Executive Overview- Fiscal 2012
The H.J. Heinz Company has been a pioneer in the food industry for over 140 years and possesses one of the world's best and most recognizable brands-Heinz®. The Company has a global portfolio of leading brands focused in three core categories, Ketchup and Sauces, Meals and Snacks, and Infant/Nutrition.

The Company's Fiscal 2012 results reflect strong sales growth of 8.8%, led by a trio of growth engines- emerging markets, our top 15 brands and global ketchup. The emerging markets posted organic sales growth(1) of 16.4% for the fiscal year (40.9% reported). Emerging markets represented 21.0% of total Company sales reflecting this strong organic growth and our Fiscal 2011 acquisitions of Quero® in Brazil and Master® in China. The Company's top 15 brands performed well with organic sales growth of 5.0% (12.3% reported) driven by the Heinz®, Master®, Complan® and ABC® brands. The Quero® and Master® brands acquired in Fiscal 2011 are now part of the Company's top 15 brands and drove an additional 4.0% increase in total Company sales. Global ketchup grew organically 8.0% (9.7% reported). Favorable foreign exchange increased sales by 1.8% while the Company's strategic decision to exit the Boston Market® license in the U.S. reduced sales by 0.5%. Overall, the Company's Fiscal 2012 organic sales growth of 3.5% reflects a 3.8% increase in net pricing and a 0.3% decline in volume. This quarter marks the 28th consecutive quarter of organic sales growth for the Company.

On May 26, 2011, the Company announced that in order to accelerate growth and drive global productivity, it would invest in productivity initiatives in Fiscal 2012 that are expected to make the Company stronger and even more competitive (see "Productivity Initiatives" section below for further detail). During Fiscal 2012, the Company incurred charges of $224 million pre-tax or $0.50 per share related to these productivity initiatives.
On a reported basis, gross margin for Fiscal 2012 declined 260 basis points to 34.3% compared to prior year. Excluding charges for productivity initiatives(2), gross margin for the year declined 140 basis points to 35.5% reflecting industry-wide commodity cost inflation, unfavorable sales mix and lower gross margin on recent acquisitions, partially offset by higher pricing and productivity improvements. Operating income for the fiscal year decreased 12.0% to $1.45 billion. Excluding charges for productivity initiatives, operating income increased 1.7% versus prior year to $1.68 billion reflecting higher sales, effective cost management and lower incentive compensation expenses. The Company continued to invest for the future, despite the tough economic environment, increasing marketing spending by 9.4% and spending approximately $80 million on Project Keystone, a multi-year program designed to drive productivity and make Heinz much more competitive by adding capabilities, harmonizing global processes and standardizing our systems through SAP. Diluted earnings per share were $2.85 for Fiscal 2012, compared to $3.06 in the prior year. Excluding charges for productivity initiatives, earnings per share were $3.35 in the current year, up 9.5%. Earnings per share benefited from the increase in operating income excluding charges for productivity initiatives and a lower effective tax rate. The Company also generated $1.08 billion of operating free cash flow(3) this year or $1.21 billion excluding the $122 million of cash paid in Fiscal 2012 for productivity initiatives. The remaining cash required for these initiatives of approximately $80 million is expected to be paid in the first quarter of Fiscal 2013.
The Company believes these Fiscal 2012 results are indicative of the effectiveness of its business plan, which is focused on the following four strategic pillars:
• Accelerate growth in emerging markets;

• Expand the core portfolio;

• Strengthen and leverage global scale; and

• Make talent an advantage. The Company remains confident in its underlying business fundamentals and plans to continue to focus on these four strategic pillars in Fiscal 2013.
(1) Organic sales growth is defined as volume plus price or total sales growth excluding the impact of foreign exchange, acquisitions and divestitures. See "Non-GAAP Measures" section below for the reconciliation of all of these organic sales growth measures to the reported GAAP measure.

(2) All results excluding charges for productivity initiatives are non-GAAP measures used for management reporting and incentive compensation purposes. See "Non-GAAP Measures" section below and the following reconciliation of all non-GAAP measures to the reported GAAP measures.

(3) Operating Free Cash Flow is defined as cash from operations less capital expenditures net of proceeds from disposals of Property, Plant and Equipment. See "Non-GAAP Measures" section below for the reconciliation of this measure to the reported GAAP measure.

                                                            Fiscal Year Ended
                                                             April 29, 2012
                                                                                           Net Income
                                                                                          attributable
                                                               Operating   Effective Tax to H.J. Heinz
                        Sales      Gross Profit      SG&A        Income        Rate         Company      Diluted EPS
                                                 (In thousands except per share amounts)
Reported results      $11,649,079     $3,999,530   $2,548,362   $1,451,168     20.6 %          $923,159         $2.85
Charges for
productivity
initiatives                   -        139,830       84,487      224,317       27.4 %         162,874          0.50
Results excluding
charges for
productivity
initiatives           $11,649,079     $4,139,360   $2,463,875   $1,675,485     21.7 %        $1,086,033         $3.35

Productivity Initiatives

The Company announced on May 26, 2011 that it would invest in productivity initiatives during Fiscal 2012 designed to increase manufacturing effectiveness and efficiency as well as accelerate overall productivity on a global scale. The Company originally anticipated investing at least $130 million of cash and $160 million of pre-tax income ($0.35 per share) on these initiatives during Fiscal 2012. During Fiscal 2012, the Company's Board of Directors gave its approval for the Company to invest an incremental $40 million cash and $75 million of pre-tax income ($0.21 per share) on additional productivity initiatives. The Company was able to execute these projects under budget and is on track to deliver the expected benefits. All of these costs in Fiscal 2012 were reported in the Non-Operating segment. See Note 3, "Productivity Initiatives" in Item 8- "Financial Statements and Supplementary Data" and the "Liquidity and Financial Position" section below for additional information on these productivity initiatives.

Discontinued Operations
During the third quarter of Fiscal 2010, the Company completed the sale of its Appetizers And, Inc. frozen hors d'oeuvres business which was previously reported within the U.S. Foodservice segment, resulting in a $14.5 million pre-tax ($10.4 million after-tax) loss. Also during the third quarter of Fiscal 2010, the Company completed the sale of its private label frozen desserts business in the U.K., resulting in a $31.4 million pre-tax ($23.6 million after-tax) loss. During the second quarter of Fiscal 2010, the Company completed the sale of its Kabobs frozen hors d'oeuvres business which was previously reported within the U.S. Foodservice segment, resulting in a $15.0 million pre-tax ($10.9 million after-tax) loss. The losses on each of these transactions have been 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 Fiscal 2010. The following table presents summarized operating results for these discontinued operations:

                      Fiscal Year Ended
                          April 28,
                            2010
                           FY 2010
                        (In millions)
Sales                       $63.0
Net after-tax losses       $(4.7)
Tax benefit on losses       $2.0

During the first quarter of Fiscal 2013, the Company's Board of Directors approved the sale of its U.S. Foodservice frozen desserts business. This business had annual sales of approximately $75 million in Fiscal 2012. The disposal transaction included the sale of two factories. As a result of this transaction, the Company will recognize a pre-tax loss of approximately $33 million ($21 million after-tax), which will be recorded in discontinued operations in the first quarter of Fiscal 2013. The sale will not significantly affect the Company's profit on a continuing operations basis going forward.

Other Disposals

During the fourth quarter of Fiscal 2010, the Company received cash proceeds of $95 million from the government of the Netherlands for property the government acquired through eminent domain proceedings. The transaction included the purchase by the government of the Company's factory located in Nijmegen, which produces soups, pasta and cereals. The cash proceeds are intended to compensate the Company for costs, both capital and expense, which are being incurred over a three year period from the date of the transaction, which is the length of time the Company has to exit the current factory location and construct new facilities. Note, the Company has and will incur costs to build an R&D facility in the Netherlands, costs to transfer a cereal line to another factory location, employee costs for severance and other costs directly related to the closure and relocation of the existing facilities. The Company also entered into a three-year leaseback on the Nijmegen factory. The Company will continue to operate in the leased factory while executing its plans for closure and relocation of the operations. The Company has accounted for the proceeds on a cost recovery basis. In doing so, the Company has made its estimates of cost, both of a capital and expense nature, to be incurred and recovered and to which proceeds from the transaction will be applied. Of the initial proceeds received, $81 million was deferred based on management's total estimated future costs to be recovered and these deferred amounts are recognized as the related costs are incurred. If estimated costs differ from what is actually incurred, these adjustments will be reflected in earnings. As of April 29, 2012 and April 27, 2011, the remaining deferred amounts on the consolidated balance sheets were $21 million and $63 million, respectively, and were recorded in other non-current liabilities and other accrued liabilities. No significant adjustments were reflected in earnings in Fiscal 2012 and 2011. The excess of the $95 million of proceeds received over estimated costs to be recovered and incurred was $15 million and was recorded as a reduction of cost of products sold in the consolidated statement of income for the year ended April 28, 2010.

Results of Continuing Operations
On March 14, 2012 the Company's Board of Directors of H. J. Heinz Company authorized a change in the Company's fiscal year end from the Wednesday nearest April 30 to the Sunday nearest April 30. The change in the fiscal year end resulted in Fiscal 2012 changing from a 53 week year to a 52 1/2 week year and was intended to better align the Company's financial reporting period with its business partners and production schedules. This change did not have a material impact on the Company's financial statements.
The Company's revenues are generated via the sale of products in the following categories:

                                       Fiscal Year Ended
                    April 29, 2012      April 27, 2011      April 28, 2010
                    (52 1/2 Weeks)        (52 Weeks)          (52 Weeks)
                                        (In thousands)
Ketchup and Sauces $      5,232,607    $      4,607,971    $      4,446,911
Meals and Snacks          4,479,502           4,282,318           4,289,977
Infant/Nutrition          1,232,248           1,175,438           1,157,982
Other                       704,722             640,861             600,113
Total              $     11,649,079    $     10,706,588    $     10,494,983

Fiscal 2012 Company Results- Fiscal Year Ended April 29, 2012 compared to Fiscal Year Ended April 27, 2011

Sales for Fiscal 2012 increased $942 million, or 8.8%, to $11.65 billion. Net pricing increased sales by 3.8%, driven by price increases across the Company, particularly in the U.S., Latin America, U.K. and China. Volume decreased 0.3%, as favorable volume in emerging markets, Japan and Germany were more than offset by declines in the U.S., Australia and Italy. Emerging markets, global ketchup and the Company's top 15 brands continued to be the most significant growth drivers, with organic sales growth of 16.4%, 8.0%, and 5.0%, respectively (40.9%, 9.7% and 12.3%, respectively, reported). Acquisitions, net of divestitures, increased sales by 3.5%. Foreign exchange translation rates increased sales by 1.8%.

Gross profit increased $47 million, or 1.2%, to $4.0 billion however, the gross profit margin decreased 260 basis points to 34.3%. Excluding charges for productivity initiatives, gross profit increased $187 million, or 4.7%, to $4.14 billion, largely due to higher pricing, acquisitions and a $59 million favorable impact from foreign exchange, partially offset by lower volume and commodity cost inflation. Gross profit margin excluding charges for productivity initiatives reflected industry-wide price and cost pressure and decreased 140 basis points to 35.5%, resulting from higher commodity and other costs, the impact of recent

acquisitions and unfavorable sales mix, partially offset by higher pricing and productivity improvements.

Selling, general and administrative expenses ("SG&A") increased $244 million, or 10.6% to $2.55 billion. Excluding charges for productivity initiatives, SG&A increased $160 million, or 6.9% to $2.46 billion, and decreased as a percentage of sales to 21.2% versus 21.5% last year. This increase in SG&A reflects a $38 million unfavorable impact from foreign exchange translation rates, as well as increases from acquisitions, higher marketing spending and incremental investments in Project Keystone. In addition, selling and distribution expense ("S&D") was unfavorably impacted by higher fuel prices, particularly in the U.S., and general and administrative expenses ("G&A") were higher as a result of strategic investments to drive growth in emerging markets, partially offset by effective cost management in developed markets and lower incentive compensation expense. SG&A, excluding marketing and charges for productivity initiatives, decreased as percentage of sales by 40 basis points, to 17.1%.

Operating income decreased $197 million, or 12.0%, to $1.45 billion. Excluding charges for productivity initiatives, operating income was up $27 million, or 1.7%, to $1.68 billion.

Net interest expense increased $7 million, to $259 million, reflecting a $19 million increase in interest expense, partially offset by a $12 million increase in interest income. The increase in interest income is mainly due to earnings on short-term investments and the increase in interest expense is largely due to interest rate mix in the Company's debt portfolio and acquisitions made last fiscal year. Other expenses, net, decreased $13 million, to $8 million, primarily due to currency gains this year compared to currency losses in the prior year.

The effective tax rate for Fiscal 2012 was 20.6%. Excluding charges for productivity initiatives, the effective tax rate was 21.7% in the current year compared to 26.8% last year. The decrease in the effective tax rate is primarily the result of the increased benefits from the revaluation of the tax basis of foreign assets, the reversal of an uncertain tax position liability due to the expiration of the statute of limitations in a foreign tax jurisdiction, the beneficial resolution of a foreign tax case, and lower tax on the income of foreign subsidiaries primarily resulting from a statutory tax rate reduction in the U.K. These benefits were partially offset by the current year expense for changes in valuation allowances.

Net income attributable to H. J. Heinz Company was $923 million, a decrease of 6.7%. Excluding charges for productivity initiatives, net income attributable to H. J. Heinz Company was $1.09 billion compared to $990 million in the prior year, an increase of 9.8%. This increase was largely due to higher sales and a lower effective tax rate, partially offset by a lower gross margin and investments in marketing, emerging markets capabilities and Project Keystone. Diluted earnings per share were $2.85 in the current year, down 6.9%. Excluding charges for productivity initiatives, diluted earnings per share were $3.35 in the current year compared to $3.06 in the prior year, up 9.5%. EPS movements were favorably impacted by $0.06 from currency translation and translation hedges.

The impact of fluctuating translation exchange rates in Fiscal 2012 has had a relatively consistent impact on all components of operating income on the consolidated statement of income.

FISCAL YEAR 2012 OPERATING RESULTS BY BUSINESS SEGMENT

North American Consumer Products

Sales of the North American Consumer Products segment decreased $24 million, or 0.7%, to $3.24 billion. Higher net price of 2.8% reflects price increases across the leading brands and reduced trade promotions. Despite volume gains from new product launches, overall volume declined 2.3% across most of our key brands reflecting reduced promotional activity and the impact of price increases. Sales were also unfavorably impacted by 1.6% from the Company's strategic decision to exit the Boston Market® license effective July 2011. Favorable Canadian exchange translation rates increased sales 0.3%.

Gross profit decreased $51 million, or 3.7%, to $1.32 billion, and the gross profit margin decreased to 40.9% from 42.1%. Gross profit declined as higher pricing and productivity improvements were more than offset by increased commodity and fuel costs, lower volume and the impact from the exit of the Boston Market® license. The decline in gross margin is due to higher commodity costs and unfavorable sales mix. Operating income decreased $21 million, or 2.5% to $812 million, as the decline in gross profit was partially offset by a decrease in G&A reflecting effective cost management, lower incentive compensation expenses and decreased S&D largely due to lower volume.

Europe

Heinz Europe sales increased $204 million, or 6.3%, to $3.44 billion. Net pricing increased 3.7%, driven by price increases across Europe and reduced promotions in the U.K. Volume increased by 0.6% as growth in ketchup across Europe, soup in the

U.K., sauces in Germany and Heinz® branded sauces in Russia were offset by declines in Italian infant nutrition and frozen products in the U.K. The Italian infant nutrition business was unfavorably impacted by weakness in the Italian economy and corresponding softness in the category. Favorable foreign exchange translation rates increased sales by 1.9%.

Gross profit increased $52 million, or 4.1%, to $1.32 billion, while the gross profit margin decreased to 38.3% from 39.1%. The $52 million increase in gross profit is due to favorable net pricing, increased volume and foreign exchange translation rates. The decrease in the gross margin reflects the benefits from higher pricing and productivity improvements which were more than offset by higher commodity costs, unfavorable sales mix and a prior year gain on the sale of distribution rights on Amoy® products to ethnic channels in the U.K. Operating income increased $28 million, or 4.8%, to $609 million, due to higher pricing, increased volume and favorable foreign currency translation, partially offset by increased marketing investments.

Asia/Pacific

Heinz Asia/Pacific sales increased $248 million, or 10.7%, to $2.57 billion. Favorable exchange translation rates increased sales by 5.4%. The acquisition of Foodstar in China during the third quarter of Fiscal 2011 increased sales 3.1%. Pricing increased 2.5% and volume decreased 0.3%. Total segment volume was negatively impacted by poor operating results in Australia. The Australian business has been impacted by a challenging market environment, higher promotions and reduced market demand. Price increases were realized on ABC® products in Indonesia, Complan® products in India, and Long Fong® frozen products and Heinz® infant feeding products in China. Significant volume growth occurred in Complan® nutritional beverages in India, frozen potatoes and sauces in Japan, ABC® sauces in Indonesia, and Heinz® and Master® branded sauces and Heinz® branded infant feeding products in China. Beyond Australia, volume declines were noted in Glucon D® and Nycil® branded products in India and Long Fong® frozen products in China.

Gross profit increased $50 million, or 6.9%, to $764 million, and the gross profit margin decreased to 29.8% from 30.8%. The $50 million increase in gross profit largely reflects favorable net pricing and foreign exchange translation rates and the Foodstar acquisition, partially offset by weakness in Australia, prior year gains from the favorable renegotiation of a long-term supply contract in Australia and the sale of a factory in India. The decline in gross margin is a result of higher commodity costs and poor operating results in Australia which were only partially offset by higher pricing and productivity improvements. SG&A increased as a result of foreign exchange translation rates, the Foodstar acquisition, increased marketing and investments to improve capabilities in our emerging markets businesses. Operating income decreased by $15 million, or 6.9%, to $206 million, reflecting results in Australia.

U.S. Foodservice

Sales of the U.S. Foodservice segment increased $6 million, or 0.4%, to $1.42 billion. Pricing increased sales 2.6%, largely due to price increases across this segment's product portfolio to offset commodity cost increases. Volume decreased by 2.2%, due largely to ongoing weakness in restaurant foot traffic at some key customers, which is beginning to improve, and the impact of price increases.

Gross profit decreased $25 million, or 5.9%, to $397 million, and the gross profit margin decreased to 28.0% from 29.9%, as pricing and productivity improvements were more than offset by increased commodity and fuel costs and unfavorable volume and product mix. Operating income decreased $10 million, or 5.5%, to $166 million, which is primarily due to higher commodity costs, partially offset by a decrease in G&A expenses which reflects effective cost management, including reduced incentive compensation expense.

Rest of World

Sales for Rest of World increased $509 million, or 108.3%, to $979 million. The Coniexpress acquisition in Brazil ("Quero"), which was completed at the end of Fiscal 2011, increased sales 76.6%. Higher pricing increased sales by 21.5%, largely due to price increases in Latin America taken to mitigate inflation. (See the "Venezuela - Foreign Currency and Inflation" section below for further discussion on inflation in Venezuela.) Volume increased 11.9% mainly due to increases in Heinz® ketchup and baby food in Latin America. Volume in Latin America was unfavorably impacted in the prior year by labor disruptions which occurred in Venezuela. Ketchup and sauces in South Africa and improvements across product categories in the Middle East also drove favorable volume. Foreign exchange translation rates decreased sales 1.7%.

Gross profit increased $158 million, or 93.2%, to $327 million, due mainly to the Quero acquisition in Brazil and higher pricing and volume, partially offset by increased commodity costs. The gross profit margin declined to 33.4% from 36.0% primarily reflecting the impact of the Quero acquisition. Operating income increased $52 million, or 96.9%, to $105 million resulting from higher pricing and volume and the Quero acquisition.

Fiscal 2011 Company Results- Fiscal Year Ended April 27, 2011 compared to Fiscal Year Ended April 28, 2010
Sales for Fiscal 2011 increased $212 million, or 2.0%, to $10.71 billion. Volume increased 0.7%, as favorable volume in emerging markets as well as improvements in North American Consumer Products were partially offset by declines in U.S. Foodservice, Australia and Germany. Emerging markets and our Top 15 brands realized combined volume and pricing gains of 14.4% and 3.8%, respectively. Net pricing increased sales by 1.2%, as price increases in emerging markets, particularly Latin America, U.S. Foodservice and the U.K. were partially offset by increased trade promotions in the North American Consumer Products and Australian businesses. Acquisitions increased sales by 0.6%, while foreign exchange translation rates reduced sales by 0.5%.
Gross profit increased $158 million, or 4.2%, to $3.95 billion, and the gross profit margin increased to 36.9% from 36.2%. Gross profit increased as higher volume, net pricing, productivity improvements and the favorable impact from the Foodstar acquisition were partially offset by a $33 million unfavorable impact from foreign exchange translation rates as well as higher commodity costs. In addition, Fiscal 2010's gross profit included $24 million in charges for a corporation-wide initiative to improve productivity, partially offset by a $15 million gain related to property sold in the Netherlands as discussed previously.
SG&A increased $69 million, or 3.1% to $2.30 billion, and increased slightly as a percentage of sales to 21.5% from 21.3%. SG&A was unfavorably impacted by S&D, largely resulting from the higher volume and fuel costs, and higher G&A, reflecting investments in global process and system upgrades, increased capabilities in emerging markets and acquisition costs related to the Coniexpress acquisition. These increases were partially offset by reduced marketing expense, a $17 million favorable impact from foreign exchange translation rates and a $14 million impact related to Fiscal 2010 targeted workforce reductions. Operating income increased $89 million, or 5.7%, to $1.65 billion, reflecting the items above.
Net interest expense increased $2 million, to $253 million, reflecting a $23 million decrease in interest income and a $20 million decrease in interest expense. The decrease in interest income is mainly due to a $24 million gain in Fiscal 2010 on a total rate of return swap, which was terminated in August 2009. Interest expense decreased due to lower average interest rates and debt balances. Other expenses, net, increased $3.0 million, to $21 million, primarily due to currency losses partially offset by $9 million of charges in Fiscal 2010 recognized in connection with the dealer remarketable securities exchange transaction (see below in "Liquidity and Financial Position" for further explanation of this transaction).
The effective tax rate for Fiscal 2011 was 26.8% compared to 27.8% for Fiscal 2010. The Fiscal 2011 effective tax rate was lower than Fiscal 2010 primarily . . .