Kellogg Company Reports Solid Results, Reaffirms Full-Year Guidance

Kellogg Company (NYSE:K) today announced solid results that were in-line with the company's expectations. First quarter 2013 reported net sales increased by 12.2 percent to $3.9 billion. Internal net sales*, which exclude the effects of foreign currency translation, acquisitions, dispositions, and integration costs, rose by 2.2 percent over the same period. First quarter 2013 operating profit was $503 million, a reported decrease of 4.5 percent; underlying internal operating profit*, which excludes the effects of foreign currency translation, acquisitions, dispositions, mark-to-market accounting, and integration costs, decreased by 5.8 percent. As expected, the decline in underlying internal operating profit* was largely due to the recognition of considerable cost-of-goods-sold inflation in the quarter. Results in the first quarter included a majority of the inflation, net of cost savings, that the company expects to recognize for the full year.
 
Reported earnings for the first quarter 2013 were $311 million, or $0.85 per diluted share, a decline of 13 percent from the $0.98 per diluted share reported in the first quarter of last year. Comparable first quarter 2013 earnings*, which exclude the impact of mark-to-market accounting and integration costs associated with the acquisition of Pringles, were $0.99 per share, in-line with the company's expectations. This result included a negative impact of $0.03 per share from the Venezuelan devaluation.
 
"Results in the first quarter were broadly as we expected, and we're pleased to have a solid start to the year," said John Bryant, Kellogg Company's president and chief executive officer. "We saw good comparable revenue growth in many regions around the world and the Pringles business continued to post strong results. As a result, we're also pleased to report that we're on-track to meet our guidance for the full-year."
 
* Internal sales growth, underlying internal operating profit growth, underlying internal operating profit, and comparable earnings are all non-GAAP financial measures. See the tables herein for important information regarding these measures and a full reconciliation to the most comparable GAAP measure.
 
North America
 
Kellogg North America net sales were $2.6 billion in the first quarter, a reported increase of 8.1 percent; internal net sales increased by 1.7 percent. The U.S. Morning Foods segment posted internal net sales growth of 1.6 percent. Internal net sales in the U.S. Snacks segment declined by 1.7 percent. The U.S. Specialty Channels segment posted 3.4 percent internal net sales growth in the quarter and the North America Other segment, which is comprised of the U.S. Frozen Foods and Canadian businesses, achieved 7.4 percent internal sales growth. Reported operating profit in North America increased by 1.2 percent; internal operating profit declined by 3.5 percent, largely as the result of the cost-of-goods-sold inflation.
 
International
 
Reported net sales increased by 28.7 percent in Europe in the quarter; internal net sales increased by 2.6 percent, primarily as the result of good growth in the United Kingdom. In Latin America, reported net sales increased by 13.7 percent and internal net sales increased by 7.4 percent. Reported net sales in Asia Pacific increased by 14.7 percent and internal net sales increased by 0.3 percent, although consumption increased at a faster rate.
 
Interest and Tax
 
Kellogg's interest expense was $60 million in the first quarter. The company recognized a one-time, pre-tax benefit of $26 million in the first quarter of 2012 as the result of hedging activities associated with the acquisition of the Pringles business; this accounted for a majority of the year-over-year increase in interest expense. The reported effective tax rate in the first quarter of 2013 was 28.4 percent.
 
Cash flow
 
Cash flow, a non-GAAP measure, defined as cash from operating activities less capital expenditures, was $236 million for the quarter. This was lower than the $277 million posted in the first quarter of 2012; the decline was the result of differences in the timing of capital expenditures. Cash flow for the year is still anticipated to be in a range between $1.1 and $1.2 billion.
 
Kellogg repurchased $44 million of shares during the first quarter, less than option proceeds of $259 million.
 
Full-Year 2013 Guidance
 
The company reaffirmed its guidance for full-year reported net sales growth of approximately seven percent. Earnings per share growth, excluding the impact of mark-to-market accounting, is still expected to be between five and seven percent. Integration costs associated with the acquisition of the Pringles business are still expected to be in a range between $0.12 and $0.14 per share. As a result, earnings excluding the impact of mark-to-market accounting and integration costs are still anticipated to be between $3.82 and $3.91 per share.
 
Share Repurchase Authorization
 
The company also announced that the Board of Directors approved a share repurchase authorization of $1 billion, which expires in April of 2014. This authorization supersedes the existing authorization and is intended to allow the company to repurchase shares to offset the impact of proceeds from the exercise of options through the end of 2013, and to begin the company's 2014 purchase plan.
 
Conference Call / Webcast
 
Kellogg will host a conference call to discuss these results on May 2, 2013 at 9:30 a.m. Eastern Time. The conference call and accompanying presentation slides will be broadcast live over the Internet at http://investor.kelloggs.com. Analysts and institutional investors may participate in the Q&A session by dialing (877) 270-2148 in the U.S., and (412) 902-6510 outside of the U.S. Members of the media and the public are invited to attend in a listen-only mode. Rebroadcast information is available at http://investor.kelloggs.com.
 
About Kellogg Company
 
At Kellogg Company (NYSE:K), we are driven to enrich and delight the world through foods and brands that matter. With 2012 sales of $14.2 billion, Kellogg is the world's leading cereal company; second largest producer of cookies and crackers; a leading producer of savory snacks; and a leading North American frozen foods company. Every day, our well-loved brands nourish families so they can flourish and thrive. These brands include Kellogg's®, Keebler®, Special K®, Pringles®, Frosted Flakes®, Pop-Tarts®, Corn Flakes®, Rice Krispies®, Kashi®, Cheez-It®, Eggo®, Coco Pops®, Mini-Wheats®, and many more. To learn more about our responsible business leadership, foods that delight and how we strive to make a difference in our communities around the world, visit www.kelloggcompany.com.
 
Use of Non-GAAP Financial Measures
 
Certain financial measures have been provided on a non-GAAP (Generally Accepted Accounting Principles) basis. Management believes the use of such non-GAAP measures provides increased transparency and assists investors in understanding the underlying operating performance of the company and its segments and in the analysis of ongoing operating trends. All non-GAAP financial measures have been reconciled with the most directly comparable GAAP financial measures in the attachments provided with the release.
 
Forward-Looking Statements Disclosure
 
This news release contains, or incorporates 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 realize the anticipated benefits and synergies from the Pringles 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.
Kellogg Company and Subsidiaries
                                                             CONSOLIDATED STATEMENT OF INCOME
                                                            (millions, except per share data)
                                                                                           
                                                                               Quarter ended
                                                                     March 30,     March 31,
                                          (Results are unaudited)          2013          2012
                                                                                         
                                                        Net sales        $3,861        $3,440
                                                                                         
                                               Cost of goods sold         2,468        $2,087
                      Selling, general and administrative expense           890           826
                                                                                         
                                                 Operating profit           503           527
                                                                                         
                                                 Interest expense            60            33
                                      Other income (expense), net          (7)           13
                                                                                         
                                     Income before income taxes            436           507
                                                     Income taxes           124           156
                              Earnings (loss) from joint ventures           (1)           --
                                                       Net income          $311          $351
     Net income (loss) attributable to noncontrolling interests            --           --
                     Net income attributable to Kellogg Company           $311          $351
                                                                                         
                                               Per share amounts:                         
                                                            Basic          $.86          $.98
                                                          Diluted          $.85          $.98
                                                                                         
                                              Dividends per share        $.4400        $.4300
                                                                                         
                                                    Average shares outstanding:            
                                                            Basic           363          357
                                                          Diluted           366          359
                                                                                         
                          Actual shares outstanding at period end           366          357
                          Kellogg Company and Subsidiaries
                           SELECTED OPERATING SEGMENT DATA
                                                      
                                                (millions)
                                            Quarter ended
                                  March 30,     March 31,
       (Results are unaudited)          2013          2012
                                                      
                     Net sales                         
            U.S. Morning Foods          $911          $897
                   U.S. Snacks           901           786
                U.S. Specialty           379           348
           North America Other           403           368
                      Europe            692           538
               Latin America            308           270
                  Asia Pacific           267           233
                  Consolidated        $3,861        $3,440
                                                      
                                                      
            Operating profit                          
            U.S. Morning Foods          $163          $153
                   U.S. Snacks           106           123
                U.S. Specialty            78            71
           North America Other            75            70
                      Europe             71            70
               Latin America             48            51
                  Asia Pacific            21            33
     Total Reportable Segments           562           571
                   Corporate           (59)          (44)
                  Consolidated          $503          $527
                                                                       
                                                                                                                                                                        Kellogg Company and Subsidiaries             
                                                                                                                                                                    CONSOLIDATED STATEMENT OF CASH FLOWS             
                                                                                                                                                                                              (millions)             
                                                                                                                                                                                         Quarter ended             
                                                                                                                                            March 30,                                       March 31,             
                                                                                           (unaudited)                                            2013                                            2012             
                                                                                                                                                                                                                  
                                                                                  Operating activities                                                                                                             
                                                                                            Net income                                             $311                                             $351             
                                         Adjustments to reconcile net income to operating cash flows:                                                                                                             
                                                                         Depreciation and amortization                                              113                                               95             
                                                         Postretirement benefit plan expense (benefit)                                              (4)                                              (5)             
                                                                                 Deferred income taxes                                               11                                             (54)             
                                                                                               Other                                                23                                             (1)             
                                                             Postretirement benefit plan contributions                                             (31)                                             (25)             
                                      Changes in operating assets and liabilities, net of acquisitions                                             (85)                                             (21)             
                                                   Net cash provided by (used in) operating activities                                              338                                              340             
                                                                                  Investing activities                                                                                                             
                                                                               Additions to properties                                            (102)                                             (63)             
                                                                                                 Other                                            --                                                 6             
                                                   Net cash provided by (used in) investing activities                                            (102)                                             (57)             
                                                                                                                                                                                                                  
                                                                                  Financing activities                                                                                                             
                                                                       Net reductions of notes payable                                            (226)                                            (178)             
                                                                           Issuances of long-term debt                                              645                                              --             
                                                                          Reductions of long-term debt                                            (749)                                              --             
                                                                         Net issuances of common stock                                              265                                               41             
                                                                            Common stock repurchases                                             (44)                                             (63)             
                                                                                        Cash dividends                                            (160)                                            (153)             
                                                                                                 Other                                               9                                              (2)             
                                                   Net cash provided by (used in) financing activities                                            (260)                                            (355)             
                                          Effect of exchange rate changes on cash and cash equivalents                                             (5)                                               16             
                                                                 Decrease in cash and cash equivalents                                             (29)                                             (56)             
                                                      Cash and cash equivalents at beginning of period                                              281                                              460             
                                                            Cash and cash equivalents at end of period                                             $252                                             $404             
                                                                                                                                                                                                                  
                                                                          Supplemental financial data:                                                                                                             
                                                   Net cash provided by (used in) operating activities                                             $338                                             $340             
                                                                               Additions to properties                                            (102)                                             (63)             
                                           Cash Flow (operating cash flow less property additions) (a)                                             $236                                             $277             
                                                                                                                                                                                                                  
(a) We use this non-GAAP measure of cash flow to focus management and investors on the amount of cash available for debt reduction, dividend distributions, acquisition opportunities, and share repurchase.
                                                                       Kellogg Company and Subsidiaries
                                                                             CONSOLIDATED BALANCE SHEET
                                                                      (millions, except per share data)
                                                                            March 30,     December 29,
                                                                                 2013             2012
                                                                          (unaudited)                *
                                                                                                   
                                                        Current assets                              
                                             Cash and cash equivalents            $252             $281
                                              Accounts receivable, net          1,588           1,454
                                                          Inventories:                              
                                            Raw materials and supplies            312             300
                               Finished goods and materials in process            972           1,065
                                                 Deferred income taxes            168             152
                                                  Other prepaid assets            170             128
                                                                                                   
                                                  Total current assets           3,462            3,380
                                                                                                   
        Property, net of accumulated depreciation of $5,227 and $5,209           3,745            3,782
                                                              Goodwill           5,058            5,053
     Other intangibles, net of accumulated amortization of $55 and $53           2,346            2,359
                                                               Pension             163              145
                                                          Other assets             450              465
                                                          Total assets         $15,224          $15,184
                                                                                                   
                                                   Current liabilities                              
                                  Current maturities of long-term debt              $1             $755
                                                         Notes payable             838            1,065
                                                      Accounts payable           1,447            1,402
                                     Accrued advertising and promotion             459              517
                                                  Accrued income taxes             87              46
                                            Accrued salaries and wages             201              266
                                             Other current liabilities             535              472
                                                                                                   
                                             Total current liabilities           3,568            4,523
                                                                                                   
                                                        Long-term debt           6,717            6,082
                                                 Deferred income taxes             563              523
                                                     Pension liability             873              886
                                    Nonpension postretirement benefits             277              281
                                                     Other liabilities             384              409
                                                                                                   
                                         Commitments and contingencies                              
                                                                                                   
                                                                Equity                              
                                          Common stock, $.25 par value             105              105
                                        Capital in excess of par value             583              573
                                                     Retained earnings           5,749            5,615
                                               Treasury stock, at cost         (2,709)          (2,943)
                         Accumulated other comprehensive income (loss)           (947)            (931)
                                          Total Kellogg Company equity           2,781            2,419
                                              Noncontrolling interests              61               61
                                                          Total equity           2,842            2,480
                                          Total liabilities and equity         $15,224          $15,184
                                                         * Condensed from audited financial statements.
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  Kellogg Company and Subsidiaries
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          Reconciliation of Non-GAAP Amounts - Reported Operating Profit Growth to
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       Underlying Internal Operating Profit Growth
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    Quarter ended
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   March 30, 2013
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
                                                                                                                                                                                                                                                                                                                                                                                 Reported Operating Profit Growth                                                                                                                                                                                                                                                                                                                                                                            -4.5%
                                                                                                                                                                                                                                                                                                                                                                                        Acquisitions/Dispositions                                                                                                                                                                                                                                                                                                                                                                             7.6%
                                                                                                                                                                                                                                                                                                                                                                                                Integration costs                                                                                                                                                                                                                                                                                                                                                                            -3.8%
                                                                                                                                                                                                                                                                                                                                                                                                 Foreign currency                                                                                                                                                                                                                                                                                                                                                                            -1.4%
                                                                                                                                                                                                                                                                                                                                                                              Internal Operating Profit Growth(a)                                                                                                                                                                                                                                                                                                                                                                            -6.9%
                                                                                                                                                                                                                                                                                                                                                                                                Mark-to-market(b)                                                                                                                                                                                                                                                                                                                                                                            -1.1%
                                                                                                                                                                                                                                                                                                                                                                   Underlying Internal Operating Profit Growth(c)                                                                                                                                                                                                                                                                                                                                                                            -5.8%
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
                                                                                                                                                                                                                                                                                                    (a) Internal operating profit growth excludes the impact of foreign currency, and, if applicable, acquisitions, dispositions, and transaction and integration costs associated with the acquisition of Pringles. The Company believes the use of this non-GAAP measure provides increased transparency and assists in understanding underlying operating performance. This non-GAAP measure is reconciled to the directly comparable measure in accordance with U.S. GAAP within this table.
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
(b) Includes mark-to-market adjustments for pension plans and commodity contracts as reflected in cost of goods sold. Actuarial gains/losses for pension plans are recognized in the year they occur. In 2012, asset returns exceeded expectations but discount rates fell almost 100 basis points for pension plans resulting in a net loss. A portion of the 2012 pension mark-to-market adjustment was capitalized as an inventoriable cost at the end of 2012. This amount has been recorded in earnings in the current quarter. Mark-to-market adjustments for commodities reflect the changes in the fair value of contracts for the difference between contract and market prices for the underlying commodities. The resulting gains/losses are recognized in the quarter they occur.
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
                                                                                                                                                                                                                       (c) Underlying internal operating profit growth excludes the impact of foreign currency translation, pension and commodity mark-to-market adjustments, and, if applicable, acquisitions, dispositions, and transaction and integration costs associated with the acquisition of Pringles. The Company believes the use of this non-GAAP measure provides increased transparency and assists in understanding the underlying operating performance. This non-GAAP measure is reconciled to the directly comparable measure in accordance with U.S. GAAP within this table.
                                                                                                                                                                                                                                                                                                   Kellogg Company and Subsidiaries
                                                                                                                                                                                                                                                                                                                       
                                                                                                                                                                                                                                                                             Analysis of net sales and operating profit performance
                                                                                                                                                                                                                                                                                                                       
                                                                                                                                                                                                                                                                                                  First quarter of 2013 versus 2012
                                                                                                                                                                                                                                                                                                                       
                     (dollars in millions)           U.S.
    Morning Foods          U.S.
    Snacks          U.S.
    Specialty          North America
    Other               North America               Europe          Latin
    America          Asia
    Pacific          Corp-
    orate          Consoli-
    dated
                            2013 net sales                          $ 911                   $ 901                      $ 379                           $ 403                   $ 2,594              $ 692                     $ 308                    $ 267                  $ --                     $ 3,861
                            2012 net sales                          $ 897                   $ 786                      $ 348                           $ 368                   $ 2,399              $ 538                     $ 270                    $ 233                  $ --                     $ 3,440
                 % change - 2013 vs. 2012:                                                                                                                                                                                                                                                                              
                      Volume (tonnage) (a)                                                                                                                                              1.2%                 1.6%                         .2%                       5.0%                     --                          1.4%
                               Pricing/mix                                                                                                                                               .5%                 1.0%                        7.2%                      -4.7%                     --                           .8%
          Subtotal - internal business (b)                             1.6%                     -1.7%                         3.4%                              7.4%                        1.7%                 2.6%                        7.4%                        .3%                     --                          2.2%
                          Acquisitions (c)                              --%                     16.3%                         5.3%                              3.2%                        6.6%                27.3%                        8.6%                      20.8%                     --                         11.0%
                          Dispositions (d)                              --%                       --%                          --%                               --%                         --%                  --%                         --%                      -1.7%                     --                          -.1%
                    Integration impact (e)                              --%                       --%                          --%                              -.2%                        -.1%                  --%                         --%                       -.4%                     --                          -.1%
                   Foreign currency impact                              --%                       --%                          --%                              -.6%                        -.1%                -1.2%                       -2.3%                      -4.3%                     --                          -.8%
                              Total change                             1.6%                     14.6%                         8.7%                              9.8%                        8.1%                28.7%                       13.7%                      14.7%                     --                         12.2%
                                                                                                                                                                                                                                                                                                                                 
                                                                                                                                                                                                                                                                                                                       
                     (dollars in millions)          U.S.
    Morning Foods          U.S.
    Snacks           U.S.
    Specialty          North America
    Other               North America               Europe          Latin
    America          Asia
    Pacific          Corp-
    orate          Consoli-
    dated
                     2013 operating profit                          $ 163                   $ 106                       $ 78                            $ 75                     $ 422               $ 71                      $ 48                     $ 21                  $ (59)                      $ 503
                     2012 operating profit                          $ 153                   $ 123                       $ 71                            $ 70                     $ 417               $ 70                      $ 51                     $ 33                  $ (44)                      $ 527
                 % change - 2013 vs. 2012:                                                                                                                                                                                                                                                                              
                     Internal business (b)                             5.9%                    -25.6%                         6.4%                              4.5%                       -3.5%                  .1%                       -5.6%                     -30.6%                    -19.7%                        -6.9%
                          Acquisitions (c)                              --%                     15.3%                         4.6%                              3.9%                        5.9%                14.2%                        6.2%                      15.2%                     -3.1%                         7.9%
                          Dispositions (d)                              --%                       --%                          --%                               --%                         --%                  --%                         --%                      -4.7%                       --%                         -.3%
                    Integration impact (e)                              --%                     -3.0%                          --%                             -1.2%                       -1.1%               -11.1%                        -.3%                     -14.2%                     -6.3%                        -3.8%
                   Foreign currency impact                              --%                        -%                          --%                              -.7%                        -.1%                -2.0%                       -7.6%                      -1.7%                     -1.0%                        -1.4%
                              Total change                             5.9%                    -13.3%                        11.0%                              6.5%                        1.2%                 1.2%                       -7.3%                     -36.0%                    -30.1%                        -4.5%
                                                                                                                                                                                                                                                                                                                       
                                                                                                                                                                                                                  (a) The Company measures the volume impact (tonnage) on revenues based on the stated weight of product shipments.
(b) Internal net sales and operating profit growth for 2013 exclude the impact of acquisitions, divestitures, integration costs and the impact of currency. Internal net sales and operating profit growth are non-GAAP financial measures which are reconciled to the directly comparable measures in accordance with U.S. GAAP within these tables.
                                                                                                                                                                                                                                       (c) Impact of results for the quarter ended March 30, 2013 from the acquisition of Pringles.
                                                                                                                                                                                                                                (d) Impact of results for the quarter ended March 30, 2013 from the divestiture of Navigable Foods.
                                                                                                                                                                                                                                                 (e) Includes impact of integration costs associated with the Pringles acquisition.                     
                                                                                                                           Kellogg Company and Subsidiaries                    
                                                                                                                                            Up-Front Costs*                    
                                                                                                                                                 $ millions                    
                                                                                                                                                                           
                                                                                                                              Quarter ended March 30, 2013                    
                                                     Cost of goods
    sold     Selling, general and
    administrative
    expense               Total                    
                                        2013                                                                                                                                
                          U.S. Morning Foods                            $ 1                                                     $ 2               $ 3                    
                                 U.S. Snacks                               1                                                        2                  3                    
                              U.S. Specialty                              --                                                        1                  1                    
                         North America Other                              --                                                       --                 --                    
                                      Europe                              --                                                       --                 --                    
                               Latin America                              --                                                       --                 --                    
                                Asia Pacific                               6                                                       --                  6                    
                                   Corporate                              --                                                       --                 --                    
                                       Total                            $ 8                                                     $ 5              $ 13                    
                                                                                                                                                                           
                                                                                                                              Quarter ended March 31, 2012                    
                                                     Cost of goods
    sold     Selling, general and
    administrative
    expense               Total                    
                                        2012                                                                                                                                
                          U.S. Morning Foods                            $ 2                                                     $ 2               $ 4                    
                                 U.S. Snacks                               2                                                        1                  3                    
                              U.S. Specialty                              --                                                       --                 --                    
                         North America Other                              --                                                        1                  1                    
                                      Europe                               1                                                       --                  1                    
                               Latin America                              --                                                       --                 --                    
                                Asia Pacific                              --                                                       --                 --                    
                                   Corporate                              --                                                       --                 --                    
                                       Total                            $ 5                                                     $ 4               $ 9                    
                                                                                                                                                                           
     2013 Variance - better(worse) than 2012                                                                                                                                
                          U.S. Morning Foods                            $ 1                                                    $ --               $ 1                    
                                 U.S. Snacks                               1                                                      (1)                 --                    
                              U.S. Specialty                              --                                                      (1)                (1)                    
                         North America Other                              --                                                        1                  1                    
                                      Europe                               1                                                       --                  1                    
                               Latin America                              --                                                       --                 --                    
                                Asia Pacific                             (6)                                                       --                (6)                    
                                   Corporate                              --                                                       --                 --                    
                                       Total                          $ (3)                                                   $ (1)             $ (4)                    
                                                                                                                                                                           
                               * Up-front costs are charges incurred by the Company which will result in future cash savings and/or reduced depreciation. 
                                                                                                                                                                                                      Kellogg Company and Subsidiaries
                                                                                                                                                                                                    Transaction and Integration Costs*
                                                                                                                                                                                                                            $ millions
                                                                                                                                                                                                                               
                                                                                                                                                                                                         Quarter ended March 30, 2013
                                                  Net Sales                Cost of
    goods sold           Selling, general and
    administrative
    expense                Other
    Income/Expense                     Total
                          2013                                                                                                                                                                                                  
                   U.S. Snacks                        $ --                                 $ --                                                           $ 3                                   $ --                     $ 3
           North America Other                            1                                    --                                                             --                                      --                        1
                        Europe                           --                                     3                                                              5                                      --                        8
                  Asia Pacific                            1                                     1                                                              3                                      --                        5
                     Corporate                           --                                    --                                                              3                                      --                        3
                         Total                         $ 2                                  $ 4                                                          $ 14                                   $ --                    $ 20
                                                                                                                                                                                                                               
                                                                                                                                                                                                         Quarter ended March 31, 2012
                                                  Net Sales                Cost of
    goods sold           Selling, general and
    administrative
    expense                Other
    Income/Expense                     Total
                          2012                                                                                                                                                                                                  
                   U.S. Snacks                        $ --                                 $ --                                                          $ --                                   $ --                    $ --
           North America Other                           --                                    --                                                             --                                      --                       --
                        Europe                           --                                    --                                                             --                                      --                       --
                  Asia Pacific                           --                                    --                                                             --                                      --                       --
                     Corporate                           --                                    --                                                             --                                      --                       --
                         Total                        $ --                                 $ --                                                          $ --                                   $ --                    $ --
                                                                                                                                                                                                                                    
                                                            2013 Variance - better(worse) than 2012                                                                                                                               
                   U.S. Snacks                        $ --                                 $ --                                                         $ (3)                                   $ --                   $ (3)
           North America Other                          (1)                                    --                                                             --                                      --                      (1)
                        Europe                           --                                   (3)                                                            (5)                                      --                      (8)
                  Asia Pacific                          (1)                                   (1)                                                            (3)                                      --                      (5)
                     Corporate                           --                                    --                                                            (3)                                      --                      (3)
                         Total                       $ (2)                                $ (4)                                                        $ (14)                                   $ --                  $ (20)
                                                                                                                                                                                                                               
* Transaction and integration costs are charges incurred by the Company as a direct result of the work performed for the acquisition of the Pringles business. No transaction costs were incurred during the quarter ended March 30, 2013.
                                                                                                                                                                                           Kellogg Company and Subsidiaries
                                                                                                                                                                                                        RECAST SEGMENT DATA
                                                                                                                                                                                                                  
                                                                                                                                                                                                                         
                        2012 (millions)                                                                                         Quarter ended                                                     Year-to-date period ended
                                           March 31,
    2012     June 30,
    2012     September 29,
    2012     December 29,
    2012     June 30,
    2012     September 29,
    2012     December 29,
    2012
                                                                                                                                                                                                                  
                    Net Sales (Recast*)                                                                                                                                                                            
                     U.S. Morning Foods                 $ 897                $ 892                     $ 903                    $ 841              $ 1,789                   $ 2,692                  $ 3,533
                            U.S. Snacks                    786                   850                        908                       856                 1,636                      2,544                     3,400
                         U.S. Specialty                    348                   252                        264                       257                   600                        864                     1,121
                    North America Other                    368                   369                        388                       360                   737                      1,125                     1,485
                    North America Total                  2,399                 2,363                      2,463                     2,314                 4,762                      7,225                     9,539
                                 Europe                    538                   613                        685                       691                 1,151                      1,836                     2,527
                          Latin America                    270                   274                        292                       285                   544                        836                     1,121
                           Asia Pacific                    233                   224                        280                       273                   457                        737                     1,010
                           Consolidated               $ 3,440              $ 3,474                   $ 3,720                  $ 3,563              $ 6,914                  $ 10,634                 $ 14,197
                                                                                                                                                                                                                  
                                                                                                                                                                                                                  
             Operating Profit (Recast*)                                                                                                                                                                            
                     U.S. Morning Foods                 $ 153                $ 178                     $ 134                    $ 123                $ 331                     $ 465                    $ 588
                            U.S. Snacks                    123                   121                        117                       115                   244                        361                       476
                         U.S. Specialty                     71                    56                         62                        52                   127                        189                       241
                    North America Other                     70                    70                         67                        58                   140                        207                       265
                    North America Total                    417                   425                        380                       348                   842                      1,222                     1,570
                                 Europe                     70                    64                         76                        51                   134                        210                       261
                          Latin America                     51                    48                         36                        32                    99                        135                       167
                           Asia Pacific                     33                    17                         29                         6                    50                         79                        85
              Total Reportable Segments                    571                   554                        521                       437                 1,125                      1,646                     2,083
                              Corporate                   (44)                  (35)                        (8)                     (434)                  (79)                       (87)                     (521)
                           Consolidated                 $ 527                $ 519                     $ 513                      $ 3              $ 1,046                   $ 1,559                  $ 1,562
                                                                                                                                                                                                                         
                                                 * During the first quarter of 2013, the Kashi operating segment was eliminated. The Kashi financial results have been recast between U.S. Morning Foods and U.S. Snacks.
                                                                                                                                                                                                                         
                        2012 (millions)                                                                                         Quarter ended                                                     Year-to-date period ended
                                           March 31,
    2012     June 30,
    2012     September 29,
    2012     December 29,
    2012     June 30,
    2012     September 29,
    2012     December 29,
    2012
                                                                                                                                                                                                                  
     Net Sales (As originally reported)                                                                                                                                                                            
             U.S. Morning Foods & Kashi                 $ 941                $ 939                     $ 946                    $ 881              $ 1,880                   $ 2,826                  $ 3,707
                            U.S. Snacks                    742                   803                        865                       816                 1,545                      2,410                     3,226
                         U.S. Specialty                    348                   252                        264                       257                   600                        864                     1,121
                    North America Other                    368                   369                        388                       360                   737                      1,125                     1,485
                    North America Total                  2,399                 2,363                      2,463                     2,314                 4,762                      7,225                     9,539
                                 Europe                    538                   613                        685                       691                 1,151                      1,836                     2,527
                          Latin America                    270                   274                        292                       285                   544                        836                     1,121
                           Asia Pacific                    233                   224                        280                       273                   457                        737                     1,010
                           Consolidated               $ 3,440              $ 3,474                   $ 3,720                  $ 3,563              $ 6,914                  $ 10,634                 $ 14,197
                                                                                                                                                                                                                  
                                                                                                                                                                                                                  
                      Operating Profit (As originally reported)                                                                                                                                                     
             U.S. Morning Foods & Kashi                 $ 157                $ 181                     $ 135                    $ 122                $ 338                     $ 473                    $ 595
                            U.S. Snacks                    119                   118                        116                       116                   237                        353                       469
                         U.S. Specialty                     71                    56                         62                        52                   127                        189                       241
                    North America Other                     70                    70                         67                        58                   140                        207                       265
                    North America Total                    417                   425                        380                       348                   842                      1,222                     1,570
                                 Europe                     70                    64                         76                        51                   134                        210                       261
                          Latin America                     51                    48                         36                        32                    99                        135                       167
                           Asia Pacific                     33                    17                         29                         6                    50                         79                        85
              Total Reportable Segments                    571                   554                        521                       437                 1,125                      1,646                     2,083
                              Corporate                   (44)                  (35)                        (8)                     (434)                  (79)                       (87)                     (521)
                           Consolidated                 $ 527                $ 519                     $ 513                      $ 3              $ 1,046                   $ 1,559                  $ 1,562
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       Kellogg Company and Subsidiaries
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         Reconciliation of Non-GAAP Amounts - Reported Operating Profit
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         to Comparable Operating Profit
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         Quarter ended
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               March 30,
    2013                                                                                                                                                                                                                                                                                                                                 March 31,
    2012
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
                                                                                                                                                                                                                                                                                                                                      Reported Operating Profit                                                                                                                                                                                                                                                                                                                                           $ 503.2                                                                                                                                                                                                                                                                                                                                           $ 526.7
                                                                                                                                                                                                                                                                                                                                              Mark-to-market(a)                                                                                                                                                                                                                                                                                                                                             (53.7)                                                                                                                                                                                                                                                                                                                                             (50.6)
                                                                                                                                                                                                                                                                                                                                 Underlying Operating Profit(b)                                                                                                                                                                                                                                                                                                                                           $ 556.9                                                                                                                                                                                                                                                                                                                                           $ 577.3
                                                                                                                                                                                                                                                                                                                                     Pringles integration costs                                                                                                                                                                                                                                                                                                                                             (20.1)                                                                                                                                                                                                                                                                                                                                               --
                                                                                                                                                                                                                                                                                                                                 Comparable Operating Profit(c)                                                                                                                                                                                                                                                                                                                                           $ 577.0                                                                                                                                                                                                                                                                                                                                           $ 577.3
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
(a) Includes mark-to-market adjustments for pension plans and commodity contracts as reflected in cost of goods sold. Actuarial gains/losses for pension plans are recognized in the year they occur. In 2012, asset returns exceeded expectations but discount rates fell almost 100 basis points for pension plans resulting in a net loss. A portion of the 2012 pension mark-to-market adjustment was capitalized as an inventoriable cost at the end of 2012. This amount has been recorded in earnings in the current quarter. In 2011, asset returns were lower than expected and discount rates declined. A portion of the 2011 pension mark-to-market adjustment was capitalized as an inventoriable cost at the end of 2011. This amount was recorded in earnings in the first quarter of 2012. Mark-to-market adjustments for commodities reflect the changes in the fair value of contracts for the difference between contract and market prices for the underlying commodities. The resulting gains/losses are recognized in the quarter they occur.
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            (b) Underlying Operating Profit excludes the impact of mark-to-market adjustments on pension plans and commodity contracts. The Company believes the use of this non-GAAP measure provides increased transparency and assists in understanding underlying operating performance. This non-GAAP measure is reconciled to the directly comparable measure in accordance with U.S. GAAP within this table.
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      (c) Comparable Operating Profit is a non-GAAP measure that excludes the impact of mark-to-market adjustments on pension plans and commodity contracts, and the impact of integration costs related to the acquisition of the Pringles business. 
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   Kellogg Company and Subsidiaries
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                Reconciliation of Non-GAAP Amounts - Reported EPS
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  to Comparable EPS
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     Quarter ended
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           March 30,
    2013                                                                                                                                                                                                                                                                                                                                 March 31,
    2012
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
                                                                                                                                                                                                                                                                                                                                               Reported EPS                                                                                                                                                                                                                                                                                                                                            $ 0.85                                                                                                                                                                                                                                                                                                                                            $ 0.98
                                                                                                                                                                                                                                                                                                                                          Mark-to-market(a)                                                                                                                                                                                                                                                                                                                                             (0.10)                                                                                                                                                                                                                                                                                                                                             (0.10)
                                                                                                                                                                                                                                                                                                                                          Underlying EPS(b)                                                                                                                                                                                                                                                                                                                                            $ 0.95                                                                                                                                                                                                                                                                                                                                            $ 1.08
                                                                                                                                                                                                                                                                                                                                 Pringles Integration costs                                                                                                                                                                                                                                                                                                                                             (0.04)                                                                                                                                                                                                                                                                                                                                               --
                                                                                                                                                                                                                                                                                                                                          Comparable EPS(c)                                                                                                                                                                                                                                                                                                                                            $ 0.99                                                                                                                                                                                                                                                                                                                                            $ 1.08
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
(a) Includes mark-to-market adjustments for pension plans and commodity contracts as reflected in cost of goods sold. Actuarial gains/losses for pension plans are recognized in the year they occur. In 2012, asset returns exceeded expectations but discount rates fell almost 100 basis points for pension plans resulting in a net loss. A portion of the 2012 pension mark-to-market adjustment was capitalized as an inventoriable cost at the end of 2012. This amount has been recorded in earnings in the current quarter. In 2011, asset returns were lower than expected and discount rates declined. A portion of the 2011 pension mark-to-market adjustment was capitalized as an inventoriable cost at the end of 2011. This amount was recorded in earnings in the first quarter of 2012. Mark-to-market adjustments for commodities reflect the changes in fair value of contracts for the difference between contract and market prices for the underlying commodities. The resulting gains/losses are recognized in the quarter they occur.
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             (b) Underlying EPS is a non-GAAP measure that excludes the impact of pension and commodity mark-to-market adjustments.
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               (c) Comparable EPS is a non-GAAP measure that excludes the impact of mark-to-market adjustments on pension plans and commodity contracts, and the impact of integration costs related to the acquisition of the Pringles business. CONTACT: Analyst Contact:
         Simon Burton, CFA
         (269) 961-6636
        
         Media Contact:
         Kris Charles
         (269) 961-3799