USA: Kellogg's earnings exceed estimates for quarter and year on Keebler acquisition
Battle Creek, Michigan-based cereals giant Kellogg Company has reported that net earnings for the fourth quarter exceeded expectations, finishing 2001 with good momentum.
Chairman and CEO Carlos M. Gutierrez commented: "In a year in which we dramatically reshaped our business, the company maintained its focus and delivered better-than-expected earnings in each of the last three quarters.
"In many respects, the fourth quarter provided the best evidence yet that a stronger Kellogg truly is emerging."
Kellogs reported Q4 profit up nearly 34% to US$124.6m, or 31 cents a share, from US$93.2m, or 23 cents a share, a year earlier. This was buoyed by stronger sales, which were up 42% to reach US$2.21bn from US$1.56bn.
The growth in sales was driven by the acquisition of Keebler Foods Co, which was completed in March. Internal net sales growth, excluding the impact of currency translation and acquisitions, was 3.7%, led by Kellogg's US division.
Gutierrez explained: "Our return to sales growth in the fourth quarter demonstrates that our strategic actions are starting to pay off. Increased brand-building efforts generated notably strong sales and share growth in US cereal. Our volume-to-value mindset enhanced pricing and mix contributions around the world."
For the FY2001, reported net earnings were US$473.6m, or US$1.16 per diluted share, versus the prior year's US$587.7m, or US$1.45 per diluted share. Excluding restructuring charges in both years, and a debt extinguishment charge, accounting change, and integration impact in 2001, earnings per share were US$1.35 in 2001, versus US$1.61 in 2000.
Cash flow reached US$856m, the highest recorded in Kellogg's history and nearly a third higher than the US$650m generated in 2000, reflecting improved working capital and continued discipline on capital spending.
Gutierrez said: "The year 2001 was one of transition, marked by the implementation of a new strategy [...] We made fundamental changes that sacrificed near-term results for the benefit of sustainable growth in 2002 and beyond.''
Gutierrez added that solid progress was made on the integration of Keebler, "our largest acquisition ever". The transition of Kellogg's snack products to Keebler's direct store door distribution system last summer was seamless, and is starting to lift the growth rates for the targeted products. The two companies' club-channel, food-away-from-home, and convenience and vending operations have been combined. Cost synergies have accelerated ahead of plan.
He concluded: "In implementing our strategy and integrating Keebler, we achieved three financial goals for 2001.
"First, we restored our competitiveness in our U.S. cereal business, as evidenced by our improved dollar share. Second, we increased our gross profit margin, which will fund further brand-building investment. Finally, we improved our financial flexibility by delivering record cash flow."
Kellogg added that it expects to earn US$0.34-0.35 a share in the current quarter, and about US$1.73 a share for the FY, up slightly on the analysts' consensus of US$1.71.
Kellogg Company and Subsidiaries
CONSOLIDATED EARNINGS (millions, except per share data)
Three months ended Twelve months ended
December 31, December 31,
(Quarterly results are unaudited) 2001 2000 2001 2000
Net sales $2,213.0 $1,556.0 $8,853.3 $6,954.7
Cost of goods sold 1,022.5 764.9 4,128.5 3,327.0
Selling and administrative expense 893.1 588.0 3,523.6 2,551.4
Restructuring charges (15.0) 65.2 33.3 86.5
Operating profit 312.4 137.9 1,167.9 989.8
Interest expense 99.7 35.1 351.5 137.5
Other income (expense), net (6.4) 7.6 (12.3) 15.4
Earnings before income taxes 206.3 110.4 804.1 867.7
Income taxes 81.7 17.2 322.1 280.0
Earnings before extraordinary loss
and cumulative effect of accounting
change 124.6 93.2 482.0 587.7
Extraordinary loss (net of tax) - - (7.4) -
Cumulative effect of accounting
change (net of tax) - - (1.0) -
Net earnings $124.6 $93.2 $473.6 $587.7
Per share amounts (basic and
Earnings before extraordinary
loss and cumulative effect of
accounting change $.31 $.23 $1.19 $1.45
Extraordinary loss (net of tax) - - ($.02) -
Cumulative effect of accounting
change (net of tax) - - - -
Net earnings per share (basic) $.31 $.23 $1.17 $1.45
Net earnings per share (diluted) $.31 $.23 $1.16 $1.45
Dividends per share $.2525 $.2525 $1.010 $.9950
Average shares outstanding (basic) 406.5 405.6 406.1 405.6
Average shares outstanding
(diluted) 408.3 405.7 407.2 405.8
Actual shares outstanding at period
end 406.6 405.6
SUPPLEMENTAL FINANCIAL DATA
(millions, except per share data)
Cash earnings per share (basic) $.35 $.37 $1.46 $1.64
Cash earnings per share (diluted) $.35 $.37 $1.45 $1.64
Amortization expense (net of tax) $27.5 $6.8 $89.4 $15.0
Cash flow (operating cash flow less
property additions) $154.6 $192.4 $855.5 $650.0
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