basis. The Company agrees
to file a copy of any instrument or agreement
defining the rights of holders of long-term debt of
the Company upon request of the Securities and
Exchange Commission.
(a) The Indenture between the Company and Bank One,
National Association dated November 6, 2000, is incorporated
herein by reference to Exhibit 4 to the Company's
Quarterly Report on Form 10-Q for the nine months
ended January 31, 2001.

64

(i) The Supplement dated May 3, 2001 to the Indenture
between the Company and Bank One, National Association dated
as of November 6, 2000 is incorporated herein by
reference to Exhibit 4(b)(i) of the Company's
Form 10-K for the fiscal year ended May 2, 2001.
(b) The Indenture among the Company, H. J. Heinz Finance
Company, and Bank One, National Association dated as of July
6, 2001 relating to the H. J. Heinz Finance Company's
$750,000,000 6.625% Guaranteed Notes due 2011,
$700,000,000 6.00% Guaranteed Notes due 2012 and
$550,000,000 6.75% Guaranteed Notes due 2032 is
incorporated herein by reference to Exhibit 4 of the
Company's Annual Report on Form 10-K for the fiscal
year ended May 1, 2002.
(c) The Certificate of Designations, Preferences and
Rights of Voting Cumulative Preferred Stock, Series A of H.
J. Heinz Finance Company is incorporated herein by
reference to Exhibit 4 of the Company's Quarterly
Report on Form 10-Q for the three months ended August
1, 2001.
10(a) Management contracts and compensatory plans:
(i) 1986 Deferred Compensation Program for H. J. Heinz
Company and affiliated companies, as amended and restated in
its entirety effective December 6, 1995, is
incorporated herein by reference to Exhibit 10(c)(i)
to the Company's Annual Report on Form 10-K for the
fiscal year ended May 1, 1995.
(ii) H. J. Heinz Company 1984 Stock Option Plan, as
amended, is incorporated herein by reference to Exhibit
10(n) to the Company's Annual Report on Form 10-K
for the fiscal year ended May 2, 1990.
(iii) H. J. Heinz Company 1987 Stock Option Plan, as
amended, is incorporated herein by reference to Exhibit
10(o) to the Company's Annual Report on Form 10-K
for the fiscal year ended May 2, 1990.
(iv) H. J. Heinz Company 1990 Stock Option Plan is
incorporated herein by reference to Appendix A to the
Company's Proxy Statement dated August 3, 1990.
(v) H. J. Heinz Company 1994 Stock Option Plan is
incorporated herein by reference to Appendix A to the
Company's Proxy Statement dated August 5, 1994.
(vi) H. J. Heinz Company Supplemental Executive Retirement
Plan, as amended, is incorporated herein by reference to
Exhibit 10(c)(ix) to the Company's Annual Report on
Form 10-K for the fiscal year ended April 28, 1993.
(vii) H. J. Heinz Company Executive Deferred Compensation
Plan (as amended and restated on December 27, 2001) is
incorporated by reference to Exhibit 10(a)(vii) of
the Company's Annual Report on Form 10-K for the
fiscal year ended May 1, 2002.
(viii) H. J. Heinz Company Incentive Compensation Plan is
incorporated herein by reference to Appendix B to the
Company's Proxy Statement dated August 5, 1994.
(ix) H. J. Heinz Company Stock Compensation Plan for
Non-Employee Directors is incorporated herein by reference
to Appendix A to the Company's Proxy Statement dated
August 3, 1995.
(x) H. J. Heinz Company 1996 Stock Option Plan is
incorporated herein by reference to Appendix A to the
Company's Proxy Statement dated August 2, 1996.
(xi) H. J. Heinz Company Deferred Compensation Plan for
Directors is incorporated herein by reference to Exhibit
10(a)(xiii) to the Company's Annual Report on Form
10-K for the fiscal year ended April 29, 1998.

65

(xii) H. J. Heinz Company Global Stock Purchase Plan is
incorporated herein by reference to Appendix A to the
Company's Proxy Statement dated August 3, 1999.
(xiii) Form of Severance Protection Agreement is
incorporated herein by reference to Exhibit 10(a)(xiv) to
the Company's Annual Report on Form 10-K for the
fiscal year ended May 3, 2000.
(xiv) H. J. Heinz Company 2000 Stock Option Plan is
incorporated herein by reference to Appendix A to the
Company's Proxy Statement dated August 4, 2000.
(xv) H. J. Heinz Company Executive Estate Life Insurance
Program is incorporated herein by reference to Exhibit
10(a)(xv) to the Company's Annual Report on Form 10-K
for the fiscal year ended May 1, 2002.
(xvi) H. J. Heinz Company Restricted Stock Recognition Plan
for Salaried Employees is incorporated herein by reference
to Exhibit 10(a)(xvi) to the Company's Annual Report
on Form 10-K for the fiscal year ended May 1, 2002.
(xvii) Retirement Agreement for Mr. Williams is
incorporated by reference to Exhibit 10(a)(xvii) of the
Company's Annual Report on Form 10-K for the fiscal
year ended May 1, 2002.
(xviii) Retirement Agreement for Mr. Wamhoff is incorporated
by reference to Exhibit 10(a)(xviii) of the Company's Annual
Report on Form 10-K for the fiscal year ended May 1,
2002.
(xix) H. J. Heinz Company Fiscal Year 2003 Stock Incentive
Plan is incorporated by reference to the Company's Proxy
Statement dated August 2, 2002.
(xx) H. J. Heinz Company Senior Executive Incentive
Compensation Plan is incorporated by reference to the
Company's Proxy Statement dated August 2, 2002.
(xxi) Form of First Amendment to Severance Protection
Agreement.
12. Computation of Ratios of Earnings to Fixed Charges.
21. Subsidiaries of the Registrant.
23. The following Exhibit is filed by incorporation by
reference to Item 15(a)(2) of this Report:
(a) Consent of PricewaterhouseCoopers LLP.
24. Powers-of-attorney of the Company's directors.
31. Rule 13a-14(a)/15d-14(a) Certifications.
99(a) Certification by the Chief Executive Officer
Relating to the Annual Report Containing Financial
Statements.
99(b) Certification by the Chief Financial Officer
Relating to the Annual Report Containing Financial
Statements.

Copies of the exhibits listed above will be furnished upon request to holders or
beneficial holders of any class of the Company's stock, subject to payment in
advance of the cost of reproducing the exhibits requested.

(b) During the last fiscal quarter of the period covered by this Report, the
Company filed a Current Report on Form 8-K dated February 17, 2003 relating to
its press release regarding the Company's growth strategy as presented to the
Consumer Analyst Group of New York conference on February 17, 2003.

66

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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, on July 24, 2003.

H. J. HEINZ COMPANY
(Registrant)

By: /s/ ARTHUR B. WINKLEBLACK
................................................
ARTHUR B. WINKLEBLACK
Executive Vice President and Chief
Financial Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated, on July 24, 2003.

William R. Johnson Director
Mary C. Choksi Director
Leonard S. Coleman, Jr. Director
Peter H. Coors Director
Edith E. Holiday Director
Dean R. O'Hare Director
Thomas J. Usher Director

James M. Zimmerman Director
By
/s/ ARTHUR B. WINKLEBLACK
........................................

ARTHUR B. WINKLEBLACK
Attorney-in-Fact

67

REPORT OF INDEPENDENT AUDITORS ON
FINANCIAL STATEMENT SCHEDULE

To the Shareholders of
H. J. Heinz Company:

Our audits of the consolidated financial statements referred to in our
report dated June 11, 2003, appearing as part of this report under Item
8--"Financial Statements and Supplementary Data" also included an audit of the
financial statement schedule listed in Item 15(a)(2) of this Form 10-K. In our
opinion, this financial statement schedule presents fairly, in all material
respects, the information set forth therein when read in conjunction with the
related consolidated financial statements.

/s/ PRICEWATERHOUSECOOPERS LLP

PricewaterhouseCoopers LLP
Pittsburgh, Pennsylvania
June 11, 2003

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

CONSENT OF INDEPENDENT AUDITORS

We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (Nos. 2-51719, 33-32563, 33-42015, 33-55777, 33-62623,
333-13849, 333-87419, 333-49728 and 333-100820) of H. J. Heinz Company and
Subsidiaries of our report dated June 11, 2003 relating to the financial
statements, which appears as part of this report under Item 8--"Financial
Statements and Supplementary Data". We also consent to the incorporation by
reference of our report dated June 11, 2003 relating to the financial statement
schedule, which appears in this Form 10-K.

/s/ PRICEWATERHOUSECOOPERS LLP

PricewaterhouseCoopers LLP
Pittsburgh, Pennsylvania
July 23, 2003

68

SCHEDULE II

H. J. HEINZ COMPANY AND SUBSIDIARIES

VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FISCAL YEARS ENDED APRIL 30, 2003, MAY 1, 2002 AND MAY 2, 2001
(THOUSANDS OF DOLLARS)

NOTES:

(1) Principally reserves on assets sold, written-off, reclassified or spun off.

(2) The net change in the valuation allowance for deferred tax assets was a
decrease of $37.6 million. The decrease was due to reductions in the
valuation allowance related to decreases in deferred tax assets for foreign
tax credit carryforward ($39.2 million) and loss carryforwards ($7.7
million). The decrease was partially offset by increases in the valuation
allowance related to additional deferred tax assets for loss carryforwards
($6.6 million). See Note 6 to the Consolidated Financial Statements on pages
44 through 45 of this Form 10-K for the fiscal year ended April 30, 2003.

(3) The net change in the valuation allowance for deferred tax assets was an
increase of $40.1 million. The increase was due to increases in the
valuation allowance related to additional deferred tax assets for foreign
tax credit carryforward ($36.8 million) and loss carryforwards ($13.6
million). The increase was partially offset by decreases in the valuation
allowance related to reduction in deferred tax assets for loss carryforwards
($10.3 million). See Note 6 to the Consolidated Financial Statements on
pages 44 through 45 of this Form 10-K for the fiscal year ended May 1, 2002.

(4) The net change in the valuation allowance for deferred tax assets was a
decrease of $14.8 million. The decrease was due to reductions in the
valuation allowance related to deferred tax assets for foreign tax credit
carryforward ($11.0 million) and loss carryforwards ($11.9 million). The
decrease was partially offset by an increase in the valuation allowance
related to deferred tax assets for loss carryforwards ($8.1 million). See
Note 6 to the Consolidated Financial Statements on pages 44 through 45 of
this Form 10-K for the fiscal year ended May 2, 2001.

EXHIBIT INDEX