HEINZ H J CO - 10-K Annual Report

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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

For the fiscal year ended April 27, 2005

or

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

For the transition period from __________ to __________

Commission File Number 1-3385

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

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

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

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

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

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

None.

Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No _

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

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

As of October 27, 2004 the aggregate market value of the Registrant's
voting stock held by non-affiliates of the Registrant was approximately
$12,361,465,110.

The number of shares of the Registrant's Common Stock, par value $.25 per
share, outstanding as of May 31, 2005, was 347,553,381 shares.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant's Proxy Statement for the Annual Meeting of
Shareholders to be held on August 23, 2005, which will be filed with the
Securities and Exchange Commission within 120 days after the end of the
Registrant's fiscal year ended April 27, 2005, are incorporated into Part III,
Items 10, 11, 12, 13, and 14.

PART I

ITEM 1. BUSINESS.

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

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

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

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

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

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

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

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

The Company's products are sold through its own sales force and through
independent brokers, agents and distributors to chain, wholesale, cooperative
and independent grocery accounts, convenience stores, bakeries, pharmacies, mass
merchants, club stores, foodservice distributors and institutions, including
hotels, restaurants, hospitals, health-care facilities, and certain government
agencies. For Fiscal Year 2005, no single customer represented more than 10% of
the Company's sales.

Compliance with the provisions of national, state and local environmental
laws and regulations has not had a material effect upon the capital
expenditures, earnings or competitive position of the Company. The Company's
estimated capital expenditures for environmental control facilities for the
remainder of Fiscal Year 2006 and the succeeding fiscal year are not material
and are not expected to materially affect either the earnings or competitive
position of the Company.

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

The Company employed, on a full-time basis as of April 27, 2005,
approximately 41,000 persons around the world.

Segment information is set forth in this report on pages 61 through 63 in
Note 15, "Segment Information" in Item 8--"Financial Statements and
Supplementary Data."

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

CAUTIONARY STATEMENT RELEVANT TO FORWARD-LOOKING INFORMATION

The Private Securities Litigation Reform Act of 1995 (the "Act") provides a
safe harbor for forward-looking statements made by or on behalf of the Company.
The Company and its represent-

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atives may from time to time make written or oral forward-looking statements,
including statements contained in the Company's filings with the Securities and
Exchange Commission and in its reports to shareholders. These forward-looking
statements are based on management's views and assumptions of future events and
financial performance. The words or phrases "will likely result," "are expected
to," "will continue," "is anticipated," "should," "estimate," "project,"
"target," "goal", "outlook" or similar expressions identify "forward-looking
statements" within the meaning of the Act.

In order to comply with the terms of the safe harbor, the Company notes
that a variety of factors could cause the Company's actual results and
experience to differ materially from the anticipated results or other
expectations expressed in the Company's forward-looking statements. These
forward-looking statements are uncertain. The risks and uncertainties that may
affect operations and financial performance and other activities, some of which
may be beyond the control of the Company, include the following:

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

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

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

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

- The Company's ability to generate sufficient cash flows to support
capital expenditures, share repurchase programs, interest and debt
principal 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 and the ability to
anticipate and respond to consumer trends;

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

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

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

- The impact of unforeseen economic and political changes in markets where
the Company competes, such as export and import restrictions, currency
exchange rates and restrictions, inflation rates, recession, foreign
ownership restrictions, nationalization and other external factors over
which the Company has no control;

- The possibility of increased pension expense and contributions resulting
from declines in stock market returns and cost increases for medical
benefits;

- The performance of businesses in hyperinflationary environments;

- The effect of any recalls of products;

- Changes in estimates in critical accounting judgments;

- Interest rate fluctuations and other capital market conditions;
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- The effectiveness of the Company's advertising, marketing and promotional
programs;

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

- The impact of supply chain efficiency and cash flow initiatives;

- Potential impairment of investments;

- Risks inherent in litigation;

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

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

- The Company'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. The Company undertakes no obligation to publicly
update or revise any forward-looking statements, whether as a result of new
information, future events or otherwise, except as required by the securities
laws.

ITEM 2. PROPERTIES.

See table in Item 1.

ITEM 3. LEGAL PROCEEDINGS.

None.

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

The Company has not submitted any matters to a vote of security holders
since the last annual meeting of shareholders on September 8, 2004.

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EXECUTIVE OFFICERS OF THE REGISTRANT

The following is a list of the names and ages of all of the executive
officers of H. J. Heinz Company indicating all positions and offices held by
each such person and each such person's principal occupations or employment
during the past five years. All the executive officers have been elected to
serve until the next annual election of officers, until their successors are
elected, or until their earlier resignation or removal. The annual election of
officers is scheduled to occur on August 23, 2005.

* Mr. Bertasso retired from the Company in June 2005.

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PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES.

Information relating to the Company's common stock is set forth in this
report on pages 27 through 28 under the caption "Stock Market Information" in
Item 7--"Management's Discussion and Analysis of Financial Condition and Results
of Operations", and on page 64 in Note 16, "Quarterly Results" in Item
8--"Financial Statements and Supplementary Data."

In the fourth quarter of Fiscal 2005, the Company repurchased the following
number of shares of its common stock:

The shares repurchased were acquired under the share repurchase program
authorized by the Board of Directors on January 14, 2004 for a maximum of 15
million shares. All repurchases were made in open market transactions. As of
April 27, 2005, the maximum number of shares that may yet be purchased under the
2004 program is 6,996,392. In addition, on June 8, 2005, the Board of Directors
authorized a share repurchase program of up to 30 million shares, all of which
may yet be purchased under the program.

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ITEM 6. SELECTED FINANCIAL DATA.

The following table presents selected consolidated financial data for the
Company and its subsidiaries for each of the five fiscal years 2001 through
2005. All amounts are in thousands except per share data.

(1) Long-term debt, exclusive of current portion, includes $186.1 million,
$125.3 million, $294.8 million and $23.6 million of hedge accounting
adjustments associated with interest rate swaps at April 27, 2005, April 28,
2004, April 30, 2003 and May 1, 2002, respectively. There were no interest
rate swaps at May 2, 2001. Long-term debt reflects the prospective
classification of Heinz Finance Company's $325 million of mandatorily
redeemable preferred shares from minority interest to long-term debt
beginning in the second quarter of Fiscal 2004 as a result of the adoption
of Statement of Financial Accounting Standards ("SFAS") No. 150.

Fiscal 2005 results from continuing operations include a $64.5 million
non-cash impairment charge for the Company's equity investment in The Hain
Celestial Group, Inc. ("Hain") and a $9.3 million non-cash charge to recognize
the impairment of a cost-basis investment in a grocery industry sponsored
e-commerce business venture. There was no tax benefit associated with these
impairment charges. Fiscal 2005 also includes a $27.0 million pre-tax ($18.0
million after-tax) non-cash asset impairment charge related to the anticipated
disposition of the HAK vegetable product line in Northern Europe early in Fiscal
2006.

Fiscal 2004 results from continuing operations include a gain of $26.3
million ($13.3 million after-tax) related to the disposal of the bakery business
in Northern Europe, costs of $17.1 million pretax ($11.0 million after-tax),
primarily due to employee termination and severance costs related

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to on-going efforts to reduce overhead costs, and $4.0 million pretax ($2.8
million after-tax) due to the write down of pizza crust assets in the United
Kingdom.

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

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

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

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

SPECIAL ITEMS

ASSET IMPAIRMENTS

In the fourth quarter of Fiscal 2005, the Company recognized a non-cash
asset impairment charge of $27.0 million pre-tax ($18.0 million after-tax) on
the HAK vegetable product line in Northern Europe. The charge, which is recorded
as a component of cost of products sold, relates to the anticipated sale of the
product line in early Fiscal 2006.

The Company holds an equity investment in The Hain Celestial Group, Inc.
("Hain"), a natural, specialty and snack food company. Hain shares traded at
less than 80% of Heinz's carrying value since late January 2004. Due to the
length of time and the amount that Hain stock had traded below the Company's
basis, the Company determined that the decline was other-than-temporary as
defined by Accounting Principles Board Opinion No. 18 and as a result,
recognized a $64.5 million non-cash impairment charge during the third quarter
of Fiscal 2005. The charge reduced Heinz's carrying value in Hain to fair market
value as of January 26, 2005, with no resulting impact on cash flows. Heinz
currently owns approximately six million shares of Hain stock, with a book value
of approximately $20.00 per share as of April 27, 2005. In the future, should
the market value of Hain common stock decline and remain below current market
value for a substantial time, the Company could be required to record additional
writedowns of its investment in Hain. The Company also recorded a $9.3 million
non-cash charge in the third quarter of Fiscal 2005 to recognize the impairment
of a cost-basis investment in a grocery industry-sponsored e-commerce business
venture. There was no tax benefit associated with these impairment charges.

DISCONTINUED OPERATIONS

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

In accordance with accounting principles generally accepted in the United
States of America, the operating results related to these businesses spun off to
Del Monte have been treated as discontinued operations in the Company's
consolidated statements of income. Net income from discontinued operations for
the years ended April 27, 2005 and April 28, 2004 was $16.9 million and $25.3
million, respectively, and reflects the favorable settlement of tax liabilities
related to the businesses spun-off to Del Monte on December 20, 2002. The
discontinued operations generated sales of $1,091.3 million and net income of
$88.7 million (net of $35.4 million in tax) for Fiscal 2003.

DIVESTITURES AND OTHER REORGANIZATION COSTS

During the first quarter of Fiscal 2004, the Company sold its bakery
business in Northern Europe for $57.9 million. The transaction resulted in a
pretax gain of $26.3 million ($13.3 million after tax), which was recorded as a
component of selling, general and administrative expenses ("SG&A"). This sale
impacted approximately 70 employees.

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

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have been included as a component of cost of products sold. Management estimates
that these actions impacted approximately 100 employees.

In Fiscal 2003, Del Monte transaction costs and costs to reduce overhead of
the remaining business totaled $164.6 million pretax ($113.1 million after-tax)
and were comprised of $61.8 million for legal, professional and other related
costs, $51.3 million in employee termination and severance costs, $39.6 million
related to the early retirement of debt, and $12.0 million in non-cash asset
write-downs. Of this amount, $6.1 million was included in cost of products sold,
$118.9 million in SG&A, and $39.6 million in other expense, net. Management
estimates that these actions impacted approximately 400 employees excluding
those who were transferred to Del Monte.

In Fiscal 2003, losses on the exit of non-strategic businesses, primarily
the UK frozen pizza business and a North American fish and frozen vegetable
business, totaled $62.4 million pretax ($49.3 million after-tax), and were
comprised of $39.7 million in non-cash asset write-downs, $12.1 million in
losses on the sale of businesses and $10.6 million in employee termination,
severance and other exit costs. Of these amounts, $47.3 million was included in
cost of products sold and $15.1 million in SG&A. Management estimates that these
actions impacted approximately 600 employees.

During Fiscal 2005, the Company utilized $9.9 million of severance and exit
cost accruals related to reorganization costs.

RESULTS OF CONTINUING OPERATIONS

FISCAL YEARS ENDED APRIL 27, 2005 AND APRIL 28, 2004

Sales for Fiscal 2005 increased $497.8 million, or 5.9%, to $8.91 billion.
Sales were favorably impacted by volume growth of 1.9% and exchange translation
rates of 3.9%. The favorable volume was primarily a result of strong increases
in the North American Consumer Products and U.S. Foodservice segments. Lower
pricing decreased sales by 0.2%, principally due to the restage of our Italian
infant nutrition business, market price pressures impacting the Tegel poultry
business in New Zealand and the trade in Northern Europe, and a $34.1 million
charge for trade spending for the Italian infant nutrition business. The trade
spending charge in the Italian infant nutrition business related to prior years
and reflected an under-accrual quantified as the Company was upgrading trade
management processes and systems in Italy. These price decreases were partially
offset by the North American Consumer Products and U.S. Foodservice segments and
U.K. convenience meals. Acquisitions, net of divestitures, increased sales by
0.3%. Domestic operations contributed approximately 38% of consolidated sales in
Fiscal 2005 and Fiscal 2004.

Gross profit increased $118.1 million, or 3.8%, to $3.21 billion; the gross
profit margin decreased to 36.0% from 36.7%. The decrease in the gross profit
margin is mainly due to increased commodity and fuel costs, lower pricing as
discussed above, increased production costs in the European seafood business and
a $27.0 million non-cash asset impairment charge related to the anticipated
disposition of the HAK vegetable product line in Northern Europe in early Fiscal
2006. The 3.8% increase in gross profit is primarily a result of higher volume
and favorable exchange translation rates. Last year's gross profit was
unfavorably impacted by the write down of U.K. pizza crust assets totaling $4.0
million.

SG&A increased $142.5 million, or 8.3%, to $1.85 billion, and increased as
a percentage of sales to 20.8% from 20.3%. The increase as a percentage of sales
is primarily due to the $26.3 million gain recorded on the sale of the Northern
European bakery business in the prior year and increased Selling and
Distribution costs ("S&D") and General and Administrative expenses ("G&A") in
the current year. The increase in S&D is largely a result of higher fuel and
transportation costs, and the increase in G&A is chiefly due to employee-related
and litigation costs, and professional fees related to various projects across
the Company, including increased administrative costs associated with Section
404 of Sarbanes-Oxley. These increases were partially offset by

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decreased marketing expense, primarily in Europe. Last year's SG&A was
unfavorably impacted by reorganization costs totaling $17.1 million. Operating
income decreased $24.4 million, or 1.8%, to $1.35 billion.

Total marketing support (recorded as a reduction of revenue or as a
component of SG&A) increased $82.0 million, or 3.4%, to $2.52 billion on a sales
increase of 5.9%. Marketing support recorded as a reduction of revenue,
typically deals and allowances, increased $98.9 million, or 4.6%, to $2.23
billion, which is largely a result of foreign exchange translation rates, the
Italian infant nutrition business, and increased promotional spending in
European seafood and Tegel poultry in New Zealand, partially offset by reduced
trade promotion spending in the U.S. Consumer Products and the U.K. businesses.
Marketing support recorded as a component of SG&A decreased $16.9 million, or
5.7%, to $282.8 million, primarily in the Europe segment.

Net interest expense increased $16.1 million, to $204.7 million. Net
interest expense was unfavorably impacted by higher interest rates during Fiscal
2005, partially offset by the benefits of lower average net debt. Fiscal 2005
income from continuing operations was also unfavorably impacted by the $73.8
million non-cash impairment charges discussed previously. Other expenses, net,
decreased $4.5 million, resulting primarily from the impact of the adoption of
Statement of Financial Accounting Standard ("SFAS") No. 150 (see below for
further discussion) beginning in the second quarter of Fiscal 2004.

The effective tax rate for the current year was 30.5% compared to 33.3%
last year. The reduction in the effective tax rate is attributable to changes to
the capital structure in several foreign subsidiaries, tax credits resulting
from tax planning associated with a change in certain foreign tax legislation,
reduction of the charge associated with remittance of foreign dividends and the
settlement of tax audits, partially offset by the impairment charges and other
operating losses for which no tax benefit can currently be recorded. In
addition, the prior year effective tax rate was unfavorably impacted by 0.4
percentage points due to the sale of the Northern European bakery business.

Income from continuing operations for Fiscal 2005 was $735.8 million
compared to $778.9 million in the prior year, a decrease of 5.5%. Diluted
earnings per share was $2.08 in the current year compared to $2.20 in the prior
year, down 5.5%.

The impact of fluctuating exchange rates for Fiscal 2005 remained
relatively consistent on a line-by-line basis throughout the consolidated
statement of income.

FISCAL YEAR 2005 OPERATING RESULTS BY BUSINESS SEGMENT

NORTH AMERICAN CONSUMER PRODUCTS

Sales of the North American Consumer Products segment increased $191.9
million, or 9.3%, to $2.26 billion. Sales volume increased 5.7% due to
significant growth in Ore-Ida frozen potatoes and SmartOnes frozen entrees,
aided by the introduction of Ore-Ida Extra Crispy Potatoes, new microwavable
Easy Fries, and several new SmartOnes frozen entrees. Strong performance in
Boston Market HomeStyle meals and in the frozen snack brands of Delimex, Bagel
Bites and TGI Friday's, as well as new distribution related to a co-packing
agreement also contributed to the volume increase. Pricing increased sales 2.7%
largely due to reduced trade spending and decreased product placement fees on
SmartOnes frozen entrees and Ore-Ida potatoes as well as increased price related
to Classico pasta sauces and Heinz ketchup. Sales increased 1.6% due to the
prior year acquisition of the Canadian business of Unifine Richardson B.V.,
which manufactures and sells salad dressings, sauces and dessert toppings.
Divestitures reduced sales 1.6% due to the sale of Ethnic Gourmet Food and
Rosetto pasta to Hain in the first quarter. Exchange translation rates increased
sales 0.9%.

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Gross profit increased $70.0 million, or 8.0%, to $942.8 million driven by
the increase in sales. The gross profit margin decreased to 41.8% from 42.3% due
primarily to higher commodity and fuel costs, partially offset by higher net
pricing. Operating income increased $56.3 million, or 11.9%, to $530.4 million,
due to the increase in gross profit, which was partially offset by higher
selling and distribution costs, related to higher volume and higher fuel costs.
Operating income for Fiscal 2004 was unfavorably impacted by reorganization
costs totaling $5.3 million.

U.S. FOODSERVICE

Sales of the U.S. Foodservice segment increased $75.2 million, or 5.3%, to
$1.50 billion. Sales volume increased sales 2.9% due to growth in Heinz ketchup,
strong performance on Truesoups frozen soup and growth in custom recipe tomato
products. Higher pricing increased sales by 1.5%, as price increases were
initiated to offset fuel and commodity cost pressures. Acquisitions increased
sales 0.9%, due to the prior year acquisition of Truesoups LLC, a manufacturer
and marketer of premium frozen soups.

Gross profit increased $48.1 million, or 11.8%, to $457.4 million, and the
gross profit margin increased to 30.4% from 28.6%. The gross profit margin
increase was primarily due to favorable pricing, partly offset by increases in
commodity costs. Operating income increased $13.7 million, or 6.5%, to $224.8
million, related to the growth in gross profit, which was partially offset by
increased selling and distribution costs, related to a substantial increase in
fuel and trucking costs. Operating income for Fiscal 2004 was unfavorably
impacted by reorganization costs totaling $3.9 million.

EUROPE

Heinz Europe's sales increased $159.6 million, or 4.9%, to $3.45 billion.
Favorable exchange translation rates increased sales by 7.5%. Volume decreased
0.3% as increases in Heinz ketchup resulting from the successful introduction of
the Top Down bottle, increases in frozen desserts in the U.K., share gains from
the successful restage of the Italian infant nutrition business, new products in
U.K. frozen potatoes and increases in Heinz ready-to-serve soups were offset by
declines in European seafood, frozen entrees in the U.K. and jarred vegetables
in Northern Europe. Lower pricing decreased sales 1.8%, primarily due to the
restage of the Italian infant nutrition business, the trade spending charge in
the Italian infant nutrition business and increased promotional activity in The
Netherlands. The $34.1 million trade spending charge in the Italian infant
nutrition business related to prior years and reflected an under-accrual
quantified as the Company was upgrading trade management processes and systems
in Italy. These decreases were partially offset by price increases in Heinz
beans and ready-to-serve soups in the U.K. Divestitures reduced sales 0.6%.

Gross profit decreased $21.2 million, or 1.7%, to $1.24 billion, and the
gross profit margin decreased to 36.1% from 38.5%. The decrease in gross profit
margin is primarily related to lower pricing as discussed above, increased
commodity and production costs, particularly in the European seafood and the UK
businesses and a $27.0 million asset impairment charge related to the HAK
vegetable product line in Northern Europe. These decreases were partially offset
by supply chain improvements in The Netherlands. Gross profit in Fiscal 2004 was
unfavorably impacted by the write-down of the U.K. pizza crust assets totaling
$4.0 million. Operating income decreased $88.6 million, or 13.9%, to $550.6
million, largely due to the decrease in gross profit, the gain recognized in the
prior year on the sale of the Northern European bakery business, and increased
G&A. The increase in G&A is largely due to increased pension costs, litigation
costs and professional fees from various projects across Europe.

ASIA/PACIFIC

Sales in Asia/Pacific increased $49.1 million, or 3.9%, to $1.31 billion.
Favorable exchange translation rates increased sales by 4.4%. Volume increased
sales 0.5%, chiefly due to new product introductions in the frozen foods and
convenience meals categories in the Australia and New
14

Zealand businesses. These were partially offset by the discontinuation of an
Indonesian energy drink and volume declines in Tegel poultry and China. The
volume decline in China was due primarily to an industry-related recall issue
pertaining to the colorant Sudan I. Lower pricing reduced sales 2.0% primarily
due to market price pressures on Tegel poultry. The acquisition of Shanghai
LongFong Foods, a maker of popular frozen Chinese snacks and desserts, increased
sales 2.3%. The divestiture of a Korean oils and fats product line reduced sales
1.3%.

Gross profit increased $5.6 million, or 1.4%, to $416.1 million. The gross
profit margin decreased to 31.8% from 32.6%. The decrease in gross profit margin
is primarily due to lower pricing and increased commodity costs, partially
offset by cost improvements in Australia and New Zealand. Operating income
decreased $10.6 million, or 7.3%, to $135.6 million, primarily due to increased
SG&A, resulting primarily from exchange translation rates and increased volume.

OTHER OPERATING ENTITIES

Sales for Other Operating Entities increased $22.0 million, or 5.9%, to
$396.6 million. Volume increased 1.2% due primarily to strong sales of ketchup
and beverages in India and new product launches in Latin America, partially
offset by lower sales in Israel, following a product recall in the third quarter
of Fiscal 2004. Lower pricing reduced sales by 2.2%, mainly due to decreases in
Latin America as a result of market price pressures and price declines in Israel
resulting from the effects of the recall. The prior year acquisition of a frozen
food business in South Africa increased sales by 5.8%. Exchange translation
rates increased sales 1.0%.

Gross profit increased $7.7 million, or 6.4%, to $127.9 million. Operating
income increased $4.8 million, primarily due to the acquisition in South Africa.

Zimbabwe remains in a period of economic uncertainty. Should the current
situation continue, the Company could experience disruptions and delays in its
Zimbabwean operations. As of the end of November 2002, the Company
deconsolidated its Zimbabwean operations and classified its remaining net
investment of approximately $110 million as a cost investment included in other
non-current assets on the consolidated balance sheets. Although the Company's
business continues to operate profitably and is able to source raw materials,
the country's economic situation remains uncertain and there are government
restrictions on the repatriation of earnings. The Company's ability to recover
its investment could become impaired if the economic and political uncertainties
continue to deteriorate.

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

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

Gross profit increased $155.8 million, or 5.3%, to $3.09 billion, and the
gross profit margin increased to 36.7% from 35.6%. The gross profit margin
increase was primarily driven by the Company's continuing focus on process and
system improvements, productivity initiatives and elimination of less profitable
SKU's. These gains were partially offset by lower overall net pricing for the
Company and increased supply chain costs in the European seafood business. The
aggre-
15

gate increase in gross profit also benefited from favorable exchange translation
rates, partially offset by the impact of higher pension costs, divestitures and
the write down of U.K. pizza crust assets in the U.K. For Fiscal 2003, gross
profit was also impacted by Del Monte transaction-related costs and costs to
reduce overhead of the remaining businesses of $6.1 million, and losses on the
exit of non-strategic businesses of $47.3 million.

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

Total marketing support (recorded either as a reduction of revenue or as a
component of SG&A) increased $179.4 million, or 8.0%, to $2.44 billion on a
sales increase of 2.2%. Marketing support recorded as a reduction of revenue
increased $179.0 million, or 9.1%, to $2.14 billion, which is primarily a result
of the Company's goal to achieve more competitive net pricing under the Every
Day Low Pricing strategy. Marketing support recorded as a component of SG&A
increased by $0.4 million, or 0.1%, to $299.7 million, as most marketing
resources were focused on sharpening retail price points.

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

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

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

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

FISCAL YEAR 2004 OPERATING RESULTS BY BUSINESS SEGMENT

NORTH AMERICAN CONSUMER PRODUCTS

Sales of the North American Consumer Products segment decreased $49.1
million, or 2.3%. Sales volume decreased 0.2% as strong increases in Heinz
ketchup and frozen potatoes were more

16

than offset by declines in SmartOnes frozen entrees, related to the increased
popularity of low-carb dieting, which drove declines in the nutritional frozen
entree category in the U.S., as well as the effects of the rationalization of
Boston Market side dishes and Hot Bites snacks. Lower pricing decreased sales
1.6% consistent with our strategy to obtain more competitive consumer price
points on Boston Market HomeStyle meals, Heinz gravy, Classico pasta sauces,
SmartOnes frozen entrees and Delimex frozen snacks. Sales increased 0.4% due to
the Canadian acquisition of Unifine Richardson B.V., which manufactures and
sells salad dressings, sauces, and dessert toppings. Divestitures in Fiscal 2003
reduced sales 2.9% and favorable exchange translation rates increased sales
1.9%.

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

U.S. FOODSERVICE

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

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

EUROPE

Heinz Europe's sales increased $251.2 million, or 8.3%. Favorable exchange
translation rates increased sales by 12.2%. Volumes declined 1.4% due to
decreases in Italian infant feeding, in advance of a restaging in early Fiscal
2005, and in convenience meals, due to promotional timing and the impact of our
previously announced program to reduce low-margin SKU's. These decreases were
partially offset by increases in Heinz ketchup from the successful introduction
of the top-down bottle, Heinz salad cream, Petite Navire seafood due to the
rebound from the prior year recall and frozen food products. Pricing decreased
0.3% as price increases on Heinz beans, ready-to-serve soups, and pasta meals
were offset by increased trade promotion spending related to seafood. Also,
prices were lower in Northern Europe as a result of The Netherland's largest
retailer rolling back prices in excess of 8% beginning in the second quarter of
Fiscal 2004. Divestitures reduced sales
17

2.2%, primarily related to the sale of the U.K. frozen pizza business, the
Northern European bakery business and a foodservice business in Italy.

Gross profit increased $128.8 million, or 11.3%, to $1,264.8 million, and
the gross profit margin increased to 38.5% from 37.4%. The increase in gross
profit is primarily due to favorable exchange translation rates, partially
offset by increased supply chain costs in our European seafood business, the
volume-related impact of reduced promotions in Heinz's Italian baby food
business, the impact of divestitures and the write down of the U.K. pizza
assets. Additionally, gross profit was unfavorably impacted by $47.4 million for
reorganization costs and losses on the exit of non-strategic businesses in
Fiscal 2003. Operating income increased $97.4 million, or 18.0%, to $639.2
million, primarily attributable to the favorable change in gross profit and the
gain on the sale of the Northern European bakery business, partially offset by
increased G&A expense primarily related to increased pension expense in the U.K.
Operating income was unfavorably impacted by $58.9 million for reorganization
costs and losses on the exit of non-strategic businesses in Fiscal 2003.

ASIA/PACIFIC

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

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

OTHER OPERATING ENTITIES

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

LIQUIDITY AND FINANCIAL POSITION

The following discussion of liquidity and financial position references the
business measures of operating free cash flow and net debt as defined below.
These measures are utilized by senior management and the board of directors to
gauge our business operating performance, and management believes these measures
provide clarity in understanding the trends of the business. Management, and
investors, can benefit from the use of the operating free cash flow measure as
it provides cash flow derived from product sales and the short-term application
of cash, including the effect of capital expenditures.

18

The limitation of operating free cash flow is that it adjusts the GAAP
measure-cash flow from operations for cash used for capital expenditures that is
no longer available to the Company for other purposes. Management compensates
for this limitation by using the GAAP operating cash flow number as well.
Operating free cash flow does not represent residual cash flow available for
discretionary expenditures and does not provide insight into the entire scope of
the historical cash inflows or outflows of our operations that are captured in
the other cash flow measures reported in the statement of cash flows.

The Company's primary measure of cash flow performance is operating free
cash flow (cash provided by operating activities less capital expenditures). The
following is the Company's calculation of operating free cash flow for the years
ended April 27, 2005, April 28, 2004 and April 30, 2003 (amounts in millions):

Cash provided by continuing operating activities in Fiscal 2005 was $1.16
billion, a decrease of $88.2 million from the prior year. The decrease in Fiscal
2005 versus Fiscal 2004 is primarily due to a planned tax pre-payment of $125
million made in Europe during the third quarter and working capital movements,
particularly inventories, partially offset by lower contributions to the
Company's pension plans in Fiscal 2005. While we continue to make progress in
reducing our cash conversion cycle (six days lower than a year ago), the rate of
improvement has lessened when compared to last fiscal year, as expected.

Cash used for investing activities totaled $264.1 million compared to
$301.1 million last year. Proceeds from divestitures provided $51.2 million in
Fiscal 2005 and related primarily to the sale of an oil and fats product line in
Korea, which was completed during the third quarter. Acquisitions used $126.5
million in Fiscal 2005 primarily related to the Company's purchase in the fourth
quarter of Appetizer's And, Inc., a manufacturer and marketer of high-quality,
frozen hors d'oeuvres sold primarily to the U.S. foodservice industry, and in
the third quarter of a controlling interest in Shanghai LongFong Foods, a maker
of frozen Chinese snacks and desserts. In Fiscal 2004, acquisitions, net of
divestitures, used $41.7 million in cash. Capital expenditures totaled $240.7
million (2.7% of sales) in Fiscal 2005 compared to $232.0 million (2.8% of
sales) last year.

Cash used for financing activities totaled $1.05 billion compared to $643.9
million last year. Payments on long-term debt were $480.5 million during Fiscal
2005, compared to $74.3 million last year. Proceeds from short-term borrowings
were $26.5 million in Fiscal 2005, compared to payments of $144.7 million in the
prior year. Cash used for the purchases of treasury stock, net of proceeds from
option exercises, was $212.0 million in Fiscal 2005, compared to $57.4 million
in the prior year, in line with the Company's strategy of flat or reduced fully
diluted shares. Dividend payments totaled $398.9 million, compared to $379.9
million last year, reflecting a 5.5% increase in the annual dividend per share
on common stock.

On May 18, 2005, the Company announced that is Board of Directors approved
a 5.3% increase in the annual dividend on common stock for Fiscal 2006 (from
28.5 cents to 30 cents per quarter), effective with the July 2005 dividend.
Fiscal 2006 dividends are expected to approximate $410 million.

Net debt is an additional measure that management utilizes to judge our
liquidity and financial condition. Net debt is defined as total debt, net of the
value of interest rate swaps, less cash and

19

cash equivalents and short-term investments. The following is the Company's
calculation of net debt as of April 27, 2005 and April 28, 2004 (amounts in
millions):

Overall, net debt decreased $243.6 million, or 6.6%, versus prior year.
Long-term debt decreased $296.2 million from the prior year primarily due to the
repayment of $480 million of debt in Fiscal 2005; offset by increases in debt as
a result of higher foreign exchange rates and debt assumed through acquisitions.
At April 27, 2005, the Company's net debt was $3.4 billion. Excluding the
reclassification of H.J. Heinz Finance Company's $325 million of preferred stock
and the impact of the changes in foreign exchange on net debt, the Company's net
debt would have been $3.1 billion, a decrease of $2.3 billion since the
beginning of Fiscal 2003. The Company anticipates that it will have additional
long-term debt reductions in Fiscal 2006, principally the retirement of E417.9
million of bonds ($540.6 million) which mature in April 2006.

Return on average shareholders' equity ("ROE") is calculated by taking net
income divided by average shareholders' equity. Average shareholders' equity is
a five-point quarterly average. ROE was 34.4% in Fiscal 2005, 51.6% in Fiscal
2004 and 34.7% in Fiscal 2003. ROE in Fiscal 2005 was unfavorably impacted by
increased average equity reflecting fluctuations in foreign exchange. In
addition, ROE was unfavorably impacted by 4.2% in Fiscal 2005 related to the
asset impairment charges. ROE was unfavorably impacted by 9.9% in Fiscal 2003
related to Del Monte transaction related costs, costs to reduce overhead of the
remaining business and losses on the exit of non-strategic businesses.

Pretax return on average invested capital ("ROIC") is calculated by taking
net operating profit before income taxes divided by average invested capital.
Net operating profit before income taxes excludes net interest expense. Average
invested capital is a five-point quarterly average of debt plus total equity
less cash and cash equivalents and short-term investments. ROIC was 21.7% in
Fiscal 2005, 24.5% in Fiscal 2004 and 19.0% in Fiscal 2003. ROIC was unfavorably
impacted by 1.7% in Fiscal 2005 related to the asset impairment charges for the
HAK vegetable product line, the equity investment in Hain and the cost-basis
investment in a grocery industry-sponsored e-commerce business venture. ROIC was
favorably impacted by 0.1% in Fiscal 2004 related to the gain on the disposal of
a bakery business in Northern Europe offset by reorganization costs and the
write down of pizza crust assets in the United Kingdom. ROIC was unfavorably
impacted by 3.5% in Fiscal 2003 related to Del Monte transaction related costs,
costs to reduce overhead of the remaining business and losses on the exit of
non-strategic businesses.

In August 2004, the Company and H.J. Heinz Finance Company amended their
$600 million 364-Day Credit Agreement and their $1.5 billion Five-Year Credit
Agreement by combining the agreements into a $2.0 billion Five-Year Credit
Agreement, expiring August 2009. The Credit Agreement supports the Company's
commercial paper borrowings and the remarketable securities. As a result, these
borrowings are classified as long-term debt based upon the Company's intent and
ability to refinance these borrowings on a long-term basis. In addition, the
Company has $1.1 billion of foreign lines of credit available at April 27, 2005.
These resources, the Company's year-end

20

cash balance of more than $1 billion, strong operating cash flow and access to
the capital market, if required, should enable the Company to meet its cash
requirements for operations, including capital expansion programs, debt
maturities, stock repurchases and dividends to shareholders.

At April 27, 2005, the Company's long-term debt ratings were A at Standard
& Poor's and Fitch and A-3 at Moody's, and the Company's short-term debt ratings
were A-1 at Standard & Poor's, F-1 at Fitch and P-2 at Moody's.

In Fiscal 2005, cash required for reorganization costs was approximately
$9.9 million. Fiscal 2006 cash requirements related to reorganization costs to
streamline the Company's organization structure, primarily in Europe, are
expected to approximate $75 to $100 million. Additionally, the Company is
reexamining its portfolio strategy which could result in the disposition of
several non-core businesses, the proceeds of which could approximate $1 billion.
If implemented, these proceeds could be used for debt reduction, share
repurchases, acquisitions and operations.

CONTRACTUAL OBLIGATIONS AND OTHER COMMITMENTS

CONTRACTUAL OBLIGATIONS

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

The following table represents the contractual obligations of the Company
as of April 27, 2005.

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

OFF-BALANCE SHEET ARRANGEMENTS AND OTHER COMMITMENTS

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

21

MARKET RISK FACTORS

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

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

The Company may attempt to limit its exposure to changing foreign exchange
rates through both operational and financial market actions. These actions may
include entering into forward or option contracts to hedge existing exposures,
firm commitments and forecasted transactions. The instruments are used to reduce
risk by essentially creating offsetting currency exposures. The following table
presents information related to foreign currency contracts held by the Company:

As of April 27, 2005, the Company's contracts to hedge forecasted
transactions mature in one year. Contracts that meet qualifying criteria are
accounted for as foreign currency cash flow hedges. Accordingly, the effective
portion of gains and losses is deferred as a component of other comprehensive
income/loss and is recognized in earnings at the time the hedged item affects
earnings. Any gains and losses due to hedge ineffectiveness or related to
contracts which do not qualify for hedge accounting are recorded in current
period earnings in other income and expense.

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

INTEREST RATE SENSITIVITY: The Company is exposed to changes in interest
rates primarily as a result of its borrowing and investing activities used to
maintain liquidity and fund business operations. The nature and amount of the
Company's long-term and short-term debt can be expected to vary as a result of
future business requirements, market conditions and other factors. The Company's
net debt obligations totaled $3.43 billion and $3.67 billion at April 27, 2005
and April 28, 2004, respectively. The Company's debt obligations are summarized
in Note 7 to the consolidated financial statements.

In order to manage interest rate exposure, the Company utilizes interest
rate swaps 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 27, 2005, a variance of 1/8% in the related interest rate
would cause annual interest expense related to

22

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

The Company had interest rate contracts with total notional amounts of
$107.6 million and $907.6 million at April 27, 2005 and April 28, 2004,
respectively, that did not meet the criteria for hedge accounting but
effectively mitigated interest rate exposures. These derivatives are accounted
for on a full mark-to-market basis through current earnings and they mature
approximately three years from the current fiscal year-end. Net unrealized
gains/(losses), which are presented as a component of other noncurrent
assets/liabilities, related to these interest rate contracts totaled $(2.5)
million and $4.5 million at April 27, 2005 and April 28, 2004, respectively.

EFFECT OF HYPOTHETICAL 10% FLUCTUATION IN MARKET PRICES: As of April 27,
2005, the potential gain or loss in the fair value of the Company's outstanding
foreign currency contracts and interest rate contracts assuming a hypothetical
10% fluctuation in currency rates and swap rates, respectively, would be
approximately:

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

RECENTLY ISSUED ACCOUNTING STANDARDS

In December 2004, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 123(R), "Share-Based Payment", which revises SFAS No. 123, "Accounting
for Stock-Based Compensation" and supersedes APB Opinion No. 25, "Accounting for
Stock Issued to Employees". This Statement focuses primarily on accounting for
transactions in which an entity compensates employee services through
share-based payments. This Statement requires an entity to measure the cost of
employee services received in exchange for an award of equity instruments based
on the grant-date fair value of the award. That cost will be recognized over the
period during which an employee is required to provide service in exchange for
the reward. On April 18, 2005, the Securities and Exchange Commission adopted a
new rule that amended the compliance dates of SFAS No. 123(R) to require the
implementation no later than the beginning of the first fiscal year beginning
after June 15, 2005. Early adoption of the Statement is permissable. The Company
plans on adopting this Statement in Fiscal 2007.

In December 2004, the FASB issued FASB Staff Position ("FSP") No. FAS
109-2, "Accounting and Disclosure Guidance for the Foreign Earnings Repatriation
Provision within the American Jobs Creation Act of 2004". The FSP provided
guidance on the accounting and disclosures for the temporary repatriation
provision of the American Jobs Creation Act. The Company has adopted the
disclosure provisions of the FSP which apply to entities that have not yet
completed their

23

evaluation of the repatriation provision, and will expand its disclosures in
accordance with the FSP upon completion of the final evaluation.

In November 2004, the FASB issued SFAS No. 151, "Inventory Costs, an
amendment of ARB No. 43, Chapter 4". This Statement is meant to eliminate any
narrow differences existing between the FASB standards and the standards issued
by the International Accounting Standards Board by clarifying that any abnormal
idle facility expense, freight, handling costs and spoilage be recognized as
current-period charges. This Statement is required to be adopted by the Company
in the first quarter of Fiscal 2007; however, early application is permitted.
The Company does not expect the adoption of this Statement to have a material
impact on results of operations, financial position or cash flows.

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 January 2005, final Medicare
prescription drug rules were issued. The adoption of the Act during Fiscal 2005
resulted in a reduction of the Company's benefit obligation of approximately
$18.8 million and has been reflected as an actuarial gain. The total reduction
in benefit cost for Fiscal 2005 is $2.3 million, comprised of $0.9 million of
interest cost, $0.1 million of service cost, and $1.4 million reduction in
unrecognized loss amortization, recognized on a pro-rata basis.

In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity". This
statement affects the classification, measurement and disclosure requirements of
certain freestanding financial instruments including mandatorily redeemable
shares. SFAS No. 150 was effective for the Company for the second quarter of
Fiscal 2004. The adoption of SFAS No. 150 required the prospective
classification of H. J. Heinz Finance Company's $325 million of mandatorily
redeemable preferred shares from minority interest to long-term debt and the
$5.1 million quarterly preferred dividend from other expenses to interest
expense beginning in the second quarter ended October 29, 2003, with no
resulting effect on the Company's profitability.

DISCUSSION OF SIGNIFICANT ACCOUNTING ESTIMATES

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

Marketing Costs -- Trade promotions are an important component of the sales
and marketing of the Company's products and are critical to the support of the
business. Trade promotion costs include amounts paid to retailers to offer
temporary price reductions for the sale of the Company's products to consumers,
amounts paid to obtain favorable display positions in retailers' stores, and
amounts paid to customers for shelf space in retail stores. Accruals for trade
promotions are recorded primarily at the time of sale of product to the customer
based on an estimate of the expected levels of performance of the trade
promotion, which is dependent upon factors such as historical trends with
similar promotions, expectations regarding customer participation, and sales and
payment trends with similar previously offered programs. Our original estimated
costs of trade promotions may change in the future as a result of changes in
customer participation, particularly for new programs and for programs related
to the introduction of new products. We

24

perform monthly and quarterly evaluations of our outstanding trade promotions;
making adjustments, where appropriate, to reflect changes in our estimates.
Settlement of these liabilities typically occurs in subsequent periods primarily
through an authorized process for deductions taken by a customer from amounts
otherwise due to the Company. As a result, the ultimate cost of a trade
promotion program is dependent on the relative success of the events and the
actions and level of deductions taken by the Company's customers for amounts
they consider due to them. Final determination of the permissible deductions may
take extended periods of time and could have a significant impact on the
Company's results of operations depending on how actual results of the programs
compare to original estimates.

We offer coupons to consumers in the normal course of our business. Costs
associated with this activity, which we refer to as coupon redemption costs, are
accrued in the period in which the coupons are offered. The initial estimates
made for each coupon offering are based upon historical redemption experience
rates for similar products or coupon amounts. We perform subsequent estimates
that compare our actual redemption rates to the original estimates. We review
the assumptions used in the valuation of the estimates and determine an
appropriate accrual amount. Adjustments to our initial accrual may be required
if our actual redemption rates vary from our estimated redemption rates.

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

Investments and Long-lived Assets and Property, Plant and
Equipment -- Investments and long-lived assets are recorded at their respective
cost basis on the date of acquisition. Buildings, equipment and leasehold
improvements are depreciated on a straight-line basis over the estimated useful
life of such assets. The Company reviews investments and long-lived assets,
including intangibles with finite useful lives, and property, plant and
equipment, whenever circumstances change such that the indicated recorded value
of an asset may not be recoverable or has suffered an other than temporary
impairment. Factors that may affect recoverability include changes in planned
use of equipment or software, the closing of facilities and changes in the
underlying financial strength of investments. The estimate of current value
requires significant management judgment and requires assumptions that can
include: future volume trends, revenue and expense growth rates and foreign
exchange rates developed in connection with the Company's internal projections
and annual operating plans, and in addition, external factors such as market
devaluation and inflation which are developed in connection with the Company's
longer-term strategic planning. As each is management's best estimate on then
available information, resulting estimates may differ from actual cash flows.

Goodwill and Indefinite Lived Intangibles -- Carrying values of goodwill
and intangible assets with indefinite lives are reviewed for impairment at least
annually, or when circumstances indicate that a possible impairment may exist,
in accordance with SFAS No. 142, "Goodwill and Other Intangible Assets."
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. The
Company's measure of impairment is based on a discounted cash flow model that
requires significant judgment and requires assumptions about future volume
trends, revenue and expense growth rates and foreign exchange rates developed in
connection with the Company's internal projections and annual operating plans,
and in addition, external factors such as changes in macroeconomic trends and
cost of capital developed in connection with the Company's longer-term strategic
planning. Inherent in estimating future performance, in particular assumptions
regarding external factors such as capital markets, are
25

uncertainties beyond the Company's control. Management believes that because
fair values of goodwill and intangible assets with indefinite lives
significantly exceed carrying value, it is unlikely that a material impairment
charge would be recognized.

Retirement Benefits -- The Company sponsors pension and other retirement
plans in various forms covering substantially all employees who meet eligibility
requirements. Several statistical and other factors that attempt to anticipate
future events are used in calculating the expense and liability related to the
plans. These factors include assumptions about the discount rate, expected
return on plan assets, turnover rates and rate of future compensation increases
as determined by the Company, within certain guidelines. The discount rate
assumptions used to value pension and postretirement benefit obligations reflect
the rates available on high quality fixed income investments available (in each
country that the Company operates a benefit plan) as of the measurement date.
The weighted average discount rate used to measure the projected benefit
obligation for the year ending April 27, 2005 was reduced to 5.5% from 5.8% as
of April 28, 2004.

Over time, the expected rate of return on pension plan assets should
approximate the actual long-term returns. In developing the expected rate of
return, the Company considers actual real historic returns on asset classes, the
investment mix of plan assets, investment manager performance and projected
future returns of asset classes developed by respected consultants. The weighted
average expected rate of return on plan assets used to calculate annual expense
was 8.2% for the years ended April 27, 2005 and April 28, 2004 and 8.9% for the
year ended April 30, 2003. For purposes of calculating Fiscal 2006 expense, the
weighted average rate of return will remain at approximately 8.2%.

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

SENSITIVITY OF ASSUMPTIONS

If we assumed a 100 basis point change in the following assumptions, our
Fiscal 2005 projected benefit obligation and expense would increase (decrease)
by the following amounts (in millions):

Income Taxes -- The Company computes its annual tax rate based on the
statutory tax rates and tax planning opportunities available to it in the
various jurisdictions in which it earns income. Significant judgment is required
in determining the Company's annual tax rate and in evaluating its tax
positions. The Company establishes reserves when it becomes probable that a tax
return position that it considers supportable may be challenged and that the
Company may not succeed in completely defending that challenge. The Company
adjusts these reserves in light of changing facts and circumstances, such as the
settlement of a tax audit. The Company's annual tax rate includes the impact of
reserve provisions and changes to reserves. While it is often difficult to
predict the final outcome or the timing of resolution of any particular tax
matter, the Company believes that
26

its reserves reflect the probable outcome of known tax contingencies. Favorable
resolution would be recognized as a reduction to the Company's annual tax rate
in the year of resolution. The Company's tax reserves are presented in the
balance sheet principally within accrued income taxes.

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

The American Jobs Creation Act ("the AJCA") provides a deduction of 85% on
certain foreign earnings repatriation. The Company may elect to apply this
provision in Fiscal 2006. The Company does not expect to be able to complete its
evaluation of the effects of the repatriation provisions until after the
Treasury Department provides additional guidance on key elements of the
provision. The Company expects to complete its evaluation within a reasonable
period of time after final guidance is issued. The range of amounts that the
Company is currently considering for repatriation under this provision is
between zero and $750 million. The related potential range of income tax (based
upon our expectation of how certain technical issues will be resolved in the
final guidance) is between zero and $20 million.

The AJCA provides a deduction calculated as a percentage of qualified
income from manufacturing in the United States. The percentage increases from 3%
to 9% over a 6 year period beginning with the Company's 2006 fiscal year. In
December 2004, the FASB issued a new staff position providing for this deduction
to be treated as a special deduction, as opposed to a tax rate reduction, in
accordance with SFAS No. 109. The benefit of this deduction is not expected to
have a material impact on the Company's effective tax rate in Fiscal 2006.

INFLATION

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

The impact of inflation on both the Company's financial position and
results of operations is not expected to adversely affect Fiscal 2006 results.
The Company's financial position continues to remain strong, enabling it to meet
cash requirements for operations, including anticipated additional pension plan
contributions, capital expansion programs and dividends to shareholders.

STOCK MARKET INFORMATION

H. J. Heinz Company common stock is traded principally on The New York
Stock Exchange and the Pacific Exchange, under the symbol HNZ. The number of
shareholders of record of the Company's common stock as of May 31, 2005
approximated 45,200. The closing price of the common stock on The New York Stock
Exchange composite listing on April 27, 2005 was $36.87.

27

Stock price information for common stock by quarter follows:

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

This information is set forth in this report in Item 7--"Management's
Discussion and Analysis of Financial Condition and Results of Operations" on
pages 22 through 23.

28

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

TABLE OF CONTENTS

Report of Management on Internal Control over Financial
Reporting................................................. 30
Report of Independent Registered Public Accounting Firm..... 31
Consolidated Statements of Income........................... 33
Consolidated Balance Sheets................................. 34
Consolidated Statements of Shareholders' Equity............. 36
Consolidated Statements of Cash Flows....................... 38
Notes to Consolidated Financial Statements.................. 39

29

REPORT OF MANAGEMENT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Management is responsible for establishing and maintaining adequate
internal control over financial reporting for the Company. Internal control over
financial reporting refers to the process designed by, or under the supervision
of, our Chief Executive Officer and Chief Financial Officer, and effected by our
Board of Directors, management and other personnel, to provide reasonable
assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with generally
accepted accounting principles, and includes those policies and procedures that:

(1) Pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of
the Company;

(2) Provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance with
generally accepted accounting principles, and that receipts and expenditures of
the Company are being made only in accordance with authorizations of management
and directors of the Company; and

(3) Provide reasonable assurance regarding prevention or timely detection
of unauthorized acquisition, use or disposition of the Company's assets that
could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may deteriorate.

Management has used the framework set forth in the report entitled
"Internal Control--Integrated Framework" published by the Committee of
Sponsoring Organizations of the Treadway Commission to evaluate the
effectiveness of the Company's internal control over financial reporting.
Management has concluded that the Company's internal control over financial
reporting was effective as of the end of the most recent fiscal year. Our
management's assessment of the effectiveness of the Company's internal control
over financial reporting as of April 27, 2005 has been audited by
PricewaterhouseCoopers LLP, an independent registered public accounting firm, as
stated in their report which appears herein.

/s/ William R. Johnson
Chairman, President and
Chief Executive Officer

/s/ Arthur B. Winkleblack
Executive Vice President and
Chief Financial Officer

June 16, 2005

30

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of
H. J. Heinz Company:

We have completed an integrated audit of H. J. Heinz Company's fiscal year 2005
consolidated financial statements and of its internal control over financial
reporting as of April 27, 2005 and audits of its fiscal year 2004 and fiscal
year 2003 consolidated financial statements in accordance with the standards of
the Public Company Accounting Oversight Board (United States). Our opinions,
based on our audits, are presented below.

Consolidated financial statements and financial statement schedule

In our opinion, the consolidated financial statements listed in the index
appearing under Item 15(a)(1) present fairly, in all material respects, the
financial position of H. J. Heinz Company and its subsidiaries at April 27, 2005
and April 28, 2004, and the results of their operations and their cash flows for
each of the three years in the period ended April 27, 2005 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 financial
statement schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
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 of financial statements
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.

Internal control over financial reporting

Also, in our opinion, management's assessment, included in Report of Management
on Internal Control Over Financial Reporting appearing under Item 8, that the
Company maintained effective internal control over financial reporting as of
April 27, 2005 based on criteria established in Internal Control - Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO), is fairly stated, in all material respects, based on those
criteria. Furthermore, in our opinion, the Company maintained, in all material
respects, effective internal control over financial reporting as of April 27,
2005, based on criteria established in Internal Control - Integrated Framework
issued by the COSO. The Company's management is responsible for maintaining
effective internal control over financial reporting and for its assessment of
the effectiveness of internal control over financial reporting. Our
responsibility is to express opinions on management's assessment and on the
effectiveness of the Company's internal control over financial reporting based
on our audit. We conducted our audit of internal control over financial
reporting 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 effective
internal control over financial reporting was maintained in all material
respects. An audit of internal control over financial reporting includes
obtaining an understanding of internal control over financial reporting,
evaluating management's assessment, testing and evaluating the design and
operating effectiveness of internal control, and performing such other
procedures as we consider necessary in the circumstances. We believe that our
audit provides a reasonable basis for our opinions.

31

A company's internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. A company's internal control over
financial reporting includes those policies and procedures that (i) pertain to
the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (ii)
provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of
the company; and (iii) provide reasonable assurance regarding prevention or
timely detection of unauthorized acquisition, use, or disposition of the
company's assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.

/s/ PRICEWATERHOUSECOOPERS LLP

PricewaterhouseCoopers LLP
Pittsburgh, Pennsylvania
June 16, 2005

32

H. J. HEINZ COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

See Notes to Consolidated Financial Statements
33

H. J. HEINZ COMPANY AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

See Notes to Consolidated Financial Statements
34

H. J. HEINZ COMPANY AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

See Notes to Consolidated Financial Statements
35

H.J. HEINZ COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

* Includes activity of the Global Stock Purchase Plan.

See Notes to Consolidated Financial Statements.
36

+ Includes income tax benefit resulting from exercised stock options.
++ Comprised of unrealized translation adjustment of $102,209, minimum pension
liability of $(71,641) and deferred net losses on derivative financial
instruments $(4,946).
37

H. J. HEINZ COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

See Notes to Consolidated Financial Statements.
38

H. J. HEINZ COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SIGNIFICANT ACCOUNTING POLICIES

FISCAL YEAR:

H. J. Heinz Company (the "Company") operates on a 52-week or 53-week fiscal
year ending the Wednesday nearest April 30. However, certain foreign
subsidiaries have earlier closing dates to facilitate timely reporting. Fiscal
years for the financial statements included herein ended April 27, 2005, April
28, 2004 and April 30, 2003.

PRINCIPLES OF CONSOLIDATION:

The consolidated financial statements include the accounts of the Company,
and entities in which the Company maintains a controlling financial interest.
Control is generally determined based on the majority ownership of an entity's
voting interests. In certain situations, control is based on participation in
the majority of an entity's economic risks and rewards. The Company has no
material investments in variable interest entities. Investments in certain
companies over which the Company exerts significant influence, but does not
control the financial and operating decisions, are accounted for as equity
method investments. All intercompany accounts and transactions are eliminated.
Certain prior-year amounts have been reclassified in order to conform with the
Fiscal 2005 presentation.

As of the end of November 2002, the Company deconsolidated its Zimbabwean
operations and classified its remaining net investment of approximately $110
million as a cost investment included in other non-current assets on the
consolidated balance sheets. Although the Company's business continues to
operate profitably and it is able to source raw materials, the country's
economic situation remains uncertain and there are government restrictions on
the repatriation of earnings. The Company's ability to recover its investment
could become impaired if the economic and political uncertainties continue to
deteriorate.

USE OF ESTIMATES:

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

TRANSLATION OF FOREIGN CURRENCIES:

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

CASH EQUIVALENTS:

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

39

H. J. HEINZ COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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, which generally have the following ranges:
buildings--40 years or less, machinery and equipment--15 years or less, computer
software--3-5 years, and leasehold improvements--over the life of the lease, not
to exceed 15 years. 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 for possible impairment when
appropriate. The Company's impairment review is based on an undiscounted cash
flow analysis at the lowest level for which identifiable cash flows exist.
Impairment occurs when the carrying value of the asset exceeds the future
undiscounted cash flows. When an impairment is indicated, the asset is written
down to its fair value.

INTANGIBLES:

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

REVENUE RECOGNITION:

The Company recognizes revenue when title, ownership and risk of loss pass
to the customer. This occurs upon delivery of the product to the customer.
Customers do no have the right to return products unless damaged or defective.
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.

MARKETING COSTS:

The Company promotes its products with advertising, consumer incentives and
trade promotions. Such programs include, but are not limited to, discounts,
coupons, rebates, in-store display incentives and volume-based incentives.
Advertising costs are expensed as incurred. Consumer incentive and trade
promotion activities are recorded as a reduction of revenue based on amounts
estimated as being due to customers and consumers at the end of a period, based
principally on historical utilization and redemption rates. For interim
reporting purposes, advertising, consumer incentive and product placement
expenses are charged to operations as a percentage of volume, based on estimated
volume and related expense for the full year.

40

H. J. HEINZ COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

INCOME TAXES:

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

The Company has not provided for possible U.S. taxes on the undistributed
earnings of foreign subsidiaries that are considered to be reinvested
indefinitely. Calculation of the unrecognized deferred tax liability for
temporary differences related to these earnings is not practicable.

STOCK-BASED EMPLOYEE COMPENSATION PLANS:

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

The Company has adopted the disclosure-only provisions of Statement of
Financial Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based
Compensation." Accordingly, no compensation cost has been recognized for the
Company's stock option plans. If the Company had elected to recognize
compensation cost based on the fair value of the options granted at grant date
as prescribed by SFAS No. 123, income and earnings per share from continuing
operations before cumulative effect of change in accounting principle would have
been as follows:

The weighted-average fair value of options granted was $9.33 per share in
Fiscal 2005, $5.90 per share in Fiscal 2004 and $6.86 per share in Fiscal 2003.

41

H. J. HEINZ COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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

FINANCIAL INSTRUMENTS:

The Company's financial instruments consist primarily of cash and cash
equivalents, short-term investments, short-term and long-term debt, swaps,
forward contracts, and option contracts. The carrying values for the Company's
financial instruments approximate fair value. As a policy, the Company does not
engage in speculative or leveraged transactions, nor does the Company hold or
issue financial instruments for trading purposes.

The Company uses derivative financial instruments for the purpose of
hedging currency and interest rate exposures, which exist as part of ongoing
business operations. The Company carries derivative instruments on the balance
sheet at fair value, determined by reference to quoted market data. 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 statements of cash
flows within operating activities as a component of other items, net.

The $40 million of auction rate securities that the Company held as of
April 28, 2004 have been reclassified from cash and cash equivalents to
short-term investments in the consolidated balance sheets. Corresponding
adjustments have also been made to the consolidated statements of cash flows to
reflect the gross purchases and sales of these securities as investing
activities rather than as a component of cash and cash equivalents. The Company
no longer owns auction rate securities as of April 27, 2005.

2. RECENTLY ISSUED ACCOUNTING STANDARDS

In December 2004, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 123(R), "Share-Based Payment", which revises SFAS No. 123, "Accounting
for Stock-Based Compensation" and supersedes APB Opinion No. 25, "Accounting for
Stock Issued to Employees". This Statement focuses primarily on accounting for
transactions in which an entity compensates employee services through
share-based payments. This Statement requires an entity to measure the cost of
employee services received in exchange for an award of equity instruments based
on the grant-date fair value of the award. That cost will be recognized over the
period during which an employee is required to provide service in exchange for
the reward. On April 18, 2005, the Securities and Exchange Commission adopted a
new rule that amended the compliance dates of SFAS No. 123(R) to require the
implementation no later than the beginning of the first fiscal year beginning
after June 15, 2005. Early adoption of the Statement is permissable. The Company
plans on adopting this Statement in Fiscal 2007.

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H. J. HEINZ COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

In December 2004, the FASB issued FASB Staff Position ("FSP") No. FAS
109-2, "Accounting and Disclosure Guidance for the Foreign Earnings Repatriation
Provision within the American Jobs Creation Act of 2004." The FSP provides
guidance on the accounting and disclosures for the temporary repatriation
provision of the American Jobs Creation Act. The Company has adopted the
disclosure provisions of the FSP which apply to entities that have not yet
completed their evaluation of the repatriation provision, and will expand its
disclosures in accordance with the FSP upon completion of the final evaluation.

In November 2004, the FASB issued SFAS No. 151, "Inventory Costs, an
amendment of ARB No. 43, Chapter 4." This Statement is meant to eliminate any
narrow differences existing between the FASB standards and the standards issued
by the International Accounting Standards Board by clarifying that any abnormal
idle facility expense, freight, handling costs and spoilage be recognized as
current-period charges. This Statement is required to be adopted by the Company
in the first quarter of Fiscal 2007; however, early application is permitted.
The Company does not expect the adoption of this Statement to have a material
impact on results of operations, financial position or cash flows.

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 January 2005, final Medicare
prescription drug rules were issued. The provisions of the Act resulted in a
reduction of the Company's benefit obligation of approximately $18.8 million and
has been reflected as an actuarial gain. The total reduction in benefit cost for
Fiscal 2005 is $2.3 million, comprised of $0.9 million of interest cost, $0.1
million of service cost, and $1.4 million reduction in unrecognized loss
amortization, recognized on a pro-rata basis.

In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity". This
statement affects the classification, measurement and disclosure requirements of
certain freestanding financial instruments including mandatorily redeemable
shares. SFAS No. 150 was effective for the Company for the second quarter of
Fiscal 2004. The adoption of SFAS No. 150 required the prospective
classification of H.J. Heinz Finance Company's $325 million of mandatorily
redeemable preferred shares from minority interest to long-term debt and the
$5.1 million quarterly preferred dividend from other expenses to interest
expense beginning in the second quarter ended October 29, 2003, with no
resulting effect on the Company's profitability.

3. SPECIAL ITEMS

ASSET IMPAIRMENTS

In the fourth quarter of Fiscal 2005, the Company recognized a non-cash
asset impairment charge of $27.0 million pre-tax ($18.0 million after-tax) on
the HAK vegetable product line in Northern Europe. The charge, which is recorded
as a component of cost of products sold, relates to the anticipated disposition
of the product line in early Fiscal 2006. The net assets related to the HAK
product line total approximately $82.7 million and are comprised primarily of
inventory, property, plant and equipment and trademarks.

The Company holds an equity investment in The Hain Celestial Group, Inc.
("Hain"), a natural, specialty and snack food company. Hain shares traded at
less than 80% of Heinz's carrying value since late January 2004. Due to the
length of time and the amount that Hain stock had traded below the Company's
basis, the Company determined that the decline was other-than-

43

H. J. HEINZ COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

temporary as defined by Accounting Principles Board Opinion No. 18 and as a
result, recognized a $64.5 million non-cash impairment charge during the third
quarter of Fiscal 2005. The charge reduced Heinz's carrying value in Hain to
fair market value as of January 26, 2005, with no resulting impact on cash
flows. Heinz currently owns approximately six million shares of Hain stock, with
a book value of approximately $20.00 per share as of April 27, 2005. In the
future, should the market value of Hain common stock decline and remain below
current market value for a substantial time, the Company could be required to
record additional writedowns of its investment in Hain. The Company also
recorded a $9.3 million non-cash charge in the third quarter of Fiscal 2005 to
recognize the impairment of a cost-basis investment in a grocery
industry-sponsored e-commerce business venture. There was no tax benefit
associated with these impairment charges.

DISCONTINUED OPERATIONS

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

In accordance with accounting principles generally accepted in the United
States of America, the operating results related to these businesses spun off to
Del Monte have been treated as discontinued operations in the Company's
consolidated statements of income. Net income from discontinued operations for
the years ended April 27, 2005 and April 28, 2004 was $16.9 million and $25.3
million, respectively, and reflects the favorable settlement of tax liabilities
related to the businesses spun-off to Del Monte. The discontinued operations
generated sales of $1,091.3 million and net income of $88.7 million (net of
$35.4 million in tax) for Fiscal 2003.

DIVESTITURES AND OTHER REORGANIZATION COSTS

During the first quarter of Fiscal 2004, the Company sold its bakery
business in Northern Europe for $57.9 million. The transaction resulted in a
pretax gain of $26.3 million ($13.3 million after tax), which was recorded as a
component of selling, general and administrative expenses ("SG&A").
Additionally, the Company made several other small divestitures in Fiscal 2005
and Fiscal 2004, none of which are material.

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

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

In Fiscal 2003, losses on the exit of non-strategic businesses, primarily
the UK frozen pizza business and a North American fish and frozen vegetable
business, totaled $62.4 million pretax

44

H. J. HEINZ COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

($49.3 million after-tax), and were comprised of $39.7 million in non-cash asset
write-downs, $12.1 million in losses on the sale of businesses and $10.6 million
in employee termination, severance and other exit costs. Of these amounts, $47.3
million was included in cost of products sold and $15.1 million in SG&A.

During Fiscal 2005, the Company utilized $9.9 million of severance and exit
cost accruals related to reorganization costs. Amounts included in accrued
expenses related to these initiatives totaled $10.0 million at April 28, 2004.

4. ACQUISITIONS

The Company made several acquisitions in Fiscal 2005, 2004 and 2003 for a
total purchase price of $132.1 million, $117.4 million and $13.6 million,
respectively, none of which were significant. The Fiscal 2005 acquisitions
include Shanghai LongFong Foods, a maker of frozen Chinese snacks and desserts,
Appetizers And, Inc., a manufacturer and marketer of high quality, frozen hors
d'oeuvres sold primarily to the U.S. foodservice industry, and certain assets
from ABAL, S.A. de C.V., a Mexican foodservice company. The Fiscal 2004
acquisitions include Unifine Richardson B.V., a Canadian manufacturer of salad
dressings, sauces, and dessert toppings, and Truesoups LLC, a manufacturer and
marketer of premium frozen soups designed primarily for the foodservice trade.

All of the acquisitions have been accounted for as purchases and,
accordingly, the respective purchase prices have been allocated to the
respective assets and liabilities based upon their estimated fair values as of
the acquisition date. Operating results of businesses acquired have been
included in the consolidated statements of income from the respective
acquisition dates forward. There are no significant contingent payments, options
or commitments associated with any of the acquisitions. Pro forma results of the
Company, assuming all of the acquisitions had occurred at the beginning of each
period presented, would not be materially different from the results reported.

5. GOODWILL AND OTHER INTANGIBLE ASSETS

Effective May 2, 2002, the Company adopted SFAS No. 142, "Goodwill and
Other Intangible Assets." Under this standard, goodwill and intangibles with
indefinite useful lives are no longer amortized. This standard also requires, at
a minimum, an annual impairment assessment of the carrying value of goodwill and
intangibles with indefinite useful lives. The reassessment of intangible assets,
including the ongoing impact of amortization, and the assignment of goodwill to
reporting units was completed during the first quarter of Fiscal 2003.

The Company completed its transitional goodwill impairment tests during the
second quarter of Fiscal 2003 and, as a result, recorded a transitional
impairment charge that was calculated as of May 2, 2002, and recorded as an
effect of a change in accounting principle for Fiscal 2003, of $77.8 million.
There was no tax effect associated with this charge. The charge, which relates
to certain of the Company's reporting units, has been reflected in its segments
as follows: Europe $54.6 million, Asia/Pacific $2.7 million, and Other Operating
Entities $20.5 million.

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

The annual impairment tests are performed in the fourth quarter of each
fiscal year unless events suggest an impairment may have occurred in the
interim.
45

H. J. HEINZ COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Changes in the carrying amount of goodwill for the fiscal year ended April
27, 2005, by reportable segment, are as follows:

During Fiscal 2005, the Company acquired a controlling interest in Shanghai
LongFong Foods, Appetizers And, Inc., and certain assets from ABAL, S.A. de C.V.
Preliminary purchase price allocations have been recorded for each of these
acquisitions. The Company expects to finalize the purchase price allocations
related to these acquisitions during Fiscal 2006 upon completion of third-party
valuation procedures. During the fourth quarter of Fiscal 2005, the Company
finalized the purchase price allocation related to the Fiscal 2004 acquisition
of Unifine Richardson B.V., within the North American Consumer Products segment.
The purchase accounting adjustment in the Europe segment primarily represents a
correction to the deferred income tax liabilities related to the Fiscal 2001
acquisition of CSM Nederland NV.

The impairment in the above table, which was classified within cost of
products sold, was recognized due to a deterioration of current and expected
operating results of a consolidated joint venture following a recall in Fiscal
2004. The Company reached an agreement with third parties, the proceeds of which
were offset by the impairment and other damages incurred to date. No other
goodwill impairment charges were recognized in Fiscal 2005.

Trademarks and other intangible assets at April 27, 2005 and April 28,
2004, subject to amortization expense, are as follows:

Amortization expense for trademarks and other intangible assets subject to
amortization was $18.4 million, $17.1 million, and $20.4 million for the fiscal
years ended April 27, 2005, April 28, 2004, and April 30, 2003, respectively.
Based upon the amortizable intangible assets recorded on the balance sheet as of
April 27, 2005, amortization expense for each of the next five fiscal years is
estimated to be approximately $18 million.

Intangible assets not subject to amortization at April 27, 2005 and April
28, 2004, were $492.2 million and $505.5 million, respectively, and consisted
solely of trademarks.

46

H. J. HEINZ COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

6. INCOME TAXES

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

Tax expense resulting from allocating certain net tax benefits directly to
additional capital was $10.5 million in Fiscal 2005, $4.4 million in Fiscal 2004
and $1.1 million in Fiscal 2003.

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

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

The reduction in the effective tax rate in Fiscal 2005 is attributable to
changes to the capital structure in certain foreign subsidiaries, tax credits
resulting from tax planning associated with a change in certain foreign tax
legislation, reduction of the charge associated with remittance of foreign
dividends and the settlement of tax audits, partially offset by impairment
charges for
47

H. J. HEINZ COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Hain, an e-commerce business venture, and other operating losses for which no
tax benefit can currently be recorded. The Fiscal 2004 and 2003 effective tax
rates were unfavorably impacted by reorganization and related costs expected to
be realized in lower tax rate jurisdictions and by nondeductible expenses
related to the restructurings.

The American Jobs Creation Act ("the AJCA") provides a deduction of 85% on
certain foreign earnings repatriation. The Company may elect to apply this
provision in Fiscal 2006. The Company does not expect to be able to complete its
evaluation of the effects of the repatriation provisions until after the
Treasury Department provides additional guidance on key elements of the
provision. The Company expects to complete its evaluation within a reasonable
period of time after final guidance is issued. The range of amounts that the
Company is currently considering for repatriation under this provision is
between zero and $750 million. The related potential range of income tax (based
upon our expectation of how certain technical issues will be resolved in the
final guidance) is between zero and $20 million.

The AJCA provides a deduction calculated as a percentage of qualified
income from manufacturing in the United States. The percentage increases from 3%
to 9% over a 6 year period beginning with the Company's 2006 fiscal year. In
December 2004, the FASB issued a new staff position providing for this deduction
to be treated as a special deduction, as opposed to a tax rate reduction, in
accordance with SFAS No. 109. The benefit of this deduction is not expected to
have a material impact on the Company's effective tax rate in Fiscal 2006.

The following table and note summarize deferred tax (assets) and deferred
tax liabilities as of April 27, 2005 and April 28, 2004.

The Company also has foreign deferred tax assets and valuation allowances
of $129.1 million each, related to statutory increases in the capital tax bases
of certain internally generated intangible assets for which the probability of
realization is remote.

The net change in the Fiscal 2005 valuation allowance shown above is an
increase of $50.6 million. The increase was primarily due to increases in the
valuation allowance related to additional deferred tax assets for loss
carryforwards of $43.8 million. The net change in the Fiscal 2004 and 2003
valuation allowances was a decrease of $43.2 million and $37.6 million,
respectively. These

48

H. J. HEINZ COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

decreases were primarily due to decreases in deferred tax assets for foreign tax
credit and loss carryforwards.

At the end of Fiscal 2005, foreign operating loss carryforwards totaled
$162.0 million. Of that amount, $92.4 million expire between 2006 and 2023; the
other $69.6 million do not expire. Deferred tax assets of $9.3 million have been
recorded for state operating loss carryforwards. These losses expire between
2006 and 2025 and have been fully reserved. Foreign tax credit carryforwards
total $35.4 million and expire in 2015.

Undistributed earnings of foreign subsidiaries considered to be
indefinitely reinvested amounted to $3.1 billion at April 27, 2005.

During the third quarter of Fiscal 2004, the Company reorganized certain of
its foreign operations and as a result incurred a foreign income tax liability.
This tax liability was settled during the third quarter of Fiscal 2005 due to a
cash payment of $124.9 million. Because the Company increased the tax basis in
amortizable assets, cash flow is expected to be positive in each of the eight
years following Fiscal 2006. Also during the third quarter of Fiscal 2004, the
Company filed suit seeking a refund of federal income tax related to a
transaction completed in Fiscal 1995. Receipt of the refund would have a
positive effect on the Company's cash flow with no earnings impact as the offset
would be a credit to additional paid-in capital.

7. DEBT

Short-term debt consisted of bank debt and other borrowings of $28.5
million and $11.4 million as of April 27, 2005 and April 28, 2004, respectively.
The weighted average interest rate was 4.7% and 4.3% for Fiscal 2005 and Fiscal
2004, respectively.

In August 2004, the Company and H.J. Heinz Finance Company amended their
$600 million 364-Day Credit Agreement and their $1.5 billion Five-Year Credit
Agreement by combining the agreements into a $2.0 billion Five-Year Credit
Agreement, expiring August 2009. The Credit Agreement supports the Company's
commercial paper borrowings and the remarketable securities. As a result, these
borrowings are classified as long-term debt based upon the Company's intent and
ability to refinance these borrowings on a long-term basis. In addition, the
Company had $1.1 billion of foreign lines of credit available at April 27, 2005.

49

H. J. HEINZ COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Long-term debt was comprised of the following as of April 27, 2005 and
April 28, 2004:

In the third quarter of Fiscal 2005, the Company paid off E300 million of
bonds ($404.7 million) which matured on January 5, 2005. In the fourth quarter
of Fiscal 2005, the Company paid off NZ$90 million of bonds ($61.3 million)
which matured on February 15, 2005.

The fair value of the debt obligations approximated the recorded value as
of April 27, 2005 and April 28, 2004. Annual maturities of long-term debt during
the next five fiscal years are $544.8 million in 2006, $2.3 million in 2007,
$301.8 million in 2008, $327.4 million in 2009 and $2.2 million in 2010.

In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity". This
statement affects the classification, measurement and disclosure requirements of
certain financial instruments, including mandatorily redeemable shares. SFAS No.
150 was effective for the Company in the second quarter of Fiscal 2004. The
adoption of SFAS No. 150 required the prospective classification of Heinz
Finance's $325 million of mandatorily redeemable preferred shares from minority
interest to long-term debt.

As of April 27, 2005, the Company had $800 million of remarketable
securities due December 2020. These securities are subject to an annual
remarketing on each December 1, and the interest rate is reset on such dates. If
the securities are not remarketed, then the Company is required to repurchase
all of the securities at 100% of the principal amount plus accrued interest. On
December 1, 2004, the securities were remarketed at a coupon of 6.189%.

50

H. J. HEINZ COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

8. SHAREHOLDERS' EQUITY

CAPITAL STOCK:

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

As of April 27, 2005, there were authorized, but unissued, 2,200,000 shares
of third cumulative preferred stock for which the series had not been
designated.

EMPLOYEE STOCK OWNERSHIP PLAN ("ESOP"):

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

GLOBAL STOCK PURCHASE PLAN ("GSPP"):

On September 8, 1999, the shareholders authorized the GSPP that provides
for the purchase by employees of up to 3,000,000 shares of the Company's stock
through payroll deductions. Employees who choose to participate in the plan
receive an option to acquire common stock at a discount. The purchase price per
share is the lower of 85% of the fair market value of the Company's stock on the
first or last day of a purchase period. During Fiscal 2005, employees purchased
353,156 shares under this plan.

PENSION OBLIGATION:

The Company made cash contributions to its pension plans totaling $40
million in Fiscal 2005 compared to $202 million in Fiscal 2004. In addition, the
Company recorded an additional minimum liability of $71.6 million and $345.6
million as of April 27, 2005 and April 28, 2004, respectively.

9. SUPPLEMENTAL CASH FLOWS INFORMATION

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

* Includes obligations to sellers of $5.5 million and $4.6 million in 2005 and
2004, respectively.

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H. J. HEINZ COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

10. EMPLOYEES' STOCK INCENTIVE PLANS AND MANAGEMENT INCENTIVE PLANS

STOCK OPTIONS:

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

Data regarding the Company's stock option plans follows:

The following summarizes information about shares under option in the
respective exercise price ranges at April 27, 2005:

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H. J. HEINZ COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The shares authorized but not granted under the Company's stock incentive
plans were 16,526,868 at April 27, 2005 and 17,785,026 at April 28, 2004. Common
stock reserved for stock incentive plans totaled 53,478,569 at April 27, 2005
and 56,793,480 at April 28, 2004.

ANNUAL INCENTIVE BONUS:

The Company's management incentive plan covers officers and other key
employees. Participants may elect to be paid on a current or deferred basis. The
aggregate amount of all awards may not exceed certain limits in any year.
Compensation under the management incentive plans was approximately $26 million
in Fiscal 2005, $26 million in Fiscal 2004 and $19 million in Fiscal 2003.

OTHER LONG-TERM INCENTIVE PROGRAMS

RESTRICTED STOCK UNITS:

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

The number of RSUs awarded to employees is determined by the fair market
value of the Company's stock on the grant date. The fair value of the awards
granted has been recorded as unearned compensation and is shown as a separate
component of shareholders' equity. Unearned compensation is amortized over the
vesting period for the particular grant, and is recognized as a component of
general and administrative expenses. The RSU liability is classified as a
component of additional paid in capital in the consolidated balance sheets. The
Company recognized amortization related to the unearned compensation of $15.5
million in Fiscal 2005, $18.1 million in Fiscal 2004 and $5.8 million in Fiscal
2003.

PERFORMANCE UNIT AWARDS PROGRAM:

In Fiscal 2005, the Company granted performance awards as permitted in the
Fiscal Year 2003 Stock Incentive Plan, subject to the achievement of certain
performance goals. These performance awards are tied to the Company's financial
measures of net income and sales growth over a

53

H. J. HEINZ COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

two year period. Awards are payable at the end of the two year performance
period based upon the Company achieving these targets. Once the minimum net
income target is met, the amount of any award is dependent upon the level of
sales growth of the Company for the performance period. Expense is recognized
based upon management's estimate of the likelihood of meeting the performance
targets based on current and future expectations of the Company's performance.
In Fiscal 2005, there was no expense recognized under this plan.

11. RETIREMENT PLANS

The Company maintains retirement plans for the majority of its employees.
Current defined benefit plans are provided primarily for domestic union and
foreign employees. Defined contribution plans are provided for the majority of
its domestic non-union hourly and salaried employees as well as certain
employees in foreign locations. The Company uses an April 30 measurement date
for its domestic plans and a March 31 measurement date for foreign plans.

The following table sets forth the funded status of the Company's principal
defined benefit plans at April 27, 2005 and April 28, 2004.

54

H. J. HEINZ COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The accumulated benefit obligation for all defined benefit pension plans
was $2,166.6 million at April 27, 2005 and $1,954.7 million at April 28, 2004.
The projected benefit obligation, accumulated benefit obligation and fair value
of plan assets for plans with accumulated benefit obligations in excess of plan
assets were $525.6 million, $461.7 million and $360.7 million, respectively, as
of April 27, 2005 and $1,304.0 million, $1,197.2 million and $1,139.8 million,
respectively, as of April 28, 2004. The change in minimum liability included in
other comprehensive (income)/loss was a decrease of $390.1 million at April 27,
2005 and a decrease of $158.7 million at April 28, 2004. The prepaid benefit
cost is included in other non-current assets in the consolidated balance sheets.

The weighted-average rates used for the years ended April 27, 2005 and
April 28, 2004 in determining the projected benefit obligations for defined
benefit plans were as follows:

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

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H. J. HEINZ COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The weighted-average rates used for the years ended April 27, 2005, April
28, 2004 and April 30, 2003 in determining the defined benefit plans' net
pension costs were as follows:

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

PLAN ASSETS:

The Company's defined benefit pension plans' weighted average asset
allocation at April 27, 2005 and April 28, 2004 and weighted average target
allocation were as follows:

The underlying basis of the investment strategy of the Company's defined
benefit plans is to ensure that pension funds are available to meet the plans'
benefit obligations when they are due. The Company's investment objectives
include: prudently investing plan assets in a high-quality, diversified manner
in order to maintain the security of the funds; achieving an optimal return on
plan assets within specified risk tolerances; and investing according to local
regulations and requirements specific to each country in which a defined benefit
plan operates. The investment strategy expects equity investments to yield a
higher return over the long term than fixed income securities, while fixed
income securities are expected to provide certain matching characteristics to
the plans' benefit payment cash flow requirements. Company common stock held as
part of the Equity Securities amounted to less than one percent of Plan assets
at April 27, 2005 and April 28, 2004.

CASH FLOWS:

The Company contributed approximately $40 million to the defined benefit
plans in Fiscal 2005. The Company funds its U.S. defined benefit plans in
accordance with IRS regulations, while foreign defined benefit plans are funded
in accordance with local laws and regulations in each respective country.
Discretionary contributions to the pension funds may also be made by the Company
from time to time. Defined benefit plan contributions for the next fiscal year
are expected to be approximately $45 million, however actual contributions may
be affected by pension asset and liability valuations during the year.

56

H. J. HEINZ COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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

2006........................................................ $121,000
2007........................................................ $122,000
2008........................................................ $125,000
2009........................................................ $130,000
2010........................................................ $133,000
Years 2011-2015............................................. $766,175

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

The Company and certain of its subsidiaries provide health care and life
insurance benefits for retired employees and their eligible dependents. Certain
of the Company's U.S. and Canadian employees may become eligible for such
benefits. The Company currently does not fund these benefit arrangements and may
modify plan provisions or terminate plans at its discretion. The Company uses an
April 30 measurement date for its domestic plans and a March 31 measurement date
for the Canadian plan.

The following table sets forth the combined status of the Company's
postretirement benefit plans at April 27, 2005 and April 28, 2004.

The weighted-average discount rate used in the calculation of the
accumulated post-retirement benefit obligation at April 27, 2005 and April 28,
2004 was 5.5% and 6.2%, respectively.

57

H. J. HEINZ COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Net postretirement costs consisted of the following:

The weighted-average discount rate used in the calculation of the net
postretirement benefit cost was 6.2% in 2005, 6.3% in 2004 and 7.2% in 2003.

The weighted-average assumed annual composite rate of increase in the per
capita cost of company-provided health care benefits begins at 10.4% for 2006,
gradually decreases to 4.6% by 2011 and remains at that level thereafter.
Assumed health care cost trend rates have a significant effect on the amounts
reported for postretirement medical benefits. A one-percentage-point change in
assumed health care cost trend rates would have the following effects:

CASH FLOWS:

The Company paid $21 million for benefits in the postretirement medical
plans in Fiscal 2005. The Company funds its postretirement medical plans in
order to make payment on claims as they occur during the fiscal year. Payments
for the next fiscal year are expected to be approximately $21 million.

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

2006........................................................ $ 21,000
2007........................................................ $ 22,000
2008........................................................ $ 22,000
2009........................................................ $ 23,000
2010........................................................ $ 23,000
Years 2011-2015............................................. $120,000

58

H. J. HEINZ COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

13. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES

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

FOREIGN CURRENCY HEDGING:

The Company uses forward contracts and to a lesser extent, option contracts
to mitigate its foreign currency exchange rate exposure due to forecasted
purchases of raw materials and sales of finished goods, and future settlement of
foreign currency denominated assets and liabilities. Derivatives used to hedge
forecasted transactions and specific cash flows associated with foreign currency
denominated financial assets and liabilities that meet the criteria for hedge
accounting are designated as cash flow hedges. Consequently, the effective
portion of gains and losses is deferred as a component of accumulated other
comprehensive (income)/loss and is recognized in earnings at the time the hedged
item affects earnings, in the same line item as the underlying hedged item.

The Company has used certain foreign currency debt instruments as net
investment hedges of foreign operations. Losses of $32.2 million (net of income
taxes of $18.9 million), $13.4 million (net of income taxes of $7.8 million) and
$41.9 million (net of income taxes of $23.5 million), which represented
effective hedges of net investments, were reported as a component of accumulated
other comprehensive (income)/loss within unrealized translation adjustment for
the years ended April 27, 2005, April 28, 2004 and April 30, 2003, respectively.

INTEREST RATE HEDGING:

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

HEDGE INEFFECTIVENESS:

Hedge ineffectiveness related to cash flow hedges, which is reported in
current period earnings as other income and expense, was not significant for the
year ended April 27, 2005, was a net gain of $0.4 million for the year ended
April 28, 2004 and was a net loss of $0.8 million for the year ended April 30,
2003. The Company excludes the time value component of option contracts from the
assessment of hedge effectiveness.

DEFERRED HEDGING GAINS AND LOSSES:

As of April 27, 2005, the Company is hedging forecasted transactions for
periods not exceeding one year. During the next 12 months, the Company expects
$4.3 million of net deferred loss reported in accumulated other comprehensive
(income)/loss to be reclassified to earnings. Net deferred losses reclassified
to earnings because the hedged transaction was no longer expected to occur were
not significant for the years ended April 27, 2005 and April 28, 2004, and
totaled $0.6 million for the year ended April 30, 2003.

59

H. J. HEINZ COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

OTHER ACTIVITIES:

The Company enters into certain derivative contracts in accordance with its
risk management strategy that do not meet the criteria for hedge accounting.
Although these derivatives do not qualify as hedges, they have the economic
impact of largely mitigating foreign currency or interest rate exposures. These
derivative financial instruments are accounted for on a full mark to market
basis through current earnings even though they were not acquired for trading
purposes.

At April 27, 2005, the Company had outstanding currency exchange and
interest rate derivative contracts with notional amounts of $1.27 billion and
$2.88 billion, respectively. At April 28, 2004, the Company had outstanding
currency exchange and interest rate derivative contracts with notional amounts
of $983 million and $3.68 billion, respectively. The fair value of derivative
financial instruments was a net asset of $177 million and $123 million at April
27, 2005 and April 28, 2004, respectively.

CONCENTRATION OF CREDIT RISK:

Counterparties to currency exchange and interest rate derivatives consist
of major international financial institutions. The Company continually monitors
its positions and the credit ratings of the counterparties involved and, by
policy, limits the amount of credit exposure to any one party. While the Company
may be exposed to potential losses due to the credit risk of non-performance by
these counterparties, losses are not anticipated. During Fiscal 2005, no single
customer represented more than 10% of the Company's sales.

14. NET INCOME PER COMMON SHARE

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

60

H. J. HEINZ COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Stock options outstanding of 15.9 million, 16.6 million and 18.4 million as
of April 27, 2005, April 28, 2004 and April 30, 2003, respectively, were not
included in the above net income per diluted share calculations because to do so
would have been antidilutive for the periods presented.

15. SEGMENT INFORMATION

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

Descriptions of the Company's segments are as follows:

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

- U.S. FOODSERVICE--This segment primarily 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, desserts and appetizers.

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

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

- OTHER OPERATING ENTITIES--This segment includes the Company's operations
in Africa, India, Latin America, the Middle East and other areas that
sell products in all of the Company's categories. During Fiscal 2003, the
Company deconsolidated its Zimbabwe operations that have historically
been reported in this segment.

The Company's management evaluates performance based on several factors
including net sales, operating income excluding special items, and the use of
capital resources. Intersegment revenues are accounted for at current market
values. Items below the operating income line of the consolidated statements of
income are not presented by segment, since they are excluded from the measure of
segment profitability reviewed by the Company's management.

61

H. J. HEINZ COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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

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

(b) FISCAL YEAR ENDED APRIL 27, 2005: Excludes the $27.0 million non-cash asset
impairment charge on the HAK vegetable product line in Northern Europe.

62

H. J. HEINZ COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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

FISCAL YEAR ENDED APRIL 30, 2003: Excludes Del Monte transaction related
costs, costs to reduce overhead of the remaining businesses and losses on
the exit of non-strategic businesses as follows: North American Consumer
Products $60.9 million, U.S. Foodservice $5.9 million, Europe $58.9
million, Asia/Pacific $6.6 million and Non-Operating $55.0 million.

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

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

The results for the year ended April 27, 2005 were impacted by a $34.1
million charge for trade promotion spending for the Italian infant nutrition
business of which $21.1 million was recorded in the second quarter and $13.0
million in the fourth quarter. The charge relates to an under-accrual in fiscal
years 2001, 2002 and 2003. The amount of the charge that corresponds to each of
the fiscal years 2001, 2002 and 2003 is less than 2% of net income for each of
those years.

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

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

63

H. J. HEINZ COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

16. QUARTERLY RESULTS

The third quarter of Fiscal 2005 includes a $64.5 million non-cash
impairment charge for the Company's equity investment in The Hain Celestial
Group, Inc. ("Hain") and a $9.3 million non-cash charge to recognize the
impairment of a cost-basis investment in a grocery industry sponsored e-commerce
business venture. There was no tax benefit associated with these impairment
charges. The fourth quarter of Fiscal 2005 includes a $27.0 million pre-tax
($18.0 million after-tax) non-cash asset impairment charge related to the
anticipated sale of the HAK vegetable product line in Northern Europe in early
Fiscal 2006.

The first quarter of Fiscal 2004 includes the gain on sale of the bakery
business in Northern Europe of $13.3 million after-tax, reorganization costs of
$3.4 million after-tax and the write down of pizza crust assets in the United
Kingdom of $2.8 million after-tax. The fourth quarter of Fiscal 2004 includes
reorganization costs of $7.6 million after-tax.

17. COMMITMENTS AND CONTINGENCIES

LEGAL MATTERS:

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

64

H. J. HEINZ COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

LEASE COMMITMENTS:

Operating lease rentals for warehouse, production and office facilities and
equipment amounted to approximately $111.3 million in 2005, $113.0 million in
2004 and $95.2 million in 2003. Future lease payments for non-cancelable
operating leases as of April 27, 2005 totaled $581.1 million (2006-$79.8
million, 2007-$206.3 million, 2008-$43.1 million, 2009-$34.4 million, 2010-$28.4
million and thereafter-$189.1 million).

No significant credit guarantees existed between the Company and third
parties as of April 27, 2005.

18. ADVERTISING COSTS

Advertising expenses (including production and communication costs) for
fiscal 2005, 2004 and 2003 were $289.4 million, $307.9 million and $328.8
million, respectively. For fiscal years 2005, 2004 and 2003, $144.8 million,
$147.0 million and $143.5 million, respectively, were recorded as a reduction of
revenue and $144.6 million, $160.9 million and $185.3 million, respectively,
were recorded as a component of SG&A.

19. SUBSEQUENT EVENT

On April 28, 2005, the Company completed the formation of a joint venture
that resulted in Heinz becoming the majority owner of Petrosoyuz, a leading
Russian maker of ketchup, condiments and sauces. Petrosoyuz's business includes
brands such as Picador, Derevenskoe, Mechta Hoziayki and Moya Semya.

65

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

There is nothing to be reported under this item.

ITEM 9A. CONTROLS AND PROCEDURES.

(a) Evaluation of Disclosure Controls and Procedures

The Company's management, with the participation of the Company's Chief
Executive Officer and Chief Financial Officer, evaluated the effectiveness of
the Company's disclosure controls and procedures as of the end of the period
covered by this report. Based on that evaluation, the Chief Executive Officer
and Chief Financial Officer concluded that the Company's disclosure controls and
procedures, as of the end of the period covered by this report, were designed
and are functioning effectively to provide reasonable assurance that the
information required to be disclosed by the Company in reports filed under the
Securities Exchange Act of 1934 is (i) recorded, processed, summarized and
reported within the time periods specified in the SEC's rules and forms, and
(ii) accumulated and communicated to our management, including the Chief
Executive Officer and Chief Financial Officer, as appropriate to allow timely
decisions regarding disclosure. See also "Report of Management on Internal
Control over Financial Reporting".

(b) Management's Report on Internal Control Over Financial Reporting

Our management's report on Internal Control Over Financial Reporting is set
forth in Item 8 and incorporated herein by reference.

Our management's assessment of the effectiveness of our internal control
over financial reporting as of April 27, 2005 has been audited by
PricewaterhouseCoopers LLP, an independent registered public accounting firm, as
stated in their report which appears herein.

(c) Changes in Internal Controls over Financial Reporting

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

ITEM 9B. OTHER INFORMATION.

There is nothing to be reported under this item.

66

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

Information relating to the Directors of the Company is set forth under the
captions "Election of Directors" and "Additional Information--Section 16
Beneficial Ownership Reporting Compliance" in the Company's definitive Proxy
Statement in connection with its Annual Meeting of Shareholders to be held
August 23, 2005. The information regarding the audit committee financial expert
is set forth under the captions "Report of the Audit Committee" and
"Relationship with Registered Public Accounting Firm" in the Company's
definitive Proxy Statement in connection with its Annual Meeting of Shareholders
to be held on August 23, 2005. The Company's Code of Conduct which is applicable
to all employees, including the principal executive officer, the principal
financial officer, and the principal accounting officer, as well as the charters
for the Company's Audit, Management Development & Compensation, Corporate
Governance, and Public Issues Committees, as well as periodic and current
reports filed with the SEC are available on the Company's website,
www.heinz.com, and are available in print to any shareholder upon request. Such
information is incorporated herein by reference. Information relating to the
executive officers of the Company is set forth under the caption "Executive
Officers of the Registrant" in Part I above.

ITEM 11. EXECUTIVE COMPENSATION.

Information relating to executive compensation is set forth under the
caption "Executive Compensation" in the Company's definitive Proxy Statement in
connection with its Annual Meeting of Shareholders to be held on August 23,
2005. Such information is incorporated herein by reference.

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

Information relating to the ownership of equity securities of the Company
by certain beneficial owners and management is set forth under the caption
"Security Ownership of Management" in the Company's definitive Proxy Statement
in connection with its Annual Meeting of Shareholders to be held August 23,
2005. Such information is incorporated herein by reference.

The number of shares to be issued upon exercise and the number of shares
remaining available for future issuance under the Company's equity compensation
plans at April 27, 2005 were as follows:

EQUITY COMPENSATION PLAN INFORMATION

(1) The H. J. Heinz Company Restricted Stock Recognition Plan for Salaried
Employees (the "Restricted Stock Plan") is designed to provide recognition
and reward in the form of awards of restricted stock to employees who have a
history of outstanding accomplishment and who, because of their experience
and skills, are expected to continue to contribute significantly to the

67

success of the Company. Eligible employees are those full-time salaried
employees not participating in the shareholder-approved H. J. Heinz Company
Incentive Compensation Plan in effect as of May 1, 2002, and who have not been
awarded an option to purchase Company Common Stock. The Company has ceased
issuing shares from this Restricted Stock Plan, and it is the Company's
intention to terminate the Restricted Stock Plan once all restrictions on
previously issued shares are lifted. All awards of this type are now made
under the Fiscal Year 2003 Stock Incentive Plan.

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

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

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

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

Information relating to certain relationships with a beneficial shareholder
and certain related transactions is set forth under the caption "Security
Ownership of Certain Principal Shareholders" in the Company's definitive Proxy
Statement in connection with its Annual Meeting of Shareholders to be held on
August 23, 2005. Such information is incorporated herein by reference.

ITEM 14. PRINCIPAL AUDITOR FEES AND SERVICES.

Information relating to the principal auditor's fees and services is set
forth under the caption "Relationship With Registered Public Accounting Firm" in
the Company's definitive Proxy Statement in connection with its Annual Meeting
of Shareholders to be held on August 23, 2005. Such information is incorporated
herein by reference.

68

PART IV

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

(a)(1) The following financial statements and reports are filed as part of this report under Item
8--"Financial Statements and Supplementary Data":
Consolidated Balance Sheets as of April 27, 2005 and April 28, 2004
Consolidated Statements of Income for the fiscal years ended April 27, 2005,
April 28, 2004 and April 30, 2003
Consolidated Statements of Shareholders' Equity for the fiscal years ended April
27, 2005, April 28, 2004 and April 30, 2003
Consolidated Statements of Cash Flows for the fiscal years ended April 27, 2005,
April 28, 2004 and April 30, 2003
Notes to Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm of
PricewaterhouseCoopers LLP dated June 16, 2005, on the Company's consolidated
financial statements and financial statement schedule filed as a part hereof for
the fiscal years ended April 27, 2005, April 28, 2004 and April 30, 2003
(2) The following report and schedule is filed herewith as a part hereof:
Consent of Independent Registered Public Accounting Firm of
PricewaterhouseCoopers LLP dated June 16, 2005 filed as a part hereof Schedule
II (Valuation and Qualifying Accounts and Reserves) for the three fiscal years
ended April 27, 2005, April 28, 2004 and April 30, 2003
All other schedules are omitted because they are not applicable or the required
information is included herein or is shown in the consolidated financial
statements or notes thereto filed as part of this report incorporated herein by
reference.
(3) Exhibits required to be filed by Item 601 of Regulation S-K are listed below. Documents
not designated as being incorporated herein by reference are filed herewith. The paragraph
numbers correspond to the exhibit numbers designated in Item 601 of Regulation S-K.
3(i) The Company's Articles of Amendment dated July 13, 1994, amending and restating
the Company's amended and restated Articles of Incorporation in their entirety,
are incorporated herein by reference to Exhibit 3(i) to the Company's Annual
Report on Form 10-K for the fiscal year ended April 27, 1994.
3(ii) The Company's By-Laws, as amended effective June 12, 2002 are incorporated
herein by reference to Exhibit 3 to the Company's Quarterly Report on Form 10-Q
for the three months ended July 31, 2002.
4. Except as set forth below, there are no instruments with respect to long-term
debt of the Company that involve indebtedness or securities authorized
thereunder exceeding 10 percent of the total assets of the Company on a
consolidated basis. The Company agrees to file a copy of any instrument or
agreement defining the rights of holders of long-term debt of the Company upon
request of the Securities and Exchange Commission.
(a) The Indenture among the Company, H. J. Heinz Finance Company, and Bank
One, National Association dated as of July 6, 2001 relating to the H.
J. Heinz Finance Company's $750,000,000 6.625% Guaranteed Notes due
2011, $700,000,000 6.00% Guaranteed Notes due 2012 and $550,000,000
6.75% Guaranteed Notes due 2032 is incorporated herein by reference to
Exhibit 4 of the Company's Annual Report on Form 10-K for the fiscal
year ended May 1, 2002.
(b) The Certificate of Designations, Preferences and Rights of Voting
Cumulative Preferred Stock, Series A of H. J. Heinz Finance Company is
incorporated herein by reference to Exhibit 4 of the Company's
Quarterly Report on Form 10-Q for the three months ended August 1,
2001.

69

10(a) Management contracts and compensatory plans:
(i) 1986 Deferred Compensation Program for H. J. Heinz Company
and affiliated companies, as amended and restated in its
entirety effective December 6, 1995, is incorporated herein
by reference to Exhibit 10(c)(i) to the Company's Annual
Report on Form 10-K for the fiscal year ended May 1, 1995.
(ii) H. J. Heinz Company 1990 Stock Option Plan is incorporated
herein by reference to Appendix A to the Company's Proxy
Statement dated August 3, 1990.
(iii) H. J. Heinz Company 1994 Stock Option Plan is incorporated
herein by reference to Appendix A to the Company's Proxy
Statement dated August 5, 1994.
(iv) H. J. Heinz Company Supplemental Executive Retirement Plan,
as amended, is incorporated herein by reference to Exhibit
10(c)(ix) to the Company's Annual Report on Form 10-K for
the fiscal year ended April 28, 1993.
(v) H. J. Heinz Company Executive Deferred Compensation Plan (as
amended and restated on December 27, 2001) is incorporated
by reference to Exhibit 10(a)(vii) of the Company's Annual
Report on Form 10-K for the fiscal year ended May 1, 2002.
(vi) H. J. Heinz Company Incentive Compensation Plan is
incorporated herein by reference to Appendix B to the
Company's Proxy Statement dated August 5, 1994.
(vii) H. J. Heinz Company Stock Compensation Plan for Non-Employee
Directors is incorporated herein by reference to Appendix A
to the Company's Proxy Statement dated August 3, 1995.
(viii) H. J. Heinz Company 1996 Stock Option Plan is incorporated
herein by reference to Appendix A to the Company's Proxy
Statement dated August 2, 1996.
(ix) H. J. Heinz Company Deferred Compensation Plan for Directors
is incorporated herein by reference to Exhibit 10(a)(xiii)
to the Company's Annual Report on Form 10-K for the fiscal
year ended April 29, 1998.
(x) H. J. Heinz Company Global Stock Purchase Plan is
incorporated herein by reference to Appendix A to the
Company's Proxy Statement dated August 3, 1999.
(xi) Form of Severance Protection Agreement is incorporated
herein by reference to Exhibit 10(a)(xiv) to the Company's
Annual Report on Form 10-K for the fiscal year ended May 3,
2000.
(xii) H. J. Heinz Company 2000 Stock Option Plan is incorporated
herein by reference to Appendix A to the Company's Proxy
Statement dated August 4, 2000.
(xiii) H. J. Heinz Company Executive Estate Life Insurance Program
is incorporated herein by reference to Exhibit 10(a)(xv) to
the Company's Annual Report on Form 10-K for the fiscal year
ended May 1, 2002.
(xiv) H. J. Heinz Company Restricted Stock Recognition Plan for
Salaried Employees is incorporated herein by reference to
Exhibit 10(a)(xvi) to the Company's Annual Report on Form
10-K for the fiscal year ended May 1, 2002.
(xv) H. J. Heinz Company Fiscal Year 2003 Stock Incentive Plan is
incorporated by reference to the Company's Proxy Statement
dated August 2, 2002.

70

(xvi) H. J. Heinz Company Senior Executive Incentive Compensation
Plan is incorporated by reference to the Company's Proxy
Statement dated August 2, 2002.
(xvii) Form of First Amendment to Severance Protection Agreement
incorporated by reference to the Company's Annual Report on
Form 10-K for the fiscal year ended April 30, 2003.
(xviii) Deferred Compensation Plan for Non-Employee Directors of H.
J. Heinz Company (as amended and restated effective January
1, 2004), is incorporated herein by reference to Exhibit 10
to the Company's Quarterly Report on Form 10-Q for the
quarterly period ended January 28, 2004.
(xix) Form of Stock Option Award and Agreement for U.S. Employees
is incorporated herein by reference to Exhibit 10(a) to the
Company's Quarterly Report on Form 10-Q for the quarterly
period ended January 26, 2005.
(xx) Form of Stock Option Award and Agreement for U.S. Employees
Based in the U.K. on International Assignment is
incorporated herein by reference to Exhibit 10(a) to the
Company's Quarterly Report on Form 10-Q for the quarterly
period ended January 26, 2005.
(xxi) Form of Restricted Stock Unit Award and Agreement for U.S.
Employees is incorporated herein by reference to Exhibit
10(a) to the Company's Quarterly Report on Form 10-Q for the
quarterly period ended January 26, 2005.
(xxii) Form of Restricted Stock Unit Award and Agreement for
Non-U.S. Based Employees is incorporated herein by reference
to Exhibit 10(a) to the Company's Quarterly Report on Form
10-Q for the quarterly period ended January 26, 2005.
(xxiii) Form of Five-Year Restricted Stock Unit Retention Award and
Agreement for U.S. Employees is incorporated herein by
reference to Exhibit 10(a) to the Company's Quarterly Report
on Form 10-Q for the quarterly period ended January 26,
2005.
(xxiv) Form of Five-Year Restricted Stock Unit Retention Award and
Agreement for Non-U.S. Based Employees is incorporated
herein by reference to Exhibit 10(a) to the Company's
Quarterly Report on Form 10-Q for the quarterly period ended
January 26, 2005.
(xxv) Form of Three-Year Restricted Stock Unit Retention Award and
Agreement for U.S. Employees is incorporated herein by
reference to Exhibit 10(a) to the Company's Quarterly Report
on Form 10-Q for the quarterly period ended January 26,
2005.
(xxvi) Form of Three-Year Restricted Stock Unit Retention Award and
Agreement for Non-U.S. Based Employees is incorporated
herein by reference to Exhibit 10(a) to the Company's
Quarterly Report on Form 10-Q for the quarterly period ended
January 26, 2005.
(xxvii) Form of Performance Unit Award Agreement is incorporated
herein by reference to Exhibit 10(a) to the Company's
Quarterly Report on Form 10-Q for the quarterly period ended
January 26, 2005.
(xxviii) Director and Named Executive Officer Compensation
(xxix) Jeffrey P. Berger Restricted Stock Unit Award and Agreement
dated November 9, 2004.
(xxx) Form of Fiscal Year 2006 Restricted Stock Unit Award and
Agreement for U.S. Employees.
(xxxi) Form of Fiscal Year 2006 Restricted Stock Unit Award and
Agreement for non-U.S. Based Employees.

71

(xxxii) Amendment Number One to the H.J. Heinz Company Fiscal Year
2003 Incentive Plan.
(xxxiii) Amendment Number One to the H.J. Heinz Company 2000 Stock
Option Plan.
(xxxiv) Amendment Number One to the H.J. Heinz Company 1996 Stock
Option Plan.
(xxxv) Form of Fiscal Year 2006 Severance Protection Agreement.
12. Computation of Ratios of Earnings to Fixed Charges.
21. Subsidiaries of the Registrant.
23. The following Exhibit is filed by incorporation by reference to Item 15(a)(2) of
this Report:
(a) Consent of PricewaterhouseCoopers LLP.
24. Powers-of-attorney of the Company's directors.
31(a) Rule 13a-14(a)/15d-14(a) Certification by the Chief Executive Officer.
31(b) Rule 13a-14(a)/15d-14(a) Certification by the Chief Financial Officer.
32(a) Certification by the Chief Executive Officer Relating to the Annual Report
Containing Financial Statements.
32(b) Certification by the Chief Financial Officer Relating to the Annual Report
Containing Financial Statements.

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

72

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized, on June 16, 2005.

H. J. HEINZ COMPANY
(Registrant)

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

Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated, on June 16, 2005.

William R. Johnson Director
Charles E. Bunch Director
Mary C. Choksi Director
Leonard S. Coleman, Jr. Director By /s/ ARTHUR B. WINKLEBLACK
Peter H. Coors Director ........................................
Edith E. Holiday Director ARTHUR B. WINKLEBLACK
Candace Kendle Director Attorney-in-Fact
Dean R. O'Hare Director
Lynn C. Swann Director
Thomas J. Usher Director

73

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (Nos. 2-51719, 33-32563, 33-42015, 33-55777, 33-62623,
333-13849, 333-87419, 333-49728, 333-100820 and 333-116534) of H. J. Heinz
Company and Subsidiaries of our report dated June 16, 2005 relating to the
financial statements, financial statement schedule, management's assessment of
the effectiveness of internal control over financial reporting and the
effectiveness of internal control over financial reporting, which appears in
this Form 10-K.

/s/ PRICEWATERHOUSECOOPERS LLP

PricewaterhouseCoopers LLP
Pittsburgh, Pennsylvania
June 16, 2005

SCHEDULE II

H. J. HEINZ COMPANY AND SUBSIDIARIES

VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FISCAL YEARS ENDED APRIL 27, 2005, APRIL 28, 2004 AND APRIL 30, 2003
(THOUSANDS OF DOLLARS)

NOTES:

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

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