EX-99.01 2 k46834exv99w01.htm EX-99.01 EX-99.01
EXHIBIT 99.01
             
(KELLOGG LOGO)   Kellogg Company News
 
            
 
  For release:   October 29, 2008    
 
  Analyst Contact:   Joel Wittenberg   (269) 961-9089
 
  Media Contact:   Kris Charles   (269) 961-3799
 
Kellogg Announces Strong Third-Quarter Results,
Expresses Confidence in Full-Year Earnings Visibility
     BATTLE CREEK, Mich. — Kellogg Company (NYSE: K) today reported third-quarter 2008 sales growth of 9% and earnings per share growth of 17% driven by strong underlying business momentum.
     Reported net earnings for the quarter were $342 million, a 12% increase over last year’s $305 million. The third-quarter performance included the impact of significantly higher commodity inflation and a higher tax rate, offset by lower upfront costs. Earnings were $0.89 per diluted share versus last year’s $0.76, an increase of 17%.
     “The Kellogg business model and strategy continue to give us the ability to offset inflationary headwinds while hitting our targets and delivering sustainable, dependable performance in these very volatile times,” said David Mackay, Kellogg’s chief executive officer.
     Reported net sales in the third quarter increased 9% to $3.3 billion. Internal net sales growth, which excludes the effects of foreign currency translation, acquisitions and differences in the number of shipping days, was 7%.
     Kellogg North America posted broad-based reported net sales growth of 10%; internal net sales growth was 9%. Retail Cereal posted internal net sales growth of 7%, the Retail Snacks business posted internal net sales growth of 10% and the North America Frozen and Specialty Channels businesses delivered internal net sales growth of 11%.
     Kellogg International reported third-quarter net sales growth of 9%, or 3% on an internal basis, which excludes the favorable effects of currency translation, acquisitions and differences in the number of shipping days. Internal net sales in Europe increased 3%, while Latin America internal sales decreased 1% versus last year’s strong 12% growth. Economic weakness and a competitive environment impacted Mexico’s performance. The Asia Pacific region posted strong internal net sales growth of 10%.
     Operating profit was $533 million in the third quarter of 2008, an increase of 9% on a reported and internal basis. Total upfront costs incurred for cost-reduction initiatives were
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approximately $0.01 per share. Kellogg still expects that upfront costs related to cost-reduction initiatives for the full year will be approximately $0.14 of earnings per share.
     Cash flow, defined as cash from operating activities less capital expenditures, was $893 million in the first three quarters of the year versus $961 million during the same period of 2007. For the full year, Kellogg still anticipates cash flow of between $1 billion and $1.075 billion.
Kellogg Expresses Increased Confidence in Achieving High End of 2008 EPS Target
     Kellogg now anticipates that 2008 earnings per share will be closer to the high end of the previous guidance of $2.95 to $3.00 per share. The Company also expects mid single-digit internal sales and internal operating profit growth for the full year. Total cost pressure expectations remain at approximately 9% of cost of goods.
     For 2009, Kellogg anticipates another year of sustainable and dependable performance. Given the current business momentum, the company provided guidance of mid single-digit internal sales growth — above its long-term guidance of low single-digit growth. In addition, internal operating profit is projected to also grow at a mid single-digit rate. The Company remains confident that it can achieve high single-digit EPS growth on a currency neutral basis, which excludes the effects of foreign currency translation but includes the impact of acquisitions, dispositions and differences in the number of shipping days. However, the recent volatility in foreign exchange markets makes forecasting reported EPS growth very difficult at this time.
     CEO Mackay concluded, “We remain confident in our ability to deliver another year of sustainable and dependable performance despite the uncertain economic environment and unpredictable foreign exchange markets.”
About Kellogg Company
With 2007 sales of nearly $12 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, fruit-flavored snacks, frozen waffles, and veggie foods. The Company’s brands include Kellogg’s®, Keebler®, Pop-Tarts®, Eggo®, Cheez-It®, Nutri-Grain®, Rice Krispies®, Morningstar Farms®, Famous Amos®, Special K®, Stretch Island®, All-Bran®, Frosted Mini-Wheats®, Club® and
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Kashi®. Kellogg products are manufactured in 19 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, earnings, costs, cash flow, brand building, and cost-reduction initiatives. Actual performance may differ materially from these statements due to factors related to 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. Forward-looking statements speak only as of the date they were made, and the Company undertakes no obligation to publicly update them.
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Kellogg Company and Subsidiaries
CONSOLIDATED STATEMENT OF EARNINGS
(millions, except per share data)
                                 
    Quarter ended   Year-to-date period ended
    September 27,   September 29,   September 27,   September 29,
(Results are unaudited)   2008   2007   2008   2007
 
 
                                
Net sales
   $ 3,288     $ 3,004     $ 9,889     $ 8,982  
 
                                
Cost of goods sold
     1,885       1,662       5,678       4,999  
Selling, general and administrative expense
     870       850       2,603       2,474  
 
 
                                
Operating profit
     533       492       1,608       1,509  
 
                                
Interest expense
     71       79       230       233  
Other income (expense), net
     13       3       (6 )     5  
 
 
                                
Earnings before income taxes
     475       416       1,372       1,281  
Income taxes
     133       111       403       354  
 
                                
Net earnings
   $ 342     $ 305     $ 969     $ 927  
 
 
                                
Net earnings per share:
                                
Basic
   $ .90     $ .77     $ 2.54     $ 2.34  
Diluted
   $ .89     $ .76     $ 2.51     $ 2.31  
 
                                
Dividends per share
   $ .3400     $ .3100     $ .9600     $ .8920  
 
 
                                
Average shares outstanding:
                                
Basic
     380       395       382       397  
 
Diluted
     384       399       385       401  
 
 
                                
Actual shares outstanding at period end
                     381       394  
 
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Kellogg Company and Subsidiaries
SELECTED OPERATING SEGMENT DATA
                                 
    Quarter ended   Year-to-date period ended
(millions)   September 27,   September 29,   September 27,   September 29,
(Results are unaudited)   2008   2007   2008   2007
 
 
                                
Net sales
                                
North America
   $ 2,156     $ 1,960     $ 6,431     $ 5,942  
Europe
     666       604       2,089       1,801  
Latin America
     277       270       813       752  
Asia Pacific (a)
     189       170       556       487  
 
Consolidated
   $ 3,288     $ 3,004     $ 9,889     $ 8,982  
 
 
                                
Operating profit
                                
North America
   $ 380     $ 333     $ 1,163     $ 1,059  
Europe
     113       110       347       345  
Latin America
     61       66       166       168  
Asia Pacific (a)
     26       18       79       65  
Corporate
     (47 )     (35 )     (147 )     (128 )
 
Consolidated
   $ 533     $ 492     $ 1,608     $ 1,509  
 
(a)   Includes Australia, Asia and South Africa.
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Kellogg Company and Subsidiaries
CONSOLIDATED STATEMENT OF CASH FLOWS
(millions)
                 
    Year-to-date period ended
    September 27,   September 29,
(unaudited)   2008   2007
 
 
                
Operating activities
                
Net earnings
   $ 969     $ 927  
Adjustments to reconcile net earnings to operating cash flows:
                
Depreciation and amortization
     274       275  
Deferred income taxes
     (12 )     (114 )
Other (a)
     122       138  
Postretirement benefit plan contributions
     (60 )     (42 )
Changes in operating assets and liabilities
     (105 )     69  
 
 
                
Net cash provided by operating activities
     1,188       1,253  
 
 
                
Investing activities
                
Additions to properties
     (295 )     (292 )
Acquisitions of business, net of cash acquired
     (212 )     —  
Other
     11       (4 )
 
 
                
Net cash used in investing activities
     (496 )     (296 )
 
 
                
Financing activities
                
Net issuances of notes payable
     48       566  
Issuances of long-term debt
     756       —  
Reductions of long-term debt
     (466 )     (730 )
Issuances of common stock
     155       141  
Common stock repurchases
     (650 )     (417 )
Cash dividends
     (365 )     (354 )
Other
     14       8  
 
 
                
Net cash used in financing activities
     (508 )     (786 )
 
 
                
Effect of exchange rate changes on cash
     (24 )     (6 )
 
 
                
Increase in cash and cash equivalents
     160       165  
Cash and cash equivalents at beginning of period
     524       411  
 
 
                
Cash and cash equivalents at end of period
   $ 684     $ 576  
 
 
                
Supplemental Financial Data:
                
 
                
Cash Flow (operating cash flow less property additions) (b)
   $ 893     $ 961  
 
(a)   Consists principally of non-cash expense accruals for employee compensation and benefit obligations.
 
(b)   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.
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Kellogg Company and Subsidiaries
CONSOLIDATED BALANCE SHEET
(millions, except per share data)
                 
    September 27,   December 29,
    2008   2007
    (unaudited)   *
 
 
                
Current assets
                
Cash and cash equivalents
   $ 684     $ 524  
Accounts receivable, net
     1,243       1,011  
Inventories:
                
Raw materials and supplies
     236       234  
Finished goods and materials in process
     671       690  
Deferred income taxes
     145       103  
Other prepaid assets
     128       140  
 
 
                
Total current assets
     3,107       2,702  
 
                
Property, net of accumulated depreciation of $4,432 and $4,313
     3,067       2,990  
Goodwill
     3,652       3,515  
Other intangibles, net of accumulated amortization of $42 and $41
     1,449       1,450  
Pension
     511       481  
Other assets
     252       259  
 
 
                
Total assets
   $ 12,038     $ 11,397  
 
Current liabilities
                
Current maturities of long-term debt
   $ 2     $ 466  
Notes payable
     1,539       1,489  
Accounts payable
     1,134       1,081  
Accrued advertising and promotion
     417       378  
Accrued income taxes
     30       —  
Accrued salaries and wages
     262       316  
Other current liabilities
     388       314  
 
 
                
Total current liabilities
     3,772       4,044  
 
                
Long-term debt
     4,008       3,270  
Deferred income taxes
     708       647  
Other liabilities
     931       910  
 
                
Shareholders’ equity
                
Common stock, $.25 par value
     105       105  
Capital in excess of par value
     424       388  
Retained earnings
     4,790       4,217  
Treasury stock, at cost
     (1,812 )     (1,357 )
Accumulated other comprehensive income (loss)
     (888 )     (827 )
 
 
                
Total shareholders’ equity
     2,619       2,526  
 
 
                
Total liabilities and shareholders’ equity
   $ 12,038     $ 11,397  
 
*   From audited financial statements.
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