Kellogg Company Reports Third-Quarter 2014 Results; Reiterates Full-Year, Currency-Neutral Guidance

Loading...
Loading...

BATTLE CREEK, Mich., Oct. 30, 2014 /PRNewswire/ -- Kellogg Company K today announced third-quarter results for operating profit and earnings per share that were slightly greater than the company's expectations.  Third-quarter 2014 reported net sales decreased by 2.1 percent to $3.6 billion.  Internal net sales,* which exclude the effects of foreign currency translation, acquisitions, dispositions, and integration costs, decreased by 1.7 percent over the same period.  Third-quarter 2014 operating profit was $365 million, a reported decrease of 27.5 percent; this decrease was driven primarily by costs associated with Project K, the company's four-year efficiency and effectiveness program, the impact of mark-to-market accounting, 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 1.8 percent.   The decline in underlying internal operating profit was largely the result of lower sales.

Reported earnings for the third quarter 2014 were $224 million, or $0.62 per diluted share, a decrease of 31 percent from the $0.90 per diluted share reported in the third quarter of last year.  This quarter's reported earnings per share included an impact from mark-to-market of $0.11 per share, $0.19 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 third quarter 2014 earnings* were $0.94 per share, slightly greater than anticipated by the company.

"We are pleased to have announced results for quarterly operating profit and earnings per share that were ahead of our expectations.  Our international business did well in the quarter, although we continued to face the challenges in developed regions and categories that we've seen all year," said John Bryant, Kellogg Company's chairman and chief executive officer.  "We have been working hard on our plans for 2015 and we have both good brand-building activities and new-product introductions planned for the first quarter, and the balance of the year.  We also continue to execute the largest restructuring program in our history, which will enable us to invest back in our business and drive sustainable growth."

North America

Net sales posted by Kellogg North America were $2.3 billion in the third quarter, a reported decrease of 4.2 percent; internal net sales decreased by 3.9 percent.  The U.S. Morning Foods segment posted an internal net sales decline of 4.7 percent.  Internal net sales in the U.S. Snacks segment decreased by 4.2 percent.  The U.S. Specialty Channels segment posted a 4.1 percent internal net sales decline in the quarter and the North America Other segment, which is comprised of the U.S. Frozen Foods and Canadian businesses, posted a 1.1 percent decrease in internal net sales.  Reported operating profit in North America decreased by 19.8 percent; underlying internal operating profit declined by 9.1 percent, as the result of lower sales.

International

Reported net sales decreased by 0.6 percent in Europe in the quarter; internal net sales also decreased by 0.6 percent.  In Latin America, reported net sales increased by 6.2 percent and internal net sales increased by 7.3 percent.  Reported net sales in Asia Pacific increased by 4.8 percent and internal net sales increased by 5.0 percent.

Interest and Tax

Kellogg's interest expense was $54 million in the third quarter.  The underlying tax rate* in the third quarter of 2014 was 28.5 percent.

Cash flow

Cash flow,* a non-GAAP measure defined as cash from operating activities less capital expenditures, was $822 million for the first three quarters of the year.  The company continues to anticipate 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 $690 million of shares, far exceeding option proceeds of $151 million.  The company remains on-track with its share repurchase program for the full year.

* 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 Retains Currency-Neutral, Full-Year 2014 Guidance

The company reiterated its currency-neutral guidance for the full year of 2014.  Internal net sales are 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 still expected to add approximately $0.07 per share to earnings and currency translation is now expected to have no impact on earnings.  As a result, the company expects a full-year earnings range including the impact of the 53rd week and currency translation of between $3.88 and $3.96 per share.

Conference Call / Webcast

Kellogg will host a conference call to discuss these results on Thursday, October 30, 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 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



            September 27,

      September 28,


            September 27,

      September 28,

(Results are unaudited)

2014

2013


2014

2013








Net sales

$3,639

$3,716


$11,066

$11,291








Cost of goods sold

2,347

$2,266


6,859

$6,971

Selling, general and administrative expense

927

946


2,761

2,743








Operating profit

365

504


1,446

1,577








Interest expense

54

56


156

177

Other income (expense), net

1

4


14

(8)








Income before income taxes 

312

452


1,304

1,392

Income taxes

86

124


373

398

Earnings (loss) from joint ventures

(1)

(2)


(5)

(5)

Net income

$225

$326


$926

$989

Net income (loss) attributable to noncontrolling interests 

1

-


1

-

Net income attributable to Kellogg Company 

$224

$326


$925

$989








Per share amounts:







Basic

$.63

$.90


$2.58

$2.72


Diluted

$.62

$.90


$2.56

$2.70








Dividends per share

$0.49

$0.46


$1.41

$1.34








Average shares outstanding:







Basic

358

362


359

363


Diluted

360

364


361

366








Actual shares outstanding at period end




355

362








 

Kellogg Company and Subsidiaries

SELECTED OPERATING SEGMENT DATA



(millions)



Quarter ended

Year-to-date period ended



            September 27,

      September 28,


            September 27,

      September 28,

(Results are unaudited)

2014

2013


2014

2013








Net sales







U.S. Morning Foods

$841

$883


$2,522

$2,657


U.S. Snacks

849

886


2,645

2,704


U.S. Specialty

270

281


918

932


North America Other

369

382


1,111

1,173


Europe 

726

729


2,206

2,144


Latin America 

320

302


918

914


Asia Pacific

264

253


746

767


Consolidated

$3,639

$3,716


$11,066

$11,291















Operating profit 







U.S. Morning Foods

$118

$132


$389

$475


U.S. Snacks

67

105


292

341


U.S. Specialty

59

70


209

210


North America Other

58

70


192

223


Europe 

61

74


181

220


Latin America 

50

39


145

129


Asia Pacific

16

25


32

63


Total Reportable Segments

429

515


1,440

1,661


Corporate 

(64)

(11)


6

(84)


Consolidated

$365

$504


$1,446

$1,577

 

Kellogg Company and Subsidiaries

CONSOLIDATED STATEMENT OF CASH FLOWS

(millions)







Year-to-date period ended



September 27,

September 28,

(unaudited)


2014

2013





Operating activities




Net income


$926

$989

Adjustments to reconcile net income to 




operating cash flows:




  Depreciation and amortization


375

340

  Postretirement benefit plan expense (benefit)

(73)

(10)

  Deferred income taxes


2

(27)

  Other 


0

73

Postretirement benefit plan contributions


(44)

(42)

Changes in operating assets and liabilities, net of acquisitions

(9)

66





Net cash provided by (used in) operating activities

1,177

1,389





Investing activities




Additions to properties


(355)

(363)

Other


7

(1)





Net cash provided by (used in) investing activities

(348)

(364)





Financing activities




Net issuances (reductions) of notes payable

339

(309)

Issuances of long-term debt


952

645

Reductions of long-term debt


(959)

(761)

Net issuances of common stock


164

450

Common stock repurchases 


(690)

(544)

Cash dividends


(506)

(486)

Other


12

23





Net cash provided by (used in) financing activities

(688)

(982)





Effect of exchange rate changes on cash and cash equivalents


12

(24)





Increase (decrease) in cash and cash equivalents

153

19

Cash and cash equivalents at beginning of period

273

281





Cash and cash equivalents at end of period

$426

$300









Supplemental financial data:








Net cash provided by (used in) operating activities

$1,177

$1,389

Additions to properties


(355)

(363)

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

$822

$1,026









(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)









 September 27,

 December 28,




2014

2013




(unaudited)

*






Current assets





Cash and cash equivalents



$426

$273

Accounts receivable, net



1,565

1,424

Inventories:





    Raw materials and supplies



348

319

    Finished goods and materials in process



860

929

Deferred income taxes



207

195

Other prepaid assets



166

127






Total current assets



3,572

3,267






Property, net of accumulated depreciation





  of $5,717 and $5,501



3,790

3,856

Goodwill



5,021

5,051

Other intangibles, net of accumulated amortization





  of $40 and $34



2,327

2,367

Pension



512

419

Other assets



550

514






Total assets



$15,772

$15,474






Current liabilities





Current maturities of long-term debt



$607

$289

Notes payable



1,079

739

Accounts payable



1,466

1,432

Accrued advertising and promotion



497

476

Accrued income taxes



56

69

Accrued salaries and wages



293

327

Other current liabilities



664

503






Total current liabilities



4,662

3,835






Long-term debt



5,963

6,330

Deferred income taxes 



943

928

Pension liability



267

277

Nonpension postretirement benefits



62

68

Other liabilities



430

429






Commitments and contingencies










Equity





Common stock, $.25 par value



105

105

Capital in excess of par value



656

626

Retained earnings



7,161

6,749

Treasury stock, at cost



(3,523)

(2,999)

Accumulated other comprehensive income (loss) 



(1,016)

(936)






Total Kellogg Company equity



3,383

3,545






Noncontrolling interests 



62

62






Total equity



3,445

3,607






Total liabilities and equity



$15,772

$15,474

* Condensed from audited financial statements.





 


Kellogg Company and Subsidiaries





Analysis of net sales and operating profit performance













Third 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

$841

$849

$270

$369

$2,329

$726

$320

$264

$0

$3,639

2013 net sales

$883

$886

$281

$382

$2,432

$729

$302

$253

$0

$3,716

% change - 2014 vs. 2013:











As Reported

-4.7%

-4.2%

-4.1%

-3.5%

-4.2%

-0.6%

6.2%

4.8%

0.0%

-2.1%


Acquisitions/Divestitures

0.0%

0.0%

0.0%

0.0%

0.0%

0.0%

0.0%

0.0%

0.0%

0.0%


Integration impact (a)

0.0%

0.0%

0.0%

0.0%

0.0%

0.0%

0.0%

0.6%

0.0%

0.0%


Foreign currency impact

0.0%

0.0%

0.0%

-2.4%

-0.3%

0.0%

-1.1%

-0.8%

0.0%

-0.4%

Subtotal - internal business (b)

-4.7%

-4.2%

-4.1%

-1.1%

-3.9%

-0.6%

7.3%

5.0%

0.0%

-1.7%














      Volume (tonnage) (c)





-2.3%

-0.1%

-5.1%

1.8%

0.0%

-1.9%


      Pricing/mix





-1.6%

-0.5%

12.4%

3.2%

0.0%

0.2%







































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 

$118

$67

$59

$58

$302

$61

$50

$16

($64)

$365

2013 operating profit

$132

$105

$70

$70

$377

$74

$39

$25

($11)

$504

% change - 2014 vs. 2013:











As Reported

-10.5%

-36.2%

-14.2%

-18.2%

-19.8%

-17.4%

29.5%

-32.1%

-512.6%

-27.5%


Acquisitions/Divestitures

0.0%

0.0%

0.0%

0.0%

0.0%

0.0%

0.0%

0.0%

0.0%

0.0%


Integration impact (a)

0.0%

0.0%

0.0%

0.3%

0.0%

0.8%

0.9%

3.8%

-27.4%

0.5%


Foreign currency impact

-0.1%

0.0%

0.0%

-2.6%

-0.5%

0.6%

-0.8%

-1.4%

16.1%

-0.3%


Mark-to-market (d)

0.0%

0.0%

0.0%

0.0%

0.0%

0.0%

0.0%

0.0%

-611.6%

-13.1%


Restructuring and cost reduction activities (e)

-6.7%

-26.3%

0.2%

-2.7%

-10.2%

-22.6%

9.6%

-39.8%

-149.3%

-12.8%


Underlying internal (f)

-3.7%

-9.9%

-14.4%

-13.2%

-9.1%

3.8%

19.8%

5.3%

259.6%

-1.8%













(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 third quarter of 2014, we remeasured the benefit obligation for an impacted other nonpension postretirement plan.  The remeasurement resulted in a mark-to-market loss of $7 million primarily due to a lower discount rate.  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.  We believe 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

$2,522

$2,645

$918

$1,111

$7,196

$2,206

$918

$746

$0

$11,066

2013 net sales

$2,657

$2,704

$932

$1,173

$7,466

$2,144

$914

$767

$0

$11,291

% change - 2014 vs. 2013:











As Reported

-5.0%

-2.2%

-1.5%

-5.3%

-3.6%

2.9%

0.5%

-2.6%

0.0%

-2.0%


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%

-2.6%

-0.4%

3.4%

-2.4%

-4.2%

0.0%

-0.1%

Subtotal - internal business (b)

-5.0%

-2.2%

-1.5%

-2.7%

-3.2%

-0.5%

2.9%

1.3%

0.0%

-1.9%














      Volume (tonnage) (c)





-3.1%

-0.1%

-6.9%

0.4%

0.0%

-2.6%


      Pricing/mix





-0.1%

-0.4%

9.8%

0.9%

0.0%

0.7%







































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 

$389

$292

$209

$192

$1,082

$181

$145

$32

$6

$1,446

2013 operating profit

$475

$341

$210

$223

$1,249

$220

$129

$63

($84)

$1,577

% change - 2014 vs. 2013:











As Reported

-18.1%

-14.6%

-0.1%

-14.2%

-13.4%

-17.9%

12.3%

-48.6%

107.5%

-8.3%


Acquisitions/Divestitures

0.0%

0.0%

0.0%

0.0%

0.0%

0.0%

0.0%

1.2%

0.0%

0.1%


Integration impact (a)

0.0%

2.9%

0.0%

0.4%

0.9%

-0.5%

0.6%

5.2%

-18.2%

1.2%


Foreign currency impact

0.0%

0.0%

0.0%

-3.0%

-0.6%

5.2%

2.0%

-3.3%

27.2%

0.4%


Mark-to-market (d)

0.0%

0.0%

0.0%

0.0%

0.0%

0.0%

0.0%

0.0%

80.6%

5.7%


Restructuring and cost reduction activities (e)

-6.6%

-9.5%

0.2%

-4.4%

-5.8%

-25.6%

-1.5%

-26.1%

-97.7%

-10.8%


Underlying internal (f)

-11.5%

-8.0%

-0.3%

-7.2%

-7.9%

3.0%

11.2%

-25.6%

115.6%

-4.9%













(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 third quarter of 2014, we remeasured the benefit obligation for an impacted other nonpension postretirement plan.  The remeasurement resulted in a mark-to-market loss of $7 million primarily due to a lower discount rate.  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.  We believe 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 September 27, 2014


Year-to-date period ended September 27, 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

$12

$3

$15


$36

$5

$41



U.S. Snacks

30

2

32


39

3

42



U.S. Specialty

-

1

1


1

1

2



North America Other

2

-

2


8

3

11



Europe

21

2

23


30

33

63



Latin America

1

-

1


1

5

6



Asia Pacific

11

-

11


17

5

22



Corporate

(13)

20

7


(12)

49

37




Total

$64

$28

$92


$120

$104

$224














Quarter ended September 28, 2013


Year-to-date period ended September 28, 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

$5

$2

$7


$7

$5

$12



U.S. Snacks

2

2

4


4

6

10



U.S. Specialty

-

1

1


1

2

3



North America Other

-

-

-


-

1

1



Europe

3

3

6


3

3

6



Latin America

1

2

3


1

2

3



Asia Pacific

1

-

1


7

-

7



Corporate

-

7

7


-

7

7




Total

$12

$17

$29


$23

$26

$49













2014 Variance - better (worse) than 2013









U.S. Morning Foods

$(7)

$(1)

$(8)


$(29)

$ -

$(29)



U.S. Snacks

(28)

-

(28)


(35)

3

(32)



U.S. Specialty

-

-

-


-

1

1



North America Other

(2)

-

(2)


(8)

(2)

(10)



Europe

(18)

1

(17)


(27)

(30)

(57)



Latin America

-

2

2


-

(3)

(3)



Asia Pacific

(10)

-

(10)


(10)

(5)

(15)



Corporate

13

(13)

-


12

(42)

(30)




Total

$(52)

$(11)

$(63)


$(97)

$(78)

$(175)













 

Kellogg Company and Subsidiaries

Integration Costs*

(millions)

















Quarter ended September 27, 2014


Year-to-date period ended September 27, 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

2

7


-

14

7

21



Latin America

-

-

-

-


-

-

-

-



Asia Pacific

-

1

-

1


-

2

1

3



Corporate

-

-

-

-


-

-

1

1




Total

$ -

$6

$2

$8


$ -

$16

$9

$25

















Quarter ended September 28, 2013


Year-to-date period ended September 28, 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

$10

$11



North America Other

-

-

-

-


1

-

-

1



Europe

-

3

4

7


-

7

11

18



Latin America

-

-

1

1


-

-

1

1



Asia Pacific

2

-

1

3


4

1

6

11



Corporate

-

-

1

1


-

-

6

6




Total

$2

$3

$7

$12


$5

$9

$34

$48















2014 Variance - better(worse) than 2013












U.S. Snacks

$ -

$ -

$ -

$ -


$ -

$1

$10

$11



North America Other

-

-

-

-


1

-

-

1



Europe

-

(2)

2

-


-

(7)

4

(3)



Latin America

-

-

1

1


-

-

1

1



Asia Pacific

2

(1)

1

2


4

(1)

5

8



Corporate

-

-

1

1


-

-

5

5




Total

$2

$(3)

$5

$4


$5

$(7)

$25

$23















*

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 September 27, 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

$118

$67

$59

$58

$61

$50

$16

$(64)

$365


Mark-to-market (a)

-

-

-

-

-

-

-

(66)

(66)


Restructuring and cost reduction activities (b)

(15)

(32)

(1)

(2)

(23)

(1)

(11)

(7)

(92)

Underlying Operating Profit (c)

$133

$99

$60

$60

$84

$51

$27

$9

$523


Pringles integration costs

-

-

-

-

(7)

-

(1)

-

(8)

Comparable Operating Profit(d)

$133

$99

$60

$60

$91

$51

$28

$9

$531






















Quarter ended September 28, 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

$132

$105

$70

$70

$74

$39

$25

$(11)

$504


Mark-to-market (a)

-

-

-

-

-

-

-

2

2


Restructuring and cost reduction activities (b)

(7)

(4)

(1)

-

(6)

(3)

(1)

(7)

(29)

Underlying Operating Profit (c)

$139

$109

$71

$70

$80

$42

$26

$(6)

$531


Pringles integration costs

-

-

-

-

(7)

(1)

(3)

(1)

(12)

Comparable Operating Profit (d)

$139

$109

$71

$70

$87

$43

$29

$(5)

$543













(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 third quarter of 2014, we remeasured the benefit obligation for an impacted other nonpension postretirement plan.  The remeasurement resulted in a mark-to-market loss of $7 million primarily due to a lower discount rate.  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 September 27, 2014 and September 28, 2013 includes postretirement benefit plan expense (income) of ($23) million and ($2) 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 September 27, 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

$389

$292

$209

$192

$181

$145

$32

$6

$1,446


Mark-to-market (a)

-

-

-

-

-

-

-

38

38


Restructuring and cost reduction activities (b)

(41)

(42)

(2)

(11)

(63)

(6)

(22)

(37)

(224)

Underlying Operating Profit (c)

$430

$334

$211

$203

$244

$151

$54

$5

$1,632


Pringles integration costs

-

-

-

-

(21)

-

(3)

(1)

(25)

Comparable Operating Profit(d)

$430

$334

$211

$203

$265

$151

$57

$6

$1,657






















Year-to-date period ended September 28, 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

$475

$341

$210

$223

$220

$129

$63

$(84)

$1,577


Mark-to-market (a)

-

-

-

-

-

-

-

(59)

(59)


Restructuring and cost reduction activities (b)

(12)

(10)

(3)

(1)

(6)

(3)

(7)

(7)

(49)

Underlying Operating Profit (c)

$487

$351

$213

$224

$226

$132

$70

$(18)

$1,685


Pringles integration costs

-

(11)

-

(1)

(18)

(1)

(11)

(6)

(48)

Comparable Operating Profit (d)

$487

$362

$213

$225

$244

$133

$81

$(12)

$1,733













(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 third quarter of 2014, we remeasured the benefit obligation for an impacted other nonpension postretirement plan.  The remeasurement resulted in a mark-to-market loss of $7 million primarily due to a lower discount rate.  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 September 27, 2014 and September 28, 2013 includes postretirement benefit plan expense (income) of ($68) million and ($10) 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




September 27,
2014

September 28,
2013


September 27,
2014

September 28,
2013








Reported EPS

$0.62

$0.90


$2.56

$2.70


Mark-to-market(a)

(0.11)

0.00


0.08

(0.12)


Restructuring and cost reduction activities(b)

(0.19)

(0.05)


(0.45)

(0.09)


Pringles Integration costs

(0.02)

(0.02)


(0.05)

(0.09)

Comparable EPS(c)

$0.94

$0.97


$2.98

$3.00
















(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 third quarter of 2014, we remeasured the benefit obligation for an impacted other nonpension postretirement plan.  The remeasurement resulted in a mark-to-market loss of $7 million primarily due to a lower discount rate.  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





September 27, 2014


September 27, 2014








Reported Effective Tax Rate


27.7%


28.6%



Mark-to-market (a)


-1.3%


-0.3%



Restructuring and cost reduction activities (b)


0.5%


0.2%


Underlying Reported Effective Tax Rate (c)


28.5%


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 September 27, 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 September 27, 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

Loading...
Loading...
Posted In: Press Releases
Benzinga simplifies the market for smarter investing

Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.

Join Now: Free!

Loading...