Breakfast With Kellogg's: Fool by Numbers

The turtle lives 'twixt plated decks
Which practically conceal its sex.
I think it clever of the turtle
In such a fix to be so fertile.

-- Ogden Nash, "The Turtle"

On April 30 -- the last day of National Poetry Month -- breakfast foods expert Kellogg Company (NYSE: K) released first-quarter earnings for the period ended March 31.

• Management said the strong revenue growth came from brand building and innovation -- not bad for a supposedly stodgy cereal specialist!
• The bottom-line boost was magnified by an unusually low income tax provision, $27 million below the year-ago charge.
• These margins are about as good as any in the sector, and the net income take beats everybody from General Mills (NYSE: GIS) to Kraft Foods (NYSE: KFT), hands down.

(Figures in millions, except per-share data)

Income Statement Highlights

	Q1 2007	Q1 2006	Change
Sales	$2,963	$2,727	8.7%
Net Profit	$321	$274	17.2%
EPS	$0.80	$0.68	17.6%
Diluted Shares	401.0	401.6	(0.1%)

Get back to basics with the income statement.

Margin Checkup

	Q1 2007	Q1 2006	Change*
Gross Margin	42.7%	43.9%	(1.2)
Operating Margin	16.8%	17.4%	(0.5)
Net Margin	10.8%	10.1%	0.8

*Expressed in percentage points.

Margins are the earnings engine.

Balance Sheet Highlights

Assets	Q1 2007	Q1 2006	Change
Cash + ST Invest.	$236	$261	(9.4%)
Accounts Rec.	$1,147	$1,028	11.6%
Inventory	$779	$706	10.3%

Liabilities	Q1 2007	Q1 2006	Change
Accounts Payable	$942	$832	13.2%
Long-Term Debt	$3,052	$3,714	(17.8%)

The balance sheet reflects the company's health.

Cash Flow Highlights

	Q1 2007	Q1 2006	Change
Cash From Ops.	$355	$164	116.7%
Capital Expenditures	$66	$63	5.4%
Free Cash Flow	$289	$101	185.6%
Owner Earnings	$342	$293	16.8%

Free cash flow is a Fool's best friend.

Related Foolishness:

• Investing in Your Backyard: Michigan
• Organic Growth at Big Cheese
• A Food-Stock Sampler
• Foolish Fundamentals: Margins

Kraft is a Motley Fool Income Investor selection. Try any one of our investing services free for 30 days. 

Fool by Numbers is designed to give you the raw earnings information in a timely fashion, putting all the numbers you need in one easy-to-read place. But at The Motley Fool, we believe numbers tell only part of the story, so check Fool.com for more of our in-depth discussion of what the numbers mean.

At the time of publication, Anders Bylund had no position in any company mentioned, despite an addiction to s'mores-flavored Pop-Tarts. Fool rules are here.