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Kellogg Company (NYSE:K - News) today reported strong fourth quarter and full-year earnings. Annual earnings were $2.51 per share; fourth quarter earnings were $0.45 per share. This result represented the fifth consecutive year that the Company has met, or exceeded, its long-term growth targets.

Reported net earnings for the full year 2006 were $1,004.1 million, or a 2% increase from last year's $980.4 million. Earnings were $2.51 per diluted share, an increase of 6% from $2.36 per share in 2005. This year's result included an impact of $0.11 from the expensing of stock options pursuant to the adoption of SFAS No. 123(R); excluding this effect full-year earnings per share growth was 11 percent. Reported net earnings in the fourth quarter of 2006 were $182.4 million, or $0.45 per diluted share, compared to $192.4 million, or $0.47 per share in the fourth quarter of 2005. This result included an effect of $0.03 from the expensing of stock options and investment in up-front costs of $0.08 per share, an amount significantly greater than was invested in the fourth quarter of 2005.

``In 2006, our Company posted another year of strong, above-target rates of growth,' said David Mackay, Kellogg's chief executive officer. ``We managed this while continuing to invest in future growth and while absorbing another year of significant cost inflation.'

Reported net sales in 2006 increased by 7% to $10.9 billion; fourth quarter sales were $2,583.9 million, which represents growth of 8% from the fourth quarter of 2005. Internal net sales growth, which excludes the effect of foreign-currency translation was also 7% for the full year and 6% in the fourth quarter.


The Company stated that it now expects that full-year 2007 earnings will fall within a range of $2.68-2.73 per share. This estimate includes estimates for significant commodity cost-inflation and continued investment in brand building and innovation. The Company also continues to anticipate that investment in up-front costs in 2007 will approximately equal the levels of investment made in recent years. In addition, the Company expects that full-year internal sales growth could be 4%, slightly greater than its long-term targets.

Mr. Mackay concluded, ``We faced a difficult cost environment in 2006 and still achieved another year of results that met, or even exceeded, our targets. Equally as important, though, is that we achieved these results while making significant investment in the business, and in future growth. This again demonstrates the flexibility of our approach to business and the dedication of our employees around the world. We will face more inflation in 2007, but we remain confident that we have the right strategy, operating principles, and business model. It is our continued focus and strong execution, driven by the strength of our organization, that give us confidence that we will deliver dependable rates of growth in 2007, and beyond.'
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