Kellogg Company reported second quarter 2008 earnings per share growth of 9% with an 11% increase in sales. Results were driven by strong execution, innovation and price realization, and were achieved after absorbing significant cost inflation. In addition, Kellogg has raised its 2008 full-year earnings guidance to a range of $2.95 to $3.00 per diluted share, as a result of the Company's first half performance and its confidence regarding performance for the remainder of the year.

The Company also announced that its board of directors has authorized an additional $500 million share repurchase program, to be executed within the next twelve months. The Company's initial 2008 authorization of $650 million has already been completed. The additional repurchases are expected to commence late this year from Company cash balances. Consequently, the Company does not anticipate the purchases will have a meaningful impact on 2008 earnings per share.

Reported net earnings for the quarter were $312 million, a 4% increase over last year's $301 million. Earnings were $0.82 per diluted share versus last year's $0.75, an increase of 9%. The second quarter performance included the impact of significantly higher commodity inflation and a double-digit increase in advertising spending offset by lower upfront costs and a lower tax rate.

"Our first half performance provides further evidence of the strength of our business model and strategy," said David Mackay, Kellogg's chief executive officer. "Despite significant inflation headwinds, we capitalized on our momentum to further increase our investment in future growth. We increased our earnings guidance and acquired two businesses in emerging markets within the first half of the year, and we continue to utilize our strong cash flow to return profits to our shareholders through dividends and share repurchases."

Reported net sales in the second quarter increased 11% to $3.3 billion. Internal net sales growth, which excludes the effect of foreign-currency translation and acquisitions, was 6%.

Kellogg North America posted reported net sales growth of 7%; internal net sales growth was 6%, driven by broad-based growth across the region. Retail Cereal posted internal net sales growth of 5%, the Retail Snacks business posted internal net sales growth of 6% and the North America Frozen and Specialty Channels businesses reported internal net sales growth of 10%.

Kellogg International reported second quarter net sales growth of 17%, or 6% excluding the favorable effect of currency translation and acquisitions. Internal net sales in Latin America increased by 7% and European internal net sales grew by 5%. The Asia Pacific region posted internal net sales growth of 9%.

Reported operating profit was $530 million in the second quarter of 2008, an increase of 2% from the second quarter of last year. Internal operating profit growth was also 2% in the second quarter. Total up-front costs incurred for cost-reduction initiatives were approximately 4 cents per share. Kellogg still expects that up-front costs related to cost-reduction initiatives for the full year will be approximately $0.14 of earnings per share.

Cash flow, defined as cash from operating activities less capital expenditures, was $510 million in the first half versus last year's $569 million. For the full year, Kellogg still anticipates cash flow of between $1,000 million and $1,075 million.

Kellogg Expresses Increased Confidence and Raises Full-Year Guidance

Kellogg now expects full-year earnings to be in the range of $2.95 to $3.00 per share. The Company still expects that internal sales and operating profit will increase at a mid single-digit rate for the full year. Expectations for 2008 now include incremental commodity, energy, fuel and benefits expense of approximately 90 cents per share versus the previous expectation of 80 cents per share.

CEO Mackay concluded, "While commodities and the economic outlook remain volatile, our business model and strategy give us continued confidence that we will achieve our long-term goals."