HEINZ HJ FINANCE CO - 10-K Annual Report

Back to GetFilings.com

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 333-85064

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

DELAWARE 82-0382406
(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:

None.

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 _ No X

All of the outstanding shares of the registrant's common stock are owned by
H. J. Heinz Company.

DOCUMENTS INCORPORATED BY REFERENCE

None

PART I

ITEM 1. BUSINESS.

GENERAL

H. J. Heinz Finance Company has been a direct or indirect subsidiary of
H.J. Heinz Company ("Heinz") since 1983. H. J. Heinz Finance Company and its
subsidiaries, collectively referred to as "Heinz Finance," had no significant
operating history until Heinz completed a corporate reorganization in the United
States on May 3, 2001. The reorganization was designed to simplify Heinz's U.S.
corporate structure, consolidate operations and establish centers of excellence
for the management of the U.S. trademarks and for U.S. treasury functions. As a
result of the reorganization, all of the U.S. business operations that had
historically been conducted by Heinz through its Heinz USA division and eight
subsidiary corporations are now conducted by Heinz Finance.

Since May 3, 2001, we have been engaged in the business of acquiring,
holding and financing equity and debt investments in subsidiaries of Heinz that
own and operate Heinz's U.S. businesses, which manufacture, market, distribute
and sell food in the United States. Our most significant asset is our ownership
interests in H. J. Heinz Company, L.P. ("Heinz LP"), a Delaware limited
partnership formed on October 9, 2000. Heinz LP has two classes of limited
partnership interests. Heinz directly owns the Class A interests in Heinz LP.
Heinz Finance, directly and through wholly-owned subsidiaries, owns the Class B
interests in Heinz LP. Heinz Management Company ("HMC") is the managing general
partner of Heinz LP and employs its salaried personnel. Heinz LP reimburses HMC
for all its management costs.

DESCRIPTION OF THE BUSINESS

We conduct our food business through two segments, North American Consumer
Products and U.S. Foodservice. Segment information is set forth in this report
on pages 40 through 41 in Note 16, "Segment Data" in Item 8 -- "Financial
Statements and Supplementary Data."

PRODUCTS AND MARKETS

Our products are manufactured and packaged to provide safe, wholesome foods
for consumers, foodservice and institutional customers. Many products are
prepared from recipes developed in our 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. Although crops constituting some
of our raw food ingredients are harvested on a seasonal basis, most of our
products are produced throughout the year.

2

The primary brands and products marketed and sold by us include, by
segment, the following:

North American
Consumer Products....................... Heinz tomato ketchup, mustard and sauces
Heinz Easy Squeeze! ketchup
E-Z Squirt kids' condiment
Classico pasta sauce
Yoshida sauces
Bell'Orto and Bella Rosa tomato products
Jack Daniels* sauces
Wyler's bouillon and soups
Ore-Ida potato products
Bagel Bites snacks
Boston Market* HomeStyle meals
Smart Ones meals
Hot Bites snacks
Poppers appetizers
T.G.I. Friday's* appetizers
Delimex snacks
U.S. Foodservice.......................... Chef Francisco and Quality Chef soups
Dianne's desserts
Domani frozen pasta
Truesoups soups

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

* Used under license from unrelated parties.

TRADEMARKS, PATENTS AND LICENSES

We own or license the trademarks used in connection with our products from
related and unrelated parties. Our most significant trademarks are "Heinz",
"Smart Ones" and "Ore-Ida" which we license from a related party. The trademarks
that we license from unrelated parties are under long-term contracts and are
important to our business although are individually immaterial.

We have participated in the development of certain food processing
equipment, some of which is patented. We regard these patents as important but
do not consider any one or group of them to be materially important to our
business as a whole.

COMPETITION

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. We
compete primarily on the basis of product quality, brand recognition, brand
loyalty and consumer value.

CUSTOMERS

Our products are sold through our 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, one customer, Wal-Mart Stores, Inc., represented more than
10% of our sales. We closely monitor the credit risk associated with our
customers and to date have never experienced significant losses.

3

PROPERTIES

We operate 25 factories involved in manufacturing our products. We own 21
of these factories and lease the remaining four factories. We also own or lease
office space, warehouses, distribution centers and research and other
facilities. Our food processing plants and principal properties are in good
condition and are satisfactory for the purposes for which they are being
utilized.

EMPLOYEES

On a full-time basis, as of April 28, 2004, approximately 9,600 people were
employed as part of our business.

REGULATORY

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

Our factories are subject to inspections by various governmental agencies,
including the United States Department of Agriculture and the Occupational
Safety and Health Administration, and our products must comply with all 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.

LEGAL PROCEEDINGS

Certain suits and claims have been filed against Heinz Finance 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 Heinz Finance's
consolidated and combined financial position, results of operations or
liquidity.

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 Heinz
Finance. Heinz Finance and its representatives may from time to time make
written or oral forward-looking statements, including statements contained in
Heinz Finance's filings with the Securities and Exchange Commission. 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, Heinz Finance notes
that a variety of factors could cause Heinz Finance's actual results and
experience to differ materially from the anticipated results or other
expectations expressed in Heinz Finance'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 Heinz Finance, 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;

4

- Competitive product and pricing pressures and Heinz Finance's ability to
gain or maintain share of sales as a result of actions by competitors and
others;

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

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

- Heinz Finance's ability to generate sufficient cash flows to support
capital expenditures, 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;

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

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

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

- The possibility of increased pension expense and contributions resulting
from continued decline in stock market returns;

- Changes in estimates in critical accounting judgments;

- Interest rate fluctuations and other capital market conditions;

- The effectiveness of Heinz Finance's advertising, marketing and
promotional programs;

- Weather conditions, which could impact demand for Heinz Finance's
products and the supply and cost of raw materials;

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

- Heinz Finance's ability to maintain its profit margin in the face of a
consolidating retail environment and large global customers;

- The impact of U.S. industry conditions, including the effect of the
economic downturn in the food industry; and

- Heinz Finance's ability to offset the reduction in volume and revenue
resulting from participation in categories experiencing declining
consumption rates.

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. Heinz Finance undertakes no obligation to publicly
update or revise any forward-looking statements, whether as a result of new
information, future events or otherwise.

5

ITEM 2. PROPERTIES.

See Item 1.

ITEM 3. LEGAL PROCEEDINGS.

None.

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

Heinz Finance did not submit any matters to a vote of security holders
during the fourth quarter of Fiscal 2004.

6

DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Our Board of Directors is composed of four members, one of whom is an
Independent Director. An "Independent Director" is a director who is not a
current officer or employee of Heinz Finance, Heinz or any affiliate of Heinz or
of any other person or persons that, in the aggregate, own or owns more than 50%
of the outstanding common stock of Heinz Finance and who is elected by holders
of Heinz Finance's outstanding Series A Preferred Shares and the holders of any
Heinz Finance stock expressly being designated by us as being at parity with the
Series A Preferred Shares, "Parity Securities," with like voting rights,
collectively, the "Voting Parity Securities." Andrew L. Stidd, the initial and
current Independent Director, was named in the Certificate of Designation for
the Series A Preferred Shares.

Our directors will serve until resignation or removal. There is no current
intention to alter the number of directors comprising the Board of Directors,
and our Bylaws provide that the Board of Directors may not comprise more than
nine members.

Our directors and executive officers are:

Each director, other than the Independent Director, is an officer or
employee of Heinz or an affiliate of Heinz.

COMPENSATION OF DIRECTORS

The Independent Director (and any subsequent additional Independent
Director) receives annual compensation of $3,500 plus reimbursement of expenses
for attendance at each meeting of the Board of Directors. We do not pay fees to
directors who are not Independent Directors.

8

PART II

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

All of the outstanding common shares of Heinz Finance are owned by Heinz.

ITEM 6. SELECTED FINANCIAL DATA.

The following table presents selected consolidated and combined financial
data for Heinz Finance and its predecessor, which consisted of Heinz's U.S.
business operations, the ("U.S. Group"), for each of the five fiscal years 2000
through 2004. All amounts are in thousands.

(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.

(2) Long-term debt, exclusive of current portion, and preferred stock
include the effects of the prospective classification of Heinz Finance
Company's $325 million of mandatorily redeemable preferred shares 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 costs of $8.7
million pretax, primarily due to employee termination and severance costs
related to ongoing efforts to reduce overhead costs, of which $8.6 million
pretax was charged to Heinz Finance by Heinz Management Company.

Fiscal 2003 results from continuing operations include costs related to the
Del Monte transaction and costs to reduce overhead of the remaining businesses
totaling $89.5 million pretax, of which $34.2 million pretax was charged to
Heinz Finance by Heinz Management Company. These include employee termination
and severance costs, legal and other professional service costs and costs
related to the early extinguishment of debt.

Fiscal 2002 results from continuing operations include a net restructuring
benefit of $1.1 million pretax related to the Streamline initiative.

Fiscal 2001 results from continuing operations include restructuring and
implementation costs of $15.3 million pretax relating to the Streamline
initiative and net restructuring and implementation costs of $37.1 million
pretax for Operation Excel. Results also include a loss of $94.6 million pretax
on the sale of The All American Gourmet business and acquisition costs of $18.5
million pretax.

9

Fiscal 2000 results from continuing operations include net restructuring
and implementation costs of $67.4 million pretax for Operation Excel.

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

EXECUTIVE OVERVIEW

Heinz Finance is engaged in the business of acquiring, holding and
financing equity and debt investments in subsidiaries that own and operate
Heinz's U.S. businesses and represents the treasury center for cash management
and debt financing for all of Heinz's domestic operations. Heinz Finance's most
significant asset is its approximately 40% ownership interest in H. J. Heinz
Company, L.P. ("Heinz LP"), a Delaware limited partnership which consists of all
of the U.S. business operations of Heinz. Heinz LP manufactures and markets an
extensive line of processed food products. Heinz LP's principal products include
ketchup, condiments and sauces, frozen food, soups, beans and other processed
food products. Heinz LP's products are sold under highly competitive conditions,
with many large and small competitors. Heinz Finance regards Heinz LP's
principal competition to be other manufacturers of processed foods, including
branded, retail products, foodservice products and private label products that
compete with Heinz LP's products for consumer preference, distribution, shelf
space and merchandising support. Product quality and consumer value are
important areas of competition.

Heinz Finance manages and reports its operating businesses under two
segments, designated North American Consumer Products and U.S. Foodservice. All
of the assets, liabilities, results of operations and cash flows of Heinz
Finance are included in the Heinz consolidated financial statements. All debt of
Heinz Finance is guaranteed by Heinz.

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. 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 Heinz Finance's
consolidated statements of income. The discontinued operations generated sales
of $1,052.6 million and $1,357.7 million and a net loss of $23.3 million (net of
$13.8 million of a tax benefit) and $35.7 million (net of $19.6 million of a tax
benefit) for Fiscal 2003 and 2002, respectively.

REORGANIZATION COSTS

Heinz Finance recognized reorganization costs of $8.7 million pretax in
Fiscal 2004. These costs were recorded as a component of Selling, General and
Administrative expense ("SG&A") and were primarily due to employee termination
and severance costs. Also, of this amount, $8.6 million was charged to Heinz
Finance by Heinz Management Company through a management fee for all salaried
employee costs. Management estimates that these actions impacted approximately
80 employees.

In Fiscal 2003, Del Monte transaction costs and costs to reduce overhead of
the remaining business totaled $55.3 million pretax. In addition, during Fiscal
2003, Heinz Management Company recognized Del Monte transaction costs and costs
to reduce overhead of the remaining business

10

totaling $34.2 million pretax. These costs were then charged to Heinz Finance
through the management fee charged to Heinz Finance by Heinz Management Company
for all salaried employee costs. These total charges of $89.5 million pretax
were comprised of $39.6 million related to the early retirement of debt, $24.4
million in employee termination and severance costs, $14.7 million for legal,
professional and other related costs, and $10.8 million of non-cash write-offs.
Of this amount, $6.0 million was included in cost of products sold, $44.0
million in SG&A, and $39.6 million in other expenses, net. Management estimates
that these actions impacted approximately 200 employees, excluding those who
were transferred to Del Monte.

During Fiscal 2004, Heinz Finance utilized $17.9 million in severance and
exit cost accruals related to reorganization costs.

STREAMLINE

In the fourth quarter of Fiscal 2001, Heinz announced a restructuring
initiative named "Streamline". This initiative included an organizational
restructuring aimed at reducing overhead costs and was completed in the first
half of Fiscal 2003.

During Fiscal 2003, Heinz Finance utilized $1.0 million of severance and
exit cost accruals, principally related to its overhead reduction plan. 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 Heinz's Terminal
Island, California facility was transferred to Del Monte.

In the fourth quarter of Fiscal 2002, Heinz Finance recorded a benefit of
$1.1 million pretax, which was classified as SG&A, to reflect revisions in
original cost estimates. In addition, Heinz Management Company, a wholly-owned
subsidiary of Heinz, assumed a portion of Heinz Finance's restructuring
liability as a result of a realignment that occurred on May 3, 2001.

RESULTS OF CONTINUING OPERATIONS

In the first quarter of Fiscal 2004, Heinz Finance changed its segment
reporting to reflect changes in organizational structure and the management of
its business. Heinz Finance is now managing and reporting its operating
businesses under two segments, which are designated North American Consumer
Products and U.S. Foodservice. Prior periods have been restated to conform with
the current presentation. (See Note 16 to the consolidated financial statements
for further discussion of Heinz Finance's reportable segments.)

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

Sales for Fiscal 2004 increased $51.8 million, or 1.6%, to $3.21 billion.
Sales were favorably impacted by volume of 0.7% due to strong increases in the
U.S. Foodservice segment. Pricing remained constant as Heinz Finance's goal to
achieve more competitive net pricing under the Every Day Low Pricing Strategy in
the retail businesses was offset by pricing improvements in the U.S. Foodservice
segment. Acquisitions, net of divestitures, increased sales 0.9% due primarily
to the acquisition of Truesoups LLC.

Gross profit increased $21.6 million, or 1.9%, to $1.16 billion, and, the
gross profit margin increased slightly to 36.2% from 36.1%. The gross profit
increase was primarily driven by Heinz Finance's continuing focus on process and
system improvements, productivity initiatives and elimination of less profitable
Stock Keeping Units. For Fiscal 2003, gross profit was impacted by Del Monte
transaction related costs and costs to reduce overhead of the remaining
businesses of $6.0 million.

SG&A decreased $60.5 million, or 10.0%, to $542.5 million, and, as a
percentage of sales, was reduced to 16.9% from 19.1%. The decrease is primarily
due to decreased marketing expense primarily in the North American Consumer
Products segment reflecting Heinz Finance's goal to achieve more competitive net
pricing as discussed above. Additionally, SG&A was impacted in Fiscal 2004 by
reorganization costs of $8.7 million, and in Fiscal 2003 by Del Monte
transaction related costs and
11

cost to reduce overhead of the remaining businesses of $44.0 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) decreased $54.2 million, or 6.9%, to $735.6 million on a
sales increase of 1.6%.

Operating income increased $85.4 million, or 22.5%, to $464.7 million, and
increased as a percentage of sales to 14.5% from 12.0% as a result of the
changes noted above.

Net interest expense increased $4.4 million, to $127.1 million, due to the
prospective classification of Heinz Finance's dividends on its mandatorily
redeemable preferred shares to interest expense from retained earnings. 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. This
increase was offset by decreases due to lower debt balances and lower interest
rates. Other expense, net, decreased $51.5 million, to $5.6 million,
attributable to a $39.6 million pretax charge related to early retirement of
debt in Fiscal 2003, gains recorded in Fiscal 2004 on closed commodity futures
contracts and increased equity income. There was a non-cash currency loss of
$21.2 million in the current year compared to $65.0 million in the prior year
related to the marked-to-market adjustment on Euro-denominated long-term debt.
This debt represents a net investment hedge at the Heinz level. Because Heinz
Finance does not have foreign operations, this marked-to-market adjustment does
not qualify for net investment hedge accounting treatment at Heinz Finance. The
effective tax rate for the current year was 14.9% compared to 10.9% last year.
Heinz Finance's effective tax rate fluctuates depending on the proportion of its
nontaxable minority interest in Heinz LP to total Heinz Finance income before
tax and was also unfavorably impacted by the nondeductible interest expense
associated with Heinz Finance's mandatorily redeemable preferred shares.

Income from continuing operations for Fiscal 2004 was $96.9 million
compared to $54.2 million in Fiscal 2003.

FISCAL 2004 OPERATING RESULTS BY BUSINESS SEGMENT

NORTH AMERICAN CONSUMER PRODUCTS

Sales of the North American Consumer Products segment decreased $60.9
million, or 3.3%. Sales volume decreased 0.4% 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 1.9% 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. Divestitures in the prior year reduced sales 1.0%.

Gross profit decreased $11.5 million, or 1.5%, to $748.4 million; however,
the gross profit margin increased to 42.3% from 41.5%, 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 $65.5 million, or 27.1%,
to $306.8 million, primarily due to decreased consumer marketing expenses
related to the prior year launch of Easy Squeeze!, Boston Market frozen entrees,
Hot Bites snacks and Ore-Ida Funky Fries. In addition, Fiscal 2004 operating
income was unfavorably impacted by reorganization costs of $4.8 million and
Fiscal 2003 operating income was unfavorably impacted by Del Monte transaction
related costs and costs to reduce overhead of the remaining businesses of $44.0
million.

12

U.S. FOODSERVICE

U.S. Foodservice's sales increased $112.6 million, or 8.5%. Sales volume
increased sales 2.3% 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 2.6%
chiefly due to Heinz ketchup and single serve condiments. Acquisitions, net of
divestitures, increased sales 3.5%, primarily due to the acquisition of
Truesoups LLC, a manufacturer and marketer of premium frozen soups.

Gross profit increased $33.0 million, or 8.6%, to $415.9 million, and the
gross profit margin remained constant at 28.8% as favorable pricing and sales
mix were offset by higher commodity costs. In addition, reorganization costs
unfavorably impacted gross profit by $1.1 million for Fiscal 2003. Operating
income increased $19.9 million, or 14.2%, to $160.1 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 unfavorably impacted operating
income by $5.9 million for Fiscal 2003.

FISCAL YEAR ENDED APRIL 30, 2003 AND MAY 1, 2002

Sales for Fiscal 2003 increased $328.8 million, or 11.6%, to $3.16 billion.
Sales were favorably impacted by acquisitions of 4.3%, pricing of 0.2% and
volumes of 7.9%. The volume increase is primarily due to the finished goods
inventories which were not contributed to Heinz Finance on May 3, 2001 (10.1%),
partially offset by volume declines in the North American Consumer Products
segment related to Boston Market HomeStyle side dishes, Ore-Ida Funky Fries and
Hot Bites. Divestitures reduced sales by 0.7%.

Gross profit increased $97.9 million, or 9.4%, to $1.14 billion; however,
the gross profit margin decreased to 36.1% from 36.8%. The margin decrease was
primarily due to unfavorable sales mix and increased manufacturing costs. The
overall dollar increase in gross profit is due to the finished goods inventories
which were retained by Heinz, acquisitions, and the benefit of reduced
amortization of intangible assets. Fiscal 2003 gross profit was also unfavorably
impacted by $6.0 million for costs related to the Del Monte transaction and to
reduce overhead of the remaining business.

SG&A increased $146.2 million, or 32.0%, to $603.0 million, and increased
as a percentage of sales to 19.1% from 16.1%. This increase is primarily due to
the finished goods inventories which were retained by Heinz, costs related to
the Del Monte transaction and to reduce overhead of the remaining business of
$44.0 million and increased marketing spend across both segments.

Total marketing support (recorded either as a reduction of revenue or as a
component of SG&A) increased $137.6 million, or 21.1%, to $789.8 million on a
sales increase of 11.6%.

Operating income decreased $68.6 million, or 15.3%, to $379.3 million and
decreased as a percentage of sales to 12.0% from 15.8%. This decrease is
primarily driven by costs related to the Del Monte transaction and to reduce
overhead of the remaining business of $50.0 million and the North American
Consumer Products segment, partially offset by the increase in sales discussed
above.

Net interest expense increased $15.5 million to $122.8 million, driven
primarily by reduced interest income related to short-term notes receivable
balances from related parties partially offset by lower interest rates and lower
average debt over the past year. During Fiscal 2003, there was a non-cash
currency loss of $65.0 million compared to $3.8 million in Fiscal 2002 related
to the marked-to-market adjustment on Euro-denominated long-term debt. This debt
represents a net investment hedge at the Heinz level. Because Heinz Finance does
not have foreign assets, this marked-to-market adjustment does not qualify for
hedge accounting treatment at Heinz Finance. Other expenses, net, increased
$52.2 million to $57.1 million. The increase is primarily attributable to the
$39.6 million
13

pretax charge related to early retirement of debt. The effective tax rate for
Fiscal 2003 was 10.9% compared to 14.2% in Fiscal 2002. Heinz Finance's
effective tax rate fluctuates depending on the proportion of its nontaxable
minority interest in Heinz LP to total Heinz Finance income before tax.

Income from continuing operations for Fiscal 2003 was $54.2 million
compared to $109.4 million in Fiscal 2002.

FISCAL YEAR 2003 OPERATING RESULTS BY BUSINESS SEGMENT

NORTH AMERICAN CONSUMER PRODUCTS

Sales of the North American Consumer Products segment increased $291.5
million, or 18.9%, to $1.83 billion. Acquisitions, net of divestitures,
increased sales 5.5%, due primarily to the prior year acquisitions of Classico
and Aunt Millie's pasta sauce, 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 0.6%, due 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 increased 16.4% due primarily to the finished goods
inventories which were retained by Heinz and increases in SmartOnes frozen
entrees and specialty sauces partially offset by decreases primarily in Heinz
ketchup and vinegar, Boston Market HomeStyle side dishes, Ore-Ida Funky Fries
and Hot Bites.

Gross profit increased $90.8 million, or 13.6%, to $759.9 million; however,
the gross profit margin decreased to 41.5% from 43.5% 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 increases
due to the finished goods inventories which were retained by Heinz, 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. Operating income decreased $39.0 million,
or 13.9%, to $241.3 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,
partially offset by increases due to the finished goods inventories retained by
Heinz. Additionally, operating income was unfavorably impacted by Del Monte
transaction related costs and costs to reduce overhead of the remaining
businesses in Fiscal 2003 of $44.0 million.

U.S. FOODSERVICE

Sales of the U.S. Foodservice segment increased $37.3 million, or 2.9%, to
$1.33 billion. Acquisitions increased sales 2.3%, due to the acquisition of
Dianne's frozen desserts. Lower pricing decreased sales 0.3%. Sales volume
increased 0.9% due primarily to Heinz ketchup and Dianne's frozen desserts.

Gross profit increased $6.9 million, or 1.8%, to $383.0 million; however,
the gross profit margin decreased to 28.8% from 29.1% due primarily to
unfavorable sales mix and increased manufacturing costs, partially offset by
favorable pricing. Operating income decreased $30.0 million, or 17.6%, to $140.2
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 in Fiscal 2003 of $5.9 million.

LIQUIDITY AND FINANCIAL POSITION

Cash provided by operating activities in Fiscal 2004 was $550.8 million, a
decrease of $184 million from last year. The decrease in Fiscal 2004 versus
Fiscal 2003 is primarily due to working capital, particularly accounts
receivable and due from/to related parties.

14

Cash used for investing activities totaled $112.6 million compared to $55.2
million last year. Acquisitions used $61.3 million in cash in Fiscal 2004, while
there were no acquisitions in Fiscal 2003. Capital expenditures totaled $56.1
million compared to $59.6 million last year and are expected to increase
slightly in Fiscal 2005 when compared with Fiscal 2004.

Cash used for financing activities totaled $170.4 million compared to
$492.2 million last year. Heinz Finance paid down $8.3 million in long-term debt
during Fiscal 2004, compared to $651.1 million last year. Heinz Finance received
$1,062.1 million of net proceeds from Heinz related to the Del Monte transaction
in Fiscal 2003. Payments on commercial paper were $89.1 million in Fiscal 2003.
Proceeds from short-term borrowings with related parties provided $0.1 million
in Fiscal 2004 and payments on short-term borrowings with related parties
required $384.3 million in Fiscal 2003. Dividend payments to preferred
shareholders were $5.1 million in the current year compared to $20.2 million for
the same period last year as a result of the adoption of SFAS No. 150 as
previously discussed. In addition, distributions to minority partners were
$157.2 million in the current year compared to $412.9 million in the prior year.

At April 28, 2004, the Heinz Finance's external net debt (total external
debt net of the value of interest rate swaps of $125.3 million, less cash and
cash equivalents) was $3.56 billion. Excluding the reclassification of Heinz
Finance's preferred stock (see below for further discussion), external net debt
would have been $3.24 billion, down approximately $255 million compared to the
year earlier period. Heinz Finance expects that over $350 million of long-term
debt maturing in Fiscal 2005 will be retired.

Heinz Finance's cash balance together with its anticipated strong operating
cash flow and access to the committed and uncommitted credit facilities and
capital market, if required, should enable Heinz Finance to meet its cash
requirements for operations.

Return on average shareholder's equity ("ROE") was 40.7% in Fiscal 2004,
16.2% in Fiscal 2003 and 45.4% in Fiscal 2002. Pretax return on average invested
capital ("ROIC") was 13.2% in Fiscal 2004, 10.0% in Fiscal 2003 and 14.8% in
Fiscal 2002.

In September 2001, Heinz and Heinz Finance 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
Heinz and Heinz Finance's commercial paper borrowings and the remarketable
securities. As a result, these borrowings are classified as long-term debt based
upon Heinz and Heinz Finance's ability to refinance these borrowings on a
long-term basis.

As of April 28, 2004, Heinz Finance 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 Heinz Finance 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%.

All of Heinz Finance's debt is guaranteed by Heinz. At April 28, 2004,
Heinz's long-term debt ratings were A at Standard & Poor's and Fitch and A-3 at
Moody's and Heinz Finance'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 $17.2 million. Fiscal 2005 cash requirements related to
reorganization costs are expected to be approximately $5.0 million.

CONTRACTUAL OBLIGATIONS AND OTHER COMMITMENTS

CONTRACTUAL OBLIGATIONS

Heinz Finance is obligated to make future payments under various contracts
such as debt agreements, lease agreements and unconditional purchase
obligations. In addition, Heinz Finance has purchase obligations for materials,
supplies, services and property, plant and equipment as part of the

15

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 Heinz Finance's materials and processes, certain supply contracts
contain penalty provisions for early terminations. Heinz Finance does not
believe that a material amount of penalties are reasonably likely to be incurred
under these contracts based upon historical experience and current expectations.

The following table represents the significant contractual obligations of
Heinz Finance as of April 28, 2004.

The following long-term liabilities included in the consolidated balance
sheet are excluded from the table above: income taxes, minority interest and
other liabilities. Heinz Finance is unable to estimate the timing of the
payments for these items.

OFF-BALANCE SHEET ARRANGEMENTS AND OTHER COMMITMENTS

Heinz Finance does not have material financial guarantees or other
contractual commitments that are reasonably likely to adversely affect
liquidity. In addition, see Note 8 of the consolidated financial statements for
disclosure of all significant related party items.

MARKET RISK FACTORS

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

INTEREST RATE SENSITIVITY

Heinz Finance 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 Heinz Finance's long-term and
short-term debt can be expected to vary as a result of future business
requirements, market conditions and other factors. Heinz Finance's external net
debt obligations totaled $3.56 billion (or $3.24 billion excluding the
reclassification of preferred stock) and $3.49 billion at April 28, 2004 and
April 30, 2003, respectively. Heinz Finance's debt obligations are summarized in
Note 10 to the consolidated financial statements.

In order to manage interest rate exposure, Heinz Finance 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 related to this debt to change by

16

approximately $3.6 million. The following table presents additional information
related to interest rate contracts designated as fair value hedges by Heinz
Finance:

Heinz Finance 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, Heinz Finance 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

Heinz Finance is the purchaser of certain commodities such as corn, soybean
oil and soybean meal. Heinz Finance generally purchases these commodities based
upon market prices that are established with the vendor as part of the purchase
process. Heinz Finance may enter into commodity futures, swaps and option
contracts to reduce the effect of price fluctuations on forecasted purchases.
Heinz Finance had no outstanding commodity contracts at April 28, 2004. Heinz
Finance 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 income 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 expenses, net. Net unrealized losses related to
commodity contracts held by Heinz Finance were not significant at April 30,
2003.

FOREIGN EXCHANGE RATE SENSITIVITY

Heinz Finance's cash flow and earnings are subject to fluctuations due to
exchange rate variation. Foreign currency risk exists due to Heinz Finance's
foreign-currency-denominated borrowings. Heinz Finance may attempt to limit its
exposure to changing foreign exchange rates through financial market actions.
These actions may include entering into forward or option contracts to hedge
exposures. The instruments are used to reduce risk by essentially creating
offsetting currency exposures.

Heinz Finance had foreign denominated borrowings totaling $539.4 million
and $335.6 million at April 28, 2004 and April 30, 2003, respectively. Euro
denominated borrowing represented $355.3 million of this amount at April 28,
2004 and the entire balance at April 30, 2003. These Euro denominated notes are
designated as net investment hedges of foreign operations at the Heinz level.
Because Heinz Finance does not have foreign operations, the changes in value due
to exchange rate variation does not qualify for net investment hedge accounting
treatment at Heinz Finance. Consequently, losses of $21.2 million and $65.4
million due to exchange rate variation were included in currency loss for the
years ended April 28, 2004 and April 30, 2003, respectively.

17

At April 28, 2004, Heinz Finance had outstanding foreign currency contracts
with a notional amount of $182 million to hedge cash flows associated with
foreign-currency-denominated borrowings. These contracts mature within one year
and 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 income and is recognized in earnings at the time the hedged item
affects earnings. Any gains and losses due to hedge ineffectiveness are recorded
in current period earnings in other expenses, net. Net unrealized gains related
to foreign currency contracts totaled $0.5 million at April 28, 2004. Heinz
Finance had no outstanding foreign currency contracts 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 Heinz
Finance's outstanding interest rate contracts and foreign currency contracts,
assuming a hypothetical 10% fluctuation in swap rates and currency 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.

RECENTLY ISSUED ACCOUNTING STANDARDS

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, Heinz Finance 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. Heinz Finance is currently evaluating the impact of this
guidance on its 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 Heinz
Finance during its fourth quarter of Fiscal 2004. The adoption of this new
standard did not have an impact on Heinz Finance'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 Heinz Finance 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 to long-term debt and the $5.1 million quarterly preferred
dividend from retained earnings to interest expense beginning in the second
quarter ending October 29, 2003.

18

Effective May 2, 2002, Heinz Finance adopted SFAS No. 142, "Goodwill and
Other Intangible Assets." Under this standard, goodwill and intangibles with
indefinite useful lives are no longer amortized. No impairment issues were
identified as result of adopting SFAS No. 142.

DISCUSSION OF SIGNIFICANT ACCOUNTING ESTIMATES

In the ordinary course of business, Heinz Finance 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. Heinz Finance believes that the following discussion
addresses Heinz Finance's most critical accounting policies, which are those
that are most important to the portrayal of Heinz Finance'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
Heinz Finance'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 Heinz Finance'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 Heinz Finance.
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
Heinz Finance'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. Heinz Finance 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 Heinz Finance's
business model or changes in Heinz Finance's capital strategy could result in
the actual useful lives differing from Heinz Finance's estimates. In those cases
where Heinz Finance determines that the useful life of buildings and equipment
should be shortened, Heinz Finance 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 Heinz Finance for
impairment whenever events or changes in circumstances indicate that the
carrying amount of any such asset may not be recoverable. If the sum

19

of the undiscounted cash flows is less than the carrying value, Heinz Finance
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 judgment and requires, among other things, certain
assumptions about future volume, revenue and expense growth 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". Heinz Finance'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. Heinz Finance 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.

INCOME TAXES

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

INFLATION

In general, costs are affected by inflation and the effects of inflation
may be experienced by Heinz Finance in future periods. Management believes,
however, that such effects have not been material to Heinz Finance during the
past three years.

The impact of inflation on both Heinz Finance's financial position and
results of operations is not expected to adversely affect Fiscal 2005 results.
Heinz Finance's financial position continues to remain strong, enabling it to
meet cash requirements for operations.

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 16 through 18.

20

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

TABLE OF CONTENTS

Report of Independent Registered Public Accounting Firm..... 22
Consolidated Statements of Income........................... 23
Consolidated Balance Sheets................................. 24
Consolidated Statements of Shareholder's Equity............. 25
Consolidated Statements of Cash Flows....................... 26
Notes to Consolidated Financial Statements.................. 27

21

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders of
H. J. Heinz Finance Company:

In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of income, shareholder's equity and cash flows
present fairly, in all material respects, the financial position of H. J. Heinz
Finance 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 7 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.

PRICEWATERHOUSECOOPERS LLP
Pittsburgh, Pennsylvania
July 8, 2004

22

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

The accompanying notes are an integral part of these financial statements.
23

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

The accompanying notes are an integral part of these financial statements.
24

H. J. HEINZ FINANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY

The accompanying notes are an integral part of these financial statements.
25

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

The accompanying notes are an integral part of these financial statements.
26

H. J. HEINZ FINANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. BASIS OF PRESENTATION

The U.S. treasury and domestic business operations of H.J. Heinz Company
("Heinz") are conducted by H.J. Heinz Finance Company and its wholly owned
subsidiaries, and H.J. Heinz Company, L.P. ("Heinz LP") collectively referred to
as "Heinz Finance" in the accompanying notes. H.J. Heinz Finance Company has
limited partnership interests in Heinz LP equal to approximately 40% of the
capital of Heinz LP.

Heinz LP owns or leases the operating assets involved in manufacturing
throughout the United States and manages the business. Heinz LP has two classes
of limited partnership interests, Class A and Class B, that are allocated
varying income and cash distributions in accordance with the Heinz LP agreement.
H. J. Heinz Finance Company, directly and through wholly-owned subsidiaries,
owns the Class B interests. Heinz directly owns the Class A interests. Heinz
Management Company, a wholly-owned subsidiary of Heinz, is the managing General
Partner of Heinz LP and employs the salaried personnel of Heinz's domestic
operations. Under the partnership agreement, Heinz Finance has the power to
control the general partner through majority membership on Heinz LP's management
board. The minority interest amounts on the April 28, 2004 and April 30, 2003
balance sheets represent the Class A and General Partner limited partnership
interest in Heinz LP, and have been adjusted for the minority partners' share of
income and cash distributions.

For all Heinz financial reporting and disclosure purposes, H. J. Heinz
Finance Company and its subsidiaries (including Heinz LP) are treated as fully
consolidated subsidiaries. All of the assets, liabilities, results of operations
and cash flows of these entities are included in the Heinz consolidated
financial statements. All of the intercompany transactions and accounts are
eliminated within the Heinz consolidated financial statements. The preferred
shares issued by Heinz Finance are reported in the Heinz consolidated financial
statements as long-term debt at April 28, 2004 and minority interest at April
30, 2003.

2. SIGNIFICANT ACCOUNTING POLICIES

FISCAL YEAR

Heinz Finance operates on a 52- or 53-week fiscal year ending the Wednesday
nearest April 30. 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 Heinz
Finance. All intercompany accounts and transactions have been 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 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.

27

H. J. HEINZ FINANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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. Heinz Finance's impairment review is based on an undiscounted cash
flow analysis at the lowest level for which identifiable cash flows exist.
Impairment occurs when the carrying value of the asset exceeds its 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

Heinz Finance 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

Until July 6, 2001, Heinz Finance joined with Heinz in the filing of a
consolidated U.S. income tax return and state income tax returns. After July 6,
2001, H. J. Heinz Finance Company began filing its own consolidated U.S. income
tax return. U.S. tax expense for all periods prior to July 7, 2001, and state
tax expense for all years includes the effect of certain tax sharing agreements
Heinz Finance has with Heinz regarding these consolidated filings. Specifically,
Heinz charged (refunded) Heinz Finance at the U.S. statutory rate for its actual
taxable income (loss). In addition, Heinz charges Heinz Finance for its share of
consolidated state tax expense based on Heinz Finance's share of the state
allocation factors.

28

H. J. HEINZ FINANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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.

FINANCIAL INSTRUMENTS

Heinz Finance's financial instruments consist primarily of cash and cash
equivalents, short-term notes receivable from related parties, long-term notes
receivable from related parties, short-term debt with related parties, long-term
debt, swaps, forward contracts, commodity futures, and option contracts. The
carrying values for Heinz Finance'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, Heinz Finance does not engage in speculative or leveraged
transactions, nor does Heinz Finance hold or issue financial instruments for
trading purposes.

Heinz Finance uses derivative financial instruments for the purpose of
hedging currency, price and interest rate exposures, which exist as part of
ongoing business operations. Heinz Finance 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 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 and
combined statements of cash flows within operating activities as a component of
other items, net.

3. RECENTLY ISSUED ACCOUNTING STANDARDS

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, Heinz Finance has 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. Heinz Finance is currently evaluating the impact of
this guidance on its 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 Heinz
Finance during the fourth quarter of Fiscal 2004. The adoption of this new
standard did not have an impact on Heinz Finance'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 Heinz Finance for the second quarter

29

H. J. HEINZ FINANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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 as long-term debt and the $5.1 million quarterly preferred
dividend from retained earnings to interest expense beginning in the second
quarter ending October 29, 2003.

4. 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. pet food and pet
snacks, U.S. tuna, U.S. retail private label soup and private label gravy,
College Inn broths and U.S. infant feeding businesses, and distributed all of
the shares of SKF Foods common stock on a pro rata basis to its shareholders.
Immediately thereafter, SKF Foods merged with a wholly-owned subsidiary of Del
Monte Foods Company ("Del Monte") resulting in SKF Foods becoming a wholly-owned
subsidiary of Del Monte.

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 Heinz Finance's
consolidated statements of income. The discontinued operations generated sales
of $1,052.6 million and $1,357.7 million and a net loss of $23.3 million (net of
$13.8 million of a tax benefit) and $35.7 million (net of $19.6 million of a tax
benefit) for Fiscal 2003 and 2002, respectively.

5. ACQUISITIONS/DIVESTITURES

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

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

During Fiscal 2002, Heinz Finance acquired the following businesses for a
total of $813.9 million, which was paid primarily in cash, including obligations
to sellers of $2.5 million:

- In July 2001, Heinz Finance completed the acquisition of Borden Food
Corporation's pasta sauce, dry bouillon and soup businesses 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, Heinz Finance 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, Heinz Finance 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 Popper's brand of retail appetizer lines.

- Heinz Finance also made other smaller acquisitions.

The allocation of the purchase price resulted in goodwill of $578.3
million, which was assigned to North American Consumer Products segment. Of that
amount, $367.8 million is expected to be deductible for tax purposes. In
addition, $186.0 million of intangible assets were acquired, of which $91.1
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 approxi-

30

H. J. HEINZ FINANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

mately 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).

Heinz Finance made a small acquisition in Fiscal 2004 for a total purchase
price of $61.3 million. There were no acquisitions in Fiscal 2003.

6. SPECIAL ITEMS

REORGANIZATION COSTS

In Fiscal 2004, Heinz Finance recognized reorganization costs of $8.7
million pretax which were primarily due to employee termination and severance
costs. Of this amount, $8.6 million was charged to Heinz finance by Heinz
Management Company through a management fee for all salaried employee costs.
These costs were recognized as a component of selling, general and
administrative expenses ("SG&A").

In Fiscal 2003, Del Monte transaction costs and costs to reduce overhead of
the remaining business totaled $55.3 million pretax. In addition, during Fiscal
2003, Heinz Management Company recognized Del Monte transaction costs and costs
to reduce overhead of the remaining business totaling $34.2 million pretax.
These costs were then charged to Heinz Finance through the management fee
charged to Heinz Finance by Heinz Management Company for all salaried employee
costs. These total charges of $89.5 million pretax were comprised of $39.6
million related to the early retirement of debt, $24.4 million in employee
termination and severance costs, $14.7 million for legal, professional and other
related costs, and $10.8 million of non-cash write-offs. Of this amount, $6.0
million was included in cost of products sold, $44.0 million in SG&A, and $39.6
million in other expenses, net.

During Fiscal 2004, Heinz Finance utilized $17.9 million of severance and
exit cost accruals related to reorganization costs. Amounts included in accounts
payable to related parties and other accrued liabilities related to these
initiatives totaled $5.0 million and $14.1 million at April 28, 2004 and April
30, 2003, respectively.

STREAMLINE

In the fourth quarter of Fiscal 2001, Heinz announced a restructuring
initiative named "Streamline" which included an organizational restructuring
aimed at reducing overhead costs and was completed in the first half of Fiscal
2003.

During Fiscal 2003, Heinz Finance utilized $1.0 million of severance and
exit cost accruals, principally related to its overhead reduction plan. 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.

In the fourth quarter of Fiscal 2002, Heinz Finance recorded a benefit of
$1.1 million pretax, classified as SG&A, to reflect revisions in original cost
estimates. In addition, Heinz Management Company, a wholly-owned subsidiary of
Heinz, assumed a portion of the Heinz Finance's restructuring liability as a
result of the realignment that occurred on May 3, 2001.

7. GOODWILL AND OTHER INTANGIBLE ASSETS

Effective May 2, 2002, Heinz Finance 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

31

H. J. HEINZ FINANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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.

Heinz Finance completed its transitional goodwill impairment tests during
the second quarter of Fiscal 2003. No impairment issues were identified as a
result of completing these transitional impairment tests.

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 are as follows:

Income from continuing operations for Fiscal 2002 would have been $110.1
million had the provisions of the new standards been applied as of May 3, 2001.

In the first quarter of Fiscal 2004, Heinz Finance changed its segment
reporting to reflect changes in organizational structure and management of its
businesses (see footnote 16). Heinz Finance 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:

32

H. J. HEINZ FINANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Amortization expense for trademarks and other intangible assets subject to
amortization was $9.6 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 years is estimated to
be approximately $10 million.

Intangible assets not subject to amortization totaled $103.1 million and
$91.1 million at April 28, 2004 and April 30, 2003, respectively, and consisted
solely of trademarks.

8. RELATED PARTY TRANSACTIONS

EMPLOYEE COSTS

Certain of Heinz's general and administrative expenses are allocated to
Heinz Finance. These costs primarily include a management charge of all salaried
employee costs from the Heinz Management Company. Total costs charged to Heinz
Finance for these services, including discontinued operations, were $252.5
million, $333.1 million and $334.8 million in Fiscal 2004, 2003 and 2002,
respectively. These costs are recorded as cost of products sold or SG&A expense
in the accompanying consolidated statements of income depending on the nature of
the cost.

Heinz charges Heinz Finance for its share of group health insurance costs
for eligible company employees based upon location-specific costs, overall
insurance costs and loss experience incurred during a calendar year. In
addition, various other insurance coverages are also provided to Heinz Finance
through Heinz's corporate programs. Workers compensation, auto, property,
product liability and other insurance coverages are charged directly based on
Heinz Finance's loss experience. Amounts charged to Heinz Finance for insurance
costs, including discontinued operations were $65.4 million, $75.8 million and
$65.2 million for Fiscal 2004, 2003, 2002, respectively, and are recorded in
SG&A expense in the accompanying consolidated statements of income.

Pension costs and postretirement costs are also charged to Heinz Finance
based upon eligible employees participating in the Plans. See Note (14).

CASH MANAGEMENT

Heinz Finance represents the treasury center for cash management and debt
financing for all of Heinz's domestic operations. In addition, Heinz Finance
enters into a number of short-term notes payable with foreign wholly-owned
subsidiaries of Heinz. As a result of these cash management activities, Heinz
Finance had $104.6 million and $100.3 million of net short-term notes receivable
with related parties recorded on the consolidated balance sheets as of April 28,
2004 and April 30, 2003, respectively. An average interest rate of 1.15%, 1.65%
and 2.99% was charged on these combined domestic and foreign notes resulting in
$0.5 million, $11.6 million and $33.8 million of net interest income for Fiscal
2004, 2003 and 2002, respectively.

At April 30, 2003, short-term notes receivable from related parties also
included $35.0 million related to a receivable from Heinz. This note was
classified as short-term at April 30, 2003 given its scheduled maturity of April
29, 2004. In Fiscal 2004, the maturity date of this note was modified such that
the note is due on May 2, 2007. Accordingly, this amount is presented in
long-term notes receivable from related parties at April 28, 2004.

PRODUCT SALES AND PURCHASES

Heinz Finance sells and purchases products and services to and from other
Heinz affiliates. The results of related party transactions are the $19.7
million and $24.6 million balances due from related parties in Fiscal 2004 and
2003, respectively, and the $72.9 million and $98.9 million balances for
accounts payable to related parties in Fiscal 2004 and 2003, respectively.
Product sales to related

33

H. J. HEINZ FINANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

parties were $46.7 million, $48.3 million and $42.0 million in Fiscal 2004, 2003
and 2002, respectively, and purchases from related parties were $33.6 million,
$28.0 million and $23.7 million in Fiscal 2004, 2003 and 2002, respectively.

OTHER RELATED PARTY ITEMS

Heinz Finance held $1.9 billion of non-voting, 6.5% cumulative
non-participating preferred stock of PM Holding, Inc. ("PM Holding"), a
subsidiary of Heinz. Heinz Finance's preferred stock investment in PM Holding
was converted to a preferred stock investment in Heinz as a result of the merger
of PM Holding with and into Heinz during the third quarter of Fiscal 2003. The
dividends on the preferred stock amounted to $123.2 million, $123.9 million and
$130.7 million for Fiscal 2004, 2003 and 2002, respectively. This preferred
stock investment is recorded in the Investments in related parties balance on
the consolidated balance sheets as of April 28, 2004 and April 30, 2003.

Heinz Finance paid royalties of $156.3 million, $159.5 million and $139.4
million in Fiscal 2004, 2003 and 2002, respectively, to Promark International,
Inc. and Promark Brands, Inc., direct subsidiaries of Heinz, for the use of
certain trademarks.

Heinz Finance received a $5.1 million administrative fee from Heinz in
Fiscal 2002 for acting as the agent in the sale of Heinz's inventory. This
administrative fee is recorded as income in SG&A expense in the accompanying
consolidated statement of income.

9. INCOME TAXES

The following table summarizes the provision for U.S. federal and state
taxes on income from continuing operations:

34

H. J. HEINZ FINANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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

The effective tax rate for Heinz Finance in Fiscal 2004, 2003 and 2002 is a
result of Heinz Finance's nontaxable minority interest in Heinz LP. The
effective tax rate will fluctuate for Heinz Finance depending on the proportion
of this nontaxable minority interest to total Heinz Finance income before tax.
In Fiscal 2004, the effective tax rate was also unfavorably impacted by the
nondeductible interest expense associated with Heinz Finance's mandatorily
redeemable preferred shares.

The deferred tax (assets) and deferred tax liabilities applicable to
continuing operations recorded on the balance sheet as of April 28, 2004 and
April 30, 2003 are as follows:

10. DEBT AND PREFERRED STOCK

In September 2001, Heinz 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
Heinz's and Heinz Finance's commercial paper borrowings and the remarketable
securities. As a result, these borrowings are classified as long-term debt based
upon

35

H. J. HEINZ FINANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Heinz Finance's ability to refinance these borrowings on a long-term basis.
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 $355.7 million in 2005, $0.4 million in 2006,
$0.2 million in 2007, $299.5 million in 2008 and $325.2 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 Heinz Finance 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 as long-term
debt.

As of April 28, 2004, Heinz Finance 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 Heinz Finance 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 an effective
yield to Heinz Finance of 5.772%.

36

H. J. HEINZ FINANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

11. MINORITY INTEREST

The components of Heinz Finance's minority interest balance as of April 28,
2004, April 30, 2003 and May 1, 2002 are as follows:

12. SUPPLEMENTAL CASH FLOW INFORMATION

Net cash paid during the year for:

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

* Includes obligations to sellers of $2.5 million in 2002.

13. MANAGEMENT INCENTIVE PLAN

Heinz'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. All of Heinz
Finance's compensation under the management incentive plan was recorded on the
Heinz Management Company and subsequently charged back to Heinz Finance (see
Note 8).

37

H. J. HEINZ FINANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

14. EMPLOYEE RETIREMENT BENEFITS

Employees participate in certain defined benefit pension plans, certain
defined contribution plans, and certain stock option plans, all of which are
sponsored by Heinz. Heinz Finance also provides post-retirement health care and
life insurance benefits for employees who meet the eligibility requirements of
the Heinz plans. Retirees share in the cost of these benefits based on age and
years of service.

Heinz allocates costs for the defined benefit plans to Heinz Finance as
determined by actuarial valuations. Company contributions to the defined
contribution plans amount to a qualified age-related contribution, a matching of
employee's contributions up to a specified amount, and for certain employees,
supplemental contributions.

The following (income) expense was included in Heinz Finance's statements
of income:

Employees also participate in the Employee Stock Ownership Plan ("ESOP")
and the Global Stock Purchase Plan ("GSPP"). Heinz established the ESOP in 1990
to replace in full or in part Heinz Finance's cash-matching contributions to the
H. J. Heinz Company Employees Retirement and Saving Plan, a 401(k) plan for
salaried employees. The GSPP gives employees an option to acquire stock at the
lower of 85% of the fair market value of Heinz's stock on the first or last day
of a purchase period.

15. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES

Heinz Finance utilizes certain derivative financial instruments to manage
its foreign currency, commodity price, and interest rate exposures.

FOREIGN CURRENCY HEDGING

Heinz Finance may hedge foreign currency cash flows associated with
foreign-currency-denominated financial liabilities. These hedges are accounted
for as cash flow hedges. Accordingly, the effective portion of gains and losses
is deferred as a component of accumulated other comprehensive income and is
recognized in earnings at the time the hedged item affects earnings, in the same
line item as the underlying hedged item.

COMMODITY PRICE HEDGING

Heinz Finance 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
income and is recognized as part of cost of products sold at the time the hedged
item affects earnings.

38

H. J. HEINZ FINANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

INTEREST RATE HEDGING

Heinz Finance 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 expenses, net was a net gain of $0.4 million
for the year ended April 28, 2004 and a net loss of $0.1 million for the years
ended April 30, 2003 and May 1, 2002. Heinz Finance excludes the time value
component of option contracts from the assessment of hedge effectiveness.

DEFERRED HEDGING GAINS AND LOSSES

As of April 28, 2004, Heinz Finance is hedging forecasted transactions for
periods not exceeding 12 months. During the next 12 months, Heinz Finance
expects $1.9 million of net deferred gain reported in accumulated other
comprehensive income to be reclassified to earnings. Net deferred gains
reclassified to earnings because the hedged transaction was no longer expected
to occur were not significant.

OTHER ACTIVITIES

Heinz Finance 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 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, Heinz Finance
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, Heinz Finance had outstanding currency exchange and
interest rate derivative contracts with notional amounts of $182 million and
$3.68 billion, respectively. Heinz Finance had no outstanding commodity
contracts at April 28, 2004. At April 30, 2003, Heinz Finance had outstanding
commodity and interest rate derivative contracts with notional amounts of $21
million and $2.95 billion, respectively. Heinz Finance had no outstanding
currency exchange contracts at April 30, 2003. The fair value of derivative
financial instruments was a net asset of $130 million and $297 million at April
28, 2004 and April 30, 2003, respectively.

CONCENTRATIONS OF CREDIT RISK

Counterparties to currency exchange and interest rate derivatives consist
of large major international financial institutions. Heinz Finance 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
Heinz Finance may be exposed to potential losses due to the credit risk of
non-performance by these counterparties, losses are not anticipated. For Fiscal
2004, Wal-Mart Stores, Inc. represented more than 10% of Heinz Finance's sales.
Heinz Finance closely monitors the credit risk associated with its customers and
has never experienced significant losses.

39

H. J. HEINZ FINANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

16. SEGMENT DATA

The composition of segments and measure of segment profitability is
consistent with that used by Heinz Finance's management. In the first quarter of
Fiscal 2004, Heinz Finance changed its segment reporting to reflect changes in
organizational structure and management of its businesses. Heinz Finance is now
managing and reporting its operating businesses under two segments, designated
North American Consumer Products and U.S. Foodservice. Prior periods have been
restated to conform to the current presentation.

Descriptions of the Heinz Finance's reportable segments are as follows:

- NORTH AMERICAN CONSUMER PRODUCTS -- This segment manufactures, markets
and sells ketchup, condiments, sauces, frozen potatoes, entrees, snacks
and appetizers to the grocery channels in the U.S.

- 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.

Heinz Finance's management evaluates performance based on several factors
including net sales, operating income, 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 Heinz Finance's management.

The following table presents information about Heinz Finance's reportable
segments:

40

H. J. HEINZ FINANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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

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

(b) Includes charges/assets not directly attributable to operating segments.

(c) Amounts include discontinued operations in 2002.

(d) FISCAL YEAR ENDED APRIL 28, 2004: Includes costs to reduce overhead of the
remaining businesses as follows: North American Consumer Products $4.8
million and U.S. Foodservice $3.9 million.

FISCAL YEAR ENDED APRIL 30, 2003: Includes Del Monte transaction related
costs and costs to reduce overhead of the remaining business as follows:
North American Consumer Products $44.0 million and U.S. Foodservice $5.9
million.

FISCAL YEAR ENDED MAY 1, 2002: North American Consumer Products includes a
net restructuring benefit related to the Streamline initiative totaling
$1.1 million.

Heinz Finance's revenues are generated via the sale of products in the
following categories:

17. QUARTERLY RESULTS (UNAUDITED)

The first quarter of Fiscal 2004 includes costs to reduce overhead of $2.5
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 $6.1 million after tax.

The second quarter of Fiscal 2003 includes costs related to the Del Monte
transaction and costs to reduce overhead of the remaining businesses of $5.2
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 $30.9
million after tax.

41

H. J. HEINZ FINANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The fourth quarter of Fiscal 2004 includes costs to reduce overhead of $3.0
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 $31.4 million after tax.

18. COMMITMENTS AND CONTINGENCIES

LEGAL MATTERS

Certain suits and claims have been filed against Heinz Finance 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 Heinz Finance's
consolidated and combined financial position, results of operations or
liquidity.

LEASE COMMITMENTS

Operating lease rentals for warehouses, production, office facilities and
equipment amounted to $23.3 million in 2004, $20.5 million in 2003 and $26.6
million in 2002. Future lease payments for noncancellable operating leases as of
April 28, 2004 totaled $52.4 million (2005 -- $10.9 million, 2006 -- $10.0
million, 2007 -- $6.1 million, 2008 -- $4.1 million, 2009 -- $3.2 million and
thereafter -- $18.3 million).

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

19. ADVERTISING COSTS

Advertising costs (including production and communication costs) for Fiscal
2004, 2003 and 2002 were $205.3 million, $232.0 million and $195.9 million,
respectively and are recorded either as a reduction of revenue or as a component
of SG&A.

42

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

Heinz Finance's management, with the participation of Heinz Finance's
President and Chief Financial Officer, evaluated the effectiveness of the design
and operation of Heinz Finance's disclosure controls and procedures as of the
end of the period covered by this report. Based on that evaluation, the
President and Chief Financial Officer concluded that Heinz Finance'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 Heinz Finance 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. Heinz
Finance 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 Heinz Finance's internal control over financial reporting
occurred during Heinz Finance's most recent fiscal quarter that has materially
affected, or is reasonably likely to materially affect, Heinz Finance's internal
control over financial reporting.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

See table in Part 1. Our code of ethics, which is applicable to all
employees including the principal executive, principal financial and principal
accounting officers, is available on Heinz's website (www.heinz.com).

ITEM 11. EXECUTIVE COMPENSATION.

Compensation of Directors

We paid fees to our Independent Director for his service as a director. The
Independent Director is entitled to receive annual compensation of $3,500 plus
reimbursement of expenses for attendance at each meeting of the Board of
Directors. We did not pay fees to directors who are not Independent Directors.

43

Executive Compensation

The following table sets forth information concerning the total
compensation paid by us (except as discussed below for executive officers Cullo,
Johnson, Winkleblack, Bertasso, Jimenez and Stein) to our executive officers for
the periods set forth below.

SUMMARY COMPENSATION TABLE

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

(1) Amounts reflect grants of restricted stock units in Fiscal 2003 and 2004,
including a grant in lieu of a portion of such officer's cash bonus for
Fiscal 2003. The number of units awarded in such grants and their aggregate
value as of April 28, 2004 were as follows: Mr. Cullo, 3,320, $126,426; Mr.
Johnson, 198,142, $7,545,247; Mr. Winkleblack, 38,871, $1,480,208; Mr.
Jimenez, 45,763, $1,742,655; Ms. Stein, 26,718, $1,017,421; and Mr.
Bertasso, 36,915, $1,405,723. The restricted stock units vest in five years,
subject to earlier vesting upon the attainment of certain predetermined
specific financial objectives. Dividend equivalents are paid on the
restricted stock units at the same rate as paid on Heinz's common stock.

(2) All option awards and those restricted stock unit awards made prior to the
spin-off of certain businesses to Del Monte Corporation on December 20, 2002
have been adjusted to reflect the stock distribution made in connection with
such spin-off.

(3) Includes for Fiscal 2004 for Messrs. Cullo, Johnson, Winkleblack, Jimenez,
Ms. Stein and Mr. Bertasso, respectively, the following: (i) amounts
contributed by Heinz under Heinz's retirement and savings plans, $38,054,
$293,450, $75,600, $67,710, $53,398, and $51,440; (ii) amounts attributable
to "split dollar" life insurance provided by Heinz for Mr. Cullo, $5,557 and
amounts paid by Heinz to executives for payment of premiums allocable to
executive life insurance provided by Heinz, $89,995, $8,904, $7,762, $3,170,
and $17,276; and (iii) the portion of interest accrued (but not currently
paid or payable) on deferred compensation above 120% of the applicable
federal long-term rate, $0, $9,918, $0, $0, $0, and $0.

(4) Executive officer Cullo is also employed by Heinz and receives a portion of
his compensation from Heinz and the remainder from Heinz Finance.

(5) Mr. Johnson is not employed by Heinz Finance, but has been included because
of his position at Heinz, which pays all of his compensation. The annual
base salary, annual bonus opportunity and long-term compensation (including
stock options and restricted stock units) for Mr. Johnson is

44

determined by the Heinz Management Development and Compensation Committee.
Because Mr. Johnson is an executive officer of Heinz and his compensation
from Heinz was previously required to be disclosed, his compensation
received from Heinz is included for the Heinz fiscal years ended May 1, 2002
and May 2, 2001.

(6) Mr. Winkleblack became an executive officer of Heinz and Heinz Finance in
January 2002. Executive officer Winkleblack is also employed by Heinz, and
receives no direct compensation from Heinz Finance. The annual base salary,
annual bonus opportunity and long-term compensation (including stock options
and restricted stock units) for Mr. Winkleblack was determined by the Heinz
Management Development and Compensation Committee. Because his compensation
received from Heinz was previously required to be disclosed, his
compensation received from Heinz is included for the Heinz fiscal year ended
May 1, 2002.

(7) Mr. Jimenez is not employed by Heinz Finance, but has been included because
of his position at Heinz, which pays all of his compensation. The annual
base salary, annual bonus opportunity and long-term compensation (including
stock options and restricted stock units) for Mr. Jimenez was determined by
the Heinz Management Development and Compensation Committee. Mr. Jimenez
became an executive officer of Heinz in September 2001. Because his
compensation received from Heinz was previously required to be disclosed,
his compensation received from Heinz is included for the Heinz fiscal year
ended May 1, 2002.

(8) Executive officer Stein is also employed by Heinz, and Ms. Stein receives no
direct compensation from Heinz Finance. The annual base salary, annual bonus
opportunity and long-term compensation (including stock options and
restricted stock units) for Ms. Stein was determined by the Heinz Management
Development and Compensation Committee. Because Ms. Stein is an executive
officer of Heinz and her compensation from Heinz was previously required to
be disclosed, her compensation received from Heinz is included for the Heinz
fiscal years ended May 1, 2002 and May 2, 2001.

(9) Mr. Bertasso is not employed by Heinz Finance, but has been included because
of his position at Heinz, which pays all of his compensation. The annual
base salary, annual bonus opportunity and long-term compensation (including
stock options and restricted stock units) for Mr. Bertasso is determined by
the Heinz Management Development and Compensation Committee. Because Mr.
Bertasso is an executive officer of Heinz and his compensation from Heinz
was previously required to be disclosed, his compensation from Heinz is
included for the Heinz fiscal years ended May 1, 2002 and May 2, 2001.

45

OPTION GRANTS BY HEINZ IN FISCAL YEAR 2004

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

(1) All options were granted in September 2003, pursuant to the terms of Heinz's
stock option plans and have identical terms. All options vest in 25% annual
increments commencing on September 12, 2004.

(2) The estimated grant date present value reflected in the above table is
determined using the Black-Scholes model. The material assumptions and
adjustments incorporated in the Black-Scholes model in estimating the value
of the option grants reflected in the above table include the following: (i)
exercise price for the options ($34.00) equal to the fair market value of
the underlying Heinz common stock on the date of grant; (ii) expected option
term of 6.5 years; (iii) dividend yield of 3.3%; (iv) risk-free interest
rate of 3.7%; and (v) volatility of 20.1%. The ultimate values of the
options will depend on the future market price of Heinz's common stock,
which cannot be forecast with reasonable accuracy. The actual value, if any,
an optionee will realize upon exercise of an option will depend on the
excess of the market value of Heinz's common stock over the exercise price
on the date the option is exercised.

AGGREGATED OPTION/SAR EXERCISES IN FISCAL YEAR 2004 AND FISCAL YEAR-END OPTION/
SAR VALUE(1)

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

(1) All options are denominated in shares of Heinz.

(2) All options granted prior to December 20, 2002 were adjusted to reflect the
stock distribution resulting from the spin-off of certain businesses to Del
Monte Corporation on that date.

(3) The "Value of Unexercised In-the-Money Options at Fiscal Year-End" is
calculated based on the difference in options with exercise prices less than
the closing price of Heinz stock on April 28, 2004 ($38.08), compared to the
grant date exercise price, times the number of options.

46

RETIREMENT BENEFITS

Most full-time salaried employees in the United States who were hired
before January 1, 1993 are entitled to retirement benefits from Plan A of the H.
J. Heinz Company Employees' Retirement System ("Plan A"). Benefits are based on
credited service and five-year average eligible compensation through December
31, 1992, the date on which Plan A was frozen. Since January 1, 1993, retirement
benefits have been provided by Heinz through an age-related contribution account
within the Employees Retirement and Savings Plan.

Heinz has a Supplemental Executive Retirement Plan, (the "SERP") which
provides additional retirement benefits for eligible executives, including the
named executive officers in the Summary Compensation Table. The SERP was adopted
in order to attract and retain executives, and to compensate them for reductions
in benefits due to limitations imposed by the Internal Revenue Code. The SERP
benefit is a lump sum equal to a multiple of the employee's final average
eligible compensation during the highest five of the last ten years prior to
retirement. It is reduced by (i) the lump sum value of the Plan A benefit (if
any), and (ii) the value of the employee's Age-Related Company Contribution
Account under the Heinz Employees Retirement and Savings Plan and the Heinz
Employees Retirement and Savings Excess Plan.

The following table entitled "Table I -- U.S. Retirement Plans" shows the
estimated maximum retirement benefit from all sources described above, at
various combinations of pay and service, stated as an annual pension equivalent
beginning at age 65. The pay included in the earnings base is the executive's
base salary, annual bonus and restricted stock units received in lieu of cash
bonus.

On May 6, 2002, the Board of Directors of Heinz approved an enhancement to
Mr. Johnson's SERP. This enhancement provides for an additional accrual equal to
3.85% of final average earnings per each additional year of service from the
date of the SERP enhancement. This benefit is subject to a maximum enhancement
of 26.95% at seven additional years of service. The enhancement is further
limited to a total annual benefit (from all of Heinz's retirement arrangements)
of 60% of final average earnings at retirement (excluding any value received
from stock options) on or after the age of 60.

This enhanced benefit would vest 100% in five years subject to Mr.
Johnson's continued employment. If Mr. Johnson is involuntarily terminated from
his position for a reason other than for cause, the benefit will fully vest; his
accrual however, would be based on years served as of the date of termination.

The following table entitled "Table II -- Retirement Plans for Mr. Johnson"
shows the estimated maximum retirement benefit from all sources described above
for Mr. Johnson, at various combinations of pay and service, stated as an annual
pension equivalent beginning at age 65. The pay included in the earnings base is
Mr. Johnson's base salary, annual bonus, and restricted stock units received in
lieu of cash bonus.

As of April 28, 2004, the years of service for Messrs. Cullo, Johnson,
Winkleblack, Jimenez, and Ms. Stein and Mr. Bertasso were, as rounded to the
nearest full year, 13, 22, 3, 6, 5 and 17, respectively.

47

TABLE I -- U.S. RETIREMENT PLANS

TABLE II -- RETIREMENT PLANS FOR MR. JOHNSON

EXECUTIVE ESTATE LIFE INSURANCE PROGRAM

In December 2001, Heinz adopted an executive estate life insurance program
("EELIP") for certain eligible executives. Under the EELIP, eligible executives
relinquished compensation in exchange for Heinz's funding of a split-dollar life
insurance policy purchased by the executive's family trust. Under the EELIP,
Heinz will automatically recover all amounts so funded plus interest thereon
from the proceeds of the policy after the participant's and/or participant's
spouse's death.

As previously disclosed, in 2001 Heinz provided funding in the amount of
$5,080,000 to Mr. Johnson's life insurance policy under the EELIP insuring Mr.
Johnson and his wife. In exchange for that funding, Mr. Johnson agreed to
relinquish his interest in a split dollar life insurance policy that had been
purchased by Heinz earlier that year along with the $3,385,249 deferred
compensation award that he had relinquished in exchange for that policy. The
EELIP loan to Mr. Johnson was subject to vesting, and fully vested in September
2003. The insurance loan to Mr. Johnson accrues interest at the annual rate of
4.99%, and, consistent with the EELIP, will be automatically repaid to Heinz
upon payment under the related life insurance policy. As of April 28, 2004, the
total due to Heinz plus interest under these life insurance loans for Mr.
Johnson was $5,378,010.

In March 2003, the executive life insurance program of Heinz was amended to
convert a split-dollar life insurance program to a bonus life insurance policy
to eliminate the loan feature of that program. The above-referenced EELIP loan,
which will be automatically repaid, with interest, to

48

Heinz upon payment under the policy, is permitted to remain outstanding under
the Sarbanes-Oxley Act of 2002, so long as its terms are not materially
modified.

SEVERANCE ARRANGEMENTS

Heinz maintains severance agreements with Ms. Stein and Messrs. Johnson,
Winkleblack, Bertasso and Jimenez. If such executive's employment is terminated
involuntarily other than for cause, or voluntarily for good reason, within two
years after a change in control of Heinz, the agreements provide for the lifting
of restrictions on outstanding incentive awards, continuation of medical, life
insurance and disability coverage for a three-year period, and a lump sum
payment equal to three times the sum of the annual salary and bonus, including
restricted stock units granted in lieu of a portion of the cash bonus
opportunity (as determined under the severance agreements), of the executive
plus a benefit determined by taking into account an additional three years of
age and service for purposes of calculating retirement benefits. The agreements
also provide that Heinz will reimburse the executive for the impact of excise
taxes, if any, which may be imposed under the Internal Revenue Code with respect
to certain payments contingent on a change in control.

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

The following table sets forth all equity securities of Heinz beneficially
owned as of May 31, 2004 by each director, director nominee, and executive
officer named in the Summary Compensation Table, and all directors, director
nominees and executive officers as a group, being eight in number. No executive
officer or director holds any shares of Heinz Finance.

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

(1) Shares listed in this column include all shares in which the named
individuals and all directors, director nominees, and executive officers as
a group have a present beneficial economic interest, and also include all
shares allocated to the accounts of the named individuals and all directors,
director nominees, and executive officers as a group under Heinz's Employees
Retirement and Savings Plan (W.R. Johnson, 77,253; A.B. Winkleblack, 2,022;
M.J. Bertasso, 16,956; J. Jimenez, 11,631; L. Stein, 797; L.A. Cullo, 3,332;
and all directors, director nominees and executive officers as a group,
125,364). Each person has both sole voting and sole investment power with
respect to the shares listed unless otherwise indicated.
(2) Shares listed include shares subject to stock options granted under Heinz's
stock option plans and exercisable within 60 days following May 31, 2004
(W.R. Johnson, 1,942,414; A.B. Winkleblack, 0; M.J. Bertasso, 324,661; J.
Jimenez, 360,734; L. Stein, 110,996; L.A. Cullo, 41,624; and all directors,
director nominees and executive officers as a group, 2,904,189).
(3) Shares listed include restricted stock units which have vested or will vest
on September 12, 2004 (W.R. Johnson, 98,762; A.B. Winkleblack, 21,317; M.J.
Bertasso, 20,260; J. Jimenez, 23,312; L. Stein, 14,586; L.A. Cullo, 2,226;
and all directors, director nominees and executive officers as a group,
192,833).

(4) Percentages of less than 1 percent are omitted.

49

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

Heinz Finance and Heinz have entered into agreements that provide for
financial support, administrative and other services, reimbursement for employee
services and intellectual property. This section describes those material
agreements between Heinz Finance and Heinz.

Operational Agreements

Heinz Finance entered into a services agreement with Heinz pursuant to
which Heinz provides certain accounting, legal, tax and other support services
and facilities to us. Under the services agreement, we reimburse Heinz for
services provided by Heinz thereunder. In addition, some of the officers and
employees of Heinz Finance are officers or employees of Heinz or its affiliates.
In particular, Heinz Management Company employs the salaried people who conduct
the business of Heinz LP, and the costs and expenses of those employees are
reimbursed by Heinz LP. If any individual provides more than de minimis services
to both Heinz and Heinz Finance, the compensation of that individual will be
apportioned between the two groups on terms no less favorable to us than we
could obtain from unaffiliated entities. We pay a royalty to Promark Brands,
Inc., for use of trademarks historically used in Heinz's U.S. business.

Guarantee Facility Agreement; Liquidity Agreement

Heinz Finance has a guarantee facility agreement with Heinz, pursuant to
which Heinz agrees to guarantee our payment of third-party obligations we have
issued or owe. We pay Heinz fees equal to 10 basis points per year of the sum of
the highest balance of the debt obligations with respect to which Heinz is a
guarantor and the highest balance of the debt obligations with respect to which
Heinz is a co-obligor. Under the terms of a liquidity agreement between Heinz
and Heinz Finance, Heinz agreed to provide or make available to us from time to
time loans in an aggregate principal amount of up to $400 million outstanding at
any one time, with normal and customary conditions to disbursement for each loan
made. Each loan under the liquidity agreement will bear interest at a floating
rate per annum equal to the then applicable LIBOR plus 100 basis points. We pay
Heinz a fee of 25 basis points per annum of the amount of loans available but
not drawn.

Other Agreements

In addition, Heinz Finance sells and purchases products from other Heinz
affiliates. Also, Heinz Finance sold certain accounts receivables to other Heinz
fully consolidated affiliates under a contract which was terminated in December
2001.

For further information regarding related party transactions, see Note 8 of
Heinz Finance's consolidated financial statements for the fiscal years ended
April 28, 2004, April 30, 2003 and May 1, 2002 included in this Form 10-K.

ITEM 14. PRINCIPAL AUDITOR FEES AND SERVICES.

PricewaterhouseCoopers LLP has been the independent accounting firm and has
audited the financial statements of Heinz Finance since Fiscal 2002.

50

The aggregate fees billed for each of the past two fiscal years are set
forth below:

The audit fees relate to professional services rendered for the audit of
the consolidated and combined financial statements of Heinz Finance, the
issuance of comfort letters and consents, and assistance with the review of
documents filed with the SEC.

Heinz Finance's Board of Directors has adopted a revised policy effective
for Fiscal 2004 which prohibits Heinz Finance from entering into non-audit
related consulting agreements for financial information systems design and
implementation, for certain other services considered to have an impact on
independence, and for all services prohibited by the Sarbanes-Oxley Act of 2002
and new Securities and Exchange Commission regulations. The policy also contains
procedures requiring Heinz Finance's Board of Directors' pre-approval of all
audit and permitted non-audit services provided by the external auditors.

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":
Report of Independent Registered Public Accounting Firm of PricewaterhouseCoopers LLP dated July 8,
2004, on Heinz Finance'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
Consolidated Statements of Income for the fiscal years ended April 28, 2004, April 30, 2003 and May
1, 2002
Consolidated Balance Sheets as of April 28, 2004 and April 30, 2003
Consolidated Statements of Shareholder's 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
(2) The following report and schedule is filed herewith 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.

51

(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) Heinz Finance's Certificate of Incorporation is incorporated herein by reference
to Exhibit 3.1 to Heinz Finance's Registration Statement on Form S-4 (Reg.
333-85064).
3(ii) Heinz Finance's By-Laws are incorporated herein by reference to Exhibit 3.2 to
Heinz Finance's Registration Statement on Form S-4 (Reg. 333-85064).
4. Except as set forth below, there are no instruments with respect to long-term
debt of Heinz Finance that involve indebtedness or securities authorized
thereunder exceeding 10 percent of the total assets of Heinz Finance on a
consolidated basis. Heinz Finance agrees to file a copy of any instrument or
agreement defining the rights of holders of long-term debt of Heinz Finance upon
request of the Securities and Exchange Commission.
(a) The Indenture between Heinz and The First National Bank of Chicago
dated as of July 15, 1992 is incorporated herein by reference to
Exhibit 4(a) to Heinz's Registration Statement on Form S-3 (Reg. No.
333-48017) and the supplements to such Indenture are incorporated
herein by reference to Heinz's Form 8-Ks dated March 25, 1998 and July
16, 1998 relating to Heinz's $300,000,000 6% Notes due 2008 and
$250,000,000 6.375% Debentures due 2028, respectively.
(i) The Supplement dated May 3, 2001 among Heinz, Heinz Finance
and Bank One, National Association to the Indenture is
incorporated herein by reference to Exhibit 4(a)(i) of
Heinz's Form 10-K for the fiscal year ended May 2, 2001.
(b) The Indenture between Heinz and Bank One, National Association dated
November 6, 2000, is incorporated herein by reference to Exhibit 4 to
Heinz's Quarterly Report on Form 10-Q for the nine months ended
January 31, 2001.
(i) The Supplement dated May 3, 2001 among Heinz, Heinz Finance
and Bank One, National Association to the Indenture is
incorporated herein by reference to Exhibit 4(b)(i) of
Heinz's Annual Report on Form 10-K for the fiscal year ended
May 2, 2001.
(ii) The second Supplement dated November 15, 2002 among Heinz,
Heinz Finance and Bank One, National Association to the
Indenture is incorporated by reference to Exhibit 4 of Heinz
Finance's Quarterly Report on Form 10-Q for the nine months
ended January 29, 2003.
(c) The Indenture among Heinz, Heinz Finance and Bank One, National
Association dated as of July 6, 2001 relating to Heinz Finance'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 Heinz's Annual Report on
Form 10-K for the fiscal year ended May 1, 2002.
(d) The Certificate of Designations, Preferences and Rights of Voting
Cumulative Preferred Stock, Series A of Heinz Finance is incorporated
herein by reference to Exhibit 4 of Heinz's Quarterly Report on Form
10-Q for the three months ended August 1, 2001.

52

10 (a) Liquidity Agreement dated as of June 26, 2001 between Heinz and Heinz
Finance is incorporated herein by reference to Exhibit 10.1 of Heinz
Finance's Registration Statement on Form S-4 (Reg. 333-85064).
(b) Administrative Services Agreement dated as of May 1, 2001 between
Heinz and Heinz Finance is incorporated herein by reference to Exhibit
10.2 of Heinz Finance's Registration Statement on Form S-4 (Reg.
333-85064).
(c) Guarantee Facility Letter Agreement dated May 3, 2001 to Heinz Finance
from Heinz is incorporated herein by reference to Exhibit 10.3 of
Heinz Finance's Registration Statement on Form S-4 (Reg. 333-85064).
(d) Third Amended and Restated Partnership Agreement of H. J. Heinz
Company, L.P. is incorporated herein by reference to Exhibit 10.6 of
Heinz Finance's Registration Statement on Amendment No. 2 to Form S-4
(Reg. 333-85064).
(i) First Amendment to Third Amended and Restated Partnership
Agreement incorporated herein by reference to Exhibit 10(a)
to H.J. Heinz Company's Quarterly Report on Form 10-Q for
the period ended January 28, 2004.
(ii) Second Amendment to Third Amended and Restated Partnership
Agreement incorporated herein by reference to Exhibit 10(b)
to H.J. Heinz Company's Quarterly Report On Form 10-Q for
the period ended January 28, 2004.
(e) 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 H. J. Heinz 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 H. J.
Heinz 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 H. J.
Heinz 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 H. J. Heinz 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 H. J. Heinz 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 H. J. Heinz 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
herein by reference to Exhibit 10(a)(vii) of H. J. Heinz
Company's Annual Report on Form 10-K for the fiscal year
ended May 1, 2002.

53

(viii) H. J. Heinz Company Incentive Compensation Plan is incorporated herein
by reference to Appendix B to H. J. Heinz 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 H. J. Heinz Proxy
Statement dated August 3, 1995.
(x) H. J. Heinz Company 1996 Stock Option Plan is incorporated herein by
reference to Appendix A to H. J. Heinz 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 H. J. Heinz
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 H. J. Heinz Company's Proxy Statement
dated August 3, 1999.
(xiii) Form of Severance Protection Agreement is incorporated herein by
reference to Exhibit 10(a)(xiv) to H. J. Heinz 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 H. J. Heinz 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 H. J. Heinz
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)(xiv) to
H. J. Heinz Company's Annual Report on Form 10-K for the fiscal year
ended May 1, 2002.
(xvii) H. J. Heinz Company Fiscal Year 2003 Stock Incentive Plan is
incorporated herein by reference to H. J. Heinz Company's Proxy
Statement dated August 2, 2002.
(xviii) H. J. Heinz Company Senior Executive Incentive Compensation Plan is
incorporated herein by reference to H. J. Heinz Company's Proxy
Statement dated August 2, 2002.
(xix) Form of First Amendment to Severance Protection Agreement is
incorporated herein by reference to Exhibit 10(a)(xxi) to H.J. Heinz
Company's Annual Report on Form 10-K for the fiscal year ended April
30, 2003.
(xx) 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 H.J. Heinz Company's Quarterly
Report on Form 10-Q for the three months ended January 28, 2004.
12. Computation of Ratios of Earnings to Fixed Charges.
21. Subsidiaries of the Registrant.
24. Powers-of-attorney of Heinz Finance's directors and officers.
31(a) Rule 13a-14(a)/15d-14(a) Certification by the President.
31(b) Rule 13a-14(a)/15(d) -- 14(a) Certification by Chief Financial Officer.

54

32(a) Certification by the President 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, 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 in the Exchange Act, except as expressly set forth by
specific reference in such filing.

(b) There have been no reports filed on Form 8-K during the last fiscal
quarter of the period covered by this Report.

55

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized, on July 16, 2004.

H. J. HEINZ FINANCE COMPANY
(Registrant)

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

Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated, on July 16, 2004.

Laura Stein Director
Andrew L. Stidd Director

SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION
15(d) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES PURSUANT TO
SECTION 12 OF THE ACT.

No annual report, other than the Annual Report for the fiscal year ended April
30, 2003 on Form 10-K, was sent to security holders.
By: /s/ LEONARD A. CULLO, JR.
-------------------------------

LEONARD A. CULLO, JR.

Attorney-in-fact

56

SCHEDULE II

H. J. HEINZ FINANCE 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)

NOTE:

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

EXHIBIT INDEX