EX-99.1 2 d575109dex991.htm EX-99.1 EX-99.1

Exhibit 99.1

 

LOGO    Kellogg Company News
   For release:    August 1, 2013
  

Analyst Contact:

   

Simon Burton, CFA

(269) 961-6636

   Media Contact:    Kris Charles (269) 961-3799

KELLOGG COMPANY REPORTS SECOND-QUARTER RESULTS AND REAFFIRMS

FULL-YEAR EARNINGS GUIDANCE ON A CURRENCY-NEUTRAL BASIS

BATTLE CREEK, Mich. – Kellogg Company (NYSE: K) today announced second quarter 2013 reported net sales of $3.7 billion, an increase of 6.9 percent from the second quarter of 2012. Internal net sales*, which exclude the effects of foreign currency translation, acquisitions, dispositions, and integration costs, decreased by 0.5 percent over the same period. Quarterly operating profit was $570 million, a reported increase of 9.6 percent; underlying internal operating profit* increased by 3.4 percent. The growth in operating profit was achieved despite the continued effect of higher net inflation. Underlying internal results exclude the effects of foreign currency translation, acquisitions, dispositions, mark-to-market accounting, and integration costs.

Reported second quarter 2013 earnings were $352 million, or $0.96 per diluted share, an increase of seven percent from the earnings of $0.90 per diluted share reported in the second quarter of 2012. Comparable earnings*, which exclude the impact of mark-to-market accounting and the integration costs associated with the acquisition of Pringles, were $1.00 per share; this result represents 5.3 percent growth from comparable earnings of $0.95 last year. This quarter’s reported earnings included $0.03 per share of integration costs associated with last year’s acquisition and $0.01 per share of commodity-related mark-to-market impact.

 

* Internal sales growth, underlying internal operating profit growth, comparable earnings, internal operating profit growth 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.

 

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“We are reaffirming our full-year earnings guidance on a currency-neutral basis,” said John Bryant, Kellogg Company’s president and chief executive officer. “While sales growth has been slower than we anticipated in developed markets, particularly the U.S., the work we have been doing on our cost base has enabled us to offset the impact. In addition, we have now owned Pringles for more than a year. The integration has gone very well, and we remain excited regarding the opportunities we see for future growth.”

North America

Kellogg North America’s reported net sales increased by 3.3 percent to $2.4 billion in the second quarter; internal net sales decreased by 1.6 percent. The U.S. Morning Foods segment posted a decline in reported and internal net sales of 3.3 percent. Reported net sales increased by eight percent in the U.S. Snacks business; internal net sales declined by 3.2 percent. The U.S. Specialty segment posted reported net sales growth of 8.1 percent and internal net sales growth of 1.9 percent. The North America Other segment reported net sales growth of five percent and internal net sales growth of 3.9 percent as the result of strong growth in the Frozen Food business. Second quarter North American reported operating profit increased by six percent; internal operating profit* increased by 3.2 percent.

International

The Latin American business posted reported net sales growth of 11.3 percent and internal net sales growth of five percent in the quarter. European reported net sales increased by 17.9 percent; internal net sales decreased by 0.3 percent due to the difficult operating environment in the region. Reported net sales increased by 10 percent in the Asia Pacific segment; internal net sales increased by 4.1 percent, as the result of growth in Australia and strong double-digit growth in both South East Asia and India.

 

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Interest and Tax

Interest expense was $61 million in the second quarter. The effective tax rate was 29.8 percent.

Cash flow

Cash flow*, defined as cash from operating activities less capital expenditure, was $467 million for the first half of 2013, a decrease of $58 million compared to results from the first half of 2012; the year-over-year decline was the result of increased capital expenditure and last year’s one-time benefit to working capital from the acquisition of Pringles.

Kellogg Reaffirms 2013 Earnings Per Share Guidance On a Currency-Neutral Basis

The company reaffirmed its guidance for full-year earnings per share of $3.84 to $3.93 per share on a currency-neutral basis, excluding integration costs and the impact of mark-to-market accounting. Previous guidance of $3.82 to $3.91 included $0.02 of negative impact from currency translation. Reported earnings per share are now expected to include a negative impact from currency translation of $0.09 per share, a $0.07 increase from previous guidance. Reported sales growth is now expected to be approximately five percent; this change is due to the slower-than-expected growth in developed markets, particularly the U.S., and the negative impact of currency translation. The company continues to expect that full-year cash flow will be between $1.1 and 1.2 billion.

 

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Conference Call / Webcast

Kellogg will host a conference call to discuss these results on August 1, 2013 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 2012 sales of $14.2 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®, Frosted Flakes®, Pop-Tarts®, 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 integration of the Pringles® business, the Company’s strategy, and the Company’s sales, earnings, margin, operating profit, costs and

 

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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 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.

 

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Kellogg Company and Subsidiaries

CONSOLIDATED STATEMENT OF INCOME

(millions, except per share data)

 

     Quarter ended      Year-to-date period ended  

(Results are unaudited)

    June 29,
2013		     June 30,
2012		      June 29,
2013		     June 30,
2012		  

Net sales

    $ 3,714      $ 3,474       $ 7,575      $ 6,914   

Cost of goods sold

      2,237        2,035         4,705        4,122   

Selling, general and administrative expense

      907        920         1,797        1,746   
  

 

 

    

 

 

     

 

 

    

 

 

  

Operating profit

      570        519         1,073        1,046   

Interest expense

      61        89         121        122   

Other income (expense), net

      (5 )      7         (12 )      20   
  

 

 

    

 

 

     

 

 

    

 

 

  

Income before income taxes

      504        437         940        944   

Income taxes

      150        113         274        269   

Earnings (loss) from joint ventures

      (2 )      —           (3 )      —     
  

 

 

    

 

 

     

 

 

    

 

 

  

Net income

    $ 352      $ 324       $ 663      $ 675   
  

 

 

    

 

 

     

 

 

    

 

 

  

Net income (loss) attributable to noncontrolling interests

      —          —           —          —     
  

 

 

    

 

 

     

 

 

    

 

 

  

Net income attributable to Kellogg Company

    $ 352      $ 324       $ 663      $ 675   
  

 

 

    

 

 

     

 

 

    

 

 

  

Per share amounts:

          

Basic

    $ .96      $ .91       $ 1.82      $ 1.89   

Diluted

    $ .96      $ .90       $ 1.81      $ 1.88   

Dividends per share

    $ .4400      $ .4300       $ .8800      $ .8600   
  

 

 

    

 

 

     

 

 

    

 

 

  

Average shares outstanding:

          

Basic

      364        357         364        357   
  

 

 

    

 

 

     

 

 

    

 

 

  

Diluted

      367        359         366        359   
  

 

 

    

 

 

     

 

 

    

 

 

  

Actual shares outstanding at period end

           362        358   
  

 

 

    

 

 

     

 

 

    

 

 

  

 

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Kellogg Company and Subsidiaries

SELECTED OPERATING SEGMENT DATA

 

(millions)

                         
     Quarter ended     Year-to-date period ended  

(Results are unaudited)

    June 29,
2013		     June 30,
2012		     June 29,
2013		     June 30,
2012		  

Net sales

         

U.S. Morning Foods

    $ 863      $ 892      $ 1,774      $ 1,789   

U.S. Snacks

      917        850        1,818        1,636   

U.S. Specialty

      272        252        651        600   

North America Other

      388        369        791        737   

Europe

      723        613        1,415        1,151   

Latin America

      304        274        612        544   

Asia Pacific

      247        224        514        457   
  

 

 

    

 

 

    

 

 

    

 

 

  

Consolidated

    $ 3,714      $ 3,474      $ 7,575      $ 6,914   
  

 

 

    

 

 

    

 

 

    

 

 

  

Operating profit

         

U.S. Morning Foods

    $ 180      $ 178      $ 343      $ 331   

U.S. Snacks

      130        121        236        244   

U.S. Specialty

      62        56        140        127   

North America Other

      78        70        153        140   

Europe

      75        64        146        134   

Latin America

      42        48        90        99   

Asia Pacific

      17        17        38        50   
  

 

 

    

 

 

    

 

 

    

 

 

  

Total Reportable Segments

      584        554        1,146        1,125   

Corporate

      (14 )      (35 )      (73 )      (79 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Consolidated

    $ 570      $ 519      $ 1,073      $ 1,046   
  

 

 

    

 

 

    

 

 

    

 

 

  

 

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Kellogg Company and Subsidiaries

CONSOLIDATED STATEMENT OF CASH FLOWS

(millions)

 

     Year-to-date period ended  

(unaudited)

    June 29,
2013		     June 30,
2012		  

Operating activities

     

Net income

    $ 663      $ 675   

Adjustments to reconcile net income to operating cash flows:

    

Depreciation and amortization

      226        194   

Postretirement benefit plan expense (benefit)

      (8 )      (10 ) 

Deferred income taxes

      9        (32 ) 

Other

      60        (20 ) 

Postretirement benefit plan contributions

      (36 )      (32 ) 

Changes in operating assets and liabilities, net of acquisitions

      (209 )      (95 ) 
  

 

 

    

 

 

  

Net cash provided by (used in) operating activities

      705        680   
  

 

 

    

 

 

  

Investing activities

     

Additions to properties

     (238 )      (155 ) 

Acquisitions, net of cash acquired

     —          (2,674 ) 

Other

     (1 )      6   
  

 

 

    

 

 

  

Net cash provided by (used in) investing activities

      (239 )      (2,823 ) 
  

 

 

    

 

 

  

Financing activities

     

Net issuances of notes payable

     71        500   

Issuances of long-term debt

     645        1,727   

Reductions of long-term debt

     (760 )      —     

Net issuances of common stock

     408        65   

Common stock repurchases

     (544 )      (63 ) 

Cash dividends

     (320 )      (306 ) 

Other

     20        (3 ) 
  

 

 

    

 

 

  

Net cash provided by (used in) financing activities

      (480 )      1,920   
  

 

 

    

 

 

  

Effect of exchange rate changes on cash and cash equivalents

     (5 )      (7 ) 
  

 

 

    

 

 

  

Decrease in cash and cash equivalents

     (19 )      (230 ) 

Cash and cash equivalents at beginning of period

      281        460   
  

 

 

    

 

 

  

Cash and cash equivalents at end of period

    $ 262      $ 230   
  

 

 

    

 

 

  

Supplemental financial data:

     

Net cash provided by (used in) operating activities

    $ 705      $ 680   

Additions to properties

      (238 )      (155 ) 
  

 

 

    

 

 

  

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

    $ 467      $ 525   
  

 

 

    

 

 

  

 

(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.

 

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Kellogg Company and Subsidiaries

CONSOLIDATED BALANCE SHEET

(millions, except per share data)

    

June 29,

2013

     December 29,
2012		  
     (unaudited)     *  

Current assets

     

Cash and cash equivalents

    $ 262      $ 281   

Accounts receivable, net

      1,512        1,454   

Inventories:

     

Raw materials and supplies

      305        300   

Finished goods and materials in process

      969        1,065   

Deferred income taxes

      161        152   

Other prepaid assets

      198        128   
  

 

 

    

 

 

  

Total current assets

      3,407        3,380   

Property, net of accumulated depreciation of $5,246 and $5,209

      3,719        3,782   

Goodwill

      5,019        5,038   

Other intangibles, net of accumulated amortization of $56 and $53

      2,347        2,359   

Pension

      171        145   

Other assets

      413        465   
  

 

 

    

 

 

  

Total assets

    $ 15,076      $ 15,169   
  

 

 

    

 

 

  

Current liabilities

     

Current maturities of long-term debt

    $ 293      $ 755   

Notes payable

      1,136        1,065   

Accounts payable

      1,364        1,402   

Accrued advertising and promotion

      482        517   

Accrued income taxes

      31        46   

Accrued salaries and wages

      219        266   

Other current liabilities

      444        472   
  

 

 

    

 

 

  

Total current liabilities

      3,969        4,523   

Long-term debt

      6,337        6,082   

Deferred income taxes

      569        523   

Pension liability

      869        886   

Nonpension postretirement benefits

      273        281   

Other liabilities

      440        409   

Commitments and contingencies

     

Equity

     

Common stock, $.25 par value

      105        105   

Capital in excess of par value

      568        573   

Retained earnings

      5,939        5,615   

Treasury stock, at cost

      (3,031 )      (2,943 ) 

Accumulated other comprehensive income (loss)

      (1,023 )      (946 ) 
  

 

 

    

 

 

  

Total Kellogg Company equity

      2,558        2,404   

Noncontrolling interests

      61        61   
  

 

 

    

 

 

  

Total equity

      2,619        2,465   
  

 

 

    

 

 

  

Total liabilities and equity

    $ 15,076      $ 15,169   
  

 

 

    

 

 

  

 

* Condensed from audited financial statements.

 

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Kellogg Company and Subsidiaries

Reconciliation of Non-GAAP Amounts - Reported Operating Profit

Growth to Underlying Internal Operating Profit Growth

 

     Quarter ended
June 29, 2013		     Year-to-date
period ended
June 29, 2013		  

Reported Operating Profit Growth(d)

      9.6 %      2.5 % 

Acquisitions/Dispositions

      5.7 %      6.6 % 

Integration costs

      3.3 %      -0.4 % 

Foreign currency

      -1.5 %      -1.4 % 
  

 

 

    

 

 

  

Internal Operating Profit Growth(a)

      2.1 %      -2.3 % 

Mark-to-market(b) (d)

      -1.3 %      -1.0 % 
  

 

 

    

 

 

  

Underlying Internal Operating Profit Growth(c)

      3.4 %      -1.3 % 
  

 

 

    

 

 

  

 

(a) Internal operating profit growth excludes the impact of foreign currency, and, if applicable, acquisitions, dispositions, and transaction 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.
(b) 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. In 2012, asset returns exceeded expectations by $211 million but discount rates fell almost 100 basis points for pension plans resulting in an unfavorable mark-to-market adjustment recorded in earnings in the fourth quarter of 2012. A portion of the 2012 pension mark-to-market adjustment was capitalized as an inventoriable cost at the end of 2012. This amount has been recorded in earnings in the first quarter of 2013. During the second quarter of 2013 there were no pension mark-to-market adjustments recorded to earnings. 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.
(c) Underlying internal operating profit growth excludes the impact of foreign currency translation, pension and commodity mark-to-market adjustments, and, if applicable, acquisitions, dispositions, and transaction 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.
(d) Underlying reported operating profit growth is reconciled to the directly comparable measure in accordance with U.S. GAAP within this table.

 

     Quarter ended
June 29, 2013		     Year-to-date
period ended
June 29, 2013		  

Reported Operating Profit Growth

      9.6 %      2.5 % 

Mark-to-market

      -1.3 %      -1.0 % 
  

 

 

    

 

 

  

Underlying Reported Operating Profit Growth

      10.9 %      3.5 % 
  

 

 

    

 

 

  

 

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Kellogg Company and Subsidiaries

Analysis of net sales and operating profit performance

 

     Second quarter of 2013 versus 2012                                                        

(dollars in millions)

   U.S.
Morning Foods		     U.S.
Snacks		     U.S.
Specialty		     North
Amer. Other		     North
America		     Europe     Latin
America		     Asia
Pacific		     Corp-
orate		     Consoli-
dated		  

2013 net sales

   $ 863      $ 917      $ 272      $ 388      $ 2,440      $ 723      $ 304      $ 247      $ —        $ 3,714   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

2012 net sales

   $ 892      $ 850      $ 252      $ 369      $ 2,363      $ 613      $ 274      $ 224      $ —        $ 3,474   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

% change - 2013 vs. 2012:

                    

Volume (tonnage) (a)

             -1.9 %      -2.8 %      -2.8 %      8.6 %      —          -1.6 % 

Pricing/mix

             .3 %      2.5 %      7.8 %      -4.5 %      —          1.1 % 
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Subtotal - internal business (b)

     -3.3 %      -3.2 %      1.9 %      3.9 %      -1.6 %      -.3 %      5.0 %      4.1 %      —          -.5 % 

Acquisitions (c)

     —   %      11.2 %      6.2 %      2.2 %      5.0 %      18.4 %      6.5 %      13.8 %      —          8.0 % 

Dispositions (d)

     —   %      —   %      —   %      —   %      —   %      —   %      —   %      -1.2 %      —          —   % 

Integration impact (e)

     —   %      —   %      —   %      —   %      —   %      —   %      —   %      -.6 %      —          -.1 % 

Foreign currency impact

     —   %      —   %      —   %      -1.1 %      -.1 %      -.2 %      -.2 %      -6.1 %      —          -.5 % 
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total change

     -3.3 %      8.0 %      8.1 %      5.0 %      3.3 %      17.9 %      11.3 %      10.0 %      —          6.9 % 
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

(dollars in millions)

   U.S.
Morning Foods		     U.S.
Snacks		     U.S.
Specialty		     North
Amer. Other		     North
America		     Europe     Latin
America		     Asia
Pacific		     Corp-
orate		     Consoli-
dated		  

2013 operating profit

   $ 180      $ 130      $ 62      $ 78      $ 450      $ 75      $ 42      $ 17      $ (14 )      $ 570   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

2012 operating profit

   $ 178      $ 121      $ 56      $ 70      $ 425      $ 64      $ 48      $ 17      $ (35 )      $ 519   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

% change - 2013 vs. 2012:

                    

Internal business (b)

     1.9 %      —   %      2.3 %      12.5 %      3.2 %      1.8 %      -8.3 %      11.3 %      -10.1 %      2.1 % 

Acquisitions (c)

     —   %      11.9 %      8.0 %      .2 %      4.5 %      11.2 %      7.6 %      6.3 %      -11.5 %      5.6 % 

Dispositions (d)

     —   %      —   %      —   %      —   %      —   %      —   %      —   %      3.4 %      —   %      .1 % 

Integration impact (e)

     —   %      -5.0 %      —   %      -.1 %      -1.5 %      6.9 %      -.2 %      -10.3 %      77.4 %      3.3 % 

Foreign currency impact

     —   %      —   %      —   %      -1.2 %      -.2 %      -1.4 %      -9.1 %      -9.0 %      -2.6 %      -1.5 % 
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total change

     1.9 %      6.9 %      10.3 %      11.4 %      6.0 %      18.5 %      -10.0 %      1.7 %      53.2 %      9.6 % 
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

(a) The Company measures the volume impact (tonnage) on revenues based on the stated weight of our product shipments.
(b) Internal net sales and operating profit growth for 2013 exclude the impact of acquisitions, divestitures, integration costs and impact of currency. Internal net sales and operating profit growth are non-GAAP financial measures which are reconciled to the directly comparable measures in accordance with U.S. GAAP within these tables.
(c) Impact of results for the quarters ended June 29, 2013 and June 30, 2012 from the acquisition of Pringles.
(d) Impact of results for the quarter ended June 29, 2013 from the divestiture of the China cereal business.
(e) Includes impact of integration costs associated with the Pringles acquisition.

 

- more -

- 11 -

Kellogg Company and Subsidiaries

Analysis of net sales and operating profit performance

 

     Year-to-date 2013 versus 2012                                                        

(dollars in millions)

   U.S.
Morning Foods		     U.S.
Snacks		     U.S.
Specialty		     North
Amer. Other		     North
America		     Europe     Latin
America		     Asia
Pacific		     Corp-
orate		     Consoli-
dated		  

2013 net sales

   $ 1,774      $ 1,818      $ 651      $ 791      $ 5,034      $ 1,415      $ 612      $ 514      $ —        $ 7,575   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

2012 net sales

   $ 1,789      $ 1,636      $ 600      $ 737      $ 4,762      $ 1,151      $ 544      $ 457      $ —        $ 6,914   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

% change - 2013 vs. 2012:

                    

Volume (tonnage) (a)

             -.3 %      -.7 %      -1.3 %      6.8 %      —          -.1 % 

Pricing/mix

             .4 %      1.8 %      7.5 %      -4.6 %      —          .9 % 
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Subtotal - internal business (b)

     -.8 %      -2.5 %      2.8 %      5.7 %      .1 %      1.1 %      6.2 %      2.2 %      —          .8 % 

Acquisitions (c)

     —   %      13.6 %      5.7 %      2.7 %      5.8 %      22.6 %      7.6 %      17.4 %      —          9.5 % 

Dispositions (d)

     —   %      —   %      —   %      —   %      —   %      —   %      —   %      -1.4 %      —          -.1 % 

Integration impact (e)

     —   %      —   %      —   %      -.1 %      —   %      —   %      —   %      -.5 %      —          —   % 

Foreign currency impact

     —   %      —   %      —   %      -.9 %      -.2 %      -.8 %      -1.3 %      -5.3 %      —          -.6 % 
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total change

     -.8 %      11.1 %      8.5 %      7.4 %      5.7 %      22.9 %      12.5 %      12.4 %      —          9.6 % 
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

(dollars in millions)

   U.S.
Morning Foods		     U.S.
Snacks		     U.S.
Specialty		     North
Amer. Other		     North
America		     Europe     Latin
America		     Asia
Pacific		     Corp-
orate		     Consoli-
dated		  

2013 operating profit

   $ 343      $ 236      $ 140      $ 153      $ 872      $ 146      $ 90      $ 38      $ (73 )    $ 1,073   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

2012 operating profit

   $ 331      $ 244      $ 127      $ 140      $ 842      $ 134      $ 99      $ 50      $ (79 )    $ 1,046   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

% change - 2013 vs. 2012:

                    

Internal business (b)

     3.8 %      -12.8 %      4.6 %      8.5 %      -.1 %      .9 %      -6.9 %      -15.5 %      -17.9 %      -2.3 % 

Acquisitions (c)

     —   %      13.6 %      6.1 %      2.1 %      5.2 %      12.7 %      6.9 %      12.2 %      -4.7 %      6.7 % 

Dispositions (d)

     —   %      —   %      —   %      —   %      —   %      —   %      —   %      -1.4 %      —   %      -.1 % 

Integration impact (e)

     —   %      -4.0 %      —   %      -.7 %      -1.3 %      -2.6 %      -.3 %      -13.3 %      28.6 %      -.4 % 

Foreign currency impact

     -.1 %      —   %      —   %      -1.0 %      -.2 %      -1.6 %      -8.3 %      -5.5 %      -1.2 %      -1.4 % 
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total change

     3.7 %      -3.2 %      10.7 %      8.9 %      3.6 %      9.4 %      -8.6 %      -23.5 %      4.8 %      2.5 % 
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

(a) The Company measures the volume impact (tonnage) on revenues based on the stated weight of our product shipments.
(b) Internal net sales and operating profit growth for 2013 exclude the impact of acquisitions, divestitures, integration costs and impact of currency. Internal net sales and operating profit growth are non-GAAP financial measures which are reconciled to the directly comparable measures in accordance with U.S. GAAP within these tables.
(c) Impact of results for the year-to-date periods ended June 29, 2013 and June 30, 2012 from the acquisition of Pringles.
(d) Impact of results for the year-to-date period ended June 29, 2013 from the divestiture of the China cereal and snacks businesses.
(e) Includes impact of integration costs associated with the Pringles acquisition.

 

- more -

- 12 -

Kellogg Company and Subsidiaries

Up-Front Costs*

$ millions

 

     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   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

     

 

 

  
     Quarter ended June 30, 2012     Year-to-date period ended June 30, 2012  
     Cost of goods
sold		     Selling, general and
administrative
expense		     Total     Cost of goods
sold		     Selling, general and
administrative
expense		      Total  

2012

              

U.S. Morning Foods

    $ 2      $ 1      $ 3      $ 4      $ 3       $ 7   

U.S. Snacks

      —          3        3        2        4         6   

U.S. Specialty

      —          1        1        —          1         1   

North America Other

      —          —          —          —          1         1   

Europe

      2        —          2        3        —           3   

Latin America

      —          —          —          —          —           —     

Asia Pacific

      —          —          —          —          —           —     

Corporate

      —          —          —          —          —           —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

     

 

 

  

Total

    $ 4      $ 5      $ 9      $ 9      $ 9       $ 18   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

     

 

 

  

2013 Variance - better(worse) than 2012

              

U.S. Morning Foods

    $ 1      $ —        $ 1      $ 2      $ —         $ 2   

U.S. Snacks

      (1 )      1        —          —          —           —     

U.S. Specialty

      (1 )      1        —          (1 )      —           (1 ) 

North America Other

      —          (1 )      (1 )      —          —           —     

Europe

      2        —          2        3        —           3   

Latin America

      —          —          —          —          —           —     

Asia Pacific

      —          —          —          (6 )      —           (6 ) 

Corporate

      —          —          —          —          —           —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

     

 

 

  

Total

    $ 1      $ 1      $ 2      $ (2 )    $ —         $ (2 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

     

 

 

  

 

* Up-front costs are charges incurred by the Company which will result in future cash savings and/or reduced depreciation.

 

- more -

- 13 -

Kellogg Company and Subsidiaries

Transaction and Integration Costs*

$ millions

 

    Quarter ended June 29, 2013     Year-to-date period ended June 29, 2013  
    Net Sales     Cost of goods
sold		     Selling, general and
administrative
expense		     Other
Income/Expense		     Total     Net Sales     Cost of goods
sold		     Selling, general and
administrative
expense		     Other
Income/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   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
    Quarter ended June 30, 2012     Year-to-date period ended June 30, 2012  
    Net Sales     Cost of goods
sold		     Selling, general and
administrative
expense		     Other
Income/Expense		     Total     Net Sales     Cost of goods
sold		     Selling, general and
administrative
expense		     Other
Income/Expense		     Total  

2012

                   

U.S. Snacks

   $ —        $ —        $ 1      $ —        $ 1      $ —        $ —        $ 1      $ —        $ 1   

North America Other

     —          —          —          —          —          —          —          —          —          —     

Europe

     —          —          7        —          7        —          —          7        —          7   

Latin America

     —          —          —          —          —          —          —          —          —          —     

Asia Pacific

     —          —          1        —          1        —          —          1        —          1   

Corporate

     —          —          22        5        27        —          —          22        5        27   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total

   $ —        $ —        $ 31      $ 5      $ 36      $ —        $ —        $ 31      $ 5      $ 36   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

2013 Variance - better(worse) than 2012

                    

U.S. Snacks

   $ —        $ (1 )    $ (6 )    $ —        $ (7 )    $ —        $ (1 )    $ (9 )    $ —        $ (10 ) 

North America Other

     —          —          —          —          —          (1 )      —          —          —          (1 ) 

Europe

     —          (1 )      5        —          4        —          (4 )      —          —          (4 ) 

Asia Pacific

     (1 )      —          (1 )      —          (2 )      (2 )      (1 )      (4 )      —          (7 ) 

Corporate

     —          —          20        5        25        —          —          17        5        22   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total

   $ (1 )    $ (2 )    $ 18      $ 5      $ 20      $ (3 )    $ (6 )    $ 4      $ 5      $ —     
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

* Transaction and integration costs are charges incurred by the Company as a direct result of the work performed for the acquisition of the Pringles business.

No transaction costs were incurred during the quarter and year-to-date periods ended June 29, 2013.

 

- more -

- 14 -

Kellogg Company and Subsidiaries

RECAST SEGMENT DATA AS SHOWN ON Q1 2013 PRESS RELEASE

 

2012 (millions)

                                           
     Quarter ended     Year-to-date period ended  
     March 31,
2012		     June 30,
2012		     September 29,
2012		     December 29,
2012		     June 30,
2012		     September 29,
2012		     December 29,
2012		  

Net Sales (Recast*)

               

U.S. Morning Foods

    $ 897      $ 892      $ 903      $ 841      $ 1,789      $ 2,692      $ 3,533   

U.S. Snacks

      786        850        908        856        1,636        2,544        3,400   

U.S. Specialty

      348        252        264        257        600        864        1,121   

North America Other

      368        369        388        360        737        1,125        1,485   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

North America Total

      2,399        2,363        2,463        2,314        4,762        7,225        9,539   

Europe

      538        613        685        691        1,151        1,836        2,527   

Latin America

      270        274        292        285        544        836        1,121   

Asia Pacific

      233        224        280        273        457        737        1,010   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Consolidated

    $ 3,440      $ 3,474      $ 3,720      $ 3,563      $ 6,914      $ 10,634      $ 14,197   

Operating Profit (Recast*)

               

U.S. Morning Foods

    $ 153      $ 178      $ 134      $ 123      $ 331      $ 465      $ 588   

U.S. Snacks

      123        121        117        115        244        361        476   

U.S. Specialty

      71        56        62        52        127        189        241   

North America Other

      70        70        67        58        140        207        265   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

North America Total

      417        425        380        348        842        1,222        1,570   

Europe

      70        64        76        51        134        210        261   

Latin America

      51        48        36        32        99        135        167   

Asia Pacific

      33        17        29        6        50        79        85   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total Reportable Segments

      571        554        521        437        1,125        1,646        2,083   

Corporate

      (44 )      (35 )      (8 )      (434 )      (79 )      (87 )      (521 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Consolidated

    $ 527      $ 519      $ 513      $ 3      $ 1,046      $ 1,559      $ 1,562   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

* During the first quarter of 2013, the Kashi operating segment was eliminated. The Kashi financial results have been recast between U.S. Morning Foods and U.S. Snacks.

 

2012 (millions)

                                           
     Quarter ended     Year-to-date period ended  
     March 31,
2012		     June 30,
2012		     September 29,
2012		     December 29,
2012		     June 30,
2012		     September 29,
2012		     December 29,
2012		  

Net Sales (As originally reported)

               

U.S. Morning Foods & Kashi

    $ 941      $ 939      $ 946      $ 881      $ 1,880      $ 2,826      $ 3,707   

U.S. Snacks

      742        803        865        816        1,545        2,410        3,226   

U.S. Specialty

      348        252        264        257        600        864        1,121   

North America Other

      368        369        388        360        737        1,125        1,485   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

North America Total

      2,399        2,363        2,463        2,314        4,762        7,225        9,539   

Europe

      538        613        685        691        1,151        1,836        2,527   

Latin America

      270        274        292        285        544        836        1,121   

Asia Pacific

      233        224        280        273        457        737        1,010   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Consolidated

    $ 3,440      $ 3,474      $ 3,720      $ 3,563      $ 6,914      $ 10,634      $ 14,197   

Operating Profit (As originally reported)

               

U.S. Morning Foods & Kashi

    $ 157      $ 181      $ 135      $ 122      $ 338      $ 473      $ 595   

U.S. Snacks

      119        118        116        116        237        353        469   

U.S. Specialty

      71        56        62        52        127        189        241   

North America Other

      70        70        67        58        140        207        265   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

North America Total

      417        425        380        348        842        1,222        1,570   

Europe

      70        64        76        51        134        210        261   

Latin America

      51        48        36        32        99        135        167   

Asia Pacific

      33        17        29        6        50        79        85   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total Reportable Segments

      571        554        521        437        1,125        1,646        2,083   

Corporate

      (44 )      (35 )      (8 )      (434 )      (79 )      (87 )      (521 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Consolidated

    $ 527      $ 519      $ 513      $ 3      $ 1,046      $ 1,559      $ 1,562   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

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Kellogg Company and Subsidiaries

Reconciliation of Non-GAAP Amounts - Reported Operating Profit to Comparable Operating Profit

 

     Quarter ended     Year-to-date period  ended  
     June 29,
2013		     June 30,
2012		     June 29,
2013		     June 30,
2012		  

Reported Operating Profit

    $ 570      $ 519      $ 1,073      $ 1,046   

Mark-to-market(a)

      (7 )      —          (61 )      (50 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Underlying Operating Profit(b)

    $ 577      $ 519      $ 1,134      $ 1,096   

Pringles integration costs

      (16 )      (31 )      (36 )      (31 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Comparable Operating Profit(c)

    $ 593      $ 550      $ 1,170      $ 1,127   
  

 

 

    

 

 

    

 

 

    

 

 

  

 

(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. In 2012, asset returns exceeded expectations by $211 million but discount rates fell almost 100 basis points for pension plans resulting in an unfavorable mark-to-market adjustment recorded in earnings in the fourth quarter of 2012. A portion of the 2012 pension mark-to-market adjustment was capitalized as an inventoriable cost at the end of 2012. This amount has been recorded in earnings in the first quarter of 2013. During the second quarter of 2013 there were no pension mark-to-market adjustments recorded to earnings. In 2011, asset returns were lower than expected by $471 million and discount rates declined resulting in an unfavorable mark-to-market adjustment recorded in earnings in the fourth quarter of 2011. A portion of the 2011 pension mark-to-market adjustment was capitalized as an inventoriable cost at the end of 2011. This amount was recorded in earnings in the first quarter of 2012. During the second quarter of 2012, there were no pension mark-to-market adjustments recorded in earnings. 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) Underlying Operating Profit excludes the impact of mark-to-market adjustments on pension plans and commodity contracts. 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 29, 2013 and June 30, 2012 includes postretirement benefit plan expense (income) of ($4) million and ($5) million, respectively. Underlying operating profit for the year-to-date periods ended June 29, 2013 and June 30, 2012 includes postretirement benefit plan expense (income) of ($8) million and ($10) million, respectively.
(c) Comparable Operating Profit is a non-GAAP measure that excludes the impact of mark-to-market adjustments on pension plans and commodity contracts, and the impact of integration costs related to the acquisition of the Pringles business.

 

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- 16 -

Kellogg Company and Subsidiaries

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

 

     Quarter ended           Year-to-date period  ended        
     June 29,
2013		     June 30,
2012		     Change vs.
prior year		     June 29,
2013		     June 30,
2012		     Change vs.
prior year		  

Reported EPS

    $ 0.96      $ 0.90        6.7 %    $ 1.81      $ 1.88        -3.7 % 

Mark-to-market(a)

      (0.01 )      —          -1.1 %      (0.11 )      (0.10 )      -0.7 % 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Underlying EPS(b)

    $ 0.97      $ 0.90        7.8 %    $ 1.92      $ 1.98        -3.0 % 

Pringles Integration costs (net of one-time benefits)

      (0.03 )      (0.05 )      2.5 %      (0.07 )      —          -3.5 % 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Comparable EPS(c)

    $ 1.00      $ 0.95        5.3 %    $ 1.99      $ 1.98        0.5 % 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

(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. In 2012, asset returns exceeded expectations by $211 million but discount rates fell almost 100 basis points for pension plans resulting in an unfavorable mark-to-market adjustment recorded in earnings in the fourth quarter of 2012. A portion of the 2012 pension mark-to-market adjustment was capitalized as an inventoriable cost at the end of 2012. This amount has been recorded in earnings in the first quarter of 2013. During the second quarter of 2013 there were no pension mark-to-market adjustments recorded to earnings. In 2011, asset returns were lower than expected by $471 million and discount rates declined resulting in an unfavorable mark-to-market adjustment recorded in earnings in the fourth quarter of 2011. A portion of the 2011 pension mark-to-market adjustment was capitalized as an inventoriable cost at the end of 2011. This amount was recorded in earnings in the first quarter of 2012. During the second quarter of 2012, there were no pension mark-to-market adjustments recorded in earnings. 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) Underlying EPS is a non-GAAP measure that excludes the impact of pension and commodity mark-to-market adjustments.
(c) Comparable EPS is a non-GAAP measure that excludes the impact of mark-to-market adjustments on pension plans and commodity contracts, and the impact of integration costs net of one-time benefits related to the acquisition of the Pringles business. One-time benefits in the first quarter of 2012 consisted of a gain on transaction-related hedging. Second quarter 2012 net one-time benefits included foreign exchange and tax rate benefits which were partially offset by a loss on transaction-related hedging.

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- 17 -