-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IaljXV5UG1JXifgr+Xb04HMSLN3N4It6yn6UvuD2AEUki1ZdCpMOfd/CXxJi+Jbu FlP79SlddPyTG+Z09GGBHA== 0000055067-04-000343.txt : 20041025 0000055067-04-000343.hdr.sgml : 20041025 20041025082256 ACCESSION NUMBER: 0000055067-04-000343 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20040925 ITEM INFORMATION: Results of Operations and Financial Condition FILED AS OF DATE: 20041025 DATE AS OF CHANGE: 20041025 FILER: COMPANY DATA: COMPANY CONFORMED NAME: KELLOGG CO CENTRAL INDEX KEY: 0000055067 STANDARD INDUSTRIAL CLASSIFICATION: GRAIN MILL PRODUCTS [2040] IRS NUMBER: 380710690 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-04171 FILM NUMBER: 041092944 BUSINESS ADDRESS: STREET 1: ONE KELLOGG SQ STREET 2: P O BOX 3599 CITY: BATTLE CREEK STATE: MI ZIP: 49016-3599 BUSINESS PHONE: 6169612000 MAIL ADDRESS: STREET 1: ONE KELLOGG SQUARE STREET 2: P O BOX 3599 CITY: BATTLE CREEK STATE: MI ZIP: 49016-3599 8-K 1 f8k_10252004-kellogg.txt 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 October 25, 2004 Date of Report (Date of Earliest Event Reported) Commission file number 1-4171 KELLOGG COMPANY (Exact Name of Registrant as Specified in its Charter) State of Incorporation - Delaware IRS Employer Identification No. 38-0710690 ONE KELLOGG SQUARE BATTLE CREEK, MICHIGAN 49016-3599 (Address of principal executive offices) (including zip code) Registrant's telephone number: 269-961-2000 Item 2.02. Results of Operations and Financial Condition The information in this Current Report, including the attached Exhibit, shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, except as shall be expressly set forth by specific reference in such filing. On October 25, 2004, Kellogg Company issued a press release announcing financial results for the period ended September 25, 2004, a copy of which is attached as Exhibit 99.1. SIGNATURE 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. Kellogg Company (Registrant) Dated: October 25, 2004 By ------------------------------------------- Jeffrey M. Boromisa Senior Vice President and Chief Financial Officer Table of Contents EXHIBIT INDEX Exhibit No. 99.1 Press release dated October 25, 2004 issued by Kellogg Company. EX-99.1 2 ex991_10252004-kellogg.txt Kellogg Company News For release: October 25, 2004 Media/Analyst Contact: Simon D. Burton, CFA (269) 961-6636 KELLOGG EXCEEDS EXPECTATIONS AND RAISES GUIDANCE BATTLE CREEK, Mich. - Kellogg Company (NYSE: K) today reported third quarter earnings growth driven by increased sales, investment, and effective execution. The Company raised its earnings guidance for the full year of 2004 due to these strong results and continued business momentum. Reported net earnings for the quarter increased by 7% to $247.0 million from $231.3 million in the comparable period of last year. Diluted earnings per share were $0.59, an increase of 5% from last year's $0.56 per share. Reported net earnings for the first nine months of the year increased by 18% to $704.2 million, or $1.69 per share, compared to $599.1 million last year, or $1.46 per share. Earnings per share growth during the first nine months of 2004 was 16 percent. "We are very pleased with our strong results in the third quarter and the first nine months of the year. We are especially pleased that we could generate strong sales and earnings growth while continuing to make significant investments in our business," said Carlos Gutierrez, Kellogg's chairman and chief executive officer. "It is this investment, and our business momentum, that helps to provide visibility for the remainder of the year and into 2005." Net sales in the third quarter increased by 7.2%, to $2.45 billion. Excluding the effect of currency translation, Kellogg's internal sales growth was 4.8 percent. This internal growth rate built on very strong 4.5% growth posted during the third quarter of last year. Kellogg North America's internal net sales growth was approximately 5% in the third quarter and for the first nine months of the year. The third quarter's growth builds on growth of 3% in the comparable period of last year. North America Retail Cereal posted an increase in internal sales of 1%, which builds on very strong 10% growth in the third quarter of 2003. This growth resulted from the introduction of new products throughout the year and successful brand-building programs. The North America Retail Snacks business also had another good quarter, posting internal sales growth of 9 percent. Cookies, Crackers, Wholesome Snacks, and Toaster Pastries all reported increased sales despite some weak category trends. The wholesome snacks business again benefited from the introduction of various varieties of fruit snacks, and Pop-Tarts achieved an 84% share of the toaster pastries category in measured channels. The North America Frozen and Specialty Channels business posted internal net sales growth of 6% as Eggo, Morningstar Farms and the Food Away From Home businesses all contributed strong sales gains. Kellogg International reported net sales growth of approximately 10%, or 4% excluding the effect of currency translation. Each of our geographic segments continues to implement and execute the Company's Volume to Value strategy through significant investment in innovation and brand building. The European business posted currency-adjusted sales growth of approximately 2% in the third quarter and 4% for the year-to-date period. The pan-European snacks business posted good growth as a result of various successful new product introductions and continued investment in brand building. Sales growth in the U.K., the region's largest market, was somewhat limited by the timing of promotional campaigns and product introductions. The Company reported sales growth of 6% in Latin America, or approximately 11% on a currency-neutral basis. The Company's Mexican business, which is the area's largest, reported strong growth in both its cereal and snacks businesses. The Asia Pacific business posted flat local-currency sales in the third quarter and 1% growth for the first three quarters of the year. "Each of our North American cereal, snacks, frozen and specialty channels, and Kellogg International businesses posted excellent results," commented Mr. Gutierrez. "They are all implementing our strategy and it is reflected in this growth." Operating profit in the third quarter increased by approximately 6% to $457 million; operating profit for the year-to-date period has increased by 10 percent. The Company's gross profit margin in the third quarter increased by 80 basis points, despite increased reinvestment in cost-reduction initiatives. In addition, gross margin was also pressured by high commodity costs. The Company offset these headwinds through improvements in mix, productivity savings, and operating leverage. "Our goal is sustainable, long-term growth, and investment in Volume to Value is an essential component of this," said Mr. Gutierrez. "We have continued our significant investment in brand building and innovation throughout this year and have continued to absorb the costs associated with cost-reduction initiatives. It is gratifying that we can make this investment in the future and still report such strong results." Cash flow, defined as cash from operating activities less capital expenditure, was $472 million in the third quarter; the full-year and third quarter totals are approximately equal to last year's results. However, the Company has contributed approximately $80 million more to benefit plans this year than it had at this point in 2003. Core working capital measured as a percentage of rolling twelve-month sales improved for the thirteenth consecutive quarter. Year-to-date, the Company has paid down $272 million of debt. Mr. Gutierrez said, "Each of our employees is focused on cash flow generation and understands their contribution. Through our Manage For Cash strategy we are becoming more efficient generators of cash flow, which is dramatically increasing our financial flexibility." Kellogg Raises 2004 Guidance and Previews 2005 Kellogg raised its guidance for full-year 2004 earnings per share to $2.11-2.13, from its previous range of $2.07-2.11, due to strong business momentum and excellent year-to-date results. In the fourth quarter, the Company expects low single-digit sales growth and net earnings lower than last year, solely due to significant reinvestment in cost-saving initiatives, a dramatic increase in brand-building activity, and a much higher tax rate than in the fourth quarter of 2003. Kellogg also gave preliminary guidance for earnings per share in 2005 of $2.28-2.32; this range is in line with the Company's long-term target of high single-digit growth. The Company expects to post low single-digit net sales growth, before the effects of currency translation and the one fewer shipping week in the fourth quarter. In keeping with its Volume to Value strategy, the Company expects to increase investment in brand building and innovation again in 2005. Mr. Gutierrez concluded, "We constantly strive to meet our goal of long-term sustainable growth and we continue to execute our strategy and invest in the future. It is a testament to our 25,000 employees worldwide that we can report such strong results while laying the foundation for future growth." About Kellogg Company With 2003 sales of nearly $9 billion, Kellogg Company is the world's leading producer of cereal and a leading producer of convenience foods, including cookies, crackers, toaster pastries, cereal bars, frozen waffles, and meat alternatives. The Company's brands include Kellogg's, Keebler, Pop-Tarts, Eggo, Cheez-It, Nutri-Grain, Rice Krispies, Murray, Austin, Morningstar Farms, Famous Amos, Carr's, Plantation, Ready Crust, and Kashi. Kellogg products are manufactured in 17 countries and marketed in more than 180 countries around the world. For more information, visit Kellogg's web site at http://www.kelloggcompany.com. Forward-Looking Statements Disclosure This news release contains forward-looking statements related to business performance, sales, costs, strategy, investment, operating profit, earnings, and growth. Actual performance may differ materially from these statements due to factors related to the substantial amount of indebtedness incurred to finance the Keebler Foods acquisition (which could, among other things, hinder the Company's ability to adjust rapidly, make the Company more vulnerable to a downturn, and place the Company at a competitive disadvantage to less-leveraged companies); competitive conditions and their impact; the effectiveness of advertising, pricing and promotional spending; the success of productivity improvements and business transitions; the success of innovation and new product introductions; the recoverability of the carrying value of goodwill and other intangibles; the availability of and interest rates on short-term financing; commodity and energy prices and labor costs; actual market performance of benefit plan trust investments; the levels of spending on systems initiatives, properties, business opportunities, integration of acquired businesses; changes in consumer behavior and preferences; U.S. and foreign economic factors such as interest rates, statutory tax rates, and foreign currency conversions or unavailability; legal and regulatory factors; business disruption or other losses from terrorist acts or political unrest; and other factors. Kellogg Company and Subsidiaries CONSOLIDATED STATEMENT OF EARNINGS (millions, except per share data) ==================================================================================================================================== Year-to-date Year-to-date Quarter ended Quarter ended period ended period ended Sept. 25, Sept. 27, Sept. 25, Sept. 27, (Results are unaudited) 2004 2003 2004 2003 ==================================================================================================================================== Net sales $2,445.3 $2,281.6 $7,223.1 $6,676.5 Cost of goods sold 1,319.1 1,247.6 3,981.7 3,710.8 Selling and administrative expense 669.4 603.2 1,926.0 1,773.4 ------------------------------------------ ----------------------------------------- Operating profit 456.8 430.8 1,315.4 1,192.3 Interest expense 76.2 87.0 230.5 268.5 Other income (expense), net (3.5) 7.6 (9.8) 2.2 ------------------------------------------ ----------------------------------------- Earnings before income taxes 377.1 351.4 1,075.1 926.0 Income taxes 130.1 120.1 370.9 326.9 ------------------------------------------ ----------------------------------------- Net earnings $247.0 $231.3 $704.2 $599.1 ========================================== ========================================= Net earnings per share: Basic $.60 $.57 $1.71 $1.47 Diluted $.59 $.56 $1.69 $1.46 Dividends per share $.2525 $.2525 $.7575 $.7575 ========================================== ========================================= Average shares outstanding: Basic 412.4 408.3 411.7 407.6 ========================================== ========================================= Diluted 416.7 410.9 415.8 410.0 ========================================== ========================================= Actual shares outstanding at period end 412.6 408.2 ========================================= ====================================================================================================================================
Kellogg Company and Subsidiaries SELECTED OPERATING SEGMENT DATA (millions) ================================================================================================================================ Year-to-date Year-to-date Quarter ended Quarter ended period period Sept. 25, Sept. 27, Sept. 25, Sept. 27, (Results are unaudited) 2004 2003 (a) 2004 2003 (a) ================================================================================================================================ Net sales North America $1,610.3 $1,525.6 $4,776.1 $4,533.4 Europe 510.5 451.1 1,517.7 1,308.5 Latin America 192.9 181.5 547.1 497.0 Asia Pacific (b) 131.6 123.4 382.2 337.6 ------------------------------------------------- ---------------------------------------- Consolidated $2,455.3 $2,281.6 $7,223.1 $6,676.5 ================================================= ======================================== - -------------------------------------------------------------------------------------------------------------------------------- Segment operating profit North America $317.4 $312.8 $906.4 $856.1 Europe 97.1 86.8 275.5 227.6 Latin America 54.2 44.8 150.5 131.3 Asia Pacific (b) 19.4 16.8 62.2 54.0 Corporate (31.3) (30.4) (79.2) (76.7) ------------------------------------------------- ---------------------------------------- Consolidated $456.8 $430.8 $1,315.4 $1,192.3 ================================================= ======================================== ==================================================================================================================================== (a) 2003 results were restated to conform to 2004 operating segment presentation as follows: 1) U.S. and Canadian results combined into North America, 2) certain U.S. export operations reclassified from U.S. to Latin America, and 3) certain SGA expenditures reallocated between Corporate and North America. (b) Includes Australia and Asia.
Kellogg Company and Subsidiaries CONSOLIDATED STATEMENT OF CASH FLOWS (millions) ================================================================================================================= Year-to-date Year-to-date period ended period ended Sept. 25, Sept. 27, (unaudited) 2004 2003 ================================================================================================================= Operating activities Net earnings $704.2 $599.1 Adjustments to reconcile net earnings to operating cash flows: Depreciation and amortization 293.5 272.0 Deferred income taxes 7.6 57.5 Other 96.7 59.9 Postretirement benefit plan contributions (140.7) (59.9) Changes in operating assets and liabilities 67.8 54.4 - ----------------------------------------------------------------------------------------------------------------- Net cash provided by operating activities 1,029.1 983.0 - ----------------------------------------------------------------------------------------------------------------- Investing activities Additions to properties (169.5) (121.2) Dispositions of businesses - 14.0 Other 1.0 8.3 - ----------------------------------------------------------------------------------------------------------------- Net cash used in investing activities (168.5) (98.9) - ----------------------------------------------------------------------------------------------------------------- Financing activities Net issuances of notes payable 223.9 (135.0) Issuances of long-term debt 7.0 498.1 Reductions of long-term debt (503.0) (710.9) Net issuances of common stock 242.0 80.4 Common stock repurchases (229.3) (76.3) Cash dividends (313.1) (308.8) Other (2.7) - - ----------------------------------------------------------------------------------------------------------------- Net cash used in financing activities (575.2) (652.5) - ----------------------------------------------------------------------------------------------------------------- Effect of exchange rate changes on cash (3.6) 9.7 - ----------------------------------------------------------------------------------------------------------------- Increase in cash and cash equivalents 281.8 241.3 Cash and cash equivalents at beginning of period 141.2 100.6 - ----------------------------------------------------------------------------------------------------------------- Cash and cash equivalents at end of period $423.0 $341.9 ================================================================================================================= ================================================================================================================= Supplemental Financial Data: Cash Flow (operating cash flow less property additions)* $859.6 $861.8 ================================================================================================================= * We use this non-GAAP measure of cash flow to focus management and investors on the amount of cash available for debt reduction, dividend distributions, acquisition opportunities, and share repurchase.
Kellogg Company and Subsidiaries CONSOLIDATED BALANCE SHEET ========================================================================================================================== (millions, except per share data) Sept. 25, December 27, 2004 2003 (unaudited) * ========================================================================================================================== Current assets Cash and cash equivalents $423.0 $141.2 Accounts receivable, net 920.6 754.8 Inventories: Raw materials and supplies 192.7 185.3 Finished goods and materials in process 448.6 464.5 Other current assets 256.3 242.1 - -------------------------------------------------------------------------------------------------------------------------- Total current assets 2,241.2 1,787.9 Property, net of accumulated depreciation of $3,655.5 and $3,439.3 2,648.5 2,780.2 Goodwill 3,094.9 3,098.4 Other intangibles, net of accumulated amortization of $36.7 and $35.1 2,024.5 2,034.4 Other assets 460.1 441.8 - -------------------------------------------------------------------------------------------------------------------------- Total assets $10,469.2 $10,142.7 ========================================================================================================================== Current liabilities Current maturities of long-term debt $78.6 $578.1 Notes payable 544.7 320.8 Accounts payable 797.6 703.8 Accrued advertising and promotion 387.9 323.1 Other current liabilities 880.3 840.2 - -------------------------------------------------------------------------------------------------------------------------- Total current liabilities 2,689.1 2,766.0 Long-term debt 4,271.0 4,265.4 Deferred income taxes 1,050.4 1,062.8 Pension benefits 176.0 165.3 Nonpension postretirement benefits 271.5 291.0 Other liabilities 139.9 149.0 Shareholders' equity Common stock, $.25 par value 103.8 103.8 Capital in excess of par value - 24.5 Retained earnings 2,622.0 2,247.7 Treasury stock, at cost (115.7) (203.6) Accumulated other comprehensive income (loss) (738.8) (729.2) - -------------------------------------------------------------------------------------------------------------------------- Total shareholders' equity 1,871.3 1,443.2 - -------------------------------------------------------------------------------------------------------------------------- Total liabilities and shareholders' equity $10,469.2 $10,142.7 ========================================================================================================================== * Condensed from audited financial statements.
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