Kellogg Affirms 2008 Guidance, Reports 2007 EPS Growth of 10%
Kellogg Affirms 2008 Guidance, Reports 2007 EPS Growth of 10% BATTLE CREEK, Mich. — Kellogg Company (NYSE: K) today reported strong 2007 earnings. Fourth quarter earnings were $0.44 per share. Annual earnings were $2.76 per share, representing the sixth consecutive year that the Company has met or exceeded its long-term EPS targets. Reported net earnings for full-year 2007 were $1,103 million, a 10% increase over last year’s $1,004 million. Earnings were $2.76 per diluted share, an increase of 10% from $2.51 per share in 2006. Reported net earnings in the fourth quarter of 2007 were $176 million, or $0.44 per diluted share, compared to $182 million, or $0.45 per share, in the fourth quarter of 2006. This result included a double-digit increase in advertising investment, significantly higher commodity, fuel, energy, and benefit cost inflation and up-front investment charges of $0.03 per share versus $0.08 per share in 2006. For the full year, upfront investment charges were $0.18 per share versus $0.14 per share in 2006. In addition, Kellogg recently announced acquisitions relating to Bear Naked, Inc.; and the Gardenburger brand in the U.S.; as well as the January 2008 acquisition of The United Bakers Group in Russia. “Despite significant additional cost pressures in 2007, our Company posted another year of strong growth,” said David Mackay, chief executive officer, Kellogg Company. “And for the first time, we generated more than $1 billion of cash flow. We also continued to invest cash back into the Company’s growth through higher up-front costs, a double-digit increase in advertising and several recent acquisitions.” Reported net sales in 2007 increased by 8% to $11.8 billion; fourth quarter sales were $2,794 million, representing 8% growth from the fourth quarter of 2006. Internal net sales growth, which excludes the effect of foreign-currency translation and acquisitions, was 5% for the full year as well as 5% for the fourth quarter.
Kellogg North America reported net sales growth of 6% in 2007, and 6% in the fourth quarter. Internal sales growth was 5% in 2007, building on growth of 8% in 2006. Internal sales growth in the fourth quarter of 5% also built on 6% growth in the fourth quarter of 2006. The Company once again had measured share gains in the U.S. ready-to-eat cereal category in 2007 driven by the North America Retail Cereal business posting internal sales growth of 3% for the full year after posting 3% growth in 2006. North America Retail Cereal internal sales rose by 8% in the fourth quarter versus a decrease of 2% in the fourth quarter of 2006. North America Retail Snacks posted full-year internal sales growth of 7% in 2007, building on 11% growth in 2006. In the fourth quarter, Retail Snacks’ internal sales increased by 2% versus 12% growth posted in the fourth quarter of 2006. Fourth quarter snacks sales were adversely affected by the transition of Kashi Snacks and Kellogg’s Fruit Snacks from warehouse to the DSD distribution system. The Frozen and Specialty Channels businesses posted internal growth of 6% for the full year and 6% for the fourth quarter. The Frozen foods business posted high single-digit sales growth in 2007 and the Specialty Channels businesses posted mid single-digit internal sales growth for the full year. Kellogg International reported net sales growth of 12% in 2007 and 12% in the fourth quarter. Internal sales growth was 5% for the full year, building on 5% growth in 2006. Internal sales growth in the fourth quarter was 4%, building on growth of 6% in the fourth quarter of 2006. The Latin American business posted internal sales growth of 9% in 2007, lapping 9% growth in