Kelloggs A Michigan Traded Company
Financial Statement Analysis Executive Summary Objective: Our goal in
composing a financial statement is to construct the most comprehensive, thorough
document possible, in order to attract investors and to confirm that we have
taken the time to explore as many potential issues for your business as may
arise. Summary of findings: Our level of cereal marketing investment early in
1998 was not sufficient in the face of extremely competitive market conditions.
This situation hurt our volume performance for much of the year and, combined
with other issues in markets around the world, led to a decline in both sales
and earnings. Nonetheless, we continue to have the utmost confidence in the
future of our grain-based businesses, and we are fully committed to return to
both top-line and bottom-line growth. Appendix # 1- Market Research Description
of firm and its management: Kellogg's products are manufactured in 20 countries
on 6 Continents and distributed in more than 160 countries.
Mr. Langbo has been
employed by the Kellogg's Company since 1956. He was named President and Chief
Operating Officer in 1990 and became Chairman of the Board and Chief Executive
Officer in 1992. In June of 1998, Mr. Carlos M. Gutierrez was named President
and Chief Operating Officer. The competitive environment: The Company has
experienced intense competition for sales of all of its principal products in
its major markets, both domestically and internationally. The Company's products
compete with advertised and branded products of a similar nature as well as
unadvertised and private label products, which are typically distributed at
lower prices, and generally with other food products with different
characteristics. Principal methods and factors for competition include new
product introductions, product quality, composition, and nutritional value,
price, advertising and promotion. Economic climate and outlook: Although our
1998 business results were below our performance expectation, it was a year in
which we put in place key elements of a stronger foundation for future growth.
This included investments in new product development and a complete overhaul of
our corporate headquarters and North American organizational structure. Should
suitable investment opportunities of working capital needs arise that would
require additional financing; management believes that the Company's strong
credit rating, balance sheet and earnings history provide a base for obtaining
additional financial resources at competitive rates and terms. Based on the
expectation of cereal volume growth, and strong results from product innovation
and the continued global rollout of convenience foods, management believes the
Company is well positioned to deliver sales and earnings growth for the full
year of 2000. Litigation: The Company is not a party to any pending legal
proceedings, which, if decided adversely, would be material to the Company on a
consolidated basis, nor is any of the Company's properties or subsidiaries
subject to any such proceedings. Appendix # 2-Financial Forecasts Financial
overview: Kellogg Company manufactures and markets ready-to-eat cereal and other
grain-based convenience food products, including toaster pastries, frozen
waffles, cereal bars, and bagels throughout the world. Principal markets for
these products include the United States and Great Britain. Operations are
managed via four major geographic areas, North America, Europe, Asia-Pacific and
Latin America-which is the basis of the Company's reportable operating segment
information. The Company leads the global ready-to-eat cereal category with an
estimated 38% annualized share of worldwide volume.
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