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USA: Kellogg's 2000 EPS increases by 7.3% with strong cash flow
Kellogg Company (NYSE: K) announced today that, excluding charges, its full-year 2000 earnings per share were $1.61, up 7.3 percent from $1.50 in 1999, and its net earnings were $651.9 million, up 7.5 percent from $606.2 million in 1999. Cash flow at $650 million was up 22.9 percent. Net sales at $6.95 billion declined 0.4 percent from $6.98 billion in 1999, but were up 1.1 percent excluding the impact of foreign exchange, acquisitions, and divestitures.
For the fourth quarter of 2000, excluding charges, earnings per share were $0.35, up 2.9 percent from $0.34 in 1999, and net earnings were $142.7 million, up 4.4 percent from $136.7 million in 1999. Sales were $1.56 billion, off 1.9 percent from $1.59 billion in the previous year, but flat excluding foreign exchange, acquisitions, and divestitures. Fourth quarter 2000 earnings were aided by planned one-time U.S. foreign tax credits, which were used to boost marketing investment in the United States.
"As we indicated in October and November, the fourth quarter was the start of a transition to a new growth strategy, characterized by reinvestment in core markets; restructuring of smaller, less-profitable markets; and preparation for the integration of Keebler Foods Company," said Carlos M. Gutierrez, Kellogg Company chairman and chief executive officer. "Although these actions negatively impacted fourth quarter results, 2000 represented our second straight year of earnings growth, excluding charges, with solid performances in the U.S. cereal business, Mexico, and Canada. However, we recognize that our new, more-focused strategy is needed to deliver sustainable, high-quality growth."
Gutierrez said Kellogg's strategy includes substantial external growth, as evidenced by the pending acquisition of Keebler. "The acquisition process continues on schedule, with closure expected by early March," he said. "Teams of Kellogg and Keebler people are working hard to assure that the integration goes smoothly and that we take full advantage of the opportunities offered by bringing together two great food companies."
During the fourth quarter of 2000, Kellogg recorded a $65.2 million pretax restructuring charge ($49.5 million after tax or $0.12 per share) for actions in various locations supporting the company's new growth strategy. Including this charge and a charge taken in the fourth quarter of 1999, fourth quarter net earnings were $93.2 million in 2000 and $100.9 million in 1999, and fourth quarter earnings per share were $0.23 in 2000 and $0.25 in 1999. Including all charges from 2000 and 1999, full-year net earnings were $587.7 million in 2000 and $338.3 million in 1999, and full-year earnings per share were $1.45 in 2000 and $0.83 in 1999.
With annual sales of nearly $7 billion, Kellogg Company is the world's leading producer of cereal and a leading producer of convenience foods, including toaster pastries, cereal bars, frozen waffles, wholesome snacks, and meat alternatives. The company's brands include Kellogg's, Special K, Rice Krispies, Eggo, Pop-Tarts, Nutri-Grain, MorningStar Farms, and Kashi. For more information, visit Kellogg's web site at http://www.kelloggs.com .
Keebler Foods Company and its subsidiaries constitute the second largest cookie and cracker maker in the United States with annual sales of about $2.8 billion. Keebler markets its products under well-recognized brands such as Keebler, Cheez-It, Carr's, Ready Crust, Famous Amos, Murray, Austin, and Plantation. For more information, visit Keebler's web site at http://www.keebler.com .
Forward-Looking Statements Disclosure
This news release contains forward-looking statements related to business strategy and our pending acquisition of Keebler. These statements are based on management's current views and assumptions. Actual performance may vary due to competitive conditions and their impact; pricing and levels of marketing and other spending; the effectiveness of marketing spending and programs; the success of new product introductions; commodity prices and labor costs; factors related to the pending acquisition of Keebler, including integration problems, failures to achieve synergies, and unanticipated liabilities; economic factors such as interest rates, statutory tax rates, and foreign currency translations; and other factors.
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)                         2000      1999      2000      1999
Ready-to-eat cereal net
sales                             $1,161.2  $1,218.9  $5,177.6  $5,304.7
Convenience foods net sales           394.8     367.2   1,777.1   1,679.5
Consolidated                      1,556.0   1,586.1   6,954.7   6,984.2
Cost of goods sold                    764.9     766.7   3,327.0   3,325.1
Selling and administrative
expense                              588.0     573.7   2,551.4   2,585.7
Restructuring charges                  65.2      58.8      86.5     244.6
Operating profit                      137.9     186.9     989.8     828.8
Interest expense                       35.1      31.3     137.5     118.8
Disposition-related charges               –         –         –     168.5
Other income (expense), net             7.6      (0.8)     15.4      (4.8)
Earnings before income taxes          110.4     154.8     867.7     536.7
Income taxes                           17.2      53.9     280.0     198.4
Net earnings                          $93.2    $100.9    $587.7    $338.3
Net earnings per share
(basic and diluted)                   $.23      $.25     $1.45      $.83
Dividends per share                   $.253     $.245     $.995     $.960
Average shares outstanding            405.6     405.4     405.6     405.2
Actual shares outstanding at
period end                                               405.6     405.5
Operating profit for the year ended December 31, 2000, includes restructuring charges of $86.5 ($64.2 after tax or $.16 per share), consisting of $65.2 for actions in various locations supporting the Company's "focus and align" strategy and $21.3 for a supply chain efficiency initiative in Europe. Approximately one-half of the charges are comprised of asset write-offs with the remainder consisting principally of cash costs for involuntary employee separation benefits.
Operating profit for the three months ended December 31, 1999, includes restructuring charges of $58.8 ($35.9 after tax or $.09 per share). Operating profit for the year ended December 31, 1999, includes restructuring charges of $244.6 ($156.4 after tax or $.40 per share). The year-to-date charges consist of $193.2 from the closing of the South Operations portion of the Company's Battle Creek, Michigan, cereal plant, $18.7 primarily from write-off of manufacturing assets in various locations, and $32.7 from workforce reduction initiatives around the world.
Disposition-related charges for the year ended December 31, 1999, include a $178.9 loss from the sale of Lender's Bagels business and a $10.4 gain from the sale of the United Kingdom corn milling business. Total restructuring and disposition-related charges for the year ended December 31, 1999, are $413.1 ($267.9 after-tax or $.67 per share).
SELECTED OPERATING SEGMENT DATA
December 31,        December 31,
United States                      $883.3    $847.8  $4,067.4  $4,014.1
Europe                              333.8     401.6   1,463.4   1,614.4
Latin America                       153.3     136.4     626.7     567.0
All other operating
segments                           177.2     200.6     776.7     788.8
Corporate                             8.4      (0.3)     20.5      (0.1)
Consolidated                     $1,556.0  $1,586.1  $6,954.7  $6,984.2
Operating profit excluding
United States                     $141.1    $157.2    $746.2    $803.0
Europe                              43.0      69.0     235.2     224.1
Latin America                       39.6      34.1     161.1     141.3
segments                           19.7      28.9      89.2      93.7
Corporate                          (40.3)    (43.5)   (155.4)   (188.7)
Consolidated                       203.1     245.7   1,076.3   1,073.4
Restructuring charges               (65.2)    (58.8)    (86.5)   (244.6)
Operating profit as reported        $137.9    $186.9    $989.8    $828.8
CONSOLIDATED BALANCE SHEET
December 31,       December 31,
2000               1999
(Condensed from audited financial
statements)
Cash and cash equivalents                  $204.4             $150.6
Accounts receivable, net                    685.3              678.5
Raw materials and supplies              138.2              141.2
Finished goods and materials in
process                                305.6              362.6
Other current assets                        273.3              236.3
Total current assets                      1,606.8            1,569.2
Property, net of accumulated
of $2,508.3 and $2,515.8                2,526.9            2,640.9
Other assets                                762.6              598.6
Total assets                             $4,896.3           $4,808.7
Current maturities of long-term debt       $901.1               $2.9
Notes payable                               485.2              518.6
Accounts payable                            388.2              305.3
Income taxes                                130.8               83.5
Other current liabilities                   587.3              677.5
Total current liabilities                 2,492.6            1,587.8
Long-term debt                              709.2            1,612.8
Nonpension postretirement benefits          408.5              424.9
Deferred income taxes and other
liabilities                                388.5              370.0
Common stock, $.25 par value                103.8              103.8
Capital in excess of par value              102.0              104.5
Retained earnings                         1,501.0            1,317.2
Treasury stock, at cost                    (374.0)            (380.9)
Accumulated other comprehensive
income                                    (435.3)            (331.4)
Total shareholders' equity                  897.5              813.2
Total liabilities and shareholders'
equity                                  $4,896.3           $4,808.7
SELECTED CONSOLIDATED CASH FLOW INFORMATION
Three months    Twelve months
ended          ended
December 31,    December 31,
(Quarterly results are unaudited)            2000    1999    2000    1999
Cash flow from operations                  $250.8  $245.8  $880.9  $795.2
expense                                    $73.3   $72.8  $290.6  $288.0
Cash used for:
Capital expenditures                        $58.4   $88.5  $230.9  $266.2
Cash dividends                             $102.7   $98.4  $403.9  $388.7
Refer to Notes to Consolidated Financial Statements
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