Keebler Foods Company (NYSE: KBL) today reported record net sales and net income for the fourth quarter ended December 30, 2000. Strong branded product sales, higher operating margins and new product introductions helped Keebler report another quarter of record growth for a 5th consecutive record year.

Fourth quarter net income was up 19.9% to $53.7 million from $44.8 million in the prior year. Diluted earnings per share were up 19.6% to $0.61 compared to $0.51 in last year’s fourth quarter and basic earnings per share were up 18.9% to $0.63 compared to $0.53 in last year’s fourth quarter. In the current quarter, favorable resolution of tax contingencies increased earnings per share by $0.01, while earnings per share in last year’s quarter included $0.01 per share due to reversing restructuring charges that were in excess of requirements.

Net sales for the fourth quarter increased 5.4% to $645.3 million from $612.0 million in the same quarter last year. The acquisition of Austin Quality Foods, completed in March 2000, contributed $34.4 million in sales for the fourth quarter of this year. The value brands businesses, which Keebler sold to Consolidated Biscuit Company in January 2000, had contributed $8.7 million to revenues during the fourth quarter last year.

Keebler’s net income before restructuring for the year ended December 30, 2000 was $175.0 million, exceeding 1999 net income of $132.1 million by 32.5%. Diluted earnings per share for the fifty-two week period were $1.99, up 31.8% from 1999, and basic earnings per share for the fifty-two week period increased 31.0% to $2.07 for 2000. These results exclude an after-tax restructuring and impairment charge of $43.9 million ($0.50 per diluted share) in 1999 and a credit of $0.6 million ($0.01 per diluted share) in 2000. For the fifty-two weeks ended December 30, 2000, sales grew 3.3%, reaching $2.76 billion from $2.67 billion for the same period of last year.

“Keebler achieved new sales and earnings records for the fifth consecutive year,” said Sam K. Reed, Chief Executive Officer. “Our fourth quarter continued to show solid growth in key businesses and an increasing rate of profitability. Sales in Keebler’s direct store door distribution business increased 10.5% and Company operating margins expanded to 14.2%. Excellent growth in our core businesses, along with reduced costs in our supply chain, produced record performance,” added Reed.

“The company’s strong performance gives us momentum in 2001 as Keebler combines forces with Kellogg’s. Keebler is confident that its powerful brands such as Keebler, Cheez-It, Carr’s, Ready Crust, Famous Amos, Murray, Plantation, Austin and Sesame Street have and will continue this earnings growth in 2001,” concluded Reed.

Branded Segment

Keebler’s Branded Segment includes sales of cookies, crackers and brownies for retail distribution. Fourth quarter sales for Keebler brands were $526.2 million, up $39.2 million, an 8.0% increase compared to the same period last year. Keebler crackers continued with stellar sales gains, increasing 15.1% over the same quarter last year. Cracker sales were driven by significant increases in several major brands including Cheez-It, Club, Townhouse, Wheatables, and Zesta. Famous Amos and Murray Sugar Free showed strong revenue gains as they completed a full year in the direct store door distribution system. The year’s net sales in the Branded Segment, after adjusting for the value brands businesses sold earlier in the year, increased 7.4% or $146.2 million over last year.

Specialty Segment

Keebler’s Specialty Segment encompasses Foodservice sales, private label biscuits, products Custom-baked for other manufacturers and cookies manufactured for the Girl Scouts of America. Fourth quarter sales for Keebler Specialty Segment were $119.1 million, down from $125.1 million the prior year, a 4.8% decrease. The revenue decline was primarily attributable to the lower margin Custom Products and Private Label businesses. Sales for the fifty-two weeks ended December 30, 2000, were $633.2 million, down 2.2% compared to 1999. Strong Foodservice sales, up 9.8% for the year, along with another record in sales to Girl Scouts, were offset by lower sales of Custom and Private Label products.

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 $2.8 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 Sesame 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 Balance Sheet
(Dollars in Thousands)

December 30, 2000 January 1, 2000
——————- —————–
ASSETS:

Current Assets $ 370,527 $ 335,579

Property, Plant and
Equipment, net 629,548 553,031

Intangible Assets, net 760,938 581,978

Other Assets 53,583 57,595
——————- —————–
Total Assets $ 1,814,596 $ 1,528,183
=================== =================

LIABILITIES AND
SHAREHOLDERS’ EQUITY:

Current Liabilities $ 431,483 $ 457,485

Long-Term Debt 527,587 419,160

Deferred Income Taxes 176,283 124,389

Deferred Compensation 25,796 24,581

Other Liabilities 90,773 93,253

Shareholders’ Equity 562,674 409,315
——————- —————–
Total Liabilities and
Shareholders’ Equity $ 1,814,596 $ 1,528,183
=================== =================

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

Twelve Twelve
Weeks Ended Weeks Ended
December 30, 2000 January 1, 2000
——————– —————-
Net Sales $ 645,315 $ 612,047
Cost of Sales 248,150 251,257
Gross Margin 397,165 360,790
Selling, Marketing and
Administrative Expenses 300,652 275,415
Other 4,910 3,809
Restructuring and
Impairment Charge — (2,859)
Operating Income 91,603 84,425
Interest Expense, Net 9,924 7,677
Income before Income
Tax Expense 81,679 76,748
Income Tax Expense 28,001 31,971
Net Income $ 53,678 $ 44,777

Memo: Total Depreciation $ 16,973 $ 16,945
Memo: Total Amortization $ 5,760 $ 4,529

Basic Net Income per Share $ 0.63 $ 0.53
Weighted Average Shares
Outstanding 85,022 83,674

Diluted Net Income per Share $ 0.61 $ 0.51
Weighted Average Shares
Outstanding 88,179 87,317

Fifty-Two Fifty-Two
Weeks Ended Weeks Ended
December 30, 2000 January 1, 2000
——————- —————-

Net Sales $ 2,756,950 $ 2,667,771
Cost of Sales 1,119,117 1,150,553
Gross Margin 1,637,833 1,517,218
Selling, Marketing and
Administrative Expenses 1,284,651 1,227,481
Other 25,707 25,834
Restructuring and
Impairment Charge (996) 66,349
Operating Income 328,471 197,554
Interest Expense, Net 44,111 36,174
Income before Income Tax
Expense 284,360 161,380
Income Tax Expense 108,768 73,175
Net Income $ 175,592 $ 88,205

Memo: Total Depreciation $ 71,126 $ 64,534
Memo: Total Amortization $ 24,154 $ 19,591

Basic Net Income per Share $ 2.07 $ 1.05
Weighted Average Shares
Outstanding 84,517 83,759

Diluted Net Income per Share $ 2.00 $ 1.01
Weighted Average Shares
Outstanding 87,840 87,645

Before Restructuring and Impairment Charge
——————————————
Twelve Twelve
Weeks Ended Weeks Ended
December 30, 2000 January 1, 2000
——————– —————-
Operating Income $ 91,603 $ 81,566
Income before Income Tax
Expense 81,679 73,889
Income Tax Expense 28,001 30,261
Net Income $ 53,678 $ 43,628

Diluted Net Income per Share $ 0.61 $ 0.50

Fifty-Two Fifty-Two
Weeks Ended Weeks Ended
December 30, 2000 January 1, 2000
——————– —————-
Operating Income $ 327,475 $ 263,903
Income before Income Tax
Expense 283,364 227,729
Income Tax Expense 108,387 95,646
Net Income $ 174,977 $ 132,083

Diluted Net Income per Share $ 1.99 $ 1.51