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 28, 2004

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. [X]

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

As of May 28, 2004 the aggregate market value of the Registrant's voting
stock held by non-affiliates of the Registrant was approximately
$15,933,752,021.

The number of shares of the Registrant's Common Stock, par value $.25 per
share, outstanding as of May 28, 2004, was 352,442,803 shares.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant's Proxy Statement for the Annual Meeting of
Shareholders to be held on September 8, 2004, which will be filed with the
Securities and Exchange Commission within 120 days after the end of the
Registrant's fiscal year ended April 28, 2004, 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 prior 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 2004, 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 2005 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 28, 2004,
approximately 37,500 persons around the world.

Segment information is set forth in this report on pages 58 through 61 in
Note 16, "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 state-

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ments contained in the Company's filings with the Securities and Exchange
Commission and in its reports to shareholders. These forward-looking statements
are based on management's views and assumptions of future events and financial
performance. The words or phrases "will likely result," "are expected to," "will
continue," "is anticipated," "should," "estimate," "project," "target," "goal",
"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
Company's 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, as well as changes in consumer preference;

- 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, the availability of new acquisition and joint
venture opportunities and the success of acquisitions, joint ventures,
divestitures and other business combinations;

- The Company's ability to achieve its cost savings objectives, including
any restructuring programs, SKU rationalization programs, working capital
initiatives or other programs;

- 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, nationalization 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;

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- 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 and large global customers;

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

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

- 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, except as required by the securities
laws.

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, 2003.

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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, until their successors are
elected, or until their earlier resignation or removal. The annual election of
officers is scheduled to occur on September 8, 2004.

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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 28 under the caption "Stock Market Information", in Item
7--"Management's Discussion and Analysis of Financial Condition and Results of
Operations", and on pages 61 through 62 in Note 17, "Quarterly Results" in Item
8--"Financial Statements and Supplementary Data."

In the fourth quarter of Fiscal 2004, the Company repurchased the following
number of shares of its common stock:

Of the shares repurchased, 1,131,150 shares were acquired under the share
repurchase program authorized by the Board of Directors on June 9, 1999 for a
maximum of 20 million shares. Once that program was completed in April, the
remaining 118,850 shares were repurchased in April under the 15 million program
authorized by the Board of Directors on January 14, 2004. All repurchases were
made in open market transactions. As of April 28, 2004, the maximum number of
shares that may yet be purchased under the 2004 program is 14,881,150.

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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 2000 through
2004. All amounts are in thousands except per share data.

(1) Long-term debt, exclusive of current portion, includes $125.3 million,
$294.8 million and $23.6 million of hedge accounting adjustments associated
with interest rate swaps at April 28, 2004, April 30, 2003 and May 1, 2002,
respectively. There were no interest rate swaps at May 2, 2001 and May 3,
2000. Long-term debt includes the effects of the prospective classification
of Heinz Finance Company's $325 million of mandatorily redeemable preferred
shares from minority interest to long-term debt beginning in the second
quarter of Fiscal 2004 as a result of the adoption of Statement of Financial
Accounting Standards ("SFAS") No. 150.

Fiscal 2004 results from continuing operations include a gain of $26.3
million ($13.3 million after-tax) related to the disposal of the bakery business
in Northern Europe, costs of $17.1 million pretax ($11.0 million after-tax),
primarily due to employee termination and severance costs related to on-going
efforts to reduce overhead costs, and $4.0 million pretax ($2.8 million
after-tax) due to the write down of pizza crust assets in the United Kingdom.

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 costs 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).

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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.

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.

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

EXECUTIVE OVERVIEW

We manufacture and market an extensive line of processed food products
throughout the world. Our 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. Our products are sold
under highly competitive conditions, with many large and small competitors. We
regard our principal competition to be other manufacturers of processed foods,
including branded retail products, foodservice products and private label
products that compete with us for consumer preference, distribution, shelf space
and merchandising support. Product quality and consumer value are important
areas of competition.

The following is a summary of the business measures for Fiscal 2004 and
2003 utilized by Senior Management and the Board of Directors to gauge our
business operating performance. Management believes the adjusted GAAP measures
provide additional clarity in understanding the trends of the business as they
provide management with a view of the business excluding special items in both
periods:

KEY PERFORMANCE MEASURES

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

(Totals may not add due to rounding)

(1) Adjusted gross profit for Fiscal 2004 excludes from reported gross profit
($3,088.3 million) $4.0 million for the write down of pizza crust assets in
the United Kingdom. Adjusted gross profit for Fiscal 2003 excludes from
reported gross profit ($2,932.5 million) Del Monte transaction related costs
and costs to reduce overhead of the remaining businesses of $6.1 million and
losses on the exit of non-strategic businesses of $47.3 million.

(2) Adjusted operating income for Fiscal 2004 excludes from reported operating
income ($1,379.3 million) the gain on the disposal of a bakery business in
Northern Europe of $28.8 million, reorganization costs of $17.1 million, and
$4.0 million for the write down of pizza crust assets in the United Kingdom.
Adjusted operating income for Fiscal 2003 excludes from reported operating
income ($1,173.8 million) Del Monte transaction related costs and costs to
reduce

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overhead of the remaining businesses of $125.0 million and losses on the exit of
non-strategic businesses of $62.4 million.

(3) Net debt is defined as total debt, less cash and cash equivalents and the
value of interest rate swaps of $125.3 million and $294.8 million for Fiscal
2004 and 2003, respectively. Also, in order to provide more meaningful
comparisons in prior periods, the current period calculation of net debt is
shown excluding the effects of the prospective classification of Heinz
Finance Company's $325 million of mandatorily redeemable preferred shares
from minority interest to long-term debt beginning in the second quarter of
Fiscal 2004 as a result of the adoption of Statement of Financial Accounting
Standards ("SFAS") No. 150. Management uses the net debt balance of the
Company as an additional important measure of the Company's liquidity and
financial condition.

(4) Adjusted Pre-Tax ROIC for Fiscal 2004 excludes from reported ROIC (24.5%)
the gain on the disposal of a bakery business in Northern Europe of $26.3
million, reorganization costs of $17.1 million, and $4.0 million for the
write down of pizza crust assets in the United Kingdom. Adjusted Pre-Tax
ROIC for Fiscal 2003 excludes from reported ROIC (19.0%) Del Monte
transaction related costs and costs to reduce overhead of the remaining
businesses of $164.6 million and losses on the exit of non-strategic
businesses of $62.4 million.

The Fiscal 2004 results were in-line with the Company's expectations as:

- Overall, net sales increased 2.2% to $8.41 billion. Volume improved 0.4%,
driven by solid growth in the U.S. Foodservice and Asia/Pacific segments.
These increases were partially offset by declines in Europe, relating
primarily to a reduction in promotional support and trade inventories in
advance of a major restage of the Italian infant feeding business in
Fiscal 2005. Overall, this positive volume performance was a solid result
in light of our significant reduction of low volume and low profit Stock
Keeping Units ("SKUs"). Average pricing was down 0.3%, largely as a
result of our Every Day Low Pricing strategy in U.S. Consumer Products
and market price pressure in our Tegel poultry business in New Zealand.
Foreign exchange for the year contributed 7.3% to growth, which was
largely offset by net divestitures and the deconsolidation of Zimbabwe in
Fiscal 2003.

- Adjusted gross profit margin (defined as adjusted gross profit as a
percentage of net sales) increased by 50 basis points to 36.7%, primarily
driven by our continuing focus on process and system improvements,
productivity initiatives and elimination of low-profit SKU's. These gains
were partially offset by lower average net pricing and increased supply
chain costs in the European seafood business.

- Consumer marketing was stable for the year at 3.6% of net sales as
resources were focused on improved pricing.

- Adjusted operating income increased 0.8% as improvements in the base
business were partially offset by the negative impact of the
deconsolidation of Zimbabwe and increased pension costs.

- Capital expenditures were 2.8% of net sales, resulting in a two-year
average of 2.3% for Fiscal 2003 and 2004.

- The cash conversion cycle continued to show strong improvement, dropping
by 11 days to 64 days. As a result, our operating free cash flow was very
strong for the year, improving 35.2% to $1.02 billion. This strong
operating free cash continues to allow the Company to reinvest in the
business, pay dividends, repurchase shares, and retire debt.

- Net Debt, excluding the impact of SFAS No. 150, was $490 million better
than last year, bringing the cumulative reduction to $1.8 billion over
two years.

- Adjusted pre-tax ROIC was up 200 basis points at 24.4%.

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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 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.

In accordance with accounting principles generally accepted in the United
States of America, the operating results related to these businesses spun off to
Del Monte have been treated as discontinued operations in the Company's
consolidated statements of income. Income from discontinued operations for
Fiscal 2004 relates to a favorable settlement of prior year tax liabilities
related to the spun off businesses. The discontinued operations generated sales
of $1,091.3 million and $1,817.0 million and net income of $88.7 million (net of
$35.4 million in tax) and $158.7 million (net of $69.4 million in tax) for
Fiscal 2003 and 2002, respectively.

DIVESTITURES AND OTHER REORGANIZATION COSTS

During Fiscal 2004, the Company sold its bakery business in Northern Europe
for $57.9 million. The transaction resulted in a pretax gain of $26.3 million
($13.3 million after-tax) which was used to offset the reorganization costs
discussed below and was recorded as a component of Selling, General and
Administrative expense ("SG&A"). This sale impacted approximately 70 employees.

Additionally, the Company recognized reorganization costs of $17.1 million
pretax ($11.0 million after-tax) in Fiscal 2004. These costs were recorded as a
component of SG&A and were primarily due to employee termination and severance
costs. Also, during Fiscal 2004, the Company wrote down pizza crust assets in
the United Kingdom totaling $4.0 million pretax ($2.8 million after-tax) which
has been included as a component of cost of products sold. Management estimates
that these actions impacted approximately 100 employees.

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 SG&A, and $39.6 million in other expenses, net. Management
estimates that these actions impacted approximately 400 employees excluding
those who were transferred to Del Monte.

In Fiscal 2003, losses on the exit of non-strategic businesses, primarily
the U.K. 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 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. Management estimates that these
actions impacted approximately 600 employees.

During Fiscal 2004, the Company utilized $49.7 million in severance and
exit cost accruals related to reorganization costs.

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STREAMLINE

In the fourth quarter of Fiscal 2001, the Company announced a restructuring
initiative named "Streamline". This initiative included a worldwide
organizational restructuring aimed at reducing overhead costs 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.

RESULTS OF CONTINUING OPERATIONS

In the first quarter of Fiscal 2004, the Company changed its segment
reporting to reflect changes in organizational structure and the management of
its business. The Company is now managing and reporting its North American
businesses under two segments, which are designated North American Consumer
Products and U.S. Foodservice. Certain changes were also made to the composition
of the remaining segments. These changes involve the reclassification of certain
operating and non-operating businesses between existing segments. Prior periods
have been restated to conform with the current presentation. (Segment
information is set forth in this report on pages 58 through 61 in Note 16,
"Segment Information" in Item 8--"Financial Statements and Supplementary Data.")

FISCAL YEARS ENDED APRIL 28, 2004 AND APRIL 30, 2003

Sales for Fiscal 2004 increased $177.7 million, or 2.2%, to $8.41 billion.
Sales were favorably impacted by volume of 0.4% and exchange translation rates
of 7.3%. The favorable volume impact is primarily due to strong increases in the
U.S. Foodservice and Asia/Pacific segments. These increases were partially
offset by the impact of SKU rationalization and declines in Europe, relating
primarily to a reduction in promotional support and trade inventories in advance
of a major restage of the Italian infant feeding business in Fiscal 2005. Lower
pricing decreased sales by 0.3%, primarily reflecting the Company's goal to
achieve more competitive net pricing under the Every Day Low Pricing Strategy in
the U.S. retail businesses as well as market price pressure in the Tegel poultry
business in New Zealand. Divestitures, net of acquisitions, reduced sales 5.3%
due primarily to the deconsolidation of Zimbabwe in the third quarter of the
prior year. Domestic operations contributed approximately 38% of consolidated
sales in Fiscal 2004 and Fiscal 2003.

Gross profit increased $155.8 million, or 5.3%, to $3.09 billion, and the
gross profit margin increased to 36.7% from 35.6%. The gross profit margin
increase was primarily driven by the Company's continuing focus on process and
system improvements, productivity initiatives and elimination of less profitable
SKU's. These gains were partially offset by lower overall net pricing for the
Company and increased supply chain costs in the European seafood business. The
aggregate increase in gross profit also benefited from favorable exchange
translation rates, partially offset by the impact of higher pension costs,
divestitures and the write down of U.K. pizza crust assets in the U.K. For
Fiscal 2003, gross profit was also impacted by Del Monte transaction related
costs, costs to reduce overhead of the remaining businesses of $6.1 million and
losses on the exit of non-strategic businesses of $47.3 million.

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SG&A decreased $49.7 million, or 2.8%, to $1.71 billion, and, as a
percentage of sales, was reduced to 20.3% from 21.4%. The decrease is primarily
due to the gain recorded on the sale of the Northern European Bakery business in
the current year, and decreased marketing expense primarily in the North
American Consumer Products segment reflecting the Company's goal to achieve more
competitive net pricing as discussed above. Additionally, SG&A was impacted in
Fiscal 2004 by reorganization costs of $17.1 million, and in Fiscal 2003 by Del
Monte transaction related costs, costs to reduce overhead of the remaining
businesses of $118.9 million, and losses on the exit of non-strategic businesses
of $15.1 million. The favorable impact of these items was offset by increases in
pension and personnel costs.

Total marketing support (recorded either as a reduction of revenue or as a
component of SG&A) increased $179.4 million, or 8.0%, to $2.44 billion on a
sales increase of 2.2%.

Operating income increased $205.4 million, or 17.5%, to $1.38 billion, and
increased as a percentage of sales to 16.4% from 14.3% as a result of the
changes noted above.

Net interest expense decreased $3.9 million, to $188.5 million, due to
lower debt balances and lower interest rates. This decrease was partially offset
by the prospective classification of the Heinz Finance Company's dividend on its
mandatorily redeemable preferred shares to interest expense from other expense.
This treatment is in accordance with the adoption of SFAS No. 150 (see below for
further discussion) beginning in the second quarter of Fiscal 2004. Other
expense, net, decreased $90.4 million, to $22.2 million, attributable to a $39.6
million pretax charge related to early retirement of debt in Fiscal 2003,
decreased minority interest expense as a result of the Zimbabwe deconsolidation,
the SFAS No. 150 reclassification previously discussed and increased equity
income. The effective tax rate for the current year was 33.3% compared to 36.1%
last year due primarily to improved country mix and effective tax planning. The
current year effective tax rate was unfavorably impacted by 0.4 percentage
points due to the sale of the Northern European bakery business and the prior
year effective tax rate was unfavorably impacted by 1.6 percentage points due in
part to the loss on the disposal of a North American fish and vegetable
business.

Income from continuing operations for Fiscal 2004 was $778.9 million
compared to $555.4 million in Fiscal 2003 (before the cumulative effect of
change in accounting principle related to the adoption of SFAS No. 142). Diluted
earnings per share was $2.20 in the current year compared to $1.57 in the prior
year (before the cumulative effect of change in accounting principle related to
the adoption of SFAS No. 142).

The impact of fluctuating exchange rates for Fiscal 2004 remained
relatively consistent on a line-by-line basis throughout the consolidated
statement of income.

FISCAL YEAR 2004 OPERATING RESULTS BY BUSINESS SEGMENT

NORTH AMERICAN CONSUMER PRODUCTS

Sales of the North American Consumer Products segment decreased $49.1
million, or 2.3%. Sales volume decreased 0.2% as strong increases in Heinz
ketchup and frozen potatoes were more than offset by declines in SmartOnes
frozen entrees, related to the increased popularity of low-carb dieting, which
drove declines in the nutritional frozen entree category in the U.S., as well as
the effects of the rationalization of Boston Market side dishes and Hot Bites
snacks. Lower pricing decreased sales 1.6% consistent with our strategy to
obtain more competitive consumer price points on Boston Market HomeStyle meals,
Heinz gravy, Classico pasta sauces, SmartOnes frozen entrees and Delimex frozen
snacks. Sales increased 0.4% due to the Canadian acquisition of Unifine
Richardson B.V., which manufactures and sells salad dressings, sauces, and
dessert toppings. Divestitures in the prior year reduced sales 2.9% and
favorable exchange translation rates increased sales 1.9%.

15

Gross profit decreased $2.9 million, or 0.3%, to $872.8 million; however,
the gross profit margin increased to 42.3% from 41.4% as manufacturing cost
savings, reflecting significant productivity initiatives and more effective and
efficient new product launches, offset unfavorable pricing and higher commodity
costs. In addition, reorganization costs unfavorably impacted gross profit by
$4.9 million in Fiscal 2003. Operating income increased $82.5 million, or 21.1%,
to $474.1 million, primarily due to decreased consumer marketing expenses
related to the prior year launch of Easy Squeeze!, Boston Market frozen entrees
and Hot Bites snacks, and Ore-Ida Funky Fries. In addition, Fiscal 2004
operating income was unfavorably impacted by reorganization costs of $5.3
million and Fiscal 2003 operating income was unfavorably impacted by Del Monte
transaction related costs and costs to reduce overhead of the remaining
businesses and losses on the exit of non-strategic businesses of $60.9 million.

U.S. FOODSERVICE

U.S. Foodservice's sales increased $113.2 million, or 8.6%. Sales volume
increased sales 2.4% primarily due to increases in Heinz ketchup, Escalon
processed tomato products, Dianne's frozen desserts and single serve condiments
as a result of new customers, successful product innovation and a strengthening
trend in the U.S. restaurant industry. Higher pricing increased sales by 2.7%
chiefly due to Heinz ketchup and single serve condiments. Acquisitions, net of
divestitures, increased sales 3.6%, primarily due to the acquisition of
Truesoups LLC, a manufacturer and marketer of premium frozen soups.

Gross profit increased $34.8 million, or 9.3%, to $409.3 million, and the
gross profit margin increased slightly to 28.6% from 28.5%. These increases are
primarily due to favorable pricing and sales mix, partially offset by higher
commodity costs. In addition, reorganization costs unfavorably impacted gross
profit by $1.1 million for Fiscal 2003. Operating income increased $19.4
million, or 10.1%, to $211.1 million, primarily due to the growth in gross
profit, partially offset by the impact of higher sales volume on Selling &
Distribution expenses ("S&D") and increased General & Administrative expenses
("G&A") attributable to increased personnel and systems costs. In addition,
reorganization costs unfavorably impacted operating income by $3.9 million in
Fiscal 2004 and Del Monte transaction related costs and costs to reduce overhead
of the remaining businesses and losses on the exit of non-strategic businesses
unfavorably impacted operating income by $5.9 million for Fiscal 2003.

EUROPE

Heinz Europe's sales increased $251.2 million, or 8.3%. Favorable exchange
translation rates increased sales by 12.2%. Volumes declined 1.4% due to
decreases in Italian infant feeding, in advance of a restaging in early Fiscal
2005, and in convenience meals, due to promotional timing and the impact of our
previously announced program to reduce low-margin SKU's. These decreases were
partially offset by increases in Heinz ketchup from the successful introduction
of the top-down bottle, and increases in Heinz salad cream, Petite Navire
seafood due to the rebound from the prior year recall and frozen food products.
Pricing decreased 0.3% as price increases on Heinz beans, ready-to-serve soups,
and pasta meals were offset by increased trade promotion spending related to
seafood. Also, prices were lower in Northern Europe as a result of the
Netherland's largest retailer rolling back prices in excess of 8% beginning in
the second quarter. Divestitures reduced sales 2.2%, primarily related to the
sale of the U.K. frozen pizza business, the Northern European bakery business
and a foodservice business in Italy.

Gross profit increased $128.8 million, or 11.3%, to $1,264.8 million, and
the gross profit margin increased to 38.5% from 37.4%. The increase in gross
profit is primarily due to favorable exchange translation rates, partially
offset by increased supply chain costs in our European seafood business, the
volume-related impact of reduced promotions in Heinz's Italian baby food
business, the impact of divestitures and the write down of the U.K. pizza
assets. Additionally, gross profit was unfavorably impacted by $47.4 million for
reorganization costs and losses on the
16

exit of non-strategic businesses in Fiscal 2003. Operating income increased
$97.4 million, or 18.0%, to $639.2 million, primarily attributable to the
favorable change in gross profit and the gain on the sale of the Northern
European bakery business, partially offset by increased G&A expense primarily
related to increased pension expense in the U.K. Operating income was
unfavorably impacted by $58.9 million for reorganization costs and losses on the
exit of non-strategic businesses in Fiscal 2003.

ASIA/PACIFIC

Sales in Asia/Pacific increased $179.7 million, or 16.7%. Favorable
exchange translation rates increased sales by 16.2%. Volume increased sales 2.6%
primarily due to strong sales of Heinz ketchup, Tegel poultry in New Zealand,
Heinz soups in Australia, and ABC sauces in Indonesia. Lower pricing decreased
sales 1.8% related to lower prices on Tegel poultry in New Zealand, partially
offset by price increases in Indonesia on ABC sauces and juice concentrates.
Divestitures, net of acquisitions, reduced sales 0.5%.

Gross profit increased $67.9 million, or 19.8%, to $410.5 million, and the
gross profit margin increased to 32.6% from 31.8%. These increases are primarily
due to favorable exchange translation rates and supply chain improvements in our
Australian and Wattie's businesses, partially offset by Tegel poultry's lower
pricing and higher commodity costs. Operating income increased $45.7 million, or
45.5%, to $146.2 million, primarily due to the growth in gross profit and G&A
reductions in our Australian and Wattie's businesses, partially offset by the
impact of exchange translation rates on SG&A expenses. Additionally, operating
income was unfavorably impacted by reorganization costs of $6.6 million in
Fiscal 2003.

OTHER OPERATING ENTITIES

Sales for Other Operating Entities decreased $317.3 million, or 45.9%,
primarily due to the deconsolidation of the Company's Zimbabwe operations in
Fiscal 2003. The deconsolidation also impacted gross profit and operating
income. Gross profit decreased $83.1 million, or 40.9%, to $120.2 million, and
operating income decreased $81.3 million, or 73.1%, to $29.9 million. Excluding
the Zimbabwe operations in the prior year, sales increased 14.3%, primarily due
to volume increases of 6.2%, and operating income decreased 15.3%. Other than
the impact of Zimbabwe, the other significant impact on operating income was the
recall in the third quarter of Fiscal 2004 of a soy-based infant formula product
sold under the Remedia brand in Israel.

Zimbabwe remains in a period of economic uncertainty. Should the current
situation continue, the Company could experience disruptions and delays
associated with 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 sheets.
Although the Company's business continues to operate and it is able to source
raw materials, the country's economic situation remains uncertain and the
Company's ability to recover its investment could become impaired.

FISCAL YEARS ENDED APRIL 30, 2003 AND MAY 1, 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 North American Consumer
Products and U.S. Foodservice 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 North American Consumer Products
segment, as well as the continued impact of the previously announced SKU
rationalization of low-margin products across the Company. Divestitures

17

reduced sales by 1.8%. Domestic operations contributed approximately 38% of
consolidated sales in Fiscal 2003 compared to 41% in Fiscal 2002.

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 gross profit
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 Del Monte
transaction related costs and costs to reduce overhead of the remaining
businesses and losses on the exit of non-strategic businesses of $53.4 million
in Fiscal 2003. Fiscal 2002 operating income was also unfavorably impacted by
$3.8 million for net Streamline restructuring charges and implementation costs.

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 Del Monte transaction related costs and costs to reduce overhead
of the remaining businesses and losses on the exit of non-strategic businesses
of $134.0 million in Fiscal 2003, increased S&D expenses, increased marketing
spend across all segments and increased G&A expenses in the Europe and
Asia/Pacific segments. Fiscal 2002 SG&A was also impacted by $8.6 million for
net Streamline restructuring charges and implementation costs.

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 Del Monte transaction related costs and costs
to reduce overhead of the remaining businesses and losses on the exit of
non-strategic businesses of $187.4 million in Fiscal 2003 and the North American
Consumer Products and U.S. Foodservice segments 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 net Streamline restructuring charges and implementation costs.

Net interest expense decreased $12.0 million to $192.4 million, driven by
lower interest rates and lower average debt. 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 the
joint venture in Zimbabwe. The effective tax rate for Fiscal 2003 was 36.1%
compared to 35.7% in Fiscal 2002. The effective tax rate was unfavorably
impacted by 1.6 percentage points in Fiscal 2003 due in part to the loss on
disposal of a North American fish and vegetable business.

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 in the prior 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.

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

FISCAL YEAR 2003 OPERATING RESULTS BY BUSINESS SEGMENT

NORTH AMERICAN CONSUMER PRODUCTS

Sales of the North American Consumer Products segment increased $8.1
million, or 0.4%, to $2.11 billion. Acquisitions, net of divestitures, increased
sales 3.3%, due primarily to the prior year acquisitions of Classico and Aunt
Millie's pasta sauces, Mrs. Grass Recipe soups, Wyler's bouillons and soups,
Delimex frozen Mexican foods, Poppers retail frozen appetizers and licensing
rights to the T.G.I. Friday's brand of frozen snacks and appetizers. Higher
pricing increased sales 0.5%, due
18

mainly to Heinz ketchup, Jack Daniels marinades and grilling sauces, Ore-Ida
frozen potatoes and a reduction in trade promotions related to the launch of Hot
Bites in the prior year, partially offset by Boston Market HomeStyle meals and
appetizers and SmartOnes frozen entrees. Sales volume decreased 3.5% as growth
in SmartOnes frozen entrees and specialty sauces was offset by decreases
primarily in Heinz ketchup and vinegar, Boston Market HomeStyle side dishes,
Ore-Ida Funky Fries and Hot Bites. Favorable exchange translation rates
increased sales 0.3%.

Gross profit decreased $27.2 million, or 3.0%, to $875.7 million, and the
gross profit margin decreased to 41.4% from 42.9% due primarily to unfavorable
sales mix, increased manufacturing costs and costs to exit the Ore-Ida Funky
Fries and Hot Bites product lines, partially offset by reduced amortization
expense on intangible assets with indefinite lives, favorable pricing and
acquisitions. Gross profit was also unfavorably impacted in Fiscal 2003 by $4.9
million for Del Monte transaction related costs and costs to reduce overhead of
the remaining businesses, and in Fiscal 2002 by $2.4 million for net Streamline
restructuring charges and implementation costs. Operating income decreased
$114.1 million, or 22.6%, to $391.7 million due primarily to the change in gross
profit, higher S&D and increased marketing primarily behind Heinz Easy Squeeze!
ketchup, Classico pasta sauce, SmartOnes frozen entrees and Ore-Ida frozen
potatoes. Additionally, operating income was unfavorably impacted by Del Monte
transaction related costs and costs to reduce overhead of the remaining
businesses and losses on the exit of non-strategic businesses in Fiscal 2003 of
$60.9 million and in Fiscal 2002 by net Streamline restructuring charges and
implementation costs of $6.1 million.

U.S. FOODSERVICE

Sales of the U.S. Foodservice segment increased $32.9 million, or 2.6%, to
$1.32 billion. Acquisitions increased sales 2.3%, due to the acquisition of
Dianne's frozen desserts. Lower pricing decreased sales 0.3%. Sales volume
increased 0.5% due primarily to Heinz ketchup and Dianne's frozen desserts.

Gross profit decreased $2.2 million, or 0.6%, to $374.5 million, and the
gross profit margin decreased to 28.5% from 29.4% due primarily to unfavorable
sales mix and increased manufacturing costs, partially offset by favorable
pricing. Operating income decreased $31.0 million, or 13.9%, to $191.7 million
due primarily to higher S&D and G&A expenses, increased marketing primarily
behind the ketchup "Insist on Heinz" campaign. Operating income was also
unfavorably impacted by costs to reduce overhead of the remaining businesses and
losses on the exit of non-strategic businesses in Fiscal 2003 of $5.9 million.

EUROPE

Heinz Europe's sales increased $300.9 million, or 11.0%, to $3.04 billion.
Favorable exchange translation rates increased sales by 11.5%. Higher pricing
increased sales 1.5%, primarily due to Heinz beans, ketchup and soups. Lower
volume decreased sales 1.3%, driven primarily by planned SKU rationalizations
and frozen pizza, partially offset by volume increases in ketchup and frozen
entrees. Divestitures reduced sales by 0.7%.

Gross profit increased $101.4 million, or 9.8%, to $1.14 billion; however,
the gross profit margin decreased to 37.4% from 37.8%. 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 reorganization
costs and losses on the exit of non-strategic businesses in Fiscal 2003.
Operating income increased $12.8 million, or 2.4%, to $541.7 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 reorganization costs and losses on the exit
of non-strategic businesses, and Fiscal 2002 operating income was unfavorably
impacted by net Streamline restructuring charges and implementation costs of
$3.6 million.

19

ASIA/PACIFIC

Sales in Asia/Pacific increased $166.3 million, or 18.2%, to $1.08 billion.
Favorable exchange translation rates increased sales by 12.9%. Higher pricing
increased sales 3.8%, primarily due to Heinz ready-to-serve soups, poultry,
juices/drinks and sauces. Volume decreased sales 0.1%, driven primarily by
declines driven by planned SKU rationalizations and decreases in cooking oils
and frozen vegetables offset by increases in sauces, poultry and ketchup.
Acquisitions, net of divestitures, increased sales by 1.6%.

Gross profit increased $73.7 million, or 27.4%, to $342.7 million, and the
gross profit margin increased to 31.8% from 29.5%. These increases were due
primarily to favorable foreign exchange 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 $29.0 million, or
40.5%, to $100.5 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 reorganization costs.

OTHER OPERATING ENTITIES

Sales for Other Operating Entities increased $114.6 million, or 19.8%, to
$691.9 million primarily due to favorable pricing in Zimbabwe. Gross profit
increased $28.5 million, or 16.3%, due primarily to favorable pricing. Operating
income increased $35.2 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.

LIQUIDITY AND FINANCIAL POSITION

Cash provided by continuing operating activities in Fiscal 2004 increased
by more than 37% to $1,249.0 million from $906.0 million last year. The increase
in Fiscal 2004 versus Fiscal 2003 is primarily due to reductions in working
capital, particularly accounts receivable and accounts payable, across the
Company which resulted in the 11 day improvement in the Company's cash
conversion cycle versus the year ago period. The Company contributed $202
million to its pension plans in Fiscal 2004 compared to $224 million of
contributions in Fiscal 2003.

Cash used for investing activities totaled $261.1 million compared to cash
provided by investing activities of $961.1 million last year. Cash provided by
the spin-off of assets to Del Monte was $1,063.6 million in the prior year.
Acquisitions, net of divestitures, used $41.7 million in cash in Fiscal 2004
compared to providing $41.4 million in the prior year. Capital expenditures
totaled $232.0 million compared to $154.0 million last year and are expected to
increase slightly in Fiscal 2005 when compared with Fiscal 2004.

Cash used for financing activities totaled $643.9 million compared to
$1,416.5 million last year. The Company paid down $74.3 million in long-term
debt during Fiscal 2004, compared to $741.2 million last year. Payments on
commercial paper and short-term borrowings required $144.7 million in Fiscal
2004 compared to $176.2 million last year. Cash used for purchases of treasury
stock, net of proceeds from option exercises, was $57.4 million this year. There
were no treasury stock purchases in the prior year, and proceeds from option
exercises provided $7.5 million in the prior year. Dividend payments totaled
$379.9 million compared to $521.6 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. On March 10, 2004, the Company
announced that its Board of Directors approved a 5.5% increase in the annual
dividend on common stock for Fiscal 2005 (from 27 cents to 28.5 cents per
quarter), effective with the July 2004 dividend. Fiscal 2005 dividends are
expected to approximate $400 million.

20

The Company's primary measure of cash flow performance is operating free
cash flow. For Fiscal 2004, the Company achieved record operating free cash flow
totaling $1,017.0 million as compared to $752.1 million for the same period a
year ago, or an increase of 35.2%. The increase in operating free cash flow is
the result of higher net income and improved working capital performance,
partially offset by increased capital expenditures. The strong cash flow
performance allowed the Company to make voluntary contributions to several of
the Company's pension plans in the amount of $152 million. The Company
anticipates that operating free cash flow for Fiscal 2005 should be in the range
of $800 million to $1.0 billion.

In Fiscal 2004, the Company continued its debt reduction efforts by
retiring approximately $219 million of debt, offset by an increase in debt of
$89 million as a result of changes in foreign exchange rates. At April 28, 2004,
the Company's net debt was $3.7 billion. Excluding the reclassification of Heinz
Finance Company's preferred stock (see below for further discussion), net debt
would have been $3.3 billion, down approximately $490 million compared to the
year earlier period and down $1.8 billion since the beginning of Fiscal 2003.
The Company expects that over $400 million of long-term debt maturing in Fiscal
2005 will be retired.

The Company has enhanced its liquidity over the past year by reducing
short-term debt to $11.4 million at April 28, 2004 from $146.8 million at April
30, 2003. Over the same time period, cash and cash equivalents have increased by
47.2% to $1.18 billion from $801.7 million. The Company's cash balance together
with its anticipated strong operating cash flow and access to committed and
uncommitted credit facilities and the capital market, if required, should enable
the Company to meet its cash requirements for operations, including capital
expansion programs and dividends to shareholders.

Since the beginning of Fiscal 2002, the Company has significantly increased
the proportion of long-term debt to total debt such that at April 28, 2004
long-term debt represented 91.2% 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 $2.875 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.

Return on average shareholders' equity ("ROE") was 51.6% in Fiscal 2004,
34.7% in Fiscal 2003 and 54.8% in Fiscal 2002. ROE was unfavorably impacted by
9.9% in Fiscal 2003 related to Del Monte transaction related costs, costs to
reduce overhead of the remaining business and losses on the exit of
non-strategic businesses, and 0.6% in Fiscal 2002 related to restructuring and
implementation costs of the Streamline initiative. Pretax return on average
invested capital ("ROIC") was 24.5% in Fiscal 2004, 19.0% in Fiscal 2003 and
22.7% in Fiscal 2002. ROIC was favorably impacted by 0.1% in Fiscal 2004 related
to the gain on the disposal of a bakery business in Northern Europe offset by
reorganization costs and the write down of pizza crust assets in the United
Kingdom. ROIC was unfavorably impacted by 3.5% in Fiscal 2003 related to Del
Monte transaction related costs, costs to reduce overhead of the remaining
business and losses on the exit of non-strategic businesses, and unfavorably
impacted by 0.2% in Fiscal 2002 related to restructuring and implementation
costs of the Streamline initiative.

In September 2001, the Company and H.J. Heinz Finance Company, a subsidiary
of the Company, entered into an $800 million 364-Day Credit Agreement, and a
$1.5 billion Five-Year Credit Agreement, expiring in September 2006. In
September 2003, the 364-day agreement was renewed and the borrowing amount was
reduced to $600 million. 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 $944 million of
foreign lines of credit available at April 28, 2004.

21

As of April 28, 2004, 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, 2003, the securities were remarketed at a coupon of 5.772%.

At April 28, 2004, the Company's long-term debt ratings were A at Standard
& Poor's and Fitch and A-3 at Moody's and the Company's short-term debt ratings
were A-1 at Standard & Poor's, F-1 at Fitch and P-2 at Moody's.

In Fiscal 2004, the cash requirements of reorganization costs were
approximately $47.3 million. Fiscal 2005 cash requirements related to
reorganization costs are expected to be approximately $13 million.

CONTRACTUAL OBLIGATIONS AND OTHER COMMITMENTS

CONTRACTUAL OBLIGATIONS

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

The following table represents the contractual obligations of the Company
as of April 28, 2004.

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

OFF-BALANCE SHEET ARRANGEMENTS AND OTHER COMMITMENTS

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.

22

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 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 28, 2004, the Company's contracts to hedge forecasted
transactions mature in one year. 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 14 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 $3.67 billion (or $3.34 billion excluding the
reclassification of preferred stock) and $3.8 billion at April 28, 2004 and
April 30, 2003, respectively. The Company's debt obligations are summarized in
Note 8 to the consolidated financial statements.

In order to manage interest rate exposure, the Company utilizes interest
rate swaps in order to convert fixed-rate debt to floating. These derivatives
are primarily accounted for as fair value hedges. 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 28, 2004, a variance of 1/8% in the related interest rate
would cause annual interest expense

23

related to this debt to change by approximately $3.6 million. The following
table presents additional information related to interest rate contracts
designated as fair value hedges by the Company:

The Company had interest rate contracts with total notional amounts of
$907.6 million and $400 million at April 28, 2004 and April 30, 2003,
respectively, that do not meet the criteria for hedge accounting but effectively
mitigate interest rate exposures. These derivatives are accounted for on a full
mark-to-market basis through current earnings and their weighted average
maturity is less than twelve months from the fiscal year-end. In connection with
one of the interest rate swaps, the Company maintains a cash investment with the
counterparty and receives a market rate of interest. The amount of the cash
investment fluctuates and was $165.6 million at April 28, 2004. Net unrealized
gains related to these interest rate contracts totaled $4.5 million and $2.1
million at April 28, 2004 and April 30, 2003, respectively.

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 had no outstanding commodity contracts at
April 28, 2004. The Company held commodity contracts to hedge certain forecasted
purchases with a notional amount of $21 million at April 30, 2003. 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 significant at April 30, 2003.

EFFECT OF HYPOTHETICAL 10% FLUCTUATION IN MARKET PRICES: As of April 28,
2004, the potential gain or loss in the fair value of the Company's outstanding
foreign currency contracts and interest rate contracts assuming a hypothetical
10% fluctuation in currency rates and swap rates, 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.

24

RECENTLY ISSUED ACCOUNTING STANDARDS

In December, 2003, the Financial Accounting Standards Board ("FASB") issued
a revision to SFAS No. 132, "Employers' Disclosures about Pensions and Other
Postretirement Benefits." This revised statement requires additional annual
disclosures regarding types of pension plan assets, investment strategy, future
plan contributions, expected benefit payments and other items. The statement
also requires quarterly disclosure of the components of net periodic benefit
cost and plan contributions. The annual disclosures have been included in the
Company's Form 10-K for its fiscal year ended April 28, 2004, and the quarterly
disclosures will be required beginning in the first quarter of Fiscal 2005.

In December, 2003, the Medicare Prescription Drug, Improvement and
Modernization Act of 2003 ("the Act") was signed into law. The Act introduced a
prescription drug benefit under Medicare (Medicare Part D) and a federal subsidy
to sponsors of retirement health care plans that provide a benefit that is at
least actuarially equivalent to Medicare Part D. In accordance with FASB Staff
Position 106-1, the Company elected to defer recognizing the effects of the Act
on the accounting for its retirement health care plans in Fiscal 2004. In May
2004, the FASB issued Staff Position 106-2, providing final guidance on
accounting for the Act. The Staff Position 106-2 will be implemented by the
Company in the second quarter of Fiscal 2005. The Company is currently
evaluating the impact of this guidance on the Company's financial position,
results of operations and cash flows.

In December 2003, the FASB issued FASB Interpretation ("FIN") No. 46-R,
"Consolidation of Variable Interest Entities." FIN No. 46-R, which modifies
certain provisions and effective dates of FIN No. 46, sets forth criteria to be
used in determining whether an investment in a variable interest entity should
be consolidated, and is based on the general premise that companies that control
another entity through interests other than voting interests should consolidate
the controlled entity. The provisions of FIN No. 46 became effective for the
Company during its fourth quarter of Fiscal 2004. The adoption of this new
standard did not have a material impact on the Company's financial position,
results of operations or cash flows.

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 was effective for the Company for the second quarter of
Fiscal 2004. The adoption of SFAS No. 150 required the prospective
classification of Heinz Finance Company's $325 million of mandatorily redeemable
preferred shares from minority interest to long-term debt and the $5.1 million
quarterly preferred dividend from other expenses to interest expense beginning
in the second quarter ending October 29, 2003, with no resulting effect on the
Company's profitability.

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 transition 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 prominent 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.

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. As a result of adopting SFAS
No. 142, the Company recorded a transitional impairment charge which was
calculated as of May 2, 2002, and recorded as an effect of a change in
accounting principle in the fiscal year ended April 30, 2003, of $77.8 million.
There was no tax effect associated
25

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.

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 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.

Investments and Long-lived Assets -- Investments and 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

26

volume, revenue and expense growth rates, foreign exchange rates, market value
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 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, and 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 in which the Company operates a benefit plan) as of the measurement
date. The weighted average discount rate used to measure the projected benefit
obligation for the year ending April 28, 2004 was reduced to 5.8% as of April
28, 2004 from 5.9% as of April 30, 2003.

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 on 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 used to calculate annual expense
was 8.2% for the year ended April 28, 2004, 8.9% for the year ended April 30,
2003 and 9.2% for the year ended May 1, 2002. For purposes of calculating Fiscal
2005 expense, the weighted average rate of return will remain at 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 computes its annual tax rate based on the
statutory tax rates and tax planning opportunities available to it in the
various jurisdictions in which it earns income. Significant judgment is required
in determining the Company's annual tax rate and in evaluating its tax
positions. The Company establishes reserves when it becomes probable that a tax
return position that it considers supportable may be challenged and that the
Company may not succeed in completely defending that challenge. The Company
adjusts these reserves in light of changing facts and circumstances, such as the
settlement of a tax audit. The Company's annual tax rate includes the impact of
reserve provisions and changes to reserves. While it is often difficult to
predict the final outcome or the timing of resolution of any particular tax
matter, the Company believes that its reserves reflect the probable outcome of
known tax contingencies. Favorable resolution would be recognized as a reduction
to the Company's annual tax rate in the year of

27

resolution. The Company's tax reserves are presented in the balance sheet
principally within accrued income taxes.

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 in 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 2005 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.

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 May 28, 2004
approximated 47,600. The closing price of the common stock on The New York Stock
Exchange composite listing on April 28, 2004 was $38.08. 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 23 through 24.

28

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

TABLE OF CONTENTS

Report of Independent Registered Public Accounting Firm..... 30
Consolidated Statements of Income........................... 31
Consolidated Balance Sheets................................. 32
Consolidated Statements of Shareholders' Equity............. 34
Consolidated Statements of Cash Flows....................... 36
Notes to Consolidated Financial Statements.................. 37

29

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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 28, 2004 and April 30,
2003, and the results of their operations and their cash flows for each of the
three years in the period ended April 28, 2004, in conformity with accounting
principles generally accepted in the United States of America. In addition, in
our opinion, the financial statement schedule listed in the index appearing
under Item 15(a)(2) presents fairly, in all material respects, the information
set forth therein when read in conjunction with the related consolidated
financial statements. These financial statements and the financial statement
schedule are the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements and the financial
statement schedule based on our audits. We conducted our audits of these
statements in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards 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 6 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 4, 2004

30

H. J. HEINZ COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

See Notes to Consolidated Financial Statements.
31

H. J. HEINZ COMPANY AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

See Notes to Consolidated Financial Statements.
32

H. J. HEINZ COMPANY AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

See Notes to Consolidated Financial Statements.
33

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.
34

+ Includes income tax benefit resulting from exercised stock options.
++ Comprised of unrealized translation adjustment of $(161,376), minimum pension
liability of $(345,575) and deferred net losses on derivative financial
instruments $(6,575).
35

H. J. HEINZ COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

See Notes to Consolidated Financial Statements.
36

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 28, 2004, April
30, 2003 and May 1, 2002.

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 2004 presentation.

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.

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 undis-

37

H. J. HEINZ COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

counted 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. Revenue is recorded, net of sales incentives, and includes
shipping and handling charges billed to customers. Shipping and handling costs
are classified as part of cost of sales.

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 Statement of
Financial Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based
Compensation." Accordingly, no compensation cost has been recognized for the
Company's stock option plans. If the Company had elected to recognize
compensation cost based on the fair value of the options granted at grant date

38

H. J. HEINZ COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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 as follows:

The weighted-average fair value of options granted was $5.90 per share in
Fiscal 2004, $6.86 per share in Fiscal 2003 and $8.54 per share in Fiscal 2002.

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 28, 2004 and April 30, 2003, 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.
Derivatives with scheduled maturities of less than one year are included in
receivables or accounts payable, based on the instrument's fair value.
Derivatives with scheduled maturities beyond one year are presented as a
component of other non-current assets or other

39

H. J. HEINZ COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

liabilities, 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.

2. RECENTLY ISSUED ACCOUNTING STANDARDS

In December, 2003, the Financial Accounting Standards Board ("FASB") issued
a revision to SFAS No. 132, "Employers' Disclosures about Pensions and Other
Postretirement Benefits." This revised statement requires additional annual
disclosures regarding types of pension plan assets, investment strategy, future
plan contributions, expected benefit payments and other items. The statement
also requires quarterly disclosure of the components of net periodic benefit
cost and plan contributions. The annual disclosures have been included in the
Company's Form 10-K for its fiscal year ended April 28, 2004, and the quarterly
disclosures will be required, beginning in the first quarter of Fiscal 2005.

In December, 2003, the Medicare Prescription Drug, Improvement and
Modernization Act of 2003 ("the Act") was signed into law. The Act introduced a
prescription drug benefit under Medicare (Medicare Part D) and a federal subsidy
to sponsors of retirement health care plans that provide a benefit that is at
least actuarially equivalent to Medicare Part D. In accordance with FASB Staff
Position 106-1, the Company elected to defer recognizing the effects of the Act
on the accounting for its retirement health care plans in Fiscal 2004. In May of
2004, the FASB issued Staff Position 106-2, providing final guidance on
accounting for the Act. The Staff Position 106-2 will be implemented by the
Company in the second quarter of Fiscal 2005. The Company is currently
evaluating the impact of this guidance on the Company's financial position,
results of operations and cash flows.

In December 2003, the FASB issued FASB Interpretation ("FIN") No. 46-R,
"Consolidation of Variable Interest Entities." FIN No. 46-R, which modifies
certain provisions and effective dates of FIN No. 46, sets forth criteria to be
used in determining whether an investment in a variable interest entity should
be consolidated, and is based on the general premise that companies that control
another entity through interests other than voting interests should consolidate
the controlled entity. The provisions of FIN No. 46 became effective for the
Company during the fourth quarter of Fiscal 2004. The adoption of this new
standard did not have a material impact on the Company's financial position,
results of operations or cash flows.

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 was effective for the Company for the second quarter of
Fiscal 2004. The adoption of SFAS No. 150 required the prospective
classification of Heinz Finance Company's $325 million of mandatorily redeemable
preferred shares from minority interest to long-term debt and the $5.1 million
quarterly preferred dividend from other expenses to interest expense beginning
in the second quarter ending October 29, 2003, with no resulting effect on the
Company's profitability.

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 transition 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 prominent disclosure about the effects of an entity's account-
40

H. J. HEINZ COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

ing 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.

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.

In accordance with accounting principles generally accepted in the United
States of America, the operating results related to these businesses spun off to
Del Monte have been treated as discontinued operations in the Company's
consolidated statements of income. Income from discontinued operations for
Fiscal 2004 relates to a favorable settlement of prior year tax liabilities
related to the spun off businesses. The discontinued operations generated sales
of $1,091.3 million and $1,817.0 million and net income of $88.7 million (net of
$35.4 million in tax) and $158.7 million (net of $69.4 million in tax) for
Fiscal 2003 and 2002, respectively.

4. ACQUISITIONS

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 had occurred at the beginning of each period presented, would not
be materially different from the results reported.

During 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.

The allocations of the purchase price resulted in goodwill of $588.5
million, which was assigned to the North American Consumer Products segment. Of
that amount, $375.3 million is expected to be deductible for tax purposes. In
addition, $192.1 million of intangible assets were

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H. J. HEINZ COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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).

The Company made several acquisitions in Fiscal 2004 and 2003 for a total
purchase price of $112.8 million and $13.6 million, respectively, none of which
were significant.

5. SPECIAL ITEMS

DIVESTITURES AND OTHER REORGANIZATION COSTS:

During Fiscal 2004, the Company sold its bakery business in Northern Europe
for $57.9 million. The transaction resulted in a pretax gain of $26.3 million
($13.3 million after-tax), which was used to offset the reorganization costs
discussed below and was recorded as a component of Selling, General and
Administrative expenses ("SG&A").

Additionally, the Company recognized $17.1 million pretax ($11.0 million
after-tax) of reorganization costs in Fiscal 2004. These costs were recorded as
a component of SG&A, and were primarily due to employee termination and
severance. Also, during Fiscal 2004, the Company wrote down pizza crust assets
in the United Kingdom totaling $4.0 million pretax ($2.8 million after-tax)
which has been included as a component of cost of products sold.

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.

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 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.

During Fiscal 2004, the Company utilized $49.7 million of severance and
exit cost accruals related to reorganization costs. Amounts included in accrued
expenses related to these initiatives totaled $13.2 million and $46.2 million at
April 28, 2004 and April 30, 2003, respectively.

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

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H. J. HEINZ COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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.

6. GOODWILL AND OTHER INTANGIBLE ASSETS

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 annual impairment tests are performed in the fourth quarter of each
fiscal year unless events suggest an impairment may have occurred in the
interim. No impairment charges were recognized in Fiscal 2004.

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

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H. J. HEINZ COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Income from continuing operations for Fiscal 2002 would have been $720.4
million ($45.2 million higher after tax) had the provisions of the new standards
been applied as of May 3, 2001.

In the first quarter of Fiscal 2004, the Company changed its segment
reporting to reflect changes in organizational structure and management of its
businesses (see footnote 16). The Company reallocated the goodwill previously
assigned to its Heinz North America and U.S. Frozen segments to the new North
American Consumer Products and U.S. Foodservice segments based on the relative
fair values of the underlying reporting units as of May 1, 2003.

Changes in the carrying amount of goodwill for the fiscal year ended April
28, 2004, by reportable segment, are as follows:

Trademarks and other intangible assets at April 28, 2004 and April 30,
2003, subject to amortization expense, are as follows:

Amortization expense for trademarks and other intangible assets subject to
amortization was $17.1 million for the fiscal year ended April 28, 2004. Based
upon the amortizable intangible assets recorded on the balance sheet as of April
28, 2004, amortization expense for each of the next five fiscal years is
estimated to be approximately $17 million.

Intangible assets not subject to amortization at April 28, 2004 and April
30, 2003, were $505.5 million and $473.9 million, respectively, and consisted
solely of trademarks.

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H. J. HEINZ COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

7. 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 net tax benefits directly to
additional capital was $4.4 million in Fiscal 2004, $1.1 million in Fiscal 2003
and $15.1 million in Fiscal 2002.

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 2004, 2003 and 2002 effective tax rates were unfavorably
impacted by reorganization 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
28, 2004 and April 30, 2003 are as follows:

At the end of Fiscal 2004, net operating loss carryforwards totaled $119.5
million. Of that amount, $55.3 million expire through 2023; the other $64.2
million do not expire.

Undistributed earnings of foreign subsidiaries considered to be
indefinitely reinvested amounted to $2.47 billion at April 28, 2004.

The Fiscal 2004 net change in valuation allowance for deferred tax assets
was a decrease of $43.2 million, due principally to a reduction of deferred tax
assets related to foreign tax credit carryforwards.

During the third quarter of Fiscal 2004, the Company reorganized certain of
its foreign operations and as a result incurred a foreign income tax liability
of $110.5 million, payable in Fiscal 2005. Because the Company increased the tax
basis in amortizable assets, cash flow is expected to be positive in each of the
nine years following Fiscal 2005. Also during the third quarter of Fiscal 2004,
the Company filed suit seeking a refund of federal income tax related to a
transaction completed in Fiscal 1995. Receipt of the refund would have a
positive effect on the Company's cash flow with no earnings impact as the offset
would be a credit to additional paid-in capital.

8. DEBT

Short-term debt consisted of bank debt and other borrowings of $11.4
million and $146.8 million as of April 28, 2004 and April 30, 2003,
respectively. The weighted average interest rate was 4.3% and 5.2% for Fiscal
2004 and Fiscal 2003, respectively.

In September 2001, the Company and Heinz Finance entered into a $800
million 364-Day Credit Agreement, and a $1.5 billion Five-Year Credit Agreement,
expiring in September 2006. In September 2003, the 364-day agreement was renewed
and the borrowing amount was reduced to $600 million. 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 Com-

46

H. J. HEINZ COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

pany had $944 million of foreign lines of credit available at April 28, 2004.
Long-term debt was comprised of the following as of April 28, 2004 and April 30,
2003:

The fair value of the debt obligations approximated the recorded value as
of April 28, 2004 and April 30, 2003. Annual maturities of long-term debt during
the next five fiscal years are $425.0 million in 2005, $497.7 million in 2006,
$1.9 million in 2007, $301.2 million in 2008 and $327.1 million in 2009.

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 financial instruments, including mandatorily redeemable shares. SFAS No.
150 was effective for the Company in the second quarter of Fiscal 2004. The
adoption of SFAS No. 150 required the prospective classification of Heinz
Finance's $325 million of mandatorily redeemable preferred shares from minority
interest to long-term debt.

As of April 28, 2004, 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, 2003, the securities were remarketed at a coupon of 5.772%.

47

H. J. HEINZ COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

9. 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 28, 2004, 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 that 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 2004, employees purchased
365,190 shares under this plan.

PENSION OBLIGATION:

The Company made cash contributions to its pension plans totaling $202
million in Fiscal 2004 compared to $224 million in Fiscal 2003. In addition, the
Company recorded an additional minimum liability of $345.6 million and $451.1
million as of April 28, 2004 and April 30, 2003, respectively.

48

H. J. HEINZ COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

10. SUPPLEMENTAL CASH FLOWS INFORMATION

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

* Includes obligations to sellers of $4.6 million and $2.5 million in 2004 and
2002, respectively.

11. 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 four 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.

49

H. J. HEINZ COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Data regarding the Company's stock option plans follows:

The following summarizes information about shares under option in the
respective exercise price ranges at April 28, 2004:

The shares authorized but not granted under the Company's stock incentive
plans were 17,785,026 at April 28, 2004 and 21,531,043 at April 30, 2003. Common
stock reserved for stock incentive plans totaled 55,269,790 at April 28, 2004
and 59,432,070 at April 30, 2003.

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 $26 million
in Fiscal 2004, $19 million in Fiscal 2003 and $21 million in Fiscal 2002.

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 pre-defined

50

H. J. HEINZ COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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. In Fiscal 2004, the Company granted
928,066 RSUs to employees, of which 14,345 were forfeited pursuant to the terms
of the awards and 172,462 were fully vested and converted to stock. At April 28,
2004, 1,523,690 RSUs remain outstanding.

The number of RSUs awarded to employees is determined by the fair market
value of the Company's stock on the date of award. 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 $14.8 million in Fiscal 2004 and $5.8 million in
Fiscal 2003.

12. 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 as well as certain
employees in foreign locations. The Company uses an April 30 measurement date
for its domestic plans and a March 31 measurement date for foreign plans.

The following table sets forth the funded status of the Company's principal
defined benefit plans at April 28, 2004 and April 30, 2003.

51

H. J. HEINZ COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The accumulated benefit obligation for all defined benefit pension plans
was $1,954.7 million at April 28, 2004 and $1,781.1 million at April 30, 2003.
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 $1,304.0 million, $1,197.2 million and $1,139.8 million,
respectively, as of April 28, 2004 and $1,551.4 million, $1,423.6 million and
$1,039.6 million, respectively, as of April 30, 2003. The change in minimum
liability included in other comprehensive income was a decrease of $158.7
million at April 28, 2004 and an increase of $601.5 million at April 30, 2003.
During Fiscal 2003, a total 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 28, 2004 and
April 30, 2003 in determining the projected benefit obligations for defined
benefit plans were as follows:

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H. J. HEINZ COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Total pension cost of the Company's principal pension plans consisted of
the following:

The weighted-average rates used for the years ended April 28, 2004, April
30, 2003 and May 1, 2002 in determining the defined benefit plans' net pension
costs were as follows:

The Company's expected rate of return is determined based on a methodology
that considers investment real returns for certain asset classes over historic
periods of various durations, in conjunction with the long-term outlook for
inflation (i.e. "building block" approach). This methodology is applied to the
actual asset allocation, which is in line with the investment policy guidelines
for each plan. The Company also considers long-term rates of return for each
asset class based on projections from consultants and investment advisers
regarding the expectations of future investment performance of capital markets.

53

H. J. HEINZ COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

PLAN ASSETS:

The Company's defined benefit pension plans' weighted average asset
allocation at April 28, 2004 and April 30, 2003 and weighted average target
allocation were as follows:

The underlying basis of the investment strategy of the Company's defined
benefit plans is to ensure that pension funds are available to meet the plans'
benefit obligations when they are due. The Company's investment objectives
include: prudently investing plan assets in a high-quality, diversified manner
in order to maintain the security of the funds; achieving an optimal return on
plan assets within specified risk tolerances; and investing according to local
regulations and requirements specific to each country in which a defined benefit
plan operates. The investment strategy expects equity investments to yield a
higher return over the long term than fixed income securities, while fixed
income securities are expected to provide certain matching characteristics to
the plans' benefit payment cash flow requirements. Company common stock held as
part of the Equity Securities amounted to less than one percent of Plan assets
at April 28, 2004 and April 30, 2003.

CASH FLOWS:

The Company contributed approximately $202 million to the defined benefit
plans in fiscal 2004. The Company funds its U.S. defined benefit plans in
accordance with IRS regulations, while foreign defined benefit plans are funded
in accordance with local laws and regulations in each respective country.
Discretionary contributions to the pension funds may also be made by the Company
from time to time. Defined benefit plan contributions for the next fiscal year
are expected to be approximately $40 million, however actual contributions may
be affected by pension asset and liability valuations during the year.

Benefit payments expected in future years are as follows (dollars in
thousands):

2005........................................................ $110,000
2006........................................................ $112,000
2007........................................................ $115,000
2008........................................................ $119,000
2009........................................................ $124,000
Years 2010-2014............................................. $687,000

13. 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.

54

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 28, 2004 and April 30, 2003.

The weighted-average discount rate used in the calculation of the
accumulated post-retirement benefit obligation at April 28, 2004 and April 30,
2003 was 6.2% and 6.3%, respectively.

Net postretirement costs consisted of the following:

The weighted-average discount rate used in the calculation of the net
postretirement benefit cost was 6.3% in 2004, 7.2% in 2003 and 7.5% in 2002.

The weighted-average assumed annual composite rate of increase in the per
capita cost of company-provided health care benefits begins at 10.6% for 2005,
gradually decreases to 5.0% by

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H. J. HEINZ COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

2010 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.

CASH FLOWS:

The Company contributed $20.0 million for benefit payments in the
postretirement medical plans in Fiscal 2004. The Company funds its
postretirement medical plans in order to make payment on claims as they occur
during the fiscal year. Contributions for the next fiscal year are expected to
be approximately $20 million.

Benefit payments expected in future years are as follows (dollars in
thousands):

2005........................................................ $ 20,000
2006........................................................ $ 24,000
2007........................................................ $ 21,000
2008........................................................ $ 22,000
2009........................................................ $ 23,000
Years 2010-2014............................................. $118,000

14. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES

The Company operates internationally, with manufacturing and sales
facilities in various locations around the world, and utilizes certain
derivative 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 that meet the criteria for hedge
accounting 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 $13.4 million (net of income
taxes of $7.8 million), $41.9 million (net of income taxes of $23.5 million) and
$2.4 million (net of income taxes of $1.4 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 28, 2004, April 30, 2003 and May 1, 2002, respectively.

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H. J. HEINZ COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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 primarily 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 gain of $0.4
million for the year ended April 28, 2004 and a net loss of $0.8 million and
$0.3 million for the years ended April 30, 2003 and May 1, 2002, 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 28, 2004, the Company is hedging forecasted transactions for
periods not exceeding one year. During the next 12 months, the Company expects
$6.4 million of net deferred loss 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 were not
significant for the years ended April 28, 2004 and May 1, 2002, and totaled $0.6
million for the year ended April 30, 2003.

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, commodity 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. In connection with one of the interest rate swaps, the
Company maintains a cash investment with the counterparty and receives a market
rate of interest. The amount of the cash investment fluctuates and was $165.6
million at April 28, 2004.

At April 28, 2004, the Company had outstanding currency exchange and
interest rate derivative contracts with notional amounts of $983 million and
$3.68 billion, respectively. The Company had no outstanding commodity contracts
at April 28, 2004. At April 30, 2003, the Company had outstanding currency
exchange, commodity, and interest rate derivative contracts with notional
amounts of $715 million, $21 million, and $2.95 billion, respectively. The fair
value of derivative

57

H. J. HEINZ COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

financial instruments was a net asset of $123 million and $300 million at April
28, 2004 and April 30, 2003, 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 counterparties 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
2004, no single customer represented more than 10% of the Company's sales.

15. 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 16.6 million, 18.4 million and 14.9 million as
of April 28, 2004, April 30, 2003 and May 1, 2002, 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.

16. 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.

58

H. J. HEINZ COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

In the first quarter of Fiscal 2004, the Company changed its segment
reporting to reflect changes in organizational structure and management of its
businesses. The Company is now managing and reporting its North American
businesses under two segments, designated North American Consumer Products and
U.S. Foodservice. Changes in the remaining segments involve the reclassification
of certain operating and non-operating businesses between existing segments.
Prior periods have been restated to conform to the current presentation.
Descriptions of the Company's reportable segments are as follows:

- NORTH AMERICAN CONSUMER PRODUCTS--This segment manufactures, markets and
sells ketchup, condiments, sauces, pasta meals, and frozen potatoes,
entrees, snacks and appetizers to the grocery channels in the United
States of America and includes our Canadian business.

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

- 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, Singapore, and
Thailand. 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, India, Latin America, the Middle East and other areas that
sell products in all of the Company's core categories. During Fiscal
2003, the Company deconsolidated its Zimbabwe operations that have
historically been reported in this segment.

The Company's management evaluates performance based on several factors
including net sales, operating income excluding special items, and the use of
capital resources. Intersegment revenues are accounted for at current market
values. Items below the operating income line 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.

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

59

H. J. HEINZ COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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

(b) FISCAL YEAR ENDED APRIL 28, 2004: Excludes the gain on disposal of the
bakery business in Northern Europe, reorganization costs and the write down
of pizza crust assets in the United Kingdom as follows: North American
Consumer Products $5.3 million, U.S. Foodservice $3.9 million, Europe
$(23.8) million, Other Operating Entities $1.0 million, and Non-Operating
$5.9 million.
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: North American Consumer
Products $60.9 million, U.S. Foodservice $5.9 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: North American Consumer
Products $6.1 million, Europe $3.6 million, Asia/Pacific $(0.1) million and
Non-Operating $2.7 million.

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

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

60

H. J. HEINZ COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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.

17. QUARTERLY RESULTS

61

H. J. HEINZ COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The first quarter of Fiscal 2004 includes the gain on sale of the bakery
business in Northern Europe of $13.3 million after-tax, reorganization costs of
$3.4 million after-tax and the write down of pizza crust assets in the United
Kingdom of $2.8 million after-tax.

The fourth quarter of Fiscal 2004 includes reorganization costs of $7.6
million after-tax.

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 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.

18. 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 $113.0 million in 2004, $95.2 million in
2003 and $91.3 million in 2002. Future lease payments for non-cancelable
operating leases as of April 28, 2004 totaled $456.1 million (2005-$63.9
million, 2006-$51.0 million, 2007-$37.5 million, 2008-$27.8 million, 2009-$27.4
million and thereafter-$248.4 million).

No significant credit guarantees existed between the Company and third
parties as of April 28, 2004.

62

H. J. HEINZ COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

19. ADVERTISING COSTS

Advertising expenses (including production and communication costs) for
fiscal years 2004, 2003 and 2002 were $360.4 million, $370.9 million and $346.2
million, respectively, and are recorded either as a reduction of revenue or as a
component of SG&A.

63

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 the participation of the Company's Chief
Executive Officer and Chief Financial Officer, evaluated the effectiveness of
the Company's disclosure controls and procedures as of the end of the period
covered by this report. Based on that evaluation, the Chief Executive Officer
and Chief Financial Officer concluded that the Company's disclosure controls and
procedures, as of the end of the period covered by this report, were designed
and are functioning effectively to provide reasonable assurance that the
information required to be disclosed by the Company in reports filed under the
Securities Exchange Act of 1934 is 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 change in the Company's internal control over financial reporting
occurred during the Company's most recent fiscal quarter that has materially
affected, or is reasonably likely to materially affect, the Company's internal
controls over financial reporting.

64

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 8, 2004. The information regarding the audit committee financial
expert is set forth under the captions "Report of the Audit Committee" and
"Relationship with Independent Auditors" in the Company's definitive Proxy
Statement in connection with its Annual Meeting of Shareholders to be held on
September 8, 2004. The Company's Code of Conduct applicable to all employees,
including the principal executive officer, the principal financial officer, and
the principal accounting officer, as well as the charters for the Company's
Audit, Management Development & Compensation, Corporate Governance, and Public
Issues Committees, as well as periodic and current reports filed with the SEC
are available on the Company's website, www.heinz.com, and are available in
print to any shareholder upon request. 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 8, 2004.
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 28, 2004 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

65

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 between 300 and 700 shares to
non-employee directors on an annual basis as discretionary grants in lieu of
cash compensation. These grants were not awarded under any equity
compensation plan and were 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. All shares issued to non-employee directors are now issued
under the shareholder-approved Fiscal Year 2003 Stock Incentive Plan and
Stock Compensation Plan for Non-Employee Directors.

(3) The Executive Deferred Compensation Plan, as amended and restated on
December 27, 2001 and the Deferred Compensation Plan for Non-Employee
Directors as amended and restated on January 1, 2004, permits full-time
salaried personnel based in the US who have been identified as key employees
and non-employee directors, to defer all or part of his or her cash
compensation into either a cash account that accrues interest, or into a
Heinz stock account. The election to defer is irrevocable. The Management
Development & Compensation Committee of the Board of Directors shall
administer the Plan. All amounts are payable at the times and in the amounts
elected by the executives at the time of the deferral. The deferral period
shall be at least one year and shall be no greater than the date of
retirement or other termination, whichever is earlier. Amounts deferred into
cash accounts are payable in cash, and all amounts deferred into the Heinz
stock account are payable in Heinz Common Stock. Compensation deferred into
the Heinz stock account appreciates or depreciates according to the fair
market value of Heinz Common Stock.

(4) The grants made under the Restricted Stock Plan, the Executive Deferred
Compensation Plan and the Deferred Compensation Plan for Non-Employee
Directors are restricted or reserved shares of Common Stock, and therefore
there is no exercise price.

(5) 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 8,
2004. 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 "Security
Ownership of Certain Principal Shareholders" in the Company's definitive Proxy
Statement in connection with its Annual Meeting of Shareholders to be held
September 8, 2004. 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 8, 2004. Such information is incorporated
herein by reference.

66

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 28, 2004 and April 30, 2003
Consolidated Statements of Income for the fiscal years ended April 28, 2004,
April 30, 2003 and May 1, 2002
Consolidated Statements of Shareholders' Equity for the fiscal years ended April
28, 2004, April 30, 2003 and May 1, 2002
Consolidated Statements of Cash Flows for the fiscal years ended April 28, 2004,
April 30, 2003 and May 1, 2002
Notes to Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm of
PricewaterhouseCoopers LLP dated June 4, 2004, on the Company's consolidated
financial statements and financial statement schedule filed as a part hereof for
the fiscal years ended April 28, 2004, April 30, 2003 and May 1, 2002
(2) The following report and schedule is filed herewith as a part hereof:
Consent of Independent Registered Public Accounting Firm of
PricewaterhouseCoopers LLP dated June 17, 2004 filed as a part hereof
Schedule II (Valuation and Qualifying Accounts and Reserves) for the three
fiscal years ended April 28, 2004, April 30, 2003 and May 1, 2002
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.
(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.

67

(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.
(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.

68

(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
incorporated by reference to the Company's Annual Report on
Form 10-K for the fiscal year ended April 30, 2003.
(xxii) Deferred Compensation Plan for Non-Employee Directors of H.
J. Heinz Company (as amended and restated effective January
1, 2004), is incorporated herein by reference to Exhibit 10
to the Company's Quarterly Report on Form 10-Q for the
quarterly period ended January 28, 2004.
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(a) Rule 13a-14(a)/15d-14(a) Certification by the Chief Executive Officer.
31(b) Rule 13a-14(a)/15d-14(a) Certification by the Chief Financial Officer.
32(a) Certification by the Chief Executive Officer Relating to the Annual Report
Containing Financial Statements.*
32(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.
- ---------------
* The Exhibit attached to this Form 10-K shall not be deemed "filed" for the
purposes of Section 18 of the Securities Exchange Act of 1934 (the "Exchange
Act") or otherwise subject to liability under that section, nor shall it be
deemed incorporated by reference in any filing under the Securities Act of
1933, as amended, or the Exchange Act, except as expressly set forth by
specific reference in such filing.

69

(b) During the last fiscal quarter of the period covered by this Report, the
Company filed the following Current Reports on Form 8-K:

(i) February 4, 2004, relating to its press release regarding
the acquisition of assets of a Canadian entity.
(ii) February 18, 2004, relating to its press release regarding
quarterly growth and earnings in Fiscal Year 2004.
(iii) February 25, 2004, relating to its press release regarding
increased net income in the third quarter of fiscal year
2004.
(iv) March 11, 2004, relating to its press release regarding
increased quarterly dividends beginning July 2004.

70

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 June 17, 2004.

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 June 17, 2004.

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

James M. Zimmerman Director
By
/s/ ARTHUR B. WINKLEBLACK
........................................
ARTHUR B. WINKLEBLACK
Attorney-in-Fact

71

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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, 333-100820 and 333-116534) of H. J. Heinz
Company and Subsidiaries of our report dated June 4, 2004 relating to the
financial statements and the financial statement schedule, which appears as part
of this report under Item 8--"Financial Statements and Supplementary Data".

/s/ PRICEWATERHOUSECOOPERS LLP

PricewaterhouseCoopers LLP
Pittsburgh, Pennsylvania
June 17, 2004

SCHEDULE II

H. J. HEINZ COMPANY AND SUBSIDIARIES

VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FISCAL YEARS ENDED APRIL 28, 2004, APRIL 30, 2003 AND MAY 1, 2002
(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 $43.2 million. The decrease was due to reductions in the
valuation allowance related to changes in judgment about the realizability
of deferred tax assets related to loss carryforwards ($10.3 million),
decreases in deferred tax assets for foreign tax credit carryforward ($31.4
million) and loss carryforwards ($9.6 million). The decrease was partially
offset by increases in the valuation allowance related to additional
deferred tax assets for loss carryforwards ($8.1 million). See Note 7 to the
Consolidated Financial Statements on pages 45 through 46 of this Form 10-K
for the fiscal year ended April 28, 2004.

(3) 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 7 to the Consolidated Financial Statements on pages
45 through 46 of this Form 10-K for the fiscal year ended April 30, 2003.

(4) 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 7 to the Consolidated Financial Statements on
pages 45 through 46 of this Form 10-K for the fiscal year ended May 1, 2002.

EXHIBIT INDEX

- ---------------
* The Exhibit attached to this Form 10-K shall not be deemed "filed" for the
purposes of Section 18 of the Securities Exchange Act of 1934 (the "Exchange
Act") or otherwise subject to liability under that section, nor shall it be
deemed incorporated by reference in any filing under the Securities Act of
1933, as amended, or the Exchange Act, except as expressly set forth by
specific reference in such filing.