-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, iCG4VAa2v1BHWvs1UdJuoJ11tWBKerOMX8SSgcUl0z84K+M7fYaP/9rNuTMSZ/w/ xKWZRpqGnCHJBYS6qkKI0g== 0000950124-95-001463.txt : 19950517 0000950124-95-001463.hdr.sgml : 19950516 ACCESSION NUMBER: 0000950124-95-001463 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950331 FILED AS OF DATE: 19950512 SROS: NYSE 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: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-04171 FILM NUMBER: 95537484 BUSINESS ADDRESS: STREET 1: ONE KELLOGG SQ STREET 2: P O BOX 3599 CITY: BATTLE CREEK STATE: MI ZIP: 49016 BUSINESS PHONE: 6169612000 MAIL ADDRESS: STREET 1: ONE KELLOGG SQUARE STREET 2: P O BOX 3599 CITY: BATTLE CREEK STATE: MI ZIP: 49016 10-Q 1 FORM 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1995 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ------- ------- Commission file number 1-4171 KELLOGG COMPANY State of Incorporation--Delaware IRS Employer Identification No. 38-0710690 One Kellogg Square, P.O. Box 3599, Battle Creek, MI 49016-3599 Registrant's telephone number: 616-961-2000 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----------- ---------- Common Stock outstanding April 28, 1995 - 219,818,205 shares 2 KELLOGG COMPANY INDEX
Page ---- PART I - Financial Information Item 1: Consolidated Balance Sheet - March 31, 1995 and December 31, 1994 2 Consolidated Earnings - three months ended March 31, 1995 and 1994 3 Consolidated Statement of Cash Flows - three months ended March 31, 1995 and 1994 4 Notes to the Consolidated Financial Statements 5 Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations 6-8 PART II - Other Information Item 6: Exhibits and Reports on Form 8-K 9 Signatures 10 Exhibit Index 11
1 3 CONSOLIDATED BALANCE SHEET ========================================================================
KELLOGG COMPANY AND SUBSIDIARIES MARCH 31, DECEMBER 31, (millions) 1995 1994 (unaudited) * - ------------------------------------------------------------------------ CURRENT ASSETS Cash and temporary investments $294.9 $266.3 Accounts receivable, net 625.8 564.5 Inventories 426.5 396.3 Other current assets 215.1 206.4 - ------------------------------------------------------------------- TOTAL CURRENT ASSETS 1,562.3 1,433.5 PROPERTY, net of accumulated depreciation of $1,803.1 and $1,707.7 2,930.5 2,892.8 INTANGIBLE ASSETS 3.5 4.1 OTHER ASSETS 195.9 136.9 - ------------------------------------------------------------------- TOTAL ASSETS $4,692.2 $4,467.3 =================================================================== CURRENT LIABILITIES Current maturities of long-term debt $1.3 $0.9 Notes payable 324.9 274.8 Accounts payable 335.5 334.5 Income taxes 146.2 72.0 Accrued liabilities 535.6 503.0 - ------------------------------------------------------------------- TOTAL CURRENT LIABILITIES 1,343.5 1,185.2 LONG-TERM DEBT 718.9 719.2 NONPENSION POSTRETIREMENT BENEFITS 495.7 486.8 DEFERRED INCOME TAXES AND OTHER LIABILITIES 282.2 268.6 SHAREHOLDERS' EQUITY Common stock, $.25 par value 77.6 77.6 Capital in excess of par value 69.7 68.6 Retained earnings 3,917.7 3,801.2 Treasury stock, at cost (2,072.4) (1,980.6) Currency translation adjustment (140.7) (159.3) - ------------------------------------------------------------------- TOTAL SHAREHOLDERS' EQUITY 1,851.9 1,807.5 - ------------------------------------------------------------------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $4,692.2 $4,467.3 ===================================================================
*Condensed from audited financial statements. See accompanying notes to consolidated financial statements. 2 4 CONSOLIDATED EARNINGS (Results are unaudited) ================================================================================
KELLOGG COMPANY AND SUBSIDIARIES THREE MONTHS ENDED MARCH 31, (millions, except per share data) 1995 1994 - -------------------------------------------------------------------------------- NET SALES $1,716.0 $1,611.2 - -------------------------------------------------------------------------- Cost of goods sold 769.3 732.0 Selling and administrative expense 623.9 580.1 - -------------------------------------------------------------------------- OPERATING PROFIT 322.8 299.1 - -------------------------------------------------------------------------- Interest Expense 18.0 9.7 Other income (expense), net 10.6 8.1 - -------------------------------------------------------------------------- EARNINGS BEFORE INCOME TAXES 315.4 297.5 Income taxes 119.4 113.6 - -------------------------------------------------------------------------- NET EARNINGS $196.0 $183.9 ========================================================================== EARNINGS PER SHARE $0.89 $0.81 DIVIDENDS PER SHARE $0.36 $0.34 AVERAGE SHARES OUTSTANDING 221.0 227.0 - --------------------------------------------------------------------------
See accompanying notes to consolidated financial statements. 3 5 CONSOLIDATED STATEMENT OF CASH FLOWS (Results are unaudited) ================================================================================
KELLOGG COMPANY AND SUBSIDIARIES THREE MONTHS ENDED MARCH 31, (millions) 1995 1994 - -------------------------------------------------------------------------------- OPERATING ACTIVITIES Net earnings $196.0 $183.9 Items in net earnings not requiring (providing) cash: Depreciation 67.2 62.0 Pre-tax gain on sale of subsidiaries - (21.1) Deferred income taxes 0.6 (2.6) Other 2.3 (20.2) Pension contribution (60.0) (32.4) Change in operating assets and liabilities 7.6 32.9 - ---------------------------------------------------------------------------- NET CASH PROVIDED FROM OPERATING ACTIVITIES 213.7 202.5 - ---------------------------------------------------------------------------- INVESTING ACTIVITIES Additions to properties (70.7) (71.1) Proceeds from sale of subsidiaries - 83.8 Other 4.0 11.4 - ---------------------------------------------------------------------------- NET CASH PROVIDED (USED) IN INVESTING ACTIVITIES (66.7) 24.1 - ---------------------------------------------------------------------------- FINANCING ACTIVITIES Net borrowings of notes payable 50.1 50.7 Issuance of long-term debt - - Reduction in long-term debt (0.3) (2.4) Common stock repurchases (91.5) (122.6) Cash dividends (79.5) (77.1) Other 0.7 0.5 - ---------------------------------------------------------------------------- NET CASH USED IN FINANCING ACTIVITIES (120.5) (150.9) - ---------------------------------------------------------------------------- Effect of exchange rate changes on cash 2.1 (4.4) - ---------------------------------------------------------------------------- Increase in cash and temporary investments 28.6 71.3 Cash and temporary investments at beginning 266.3 98.1 - ---------------------------------------------------------------------------- CASH AND TEMPORARY INVESTMENTS AT END OF PERIOD $294.9 $169.4 ============================================================================
See accompanying notes to consolidated financial statements. 4 6 Notes To Consolidated Financial Statements for the three months ended March 31, 1995 (Unaudited) 1. Accounting Policies The unaudited interim financial information included herein reflects the adjustments (consisting solely of normal recurring adjustments) which are, in the opinion of management, necessary for a fair presentation of the results of operations, financial position, and cash flows for the periods presented. Such interim information should be read in conjunction with the financial statements and notes thereto contained on pages 15 to 28 of the Company's Annual Report. The accounting policies used in preparing these financial statements are the same as those summarized in the Company's Annual Report. The results of operations for the three months ended March 31, 1995, are not necessarily indicative of the results to be expected for the full year. 2. Other Revenue Other revenue for the three months ended March 31, 1994, includes a gain of $21.1 million ($13.3 million after tax or $.06 per share) from the sale of the Mrs. Smith's Frozen Foods pie business and a charge of $20.5 million ($13.1 million after tax or $.06 per share) primarily from the initial funding of the Kellogg's Corporate Citizenship Fund. 5 7 KELLOGG COMPANY PART I - FINANCIAL INFORMATION Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of operations Kellogg revenues are generated from the sale of ready-to-eat cereals and other grain-based convenience foods in nearly 160 countries. The ready-to-eat cereal category continued to exhibit volume growth around the world during the first quarter of 1995, with Kellogg continuing to demonstrate strong global leadership. Consolidated net sales increased 7% over the comparable quarter of 1994, principally from higher selling prices, volume growth and, to a lesser extent, product mix improvements. Excluding the results of the Mrs. Smith's Frozen Foods pie business, divested during the first quarter of 1994, consolidated net sales increased 8%. The Company's total volume was up 2% for the quarter versus the prior year. Excluding results of the divested business, total volume increased 4% over the previous year, buoyed by strong growth in European ready-to-eat cereal and the U.S. convenience foods business. Cereal volume was up 3% in total, with strong international growth more than offsetting a slight decline in the highly competitive U.S. market. Other convenience foods volume, excluding the divested business, increased 8%. The gross profit margin for the first quarter of 1995 strengthened to 55.2%, up .6 percentage points over 1994. This increase in gross margin was the result of favorable pricing, combined with aggressive cost containment programs which limited the increase in cost of goods sold per-kilo. Selling and administrative expense for the first quarter of 1995 was up 8% over the comparable period of 1994 but remained relatively constant as a percentage of net sales, at 36%. Beginning in the second quarter of 1994, a shift in the marketing investment mix occurred toward advertising from promotion. This trend has continued through the first quarter of 1995. Management believes that its strategy of investment in brand-building advertising and reduction in price promotion spending on established brands, coupled with a strong new-product program, will assist in delivering long-term growth. Operating profit increased 8% to $323 million, reflecting increased volume and stronger gross profit margins. Other income for the first quarter of 1994 includes a gain of $21.1 million ($13.3 million after tax or $.06 per share) from the sale of the Mrs. Smith's Frozen Foods pie business. Other expense includes a charge of $20.5 million ($13.1 million after tax or $.06 per share), primarily from the initial funding of the Kellogg's Corporate Citizenship Fund, a private trust established for charitable donations. 6 8 Gross interest expense, prior to amounts capitalized, increased to $19.9 million for the first quarter of 1995 compared to $11.4 million for the first quarter of 1994, due to higher debt levels, incurred primarily to fund common stock repurchases, and increased interest rates on short-term borrowings. The Company expects a further increase in interest expense during the remainder of 1995, primarily due to expected higher effective rates than those experienced during 1994 as well as a higher average debt level for the year. The Company's effective income tax rate for the quarter was 37.9%, .3 percentage points lower than the comparable 1994 rate of 38.2%. The Company expects its effective income tax rate for 1995 to be between 37% and 38%. Earnings per share for the first quarter of 1995 were $.89, up 10% from the $.81 reported for the first quarter of 1994. Net earnings for the quarter were $196.0 million, an increase of 7% from the comparable period of 1994. Liquidity and capital resources The financial condition of the Company remained strong during the first quarter of 1995. Operations provided a strong, positive cash flow of $213.7 million of which approximately 80% was returned to shareholders in the form of cash dividends and common stock repurchases during the quarter. The strong cash flow, combined with a program of issuing commercial paper and maintaining worldwide credit facilities, provides adequate liquidity to meet the Company's operational needs. The Company maintains credit facilities with banking institutions in the United States and other countries where it conducts business. The ratio of current assets to current liabilities was 1.2:1 as of March 31, 1995, unchanged from the ratio at December 31, 1994. Capital spending for the first quarter of 1995 was $70.7 million, compared with $71.1 million during the first quarter of 1994. Capital expenditures have remained steady, reflecting the Company's application of value-based management principles and the ongoing strategy of improving return on invested capital. Management anticipates that total year 1995 capital expenditures will be approximately $350 million, essentially flat when compared with 1994. During the first quarter of 1995 the Company spent $91.5 million to purchase approximately 1.6 million shares of its common stock. Stock repurchases are made under plans authorized by the Company's Board of Directors. The total authorized purchase amount remaining for 1995 is $233.9 million. Market conditions permitting, management intends to fully utilize this authorization by the end of 1995. Long-term debt outstanding at March 31, 1995 consisted principally of $200 million of three-year notes issued in 1994, $200 million of five-year notes issued in 1993, and $300 million of five-year notes issued in 1992. Short-term debt outstanding consisted principally of commercial paper. The Company continues to enjoy the highest available debt ratings on both its long-term debt and commercial paper. The Company's net debt position (long-term debt plus notes payable less cash and temporary investments) at March 31, 1995 was $750.2 million, up $21.6 million from December 31, 1994. 7 9 The ratio of debt to total capitalization remained at 36%, unchanged from December 31, 1994. At March 31, 1995, the Company had available an unused "shelf registration" of $200 million with the Securities and Exchange Commission to provide for the issuance of debt in the United States. The proceeds of such an offering would be added to the Company's working capital and be available for general corporate purposes. Dividends paid per share of common stock increased 6% to $.36 during the first quarter of 1995. Management believes the trend of increased dividends will continue in 1995. LOOKING FORWARD Management is not aware of any adverse trends that would materially affect the Company's strong financial position. Should suitable investment opportunities or working capital needs arise that would require additional financing, management believes that the Company's triple A credit rating, strong balance sheet, and its solid earnings history provides a base for obtaining additional financial resources at competitive rates and terms. 8 10 KELLOGG COMPANY PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits: 4 - There is no instrument with respect to long-term debt of the Company that involves indebtedness or securities authorized thereunder exceeding ten percent of the total assets of the Company and its subsidiaries on a consolidated basis. The Company agrees to file a copy of any instrument or agreement defining the rights of holders of long-term debt of the Company upon request of the Securities and Exchange Commission. 27 - Financial Data Schedule (b) Reports on Form 8-K: No reports on Form 8-K were filed during the quarter for which this report is filed. 9 11 KELLOGG COMPANY 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 thereunto duly authorized. KELLOGG COMPANY /s/ C.W. Elliott ------------------------------- C.W. Elliott Principal Financial Officer; Executive Vice President - Administration /s/ A. Taylor ------------------------------- A. Taylor Principal Accounting Officer; Vice President and Corporate Controller Date: May 10, 1995 10 12 KELLOGG COMPANY EXHIBIT INDEX
Number Description Page ------ ----------- ---- 27 Financial Data Schedule 12
11 EX-27 2 EXHIBIT 27
5 This schedule contains summary financial information extracted from Kellogg Company and subsidiaries Consolidated financial statements for the three months ended March 31, 1995 and is qualified in its entirety by reference to such Financial Statements. 1,000,000 3-MOS DEC-31-1995 JAN-01-1995 DEC-31-1995 295 0 626 0 427 1,562 4,734 (1,803) 4,692 1,344 719 78 0 0 70 4,692 1,716 1,716 769 769 613 0 18 315 119 196 0 0 0 196 .89 0
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