Document and Entity Information	3 Months Ended
Document and Entity Information	Mar. 31, 2010	Apr. 30, 2010
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Mar. 31, 2010
Trading Symbol	KFT
Document Fiscal Year Focus	2010
Document Fiscal Period Focus	Q1
Entity Registrant Name	KRAFT FOODS INC
Entity Central Index Key	0001103982
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	Yes
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		1,743,483,521

Condensed Consolidated Statements of Earnings (USD $) In Millions, except Per Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2010	Mar. 31, 2009
Net revenues	$ 11,318	$ 8,979
Cost of sales	7,229	5,879
Gross profit	4,089	3,100
Marketing, administration and research costs	2,850	1,919
Amortization of intangibles	33	6
Operating income	1,206	1,175
Interest and other expense, net	624	280
Earnings from continuing operations before income taxes	582	895
Provision for income taxes	333	292
Earnings from continuing operations	249	603
Earnings and gain from discontinued operations, net of income taxes (Note 2)	1,644	59
Net earnings	1,893	662
Noncontrolling interest	10	2
Net earnings attributable to Kraft Foods	$ 1,883	$ 660
Basic earnings per share attributable to Kraft Foods:
Continuing operations	$ 0.15	$ 0.41
Discontinued operations	$ 1.02	$ 0.04
Net earnings attributable to Kraft Foods	$ 1.17	$ 0.45
Diluted earnings per share attributable to Kraft Foods:
Continuing operations	$ 0.15	$ 0.41
Discontinued operations	$ 1.01	$ 0.04
Net earnings attributable to Kraft Foods	$ 1.16	$ 0.45
Dividends declared	$ 0.29	$ 0.29

Condensed Consolidated Balance Sheets (USD $) In Millions, unless otherwise specified	3 Months Ended	12 Months Ended
	Mar. 31, 2010	Dec. 31, 2009
ASSETS
Cash and cash equivalents	$ 3,878	$ 2,101
Receivables (less allowances of $181 in 2010 and $121 in 2009)	6,575	5,197
Inventories, net	5,097	3,775
Deferred income taxes	839	730
Other current assets	826	651
Total current assets	17,215	12,454
Property, plant and equipment, net	13,896	10,693
Goodwill	37,119	28,764
Intangible assets, net	25,648	13,429
Prepaid pension assets	140	115
Other assets	1,691	1,259
TOTAL ASSETS	95,709	66,714
LIABILITIES
Short-term borrowings	891	453
Current portion of long-term debt	633	513
Accounts payable	5,422	3,766
Accrued marketing	2,154	2,181
Accrued employment costs	1,223	1,175
Other current liabilities	5,258	3,403
Total current liabilities	15,581	11,491
Long-term debt	29,496	18,024
Deferred income taxes	7,561	4,508
Accrued pension costs	2,565	1,765
Accrued postretirement health care costs	2,878	2,816
Other liabilities	3,134	2,138
TOTAL LIABILITIES	61,215	40,742
Contingencies (Note 13)
EQUITY
Common Stock, no par value (1,990,695,311 shares issued in 2010 and 1,735,000,000 shares in issued 2009)
Additional paid-in capital	30,915	23,611
Retained earnings	15,971	14,636
Accumulated other comprehensive losses	(4,422)	(3,955)
Treasury stock, at cost	(8,286)	(8,416)
Total Kraft Foods Shareholders' Equity	34,178	25,876
Noncontrolling interest	316	96
TOTAL EQUITY	34,494	25,972
TOTAL LIABILITIES AND EQUITY	$ 95,709	$ 66,714

Condensed Consolidated Balance Sheets (Parenthetical) (USD $) In Millions, except Share data, unless otherwise specified	Mar. 31, 2010	Dec. 31, 2009
Receivables, allowances	$ 181	$ 121
Common Stock, no par value	$ 0	$ 0
Common Stock, shares issued	1,990,695,311	1,735,000,000

Condensed Consolidated Statements of Equity (USD $)
In Millions, unless otherwise specified

Total

Common Stock

Additional Paid-in Capital

Retained Earnings

Accumulated Other Comprehensive Earnings/(Losses)

Treasury Stock

Noncontrolling Interest

Balances at Dec. 31, 2008

$ 22,356

$ 23,563

$ 13,440

$ (5,994)

$ (8,714)

$ 61

Comprehensive earnings / (losses):

Net earnings

3,028

3,021

Other comprehensive earnings / (losses), net of income taxes

2,073

2,039

Total comprehensive earnings /(losses)

^[1]

5,101

Exercise of stock options and issuance of other stock awards

237

(110)

298

Cash dividends declared ($1.16 per share in 2009, $0.29 per share in 2010)

(1,715)

Dividends paid on noncontrolling interest and other activities

(7)

(1)

(6)

Balances at Dec. 31, 2009

25,972

23,611

14,636

(3,955)

(8,416)

Comprehensive earnings / (losses):

Net earnings

1,893

1,883

Other comprehensive earnings / (losses), net of income taxes

(486)

(467)

(19)

Total comprehensive earnings /(losses)

^[2]

(1,407)

(9)

Exercise of stock options and issuance of other stock awards

(14)

(43)

130

Cash dividends declared ($1.16 per share in 2009, $0.29 per share in 2010)

(505)

Noncontrolling interest recorded upon Cadbury acquisition

5,420

Acquisition of noncontrolling interest

(5,153)

(5,191)

Issuance of Common Stock

7,280

Balances at Mar. 31, 2010

$ 34,494

$ 30,915

$ 15,971

$ (4,422)

$ (8,286)

$ 316

[1]	For the quarter ended March 31, 2009, total comprehensive earnings were $510 million, and comprehensive earnings attributable to Kraft Foods were $508 million.
[2]	For the quarter ended March 31, 2010, comprehensive earnings attributable to Kraft Foods were $1,416 million.

Condensed Consolidated Statements of Equity (Parenthetical) (USD $)
In Millions, except Per Share data, unless otherwise specified

3 Months Ended

Mar. 31, 2010

Mar. 31, 2009

Cash dividends declared, per share

$ 0.29

Comprehensive earnings attributable to Kraft Foods

$ 1,416

$ 508

Total comprehensive earnings /(losses)

$ (1,407)

^[1]

$ 510

[1]	For the quarter ended March 31, 2010, comprehensive earnings attributable to Kraft Foods were $1,416 million.

Condensed Consolidated Statements of Cash Flows (USD $) In Millions, unless otherwise specified	3 Months Ended
	Mar. 31, 2010	Mar. 31, 2009
CASH PROVIDED BY / (USED IN) OPERATING ACTIVITIES
Net earnings	$ 1,893	$ 662
Adjustments to reconcile net earnings to operating cash flows:
Depreciation and amortization	313	215
Stock-based compensation expense	40	40
Deferred income tax provision	116	7
Gain on discontinued operations (Note 2)	(1,596)
Other non-cash (income) / expense, net	(166)	104
Change in assets and liabilities, excluding the effects of acquisitions and divestitures:
Receivables, net	(176)	251
Inventories, net	(163)	(232)
Accounts payable	24	(174)
Other current assets	168	49
Other current liabilities	(498)	(530)
Change in pension and postretirement assets and liabilities, net	40	31
Net cash (used in) / provided by operating activities	(5)	423
CASH PROVIDED BY / (USED IN) INVESTING ACTIVITIES
Capital expenditures	(241)	(207)
Acquisitions, net of cash received	(9,591)
Proceeds from divestitures, net of disbursements	3,700
Other	2	33
Net cash used in investing activities	(6,130)	(174)
CASH PROVIDED BY / (USED IN) FINANCING ACTIVITIES
Net (repayment) / issuance of short-term borrowings	(708)	145
Long-term debt proceeds	9,432
Long-term debt repaid	(6)	(9)
Dividends paid	(653)	(426)
Other	(72)	(4)
Net cash provided by / (used in) financing activities	7,993	(294)
Effect of exchange rate changes on cash and cash equivalents	(81)	(15)
Cash and cash equivalents:
Increase / (decrease)	1,777	(60)
Balance at beginning of period	2,101	1,244
Balance at end of period	$ 3,878	$ 1,184

Summary of Significant Accounting Policies

3 Months Ended

Mar. 31, 2010

Summary of Significant Accounting Policies:

Note 1. Summary of Significant Accounting Policies:

Basis of Presentation:

Our interim condensed consolidated financial statements are unaudited. We prepared the condensed consolidated financial statements following SEC rules for interim reporting. As permitted under those rules, we have condensed or omitted a number of footnotes or other financial information that are normally required by accounting principles generally accepted in the United States of America ("U.S. GAAP"). It is management's opinion that these financial statements include all normal and recurring adjustments necessary for a fair presentation of our financial position and operating results. Net revenues and net earnings for any interim period are not necessarily indicative of future or annual results.

You should read these statements in conjunction with our consolidated financial statements and related notes in our Form 10-K for the year ended December 31, 2009.

Principles of Consolidation:

Our domestic operating subsidiaries report results as of the last Saturday of the quarter, and our international operating subsidiaries generally report results two weeks prior to the last Saturday of the quarter. The results of operations of the newly acquired Cadbury plc ("Cadbury") are reported on the last day of the calendar month.

Highly Inflationary Accounting:

In the fourth quarter of 2009, the Venezuelan economy was classified as highly inflationary under U.S. GAAP. Effective January 1, 2010, we are accounting for our Venezuelan subsidiaries under highly inflationary accounting rules, which principally means all transactions are recorded in U.S. dollars. Venezuela has three exchange rates: the official rate, the consumer staples rate and the secondary (or parallel) rate. We have historically used both the official rate and the secondary rate to translate our Venezuelan operations, based on the nature of the operations of each individual subsidiary. Additionally, we previously carried cash that we had exchanged into U.S. dollars using the secondary market at that rate. Upon the change to highly inflationary accounting, we were then required to translate those U.S. dollars on hand using the official rate, which resulted in a charge of $34 million in the first quarter of 2010.

On January 8, 2010, the Venezuelan government devalued its currency. Accordingly, we were required to revalue our net assets in Venezuela, and we recorded an insignificant loss in the first quarter of 2010.

New Accounting Pronouncements:

In June 2009, new guidance was issued on the consolidation of variable interest entities. We adopted the guidance effective January 1, 2010. This guidance increases the likelihood of an enterprise being classified as a variable interest entity. The adoption of this guidance did not have a material impact on our financial statements.

Acquisitions and Divestitures

3 Months Ended

Mar. 31, 2010

Acquisitions and Divestitures:

Note 2. Acquisitions and Divestitures:

Cadbury Acquisition:

On January 19, 2010, we announced the terms of our final offer for each outstanding ordinary share of Cadbury, including each ordinary share represented by an American Depositary Share ("Cadbury ADS"), and the Cadbury Board of Directors recommended that Cadbury shareholders accept the terms of the final offer. On February 2, 2010, all of the conditions to the offer were satisfied or validly waived, the initial offer period expired and a subsequent offer period immediately began. At that point, we had received acceptances of 71.73% of the outstanding Cadbury ordinary shares, including those represented by Cadbury ADSs ("Cadbury Shares"). The combination of Kraft Foods and Cadbury will create a global powerhouse in snacks, confectionery and quick meals with a rich portfolio of iconic brands.

Under the terms of our final offer and the subsequent offer, we agreed to pay Cadbury shareholders 500 pence in cash and 0.1874 shares of Kraft Foods Common Stock per Cadbury ordinary share validly tendered and 2,000 pence in cash and 0.7496 shares of Kraft Foods Common Stock per Cadbury ADS validly tendered. This valued Cadbury at $18.5 billion, or approximately £11.6 billion (based on the average price of $28.36 for a share of Kraft Foods Common Stock on February 2, 2010 and an exchange rate of $1.595 per £1.00).

The subsequent offer period closed on April 16, 2010, at which time we owned 99.95% of the outstanding Cadbury Shares. As we have received acceptances of over 90% of Cadbury Shares, we are in the process of acquiring the remaining Cadbury Shares that were not tendered during the offer period through a compulsory acquisition procedure under the United Kingdom Companies Act of 2006, as amended.

The EU Commission requires, as a condition of the offer, that we divest the Cadbury confectionary operations in Poland and Romania. We are in the process of divesting these operations.

As part of our Cadbury acquisition, we expensed and incurred $203 million in transaction related fees in the first quarter of 2010. We recorded these expenses within marketing, administration and research costs. We also incurred $96 million in acquisition financing fees in the first quarter of 2010. We recorded these expenses within interest and other expense, net.

Cadbury contributed net revenues of $1,693 million and net earnings of $60 million from February 2, 2010 through March 31, 2010. The following unaudited pro forma summary presents Kraft Foods' consolidated information as if Cadbury had been acquired on January 1, 2009. These amounts were calculated after conversion to U.S. GAAP, applying our accounting policies, and adjusting Cadbury's results to reflect the additional depreciation and amortization that would have been charged assuming the fair value adjustments to property, plant and equipment, and intangible assets had been applied from January 1, 2009, together with the consequential tax effects. These adjustments also reflect the additional interest expense incurred on the debt to finance the purchase.


	Pro forma for the Three
	Months Ended March 31,
	2010		2009
	(in millions; unaudited)

Net revenues	$	11,999	$	10,987
Net earnings attributable to Kraft Foods		1,610		587

On February 2, 2010, we acquired 71.73% of Cadbury's Shares for $13.1 billion and the value attributed to noncontrolling interests was $5.4 billion. From February 2, 2010 through March 31, 2010, we acquired an additional 27.03% of Cadbury's Shares for $5.2 billion. We had a $38 million gain on noncontrolling interest acquired and recorded it within additional paid in capital.

Our February 2, 2010 Cadbury acquisition was valued at $18,546 million, or $17,485 million net of cash and cash equivalents. As part of that acquisition, we acquired the following assets and assumed the following liabilities (in millions):


Receivables ⁽¹⁾	$ 1,387
Inventories	1,317
Other current assets	491
Property, plant and equipment	3,700
Goodwill ⁽²⁾	9,151
Intangible assets ⁽³⁾	12,637
Other assets	424
Short-term borrowings	(1,206	)
Accounts payable	(1,620	)
Other current liabilities	(1,523	)
Long-term debt	(2,309	)
Deferred income taxes	(3,098	)
Accrued pension costs	(838	)
Other liabilities	(1,028	)
(1) The gross amount due under the receivables we acquired is $1,457 million, of which $70 million is expected to be uncollectable. (2) Goodwill will not be deductible for statutory tax purposes and is attributable to Cadbury's workforce and the significant synergies we expect from the acquisition. (3) $10.1 billion of the intangible assets acquired are expected to be indefinite lived.

The above amounts represent the preliminary allocation of purchase price and are subject to revision when appraisals are finalized, which will occur during 2010.

Pizza Divestiture:

On March 1, 2010, we completed the sale of the assets of our North American frozen pizza business ("Frozen Pizza") to Nestlé USA, Inc. ("Nestlé") for $3.7 billion. Our Frozen Pizza business was a component of our U.S. Convenient Meals and Canada & North America Foodservice segments. The sale included the DiGiorno, Tombstone and Jack's brands in the U.S., the Delissio brand in Canada and the California Pizza Kitchen trademark license. It also included two Wisconsin manufacturing facilities (Medford and Little Chute) and the leases for the pizza depots and delivery trucks. Approximately 3,600 of our employees transferred with the business to Nestlé. Accordingly, the results of our Frozen Pizza business have been reflected as discontinued operations on the condensed consolidated statement of earnings, and prior period results have been revised in a consistent manner.

Pursuant to the Frozen Pizza business Transition Services Agreement, we agreed to provide certain sales, co-manufacturing, distribution, information technology, accounting and finance services to Nestlé for up to two years. We can agree with Nestlé to extend the term of the agreement.

Summary results of operations for the Frozen Pizza business through March 1, 2010 were:


	For the Periods Ended
	March 1,			March 31,
	2010			2009
	(in millions)

Net revenues	$	335		$	417


Earnings before income taxes		73			93
Provision for income taxes		(25	)		(34	)
Gain on discontinued operations, net of income taxes		1,596			–

Earnings and gain from discontinued operations, net of income taxes	$	1,644		$	59

Earnings before income taxes as presented exclude associated allocated overheads of $25 million in the first quarter of 2010 and $27 million in the first quarter of 2009.

The gain on discontinued operations in the first quarter of 2010 from the sale of the Frozen Pizza business included tax expense of $1.2 billion.

The following assets of the Frozen Pizza business were included in the Frozen Pizza divestiture (in millions):


Inventories, net	$	102
Property, plant and equipment, net		317
Goodwill		475

Distributed assets of the Frozen Pizza business	$	894

Inventories

3 Months Ended

Mar. 31, 2010

Inventories:

Note 3. Inventories:
Inventories at March 31, 2010 and December 31, 2009 were:

		March 31,		December 31,
		2010		2009
		(in millions)

	Raw materials	$	1,894	$	1,410
	Finished product		3,203		2,365

	Inventories, net	$	5,097	$	3,775

Property, Plant and Equipment

3 Months Ended

Mar. 31, 2010

Property, Plant and Equipment:

Note 4. Property, Plant and Equipment:
Property, plant and equipment at March 31, 2010 and December 31, 2009 were:

		March 31,			December 31,
		2010			2009
		(in millions)

	Land and land improvements	$	769		$	492
	Buildings and building equipment		4,736			4,231
	Machinery and equipment		16,187			13,872
	Construction in progress		1,236			828

			22,928			19,423
	Accumulated depreciation		(9,032	)		(8,730	)

	Property, plant and equipment, net	$	13,896		$	10,693

Goodwill and Intangible Assets

3 Months Ended

Mar. 31, 2010

Goodwill and Intangible Assets:

Note 5. Goodwill and Intangible Assets:

Goodwill by reportable segment at March 31, 2010 and December 31, 2009 was:


		March 31,			December 31,
		2010			2009
		(in millions)

	Kraft Foods North America:
	U.S. Beverages	$	1,290		$	1,290
	U.S. Cheese		3,000			3,000
	U.S. Convenient Meals		985			1,460
	U.S. Grocery		3,046			3,046
	U.S. Snacks		8,845			6,948
	Canada & N.A. Foodservice		3,352			2,340
	Kraft Foods Europe		8,985			6,756
	Kraft Foods Developing Markets		7,616			3,924

	Total goodwill	$	37,119		$	28,764


Intangible assets at March 31, 2010 and December 31, 2009 were:

		March 31,			December 31,
		2010			2009
		(in millions)

	Non-amortizable intangible assets	$	22,966		$	13,262
	Amortizable intangible assets		2,825			278

			25,791			13,540
	Accumulated amortization		(143	)		(111	)

	Intangible assets, net	$	25,648		$	13,429

Non-amortizable intangible assets consist substantially of brand names purchased through our acquisitions of Nabisco Holdings Corp., the Spanish and Portuguese operations of United Biscuits, the global LU biscuit business of Groupe Danone S.A. and Cadbury. Amortizable intangible assets consist primarily of trademark licenses, customer-related intangibles and non-compete agreements. At March 31, 2010, the weighted-average life of our amortizable intangible assets was 17.0 years. The movements in goodwill and intangible assets were:
		Goodwill			Intangible Assets, at Cost
		Goodwill			Intangible Assets, at Cost
		(in millions)

	Balance at January 1, 2010	$	28,764		$	13,540
	Changes due to:
	Foreign currency		(321	)		(386	)
	Acquisitions		9,151			12,637
	Divestitures		(475	)		–

	Balance at March 31, 2010	$	37,119		$	25,791

Changes to goodwill and intangible assets during the first quarter of 2010 were:

•

Acquisitions – We increased goodwill by $9,151 million and intangible assets by $12,637 million related to preliminary allocations of purchase price for our Cadbury acquisition. The allocations are based upon preliminary estimates and assumptions and are subject to revision when appraisals are finalized, which will occur during 2010. We assigned $1,897 million of the acquired goodwill to our U.S. Snacks segment, $945 million to our Canada & N.A. Foodservice segment, $2,576 million to our Kraft Foods Europe segment and $3,733 million to our Kraft Foods Developing Markets segment.

•

Divestitures – We reduced goodwill by $475 million due to our Frozen Pizza business divestiture.

Amortization expense was $33 million for the first quarter of 2010. We currently estimate amortization expense for each of the next five years to be approximately $180 million or less, including the estimated impact of our Cadbury acquisition. Our estimated amortization for each of the next five years is subject to revision when appraisals are finalized for our Cadbury acquisition.

- Definition

Discloses the aggregate amount of goodwill and a description of intangible assets, which may include (a) for amortizable intangible assets (also referred to as finite-lived intangible assets), the carrying amount, the amount of any significant residual value, and the weighted-average amortization period, (b) for intangible assets not subject to amortization (also referred to as indefinite-lived intangible assets), the carrying amount, and (c) the amount of research and development assets acquired and written off in the period, including the line item in the income statement in which the amounts written off are aggregated, if not readily apparent from the income statement. Also discloses (a) for amortizable intangibles assets in total and by major class, the gross carrying amount and accumulated amortization, the total amortization expense for the period, and the estimated aggregate amortization expense for each of the five succeeding fiscal years, (b) for intangible assets not subject to amortization the carrying amount in total and by major class, and (c) for goodwill, in total and for each reportable segment, the changes in the carrying amount of goodwill during the period (including the aggregate amount of goodwill acquired, the aggregate amount of impairment losses recognized, and the amount of goodwill included in the gain or loss on disposal of a reporting unit). If any part of goodwill has not been allocated to a reportable segment, discloses the unallocated amount and the reasons for not allocating. For each impairment loss recognized related to an intangible asset (excluding goodwill), discloses: (a) a description of the impaired intangible asset and the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method for determining fair value, (c) the caption in the income statement or the statement of activities in which the impairment loss is aggregated, and (d) the segment in which the impaired intangible asset is reported. For each goodwill impairment loss recognized, discloses: (a) a description of the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method of determining the fair value of the associated reporting unit, and (c) if a recognized impairment loss is an estimate not finalized and the reasons why the estimate is not final. May also disclose the nature and amount of any significant adjustments made to a previous estimate of an impairment loss. This element may be used as a single block of text to include the entire intangible asset disclosure including data and tables.

+ References+ Details

Restructuring Costs

3 Months Ended

Mar. 31, 2010

Restructuring Costs:

Note 6. Restructuring Costs:

Integration Charges:

We believe our combination with Cadbury has the potential for meaningful revenue synergies over time from investments in distribution, marketing and product development. We expect to incur total integration charges of approximately $1.3 billion in the first three years following the acquisition to combine and integrate the two businesses. Integration costs include the costs associated with combining the operations of Kraft Foods and Cadbury and are separate from those costs related to the acquisition. In the first quarter of 2010, we incurred $43 million of the $1.3 billion in expected charges, which were primarily recorded within general corporate expenses.

Cost Savings Initiatives:

Cost savings initiatives generally include exit, disposal and other project savings costs. In the first quarter of 2010, we incurred $24 million in charges associated with our cost savings initiatives. We recorded these charges in operations, primarily within the segment operating income of Kraft Foods Europe and Canada & N.A. Foodservice. These charges primarily included other project savings costs associated with the Kraft Foods Europe Reorganization. Even though other project savings costs were directly attributable to exit and disposal costs, they did not qualify for special accounting treatment as exit or disposal activities.

Cadbury VIA Program:

In 2007, Cadbury initiated a Vision into Action ("VIA") restructuring program that was planned to run through 2011. We are evaluating the previous expectation of the remaining $250 million in pre-tax charges associated with the VIA restructuring program. We may modify the program in future quarters as we evaluate it in conjunction with the overall integration program. In the first quarter of 2010, we incurred $15 million in charges related to the program. We recorded these charges in operations, primarily within the segment operating income of Kraft Foods Europe and Kraft Foods Developing Markets. At March 31, 2010, we had an accrual of $158 million related to the program.

Liability activity for the VIA program in the first quarter of 2010 was (in millions):


Liability assumed upon acquisition	$	190
Charges		15
Cash spent		(39	)
Write-offs		(1	)
Currency		(7	)

Liability balance, March 31, 2010	$	158

2004 – 2008 Restructuring Program:

In 2008, we completed our five-year restructuring program (the "Restructuring Program"). The Restructuring Program's objectives were to leverage our global scale, realign and lower our cost structure, and optimize capacity. As part of the Restructuring Program, we:

•

incurred $3.0 billion in pre-tax charges reflecting asset disposals, severance and implementation costs;

•

announced the closure of 35 facilities and the elimination of approximately 18,600 positions; and

•

will use cash to pay for $2.0 billion of the $3.0 billion in charges.

Since the inception of the Restructuring Program, we have paid cash for $1.7 billion of the $2.0 billion in expected cash payments, including $22 million paid in the first quarter of 2010. At March 31, 2010, we had an accrual of $236 million related to the program.

Restructuring liability activity for the three months ended March 31, 2010 was:



		Severance			Other			Total
					(in millions)

	Liability balance, January 1, 2010	$	245		$	25		$	270
	Cash spent		(21	)		(1	)		(22	)
	Currency		(12	)		–			(12	)

	Liability balance, March 31, 2010	$	212		$	24		$	236


Our 2010 activity was related to cash outflows on prior year Restructuring Program charges. Our prior year severance charges included the cost of benefits received by terminated employees. Other prior year costs related primarily to the renegotiation of supplier contract costs, workforce reductions associated with facility closings and the termination of leasing agreements.

Debt

3 Months Ended

Mar. 31, 2010

Debt

Note 7. Debt: Short-Term Borrowings: At March 31, 2010 and December 31, 2009, our short-term borrowings and related weighted-average interest rates consisted of:
		March 31, 2010				December 31, 2009
		Amount		Weighted-		Amount		Weighted-
		Outstanding		Average Rate		Outstanding		Average Rate
		(in millions)				(in millions)

	Commercial paper	$	604		0.5%	$	262	0.5%
	Bank loans		287		6.0%		191	10.5%

	Total short-term borrowings	$	891			$	453

The fair values of our short-term borrowings at March 31, 2010 and December 31, 2009, based upon current market interest rates, approximate the amounts disclosed above.

Borrowing Arrangements:

We maintain a revolving credit facility that we have historically used for general corporate purposes, including for working capital purposes, and to support our commercial paper issuances. Our $4.5 billion three-year senior unsecured revolving credit facility expires in November 2012. No amounts have been drawn on the facility.

The revolving credit facility agreement includes a covenant that we maintain a minimum total shareholders' equity, excluding accumulated other comprehensive earnings / (losses), of at least $28.5 billion. This covenant increased by $5.5 billion due to our Cadbury acquisition. It will continue to increase by 75% of any increase in our total shareholders' equity if we refinance certain indebtedness. At March 31, 2010, our total shareholders' equity, excluding accumulated other comprehensive earnings / (losses), was $38.6 billion. We expect to continue to meet this covenant. The revolving credit facility agreement also contains customary representations, covenants and events of default. However, there are no other financial covenants, credit rating triggers or provisions that could require us to post collateral as security.

Cadbury maintains a three-year, £450 million senior unsecured revolving credit facility that expires in June 2012. No amounts have been drawn on the facility, and we currently maintain it for general corporate purposes. This revolving credit agreement includes a covenant that our subsidiary, Cadbury plc Group, maintain a minimum EBITDA to adjusted net interest ratio of 3.5 to 1 and a maximum net debt to adjusted EBITDA ratio of 3.6 to 1. At March 31, 2010, we were in compliance with and expect to continue to meet these covenants.

In addition to the above, some of our international subsidiaries maintain primarily uncommitted credit lines to meet short-term working capital needs. Collectively, these credit lines amounted to $2.2 billion at March 31, 2010. Borrowings on these lines amounted to $287 million at March 31, 2010 and $191 million at December 31, 2009.

As part of our Cadbury acquisition, on November 9, 2009, we entered into an agreement for a 364-day senior unsecured bridge facility (the "Cadbury Bridge Facility"). During the first quarter of 2010, we borrowed £807 million under the Cadbury Bridge Facility, and later repaid it ($1,205 million at the time of repayment) with proceeds from the divestiture of our Frozen Pizza business. Upon repayment, the Cadbury Bridge Facility was terminated.

Long-Term Debt:

On February 8, 2010, we issued $9.5 billion of senior unsecured notes at a weighted-average effective rate of 5.364% and used the net proceeds ($9,379 million) to finance the Cadbury acquisition and for general corporate purposes. The general terms of the $9.5 billion notes are:

•

$1.00 billion total principal notes due May 8, 2013 at a fixed, annual interest rate of 2.625%. Interest is payable semiannually beginning November 8, 2010.

•

$1.75 billion total principal notes due February 9, 2016 at a fixed, annual interest rate of 4.125%. Interest is payable semiannually beginning August 9, 2010.

•

$3.75 billion total principal notes due February 10, 2020 at a fixed, annual interest rate of 5.375%. Interest is payable semiannually beginning August 10, 2010.

•

$3.00 billion total principal notes due February 9, 2040 at a fixed, annual interest rate of 6.500%. Interest is payable semiannually beginning August 9, 2010.

In addition, these notes include covenants that restrict our ability to incur debt secured by liens above a certain threshold. We also must offer to purchase these notes at a price equal to 101% of the aggregate principal amount, plus accrued and unpaid interest to the date of repurchase, if both of the following occur:

(i)

a "change of control" triggering event, and

(ii)

a downgrade of these notes below an investment grade rating by each of Moody's Investors Service, Inc., Standard & Poor's Ratings Services and Fitch, Inc. within a specified period.

The fair value of the long-term debt we acquired as part of our Cadbury acquisition was $2,432 million at February 2, 2010. The acquired debt has the following terms:

•

£77 million (approximately $117 million) total principal notes due December 1, 2010 at a fixed, annual interest rate of 4.875%.

•

C$150 million (approximately $147 million) Canadian bank loan agreement expiring August 30, 2012 at a variable interest rate. The interest rate at March 31, 2010 was 0.795%.

•

$1.00 billion total principal notes due October 1, 2013 at a fixed, annual interest rate of 5.125%.

•

£300 million (approximately $456 million) total principal notes due December 11, 2014 at a fixed, annual interest rate of 5.375%.

•

£350 million (approximately $532 million) total principal notes due July 18, 2018 at a fixed, annual interest rate of 7.250%.

We expect to continue to comply with our long-term debt covenants.

At March 31, 2010 and December 31, 2009, our long-term debt consisted of (interest rates were as of March 31, 2010):


					March 31,			December 31,
					2010			2009
					(in millions)

	Notes, 0.90% to 7.55% (average effective rate 5.81%), due through 2040				$	24,877		$	14,395
	Euro notes, 5.75% to 6.25% (average effective rate 5.98%), due through 2015					3,842			4,072
	Sterling notes, 4.88% to 7.25% (average effective rate 4.42%), due through 2018					1,191			–
	Other foreign currency obligations					152			5
	Capital leases and other					67			65

	Total					30,129			18,537
	Less current portion of long-term debt					(633	)		(513	)

	Long-term debt				$	29,496		$	18,024

Aggregate maturities of our long-term debt for the years ended March 31 were (in millions):
	2011				$	633
	2012					4,712
	2013					2,407
	2014					3,306
	2015					1,610
	Thereafter					17,453
Fair Value: The aggregate fair value of total debt, based on quoted prices in active markets for identical liabilities, at March 31, 2010, was $32,762 million as compared with the carrying value of $31,020 million. The aggregate fair value of our total debt, based on quoted prices in active markets for identical liabilities, at December 31, 2009, was $20,222 million as compared with the carrying value of $18,990 million. Interest and Other Expense: Interest and other expense was:
		For the Three Months Ended
		March 31,
		2010			2009
		(in millions)

	Interest and other expense, net:
	Interest expense, external debt	$	378		$	305
	Acquisition-related financing fees		247			–
	Other income, net		(1	)		(25	)

	Total interest and other expense, net	$	624		$	280

Acquisition-related financing fees include hedging and foreign currency impacts associated with the Cadbury acquisition and other fees associated with the Cadbury Bridge Facility.

Capital Stock

3 Months Ended

Mar. 31, 2010

Capital Stock:

Note 8. Capital Stock:

Our articles of incorporation authorize 3.0 billion shares of Class A common stock, 2.0 billion shares of Class B common stock and 500 million shares of preferred stock. There were no Class B common shares or preferred shares issued and outstanding at March 31, 2010. Shares of Class A common stock issued, repurchased and outstanding were:


				Shares			Shares
		Shares Issued		Repurchased			Outstanding

	Balance at January 1, 2010		1,735,000,000		(257,115,097	)		1,477,884,903
	Shares issued		255,695,311		–			255,695,311
	Exercise of stock options and issuance of other stock awards		–		3,796,755			3,796,755

	Balance at March 31, 2010		1,990,695,311		(253,318,342	)		1,737,376,969


In the first quarter of 2010, we issued 256 million additional shares of our Common Stock as part of the Cadbury acquisition. The issued stock had a total fair value of $7,280 million based on the average of the high and low market prices on the dates of issuance.

- Definition

Disclosures related to accounts comprising shareholders' equity, including other comprehensive income. Includes: (1) balances of common stock, preferred stock, additional paid-in capital, other capital and retained earnings; (2) accumulated balance for each classification of other comprehensive income and total amount of comprehensive income; (3) amount and nature of changes in separate accounts, including the number of shares authorized and outstanding, number of shares issued upon exercise and conversion, and for other comprehensive income, the adjustments for reclassifications to net income; (4) rights and privileges of each class of stock authorized; (5) basis of treasury stock, if other than cost, and amounts paid and accounting treatment for treasury stock purchased significantly in excess of market; (6) dividends paid or payable per share and in the aggregate for each class of stock for each period presented; (7) dividend restrictions and accumulated preferred dividends in arrears (in aggregate and per share amount); (8) retained earnings appropriations or restrictions, such as dividend restrictions; (9) impact of change in accounting principle, initial adoption of new accounting principle and correction of an error in previously issued financial statements; (10) shares held in trust for Employee Stock Ownership Plan (ESOP); (11) deferred compensation related to issuance of capital stock; (12) note received for issuance of stock; (13) unamortized discount on shares; (14) description, terms and number of warrants or rights outstanding; (15) shares under subscription and subscription receivables; effective date of new retained earnings after quasi-reorganization and deficit eliminated by quasi-reorganization and, for a period of at least ten years after the effective date, the point in time from which the new retained dates; and (16) retroactive effective of subsequent change in capital structure.

+ References+ Details

Accumulated Other Comprehensive Earnings / (Losses)

3 Months Ended

Mar. 31, 2010

Accumulated Other Comprehensive Earnings / (Losses):

Note 9. Accumulated Other Comprehensive Earnings / (Losses):

The components of accumulated other comprehensive earnings / (losses) were:

		Currency						Derivatives
		Translation			Pension and			Accounted for
		Adjustments			Other Benefits			as Hedges			Total
		(in millions)

	Balances at December 31, 2009	$	(506	)	$	(3,550	)	$	101		$	(3,955	)
	Other comprehensive earnings / (losses), net of income taxes:
	Currency translation adjustments		(447	)		7			–			(440	)
	Amortization of experience losses and prior service costs		–			45			–			45
	Settlement losses		–			44			–			44
	Net actuarial loss arising during period		–			(83	)		–			(83	)
	Change in fair value of cash flow hedges		–			–			(33	)		(33	)

	Total other comprehensive losses											(467	)

	Balances at March 31, 2010	$	(953	)	$	(3,537	)	$	68		$	(4,422	)

- Definition

This label may include the following: 1) the amount of income tax expense or benefit allocated to each component of other comprehensive income, including reclassification adjustments, 2) the reclassification adjustments for each classification of other comprehensive income and 3) the ending accumulated balances for each component of comprehensive income. Components of comprehensive income include: (1) foreign currency translation adjustments; (2) gains and losses on foreign currency transactions that are designated as, and are effective as, economic hedges of a net investment in a foreign entity; (3) gains and losses on intercompany foreign currency transactions that are of a long-term-investment nature, when the entities to the transaction are consolidated, combined, or accounted for by the equity method in the reporting enterprise's financial statements; (4) change in the market value of a futures contract that qualifies as a hedge of an asset reported at fair value; (5) unrealized holding gains and losses on available-for-sale securities and that resulting from transfers of debt securities from the held-to-maturity category to the available-for-sale category; (6) a net loss recognized as an additional pension liability not yet recognized as net periodic pension cost; and (7) the net gain or loss and net prior service cost or credit for pension plans and other postretirement benefit plans.

+ References+ Details

Stock Plans

3 Months Ended

Mar. 31, 2010

Stock Plans:

Note 10. Stock Plans:

Restricted and Deferred Stock:

In January 2010, we granted 1.6 million shares of stock in connection with our long-term incentive plan, and the market value per share was $27.33 on the date of grant. In February 2010, as part of our annual equity program, we issued 2.5 million shares of restricted and deferred stock to eligible employees, and the market value per restricted or deferred share was $29.15 on the date of grant. During the first quarter of 2010, we issued an additional 0.6 million shares of restricted and deferred stock, and the weighted-average market value per restricted or deferred share was $29.22 on the date of grant. In aggregate, we issued 4.7 million restricted and deferred shares during the first quarter of 2010, including those issued as part of our long-term incentive plan.

During the first quarter of 2010, 3.8 million shares of restricted and deferred stock vested at a market value of $110 million.

Stock Options:

In February 2010, as part of our annual equity program, we granted 15.0 million stock options to eligible employees at an exercise price of $29.15. During the first quarter of 2010, we granted an additional 0.7 million stock options at a weighted-average exercise price of $29.54. In aggregate, we granted 15.7 million stock options in the first quarter of 2010.

There were 2.3 million stock options exercised during the first quarter of 2010 with a total intrinsic value of $34 million.

Benefit Plans

3 Months Ended

Mar. 31, 2010

Benefit Plans:

Note 11. Benefit Plans:

Pension Plans

Components of Net Periodic Pension Cost:

Net periodic pension cost consisted of the following for the three months ended March 31, 2010:


	U.S. Plans						Non-U.S. Plans
	For the Three Months Ended						For the Three Months Ended
	March 31,						March 31,
	2010			2009			2010			2009
	(in millions)

Service cost	$	37		$	39		$	36		$	15
Interest cost		92			92			86			51
Expected return on plan assets		(121	)		(121	)		(97	)		(57	)
Amortization:
Net loss from experience differences		43			39			18			5
Prior service cost		1			2			2			1
Other expenses		47			26			–			–

Net periodic pension cost	$	99		$	77		$	45		$	15

A significant portion of the 2010 increase in non-U.S. net periodic pension cost related to the Cadbury acquisition. Other expenses above included settlement losses under our U.S. plans from lump-sum payments made to retired employees of $42 million in the first quarter of 2010 and $26 million in the first quarter of 2009, and a $5 million curtailment charge in the first quarter of 2010 related to the divestiture of our Frozen Pizza business.

Employer Contributions:

We make contributions to our U.S. and non-U.S. pension plans, primarily to the extent that they are tax deductible and do not generate an excise tax liability. During the first quarter of 2010, we contributed $11 million to our U.S. plans and $80 million to our non-U.S. plans. Based on current tax law, we plan to make further contributions of approximately $40 million to our U.S. plans and approximately $200 million to our non-U.S. plans during the remainder of 2010. However, our actual contributions may differ due to many factors, including changes in tax and other benefit laws, or significant differences between expected and actual pension asset performance or interest rates.

Postretirement Benefit Plans

Net postretirement health care costs consisted of the following for the three months ended March 31, 2010 and 2009:


		For the Three Months Ended
		March 31,
		2010			2009
		(in millions)

	Service cost	$	10		$	9
	Interest cost		42			44
	Amortization:
	Net loss from experience differences		13			11
	Prior service credit		(8	)		(8	)

	Net postretirement health care costs	$	57		$	56

Postemployment Benefit Plans Net postemployment costs consisted of the following for the three months ended March 31, 2010 and 2009:
		For the Three Months Ended
		March 31,
		2010			2009
		(in millions)

	Service cost	$	3		$	2
	Interest cost		2			3
	Amortization of net gains		–			(1	)

	Net postemployment costs	$	5		$	4

- Definition

Description containing the entire pension and other postretirement benefits disclosure as a single block of text.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 158

-Paragraph 7, 21, 22

Reference 2: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 132R

-Paragraph 5, 6, 7, 8

Reference 3: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 132R

-Paragraph 8

-Subparagraph m

Reference 4: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 106

-Paragraph 518

Reference 5: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 87

-Paragraph 264

Reference 6: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 132R

-Paragraph 5

-Subparagraph b

Reference 7: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 132R

-Paragraph 5

-Subparagraph a

Reference 8: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 132R

-Paragraph 5

-Subparagraph h

Reference 9: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 132R

-Paragraph 5

-Subparagraph q

Reference 10: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name FASB Staff Position (FSP)

-Number FAS106-2

-Paragraph 20, 21, 22

Reference 11: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Emerging Issues Task Force (EITF)

-Number 03-2

-Paragraph 8

Reference 12: http://www.xbrl.org/2003/role/presentationRef

-Publisher AICPA

-Name Accounting Principles Board Opinion (APB)

-Number 30

-Paragraph 26

Reference 13: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Implementation Guide (Q and A)

-Number FAS88

-Paragraph 63

+ Details

Financial Instruments

3 Months Ended

Mar. 31, 2010

Financial Instruments:

Note 12. Financial Instruments: Fair Value of Derivative Instruments: The fair values of derivative instruments recorded in the condensed consolidated balance sheet as of March 31, 2010 and December 31, 2009 were:
		March 31, 2010				December 31, 2009
		Asset		Liability		Asset	Liability
		Derivatives		Derivatives		Derivatives	Derivatives
		(in millions)

	Derivatives designated as hedging instruments:
	Foreign exchange contracts	$	10	$	137	$ 8	$ 158
	Commodity contracts		15		38	25	14
	Interest rate contracts		139		–	153	–

		$	164	$	175	$ 186	$ 172

	Derivatives not designated as hedging instruments:
	Foreign exchange contracts	$	124	$	149	$ 2	$ –
	Commodity contracts		97		88	71	62
	Interest rate contracts		88		16	–	–

		$	309	$	253	$ 73	$ 62

	Total fair value	$	473	$	428	$ 259	$ 234

The majority of the increase in derivatives not designated as hedging instruments was a result of the Cadbury acquisition as we did not re-designate them for hedge accounting. We include the fair value of our asset derivatives within other current assets and the fair value of our liability derivatives within other current liabilities.

The fair values (asset / (liability)) of our derivative instruments at March 31, 2010 were determined using:


					Quoted Prices in
					Active Markets			Significant			Significant
					for Identical			Other Observable			Unobservable
		Total			Assets			Inputs			Inputs
		Fair Value			(Level 1)			(Level 2)			(Level 3)
		(in millions)

	Foreign exchange contracts	$	(152	)	$	–		$	(152	)	$	–
	Commodity contracts		(14	)		(19	)		4			1
	Interest rate contracts		211			–			211			–

	Total derivatives	$	45		$	(19	)	$	63		$	1

Cash Flow Hedges:
Cash flow hedges affected accumulated other comprehensive earnings / (losses), net of income taxes, as follows:
		For the Three Months Ended
		March 31,
		2010			2009
		(in millions)

	Accumulated gain / (loss) at beginning of period	$	101		$	(23	)
	Transfer of realized (gains) / losses in fair value to earnings		(3	)		35
	Unrealized loss in fair value		(30	)		(17	)

	Accumulated gain / (loss) at March 31	$	68		$	(5	)


The effects of cash flow hedges for the three months ended March 31, 2010 and 2009 were:
		For the Three Months Ended						For the Three Months Ended
		March 31, 2010						March 31, 2009
					(Gain) / Loss						(Gain) / Loss
		Gain / (Loss)			Reclassified			Gain / (Loss)			Reclassified
		Recognized			from AOCI			Recognized			from AOCI
		in OCI			into Earnings			in OCI			into Earnings
		(in millions)

	Foreign exchange contracts – intercompany loans	$	3		$	–		$	–		$	–
	Foreign exchange contracts – forecasted transactions		12			(6	)		15			(22	)
	Commodity contracts		(12	)		3			(32	)		57
	Interest rate contracts		(33	)		–			–			–

	Total	$	(30	)	$	(3	)	$	(17	)	$	35


		For the Three Months Ended March 31, 2010						For the Three Months Ended March 31, 2009
		Gain/(Loss) on Ineffectiveness Recognized in Earnings			Gain / (Loss) on Amount Excluded from Effectiveness Testing Recognized in Earnings			Gain /(Loss) on Ineffectiveness Recognized in Earnings			Gain /(Loss) on Amount Excluded from Effectiveness Testing Recognized in Earnings
		(in millions)

	Foreign exchange contracts – intercompany loans	$	–		$	–		$	–		$	–
	Foreign exchange contracts – forecasted transactions		–			–			–			–
	Commodity contracts		(9	)		(1	)		(2	)		–
	Interest rate contracts		–			–			–			–

	Total	$	(9	)	$	(1	)	$	(2	)	$	–

We record (i) the gain or loss reclassified from accumulated other comprehensive earnings / (losses) into earnings, (ii) the gain or loss on ineffectiveness, and (iii) the gain or loss on the amount excluded from effectiveness testing in: • cost of sales for commodity contracts; • cost of sales for foreign exchange contracts related to forecasted transactions; and • interest and other expense, net for interest rate contracts and foreign exchange contracts related to intercompany loans. We expect to transfer unrealized losses of $9 million (net of taxes) for commodity cash flow hedges, unrealized gains of $13 million (net of taxes) for foreign currency cash flow hedges and unrealized losses of $1 million (net of taxes) for interest rate cash flow hedges to earnings during the next 12 months. Hedge Coverage: As of March 31, 2010, we had hedged forecasted transactions for the following durations: • commodity transactions for periods not exceeding the next 21 months; • interest rate transactions for periods not exceeding the next 32 years and 10 months; and • foreign currency transactions for periods not exceeding the next 22 months. Fair Value Hedges: The effects of fair value hedges for the three months ended March 31, 2010 were:
		For the Three Months Ended March 31, 2010
		Gain /(Loss) Recognized in Income on Derivatives			Gain / (Loss) Recognized in Income on Borrowings
		(in millions)

	Interest rate contracts	$	5		$	(5	)

We include the gain or loss on hedged long-term debt and the offsetting loss or gain on the related interest rate swap in interest and other expense, net. We had no fair value hedges in the first quarter of 2009.

Hedges of Net Investments in Foreign Operations:

The effects of hedges of net investments in foreign operations for the three months ended March 31, 2010 and 2009 were:


		Gain / (Loss) Recognized in OCI						Location of Gain / (Loss) Recorded in AOCI
		For the Three Months Ended March 31, 2010			For the Three Months Ended March 31, 2009			Location of Gain / (Loss) Recorded in AOCI
		(in millions)

	Euro notes	$	147		$	131		Currency Translation Adjustment
Economic Hedges: The effects of economic hedges, derivatives that are not designated as hedging instruments, for the three months ended March 31, 2010 and 2009 were:
		Gain / (Loss) Recognized in Earnings						Location of
		Gain / (Loss) Recognized in Earnings						Location of
		For the Three Months Ended March 31, 2010			For the Three Months Ended March 31, 2009			Gain / (Loss) Recognized in Earnings
		(in millions)

	Foreign exchange contracts:
	Intercompany loans and forecasted interest payments	$	7		$	(19	)	Interest expense
	Forecasted transactions		–			1		Cost of sales
	Forecasted transactions		(17	)		–		Interest expense
	Cadbury acquisition-related		(395	)		–		Interest expense
	Interest rate contracts		9			–		Interest expense
	Commodity contracts		(24	)		26		Cost of sales

	Total	$	(420	)	$	8


The hedging losses related to the Cadbury acquisition were economically offset by foreign exchange movement net gains of $241 million on the British pound cash, Cadbury Bridge Facility and payable balances associated with the acquisition. See our consolidated financial statements for the year ended December 31, 2009 for additional information on our purpose for entering into derivatives not designated as hedging instruments and our overall risk management strategies.

Volume:
As of March 31, 2010 and December 31, 2009, we had the following outstanding hedges:
		Notional Amount
		March 31, 2010			December 31, 2009
		(in millions)

	Foreign exchange contracts:
	Intercompany loans and forecasted interest payments	$	4,625		$	1,376
	Forecasted transactions		2,577			631
	Cadbury acquisition-related		–			–
	Commodity contracts		2,080			1,832
	Interest rate contracts		4,020			2,350
	Net investment hedge – euro notes		3,850			4,081

Commitments and Contingencies

3 Months Ended

Mar. 31, 2010

Commitments and Contingencies:

Note 13. Commitments and Contingencies:

Legal Proceedings:

We routinely are involved in legal proceedings, claims and governmental inspections or investigations ("Legal Matters") arising in the ordinary course of our business. Currently, we do not believe that the ultimate costs to resolve any of the Legal Matters will have a material effect on our financial results.

Third-Party Guarantees:

We have third-party guarantees primarily covering the long-term obligations of our vendors. As part of those transactions, we guarantee that third parties will make contractual payments or achieve performance measures. At March 31, 2010, the carrying amount of our third-party guarantees on our condensed consolidated balance sheet and the maximum potential payment under these guarantees was $29 million. Substantially all of these guarantees expire at various times through 2018.

Leases:

As of March 31, 2010, minimum rental commitments under non-cancelable operating leases in effect at quarter-end were (in millions):


2011	$	363
2012		301
2013		238
2014		171
2015		146
Thereafter		335

Income Taxes

3 Months Ended

Mar. 31, 2010

Income Taxes:

Note 14. Income Taxes:

As of January 1, 2010, our unrecognized tax benefits were $829 million. If we had recognized all of these benefits, the net impact on our income tax provision would have been $661 million. Our unrecognized tax benefits were $1,217 million at March 31, 2010, and if we had recognized all of these benefits, the net impact to our income tax provision would have been $1,017 million. We expect that the amount of unrecognized tax benefits will decrease by approximately $50 million during the next 12 months due to the potential resolution of certain foreign, U.S. federal and state examinations. Furthermore, we recorded $319 million of unrecognized tax benefits and $33 million of accrued interest and penalties as part of our preliminary purchase price allocations for Cadbury, which are subject to revision when the purchase price allocations are finalized in 2010. We include accrued interest and penalties related to uncertain tax positions in our tax provision. We had accrued interest and penalties of $210 million as of January 1, 2010 and $248 million as of March 31, 2010.

The changes in our unrecognized tax benefits for the three months ended March 31, 2010 and 2009 were (in millions):


	2010			2009

January 1	$	829		$	807
Increases from positions taken during prior periods		–			2
Decreases from positions taken during prior periods		(10	)		(8	)
Increases from positions taken during the current period		99			36
Increases from acquisition adjustments		319			–
Decreases relating to settlements with taxing authorities		(2	)		–
Reductions resulting from the lapse of the applicable statute of limitations		(7	)		(7	)
Currency / other		(11	)		(9	)

March 31	$	1,217		$	821

The tax effects of temporary differences that gave rise to deferred income tax assets and liabilities consisted of the following at March 31, 2010 and December 31, 2009:


	March 31, 2010			December 31, 2009
	(in millions)
Deferred income tax assets:
Accrued postretirement and postemployment benefits	$	1,356		$	1,472
Accrued pension costs		717			456
Other		2,086			1,997

Total deferred income tax assets		4,159			3,925

Valuation allowance		(307	)		(97	)

Net deferred income tax assets	$	3,852		$	3,828


Deferred income tax liabilities:
Trade names	$	(7,451	)	$	(4,431	)
Property, plant and equipment		(2,141	)		(2,029	)
Other		(689	)		(1,055	)

Total deferred income tax liabilities		(10,281	)		(7,515	)

Net deferred income tax liabilities	$	(6,429	)	$	(3,687	)

Earnings Per Share

3 Months Ended

Mar. 31, 2010

Earnings Per Share:

Note 15. Earnings Per Share:

Basic and diluted EPS were calculated using the following:

		For the Three Months Ended March 31,
		2010		2009
		(in millions, except per share data; 2009 revised)

	Earnings from continuing operations	$	249	$	603
	Earnings and gain from discontinued operations, net of income taxes		1,644		59

	Net earnings		1,893		662
	Noncontrolling interest		10		2

	Net earnings attributable to Kraft Foods	$	1,883	$	660


	Weighted-average shares for basic EPS		1,614		1,475
	Plus incremental shares from assumed conversions of stock options and long-term incentive plan shares		6		8


	Weighted-average shares for diluted EPS		1,620		1,483


	Basic earnings per share attributable to Kraft Foods:
	Continuing operations	$	0.15	$	0.41
	Discontinued operations		1.02		0.04

	Net earnings attributable to Kraft Foods	$	1.17	$	0.45


	Diluted earnings per share attributable to Kraft Foods:
	Continuing operations	$	0.15	$	0.41
	Discontinued operations		1.01		0.04

	Net earnings attributable to Kraft Foods	$	1.16	$	0.45

We exclude antidilutive Kraft Foods stock options from our calculation of weighted-average shares for diluted EPS. We excluded 37.9 million antidilutive stock options for the three months March 31, 2010, and we excluded 24.2 million antidilutive stock options for the three months ended March 31, 2009.

Segment Reporting

3 Months Ended

Mar. 31, 2010

Segment Reporting:

Note 16. Segment Reporting:

We manufacture and market packaged food products, including snacks, beverages, cheese, convenient meals and various packaged grocery products. We manage and report operating results through three geographic units: Kraft Foods North America, Kraft Foods Europe and Kraft Foods Developing Markets. We manage the operations of Kraft Foods North America and Kraft Foods Europe by product category, and we manage the operations of Kraft Foods Developing Markets by location. Our reportable segments are U.S. Beverages, U.S. Cheese, U.S. Convenient Meals, U.S. Grocery, U.S. Snacks, Canada & N.A. Foodservice, Kraft Foods Europe and Kraft Foods Developing Markets. The results from our Cadbury acquisition are reflected within our U.S. Snacks, Canada & N.A. Foodservice, Kraft Foods Europe and Kraft Foods Developing Markets segments.

Management uses segment operating income to evaluate segment performance and allocate resources. We believe it is appropriate to disclose this measure to help investors analyze segment performance and trends. Segment operating income excludes unrealized gains and losses on hedging activities (which are a component of cost of sales), certain components of our U.S. pension plan cost (which is a component of cost of sales and marketing, administration and research costs), general corporate expenses (which are a component of marketing, administration and research costs) and amortization of intangibles for all periods presented. We exclude certain components of our U.S. pension plan cost from segment operating income because we centrally manage pension plan funding decisions and the determination of discount rate, expected rate of return on plan assets and other actuarial assumptions. Therefore, we allocate only the service cost component of our U.S. pension plan expense to segment operating income. We exclude the unrealized gains and losses on hedging activities from segment operating income in order to provide better transparency of our segment operating results. Once realized, we record gains and losses on hedging activities within segment operating results. Furthermore, we centrally manage interest and other expense, net. Accordingly, we do not present these items by segment because they are excluded from the segment profitability measure that management reviews.

Segment data were:


	For the Three Months Ended March 31,
	2010		2009
	(in millions; 2009 revised)
Net revenues:
Kraft Foods North America:
U.S. Beverages	$	821	$	783
U.S. Cheese		845		894
U.S. Convenient Meals		770		735
U.S. Grocery		816		818
U.S. Snacks		1,392		1,197
Canada & N.A. Foodservice		1,044		872
Kraft Foods Europe		2,709		1,928
Kraft Foods Developing Markets		2,921		1,752

Net revenues	$	11,318	$	8,979


	For the Three Months Ended
	March 31,
	2010			2009
	(in millions; 2009 revised)
Earnings from continuing operations before income taxes:
Operating income:
Kraft Foods North America:
U.S. Beverages	$	172		$	162
U.S. Cheese		134			131
U.S. Convenient Meals		84			61
U.S. Grocery		286			262
U.S. Snacks		207			129
Canada & N.A. Foodservice		100			72
Kraft Foods Europe		289			146
Kraft Foods Developing Markets		359			207
Unrealized gains / (losses) on hedging activities		(38	)		87
Certain U.S. pension plan costs		(56	)		(40	)
General corporate expenses		(298	)		(36	)
Amortization of intangibles		(33	)		(6	)

Operating income		1,206			1,175
Interest and other expense, net		624			280

Earnings from continuing operations before income taxes	$	582		$	895

Unrealized Gains / (Losses) on Hedging Activities – We recognized losses on the change in unrealized hedging positions of $38 million for the three months ended March 31, 2010 and gains of $87 million for the three months ended March 31, 2009.

General Corporate Expenses – The 2010 increase in general corporate expenses was primarily due to acquisition-related transaction fees and integration costs.

Restructuring Costs – In the first quarter of 2010, we incurred $43 million in integration charges to combine and integrate Kraft Foods and Cadbury. We recorded these charges primarily within general corporate expenses. We also incurred charges associated with our cost savings initiatives of $24 million in the first quarter of 2010. We recorded these charges in operations, primarily within the segment operating income of Kraft Foods Europe and Canada & N.A. Foodservice. In addition, in the first quarter of 2010, we incurred $15 million in charges related to the Cadbury VIA program. We recorded these charges in operations, primarily within the segment operating income of Kraft Foods Europe and Kraft Foods Developing Markets.

Total assets by segment were:


		March 31, 2010		December 31, 2009
		(in millions)
	Total assets:
	Kraft Foods North America:
	U.S. Beverages	$	2,364	$	2,382
	U.S. Cheese		4,499		4,589
	U.S. Convenient Meals		2,186		3,063
	U.S. Grocery		5,587		5,565
	U.S. Snacks		22,230		16,418
	Canada & N.A. Foodservice		6,501		5,051
	Kraft Foods Europe		26,739		16,073
	Kraft Foods Developing Markets		20,816		11,087
	Unallocated assets ⁽¹⁾		4,787		2,486

	Total assets	$	95,709	$	66,714

	(1) Unallocated assets consist primarily of cash and cash equivalents, deferred income taxes, centrally held property, plant and equipment, prepaid pension assets and derivative financial instrument balances.

Net revenues by consumer sector, which includes Kraft macaroni and cheese dinners in the Convenient Meals sector and the separation of Canada & N.A. Foodservice, Kraft Foods Europe and Kraft Foods Developing Markets into sector components, were:

		For the Three Months Ended March 31, 2010
		Kraft Foods North America		Kraft Foods Europe		Kraft Foods Developing Markets		Total
		(in millions)

	Snacks ⁽¹⁾	$	1,366	$	559	$	604	$	2,529
	Confectionery		307		1,197		1,381		2,885
	Beverages		940		587		571		2,098
	Cheese		1,211		242		209		1,662
	Grocery		747		74		127		948
	Convenient Meals		1,117		50		29		1,196

	Total net revenues	$	5,688	$	2,709	$	2,921	$	11,318


		For the Three Months Ended March 31, 2009
		Kraft Foods North America		Kraft Foods Europe		Kraft Foods Developing Markets		Total
		(in millions; as revised)

	Snacks ⁽¹⁾	$	1,334	$	520	$	538	$	2,392
	Confectionery		46		540		461		1,047
	Beverages		881		525		421		1,827
	Cheese		1,207		221		190		1,618
	Grocery		752		72		116		940
	Convenient Meals		1,079		50		26		1,155

	Total net revenues	$	5,299	$	1,928	$	1,752	$	8,979

	(1) The Snacks sector formerly included Confectionery brands. With the Cadbury acquisition, the Confectionery brands have been separately broken out. Confectionery primarily includes our chocolate and gum brands.

Subsequent Events	3 Months Ended
Subsequent Events	Mar. 31, 2010
Subsequent Events:	Note 17. Subsequent Events: We evaluated subsequent events and included all accounting and disclosure requirements related to subsequent events in our financial statements.