The Quaker Oats Company (NYSE: OAT - news) today reported diluted earnings per share of $1.11 for its second quarter ended June 30, 2000, excluding unusual items. This compares to $0.95 per share in the second quarter of 1999, an increase of 17 percent.

Including unusual items in both years, second-quarter diluted earnings were $1.10 in 2000, versus $1.22 per share in 1999, a decrease of 10 percent. The decrease relates primarily to a one-time favorable tax adjustment of $0.27 per share in the year-ago quarter (see section entitled "Unusual Items" for details).

"Our results again exceeded expectations, with Gatorade delivering another quarter of excellent sales and volume growth," said Robert S. Morrison, chairman, president and chief executive officer. "Its volume was up strongly in all channels of distribution, reflecting strong consumer acceptance of Gatorade's new Fierce flavors, the new eight-pack and the EDGE sport bottle.

"In addition, results were bolstered by strong operating income growth in U.S. and Canadian Foods, and signs of a turnaround in Latin America, where we achieved growth in both Foods and Beverages -- top and bottom line."

As Reported

Business segment operating income for the quarter was $253.5 million, versus $229.8 million in 1999, an increase of 10 percent. Foods reported a 17 percent increase in operating income, and Beverages reported a 6 percent increase in operating income. Sales from ongoing businesses were $1.40 billion, versus $1.32 billion in 1999, an increase of 6 percent. Excluding the impact of changes in foreign currency exchange rates, sales would have increased 7 percent. Worldwide Beverages achieved 15 percent sales growth, and total Foods sales declined 2 percent. Ongoing business volume, as measured in pounds, increased 11 percent for the quarter.

TOTAL FOODS

Operating income for the Company's Foods businesses was $101.0 million, versus $86.3 million in 1999, an increase of 17 percent. Worldwide Foods sales were $646.9 million, versus $662.6 million in 1999, a decrease of 2 percent. Volume was relatively even with the year-ago period.

Foods: U.S. and Canada

Operating income for U.S. and Canadian Foods was $86.8 million, versus $71.9 million in 1999, an increase of 21 percent. Sales for U.S. and Canadian Foods were $515.7 million, versus $534.2 million reported for 1999, a decrease of 3 percent. Volume also decreased 3 percent. This decrease primarily reflects lower ready-to-eat cereals volumes.

Within the Foods portfolio, grain-based snacks volume grew 6 percent and Canadian Foods grew 5 percent. Hot cereals was relatively even with the year-ago period. Ready-to-eat cereals volume decreased 11 percent, and rice and pasta declined 7 percent. However, for these two product lines, operating margins and operating income were higher than in the year-ago quarter.

"Operating income grew in virtually every North American food business. Lower ready-to-eat cereals promotional spending, savings from our supply chain, and top-line growth in our grain-based snacks business all contributed. In the quarter, we focused on more innovative marketing tactics instead of pure price promotion for ready-to-eat cereals. However, pervasive deep discounting in the category prevailed, rendering our marketing efforts ineffective in building top-line growth," Morrison said. "While profits improved significantly, we're clearly not satisfied with our ready-to-eat cereals sales trends."

Foods: Latin America, Europe and Asia/Pacific

Operating income from Quaker's Foods businesses in Latin America, Europe and the Asia/Pacific region was $14.2 million in the second quarter, versus $14.4 million in 1999, a decrease of 1 percent. The decrease primarily reflects investment spending to launch a new snack product in Europe. Sales for Latin America, Europe and Asia/Pacific increased 2 percent to $131.2 million, versus $128.4 million for the year-ago period. Volume for the quarter increased 5 percent.

In Latin America, Foods sales and operating income increased 7 percent and 23 percent, respectively.

TOTAL BEVERAGES

Beverages operating income increased 6 percent in the quarter to $152.5 million, versus $143.5 million in 1999. Second-quarter sales were $751.0 million, versus $654.9 million in 1999, an increase of 15 percent. In the United States and Canada, and in Latin America, sales increased 15 percent. In Europe and the Asia/Pacific region combined, sales increased 5 percent. Worldwide Beverages volume grew 15 percent in the quarter.

In the United States and Canada, Beverages operating income increased 2 percent to $138.8 million, from $135.7 million in the year-ago period. Advertising and merchandising expenses in the quarter increased 28 percent, primarily in support of new products.

Outside of the U.S. and Canada, Beverages operating income increased 76 percent in the quarter, to $13.7 million from $7.8 million in 1999, primarily driven by improving economic conditions in certain countries in Latin America.

"The strong response to our new flavors and new eight-pack is a big part of our evolving Gatorade 2000 success story," Morrison said. "As we continue to aggressively support the growth of Gatorade thirst quencher, we're also exploring new beverage concepts. Propel, our new fitness water, and Torq, our new energy juice drink, are being introduced into limited geographies, and we're currently implementing strategies to build awareness and trial among consumers."

UNUSUAL ITEMS

In the second quarter, Quaker recorded unusual items totaling $1.9 million of after-tax expense, or $0.01 per share, versus $37.7 million of after-tax gains, or $0.27 per share, in the second quarter of 1999. The $1.9 million was comprised of: $3.8 million, or $0.02 per share from U.S. and Canadian restructuring charges ($6.2 million pretax), and $1.9 million of after-tax income, or $0.01 per share, from prior-year restructuring and divestiture reserve adjustments ($2.5 million pretax). In 1999, the after-tax gains resulted from reductions in the provision for income taxes related to previously recorded tax accruals.

FINANCING AND OTHER

Net financing costs (net interest and foreign exchange expense) decreased to $9.8 million for the quarter, compared to $14.6 million in 1999. Foreign currency movements resulted in gains on the Company's foreign currency hedges. Interest expense declined $1.4 million, as total debt, as of June 30, 2000, decreased $114.1 million to $785.3 million from the year-ago period.

Excluding unusual items, the effective tax rate was 36.1 percent in both 2000 and 1999.

YEAR-TO-DATE RESULTS:

"The year is off to a very strong start," Morrison said. "For the first half, sales from ongoing businesses were up 8 percent, and operating income increased 16 percent." For the six months ended June 30, 2000, diluted earnings per share, excluding unusual items, were $1.88 versus a comparable $1.46 in the prior year, a 29 percent increase.

The average number of common shares outstanding was 131.7 million, compared to 135.0 million a year ago. Average diluted shares in 2000 were 137.0 million versus 140.8 million in 1999.

The Quaker Oats Company is an international marketer of foods and beverages. Its major brands include: Gatorade thirst quencher; Quaker cereals and grain-based snacks; Rice-A-Roni, Pasta Roni and Near East side dishes; and Aunt Jemima mixes and syrup.

Forward-looking statements, within the meaning of Section 21E of the Securities and Exchange Act of 1934, are made in this document. The Company's results may differ materially from those suggested by the forward-looking statements for a variety of reasons, including actions of competitors; changes in laws and regulations (including changes in governmental interpretations of regulations and changes in accounting standards); customer and consumer demand, including customer and consumer response to marketing; effectiveness of spending, investments or programs, including cost reduction projects; changes in market prices or rates; fluctuations in the cost and availability of supply chain resources; foreign economic conditions, including currency rate fluctuations; weather; and the ability of the Company to effect manufacturing, distribution and outsourcing initiatives and plant consolidations. Additional expenditures and cash dividends may be affected by the amount of cash flow from operating activities. These factors are more fully described in the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission.

The Quaker Oats Company press releases are available through the Internet at: www.quakeroats.com

They are also available, at no charge, through PR Newswire's Company News On-Call Fax Service. For a menu of available Quaker Oats Company press releases or to retrieve a specific release, call 1-800-758-5804, extension 103689.


                   THE QUAKER OATS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
AND REINVESTED EARNINGS (UNAUDITED)

Dollars in Millions (Except Per Share Data)
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
Net Sales $1,397.9 $1,317.5 $2,570.0 $2,392.1
Cost of goods sold 637.5 594.1 1,160.4 1,082.4
Gross profit 760.4 723.4 1,409.6 1,309.7
Selling, general
and administrative
expenses 511.1 498.5 978.7 942.6
Restructuring charges,
asset impairments
and (gain) on
divestiture (a) 3.7 -- 177.4 (8.4)
Interest expense 13.0 16.1 26.9 32.5
Interest income (1.1) (2.8) (2.9) (5.3)
Foreign exchange
(gain) loss -- net (2.1) 1.3 1.5 15.6
Income before
income taxes 235.8 210.3 228.0 332.7
Provision for
income taxes (b) 84.7 38.3 75.1 74.0
Net Income $151.1 $172.0 $152.9 $258.7
Preferred dividends
-- net of tax 1.0 1.1 2.1 2.2
Net Income Available
for Common $150.1 $170.9 $150.8 $256.5
Per Common Share:
Net Income -- basic $1.13 $1.27 $1.14 $1.90
Income before
unusual charges/
gains -- diluted $1.11 $0.95 $1.88 $1.46
Unusual (charges)
gains -- diluted
(a)(b) (0.01) 0.27 (0.77) 0.37
Net Income --
diluted (c) $1.10 $1.22 $1.11 $1.83
Dividends declared $0.285 $0.285 $0.57 $0.57
Average Number of
Common Shares
Outstanding
(in thousands) 131,871 134,642 131,732 134,960
Reinvested Earnings:
Balance -- beginning
of period $818.1 $603.2 $854.6 $555.8
Net income 151.1 172.0 152.9 258.7
Dividends (38.4) (39.4) (76.7) (78.7)
Balance --
end of period $930.8 $735.8 $930.8 $735.8

(a) The three months ended June 30, 2000, includes restructuring charges
of $6.2 million pretax ($3.8 million after tax), or $0.02 per share, and
adjustments to reduce prior restructuring and divestiture reserves of
$2.5 million pretax ($1.9 million after tax), or $0.01 per share. The six
months ended June 30, 2000, includes restructuring charges of
$63.0 million pretax ($37.9 million after tax), or $0.27 per share;
adjustments to reduce prior restructuring and divestiture reserves of
$5.7 million pretax ($3.9 million after tax), or $0.03 per share; and
asset impairment losses of $120.1 million pretax ($72.1 million after
tax), or $0.53 per share, related to the Supply Chain Reconfiguration
project.The six months ended June 30, 1999, includes a gain on the
divestiture of a Brazilian pasta business of $5.1 million pretax ($3.4
million after tax), or $0.03 per share, and adjustments to reduce prior
restructuring and divestiture reserves of $3.3 million pretax ($2.0
million after tax), or $0.01 per share.

(b) The three months ended June 30, 1999, includes $37.7 million, or
$0.27 per share, of reductions in the provision for income taxes related
to previously recorded tax accruals.The six months ended June 30, 1999,
includes $46.1 million, or $0.33 per share, of reductions in the provision
for income taxes related to previously recorded tax accruals and tax
assets.

(c)For the six months ended June 30, 2000, adjustments to income and
shares for the calculation of diluted EPS were approximately $1.0 million
and 5.3 million shares, respectively. For the six months ended June 30,
1999, adjustments to income and shares for the calculation of diluted EPS
were approximately $1.0 million and 5.8 million shares, respectively.


THE QUAKER OATS COMPANY AND SUBSIDIARIES
SIX MONTHS NET SALES AND OPERATING
INCOME (LOSS) BY SEGMENT (UNAUDITED)

Dollars in Millions
Net Sales Operating Income (Loss)
Six Months Ended Percent Six Months Ended Percent
June 30, Inc(Dec) June 30, Inc(Dec)
2000 1999 2000 1999
Foods:
U.S. and
Canadian $1,148.5 $1,140.1 0.7% $227.0 $184.7 22.9%
Latin American 170.7 150.7 13.3% 15.2 12.0 26.7%
Other (a) 100.9 103.0 (2.0%) 12.8 14.1 (9.2%)
Total Foods $1,420.1 $1,393.8 1.9% $255.0 $210.8 21.0%

Beverages:
U.S. and
Canadian $948.2 $812.8 16.7% $173.6 $164.0 5.9%
Latin American 139.3 118.1 18.0% 15.3 10.1 51.5%
Other (a) 62.4 60.7 2.8% (1.1) (2.8) N/M
Total
Beverages $1,149.9 $991.6 16.0% $187.8 $171.3 9.6%

Total Ongoing
Businesses $2,570.0 $2,385.4 7.7% $442.8 $382.1 15.9%

Total Divested $-- $6.7 N/M $-- $-- --

Total Sales/
Operating
Income $2,570.0 $2,392.1 7.4% $442.8 $382.1 15.9%

Less: Restructuring
charges, asset
impairments and
(gain) on divestiture 177.4 (8.4)
General corporate expenses 11.9 15.0
Interest expense -- net 24.0 27.2
Foreign exchange loss -- net 1.5 15.6

Income before income taxes $228.0 $332.7

(a) Other includes European and Asia/Pacific results.

N/M = Not Meaningful


THE QUAKER OATS COMPANY AND SUBSIDIARIES
THREE MONTHS NET SALES AND OPERATING
INCOME BY SEGMENT (UNAUDITED)

Dollars in Millions
Net Sales Operating Income
Three Months Ended Percent Three Months Ended Percent
June 30, Inc(Dec) June 30, Inc(Dec)
2000 1999 2000 1999
Foods:
U.S. and
Canadian $515.7 $534.2 (3.5%) $86.8 $71.9 20.7%
Latin American 83.3 77.5 7.5% 7.6 6.2 22.6%
Other (a) 47.9 50.9 (5.9%) 6.6 8.2 (19.5%)
Total Foods $646.9 $662.6 (2.4%) $101.0 $86.3 17.0%

Beverages:
U.S. and
Canadian $629.3 $545.2 15.4% $138.8 $135.7 2.3%
Latin American 75.7 65.9 14.9% 12.2 7.6 60.5%
Other (a) 46.0 43.8 5.0% 1.5 0.2 650.0%
Total Beverages $751.0 $654.9 14.7% $152.5 $143.5 6.3%

Total Sales/
Operating
Income $1,397.9 $1,317.5 6.1% $253.5 $229.8 10.3%

Less:Restructuring charges
and other (b) 3.7 --
General corporate
expenses 4.2 4.9
Interest expense
-- net 11.9 13.3
Foreign exchange
(gain) loss -- net (2.1) 1.3

Income before income taxes $235.8 $210.3

(a) Other includes European and Asia/Pacific results.

(b) Other includes adjustments to reduce prior restructuring and
divestiture reserves.