Keebler Foods Company (NYSE:KBL) today reported record net sales and net income for the second quarter ended July 15, 2000.

Keebler's strong results reflect the strength of its brands and distribution system, benefits of acquisitions and increased efficiencies in operations.

Second quarter net income was up 38.8% to $32.8 million from $23.7 million in the prior year. Diluted earnings per share were up 37.0% to $0.37, compared to $0.27 in last year's second quarter and basic earnings per share were up 39.3% to $0.39 compared to $0.28 in last year's second quarter. Net income and earnings per share are before a pre-tax restructuring and impairment charge of $69.2 million in the second quarter of 1999 and a credit of $1.0 million in the current quarter. Current quarter results also include a $0.01 gain on the sale of non-operating assets.

Net sales for the second quarter increased to $613.6 million from $587.8 million in the same quarter last year. The acquisition of Austin Quality Foods ("Austin"), completed in March 2000, contributed $46.4 million in sales for the second quarter of this year. The value brands business, which Keebler sold to Consolidated Baking Company in January 2000, had contributed $11.4 million to revenues during the second quarter last year.

Net income for the first half of 2000 was $80.3 million, exceeding 1999 net income of $56.3 million by 42.6%, excluding the restructuring and impairment charge in the second quarter of 1999. Diluted earnings per share for the twenty-eight week period were $0.92, up 43.8% from 1999 and basic earnings per share for the twenty-eight week period, increased 43.3% to $0.96 for 2000, excluding the restructuring and impairment charges and credits. For the twenty-eight weeks ended July 15, 2000, sales grew 2.1%, reaching $1.47 billion from $1.44 billion for the same period of last year.

"We are pleased to report another solid quarter for Keebler, especially in the midst of a very competitive environment in the cookie and cracker industry," said Keebler CEO Sam K. Reed. "Continued improvement in the mix of our businesses, benefits of the Austin acquisition, along with the supply chain efficiencies, are paying off with strong increases in net income."

"The second quarter was important as we integrated Austin and geared up for the roll-out in mid-July of sixteen cookie and cracker items in our new "kid-targeted" product line under the Sesame Street brand. The response from retailers to Sesame Street has been excellent," Reed added. "We are excited about the second half of the year and are confident that Keebler is on track to once again lead the food industry in earnings growth," concluded Reed.

Branded Segment

Keebler's Branded Segment includes sales of cookies, crackers and brownies for retail distribution. Second quarter revenues for Keebler brands were $482.1 million, up from $463.1 million, a 4.1% increase. Good growth was generated on core cookie and cracker products including Keebler brand crackers, Cheez-It, and Keebler brand cookies including Fudge Shoppe, Sandies, Vienna Fingers, Famous Amos and Murray Sugar Free. Widespread discounting of national brands in the cookie market had an effect on smaller, more promotion sensitive brands.

Specialty Segment

Keebler's Specialty Segment encompasses Foodservice sales, products custom-baked for other manufacturers and cookies manufactured for the Girl Scouts of America. Second quarter revenues for Keebler Specialty Segment were $131.5 million, up from $124.7 million the prior year, a 5.4% increase. Key growth factors included growth in Foodservice, contributions from acquisitions and increased focus on the higher-margin segments of the specialty segment.

Keebler, founded in 1853, is the second-largest cookie and cracker marketer and manufacturer in the United States with the last trailing twelve-month net sales of $2.7 billion. Keebler markets its products under well-recognized brands such as Keebler, Cheez-It, Carr's, Ready Crust, Famous Amos, Murray, Plantation and Austin. Keebler is also a leading manufacturer for both the private label and foodservice markets. Through its Little Brownie Bakers subsidiary, Keebler is a leading licensed supplier of Girl Scout Cookies. Keebler is also the licensed supplier with the Children's Television Workshop featuring Sesame Street Muppet characters and educational games on a broad range of snack category products. Keebler Foods Company is headquartered in Elmhurst, Illinois. For additional information, please visit the Keebler Web site at www.keebler.com.

Statements contained in this press release that are not historical facts are forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. All forward-looking statements are subject to risks and uncertainties that could cause actual results to differ from those projected. Other factors that may cause actual results to differ from the forward-looking statements contained in this release and that may affect the company's prospects in general are described in the company's filings with the Securities and Exchange Commission.


KEEBLER FOODS COMPANY
Consolidated Condensed Statements of Income
(Dollars in Thousands, Except Per Share Amounts)

Twelve Twelve Twenty-Eight Twenty-Eight
Weeks Ended Weeks Ended Weeks Ended Weeks Ended
July 15, July 17, July 15, July 17,
2000 1999 2000 1999
----------- ----------- ----------- -----------

Net Sales $ 613,572 $ 587,847 $ 1,469,432 $ 1,439,880
Cost of Sales 253,341 257,349 616,730 638,052
Gross Margin 360,231 330,498 852,702 801,828
Selling,
Marketing and
Administrative
Expenses 286,967 273,349 682,247 667,691
Other 6,733 8,417 10,228 14,760
Restructuring
and Impairment
Charge (996) 69,208 (996) 69,208
Operating Income
(Loss) 67,527 (20,476) 161,223 50,169
Interest Expense,
Net 10,987 8,084 24,136 21,400
Income (Loss) before
Income Tax Expense
(Benefit) 56,540 (28,560) 137,087 28,769
Income Tax Expense
(Benefit) 23,099 (7,190) 56,123 17,462
Net Income (Loss) $ 33,441 $ (21,370) $ 80,964 $ 11,307

Memo: Total
Depreciation $ 19,045 $ 15,202 $ 37,069 $ 32,585
Memo: Total
Amortization $ 5,636 $ 4,494 $ 12,363 $ 10,586


Net Income (Loss)
Per Share:
Basic $ 0.39 $ (0.25) $ 0.96 $ 0.14
Diluted 0.38 (0.24) 0.93 0.13

Average Shares
Outstanding:
Basic 84,449 83,778 84,096 83,818
Diluted 87,749 87,622 87,447 87,871


Before Restructuring and Impairment Charge

Twelve Twelve Twenty-Eight Twenty-Eight
Weeks Ended Weeks Ended Weeks Ended Weeks Ended
July 15, July 17, July 15, July 17,
2000 1999 2000 1999
----------- ----------- ----------- -----------


Operating Income $ 66,531 $ 48,732 $160,227 $119,377
Income before
Income Tax Expense 55,544 40,648 136,091 97,977
Income Tax Expense 22,718 16,991 55,742 41,643
Net Income $ 32,826 $ 23,657 $ 80,349 $ 56,334


Net Income Per
Share:
Basic $ 0.39 $ 0.28 $ 0.96 $ 0.67
Diluted 0.37 0.27 0.92 0.64


KEEBLER FOODS COMPANY
Consolidated Condensed Balance Sheets
(Dollars in Thousands)


July 15, January 1,
2000 2000
---------- ----------

ASSETS:

Current Assets $ 300,376 $ 335,579

Property, Plant and Equipment, net 609,343 553,031

Intangible Assets, net 772,050 581,978

Other Assets 54,730 57,595

---------- ----------
Total Assets $1,736,499 $1,528,183
========== ==========


LIABILITIES AND SHAREHOLDERS' EQUITY:

Current Liabilities $ 420,849 $ 457,485

Long-Term Debt 590,149 419,160

Deferred Income Taxes 121,278 124,389

Deferred Compensation 26,221 24,581

Other Liabilities 93,895 93,253

Shareholders' Equity 484,107 409,315

---------- ----------
Total Liabilities and Shareholders'
Equity $1,736,499 $1,528,183