Q2 2012 Printable Slides

Kellogg Company August 2, 2012

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SECOND QUARTER 2012FINANCIAL RESULTS

August 2, 2012

Forward‐Looking Statements

This presentation contains by reference, “forward‐looking statements” with projections concerning, among other things, the integration of the Pringles® business, the Company’s strategy, and the Company’s sales, earnings, margin, operating profit, costs and expenditures, interest expense, tax rate, capital expenditure, dividends, cash flow, debt reduction, share repurchases, costs, brand building, ROIC, working capital, growth, new products, innovation, cost reduction projects, and competitive pressures. Forward‐looking statements include predictions of future results or activities and may contain the words “expects,” “believes,” “should,” “will,” “anticipates,” “projects,” “estimates,” “implies,” “can,” or words or phrases of similar meaning.

The Company’s actual results or activities may differ materially from these predictions. The Company’s future results could also be affected by a variety of factors, including the ability to integrate the Pringles® business and the realization of the anticipated benefits from the acquisition in the amounts and at the times expected, the impact of competitive conditions; the effectiveness of pricing, advertising, and promotional programs; the success of innovation, renovation and new product introductions; the recoverability of the carrying value of goodwill and other intangibles; the success of productivity improvements and business transitions; commodity and energy prices; labor costs; disruptions or inefficiencies in supply chain; the availability of and interest rates on short‐term and long‐term financing; actual market performance of benefit plan trust investments; the levels of spending on systems initiatives, properties, business opportunities, integration of acquired businesses, and other general and administrative costs; changes in consumer behavior and preferences; the effect of U.S. and foreign economic conditions on items such as interest rates, statutory tax rates, currency conversion and availability; legal and regulatory factors including changes in food safety, advertising and labeling laws and regulations; the ultimate impact of product recalls; business disruption or other losses from war, terrorist acts or political unrest; and other items.

Forward‐looking statements speak only as of the date they were made, and the Company undertakes no obligation to update them publicly.

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Second Quarter 2012 Overview

Quarterly results on‐track

Maintaining outlook for the full‐year, including investment

Improvement in North America, and Europe in‐line with expectations

Executing our growth strategy –Pringles growth opportunity

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Pringles

Day One transition executed very smoothly

On track to exit from transition services on or ahead of schedule

Synergy projections remain as expected

Top-to-Top meetings held with multiple customers – they have confidence in this brand

Demand growth remains ahead of last year

Excited about combining Kellogg and Pringles talent

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Summary of Financial Results

($ millions, except EPS)

(a) Internal net sales and operating profit growth exclude the impact of foreign currency translation and if applicable, acquisitions and dispositions. In addition to these items, internal operating profit growth also excludes the impact of transaction and integration costs associated with the Pringles acquisition.

Second Quarter 2012

Kellogg Company

Growth Growth

Internal Net Sales(a) $ 3,474 2.3% 6,914 1.1%

Internal Operating Profit(a) $ 485 -5.0% 1,020 -5.6%

Reported Earnings Per Share $ 0.84 -10.6% 1.84 -4.7%

Second Quarter 2012

$

Year-to-Date 2012

$

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Net Sales Components

(year‐over‐year, % change)Second Quarter 2012

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2Q 2011Net Sales

Volume Price / Mix Acq/Div. Currency 2Q 2012Net Sales

(0.6)%

$3.39 B

+ 2.9% 3.3%

Internal Growth 2.3%

+2.6%

(3.0)% $3.47 B


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Gross ProfitSecond Quarter 2012

40.7%Margin(a)

42.6%Margin(a)

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Gross Profit of $1.4 billion; margin impacted by:

• Continued commodity inflation

• The timing of investment in Supply Chain

• Lower production to reduce levels of inventory

• Pringles

Brand‐Building(a) Investment

(brand building $)

Second Quarter 2012

(a) Brand building includes advertising, consumer promotions, COGS promotions, and excludes trade spending.(b) Internal brand building growth excludes the impact of foreign currency translation and if applicable,

acquisitions, dispositions, and differences in the number of shipping days.

10%Y-O-Y Change Int. Growth (b)

Incr./(Decr.)

4% (9)% (3)%

2011

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Q1 Q2 Q3 Q4

2012

(4)%

Q1 Q2

(5)%

Higher in 2H

2H


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Internal Operating Profit Performance by Area

(a) Internal operating profit performance excludes the impact of foreign currency translation and if applicable, acquisitions and dispositions. In addition to these items, internal operating profit growth also excludes the impact of transaction and integration costs associated with the Pringles acquisition.

(year‐over‐year % change, internal performance(a))

Second Quarter 2012

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North America $ 425 +3.3% Good growth

Europe $ 72 -19.9% In-line with expectations

Latin America $ 48 -15.2% Lapping disposal of assets.+DD brand building

Asia Pacific $ 16 -31.6% Difficult environment in ANZ and timing

Cash Flow(a)

(a) Kellogg defines cash flow as cash from operating activities, less capital expenditures; see reconciliation to GAAP cash flow at the end of this presentation.

Cash flow(a) approximately $525 million

Capital expenditure was $155 million or 2.2% of net sales

Remain focused on working capital

Did not repurchase shares during the quarter

Year‐to‐date 2012

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Full Year

Lower by 2 – 4%

2 – 3%

$3.18 – 3.30

Internal Net Sales (a)

Internal Operating Profit (a)

EPS

2012 Outlook:Reaffirming the Outlook

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(a) Internal sales and operating profit growth exclude the impact of foreign currency translation and if applicable, acquisitions and dispositions. In addition to these items, internal operating profit growth also excludes the impact of transaction and integration costs associated with the Pringles acquisition.

(As Reported, including Pringles)

Including Investment in Innovation, Brand Building, and SAP, but excluding Pringles

2012 Outlook:Reaffirming the Outlook

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Changes From Previous Guidance

Previous, As‐Reported Guidance $ 3.18 ‐ $ 3.30

Change, Impact from FX (a) $ (0.02) ‐ $ (0.02)

One‐Time Change, Transaction‐Related Items (0.02) (0.02)

One‐Time Tax Benefit 0.04 0.04

Guidance Range $ 3.18 ‐ $ 3.30

(a) At current spot rates.


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Net SalesSecond Quarter 2012

(a) Internal sales growth excludes the impact of foreign currency translation and if applicable, acquisitions, dispositions and differences in the number of shipping days.

(internal net sales growth(a), year‐over‐year % change)

Kellogg North America Kellogg International

-1%

4%

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1%

4%

6%

9%

Building on Difficult Comps.

North America Net SalesSecond Quarter 2012

(a) Internal sales growth excludes the impact of foreign currency translation and if applicable, acquisitions, dispositions and differences in the number of shipping days.

(b) Includes U.S. cereal, Pop-Tarts, health and wellness, and Kashi businesses.

(c) Includes U.S. cookies, crackers, cereal bars, and fruit-flavored snack businesses.

(d) Includes food service, convenience and Girl Scouts businesses.

(e) Includes the U.S. frozen and Canadian businesses.

(internal net sales growth(a), year‐over‐year% change)

U.S. Snacks (c)U.S. Morning Foods & Kashi (b)

U.S. Specialty (d)

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North America Other(e)


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North American Innovation

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U.S. Snacks(a)

Second Quarter 2012 – excl. Pringles

$725 $729 $727

$702

$742$759

2012

Q4Q3Q2Q1

2011

Q1

Net Sales

Q2

(b)

(a) Includes U.S. cookies, crackers, cereal bars, and fruit-flavored snacks businesses.

(b) Internal sales growth excludes the impact of foreign currency translation and if applicable, acquisitions and dispositions.

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Category$ in Billions

Growth Kellogg Share

$3.1(a) 4.8%(a) 30.8%(b)

$5.6(a) 4.0%(a) 30.1%(b)

$5.3(a) 5.1%(a) 15.5%(b)

$5.2(a) 4.8%(a) 10.6%(b)

Cookies

Wholesome Snacks

Crackers

Salty Snacks (Potato Chips)

(a) Nielsen XAOC data, 52-week, 2011.(b) Nielsen XAOC data, 12-week through 30 June, 2012.

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Consecutive Years of Growth15

1996 2011

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Special K • Strong innovation

• Passionate consumers

• Household penetration growth

and gap

• SK franchise point of entry

• Immediate effect of TV activity

2008 2009 2010 2011 2012E

Cracker ChipsAll Other

Special K brandgrowth in snacks

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3%

Previous 52 Weeks

2%

Current 52 Weeks

Unit Sales

Category Keebler FudgeShoppe

ChipsDeluxe

Sandies

* Source: Nielsen all-channel consumption,52-week period ending 30 June, 2012)

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Successful Innovation – Snacks

* Source: Nielsen all channel consumption 2009, 2010, 2011

2006 2007 2008 2009 2010 2011 2012Cookies Crackers Wholesome Snacks

% Sales from Innovation3-Year Rolling*

2 Breakthrough Innovation Awards New Product Pacesetter Award

Kellogg Competitor 1

Competitor 2 Competitor 3

Kellogg Innovation SalesAnnual

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A majority of Kellogg’s U.S. Snacks’ net sales ($2.4 billion in 2011) distributed via DSD

Total number of stores serviced 22,000

Average number of stores per territory 16

Average store visits per week 4.5

Total deliveries a week 28,000

Average deliveries per store per week 1.3

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(4)%

(2)%

7%

International Growth

(internal net sales growth(a), year‐over‐year % change)

(a) Internal sales growth excludes the impact of foreign currency translation and if applicable, acquisitions, dispositions, and differences in the number of shipping days.

Second Quarter 2012

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Latin AmericaEurope Asia Pacific

SUMMARYSETTING THE FOUNDATION

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Summary

Quarterly results on‐track

Maintaining outlook for the full‐year, including investment

Improvement in North America, and Europe in‐line with expectations

Executing our growth strategy –Pringles growth opportunity


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Appendix 1Reconciliation of Kellogg‐Defined Cash Flow to GAAP Cash Flow (a)

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(a) We use this non‐GAAP financial measure of cash flow to focus management and investors on the amount of cash available for debt repayment, dividend distributions, acquisition opportunities, and share repurchases.

June 30, July 2,(unaudited) 2012 2011

Operating activitiesNet income $659 $707Adjustments to reconcile net income to operating cash flows: Depreciation and amortization 194 175 Deferred income taxes (38) (1) Other 34 25Postretirement benefit plan contributions (32) (183)Changes in operating assets and liabilities (137) (77)

Net cash provided by operating activities 680 646

Less:Additions to properties (155) (243)

Cash flow $525 $403

Year-to-date period ended

Appendix 2

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Analysis of net sales and operating profit performance

Second quarter of 2012 versus 2011

U.S.

Morning Foods U.S. U.S. North America North Latin Asia Corp- Consoli-

(dollars in millions) & Kashi Snacks Specialty Other America Europe America Pacific orate dated

2012 net sales 939$ 803$ 252$ 369$ 2,363$ 613$ 274$ 224$ -$ 3,474$ 2011 net sales 927$ 729$ 232$ 343$ 2,231$ 634$ 281$ 240$ -$ 3,386$

% change ‐ 2012 vs. 2011:Volume (tonnage) (a) .3% ‐3.2% ‐1.6% ‐1.4% ‐ ‐.6%Pricing/mix 3.6% ‐.4% 8.4% ‐.6% ‐ 2.9%

Subtotal - internal business (b) 1.2% 4.1% 6.3% 8.9% 3.9% -3.6% 6.8% -2.0% - 2.3%Acquisitions (c) ‐% 6.2% 2.3% .8% 2.4% 7.9% .6% 5.7% ‐ 3.5%Divestitures (d) ‐% ‐% ‐% ‐% ‐% ‐% ‐% ‐2.7% ‐ ‐.2%Foreign currency impact ‐% ‐% ‐% ‐2.3% ‐.4% ‐7.6% ‐10.2% ‐7.5% ‐ ‐3.0%

Total change 1.2% 10.3% 8.6% 7.4% 5.9% -3.3% -2.8% -6.5% - 2.6%

U.S.

Morning Foods U.S. U.S. North America North Latin Asia Corp‐ Consoli‐

(dollars in millions) & Kashi Snacks Specialty Other America Europe America Pacific orate dated183$ 117$ 55$ 70$ 425$ 72$ 48$ 16$ (76)$ 485$ 176$ 111$ 56$ 63$ 406$ 102$ 61$ 25$ (51)$ 543$

% change ‐ 2012 vs. 2011:

Internal business (b) 3.3% .1% -3.2% 14.5% 3.3% -19.9% -15.2% -31.6% -4.8% -5.0%

Acquisitions (c) ‐% 6.8% 2.8% .1% 2.3% 1.2% ‐% .1% ‐.3% 1.9%Divestitures (d) ‐% ‐% ‐% ‐% ‐% ‐% ‐% 4.9% ‐% .3%Integration impact (e) ‐% ‐1.2% ‐% ‐% ‐.3% ‐7.1% ‐.3% ‐3.3% ‐43.1% ‐5.8%Foreign currency impact .1% ‐% ‐% ‐3.1% ‐.5% ‐4.4% ‐6.9% ‐3.8% ‐% ‐2.1%

Total change 3.4% 5.7% -.4% 11.5% 4.8% -30.2% -22.4% -33.7% -48.2% -10.7%

(a) We measure the volume impact (tonnage) on revenues based on the stated w eight of our product shipments.

(b) Internal net sales and operating profit grow th for 2012, exclude the impact of acquisitions, divestitures, transaction and integration costs

and impact of currency. Internal net sales and operating prof it grow th are non-GAAP f inancial measures w hich are reconciled to the

directly comparable measures in accordance w ith U.S. GAAP w ithin these tables.

(c) Impact of results for the quarter ended June 30, 2012 from the acquisition of Pringles.

(d) Impact of results for the quarter ended June 30, 2012 from the divestiture of Navigable Foods.

(e) Includes impact of transaction and integration costs associated w ith the Pringles acquisition.

2012 operating profit 2011 operating profit


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Appendix 3

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Analysis of net sales and operating profit performance

Year-to-date 2012 versus 2011

U.S.

Morning Foods U.S. U.S. North North Latin Asia Corp‐ Consoli‐

(dollars in millions) & Kashi Snacks Specialty America Other America Europe America Pacific orate dated

2012 net sales 1,880$ 1,545$ 600$ 737$ 4,762$ 1,151$ 544$ 457$ -$ 6,914$

2011 net sales 1,885$ 1,454$ 555$ 701$ 4,595$ 1,255$ 542$ 479$ -$ 6,871$

% change ‐ 2012 vs. 2011:Volume (tonnage) (a) ‐1.7% ‐7.9% ‐2.2% 1.3% ‐ ‐2.7%Pricing/mix 4.4% 1.0% 9.3% ‐1.5% ‐ 3.8%

Subtotal - internal business (b) -.3% 3.2% 7.2% 6.1% 2.7% -6.9% 7.1% -.2% - 1.1%Acquisitions (c) -% 3.1% 1.0% .4% 1.1% 4.0% .3% 2.8% ‐ 1.7%Divestitures (d) -% -% -% -% -% -% -% ‐3.3% ‐ ‐.3%Foreign currency impact -% -% -% ‐1.5% ‐.2% ‐5.4% ‐7.1% ‐3.8% ‐ ‐1.9%

Total change -.3% 6.3% 8.2% 5.0% 3.6% -8.3% .3% -4.5% - .6%

U.S.Morning Foods U.S. U.S. North North Latin Asia Corp‐ Consoli‐

(dollars in millions) & Kashi Snacks Specialty America Other America Europe America Pacific orate dated342$ 235$ 126$ 140$ 843$ 150$ 99$ 50$ (122)$ 1,020$

357$ 235$ 121$ 133$ 846$ 203$ 109$ 56$ (99)$ 1,115$

% change ‐ 2012 vs. 2011:Internal business (b) -4.5% -2.4% 2.8% 7.4% -1.0% -19.8% -3.8% -14.7% -.4% -5.6%

Acquisitions (c) -% 3.2% 1.3% .1% 1.1% .6% -% -% ‐.1% .9%Divestitures (d) -% -% -% -% -% -% -% 5.6% -% .3%Integration impact (e) -% ‐.5% -% -% ‐.2% ‐3.6% ‐.1% ‐1.5% ‐22.2% ‐2.8%Foreign currency impact -% -% -% ‐2.0% ‐.3% ‐3.4% ‐5.8% .1% -% ‐1.3%

Total change -4.5% .3% 4.1% 5.5% -.4% -26.2% -9.7% -10.5% -22.7% -8.5%

(a) We measure the volume impact (tonnage) on revenues based on the stated w eight of our product shipments.

(b) Internal net sales and operating profit grow th for 2012, exclude the impact of acquisitions, divestitures, transaction and integration costs

and impact of currency. Internal net sales and operating profit grow th are non-GAAP financial measures w hich are reconciled to the

directly comparable measures in accordance w ith U.S. GAAP w ithin these tables.

(c) Impact of results for the year-to-date period ended June 30, 2012 from the acquisition of Pringles.

(d) Impact of results for the year-to-date period ended June 30, 2012 from the divestiture of Navigable Foods.

(e) Includes impact of transaction and integration costs associated w ith the Pringles acquisition.

2012 operating profit

2011 operating profit

SECOND QUARTER 2012FINANCIAL RESULTS

August 2, 2012

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