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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

For the fiscal year ended May 3, 2006

or

For the transition period from                 to                

Commission File Number 1-3385

H. J. HEINZ COMPANY

(Exact name of registrant as specified in its charter)

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 if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.     Yes þ          No o

      Indicate by check mark if the registrant is not required to file report pursuant to Section 13 or Section 15(d) of the Act.     Yes o          No þ

      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 þ          No o

      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.     þ

      Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated filer     þ          Accelerated Filer     o          Non- Accelerated Filer     o

      Indicate by check mark whether the registrant is a shell Company (as defined in Rule 12b-2 of the Exchange Act).     Yes o          No þ

      As of October 26, 2005 the aggregate market value of the Registrant’s voting stock held by non-affiliates of the Registrant was approximately $11,990,149,988.

      The number of shares of the Registrant’s Common Stock, par value $.25 per share, outstanding as of May 31, 2006, was 331,675,574 shares.

DOCUMENTS INCORPORATED BY REFERENCE

      Portions of the Registrant’s Proxy Statement for the Annual Meeting of Shareholders to be held on August 16, 2006, which will be filed with the Securities and Exchange Commission within 120 days after the end of the Registrant’s fiscal year ended May 3, 2006, are incorporated into Part III, Items 10, 11, 12, 13, and 14.

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PART I

      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, 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 and other sweeteners including high fructose corn syrup, spices, flour and certain other fruits and vegetables are generally purchased on the open market.

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

      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 organizations 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 2006, 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 2007 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 May 3, 2006, approximately 36,000 persons around the world.

      Segment information is set forth in this report on pages 69 through 71 in Note 16, “Segment Information” in Item 8 — “Financial Statements and Supplementary Data.”

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

      The Company’s annual report on Form 10-K, Quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to section 13(a) or 15(d) of the Exchange Act are available free of charge on the Company’s website at www.heinz.com, as soon as reasonably practicable after filed or furnished to the SEC.

Item 1A.     Risk Factors

      In addition to the factors discussed elsewhere in this Report, the following risks and uncertainties could materially adversely affect the Company’s business, financial condition, and results of operations. Additional risks and uncertainties not presently known to the Company or that the

Company currently deems immaterial also may impair the Company’s business operations and financial condition.

      The Company operates in the highly competitive food industry across its product lines competing with other companies that have varying abilities to withstand changing market conditions. Any significant change in relationship with a major customer, including as a result of changes in product prices, sales volume, or contractual terms may impact financial results. Such changes may result because the Company’s competitors may have substantial financial, marketing, and other resources that may change the competitive environment. Such competition could cause the Company to reduce prices and/or increase capital, marketing, and other expenditures, or result in the loss of category share. Such changes could have a material adverse impact on the Company’s net income. As the retail grocery trade continues to consolidate, the larger retail customers of the Company could seek to use their positions to improve their profitability through lower pricing and increased promotional programs. If the Company is unable to use its scale, marketing expertise, product innovation, and category leadership positions to respond to these changes, its profitability and volume growth could be negatively impacted.

      The Company’s performance has been in the past and may continue in the future to be impacted by economic and political conditions in the United States and in other nations. Such conditions and factors include changes in applicable laws and regulations, including changes in food and drug laws, accounting standards, taxation requirements and environmental laws. Other factors impacting our operations include export and import restrictions, currency exchange rates, recession, foreign ownership restrictions, nationalization, the performance of businesses in hyperinflationary environments, and political unrest and terrorist acts in the U.S. and other international locations where the Company does business. Such changes in either domestic or foreign jurisdictions could adversely affect our financial results.

      The Company sources raw materials including agricultural commodities such as tomatoes, cucumbers, potatoes, onions, other fruits and vegetables, dairy products, meat, sugar and other sweeteners, including high fructose corn syrup, spices, and flour, as well as packaging materials such as glass, plastic, metal, paper, fiberboard, and other materials in order to manufacture products. The cost of such commodities may fluctuate widely due to government policy and regulation, weather conditions, or other unforeseen circumstances. To the extent that any of the foregoing factors increase the prices of such commodities and the Company is unable to increase its prices or adequately hedge against such changes in a manner that offsets such changes, the results of its operations could be materially and adversely affected. Similarly, if supplier arrangements and relationships result in increased and unforeseen expenses, the Company’s financial results could be adversely impacted.

      Rising fuel and energy costs may have a significant impact on the cost of operations, including the manufacture, transport, and distribution of products. Fuel costs may fluctuate due to a number of factors outside the control of the Company, including government policy and regulation and weather conditions. Additionally, the Company may be unable to maintain favorable arrangements

with respect to the costs of procuring raw materials, packaging, services, and transporting products, which could result in increased expenses and negatively affect operations. If the Company is unable to hedge against such increases or raise the prices of its products to offset the changes, its results of operations could be adversely affected.

      Inflationary pressures and any shortages in the labor market could increase labor costs, which could have a material adverse effect on the Company’s consolidated operating results or financial condition. The Company’s labor costs include the cost of providing employee benefits in the U.S. and foreign jurisdictions, including pension, health and welfare, and severance benefits. Any declines in stock market returns could adversely impact the funding of health and welfare plans, the assets of which are invested in a diversified portfolio of equity securities and other investments. Additionally, the annual costs of benefits vary with increased costs of health care and the outcome of collectively-bargained wage and benefit agreements.

      The Company is subject to numerous food safety and other laws and regulations regarding the manufacturing, marketing, and distribution of food products. These regulations govern matters such as ingredients, advertising, taxation, relations with distributors and retailers, health and safety matters, and environmental concerns. The ineffectiveness of the Company’s planning and policies with respect to these matters, and the need to comply with new or revised laws or regulations with regard to licensing requirements, trade and pricing practices, environmental permitting, or other food or safety matters, or new interpretations or enforcement of existing laws and regulations, may have a material adverse effect on the Company’s sales and profitability. Avian flu or other pandemics could disrupt production of the Company’s products, reduce demand for certain of the Company’s products, or disrupt the marketplace in the foodservice or retail environment with consequent material adverse effect on the Company’s results of operations.

      If any of the Company’s products become misbranded or adulterated, the Company may need to conduct a product recall. The scope of such a recall could result in significant costs incurred as a result of the recall, potential destruction of inventory, and lost sales. Should consumption of any product cause injury, the Company may be liable for monetary damages as a result of a judgment against it. A significant product recall or product liability case could cause a loss of consumer confidence in the Company’s food products and could have a material adverse effect on the value of its brands and results of operations.

      The success of the Company is dependent upon anticipating and reacting to changes in consumer preferences, including health and wellness. There are inherent marketplace risks associated with new product or packaging introductions, including uncertainties about trade and consumer acceptance. Moreover, success is dependent upon the Company’s ability to identify and respond to consumer trends through innovation. The Company may be required to increase expenditures for new product development. The Company may not be successful in developing new products or improving existing products, or its new products may not achieve consumer acceptance, each of which could negatively impact sales.

      The Company’s ability to efficiently integrate acquisitions and joint ventures into its existing operations also affects the financial success of such transactions. The Company may seek to expand its business through acquisitions and joint ventures, and may divest underperforming or non-core businesses. The Company’s success depends, in part, upon its ability to identify such acquisition and divestiture opportunities and to negotiate favorable contractual terms. Activities in such areas are regulated by numerous antitrust and competition laws in the U. S., the European Union, and other jurisdictions, and the Company may be required to obtain the approval of such transactions by competition authorities, as well as satisfy other legal requirements. The failure to obtain such approvals could adversely affect our results.

      The Company holds assets and incurs liabilities, earns revenue, and pays expenses in a variety of currencies other than the U. S. dollar, primarily the British Pound, Euro, Australian dollar, Canadian dollar, and New Zealand dollar. The Company’s consolidated financial statements are presented in U. S. dollars, and therefore the Company must translate its assets, liabilities, revenue, and expenses into U. S. dollars. Increases or decreases in the value of the U. S. dollar may negatively affect the value of these items in the Company’s consolidated financial statements, even if their value has not changed in their original currency. To the extent the Company fails to manage its foreign currency exposure adequately, the Company’s consolidated results of operations may be negatively impacted.

      As publicly announced, the Company has been implementing a strategic transformation initiative to simplify its business, further prune and realign its portfolio, sell underutilized assets, reduce cost and increase efficiency, and sharpen its focus on three core categories of Ketchup & Sauces, Meals & Snacks, and Infant Food. The success of the Company could be impacted by its inability to continue to execute on its plans through product innovation, implementing cost-cutting measures, enhancing processes and systems on a global basis, and growing market share and volume. Additionally, the Company’s inability to limit disruptions to the business resulting from the emphasis on the three core categories and potential non-core divestitures could adversely affect our financial results. The failure to fully implement the plans could adversely affect the Company’s ability to increase net income.

      None.

CAUTIONARY STATEMENT RELEVANT TO FORWARD-LOOKING INFORMATION

      The Private Securities Litigation Reform Act of 1995 (the “Act”) provides a safe harbor for forward-looking statements made by or on behalf of the Company. The Company and its representatives may from time to time make written or oral forward-looking statements, including statements contained in the Company’s filings with the Securities and Exchange Commission and in its reports to shareholders. These forward-looking statements are based on management’s views and assumptions of future events and financial performance, including future revenue growth, earnings, capital expenditures, and other spending, as well as anticipated reduction in spending. The words or phrases “will,” “will likely result,” “are expected to,” “will continue,” “anticipates,” “is

anticipated,” “should,” “estimates,” “believes,” “projects,” “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. In addition to the factors described in Item 1A “Risk Factors” above, 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:

      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.

      See table in Item 1.

      None.

      The Company has not submitted any matters to a vote of security holders since the last annual meeting of shareholders on August 23, 2005.

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 16, 2006.

PART II

      Information relating to the Company’s common stock is set forth in this report on page 33 under the caption “Stock Market Information” in Item 7 — “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and on pages 72 through 73 in Note 17, “Quarterly Results” in Item 8 — “Financial Statements and Supplementary Data.”

      In the fourth quarter of Fiscal 2006, 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 June 8, 2005 for a maximum of 30 million shares. Of the 7,355,100 shares repurchased during the fourth quarter, 1,080,000 shares were repurchased in the open market and 6,275,100 shares were repurchased in a private transaction. As of May 3, 2006, the maximum number of shares that may yet be purchased under the 2005 program is 15,071,092. In addition, on May 31, 2006, the Board of Directors authorized a share repurchase program of up to 25 million shares, all of which may yet be purchased under the program.

      The following table presents selected consolidated financial data for the Company and its subsidiaries for each of the five fiscal years 2002 through 2006. All amounts are in thousands except per share data.

      As a result of the Company’s strategic transformation, the Fiscal 2006 results from continuing operations include $124.7 million pretax ($80.3 million after tax) for targeted workforce reductions consistent with the Company’s goals to streamline its businesses and $22.0 million pretax ($16.3 million after tax) for strategic review costs related to the potential divestiture of several businesses. Also, $206.5 million pretax ($153.9 million after tax) was recorded for net losses on

non-core businesses and product lines which were sold and asset impairment charges on non-core businesses and product lines anticipated to be sold in Fiscal 2007. Also during 2006, the Company reversed valuation allowances of $27.3 million primarily related to The Hain Celestial Group, Inc. (“Hain”). In addition, results include $24.4 million of tax expense relating to the impact of the American Jobs Creation Act. For more details regarding these items, see pages 49 to 51 in Note 4, “Transformation Costs” in Item 8 — “Financial Statements and Supplementary Data.”

      Fiscal 2005 results from continuing operations include a $64.5 million non-cash impairment charge for the Company’s equity investment in 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 recorded with these impairment charges in Fiscal 2005. 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 which occurred 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 $16.6 million pretax ($10.6 million after-tax), primarily due to employee termination and severance costs related to on-going efforts to reduce overhead costs, and $4.0 million pretax ($2.8 million after-tax) due to the write down of pizza crust assets in the United Kingdom.

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

      Fiscal 2002 results from continuing operations include net restructuring and implementation costs of $10.5 million pretax ($7.1 million after-tax) for the Streamline initiative.

Overview

      The H.J. Heinz Company has been a pioneer in the food industry for 137 years and possesses one of the world’s best and most recognizable brands— Heinz^®. While the Company has prospered for a long time, we are constantly finding new ways to capitalize on emerging consumer trends and better methods of doing business. Over the past several years, we have been making great progress in simplifying and focusing the Company on our core businesses. This strategic transformation has been a long journey that began with the spin-off of our non-core U.S. businesses in December 2002, and has continued throughout Fiscal 2006, culminating with the recently completed sales of our European Seafood and New Zealand Poultry businesses.

      We are very pleased that the portfolio realignment portion of the transformation strategy is now virtually finished. We have a few, non-core, geographically-isolated divestitures to complete, but with the majority of divestitures behind us, we can now sharpen our focus on growing our three core categories of Ketchup & Sauces, Meals & Snacks and Infant Food, where we have competitive advantages and leadership positions. The portfolio realignment has resulted in the divesture of approximately 20 non-core product lines/businesses and has generated proceeds of approximately $1 billion. More than 90% of sales are in our three core categories and approximately 60% of sales are generated by our top 10 brands, making Heinz one of the most focused companies in the packaged food industry.

      Over the past several years, the results of our strategic transformation have established a much stronger foundation upon which we believe the Company is positioned to build consistent, sustainable growth. Under this plan, we:

      As a result of all these actions, we believe Heinz has become a stronger and more focused company.

      Looking forward, we are excited about the opportunity to build on our stronger foundation. We will pursue the following strategies to achieve our goal of becoming the world leader in our three categories of Ketchup & Sauces, Meals & Snacks and Infant Food:

Strategic Transformation

      The following is a more detailed discussion of the effects of our strategic transformation initiatives and results of our operations for the past three years.

      In August 2005, the Company acquired HP Foods Limited, HP Foods Holdings Limited, and HP Foods International Limited (collectively referred to as “HPF”) for a purchase price of approximately $877 million. HPF is a manufacturer and marketer of sauces which are primarily sold in the United Kingdom, the United States, and Canada. The Company acquired HPF’s brands including HP^® and Lea & Perrin^® and a perpetual license to market Amoy^® brand Asian sauces and products in Europe. In March 2006, the British Competition Commission formally cleared this acquisition, concluding that the acquisition may not be expected to result in a substantial lessening of competition within the markets for tomato ketchup, brown sauce, barbeque sauce, canned baked beans and canned pasta in the United Kingdom.

      In September 2005, the Company opened the Heinz Global Innovation and Quality Center and announced a significant commitment to product development and quality to better align with consumer desires. Located north of Pittsburgh, the 100,000-square-foot facility is Heinz’s global hub for research and development and home to more than 100 chefs, food technologists, researchers and package designers, plus experts in nutrition and quality assurance. The center provides technical direction, assistance and advice to Heinz business units worldwide.

      Housed at the Heinz Global Innovation and Quality Center is its International Center for Excellence in Ketchup & Sauces, a repository of technology and a knowledge base for tomatoes. A multi-national team operates out of key growing and processing regions worldwide and studies all facets of the tomato. They are seeking an understanding of the anti-oxidant lycopene and its means to enhance health and well-being. Botanists and agronomists are constantly developing proprietary tomato hybrids to bolster field yields, enhance color and flavor and to better withstand cooking and packing operations. Heinz technologists are reviewing every production phase from paste to packaging.

      During the past several years, the Company has focused on exiting non-strategic business operations. Certain of these businesses which were sold are accounted for as discontinued operations.

      In the fourth quarter of Fiscal 2006, the Company completed the sale of the European seafood business, which included the brands of John West^®, Petit Navire^®, Marie Elisabeth^® and Mareblu^®. The Company received net proceeds of $469.3 million for this disposal and recognized a $199.8 million pretax ($122.9 million after tax) gain which has been recorded in discontinued operations. Also in the fourth quarter of Fiscal 2006, the Company completed the sale of the Tegel^® poultry business in New Zealand and received net proceeds of $150.4 million, and recognized a $10.4 million non-taxable gain, which is also recorded in discontinued operations.

      In accordance with accounting principles generally accepted in the United States of America, the operating results related to these businesses have been included in discontinued operations in the Company’s consolidated statements of income for all periods presented. These discontinued operations generated sales of $688.0 million (partial year), $808.8 million and $788.7 million and net income of $169.1 million (net of $90.2 million in tax expense), $47.8 million (net of $23.3 million in tax expense), and $63.5 million (net of $37.5 million in tax expense) for the years ended May 3, 2006, April 27, 2005 and April 28, 2004, respectively.

      In addition, net income from discontinued operations includes amounts related to the favorable settlement of tax liabilities associated with the businesses spun-off to Del Monte in Fiscal 2003. Such amounts totaled $33.7 million, $16.9 million and $25.3 million for the years ended May 3, 2006, April 27, 2005 and April 28, 2004, respectively.

Transformation Costs

      In executing our strategic transformation, the Company has incurred the following associated costs. These costs are directly linked to the Company’s transformation strategy.

      The Company recorded pretax integration and reorganization charges for targeted workforce reductions consistent with the Company’s goals to streamline its businesses totaling $124.7 million ($80.3 million after tax) in Fiscal 2006. Approximately 1,000 positions were eliminated as a result of this program, primarily in the General & Administrative (“G&A”) area. Additionally, pretax costs of $22.0 million ($16.3 million after tax) were incurred in Fiscal 2006, primarily as a result of the strategic reviews related to the portfolio realignment.

      The total impact of these initiatives on continuing operations in Fiscal 2006 was $146.7 million pre-tax ($96.6 million after-tax), of which $17.4 million was recorded as costs of products sold and $129.3 million in selling, general and administrative expenses (“SG&A”). In addition, $10.5 million was recorded in discontinued operations, net of tax. The amount included in accrued expenses related to these initiatives totaled $51.6 million at May 3, 2006, most of which will be paid during the first quarter of Fiscal 2007.

      There were no reorganization costs incurred in Fiscal 2005. During Fiscal 2004, the Company recognized $16.6 million pretax ($10.6 million after tax) of reorganization costs. These costs are recorded as a component of SG&A and were primarily due to employee termination and severance costs. Management estimates that these actions impacted approximately 100 employees.

      As a result of the finalization of the strategic reviews related to the portfolio realignment, the following non-core businesses and product lines were sold in Fiscal 2006 or are anticipated to be sold in Fiscal 2007, and, accordingly, the following gains/(losses) or non-cash asset impairment charges have been recorded in continuing operations during Fiscal 2006:

      Of the above pre-tax amounts, $74.1 million was recorded in cost of products sold, $15.5 million in SG&A, $111.0 million in asset impairment charges for cost and equity investments, and $(1.0) million in other expense.

      Also during the third quarter of Fiscal 2006, the Company sold its equity investment in The Hain Celestial Group, Inc. (“Hain”) and recognized a $6.9 million ($4.5 million after-tax) loss which is recorded within other expense, net. Net proceeds from the sale of this investment were $116.1 million. During the third quarter of Fiscal 2005, the Company recognized a $64.5 million impairment charge on its equity investment in Hain. 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. 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. Due to the uncertainty of realizability and executing possible tax planning strategies, the Company recorded a valuation allowance of $27.3 million against the potential tax benefits primarily related to the Hain impairment. This valuation allowance was subsequently released in Fiscal 2006 based upon tax planning strategies that are expected to generate sufficient capital gains that will occur during the capital loss carryforward period. See further discussion in Note 7, “Income Taxes” in Item 8—“Financial Statements and Supplementary Data.”

      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) related to the HAK^® vegetable product line which was sold in Fiscal 2006.

      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 SG&A. This sale impacted approximately 70 employees. 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 have been included as a component of cost of products sold.

      In Fiscal 2006 the Company repatriated $1.3 billion of cash from foreign subsidiaries. The following table summarizes the nature of these repatriations:

      The American Jobs Creation Act (“AJCA”) provides a deduction of 85% of qualified foreign dividends in excess of a “Base Period” dividend amount. During Fiscal 2006, in order to utilize the beneficial provisions of the AJCA, the Company repatriated amounts incremental to its original business plan in the amount of $253.5 million to satisfy the Base Period dividend requirement and $425.4 million that qualified under the AJCA (the “Qualified Dividends”). In addition, $162.5 million of $174.6 million of previously planned dividends also qualified under the AJCA. The Company incurred a tax charge of $28.9 million on total Base Period dividends, $7.6 million of which is incremental to the tax already accrued on the $162.5 million of qualifying previously planned dividends. The Fiscal 2006 net tax cost related to the $587.9 million of Qualified Dividends is $9.7 million. The $7.6 million of incremental tax related to the Base Period dividends and the $9.7 million of tax related to the Qualified Dividends were recorded as part of tax expense related to special items. The total impact of the AJCA on tax expense for Fiscal 2006 was $17.3 million, of which $24.4 million of expense was recorded in continuing operations and $7.1 million was a benefit in discontinued operations.

Results of Continuing Operations

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

      Sales for Fiscal 2006 increased $540.0 million, or 6.7%, to $8.6 billion. Sales were favorably impacted by a volume increase of 3.8% driven primarily by the North American Consumer Products segment, as well as the Australian, Indonesian and Italian businesses. These volume increases were partially offset by declines in the European frozen food business. Pricing decreased sales slightly, by 0.1%, as improvements in Latin America, Indonesia and North America were offset by declines in Australia, U.K and Northern Europe. Acquisitions, net of divestitures, increased sales by 4.4%. Foreign exchange translation rates decreased sales by 1.5%.

      Gross profit increased $59.5 million, or 2.0%, to $3.1 billion, primarily due to the favorable impact of acquisitions and higher sales volume, partially offset by unfavorable exchange translation rates. The gross profit margin decreased to 35.8% from 37.4% mainly due to the strategic transformation costs previously discussed, pricing declines in the Europe segment, particularly in Northern Europe and in the U.K. and due to increased commodity costs, particularly in the North American and Indonesian businesses.

      SG&A increased $227.4 million, or 13.0%, to $2.0 billion, and increased as a percentage of sales to 22.9% from 21.6%. The increase as a percentage of sales is primarily due to the $144.8 million (1.7% of sales) of strategic transformation costs discussed above, the impact of acquisitions, and higher fuel and transportation costs. These increases were partially offset by decreased G&A in Europe, due primarily to the elimination of European Headquarters and reduced litigation costs.

      Total marketing support (recorded as a reduction of revenue or as a component of SG&A) increased $108.8 million, or 5.3%, to $2.2 billion on a gross sales increase of 6.5%. Marketing support recorded as a reduction of revenue, typically deals and allowances, increased $107.0 million, or 5.9%, to $1.9 billion. This increase is largely a result of increased trade promotion spending in the U.K. and Australia and the impact of acquisitions. These increases were partially offset by decreases in the Italian infant nutrition business and foreign exchange translation rates. Marketing support recorded as a component of SG&A increased $1.8 million, or 0.7%, to $269.4 million, as increases from acquisitions were largely offset by declines in the U.K.

      Operating income decreased $167.9 million, or 13.1%, to $1.1 billion. Net interest expense increased $78.0 million, to $283.1 million due to higher average interest rates and higher average debt in Fiscal 2006 due to acquisitions and share repurchases.

      Fiscal 2006 income from continuing operations was unfavorably impacted by the $111.0 million write down of the Company’s net investment in Zimbabwe. The prior year includes the non-cash impairment charges totaling $73.8 million related to the cost and equity investments previously discussed. Other expenses, net, increased $11.1 million to $26.1 million primarily due to the loss on the sale of equity investments in the current year.

      The current year effective tax rate was 36.2% compared to 30.3% for the prior year. The increase in the effective tax rate is primarily the result of increased costs of repatriation including the effects of the AJCA, a reduction in tax benefits associated with tax planning, increased costs associated with audit settlements and the write-off of investment in affiliates for which no tax benefit could be recognized, offset by the reversal of valuation allowances, the benefit of increased profits in lower tax rate jurisdictions and a reduction in tax reserves.

      Income from continuing operations was $442.8 million compared to $688.0 million in the prior year, a decrease of 35.6%. Diluted earnings per share from continuing operations was $1.29 in the current year compared to $1.95 in the prior year.

FISCAL YEAR 2006 OPERATING RESULTS BY BUSINESS SEGMENT

North American Consumer Products

      Sales of the North American Consumer Products segment increased $297.3 million, or 13.2%, to $2.6 billion. Volume increased significantly, up 7.7%, as a result of strong growth in Heinz^® ketchup, TGI Friday’s^® and Delimex^® brands of frozen snacks, Classico^® pasta sauces, Smart Ones^® frozen entrees and in Ore-Ida^® potatoes. Pricing was up 0.4% and the HPF and Nancy’s acquisitions increased sales 3.9%. Divestitures reduced sales 0.1% and favorable Canadian exchange translation rates increased sales 1.3%.

      Gross profit increased $106.6 million, or 11.3%, to $1.0 billion, driven primarily by volume growth and acquisitions. The gross profit margin declined to 41.1% from 41.8%, primarily due to increased commodity costs and a benefit in the prior year from the favorable termination of a long-term co-packing arrangement with a customer. Operating income increased $52.9 million, or 10.0%, to $583.4 million, due to the increase in gross profit, partially offset by increased Selling and Distribution costs (“S&D”), primarily due to acquisitions and increased volume, $6.6 million of transformation costs, and increased Research and Development costs (“R&D”) associated with the new Heinz Global Innovation and Quality Center.

U.S. Foodservice

      Sales of the U.S. Foodservice segment increased $66.0 million, or 4.4%, to $1.6 billion. The acquisition of AAI and Kabobs, Inc. increased sales 3.9%. Volume increased sales 0.2%, as increases in Truesoups frozen soups were partially offset by declines in Heinz^® ketchup. Pricing increased sales 0.3% as increases in custom recipe tomato products and frozen desserts were partially offset by declines in ketchup.

      Gross profit decreased $21.2 million, or 4.6%, to $436.3 million, as the favorable benefit of the AAI acquisition was partially offset by $7.5 million of reorganization costs discussed above and a $21.5 million impairment charge for the planned sale of the Portion Pac Bulk product line. The gross profit margin decreased to 27.8% from 30.4% primarily due to the reorganization costs and the asset impairment charge, as well as increased commodity and fuel costs. Operating income decreased $47.5 million, or 21.1%, to $177.3 million, chiefly due to $34.8 million of reorganization and asset impairment charges and increased SG&A, largely due to higher fuel and distribution costs and marketing support.

Europe

      Heinz Europe’s sales increased $79.1 million, or 2.7%, to $3.0 billion. The HPF and Petrosoyuz acquisitions increased sales 9.1%. Volume increased 1.2%, principally due to the Italian infant feeding business, convenience meals in Poland and the U.K., and ketchup growth across Europe. These increases were partially offset by the frozen foods business in the U.K., resulting from general category softness. Lower pricing decreased sales 1.4%, driven by increased promotional

spending in the U.K on Heinz^® soup, partially offset by price increases on Heinz^® beans and improvements in the Italian infant feeding business. Divestitures reduced sales 1.8%, and unfavorable exchange translation rates decreased sales by 4.3%.

      Gross profit decreased $10.9 million, or 1.0%, to $1.1 billion, and the gross profit margin decreased to 37.6% from 39.0%. These decreases are primarily due to $36.3 million of transformation costs previously discussed, unfavorable exchange translation rates, decreased pricing in the U.K and higher manufacturing costs in Northern Europe. Operating income decreased $85.8 million, or 17.2%, to $414.2 million, due largely to the gross profit decrease, unfavorable exchange translation rates and the $112.2 million of transformation costs discussed above, partially offset by the favorable impact of acquisitions, reduced G&A and decreased marketing expense in the U.K.

Asia/ Pacific

      Sales in Asia/ Pacific increased 7.6%. Volume increased sales 8.1%, reflecting double-digit volume growth in Australia along with strong performances in the Watties business and in Indonesia. These increases reflect new product introductions and increased promotional programs. Unfavorable exchange translation rates decreased sales by 1.0%, while lower pricing reduced sales 0.5%, primarily in the Australian business. The acquisition of LongFong in China, net of a small divestiture, increased sales 1.1%.

      Gross profit decreased $16.1 million, or 4.6%, to $335.3 million, and the gross profit margin declined to 30.0% from 33.9%. These declines were primarily a result of an $18.8 million asset impairment charge on an Indonesian noodle product line to be divested and increased commodity and manufacturing costs in Indonesia and China, partially offset by the favorable impact of acquisitions and sales volume. Operating income decreased $27.9 million, or 24.7%, to $85.2 million, primarily due to the decline in gross profit margin, increased S&D and $10.2 million of reorganization costs related to targeted workforce reductions discussed above.

Other Operating Entities

      Sales for Other Operating Entities increased 4.6%. Volume increased 3.8% reflecting strong infant feeding sales in Latin America and beverage sales in India. Higher pricing increased sales by 6.2%, largely due to price increases and reduced promotions in Latin America. Divestitures, net of acquisitions, reduced sales by 2.6%, and foreign exchange translation rates reduced sales by 2.8%.

      Gross profit increased $5.0 million, or 3.9%, to $132.8 million, due mainly to increased pricing which was partially offset by $5.8 million in asset impairment charges previously discussed. Operating income decreased $16.9 million, to $17.9 million, as the increase in gross profit was more than offset by the $27.9 million in transformation costs primarily related to divestitures. In addition, last year’s results include the proceeds of an agreement related to the recall in Israel.

      As a result of general economic uncertainty, coupled with restrictions on the repatriation of earnings, as of the end of November 2002 the Company deconsolidated its Zimbabwean operations and classified its remaining net investment of approximately $111 million as a cost investment. This investment is included in other non-current assets on the consolidated balance sheet as of April 27, 2005. In the fourth quarter of Fiscal 2006, the Company wrote off its net investment in Zimbabwe. The decision to write down the Zimbabwe investment relates to management’s determination that this investment is not a core business and, as a consequence, the Company will explore strategic options to exit this business. Management’s determination is based on a current evaluation of political and economic conditions existing in Zimbabwe and the ability for the Company to recover its cost in this investment. This evaluation considered the continued economic turmoil, further instability in the local currency and the uncertainty regarding the ability to source raw material in the future.

      Sales for Fiscal 2005 increased $477.6 million, or 6.3%, to $8.10 billion. Sales were favorably impacted by volume growth of 2.4% and exchange translation rates of 3.5%. The favorable volume was primarily a result of strong increases in the North American Consumer Products and U.S. Foodservice segments. Net pricing remained consistent as increases in the North American Consumer Products and U.S. Foodservice segments and U.K. convenience meals were offset by the restage of our Italian infant nutrition business, market price pressures impacting 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. Acquisitions, net of divestitures, increased sales by 0.4%. Domestic operations contributed approximately 42% of consolidated sales in Fiscal 2005 and Fiscal 2004.

      Gross profit increased $141.0 million, or 4.9%, to $3.03 billion; the gross profit margin decreased to 37.4% from 37.9%. The decrease in the gross profit margin is mainly due to increased commodity and fuel costs, the trade spending charge for the Italian infant nutrition business discussed above and a $27.0 million non-cash asset impairment charge related to the disposition of the HAK^® vegetable product line in Northern Europe in early Fiscal 2006. The 4.9% increase in gross profit is primarily a result of higher volume and favorable exchange translation rates. Fiscal 2004’s gross profit was unfavorably impacted by the write-down of U.K. pizza crust assets totaling $4.0 million.

      SG&A increased $135.6 million, or 8.4%, to $1.75 billion, and increased as a percentage of sales to 21.6% from 21.2%. 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 Fiscal 2004 and increased S&D and General and Administrative expenses (“G&A”) in Fiscal 2005. 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 expenses, 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 decreased marketing expense, primarily in Europe. Fiscal 2004’s SG&A was unfavorably impacted by reorganization costs totaling $12.2 million. Operating income increased $5.4 million, or 0.4%, to $1.28 billion.

      Total marketing support (recorded as a reduction of revenue or as a component of SG&A) increased $50.0 million, or 2.5%, to $2.07 billion on a sales increase of 6.3%. Marketing support recorded as a reduction of revenue, typically deals and allowances, increased $63.0 million, or 3.6%, to $1.80 billion, which is largely a result of foreign exchange translation rates and the Italian infant nutrition business, 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 $13.1 million, or 4.7%, to $267.5 million, primarily in the Europe segment.

      Net interest expense increased $18.3 million, to $205.1 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 $6.7 million, resulting primarily from the impact of the adoption of Statement of Financial Accounting Standard (“SFAS”) No. 150, which required the prospective classification of the quarterly preferred dividend on Heinz Finance Company’s $325 million of mandatorily redeemable preferred shares from other expenses to interest expense beginning in the second quarter of Fiscal 2004.

      The effective tax rate for Fiscal 2005 was 30.3% compared to 33.0% in Fiscal 2004. 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 Fiscal 2004 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 $688.0 million compared to $715.5 million in Fiscal 2004, a decrease of 3.8%. Diluted earnings per share was $1.95 in Fiscal 2005 compared to $2.02 in Fiscal 2004, down 3.5%.

      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 Fiscal 2004 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%.

      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 Fiscal 2004 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 $137.9 million, or 5.0%, to $2.91 billion. Favorable exchange translation rates increased sales by 7.6%. Volume increased 0.2% 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 partially offset by declines in frozen entrees in the U.K. and jarred vegetables in Northern Europe. Lower pricing decreased sales 2.1%, 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 0.7%.

      Gross profit decreased $9.7 million, or 0.8%, to $1.14 billion, and the gross profit margin decreased to 39.0% from 41.3%. The decrease in gross profit margin is primarily related to lower pricing as discussed above, increased commodity and production costs, particularly in the UK business, 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 $74.7 million, or 13.0%, to $500.0 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 $50.6 million, or 5.1%, to $1.04 billion. Favorable exchange translation rates increased sales by 3.2%. Volume increased sales 1.4%, chiefly due to new product introductions in the frozen foods and convenience meals categories in the Australia and New Zealand businesses. These were partially offset by the discontinuation of an Indonesian energy drink and volume declines in 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 0.8%. The acquisition of Shanghai LongFong Foods, a maker of popular frozen Chinese snacks and desserts, increased sales 2.9%. The divestiture of a Korean oils and fats product line reduced sales 1.6%.

      Gross profit increased $16.8 million, or 5.0%, to $351.4 million. The gross profit margin remained consistent at 33.9% as lower pricing and increased commodity costs were offset by cost improvements in Australia and New Zealand. Operating income increased $5.1 million, or 4.7%, to $113.1 million, primarily due to the increase in gross profit, partially offset by 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 Fiscal 2004 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.

Liquidity and Financial Position

      Cash provided by operating activities in Fiscal 2006 was $1.1 billion, a decrease of $85.8 million from the prior year. The decrease in Fiscal 2006 versus Fiscal 2005 is primarily due to unfavorable movement in inventories and the timing of income tax payments, partially offset by favorable movement in accounts payable and accrued expenses. The Company continues to make progress in reducing its cash conversion cycle, with a reduction of 2 days in Fiscal 2006 compared to Fiscal 2005. This improvement was led by a reduction in days in inventory (DII) of 4 days.

      During the third quarter of Fiscal 2004, the Company reorganized certain of its foreign operations, resulting in a step-up in the tax basis of certain assets. As a consequence, the Company incurred a foreign income tax liability of $125 million, which was offset by an equal amount of a prepaid tax asset. The tax liability was paid in the third quarter of Fiscal 2005. The prepaid tax asset is being amortized to tax expense to match the amortization of the stepped up tax basis in the assets. As a result of the step-up, the Company expects to realize a tax benefit in excess of the tax liability paid. Accordingly, cash flow and tax expense are expected to improve by $120 million over the amortization period.

      Cash used for investing activities totaled $451.8 million compared to $264.1 million last year. Capital expenditures were $230.6 million (2.7% of sales) compared to $240.7 million (2.7% of sales) last year. Acquisitions required $1.1 billion in Fiscal 2006 primarily related to the Company’s purchase of HPF, Nancy’s Specialty Foods, Inc., Kabobs, Inc., and Petrosoyuz, compared to $126.5 million in the prior year, which related to the purchase of Appetizer’s And, Inc. and to the purchase of a controlling interest in Shanghai LongFong Foods. Proceeds from divestitures provided $856.7 million in the current year, related primarily to the sales of the European seafood and Tegel^® poultry businesses, the sale of the Company’s equity investment in Hain and the sale of the HAK^® vegetable product line in Northern Europe. In Fiscal 2005, proceeds from divestitures provided $51.2 million related primarily to the sale of an oil and fats product line in Korea.

      Cash used for financing activities totaled $1.3 billion compared to using $1.05 billion last year. Proceeds from short-term debt and commercial paper were $298.5 million this year compared to $26.5 million in the prior year. Payments on (net of proceeds from) long-term debt were $497.0 million compared to $480.5 million in the prior year, as the Company retired Euro-denominated long-term debt of €418 million and €300 million in Fiscals 2006 and 2005, respectively. Cash used for the purchases of treasury stock, net of proceeds from option exercises, was $681.3 million this year compared to $212.0 million in the prior year, in line with the Company’s plans of reducing shares outstanding. Dividend payments totaled $408.2 million, compared to $398.9 million for the same period last year, reflecting the increase in the annual dividend on common stock.

      On June 1, 2006, the Company announced that its Board of Directors approved a 16.7% increase in the annual dividend on common stock for Fiscal 2007 (from 30 cents to 35 cents per quarter), effective with the July 2006 dividend. Fiscal 2007 dividends are expected to approximate $450 million. Also, the Company announced that it anticipates repurchasing approximately $1 billion of its stock over the next two fiscal years.

      At May 3, 2006, the Company had total debt of $4.4 billion and cash and cash equivalents of $445.4 million as compared to total debt of $4.7 billion and cash and cash equivalents of $1.1 billion at Fiscal 2005 year-end. In the fourth quarter of Fiscal 2006, the Company used cash on hand and a portion of the proceeds from the European seafood and Tegel^® poultry divestitures to reduce commercial paper borrowings, to repay long-term debt that matured and repurchase other long-term debt in the open market.

      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 29.1% in Fiscal 2006, 34.4% in Fiscal 2005 and 51.6% in Fiscal 2004. Fiscal 2006 ROE was unfavorably impacted by 6.5% due to the previously discussed strategic transformation costs. ROE in Fiscal 2005 was unfavorably impacted by increased average equity reflecting fluctuations in foreign exchange translation rates. In addition, ROE was unfavorably impacted by 4.2% in Fiscal 2005 related to the asset impairment charges.

      Pretax return on average invested capital (“ROIC”) is calculated by taking income before income taxes, less net interest expense, divided by average invested capital. Average invested capital is a five-point quarterly average of debt plus total equity less cash and cash equivalents, short-term investments and the value of interest rate swaps. ROIC was 19.3% in Fiscal 2006, 21.7% in Fiscal 2005 and 24.7% in Fiscal 2004. Fiscal 2006 ROIC was unfavorably impacted by higher average debt and by 5.5% related to the previously discussed strategic transformation costs. 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.

      The Company and H.J. Heinz Finance Company maintain a $2 billion credit agreement that expires in 2009. The credit agreement supports the Company’s commercial paper borrowings. As a result, the commercial paper borrowings are classified as long-term debt based upon the Company’s intent and ability to refinance these borrowings on a long-term basis. The Company maintains in excess of $1 billion of other credit facilities used primarily by the Company’s foreign subsidiaries. These resources, the Company’s existing cash balance, strong operating cash flow, and access to the capital markets, if required, should enable the Company to meet its cash requirements for operations, including capital expansion programs, debt maturities, share repurchases and dividends to shareholders.

      On December 1, 2005, the Company remarketed the $800 million remarketable securities and amended the terms of the securities so that the securities will be remarketed every third year rather than annually. The next remarketing is scheduled for December 1, 2008.

      In the third quarter of Fiscal 2006, Moody’s changed the Company’s long-term debt rating from A3 to Baa1. The Company’s long-term debt rating was A- at Standard & Poors. Both Moody’s and Standard & Poors have placed the Company’s ratings under review for possible downgrades.

      In Fiscal 2006, cash required for reorganization costs, related to both workforce reductions and strategic review costs, was approximately $87.7 million pre-tax. On-going savings relative to these initiatives were approximately $25 million in Fiscal 2006 and are anticipated to be approximately $45 million in Fiscal 2007.

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 May 3, 2006.

      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.

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 contracts, option contracts, or cross currency swaps 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 May 3, 2006, the Company’s foreign currency contracts mature within two years. Contracts that meet qualifying criteria are accounted for as either foreign currency cash flow hedges or net investment hedges of foreign operations. Any gains and losses related to contracts that do not qualify for hedge accounting are recorded in current period earnings in other income and expense.

      Substantially all of the Company’s foreign affiliates’ financial instruments are denominated in their respective functional currencies. Accordingly, exposure to exchange risk on foreign currency financial instruments is not material. (See Note 14 to the consolidated financial statements.)

      Interest Rate Sensitivity: The Company is exposed to changes in interest rates primarily as a result of its borrowing and investing activities used to maintain liquidity and fund business operations. The nature and amount of the Company’s long-term and short-term debt can be expected to vary as a result of future business requirements, market conditions and other factors. The Company’s debt obligations totaled $4.4 billion and $4.7 billion at May 3, 2006 and April 27, 2005, respectively. The Company’s debt obligations are summarized in Note 8 to the consolidated financial statements.

      In order to manage interest rate exposure, the Company utilizes interest rate swaps 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 May 3, 2006, a variance of 1/8% in the related interest rate would cause annual interest expense related to this debt to change by approximately $3.4 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 a total notional amount of $107.6 million at May 3, 2006 and April 27, 2005 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 two years from the current fiscal year-end. Net unrealized losses, which are presented as a component of other noncurrent liabilities, related to these interest rate contracts totaled $4.4 million and $2.5 million at May 3, 2006 and April 27, 2005, respectively.

      Effect of Hypothetical 10% Fluctuation in Market Prices: As of May 3, 2006, 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 and swap rates 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 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 employees for 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. The impact of adoption in Fiscal 2007 is anticipated to be approximately $13 million before the impact of income taxes.

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 initially recorded 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 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 monthly and quarterly evaluations of our outstanding coupon accruals 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.

      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 uncertainties beyond the Company’s control.

      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 obligations 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. In addition, the Company’s actuarial consultants use best estimate assumptions for withdrawal and mortality rates to estimate benefit expense. The financial and actuarial assumptions used by the Company may differ materially from actual results due to changing market and economic conditionals, 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.

      The Company recognized pension expense of $77.1 million, $65.6 million and $52.7 million for fiscal years 2006, 2005 and 2004 respectively, which reflected expected return on plan assets of $169.0 million, $168.4 million and $151.1 million, respectively. The Company contributed $64.6 million in Fiscal 2006 compared to $39.9 million in Fiscal 2005 and $201.5 million in Fiscal 2004. The Company expects to contribute approximately $57 million to its pension plans in Fiscal 2007.

      One of the significant assumptions for pension plan accounting is the expected rate of return on pension plan assets. Over time, the expected rate of return on assets should approximate the actual long-term returns. In developing the expected rate of return, the Company considers average 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. When calculating the expected return on plan assets, the Company primarily uses a market-related-value of assets that spreads asset gains and losses (difference between actual return and expected return) uniformly over 3 years. The weighted average expected rate of return on plan assets used to calculate annual expense was 8.2% for the years ended May 3, 2006, April 27, 2005 and April 28, 2004. For purposes of calculating Fiscal 2007 expense, the weighted average rate of return will remain at approximately 8.2%.

      Another significant assumption used to value benefit plans is the discount rate. 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 Company uses bond yields of appropriate duration for each country by matching to the duration of plan liabilities. The weighted average discount rate used to measure the projected benefit obligation for the year ending May 3, 2006 was reduced to 5.3% from 5.5% as of April 27, 2005.

      Deferred gains and losses result from actual experience different from expected financial and actuarial assumptions. The pension plans currently have a deferred loss amount of $645.8 million at May 3, 2006. During 2006, the deferred loss amount was positively impacted by actual asset returns greater than expected in the amount of $261.5 million offset partially by the reduction in the average discount rate at May 3, 2006 and other plan experience. Deferred gains and losses are amortized through the actuarial calculation into annual expense over the estimated average remaining service period of plan participants, which is currently 11 years.

      The Company also provides certain postretirement health care benefits. The postretirement health benefit expense and obligation are determined using the Company’s assumptions regarding health care cost trend rates. The health care trend rates are developed based on historical cost data, the near-term outlook on health care trends and the likely long-term trends. The postretirement health care benefit obligation at May 3, 2006 was determined using an average initial health care trend rate of 9.2% which gradually decreases to an average ultimate rate of 4.9% in 2014. A one percentage point increase in the assumed health care cost trend rate would increase the service and interest cost components of annual expense by $2.0 million and increase the benefit obligation by $18.5 million. A one percentage point decrease in the assumed health care cost trend rates

would decrease the service and interest cost by $1.8 million and decrease the benefit obligation by $16.7 million.

      If we assumed a 100 basis point change in the following assumptions, our Fiscal 2006 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 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 resolution of tax reserves and changes in valuation allowances could be material to the Company’s results of operations for any period, but is not expected to be material to the Company’s financial position.

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 Venezuela, 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 2007 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, 2006 approximated 42,000. The closing price of the common stock on The New York Stock Exchange composite listing on May 3, 2006 was $41.88.

      Stock price information for common stock by quarter follows:

      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 27 through 29.

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TABLE OF CONTENTS

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 May 3, 2006 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears herein.

June 20, 2006

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of

H. J. Heinz Company:

We have completed integrated audits of H. J. Heinz Company’s fiscal year 2006 and 2005 consolidated financial statements and of its internal control over financial reporting as of May 3, 2006, and an audit of its fiscal year 2004 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 May 3, 2006 and April 27, 2005, and the results of their operations and their cash flows for each of the three years in the period ended May 3, 2006 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 the 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 May 3, 2006 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 May 3, 2006, 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.

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

Pittsburgh, Pennsylvania

June 20, 2006

H. J. Heinz Company and Subsidiaries

Consolidated Statements of Income

See Notes to Consolidated Financial Statements

H. J. Heinz Company and Subsidiaries

Consolidated Balance Sheets

See Notes to Consolidated Financial Statements

H. J. Heinz Company and Subsidiaries

Consolidated Balance Sheets

See Notes to Consolidated Financial Statements

H.J. Heinz Company and Subsidiaries

Consolidated Statements of Shareholders’ Equity

See Notes to Consolidated Financial Statements