BATTLE CREEK, Mich., April 30, 2009 (GLOBE NEWSWIRE) -- Kellogg Company (NYSE:K) today reported solid first quarter 2009 growth in internal net sales, internal operating profit and currency-neutral earnings per share. The strong performance was driven by internal net sales growth and a focus on cost savings.
Kellogg also announced that it plans to increase up-front cost investments for cost savings initiatives from the original expectation of $0.14 per share to approximately $0.22 per share for 2009, while still maintaining current 2009 earnings per share guidance. These investments will help enable the Company to deliver its goal of reducing annual costs by $1 billion by the end of 2011.
First quarter net earnings were $321 million, a 2% increase from last year's $315 million. First quarter reported earnings per diluted share were $0.84, a 4% increase on a reported basis and a 14% increase on a currency-neutral basis. First quarter results included an estimated $0.05 per share impact due to the cost of the recent peanut-related recalls.
"By remaining focused on our business model and strategy, we performed ahead of our expectations during the first quarter despite cost pressures and the difficult economic environment," said David Mackay, Kellogg's chief executive officer. "We also continue to focus on cost-savings initiatives and reinvestment for the future. We now plan to increase our up-front cost investments to achieve our ambitious $1 billion savings target."
First quarter reported net sales decreased 3% to $3.2 billion. Internal net sales growth, which excludes the effects of foreign currency translation and acquisitions, rose 4%. Kellogg North America posted first quarter reported net sales growth of 3%; internal net sales growth was 4%. North America Retail Cereal delivered internal net sales growth of 6% for the quarter. Retail Snacks posted internal net sales growth of 2%, which was negatively impacted by the peanut-related recalls. North America Frozen and Specialty Channels businesses together delivered internal net sales growth of 6%.
Kellogg International posted a first quarter 2009 reported net sales decline of 14%. However, net sales growth for Kellogg International was 4% on an internal basis, which excludes the effects of currency translation and acquisitions. First quarter internal net sales growth in Europe was 1% and was negatively impacted by some challenging retailer negotiations, which have now been resolved. Latin America internal net sales increased 8%, while Asia Pacific internal net sales rose 11%.
First quarter operating profit was $529 million, a 3% decline on a reported basis, however on an internal basis it was a strong 7% increase. Total up-front costs for cost-reduction initiatives were approximately $0.03 per share, in line with the first quarter of last year.
Cash flow, defined as cash from operating activities less capital expenditures, was $172 million for the quarter including the unfavorable impacts of foreign exchange and the timing of interest payments.
Kellogg Affirms 2009 Guidance
Kellogg continues to be well positioned to drive sustainable and dependable performance. The Company affirmed its previous 2009 guidance of 3-4% internal net sales growth and mid single-digit internal operating profit growth. 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. This guidance includes an approximately $0.06 earnings per share cost in 2009 from the peanut-related recalls and an increase in up-front charges for cost reduction initiatives from $0.14 per share to $0.22 per share.
CEO Mackay concluded, "Our strong start increases our visibility with respect to another year of sustainable and dependable performance. For 2009, we will focus on driving solid top-line growth, considerable cost savings and strong reinvestment."
About Kellogg Company
With 2008 sales of nearly $13 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(r), Keebler(r), Pop-Tarts(r), Eggo(r), Cheez-It(r), Nutri-Grain(r), Rice Krispies(r), BearNaked(r), Morningstar Farms(r), Famous Amos(r), Special K(r), All-Bran(r), Frosted Mini-Wheats(r), Club(r) and Kashi(r). 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; the ultimate impact of product recalls; 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.
Kellogg Company and Subsidiaries
CONSOLIDATED STATEMENT OF INCOME
(millions, except per share data)
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Quarter ended
April 4, March 29,
(Results are unaudited) 2009 2008
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Net sales $ 3,169 $ 3,258
Cost of goods sold 1,867 1,894
Selling, general and administrative expense 773 819
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Operating profit 529 545
Interest expense 67 82
Other income (expense), net -- (11)
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Income before income taxes 462 452
Income taxes 143 137
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Net income $ 319 $ 315
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Net income (loss) attributable to
noncontrolling interests (a) ($2) $ --
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Net income attributable to Kellogg
Company (a) $ 321 $ 315
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Net income attributable to Kellogg Company:
Basic $ .84 $ .82
Diluted $ .84 $ .81
Dividends per share $ .3400 $ .3100
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Average shares outstanding:
Basic 382 386
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Diluted 383 389
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Actual shares outstanding at period end 382 379
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(a) The company adopted SFAS No. 160, "Noncontrolling interests in
Consolidated Financial Statements" which requires retrospective
presentation of amounts related to partially-owned subsidiaries.
Kellogg Company and Subsidiaries
SELECTED OPERATING SEGMENT DATA
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Quarter ended
(millions) April 4, March 29,
(Results are unaudited) 2009 2008
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Net sales
North America $ 2,211 $ 2,148
Europe 557 677
Latin America 230 253
Asia Pacific (a) 171 180
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Consolidated $ 3,169 $3,258
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Operating profit
North America $ 403 $ 403
Europe 95 112
Latin America 49 45
Asia Pacific (a) 25 31
Corporate (43) (46)
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Consolidated $ 529 $ 545
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(a) Includes Australia, Asia and South Africa.
Kellogg Company and Subsidiaries
CONSOLIDATED STATEMENT OF CASH FLOWS
(millions)
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Quarter ended
April 4, March 29,
(unaudited) 2009 2008
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Operating activities
Net income $ 319 $ 315
Adjustments to reconcile net income to
operating cash flows:
Depreciation and amortization 84 94
Deferred income taxes (31) (11)
Other (a) 21 70
Postretirement benefit plan contributions (74) (41)
Changes in operating assets and liabilities (74) (179)
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Net cash provided by operating activities 245 248
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Investing activities
Additions to properties (73) (67)
Acquisitions of businesses, net of cash
acquired -- (105)
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Net cash used in investing activities (73) (172)
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Financing activities
Net issuances (reductions) of notes payable 2 (117)
Issuances of long-term debt -- 746
Reductions of long-term debt (1) (1)
Issuances of common stock 7 40
Common stock repurchases -- (642)
Cash dividends (130) (119)
Other 2 8
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Net cash used in financing activities (120) (85)
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Effect of exchange rate changes on cash (3) 17
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Increase in cash and cash equivalents 49 8
Cash and cash equivalents at beginning of
period 255 524
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Cash and cash equivalents at end of period $ 304 $ 532
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Supplemental Financial Data:
Cash Flow (operating cash flow less property
additions) (b) $ 172 $ 181
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(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.
Kellogg Company and Subsidiaries
CONSOLIDATED BALANCE SHEET
(millions, except per share data)
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April 4, January 3,
2009 2009
(unaudited) *
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Current assets
Cash and cash equivalents $ 304 $ 255
Accounts receivable, net 1,170 1,100
Inventories:
Raw materials and supplies 206 203
Finished goods and materials in process 615 694
Deferred income taxes 116 112
Other prepaid assets 161 157
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Total current assets 2,572 2,521
Property, net of accumulated depreciation
of $4,157 and $4,171 2,884 2,933
Goodwill 3,631 3,637
Other intangibles, net of accumulated
amortization of $43 and $42 1,460 1,461
Pension 141 96
Other assets 286 298
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Total assets $10,974 $10,946
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Current liabilities
Current maturities of long-term debt $ 1 $ 1
Notes payable 1,392 1,387
Accounts payable 1,058 1,135
Accrued advertising and promotion 397 357
Accrued income taxes 110 51
Accrued salaries and wages 172 280
Other current liabilities 323 341
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Total current liabilities 3,453 3,552
Long-term debt 4,060 4,068
Deferred income taxes 301 300
Pension liability 590 631
Other liabilities 945 940
Shareholders' equity
Common stock, $.25 par value 105 105
Capital in excess of par value 428 438
Retained earnings 5,027 4,836
Treasury stock, at cost (1,767) (1,790)
Accumulated other comprehensive income (loss) (2,173) (2,141)
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Total Kellogg Company shareholders' equity 1,620 1,448
Noncontrolling interest (a) 5 7
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Total shareholders' equity 1,625 1,455
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Total liabilities and shareholders' equity $10,974 $10,946
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* Condensed from audited financial statements.
(a) The company adopted SFAS No. 160, "Noncontrolling interests in
Consolidated Financial Statements" which requires retrospective
presentation of amounts related to partially-owned subsidiaries.