Table of lease assets and lease liabilities by lessees for all leases with terms greater than 12 months. The distinction between finance leases and operating leases will remain, with similar classification criteria as current GAAP to distinguish between capital and operating leases. The principal difference from current guidance is that the lease assets and lease liabilities arising from operating leases will be recognized on the Consolidated Balance Sheet. Lessor accounting remains substantially similar to current GAAP. The ASU is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018. Early adoption is permitted. The Company will adopt the ASU in the first quarter of 2019, and is currently evaluating the impact that implementing this ASU will have on its financial statements.Contents

~~Recognition and measurement of financial assets and liabilities.~~ In January 2016, the FASB issued an ASU which which requires equity investments that are not accounted for under the equity method of accounting to be measured at fair value with changes recognized in net income and which updates certain presentation and disclosure requirements. The ASU is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017. Early adoption can be elected for all financial statements of fiscal years and interim periods that have not yet been issued or that have not yet been made available for issuance. Entities should apply the update by means of a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption. The Company will adopt the updated standard in the first quarter of 2018. The Company does not expect the adoption of this ASU to have a material impact on its financial statements.

~~Revenue from contracts with customers.~~ In May 2014, the FASB issued an ASU, as amended, which provides guidance for accounting for revenue from contracts with customers. The core principle of this ASU is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration the entity expects to be entitled to in exchange for those goods or services. To achieve that core principle, an entity would be required to apply the following five steps: 1) identify the contract(s) with a customer; 2) identify the performance obligations in the contract; 3) determine the transaction price; 4) allocate the transaction price to the performance obligations in the contract and 5) recognize revenue when (or as) the entity satisfies a performance obligation. When the ASU was originally issued it was effective for fiscal years, and interim periods within those years, beginning after December 15, 2016, and early adoption was not permitted. On July 9, 2015, the FASB decided to delay the effective date of the new revenue standard by one year. The 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. 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. Based upon the Company's preliminary assessment, the impact of adoption is not expected to be material, and is limited to timing and classification differences as well as disaggregated revenue disclosures. The Company will adopt the updated standard in the first quarter of 2018, using a modified retrospective transition method.

~~Note 2 Sale~~NOTE 3 SALE OF ACCOUNTS RECEIVABLE

The Company has a program in which a discrete group of ~~accounts receivable~~

In 2016, the Company entered into a Receivable Sales Agreement and a separate U.S. accounts receivable securitization program (the "securitization program"), both described below, which primarily enable the Companycustomers are allowed to extend their payment terms ~~for participating customers~~ in exchange for the elimination of ~~the discount the~~early payment discounts (Extended Terms Program).

The Company ~~offered for early payment. The agreements~~has two Receivable Sales Agreements (Monetization Programs) described below, which are intended to directly offset the impact ~~that extended customer payment terms~~the Extended Terms Program would have on the days-sales-outstanding (DSO) metric that is critical to the effective management of the Company's accounts receivable balance and overall working capital. ~~See further discussion in the~~ ~~Liquidity and capital resources~~ ~~section of MD&A.~~

~~In March 2016, the Company entered into a Receivable Sales Agreement to~~The Monetization Programs sell, on a revolving basis, certain trade accounts receivable ~~balances~~invoices to a third party financial ~~institution.~~institutions. Transfers under ~~this agreement~~these agreements are accounted for as sales of receivables resulting in the receivables being de-recognized from the Consolidated Balance Sheet. The ~~Receivable Sales Agreement provides~~Monetization Programs provide for the continuing sale of certain receivables on a revolving basis until terminated by either party; however the maximum receivables that may be sold at any time is ~~$800 million (increased from $700 million as of July 1, 2017). During the year-to-date periods ended September 30, 2017 and October 1, 2016~~ approximately $1.7 billion and $1.0 billion, respectively, of accounts receivable have been sold via this arrangement. Accounts receivable sold of $629 million and $562 million remained outstanding under this arrangement as of September 30, 2017 and December 31, 2016, respectively. The proceeds from these sales of receivables are included in cash from operating activities in the Consolidated Statement of Cash Flows. The recorded loss on sale of receivables was $3 million and $8 million for the quarter and year-to-date period ended September 30, 2017, respectively, and was $1 million and $3 million for the quarter and year-to-date period ended October 1, 2016, respectively. The recorded loss is included in Other income and expense.

In July 2016, the Company entered into the securitization program with a third party financial institution. Under the program, the Company receives cash consideration of up to $600 million and a deferred purchase price asset for the remainder of the purchase price. Transfers under this agreement are accounted for as sales of receivables resulting in the receivables being de-recognized from the Consolidated Balance Sheet. This securitization program utilizes Kellogg Funding Company (Kellogg Funding), a wholly-owned subsidiary of the Company. Kellogg Funding's sole business consists of the purchase of receivables, from its parent or other subsidiary and subsequent transfer of such receivables and related assets to financial institutions. Although Kellogg Funding is included in the Company's consolidated financial statements, it is a separate legal entity with separate creditors who will be entitled, upon its liquidation, to be satisfied out of Kellogg Funding assets prior to any assets or value in Kellogg Funding becoming available to the Company or its subsidiaries. The assets of Kellogg Funding are not available to pay creditors of the Company or its subsidiaries. This program expires in July 2018 but can be renewed with consent from the parties to the program.

During the year-to-date periods ended September 30, 2017 and October 1, 2016, respectively, approximately $2.0 billion and $341 million of accounts receivable were sold via the accounts receivable securitization program. As of September 30, 2017, approximately $480 million of accounts receivable sold to Kellogg Funding under the securitization program remained outstanding, for which the Company received net cash proceeds of approximately $433 million and a deferred purchase price asset of approximately $47$975 million. As of December 31, 2016, approximately $292 million of accounts receivable sold to Kellogg Funding under the securitization program remained outstanding, for which the Company received net cash proceeds of approximately $255 million and a deferred purchase price asset of approximately $37 million. The portion of the purchase price for the receivables which is not paid in cash by the financial institutions is a deferred purchase price asset, which is paid to Kellogg Funding as payments on the receivables are collected from customers. The deferred purchase price asset represents a beneficial interest in the transferred financial assets and is recognized at fair value as part of the sale transaction. The deferred purchase price asset is included in Other prepaid assets on the Consolidated Balance Sheet. The proceeds from these sales of receivables are included in cash from operating activities in the Consolidated Statement of Cash Flows. The recorded loss on sale of receivables was $1 million and $4 million for the quarter and year-to-date periods ended September 30, 2017, respectively and was not material for the 2016 periods. The recorded loss is included in Other income and expense.

The Company has no retained ~~interests~~interest in the receivables sold, ~~under~~however the ~~programs above. The~~ Company does have collection and administrative responsibilities for the sold receivables. The Company has not recorded any servicing assets or liabilities as of ~~September~~March 30, ~~2017~~2024 and December ~~31, 2016~~30, 2023 for these agreements as the fair value of these servicing arrangements as well as the fees earned were not material to the financial statements.

Accounts receivable sold of $725 million and $697 million remained outstanding under these arrangements as of March 30, 2024 and December 30, 2023, respectively. The proceeds from these sales of receivables are included in cash from operating activities in the Consolidated Statement of Cash Flows in the period of sale. The recorded net loss on sale of receivables was $11 million and $8 million for the quarters ended March 30, 2024 and April 1, 2023, respectively. The recorded loss is included in Other income and expense (OIE).

Other programs

Additionally, from time to time certain of the Company's foreign subsidiaries will transfer, without recourse, accounts receivable ~~balances~~invoices of certain customers to financial institutions. These transactions are accounted for as sales of the receivables resulting in the receivables being de-recognized from the Consolidated Balance Sheet. ~~During the year-to-date periods ended September 30, 2017 and October 1, 2016, respectively, $145 million and $33 million of accounts receivable have been sold via these programs.~~ Accounts receivable sold of ~~$45~~$20 million and ~~$124~~$8 million remained outstanding under these programs as of ~~September~~March 30, ~~2017~~2024 and December ~~31, 2016,~~30, 2023, respectively. The proceeds from these sales of receivables are included in cash from operating activities in the Consolidated Statement of Cash Flows in the period of sale. The recorded net loss on the sale of these receivables is included in ~~Other income and expense~~OIE and is not material.

~~Note 3 Goodwill and other intangible assets~~

~~Parati acquisition~~

In December 2016, the Company acquired Ritmo Investimentos, controlling shareholder of Parati S/A, Afical Ltda and Padua Ltda ("Parati Group"), a leading Brazilian food group for approximately BRL 1.38 billion ($381 million) or $379 million, net of cash and cash equivalents. The purchase price was subject to certain working capital and net debt adjustments based on the actual working capital and net debt existing on the acquisition date compared to targeted amounts. These adjustments were finalized during the quarter ended July 1, 2017 and resulted in a purchase price reduction of BRL 14 million ($NOTE 4 ~~million). The acquisition was accounted for under the purchase price method and was financed with cash on hand and short-term borrowings.~~

In our Latin America reportable segment, for the quarter ended September 30, 2017 the acquisition added $48 million in net sales and $3 million of operating profit. For the year-to-date period ended September 30, 2017 the acquisition added $141 million in net sales and $15 million of operating profit.

The assets and liabilities of the Parati Group are included in the Consolidated Balance Sheet as of September 30, 2017 within the Latin America segment. The acquired assets and assumed liabilities include the following:

(millions) December 1, 2016
Current assets $ 44
Property 72
Goodwill 165
Intangible assets 148
Current liabilities (48 )
Non-current deferred tax liability and other (6 )
$ 375

During the year-to-date period ended September 30, 2017, the value of intangible assets subject to amortization increased $38 million and intangible assets not subject to amortization decreased $11 million with an offsetting $27 million adjustment to goodwill in conjunction with an updated allocation of the purchase price.

A portion of the acquisition price aggregating $67 million was placed in escrow in favor of the seller for general representations and warranties, as well as pending resolution of certain contingencies arising from the business prior to the acquisition. During the quarter and year-to-date periods ended September 30, 2017, the Company recognized $3 million and $7 million, respectively, for certain pre-acquisition contingencies which are considered to be probable of being incurred, which increased goodwill.

During the quarter ended April 1, 2017, the Company finalized plans to merge the acquired and pre-existing Brazilian legal entities, which resulted in tax basis of the acquired intangible assets. Accordingly, deferred tax liabilities and goodwill were both reduced by $41 million during the first quarter of 2017. In addition, deferred tax liabilities related to basis differences were reduced by $15 million with a corresponding reduction in goodwill, for the quarter ended September 30, 2017.

The amounts in the above table represent the allocation of purchase price as of September 30, 2017 and represent the finalization of the appraisals for intangible assets and the Company's evaluation of pre-acquisition contingencies. The purchase price allocation remains subject to the Company’s finalization of the merger and the resulting income tax effects, which is expected to occur in November 2017. The goodwill from this acquisition is expected to be deductible for income tax purposes.

Changes in the carrying amount of goodwill, intangible assets subject to amortization, consisting primarily of customer lists, and indefinite-lived intangible assets, consisting of brands, are presented in the following tables:

~~Carrying amount of goodwill~~

(millions)
U.S.
Morning
Foods
U.S.
Snacks
U.S.
Specialty
North
America
Other
Europe
Latin
America
Asia
Pacific
Consoli-
dated
December 31, 2016 $ 131
$ 3,568
$ 82
$ 457
$ 376
$ 328
$ 224
$ 5,166
Purchase price allocation adjustment —
—
—
—
—
(79 ) —
(79 )
Purchase price adjustment —
—
—
—
—
(4 ) —
(4 )
Currency translation adjustment —
—
—
4
35
9
4
52
September 30, 2017 $ 131
$ 3,568
$ 82
$ 461
$ 411
$ 254
$ 228
$ 5,135

~~Intangible assets subject to amortization~~

Gross carrying amount
(millions)
U.S.
Morning
Foods
U.S.
Snacks
U.S.
Specialty
North
America
Other
Europe
Latin
America
Asia
Pacific
Consoli-
dated
December 31, 2016 $ 8
$ 42
$ —
$ 5
$ 40
$ 36
$ 10
$ 141
Purchase price allocation adjustment —
—
—
—
—
39
—
39
Currency translation adjustment —
—
—
—
3
2
—
5
September 30, 2017 $ 8
$ 42
$ —
$ 5
$ 43
$ 77
$ 10
$ 185

Accumulated Amortization
December 31, 2016 $ 8
$ 19
$ —
$ 4
$ 14
$ 6
$ 3
$ 54
Amortization —
2
—
—
2
3
1
8
September 30, 2017 $ 8
$ 21
$ —
$ 4
$ 16
$ 9
$ 4
$ 62

Intangible assets subject to amortization, net
December 31, 2016 $ —
$ 23
$ —
$ 1
$ 26
$ 30
$ 7
$ 87
Purchase price allocation adjustment —
—
—
—
—
39
—
39
Currency translation adjustment —
—
—
—
3
2
—
5
Amortization —
(2 ) —
—
(2 ) (3 ) (1 ) (8 )
September 30, 2017 $ —
$ 21
$ —
$ 1
$ 27
$ 68
$ 6
$ 123

For intangible assets in the preceding table, amortization was $8 million and $5 million for the year-to-date periods ended September 30, 2017 and October 1, 2016, respectively. The currently estimated aggregate annual amortization expense for full-year 2017 is approximately $11 million.

~~Intangible assets not subject to amortization~~

(millions)
U.S.
Morning
Foods
U.S.
Snacks
U.S.
Specialty
North
America
Other
Europe
Latin
America
Asia
Pacific
Consoli-
dated
December 31, 2016 $ —
$ 1,625
$ —
$ 176
$ 383
$ 98
$ —
$ 2,282
Purchase price allocation adjustment —
—
—
—
—
(11 ) —
(11 )
Currency translation adjustment —
—
—
—
45
3
—
48
September 30, 2017 $ —
$ 1,625
$ —
$ 176
$ 428
$ 90
$ —
$ 2,319

~~Note 4 Investments in unconsolidated entities~~

In 2015, the Company acquired, for a final net purchase price of $418 million, a 50% interest in Multipro Singapore Pte. Ltd. (Multipro), a leading distributor of a variety of food products in Nigeria and Ghana and also obtained a call option to acquire 24.5% of an affiliated food manufacturing entity under common ownership based on a fixed multiple of future earnings as defined in the agreement (Purchase Option). The acquisition of the 50% interest is accounted for under the equity method of accounting. The Purchase Option, is recorded at cost and has been monitored for impairment through September 30, 2017 with no impairment being required. In July 2017, the Company received notification that the entity, through June 30, 2017, had achieved the level of earnings as defined in the agreement for the purchase option to become exercisable for a one year period. During the exercise period, the Company will validate the information provided in the notification and evaluate whether to exercise its right to acquire the 24.5% interest. While no decision to exercise the option has been made by the Company, if the option is exercised, the Company would acquire 24.5% of the affiliated food manufacturing entity for approximately $400 million.

~~Note 5 Restructuring and cost reduction activities~~RESTRUCTURING

The Company views its restructuring ~~and cost reduction activities~~programs as part of its operating principles to provide greater visibility in achieving its long-term profit growth targets. Initiatives undertaken are ~~currently~~generally expected to recover cash implementation costs within a ~~five-year~~1 to 5-year period ofsubsequent to completion. ~~Upon completion~~Completion (or as each major stage is completed in the case of multi-year programs), is when the project begins to deliver cash savings and/or reduced depreciation.

~~Total Projects~~

~~During~~In the first quarter, the Company announced a reconfiguration of the North America frozen supply chain network, designed to drive increased productivity. The project is expected to be substantially completed by late 2024, with cost savings beginning to contribute to gross margin improvements in the second half of 2024 and reaching full-run rate in 2025. The overall project is expected to result in cumulative pretax charges of approximately $50 million, which include employee-related costs of $10 million, other cash costs of $10 million, and non-cash costs, primarily consisting of asset impairment, accelerated depreciation, and asset disposals of $30 million. Charges incurred related to this restructuring program were $31 million during the quarter ended ~~September~~March 30, ~~2017,~~2024. These charges primarily related to severance costs and asset impairment, and were recorded in COGS.

In the first quarter, the Company ~~recorded total net~~proposed a reconfiguration of the European cereal supply chain network, following the completion of any collective bargaining obligations and consultation with impacted employees. The project, designed to drive efficiencies, is expected to be substantially completed by late 2026, with resulting efficiencies expected to begin contributing to gross margin improvements in late 2026. The overall project is expected to result in cumulative pretax charges of $1approximately $120 million, ~~across all~~which include employee-related costs of $50 million, other cash costs of $30 million, and non-cash costs, primarily consisting of asset impairment, accelerated depreciation, and asset disposals of $40 million. Charges incurred related to this restructuring ~~and cost reduction activities. The charges~~program were ~~comprised of a net $9~~$70 million credit recorded in cost of goods sold (COGS) and a net $10 million expense recorded in selling, general and administrative (SG&A) expense. During the year-to-date period ended September 30, 2017, the Company recorded total charges of $239 million across all restructuring and cost reduction activities. The charges were comprised of $26 million recorded in cost of goods sold (COGS) and $213 million recorded in selling, general and administrative (SG&A) expense.

~~During~~during the quarter ended ~~October 1, 2016, the Company recorded total~~March 30, 2024. These charges ~~of $40 million across all restructuring~~primarily related to severance costs and ~~cost reduction activities. The charges consist of $12 million~~asset impairment, and were recorded in ~~COGS and $28 million recorded in SG&A expense. During the year-to-date period ended October 1, 2016, the Company recorded total charges~~COGS.

Table of ~~$164 million across all restructuring and cost reduction activities. The charges consist of $66 million recorded in COGS and $98 million recorded in SG&A expense.~~Contents

~~Project K~~

In February 2017, the Company announced an expansion and an extension to its previously-announced global efficiency and effectiveness program (“Project K”), to reflect additional and changed initiatives. Project K is expected to continue generating a significant amount of savings that may be invested in key strategic areas of focus for the business to drive future growth or utilized to achieve our 2018 Margin Expansion target.

In addition to the original program’s focus on strengthening existing businesses in core markets, increasing growth in developing and emerging markets, and driving an increased level of value-added innovation, the extended program will also focus on implementing a more efficient go-to-market model for certain businesses and creating a more efficient organizational design in several markets. Since inception, Project K has provided significant benefits and is expected to continue to provide a number of benefits in the future, including an optimized supply chain infrastructure, the implementation of global business services, a new global focus on categories, increased agility from a more efficient organization design, and improved effectiveness in go-to-market strategies.

The Company currently anticipates that Project K will result in total pre-tax charges, once all phases are approved and implemented, of $1.5 to $1.6 billion, with after-tax cash costs, including incremental capital investments, estimated to be approximately $1.1 billion. Based on current estimates and actual charges to date, the Company expects the total project charges will consist of asset-related costs of approximately $500 million which will consist primarily of asset impairments, accelerated depreciation and other exit-related costs; employee-related costs of approximately $500 million which will include severance, pension and other termination benefits; and other costs of approximately $600 million which consists primarily of charges related to the design and implementation of global business capabilities and a more efficient go-to-market model.

The Company currently expects that total pre-tax charges will impact reportable segments as follows: U.S. Morning Foods (approximately 16%), U.S. Snacks (approximately 35%), U.S. Specialty (approximately 1%), North America Other (approximately 13%), Europe (approximately 23%), Latin America (approximately 2%), Asia-Pacific (approximately 5%), and Corporate (approximately 5%).

During the quarter ended September 30, 2017, the Company recorded a net curtailment gain of $134 million related to certain pension and post-retirement benefit plans. The curtailment gain is primarily the result of an amendment of certain defined benefit pension plans in the U.S. and Canada for salaried employees as well as other project related initiatives. See additional discussion regarding this net curtailment gain in Note 9 Employee benefits.

Since the inception of Project K, the Company has recognized charges of $1,355 million that have been attributed to the program. The charges consist of $6 million recorded as a reduction of revenue, $716 million recorded in COGS and $633 million recorded in SG&A expense.

~~Other Projects~~

In 2015 the Company implemented a zero-based budgeting (ZBB) program in its North America business that has delivered ongoing annual savings. During 2016, ZBB was expanded to include the international segments of the business. In support of the ZBB initiative, the Company incurred pre-tax charges of approximately $1 million and $21 million during the year-to-date periods ended September 30, 2017 and October 1, 2016, respectively. Total charges of $38 million have been recognized since the inception of the ZBB program.

The tables below provide the details for charges ~~across all restructuring and cost reduction activities~~ incurred during the quarter ~~and year-to-date~~ended March 30, 2024.


	Quarter ended
(millions)	March 30, 2024
Employee related costs	$	37

Asset related costs	4
Asset impairment	60

Total	$	101

	Quarter ended
(millions)	March 30, 2024
North America	$	31
Europe	70



Total	$	101

All other restructuring projects were immaterial during the periods ~~ended September 30, 2017 and October 1, 2016 and program costs to date for programs currently active as of September 30, 2017.~~

Quarter ended Year-to-date period ended Program costs to date
(millions) September 30, 2017 October 1, 2016 September 30, 2017 October 1, 2016 September 30, 2017
Employee related costs $ 31
$ 6
$ 166
$ 26
$ 523
Pension curtailment (gain) loss, net (134 ) —
(133 ) —
(122 )
Asset related costs 38
5
68
32
260
Asset impairment —
—
—
16
155
Other costs 66
29
138
90
577
Total $ 1
$ 40
$ 239
$ 164
$ 1,393

Quarter ended Year-to-date period ended Program costs to date
(millions) September 30, 2017 October 1, 2016 September 30, 2017 October 1, 2016 September 30, 2017
U.S. Morning Foods $ 14
$ 4
$ 16
$ 13
$ 257
U.S. Snacks 106
8
305
62
507
U.S. Specialty —
1
1
4
20
North America Other 4
7
13
20
141
Europe 13
6
21
34
320
Latin America 2
2
6
6
30
Asia Pacific 1
2
5
6
86
Corporate (139 ) 10
(128 ) 19
32
Total $ 1
$ 40
$ 239
$ 164
$ 1,393

For the quarters ended September 30, 2017 and October 1, 2016 employee related costs consist primarily of severance and other termination related benefits, pension curtailment (gain) loss consists of curtailment gains or losses that resulted from project initiatives, asset related costs consist primarily of accelerated depreciation and other costs consist primarily of lease termination costs as well as third-party incremental costs related to the development and implementation of global business capabilities and a more efficient go-to-market model.presented.

At ~~September~~March 30, ~~2017~~2024 total ~~exit cost~~project reserves for the European and North American reorganizations were ~~$194~~$31 million and $6 million, respectively. The reserves were related to severance payments and other costs of which a substantial portion will not be paid ~~out in 2017 and 2018.~~during the current year. The following table provides details for exit cost ~~reserves.~~reserves related to the European and North American reorganizations described above.



	Employee Related Costs		Asset Impairment		Asset Related Costs		Total
Liability as of December 30, 2023	$	—	$	—	$	—	$	—
2024 restructuring charges	37		60		4		101
Cash payments	—		—		—		—
Non-cash charges and other	—		(60)		(4)		(64)
Liability as of March 30, 2024	$	37	$	—	$	—	$	37

NOTE 5DIVESTITURES

Employee
Related
Costs
Pension curtailment (gain) loss, net
Asset
Impairment
Asset
Related
Costs
Other
Costs
Total
Liability as of December 31, 2016 $ 102
$ —
$ —
$ —
$ 29
$ 131
2017 restructuring charges 166
(133 ) —
68
138
239
Cash payments (146 ) —
—
(31 ) (98 ) (275 )
Non-cash charges and other 3
133
—
(37 ) —
99
Liability as of September 30, 2017 $ 125
$ —
$ —
$ —
$ 69
$ 194
Russia

In July 2023 the Company completed the sale of its Russian business. As a result of completing the transaction, the Company derecognized net assets of approximately $65 million and recorded a non-cash loss on the transaction of approximately $113 million in OIE, primarily related to the release of historical currency translation adjustments. The business was part of the Europe reportable segment and the sale resulted in a complete exit from the Russian market. The business in Russia represented approximately 1% of consolidated Kellanova net sales.

~~Note~~

NOTE 6 ~~Equity~~EQUITY

Earnings per share

Basic earnings per share is determined by dividing net income by the weighted average number of common shares outstanding during the period. Diluted earnings per share is similarly determined, except that the denominator is increased to include the number of additional common shares that would have been outstanding if all dilutive potential common shares had been issued. Dilutive potential common shares consist principally of employee stock options issued by the Company, restricted stock units, and ~~to a lesser extent,~~ certain contingently issuable performance shares. ~~Basic earnings per share is reconciled to diluted earnings per share in the following table.~~ There were 5approximately 6 million and 4 million anti-dilutive potential common shares excluded from the ~~reconciliation~~calculation for the ~~quarter~~quarters ended March 30, 2024 and ~~year-to-date periods ended September 30, 2017. There were~~ ~~3 million~~ ~~anti-dilutive potential common shares excluded from~~April 1, 2023, respectively. Please refer to the ~~reconciliation~~Consolidated Statement of Income for basic and diluted earnings per share for the ~~quarter~~quarters ended March 30, 2024 and ~~year-to-date periods ended October~~April 1, ~~2016, respectively.~~

~~Quarters ended September 30, 2017 and October 1, 2016:~~2023.

Table of Contents

(millions, except per share data)
Net income

Average
shares
outstanding
Earnings
per share
2017
Basic $ 297
345
$ 0.86
Dilutive potential common shares 3
(0.01 )
Diluted $ 297
348
$ 0.85
2016
Basic $ 292
350
$ 0.83
Dilutive potential common shares 4
(0.01 )
Diluted $ 292
354
$ 0.82

~~Year-to-date periods ended September 30, 2017 and October 1, 2016:~~

(millions, except per share data)
Net income

Average
shares
outstanding
Earnings
per share
2017
Basic $ 841
348
$ 2.41
Dilutive potential common shares 3
(0.02 )
Diluted $ 841
351
$ 2.39
2016

Basic $ 747
350
$ 2.13
Dilutive potential common shares 4
(0.02 )
Diluted $ 747
354
$ 2.11
Share repurchases

In December ~~2015,~~2022, the ~~board~~Board of ~~directors~~Directors approved ~~a new~~an authorization to repurchase up to $1.5 billion of our common stock ~~beginning in 2016~~ through December ~~2017. As of September 30, 2017, $558 million remains available under the authorization.~~

2025. During the ~~year-to-date period~~quarters ended ~~September~~March 30, ~~2017,~~2024 and April 1, 2023, the Company ~~repurchased approximately 7 million~~did not repurchase any shares of common ~~stock for a total of $516 million. During the year-to-date period ended October 1, 2016, the Company repurchased 6 million shares of common stock for a total of $426 million.~~stock.

Comprehensive income

Comprehensive income includes net income and all other changes in equity during a period except those resulting from investments by or distributions to shareholders. Other comprehensive income consists of foreign currency translation adjustments, fair value adjustments associated with cash flow hedges, ~~and~~which are recorded in interest expense within the statement of income, upon reclassification from Accumulated Other Comprehensive Income (AOCI), adjustments for net experience ~~losses and~~gains (losses), prior service ~~cost~~credit (costs) related to employee benefit ~~plans.~~

~~Reclassifications out~~plans and adjustments for unrealized (gains) losses on available-for-sale securities, which are recorded in other income (expense) within the statement of ~~AOCI for~~income, upon reclassification from AOCI. The related tax effects of these items are recorded in income tax expense within the ~~quarter and year-to-date periods ended September 30, 2017 and October 1, 2016, consisted~~statement of ~~the following:~~

(millions)



Details about AOCI
components
Amount reclassified
from AOCI
Line item impacted
within Income Statement

Quarter ended
September 30, 2017
Year-to-date period ended
September 30, 2017

(Gains) losses on cash flow hedges:
Foreign currency exchange contracts $ —
$ (1 ) COGS
Interest rate contracts 3
8
Interest expense
$ 3
$ 7
Total before tax
(1 ) (2 ) Tax expense (benefit)
$ 2
$ 5
Net of tax
Amortization of postretirement and postemployment benefits:
Net experience loss $ —
$ 1
See Note 9 for further details
$ —
$ 1
Total before tax
—
—
Tax expense (benefit)
$ —
$ 1
Net of tax
Total reclassifications $ 2
$ 6
Net of tax

(millions)
Details about AOCI
components
Amount reclassified
from AOCI
Line item impacted
within Income Statement

Quarter ended
October 1, 2016
Year-to-date period ended
October 1, 2016

(Gains) losses on cash flow hedges:
Foreign currency exchange contracts $ (4 ) $ (11 ) COGS
Foreign currency exchange contracts (1 ) (1 ) SGA
Interest rate contracts 2
10
Interest expense
Commodity contracts 3
10
COGS
$ —
$ 8
Total before tax
(1 ) (4 ) Tax expense (benefit)
$ (1 ) $ 4
Net of tax
Amortization of postretirement and postemployment benefits:
Net experience loss $ 1
$ 3
See Note 9 for further details
Prior service cost 1
3
See Note 9 for further details
$ 2
$ 6
Total before tax
(1 ) (1 ) Tax expense (benefit)
$ 1
$ 5
Net of tax
Total reclassifications $ —
$ 9
Net of tax

income, upon reclassification from AOCI.

Accumulated other comprehensive income (loss), net of tax, as of ~~September~~March 30, ~~2017~~2024 and December ~~31, 2016~~30, 2023 consisted of the following:


(millions)	March 30, 2024		December 30, 2023
Foreign currency translation adjustments	$	(2,528)	$	(2,326)
Net investment hedges gain (loss)	239		186
Cash flow hedges — net deferred gain (loss)	161		143
Postretirement and postemployment benefits:
Net experience gain (loss)	1		1
Prior service credit (cost)	(44)		(45)

Total accumulated other comprehensive income (loss)	$	(2,171)	$	(2,041)

Table of Contents


~~(a)~~	Includes non-cash losses totaling $13 million associated with the remeasurement of the financial statements of the Company's Venezuela subsidiary during the year-to-date period ended October 1, 2016, respectively.

~~(b)~~

Includes mark-to-market adjustments for pension and postretirement plans, commodity and foreign currency contracts totaling ($104) million and ($31) million for the quarters ended September 30, 2017 and October 1, 2016, respectively. Includes mark-to-market adjustments for pension and postretirement plans, commodity and foreign currency contracts totaling ($118) million and ($35) million for the year-to-date periods ended September 30, 2017 and October 1, 2016, respectively. See further discussion in ~~Note 9 Employee benefits~~.

NOTE 11SUPPLEMENTAL FINANCIAL STATEMENT DATA


Consolidated Balance Sheet
(millions)	March 30, 2024 (unaudited)		December 30, 2023
Trade receivables	$	1,401	$	1,246
Allowance for credit losses	(16)		(16)
Refundable income taxes	42		74
Other receivables	239		264
Accounts receivable, net	$	1,666	$	1,568
Raw materials and supplies	$	305	$	303
Finished goods and materials in process	905		940
Inventories	$	1,210	$	1,243



Intangible assets not subject to amortization	$	1,692	$	1,750
Intangible assets subject to amortization, net	136		180
Other intangibles, net	$	1,828	$	1,930

~~Note 13 Subsequent Event~~

~~On October 27, 2017, the Company completed its acquisition~~

Table of Chicago Bar Co., LLC, the manufacturer of RXBAR, for approximately $600 million, funded through short-term borrowings. The purchase price is subject to certain working capital and net debt adjustments based on the actual working capital and net debt existing on the acquisition date compared to targeted amounts. The major classes of assets and liabilities of Chicago Bar Co., LLC are expected to be net working capital, intangible assets (primarily, customer lists and brands), and goodwill.Contents

~~KELLOGG COMPANY~~KELLANOVA

PART I—FINANCIAL INFORMATION

~~Item~~ITEM 2. ~~Management’s Discussion and Analysis of Financial Condition and Results of Operations~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Business overview

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is intended to help the reader understand ~~Kellogg Company,~~Kellanova, our operations and our present business environment. MD&A is provided as a supplement to, and should be read in conjunction with, our Consolidated Financial Statements and the accompanying notes thereto contained in Item 1 of this report. Our MD&A references consumption and net sales in discussing our sales trends for certain categories and brands. We record net sales upon delivery of shipments to our customers. Consumption and share data noted within is based on Nielsen x-AOC or other comparable source, for the applicable period. Consumption refers to consumer purchases of our products from our customers. Unless otherwise noted, consumption and shipment trends are materially consistent.

~~For more than 100 years, consumers have counted~~Consumers count on ~~Kellogg~~Kellanova for great-tasting, high-quality and nutritious foods. ~~Kellogg is the world’s leading producer of cereal, second largest producer of cookies and~~Currently, these foods include snacks, such as crackers, ~~and a leading producer of~~ savory snacks, ~~and frozen foods. Additional product offerings include~~ toaster pastries, cereal bars ~~fruit-flavored snacks~~ and bites; and convenience foods, such as, ready-to-eat cereals, frozen waffles, veggie ~~foods. Kellogg~~foods and noodles. Kellanova products are manufactured and marketed globally.

Separation transaction

~~Corporate responsibility~~On June 21, 2022, the Company announced its intent to separate its North American cereal business, via tax-free spin-off. The transaction was completed on October 2, 2023, resulting in two independent public companies, Kellanova and ~~sustainability~~WK Kellogg Co.

In accordance with applicable accounting guidance, the results of WK Kellogg Co are presented as discontinued operations in the Kellanova consolidated statement of income and, as such, have been excluded from both continuing operations and segment results for all periods presented. The recast operating profit includes certain costs that are reported in continuing operations but relate to items that will be reimbursed by the transition services agreement (“TSA”) with WK Kellogg Co. We expect that the costs for such services will be fully reimbursed under the TSA for the applicable future periods. Following the end of the TSA period, we expect that such costs will no longer be incurred by Kellanova.

The consolidated statements of cash flows are presented on a consolidated basis for both continuing operations and discontinued operations.

Nigerian Naira

During the second quarter of 2023, the Nigerian government removed certain currency restrictions over the Nigerian Naira leading to a significant decline in the exchange rate of the Naira to the U.S. dollar on the official market in Nigeria. Exchange rates have declined further since the second quarter of 2023. As a ~~grain-based food company,~~result of the decline in the exchange rate, the U.S. dollar value of the assets, liabilities, expenses and revenues of our ~~success is dependent on timely access~~Nigerian business in our consolidated financial statements has decreased significantly compared to ~~high quality, low cost ingredients, and water and energy~~prior periods. The consolidated assets of our Nigerian business represented approximately 3% of our consolidated assets as of March 30, 2024, compared to 5% as of December 30, 2023. Net sales of our Nigerian business were 6% of our consolidated net sales for our global manufacturing operations. We rely on natural capital including energy for product manufacturing and distribution, water as an ingredient, for facility cleaning and steam power, and food crops and commodities as an ingredient. These natural capital dependencies are at risk of shortage, price volatility, regulation, and quality impacts due to climate change which is assessed as partthe quarter ended March 30, 2024 but could become a smaller percentage of our overall ~~enterprise risk management program. Due to these risks, we have implemented major short and long-term initiatives to mitigate and adapt to these environmental pressures, as well as~~sales if exchange rates decline further from current levels over the ~~resulting challenges~~remainder of ~~food security.~~2024.

To address these risks, we partner with suppliers, customers, governments and non-governmental organizations, including the World Business Council for Sustainable Development and the Consumer Goods Forum. We are also committed to improving efficiency and technologies in our owned manufacturing footprint by reducing water use, total waste, energy use, and greenhouse gas (GHG) emissions as well as working across our supply chain with the goal of reducing risk of disruptions from unexpected constraints in natural resource availability or impacts on raw material pricing. In addition ~~we established third-party approved science-based targets~~ to ~~measure progress against~~ our ~~goal to significantly reduce absolute GHG emissions across our own footprint~~consolidated Nigerian business, the Company also has an investment in an unconsolidated entity, Tolaram Africa Foods PTE LTD, that holds an investment in a Nigerian food manufacturer. This investment is accounted for under the equity method of accounting and ~~that~~is evaluated for indicators of ~~our suppliers. In 2016, we expanded our global signature cause platform, Breakfasts for Better Days, with the intent to help address hunger relief and food security.~~

We have incorporated the risks and opportunities of climate change and food security into the Global 2020 Growth Strategy and Global Heart and Soul Strategy by continuing to identify risk, incorporating environmental and social indicators into strategic priorities and reporting regularly to leadership, the board of directors, and publicly. Future reporting on our environmental and social risks and performance against targets will be included in our Annual Report on Form 10-K.

other than temporary impairment.

Segments

We manage our operations through ~~nine~~four operating segments that are based primarily on ~~product category or~~ geographic ~~location.~~location – North America which includes the U.S. businesses and Canada; Europe which consists principally of European countries; Latin America which consists of Central and South America and includes Mexico; and AMEA (Asia Middle East Africa) which consists of Africa, Middle East, Australia and other Asian and Pacific markets. These operating segments ~~are evaluated for similarity with regards to economic characteristics, products, production processes, types or classes~~also represent our reportable segments.

Table of customers, distribution methods and regulatory environments to determine if they can be aggregated into reportable segments. We report results of operations in the following reportable segments: U.S. Morning Foods; U.S. Snacks; U.S. Specialty; North America Other; Europe; Latin America; and Asia Pacific. The reportable segments are discussed in greater detail in Note 12 within Notes to Consolidated Financial Statements.Contents

~~Operating margin expansion through 2018~~

~~In 2016 we announced a plan to increase our currency-neutral comparable operating margin by 350 basis points from 2015 through 2018. There are four elements to this margin expansion plan:~~

Productivity and savings - In addition to annual productivity savings to offset inflation, we have expanded our Project K restructuring program, and we have expanded our zero-based budgeting initiative in the U.S. and our international regions. These initiatives are expected to result in higher annual savings.

Price and Mix - We have established a more formal Revenue Growth Management discipline around the world, to help us ensure our products and pack-sizes are priced correctly, and that we are generating a positive mix of sales volume.

~~Investing for Impact - We are updating our investment model to align with today's consumer and technology in order to optimize the return on investment in our brands.~~

~~On-Trend Foods and Packaging - We are adopting a more impactful approach to renovation and innovation of our foods.~~

During this time period, we will be working to stabilize net sales, with an aim to returning to growth. Accordingly, our margin expansion target incorporates continued investment in food and packaging, investment in new capabilities, and an increase in brand investment in our U.S. Snacks business. These margin-expansion actions are expected to drive accelerated growth in currency-neutral comparable operating profit and currency neutral comparable earnings per share in 2017 and 2018.

~~We are currently on pace to deliver the 350 basis point improvement.~~

In March 2017, the Financial Accounting Standards Board (FASB) issued an Accounting Standards Update (ASU) changing the presentation of net periodic pension and postretirement benefit costs within the income statement. The ASU requires all components of net periodic benefit cost, other than service cost, be presented in the income statement outside of income from operations. We expect to adopt the ASU retrospectively in the first quarter of 2018. The impact of adoption, when applied retrospectively, is expected to reduce our 2015 currency-neutral comparable operating margin, the basis for our 350 basis point improvement, by approximately 175-185 basis points. The adoption is anticipated to impact only the Corporate segment, and is not expected to impact our ability to achieve 350 basis points of currency-neutral comparable operation margin expansion from this new base by the end of 2018. See the ~~Accounting standards to be adopted in future periods~~ ~~section of the MD&A for additional information regarding the impact of this ASU.~~

Guidance on operating profit margin expansion and net sales growth outlook is provided on a non-GAAP, currency-neutral comparable basis only because certain information necessary to calculate such measures on a GAAP basis is unavailable, dependent on future events outside of our control and cannot be predicted without unreasonable efforts by the Company. Please refer to the "Non-GAAP Financial Measures" section for a further discussion of our use of non-GAAP measures, including quantification of known expected adjustment items.

Non-GAAP financial measures

This filing includes non-GAAP financial measures that we provide to management and investors that exclude certain items that we do not consider part of on-going operations. Items excluded from our non-GAAP financial measures are discussed in the "Significant items impacting comparability" section of this filing. Our management team consistently utilizes a combination of GAAP and non-GAAP financial measures to evaluate business results, to make decisions regarding the future direction of our business, and for resource allocation decisions, including incentive compensation. As a result, we believe the presentation of both GAAP and non-GAAP financial measures provides investors with increased transparency into financial measures used by our management team and improves investors’ understanding of our underlying operating performance and in their analysis of ongoing operating trends. All historic non-GAAP financial measures have been reconciled with the most directly comparable GAAP financial measures.

Non-GAAP financial measures used for evaluation of performance include ~~comparable~~currency-neutral and organic net sales, ~~comparable~~adjusted and currency-neutral adjusted operating profit, adjusted and currency-neutral adjusted diluted earnings per share (EPS), currency-neutral adjusted gross profit, currency neutral adjusted gross margin, ~~comparable SG&A, comparable operating profit, comparable operating profit margin, comparable~~adjusted effective tax rate, ~~comparable~~ net ~~income, comparable diluted EPS,~~debt, and free cash flow. These non-GAAP financial measures are also evaluated for year-over-year growth and on a currency-neutral basis to evaluate the underlying growth of the business and to exclude the effect of foreign currency. We determine currency-neutral ~~operating~~ results by dividing or multiplying, as appropriate, the current-period local currency operating results by the currency exchange rates used to translate our financial statements in the comparable prior-year period to determine what the current period U.S. dollar operating results would have been if the currency exchange rate had not changed from the comparable prior-year period. These non-GAAP financial measures may not be comparable to similar measures used by other companies.

~~Comparable~~•Currency-neutral net ~~sales:~~sales and organic net sales: We adjust the GAAP financial ~~measures~~measure to exclude the ~~pre-tax effect~~impact of foreign currency, resulting in currency-neutral net sales. In addition, we exclude the impact of acquisitions, divestitures, and ~~divestitures.~~foreign currency, resulting in organic net sales. We excluded the items which we believe may obscure trends in our underlying net sales performance. By providing ~~this~~these non-GAAP net sales ~~measure,~~measures, management intends to provide investors with a meaningful, consistent comparison of net sales performance for the Company and each of our reportable segments for the periods presented. Management uses ~~this~~these non-GAAP ~~measure~~measures to evaluate the effectiveness of initiatives behind net sales growth, ~~price~~pricing realization, and the impact of mix on our business results. ~~This~~These non-GAAP ~~measure is~~measures are also used to make decisions regarding the future direction of our business, and for resource allocation decisions. ~~Currency-neutral comparable net sales represents comparable net sales excluding the impact of foreign currency.~~

~~Comparable~~•Adjusted: gross profit, ~~comparable~~ gross margin, ~~comparable SG&A, comparable SG&A%, comparable~~ operating profit, ~~comparable~~ operating ~~profit~~ margin, ~~comparable net income,~~ and ~~comparable~~ diluted ~~EPS:~~EPS from continuing operations: We adjust the GAAP financial measures to exclude the effect of ~~Project K and cost reduction activities, acquisitions, divestitures, integration~~restructuring programs, costs of the separation transaction, mark-to-market adjustments for pension plans ~~commodities~~(service cost, interest cost, expected return on plan assets, and other net periodic pension costs are not excluded), commodity contracts, certain equity investments and certain foreign currency contracts, a gain on interest rate swaps, and other costs ~~associated with the early redemption of debt outstanding, and impacts of the prior-year Venezuela remeasurement and deconsolidation.~~impacting comparability resulting in adjusted. We excluded the items which we believe may obscure trends in our underlying profitability. ~~The impact of acquisitions and divestitures are not excluded from comparable diluted EPS.~~ By providing these non-GAAP profitability measures, management intends to provide investors with a meaningful, consistent comparison of the Company's profitability measures for the periods presented. Management uses these non-GAAP financial measures to evaluate the effectiveness of initiatives intended to improve profitability, ~~such as Project K, ZBB and Revenue Growth Management,~~ as well as to evaluate the impacts of inflationary pressures and decisions to invest in new initiatives within each of our segments.

•Currency-neutral ~~comparable represents comparable excluding foreign currency impact.~~

~~Comparable effective tax rate:~~adjusted: gross profit, gross margin, operating profit, operating margin, and diluted EPS from continuing operations: We adjust the GAAP financial ~~measure~~measures to exclude ~~tax~~the effect of ~~Project K and cost reduction activities, divestitures, integration~~restructuring programs, costs of the separation transaction, mark-to-market adjustments for pension plans ~~commodities~~(service cost, interest cost, expected return on plan assets, and other net periodic pension costs are not excluded), commodity contracts, certain equity investments and certain foreign currency contracts, other costs ~~associated~~impacting comparability, and foreign currency, resulting in currency-neutral adjusted. We excluded the items which we believe may obscure trends in our underlying profitability. By providing these non-GAAP profitability measures, management intends to provide investors with a meaningful, consistent comparison of the ~~early redemption~~Company's profitability measures for the periods presented. Management uses these non-GAAP financial measures to evaluate the effectiveness of ~~debt outstanding,~~initiatives intended to improve profitability, as well as to evaluate the impacts of inflationary pressures and decisions to invest in new initiatives within each of our segments.

•Adjusted effective income tax rate: We adjust the GAAP financial measures to exclude the effect of restructuring programs, costs ~~associated with prior-year Venezuela remeasurement.~~ of the separation transaction, mark-to-market adjustments for pension plans (service cost, interest cost, expected return on plan assets, and other net periodic pension costs are not

Table of Contents

excluded), commodity contracts, certain equity investments and certain foreign currency contracts, a gain on interest rate swaps, and other costs impacting comparability. We excluded the items which we believe may obscure trends in our pre-tax income and the related tax effect of those items on our ~~underlying~~adjusted effective income tax ~~rate.~~rate, and other impacts to tax expense. By providing this non-GAAP measure, management intends to provide investors with a meaningful, consistent comparison of the Company's effective tax rate, excluding the pre-tax income and tax effect of the items noted above, for the periods presented. Management uses this non-GAAP measure to monitor the effectiveness of initiatives in place to optimize our global tax rate.

•Net debt: Defined as the sum of long-term debt, current maturities of long-term debt and notes payable, less cash and cash equivalents. With respect to net debt, cash and cash equivalents are subtracted from the GAAP measure, total debt liabilities, because they could be used to reduce the Company’s debt obligations. Company management and investors use this non-GAAP measure to evaluate changes to the Company's capital structure and credit quality assessment.

~~Cash~~•Free cash flow: Defined as net cash provided by operating activities reduced by expenditures for property additions. ~~Cash~~Free cash flow does not represent the residual cash flow available for discretionary expenditures. We use this non-GAAP financial measure of cash flow to focus management and investors on the amount of cash available for debt repayment, dividend distributions, acquisition opportunities, and share repurchases once all of the Company’s business needs and obligations are met. Additionally, certain performance-based compensation includes a component of this non-GAAP measure.

These measures have not been calculated in accordance with GAAP and should not be viewed as a substitute for GAAP reporting measures.

Significant items impacting comparability

~~Project K and cost reduction activities~~Mark-to-market

In February 2017, the Company announced an expansion and an extension to its previously-announced global efficiency and effectiveness program ("Project K"). Project K is expected to continue generating a significant amount of savings that may be invested in key strategic areas of focus for the business. The Company expects that these savings may be used to drive future growth in the business. We recorded pre-tax charges related to this program of $1 million and $238 million for the quarter and year-to-date periods ended September 30, 2017, respectively. We also recorded pre-tax charges of $36 million and $143 million for the quarter and year-to-date periods ended October 1, 2016, respectively.

In 2015 we initiated the implementation of a Zero-Based Budgeting (ZBB) program in our North America business. During 2016 ZBB was expanded to include international segments of the business. In support of the ZBB initiative, we incurred pre-tax charges of $1 million for the year-to-date period ended September 30, 2017. We also incurred

~~pre-tax charges of $4 million and $21 million for the quarter and year-to-date periods ended October 1, 2016, respectively.~~

~~See the Restructuring and cost reduction activities section for more information.~~

~~Acquisitions~~

In December 2016, the Company acquired Ritmo Investimentos, controlling shareholder of Parati S/A, Afical Ltda and Padua Ltda ("Parati Group"), a leading Brazilian food group. In our Latin America reportable segment, for the quarter ended September 30, 2017 the acquisition added $48 million in net sales and $3 million of operating profit (before integration costs) that impacted the comparability of our reported results. For the year-to-date period ended September 30, 2017 the acquisition added $141 million in net sales and $15 million of operating profit (before integration costs) that impacted the comparability of our reported results.

~~Mark-to-market accounting for pension plans, commodities and certain foreign currency contracts~~

We recognize mark-to-market adjustments for pension and postretirement benefit plans, commodity contracts, and certain foreign currency contracts as incurred. Actuarial gains/losses for pension plans are recognized in the year they occur. Mark-to-market gains/losses for certain equity investments are recorded based on observable price changes.Changes between contract and market prices for ~~commodities~~commodity contracts and certain foreign currency contracts result in gains/losses that are recognized in the quarter they occur. We recorded ~~total~~a pre-tax mark-to-market ~~charges~~gain of ~~$104 million and $31 million for quarters ended September 30, 2017 and October 1, 2016, respectively, and $118 million and $35~~$12 million for the ~~year-to-date periods~~quarter ended ~~September~~March 30, ~~2017 and October 1, 2016, respectively.~~2024. Included within the aforementioned ~~charges are~~was a pre-tax mark-to-market ~~charges~~gain for pension ~~plans~~plan remeasurements related to the transfer of ~~$76 million and $28 million for quarters ended September 30, 2017 and October 1, 2016, respectively, and $73 million and $62~~assets to a sub-trust of $13 million for the ~~year-to-date periods~~quarter ended ~~September~~March 30, ~~2017 and October 1, 2016, respectively.~~

~~Other costs impacting comparability~~

~~During~~2024. Additionally, we recorded a pre-tax mark-to-market loss of $55 million for the quarter ended April 1, 2023.

Separation costs

The Company successfully completed the separation transaction on October 2, ~~2016, we redeemed $475 million of our 7.45% U.S. Dollar Debentures due 2031. In connection with the debt redemption, we~~2023. We incurred $153 million of interest expense, consisting primarily of a premium on the tender offer and also including accelerated losses on pre-issuance interest rate hedges, acceleration of fees and debt discount on the redeemed debt and feespre-tax charges related to the ~~tender offer.~~

~~Venezuela~~

~~There was a material change in the business environment, including a worsening~~separation of our access to key raw materials subject to restrictions, and a related significant drop in production volume in the fourth quarter of 2016. These supply chain disruptions, along with other factors such as the worsening economic environment in Venezuela and the limited access to dollars to import goods through the use of any of the available currency mechanisms, have impaired our ability to effectively operate and fully control our Venezuelan subsidiary.

~~As of December 31, 2016, we deconsolidated and changed to the cost method of accounting~~$12 million for ~~our Venezuelan subsidiary. For~~ the quarter ended ~~October 1, 2016~~March 30, 2024. We recorded $1 million for the ~~deconsolidation reduced net sales by $7 million and operating profit by $3 million which impacted the comparability of our reported results. For the year-to-date~~quarter period ended ~~October~~April 1, ~~2016 the deconsolidation reduced net sales by $23 million and operating profit by $8 million which impacted the comparability of our reported results.~~2023.

~~In 2016 certain non-monetary assets~~Network optimization

Costs related to ~~our Venezuelan subsidiary continued~~reorganizations to ~~be remeasured at historical exchange rates. As these assets were utilized by our Venezuelan subsidiary during 2016 they were recognized in~~increase the ~~income statement at historical exchange rates resulting in an unfavorable impact.~~productivity and efficiency of the Company's supply chain. As a result, we incurred pre-tax charges, primarily related to severance and asset impairment, of ~~the utilization of the remaining non-monetary assets, we experienced an unfavorable operating profit impact of $13~~$101 million for ~~year-to-date period~~the quarter ended ~~October~~March 30, 2024.

Business and portfolio realignment

Costs related to reorganizations in support of our Deploy for Growth priorities and a reshaped portfolio; investments in enhancing capabilities prioritized by our Deploy for Growth strategy; and prospective divestitures and acquisitions. As a result, we recorded pre-tax charges, primarily related to reorganizations, of $1 million for the quarter ended April 1, ~~2016, primarily impacting COGS.~~2023.

Foreign currency translation

We evaluate the operating results of our business on a currency-neutral basis. We determine currency-neutral operating results by dividing or multiplying, as appropriate, the current-period local currency operating results by the currency exchange rates used to translate our financial statements in the comparable prior-year period to determine what the current period U.S. dollar operating results would have been if the currency exchange rate had not changed from the comparable prior-year period.

Table of Contents

Financial results

For the quarter ended ~~September~~March 30, ~~2017,~~2024, our reported net sales ~~improved by 0.6% due primarily to~~were down 4% versus the ~~Parati acquisition in Brazil~~prior year as ~~well as favorable foreign~~unfavorable currency ~~translation. This principally reflects on the previously announced list-price adjustments and other impacts in U.S. Snacks related to its transition from DSD. Currency-neutral comparable~~more than offset positive price/mix. Organic net sales ~~were down 1.4% after eliminating~~increased 5% from the ~~impact of acquisitions,~~prior year excluding foreign currency and ~~prior year Venezuela results.~~divestitures.

~~Reported~~First quarter reported operating profit increased ~~13.1%, as a result of productivity savings from Project K restructuring, which includes this year's exit from its U.S. Snacks segment's Direct Store Delivery sales~~13% versus the year-ago quarter primarily due to favorable mark-to-market impacts, continued gross profit margin recovery, and ~~delivery system. Reported~~reimbursement for transition services provided to WK Kellogg Co, partially offset by network optimization costs. Currency-neutral adjusted operating profit ~~also benefited from lower year-over-year restructuring and integration expense, and the impact of acquisitions and foreign currency. This was partially offset by~~increased 30%, after excluding the impact of mark-to-market, ~~accounting for pension plans, commodities, prior year Venezuela operations,~~network optimization costs, separation costs, and foreign currency contracts. Currency-neutral comparable operating profit increased by 17.5% excluding the impact of mark-to-market, restructuring, integration costs, acquisitions, prior year Venezuela operations, and foreign currency.translation.

Reported operating margin for the quarter was favorable 160 basis points due primarily to COGS and SG&A savings realized from Project K and ZBB initiatives, lower restructuring costs, and acquisitions, partially offset by the year-over-year impact of market-to-market. Currency-neutral comparable operating margin was favorable 280 basis points after excluding the impact of restructuring, mark-to-market, and acquisitions.

Reported diluted EPS of ~~$.85~~$0.78 for the quarter ~~was up almost 4%~~increased 16% compared to the prior year quarter of ~~$.82. Higher~~$0.67 due primarily to higher operating ~~profit as a result of productivity savings from Project K restructuring more than offset a higher effective tax rate.~~profit. Currency-neutral ~~comparable~~adjusted diluted EPS of ~~$1.05~~$1.04 for the quarter increased ~~by 9% compared to~~33% from the prior year ~~of $.96, due to higher profit margins driven by productivity initiatives.~~quarter after excluding mark-to-market, network optimization costs, separation costs, and foreign currency translation.

Reconciliation of certain non-GAAP Financial Measures

Quarter ended Year-to-date period ended
Consolidated results
(dollars in millions, except per share data)
September 30,
2017 October 1,
2016 September 30,
2017 October 1,
2016
Reported net income $ 297
$ 292
$ 841
$ 747
Mark-to-market (pre-tax) (104 ) (31 ) (118 ) (35 )
Project K and cost reduction activities (pre-tax) (1 ) (40 ) (239 ) (164 )
Other costs impacting comparability (pre-tax) —
—
—
(153 )
Integration and transaction costs (pre-tax) (1 ) (2 ) (2 ) (3 )
Venezuela operations impact (pre-tax) —
3
—
8
Venezuela remeasurement (pre-tax) —
—
—
(11 )
Income tax benefit applicable to adjustments, net* 36
23
117
106
Comparable net income $ 367
$ 339
$ 1,083
$ 999
Foreign currency impact 4
(10 )
Currency-neutral comparable net income $ 363

$ 1,093

Reported diluted EPS $ 0.85
$ 0.82
$ 2.39
$ 2.11
Mark-to-market (pre-tax) (0.30 ) (0.09 ) (0.34 ) (0.10 )
Project K and cost reduction activities (pre-tax) —
(0.11 ) (0.68 ) (0.46 )
Other costs impacting comparability (pre-tax) —
—
—
(0.43 )
Integration and transaction costs (pre-tax) —
(0.01 ) —
(0.01 )
Venezuela operations impact (pre-tax) —
—
—
0.01
Venezuela remeasurement (pre-tax) —
—
—
(0.03 )
Income tax benefit applicable to adjustments, net* 0.10
0.07
0.33
0.31
Comparable diluted EPS $ 1.05
$ 0.96
$ 3.08
$ 2.82
Foreign currency impact —
(0.03 )
Currency-neutral comparable diluted EPS $ 1.05

$ 3.11

Currency-neutral comparable diluted EPS growth 9.4 % 15.1 % 10.3 % 7.4 %


	Quarter ended
Consolidated results (dollars in millions, except per share data)	March 30, 2024			April 1, 2023
Reported net income	$	267		$	298
Mark-to-market (pre-tax)	12			(55)

Separation costs (pre-tax)	(12)			(1)
Network optimization (pre-tax)	(101)			—
Business and portfolio realignment (pre-tax)	—			(1)


Income tax impact applicable to adjustments, net*	21			18



Adjusted net income	$	347		$	337
Foreign currency impact	(11)			—
Currency-neutral adjusted net income	$	358		$	337
Reported diluted EPS from continuing operations	$	0.78		$	0.67
Mark-to-market (pre-tax)	0.03			(0.16)

Separation costs (pre-tax)	(0.04)			—
Network optimization (pre-tax)	(0.28)			—
Business and portfolio realignment (pre-tax)	—			—


Income tax impact applicable to adjustments, net*	0.06			0.05



Adjusted diluted EPS from continuing operations	$	1.01		$	0.78
Foreign currency impact	(0.03)			—
Currency-neutral adjusted diluted EPS from continuing operations	$	1.04		$	0.78
Currency-neutral adjusted diluted EPS growth	33.3		%

* Represents the estimated income tax effect on the reconciling items, using weighted-average statutory tax rates, depending upon the applicable jurisdiction.Note: Tables may not foot due to rounding.

For more information on the reconciling items in the table above, please refer to the Significant items impacting comparability section.

*Represents the estimated income tax effect on the reconciling items, using weighted-average statutory tax rates, depending upon the applicable jurisdiction.

Table of Contents

Net sales and operating profit

The following tables provide an analysis of net sales and operating profit performance for the ~~third~~first quarter of ~~2017~~2024 versus ~~2016:~~2023:


Quarter ended March 30, 2024
(millions)	North America			Europe			Latin America			AMEA			Corporate		Kellanova Consolidated
Reported net sales	$	1,688		$	599		$	314		$	600		$	(1)	$	3,200




Foreign currency impact	—			7			16			(319)			—		(296)






Organic net sales	$	1,688		$	592		$	297		$	919		$	(1)	$	3,495

Quarter ended April 1, 2023
(millions)
Reported net sales	$	1,686		$	604		$	283		$	770		$	(1)	$	3,342







Divestiture	—			27			—			—			—		27



Organic net sales	$	1,686		$	577		$	283		$	770		$	(1)	$	3,315

% change - 2024 vs. 2023:
Reported growth	0.1		%	(0.7)		%	10.9		%	(22.1)		%	n/m		(4.3)		%




Foreign currency impact	—		%	1.3		%	5.7		%	(41.5)		%	n/m		(8.9)		%
Currency-neutral growth	0.1		%	(2.0)		%	5.2		%	19.4		%	n/m		4.6		%


Divestiture	—		%	(4.6)		%	—		%	—		%	n/m		(0.8)		%



Organic growth	0.1		%	2.6		%	5.2		%	19.4		%	n/m		5.4		%
Volume (tonnage)	(4.7)		%	(6.9)		%	(1.1)		%	—		%	n/m		(3.1)		%
Pricing/mix	4.8		%	9.5		%	6.3		%	19.4		%	n/m		8.5		%

Quarter ended September 30, 2017
(millions)
U.S.
Morning
Foods

U.S.
Snacks

U.S.
Specialty

North
America
Other
Europe
Latin
America

Asia
Pacific
Corporate
Kellogg
Consolidated
Reported net sales $ 710
$ 760
$ 290
$ 420
$ 599
$ 240
$ 254
$ —
$ 3,273
Acquisitions —
—
—
—
4
48
—
—
52
Comparable net sales $ 710
$ 760
$ 290
$ 420
$ 595
$ 192
$ 254
$ —
$ 3,221
Foreign currency impact —
—
—
7
7
6
1
—
21
Currency-neutral comparable net sales $ 710
$ 760
$ 290
$ 413
$ 588
$ 186
$ 253
$ —
$ 3,200
Quarter ended October 1, 2016
(millions)
U.S.
Morning
Foods

U.S.
Snacks

U.S.
Specialty

North
America
Other
Europe
Latin
America

Asia
Pacific
Corporate
Kellogg
Consolidated
Reported net sales $ 733
$ 796
$ 284
$ 402
$ 594
$ 197
$ 248
$ —
$ 3,254
Venezuela operations impact —
—
—
—
—
7
—
—
7
Comparable net sales $ 733
$ 796
$ 284
$ 402
$ 594
$ 190
$ 248
$ —
$ 3,247
% change - 2017 vs. 2016:
Reported growth (3.0 )% (4.5 )% 1.9 % 4.4 % 0.8 % 21.5 % 2.9 % — % 0.6 %
Acquisitions — % — % — % — % 0.7 % 24.4 % — % — % 1.6 %
Venezuela operations impact — % — % — % — % — % (4.0 )% — % — % (0.2 )%
Comparable growth (3.0 )% (4.5 )% 1.9 % 4.4 % 0.1 % 1.1 % 2.9 % — % (0.8 )%
Foreign currency impact — % — % — % 1.5 % 1.2 % 3.2 % 0.9 % — % 0.6 %
Currency-neutral comparable growth (3.0 )% (4.5 )% 1.9 % 2.9 % (1.1 )% (2.1 )% 2.0 % — % (1.4 )%
Note: Tables may not foot due to rounding.

For more information on the reconciling items in the table above, please refer to the Significant items impacting comparability section.

Table of Contents

Quarter ended September 30, 2017
(millions)
U.S.
Morning
Foods

U.S.
Snacks

U.S.
Specialty

North
America
Other
Europe
Latin
America

Asia
Pacific
Corporate
Kellogg
Consolidated
Reported operating profit $ 141
$ 14
$ 76
$ 65
$ 72
$ 23
$ 25
$ 48
$ 464
Mark-to-market —
—
—
—
—
—
—
(104 ) (104 )
Project K and cost reduction activities (14 ) (106 ) —
(4 ) (13 ) (2 ) (1 ) 139
(1 )
Integration and transaction costs —
—
—
—
—
(1 ) —
—
(1 )
Acquisitions —
—
—
—
(1 ) 3
—
—
2
Comparable operating profit $ 155
$ 120
$ 76
$ 69
$ 86
$ 23
$ 26
$ 13
$ 568
Foreign currency impact —
—
—
2
3
—
—
(1 ) 4
Currency-neutral comparable operating profit $ 155
$ 120
$ 76
$ 67
$ 83
$ 23
$ 26
$ 14
$ 564
Quarter ended October 1, 2016
(millions)
U.S.
Morning
Foods

U.S.
Snacks

U.S.
Specialty

North
America
Other
Europe
Latin
America

Asia
Pacific
Corporate
Kellogg
Consolidated
Reported operating profit $ 144
$ 78
$ 68
$ 43
$ 78
$ 27
$ 21
$ (49 ) $ 410
Mark-to-market —
—
—
—
—
—
—
(31 ) (31 )
Project K and cost reduction activities (4 ) (8 ) (1 ) (7 ) (6 ) (2 ) (2 ) (10 ) (40 )
Integration and transaction costs —
—
—
—
(1 ) 1
—
(2 ) (2 )
Venezuela operations impact —
—
—
—
—
3
—
—
3
Comparable operating profit $ 148
$ 86
$ 69
$ 50
$ 85
$ 25
$ 23
$ (6 ) $ 480
% change - 2017 vs. 2016:
Reported growth (2.6 )% (82.5 )% 12.2 % 52.8 % (9.2 )% (13.2 )% 18.7 % 197.0 % 13.1 %
Mark-to-market — % — % — % — % — % — % — % (721.7 )% (15.6 )%
Project K and cost reduction activities (6.8 )% (121.3 )% 0.7 % 12.7 % (9.3 )% (1.7 )% 7.0 % 647.7 % 10.3 %
Integration and transaction costs — % — % — % 0.2 % 1.3 % (3.5 )% 0.8 % (28.0 )% 0.4 %
Acquisitions — % — % — % — % (0.3 )% 8.7 % — % — % 0.4 %
Venezuela operations impact — % — % — % — % — % (9.8 )% — % (1.4 )% (0.7 )%
Comparable growth 4.2 % 38.8 % 11.5 % 39.9 % (0.9 )% (6.9 )% 10.9 % 300.4 % 18.3 %
Foreign currency impact — % — % — % 2.0 % 2.0 % 2.3 % 0.2 % 4.4 % 0.8 %
Currency-neutral comparable growth 4.2 % 38.8 % 11.5 % 37.9 % (2.9 )% (9.2 )% 10.7 % 296.0 % 17.5 %


Quarter ended March 30, 2024
(millions)	North America			Europe			Latin America			AMEA			Corporate			Kellanova Consolidated
Reported operating profit	$	335		$	28		$	27		$	75		$	(72)		$	393
Mark-to-market	—			—			2			—			(3)			(1)

Separation costs	(10)			—			—			—			(2)			(12)
Network optimization	(31)			(70)			—			—			—			(101)
Business and portfolio realignment	—			—			—			—			—			—

Adjusted operating profit	$	376		$	98		$	25		$	75		$	(66)		$	508
Foreign currency impact	—			2			2			(20)			1			(16)
Currency-neutral adjusted operating profit	$	376		$	96		$	23		$	95		$	(67)		$	523







Quarter ended April 1, 2023
(millions)
Reported operating profit	$	269		$	92		$	22		$	74		$	(111)		$	346
Mark-to-market	—			—			(2)			—			(53)			(55)

Separation costs	(1)			—			—			—			—			(1)

Business and portfolio realignment	—			—			—			—			(1)			(1)

Adjusted operating profit	$	270		$	92		$	25		$	74		$	(57)		$	404









% change - 2024 vs. 2023:
Reported growth	24.6		%	(69.8)		%	21.2		%	1.5		%	34.9		%	13.4		%
Mark-to-market	—		%	—		%	18.3		%	—		%	54.3		%	15.2		%

Separation costs	(3.3)		%	—		%	0.8		%	—		%	(3.9)		%	(2.8)		%
Network optimization	(11.3)		%	(76.3)		%	—		%	—		%	—		%	(24.9)		%
Business and portfolio realignment	0.2		%	—		%	—		%	—		%	0.9		%	0.2		%

Adjusted growth	39.0		%	6.5		%	2.1		%	1.5		%	(16.4)		%	25.7		%
Foreign currency impact	—		%	2.1		%	8.5		%	(27.5)		%	0.9		%	(3.9)		%
Currency-neutral adjusted growth	39.0		%	4.4		%	(6.4)		%	29.0		%	(17.3)		%	29.6		%

Note: Tables may not foot due to rounding.

For more information on the reconciling items in the table above, please refer to the Significant items impacting comparability section.

~~U.S. Morning Foods~~

~~This segment consists~~27

Table of ~~cereal, toaster pastries, and health and wellness bars. As reported and Currency-neutral comparable~~Contents

North America

Reported net sales ~~declined 3.0% as a result of decreased~~for the first quarter increased slightly from the prior year due to favorable price/mix growth, related to prior year actions to cover high input cost inflation, was offset by volume pressured by elasticities across categories.

North America operating profit increased 25% reflecting recovering gross profit margin and reimbursement for transition services provided to WK Kellogg Co, partially offset by ~~favorable pricing/mix.~~

~~In our cereal business, kid-oriented brands performed well during~~ the ~~quarter as~~ ~~Froot Loops~~impact of network optimization costs, higher separation costs and ~~Frosted Flakes~~ ~~continued to gain share behind effective media and innovation. Adult-oriented brands declined, reflecting a category trend and our lack of sufficient food news and~~increased brand ~~activity.~~

~~Toaster pastries grew share during the quarter despite lower consumption in the category.~~

~~As reported operating profit decreased 2.6% due to higher restructuring charges and lower net sales.~~investment. Currency-neutral ~~comparable~~adjusted operating profit increased ~~4.2% after excluding restructuring charges.~~

~~U.S. Snacks~~

~~This segment consists of crackers, cookies, savory snacks, wholesome snacks and fruit-flavored snacks.~~

As reported and Currency-neutral comparable net sales were 4.5% lower versus the comparable quarter due to price/mix and lower volume. During the quarter the Company discontinued shipping through its DSD distribution system. Accordingly, all sales are now made at a list-price that is reduced by a cost-to-serve for various DSD services no longer provided by the Company. As reported net sales were also affected by a pull-back in merchandising to facilitate customer transitions early in the quarter, and the impact of eliminating smaller, less productive SKUs.

Crackers, Cookies, and Wholesome Snacks declined in consumption in the third quarter due to the reduction of promotion activity related to our efforts to smoothly transition out of DSD. Savory snacks consumption was pulled down, in part, on the elimination of a promotion-sized can but Core Four flavors grew during the quarter.

As reported operating profit declined 82.5% due to increased Project K restructuring charges in the current year associated with our DSD transition. Currency-neutral comparable operating profit increased 38.8%39%, after excluding the impact of ~~restructuring charges; this was driven~~network optimization costs and separation costs.



Net sales % change - first quarter 2024 vs. 2023:
North America	Reported net sales		Foreign currency		Currency-neutral net sales		Divestiture		Organic net sales
Snacks	0.3	%	—	%	0.3	%	—	%	0.3	%

Frozen	(0.7)	%	—	%	(0.7)	%	—	%	(0.7)	%

North America snacks net sales grew slightly despite lapping strong growth in the prior year quarter. Category elasticities moderated during the quarter and we returned to normalized merchandising activity.

North America frozen net sales were down 1% versus the prior year quarter primarily due to category elasticities.

Europe

Reported net sales decreased 1% in the first quarter, reflecting volume pressured by ~~DSD-related overhead reductions~~elasticity across categories and last year's divestiture of operations in Russia, partially offset by ~~increased brand investment.~~

~~U.S. Specialty~~

~~As reported and Currency-neutral comparable~~price/mix growth related to prior year actions to cover high input-cost inflation. Organic net sales ~~improved 1.9% as a result of higher volume and improved pricing/mix.~~

~~Shipments grew in the quarter led by both our Convenience and Foodservice channels, with the latter additionally benefiting from hurricane-related orders.~~

~~As Reported operating profit~~ increased ~~12.2% due to the higher net sales and savings from Project K and ZBB initiatives. Currency-neutral comparable operating profit increased 11.5%~~3% after excluding the impact of ~~restructuring charges.~~the divestiture and foreign currency.

~~North America Other~~

~~This segment is composed~~Reported operating profit decreased 70% due primarily to network optimization costs, which more than offsets the benefits of ~~our U.S. Frozen Foods, Kashi Company, and Canada businesses.~~

~~As reported net sales increased 4.4% due to higher volume, favorable pricing/mix,~~improved productivity and favorable foreign ~~currency.~~currency translation. Currency-neutral ~~comparable net sales~~adjusted operating profit increased ~~2.9%~~4% after excluding the impact of ~~foreign currency.~~

~~The U.S. Frozen business reported increased shipments on higher volume and favorable price/mix.~~ ~~Eggo~~^®grew share and consumption during the quarter, benefiting from the removal of artificial ingredients and the success of Disney-shaped waffles, as well as the exit of a competitor. Our frozen veggie business, under the ~~Morningstar Farms~~^®~~and~~ ~~Gardenburger~~^®~~brands, returned to consumption and share growth during the quarter, reflecting focused marketing support on our core burger offerings during the summer grilling season.~~

Canada reported increased shipments during the quarter on higher volume, positive price/mix, and favorable foreign currency. We generated continued improvement in consumption with broad-based share gains in both cereal and snacks. The business is past the elasticity impact of currency-driven pricing actions taken in the second quarter of 2016, and is showing consistent improvement as we invest in brand building and innovation.

Kashi Company posted lower net sales in the quarter due to the decision to eliminate less profitable SKUs in certain channels, but its sales performance did continue to improve sequentially from previous quarters. Our cereal business grew share, led by ~~Bear Naked, which is now the largest granola brand in the U.S. Additionally, our renovated snacks offerings are stabilizing share more quickly than anticipated, with share flat during the quarter.~~

As Reported operating profit increased 52.8% due to lower restructuring charges, Project K and ZBB savings and favorable foreign currency. Currency-neutral comparable operating profit increased 37.9% after excluding the impact of restructuring chargesnetwork optimization costs and foreign currency.



Net sales % change - first quarter 2024 vs. 2023:
Europe	Reported net sales		Foreign currency		Currency-neutral net sales		Divestiture		Organic net sales
Snacks	(0.1)	%	1.2	%	(1.3)	%	(5.2)	%	3.9	%
Cereal	(1.3)	%	1.5	%	(2.8)	%	(4.0)	%	1.2	%

~~Europe~~Snacks net sales were flat as unfavorable foreign currency and the divestiture were offset by sustained organic growth across the region, led by Pringles, which gained share in key markets.

As Cereal net sales declined as unfavorable foreign currency and the divestiture more than offset by organic growth, led by the UK.

Latin America

Reported net sales increased ~~0.8% due to~~11% driven by favorable foreign currency ~~pricing/~~and price/mix ~~and acquisitions,~~growth, partially offset by ~~lower~~a modest, elasticity-driven decline in volume. ~~Currency-neutral comparable net sales declined 1.1% after excluding the impact of foreign currency and acquisitions.~~

~~Pringles returned to growth during the quarter, following temporary declines in the first half of 2017, when prolonged customer negotiations resulted in reduced promotional activity.~~

Cereal net sales declined due to softness in adult-oriented brands in continental Europe and economic softness in our Mediterranean, Middle East, and Africa sub-region. The U.K. cereal business grew consumption and share during the quarter, continuing its improving trend with growth in several brands.

As reported operating profit decreased 9.2% due to higher restructuring charges partially mitigated by incremental Project K savings and favorable foreign currency. Currency-neutral comparable operating profit declined 2.9% after excluding the impact of restructuring charges, acquisitions and foreign currency.

~~Latin America~~

As reported net sales improved 21.5% due to increased volume as a result of the Parati acquisition and favorable pricing/mix. This was partially offset by lower volume in the base business and the unfavorable impact of foreign currency. Currency-neutral comparable net sales declined 2.1% after excluding the impact of acquisitions, prior year Venezuela results, and foreign currency.

~~This decline was due solely to the Caribbean/Central America sub-region, where economic softness was exacerbated by shipment disruptions due to hurricanes Maria and Irma.~~

We did post growth in each of the other sub-regions within Latin America. Our Mexico business continued to perform well, despite disruptions related to two major earthquakes. Mercosur posted particularly strong growth in ~~Pringles, despite a challenging environment.~~

~~The integration of Parati, our acquisition in Brazil, continues to progress well, as the business posted solid growth.~~

As reported operating profit decreased 13.2%, primarily due to the impact of prior year Venezuela results partially mitigated by efficiencies from productivity initiatives and the impact of the Parati acquisition. Currency-neutral comparable operating profit decreased 9.2% after excluding the impact of restructuring costs, acquisitions, prior year Venezuela remeasurement and foreign currency.

~~Asia Pacific~~

~~As reported net sales improved 2.9% due to higher volume and favorable foreign currency partially offset by unfavorable price/mix. Currency-neutral comparable~~Organic net sales increased ~~2.0%~~5%, after excluding the impact of foreign currency.

~~Good growth in cereal was broad-based across the region, led by Asia's expansion in granola, e-commerce, and the re-acceleration~~28

Table of ~~growth in India. Australia, our largest market in the region, posted consumption and share gains during the quarter, continuing its stabilization trend.~~Contents

~~Our Pringles business posted growth for the quarter across the region.~~

~~As reported~~Reported operating profit increased ~~18.7% due to higher net sales, lower restructuring charges, and brand-building efficiencies related to ZBB. Currency-neutral comparable operating profit improved 10.7% after excluding~~21% as the impact of ~~restructuring~~net sales growth, recovering gross profit margin, favorable foreign currency, and ~~foreign currency.~~

Outside of reported results, our joint ventures in West Africa and China continued to perform well. Our venture in West Africa posted double-digit growth for the quarter driven by strong noodles volume. The China JV is benefiting from granola cereal and rapid expansion of e-commerce sales.

~~Corporate~~

~~As reported operating profit increased $97 million due primarily to pension curtailment gains related to Project K restructuring~~a modestly favorable mark-to-market partially offset by ~~higher mark-to-market costs.~~continued high costs. Currency-neutral ~~comparable~~adjusted operating profit ~~improved $20 million due to lower pension and postretirement benefit costs~~decreased 6% after excluding the impact of mark-to-market, ~~restructuring charges,~~ and foreign currency.


Net sales % change - first quarter 2024 vs. 2023:
Latin America	Reported net sales		Foreign currency		Currency-neutral net sales		Divestiture		Organic net sales
Snacks	2.9	%	4.5	%	(1.6)	%	—	%	(1.6)	%
Cereal	16.2	%	6.5	%	9.7	%	—	%	9.7	%

~~The following tables provide an analysis of~~Snacks net sales increased due to favorable foreign currency and ~~operating profit performance for the year-to-date periods ended September 30, 2017 versus October 1, 2016:~~organic growth led by Pringles in Mexico and Brazil.

Year-to-date period ended September 30, 2017
(millions)
U.S.
Morning
Foods

U.S.
Snacks

U.S.
Specialty

North
America
Other
Europe
Latin
America

Asia
Pacific
Corporate
Kellogg
Consolidated
Reported net sales $ 2,108
$ 2,344
$ 961
$ 1,204
$ 1,677
$ 696
$ 724
$ —
$ 9,714
Acquisitions —
—
—
1
11
141
—
—
153
Comparable net sales $ 2,108
$ 2,344
$ 961
$ 1,203
$ 1,666
$ 555
$ 724
$ —
$ 9,561
Foreign currency impact —
—
—
6
(55 ) (1 ) 16
—
(34 )
Currency-neutral comparable net sales $ 2,108
$ 2,344
$ 961
$ 1,197
$ 1,721
$ 556
$ 708
$ —
$ 9,595
Year-to-date period ended October 1, 2016
(millions)
U.S.
Morning
Foods

U.S.
Snacks

U.S.
Specialty

North
America
Other
Europe
Latin
America

Asia
Pacific
Corporate
Kellogg
Consolidated
Reported net sales $ 2,227
$ 2,431
$ 931
$ 1,222
$ 1,821
$ 593
$ 692
$ —
$ 9,917
Venezuela operations impact —
—
—
—
—
23
—
—
23
Comparable net sales $ 2,227
$ 2,431
$ 931
$ 1,222
$ 1,821
$ 570
$ 692
$ —
$ 9,894
% change - 2017 vs. 2016:
Reported growth (5.3 )% (3.6 )% 3.2 % (1.5 )% (7.9 )% 17.3 % 4.7 % — % (2.0 )%
Acquisitions — % — % — % 0.1 % 0.6 % 23.7 % — % — % 1.6 %
Venezuela operations impact — % — % — % — % — % (3.8 )% — % — % (0.2 )%
Comparable growth (5.3 )% (3.6 )% 3.2 % (1.6 )% (8.5 )% (2.6 )% 4.7 % — % (3.4 )%
Foreign currency impact — % — % — % 0.4 % (3.0 )% (0.2 )% 2.4 % — % (0.4 )%
Currency-neutral comparable growth (5.3 )% (3.6 )% 3.2 % (2.0 )% (5.5 )% (2.4 )% 2.3 % — % (3.0 )%

~~For more information on the reconciling items in the table above, please refer to the Significant items impacting comparability section.~~

Year-to-date period ended September 30, 2017
(millions)
U.S.
Morning
Foods

U.S.
Snacks

U.S.
Specialty

North
America
Other
Europe
Latin
America

Asia
Pacific
Corporate
Kellogg
Consolidated
Reported operating profit $ 477
$ (8 ) $ 242
$ 173
$ 214
$ 82
$ 66
$ 31
$ 1,277
Mark-to-market —
—
—
—
—
—
—
(118 ) (118 )
Project K and cost reduction activities (16 ) (305 ) (1 ) (13 ) (21 ) (6 ) (5 ) 128
(239 )
Integration and transaction costs —
—
—
—
—
(2 ) —
—
(2 )
Acquisitions —
—
—
(2 ) (1 ) 15
—
—
12
Comparable operating profit $ 493
$ 297
$ 243
$ 188
$ 236
$ 75
$ 71
$ 21
$ 1,624
Foreign currency impact —
—
—
1
(8 ) (3 ) 2
(3 ) (11 )
Currency-neutral comparable operating profit $ 493
$ 297
$ 243
$ 187
$ 244
$ 78
$ 69
$ 24
$ 1,635
Year-to-date period ended October 1, 2016
(millions)
U.S.
Morning
Foods

U.S.
Snacks

U.S.
Specialty

North
America
Other
Europe
Latin
America

Asia
Pacific
Corporate
Kellogg
Consolidated
Reported operating profit $ 457
$ 230
$ 214
$ 135
$ 216
$ 70
$ 50
$ (75 ) $ 1,297
Mark-to-market —
—
—
—
—
—
—
(35 ) (35 )
Project K and cost reduction activities (13 ) (62 ) (4 ) (20 ) (34 ) (6 ) (6 ) (19 ) (164 )
integration and transaction costs —
—
—
—
(2 ) 1
—
(2 ) (3 )
Venezuela operations impact —
—
—
—
—
8
—
—
8
Venezuela remeasurement —
—
—
—
—
(13 ) —
—
(13 )
Comparable operating profit $ 470
$ 292
$ 218
$ 155
$ 252
$ 80
$ 56
$ (19 ) $ 1,504
% change - 2017 vs. 2016:
Reported growth 4.3 % (103.7 )% 13.2 % 28.8 % (1.2 )% 17.6 % 32.7 % 141.1 % (1.6 )%
Mark-to-market — % — % — % — % — % — % — % (335.9 )% (6.3 )%
Project K and cost reduction activities (0.6 )% (105.3 )% 1.6 % 8.2 % 5.0 % 0.7 % 5.8 % 270.8 % (4.5 )%
Integration and transaction costs — % — % — % 0.1 % 0.7 % (3.0 )% 1.0 % (8.3 )% 0.1 %
Acquisitions — % — % — % (1.2 )% (0.3 )% 19.2 % — % — % 0.8 %
Venezuela operations impact — % — % — % — % — % (13.0 )% — % (1.6 )% (0.6 )%
Venezuela remeasurement — % — % — % — % — % 18.4 % — % — % 0.9 %
Comparable growth 4.9 % 1.6 % 11.6 % 21.7 % (6.6 )% (4.7 )% 25.9 % 216.1 % 8.0 %
Foreign currency impact — % — % — % 0.5 % (3.3 )% (2.8 )% 3.4 % (15.9 )% (0.7 )%
Currency-neutral comparable growth 4.9 % 1.6 % 11.6 % 21.2 % (3.3 )% (1.9 )% 22.5 % 232.0 % 8.7 %

~~For more information on the reconciling items in the table above, please refer to the Significant items impacting comparability section.~~

~~U.S. Morning Foods~~

~~This segment consists of cereal, toaster pastries, and health and wellness bars. As reported and currency-neutral comparable~~Cereal net sales ~~declined 5.3% as a result of decreased volume partially offset by favorable pricing/mix.~~

~~Cereal consumption declined~~increased due to ~~our adult-oriented brands, for which we have not supported with enough food news and brand activity to reverse a category-wide trend. Our kid-oriented brands have continued to perform well.~~ ~~Frosted Flakes~~ ~~grew consumption and share during the year-to-date period behind effective media and innovation, including new Cinnamon~~ ~~Frosted Flakes~~. ~~Froot Loops~~ ~~also grew consumption and share during the year-to-date period reflecting effective innovation and brand-building.~~

~~Toaster pastries grew share during year-to-date period, despite lower consumption in the category.~~

As Reported operating profit increased 4.3% due to productivity initiatives partially offset by lower net sales and higher restructuring charges. Currency-neutral comparable operating profit increased 4.9% after eliminating the impact of restructuring charges.

~~U.S. Snacks~~

~~This segment consists of crackers, cookies, savory snacks, wholesome snacks and fruit-flavored snacks.~~

As reported and Currency-neutral comparable net sales declined 3.6% primarily due to impacts related to our conversion from DSD to warehouse distribution; specifically, reduced merchandising during the transition, reduction of SKUs, and a list-price adjustment.

As reported operating profit declined 103.7% due to increased Project K restructuring charges in the current year associated with our DSD transition. Currency-neutral comparable operating profit increased 1.6% after excluding the impact of restructuring charges; this was driven by DSD-related overhead reductions partially offset by increased brand investment.

~~U.S. Specialty~~

As reported and Currency-neutral comparable net sales improved 3.2% as a result of higher volume and improved pricing/mix aided by innovation and expansion in core and emerging growth channels, and the third quarter benefit of hurricane-related shipments.

As reported operating profit increased 13.2% due to the higher net sales, savings from Project K and ZBB initiatives, and lower restructuring charges. Currency-neutral comparable operating profit increased 11.6% after excluding the impact of restructuring charges.

~~North America Other~~

~~This segment is composed of our U.S. Frozen Foods, Kashi Company, and Canada businesses.~~

~~As reported net sales declined 1.5% due to decreased volume and~~favorable foreign currency ~~partially offset~~and organic growth led by ~~acquisitions. Currency-neutral comparable net sales declined 2.0% after excluding the impact of acquisitions and foreign currency.~~Mexico.

~~In U.S. Frozen,~~ ~~Eggo~~^®grew share and consumption during the year-to-date period, benefiting from the removal of artificial ingredients and the success of Disney-shaped waffles, as well as the exit of a competitor. Our frozen veggie business, under the ~~Morningstar Farms~~^®~~and~~ ~~Gardenburger~~^®~~brands, returned to growth in the second and third quarters reflecting focused marketing support on our core burger offerings during the summer grilling season.~~

~~In Canada, consumption and share performance continued to improve in both cereal and in snacks.~~

Kashi Company shipments were impacted by the exit of non-core or less profitable SKUs, promotions, or categories. Our cereal business grew share during the year-to-date period. We also saw improved trends for the wholesome snacks business, as recent innovations and media are starting to take hold.

Reported operating profit increased 28.8% due to lower restructuring charges and by Project K and ZBB savings. Currency-neutral comparable operating profit increased 21.2% after excluding the impact of restructuring charges and foreign currency.

~~Europe~~AMEA

Reported net sales ~~declined 7.9% due to lower volume partially offset by the favorable impact of~~decreased 22% as unfavorable foreign currency, ~~pricing/~~principally related to the Nigerian Naira, more than offset price/mix ~~and acquisitions. Currency-neutral comparable~~growth. Organic net sales ~~declined 5.5%~~increased 19% on positive price/mix after excluding the impact of foreign ~~currency and acquisitions.~~

Pringles volume was lower due primarily to prolonged negotiations with our customers as we sought to price behind our food and packaging upgrades. These negotiations were resolved by April but caused us to miss out on several first and second quarter merchandising programs. Promotional activity resumed in the third quarter and the brand returned to year-over-year growth.

~~Cereal consumption has declined due to sluggish categories across the region and particular softness in the adult-oriented brands across the category, notably our~~ ~~Special K. In the U.K., our largest market in the region, consumption and share turned positive in the third quarter, continuing an improving trend that began early this year.~~

As reported operating profit decreased 1.2% due to lower sales offset somewhat by lower restructuring charges, incremental Project K savings, and favorable foreign currency. Currency-neutral comparable operating profit declined 3.3% after excluding the impact of restructuring charges, prior year integration costs, acquisitions and foreign currency.

~~Latin America~~

Reported net sales improved 17.3% due to increased volume as a result of the Parati acquisition and the impact of favorable pricing/mix. This was partially offset by lower volume in the base business and the unfavorable impact of foreign currency. Currency-neutral comparable net sales declined 2.4% after excluding the impact of acquisitions, prior year Venezuela results, and foreign currency.

This decline was due solely to the Caribbean/Central America sub-region, where distributor transitions and economic softness were exacerbated during the third quarter by shipment disruptions due to hurricanes Maria and Irma.

We did post growth in each of the other sub-regions within Latin America. Our Mexico business continued to perform well with consumption increasing year-on-year. Mercosur posted particularly strong growth in ~~Pringles, despite a challenging environment, and continued its expansion in Argentina and Chile.~~

~~The integration of Parati, our acquisition in Brazil, continues to progress well, as the business posted solid growth.~~

As Reported operating profit increased ~~17.6%, primarily due to the impact of the Parati acquisition.~~2% as gross margin recovery was offset by unfavorable foreign currency translation. Currency-neutral ~~comparable~~adjusted operating profit ~~decreased 1.9% after excluding the impact of restructuring costs, acquisitions, prior year Venezuela remeasurement and foreign currency.~~

~~Asia Pacific~~

~~Reported net sales improved 4.7% due to favorable foreign currency and pricing/mix as well as a slight increase in volume. Currency-neutral comparable net sales~~ increased ~~2.3%~~29%, after excluding the impact of foreign currency.


Net sales % change - first quarter 2024 vs. 2023:
AMEA	Reported net sales		Foreign currency		Currency-neutral net sales		Divestiture		Organic net sales
Snacks	(4.1)	%	(6.4)	%	2.3	%	—	%	2.3	%
Cereal	(9.1)	%	(8.3)	%	(0.8)	%	—	%	(0.8)	%
Noodles and other	(40.5)	%	(82.4)	%	41.9	%	—	%	41.9	%

~~Growth in cereal was~~Snacks net sales declined as unfavorable foreign currency more than offset organic growth led by ~~India~~Pringles.

Cereal net sales decreased due primarily to unfavorable foreign currency and ~~Korea. Australia, our largest market~~category elasticities.

Noodles and other net sales decreased due to unfavorable foreign currency more than offset organic growth led by price realization intended to cover currency devaluation in ~~the region, gained share during the period, reflecting continued stabilization.~~Nigeria.

Corporate

~~Our Pringles business posted growth for the period across the region.~~

~~As reported~~Reported operating profit increased 32.7% due to higher net sales, lower restructuring charges, and brand-building efficiencies. Currency-neutral comparable operating profit improved 22.5% after excluding the impact of restructuring, prior year integration costs and foreign currency.

Outside of our reported results, our joint ventures in West Africa and China continued to perform extremely well. Growth was driven by strong noodles volume in West Africa and e-commerce sales in China.

~~Corporate~~

As Reported operating profit improved $106 million due primarily to pension curtailments gains in conjunction with Project K restructuring mitigated somewhat by higher mark-to-market costs. Currency-neutral comparable operating profit improved $43 million after excluding the impact of mark-to-market, restructuring charges, and foreign currency.

~~Margin performance~~

~~Margin performance for the quarter and year-to-date periods of 2017 versus 2016 is as follows:~~

Quarter 2017 2016
Change vs. prior
year (pts.)
Reported gross margin (a) 37.7 % 38.9 % (1.2 )
Mark-to-market (COGS) (2.0 ) (0.1 ) (1.9 )
Project K and cost reduction activities (COGS) 0.2
(0.4 ) 0.6
Acquisitions (COGS) 0.1
—
0.1
Comparable gross margin 39.4 % 39.4 % —
Foreign currency impact —
—
Currency-neutral comparable gross margin 39.4 %

—
Reported SG&A% (23.5 )% (26.3 )% 2.8
Mark-to-market (SG&A) (1.1 ) (0.8 ) (0.3 )
Project K and cost reduction activities (SG&A) (0.3 ) (0.9 ) 0.6
Acquisitions (SG&A) (0.3 ) —
(0.3 )
Comparable SG&A% (21.8 )% (24.6 )% 2.8
Foreign currency impact —

—
Currency-neutral comparable SG&A% (21.8 )%

2.8
Reported operating margin 14.2 % 12.6 % 1.6
Mark-to-market (3.1 ) (0.9 ) (2.2 )
Project K and cost reduction activities (0.1 ) (1.3 ) 1.2
Acquisitions (0.2 ) —
(0.2 )
Comparable operating margin 17.6 % 14.8 % 2.8
Foreign currency impact —
—
Currency-neutral comparable operating margin 17.6 %

2.8

~~For more information on the reconciling items in the table above, please refer to the Significant items impacting comparability section.~~

~~(a) Reported gross profit as a percentage of net sales. Gross profit is equal to net sales less cost of goods sold.~~

Reported gross margin for the quarter was unfavorable 120 basis points due primarily to the impact of mark-to-market accounting for pension, commodities and foreign currency contracts, as well as the impact of U.S. Snacks transition out of DSD distribution, namely the list price adjustment and increased resources in warehouse logistics due to the DSD transition. This was partially offset by the impact of productivity and cost-savings under the Project K restructuring program, lower restructuring charges, and acquisitions. Currency-neutral comparable gross margin was flat compared to the third quarter of 2016 after eliminating the impact of mark-to-market, restructuring, and acquisitions.

Reported SG&A% for the quarter was favorable 280 basis points due primarily to overhead savings realized from Project K and ZBB, lower Project K restructuring charges, and acquisitions. These impacts were partially mitigated by higher year-over-year mark-to-market charges. Currency-neutral comparable SG&A% was favorable 280 basis points after excluding the impact of restructuring, mark-to-market, and acquisitions.

Reported operating margin for the quarter was favorable 160 basis points due primarily to COGS and SG&A savings realized from Project K and ZBB initiatives, lower restructuring charges, and acquisitions partially mitigated by the impact of mark-to-market accounting for pension, commodities and foreign currency contracts. Currency-neutral comparable operating margin was favorable 280 basis points after excluding the year-over-year impact of restructuring, mark-to-market, and acquisitions.

Year-to-date 2017 2016
Change vs. prior
year (pts.)
Reported gross margin (a) 38.1 % 38.1 % —
Mark-to-market (COGS) (0.9 ) (0.1 ) (0.8 )
Project K and cost reduction activities (COGS) (0.3 ) (0.7 ) 0.4
Acquisitions (COGS) 0.1
—
0.1
Venezuela remeasurement (COGS) —
(0.1 ) 0.1
Comparable gross margin 39.2 % 39.0 % 0.2
Foreign currency impact —
—
Currency-neutral comparable gross margin 39.2 % 0.2
Reported SG&A% (25.0 )% (25.0 )% —
Mark-to-market (SG&A) (0.4 ) (0.2 ) (0.2 )
Project K and cost reduction activities (SG&A) (2.1 ) (1.0 ) (1.1 )
Acquisitions (SG&A) (0.3 ) —
(0.3 )
Venezuela operations impact (SG&A) —
0.1
(0.1 )
Venezuela remeasurement (SG&A) —
(0.1 ) 0.1
Comparable SG&A% (22.2 )% (23.8 )% 1.6
Foreign currency impact —
—
Currency-neutral comparable SG&A% (22.2 )% 1.6
Reported operating margin 13.1 % 13.1 % —
Mark-to-market (1.3 ) (0.3 ) (1.0 )
Project K and cost reduction activities (2.4 ) (1.7 ) (0.7 )
Acquisitions (0.2 ) —
(0.2 )
Venezuela operations impact —
0.1
(0.1 )
Venezuela remeasurement —
(0.2 ) 0.2
Comparable operating margin 17.0 % 15.2 % 1.8
Foreign currency impact —
—
Currency-neutral comparable operating margin 17.0 % 1.8

~~For more information on the reconciling items in the table above, please refer to the Significant items impacting comparability section.~~

~~(a) Reported gross profit as a percentage of net sales. Gross profit is equal to net sales less cost of goods sold.~~

~~Reported gross margin for the year-to-date period was flat~~significantly versus the comparable prior year ~~period. The impact of productivity and cost-savings under Project K,~~quarter due primarily to favorable ~~net input costs, lower restructuring costs, and Venezuela remeasurement were partially offset by~~mark-to-market impacts. Currency-neutral adjusted operating profit decreased $10 million from the impact of U.S. Snacks transition out of DSD distribution, namely the list price adjustment and increased resources in warehouse logistics due to the DSD transition, impact of acquisitions, mark-to-market accounting for pension plans, commodities and foreign currency contracts. Currency-neutral comparable gross margin improved 20 basis points after eliminating the impact of mark-to-market, restructuring, acquisitions, and Venezuela remeasurement.

~~Reported SG&A% for the year-to-date period was flat versus the comparable~~ prior year period. Overhead savings realized from Project K and ZBB, the impact to brand-building investment from ZBB efficiencies, and acquisitions were mitigated by increased Project K restructuring and mark-to-market costs. Currency-neutral comparable SG&A% was favorable 160 basis points after excluding ~~the impact~~mark-to-market.

Table of ~~restructuring, mark-to-market, and acquisitions.~~Contents

Reported operating margin for the year-to-date period was flat compared to the prior year. The favorable impact to COGS and SG&A expense realized from Project K and ZBB initiatives, acquisitions and Venezuela remeasurement were partially mitigated by higher market-to-market and restructuring charges. Currency-neutral comparable operating margin was favorable 180 basis points after excluding the year-over-year impact of restructuring, mark-to-market, acquisitions, and Venezuela remeasurement.

Margin performance

Our currency-neutral ~~comparable~~adjusted gross profit ~~currency-neutral comparable SG&A,~~ and ~~currency-neutral comparable operating~~gross profit ~~measures~~margin performance for the quarter ended March 30, 2024 and April 1, 2023 are reconciled to the directly comparable GAAP measures as follows:


Quarter ended	March 30, 2024				April 1, 2023				GM change vs. prior year (pts.)
(dollars in millions)	Gross Profit (a)		Gross Margin (b)		Gross Profit (a)		Gross Margin (b)
Reported	$	1,030	32.2	%	$	984	29.4	%	2.8
Mark-to-market	(10)		(0.3)	%	(53)		(1.6)	%	1.3
Separation costs	(2)		(0.1)	%	—		—	%	(0.1)

Network optimization	(101)		(3.1)	%	—		—	%	(3.1)


Adjusted	1,143		35.7	%	1,037		31.0	%	4.7
Foreign currency impact	(45)		1.7	%	—		—	%	1.7
Currency-neutral adjusted	$	1,188	34.0	%	$	1,037	31.0	%	3.0

Quarter ended Year-to-date period ended
(dollars in millions) September 30,
2017 October 1,
2016 September 30,
2017 October 1,
2016
Reported gross profit (a) $ 1,232
$ 1,264
$ 3,701
$ 3,779
Mark-to-market (COGS) (69 ) (3 ) (90 ) (12 )
Project K and cost reduction activities (COGS) 9
(12 ) (26 ) (66 )
Integration and transaction costs (COGS) —
—
—
(1 )
Acquisitions (COGS) 22
—
65
—
Venezuela operations impact (COGS) —
2
—
9
Venezuela remeasurement (COGS) —
—
—
(12 )
Comparable gross profit $ 1,270
$ 1,277
$ 3,752
$ 3,861
Foreign currency impact 10
(10 )
Currency-neutral comparable gross profit $ 1,260

$ 3,762

Reported SG&A $ 768
$ 854
$ 2,424
$ 2,482
Mark-to-market (SG&A) 35
28
28
23
Project K and cost reduction activities (SG&A) 10
28
213
98
Integration and transaction costs (SG&A) 1
2
2
2
Acquisitions (SG&A) 20
—
53
—
Venezuela operations impact (SGA) —
(1 ) —
1
Venezuela remeasurement (SG&A) —
—
—
1
Comparable SG&A $ 702
$ 797
$ 2,128
$ 2,357
Foreign currency impact 6

1

Currency-neutral comparable SG&A $ 696

$ 2,127

Reported operating profit $ 464
$ 410
$ 1,277
$ 1,297
Mark-to-market (104 ) (31 ) (118 ) (35 )
Project K and cost reduction activities (1 ) (40 ) (239 ) (164 )
Integration and transaction costs (1 ) (2 ) (2 ) (3 )
Acquisitions 2
—
12
—
Venezuela operations impact —
3
—
8
Venezuela remeasurement —
—
—
(13 )
Comparable operating profit $ 568
$ 480
$ 1,624
$ 1,504
Foreign currency impact 4
(11 )
Currency-neutral comparable operating profit $ 564

$ 1,635

Note: Tables may not foot due to rounding.

For more information on the reconciling items in the table above, please refer to the Significant items impacting comparability section.

(a) Gross profit is equal to net sales less cost of goods sold.

(b) Gross profit as a percentage of net sales.

Reported gross margin for the quarter increased 280 basis points versus the prior year due primarily to favorable mark-to-market, reimbursement for transition services provided to WK Kellogg Co, last year's revenue growth management actions, improved supply environment, a resumed higher level of productivity, and country mix resulting from currency devaluations, partially offset by network optimization costs. Currency-neutral adjusted gross margin increased 300 basis points compared to the first quarter of 2023 after eliminating the impact of mark-to-market, network optimization costs, separation costs, and foreign currency.

Restructuring ~~and cost reduction activities~~Programs

We view our restructuring ~~and cost reduction activities~~programs as part of our operating principles to provide greater visibility in achieving our long-term profit growth targets. Initiatives undertaken are ~~currently~~generally expected to recover cash implementation costs within a ~~five-year~~1 to 5-year period ofsubsequent to completion. ~~Upon completion~~Completion (or as each major stage is completed in the case of multi-year programs), is when the project begins to deliver cash savings and/or reduced depreciation.

~~Project K~~

In ~~February 2017,~~the first quarter, the Company announced ~~an expansion and an extension to its previously-announced global efficiency and effectiveness program (“Project K”), to reflect additional and changed initiatives. Project K is~~

~~expected to continue generating~~ a ~~significant amount~~reconfiguration of ~~savings that may be invested in key strategic areas of focus for~~ the ~~business~~North America frozen supply chain network, designed to drive ~~future growth or utilized to achieve our 2018 Margin Expansion target.~~

~~In addition to the original program’s focus on strengthening existing businesses in core markets, increasing growth in developing and emerging markets, and driving an~~ increased level of value-added innovation, the extended program will also focus on implementing a more efficient go-to-market model for certain businesses and creating a more efficient organizational design in several markets. Since inception, Project K has provided significant benefits andproductivity. The project is expected to ~~continue~~be substantially completed by late 2024, with cost savings beginning to ~~provide a number of benefits~~contribute to gross margin improvements in the ~~future, including an optimized~~second half of 2024 and reaching full-run rate in 2025. The overall project is expected to result in cumulative pretax charges of approximately $50 million, which include employee-related costs of $10 million, other cash costs of $10 million, and non-cash costs, primarily consisting of asset impairment, accelerated depreciation, and asset disposals of $30 million. Charges incurred related to this restructuring program were $31 million during the quarter ended March 30, 2024. These charges primarily related to severance costs and asset impairment, and were recorded in COGS.

In the first quarter, the Company proposed a reconfiguration of the European cereal supply chain ~~infrastructure,~~network, following the ~~implementation~~completion of ~~global business services, a new global focus on categories, increased agility from a more efficient organization design,~~any collective bargaining obligations and ~~improved effectiveness in go-to-market models.~~

~~We currently anticipate that Project K will result in total pre-tax charges, once all phases are approved and implemented, of $1.5~~consultation with impacted employees. The project, designed to $1.6 billion, with after-tax cash costs, including incremental capital investments, estimated to be approximately $1.1 billion. Cash expenditures of approximately $725 million have been incurred through the end of fiscal year 2016. Total cash expenditures, as defined, aredrive efficiencies, is expected to be ~~approximately $250 million for 2017 and the balance thereafter. Total charges for Project K in 2017 are~~substantially completed by late 2026, with resulting efficiencies expected to ~~be approximately $325~~begin contributing to ~~$375 million.~~

~~We expect annual cost savings generated from Project K will be approximately $600 to $700 million~~gross margin improvements in 2019. The savings will be realized primarily in selling, general and administrative expense with additional benefit realized in gross profit as cost of goods sold savings are partially offset by negative volume and price impacts resulting from go-to-market business model changes.late 2026. The overall ~~savings profile of the~~ project reflects our go-to-market initiatives that will impact both selling, general and administrative expense and gross profit. We have realized approximately $300 million of annual savings through the end of 2016. Cost savings have been utilizedis expected to ~~increase margins and be strategically invested~~result in areas such as in-store execution, sales capabilities, including adding sales representatives, re-establishing the Kashi business unit, and in the design and quality of our products. We have also invested in production capacity in developing and emerging markets, and in global category teams.

We funded much of the initial cash requirements for Project K through our supplier financing initiative. We are now able to fund much of the cash costs for the project through cash on hand as we have started to realize cash savings from the project.

We also expect that the project will have an impact on our consolidated effective income tax rate during the execution of the project due to the timing of charges being taken in different tax jurisdictions. The impact of this project on our consolidated effective income tax rate will be excluded from the comparable income tax rate that will be disclosed on a quarterly basis.

~~Refer to Note 5 within Notes to Consolidated Financial Statements for further information related to Project K and other restructuring activities.~~

~~Other Projects~~

~~In 2015 we implemented a zero-based budgeting (ZBB) program in our North America business and during the first half of 2016 the program was expanded into our international businesses. We expect~~ cumulative ~~savings from the ZBB program to be approximately $450 to $500 million by the end of 2018, realized largely in selling, general and administrative expense.~~

~~In support of the ZBB initiative, we incurred pre-tax~~pretax charges of approximately $1$120 million, which include employee-related costs of $50 million, other cash costs of $30 million, and ~~$21~~non-cash costs, primarily consisting of asset impairment, accelerated depreciation, and asset disposals of $40 million. Charges incurred related to this restructuring program were $70 million during the ~~year-to-date~~quarter ended March 30, 2024. These charges primarily related to severance costs and asset impairment, and were recorded in COGS.

All other restructuring projects were immaterial during the periods ~~ended September~~ presented.

30 ~~2017 and October 1, 2016, respectively. Total charges~~

Table of $38 million have been recognized since the inception of the ZBB program. We anticipate that ZBB will result in total cumulative pre-tax charges of approximately $40 million through 2017 which will consist primarily of the design and implementation of business capabilities.Contents

Foreign currency translation

The reporting currency for our financial statements is the U.S. dollar. Certain of our assets, liabilities, expenses and revenues are denominated in currencies other than the U.S. dollar, ~~including~~primarily in the euro, British pound, Australian dollar, Canadian dollar, Mexican peso, Brazilian Real, Nigerian Naira, Polish zloty, and ~~Russian ruble.~~Egyptian pound. To prepare our consolidated financial statements, we must translate those assets, liabilities, expenses and revenues into U.S. dollars at the applicable exchange rates. As a result, increases and decreases in the value of the U.S. dollar against these other currencies will affect the amount of these items in our consolidated financial statements, even if their value has not changed in their original currency. This could have a significant impact on our results if such increase or decrease in the value of the U.S. dollar is substantial.

Interest expense

For the ~~year-to-date periods~~quarters ended ~~September~~March 30, ~~2017~~2024 and ~~October~~April 1, ~~2016,~~2023, interest expense was ~~$188~~$83 million and ~~$343~~$70 million, respectively. ~~Prior~~The increase from the prior year is due primarily to higher interest ~~expense includes $153 million charge to redeem $475 million of 7.45% U.S. Dollar Debentures due 2031. The charge consisted primarily of a premium~~rates on commercial paper and floating rate debt versus the ~~tender offer and also including accelerated losses on pre-issuance interest rate hedges, acceleration of fees and debt discount on the redeemed debt and fees.~~prior year.

~~For the full year 2017, we expect gross interest expense to be approximately $255 million. Full year interest expense for 2016 was $406 million, including $153 million related to the tender offer.~~

Income ~~taxes~~Taxes

Our reported effective tax rate for the quarters ended ~~September~~March 30, ~~2017~~2024 and ~~October~~April 1, ~~2016 was 26% and 18%, respectively. The reported effective tax rate for the year-to-date periods ended September 30, 2017 and October 1, 2016~~2023 was 23% and ~~22%~~21%, respectively.

For the year-to-date period ended September 30, 2017, the effective tax rate benefited from a deferred tax benefit of $39 million resulting from the intercompany transfer of intellectual property. The effective tax rate for the quarter and year-to-date periods ended October 1, 2016, benefited from excess tax benefits from share-based compensation and the completion of certain tax examinations. Refer to Note 10 within Notes to Consolidated Financial Statements for further information.

~~The comparable~~Our adjusted effective tax rate for the quarters ended ~~September~~March 30, ~~2017~~2024 and ~~October~~April 1, ~~2016~~2023 was ~~28% and 20%, respectively. The comparable effective tax rate for the year-to-date periods ended September 30, 2017 and October 1, 2016 was 25% and 24%, respectively.~~23%.

~~For the full year 2017, we currently expect the comparable effective tax rate to be approximately 26-27%.~~ Fluctuations in foreign currency exchange rates could impact the expected effective income tax rate as it is dependent upon U.S. dollar earnings of foreign subsidiaries doing business in various countries with differing statutory rates. Additionally, the rate could be impacted by tax legislation and if pending uncertain tax matters, including tax positions that could be affected by planning initiatives, are resolved more or less favorably than we currently expect.



	Quarter ended
Consolidated results (dollars in millions)	March 30, 2024			April 1, 2023
Reported income taxes	$	82		$	61
Mark-to-market	3			(14)

Separation costs	(2)			(4)
Network Optimization	(21)			—
Business and portfolio realignment	—			(1)






Adjusted income taxes	$	103		$	80




Reported effective income tax rate	23.2		%	21.0		%
Mark-to-market	0.1		%	(0.7)		%

Separation costs	0.1		%	(0.9)		%
Network optimization	0.4		%	—		%
Business and portfolio realignment	—		%	(0.1)		%






Adjusted effective income tax rate	22.6		%	22.7		%

~~The following~~Note: Tables may not foot due to rounding.

For more information on the reconciling items in the table ~~provides a reconciliation of as reported~~above, please refer to ~~comparable income taxes and effective tax rate for~~ the ~~quarter and year-to-date periods ended September 30, 2017 and October 1, 2016.~~

Significant items impacting comparability section.

Quarter ended Year-to-date period ended
Consolidated results (dollars in millions) September 30,
2017 October 1,
2016 September 30,
2017 October 1,
2016
Reported income taxes $ 104
$ 62
$ 248
$ 215
Mark-to-market (38 ) (13 ) (39 ) (11 )
Project K and cost reduction activities 2
(11 ) (78 ) (43 )
Other costs impacting comparability —
—
—
(54 )
Venezuela operations impact —
1
—
2
Comparable income taxes $ 140
$ 85
$ 365
$ 321
Reported effective income tax rate 26.3 % 17.5 % 22.9 % 22.3 %
Mark-to-market (2.0 )% (1.8 )% (1.0 )% (0.3 )%
Project K and cost reduction activities 0.5 % (0.8 )% (1.4 )% (0.5 )%
Other costs impacting comparability — % — % — % (1.4 )%
Venezuela operations impact — % 0.1 % — % — %
Venezuela remeasurement — % — % — % 0.2 %
Comparable effective income tax rate 27.8 % 20.0 % 25.3 % 24.3 %



		~~2017 full year guidance~~
~~Reported effective income tax rate~~		*
~~Mark-to-market~~		*
~~Project K and cost reduction activities~~		(2	)%
~~Integration costs~~		*
~~Comparable effective income tax rate~~	~~Approx.~~	~~26-27%~~
* Full year guidance for this measure cannot be reasonably estimated as certain information necessary to calculate such measure on a GAAP basis is unavailable, dependent on future events outside of our control and cannot be predicted without unreasonable efforts by the Company.

Liquidity and capital resources

We anticipate current cash and marketable security balances, operating cash flows, together with our credit facilities and other financing sources including commercial paper, credit and bond markets, will be adequate to meet our operating, investing and financing needs. We expect to generate $1.7 billion of operating cash flow during 2024. We currently have $2.5 billion of ongoing unused revolving credit agreements, including $1.5 billion effective through 2026 and $1.0 billion effective through December 2024, as well as continued access to the commercial paper markets. We are currently in compliance with all debt covenants and do not have material uncertainty about our ability to maintain compliance in future periods.

Table of Contents

Our principal source of liquidity is operating cash flows supplemented by borrowings for major acquisitions and other significant transactions. Our cash-generating capability is one of our fundamental strengths and provides us with substantial financial flexibility in meeting operating and investing needs.

We have historically reported negative working capital primarily as the result of our focus to improve core working capital by reducing our levels of trade receivables and inventory while ~~extending~~optimizing the timing of payment of our trade payables. ~~In addition,~~The impacts of the extended customer terms program and the monetization programs on core working capital are largely offsetting.

We periodically monitor our supplier payment terms to assess whether our terms are competitive and in line with local market terms. To the extent that such assessment indicates that our supplier payment terms are not aligned with local market terms, we may seek to adjust our terms, including extending or shortening our payment due dates as appropriate. Supplier payment term modifications did not have a material impact on our cash flows during 2023, and are not expected to have a material impact in 2024.

We have a substantial amount of indebtedness which results in current maturities of long-term debt and notes payable which can have a significant impact on working capital as a result of the timing of these required payments. These factors, coupled with the use of our ongoing cash flows from operations to service our debt obligations, pay dividends, fund acquisition opportunities, and repurchase our common stock, reduce our working capital amounts. We had negative working capital of ~~$1.5~~$2.0 billion and $1.7 billion as of ~~September~~March 30, ~~2017~~2024 and ~~October 1, 2016,~~December 30, 2023, respectively.

The following table reflects net debt amounts:

We believe that our operating cash flows, together with our credit facilities and other available debt financing, will be adequate to meet our operating, investing and financing needs in the foreseeable future. However, there can be no assurance that volatility and/or disruption in the global capital and credit markets will not impair our ability to access these markets on terms acceptable to us, or at all.



(millions, unaudited)	March 30, 2024		December 30, 2023
Notes payable	$	236	$	121
Current maturities of long-term debt	1,303		663
Long-term debt	4,395		5,089
Total debt liabilities	$	5,934	$	5,873
Less:
Cash and cash equivalents	(242)		(274)

Net debt	$	5,692	$	5,599

The following table sets forth a summary of our cash flows:


	Year-to-date Period ended							Year-to-date period ended
(millions)	September 30, 2017			October 1, 2016			(millions)	March 30, 2024	April 1, 2023
Net cash provided by (used in):
Operating activities	$	1,121		$	1,021
Operating activities
Operating activities
Investing activities	(363		)	(381		)
Financing activities	(815		)	(521		)
Effect of exchange rates on cash and cash equivalents	44			(24		)
Net increase (decrease) in cash and cash equivalents	$	(13	)	$	95

Operating activities

The principal source of our operating cash flow is net earnings, meaning cash receipts from the sale of our products, net of costs to manufacture, distribute, and market our products.

Net cash provided by our operating activities for the ~~year-to-date period~~quarter ended ~~September~~March 30, ~~2017,~~2024, totaled ~~$1,121~~$364 million ~~an increase of $100 million over the same period in 2016. Pre-tax cash costs totaling $144~~compared to $276 million in the ~~year-to-date period ended October 1, 2016 related~~prior year period. The increase is due primarily to the $475 million redemption of our 7.45% U.S. Dollar Debentures due 2031 and $59 million cash settlement of forward starting swaps were offset by an increase in tax cash payments during the year-to-date period ended September 30, 2017 as well as a lower year-over-year cash flow impactdistribution from the ~~supplier financing initiative.~~

~~After-tax Project K cash payments were $185 million and $112 million for the year-to-date periods ended September 30, 2017 and October 1, 2016, respectively.~~

Our cash conversion cycle (defined as days of inventory and trade receivables outstanding less days of trade payables outstanding, based on a trailing 12 month average), was slightly below zero days and 3 days for the 12 month periods ended September 30, 2017 and October 1, 2016, respectively. Compared with the 12 month period ended October 1, 2016, the 2017 cash conversion cycle was positively impacted by an increase in the days of trade payables outstanding attributable to a supplier financing initiative.

~~Our pension and other~~Company's postretirement benefit plan ~~contributions amounted~~of $175 million during the first quarter of 2024. During the first quarter of 2024, the Company amended the U.S. retiree health and welfare plan to ~~$33 million and $29 million~~create a sub-trust to permit the payment of certain benefits for active union employees using a portion of the year-to-date periods ended September 30, 2017 and October 1, 2016, respectively. For the full year 2017, we currently expect that our contributions to pension and other postretirement plans will total approximately $42 million. Plan funding strategies may be modified in response to our evaluation of tax deductibility, market conditions and competing investment alternatives.plan surplus.

We measure free cash flow as net cash provided by operating activities reduced by expenditures for property additions. We use this non-GAAP financial measure of cash flow to focus management and investors on the amount

Table of Contents

of cash available for debt repayment, dividend distributions, acquisition opportunities, and share repurchases. Our free cash flow metric is reconciled to the most comparable GAAP measure, as follows:


	Quarter ended
(millions)	September 30, 2017			October 1, 2016			Approximate 2017 full year guidance
(millions)
(millions)
Net cash provided by operating activities
Net cash provided by operating activities
Net cash provided by operating activities	$	1,121		$	1,021		$1,600-$1,700
Additions to properties	(374		)	(376		)	(500)
Cash flow	$	747		$	645		$1,100-$1,200
Additions to properties
Additions to properties
Free cash flow
Free cash flow
Free cash flow

Our non-GAAP measure for free cash flow increased to $209 million in the year-to-date period ended March 30, 2024, from $73 million in the prior year due primarily to the distribution from the Company's postretirement benefit plan of $175 million and lower capital expenditures.

Investing activities

Our net cash used in investing activities totaled ~~$363~~$333 million for the year-to-date period ended ~~September~~March 30, ~~2017~~2024 compared to ~~$381~~$205 million in the ~~same~~comparable prior year period due primarily to the purchase of ~~2016. The slight decrease was primarily due to an $18~~marketable securities of $175 million ~~acquisition during~~in conjunction with the ~~first quarter of 2016.~~distribution from the postretirement healthcare plan partially offset by lower capital expenditures.

Financing activities

Our net cash used in financing activities for the ~~year-to-date period~~quarter ended ~~September~~March 30, ~~2017~~2024 totaled ~~$815~~$58 million compared to ~~$521~~cash used of $33 million induring the ~~same period~~comparable prior year quarter. During the first quarter of ~~2016. The difference is due to lower~~2024, the Company received net proceeds of $115 million from ~~issuance~~notes payable.

During the first quarter of

~~common stock related primarily to option exercises. Proceeds from issuance of common stock was $87 million in~~ 2023, the ~~current year-to-date period compared to $356 million in the prior year-to-date period.~~

~~In May 2017, we~~Company issued ~~€600 million of five-year 0.80% Euro Notes due 2022 and repaid our 1.75% fixed rate~~ $400 ~~million U.S. Dollar Notes due 2017 at maturity. Additionally, we repaid our 2.05% fixed rate Cdn. $300 million Canadian Dollar Notes at maturity.~~

~~In November 2016, we issued $600 million of seven-year 2.65% U.S. Dollar Notes and repaid our 1.875% $500 million U.S. Dollar Notes due 2016 at maturity.~~

~~In May 2016, we issued €600 million of eight-year 1.00% Euro Notes due 2024 and repaid our 4.45% fixed rate $750 million U.S. Dollar Notes due 2016 at maturity.~~

~~In March 2016, we issued $750~~ million of ten-year ~~3.25% U.S. Dollar~~5.25% Notes due 2033, resulting in net proceeds after discount and ~~$650~~underwriting commissions of $396 million. The proceeds from these notes were used for general corporate purposes, including the payment of offering related fees and expenses, repayment of the $210 million 2.75% Notes when they matured on March 1, 2023, and repayment of ~~thirty-year 4.50% U.S. Dollar Notes. Also in March 2016, we redeemed $475 million~~a portion of ~~our 7.45% U.S. Dollar Debentures due 2031.~~

commercial paper borrowings.

In December ~~2015,~~2022, the ~~board~~Board of ~~directors~~Directors approved ~~a new~~an authorization to repurchase up to $1.5 billion ~~in shares beginning in 2016~~of the Company's common stock through December ~~2017. Total purchases for~~2025. This authorization is intended to allow the ~~year-to-date period ended September 30, 2017, were 7 million~~Company to repurchase shares for ~~$516 million. Total purchases~~general corporate purposes and to offset issuances for employee benefit programs.

The Company did not repurchase shares during the ~~year-to-date period~~quarters ended ~~October~~March 30, 2024 and April 1, ~~2016, were 6 million shares for $426 million.~~

2023.

We paid cash dividends of ~~$550 million in the year-to-date period ended September 30, 2017, compared to $533~~$191 million during the ~~same period in 2016. The increase in dividends paid reflects our third~~ quarter ~~2016 increase in~~ended March 30, 2024, compared to $202 million during the ~~quarterly dividend to $.52 per common share from~~comparable prior year quarter. In April 2024, the ~~previous $.50 per common share. In October 2017, the board~~Board of ~~directors~~Directors declared a dividend of ~~$.54~~$.56 per common share, payable on ~~December 15, 2017~~June 14, 2024 to shareholders of record at the close of business on ~~December 1, 2017. The~~June 3, 2024.

In addition, the Kellanova Board of Directors announced plans to increase the quarterly dividend ~~is broadly in line~~to $0.57 per share beginning with ~~our current plan~~the third quarter of 2024.

We continue to maintain ~~our long-term dividend pay-out of approximately 50% of comparable net income.~~

~~In February 2014, we entered into an unsecured five year credit agreement expiring in 2019, which allows us to borrow, on~~both a ~~revolving credit basis, up to $2.0 billion.~~

~~In January 2017, we entered into an unsecured~~Five-Year and a 364-Day Credit Agreement, ~~to borrow, on a revolving credit basis, up to $800 million at any time outstanding. The new credit facility contains~~which had no outstanding borrowings as of March 30, 2024, and contain customary covenants and warranties, including specified restrictions on indebtedness, liens and a specified interest expense coverage ratio. If an event of default occurs, then, to the extent permitted, the administrative ~~agent~~agents may terminate the commitments under the credit ~~facility,~~facilities, accelerate any outstanding loans under the ~~agreement,~~agreements, and demand the deposit of cash collateral equal to the lender's letter of credit exposure plus interest.

Our 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 and also contain a change of control provision. There are no ~~borrowings outstanding under~~significant restrictions on the ~~new credit facility.~~

payment of dividends. We ~~are~~were in compliance with all ~~debt covenants. We continue to believe~~covenants as of March 30, 2024.

The Notes do not contain acceleration of maturity clauses that ~~we will be able to meet~~are dependent on credit ratings. A change in our ~~interest and principal repayment obligations and maintain our debt covenants for the foreseeable future. We expect~~credit ratings could limit our access to ~~public~~the U.S. short-term debt market and/or increase the cost of refinancing long-

Table of Contents

term debt in the future. However, even under these circumstances, we would continue to have access to our 364-Day Credit Facility, which expires in December 2024, as well as our Five-Year Credit Agreement, which expires in December 2026. This source of liquidity is unused and ~~commercial paper markets, along with operating cash flows, will be adequate~~available on an unsecured basis, although we do not currently plan to ~~meet future operating, investing~~use it.

Monetization and ~~financing needs, including the pursuit of selected acquisitions.~~Supplier Finance Programs

~~On October 27, 2017, we completed our acquisition of Chicago Bar Co., LLC, the manufacturer of RXBAR, for approximately $600 million, funded through short-term borrowings.~~

~~During the first half of 2016, we executed~~We have a ~~discrete customer~~ program toin which customers could extend ~~customer~~their payment terms in exchange for the elimination of ~~the discount we had offered for~~ early ~~payment.~~payment discounts (Extended Terms Program). In order to mitigate the net working capital impact of the ~~extended payment terms,~~Extended Terms Program for discrete customers, we entered into ~~an agreement~~agreements to sell, on a revolving basis, certain trade accounts receivable balances ~~of the customer~~ to a third party financial institution. The agreement is intended to directly offset the impact that extended customer payment terms would have on our days-sales-outstanding (DSO) metric that is critical to the effective management of our accounts receivable balance and our overall working capital. Consequently, we realize no negative effect on our net income or cash flow associated with the extended customer payment terms.institutions (Monetization Programs). Transfers under ~~this agreement~~the Monetization Programs are accounted for as sales of receivables resulting in the receivables being de-recognized from our Consolidated Balance Sheet. The ~~agreement provides~~Monetization Programs provide for the continuing sale of certain receivables on a revolving basis until terminated by either ~~party to the agreement;~~party; however the maximum funding from receivables that may be sold at any time is currently ~~$800~~approximately $975 million, but may be increased or decreased as customers move in or out of the Extended Terms Program and as additional financial institutions ~~are added to~~move in or out of the ~~agreement. We currently estimate that the amount of these~~

receivables held at any time by the financial institution(s) will be approximately $550 to $650 million. During the year-to-date period ended September 30, 2017, approximately $1.7 billion of accounts receivable have been sold via this arrangement.Monetization Programs. Accounts receivable sold of ~~$629~~$725 million and $697 million remained outstanding under this arrangement as of ~~September~~March 30, ~~2017.~~2024 and December 30, 2023, respectively.

In addition to the discrete customer program above, in July 2016 we established an accounts receivable securitization program for certain customers which allows for extended customer payment terms in exchange for the elimination of the discount we had offered for early payment. In order to mitigate the net working capital impact of the extended payment terms, we entered into an agreement with a financial institution to sell these receivables resulting in the receivables being de-recognized from our consolidated balance sheet. The ~~agreement is intended~~Monetization Programs are designed to directly offset the impact ~~that extended customer payment terms~~the Extended Terms Program would have on ~~our~~the days-sales-outstanding (DSO) metric that is critical to the effective management of ~~our~~the Company's accounts receivable balance and ~~our~~ overall working capital. ~~Consequently, we realize no negative effect on our net income or cash flow associated~~Current DSO levels within North America are consistent with ~~the extended customer payment terms. The maximum funding from receivables that may be sold at any time is currently $600 million, but may be increased as additional financial institutions are added~~DSO levels prior to the ~~agreement. We currently estimate that~~execution of the amount of these receivables held at any time by the financial institution(s) will be up to approximately $1 billion. During the year-to-date period ended September 30, 2017, $2.0 billion of accounts receivable have been sold through this program. As of September 30, 2017, approximately $480 million of accounts receivable sold under the securitization program remained outstanding, for which we received cash of approximately $433 millionExtended Term Program and ~~a deferred purchase price asset of approximately $47 million.~~Monetization Programs.

Refer to Note 23 within Notes to Consolidated Financial Statements for further information related to the sale of accounts receivable.

~~Accounting standards~~We periodically monitor our supplier payment terms to ~~be adopted~~assess whether our terms are competitive and in ~~future periods~~

~~Derivatives and Hedging: Targeted Improvements~~line with local market terms. To the extent that such assessment indicates that our supplier payment terms are not aligned with local market terms, we may seek to ~~Accounting for Hedging Activities~~. In August 2017, the FASB issued an ASU intended to simplify hedge accounting by better aligning an entity’s financial reporting for hedging relationships with its risk management activities. The ASU also simplifies the application of the hedge accounting guidance. The new guidance is effective on January 1, 2019, with early adoption permitted. For cash flow hedges existing at the adoption date, the standard requires adoption on a modified retrospective basis with a cumulative-effect adjustment to the Consolidated Balance Sheetadjust our terms, including extending or shortening our payment due dates as of the beginning of the year of adoption. The amendments to presentation guidance and disclosure requirements are required to be adopted prospectively. The Company is currently assessing the impact and timing of adoption of this ASU.

In March 2017, the FASB issued an ASU to improve the presentation of net periodic pension cost and net periodic postretirement benefit cost. The ASU requires that an employer report the service cost component in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net benefit cost are required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations, if one is presented. The ASU is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017. Early adoption is permitted, as of the beginning of an annual reporting period for which financial statements (interim or annual) have not been issued or made available for issuance. That is, early adoption should be the first interim period if an entity issues interim financial statements. The amendments in this ASU should be applied retrospectively for the presentation of the service cost component and the other components of net periodic pension cost and net periodic postretirement benefit cost in the income statement and prospectively, on and after the effective date, for the capitalization of the service cost component of net periodic pension cost and net periodic postretirement benefit in assets. We will adopt the ASU in the first quarter of 2018. Ifappropriate, however, we had adopted the ASU in the first quarter of 2017, on an as reported basis, the impact to our Corporate segment would have been an increase to COGS and SG&A of $157 million and $120 million, respectively, with an offsetting decrease to other income (expense), net (OIE) of $277 million in the year-to-date period ended September 30, 2017. For the year-to-date period ended October 1, 2016, the impact to our Corporate segment would have been an increase to COGS and SG&A of $107 million and $35 million, respectively, with an offsetting decrease to OIE of $142 million. Adoption will have no impact on net income or cash flow. The impact to the Consolidated Balance Sheet at September 30, 2017 and October 1, 2016 would have been insignificant.

On a comparable basis, the impact would have been an increase to COGS and SG&A of $128 million and $71 million, respectively, with an offsetting decrease to OIE of $199 million in the year-to-date period ended September 30, 2017, and an increase to COGS and SG&A of $107 million and $63 million, respectively, with a decrease to OIE of $170 million in the year-to-date period ended October 1, 2016. On a comparable basis for the

~~year ended December 31, 2016, the impact would have been an increase to COGS and SG&A of $144 million and $83 million, respectively, with an offsetting decrease to OIE of $227 million.~~

In January 2017, the FASB issued an ASU to simplify how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting unit's goodwill with the carrying amount of that goodwill. The ASU is effective for an entity's annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The amendments in this ASU should be applied on a prospective basis. We are currently assessing the impact and timing of adoption of this ASU.

In August 2016, the FASB issued an ASU to provide cash flow statement classification guidance for certain cash receipts and payments including (a) debt prepayment or extinguishment costs; (b) contingent consideration payments made after a business combination; (c) insurance settlement proceeds; (d) distributions from equity method investees; (e) beneficial interests in securitization transactions and (f) application of the predominance principle for cash receipts and payments with aspects of more than one class of cash flows. The ASU is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017. Early adoption is permitted, including adoption in an interim period, in which case adjustments should be reflected as of the beginning of the fiscal year that includes the interim period. The amendments in this ASU should be applied retrospectively. We will adopt the new ASU in the first quarter of 2018. If we had adopted the ASU in the first quarter of 2017, cash flow from operations would have decreased $45 million and cash flow from investing activities would have increased $45 million for the year-to-date period ended September 30, 2017.

In February 2016, the FASB issued an ASU which will require the recognition of lease assets and lease liabilities by lessees for all leases with terms greater than 12 months. The distinction between finance leases and operating leases will remain, with similar classification criteria as current GAAP to distinguish between capital and operating leases. The principal difference from current guidance is that the lease assets and lease liabilities arising from operating leases will be recognized on the Consolidated Balance Sheet. Lessor accounting remains substantially similar to current GAAP. The ASU is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018. Early adoption is permitted. We will adopt the ASU in the first quarter of 2019, and are currently evaluating the impact that implementing this ASU will have on our financial statements.

In January 2016, the FASB issued an ASU which primarily affects the accounting for equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. The ASU is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017. Early adoption can be elected for all financial statements of fiscal years and interim periods that have not yet been issued or that have not yet been made available for issuance. Entities should apply the update by means of a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption. We will adopt the updated standard in the first quarter of 2018. We do not expect ~~the adoption of this ASU~~supplier payment term modifications to have a material impact on our cash flows during 2024.

The Company establishes competitive market-based terms with our suppliers, regardless of whether they participate in supplier finance programs, which generally range from 0 to 150 days dependent on their respective industry and geography. We have agreements with third parties (Supplier Finance Programs) to provide accounts payable tracking systems which facilitate participating suppliers’ ability to monitor and, if elected, sell our payment obligations to designated third-party financial ~~statements.~~

~~In May 2014,~~institutions. Participating suppliers may, at their sole discretion, make offers to sell one or more of our payment obligations prior to their scheduled due dates at a discounted price to participating financial institutions. We have no economic interest in the ~~FASB issued an ASU which provides guidance for accounting for revenue~~sale of these suppliers’ receivables and no direct financial relationship with the financial institutions concerning these services. Our obligations to our suppliers, including amounts due and scheduled payment dates, are not impacted by suppliers’ decisions to sell amounts under the arrangements. However, our right to offset balances due from ~~contracts with customers. The core principle of this ASU~~suppliers against payment obligations is ~~that an entity should recognize revenue to depict~~restricted by the ~~transfer of promised goods or services to customers in an amount that reflects the consideration the entity expects to be entitled in exchange~~agreements for those ~~goods or services. To achieve~~payment obligations that ~~core principle, an entity would be required~~have been sold by suppliers.

Refer to ~~apply the following five steps: 1) identify the contract(s) with a customer; 2) identify the performance obligations~~Note 1 within Notes to Consolidated Financial Statements for further information related to accounts payable.

If financial institutions were to terminate their participation in the ~~contract; 3) determine the transaction price; 4) allocate the transaction price~~Monetization Programs and we are not able to ~~the performance obligations~~modify related customer payment terms, working capital could be negatively impacted. Additionally, working capital could be negatively impacted if we shorten our supplier payment terms as a result of supplier negotiations. For suppliers participating in the ~~contract~~Supplier Finance Programs, financial institutions may terminate their participation or we could experience a downgrade in our credit rating that could result in higher costs to suppliers. If working capital is negatively impacted as a result of these events and ~~5) recognize revenue when (or as) the entity satisfies a performance obligation. When the ASU was originally issued it was effective~~we were unable to secure alternative programs, we may have to utilize our various financing arrangements for ~~fiscal years,~~short-term liquidity or increase our long-term borrowings.

Critical accounting estimates

Goodwill and ~~interim periods within those years, beginning after December 15, 2016. Early adoption was not permitted. On July 9, 2015, the FASB decided to delay the effective date~~other intangible assets

Table of ~~the new revenue standard by one year. The updated standard will be effective for fiscal years,~~Contents

We review our operating segment 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. Entities will have the option to apply the final standard retrospectivelyreporting unit structure annually 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 affectedas significant changes in the organization occur and assess goodwill impairment risk throughout the year by performing a qualitative review of entity-specific, industry, market and general economic factors affecting our reporting units with goodwill. Similarly, we assess indefinite-life intangible assets impairment risk throughout the year by performing a qualitative review and assessing events and circumstances that could affect the fair value or carrying value of these intangible assets. No interim triggering events requiring further impairment assessments of goodwill or indefinite-life intangibles have been noted during 2024. Annually during the fourth quarter, in conjunction with our annual budgeting process, we perform qualitative or quantitative testing, depending on factors such as prior-year test results, 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. Based upon the Company's preliminary assessment, there will be some limited timing and classification differences upon adoption. The Company will adopt the updated standard in the

~~first quarter of 2018, using a modified retrospective transition method, and the adoption is not expected to have a material impact on its financial statements.~~

~~Future outlook~~

We affirm our guidance for currency-neutral comparable net sales, operating profit and earnings per share, as well as for cash flow, as strong productivity performance offsets a softened outlook for currency neutral comparable net sales. The company affirms its guidance for about 3% decline in currency-neutral comparable net sales in 2017. This figure includes the expected (1%) impact from the U.S. Snacks transition to warehouse distribution from DSD, an estimate that has not changed.

~~Guidance is affirmed for currency-neutral comparable operating profit, which we believe will grow 7-9%~~ year on year, as productivity savings offset the impact of lower net sales. The Company's currency-neutral comparable operating profit margin remains on pace to improve by 350 basis points from 2015 through 2018.

Guidance is also affirmed for earnings per share on a currency-neutral comparable basis. Specifically, we expect to generate growth of 8-10% off a 2016 base that excludes after-tax $0.02 from deconsolidated Venezuela results, to $4.03-$4.09. The growth should be driven by the aforementioned 7-9% growth in operating profit, with roughly 1% of additional leverage from modestly lower shares outstandingdevelopments, current risk evaluations and other ~~items, which slightly more than offsets a higher effective tax rate and flat interest expense. This earnings per share guidance excludes currency translation impact, which we now believe may come~~practical considerations. Refer to our Critical Accounting Estimates in ~~at roughly half of~~ our previous forecast of after-tax ($0.06) per share, owing to the year-to-date weakening of the U.S. dollar against certain currencies. Including this impact, comparable-basis earnings per share are expected to be $4.00-4.06.

Comparable-basis and currency-neutral comparable-basis earnings per share guidance by definition exclude up-front costs, principally related to the Project K program. These up-front costs are now expected to be after-tax $(0.65)-(0.75) per share, or $(325)-(375) million pretax, down from previous guidance of $(0.80)-(0.90) per share after tax and $(400)-(450) million pretax. The EPS guidance also continues to exclude integration costs, related to the Company's acquisition in Brazil, as well as previous acquisitions. These integration costs are now expected to come in toward the low end of our previous guidance range of $(0.01)-(0.03) per share after-tax.

~~We also affirmed our guidance~~2023 Form 10-K for ~~2017 cash flow. Specifically, cash from operating activities should be approximately $1.6-1.7 billion, which after capital expenditure translates into cash flow of $1.1-1.2 billion.~~

Reconciliation of Non-GAAP amounts - 2017 Full Year Guidance*
Net sales Operating profit EPS
Currency-Neutral Comparable Guidance (3.0%) 7.0% - 9.0% $4.03 - $4.09
Foreign currency impact (0.5%) (0.6%) ($.03)
Comparable Guidance (3.5%) 6.4% - 8.4% $4.00 - $4.06

Impact of certain items excluded from Non-GAAP guidance:
Project K and cost reduction activities (pre-tax) 1.9% - (1.5%) ($1.07) - ($.93)
Integration costs (pre-tax) 0.3% ($.02)
Acquisitions/dispositions (pre-tax) 1.4% 0.7% $.07
Income tax benefit applicable to adjustments, net** $.31 - $.27

* 2017 full year guidance for net sales, operating profit, and earnings per share are provided on a non-GAAP, comparable and currency-neutral comparable basis only because certain information necessary to calculate such measures on a GAAP basis is unavailable, dependent on future events outside of our control and cannot be predicted without unreasonable efforts by the Company. The Company is providing quantification of known adjustment items where available.

** Represents the estimated income tax effectfurther details on the ~~reconciling items, using weighted-average statutory tax rates, depending upon the applicable jurisdiction.~~methodologies used for evaluating goodwill and intangible assets.



~~Reconciliation of Non-GAAP amounts - Cash Flow Guidance~~
	~~Approximate~~
~~(millions)~~	~~Full Year 2017~~
~~Net cash provided by (used in) operating activities~~	~~$1,600 - $1,700~~
~~Additions to properties~~	~~($500)~~
~~Cash Flow~~	~~$1,100 - $1,200~~

Forward-looking statements

This Report contains “forward-looking statements” with projections and expectations concerning, among other things, the Company’s ~~global growth and efficiency program (Project K),~~restructuring programs; the integration of acquired ~~businesses,~~businesses; our strategy, ~~zero-based budgeting,~~ financial principles, and plans; initiatives, improvements and growth; sales, ~~gross~~ margins, advertising, promotion, merchandising, brand building, operating profit, and earnings per share; innovation; investments; capital expenditures; asset write-offs and expenditures and costs related to productivity or efficiency initiatives; the impact of accounting changes and significant accounting estimates; our ability to meet interest and debt principal repayment obligations; minimum contractual obligations; future common stock repurchases or debt reduction; effective income tax rate; cash flow and core working capital improvements; interest expense; commodity and energy prices; ESG performance; and employee benefit plan costs and funding. Forward-looking statements include predictions of future results or activities and may contain the words “expect,” “believe,” “will,” “can,” “anticipate,” “estimate,” “project,” “should,~~” “estimate,~~” or words or phrases of similar meaning. For example, forward-looking statements are found in this Item 1 and in several sections of Management’s Discussion and Analysis. Our actual results or activities may differ materially from these predictions.

Our future results could be affected by a variety of other factors, ~~including:~~

including the impact of macroeconomic conditions; business disruptions; consumers' and other stakeholders' perceptions of our brands; the ability to implement ~~Project K, including exiting our Direct-Store-Door distribution system,~~restructurings as planned, whether the expected amount of costs associated with ~~Project K~~restructurings will ~~exceed~~differ from forecasts, whether the Company will be able to realize the anticipated benefits from ~~Project K~~restructurings in the amounts and times expected;

~~the ability to realize the benefits we expect from the adoption of zero-based budgeting in the amounts and at the times expected;~~

~~the ability to realize the anticipated benefits from our implementation of a more formal revenue growth management discipline;~~

the ability to realize the anticipated benefits and synergies from ~~acquired businesses~~business acquisitions in the amounts and at the times expected;

the impact of competitive conditions;

the ability to realize the intended benefits of the separation of WK Kellogg Co (the "separation"); the possibility of disruption from the separation, including changes to existing business relationships, disputes, litigation or unanticipated costs; uncertainty of the expected financial performance of the Company following completion of the separation; the effectiveness of pricing, advertising, and promotional programs;

the success of innovation, renovation and new product introductions;

the success of our Better Days and sustainability programs; the recoverability of the carrying value of goodwill and other intangibles;

the success of productivity improvements and business transitions;

commodity and energy ~~prices;~~

prices, transportation costs, labor ~~costs;~~

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,~~opportunities; integration of acquired ~~businesses, and~~businesses; 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,~~rates; statutory tax ~~rates,~~rates; currency conversion and availability;

legal and regulatory factors including changes in food safety, advertising and labeling laws and ~~regulations;~~

regulations, the ultimate impact of product recalls;

~~adverse changes in global climate or extreme weather conditions;~~

business disruption or other losses from ~~natural disasters,~~ war, terrorist acts or political unrest; and

the risks and uncertainties described ~~herein under Part II,~~in Item ~~1A.~~

1A below. Forward-looking statements speak only as of the date they were made, and we undertake no obligation to publicly update them.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Our Company is exposed to certain market risks, which exist as a part of our ongoing business operations. We use derivative financial and commodity instruments, where appropriate, to manage these risks. Refer to Note 1112 within Notes to Consolidated Financial Statements for further information on our derivative financial and commodity instruments.

Refer to disclosures contained within Item 7A of our ~~2016~~2023 Annual Report on Form 10-K. Other than changes noted here, there have been no material changes in the Company’s market risk as of ~~September~~March 30, ~~2017.~~2024.

Table of Contents

Volatile market conditions arising from geopolitical events may result in significant changes in foreign exchange rates, and in particular a weakening of foreign currencies relative to the U.S. dollar may negatively affect the translation of foreign currency denominated earnings to U.S. dollars. Additionally the Company operates in certain emerging markets that may be subject to hyperinflationary economic conditions. Primary currency exposures include the U.S. dollar versus the euro, British pound, Australian dollar, Canadian dollar, Mexican peso, Brazilian real, Nigerian naira, Polish zloty and Egyptian pound, and in the case of inter-subsidiary transactions, the British pound versus the euro.

During ~~2017,~~the second quarter of 2023, the Nigerian government removed certain currency restrictions over the Nigerian naira leading to a significant decline in the exchange rate of the naira to the U.S. dollar on the official market in Nigeria. Exchange rates have declined further since the second quarter of 2023. As a result of this decline in the exchange rate, the U.S. dollar value of the assets, liabilities, expenses and revenues of our Nigerian business in our consolidated financial statements has decreased significantly compared to prior periods. The consolidated assets of our Nigerian business represented approximately 3% of our consolidated assets as of March 30, 2024, compared to 5% as of December 30, 2023. Net sales of our Nigerian business were 6% of our consolidated net sales quarter ended March 30, 2024, but could become a smaller percentage of our overall sales if exchange rates decline further from current levels over the remainder of 2024.

In addition to our consolidated Nigerian business, the Company also has an investment in an unconsolidated entity, Tolaram Africa Foods PTE LTD (TAF), that holds an investment in a Nigerian food manufacturer. This investment is accounted for under the equity method of accounting and is evaluated for indicators of other than temporary impairment.

We have interest rate contracts with notional amounts totaling $2.3 billion representing a net settlement obligation of $69 million as of March 30, 2024. We had interest rate contracts with notional amounts totaling $2.3 billion representing a net settlement obligation of $93 million as of December 30, 2023.

During the quarter ended March 30, 2024, we ~~entered into forward starting interest~~settled cross currency swaps with notional amounts totaling ~~€300~~approximately €700 million, ~~as hedges against interest rate volatility associated with~~resulting in a ~~forecasted issuance~~net realized loss of ~~fixed rate Euro debt to be used for general corporate purposes.~~approximately $7 million. These cross currency swaps were ~~designated~~accounted for as ~~cash flow hedges. The Euro forward starting interest rate swaps were settled upon issuance of fixed rate Euro debt. A resulting aggregate gain of $1 million~~net investment hedges and the related loss 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 7 within Notes to Consolidated Financial Statements for further information related to the fixed rate debt issuance.

income. During the ~~year-to-date period~~quarter ended ~~September~~March 30, ~~2017~~,2024, we also entered into ~~interest rate~~cross currency swaps with notional amounts totaling approximately ~~€600~~€800 million, ~~that are~~as hedges against foreign currency volatility associated with our net investment in our wholly-owned foreign subsidiaries. These swaps were designated as ~~fair value hedges of certain Euro debt. Additionally, we settled interest rate~~net investment hedges. We have cross currency swaps with notional amounts totaling approximately $700 million which were previously designated as fair value hedges of certain U.S. Dollar Notes. We recorded an aggregate loss of $14 million related to the settled swaps that will be amortized as interest expense over the life of the related fixed rate debt. Refer to Note 7 within Notes to Consolidated financial Statements.

~~We have interest rate swaps with notional amounts totaling $2.2~~$1.8 billion outstanding ~~at September~~as of March 30, ~~2017 and~~2024 representing a net settlement receivable of $25 million. The total notional amount of cross currency swaps outstanding as of December ~~31, 2016,~~30, 2023 was $1.7 billion representing a net settlement obligation of ~~$43 million~~$16 million.

Our Company is exposed to price fluctuations primarily as a result of anticipated purchases of raw and ~~$64 million, respectively. The interest rate swaps are designated~~packaging materials, fuel, and energy. Primary exposures include corn, wheat, potato flakes, soybean oil, sugar, cocoa, cartonboard, natural gas, and diesel fuel. We have historically used the combination of long-term contracts with suppliers, and exchange-traded futures and option contracts to reduce price fluctuations in a desired percentage of forecasted raw material purchases over a duration of generally less than 18 months.

Geopolitical instability, including wars and conflicts (including conflicts in Ukraine and the Middle East), actual and potential shifts in U.S. and foreign, trade, economic and other policies as ~~fair value hedges~~well as other global events, have resulted in certain impacts to the global economy, including market disruptions, supply chain challenges, and inflationary pressures. During the quarter ended March 30, 2024, we continue to experience elevated commodity and supply chain costs, including procurement and manufacturing costs, although certain supply chain challenges eased. We continue to mitigate the dollar impact of ~~certain U.S. Dollar~~this input cost inflation through the execution of productivity initiatives and ~~Euro debt. Assuming average variable rate debt levels~~revenue growth management actions. We continue to expect input cost inflation to be flat during ~~the year, a one percentage point increase in interest rates would have increased interest expense by approximately $26 million and $17 million at~~ ~~September 30, 2017~~ ~~and December 31, 2016, respectively.~~2024.

Table of Contents

Item 4. Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer as appropriate, to allow timely decisions regarding required disclosure under Rules 13a-15(e) and 15d-15(e). Disclosure controls and procedures, no matter how well designed and operated, can provide only reasonable, rather than absolute, assurance of achieving the desired control objectives.

As of ~~September~~March 30, ~~2017,~~2024, 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.

Kellogg’s Project K initiative which includes the reorganization and relocation of certain financial, information technology, and logistics and distribution processes; internal to the organization was initiated in 2014. This initiative is expected to continue through 2018 and will continue to impact the design of our control framework. During efforts associated with Project K, we have implemented additional controls to monitor and maintain appropriate internal controls over financial reporting. There were no ~~other~~ changes during the quarter ended ~~September~~March 30, ~~2017,~~2024, that materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

~~KELLOGG COMPANY~~

Table of Contents

Kellanova (formerly known as Kellogg Company)

PART II — OTHER INFORMATION

~~Item 1. Legal Proceedings~~

In April, 2016, the United States Environmental Protection Agency (the “EPA”) issued to The Eggo Company, a subsidiary of the Company, a notice of potential violation alleging that the Company’s Rossville, Tennessee facility had violated certain recordkeeping and reporting requirements under Section 112(r)(7) of the Clean Air Act (the “Notification”). The Notification was based on the findings of an August 2013 inspection of the Company’s Rossville, Tennessee facility by the EPA relating to the ammonia refrigeration system operated at the facility. The Company and the EPA resolved this matter through a Consent Agreement and Final Order which was signed and filed with the EPA Region 4 Clerk on April 6, 2017. In accordance with the provisions of the Consent Agreement and Final Order, the Company paid a civil penalty of $133,000 in full settlement of the allegations set forth in the Consent Agreement and Final Order, but without admitting or denying the factual allegations set forth in that Consent Agreement and Final Order.

Item 1A. Risk Factors

There have been no material changes in our risk factors from those disclosed in Part I, Item 1A to our Annual Report on Form 10-K for the fiscal year ended December ~~31, 2016.~~30, 2023. The risk factors disclosed under those Reports in addition to the other information set forth in this Report, could materially affect our business, financial condition, or results. Additional risks and uncertainties not currently known to us or that we deem to be immaterial could also materially adversely affect our business, financial condition, or results.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

~~(c) Issuer Purchases of Equity Securities~~

~~(millions, except per share data)~~

Period
(a) Total Number
of Shares
Purchased
(b) Average Price
Paid Per Share
(c) Total Number
of Shares
Purchased as
Part of Publicly
Announced
Plans or
Programs
(d) Approximate
Dollar Value of
Shares that May
Yet Be
Purchased
Under the Plans
or Programs
Month #1:
7/02/2017 - 7/29/2017 1.2
$ 66.82
—
$ 558
Month #2:
7/30/2017 - 8/26/2017 —
$ —
—
$ 558
Month #3:
8/27/2017 - 9/30/2017 —
$ —
—
$ 558
Total 1.2
$ 66.82
—

In December ~~2015, our board~~2022, the Board of ~~directors~~Directors approved ~~a share repurchase program authorizing us~~an authorization to repurchase ~~shares of our common stock amounting~~up to $1.5 billion ~~beginning in January 2016~~of the Company's common stock through December ~~2017.~~2025. This authorization is intended to allow usthe Company to repurchase shares for general corporate purposes and to offset issuances for employee benefit programs. ~~During~~

The following table provides information with respect to purchases of common shares under programs authorized by our Board of Directors during the ~~third~~ quarter ended March 30, 2024.

(millions, except per share data)


Period	(a) Total Number of Shares Purchased	(b) Average Price Paid Per Share		(c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	(d) Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
Month #1:
12/31/2023 - 1/27/2024	—	$	—	—	$	1,330
Month #2:
1/28/2024 - 2/24/2024	—	$	—	—	$	1,330
Month #3:
2/25/2024 - 3/30/2024	—	$	—	—	$	1,330
Total	—			—

Item 5. Other Information

None.

Table of ~~$81 million.~~Contents

Item 6. Exhibits


~~(a)~~	~~Exhibits:~~

(a)Exhibits:


3.1			Certificate of Amendment to the Restated Certificate of Incorporation of Kellanova, incorporated by reference to Exhibit 3.1 of our Current Report on Form 8-K filed May 1, 2024, Commission file number 1-4171.
10.1			2024-2026 Performance Stock Unit Plan, incorporated by reference to Exhibit 10.1 of our Current Report on Form 8-K filed February 22, 2024, Commission file number 1-4171.
~~31.1~~ 10.2			Form of Restricted Stock Unit Terms and Conditions, incorporated by reference to Exhibit 10.2 of our Current Report on Form 8-K filed February 22, 2024, Commission file number 1-4171.
31.1			Rule 13a-14(e)/15d-14(a) Certification from Steven A. Cahillane
31.2			Rule 13a-14(e)/15d-14(a) Certification from ~~Fareed Khan~~Amit Banati
32.1			Section 1350 Certification from Steven A. Cahillane
32.2			Section 1350 Certification from ~~Fareed Khan~~Amit Banati
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

* A management contract or compensatory plan required to be filed with this Report.

~~KELLOGG COMPANY~~39

Table of Contents

KELLANOVA

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


KELLANOVA

/s/ Amit Banati
~~KELLOGG COMPANY~~Amit Banati

~~/s/ Fareed Khan~~
~~Fareed Khan~~
Principal Financial Officer; ~~Senior~~ Vice ~~President~~Chairman and Chief Financial Officer

/s/ Kurt Forche
~~/s/ Donald O. Mondano~~Kurt Forche
~~Donald O. Mondano~~
Principal Accounting Officer; Vice President and Corporate Controller

Date: May 2, 2024

~~Date: November 3, 2017~~

~~KELLOGG COMPANY~~

Table of Contents

Kellanova

EXHIBIT INDEX



Exhibit No.	Description		Electronic (E) Paper (P) Incorp. By Ref. (IBRF)
3.1		Certificate of Amendment to the Restated Certificate of Incorporation of Kellanova, incorporated by reference to Exhibit 3.1 of our Current Report on Form 8-K filed May 1, 2024, Commission file number 1-4171.		IBRF
10.1		2024-2026 Performance Stock Unit Plan, incorporated by reference to Exhibit 10.1 of our Current Report on Form 8-K filed February 22, 2024, Commission file number 1-4171.		IBRF
10.2		Form of Restricted Stock Unit Terms and Conditions, incorporated by reference to Exhibit 10.2 of our Current Report on Form 8-K filed February 22, 2024, Commission file number 1-4171.		IBRF
31.1		Rule 13a-14(e)/15d-14(a) Certification from Steven A. Cahillane		E
31.2		Rule 13a-14(e)/15d-14(a) Certification from ~~Fareed Khan~~Amit Banati		E
32.1		Section 1350 Certification from Steven A. Cahillane		E
32.2		Section 1350 Certification from ~~Fareed Khan~~Amit Banati		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

* A management contract or compensatory plan required to be filed with this Report.


Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common Stock, $.25 par value per share	K	New York Stock Exchange
1.000% Senior Notes due 2024	K 24	New York Stock Exchange
1.250% Senior Notes due 2025	K 25	New York Stock Exchange
0.500% Senior Notes due 2029	K 29	New York Stock Exchange


			Page

		~~Page~~
	PART I — Financial Information
			Item 1:
			Financial Statements
			Consolidated Balance Sheet — ~~September~~March 30, ~~2017~~2024 and December ~~31, 2016~~3 0 , 202 3	3
			Consolidated Statement of Income — quarter s ended March 30 , 202 4 and ~~year-to-date periods ended September 30, 2017 and October~~April 1 ~~2016~~, 2023	4
			Consolidated Statement of Comprehensive Income – quarter s ended March 30, 2024 and ~~year-to-date periods ended September 30, 2017 and October~~April 1, ~~2016~~2023	5
			Consolidated Statement of Equity — ~~year~~ quarter s ended ~~December 31, 2016~~March 30, 2024 and ~~year-to-date period ended September 30, 2017~~April 1, 202 3	6
			Consolidated Statement of Cash Flows — year-to-date periods ended ~~September~~March 30, ~~2017~~2024 and ~~October~~April 1, ~~2016~~2023	7
			Notes to Consolidated Financial Statements	8
			Item 2:
			Management’s Discussion and Analysis of Financial Condition and Results of Operations	3322
			Item 3:
			Quantitative and Qualitative Disclosures about Market Risk	5835
			Item 4:
			Controls and Procedures	5837
			PART II — Other Information
Item 1A:
Risk Factors			~~Item 1:~~38
	~~Legal Proceedings~~	59
			~~Item 1A:~~
	~~Risk Factors~~	59
	Item 2:
			Unregistered Sales of Equity Securities and Use of Proceeds	5938
			Item 6:
			Exhibits	6039
			Signatures	6140
			Exhibit Index	6241


	September 30, 2017 (unaudited)			December 31, 2016 *
	March 30, 2024							March 30, 2024	December 30, 2023
Current assets
Cash and cash equivalents	$	267		$	280
Cash and cash equivalents
Cash and cash equivalents
Accounts receivable, net	1,512			1,231
Inventories:
Raw materials and supplies	327			315
Finished goods and materials in process	868			923
Other prepaid assets	198			191
Inventories
Other current assets
Total current assets	3,172			2,940
Property, net of accumulated depreciation of $5,636 and $5,280	3,629			3,569
Property, net
Operating lease right-of-use assets
Goodwill
Other intangibles, net
Investments in unconsolidated entities	432			438
Goodwill	5,135			5,166
Other intangibles, net of accumulated amortization of $62 and $54	2,442			2,369
Other assets	831			629
Total assets	$	15,641		$	15,111
Current liabilities
Current maturities of long-term debt	$	410		$	631
Current maturities of long-term debt
Current maturities of long-term debt
Notes payable	572			438
Accounts payable	2,140			2,014
Current operating lease liabilities
Accrued advertising and promotion	552			436
Accrued income taxes	38			47
Accrued salaries and wages	277			318
Other current liabilities	658			590
Total current liabilities	4,647			4,474
Long-term debt	7,216			6,698
Operating lease liabilities
Deferred income taxes	411			525
Pension liability	933			1,024
Other liabilities	491			464
Commitments and contingencies							Commitments and contingencies
Equity
Common stock, $.25 par value	105			105
Common stock, $.25 par value
Common stock, $.25 par value
Capital in excess of par value	851			806
Retained earnings	6,862			6,571
Treasury stock, at cost	(4,425		)	(3,997		)
Accumulated other comprehensive income (loss)	(1,466		)	(1,575		)
Total Kellogg Company equity	1,927			1,910
Total Kellanova equity
Noncontrolling interests	16			16
Total equity	1,943			1,926
Total liabilities and equity	$	15,641		$	15,111


	Quarter ended						Year-to-date period ended
(Results are unaudited)	September 30, 2017			October 1, 2016			September 30, 2017			October 1, 2016

			March 30, 2024
			March 30, 2024
			March 30, 2024
Net sales
Net sales
Net sales	$	3,273		$	3,254		$	9,714		$	9,917
Cost of goods sold	2,041			1,990			6,013			6,138
Cost of goods sold
Cost of goods sold
Selling, general and administrative expense
Selling, general and administrative expense
Selling, general and administrative expense	768			854			2,424			2,482
Operating profit	464			410			1,277			1,297
Operating profit
Operating profit
Interest expense
Interest expense
Interest expense	64			58			188			343
Other income (expense), net	(2		)	3			(5		)	7
Income before income taxes	398			355			1,084			961
Other income (expense), net
Other income (expense), net
Income from continuing operations before income taxes
Income from continuing operations before income taxes
Income from continuing operations before income taxes
Income taxes
Income taxes
Income taxes	104			62			248			215
Earnings (loss) from unconsolidated entities	3			(1		)	5			1
Net Income	$	297		$	292		$	841		$	747
Earnings (loss) from unconsolidated entities
Earnings (loss) from unconsolidated entities
Net income from continuing operations
Net income from continuing operations
Net income from continuing operations
Net income (loss) attributable to noncontrolling interests
Net income (loss) attributable to noncontrolling interests
Net income (loss) attributable to noncontrolling interests
Income (loss) from discontinued operations, net of taxes
Income (loss) from discontinued operations, net of taxes
Income (loss) from discontinued operations, net of taxes
Net income attributable to Kellanova
Net income attributable to Kellanova
Net income attributable to Kellanova
Per share amounts:
Basic earnings	$	0.86		$	0.83		$	2.41		$	2.13
Diluted earnings	$	0.85		$	0.82		$	2.39		$	2.11
Dividends	$	0.54		$	0.52		$	1.58		$	1.52
Per share amounts:
Per share amounts:
Earnings per common share - basic
Earnings per common share - basic
Earnings per common share - basic
Earnings (loss) from continuing operations
Earnings (loss) from continuing operations
Earnings (loss) from continuing operations
Earnings (loss) from discontinued operations
Earnings (loss) from discontinued operations
Earnings (loss) from discontinued operations
Net earnings (loss) per common share - basic
Net earnings (loss) per common share - basic
Net earnings (loss) per common share - basic
Earnings per common share - diluted
Earnings per common share - diluted
Earnings per common share - diluted
Earnings (loss) from continuing operations
Earnings (loss) from continuing operations
Earnings (loss) from continuing operations
Earnings (loss) from discontinued operations
Earnings (loss) from discontinued operations
Earnings (loss) from discontinued operations
Net earnings (loss) per common share - diluted
Net earnings (loss) per common share - diluted
Net earnings (loss) per common share - diluted
Average shares outstanding:
Average shares outstanding:
Average shares outstanding:
Basic	345			350			348			350
Basic
Basic
Diluted
Diluted
Diluted	348			354			351			354
Actual shares outstanding at period end							345			351
Actual shares outstanding at period end
Actual shares outstanding at period end


	Quarter ended
	March 30, 2024
	Pre-tax amount		Tax (expense) benefit		After-tax amount
Net income					$	271
Other comprehensive income (loss):
Foreign currency translation adjustments:
Foreign currency translation adjustments during period	$	(272)	$	—	(272)
Net investment hedges:
Net investment hedges gain (loss)	71		(18)		53
Cash flow hedges:
Net deferred gain (loss) on cash flow hedges	22		(6)		16
Reclassification to net income	2		—		2
Postretirement and postemployment benefits:


Reclassification to net income:

Prior service cost	1		—		1



Other comprehensive income (loss)	$	(176)	$	(24)	$	(200)
Comprehensive income					$	71
Net Income attributable to noncontrolling interests					4
Other comprehensive income (loss) attributable to noncontrolling interests					(70)
Comprehensive income attributable to Kellanova					$	137

	Quarter ended
	April 1, 2023
	Pre-tax amount		Tax (expense) benefit		After-tax amount
Net income					$	302
Other comprehensive income (loss):
Foreign currency translation adjustments:
Foreign currency translation adjustments during period	$	42	$	3	45
Net investment hedges:
Net investment hedges gain (loss)	(57)		15		(42)
Cash flow hedges:
Net deferred gain (loss) on cash flow hedges	(18)		5		(13)
Reclassification to net income	3		(1)		2
Postretirement and postemployment benefits:


Reclassification to net income:
Net experience (gain) loss	(1)		—		(1)

Available-for-sale securities:
Unrealized gain (loss)	1		—		1

Other comprehensive income (loss)	$	(30)	$	22	$	(8)
Comprehensive income					$	294
Net Income attributable to noncontrolling interests					4
Other comprehensive income (loss) attributable to noncontrolling interests					(3)
Comprehensive income attributable to Kellanova					$	293


☒
x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐
¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



	Quarter ended September 30, 2017									Year-to-date period ended September 30, 2017
(Results are unaudited)	Pre-tax amount			Tax (expense) benefit			After-tax amount			Pre-tax amount			Tax (expense) benefit			After-tax amount
Net income							$	297								$	841
Other comprehensive income (loss):
Foreign currency translation adjustments	(6		)	33			27			4			99			103
Cash flow hedges:
Reclassification to net income	3			(1		)	2			7			(2		)	5
Postretirement and postemployment benefits:
Reclassification to net income:
Net experience loss	—			—			—			1			—			1
Other comprehensive income (loss)	$	(3	)	$	32		$	29		$	12		$	97		$	109
Comprehensive income							$	326								$	950

	Quarter ended October 1, 2016									Year-to-date period ended October 1, 2016
(Results are unaudited)	Pre-tax amount			Tax (expense) benefit			After-tax amount			Pre-tax amount			Tax (expense) benefit			After-tax amount
Net income							$	292								$	747
Other comprehensive income (loss):
Foreign currency translation adjustments	(20		)	7			(13		)	(123		)	20			(103		)
Cash flow hedges:
Unrealized gain (loss) on cash flow hedges	3			(1		)	2			(57		)	23			(34		)
Reclassification to net income	—			(1		)	(1		)	8			(4		)	4
Postretirement and postemployment benefits:
Amount arising during the period:
Prior service cost	—			—			—			(1		)	—			(1		)
Reclassification to net income:
Net experience loss	1			—			1			3			—			3
Prior service cost	1			(1		)	—			3			(1		)	2
Other comprehensive income (loss)	$	(15	)	$	4		$	(11	)	$	(167	)	$	38		$	(129	)
Comprehensive income							$	281								$	618


	Quarter ended March 30, 2024
	Common stock			Capital in excess of par value		Retained earnings		Treasury stock			Accumulated other comprehensive income (loss)		Total Kellanova equity		Non-controlling interests		Total equity
	shares	amount						shares	amount
Balance, December 30, 2023	421	$	105	$	1,101	$	8,804	81	$	(4,794)	$	(2,041)	$	3,175	$	194	$	3,369

Net income						267							267		4		271


Dividends declared ($0.56 per share)						(191)							(191)				(191)
Distributions to noncontrolling interest													—		(2)		(2)
Other comprehensive income (loss)											(130)		(130)		(70)		(200)

Stock compensation				21									21				21
Stock options exercised, issuance of other stock awards and other				(59)		(2)		(1)	71				10				10
Balance, March 30, 2024	421	$	105	$	1,063	$	8,878	80	$	(4,723)	$	(2,171)	$	3,152	$	126	$	3,278



	Year-to-date period ended
(unaudited)	September 30, 2017			October 1, 2016
Operating activities
Net income	$	841		$	747
Adjustments to reconcile net income to operating cash flows:
Depreciation and amortization	366			357
Postretirement benefit plan expense (benefit)	(191		)	(53		)
Deferred income taxes	(20		)	(26		)
Stock compensation	53			45
Other	32			(3		)
Postretirement benefit plan contributions	(33		)	(29		)
Changes in operating assets and liabilities, net of acquisitions:
Trade receivables	(223		)	(208		)
Inventories	78			25
Accounts payable	135			139
Accrued income taxes	(10		)	10
Accrued interest expense	43			53
Accrued and prepaid advertising and promotion	83			66
Accrued salaries and wages	(50		)	(45		)
All other current assets and liabilities, net	17			(57		)
Net cash provided by (used in) operating activities	1,121			1,021
Investing activities
Additions to properties	(374		)	(376		)
Acquisitions, net of cash acquired	4			(21		)
Investments in unconsolidated entities, net proceeds	14			27
Other	(7		)	(11		)
Net cash provided by (used in) investing activities	(363		)	(381		)
Financing activities
Net issuances (reductions) of notes payable	134			(749		)
Issuances of long-term debt	656			2,061
Reductions of long-term debt	(626		)	(1,230		)
Net issuances of common stock	87			356
Common stock repurchases	(516		)	(426		)
Cash dividends	(550		)	(533		)
Net cash provided by (used in) financing activities	(815		)	(521		)
Effect of exchange rate changes on cash and cash equivalents	44			(24		)
Increase (decrease) in cash and cash equivalents	(13		)	95
Cash and cash equivalents at beginning of period	280			251
Cash and cash equivalents at end of period	$	267		$	346

Supplemental cash flow disclosures
Interest paid	$	149		$	294
Income taxes paid	$	279		$	225

Supplemental cash flow disclosures of non-cash investing activities:
Additions to properties included in accounts payable	$	85		$	87



(millions)		December 1, 2016
Current assets		$	44
Property	72
Goodwill	165
Intangible assets	148
Current liabilities	(48			)
Non-current deferred tax liability and other	(6			)
		$	375



(millions)	U.S. Morning Foods		U.S. Snacks		U.S. Specialty		North America Other		Europe		Latin America			Asia Pacific		Consoli- dated
December 31, 2016	$	131	$	3,568	$	82	$	457	$	376	$	328		$	224	$	5,166
Purchase price allocation adjustment	—		—		—		—		—		(79		)	—		(79		)
Purchase price adjustment	—		—		—		—		—		(4		)	—		(4		)
Currency translation adjustment	—		—		—		4		35		9			4		52
September 30, 2017	$	131	$	3,568	$	82	$	461	$	411	$	254		$	228	$	5,135



Gross carrying amount
(millions)	U.S. Morning Foods		U.S. Snacks			U.S. Specialty		North America Other		Europe			Latin America			Asia Pacific			Consoli- dated
December 31, 2016	$	8	$	42		$	—	$	5	$	40		$	36		$	10		$	141
Purchase price allocation adjustment	—		—			—		—		—			39			—			39
Currency translation adjustment	—		—			—		—		3			2			—			5
September 30, 2017	$	8	$	42		$	—	$	5	$	43		$	77		$	10		$	185

Accumulated Amortization
December 31, 2016	$	8	$	19		$	—	$	4	$	14		$	6		$	3		$	54
Amortization	—		2			—		—		2			3			1			8
September 30, 2017	$	8	$	21		$	—	$	4	$	16		$	9		$	4		$	62

Intangible assets subject to amortization, net
December 31, 2016	$	—	$	23		$	—	$	1	$	26		$	30		$	7		$	87
Purchase price allocation adjustment	—		—			—		—		—			39			—			39
Currency translation adjustment	—		—			—		—		3			2			—			5
Amortization	—		(2		)	—		—		(2		)	(3		)	(1		)	(8		)
September 30, 2017	$	—	$	21		$	—	$	1	$	27		$	68		$	6		$	123



	Quarter ended					Year-to-date period ended					Program costs to date
(millions)	September 30, 2017			October 1, 2016		September 30, 2017			October 1, 2016		September 30, 2017
Employee related costs	$	31		$	6	$	166		$	26	$	523
Pension curtailment (gain) loss, net	(134		)	—		(133		)	—		(122		)
Asset related costs	38			5		68			32		260
Asset impairment	—			—		—			16		155
Other costs	66			29		138			90		577
Total	$	1		$	40	$	239		$	164	$	1,393

	Quarter ended					Year-to-date period ended					Program costs to date
(millions)	September 30, 2017			October 1, 2016		September 30, 2017			October 1, 2016		September 30, 2017
U.S. Morning Foods	$	14		$	4	$	16		$	13	$	257
U.S. Snacks	106			8		305			62		507
U.S. Specialty	—			1		1			4		20
North America Other	4			7		13			20		141
Europe	13			6		21			34		320
Latin America	2			2		6			6		30
Asia Pacific	1			2		5			6		86
Corporate	(139		)	10		(128		)	19		32
Total	$	1		$	40	$	239		$	164	$	1,393



(millions, except per share data)	Net income		Average shares outstanding	Earnings per share
2017
Basic	$	297	345	$	0.86
Dilutive potential common shares			3	(0.01		)
Diluted	$	297	348	$	0.85
2016
Basic	$	292	350	$	0.83
Dilutive potential common shares			4	(0.01		)
Diluted	$	292	354	$	0.82



(millions)
Details about AOCI components	Amount reclassified from AOCI						Line item impacted within Income Statement
	Quarter ended September 30, 2017			Year-to-date period ended September 30, 2017
(Gains) losses on cash flow hedges:
Foreign currency exchange contracts	$	—		$	(1	)	COGS
Interest rate contracts	3			8			Interest expense
	$	3		$	7		Total before tax
	(1		)	(2		)	Tax expense (benefit)
	$	2		$	5		Net of tax
Amortization of postretirement and postemployment benefits:
Net experience loss	$	—		$	1		See Note 9 for further details
	$	—		$	1		Total before tax
	—			—			Tax expense (benefit)
	$	—		$	1		Net of tax
Total reclassifications	$	2		$	6		Net of tax



(millions)	September 30, 2017			December 31, 2016
Foreign currency translation adjustments	$	(1,402	)	$	(1,505	)
Cash flow hedges — unrealized net gain (loss)	(62		)	(67		)
Postretirement and postemployment benefits:
Net experience loss	(13		)	(14		)
Prior service cost	11			11
Total accumulated other comprehensive income (loss)	$	(1,466	)	$	(1,575	)



Employee and director stock options	Shares (millions)		Weighted- average exercise price		Weighted- average remaining contractual term (yrs.)	Aggregate intrinsic value (millions)
Employee and director stock options	Shares (millions)		Weighted- average exercise price		Weighted- average remaining contractual term (yrs.)	Aggregate intrinsic value (millions)
Outstanding, beginning of period	15		$	62
Granted	2		73
Exercised	(1	)	57
Forfeitures and expirations	(1	)	70
Outstanding, end of period	15		$	64	6.8	$	37
Exercisable, end of period	10		$	60	5.8	$	37



	Weighted- average expected volatility		Weighted- average expected term (years)	Weighted- average risk-free interest rate		Dividend yield
Grants within the year-to-date period ended September 30, 2017:	18	%	6.6	2.26	%	2.80	%
Grants within the year-to-date period ended October 1, 2016:	17	%	6.9	1.60	%	2.60	%



(millions)	September 30, 2017
2015 Award	$	20
2016 Award	$	22
2017 Award	$	23



Employee restricted stock and restricted stock units	Shares (thousands)		Weighted-average grant-date fair value
Non-vested, beginning of year	1,166		$	63
Granted	666		67
Vested	(76	)	57
Forfeited	(125	)	65
Non-vested, end of period	1,631		$	65



(millions)	Pension		Nonpension postretirement		Total
Quarter ended:
September 30, 2017	$	2	$	3	$	5
October 1, 2016	$	3	$	3	$	6
Year-to-date period ended:
September 30, 2017	$	25	$	8	$	33
October 1, 2016	$	18	$	11	$	29
Full year:
Fiscal year 2017 (projected)	$	26	$	16	$	42
Fiscal year 2016 (actual)	$	18	$	15	$	33



(millions)
December 31, 2016	$	63
Tax positions related to current year:
Additions	4
Reductions	—
Tax positions related to prior years:
Additions	3
Reductions	(8		)
Settlements	(4		)
Lapse in statute of limitations	(2		)
September 30, 2017	$	56


(millions)	Line Item in the Consolidated Balance Sheet in which the hedged item is included	Carrying amount of the hedged liabilities				Cumulative amount of fair value hedging adjustment included in the carrying amount of the hedged liabilities (a)
		March 30, 2024		December 30, 2023		March 30, 2024		December 30, 2023
Interest rate contracts	Current maturities of long-term debt	$	1,297	$	655	$	2	$	(8)
Interest rate contracts	Long-term debt	$	994	$	1,666	$	(53)	$	(43)



As of March 30, 2024:			Gross Amounts Not Offset in the Consolidated Balance Sheet
	Amounts Presented in the Consolidated Balance Sheet		Financial Instruments		Cash Collateral Received/ Posted		Net Amount
Total asset derivatives	$	99	$	(81)	$	6	$	24
Total liability derivatives	$	(139)	$	81	$	58	$	—



As of September 30, 2017:
				Gross Amounts Not Offset in the Consolidated Balance Sheet
	Amounts Presented in the Consolidated Balance Sheet			Financial Instruments			Cash Collateral Received/ Posted		Net Amount
Total asset derivatives	$	14		$	(14	)	$	—	$	—
Total liability derivatives	$	(71	)	$	14		$	16	$	(41	)



As of December 30, 2023:			Gross Amounts Not Offset in the Consolidated Balance Sheet
	Amounts Presented in the Consolidated Balance Sheet		Financial Instruments		Cash Collateral Received/ Posted		Net Amount
Total asset derivatives	$	86	$	(84)	$	—	$	2
Total liability derivatives	$	(200)	$	84	$	68	$	(48)



As of December 31, 2016:
				Gross Amounts Not Offset in the Consolidated Balance Sheet
	Amounts Presented in the Consolidated Balance Sheet			Financial Instruments			Cash Collateral Received/ Posted		Net Amount
Total asset derivatives	$	41		$	(24	)	$	—	$	17
Total liability derivatives	$	(83	)	$	24		$	48	$	(11	)



(millions)	Location of gain (loss) recognized in income	Gain (loss) recognized in income (a)
		September 30, 2017		October 1, 2016
Interest rate contracts	Interest expense	$	4	$	6
Total		$	4	$	6


~~(a)~~	~~Includes the ineffective portion and amount excluded from effectiveness testing.~~



(millions)	Gain (loss) recognized in AOCI				Location of gain (loss) reclassified from AOCI	Gain (loss) reclassified from AOCI into income						Location of gain (loss) recognized in income (a)	Gain (loss) recognized in income (a)
	September 30, 2017		October 1, 2016			September 30, 2017			October 1, 2016				September 30, 2017		October 1, 2016
Foreign currency exchange contracts	$	—	$	1	COGS	$	—		$	4		Other income (expense), net	$	—	$	(1	)
Foreign currency exchange contracts	—		1		SGA expense	—			1			Other income (expense), net	—		—
Interest rate contracts	—		1		Interest expense	(3		)	(2		)	N/A	—		—
Commodity contracts	—		—		COGS	—			(3		)	Other income (expense), net	—		—
Total	$	—	$	3		$	(3	)	$	—			$	—	$	(1	)



(millions)	Gain (loss) recognized in AOCI
	September 30, 2017			October 1, 2016
Foreign currency denominated long-term debt	$	(90	)	$	(19	)



(millions)	Location of gain (loss) recognized in income	Gain (loss) recognized in income
		September 30, 2017			October 1, 2016
Foreign currency exchange contracts	COGS	$	—		$	3
Foreign currency exchange contracts	Other income (expense), net	(3		)	(1		)
Foreign currency exchange contracts	SG&A	(1		)	—
Commodity contracts	COGS	(13		)	(14		)
Commodity contracts	SG&A	(16		)	—
Total		$	(33	)	$	(12	)



(millions)	Fair Value		Total Loss
Description:
Long-lived assets	$	10	$	(16	)



Quarter ended September 30, 2017
(millions)	U.S. Morning Foods			U.S. Snacks			U.S. Specialty			North America Other			Europe			Latin America			Asia Pacific			Corporate			Kellogg Consolidated
Reported net sales	$	710		$	760		$	290		$	420		$	599		$	240		$	254		$	—		$	3,273
Acquisitions	—			—			—			—			4			48			—			—			52
Comparable net sales	$	710		$	760		$	290		$	420		$	595		$	192		$	254		$	—		$	3,221
Foreign currency impact	—			—			—			7			7			6			1			—			21
Currency-neutral comparable net sales	$	710		$	760		$	290		$	413		$	588		$	186		$	253		$	—		$	3,200
Quarter ended October 1, 2016
(millions)	U.S. Morning Foods			U.S. Snacks			U.S. Specialty			North America Other			Europe			Latin America			Asia Pacific			Corporate			Kellogg Consolidated
Reported net sales	$	733		$	796		$	284		$	402		$	594		$	197		$	248		$	—		$	3,254
Venezuela operations impact	—			—			—			—			—			7			—			—			7
Comparable net sales	$	733		$	796		$	284		$	402		$	594		$	190		$	248		$	—		$	3,247
% change - 2017 vs. 2016:
Reported growth	(3.0		)%	(4.5		)%	1.9		%	4.4		%	0.8		%	21.5		%	2.9		%	—		%	0.6		%
Acquisitions	—		%	—		%	—		%	—		%	0.7		%	24.4		%	—		%	—		%	1.6		%
Venezuela operations impact	—		%	—		%	—		%	—		%	—		%	(4.0		)%	—		%	—		%	(0.2		)%
Comparable growth	(3.0		)%	(4.5		)%	1.9		%	4.4		%	0.1		%	1.1		%	2.9		%	—		%	(0.8		)%
Foreign currency impact	—		%	—		%	—		%	1.5		%	1.2		%	3.2		%	0.9		%	—		%	0.6		%
Currency-neutral comparable growth	(3.0		)%	(4.5		)%	1.9		%	2.9		%	(1.1		)%	(2.1		)%	2.0		%	—		%	(1.4		)%