Kraft Foods Inc. and Subsidiaries

Condensed Consolidated Statements of Earnings

For the Three Months Ended June 30,

Schedule 1

(in millions of dollars, except per share data) (Unaudited)

As Reported (GAAP)

2012

2011

% Change

Fav / (Unfav)

Net revenues

$13,286

$13,878

(4.3)%

Cost of sales

8,416

9,007

6.6%

Gross profit

4,870

4,871

-

Gross profit margin

36.7%

35.1%

Selling, general and administrative expenses

2,854

3,008

5.1%

Asset impairment and exit costs

84

-

(100.0)%

Amortization of intangibles

53

57

7.0%

Operating income

1,879

1,806

4.0%

Operating income margin

14.1%

13.0%

Interest and other expense, net

429

441

2.7%

Earnings before income taxes

1,450

1,365

6.2%

Provision for income taxes

416

389

(6.9)%

Effective tax rate

28.7%

28.5%

Net earnings

$ 1,034

$ 976

5.9%

Noncontrolling interest

5

-

(100.0)%

Net earnings attributable to Kraft Foods

$ 1,029

$ 976

5.4%

Per share data:

Basic earnings per share attributable to Kraft Foods

$ 0.58

$ 0.55

5.5%

Diluted earnings per share attributable to Kraft Foods

$ 0.58

$ 0.55

5.5%

Average shares outstanding:

Basic

1,777

1,764

(0.7)%

Diluted

1,786

1,771

(0.8)%

Kraft Foods Inc. and Subsidiaries

Reconciliation of GAAP to Non-GAAP Information

Net Revenues

Schedule 2

For the Three Months Ended June 30,

($ in millions) (Unaudited)

% Change

Organic Growth Drivers

As Reported (GAAP)

Impact of Accounting Calendar Changes

Impact of Currency

Organic
(Non-GAAP)

As Reported (GAAP)

Organic

(Non-GAAP)

Vol / Mix

Price

2012

U.S. Beverages

$ 778

$ -

$ -

$ 778

(0.1)%

(0.1)%

(0.9)pp

0.8pp

U.S. Cheese

900

-

-

900

2.9%

2.9%

0.0

2.9

U.S. Convenient Meals

903

-

-

903

2.5%

2.5%

1.3

1.2

U.S. Grocery

989

-

-

989

1.6%

1.6%

(3.3)

4.9

U.S. Snacks

1,555

-

-

1,555

3.0%

3.0%

(4.4)

7.4

Canada & N.A. Foodservice

1,266

-

37

1,303

(2.6)%

0.2%

(2.0)

2.2

Kraft Foods North America

$ 6,391

$ -

$ 37

$ 6,428

1.2%

1.7%

(2.0)

3.7

Kraft Foods Europe

3,004

-

297

3,301

(14.8)%

1.4%

(1.1)

2.5

Kraft Foods Developing Markets

3,891

-

351

4,242

(3.6)%

7.6%

1.9

5.7

Kraft Foods

$ 13,286

$ -

$ 685

$ 13,971

(4.3)%

3.4%

(0.6)pp

4.0pp

2011

U.S. Beverages

$ 779

$ -

$ -

$ 779

U.S. Cheese

875

-

-

875

U.S. Convenient Meals

881

-

-

881

U.S. Grocery

973

-

-

973

U.S. Snacks

1,510

-

-

1,510

Canada & N.A. Foodservice

1,300

-

-

1,300

Kraft Foods North America

$ 6,318

$ -

$ -

$ 6,318

Kraft Foods Europe

3,525

(269)

-

3,256

Kraft Foods Developing Markets

4,035

(92)

-

3,943

Kraft Foods

$ 13,878

$ (361)

$ -

$ 13,517

Kraft Foods Inc. and Subsidiaries

Operating Income by Reportable Segments

Schedule 3

For the Three Months Ended June 30,

($ in millions) (Unaudited)

2011 Impacts

2012 Impacts

2011 Operating Income - As Reported (GAAP)

Integration Program costs ⁽¹⁾

Impact of Accounting Calendar Changes

Integration Program costs ⁽¹⁾

Impact of Currency

Spin-Off

Costs⁽²⁾

2012-2014

Restructuring

Program costs⁽³⁾

Operations

2012 Operating Income -As Reported (GAAP)

% Change

Segment Operating Income:

U.S. Beverages

$ 138

$ -

$ -

$ -

$ -

$ -

$ (11)

$ 7

$ 134

(2.9)%

U.S. Cheese

143

-

-

-

-

-

(26)

39

156

9.1%

U.S. Convenient Meals

99

-

-

-

-

-

(6)

36

129

30.3%

U.S. Grocery

379

-

-

-

-

-

(8)

10

381

0.5%

U.S. Snacks

192

8

-

-

-

-

(19)

17

198

3.1%

Canada & N.A. Foodservice

188

6

-

2

(7)

-

(15)

2

176

(6.4)%

Kraft Foods North America

$ 1,139

$ 14

$ -

$ 2

$ (7)

$ -

$ (85)

$ 111

$ 1,174

3.1%

Kraft Foods Europe

415

58

(41)

(17)

(39)

-

-

20

396

(4.6)%

Kraft Foods Developing Markets

518

55

(10)

(18)

(44)

-

(5)

48

544

5.0%

Unrealized G/(L) on Hedging Activities

(100)

-

-

-

-

-

-

129

29

HQ Pension

(44)

-

-

-

-

-

-

(23)

(67)

General Corporate Expenses

(65)

9

-

(2)

7

(100)

-

7

(144)

Amortization of Intangibles

(57)

-

-

-

8

-

-

(4)

(53)

Kraft Foods

$ 1,806

$ 136

$ (51)

$ (35)

$ (75)

$(100)

$ (90)

$ 288

$ 1,879

4.0%

⁽¹⁾

Integration Program costs are defined as the costs associated with combining the Kraft Foods and Cadbury businesses, and are separate from those costs associated with the acquisition. In Q2 2012, $3 million was recorded in Cost of Sales and $32 million was recorded in Selling, General and Administrative expenses. In Q2 2011, $19 million was recorded in Cost of Sales and $117 million was recorded in Selling, General and Administrative expenses.

⁽²⁾

Spin-Off Costs represent non-recurring transaction and transition costs associated with preparing the businesses for independent operations consisting primarily of financial advisory fees, legal fees, accounting fees, tax services and information systems infrastructure duplication.

⁽³⁾

Restructuring Program costs represent non-recurring restructuring and related implementation costs reflecting primarily severance, asset disposals and other manufacturing related non-recurring costs.

Kraft Foods Inc. and Subsidiaries

Reconciliation of GAAP to Non-GAAP Information

Operating Income

Schedule 4

For the Three Months Ended June 30,

($ in millions) (Unaudited)

As Reported (GAAP)

Integration Program costs ⁽¹⁾

Spin-Off

Costs⁽²⁾

2012-2014 Restructuring Program costs ⁽³⁾

Adjusted

(Non-GAAP)

2012

Net Revenues

$13,286

$ -

$ -

$ -

$ 13,286

Operating Income

$ 1,879

$ 35

$ 100

$ 90

$ 2,104

Operating Income Margin

14.1%

15.8%

2011

Net Revenues

$13,878

$ -

$ -

$ -

$ 13,878

Operating Income

$ 1,806

$ 136

$ -

$ -

$ 1,942

Operating Income Margin

13.0%

14.0%

⁽¹⁾

Integration Program costs are defined as the costs associated with combining the Kraft Foods and Cadbury businesses, and are separate from those costs associated with the acquisition.

⁽²⁾

Spin-Off Costs represent non-recurring transaction and transition costs associated with preparing the businesses for independent operations consisting primarily of financial advisory fees, legal fees, accounting fees, tax services and information systems infrastructure duplication.

⁽³⁾

Restructuring Program costs represent non-recurring restructuring and related implementation costs reflecting primarily severance, asset disposals and other manufacturing related non-recurring costs.

Kraft Foods Inc. and Subsidiaries

Reconciliation of GAAP to Non-GAAP Information

Diluted EPS

Schedule 5

(Unaudited)

Diluted EPS

% Growth

Diluted EPS Attributable to Kraft Foods for the Three

Months Ended June 30, 2011 (GAAP)

$ 0.55

    Integration Program costs ⁽¹⁾

0.07

Operating EPS for the Three Months Ended June 30, 2011 (Non-GAAP)

0.62

    Increases in operations

0.06

    Change in unrealized gains/losses on hedging activities

0.05

    Accounting calendar changes

(0.02)

    Unfavorable foreign currency ⁽²⁾

(0.03)

    Lower interest and other expense, net ⁽³⁾

0.01

    Changes in taxes

(0.01)

    Higher shares outstanding

-

Operating EPS for the Three Months Ended June 30, 2012 (Non-GAAP)

0.68

9.7%

    Integration Program costs ⁽¹⁾

(0.02)

    Spin-Off Costs ⁽⁴⁾

(0.05)

    2012-2014 Restructuring Program costs ⁽⁵⁾

(0.03)

Diluted EPS Attributable to Kraft Foods for the Three

Months Ended June 30, 2012 (GAAP)

$ 0.58

5.5%

⁽¹⁾

Integration Program costs are defined as the costs associated with combining the Kraft Foods and Cadbury businesses, and are separate from those costs associated with the acquisition. Integration Program costs were $35 million, or $33 million after-tax including certain tax costs associated with the integration of Cadbury, for the three months ended June 30, 2012, as compared to $136 million, or $120 million after-tax for the three months ended June 30, 2011.

⁽²⁾

Includes the favorable foreign currency impact on Kraft Foods foreign denominated debt and interest expense due to the strength of the U.S. dollar.

⁽³⁾

Excludes financing costs/other fees related to our planned Spin-Off.

⁽⁴⁾

Spin-Off Costs represent non-recurring transaction and transition costs associated with preparing the businesses for independent operations consisting primarily of financial advisory fees, legal fees, accounting fees, tax services and information systems infrastructure duplication, and financing and related costs to redistribute debt and secure investment grade ratings for both the North American Grocery Business and the Global Snacks Business. Spin-Off Costs for the three months ended June 30, 2012 were $128 million, or $89 million after-tax and include $28 million of pre-tax financing and related costs recorded in interest and other expense, net.

⁽⁵⁾

Restructuring Program costs for the three months ended June 30, 2012 were $90 million, or $58 million after-tax and represent non-recurring restructuring and related implementation costs reflecting primarily severance, asset disposals and other manufacturing related non-recurring costs.

Kraft Foods Inc. and Subsidiaries

Reconciliation of GAAP to Non-GAAP Information

Diluted Earnings Per Share

Schedule 6

Constant Currency Growth

For the Three Months Ended June 30,

(Unaudited)

% Growth

As Reported (GAAP)

Integration

Program

costs ⁽¹⁾

Spin-Off

Costs⁽²⁾

2012 - 2014

Restructuring

Program costs⁽³⁾

Operating

(Non-GAAP)

Currency ⁽⁴⁾

Operating

Constant FX

(Non-GAAP)

As Reported EPS Growth (GAAP)

Operating

EPS Growth

(Non-GAAP)

Operating

Constant FX EPS

Growth

(Non-GAAP)

2012

Diluted EPS attributable to Kraft Foods

$ 0.58

$ 0.02

$ 0.05

$ 0.03

$ 0.68

$ 0.03

$ 0.70 ⁽⁵⁾

5.5%

9.7%

12.9%

2011

Diluted EPS attributable to Kraft Foods

$ 0.55

$ 0.07

$ -

$ -

$ 0.62

$ -

$ 0.62

⁽¹⁾

Integration Program costs are defined as the costs associated with combining the Kraft Foods and Cadbury businesses, and are separate from those costs associated with the acquisition.

⁽²⁾

Spin-Off Costs represent non-recurring transaction and transition costs associated with preparing the businesses for independent operations consisting primarily of financial advisory fees, legal fees, accounting fees, tax services and information systems infrastructure duplication, and financing and related costs to redistribute debt and secure investment grade ratings for both the North American Grocery Business and the Global Snacks Business.

⁽³⁾

Restructuring Program costs represent non-recurring restructuring and related implementation costs reflecting primarily severance, asset disposals and other manufacturing related non-recurring costs.

⁽⁴⁾

Includes the favorable foreign currency impact on Kraft Foods foreign denominated debt and interest expense due to the strength of the U.S. dollar.

⁽⁵⁾

Does not cross-foot due to rounding.

Kraft Foods Inc. and Subsidiaries

Condensed Consolidated Statements of Earnings

For the Six Months Ended June 30,

Schedule 7

(in millions of dollars, except per share data) (Unaudited)

As Reported (GAAP)

2012

2011

% Change

Fav / (Unfav)

Net revenues

$26,379

$26,451

(0.3)%

Cost of sales

16,842

16,944

0.6%

Gross profit

9,537

9,507

0.3%

Gross profit margin

36.2%

35.9%

Selling, general and administrative expenses

5,676

5,941

4.5%

Asset impairment and exit costs

182

-

(100.0)%

Amortization of intangibles

109

114

4.4%

Operating income

3,570

3,452

3.4%

Operating income margin

13.5%

13.1%

Interest and other expense, net

982

887

(10.7)%

Earnings before income taxes

2,588

2,565

0.9%

Provision for income taxes

735

787

6.6%

Effective tax rate

28.4%

30.7%

Net earnings

$ 1,853

$ 1,778

4.2%

Noncontrolling interest

11

3

(100.0+)%

Net earnings attributable to Kraft Foods

$ 1,842

$ 1,775

3.8%

Per share data:

Basic earnings per share attributable to Kraft Foods

$ 1.04

$ 1.01

3.0%

Diluted earnings per share attributable to Kraft Foods

$ 1.03

$ 1.01

2.0%

Average shares outstanding:

Basic

1,775

1,759

(0.9)%

Diluted

1,785

1,766

(1.1)%

Kraft Foods Inc. and Subsidiaries

Reconciliation of GAAP to Non-GAAP Information

Net Revenues

Schedule 8

For the Six Months Ended June 30,

($ in millions) (Unaudited)

% Change

Organic Growth Drivers

As Reported (GAAP)

Impact of

Divestitures ⁽¹⁾

Impact of Accounting Calendar Changes

Impact of Currency

Organic
(Non-GAAP)

As Reported (GAAP)

Organic

(Non-GAAP)

Vol / Mix

Price

2012

U.S. Beverages

$ 1,486

$ -

$ -

$ -

$ 1,486

(7.1)%

(1.8)%

(3.6)pp

1.8pp

U.S. Cheese

1,832

-

-

-

1,832

4.7%

4.7%

(3.2)

7.9

U.S. Convenient Meals

1,710

-

-

-

1,710

2.2%

2.2%

0.2

2.0

U.S. Grocery

1,841

-

-

-

1,841

4.2%

4.2%

0.3

3.9

U.S. Snacks

3,095

-

-

-

3,095

3.1%

3.1%

(4.3)

7.4

Canada & N.A. Foodservice

2,439

-

-

45

2,484

(1.0)%

1.0%

(2.3)

3.3

Kraft Foods North America

$ 12,403

$ -

$ -

$ 45

$ 12,448

1.2%

2.3%

(2.4)

4.7

Kraft Foods Europe

6,155

-

-

380

6,535

(5.9)%

4.2%

1.6

2.6

Kraft Foods Developing Markets

7,821

-

-

459

8,280

2.2%

9.5%

3.0

6.5

Kraft Foods

$ 26,379

$ -

$ -

$ 884

$ 27,263

(0.3)%

4.9%

0.2pp

4.7pp

2011

U.S. Beverages

$ 1,600

$ (87)

$ -

$ -

$ 1,513

U.S. Cheese

1,749

-

-

-

1,749

U.S. Convenient Meals

1,673

-

-

-

1,673

U.S. Grocery

1,767

-

-

-

1,767

U.S. Snacks

3,002

-

-

-

3,002

Canada & N.A. Foodservice

2,463

(4)

-

-

2,459

Kraft Foods North America

$ 12,254

$ (91)

$ -

$ -

$ 12,163

Kraft Foods Europe

6,541

-

(269)

-

6,272

Kraft Foods Developing Markets

7,656

-

(92)

-

7,564

Kraft Foods

$ 26,451

$ (91)

$ (361)

$ -

$ 25,999

⁽¹⁾

Impact of divestitures includes for reporting purposes Starbucks CPG business.

Kraft Foods Inc. and Subsidiaries

Operating Income by Reportable Segments

Schedule 9

For the Six Months Ended June 30,

($ in millions) (Unaudited)

2011 Impacts

2012 Impacts

2011 Operating Income - As Reported (GAAP)

Integration

Program costs ⁽¹⁾

Impact of

Divestitures ⁽²⁾

Impact of Accounting Calendar Changes

Integration Program costs ⁽¹⁾

Asset Impairment & Exit costs ⁽³⁾

Impact of Currency

Spin-Off

Costs⁽⁴⁾

2012-2014

Restructuring

Program costs⁽⁵⁾

Operations

2012 Operating Income -

As Reported (GAAP)

% Change

Segment Operating Income:

U.S. Beverages

$ 299

$ -

$ (13)

$ -

$ -

$ -

$ -

$ -

$ (17)

$ (37)

$ 232

(22.4)%

U.S. Cheese

277

-

-

-

-

-

-

-

(45)

91

323

16.6%

U.S. Convenient Meals

204

-

-

-

-

-

-

-

(12)

30

222

8.8%

U.S. Grocery

671

-

-

-

-

-

-

-

(17)

36

690

2.8%

U.S. Snacks

385

15

-

-

(2)

-

-

-

(46)

50

402

4.4%

Canada & N.A. Foodservice

339

7

(2)

-

1

-

(8)

-

(27)

(10)

300

(11.5)%

Kraft Foods North America

$ 2,175

$ 22

$ (15)

$ -

$ (1)

$ -

$ (8)

$ -

$ (164)

$ 160

$ 2,169

(0.3)%

Kraft Foods Europe

723

109

-

(41)

(36)

-

(50)

-

-

75

780

7.9%

Kraft Foods Developing Markets

923

90

-

(10)

(39)

(21)

(40)

-

(5)

171

1,069

15.8%

Unrealized G/(L) on Hedging Activities

(38)

-

-

-

-

-

-

-

-

85

47

HQ Pension

(86)

-

-

-

-

-

-

-

-

(61)

(147)

General Corporate Expenses

(131)

19

-

-

(2)

-

7

(139)

-

7

(239)

Amortization of Intangibles

(114)

-

-

-

-

-

7

-

-

(2)

(109)

Kraft Foods

$ 3,452

$ 240

$ (15)

$ (51)

$ (78)

$ (21)

$ (84)

$(139)

$ (169)

$ 435

$ 3,570

3.4%

⁽¹⁾

Integration Program costs are defined as the costs associated with combining the Kraft Foods and Cadbury businesses, and are separate from those costs associated with the acquisition. For the six months ended June 30, 2012, $8 million was recorded in Cost of Sales and $70 million was recorded in Selling, General and Administrative expenses. For the six months ended June 30, 2011, $22 million was recorded in Cost of Sales and $218 million was recorded in Selling, General and Administrative expenses.

⁽²⁾

Impact of divestitures includes for reporting purposes Starbucks CPG business.

⁽³⁾

Includes an asset impairment charge related to a trademark in Japan.

⁽⁴⁾

Spin-Off Costs represent non-recurring transaction and transition costs associated with preparing the businesses for independent operations consisting primarily of financial advisory fees, legal fees, accounting fees, tax services and information systems infrastructure duplication.

⁽⁵⁾

Restructuring Program costs represent non-recurring restructuring and related implementation costs reflecting primarily severance, asset disposals and other manufacturing related non-recurring costs.

Kraft Foods Inc. and Subsidiaries

Reconciliation of GAAP to Non-GAAP Information

Operating Income

Schedule 10

For the Six Months Ended June 30,

($ in millions) (Unaudited)

As Reported (GAAP)

Integration Program costs ⁽¹⁾

Spin-Off
Costs ⁽²⁾

2012-2014
Restructuring
Program costs ⁽³⁾

Adjusted

(Non-GAAP)

2012

Net Revenues

$26,379

$ -

$ -

$ -

$ 26,379

Operating Income

$ 3,570

$ 78

$ 139

$ 169

$ 3,956

Operating Income Margin

13.5%

15.0%

2011

Net Revenues

$26,451

$ -

$ -

$ -

$ 26,451

Operating Income

$ 3,452

$ 240

$ -

$ -

$ 3,692

Operating Income Margin

13.1%

14.0%

⁽¹⁾

Integration Program costs are defined as the costs associated with combining the Kraft Foods and Cadbury businesses, and are separate from those costs associated with the acquisition.

⁽²⁾

Spin-Off Costs represent non-recurring transaction and transition costs associated with preparing the businesses for independent operations consisting primarily of financial advisory fees, legal fees, accounting fees, tax services and information systems infrastructure duplication.

⁽³⁾

Restructuring Program costs represent non-recurring restructuring and related implementation costs reflecting primarily severance, asset disposals and other manufacturing related non-recurring costs.

Kraft Foods Inc. and Subsidiaries

Reconciliation of GAAP to Non-GAAP Information