Kellogg Company Delivers Strong Second Quarter Performance; Reaffirms 2011 Currency-Neutral EPS Guidance

BATTLE CREEK, Mich., July 28, 2011 (GLOBE NEWSWIRE) -- Kellogg Company (NYSE:K) today announced second quarter 2011 reported net sales growth of 11 percent to $3.4 billion. Internal net sales, which exclude the effects of foreign currency translation, rose 6 percent over the same period. Second quarter 2011 operating profit of $543 million increased 12 percent on a reported basis and 8 percent on an internal basis.  While the Company was lapping soft comparisons in second quarter 2010, the performance reflected strong innovation and the benefit from pricing actions taken over the first half 2011 which helped offset higher input costs.

Reported earnings for the second quarter 2011 were $343 million, or $0.94 per diluted share, an increase of 19 percent from second quarter 2010 reported earnings of $0.79 per diluted share. On a currency-neutral basis, second quarter 2011 earnings per share grew 13 percent.

"We continue to build momentum as demonstrated by our solid first half top-line results. During the second quarter, we benefited from improved net price realization and were pleased with the performance of our strong innovation," said John Bryant, Kellogg Company's president and chief executive officer. "As we look to the back half of 2011, we expect continued sales growth driven by price and mix and are confident in our innovation line up and commercial plans."

North America

During the second quarter 2011, Kellogg North America net sales were $2.2 billion, an 8 percent increase on both a reported and internal basis. On an internal basis, North America Retail Cereal net sales rose 13 percent reflecting higher net price realization, the strength of recently launched innovation, as well as easier comparisons to second quarter 2010.  North America Retail Snacks delivered internal net sales growth of 3 percent driven by the crackers business.  North America Frozen and Specialty Channels internal net sales grew 10 percent. Second quarter 2011 North America operating profit increased 12 percent on a reported basis and 11 percent on an internal basis.

International

Kellogg International posted second quarter 2011 reported net sales of $1.2 billion, growing 16 percent year-over-year supported by net price realization and innovation. On an internal basis, excluding the effects of currency translation, net sales increased 3 percent. Compared with the same period last year, internal net sales in Europe increased 1 percent, Latin America internal net sales grew 7 percent, and Asia Pacific internal net sales rose 4 percent.   Reported second quarter 2011 operating profit for the Kellogg International business increased 12 percent. On an internal basis, operating profit was flat to a year earlier as recent price increases helped offset the impact of higher input costs.

Interest and Tax

Kellogg's interest expense was $53 million for the quarter. The second quarter 2011 effective tax rate was 30.1 percent.

Cash flow

Cash flow, defined as cash from operating activities less capital expenditures, was $403 million for the first half of 2011, compared to $446 million in the first half of 2010.

Kellogg repurchased nearly $190 million of shares during the second quarter, and more than $500 million in the first half of 2011, under its $2.5 billion three-year share repurchase authorization.

Kellogg 2011 Guidance

The Company expanded its full-year 2011 internal net sales growth guidance to a range of 4 to 5 percent. The increased net sales outlook is expected to offset anticipated higher cost pressures. The Company reiterated its 2011 internal operating profit guidance of approximately flat to down two percent year-over-year. Kellogg also reaffirmed its full-year 2011 guidance of currency-neutral earnings per share growth in the low single-digit range. Assuming no foreign exchange impact, this implies earnings per share in the range of $3.33 to $3.40. The Company estimates a foreign exchange benefit of approximately $0.09, which would result in reported 2011 EPS guidance of $3.42 to $3.49.

Conference Call / Webcast

Kellogg Company will host a conference call to discuss these results on July 28, 2011 at 9:30 a.m. Eastern Time. The conference call and accompanying presentation slides will be broadcast live over the Internet at http://investor.kelloggs.com. Analysts and institutional investors may participate in the Q&A session by dialing 888-465-4043 in the U.S., and 201-604-5146 outside of the U.S. Members of the media and the public are invited to attend in a listen-only mode. Rebroadcast information is available at http://investor.kelloggs.com.

About Kellogg Company

For more than 100 years, consumers have counted on Kellogg for great-tasting, high-quality and nutritious foods. Kellogg Company, with 2010 sales of more than $12 billion, 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. Kellogg Company's beloved brands, which are manufactured in 18 countries and marketed in more than 180 countries, include Kellogg's^®, Keebler^®, Pop-Tarts^®, Eggo^®, Cheez-It^®, All-Bran^®, Mini-Wheats^®, Nutri-Grain^®, Rice Krispies^®, Special K^®, Chips Deluxe^®, Famous Amos^®, Sandies^®, Austin^®, Club^®, Murray^®, Kashi^®, Bear Naked^®, Morningstar Farm^®, Gardenburger^® and Stretch Island^®. For more information on the Kellogg Company, including our corporate responsibility initiatives, visit www.kelloggcompany.com.

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Forward-Looking Statements Disclosure

This news release contains, or incorporates by reference, "forward-looking statements" with projections concerning, among other things, the Company's strategy, and the Company's sales, earnings, margin, operating profit, costs and expenditures, interest expense, tax rate, capital expenditure, dividends, cash flow, debt reduction, share repurchases, costs, brand building, ROIC, working capital, growth, new products, innovation, cost reduction projects, and competitive pressures. Forward-looking statements include predictions of future results or activities and may contain the words "expects," "believes," "should," "will," "anticipates," "projects," "estimates,"  "implies," "can," or words or phrases of similar meaning.  

The Company's actual results or activities may differ materially from these predictions. The Company's future results could also be affected by a variety of factors, including the impact of competitive conditions; the effectiveness of pricing, advertising, and promotional programs; the success of innovation, renovation and new product introductions; the recoverability of the carrying value of goodwill and other intangibles; the success of productivity improvements and business transitions; commodity and energy prices; labor costs; disruptions or inefficiencies in supply chain; the availability of and interest rates on short-term and long-term financing; actual market performance of benefit plan trust investments; the levels of spending on systems initiatives, properties, business opportunities, integration of acquired businesses, and other general and administrative costs; changes in consumer behavior and preferences; the effect of U.S. and foreign economic conditions on items such as interest rates, statutory tax rates, currency conversion and availability; legal and regulatory factors including changes in food safety, advertising and labeling laws and regulations; the ultimate impact of product recalls; business disruption or other losses from war, terrorist acts or political unrest; and other items. 

Forward-looking statements speak only as of the date they were made, and the Company undertakes no obligation to publicly update them.