-------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): October 16, 2001 KRAFT FOODS INC. (Exact name of registrant as specified in its charter) Virginia 001-16483 52-2284372 (State or other jurisdiction (Commission (I.R.S. Employer of incorporation) File Number) Identification No.) Three Lakes Drive, Northfield, Illinois 60093-2753 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (847) 646-2000 (Former name or former address, if changed since last report.) --------------------------------------------------------------------------------
Item 5. Other Events. On October 16, 2001, Kraft Foods Inc. issued a press release announcing its financial results for the third quarter ended September 30, 2001. A copy of the press release is attached as Exhibit 99. Item 7. Financial Statements, Pro Forma Financial Information and Exhibits. (c) Exhibits. 99.1 Kraft Foods Inc. Press Release dated October 16, 2001
SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. KRAFT FOODS INC. By: /s/ JAMES P. DOLLIVE ---------------------------------- Name: James P. Dollive Title: Senior Vice President and Chief Financial Officer Date: October 16, 2001
INDEX TO EXHIBITS EXHIBIT NO. DESCRIPTION ---------- ----------- 99.1 Kraft Foods Inc. Press Release dated October 16, 2001
EXHIBIT 99.1 KRAFT FOODS INC. REPORTS 2001 THIRD-QUARTER RESULTS Pro Forma Diluted E.P.S. Up 25.0% to $0.30 Pro Forma Net Earnings Up 24.3% to $522 Million Highlights: - Pro forma worldwide volume up 3.0%, with Kraft Foods North America up 2.5% and Kraft Foods International up 4.4%. - Pro forma operating companies income up 9.8% to $1.5 billion. - Pro forma diluted earnings per share up 25.0% to $0.30. - Pro forma net earnings up 24.3% to $522 million. - Pro forma cash earnings per share, which exclude amortization of goodwill, increased 15.8% to $0.44. - Reported worldwide volume increased 34.6% and reported operating companies income increased 17.5%. However, due to the impact of the Nabisco acquisition on interest expense and goodwill amortization, reported net earnings were down 8.2% to $503 million and reported diluted earnings per share were down 23.7% to $0.29. 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 indebtedness incurred 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 third quarter of 2001 versus the third quarter of 2000. Audio Webcast: A conference call with members of the investment community will be Webcast at 5:00 p.m. ET on October 16, 2001. Access is available at www.kraft.com.
Contacts: North American Media Michael Mudd 847-646-2868 mmudd@kraft.com International Media Paul Carothers 914-335-1897 pcarothers@kraftintlhq.com Investor Relations Gordon Fruetel 914-335-3194 ir@kraft.com KRAFT FOODS INC. REPORTS 2001 THIRD-QUARTER RESULTS Pro Forma Diluted E.P.S. Up 25.0% to $0.30 Pro Forma Net Earnings Up 24.3% to $522 Million NORTHFIELD, IL - October 16, 2001 -- Kraft Foods Inc. (NYSE: KFT), a global leader in branded foods and beverages, announced today strong results for the third quarter, with pro forma diluted earnings per share increasing 25.0% to $0.30 and net earnings increasing 24.3% to $522 million. Pro forma cash earnings per share, which exclude amortization of goodwill, increased 15.8% to $0.44. "Kraft's continued strong performance was driven by a balance of three factors - higher volume from new products and in developing markets, cost savings from productivity and synergies, and lower interest expense," said Roger K. Deromedi, Co-Chief Executive Officer of Kraft Foods. "Our results in the quarter are on target and keep us in line with our full-year 2001 projections," said Betsy D. Holden, Co-Chief Executive Officer of Kraft Foods. "For this year we continue to expect pro forma diluted earnings per share in the range of $1.18 to $1.21 based on 1.735 billion shares outstanding. On a pro forma diluted cash basis, we expect 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. During the quarter, Kraft declared its first regular quarterly dividend of $0.13 per common share. Nabisco Integration "Around the world, the integration of Nabisco is proceeding smoothly and meeting expectations," Deromedi said. "We're starting to see the power of joint promotions and cross-branding initiatives," Holden added, "and we're on track to capture $100 million in net cost synergy savings this year." Reported Results On a reported basis, worldwide volume increased 34.6%; operating revenues increased 29.6% to $8.1 billion; and operating companies income increased 17.5% to $1.5 billion, reflecting the acquisition of Nabisco. Net earnings decreased 8.2% to $503 million and diluted earnings per share decreased 23.7% to $0.29 as a result of higher interest expense and goodwill amortization from the Nabisco acquisition. Included in reported results for the third quarter are $37 million of costs to consolidate production lines in the U.S. These costs are part of the previously communicated $200-$300 million in estimated charges for Kraft site closures, reconfigurations and other consolidation programs associated with integrating Kraft and Nabisco. Pro Forma Results Pro forma worldwide volume increased 3.0%; operating revenues decreased 0.7%, as the favorable impact of volume growth was more than offset by the adverse effect of currency, lower coffee prices and product mix. Operating companies income increased 9.8%; net earnings increased 24.3% due to growth in operating companies income and reduced interest expense; diluted earnings per share increased 25.0%; and diluted cash earnings per share increased 15.8%. Excluding unfavorable currency impacts, operating revenues would have increased 1.3% and operating companies income would have been up 10.8%. To allow for a more meaningful comparison of business results for the third quarter of 2001 versus the third quarter of 2000, the following discussion is on a pro forma basis. -2-
KRAFT FOODS NORTH AMERICA Volume for Kraft Foods North America (KFNA) increased 2.5%, 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 0.5% as the favorable impact of stronger volume was partially offset by the adverse impact of currency in Canada, lower coffee pricing due to declines in coffee commodity costs and product mix. Operating companies income improved a strong 10.2%, driven by volume growth and productivity and Nabisco cost synergy savings, partially offset by higher dairy commodity costs. Following are results by segment for KFNA: Cheese, Meals and Enhancers volume was 0.9% below prior year due to the company's decision to exit lower-margin, non-branded businesses in both cheese and U.S. Foodservice. Excluding these initiatives, volume increased 0.5%. Operating companies income increased 3.6% for this segment with gains in Meals, Enhancers, Canada and Foodservice, partially offset by the adverse impact of higher dairy commodity costs in the Cheese business. Meals recorded strong volume gains in Kraft macaroni and cheese dinners. Shipments in Canada also increased, driven by continued momentum from new products, including Kraft Delissio frozen pizza. Biscuits, Snacks and Confectionery volume was down 0.3%. Operating companies income increased a strong 26.4%, due primarily to productivity and synergy savings. Biscuits recorded volume gains, led by continued momentum in crackers and pet snacks and the successful introduction of Chocolate Creme Oreos. In salty snacks, volume declined as a result of lower shipments of Planters nuts to non-grocery channels. Shipments were also lower in the Confectionery business versus a strong year-ago period. Beverages, Desserts and Cereals volume increased 9.6%, driven by continued momentum in ready-to-drink beverages. Operating companies income improved by 11.0% driven by the increase in volume. Double-digit volume gains in ready-to-drink beverages resulted from the continued success of new products, including Capri Sun Big Pouch and Crystal Light in bottles. Shipments of Kool-Aid and Country Time powdered soft drinks also increased, due to strong merchandising programs. In Desserts, volume was down in Jell-O dry packaged desserts, partially offset by gains in ready-to-eat desserts, aided by the launch of Jell-O Oreo pudding. Post cereal volume declined due primarily to increased competition in the ready-to-eat cereal category. -3-
Oscar Mayer and Pizza volume increased 3.2% with gains across all major categories. Operating companies income increased 7.5%, resulting from volume gains, partially offset by higher meat and cheese costs. The processed meats business recorded volume gains in luncheon meats, hot dogs, Lunchables and Boca meat alternatives. Shipments of frozen pizza also increased, aided by the successful introduction of DiGiorno stuffed crust pizza and Tombstone Mexican-style pizza. KRAFT FOODS INTERNATIONAL Volume for Kraft Foods International (KFI) increased 4.4%, benefiting from gains across most key sectors and driven by a 12.1% growth in the developing markets of Central and Eastern Europe, Latin America and Asia Pacific. Operating companies income increased 8.2%, driven by volume growth, continued productivity savings and Nabisco cost synergies. Excluding an unfavorable currency impact of $11 million, operating companies income would have increased 12.5%. Operating revenues decreased 4.1%. Excluding the negative currency impact, revenues increased 2.7% with the impact of higher volume moderated by lower coffee pricing due to declining commodity costs. Following are results by segment for KFI: Europe, Middle East and Africa (EMEA) volume was in-line with prior year, as double-digit gains in the developing markets of Central and Eastern Europe and growth in Austria, Greece, Norway, Spain, Sweden and the United Kingdom were offset by lower volumes in Germany and Italy. Operating companies income increased 0.5% including an unfavorable currency impact of $7.0 million. Excluding negative currency, operating companies income would have increased 4.0%. Snacks volume increased, driven by favorable confectionery and salty snacks performance. Confectionery volume was above last year, reflecting growth of Milka in Bulgaria, Hungary, Italy, Spain and the Ukraine; Cote d'Or in Belgium and Italy; Marabou in Sweden and Korona in the Ukraine. Successful new product introductions included the Milka 100-year anniversary praline box in Germany; Terry's chocolate orange mini segments in a tub in the United Kingdom and Milka line extensions across Europe. Germany volume was lower, due to increased price competition and trade inventory reductions. Double-digit volume growth in salty snacks was driven by successful Estrella -4-
promotions in Lithuania and the strong performance of Lux and Estrella brands in the Ukraine. Volume growth in beverages was driven by favorable performance in both coffee and refreshment beverages. Coffee volume increases were led by Hag in Austria and Italy; Jacobs in Poland, Lithuania and the Ukraine; Kenco Rappor and Maxwell House in the United Kingdom as well as recent coffee acquisitions in Bulgaria, Romania and Morocco. In Germany, coffee volume declined reflecting continued trade inventory reductions. Refreshment beverages volume grew, driven by higher Tang shipments to the Middle East and Africa. Cheese volume was lower, as favorable Philadelphia cream cheese performance in Belgium, Italy, Spain, the United Kingdom and Away from Home markets was more than offset by lower volume in Germany, reflecting increased price competition. In Convenient Meals, volume was down as lower canned meats volume in Italy was partly offset by the continued momentum of new Dairylea Lunchables products in the United Kingdom. During the quarter, KFI announced its agreement to purchase the Central and Eastern European confectionery business of Stollwerck AG. This acquisition is subject to regulatory approvals in the respective countries. Latin America and Asia Pacific (LAAP) volume increased 10.7%, driven by gains in Australia, Brazil, China, Peru and the Philippines, partially offset by a decline in Argentina due to economic weakness. Operating companies income increased 34.5%, driven by higher volume, productivity and Nabisco synergies. In snacks, volume was higher, driven by successful marketing programs for Club Social crackers and line extensions of Trakinas cookies in Brazil, higher sales of Chips Ahoy!, Trakinas and Marbu cookies in China and gains in Club Social crackers and Oreo cookies in Peru. Double-digit volume growth in beverages was driven by the strong performance of Tang, Fresh and Clight powdered soft drinks and Maguary juice concentrate in Brazil, as well as successful marketing programs and improved distribution of Tang in the Philippines. Cheese volume also grew strongly, driven by higher Philadelphia cream cheese shipments in Australia and successful marketing programs for Kraft Cheez Whiz and Eden process cheese in the Philippines. * * * -5-
Kraft Foods Inc. 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. You may learn more by listening to a live audio webcast of the Kraft conference call with members of the investment community at 5:00 p.m. ET on October 16, 2001. Access is available at www.kraft.com. 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, fluctuations in levels of customer inventories 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 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. # # # -6-
KRAFT FOODS INC. and Subsidiaries Condensed Statements of Earnings For the Quarters Ended September 30, ($ in millions, except per share data) REPORTED PRO FORMA ( * ) ----------------------------------- --------------------------------- 2001 2000 % Change 2001 2000 % Change ------ ------- -------- ------ ------ -------- Operating revenues $8,056 $ 6,215 29.6 % $8,056 $8,110 (0.7)% Cost of sales 4,224 3,257 29.7 % ------ ------- Gross profit 3,832 2,958 29.5 % Marketing, administration and research costs 2,335 1,854 25.9 % Loss on sale of a North American food factory and integration costs 37 -- Gain on sale of a French confectionery business -- (139) ------ ------- Operating companies income 1,460 1,243 17.5 % $1,497 $1,363 9.8 % Amortization of goodwill 239 136 General corporate expenses 45 50 Interest and other debt expense, net 256 122 ------ ------- Earnings before income taxes 920 935 (1.6)% Provision for income taxes 417 387 7.8 % ------ ------- Net earnings $ 503 $ 548 (8.2)% $ 522 $ 420 24.3 % ====== ======= ====== ====== Basic earnings per share (**) $ 0.29 $ 0.38 (23.7)% $ 0.30 $ 0.24 25.0 % ====== ======= ====== ====== Diluted earnings per share (**) $ 0.29 $ 0.38 (23.7)% $ 0.30 $ 0.24 25.0 % ====== ======= ====== ====== Weighted average number of shares outstanding - Basic 1,735 1,455 19.2 % 1,735 1,735 -- % - Diluted 1,735 1,455 19.2 % 1,735 1,735 -- % (*) 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. (**) 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. -7-
KRAFT FOODS INC. and Subsidiaries Operating Revenues For the Quarters Ended September 30, ($ in millions) OPERATING REVENUES REPORTED PRO FORMA ( * ) ---------------------------------- ----------------------------------- ------------------------------------ 2001 2000 % Change 2001 2000 % Change ------ ------ -------- ------ ------ -------- Cheese, Meals and Enhancers $2,438 $2,237 9.0 % $2,438 $2,447 (0.4)% Biscuits, Snacks and Confectionery 1,479 82 100.0+% 1,479 1,479 -- % Beverages, Desserts and Cereals 1,225 1,188 3.1 % 1,225 1,226 (0.1)% Oscar Mayer and Pizza 913 872 4.7 % 913 872 4.7 % ------ ------ ------ ------ Total Kraft Foods North America 6,055 4,379 38.3 % 6,055 6,024 0.5 % ------ ------ ------ ------ Europe, Middle East and Africa 1,427 1,552 (8.1)% 1,427 1,529 (6.7)% Latin America and Asia Pacific 574 284 100.0+% 574 557 3.1 % ------ ------ ------ ------ Total Kraft Foods International 2,001 1,836 9.0 % 2,001 2,086 (4.1)% ------ ------ ------ ------ Total operating revenues- Kraft Foods Inc. $8,056 $6,215 29.6 % $8,056 $8,110 (0.7)% ====== ====== ====== ====== (*) Results are presented on a Pro forma basis as if Nabisco had been acquired on Jan. 1, 2000. -8-
KRAFT FOODS INC. and Subsidiaries Operating Companies Income For the Quarters Ended September 30, ($ in millions) OPERATING COMPANIES INCOME REPORTED PRO FORMA ( * ) -------------------------------------- ------------------------------------ 2001 2000 % Change 2001 2000 % Change ------- ------ -------- ------ ------ -------- Cheese, Meals and Enhancers $ 525 $ 456 15.1 % $ 525 $ 507 3.6% Loss on sale of a North American food factory and integration costs (31) -- -- -- ------- ------ ------ ------ Cheese, Meals and Enhancers, net 494 456 8.3 % 525 507 3.6% Biscuits, Snacks and Confectionery 278 24 100.0+% 278 220 26.4% Beverages, Desserts and Cereals 273 240 13.8 % 273 246 11.0% Loss on sale of a North American food factory and integration costs (6) -- -- -- ------- ------ ------ ------ Beverages, Desserts and Cereals, net 267 240 11.3 % 273 246 11.0% Oscar Mayer and Pizza 144 134 7.5 % 144 134 7.5% ------- ------ ------ ------ Total Kraft Foods North America 1,220 854 42.9 % 1,220 1,107 10.2% Loss on sale of a North American food factory and integration costs (37) -- -- -- ------- ------ ------ ------ Total Kraft Foods North America, net 1,183 854 38.5 % 1,220 1,107 10.2% ======= ====== ====== ====== Europe, Middle East and Africa 199 211 (5.7)% 199 198 0.5% Gain on sale of a French confectionery business -- 139 -- -- ------- ------ ------ ------ Europe, Middle East and Africa, net 199 350 (43.1)% 199 198 0.5% Latin America and Asia Pacific 78 39 100.0 % 78 58 34.5% ------- ------ ------ ------ Total Kraft Foods International 277 250 10.8 % 277 256 8.2% Gain on sale of a French confectionery business -- 139 -- -- ------- ------ ------ ------ Total Kraft Foods International, net 277 389 (28.8)% 277 256 8.2% ------- ------ ------ ------ Total operating companies income- Kraft Foods Inc. $ 1,497 $1,104 35.6 % $1,497 $1,363 9.8% Loss on sale of a North American food factory and integration costs (37) -- -- -- Gain on sale of a French confectionery business -- 139 -- -- ------- ------ ------ ------ Total operating companies income- Kraft Foods Inc., net $ 1,460 $1,243 17.5 % $1,497 $1,363 9.8% ======= ====== ====== ====== (*) Results are presented on a Pro forma basis as if Nabisco had been acquired on Jan. 1, 2000. -9-
KRAFT FOODS INC. and Subsidiaries Condensed Statements of Earnings For the Nine Months Ended September 30, ($ in millions, except per share data) REPORTED PRO FORMA (*) -------------------------------------- --------------------------------------- 2001 2000 % Change 2001 2000 % Change ------- -------- -------- ------- ------- -------- Operating revenues $25,115 $ 19,649 27.8 % $25,111 $25,171 (0.2)% Cost of sales 12,883 10,195 26.4 % ------- -------- Gross profit 12,232 9,454 29.4 % Marketing, administration and research costs 7,673 5,952 28.9 % Loss on sale of a North American food factory and integration costs 66 -- Gain on sale of a French confectionery business -- (139) ------- -------- Operating companies income 4,493 3,641 23.4 % $ 4,558 $ 4,218 8.1 % Amortization of goodwill 719 403 General corporate expenses 141 151 Interest and other debt expense, net 1,189 381 ------- -------- Earnings before income taxes 2,444 2,706 (9.7)% Provision for income taxes 1,110 1,120 (0.9)% ------- -------- Net earnings $ 1,334 $ 1,586 (15.9)% $ 1,536 $ 1,329 15.6 % ======= ======== ======= ======= Basic earnings per share (**) $ 0.85 $ 1.09 (22.0)% $ 0.89 $ 0.77 15.6 % ======= ======== ======= ======= Diluted earnings per share (**) $ 0.85 $ 1.09 (22.0)% $ 0.89 $ 0.77 15.6 % ======= ======== ======= ======= Weighted average number of shares outstanding - Basic 1,568 1,455 7.8 % 1,735 1,735 -- % - Diluted 1,568 1,455 7.8 % 1,735 1,735 -- % (*) 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. (**) 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. -10-
KRAFT FOODS INC. and Subsidiaries Operating Revenues For the Nine Months Ended September 30, ($ in millions) REPORTED PRO FORMA ( * ) ------------------------------------ ----------------------------------- 2001 2000 % Change 2001 2000 % Change ------- -------- -------- ------- ------- -------- Cheese, Meals and Enhancers $ 7,680 $ 7,010 9.6 % $ 7,680 $ 7,649 0.4 % Incremental Year 2000 business -- (34) -- -- ------- -------- ------- ------- Cheese, Meals and Enhancers, net 7,680 6,976 10.1 % 7,680 7,649 0.4 % ------- -------- ------- ------- Biscuits, Snacks and Confectionery 4,310 225 100.0+% 4,310 4,201 2.6 % Incremental Year 2000 business -- (3) -- -- ------- -------- ------- ------- Biscuits, Snacks and Confectionery, net 4,310 222 100.0+% 4,310 4,201 2.6 % ------- -------- ------- ------- Beverages, Desserts and Cereals 4,106 4,037 1.7 % 4,106 4,142 (0.9)% Incremental Year 2000 business -- (22) -- -- ------- -------- ------- ------- Beverages, Desserts and Cereals, net 4,106 4,015 2.3 % 4,106 4,142 (0.9)% ------- -------- ------- ------- Oscar Mayer and Pizza 2,759 2,621 5.3 % 2,759 2,621 5.3 % Incremental Year 2000 business -- (12) -- -- ------- -------- ------- ------- Oscar Mayer and Pizza, net 2,759 2,609 5.7 % 2,759 2,621 5.3 % ------- -------- ------- ------- Total Kraft Foods North America 18,855 13,893 35.7 % 18,855 18,613 1.3 % Incremental Year 2000 business -- (71) -- -- ------- -------- ------- ------- Total Kraft Foods North America, net 18,855 13,822 36.4 % 18,855 18,613 1.3 % ------- -------- ------- ------- Europe, Middle East and Africa 4,477 4,926 (9.1)% 4,477 4,828 (7.3)% Incremental Year 2000 business -- (14) -- -- ------- -------- ------- ------- Europe, Middle East and Africa, net 4,477 4,912 (8.9)% 4,477 4,828 (7.3)% ------- -------- ------- ------- Latin America and Asia Pacific 1,783 927 92.3 % 1,779 1,730 2.8 % Incremental Year 2000 business -- (12) -- -- ------- -------- ------- ------- Latin America and Asia Pacific, net 1,783 915 94.9 % 1,779 1,730 2.8 % ------- -------- ------- ------- Total Kraft Foods International 6,260 5,853 7.0 % 6,256 6,558 (4.6)% Incremental Year 2000 business -- (26) -- -- ------- -------- ------- ------- Total Kraft Foods International, net 6,260 5,827 7.4 % 6,256 6,558 (4.6)% ------- -------- ------- ------- Total operating revenues- Kraft Foods Inc. $25,115 $ 19,746 27.2 % $25,111 $25,171 (0.2)% Incremental Year 2000 business -- (97) -- -- ------- -------- ------- ------- Total operating revenues- Kraft Foods Inc., net $25,115 $ 19,649 27.8 % $25,111 $25,171 (0.2)% ======= ======== ======= ======= (*) Results are presented on a Pro forma basis as if Nabisco had been acquired on Jan. 1, 2000. -11-
KRAFT FOODS INC. and Subsidiaries Operating Companies Income For the Nine Months Ended September 30, ($ in millions) REPORTED PRO FORMA(*) ---------------------------- -------------------------- 2001 2000 % Change 2001 2000 % Change ------ ------ -------- ------ ------ -------- Cheese, Meals and Enhancers $1,647 $1,452 13.4 % $1,647 $1,600 2.9% Incremental Year 2000 business -- (15) -- -- Loss on sale of a North American food factory and integration costs (60) -- -- -- ------ ------ ------ ------ Cheese, Meals and Enhancers, net 1,587 1,437 10.4 % 1,647 1,600 2.9% ------ ------ ------ ------ Biscuits, Snacks and Confectionery 689 65 100.0+% 689 549 25.5% Incremental Year 2000 business -- (1) -- -- ------ ------ ------ ------ Biscuits, Snacks and Confectionery, net 689 64 100.0+% 689 549 25.5% ------ ------ ------ ------ Beverages, Desserts and Cereals 953 877 8.7 % 953 889 7.2% Incremental Year 2000 business -- (7) -- -- Loss on sale of a North American food factory and integration costs (6) -- -- -- ------ ------ ------ ------ Beverages, Desserts and Cereals, net 947 870 8.9 % 953 889 7.2% ------ ------ ------ ------ Oscar Mayer and Pizza 456 429 6.3 % 456 429 6.3% Incremental Year 2000 business -- (4) -- -- ------ ------ ------ ------ Oscar Mayer and Pizza, net 456 425 7.3 % 456 429 6.3% ------ ------ ------ ------ Total Kraft Foods North America 3,745 2,823 32.7 % 3,745 3,467 8.0% Incremental Year 2000 business -- (27) -- -- Loss on sale of a North American food factory and integration costs (66) -- -- -- ------ ------ ------ ------ Total Kraft Foods North America, net 3,679 2,796 31.6 % 3,745 3,467 8.0% ------ ------ ------ ------ Europe, Middle East and Africa 563 584 (3.6)% 563 553 1.8% Incremental Year 2000 business -- (8) -- -- Gain on sale of a French confectionery business -- 139 -- -- ------ ------ ------ ------ Europe, Middle East and Africa, net 563 715 (21.3)% 563 553 1.8% ------ ------ ------ ------ Latin America and Asia Pacific 251 135 85.9 % 250 198 26.3% Incremental Year 2000 business -- (5) -- -- ------ ------ ------ ------ Latin America and Asia Pacific, net 251 130 93.1 % 250 198 26.3% ------ ------ ------ ------ Total Kraft Foods International 814 719 13.2 % 813 751 8.3% Incremental Year 2000 business -- (13) -- -- Gain on sale of a French confectionery business -- 139 -- -- ------ ------ ------ ------ Total Kraft Foods International, net 814 845 (3.7)% 813 751 8.3% ------ ------ ------ ------ Total operating companies income- Kraft Foods Inc. $4,559 $3,542 28.7 % $4,558 $4,218 8.1% Incremental Year 2000 business -- (40) -- -- Loss on sale of a North American food factory and integration costs (66) -- -- -- Gain on sale of a French confectionery business -- 139 -- -- ------ ------ ------ ------ Total operating companies income- Kraft Foods Inc., net $4,493 $3,641 23.4 % $4,558 $4,218 8.1% ====== ====== ====== ====== (*) Results are presented on a Pro forma basis as if Nabisco had been acquired on Jan. 1, 2000. -12-
KRAFT FOODS INC. and Subsidiaries Diluted Earnings per Share Reconciliation of Reported to Pro forma results For the Quarters Ended September 30, ($ and shares in millions, except per share data) 2001 2000 % Change ------ ------ -------- Reported Net Earnings $ 503 $ 548 (8.2)% After-tax effect of incremental year 2000 income, loss on sale of a food factory and integration costs and divestiture gain* 19 (82) Nabisco results** -- (137) Lower after-tax interest expense assuming 1/1/00 IPO data -- 91 ------ ------ Pro forma net earnings $ 522 $ 420 24.3 % ====== ====== Average shares outstanding 1,735 1,455 Adjustment to reflect shares outstanding after IPO -- 280 ------ ------ Pro forma shares outstanding 1,735 1,735 ====== ====== Pro forma diluted earnings per share $ 0.30 $ 0.24 25.0 % ====== ====== For the Nine Months Ended September 30, ($ and shares in millions, except per share data) 2001 2000 % Change ------ ------ -------- Reported Net Earnings $1,334 $1,586 (15.9)% After-tax effect of incremental year 2000 income, loss on sale of a food factory and integration costs and divestiture gain* 37 (58) Nabisco results** -- (472) Lower after-tax interest expense assuming 1/1/00 IPO data 165 273 ------ ------ Pro forma net earnings $1,536 $1,329 15.6 % ====== ====== Average shares outstanding 1,568 1,455 Adjustment to reflect shares outstanding after IPO 167 280 ------ ------ Pro forma shares outstanding 1,735 1,735 ====== ====== Pro forma diluted earnings per share $ 0.89 $ 0.77 15.6 % ====== ====== (*) See notes on last page. (**) Nabisco results include goodwill amortization and interest expense as if Nabisco had been acquired on January 1, 2000. -13-
KRAFT FOODS INC. and Subsidiaries Condensed Balance Sheets ($ in millions, except ratios) September 30, December 31, 2001 2000 ------------ ------------ Assets Current assets $ 7,348 $ 7,152 Property, plant and equipment, net 9,090 9,405 Goodwill and other intangible assets, net 31,472 31,584 Other assets 3,913 3,930 -------- -------- Total assets $ 51,823 $ 52,071 ======== ======== Liabilities and Stockholders' Equity Total current liabilities $ 8,419 $ 7,590 Long-term debt 4,654 2,695 Notes payable to parent and affiliates 9,000 21,407 Other long-term liabilities 6,443 6,331 -------- -------- Total liabilities 28,516 38,023 Total stockholders' equity 23,307 14,048 -------- -------- Total liabilities and stockholders' equity $ 51,823 $ 52,071 -------- -------- Total debt $ 16,731 $ 25,826 Debt/equity ratio 0.72 1.84 -14-
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: Third Third Nine Nine Quarter Quarter Months Months 2001 2000 2001 2000 ------ ------ ------ ------ - Loss on sale of a North American food factory and integration costs $ 37 $ -- $ 66 $ -- - Gain on sale of a French confectionery business -- (139) -- (139) - Related to incremental Year 2000 business:* Kraft Foods North America -- -- -- (27) Kraft Foods International -- -- -- (13) ------ ------ ------ ------ $ 37 $ (139) $ 66 $ (179) ====== ====== ====== ====== * 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. -15-