3 Aug 2012--- Kellogg Company announced second quarter 2012 reported net sales of $3.5 billion, an increase of 2.6 percent from the second quarter of 2011. Internal net sales increased by 2.3 percent over the same period.

Operating profit was $485 million in the quarter, a reported decrease of 10.7 percent; internal operating profit declined by five percent, as expected. Higher commodity costs, the timing of investment in Supply Chain, and anticipated weakness in European results all had an impact on operating profit. Internal results exclude the effects of foreign currency translation, one month of results from the recently acquired Pringles business, transaction and integration costs, and divestitures.

Reported second quarter 2012 earnings were $301 million, or $0.84 per diluted share, a decrease of 10.6 percent from the earnings of $0.94 per diluted share reported in the second quarter of 2011. This quarter's earnings per share included $0.07 of transaction and integration costs and a $0.02, one-time, below-the-line benefit, both associated with the acquisition of the Pringles business. The below-the-line benefit was the result of a lower tax rate and a gain from foreign exchange; this benefit was partially offset by the impact of interest-rate swaps also related to the acquisition of Pringles.

"We are pleased that our top-line performance improved in the second quarter. This year, we have taken strategic actions that have also made a difference in the near-term," said John Bryant, Kellogg Company's president and chief executive officer. "Last year we outlined a plan that focused the company on driving our two core growth platforms: cereal and snacks. The acquisition of the Pringles business takes us a long way toward achieving our goals and provides us with significant potential for future growth."

Kellogg North America's reported net sales increased by 5.9 percent to $2.4 billion in the second quarter; internal net sales increased by 3.9 percent. The U.S. Morning Foods and Kashi segment posted internal sales growth of 1.2 percent. The company posted better performance in the cereal business than it did in the first quarter of the year; it also realized significant growth in the Pop-Tarts business. Internal net sales growth in the U.S. Snacks business was 4.1 percent, building on 4.9 percent growth in the comparable period of last year; the cookie, cracker, and wholesome snack businesses all posted revenue growth for the quarter.  The U.S. Specialty segment posted internal net sales growth of 6.3 percent and the North America Other segment reported internal net sales growth of 8.9 percent as the result of strong growth in both the Canadian and Frozen Foods businesses. Second quarter North American reported operating profit increased by 4.8 percent; North American internal operating profit increased by 3.3 percent.

Kellogg International reported net sales of $1.1 billion, or a decline of 3.8 percent from the second quarter of 2011; internal net sales declined by 0.7 percent. The Latin American business posted internal net sales growth of 6.8 percent in the quarter. Internal net sales of the European business decreased by 3.6 percent. While this reflected the difficult operating environment in the region, it was an improvement from the performance posted in the first quarter of the year. Internal net sales declined by 2 percent in the Asia Pacific segment, primarily as the result of continued weakness in Australia.   Kellogg International's reported second quarter 2012 operating profit declined by 30.9 percent; internal operating profit declined by 22.5 percent, primarily due to results in Europe.

The company reaffirmed its guidance for full-year internal net sales growth of between two and three percent. In addition, the company continues to expect that full-year internal operating profit will decline between two and four percent. Expectations remain for full-year, as-reported earnings per share to be in a range between $3.18 and $3.30 per share, including the anticipated impact of the Pringles acquisition.

"We've taken significant actions in the first half of the year and our second quarter performance reflects some of the improvement that has resulted," continued Bryant. "This, and the inclusion of the Pringles business, has given us improved visibility into our outlook, and we remain optimistic regarding the significant, long-term potential of our businesses."