Kraft Foods Reports 2001 Second-quarter Results; Pro Forma Diluted E.P.S. Up 10.0% to $0.33; Pro Forma Net Earnings Up 13.5% to $581 Million

Highlights:

  • Pro forma worldwide volume was up 3.4%, with Kraft Foods North America up 2.8% and Kraft Foods International up 4.9%.
  • Pro forma operating companies income was up 7.4% to $1.7 billion. Excluding an unfavorable currency impact of $29 million, pro forma operating companies income would have been up 9.3%.
  • Pro forma diluted earnings per share were up 10.0% to $0.33.
  • Pro forma net earnings were up 13.5% to $581 million.
  • Pro forma cash earnings per share, which exclude amortization of goodwill, increased 9.3% to $0.47.
  • Reported worldwide volume increased 28.6% and reported operating companies income increased 28.5%. However, due to the impact of the Nabisco acquisition on interest expense and goodwill amortization, reported net earnings were down 11.1% to $505 million and reported diluted earnings per share were down 15.4% to $0.33.

        Pro Forma results assume Kraft owned Nabisco for all of 2000,
        rather than from the actual acquisition date of December 11,
        2000. In addition, pro forma results assume common shares
        outstanding of 1.735 billion based on the assumption that
        shares issued immediately following the recent Kraft initial
        public offering (IPO) were outstanding during all periods
        presented and that effective January 1, 2000, the net proceeds
        of the IPO were used to retire a portion of a long-term note
        payable used to finance the Nabisco acquisition. These results
        also adjust for certain items as detailed on the last page of
        this release, including results from operations divested since
        the beginning of 2000.

Reported results include the operating results of Nabisco in 2001, but not in 2000. Reported results also reflect average shares of common stock outstanding during 2001 and assume an average of 1.455 billion shares outstanding during 2000.

        Unless otherwise stated, all comparisons are for business
        results in the second quarter 2001 versus the second quarter
        2000.

KRAFT FOODS REPORTS

2001 SECOND-QUARTER RESULTS

Pro Forma Diluted E.P.S. Up 10.0% to $0.33

Pro Forma Net Earnings Up 13.5% to $581 Million

Kraft Foods Inc. (NYSE: KFT), a global leader in branded foods and beverages, announced today that, on a pro forma basis, 2001 second-quarter diluted earnings per share increased 10.0% to $0.33 and net earnings increased 13.5% to $581 million. Pro forma cash earnings per share, which exclude amortization of goodwill, increased 9.3% to $0.47.

On a reported basis, as a result of interest expense and amortization of goodwill resulting from the Nabisco acquisition, net earnings were down 11.1% to $505 million, and diluted earnings per share were down 15.4% to $0.33.

"Kraft had a strong quarter, with earnings growth driven by higher volume from new products and strong growth in developing markets. Earnings were in line with our expectations for the quarter, and we are pleased with the results," said Betsy D. Holden, Co-Chief Executive Officer of Kraft.

Commenting on the full year, Co-Chief Executive Officer Roger K. Deromedi said, "Based on 1.735 billion shares outstanding, for the full year we expect to deliver pro forma diluted earnings per share in the range of $1.18 to $1.21. On a pro forma diluted cash basis, we expect to deliver earnings per share in the range of $1.74 to $1.77. The impact of currency, as well as other factors described in the Forward-Looking and Cautionary Statements section of this release, are risks to these projections."

Results of Initial Public Offering

During the quarter, Kraft completed an IPO of 280,000,000 Class A common shares. Kraft shares began trading on the New York Stock Exchange (NYSE) on June 13, 2001, under the symbol "KFT."

Net proceeds of the offering of approximately $8.4 billion, received on June 18, 2001, were used to repay a portion of Kraft's long-term notes payable to Philip Morris Companies Inc., decreasing Kraft's debt-to-equity ratio from 1.84 on December 31, 2000, to 0.75 on June 30, 2001.

Nabisco Integration

"The integration of Nabisco worldwide remains on track, and we are excited to see the excellent contributions its people and products are making to our business," Deromedi said. Holden added, "We also are excited by the emerging revenue growth opportunities offered by our combined brands, such as the introduction of Jell-O Oreo puddings in the U.S. and the Milka with Oreo chocolate bar in Argentina. As previously disclosed, we expect to capture $100 million in net cost synergies through the end of this year, which keeps us on track with our cost synergy projections."

Reported Results

On a reported basis, for the second quarter of 2001, worldwide volume increased 28.6%; operating revenues increased 24.6% to $8.7 billion; operating companies income increased 28.5% to $1.7 billion; net earnings decreased 11.1% to $505 million; and diluted earnings per share decreased 15.4% to $0.33.

Pro Forma Results

Pro forma second-quarter 2001 worldwide volume increased 3.4%; operating revenues decreased 0.4%, primarily as a result of the adverse effect of currency and lower coffee prices; operating companies income increased 7.4%; net earnings increased 13.5%; diluted earnings per share increased 10.0%; and diluted cash earnings per share increased 9.3%. Excluding unfavorable currency impacts, operating revenues would have increased 1.6% and operating companies income would have been up 9.3%.

To allow for more meaningful comparison of business results for the second quarter of 2001 versus the second quarter of 2000, the following discussion is on a pro forma basis.

KRAFT FOODS NORTH AMERICA

Volume for Kraft Foods North America (KFNA) increased 2.8%, due primarily to strong results in the Beverages, Desserts and Cereals segment and the Oscar Mayer and Pizza segment, as well as contributions from successful new products. Operating revenues increased 1.3%, as the favorable impact of stronger volume was partially offset by the adverse impact of currency in Canada as well as lower coffee pricing due to declines in coffee commodity costs. Operating companies income improved by 7.3%, driven by volume growth, productivity savings and Nabisco cost synergies.

Following are results by segment for KFNA:

Cheese, Meals and Enhancers volume was up 0.5%, as increased shipments to grocery customers were partially offset by a decline in the U.S. foodservice business. Operating companies income increased 1.7% for this segment as strong gains in Meals and Enhancers were partially offset by the adverse impact of higher dairy commodity costs on the cheese business. Meals recorded strong volume gains led by the double-digit growth momentum in Kraft macaroni and cheese dinners. Shipments in Canada also increased, driven by strong retail branded consumption and new product momentum, including Kraft Delissio frozen pizza. Branded cheese volume was up, with strong performance in Kraft cheese slices and Kraft natural cheese. However, the company's decision to exit the lower-margin, non-branded cheese business resulted in a decline in overall cheese shipments.

Biscuits, Snacks and Confectionery volume was up 0.6%. Operating companies income increased a strong 28.1%, due primarily to strong revenue growth in cookies and crackers and synergy savings resulting from the Nabisco acquisition and the timing of marketing spending. Biscuits recorded volume gains in total cookies and crackers, driven by several successful new products, including Chocolate Creme Oreos and Mini Oreos. In salty snacks, volume declined as a result of lower shipments of Planters nuts to non-grocery channels. Confectionery volume increased, led by the continued success of new Creme Savers bagged candies.

Beverages, Desserts and Cereals volume increased 7.1%, driven by continued strong gains in ready-to-drink beverages. Operating companies income improved by 7.2%. Refreshment beverages continued to record double-digit volume gains, aided by the continued momentum of Capri Sun Big Pouch and other ready-to-drink beverages. In coffee, volume declined as lower shipments of Maxwell House were partially offset by gains in Starbucks sold to grocery stores. Desserts volume was down as lower shipments of Jell-O dry packaged and ready-to-eat desserts and Cool Whip frozen toppings, resulting from lower consumption and reduced trade inventories, were partially offset by gains in Kraft Handi-Snacks desserts. Cereal volume declined, reflecting increased frequency of competitive promotional activity in the ready-to-eat cereal category.

Oscar Mayer and Pizza volume increased 4.6%, due to gains across all major categories. Operating companies income increased 3.1%, resulting from increased shipments, partially offset by higher meat and cheese costs. The processed meats business recorded volume gains in hot dogs, bacon, luncheon meats and Boca Foods meat alternatives. Lunchables consumption at retail remained strong, benefiting from continued momentum in Lunchables Fun Snacks. The frozen pizza business continued to record strong growth, with gains in Tombstone, DiGiorno and Jack's, aided by the introduction of Tombstone Mexican-style pizza and strength in DiGiorno and Jack's Half-and-Half pizzas.

KRAFT FOODS INTERNATIONAL

Volume for Kraft Foods International (KFI) increased 4.9%, benefiting from gains across most key sectors and driven by 12.1% growth in the developing markets of Central and Eastern Europe, Latin America and Asia Pacific. Operating companies income increased 8.0%, driven by volume growth, productivity savings and Nabisco cost synergies. Excluding an unfavorable currency impact of $24 million, operating companies income would have increased 16.7%. Operating revenues decreased 5.3%, as the favorable impact of higher volume was more than offset by the negative impact of currency. Excluding the effects of currency, revenues increased 1.4% as the impact of higher volume was moderated by lower coffee pricing due to declining commodity costs.

Following are results by segment for KFI:

Europe, Middle East and Africa (EMEA) volume increased 0.5%, as double-digit gains in the developing markets of Central and Eastern Europe and growth in numerous Western European countries were partially offset by volume declines in Germany and Italy. Operating companies income increased 3.2%. Excluding an unfavorable currency impact of $15 million, operating companies income would have increased 11.3%.

In EMEA beverages, volume growth was driven by favorable performances in both coffee and refreshment beverages. Coffee volume grew with strong performance registered by Jacobs Monarch in Austria; Dadak and Jacobs Ebony in the Czech Republic; Grand' Mere in France; Onko in Germany; Saimaza in Iberia and Hag in Italy. In Bulgaria, Romania and Morocco, coffee volume grew strongly, benefiting from recent acquisitions. Refreshment beverages volume was up, driven by gains in the Czech Republic due to the recent launch of new apple-flavored Tang and higher sales to the Middle East and Africa.

Snacks volume in EMEA increased, driven by favorable confectionery and salty snacks performance. Confectionery volume was above last year, reflecting growth of Milka in France and Austria; 3-Bit in the Czech Republic; Prince Polo in Poland; the launch of Poiana Creme in Romania; Milka in the Slovak Republic and Marabou in Sweden. In the Ukraine, strong volume growth was driven by gains in Korona and Ukraina chocolate and the introduction of Milka. Overall growth in confectionery was moderated by a shortfall in Germany, due to increased price competition and trade inventory reductions. Volume for salty snacks also grew, driven by gains in Finland, Lithuania, Norway, Russia and the Ukraine.

Cheese volume in EMEA grew, driven by the favorable performance of Philadelphia cream cheese in Austria, the Netherlands, Italy and the United Kingdom and Dairylea process cheese spreads in the United Kingdom.

In EMEA grocery, lower volume was due to a shortfall in Germany, reflecting aggressive competition and a difficult trade environment, partly offset by successful promotions and new varieties of Kraft salad dressings in the United Kingdom. Convenient Meals volume was down, impacted by lower canned meats volume in Italy.

Latin America and Asia Pacific (LAAP) volume increased 11.6%, driven by gains across most sectors and in numerous countries including Australia, Brazil, the Caribbean, China, Japan and the Philippines. Operating companies income increased 17.8%. Excluding an unfavorable currency impact of $9.0 million, operating companies income would have increased by 27.8%.

Strong LAAP beverage volume growth was driven by the successful performance of refreshment beverages, including Tang powdered soft drinks in Brazil, the Caribbean markets, China and the Philippines. In Brazil, refreshment beverages volume also benefited from gains in Fresh and Clight powdered soft drinks and Maguary juice concentrate. Coffee volume grew, aided by the continued success of Maxwell House coffee mix in China.

In snacks, LAAP volume was higher in biscuits, driven by gains in Club Social crackers and Trakinas cookies in Brazil and higher sales of Oreo and Ritz in China. Biscuits volume was lower in Argentina, impacted by economic softness. Confectionery volume was lower, as a shortfall in Brazil was partly offset by higher Artic chewy candy performance in the Philippines and Toblerone chocolate in Australia.

Cheese volume in LAAP grew strongly, aided by Philadelphia cream cheese in Australia and the Caribbean markets and Kraft Cheez Whiz and Eden process cheese in the Philippines. Grocery volume was up in LAAP, benefiting from higher sales of Royal gelatin in Brazil, Kraft mayonnaise, Kraft Miracle Whip and Post cereals in the Caribbean and Kraft mayonnaise and Kraft sandwich spreads in the Philippines.

Kraft Foods is the largest branded food and beverage company headquartered in the United States and the second largest worldwide. Kraft Foods markets many of the world's leading food brands, including Kraft cheese, Jacobs and Maxwell House coffees, Nabisco cookies and crackers, Philadelphia cream cheese, Oscar Mayer meats, Post cereals and Milka chocolates, in more than 140 countries.

Forward-Looking and Cautionary Statements

This press release contains projections of future results and other forward-looking statements that involve a number of risks and uncertainties and are made pursuant to the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995. The following important factors could cause actual results and outcomes to differ materially from those contained in such forward-looking statements.

The Company is subject to unfavorable currency movements, intense competition, changes in consumer preferences and demand for its products, changing prices for raw materials and energy and the effects of foreign economies and local economic and market conditions. Its results are dependent upon its continued ability to promote brand equity successfully; to anticipate and respond to new consumer trends; to develop new products and markets and to broaden brand portfolios; to compete effectively with lower-priced products in a consolidating environment at the retail and manufacturing levels; to improve productivity; to successfully integrate Nabisco's operations with its own; and other risks detailed from time to time in the Company's publicly-filed documents, including but not limited to the Prospectus related to its initial public offering of shares. The Company cautions that the foregoing list of important factors is not complete and does not undertake to update any forward-looking statement.

-0-
KRAFT FOODS INC.
and Subsidiaries
----------------
Condensed Statements of Earnings
--------------------------------
For the Quarters Ended June 30,
($ in millions, except per share data)

                                              REPORTED
                         ---------------------------------------------
                               2001          2000      % Change
                         --------------   -----------  ---------------

Operating revenues             $ 8,692       $ 6,974       24.6 %

Cost of sales                    4,392         3,557       23.5 %
                         --------------   -----------

Gross profit                     4,300         3,417       25.8 %

Marketing, administration
 and research costs              2,649         2,132       24.2 %
                         --------------   -----------
Operating companies
 income                          1,651         1,285       28.5 %

Amortization of goodwill           240           134
General corporate
 expenses                           46            50
Interest and other debt
 expense, net                      451           132
                         --------------   -----------

Earnings before income
 taxes                             914           969       (5.7)%

Provision for income
 taxes                             409           401        2.0 %
                         --------------   -----------
Net earnings                     $ 505         $ 568      (11.1)%
                         ==============   ===========




Basic earnings per
 share  (2)                     $ 0.33        $ 0.39      (15.4)%
                         ==============   ===========

Diluted earnings per
 share (2)                      $ 0.33        $ 0.39      (15.4)%
                         ==============   ===========


Weighted average number
 of shares outstanding
 - Basic                         1,510         1,455        3.8 %
 - Diluted                       1,510         1,455        3.8 %
                                           PROFORMA (1)
                         ---------------------------------------------
                               2001          2000      % Change
                         --------------   -----------  ---------------
Operating revenues             $ 8,692       $ 8,731       (0.4)%
Operating companies
 income                        $ 1,651       $ 1,537        7.4 %
Net earnings                     $ 581         $ 512       13.5 %
                         ==============   ===========
Basic earnings per
 share  (2)                     $ 0.33        $ 0.30       10.0 %
                         ==============   ===========
Diluted earnings per
 share (2)                      $ 0.33        $ 0.30       10.0 %
                         ==============   ===========
Weighted average number
 of shares outstanding
 - Basic                         1,735         1,735          - %
 - Diluted                       1,735         1,735          - %

(1) Results are presented on a Pro forma basis as if Nabisco had been
    acquired on Jan. 1, 2000 and the initial public offering had been
    completed for all the periods presented.

(2) Basic and Diluted earnings per share are computed for each of the
    periods presented. Accordingly, the sum of the quarterly earnings
    per share amounts may not agree to the year-to-date amounts.


KRAFT FOODS INC.
and Subsidiaries
Selected Financial Data by Business Segment
For the Quarters Ended June 30,
( $ in millions)


OPERATING REVENUES                            REPORTED
----------------------------------------------------------------------
                            2001             2000      % Change
                         --------------   -----------  ---------------

Cheese, Meals and
 Enhancers                  $ 2,748          $ 2,505        9.7 %
Biscuits, Snacks and
 Confectionery                1,391               66     100.0+ %
Beverages, Desserts and
 Cereals                      1,417            1,432       (1.0)%
Oscar Mayer and Pizza           962              906        6.2 %
                         --------------   -----------
Total Kraft Foods North
 America                      6,518            4,909       32.8 %
                         --------------   -----------

Europe, Middle East and
 Africa                       1,547            1,721      (10.1)%
Latin America and Asia
 Pacific                        627              344       82.3 %
                         --------------   -----------
Total Kraft Foods
 International                2,174            2,065        5.3 %
                         --------------   -----------

Total operating revenues
 - Kraft Foods Inc.         $ 8,692          $ 6,974       24.6 %
                         --------------   -----------




OPERATING COMPANIES INCOME                    REPORTED
----------------------------------------------------------------------
                            2001             2000      % Change
                         --------------   -----------  ---------------

Cheese, Meals and
 Enhancers                    $ 602            $ 532       13.2 %
Biscuits, Snacks and
 Confectionery                  246               19     100.0+ %
Beverages, Desserts and
 Cereals                        341              319        6.9 %
Oscar Mayer and Pizza           164              159        3.1 %
                         --------------   -----------
Total Kraft Foods North
 America                      1,353            1,029       31.5 %
                         --------------   -----------

Europe, Middle East and
 Africa                         192              195       (1.5)%
Latin America and Asia
 Pacific                        106               61       73.8 %
                         --------------   -----------
Total Kraft Foods
 International                  298              256       16.4 %
                         --------------   -----------

Total operating companies
 income-Kraft Foods Inc.    $ 1,651          $ 1,285       28.5 %
                         --------------   -----------

OPERATING REVENUES                            PROFORMA (1)
----------------------------------------------------------------------
                            2001             2000     % Change
                         --------------   ----------- ----------------

Cheese, Meals and
 Enhancers                  $ 2,748          $ 2,728        0.7 %
Biscuits, Snacks and
 Confectionery                1,391            1,354        2.7 %
Beverages, Desserts and
 Cereals                      1,417            1,448       (2.1)%
Oscar Mayer and Pizza           962              906        6.2 %
                         --------------   -----------
Total Kraft Foods North
 America                      6,518            6,436        1.3 %
                         --------------   -----------

Europe, Middle East and
 Africa                       1,547            1,681       (8.0)%
Latin America and Asia
 Pacific                        627              614        2.1 %
                         --------------   -----------
Total Kraft Foods
 International                2,174            2,295       (5.3)%
                         --------------   -----------

Total operating revenues
 - Kraft Foods Inc.         $ 8,692          $ 8,731       (0.4)%
                         --------------   -----------




OPERATING COMPANIES INCOME                     PROFORMA (1)
----------------------------------------------------------------------
                            2001             2000      % Change
                         --------------   -----------  ---------------

Cheese, Meals and
 Enhancers                    $ 602            $ 592        1.7 %
Biscuits, Snacks and
 Confectionery                  246              192       28.1 %
Beverages, Desserts and
 Cereals                        341              318        7.2 %
Oscar Mayer and Pizza           164              159        3.1 %
                         --------------   -----------
Total Kraft Foods North
 America                      1,353            1,261        7.3 %
                         --------------   -----------

Europe, Middle East and
 Africa                         192              186        3.2 %
Latin America and Asia
 Pacific                        106               90       17.8 %
                         --------------   -----------
Total Kraft Foods
 International                  298              276        8.0 %
                         --------------   -----------

Total operating companies
 income-Kraft Foods Inc.    $ 1,651          $ 1,537        7.4 %
                         --------------   -----------

(1) Results are presented on a Pro forma basis as if Nabisco had been
    acquired on Jan. 1, 2000.


KRAFT FOODS INC.
----------------
and Subsidiaries
----------------
Condensed Statements of Earnings
For the Six Months Ended June 30,
($ in millions, except per share data)
                                                   REPORTED
                                        ------------------------------

                                           2001      2000     % Change
                                        ---------  --------  ---------

Operating revenues                       $17,059   $13,434      27.0 %

Cost of sales                              8,659     6,938      24.8 %

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

Gross profit                               8,400     6,496      29.3 %

Marketing, administration
 and research costs                        5,338     4,098      30.3 %
Loss on sale of a North American
 food factory                                29        -
                                        ---------  --------

Operating companies income                 3,033     2,398      26.5 %

Amortization of goodwill                     480       267

General corporate expenses                    96       101
Interest and other debt expense, net         933       259
                                        ---------  --------

Earnings before income taxes               1,524     1,771     (13.9)%

Provision for income taxes                   693       733      (5.5)%
                                        ---------  --------

Net earnings                              $  831   $ 1,038     (19.9)%
                                        =========  ========

Basic earnings per share  (2)             $ 0.56   $  0.71     (21.1)%
                                        =========  ========

Diluted earnings per share (2)            $ 0.56    $ 0.71     (21.1)%
                                        =========  ========

Weighted average number of
shares outstanding-Basic                   1,483     1,455       1.9 %
                  - Diluted                1,483     1,455       1.9 %
                                                 PROFORMA (1)
                                        ------------------------------
                                           2001      2000     % Change
                                        ---------  --------  ---------
Operating revenues                       $17,055   $17,061         - %
Operating companies income               $ 3,061   $ 2,855       7.2 %
Net earnings                             $ 1,014   $   909      11.6 %
                                        =========  ========
Basic earnings per share  (**)           $  0.58   $  0.52      11.5 %
                                        =========  ========
Diluted earnings per share (**)          $  0.58   $  0.52      11.5 %
                                        =========  ========
Weighted average number of
shares outstanding-Basic                   1,735     1,735         - %
                  - Diluted                1,735     1,735         - %

(1) Results are presented on a Pro forma basis as if Nabisco had been
    acquired on Jan. 1, 2000 and the initial public offering had been
    completed for all the periods presented.

(2) Basic and Diluted earnings per share are computed for each of the
    periods presented. Accordingly, the sum of the quarterly earnings
    per share amounts may not agree to the year-to-date amounts.


KRAFT FOODS INC.
----------------
and Subsidiaries
----------------
OPERATING REVENUES
For the Six Months Ended June 30,
( $ in millions)


                                                   REPORTED
                                        ------------------------------
                                           2001      2000    % Change
                                         --------  --------  --------

Cheese, Meals and Enhancers              $ 5,242   $ 4,773       9.8 %
 Incremental Year 2000 business              -         (34)
                                         --------  --------
 Cheese, Meals and Enhancers, net          5,242     4,739      10.6 %
                                         --------  --------
Biscuits, Snacks and Confectionery         2,831       143    100.0+ %
 Incremental Year 2000 business              -          (3)
                                         --------  --------
 Biscuits, Snacks and Confectionery, net   2,831       140    100.0+ %
                                         --------  --------
Beverages, Desserts and Cereals            2,881     2,849       1.1 %
 Incremental Year 2000 business              -         (22)
                                         --------  --------
 Beverages, Desserts and Cereals, net      2,881     2,827       1.9 %
                                         --------  --------
Oscar Mayer and Pizza                      1,846     1,749       5.5 %
 Incremental Year 2000 business              -         (12)
                                         --------  --------
 Oscar Mayer and Pizza, net                1,846     1,737       6.3 %
                                         --------  --------
Total Kraft Foods North America           12,800     9,514      34.5 %
 Incremental Year 2000 business              -         (71)
                                         --------  --------
 Total Kraft Foods North America, net     12,800     9,443      35.6 %
                                         --------  --------

Europe, Middle East and Africa             3,050     3,374      (9.6)%
 Incremental Year 2000 business              -         (14)
                                         --------  --------
 Europe, Middle East and Africa, net       3,050     3,360      (9.2)%
                                         --------  --------
Latin America and Asia Pacific             1,209       643      88.0 %
 Incremental Year 2000 business              -         (12)
                                         --------  --------
 Latin America and Asia Pacific, net       1,209       631      91.6 %
                                         --------  --------
Total Kraft Foods International            4,259     4,017       6.0 %
 Incremental Year 2000 business              -         (26)
                                         --------  --------
 Total Kraft Foods International, net      4,259     3,991       6.7 %
                                         --------  --------

Total operating revenues -
  Kraft Foods Inc.                       $17,059   $13,531      26.1 %
 Incremental Year 2000 business              -         (97)
                                         --------  --------
Total operating revenues -
  Kraft Foods Inc.,  net                 $17,059   $13,434      27.0 %
                                         --------  --------

                                                 PROFORMA ( 1 )
                                        ------------------------------
                                           2001      2000    % Change
                                         --------  --------  ---------

Cheese, Meals and Enhancers              $ 5,242   $ 5,202       0.8 %
 Incremental Year 2000 business              -         -
                                        ---------  --------  ---------
 Cheese, Meals and Enhancers, net          5,242     5,202       0.8 %
                                        ---------  --------  ---------
Biscuits, Snacks and Confectionery         2,831     2,722       4.0 %
 Incremental Year 2000 business              -         -
                                        ---------  --------  ---------
 Biscuits, Snacks and Confectionery, net   2,831     2,722       4.0 %
                                        ---------  --------  ---------
Beverages, Desserts and Cereals            2,881     2,916      (1.2)%
 Incremental Year 2000 business              -         -
                                        ---------  --------
 Beverages, Desserts and Cereals, net      2,881     2,916      (1.2)%
                                        ---------  --------
Oscar Mayer and Pizza                      1,846     1,749       5.5 %
 Incremental Year 2000 business              -         -
                                        ---------  --------
 Oscar Mayer and Pizza, net                1,846     1,749       5.5 %
                                        ---------  --------
Total Kraft Foods North America           12,800    12,589       1.7 %
 Incremental Year 2000 business              -         -
                                        ---------  --------
 Total Kraft Foods North America, net     12,800    12,589       1.7 %
                                        ---------  --------

Europe, Middle East and Africa             3,050     3,299      (7.5)%
 Incremental Year 2000 business              -         -
                                        ---------  --------
 Europe, Middle East and Africa, net       3,050     3,299      (7.5)%
                                        ---------  --------
Latin America and Asia Pacific             1,205     1,173       2.7 %
 Incremental Year 2000 business              -         -
                                        ---------  --------
 Latin America and Asia Pacific, net       1,205     1,173       2.7 %
                                        ---------  --------
Total Kraft Foods International            4,255     4,472      (4.9)%
 Incremental Year 2000 business              -         -
                                        ---------  --------
 Total Kraft Foods International, net      4,255     4,472      (4.9)%
                                        ---------  --------

Total operating revenues -
  Kraft Foods Inc.                       $17,055   $17,061         - %
 Incremental Year 2000 business              -         -
                                        ---------  --------
Total operating revenues -
  Kraft Foods Inc.,  net                 $17,055   $17,061         - %
                                        --------   --------

( 1 ) Results are presented on a Pro forma basis as if Nabisco had
      been acquired on Jan. 1, 2000.

KRAFT FOODS INC.
and Subsidiaries
OPERATING COMPANIES INCOME
For the Six Months Ended June 30,
( $ in millions)

                                                   REPORTED
                                     ---------------------------------
                                        2001      2000      % Change
                                     ---------------------------------
Cheese, Meals and Enhancers          $ 1,122     $ 996         12.7  %
  Incremental Year 2000 business           -       (15)
  Loss on sale of a North American
   food factory                          (29)        -
                                     ------------------
  Cheese, Meals and Enhancers, net     1,093       981         11.4  %
                                     ------------------
Biscuits, Snacks and Confectionery       411        41        100.0+ %
  Incremental Year 2000 business           -        (1)
                                     ------------------
  Biscuits, Snacks and Confectionery,
   net                                   411        40        100.0+ %
                                     ------------------
Beverages, Desserts and Cereals          680       637          6.8  %
  Incremental Year 2000 business           -        (7)
                                     ------------------
  Beverages, Desserts and Cereals,
   net                                   680       630          7.9  %
                                     ------------------
Oscar Mayer and Pizza                    312       295          5.8  %
  Incremental Year 2000 business           -        (4)
                                     ------------------
  Oscar Mayer and Pizza, net             312       291          7.2  %
                                     ------------------
Total Kraft Foods North America        2,525     1,969         28.2  %
  Incremental Year 2000 business           -       (27)
  Loss on sale of a North American
   food factory                          (29)        -
                                     ------------------
  Total Kraft Foods North America,
   net                                 2,496     1,942         28.5  %
                                     ------------------
Europe, Middle East and Africa           364       373         (2.4) %
  Incremental Year 2000 business           -        (8)
                                     ------------------
  Europe, Middle East and Africa, net    364       365         (0.3) %
                                     ------------------
Latin America and Asia Pacific           173        96         80.2  %
  Incremental Year 2000 business           -        (5)
                                     ------------------
  Latin America and Asia Pacific, net    173        91         90.1  %
                                     ------------------
Total Kraft Foods International          537       469         14.5  %
  Incremental Year 2000 business           -       (13)
                                     ------------------
  Total Kraft Foods International, net   537       456         17.8  %
                                     ------------------
Total operating companies income -
 Kraft Foods Inc.                    $ 3,062   $ 2,438         25.6  %
  Incremental Year 2000 business           -       (40)
  Loss on sale of a North American
   food factory                          (29)        -
                                     ------------------
Total operating companies income -
 Kraft Foods Inc., net               $ 3,033   $ 2,398         26.5  %
                                     ==================

                                                PROFORMA (a)
                                     ---------------------------------
                                        2001      2000      % Change
                                     ---------------------------------
Cheese, Meals and Enhancers          $ 1,122   $ 1,093          2.7  %
  Incremental Year 2000 business           -         -
  Loss on sale of a North American
   food factory                            -         -
                                     ------------------
  Cheese, Meals and Enhancers, net     1,122     1,093          2.7  %
                                     ------------------
Biscuits, Snacks and Confectionery       411       329         24.9  %
  Incremental Year 2000 business           -         -
                                     ------------------
  Biscuits, Snacks and Confectionery,
   net                                   411       329         24.9  %
                                     ------------------
Beverages, Desserts and Cereals          680       643          5.8  %
  Incremental Year 2000 business           -         -
                                     ------------------
  Beverages, Desserts and Cereals, net   680       643          5.8  %
                                     ------------------
Oscar Mayer and Pizza                    312       295          5.8  %
  Incremental Year 2000 business           -         -
                                     ------------------
  Oscar Mayer and Pizza, net             312       295          5.8  %
                                     ------------------
Total Kraft Foods North America        2,525     2,360          7.0  %
  Incremental Year 2000 business           -         -
  Loss on sale of a North American
   food factory                            -         -
                                     ------------------
  Total Kraft Foods North America,
   net                                 2,525     2,360          7.0  %
                                     ------------------
Europe, Middle East and Africa           364       355          2.5  %
  Incremental Year 2000 business           -         -
                                     ------------------
  Europe, Middle East and Africa, net    364       355          2.5  %
                                     ------------------
Latin America and Asia Pacific           172       140         22.9  %
  Incremental Year 2000 business           -         -
                                     ------------------
  Latin America and Asia Pacific, net    172       140         22.9  %
                                     ------------------
Total Kraft Foods International          536       495          8.3  %
  Incremental Year 2000 business           -         -
                                     ------------------
  Total Kraft Foods International, net   536       495          8.3  %
                                     ------------------
Total operating companies income -
 Kraft Foods Inc.                    $ 3,061   $ 2,855          7.2  %
  Incremental Year 2000 business           -         -
  Loss on sale of a North American
   food factory                            -         -
                                     ------------------
Total operating companies income -
 Kraft Foods Inc., net               $ 3,061   $ 2,855          7.2  %
                                     =================

(a) Results are presented on a Pro forma basis as if Nabisco had been
    acquired on Jan. 1, 2000.



KRAFT FOODS INC.
and Subsidiaries
Diluted Earnings per Share
Reconciliation of Reported to Pro forma results
For the Quarters Ended June 30,
($ and shares in millions, except per share data)


                            2001             2000      % Change
                         --------------   -----------  ---------------

Reported Net Earnings           $ 505          $ 568      (11.1)%

Nabisco results  (2)                -           (147)

Lower after-tax interest
 expense assuming 1/1/00
 IPO date                         76             91

                         --------------   -----------
Pro forma net earnings          $ 581          $ 512       13.5 %
                         --------------   -----------

Average shares
 outstanding                    1,510          1,455

Adjustment to reflect
 shares outstanding after
 IPO                              225            280

                         --------------   -----------
Pro forma shares
 outstanding                    1,735          1,735
                         --------------   -----------


Pro forma diluted
 earnings per share            $ 0.33          $0.30       10.0 %
                         --------------  ------------

For the Six Months Ended June 30,
($ and shares in millions, except per share data)


                            2001             2000      % Change
                         -------------   ------------  ---------------

Reported Net Earnings           $ 831        $ 1,038      (19.9)%
After-tax effect of
 incremental year 2000
 income and loss on sale
 of food factory (1)               18             24
Nabisco results  (2)                -           (335)

Lower after-tax interest
 expense assuming 1/1/00
 IPO date                         165            182

                         --------------   -----------
Pro forma  net earnings        $1,014          $ 909       11.6 %
                         --------------   -----------

Average shares
 outstanding                    1,483          1,455

Adjustment to reflect
 shares outstanding after
 IPO                              252            280
                         --------------   -----------
Pro forma shares
 outstanding                    1,735          1,735
                         --------------   -----------


Pro forma diluted
 earnings per share            $ 0.58          $0.52       11.5 %
                         --------------   -----------

(1) See notes on last page.

(2) Nabisco results include goodwill amortization and interest expense
    as if Nabisco had been acquired on January 1, 2000.

KRAFT FOODS INC.
and Subsidiaries
Condensed Balance Sheets
------------------------
( $ in millions, except ratios)



                               June 30,             December 31,
                                 2001                   2000
                         ---------------------  ---------------------
Assets



Current assets                        $ 7,387                $ 7,152

Property, plant and
 equipment, net                         9,146                  9,405

Goodwill and other
 intangible assets, net                31,388                 31,584

Other assets                            3,837                  3,930
                         ---------------------  ---------------------


      Total assets                   $ 51,758               $ 52,071
                         =====================  =====================


Liabilities and Stockholders' Equity


Total current liabilities             $ 8,120                $ 7,590

Long-term debt                          2,679                  2,695

Notes payable to parent
 and affiliates                        11,557                 21,407

Other long-term
 liabilities                            6,394                  6,331
                                   -----------  ---------------------

Total liabilities                      28,750                 38,023

Total stockholders'
 equity                                23,008                 14,048
                                   -----------  ---------------------

Total liabilities and
 stockholders' equity                $ 51,758               $ 52,071
                                   ===========  =====================


Total debt                           $ 17,152               $ 25,826

Debt/equity ratio                        0.75                   1.84

                           KRAFT FOODS INC.
                           and Subsidiaries
 Notes to Condensed Statements of Earnings and Selected Financial Data
                            ($ in millions)


The following pre-tax items had an impact on underlying
results in 2001 and 2000:


                                     Second   Second    Six     Six
                                     Quarter  Quarter  Months  Months
                                      2001     2000     2001    2000
                                      ----     ----     ----    ----

- Loss on sale of a North
 American food factory               $  -     $  -      $ 29    $  -

- Related to incremental
 Year 2000 business:(1)
   Kraft Foods North America            -        -         -     (27)
   Kraft Foods International            -        -         -     (13)
                                      ----     ----     ----    ----
                                     $  -     $  -      $ 29  $  (40)
                                      ====     ====     ====    ====

    (1)Relates to sales of products that would normally have occurred
    in January 2000, but were made in 1999 in order for the Company's
    customers to avoid potential problems related to the Century Date
    Change. These sales were previously excluded from the underlying
    1999 fourth quarter results.

    In addition, operating results of businesses sold since the
    beginning of 2000 are excluded from underlying operating revenues
    and operating companies income (but not from underlying net
    earnings or earnings per share). Several international food and
    domestic food operations were divested since the beginning of
    2000. No assumptions were made as to the application of proceeds
    from the sales of any operations.


    Operating revenues and operating companies income for all periods
    presented were restated to reflect the transfer of management
    responsibility for Mexico and Puerto Rico from the international
    food business to the North American food business.

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