Kellogg Company August 2, 2012 Page 1 of 18 SECOND QUARTER 2012 FINANCIAL RESULTS August 2, 2012 Forward‐Looking Statements This presentation contains 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 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 integrate the Pringles® business and the realization of the anticipated benefits from the 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. 2
This document is posted to help you gain knowledge. Please leave a comment to let me know what you think about it! Share it to your friends and learn new things together.
Transcript
Kellogg Company August 2, 2012
Page 1 of 18
SECOND QUARTER 2012FINANCIAL RESULTS
August 2, 2012
Forward‐Looking Statements
This presentation contains 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 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 integrate the Pringles® business and the realization of the anticipated benefits from the 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.
2
Kellogg Company August 2, 2012
Page 2 of 18
Second Quarter 2012 Overview
Quarterly results on‐track
Maintaining outlook for the full‐year, including investment
Improvement in North America, and Europe in‐line with expectations
On track to exit from transition services on or ahead of schedule
Synergy projections remain as expected
Top-to-Top meetings held with multiple customers – they have confidence in this brand
Demand growth remains ahead of last year
Excited about combining Kellogg and Pringles talent
4
Kellogg Company August 2, 2012
Page 3 of 18
Summary of Financial Results
($ millions, except EPS)
(a) Internal net sales and operating profit growth exclude the impact of foreign currency translation and if applicable, acquisitions and dispositions. In addition to these items, internal operating profit growth also excludes the impact of transaction and integration costs associated with the Pringles acquisition.
(a) Brand building includes advertising, consumer promotions, COGS promotions, and excludes trade spending.(b) Internal brand building growth excludes the impact of foreign currency translation and if applicable,
acquisitions, dispositions, and differences in the number of shipping days.
10%Y-O-Y Change Int. Growth (b)
Incr./(Decr.)
4% (9)% (3)%
2011
8
Q1 Q2 Q3 Q4
2012
(4)%
Q1 Q2
(5)%
Higher in 2H
2H
Kellogg Company August 2, 2012
Page 5 of 18
Internal Operating Profit Performance by Area
(a) Internal operating profit performance excludes the impact of foreign currency translation and if applicable, acquisitions and dispositions. In addition to these items, internal operating profit growth also excludes the impact of transaction and integration costs associated with the Pringles acquisition.
Latin America $ 48 -15.2% Lapping disposal of assets.+DD brand building
Asia Pacific $ 16 -31.6% Difficult environment in ANZ and timing
Cash Flow(a)
(a) Kellogg defines cash flow as cash from operating activities, less capital expenditures; see reconciliation to GAAP cash flow at the end of this presentation.
Cash flow(a) approximately $525 million
Capital expenditure was $155 million or 2.2% of net sales
Remain focused on working capital
Did not repurchase shares during the quarter
Year‐to‐date 2012
10
Kellogg Company August 2, 2012
Page 6 of 18
Full Year
Lower by 2 – 4%
2 – 3%
$3.18 – 3.30
Internal Net Sales (a)
Internal Operating Profit (a)
EPS
2012 Outlook:Reaffirming the Outlook
11
(a) Internal sales and operating profit growth exclude the impact of foreign currency translation and if applicable, acquisitions and dispositions. In addition to these items, internal operating profit growth also excludes the impact of transaction and integration costs associated with the Pringles acquisition.
(As Reported, including Pringles)
Including Investment in Innovation, Brand Building, and SAP, but excluding Pringles
(a) Internal sales growth excludes the impact of foreign currency translation and if applicable, acquisitions, dispositions and differences in the number of shipping days.
(internal net sales growth(a), year‐over‐year % change)
Kellogg North America Kellogg International
-1%
4%
13
1%
4%
6%
9%
Building on Difficult Comps.
North America Net SalesSecond Quarter 2012
(a) Internal sales growth excludes the impact of foreign currency translation and if applicable, acquisitions, dispositions and differences in the number of shipping days.
(b) Includes U.S. cereal, Pop-Tarts, health and wellness, and Kashi businesses.
(c) Includes U.S. cookies, crackers, cereal bars, and fruit-flavored snack businesses.
(d) Includes food service, convenience and Girl Scouts businesses.
(e) Includes the U.S. frozen and Canadian businesses.
(internal net sales growth(a), year‐over‐year% change)
U.S. Snacks (c)U.S. Morning Foods & Kashi (b)
U.S. Specialty (d)
14
North America Other(e)
Kellogg Company August 2, 2012
Page 8 of 18
15
North American Innovation
16
Kellogg Company August 2, 2012
Page 9 of 18
U.S. Snacks(a)
Second Quarter 2012 – excl. Pringles
$725 $729 $727
$702
$742$759
2012
Q4Q3Q2Q1
2011
Q1
Net Sales
Q2
(b)
(a) Includes U.S. cookies, crackers, cereal bars, and fruit-flavored snacks businesses.
(b) Internal sales growth excludes the impact of foreign currency translation and if applicable, acquisitions and dispositions.
2 Breakthrough Innovation Awards New Product Pacesetter Award
Kellogg Competitor 1
Competitor 2 Competitor 3
Kellogg Innovation SalesAnnual
26
Kellogg Company August 2, 2012
Page 14 of 18
A majority of Kellogg’s U.S. Snacks’ net sales ($2.4 billion in 2011) distributed via DSD
Total number of stores serviced 22,000
Average number of stores per territory 16
Average store visits per week 4.5
Total deliveries a week 28,000
Average deliveries per store per week 1.3
27
28
Kellogg Company August 2, 2012
Page 15 of 18
(4)%
(2)%
7%
International Growth
(internal net sales growth(a), year‐over‐year % change)
(a) Internal sales growth excludes the impact of foreign currency translation and if applicable, acquisitions, dispositions, and differences in the number of shipping days.
Second Quarter 2012
29
Latin AmericaEurope Asia Pacific
SUMMARYSETTING THE FOUNDATION
30
Summary
Quarterly results on‐track
Maintaining outlook for the full‐year, including investment
Improvement in North America, and Europe in‐line with expectations
Appendix 1Reconciliation of Kellogg‐Defined Cash Flow to GAAP Cash Flow (a)
31
(a) We use this non‐GAAP financial measure of cash flow to focus management and investors on the amount of cash available for debt repayment, dividend distributions, acquisition opportunities, and share repurchases.
June 30, July 2,(unaudited) 2012 2011
Operating activitiesNet income $659 $707Adjustments to reconcile net income to operating cash flows: Depreciation and amortization 194 175 Deferred income taxes (38) (1) Other 34 25Postretirement benefit plan contributions (32) (183)Changes in operating assets and liabilities (137) (77)
Net cash provided by operating activities 680 646
Less:Additions to properties (155) (243)
Cash flow $525 $403
Year-to-date period ended
Appendix 2
32
Analysis of net sales and operating profit performance
Second quarter of 2012 versus 2011
U.S.
Morning Foods U.S. U.S. North America North Latin Asia Corp- Consoli-
(dollars in millions) & Kashi Snacks Specialty Other America Europe America Pacific orate dated
U.S.Morning Foods U.S. U.S. North North Latin Asia Corp‐ Consoli‐
(dollars in millions) & Kashi Snacks Specialty America Other America Europe America Pacific orate dated342$ 235$ 126$ 140$ 843$ 150$ 99$ 50$ (122)$ 1,020$