Management’s Discussion and Analysis of Financial Condition and Results of Operations Quantitative and Qualitative Disclosures about Market Risk Controls and Procedures Risk Factors Unregistered Sales of Equity Securities and Use of Proceeds April 4, (unaudited) Current assets Cash and cash equivalents Accounts receivable, net Inventories: Raw materials and supplies Finished goods and materials in process Deferred income taxes Other prepaid assets Total current assets Property, net of accumulated depreciation of $5,466 and $5,526 Goodwill Other intangibles, net of accumulated amortization of $45 and $43 Pension Other assets Total assets Current liabilities Current maturities of long-term debt Notes payable Accounts payable Accrued advertising and promotion Accrued income taxes Accrued salaries and wages Other current liabilities Total current liabilities Long-term debt Deferred income taxes Pension liability Nonpension postretirement benefits Other liabilities Commitments and contingencies Equity Common stock, $.25 par value Capital in excess of par value Retained earnings Treasury stock, at cost Accumulated other comprehensive income (loss) Total Kellogg Company equity Noncontrolling interests Total equity Total liabilities and equity Net sales Cost of goods sold Selling, general and administrative expense Operating profit Interest expense Other income (expense), net Income before income taxes Income taxes Earnings (loss) from joint ventures Net income Net income (loss) attributable to noncontrolling interests Net income attributable to Kellogg Company Per share amounts: Basic Diluted Dividends per share Average shares outstanding: Basic Diluted Actual shares outstanding at period end Net income Other comprehensive income (loss): Foreign currency translation adjustments Cash flow hedges: Unrealized gain (loss) on cash flow hedges Reclassification to net income Postretirement and postemployment benefits: Amount arising during the period: Prior service credit (cost) Reclassification to net income: Net experience loss Prior service cost Other comprehensive income (loss) attributable to Kellogg Company Comprehensive income attributable to noncontrolling interests Comprehensive income Tax (expense) benefit Net income Other comprehensive income (loss): Foreign currency translation adjustments Cash flow hedges: Unrealized gain (loss) on cash flow hedges Reclassification to net income Postretirement and postemployment benefits: Reclassification to net income: Net experience loss Prior service cost Other comprehensive income (loss) attributable to Kellogg Company Comprehensive income Common Capital in excess of par value Retained earnings Treasury Accumulated other comprehensive income (loss) Total Kellogg Company equity Non- controlling interests Total equity Total comprehensive income (loss) Balance, December 28, 2013 Common stock repurchases Net income Dividends Other comprehensive loss Stock compensation Stock options exercised and other Balance, January 3, 2015 Common stock repurchases Acquisition of noncontrolling interest Net income Dividends Other comprehensive loss Stock compensation Stock options exercised and other Balance, April 4, 2015 Operating activities Net income Adjustments to reconcile net income to operating cash flows: Depreciation and amortization Postretirement benefit plan expense (benefit) Deferred income taxes Other Postretirement benefit plan contributions Changes in operating assets and liabilities, net of acquisitions: Trade receivables Inventories Accounts payable Accrued income taxes Accrued interest expense Accrued and prepaid advertising, promotion and trade allowances Accrued salaries and wages All other current assets and liabilities Net cash provided by (used in) operating activities Investing activities Additions to properties Acquisitions, net of cash acquired Other Net cash provided by (used in) investing activities Financing activities Net issuances (reductions) of notes payable Issuances of long-term debt Reductions of long-term debt Net issuances of common stock Common stock repurchases Cash dividends Other Net cash provided by (used in) financing activities Effect of exchange rate changes on cash and cash equivalents Increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period Current assets Property Goodwill Intangible assets and other Current liabilities Other non current liabilities, primarily deferred taxes Non-controlling interests 2015. January 3, 2015* Additions Currency translation adjustment April 4, 2015 January 3, 2015 Additions Currency translation adjustment April 04, 2015 Accumulated Amortization January 3, 2015 Amortization April 4,2015 Intangible assets subject to amortization, net January 3, 2015 Additions Currency translation adjustment Amortization April 04, 2015 January 3, 2015* Additions Currency translation adjustment April 4, 2015 During the year-to-date period ended June 28, 2014, the Company recorded total charges of $132 million across all restructuring and cost reduction activities. The charges consist of $56 million recorded in COGS and $76 million recorded in SGA expense. Employee related costs Asset related costs Asset impairment Other costs Total U.S. Morning Foods U.S. Snacks U.S. Specialty North America Other Europe Latin America Asia Pacific Corporate Total Liability as of January 3, 2015 2015 restructuring charges Cash payments Non-cash charges and other Liability as of April 4, 2015 2015 Basic Dilutive potential common shares Diluted 2014 Basic Dilutive potential common shares Diluted Pre-tax amount Net income Other comprehensive income (loss): Foreign currency translation adjustments Cash flow hedges: Unrealized gain (loss) on cash flow hedges Reclassification to net income Postretirement and postemployment benefits: Amounts arising during the period: Prior service credit (cost) Reclassification to net income: Net experience loss Prior service cost Other comprehensive income (loss) attributable to Kellogg Comprehensive income attributable to noncontrolling interest Comprehensive income Details about AOCI components Amount reclassified from AOCI Line item impacted within Income Statement Gains and losses on cash flow hedges: Foreign currency exchange contracts Foreign currency exchange contracts Interest rate contracts Commodity contracts Amortization of postretirement and postemployment benefits: Net experience loss Prior service cost Total reclassifications Foreign currency translation adjustments Cash flow hedges — unrealized net gain (loss) Postretirement and postemployment benefits: Net experience loss Prior service cost Total accumulated other comprehensive income (loss) During the quarter ended July 4, 2015, the 2012 Agreements were terminated and the VIE Loan, including related accrued interest and other receivables, were settled, resulting in a partial reversal of the prior quarter charge of $6 million for the current quarter. The net charge, in the year-to-date period of $19 million was recorded as Other income (expense), net. Upon termination of the 2012 Agreements, the Company is no longer considered the primary beneficiary of the VIE and accordingly, the VIE was deconsolidated as of July 4, 2015. In connection with the deconsolidation, the Company derecognized all assets and liabilities of the VIE, including an allocation of a portion of goodwill from the U.S. Snacks operating segment, resulting in a $67 million non-cash gain, which was recorded within SGA expense for the quarter ended July 4, 2015. U.S. commercial paper Europe commercial paper Bank borrowings Total April 4, 2015 March 29, 2014 Pre-tax compensation expense Related income tax benefit Outstanding, beginning of period Granted Exercised Forfeitures and expirations Outstanding, end of period Exercisable, end of period Outstanding, beginning of period Granted Exercised Forfeitures and expirations Outstanding, end of period Exercisable, end of period Grants within the quarter ended April 4, 2015: Grants within the quarter ended March 29, 2014: April 4, 2015 2013 Award 2014 Award 2015 Award Non-vested, beginning of year Granted Vested Forfeited Non-vested, end of year 2015: Service cost Interest cost Expected return on plan assets Amortization of unrecognized prior service cost Total pension (income) expense Other nonpension postretirement Service cost Interest cost Expected return on plan assets Amortization of unrecognized prior service cost (credit) Total postretirement benefit (income) expense Postemployment Service cost Interest cost Recognized net loss Total postemployment benefit expense Quarter ended: April 4, 2015 March 29, 2014 Full year: Fiscal year 2015 (projected) Fiscal year 2014 (actual) current liability balance expected to be settled within one year, offset by approximately $7 million of projected additions related primarily to ongoing intercompany transfer pricing activity. Management is currently unaware of any issues under review that could result in significant additional payments, accruals or other material deviation in this estimate. January 3, 2015 Tax positions related to current year: Additions Reductions Tax positions related to prior years: Additions Reductions Settlements April 4, 2015 Foreign currency exchange contracts Interest rate contracts Commodity contracts Total Assets: Foreign currency exchange contracts: Other prepaid assets Interest rate contracts (a): Other assets Total assets Liabilities: Foreign currency exchange contracts: Other current liabilities Interest rate contracts: Other current liabilities Other liabilities (a) Commodity contracts: Other current liabilities Other liabilities Total liabilities Assets: Commodity contracts: Other prepaid assets Total assets Liabilities: Commodity contracts: Other current liabilities Other liabilities Total liabilities The carrying value of this debt was approximately $1.2 billion and $600 million as of Amounts the Total asset derivatives Total liability derivatives As of January 3, 2015: Total asset derivatives Total liability derivatives Gain (loss) income (a) Foreign currency exchange contracts Interest rate contracts Total Location of gain (loss) reclassified from AOCI Location of gain (loss) recognized Foreign currency exchange contracts Foreign currency exchange contracts Interest rate contracts Commodity contracts Total Gain (loss) AOCI Foreign currency exchange contracts Foreign currency denominated long-term debt Total Foreign currency exchange contracts Interest rate contracts Commodity contracts Total Current maturities of long-term debt Long-term debt Total net on the Consolidated Balance Sheet. fair value basis. In conjunction with the reallocation of goodwill, an impairment analysis was performed. No impairment of the operating segments was noted. Reportable segment results of prior periods have been recast to conform to the current The Company currently has the following reportable segments: U.S. Morning Foods; U.S. Snacks; U.S. Specialty; North America Other; Europe; Latin America; and Asia Pacific. Net sales U.S. Morning Foods U.S. Snacks U.S. Specialty North America Other Europe Latin America Asia Pacific Consolidated Operating profit U.S. Morning Foods U.S. Snacks U.S. Specialty North America Other Europe Latin America Asia Pacific Total Reportable Segments Corporate (a) Consolidated share (EPS). The acquisition added $15 million and $23 million in incremental net sales to our reported results in the European reportable segment for the quarter and year-to-date periods ended July 4, 2015. The acquisition added $2 million of incremental operating profit to our reported results for the quarter and year-to-date periods ended July 4, 2015. expectations. Reported net sales Project K (b) Acquisitions/divestitures (e) Differences in shipping days Comparable net sales (f) Foreign currency impact Currency neutral comparable net sales (g) Reported operating profit Mark-to-market (a) Project K (b) Integration costs (d) Comparable operating profit (f) Foreign currency impact Currency neutral comparable operating profit (g) Reported income taxes Mark-to-market (a) Project K (b) Integration costs (d) Comparable income taxes (f) Foreign currency impact Currency neutral comparable income taxes (g) Reported effective income tax rate Mark-to-market (a) Project K (b) Other costs (c) Integration costs (d) Comparable effective income tax rate (f) Foreign currency impact Currency neutral comparable effective income tax rate (g) Reported net income attributable to Kellogg Company Mark-to-market (a) Project K (b) Other costs (c) Integration costs (d) Comparable net income attributable to Kellogg Company (f) Foreign currency impact Currency neutral comparable net income attributable to Kellogg Company (g) Reported diluted EPS Mark-to-market (a) Project K (b) Other costs (c) Integration costs (d) Comparable diluted EPS (f) Foreign currency impact Currency neutral comparable diluted EPS (g) Currency neutral comparable diluted EPS growth (g) 2015 net sales 2014 net sales % change - 2015 vs. 2014: As Reported Project K (b) Acquisitions/divestitures (d) Differences in shipping days Comparable (e) Foreign currency impact Currency neutral comparable (f) 2015 operating profit 2014 operating profit % change - 2015 vs. 2014: As Reported Mark-to-market (a) Project K (b) Integration impact (c) Acquisitions/divestitures (d) Differences in shipping days Comparable (e) Foreign currency impact Currency neutral comparable (f) Simply Made® cookies continued to post strong consumption growth. incentive compensation levels. which we compete. sales, increased distribution costs, and the resetting of incentive compensation levels. Organic Promise chewy granola bars. incentive compensation levels. K, and favorable brand-building investment in the quarter associated with the timing of commercial programs. commercial activities. costs, partially offset by the resetting of incentive compensation levels. Reported gross margin (a) Mark-to-market (COGS) (b) Project K (COGS) (c) Integration costs (COGS) (d) Comparable gross margin (e) Foreign currency impact Currency neutral comparable gross margin (f) Reported SGA% Project K (SGA) (c) Integration costs (SGA) (d) Comparable SGA% (e) Currency neutral comparable SGA% (f) Reported operating margin Mark-to-market (b) Project K (c) Integration costs (d) Comparable operating margin (e) Foreign currency impact Currency neutral comparable operating margin (f) due to the timing of commercial programs. Reported gross profit (a) Mark-to-market (COGS) (b) Project K (COGS) (c) Integration costs (COGS) (d) Acquisitions/divestitures (COGS) (e) Comparable gross profit (COGS) (f) Foreign currency impact (COGS) Currency neutral comparable gross profit (g) Reported SGA Mark-to-market (SGA) (b) Project K (SGA) (c) Integration costs (SGA) (d) Acquisitions/divestitures (SGA) (e) Comparable SGA (f) Foreign currency impact (SGA) Currency neutral comparable SGA (g) Reported operating profit Mark-to-market (b) Project K (c) Integration costs (d) Comparable operating profit (f) Foreign currency impact Currency neutral comparable operating profit (g) During the year-to-date period ended June 28, 2014, the Company recorded total charges of $132 million across all restructuring and cost reduction activities. The charges consist of $56 million recorded in COGS and $76 million recorded in SGA expense. Employee related costs Asset related costs Asset impairment Other costs Total U.S. Morning Foods U.S. Snacks U.S. Specialty North America Other Europe Latin America Asia Pacific Corporate Total Liability as of January 3, 2015 2015 restructuring charges Cash payments Non-cash charges and other Liability as of April 4, 2015 Net cash provided by (used in): Operating activities Investing activities Financing activities Effect of exchange rates on cash and cash equivalents Net increase (decrease) in cash and cash equivalents Change versus prior year Net cash provided by operating activities Additions to properties Cash flow the ability to implement Project K as planned, whether the expected amount of costs associated with Project K will exceed forecasts, whether the Company will be able to realize the anticipated benefits from Project K in the amounts and times expected; the ability to realize the anticipated benefits and synergies from acquired businesses in the amounts and at the times expected; the impact of competitive conditions; the effectiveness of pricing, advertising, and promotional programs; the success of innovation, renovation and new product introductions; the recoverability of the carrying value of goodwill and other intangibles; the success of productivity improvements and business transitions; labor costs; disruptions or inefficiencies in supply chain; the availability of and interest rates on short-term and long-term financing; actual market performance of benefit plan trust investments; the levels of spending on systems initiatives, properties, business opportunities, integration of acquired businesses, and other general and administrative costs; changes in consumer behavior and preferences; the effect of U.S. and foreign economic conditions on items such as interest rates, statutory tax rates, currency conversion and availability; legal and regulatory factors including changes in food safety, advertising and labeling laws and regulations; the ultimate impact of product recalls; business disruption or other losses from natural disasters, war, terrorist acts, or political unrest; and, the risks and uncertainties described herein under Part II, Item 1A. Month #1: 1/4/15-1/31/15 Month #2: 2/1/15-2/28/15 Month #3: 3/1/15-4/4/15 Total /s/ R. L. Dissinger Officerxx QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 AprilJuly 4, 2015¨¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 State of Incorporation—Delaware IRS Employer Identification No.38-0710690 May 2,August 1, 2015 — 352,898,107353,581,043 sharesKELLOGG COMPANY Page Financial Statements Financial Statements8 26 40 41Risk Factors42 42 Exhibits Exhibits424344
2015 January 3,
2015 * $ 349 $ 443 1,503 1,276 353 327 846 952 170 184 220 158 3,441 3,340 3,719 3,769 4,993 4,971 2,282 2,295 254 250 519 528 $ 15,208 $ 15,153 $ 360 $ 607 809 828 1,537 1,528 453 446 72 39 226 320 543 596 4,000 4,364 6,561 5,935 764 726 760 777 75 82 396 418 105 105 689 678 6,739 6,689 (3,696 ) (3,470 ) (1,291 ) (1,213 ) 2,546 2,789 106 62 2,652 2,851 $ 15,208 $ 15,153 *Condensed from audited financial statements. July 4,
2015 (unaudited)January 3,
2015 *Current assets Cash and cash equivalents $ 294 $ 443 Accounts receivable, net 1,420 1,276 Inventories: Raw materials and supplies 318 327 Finished goods and materials in process 893 952 Deferred income taxes 161 184 Other prepaid assets 240 158 Total current assets 3,326 3,340 Property, net of accumulated depreciation of $5,585 and $5,526 3,624 3,769 Goodwill 4,978 4,971 Other intangibles, net of accumulated amortization of $43 and $43 2,266 2,295 Pension 279 250 Other assets 489 528 Total assets $ 14,962 $ 15,153 Current liabilities Current maturities of long-term debt $ 754 $ 607 Notes payable 939 828 Accounts payable 1,591 1,528 Accrued advertising and promotion 470 446 Accrued income taxes 15 39 Accrued salaries and wages 245 320 Other current liabilities 505 596 Total current liabilities 4,519 4,364 Long-term debt 5,800 5,935 Deferred income taxes 747 726 Pension liability 728 777 Nonpension postretirement benefits 69 82 Other liabilities 425 418 Commitments and contingencies Equity Common stock, $.25 par value 105 105 Capital in excess of par value 704 678 Retained earnings 6,789 6,689 Treasury stock, at cost (3,665 ) (3,470 ) Accumulated other comprehensive income (loss) (1,281 ) (1,213 ) Total Kellogg Company equity 2,652 2,789 Noncontrolling interests 22 62 Total equity 2,674 2,851 Total liabilities and equity $ 14,962 $ 15,153 Quarter ended April 4, March 29, (Results are unaudited) 2015 2014 $ 3,556 $ 3,742 2,311 2,238 861 890 384 614 54 52 (26 ) 10 304 572 76 165 (1 ) (1 ) $ 227 $ 406 — — $ 227 $ 406 $ 0.64 $ 1.13 $ 0.64 $ 1.12 $ 0.490 $ 0.460 355 360 357 362 353 358 Quarter ended Year-to-date period ended (Results are unaudited) July 4,
2015June 28,
2014 July 4,
2015June 28,
2014Net sales $ 3,498 $ 3,685 $ 7,054 $ 7,427 Cost of goods sold 2,257 2,274 4,568 4,512 Selling, general and administrative expense 829 944 1,690 1,834 Operating profit 412 467 796 1,081 Interest expense 58 50 112 102 Other income (expense), net (46 ) 3 (72 ) 13 Income before income taxes 308 420 612 992 Income taxes 85 122 161 287 Earnings (loss) from joint ventures (1 ) (3 ) (2 ) (4 ) Net income $ 222 $ 295 $ 449 $ 701 Net income (loss) attributable to noncontrolling interests (1 ) — (1 ) — Net income attributable to Kellogg Company $ 223 $ 295 $ 450 $ 701 Per share amounts: Basic $ 0.63 $ 0.82 $ 1.27 $ 1.95 Diluted $ 0.63 $ 0.82 $ 1.26 $ 1.94 Dividends per share $ 0.49 $ 0.46 $ 0.98 $ 0.92 Average shares outstanding: Basic 353 359 354 360 Diluted 355 362 356 362 Actual shares outstanding at period end 353 360 Quarter ended April 4, 2015 Pre-tax Tax (expense) After-tax (Results are unaudited) amount benefit amount $ 227 (62 ) (21 ) (83 ) 8 (1 ) 7 (4 ) — (4 ) — (1 ) — (1 ) 1 — 1 3 (1 ) 2 $ (55 ) $ (23 ) $ (78 ) (1 ) $ 148 Quarter ended March 29, 2014 (Results are unaudited) Pre-tax
amount After-tax
amount $ 406 3 — 3 (1 ) — (1 ) (10 ) 3 (7 ) 1 — 1 2 (1 ) 1 $ (5 ) $ 2 $ (3 ) $ 403 Quarter ended
July 4, 2015Year-to-date period ended
July 4, 2015(Results are unaudited) Pre-tax
amountTax (expense)
benefitAfter-tax
amountPre-tax
amountTax (expense)
benefitAfter-tax
amountNet income $ 222 $ 449 Other comprehensive income (loss): Foreign currency translation adjustments 9 5 14 (54 ) (16 ) (70 ) Cash flow hedges: Unrealized gain (loss) on cash flow hedges (4 ) — (4 ) 4 (1 ) 3 Reclassification to net income (3 ) — (3 ) (7 ) — (7 ) Postretirement and postemployment benefits: Amount arising during the period: Prior service credit (cost) 1 — 1 — — — Reclassification to net income: Net experience loss 1 — 1 2 — 2 Prior service cost 2 (1 ) 1 5 (2 ) 3 Other comprehensive income (loss) $ 6 $ 4 $ 10 $ (50 ) $ (19 ) $ (69 ) Comprehensive income $ 232 $ 380 Net income (loss) attributable to noncontrolling interests (1 ) (1 ) Other comprehensive income (loss) attributable to noncontrolling interests — (1 ) Comprehensive income attributable to Kellogg Company $ 233 $ 382 Quarter ended
June 28, 2014Year-to-date period ended
June 28, 2014(Results are unaudited) Pre-tax
amountTax (expense)
benefitAfter-tax
amountPre-tax
amountTax (expense)
benefitAfter-tax
amountNet income $ 295 $ 701 Other comprehensive income (loss): Foreign currency translation adjustments 30 — 30 33 — 33 Cash flow hedges: Unrealized gain (loss) on cash flow hedges (23 ) 7 (16 ) (24 ) 7 (17 ) Reclassification to net income (1 ) — (1 ) (11 ) 3 (8 ) Postretirement and postemployment benefits: Amount arising during the period: Prior service credit (cost) (9 ) 3 (6 ) (9 ) 3 (6 ) Reclassification to net income: Net experience loss 1 — 1 2 — 2 Prior service cost 4 (1 ) 3 6 (2 ) 4 Other comprehensive income (loss) $ 2 $ 9 $ 11 $ (3 ) $ 11 $ 8 Comprehensive income $ 306 $ 709
stock
stock (unaudited) shares amount shares amount 420 $ 105 $ 626 $ 6,749 57 $ (2,999 ) $ (936 ) $ 3,545 $ 62 $ 3,607 — 11 (690 ) (690 ) (690 ) 632 632 1 633 633 (680 ) (680 ) (1 ) (681 ) (277 ) (277 ) (277 ) (277 ) 29 29 29 23 (12 ) (4 ) 219 230 230 420 $ 105 $ 678 $ 6,689 64 $ (3,470 ) $ (1,213 ) $ 2,789 $ 62 $ 2,851 $ 356 — 4 (285 ) (285 ) (285 ) — 20 20 227 227 227 227 (174 ) (174 ) (174 ) (78 ) (78 ) (1 ) (79 ) (79 ) 10 10 10 1 (3 ) (1 ) 59 57 25 82 420 $ 105 $ 689 $ 6,739 67 $ (3,696 ) $ (1,291 ) $ 2,546 $ 106 $ 2,652 $ 148 (unaudited) shares amount shares amount Balance, December 28, 2013 420 $ 105 $ 626 $ 6,749 57 $ (2,999 ) $ (936 ) $ 3,545 $ 62 $ 3,607 Common stock repurchases 11 (690 ) (690 ) (690 ) Net income 632 632 1 633 633 Dividends (680 ) (680 ) (1 ) (681 ) Other comprehensive loss (277 ) (277 ) (277 ) (277 ) Stock compensation 29 29 29 Stock options exercised and other 23 (12 ) (4 ) 219 230 230 Balance, January 3, 2015 420 $ 105 $ 678 $ 6,689 64 $ (3,470 ) $ (1,213 ) $ 2,789 $ 62 $ 2,851 $ 356 Common stock repurchases 4 (285 ) (285 ) (285 ) Acquisition of noncontrolling interest — 20 20 VIE deconsolidation — (58 ) (58 ) Net income 450 450 (1 ) 449 449 Dividends (347 ) (347 ) (347 ) Other comprehensive loss (68 ) (68 ) (1 ) (69 ) (69 ) Stock compensation 21 21 21 Stock options exercised and other 5 (3 ) (1 ) 90 92 92 Balance, July 4, 2015 420 $ 105 $ 704 $ 6,789 67 $ (3,665 ) $ (1,281 ) $ 2,652 $ 22 $ 2,674 $ 380 Year-to-date period ended (unaudited) April 4,
2015 March 29,
2014 $ 227 $ 406 131 116 (21 ) (22 ) (2 ) 45 57 6 (12 ) (28 ) (240 ) (195 ) 70 (29 ) 27 (49 ) 33 76 17 45 (12 ) (9 ) (88 ) (84 ) (92 ) (10 ) 95 268 (83 ) (97 ) (117 ) — 3 (2 ) (197 ) (99 ) (19 ) 986 672 — (243 ) (682 ) 57 37 (285 ) (321 ) (174 ) (166 ) 5 (1 ) 13 (147 ) (5 ) (11 ) (94 ) 11 443 273 $ 349 $ 284 Year-to-date period ended (unaudited) July 4,
2015June 28,
2014Operating activities Net income $ 449 $ 701 Adjustments to reconcile net income to operating cash flows: Depreciation and amortization 269 235 Postretirement benefit plan expense (benefit) (41 ) (45 ) Deferred income taxes (11 ) 18 Venezuela remeasurement expense 152 — VIE deconsolidation (49 ) — Other 56 18 Postretirement benefit plan contributions (17 ) (37 ) Changes in operating assets and liabilities, net of acquisitions: Trade receivables (207 ) (136 ) Inventories 5 (55 ) Accounts payable 114 30 Accrued income taxes (34 ) 7 Accrued interest expense (2 ) (8 ) Accrued and prepaid advertising, promotion and trade allowances 9 (12 ) Accrued salaries and wages (61 ) (39 ) All other current assets and liabilities (91 ) (23 ) Net cash provided by (used in) operating activities 541 654 Investing activities Additions to properties (218 ) (226 ) Acquisitions, net of cash acquired (117 ) — Other 42 — Net cash provided by (used in) investing activities (293 ) (226 ) Financing activities Net issuances (reductions) of notes payable 114 118 Issuances of long-term debt 672 952 Reductions of long-term debt (606 ) (957 ) Net issuances of common stock 90 133 Common stock repurchases (285 ) (329 ) Cash dividends (347 ) (331 ) Other 5 6 Net cash provided by (used in) financing activities (357 ) (408 ) Effect of exchange rate changes on cash and cash equivalents (40 ) (3 ) Increase (decrease) in cash and cash equivalents (149 ) 17 Cash and cash equivalents at beginning of period 443 273 Cash and cash equivalents at end of period $ 294 $ 290 AprilJuly 4, 2015 (unaudited)AprilJuly 4, 2015 are not necessarily indicative of the results to be expected for other interim periods or the full year. pricing, payment terms or vendor funding, created by facilitating suppliers’ ability to sell payment obligations, while providing them with greater working capital flexibility. We have no economic interest in the sale of these suppliers’ receivables and no direct financial relationship with the financial institutions concerning these services. The Company’s obligations to its suppliers, including amounts due and scheduled payment dates, are not impacted by suppliers’ decisions to sell amounts under this arrangement. However, the Company’s right to offset balances due from suppliers against payment obligations is restricted by this agreement for those payment obligations that have been sold by suppliers. As of AprilJuly 4, 2015, $261$355 million of the Company’s outstanding payment obligations had been placed in the accounts payable tracking system, and participating suppliers had sold $212$294 million of those payment obligations to participating financial institutions. As of January 3, 2015, $236 million of the Company’s outstanding payment obligations had been placed in the accounts payable tracking system, and participating suppliers had sold $184 million of those payment obligations to participating financial institutions.standard in the first quarter of 2016.standard. The Company does not expect the adoption of this guidance to have a significant impact on its financial statements.April 29,July 9, 2015, the FASB issued an exposure draft of a proposed ASU that woulddecided to delay the effective date of the new revenue standard by one year. Under the proposal, theThe updated standard will be effective for fiscal years, and interim periods within those years, beginning after December 15, 2017. Entities will be permitted to adopt the new revenue standard early, but not before the original effective date. Comments on the proposal are due by May 29, 2015. Entities will have the option to apply the final standard retrospectively or use a modified retrospective method, recognizing the cumulative effect of the ASU in retained earnings at the date of initial application. An entity will not restate prior periods if it uses the modified retrospective method, but will be required to disclose the amount by which each financial statement line item is affected in the current reporting period by the application of the ASU as compared to the guidance in effect prior to the change, as well as reasons for significant changes. The Company will adopt the updated standard in the first quarterly reporting period after it becomes effective.quarter of 2018. The Company is currently evaluating the impact that implementing this ASU will have on its financial statements and disclosures, as well as whether it will use the retrospective or modified retrospective method of adoption.AprilJuly 4, 2015 and the results of its operations subsequent to the acquisition date, which are immaterial, are included in the Consolidated Statement of Income within the Europe operating segment. In addition, the pro-forma effect of this acquisition, if the acquisition had been completed at the beginning of 2014, would have been immaterial. January 18, (millions) 2015 $ 11 79 58 30 (14 ) (27 ) (20 ) $ 117 (millions) January 18,
2015Current assets $ 11 Property 79 Goodwill 59 Intangible assets and other 30 Current liabilities (15 ) Other non current liabilities, primarily deferred taxes (27 ) Non-controlling interests (20 ) $ 117 first quarterend of 2016.(millions) U.S.
Morning
Foods U.S.
Snacks U.S.
Specialty North
America
Other Europe Latin
America Asia
Pacific Consoli-
dated $ 131 $ 3,589 $ 82 $ 465 $ 389 $ 83 $ 232 $ 4,971 — — — — 58 — — 58 — — — (5 ) (26 ) (1 ) (4 ) (36 ) $ 131 $ 3,589 $ 82 $ 460 $ 421 $ 82 $ 228 $ 4,993 (millions) Europe January 3, 2015* $ 131 $ 3,589 $ 82 $ 465 $ 389 $ 83 $ 232 $ 4,971 Additions — — — — 59 — — 59 VIE deconsolidation** — (21 ) — — — — — (21 ) Currency translation adjustment — — — (5 ) (18 ) (3 ) (5 ) (31 ) July 4, 2015 $ 131 $ 3,568 $ 82 $ 460 $ 430 $ 80 $ 227 $ 4,978 Gross carrying amount U.S.
Morning
Foods U.S.
Snacks U.S.
Specialty North
America
Other Europe Latin
America Asia
Pacific Consoli-
dated $ 8 $ 65 $ — $ 5 $ 38 $ 6 $ 10 $ 132 — — — — 4 — — 4 — — — — (2 ) — — (2 ) $ 8 $ 65 $ — $ 5 $ 40 $ 6 $ 10 $ 134 $ 8 $ 16 $ — $ 4 $ 7 $ 6 $ 2 $ 43 — 1 — — 1 — — 2 $ 8 $ 17 $ — $ 4 $ 8 $ 6 $ 2 $ 45 $ — $ 49 $ — $ 1 $ 31 $ — $ 8 $ 89 — — — — 4 — — 4 — — — — (2 ) — — (2 ) — (1 ) — — (1 ) — — (2 ) $ — $ 48 $ — $ 1 $ 32 $ — $ 8 $ 89 Gross carrying amount Europe January 3, 2015 $ 8 $ 65 $ — $ 5 $ 38 $ 6 $ 10 $ 132 Additions — — — — 4 — — 4 VIE deconsolidation** — (23 ) — — — — — (23 ) Currency translation adjustment — — — — (1 ) — — (1 ) July 4, 2015 $ 8 $ 42 $ — $ 5 $ 41 $ 6 $ 10 $ 112 Accumulated Amortization January 3, 2015 $ 8 $ 16 $ — $ 4 $ 7 $ 6 $ 2 $ 43 VIE deconsolidation** — (4 ) — — — — — (4 ) Amortization — 2 — — 2 — — 4 July 4, 2015 $ 8 $ 14 $ — $ 4 $ 9 $ 6 $ 2 $ 43 Intangible assets subject to amortization, net January 3, 2015 $ — $ 49 $ — $ 1 $ 31 $ — $ 8 $ 89 Additions — — — — 4 — — 4 VIE deconsolidation** — (19 ) — — — — — (19 ) Currency translation adjustment — — — — (1 ) — — (1 ) Amortization — (2 ) — — (2 ) — — (4 ) July 4, 2015 $ — $ 28 $ — $ 1 $ 32 $ — $ 8 $ 69 $2$4 million for the quartersyear-to-date periods ended AprilJuly 4, 2015 and March 29,June 28, 2014. The currently estimated aggregate annual amortization expense for full-year 2015 is approximately $9$8 million.(millions) U.S.
Morning
Foods U.S.
Snacks U.S.
Specialty North
America
Other Europe Latin
America Asia
Pacific Consoli-
dated $ — $ 1,625 $ — $ 158 $ 423 $ — $ — $ 2,206 — — — — 25 — — 25 — — — — (38 ) — — (38 ) $ — $ 1,625 $ — $ 158 $ 410 $ — $ — $ 2,193 (millions) Europe January 3, 2015* $ — $ 1,625 $ — $ 158 $ 423 $ — $ — $ 2,206 Additions — — — — 25 — — 25 Currency translation adjustment — — — — (34 ) — — (34 ) July 4, 2015 $ — $ 1,625 $ — $ 158 $ 414 $ — $ — $ 2,197 willmay be invested in key strategic areas of focus for the business. The Company expects that this investment will drive future growth in revenues, gross margin, operating profit, and cash flow.will beis to strengthen existing businesses in core markets, increase growth in developing and emerging markets, and drive an increased level of value-added innovation. The program is expected to provide a number of benefits, including an optimized supply chain infrastructure, the implementation of global business services, and a new global focus on categories.13%14%), Latin America (approximately 3%), Asia-Pacific (approximately 6%), and Corporate (approximately 38%37%). A majority of the costs impacting Corporate relate to additional initiatives to be approved and executed in the future. When these initiatives are fully defined and approved, the Company will update its estimated costs by reportable segment as needed.$574$664 million that have been attributed to the program. The charges consist of $4 million recorded as a reduction of revenue, $358$423 million recorded in COGS and $212$237 million recorded in SGA.AprilJuly 4, 2015, the Company recorded total charges of $68$90 million across all restructuring and cost reduction activities. The charges consist of $65 million recorded in cost of goods sold (COGS) and $25 million recorded in selling, general and administrative (SGA) expense. During the year-to-date period ended July 4, 2015, the Company recorded total charges of $158 million across all restructuring and cost reduction activities. The charges consist of $2 million recorded as a reduction of revenue, $32$97 million recorded in cost of goods sold (COGS)COGS and $34$59 million recorded in selling, general and administrative (SGA)SGA expense.March 29,June 28, 2014, the Company recorded total charges of $54$78 million across all restructuring and cost reduction activities. The charges consist of $25$31 million being recorded in COGS and $29$47 million recorded in SGA expense.quartersquarter and year-to-date periods ended AprilJuly 4, 2015 and March 29,June 28, 2014 and program costs to date for programs currently active as of AprilJuly 4, 2015. Program costs to date (millions) 2015 2014 April 4, 2015 $ 17 $ 17 $ 214 23 3 66 — — 87 28 34 207 $ 68 $ 54 $ 574 Program costs to date (millions) 2015 2014 April 4, 2015 $ 8 $ 11 $ 168 9 7 85 1 1 7 6 3 33 19 12 118 — 4 12 5 6 66 20 10 85 $ 68 $ 54 $ 574 Quarter ended Year-to-date period ended Program costs to date (millions) July 4, 2015 June 28, 2014 July 4, 2015 June 28, 2014 July 4, 2015 Employee related costs $ 16 $ 35 $ 33 $ 52 $ 230 Asset related costs 24 7 47 10 90 Asset impairment 18 — 18 — 105 Other costs 32 36 60 70 239 Total $ 90 $ 78 $ 158 $ 132 $ 664 Quarter ended Year-to-date period ended Program costs to date (millions) July 4, 2015 June 28, 2014 July 4, 2015 June 28, 2014 July 4, 2015 U.S. Morning Foods $ 13 $ 15 $ 21 $ 26 $ 181 U.S. Snacks 10 3 19 10 95 U.S. Specialty 1 — 2 1 8 North America Other 23 6 29 9 56 Europe 25 28 44 40 143 Latin America 1 1 1 5 13 Asia Pacific 3 5 8 11 69 Corporate 14 20 34 30 99 Total $ 90 $ 78 $ 158 $ 132 $ 664 quartersquarter and year-to-date periods ended AprilJuly 4, 2015 and March 29,June 28, 2014 employee related costs consist primarily of severance benefits, asset related costs consist primarily of accelerated depreciation, and other costs consist primarily of third-party incremental costs related to the development and implementation of global business capabilities.AprilJuly 4, 2015 total exit cost reserves were $87$78 million, related to severance payments and other costs of which a substantial portion will be paid out in 2015 and 2016. The following table provides details for exit cost reserves. Employee
Related
Costs Asset
Impairment Asset
Related
Costs Other
Costs Total $ 96 $ — $ — $ 14 $ 110 17 — 23 28 68 (39 ) — (4 ) (27 ) (70 ) (3 ) — (18 ) — (21 ) $ 71 $ — $ 1 $ 15 $ 87 Total Liability as of January 3, 2015 $ 96 $ — $ — $ 14 $ 110 2015 restructuring charges 33 18 47 60 158 Cash payments (62 ) — (12 ) (63 ) (137 ) Non-cash charges and other (2 ) (18 ) (33 ) — (53 ) Liability as of July 4, 2015 $ 65 $ — $ 2 $ 11 $ 78 23 million and 82 million anti-dilutive potential common shares excluded from the reconciliation for the quartersquarter and year-to-date periods ended AprilJuly 4, 2015, respectively. There were zero and 4March 29, 2014, respectively.QuartersJune 28, 2014:(millions, except per share data) 2015 Basic $ 223 353 $ 0.63 Dilutive potential common shares 2 — Diluted $ 223 355 $ 0.63 2014 Basic $ 295 359 $ 0.82 Dilutive potential common shares 3 — Diluted $ 295 362 $ 0.82 AprilJuly 4, 2015 and March 29,June 28, 2014:(millions, except per share data) Net income
attributable to
Kellogg Company Average
shares
outstanding Earnings
per share $ 227 355 $ 0.64 2 — $ 227 357 $ 0.64 $ 406 360 $ 1.13 2 (0.01 ) $ 406 362 $ 1.12 (millions, except per share data) 2015 Basic $ 450 354 $ 1.27 Dilutive potential common shares 2 (0.01 ) Diluted $ 450 356 $ 1.26 2014 Basic $ 701 360 $ 1.95 Dilutive potential common shares 2 (0.01 ) Diluted $ 701 362 $ 1.94 ourit's common stock through December 2015. This authorization supersedes the April 2013 authorization and is intended to allow the Company to repurchase shares for general corporate purposes and to offset issuances for employee benefit programs.quarteryear-to-date period ended AprilJuly 4, 2015, the Company repurchased approximately 4 million shares of common stock for a total of $285 million. During the quarteryear-to-date period ended March 29,June 28, 2014, the Company repurchased 56 million shares of common stock for a total of $321$329 million. Quarter ended April 04, 2015 Quarter ended March 29, 2014 (millions) Tax (expense)
or benefit After-tax
amount Pre-tax
amount Tax (expense)
or benefit After-tax
amount $ 227 $ 406 $ (62 ) $ (21 ) (83 ) $ 3 $ — 3 8 (1 ) 7 (1 ) — (1 ) (4 ) — (4 ) (10 ) 3 (7 ) (1 ) — (1 ) — — — 1 — 1 1 — 1 3 (1 ) 2 2 (1 ) 1 $ (55 ) $ (23 ) (78 ) $ (5 ) $ 2 (3 ) (1 ) — $ 148 $ 403 Quarter ended
July 4, 2015Year-to-date period ended
July 4, 2015(Results are unaudited) Pre-tax
amountTax (expense)
benefitAfter-tax
amountPre-tax
amountTax (expense)
benefitAfter-tax
amountNet income $ 222 $ 449 Other comprehensive income (loss): Foreign currency translation adjustments 9 5 14 (54 ) (16 ) (70 ) Cash flow hedges: Unrealized gain (loss) on cash flow hedges (4 ) — (4 ) 4 (1 ) 3 Reclassification to net income (3 ) — (3 ) (7 ) — (7 ) Postretirement and postemployment benefits: Amount arising during the period: Prior service credit (cost) 1 — 1 — — — Reclassification to net income: Net experience loss 1 — 1 2 — 2 Prior service cost 2 (1 ) 1 5 (2 ) 3 Other comprehensive income (loss) $ 6 $ 4 $ 10 $ (50 ) $ (19 ) $ (69 ) Comprehensive income $ 232 $ 380 Net income (loss) attributable to noncontrolling interests (1 ) (1 ) Other comprehensive income (loss) attributable to noncontrolling interests — (1 ) Comprehensive income attributable to Kellogg Company $ 233 $ 382 Quarter ended
June 28, 2014Year-to-date period ended
June 28, 2014(Results are unaudited) Pre-tax
amountTax (expense)
benefitAfter-tax
amountPre-tax
amountTax (expense)
benefitAfter-tax
amountNet income $ 295 $ 701 Other comprehensive income (loss): Foreign currency translation adjustments 30 — 30 33 — 33 Cash flow hedges: Unrealized gain (loss) on cash flow hedges (23 ) 7 (16 ) (24 ) 7 (17 ) Reclassification to net income (1 ) — (1 ) (11 ) 3 (8 ) Postretirement and postemployment benefits: Amounts arising during the period: Prior service credit (cost) (9 ) 3 (6 ) (9 ) 3 (6 ) Reclassification to net income: Net experience loss 1 — 1 2 — 2 Prior service cost 4 (1 ) 3 6 (2 ) 4 Other comprehensive income (loss) $ 2 $ 9 $ 11 $ (3 ) $ 11 $ 8 Comprehensive income $ 306 $ 709 (millions) Quarter ended
April 4, 2015 Quarter ended
March 29, 2014 $ (7 ) $ (1 ) COGS — (1 ) SGA — (9 ) Interest expense 3 1 COGS $ (4 ) $ (10 ) Total before tax — 3 Tax (expense) benefit $ (4 ) $ (7 ) Net of tax $ 1 $ 1 See Note 7 for further details 3 2 See Note 7 for further details $ 4 $ 3 Total before tax (1 ) (1 ) Tax (expense) benefit $ 3 $ 2 Net of tax $ (1 ) $ (5 ) Net of tax (millions) (Gains) losses on cash flow hedges: Foreign currency exchange contracts $ (9 ) $ (16 ) COGS Foreign currency exchange contracts 2 2 SGA Interest rate contracts 1 1 Interest expense Commodity contracts 3 6 COGS $ (3 ) $ (7 ) Total before tax — — Tax (expense) benefit $ (3 ) $ (7 ) Net of tax Amortization of postretirement and postemployment benefits: Net experience loss $ 1 $ 2 See Note 7 for further details Prior service cost 2 5 See Note 7 for further details $ 3 $ 7 Total before tax (1 ) (2 ) Tax (expense) benefit $ 2 $ 5 Net of tax Total reclassifications $ (1 ) $ (2 ) Net of tax (millions) (Gains) losses on cash flow hedges: Foreign currency exchange contracts $ (1 ) $ (2 ) COGS Foreign currency exchange contracts (2 ) (3 ) SGA Interest rate contracts — (9 ) Interest expense Commodity contracts 2 3 COGS $ (1 ) $ (11 ) Total before tax — 3 Tax (expense) benefit $ (1 ) $ (8 ) Net of tax Amortization of postretirement and postemployment benefits: Net experience loss $ 1 $ 2 See Note 7 for further details Prior service cost 4 6 See Note 7 for further details $ 5 $ 8 Total before tax (1 ) (2 ) Tax (expense) benefit $ 4 $ 6 Net of tax Total reclassifications $ 3 $ (2 ) Net of tax AprilJuly 4, 2015 and January 3, 2015 consisted of the following:(millions) April 4,
2015 January 3,
2015 $ (1,202 ) $ (1,119 ) (21 ) (24 ) (17 ) (18 ) (51 ) (52 ) $ (1,291 ) $ (1,213 ) (millions) Foreign currency translation adjustments $ (1,188 ) $ (1,119 ) Cash flow hedges — unrealized net gain (loss) (28 ) (24 ) Postretirement and postemployment benefits: Net experience loss (16 ) (18 ) Prior service cost (49 ) (52 ) Total accumulated other comprehensive income (loss) $ (1,281 ) $ (1,213 ) iswas a variable interest entity, the Company iswas the primary beneficiary and the Company has consolidated the financial statements of the VIE. The assets and liabilities of the VIE are included in the Consolidated Balance Sheets as of April 4, 2015 and January 3, 2015 and the results of the VIE’s operations are included in the Consolidated Statements of Income for the quarters ended April 4, 2015 and March 29, 2014. The Company evaluates the consolidated assets of the VIE as well as the VIE Loan and related accrued interest for recoverability based on the actual and projected financial results of the VIE, the amount of senior collateralized borrowings of the VIE as well as other matters impacting the VIE’s operations.U.S. Snacks operating segment. During the quarter ended April 4, 2015, the Company has determined that certain assets related tothe VIE Loan and other amounts receivable from the VIE may not be fully recoverable and has recorded a non-cash charge of $25 million, which has beenwas recorded as other income (expense), net.AprilJuly 4, 2015 and January 3, 2015: April 4, 2015 January 3, 2015 (millions) Principal
amount Effective
interest rate Principal
amount Effective
interest rate $ 610 0.39 % $ 681 0.36 % 121 0.07 96 0.09 78 51 $ 809 $ 828 July 4, 2015 January 3, 2015 (millions) U.S. commercial paper $ 857 0.44 % $ 681 0.36 % Europe commercial paper 28 0.05 % 96 0.09 % Bank borrowings 54 51 Total $ 939 $ 828 €600 €600 million (approximately $658$665 million USD at AprilJuly 4, 2015, which reflects the discount and translation adjustments) of ten-year 1.25% Euro Notes due 2025, using the proceeds from these Notes for general corporate purposes, including the repayment of a portion of its commercial paper borrowings. The Notes contain customary covenants that limit the ability of the Company and its restricted subsidiaries (as defined) to incur certain liens or enter into certain sale and lease-back transactions, as well as a change of control provision.unrealized gain upon termination of $26 million will be amortized to interest expense over the remaining term of the Notes.AprilJuly 4, 2015, the Company has interest rate swaps with notional amounts totaling $1.4$2.4 billion, which effectively converts a portion of the associated U.S. Dollar Notes from fixed rate to floating rate obligations. These derivative instruments are designated as fair value hedges. The effective interest rates on debt obligations resulting from the Company’s current and previous interest rate swaps as of AprilJuly 4, 2015 were as follows: (a) seven-year 4.45% U.S. Dollar Notes due 2016 – 3.41%3.58%; (b) five-year 1.875% U.S. Dollar Notes due 2016 – 1.58%; (c) five-year 1.75% U.S. Dollar Notes due 2017 - 1.34%– 1.36%; (d) seven-year 3.25% U.S. Dollar Notes due 2018 – 1.87%1.88%; (e) ten-year 4.15% U.S. Dollar Notes due 2019 - 3.86%– 2.58%; (f) ten-year 4.00% U.S. Dollar Notes due 2020 - 2.59%– 1.52%; (g) ten-year 3.125% U.S. Dollar Notes due2022 - 2.03%– 1.44%. Quarter ended (millions) $ 12 $ 14 $ 4 $ 5 Quarter ended Year-to-date period ended (millions) July 4, 2015 June 28, 2014 July 4, 2015 June 28, 2014 Pre-tax compensation expense $ 13 $ 14 $ 25 $ 28 Related income tax benefit $ 5 $ 5 $ 9 $ 10 AprilJuly 4, 2015, total stock-based compensation cost related to non-vested awards not yet recognized was $90$77 million and the weighted-average period over which this amount is expected to be recognized was 2 years.quartersyear-to-date periods ended AprilJuly 4, 2015 and March 29,June 28, 2014, the Company granted non-qualified stock options to eligible employees as presented in the following activity tables. Terms of these grants and the Company’s methods for determining grant-date fair value of the awards were consistent with that described within the stock compensation footnote in the Company’s 2014 Annual Report on Form 10-K.QuarterAprilJuly 4, 2015: Weighted- Weighted- average Aggregate average remaining intrinsic Shares exercise contractual value Employee and director stock options (millions) price term (yrs.) (millions) 21 $ 56 3 64 (1 ) 52 — — 23 $ 57 7.4 $ 204 14 $ 55 6.3 $ 163 Quarter Employee and director stock options Shares (millions) Outstanding, beginning of period 21 $ 56 Granted 3 64 Exercised (2 ) 53 Forfeitures and expirations — — Outstanding, end of period 22 $ 57 7.1 $ 131 Exercisable, end of period 13 $ 55 6.1 $ 114 March 29,June 28, 2014: Weighted- Weighted- average Aggregate average remaining intrinsic Shares exercise contractual value Employee and director stock options (millions) price term (yrs.) (millions) 20 $ 54 6 60 (1 ) 47 — — 25 $ 55 7.6 $ 166 13 $ 52 6.2 $ 131 Employee and director stock options Shares (millions) Outstanding, beginning of period 20 $ 54 Granted 6 60 Exercised (2 ) 50 Forfeitures and expirations (1 ) 57 Outstanding, end of period 23 $ 55 7.5 $ 209 Exercisable, end of period 11 $ 52 6.0 $ 145 quarteryear-to-date periods ended AprilJuly 4, 2015 and March 29,June 28, 2014, respectively. The fair value was estimated using the following assumptions: Weighted-
average
expected
volatility Weighted-
average
expected
term
(years) Weighted-
average
risk-free
interest
rate Dividend
yield 16 % 6.87 1.98 % 3.00 % 15 % 7.34 2.35 % 3.00 % Grants within the year-to-date period ended July 4, 2015: 16 % 6.9 1.98 % 3.00 % Grants within the year-to-date period ended June 28, 2014: 15 % 7.3 2.35 % 3.00 % $17$23 million and $8$33 million for the quarteryear-to-date periods ended AprilJuly 4, 2015 and March 29,June 28, 2014, respectively.184,000177,000 shares, with a grant-date fair value of $58 per share.AprilJuly 4, 2015, the maximum future value that could be awarded to employees on the vesting date for all outstanding performance share awards was as follows:(millions) $ 26 $ 29 $ 24 (millions) July 4, 2015 2013 Award $ 24 2014 Award $ 27 2015 Award $ 22 quarteryear-to-date period ended AprilJuly 4, 2015, the Company granted restricted stock units and a nominal number of restricted stock awards to eligible employees as presented in the following table. Terms of these grants and the Company’s method of determining grant-date fair value were consistent with that described within the stock compensation footnote in the Company’s 2014 Annual Report on Form 10-K.QuarterAprilJuly 4, 2015 Weighted- average Shares grant-date Employee restricted stock and restricted stock units (thousands) fair value 346 $ 54 563 58 (48 ) 51 (2 ) 58 859 $ 57 Employee restricted stock and restricted stock units Shares(thousands) Weighted-average grant-date fair value Non-vested, beginning of year 346 $ 54 Granted 563 58 Vested (79 ) 51 Forfeited (17 ) 56 Non-vested, end of period 813 $ 57 March 29,June 28, 2014 were 51,000.56,000. Quarter ended (millions) April 4, 2015 March 29, 2014 $ 28 $ 26 53 57 (100 ) (104 ) 3 3 $ (16 ) $ (18 ) Quarter ended (millions) April 4, 2015 March 29, 2014 $ 8 $ 7 12 14 (25 ) (24 ) — (1 ) $ (5 ) $ (4 ) Quarter ended (millions) April 4, 2015 March 29, 2014 $ 2 $ 2 1 1 1 1 $ 4 $ 4 Quarter ended Year-to-date period ended (millions) July 4, 2015 June 28, 2014 July 4, 2015 June 28, 2014 Service cost $ 28 $ 27 $ 56 $ 53 Interest cost 53 56 106 113 Expected return on plan assets (100 ) (105 ) (200 ) (209 ) Amortization of unrecognized prior service cost 3 4 6 7 Total pension (income) expense $ (16 ) $ (18 ) $ (32 ) $ (36 ) Quarter ended Year-to-date period ended (millions) July 4, 2015 June 28, 2014 July 4, 2015 June 28, 2014 Service cost $ 9 $ 7 $ 17 $ 14 Interest cost 13 13 25 27 Expected return on plan assets (25 ) (25 ) (50 ) (49 ) Amortization of unrecognized prior service cost (credit) (1 ) — (1 ) (1 ) Total postretirement benefit (income) expense $ (4 ) $ (5 ) $ (9 ) $ (9 ) Quarter ended Year-to-date period ended (millions) July 4, 2015 June 28, 2014 July 4, 2015 June 28, 2014 Service cost $ 1 $ 2 $ 3 $ 4 Interest cost 1 1 2 2 Recognized net loss 1 1 2 2 Total postemployment benefit expense $ 3 $ 4 $ 7 $ 8 Nonpension (millions) Pension postretirement Total $ 9 $ 3 $ 12 $ 24 $ 4 $ 28 $ 39 $ 16 $ 55 $ 37 $ 16 $ 53 (millions) Pension Nonpension postretirement Total Quarter ended: July 4, 2015 $ 1 $ 4 $ 5 June 28, 2014 $ 5 $ 4 $ 9 Year-to-date period ended: July 4, 2015 $ 10 $ 7 $ 17 June 28, 2014 $ 29 $ 8 $ 37 Full year: Fiscal year 2015 (projected) $ 39 $ 16 $ 55 Fiscal year 2014 (actual) $ 37 $ 16 $ 53 AprilJuly 4, 2015 was 25%28% as compared to the prior year’s rate of 29%. The consolidated effective tax rates for the year-to-date periods ended July 4, 2015 and June 28, 2014 were 26% and 29%, respectively. The effective tax rate for the first quarterhalf of 2015 benefited from a reduction in tax related to current year remitted and unremitted earnings and the completion of certain tax examinations.AprilJuly 4, 2015, the Company classified $9$10 million of unrecognized tax benefits as a net current liability. Management’s estimate of reasonably possible changes in unrecognized tax benefits during the next twelve months consists of thequarteryear-to-date period ended AprilJuly 4, 2015; $50 million of this total represents the amount that, if recognized, would affect the Company’s effective income tax rate in future periods.(millions) $ 78 2 — — (7 ) — $ 73 (millions) January 3, 2015 $ 78 Tax positions related to current year: Additions 3 Reductions — Tax positions related to prior years: Additions 2 Reductions (8 ) Settlements (1 ) July 4, 2015 $ 74 AprilJuly 4, 2015, the Company recognized a decreasean increase of $1 million for tax-related interest and penalties. For the year-to-date period ended July 4, 2015, the Company recognized tax-related interest and penalties netting to zero. The Company recognized no cash settlements during the current quarter.quarter or year-to-date periods. The accrual balance was $19$20 million at AprilJuly 4, 2015.AprilJuly 4, 2015 and January 3, 2015 were as follows: April 4, January 3, (millions) 2015 2015 $ 946 $ 764 1,400 2,958 651 492 $ 2,997 $ 4,214 (millions) July 4,
2015January 3,
2015Foreign currency exchange contracts $ 957 $ 764 Interest rate contracts 2,358 2,958 Commodity contracts 388 492 Total $ 3,703 $ 4,214 AprilJuly 4, 2015 and January 3, 2015, measured on a recurring basis.AprilJuly 4, 2015 or January 3, 2015.AprilJuly 4, 2015 and January 3, 2015: April 4, 2015 January 3, 2015 (millions) Level 1 Level 2 Total Level 1 Level 2 Total $ — $ 45 $ 45 $ — $ 29 $ 29 — 2 2 — 7 7 $ — $ 47 $ 47 $ — $ 36 $ 36 $ — $ (19 ) $ (19 ) $ — $ (6 ) $ (6 ) — — — — (3 ) (3 ) — (1 ) (1 ) — (16 ) (16 ) — (12 ) (12 ) — (12 ) (12 ) — (9 ) (9 ) — (11 ) (11 ) $ — $ (41 ) $ (41 ) $ — $ (48 ) $ (48 ) July 4, 2015 January 3, 2015 (millions) Level 1 Level 2 Total Level 1 Level 2 Total Assets: Foreign currency exchange contracts: Other prepaid assets $ — $ 34 $ 34 $ — $ 29 $ 29 Interest rate contracts: Other assets (a) — — — — 7 7 Total assets $ — $ 34 $ 34 $ — $ 36 $ 36 Liabilities: Foreign currency exchange contracts: Other current liabilities $ — $ (14 ) $ (14 ) $ — $ (6 ) $ (6 ) Interest rate contracts: Other current liabilities — — — — (3 ) (3 ) Other liabilities (a) — (14 ) (14 ) — (16 ) (16 ) Commodity contracts: Other current liabilities — (12 ) (12 ) — (12 ) (12 ) Other liabilities — (6 ) (6 ) — (11 ) (11 ) Total liabilities $ — $ (46 ) $ (46 ) $ — $ (48 ) $ (48 ) (a) The fair value of the related hedged portion of the Company’s long-term debt, a level 2 liability, was $1.5$2.4 billion as of April 4, 2015 and $2.5 billion as of July 4, 2015 and January 3, 2015.2015, respectively. April 4, 2015 January 3, 2015 (millions) Level 1 Level 2 Total Level 1 Level 2 Total $ 11 $ — $ 11 $ 7 $ — $ 7 $ 11 $ — $ 11 $ 7 $ — $ 7 $ (34 ) $ — $ (34 ) $ (36 ) $ — $ (36 ) (2 ) — (2 ) (4 ) — (4 ) $ (36 ) $ — $ (36 ) $ (40 ) $ — $ (40 ) July 4, 2015 January 3, 2015 (millions) Level 1 Level 2 Total Level 1 Level 2 Total Assets: Foreign currency exchange contracts: Other prepaid assets $ — $ 4 $ 4 $ — $ — $ — Commodity contracts: Other prepaid assets 24 — 24 7 — 7 Total assets $ 24 $ 4 $ 28 $ 7 $ — $ 7 Liabilities: Commodity contracts: Other current liabilities $ (13 ) $ — $ (13 ) $ (36 ) $ — $ (36 ) Other liabilities — — — (4 ) — (4 ) Total liabilities $ (13 ) $ — $ (13 ) $ (40 ) $ — $ (40 ) AprilJuly 4, 2015 and January 3, 2015, respectively.AprilJuly 4, 2015 and January 3, 2015 would be adjusted as detailed in the following table:As of April 4, 2015: Gross Amounts Not Offset in the
Consolidated Balance Sheet
Presented in
Consolidated
Balance Sheet Financial
Instruments Cash Collateral
Received/
Posted Net
Amount $ 58 $ (24 ) $ — $ 34 $ (77 ) $ 24 $ 40 $ (13 ) Gross Amounts Not Offset in the
Consolidated Balance Sheet Amounts
Presented in the
Consolidated
Balance Sheet Financial
Instruments Cash Collateral
Received/
Posted Net
Amount $ 43 $ (29 ) $ — $ 14 $ (88 ) $ 29 $ 50 $ (9 ) As of July 4, 2015: Total asset derivatives $ 62 $ (38 ) $ — $ 24 Total liability derivatives $ (59 ) $ 38 $ 11 $ (10 ) As of January 3, 2015: Total asset derivatives $ 43 $ (29 ) $ — $ 14 Total liability derivatives $ (88 ) $ 29 $ 50 $ (9 ) AprilJuly 4, 2015 and March 29,June 28, 2014 was as follows:(millions) Location of gain (loss)
recognized in income
recognized in Apr. 4, Mar. 29, 2015 2014 Other income (expense), net $ (4 ) $ 1 Interest expense 9 4 $ 5 $ 5 (millions) July 4,
2015 June 28,
2014Foreign currency exchange contracts Other income (expense), net $ — $ 1 Interest rate contracts Interest expense (2 ) 5 Total $ (2 ) $ 6 (a) Includes the ineffective portion and amount excluded from effectiveness testing. (millions) Gain (loss)
recognized in AOCI Gain (loss)
reclassified from
AOCI into income
in income (a) Gain (loss)
recognized in
income (a) Apr. 4, Mar. 29, Apr. 4, Mar. 29, Apr. 4, Mar. 29, 2015 2014 2015 2014 2015 2014 $ 17 $ 5 COGS $ 7 $ 1 Other income (expense), net $ — $ — — — SGA expense — 1 Other income (expense), net — — (9 ) (7 ) Interest expense — 9 N/A — — — 1 COGS (3 ) (1 ) Other income (expense), net — — $ 8 $ (1 ) $ 4 $ 10 $ — $ — (millions) July 4,
2015 June 28,
2014 July 4,
2015 June 28,
2014 July 4,
2015 June 28,
2014Foreign currency exchange contracts $ 2 $ (8 ) COGS $ 9 $ 1 Other income (expense), net $ (2 ) $ (2 ) Foreign currency exchange contracts (6 ) 1 SGA expense (2 ) 2 Other income (expense), net — — Interest rate contracts — (16 ) Interest expense (1 ) — N/A — — Commodity contracts — — COGS (3 ) (2 ) Other income (expense), net — — Total $ (4 ) $ (23 ) $ 3 $ 1 $ (2 ) $ (2 ) (a) Includes the ineffective portion and amount excluded from effectiveness testing. (millions)
recognized in Apr. 4, Mar. 29, 2015 2014 $ — $ (3 ) 57 — $ 57 $ (3 ) (millions) July 4,
2015 June 28,
2014Foreign currency exchange contracts $ — $ 3 Foreign currency denominated long-term debt (14 ) — Total $ (14 ) $ 3 (millions) Location of gain
(loss) recognized
in income Gain (loss)
recognized in
income Apr. 4, Mar. 29, 2015 2014 Other income (expense), net $ 2 $ (1 ) Interest expense — (4 ) COGS (11 ) 13 $ (9 ) $ 8 (millions) July 4,
2015 June 28,
2014Foreign currency exchange contracts COGS $ 1 $ — Foreign currency exchange contracts Other income (expense), net 5 (1 ) Commodity contracts COGS 13 (18 ) Commodity contracts SGA 1 — Total $ 20 $ (19 ) (millions) July 4,
2015 June 28,
2014Foreign currency exchange contracts Other income (expense), net $ (4 ) $ 2 Interest rate contracts Interest expense 7 9 Total $ 3 $ 11 (a) Includes the ineffective portion and amount excluded from effectiveness testing. (millions) July 4,
2015 June 28,
2014 July 4,
2015 June 28,
2014 July 4,
2015 June 28,
2014Foreign currency exchange contracts $ 19 $ (3 ) COGS $ 16 $ 2 Other income (expense), net $ (2 ) $ (2 ) Foreign currency exchange contracts (6 ) 1 SGA expense (2 ) 3 Other income (expense), net — — Interest rate contracts (9 ) (23 ) Interest expense (1 ) 9 N/A — — Commodity contracts — 1 COGS (6 ) (3 ) Other income (expense), net — — Total $ 4 $ (24 ) $ 7 $ 11 $ (2 ) $ (2 ) (a) Includes the ineffective portion and amount excluded from effectiveness testing. (millions) July 4,
2015 June 28,
2014Foreign currency denominated long-term debt $ 43 $ — Total $ 43 $ — (millions) July 4,
2015 June 28,
2014Foreign currency exchange contracts COGS $ 1 $ — Foreign currency exchange contracts Other income (expense), net 7 (2 ) Interest rate contracts Interest expense — (4 ) Commodity contracts COGS 2 (5 ) Commodity contracts SGA 1 — Total $ 11 $ (11 ) $15$4 million of net deferred gains reported in AOCI at AprilJuly 4, 2015 to be reclassified to income, assuming market rates remain constant through contract maturities.AprilJuly 4, 2015 was $17$21 million. If the credit-risk-related contingent features were triggered as of AprilJuly 4, 2015, the Company would be required to post additional collateral of $17$15 million. In addition, certain derivative instruments contain provisions that would be triggered in the event the Company defaults on its debt agreements. There were no collateral posting requirements as of AprilJuly 4, 2015 triggered by credit-risk-related contingent features.(millions) Fair Value Total Loss Description: Long-lived assets $ 15 $ (67 ) Total $ 15 $ (67 ) (millions) Fair Value Total Loss Description: Long-lived assets $ 3 $ (21 ) Total $ 3 $ (21 ) AprilJuly 4, 2015:(millions) Fair Value Carrying Value $ 360 $ 360 7,182 6,561 $ 7,542 $ 6,921 (millions) Fair Value Carrying Value Current maturities of long-term debt $ 754 $ 754 Long-term debt 6,131 5,800 Total $ 6,885 $ 6,554 AprilJuly 4, 2015, the Company was not in a significant net asset position with any counterparties with which a master netting agreement would apply.AprilJuly 4, 2015 the Company had noposted $6 million of collateral posting requirementsin the form of cash related to reciprocal collateralization agreements.agreements, which was reflected as an increase in accounts receivable, net on Consolidated Balance Sheet. As of AprilJuly 4, 2015 the Company posted $40$5 million in margin deposits for exchange-traded commodity derivative instruments, which was reflected as an increase in accounts receivable, net.27%29% of consolidated trade receivables at AprilJuly 4, 2015.on-goingprevious labor negotiations with the union representing the work-force at its Memphis, TN cereal production facility, the National Labor Relations Board (NLRB) filed a complaint alleging unfair labor practices under the National Labor Relations Act in March 2014. In July 2014, a U.S. District Court judge ruled that the Memphis employees were entitled to return to work while the underlying litigation continues and employees have subsequently returned to work. In August 2014, an NLRB Administrative Law Judge dismissed the complaint that initiated the underlying litigation. In May 2015, the NLRB reversed the decision of the Administrative Law Judge in favor of the union. The Company will be appealing this decision and the case continues. This litigation is not expected to have a material effect on the production or distribution of products from the Memphis, TN facility or a material financial impact on the Company. As of AprilJuly 4, 2015, the Company has not recorded a liability related to this matter as an adverse outcome is not considered probable. The Company will continue to evaluate the likelihood of potential outcomes for this case as the litigation continues.designated asconsidered a highly inflationary economy. As such, the functional currency for the Company's operations in Venezuela is the U.S. dollar, which in turn, requires bolivar denominated monetary assets and liabilities to be remeasured into U.S. dollars using an exchange rate at which such balances could be settled as of the balance sheet date. In addition, revenues and expenses are recorded in U.S. dollars at an appropriate rate on the date of the transaction. Gains and losses resulting from the translationremeasurement of the financial statements of subsidiaries operating in highly inflationary economiesbolivar denominated monetary assets and liabilities are recorded in earnings. In 2013, the Company began using the CADIVI, now CENCOEX, exchangeofficial rate, which iscontinues to be 6.3 bolivars to the U.S. dollar at July 4, 2015, to translateremeasure its Venezuelan subsidiary’s financial statements to U.S. dollars. The CENCOEX exchangeofficial rate is presently restricted to some raw materials, finishedmachineryservices for industry sectors considered as national priorities,essential, which isare primarily food, medicines and medicines.Ina few others.established an auction-basedannounced a complementary currency transaction program referredexchange system, SICAD, followed by the establishment of another floating rate exchange system (referred to as SICAD1. SICAD1 allowed entities in specific sectors to bid for U.S. dollars to be used for specified import transactions, with the minimum exchange rate to be offered being 6.3 bolivars to the U.S. dollar.SICAD II) during 2014. In addition in 2014, the Venezuelan government expanded SICAD1 to include prospective dividends and royalties and established new profit margin controls. As the Company’s Venezuelan subsidiary declares dividends or pays royalties in the future, based on the availability of U.S. dollars exchanged under the SICAD1 program, the realized exchange losses on payments made in U.S. dollars would be recognized in earnings. On profit margin controls, the Company continues to ensure it is complying with the requirements.In 2014, the Venezuelan government also established a third foreign exchange mechanism, known as SICAD2. SICAD2 relied on U.S. dollar cash and U.S. dollar denominated bonds offered by the Venezuelan Central Bank, PDVSA (the national oil and gas company) and private companies. The Venezuelan government allowed all industry sectors to access SICAD2 and indicated that its use would not be restricted as to purpose.In the first quarter ofFebruary 2015, the Venezuelan government establishedannounced the addition of a new foreign currency exchange mechanism, knownsystem referred to as SIMADI.the Marginal Currency System, or SIMADI, has been reported to be an open market in which rates will be determined based on supply and demand, however there has been minimal transactions exchanged in the first quarter of 2015. In connectionalong with the establishmentmerger of SIMADI, SICAD1 and SICAD2 have been merged into one exchange known asthe SICAD II system with SICAD.AprilJuly 4, 2015, the published SICAD and SIMADI rates offered were 12.012.8 and 193.0198.4 bolivars to the U.S. dollar, respectively.In lightcurrent difficultrelated purchasing arrangements. While the Company continues to qualify for participation in CENCOEX at the official rate, there has been a continued reduction in the level of U.S. dollars available to exchange, in part due to recent declines in the price of oil and the overall decline of the macroeconomic environment within the country. The Company has experienced an increase in the amount of time it takes to exchange bolivars for U.S. dollars through the CENCOEX exchange during the year. Given this economic backdrop, and upon review of current U.S. dollar cash needs in the Company's Venezuela operations as of the quarter ended July 4, 2015, the Company concluded that it is no longer able to obtain sufficient U.S. dollars on a timely basis through the CENCOEX exchange to support its Venezuela operations. The Company has evaluated all of the facts and circumstances surrounding its Venezuelan business and determined that as of July 4, 2015, the SIMADI rate is the appropriate rate to use for remeasuring its Venezuelan subsidiary’s financial statements.rate. As of April 4, 2015 and January 3, 2015official rate however, the Company remeasuredconsiders it reasonably possible to utilize alternate exchange mechanisms in the future. The Company is continuing to take actions to further reduce its Venezuelan subsidiary’s financial statementsreliance on imports in order to run its operations without the need for U.S. dollars using the CENCOEX exchange rate.dollars. The Company will continue to monitor local conditions and its continued ability to obtain U.S. dollars atthrough the CENCOEXvarious exchange rate, and the use, if applicable, of the SICAD or SIMADI mechanisms available to determine the appropriate rate for remeasurement.For the quarter ended April 4, 2015, Venezuela represented approximately 2% of total net sales and 3% of total operating profit. As of April 4, 2015 and January 3, 2015, the Company’s net monetary assets denominated in the Venezuelan bolivar were approximately $117 million and $100 million, respectively in U.S. dollars applying the CENCOEX exchange rate.If the CENCOEX exchange rate were to devalue further or if the currently less favorable SICAD or SIMADI exchange rates were extended to apply to a greater portion of the Company’s net monetary assets in Venezuela, the Company would recognize a devaluation charge in earnings. The Company continues to monitor the currency developments in Venezuela and take protective measures against currency devaluation which may include converting monetary assets into non-monetary assets which the Company can use in its business.The Company has the following reportable segments: U.S. Morning Foods; U.S. Snacks; U.S. Specialty; North America Other; Europe; Latin America; and Asia Pacific. SouthSub-Saharan Africa, Australia and other Asian and Pacific markets. Quarter ended April 4, March 29, (millions) 2015 2014 $ 776 $ 799 854 864 361 372 433 482 607 705 295 278 230 242 $ 3,556 $ 3,742 $ 127 $ 126 80 86 78 87 59 83 61 65 51 48 12 16 468 511 (84 ) 103 $ 384 $ 614 Quarter ended Year-to-date period ended (millions) July 4,
2015June 28,
2014 July 4,
2015June 28,
2014Net sales U.S. Morning Foods $ 742 $ 759 $ 1,518 $ 1,558 U.S. Snacks 835 851 1,689 1,715 U.S. Specialty 270 276 631 648 North America Other 439 464 872 946 Europe 650 767 1,257 1,472 Latin America 328 320 623 598 Asia Pacific 234 248 464 490 Consolidated $ 3,498 $ 3,685 $ 7,054 $ 7,427 Operating profit U.S. Morning Foods $ 131 $ 137 $ 258 $ 263 U.S. Snacks (a) 160 124 240 210 U.S. Specialty 59 63 137 150 North America Other 37 74 96 157 Europe 57 50 118 115 Latin America (b) (56 ) 47 (5 ) 95 Asia Pacific 10 5 22 21 Total Reportable Segments 398 500 866 1,011 Corporate (c) 14 (33 ) (70 ) 70 Consolidated $ 412 $ 467 $ 796 $ 1,081 (a) Includes a non-cash gain of $67 million associated with the deconsolidation of a VIE during the quarter and year-to-date periods ended July 4, 2015. (b) Includes a non-cash loss of $103 million associated with the remeasurement of the financial statements of the Company's Venezuela subsidiary during the quarter and year-to-date periods ended July 4, 2015. (c) Includes mark-to-market adjustments for pension plans, commodity and commodityforeign currency contracts totaling $(67)$35 million and $116($12) million for the quarters ended AprilJuly 4, 2015 and March 29,June 28, 2014, respectively. Includes mark-to-market adjustments for pension plans, commodity and foreign currency contracts totaling ($32) million and $104 million for the year-to-date periods ended July 4, 2015 and June 28, 2014, respectively.share.the Companywe completed itsthe acquisition of a majority interest in Bisco Misr, the number one packaged biscuits company in Egypt for $125 million, or $117 million net of cash and cash equivalents acquired.Comparabilityeffectedaffected significantly by several types of financial impacts such as foreign currency translation, integration costs, pension and commodity mark-to-market adjustments for pension plans, commodities and certain foreign currency contracts, Project K costs, costs associated with the Venezuela remeasurement and long-lived asset impairment, costs associated with the VIE deconsolidation, differences in shipping days, acquisitions, dispositions, and other costs impacting comparability. To provide increased transparency and assist in understanding our comparable operating performance, we use non-GAAP financial measures within MD&A that exclude these financial impacts.AprilJuly 4, 2015, our reported net sales declined by 5.0%, driven5.1% primarily bythe result of currency devaluation and currency-neutraldevaluation. Currency-neutral comparable net sales declinedimproved by 0.3%0.1%. We experienced currency-neutral comparable net sales growth in Latin America, Asia-Pacific, and in the U. S. Frozen Foods and Canadian businesses which are included in the North America Other reportable segment. We experienced currency-neutral net sales declines in all North America reportable segments,the U.S. Morning Foods, U.S. Snacks, U.S. Specialty, and currency-neutral comparable net sales growth in Europe Latin America, and Asia-Pacific reportable segments. Reported operating profit decreased by 37.5%11.6%, driven primarily by mark-to-market charges on pension plans, currency devaluation, andthe remeasurement of our Venezuelan business at the SIMADI rate of 198 Venezuelan bolivars to the U.S. dollar, Project K costs.costs, and foreign currency devaluation. Currency-neutral comparable operating profit declined by 1.9%. The decline in currency-neutral comparable operating profit was driven by slightly lower net sales6.8% due to higher distribution costs, costs associated with the timing of production, and investments in capability, including sales and re-establishmentthe resetting of the Kashi organization.incentive compensation levels. This was partially offset by favorable timing in brand-building investment.$.64$.63 for the quarter was down 42.9%23.2% compared to the prior year of $1.12.$.82. Reported diluted EPS for the quarter was impacted negatively by the remeasurement of the Venezuelan business to the SIMADI rate ($.37), Project K costs ($.18), foreign currency translation ($.05) and integration costs ($.01), and was impacted positively by the VIE deconsolidation ($.21) and mark-to-market accounting ($.06). Currency-neutral comparable diluted EPS of $1.04 increased$.97 decreased by 3.0%4.9% compared to prior year of $1.01. This result was better than$1.02, in line with our expectations as a result of favorable operating profit delivery and a better-than-expected tax rate. Quarter ended Consolidated results April 4, March 29, (dollars in millions, except per share data) 2015 2014 $ 3,556 $ 3,742 (2 ) — 8 2 (3 ) — $ 3,553 $ 3,740 (176 ) — $ 3,729 $ 3,740 $ 384 $ 614 (67 ) 116 (68 ) (54 ) (8 ) (7 ) $ 527 $ 559 (21 ) — $ 548 $ 559 $ 76 $ 165 (21 ) 36 (21 ) (18 ) (2 ) (2 ) $ 120 $ 149 (2 ) — $ 122 $ 149 25.1 % 28.9 % (1.0 ) 0.5 (0.8 ) (0.4 ) 1.4 — 0.1 — 25.4 % 28.8 % 0.7 — 24.7 % 28.8 % $ 227 $ 406 (46 ) 80 (47 ) (36 ) (25 ) — (6 ) (5 ) $ 351 $ 367 (19 ) — $ 370 $ 367 $ 0.64 $ 1.12 (0.13 ) 0.22 (0.13 ) (0.10 ) (0.07 ) — (0.01 ) (0.01 ) $ 0.98 $ 1.01 (0.06 ) — $ 1.04 $ 1.01 3.0 % (3.8 )% a)Includes mark-to-market adjustments for pension plans and commodity contracts as reflected in selling, general and administrative expense as well as cost of goods sold. Actuarial gains/losses for pension plans are recognized in the year they occur. A portion of these mark-to-market adjustments were capitalized as inventoriable cost at the end of 2014 and 2013. These amounts have been recorded in earnings in the first quarter of 2015 and 2014, respectively. Mark-to-market adjustments for commodities reflect the changes in the fair value of contracts for the difference between contract and market prices for the underlying commodities. The resulting gains/losses are recognized in the quarter they occur.b)Costs incurred related primarily to the execution of Project K, a four-year efficiency and effectiveness program. The focus of the program will be to strengthen existing businesses in core markets, increase growth in developing and emerging markets, and drive an increased level of value-added innovation. The program is expected to provide a number of benefits, including an optimized supply chain infrastructure, the implementation of global business services, and a new global focus on categories.c)During the quarter ended April 4, 2015, the Company has determined that certain assets related to a portion of the business may not be fully recoverable and has recorded a non-cash charge within other income (expense). Refer to Note 4 within the Notes to Consolidated Financial Statements for further information.d)Includes impact of integration costs associated with the Pringles and Bisco Misr acquisitions.e)Includes impact of Bisco Misr acquisition during the first quarter of 2015 and the divestiture of Loma Linda in 2014.f)Comparable net sales, comparable operating profit, comparable income taxes, comparable effective income tax rate, comparable net income attributable to Kellogg Company and comparable diluted EPS are non-GAAP measures which are reconciled to the directly comparable measure in accordance with U.S. GAAP within this table. We believe the use of such non-GAAP measures provides increased transparency and assists in understanding our comparable operating performance.g)Currency neutral comparable net sales, currency neutral comparable operating profit, currency neutral comparable income taxes, currency neutral comparable effective income tax rate, currency neutral comparable net income attributable to Kellogg Company, currency neutral comparable diluted EPS and currency neutral comparable diluted EPS growth are non-GAAP measures which are reconciled to the directly comparable measure in accordance with U.S. GAAP within this table. We believe the use of such non-GAAP measures provides increased transparency and assists in understanding our comparable operating performance. Quarter ended Year-to-date period ended July 4,
2015June 28,
2014July 4,
2015June 28,
2014Reported net sales $ 3,498 $ 3,685 $ 7,054 $ 7,427 Project K — — (2 ) — Acquisitions/divestitures 15 3 23 5 Differences in shipping days — — (3 ) — Comparable net sales $ 3,483 $ 3,682 $ 7,036 $ 7,422 Foreign currency impact (202 ) — (378 ) — Currency neutral comparable net sales $ 3,685 $ 3,682 $ 7,414 $ 7,422 Reported operating profit $ 412 $ 467 $ 796 $ 1,081 Mark-to-market 35 (12 ) (32 ) 104 Project K (90 ) (78 ) (158 ) (132 ) VIE deconsolidation 67 — 67 — Integration costs (6 ) (10 ) (14 ) (17 ) Acquisitions/divestitures 2 — 2 — Venezuela remeasurement (103 ) — (103 ) — Comparable operating profit $ 507 $ 567 $ 1,034 $ 1,126 Foreign currency impact (22 ) — (43 ) — Currency neutral comparable operating profit $ 529 $ 567 $ 1,077 $ 1,126 Reported income taxes $ 85 $ 122 $ 161 $ 287 Mark-to-market 13 (4 ) (8 ) 32 Project K (26 ) (20 ) (47 ) (38 ) VIE deconsolidation (2 ) — (2 ) — Integration costs (1 ) (3 ) (3 ) (5 ) Acquisitions/divestitures 1 — 1 — Venezuela remeasurement (20 ) — (20 ) — Comparable income taxes $ 120 $ 149 $ 240 $ 298 Foreign currency impact (2 ) — (4 ) — Currency neutral comparable income taxes $ 122 $ 149 $ 244 $ 298 Reported effective income tax rate 27.6 % 29.0 % 26.4 % 28.9 % Mark-to-market 1.1 (0.2 ) 0.1 0.1 Project K (0.5 ) 0.5 (0.7 ) 0.1 VIE deconsolidation (7.4 ) — (1.9 ) — Integration costs 0.3 — 0.2 — Venezuela remeasurement 7.2 — 2.6 — Comparable effective income tax rate 26.9 % 28.7 % 26.1 % 28.7 % Foreign currency impact 0.8 — 0.7 — Currency neutral comparable effective income tax rate 26.1 % 28.7 % 25.4 % 28.7 % Reported net income attributable to Kellogg Company $ 223 $ 295 $ 450 $ 701 Mark-to-market 22 (8 ) (24 ) 72 Project K (64 ) (58 ) (111 ) (94 ) VIE deconsolidation 75 — 50 — Integration costs (5 ) (7 ) (11 ) (12 ) Acquisitions/divestitures 1 — 1 — Venezuela remeasurement (132 ) — (132 ) — Comparable net income attributable to Kellogg Company $ 326 $ 368 $ 677 $ 735 Foreign currency impact (18 ) — (37 ) — Currency neutral comparable net income attributable to Kellogg Company $ 344 $ 368 $ 714 $ 735 Reported diluted EPS $ 0.63 $ 0.82 $ 1.26 $ 1.94 Mark-to-market 0.06 (0.02 ) (0.07 ) 0.20 Project K (0.18 ) (0.16 ) (0.31 ) (0.26 ) VIE deconsolidation 0.21 — 0.14 — Integration costs (0.01 ) (0.02 ) (0.03 ) (0.03 ) Venezuela remeasurement (0.37 ) — (0.37 ) — Comparable diluted EPS $ 0.92 $ 1.02 $ 1.90 $ 2.03 Foreign currency impact (0.05 ) — (0.11 ) — Currency neutral comparable diluted EPS $ 0.97 $ 1.02 $ 2.01 $ 2.03 Currency neutral comparable diluted EPS growth (4.9 )% (2.9 )% (1.0 )% (3.4 )% firstsecond quarter of 2015 versus 2014:(dollars in millions) U.S.
Morning Foods U.S.
Snacks U.S.
Specialty North
America
Other Europe Latin
America Asia
Pacific Corp-
orate Consol-
idated $ 776 $ 854 $ 361 $ 433 $ 607 $ 295 $ 230 $ — $ 3,556 $ 799 $ 864 $ 372 $ 482 $ 705 $ 278 $ 242 $ — $ 3,742 (2.9 )% (1.1 )% (3.0 )% (10.2 )% (13.8 )% 6.3 % (5.3 )% — % (5.0 )% — % — % — % (.5 )% — % — % — % — % (.1 )% — % — % (.5 )% — % 1.1 % — % — % — % .2 % — % — % — % — % (.4 )% — % — % — % (.1 )% (2.9 )% (1.1 )% (2.5 )% (9.7 )% (14.5 )% 6.3 % (5.3 )% — % (5.0 )% — % — % — % (3.6 )% (15.5 )% (9.4 )% (9.3 )% — % (4.7 )% (2.9 )% (1.1 )% (2.5 )% (6.1 )% 1.0 % 15.7 % 4.0 % — % (.3 )% (dollars in millions) U.S.
Morning Foods U.S.
Snacks U.S.
Specialty North
America
Other Europe Latin
America Asia
Pacific Corp-
orate Consol-
idated $ 127 $ 80 $ 78 $ 59 $ 61 $ 51 $ 12 $ (84 ) $ 384 $ 126 $ 86 $ 87 $ 83 $ 65 $ 48 $ 16 $ 103 $ 614 .2 % (7.3 )% (10.2 )% (27.9 )% (5.8 )% 4.8 % (22.8 )% (182.1 )% (37.5 )% — % — % — % — % — % — % — % (154.1 )% (28.1 )% 1.8 % (3.1 )% (.1 )% (4.2 )% (9.4 )% 8.1 % 2.3 % (213.8 )% (3.5 )% — % (.1 )% — % — % .9 % (.1 )% (8.9 )% (24.8 )% (.2 )% — % — % .1 % — % .7 % — % — % — % .2 % — % — % — % — % (.5 )% — % — % — % (.1 )% (1.6 )% (4.1 )% (10.2 )% (23.7 )% 2.5 % (3.2 )% (16.2 )% 210.6 % (5.8 )% .4 % — % — % (4.3 )% (10.3 )% (8.4 )% (13.0 )% (87.1 )% (3.9 )% (2.0 )% (4.1 )% (10.2 )% (19.4 )% 12.8 % 5.2 % (3.2 )% 297.7 % (1.9 )% a)Includes mark-to-market adjustments for pension plans and commodity contracts as reflected in selling, general and administrative expense as well as cost of goods sold. Actuarial gains/losses for pension plans are recognized in the year they occur. A portion of these mark-to-market adjustments were capitalized as inventoriable cost at the end of 2014 and 2013. These amounts have been recorded in earnings in the first quarter of 2015 and 2014, respectively. Mark-to-market adjustments for commodities reflect the changes in the fair value of contracts for the difference between contract and market prices for the underlying commodities. The resulting gains/losses are recognized in the quarter they occur.b)Costs incurred related primarily to the execution of Project K, a four-year efficiency and effectiveness program. The focus of the program will be to strengthen existing businesses in core markets, increase growth in developing and emerging markets, and drive an increased level of value-added innovation. The program is expected to provide a number of benefits, including an optimized supply chain infrastructure, the implementation of global business services, and a new global focus on categories.c)Includes impact of integration costs associated with the Pringles and Bisco Misr acquisitions.d)Includes impact of Bisco Misr acquisition during the first quarter of 2015 and the divestiture of Loma Linda in 2014.e)Comparable net sales and comparable operating profit growth are non-GAAP measures which are reconciled to the directly comparable measure in accordance with U.S. GAAP within this table. We believe the use of such non-GAAP measures provides increased transparency and assists in understanding our comparable operating performance.f)Currency neutral comparable net sales and currency neutral comparable operating profit growth are non-GAAP measures which are reconciled to the directly comparable measure in accordance with U.S. GAAP within this table. We believe the use of such non-GAAP measures provides increased transparency and assists in understanding our comparable operating performance.(dollars in millions) Europe 2015 net sales $ 742 $ 835 $ 270 $ 439 $ 650 $ 328 $ 234 $ — $ 3,498 2014 net sales $ 759 $ 851 $ 276 $ 464 $ 767 $ 320 $ 248 $ — $ 3,685 % change - 2015 vs. 2014: As Reported (2.3 )% (1.8 )% (2.4 )% (5.5 )% (15.3 )% 2.5 % (5.2 )% — % (5.1 )% Project K — % — % — % — % — % 0.2 % — % — % — % Acquisitions/divestitures — % — % (1.2 )% — % 2.0 % — % — % — % 0.3 % Comparable (2.3 )% (1.8 )% (1.2 )% (5.5 )% (17.3 )% 2.3 % (5.2 )% — % (5.4 )% Foreign currency impact — % — % — % (4.2 )% (14.8 )% (12.2 )% (12.0 )% — % (5.5 )% Currency neutral comparable (2.3 )% (1.8 )% (1.2 )% (1.3 )% (2.5 )% 14.5 % 6.8 % — % 0.1 % (dollars in millions) Europe 2015 operating profit $ 131 $ 160 $ 59 $ 37 $ 57 $ (56 ) $ 10 $ 14 $ 412 2014 operating profit $ 137 $ 124 $ 63 $ 74 $ 50 $ 47 $ 5 $ (33 ) $ 467 % change - 2015 vs. 2014: As Reported (3.6 )% 29.6 % (5.9 )% (51.6 )% 13.7 % (219.3 )% 147.2 % 145.8 % (11.6 )% Mark-to-market — % — % — % — % — % — % — % 163.2 % 9.9 % Project K 1.7 % (3.8 )% (0.6 )% (25.4 )% 8.5 % (4.6 )% 101.1 % 4,115.3 % (5.1 )% VIE deconsolidation — % 52.1 % — % — % — % — % — % — % 11.9 % Integration impact — % — % — % — % 7.7 % (0.9 )% (9.5 )% (68.3 )% — % Acquisitions/divestitures — % — % — % — % 1.5 % — % — % — % 0.3 % Venezuela remeasurement — % — % — % — % — % (212.0 )% — % (677.8 )% (18.1 )% Comparable (5.3 )% (18.7 )% (5.3 )% (26.2 )% (4.0 )% (1.8 )% 55.6 % (3,386.6 )% (10.5 )% Foreign currency impact 0.2 % — % — % (3.8 )% (9.6 )% (10.7 )% (20.4 )% (1,860.7 )% (3.7 )% Currency neutral comparable (5.5 )% (18.7 )% (5.3 )% (22.4 )% 5.6 % 8.9 % 76.0 % (1,525.9 )% (6.8 )% 2.9%2.3% as a result of unfavorable volume andwhich was partially offset by favorable pricing/mix. This segment consists of cereal, toaster pastries, health and wellness bars, and beverages.continued to declinewas approximately flat in the quarter, although trends have started to improve.reflecting improving trends. We gained share in the category as result ofRaisin Bran®,Froot Loops®, andRice Krispies® all postingreported solid consumption increases and share gains duringin the quarter. This good performance was partially offset by the impactquarter for three of the discontinuation of prior innovationour core brands: Special K®, Raisin Bran®, and the performance of theFroot Loops®. Special K® brand.has performed well behind a new "Eat Special, Feel Special" campaign, in-store events, and food improvements. In addition, our innovation launches performedcontinued to perform well in the quarter:Raisin Bran® Cranberry,Special K® Protein, andDisney Frozen®-themed cereal.quarter asquarter. Sales trends have improved, resulting in consumption declined.growth for the quarter. Health and wellness bars and beverages each reported a sales decline for the quarter.2.0%5.5% due to the unfavorable sales performance and increased distribution costs, and the resetting of incentive compensation levels which waswere partially offset by net cost deflation resulting from productivity savings and Project K savings. In addition there was favorable brand-building investment in the quarter associated with the timing of commercial programs.1.1%1.8% as a result of decreased volume partially offset by favorableand unfavorable pricing/mix. This segment consists of crackers, cereal bars, cookies, savory snacks, and fruit-flavored snacks. slight sales decline as a result of lappingunfavorable year-over-year timing of innovation launches. We launched a significant slate of innovations that were launched in early 2014. Our innovation for 2015 is planned for launch innear the second quarter.end of the current quarter including Cheez-It® Toasty, Townhouse® Focaccia, and Club® Snack Sticks. Cheez-It® reported strong consumption growth and share gains as a result of innovations and core product performance. Core products in theClub® brand continued to report consumption growth in the quarter resulting in solid consumption and share gain for the brand.quarter. The gains inClubCheez-It®have been offset by consumption declines inTownhouse®, which was lapping innovation launches, and continued weaknessdistribution losses inSpecial K® Cracker Chips. We have redesigned theRedesigned Special K® food and packaging andhas resulted in improved velocity for the consumer communication supporting these changes begins in earnest in the second quarter.product where we have maintained distribution.was flatposted a sales decline for the quarter due to continued weakness in theSpecial K® andFiber Plus® brands. The newSpecial K® bars that we launched in late 2014 have performed well and recently launched renovations to this food are off to a good startstart. We also recently launched Jif® Peanut Butter bars, Nutri-grain® Harvest Apple bars, and we have renovations and more new products to be launched in this category later in the year. This activity ties into the initiatives we are launching in other categories and regions around the world.Rice Krispies Treats® blasted M&Ms which we expect to do well. Rice Krispies Treats® reported double-digit consumption gains and gained share as a result of good core growth and innovation.declined resulting in lost share as we saw continued declines in ourRight Bites® 100-calorie packs inposted sales growth for the quarter as a result of trends in weight-management foods.Simply MadeFudge Shoppe® cookies posted double-digit and Sandies® both reported consumption growth and we have additional innovation planned for this brand later in the year.share gains. flatsolid sales growth for the quarter even as the business was lapping difficult comparisons due to the launch ofPringles® Tortilla last year. We have increased levels of brand-building investment planned for the remainder of the year and we expect sales growth to increase as a result.4.1%18.7% due to unfavorable sales performance, negative operating leverage due to the sales decline, increased distribution costs, and increased investment in brand-building for consumer promotions and advertising to support the re-launchresetting ofSpecial K® Cracker Chips and snack bars.2.5%1.2% as a result of decreasedincreased volume and unfavorable pricing/mix. The sales decline was the result of a distributorweakness in Foodservice, partially due to the exit of some unprofitable business. The Convenience channel that decreased levels of inventory dramatically during the quarter. Without this impact,business posted sales in the Convenience channel, and the reportable segmentgrowth as a whole, would have increased slightly in the quarter. In the Convenience business, we increasedresult of strong innovations, increasing share in five of the Cracker, Wholesome Snacks, Cookie, and Salty Snack categories. The Foodservice business posted net sales growth with good resultsseven categories in our top four customers.10.2%5.3% due primarily to the decline in sales.6.1%1.3% due to decreasedincreased volume and unfavorable pricing/mix.decline due primarily to a supply disruption that occurred due to a limited recall of aMorningstar Farmsincrease as the Eggo® product late in 2014. Supply has been restored in the first quarter. TheEggo® franchise posted strong sales growth, higher rates of penetration, consumption growth and share gains in the quarter due to good performance from the core products.products and innovations. The newEggo®hand-held sandwiches that we launched recentlyearly in the year continue to do well and already account for three points of share. In addition, the relaunch of theL’Eggo My Eggo® brand-building program continues to drive the entire brand. declines resulting from prior distribution losses and the unfavorable year-over-year timing of year-over-year activity. We believeinnovations. Trends for this business have improved as we began to launch new products and re-establish distribution. During the quarter, we launched 5 product lines that these distribution losses are largely behind us. TheBear Nakedmeet the USDA's Organic standard during the quarter: Kashi® Sprouted Grains cereal, Kashi® brand increased distribution Sweet Potato cereal, Kashi® Organic Promise granola, Kashi® Overnight Muesli, and category share and posted net sales growth. Canada reported a decline in sales driven primarily by the timing and phasing of activity and weakness in theSpecial KKashi® brand.19.4%22.4% primarily due to unfavorable sales performance in the Kashi business, net cost inflation, including transactional currency expense, in the Canadian business, increased distribution costs realized by the U.S. Frozen business, and unfavorable production costs. This was partially offset by favorable timingthe resetting of investment in brand-building.increased 1.0%declined 2.5% as a result of increaseddecreased volume which was partially offset byand slightly unfavorable pricing/mix. The cereal business declined in the quarter dueas the cereal category continued to the timing of promotions and weakness in thebe a challenge. We will restage our Special K® brand, although results were in line with our expectations. We have newly renovated food being launchedcereals early in the second quarter,half of the year, including the introduction of new packagingfood and support scheduled and innovations planned for later in the year.other activity. Savory snacks continued to performed well in the quarter, driven by good promotions and new flavors. We plan to launchPringles® Tortilla in the second quarter, which is expected to drivedelivering mid-single-digit currency-neutral comparable sales growth on a difficult double-digit comparison from last year. The launch of Pringles® Tortilla made an important contribution to sales, although it only launched recently. We continue to see growth for this business in key markets as it has in other regions.we gain distribution and increase commercial activity.12.8%5.6% due to increased sales and net cost deflation, including savings from Project K.15.7%14.5% due to favorable volume and pricing/mix. We experienced strong volume growth for both cereal and snacks in most of our markets in addition to strong price realization in Venezuela. Net sales growth was the result of good innovation and strong in-market activity. Excluding Venezuela, currency-neutral comparable net sales growth would have been approximately 3%4.3% for the quarter.5.2%8.9% due to favorable sales performance which was partially offset by net cost inflation and increased brand-building investment to support product launches and drive market penetration.4.0%6.8% as a result of increased volume which was partially offset by unfavorable pricing/mix. The sales increase was the result of double-digit growth in Asia and Sub-Saharan Africa due to performance in India, Japan, and South Korea.broad-based growth. In India we saw double-digit growth in our coreacross most brands and inas the new smaller-sized packs designed to make our products more affordable.affordable continued to drive growth. Japan grew at a double-digit rate due to the continued popularity of granolas and strong growth from All-Bran®. New advertising and innovation contributed to significant Special K® growth in South Korea, resulting in double-digit growth for this market. The savory snacks business postedcontinued to post solid growth across the region exceeding our expectations.behind successful commercial activities. This sales performance was partially offset by weakness in the Australian cereal and snacks businesses.3.2% due to the resetting of incentive compensation levels which was partially offset by reduced pension costs.(dollars in millions) Europe 2015 net sales $ 1,518 $ 1,689 $ 631 $ 872 $ 1,257 $ 623 $ 464 $ — $ 7,054 2014 net sales $ 1,558 $ 1,715 $ 648 $ 946 $ 1,472 $ 598 $ 490 $ — $ 7,427 % change - 2015 vs. 2014: As Reported (2.6 )% (1.5 )% (2.7 )% (7.9 )% (14.6 )% 4.3 % (5.2 )% — % (5.0 )% Project K — % — % — % (0.2 )% — % 0.1 % — % — % — % Acquisitions/divestitures — % — % (0.7 )% — % 1.5 % — % — % — % 0.2 % Differences in shipping days — % — % — % — % (0.2 )% — % — % — % — % Comparable (2.6 )% (1.5 )% (2.0 )% (7.7 )% (15.9 )% 4.2 % (5.2 )% — % (5.2 )% Foreign currency impact — % — % — % (4.0 )% (15.1 )% (10.9 )% (10.6 )% — % (5.1 )% Currency neutral comparable (2.6 )% (1.5 )% (2.0 )% (3.7 )% (0.8 )% 15.1 % 5.4 % — % (0.1 )% (dollars in millions) Europe 2015 operating profit $ 258 $ 240 $ 137 $ 96 $ 118 $ (5 ) $ 22 $ (70 ) $ 796 2014 operating profit $ 263 $ 210 $ 150 $ 157 $ 115 $ 95 $ 21 $ 70 $ 1,081 % change - 2015 vs. 2014: As Reported (1.8 )% 14.5 % (8.4 )% (39.1 )% 2.7 % (105.4 )% 12.1 % (197.8 )% (26.3 )% Mark-to-market — % — % — % — % — % — % — % (175.9 )% (11.0 )% Project K 1.8 % (3.1 )% (0.3 )% (14.2 )% (1.7 )% (1.5 )% 16.3 % (17.6 )% (4.1 )% VIE deconsolidation — % 30.2 % — % — % — % — % — % — % 6.0 % Integration impact — % — % — % — % 4.4 % (0.4 )% (10.3 )% (23.0 )% (0.1 )% Acquisitions/divestitures — % — % 0.1 % — % 1.1 % — % — % — % 0.2 % Differences in shipping days — % — % — % — % (0.3 )% — % — % — % — % Venezuela remeasurement — % — % — % — % — % (101.0 )% — % (30.5 )% (9.1 )% Comparable (3.6 )% (12.6 )% (8.2 )% (24.9 )% (0.8 )% (2.5 )% 6.1 % 49.2 % (8.2 )% Foreign currency impact 0.2 % — % — % (4.0 )% (9.9 )% (9.5 )% (15.3 )% (166.7 )% (3.8 )% Currency neutral comparable (3.8 )% (12.6 )% (8.2 )% (20.9 )% 9.1 % 7.0 % 21.4 % 215.9 % (4.4 )% investmentsthe resetting of incentive compensation levels. This has been partially offset by favorable brand-building investment associated with the timing of commercial programs.capabilitiesour crackers, cookies, and brand-buildingbars businesses as a result of unfavorable year-over-year timing of innovation launches, continued weakness in theemergingthe second quarter after being negatively impacted early in the year by a supply disruption that occurred due to a limited recall of a Morningstar Farms® product late in 2014.developingincreased distribution costs realized by the U.S. Frozen business.withinin addition to strong price realization in Venezuela. Net sales growth was the region.CorporateCurrency-neutralresult of good innovation and strong in-market activity. Excluding Venezuela, year-to-date currency-neutral comparable net sales growth would have been 3.5%.costs.first quarter and year-to-date periods of 2015 versus 2014 is as follows:Quarter 2015 2014 Change vs. prior
year (pts.) 35.0 % 40.2 % (5.2 ) (1.9 ) 3.1 (5.0 ) (0.9 ) (0.7 ) (0.2 ) (0.2 ) (0.1 ) (0.1 ) 38.0 % 37.9 % 0.1 0.1 — 0.1 37.9 % 37.9 % — (24.2 )% (23.8 )% (0.4 ) (1.0 ) (0.7 ) (0.3 ) — (0.1 ) 0.1 (23.2 )% (23.0 )% (0.2 ) (23.2 )% (23.0 )% (0.2 ) 10.8 % 16.4 % (5.6 ) (1.9 ) 3.1 (5.0 ) (1.9 ) (1.4 ) (.5 ) (0.2 ) (0.2 ) — 14.8 % 14.9 % (.1 ) 0.1 — .1 14.7 % 14.9 % (.2 ) a)Reported gross margin as a percentage of net sales. Gross margin is equal to net sales less cost of goods sold.b)Includes mark-to-market adjustments for pension plans and commodity contracts as reflected in selling, general and administrative expense as well as cost of goods sold. Actuarial gains/losses for pension plans are recognized in the year they occur. A portion of these mark-to-market adjustments were capitalized as inventoriable cost at the end of 2014 and 2013. These amounts have been recorded in earnings in the first quarter of 2015 and 2014, respectively. Mark-to-market adjustments for commodities reflect the changes in the fair value of contracts for the difference between contract and market prices for the underlying commodities. The resulting gains/losses are recognized in the quarter they occur.c)Costs incurred related primarily to the execution of Project K, a four-year efficiency and effectiveness program. The focus of the program will be to strengthen existing businesses in core markets, increase growth in developing and emerging markets, and drive an increased level of value-added innovation. The program is expected to provide a number of benefits, including an optimized supply chain infrastructure, the implementation of global business services, and a new global focus on categories.d)Includes impact of integration costs associated with Pringles and Bisco Misr acquisitions.e)Comparable gross margin, comparable SGA%, and comparable operating margin are non-GAAP measures which are reconciled to the directly comparable measure in accordance with U.S. GAAP within this table. We believe the use of such non-GAAP measures provides increased transparency and assists in understanding our comparable operating performance.f)Currency neutral comparable gross margin, currency neutral comparable SGA%, and currency neutral comparable operating margin are non-GAAP measures which are reconciled to the directly comparable measure in accordance with U.S. GAAP within this table. We believe the use of such non-GAAP measures provides increased transparency and assists in understanding our comparable operating performance.Quarter 2015 2014 Reported gross margin (a) 35.5 % 38.3 % (2.8 ) Mark-to-market (COGS) 1.0 (0.3 ) 1.3 Project K (COGS) (1.9 ) (0.9 ) (1.0 ) VIE deconsolidation (COGS) — — — Integration costs (COGS) (0.1 ) (0.2 ) 0.1 Venezuela remeasurement (COGS) (2.9 ) — (2.9 ) Comparable gross margin 39.4 % 39.7 % (0.3 ) Foreign currency impact 0.1 — 0.1 Currency neutral comparable gross margin 39.3 % 39.7 % (0.4 ) Reported SGA% (23.7 )% (25.6 )% 1.9 Mark-to-market (SGA) — — — Project K (SGA) (0.7 ) (1.2 ) 0.5 VIE deconsolidation (SGA) 1.9 — 1.9 Integration costs (SGA) (0.1 ) (0.1 ) — Venezuela remeasurement (SGA) — — — Comparable SGA% (24.8 )% (24.3 )% (0.5 ) Foreign currency impact 0.2 — 0.2 Currency neutral comparable SGA% (25.0 )% (24.3 )% (0.7 ) Reported operating margin 11.8 % 12.7 % (0.9 ) Mark-to-market 1.0 (0.3 ) 1.3 Project K (2.6 ) (2.1 ) (0.5 ) VIE deconsolidation 1.9 — 1.9 Integration costs (0.2 ) (0.3 ) 0.1 Venezuela remeasurement (2.9 ) — (2.9 ) Comparable operating margin 14.6 % 15.4 % (0.8 ) Foreign currency impact 0.3 — 0.3 Currency neutral comparable operating margin 14.3 % 15.4 % (1.1 ) Year-to-date 2015 2014 Reported gross margin (a) 35.3 % 39.2 % (3.9 ) Mark-to-market (COGS) (0.4 ) 1.4 (1.8 ) Project K (COGS) (1.4 ) (0.8 ) (0.6 ) VIE deconsolidation (COGS) — — — Integration costs (COGS) (0.1 ) (0.2 ) 0.1 Acquisitions/divestitures (COGS) (0.1 ) — (0.1 ) Venezuela remeasurement (COGS) (1.4 ) — (1.4 ) Comparable gross margin 38.7 % 38.8 % (0.1 ) Foreign currency impact 0.1 — 0.1 Currency neutral comparable gross margin 38.6 % 38.8 % (0.2 ) Reported SGA% (24.0 )% (24.6 )% 0.6 Mark-to-market (SGA) (0.1 ) — (0.1 ) Project K (SGA) (0.8 ) (0.9 ) 0.1 VIE deconsolidation (SGA) 0.9 — 0.9 Integration costs (SGA) (0.1 ) — (0.1 ) Acquisitions/divestitures (SGA) 0.1 — 0.1 Venezuela remeasurement (SGA) — — — Comparable SGA% (24.0 )% (23.7 )% (0.3 ) Foreign currency impact 0.1 — 0.1 Currency neutral comparable SGA% (24.1 )% (23.7 )% (0.4 ) Reported operating margin 11.3 % 14.6 % (3.3 ) Mark-to-market (0.5 ) 1.4 (1.9 ) Project K (2.2 ) (1.7 ) (0.5 ) VIE deconsolidation 0.9 — 0.9 Integration costs (0.2 ) (0.2 ) — Acquisitions/divestitures — — — Venezuela remeasurement (1.4 ) — (1.4 ) Comparable operating margin 14.7 % 15.1 % (0.4 ) Foreign currency impact 0.2 — 0.2 Currency neutral comparable operating margin 14.5 % 15.1 % (0.6 ) flat to prior year as net cost deflation was offset by unfavorable channel mix.Currency-neutral comparable SGA% increased by40 basis points and 20 basis points, respectively, as a resultincreased distribution costs, investment in food renovation, and unfavorable channel mix more than offset productivity savings and favorable pricing. Currency-neutral comparable SGA% for the quarter and year-to-date periods was unfavorable 70 basis points and 40 basis points, respectively, resulting from reinvestment of increased overhead spendingProject K savings into sales capabilities including adding sales representatives, re-establishing the Kashi business unit and resetting incentive compensation which was partially offset by reducedfavorable brand building investment in brand building.Quarter (dollars in millions) 2015 2014 $ 1,245 $ 1,504 (68 ) 116 (34 ) (25 ) (6 ) (4 ) 2 — $ 1,351 $ 1,417 (64 ) — $ 1,415 $ 1,417 $ 861 $ 890 (1 ) — 34 29 2 3 2 — $ 824 $ 858 (43 ) — $ 867 $ 858 $ 384 $ 614 (67 ) 116 (68 ) (54 ) (8 ) (7 ) $ 527 $ 559 (21 ) — $ 548 $ 559 a)Gross profit is equal to net sales less cost of goods sold.b)Includes mark-to-market adjustments for pension plans and commodity contracts as reflected in selling, general and administrative expense as well as cost of goods sold. Actuarial gains/losses for pension plans are recognized in the year they occur. A portion of these mark-to-market adjustments were capitalized as inventoriable cost at the end of 2014 and 2013. These amounts have been recorded in earnings in the first quarter of 2015 and 2014, respectively. Mark-to-market adjustments for commodities reflect the changes in the fair value of contracts for the difference between contract and market prices for the underlying commodities. The resulting gains/losses are recognized in the quarter they occur.c)Costs incurred related primarily to the execution of Project K, a four-year efficiency and effectiveness program. The focus of the program will be to strengthen existing businesses in core markets, increase growth in developing and emerging markets, and drive an increased level of value-added innovation. The program is expected to provide a number of benefits, including an optimized supply chain infrastructure, the implementation of global business services, and a new global focus on categories.d)Includes impact of integration costs associated with the Pringles and Bisco Misr acquisitions.e)Includes impact of Bisco Misr acquisition during the first quarter of 2015 and the divestiture of Loma Linda in 2014.f)Comparable gross profit, comparable SGA, and comparable operating profit are non-GAAP measures which are reconciled to the directly comparable measure in accordance with U.S. GAAP within this table. We believe the use of such non-GAAP measures provides increased transparency and assists in understanding our comparable operating performance.g)Currency neutral comparable gross profit, currency neutral comparable SGA, and currency neutral comparable operating profit are non-GAAP measures which are reconciled to the directly comparable measure in accordance with U.S. GAAP within this table. We believe the use of such non-GAAP measures provides increased transparency and assists in understanding our comparable operating performance. Quarter ended Year-to-date period ended (dollars in millions) July 4, 2015 June 28, 2014 July 4, 2015 June 28, 2014 Reported gross profit (a) $ 1,241 $ 1,411 $ 2,486 $ 2,915 Mark-to-market (COGS) 34 (12 ) (34 ) 104 Project K (COGS) (65 ) (31 ) (99 ) (56 ) VIE deconsolidation (COGS) — — — — Integration costs (COGS) (3 ) (6 ) (9 ) (10 ) Acquisitions/divestitures (COGS) 2 — 4 — Venezuela remeasurement (COGS) (100 ) — (100 ) — Comparable gross profit (COGS) $ 1,373 $ 1,460 $ 2,724 $ 2,877 Foreign currency impact (COGS) (77 ) — (141 ) — Currency neutral comparable gross profit $ 1,450 $ 1,460 $ 2,865 $ 2,877 Reported SGA $ 829 $ 944 $ 1,690 $ 1,834 Mark-to-market (SGA) (1 ) — (2 ) — Project K (SGA) 25 47 59 76 VIE deconsolidation (SGA) (67 ) — (67 ) — Integration costs (SGA) 3 4 5 7 Acquisitions/divestitures (SGA) — — 2 — Venezuela remeasurement (SGA) 3 — 3 — Comparable SGA $ 866 $ 893 $ 1,690 $ 1,751 Foreign currency impact (SGA) (55 ) — (98 ) — Currency neutral comparable SGA $ 921 $ 893 $ 1,788 $ 1,751 Reported operating profit $ 412 $ 467 $ 796 $ 1,081 Mark-to-market 35 (12 ) (32 ) 104 Project K (90 ) (78 ) (158 ) (132 ) VIE Consolidation 67 — 67 — Integration costs (6 ) (10 ) (14 ) (17 ) Acquisitions/divestitures 2 — 2 — Venezuela remeasurement (103 ) — (103 ) — Comparable operating profit $ 507 $ 567 $ 1,034 $ 1,126 Foreign currency impact (22 ) — (43 ) — Currency neutral comparable operating profit $ 529 $ 567 $ 1,077 $ 1,126 improvebe flat to up slightly due to net cost deflation.willmay be invested in key strategic areas of focus for the business. We expect that this investment will drive future growth in revenues, gross margin, operating profit, and cash flow.we experiencedcapital spending was 4% of net sales. We expect capital spending of approximately 4-5% of net sales and we expect the same level of spending in 2015.13%14%), Latin America (approximately 3%), Asia-Pacific (approximately 6%), and Corporate (approximately 38%37%). A majority of the costs impacting Corporate relate to additional initiatives to be approved and executed in the future. When these initiatives are fully defined and approved, we will update our estimated costs by reportable segment as needed.$574$664 million that have been attributed to the program. The charges consist of $4 million recorded as a reduction of revenue, $358$423 million recorded in COGS and $212$237 million recorded in SGA. Total charges for Project K in 2015 are expected to be approximately $400 to $450 million.AprilJuly 4, 2015, wethe Company recorded total charges of $68$90 million across all restructuring and cost reduction activities. The charges consist of $65 million recorded in cost of goods sold (COGS) and $25 million recorded in selling, general and administrative (SGA) expense. During the year-to-date period ended July 4,$32$97 million being recorded in COGS and $34$59 million recorded in SGA expense.March 29,June 28, 2014 wethe Company recorded total charges of $54$78 million across all restructuring and cost reduction activities. The charges consist of $25$31 million being recorded in COGS and $29$47 million recorded in SGA expense.quartersquarter and year-to-date periods ended AprilJuly 4, 2015 and March 29,June 28, 2014 and program costs to date for programs currently active as of AprilJuly 4, 2015. Program costs to date (millions) 2015 2014 April 4, 2015 $ 17 $ 17 $ 214 23 3 66 — — 87 28 34 207 $ 68 $ 54 $ 574 Program costs to date (millions) 2015 2014 April 4, 2015 $ 8 $ 11 $ 168 9 7 85 1 1 7 6 3 33 19 12 118 — 4 12 5 6 66 20 10 85 $ 68 $ 54 $ 574 Quarter ended Year-to-date period ended Program costs to date (millions) July 4, 2015 June 28, 2014 July 4, 2015 June 28, 2014 July 4, 2015 Employee related costs $ 16 $ 35 $ 33 $ 52 $ 230 Asset related costs 24 7 47 10 90 Asset impairment 18 — 18 — 105 Other costs 32 36 60 70 239 Total $ 90 $ 78 $ 158 $ 132 $ 664 Quarter ended Year-to-date period ended Program costs to date (millions) July 4, 2015 June 28, 2014 July 4, 2015 June 28, 2014 July 4, 2015 U.S. Morning Foods $ 13 $ 15 $ 21 $ 26 $ 181 U.S. Snacks 10 3 19 10 95 U.S. Specialty 1 — 2 1 8 North America Other 23 6 29 9 56 Europe 25 28 44 40 143 Latin America 1 1 1 5 13 Asia Pacific 3 5 8 11 69 Corporate 14 20 34 30 99 Total $ 90 $ 78 $ 158 $ 132 $ 664 quartersquarter and year-to-date periods ended AprilJuly 4, 2015 and March 29,June 28, 2014 employee related costs consist primarily of severance benefits, asset related costs consist primarily of accelerated depreciation, and other costs consist primarily of third-party incremental costs related to the development and implementation of global business capabilities.AprilJuly 4, 2015 total exit cost reserves were $87$78 million, related to severance payments and other costs of which a substantial portion will be paid out in 2015 and 2016. The following table provides details for exit cost reserves. Employee
Related
Costs Asset
Impairment Other Asset
Related Costs Other
Costs Total $ 96 $ — $ — $ 14 $ 110 17 — 23 28 68 (39 ) — (4 ) (27 ) (70 ) (3 ) — (18 ) — (21 ) $ 71 $ — $ 1 15 $ 87 Total Liability as of January 3, 2015 $ 96 $ — $ — $ 14 $ 110 2015 restructuring charges 33 18 47 60 158 Cash payments (62 ) — (12 ) (63 ) (137 ) Non-cash charges and other (2 ) (18 ) (33 ) — (53 ) Liability as of July 4, 2015 $ 65 $ — $ 2 $ 11 $ 78 quartersquarter and year-to-date periods ended AprilJuly 4, 2015, interest expense was $58 million and March 29,$112 million, respectively. For the quarter and year-to-date periods ended June 28, 2014, interest expense was $54$50 million and $52$102 million, respectively. For the full year 2015, we expect gross interest expense to be approximately $215-$225 million, compared to 2014’s full year interest expense of $209 million.AprilJuly 4, 2015 and March 29,June 28, 2014 were 25.1%28% and 28.9%29%, respectively. The effective tax rate for the first quarter of 2015 benefited from a reduction in tax related to current year remitted and unremitted earnings and the completion of certain tax examinations. Comparable effective tax rates for the quarters ended AprilJuly 4, 2015 and March 29,June 28, 2014 were 25.4%26% and 28.8%29%, respectively. Refer to Note 8 within Notes to Consolidated Financial Statements for further information. Quarter ended (millions) April 4,
2015 March 29,
2014 $ 95 $ 268 (197 ) (99 ) 13 (147 ) (5 ) (11 ) $ (94 ) $ 11 Year-to-date period ended (millions) July 4, 2015 June 28, 2014 Net cash provided by (used in): Operating activities $ 541 $ 654 Investing activities (293 ) (226 ) Financing activities (357 ) (408 ) Effect of exchange rates on cash and cash equivalents (a) (40 ) (3 ) Net increase (decrease) in cash and cash equivalents $ (149 ) $ 17 quarterhalf of 2015 amounted to $95$541 million, a decrease of $173$113 million over the same period in 2014. The quarter over quarter decrease compared to the prior yearyear-to-date period is primarily due to the timing of an interest payment,earnings results, changes in core working capital, and an increase in cash costs for Project K. Core working capital includes the positive impact of a supplier financing initiative of approximately $50$135 million. Net cash provided by operating activities for the first quarterhalf of 2015 and 2014 was negatively impacted by $49$97 million and $32$63 million of after-tax Project K cash payments, respectively.2321 days and 3130 days for the 12 month periods ended AprilJuly 4, 2015 and March 29,June 28, 2014, respectively. Compared with the 12 month period ended March 29,June 28, 2014, the 2015 cash conversion cycle was positively impacted by an increase in the days of trade payables outstanding attributable to a supplier financing initiative.$12$17 million and $28$37 million for the first quarterhalf of 2015 and 2014, respectively. For the full year 2015, we currently expect that our contributions to pension and other postretirement plans will total approximately $55 million. Plan funding strategies may be modified in response to our evaluation of tax deductibility, market conditions and competing investment alternatives. Quarter ended (millions) April 4,
2015 March 29,
2014 $ 95 $ 268 (64.6 )% (83 ) (97 ) $ 12 $ 171 (93.0 )% Year-to-date period ended (millions) July 4, 2015 June 28, 2014 Net cash provided by operating activities $ 541 $ 654 (17.3 )% Additions to properties (218 ) (226 ) Cash flow $ 323 $ 428 (24.5 )% $197$293 million for the first quarterhalf of 2015 compared to $99$226 million in the same period of 2014. The increase was primarily driven by the $117 million acquisition of Bisco Misr during the first quarter of 2015.2015, partially offset by proceeds totaling $33 million from the repayment of a loan to a VIE. For the full-year 2015, we project capital spending to be between 4% and 5% of net sales.provided byused in financing activities for the first quarterhalf of 2015 amounted to $13$357 million compared to net cash used in financing activities of $147$408 million in the same period of 2014.€600 €600 million of ten-year 1.25% Euro Notes due 2025.FebruaryMarch 2014, we retired an aggregate of $681 million of our 2020, 2022 and 2023 debt through a tender offer, which was primarily funded by commercial paper. In connection with the debt redemption, we incurred $1 million of interest expense, offset by $8 million of accelerated gains on interest rate hedges previously recorded in accumulated other comprehensive income, and recorded $5 million in Other Income, Expense (net), related to acceleration of deferred fees on the redeemed debt and fees related to the tender offer. These charges were included in cash flows for operating activities.quarterhalf of 2015 and 2014 were 4 million shares for $285 million and 56 million shares for $321$329 million, respectively.$174$347 million in the first quarterhalf of 2015, compared to $166$331 million during the same period in 2014. The increase in dividends paid reflects our increase in the quarterly dividend to $.49 per common share, which began in the third quarter of 2014. In AprilJuly 2015, the board of directors declared a dividend of $.49$.50 per common share, payable on JuneSeptember 15, 2015 to shareholders of record at the close of business on JuneSeptember 1, 2015. In addition, the board of directors announced plans to increase the quarterly dividend by 2.0% to $.50 per common share beginning with the third quarter of 2015. The dividend is consistentbroadly in line with our current plan to maintain our long-term dividend pay-out between 40% and 50% of comparable net income.standard in the first quarter of 2016.standard. We do not expect the adoption of this guidance to have a significant impact on our financial statements.April 29,July 9, 2015, the FASB issued an exposure draft of a proposed ASU that woulddecided to delay the effective date of the new revenue standard by one year. Under the proposal, theThe updated standard will be effective for fiscal years, and interim periods within those years, beginning after December 15, 2017. Entities will be permitted to adopt the new revenue standard early, but not before the original effective date. Comments on the proposal are due by May 29, 2015. Entities will have the option to apply the final standard retrospectively or use a modified retrospective method, recognizing the cumulative effect of the ASU in retained earnings at the date of initial application. An entity will not restate prior periods if it uses the modified retrospective method, but will be required to disclose the amount by which each financial statement line item is affected in the current reporting period by the application of the ASU as compared to the guidance in effect prior to the change, as well as reasons for significant changes. We will adopt the updated standard in the first quarterly reporting period after it becomes effective.quarter of 2018. We are currently evaluating the impact that implementing this ASU will have on our financial statements and disclosures, as well as whether we will use the retrospective or modified retrospective method of adoption.AprilJuly 4, 2015.€500 €500 million, as a hedge against interest rate volatility associated with a forecasted issuance of fixed rate debt to be used for general corporate purposes. These swaps were designated as cash flow hedges. In the quarteryear-to-date period ended AprilJuly 4, 2015 these forward starting interest swaps were settled and other forward starting interest rate swaps with a notional amount totaling€600 €600 million were entered into and were designated as cash flow hedges. These forward starting interest rate swaps were settled in March 2015, upon the issuance of fixed rate debt. A resulting aggregate loss of $12 million was recorded in accumulated other comprehensive income (loss) and will be amortized as interest expense over the life of the related fixed rate debt. Refer to Note 5 within Notes to Consolidated Financial Statements for further information related to the fixed rate debt issuance.quarteryear-to-date period ended AprilJuly 4, 2015 we entered into new interest rate swaps with notional amounts totaling approximately $558 million$1.5 billion that are designated as fair value hedges of certain U.S. Dollar Notes. Additionally during the quarteryear-to-date period ended AprilJuly 4, 2015 we terminated interest rate swaps with notional amounts totaling approximately $1.5 billion which were previously designated as fair value hedges of certain U.S. Dollar Notes. Refer to Note 5 within Notes to Consolidated Financial Statements.AprilJuly 4, 2015 was $1.4$2.4 billion, with a fair value of the related assetliability of $1$14 million. The total notional amount of interest rate swaps at January 3, 2015 was $3.0 billion, with a fair value of the related liability of $12 million. Assuming average variable rate debt levels during the year, a one percentage point increase in interest rates would have increased annual interest expense by approximately $27$28 million at AprilJuly 4, 2015 and $36 million at January 3, 2015.designated asconsidered a highly inflationary economy. As such, the functional currency for our operations in Venezuela is the U.S. dollar, which in turn, requires bolivar denominated monetary assets and liabilities to be remeasured into U.S. dollars using an exchange rate at which such balances could be settled as of the balance sheet date. In addition, revenues and expenses are recorded in U.S. dollars at an appropriate rate on the date of the transaction. Gains and losses resulting from the translationremeasurement of the financial statements of subsidiaries operating in highly inflationary economiesbolivar denominated monetary assets and liabilities are recorded in earnings. In 2013, wethe Company began using the CADIVI, now CENCOEX exchangeofficial rate, which iscontinues to be 6.3 bolivars to the U.S. dollar at July 4, 2015, to translate ourremeasure its Venezuelan subsidiary’s financial statements to U.S. dollars. The CENCOEX exchangeofficial rate is presently restricted to some raw materials, finishedtoward goods and machineryservices for industry sectors considered as national priorities,essential, which isare primarily food, medicines and medicines.Ina few others.established an auction-basedannounced a complementary currency transaction program referredexchange system, SICAD, followed by the establishment of another floating rate exchange system (referred to as SICAD1. SICAD1 allowed entities in specific sectors to bid for U.S. dollars to be used for specified import transactions, with the minimum exchange rate to be offered being 6.3 bolivars to the U.S. dollar.SICAD II) during 2014. In addition in 2014, the Venezuelan government expanded SICAD1 to include prospective dividends and royalties and established new profit margin controls. As our Venezuelan subsidiary declares dividends or pays royalties in the future, based on the availability of U.S. dollars exchanged under the SICAD1 program, the realized exchange losses on payments made in U.S. dollars would be recognized in earnings. On profit margin controls, we continue to ensure we are complying with the requirements.In 2014, the Venezuelan government also established a third foreign exchange mechanism, known as SICAD2. SICAD2 relied on U.S. dollar cash and U.S. dollar denominated bonds offered by the Venezuelan Central Bank, PDVSA (the national oil and gas company) and private companies. The Venezuelan government allowed all industry sectors to access SICAD2 and indicated that its use would not be restricted as to purpose.In the first quarter ofFebruary 2015, the Venezuelan government establishedannounced the addition of a new foreign currency exchange mechanism, knownsystem referred to as SIMADI.the Marginal Currency System, or SIMADI, has been reported to be an open market in which rates will be determined based on supply and demand, however there has been minimal transactions exchanged in the first quarter of 2015. In connectionalong with the establishmentmerger of SIMADI, SICAD1 and SICAD2 have been merged into one exchange known asthe SICAD II system with SICAD.AprilJuly 4, 2015, the published SICAD and SIMADI rates offered were 12.012.8 and 193.0198.4 bolivars to the U.S. dollar, respectivelyIn lightrespectively.current difficultrelated purchasing arrangements. While we continue to qualify for participation in CENCOEX at the official rate, there has been a continued reduction in the level of U.S. dollars available to exchange, in part due to recent declines in the price of oil and the overall decline of the macroeconomic environment within the country. We have experienced an increase in the amount of time it takes to exchange bolivars for U.S. dollars through the CENCOEX exchange during the year. Given this economic backdrop, and upon review of current U.S. dollar cash needs in our Venezuela operations as of the quarter ended July 4, 2015, we concluded that we are no longer able to obtain sufficient U.S. dollars on a timely basis through the CENCOEX exchange to support our Venezuela operations. We have evaluated all of the facts and circumstances surrounding our Venezuelan business and determined that as of July 4, 2015, the SIMADI rate is the appropriate rate to use for remeasuring our Venezuelan subsidiary’s financial statements.rate. As of April 4, 2015 and January 3, 2015official rate however, we translatedconsider it reasonably possible to utilize alternate exchange mechanisms in the future. We will continue to take actions to further reduce our Venezuelan subsidiary’s financial statementsreliance on imports in order to run our operations without the need for U.S. dollars using the CENCOEX exchange rate.dollars. We will continue to monitor local conditions and our continued ability to obtain U.S. dollars atthrough the CENCOEXvarious exchange rate, and the use, if applicable, of the SICAD or SIMADI mechanisms available to determine the appropriate rate for translation.For the quarter ended April 4, 2015, Venezuela represented approximately 2% of total net sales and 3% of total comparable operating profit. As of April 4, 2015 and January 3, 2015, our net monetary assets denominated in the Venezuelan bolivar were approximately $117 million and $100 million, respectively in U.S. dollars applying the CENCOEX exchange rate.If the CENCOEX exchange rate were to devalue further or if the currently less favorable SICAD or SIMADI exchange rates were extended to apply to a greater portion of our net monetary assets in Venezuela, we would recognize a devaluation charge in earnings. The potential unfavorable fully diluted EPS impact of adopting the SICAD exchange rate, at the current rate of 12.0 bolivars to the U.S. dollar, would be approximately $.13 for the revaluation of our net monetary assets denominated in the Venezuelan bolivar at April 4, 2015 and approximately $.05 for the translation of forecasted after-tax operating profit for the remainder of 2015. The potential unfavorable fully diluted EPS impact of adopting the SIMADI exchange rate, at the current rate of 193.0 bolivars to the U.S. dollar, would be approximately $.27 for the revaluation of our net monetary assets denominated in the Venezuelan bolivar at April 4, 2015 and approximately $.11 for the translation of forecasted after-tax operating profit for the remainder of 2015. We continue to monitor the currency developments in Venezuela and take protective measures against currency devaluation which may include converting monetary assets into non-monetary assets which we can use in our business.AprilJuly 4, 2015, we carried out an evaluation under the supervision and with the participation of our chief executive officer and our chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on the foregoing, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level.Period (a) Total Number
of Shares
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Paid Per Share (c) Total Number
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or Programs — $ 0.00 — $ 1,069 2.8 $ 64.02 2.8 $ 888 1.6 $ 62.94 1.6 $ 784 4.4 $ 63.62 4.4 Period Month #4: 4/5/15-5/2/15 — $ — — $ 784 Month #2: 5/3/15-5/30/15 — $ — — $ 784 Month #3: 5/31/15-7/4/15 — $ — — $ 784 Total — $ — — (a) Exhibits: 31.1 31.1 Rule 13a-14(e)/15d-14(a) Certification from John A. Bryant 31.2 Rule 13a-14(e)/15d-14(a) Certification from Ronald L. Dissinger 32.1 Section 1350 Certification from John A. Bryant 32.2 Section 1350 Certification from Ronald L. Dissinger 101.INS XBRL Instance Document 101.SCH XBRL Taxonomy Extension Schema Document 101.CAL XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF XBRL Taxonomy Extension Definition Linkbase Document 101.LAB XBRL Taxonomy Extension Label Linkbase Document 101.PRE XBRL Taxonomy Extension Presentation Linkbase Document KELLOGG COMPANY R. L. Dissinger May 11,August 10, 2015Exhibit No. Description 31.1 Rule 13a-14(e)/15d-14(a) Certification from John A. Bryant E 31.2 Rule 13a-14(e)/15d-14(a) Certification from Ronald L. Dissinger E 32.1 Section 1350 Certification from John A. Bryant E 32.2 Section 1350 Certification from Ronald L. Dissinger E 101.INS XBRL Instance Document E 101.SCH XBRL Taxonomy Extension Schema Document E 101.CAL XBRL Taxonomy Extension Calculation Linkbase Document E 101.DEF XBRL Taxonomy Extension Definition Linkbase Document E 101.LAB XBRL Taxonomy Extension Label Linkbase Document E 101.PRE XBRL Taxonomy Extension Presentation Linkbase Document E 44