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January 22, 2013 Kellogg Company Fourth Quarter And Full-Year 2012 Results Conference Call / Webcast
BATTLE CREEK, MICH. – Kellogg Company (NYSE: K) plans to issue its fourth quarter and full-year 2012 earnings results in a press release at approximately 8:00 am ET on Tuesday, February 5, 2013. The company will also host a public conference call / webcast during which Kellogg executive management will review and discuss these results. Speaking on behalf of Kellogg Company will be John Bryant, Kellogg Company president and CEO; Ron Dissinger, Kellogg Company Chief Financial Officer; and Michael Allen, President, U.S. Frozen Foods. A question and answer session with analysts and investors will follow. Live Conference Date: Tuesday, February 5, 2013 Time: 9:30 am – 10:30 am ET Teleconference Number: (877) 270-2148 in the U.S. (412) 902-6510 outside the U.S. Dial-in available beginning at 9:15 am ET, no access code needed. Presentation Slides: Printable slides available at approximately 8:00 am ET on Tuesday, February 5, at http://investor.kelloggs.com . Webcast: Live audio webcast with...
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October 10, 2012 Kellogg Company Third Quarter 2012 Results Conference Call / Webcast
BATTLE CREEK, Mich. Oct. 10, 2012 (GLOBE NEWSWIRE) - (NYSE:K) - Kellogg Company (NYSE:K) plans to issue its 2012 third quarter earnings results in a press release at approximately 8:00 am ET on Thursday, November 1, 2012 . The company will also host a public conference call / webcast during which Kellogg executive management will review and discuss these results. Speaking on behalf of Kellogg Company will be John Bryant , Kellogg Company president and CEO; and Ron Dissinger , Kellogg Company Chief Financial Officer. A question and answer session with analysts and investors will follow. Live Conference Date: Thursday, November 1, 2012     Time: 9:30 am – 10:30 am ET     Teleconference Number: (888) 338-8373 in the U.S.    (973) 872-3000 outside the U.S.    Dial-in available beginning at 9:15 am ET, no access code needed.     Presentation Slides: Printable slides available at approximately 8:00 am ET on Thursday,   November 1, at...
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  • Kellogg Company Second Quarter Results Conference Call / Webcast

    Kellogg Company (NYSE:K) announced second-quarter results for earnings per share that were broadly in-line with the company’s expectations.

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  • The 2013 Annual Report is now available.

Investor Relations

Kellogg Company Reports Second-Quarter Earnings Per Share Broadly In-line With Expectations and Provides Revised Guidance

July 31,2014

BATTLE CREEK, Mich., July 31, 2014 /PRNewswire/ -- Kellogg Company (NYSE: K) today announced second-quarter results for earnings per share that were broadly in-line with the company's expectations.  Second-quarter 2014 reported net sales decreased by 0.8 percent to $3.7 billion.  Internal net sales,* which exclude the effects of foreign currency translation, acquisitions, dispositions, and integration costs, decreased by 1.5 percent over the same period.  Second-quarter 2014 operating profit was $467 million, a reported decrease of 18.1 percent; this decrease was driven primarily by costs associated with Project K, the company's four-year efficiency and effectiveness program, and lower sales.  Underlying internal operating profit,* which excludes the effects of foreign currency translation, acquisitions, dispositions, mark-to-market accounting, integration costs, and costs associated with Project K, decreased by 7.2 percent.  The decline in underlying internal operating profit was largely the result of lower sales, and investment in brand-building activities.

Reported earnings for the second quarter 2014 were $295 million, or $0.82 per diluted share, a decrease of 15 percent from the $0.96 per diluted share reported in the second quarter of last year.  This quarter's reported earnings per share included an impact from mark-to-market of $0.02 per share, $0.16 per share of costs associated with Project K, and approximately $0.02 per share of integration costs related to the acquisition of Pringles.  Excluding these items, comparable second quarter 2014 earnings* were $1.02 per share, broadly in-line with the company's expectations; this result included a $0.02 benefit from currency-translation.

"We have announced earnings per share for the second quarter that were broadly in-line with our expectations.  While we saw growth in various areas of our business including Pringles and the international segments, the cereal category in developed markets remained challenging," said John Bryant , Kellogg Company's chairman and chief executive officer.  "Our Project K efficiency and effectiveness program continues to go well, and we are in the very early stages of the increased investment we are making in our developed-markets business.  We know that improvement will take some time, but we believe we are making the right decisions to drive profitable revenue growth in the future."

North America
Net sales posted by Kellogg North America were $2.4 billion in the second quarter, a reported decrease of 3.7 percent; internal net sales decreased by 3.4 percent.  The U.S. Morning Foods segment posted an internal net sales decline of 4.9 percent.  Internal net sales in the U.S. Snacks segment decreased by 2.7 percent.  The U.S. Specialty Channels segment posted a 1.4 percent internal net sales increase in the quarter and the North America Other segment, which is comprised of the U.S. Frozen Foods and Canadian businesses, posted a 4.9 percent decrease in internal net sales.  Reported operating profit in North America decreased by 11.9 percent; underlying internal operating profit declined by 8.7 percent, largely as the result of lower sales and increased investment in brand building.

International
Reported net sales increased by 6.9 percent in Europe in the quarter; internal net sales increased by 0.7 percent.  In Latin America, reported net sales increased by 5.2 percent and internal net sales increased by 6.9 percent, due to strong price realization, innovation, and brand-building activities.  Reported net sales in Asia Pacific decreased by 1.5 percent and internal net sales increased by 0.5 percent.

Interest and Tax
Kellogg's interest expense was $50 million in the second quarter.  The underlying tax rate* in the second quarter of 2014 was 28.7 percent.

Cash flow
Cash flow,* a non-GAAP measure defined as cash from operating activities less capital expenditures, was $428 million for the first half of the year.  The company anticipates that cash flow for the year will be at the low end of the range between $1 billion and $1.1 billion.

Year-to-date, Kellogg has repurchased $329 million of shares, far exceeding option proceeds of $124 million.

* Internal sales growth, underlying internal operating profit growth, comparable earnings, underlying effective tax rate and cash flow are all non-GAAP financial measures. See the tables herein for important information regarding these measures and a full reconciliation to the most comparable GAAP measure.

Kellogg Revises Full-Year 2014 Guidance

The company lowered its guidance for the full-year of 2014.  Internal net sales are now expected to decline by between one and two percent.  Underlying internal operating profit growth is expected to decline by between one and three percent.  Currency-neutral comparable earnings per share are expected to be in a range between a decline of one percent and an increase of one percent.  Integration costs associated with the acquisition of the Pringles business are still expected to be in a range between $0.07 and $0.09 per share.  Costs associated with Project K are still expected to be in a range between $0.60 and $0.65 per share.  As a result, earnings excluding the impact of mark-to-market accounting, integration costs, Project K and other items impacting comparability are anticipated to be between $3.81 and $3.89 per share.  This year's 53rd week is now expected to add approximately $0.07 per share to earnings and currency translation is now expected to add $0.03 per share.  As a result, the company expects an earnings range including the impact of the 53rd week and currency translation of between $3.91 and $3.99 per share.

Conference Call / Webcast

Kellogg will host a conference call to discuss these results on Thursday, July 31, 2014 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 (877) 270-2148 in the U.S., and (412) 902-6510 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

At Kellogg Company (NYSE: K), we are driven to enrich and delight the world through foods and brands that matter. With 2013 sales of approximately $14.8 billion, Kellogg is the world's leading cereal company; second largest producer of cookies and crackers; a leading producer of savory snacks; and a leading North American frozen foods company.  Every day, our well-loved brands nourish families so they can flourish and thrive. These brands include Kellogg's®, Keebler®, Special K®, Pringles®, Kellogg's Frosted Flakes®, Pop-Tarts®, Kellogg's Corn Flakes®, Rice Krispies®, Kashi®, Cheez-It®, Eggo®, Coco Pops®, Mini-Wheats®, and many more. To learn more about our responsible business leadership, foods that delight and how we strive to make a difference in our communities around the world, visit www.kelloggcompany.com.

Use of Non-GAAP Financial Measures

Certain financial measures have been provided on a non-GAAP (Generally Accepted Accounting Principles) basis.  Management believes the use of such non-GAAP measures provides increased transparency and assists investors in understanding the underlying operating performance of the company and its segments and in the analysis of ongoing operating trends.  All non-GAAP financial measures have been reconciled with the most directly comparable GAAP financial measures in the attachments provided with the release.

Forward-Looking Statements Disclosure

This news release contains, or incorporates by reference, "forward-looking statements" with projections concerning, among other things, the Company's efficiency-and-effectiveness program (Project K), the integration of the Pringles® business, 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, charges, rates of return, brand building, ROIC, working capital, growth, new products, innovation, cost reduction projects, workforce reductions, savings, 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 ability to implement Project K as planned, whether the expected amount of costs associated with Project K will differ from forecasts, whether the Company will be able to realize the anticipated benefits from Project K in the amounts and times expected, the ability to realize the anticipated benefits and synergies from the Pringles acquisition in the amounts and at the times expected, 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 update them publicly.

[Kellogg Company Financial News]

 

Kellogg Company and Subsidiaries






CONSOLIDATED STATEMENT OF INCOME






(millions, except per share data)















Quarter ended


Year-to-date period ended



June 28,

June 29,


June 28,

June 29,

(Results are unaudited)

2014

2013


2014

2013








Net sales

$3,685

$3,714


$7,427

$7,575








Cost of goods sold

2,274

$2,237


4,512

$4,705

Selling, general and administrative expense

944

907


1,834

1,797








Operating profit

467

570


1,081

1,073








Interest expense

50

61


102

121

Other income (expense), net

3

(5)


13

(12)








Income before income taxes 

420

504


992

940

Income taxes

122

150


287

274

Earnings (loss) from joint ventures

(3)

(2)


(4)

(3)

Net income

$295

$352


$701

$663

Net income (loss) attributable to noncontrolling interests 

-

-


-

-

Net income attributable to Kellogg Company 

$295

$352


$701

$663








Per share amounts:







Basic

$.82

$.96


$1.95

$1.82


Diluted

$.82

$.96


$1.94

$1.81








Dividends per share

$0.46

$0.44


$0.92

$0.88








Average shares outstanding:







Basic

359

364


360

364


Diluted

362

367


362

366








Actual shares outstanding at period end




360

362








 

Kellogg Company and Subsidiaries





SELECTED OPERATING SEGMENT DATA












(millions)









Quarter ended


Year-to-date period ended



June 28,

June 29,


June 28,

June 29,

(Results are unaudited)

2014

2013


2014

2013








Net sales







U.S. Morning Foods

$820

$863


$1,681

$1,774


U.S. Snacks

893

917


1,796

1,818


U.S. Specialty

276

272


648

651


North America Other

361

388


742

791


Europe 

772

723


1,480

1,415


Latin America 

320

304


598

612


Asia Pacific

243

247


482

514


Consolidated

$3,685

$3,714


$7,427

$7,575















Operating profit 







U.S. Morning Foods

$143

$180


$271

$343


U.S. Snacks

130

130


225

236


U.S. Specialty

63

62


150

140


North America Other

62

78


134

153


Europe 

53

75


120

146


Latin America 

47

42


95

90


Asia Pacific

2

17


16

38


Total Reportable Segments

500

584


1,011

1,146


Corporate 

(33)

(14)


70

(73)


Consolidated

$467

$570


$1,081

$1,073








 

Kellogg Company and Subsidiaries




CONSOLIDATED STATEMENT OF CASH FLOWS




(millions)










Year-to-date period ended



June 28,

June 29,

(unaudited)


2014

2013





Operating activities




Net income


$701

$663

Adjustments to reconcile net income to 




operating cash flows:




  Depreciation and amortization


235

226

  Postretirement benefit plan expense (benefit)

(45)

(8)

  Deferred income taxes


18

9

  Other 


18

60

Postretirement benefit plan contributions


(37)

(36)

Changes in operating assets and liabilities, net of acquisitions

(236)

(209)





Net cash provided by (used in) operating activities

654

705





Investing activities




Additions to properties


(226)

(238)

Other


-

(1)





Net cash provided by (used in) investing activities

(226)

(239)





Financing activities




Net issuances (reductions) of notes payable


118

71

Issuances of long-term debt


952

645

Reductions of long-term debt


(957)

(760)

Net issuances of common stock


133

408

Common stock repurchases 


(329)

(544)

Cash dividends


(331)

(320)

Other


6

20





Net cash provided by (used in) financing activities

(408)

(480)





Effect of exchange rate changes on cash and cash equivalents


(3)

(5)





Increase (decrease) in cash and cash equivalents

17

(19)

Cash and cash equivalents at beginning of period

273

281





Cash and cash equivalents at end of period

$290

$262









Supplemental financial data:








Net cash provided by (used in) operating activities

$654

$705

Additions to properties


(226)

(238)

Cash Flow (operating cash flow less property additions) (a)

$428

$467









(a) 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)













 June 28,

 December 28,




2014

2013




(unaudited)

*






Current assets





Cash and cash equivalents



$290

$273

Accounts receivable, net



1,544

1,424

Inventories:





    Raw materials and supplies



345

319

    Finished goods and materials in process



958

929

Deferred income taxes



169

195

Other prepaid assets



185

127






Total current assets



3,491

3,267






Property, net of accumulated depreciation





  of $5,719 and $5,501



3,879

3,856

Goodwill



5,055

5,051

Other intangibles, net of accumulated amortization





  of $66 and $62



2,361

2,367

Pension



560

419

Other assets



467

514






Total assets



$15,813

$15,474






Current liabilities





Current maturities of long-term debt



$607

$289

Notes payable



858

739

Accounts payable



1,462

1,432

Accrued advertising and promotion



487

476

Accrued income taxes



39

69

Accrued salaries and wages



287

327

Other current liabilities



555

503






Total current liabilities



4,295

3,835






Long-term debt



6,029

6,330

Deferred income taxes 



917

928

Pension liability



269

277

Nonpension postretirement benefits



69

68

Other liabilities



421

429






Commitments and contingencies










Equity





Common stock, $.25 par value



105

105

Capital in excess of par value



653

626

Retained earnings



7,113

6,749

Treasury stock, at cost



(3,191)

(2,999)

Accumulated other comprehensive income (loss) 



(928)

(936)






Total Kellogg Company equity



3,752

3,545






Noncontrolling interests 



61

62






Total equity



3,813

3,607






Total liabilities and equity



$15,813

$15,474

* Condensed from audited financial statements.





 

Kellogg Company and Subsidiaries





















Analysis of net sales and operating profit performance

















Second Quarter of 2014 versus 2013 






















U.S.

U.S.

U.S.

N. America

North


Latin

Asia

Corp-

Consoli-

(dollars in millions)

Morning Foods

Snacks

Specialty

Other

America

Europe

America

Pacific

orate

dated

2014 net sales

$820

$893

$276

$361

$2,350

$772

$320

$243

$0

$3,685

2013 net sales

$863

$917

$272

$388

$2,440

$723

$304

$247

$0

$3,714

% change - 2014 vs. 2013:











As Reported

-4.9%

-2.7%

1.4%

-6.8%

-3.7%

6.9%

5.2%

-1.5%

0.0%

-0.8%


Acquisitions/Divestitures

0.0%

0.0%

0.0%

0.0%

0.0%

0.0%

0.0%

-0.1%

0.0%

0.0%


Integration impact (a)

0.0%

0.0%

0.0%

0.0%

0.0%

0.0%

0.0%

0.4%

0.0%

0.0%


Foreign currency impact

0.0%

0.0%

0.0%

-1.9%

-0.3%

6.2%

-1.7%

-2.3%

0.0%

0.7%

Subtotal - internal business (b)

-4.9%

-2.7%

1.4%

-4.9%

-3.4%

0.7%

6.9%

0.5%

0.0%

-1.5%














      Volume (tonnage) (c)





-4.0%

2.6%

-4.3%

-0.6%

0.0%

-2.5%


      Pricing/mix





0.6%

-1.9%

11.0%

1.1%

0.0%

1.0%







































U.S.

U.S.

U.S.

N. America

North


Latin

Asia

Corp-

Consoli-

(dollars in millions)

Morning Foods

Snacks

Specialty

Other

America

Europe

America

Pacific

orate

dated

2014 operating profit 

$143

$130

$63

$62

$398

$53

$47

$2

($33)

$467

2013 operating profit

$180

$130

$62

$78

$450

$75

$42

$17

($14)

$570

% change - 2014 vs. 2013:











As Reported

-20.9%

-0.4%

0.8%

-20.4%

-11.9%

-29.7%

9.5%

-90.2%

-104.7%

-18.1%


Acquisitions/Divestitures

0.0%

0.0%

0.0%

0.0%

0.0%

0.0%

0.0%

1.8%

0.0%

0.2%


Integration impact (a)

0.0%

5.4%

0.0%

0.1%

1.6%

-5.9%

0.4%

-0.2%

0.2%

1.0%


Foreign currency impact

0.0%

0.0%

0.0%

-2.1%

-0.4%

8.3%

5.4%

3.3%

30.7%

1.5%


Mark-to-market (d)

0.0%

0.0%

0.0%

0.0%

0.0%

0.0%

0.0%

0.0%

20.2%

-1.3%


Restructuring and cost reduction activities (e)

-7.4%

-0.8%

0.9%

-7.5%

-4.4%

-37.2%

-2.3%

-29.9%

-222.6%

-12.3%


Underlying internal (f)

-13.5%

-5.0%

-0.1%

-10.9%

-8.7%

5.1%

6.0%

-65.2%

66.8%

-7.2%













(a)

Includes impact of integration costs associated with the Pringles acquisition.



(b)

Internal net sales growth for 2014 excludes the impact of acquisitions, divestitures, integration costs and impact of foreign currency translation.  Internal net sales growth is a non-GAAP financial measure which is reconciled to the directly comparable measure in accordance with U.S. GAAP within these tables.



(c)

We measure the volume impact (tonnage) on revenues based on the stated weight of our product shipments.



(d)

Includes mark-to-market adjustments for pension plans and commodity contracts as reflected in cost of goods sold.  Actuarial gains/losses for pension plans are recognized in the year they occur.  A portion of these mark-to-market adjustments were capitalized as inventoriable cost at the end of 2013 and 2012.  These amounts have been recognized in the first quarter of 2014 and 2013, respectively.  During the second quarter of 2014 and 2013, there were no pension mark-to-market adjustments recognized.  Mark-to-market adjustments for commodities reflect the changes in the fair value of contracts for the difference between contract and market prices for the underlying commodities.  The resulting gains/losses are recognized in the quarter they occur.



(e)

Costs incurred related primarily to the execution of Project K, a global four-year efficiency and effectiveness program. The focus of the program will be to strengthen existing businesses in core markets, increase growth in developing and emerging markets, and drive an increased level of value-added innovation.  The program is expected to provide a number of benefits, including an optimized supply chain infrastructure, the implementation of global business services, and a new global focus on categories.  The 2013 periods presented have been recast to exclude all restructuring and cost reduction activities from underlying and comparable results.  Previously, only costs associated with Project K were excluded from underlying and comparable results.



(f)

Underlying internal operating profit growth excludes the impact of foreign currency translation, pension plans and commodity contracts mark-to-market adjustments, costs related to restructuring and cost reduction activities, and if applicable, acquisitions, dispositions, and integration costs associated with the acquisition of Pringles.  The Company believes the use of this non-GAAP measure provides increased transparency and assists in understanding underlying operating performance.  This non-GAAP measure is reconciled to the directly comparable measure in accordance with U.S. GAAP within this table. 

 

Kellogg Company and Subsidiaries
























Analysis of net sales and operating profit performance

















Year-to-date 2014 versus 2013

























U.S.

U.S.

U.S.

N. America

North


Latin

Asia

Corp-

Consoli-

(dollars in millions)

Morning Foods

Snacks

Specialty

Other

America

Europe

America

Pacific

orate

dated

2014 net sales

$1,681

$1,796

$648

$742

$4,867

$1,480

$598

$482

$0

$7,427

2013 net sales

$1,774

$1,818

$651

$791

$5,034

$1,415

$612

$514

$0

$7,575

% change - 2014 vs. 2013:











As Reported

-5.2%

-1.2%

-0.4%

-6.2%

-3.3%

4.6%

-2.3%

-6.3%

0.0%

-2.0%


Acquisitions/Divestitures

0.0%

0.0%

0.0%

0.0%

0.0%

0.0%

0.0%

-0.2%

0.0%

0.0%


Integration impact (a)

0.0%

0.0%

0.0%

0.1%

0.0%

0.0%

0.0%

0.3%

0.0%

0.0%


Foreign currency impact

0.0%

0.0%

0.0%

-2.8%

-0.4%

5.1%

-3.1%

-5.9%

0.0%

0.0%

Subtotal - internal business (b)

-5.2%

-1.2%

-0.4%

-3.5%

-2.9%

-0.5%

0.8%

-0.5%

0.0%

-2.0%














      Volume (tonnage) (c)





-3.4%

-0.2%

-7.8%

-0.3%

0.0%

-3.0%


      Pricing/mix





0.5%

-0.3%

8.5%

0.2%

0.0%

1.1%







































U.S.

U.S.

U.S.

N. America

North


Latin

Asia

Corp-

Consoli-

(dollars in millions)

Morning Foods

Snacks

Specialty

Other

America

Europe

America

Pacific

orate

dated

2014 operating profit 

$271

$225

$150

$134

$780

$120

$95

$16

$70

$1,081

2013 operating profit

$343

$236

$140

$153

$872

$146

$90

$38

($73)

$1,073

% change - 2014 vs. 2013:











As Reported

-21.0%

-4.9%

6.8%

-12.4%

-10.7%

-18.2%

5.0%

-59.1%

196.7%

0.8%


Acquisitions/Divestitures

0.0%

0.0%

0.0%

0.0%

0.0%

0.0%

0.0%

1.5%

0.0%

0.1%


Integration impact (a)

0.0%

4.3%

0.0%

0.6%

1.3%

-1.0%

0.4%

5.3%

8.1%

1.5%


Foreign currency impact

0.0%

0.0%

0.0%

-3.2%

-0.6%

7.7%

3.1%

-4.3%

34.1%

0.8%


Mark-to-market (d)

0.0%

0.0%

0.0%

0.0%

0.0%

0.0%

0.0%

0.0%

59.5%

14.6%


Restructuring and cost reduction activities (e)

-6.4%

-2.0%

0.2%

-5.3%

-4.0%

-27.4%

-5.9%

-19.6%

68.4%

-9.9%


Underlying internal (f)

-14.6%

-7.2%

6.6%

-4.5%

-7.4%

2.5%

7.4%

-42.0%

26.6%

-6.3%













(a)

Includes impact of integration costs associated with the Pringles acquisition.



(b)

Internal net sales growth for 2014 excludes the impact of acquisitions, divestitures, integration costs and impact of foreign currency translation.  Internal net sales growth is a non-GAAP financial measure which is reconciled to the directly comparable measure in accordance with U.S. GAAP within these tables.



(c)

We measure the volume impact (tonnage) on revenues based on the stated weight of our product shipments.



(d)

Includes mark-to-market adjustments for pension plans and commodity contracts as reflected in cost of goods sold.  Actuarial gains/losses for pension plans are recognized in the year they occur.  A portion of these mark-to-market adjustments were capitalized as inventoriable cost at the end of 2013 and 2012.  These amounts have been recognized in the first quarter of 2014 and 2013, respectively.  During the second quarter of 2014 and 2013, there were no pension mark-to-market adjustments recognized.  Mark-to-market adjustments for commodities reflect the changes in the fair value of contracts for the difference between contract and market prices for the underlying commodities.  The resulting gains/losses are recognized in the quarter they occur.



(e)

Costs incurred related primarily to the execution of Project K, a global four-year efficiency and effectiveness program. The focus of the program will be to strengthen existing businesses in core markets, increase growth in developing and emerging markets, and drive an increased level of value-added innovation.  The program is expected to provide a number of benefits, including an optimized supply chain infrastructure, the implementation of global business services, and a new global focus on categories.  The 2013 periods presented have been recast to exclude all restructuring and cost reduction activities from underlying and comparable results.  Previously, only costs associated with Project K were excluded from underlying and comparable results.



(f)

Underlying internal operating profit growth excludes the impact of foreign currency translation, pension plans and commodity contracts mark-to-market adjustments, costs related to restructuring and cost reduction activities, and if applicable, acquisitions, dispositions, and integration costs associated with the acquisition of Pringles.  The Company believes the use of this non-GAAP measure provides increased transparency and assists in understanding underlying operating performance.  This non-GAAP measure is reconciled to the directly comparable measure in accordance with U.S. GAAP within this table. 

 

Kellogg Company and Subsidiaries






Restructuring and cost reduction activities






(millions)











Quarter ended June 28, 2014


Year-to-date period ended June 28, 2014




Cost of goods
sold

Selling, general and
administrative
expense

Total


Cost of goods
sold

Selling, general and
administrative
expense

Total

2014










U.S. Morning Foods

$15

$ -

$15


$24

$2

$26


U.S. Snacks

4

(1)

3


9

1

10


U.S. Specialty

1

(1)

-


1

-

1


North America Other

4

2

6


6

3

9


Europe

4

24

28


9

31

40


Latin America

-

1

1


-

5

5


Asia Pacific

2

3

5


6

5

11


Corporate

1

19

20


1

29

30



Total

$31

$47

$78


$56

$76

$132













Quarter ended June 29, 2013


Year-to-date period ended June 29, 2013



Cost of goods sold

Selling, general and administrative expense

Total


Cost of goods sold

Selling, general and administrative expense

Total

2013










U.S. Morning Foods

$1

$1

$2


$2

$3

$5


U.S. Snacks

1

2

3


2

4

6


U.S. Specialty

1

-

1


1

1

2


North America Other

-

1

1


-

1

1


Europe

-

-

-


-

-

-


Latin America

-

-

-


-

-

-


Asia Pacific

-

-

-


6

-

6


Corporate

-

-

-


-

-

-



Total

$3

$4

$7


$11

$9

$20











2014 Variance - better(worse) than 2013








U.S. Morning Foods

$(14)

$1

$(13)


$(22)

$1

$(21)


U.S. Snacks

(3)

3

-


(7)

3

(4)


U.S. Specialty

-

1

1


-

1

1


North America Other

(4)

(1)

(5)


(6)

(2)

(8)


Europe

(4)

(24)

(28)


(9)

(31)

(40)


Latin America

-

(1)

(1)


-

(5)

(5)


Asia Pacific

(2)

(3)

(5)


-

(5)

(5)


Corporate

(1)

(19)

(20)


(1)

(29)

(30)



Total

$(28)

$(43)

$(71)


$(45)

$(67)

$(112)

 

Kellogg Company and Subsidiaries







Integration Costs*








(millions)

























Quarter ended June 28, 2014


Year-to-date period ended June 28, 2014




Net Sales

Cost of goods
sold

Selling, general and
administrative
expense

Total


Net Sales

Cost of goods
sold

Selling, general and
administrative
expense

Total

2014












U.S. Snacks

$ -

$ -

$ -

$ -


$ -

$ -

$ -

$ -


North America Other

-

-

-

-


-

-

-

-


Europe

-

5

3

8


-

9

5

14


Asia Pacific

-

1

1

2


-

1

1

2


Corporate

-

-

-

-


-

-

1

1



Total

$ -

$6

$4

$10


$ -

$10

$7

$17















Quarter ended June 29, 2013


Year-to-date period ended June 29, 2013




Net Sales

Cost of goods sold

Selling, general and administrative expense

Total


Net Sales

Cost of goods sold

Selling, general and administrative expense

Total

2013












U.S. Snacks

$ -

$1

$7

$8


$ -

$1

$10

$11


North America Other

-

-

-

-


1

-

-

1


Europe

-

1

2

3


-

4

7

11


Asia Pacific

1

-

2

3


2

1

5

8


Corporate

-

-

2

2


-

-

5

5



Total

$1

$2

$13

$16


$3

$6

$27

$36













2014 Variance - better(worse) than 2013










U.S. Snacks

$ -

$1

$7

$8


$ -

$1

$10

$11


North America Other

-

-

-

-


1

-

-

1


Europe

-

(4)

(1)

(5)


-

(5)

2

(3)


Asia Pacific

1

(1)

1

1


2

-

4

6


Corporate

-

-

2

2


-

-

4

4



Total

$1

$(4)

$9

$6


$3

$(4)

$20

$19













*

Integration costs are charges incurred by the Company as a direct result of the work performed for the acquisition of the Pringles business.

 

Kellogg Company and Subsidiaries




Reconciliation of Non-GAAP Amounts - Reported Operating Profit




to Comparable Operating Profit


























Quarter ended June 28, 2014













U.S.

U.S.

U.S.

N. America





Kellogg

(millions)

Morning Foods

Snacks

Specialty

Other

Europe

Latin America

Asia Pacific

Corporate

Consolidated












Reported Operating Profit

$143

$130

$63

$62

$53

$47

$2

$(33)

$467


Mark-to-market (a)

-

-

-

-

-

-

-

(12)

(12)


Restructuring and cost reduction activities (b)

(15)

(3)

-

(6)

(28)

(1)

(5)

(20)

(78)

Underlying Operating Profit (c)

$158

$133

$63

$68

$81

$48

$7

$(1)

$557


Pringles integration costs

-

-

-

-

(8)

-

(2)

-

(10)

Comparable Operating Profit(d)

$158

$133

$63

$68

$89

$48

$9

$(1)

$567






















Quarter ended June 29, 2013













U.S.

U.S.

U.S.

N. America





Kellogg

(millions)

Morning Foods

Snacks

Specialty

Other

Europe

Latin America

Asia Pacific

Corporate

Consolidated












Reported Operating Profit

$180

$130

$62

$78

$75

$42

$17

$(14)

$570


Mark-to-market (a)

-

-

-

-

-

-

-

(7)

(7)


Restructuring and cost reduction activities (b)

(2)

(3)

(1)

(1)

-

-

-

-

(7)

Underlying Operating Profit (c)

$182

$133

$63

$79

$75

$42

$17

$(7)

$584


Pringles integration costs

-

(8)

-

-

(3)

-

(3)

(2)

(16)

Comparable Operating Profit (d)

$182

$141

$63

$79

$78

$42

$20

$(5)

$600













(a)

Includes mark-to-market adjustments for pension plans and commodity contracts as reflected in cost of goods sold. Actuarial gains/losses for pension plans are recognized in the year they occur. A portion of these mark-to-market adjustments were capitalized as inventoriable cost at the end of 2013 and 2012. These amounts have been recognized in the first quarter of 2014 and 2013, respectively. During the second quarter of 2014 and 2013, there were no pension mark-to-market adjustments recognized. Mark-to-market adjustments for commodities reflect the changes in the fair value of contracts for the difference between contract and market prices for the underlying commodities. The resulting gains/losses are recognized in the quarter they occur.



(b)

Costs incurred related primarily to the execution of Project K, a global four-year efficiency and effectiveness program. The focus of the program will be to strengthen existing businesses in core markets, increase growth in developing and emerging markets, and drive an increased level of value-added innovation. The program is expected to provide a number of benefits, including an optimized supply chain infrastructure, the implementation of global business services, and a new global focus on categories. The 2013 periods presented have been recast to exclude all restructuring and cost reduction activities from underlying and comparable results. Previously, only costs associated with Project K were excluded from underlying and comparable results.



(c)

Underlying Operating Profit excludes the impact of pension plans and commodity contracts mark-to-market adjustments and costs related to restructuring and cost reduction activities. The Company believes the use of this non-GAAP measure provides increased transparency and assists in understanding underlying operating performance. This non-GAAP measure is reconciled to the directly comparable measure in accordance with U.S. GAAP within this table. Underlying operating profit for the quarters ended June 28, 2014 and June 29, 2013 includes postretirement benefit plan expense (income) of ($23) million and ($4) million, respectively.



(d)

Comparable Operating Profit is a non-GAAP measure that excludes the impact of mark-to-market adjustments on pension plans and commodity contracts, the impact of restructuring and cost reduction activities and the impact of integration costs related to the acquisition of the Pringles business.

 

Kellogg Company and Subsidiaries




Reconciliation of Non-GAAP Amounts - Reported Operating Profit




to Comparable Operating Profit


























Year-to-date period ended June 28, 2014













U.S.

U.S.

U.S.

N. America





Kellogg

(millions)

Morning Foods

Snacks

Specialty

Other

Europe

Latin America

Asia Pacific

Corporate

Consolidated












Reported Operating Profit

$271

$225

$150

$134

$120

$95

$16

$70

$1,081


Mark-to-market (a)

-

-

-

-

-

-

-

104

104


Restructuring and cost reduction activities (b)

(26)

(10)

(1)

(9)

(40)

(5)

(11)

(30)

(132)

Underlying Operating Profit (c)

$297

$235

$151

$143

$160

$100

$27

$(4)

$1,109


Pringles integration costs

-

-

-

-

(14)

-

(2)

(1)

(17)

Comparable Operating Profit(d)

$297

$235

$151

$143

$174

$100

$29

$(3)

$1,126






















Year-to-date period ended June 29, 2013













U.S.

U.S.

U.S.

N. America





Kellogg

(millions)

Morning Foods

Snacks

Specialty

Other

Europe

Latin America

Asia Pacific

Corporate

Consolidated












Reported Operating Profit

$343

$236

$140

$153

$146

$90

$38

$(73)

$1,073


Mark-to-market (a)

-

-

-

-

-

-

-

(61)

(61)


Restructuring and cost reduction activities (b)

(5)

(6)

(2)

(1)

-

-

(6)

-

(20)

Underlying Operating Profit (c)

$348

$242

$142

$154

$146

$90

$44

$(12)

$1,154


Pringles integration costs

-

(11)

-

(1)

(11)

-

(8)

(5)

(36)

Comparable Operating Profit (d)

$348

$253

$142

$155

$157

$90

$52

$(7)

$1,190













(a)

Includes mark-to-market adjustments for pension plans and commodity contracts as reflected in cost of goods sold.  Actuarial gains/losses for pension plans are recognized in the year they occur.  A portion of these mark-to-market adjustments were capitalized as inventoriable cost at the end of 2013 and 2012.  These amounts have been recognized in the first quarter of 2014 and 2013, respectively.  During the second quarter of 2014 and 2013, there were no pension mark-to-market adjustments recognized.  Mark-to-market adjustments for commodities reflect the changes in the fair value of contracts for the difference between contract and market prices for the underlying commodities.  The resulting gains/losses are recognized in the quarter they occur.



(b)

Costs incurred related primarily to the execution of Project K, a global four-year efficiency and effectiveness program. The focus of the program will be to strengthen existing businesses in core markets, increase growth in developing and emerging markets, and drive an increased level of value-added innovation.  The program is expected to provide a number of benefits, including an optimized supply chain infrastructure, the implementation of global business services, and a new global focus on categories.  The 2013 periods presented have been recast to exclude all restructuring and cost reduction activities from underlying and comparable results.  Previously, only costs associated with Project K were excluded from underlying and comparable results.



(c)

Underlying Operating Profit excludes the impact of pension plans and commodity contracts mark-to-market adjustments and costs related to restructuring and cost reduction activities.  The Company believes the use of this non-GAAP measure provides increased transparency and assists in understanding underlying operating performance.  This non-GAAP measure is reconciled to the directly comparable measure in accordance with U.S. GAAP within this table.  Underlying operating profit for the year-to-date period ended June 28, 2014 and June 29, 2013 includes postretirement benefit plan expense (income) of ($45) million and ($8) million, respectively. 



(d)

Comparable Operating Profit is a non-GAAP measure that excludes the impact of mark-to-market adjustments on pension plans and commodity contracts, the impact of restructuring and cost reduction activities and the impact of integration costs related to the acquisition of the Pringles business. 

 

Kellogg Company and Subsidiaries






Reconciliation of Non-GAAP Amounts - Reported EPS to Comparable EPS















 Quarter ended


Year-to-date period ended





June 28,
2014

June 29,
2013


June 28,
2014

June 29,
2013










Reported EPS

$0.82

$0.96


$1.94

$1.81



Mark-to-market(a)

(0.02)

(0.01)


0.20

(0.11)



Restructuring and cost reduction activities(b)

(0.16)

(0.02)


(0.26)

(0.05)



Pringles Integration costs

(0.02)

(0.03)


(0.03)

(0.07)


Comparable EPS(c)

$1.02

$1.02


$2.03

$2.04



















(a)

Includes mark-to-market adjustments for pension plans and commodity contracts as reflected in cost of goods sold.  Actuarial gains/losses for pension plans are recognized in the year they occur.  A portion of these mark-to-market adjustments were capitalized as inventoriable cost at the end of 2013 and 2012.  These amounts have been recognized in the first quarter of 2014 and 2013, respectively.  During the second quarter of 2014 and 2013, there were no pension mark-to-market adjustments recognized.  Mark-to-market adjustments for commodities reflect the changes in the fair value of contracts for the difference between contract and market prices for the underlying commodities.  The resulting gains/losses are recognized in the quarter they occur.





(b)

Costs incurred related primarily to the execution of Project K, a global four-year efficiency and effectiveness program. The focus of the program will be to strengthen existing businesses in core markets, increase growth in developing and emerging markets, and drive an increased level of value-added innovation.  The program is expected to provide a number of benefits, including an optimized supply chain infrastructure, the implementation of global business services, and a new global focus on categories.  The 2013 periods presented have been recast to exclude all restructuring and cost reduction activities from underlying and comparable results.  Previously, only costs associated with Project K were excluded from underlying and comparable results.





(c)

Comparable EPS is a non-GAAP measure that excludes the impact of mark-to-market adjustments on pension plans and commodity contracts, the impact of costs related to restructuring and cost reduction activities, and the impact of integration costs related to the acquisition of the Pringles business.     


 

Kellogg Company and Subsidiaries




Reconciliation of Non-GAAP Amounts - Reported
Effective Tax Rate to Underlying Effective Tax Rate














Quarter ended


Year-to-date period
ended





June 28, 2014


June 28, 2014








Reported Effective Tax Rate


29.0%


28.9%



Mark-to-market (a)


-0.2%


0.1%



Restructuring and cost reduction activities (b)


0.5%


0.1%


Underlying Reported Effective Tax Rate (c)


28.7%


28.7%














(a)

Mark-to-market adjustments, in general, were incurred in jurisdictions with tax rates higher than our reported effective tax rate during the  quarter and year-to-date period ended June 28, 2014.



(b)

Costs incurred related to the execution of restructuring and cost reduction activities, in general, were incurred in jurisdictions with tax rates lower than our effective tax rate during the quarter and year-to-date period ended June 28, 2014.



(c)

Underlying reported effective tax rate is reconciled to the directly comparable measure in accordance with U.S. GAAP within this table.

 

SOURCE Kellogg Company

Analyst Contact: Simon Burton, CFA (269) 961-6636, Media Contact: Kris Charles (269) 961-3799

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