K » Topics » Overview

This excerpt taken from the K 10-K filed Feb 26, 2010.

Overview

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is intended to help the reader understand Kellogg Company, our operations and our present business environment. MD&A is provided as a supplement to, and should be read in conjunction with, our Consolidated Financial Statements and the accompanying notes thereto contained in Item 8 of this report.

Kellogg Company is the world’s leading producer of cereal and a leading producer of convenience foods, including cookies, crackers, toaster pastries, cereal bars, fruit snacks, frozen waffles, and veggie foods. Kellogg products are manufactured and marketed globally. We currently manage our operations in four geographic operating segments, comprised of North America and the three International operating segments of Europe, Latin America, and Asia Pacific.

We manage our Company for sustainable performance defined by our long-term annual growth targets. These targets are low single-digit (1 to 3%) for internal net sales, mid single-digit (4 to 6%) for internal operating profit, and high single-digit (7 to 9%) for diluted net earnings per share (EPS) on a currency neutral basis. See Foreign currency translation section for our definition of currency neutral EPS.

For our full year 2009, we were at the high end of our long-term annual net sales target with internal growth of 3%. On a reported basis, net sales declined by 2%. Consolidated internal operating profit increased 10%, exceeding our long-term annual growth target. Reported operating profit grew 2%. Diluted EPS grew 13% on a currency neutral basis, exceeding our long-term annual growth target of 7 to 9%. Reported EPS was $3.16, an increase of 6% over last year’s $2.99.

 

Consolidated results

(dollars in millions, except per share data)

  2009    2008    2007

Net sales

  $ 12,575    $ 12,822    $ 11,776

Net sales growth:

  As reported     –1.9%      8.9%      8.0%
    Internal (a)     3.0%      5.4%      5.4%

Operating profit

  $ 2,001    $ 1,953    $ 1,868

Operating profit growth:

  As reported     2.5%      4.5%      5.8%
    Internal (a)     10.3%      4.2%      3.1%

Diluted net earnings per share (EPS)

  $ 3.16    $ 2.99    $ 2.76

EPS growth

    6%      8%      10%

Currency neutral diluted EPS growth (b)

    13%      8%      7%

 

(a)

Internal net sales and operating profit for 2009 exclude the impact of currency and acquisitions. Internal net sales and operating profit growth for 2008 exclude the impact of currency, a 53rd shipping week and acquisitions. Internal net sales and operating profit for 2007 excludes the impact of currency. Internal net sales and operating profit growth is a non-GAAP financial measure which is further discussed and reconciled to GAAP basis growth on page 16.

 

(b) See the section entitled Foreign currency translation for discussion and reconciliation of the non-GAAP financial measure.

In combination with an attractive dividend yield, we believe this profitable growth has and will continue to provide a strong total return to our shareholders. We believe we can achieve this sustainable growth through a strategy focused on growing our cereal business, expanding our snacks business, and pursuing selected growth opportunities. We support our business strategy with operating principles that emphasize profit-rich, sustainable sales growth, as well as cash flow and return on invested capital. We believe our steady earnings growth, strong cash flow, and continued investment during a multi-year period of economic uncertainty demonstrates the strength and flexibility of our business model.

 

13


This excerpt taken from the K 10-K filed Feb 24, 2009.
Overview
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to help the reader understand Kellogg Company, our operations and our present business environment. MD&A is provided as a supplement to, and should be read in conjunction with, our Consolidated Financial Statements and the accompanying notes thereto contained in Item 8 of this report.
 
 
Kellogg Company is the world’s leading producer of cereal and a leading producer of convenience foods, including cookies, crackers, toaster pastries, cereal bars, fruit snacks, frozen waffles, and veggie foods. Kellogg products are manufactured and marketed globally. We currently manage our operations in four geographic operating segments, comprised of North America and the three International operating segments of Europe, Latin America, and Asia Pacific. Beginning in 2007, the Asia Pacific segment includes South Africa, which was formerly a part of Europe. Prior years were restated for comparison purposes.
 
 
We manage our Company for sustainable performance defined by our long-term annual growth targets. These targets are low single-digit (1 to 3%) for internal net sales, mid single-digit (4 to 6%) for internal operating profit, and high single-digit (7 to 9%) for net earnings per share on a currency neutral basis. See “Foreign currency translation” section on page 15 for an explanation of the Company’s definition of currency neutral.
 
 
For our full year 2008, we exceeded our net sales target with reported net sales growth of 9%, and internal growth of 5.4%. Consolidated operating profit increased 4.5%, on internal growth of 4.2%, in line with our target. Reported diluted earnings per share grew 8%, within our target, to $2.99 per share, while currency neutral EPS grew 10%.
 
                             
 
Consolidated results
           
(dollars in millions except per share data)   2008   2007   2006
 
Net sales
      $ 12,822     $ 11,776     $ 10,907  
 
 
Net sales growth:
  As reported     8.9%       8.0%       7.2%  
 
 
    Internal (a)     5.4%       5.4%       6.8%  
 
 
Operating profit
      $ 1,953     $ 1,868     $ 1,766  
 
 
Operating profit growth:
  As reported (b)     4.5%       5.8%       .9%  
 
 
    Internal (a)     4.2%       3.1%       4.3%  
 
 
Diluted net earnings per share (EPS)
  $ 2.99     $ 2.76     $ 2.51  
 
 
EP S growth (b)
        8%       10%       6%  
 
 
Currency neutral diluted EPS growth (c)
    10%       7%       11%  
 
 
 
(a) Internal net sales and operating profit growth for 2008 exclude the impact of currency, a 53rd shipping week and acquisitions. Internal net sales and operating profit for 2007 and 2006 excludes the impact of currency. Additionally, internal operating profit growth for 2006 excludes the impact of adopting SFAS No. 123(R) “Share-Based Payment”. Accordingly, internal net sales operating profit growth is a non-GAAP financial measure, which is further discussed and reconciled to GAAP-basis growth on page 13.
 
 
(b) At the beginning of 2006, we adopted SFAS No. 123(R) “Share-Based Payment,” which reduced our fiscal 2006 operating profit by $65 million ($42 million after tax or $.11 per share), due primarily to recognition of compensation expense associated with employee and director stock option grants. Correspondingly, our reported operating profit and net earnings growth for 2006 was reduced by approximately 4% and diluted net earnings per share growth was reduced by approximately 5%.
 
 
(c) See section entitled “Foreign currency translation” for discussion and reconciliation of this non-GAAP financial measure.
 
 
In combination with an attractive dividend yield, we believe this profitable growth has and will continue to provide a strong total return to our shareholders. We believe we can achieve this sustainable growth through a strategy focused on growing our cereal business, expanding our snacks business, and pursuing selected growth opportunities. We support our business strategy with operating principles that emphasize profit-rich, sustainable sales growth, as well as cash flow and return on invested capital. We believe our steady earnings growth, strong cash flow, and continued investment during a multi-year period of significant commodity and energy-driven cost inflation demonstrates the strength and flexibility of our business model.


12


Table of Contents

These excerpts taken from the K 10-K filed Feb 25, 2008.
Overview
Our principal source of liquidity is operating cash flows, supplemented by borrowings for major acquisitions and other significant transactions. This cash-generating capability is one of our fundamental strengths and provides us with substantial financial flexibility in meeting operating and investing needs. During 2007, we believe our Company’s financial strength has been especially evident in the face of the recent U.S. sub-prime mortgage market crisis and its pervasive effect on general credit market liquidity. For the year, we continued to have access to the U.S. commercial paper market without significant increase in our effective short-term borrowing rate, and our commercial paper and term debt credit ratings have not been affected. Our annual interest expense for the 2005-2007 period has been relatively steady, which reflects a stable effective interest rate on total debt and a relatively constant debt balance throughout most of that time. We have not had any significant new borrowings under our Euro or Canadian commercial paper programs since June 2007, which has limited our exposure to non-U.S. credit market illiquidity during this turbulent period.
 
 
 
Overview





Our principal source of liquidity is operating cash flows,
supplemented by borrowings for major acquisitions and other
significant transactions. This cash-generating capability is one
of our fundamental strengths and provides us with substantial
financial flexibility in meeting operating and investing needs.
During 2007, we believe our Company’s financial strength
has been especially evident in the face of the recent
U.S. sub-prime mortgage market crisis and its pervasive
effect on general credit market liquidity. For the year, we
continued to have access to the U.S. commercial paper
market without significant increase in our effective short-term
borrowing rate, and our commercial paper and term debt credit
ratings have not been affected. Our annual interest expense for
the
2005-2007
period has been relatively steady, which reflects a stable
effective interest rate on total debt and a relatively constant
debt balance throughout most of that time. We have not had any
significant new borrowings under our Euro or Canadian commercial
paper programs since June 2007, which has limited our exposure
to
non-U.S. credit
market illiquidity during this turbulent period.


 


 


 




This excerpt taken from the K 10-K filed Feb 23, 2007.
Overview
 
Kellogg Company is the world’s leading producer of cereal and a leading producer of convenience foods, including cookies, crackers, toaster pastries, cereal bars, fruit snacks, frozen waffles, and veggie foods. Kellogg products are manufactured and marketed globally. We currently manage our operations in four geographic operating segments, comprised of North America and the three International operating segments of Europe, Latin America, and Asia Pacific. For the periods presented, the Asia Pacific operating segment included Australia and Asian markets. Beginning in 2007, this segment will also include South Africa, which was formerly a part of Europe.
 
We manage our Company for sustainable performance defined by our long-term annual growth targets. During the periods presented, these targets were low single-digit for internal net sales, mid single-digit for internal operating profit, and high single-digit for net earnings per share, which we met or exceeded in each of 2004, 2005, and 2006:
 
                             
 
Consolidated results
               
(dollars in millions)       2006   2005   2004
 
Net sales
      $ 10,906.7     $ 10,177.2     $ 9,613.9  
 
 
Net sales growth:
  As reported     7.2%       5.9%       9.1%  
 
 
    Internal (a)     6.8%       6.4%       5.0%  
 
 
Operating profit
      $ 1,765.8     $ 1,750.3     $ 1,681.1  
 
 
Operating profit growth:
  As reported (b)     .9%       4.1%       8.9%  
 
 
    Internal (a)     4.3%       5.2%       4.5%  
 
 
Diluted net earnings per share (EPS)
  $ 2.51     $ 2.36     $ 2.14  
 
 
EPS growth (b)
        6%       10%       11%  
 
 
 
(a) Our measure of “internal growth” excludes the impact of currency and, if applicable, acquisitions, dispositions, and shipping day differences. Specifically, internal net sales and operating profit growth for 2005 and 2004 exclude the impact of a 53rd shipping week in 2004. Internal operating profit growth for 2006 also excludes the impact of adopting SFAS No. 123(R) “Share-Based Payment.” Accordingly, internal operating profit growth for 2006 is a non-GAAP financial measure, which is further discussed and reconciled to GAAP-basis growth on pages 11 and 12.
 
 
(b) At the beginning of 2006, we adopted SFAS No. 123(R) “Share-Based Payment,” which reduced our fiscal 2006 operating profit by $65.4 million ($42.4 million after tax or $.11 per share), due primarily to recognition of compensation expense associated with employee and director stock option grants. Correspondingly, our reported operating profit and net earnings growth for 2006 was reduced by approximately 4%. Diluted net earnings per share growth was reduced by approximately 5%. Refer to the section beginning on page 21 entitled “Stock compensation” for further information on the Company’s adoption of SFAS No. 123(R).
 
In combination with an attractive dividend yield, we believe this profitable growth has and will continue to provide a strong total return to our shareholders. We plan to continue to achieve this sustainability through a strategy focused on growing our cereal business, expanding our snacks business, and pursuing selected growth opportunities. We support our business strategy with operating principles that emphasize profit-rich, sustainable sales growth, as well as cash flow and return on invested capital. We believe our steady earnings growth, strong cash flow, and continued investment during a multi-year period of significant commodity and energy-driven cost inflation demonstrates the strength and flexibility of our business model.
 
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