Kellogg Earnings Meet Analysts' Estimate

Apr 26, 2001, 01:00 ET from Kellogg Company

    BATTLE CREEK, Mich., April 26 /PRNewswire/ -- Consistent with both its
 forecast and the security analysts' consensus estimate, Kellogg Company
 (NYSE:   K) today reported first quarter 2001 earnings per share of $.30, down
 from last year's $.40.  Net earnings were $122.8 million, down from $161.7
 million last year.  The results exclude restructuring charges and an
 extraordinary loss from the early extinguishment of debt.  Net sales were
 $1.71 billion, down from last year's $1.75 billion.  However, net sales grew 1
 percent without the impact of weakening foreign currencies.  Sales were up 2
 percent in the United States.
     This was the second of three previously predicted transition quarters as
 the company implements a new business strategy, including the acquisition and
 integration of Keebler Foods Company.  First quarter results include no sales
 or earnings from Keebler operations.  Kellogg completed its purchase of
 Keebler on March 26.
     "In addition to acquiring Keebler, we stepped up investment in our U.S.
 cereal business during the first quarter," said Carlos M. Gutierrez, Kellogg
 Company chairman and chief executive officer.  "Also, as anticipated, we
 experienced short-term disruptions in sales as we refocused several smaller
 international markets and prepared our U.S. Rice Krispies Treats(R) and Nutri-
 Grain(R) Bars businesses for inclusion in Keebler's direct store door (DSD)
 delivery system by the third quarter of this year.
     "Given all the challenges, we are pleased with our first quarter results,"
 Gutierrez said.  "We are particularly encouraged by the performance of our
 U.S. cereal business which, on a year-ago comparison basis, achieved sales
 growth for the second straight quarter and dollar share growth for the fourth
 straight quarter.  All other U.S. business units, except for brands
 experiencing inventory drawdowns before being transferred to Keebler's DSD
 system, showed solid sales growth.
     "As our transition period continues, we remain comfortable with our
 previous EPS guidance for the full year, excluding charges as well as
 integration costs associated with the Keebler acquisition.  We are confident
 that Kellogg and Keebler are a winning combination and that our overall
 strategy is right for the growth of our business."
     During the first quarter of 2001, Kellogg recorded pretax restructuring
 charges of $48.3 million ($30.3 million after tax or $.07 per share) related
 to the Keebler acquisition and continued implementation of the company's new
 business strategy.  The company also incurred an extraordinary after-tax loss
 of $7.4 million associated with extinguishing long-term debt and an after-tax
 charge of $1.0 million from the cumulative effect of an accounting change.
 Including all these items, first quarter net earnings were $84.1 million and
 first quarter earnings per share were $.21.
 
     About Kellogg Company
     With projected annual sales of more than $9 billion, Kellogg Company is
 the world's leading producer of cereal and a leading producer of convenience
 foods, including cookies, crackers, toaster pastries, cereal bars, frozen
 waffles, meat alternatives, pie crusts, and ice cream cones.  The company's
 brands include Kellogg's, Keebler, Pop-Tarts, Eggo, Cheez-It, Nutri-Grain,
 Rice Krispies, Murray, Austin, Morningstar Farms, Famous Amos, Carr's,
 Plantation, Ready Crust, and Kashi.  Kellogg products are manufactured in 19
 countries and marketed in more than 160 countries around the world.  For more
 information, visit Kellogg's web site at http://www.kelloggs.com or Keebler's
 web site at http://www.keebler.com .
 
     Forward-Looking Statements Disclosure
     This news release contains forward-looking statements related to strategy,
 earnings per share, and the integration of Keebler.  Actual performance may
 differ materially from these statements due to factors related to the Keebler
 acquisition, including integration problems, failures to achieve synergies,
 unanticipated liabilities, and the substantial amount of indebtedness incurred
 to finance the acquisition (which could, among other things, hinder the
 company's ability to adjust rapidly, make the company more vulnerable to a
 downturn, and place the company at a competitive disadvantage to less-
 leveraged companies); competitive conditions and their impact; pricing and
 promotional spending; the effectiveness of marketing spending and programs;
 the success of new product introductions; the availability of and interest
 rates on short-term financing; commodity price and labor cost fluctuations;
 changes in consumer preferences; economic factors such as interest rates,
 statutory tax rates, and foreign currency translations; and other factors.
 
     Kellogg Company and Subsidiaries
     CONSOLIDATED EARNINGS
     (millions, except per share data)
 
                                                        Three months ended
                                                             March 31,
     (Results are unaudited)                           2001              2000
 
     Ready-to-eat cereal net sales                 $1,265.9          $1,304.6
     Convenience foods net sales                      441.4             447.3
       Consolidated                                 1,707.3           1,751.9
 
     Cost of goods sold                               823.8             836.9
     Selling and administrative expense               628.0             629.8
     Restructuring charges                             48.3               -
 
     Operating profit                                 207.2             285.2
 
     Interest expense                                  40.7              31.8
     Other income (expense), net                        1.9              (0.8)
 
     Earnings before income taxes,
       extraordinary loss, and cumulative
       effect of accounting change                    168.4             252.6
     Income taxes                                      75.9              90.9
 
     Earnings before extraordinary loss
      and cumulative effect of accounting
      change                                           92.5             161.7
     Extraordinary loss (net of tax)                   (7.4)              -
     Cumulative effect of accounting
      change (net of tax)                              (1.0)              -
 
     Net earnings                                     $84.1            $161.7
 
     Per share amounts (basic and
      diluted):
       Earnings before extraordinary loss
        and cumulative effect of accounting
        change                                         $.23              $.40
       Extraordinary loss (net of tax)                ($.02)              -
       Cumulative effect of accounting
        change (net of tax)                             -                 -
       Net earnings per share                          $.21              $.40
 
     Cash earnings per share (basic and
      diluted)                                         $.31              $.41
     Amortization expense (net of tax)                 $2.8              $2.6
 
     Dividends per share                             $.2525             $.245
 
     Average shares outstanding                       405.7             405.5
 
     Actual shares outstanding at period end          405.9             405.6
 
     Operating profit for the three months ended March 31, 2001, includes
 restructuring charges of $48.3 ($30.3 after tax or $.07 per share), related to
 integration of the Kellogg and Keebler business models and continued actions
 supporting the Company's "focus and align" strategy in the U.S. and S.E. Asia.
 Approximately 70% of the charges are comprised of asset write-off's, with the
 remainder consisting of employee severance and other cash costs.
     Net earnings for the three months ended March 31, 2001, includes an
 extraordinary loss of $7.4 (net of tax benefit of $4.2 or $.02 per share),
 related to the extinguishment of $400 of long-term debt.
     On January 1, 2001, the Company adopted SFAS No. 133 "Accounting for
 Derivative Instruments and Hedging Activities."  For the three months ended
 March 31, 2001, the Company reported a charge to earnings of $1.0 (net of tax
 benefit of $.6) and a charge to other comprehensive income of $14.9 (net of
 tax benefit of $8.6) in order to recognize the fair value of derivative
 instruments as either assets or liabilities on the balance sheet.
     Cash earnings per share is defined as net earnings excluding restructuring
 charges, extraordinary loss, cumulative effect of accounting change, and
 amortization expense divided by average shares outstanding.
 
 
     Kellogg Company and Subsidiaries
     SELECTED OPERATING SEGMENT DATA
     (millions)
 
                                                         Three months ended
                                                              March 31,
     (Results are unaudited)                           2001              2000
 
     Net sales
       United States                               $1,048.0          $1,024.5
       Europe                                         331.0             383.3
       Latin America                                  152.7             147.1
       All other operating segments                   175.6             195.3
       Corporate                                        -                 1.7
       Consolidated                                $1,707.3          $1,751.9
 
 
     Operating profit excluding restructuring charges
       United States                                 $177.9            $205.1
       Europe                                          53.6              52.9
       Latin America                                   38.5              35.0
       All other operating segments                    23.7              29.5
       Corporate                                      (38.2)            (37.3)
       Consolidated                                   255.5             285.2
 
       Restructuring charges                          (48.3)              -
     Operating profit as reported                    $207.2            $285.2
 
 
     Kellogg Company and Subsidiaries
     CONSOLIDATED BALANCE SHEET
     (millions, except per share data)
 
                                                 March 31,         December 31,
                                                   2001               2000
                                                (unaudited)             *
 
     Current assets
     Cash and cash equivalents                   $346.0             $204.4
     Accounts receivable, net                     956.3              685.3
     Inventories:
       Raw materials and supplies                 176.0              138.2
       Finished goods and materials in process    375.6              305.6
     Other current assets                         342.3              273.3
 
     Total current assets                       2,196.2            1,606.8
     Property, net of accumulated depreciation
      of $2,512.9 and $2,508.3                  3,002.3            2,526.9
     Goodwill, net of accumulated amortization
      of $12.1 and $10.5                        3,087.7              208.2
     Other intangibles, net of accumulated
      amortization of $20.7 and $18.6           2,096.9              199.2
     Other assets                                 384.7              355.2
 
     Total assets                             $10,767.8           $4,896.3
 
     Current liabilities
     Current maturities of long-term debt        $502.7             $901.1
     Notes payable                                898.3              485.2
     Accounts payable                             505.0              388.2
     Income taxes                                 111.7              130.8
     Other current liabilities                    867.8              587.3
 
     Total current liabilities                  2,885.5            2,492.6
 
     Long-term debt                             5,416.6              709.2
     Nonpension postretirement benefits           486.7              408.5
     Deferred income taxes and other
      liabilities                               1,197.3              388.5
 
     Shareholders' equity
     Common stock, $.25 par value                 103.8              103.8
     Capital in excess of par value               100.1              102.0
     Retained earnings                          1,482.4            1,501.0
     Treasury stock, at cost                     (364.5)            (374.0)
     Accumulated other comprehensive
      income                                     (540.1)            (435.3)
 
     Total shareholders' equity                   781.7              897.5
 
     Total liabilities and shareholders'
      equity                                  $10,767.8           $4,896.3
     * Condensed from audited financial statements
 
     On March 26, 2001, the Company acquired all of the outstanding common
 stock of Keebler Foods Company.  The assets and liabilities of the acquired
 business are included in the consolidated balance sheet as of March 31, 2001.
 For purposes of consolidated reporting, during 2001 Keebler's interim results
 of operations will be reported for the periods ending March 24, 2001, June 16,
 2001, October 6, 2001, and December 29, 2001.  As a result, the Company's
 first quarter 2001 results do not include any earnings from Keebler
 operations.
 
 
     Kellogg Company and Subsidiaries
     CONSOLIDATED STATEMENT OF CASH FLOWS
     (millions)
 
                                                         Three months ended
                                                              March 31,
     (Results are unaudited)                            2001             2000
 
     Operating activities
     Net earnings                                      $84.1           $161.7
     Items in net earnings not requiring
      cash:
       Depreciation and amortization                    70.5             68.9
       Deferred income taxes                           (26.0)            15.3
       Restructuring charges, net of cash
        paid                                            47.8              -
       Other                                           (62.4)             6.9
     Postretirement benefit plan
      contributions                                    (25.9)           (40.9)
     Changes in operating assets and
      liabilities                                       (9.2)           (13.5)
 
     Net cash provided by operating
      activities                                        78.9            198.4
 
     Investing activities
     Additions to properties                           (27.4)           (70.1)
     Acquisitions of businesses                     (3,842.8)           (92.6)
     Other                                              (1.8)             3.0
 
     Net cash used in investing activities          (3,872.0)          (159.7)
 
     Financing activities
     Net issuances of notes payable                    413.3             57.8
     Issuances of long-term debt                     4,567.0              2.6
     Reductions of long-term debt                     (946.2)             -
     Net issuances of common stock                       7.6              3.0
     Cash dividends                                   (102.7)           (99.2)
     Other                                               0.6              -
 
     Net cash provided by (used) in
      financing activities                           3,939.6            (35.8)
 
     Effect of exchange rate changes on
      cash                                              (4.9)            (5.2)
 
     Increase (decrease) in cash and cash
      equivalents                                      141.6             (2.3)
     Cash and cash equivalents at
      beginning of period                              204.4            150.6
 
     Cash and cash equivalents at end of
      period                                          $346.0           $148.3
 
                     MAKE YOUR OPINION COUNT -  Click Here
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SOURCE Kellogg Company
    BATTLE CREEK, Mich., April 26 /PRNewswire/ -- Consistent with both its
 forecast and the security analysts' consensus estimate, Kellogg Company
 (NYSE:   K) today reported first quarter 2001 earnings per share of $.30, down
 from last year's $.40.  Net earnings were $122.8 million, down from $161.7
 million last year.  The results exclude restructuring charges and an
 extraordinary loss from the early extinguishment of debt.  Net sales were
 $1.71 billion, down from last year's $1.75 billion.  However, net sales grew 1
 percent without the impact of weakening foreign currencies.  Sales were up 2
 percent in the United States.
     This was the second of three previously predicted transition quarters as
 the company implements a new business strategy, including the acquisition and
 integration of Keebler Foods Company.  First quarter results include no sales
 or earnings from Keebler operations.  Kellogg completed its purchase of
 Keebler on March 26.
     "In addition to acquiring Keebler, we stepped up investment in our U.S.
 cereal business during the first quarter," said Carlos M. Gutierrez, Kellogg
 Company chairman and chief executive officer.  "Also, as anticipated, we
 experienced short-term disruptions in sales as we refocused several smaller
 international markets and prepared our U.S. Rice Krispies Treats(R) and Nutri-
 Grain(R) Bars businesses for inclusion in Keebler's direct store door (DSD)
 delivery system by the third quarter of this year.
     "Given all the challenges, we are pleased with our first quarter results,"
 Gutierrez said.  "We are particularly encouraged by the performance of our
 U.S. cereal business which, on a year-ago comparison basis, achieved sales
 growth for the second straight quarter and dollar share growth for the fourth
 straight quarter.  All other U.S. business units, except for brands
 experiencing inventory drawdowns before being transferred to Keebler's DSD
 system, showed solid sales growth.
     "As our transition period continues, we remain comfortable with our
 previous EPS guidance for the full year, excluding charges as well as
 integration costs associated with the Keebler acquisition.  We are confident
 that Kellogg and Keebler are a winning combination and that our overall
 strategy is right for the growth of our business."
     During the first quarter of 2001, Kellogg recorded pretax restructuring
 charges of $48.3 million ($30.3 million after tax or $.07 per share) related
 to the Keebler acquisition and continued implementation of the company's new
 business strategy.  The company also incurred an extraordinary after-tax loss
 of $7.4 million associated with extinguishing long-term debt and an after-tax
 charge of $1.0 million from the cumulative effect of an accounting change.
 Including all these items, first quarter net earnings were $84.1 million and
 first quarter earnings per share were $.21.
 
     About Kellogg Company
     With projected annual sales of more than $9 billion, Kellogg Company is
 the world's leading producer of cereal and a leading producer of convenience
 foods, including cookies, crackers, toaster pastries, cereal bars, frozen
 waffles, meat alternatives, pie crusts, and ice cream cones.  The company's
 brands include Kellogg's, Keebler, Pop-Tarts, Eggo, Cheez-It, Nutri-Grain,
 Rice Krispies, Murray, Austin, Morningstar Farms, Famous Amos, Carr's,
 Plantation, Ready Crust, and Kashi.  Kellogg products are manufactured in 19
 countries and marketed in more than 160 countries around the world.  For more
 information, visit Kellogg's web site at http://www.kelloggs.com or Keebler's
 web site at http://www.keebler.com .
 
     Forward-Looking Statements Disclosure
     This news release contains forward-looking statements related to strategy,
 earnings per share, and the integration of Keebler.  Actual performance may
 differ materially from these statements due to factors related to the Keebler
 acquisition, including integration problems, failures to achieve synergies,
 unanticipated liabilities, and the substantial amount of indebtedness incurred
 to finance the acquisition (which could, among other things, hinder the
 company's ability to adjust rapidly, make the company more vulnerable to a
 downturn, and place the company at a competitive disadvantage to less-
 leveraged companies); competitive conditions and their impact; pricing and
 promotional spending; the effectiveness of marketing spending and programs;
 the success of new product introductions; the availability of and interest
 rates on short-term financing; commodity price and labor cost fluctuations;
 changes in consumer preferences; economic factors such as interest rates,
 statutory tax rates, and foreign currency translations; and other factors.
 
     Kellogg Company and Subsidiaries
     CONSOLIDATED EARNINGS
     (millions, except per share data)
 
                                                        Three months ended
                                                             March 31,
     (Results are unaudited)                           2001              2000
 
     Ready-to-eat cereal net sales                 $1,265.9          $1,304.6
     Convenience foods net sales                      441.4             447.3
       Consolidated                                 1,707.3           1,751.9
 
     Cost of goods sold                               823.8             836.9
     Selling and administrative expense               628.0             629.8
     Restructuring charges                             48.3               -
 
     Operating profit                                 207.2             285.2
 
     Interest expense                                  40.7              31.8
     Other income (expense), net                        1.9              (0.8)
 
     Earnings before income taxes,
       extraordinary loss, and cumulative
       effect of accounting change                    168.4             252.6
     Income taxes                                      75.9              90.9
 
     Earnings before extraordinary loss
      and cumulative effect of accounting
      change                                           92.5             161.7
     Extraordinary loss (net of tax)                   (7.4)              -
     Cumulative effect of accounting
      change (net of tax)                              (1.0)              -
 
     Net earnings                                     $84.1            $161.7
 
     Per share amounts (basic and
      diluted):
       Earnings before extraordinary loss
        and cumulative effect of accounting
        change                                         $.23              $.40
       Extraordinary loss (net of tax)                ($.02)              -
       Cumulative effect of accounting
        change (net of tax)                             -                 -
       Net earnings per share                          $.21              $.40
 
     Cash earnings per share (basic and
      diluted)                                         $.31              $.41
     Amortization expense (net of tax)                 $2.8              $2.6
 
     Dividends per share                             $.2525             $.245
 
     Average shares outstanding                       405.7             405.5
 
     Actual shares outstanding at period end          405.9             405.6
 
     Operating profit for the three months ended March 31, 2001, includes
 restructuring charges of $48.3 ($30.3 after tax or $.07 per share), related to
 integration of the Kellogg and Keebler business models and continued actions
 supporting the Company's "focus and align" strategy in the U.S. and S.E. Asia.
 Approximately 70% of the charges are comprised of asset write-off's, with the
 remainder consisting of employee severance and other cash costs.
     Net earnings for the three months ended March 31, 2001, includes an
 extraordinary loss of $7.4 (net of tax benefit of $4.2 or $.02 per share),
 related to the extinguishment of $400 of long-term debt.
     On January 1, 2001, the Company adopted SFAS No. 133 "Accounting for
 Derivative Instruments and Hedging Activities."  For the three months ended
 March 31, 2001, the Company reported a charge to earnings of $1.0 (net of tax
 benefit of $.6) and a charge to other comprehensive income of $14.9 (net of
 tax benefit of $8.6) in order to recognize the fair value of derivative
 instruments as either assets or liabilities on the balance sheet.
     Cash earnings per share is defined as net earnings excluding restructuring
 charges, extraordinary loss, cumulative effect of accounting change, and
 amortization expense divided by average shares outstanding.
 
 
     Kellogg Company and Subsidiaries
     SELECTED OPERATING SEGMENT DATA
     (millions)
 
                                                         Three months ended
                                                              March 31,
     (Results are unaudited)                           2001              2000
 
     Net sales
       United States                               $1,048.0          $1,024.5
       Europe                                         331.0             383.3
       Latin America                                  152.7             147.1
       All other operating segments                   175.6             195.3
       Corporate                                        -                 1.7
       Consolidated                                $1,707.3          $1,751.9
 
 
     Operating profit excluding restructuring charges
       United States                                 $177.9            $205.1
       Europe                                          53.6              52.9
       Latin America                                   38.5              35.0
       All other operating segments                    23.7              29.5
       Corporate                                      (38.2)            (37.3)
       Consolidated                                   255.5             285.2
 
       Restructuring charges                          (48.3)              -
     Operating profit as reported                    $207.2            $285.2
 
 
     Kellogg Company and Subsidiaries
     CONSOLIDATED BALANCE SHEET
     (millions, except per share data)
 
                                                 March 31,         December 31,
                                                   2001               2000
                                                (unaudited)             *
 
     Current assets
     Cash and cash equivalents                   $346.0             $204.4
     Accounts receivable, net                     956.3              685.3
     Inventories:
       Raw materials and supplies                 176.0              138.2
       Finished goods and materials in process    375.6              305.6
     Other current assets                         342.3              273.3
 
     Total current assets                       2,196.2            1,606.8
     Property, net of accumulated depreciation
      of $2,512.9 and $2,508.3                  3,002.3            2,526.9
     Goodwill, net of accumulated amortization
      of $12.1 and $10.5                        3,087.7              208.2
     Other intangibles, net of accumulated
      amortization of $20.7 and $18.6           2,096.9              199.2
     Other assets                                 384.7              355.2
 
     Total assets                             $10,767.8           $4,896.3
 
     Current liabilities
     Current maturities of long-term debt        $502.7             $901.1
     Notes payable                                898.3              485.2
     Accounts payable                             505.0              388.2
     Income taxes                                 111.7              130.8
     Other current liabilities                    867.8              587.3
 
     Total current liabilities                  2,885.5            2,492.6
 
     Long-term debt                             5,416.6              709.2
     Nonpension postretirement benefits           486.7              408.5
     Deferred income taxes and other
      liabilities                               1,197.3              388.5
 
     Shareholders' equity
     Common stock, $.25 par value                 103.8              103.8
     Capital in excess of par value               100.1              102.0
     Retained earnings                          1,482.4            1,501.0
     Treasury stock, at cost                     (364.5)            (374.0)
     Accumulated other comprehensive
      income                                     (540.1)            (435.3)
 
     Total shareholders' equity                   781.7              897.5
 
     Total liabilities and shareholders'
      equity                                  $10,767.8           $4,896.3
     * Condensed from audited financial statements
 
     On March 26, 2001, the Company acquired all of the outstanding common
 stock of Keebler Foods Company.  The assets and liabilities of the acquired
 business are included in the consolidated balance sheet as of March 31, 2001.
 For purposes of consolidated reporting, during 2001 Keebler's interim results
 of operations will be reported for the periods ending March 24, 2001, June 16,
 2001, October 6, 2001, and December 29, 2001.  As a result, the Company's
 first quarter 2001 results do not include any earnings from Keebler
 operations.
 
 
     Kellogg Company and Subsidiaries
     CONSOLIDATED STATEMENT OF CASH FLOWS
     (millions)
 
                                                         Three months ended
                                                              March 31,
     (Results are unaudited)                            2001             2000
 
     Operating activities
     Net earnings                                      $84.1           $161.7
     Items in net earnings not requiring
      cash:
       Depreciation and amortization                    70.5             68.9
       Deferred income taxes                           (26.0)            15.3
       Restructuring charges, net of cash
        paid                                            47.8              -
       Other                                           (62.4)             6.9
     Postretirement benefit plan
      contributions                                    (25.9)           (40.9)
     Changes in operating assets and
      liabilities                                       (9.2)           (13.5)
 
     Net cash provided by operating
      activities                                        78.9            198.4
 
     Investing activities
     Additions to properties                           (27.4)           (70.1)
     Acquisitions of businesses                     (3,842.8)           (92.6)
     Other                                              (1.8)             3.0
 
     Net cash used in investing activities          (3,872.0)          (159.7)
 
     Financing activities
     Net issuances of notes payable                    413.3             57.8
     Issuances of long-term debt                     4,567.0              2.6
     Reductions of long-term debt                     (946.2)             -
     Net issuances of common stock                       7.6              3.0
     Cash dividends                                   (102.7)           (99.2)
     Other                                               0.6              -
 
     Net cash provided by (used) in
      financing activities                           3,939.6            (35.8)
 
     Effect of exchange rate changes on
      cash                                              (4.9)            (5.2)
 
     Increase (decrease) in cash and cash
      equivalents                                      141.6             (2.3)
     Cash and cash equivalents at
      beginning of period                              204.4            150.6
 
     Cash and cash equivalents at end of
      period                                          $346.0           $148.3
 
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 SOURCE  Kellogg Company

RELATED LINKS

http://www.kelloggs.com